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Allianz Annual Report 2012

Annual Report 2012    Allianz Group Credit risk – investment As of 31 December 2012, 83.4 % of our total Group pre-diver- sified internal credit risk capital was allocated to invest- ment exposures of the Property-Casualty, Life/Health as well as Corporate and Other segments – 55.5 % of which was related to issuers and counterparties in the United States and Germany. We limit the credit risk of our fixed income investments by setting high requirements on the credit- worthiness of our issuers, by diversifying our investments and by setting obligor concentration limits. As of 31 December 2012, approximately 94.5 % (2011: 93.8 %) of the fixed income investment portfolio (€ 444.5  bn) of the insurance companies of the ­Allianz Group had an invest- ment grade rating and approximately 71.6 % (2011: 80.6 %) of the fixed income investments were distributed among obli­ gors that had been assigned at least an A rating by Stan- dard & Poor’s. In the Life/Health segment these assets tend to be long term to cover long-term liabilities. Typical investments are government bonds, senior corporate bonds, covered bonds and also self-originated mortgages and loans. The premi- ums for traditional life products typically contain a savings component, which makes the fixed income investments the largest credit exposure for ­Allianz. Due to the nature of the business, the fixed income securities in the Property- Casualty segment tends to be short to mid term. Additional asset classes like cash or derivatives fall within the scope of our credit risk model, but contribute only marginally to the credit risk at the ­Allianz Group level.1 1 Additionally 4.1 % of our total Group pre-diversified internal credit risk capital is allocated to receivables and potential future exposure for derivatives and reinsurance. Fixed income investments by rating class as of 31 December 2012 – fair values C 096 Total: € 444.5 bn € bn 0 15050 100 140.5 A+ to A– AA+ to AA- BBB+ to BBB- Non-investment grade Not assigned AAA 101.9 75.6 102.0 13.0 11.5 ­Allianz components of credit risk exposure C 095 ­Allianz components of credit risk Description Investment portfolio Premiums collected from our customers and shareholders’ capital, which is required to support the risks under­written, are invested to a great extent in fixed income instruments. These investment portfolios ultimately cover the future claims to our customers. However, for certain life insurance products, losses due to credit events can be shared with the policyholder, as described in the context of market risks. Reinsurance portfolio Credit risk to external reinsurers appears when insurance risk exposures are transferred by us to external reinsurance companies to mitigate insurance risk. Potential losses can arise either due to non-recoverability of reinsurance receivables already present at the as-of date or default on benefits that are under reinsurance treaties in-force. Credit insurance portfolio Credit risk arises from potential claim payments on limits granted by Euler Hermes to its policyholders. Euler Hermes protects its policyholders (partially) from credit risk associated with short-term trade credits advanced to clients of the policyholder. If the client of the policyholder is unable to meet its payment obligations then Euler Hermes indemnifies the loss to the policyholder. C Group Management Report Risk Report and Financial Control 184 Risk Report 214 Controls and Procedures 201