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Allianz Annual Report 2012

Annual Report 2012    Allianz Group Biometric risk Biometric risks associated with life and health insurance include mortality, disability, morbidity, and longevity risks. −− Mortality, disability, and morbidity risks are risks associ- ated with the death or disability of policyholders’ or when medical claims are higher than expected. −− Longevity risk is the risk that policyholders live longer than expected. For modeling these risks within our inter- nal risk capital model, we distinguish level, trend volatil- ity, and calamity risks. Biometric assumptions, such as life expectancy, play a significant role. Due to product design, the offsetting effects of mortality risk, morbidity risk and longevity risk inherent in the com- bined portfolios of life insurance and annuity products, as well as because of our geographically diverse portfolio, our Life/Health segment did not have significant concentra- tions of biometric risk as of 31 December 2012.1 Business risk Businessrisksconsistofcostrisksandpolicyholderbehavior risks. Cost risks consist of unexpected changes in business assumptions and unanticipated fluctuations in earnings arising from a decline in income without a corresponding decrease in expenses. They include the risk that expenses incurred in acquiring and administering policies are higher than expected as a result of inflation, lower revenues or higher costs than budgeted. Policyholder behavior risks are risks related to the early ter- mination of contracts as well as risks that policyholders’ actions – such as withdrawals, renewals and annuitization – are more adverse than assumed. 1 For further information about insurance risk in the Life/Health segment, please refer to note 20 to the consolidated financial statements. Allocated internal business risk capital by business segment (total portfolio before tax and non-controlling interests) as of 31 December 2012 [31 December 20111] C 102 Pre-diversified Group-diversified Total Group internal business risk capital: 4,444 [4,076] Share of total Group internal risk capital: 9.9 % [9.8 %] € mn € mn 12/31/2011 12/31/2012 1,500 1,200 900 600 300 Life/Health 3,424 [3,173] Property-Casualty 1,020 [903] 177 973 218 1,018 +7.5 % 1,150 1,236  Property-Casualty   Life/Health  1 Recalculated based on model updates in 2012. 206

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