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Allianz Annual Report 2012

The ultimate loss of an accident year comprises all pay- ments made for that accident year up to the reporting date, plus the loss reserve at the reporting date. Given complete information regarding all losses incurred up to the balance sheet date, the ultimate loss for each accident-year period would remain the same. In practice, however, the ultimate loss (based on estimates) is exposed to fluctuations that reflect the increase in knowledge regarding the loss cases. The loss ratio presented above varies slightly from the re- ported loss ratio because the ultimate loss in the table above is based on the sum of the payments plus the loss reserve, and not the incurred loss from the profit and loss account. The run-off triangles are not prepared on a currency-ad- justed basis. This means all figures are translated from the respective local currency into the Allianz Group currency (Euro), consistently using the exchange rates applicable at the reporting date. This ensures that the reserves reconcile with reserves in the consolidated balance sheet. Development of reserves for loss and loss adjustment expenses The following table summarizes the development of the ­Allianz Group’s loss and LAE reserves over the past eight years. The table presents calendar year data, not accident year data. Each column of this table shows reserves as of a single re- porting date and subsequent development of these re- serves. The top section of each column shows reserves as initially established at the end of each stated year. The next section, reading down, shows the cumulative net amounts paid as of the end of the successive years with respect to the reserve initially established. The next section shows the retroactive re-estimation of the initially established net re- serves for loss and LAE as of the end of each successive year. This re-estimation results primarily from additional facts and circumstances that pertain to open claims. The bottom section compares the latest re-estimated gross and net reserves for loss and LAE to the gross and net re- serves, respectively, as initially established, and indicates the cumulative development of the initially established reserves until 31 December 2012. The surplus shown in the table for each year represents the aggregate amount by which the original estimates of reserves at that year-end have changed in subsequent years. Accordingly, the cumu- lative surplus for a year-end relates only to reserves at that year-end and such amounts are not additive. Caution should be exercised in evaluating the information shown in this table, as each amount includes the effects of all changes in amounts for prior periods. For example, the de- velopment of the 2005 reserves during 2012 is shown in the cumulative surplus columns from 2005 to 2011. The cumulative surplus can be distorted due to various ef- fects. The liabilities will change if, through either acquisi- tion, sale of a company or reclassification, entire new port- folios of claim payments and reserves are added to or subtracted from the data. In addition, changes in currency exchange rates can lead to distortions in the cumulative surplus. The effective run-off result is derived after adjust- ing for these effects. Annual Report 2012    Allianz Group D Consolidated Financial Statements 219 Consolidated Balance Sheets 220 Consolidated Income Statements 221 Consolidated Statements of Comprehensive Income 222 Consolidated Statements of Changes in Equity 223 Consolidated Statements of Cash Flows 226 Notes to the Consolidated Financial Statements 293