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Allianz Annual Report 2012

€ 36 mn in environmental claims driven by higher defence costs and higher severity for more serious diseases and € 35 mn in Construction Defect coverages was observed. € 72 mn unfavorable run-off at Allianz Germany due to an ongoing review of the related methods and assumptions. € 65 mn unfavorable development at Allianz Italy, mainly due to an allowance made for an increase in VAT and the uncertain economic conditions. Furthermore as part of the ongoing monitoring of the portfolio an additional IBNR of € 27 mn for latent man-made claims was booked during 2012. Workers Compensation / Employers Liability For Workers Compensation / Employers Liability, net loss and LAE reserves developed unfavorably during 2012 by € 71 mn, or 1.6 % of reserves at 31 December 2011. This devel- opment was caused by different effects across several op- erating entities. The largest contributor was Fireman’s Fund Insurance Company, with an unfavorable develop- ment of € 73 mn due to higher trends for medical inflation. Property For Property Insurance, net loss and LAE reserves developed favorably during 2012 by € 253 mn, or 7.8 % of reserves at 31 December 2011. Favorable development was caused by dif- ferent effects across several operating entities. The follow- ing subsidiaries were the largest contributors: € 88 mn at Allianz Germany, mainly due to the release of IBNR for natural catastrophes, favorable development of large claims and overall improved claims handling. € 43 mn at Allianz France, mainly due to favorable develop- ment on large losses. Inwards and Group Internal Reinsurance For Inwards and Group Internal Reinsurance, net loss and LAE reserves developed unfavorably during 2012 by € 73 mn or 1.5 % of reserves at December 2011. This development was caused by different effects across several operating entities. The largest contributor was Allianz Re with an increase of € 46  mn, driven by an unfavorable development of the claims arising from the 2011 floods in Thailand in the amount of approximately € 217 mn. This development was partially offset by a favorable development of the claims arising from the 2011 earthquake in Japan in the amount of € 49 mn. Credit Insurance Credit Insurance is underwritten in the Allianz Group by Euler Hermes. During 2012, Euler Hermes experienced a favorable development of € 206 mn net of reinsurance, or 18.5 % of reserves, mainly driven by a better than expected development of the previous years claims in almost all re- gions where Euler Hermes operates. ­Allianz Global Corporate and Specialty ­­Allianz Global Corporate and Specialty (AGCS) is the Allianz Group’s global carrier for corporate and specialty risks and also includes the corporate branch of the German business. Overall, AGCS experienced a favorable development of € 348 mn in 2012, net of reinsurance, or 5.7 % of reserves as of 31 December 2011. The major contributors of the run-off included: € 91 mn favorable from the German branch corporate liabil- ity portfolio and € 65 mn from the German branch aviation portfolio due to the release of IBNR on prior year reserves based on better than expected experience. € 51 mn favorable from all AGCS entities and classes of busi- ness due to an unallocated LAE estimate reduction follow- ing an enhancement of the unallocated LAE estimation methodology. Discounting of reserves for loss and LAE As of 31 December 2012, 2011 and 2010, the Allianz Group’s consolidated Property-Casualty reserves included dis- counted reserves of € 3,583 mn, € 1,981 mn and € 1,846 mn, respectively. In general, reserves for loss and loss adjustment expenses are not discounted, except when payment amounts are fixed and timing is reasonably determinable. Reserves are discounted to varying degrees in the United States, Ger- many, the United Kingdom, Switzerland, Portugal, Belgium and France. The reserve discounts relate to reserves for structured settlements in various lines of business. These lines of business include personal accident, general liabil- ity and motor liability in Germany and France, workers’ compensation, general liability and motor liability in the United Kingdom and the United States and workers’ com- pensation in Switzerland, Portugal and Belgium. 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 297

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