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Allianz Annual Report 2012

Cash flow hedges During the year ended 31 December 2012, cash flow hedges were used to hedge variable cash flows exposed to interest rate, exchange rate fluctuations and inflation. As of 31 De- cember 2012, the derivative instruments utilized had a positive fair value of € 75 mn (2011: negative fair value of € 2 mn). Unrealized gains and losses (net) in shareholders’ equity increased by € 65 mn (2011: decreased by € 5 mn). Hedge of net investment in foreign operations As of 31 December 2012, the ­­­Allianz Group hedges part of its U.S. Dollar net investments through the issuance of U.S.Dol- lar denominated liabilities with a nominal amount of USD 1.0 Bn. Derivative financial instruments used in accounting hedges Important hedging instruments are equity forward con- tracts, equity options, total returns swaps, interest rate swaps, interest rate forwards, currency swaps and currency forwards. Hedging instruments may be implemented for individual transactions (micro hedge) or for a portfolio of similar assets or liabilities (portfolio hedge). At the local level, ­­Allianz subsidiaries are obliged to assess whether the criteria for hedge accounting are met, in par- ticular whether the hedge relationships are highly effective in offsetting changes in fair values or cash flows between thehedginginstrumentandthehedgeditem.Furthermore, the ­­­Allianz subsidiaries have to prepare the required hedge documentation. At inception of all hedge relationships, the conclusionsreachedbythe­­Allianzsubsidiariesmustbeap- provedatGroupleveltoensurethatallhedgerequirements are fulfilled and the hedge documentation is complete. Fair value hedges The ­­­Allianz Group uses fair value hedges to hedge its eq- uity portfolio against equity market risk. The financial in- struments used in the related fair value hedges had a negative fair value of € 209 mn (2011: positive fair value of € 334 mn) as of 31 December 2012. Additionally, the ­­­­Allianz Group uses fair value hedges to protect against the change in the fair value of financial as- sets due to movements in interest rates or exchange rates. The derivative financial instruments used for the related fair value hedges of the ­­­­Allianz Group had a total negative fair value as of 31 December 2012 of € 199 mn (2011: negative fair value of € 139 mn). For the year ended 31 December 2012, the ­­Allianz Group recognized for fair value hedges a net loss of € 210 mn (2011: net gain of € 249 mn; 2010: net loss of € 1 mn) on the hedging instrument and a net gain of € 168 mn (2011: net loss of € 311 mn; 2010: net loss of € 30 mn) on the hedged item at- tributable to the hedged risk. Annual Report 2012    Allianz Group326

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