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Allianz Annual Report 2012

L Loss frequency Number of losses in relation to the number of insured risks. Loss ratio Represents claims and insurance benefits in- curred (net) divided by premiums earned (net). M Market value The amount obtainable from the sale of an invest- ment in an active market. N Non-controlling interests Those parts of the equity of affiliated enterprises which are not owned by companies in the Group. Net income attributable to non-controlling interests That part of net income for the year which is not attributable to the share­holders of the ­Allianz Group but to other third parties who hold shares in affiliated enterprises. O Options Derivative financial instruments where the holder is entitled – but not obliged – to buy (call option) or sell (put option) the underlying asset at a pre- determined price sometime in the future. The grantor (writer) of the option, on the other hand, is obliged to transfer or buy the asset and receives a premium for granting the option to the purchaser. OTC derivatives Derivative financial instruments which are not standardized and not traded on an exchange but are traded directly between two counter­parties via over-the-counter (OTC) transactions. P Participating certificates Amount payable on redemption of participating certificates issued. The participating certificates of ­Allianz SE carry distribution rights based on the dividends paid, and subscription rights when the capital stock is increased; but they carry no voting rights, no rights to participate in any proceeds of liquidation, and no rights to be converted into shares. Pension and similar obligations Reserves for current and future post-employment benefits formed for the defined benefit plans of active and former employees. These also include reserves for health care benefits and processing payments. Premiums written/earned Premiums written represent all premium rev- enues in the year under review. Premiums earned represent that part of the premiums written used to provide insurance coverage in that year. In the case of life insurance products where the policy- holder carries the investment risk (e. g. variable annuities), only that part of the premiums used to cover the risk insured and costs involved is treated as premium income. R Reinsurance Where an insurer transfers part of the risk which he has assumed to another insurer. Replicating portfolio Representation of the liabilities of our Life/Health insurance business via standard financial instru- ments. This form of representation mimics the behavior of these liabilities under different market conditions and allows for efficient risk calculations on the basis of Monte Carlo simulations. Repurchase and reverse repurchase agreements A repurchase (repo) transaction involves the sale of securities by the Group to a counterparty, sub- ject to the simultaneous agreement to repurchase these securities at a certain later date, at an agreed price. The securities concerned are re- tained in the Group’s balance sheet for the entire lifetime of the transaction, and are valued in ac- cordance with the accounting principles for finan- cial assets carried at fair value through income or investment securities, respectively. The proceeds of the sale are reported in liabilities to banks or to customers, as appropriate. A reverse repo transac- tion involves the purchase of securities with the simultaneous obligation to sell these securities at a future date, at an agreed price. Such transac- tions are reported in loans and advances to banks, or loans and advances to customers, respectively. Interest income from reverse repos and interest expenses from repos are accrued evenly over the lifetime of the transactions and reported under interest and similar income or interest expenses. Reserves for loss and loss adjustment expenses Reserves for the cost of insurance claims incurred by the end of the year under review but not yet settled. Reserve for premium refunds That part of the operating surplus which will be distributed to policy­holders in the future. This refund of premiums is made on the basis of statu- tory, contractual, or company by-law obligations, or voluntary undertaking. Retained earnings In addition to the reserve required by law in the financial statements of the Group parent company, this item consists mainly of the undistributed prof- its of Group enterprises and amounts transferred from consolidated net income. Risk appetite The level of risk that an organization is prepared to accept, before action is deemed necessary to reduce it. We define risk appetite therefore clearly and comprehensively by using target and mini- mum risk indicators, (quantitative) limit systems, or adequate policies, standards and guidelines to determine the “boundaries” of the Group’s busi- ness operations. Annual Report 2012    Allianz Group E Further Information 369 Joint Advisory Council of the Allianz Companies 370 International Advisory Board 371 Mandates of the Members of the Supervisory Board 372 Mandates of the Members of the Board of Management 374 Glossary 379 Indexes 377