6. RESULTADOS
6.1. Validación de la primera escala: Participación de los padres en la educación
Income tax expense consists of current taxes on taxable income actually charged to the individual Allianz Group companies and changes in deferred tax assets and liabilities. Expense and income from interest and penalties to or from tax authorities are included in current taxes.
Please refer to note 3, where the processes and controls for ensuring an appropriate use of estimates and assumptions are explained.
For Life/Health and for Property-Casualty the central oversight pro- cess includes the following key components:
Group-wide standards and guidelines: They define the reserving practices which must be conducted by each subsidiary including aspects of assumptions and estimates. This includes the organiza- tion and structure, data, methods, and reporting. The Allianz Group Actuarial Department monitors compliance with these standards and guidelines.
Regular site visits: The Allianz Group Actuarial Department regu- larly visits Allianz subsidiaries in order to ensure that they apply the group-wide standards and guidelines. The on-site review focuses on all significant changes in assumptions and methodologies as well as on procedures and professional practices relevant for the reserving process. Furthermore, these meetings are to update knowledge of the underlying local business developments.
Regular quantitative and qualitative reserve monitoring: On a quarterly basis, the Allianz Group Actuarial Department monitors reserve levels, movements and trends across the Allianz Group. This monitoring is conducted on the basis of quarterly data submitted by the subsidiaries as well as through frequent dialogue with local actuaries.
The oversight and monitoring of the Allianz Group’s reserves culminate in quarterly meetings of the Allianz Group Reserve Com- mittee, which is the supervising body that governs all significant reserves. It particularly monitors key developments across the Allianz Group affecting the adequacy of loss reserves.
Life/Health reserves are dependent on estimates and assump- tions, especially on the life expectancy and health of an insured indi- vidual (mortality, longevity and morbidity risk) and on the develop- ment of interest rates and investment returns (asset-liability mismatch risk). These assumptions also have an impact on the pre- sentation of costs arising from the origination of insurance business (acquisition costs and sales inducements) and the value of acquired insurance business (PVFP). To ensure consistency in the application of actuarial methods and assumptions in the Life/Health reserving process, the Allianz Group has designed a two-stage reserving process:
Stage one: Life/Health reserves are calculated by qualified local staff experienced in the business of the subsidiaries. Actuaries in the local entities also conduct tests of the adequacy of the premiums and reserves to cover future claims and expenses (liability adequacy tests). The process follows group-wide standards for applying consis- tent and plausible assumptions. The appropriateness of the reserves and compliance with the group-wide standards is confirmed by the local actuary.
Stage two: The Allianz Group Actuarial Department regularly reviews the local reserving processes, including the appropriateness and consistency of assumptions, and analyzes the movements of reserves. Any adjustments to reserves and other insurance-related reporting items are reported to and analyzed together with the Allianz Group Reserve Committee.
applied and management decisions to be taken in order to establish appropriate values for these assets and liabilities. Any change in the assumptions and estimates could, in certain circumstances, signifi- cantly affect the reported results and values because the range of reasonable judgment in some cases may be very large. The Allianz Group understands the degree of impact that these judgments may have and has established a strong system of governance as well as controls, procedures and guidelines to ensure consistency and soundness over these judgments.
Subsidiaries of the Allianz Group are required to establish con- trols which promote a culture of good judgment and sound decision- making around accounting estimates. These include providing train- ing programs, hiring people with the right background for the job (i.e. certified or experienced accountants, actuaries and finance profes- sionals), and providing formalized policies and procedures manuals for accounting and internal controls.
At the Allianz Group level, processes and committees have been established to ensure sound judgment and consistent application of the Allianz Group’s standards. Furthermore, the Allianz Group has a culture that is strongly committed to reliability, encourages open and transparent discussions, provides a venue for asking questions and admitting mistakes, recognizes experts and expertise, and respects the four eyes principle of review. Committees, none of which are chaired by the CFO of the Allianz Group, ensure that judgmental deci- sions and selection of assumptions are discussed in an open setting among experts and that inconsistencies are identified and resolved. Complex accounting areas that are especially sensitive to the estimates and assumptions are described in the following sections.
reserVes for Loss aND Loss aDJustmeNt eXpeNses,
reserVes for iNsuraNCe aND iNVestmeNt CoNtraCts
aND DeferreD aCQuisitioN Costs
As of 31 December 2014, the Allianz Group reported:1
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reserves for loss and loss adjustments expenses of € 68,989 mn mainly for the Property-Casualty operations, including run-off business and reinsurance business assumed,−
reserves for insurance and investment contracts of € 463,334 mn mainly for the Life/Health operations, and−
deferred acquisition costs of € 22,262 mn.1 Please refer to note 2 Summary of significant accounting policies. For further details, please refer to note 12 Deferred acquisition costs, note 19 Reserves for loss and loss adjustment expenses and note 20 Reserves for insurance and investment contracts.
Property-Casualty reserves are set by leveraging the use of actu- arial techniques and educated judgment. A two-stage process exists for the setting of reserves in the Allianz Group:
Stage one: Property-Casualty reserves are calculated by local reserving actuaries in the Allianz operating entities. Reserves are set based on a thorough analysis of historical data, enhanced by interac- tions with other business functions (e.g. Underwriting, Claims and Reinsurance). Actuarial judgment is applied where necessary, espe- cially in the cases where data is unreliable, scanty or unavailable. The judgment of Property-Casualty actuaries is based on past experience of the characteristics of each line of business, the current stage of the underwriting cycle and the external environment in which the sub- sidiary operates. The reserves are proposed to a local reserve com- mittee, whereby the rationale of the selections are discussed and subsequently documented. A final decision on the reserve selection is made in the reserve committee. Local actuaries are responsible for their compliance with the Group Actuarial Standards and Guidelines.
Stage two: The Allianz Group Actuarial Department forms an opinion on the adequacy of the reserves proposed by the local entities. The Allianz Group Actuarial Department challenges the operating entities’ selection through their continuous interaction with local teams and quarterly attendance in the local reserve committees. The ability to form a view on reserve adequacy is further enabled by regu- lar reviews of the local reserving practices. Such reviews consist of an evaluation of the reserving process, appropriateness and consistency of assumptions and analysis of movement of reserves. Significant findings from such reviews are communicated in the Allianz Group Reserve Committee to initiate actions where necessary.
fair VaLue aND impairmeNts
of fiNaNCiaL iNstrumeNts
As of 31 December 2014, the Allianz Group reported financial instru- ments carried at fair value as follows:1
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€ 171,131 mn of the financial assets and € 93,688 mn of the financial liabilities carried at fair value are classified within level 1 of the fair value hierarchy (unadjusted quoted prices in active markets)−
€ 381,659 mn of the financial assets and € 4,135 mn of the financial liabilities carried at fair value are classified within level 2 of the fair value hierarchy (valuation techniques with mainly observ- able market inputs)−
€ 14,037 mn of the financial assets and € 7,310 mn of the financial liabilities carried at fair value are classified within level 3 of the fair value hierarchy (valuation techniques with significant input1 Please refer to the consolidated financial statements note 2 Summary of significant accounting policies, note 37 Impairments of investments (net) and note 44 Financial instruments for further details regarding
being non-observable). Level 3 financial assets represent 2.5 % of the Allianz Group’s total financial assets carried at fair value. Financial liabilities classified as Level 3 represent 7.0 % of the Allianz Group’s total financial liabilities carried at fair value. Estimates and assumptions are particularly significant when deter- mining the fair value of financial instruments for which at least one significant input is not based on observable market data (classified within level 3 of the fair value hierarchy). The availability of market information is determined by the relative trading levels of identical or similar instruments in the market, with emphasis placed on infor- mation that represents actual market activity or binding quotations from brokers or dealers. When appropriate, values are adjusted on the basis of available market information including pricing, credit- related factors, volatility levels, and liquidity considerations. If suffi- cient market information is unavailable, management’s best esti- mate of a particular input is used to determine the value.
The evaluation of whether a financial debt security is impaired requires analysis of the underlying credit risk/ quality of the relevant issuer and involves significant management judgment. In particular, current publicly available information relating to the issuer and the particular security is considered relating to factors including, but not limited to, evidence of significant financial difficulty of the issuer and breach of contractual obligations of the security, such as a default or delinquency on interest or principal payments. The Allianz Group also considers other factors which could provide objective evidence of a loss event, including the probability of bankruptcy and the lack of an active market due to financial difficulty. The presence of either a decline in fair value below amortized cost or the downgrade of an issuer’s credit rating does not by itself represent objective evidence of a loss event, but may represent objective evidence of a loss event when considered with other available information.
In general, the subsidiaries assume responsibility for assessing fair values and evaluating impairments of financial instruments. This process is consistent with the decentralized organizational structure and reflects the fact that local managers are often best suited to analyze securities trading in local markets. Nevertheless, the subsidiaries are responsible for adhering to the Allianz Group’s internal control policy regarding impairment assessment, mea- surement and disclosure. Subsidiaries must report all impairment decisions on debt securities to the Allianz Group Accounting and Reporting department, which then reviews them for consistency and resolves discrepancies.