E _ Further Information Hereinafter we present the key audit matters: With the support of our internal valuation specialists, we have compared the respective valuation methods applied and the material assumptions with generally recognized methods and ❶ Measurement of certain technical assets and liabilities as well industry standards and examined to what extent these are as certain financial liabilities carried at fair value (Level 3) in appropriate for the valuation of technical assets and liabilities as life and health insurance well as financial liabilities carried at fair value (Level 3). A key point of our audit was the assessment of the liability adequacy test and ① In the consolidated financial statements of the Company, assets the recoverability of reinsurance assets, the evaluation of and liabilities of the Life and Health Insurance business segment expected gross margins/profits, which are used, among other amounting to € 18,657 million and € 617,109 million (1.6 % or things, as the basis for amortizing the deferred acquisition costs, 54.2 % of consolidated total assets) are reported under the and the assessment of the appropriateness of material "Deferred acquisition costs" and "Reserves for insurance and assumptions not observable in the market for the measurement of investment contracts" balance sheet items, respectively. derivative financial instruments, such as mortality rates and Furthermore, financial liabilities from the life and health insurance lapse/surrender rates. Our audit also included an evaluation of the segment amounting to € 14,271 million (1.3 % of consolidated plausibility and integrity of the data and assumptions used in the total assets) are reported that are classified as Level 3 of the fair valuation and of the Group Actuarial department's reporting to value hierarchy according to the requirements of IFRS 13. the Group Reserve Committee. Furthermore, assets amounting to € 42,059 million (3.7 % of Based on our audit procedures, we were able to satisfy consolidated total assets) are reported under the “Reinsurance ourselves that the methods and assumptions used by the executive assets” balance sheet item and liabilities are reported under the directors are appropriate overall for measuring certain technical „Other Liabilities" balance sheet item relating to reinsurance assets and liabilities as well as the financial liabilities carried at fair contracts of the life/health business segment. value (Level 3). These technical assets and liabilities are measured using ③ The Company's disclosures on the measurement of certain complex actuarial methods and models based on a comprehensive process for arriving at assumptions about future technical assets and liabilities as well as the measurement of developments relating to the insurance portfolios to be measured. certain financial liabilities carried at fair value (Level 3) in life and The methods used and the actuarial assumptions determined in health insurance are included in sections 2 and 15 and sections 2 connection with interest rates, investment yields, mortality, and 34, respectively, of the notes to the consolidated financial invalidity, longevity, costs and future behaviour of policyholders statements. could materially affect the measurement of these technical assets and liabilities. ❷ Measurement of certain technical provisions in property- casualty insurance The financial liabilities concerned include mainly bifurcated derivative financial instruments resulting from insurance contracts and are assigned to Level 3 of the fair value hierarchy as for the ① In the consolidated financial statements of the Company, measurement in the underlying valuation models sufficient technical provisions amounting to € 86,974 million (7.6 % of observable market data was not available and therefore consolidated total assets) are reported under the "Reserves for loss significant unobservable inputs had to be used instead. These and loss adjustment expenses" balance sheet item. Of this amount, inputs may include data derived from approximations using, inter € 73,425 million is attributable to the Property-Casualty Insurance alia, historical data. In this context, the derivative financial business segment. instruments resulting from insurance contracts are subject to an Reserves for loss and loss adjustment expenses in property increased valuation risk due to lower objectivity and the casualty insurance represent the Company's expectations underlying assumptions and estimates of the executive directors. regarding future payments for known and unknown claims Against this background and due to the material significance including associated expenses. The Company uses various of the amounts for the assets, liabilities and financial performance methods to estimate these obligations. Furthermore, the of the Group and the complex process for determining the measurement of these provisions requires a significant degree of underlying assumptions and estimates of the executive directors, judgment by the executive directors of the Company regarding the the measurement of these technical assets and liabilities as well as assumptions made, such as inflation, loss developments and of the financial liabilities carried at fair value (Level 3) was of regulatory changes. In particular, the lines of products with low loss particular significance in the context of our audit. frequency, high individual losses or long claims settlement periods are usually subject to increased estimation uncertainties. ② As part of our audit, we assessed the appropriateness of selected Due to the material significance of these provisions for the controls established by the Company for the purpose of selecting assets, liabilities and financial performance of the Group as well as the valuation methods applied, determining assumptions and the considerable scope for judgment on the part of the executive making estimates for the measurement of certain technical assets directors and the associated uncertainties in the estimations and liabilities as well as financial liabilities carried at fair value made, the measurement of the technical provisions in property (Level 3). In doing so we evaluated, among others, the integrity of casualty insurance was of particular significance to our audit. the underlying data and the process for determining the assumptions and estimates used in the valuation. 198 Annual Report 2021 − Allianz Group