D _ Consolidated Financial Statements amount is based on the best possible assessment of the tax payment on an instrument-by-instrument basis, in a way that aligns with how the expected. Tax refund claims from uncertain tax positions are entity expects those assets to be classified on initial application of recognized when it is probable that they can be realized. IFRS 9. The Allianz Group intends to apply the classification overlay, Deferred tax assets and liabilities are calculated for temporary including the impairment requirements of IFRS 9, consistently to all differences between the tax bases and the financial statement carrying eligible financial instruments. amounts, including differences from consolidation, unused tax loss IFRS 17 provides comprehensive guidance on accounting for carry-forwards, and unused tax credits. The measurement of deferred insurance contracts issued, reinsurance contracts held, and investment tax assets has to take into account estimates on the availability of future contracts with discretionary participation features. It introduces three taxable profits. This includes the character and amounts of taxable new measurement models, reflecting a different extent of policyholder future profits, the periods in which those profits are expected to occur, participation in investment performance or overall insurance entity and the availability of tax planning opportunities. The Allianz Group performance. The general measurement model, also known as the recognizes a valuation allowance for deferred tax assets when it is building block approach, consists of the fulfillment cash flows and the unlikely that a corresponding amount of future taxable profit will be contractual service margin. The fulfillment cash flows represent the available against which the deductible temporary differences, tax loss risk-adjusted present value of an entity’s rights and obligations to the carry forwards and tax credits can be utilized. policyholders, comprising estimates of expected cash flows, Further explanations are given in note 3 discounting, and an explicit risk adjustment for non-financial risk. The 2. contractual service margin represents the unearned profit from in- force contracts that an entity will recognize as it provides services over the coverage period. The variable fee approach is a mandatory Recently adopted accounting pronouncements modification of the general measurement model regarding the The following amendments and revisions to existing standards treatment of the contractual service margin in order to accommodate became effective for the Allianz Group’s consolidated financial direct participating contracts. The premium allocation approach is a statements as of 1 January 2021: simplified approach an entity may choose to use when certain criteria are met. − IFRS 9, IAS 39, IFRS 4 and IFRS 16, Interest Rate Benchmark Measurement is not carried out at the level of individual contracts, Reform (Phase 2), but on the basis of groups of contracts. To build groups of contracts, an − IFRS 4, Extension of the Temporary Exemption from Applying entity first needs to define portfolios which include contracts with IFRS 9. similar risks that are managed together. These portfolios are to be subdivided into groups of contracts on the basis of profitability and Regarding IBOR Reform, the transition to alternative benchmark rates annual cohorts. On 23 November 2021, the E.U. Commission endorsed affects two components, the risk-free rates for discounting cash flows IFRS 17 into EU law. The requirement to form annual cohorts in derivative transactions (e.g., Eonia in Europe) as well as the short- (IFRS 17.22) is subject to an optional exemption in the E.U. term floating rate leg in many transactions (e.g., 6-month-Euribor in endorsement: The E.U. Commission grants E.U. users the right to choose Europe). whether or not to apply the requirement in IFRS 17.22 for certain Overall the risks involved in transitions for Allianz as a group are contracts. Allianz will not make use of this exemption and apply not material from an economic perspective as for the Allianz Group IFRS 17 as issued by the IASB. the derivatives are fully migrated in the meantime due to the already In the statement of financial position, DAC and insurance-related implemented transition of the risk-free discount rate in major currency receivables will no longer be presented separately, but as part of the blocks. For cash instruments the transition of the risk-free discount rate, insurance liabilities. This will lead to a reduction in total assets, offset but also the transition of the reference rate is relevant. In EUR where by a reduction in total liabilities, with only limited impact on equity. the majority of the holdings are, the transition not only of the risk-free discount rate but also of the reference rate Euribor has already happened. The USD Libor transition will happen mid of 2023. For non-life insurance contracts, the Allianz Group expects that a large All other changes had no material impact on the Allianz Group's part of the business qualifies for the premium allocation approach financial results or financial position. eligibility (probably >95 %). For operational reasons, some of the entities which have both Recently issued accounting pronouncements premium allocation approach eligible business and general measurement model business will implement the general IFRS 17, Insurance Contracts measurement model for their whole business. From a P&L and KPI In May 2017, the IASB issued IFRS 17, Insurance Contracts. In addition, perspective, the general measurement model and premium allocation the IASB issued further amendments to IFRS 17 in June 2020 and approach lead to almost identical results, and the Allianz Group does December 2021. The effective date of the standard was postponed not plan general measurement model specific KPIs for the Property- until 1 January 2023. The latest amendment issued by the IASB on Casualty segment. 9 December 2021 adds a transition option that permits an entity to The main changes for non-life insurance contracts comprise the apply a classification overlay in the comparative periods presented on mandatory discounting of loss reserves, a higher transparency of loss- initial application of IFRS 17. The overlay allows all financial assets, making portfolios due to more granular onerous contract testing, and including those held in respect of activities not connected to contracts the introduction of the risk adjustment for non-financial risk. within the scope of IFRS 17, to be classified in the comparative periods, Furthermore, IFRS 17 will change the presentation of insurance 132 Annual Report 2021 − Allianz Group