C _ Group Management Report Expenses1 the long-term care business, and positive true-ups in both our fixed index and our variable-annuity businesses in the United States. Expenses € mn 2021 2020 Delta Acquisition expenses and commissions (5,864) (5,458) (407) Operating profit by lines of business Administrative and other expenses (2,135) (1,907) (228) € mn Expenses (7,999) (7,365) (635) 2021 2020 Delta Guaranteed savings & annuities 2,071 2,003 68 Acquisition expenses and commissions as % Protection & health 910 781 129 1 of PVNBP (7.1) (8.3) 1.2 Unit-linked without guarantee 578 488 90 Administrative and other expenses as % of average reserves2,3 (0.3) (0.3) 0.0 Capital-efficient products 1,452 1,087 364 Operating profit 5,011 4,359 652 1_PVNBP before non-controlling interests. 2_Aggregate policy reserves and unit-linked reserves. 3_Yields are pro rata. Acquisition expenses and commissions went up as sales volumes The operating profit in our guaranteed savings & annuities line of increased, particularly in our U.S. non-traditional variable-annuity business increased, largely attributable to France, where higher products and our fixed index annuity products. In addition, product investment income drove up the investment margin. Another key factor transfers and specific distribution channels in France drove up costs was the disposal of our participation in Thailand. The positive trend there. The increase was partly offset by lower sales from capital- was partly offset by a write-off for an administrative system in efficient products in our German life business. Administrative and Benelux. The operating profit in the protection & health line of other expenses went up due to a write-off for an administrative system business increased. Key drivers included a prior year loss recognition in Benelux, and in Germany as a result of a reallocation between in our U.S. long-term care business as well as a reserve release and a acquisition and administrative expenses as well as higher higher investment margin in our German health business. A lower restructuring and IT expenses. technical margin in Indonesia had a partially offsetting effect. Our operating profit in the unit-linked without guarantee line of business Technical margin2 went up. Most of the growth resulted from increased unit-linked Our technical margin increased, particularly because of a positive management fees in Italy. Finally, the higher operating profit in our lapse and reinsurance margin in the United States. The release of capital-efficient products line of business was primarily due to our pandemic-related claim reserves in Germany also contributed to the non-traditional variable-annuities business in the United States, where margin increase. Higher claims in Asia-Pacific, particularly in the technical and investment margin as well as the reserve loadings all Indonesia, partly offset the positive development. improved. The growth in our German life business was another contributing factor. Impact of change in deferred acquisition costs (DAC)3 Net income Impact of change in DAC € mn Our net income increased by € 404 mn. This was attributable to the 2021 2020 Delta higher operating profit in 2021. The non-operating result decreased, Capitalization of DAC 2,139 1,745 394 mainly due to reduced realized gains compared to last year, where the Amortization, unlocking, and true-up of DAC (1,762) (1,951) 189 disposal of Allianz Popular S.L. in Spain and debt investments in Impact of change in DAC 377 (206) 583 France led to a high result. On the other hand, the non-operating impact of € 0.4 bn from a reinsurance transaction in our fixed index annuity portfolio in the United States, as well as hyperinflation impacts in Lebanon, positively impacted the non-operating result. The impact of change in DAC turned positive with a high result, largely due to our business in the United States. Higher capitalization in line with higher sales in our business with fixed indexed and non-traditional Return on equity variable-annuity products had caused a favorable effect for this year. Additional drivers included stronger unit-linked product sales in Our return on equity went up slightly by 0.2 percentage points to Taiwan and Indonesia and higher deferrable costs in France. 13.0 %. Amortization decreased, dominated by a prior year loss recognition in 1_Expenses include acquisition expenses and commissions (excluding commission clawbacks, which are 3_The impact of change in DAC includes effects of the change in DAC, unearned revenue reserves (URR), allocated to the technical margin) as well as administrative and other expenses. and the value of business acquired (VOBA). It represents the net impact of deferral and amortization of 2_The technical margin comprises the risk result (risk premiums less benefits in excess of reserves less policy- acquisition costs and front-end loadings on operating profit, and therefore deviates from the IFRS holder participation), the lapse result (surrender charges and commission clawbacks) and the financial statements. reinsurance result. 82 Annual Report 2021 − Allianz Group