D _ Consolidated Financial Statements The majority of the Allianz Group’s Life/Health business segment In addition, the operations in these markets may also have significant operations are conducted in Western Europe. Insurance laws and mortality and expense margins. However, the Allianz Group’s regulations in Europe have historically been characterized by legal or Life/Health operations in Switzerland and Belgium have high contractual minimum participation of contract holders in the profits of guaranteed minimum interest rates on older contracts in their the insurance company issuing the contract. In particular, life insurance portfolios and, as a result, may be sensitive to declines in investment business in Germany, Switzerland, and Austria, which comprises rates or a prolonged low interest rate environment. In 2021, significant approximately 53 % (2020: 54 %) of the Allianz Group’s reserves for parts of said portfolios have been sold or reinsured. insurance and investment contracts as of 31 December 2021, includes Further risk disclosure requirements of IFRS 4 in connection with a substantial level of policyholder participation in all sources of profit, IFRS 7 are reflected in the following sections of the Risk and including mortality/morbidity, investment, and expense. As a result of Opportunity Report within the Group Management Report: this policyholder participation, the Allianz Group’s exposure to insur- ance, investment, and expense risk is mitigated. − Internal risk capital framework, Furthermore, all of the Allianz Group’s annuity policies issued in − Risk-based steering and risk management, the United States meet the criteria for classification as insurance − Underwriting risk in the section Quantifiable risks and contracts under IFRS 4 because they include options for contract opportunities by risk category. holders to elect a life-contingent annuity. These contracts currently do expose the Allianz Group to a certain longevity risk, however, adverse developments can be counteracted by using the flexible crediting As of 31 December 2021, benefits for insurance and investment options on the in-force book. Additionally, many of the Allianz Group’s contracts which are expected to be due in 2022 amounted to € 62 bn, traditional contracts issued in France and Italy do not incorporate while those expected to be due between 2023 and 2026 amounted to significant insurance risk, although they are accounted for as insurance € 204 bn, and those expected to be due after 2026 amounted to contracts because of their discretionary participation features. € 1,599 bn. Similarly, a significant portion of the Allianz Group’s unit-linked The resulting total benefits for insurance and investment contracts contracts in France and Italy do not incorporate significant insurance in the amount of € 1,865 bn include contracts where the timing and risk. amount of payments are considered fixed and determinable, as well As a result of the considerable diversity in types of contracts as contracts which have no specified maturity dates and may result in issued, including the offsetting effects of mortality risk and longevity a payment to the contract beneficiary, depending on mortality and risk inherent in a combined portfolio of life insurance and annuity morbidity experience and the incidence of surrenders, lapses, or products, the geographic diversity of the Allianz Group’s Life/Health maturities. Furthermore, the amounts are undiscounted and do not business segment and the substantial level of policyholder include any expected future premiums; therefore they significantly participation in mortality/morbidity risk in certain countries in Western exceed the reserves for insurance and investment contracts presented Europe, the Allianz Group does not believe its Life/Health segment has in the consolidated balance sheet. any significant concentrations of insurance risk, nor does it believe its For contracts without fixed and determinable payments, the net income or shareholders’ equity is highly sensitive to insurance risk. Allianz Group has made assumptions in estimating the undiscounted The Allianz Group’s Life/Health business segment is exposed to cash flows of contractual policy benefits including mortality, morbidity, significant investment risk as a result of guaranteed minimum interest interest crediting rates, policyholder participation in profits, and future rates being included in most of its non-unit-linked contracts. The lapse rates. These assumptions represent current best estimates and weighted average guaranteed minimum interest rates of the Allianz may differ from the estimates used to establish the reserves for Group’s largest operating entities in the business segment Life/Health, insurance and investment contracts in accordance with the Allianz comprising 86 % (2020: 86 %) of the aggregate policy reserves in this Group’s established accounting policy. Due to the uncertainty of the business segment in 2021, can be summarized by country as follows: assumptions used, the amount presented could be materially different from the actual incurred payments in future periods. Weighted average guaranteed minimum interest rates of life insurance entities As of 31 December 2021 2020 Aggregate Aggregate Guaranteed policy Guaranteed policy rate reserves rate reserves % € bn % € bn Germany 1.7 228.5 1.8 218.3 United States 0.4 123.6 0.5 104.3 France 0.3 54.2 0.3 56.0 Italy 1.0 27.6 1.3 28.8 Switzerland 1.4 12.4 1.5 12.0 Belgium 1.4 6.8 1.9 7.1 In most of these markets, the effective interest rates earned on the investment portfolio exceed these guaranteed minimum interest rates. 156 Annual Report 2021 − Allianz Group