C _ Group Management Report Life/Health insurance operations Impact of change in Deferred Acquisition Costs (DAC) “Impact of change in DAC” includes the effects of changes in DAC, The reconciling item scope comprises the effects from out-of-scope unearned revenue reserves (URR), and value of business acquired entities in the profit sources reporting compilation. Operating profit (VOBA). As such, it is the net impact of the deferral and amortization from operating entities that are out of scope is included in the of acquisition costs and front-end loadings on operating profit. investment margin. Currently, 23 entities – comprising the vast majority URR capitalized: capitalization amount of unearned revenue of Life/Health total statutory premiums – are in scope. reserves (URR) and deferred profit liabilities (DPL) for FAS 97 LP. URR amortized: total amount of URR amortized includes Expenses scheduled URR amortization, true-up, and unlocking. Expenses include acquisition expenses and commissions as well as Both capitalization and amortization are included in the line item administrative and other expenses. premiums earned (net) in the Group income statement. The delta shown as definitions in acquisition expenses and Policyholder participation is included in “Change in our commissions represents commission clawbacks, which are allocated to reserves for insurance and investment contracts (net)” in the Group the technical margin. The delta shown as definitions in administrative income statement. and other expenses mainly represents restructuring charges, which are stated in a separate line item in the Group income statement. Reconciliation to Notes to the Consolidated Financial Statements € mn Acquisition, administrative, capitalization, and amortization of DAC 2021 2020 € mn 1 Acquisition expenses and commissions (5,864) (5,458) 2021 2020 Operating administrative and other expenses1 (2,135) (1,907) 1 Non-Operating administrative and other expenses (36) - Acquisition expenses and commissions (5,864) (5,458) Definitions 15 12 Capitalization of DAC2 2,139 1,745 Scope (142) (129) Operating amortization, unlocking, and true-up of DAC1 (1,762) (1,951) Acquisition costs incurred (5,992) (5,575) Non-Operating amortization, unlocking, and true-up of DAC (228) - Capitalization of DAC1 2,139 1,745 Acquisition and administrative expenses (7,887) (7,571) Definition: URR capitalized 702 642 Definitions 602 691 2 Scope (228) (302) Definition: policyholder participation 1,039 1,078 Scope 54 30 Commissions and profit received on reinsurance business ceded 195 131 Capitalization of DAC 3,934 3,494 Administrative expenses on reinsurance business ceded 11 9 1 2 Operating amortization, unlocking, and true-up of DAC (1,762) (1,951) Acquisition and administrative expenses (net) (7,307) (7,042) Non-Operating amortization, unlocking, and true-up of DAC (228) - 1_As per Group Management Report. Definition: URR amortized (254) (79) 2_As per notes to the Consolidated Financial Statements. 2 Definition: policyholder participation (1,093) (1,127) Scope (7) (36) Amortization, unlocking, and true-up of DAC (3,345) (3,194) Commissions and profit received on reinsurance business ceded 195 131 3 Acquisition costs (5,208) (5,144) Operating administrative and other expenses1 (2,135) (1,907) Non-Operating administrative and other expenses (36) - Definitions 194 166 Scope (133) (166) Administrative expenses on reinsurance business ceded 11 9 3 Administrative expenses (2,100) (1,898) 1_As per Group Management Report. 2_For German Speaking Countries, policyholder participation on revaluation of DAC/URR capitalization/amortization. 3_As per notes to the Consolidated Financial Statements. 96 Annual Report 2021 − Allianz Group