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Interim Report Third Quarter 2014

104 Interim Report Third Quarter and First Nine Months of 2014    Allianz Group Available-for-sale investments – Corporate bonds Corporate bonds within available-for-sale investments classified as level 3 are mainly priced based on the income approach (€ 4.1 bn). The primary non-market observable input used in the discounted cash flow method is an option adjusted spread taken from a bench- marksecurity.Asignificantyieldincreaseofthebenchmarksecurities in isolation could result in a decreased fair value, while a significant yield decrease could result in an increased fair value. However, a 10 % stress of the main non-market observable inputs has only an imma- terial impact on fair value. Financial liabilities held for trading Financial liabilities held for trading mainly include embedded de­rivative financial instruments relating to annuity products that are priced internally using discounted cash flow models (€ 5.5 bn). A sig- nificant decrease (increase) in surrender rates, mortality rates or the utilization of annuitization benefits could result in a higher (lower) fair value. For products with a high death benefit, surrender rates may show an opposite effect. However, a 10 % stress of the main non- market observable inputs has only an immaterial impact on fair value. Quantification of significant non-market observable inputs The following table shows the quantitative description of valuation technique(s) and input(s) used for the level 3 portfolios described above. Quantitative description of valuation technique(s) and non-market observable input(s) used € mn Description Fair value as of 30 September 2014 Valuation technique(s) Non-market observable input(s) Range Available-for-sale investments Equity securities 5,062 Net asset value n/a n/a Corporate bonds 4,075 Discounted cash flow method Option adjusted spread 14 bps – 574 bps Financial liabilities held for trading Derivative financial instruments 5,465 Fixed-indexed annuities 4,645 Present value of insurance cash flow Annuitizations 0 % – 25 % Surrenders 0 % – 25 % Mortality 0 % – 100 % Withdrawal benefit election 0 % – 50 % Volatility n/a Variable annuities 820 Deterministic discounted cash flow Surrenders 0.5 % – 35 % Mortality 0 % – 100 %

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