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Insurance companies in the Allianz Group use derivatives to man- age their investments efficiently on the basis of general investment targets. The most important aspect of these instruments is hedging against adverse market movements for selected securities or for parts of a portfolio. In our banking business, derivatives are used partic- ularly for trading purposes and to hedge interest-rate, currency and other price risks of the banking book. 

The settlement risk is virtually excluded in the case of exchange- traded products, which are standardized products. By contrast, over- the-counter products, which are individually traded contracts, carry a theoretical credit risk amounting to the positive market values. The Allianz Group therefore closely monitors the credit rating of coun- terparties for OTC derivatives. 

The following table shows the distribution of derivative positions on the balance sheet date: 

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*) Positive and negative market values are shown on a gross basis, i.e. not taking into account netting effects 

