(1)
| The table sets forth the Allianz Group’s contractual obligations as of December 31, 2006. Contractual obligations do not include contingent liabilities or commitments and only
The table sets forth the Allianz Group’s contractual obligations as of December 31, 2008. Contractual obligations do not include contingent liabilities or commitments. Only transactions with parties outside the Allianz Group are considered. With the announcement of the sale of Dresdner Bank from Allianz to Commerzbank as of August 31, 2008, Dresdner Bank was classified as a disposal group held for sale and discontinued operations. Following this classification, contractual obligations of Dresdner Bank are presented as part of the disposal group held for sale and discontinued operations. The following table includes only continuing operations. The table includes only liabilities that represent fixed and determinable amounts. The table excludes interest on floating rate long-term debt obligations and interest on money market securities, as the contractual interest rate on floating rate interest is not fixed and determinable. The amount and timing of interest on money market securities is not fixed and determinable since these instruments have a daily maturity. For further information, refer to Notes 23 and 24 to the consolidated financial statements. Furthermore, reserves for insurance and investment contracts presented in the table include contracts where the timing and amount of payments are considered fixed and determinable and contracts which have no specified maturity dates and may result in a payment to the contract holder depending on mortality and morbidity experience and the incidence of surrenders, lapses, or maturities. For contracts which do not have payments that are fixed and determinable, the Allianz Group has made assumptions to estimate the undiscounted cash flows of contractual policy benefits including mortality, morbidity, interest crediting rates, policyholder participation in profits, and future lapse rates. These assumptions represent current best estimates, and may differ from the estimates originally used to establish the reserves for insurance and investment contracts as a result of the lock-in of assumptions on the issue dates of the contracts as required by the Allianz Group’s established accounting policy. For further information, refer to Note 2 to the consolidated financial statements. Due to the uncertainty of the assumptions used, the amount presented could be materially different from the actual incurred payments in future periods. Furthermore, these amounts do not include premiums and fees expected to be received, investment income earned, expenses incurred to parties other than the policyholders such as agents, or administrative expenses. In addition, these amounts are presented net of reinsurance expected to be received as a result of these cash flows. The amounts presented in this table are undiscounted and therefore exceed the reserves for insurance and investment contracts presented in the consolidated balance sheet. For further information on reserves for insurance and investment contracts, refer to Note 20 to the consolidated financial statements.
As of December 31, 2008, the income tax obligations amounted to €1,446 million. Thereof €1,106 million the Allianz Group expects to pay within the twelve months after the balance sheet date. For the remaining amount of €340 million an estimate of the timing of cash outflows is not reasonably possible. The income tax obligations are not included in the table below. | | | | | | | | | | | | | | Payments due by period as of December 31, 2008 | | | | Less than
1 year | | 1-3 years | | 3-5 years | | More than
5 years | | Total | | | | € mn | | € mn | | € mn | | € mn | | € mn | Long-term debt obligations(1) | | 5,191 | | 329 | | 2,479 | | 10,891 | | 18,890 | Interest on long-term debt obligations(2) | | 21 | | 9 | | 129 | | 285 | | 444 | Operating lease obligations(3) | | 261 | | 470 | | 371 | | 1,108 | | 2,210 | Purchase obligations(4) | | 166 | | 258 | | 116 | | 203 | | 743 | Liabilities to banks and customers(5) | | 15,480 | | 1,020 | | 760 | | 1,191 | | 18,451 | Future policy benefits | | 34,376 | | 99,114 | | 63,172 | | 642,805 | | 839,467 | Reserves for loss and loss adjustment expenses(6) | | 17,271 | | 14,455 | | 7,212 | | 16,678 | | 55,616 | | | | | | | | | | | | Total contractual obligations | | 72,766 | | 115,655 | | 74,239 | | 673,161 | | 935,821 | | | | | | | | | | | |
(1) | For further information, refer to Notes 23 and 24 to the consolidated financial statements. Total obligations of €56,894 at December 31, 2007 included obligations of Dresdner Bank, which are no longer obligations of the Allianz Group. |
(2) | For further information, see Notes 21 and 22 to our consolidated financial statements.
|
(3)
| Amounts included in the table reflect estimates of interest on fixed rate long-term debt obligations to be made to lenders based upon the contractually fixed interest rates. Amounts excluded from the table represent interest on floating rate long-term debt obligations and interest on money market securities. The amount of floating rate interest is not reasonably fixed and determinable since the interest rate is not contractually fixed. The amount and timing of interest on money market securities is not reasonably fixed and determinable since these instruments have a daily maturity. For further information, see Notes 21 and 22 to our consolidated financial statements. |
(4)(3)
| The amount of €3,909 million€2,210 mn is gross of €82 million€43 mn related to subleases, which represent cash inflow to the Allianz Group. |
(5)(4)
| Purchase obligations only include transactions related to goods and services; purchase obligations for financial instruments are excluded. |
(6)(5)
| Liabilities to banks and customers include €18,216 million€311 mn and €68,677 million€4,096 mn of payables on demand, respectively. For further information, seerefer to Note 1517 to ourthe consolidated financial statements. Total liabilities of €336,494 at December 31, 2007 included liabilities of Dresdner Bank, which are no longer liabilities of the Allianz Group. |
(7)(6)
| Reserves for insurance and investment contracts include contracts where the timing and amount of payments are considered fixed and determinable and contracts which have no specified maturity dates and may or may not result in a payment to the contract holder depending on mortality and morbidity experience and the incidence of surrenders, lapses, or maturities. For contracts which do not have payments that are fixed and determinable, the Allianz Group has made assumptions to estimate the undiscounted cash flows of contractual policy benefits including mortality, morbidity, interest crediting rates, policyholder participation in profits, and future lapse rates. These assumptions represent current best estimates, and may differ from estimates utilized to establish theComprise reserves for loss and loss adjustment expenses from the Property-Casualty insurance and investment contracts as a result of applying the provisions of U.S. GAAP relating to the lock-in of assumptions on the issuance dates of the contracts.operations. Due to the uncertainty of the assumptions used, the amountamounts presented could be materially different from the actual incurred payments in future periods. Furthermore, these amounts do not include premiums and fees expected to be received, investment income earned, expenses incurred to parties other than the policyholder such as agents, or administrative expenses. In addition, these amounts are presented net of reinsurance expected to be received as a result of these cash flows. The amounts presented in this table are undiscounted and therefore exceed the reserves for insurance and investment contracts presented in the consolidated balance sheet. For further information on reserves for insurance and investment contracts, see Note 18 to our consolidated financial statements.
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(8)
| Comprise reserves for loss and loss adjustment expenses from our property-casualty insurance operations. The amounts presented in the table above table are gross of reinsurance ceded. The corresponding amounts, net of reinsurance ceded, are €14,812 million, €12,739 million, €6,705 million€14,621 mn, €12,339 mn, €6,215 mn and €15,075 million€14,620 mn for the periods less than 1 year, 1-3 years, 3-5 years and more than 5 years, respectively. For further information on reserves for loss and loss adjustment expenses, see “Information onrefer to Note 19 to the Company—Property-Casualty Insurance Reserves” and Note 17 to our consolidated financial statements.
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Reconciliation of future policy benefits The following table presents a reconciliation of future policy benefits to the total balance sheet positions, which include reserves for insurance and investment contracts and financial liabilities for unit-linked contracts, as presented in the consolidated balance sheet: | | | | (9)As of December 31,
| | 2008 | | | | € mn | | Comprise estimatedFuture policy benefits
| | 839,467 | | Effect of discounting and differences between locked-in and best estimate assumptions | | (363,279 | ) | Expected future benefit payments. For further information, see Note 47premiums and expenses | | (147,731 | ) | Total consolidated balance sheet positions | | 328,457 | | Thereof: | | | | Reserves for insurance and investment contracts | | 296,557 | | Financial liabilities for unit-linked contracts | | 50,450 | | Market value liability options | | 5,163 | | Less: | | | | Deferred acquisition costs | | 18,695 | | Ceded reserves to ourreinsurers | | 5,018 | | Total consolidated financial statements.balance sheet positions | | 328,457 | |
Reconciling items related to the effect of discounting and differences between locked-in and best estimate assumptions occur because future policy benefits are presented on an undiscounted basis, while reserves for insurance and investment contracts in the consolidated balance sheet reflect the time value of money. Furthermore, future policy benefits are based on current best estimate assumptions such as mortality, morbidity, interest rates, policyholder participation in profits and future lapse rates. For certain contracts (SFAS 60 and SFAS 97), current best estimate assumptions may differ from the locked-in estimates required to be used to establish the reserves for insurance and investment contracts in the consolidated balance sheet, which also include provisions for adverse deviations as required by the Allianz Group’s established accounting policy. Reconciling items related to expected future premiums and expenses occur because future policy benefits take into account best estimates of future premiums expected to be received and future expenditures expected to be incurred. Future policy benefits implicitly include embedded derivatives or market value liability options (“MVLO”) of our equity indexed annuity business that are accounted for as derivatives and are presented within financial liabilities carried at fair value through income in our consolidated balance sheet. Deferred acquisition costs comprise deferred acquisition costs for our Life/Health segment, present value of future profits and deferred sales inducements. Refer to Note 12 to our consolidated financial statements for more information. Ceded reserves to reinsurers are presented within reinsurance assets in our consolidated balance sheet. Recent and Expected Developments First Quarter 2007 ResultsEconomic Outlook
Allianz announced its unaudited consolidated financial results for the three months ended March 31, 2007 on May 8, 2007 and furnished its “Interim Report First Quarter of 2007” to the SEC on Form 6-K on May 9, 2007. At €29.3 billion, total revenues declined by 1.1% compared to the three months ended March 31, 2006, due largely to the depreciation of the U.S. Dollar compared to the Euro primarily impacting the development in our Property-Casualty, Life/Health and Asset Management segments. Following the segments’ operating profit growth and the high level of realized capital gains, net income for the first quarter of 2007 rose 82.1% over the prior year period to €3.2 billion. For more information on our 2007 first quarter results, see our report furnished to the SEC on Form 6-K mentioned above, and for more information on certain recent events, see Note 52 to the consolidated financial statements.
Significant Expected InvestmentsContinuing uncertainty
On January 18, 2007, Allianz SE announced its intention to launch a tender offer to acquire the outstanding shares in Assurances Générales de France S.A. (or “AGF”, and together with its subsidiaries, the “AGF Group”) that it did not already own. The Board of Directors of AGF welcomed the proposed transaction.
The acceptance period started on March 23, 2007 after the draft tender offer had been approved by the French stock market authority Autorité des Marchés Financiers (AMF) and ended on April 20, 2007. The consideration for one AGF share provided in the offer was 0.25 of an Allianz SE share and €87.50 in cash, which was increased to €88.45 to reflect the dividend per Allianz SE share for 2006 multiplied by 0.25, as Allianz SE shares issued due to the tender offer did not carry the rights to dividends for 2006.
On April 27, 2007, the AMF announced that Allianz SE would hold, following the closing of the tender offer, (directly and through its subsidiary Allianz Holding France SAS) 178,030,698 shares of AGF, representing 92.18% of AGF share capital and voting rights. Taking into account the 6,199,392 treasury shares held by AGF, representing 3.21% of
the share capital, following the tender offer minority shareholders hold 8,895,695 shares, representing 4.61% of the AGF share capital and voting rights. On May 9, 2007, Allianz SE and its subsidiary Allianz Holding France SAS, confirmed that they would launch a mandatory squeeze-out procedure on AGF’s shares still held by minority shareholders pursuant to the conditions set forth in the General Regulations of the AMF in order to achieve 100% ownership of AGF. Subject to review and prior authorization by the AMF, the squeeze-out will be implemented on the basis of a price of €125.00 in cash per AGF share. AGF’s minority shareholders will also receive the 2006 AGF dividend of €4.25 per share.
The aim of the full acquisition of AGF is to allow Allianz to simplify the implementation of Group-wide initiatives and to strengthen our position in one of our core home markets.
In addition, Allianz AZL Vermögensverwaltung GmbH & Co. KG, a subsidiary of Allianz Deutschland AG, Allianz SE’s wholly-owned German insurance holding company, launched a tender offer on February 28, 2007the year under review, the global economy entered the deepest recession it has seen in decades. The situation is not expected to acquire the approximately 9% of outstanding shares of Allianz Lebensversicherungs-Aktiengesellschaft (or “Allianz Leben”) that Allianz didstabilize until sometime later in 2009, not already own. Allianz AZL Vermögensverwaltung GmbH & Co. KG offered €750.00 in cash per Allianz Leben share. The acceptance period ended on March 29, 2007. The resultsleast because of the tender offer were published on April 2, 2007. Following the closing of the tender offertime lag for the outstanding Allianz Leben shares,massive global expansion of monetary and fiscal policy to have an effect. Nevertheless despite these policy actions, gross national product in the Allianz Group increased its ownership interest by 1.55% from 91.03%industrialized countries is expected to 92.58% of the share capital. Allianz Group’s interest therefore stays below the 95% level required for a squeeze-out of the remaining minority shareholders pursuant to the German Stock Corporation Act. The cash consideration requiredfall for the two transactionsyear as a whole. In contrast, we expect the emerging economies to grow overall. The financial markets will not be calm in 2009. The distortions from the boom years have not yet fully worked through, particularly in the banking sector. The process of approximately €7 billion, includingadjustment and consolidation that is required will continue to create an atmosphere of great uncertainty in the contemplated squeeze-out on AGF’s shares still held by minority shareholders, is being funded internally bymarkets. Central banks and governments remain obligated to avert the Allianz Group. However, bridge loans from differentrisk of a systemic crisis. Taken together, these developments create a very challenging environment for financial institutions were also used. With the additional approximately €3 billion share consideration paid to AGF shareholders, the total acquisition cost for the additional AGF and Allianz Leben minority shareholdings, including the contemplated squeeze-out on AGF’s shares still held by minority shareholders, will amount to approximately €10 billion.services providers in 2009.
Economic Outlook—Little or no Business Cycle Burdens for Financial Service ProvidersStabilization
We expect that the dynamics of global economic development will slacken slightly in 2007. Both industrialized countries and emerging markets will grow more slowly than in 2006. Uncertainties still arise from the United States’ foreign trade imbalance. Since the danger of inflation is low, we are not counting on a more restrictive monetary policy; in fact, the key rate in the United States may rather be lowered. This means that the macroeconomic framework conditions are expected to have a rather positive impact on financial service providers’ business.
Our economists predict a global economy growth of approximately 3% in 2007, which is about half a percentage point less than last year. This is expected to provide breathing space after the strong growth in previous years. Development in emerging markets should be particularly dynamic again; we expect an increase of 5.75%. We estimate growth in industrialized countries at 2.25%, after nearly 3% in 2006.
Once again, Asia is the most powerful growth driver in the global economy; we expect growth of over 7% here, as compared to 8% in 2006. The highest growth rates are once more expected to be achieved by China (9.5 %; 2006: 10.5%) and India (8%; 2006: 9%). Most other economies in Asia are expected to continue their growth trend of last year, with the exception of Singapore, where the 7.5% rate in 2006 could fall to 5% in 2007. For Japan, we expect economic growth to remain unchanged at 2% (2006: 2.1%).
We believe that, following an expansion of a good 2% last year, the USglobal economy will not grow in 2009 (even including the emerging markets). We expect the industrialized countries to shrink by about 1.5%, while growth will slow down to around 2.5% (2008: 6%) in the emerging markets. The performance in the emerging markets, however, will be very uneven. Asia remains the most dynamic region, with gains of 3%. China leads the way here, although it is expected to turn in its lowest growth rate since 1990. We estimate growth in Eastern Europe at 1%, primarily because recent growth in many Eastern European countries has been financed by the rapid expansion of credit, partly in foreign currencies. These countries have been hit so hard by the financial crisis that some of them have already turned to the International Monetary Fund and the European Union for support. Latin America (with the exception of Mexico) seems to be handling the crisis somewhat better; we expect growth of 2% there in 2009. The gross national product in all the industrialized countries will shrink in 2009. We estimate the drop in Japan at 2%. Although the Japanese economy itself has been relatively untouched by the financial crisis, its dependence on export demand will have a noticeable impact on the economy’s performance, given the current environment. The same will hold true for Germany, where we expect economic situation inactivity to decline by 1.5%. Also the economy of the United States will slow downshrink in 2009. We forecast a drop of about 1.5% there. However, the negative figures for the entire year obscure the fact that a gradual stabilization is expected to 2.5%, comparedtake place in the course of the year. It is possible that the industrialized countries may return to 3.4%the path to growth in 2006,the second half of the year. There are three reasons—all of them valid globally—that such a recovery is possible: extensive public economic programs designed to stimulate demand, low interest rates resulting from an extremely expansionary monetary policy and a major gain in consumer purchasing power due to the interest rate rises and the downturnsignificant drop in the real estate market last year. Growth in the European Union (EU) should also flatten to a similar level (2006: 2.8%). Among the larger EU states, France will match last year’s growth. The dynamism of the German economy will fall, and we forecast growth of 1.75% (2006: 2.7%). The dent in growth at the start of the year, linked to increased value added tax (VAT) rates, is expected to recede as the year progresses. Private consumption should suffer most due to the higher tax. However, the German economic situation is bolstered by the good position of German export firms, which are benefiting from continuing dynamic global trade. Interest rate movements are expected to be limited in 2007, as inflationary pressure is declining and the economy is slowing down. This means that the prerequisites are met for central banks to increase interest rates slightly at most, in the United States even an interest rate reduction seems possible. The U.S. Dollar is expected to be quoted at rather a weak rate compared to the Euro. As earning prospects for companies are not quite as good as in 2006 and last year saw sharp price rises in stock markets, we are no longer as positive about equity markets as we were then.
Industry Outlook—Good Framework Conditions Overall for Financial Service Providerscommodity prices.
The business prospectsfinancial markets will remain uncertain in 2009 because of heavy losses, particularly in the banking sector. Additional public measures may be required to stabilize the financial sector. In any case, a rapid normalization of the markets is not foreseen, but we expect investor confidence to return if the economy picks up during the year. Given the rapid increase in government indebtedness, the focus will likely shift to inflation and rising interest rates. An economic recovery should have a positive impact on the equity markets. Challenging environment for financial serviceservices providers remain positive against this background. An ageing society with a simultaneous reduction in the level of health care support by state pension systemsFinancial services providers will continue to be an important demand driver for private and corporate life and health insuranceface major challenges in the short term. As state pension systems in many countries have not been adapted to the demographic reality yet or only inadequately so, the future prospects for life and pension insurance remain highly positive. Health systems also have to be adapted to cater for ageing; in view2009 as a result of the high costs forglobal economic crisis. The most obvious of these are gloomy economic prospects, possible impairments on all types of securities and the old, higher own contributionsloss of consumer
confidence. It is imperative that providers restore their customers’ faith in a reliable long-term partnership. Property-Casualty will likely see new business slowing because of the weak economy; individual sectors such as credit insurance are being directly affected by patients are unavoidable. This irreversible trend opens up new, additional business opportunities for private health insurers.the crisis. The difficulties on the capital markets and, in particular, the low interest rates could increase pricing discipline among providers. The high provision requiredaging of society continues. Sustainable retirement and healthcare cannot be built solely on a pay-as-you-go basis (inter-generational contract)—capital markets are required. The long-term fundamentals of the Life/Health insurance operations remain intact, but they will be affected by how effectively mandatory health insurance systems are complemented by privately funded health insurance. Asset Management operations once again have a solid long-term growth and profit outlook, too. First, however, the fund industry will need to provide convincing arguments to customers wary of highly volatile markets. 2009 will clearly be an extremely difficult year for longevity, healthbanks. After the direct impact of the financial crisis, additional impairments are now threatening the traditional lending business, where more defaults are expected during the economic downturn. In 2009, banks will attempt to shore up liquidity and care makescapital, though it necessaryis far from clear how long it will take for the citizenchanged regulations to save more for retirement during his or her working life. Asset Management benefits as a result. This business sector is already well developed inprovide relief and the United States and Europe, not least because the post-war baby boom generation has been accumulating assets for retirement for quite some time. Asset saving is now also becoming a focusdegree of attention in Asia, as demographic problems are similarly aggravating here and many emerging markets are experiencing rises in income that permit asset accumulation for old age. Property-Casualty insurance is characterized by highly intensive competition. This has led to a situation where the battle for market share is being waged at the expense of margins in some countries or business sectors. The bullish economic trend, inimpact these changes will have.
particular in Asia with its growth dynamics, offer asset insurers interesting new business opportunities.
The Banking segment, whose activities are more sensitive to the business cycle than the insurance sector and which had a very good financial year in 2006, will have to cut back in 2007 against the background of slowing economic expansion. We do not expect any additional drivers from the lending sector, as demand from private households should shrink, especially for house-building.
ITEM 6. Directors, Senior Management and Employees
| ITEM 6. | Directors, Senior Management and Employees |
Corporate Governance General On October 13, 2006 the merger of Allianz AG with its subsidiary Riunione Adriatica di Sicurtà S.p.A. (defined above as RAS) became effective. Because of the merger, Allianz AG was ipso iure converted into Allianz SE is a Germany–based stock corporation in the form of a European Company (Societas Europaea or SE) thereby preserving its legal identity.. Allianz SE is subject to specific provisions regarding the SE (such as the Council Regulation (EC) 2157/2001 (“SE-Regulation”) and the German Act on the SE-Implementation (SE-Ausführungsgesetz, SEAG)). However, to a large extent Allianz SE is still treated as a German stock corporation and therefore governed by the general provisions of German corporate law (in particular the German Stock Corporation Act—Act, Aktiengesetz). Allianz SE maintained the dual board system applicable to German Stock Corporations. The corporate bodies of Allianz SE are the Board of Management (Vorstand), the Supervisory Board (Aufsichtsrat) and the General Meeting (Hauptversammlung). The Board of Management and the Supervisory Board are separate and no individual may serve simultaneously as a member of both boards.
The Board of Management is responsible for managing the day-to-day business of Allianz SE in accordance with the European SE-Regulation, the German Stock Corporation Act, the Statutes (Satzung) of Allianz SE as well as its internal rules of procedure (Geschäftsordnung). The Board of Management represents Allianz SE in its dealings with third parties. The Supervisory Board oversees the management. It is also responsible for appointing and removing the members of the Board of Management and representing Allianz SE in its transactions with members of the Board of Management. The Supervisory Board is not permitted to make management decisions, but as established by the Statutes or determined by the Supervisory Board, or the Statutes must determine that certain types of transactions may require the Supervisory Board’s prior consent. The chairman of the Board of Management has a casting vote and veto power against Board of Management resolutions. In carrying out their duties, the members of the Board of Management and the Supervisory Board must exercise the standard of care of a diligent and prudent business person. In complying with this standard of care, the members of both boards must take into account a broad range of considerations in their decisions, including the interests of Allianz SE, its shareholders, employees and creditors. Additionally, the Board of Management is required to respect the rights of shareholders to equal treatment and equal information. Members of either board who violate their duties may be personally liable for damages to Allianz SE. The company may only waive these damages or settle these claims if at least three years have passed from the date of their origination and if the General Meeting approves the waiver or settlement with a simple majority. No approval of a waiver or settlement by the General Meeting will be effective if opposing shareholders who hold, in the aggregate, one-tenth or more of the share capital of Allianz SE have their opposition formally noted in the minutes recorded by a German notary. As a general rule under German law, a shareholder has no direct recourse against the members of the Board of Management or the Supervisory Board in the event that they are believed to have breached a duty to Allianz SE. The Supervisory Board has comprehensive monitoring functions. To ensure that these functions are carried out properly, the Board of Management must regularly report to the Supervisory Board with regard to current business operations and future business planning (including financial, investment and personnel planning). The Supervisory Board is also entitled to request at any time special reports regarding the affairs of Allianz SE, the legal or business relations of Allianz SE to its subsidiaries and the affairs of any of its subsidiaries to the extent these may have a significant impact on Allianz SE.
The Board of Management is required to ensure that adequate risk management and internal monitoring systems exist within Allianz SE to detect risks relating to Allianz Group’s business activities at the earliest possible stage. Upon the transformation of Allianz into an SE in 2006, Allianz SE was required to establish an SE works council that represents the European Allianz employees. The Allianz SE works council currently consists of employee representatives from up to 26 European countries. The SE works council, in simplebasic terms, is a company-wide representative body for the European Allianz employees with special responsibility for cross cross–border matters within Europe. In particular, the SE works council has athe right to be informed and heard with regard to all cross-border matters. In addition, it has the right to
initiate cross-border measures in the areas of equal opportunity, worker safety and health protection, data protection and basic and further training. Details of the SE works council are contained in the Agreement concerning the Participation of Employees in Allianz SE (“Employee Involvement AgreementAgreement”) discussed below. Applicable Corporate Governance Rules Principal sources of enacted corporate governance standards for a European Company with its registered seat in Germany isare the SE-Regulation, the German Act on the SE-Implementation (SE-Ausführungsgesetz, SEAG), the German Act on Employee Participation in a SE (SE-Beteiligungsgesetz, SEBG) and the German Stock Corporation Act.Act (Aktiengesetz). The German Co-determination Act (Mitbestimmungsgesetz), however, does not apply to Allianz SE. Instead, the participation of employees of Allianz on the Supervisory Board of Allianz SE is governed by the Employee Involvement Agreement of September 20, 2006, which2006. This agreement was concluded between the Special Negotiating Body of the employees and the managements of Allianz SE and RAS within the employee involvement procedures initiated in connection with the formation of Allianz SE. The Employee Involvement Agreement to a large extent follows the statutory default provisions provided for in the German Act on Employee Participation in a SE (SE-Beteiligungsgesetz, SEBG). In addition, the German Corporate Governance Code (Deutscher Corporate Governance Kodex, “Code”), originally published by the German Ministry of Justice (Bundesministerium der Justiz) in 2002, as amended in its June 2008 version, presents essential statutory regulations for the corporate governance of German listed companies. The aim of the Code is to make the German corporate governance rules related to German listed stock corporations transparent for national and international investors. As an SE with a registered office and listed in Germany, Allianz SE is subject to the Code. The Code comprises a set of best-practice guidelines. In addition to restating various corporate governance-related provisions of German law, the Code contains “recommendations”, which reflect widely recognized standards of corporate governance. Listed companies can deviate from the recommendations, but are then required to disclose this annually. Furthermore, the Code contains “suggestions”, which incorporate additional standards for the sound and responsible management and supervision of a company. Companies can deviate from the Code’s suggestions without disclosure. Topics covered by the German Corporate Governance Code include: The composition and responsibilities of the Board of Management, the compensation of Board of Management members, and rules for avoiding and resolving conflicts of interest; The composition and responsibilities of the Supervisory Board and committees of the Supervisory Board, the compensation of Supervisory Board members, and rules for avoiding and resolving conflicts of interest; The relationship between the Board of Management and the Supervisory Board; Transparency and disclosure in periodic reports; and Reporting on, and auditing of, the company’s annual financial statements. Although the Code does not have the force of law, it has a legal basis through the declaration of compliance required by Section 161 of the German Stock Corporation Act, which entered into force in 2002 and requires that the Board of Management and the Supervisory Board of a listed company declare annually eithereither; (i) that the company has complied, and doeswill comply, with the recommendations set forth in the German Corporate Governance Code, or, alternatively,
(ii) which recommendations the company has not complied, and / or doeswill not comply, with (so-called “comply or explain” system). On December 18, 2006,2008, the Board of Management and the Supervisory Board of Allianz SE issued the following compliance declaration:Declaration of Compliance: “1. Allianz SE will comply with all recommendations made by the Government Commission on the German Corporate Governance Code (Code version as of 12 June 2006)6, 2008).
2. Since the last Declaration of Compliance as of 15 December 2005,20, 2007, which referred to the German Corporate Governance Code in its 2version as of June 2005 version,14, 2007, Allianz SE has complied with all recommendations made by the Government Commission on the German Corporate Governance Code then in force.” The declarationDeclaration of Compliance is also available on Allianz Group’s website at www.allianz.com/corporate-governance. (Reference to this “uniform resource locator” or “URL” is made as an inactive textual reference for informational purposes only. The information found at this website is not incorporated by reference into this document.) General Meeting General Meetings of the shareholders are called by the Board of Management. In exceptional cases, the Supervisory Board can call a General Meeting. Shareholders holding an aggregate of at least 5% of Allianz SE’s issued share capital may request that a General Meeting be called. The right to participate in and vote at a General Meeting is only given to those shareholders who have timely notified Allianz SE of their attendance at the General Meeting and whose respective shares are registered in the share register. Board of Management The Board of Management (Vorstand) of Allianz SE currently consists of eleventen members, and is multinationally staffed, in keeping with Allianz Group’s international orientation. It is responsible for the management of Allianz SE and the Group. The managerial tasks of the Board of Management are primarily to determine the strategic direction of and to manage the Group, and the planning, establishment and monitoring of a risk management system. The chairman of the Board of Management coordinates its work; he has a casting vote in case of a tie and a veto right against resolutions of the Board of Management. Under the Statutes of Allianz SE, the Supervisory Board determines the size of the Board of Management, although it must have at least two members. The Statutes furthermore provide that Allianz SE may be legally represented by two members of the Board of Management or by one member of the Board of Management together with one holder ofperson vested with a general commercial power of attorney (Prokura), which entitles its holder to carry out legal acts and transactions on behalf of Allianz SE.under German law (Prokurist). In addition, pursuant to a filing with the commercial register in Munich, Allianz SE may also be represented by two holders of a general commercial power of attorney (Prokura). The Supervisory Board represents Allianz SE in connection with transactions between a member of the Board of Management and Allianz SE. To the extent that a Supervisory Board committee is entitled to decide on a specific matter in lieu of the Supervisory Board, the right of representing Allianz SE vis-à-vis the Board of Management in that matter can be transferred to the relevant Supervisory Board committee.
The Supervisory Board appoints the members of the Board of Management. The initial term of the members of the Board of Management is generally between three and five years. Under the Statutes of Allianz SE, the term of the members of the Board of Management is limited to a maximum of five years. Each member may be reappointed or have his term extended by the Supervisory Board for one or more terms of up to five years each. As a general rule, the Supervisory Board limits the initial appointment or the reappointment of members of the Board of Management attaining the age of 60 to terms of one year. Members of the Board of Management must further resign from office at the end of the fiscal year in which they attain the age of 65. There is no share ownership requirement to qualify for or to remain a member of the Board of Management. The Supervisory Board may remove a member of the Board of Management prior to the expiration of his term for good cause, for example in the case of a serious breach of duty or a bona fide vote of no confidence by the General Meeting. A member of the Board of Management may not deal with, or vote on, matters relating to proposals, arrangements or contractual agreements between himself and Allianz SE and may be liable to Allianz SE if he has a material interest in any contractual agreement between Allianz SE and a third partythird-party which was not disclosed to, and approved by, the Supervisory Board. The Board of Management has adopted its own internal rules of procedure. The Board of Management regularly reports to the Supervisory Board on the business of Allianz SE. According to the German Stock Corporation Act, the Board of Management requires the consent of the Supervisory Board forto engage in certain transactions, primarily, certain share capital measures.
Further, the Statutes of Allianz SE contain a catalogue of transactions requiring consent of the
Supervisory Board, namely (i) acquisition of companies, participationsparticipation in companies and parts of enterprisescompanies (except for financial investments), if in the individual case the presentmarket value, or in absencecase of a presentlack of a market value, the book value reaches or exceeds 10% of the share capitalequity of the latest group financial statements;last consolidated balance sheet; or (ii) disposal of participations (except for financial investments) in a group company, if suchto the extent that it leaves the circle of group company thereby is no longer a group companycompanies by virtue of the disposal and if in the individual case the presentmarket value, or in absence case of a presentlack of market value, the book value of the participation disposed of reaches or exceeds 10% of the share capitalequity of the latest group financial statements;last consolidated balance sheet; or (iii) conclusion of enterpriseentering into intercompany agreements (Unternehmensverträge); or (iv) openingdevelopment of new business segments or closureand abandonment of existing business segments, to the extent the measuresuch action is of essentialmaterial importance to the group. The Supervisory Board of Allianz SE may determinemake further types of transactions to requirecontingent upon its consent.approval.
The current members of the Board of Management of Allianz SE, were all members of the Board of Management of Allianz AG when Allianz SE was established. Theirtheir age as of December 31, 2006,2008, their areas of responsibility, the year in which each member was first appointed, as member of the Board of Management of Allianz AG, the year in which the term of each member expires, and their principal board memberships outside the Allianz Group, respectively, are listed below. | Name | | Age | | Area of Responsibility | | Year First Appointed | | Year Current Term Expires | | Principal Outside Board Memberships | | Age | | Area of Responsibility | | Year First
Appointed | | Year Current
Term Expires | | Principal Outside Board Memberships | Michael Diekmann | | 52 | | Chairman of the Board of Management | | 1998 | | 2011 | | Member of the Supervisory Boards of BASF AG, Linde AG (deputy chairman) and Deutsche Lufthansa AG | | 54 | | Chairman of the Board of Management | | 1998 | | 2011 | | Member of the Supervisory Boards of BASF SE, Linde AG (deputy chairman) and Siemens AG | Dr. Paul Achleitner | | 50 | | Finance | | 2000 | | 2009 | | Member of the Supervisory Boards of Bayer AG and RWE AG | | 52 | | Finance | | 2000 | | 2014 | | Member of the Supervisory Boards of Bayer AG and RWE AG | Oliver Bäte | | | 43 | | Chief Operating Officer | | 2008 | | 2012 | | None | Clement B. Booth | | 52 | | Insurance Anglo Broker Markets/Global Lines | | 2006 | | 2010 | | None | | 54 | | Insurance Anglo, NAFTA Markets/Global Lines | | 2006 | | 2010 | | None | Jan R. Carendi | | 61 | | Insurance NAFTA Markets | | 2003 | | 2007 | | None | | Enrico Cucchiani | | 56 | | Insurance Europe I | | 2006 | | 2010 | | Member of the board of directors of ACEGAS-APS S.p.A. and Banca Antonveneta S.p.A. | | 58 | | Insurance Europe I | | 2006 | | 2010 | | Member of the board of directors of Pirelli & Co. S.p.A. and Unicredit S.p.A. | Dr. Joachim Faber | | 56 | | Asset Management Worldwide | | 2000 | | 2009 | | Member of the Supervisory Board of Bayerische Börse AG | | 58 | | Asset Management Worldwide | | 2000 | | 2010 | | Member of the Supervisory Board of Bayerische Börse AG | Dr. Helmut Perlet | | 59 | | Controlling, Reporting, Risk | | 1997 | | 2008 | | Member of the Supervisory Board of GEA Group AG | | 61 | | Controlling, Reporting, Risk | | 1997 | | 2009 | | Member of the Supervisory Board of GEA Group AG | Dr. Gerhard Rupprecht | | 58 | | Insurance Germany | | 1991 | | 2008 | | Member of the Supervisory Boards of Fresenius AG and Heidelberger Druckmaschinen AG | | 60 | | Insurance German Speaking Countries | | 1991 | | 2010 | | Member of the Supervisory Boards of Fresenius SE and Heidelberger Druckmaschinen AG | Jean-Philippe Thierry | | 58 | | Insurance Europe II | | 2006 | | 2008 | | Member of the boards of directors of Société Financière et Foncière de participation and Pinault Printemps Redoute | | 60 | | Insurance Europe II | | 2006 | | 2009 | | Member of the boards of directors of Société Financière et Foncière de participation, Baron Philippe de Rothschild, Compagnie Financière Saint-Honoré, Eurazeo, Paris Orléans and Pinault Printemps Redoute | Dr. Herbert Walter | | 53 | | Banking Worldwide | | 2003 | | 2012 | | Member of the Supervisory Board of Deutsche Börse AG, E.ON Ruhrgas AG and the board of directors of Banco Popular Español S.A. and Banco Portugues de Investimento S.A. | | Dr. Werner Zedelius | | 49 | | Insurance Growth Markets | | 2002 | | 2009 | | None | | 51 | | Insurance Growth Markets | | 2002 | | 2014 | | Member of the boards of directors of Bajaj Allianz General Insurance Company Limited; Bajaj Allianz Life Insurance Company Limited |
The following is a summary of the business experience of the current members of the Board of Management: Michael Diekmann: Joined the Allianz Group in 1988. From 1996 to 1998 he was chief executive officer of Allianz Insurance Management Asia-PacificAsia- Pacific Pte. Ltd., Singapore. He became a deputy member in October 1998 and a full member of the Board of Management of Allianz AG in March 2000. He was appointed as chairman of the Board of Management in April 2003.
Dr. Paul Achleitner: Joined the Board of Management of Allianz AG in January 2000. He was previously chairman of Goldman, Sachs & Co. oHG, Frankfurt/Main, Germany and a partner of Goldman Sachs Group from 1994 to 1999. Oliver Bäte: Joined the Board of Management of Allianz SE on January 1, 2008. He worked with McKinsey&Company from 1993 on. At McKinsey&Company, he was head of the German Insurance Sector from 1998-2003, and director and head of the European Insurance and Asset Management Sector from 2003 to 2007. Clement B. Booth: Joined the Board of Management of Allianz AG on January 1, 2006. From 1999 to 2003, he was a member of the Board of Management of Munich Re and from 2003 to 2005 he was chairman and CEO of Aon Re International, London. Jan R. Carendi: Became a member of the Board of Management of Allianz AG in May 2003. He previously held a variety of positions at Skandia Insurance Company Ltd. and other companies of the Skandia Group, including chief executive officer of Skandia Insurance Company Ltd. and Skandia New Markets Inc. and chief executive officer of American Skandia Inc.
Enrico Cucchiani: Joined the Board of Management of Allianz AG on January 1, 2006. From 1996, he has held several leading management positions within Lloyd Adriatico S.p.A., Trieste. He became CEO in 1998 and sincefrom 2001 to 2007 he iswas chairman of the board of directors of Lloyd Adriatico. Dr. Joachim Faber: Joined the Allianz Group in 1997 after holding various positions at Citibank AG, Frankfurt/Main, Germany (1984-1992), including chairman of the Board of Management, and Citibank International PLC, London (1992-1997), including head of capital markets. He was a member of the Board of Management of Allianz Versicherung from 1997 to 1999 and became a member of the Board of Management of Allianz AG in January 2000. Dr. Helmut Perlet: Joined the Allianz Group in 1973. He has been head of the foreign tax department since 1981, head of corporate finance since 1990 and head of accounting and controlling since 1992. He became a deputy member in July 1997 and a full member of the Board of Management of Allianz AG in January 2000. Dr. Gerhard Rupprecht: Joined the Allianz Group in 1979. In January 1989, he became a deputy member, and in January 1991 a full member, and in October 1991 was appointed chairman, of the Board of Management of Allianz Leben. He became a member of the Board of Management of Allianz AG in October 1991. Jean-Philippe Thierry: Joined the Board of Management of Allianz AG on January 1, 2006. Previously, he was Chairman and CEO of Athena Insurance (1985-1997) and CEO of Generali France (1998-2001). Since June 2001, he is Chairman and Chief Executive Officer of Assurances Générales de France. Dr. Herbert Walter: Held various positions at Deutsche Bank AG since 1983, including chairman of the business segment Private & Business Clients and speaker of the Board of Management of Deutsche Bank 24. Since 2002, he was a member of the Group Executive Committee of Deutsche Bank group as well as Global Head of Private & Business Clients. He became a member of the Board of Management of Allianz AG on March 19, 2003, and became the Chairman of the Board of Management of Dresdner Bank AG effective March 25, 2003.
Dr. Werner Zedelius: Joined the Allianz Group in 1987. After various positions in branch offices and in the headquarters of Allianz AG, he was General Manager Finance and member of the board of directors of Cornhill Insurance PLC in London from 1996 until 1999. Dr. Zedelius became a member of the Board of Management of Allianz AG on January 1, 2002. The members of the Board of Management may be contacted at the business address of Allianz SE. Supervisory Board In accordance with the Statutes of Allianz SE, the Supervisory Board (Aufsichtsrat) of Allianz SE consists of twelve members, six of whom are shareholder representatives and six of whom are employee representatives. According to applicable law and the Statutes of Allianz SE the members of the Supervisory Board are appointed by the General Meeting, however, as to the appointment of the employee representatives, the General Meeting is bound to the proposals of the employees. There is no share ownership requirement to qualify for or remain a member of the Supervisory Board. With the exception of Karl Grimm, the current members of the Supervisory Board of Allianz SE were elected by the General Meeting of Allianz SE on May 2, 2007. After the completion of the sale of Dresdner Bank to Commerzbank on January 12, 2009, Claudia Eggert–Lehmann resigned from her position as an employee representative for Dresdner Bank on the Supervisory Board. On January 29, 2009, Karl Grimm was appointed by the local district
court of Munich as a substitute member and employee representative to replace Claudia Eggert-Lehmann until the next General Meeting of Allianz SE, which is scheduled to take place on April 29, 2009. The employee representatives are no longer representatives of the German employees only, but also representatives of employees of Allianz Group in certain other European countries. Among the
employee representatives, there may also be representatives of the trade unions represented in the Allianz Group in Europe. For the appointment of the members of the first Supervisory Board special rules applied: The shareholder representatives on the first Supervisory Board of Allianz SE were appointed by the Statutes of Allianz SE; the employee representatives were named in the Employee Involvement Agreement and appointed by court. The term of office of all members of the first Supervisory Board of Allianz SE will last until the end of the General Meeting which will decide on the discharge regarding the first fiscal year of Allianz SE, but in no case longer than for three years. Consequently, the entire Supervisory Board will be newly appointed by the first General Meeting of Allianz SE on May 2, 2007 whereby as to the appointment of the employee representatives the General Meeting is bound to the proposals of the employees. The term of office of the members of the Supervisory Board of Allianz SE (notwithstanding the term of office of the first members indicated above) runs until the endclose of the shareholders meeting resolvingGeneral Meeting which resolves on the dischargeratification of actions in respect of the forth fiscalfourth financial year afterfollowing the beginning of the term (wherebyof office not counting the financial year in which the term of office begins, shall not be counted). The maximum term isbut in no case longer than six years. Supervisory board members may be reelected.Repeated appointments are permitted. The employeeAs stipulated in the Employee Involvement Agreement concluded with the representatives of Allianz employees in September 2006, four of the six employees’ representatives on the Supervisory Board of Allianz SE to be appointed in 2007 will comprise four employee representativesare from Germany (including one union representative), one is from France and one is from the U.K. in accordance with the Employee Involvement Agreement.UK. For all furtherforthcoming Supervisory Boards of Allianz SE (2012 onwards)(from 2012 onward), the country distribution of the employee representatives will depend on the country distribution of the employees of the Allianz Group within the EU, and the European Economic Area.Area and Switzerland. The appointment of the employee representatives of the Supervisory Board will follow the respective national legal provisions of the countries of origin of such representatives. In case no such provisions exist, the appointment will be made by the SE Works Council which was established pursuant to the Employee Involvement Agreement.
The General Meeting may remove any Supervisory Board member it has elected without having been bound by a proposal for the election by a simple majority of the votes cast. As regards the removal of members of the Supervisory Board that have been elected in accordance with a proposal by the employees, the Employee Involvement Agreement provides for the application of the respective statutory framework for the removal enacted in the respective member states. In the event no such provisions exist, Section 37 of the German Act on Employee Participation in a SE (SE-Beteiligungsgesetz, SEBG) shall apply accordingly. Under such provision, the employee representatives from Germany may be removed by the General Meeting upon a respective request by (i) the works councils (Arbeitnehmervertretungen) that have formed the electoral college (Wahlgremium), i.e., in the present case, Allianz SE’s Group Works Council (Konzernbetriebsrat), with a 75% majority of the votes cast, andor (ii), with respect to the Supervisory Board members proposed by a trade union, only such trade union. The General Meeting is bound by such request. In addition, any member of the Supervisory Board may resign by giving written notice to the Board of Management. The Supervisory Board of Allianz SE has elected a chairman, who has tomust be a shareholder representative, and two deputy chairmen.chairpersons. The Supervisory Board of Allianz SE hasconstitutes a quorum if upon proper invitation,all members are invited or requested to adopt a resolution and if either at least six members, includingamong them the chairman, or at least nine members, participate in the vote.resolution. Except where a different majority is required by law or the Statutes of Allianz SE, the Supervisory Board acts by simple majority of the votes cast. In the case of any deadlock,a tie, the vote of the chairman (as wellor if he does not participate in the voting, the vote of the deputy chairperson (provided that the deputy chairperson is a deputy acting as chairman, unless such deputy is an employeeshareholder representative) has a casting vote.shall be decisive (casting vote). The Supervisory Board meets at least twice each half-year. During the financial year 2008, the Supervisory Board met in total five times. Its main functions are: to monitor the management of Allianz SE; to appoint the members of the Board of Management; and to approve matters in areas where such approval is required by German law or by the Statutes or Rules of Procedure or which the Supervisory Board has made generally or in the individual case subject to its approval. SeeRefer to “—Board of Management”. In addition, Supervisory Boards of German insurance companies are tasked with the appointment of the external auditor.
TheIn order to exercise its functions efficiently, the Supervisory Board has established a Standing Committee, an Audit Committee, a Personnel
Committee a Risk Committee, and a RiskNomination Committee. The committees prepare the discussion and adoption of resolutions in the plenary session. Furthermore, in appropriate cases, authority to take decisions has been delegated to committees themselves. The establishment of a Mediation Committee is not required because the German Employee Co-determination Act, which provides for such a committee, does not apply to anAllianz SE. Standing Committee. The Standing Committee, which comprises the chairman of the Supervisory Board, and four additional members elected by the Supervisory Board (two members upon proposal of the shareholders representatives and two upon proposal of the employee representatives), may approve or disapprove certain transactions of Allianz SE to the extent that such transactions do not fall under the competency of any other committee or are not required to be decided by plenary meeting of the Supervisory Board. TheIn particular, the Standing Committee is responsible for approving several loans in accordance with the German Stock Corporation Act, Board of Management resolutions on capital measures and on acquisition or disposal of treasury shares and certain acquisitions of companies or participations in companies. Furthermore, the Standing Committee examines the corporate governance of Allianz SE, drafts the declaration of compliance and examines the efficiency of the work of the Supervisory Board. In addition, it determines changes in formis responsible for amendments to the Statutes.Statutes that only affect the wording, not the content. The Standing Committee held five meetings in 2006 (four of which still as Standing Committee of Allianz AG).2008. The members of the Standing Committee are Dr. Henning Schulte-Noelle as chairman, Dr. Gerhard Cromme, Karl Grimm, Dr. Franz B. Humer Claudia Eggert-Lehmann and Rolf Zimmermann. Audit Committee. The Audit Committee comprises five members elected by the Supervisory Board (three members upon proposal of the shareholders representatives and two upon proposal of the employee representatives). The Audit Committee prepares the decisions of the Supervisory Board about the Allianz Group’s annual financial statements, the consolidated financial statements and the appointment of the auditors and ascertains the independence of the auditors. Furthermore, the Audit Committee assigns the mandate to the auditors, sets priorities for the audit and determines the compensation of the auditors. In addition, it examines the quarterly reports. After the end of the fiscal year, the Audit Committee examines the Allianz Group’s annual financial statements and the consolidated financial statements, examines the risk monitoring system, and discusses the auditor’s report with the auditors.auditors and deals with compliance topics. The Audit Committee held five meetings in 2006 (four of which still as Audit Committee of Allianz AG).2008. The members of the Audit Committee are Dr. Gerhard CrommeFranz B. Humer as chairman, Dr. Wulf H. Bernotat, Igor Landau, Jean-Jaques Cette and Jörg Reinbrecht. Personnel Committee. The Personnel Committee consists of the chairman of the Supervisory Board and two other members elected by the Supervisory Board (one member upon proposal of the shareholders representatives and one upon proposal of the employee representatives). It prepares the appointment of members of the Board of Management.Management and it represents the company before the members of the Management Board pursuant to § 112 of the German Stock Corporation Act. In addition, it attends to on-going personnel matters of the members of the Board of Management including their membership on boards of other companies and the payments they receive and the structure of group equity incentives. See “—Stock-based Compensation Plans—Group Equity Incentive (GEI) Plans.”receive. The Personnel Committee held twothree meetings in 2006 (one of which still as Audit Committee of Allianz AG) still as Personnel Committee of Allianz AG).2008. The members of the Personnel Committee are Dr. Henning Schulte-Noelle as chairman, Claudia Eggert-Lehmann and Dr. Gerhard Cromme.Cromme and Rolf Zimmermann. Risk Committee. The Risk Committee consists of five members elected by the Supervisory Board (three members upon proposal of the shareholders representatives and two upon proposal of the employee representatives). The Risk Committee was established in December 2006 by the newly constituted Supervisory Board of Allianz SE. The Risk Committee monitors the installationestablishment and maintenance of thean appropriate risk management and risk surveillancemonitoring system as well as its organizational structure and ongoing development. The Risk Committee monitors whether the risk strategy is aligned with general business strategy, keeping itself informed about the general risk situation and special risk developments. The Committee also conducts a preliminary examination of special risk-related statements as part of the audit of annual financial statements and management reports, informing the Audit Committee about its findings. Only established in December, theThe Risk Committee did not hold anyheld three meetings in 2006.2008. The members of the Risk Committee are Dr. Henning Schulte-Noelle as chairman, Dr. Wulf H. Bernotat, Prof. Dr. Renate Köcher, Godfrey Robert Hayward and Margit Schoffer.Peter Kossubek.
Nomination Committee. The Nomination Committee was established in December 2007 and consists of the chairman of the Supervisory Board and two further shareholder representatives (elected by the shareholder representatives of the Supervisory Board). With the establishment of the Nomination Committee, Allianz SE is following a new recommendation of the German Corporate Governance Code to establish this type of committee. The Nomination Committee is responsible for drawing up selection criteria for shareholder representatives on the Supervisory Board, seeking suitable candidates for the election of shareholder representatives to the Supervisory Board and proposing suitable candidates to the Supervisory Board for its election proposal to the General Meeting. The Nomination Committee held no meetings in 2008. The members of the Nomination Committee are Dr. Henning Schulte-Noelle as chairman, Dr. Gerhard Cromme and Dr. Franz B. Humer.
The current members of the first Supervisory Board of Allianz SE, their age as of December 31, 2006,2008, their principal occupations, the year in which each member first served on the Supervisory Board, of Allianz AG or Allianz SE, the year in which the current term of each member expires and their principal board memberships outside the Allianz Group, respectively, are as follows: | | | | | | | | | | Name | | Age | | Principal Occupation | | Year First Appointed | | | Principal Outside Board Memberships | Dr. Henning Schulte-Noelle, Chairman(1) | | 64 | | Former chairman of the Board of Management of Allianz SE | | 2003 | | | Member of the Supervisory Boards of E.ON AG, Siemens AG and ThyssenKrupp AG | | | | | | Dr. Wulf H. Bernotat(1) | | 58 | | Chairman of the Board of Management of E.ON AG | | 2003 | | | Member of the Supervisory Boards of Metro AG, RAG AG (chairman) and Bertelsmann AG | | | | | | Jean-Jacques Cette(2) | | 50 | | Member of the AGF board of directors | | 2006 | (SE) | | None | | | | | | Dr. Gerhard Cromme(1) | | 63 | | Chairman of the Supervisory Board of ThyssenKrupp AG | | 2001 | | | Member of the Supervisory Boards of ThyssenKrupp AG (chairman), Axel Springer AG, Siemens AG, Deutsche Lufthansa AG, E.ON AG, and member of Board of Directors of Suez S.A., BNP Paribas and Compagnie de Saint-Gobain S.A. | | | | | | Claudia Eggert-Lehmann(2) | | 39 | | Employee, Dresdner Bank AG | | 2003 | | | None | | | | | | Godfrey Robert Hayward(2) | | 46 | | Employee, Allianz Cornhill, UK | | 2006 | (SE) | | None | | | | | | Dr. Franz B. Humer(1) | | 60 | | Chairman of the board of directors and Chief Executive Officer of F. Hoffmann-La Roche AG | | 2005 | | | Member of the Supervisory Board of F. Hoffmann-La Roche AG (Chairman) and member of the board of directors of DIAGEO plc. | | | | | | Prof. Dr. Renate Köcher(1) | | 54 | | Chairperson Institut für Demoskopie, Allensbach | | 2003 | | | Member of the Supervisory Boards of MAN AG, Infineon Technologies AG and BASF AG | | | | | | Igor Landau(1) | | 62 | | Member of the board of directors of Sanofi-Aventis S.A. | | 2005 | | | Member of the Supervisory Boards of adidas AG and member of the boards of directors of HSBC France and Sanofi-Aventis S.A. | | | | | | Jörg Reinbrecht(2) | | 49 | | Trade Union Secretary, ver.di, Germany | | 2006 | (SE) | | Member of the Supervisory Board of SEB AG | | | | | | Margit Schoffer(2) | | 50 | | Employee, Dresdner Bank AG | | 2003 | | | None | | | | | | Rolf Zimmermann(2) | | 53 | | Employee, Allianz Versicherungs-AG | | 2006 | (SE) | | None |
| | | | | | | | | Name | | Age | | Principal Occupation | | Year First
Appointed | | Principal Outside Board Memberships | Dr. Henning Schulte-Noelle, Chairman(1) | | 66 | | Former chairman of the Board of Management of Allianz AG | | 2003 | | Member of the Supervisory Boards of E.ON AG and ThyssenKrupp AG | Dr. Wulf H. Bernotat(1) | | 60 | | Chairman of the Board of Management of E.ON AG | | 2003 | | Member of the Supervisory Boards of Metro AG and Bertelsmann AG | Jean-Jacques Cette(2) | | 52 | | Member of the AGF board of directors | | 2006 | | None | Dr. Gerhard Cromme(1) | | 65 | | Chairman of the Supervisory Board of ThyssenKrupp AG | | 2001 | | Member of the Supervisory Boards of ThyssenKrupp AG (chairman), Axel Springer AG, Siemens AG (chairman), and member of Board of Directors of Compagnie de Saint-Gobain S.A. | Karl Grimm(2) | | 60 | | Employee Allianz Deutschland AG | | 2009 | | None | Godfrey Robert Hayward(2) | | 48 | | Employee, Allianz Cornhill, UK | | 2006 | | None | Dr. Franz B. Humer(1) | | 62 | | Chairman of the board of directors of F. Hoffmann-La Roche AG | | 2005 | | Member of the board of directors of DIAGEO plc. | Prof. Dr. Renate Köcher(1) | | 56 | | Chairperson Institut für Demoskopie, Allensbach | | 2003 | | Member of the Supervisory Boards of MAN AG and Infineon Technologies AG | Peter Kossubek(2) | | 54 | | Employee, Allianz Versicherungs-AG | | 2007 | | None | Igor Landau(1) | | 64 | | Member of the board of directors of Sanofi-Aventis S.A. | | 2005 | | Member of the Supervisory Boards of adidas AG (deputy chairman) and member of the boards of directors of HSBC France and Sanofi-Aventis S.A. | Jörg Reinbrecht(2) | | 51 | | Trade Union Secretary, ver.di, Germany | | 2006 | | Member of the Supervisory Board of SEB AG | Rolf Zimmermann(2) | | 55 | | Employee, Allianz Versicherungs-AG | | 2006 | | None |
(1) | Shareholder Representative |
(2) | Employee Representative |
The members of the Supervisory Board may be contacted at the business address of Allianz SE. Compensation of Directors and Officers Remuneration of the Board of Management remuneration
The remuneration of the Board of Management consists of different components and is aimed at supporting a sustained value-oriented management. Therefore, a distinction should be made between fixed salary, performance-based remuneration and equity-based remuneration as a long-term incentive. The amount of total remuneration of individual board members is dependent upon the delegated role and accountability, individual performance, achievement of the financial goals of the Allianz Group and of respective business unit, as well as the evolution of the Allianz SE share price. The remuneration of the Board of Management is set by the Personnel Committee within the Supervisory Board while considering market and competition. Moreover, theBoard. The structure of the remuneration is regularly reviewed and discussed atby the Supervisory Board. The last review was carried out in December 2008.
In detail, theThe remuneration of the Board of Management is designed to be competitive given the nature and global scope of activities of the Allianz Group, the environment in which the Group operates and its performance and prospects relative to peers. Its aim is to provide a suitable mix and weight of remuneration components, optimally balance risk and opportunity to achieve an appropriate level of remuneration in different performance scenarios and business circumstances. It is designed to support sustained value-oriented management performance.
The key principles of the remuneration strategy are: Total remuneration is set at a level appropriate to attract and retain highly qualified executives. Incentive plans are structured to operate effectively throughout the business cycle. Incentive awards are earned through the achievement of the financial and strategic goals of the Allianz Group and are consistent with shareholder interests. An appropriate balance is maintained between short-term and long-term remuneration components. The overall remuneration for individual Board Members is dependent upon their designated role, accountability and performance. To achieve these objectives, a significant portion of the overall remuneration of the members of the Board of Management is variable. It comprises a three-tier incentive system which includes short- and mid-term cash bonus plans and equity-related long-term incentives. The remuneration components of the following components:Board of Management are described below: Fixed salary Base salary is a fixed amount, paid in twelve monthly installments. It is normally reviewed every 3 years by the Supervisory Board and reflects the individual’s role as well as the market context. The 2008 base pay levels of the Board of Management are shown on page 135. Performance-based remuneration The fixed amountaim of the three-tier incentive system is paid as a monthly basic salary unrelated to performance. Itachieve an appropriate balance between components linked to short-term financial performance and those linked to long-term success and sustained shareholder value creation. The Supervisory Board reviews the goals regularly to ensure they remain appropriate in the context of the strategic priorities of the Group. An overview is reviewed at the latest every three years. The amount is firstly influenced by the delegated role and accountability and, secondly, by external market conditions.set out below: Performance-based remuneration
This component consists of an annual and a mid-term three-year bonus that are both dependent on performance and success, and limited in their amounts.
Equity-based Remuneration
This element consists of virtual options (“Stock Appreciation Rights”, SAR) and virtual stocks (“Restricted Stock Units”, RSU). It is identical to the Allianz Equity Incentive Program which around 700 top managers and approximately 100 top performing future leaders participate in worldwide. Its value is aligned to the evolution of the Allianz SE share price. More detailed information on equity-based remuneration components can be found in Note 48 our consolidated financial statements and on the internet at www.allianz.com/corporate-governance.
The amount of equity-based remuneration shown represents solely a mathematically calculated reference value. If and when the equity-based remuneration component actually leads to payout depends on the future evolution of the share price and the strike price on the exercise date. The exercise of SARs is possible, at the earliest, two years after their grant. RSUs will be exercised by the company after five years. In relation to the exercise of SARs, the Board of Management has voluntarily committed to always hold the rights until the end of the plan as long as the share price has not already reached the defined maximum relevant to the exercise of the specific SARs. The exercises, the number of rights issued and the evolution of the value of equity-based remuneration are shown in the consolidated income statement.
Performance-based remuneration and equity-based remuneration together form a three-tierThree-tier incentive system as presented in the following overview:
| | | | | Annual bonus
(short-term) | | (short-term)Three-year
bonus
(mid-term) | | Three-year bonusEquity-related
(mid-term)
| | Equity-based remuneration
(long-term) | | | | TargetGoal category
| | TargetGoal category | | TargetGoal category | Allianz Group financial goals | | EVA-objective during issue EVA-objectives
over three-year
performance
period
| | Sustained
increase
in share
price | | | | | Business division financial goals | | Allianz Group
financial goals
and strategic
objectives | | | | | | | Individual objectives | | Business Division
division
financial goals
and strategic
objectives | | | Individual objectives
| | | | | Strategic or “+One” Individual
strategic
objectives
| | |
Short-term and mid-term bonus plans All members of the Board of Management are eligible to participate in the annual (short-term) and three-year (mid-term) bonus plans. Annual bonus The annual bonus is a variable pay component that is dependent on the achievement of annual goals, as set out in the table above. The goals are specified at the beginning of the performance period. Performance against these goals is then assessed at the end of the period, with the amount of bonus payable in the beginning of the following year and
dependent on the extent to which targets and objectives have been met. The Supervisory Board sets the target bonus level for members of the Board of Management. For 2008, the target bonus amounts to 150.0% of base salary. The maximum achievement is set at 165.0% of target performance. Details of the annual bonus amounts to be paid in March 2009 to each member of the Board of Management in respect of the performance year 2008 are shown in the remuneration table on page 135. Three-year bonus The three-year or mid-term bonus plan was purposely designed to make the value of the company a priority concern of executive management across the Group. Plan participants include the Board of Management and approximately 100 top managers globally. Bonus payouts under the plan depend on the attainment of financial and strategic goals over the defined three-year performance period, as set out in the table above. The mid-term bonus is paid after completion of the defined three-year performance period, with the amount based on the extent to which goals have been achieved. Certain exceptions apply, for example in the event of retirement. Although an interim assessment of the objectives occurs once a year, these projections are only provisional and informative in nature. Mid-term bonus target levels for members of the Board of Management are set by the Supervisory Board. For the 2007 – 2009 plan, the target bonus amounts to approximately 128.0% of the 2007 base salary over the three-year performance period. The maximum achievement is set at 140.0% of target performance. Details of the mid-term bonus amounts accrued for each member of the Board of Management are shown on page 135. In exceptional circumstances, the Supervisory Board can decide to award bonuses moderately above maximum level. It can also decide to reduce bonuses where warranted and, in exceptional circumstances, could reduce them to zero. Any material exercise of discretion outside the maximum range will be explained in the Remuneration Report. Equity-related remuneration The Board of Management and approximately 800 top managers and high performing prospective future leaders worldwide participate in the Group Equity Incentives (GEI) program. This consists of “virtual stock options”, known as Stock Appreciation Rights (SAR) and “virtual stock” awards, known as Restricted Stock Units (RSU). The number of SAR and RSU awarded to the members of the Board of Management is dependent upon the discretionary decision of the Supervisory Board based on their designated role as well as the performance of the Group and their respective business division. The value of the GEI program granted in any year cannot exceed the sum of base salary and the annual target bonus. The SAR have a vesting period of two years and subject to the performance conditions mentioned below, they may be exercised during the following five years, as set out in the plan conditions. They lapse unconditionally at the end of the seven-year term. To align the interests of management with those of shareholders the Supervisory Board has established two performance conditions for the exercise of the SAR, applicable to all plan participants. These are directly linked to the performance of Allianz SE stock. The conditions consist of a relative measure linked to the Dow Jones EURO STOXX Price Index (600) and an absolute measure requiring a set increase in the price of Allianz SE stock over the period between grant and exercise. Also, the program has a cap of 150.0% of the grant price on the potential payout from SAR exercises in recognition of the leverage profile. To encourage long-term value creation the RSU normally have a vesting period of five years, at the end of which they are automatically released as set out in the plan conditions. Miscellaneous The members of the Board of Management also receive certain perquisites. These are essentiallymainly consist of contributions to accident and liability insurances as well asand the provision of a company car; they are taxed individually ascar. Each member of the Board of Management is responsible for income tax on these perquisites. Where applicable, a remuneration componenttravel allowance for each individual board member. Innon-resident Board Members is provided. For 2008, the total the value of the perquisites amounted to €0.3€0.7 million in 2006.(2007: €0.5 million).
The following table sets forthout the total remuneration each individual member offor the Board of Management of Allianz SE receivedfor 2008, including the fair value of the SAR and RSU awards, with previous year figures shown in 2006.italics. The proportional bonus accrued for each member for 2008 of the three-year bonus plan has been included. | | | | | | | | | | | | | | | | | | | | | | | | | | Fixed
remuneration | | | Perquisites | | Total non-performance- related
remuneration | | | Annual bonus(1) | | | Reserves 3-year bonus(2) | | Board of Management | | 2006 | | Change
from
previous
year | | | 2006 | | 2006 | | Change
from
previous
year | | | 2006 | | Change
from
previous
year | | | 2006 | | Change
from
previous
year | | | | | € thou | | % | | | € thou | | € thou | | % | | | € thou | | % | | | € thou | | % | | Michael Diekmann (Chairman) | | 1,050 | | 17 | | | 40 | | 1,090 | | 16 | | | 2,224 | | 49 | | | 458 | | (15 | ) | Dr. Paul Achleitner | | 700 | | — | | | 25 | | 725 | | 1 | | | 1,575 | | 48 | | | 308 | | (14 | ) | Clement B. Booth | | 700 | | — | (3) | | 44 | | 744 | | — | (3) | | 1,476 | | — | (3) | | 345 | | — | (3) | Jan R. Carendi | | 700 | | 17 | | | 15 | | 715 | | 16 | | | 1,308 | | 51 | | | 285 | | (5 | ) | Enrico Cucchiani | | 700 | | — | (3) | | 13 | | 713 | | — | (3) | | 1,488 | | — | (3) | | 358 | | — | (3) | Dr. Joachim Faber | | 700 | | 17 | | | 16 | | 716 | | 16 | | | 1,399 | | 53 | | | 296 | | (10 | ) | Dr. Helmut Perlet | | 700 | | 17 | | | 31 | | 731 | | 16 | | | 1,508 | | 64 | | | 315 | | (12 | ) | Dr. Gerhard Rupprecht | | 700 | | 17 | | | 15 | | 715 | | 16 | | | 1,500 | | 65 | | | 330 | | (8 | ) | Jean-Philippe Thierry | | 700 | | — | (3) | | 21 | | 721 | | — | (3) | | 1,437 | | — | (3) | | 353 | | — | (3) | Dr. Herbert Walter | | 700 | | — | | | 33 | | 733 | | 1 | | | 1,363 | | 30 | | | 363 | | 17 | | Dr. Werner Zedelius | | 700 | | 17 | | | 14 | | 714 | | 16 | | | 1,570 | | 61 | | | 294 | | 9 | | | | | | | | | | | | | | | | | | | | | | | | | Total | | 8,050 | | — | (3) | | 267 | | 8,317 | | — | (3) | | 16,848 | | — | (3) | | 3,705 | | — | (3) | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Board of Management | | | | Fixed
salary | | Perquisites(1) | | Total
non-performance-
based
remuneration | | Annual
bonus(2) | | | Three-year
bonus(3) | | | Total | | | Fair
value
of SAR
award
at date
of
grant(4) | | | Fair
value
of RSU
award
at date
of
grant(5) | | | Overall
total | | | | | | | € thou | | € thou | | € thou | | € thou | | | € thou | | | € thou | | | € thou | | | € thou | | | € thou | | Michael Diekmann (Chairman) | | 2008 | | 1,200 | | 26 | | 1,226 | | 1,112 | | | 311 | | | 2,649 | | | 430 | | | 720 | | | 3,799 | | | | 2007 | | 1,050 | | 24 | | 1,074 | | 2,046 | | | 472 | | | 3,592 | | | 588 | | | 1,020 | | | 5,200 | | | | | | | | | | | | | Dr. Paul Achleitner | | 2008 | | 800 | | 44 | | 844 | | 704 | | | 205 | | | 1,753 | | | 287 | | | 480 | | | 2,520 | | | | 2007 | | 700 | | 13 | | 713 | | 1,416 | | | 310 | | | 2,439 | | | 392 | | | 680 | | | 3,511 | | | | | | | | | | | | | Oliver Bäte(6) | | 2008 | | 700 | | 48 | | 748 | | 701 | | | 209 | | | 1,658 | | | 251 | | | 420 | | | 2,329 | | | | 2007 | | — | | — | | — | | — | | | — | | | — | | | — | | | — | | | — | | | | | | | | | | | | | Clement B. Booth | | 2008 | | 700 | | 93 | | 793 | | 624 | | | 205 | | | 1,622 | | | 251 | | | 420 | | | 2,293 | | | | 2007 | | 700 | | 78 | | 778 | | 1,218 | | | 318 | | | 2,314 | | | 392 | | | 680 | | | 3,386 | | | | | | | | | | | | | Enrico Cucchiani | | 2008 | | 700 | | 88 | | 788 | | 707 | | | 263 | | | 1,758 | | | 260 | | | 435 | | | 2,453 | | | | 2007 | | 700 | | 118 | | 818 | | 1,261 | | | 346 | | | 2,425 | | | 392 | | | 680 | | | 3,497 | | | | | | | | | | | | | Dr. Joachim Faber | | 2008 | | 700 | | 19 | | 719 | | 526 | | | 211 | | | 1,456 | | | 261 | | | 437 | | | 2,154 | | | | 2007 | | 700 | | 20 | | 720 | | 1,245 | | | 312 | | | 2,277 | | | 392 | | | 680 | | | 3,349 | | | | | | | | | | | | | Dr. Helmut Perlet | | 2008 | | 700 | | 206 | | 906 | | 653 | | | 214 | | | 1,773 | | | 251 | | | 420 | | | 2,444 | | | | 2007 | | 700 | | 20 | | 720 | | 1,469 | | | 311 | | | 2,500 | | | 392 | | | 680 | | | 3,572 | | | | | | | | | | | | | Dr. Gerhard Rupprecht | | 2008 | | 700 | | 24 | | 724 | | 713 | | | 246 | | | 1,683 | | | 238 | | | 399 | | | 2,320 | | | | 2007 | | 700 | | 34 | | 734 | | 1,217 | | | 322 | | | 2,273 | | | 392 | | | 680 | | | 3,345 | | | | | | | | | | | | | Jean-Philippe Thierry | | 2008 | | 700 | | 68 | | 768 | | 620 | | | 209 | | | 1,597 | | | 237 | | | 397 | | | 2,231 | | | | 2007 | | 700 | | 77 | | 777 | | 1,245 | | | 312 | | | 2,334 | | | 392 | | | 680 | | | 3,406 | | | | | | | | | | | | | Dr. Herbert Walter(7) | | 2008 | | 700 | | 48 | | 748 | | 0 | | | 0 | | | 748 | | | 116 | | | 195 | | | 1,059 | | | | 2007 | | 700 | | 45 | | 745 | | 923 | | | 175 | | | 1,843 | | | 392 | | | 680 | | | 2,915 | | | | | | | | | | | | | Dr. Werner Zedelius | | 2008 | | 700 | | 9 | | 709 | | 825 | | | 300 | | | 1,834 | | | 314 | | | 525 | | | 2,673 | | | | 2007 | | 700 | | 14 | | 714 | | 1,363 | | | 348 | | | 2,425 | | | 392 | | | 680 | | | 3,497 | | | | | | | | | | | | | Total(8) | | 2008 | | 8,300 | | 673 | | 8,973 | | 7,185 | | | 2,373 | | | 18,531 | | | 2,896 | | | 4,848 | | | 26,275 | | | | 2007 | | 8,050 | | 459 | | 8,509 | | 14,505 | | | 3,481 | | | 26,495 | | | 4,508 | | | 7,820 | | | 38,823 | | | | | | | | | | | | | Change from previous year in %(8) | | | | 3.1 | | 46.6 | | 5.5 | | (50.5 | ) | | (31.8 | ) | | (30.1 | ) | | (35.8 | ) | | (38.0 | ) | | (32.3 | ) |
(1) | Paid in 2007Broad range reflects travel allowances for fiscal year 2006.non-German resident Board Members and a long-term service award for Dr. Perlet.
|
(2) | Proportional amount accruedActual bonus paid in 2009 for fiscal year 2006.2008.
|
The following table sets forth the equity-based remuneration each individual member of the Board of Management received in 2006.
| | | | | | | | | | | | | | Board of Management | | Number of
SARs(1) granted
2006 | | Number of
RSUs(2) granted
2006 | | Mathematical
value of
SARs at the date of
grant 2006 | | Mathematical
value of RSU at the date of
grant 2006 | | Total
2006 | | Change from
previous
year | | | | | | | | | € thou | | € thou | | € thou | | % | | Michael Diekmann (Chairman) | | 15,228 | | 7,752 | | 571 | | 957 | | 1,528 | | (27 | ) | Dr. Paul Achleitner | | 10,476 | | 5,332 | | 393 | | 658 | | 1,051 | | (34 | ) | Clement B. Booth | | 9,379 | | 4,774 | | 352 | | 589 | | 941 | | — | | Jan R. Carendi | | 9,380 | | 4,775 | | 352 | | 589 | | 941 | | (34 | ) | Enrico Cucchiani | | 7,139 | | 5,634 | | 268 | | 696 | | 963 | | (23 | ) | Dr. Joachim Faber | | 9,673 | | 4,924 | | 363 | | 608 | | 971 | | (31 | ) | Dr. Helmut Perlet | | 9,697 | | 4,936 | | 364 | | 609 | | 973 | | (30 | ) | Dr. Gerhard Rupprecht | | 9,638 | | 4,906 | | 361 | | 606 | | 967 | | (29 | ) | Jean-Philippe Thierry | | 9,321 | | 4,745 | | 350 | | 586 | | 935 | | 73 | ) | Dr. Herbert Walter | | 10,476 | | 13,398 | | 393 | | 1,654 | | 2,047 | | (34 | ) | Dr. Werner Zedelius | | 10,027 | | 5,104 | | 376 | | 630 | | 1,006 | | (15 | ) |
(1)
| SARsEstimated amount for 2008 following interim assessment—the actual performance assessment can be exercised any time from May 17, 2008 to May 16, 2013,only take place at the latest after the expiration of a blocking period, under the condition that the price of the Allianz SE share is at least €158.89 and that it at least once during the plan period exceeded the Dow Jones Europe STOXX Price Index (600) during a period of five consecutive trading days. Moreover, the Board of Management has voluntarily committed to hold options in principle until the end of plan as long as the share price has not already reached the defined maximum relevant for the exercise of the specific SARs. For further information on the SARs please refer to Note 48 of our consolidated financial statements.three-year period.
|
(2)(4)
| Fair value of SAR granted in 2008. |
(5)The RSUs | Fair value of RSU granted in 2008. |
(6) | Mr. Oliver Bäte joined the Board of Management on January 1, 2008. His mid-term bonus is pro rated to reflect his length of service during the three-year performance period. All other terms are exercised on the first day aftersame as those of the expirationother members. |
(7) | Dr. Herbert Walter resigned from the Board of a five-year blocking period, i.e. May 17, 2011, at the priceManagement of Allianz SE share at that date. For further information on January 12, 2009 upon the RSUs please see Note 48change of control of Dresdner Bank (sale to Commerzbank). Further, Dr. Walter resigned from the Board of Management of Dresdner Bank AG, upon appointment of Dr. Blessing as Chairman of the consolidated financial statements.Board of Management of Dresdner Bank AG on January 19, 2009. In a separation agreement of December 23, 2008 and in accordance with the terms of his service contract it was agreed that upon his resignation Dr. Walter will receive a gross termination payment amounting to €3,595,100 as compensation for the termination of his service contract running until December 31, 2012. Pursuant to the terms of his service contract, Dr. Walter will further receive a transition payment for a period of six months after termination of his service (refer to “Termination of service” below). Dr. Walter has waived his entitlement to his 2008 annual bonus and to his 2008 three-year bonus (pro-rated). His three-year bonus for 2007 (pro-rated) has been calculated according to the terms of his service contract and will be paid out in 2009. With respect to the outstanding Stock Appreciation Rights (SAR) granted to Dr. Walter during his term of service it was agreed that such rights will remain in force. They can be exercised by Dr. Walter subject to the current plan terms and conditions and subject to the applicable exercise hurdles and vesting periods. |
(8) | Mr. Jan Carendi retired from the Board of Management on December 31, 2007. The total remuneration for 2007 and the percentage change between 2007 and 2008 reflects the remuneration of the full Board of Management active in the respective years. |
The total remuneration of the Board of Management for fiscal year 2006 amounted to €41.22008, excluding the interim assessment value for the three-year bonus plan, was € 24 million (2005: €37.1(2007: € 35 million). The following table sets out the details of the awards made to the Board of Management under the GEI program of equity–related remuneration in 2008 and their outstanding holdings at the end of the fiscal year.
| | | | | | | | | | | Board of Management | | Number
of SAR
granted
2008 | | Number of
SAR held at
31 December
2008 | | Strike
Price
Range | | Number
of RSU
granted
2008 | | Number of
RSU held at
31 December
2008 | | | | | | | | € | | | | | Michael Diekmann (Chairman) | | 17,930 | | 107,196 | | 83.47 - 239.80 | | 8,701 | | 50,799 | Dr. Paul Achleitner | | 11,953 | | 80,895 | | 83.47 - 239.80 | | 5,801 | | 37,144 | Oliver Bäte | | 10,459 | | 10,459 | | 117.38 | | 5,076 | | 5,076 | Clement B. Booth | | 10,459 | | 29,882 | | 117.38 - 160.13 | | 5,076 | | 14,904 | Enrico Cucchiani | | 10,825 | | 69,894 | | 83.47 - 239.80 | | 5,253 | | 34,547 | Dr. Joachim Faber | | 10,878 | | 70,297 | | 83.47 - 239.80 | | 5,279 | | 32,896 | Dr. Helmut Perlet | | 10,459 | | 71,391 | | 83.47 - 239.80 | | 5,076 | | 33,043 | Dr. Gerhard Rupprecht | | 9,936 | | 68,368 | | 83.47 - 239.80 | | 4,822 | | 32,105 | Jean-Philippe Thierry | | 9,884 | | 69,364 | | 83.47 - 239.80 | | 4,797 | | 14,596 | Dr. Herbert Walter | | 4,850 | | 69,325 | | 83.47 - 160.13 | | 2,354 | | 74,698 | Dr. Werner Zedelius | | 13,074 | | 65,525 | | 83.47 - 239.80 | | 6,345 | | 31,064 |
The GEI awards are accounted for as cash-settled plans and the fair value of the awards is accrued as compensation expense over the relevant vesting period. Upon vesting, any changes in the fair value of the outstanding SAR are recognized as compensation expense. The fair value at the end of fiscal year 2008 was below prior year. Therefore, no additional compensation expense was recognized. SAR can be exercised once the two-year vesting period has expired on the condition that the Allianz SE stock price is at least 20.0% above the price at which the SAR were granted (strike price). Also, the share price of the Allianz SE stock must have exceeded the Dow Jones EURO STOXX Price Index (600) over a period of five consecutive trading days at least once during the plan period. The RSU are released on the first trading day after the end of a five-year vesting period. Remuneration for Allianz Group Mandatesmandates and for Mandatesmandates from outside the Allianz Group If a member of the Board of Management accepts mandatesholds a mandate in other companies and receivesanother company the full compensation for it, the amount is fully transferred to Allianz SE inif the case of Allianzcompany is owned companies. In case of remuneration receivedby Allianz. If the mandate is from mandates in companiesa company outside the Allianz Group, 50%50.0% of itthe compensation received is normally transferredpaid to Allianz SE. In 2006, the remuneration that the members of the Board of Management were entitled to keep after payment to Allianz SE amounted to €397,225. The remuneration from mandates incompensation paid by companies outside the Allianz Group is shown in the Annual Reports of the companies concerned. Pensions and similar Benefitsbenefits The pension agreements for members of the Board of Management up to 2004 stipulatedprovided for retirement benefits of a fixed amount that waswere not linked to the development of fixedincreases in salary or variable remuneration components. These pension agreements were examined and revised at irregular intervals. Effectivepay. With effect from 2005, Allianz SE changed from this defined benefit arrangement to a contribution-orientedcontribution-based system. The rights from the respective pension promises existingrights that existed at that point in time were frozen. As a result of the change, since 2005, annual contributions have been made by the companyCompany instead of the former increase amendments. Interest is accrued on the contributions with a minimum guaranteed rate of 2.75% per year is guaranteed as the minimum interest rate applicable to these contributions. In case of an insured event, the accumulated capital is converted to equal annuity payments which are then paid out for the rest of the member’s life. Ifannum. Should the net annual return on investment exceedsfrom the actuarial interest rate, a corresponding profit share will beinvested contribution exceed 2.75% the full increase in value is credited into the followingmembers the same year. The amountcompany reviews the level of the contribution payment will be revised yearly.contributions annually. The contribution payments are guaranteed only as required for further regular financing of accrued pension rights resulting from defined benefitsbenefit promises existing on December 31, 2004. In the case of an insured event, the accumulated capital is converted to equivalent annuity payments which are then paid out for the rest of the member’s life or, where applicable, to dependents. The increase in
reserves for pensions (service(current service cost) includes the required expenditures for further financing of accrued pension rights as well as the contribution payments for the new contribution-orientedcontribution-based system. When a mandate of a member of the Board of Management ends, an old agea pension may become payable at the earliest upon completionreaching the age of the 60th year of age,60, except for cases of professionaloccupational or general disability for medical reasons, or survivors´ pensions in the case of death.death, when a pension may become payable to the dependents. If the mandate is terminated for other reasons before the retirement age has been reached, a non-forfeitable pension promise is maintained.maintained if non-forfeitable. This does not include, however, a right to pension payments beginning immediately. The Allianz Group has paid €3.6€4 million (2005: €2.0(2007: €4 million) to increase pension reserves and reserves for similar benefits for active members of the Board of Management. On December 31, 2006,2008, pension reserves and reserves for similar benefits to members of the Board of Management who were active at that date, amounted to €23.1 million.€29 million (2007: €26 million).
The following table sets forthout the current service cost and contributions arising within relation to the current pension plans according to IAS 19, excluding the current service cost for the old pension plan redeemed as of December 31, 2004, for each individual member of the Board of Management of Allianz SE in 2006. | | | Board of Management
| | € thou | Michael Diekmann (Chairman)
| | 365 | Dr. Paul Achleitner
| | 187 | Clement B. Booth
| | 258 | Jan R. Carendi
| | — | Enrico Cucchiani
| | 255 | Dr. Joachim Faber
| | 253 | Dr. Helmut Perlet | | 239 | Dr. Gerhard Rupprecht | | 226 | Jean-Philippe Thierry | | 34 | Dr. Herbert Walter | | 195 | Dr. Werner Zedelius | | 238 |
2008. The additionaltable below separates the current service cost in 2006 according to IAS 19 for the frozen olddefined benefit plan (redeemed as of December 31, 2004) from the current pension plan amounted to, in € thousand, for Mr. Diekmann 166, for Dr. Achleitner 257, for Dr. Faber 134, for Dr. Perlet 138, for Dr. Rupprecht 174, for Dr. Walter 383 and for Dr. Zedelius 89.plans.
| | | | | | | Board of Management | | Defined
Benefit
Pension Plan
(frozen)
2008 | | Current
Pension Plans
2008 | | Total
2008 | | | | € thou | | € thou | | € thou | Michael Diekmann (Chairman) | | 157 | | 396 | | 553 | Dr. Paul Achleitner | | 237 | | 237 | | 474 | Oliver Bäte | | — | | 267 | | 267 | Clement B. Booth | | — | | 261 | | 261 | Enrico Cucchiani | | — | | 293 | | 293 | Dr. Joachim Faber | | 133 | | 213 | | 346 | Dr. Helmut Perlet(1) | | 0 | | 220 | | 220 | Dr. Gerhard Rupprecht | | 176 | | 196 | | 372 | Jean-Philippe Thierry | | — | | 35 | | 35 | Dr. Herbert Walter | | 315 | | 209 | | 524 | Dr. Werner Zedelius | | 81 | | 209 | | 290 |
Termination of service Former membersMembers of the Board of Management who leave the Board after serving a term of at least a five-year term of membershipfive years are entitled to a transition payment for a period of six months. This consists of monthly fixed payments to theThe amount of the last paidpayable is calculated on fixed salary and a proportion of the proportionate annual target bonus on the basis of 100% target achievement.and is paid in monthly instalments.
If service is terminated as a result of a so-called “change of control”, the following separate regulation additionally applies: A change of control requires that a stockholdershareholder of Allianz SE acting alone or together with other stockholdersshareholders holds more than 50%50.0% of voting rights in Allianz SE. If the appointment of a member of the Board of Management is unilaterally revoked by the Supervisory Board as a result of such a change of control within a period of twelve months after the change of control, membershipevent, or if the member terminates service by resignation jointly or from the side of the concerned member of the Board of Management, because his or herdue to a substantial decrease in managerial responsibilities as manager are substantially decreased and, without the concerned Board member culpably giving cause for termination, he receives theall contracted benefits for the rest of the duration of his or her employment contract paidwill be payable in the form of a lump-sum payment.for the duration of the employment contract. The amount dependsto be paid is based on the following determining factors:fixed salary at the fixed remuneration attime of the change of control, the annual and current 3-yearthree-year bonus, in each case discounted according to market conditions at the time of payment. A target achievement of 100%100.0% is the basis for the annual orand three-year bonus. If the remaining duration of the service contract is not at least three years at the time of the change of control, the lump-sum payment increases in regard torespect of fixed remunerationsalary and annual bonus is increased to
(1) | No current service cost for the defined benefit pension plan of Dr. Perlet, as above age 60. |
correspond to a term of three years. If the concerned member reaches the age of 60 before the Board of Management completes his or her 60th year of age before three years have elapsed, the lump-sum payment decreases correspondingly. In view of stock-basedFor the equity-based remuneration the concerned member of the Board of Management is treated as a pensioner according to the respective conditions of the pension plan.having retired. These regulations are also effective correspondingly if the Board of Management mandate is not extended within two years after athe change of control. For other cases of an early termination of appointment to the Board of Management, the service contracts do not contain any particular regulations.special rules. Since their introduction in June 2007, Allianz SE complies with the provisions of rule 4.2.3 sections 4 and 5 of the German Corporate Governance Code setting out suggestions and – later on – recommendations on severance payment caps in case of premature termination of Board of Management contracts without serious cause. Thus, for the appointment of new Board of Management members or for extensions of the existing mandates, the service contract provides that payments for early termination shall neither exceed the value of two times annual compensation (severance payment cap) nor the payments due for the remaining term of the contract. In case of early termination due to a change of control payments shall not exceed 150.0% of the severance payment cap. Benefits to retired membersMembers of the Board of Management In 2006,2008, remuneration and other benefits in the amount of €4.3€7 million (2005: €4.3(2007: €5 million) were paid to retired members of the Board of Management and their surviving dependents. Additionally, a reservereserves for current pensions and accrued pension rights totaled in €47.0€47 million (2005: €38.9(2007: €49 million). Remuneration of the Supervisory Board Remuneration system The remuneration of the Supervisory Board is based on the size of the company, the functions and responsibilities of the members of the Supervisory Board and the financial situation of the company. It is determinedgoverned by the Annual General Meeting. Remuneration for the Supervisory Board of Allianz AG was regulated in Section 9§11 of the Statutes of Allianz AG.SE. In connectionline with §113 of the German Stock Corporation Act, the General Meeting is responsible for establishing the Supervisory Board’s remuneration. Accordingly, the provisions on the amount and structure of the Supervisory Board remuneration in §11 of the Statutes were ratified by the Annual General Meeting in 2005. Upon the conversion of Allianz AG into Allianz SE effective October 13,in 2006, the regulations for remunerationthese provisions were adopted by shareholders without changes. The key principles of the Supervisory Board were transferred unchanged into Section 11remuneration are: Total remuneration is set at an appropriate level based on the scale and scope of the StatutesSupervisory Board members’ duties and responsibilities as well as the Company’s activities, business and financial situation. An appropriate balance is maintained between fixed remuneration and short-term and long-term performance based components in order to adhere to the principles of Allianz SE.neutrality and independence of the Supervisory Board members, while at the same time providing adequate performance incentives. The remuneration conforms to the individual functions and responsibilities of the Supervisory Board members, such as chair or vice-chair or committee mandates. Three components make up the Supervisory Board’s remuneration:regular remuneration of a fixed sum of €50,000 and two performance-based components. Onemember of the Supervisory Board of Allianz SE, i.e. the remuneration without taking into account additional remuneration for the Chairperson, Deputy Chairpersons and/or members and Chairpersons of committees: The fixed remuneration amounts to €50,000 per fiscal year. The first performance-based componentscomponent of remuneration has a short-term orientation andfocus. It depends on the increase of the consolidated earnings-per-share incompared to the previous fiscal year;year. It amounts to €150 for each tenth percentage point by which the otherGroup’s earnings-per-share increased in comparison to the preceding year and is long-term and focusesset at a maximum limit per member of €24,000. The second performance-based component of remuneration depends on the cumulative trend inincrease of the consolidated earnings-per-share compared to this indicatorfigure three years ago and therefore seeks to reflect long-term performance. It amounts to €60 for each tenth percentage point by which the Group’s earnings-per-share increased over the past three years. It is also set at a maximum limit of €24,000.
Maximum regular remuneration The maximum sum for each ofWith the two variable remuneration components is limited to €24,000. This means that with thebeing capped at a maximum limit of €24,000 and a fixed sum of €50,000, the maximum total regular compensation for an ordinarya Supervisory Board member amounts to €98,000.€98,000 per fiscal year. This maximum amount is achievedreached when the previous year’s earnings-per-share have risen by 16%16.0% and when this indicator has further improved by a total of 40%40.0% or more over the last three years. If there has been no improvement in corporatethe Allianz Group’s earnings-per-share during the relevant period (i.e. the past fiscal year or the past three years), no performance-based remuneration will be awarded.
Compliance with German Corporate Governance CodeThe Chairmanstructure of the Supervisory Board’s remuneration complies with the recommendation and the suggestion of the German Corporate Governance Code under which members of the Supervisory Board shall receive fixed as well as performance-based compensation that should contain components based on the long-term performance of the business. We believe that this form of the Supervisory Board’s remuneration has proven to be effective, and that the earnings-per-share performance measure is appropriate for the calculation of the performance-based remuneration of the Supervisory Board. Chair and committees, limits and attendance fees The Chairperson and Deputy Chairpersons of the Supervisory Board as well as the ChairmanChairperson and members of itsSupervisory Board committees receive additional remuneration as follows: The ChairmanChairperson of the Supervisory Board receives double, and his deputiesthe Deputy Chairpersons receive one-and-a-half times, the regular remuneration of an ordinarya member of the Supervisory Board. Members of the Personnel Committee, Standing Committee and Risk Committee receive an additional 25%,25.0% above the regular remuneration, and the ChairmenChairpersons of each of these committees 50%.receive 50.0% over the regular remuneration. Members of the Audit Committee are entitled to a fixed sum of €30,000 per year and the Audit Committee ChairmanChairperson receives €45,000. No additional remuneration is granted to the members of the Nomination Committee. There is also a capmaximum limit on the total remuneration of each member of the Supervisory Board. It is reached when the ChairmanChairperson of the Supervisory Board has been awarded triple, and the other members of the Supervisory Board double, the regular remuneration of an ordinarya member of the Supervisory Board. The members of the Supervisory Board receive a €500 attendance fee for each Supervisory Board or committee meeting that they personally attend.attend in person. This sum remains unchanged if several meetings occur on one day or when various meetings are held on consecutive days. The total expenditure for attendance fees in 2006 amounted to €55,500. RemunerationFigures for 2008 fiscal year
The Group’s earnings-per-share were negative in 2008. The performance-based remuneration of the Supervisory Board of Allianz AG On October 13, 2006, whenbeing based on the conversion of Allianz AG into Allianz SE became effective, the mandatesincrease of the presentGroup’ earnings-per-share, no short-term or long-term performance-based remuneration will be awarded to the Supervisory Board members of Allianz AG were terminated. Therefore, they receivedfor 2008. For 2008 the regular remuneration for a time-apportioned 10/12member of the above-described remuneration for their activity in 2006 accordingSupervisory Board thus amounted to clause 9 paragraph 4 of the Articles of Association of Allianz AG. The fixed sum for fiscal year 2006 was thus 10/12a total of €50,000, i.e. €41,667. In 2006, both performance-basedbeing the fixed remuneration. The maximum limit of remuneration components reached €24,000 becauseapplicable to the consolidated earnings per share improved by more than 16% in 2006 and more than 40% during the period from 2003 to 2006. Because of the time-apportioned calculation both performance-based remuneration components total 10/12 of €24,000, i.e. €20,000. Additional remuneration for the Chairman and Deputy Chairman of the Supervisory Board, as well asbeing three times the Chairman andregular remuneration, amounted to €150,000, the maximum limit of remuneration applicable to the other Supervisory Board members of committees is determined based on these amounts.amounted to €100,000.
Each individual member ofThe total remuneration for the Supervisory Board of Allianz AG (upmembers including attendance fees amounted to October 13, 2006) received€1,080,000 in 2008, compared to €1,598,305 in 2007. Accordingly, the following remuneration.average annual remuneration for the Supervisory Board members decreased to €90,000 (2007: €132,274). The reason for this is that no performance-based remuneration was awarded.
| | | | | | | | | | | Name | | Fixed remuneration | | Performance-based remuneration | | Committee remuneration (may be capped) | | Total remuneration | | | | short-term | | long-term | | | | | | € | | € | | € | | € | | € | Dr. Henning Schulte-Noelle (Chairman) | | 83,334 | | 40,000 | | 40,000 | | 81,666 | | 245,000 | Norbert Blix (Deputy Chairman) | | 62,500 | | 30,000 | | 30,000 | | 40,834 | | 163,334 | Dr. Wulf H. Bernotat | | 41,667 | | 20,000 | | 20,000 | | — | | 81,667 | Dr. Diethart Breipohl | | 41,667 | | 20,000 | | 20,000 | | — | | 81,667 | Dr. Gerhard Cromme | | 41,667 | | 20,000 | | 20,000 | | 65,834 | | 147,501 | Claudia Eggert-Lehmann | | 41,667 | | 20,000 | | 20,000 | | 25,000 | | 106,667 | Hinrich Feddersen | | 41,667 | | 20,000 | | 20,000 | | — | | 81,667 | Franz Fehrenbach | | 41,667 | | 20,000 | | 20,000 | | — | | 81,667 | Peter Haimerl | | 41,667 | | 20,000 | | 20,000 | | 20,417 | | 102,084 | Prof. Dr. Rudolf Hickel | | 41,667 | | 20,000 | | 20,000 | | 25,000 | | 106,667 | Dr. Franz B. Humer | | 41,667 | | 20,000 | | 20,000 | | — | | 81,667 | Prof. Dr. Renate Köcher | | 41,667 | | 20,000 | | 20,000 | | — | | 81,667 | Igor Landau | | 41,667 | | 20,000 | | 20,000 | | — | | 81,667 | Dr. Max Link | | 41,667 | | 20,000 | | 20,000 | | — | | 81,667 | Iris Mischlau-Meyrahn | | 41,667 | | 20,000 | | 20,000 | | — | | 81,667 | Karl Neumeier | | 41,667 | | 20,000 | | 20,000 | | — | | 81,667 | Sultan Salam | | 41,667 | | 20,000 | | 20,000 | | — | | 81,667 | Dr. Manfred Schneider | | 41,667 | | 20,000 | | 20,000 | | 57,917 | | 139,584 | Margit Schoffer | | 41,667 | | 20,000 | | 20,000 | | — | | 81,667 | Prof. Dr. Dennis J. Snower | | 41,667 | | 20,000 | | 20,000 | | — | | 81,667 | | | | | | | | | | | | Total | | 895,840 | | 430,000 | | 430,000 | | 316,668 | | 2,072,508 | | | | | | | | | | | |
Remuneration of the Supervisory Board of Allianz SE | | | | | | | | | | | | | | | | | Supervisory Board | | Fixed
remuneration | | Long-term
performance
based
remuneration | | Short-term
performance
based
remuneration | | Committee
remuneration | | | 2008 | | 2007 | | 2008 | | 2007 | | 2008 | | 2007 | | 2008 | | 2007 | | | | € | | € | | € | | € | | € | | € | | € | | € | Dr. Henning Schulte-Noelle (Chairman) | | 100,000 | | 100,000 | | 0 | | 48,000 | | 0 | | 16,200 | | 75,000 | | 123,150 | Dr. Gerhard Cromme (Deputy Chairman) | | 75,000 | | 75,000 | | 0 | | 36,000 | | 0 | | 12,150 | | 36,250 | | 86,050 | Claudia Eggert-Lehmann (Deputy Chairwoman) (until January 12, 2009) | | 75,000 | | 75,000 | | 0 | | 36,000 | | 0 | | 12,150 | | 25,000 | | 41,050 | Dr. Wulf H. Bernotat | | 50,000 | | 50,000 | | 0 | | 24,000 | | 0 | | 8,100 | | 42,500 | | 50,525 | Jean-Jacques Cette | | 50,000 | | 50,000 | | 0 | | 24,000 | | 0 | | 8,100 | | 30,000 | | 30,000 | Godfrey Robert Hayward | | 50,000 | | 50,000 | | 0 | | 24,000 | | 0 | | 8,100 | | 12,500 | | 20,525 | Dr. Franz B. Humer | | 50,000 | | 50,000 | | 0 | | 24,000 | | 0 | | 8,100 | | 50,000 | | 20,525 | Prof. Dr. Renate Köcher | | 50,000 | | 50,000 | | 0 | | 24,000 | | 0 | | 8,100 | | 12,500 | | 20,525 | Peter Kossubek (since May 2, 2007) | | 50,000 | | 33,334 | | 0 | | 16,000 | | 0 | | 5,400 | | 12,500 | | 13,684 | Igor Landau | | 50,000 | | 50,000 | | 0 | | 24,000 | | 0 | | 8,100 | | 30,000 | | 30,000 | Jörg Reinbrecht | | 50,000 | | 50,000 | | 0 | | 24,000 | | 0 | | 8,100 | | 30,000 | | 30,000 | Margit Schoffer (until May 2, 2007) | | — | | 20,834 | | — | | 10,000 | | — | | 3,375 | | — | | 8,553 | Rolf Zimmermann | | 50,000 | | 50,000 | | 0 | | 24,000 | | 0 | | 8,100 | | 12,500 | | 20,525 | Total | | 700,000 | | 704,168 | | 0 | | 338,000 | | 0 | | 114,075 | | 368,750 | | 495,112 |
The newly constituted first
Total remuneration including attendance fees | | | | | | | | | | | | | | | | | | Total remuneration
(fixed, performance
based and committee)
(after cap) | | | Attendance fees | | Total amount (total
remuneration and
attendance fees) | Supervisory Board | | 2008 | | | 2007 | | | 2008 | | 2007 | | 2008 | | 2007 | | | | € | | | € | | | € | | € | | € | | € | Dr. Henning Schulte-Noelle (Chairman) | | 150,000 | (3) | | 246,300 | (1) | | 4,000 | | 2,500 | | 154,000 | | 248,800 | Dr. Gerhard Cromme (Deputy Chairman) | | 100,000 | (4) | | 164,200 | (2) | | 4,000 | | 3,500 | | 104,000 | | 167,700 | Claudia Eggert-Lehmann (Deputy Chairwoman) (until January 12, 2009) | | 100,000 | | | 164,200 | | | 3,500 | | 2,500 | | 103,500 | | 166,700 | Dr. Wulf H. Bernotat | | 92,500 | | | 132,625 | | | 4,000 | | 3,000 | | 96,500 | | 135,625 | Jean-Jacques Cette | | 80,000 | | | 112,100 | | | 4,000 | | 3,000 | | 84,000 | | 115,100 | Godfrey Robert Hayward | | 62,500 | | | 102,625 | | | 3,500 | | 2,000 | | 66,000 | | 104,625 | Dr. Franz B. Humer | | 100,000 | | | 102,625 | | | 4,500 | | 2,000 | | 104,500 | | 104,625 | Prof. Dr. Renate Köcher | | 62,500 | | | 102,625 | | | 3,500 | | 2,000 | | 66,000 | | 104,625 | Peter Kossubek (since May 2, 2007) | | 62,500 | | | 68,418 | | | 3,500 | | 1,000 | | 66,000 | | 69,418 | Igor Landau | | 80,000 | | | 112,100 | | | 4,500 | | 3,500 | | 84,500 | | 115,600 | Jörg Reinbrecht | | 80,000 | | | 112,100 | | | 4,500 | | 3,500 | | 84,500 | | 115,600 | Margit Schoffer (until May 2, 2007) | | — | | | 42,762 | | | — | | 2,000 | | — | | 44,762 | Rolf Zimmermann | | 62,500 | | | 102,625 | | | 4,000 | | 2,500 | | 66,500 | | 105,125 | Total | | 1,032,500 | | | 1,565,305 | | | 47,500 | | 33,000 | | 1,080,000 | | 1,598,305 |
(1) | Total calculated remuneration of €287,350, which is capped at €246,300 (for Chairman, the limit is three times the 2007 regular remuneration). |
(2) | Total calculated remuneration of €209,200, which is capped at €164,200 (limit of two times the 2007 regular remuneration). |
(3) | Total calculated remuneration of €175,000, which is capped at €150,000 (for Chairperson, the limit is three times the 2008 regular remuneration). |
(4) | Total calculated remuneration of €111,250, which is capped at €100,000 (limit of two times the 2008 regular remuneration). |
Remuneration for mandates in other Allianz Group subsidiaries, agent commissions As member of the Supervisory Board of Dresdner Bank AG Claudia Eggert-Lehmann received €45,000. Peter Kossubek received €13,333.33 as member of the Supervisory Board of Allianz SE was established with the completion of the conversion of Allianz AG into Allianz SE, effective October 13, 2006. Employee representatives were legally appointed on October 27, 2006. The remuneration for the appointment period of members of the first Supervisory Board until the regular Annual General Meeting on May 2, 2007 can be determined only by the Annual General Meeting according to Section 113 para. 2 of the German Stock Corporation Act (Aktiengesetz). The Board of Management and the Supervisory Board will propose to the Annual General Meeting to grant remuneration corresponding to the regulation in Section 11 of the Statutes of Allianz SE. In order to avoid a double payment, remuneration for October 2006 is guaranteed only for the Supervisory Board functions assumed for the first time in that month. On that basis, the members of the Supervisory Board would receive the following remuneration:
| | | | | | | | | | | Name | | Fixed
remuneration | | Performance-based
remuneration | | Committee remuneration (may be capped) | | Total
remuneration | | | | short-term | | long-term | | | | | | € | | € | | € | | € | | € | Dr. Henning Schulte-Noelle (Chairman) | | 16,667 | | 8,000 | | 8,000 | | 16,333 | | 49,000 | Dr. Gerhard Cromme (Deputy Chairman) | | 14,584 | | 7,000 | | 7,000 | | 16,918 | | 45,502 | Claudia Eggert-Lehmann (Deputy Chairman) | | 10,417 | | 5,000 | | 5,000 | | 4,084 | | 24,501 | Dr. Wulf H. Bernotat | | 8,334 | | 4,000 | | 4,000 | | 15,667 | | 32,001 | Jean-Jacques Cette | | 12,500 | | 6,000 | | 6,000 | | 2,500 | | 27,000 | Godfrey Robert Hayward | | 12,500 | | 6,000 | | 6,000 | | 2,042 | | 26,542 | Dr. Franz B. Humer | | 8,334 | | 4,000 | | 4,000 | | 12,250 | | 28,584 | Prof. Dr. Renate Köcher | | 8,334 | | 4,000 | | 4,000 | | 9,542 | | 25,876 | Igor Landau | | 8,334 | | 4,000 | | 4,000 | | 7,500 | | 23,834 | Jörg Reinbrecht | | 12,500 | | 6,000 | | 6,000 | | 2,500 | | 27,000 | Margit Schoffer | | 8,334 | | 4,000 | | 4,000 | | 2,042 | | 18,376 | Rolf Zimmermann | | 12,500 | | 6,000 | | 6,000 | | 2,042 | | 26,542 | | | | | | | | | | | | Total | | 133,338 | | 64,000 | | 64,000 | | 93,420 | | 354,758 | | | | | | | | | | | |
Remuneration for Mandates in Other Allianz Group Subsidiaries
In connection with the assumption of Supervisory Board or similar mandates in other companies of the Allianz Group, Dr. Diethart Breipohl received €57,829, Claudia Eggert-Lehmann €45,000, Peter Haimerl €67,500, Igor Landau €45,000, Sultan Salam €45,000 and Margit Schoffer €45,000.
Agent Commissions
Versicherungs-AG. One member of the Supervisory Board receives small-scalereceived certain small commission paymentspayment for peripheralancillary agent activities. Loans to Members of the Board of Management and Supervisory Board Loans granted by the Dresdner Bank AG and other Allianz Group companies to members of the Board of Management and Supervisory Board totalled €61,285totaled €85,000 on the date of balance.balance (December 31, 2008). Loan amounts repaid in 2008 totaled €50,876. Loans are provided at standard market conditions or at thosethe conditions also valid foras applied to employees. The repaid amounts of these loans amounted to €12,168 in 2006. Moreover, overdraft facilities were granted to members of the Board of Management and Supervisory Board as part of existing account relationships, likewise corresponding to conditions according to market standard or those valid forapplied to employees. The loans and overdrafts mentioned above (1) were made in the ordinary course of business, (2) were granted on conditions that are comparable to those of loans and overdrafts granted to people in peer groups and (3) did not involve more than the normal risk of collectibilitycollectability or present other unfavourableunfavorable features. For members of the Board of Management, this means that the conditions have been set according to the prevailing conditions for Allianz employees. Board Practices Allianz SE has entered into service contracts with members of the boardBoard of managementManagement providing for a limited benefit upon termination of service prior to the stated expiration date of a management board member’s contract. In such circumstances, the management board member of the Board of Management would receive monthly fixed payments for a further six months as well aspro ratabonus payments if the conditions for the bonus payments are fulfilled. If regular pension benefits were to become due during this time period, they would be credited against these payments. Allianz SE has not entered into such contracts with supervisory board members.members of the Supervisory Board. Share Ownership As of May 22, 2007,March 9, 2009, the members of the boardBoard of managementManagement and the supervisory boardSupervisory Board held less than 1% of our ordinary shares issued and outstanding. As of such date, based on our share register, the members of the boardBoard of managementManagement and the supervisory boardSupervisory Board held in the aggregate approximately 3,000130.200 ordinary shares of Allianz SE. Employees As of December 31, 2006,2008, the Allianz Group employed a total of 166,505182,865 people worldwide, of whom 76,15471,267 or 45.7 %,39.0%, were employed in Germany. A large number of our German employees are covered by collective bargaining agreements or similar arrangements. In the past three years, there have been no work stoppages or strikes at our various sites that have arisen from collective bargaining disputes or for other reasons which had a material adverse effect on the Allianz Group’s results of operations. We believe that our employee relations are good. The following table shows the number of employees of the Allianz Group by region as of December 31, 2006, 20052008, 2007 and 2004.2006. | | | | As of December 31, | | 2008 | | 2007 | | 2006 | | | | 2006 | | 2005 | | 2004 | | Employees by countries | | | | | | | | Germany | | 76,154 | | 72,195 | | 75,667 | | 71,267 | | 72,063 | | 76,790 | France | | 17,096 | | 17,246 | | 17,129 | | 18,915 | | 19,120 | | 17,096 | United States | | 10,691 | | 10,840 | | 10,313 | | 10,627 | | 10,706 | | 10,691 | United Kingdom | | 9,945 | | 27,661 | | 23,817 | | 10,207 | | 10,865 | | 9,945 | Russia | | | 9,106 | | 11,744 | | 280 | Italy | | 7,661 | | 7,706 | | 7,715 | | 7,211 | | 7,445 | | 7,661 | Switzerland | | | 4,286 | | 4,117 | | 2,874 | Australia | | 3,474 | | 3,673 | | 3,283 | | 3,719 | | 3,608 | | 3,474 | Spain | | | 3,440 | | 3,299 | | 3,139 | Hungary | | | 3,427 | | 3,235 | | 3,159 | Austria | | 3,106 | | 3,024 | | 3,006 | | 3,272 | | 3,096 | | 3,106 | Hungary | | 3,159 | | 2,839 | | 2,941 | | Switzerland | | 2,874 | | 2,823 | | 2,930 | | Spain | | 3,139 | | 2,762 | | 2,664 | | Brazil | | | 2,941 | | 2,971 | | 2,334 | Slovakia | | 2,564 | | 2,645 | | 2,858 | | 2,682 | | 2,627 | | 2,564 | Brazil | | 2,334 | | 2,345 | | 2,259 | | Poland | | | 2,458 | | 1,358 | | 1,290 | Romania | | 2,061 | | 1,749 | | 1,598 | | 2,331 | | 2,292 | | 2,061 | South Korea | | 1,749 | | 1,711 | | 1,785 | | China (incl. Hong Kong) | | | 2,501 | | 2,137 | | 1,374 | Other | | 20,498 | | 18,406 | | 18,536 | | 24,475 | | 20,524 | | 18,667 | | | | | | | | | Total | | 166,505 | | 177,625 | | 176,501 | | 182,865 | | 181,207 | | 166,505 | | | | | | | | |
Stock-based Compensation Plans Group Equity IncentiveIncentives (GEI) Plans The Allianz Group Equity Incentives (GEI) support the orientation of senior management, and in particular the Board of Management, towardto create sustainable value for shareholders. The GEI plan, as a key component of performance related pay, supports this goal through its direct link to the long-term increaseperformance of the valueAllianz SE stock. The GEI consist of the company. In 1999, Allianz introducedtwo vehicles, Stock Appreciation Rights (SAR) through, which part of the total remuneration is directly tied to the development of the Allianz share price. In 2003,were introduced in 1999, and Restricted Stock Units (RSU) with, which were introduced in 2003. The SAR have a vesting period of two years and an exercise period of five years, the RSU have a 5-year vesting period were issued for the first time. Allianz senior management worldwide is entitled to participateperiod. Participation in these Group Equity Incentives.plans is limited to Allianz top managers and certain designated future leaders worldwide. Awards were granted by the respective companies in accordance with uniform group-wide conditions. The grant price for SAR and RSU applicable for the award is calculated on the basis of the arithmetic average dailyof the closing priceprices of the Allianz shareSE stock in Xetra trading onover the 10ten trading days following the Annual General MeetingFinancial Press Conference of Allianz SE.SE until and including the grant date in the year of issue of the relevant plan. The grant price for the GEI plan 20062008 is €132.41.€117.38. The number of SAR and RSU offered is set individually for each participant and is determined on the basis of the grant price, the economic developmentperformance of the value of Allianz SEGroup and the respective responsibleemploying company, and individual elementsother factors such as fixedparticipants’ remuneration and performance. The volume of rights granted and thus the potential gain for the participant depends essentially on the economic performance. For additional information on the Group Equity Incentive Plans seerefer to Note 48 to our consolidated financial statements. Employee Stock Purchase Plans The purpose of the Allianz Employee Stock Purchase Plan (ESPP) is to promote share ownership among employees as well as to increase their financial awareness and interest in the company’s performance. The ESPP gives employees the opportunity to acquire shares of Allianz SE offers its shares to qualified employees in Germany and abroad at favorable conditions within pre-defined timeframes. To be eligible, employees must have been employed for a minimum period of time prior to the share offering and no notice of termination of employment must have been served. Employees are alsopreferential terms, subject to certain restrictions onconditions. To purchase Allianz SE shares there is a set maximum investment as to the amount that may be invested toannual base pay plus target bonus. The timing of participation and the purchase Allianz shares. Allianz SE and each participating Allianz Group subsidiary establishes a restricted period of at least one and maximum five years during which employees may not transfer these Allianz shares after purchasing them. After this period, these Allianz shares are not subject to vesting or other restrictions. The eligible employees of the Allianz Group acquired a totalshares differs by country. The specific features of 929,509 Allianz shares under such arrangementsthe plan offer are decided annually. In 2008, around 125,000 employees in 2006 (2005: 1,144,196; 2004: 1,051,191).24 countries were eligible to participate in the plan, and approximately 22,000 employees accepted the offer. For additional information on our Employee Stock Purchase Plans, seerefer to Note 48 to our consolidated financial statements. ITEM 7. Major Shareholders and Related Party Transactions
| ITEM 7. | Major Shareholders and Related Party Transactions |
Major Shareholders The outstanding capital stock of Allianz SE consists of ordinary shares without par value that are issued in registered form. Under our statutes,Statutes, each outstanding ordinary share represents one vote. Major shareholders do not have different voting rights. Based on our share register, as of May 22, 2007,March 9, 2009, we had approximately 424,800490,160 registered shareholders, of which approximately 520560 were U.S. holders. Based on our share register, approximately 11.9%16.7% of our ordinary shares issued were held by such U.S. holders. Although our shareholders are generally required when registering to indicate their respective names, addresses and, in the case of legal entities, whether they hold on behalf of a third party,third-party, many of our ordinary shares may be held of record by brokers, trustees or other nominal holders who are not required to provide such information with regard to beneficial shareholders. As a result, the number of holders of record or registered U.S. holders may not be representative of the actual number of beneficial U.S. holders. For information regarding the share ownership of the members of our Board of Management and our Supervisory Board, seerefer to “Directors, Senior Management and Employees—ShareEmployees-Share Ownership.” Under the German Securities Trading Act, holders of voting securities of a listed German company are required to notify the German Federal Financial Supervisory Authority (Bundesanstalt(Bundesanstalt für Finanzdienstleistungsaufsicht,or BaFin) and the company of the level of their holding whenever it reaches, exceeds or falls below specified thresholds. These thresholds are 3%, 5%, 10%, 15%, 20%, 25%, 30%, 50% and 75% of a company’s shares. The provisions of the German Securities Trading Act provide several criteria for attribution of shares. As of May 22, 2007,March 9, 2009, no shareholder holding 5% or more of the share capital was reported to Allianz SE. As of May 18, 2007, 449,124,357March 16, 2009, 453,050,000 ordinary shares were issued, of which 446,665,928451,505,783 were outstanding and 2,458,4291,544,217 were held by the Allianz Group in treasury (including 1,985,182 shares held by Dresdner Bank in trading positions).treasury. Significant changes in the percentage ownership held of record by any of our major shareholders in the last three years were as follows:
the share ownership of Munich Re as reported to the SEC decreased from 12.8% as of December 31, 2003 to approximately 4.9% of our outstanding ordinary shares on July 12, 2005.
Related Party Transactions For a description of related party transactions, seerefer to Note 45 to the consolidated financial statements.
ITEM 8. Financial Information
| ITEM 8. | Financial Information |
Consolidated Statements and Other Financial Information SeeRefer to pages F-1 and following for the consolidated financial statements required by this item.
Legal Proceedings For a description of legal proceedings, seerefer to Note 46 to the consolidated financial statements. Dividend Policy Allianz SE normally declares dividends at the annual general meeting and pays these dividends once a year. Under applicable German law, dividends may be declared and paid only from balance sheet profitsavailable unappropriated earnings as shown in the German statutory annual financial statements of Allianz SE. For each fiscal year, the Board of Management approves the annual financial statements and submits them to the Supervisory Board with its proposal as to the appropriation of the annual profit. This proposal will set forth what amounts of the annual profit should be paid out as dividends, transferred to capital reserves, or carried forward to the next fiscal year. Upon approval by the Supervisory Board, the Board of Management and the Supervisory Board submit their combined proposal to the shareholders at the annual general meeting. The general meeting ultimately determines the appropriation of the annual profits, including the amount of the annual dividends. Shareholders generally participate in distributions of any dividends in proportion to the number of their ordinary shares. Any dividends declared by Allianz SE will be paid in Euro. For information regarding annual dividends declared in 2008 and paid from 20022004 through 2006, see2007, refer to “Key Information—Dividends.” Significant Changes For a description of significant developments since the date of the annual financial statements included in this annual report, seerefer to Note 52 to the consolidated financial statements.
ITEM 9. The Offer and Listing
| ITEM 9. | The Offer and Listing |
Trading Markets The principal trading market for the ordinary shares is the Frankfurt Stock Exchange. The ordinary shares also trade on the following other German stock exchanges: Berlin-Bremen, Düsseldorf, Hamburg, Hanover, Munich and Stuttgart, as well as the stock exchanges in London, Paris, Milan and Zurich. The ADSs of Allianz SE, each representing one-tenth of an ordinary share, trade on the New York Stock Exchange under the symbol “AZ.” SeeRefer also to “Major Shareholders and Related Party Transactions—Major Shareholders.”
Market Price Information The table below sets forth, for the periods indicated, the high and low closing sales prices on the Frankfurt Stock Exchange for the ordinary shares of Allianz SE as reported by XETRA. The table also shows, for the periods indicated, the highs and lows of the DAX. SeeRefer to the discussion under “Key Information—Exchange Rate Information” for information with respect to rates of exchange between the U.S. Dollar and the Euro applicable during the periods set forth below. | | | | | | | | | | | | Price per
ordinary share(1) | | DAX | | | | High | | Low | | High | | Low | | | | € | | € | | | | | Annual highs and lows | | | | | | | | | 2002 | | 259.5 | | 69.4 | | 5,462.6 | | 2,597.9 | 2003 | | 101.5 | | 41.1 | | 3,965.2 | | 2,203.0 | 2004 | | 111.2 | | 73.9 | | 4,261.8 | | 3,647.0 | 2005 | | 129.7 | | 89.7 | | 5,458.6 | | 4,178.1 | 2006 | | 156.8 | | 111.2 | | 6,611.8 | | 5,292.1 | 2007 (through May 18, 2007) | | 169.0 | | 147.8 | | 7,607.5 | | 6,447.7 | | | | | | Quarterly highs and lows | | | | | | | | | 2005 | | | | | | | | | First quarter | | 101.0 | | 89.7 | | 4,428.1 | | 4,201.8 | Second quarter | | 98.4 | | 90.1 | | 4,627.5 | | 4,178.1 | Third quarter | | 112.3 | | 95.2 | | 5,048.7 | | 4,530.2 | Fourth quarter | | 129.7 | | 110.6 | | 5,458.6 | | 4,806.1 | | | | | | 2006 | | | | | | | | | First quarter | | 139.5 | | 124.1 | | 5,984.2 | | 5,334.3 | Second quarter | | 139.0 | | 111.2 | | 6,140.7 | | 5,292.1 | Third quarter | | 137.4 | | 115.5 | | 6,004.3 | | 5,396.9 | Fourth quarter | | 156.8 | | 136.1 | | 6,611.8 | | 5,992.2 | | | | | | 2007 | | | | | | | | | First quarter | | 169.0 | | 147.8 | | 7,027.6 | | 6,447.7 | | | | | | Monthly highs and lows | | | | | | | | | 2006 | | | | | | | | | September | | 137.4 | | 130.8 | | 6,004.3 | | 5,773.7 | October | | 145.7 | | 136.1 | | 6,284.2 | | 5,992.2 | November | | 152.7 | | 143.9 | | 6,476.1 | | 6,223.3 | December | | 156.8 | | 145.2 | | 6,611.8 | | 6,241.1 | | | | | | 2007 | | | | | | | | | January | | 159.5 | | 147.8 | | 6,789.1 | | 6,566.6 | February | | 169.0 | | 154.2 | | 7,027.6 | | 6,715.4 | March | | 158.9 | | 148.3 | | 6,917.0 | | 6,447.7 | April | | 166.7 | | 155.0 | | 7,408.9 | | 6,937.2 |
(1)
| Adjusted to reflect the capital increase in April 2003.
|
| | | | | | | | | | | | Price per
ordinary share | | DAX | | | | High | | Low | | High | | Low | | | | € | | € | | | | | Annual highs and lows | | | | | | | 2004 | | 111.2 | | 73.9 | | 4,261.8 | | 3,647.0 | 2005 | | 129.7 | | 89.7 | | 5,458.6 | | 4,178.1 | 2006 | | 156.8 | | 111.2 | | 6,611.8 | | 5,292.1 | 2007 | | 178.6 | | 133.9 | | 8,105.7 | | 6,447.7 | 2008 | | 145.9 | | 46.6 | | 7,949.1 | | 4,127.4 | 2009 (through March 20, 2009) | | 77.2 | | 48.7 | | 5,026.3 | | 3,666.4 | | | | Quarterly highs and lows | | | | | 2007 | | | | | | | | | First quarter | | 169.0 | | 147.8 | | 7,027.6 | | 6,447.7 | Second quarter | | 178.6 | | 155.0 | | 8,090.5 | | 6,937.2 | Third quarter | | 174.6 | | 148.7 | | 8,105.7 | | 7,270.1 | Fourth quarter | | 165.4 | | 133.9 | | 8,076.1 | | 7,512.0 | | | | | | 2008 | | | | | | | | | First quarter | | 145.9 | | 106.2 | | 7,949.1 | | 6,182.3 | Second quarter | | 134.5 | | 111.0 | | 7,225.9 | | 6,418.3 |
| | | | | | | | | | | | Price per
ordinary share | | DAX | | | | High | | Low | | High | | Low | | | | € | | € | | | | | Third quarter | | 116.3 | | 89.4 | | 6.609,6 | | 5,807.1 | Fourth quarter | | 99.1 | | 46.6 | | 5,806.3 | | 4,127.4 | | | | | | 2009 (through March 20, 2009) | | 77.2 | | 48.7 | | 5,026.3 | | 3,666.4 | | Monthly highs and lows | 2008 | | | | | | | | | September | | 116.1 | | 89.4 | | 6,518,5 | | 5,807.1 | October | | 99.1 | | 48.2 | | 5.806,3 | | 4.295,7 | November | | 68.9 | | 46.6 | | 5,278.0 | | 4,127.4 | December | | 76.2 | | 60.8 | | 4,810.2 | | 4,381,5 | | | | | | 2009 | | | | | | | | | January | | 77.2 | | 60.1 | | 5,026.3 | | 4,179.0 | February | | 71.8 | | 49.2 | | 4,666.8 | | 3,843.7 | March 20 | | 64.8 | | 48.7 | | 4,068.7 | | 3,666.4 |
On May 18, 2007,March 20, 2009, the closing sale price per Allianz SE ordinary share on XETRA was €161.36,63.99, which was equivalent to $218.01$86.81 per ordinary share, translated at the closing noon buying rate for Euros on suchthat date. Based on turnover statistics supplied by Bloomberg, the average daily volume of the ordinary shares of Allianz SE traded on the Frankfurt Stock Exchange (XETRA) between January 2, 20072009 and May 18, 2007March 20, 2009 was 3,772,882. Trading on the New York Stock Exchange Official trading of Allianz SE ADSs on the New York Stock Exchange commenced on November 3, 2000. Allianz SE ADSs trade under the symbol “AZ.” The following table sets forth, for the periods indicated, the high and low closing sales prices per Allianz SE ADS as reported on the New York Stock Exchange Composite Tape: | | | | Price per ADS | | Price per
ADS | | | | High | | Low | | High | | Low | | | | $ | | $ | | $ | | $ | Annual highs and lows | | | | | | | | | 2002 | | 25.2 | | 7.5 | | 2003 | | 12.7 | | 5.0 | | 2004 | | 14.0 | | 9.0 | | 14.0 | | 9.0 | 2005 | | 15.4 | | 11.4 | | 15.4 | | 11.4 | 2006 | | 20.6 | | 13.9 | | 20.6 | | 13.9 | 2007 (through May 18, 2007) | | 22.7 | | 19.2 | | 2007 | | | 24.0 | | 19.2 | 2008 | | | 21.4 | | 5.7 | 2009 (through March 20, 2009) | | | 10.8 | | 6.0 | | Quarterly highs and lows | | | | | | | | | 2005 | | | | | | 2007 | | | | | | First quarter | | 13.4 | | 11.7 | | 22.2 | | 19.2 | Second quarter | | 12.6 | | 11.5 | | 23.8 | | 20.7 | Third quarter | | 13.8 | | 11.4 | | 24.0 | | 20.3 | Fourth quarter | | 15.4 | | 13.3 | | 23.5 | | 19.6 | | 2006 | | | | | | 2008 | | | | | | First quarter | | 17.0 | | 15.1 | | 21.4 | | 16.4 | Second quarter | | 17.5 | | 13.9 | | 21.0 | | 17.2 | Third quarter | | 17.5 | | 14.6 | | 18.3 | | 13.3 | Fourth quarter | | 20.6 | | 17.3 | | 13.6 | | 5.7 | | 2007 | | | | | | First quarter | | 22.2 | | 19.2 | | 2009 | | | | | | (through March 20) | | | 10.8 | | 6.0 | | Monthly highs and lows | | | | | | | | | 2006 | | | | | | 2008 | | | | | | September | | 17.5 | | 16.7 | | 16.8 | | 13.3 | October | | 18.6 | | 17.3 | | 13.6 | | 6.4 | November | | 19.8 | | 18.4 | | 9.0 | | 5.7 | December | | 20.6 | | 19.5 | | 10.8 | | 7.3 | | 2007 | | | | | | 2009 | | | | | | January | | 21.0 | | 19.2 | | 10.8 | | 7.5 | February | | 22.2 | | 20.0 | | 9.3 | | 6.3 | March | | 21.0 | | 19.9 | | April | | 22.7 | | 20.7 | | March (through March 20) | | | 8.7 | | 6.0 |
On May 18, 2007,March 20, 2009, the closing sales price per Allianz SE ADS on the New York Stock Exchange as reported on the New York Stock Exchange Composite Tape was $21.84.$8.45. ITEM 10. Additional Information
| ITEM 10. | Additional Information |
Articles of Association (Statutes) Allianz SE’s current statutes are filed as an exhibit to this annual report. Refer also to “Directors, Senior Management and Employees” for a description of our corporate governance structure. Organization and Share Capital Allianz SE is a Stock Corporation in the form of a European Company (Societas Europaea or SE) and is organized under the laws of the Federal Republic of Germany and the European Union. It is registered in the Commercial Register in Munich, Germany, under the entry number HRB 164232. The share capital of Allianz SE consists of ordinary shares without par value. As of May 18, 2007,March 16, 2009, the capital stock of Allianz SE amounts to €1,149,758,353.92.€1,159,808,000. It is sub-divided into 449,124,357453,050,000 shares with no par value, of which 446,665,928451,505,783 shares were outstanding. The shares are registered and can only be transferred with the approval of the Company. The Company will withhold a duly applied approval only if it deems this to be necessary in the interest of the Company.Company on exceptional grounds. The applicant will be informed about the reasons. Objects and Purposes Pursuant to article 1, paragraph 2 of our statutes the corporate purpose of the Company is the direction of an international group of companies, that arewhich is active in the areas of insurance, banking, asset management and other financial, consulting and similar services. The Company holds interests in insurance companies, banks, industrial companies, investment companies and other enterprises. As a reinsurer, the Company primarily assumes insurance business from its Group companies and other companies in which Allianz SE holds direct or indirect interests. Copies of the statutes are publicly available from the Commercial Register in Munich. German- and English-language versions are available at our headquartersheadquarter and on our website. Conditions Governing Changes in Capital Allianz SE has several categories of authorized capital, which are set forth in its statutes. At the Extraordinary General Meeting on February 8, 2006, the shareholders approved the following authorized capital for issuance of new registered shares by the Board of Management, upon the approval of the Supervisory Board: Up to €450,000,000 in the aggregate on one or more occasions on or before February 7, 2011 by issuing new registered no-par value shares against contributions in cash and/or in kind (Authorized Capital 2006/1)I), of which an amount of €406,545,646 remains as of May 22, 2007.March 16, 2009. If the capital stock is increased against contributions in cash, the shareholders are to be granted preemptive rights.a subscription right. However, the Board of Management is authorized, upon the approval of the Supervisory Board, to exclude such shareholders’ preemptive rights:subscription right: (i) for fractional amounts; (ii) ifto the extent necessary to grant preemptivesubscription rights on new shares to holders of bonds issued by Allianz SE or Allianz AG or its Group companies that carry conversationconversion or option rights or conversationconversion obligations to such an extent as such holders would be entitled after having exercised their conversationconversion or option rights after any conversationconversion obligations have been fulfilled; and (iii) if the issue price is not substantially lower than the market price, subject to certain additional limitations in accordance with the German Stock Corporation Act. Furthermore, the Board of Management is authorized, upon the approval of the Supervisory Board, to exclude shareholders’ preemptivesubscription rights in the case of a capital increase against contributions in kind. The Board of Management is also authorized, upon the approval of the Supervisory Board, to determine the additional rights of the shares and the conditions of theirthe share issuance. Up to €12,473,943€15,000,000 in the aggregate on one or more occasions on or before February 7, 2011 by issuing new registered no-par shares against contributions in cash (Authorized Capital 2006/II), of which an amount of €12,473,943 remains as of May 22, 2006. The Board of Management is authorized, upon the approval of the Supervisory Board: | 2011 by issuing new registered no-par shares against contributions in cash (Authorized Capital 2006/II), of which an amount of €8,056,297 remains as of March 16, 2008. The Board of Management is authorized, upon the approval of the Supervisory Board: |
(i) to exclude shareholders’ preemptivesubscription rights in order to issue the new shares to the employees of Allianz SE and Allianz Group companies; (ii) to exclude preemptive rights with respect to fractional amounts;amounts from the shareholders’ subscription right; and (iii) to determine the additional rights of thesethe shares and the conditions of theirthe share issuance. TheFurthermore, the shareholders have conditionally increased the share capital by an aggregate amount of up to €250,000,000.00 through issuance of up to 97,656,250 new registered no-par value shares with entitlement to share in profits from the beginning of the financial year of their issuance (Conditional Capital 2004)2006). The conditional capital increase shall be carried out only to the extent that conversationconversion or option rights are exercised by holders of conversion or option rights attached to bonds thatwhich Allianz SE or Allianz AG or Allianz SE or itstheir Group companies have issued against paymentcash payments in cash pursuant toaccordance with the authorization approved byresolution of the Annual General Meeting on May 5, 2004,as of February 8, 2006, or to the extent that mandatory conversion obligations under such bonds are fulfilled, and insofaronly in so far as no other methods of servicingperformance are used in serving these rights are used. Of thisrights. The Board of Management is authorized to determine further details of the conditional share capital an amount of up to €5,632,000 through issuance of up to 2,200,000 new registered no-par shares remains as of May 22, 2007.increase.
With respect to purchases of our own ordinary shares, seerefer to Note 2325 to our consolidated financial statements. Capital Increase For information regarding capital increases, seerefer to Note 2325 to our consolidated financial statements. Material Contracts In connection with the sale of Dresdner Bank to Commerzbank, Allianz and Commerzbank entered into a transaction agreement dated August 31, 2008, as supplemented by an amended agreement dated November 27, 2008, which are attached hereto as exhibits 4.1 and 4.2, respectively. For more information on material contractsthis transaction, refer to which Allianz AG or Allianz SE or any“Item 4. Information on the Company—Major Disposals—Sale of its subsidiaries was a party in the preceding two years, see Note 45 to our consolidated financial statements. Exchange Controls Germany does not generally restrict capital movements between Germany and other countries, institutions or persons. For statistical purposes, subject to certain exceptions, each company or person domiciled in Germany is required to report to the German Bundesbank each payment received from or made to a company or person not domiciled in Germany in excess of €12,500 (or an equivalent amount in a foreign currency). Moreover, all claims and liabilities of a company or person domiciled in Germany against or towards a company or person not domiciled in Germany in excess of €5 million (or an equivalent amount in a foreign currency) are required to be reported monthly to the German Bundesbank. Other than as described above, there is no limitation on the right of non-resident or foreign owners to receive dividends or other payments relating to the ordinary shares or the ADSs permitted or granted by German law. Various national, state and other laws relating to the acquisition of “control” of Allianz SE’s insurance and banking subsidiaries may impose limitations on the ability to acquire ordinary shares or ADSs beyond specified thresholds. In addition, some national laws may authorize investigation of certain money transfers. German Taxation The following discussion is a summary of the material German tax consequencesregulations which might be of interest for legal or beneficial owners of shares or ADSs, whoparticularly for “Non-German-Holders”. Throughout this section we refer to owners as “Non-German Holders if they are (i) not German residents for German income tax purposes (i.e., persons whose residence, habitual abode, statutory seat or place of effective management and control is not located in Germany) and (ii) whose shares do not form part of the business property of a permanent establishment or fixed base in Germany. Throughout this section we refer to these owners as “Non-German Holders.” This summary is based on German tax laws and typical tax treaties to which Germany is a party as they are in effect on the date hereof and is subject to changes in German tax laws or such treaties.
The following discussioncomments are of a general nature and included herein solely for information purposes. These comments cannot replace legal or tax advice and does not purport to be a comprehensive discussion of all German tax consequences which may be relevant for Non-German Holders. You consequences. The owner should consult yourtheir tax advisor regarding the German federal, state and local tax consequences of the purchase, ownership and disposition of shares or ADSs, and the procedures to follow for the refund of German taxes withheld from dividends.dividends and the possible effects of changes in the tax laws of the Federal Republic of Germany.
This summary is based on the relevant German tax laws in 2008 and 2009 respectively in force and typical tax treaties to which Germany is a party, as they are applied on the date hereof and are subject to changes in German tax laws or respective treaties. Taxation of the Company in Germany German corporations, with a fiscal year that equals the calendar year, including Allianz SE, have beenwere subject to a corporate income tax rate of 25% in 2006. The2007. In addition a solidarity surcharge of 5.5% on the net assessed corporate income tax has been retained in 2006,to be paid, so that the corporate income tax and the solidarity surcharge, in the aggregate, amount to approximately 26.38%26.375%. In the course of the reform of business taxation, implemented by the Business Tax Reform Act 2008, the income tax rate for corporations has been reduced to 15% as of the fiscal year 2008; including the solidarity surcharge, the aggregate rate amounts to 15.825%. In addition, German corporations are subject to profit-related trade tax on income, the exact amountwhich is a municipal tax levied at an effective tax rate of which dependsbetween approximately 12% and 20%, depending on the applicable trade tax factor of the relevant municipality in which the corporation maintains its business establishment(s). Trade tax on incomeand is a deductible item in computing the corporation’s tax base for corporate income and trade tax purposes. Due to the Business Tax Reform Act 2008 from 2008 onwards the trade tax is no longer deductible for corporate income tax and trade tax purposes. From 2004 onwards, tax
Tax losses carried forward can be used to offset against taxable profits of a period for an amount not exceeding €1 million. Taxable profits exceeding €1 million may only be set off by 60% with tax losses brought forward from prior periods. Unutilized tax losses can be carried forward without any time limitation. Taxation of Dividends Germany has a classic corporate tax system, which appliedsystem. If the Shares or ADS’s are held as private assets (Privatvermögen) by an individual German resident private investor, dividends are taxed as investment income (Einkünfte aus Kapitalvermögen). Till 2008, only 50% of the dividends received were included in the tax basis. However, income related expenses (e.g. custody fees or interest for a debt financed portfolio) were also deductible by only 50% (half-income system). The amount of such payments after deduction of related expenses was subject to progressive income tax plus solidarity surcharge thereon. Since 2007, a personal annual exemption (Sparer-Freibetrag) of €750 (€1,500 for married couples filing their tax return jointly) was available for the first timeaggregate amount of the investment income, including the dividends. In addition, an individual was entitled to dividend distributions paida standard deduction of €51 (€102 for married couples filing their tax return jointly) in computing his overall investment income unless the expenses involved are demonstrated to have actually exceeded that amount. If the shares are held as business assets (Betriebsvermögen) by Allianz SE in 2002 fora German resident corporate investor, the financial year 2001. The formerdividends are generally subject to corporate income tax credit system has been abolished. Certain transition rules apply in connection withplus solidarity surcharge thereon and trade tax. Under the change from thecurrent corporate income tax credit system to the classic corporate tax system. Under the current system, a tax credit is no longer attached to the dividends. To avoid multiple levels of taxation in a corporate chain, the law provides for an exemption comparable to a full dividenddividends received deduction for inter-corporate dividends at the level ofby a German resident corporate
shareholder. investor are basically 100% tax-exempt (participation exemption). However, from 2004 onwards, 5% of the gross dividend is considered non tax deductible expense on(on each level of a corporate chain for corporate tax as well as for trade tax purposes.purposes). Dividends received from non-qualifying participations, which are participations of less than 10% (15% as from fiscal year 2008), are subject to trade tax on income infor the full amount.
If the shares were held as business assets (Betriebsvermögen) by a natural person (via a German resident individuals are required to recognizepartnership or an individual enterprises), only 50% of the dividends received are included in the tax basis till to 2008. For trade tax purposes the same rules apply as for corporate investors. In the course of the reform of business taxation the taxation of dividends has been changed for individuals private investors and for business assets by a natural persons. From January 1, 2009 onwards a final flat-rate tax (Abgeltungsteuer) amounting to 25% (plus a 5.5% solidarity surcharge) on all types of investment income (including dividends) has been established. This withholding tax levied on the income from capital investment is generally final for private investors and will only be included in the relevant tax assessment for individuals upon application, especially if the personal income tax rate falls below 25%. In addition, from January 1, 2009, the half-income system for dividends received by private investors has been abolished. For dividends received from shareholdings held as business assets by a natural person, the half-income system has changed to a partial-income system. Under this system, 60% of the dividends will be taxable income.and only 40% will be exempt. Income related expenses are also deductible by only 60%. The personal annual exemption (Sparer-Freibetrag for private Investors) and the standard deduction has been replaced by a unitary flat sum (Sparer-Pauschbetrag) for the overall investment income of € 801 (€ 1,602 for married couples filing their tax return jointly). The deduction of related expenses is not possible any more. For German non-residents (individuals and corporate investors) the dividends received are basically subject to income taxes and therefore to withholding tax (see next section). Imposition of Withholding Tax DividendTill 2008, dividend distributions on or after January 1, 2002 by a German corporation with a calendar year that equals fiscal year arewere subject to a 20% withholding tax. In addition, a solidarity surcharge at a rate of 5.5% on the withholding tax iswas levied, resulting in an aggregate rate of withholding tax of 21.1% of the declared dividend. The withholding tax is generally withheld irrespective of whether and to what extent the dividend distribution is exempt at the level of the holder.
As part of the reform of business taxation, from January 2009 1, onwards the withholding tax amounts to 25% (plus a 5.5% solidarity surcharge) on all types of investment income, including dividends. If you areFor a Non-German Holder, the withholding tax rate may be reduced in accordance with an applicable income tax treaty. Under most income tax treaties to which Germany is a party, including the U.S.-German income tax treaty, the rate of dividend withholding tax for individual holders and corporate holders of a non-qualifying participation is reduced to 15%. In that case, the Non-German Holder eligible for the reduced treaty rate may apply for a refund of 6.1% of the declared dividend for dividend distributions paid on or after January 1, 2002 by Allianz SE. The application for refund must be filed with the German Federal Tax Office (Bundeszentralamt für Steuern, Dienstsitz Bonn, An der Kueppe 1, D-53225 Bonn, Germany). The relevant forms can be obtained from the German Federal Tax Office or from German embassies and consulates.
From January 1, 2009 onwards two-fifths of the withholding tax can in some circumstances be refunded to Non-German corporate investors upon application at the German Federal Tax Office, which finally results in a withholding tax of 15% (plus solidarity surcharge), leaving the entitlement for further reductions under an applicable income tax treaty unaffected. Refund Procedure for U.S. Shareholders For shares and ADSs kept in custody with The Depository Trust Company in New York or one of its participating banks, the German tax authorities have introduced a collective procedure for the refund of German dividend withholding tax and the solidarity surcharge thereon on a trial basis. Under this procedure, The Depository Trust Company may submit claims for refunds payable to eligible U.S. holders (as defined below) under the income tax convention between Germany and the United States, as currently in effect (the “Treaty”) collectively to the German tax authorities on behalf of these eligible U.S. holders. The German Federal Tax Office will pay the refund amounts on a preliminary basis to The Depository Trust Company, which will redistribute these amounts to the eligible U.S. holders according to the regulations governing the procedure. The German Federal Tax Office may review whether the refund was made in accordance with the law within four years after making the payment to The Depository Trust Company. Details of this collective procedure are available from The Depository Trust Company. You are an “eligible U.S. holder” if you are a U.S. holder (as defined below under “—United States Taxation”) that: is a resident of the United States for purposes of the Treaty; does not maintain a permanent establishment or fixed base in Germany to which the ordinary shares or ADSs are attributable and through which you carry on or have carried on business (or, in the case of an individual, perform or have performed independent personal services); and is otherwise eligible for benefits under the Treaty with respect to income and gain from the ordinary shares or ADSs. Individual claims for refunds may be made on a special German form which must be filed with the German Federal Tax Office at the address noted above. Copies of such form may be obtained from the German Federal Tax Office at the same address or from the Embassy of the Federal Republic of Germany, 4645 Reservoir Road, N.W., Washington, D.C. 20007-1998. Claims must be filed within a four-year period from the end of the calendar year in which the dividend was received. As part of the individual refund claim, an eligible U.S. holder must submit to the German tax authorities the original bank voucher (or a certified copy thereof) issued by the paying agent documenting the tax withheld, and an official certification on IRS Form 6166 of its last United States federal income tax return. IRS Form 6166 may be obtained by filing a request, via IRS form 8802, with the Internal Revenue Service Center in Philadelphia, Pennsylvania, P.O. Box 42530, Philadelphia, PA 19101-2530. Requests for certification must include the eligible U.S. holder’s name, Social Security or Employer Identification Number, tax return form number, and tax period for which the certification is requested. Requests for certifications can include a request to the Internal Revenue Service to send the certification directly to the German tax authorities. If no such request is made, the Internal Revenue Service will send a certification on IRS Form 6166 to the eligible U.S. holder, who then must submit this document with his refund claim. Taxation of Capital Gains If the shares are held as business assets (Betriebsvermögen) by a corporate investor or by a natural person (via a German partnership or an individual enterprises), the capital gains are treated as the dividends. Till 2008, for private investors, a 50% tax exemption on realized gains on the disposal of shares arised only if they sold shares of a corporation of which they hold at least 1% of the outstanding shares of the company at any time within the five years prior to the sale. Shares with less than 1% of the outstanding shares of the company were only subject to taxation within the 12 month speculative period. Due to the Business Tax Reform Act 2008 capital gains from private investors are subject to taxation irrespective of any holding period with a 25% withholding tax plus a 5.5% solidarity surcharge. There are some transition rules regarding the change in the taxation of capital gains. Under German domestic tax law, capital gains derived on or after January 1, 2002 by a Non-German Holder from the sale or other disposition of shares or ADSs are subject to tax in Germany only if such Non-German Holder has held, directly or indirectly, shares or ADSs representing 1% or more of the registered share capital of the company at any time during the five-year period immediately preceding the disposition. In computing the relevant size of a Non-German Holder’s shareholding, shareholdings already existing prior to the effective date of the German Tax Reduction Act (approved by the German legislature in July 2000) are also taken into account. Corporate Non-German Holders are exempt from German tax on capital gains derived on or after January 1, 2002 from the sale or other disposition of shares or ADSs in a German corporation with a fiscal year that equals the calendar year. However, from 2004 onwards, 5% of the net capital gain are considered as non tax deductible expense for purposes of corporate income tax as well as trade tax on income. Half of the capital gains realized by the individual Non-German Holders are subject to German individual income tax plus a 5.5% solidarity surcharge. U.S. holders that qualify for benefits under the Treaty are exempt in Germany under the Treaty on capital gains derived from the sale or disposition of shares or ADSs. Inheritance and Gift Tax Under German law, German gift or inheritance tax will be imposed on transfers of shares or ADSs by a Non-German Holder at death or by way of gift, if (i) the decedent or donor, or the heir, donee or other transferee has his residence in Germany at the time of the transfer or with respect to German citizens who are not resident in Germany, if the decedent or donor, or the heir, donee or other transferee has not been continuously outside of Germany for a period of more than five years; or (ii) the shares or ADSs subject to such transfer form part of a portfolio which represents 10% or more of the registered share capital of the company and has been held, directly or indirectly, by the decedent or donor, respectively, himself or together with related parties. The right of the German government to impose inheritance or gift tax on a Non-German Holder may be further limited by an applicable estate tax treaty (such as the U.S.-German Inheritances and Gifts Tax Treaty of December 14, 1998). Other Taxes No German transfer, stamp or similar taxes apply to the purchase, sale or other disposition of shares or ADSs by a Non-German Holder. Currently, net worth tax is not levied in Germany. United States Taxation This section describes the principal United States federal income tax consequences of owning ordinary shares or ADSs. It applies to you only if you hold your ordinary shares or ADSs as capital assets for tax purposes. This section does not address all material tax consequences of owning ordinary shares or ADSs. It does not address special classes of holders, some of whom may be subject to other rules, including: dealers in securities or currencies; life insurance companies; traders in securities that elect to use a mark-to-market method of accounting for their securities holdings; investors liable for alternative minimum tax; investors that actually or constructively own 10% or more of the voting stock of Allianz AG;SE; investors that hold ordinary shares or ADSs as part of a straddle or a hedging or conversion transaction; or U.S. personsinvestors whose functional currency is not the U.S. Dollar.
This section is based on the Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations, and published rulings and court decisions, all as currently in effect, as well as on the Treaty. These laws are subject to change, possibly on a retroactive basis. In addition, this section is based in part upon the representations of the depositary and the assumption that each obligation in the deposit agreement and any related agreement will be performed in accordance with its terms. In general, for United States federal income tax purposes, if you hold ADRs evidencing ADSs, you will be treated as the owner of the ordinary shares represented by those ADSs. Exchanges of ordinary shares for ADRs, and ADRs for ordinary shares, generally will not be subject to United States federal income tax. You are a “U.S. holder” if you are a beneficial owner of ordinary shares or ADSs and you are, for United States federal income tax purposes: a citizen or resident of the United States; an estate whose income is subject to United States federal income tax regardless of its source; or a trust if a United States court can exercise primary supervision over the trust’s administration and one or more United States persons are authorized to control all substantial decisions of the trust. If a partnership holds our ordinary shares, the U.S. federal income tax treatment of a partner will generally depend on the status of the partner and the tax treatment of the partnership. If you hold our ordinary shares as a partner in a partnership, you should consult your tax advisor with regard to the U.S. federal income tax treatment of an investment in our ordinary shares. You should consult your own tax advisor regarding the United States federal, state, local, foreign and other tax consequences of owning and disposing of ordinary shares or ADSs in your particular circumstances. In particular, you should confirm whether you qualify for the benefits of the Treaty and the consequences of failing to do so. Taxation of Dividends IfSubject to the passive foreign investment company rules discussed below, if you are a U.S. holder, the gross amount of any dividend we pay out of our current or accumulated earnings and profits (as determined for United States federal income tax purposes) is subject to United States federal income taxation. If you are a noncorporatenon-corporate U.S. holder, dividends paid to you in taxable years beginning before January 1, 2011 that constitute qualified dividend income will be taxable to you at a maximum tax rate of 15% provided that you hold the ordinary shares or ADSs for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date and meet other holding period requirements. Dividends we pay with respect to the ordinary shares or ADSs generally will be qualified dividend income if you meet the holding period requirement. You must include any German tax withheld from the dividend payment in this gross amount even though you do not in fact receive it. The dividend is taxable to you when you, in the case of ordinary shares, or the depositary, in the case of ADSs, receive the dividend, actually or constructively. The dividend will not be eligible for the dividends-received deduction generally allowed to United States corporations in respect of dividends received from other United States corporations. The amount of the dividend distribution that you must include in your income as a U.S. holder will be the U.S. Dollar value of the gross dividend amount, determined at the spot Euro/U.S. Dollar rate on the date the dividend distribution is includible in your income, regardless of whether the payment is in fact converted into U.S. Dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date you include the dividend payment in income to the date you convert the payment into U.S. Dollars will be treated as ordinary income or loss and will not be eligible for the special tax rate applicable to qualified dividend income. The currency gain or loss generally will be income or loss from sources within the United States for foreign tax credit limitation purposes. Distributions in excess of current and accumulated
earnings and profits, as determined for United States federal income tax purposes, will be treated as a return of capital to the extent of your basis in the ordinary shares or ADSs and thereafter as capital gain. Subject to certain limitations, the German tax withheld in accordance with German law or the Treaty and paid over to Germany will be creditable against your United States federal income tax liability. To the extent a refund of the tax withheld is available to you under German law or under the Treaty, the amount of tax withheld that is refundable will not be eligible for credit against your United States federal income tax liability. SeeRefer to “—German Taxation—Refund Procedure for U.S. Shareholders,” above, for the procedures for obtaining a tax refund. Special rules apply in determining the foreign tax credit limitation with respect to dividends that are subject to the maximum 15% tax rate. Dividends constituteFor foreign tax credit purposes, dividends will generally be income from sources outside the United States but dividends paid in taxable years beginning before January 1, 2007 generally will be “passive” or “financial services” income, and dividends paid in taxable years beginning after December 31, 2006 will, depending on your circumstances, be either “passive” or “general” income which, in either case, is treated separately from other types of income for purposes of computing the foreign tax credit allowable to you.
Taxation of Capital Gains IfSubject to the passive foreign investment company rules discussed below, if you are a U.S. holder and sell or otherwise dispose of your ordinary shares or ADSs, you will recognize capital gain or loss for United States federal income tax purposes equal to the difference between the U.S. Dollar value of the amount that you realize and your tax basis, determined in U.S. Dollars, in your ordinary shares or ADSs. Capital gain of a non-corporate U.S. holder that is recognized in taxable years beginning before January 1, 2011 is generally taxed at a maximum rate of 15% where the holder has a holding period greater than one year. Gain or loss generally will be treated as arising from sources within the United States for foreign tax credit limitation purposes.
Passive Foreign Investment Company Status We believe that our ordinary shares and ADSs should not be treated as stock of a passive foreign investment company (PFIC), for United States federal income tax purposes, but this conclusion is a factual determination that is made annually and thus may be subject to change. If we were to become a PFIC, the tax treatment of distributions on our ordinary shares or ADSs and of any gains realized upon the disposition of our ordinary shares or ADSs may be less favorable than as described herein. You should consult your own tax advisors regarding the PFIC rules and their effect on you if you hold ordinary shares or ADSs. Documents on Display Allianz SE is subject to the informational requirements of the Securities Exchange Act of 1934, as amended. In accordance with these requirements, Allianz SE files reports and other information with the Securities and Exchange Commission. These materials, including this annual report and the exhibits thereto, may be inspected and copied at the Commission’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Copies of the materials may be obtained from the Commission’s Public Reference Room at prescribed rates. The public may obtain information on the operation of the Commission’s Public Reference Room by calling the Commission in the United States at 1-800-SEC-0330. The Commission also maintains a web site at http://www.sec.gov that contains reports, proxy statements and other information regarding registrants that file electronically with the Commission. Allianz SE’s annual reports and some of the other information submitted by Allianz SE to the Commission may be accessed through this web site. In addition, material filed by Allianz SE can be inspected at the offices of the New York Stock Exchange at 20 Broad11 Wall Street, New York, New York 10005. | ITEM 11. | Quantitative and Qualitative Disclosures about Market Risk |
ITEM 11. QuantitativeAllianz risk management is designed to add value by focusing on both risk and Qualitative Disclosures About Market Riskreturn.
Risk management is targeted at protecting our capital base and supporting our value based management.
As a provider of financial services, we consider risk management to be one of our core competencies. It is therefore an integrated part of our business processes. The key elements of our risk management framework are: Promotion of a strong risk management culture supported by a robust risk governance structure. Risks arise for a number of reasons, including insufficient information concerning possible adverse developments affectingIntegrated risk capital framework consistently applied across the Group to protect our business targets or plans.capital base and to support effective capital management.
We identify, measure, aggregateIntegration of risk considerations and manage risks. The resultcapital needs into management and decision-making processes through the attribution of this process determines, among other things, how muchrisk and allocation of capital is attributed and allocated to the Allianz Group’s various segments.
Risk Governance Structure In our business, successful risk management means an adequate and effective steering of the risk profile ofThe Allianz in order to protect the financial strength of the Allianz Group and to increase its value on a sustainable basis. The Board of Management of Allianz SE formulates the business objectives and allocates the capital resources of the Allianz Group balancing return on investment and risk criteria.
The Group Risk Committee monitors the Allianz Group’s availability of capital and risk profile to ensure a reasonable relationship between
these two criteria. Its role is to provide for comprehensive risk awareness within the Allianz Group and to further improve risk control. It also provides timely information to the Board of Management of Allianz SE about developments related to risk, sets risk limits, and is responsible for recommending and coordinating measures to mitigate risk. With respect to property-casualty insurance, the Group Risk Committee is supported by the Group Insurance Risk Sub-Committee, which is responsible for updating our underwriting guidelines and monitoring the development of our property-casualty insurance portfolio.
Group Risk, which reports to the Chief Financial Officer, develops methods and processes for identifying, assessing and monitoring risks on an Allianz Group-wide basis. An important instrument to assess the Allianz Group’s risk profile is our internal risk capital model, which is the methodology we use to assess quantitative risk. This model is described in more detail in the section below entitled “—Internal Risk Capital”. Group Risk also identifies and assesses risks qualitatively by performing a systematic quarterly evaluation. On the basis of this evaluation, Group Risk creates an overview of local and global risks, analyzes the risk profile of the Allianz Group and regularly informs management about the current situation. In addition, Group Risk oversees the adherence of operating units to the Allianz Group’s risk governance principles and further develops the same. Group Risk is also responsible for the centralized monitoring of accumulation of risk over all business lines, in particular with respect to natural disasters and business counterparties. This structureapproach is designed to enable us to manage our local and global risks equally and to reduce the likelihood ofthat our overall risk increasing unnoticed.
Withinincreases in an undetected manner. The following diagram provides an overview regarding risk-related decision-making responsibility within our risk governance policy,structure.
The Board of Management of Allianz SE formulates business objectives and allocates capital resources across the Allianz Group, with the objective of balancing return on investment and risk. The Supervisory Board Risk Committee of Allianz SE meets on a regular and ad-hoc basis to monitor the risk profile of the Allianz Group based on risk reports presented by the Chief Financial Officer and Chairman of the Group Risk Committee. Two additional Board of Management level committees focus on the Group’s risk exposure. The Group Risk Committee monitors the Allianz Group’s risk profile and availability of capital in an effort to maintain an adequate relationship between return on investment and risk. Its role is to provide for comprehensive risk awareness within the Allianz Group and to continually improve risk control. It also defines risk standards and establishes risk limits. Furthermore, it is responsible for recommending and coordinating measures to mitigate risk. The Group Finance Committee makes decisions about investments and market risks, while complying with the Allianz Group’s risk framework. The Group Risk department (“Group Risk”), which reports to the Chief Financial Officer, develops methods and processes for identifying, assessing and monitoring risks across the Allianz Group based on systematic qualitative and quantitative analysis and regularly informs management concerning the Allianz Group’s risk profile. Group Risk develops the Allianz risk framework and oversees the operating unitsentities’ adherence to the framework. The core elements of the risk framework are set forth in the Group Risk Policy, which has been approved by the Board of Management of Allianz SE and which defines the minimum requirements for all operating entities within the Allianz Group. Additional risk standards, such as standards related to specific segments or risk categories, are in place for our operating entities worldwide. Group Risk is also responsible for monitoring the accumulation of specific types of risks across business lines, in particular with respect to natural disasters and exposures to counterparties. Local operating entities assume independent responsibility for their own risk control, as itmanagement, with risk functions and committees that are similar to the Group structure. Independent risk oversight is ultimately they who havea fundamental principle of our risk governance structure, with a clear separation between business functions that actively take decisions and assume risk responsibility, on the one hand, and independent risk oversight functions, on the other hand. Risk oversight consists of independent risk identification, assessment, reporting and monitoring and also includes analyzing alternatives and proposing recommendations to respond quicklythe Risk Committees and local management or to risk changes in a market-oriented manner. At the same time, this independent responsibility provides the operating units with the tools to meet the applicable local legal requirements. In 2006,Board of Management of Allianz SE. The local risk monitoring was further strengthened throughdepartments performing the establishment of local risk committees and risk control functionsoversight role in our major operating unitsentities are headed by a local Chief Risk Officer. Group Risk is represented on the local Risk Committees to enhance the risk dialogue between the Group and the operating entities. The risk governance structure is further complemented by Group Audit, Group Compliance and Group Legal Services. On a periodic basis, Group Audit independently reviews the risk governance implementation, performs quality reviews of risk processes and tests adherence to business standards. Group Legal Services seek to mitigate legal risks with support from other departments. Legal risks include legislative changes, Investment risk management is implemented jointly with operating units as part of a structured investment process. The Allianz Group Finance Committee, which consists of members of the Board of Management of Allianz SE, delegates broad decision-making authority to the regional Finance Committees, which monitor the activities in their respective regions or countries. These regional Finance Committees compile local investment guidelines for their respective locations. Operational responsibility for investment portfolios lies with our local operating units.
Insurance, banking and asset management are all heavily influenced by legal factors; legislative changes in particular have a primary influence on our activities. As a global financial services provider, Allianz acts in a broad range of global and local legal and regulatory environments, which are subject to constant change (e.g. Solvency II, Basel II). Legal risks also include major litigation and disputes, regulatory proceedings and contractual clauses that are unclear or construed differently by the courts. Limitation of these legal risks is a major task of our Legal Department, carried out with support from other departments. OurThe Allianz Group’s objective is to ensure that developments in laws and regulations are observed, to react appropriately to all impending legislative changes or new court rulings, to attend to legal disputes and litigation, and to provide legally appropriate solutions for transactions and business processes.
TheAllianz Group’s risk landscape is continually evolving due to changes in our environment. In order to adapt, the Trend Assessment Committee is responsible for early recognition of new risks and opportunities. With regard to risk, the committee’s role is to studyopportunities and evaluateevaluating long-term trends and changes that may have a significant impact on the Allianz Group’s risk situation. Committeeprofile. Furthermore, Allianz is an active member of the CRO Forum Emerging Risk Initiative that continuously monitors the industry-wide risk landscape and raises awareness of major risks which are senior managers representing Allianz Group Centerrelevant for the insurance industry. This initiative promotes stakeholder dialogue and selective business units whose work is also supported byproposes best practice monitoring and management approaches via regular risk reports and analyses from external consultants.publications on specific topics.
In 2005, we established theThe Allianz Climate Core Group. ThisGroup is a panel of internal experts consists of representatives from our Property-Casualty, Life/Health, Banking and Asset Management segments and was established to examinethat specifically examines the possible effects of climate change on our business. Its task is to developbusiness, developing risk management strategies and to identifyidentifying potential opportunities resulting from climate change. We are also a member of the Emerging Risk
Initiative of the CRO Forum’s task force, which examines methods to identify, analyze and manage potential risks. The task force consists of representatives from ten international insurance and reinsurance companies.
Independent Risk Oversight
The principle of independent risk oversight is well-established within the Allianz Group. There is a clear distinction between active risk taking by line management functions, on the one hand, and risk oversight conducted by independent functions, on the other. The latter role not only consists of independent risk identification, assessment, reporting and monitoring, but also includes analyzing alternative courses of action and proposing recommendations to the Risk Committee and the Boards of Directors of the local operating units or the Board of Management of Allianz SE.
Risk Policies
The Group Risk Policy defines the minimum requirements that are binding on all operating units. Specific minimum risk standards for our Property-Casualty, Life/Health, Banking and Asset Management segments, as well as on specific risk topics such as risk capital modeling, translate these requirements into action. These standards are implemented by the operating units worldwide and are monitored on a regular basis by Group Risk through a structured risk-based diagnostic process.
Risk Capital
We employ a value-based approach (Economic Value Added or “EVA”®), among other approaches, to manage our business activities, which are conducted through our local operating units. Risk capital, which is required to protect against unexpected losses, is one of the key parameters of this approach.
Internal risk capital, as described below, forms the central element for our local risk-oriented control performance measurement processes. However, in managing our capital position we have to consider additional conditions imposed by our regulator (the BaFin) and rating agencies. While meeting rating agencies’ capital requirements form a strategic
business objective of the Allianz Group, capital requirements imposed by the BaFin form a constraint with which the Allianz Group must comply in order to operate our business. We expect a more coherent framework with the adoption of the Solvency II regulation in the future. The Solvency II standards, which are being developed pursuant to an EU-initiated project designed to create a solvency model for insurance companies that is more risk-based, impose quantitative solvency requirements based on insurance risk while also considering the insurer’s overall management of risks and structure of insurance supervision. For the time being, however, we have to monitor two different solvency regimes for managing our capital position on the Allianz Group level.
As a Financial Conglomerate based in the European Union, our regulatory solvency capital requirements are defined by the EU Financial Conglomerate Directive (or “FCD”), which was issued in 2002 and transposed into German national law effective at the end of 2005.
As of December 31, 2006, our regulatory capital required by the FCD amounted to €26.1 billion in comparison to our admissible capital of €50.5 billion.
Stress Tests
In addition to internal risk capital analysis, we perform regular stress tests, which act as early-warning indicators in monitoring the regulatory solvency capital ratios for the Allianz Group. We also apply regular stress tests on a local operating unit level in order to monitor capital requirements imposed by regulators and rating-agencies locally.
A 10% price decline in our available-for-sale equity securities as of December 31, 2006 would have resulted in a €3.1 billion decline in shareholders’ equity before minority interests. If the interest rate had increased by 100 basis points, shareholders’ equity before minority interests would have decreased by €3.9 billion, if we take into account the available-for-sale fixed income securities as of December 31, 2006. A 10% devaluation of the U.S. Dollar against the Euro as of December 31, 2006 would have decreased shareholders’ equity before minority interests by €1.0 billion. These calculations do not take into account derivatives.
Internal Risk Capital Framework InternalWe define internal risk capital which isas the capital required to protect against unexpected, extreme economic losses, islosses. We aggregate internal risk capital consistently across all business segments (Property-Casualty, Life/Health, Banking, Asset Management and Corporate), providing a key parametercommon standard for measuring and comparing risks across the wide range of our EVA-approach, consistently applied to all segments. In 2006,different activities that we usedundertake as an integrated financial service provider.
Value-at-Risk approach We use an internal risk capital model to assess and allocate quantitative risk for our major insurance companies as well as for our banking subsidiary, Dresdner Bank. For our smaller operating units having an immaterial impact on the Group level in terms of business volume and for the Asset Management segment, in contrast, we assign internal risk capital requirements based on the standard model of Standard & Poor’s rating agency using the same risk categories we use for our internal risk capital model. This process allows us to consistently aggregate risk capital for all segments on the Group level within our internal risk capital framework. By using our internal risk capital model, we endeavor to evaluate risks more precisely in an effort to optimize allocation of capital within the Allianz Group. Furthermore, we continually seek to refine and optimize our internal risk capital model with the aim to apply for regulatory approval in the framework of the currently evolving Solvency II standards. a Value-at-Risk Approach Our internal risk capital model is based on the value-at-risk approach. This model, consistent with value-at-risk determinations, calculates(VaR) approach, determining a maximum loss in the value of our portfolio of assetsbusinesses covered within the scope of the model (the “covered business”) due to adverse market, credit,
insurance and liabilitiesother business events, within a givenspecified timeframe (“holding period”) and with a certain specified probability or frequency, in the event of adverse market movements.(“confidence level”). More specifically, for each risk category, we calculate the net fair asset value of each of our assets and liabilities in terms ofcovered businesses based on values (i) aunder current best estimate under current market conditions and (ii) an adverse value under adverse market conditions over a certain holding period.defined by scenarios for each risk category. The required internal risk capital per risk category is then defined as the difference between the best estimate and adverse value of the portfolio. In order to calculate both of these values, we revalue optionsportfolio under the best estimate scenario and guarantees under current andthe adverse market conditions using statistical models.scenario. Internal risk capital is determined on a quarterly basis and results per category are aggregated in a manner that takes into account the diversification effectseffect across risk categories and/or regions into account. The requiredand regions. To calculate internal risk capital is determined on a quarterly basis. Assumptions
Onusing the VaR approach at the Allianz Group level, our objective is to maintain capital according towe assume a confidence level or solvency probability of 99.97% overand a holding period of one year, which is assumed to be equivalent to an “AA” rating of Standard & Poor’s. The time horizon over which the change in value is measured on the Allianz Group level is set atWe apply a holding period of one year asbecause it is generally assumed that it may take aup to one year to findidentify a counterparty to whom to transfer the liabilities in our portfolio. In supportThis capital requirement is sufficient to cover a loss in any one year equivalent to a 3-in-10,000 year event. Although our internal risk capital is based on extreme events, it nonetheless aims to provide adequate indications to manage the risks resulting from reasonably possible smaller adverse events that we might identify in the near-term, because the results allow us to analyze separately and in aggregate our exposure to each source of risk.
Diversification and correlation assumptions Our internal risk capital model considers both concentration and correlation when aggregating results on the Allianz Group’s objective to ensure a solvency probability of 99.97% over a holding period of one year at the Group level, we require our local operating unitsin order to hold risk capital allowing them to remain solvent with a certainty of 99.93% over a holding period of one year and take into account the diversification effects resulting from balancing our portfolio risks. We consider diversification effects becausereflect that not all of our potential losses are likely to be realized at the same time. An operating unitThis effect is known as diversification. Managing diversification forms a central element of our risk management framework. The Allianz Group strives to diversify the risks to which ensures a solvency probabilityit is exposed in order to limit the impact of 99.93% over one year, meets the “A” target rating level requirementany single source of Standard & Poor’s. This requirement impliesrisk and to help ensure that the portfolio could sufferpositive developments of some businesses operate in such a loss that exceedsmanner as to neutralize the adverse value assumed in the value-at-risk calculation in seven outpossible negative developments of 10,000 years. Although these are extreme events, our internal risk capital results based on such extreme events provide indications of a maximum risk exposure for possible smaller adverse market movements we might identify in the near-term. Though our internal risk capital model generally uses a one-year holding period at the Allianz Group level, as Dresdner Bank’s trading portfolio can be transferred significantly faster than insurance liabilities, Dresdner Bank calculates market value-at-risk figures with a confidence level of 95% and a holding period of one business day for the purposes of internal limit setting and operative risk management and, additionally, with a confidence level of 99% and a holding period of 10 days for its regulatory reporting. These market risks, however, are aggregated into our internal risk capital framework using a holding period of one year and a confidence level of 99.93%, which is consistent with the Group level holding period and confidence interval. To this end, we convert Dresdner Bank’s value-at-risk calculated using a 99% confidence interval and 10-day holding period to match Allianz’s Group-wide internal risk capital guidelines regarding time horizon and confidence level allowing for
improved comparability and the integration of the Dresdner Bank results into the Group-wide analysis. The conversion methodology employed is linked to that used by industry regulators for purposes of converting the value-at-risk into a 6% regulatory Tier I capital requirement and takes into account the capital multiplier established by the BaFin.others.
The Allianz Group’s policydegree to which diversification can be realized depends in part on the level of relative concentration of those risks. For example, the greatest diversification is that all loans and deposits in foreign currencies should generally be funded and reinvestedgeneral obtained in investments ina balanced portfolio without any disproportionately large exposures to any one or more risks. In addition, the same currency with matching maturities. Therefore, our residual foreign currency risk results primarily fromdiversification effect depends upon the net fair value baserelationship between sources of financial instruments denominated in foreign currency and the net asset valuerisks. The degree of our local non-Euro operating units. This currency marketrelationship between two sources of risk is generally managed centrally atreferred to as correlation, characterized by a value between “-1” and “+1”. Where possible, we develop correlation parameters for each pair of risks through statistical analysis of historical data. If only insufficient historical data is available, we use conservative professional judgment, ruling out negative correlations, and, in general, we set the Allianz Groupcorrelation parameters to represent the level and is, therefore, allocated to the Corporate segment.of interdependency of risks under adverse conditions. Scope Our internal risk capital covers the specific assets and liabilities listed below: | • | | Assets—Bonds, mortgages, investment funds, loans, floating rate notes, equities, real estate, conventional options, and swaps,
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| • | | Liabilities—Cash flow profile of all technical reserves as well as deposits and issued securities.
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The model takes substantially all of our derivatives into account, in particular when such instruments are entered into as part of the operating unit’s regular business model (e.g. Dresdner Bank or Allianz Life of North America) or if they are of such a magnitude that they have a significant impact on the resulting risk capital (e.g., hedges of Allianz SE or in the Life/Health segment, if material obligations to policyholders are hedged through financial derivatives).
Our internal risk capital model quantifies the following risk categories:
| • | | Market risks—Possible losses caused by changes in interest rates, exchange rates, share prices, real estate values and other relevant market prices (such as commodities);
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| • | | Credit risks—Possible losses caused by the inability to pay or a downgrade in the credit rating of debtors or counterparties;
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| • | | Actuarial risks—Unexpected financial losses from the sale of insurance protection; and
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| • | | Business risks—Cost and lapse risks, as well as operational risks including risks associated with external events or arising from insufficient or failing internal processes, procedures and systems.
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The quantification of the internal risk capital pursuant to our internal risk capital model starts at the highest granularity level of the risk (sub-) categories mentioned above, and then aggregates the results at the operating unit level and ultimately at the Allianz Group level. The aggregation process takes into account the diversification effects described above. We have developed our diversification parameters through statistical analysis and professional judgmentfollowing sources of assumptions. In general, the diversification parameters represent worst case correlations, and negative dependencies are ruled out.risk, classified as risk categories per segment:
The internal risk capital model allows us to evaluate the risk to which we are exposed by using statistically-based methods. The individual characteristics of our operating units and the specific nature of their risks are taken into account by reflecting local management rules such as investment strategies and policyholder participation rules in the Life/Health segment and establishing risk parameters based on past developments affecting each such unit.
Limitations
Our internal risk capital model is subject to the following limitations.
We develop internal risk capital figures on a quarterly basis. Our ability to back-test the model’s accuracy is limited because quarterly analysis does not allow for robust back-testing and because historical data is used to calibrate the model and, therefore, cannot be used to validate it. Instead, to test the model’s accuracy, we have the model reviewed by independent consulting firms who focus on its parameters, the methods for selecting such parameters and our assignment of internal responsibilities, as well as through the review of
results of methodological benchmark studies such as the IFRI/CRO Forum Economic Capital Survey of peer group companies.
In general, our internal risk capital covers all operating units. Our integrated internal risk capital model as described above, in contrast, does not capture all of our smaller operating units having an immaterial impact on the Group level in terms of business volume or operating units forming part of our Asset Management segment. Risk capital requirements related to these units are considered by assigning internal risk capital requirements based on the standard model of Standard & Poor’s rating agency using the same risk categories we use for our internal risk capital model. Because this model is not as sophisticated as our integrated internal model, the risk exposure estimates for such units may be less accurate than estimates generated by our integrated internal model.
Furthermore, our internal risk capital model takes substantially all of our derivatives into account, in particular when such instruments are entered as an integral part of the business model or if they are of a magnitude that they have a significant impact on the internal risk capital. In such cases, we apply customized derivative valuation tools. Our integrated internal model framework for insurance operations currently only allows for the modeling of common derivatives such as equity calls, puts, forwards and interest rate swaps. For the incorporation of non-standardized instruments into the integrated internal risk capital framework, such as derivatives forming a component of structured financial transactions, instruments are represented by the most comparable standard derivative product types. The
volume of these instruments is not material on either the operating unit or the Allianz Group level, but a more precise modeling of these instruments might lead to a change in the resulting internal risk capital. Allianz believes, however, that any such change would not be material.
Price changes in a diversified portfolio have offsetting effects because various assets and liabilities revalue in directions or in magnitudes that differ from overall marketplace changes. This development is known as the “diversification effect” of holding a portfolio consisting of different assets and liabilities. The Allianz Group’s risk estimates
take this diversification effect into account, but as our diversification parameters are based on historical considerations, actual changes in the fair value of the Allianz Group’s economic value base could be different from those shown in the tables included under “—Risk Measurement”.
Additionally, routine daily business activity entails a certain amount of change in the portfolios’ composition as bonds mature or as portfolio managers buy or sell investments. As a result, the actual required risk capital of the Allianz Group’s portfolio will vary at any particular moment in time, and the risk of loss from equity, interest rate, foreign exchange, real estate or other risks cannot be eliminated, although it can be quantified and monitored.
Our internal risk model expresses the potential, “maximum” amount we might lose in economic fair value resulting from certain adverse market conditions, but only to a certain level of confidence, therefore there is a specified statistical possibility that actual losses could exceed our estimates.
Finally, the Allianz Group’s internal risk capital results are estimates based on a fixed moment in the past. Substantially all of the Allianz Group’s assets and liabilities are subject to market risks arising from fluctuating equity, interest, foreign exchange and real estate markets. These fluctuations cannot be foreseen and can occur unexpectedly. The quantitative risk measurements reflected in the tables below, therefore, show a risk profile existing at a particular moment in time and illustrate the potential losses to assets and liabilities under a particular set of assumptions and parameters at such time. Although these measurements reflect reasonable possibility, they may differ considerably from actual losses that may be experienced in the future.
Risk Measurement
The Allianz Group-wide internal risk capital after Group diversification effects and before minority interests, as calculated pursuant to our internal risk capital model discussed more fully above under “—Value-at-Risk Approach” amounted to €35.8 billion as of December 31, 2006.
Allocated Internal Risk Capital by Risk Category(1)
– Total Portfolio –
| | | | | | | | | As of
December 31, | | before minority
interests | | after minority
interests | | | 2006 | | 2005(2) | | 2006 | | 2005(2) | | | | € mn | | € mn | | € mn | | € mn | Market risks | | 17,457 | | 18,270 | | 16,217 | | 16,592 | Credit risks | | 5,767 | | 6,208 | | 5,199 | | 5,612 | Actuarial risks | | 5,846 | | 5,912 | | 5,190 | | 5,085 | Business risks | | 6,716 | | 6,221 | | 6,075 | | 5,708 | | | | | | | | | | Total | | 35,786 | | 36,611 | | 32,681 | | 32,997 | | | | | | | | | |
(1)
| After Group diversification
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(2)
| 2005 figures adjusted as coverage of internal risk capital model has been extended.
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Total internal risk capital as of December 31, 2006, before and after Group diversification (before minority interests)
in€ bn
The risk profile of the Allianz Group is actively managed. Under the “3+One program”, we have reduced internal risk capital from €43.5 billion as of December 31, 2002 to €35.8 billion as of December 31, 2006, thereby strengthening the Allianz Group’s capitalization. The overall decrease of internal risk capital in 2006 was due to a decline in market risk, resulting from an increase in interest rates, which in turn, decreases our exposure to risk in connection with the minimum guaranteed credits that we must provide to policyholders for some of our Life/Health products.
Total internal risk capital development as of December 31 after Group diversification (before minority interests)
in€ bn
 
(1) | 2004 and 2005 figures adjusted as coverage of internal risk capital model has been extended.
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As an integrated financial service provider we are exposed to a wide range of different risks in our Property-Casualty, Life/Health, Banking, Asset Management and Corporate segments. Although these risks are different in nature and each of these sources of risk has distinct statistical properties, internal risk capital sets a common standard for measuring the degree of risk taking, thus making them comparable.
The risk of our Banking segment measured in internal risk capital is dominated by Dresdner Bank accounting for 96.1%(2005: 95.6%) of our total Banking segment’s operating revenues. The remaining part comes from smaller units mainly operating in the retail banking sector and serving as product factory for our assurbanking activities. Therefore detailed discussions of risk management processes in this segment relate to Dresdner Bank.
The Corporate segment includes the management of equity participations held on the Allianz SE parent level as well as securities issued to fund the capital requirements of the Allianz Group. The securities issued include structured products that might be partly repaid in the form of equity participations held in our asset portfolio. In addition, Group Corporate Finance & Treasury monitors global currency risks and executes overlaying strategic hedging initiatives for the Allianz Group. As local laws generally require that the liabilities of our foreign operating units are backed by assets in the
same currency, the biggest part of our economic currency risks arises from the economic net asset
values of our non-Euro operating units and is allocated to the Corporate segment at Group level.
Allocated Internal Risk Capital by Segment(1)
– Total Portfolio –
| | | | | | | | | | | | before minority
interests | | after minority
interests | As of December 31, | | 2006 | | 2005(2) | | 2006 | | 2005(2) | | | | € mn | | € mn | | € mn | | € mn | Property-Casualty | | 17,973 | | 18,269 | | 15,826 | | 15,644 | Life/Health | | 5,477 | | 5,773 | | 4,568 | | 4,756 | Banking | | 5,897 | | 6,216 | | 5,887 | | 6,215 | Asset Management | | 2,602 | | 2,474 | | 2,492 | | 2,474 | Corporate | | 3,837 | | 3,879 | | 3,908 | | 3,908 | | | | | | | | | | Total | | 35,786 | | 36,611 | | 32,681 | | 32,997 | | | | | | | | | |
(1)
| After Group diversification
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(2)
| 2005 figures adjusted as coverage of internal risk capital model has been extended.
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Concentration of Insurance Risks
Property-Casualty Segment. The Allianz Group’s Property-Casualty segment provides both personal and commercial insurance coverage. Our business activities are focused in Western Europe (in terms of IFRS reserves 61% as of December 31, 2006), with further significant activities in North America (in terms of IFRS reserves 11% as of December 31, 2006). The worldwide corporate business is centrally managed by Allianz Global Corporate & Specialty, which was formed in 2006 by the integration of AGR Re and significant elements of Allianz Marine and Aviation. Please see “Information on the Company—Important Group Organizational Changes—Merger of Industrial Insurance Business within Allianz Global Corporate & Specialty” for further information.
Potential risk concentrations (e.g. natural catastrophes) are closely monitored on a regular basis. In addition, underwriting guidelines define maximum limits to the segment’s risk exposure. Reinsurance coverage is obtained to mitigate the peak risks resulting from natural catastrophes and to limit the impact of adverse conditions on profit and loss and shareholders’ equity. We analyze the reinsurance program in an effort to further optimize the Allianz Group’s use of reinsurance arrangements.
Life/Health Segment. The Allianz Group’s Life/ Health segment provides both traditional contracts and unit-linked contracts. Traditional contracts include life, endowment, annuity, and supplemental health contracts. We issue both deferred and immediate traditional annuity contracts. In addition, the Allianz Group’s life operations in the United States issues a significant amount of equity indexed deferred annuities.
A significant part of the Allianz Group’s Life/Health segment operations is conducted in Western Europe. Insurance laws and regulations in Western Europe have historically been characterized by the legal or contractual participation of contract holders in the profits of the insurance company issuing the contract subject to a minimum guaranteed crediting rate. In particular, our Life/Health contracts in Germany, Switzerland and Austria, which comprise approximately 42% of the Allianz Group’s IFRS reserves for insurance and investment contracts as of December 31, 2006, include a significant level of policyholder participation in all sources of risk including market, actuarial and expense risks.
Due to the offsetting effects of mortality risk and longevity risk inherent in its combined portfolio of life insurance and annuity products, as well as due
to a geographically diverse portfolio, our Life/Health segment does not have significant concentrations of actuarial risk.
Due to policyholder participation, our internal risk capital model for the Life/Health segment has a specific focus on the interaction between investments and insurance liabilities. We are continuously developing the integrated asset-liability management modeling to enable us to quantify the risk-mitigating effects resulting from policyholder participation in market, actuarial and expense risks.
Market Risk Measurement
In the past, we presented a sensitivity analysis of the Allianz Group’s market risk. We have replaced this approach with our internal risk capital model, as we primarily measure, monitor and manage Group-wide risk using internal risk capital. Furthermore, internal risk capital is fully integrated into our value-based steering approach as it defines a key input parameter for our EVA-based performance measurement (see “—Internal Risk Capital”). As
shown above in the table “Allocated Internal Risk Capital by Risk Category”, market risks are the primary variable affecting the risk profile at the Group level. In contrast to the sensitivity approach, our approach takes into account diversification effects, which for an integrated financial service provider like Allianz, we consider a key factor in risk management.
The former sensitivity approach only focused, moreover, on financial assets, whereas our internal risk capital model reflects our portfolio of both assets and liabilities, making it difficult to compare the results of the former sensitivity approach to the new approach. The consideration of both assets and liabilities in our internal risk capital model may result in an overall lower risk for individual business segments compared to the former sensitivity approach.
In the following we present our Group-wide internal risk capital related to market risks, as calculated pursuant to our internal risk capital model. The figures presented take into account diversification effects, but do not include minority interests.
Allocated Internal Risk Capital by Business Segment and Source of Risk(1)
– Total Portfolio Before Minority Interests –
| | | | | As of December 31, | | 2006 | | 2005 | | | | € mn | | € mn | Property-Casualty: | | | | | Market risks: | | 8,379 | | 8,717 | thereof: Interest rate | | 427 | | 642 | Equity | | 7,300 | | 7,408 | Real estate | | 617 | | 631 | Currency(2) | | 35 | | 36 | Life/Health: | | | | | Market risks: | | 3,244 | | 3,668 | thereof: Interest rate | | 383 | | 917 | Equity | | 2,615 | | 2,544 | Real estate | | 246 | | 207 | Currency(2) | | — | | — | Banking: | | | | | Market risks: | | 2,090 | | 2,092 | thereof: Interest rate | | 55 | | 38 | Equity | | 1,865 | | 2,050 | Real estate(3) | | 165 | | — | Currency(2) | | 5 | | 4 | Asset Management:(4) | | | | | Market risks: | | — | | — | thereof: Interest rate | | — | | — | Equity | | — | | — | Real estate | | — | | — | Currency(2) | | — | | — | Corporate: | | | | | Market risks: | | 3,744 | | 3,793 | thereof: Interest rate | | 394 | | 639 | Equity | | 2,010 | | 1,774 | Real estate | | 55 | | 33 | Currency(2) | | 1,285 | | 1,347 | | | | | | Total | | 17,457 | | 18,270 | | | | | |
(1)
| Internal risk capital is calculated as value-at-risk with a one-year holding period and a confidence level of 99.97%Foreign currency risks are mainly allocated to the Corporate segment (please see below for further information).
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(2) | According to the Allianz Group’s policy, foreign currency risks are generally managed centrally at the Allianz Group level and are, therefore, allocated to the Corporate segment. As commodity risk is not significant on the Group level, it is covered in our internal risk capital model within currency risk.
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(3) | For our Banking segment,Although the internal risk capital requirements for real estatethe Asset Management segment only reflect business risk was introduced in 2006.(please see below for further information), the evaluation of market risk and credit risk on the account of third parties is an integral part of the risk management process of our local operating entities.
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(4) | The premium risk which our credit insurance entity Euler Hermes is exposed to due to its business model is also covered here, as this type of risk is a special form of credit risk. |
(5) | In the Banking segment, credit risks include default and migration risks arising from the lending and securities business and our derivatives trading activities; for the latter, settlement risk is additionally taken into account. Furthermore, credit risks include country (and transfer) risk. |
Our internal risk capital model covers: Substantially all of our major insurance and banking operations. Substantially all of our assets (including bonds, mortgages, investment funds, loans, floating rate notes, equities and real estate) and liabilities (including the cash flow profile of all technical reserves as well as deposits and issued securities). For the Life/ | Health segment, the model reflects the interaction between assets and liabilities and local management decisions such as investment strategies and policyholder participation rules. |
Substantially all of our derivatives (options, swaps and futures), in particular if they form part of the operating entity’s regular business model (e.g., at Allianz Life | Insurance Company of North America) or if they have a significant impact on the resulting internal risk capital calculation(e.g., hedges of Allianz SE or in the Life/Health segment, if material obligations to policyholders are hedged through financial derivatives). Typically, embedded derivatives contained in a host contract are also included. |
For smaller insurance operating entities that have an immaterial impact on the Group risk profile, and for the Asset Management segment, we assign internal risk capital requirements based on an approach similar to Standard & Poor’s standard model. This uses the same risk categories as our internal risk capital model, thereby allowing us to consistently aggregate internal risk capital for all segments at the Group level. More specifically, approximately 99% of the investments managed by the Asset Management segment are held for the benefit of either third parties or Allianz Group insurance entities and, therefore, do not result in significant market and credit risk for the Asset Management segment. As a result, the internal risk capital requirements for the Asset Management segment only reflect business risk. However, the evaluation of market risk and credit risk on the account of third parties is an integral part of the risk management process of our local operating entities. Applying an approach based on risk weighted assets, and following the sale of our former banking subsidiary, Dresdner Bank, to Commerzbank, our continuing banking operations in Germany, Italy, France and New Europe represent only an insignificant amount of approximately 1.3% of total non-diversified internal risk capital. Therefore, risk management with respect to banking operations is not discussed below in detail. The Allianz Group’s policy is to require each operating entity to match the currency of their material assets and liabilities or to otherwise hedge foreign currency risk. As a result, our residual foreign currency risk results primarily from the fair value of the net asset value of our non-Euro operating entities and certain exposures to non-Euro denominated assets and liabilities held at the Group level. This currency risk is monitored and managed centrally at the Allianz Group level by Group Corporate Finance & Treasury and is, therefore, mostly allocated to the Corporate segment. Following the announcement of the sale of Dresdner Bank to Commerzbank in August 2008, Dresdner Bank qualified as held-for-sale and discontinued operations. For the purpose of this discussion on risk management, we refer to “discontinued operations” to mean the assets and liabilities held by Dresdner Bank upon its sale by Allianz to Commerzbank on January 12, 2009. Certain former assets and liabilities of Dresdner Bank, which Allianz retained and which were not transferred to Commerzbank, were not classified as discontinued operations. We generally present figures as of December 31, 2008 excluding discontinued operations, although we also provide certain information regarding the total Group including discontinued operations for the purpose of comparison. When excluding discontinued operations from internal risk capital calculations, we also take into account, that the discontinuation of certain banking operations results in a smaller diversification effect. Limitations Our internal risk capital model expresses the potential “worst case” amount in economic value that we might lose at a certain level of confidence. However, there is a statistically low probability of 0.03% that actual losses could exceed this threshold. We assume that model parameters derived from historical data can be used to characterize future possible risk events; if future market conditions differ substantially from the past, as in the case of the 2008 financial crisis for which there was no precedent, then our VaR approach may be too conservative or too liberal in ways that can not be predicted. Our ability to back-test the model’s accuracy is limited because of the high confidence level of 99.97% and one-year holding period. Furthermore, as historical data is used to calibrate the model, it cannot be used for validation. Instead, we validate the model and parameters through external reviews by independent consulting firms focusing on methods for selecting parameters and control processes. Overall, we believe that our model adequately assesses the risks to which we are exposed. As our internal risk capital model considers the change in economic fair value of our assets and liabilities, it is crucial to accurately estimate the fair market value of each item. For some assets and liabilities, it has become increasingly difficult in today’s financial markets, if not impossible, to obtain either a current market price or to apply a mark-to-market approach. For certain assets and liabilities, where a current market price for that instrument or similar instruments is not available, we apply a mark-to-model approach. For some of our liabilities, the accuracy of fair values depends on the quality of the actuarial cash flow estimates. Despite these limitations, we believe the estimated fair values are appropriately assessed. We apply customized derivative valuation tools which are suitable to our business to reflect substantially all of our derivatives in internal risk capital. Our integrated internal risk capital model for insurance operations currently only allows for the modeling of common derivatives such as equity calls, puts, forwards and interest rate swaps. For internal risk capital calculations, non-standardized instruments, such as derivatives embedded in structured financial products, are represented by the most comparable standard derivative types. The volume of non-standard instruments is not material on either the local or the Allianz Group level, but a more precise modeling of these instruments might impact the fair value and resulting internal risk capital for these derivatives. However, we believe that any such change would not be material. Capital Management The Allianz internal risk capital model plays a significant role in solvency management and capital allocation. Our aim is to ensure that the Allianz Group is adequately capitalized at all times, even following a significant adverse event, and that all operating entities meet their respective capital requirements. In addition, we employ a value-based approach (Economic Value Added or “EVA”®), among other approaches, to measure and manage our business activities as well as to optimize capital allocation across the Allianz Group. Internal risk capital is a key parameter of our EVA®-approach. In managing our capital position, we also consider additional external requirements of regulators and rating agencies. While meeting rating agencies’ capital requirements forms a strategic business objective of the Allianz Group, capital requirements imposed by regulators constitute a binding constraint. Regulators and rating agencies impose minimum capital rules on the level of both the Allianz Group’s operating entities and on the Allianz Group as a whole. Internal capital adequacy Our objective is to maintain available capital at the Group level in excess of the minimum requirements that are determined by our internal risk capital model according to a solvency probability of 99.97% over a holding period of one year. In support of this objective, we require each of our local operating entities to hold available capital resources allowing them to remain solvent at a lower confidence level of 99.93% over the same one-year holding period. This approach is designed to ensure a consistent capital standard across the Group that helps mitigate potential constraints of capital fungibility—i.e., by requiring our local operating entities to hold such levels of capital resources, the Group is less likely to be required to allocate capital to a local operating entity that may have incurred a loss, and accordingly the Group is less likely to encounter constraints inherent in moving capital across the many different jurisdictions in which the Group conducts business. In addition, we take into account the benefits of a single operating entity being part of a larger, diversified Group. The Allianz Group’s available capital is based on the Group’s shareholders’ equity as adjusted to reflect the full economic capital base available to absorb any unexpected volatility in results of operations. For example, the present value of future profits in the Life/Health segment and hybrid capital are added to shareholders’ equity, whereas goodwill and other intangible assets are subtracted. Available capital and internal risk capital in € bn 
Based on pro-forma calculations assuming the completion of the Dresdner Bank transaction prior to year-end of 2008(1), our available capital at December 31, 2008 amounted to €42.5 billion (2007: €63.8 billion), while our corresponding internal risk capital at December 31, 2008 amounted to €30.3 billion (2007: €33.4 billion), resulting in a capital ratio of 140% at December 31, 2008, compared to 191% at December 31, 2007(2). The decrease of 33% in available capital was primarily driven by a decrease in shareholders’ equity and a decline in the present value of future profits in the Life/Health segment. Including discontinued operations, the Allianz Group-wide internal risk capital after Group diversification and before minority interests of €32.9 billion at December 31, 2008 reflects a realized diversification benefit on the Group level of approximately 56%. Non-diversified and Group diversified internal risk capital are broken down as follows: (1) | Available capital and internal risk capital as of December 31, 2008 including discontinued operations were adjusted to reflect the pro-forma view. For example, we removed hybrid capital and the pension deficit related to Dresdner Bank from available capital, deleted internal risk capital requirements of our discontinued operations and included those related to the shares and the silent participation in Commerzbank. |
(2) | Including discontinued operations, our available capital at December 31, 2008 amounted to €48.8 billion, while our corresponding internal risk capital at December 31, 2008 amounted to €32.9 billion, resulting in a capital ratio of 148% at December 31, 2008. |
Allocated internal risk capital by risk category (total portfolio before minority interest) in € mn 
Allocated internal risk capital by segment(3) (total portfolio before minority interest) in € mn 
(3) | 2008 figures exclude discontinued operations, while 2007 figures include them. |
Taking into account discontinued operations as of December 31, 2008, total internal risk capital is still at a comparable level as at December 31, 2007 due to offsetting effects across the different risk categories (e.g., interest rate risk increased while equity risk decreased). The discontinued operations contributed 12% to total internal risk capital as of December 31, 2008. More detailed discussions of movements are provided in the sections specifically related to the risk categories. Regulatory capital adequacy Under the EU Financial Conglomerates Directive, a supplementary European Union directive, a financial conglomerate is defined as any financial parent holding company that, together with its subsidiaries, has significant cross-border and cross-sector activities. The Allianz Group is a financial conglomerate within the scope of the Directive and related German law. The law requires that a financial conglomerate calculates the capital needed to meet its solvency requirements on a consolidated basis, which we refer to below as “available funds”. Financial conglomerate solvency in € bn 
Based on pro-forma calculations assuming the completion of the Dresdner Bank transaction prior to year-end of 2008(1), our available funds for the solvency margin, required for our insurance segments and our banking and asset management business, is €32.7 billion (2007: €46.5 billion) at December 31, 2008 including off-balance sheet reserves(2), surpassing the minimum legally stipulated level by €12.4 billion (2007: €17.6 billion). This margin results in a preliminary pro-forma cover ratio(3) of 161% at December 31, 2008 (2007: 161%)(4). The decrease of 30% in available funds was primarily driven by a decrease in shareholders’ equity. Rating agency capital adequacy Rating agencies apply their own models to evaluate the relationship between the required risk capital of a company and its available capital resources. Assessing capital adequacy is usually an integral part of the rating process. At December 31, 2008, the financial strength of Allianz SE was rated by Standard & Poor’s as “AA” (stable outlook), by A. M. Best as “A+” (stable outlook), and by Moody’s as “Aa3” (stable outlook). (1) | Available funds and requirement as of December 31, 2008 including discontinued operations were adjusted to reflect the pro-forma view. For example, we removed hybrid capital related to Dresdner Bank from available funds and adjusted the deduction of goodwill and other intangible assets. Furthermore, we deleted the requirement of our discontinued operations. |
(2) | Off-balance sheet reserves represent the difference between fair value and amortized cost of real estate held for investment and investments in associates and joint ventures, net of deferred taxes, policyholders’ participation and minority interests. |
| (3) | Represents the ratio of available funds to required capital. |
| (4) | As of December 31, 2008, our available funds for the solvency margin including discontinued operations, required for our insurance segments and our banking and asset management business, is €39.5 billion including off-balance sheet reserves, surpassing the minimum legally stipulated level by €9.9 billion. |
| Conglomerate solvency is computed according to the adjusted Finanzkonglomerate-Solvabilitäts-Verordnung (FkSolV) published by the German regulator, BaFin, which revised the treatment of unrealized gains and losses in the bond portfolio. As of December 31, 2007, reported under the old method, the solvency ratio was 157% and available funds were €45.5 billion. |
In addition to its long-term financial strength rating, Standard & Poor’s determines a separate rating for “Enterprise Risk Management” (ERM). As of September 2008, Standard & Poor’s has assigned Allianz a “Strong” rating for the ERM capabilities of our insurance operations. This rating indicates that Standard & Poor’s regards it “unlikely that Allianz SE will experience major losses outside its risk tolerance”. Standard & Poor’s stated that the assessment is based on the Allianz Group’s strong risk management culture, strong controls for the majority of key risks and strong strategic risk management. Supplementary stress test analysis In addition to our internal risk capital analysis, we perform regular stress tests that act as early-warning indicators in monitoring the Allianz Group’s regulatory solvency capital ratios and its capital position required by rating agencies. We also apply regular stress tests on a local operating entity level in order to monitor capital requirements imposed by local regulators and rating agencies. For example, stress test results on a Group level indicated that a 10% price decline in our available-for-sale equity securities as of December 31, 2008 would have resulted in a €1.7 billion decline in shareholders’ equity before minority interests. An increase in the interest rate by 100 basis points would have decreased shareholders’ equity before minority interests by €3.5 billion, if available-for-sale fixed-income securities are taken into account as of December 31, 2008. Concentration of Risks As we are an integrated financial service provider offering a variety of products across different business segments and geographic regions, diversification is key to our business model. Diversification helps us to manage our risks efficiently by limiting the economic impact of any single event and by contributing to relatively stable results and risk profile in general. As discussed above, the degree to which the diversification effect can be realized depends not only on the correlation between risks but also on the level of relative concentration of those risks. Therefore, our aim is to maintain a balanced risk profile without any one or more disproportionately large risks. Disproportionately large risks that might accumulate and have the potential to produce substantial losses (e.g., natural catastrophes or credit events) are closely monitored on a standalone basis (i.e., before the diversification effect) and are subject to a global limit framework. For example, the Management Board of Allianz SE has implemented a framework of natural catastrophe limits at both the operating entity and Group levels in an effort to reduce potential earnings volatility and restrict potential losses from events having an occurrence probability of once in 250 years. Group limits are linked to the planned operating profit and the limits on operating entity level are based on the Property-Casualty net asset value. Traditional reinsurance coverage and dedicated financial transactions on Group level are examples of two instruments to mitigate the peak risks and to limit the impact of adverse conditions on our financial results and shareholders’ equity. Similarly, the Group monitors and limits credit exposures to single obligors and groups using its overall limit-setting framework to ensure that Allianz Group’s credit and counterparty risk profile is appropriately controlled. As a fundamental principle underlying the limit system, several risk criteria of a counterparty have to be taken into account: financial statements, creditworthiness, country and industry assignment, the current Allianz Group’s portfolio composition and the concentration a particular counterparty introduces within the portfolio. Counterparty limits serve not only to restrict the exposure, but also to identify open investment opportunities for the operating entities while at the same time taking into consideration the current portfolio structure at the Group level. In general, we identify and measure risk concentrations in terms of non-diversified internal risk capital in line with the risk categories covered in our internal risk capital model. In the subsequent sections all risks are presented before and after diversification and concentrations of single sources of risk are discussed accordingly. Market Risk In the following table, we present our Group-wide internal risk capital related to market risks. Allocated Internal Market Risk Capital by Business Segment and Source of Risk (Total Portfolio Before Minority Interests) | | | | | | | | | | | | | | | | Non-diversified | | | Group diversified | | As of December 31, | | 2008(1) | | | 2007(2) | | | 2008(1) | | | 2007(2) | | | | | € mn | | | € mn | | | € mn | | | € mn | | Total Group | | 24,173 | | | 22,738 | | | 13,128 | | | 13,913 | | Percentage of total Group internal risk capital | | 36 | % | | 32 | % | | 45 | % | | 42 | % | Interest rate | | 12,124 | | | 6,691 | | | 3,784 | | | 655 | | Equity | | 9,454 | | | 13,508 | | | 6,774 | | | 10,885 | | Real estate | | 2,516 | | | 2,238 | | | 1,300 | | | 1,088 | | Currency(3) | | 79 | | | 301 | | | 1,270 | | | 1,285 | | Property-Casualty | | 9,062 | | | 11,066 | | | 4,774 | | | 6,477 | | Interest rate | | 3,550 | | | 2,758 | | | 1,108 | | | 270 | | Equity | | 4,183 | | | 6,835 | | | 2,997 | | | 5,508 | | Real estate | | 1,250 | | | 1,385 | | | 646 | | | 673 | | Currency(3) | | 79 | | | 88 | | | 23 | | | 26 | | Life/Health | | 11,320 | | | 5,533 | | | 5,396 | | | 2,836 | | Interest rate | | 6,163 | | | 2,100 | | | 1,924 | | | 206 | | Equity | | 4,039 | | | 3,006 | | | 2,894 | | | 2,422 | | Real estate | | 1,118 | | | 427 | | | 578 | | | 208 | | Currency(3) | | — | | | — | | | — | | | — | | Banking | | 263 | | | 2,814 | | | 175 | | | 1,962 | | Asset Management(4) | | — | | | — | | | — | | | — | | Corporate | | 3,528 | | | 3,325 | | | 2,783 | | | 2,638 | | Interest rate | | 2,378 | | | 1,628 | | | 742 | | | 159 | | Equity | | 1,002 | | | 1,428 | | | 718 | | | 1,151 | | Real estate | | 148 | | | 269 | | | 76 | | | 131 | | Currency(3) | | — | | | — | | | 1,247 | | | 1,197 | |
(1) | 2008 figures exclude discontinued operations. On a total Group basis, internal market risk capital would amount to €26,043 million on a non-diversified basis and €14,009 million on a Group diversified basis, if discontinued operations were taken into account. |
(2) | 2007 figures include discontinued operations. |
(3) | Foreign currency risks are mainly allocated to the Corporate segment (please refer to “Internal Risk Capital Framework—Scope” for further information). |
(4) | The internal risk capital requirements for the Asset Management segment at Group level is based on a standard model of Standard & Poor’s. This approach does not provide separate risk capital figures for market risk. Approximately 99% of the investments held by the Asset Management segment’s units are held for the benefit of third parties and, therefore, do not result in significant market risk for Allianz. As a result, the risk capital calculated for the Asset Management segment is allocated toonly reflect business risk in its entirety.(please refer to “Internal Risk Capital Framework—Scope” for further information). |
Internal equity risk capital decreased in the aggregate mainly driven by the worldwide market drop in 2008 and an active reduction of exposure throughout the year. In our insurance segments, parts of the equity exposure were re-invested in fixed-income resulting in an increase in internal interest rate risk capital. Furthermore, the drop in interest rates across the world raised internal interest rate risk capital as well, in particular in our Life/Health segment which suffered from diminishing “buffers” (e.g., a decrease in unrealized gains in equity investments) that would otherwise help mitigate the impact of adverse developments. In this segment, internal risk capital additionally increased significantly due to the model change for which more details are provided in the following section. The decline in internal equity risk capital allocated to the Corporate segment was also due to the market developments experienced in 2008, supported by the sale of some strategic participations which were offset in part by the transfer of strategic participations from Dresdner Bank to the Corporate segment. As previously discussed, we developdetermine internal risk capital figures on a quarterly basis. The table below presents the average internal risk capital for market risk calculated over the four quarters of 2006 2008 and 2005,2007, as well as the high and low quarterly internal risk capital amounts calculated in both years. All figures include discontinued operations. Average, High and Low Allocated Internal Market Risk Capital by Business Segment and Source of Risk(1) – (Total Portfolio Before Minority Interests, –After Group Diversification and Including Discontinued Operations)
| | | | | | | | | | | | | | | | | | | Years ended December 31, | | 2006 | | | 2005 | | | | | Average | | | High | | | Low | | | Average | | | High | | | Low | | | | | over quarterly results | | | over quarterly results | | | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | Property-Casualty: | | | | | | | | | | | | | | | | | | | Market risks: | | | | | | | | | | | | | | | | | | | Interest rate | | 456 | | | 478 | | | 427 | | | 574 | | | 642 | | | 522 | | Equity | | 7,481 | | | 8,291 | | | 7,137 | | | 6,936 | | | 7,409 | | | 6,455 | | Real estate | | 624 | | | 672 | | | 599 | | | 614 | | | 631 | | | 586 | | Currency(2) | | 34 | | | 35 | | | 33 | | | 9 | | | 36 | | | — | | Life/Health: | | | | | | | | | | | | | | | | | | | Market risks: | | | | | | | | | | | | | | | | | | | Interest rate | | 468 | | | 517 | | | 383 | | | 764 | | | 917 | | | 669 | | Equity | | 2,478 | | | 2,615 | | | 2,369 | | | 2,388 | | | 2,544 | | | 2,150 | | Real estate | | 238 | | | 246 | | | 233 | | | 202 | | | 207 | | | 197 | | Currency(2) | | — | | | — | | | — | | | — | | | — | | | — | | Banking: | | | | | | | | | | | | | | | | | | | Market risks: | | | | | | | | | | | | | | | | | | | Interest rate | | 60 | | | 68 | | | 55 | | | 40 | | | 45 | | | 33 | | Equity | | 2,000 | | | 2,137 | | | 1,865 | | | 2,330 | | | 2,497 | | | 2,050 | | Real estate | | — | (4) | | — | (4) | | — | (4) | | — | (4) | | — | (4) | | — | (4) | Currency(2) | | — | (4) | | — | (4) | | — | (4) | | — | (4) | | — | (4) | | — | (4) | Asset Management:(3) | | | | | | | | | | | | | | | | | | | Market risks: | | | | | | | | | | | | | | | | | | | Interest rate | | — | | | — | | | — | | | — | | | — | | | — | | Equity | | — | | | — | | | — | | | — | | | — | | | — | | Real estate | | — | | | — | | | — | | | — | | | — | | | — | | Currency(2) | | — | | | — | | | — | | | — | | | — | | | — | | Corporate: | | | | | | | | | | | | | | | | | | | Market risks: | | | | | | | | | | | | | | | | | | | Interest rate | | 422 | | | 448 | | | 394 | | | 487 | | | 639 | | | 425 | | Equity | | 1,757 | | | 2,192 | | | 1,285 | | | 2,231 | | | 2,514 | | | 1,774 | | Real estate | | 65 | | | 75 | | | 55 | | | 86 | | | 109 | | | 33 | | Currency(2) | | 1,319 | | | 1,400 | | | 1,283 | | | 1,224 | | | 1,347 | | | 1,078 | |
| | | | | | | | | | | | | As of December 31, | | 2008 | | 2007 | | | Over quarterly results | | Over quarterly results | | | | Average | | High | | Low | | Average | | High | | Low | | | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | Total Group | | 13,857 | | 14,196 | | 13,466 | | 15,559 | | 16,800 | | 13,913 | Interest rate | | 1,983 | | 3,292 | | 1,138 | | 713 | | 764 | | 655 | Equity | | 9,214 | | 10,539 | | 7,838 | | 12,424 | | 13,662 | | 10,885 | Real estate | | 1,286 | | 1,425 | | 1,218 | | 1,072 | | 1,103 | | 1,038 | Currency(1) | | 1,374 | | 1,454 | | 1,301 | | 1,350 | | 1,409 | | 1,285 | | | | | | | | | | | | | | Property-Casualty | | 5,145 | | 5,727 | | 4,813 | | 7,299 | | 7,948 | | 6,476 | Interest rate | | 599 | | 930 | | 392 | | 301 | | 330 | | 270 | Equity | | 3,883 | | 4,706 | | 3,185 | | 6,331 | | 7,020 | | 5,508 | Real estate | | 634 | | 673 | | 598 | | 636 | | 673 | | 593 | Currency(1) | | 30 | | 33 | | 25 | | 31 | | 33 | | 26 | | | | | | | | | | | | | | Life/Health | | 4,693 | | 5,292 | | 4,296 | | 3,074 | | 3,215 | | 2,835 | Interest rate | | 907 | | 1,615 | | 488 | | 210 | | 226 | | 195 | Equity | | 3,288 | | 3,580 | | 3,075 | | 2,650 | | 2,781 | | 2,422 | Real estate | | 498 | | 602 | | 460 | | 214 | | 223 | | 208 | Currency(1) | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | | | | | | | | | | | | | Banking | | 1,788 | | 2,380 | | 1,154 | | 2,116 | | 2,326 | | 1,962 | Interest rate | | 81 | | 124 | | 51 | | 25 | | 33 | | 20 | Equity | | 1,520 | | 2,132 | | 815 | | 1,933 | | 2,136 | | 1,804 | Real estate | | 75 | | 78 | | 70 | | 113 | | 159 | | 76 | Currency(1) | | 113 | | 145 | | 90 | | 45 | | 62 | | 28 | | | | | | | | | | | | | | Asset Management(2) | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | | | | | | | | | | | | | Corporate | | 2,230 | | 2,750 | | 1,977 | | 3,071 | | 3,521 | | 2,639 | Interest rate | | 397 | | 623 | | 207 | | 177 | | 185 | | 159 | Equity | | 522 | | 763 | | 291 | | 1,510 | | 1,988 | | 1,151 | Real estate | | 79 | | 80 | | 78 | | 109 | | 131 | | 63 | Currency(1) | | 1,232 | | 1,289 | | 1,173 | | 1,275 | | 1,339 | | 1,197 |
(1) | Internal risk capital is calculated as value-at-risk with a one-year holding period and a confidence level of 99.97%Foreign currency risks are mainly allocated to the Corporate segment (please refer to “Internal Risk Capital Framework—Scope” for further information).
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(2) | According to the Allianz Group’s policy, foreign currency risks are generally managed centrally at the Allianz Group level and are, therefore, allocated to the Corporate segment. As commodity risk is not significant on Group level, it is covered in our internal risk capital model within currency risk.
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(3)
| The internal risk capital calculationrequirements for the Asset Management segment at Group level is based on a standard model of Standard & Poor’s. This approach does not provide separate risk capital figures for market risk. Approximately 99% of the investments held by the Asset Management segment’s units are held for the benefit of third parties and, therefore, do not result in significant market risk for Allianz. As a result, the risk capital calculated for the Asset Management segment is allocated toonly reflect business risk in its entirety.(please refer to “Internal Risk Capital Framework—Scope” for further information). |
(4)
| Only year-end results available for 2005 and 2006.
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In addition to the information given in the following paragraphs, the quantitative contributions of the non-trading and trading positions to the overall internal risk capital for market risk is presented at the end of this section. Non-Trading PortfoliosNon-trading portfolios
The Allianz Group’s non-trading portfolios contain all non-trading activities of the Banking segment as well as the financial assets and liabilities of the Property-Casualty, and Life/Health segments.and Corporate segments as well as all non-trading activities of the Banking segment. The Allianz Group holds and uses many different financial instruments in managing its businesses. Grouped according to our internal risk category,capital model categories, the following representare the most significant market risks in terms of market values: Equity equity price risk:risk (including risks arising from common shares and preferred shares.
Interestshares) and interest rate risk:risk (arising from bonds, loans and mortgages serving as collateral for liabilities resulting from our Banking, Property-Casualty and Life/Health segments.mortgages).
Foreign exchange rate risk: net asset value impact of the difference in fair value between assets and liabilities of our non-Euro denominated operating units.
Property-Casualty and Life/Health and Corporate Segmentssegments MostThe Allianz Group’s insurance operating entities hold equity investments usually to diversify their portfolios. 66% of the Allianz Group’s insurance-related equity investments are intended to be held for the long-term, where ournon-diversified internal risk capital model is usedallocated to regularly align the insurance business’ risk-bearing capacity with the economic risks it faces by taking into account short-term market developments. The Property-Casualty and Life/Health segments for equity holdings are primarilyrisk is assigned to our operating entities in the Euro zone equity markets of Germany, Italy, France and Italy, with significant additional exposures in the Swiss and U.K. markets. Our exposure to equity risk in 2006 remained rather stable reflecting a reduction in equity investments held that has also been offset by an overall appreciation in market values.U.S.
The interest rate risk to which the Property-Casualty and Life/Health segments are exposed to interest rate risk due to theirarises from the net position between our insurance liabilities and the investments in fixed incomefixed-income instruments, in particular bonds, loans and mortgages, serving as collateral forbacking policyholder obligations that are different in terms of maturity and size. Our internal risk capital model provides management with information regarding the cash flow profiles of the segments’ liabilities, which allows for active asset-liabilitymonitoring and management of our assets and monitoring.liabilities. While the potential cash flow payments related to our liabilities in the Property-Casualty segment are typically shorter in naturematurity than the financial assets backing them, the opposite usually holds true for our Life/Health segment, which provides us with a natural hedge at the Allianz Group level. In our We have allocated a significant part of the Life/Health segment, risks are mitigated bysegment’s non-diversified internal risk capital for interest rate risk to Western Europe (74% as of December 31, 2008), mainly to cover traditional life insurance products. Traditional products sold in Western Europe generally feature policyholder participation though there existin the profits (or losses) of the insurance company issuing the contract, subject to a minimum guaranteed crediting rate. In particular, our Life/ Health contracts in Germany, France, Switzerland and Austria comprise a significant level of policyholder participation, limiting all sources of risk, including market, credit, actuarial and cost risks, which would otherwise be borne by Allianz. On the other hand, in accordance with the guarantees in thatrelated to these arrangements, we must credit minimum rates for individual contracts. The valuation of these guarantees, which take into account the interaction of assets and policyholder obligations, forms an integral part of our risk management framework. Our primary interest rate exposure is the risk that interest ratescontracts (e.g., in Germany, France, U.S., Italy and South KoreaKorea). As interest rates may fall below the guaranteed credit minimums for certaincrediting rates in those markets, we are exposed to interest rate risk. The valuation of these guarantees, which takes into account the interaction of investment strategy and obligations to policyholders, forms an integral part of our internal risk capital model. In 2008, we enhanced our internal risk capital model for the purpose of quarterly risk reporting and risk related-performance measurement (EVA®) in the Life/Health policiessegment. The enhanced model is part of an integrated approach and is more closely linked to the calculation of Market Consistent Embedded Value (MCEV), which, on an economic basis, is considered the shareholders’ future profit embedded in those markets. In 2006, thisthe issued Life/Health business. This model, applied from January 1, 2008, increased 2007 Group diversified internal risk capital for the Life/Health segment by approximately a third. Banking and Asset Management segments Following the sale of Dresdner Bank, we do not consider market risk related to our continuing Banking operations to be significant at the Group level. Although the internal risk capital requirements for the Asset Management segment only reflect business risk, the evaluation of market risk and credit risk on the account of third parties is an integral part of the risk management process of our local operating entities. Our Asset Management operating entities monitor market risks using VaR models, sensitivity analyses and stress tests that estimate the potential loss under extreme market conditions. All underlying models are regularly reviewed by the risk departments of the respective local operating entities. Corporate segment The primary Corporate risks are interest rate, risk decreased as interest rates increased in the Euro-zoneequity and the U.S. and as the difference between interest rates and the average guaranteed levels also increased. Interest rate risk in theforeign currency risks. The Corporate segment primarily arises in connection withmanages the equity investments of Allianz SE and its finance subsidiary holding companies, as well as securities issued to fund the capital requirements of the Allianz Group. TheseThe issued securities include structured products that might be partly repaid in the form ofwith equity participationsparticipation securities held
in our asset portfolio. Some of the securities issued qualify as eligible capital for existing regulatory solvency requirements to the extent they constitute subordinated debt or are perpetual in nature. The Property-Casualty and Life/Health segments’ non-trading portfolio isOn the level of the Corporate segment we are exposed to foreign exchangecurrency risk because some of our subsidiaries’ local currencies are different thanfrom the Euro. If non-Euro foreign exchange rates decline against the Euro, from a Group perspective, the fair values of the correspondingEuro equivalent net asset valuevalues also decline. TheOur primary exposures forto foreign exchangecurrency risk are related to the U.S. Dollar, Swiss Franc, British Pound and South Korean Won. Local laws generally require that the insurance policy obligations of the Allianz Group’s subsidiaries and the investments covering them are in the same currency. When this is not the case (e.g. in Switzerland, obligations to policyholders resulting from life insurance contracts are partly backed by Euro-dominated bonds), the resulting foreign exchange risk is generally hedged against the local currency. Hedge efficiency is monitored by the local risk managers. As a result, currency fluctuations in connection with foreign subsidiaries have only a minor impact on the Property-Casualty and Life/
Health segments’ risk management strategies locally, and active management of currency risks is performed centrally at the Allianz Group level within the Corporate segment.
Banking Segment
The Banking segment’s interest rate risk arises from its non-trading portfolio of loans and deposits, issued securities, interest rate-related investment securities, as well as corresponding hedges of Dresdner Bank and the other banks forming part of the Allianz Group. The market risk in the non-trading portfolio is also primarily interest rate risk that results from long-term fixed rate loans funded in part by short-term deposits. As is the case for Dresdner Bank’s trading portfolio, Dresdner Bank manages this risk by setting value-at-risk limits. As of December 31, 2006, the value-at-risk, with a 99% confidence level and 10-day holding period, for interest rate risks at Dresdner Bank amounted to €15.5 million, compared to €14.0(1) million as of December 31, 2005. The value-at-risk in Dresdner Bank’s non trading book increased due to increases in market volatility and lower diversification effects between asset classes.
Market risks within Dresdner Bank’s participations result from unanticipated adverse movements in the value of these positions due to general market fluctuations or issuer-specific factors. The reduction in internal risk capital for equity investments from 2005 to 2006 is mainly driven by the sale of remaining parts of the Eurohypo AG by Dresdner Bank. This decrease was partially offset by appreciation of the share prices of the remaining portfolio.
Dresdner Bank limits currency risks by applying the Allianz Group-wide policy that all loans and
(1)
| Last year’s disclosure value has been restated for reasons of comparability with current value-at-risk figure, which according to new methodology includes for the first time equity positions (without participation intention).
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deposits in foreign currencies are refinanced or reinvested in the same currency with matching maturities.
Asset Management SegmentTrading portfolios
The internaltrading portfolios of the Allianz Group consist of all assets and liabilities classified as “held for trading” positions, the majority of which were held in the Banking segment before the sale of Dresdner Bank. Activities in the Property-Casualty, Life/Health and Corporate segments designated as “trading” for accounting purposes relate mainly to hedging instruments for our insurance liabilities; in general, we do not actively trade structural hedge positions and they are not internally classified as trading. For accounting purposes and from a management perspective, financial instruments are typically classified as held-for-trading if they are financial assets or financial liabilities that are acquired or incurred for the purpose of selling or repurchasing them in the near term. For accounting purposes, however, all derivative instruments must be classified as trading regardless of their specific use within the business or of whether management intends to sell or repurchase them in the near term, and as such, their accounting classification may differ from Allianz Group’s management view. The market risk capital calculationdata for the trading portfolios of the Property-Casualty, Life/Health and Corporate segments reflects risks related to such derivatives that are required to be treated as “trading” for accounting purposes. However, derivatives used in the Allianz Group’s insurance operations and in the Corporate segment are principally used for hedging and not for trading purposes, and, as such, from a management perspective, we do not view them as “trading”. Trading activities in the Asset Management segment atand those related to our continuing Banking operations are immaterial to the Allianz Group level is based onas a standard modelwhole. In our worldwide hedging and trading activities, the Allianz Group uses financial derivatives for the management of Standard & Poor’s. This approach does not provide separate risk capital figures for market risk. Approximately 99%risks and as a component of structured financial transactions. In terms of volume, the investments heldprimary derivative products entered into by the Asset Management segment’s unitsAllianz Group are held for the benefit of third partiesinterest rate swaps, futures and therefore, do not result in significant market risk for Allianz. As a result, the risk capital calculated for the Asset Management segment is allocated to business risk in its entirety.options as well as foreign exchange forwards and equity derivatives. Despite the limited significanceContributions of the risk, taking steps to manage market risk in thetrading and non-trading portfolios of the Asset Management units’ customers is an integral part of the risk management process. Our operating units monitor market risks using value-at-risk models, sensitivity analyses and stress tests that estimate the potential loss under extreme market conditions. All underlying models are regularly reviewed by the local risk functions.
The following table showstables show the contribution of non-trading and trading positions to the overall internal risk capital for market risks of the Allianz Group. The figures take into account the diversification effectseffect for all the main sources of risk addressed in our internal risk capital model. Certain financial instruments are included in more than one risk category because they may be affected by changes in more than one parameter. For example, equities denominated in non-Euro currencies are affected by fluctuation in both stock prices and exchange rates. Allocated Internal Market Risk Capital byBy Business Segment and Source of Risk(1) – (Non-Trading Portfolio Before Minority Interests –and After Group Diversification)
| | | | | As of December 31, | | 2006 | | 2005 | | | | € mn | | € mn | Property-Casualty: | | | | | Market risks: | | 8,307 | | 8,681 | thereof: Interest rate | | 418 | | 638 | Equity | | 7,237 | | 7,376 | Real estate(2) | | 617 | | 631 | Currency(3) | | 35 | | 36 | Life/Health: | | | | | Market risks: | | 3,014 | | 3,485 | thereof: Interest rate | | 383 | | 916 | Equity | | 2,385 | | 2,362 | Real estate(2) | | 246 | | 207 | Currency(3) | | — | | — | Banking: | | | | | Market risks: | | 2,030 | | 2,057 | thereof: Interest rate | | 47 | | 22 | Equity | | 1,818 | | 2,035 | Real estate(2) | | 165 | | — | Currency(3) | | — | | — | Asset Management:(4) | | | | | Market risks: | | — | | — | thereof: Interest rate | | — | | — | Equity | | — | | — | Real estate(2) | | — | | — | Currency(3) | | — | | — | Corporate Items: | | | | | Market risks: | | 3,604 | | 3,616 | thereof: Interest rate | | 394 | | 639 | Equity | | 1,872 | | 1,600 | Real estate(2) | | 55 | | 33 | Currency(3) | | 1,283 | | 1,344 | | | | | | Total | | 16,955 | | 17,839 | | | | | |
| | | | | As of December 31, | | 2008(1) | | 2007(2) | | | | € mn | | € mn | Total Group | | 12,152 | | 13,352 | Property-Casualty | | 4,707 | | 6,360 | Interest rate | | 1,105 | | 265 | Equity | | 2,933 | | 5,396 | Real estate(3) | | 646 | | 673 | Currency(4) | | 23 | | 26 | | | | | | Life/Health | | 5,017 | | 2,625 | Interest rate | | 1,920 | | 205 | Equity | | 2,519 | | 2,212 | Real estate(3) | | 578 | | 208 | Currency(4) | | 0 | | 0 | | | | | | Banking | | 109 | | 1,885 | Interest rate | | 5 | | 11 | Equity | | 104 | | 1,743 | Real estate(3) | | 0 | | 76 | Currency(4) | | 0 | | 55 | | | | | | Asset Management(5) | | 0 | | 0 | | | | | | Corporate | | 2,319 | | 2,482 | Interest rate | | 742 | | 159 | Equity | | 684 | | 1,029 | Real estate(3) | | 76 | | 131 | Currency(4) | | 817 | | 1,163 |
(1) | Internal2008 figures exclude discontinued operations. On a total Group basis, internal market risk capital is calculated as value-at-risk withrelated to our non-trading portfolio would amount to €12,546 million on a one-year holding period and a confidence level of 99.97%.Group diversified basis, if discontinued operations were taken into account.
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(2) | All real estate assets are non-trading. For our Banking segment, internal risk capital for real estate risk was introduced in 2006.2007 figures include discontinued operations.
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(3) | According to the Allianz Group’s policy, foreign currency risksAll real estate assets are generally managed centrally at the Allianz Group level and are, therefore, allocated to the Corporate segment. As commodity risk is not significant on Group level, it is covered in our internal risk capital model within currency risk.non-trading.
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(4) | Foreign currency risks are mainly allocated to the Corporate segment (please refer to “Internal Risk Capital Framework—Scope” for further information). |
(5) | The internal risk capital calculationrequirements for the Asset Management segment at Group level is based on a standard model of Standard & Poor’s. This approach does not provide separate risk capital figures for market risk. Approximately 99% of the investments held by the Asset Management segment’s units are held for the benefit of third parties and, therefore, do not result in significant market risk for Allianz. As a result, the risk capital calculated for the Asset Management segment is allocated toonly reflect business risk in its entirety.(please refer to “Internal Risk Capital Framework—Scope” for further information). |
Allocated Internal Market Risk Capital By Business Segment and Source of Risk (Trading PortfoliosPortfolio Before Minority Interests and After Group Diversification) The trading portfolios of the Allianz Group contain all assets and liabilities classified as “held for trading” positions. In terms of activity and absolute volumes they relate primarily to the Banking segment. While our Banking segment business is separated into a designated trading portfolio and a non-trading portfolio, trading activities in the Property-Casualty, Life/Health and Corporate segments relate mainly to the hedging of insurance liabilities not internally classified as trading. Trading activities in the Asset Management segment are immaterial. In our worldwide trading activities, the Allianz Group uses financial derivatives both as non-standardized financial instruments for the individual management of market risks and as a component of structured financial transactions. The Allianz Group’s derivative trading activities focus on interest-bearing financial instruments, predominately interest rate swaps. The Allianz Group also uses currency, credit and equity/index derivatives.
| | | | | As of December 31, | | 2008(1) | | 2007(2) | | | | € mn | | € mn | Total Group | | 976 | | 561 | Property-Casualty | | 67 | | 117 | Interest rate | | 3 | | 5 | Equity | | 64 | | 112 | Real estate(3) | | 0 | | 0 | Currency(4) | | 0 | | 0 | | | | | | Life/Health | | 379 | | 211 | Interest rate | | 4 | | 1 | Equity | | 375 | | 210 | Real estate(3) | | 0 | | 0 | Currency(4) | | 0 | | 0 | | | | | | Banking | | 66 | | 77 | Interest rate | | 5 | | 9 | Equity | | 61 | | 61 | Real estate(3) | | 0 | | 0 | Currency(4) | | 0 | | 7 | | | | | | Asset Management(5) | | 0 | | 0 | | | | | | Corporate | | 464 | | 156 | Interest rate | | 0 | | 0 | Equity | | 34 | | 122 | Real estate(3) | | 0 | | 0 | Currency(4) | | 430 | | 34 |
Property-Casualty, Life/Health and Corporate Segments
The Allianz Group’s insurance business does not generally engage in trading activities. With the adoption of IAS 39, however, we are exposed to market risks due to trading positions not only in respect of the banking business but also in respect of the insurance business. However, derivatives used in the Allianz Group’s insurance operations are principally used for portfolio hedging and not for trading purposes. As mentioned above, we manage and measure risks on an economic basis applying a value-at-risk approach on a total portfolio basis of assets and liabilities and without addressing accounting classifications explicitly. Our internal risk capital model’s value-at-risk approach allows for efficient risk management by taking into account natural hedge positions and diversification effects within the overall portfolio.
Banking Segment
The Banking segment is active in trading equities, interest rate instruments, foreign exchange and commodities. The Banking segment uses derivatives in its trading portfolios primarily to meet customer demands as well as to hedge market and credit risk. Derivatives are also used to take advantage of market opportunities. Dresdner Bank
has expanded its use of credit derivatives in line with market growth in order to meet client demands in this product field. In terms of volume, the primary derivative products held by the Allianz Group are interest rate swaps, futures and options as well as foreign exchange forwards and equity-related options. The primary exposures in foreign currencies are U.S. Dollars and British Pounds.
In 1998, the BaFin approved Dresdner Bank’s value-at-risk model for purposes of reporting market risks within the trading portfolio in accordance with Principle I of the German Banking Act. The BaFin also approved the improvements made to this model in 2001, 2002 and 2004. This value-at-risk model, which is used to evaluate capital adequacy for regulatory purposes and which forms the basis for our internal risk capital model, must take into account market fluctuations that can occur at a confidence level of 99% and a 10-day holding period. The value-at-risk model is supplemented by stress tests that estimate the potential loss under extreme market conditions.
For the purpose of setting internal limits and risk management, Dresdner Bank calculates a value-at-risk with a confidence level of 95% and a one-day holding period. While the value-at-risk for regulatory purposes is based on volatilities derived from equally weighted time series, the value-at-risk for internal use is based on volatilities derived from exponentially weighted time series, which assigns a greater weight to the most recent market developments. Therefore, unlike the value-at-risk calculation required by the BaFin, which is based on historical market data, we thus assign greater weight to the most recent market fluctuations. By doing so, we endeavor to reflect current market trends in the value-at-risk calculation on a timely basis.
Value-at-risk is only one of the instruments used to characterize and control the market risk profile of Dresdner Bank. In addition, Dresdner Bank uses operational risk indicators and limits, which are specifically adapted to the risk situation of the trading units. The Banking segment endeavors to control risk from trading by setting value-at-risk and operational market risk limits. Current limit utilization is determined and monitored on a daily basis. Any limit breach is immediately communicated to management so that corrective action can be taken.
Market risks within Dresdner Bank’s trading portfolio had a value-at-risk, with a 99% confidence level and a 10-day holding period, of €57 million as of December 31, 2006, compared to €66 million as of
December 31, 2005. Market risk from trading activities declined in comparison to last year mainly due to the lower interest rate risk.
Value-at-Risk Statistics (Dresdner Bank)
– 99% confidence level, 10-day holding period –
| | | | | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, | | | Years ended December 31, | | | | | | Average | | | High | | | Low | | | | | 2006 | | | 2005 | | | 2006 | | | 2005 | | | 2006 | | | 2005 | | | 2006 | | | 2005 | | | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | Aggregate risk | | 57 | | | 66 | | | 46 | | | 49 | | | 89 | | | 105 | | | 26 | | | 26 | | Interest-rate risk | | 43 | | | 71 | | | 51 | | | 52 | | | 77 | | | 121 | | | 32 | | | 25 | | Equity risk | | 44 | | | 12 | | | 23 | | | 19 | | | 85 | | | 36 | | | 8 | | | 10 | | Currency risk | | 9 | | | 9 | | | 10 | | | 7 | | | 25 | | | 21 | | | 1 | | | 1 | | Commodity risk | | 4 | | | 1 | | | 4 | | | 3 | | | 17 | | | 10 | | | 1 | | | — | | Diversification effect | | (43 | ) | | (27 | ) | | (42 | ) | | (32 | ) | | — | (1) | | — | (1) | | — | (1) | | — | (1) |
(1) | No diversification effects are2008 figures exclude discontinued operations. On a total Group basis, internal market risk capital related to our trading portfolio would amount to €1,463 million on a Group diversified basis, if discontinued operations were taken into account because the high and low values were measured on different dates.
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The following table shows the contribution of trading positions to the overall internal risk capital for market risks of the Allianz Group. The figures take into account diversification benefits for all the main sources of risk addressed in our internal risk capital model. Certain financial instruments are included in more than one risk category because they may be affected by changes in more than one parameter. For example, equities denominated in non-Euro currencies are affected by fluctuation in both stock prices and exchange rates.
Allocated Internal Risk Capital by Business Segment and Source of Risk(1)
– Trading Portfolio Before Minority Interests –
| | | | | As of December 31, | | 2006 | | 2005 | | | | € mn | | € mn | Property-Casualty: | | | | | Market risks: | | 72 | | 36 | thereof: Interest rate | | 9 | | 4 | Equity | | 63 | | 32 | Real estate(2) | | — | | — | Currency(3) | | — | | — | Life/Health: | | | | | Market risks: | | 230 | | 183 | thereof: Interest rate | | — | | 1 | Equity | | 230 | | 182 | Real estate(2) | | — | | — | Currency(3) | | — | | — | Banking: | | | | | Market risks: | | 60 | | 35 | thereof: Interest rate | | 8 | | 16 | Equity | | 47 | | 15 | Real estate(2) | | — | | — | Currency(3) | | 5 | | 4 | Asset Management:(4) | | | | | Market risks: | | — | | — | thereof: Interest rate | | — | | — | Equity | | — | | — | Real estate(2) | | — | | — | Currency(3) | | — | | — | Corporate Items: | | | | | Market risks: | | 140 | | 177 | thereof: Interest rate | | — | | — | Equity | | 138 | | 174 | Real estate(2) | | — | | — | Currency(3) | | 2 | | 3 | | | | | | Total | | 502 | | 431 | | | | | |
(1)
| Internal risk capital is calculated as value-at-risk with a one-year holding period and a confidence level of 99.97%.account.
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(2) | 2007 figures include discontinued operations. |
(3) | All real estate assets are non-trading. For our Banking segment, internal risk capital for real estate risk was introduced in 2006. |
(3)(4)
| According to the Allianz Group’s policy, foreignForeign currency risks are generally managed centrally at the Allianz Group level and are, therefore,mainly allocated to the Corporate segment. As commodity risk is not significant on Group level, it is covered in our internal risk capital model within currency risk.segment (please refer to “Internal Risk Capital Framework—Scope” for further information).
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(4)(5)
| The internal risk capital calculationrequirements for the Asset Management segment at Group level is based on a standard model of Standard & Poor’s. This approach does not provide separate risk capital figures for market risk. Approximately 99% of the investments held by the Asset Management segment’s units are held for the benefit of third parties and, therefore, do not result in significant market risk for Allianz. As a result, the risk capital calculated for the Asset Management segment is allocated toonly reflect business risk in its entirety.(please refer to “Internal Risk Capital Framework—Scope” for further information). |
Credit Risk Measurement Credit risk is defined as the potential loss in portfolio value over a given time horizon due to changes in the credit quality of exposures in the portfolio. Credit risk arises from claims against various obligors likesuch as borrowers, counterparties,counter-parties, issuers, guarantors or insurers. Lossesand insurers, including all relevant product classes such as fixed-income investments, lending, credit insurance and reinsurance recoverables. Credit losses may result inarise from the following events: FailureDeterioration in creditworthiness of an obligor, including ultimately its failure to meet payment obligations (default and migration risk); and
In a given country, defaultDefault on local government debt or temporary suspension of payment obligations (“moratorium”), deterioration of economic or political conditions, expropriation of assets, inability to transfer assets abroad due to sovereign intervention, etcfreezing of converted and unconverted sums of money, etc. (country risk including transfer and conversion risk)
Failure in the settlement of transactions (settlement risk).
Group Risk’s obligor credit risk management framework is comparable to those widely used in the industry and is based on internal ratings, estimates of exposure at default (EAD) and loss given default (LGD). These measurements are all estimated using statistical analysis and professional judgment. Our aggregation methodology is comparable to one of the mostapproaches widely used approaches in this area. We usethe industry known as “structural model”. In a structural model, a counterparty is deemed to have defaulted when the value of its total assets is lower than its total liabilities. Since changes in the asset value of a approximatecompany determine whether it defaults or migrates from one credit class to another, the losses thatcorrelation between different firms’ asset values determines the Allianz Group’s portfolio may incur. In accordance with our internalcorrelation between the firms’ defaults and migrations. Estimating these parameters allows us to aggregate credit risk capital model, we consider losses within a one-year horizon. The model recognizes certain parameters that influence the risk of a portfolio. Values of variables like the exposure amount at the time of default or the probability of default of a counterparty are estimated.
We assume probability distributions and estimate their parameters for random variables such as the portion of a counterparty’s exposure that would be lost in event of default, of country or industry market-wide events or of counterparty-specific changes on the creditworthiness.
We performacross individual obligors using Monte-Carlo simulations to obtain the loss profile of a given portfolio—i.e., its loss probability distribution. The loss profile serves asis the basis of our internal credit risk measure.capital model.
We monitor and manage credit risks and concentrations within the portfolio based on a counterparty limit system that is applied across the entire Allianz Group. Counter-party limits are calculated taking into account the main risk drivers of credit risk and aim to cut off peak concentrations by industry and counterparty name in the portfolio. For monitoring the credit risk profile of our operating entities’ portfolios and the whole Allianz Group portfolio, credit reports for portfolio analysis are provided within a web-based limit system application. Our internal credit risk capital increased in 2008 mainly due to rating downgrades of some of our counterparties following the financial turmoil throughout 2008. The high credit quality of our investment and reinsurance portfolio mitigated the impact that the broad credit deterioration had on Allianz Group’s credit risk profile. In response to the financial crisis, we have initiated a number of actions, for example, weekly review and adjustment of limit settings for the major financial institutions as a temporary measure to assess systemic risks of the financial industry and to recommend short-term actions to our operating entities in light of this severe market volatility.
Allocated Internal Credit Risk Capital by Business Segment and Source of Risk(1) – (Total Portfolio Before Minority Interests)
| | | | | | | | | | | | | | | | Non-diversified | | | Group diversified | | As of December 31, | | 2008(1) | | | 2007(2) | | | 2008(1) | | | 2007(2) | | | | | € mn | | | € mn | | | € mn | | | € mn | | Total Group | | 5,019 | | | 7,983 | | | 3,372 | | | 5,701 | | Percentage of total Group internal risk capital | | 8 | % | | 11 | % | | 12 | % | | 17 | % | Investment | | 2,533 | | | 5,839 | | | 1,435 | | | 4,128 | | (Re)insurance(3) | | 2,486 | | | 2,144 | | | 1,937 | | | 1,573 | | Property-Casualty | | 3,196 | | | 2,779 | | | 2,305 | | | 2,016 | | Investment | | 872 | | | 832 | | | 494 | | | 588 | | (Re)insurance(3) | | 2,324 | | | 1,947 | | | 1,811 | | | 1,428 | | Life/Health | | 1,321 | | | 936 | | | 783 | | | 668 | | Investment | | 1,159 | | | 739 | | | 657 | | | 523 | | (Re)insurance(3) | | 162 | | | 197 | | | 126 | | | 145 | | Banking | | 428 | | | 4,216 | | | 242 | | | 2,981 | | Asset Management(4) | | — | | | — | | | — | | | — | | Corporate | | 74 | | | 52 | | | 42 | | | 36 | |
As previously discussed, we determine internal risk capital figures on a quarterly basis. The table below presents the average internal risk capital for credit risk calculated over the four quarters of 2008 and 2007, as well as the high and low quarterly internal risk capital amounts calculated in both years. All figures include discontinued operations.
Average, High and Low Allocated Internal Credit Risk Capital by Source of Risk (Total Portfolio Before Minority Interests, –After Group Diversification and Including Discontinued Operations) | | | | | As of December 31, | | 2006 | | 2005 | | | | € mn | | € mn | Property-Casualty: | | | | | Credit risks: | | 1,844 | | 1,753 | thereof: Investment | | 521 | | 505 | Reinsurance | | 1,323 | | 1,248 | Life/Health: | | | | | Credit risks: | | 685 | | 874 | thereof: Investment | | 548 | | 702 | Reinsurance | | 137 | | 172 | Banking: | | | | | Credit risks: | | 3,236 | | 3,575 | thereof: Investment | | 3,236 | | 3,575 | Reinsurance | | — | | — | Asset Management:(2) | | | | | Credit risks: | | — | | — | thereof: Investment | | — | | — | Reinsurance | | — | | — | Corporate: | | | | | Credit risks: | | 2 | | 6 | thereof: Investment | | 2 | | 6 | Reinsurance | | — | | — | | | | | | Total | | 5,767 | | 6,208 | | | | | |
(1)
| Internal risk capital is calculated as value-at-risk with a one-year holding period and a confidence level of 99.97%.
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(2)
| The internal risk capital calculation for the Asset Management segment at Group level is based on a standard model of Standard & Poor’s. This approach does not provide separate risk capital figures for market risk. Approximately 99% of the investments held by the Asset Management segment’s units are held for the benefit of third parties and, therefore, do not result in significant market risk for Allianz. As a result, the risk capital calculated for the Asset Management segment is allocated to business risk in its entirety.
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We monitor and manage credit risks pursuant to a limit system applicable to the entire Allianz Group. The limit system aggregates major risks having Group-wide significance such as credit insurance, lending and our capital investments and serves as the basis for controlling the risk on an Allianz Group-wide basis by detecting credit risks at an early stage.
| | | | | | | | | | | | | | | | 2008 | | 2007 | | | | Over quarterly results | | Over quarterly results | | | | Average | | High | | Low | | Average | | High | | Low | | | | €mn | | € mn | | € mn | | €mn | | € mn | | € mn | Total Group | | 6,127 | | 6,614 | | 5,837 | | 5,385 | | 5,701 | | 5,247 | Investment | | 4,358 | | 4,771 | | 4,181 | | 3,966 | | 4,128 | | 3,862 | (Re)insurance(3) | | 1,770 | | 1,871 | | 1,656 | | 1,419 | | 1,573 | | 1,356 |
Property-Casualty, Life/Health and Corporate Segmentssegments In the Property-Casualty and Life/Health and Corporate segments, credit riskrisks arising from reinsurance counterparties are considered separately from issuer and counterparty risks arising from our asset investment activities, though the same methodology is applied. For the Corporate segment, our internal risk capital model covers only investment credit risk, as reinsurance activities are generally allocated to the Property-Casualty segment. Credit risk—reinsurance and credit insurance ReinsuranceThis risk category also covers the premium risk which our credit insurance entity Euler Hermes is exposed to due to its business model, as this type of risk is a special form of credit risk. As of December 31, 2008, it represented 64% of our total Group non-diversified internal risk capital allocated to credit reinsurance risk.
(1) | 2008 figures exclude discontinued operations. On a total Group basis, internal credit risk capital would amount to €9,353 million on a non-diversified basis and €6,614 million on a Group diversified basis, if discontinued operations were taken into account. |
(2) | 2007 figures include discontinued operations. |
(3) | The premium risk which our credit insurance entity Euler Hermes is exposed to due to its business model is also covered here, as this type of risk is a special form of credit risk. |
(4) | The internal risk capital requirements for the Asset Management segment only reflect business risk (please refer to “Internal Risk Capital Framework—Scope” for further information). |
We take steps to limit our liability from insurance business by ceding part of the risks we assume to the international reinsurance market. When selectingA dedicated team selects our reinsurance partners we considerand considers only companies with strong credit profiles. We may also require letters of credit, cash deposits or other financial measures to further mitigate our exposure to credit risk. To manage thisthe related credit risk, we compile Allianz Group-wide data on receivables from insurancepotential and actual recoverables in respect of reinsurance losses. As ofAt December 31, 2006, approximately 80%2008, 74% of the Allianz Group’s reinsurance recoverables were distributed among reinsurers with an investment grade rating. Additionally, more than 79% were distributed among reinsurers that havehad been assigned at least an “A” rating by Standard & Poor’s. We may also require lettersNon-rated reinsurance recoverables represented 24% of credit, deposits or other financial measuresthe total reinsurance recoverables at December 31, 2008. Reinsurance recoverables without Standard & Poor’s rating include exposures to further minimizebrokers, companies in run-off and pools, where no rating is available, and companies rated by A.M. Best. As of December 31, 2008, 9% of our exposuretotal Group non-diversified internal risk capital allocated to credit risk. See Note 10reinsurance risk was assigned to our consolidated financial statements for further information.operating entities in the U.S. Ceded reservesReinsurance recoverables by rating class(1) as of December 31, 20062008(1)
in€ bn 
(1) | Represents netted amounts pergross exposure broken down by reinsurer. |
Credit risk—investment As of December 31, 2008, our operating entities in the U.S. and Germany accounted for 40% of the non-diversified internal risk capital allocated to our Property-Casualty, Life/ Health and Corporate segments for investment credit risk. Investment credit risk.We limit our fixed income investmentthe credit risk of our fixed-income investments by setting high requirements on the creditworthiness of our debtors andissuers, by diversifying our investments. Through our centralinvestments and by setting limits for credit risk management, we consolidateconcentrations. We track the limit utilization by consolidating and monitoring our exposure according toacross individual debtors and across all investment categories and business segments and monitor the exposure of the Allianz Group on a monthly basis. As ofAt December 31, 2006,2008, approximately 91%94% of the fixed incomefixed-income investments of the insurance companies of the Allianz Group had an investment grade rating. More than 86%rating and approximately 88% of the fixed-income investments were distributed among obligors that had been assigned at least an “A” rating by Standard & Poor’s.
Fixed income investments by rating class as of
December 31, 2006
in€ bn
Banking Segment
In the Banking Segment, credit risks include credit and counterparty risks in the lending business, issuer risks from our securities business, counterparty risks from trading activities and country risks.
We use our customers’ credit ratings as the central element for our approval, monitoring and control process. In this process, the various creditworthiness characteristics of our customers are represented in the form of rating classes. To categorize the default probability of a borrower, we use a system with 16 different rating classes. The first six classes correspond to “investment grade” and classes VII to XIV signify “non-investment grade”. Rating classes XV and XVI are default classes according to the Basel II definition. We assess and endeavor to improve our rating procedures on an ongoing basis.
The total credit risk exposure of Dresdner Bank of €341 billion includes loans from lending business and market values of trading positions, in the case of derivatives it contains the positive replacement values plus risk-based add-ons. As of December 31, 2006, approximately 82% of overall counterparty limits in the trading and non-trading portfolios of Dresdner
Bank were included in the rating classes I to VI, compared to 81% as of December 31, 2005. Approximately 18% of limits are included in the rating classes VII to XVI (2005: 19%). Furthermore, 97% (2005: 96%) of the counterparty limits in the trading portfolio are classified with a rating of I to VI.
Overall portfolio viewFixed-income investments by rating class as of December 31, 2006 (Dresdner Bank)2008
fair values in %€ bn 
Of Dresdner Bank’s lending activities measured by limits as of December 31, 2006, 29% (2005: 32%) were accounted for by the Private & Business Clients divisions and 71% (2005: 68%) by the Corporate & Investment Banking division.
IncreasingIn addition to these fixed-income investments, Allianz Group also has non-tradable mortgage loan volumes have been accompanied by a reduction of important risk parameters such as average probability of default, expected lossportfolios in Germany and internal risk capital. Dresdner Bank has made an effort to improve its loan quality, supported by state-of-the-art loan processes, the implementation of a value-oriented growth strategy as well as better economic environment.U.S. As of December 31, 2006, approximately 68 % (2005: 64%)2008, 97% of the German mortgage portfolio obligors were assigned a Standard & Poor’s equivalent investment grade rating based on an internal scoring. The U.S. commercial mortgage loan investments are subject to thorough credit assessment and conservative underwriting by the responsible credit managers. There have been no delinquent or foreclosed non-tradable commercial mortgage loans since 1994, and we thus regard the portfolio as investment grade based on additional stress test analysis. The North American Allianz insurance companies have a residential mortgage portfolio exposure of less than $2 million.
Banking and Asset Management segments Following the sale of Dresdner Bank’s loans were with investment grade counterparties. In line withBank, we do not consider credit risk related to our continuing Banking operations to be significant at the observed portfolio quality, our total volume of problem loans and potential problem loans (measured by usage), which are two additional indicators for the quality of the loan portfolio, decreased from approximately €3.0 billion as of December 31, 2005 to €2.0 billion as of December 31, 2006.
Asset Management SegmentGroup level.
As part of the investment management process, the Asset Management segment’s unitsentities assess credit risk affecting their customers’ portfolios. Though our asset managementAsset Management companies do not engage in any lending transactions, counterparty risks can arise in certain circumstances, such as with broker-related over-the-counter transactions. Our asset management companiesThe Asset Management operating entities analyze the creditworthinesscredit-worthiness of their counterparties and set limits per counterparty based on objective criteria. Actuarial Risk Measurement Actuarial risks consist of premium and reserve risks in the Property-Casualty segment as well as mortalitybiometric risks in our Life/Health segment. In the Banking and Asset Management and Corporate segments, actuarial risks are immaterial.not relevant. Although the Corporate segment provides some guarantees that transfer small parts of the actuarial risk away from local entities, such risk is primarily transferred by internal reinsurance and allocated to the Property-Casualty segment. Allocated Internal Actuarial Risk Capital by Business Segment and Source of Risk(1) (Total Portfolio Before Minority Interests) | | | | | | | | | | | | | | | | Non-diversified | | | Group diversified | | As of December 31, | | 2008(2) | | | 2007(3) | | | 2008(2) | | | 2007(3) | | | | | € mn | | | € mn | | | € mn | | | € mn | | Total Group | | 22,533 | | | 23,038 | | | 7,265 | | | 6,521 | | Percentage of total Group internal risk capital | | 34 | % | | 32 | % | | 25 | % | | 20 | % | Premium CAT | | 5,913 | | | 5,780 | | | 1,390 | | | 1,077 | | Premium non-CAT | | 8,083 | | | 8,284 | | | 3,517 | | | 3,249 | | Reserve | | 7,307 | | | 8,037 | | | 2,308 | | | 2,170 | | Biometric | | 1,230 | | | 937 | | | 50 | | | 25 | | Property-Casualty | | 20,851 | | | 21,705 | | | 7,072 | | | 6,389 | | Life/Health | | 1,244 | | | 950 | | | 55 | | | 29 | | Corporate(4) | | 438 | | | 383 | | | 138 | | | 103 | |
(1) | As risks are measured by an integrated approach on an economic basis, internal risk capital takes reinsurance effects into account. |
(2) | 2008 figures exclude discontinued operations. On a total Group basis, internal actuarial risk capital would amount to €22,533 million on a non-diversified basis and €6,614 million on a Group diversified basis, if discontinued operations were taken into account. Although our discontinued operations are not exposed to actuarial risks, they have an impact on Group diversified internal risk capital due to diversification effects. The discontinuation of certain banking operations results in less diversified insurance operations. |
(3) | 2007 figures include discontinued operations. |
(4) | Allianz SE has a conditional commitment to make capital payments to its U.S. subsidiary, Fireman’s Fund Insurance Co. In particular, Allianz SE is required to make these payments in case of future negative developments relating to the reserves of Fireman’s Fund for the year 2003 and before. |
In general, Group-diversified internal actuarial risk capital increased, as the discontinuation of certain banking operations results in less diversified insurance operations and a smaller diversification effect. Before Group diversification, internal premium CAT risk capital remained relatively stable compared to 2007, while it increased after Group diversification additionally driven by a shift in contributions from other risk categories, mainly due to the decline in internal market risk capital. As previously discussed, we determine internal risk capital figures on a quarterly basis. The table below presents the average internal risk capital calculated for actuarial risks over the four quarters of 2008 and 2007, as well as the high and low quarterly internal risk capital amounts calculated in both years. All figures include discontinued operations. Average, High and Low Allocated Internal Actuarial Risk Capital by Source of Risk (Total Portfolio Before Minority Interests, After Group Diversification and Including Discontinued Operations) | | | | | | | | | | | | | | | | 2008 | | 2007 | | | | Over quarterly results | | Over quarterly results | | | | Average | | High | | Low | | Average | | High | | Low | | | | € mn | | € mn | | €mn | | € mn | | € mn | | € mn | Total Group | | 6,597 | | 6,796 | | 6,421 | | 6,311 | | 6,521 | | 6,111 | Premium CAT | | 1,245 | | 1,258 | | 1,218 | | 1,007 | | 1,077 | | 953 | Premium non-CAT | | 3,333 | | 3,399 | | 3,264 | | 3,210 | | 3,249 | | 3,143 | Reserve | | 1,979 | | 2,098 | | 1,872 | | 2,071 | | 2,170 | | 1,984 | Biometric | | 41 | | 45 | | 35 | | 23 | | 25 | | 21 |
Property-Casualty segment A substantial portion of the Property-Casualty segment’s non-diversified internal actuarial risk capital is assigned to our operating entities in Germany, Italy, France and the U.S. (49% as of December 31, 2008). Property-Casualty SegmentPremium risk
Premium risk represents risk that, during a one-year time horizon, underwriting profitability is defined as an unexpected high loss volume resulting in an insufficient coverage from premiums. Premiumless than expected. Such risk is subdivided into catastrophe risk (CAT risk) and non-catastrophe risk (non-CAT risk). We primarily quantify and manage premium risks usingrisk based on actuarial models that are used to calculate premiums and to monitor claim patterns. derive loss distributions for each risk. Natural disasters such as earthquakes, storms and floods represent a special challenge for risk management.management due to their accumulation potential and occurrence volatility. In order to measure such risks and better estimate the potential effects of natural disasters, we use special modeling techniques in which we combine data about our portfolio (such as the geographic distribution and characteristics of insurance amounts)insured objects and their values), with simulated natural disaster scenarios to estimate the magnitude and frequency of potential damage.losses. Where such models do not exist (for example, hail(e.g., flood risk in Germany)Italy), we use a scenario-based methodology.methods to estimate probable losses. In order to manage exposures dueMore than a third (36% as of December 31, 2008) of the non-diversified internal premium risk capital allocated to natural catastrophes,catastrophe risk was borne by our operating entities in Germany and the Management BoardU.S. Our exposure to losses from wind-storms over Europe (including hail) is our largest exposure to natural catastrophe, followed by U.S. hurricanes and
Californian earthquakes. Our loss potential net of Allianz SE has defined an earnings volatility limitreinsurance for these exposures. These limitations are basedEuropean windstorms is approximately €1.3 billion, measured at both the operating unit and Group levels and define the amount Allianz is willing to lose in any such event with an occurrencea probability level of once in 250 years.years (i.e., 0.4%). Reserve risk quantifies Reserve risk represents the risk of loss resulting from deviations between payments for incurred losses that have not yet been definitively settled and the reserves established to cover these payments, which may be due to the use of an insufficient basis for the calculation of reserves.emerging on claims provisions over a one-year time horizon. We measure and manage reserve risks by constantly monitoring the development of the provisions for insurance claims that have been submitted but not yet settled in all companies, and change the provision for reserves asin line with actuarial standards if necessary. ToWe use approaches that are similar to the extent available, we use assumptions approved by supervisory authorities and actuarial associations to enhance our models. Actuarial risks in property-casualty insurance have led to fluctuations ofmethods used for setting the loss ratio in our Property-Casualty segment over time, as shown below.reserves.
Property-Casualty loss ratios for the years ended
December 31,(1)
in %
(1)
| Loss ratios for the years ended December 31, 1997 to 2003 do not reflect the reporting changes effective January 1, 2006.
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Life/Health Segmentsegment MortalityBiometric risk is the risk associated with
We consider mortality and longevity risks which can cause variability in policyholder benefits resulting from the unpredictability of the (non)-incidence(non-) incidence of death and the timing of its occurrence. For modeling mortality riskthese risks within our internal risk capital frameworkmodel, we distinguish mortality level, trend and calamity risk. Biometric assumptions, such as life expectancy, play a significant role. To the extent available, we use assumptions approved by supervisory authorities and actuarial associations to enhance our models. Due to the offsetting effects of mortality risk and longevity risk inherent in the combined portfolios of life insurance and annuity products, as well as due to a geographically diverse portfolio, our Life/Health segment does not have significant concentrations of biometric risk. Business Risk Measurement Business risks consist of operational risks and cost risks. Operational risks.These arerisks represent the risks of lossesloss resulting from inadequate or failed internal processes, peopleor from personnel and systems, or from external events. The definition includesevents, such as interruption of business operations due to a break-down of electricity or a flood, damage caused by employee fraud or the losses caused by court cases. Operational risks include legal risk, whereas strategic risk and reputational riskrisks are excluded in accordance with the requirements of Solvency II and Basel II. Cost risks. These risks consist of unexpected changes in business assumptions and unanticipated fluctuations in earnings arising from a decline in income without a corresponding decrease in expenses andexpenses. They also include the risk of budget deficits resulting from lower revenues or higher costs than budgeted. Within our Life/Health segment we also evaluate lapse risks. Allocated Internal Business Risk Capital by Business Segment(1) – (Total Portfolio Before Minority Interests –Interests)
| | | | | As of December 31, | | 2006 | | 2005 | | | | € mn | | € mn | Property-Casualty: | | | | | Business risks: | | 1,941 | | 1,927 | Life/Health: | | | | | Business risks: | | 1,509 | | 1,190 | Banking: | | | | | Business risks: | | 570 | | 550 | Asset Management: | | | | | Business risks: | | 2,605 | | 2,474 | Corporate: | | | | | Business risks: | | 91 | | 80 | | | | | | Total | | 6,716 | | 6,221 | | | | | |
(1) | | | | | | | | | | | | | | | | Non-diversified | | | Group
diversified | | As of December 31, | | 2008(1) | | | 2007(2) | | | 2008(1) | | | 2007(2) | | | | | € mn | | | € mn | | | € mn | | | € mn | | Total Group | | 15,013 | | | 18,365 | | | 5,155 | | | 7,233 | | Percentage of total Group internal risk capital | | 22 | % | | 25 | % | | 18 | % | | 22 | % | Property-Casualty | | 5,898 | | | 6,425 | | | 1,707 | | | 2,064 | | Life/Health | | 5,163 | | | 4,288 | | | 1,864 | | | 1,840 | | Banking | | 145 | | | 1,630 | | | 59 | | | 634 | | Asset Management(3) | | 3,304 | | | 5,576 | | | 1,453 | | | 2,621 | | Corporate | | 503 | | | 446 | | | 72 | | | 74 | |
The decrease in internal business risk capital related to the Asset Management segment is primarily driven by an update of the risk factor incorporated within the model used to derive business risk capital for these operations. The factor was reviewed, and as a result, a level of conservatism within this factor has been reduced to better reflect the risk capital needs of this segment. | Internal risk capital is calculated as value-at-risk with one-year holding period and confidence level of 99.97%.
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Property-Casualty, Life/HealthAs discussed, because substantially all of the investments managed by the Asset Management segment are held for the benefit of either third parties or Allianz insurance entities, we are not exposed to significant market and Corporate Segmentscredit risk in the Asset Management segment. As a result, the internal risk capital requirements for the Asset Management segment only reflect business risk.(4)
Allianz has developed ana Group-wide operational risk management framework for the Allianz Group that focuses on early recognition and pro-active management of operational risks. The framework defines roles and responsibilities, risk processes and methods and has been implemented at the major Allianz Group companies. Local risk managers implementensure this framework withinis implemented in the respective operating units.entities. The operating unitsentities identify and evaluate relevant operational risks and control weaknesses throughvia a bottom-up approach via self-assessment. Complementing our pro-active local management approach,structured self assessment. Furthermore, operational losses are collected in a central loss database and andatabase. From the middle of 2008, the data collection has been extended to all our operating entities. An analysis of the causes for significant losses is used to enable the operating unitsentities to implement measures to avoid or reduce future losses. The measures adopted may include revising processes, improving failed or inappropriate controls, installing comprehensive security systems and strengthening emergency plans. This structured reporting is designed to provide comprehensive and timely information to senior management of the Allianz Group and the relevant local operating units.entities.
Cost risks include new business risk, which is the risk that the volume of new business is so low that our fixed acquisition costs cannot be covered by
the premiums from new business. It also includes maintenance expense risk, which is a decrease in value due to unexpectedly high increases in maintenance and administrative expenses associated with in-force business.
(1) | 2008 figures exclude discontinued operations. On a total Group basis, internal business risk capital would amount to €16,362 million on a non-diversified basis and €5,635 million on a Group diversified basis, if discontinued operations were taken into account. |
(2) | 2007 figures include discontinued operations. |
(3) | The internal risk capital requirements for the Asset Management segment only reflect business risk (please refer to “Internal Risk Capital Framework—Scope” for further information). |
(4) | Internal risk capital for guarantees in the Asset Management segment is not significant. |
We consider the lapse risk in our Life/Health insurance business to mean the unexpected economic losses due to early cancellation of contracts by our customers. We assess this risk by calculating technical reserves using probability data based on historic rates of cancellation in our respective local markets.
Banking Segment
Dresdner Bank has a process for the systematic identification, measurement and management of operational risks. The main sources of risk for operational risk are evaluated in the framework of a structured scenario analysis. A historical loss database is employed to record and analyze losses that actually occur. As part of a scenario-based loss data approach, Dresdner Bank has developed an internal model for risk capital calculation for operational risk, which is based on both internal and external loss data, as well as scenario analysis results along with statistical modeling of extreme events. This internal risk model calculates the risk capital requirement taking into account the criteria of the Basel II Advanced Measurement Approach (or “AMA”).
Cost-cutting measures implemented in the past have significantly reduced risks associated with fixed costs. Above and beyond current and future foreseeable regulatory capital requirements, cost risks are backed by economic risk capital as part of internal risk management procedures in Dresdner Bank. Risk capital requirements are determined on the basis of the divisional business plans using a stress scenario approach that assumes specific stress scenarios for the individual earnings and cost components.
Asset Management Segment
Operational risks are managed through structured processes and controls that include categorization of risks and allocation of responsibilities. Where appropriate, our asset management companies employ a process for the
systematic identification, measurement, and controlling of operational risks, and the key methodology to assist in this process is a structured self-assessment. Loss databases are employed to record and analyze losses as they occur. In addition, the local units produce regular reports of operational risks.
All operating units are responsible for monitoring and reducing business continuity risks. We employ strict business continuity standards for all key processes in the value chain.
Our asset management units maintain comprehensive compliance functions that employ a Code of Ethics as well as anti-fraud and anti-money laundering policies to comply with regulations related to their investment management business.
All risk management and control processes are regularly reviewed for effectiveness and actions are taken where areas for improvement are identified. Internal Audit plays a key role in the review process. In addition, risk management and control processes of our asset management companies are subject to periodic examinations by regulatory authorities.
A comprehensive internal system of regular reporting and forecasting is used to manage cost risks. Both the financial and investment performance of our product lines and business segments are constantly monitored and analyzed by the operating units, Allianz Global Investors Global Corporate Center and the Allianz Group.
Management of Other Risks
There are certain risks that cannot be fully quantified across the Group using our internal risk capital model. For these risks, we also pursue a systematic approach with respect to identification, analysis, assessment and monitoring. TheIn general, the risk assessment is based on qualitative criteria or using scenario analyses. For example,The most important of these other risks include:include liquidity, reputational and strategic risk. Liquidity Riskrisk Liquidity risk is the risk that short-term current or future payment obligations cannot be met or can only be met on the basis of altered conditions, along with the risk that in the event of a company liquidity crisis, refinancing is only possible at higher interest rates or that assets may have to be liquidated at a discount. This risk can arise primarily if there are mismatches in the timing of cash payments and funding obligations. Liquidity risk does not include the risk of a change in market prices due to a worsening of the market liquidity of assets, as this is a component of market risk analyzed through our internal risk capital model.model (e.g., the assumed volatility of real estate investments takes into account historical observations). Funding risk, a particular form of liquidity risk, arises when the necessary liquidity to fund illiquid asset positions cannot be obtained at the expected terms and when required. For more information, refer to “Item 3. Risk Factors—Risks arising from the financial markets—Allianz Group’s financial condition, liquidity needs, access to capital and cost of capital may be significantly affected by adverse developments in the capital and credit markets”. Corporate segment On the Group level, liquidity risks arise mainly from capital requirements of subsidiaries and necessary refinancing of expiring strategic financial liabilities. The liquidity position of Allianz SE is monitored on a daily basis and reported to the Board of Management regularly. The main tools to limit unforeseen liquidity requirements are committed credit lines from banks, commercial paper facilities, medium-term debt issuance programs, access to the market of sale and repurchase agreements (the so-called “Repo market”) as well as internal resources in the form of intra-Group loans and an international cash pooling infrastructure. Property-Casualty and Life/Health segments Our insurance operating entities manage liquidity risk locally, using local asset-liability management systems designed to ensure that assets and Corporate segments.liabilities are adequately matched. To the extent available, the approaches used to project the liability cash flows for the Property-Casualty segment are similar to the methods used for setting reserves. Liquidity risk in our insurance segments is a secondary risk following external events, such as natural disasters, that are generally reflected in other risks. Limitingour internal risk capital model. Therefore, limiting and monitoring of the associated primary risks (such as through the use of reinsurance) also helps limit our liquidity risk. risk related to such events. Extreme adverse changes in business assumptions such as lapse or renewal rates or costs may cause liquidity risk as well. However, these effects are covered by our internal risk capital model. The quality of our investments also provides comfort that we can meet high liquidity requirements in unlikely events. Furthermore, in the case of an extraordinary event, a portion of the applicable payments may usually be made with a certain time lag, which reduces the risk that short-term current payment obligations cannot be met. We employ actuarial methods for estimating our liabilities arising from insurance contracts. In the course of standard liquidity planning we reconcile the cash flows from our investment portfolio with our commitments to pay liabilities.the estimated liability cash flows. These analyses are performed on the operating unitentity level and aggregated at the Group level. Excess liquidity is centrally pooled on the Group level and can be transferred to single operating unitsentities if necessary. Banking and Asset Management segments Banking segment. In this segment,Due to the treasury function is responsible for liquidity managementsmall size of risk weighted assets and the risk function is responsible for monitoring liquidity risk. The Dresdner Bank Group Liquidity Policy implements both internal standardstotal assets (as of December 31, 2008, €7.4 billion and regulatory requirements. The€19.8 billion, respectively), liquidity risk measures include a reporting process for limit breaches and provisions for emergency planning. Liquidity risk measurementrelated to our continuing Banking operations is based on Dresdner Bank’s liquidity management system, which modelsnot significant at the maturities of all cash flows and compiles a scenario-based liquidity balance sheet, taking into account available prime-rated securities. Limits on liquidity gaps are established to manage short-term liquidity risk.Group level.
In the Asset Management segment. We endeavor tosegment, we limit liquidity risk by continually reconciling the cash flowflows from our operating business with our commitments to pay liabilities. Forecasting and managing liquidity is a regular process, designed to meet both regulatory requirements and Allianz Group standards.
Reputational Riskrisk Reputational risk is the risk of direct loss or loss in future business caused by a decline in the reputation of the Allianz Group unit or
one or more of its specific operating unitsentities from the perspective of its stakeholders, stakeholders—shareholders, customers, staff, business partners or the general public. First, eachevery action, existing or new transaction or product that poses reputational risk to the Allianz Group couldcan lead to losses in the value of our reputation, either directly or indirectly, and couldcan also result in losses in other risk categories. Second, every loss in other risk categories, irrespective of its size, can pose reputational risk to the Allianz Group if and when it is made public.Group. Therefore, reputational risk can both cause and result from losses in all risk categories such as market or credit risks. Our operating entities identify and assess reputational risks within their business processes. In addition, Group Risk identifies and assesses thisreputational risk qualitatively as part of a quarterly evaluation. On the basis of this evaluation, Group Risk creates an overview of local and global risks which also includes reputational risks, analyses the risk profile of the Allianz Group and regularly informs management about the current situation. Strategic Riskrisk Strategic risk is the risk of an unexpected negative change in the company value, arising from the adverse effect of management decisions on both business strategies and their implementation. This risk is a function of the compatibility between strategic goals, the business strategies developed to achieve those goals and the resources deployed to achieve those goals. Strategic risk also includes the ability of management to effectively analyze and react to external factors, which could impact the future direction of the relevant operating unit.entity. These risks are evaluated and analyzed quarterly in the same way as reputational risk. Risk Monitoring by Third-Parties
Supervisory authorities and rating agencies are additional risk monitoring bodies. Supervisory authorities stipulate the minimum precautions and capital requirements that we must meet in individual countries and on an international level. Rating agencies evaluate the relationship between the required risk capital of a company and its available safeguards. In the agencies’ evaluation of capital resources, they consider equity shown in the balance sheet, minority interests and other items representing additional securities in times of crisis. As of
December 31, 2006, this total was at a level that corresponds to our current ratings. As of December 31, 2006, the financial strength of the Allianz Group was rated by Standard & Poor’s as “AA-” (outlook positive), by A. M. Best as “A+” (outlook stable), and by Moody’s as “Aa3” (outlook stable).
Outlook We plan to continue to strengthen our risk management systemframework and systems in 2007. We strive2009. In particular, we are striving to constantly improve our accumulation monitoring systems, for accumulating risk-related data, particularly those related to natural and man-made catastrophes. Wecatastrophes, and are continuing to develop and extend our modeling capabilities for natural catastrophescatastrophe risk. In addition, we plan to establish an internal expert network dedicated to emerging insurance risks such as nanotechnology and to combine results with geographical information systems. We also continue to develop our monitoring and early warning systems related to “Emerging Risks”, which are new and developing or existing risks that are difficult to quantify in terms of frequency and severity of potential losses. Therefore, these Emerging Risks are generally characterized by major uncertainty. Discontinuities in the evolution of a risk are often driven by scientific-technological, socio-political or legal and regulatory changes.food additives. In 2007, the Group Risk function at Allianz SE plans to embark on a multi-year project to consolidate all Allianz Group-related risk information, calculations and analysis onto one technology platform. This platform will be centrally hosted and available to support risk staff both in the Group Center and in the operating units around the world. Data from a data warehouse for both finance and risk data will be included on the platform to provide consistency between both areas. It will also be subject to a rigorous but flexible change management process designed to serve as a Solvency II platform.
Furthermore in 2007, we expect to introduceis a revised internal risk capital model for life insurance business. The new model is part of an integrated framework addressing the Market Consistent Embedded Value (MCEV) calculation, the assessment of risk capitalmajor European project and the estimation of sensitivity analyses for our life portfolios. When fully introduced, this model is expected to providelead to significant support to the risk management of our life insurance business.
We also plan to continue our project to evaluate derivatives on the basis of an Allianz Group-wide uniform IT system. In addition, we will further strengthen and clarify our guidelines for handling derivatives.
We are monitoring the Solvency II Project to prepare for the anticipated changes to the European insurance solvency requirements. In particular, werequirements in the coming years; the Allianz Group is actively participating in the process. We are continuously updatingproviding feedback on the methodologyproposals and analyses of the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) and the EU Commission. Furthermore, we participate in the Quantitative Impact Studies and give technical advice, for instance, through the Chief Risk Officer Forum, which is comprised of the Chief Risk Officers of the major European insurance companies and financial conglomerates. It is our aim to have our internal risk capital model and our risk management practices comply with the forthcoming internal model supervisory requirements at an early stage. Accordingly, we are constantly reviewing them on the basis of the evolving standards. In order to meetfulfill future Solvency II requirements, on internal models resulting from this project.Allianz has launched a Solvency II umbrella project which consists of quantitative and qualitative workstreams. In particular, these workstreams cover activities to (i) improve data quality, (ii) enhance analysis capabilities, (iii) strengthen model robustness and process governance and (iv) ensure that all future qualitative Solvency II requirements will be met.
ITEM 12. DescriptionAs a key initiative of Securities Other than Equity Securitiesthe Solvency II umbrella project, we are strengthening our efforts to consolidate our risk analysis infrastructure and to establish a best practice technical platform. The key objectives of this initiative are to (i) improve methodology and increase the scope and (ii) extend the functionality and enhance user benefits within an efficient risk capital process. We are planning to thoroughly test the new model and reconcile its results with the existing model, and aiming to introduce the new internal model framework for our
internal risk based performance measurement. This platform will help us establish a framework that fulfills the quantitative Pillar I requirements under the Solvency II project after internal model approval for regulatory purposes. In addition to the key objectives defined by the Solvency II umbrella project for all risk types, the credit risk implementation project aims to streamline the existing credit risk data submission process and to develop a new web-based Credit Risk Reporting Platform for comprehensive and flexible portfolio analyses as well as for a more powerful limit-setting framework including monitoring and management processes. This reporting tool will support all operating entities and the Group in their decisions regarding asset management and strategic portfolio optimization. As part of the Solvency II umbrella project, a subproject has been launched to roll-out a new operational risk management platform to all operating entities which will automate the operational risk management process, complemented by a refined risk and control self-assessment based on scenarios. | ITEM 12. | Description of Securities other than Equity Securities |
Not applicable. Not applicable.
| ITEM 13. | Defaults, Dividend Arrearages and Delinquencies |
ITEM 13. Defaults, Dividend Arrearages and DelinquenciesNone.
| ITEM 14. | Material Modifications to the Rights of Security Holders and Use of Proceeds |
None. ITEM 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
None.
ITEM 15: Controls and Procedures
| ITEM 15. | Controls and Procedures |
For its fiscal year ending December 31, 2006,2008, Allianz performed an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures. In doing so, we recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable, and not absolute, assurance of achieving the desired control objectives. Allianz’s management is required to apply judgment in evaluating the risks facing Allianz in achieving its objectives, in determining the risks that are considered acceptable to bear, in assessing the likelihood of the risks concerned materializing, in identifying its ability to reduce the incidence and impact onof the business of risks concerned materializing, in identifying its ability to reduce the incidence and impact on the business of risks that do materialize and in ensuring the costs of operating particular controls are proportionate to the benefit. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated Allianz’s disclosure controls and procedures, as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, in light of the judgments noted above as of the end of the period covered by this report. Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that these disclosure controls and procedures provided reasonable assurance as to effectiveness as of December 31, 2006.2008. Management’s Annual Report on Internal Control Over Financial Reporting The management of Allianz is responsible for establishing and maintaining adequate internal control over financial reporting. Allianz’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards (“IFRS”) and accounting principles generally accepted in the United States of America (“U.S. GAAP”)(IFRS)(1). Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of Allianz; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS, and U.S. GAAP, and that our receipts and expenditures are being made only in accordance with the authorizations of the management and the directors of Allianz; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. | (1) | As issued by the IASB and adopted by the European Union. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of Allianz’s internal control over financial reporting as
of December 31, 2006.2008. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in “Internal Control—Integrated Framework.” Based on this assessment, Allianz’s management has concluded that Allianz maintained effective internal control over financial reporting as of December 31, 2006.2008. Report of Independent Registered Public Accounting Firm To the Board of Management and Supervisory Board ofBoardof Allianz SE: We have audited management’s assessment, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting, that Allianz SESE’s and subsidiariesits subsidiaries’ (collectively, “the Allianz Group”) maintained effective internal control over financial reporting as of December 31, 2006,2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Allianz Group’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting.reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Allianz Group’s internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment,assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control andbased on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, management’s assessment that the Allianz Group maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).Also, in our opinion, the Allianz Group maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006,2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Allianz Group as of December 31, 20062008 and 2005,2007, and the related
consolidated income statements, consolidated statements of changes in equity and consolidated statements of cash flows for each of the years in the three-year period ended December 31, 2006,2008 including the disclosures provided in the Qualitative and Quantitative Disclosures about Market Risk on pages 153 to 175, and our report
dated June 14, 2007,March 31, 2009, expressed an unqualified opinion on those consolidated financial statements. March 31, 2009 KPMG Deutsche Treuhand-Gesellschaft AktiengesellschaftAG
Wirtschaftsprüfungsgesellschaft Munich, Germany June 14, 2007(formerly
Changes in Internal Control Over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting that occurred during fiscal year 2006, which have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.
ITEM 16A. Audit Committee Financial Expert
Our Supervisory Board has determined that Dr. Gerhard Cromme, Dr. Wulf H. Bernotat and Igor Landau meet the criteria of an audit committee financial expert, as that term is defined in Item 16A(b) of Form 20-F. Dr. Gerhard Cromme, Dr. Wulf H. Bernotat and Igor Landau are “independent” members of the Supervisory Board in accordance with NYSE listing standards applicable to Allianz SE.
ITEM 16B. Code of Ethics
In response to Section 406 of the Sarbanes-Oxley Act of 2002, we have adopted a specific Code of Ethics in addition to our general Code of Conduct that applies to all members of our Board of Management, including persons performing the functions of a principal executive officer, principal financial officer, principal accounting officer and controller and senior employees performing similar functions. A copy of this code of ethics is available on our Internet websitewww.allianz.com/corporate-governance. (Reference to this “uniform resource locator” or “URL” is made as an inactive textual reference for informational purposes only. The information found at this website is not incorporated by reference into this document). There have been no amendments or waivers to this code of ethics since its adoption. Information regarding any future amendments or waivers will be published on the aforementioned website.
ITEM 16C. Principal Accountant Fees and Services
KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft (or “KPMG DTG”) serves as the external auditing firm for the Allianz Group.
The table set forth below contains the aggregate fees billed for each of the last two fiscal years by KPMG DTG or KPMG DTG and the worldwide member firms of KPMG International (or “KPMG”) in each of the following categories: (i) Audit Fees, which comprise fees billed for services rendered for the audit of the Allianz Group’s consolidated financial statements, the statutory audits of the financial statements of Allianz SE and its subsidiaries or services that are normally provided in connection with statutory and regulatory filings or engagements; (ii) Audit Related Fees, which comprise fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the financial statements and which are not reported under (i); (iii) Tax Fees, which comprise fees billed for professional services rendered for tax advice and tax compliance; and (iv) All Other Fees, which comprise fees billed for all other products and services provided other than the services reported under (i) through (iii).
Fees of KPMG worldwide
| | | | | | | | | 2006 | | | 2005 | | | | € mn | | | € mn | Audit fees | | 57.8 | (1) | | 60.1 | Audit-related fees | | 8.1 | | | 11.0 | Tax fees | | 6.0 | | | 4.0 | All other fees | | 7.0 | | | 12.1 | | | | | | | Total(2) | | 78.9 | (1) | | 87.2 | | | | | | |
(1)
| Includes €1.7 mn, thereof €1.1 mn attributable to KPMG DTG, additional audit service for Dresdner Bank Group relating to fiscal year 2005 which have been billed in 2006.
|
(2)
| Fees attributable to KPMG DTG for audit fees were €24.7 mn (2005: €26.3 mn), audit-related fees €3.6 mn (2005: €3.6 mn), tax fees €2.7 mn (2005: €1.0 mn) and all other fees €3.6 mn (2005: €3.7 mn) for the year ended December 31, 2005.
|
Audit fees KPMG billed the Allianz Group an aggregate of €57.8 million in 2006 and €60.1 million in 2005 in connection with professional services rendered for the audit of our annual consolidated financial statements and services normally provided by KPMG in connection with statutory and regulatory filings or engagements. These services
consisted mainly of periodic review engagements and the annual audit.
Audit-related fees KPMG billed the Allianz Group an aggregate of €8.1 million in 2006 and €11.0 million in 2005 for assurance and related services. These services consisted primarily of advisory and consulting services related to accounting and financial reporting standards and financial due diligence services.
Tax fees KPMG billed the Allianz Group an aggregate of €6.0 million in 2006 and €4.0 million in 2005 for professional services, primarily for tax advice and tax compliance.
All other fees KPMG billed the Allianz Group an aggregate of €7.0 million in 2006 and €12.1 million in 2005 for other services, which consisted primarily of general consulting services and other services under the guidance of Allianz Group management.
All services provided by KPMG to Allianz Group companies must be approved by the Audit Committee of the Allianz SE Supervisory Board. Services other than audit services must be pre-approved by the Audit Committee. The Audit Committee pre-approval process is based on the use of a “Positive List” of activities decided by the Audit Committee and, in addition, a “Guiding Principles and User Test” is applied. All internal control-related
services are specifically pre-approved by the Audit Committee. Group Compliance and KPMG report to the Audit Committee periodically with respect to services performed. In 2006, the percentage of the total amount of revenue we paid to our principal accountants represented by non-audit services subject to paragraph (c)(7)(1)(G) of Rule 2-01 of Regulation S-X was less than 5%.
ITEM 16D. Exemptions from the Listing Standards for Audit Committees
Our Audit Committee consists of three shareholder representatives and two employee representatives, one of whom is employed by the Allianz Group. With respect to the employee representative employed by the Allianz Group, Allianz SE relies on the exemption afforded by Rule 10A-3(b)(1)(iv)(C) under the Securities Exchange Act of 1934. We believe that such reliance does not materially adversely affect the ability of the Audit Committee to act independently or to satisfy the other requirements of Rule 10A-3.
ITEM 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The table below sets forth the information with respect to purchases made by or on behalf of Allianz SE or any “affiliated purchaser”, as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, of Allianz SE shares for the year ended December 31, 2006.
| | | | | | | | | | | | | Period | | | | Total Number of Shares Purchased(1) | | | Average Price Paid per Share | | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs | January | | 1/1/06-1/31/06 | | — | | | — | | | N/A | | N/A | February | | 2/1/06-2/28/06 | | — | | | — | | | | | | March | | 3/1/06-3/31/06 | | — | | | — | | | | | | April | | 4/1/06-4/30/06 | | — | | | — | | | | | | May | | 5/1/06-5/31/06 | | — | | | — | | | | | | June | | 6/1/06-6/30/06 | | — | | | — | | | | | | July | | 7/1/06-7/31/06 | | — | | | — | | | | | | August | | 8/1/06-8/31/06 | | — | | | — | | | | | | September | | 9/1/06-9/30/06 | | — | | | — | | | | | | October | | 10/1/06-10/31/06 | | — | | | — | | | | | | November | | 11/1/06-11/30/06 | | 986,741 | (2) | | 131.00 | (2) | | | | | December | | 12/1/06-12/31/06 | | — | | | — | | | | | | | | | | | | | | | | | | | Total | | 986,741 | | | 131.00 | | | | | | | | | | | | | | | | | | |
(1)
| This table excludes market-making and related hedging purchases by Dresdner Bank and certain other Allianz Group entities. The table also excludes Allianz SE shares purchased by investment funds managed by Allianz Group entities for clients in accordance with investment strategies that are established by fund managers acting independently of Allianz SE.
|
(2)
| Allianz SE purchased these newly issued shares in connection with the Allianz Group’s Employee Stock Purchase Plan.
|
PART III
ITEM 17. Financial Statements
Not applicable.
ITEM 18. Financial Statements
See pages F-1 forward for the consolidated financial statements required by this item.
ITEM 19. Exhibits
The following exhibits are filed as part of this annual report:
| | | Exhibit
Number | | Document
| | | 1.1 | | Statutes of Allianz SE, dated April 2007 | | | 4.1 | | English translation of the Merger Plan between Allianz AG and Riunione Adriatica di Sicurtà S.p.A., dated December 16, 2005 (Incorporated by reference to Exhibit 2.1 to the Registrant’s Registration Statement on Form F-4 filed with the SEC on December 22, 2005 (File No. 333-128715)) | | | 7.1 | | Statement regarding ratio of earnings to fixed charges | | | 8.1 | | List of subsidiaries | | | 12.1 | | Certification of the Chief Executive Officer required by Section 302 of the Sarbanes-Oxley Act of 2002 | | | 12.2 | | Certification of the Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002 | | | 13.1 | | Certification of the Chief Executive Officer required by Section 906 of the Sarbanes-Oxley Act of 2002 | | | 13.2 | | Certification of the Chief Financial Officer required by Section 906 of the Sarbanes-Oxley Act of 2002 | | | 14.1 | | Consent of KPMG Deutsche Treuhand-Gesellschaft AG Wirtschaftsprüfungsgesellschaft |
ALLIANZ GROUP
Report of Independent Registered Public Accounting Firm
To the Board of Management and Supervisory Board
of Allianz SE:
We have audited the accompanying consolidated balance sheets of Allianz SE and subsidiaries (collectively, “the Allianz Group”) as of December 31, 2006 and 2005, and the related consolidated income statements, consolidated statements of changes in equity and consolidated statements of cash flows for each of the years in the three-year period ended December 31, 2006. In connection with our audits of the consolidated financial statements we have also audited the accompanying financial statement schedules I to IV. These consolidated financial statements and financial statement schedules are the responsibility of the Allianz Group’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Allianz Group as of December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2006, in conformity with International Financial Reporting Standards, as adopted by the EU. Also in our opinion, the related financial statement schedules referred to above, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
International Financial Reporting Standards vary in certain significant respects from accounting principles generally accepted in the United States. Information relating to the nature and effect of such differences is presented in Note 53 to the consolidated financial statements.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Allianz Group’s internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated June 14, 2007, expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.
KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft) Changes in Internal Control Over Financial Reporting There have been no changes in the Company’s internal control over financial reporting that occurred during fiscal year 2008, which have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting. | ITEM 16A. | Audit Committee Financial Expert |
Our Supervisory Board has determined that Dr. Franz B. Humer, Dr. Wulf H. Bernotat and Igor Landau meet the criteria of an audit committee financial expert, as that term is defined in Item 16A(b) of Form 20-F. Dr. Franz B. Humer, Dr. Wulf H. Bernotat and Igor Landau are “independent” members of the Supervisory Board in accordance with NYSE listing standards applicable to Allianz SE. In response to Section 406 of the Sarbanes-Oxley Act of 2002, we have adopted a specific Code of Ethics in addition to our general Code of Conduct that applies to all members of our Board of Management, including persons performing the functions of a principal executive officer, principal financial officer, principal accounting officer and controller and senior employees performing similar functions. A copy of this code of ethics is available on our Internet website www.allianz.com/corporate-governance. (Reference to this “uniform resource locator” or “URL” is made as an inactive textual reference for informational purposes only. The information found at this website is not incorporated by reference into this document). There have been no amendments or waivers to this code of ethics since its adoption. Information regarding any future amendments or waivers will be published on the aforementioned website. | ITEM 16C. | Principal Accountant Fees and Services |
KPMG AG Wirtschaftsprüfungsgesellschaft (or “KPMG AG”) serves as the external auditing firm for the Allianz Group. The table set forth below contains aggregate fees billed for each of the last two fiscal years by KPMG AG or KPMG AG and the world wide member firms of KPMG International (or “KPMG”) in the following categories: (i) Audit fees, which comprise fees billed for services rendered for the audit of the Allianz Group’s consolidated financial statements, the statutory audits of the financial statements of Allianz SE and its subsidiaries or services the are normally provided in connection with statutory and regulatory filings or engagements; (ii) Audit-related fees, which comprise fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the financial statements and which are not reported under (i); (iii) Tax fees, which comprise fees billed for professional services rendered for tax advice and tax compliance; and (iv) All other fees, which comprise fees billed for all other products and services provided other than the services reported under (i) through (iii).
Fees billed | | | | | | | | | | | | KPMG
worldwide | | KPMG AG and
affiliated
entities(1) | | | | 2008 | | 2007 | | 2008 | | 2007 | | | | € mn | | € mn | | € mn | | € mn | Audit fees | | 50.5 | | 49.0 | | 27.6 | | 27.7 | Audit-related fees | | 6.1 | | 9.8 | | 4.4 | | 8.6 | Tax fees | | 3.3 | | 4.2 | | 2.0 | | 2.8 | All other fees | | 7.5 | | 4.1 | | 6.8 | | 2.8 | | | | | | | | | | Total | | 67.4 | | 67.1 | | 40.8 | | 42.0 | | | | | | | | | |
(1) | KPMG AG and affiliated entities comprises KPMG operations in Germany, the United Kingdom, Spain and Switzerland. Effective October 1, 2007, KPMG operations in Germany and the United Kingdom became affiliated entities; effective October 1, 2008 and retroactively effective October 1, 2007 operations in Spain and Switzerland joined. Fee amounts pertaining to the year 2007 have been adjusted accordingly. |
Audit fees KPMG billed the Allianz Group an aggregate of €50.5 million (2007: €49.0 million) in connection with professional services rendered for the audit of our annual consolidated financial statements and services normally provided by KPMG in connection with statutory and regulatory filings or engagements. These services consisted mainly of periodic review engagements and the annual audit. Audit-related fees KPMG billed the Allianz Group an aggregate of €6.1 million (2007: €9.8 million) for assurance and related services. These services consisted primarily of advisory and consulting services related to accounting and financial reporting standards and financial due diligence services. Tax fees KPMG billed the Allianz Group an aggregate of €3.3 million (2007: €4.2 million) for professional services, primarily for tax advice. All other fees KPMG billed the Allianz Group an aggregate of €7.5 million (2007: €4.1 million) for other services, which consisted primarily of services under the guidance of Allianz Group management and general consulting services. All services provided by KPMG to Allianz Group companies must be approved by the Audit Committee of the Allianz SE Supervisory Board. Services other than audit services must be pre-approved by the Audit Committee. The Audit Committee pre-approval process is based on the use of a “Positive List” of activities decided by the Audit Committee and, in addition, a “Guiding Principles and User Test” is applied. Group Compliance and KPMG report to the Audit Committee periodically with respect to services performed. In 2008, the percentage of the total amount of revenue we paid to our principal accountants represented by non-audit services subject to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X was less than 5%. | ITEM 16D. | Exemptions from the Listing Standards for Audit Committees |
Our Audit Committee consists of three shareholder representatives and two employee representatives, one of whom is employed by the Allianz Group. With respect to the employee representative employed by the Allianz Group, Allianz SE relies on the exemption afforded by Rule 10A-3(b)(1)(iv)(C) under the Securities Exchange Act of 1934. We believe that such reliance does not materially adversely affect the ability of the Audit Committee to act independently or to satisfy the other requirements of Rule 10A-3.
| ITEM 16E. | Purchases of Equity Securities by the Issuer and Affiliated Purchasers |
The table below sets forth the information with respect to purchases made by or on behalf of Allianz SE or any “affiliated purchaser”, as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, of Allianz SE shares for the year ended December 31, 2008. | | | | | | | | | | | Period | | Total
Number of
Shares
Purchased(1) | | | Average
Price Paid
per Share | | | Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs | | Maximum
Number of Shares
that May Yet Be
Purchased Under the
Plans or Programs | January 1/1/08-1/31/08 | | — | | | — | | | N/A | | N/A | February 2/1/08-2/28/08 | | — | | | — | | | | | | March 3/1/08-3/31/08 | | — | | | — | | | | | | April 4/1/08-4/30/08 | | — | | | — | | | | | | May 5/1/08-5/31/08 | | — | | | — | | | | | | June 6/1/08-6/30/08 | | — | | | — | | | | | | July 7/1/08-7/31/08 | | — | | | — | | | | | | August 8/1/08-8/31/08 | | — | | | — | | | | | | September 9/1/08-9/30/08 | | — | | | — | | | | | | October 10/1/08-10/31/08 | | — | | | — | | | | | | November 11/1/08-11/30/08 | | 700,000 | (2) | | 64,30 | (2) | | | | | December 12/1/08-12/31/08 | | — | | | — | | | | | | | | | | | | | | | | | Total | | 700,000 | | | 64,30 | | | | | | | | | | | | | | | | |
(1) | This table excludes market-making and related hedging purchases by Dresdner Bank and certain other Allianz Group entities. The table also excludes Allianz SE shares purchased by investment funds managed by Allianz Group entities for clients in accordance with investment strategies that are established by fund managers acting independently of Allianz SE. |
(2) | Allianz SE purchased these newly issued shares in connection with the Allianz Group’s Employee Stock Purchase Plan. |
| ITEM 16G. | Disclosure about Differences in Corporate Governance Practices |
The following summarizes the significant differences between the corporate governance standards set forth by the New York Stock Exchange (NYSE) for U.S. companies listed on the NYSE and German and European corporate governance practices as Allianz SE has implemented them. General Allianz SE is a European Company, incorporated in the Federal Republic of Germany (“Germany”) and organized under the laws of Germany and the European Union. It has a dual board system, consisting of the Board of Management (Vorstand) and the Supervisory Board (Aufsichtsrat). The two boards are separate and no individual may serve simultaneously on both boards. The Board of Management is responsible for managing the day-to day business of the Company and the Supervisory Board advises and oversees the Board of Management. This dual board system of Allianz SE contrasts with the unitary board system of U.S. companies and therefore also with some of the corporate governance standards set forth by the NYSE, which refer to the unitary board of directors of U.S. companies. German Corporate Governance Rules The primary source for the corporate governance of German listed companies, such as Allianz SE, is the German Stock Corporation Act (Aktiengesetz), a Federal Act of Parliament which is in effect since 1965 and was amended several times. In addition, Allianz as a European Company is subject to specific provisions regarding the SE (such as the Council Regulation (EC) 2157/2001 (“SE-Regulation”), the German Act on the SE-Implementation (SE-Ausführungsgesetz, SEAG), the German Act on the SE-Employee Involvement (SE-Beteiligungsgesetz, SEBG) as well as the Agreement concerning the Participation of Employees in Allianz SE of September 20, 2006 (Vereinbarung über die Beteiligung der Arbeitnehmer in der Allianz SE)). Additional best practice rules are provided by the German Corporate Governance Code (the “Code”), that was enacted on February 26, 2002 by a Government Commission appointed by the German Justice Minister, and which is widely acknowledged by all German listed companies which are subject to it. The Code was amended several times and the current version is available in several languages on the internet at www.corporate-governance-code.de. It describes
essential statutory regulations for the management and supervision of German listed companies and contains standards for good and responsible governance. The Code aims at making the corporate governance practices of German listed companies more transparent and understandable and to promote the trust of international and national investors as well as the general public in the management and supervision of German listed companies. It contains requirements which are also covered by the German Stock Corporation Act and in addition addresses new corporate governance rules in terms of recommendations and suggestions. The Code has an extensive area of application which covers substantially the same topics as the NYSE corporate governance rules. Main topics are the annual general meeting, the cooperation between the Board of Management and the Supervisory Board, special rules concerning tasks, responsibilities, composition and compensation of both boards as well as rules regarding conflicts of interest of board members. With respect to the Supervisory Board, the Code also establishes certain rules regarding the composition of board committees, in particular the audit committee. Another important area covered by the Code is the audit of the Annual Financial Statements and related reporting requirements. In consideration of the extensive area of corporate governance which is covered by the Code, Allianz SE is broadly regulated in the area of corporate governance. To ensure that German listed companies comply with the Code to the broadest extent, the Code is linked with the German Stock Corporation Act. Pursuant to Section 161 of the German Stock Corporation Act, German listed Companies have to declare annually their compliance with the recommendations contained in the Code or to disclose any exception. This declaration is to be made permanently available for all investors. Thus, the Code has a legal basis and each German listed company’s compliance with the Code is transparent for all investors. Allianz SE´s declaration of compliance is available at our website www.allianz.com/corporate-covernance. (Reference to this “uniform resource locator” or “URL” is made as an inactive textual reference for informational purposes only. The information found at this website is not incorporated by reference into this document). Independence Requirements NYSE corporate governance standards contain specific independence requirements for members of the board of directors and certain committees. These requirements are, in part, a consequence of the potential risks which result from the composition of the board of directors as the single executive body of U.S. companies. Therefore, they may only apply in a limited way to Supervisory Boards of German stock corporations, because the dual board system and the consequential task sharing between the Board of Management as decision-making body and the Supervisory Board as advisory and supervisory body, creates a unique system of “checks and balances” which are not directly comparable with a unified board system. The Supervisory Board of German stock corporations is a separate board beside the Board of Management and no person may concurrently serve on the Board of Management and the Supervisory Board of the same company. Consequently, the Supervisory Board members are not involved in the day-to-day business decisions, which are taken by the Board of Management. This assures a certain degree of independence of Supervisory Board members from the management of the company. In addition, the Code recommends that proposals for the election of Supervisory Board members ensure that, at any time, the Supervisory Board as a whole is composed of members who are “sufficiently independent”. Furthermore, German law and the Code establish a number of principles that are designed to strengthen the independence of board members and to avoid conflicts of interests. For example, the Code recommends that not more than two former members of the Board of Management shall be members of the Supervisory Board, that Supervisory Board members shall not exercise directorships or similar positions or advisory tasks for important competitors of the company and that candidates for the election for the Supervisory Board shall be-among others-sufficiently independent. Additionally, the Code contains special recommendations with respect to the handling of conflicts of interest. Allianz SE complies with all of these recommendations.
Committees The Supervisory Board of Allianz SE has-among others-established an audit committee, a personnel committee and a nominating committee. These committees are comparable to the audit committee, the compensation committee and the nominating/corporate governance committee as required by the NYSE corporate governance standards. Differing from the NYSE corporate governance standards, Allianz SE’s committees do not consist solely of independent directors, which is a consequence of the fact that employee representatives are members of the Supervisory Board. German companies were granted an exemption by the SEC from the independence requirements for audit committee members as established by the SEC pursuant to section 301 of the Sarbanes-Oxley Act of 2002. Furthermore, former members of the Board of Management may serve on the Supervisory Board of the company as well as on Supervisory Board committees without passing through a “black out period” as required to some extent by the NYSE rules. However, the Code requires that the chairman of the audit committee should not be a former member of the Board of Management of the company. Allianz SE complies with this requirement. Allianz SE’s audit committee was created in accordance with the audit committee rules established by the German Corporate Governance Code, which contains to some extent similar topics as the respective NYSE standards. Allianz SE’s audit committee has a written charter which addresses the goals and purposes required by the Code. These are similar to the NYSE requirements. According to German Law, the Supervisory Board of German insurance companies is responsible for electing and dismissing the auditor. In preparing this decision, a proposal is submitted to it by the audit committee. The audit committee, in turn, is responsible for engaging the auditor, setting the terms of the engagement and reviewing reports by the auditor according to IFRS rules and regulations. Disclosure of Corporate Governance Guidelines Allianz SE discloses a substantial amount of information with respect to its corporate governance on its website. In particular, information about the German Corporate Governance Code, Allianz SE’s current declaration of compliance with the Code, the composition of the Supervisory Board and the Board of Management of Allianz SE, the functions of both boards, the curriculum vitae of the board members, information with respect to the general meeting, the statutes of Allianz SE and information about Allianz SE’s external auditor and director’s dealings, are disclosed at our website www.allianz.com/corporate- covernance. (Reference to this “uniform resource locator” or “URL” is made as an inactive textual reference for informational purposes only. The information found at this website is not incorporated by reference into this document).
PART III | ITEM 17. | Financial Statements |
Not applicable. | ITEM 18. | Financial Statements |
Refer to page F-1 forward for the consolidated financial statements required by this item. The following exhibits are filed as part of this annual report: | | | Exhibit
Number | | Document | | 1.1 | | Statutes of Allianz SE, dated November 2008 | | 4.1 | | Transaction Agreement between Allianz SE and Commerzbank Aktiengesellschaft dated August 31, 2008 (Convenience English Translation) | | 4.2 | | New Version of Transaction Agreement between Allianz SE and Commerzbank Aktiengesellschaft dated November 27, 2008 (Convenience English Translation) | | 7.1 | | Statement regarding ratio of earnings to fixed charges | | 8.1 | | List of subsidiaries | | 12.1 | | Certification of the Chief Executive Officer required by Section 302 of the Sarbanes-Oxley Act of 2002 | | 12.2 | | Certification of the Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002 | | 13.1 | | Certification of the Chief Executive Officer required by Section 906 of the Sarbanes-Oxley Act of 2002 | | 13.2 | | Certification of the Chief Financial Officer required by Section 906 of the Sarbanes-Oxley Act of 2002 | | 14.1 | | Consent of KPMG Deutsche Treuhand-Gesellschaft AG Wirtschaftsprufungsgesellschaft |
ALLIANZ GROUP
Report of Independent Registered Public Accounting Firm To the Board of Management and Supervisory Board of Allianz SE: We have audited the accompanying consolidated balance sheets of Allianz SE and subsidiaries (collectively, “the Allianz Group”) as of December 31, 2008 and 2007, and the related consolidated income statements, consolidated statements of changes in equity and consolidated statements of cash flows for each of the years in the three-year period ended December 31, 2008 including the disclosures provided in the Qualitative and Quantitative Disclosures about Market Risk on pages 153 to 175. In connection with our audits of the consolidated financial statements we have also audited the accompanying financial statement schedules I to IV. These consolidated financial statements and financial statement schedules are the responsibility of the Allianz Group’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Allianz Group as of December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2008, in conformity with International Financial Reporting Standards, as issued by the IASB and as adopted by the EU. Also in our opinion, the related financial statement schedules referred to above, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Allianz Group’s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 31, 2009, expressed an unqualified opinion on the effectiveness of the Allianz Group’s internal control over financial reporting. March 31, 2009 KPMG AG Wirtschaftsprüfungsgesellschaft Munich, Germany June 14, 2007(formerly
KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft)
Allianz Group Consolidated Balance Sheets | | | | | | | As of December 31,
| | | | 2006
| | 2005
| | | | Note | | € mn | | € mn | ASSETS | | | | | | | Cash and cash equivalents | | 6 | | 33,031 | | 31,647 | Financial assets carried at fair value through income(1) | | 7 | | 156,869 | | 180,346 | Investments(2) | | 8 | | 298,134 | | 285,015 | Loans and advances to banks and customers | | 9 | | 408,278 | | 336,808 | Financial assets for unit linked contracts | | | | 61,864 | | 54,661 | Reinsurance assets | | 10 | | 19,360 | | 22,120 | Deferred acquisition costs | | 11 | | 19,135 | | 18,141 | Deferred tax assets | | 41 | | 4,727 | | 5,299 | Other assets | | 12 | | 38,893 | | 42,293 | Intangible assets | | 13 | | 12,935 | | 12,958 | | | | | |
| |
| Total assets | | | | 1,053,226 | | 989,288 | | | | | |
| |
|
| | | | | | | As of December 31,
| | | | 2006
| | 2005
| | | | Note | | € mn | | € mn | LIABILITIES AND EQUITY | | | | | | | Financial liabilities carried at fair value through income | | 14 | | 79,699 | | 86,842 | Liabilities to banks and customers | | 15 | | 361,078 | | 310,316 | Unearned premiums | | 16 | | 14,868 | | 14,524 | Reserves for loss and loss adjustment expenses | | 17 | | 65,464 | | 67,005 | Reserves for insurance and investment contracts | | 18 | | 287,697 | | 278,312 | Financial liabilities for unit linked contracts | | 19 | | 61,864 | | 54,661 | Deferred tax liabilities | | 41 | | 4,618 | | 5,324 | Other liabilities | | 20 | | 49,764 | | 51,315 | Certificated liabilities | | 21 | | 54,922 | | 59,203 | Participation certificates and subordinated liabilities | | 22 | | 16,362 | | 14,684 | Total liabilities | | | | 996,336 | | 942,186 | | | | | | | | | Shareholders’ equity | | 23 | | 50,481 | | 39,487 | Minority interests | | 23 | | 6,409 | | 7,615 | Total equity | | | | 56,890 | | 47,102 | | | | | |
| |
| Total liabilities and equity | | | | 1,053,226 | | 989,288 | | | | | |
| |
|
| | | | | | | As of December 31, | | | | 2008 | | 2007 | | | | Note | | € mn | | € mn | ASSETS | | | | | | | Cash and cash equivalents | | 7 | | 8,958 | | 31,337 | Financial assets carried at fair value through income1) | | 8 | | 14,240 | | 185,461 | Investments2) | | 9 | | 260,147 | | 286,952 | Loans and advances to banks and customers | | 10 | | 115,655 | | 396,702 | Financial assets for unit-linked contracts | | | | 50,450 | | 66,060 | Reinsurance assets | | 11 | | 14,599 | | 15,312 | Deferred acquisition costs | | 12 | | 22,563 | | 19,613 | Deferred tax assets | | 42 | | 3,996 | | 4,771 | Other assets | | 13 | | 34,004 | | 38,025 | Non-current assets and assets of disposal groups classified as held-for-sale | | 4, 14 | | 419,513 | | 3,503 | Intangible assets | | 15 | | 11,451 | | 13,413 | | | | | | | | Total assets | | | | 955,576 | | 1,061,149 | | | | | | | |
| | | | | | | As of December 31, | | | | 2008 | | 2007 | | | | Note | | € mn | | € mn | LIABILITIES AND EQUITY | | | | | | | Financial liabilities carried at fair value through income | | 16 | | 6,244 | | 126,053 | Liabilities to banks and customers | | 17 | | 18,451 | | 336,494 | Unearned premiums | | 18 | | 15,233 | | 15,020 | Reserves for loss and loss adjustment expenses | | 19 | | 63,924 | | 63,706 | Reserves for insurance and investment contracts | | 20 | | 296,557 | | 292,244 | Financial liabilities for unit-linked contracts | | 21 | | 50,450 | | 66,060 | Deferred tax liabilities | | 42 | | 3,833 | | 3,973 | Other liabilities | | 22 | | 32,930 | | 48,031 | Liabilities of disposal groups classified as held-for-sale | | 4, 14 | | 411,816 | | 1,293 | Certificated liabilities | | 23 | | 9,544 | | 42,070 | Participation certificates and subordinated liabilities | | 24 | | 9,346 | | 14,824 | | | | | | | | Total liabilities | | | | 918,328 | | 1,009,768 | | | | | | | | Shareholders’ equity | | | | 33,684 | | 47,753 | | | | | | | | Minority interests | | | | 3,564 | | 3,628 | | | | | | | | Total equity | | 25 | | 37,248 | | 51,381 | | | | | | | | Total liabilities and equity | | | | 955,576 | | 1,061,149 | | | | | | | |
(1)1)
| As of December 31, 2006, €90,2112008, €101 mn are pledged to creditors and can be sold or repledged (2005: €77,954(2007: €23,163 mn). |
(2)2)
| As of December 31, 2006, €3,1562008, €826 mn are pledged to creditors and can be sold or repledged (2005: €5,079(2007: €7,384 mn). |
Allianz Group Consolidated Income Statements | | | | Note | | 2006
| | 2005
| | 2004
| | | | | 2008 | | 2007 | | 2006 | | | | | € mn | | € mn | | € mn | | | Note | | € mn | | € mn | | € mn | | Premiums written | | | | 65,275 | | | 64,766 | | | 63,690 | | | | | 66,171 | | | 65,788 | | | 65,275 | | Ceded premiums written | | | | (6,218 | ) | | (6,429 | ) | | (6,569 | ) | | | | (5,474 | ) | | (5,934 | ) | | (6,218 | ) | Change in unearned premiums | | | | (533 | ) | | (655 | ) | | (332 | ) | | | | (253 | ) | | (492 | ) | | (533 | ) | Premiums earned (net) | | 24 | | 58,524 | | | 57,682 | | | 56,789 | | | 26 | | 60,444 | | | 59,362 | | | 58,524 | | Interest and similar income | | 25 | | 23,956 | | | 22,644 | | | 21,196 | | | 27 | | 19,072 | | | 18,624 | | | 17,430 | | Income from financial assets and liabilities carried at fair value through income (net) | | 26 | | 940 | | | 1,163 | | | 1,677 | | | 28 | | (686 | ) | | (817 | ) | | (370 | ) | Realized gains/losses (net) | | 27 | | 6,151 | | | 4,978 | | | 4,568 | | | 29 | | 3,603 | | | 6,008 | | | 5,921 | | Fee and commission income | | 28 | | 8,856 | | | 8,162 | | | 6,813 | | | 30 | | 6,032 | | | 6,553 | | | 6,025 | | Other income | | 29 | | 86 | | | 92 | | | 329 | | | 31 | | 408 | | | 217 | | | 61 | | Income from fully consolidated private equity investments | | 30 | | 1,392 | | | 598 | | | 175 | | | 32 | | 2,549 | | | 2,367 | | | 1,392 | | | | | | |
|
| |
|
| |
|
| | | | | | | | | | | | Total income | | | | 99,905 | | | 95,319 | | | 91,547 | | | | | 91,422 | | | 92,314 | | | 88,983 | | | | | | |
|
| |
|
| |
|
| | | | | | | | | | | | Claims and insurance benefits incurred (gross) | | 31 | | (45,523 | ) | | (46,802 | ) | | (45,994 | ) | | | | (48,287 | ) | | (46,409 | ) | | (45,523 | ) | Claims and insurance benefits incurred (ceded) | | 31 | | 3,226 | | | 4,032 | | | 3,188 | | | | | 2,628 | | | 3,287 | | | 3,226 | | Claims and insurance benefits incurred (net) | | 31 | | (42,297 | ) | | (42,770 | ) | | (42,806 | ) | | 33 | | (45,659 | ) | | (43,122 | ) | | (42,297 | ) | Change in reserves for insurance and investment contracts (net) | | 32 | | (11,375 | ) | | (11,176 | ) | | (9,556 | ) | | 34 | | (5,140 | ) | | (10,685 | ) | | (11,375 | ) | Interest expense | | 33 | | (5,759 | ) | | (6,377 | ) | | (5,688 | ) | | Interest expenses | | | 35 | | (1,893 | ) | | (2,070 | ) | | (1,633 | ) | Loan loss provisions | | 34 | | (36 | ) | | 109 | | | (354 | ) | | 36 | | (59 | ) | | (18 | ) | | (5 | ) | Impairments of investments (net) | | 35 | | (775 | ) | | (540 | ) | | (1,475 | ) | | 37 | | (9,495 | ) | | (1,185 | ) | | (560 | ) | Investment expenses | | 36 | | (1,108 | ) | | (1,092 | ) | | (767 | ) | | 38 | | (645 | ) | | (1,037 | ) | | (1,055 | ) | Acquisition and administrative expenses (net) | | 37 | | (23,486 | ) | | (22,559 | ) | | (21,969 | ) | | 39 | | (17,922 | ) | | (18,788 | ) | | (18,468 | ) | Fee and commission expenses | | 38 | | (2,351 | ) | | (2,312 | ) | | (1,804 | ) | | 40 | | (2,502 | ) | | (2,313 | ) | | (2,040 | ) | Amortization of intangible assets | | | | (51 | ) | | (50 | ) | | (1,362 | ) | | | | (23 | ) | | (17 | ) | | (51 | ) | Restructuring charges | | 49 | | (964 | ) | | (100 | ) | | (347 | ) | | | | (129 | ) | | (182 | ) | | (542 | ) | Other expenses | | 39 | | 1 | | | (51 | ) | | (200 | ) | | 41 | | (12 | ) | | (17 | ) | | (13 | ) | Expenses from fully consolidated private equity investments | | 40 | | (1,381 | ) | | (572 | ) | | (175 | ) | | 32 | | (2,470 | ) | | (2,317 | ) | | (1,381 | ) | | | | | |
|
| |
|
| |
|
| | | | | | | | | | | | Total expenses | | | | (89,582 | ) | | (87,490 | ) | | (86,503 | ) | | | | (85,949 | ) | | (81,751 | ) | | (79,420 | ) | | | | | |
|
| |
|
| |
|
| | | | | | | | | | | | Income before income taxes and minority interests in earnings | | | | 10,323 | | | 7,829 | | | 5,044 | | | Income from continuing operations before income taxes and minority interests in earnings | | | | | 5,473 | | | 10,563 | | | 9,563 | | Income taxes | | 41 | | (2,013 | ) | | (2,063 | ) | | (1,610 | ) | | 42 | | (1,287 | ) | | (2,572 | ) | | (1,720 | ) | Minority interests in earnings | | | | (1,289 | ) | | (1,386 | ) | | (1,168 | ) | | | | (219 | ) | | (675 | ) | | (1,203 | ) | | | | | |
|
| |
|
| |
|
| | | | | | | | | | | | Net income | | | | 7,021 | | | 4,380 | | | 2,266 | | | Net income from continuing operations | | | | | 3,967 | | | 7,316 | | | 6,640 | | | | | | | | | | | | | | | Net income (loss) from discontinued operations, net of income taxes and minority interests in earnings | | | 4 | | (6,411 | ) | | 650 | | | 381 | | | | | | | | | | | | | | | Net income (loss) | | | | | (2,444 | ) | | 7,966 | | | 7,021 | | | | | | |
|
| |
|
| |
|
| | | | | | | | | | | | | | | | | | €
| | €
| | €
| | | | | € | | € | | € | | Basic earnings per share | | 50 | | 17.09 | | | 11.24 | | | 6.19 | | | 50 | | (5.43 | ) | | 18.00 | | | 17.09 | | from continuing operations | | | | | 8.81 | | | 16.53 | | | 16.16 | | from discontinued operations | | | | | (14.24 | ) | | 1.47 | | | 0.93 | | Diluted earnings per share | | 50 | | 16.78 | | | 11.14 | | | 6.16 | | | 50 | | (5.47 | ) | | 17.71 | | | 16.78 | | from continuing operations | | | | | 8.59 | | | 16.26 | | | 15.87 | | from discontinued operations | | | | | (14.06 | ) | | 1.45 | | | 0.91 | |
Allianz Group Consolidated Statements of Changes in Equity | | | | | | | | | | | | | | | | | | | | | | | | Paid-in
capital
| | Revenue
reserves
| | | Foreign
currency
translation
adjustments
| | | Unrealized
gains and
losses (net)
| | | Shareholders’
equity
| | | Minority
interests
| | | Total equity
| | | | | € mn | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | Balance as of January 1, 2004 | | 19,347 | | 4,093 | | | (1,893 | ) | | 6,446 | | | 27,993 | | | 7,266 | | | 35,259 | | Foreign currency translation adjustments | | — | | — | | | (805 | ) | | (12 | ) | | (817 | ) | | (2 | ) | | (819 | ) | Available-for-sale investments | | | | | | | | | | | | | | | | | | | | | Unrealized gains and losses (net) arising during the year(1) | | — | | — | | | — | | | 2,336 | | | 2,336 | | | 482 | | | 2,818 | | Transferred to net income on disposal(2) | | — | | — | | | — | | | (1,405 | ) | | (1,405 | ) | | (166 | ) | | (1,571 | ) | Cash flow hedges | | — | | — | | | — | | | 225 | | | 225 | | | (1 | ) | | 224 | | Miscellaneous | | — | | 217 | | | — | | | (260 | ) | | (43 | ) | | (533 | ) | | (576 | ) | Total income and expense recognized directly in shareholders’ equity | | — | | 217 | | | (805 | ) | | 884 | | | 296 | | | (220 | ) | | 76 | | Net income | | — | | 2,266 | | | — | | | — | | | 2,266 | | | 1,168 | | | 3,434 | | Total recognized income and expense for the year | | — | | 2,483 | | | (805 | ) | | 884 | | | 2,562 | | | 948 | | | 3,510 | | Paid-in capital | | 86 | | — | | | — | | | — | | | 86 | | | — | | | 86 | | Treasury shares | | — | | (59 | ) | | — | | | — | | | (59 | ) | | — | | | (59 | ) | Transactions between equity holders | | — | | (73 | ) | | 64 | | | (27 | ) | | (36 | ) | | — | | | (36 | ) | Dividends paid | | — | | (551 | ) | | — | | | — | | | (551 | ) | | (518 | ) | | (1,069 | ) | | | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Balance as of December 31, 2004 | | 19,433 | | 5,893 | | | (2,634 | ) | | 7,303 | | | 29,995 | | | 7,696 | | | 37,691 | | Foreign currency translation adjustments | | — | | — | | | 1,601 | | | 50 | | | 1,651 | | | 33 | | | 1,684 | | Available-for-sale investments | | | | | | | | | | | | | | | | | | | | | Unrealized gains and losses (net) arising during the year(1) | | — | | — | | | — | | | 3,805 | | | 3,805 | | | 549 | | | 4,354 | | Transferred to net income on disposal(2) | | — | | — | | | — | | | (1,114 | ) | | (1,114 | ) | | (133 | ) | | (1,247 | ) | Cash flow hedges | | — | | — | | | — | | | 3 | | | 3 | | | — | | | 3 | | Miscellaneous | | — | | 370 | | | — | | | — | | | 370 | | | 141 | | | 511 | | Total income and expense recognized directly in shareholders’ equity | | — | | 370 | | | 1,601 | | | 2,744 | | | 4,715 | | | 590 | | | 5,305 | | Net income | | — | | 4,380 | | | — | | | — | | | 4,380 | | | 1,386 | | | 5,766 | | Total recognized income and expense for the year | | — | | 4,750 | | | 1,601 | | | 2,744 | | | 9,095 | | | 1,976 | | | 11,071 | | Paid-in capital | | 2,183 | | — | | | — | | | — | | | 2,183 | | | — | | | 2,183 | | Treasury shares | | — | | 352 | | | — | | | — | | | 352 | | | — | | | 352 | | Transactions between equity holders | | — | | (1,742 | ) | | 1 | | | 277 | | | (1,464 | ) | | (1,328 | ) | | (2,792 | ) | Dividends paid | | — | | (674 | ) | | — | | | — | | | (674 | ) | | (729 | ) | | (1,403 | ) | | | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Balance as of December 31, 2005 | | 21,616 | | 8,579 | | | (1,032 | ) | | 10,324 | | | 39,487 | | | 7,615 | | | 47,102 | | Foreign currency translation adjustments | | — | | — | | | (1,175 | ) | | (4 | ) | | (1,179 | ) | | (276 | ) | | (1,455 | ) | Available-for-sale investments | | | | | | | | | | | | | | | | | | | | | Unrealized gains and losses (net) arising during the year(1)(3) | | — | | — | | | — | | | 4,731 | | | 4,731 | | | 20 | | | 4,751 | | Transferred to net income on disposal(2) | | — | | — | | | — | | | (1,744 | ) | | (1,744 | ) | | (146 | ) | | (1,890 | ) | Cash flow hedges | | — | | — | | | — | | | 1 | | | 1 | | | — | | | 1 | | Miscellaneous | | — | | 246 | | | — | | | — | | | 246 | | | 111 | | | 357 | | Total income and expense recognized directly in shareholders’ equity | | — | | 246 | | | (1,175 | ) | | 2,984 | | | 2,055 | | | (291 | ) | | 1,764 | | Net income | | — | | 7,021 | | | — | | | — | | | 7,021 | | | 1,289 | | | 8,310 | | Total recognized income and expense for the year | | — | | 7,267 | | | (1,175 | ) | | 2,984 | | | 9,076 | | | 998 | | | 10,074 | | Paid-in capital | | 129 | | — | | | — | | | — | | | 129 | | | — | | | 129 | | Treasury shares | | — | | 910 | | | — | | | — | | | 910 | | | — | | | 910 | | Transactions between equity holders | | 3,653 | | (2,316 | ) | | (3 | ) | | 356 | | | 1,690 | | | (1,552 | ) | | 138 | | Dividends paid | | — | | (811 | ) | | — | | | — | | | (811 | ) | | (652 | ) | | (1,463 | ) | | | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Balance as of December 31, 2006 | | 25,398 | | 13,629 | | | (2,210 | ) | | 13,664 | | | 50,481 | | | 6,409 | | | 56,890 | | | | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | Paid-in
capital | | Revenue
reserves | | | Foreign
currency
translation
adjustments | | | Unrealized
gains and
losses (net) | | | Share-holders’
equity | | | Minority
interests | | | Total
equity | | | | | € mn | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | Balance as of January 1, 2006 | | 21,616 | | 8,020 | | | (1,032 | ) | | 10,052 | | | 38,656 | | | 8,386 | | | 47,042 | | Foreign currency translation adjustments | | — | | — | | | (1,175 | ) | | (4 | ) | | (1,179 | ) | | (276 | ) | | (1,455 | ) | Available-for-sale investments | | | | | | | | | | | | | | | | | | | | | Unrealized gains and losses (net) arising during the year1) | | — | | — | | | — | | | 4,731 | | | 4,731 | | | 20 | | | 4,751 | | Transferred to net income on disposal or impairment2) | | — | | — | | | — | | | (1,744 | ) | | (1,744 | ) | | (146 | ) | | (1,890 | ) | Cash flow hedges | | — | | — | | | — | | | 1 | | | 1 | | | — | | | 1 | | Miscellaneous | | — | | 246 | | | — | | | — | | | 246 | | | 111 | | | 357 | | | | | | | | | | | | | | | | | | | | | | | Total income and expense recognized directly in shareholders’ equity | | — | | 246 | | | (1,175 | ) | | 2,984 | | | 2,055 | | | (291 | ) | | 1,764 | | Net income | | — | | 7,021 | | | — | | | — | | | 7,021 | | | 1,289 | | | 8,310 | | | | | | | | | | | | | | | | | | | | | | | Total recognized income and expense for the year | | — | | 7,267 | | | (1,175 | ) | | 2,984 | | | 9,076 | | | 998 | | | 10,074 | | Paid-in capital | | 129 | | — | | | — | | | — | | | 129 | | | — | | | 129 | | Treasury shares | | — | | 910 | | | — | | | — | | | 910 | | | — | | | 910 | | Transactions between equity holders | | 3,653 | | (2,316 | ) | | (3 | ) | | 356 | | | 1,690 | | | (1,552 | ) | | 138 | | Dividends paid | | — | | (811 | ) | | — | | | — | | | (811 | ) | | (652 | ) | | (1,463 | ) | | | | | | | | | | | | | | | | | | | | | | Balance as of December 31, 2006 | | 25,398 | | 13,070 | | | (2,210 | ) | | 13,392 | | | 49,650 | | | 7,180 | | | 56,830 | | Foreign currency translation adjustments | | — | | — | | | (1,378 | ) | | (2 | ) | | (1,380 | ) | | (214 | ) | | (1,594 | ) | Available-for-sale investments | | | | | | | | | | | | | | | | | | | | | Unrealized gains and losses (net) arising during the year1) | | — | | — | | | — | | | (1,123 | ) | | (1,123 | ) | | (41 | ) | | (1,164 | ) | Transferred to net income on disposal or impairment2) | | — | | — | | | — | | | (2,484 | ) | | (2,484 | ) | | (101 | ) | | (2,585 | ) | Cash flow hedges | | — | | — | | | — | | | 35 | | | 35 | | | — | | | 35 | | Miscellaneous | | — | | (77 | ) | | — | | | — | | | (77 | ) | | 116 | | | 39 | | | | | | | | | | | | | | | | | | | | | | | Total income and expense recognized directly in shareholders’ equity | | — | | (77 | ) | | (1,378 | ) | | (3,574 | ) | | (5,029 | ) | | (240 | ) | | (5,269 | ) | Net income | | — | | 7,966 | | | — | | | — | | | 7,966 | | | 748 | | | 8,714 | | | | | | | | | | | | | | | | | | | | | | | Total recognized income and expense for the year | | — | | 7,889 | | | (1,378 | ) | | (3,574 | ) | | 2,937 | | | 508 | | | 3,445 | | Paid-in capital | | 158 | | — | | | — | | | — | | | 158 | | | — | | | 158 | | Treasury shares | | — | | 269 | | | — | | | — | | | 269 | | | — | | | 269 | | Transactions between equity holders | | 2,765 | | (6,968 | ) | | (68 | ) | | 652 | | | (3,619 | ) | | (3,707 | ) | | (7,326 | ) | Dividends paid | | — | | (1,642 | ) | | — | | | — | | | (1,642 | ) | | (353 | ) | | (1,995 | ) | | | | | | | | | | | | | | | | | | | | | | Balance as of December 31, 2007 | | 28,321 | | 12,618 | | | (3,656 | ) | | 10,470 | | | 47,753 | | | 3,628 | | | 51,381 | | Foreign currency translation adjustments | | — | | — | | | (340 | ) | | (48 | ) | | (388 | ) | | 71 | | | (317 | ) | Available-for-sale investments | | | | | | | | | | | | | | | | | | | | | Unrealized gains and losses (net) arising during the year1) | | — | | — | | | — | | | (9,170 | ) | | (9,170 | ) | | (78 | ) | | (9,248 | ) | Transferred to net income on disposal or impairment2) | | — | | — | | | — | | | 697 | | | 697 | | | 34 | | | 731 | | Cash flow hedges | | — | | — | | | — | | | 30 | | | 30 | | | — | | | 30 | | Miscellaneous | | — | | (65 | ) | | — | | | — | | | (65 | ) | | 74 | | | 9 | | | | | | | | | | | | | | | | | | | | | | | Total income and expense recognized directly in shareholders’ equity | | — | | (65 | ) | | (340 | ) | | (8,491 | ) | | (8,896 | ) | | 101 | | | (8,795 | ) | Net loss | | — | | (2,444 | ) | | — | | | — | | | (2,444 | ) | | 258 | | | (2,186 | ) | | | | | | | | | | | | | | | | | | | | | | Total recognized income and expense for the year | | — | | (2,509 | ) | | (340 | ) | | (8,491 | ) | | (11,340 | ) | | 359 | | | (10,981 | ) | Paid-in capital | | 248 | | — | | | — | | | — | | | 248 | | | — | | | 248 | | Treasury shares | | — | | 25 | | | — | | | — | | | 25 | | | — | | | 25 | | Transactions between equity holders | | — | | (552 | ) | | (10 | ) | | 32 | | | (530 | ) | | (136 | ) | | (666 | ) | Dividends paid | | — | | (2,472 | ) | | — | | | — | | | (2,472 | ) | | (287 | ) | | (2,759 | ) | | | | | | | | | | | | | | | | | | | | | | Balance as of December 31, 2008 | | 28,569 | | 7,110 | | | (4,006 | ) | | 2,011 | | | 33,684 | | | 3,564 | | | 37,248 | | | | | | | | | | | | | | | | | | | | | | |
(1)1)
| During the year ended December 31, 20062008 unrealized gains and losses (net) arising during the year included in shareholders’ equity are net of deferred tax benefit of €1,690 mn (2007: €720 mn; 2006: €478 mn (2005: deferred tax charge of €568 mn; 2004: deferred tax charge of €868 mn). |
(2)2)
| During the year ended December 31, 2006,2008, realized gains/losses (net) transferred to net income on disposal or impairment are net of income tax benefit of €755 mn (2007: income tax charge of €206 mn; 2006: income tax charge of €308 mn (2005: €303 mn; 2004: €318 mn). |
(3)
| Includes €2,005 mn unrealized gains from the investment in Industrial and Commercial Bank of China (“ICBC”) as of December 31, 2006.
|
Allianz Group Consolidated Statements of Cash Flows | | | | 2006
| | 2005
| | 2004
| | | 2008 | | 2007 | | 2006 | | | | | € mn | | € mn | | € mn | | | € mn | | € mn | | € mn | | Summary | | | | Net cash flow provided by (used in) operating activities | | 20,265 | | | 47,311 | | | 1,293 | | | Net cash flow provided by (used in) investing activities | | (34,450 | ) | | (22,922 | ) | | (9,155 | ) | | Summary: | | | | | | | | Net cash flow provided by operating activities | | | 25,278 | | | 11,524 | | | 20,099 | | Net cash flow used in investing activities | | | (6,236 | ) | | (2,357 | ) | | (33,951 | ) | Net cash flow provided by (used in) financing activities | | 15,647 | | | (8,442 | ) | | (2,014 | ) | | (11,285 | ) | | (10,746 | ) | | 15,314 | | Effect of exchange rate changes on cash and cash equivalents | | (78 | ) | | 72 | | | (24 | ) | | 102 | | | (115 | ) | | (78 | ) | | | | | | | | | | | | Change in cash and cash equivalents | | 1,384 | | | 16,019 | | | (9,900 | ) | | 7,859 | | | (1,694 | ) | | 1,384 | | Cash and cash equivalents at beginning of period | | 31,647 | | | 15,628 | | | 25,528 | | | 31,337 | | | 33,031 | | | 31,647 | | | | | | | | | | | | | Cash and cash equivalents at end of period | | 33,031 | | | 31,647 | | | 15,628 | | | 39,196 | | | 31,337 | | | 33,031 | | Cash and cash equivalents reclassified to assets of disposal groups held-for-sale | | | 30,238 | | | — | | | — | | | | | | | | | | | | | Cash and cash equivalents at end of period of continuing operations | | | 8,958 | | | 31,337 | | | 33,031 | | | | | | | | | | | | | | Cash flow from operating activities: | | | | | | | | | Net income | | 7,021 | | | 4,380 | | | 2,266 | | | Adjustments to reconcile net income to net cash flow provided by (used in) operating activities: | | | | Net income (loss) | | | (2,444 | ) | | 7,966 | | | 7,021 | | Adjustments to reconcile net income (loss) to net cash flow provided by operating activities | | | | | | | | Minority interests in earnings | | 1,289 | | | 1,386 | | | 1,168 | | | 262 | | | 748 | | | 1,289 | | Share of earnings from investments in associates and joint ventures | | (287 | ) | | (253 | ) | | (253 | ) | | (12 | ) | | (521 | ) | | (287 | ) | Realized gains/losses (net) and impairments of investments (net) of: | | | | | | | | | Impairment loss recognized on remeasurement of assets of disposal group to fair value less costs to sell as of September 30, 2008 | | | 1,409 | | | — | | | — | | Available-for-sale and held-to-maturity investments, investments in associates and joint ventures, real estate held for investment, loans to banks and customers | | (5,376 | ) | | (4,438 | ) | | (3,093 | ) | | 5,710 | | | (5,276 | ) | | (5,376 | ) | Other investments, mainly financial assets held for trading and designated at fair value through income | | (947 | ) | | (1,557 | ) | | (1,651 | ) | | 3,497 | | | 681 | | | (938 | ) | Result of transaction of Dresdner Bank between September 30 and December 31, 2008 | | | 2,928 | | | — | | | — | | Depreciation and amortization | | 916 | | | 723 | | | 1,236 | | | 640 | | | 891 | | | 983 | | Amortization of goodwill | | — | | | — | | | 1,164 | | | Loan loss provision | | 36 | | | (109 | ) | | 354 | | | Loan loss provisions | | | 385 | | | (113 | ) | | 36 | | Interest credited to policyholder accounts | | 3,126 | | | 2,748 | | | 2,523 | | | 4,008 | | | 3,225 | | | 3,126 | | Net change in: | | | | | | | | | Financial assets and liabilities held for trading | | 19,265 | | | 10,371 | | | (30,174 | ) | | 6,443 | | | 18,948 | | | 19,265 | | Reverse repurchase agreements and collateral paid for securities borrowing transactions | | (50,096 | ) | | 43,508 | | | (19,368 | ) | | 32,463 | | | 30,215 | | | (27,294 | ) | Repurchase agreements and collateral received from securities lending transactions | | 36,990 | | | (18,692 | ) | | 33,488 | | | (30,763 | ) | | (48,143 | ) | | 14,188 | | Reinsurance assets | | 663 | | | 428 | | | 1,499 | | | 818 | | | 716 | | | 663 | | Deferred acquisition costs | | (1,434 | ) | | (1,753 | ) | | (1,171 | ) | | (1,353 | ) | | (932 | ) | | (1,434 | ) | Unearned premiums | | 593 | | | 876 | | | 286 | | | 345 | | | 341 | | | 593 | | Reserves for losses and loss adjustment expenses | | (188 | ) | | 2,621 | | | 1,274 | | | 527 | | | (389 | ) | | (188 | ) | Reserves for insurance and investment contracts | | 7,025 | | | 7,634 | | | 7,049 | | | 390 | | | 6,675 | | | 7,025 | | Deferred tax assets/liabilities | | 292 | | | (39 | ) | | 470 | | | 351 | | | 55 | | | 292 | | Financial assets designated at fair value through income (only banking segment) | | | 3,204 | | | (2,286 | ) | | (915 | ) | Financial liabilities designated at fair value through income (only banking segment) | | | 2,925 | | | 1,104 | | | 333 | | Other (net) | | 1,377 | | | (523 | ) | | 4,226 | | | (6,455 | ) | | (2,381 | ) | | 1,717 | | Subtotal | | 13,244 | | | 42,931 | | | (973 | ) | | 27,722 | | | 3,558 | | | 13,078 | | | | |
|
| |
|
| |
|
| | | | | | | | | | Net cash flow provided by (used in) operating activities | | 20,265 | | | 47,311 | | | 1,293 | | | Net cash flow provided by operating activities | | | 25,278 | | | 11,524 | | | 20,099 | | | | |
|
| |
|
| |
|
| | | | | | | | | | Cash flow from investing activities: | | | | Proceeds from the sale, maturity or repayment of: | | | | Financial assets designated at fair value through income | | 7,207 | | | 9,981 | | | 1,332 | | | Available-for-sale investments | | 118,747 | | | 137,915 | | | 124,481 | | | Held-to-maturity investments | | 336 | | | 534 | | | 781 | | | Investments in associates and joint ventures | | 730 | | | 3,938 | | | 1,876 | | | Assets held for sale | | 2,253 | | | 792 | | | — | | | Real estate held for investment | | 1,376 | | | 1,091 | | | 890 | | | Loans and advances to banks and customers (purchased loans) | | 8,365 | | | 5,195 | | | 3,739 | | | Property and equipment | | 453 | | | 113 | | | 667 | | | | | |
|
| |
|
| |
|
| | Subtotal | | 139,467 | | | 159,559 | | | 133,766 | | | | | |
|
| |
|
| |
|
| |
Allianz Group Consolidated Statements of Cash Flows—(Continued) | | | | 2006
| | 2005
| | 2004
| | | 2008 | | 2007 | | 2006 | | | | | | € mn | | € mn | | € mn | | Cash flow from investing activities: | | | | | | | | Proceeds from the sale, maturity or repayment of: | | | | | | | | Financial assets designated at fair value through income | | | 4,105 | | | 5,678 | | | 5,001 | | Available-for-sale investments | | | 106,665 | | | 130,421 | | | 118,747 | | Held-to-maturity investments | | | 497 | | | 317 | | | 336 | | Investments in associates and joint ventures | | | 1,285 | | | 1,902 | | | 730 | | Non-current assets and assets of disposal groups classified as held-for-sale | | | 2,199 | | | 4 | | | 2,253 | | Real estate held for investment | | | 491 | | | 889 | | | 1,376 | | Loans and advances to banks and customers (purchased loans) | | | 8,557 | | | 8,689 | | | 8,365 | | Property and equipment | | | 431 | | | 607 | | | 453 | | | | | | | | | | | | | Subtotal | | | 124,230 | | | 148,507 | | | 137,261 | | | | | € mn | | € mn | | € mn | | | | | | | | | | | Payments for the purchase or origination of: | | | | | | | | | Financial assets designated at fair value through income | | (9,680 | ) | | (11,278 | ) | | (2,297 | ) | | (4,107 | ) | | (6,393 | ) | | (6,559 | ) | Available-for-sale investments | | (130,949 | ) | | (161,583 | ) | | (135,005 | ) | | (114,041 | ) | | (129,060 | ) | | (131,290 | ) | Held-to-maturity investments | | (280 | ) | | (255 | ) | | (1,071 | ) | | (720 | ) | | (301 | ) | | (280 | ) | Investments in associates and joint ventures | | (491 | ) | | (934 | ) | | (526 | ) | | (610 | ) | | (1,509 | ) | | (491 | ) | Assets held for sale | | — | | | (178 | ) | | — | | | Non-current assets and assets of disposal groups classified as held-for-sale | | | (97 | ) | | (1,073 | ) | | — | | Real estate held for investment | | (860 | ) | | (1,064 | ) | | (1,752 | ) | | (395 | ) | | (430 | ) | | (860 | ) | Loans and advances to banks and customers (purchased loans) | | (10,598 | ) | | (5,493 | ) | | (6,172 | ) | | (9,631 | ) | | (12,286 | ) | | (10,598 | ) | Property and equipment | | (1,588 | ) | | (1,126 | ) | | (2,345 | ) | | (953 | ) | | (832 | ) | | (1,588 | ) | | | | | | | | | | | | Subtotal | | (154,446 | ) | | (181,911 | ) | | (149,168 | ) | | (130,554 | ) | | (151,884 | ) | | (151,666 | ) | Business combinations (Note 4): | | | | | | | | | | | | | | | Business combinations (Note 5): | | | | | | | | Proceeds from sale, net of cash disposed | | — | | | 2,029 | | | (886 | ) | | 103 | | | 372 | | | — | | Acquisition, net of cash acquired | | (344 | ) | | — | | | (416 | ) | | (152 | ) | | (670 | ) | | (344 | ) | Net cash flows arising during the fourth quarter from assets and liabilities of disposal groups classified as held-for-sale | | | 9,327 | | | — | | | — | | Change in other loans and advances to banks and customers (originated loans) | | (19,224 | ) | | (1,877 | ) | | 10,287 | | | (8,673 | ) | | 43 | | | (19,224 | ) | Other (net) | | 97 | | | (722 | ) | | (2,738 | ) | | (517 | ) | | 1,275 | | | 22 | | | | |
|
| |
|
| |
|
| | | | | | | | | | Net cash flow provided by (used in) investing activities | | (34,450 | ) | | (22,922 | ) | | (9,155 | ) | | Net cash flow used in investing activities | | | (6,236 | ) | | (2,357 | ) | | (33,951 | ) | | | |
|
| |
|
| |
|
| | | | | | | | | | Cash flow from financing activities: | | | | | | | | | Policyholders’ account deposits | | 13,234 | | | 14,118 | | | 10,364 | | | 13,205 | | | 12,810 | | | 13,234 | | Policyholders’ account withdrawals | | (8,432 | ) | | (5,560 | ) | | (4,232 | ) | | (10,985 | ) | | (9,365 | ) | | (8,432 | ) | Net change in liabilities to banks and customers | | 13,524 | | | (19,167 | ) | | (14,597 | ) | | (4,920 | ) | | 9,007 | | | 13,524 | | Proceeds from the issuance of certificated liabilities, participation certificates and subordinated liabilities | | 103,429 | | | 115,422 | | | 107,861 | | | 40,672 | | | 58,087 | | | 103,096 | | Repayments of certificated liabilities, participation certificates and subordinated liabilities | | (103,946 | ) | | (111,737 | ) | | (100,698 | ) | | (45,868 | ) | | (71,627 | ) | | (103,946 | ) | Cash inflow from capital increases | | 98 | | | 2,159 | | | 69 | | | 239 | | | 115 | | | 98 | | Transactions between equity holders | | (70 | ) | | (2,932 | ) | | (598 | ) | | (666 | ) | | (7,326 | ) | | (70 | ) | Dividends paid to shareholders | | (1,463 | ) | | (1,403 | ) | | (1,069 | ) | | (2,759 | ) | | (1,995 | ) | | (1,463 | ) | Net cash from sale or purchase of treasury shares | | (458 | ) | | 2,061 | | | (53 | ) | | 40 | | | (34 | ) | | (458 | ) | Other (net) | | (269 | ) | | (1,403 | ) | | 939 | | | (243 | ) | | (418 | ) | | (269 | ) | | | |
|
| |
|
| |
|
| | | | | | | | | | Net cash flow provided by (used in) financing activities | | 15,647 | | | (8,442 | ) | | (2,014 | ) | | (11,285 | ) | | (10,746 | ) | | 15,314 | | | | |
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| |
|
| |
|
| | | | | | | | | | Supplementary information on the consolidated statement of cash flows: | | | | Income taxes paid | | (2,241 | ) | | (1,644 | ) | | (1,691 | ) | | Dividends received | | 1,946 | | | 1,476 | | | 1,339 | | | Interest received | | 20,598 | | | 19,796 | | | 18,780 | | | Interest paid | | (5,556 | ) | | (6,332 | ) | | (5,687 | ) | | | Significant non-cash transactions: | | | | Settlement of exchangeable bonds issued by Allianz Finance II B.V. with shares: | | | | Available-for-sale investments | | (1,074 | ) | | — | | | (989 | ) | | Certificated liabilities | | (1,074 | ) | | — | | | (989 | ) | | Novation of quota share reinsurance agreement: | | | | Reinsurance assets | | (1,111 | ) | | (1,117 | ) | | — | | | Deferred acquisition costs | | 76 | | | 76 | | | — | | | Payables from reinsurance contracts | | (1,035 | ) | | (1,041 | ) | | — | | | Effects from the merger of RAS with and into Allianz AG (Note 4): | | | | Revenue reserves | | (2,362 | ) | | — | | | — | | | Minority interests | | (1,659 | ) | | — | | | — | | | Paid-in capital | | 3,653 | | | — | | | — | | | Unrealized gains and losses (net) | | 368 | | | — | | | — | | | Proceeds from sales of available-for-sale investments: | | | | Debt securities | | 89,813 | | | 107,929 | | | 101,239 | | | Equity securities | | 21,696 | | | 24,800 | | | 17,462 | | | | | |
|
| |
|
| |
|
| | Total | | 111,509 | | | 132,729 | | | 118,701 | | | | | |
|
| |
|
| |
|
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The net cash flows provided by (used in) discontinued operations for the first nine months of 2008 contribute to the net cash flows of the operating, investing, and financing activities. Only the net cash flows of discontinued operations of the fourth quarter 2008 are shown on a net basis in one single line within the investing activities. Allianz Group Consolidated Statements of Cash Flows—(Continued) The following table shows the net cash flows provided by (used in) discontinued operations for the year ended December 31, 2008, 2007 and 2006 that are included in the consolidated statement of cash flows above. | | | | | | | | | | | | | 2008 | | | 2007 | | | 2006 | | | | | € mn | | | € mn | | | € mn | | Net cash flow provided by operating activities from discontinued operations | | 24,367 | | | 369 | | | 3,187 | | Net cash flow provided by (used in) investing activities from discontinued operations | | (1,888 | ) | | 7,415 | | | (13,496 | ) | Net cash flow provided by (used in) financing activities from discontinued operations | | (8,520 | ) | | (12,552 | ) | | 10,003 | | | | | | | | | | | | Net cash flow provided by (used in) discontinued operations | | 13,959 | | | (4,768 | ) | | (306 | ) | | | | | | | | | | | | | | | Supplementary information on the consolidated statement of cash flows: | | | | | | | | | | Income taxes paid | | (2,846 | ) | | (2,856 | ) | | (2,241 | ) | Dividends received | | 1,845 | | | 2,526 | | | 1,946 | | Interest received | | 21,361 | | | 22,256 | | | 20,552 | | Interest paid | | (5,931 | ) | | (6,697 | ) | | (5,556 | ) | Significant non-cash transactions: | | | | | | | | | | Settlement of exchangeable bonds issued by Allianz Finance II B.V. with shares: | | | | | | | | | | Available-for-sale investments | | (450 | ) | | (812 | ) | | (1,074 | ) | Certificated liabilities | | (450 | ) | | (812 | ) | | (1,074 | ) | Novation of quota share reinsurance agreement: | | | | | | | | | | Reinsurance assets | | (29 | ) | | (2,469 | ) | | (1,111 | ) | Deferred acquisition costs | | 1 | | | 145 | | | 76 | | Payables from reinsurance contracts | | (28 | ) | | (2,324 | ) | | (1,035 | ) | Effects from the merger of RAS with and into Allianz AG (Note 5): | | | | | | | | | | Revenue reserves | | — | | | — | | | (2,362 | ) | Minority interests | | — | | | — | | | (1,659 | ) | Paid-in capital | | — | | | — | | | 3,653 | | Unrealized gains and losses (net) | | — | | | — | | | 368 | | Effects from buy-out of AGF minorities (Note 5): | | | | | | | | | | Revenue reserves | | — | | | (1,843 | ) | | — | | Unrealized gains and losses (net) | | — | | | 146 | | | — | | Minority interests | | — | | | (1,068 | ) | | — | | Paid-in capital | | — | | | 2,765 | | | — | | Effects from first consolidation of K2: | | | | | | | | | | Financial assets held for trading | | 107 | | | — | | | — | | Financial assets designated at fair value through income | | 8,665 | | | — | | | — | | Loans and advances to banks and customers | | 1,714 | | | — | | | — | | Other assets | | 51 | | | — | | | — | | Financial liabilities held for trading | | 497 | | | — | | | — | | Financial liabilities designated at fair value through income | | 8,889 | | | — | | | — | | Liabilities to banks and customers | | 1,076 | | | — | | | — | | Other liabilities | | 75 | | | — | | | — | | Proceeds from sales of available-for-sale investments: | | | | | | | | | | Debt securities | | 60,265 | | | 89,355 | | | 89,813 | | Equity securities | | 26,645 | | | 27,485 | | | 21,696 | | | | | | | | | | | | Total | | 86,910 | | | 116,840 | | | 111,509 | | | | | | | | | | | |
Notes to the Allianz Group’s Consolidated Financial Statements 1 Nature of operations and basis of presentation Nature of operations Allianz SE and its subsidiaries (“the Allianz Group”) have global Property-Casualty insurance, Life/Health insurance, Banking and Asset Management operations in more than 70 countries, with the largest of its operations in Europe. The Allianz Group’s headquarters are located in Munich, Germany. The parent company of the Allianz Group is Allianz SE, Munich. On October 13, 2006 Allianz AG changed its legal form to that of a European Company or Societas Europaea (“SE”) incorporated in Germany. It is recorded in the Commercial Register of the municipal court Munich under its registered address at KöniginstraßKoeniginstraße 28, 80802 Munich. Allianz SE is a stock corporation in the form of a European Company (Societas Europaea) and is listed on all German stock exchanges and the stock exchanges in London, Paris, Zurich, Milan and New York. The consolidated financial statements of the Allianz Group for the year ended December 31, 2008 were authorized for issue by the Board of Management on February 23, 2009. Basis of presentation The consolidated financial statements of the Allianz Group have been prepared in conformity with International Financial Reporting Standards (“IFRS”)(IFRS), as adopted under European Union (“EU”)(EU) regulations in accordance with section 315a of the German Commercial Code (“HGB”)(HGB). The consolidated financial statements of the Allianz Group have also been prepared in accordance with IFRS as adoptedissued by the EU offers certain options for applying IFRS standards.International Accounting Standard Board (IASB). The Allianz Group’s application of these optionsIFRS results in no material differences between IFRS as adopted by the EU and IFRS as adoptedissued by the IASB. Within these consolidated financial statements, the Allianz Group has applied all IFRS issued by the IASB that are compulsory as of December 31, 2008. IFRS comprise International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), and interpretations developed by the International Accounting Standard Board (“IASB”)Financial Reporting Interpretations Committee (IFRIC) or the former Standing Interpretations Committee (SIC). IFRS does not provide specific guidance concerning all aspects of the recognition and measurement of insurance contracts, reinsurance contracts and reinsurance contracts.investment contracts with discretionary participation features. Therefore, as envisioned in IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, the provisions embodied under accounting principles generally accepted in the United States of America (“US GAAP”)(U.S. GAAP) have been applied to those aspects where specific guidance is not provided by IFRS 4, Insurance Contracts. See Note 3 regarding changes to IFRS The accounting policies adopted are consistent with those of the previous financial year except for recently adopted IFRSs effective January 1, 2006. 2008 as described in Note 3. The consolidated financial statements are prepared as of and for the year ended December 31, and presented in millions of Euro (€)., unless otherwise stated. 2 Summary of significant accounting policies Principles of consolidation Scope of consolidation The consolidated financial statements of the Allianz Group include those of Allianz SE, its subsidiaries and certain investment funds and special purpose entities (“SPEs”)(SPEs). Subsidiaries, investment funds and SPEs, hereafter “subsidiaries”, which are directly or indirectly controlled by the Allianz Group, are consolidated. Control exists when the Allianz Group has the power to govern the financial and operating policies of the subsidiary generally either when the Allianz Group owns directly or indirectly more than half of the voting rights of the subsidiary or when control can be legally evidenced otherwise because of an agreement with other investors or of a specific corporate charter. In order to determine whether control exists, potential voting rights that are currently exercisable or convertible have to be taken into consideration. If no control exists from a legal perspective, it has to be assessed whether control exists from an economic perspective, as in the case of SPEs. Subsidiaries are consolidated from the date control is obtained by the Allianz Group. Subsidiaries are consolidated until the date that the Allianz Group no longer maintains control. The Allianz Group has used interim financial statements for certain
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) subsidiaries whose fiscal year is other than December 31, but not exceeding a lag of three months. Adjustments are then made for the effects of significant transactions or events that occur between that date and the date of the Allianz Group’s financial statements. The Allianz Group transfers financial assets to certain SPEs in revolving securitization of commercial mortgage or other loan portfolios. The Allianz Group consolidates these SPEs as the Allianz Group continues to control the financial assets transferred and retains the servicing of such loans. Third-party assets held in an agency or fiduciary capacity are not assets of the Allianz Group and are not presented in these consolidated financial statements. Accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Allianz Group. The effects of intra-Allianz Group transactions have been eliminated. Business combinations including acquisitions and disposals of minority interests A business combination occurs when the Allianz Group obtains control over a business. Business combinations are accounted for by applyingusing the purchase method. The purchase method requires that the Allianz Group allocateallocates the cost of a business combination on the date of acquisition by recognizing the acquiree’s identifiable assets, liabilities and certain contingent liabilities at their fair values. The cost of a business combination represents the fair value of the considerationassets given, equity instruments issued and liabilities incurred or assumed in exchange for control at the acquisition date, plus any costs directly attributable to the business combination.acquisition. If the acquisition cost of the business combination exceeds the Allianz Group’s proportionate share of the fair value of the net assets of the acquiree, the difference is recorded as goodwill. Any minority interest is recorded at the minority’s proportion of the fair value of the net assets of the acquiree. For If the initial accounting for a business combinations with an agreement date before March 31, 2004, minority interestscombination can only be determinded provisionally, Allianz Group accounts for the combination using those provisional values.
Any adjustments to those provisional amounts as a result of completing the initial accounting are recorded at the minority’s proportionrecognized within twelve months of the pre-acquisition carrying amountsacquisition date and from the acquisition date. If Allianz Group’s proportionate share of the fair value of the net assets exceeds the acquisition cost, Allianz Group reassesses the identification and measurement of the identifiable assets, liabilities and liabilities. contingent liabilities as well as the measurement of the cost of the combination and recognises immediately in profit or loss any excess remaining after that assessment. Acquisitions and disposals of minority interests are treated as transactions between equity holders. Therefore, any difference between the acquisition cost or sale price of the minority interest and the carrying amount of the minority interest is recognized as an increase or decrease of equity. For business combinations with an agreement date before March 31, 2004, minority interests are recorded at the minority’s proportion of the pre-acquisition carrying amounts of the identifiable assets and liabilities. Associated enterprises and joint ventures Associated enterprises are entities over which the Allianz Group can exercise significant influence and which are not joint ventures. Significant influence is the power to participate in, but not to control, the financial and operating policies within an enterprise. Significant influence is presumed to exist where the Allianz Group has at least 20% but not more than 50% of the voting rights unless it can be clearly demonstrated that this is not the case. If the investor holds less than 20% of the voting power of the investee, it is presumed that the investor does not have significant influence unless such influence can be clearly demonstrated. Joint ventures are entities over which the Allianz Group and one or more other parties have joint control. Investments in associated enterprises and joint ventures are generally accounted for using the equity method of accounting, in which the results and the carrying amount of the investment represent the Allianz Group’s proportionate share of the entity’s net income and net assets, respectively. The Allianz Group accounts for all material investments in associates on a time lag of no more than three
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) months. Income from investments in associated enterprises and joint ventures is included in interest and similar income. The positive difference between the cost of the investment and the Allianz Group transfers financialGroup’s share of the net fair value of the associate’s identifiable assets to certain SPEsand liabilities is accounted for as goodwill and included in revolving securitizationsthe carrying amount of commercial mortgage or other loan portfolios. The Allianz Group consolidates these SPEs asthe investment. Profits and losses resulting from upstream and downstream transactions between the Allianz Group continuesand an associated enterprise are recognized in Allianz Group’s financial statements only to control the financial assets transferredextent of unrelated interests in the associate. Allianz Group’s share in the associate’s profits and retainslosses resulting from these transactions is eliminated. Accounting policies of associated enterprises and joint ventures have been adjusted where necessary to ensure consistency with the servicing of such loans.accounting policies adopted by the Allianz Group. Foreign currency translation and transactions Translation from any foreign currency into functional currency The individual financial statements of each of the Allianz Group’s subsidiaries are prepared in the prevailing currency in the environment where the subsidiary conducts its ordinary activities (its functional currency). Transactions recorded in currencies other than the functional currency (foreign currencies) are recorded at the exchange rate of exchangeprevailing on the date of the transaction. At the balance sheet date, monetary assets and liabilities recorded in foreign currencies are translated into the functional currency using the closing exchange rate and non-monetary assets and liabilities are translated at historical rates. CurrencyForeign currency gains and losses arising from foreign currency transactions are reported in investment expenses.
Translation to the presentation currency For purposes of the consolidated financial statements, the results and financial position of each of the Allianz Group’s subsidiaries are expressed in Euro, the functional currency of the Allianz Group. Assets and liabilities of subsidiaries not reporting in Euro are translated at the closing rate on the balance sheet date and income and expenses are translated at the quarterly average exchange rate. Any foreign currency translation differences, including those arising from the equity method, are recorded directly in shareholders’ equity, as foreign currency translation adjustments. Fair value of financial assets and liabilities
The fair values of financial instruments traded in active markets (such as publicly traded derivatives and trading and available-for-sale investments) are based on quoted market prices or dealer price quotations on the last exchange trading day prior to the balance sheet date. The quoted market price used for financial assets held by the Group is the current bid price; the quoted market price used for financial liabilities is the current ask price.
The fair values of financial instruments that are not traded in an active market are determined by using valuation techniques. Valuation techniques include net present value techniques, the discounted cash flow method, comparison to similar instruments for which observable market prices exist and other valuation models. The Allianz Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet date. In the process, appropriate adjustments are made for credit and measurement risks.
Use of estimates and assumptions The preparation of consolidated financial statements requires the Allianz Group to make estimates and assumptions that affect items reported in the consolidated balance sheets and consolidated income statements, and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates. The most significant accounting estimates are associated with the reserves for loss and loss adjustment expenses, reserves for insurance and investment contracts, loan loss allowance, fair value and impairments of financial instruments, goodwill, deferred acquisition costs, deferred taxes and reserves for pensions and similar obligations. Supplementary information on the Allianz Group’s assets
Cash and cash equivalents Cash and cash equivalents include balances with banks payable on demand, balances with central banks, cash on hand, treasury bills to the extent they are not included in financial assets held for trading, checks and bills of exchange which are eligible for refinancing at central banks, subject to a maximum term of three months from the date of acquisition. Financial assets carried at fair value through incomeReal estate held for investment
Financial assetsReal estate held for investment (i.e., real estate and rights equivalent to real property and buildings, including buildings on leased land) is carried at cost less accumulated depreciation and impairments. Real estate held for investment is depreciated on a straight-line basis over its estimated life, with a maximum of 50 years. When testing for impairment, the fair value through income include financial assetsof real estate held for trading and financial assets designated at fairinvestment is determined by the discounted cash flow method. Improvement costs are capitalized if they extend the useful life or increase the value through income.
Financial assets held for trading consist of debt and equity securities, promissory notes and preciousthe asset; otherwise they are recognized as an expense as incurred.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) metal holdings,Financial instruments
Classification, recognition and initial measurement Financial assets within the scope of IAS 39 are either classified as financial assets carried at fair value through income, available-for-sale investments, held-to-maturity investments, loans and advances to banks and customers or as derivative financial instruments used for hedging. Furthermore financial assets comprise funds held by others under reinsurance contracts assumed and financial assets for unit-linked contracts. Financial liabilities within the scope of IAS 39 are either classified as financial liabilities carried at fair value through income, liabilities to banks and customers, investment contracts with policyholders, derivative financial instruments used for hedging, financial liabilities for puttable equity instruments, certificated liabilities or participation certificates and subordinated liabilities. Furthermore financial liabilities comprise financial liabilities for unit-linked contracts. The classification depends on the nature and purpose of the financial instrument and is determined at initial recognition. Financial instruments are initially recognized at fair value plus, in the case of financial instruments not carried at fair value through income, directly attributable transaction costs. Financial instruments are generally recognized and derecognized on trade date, when the Allianz Group has entered into contractual arrangements with counterparties to purchase or sell securities or incur a liability. Fair value of financial instruments The Allianz Group applies the IAS 39 fair value hierarchy to determine the fair value of financial instruments. Active markets—quoted market price The fair values of financial instruments that are traded in active markets are based on quoted market prices or dealer price quotations on the last exchange trading day prior to and including the balance sheet date. The quoted market price used for a financial asset held by the Allianz Group is the current bid price; the quoted market price used for financial liabilities is the current ask price. The impact of the Allianz Group´s own credit spread on financial liabilities carried at fair value is calculated by discounting future cash flows at a rate which incorporates the Allianz Group´s observable credit spread. No active markets—valuation techniques If the market for a financial instrument is not active, the fair value is determined by using valuation techniques. The valuation techniques used are based on market observable inputs when available. Such market inputs include references to recently quoted prices for identical instruments from an active market, quoted prices for identical instruments from an inactive market, quoted prices for similar instruments from active markets, quoted prices for similar instruments from inactive markets. Market observable inputs also include interest rate yield curves, option volatilities and foreign currency exchange rates. Where observable market prices are not available, fair value is based on appropriate valuation techniques using non-market observable inputs. Valuation techniques include net present value techniques, the discounted cash flow method, comparison to similar instruments for which observable market prices exist and other valuation models. In the process, appropriate adjustments are made for credit and measurement risks. Due to the worldwide financial market crisis, some markets faced a significant shortage of liquidity, which affected the valuation techniques used by the Allianz Group to measure fair value. For certain financial instruments, the market has been completely illiquid and market prices were no longer available. In addition, the market prices of certain asset-backed securities (ABS)-based products declined significantly. For ABS-based products the availability of price quotations from a functioning market was limited during 2008 and as of December 31, 2008. Therefore the valuation of these financial instruments is mainly based on quoted market prices or current market values of very similar same financial instruments. The market values used were taken from other
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) market participants that are representative of the market. In all other cases Allianz Group used model-based valuation techniques. Regardless of the valuation technique used, that technique reflects current market conditions and appropriate risk adjustments that market participants would make. No active market—equity instruments If the fair value cannot be measured reliably, unquoted equity instruments and derivatives linked to such instruments are stated at cost until a fair value can be measured reliably. These financial instruments are subject to the normal impairment procedures. Amortized cost of financial instruments The amortized cost of a financial instrument is the amount at which the financial instrument is measured at initial recognition minus principal repayments, plus or minus the cumulative amortization using the effective interest rate method of any difference between that initial amount and the maturity amount, and minus any reduction for impairment or uncollectability. Recognition of a day one profit or loss If the fair value of a financial instrument differs from its initial transaction price (i.e. by comparing it to other observable current market transactions or by using a technical valuation model incorporating only observable market data), it is required that the recognition of a “day one profit or loss” is consistent with the subsequent measurement of the financial instrument with all the other requirements regarding the calculation of fair value. A profit or loss should be recognized after initial recognition only to the extent that it arises from a change in a factor that market participants would consider in setting a price. Subsequent measurement of financial instruments The subsequent measurement of financial instruments depends on their classification as follows: Financial assets and liabilities carried at fair value through income Financial assets and liabilities carried at fair value through income include financial assets and liabilities held for trading and financial assets and liabilities designated at fair value through income. Financial assets and liabilities are classified as held for trading if they have been principally acquired principally for the purpose of generating a profit from short-term fluctuations in price or for the purpose of selling in the near future. Financial assets consist of debt and equity securities, promissory notes and derivative financial instruments with positive fair values that do not meet the criteria for hedge accounting. Financial liabilities held for trading primarily consist of derivative financial instruments with negative fair values that do not meet the criteria for hedge accounting and obligations to deliver assets arising from short sales of securities, which are carried out in order to benefit from short-term price fluctuations. The securities required to close out short sales are obtained through securities borrowing or reverse repurchase agreements. This treatment is also applicable for bifurcated embedded derivatives of hybrid financial instruments. Financial assets and liabilities held for trading are reportedmeasured at fair value. Changes in fair value are recognized directly in the consolidated income statement. The recognized net income forgains and losses include dividends and interest of the period.underlying financial instruments. Financial assets and liabilities designated at fair value through income are recordedmeasured at fair value with changes in fair value recorded in the consolidated income statement. The recognized net income forgains and losses include dividends and interest of the period.underlying financial instruments. A financial instrument may only be designated at inception as held at fair value through income and cannot be subsequently be changed. InvestmentsAvailable-for-sale investments
Investments include available-for-sale investments, held-to-maturity investments, funds held by others under reinsurance contracts assumed, investments in associates and joint ventures, and real estate held for investment.
Available-for-sale investments arecomprise debt and equity securities that are designated as available-for-sale or are not classified as held-to-maturity, loans and advances to banks and
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) customers, or financial assets carried at fair value through income. Available-for-sale securitiesinvestments are recorded at fair value. Unrealized gains and losses, which are the difference between fair value and cost or amortized cost, are included as a separate component of shareholders’ equity, net of deferred taxes and the latent reserve for premium refunds to the extent that policyholders will participate in such gains and losses on the basis of statutory or contractual regulations when they are realized. When an available-for-sale investment is derecognized or determined to be impaired, the cumulative gain or loss previously recorded in shareholders’ equity is transferred and recognized in the consolidated income statement. Realized gains and losses on securities are generally determined by applying the average cost method at the subsidiary level. Available-for-sale equity securities include investments in limited partnerships. The Allianz Group records its investments in limited partnerships at cost, where the ownership interest is less than 20%, as the limited partnerships do not have a quoted market price and fair value cannot be reliably measured. The Allianz Group accounts for its investments in limited partnerships with ownership interests of 20% or greater using the equity method due to the rebuttable assumptionpresumption that the limited partner has no control over the limited partnership. Held-to-maturity investments Held-to-maturity investments are debt securities with fixed or determinable payments and fixed maturities for which the Allianz Group has the positive intent and ability to hold to maturity. These securities are recorded at amortized cost using the effective interest method over the life of the security, less any impairment losses. Amortization of premium or discount is included in interest and similar income. A Gains and losses from derecognition and impairment of held-to-maturity or available-for-sale debt security is impaired if there is objective evidence that a loss event has occurred, which has impaired the expected cash flows, i.e. all amounts due according to the contractual terms of the securityinvestments are not considered collectible. Typically this is due to deteriorationrecognized in the creditworthiness of the issuer. A decline in fair value below amortized cost due to changes in risk free interest rates does not represent objective evidence of a loss event.
If there is objective evidence that the cost may not be recovered, an available-for-sale equity security is considered to be impaired. Objective evidence that the cost may not be recovered, in addition to qualitative impairment criteria, includes a significant or prolonged decline in the fair value below cost. The Allianz Group’s policy considers a significant decline to be one in which the fair value is below the weighted-average cost by more than 20% and a prolonged decline to be one in which fair value is below the weighted-average cost for greater than nine months. This policy is applied by all subsidiaries at the individual security level.
If an available-for-sale equity security is impaired based upon the Allianz Group’s qualitative or quantitative impairment criteria, any further declines in the fair value at subsequent reporting dates are recognized as impairments. Therefore, at each reporting period, for an equity security that is determined to be impaired based upon the Allianz Group’s impairment criteria, an impairment is recognized for the difference between the fair value and the original cost basis, less any previously recognized impairments.
In a subsequent period, if the fair value of an available-for sale debt security instrument increases and the increase can be objectively related to an event occurring after the recognition of an impairment loss, such as an improvement in the
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
debtor’s credit rating, the impairment is reversed through impairments of investments (net). Reversals of impairments of available-for-sale equity securities are not recorded through theconsolidated income statement.
Funds held by others under reinsurance contracts assumed relate to cash deposits to which the Allianz Group is entitled, but which the ceding insurer retains as collateral for future obligations of the Allianz Group. The cash deposits are recorded at face value, less any impairments for balances that are deemed to be not recoverable.
Associated enterprises are entities over which the Allianz Group can exercise significant influence and which are not joint ventures. Significant influence is the power to participate in, but not to control, the financial and operating policies within an enterprise. Significant influence is presumed to exist where the Allianz Group has at least 20% but not more than 50% of the voting rights. Joint ventures are entities over which the Allianz Group and one or more other parties have joint control.
Investments in associated enterprises and joint ventures are generally accounted for using the equity method of accounting, in which the results and the carrying amount of the investment represent the Allianz Group’s proportionate share of the entity’s net income and net assets, respectively. The Allianz Group accounts for all material investments in associates on a time lag of no more than three months. Income from investments in associated enterprises and joint ventures is included in interest and similar income.
Real estate held for investment (i.e., real property and equivalent rights and buildings, including buildings on leased land) is carried at cost less accumulated depreciation and impairments. Real estate held for investment is depreciated on a straight-line basis over its estimated life, with a maximum of 50 years. When testing for impairment, the fair value of real estate held for investment is determined by the discounted cash flow method. Improvement costs are capitalized if they extend the useful life or increase the value of the asset; otherwise they are recognized as an expense as incurred.
Loans and advances to banks and customers Loans and advances to banks and customers are non-derivative financial assets with fixed andor determinable payments, that are not quoted in an active market, that are not classified as available-for-sale investments or held-to-maturity investments, financial assets held for trading, or financial assets designated at fair value through income. Loans to banks and customers are initially recorded at fair value plus transaction costs, and subsequently recorded at amortized cost using the effective interest rate method. Interest income is accrued on the unpaid principal balance, net of charge-offs. Using the effective interest method, net deferred fees and premiums or discounts are recorded as an adjustment of interest income yield over the lives of the related loans. Loans are placed on non-accrual status when the payment of principal or interest is doubtful based on the credit assessment of the borrower. Non-accrual loans consist of loans on which interest income is no longer recognized on an accrued basis, and loans for which a specific provision is recorded for the entire amount of accrued interest receivable. When a loan is placed on non-accrual status, any accrued interest receivable is reversed against interest and similar income. Loans can only be restored to accrual status when interest and principal payments are made current (in accordance with the contractual terms), and future payments in accordance with those terms are reasonably assured. When there is a doubt regarding the ultimate collectibility of the principal of a loan placed in non-accrual status, all cash receipts are applied as reductions of principal. Once the recorded principal amount of the loan is reduced to zero, future cash receipts are recognized as interest income. Loans and advances to banks and customers include reverse repurchase (“reverse repo”) agreements and collateral paid for securities borrowing transactions. Reverse repo transactions involve the purchase of securities by the Allianz Group from a counterparty, subject to a simultaneous obligation to sell these securities at a certain later date, at an agreed upon price. If control of the securities remains with the counterparty over the entire lifetime of the agreement of the transaction, the securities concerned are not recognized as assets. The Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
amounts of cash disbursed are recorded under loans and advances to banks and customers. Interest income on reverse repo agreements is accrued over the duration of the agreements and is reported in interest and similar income.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Securities borrowing transactions generally require the Allianz Group to deposit cash with the security’s lender. Fees paid are reported as interest expense. Loans and advances to customers include the Allianz Group’s gross investment in leases, less unearned finance income, related to lease financing transactions for which the Allianz Group is the lessor. The gross investment in leases is the aggregate of the minimum lease payments and any unguaranteed residual value accruing to the Allianz Group. Lease financing transactions include direct financing leases and leveraged leases. The unearned finance income is amortized over the period of the lease in order to produce a constant periodic rate of return on the net investment outstanding with respect to finance leases. Funds held by others under reinsurance contracts Funds held by others under reinsurance contracts assumed relate to cash deposits to which the Allianz Group is entitled, but which the ceding insurer retains as collateral for future obligations of the Allianz Group. The cash deposits are recorded at face value, less any impairments for balances that are deemed to be not recoverable. Financial assets for unit-linked contracts Financial assets for unit-linked contracts are recorded at fair value with changes in fair value recorded in net income together with the offsetting changes in fair value of the corresponding financial liabilities for unit-linked contracts. Liabilities to banks and customers Liabilities to banks and customers are subsequently measured at amortized cost. Herein included are repurchase (“repo”) agreements and securities lending transactions. Repo transactions involve the sale of securities by the Allianz Group to a counterparty, subject to the simultaneous agreement to repurchase these securities at a certain later date, at an agreed price. If control of the securities remains with the Allianz Group over the entire lifetime of the transaction, the securities concerned are not derecognized by the Allianz Group. The proceeds of the sale are reported under liabilities to banks or customers. Interest expense from repo transactions is accrued over the duration of the agreements and reported in interest and similar expenses. In securities lending transactions the Allianz Group generally receives cash collateral which is recorded as liabilities to banks or customers. Fees received are recognized as interest income. Investment contracts with policyholders Fair value for investment and annuity contracts are determined using the cash surrender values of policyholders’ and contract holders’ accounts. Financial liabilities for unit-linked contracts The fair value of financial liabilities for unit-linked contracts is equal to the fair value of the financial assets for unit-linked contracts. Financial liabilities for puttable equity instruments Financial liabilities for puttable equity instruments include the minority interests in shareholders’ equity of certain consolidated investment funds. These minority interests qualify as a financial liability of the Allianz Group, as they give the holder the right to put the instrument back to the Allianz Group for cash or another financial asset (“puttable instrument”). These liabilities are required to be recorded at redemption amount with changes recognized in income. Certified liabilities, participation certificates and subordinated liabilities Certified liabilities, participation certificates and subordinated liabilities are subsequently measured at amortized cost, using the effective interest method to amortize the premium or discount to the redemption value over the life of the liability. Financial guarantee contracts Financial guarantee contracts issued by the Allianz Group are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts which
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) are not accounted for as insurance contracts are recognized initially at fair value. Subsequently, unless the financial guarantee contract was designated at inception as at fair value through income, the issuer measures it at the higher of the best estimate of the expenditure required to settle the present obligation and the amount initially recognized less cumulative amortization when appropriate. Impairment of financial assets Impairment of available-for-sale and held-to-maturity investments A held-to-maturity or available-for-sale debt security is impaired if there is objective evidence that a loss event has occurred, which has impaired the expected cash flows, i.e. all amounts due according to the contractual terms of the security are not considered collectible. Typically this is due to deterioration in the creditworthiness of the issuer. A decline in fair value below amortized cost due to changes in risk free interest rates does not by itself represent objective evidence of a loss event. If there is objective evidence that the cost may not be recovered, an available-for-sale equity security is considered to be impaired. Objective evidence that the cost may not be recovered, in addition to qualitative impairment criteria, includes a significant or prolonged decline in the fair value below cost. The Allianz Group’s policy considers a significant decline to be one in which the fair value is below the weighted average cost by more than 20% or a prolonged decline to be one in which fair value is below the weighted average cost for greater than nine months. This policy is applied by all subsidiaries at the individual security level. If an available-for-sale equity security is impaired based upon the Allianz Group’s qualitative or quantitative impairment criteria, any further declines in the fair value at subsequent reporting dates are recognized as impairments. Therefore, at each reporting period, for an equity security that is determined to be impaired based upon the Allianz Group’s impairment criteria, an impairment is recognized for the difference between the fair value and the original cost basis, less any previously recognized impairments. In a subsequent period, if the fair value of an available-for sale debt security instrument increases and the increase can be objectively related to an event occurring after the recognition of an impairment loss, such as an improvement in the debtor’s credit rating, the impairment is reversed through impairments of investments (net). Reversals of impairments of available-for-sale equity securities are not recorded through the income statement. Impairment of loans Loan loss allowance is recognized for loans for which there is objective evidence of impairment as a result of one or more loss events that occurred after the initial recognition of the loan, and that loss event has an impact on the estimated future cash flows of the loan that can be reasonably estimated. If there is objective evidence that a loan is impaired, a loan loss allowance is recognized as the difference between the loan’s carrying amount and the present value of future cash flows, which includes all contractual interest and principal payments, discounted at the loan’s original effective interest rate. The loan loss allowance is reported as a reduction of loans and advances to banks and customers. Provisions for contingent liabilities, such as guarantees, loan commitments and other obligations are reported as other liabilities. Loans with an outstanding balance greater than €1 mn are considered to be individually significant, and they are assessed individually to determine whether an impairment exists. Individually significant loans that are not impaired, as well as loans that are not individually significant, are grouped with loans evidencing similar creditcharacteristicscredit characteristics and are collectively assessed for impairment. Loans impaired individually or collectively are eliminated from further testing to ensure that there is no duplication of impairment. The following allowances comprise the total loan loss allowance. Specific allowances are established to provide for specifically identified counterparty risks. Specific allowances are established for impaired loans. The amount of the impairment is based on the present value of expected future cash flows or based on the fair value of the collateral if the loan is collateralized
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) and foreclosure is probable. If the amount of the impairment subsequently increases or decreases due to an event occurring after the initial measurement of impairment, a change in the allowance is recognized in earnings by a charge or a credit to the loan loss provisions. General allowances are established to provide for incurred but unidentified losses for individually significant loans that do not have a specific allowance. Loans are segmented into groups of loans with similar risk characteristics and general allowances are calculated using statistical methods of credit risk measurement based on historical loss experience and the evaluation of the loan portfolio under current events and economic conditions. Portfolio allowances are established for all loans that are not considered individually significant and have not been individually assessed. These loans are segmented into portfolios of homogeneous loans exhibiting similar loss characteristics, and allowances are calculated using statistical methods based upon historical loss rates which are regularly updated. Portfolio allowances are presented within the specific allowance category. Country risk allowances are established for transfer risk. Transfer risk is a measure of the likely ability of a borrower in a country to repay its foreign currency-denominated debt in light of the economic or political situation prevailing in the country. Country risk allowances are based on a country risk rating system that incorporates current and historical economic, political and other data to categorize countries by risk profile. Loans with specific allowances are excluded from the country risk rating system, and countries provided for within the country risk allowance are excluded from the determination Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
of the transfer risk component of the general allowance. Country risk allowances are presented within the specific or general risk category, as appropriate. Loans are charged-off when all economically sensible means of recovery have been exhausted. At the point of charge-off, the loan, as well as any specific allowance associated with the loan, is removed from the consolidated balance sheet or a charge may be recorded to directly charge-off the loan. A charge-off may be full or partial. Subsequent to a charge-off, recoveries, if any, are recognized as a credit to the loan loss provisions. The loan loss provisions are the amount necessary to adjust the loan loss allowance to a level determined through the process described above. Financial assetsReclassification of financial instruments
Once a financial instrument has been classified into a particular category at initial recognition, transfers into or out of that category from or to another category are impossible for unit linked contractssome categories and are rarely done in all other circumstances. Please refer to Note 3 for amendments to IAS 39 with regard to reclassifications. Offsetting of financial instruments Financial assets and liabilities are offset and the net amount reported in the balance sheet only when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously. Derecognition of financial instruments A financial asset is derecognized when the contractual rights to the cash flows from the financial asset expire or the Allianz Group transfers the asset and substantially all of the risks and rewards of ownership or transfers the asset and loses control of the asset. A financial liability is derecognized when it is extinguished. Derivative financial instruments The Allianz Group’s Property-Casualty and Life/Health segments use derivative financial instruments such as swaps, options and futures to hedge against changes in market prices or interest rates in their investment portfolios. In the Allianz Group’s Banking segment, derivative financial instruments are used both for unit linked contractstrading purposes and to hedge against movements in interest rates, currency exchange rates and other price risks of investments, loans, deposit liabilities and other interest sensitive assets and liabilities.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Derivative financial instruments that do not meet the criteria for hedge accounting are reported at fair value as financial assets held for trading or financial liabilities held for trading. Gains or losses from these derivative financial instruments arising from valuation at fair value are included in income from financial assets and liabilities held for trading. This treatment is also applicable for bifurcated embedded derivatives of hybrid financial instruments. For derivative financial instruments used in hedge transactions that meet the criteria for hedge accounting (“accounting hedges”), the Allianz Group designates the derivative financial instrument as a fair value hedge, cash flow hedge, or hedge of a net investment in a foreign entity. The Allianz Group documents the hedge relationship, as well as its risk management objective and strategy for entering into various hedge transactions. The Allianz Group assesses, both at the hedge’s inception and on an ongoing basis, whether the derivative financial instruments that are used for hedging transactions are highly effective in offsetting changes in fair values or cash flows of the hedged items. Derivative financial instruments used in accounting hedges are recognized as follows: Fair value hedges Fair value hedges are hedges of a change in the fair value of a recognized financial asset or liability or a firm commitment due to a specified risk. Changes in the fair value of a derivative financial instrument, together with the share of the change in fair value of the hedged item attributable to the hedged risk are recognized in net income. Cash flow hedges Cash flow hedges offset the exposure to variability in expected future cash flows that is attributable to a particular risk associated with a recognized asset or liability or a forecasted transaction. Changes in the fair value of a derivative financial instrument that represent an effective hedge are recorded in unrealized gains and losses (net) in shareholders’ equity, and are recognized in net income when the offsetting gain or loss associated with the hedged item is recognized. Any ineffectiveness of the cash flow hedge is recognized directly in net income. Hedges of a net investment in a foreign entity Hedge accounting may be applied to derivative financial instruments used to hedge the foreign currency risk associated with a net investment in a foreign entity. The proportion of gains or losses arising from valuation of the derivative financial instrument, which is determined to be an effective hedge, is recognized in unrealized gains and losses (net) in shareholders’ equity, while any ineffectiveness is recognized directly in net income. For all fair value hedges, cash flow hedges, and hedges of a net investment in a foreign entity, the derivative financial instruments are included in other assets or other liabilities. The Allianz Group discontinues hedge accounting prospectively when it is determined that the derivative financial instrument is no longer highly effective, when the derivative financial instrument or the hedged item expires, or is sold, terminated or exercised, or when the Allianz Group determines that designation of the derivative financial instrument as a hedging instrument is no longer appropriate. After a fair value hedge is discontinued, the Allianz Group continues to report the derivative financial instrument at its fair value with changes in fair value recordedrecognized in net income, together with the offsettingbut changes in the fair value of the correspondinghedged item are no longer recognized in net income. After hedge accounting for a cash flow hedge is discontinued, the Allianz Group continues to record the derivative financial instrument at its fair value; any net unrealized gains and losses accumulated in shareholders’ equity are recognized when the planned transaction occurs. After a hedge of a net investment in a foreign entity is discontinued, the Allianz Group continues to report the derivative financial instrument at its fair value and any net unrealized gains or losses accumulated in shareholders’ equity remain in shareholders’ equity until the disposal of the foreign entity. Derivative financial instruments are netted when there is a legally enforceable right to offset with the same counter-party and the Allianz Group intends to settle on a net basis.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Disclosures relating to financial instruments IFRS 7 requires to group financial instruments into classes that are appropriate to the nature of the information disclosed and that take into account the characteristics of those financial instruments. The scope of IFRS 7 includes recognized and unrecognized financial instruments. Recognized financial instruments are those financial assets and financial liabilities within the scope of IAS 39. Unrecognized financial instruments are financial instruments that are outside of the scope of IAS 39 but within the scope of IFRS 7. The classes of financial instruments within Allianz Group are mainly in line with the categories according to IAS 39. The enlarged risk disclosure requirements of IFRS 7 are reflected in the Quantitative and Qualitative Disclosures about Market Risk (ITEM 11) on pages 153 to 175 in this 20-F. The requirements of IAS 1 with regard to capital disclosures are also incorporated in ITEM 11. ITEM 11, with the exception of the “Outlook” section on page 176, is an integral part of the audited consolidated financial statements.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) The following table summarizes the relations between balance sheet positions, classes according to IFRS 7 and categories according to IAS 39. | | | | | | | Measurement basis | | IAS 39 category | Balance sheet line item and IFRS 7 classes of financial assets | | | | | | | | Financial assets | | | | | | | | Cash and cash equivalents | | Nominal value | | — | | | | Financial assets carried at fair value through income | | | | | – Financial assets held for trading | | Fair value | | Held for trading | – Financial assets designated at fair value through income | | Fair value | | Designated at fair value through income | | | | Investments | | | | | – Available-for-sale investments | | Fair value | | Available-for-sale investments | – Held-to-maturity investments | | Amortized cost | | Held-to-maturity investments | | | | Loans and advances to banks and customers | | Amortized cost | | Loans and receivables | | | | Financial assets for unit-linked contracts | | Fair value | | — | | | | Other Assets | | | | | – Derivative financial instruments used for hedging that meet the criteria for hedge accounting and firm commitments | | Fair value | | — | | | | Balance sheet line item and IFRS 7 classes of financial liabilities | | | | | | | | Financial liabilities | | | | | | | | Financial liabilities carried at fair value through income | | | | | – Financial liabilities held for trading | | Fair value | | Held for trading | – Financial liabilities designated at fair value through income | | Fair value | | Designated at fair value through income | | | | Liabilities to banks and customers | | Amortized cost | | Other liabilities - at amortized cost | | | | Reserves for insurance and investment contracts | | | | | – Investment contracts with policyholders | | Fair value | | — | | | | Financial liabilities for unit-linked contracts | | Fair value | | — | | | | Other Liabilities | | | | | – Derivative financial instruments used for hedging purposes that meet the criteria for hedge accounting and firm commitments | | Fair value | | — | – Financial liabilities for puttable equity instruments | | Redemption amount | | — | | | | Certificated liabilities | | Amortized cost | | Other liabilities - at amortized cost | | | | Participation certificates and subordinated liabilities | | Amortized cost | | Other liabilities - at amortized cost | | | | Off-balance sheet | | | | | | | | Financial guarantees | | Nominal value | | — | | | | Irrevocable loan commitments | | Nominal value | | — |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Insurance, investment and reinsurance contracts Insurance and investment contracts Contracts issued by insurance subsidiaries of the Allianz Group are classified according to IFRS 4 as insurance or investment contracts. Contracts under which the Allianz Group accepts significant insurance risk from a policyholder are classified as insurance contracts. Contracts under which the Allianz Group does not accept significant insurance risk are classified as investment contracts. Certain insurance and investment contracts include discretionary participation features. All insurance contracts and investment contracts with discretionary participating features are accounted for unit linked contracts.under the provisions of U.S. GAAP, including SFAS 60, SFAS 97 and SFAS 120. Investment contracts without discretionary participation features are accounted for as financial instruments in accordance with IAS 39. Reinsurance contracts The Allianz Group’s consolidated financial statements reflect the effects of ceded and assumed reinsurance contracts. Assumed reinsurance refers to the acceptance of certain insurance risks by Allianz that other companies have underwritten. Ceded reinsurance refers to the transfer of insurance risk, along with the respective premiums, to one or more reinsurers who will share in the risks. When the reinsurance contracts do not transfer significant insurance risk according to SFAS 113, deposit accounting is applied as required under SOP 98-7. Assumed reinsurance premiums, commissions and claim settlements, as well as the reinsurance element of technical provisions are accounted for in accordance with the conditions of the reinsurance contracts and with consideration of the original contracts for which the reinsurance was concluded. Premiums ceded for reinsurance and reinsurance recoveries on benefits and claims incurred are deducted from premiums earned and insurance and investment contract benefits. Assets and liabilities related to reinsurance are reported on a gross basis. Amounts ceded to reinsurers from reserves for insurance and investment contracts are estimated in a manner consistent with the claim liability associated with the reinsured risks. Accordingly, revenuesRevenues and expenses related to reinsurance agreements are recognized in a manner consistent with the underlying risk of the business reinsured. To the extent that the assuming reinsurers are unable to meet their obligations, the Group remains liable to its policy-holders for the portion reinsured. Consequently, allowances are made for receivables on reinsurance contracts which are deemed uncollectible. Deferred acquisition costs Deferred acquisition costs (“DAC”)(DAC), present value of future profits (PVFP) and deferred sales inducements comprise the deferred acquisition costs in the balance sheet. DAC generally consist of commissions, underwriting expenses and policy issuance costs, which vary with and are directly related to theacquisitionthe acquisition and renewal of insurance contracts. These acquisition costs are deferred, to the extent they are recoverable, and are subject to recoverability testing at the end of each accounting period. For short and long duration traditional products (SFAS 60) and limited payment products (SFAS 97), DAC is amortized in proportion to premium revenue recognized. For universal life, participating life, and investment-type products (SFAS 97 and SFAS 120), DAC is amortized over the contract life of the related contracts.a book of contracts based on estimated gross profit (EGP) or estimated gross margin (EGM), as appropriate, based on historical and anticipated future experience, which is evaluated regularly. For investment contracts, acquisition costs are only deferred if the costs are incremental. Acquisition costs are incremental if the costs would not have been incurred if the related contracts would not have been issued. Present value of future profits (“PVFP”)PVFP is the present value of net cash flows anticipated in the future from insurance contracts in force at the date of acquisition and is amortized over the life of the related contracts. PVFP was determined using discount rates ranging from 12%12.0% to 15%16.9%. Interest accrues on the PVFP balance based upon the
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) policy liability rate or contract rate. Interest accrues on PVFP at rates between 3.5%2.0% and 8.5%18.7%. Deferred sales inducements on insurance contracts that meet the following criteria are deferred and amortized using the same methodology and assumptions used to amortizefor amortized deferred acquisition costs: recognized as part of reserves for insurance and investment contracts, explicitly identified in the contract at inception, incremental to amounts the Allianz Group credits on similar contracts without sales inducements, and higher than the contract’s expected ongoing crediting rates for periods after the inducement. Shadow accounting Shadow accounting is applied to insurance and investment contracts with discretionary participating features, and SFAS 97 universal life type insurance contracts and SFAS 97 investment contracts. Shadow accounting is applied to DAC, PVFP, deferred sales inducements, unearned premium liabilities and the reserves for insurance and investment contracts to take into account the effect of unrealized gains or losses on insurance liabilities or assets in the same way as it is done for a realized gain or loss. These assets or liabilities are adjusted with corresponding charges or credits recognized directly to shareholders’ equity as a component of the related unrealized gains and losses. Unearned premiums For short-duration insurance contracts, such as property-casualty contracts, in accordance with SFAS 60, premiums written to be earned in future years are recorded as unearned premiums. These premiums are earned in subsequent years in relation to the insurance coverage provided. For long-duration insurance contracts, in accordance with SFAS 97, amounts charged as consideration for origination of the contract (i.e. initiation or front-end fees) are reported as unearned premium. These fees are recognized using the same methodology as DAC amortization. Unbundling The deposit component of an insurance contract is unbundled when both of the following conditions are met: | 1. | the deposit component (including any embedded surrender option) can be measured separately (i.e., without taking into account the insurance component); and |
| 2. | the Allianz Group’s accounting policies do not otherwise require the recognition of all obligations and rights arising from the deposit component. |
Currently, the Allianz Group has no in-force insurance contracts for which all of the rights and obligations related to such contracts have not been recognized. As a result, the Allianz Group has not recognized an unbundled deposit component in respect of any of its insurance contracts, and accordingly the Allianz Group has not recorded any related provisions in its consolidated financial statements. Bifurcation Certain of the Allianz Group’s universal life-type insurance contracts include options to replicate a market index (market value liability options or “MVLO”). These options are bifurcated from the insurance contracts and accounted for as derivatives. Reserves for loss and loss adjustment expenses Reserves are established for the payment of losses and loss adjustment expenses (LAE) on claims which have occurred but are not yet settled. Reserves for loss and loss adjustment expenses fall into two categories: case reserves for reported claims and incurred but not reported reserves (IBNR). Case reserves for reported claims are based on estimates of future payments that will be made with respect to claims, including LAE relating to such claims. Such estimates are made on a case-by-case
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) basis, based on the facts and circumstances available at the time the reserves are established. The estimates reflect the informed judgment of claims personnel based on general insurance reserving practices and knowledge of the nature and value of a specific type of claim. These case reserves are regularly reevaluated in the ordinary course of the settlement process and adjustments are made as new information becomes available. IBNR reserves are established to recognize the estimated cost of losses that have occurred but where the Allianz Group has not yet been notified. IBNR reserves, similar to case reserves for reported claims, are established to recognize the estimated costs, including expenses, necessary to bring claims to final settlement. The Allianz Group relies on its past experience, adjusted for current trends and any other relevant factors to estimate IBNR reserves. IBNR reserves are estimates based on actuarial and statistical projections of the expected cost of the ultimate settlement and administration of claims. The analyses are based on facts and circumstances known at the time, predictions of future events, estimates of future inflation and other societal and economic factors. Trends in claim frequency, severity and time lag in reporting are examples of factors used in projecting the IBNR reserves. IBNR reserves are reviewed and revised periodically as additional information becomes available and actual claims are reported. The process of estimating loss and LAE reserves is by nature uncertain due to the large number of variables affecting the ultimate amount of claims. Some of these variables are internal, such as changes in claims handling procedures, introduction of new IT systems or company acquisitions and divestitures. Others are external, such as inflation, judicial trends, and legislative changes. The Allianz Group reduces the uncertainty in reserve estimates through the use of multiple actuarial and reserving techniques and analysis of the assumptions underlying each technique. There is no adequate statistical data available for some risk exposures in liability insurance, such as environmental and asbestos claims and large-scale individual claims, because some aspects of these types of claims become known very slowly and continue to evolve. Appropriate provisions have been made for such cases based on the Allianz Group’s judgment and an analysis of the portfolios in which such risks occur. These provisions represent the Allianz Group’s best estimate. The reserves for loss and loss adjustment expenses for asbestos claims in the United States were reviewed by independent actuaries during the year-end of 2005; current reserves reflect subsequent loss developments and reestimation of initial reserves. Reserves for insurance and investment contracts and financial liabilities for unit-linked contracts Reserves for insurance and investment contracts include aggregate policy reserves, reserves for premium refunds and other insurance reserves. Aggregate policy reserves for long-duration insurance contracts, such as traditional life and health products, are computed in accordance with SFAS 60 using the net level premium method, which represents the present value of estimated future policy benefits to be paid less the present value of estimated future net premiums to be collected from policyholders. The method uses best estimate assumptions adjusted for a provision for adverse deviation for mortality, morbidity, expected investment yields, surrenders and expenses at the policy inception date, which remain locked in thereafter unless a premium deficiency occurs. DAC and PVFP for traditional life and health products are amortized over the premium paying period of the related policies in proportion to the earned premium using assumptions consistent with those used in computing the aggregate policy reserves. The aggregate policy reserves for traditional participating insurance contracts are computed in accordance with SFAS 120 using the net level premium method. The method uses assumptions for mortality, morbidity and interest rates that are guaranteed in the contract or used in determining the policyholder dividends (or “premium refunds”). DAC and PVFP for traditional participating insurance products are amortized over the expected life of the contracts in proportion to EGMs based upon historical and anticipated future experience, which is determined on a best estimate basis and evaluated regularly. The present value of EGMs is computed using the expected investment yield. EGMs include premiums, investment income including realized gains and losses, insurance benefits, administration costs, changes in the
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) aggregate reserves and policyholder dividends. The effect of changes in EGMs are recognized in net income in the period revised. The aggregate policy reserves for universal life-type insurance contracts and unit-linked insurance contracts in accordance with SFAS 97 are equal to the account balance, which represents premiums received and investment return credited to the policy less deductions for mortality costs and expense charges. DAC and PVFP for universal life-type and investment contracts are amortized over the expected life of the contracts in proportion to EGPs based upon historical and anticipated future experience, which is determined on a best estimate basis and evaluated regularly. The present value of EGPs is computed using the interest rate that accrues to the policyholders, or the credited rate. EGPs include margins from mortality, administration, investment income including realized gains and losses and surrender charges. The effect of changes in EGPs are recognized in net income in the period revised. Current and historical client data, as well as industry data, are used to determine the assumptions. Assumptions for interest reflect expected earnings on assets, which back the future policyholder benefits. The information used by the Allianz Group’s actuaries in setting such assumptions includes, but is not limited to, pricing assumptions, available experience studies, and profitability analyses. The interest rate assumptions used in the calculation of deferred acquisition costs and aggregate policy reserves were as follows: | | | | | | | | | Long-
duration
insurance
contracts
(SFAS 60) | | | Traditional
participating
insurance
contracts
(SFAS 120) | | Deferred acquisition costs | | 2.5 – 6.0 | % | | 3.1 – 5.2 | % | Aggregate policy reserves | | 2.5 – 6.0 | % | | 2.0 – 4.3 | % |
Aggregate policy reserves also include liabilities for guaranteed minimum death, and similar mortality and morbidity benefits related to non-traditional contracts, annuitization options, and sales inducements. These liabilities are calculated based on contractual obligations using actuarial assumptions. Contractually agreed sales inducements to contract holders include persistency bonuses, and are accrued over the period in which the insurance contract must remain in force to qualify for the inducement. The aggregate policy reserves for unit-linked investment contracts are equal to the account balance, which represents premiums received and investment returns credited to the policy less deductions for mortality costs and expense charges. The aggregate policy reserves for non unit-linked investment contracts are equal to amortized cost, or account balance less DAC. DAC for unit-linked and non unit-linked investment contracts are amortized over the expected life of the contracts in proportion to revenues. Reserves for premium refunds include the amounts allocated under the relevant local statutory or contractual regulations to the accounts of the policyholders and the amounts resulting from the differences between these IFRSs based financial statements and the local financial statements (“latent reserve for premium refunds”), which will reverse and enter into future profit participation calculations. Unrealized gains and losses recognized for available-for-sale investments are recognized in the latent reserve for premium refunds to the extent that policyholders will participate in such gains and losses on the basis of statutory or contractual regulations when they are realized. The profit participation allocated to participating policyholders or disbursed to them reduces the reserve for premium refunds. Methods and corresponding percentages for participation in profits by the policyholders are set out below for the most significant countries for latent reserves: | | | | | | Country | | Base | | Percentage | | Germany | | | | | | Life1) | | investments | | 90 | % | Health | | all sources of profit | | 80 | % | France | | | | | | Life | | all sources of profit | | 80 | % | Italy | | | | | | Life | | investments | | 85 | % | Switzerland | | | | | | Group Life | | all sources of profit | | 90 | % | Individual Life | | all sources of profit | | 100 | % |
1) | additionally 75% of risk result and 50% of all other results. |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Liability adequacy tests are performed for each insurance portfolio on the basis of estimates of future claims, costs, premiums earned and proportionate investment income. For short duration contracts, a premium deficiency is recognized if the sum of expected claim costs and claim adjustment expenses, expected dividends to policyholders, un-amortized acquisition costs, and maintenance expenses exceeds related unearned premiums while considering anticipated investment income. For long duration contracts, if actual experience regarding investment yields, mortality, morbidity, terminations or expense indicate that existing contract liabilities, along with the present value of future gross premiums, will not be sufficient to cover the present value of future benefits and to recover deferred policy acquisition costs, then a premium deficiency is recognized. Other assets Other assets primarily consist of receivables, prepaid expenses, derivative financial instruments used for hedging that meet the criteria for hedge accounting, and firm commitments, property and equipment assets held for sale and other assets. Receivables are generally recorded at face value less any payments received, net of valuation allowances. Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Property and equipment includes real estate held for own use, equipment and software. Real estate held for own use (e.g., real propertyestate and buildings, including buildings on leased land) is carried at cost less accumulated depreciation and impairments. The capitalized cost of buildings is calculated on the basis of acquisition cost and depreciated on a straight-line basis over a maximum of 50 years in accordance with their useful lives. Costs for repairs and maintenance are expensed as incurred, while improvements if they extend the useful life or increase the value of the asset are capitalized. An impairment is recognized when the recoverable amount of these assets is less than their carrying amount. Where it is not possible to identify separate cash flows for estimating the recoverable cost of an individual asset, an estimate of the recoverable amount of the cash generating unit to which the asset belongs is used. Equipment is carried at cost less accumulated depreciation and impairments. Depreciation is generally computed using the straight-line method over the estimated useful lives of the assets. The estimated useful life of equipment ranges from 2 to 10 years, except for purchased information technology equipment, which is 2 to 8 years. Software, which includes software purchased from third parties or developed internally, is initially recorded at cost and is amortized on a straight-line basis over the estimated useful service lives or contractual terms, generally over 3 to 5 years. Costs for repairs and maintenance are expensed as incurred, while improvements, if they extend the useful life of the asset or provide additional functionality, are capitalized. Non-current assets and disposal groups classified as held-for-sale and discontinued operations Non-current assets or disposal groups are classified as held-for-sale if their carrying amounts will be principally recovered through a sale transaction rather than through continuing use. This requires that the asset or disposal group must be available for immediate sale in its present condition and its sale must be highly probable. The appropriate level of management must be committed to a plan to sell the asset or disposal group and the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification. Non-current assets or disposal groups classified as held-for-sale are measured at the lower of carrying amount and fair value less costs to sell. Any subsequent increases in fair value less costs shall be recognized as a gain but not in excess of the cumulative impairment loss that has been recognized either in accordance with IFRS 5 or IAS 36. A non-current asset shall not be depreciated while classified as held-for-sale. A gain or loss not previously recognized by the date of the sale shall be recognized at the date of derecognition. A discontinued operation is defined as a component of an entity that either has been disposed of or is classified as held-for-sale and represents a major line of business or geographical area of operations,
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or is a subsidiary acquired exclusively with a view to resale. In the consolidated income statement of the reporting period and the comparable period of the previous years, income and expenses from discontinued operations are reported separately from income and expenses from continuing operations. Intangible assets Intangible assets include goodwill, brand names and other intangible assets. Goodwill resulting from business combinations represents the difference between the acquisition cost of the business combination and the Allianz Group’s proportionate share of the net fair value of identifiable assets acquired and liabilities and certain contingentliabilities.contingent liabilities assumed. Goodwill resulting from business combinations is not subject to amortization. It is initially recorded at cost and subsequently measured at cost less accumulated impairments. The Allianz Group conducts an annual impairment test of goodwill during the 4th quarter or more frequently if there is an indication that goodwill is not recoverable. For the purpose of impairment testing, goodwill is allocated to each of the Allianz Group’s cash generating units that is expected to benefit from the business combination. The impairment test includes comparing the recoverable amount to the carrying amount, including goodwill, of all relevant cash generating units. A cash generating unit is impaired if the carrying amount is greater than the recoverable amount. The impairment of a cash generating unit is equal to the difference between the carrying amount and recoverable amount and is allocated to reduce any goodwill, followed by allocation to the carrying amount of any remaining assets. Impairments of goodwill are not reversed. Gains or losses realized on the disposal of subsidiaries include any related goodwill. Intangible assets acquired in business combinations are initially recorded at fair value on the acquisition date if the intangible asset is separable or arises from contractual or other legal rights. Intangible assets with an indefinite useful lifelives are not subject to amortization and are subsequently recorded at cost less accumulated impairments. Intangible assets with a definitefinite useful lifelives are amortized over their useful lives and are subsequently recorded at cost less accumulated amortization and impairments. The brand name “Dresdner Bank” has an indefinite life, as there is no foreseeable end to its economic life; therefore, it is not subject to amortization and it is recorded at cost less accumulated impairments. The fair value of this brand name, registered as a trade name, was determined using a royalty savings approach.
Similar to goodwill, an intangible asset with an indefinite useful life is subject to an annual impairment test, or more frequently if there is an indication that it is not recoverable. The impairment test includes comparing the recoverable amount to the carrying amount. Where it is not possible to identify separate Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
cash flows for estimating the recoverable amount of an individual asset, the Allianz Group estimates the recoverable amount of the cash generating unit to which the intangible asset belongs. An intangible asset is impaired if the carrying amount is greater than the recoverable amount. The impairment of an intangible asset is equal to the difference between the carrying amount and recoverable amount. Supplementary information on the Allianz Group’s liabilities and equity
Financial liabilities carried at fair value through income
Financial liabilities carried at fair value through income include financial liabilities held for trading and financial liabilities designated at fair value through income.
Financial liabilities held for trading primarily consist of derivative financial instruments with negative fair values that do not meet the criteria for hedge accounting and obligations to deliver assets arising from short sales of securities, which are carried out in order to benefit from short-term price fluctuations. The securities required to close out short sales are obtained through securities borrowing or reverse repurchase agreements.
Financial liabilities designated at fair value through income are recorded at fair value with changes in fair value recorded directly in net income for the period.
Liabilities to banks and customers
Liabilities to banks and customers include repurchase (“repo”) agreements and securities lending transactions. Repo transactions involve the sale of securities by the Allianz Group to a counter-party, subject to the simultaneous agreement to repurchase these securities at a certain later date, at an agreed price. If control of the securities remains with the Allianz Group over the entire lifetime of the transaction, the securities concerned are not derecognized by the Allianz Group. The proceeds of the sale are reported under liabilities to banks or customers. Interest expense from repo transactions is accrued over the duration of the agreements and reported in interest and similar expenses.
In securities lending transactions the Allianz Group generally receives cash collateral which is recorded as liabilities to banks or customers. Fees received are recognized as interest income.
Unearned premiums
For short-duration insurance contracts, such as property-casualty contracts, in accordance with SFAS 60, premiums written to be earned in future years are recorded as unearned premiums. These premiums are earned in subsequent years in relation to the insurance coverage provided. Deferred policy acquisition costs for short-duration insurance contracts are amortized over the periods in which the related premiums are earned.
For long-duration insurance contracts, in accordance with SFAS 97, amounts charged as consideration for origination of the contract, (i.e. initiation or front-end fees) are reported as unearned premium. These fees are recognized using the same methodology as DAC amortization.
Reserves for loss and loss adjustment expenses
Reserves are established for the payment of losses and loss adjustment expenses (“LAE”) on claims which have occurred but are not yet settled. Reserves for loss and loss adjustment expenses fall into two categories: case reserves for reported claims and incurred but not reported reserves (“IBNR”).
Case reserves for reported claims are based on estimates of future payments that will be made with respect to claims, including LAE relating to such claims. Such estimates are made on a case-by-case basis, based on the facts and circumstances available at the time the reserves are established. The estimates reflect the informed judgment of claims personnel based on general insurance reserving practices and knowledge of the nature and value of a specific type of claim. These case reserves are regularly re-evaluated in the ordinary course of the settlement process and adjustments are made as new information becomes available.
IBNR reserves are established to recognize the estimated cost of losses that have occurred but where the Allianz Group has not yet been notified. IBNR
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
reserves, similar to case reserves for reported claims, are established to recognize the estimated costs, including expenses, necessary to bring claims to final settlement. Since nothing is known about the occurrence, the Allianz Group relies on its past experience, adjusted for current trends and any other relevant factors. IBNR reserves are estimates based on actuarial and statistical projections of the expected cost of the ultimate settlement and administration of claims. The analyses are based on facts and circumstances known at the time, predictions of future events, estimates of future inflation and other societal and economic factors. Trends in claim frequency, severity and time lag in reporting are examples of factors used in projecting the IBNR reserves. IBNR reserves are reviewed and revised periodically as additional information becomes available and actual claims are reported.
The process of estimating loss and LAE reserves is by nature uncertain due to the large number of variables affecting the ultimate amount of claims. Some of these variables are internal, such as changes in claims handling procedures, introduction of new IT systems or company acquisitions and divestitures. Others are external, such as inflation, judicial trends, and legislative changes. The Allianz Group attempts to reduce the uncertainty in reserve estimates through the use of multiple actuarial and reserving techniques and analysis of the assumptions underlying each technique.
There is no adequate statistical data available for some risk exposures in liability insurance, such as environmental and asbestos claims and large-scale individual claims, because some aspects of these types of claims become known very slowly and continue to evolve. Appropriate provisions have been made for such cases based on the Allianz Group’s judgment and an analysis of the portfolios in which such risks occur. These provisions represent the Allianz Group’s best estimate. The reserves for loss and loss adjustment expenses for asbestos claims in the United States were reviewed by independent actuaries during the year end of 2005; current reserves reflect subsequent loss developments and reestimation of initial reserves.
Reserves for insurance and investment contracts and financial liabilities for unit linked contracts
Reserves for insurance and investment contracts include aggregate policy reserves, reserves for premium refunds and other insurance reserves.
Contracts issued by insurance subsidiaries of the Allianz Group are classified according to IFRS 4 as insurance or investment contracts. Contracts under which the Allianz Group accepts significant insurance risk from a policyholder are classified as insurance contracts. Contracts under which the Allianz Group does not accept significant insurance risk are classified as investment contracts. Certain insurance and investment contracts include discretionary participation features. All insurance contracts and investment contracts with discretionary participating features are accounted for under the provisions of US GAAP, including SFAS 60, SFAS 97 and SFAS 120.
Aggregate policy reserves for long-duration insurance contracts, such as traditional life and health products, are computed in accordance with SFAS 60 using the net level premium method, which represents the present value of estimated future policy benefits to be paid less the present value of estimated future net premiums to be collected from policyholders. The method uses best estimate assumptions adjusted for a provision for adverse deviation for mortality, morbidity, expected investment yields, surrenders and expenses at the policy inception date, which remain locked-in thereafter unless a premium deficiency occurs. DAC and PVFP for traditional life and health products are amortized over the premium paying period of the related policies in proportion to the earned premium using assumptions consistent with those used in computing the aggregate policy reserves.
The aggregate policy reserves for traditional participating insurance contracts are computed in accordance with SFAS 120 using the net level premium method. The method uses assumptions for mortality, morbidity and interest rates that are guaranteed in the contract or used in determining the policyholder dividends (or “premium refunds”). DAC
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
and PVFP for traditional participating insurance products are amortized over the expected life of the contracts in proportion to estimated gross margins (“EGMs”) based upon historical and anticipated future experience, which is determined on a best estimate basis and evaluated regularly. The present value of EGMs is computed using the expected investment yield. EGMs include premiums, investment income including realized gains and losses, insurance benefits, administration costs, changes in the aggregate reserves and policyholder dividends (or “premium refunds”). The effect of changes in EGMs are recognized in net income in the period revised.
The aggregate policy reserves for universal life-type insurance contracts and unit linked insurance contracts in accordance with SFAS 97 are equal to the account balance, which represents premiums received and investment return credited to the policy less deductions for mortality costs and expense charges. DAC and PVFP for universal life-type and investment contracts are amortized over the expected life of the contracts in proportion to estimated gross profits (“EGPs”) based upon historical and anticipated future experience, which is determined on a best estimate basis and evaluated regularly. The present value of EGPs is computed using the interest rate that accrues to the policyholders, or the credited rate. EGPs include margins from mortality, administration, investment income including realized gains and losses and surrender charges. The effect of changes in EGPs are recognized in net income in the period revised.
Current and historical client data, as well as industry data, are used to determine the assumptions.
Assumptions for interest reflect expected earnings on assets, which back the future policyholder benefits. The information used by the Allianz Group’s actuaries in setting such assumptions includes, but is not limited to, pricing assumptions, available experience studies, and profitability analyses.
The interest rate assumptions used in the calculation of aggregate policy reserves were as follows:
| | | | | | | | | Long-
duration
insurance
contracts
(SFAS 60)
| | | Traditional
participating
insurance
contracts
(SFAS 120)
| | Aggregate policy reserves
| | 2.5 – 6 | % | | 3 – 4 | % | Deferred acquisition costs
| | 5 – 6 | % | | 5 – 6 | % |
Aggregate policy reserves include liabilities for guaranteed minimum death, and similar mortality and morbidity benefits related to non-traditional contracts, annuitization options, and sales inducements. These liabilities are calculated based on contractual obligations using actuarial assumptions. Contractually agreed sales inducements to contract holders include persistency bonuses, and are accrued over the period in which the insurance contract must remain in force to qualify for the inducement.
The aggregate policy reserves for unit linked investment contracts are equal to the account balance, which represents premiums received and investment returns credited to the policy less deductions for mortality costs and expense charges. The aggregate policy reserves for non unit linked investment contracts are equal to amortized cost, or account balance less DAC. DAC for unit linked and non unit linked investment contracts are amortized over the expected life of the contracts in proportion to revenues.
Reserves for premium refunds include the amounts allocated under the relevant local statutory or contractual regulations to the accounts of the policyholders and the amounts resulting from the differences between these IFRS based financial statements and the local financial statements (“latent reserve for premium refunds”), which will reverse and enter into future profit participation calculations. Unrealized gains and losses recognized for available-for-sale investments are recognized in the latent reserve for premium refunds to the extent that policyholders will participate in such gains and losses on the basis of statutory or contractual regulations when they are realized. The profit participation allocated to participating policyholders or disbursed to them reduces the reserve for premium refunds.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Methods and corresponding percentages for participation in profits by the policyholders are set out below for the most significant countries for latent reserves:
| | | | | | Country
| | Base
| | Percentage
| | Germany
| | | | | | Life
| | all sources of Profit | | 90 | % | Health
| | all sources of Profit | | 80 | % | France
| | | | | | Life
| | investments | | 80 | % | Italy
| | | | | | Life
| | investments | | 85 | % | Switzerland
| | | | | | Group Life
| | all sources of Profit | | 90 | % | Individual Life
| | all sources of Profit | | 100 | % |
Liability adequacy tests are performed for each insurance portfolio on the basis of estimates of future claims, costs, premiums earned and proportionate investment income. For short duration contracts, a premium deficiency is recognized if the sum of expected claim costs and claim adjustment expenses, expected dividends to policyholders, unamortized acquisition costs, and maintenance expenses exceeds related unearned premiums while considering anticipated investment income. For long duration contracts, if actual experience regarding investment yields, mortality, morbidity, terminations or expense indicate that existing contract liabilities, along with the present value of future gross premiums, will not be sufficient to cover the present value of future benefits and to recover deferred policy acquisition costs, then a premium deficiency is recognized.
Other liabilities Other liabilities include payables, unearned income, provisions, deposits retained for reinsurance ceded, derivative financial instruments for hedge accounting purposes that meet the criteria for hedge accounting and firm commitments, financial liabilities for puttable equity instruments disposal groups held for sale, and other liabilities. These liabilities are reported at redemption value. Tax payables are calculated in accordance with relevant local tax regulations. Liabilities for puttable equity instruments include the minority interests in shareholders’ equity of certain consolidated investment funds. These minority interests qualify as a financial liability of the Allianz Group, as they give the holder the right to put the instrument back to the Allianz Group for cash or another financial asset (a “puttable instrument”). These liabilities are required to be recorded at redemption amount with changes recognized in net income.
Certificated liabilities, participation certificates and subordinated liabilities
Certificated liabilities, participation certificates and subordinated liabilities are initially recorded at cost, which is the fair value of the consideration received, net of transaction costs incurred. Subsequent measurement is at amortized cost, using the effective interest method to amortize the premium or discount to the redemption value over the life of the liability.
Equity Issued capital represents the mathematical per share value received from the issuance of shares. Capital reserves represent the premium, or additional paid in capital, received from the issuance of shares. Revenue reserves include the retained earnings of the Allianz Group and treasury shares. Treasury
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) shares are deducted from shareholders’ equity. No gain or loss is recognized on the sale, issuance, acquisition or cancellation of these shares. Any consideration paid or received is recorded directly in shareholders’ equity. AnyForeign currency translation differences, including those arising in the application of the equity method of accounting, are recorded as foreign currency translation adjustments directly in shareholders’ equity without affecting earnings.
Unrealized gains and losses (net) include unrealized gains and losses from available-for-sale investments and derivative financial instruments used for hedge purposes that meet the criteria for hedge Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
accounting, including cash flow hedges and hedges of a net investment in a foreign entity. Minority interests represent the proportion of equity that is attributable to minority shareholders. Supplementary information on the Allianz Group’s income statement
Premiums earned (net)and claims and insurance benefits paid Property-casualty insurance premiums are recognized as revenues over the period of the contract in proportion to the amount of insurance protection provided. Unearned premiums are calculated separately for each individual policy to cover the unexpired portion of written premiums. Health insurance premiums for long-duration contracts such as non-cancelable and guaranteed renewable contracts that are expected to remain in force over an extended period of time are recognized as earned when due. Premiums for short-duration health insurance contracts are recognized as revenues over the period of the contract in proportion to the amount of insurance protection provided. Unearned premiums are calculated separately for each individual policy to cover the unexpired portion of written premiums. Life insurance premiums from traditional life insurance policies are recognized as earned when due. Premiums from short-duration life insurance policies are recognized as revenues over the period of the contract in proportion to the amount of insurance protection provided. Benefits are recognized when incurred. Unearned premiums for Property-Casualty and Life/Health contracts are calculated separately for each individual policy to cover the unexpired portion of written premiums. Benefits are recognized when incurred. Revenues for universal life-type and investment contracts, such as universal life and variable annuity contracts, represent charges assessed against the policyholders’ account balances for the front-end loads, net of the change in unearned revenue liability, cost of insurance, surrenders and policy administration and are included within premiums earned (net). Benefits charged to expense include benefit claims incurred during the period in excess of policy account balances and interest credited to policy account balances. Interest and similar income/expense Interest income and interest expense are recognized on an accrual basis. Interest income is recognized using the effective interest method. This line item also includes dividends from available-for-sale equity securities, interest recognized on finance leases and income from investments in associated entities and joint ventures. Dividends are recognized in income when declared. Interest on finance leases is recognized in income over the term of the respective lease so that a constant period yield based on the net investment is attained. Income from investments in associated entities and joint ventures (net) represents the share of net income from entities accounted for using the equity method. Income from financial assets and liabilities carried at fair value through income (net) Income from financial assets and liabilities carried at fair value through income includes all investment income, and realized and unrealized gains and losses from financial assets and liabilities carried at fair value through income. In addition, commissions attributable to trading operations and related interest expense and transaction costs are included in this line item. Fee and commission income and expenses In addition to traditional commission income received on security transactions, fee and commission income in the securities business also includes commissions received in relation to private placements, syndicated loans and financial advisory services. Other fees reflect fees from underwriting
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) business (new issues), commissions received for trust and custody services, for the brokerage of insurance policies, and fees related to credit cards, home loans, savings contracts and real estate. Fee and commission income is recognized in Allianz Group’s Banking segment when the corresponding service is provided. Assets and liabilities held in trust by the Allianz Group in its own name, but for the account of third parties, are not reported in its consolidated balance Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
sheet. Commissions received from such business are shown in fee and commission income. Investment advisory fees are recognized as the services are performed. Such fees are primarily based on percentages of the market value of the assets under management. Investment advisory fees receivable for private accounts consist primarily of accounts billed on a quarterly basis. Private accounts may also generate a fee based on investment performance, which is recognized at the end of the respective contract period if the prescribed performance hurdles have been achieved. Distribution and servicing fees are recognized as the services are performed. Such fees are generally based on percentages of the market value of assets under management. Administration fees are recognized as the services are performed. Such fees are generally based on percentages of the market value of assets under management. Income and expenses from fully consolidated private equity investments All of the income from fully consolidated private equity investments and all of the expenses from fully consolidated private equity investments are presented in separate income and expense line items. Revenue from fully consolidated private equity investments is recognized upon customer acceptance of goods delivered and when services have been rendered. Income taxes Income tax expense consists of the current taxes on profits actually charged to the individual Allianz Group subsidiaries and changes in deferred tax assets and liabilities. The calculation of deferred tax is based on temporary differences between the Allianz Group’s carrying amounts of assets or liabilities in its consolidated balance sheet and their tax bases. The tax rates used for the calculation of deferred taxes are the local rates applicable in the countries concerned; changes to tax rates already adopted prior to or as oftheof the consolidated balance sheet date are taken into account. Deferred tax assets are recognized only to the extent it is probable that sufficient future taxable income will be available for realization. Other supplementary information
Derivative financial instruments
The Allianz Group’s Property-Casualty and Life/Health segments use derivative financial instruments such as swaps, options and futures to hedge against changes in market prices or interest rates in their investment portfolios.
In the Allianz Group’s Banking segment, derivative financial instruments are used both for trading purposes and to hedge against movements in interest rates, currency exchange rates and other price risks of investments, loans, deposit liabilities and other interest sensitive assets and liabilities.
Derivative financial instruments that do not meet the criteria for hedge accounting are reported at fair value as financial assets held for trading or financial liabilities held for trading. Gains or losses from these derivative financial instruments arising from valuation at fair value are included in income from financial assets and liabilities held for trading. This treatment is also applicable for bifurcated embedded derivatives of hybrid financial instruments.
For derivative financial instruments used in hedge transactions that meet the criteria for hedge accounting (“accounting hedges”), the Allianz Group designates the derivative financial instrument as a fair value hedge, cash flow hedge, or hedge of a net investment in a foreign entity. The Allianz Group documents the hedge relationship, as well as its risk management objective and strategy for entering into various hedge transactions. The Allianz Group assesses, both at the hedge’s inception and on an ongoing basis, whether the derivative financial instruments that are used for hedging transactions are highly effective in offsetting changes in fair values or cash flows of the hedged items.
Derivative financial instruments used in accounting hedges are recognized as follows:
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Fair value hedges
Fair value hedges are hedges of a change in the fair value of a recognized financial asset or liability or a firm commitment due to a specified risk. Changes in the fair value of a derivative financial instrument, together with the share of the change in fair value of the hedged item attributable to the hedged risk are recognized in net income.
Cash flow hedges
Cash flow hedges offset the exposure to variability in expected future cash flows that is attributable to a particular risk associated with a recognized asset or liability or a forecasted transaction. Changes in the fair value of a derivative financial instrument that represent an effective hedge are recorded in unrealized gains and losses (net) in shareholders’ equity, and are recognized in net income when the offsetting gain or loss associated with the hedged item is recognized. Any ineffectiveness of the cash flow hedge is recognized directly in net income.
Hedges of a net investment in a foreign entity
Hedge accounting may be applied to derivative financial instruments used to hedge the foreign currency risk associated with a net investment in a foreign entity. The proportion of gains or losses arising from valuation of the derivative financial instrument, which is determined to be an effective hedge, is recognized in unrealized gains and losses (net) in shareholders’ equity, while any ineffectiveness is recognized in net income.
For all fair value hedges, cash flow hedges, and hedges of a net investment in a foreign entity, the derivative financial instruments are included in other assets or other liabilities.
The Allianz Group discontinues hedge accounting prospectively when it is determined that the derivative financial instrument is no longer highly effective, when the derivative financial instrument or the hedged item expires, or is sold, terminated or exercised, or when the Allianz Group determines that designation of the derivative financial instrument as a hedging instrument is no longer appropriate. After afair value hedge is discontinued, the Allianz Group continues to report the derivative financial instrument at its fair value, but changes in the fair value of the hedged item are no longer recognized in net income. After hedge accounting for a cash flow hedge is discontinued, the Allianz Group continues to record the derivative financial instrument at its fair value; any net unrealized gains and losses accumulated in shareholders’ equity are recognized when the planned transaction occurs. After a hedge of a net investment in a foreign entity is discontinued, the Allianz Group continues to report the derivative financial instrument at its fair value and any net unrealized gains or losses accumulated in shareholders’ equity remain in shareholders’ equity until the disposal of the foreign entity.
Derivative financial instruments are netted when there is a legally enforceable right to offset with the same counterparty and the Allianz Group intends to settle on a net basis.
Unbundling
The deposit component of an insurance contract is unbundled when both of the following conditions are met:
1. | the deposit component (including any embedded surrender option) can be measured separately (i.e., without taking into account the insurance component); and |
2. | the Allianz Group’s accounting policies do not otherwise require the recognition of all obligations and rights arising from the deposit component. |
Currently, the Allianz Group has no in-force insurance contracts for which all of the rights and obligations related to such contracts have not been recognized. As a result, the Allianz Group has not recognized an unbundled deposit component in respect of any of its insurance contracts, and accordingly the Allianz Group has not recorded any related provisions in its consolidated financial statements.
Leases Payments made under operating leases to the lessor are charged to administrative expenses using Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
the straight-line method over the period of the lease. When an operating lease is terminated before the lease period has expired, any penalty is recognized in full as an expense at the time when such termination takes place. Pensions and similar obligations The Allianz Group uses the projected unit credit actuarial method to determine the present value of its defined benefit plans and the related service cost and, where applicable, past service cost. The principal assumptions used by the Allianz Group are included in Note 47. The census date for the primary pension plans is October or November, with any significant changes through December 31, taken into account. For each individual defined benefit pension plan, the Allianz Group recognizes a portion of its actuarial gains and losses in income or expense if the unrecognized actuarial net gain or loss at the end of the previous reporting period exceeds the greater of: a) 10% of the projected benefit obligation at that date; or b) 10% of the fair value of any plan assets at that date. Any unrecognized actuarial net gain or loss exceeding the greater of these two values is generally recognized in net periodic benefit cost in the consolidated income statement over the expected average remaining working lives of the employees participating in the plans. Share-basedShare compensation plans
The share-based compensation plans of the Allianz Group are required to be classified as equity
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) settled or cash settled plans. Equity settled plans are measured at fair value on the grant date and recognized as an expense, with an increase in shareholders’ equity, over the vesting period. Equity settled plans include a best estimate of the number of equity instruments that are expected to vest in determining the amount of expense to be recognized. For cash settled plans, the Allianz Group accrues the fair value of the award as compensation expense over the vesting period. Upon vesting, any change in the fair value of any unexercised awards is recognized as compensation expense. Restructuring plans Provisions for restructuring are recognized when the Allianz Group has a detailed formal plan for therestructuringthe restructuring and has started to implement the plan or has communicated its main features. The detailed formal plan includes the business concerned, approximate number of employees who will be compensated for terminating their services, the expenses to be incurred and the time period over which the plan will be implemented. The detailed plan must be communicated such that those affected have an expectation that the plan will be implemented. Reclassifications
For reasons of comparability The income statement line item, restructuring charges, includes additional restructuring related expenditures that are necessarily entailed by the restructuring and not associated with the current reporting year, some prior-year amounts were adjustedongoing activities of the entity but which are not included in the consolidated balance sheet and the consolidated income statements through reclassifications that do not affect net income or shareholders’ equity.
Certain immaterial amounts of unearned premium were previously netted against DAC in the consolidated balance sheets and against the related amortization account in the income statements. All periods have now been presented on a gross basis.restructuring provisions.
3 Recently adopted and issued accounting pronouncements and changes in the presentation of the consolidated financial statements Recently adopted accounting pronouncements (effective January 1 2006)and July 1, 2008 and early adoption) In December 2004, the IASB issued an amendment to IAS 19, Employee Benefits, relating to the recognition of actuarial gains and losses and disclosure requirements for defined benefits plans. The amendment allows the Allianz Group the election to adopt an accounting policy to recognize actuarial gains and losses in the period in which they occur outside of net income. The Allianz Group did not elect to utilize this option; however, this amendment requires additional disclosure requirements with respect to defined benefit plans that have been incorporated into the consolidated financial statements for the year ended December 31, 2006.
In April 2005, the IASB issued an amendmentAmendments to IAS 39, Financial Instruments: Recognition and Measurement, and IFRS 7, Financial Instruments: Disclosures
In October 2008, the IASB issued amendments to IAS 39, Financial Instruments: Recognition and Measurement, and IFRS 7, Financial Instruments: Disclosures, titled “Reclassification of financial assets”. The amendments to IAS 39 permit an entity to reclassify certain non-derivative financial assets out of the “held for trading” (“at fair value through income”) category and out of the “available-for-sale” category if the following specific conditions are met. Debt instruments, classified as “held for trading” (“at fair value through income”) or “available-for-sale” may be reclassified to the “loans and receivable” category, if they meet the definition of loans and receivables at the reclassification date and where the Allianz Group has now the intent and ability to hold the assets for the foreseeable future or until maturity. Any other debt instrument and any other equity instrument, classified as “held for trading” (“at fair value through income”) may be reclassified to the “held-to-maturity” category (debt instruments) or to the “available-for-sale” category in rare circumstances and where the Allianz Group has no longer the intention to sell or trade the assets in the short term. The IASB acknowledged, that the deterioration of the world’s financial markets, that has occurred during the third quarter of 2008 is a possible example of a “rare circumstance”. The amendments to IAS 39 and IFRS 7 are effective July 1, 2008 and should be accounted for on a prospective basis from the date of reclassification. For reclassifications made before November 1, 2008, the amended IAS 39 permits an entity to use fair values as of July 1, 2008 instead of the prevailing fair value at the date of reclassification. At the reclassification date non-derivative financial assets have to be reclassified at their fair value, which becomes the new cost or amortized cost of the financial asset, as applicable. Previously recognized gains and losses cannot be reversed. After the reclassification date the existing requirements of IAS 39 for measuring financial assets at cost or at amortized cost apply. Any reclassifications under the new requirements of the amended IAS 39 trigger additional extensive disclosure requirements specified in the amendments to IFRS 7. Allianz Group adopted the amended IAS 39 and IFRS 7 in the third quarter 2008. The adoption of
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Measurement, related to the cash flow hedge accounting of intragroup transactions. The Allianz Group adopted this amendment as of January 1, 2006 with no material effect on its financial results or financial position.
In August 2005, the IASB issued amendments toamended IAS 39 and IFRS 4, Insurance Contracts, relating7 had no impact on the net income of the Allianz Group for the year ended December 31, 2008.
IFRIC 11, Group and Treasury Share Transactions In November 2006, the IFRIC issued IFRIC 11, Group and Treasury Share Transactions. IFRIC 11 addresses the application of IFRS 2 to share-based payment arrangements in three cases. When an entity chooses or is required to buy its own equity instruments to settle the recognitionshare-based payment obligation, the arrangement should be accounted for as equity-settled share-based payment transaction. When a parent grants employees of a subsidiary rights to its equity instruments, assuming the transaction is recorded as an equity-settled transaction in the consolidated financial statements, the subsidiary would also record the transaction as an equity-settled transaction in its financial statements. When a subsidiary grants its employees rights to equity instruments of its parent, the subsidiary should record the transaction as a cash-settled share-based payment transaction. IFRIC 11 is effective for annual periods beginning on or after March 1, 2007. The interpretation did not have a material impact on the Allianz Group’s consolidated financial statements. IFRIC 12, Service Concession Arrangements In November 2006, the IFRIC issued IFRIC 12, Service Concession Arrangements. IFRIC 12 addresses how service concession operators should apply existing IFRSs to account for the obligations they undertake and measurementrights they receive in service concession arrangements. Service concession arrangements are arrangements whereby a government or other body grants contracts for the supply of public services, such as roads, energy distribution, prisons or hospitals, to private operators. The grantor controls or regulates what services the operator must provide using the assets, to whom, and at what price, and also controls any significant residual interest in the assets at the end of the term of the arrangement. An operator recognises a financial guarantee contracts. The amendments require that financial guarantee contracts be initially measured at fair value. After initial recognition,asset and/or an intangible asset in respect of the financial guarantee contracts areconsideration received or receivable by it, measured at the higherfair value of the amount determined in accordance withconstruction or upgrade services it provides. IFRIC 12 is effective for annual periods beginning on or after January 1, 2008. The interpretation has not yet been endorsed by the EU but does not have an impact on the Allianz Group’s consolidated financial statements. IFRIC 14, IAS 37, Provisions, Contingent Liabilities19—The Limit on a Defined Benefit Asset, Minimum Funding Requirements and Contingent Assets,their Interaction In July 2007, IFRIC issued IFRIC 14, IAS 19—The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction. IFRIC 14 addresses how entities should determine the limit placed by IAS 19, Employee Benefits, on the amount initiallyof a surplus in a pension plan they can recognize as an asset, how a minimum funding requirement affects that limit and when a minimum funding requirement creates an onerous obligation that should be recognized less cumulative amortizationas a liability in addition to that otherwise recognized in accordance withunder IAS 18, Revenue.19. The amendmentinterpretation is effectivemandatory for annual periods beginning on or after January 1, 2006; however,2008. Earlier application is permitted. The interpretation has not yet been endorsed by the EU, but does not have an impact on the Allianz Group will be required to retrospectively apply the provisions of the amendments to reporting periods prior to January 1, 2006. As the Allianz Group previously applied US GAAP to its credit insurance contracts, the amendments will not impact the insurance segments. The Allianz Group adopted these amendments as of January 1, 2006 with no material effect on itsGroup’s consolidated financial results or financial position.statements. Recently issued accounting pronouncements (effective on or after January 1, 2007)2009) In August 2005, the IASB issued an amendment to IAS 1, Presentation of Financial Statements. The amendment requires additional disclosures relating to the Allianz Group’s capital. In addition, in August 2005, the IASB issued IFRS 7, Financial Instruments: Disclosures. This standard requires additional disclosures relating to the Allianz Group’s financial instruments and insurance contracts. The amendment to IAS 1 and IFRS 7 are effective for the year ended December 31, 2007. The adoptions are not expected to have an impact on the Allianz Group’s financial results or financial position.
In March 2006, the International Financial Reporting Interpretations Committee (“IFRIC”) issued IFRIC 9, Reassessment of Embedded Derivatives. The Interpretation clarifies whether a reassessment should be made regarding whether an embedded derivative needs to be separated from the host contract after the initial hybrid contract has beenrecognized. IFRIC 9 concludes that reassessment is prohibited unless there is a change in the terms of the contract that significantly modifies the cash flows that otherwise would be required under the contract, in which case reassessment is required. IFRIC 9 is effective for annual periods beginning on or after June 1, 2006. As the interpretation is consistent with the Allianz Group’s existing policy, there is no expected impact on the Allianz Group’s financial results or financial position.
In July 2006, the IFRIC issued IFRIC 10, Interim Financial Reporting and Impairment. IFRIC 10 address the potential conflict between requirements of IAS 34 and the requirements for recording impairment losses on goodwill in IAS 36 and certain financial assets in IAS 39. The interpretation prohibits the reversal of an impairment loss recognized in a previous interim period with respect to goodwill or an investment in either an equity instrument or a financial asset carried at cost. IFRIC 10 is effective for annual periods beginning on or after November 1, 2006. As the interpretation is consistent with the Allianz Group’s existing policy, there is no expected impact on the Allianz Group’s financial results or financial position.8, Operating Segments
In November 2006, the IASB issued IFRS 8, Operating Segments. IFRS 8 requires the identification of operating segments on the basis of internal reports that are regularly reviewed by the entity’s chief operating decision maker in order to allocate resources to the segment and assess its performance (i.e.(i. e., the “management approach”). IFRS 8 requires explanations of how the segment information is prepared as well as reconciliations of total reportable segment revenues, total profits or losses, total assets, total liabilities, and other amounts disclosed for reportable segments to corresponding amounts recognized in the entity’s financial statements. IFRS 8 applies to annual financial statements for periods beginning on or after January 1, 2009. IFRS 8 will have no impact on the Allianz Group’s financial results or financial position. The Allianz Group is currently evaluating the potential impact, if any, that the adoption of IFRS 8 will have on the Group’s segment reporting.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) IAS 23, Borrowing Costs—amended In November 2006,March 2007, the IFRICIASB issued IFRIC 11,amendments to IAS 23, Borrowing Costs. The main change from the previous version is the removal of the option of immediately recognizing as an expense borrowing costs that relate to assets that take a substantial period of time to get ready for use or sale. The cost of an asset will in future include all costs incurred in getting it ready for use or sale. The revised standard applies to borrowing costs relating to qualifying assets for which the commencement date for capitalization is on or after January 1, 2009. The amendment is expected to have no impact on the Allianz Group’s consolidated financial statements. IAS 1, Presentation of Financial Statements—revised In September 2007, the IASB issued the revised IAS 1, Presentation of Financial Statements. The revised standard requires information in financial statements to be aggregated on the basis of shared characteristics and introduces a statement of comprehensive income. The revised standard gives preparers of financial statements the option of presenting items of income and expense and components of other comprehensive income either in a single statement of comprehensive income with subtotals, or in two separate statements. The revisions also include changes in the titles of some of the financial statements to reflect their function more clearly. The new titles will be used in accounting standards, but are not mandatory for use in financial statements. Revised IAS 1 applies to annual financial statements for periods beginning on or after January 1, 2009. The Allianz Group is currently evaluating the potential impact, if any, that the adoption of revised IAS 1 will have on the presentation of the Group’s financial statements. IFRS 3, Business Combinations—revised and Treasury Share Transactions. IFRIC 11IAS 27, Consolidated and Separate Financial Statements—revised In January 2008, the IASB issued a revised version of IFRS 3, Business Combinations, and an amended version of IAS 27, Consolidated and Separate Financial Statements. The revised version of IFRS 3 and the amended version of IAS 27 include the following changes: The scope of IFRS 3 has been extended and applies now also to combinations of mutual entities and to combinations achieved by contract alone. In partial acquisitions, non-controlling interests are measured as their proportionate interest in the net identifiable assets or at fair value of the interests. Under the current IFRS 3, if control is achieved in stages, it is required to measure at fair value every asset and liability at each step for the purpose of calculating a portion of goodwill. The revised version requires that goodwill is measured as the difference at acquisition date between the fair value of any investment in the business held before the acquisition, the consideration transferred and the net assets acquired. Acquisition-related costs are generally recognized as expenses and are not included in goodwill. Contingent consideration must be recognized and measured at fair value at the acquisition date. Subsequent changes in fair value are recognized in accordance with other IFRSs, usually in profit and loss. Goodwill is no longer adjusted for those changes. Transactions with non-controlling interests, i.e., changes in a parent’s ownership interest in a subsidiary that do not result in a loss of control, are accounted for as equity transactions. The revised standards apply to annual financial statements for periods beginning on or after July 1, 2009. The carrying amounts of any assets and liabilities that arose under business combinations prior to the application of the revised IFRS 3 are not adjusted. The amendments to IAS 27 need to be applied retrospectively with certain exceptions. Earlier application is permitted under certain conditions. The Allianz Group is currently evaluating
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) the potential impact that the adoption of the standards will have on the Group’s financial statements. IFRS 2, Share-based Payment—amended In January 2008, the IASB issued an amendment to IFRS 2, Share-based Payment. The amendment clarifies that vesting conditions are service conditions and performance conditions only. Other features of a share-based payment are not vesting conditions. It also specifies that all cancellations, whether by the entity or by other parties, should receive the same accounting treatment. The amendment applies to annual financial statements for periods beginning on or after January 1, 2009. Earlier application is permitted. The Allianz Group is currently evaluating the potential impact, if any, that the adoption of the amendment of IFRS 2 will have on the Group’s financial statements. IAS 32, Financial Instruments: Presentation, and IAS 1, Presentation of Financial Statements—amended In February 2008, the IASB issued amendments to IAS 32, Financial Instruments: Presentation, and IAS 1, Presentation of Financial Statements. IAS 32 requires a financial instrument to be classified as a liability if the holder of that instrument can require the issuer to redeem it for cash. The consequence is that some financial instruments that would usually be considered equity allow the holder to “put” the instrument and are, therefore, considered liabilities rather than equity. The amendments to IAS 32 address this issue and require entities to classify the following types of financial instruments as equity provided they have particular features and meet specific conditions: puttable financial instruments (e.g., some shares issued by cooperative entities) instruments, or components of instruments, that impose on the entity an obligation to deliver to another party a pro rata share of the net assets of the entity only on liquidation (e.g., some partnership interests and some shares issued by limited life entities). The amendments apply to annual financial statements for periods beginning on or after January 1, 2009. Earlier application is permitted. The amendments are expected to have no material impact on the Allianz Group’s consolidated financial statements. Improvements to IFRSs In May 2008, the IASB issued Improvements to IFRSs. The improvements to IFRS project is an annual process that the IASB has adopted to deal with non-urgent but necessary amendments to IFRS (the ‘annual improvements process’). The amendments are divided in two parts and include 34 amendments. Part I deals with changes the IASB identified resulting in accounting changes. Part II deals with terminology and editorial amendments that have a minimal impact.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) addressesThe following table summarizes the applicationchanges relating to Part I that are applicable to Allianz Group.
| | | | | | Standard | | Description of the change | | Effective dates and impact | | | | | IFRS 5 | | If an entity plans to sell the controlling interest in a subsidiary, all of the subsidiary’s assets and liabilities will be classified as held-for-sale under IFRS 5 even when the entity retains a non-controlling interest in the subsidiary after the sale. | | Annual periods beginning on or after 1 July 2009; no material impact expected on Allianz Group’s consolidated financial statements | | | | | IAS 1 | | Assets and liabilities classified as held for trading in accordance with IAS 39 are not automatically classified as current in the balance sheet. | | Annual periods beginning on or after 1 January 2009; no material impact expected on Allianz Group’s consolidated financial statements | | | | | IAS 16 | | Net selling price is replaced by fair value less costs to sell. Property, plant and equipment held for rental that are routinely sold in the course of business after rental are transferred to inventory when rental ceases and they are held-for-sale. Proceeds of the sale are shown as revenue. Cash payments on initial recognition of such items, cash receipts from rents and subsequent sales are shown as cash flows from operating activities. | | Annual periods beginning on or after 1 January 2009; no material impact expected on Allianz Group’s consolidated financial statements | | | | | IAS 19 | | The definition of past service cost is revised to include reductions in benefits related to past services and to exclude reductions in benefits related to future services that arise from plan amendments. Amendments to plans that result in a reduction in benefits related to future services are accounted for as a curtailment. The definition of return on plan assets now excludes plan administration costs if they have already been included in the actuarial assumptions used to measure the defined benefit obligation. The definition of “short-term” and “other long- term” employee benefits is revised to focus on the point in time at which the liability is due to be settled. The reference to the recognition of contingent liabilities is deleted to ensure consistency with IAS 37. | | Annual periods beginning on or after 1 January 2009; no material impact expected on Allianz Group’s consolidated financial statements | | | | | IAS 23 | | The definition of borrowing costs is revised , i.e., components of interest expense calculated using the effective interest rate method calculated in accordance with IAS 39. | | Annual periods beginning on or after 1 January 2009; no material impact expected on Allianz Group’s consolidated financial statements | | | | | IAS 27 | | When an entity accounts for a subsidiary at fair value in its separate financial statements, this treatment continues when the subsidiary is subsequently classified as held-for-sale | | Annual periods beginning on or after 1 January 2009; no material impact expected on Allianz Group’s consolidated financial statements | | | | | IAS 28 | | Certain disclosures are required when investments in associates are accounted for at fair value through profit or loss. For the purpose of testing an investment in an associate for impairment, the investment is considered a single asset. Therefore, any impairment is not separately allocated to goodwill included in the investment. | | Annual periods beginning on or after 1 January 2009; no material impact expected on Allianz Group’s consolidated financial statements |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) | | | | | | Standard | | Description of the change | | Effective dates and impact | | | | | IAS 31 | | Disclosures are required when interests in jointly controlled entities are accounted for at fair value through profit or loss | | Annual periods beginning on or after 1 January 2009; no material impact expected on Allianz Group’s consolidated financial statements | | | | | IAS 36 | | Additional disclosure are required with regard to estimates used to determine recoverable amount | | Annual periods beginning on or after 1 January 2009; no material impact expected on Allianz Group’s consolidated financial statements | | | | | IAS 38 | | Expenditures relating to advertising and promotional activities are recognized as expense when the entity has the right to access the goods or has received the services. These activities now also specifically include mail order catalogues. Amendment deletes references to there being rarely, if ever, persuasive evidence to support an amortisation method for intangible assets with finite useful lives that results in a lower amount of accumulated amortisation than under the straight-line method, thereby effectively allowing the use of the unit of production method. | | Annual periods beginning on or after 1 January 2009; no material impact expected on Allianz Group’s consolidated financial statements | | | | | IAS 39 | | Changes in circumstances relating to derivatives are not reclassifications. When financial assets are reclassified as a result of an insurance company changing its accounting policy in accordance with IFRS 4, this is a change in circumstance, not a reclassification. The reference to “segment” is removed when determining whether an instrument qualifies as a hedge. The use of the revised effective interest rate rather than the original effective interest rate is required when remeasuring a debt instrument on the cessation of fair value hedge accounting. | | Annual periods beginning on or after 1 July 2009; impact on Allianz Group’s consolidated financial statements currently being evaluated | | | | | IAS 40 | | The scope is being revised now including property that is being constructed or developed for future use as an investment property. Where an entity is unable to determine the fair value of an investment property under construction but expects to be able to determine its fair value on completion, the investment under construction shall be measured at cost until the fair value can be determined or the construction is complete. | | Annual periods beginning on or after 1 January 2009; no material impact expected on Allianz Group’s consolidated financial statements |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Voluntary presentation of improved disclosure requirements for IFRS 27 In October 2008, the IASB released an exposure draft: Improving Disclosures about Financial Instruments, proposed amendments to share-based payment arrangementsIFRS 7. This exposure draft proposes in three cases. When an entity chooses or is requiredparticular amendments to buy its own equitydisclosure requirements that are based on a three-level fair value hierarchy (similar to that used in SFAS 157). The amendments apply to financial instruments to settle and require disclosures about: the share-based payment obligation,level of the arrangement should be accountedfair value hierarchy into which fair value measurements are categorized in their entirety. This requirement would apply both for as equity-settled share-based payment transactions. When a parent grants employees of a subsidiary rights to its equity instruments, assuming the transaction is recorded as an equity-settled transactionfair values included in the consolidated balance sheet and for other fair values that are disclosed but not included in that statement. the fair value measurements resulting from the use of significant unobservable inputs to valuation techniques. For these measurements, the disclosures include a reconciliation from the beginning balances to the ending balances. the movements between different levels of the fair value hierarchy, and the reasons for those movements. According to the exposure draft an entity shall apply the amendments for annual periods beginning on or after 1 July 2009. Earlier application is permitted. An earlier adoption is allowed. In anticipation of the new standard the Allianz Group disclosed voluntarily amendments regarding the fair value hierarchy in the Annual Report 2008. Please refer to Note 44 for details. IFRIC 13, Customer Loyalty Programmes In June 2007, the IFRIC issued IFRIC 13, Customer Loyalty Programmes. IFRIC 13 addresses how companies, that grant their customers loyalty award credits (often called “points”) when buying goods or services, should account for their obligation to provide free or discounted goods or services if and when the customers redeem the points. Customers are implicitly paying for the points they receive when they buy other goods or services. Some revenue should be allocated to the points. Therefore, IFRIC 13 requires companies to estimate the value of the points to the customer and defer this amount of revenue as a liability until they have fulfilled their obligations to supply awards. IFRIC 13 is mandatory for annual periods beginning on or after July 1, 2008. Earlier application is permitted. The interpretation is expected to have no material impact the Allianz Group’s consolidated financial statements,statements. IFRIC 15, Agreements for the subsidiary would also recordConstruction of Real Estate In July 2008, the transactionIFRIC issued IFRIC 15, Agreements for the Construction of Real Estate. IFRIC 15 clarifies the definition of a construction contract and the articulation between IAS 11 and IAS 18 and provides guidance on how to account for revenue when the agreement for the construction of real estate falls within the scope of IAS 18. The main expected change is a shift from recognition of revenue using the percentage of completion method to recognition of revenue at a single time (eg at completion, upon or after delivery). Affected agreements will be mainly those accounted for in accordance with IAS 11 that do not meet the definition of a construction contract as an equity-settled transactioninterpreted by the IFRIC and do not result in a “continuous transfer” (i.e. agreements in which the entity transfers to the buyer control and the significant risks and rewards of ownership of the work in progress in its financial statements. When a subsidiary grants its employees rights to equity instruments of its parent, the subsidiary should record the transactioncurrent state as a cash-settled share-based payment transaction.construction progresses). IFRIC 1115 is effective for annual periods beginning on or after March 1 2007.January 2009 and must be applied retrospectively. Earlier application is permitted. The interpretation does notis expected to have no material impact the Allianz Group’s consolidated financial statements. IFRIC 16, Hedges of a Net Investment in a Foreign Operation In July 2008, the IFRIC issued IFRIC 16, Hedges of a Net Investment in a Foreign Operation. IFRIC 16 provides guidance on: identifying the foreign currency risks that qualify as a hedged risk in the hedge of a net investment in a foreign operation;
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) where, within a group, hedging instruments that are hedges of a net investment in a foreign operation can be held to qualify for hedge accounting; and how an entity should determine the amounts to be reclassified from equity to profit or loss for both the hedging instrument and the hedged item. IFRIC 16 concludes that the presentation currency does not create an exposure to which an entity may apply hedge accounting. Consequently, a parent entity may designate as a hedged risk only the foreign exchange differences arising from a difference between its own functional currency and that of its foreign operation. In addition, the hedging instrument(s) may be held by any entity or entities within the group. While IAS 39 must be applied to determine the amount that needs to be reclassified to profit or loss from the foreign currency translation reserve in respect of the hedging instrument, IAS 21 must be applied in respect of the hedged item. IFRIC 16 is effective for annual periods beginning on or after 1 October 2008 and is to be applied prospectively. The amendments are expected to have no material impact on Allianz Group’s consolidated financial statements. IFRIC 17, Distributions of Non-cash Assets to Owners In November 2008, the IFRIC issued IFRIC 17, Distributions of Non-cash Assets to Owners. IFRIC 17 clarifies that: a dividend payable should be recognized when the dividend is appropriately authorized and is no longer at the discretion of the entity. an entity should measure the dividend payable at the fair value of the net assets to be distributed. an entity should recognize the difference between the dividend paid and the carrying amount of the net assets distributed in profit or loss. The Interpretation also requires an entity to provide additional disclosures if the net assets being held for distribution to owners meet the definition of a discontinued operation. IFRIC 17 applies to pro rata distributions of non-cash assets except for common control transactions. IFRIC 17 is effective for annual periods beginning on or after 1 July 2009 and is to be applied prospectively. Earlier application is permitted. The Allianz Group is currently evaluating the potential impact, if any, that the adoption of IFRIC 17 will have on the Group’s consolidated financial statements. IFRIC 18, Transfers of Assets from Customers In January 2009, the IFRIC issues IFRIC 18, Transfers of Assets from Customers. IFRIC 18 is particularly relevant for the utility sector. It clarifies the requirements of IFRS for agreements in which an entity receives from a customer an item of property, plant and equipment that the entity must then use either to connect the customer to a network or to provide the customer with ongoing access to a supply of goods and services. The entity might in certain cases receive cash from a customer which must be used only to acquire or construct the item of property, plant and equipment in order to connect the customer to a network or provide the customer with ongoing access to a supply of goods or services or both. IFRIC 18 includes a clarification with regard to the circumstances in which the definition of an asset is met, the recognition of the asset and measurement of its cost on initial recognition, the identification of the separately identifiable services, the recognition of revenue, the accounting for transfers of cash from customers. IFRIC 18 is effective for annual periods beginning on or after 1 July 2009 and applies prospectively. Limited retrospective application is permitted. IFRIC 18 is expected to have no material impact on Allianz Group’s consolidated financial statements.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Changes in the presentation of the consolidated financial statements TheReclassification of Dresdner Bank Group as disposal group held-for-sale and discontinued operation
On August 31, 2008, Allianz Group comprehensively reviewed its financial reporting methodologySE and Commerzbank AG agreed on the sale of Dresdner Bank AG (“Dresdner Bank”) to improveCommerzbank AG. Following the transparencyannouncement of its financial resultsthe sale, Dresdner Bank qualifies as disposal group held-for-sale and ensure consistency with its peers. As a resultdiscontinued operation according to the requirements of this review,IFRS 5, Non-current Assets Held-for-sale and Discontinued Operations. Thus, almost all assets and liabilities of Dresdner Bank have been reclassified and presented as separate line items “Non-current assets and assets of disposal groups classified as held-for-sale” and “Liabilities of disposal groups classified as held-for-sale”, respectively, on the Allianz Group implemented numerous revisions to its financial reporting that were effective on January 1, 2006. The Allianz Group’s financial reporting reflects reclassifications inface of the consolidated balance sheetssheet as of December 31, 2008. Comparative information has not been adjusted in accordance with IFRS 5. All income and consolidated income statements, changes to segment reporting, changes to operating profit methodology and changesexpenses relating to the consolidated statementsdiscontinued operations of cash flows that reflects the continuous reviewDresdner Bank have been reclassified and presented in a separate line item “Net income (loss) from discontinued operations, net of our evolving business. Reclassifications
A significant portion of these revisions to financial reporting resulted from the implementation of changes to the presentation of certain financial information of the Allianz Group’s consolidated balance sheetsincome taxes and consolidated income statements. These revisions were implemented to improve transparency and resultminority interests in the following:
The line itemsearnings” in the consolidated income statements include aggregations of items which are similarly aggregated as the line items utilized for determining operating profit.all years presented in accordance with IFRS 5.
The line items in the consolidated income statements include aggregations of items that allow the Allianz Group’s key performance indicators to be directly derived from the Allianz Group’s external financial results.
The line items in the consolidated income statements include aggregations of items which are based more on the nature rather than the function.
The line items in the consolidated balance sheets include aggregations of items which are consistently presented within the line items in the consolidated income statements.
The line items in the consolidated balance sheets are relatively displayed in a liquidity format as required by IAS 1.
As a result, the Allianz Group’s previously reported consolidated balance sheets and consolidated income statements were reclassified to ensure consistency and comparability with the presentation as implemented on January 1, 2006. These reclassifications did not have an impact on the Allianz Group’s net income or shareholders’ equity for any previously reported period.
The key changes to the previous presentation in the Allianz Group’s consolidated balance sheets are:
Financial assets and liabilities for unit linked contracts are presented as separate line items.
Investments in associates and joint ventures have been reclassified to investments.
Deferred acquisition costs, including present value of future profits and deferred sales inducements, are presented as a separate line item.
Unearned premiums and reserves for loss and loss adjustment expenses are presented as separate line items.
Financial liabilities for puttable equity instruments have been reclassified to other liabilities.
Deferred tax assets and deferred tax liabilities are presented on a net basis to the extent the requirements of IAS 12 for offset are met.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) The key changesfollowing table summarizes the impact on the consolidated income statements for the year ended December 31, 2007 and 2006, respectively: | | | | | | | | | | | | | | | | | | | | | | 2007 | | | 2006 | | | | | As
previously
reported | | | Classified as
discontinued
operations | | | Reported as
income and
expense from
continuing
operations | | | As
previously
reported | | | Classified as
discontinued
operations | | | Reported as
income and
expense from
continuing
operations | | | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | Premiums written | | 65,788 | | | — | | | 65,788 | | | 65,275 | | | — | | | 65,275 | | Ceded premiums written | | (5,934 | ) | | — | | | (5,934 | ) | | (6,218 | ) | | — | | | (6,218 | ) | Change in unearned premiums | | (492 | ) | | — | | | (492 | ) | | (533 | ) | | — | | | (533 | ) | | | | | | | | | | | | | | | | | | | | Premiums earned (net) | | 59,362 | | | — | | | 59,362 | | | 58,524 | | | — | | | 58,524 | | | | | | | | | | | | | | | | | | | | | Interest and similar income | | 26,047 | | | (7,423 | ) | | 18,624 | | | 23,956 | | | (6,526 | ) | | 17,430 | | Income from financial assets and liabilities carried at fair value through income (net) | | (1,247 | ) | | 430 | | | (817 | ) | | 940 | | | (1,310 | ) | | (370 | ) | Realized gains/losses (net) | | 6,548 | | | (540 | ) | | 6,008 | | | 6,151 | | | (230 | ) | | 5,921 | | Fee and commission income | | 9,440 | | | (2,887 | ) | | 6,553 | | | 8,856 | | | (2,831 | ) | | 6,025 | | Other income | | 217 | | | — | | | 217 | | | 86 | | | (25 | ) | | 61 | | Income from fully consolidated private equity investments | | 2,367 | | | — | | | 2,367 | | | 1,392 | | | — | | | 1,392 | | | | | | | | | | | | | | | | | | | | | Total income | | 102,734 | | | (10,420 | ) | | 92,314 | | | 99,905 | | | (10,922 | ) | | 88,983 | | | | | | | | | | | | | | | | | | | | | Claims and insurance benefits incurred (gross) | | (46,409 | ) | | — | | | (46,409 | ) | | (45,523 | ) | | — | | | (45,523 | ) | Claims and Insurance benefits incurred (ceded) | | 3,287 | | | — | | | 3,287 | | | 3,226 | | | — | | | 3,226 | | | | | | | | | | | | | | | | | | | | | Claims and insurance benefits incurred (net) | | (43,122 | ) | | — | | | (43,122 | ) | | (42,297 | ) | | — | | | (42,297 | ) | | | | | | | | | | | | | | | | | | | | Change in reserves for insurance and investment contracts (net) | | (10,685 | ) | | — | | | (10,685 | ) | | (11,375 | ) | | — | | | (11,375 | ) | Interest expenses | | (6,672 | ) | | 4,602 | | | (2,070 | ) | | (5,759 | ) | | 4,126 | | | (1,633 | ) | Loan loss provisions | | 113 | | | (131 | ) | | (18 | ) | | (36 | ) | | 31 | | | (5 | ) | Impairments of investments (net) | | (1,272 | ) | | 87 | | | (1,185 | ) | | (775 | ) | | 215 | | | (560 | ) | Investment expenses | | (1,057 | ) | | 20 | | | (1,037 | ) | | (1,108 | ) | | 53 | | | (1,055 | ) | Acquisition and administrative expenses (net) | | (23,218 | ) | | 4,430 | | | (18,788 | ) | | (23,486 | ) | | 5,018 | | | (18,468 | ) | Fee and commission expenses | | (2,673 | ) | | 360 | | | (2,313 | ) | | (2,351 | ) | | 311 | | | (2,040 | ) | Amortization of intangible assets | | (17 | ) | | — | | | (17 | ) | | (51 | ) | | — | | | (51 | ) | Restructuring charges | | (232 | ) | | 50 | | | (182 | ) | | (964 | ) | | 422 | | | (542 | ) | Other expenses | | (14 | ) | | (3 | ) | | (17 | ) | | 1 | | | (14 | ) | | (13 | ) | Expenses from fully consolidated private equity investments | | (2,317 | ) | | — | | | (2,317 | ) | | (1,381 | ) | | — | | | (1,381 | ) | | | | | | | | | | | | | | | | | | | | Total expenses | | (91,166 | ) | | 9,415 | | | (81,751 | ) | | (89,582 | ) | | 10,162 | | | (79,420 | ) | | | | | | | | | | | | | | | | | | | | Income before income taxes and minority interests in earnings | | 11,568 | | | (1,005 | ) | | 10,563 | | | 10,323 | | | (760 | ) | | 9,563 | | Income taxes | | (2,854 | ) | | 282 | | | (2,572 | ) | | (2,013 | ) | | 293 | | | (1,720 | ) | Minority interests in earnings | | (748 | ) | | 73 | | | (675 | ) | | (1,289 | ) | | 86 | | | (1,203 | ) | | | | | | | | | | | | | | | | | | | | Net income | | 7,966 | | | (650 | ) | | 7,316 | | | 7,021 | | | (381 | ) | | 6,640 | | | | | | | | | | | | | | | | | | | | |
For a detailed description of the transaction agreement see Note 4. Notes to the previous presentation in the Allianz Group’s consolidated income statements are:Consolidated Financial Statements—(Continued) InterestChange in the presentation from administrative expenses to acquisition costs
Allianz Group discloses the acquisition costs and similaradministrative expenses (net) in the consolidated income includesstatement. Acquisition costs and administrative expenses are disaggregated according to segment and type of costs in Note 39. Acquisition costs relate to the acquisition and administration of insurance policies and include commissions and other acquisition costs paid, commissions and profit received on reinsurance ceded, deferrals of acquisition costs and amortizations of deferred acquisition costs. Administrative expenses include personnel expenses, operating expenses, and other administrative expenses. Few of Allianz Group’s subsidiaries have incorrectly allocated some of the costs into acquisition costs and administrative expenses in the past. These incorrect allocations have been corrected in the notes to the consolidated financial statements. This reclassification from administrative expenses to acquisition costs affects only the Property-Casualty segment. The change in presentation has had no effect on consolidation, reported earnings or equity. The following table summarizes the impact that this reclassification has had on the previously reported financial statements: | | | | | | | | | | | | | | | | | | | | | | Segment | | | Group | | | | | As previously
reported | | | Adjustment | | | As
adjusted | | | As previously
reported | | | Adjustment | | | As
adjusted | | | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | 2007 | | | | | | | | | | | | | | | | | | | Property Casualty | | | | | | | | | | | | | | | | | | | Acquisition costs | | | | | | | | | | | | | | | | | | | Incurred | | (7,310 | ) | | (380 | ) | | (7,690 | ) | | (7,310 | ) | | (380 | ) | | (7,690 | ) | Commissions and profit received on reinsurance business ceded | | 691 | | | (20 | ) | | 671 | | | 689 | | | (20 | ) | | 669 | | Deferrals of acquisition costs | | 4,511 | | | — | | | 4,511 | | | 4,511 | | | — | | | 4,511 | | Amortization of deferred acquisition costs | | (4,384 | ) | | — | | | (4,384 | ) | | (4,384 | ) | | — | | | (4,384 | ) | Subtotal | | (6,492 | ) | | (400 | ) | | (6,892 | ) | | (6,494 | ) | | (400 | ) | | (6,894 | ) | | | | | | | | | | | | | | | | | | | | Administrative expenses | | (4,124 | ) | | 400 | | | (3,724 | ) | | (4,060 | ) | | 400 | | | (3,660 | ) | | | | | | | | | | | | | | | | | | | | Subtotal | | (10,616 | ) | | — | | | (10,616 | ) | | (10,554 | ) | | — | | | (10,554 | ) | | | | | | | | | | | | | | | | | | | | 2006 | | | | | | | | | | | | | | | | | | | Property Casualty | | | | | | | | | | | | | | | | | | | Acquisition costs | | | | | | | | | | | | | | | | | | | Incurred | | (7,131 | ) | | (384 | ) | | (7,515 | ) | | (7,131 | ) | | (384 | ) | | (7,515 | ) | Commissions and profit received on reinsurance business ceded | | 722 | | | (5 | ) | | 717 | | | 721 | | | (5 | ) | | 716 | | Deferrals of acquisition costs | | 3,983 | | | — | | | 3,983 | | | 3,983 | | | — | | | 3,983 | | Amortization of deferred acquisition costs | | (3,843 | ) | | — | | | (3,843 | ) | | (3,843 | ) | | — | | | (3,843 | ) | Subtotal | | (6,269 | ) | | (389 | ) | | (6,658 | ) | | (6,270 | ) | | (389 | ) | | (6,659 | ) | | | | | | | | | | | | | | | | | | | | Administrative expenses | | (4,321 | ) | | 389 | | | (3,932 | ) | | (4,240 | ) | | 389 | | | (3,851 | ) | | | | | | | | | | | | | | | | | | | | Subtotal | | (10,590 | ) | | — | | | (10,590 | ) | | (10,510 | ) | | — | | | (10,510 | ) | | | | | | | | | | | | | | | | | | | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Reclassifications Certain prior period amounts have been reclassified to conform to the current period presentation. 4 Assets and liabilities of disposal groups classified as held-for-sale and discontinued operations Impact of the sale of Dresdner Bank AG to Commerzbank AG On August 31, 2008, Allianz SE (“Allianz”) and Commerzbank AG (“Commerzbank”) agreed on the sale of Dresdner Bank AG (“Dresdner Bank”) to Commerzbank. The transaction was planned to take place in two steps. In the first step, Commerzbank would acquire 60.2% of the shares in Dresdner Bank from Allianz. In exchange Allianz would receive cash, the Asset Manager cominvest, a long-term distribution agreement and 163.5 mn new shares in Commerzbank generated from a capital increase against contribution in kind which was equivalent to a share of earnings18.4% of the increased share capital of Commerzbank. Of the total cash payment of €2.54 bn, €975 mn would be provided to a trust account to cover ultimate losses for specific ABS assets. In the second step, which was subject to the approval by the General Meetings of both entities, Dresdner Bank would be merged with Commerzbank and Allianz would receive shares in Commerzbank. The expected stake that Allianz would have held in Commerzbank would have amounted to nearly 30%. The fair value of these considerations amounted to €7.8 bn as of September 30, 2008. Lastly, it was agreed that Oldenburgische Landesbank AG (OLB) and the banking clients that were introduced through our tied agent’s channel as well as some other bank participations would remain within the Allianz Group. On November 27, 2008, Allianz and Commerzbank agreed to accelerate the change in ownership of Dresdner Bank. According to the new agreement, Commerzbank will also immediately take ownership of the 39.8% share, which was originally contemplated in the second step, in exchange for an additional cash payment of €1.4 bn at the beginning of 2009. The trust fund agreed upon in the original transaction agreement will be foregone. In exchange, Allianz will receive a compensation payment of €250 mn in cash. Other agreements remain unchanged. According to the agreement in November 2008, Allianz will receive a total of €3.215 bn in cash and 163.5 mn Commerzbank shares equal to an 18.4% stake in Commerzbank’s share capital as well as the Asset Manager cominvest and a long-term distribution agreement in exchange for Dresdner Bank. With this new agreement, Dresdner Bank and Commerzbank should be able to merge approximately six to nine months earlier than originally planned. Additionally, the Special Fund Financial Market Stabilization (SoFFin), Allianz and Commerzbank agreed on January 9, 2009, to strengthen the new Commerzbank’s core capital ratio with a silent participation of €750 mn from investmentsAllianz in associatesDresdner Bank and joint ventures.the acquisition of Collaterized Debt Obligations (CDOs) by Allianz for a consideration of €1.1 bn. SoFFin will receive a 25% plus one share participation in Commerzbank shareholders’ equity. The investment of SoFFin in Commerzbank will dilute the newly acquired stake of Allianz in Commerzbank to about 13.8%. The fair value of these considerations amounts to €5.1 bn as of December 31, 2008. Realized gainsThe transfer of ownership of Dresdner Bank to Commerzbank was completed on January 12, 2009 as scheduled.
With the agreement of the sale transaction Dresdner Bank qualifies as disposal group held-for-sale and realized losses are presented net as a separate line item. Realized gains/losses (net) include realized gainsdiscontinued operation according to the requirements of IFRS 5, “Non-current Assets Held-for-sale and losses from disposalsDiscontinued Operations”. Thus, almost all assets and liabilities of associatesDresdner Bank have been reclassified and subsidiaries and loans and advances to banks and customers. Income from fully consolidated private equity investments and expenses from fully consolidated private equity investments are presented as separate line items “Non-current assets and assets of disposal groups classified as held-for-sale” and “Liabilities of disposal groups classified as held-for-sale”, respectively, on the face of the consolidated balance sheet as of December 31, 2008. Comparative information has not been adjusted in accordance with IFRS 5.
All income and expenses relating to the discontinued operations of Dresdner Bank have been reclassified and presented in a separate line item “Net Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) income (loss) from discontinued operations, net of income taxes and minority interests in earnings” in the consolidated income statements. Fully consolidated private equity investments includestatements for all years presented in accordance with IFRS 5. The following tables shows the Four Seasons Health Care Ltd., Wilmslowassets and MAN Roland Druckmaschinen AG, Offenbach.liabilities of disposal groups classified as held-for-sale. Impairments and reversals of impairments are presented net as a separate line item. Impairments of investments (net) includeimpairments and reversals of impairments of investments in associates and joint ventures.
| | | As of December 31, | | 2008 | | | € mn | Cash and cash equivalents | | 30,238 | Financial assets carried at fair value through income | | 201,911 | Investments | | 11,113 | Loans and advances to banks and customers | | 166,718 | Deferred tax assets | | 37 | Other assets | | 7,056 | Intangible assets | | 801 | | | | Total assets of disposal groups classified as held-for-sale | | 417,874 | | | | | | As of December 31, | | 2008 | | | € mn | Financial liabilities carried at fair value through income | | 180,249 | Liabilities to banks and customers | | 193,315 | Deferred tax liabilities | | 214 | Other liabilities | | 7,983 | Certificated liabilities | | 22,419 | Participation certificates and subordinated liabilities | | 6,289 | | | | Total liabilities of disposal groups classified as held-for-sale | | 410,469 | | | |
Changes in reserves for insuranceThe following table shows the accumulated other comprehensive income and investment contracts (net) are presented as a separate line item.expenses, net of tax
| | | | As of December 31, | | 2008 | | | | € mn | | Gains on cash flow hedges, net of tax | | 60 | | Cumulative foreign currency translation adjustment, net of tax | | (516 | ) | Unrealized gains on securities, net of tax | | 95 | | | | | | Total accumulated other comprehensive loss, net of tax related to disposal groups classified as held-for-sale | | (361 | ) | | | | |
Fee
Net income (loss) from discontinued operations Due to the structure of the transaction, Allianz ceased to be exposed to changes in the results of Dresdner Bank from the signing date. Instead Allianz is exposed to changes in the fair value of its stake in Commerzbank. Therefore, the loss from discontinued operations is mainly subject to changes in the fair value of the consideration received. As disclosed in our interim report for the third quarter of 2008, the loss from discontinued operations amounted to €3.5 bn, stemming from Dresdner Bank’s net loss of €2.1 bn until the change in ownership and commission expensesan impairment charge of €1.4 bn, reflecting the difference between the fair value of considerations agreed (€7.8 bn) and investment expenses are presented as separate line items.the carrying value of €9.2 bn. Between October 1, 2008 and the date of completion of the transaction on January 12, 2009, the fair value of the agreed consideration declined by €2.7 bn. Foreign currencyIn addition, the results for the first quarter of 2009 will be burdened by another €0.4 bn stemming from unrealized gains and losses and depreciation of real estate held for investment are included in investment expenses.
Amortization of intangible assets includes amortization of intangible assets previously included in other expenses.
Restructuring charges are presented as a separate line item. Restructuring charges were previously presented in other expenses.
Acquisition and administrative expenses (net) include a significant portionforeign exchange movements which, according to IFRS 5, can only be taken after the completion of the amounts previously reported in other income and other expense. Acquisition and administrative expenses (net) include other taxes previously included in taxes.transaction.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Summary ofNet income (loss) from discontinued operations for the impact of the reclassifications on the consolidated balance sheet as ofyears ended December 31, 2005:2008, 2007 and 2006, respectively is comprised of:
| | | | | | | | | | | As of
December 31, 2005,
as previously reported
| | Reclassifi- cations
| | | As of December 31, 2005
| | | | € mn | | € mn | | | € mn | ASSETS | | | | | | | | Cash and cash equivalents | | 31,647 | | — | | | 31,647 | Financial assets carried at fair value through income | | 235,007 | | (54,661 | ) | | 180,346 | Investments(1) | | 285,015 | | — | | | 285,015 | Loans and advances to banks and customers(2) | | 336,808 | | — | | | 336,808 | Financial assets for unit linked contracts | | — | | 54,661 | | | 54,661 | Reinsurance assets(3) | | 22,120 | | — | | | 22,120 | Deferred acquisition costs | | — | | 18,141 | | | 18,141 | Deferred tax assets | | 14,596 | | (9,297 | ) | | 5,299 | Other assets | | 57,303 | | (15,010 | ) | | 42,293 | Intangible assets | | 15,385 | | (2,427 | ) | | 12,958 | | | |
| |
|
| |
| Total assets | | 997,881 | | (8,593 | ) | | 989,288 | | | |
| |
|
| |
| LIABILITIES AND EQUITY | | | | | | | | Financial liabilities carried at fair value through income | | 144,640 | | (57,798 | ) | | 86,842 | Liabilities to banks and customers(4) | | 310,316 | | — | | | 310,316 | Unearned premiums | | — | | 14,524 | | | 14,524 | Reserves for loss and loss adjustment expenses | | — | | 67,005 | | | 67,005 | Reserves for insurance and investment contracts | | 359,137 | | (80,825 | ) | | 278,312 | Financial liabilities for unit linked contracts | | — | | 54,661 | | | 54,661 | Deferred tax liabilities | | 14,621 | | (9,297 | ) | | 5,324 | Other liabilities(5) | | 48,178 | | 3,137 | | | 51,315 | Certificated liabilities | | 59,203 | | — | | | 59,203 | Participation certificates and subordinated liabilities | | 14,684 | | — | | | 14,684 | | | |
| |
|
| |
| Total liabilities | | 950,779 | | (8,593 | ) | | 942,186 | | | |
| |
|
| |
| Shareholders’ equity | | 39,487 | | — | | | 39,487 | Minority interests | | 7,615 | | — | | | 7,615 | | | |
| |
|
| |
| Total equity | | 47,102 | | — | | | 47,102 | | | |
| |
|
| |
| Total liabilities and equity | | 997,881 | | (8,593 | ) | | 989,288 | | | |
| |
|
| |
|
| | | | | | | | | | | | | 20081)3) | | | 20073) | | | 20063) | | | | | € mn | | | € mn | | | € mn | | Interest and similar income | | 5,257 | | | 7,423 | | | 6,526 | | Income from financial assets and liabilities carried at fair value through income (net) | | (1,439 | ) | | (430 | ) | | 1,310 | | Realized gains/losses (net) | | 285 | | | 540 | | | 230 | | Fee and commission income | | 1,760 | | | 2,887 | | | 2,831 | | Other income | | — | | | — | | | 25 | | | | | | | | | | | | Total income from discontinued operations | | 5,863 | | | 10,420 | | | 10,922 | | | | | | | | | | | | Interest expenses | | (3,401 | ) | | (4,602 | ) | | (4,126 | ) | Loan loss provisions | | (327 | ) | | 131 | | | (31 | ) | Impairments of investments (net) | | (102 | ) | | (87 | ) | | (215 | ) | Investment expenses | | (2 | ) | | (20 | ) | | (53 | ) | Acquisition and administrative expenses (net) | | (3,326 | ) | | (4,430 | ) | | (5,018 | ) | Fee and commission expenses | | (267 | ) | | (360 | ) | | (311 | ) | Amortization of intangible assets | | (2 | ) | | — | | | — | | Restructuring charges | | (17 | ) | | (50 | ) | | (422 | ) | Other expenses | | (52 | ) | | 3 | | | 14 | | | | | | | | | | | | Total expenses from discontinued operations | | (7,496 | ) | | (9,415 | ) | | (10,162 | ) | | | | | | | | | | | Result from discontinued operations before income taxes and minority interests in earnings | | (1,633 | ) | | 1,005 | | | 760 | | Income taxes | | (398 | ) | | (282 | ) | | (293 | ) | Minority interests in earnings | | (43 | ) | | (73 | ) | | (86 | ) | | | | | | | | | | | Result from operating activities of discontinued operations | | (2,074 | ) | | 650 | | | 381 | | | | | | | | | | | | Impairment loss recognized on remeasurement of assets of disposal group to fair value less costs to sell as of September 30, 20082) | | (1,409 | ) | | — | | | — | | Result from transaction between September 30, 2008 and December 31, 20082) | | (2,928 | ) | | — | | | — | | After-tax loss on remeasurement of assets of disposal group to fair value less costs to sell | | (4,337 | ) | | — | | | — | | | | | | | | | | | | Net income (loss) from discontinued operations | | (6,411 | ) | | 650 | | | 381 | | | | | | | | | | | |
(1)1)
| Includes investments in associated enterprises and joint ventures previously reported as a separate balance sheet line item.For the year ended 2008 the result from operating activities of discontinued operations represents the nine months ended September 30, 2008. Previous year figures represent 12 months ended December 31.
|
(2)2)
| Includes loansNo income taxes were related to the impairment loss of September 30, 2008 and advances to banksthe result from transaction between September 30, 2008 and loans and advances to customers previously reported as two separate balance sheet line items.December 31, 2008.
|
(3)3)
| Formerly “Amounts ceded to reinsurers from reserves for insurance and investment contracts”.
|
(4)All numbers are stated on a consolidated basis.
| Includes liabilities to banks and liabilities to customers previously reported as two separate balance sheet line items.
|
(5)
| Includes other accrued liabilities, other liabilities and deferred income previously reported as three separate balance sheet line items.
|
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Summary of the impact of the reclassifications on the consolidated income statements for the years ended December 31, 2005 and 2004:
| | | | | | | | | | | | | | | | | | | | | | Year ended
December 31,
2005,
as previously
reported
| | | Reclassifi- cations
| | | Year ended
December 31,
2005
| | | Year ended
December 31,
2004
as previously
reported
| | | Reclassifi-
cations
| | | Year ended
December 31,
2004
| | | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | Premiums earned (net) | | 57,747 | | | (65 | ) | | 57,682 | | | 56,789 | | | — | | | 56,789 | | Interest and similar income | | 22,341 | | | 303 | | | 22,644 | | | 20,956 | | | 240 | | | 21,196 | | Income from investments in associated enterprises and joint ventures (net) | | 1,257 | | | (1,257 | ) | | — | | | 777 | | | (777 | ) | | — | | Income from financial assets and liabilities carried at fair value through income (net) | | 1,159 | | | 4 | | | 1,163 | | | 1,658 | | | 19 | | | 1,677 | | Realized gains/losses (net)(1) | | 4,710 | | | 268 | | | 4,978 | | | 5,179 | | | (611 | ) | | 4,568 | | Fee and commission income(2) | | 8,310 | | | (148 | ) | | 8,162 | | | 6,823 | | | (10 | ) | | 6,813 | | Other income | | 2,182 | | | (2,090 | ) | | 92 | | | 2,533 | | | (2,204 | ) | | 329 | | Income from fully consolidated private equity investments | | — | | | 598 | | | 598 | | | — | | | 175 | | | 175 | | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Total income | | 97,706 | | | (2,387 | ) | | 95,319 | | | 94,715 | | | (3,168 | ) | | 91,547 | | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Claims and insurance benefits incurred (net)(3) | | (53,797 | ) | | 11,027 | | | (42,770 | ) | | (52,255 | ) | | 9,449 | | | (42,806 | ) | Change in reserves for insurance and investment contracts (net) | | — | | | (11,176 | ) | | (11,176 | ) | | — | | | (9,556 | ) | | (9,556 | ) | Interest expense(4) | | (6,370 | ) | | (7 | ) | | (6,377 | ) | | (5,703 | ) | | 15 | | | (5,688 | ) | Loan loss provisions | | 109 | | | — | | | 109 | | | (354 | ) | | — | | | (354 | ) | Impairments of investments (net)(5) | | (1,679 | ) | | 1,139 | | | (540 | ) | | (2,672 | ) | | 1,197 | | | (1,475 | ) | Investment expenses | | — | | | (1,092 | ) | | (1,092 | ) | | — | | | (767 | ) | | (767 | ) | Acquisition costs and administrative
expenses (net) | | (24,447 | ) | | 1,888 | | | (22,559 | ) | | (23,380 | ) | | 1,411 | | | (21,969 | ) | Fee and commission expenses | | — | | | (2,312 | ) | | (2,312 | ) | | — | | | (1,804 | ) | | (1,804 | ) | Amortization of intangible assets(6) | | — | | | (50 | ) | | (50 | ) | | (1,164 | ) | | (198 | ) | | (1,362 | ) | Restructuring charges | | — | | | (100 | ) | | (100 | ) | | — | | | (347 | ) | | (347 | ) | Other expenses | | (3,642 | ) | | 3,591 | | | (51 | ) | | (4,091 | ) | | 3,891 | | | (200 | ) | Expenses from fully consolidated private equity investments | | — | | | (572 | ) | | (572 | ) | | — | | | (175 | ) | | (175 | ) | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Total expenses | | (89,826 | ) | | 2,336 | | | (87,490 | ) | | (89,619 | ) | | 3,116 | | | (86,503 | ) | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Income before income taxes and minority interests in earnings | | 7,880 | | | (51 | ) | | 7,829 | | | 5,096 | | | (52 | ) | | 5,044 | | Income taxes(7) | | (2,114 | ) | | 51 | | | (2,063 | ) | | (1,662 | ) | | 52 | | | (1,610 | ) | Minority interests in earnings | | (1,386 | ) | | — | | | (1,386 | ) | | (1,168 | ) | | — | | | (1,168 | ) | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Net income | | 4,380 | | | — | | | 4,380 | | | 2,266 | | | — | | | 2,266 | | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(1)
| Formerly “Other income from investments”.
|
(2)
| Formerly “Fee and commission income, and income from service activities”.
|
(3)
| Formerly “Insurance and investments contract benefits (net)”.
|
(4)
| Formerly “Interest and similar expenses”.
|
(5)
| Formerly “Other expenses from investments”.
|
(6)
| Formerly “Amortization of goodwill”.
|
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Segment Reporting
Effective January 1, 2006, the Allianz Group introduced a Corporate segment. The Corporate segment includes all group activities which are not allocated to a specific business segment. Further, the Corporate segment includes group funding and risk management activities, such as the senior bonds, subordinated bonds and money market securities issued or guaranteed by Allianz SE and the related derivative financial instruments held by Allianz SE or one of its subsidiaries. The activities included in the Corporate segment were previously reported in the Property-Casualty segment.
In addition, the Allianz Group reclassified its life and health reinsurance assumed business to the Life/Health segment. This business was previously reported in the Property-Casualty segment.
Finally, the Allianz Group revised the presentation of elimination for intra-Allianz Group dividends. Intra-Allianz Group dividends are now eliminated by the subsidiary receiving the dividend. Intra-Allianz Group dividends were previously eliminated within the segment if the dividend-involved subsidiaries were within the same segment or eliminated in the consolidation adjustments if the dividend-involved subsidiaries were in different segments.
The effects of all of these changes to segment reporting were implemented retrospectively; therefore, all previously reported segment balance sheets and segment income statements were reclassified to ensure consistency and comparability with the presentation as implemented on January 1, 2006.
Operating Profit Methodology
As a result of the reclassifications and changes in segment reporting, as well as improving the consistency of external financial reporting with internal financial reporting, the methodology for defining operating profit was changed effective January 1, 2006. A summary of the key changes is as follows:
Amortization of intangible assets and restructuring charges, except for the operating restructuring charges for the Life/Health segment, are non operating items for all segments.
Realized gains/losses (net) from investments, shared with policyholders and impairments of investments (net), shared with policyholders are included in operating profit for the Property-Casualty and Life/Health segment.
The policyholder participation in tax income/tax expenses on premium refunds arising in connection with tax exempted income/expenses is, similar to the recognition of premium refunds included in the operating profit of the Life/Health segment.
Summary of the impact of the changes to operating profit by segment for the years ended December 31, 2005 and 2004:
| | | | | | | | | | | | Operating
profit, as
previously
reported
| | Changes
| | | Operating profit
| | | | | € mn | | € mn | | | € mn | | 2005 | | | | | | | | | Property-Casualty | | 4,162 | | 980 | | | 5,142 | | Life/Health | | 1,603 | | 491 | | | 2,094 | | Banking | | 845 | | (141 | ) | | 704 | | Asset Management | | 1,133 | | (1 | ) | | 1,132 | | Corporate | | — | | (881 | ) | | (881 | ) | Consolidation adjustments | | — | | (188 | ) | | (188 | ) | Allianz Group | | 7,743 | | 260 | | | 8,003 | | 2004 | | | | | | | | | Property-Casualty | | 3,979 | | 846 | | | 4,825 | | Life/Health | | 1,418 | | 370 | | | 1,788 | | Banking | | 586 | | (139 | ) | | 447 | | Asset Management | | 856 | | (17 | ) | | 839 | | Corporate | | — | | (870 | ) | | (870 | ) | Consolidation adjustments | | — | | (28 | ) | | (28 | ) | Allianz Group | | 6,839 | | 162 | | | 7,001 | |
Cash Flow Statements
As a result of the reclassifications to the consolidated balance sheets and consolidated income statements discussed above, the Allianz Group made corresponding reclassifications to the consolidated statements of cash flows. In addition, the Allianz Group reclassified the following line items from operating activities to investing or financing activities in order to consistently present changes in interest-bearing assets and liabilities:
Loans and advances to banks and customers are reclassified as investing activities.
Liabilities to banks and customers are reclassified as financing activities.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Aggregate policy reserves for universal-life type insurance and investment contracts are reclassified as financing activities.
Certificated liabilities are reclassified as financing activities.
45 Consolidation
Scope of the consolidation As of December 31, 2006, inIn addition to Allianz SE, 143 (2005: 169; 2004: 156)the consolidated financial statements for the period ended December 31, 2008, generally include all German and 824 (2005: 840; 2004: 907) foreign subsidiaries have been consolidated. As of December 31, 2006, 51 (2005: 67; 2004: 68) German and 21 (2005: 26; 2004: 29) foreign investment funds and 46 (2005: 35; 2004: 24) SPEs were also consolidated.
As of December 31, 2006, of the entities that have been consolidated, 9 (2005: 9; 2004: 9) subsidiaries have been consolidated where theoperating companies in which Allianz Group owns less than majority of the voting power of the subsidiary, including CreditRas Vita S.p.A. (“CreditRas”) and Antoniana Veneta Popolare Vita S.p.A. (“Antoniana”). The Allianz Group controls these entities on the basis of shareholder agreements between the Allianz Group subsidiary owning 50% of each such entity and the other shareholders. Pursuant to these shareholder agreements, the Allianz Group has the power to govern the financial and operating policies of these subsidiaries and the right to appoint the general manager, in the case of CreditRas, and the CEO, in the case of Antoniana, who have been given unilateral authority over all aspects of the financial and operating policies of these entities, including the hiring and termination of staff and the purchase and sale of assets. Furthermore, all management functions of these subsidiaries are performed by the employees of the Allianz Group and all operations are undertaken in Allianz Group’s facilities. The Allianz Group also develops all insurance products written through these subsidiaries. Although the Allianz Group and the other shareholders each have the rightto appoint half of the directors of each subsidiary, the rights of the other shareholders are limited to matters specifically reserved to the board of directors and shareholders under Italian law, such as decisions concerning capital increases, amendments to articles and similar matters. In addition, in the case of Antoniana, the Allianz Group has the right to appoint the Chairman, who has double board voting rights, thereby giving the Allianz GroupSE directly or indirectly holds a majority of board votes.voting rights, or whose activities it can in some other way control. The shareholder agreements for CreditRas and Antonianacompanies are subjectconsolidated from the date on which Allianz SE is able to automatic renewal and are not terminable prior to their stated terms.exercise control.
As of December 31, 2006, there were 9 (2005: 10; 2004: 11) joint ventures that were accounted for usingThe companies listed in the equity method; each of these entities is jointly managed by the Allianz Group together with a third party nottable below are consolidated in addition to the parent company Allianz Group’s consolidated financial statements. As of December 31, 2006, there were 177 (2005: 150; 2004: 181) associated entities accounted for using the equity method.SE.
| | | | | | | Consolidated group | | 2008 | | 2007 | | 2006 | Number of fully consolidated companies (subsidiaries) | | | | | | | Germany | | 152 | | 172 | | 143 | Other countries1) | | 935 | | 1,003 | | 824 | | | | | | | | Total | | 1,087 | | 1,175 | | 967 | | | | | | | | Number of fully consolidated investment funds | | | | | | | Germany | | 49 | | 47 | | 51 | Other countries | | 9 | | 12 | | 21 | | | | | | | | Total | | 58 | | 59 | | 72 | | | | | | | | Number of fully consolidated Special Purpose Entities (“SPE”) | | 59 | | 55 | | 46 | Total of fully consolidated entities | | 1,204 | | 1,289 | | 1,085 | thereof: Related to the discontinued operation of Dresdner Bank | | 365 | | — | | — | Number of joint ventures valued at equity | | 10 | | 4 | | 9 | thereof: Related to the discontinued operation of Dresdner Bank | | 1 | | — | | — | Number of associated entities valued at equity | | 167 | | 218 | | 177 | | | | | | | | thereof: Related to the discontinued operation of Dresdner Bank | | 15 | | — | | — | | | | | | | |
1) | Includes 10 (2007: 8; 2006: 9) subsidiaries where the Allianz Group owns less than majority of the voting power of the subsidiary, including CreditRas Vita S.p.A. (“CreditRas”) and Antoniana Veneta Popolare Vita S.p.A. (“Antoniana”). The Allianz Group controls these entities on the basis of shareholder agreements between the Allianz Group subsidiary owning 50% of each such entity and the other shareholders. Pursuant to these shareholder agreements, the Allianz Group has the power to govern the financial and operating policies of these subsidiaries and the right to appoint the general manager, in the case of CreditRas, and the CEO, in the case of |
| Antoniana, who have been given unilateral authority over all aspects of the financial and operating policies of these entities, including the hiring and termination of staff and the purchase and sale of assets. Furthermore, all management functions of these subsidiaries are performed by the employees of the Allianz Group and all operations are undertaken in Allianz Group’s facilities. The Allianz Group also develops all insurance products written through these subsidiaries. Although the Allianz Group and the other shareholders each have the right to appoint half of the directors of each subsidiary, the rights of the other shareholders are limited to matters specifically reserved to the board of directors and shareholders under Italian law, such as decisions concerning capital increases, amendments to articles and similar matters. In addition, in the case of Antoniana, the Allianz Group has the right to appoint the Chairman, who has double board voting rights, thereby giving the Allianz Group a majority of board votes. The shareholder agreements for CreditRas and Antoniana are subject to automatic renewal and are not terminable prior to their stated terms. |
All subsidiaries, joint ventures and associated enterprises are individually listed in the disclosure of equity investments that will be published together with the consolidated financial statements in the German Electronic Federal Gazette as well as on the Company’s Website. The disclosure of equity investments includes individually listed commercial partnerships which are exempt from preparing single financial statements in accordance with section 264b of the German Commercial Code (“HGB”)(HGB) as they are included in the consolidated financial statements of the Allianz Group. Selected subsidiaries and associated entities are listed in the selected subsidiaries and other holdings section.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) AcquisitionsSignificant acquisitions
| | | | | | | | | | | | | Effects on the Consolidated Financial Statements in the Year of Acquisition(1)
| | | | Date of first-time consolidation
| | Revenues
| | | Net income
| | Goodwill(2)
| | | | | | € mn | | | € mn | | € mn | 2006 | | | | | | | | | | Home & Legacy Limited, London | | 6/15/2006 | | — | | | 1 | | 68 | MAN Roland Druckmaschinen AG, Offenbach | | 7/18/2006 | | 1,044 | | | 3 | | 144 | Premier Line Direct Limited, Lancaster | | 10/1/2006 | | 7 | | | 1 | | 36 | 2004 | | | | | | | | | | Four Seasons Health Care Ltd., Wilmslow | | 8/18/2004 | | 163 | (3) | | 2 | | 141 |
| | | | | | | | | | | | | | | Equity
interest | | | Date of
first-time
consolidation | | Segment | | Goodwill2) | | Transaction | | | | % | | | | | | | € mn | | | 2008 | | | | | | | | | | | | Allianz Hayat ve Emeklilik AŞ , Istanbul | | 89.0 | | | 07/21/2008 | | Life/
Health | | 81 | | Increase
in equity
interest | Allianz Sigorta AŞ , Istanbul | | 84.2 | | | 07/21/2008 | | Property-
Casualty | | 166 | | Increase
in equity
interest | 2007 | | | | | | | | | | | | Russian People’s Insurance Society “ROSNO”, Moscow | | 97.2 | | | 02/21/2007 | | Property-
Casualty | | 514 | | Increase
in equity
interest | Selecta AG, Muntelier1) | | 100.0 | | | 07/03/2007 | | Corporate | | 472 | | Purchase | Insurance Company “Progress Garant”, Moscow | | 100.0 | | | 05/31/2007 | | Property-
Casualty | | 70 | | Purchase | Commerce Assurance Bhd., Kuala Lumpur | | 100.0 | | | 09/30/2007 | | Property-
Casualty | | 49 | | Purchase | JSC Insurance Company “ATF POLICY”, Almaty | | 100.0 | | | 09/30/2007 | | Property-
Casualty | | 8 | | Purchase | 2006 | | | | | | | | | | | | manroland AG, Offenbach | | 100.0 | 3) | | 7/18/2006 | | Corporate | | 144 | | Purchase | Home & Legacy Limited, London | | 100.0 | | | 6/15/2006 | | Property-
Casualty | | 68 | | Purchase | Premier Line Direct Limited, Lancaster | | 100.0 | | | 10/01/2006 | | Property-
Casualty | | 36 | | Purchase |
(1)1)
| Consolidated in the business segments.Classified as “held-for-sale”
|
(2)2)
| At the date of first-time consolidation.consolidation |
(3)3)
| Income from service agreements (not included in total revenuesGroup share through indirect holder Roland Holding GmbH, Munich at the date of the Allianz Group).first-time consolidation: 65.0%
|
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) 2006 Acquisitions2008 Significant acquisitions
MAN Roland DruckmaschinenAllianz Sigorta AŞ, Istanbul and Allianz Hayat ve Emeklilik AŞ, Istanbul
In April 2008, the Allianz Group signed a share purchase agreement to acquire 47.1% of shares in the non-life insurer Allianz Sigorta AŞ, Istanbul, and 51.0% of the shares in the life-insurance and pension company Allianz Hayat ve Emeklilik AŞ, Istanbul, for a total consideration of €373 mn. The transaction has been approved by the relevant regulatory and competition board on July 21, 2008 so that Allianz Group now holds 84.2% and 89.0% of shares, respectively. The impact of the acquisition, net of cash acquired, on the consolidated statement of cash flows for the year ended December 31, 2008 was: | | | | | | € mn | | Intangible assets | | (247 | ) | Other assets | | (914 | ) | Other liabilities | | 870 | | Minority interests | | 38 | | Less: previous investment in Allianz Sigorta and Hayat | | 101 | | | | | | Acquisition of subsidiary, net of cash acquired | | (152 | ) | | | | |
Components of costs | | | | | € mn | Purchase price Allianz Sigorta AŞ (47.1%) | | 248 | Purchase price Allianz Hayat ve Emeklilik AŞ (51.0%) | | 125 | Transaction costs | | — | | | | Total purchase price | | 373 | | | |
The impact of Allianz Sigorta AŞ and Allianz Hayat ve Emeklilik AŞ on the Allianz Group’s net income for the year ended December 31, 2008 was €8.3 mn. The amounts recognized for major classes of assets and liabilities are as follows: | | | | | | | | Fair
value | | Carrying
amount | | | | € mn | | € mn | Cash and cash equivalents | | 221 | | 221 | Investments | | 386 | | 374 | Financial assets for unit-linked contracts | | 150 | | 150 | Reinsurance assets | | 136 | | 136 | Deferred acquisition costs | | 51 | | 6 | Other assets | | 201 | | 183 | | | | | | Total assets | | 1,145 | | 1,070 | | | | | | Unearned premiums | | 249 | | 249 | Reserves for loss and loss adjustments | | 117 | | 117 | Reserves for insurance and investment contracts | | 269 | | 263 | Financial liabilities for unit-linked contracts | | 150 | | 150 | Other liabilities | | 90 | | 85 | Total equity | | 270 | | 206 | | | | | | Total liabilities and equity | | 1,145 | | 1,070 | | | | | |
At the date of acquisition the goodwill reflects mainly the market position and growth potential of the turkish insurance market. The premiums written and premiums earned (net) of the combined entity (Allianz Group including Allianz Hayat and Allianz Sigorta) for the year ended December 31, 2008 would have been €66,417 mn and €60,660 mn, respectively, if the acquisition date had been on January 1, 2008. The net loss of the combined entity for the year ended December 31, 2008 would have been €2,415 mn if the acquisition date had been on January 1, 2008. 2007 Significant acquisitions Russian People’s Insurance Society “ROSNO”, Moscow On February 21, 2007, the Allianz Group acquired additional 49.8% of Russian People´s Insurance Society “ROSNO”, Moscow (“ROSNO”) at a purchase price of €572 mn. ROSNO is the second largest insurance company in Russia which offers products in the business segments Property-Casualty, Life/Health and Asset Management.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) The impact of the acquisition of ROSNO net of cash acquired, on the consolidated statement of cash flows for the year ended December 31, 2007 was: | | | | | | € mn | | Intangible assets | | (530 | ) | Other assets | | (798 | ) | Other liabilities | | 717 | | Deferred tax liabilities | | 15 | | Minority interests | | 10 | | Less: previous investment in Rosno | | 78 | | | | | | Acquisition of subsidiary, net of cash acquired | | (508 | ) | | | | |
Components of costs | | | | | € mn | Purchase price (49.8 % interest) | | 571 | Subsequent acquisition costs | | 1 | | | | Total purchase price | | 572 | | | |
The impact on the Allianz Group’s net income for the year ended December 31, 2007 was €(11) mn. The amounts recognized for major classes of assets and liabilities are as follows: | | | | | | | | Fair
value | | Carrying
amount | | | | € mn | | € mn | Cash and cash equivalents | | 64 | | 64 | Investments | | 408 | | 408 | Reinsurance assets | | 55 | | 55 | Deferred acquisition costs | | 73 | | 71 | Other assets | | 303 | | 279 | Intangible assets | | 16 | | — | | | | | | Total assets | | 919 | | 877 | | | | | | Unearned premiums | | 350 | | 350 | Reserves for loss and loss adjustments | | 122 | | 120 | Other liabilities | | 258 | | 252 | Total equity | | 189 | | 155 | | | | | | Total liabilities and equity | | 919 | | 877 | | | | | |
At the date of acquisition the goodwill reflects mainly the market position and growth potential of the Russian insurance market. The revenues of the combined entity (Allianz Group including ROSNO) for the year ended December 31, 2007 would have been €102,785 mn, if the acquisition date had been on January 1, 2007. The net income of the combined entity for the year ended December 31, 2007 would have been €7,969 mn if the acquisition date had been on January 1, 2007. Selecta AG, Muntelier On July 3, 2007, the Allianz Group acquired 100.0% of Selecta AG, Muntelier at a purchase price of €1,126 mn. Selecta AG, Muntelier is the leading vending operator in Europe. The impact of the acquisition of Selecta AG, Muntelier, net of cash acquired, on the consolidated statement of cash flows for the year ended December 31, 2007 was: | | | | | | € mn | | Intangible assets | | (1,113 | ) | Loans and advances to banks and customers | | (107 | ) | Other assets | | (301 | ) | Other liabilities | | 258 | | Deferred tax liabilities | | 190 | | | | | | Acquisition of subsidiary, net of cash acquired | | (1,073 | ) | | | | |
Components of costs | | | | | € mn | Purchase price (100.0 % interest) | | 1,126 | Transaction costs | | — | | | | Total purchase price | | 1,126 | | | |
The impact on the Allianz Group’s net income for the year ended December 31, 2007 was €(11) mn.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) The amounts recognized for major classes of assets and liabilities are as follows: | | | | | | | | Fair
value | | Carrying
amount | | | | € mn | | € mn | Cash and cash equivalents | | 53 | | 53 | Other assets | | 404 | | 360 | Intangible assets | | 683 | | 46 | | | | | | Total assets | | 1,140 | | 459 | | | | | | Other liabilities | | 448 | | 230 | Total equity | | 692 | | 229 | | | | | | Total liabilities and equity | | 1,140 | | 459 | | | | | |
The revenues of the combined entity (Allianz Group including Selecta AG) for the year ended December 31, 2007 would have been €102,978 mn if the acquisition date had been on January 1, 2007. The net income of the combined entity for the year ended December 31, 2007 would have been €8,013 mn if the acquisition date had been on January 1, 2007. During the fourth quarter ended December 31, 2007, Selecta AG, Muntelier was reclassified to disposal groups held-for-sale. 2006 Significant acquisitions manroland AG, Offenbach On July 18, 2006, the Allianz Group acquired 100.0% (Group share through indirect holder Roland Holding GmbH, Munich at the date of MAN Roland Druckmaschinenfirst-time consolidation: 65,0% ) of manroland AG, Offenbach, at a purchase price of €554 mn. MAN RolandManroland AG is the world’s second largest manufacturer of printing systems. The impact of the acquisition of MAN Roland Druckmaschinenmanroland AG, Offenbach, net of cash acquired, on the consolidated statementsstatement of cash flows for the year ended December 31, 2006 was: | | | | As of December 31,
| | 2006
| | | | | € mn | | Intangible assets | | 268 | | Loans and advances to banks and customers | | 386 | | Other assets | | 931 | | Liabilities to banks and customers | | (491 | ) | Other liabilities | | (625 | ) | Deferred tax liabilities | | (125 | ) | | | | | Acquisition of subsidiary, net of cash acquired | | 344 | | | | | |
Components of costs | | | | | €mn | Purchase price (100.0 % interest) | | 553 | Transaction costs | | 1 | | | | Total purchase price | | 554 | | | |
2004 AcquisitionsThe impact on the Group’s net income for the year ended December 31, 2006 was €3 mn.
Four Seasons Health Care Ltd., WilmslowThe amounts recognized for major classes of assets and liabilities are as follows:
| | | | | | | | Fair
value | | Carrying
amount | | | | € mn | | € mn | Cash and cash equivalents | | 210 | | 210 | Investments | | 10 | | 7 | Other assets | | 1,316 | | 1,131 | Intangible assets | | 125 | | 78 | | | | | | Total assets | | 1,661 | | 1,426 | | | | | | Other liabilities | | 1,230 | | 1,115 | Total equity | | 431 | | 311 | | | | | | Total liabilities and equity | | 1,661 | | 1,426 | | | | | |
On August 18, 2004,
The revenues of the Allianzcombined entity (Allianz Group acquired 100.0%including manroland AG) for the year ended December 31, 2006 would have been €102,137 mn if the acquisition date had been on January 1, 2006. The net income of Four Seasons Health Care Ltd., Wilmslow at a purchase price of €347 mn. Four Seasons Health Care Ltd., Wilmslow operates care homes and specialist centres in England, Scotland and Northern Ireland.the combined entity for the year ended December 31, 2006 would have been €7,024 mn if the acquisition date had been on January 1, 2006.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) DisposalsSignificant disposals
| | | | | | | | | | | | | Effects on the Consolidated Financial Statements in the Year of Disposal(1)
| | | | | Date of deconsolidation
| | Revenues
| | Net income
| | Disposed goodwill
charged to income(2)
| | | | | | | € mn | | € mn | | € mn | | 2006 | | | | | | | | | | Four Seasons Health Care Ltd., Wilmslow | | 8/31/2006 | | — | | 16 | | 158 | | 2005 | | | | | | | | | | Cadence Capital Management Inc., Delaware | | 8/31/2005 | | 17 | | 5 | | 39 | | DresdnerGrund-Fonds, Frankfurt am Main | | 12/22/2005 | | — | | 85 | | — | | 2004 | | | | | | | | | | Allianz of Canada, Inc., Toronto | | 9/12/2004 | | 458 | | 105 | | 31 | | Allianz President General Insurance Co. Ltd., Taipeh | | 9/27/2004 | | 69 | | 10 | | 4 | | ENTENIAL, Guyancourt | | 4/2/2004 | | — | | — | | (5 | ) |
(1)
| Consolidated in the business segments.
|
(2)
| At the date of deconsolidation.
|
2006 Disposals
Four Seasons Health Care Ltd., Wilmslow On August 31, 2006, the Allianz Group sold its shares in Four Seasons Health Care Ltd., Wilmslow. The proceeds from sale of these shares amounted to €863 mn.
2005 Disposals
DresdnerGrund-Fonds, Frankfurt am Main On December 22, 2005, the Allianz Group sold its shares in DresdnerGrund-Fonds, Frankfurt am Main. The proceeds from sale of these shares amounted to €2,029 mn.
| | | | | | | | | | | | | | | | Equity
interest | | Date of
deconsoli-
dation | | Proceeds
from sale | | Segment | | Goodwill | | Transaction | | | | % | | | | € mn | | | | € mn | | | 2008 | | | | | | | | | | | | | DEGI Deutsche Gesellschaft für Immobilienfonds m.b.H, Frankfurt am Main | | 94.0 | | 01/01/2008 | | 103 | | Banking | | — | | Sale to third-party | | | | | | | | 2007 | | | | | | | | | | | | | Grundstücksgesellschaft der Vereinten Versicherungen mbH & Co. Besitz- und Betriebs KG, Munich | | 93.7 | | 12/14/2007 | | 194 | | Property-
Casualty | | — | | Sale to third-party | Les Assurances Fédérales IARD, Strasbourg | | 60.0 | | 09/30/2007 | | 86 | | Property-
Casualty | | — | | Sale to third-party | Allianz PFI (UK) Ltd., London | | 100.0 | | 08/17/2007 | | 52 | | Corporate | | — | | Sale to third-party | Adriática de Seguros C.A., Caracas | | 98.3 | | 08/31/2007 | | 26 | | Property-
Casualty/
Life/Health | | — | | Sale to third-party | | | | | | | | 2006 | | | | | | | | | | | | | Four Seasons Health Care Ltd., Wilmslow | | 100.0 | | 8/31/2006 | | 863 | | Corporate | | 158 | | Sale to third-party |
Acquisitions and disposals of significant minority interests | | | | | | | | | | | | | | | | Date of
acquisition/
disposal | | Equity
interest
change | | Costs of
acquisition | | Increase
(decrease)
in share
holders’
equity | | | Increase
(decrease)
of minority
interests | | | | | | | % | | € mn | | € mn | | | € mn | | 2008 | | | | | | | | | | | | | Allianz Lebensversicherungs-Aktiengesellschaft, Stuttgart | | during 2008 | | 5.2 | | 425 | | (352 | ) | | (73 | ) | Allianz Global Investors of America L.P., Dover/Delaware | | 02/28/2008 | | 2.5 | | 122 | | (122 | ) | | — | | Russian People’s Insurance Society “ROSNO”, Moscow | | 10/27/2008 | | 2.6 | | 34 | | (30 | ) | | (4 | ) | Allianz Mena Holding Bermuda, Beirut | | 08/25/2008 | | 30.3 | | 26 | | (16 | ) | | (10 | ) | | | | | | | 2007 | | | | | | | | | | | | | Assurances Générales de France, Paris1) | | during 2007 | | 39.8 | | 10,052 | | (3,419 | ) | | (3,868 | ) | Allianz Lebensversicherungs-Aktiengesellschaft, Stuttgart | | during 2007 | | 3.8 | | 303 | | (211 | ) | | (92 | ) | Allianz Taiwan Life Insurance Co. Ltd., Taipei | | 04/19/2007 | | 49.6 | | 40 | | (39 | ) | | (1 | ) | | | | | | | 2006 | | | | | | | | | | | | | Riunione Adriatica di Sicurtà S.p.A., Milan (RAS)1) | | 10/13/2006 | | 23.7 | | 3,653 | | 1,659 | | | (1,659 | ) | Allianz Global Investors of America L.P., Delaware | | during 2006 | | 0.3 | | 70 | | (70 | ) | | — | |
1) | Impact on shareholders’ equity includes increase in equity due to financing of AGF minority buy-out in the year 2007 of €2,765 mn and RAS minority buy-out in the year 2006 of €3,653 mn. |
2006Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Riunione Adriatica di Sicurtà S.p.A., Milan (“RAS”) On October 13, 2006, the Allianz Group increased its interest in RAS by 23.7% to 100.0% followed by the merger of RAS with and into Allianz AG. The acquisition cost for the additional interest was €3,653 mn. This transaction was accounted for as a transaction between equity holders; therefore, the Allianz Group recorded a decrease in shareholders’ equity of €1,994 mn and a decrease of minority interests of €1,659 mn.
Allianz Global Investors of America L.P., DelawareDuring the year ended December 31, 2006, the Allianz Group increased its interest in Allianz Global Investors of America L.P., Delaware, by 0.3% to 97.3%. The acquisition cost for the additional interest was €70 mn. This transaction was accounted for as a transaction between equity holders; therefore, the Allianz Group recorded a decrease in shareholders’ equity of €70 mn.
[THIS PAGE INTENTIONALLY LEFT BLANK] 2005
Riunione Adriatica di Sicurtà S.p.A., Milan (“RAS”) On November 30, 2005, the Allianz Group increased its interest in RAS, by 20.7% to 76.3%. The acquisition cost for the additional interest was €2,701 mn. This transaction was accounted for as a transaction between equity holders; therefore, the Allianz Group recorded a decrease in shareholders’ equity of €1,339 mn and a decrease of minority interests of €1,362 mn.
Allianz Global Investors of America L.P., Delaware During the year ended December 31, 2005, the Allianz Group increased its interest in Allianz Global Investors of America L.P., Delaware, by 3.4% to 97.0%. The acquisition cost for the additional interest was €209 mn. This transaction was accounted for as a transaction between equity holders; therefore, the Allianz Group recorded a decrease in shareholders’ equity of €209 mn.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Bayerische Versicherungsbank AG, Munich (was merged in January 2006 retroactively effective October 1, 2005 into Allianz Versicherungs-Aktiengesellschaft, Munich) On November 15, 2005, the Allianz Group increased its interest in Bayerische Versicherungsbank AG, Munich, by 10.0% to 100.0%. The acquisition cost for the additional interest was €22 mn. This transaction was accounted for as a transaction between equity holders; therefore, the Allianz Group recorded an increase in shareholders’ equity of €82 mn and a decrease of minority interest of €104 mn.
Assurances Générales de France, Paris During the year ended December 31, 2005, Assurances Générales de France, Paris issued shares to plan participants as a result of exercises of share options. These issuances resulted in a decrease in the Allianz Group’s ownership interest in Assurances Générales de France, Paris from 62% at December 31, 2004 to 61% at December 31, 2005. These transactions were accounted for as transactions between equity holders; therefore, the Allianz Group recorded an increase in shareholders’ equity of €19 mn and an increase in minority interests of €127 mn.
2004
Allianz Global Investors of America L.P., Delaware In January, April and November 2004, the Allianz Group increased its interest in Allianz Global Investors of America L.P., Delaware, by a total of 9.7% to 93.6%, resulting in additional goodwill of €583 mn. The acquisition cost for the additional interest was €598 mn.
56 Segment reporting
As a result of the Allianz Group’s worldwide organization, theThe business activities of the Allianz Group are first segregated by product and type of service: insurance activities, banking activities, asset management activities and corporate activities. Due to differences in the nature of products, risks and capital allocation, insurance activities are further divided between property-casualty and life/health categories. Thus, the Allianz Group’s segments are structured as Property-Casualty, Life/Health, Banking, Asset Management and Corporate. Based on various legal, regulatory and other operationalissues associated with operating entities in jurisdictions worldwide, theThe insurance segments of the Allianz Group are also further analyzed by geographical areas or regionsregions.
Transfer prices between business segments are set on an arm’s length basis in matrixes that comprise a number of profit and service-centermanner similar to transactions with third parties. Transfers between business segments (see following pages). This geographic analysis is performed to provide further understanding of trends and results underlyingare eliminated in the segment data.consolidation. Property-Casualty The Allianz GroupIn the Property-Casualty segment, a wide variety of insurance products is the largest German property-casualty insurance company based on gross premiums written during the year ended December 31, 2006. Principal product lines offered primarily within Germany include automobileto both private and corporate customers, including motor liability and other automobile insurance,own damage, accident, general liability, fire and property, insurance, personal accident insurance, liability insurance and legal expense, credit and travel insurance. The Allianz Group is also amongcore markets for the largest property-casualty insurance companies inProperty-Casualty business are Germany, France, Italy and other European countries, including France, Italy,like the United Kingdom, Switzerland and Spain. The Allianz Group conducts its property-casualty insuranceFurther operations in these countries through five main groups of operating entities in France, primarily offering automobile, property, injury and liability insurance for both individual and corporate customers; Italy, operating in all personal and commercial property-casualty linesare run in particular personal automobile insurance;in the United Kingdom, offering products generally similar to those offered by the Allianz Group’s German property-casualty operations as well as a number of specialty products, including extended warrantyStates, Central and pet insurance; Switzerland, offering property-casualty insurance, travelEastern Europe and assistance insurance, conventional reinsurance as well as a variety of alternative risk transfer products for corporate customers worldwide; and Spain, offering a wide variety of traditional personal and commercial property-casualty insurance products, with an emphasis on automobile insurance.Asia-Pacific.
Life/Health The Allianz Group isIn the largest provider of life insurance and the third largest provider of health insurance in Germany as measured by gross premiums written during the year ended December 31, 2006. Germany is the Allianz Group’s
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
most important market for life/health insurance. The Allianz Group’s German life insurance companies offerLife/Health segment a comprehensive and unified range of life insurance and life insurance-relatedhealth insurance products on both an individual and group basis. The main classes of coveragebasis is offered, includeincluding annuity, endowment lifeand term insurance, annuity policies, term life insurance, unit linked annuities, and other life insurance-related forms of cover, which are provided as riders to other policies and on a stand-alone basis. The Allianz Group’s German health insurance companies provide a wide range of health insurance products, including full private healthcare coverage for the self-employed, salaried employees and civil servants, supplementary insurance for people insured under statutory health insurance plans, daily sickness allowance for the self-employed and salaried employees, hospital daily allowance, supplementary care insurance and foreign travel medical expenses insurance. The Allianz Group also maintains significant life/health operations in the United States, offering a wide variety of life insurance, fixed and variable annuity contracts, including equity-indexed annuities to individuals, and long-term care insurance to individual and corporate customers. Italy and France are also markets where the Allianz Group maintains a significant presence offering products such as unit linkedunit-linked and investment-oriented products as well as full private health insurance and individualsupplemental health and group lifecare insurance. The core markets are Germany, France, Italy and the United States.
Banking The Allianz Group’sAfter the classification of Dresdner Bank as discontinued operation, the banking operations primarily comprise the operations segment consists
of the Dresdner Bank AG and subsidiaries, hereafter “Dresdner Bank Group”, whose principal banking products and services include traditional commercial banking activities such as deposit taking, lending (including residential mortgage lending) and cash management, as well as corporate finance advisory services, mergers and acquisitions advisory services, capital and money market services, securities underwriting and securities trading and derivatives business on its own account and for its customers. The Allianz Group operates through the domestic and international branch network of the Dresdner Bank Group and through various subsidiaries both in Germany, France, Italy and abroad, someCentral and Eastern Europe. The banks offer a wide range of which also have branch networks. products for corporate and retail clients with its main focus on the latter. Asset Management The Allianz Group’s Asset Management segment operates as a global provider of institutional and retail asset management products and services to third-party investors and provides investment management services to the Allianz Group’s insurance operations. The Allianz Group managed €764 bn of third-party assets on a worldwide basisproducts for retail and institutional customers include equity and fixed-income funds as of December 31, 2006, with key management centers in Munich, Frankfurt, London, Paris, Singapore, Hong Kong, Milan, Westport (Connecticut) and San Francisco, San Diego and Newport Beach (California).well as alternative products. The United States isand Germany as well as France, Italy and the Allianz Group’s largest geographicAsia-Pacific region for third-party assets underrepresent the primary asset management accounting for approximately 57.1% (2005: 59.6% and 2004: 59.5%) of the total third-party assets under management. As measured by total assets under management at December 31, 2006, the Allianz Group is one of the five largest asset managers in the world.markets. Corporate The Corporate segment includes all group activities which are not allocated to a specific business segment. Further,include the management and support of Allianz Group’s businesses through its strategy, risk, corporate finance, treasury, financial control, communication, legal, human resources and technology functions. The Corporate segment also includes group funding and risk management activities, such as the senior bonds, subordinated bonds and money market securities issued or guaranteed byGroup’s alternative investment activities. Operating Profit The Allianz SEGroup uses operating profit to evaluate the performance of its business segments and the related derivative financial instruments held byGroup as a whole. The Allianz SE or oneGroup considers the presentation of operating profit to be useful and meaningful to investors because it enhances the understanding of the Allianz Group’s underlying operating performance and the comparability of its subsidiaries. The activities includedoperating performance over time. Operating profit highlights the portion of income before income taxes and minority interests in earnings attributable to the Corporate segment were previously reported inongoing core operations of the Property-Casualty segment.Allianz Group. To better understand the on-going operations of the business, we exclude the effects of acquisition-related expenses and the amortization of intangible assets, as these relate to business combinations; and we exclude interest expense from external debt and non-operating income from financial assets and liabilities carried at fair value through income (net) as these relate to our capital structure.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Business Segment Information—Consolidated Balance Sheets
| | | | | | | | | | | | | | | | Property-Casualty
| | Life/Health
| | Banking
| As of December 31,
| | 2006
| | 2005
| | 2006
| | 2005
| | 2006
| | 2005
| | | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | ASSETS | | | | | | | | | | | | | Cash and cash equivalents | | 4,100 | | 3,793 | | 6,998 | | 5,874 | | 21,528 | | 21,848 | Financial assets carried at fair value through income | | 4,814 | | 2,243 | | 11,026 | | 10,564 | | 139,505 | | 165,928 | Investments | | 88,819 | | 87,587 | | 190,607 | | 183,350 | | 17,803 | | 17,323 | Loans and advances to banks and customers | | 16,825 | | 15,873 | | 85,769 | | 84,072 | | 313,709 | | 249,212 | Financial assets for unit linked contracts | | — | | — | | 61,864 | | 54,661 | | — | | — | Reinsurance assets | | 11,437 | | 12,728 | | 7,966 | | 9,494 | | — | | — | Deferred acquisition costs | | 3,704 | | 3,563 | | 15,381 | | 14,550 | | — | | — | Deferred tax assets | | 1,651 | | 1,775 | | 503 | | 567 | | 1,679 | | 2,016 | Other assets | | 17,737 | | 16,607 | | 12,891 | | 12,505 | | 9,571 | | 12,273 | Intangible assets | | 1,653 | | 1,595 | | 2,399 | | 2,390 | | 2,285 | | 2,283 | | | |
| |
| |
| |
| |
| |
| Total assets | | 150,740 | | 145,764 | | 395,404 | | 378,027 | | 506,080 | | 470,883 | | | |
| |
| |
| |
| |
| |
| | | | | | | | Property-Casualty
| | Life/Health
| | Banking
| As of December 31,
| | 2006
| | 2005
| | 2006
| | 2005
| | 2006
| | 2005
| | | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | LIABILITIES AND EQUITY | | | | | | | | | | | | | Financial liabilities carried at fair value through income | | 1,070 | | 132 | | 5,251 | | 3,517 | | 72,215 | | 82,080 | Liabilities to banks and customers | | 4,473 | | 4,383 | | 7,446 | | 5,479 | | 350,148 | | 301,586 | Unearned premiums | | 12,994 | | 12,945 | | 1,874 | | 1,580 | | — | | — | Reserves for loss and loss adjustment expenses | | 58,664 | | 60,259 | | 6,804 | | 6,806 | | — | | — | Reserves for insurance and investment contracts | | 8,956 | | 9,161 | | 278,701 | | 269,433 | | — | | 2 | Financial liabilities for unit linked contracts | | — | | — | | 61,864 | | 54,661 | | — | | — | Deferred tax liabilities | | 3,902 | | 4,155 | | 1,181 | | 1,800 | | 83 | | 405 | Other liabilities | | 18,699 | | 16,491 | | 16,314 | | 18,454 | | 12,140 | | 12,557 | Certificated liabilities | | 657 | | 412 | | 3 | | 4 | | 46,191 | | 50,719 | Participation certificates and subordinated liabilities | | 1,605 | | 1,634 | | 66 | | 141 | | 8,456 | | 7,428 | | | |
| |
| |
| |
| |
| |
| Total liabilities | | 111,020 | | 109,572 | | 379,504 | | 361,875 | | 489,233 | | 454,777 | | | |
| |
| |
| |
| |
| |
|
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
| | | | | | | | | | | | | | | | | | | | | | | Asset Management
| | Corporate
| | | Consolidation
| | | Group
| | | | 2006
| | 2005
| | 2006
| | 2005
| | | 2006
| | | 2005
| | | 2006
| | 2005
| | | | € mn | | € mn | | € mn | | € mn | | | € mn | | | € mn | | | € mn | | € mn | | | | | | | | | | | | | | | | | | | | | | | | | 767 | | 476 | | 536 | | 166 | | | (898 | ) | | (510 | ) | | 33,031 | | 31,647 | | | | | | | | | | | | | 985 | | 1,031 | | 1,158 | | 956 | | | (619 | ) | | (376 | ) | | 156,869 | | 180,346 | | | | 774 | | 832 | | 96,652 | | 88,130 | | | (96,521 | ) | | (92,207 | ) | | 298,134 | | 285,015 | | | | 367 | | 477 | | 2,963 | | 2,180 | | | (11,355 | ) | | (15,006 | ) | | 408,278 | | 336,808 | | | | — | | — | | — | | — | | | — | | | — | | | 61,864 | | 54,661 | | | | — | | — | | — | | — | | | (43 | ) | | (102 | ) | | 19,360 | | 22,120 | | | | 50 | | 28 | | — | | — | | | — | | | — | | | 19,135 | | 18,141 | | | | 196 | | 213 | | 1,473 | | 1,840 | | | (775 | ) | | (1,112 | ) | | 4,727 | | 5,299 | | | | 3,471 | | 3,567 | | 7,020 | | 5,331 | | | (11,797 | ) | | (7,990 | ) | | 38,893 | | 42,293 | | | | 6,334 | | 6,690 | | 264 | | — | | | — | | | — | | | 12,935 | | 12,958 | | | |
| |
| |
| |
|
| |
|
| |
|
| |
| |
| | | | 12,944 | | 13,314 | | 110,066 | | 98,603 | | | (122,008 | ) | | (117,303 | ) | | 1,053,226 | | 989,288 | | | |
| |
| |
| |
|
| |
|
| |
|
| |
| |
| | | | | | | | | Asset Management
| | Corporate
| | | Consolidation
| | | Group
| | | | 2006
| | 2005
| | 2006
| | 2005
| | | 2006
| | | 2005
| | | 2006
| | 2005
| | | | € mn | | € mn | | € mn | | € mn | | | € mn | | | € mn | | | € mn | | € mn | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | — | | 1,713 | | 1,492 | | | (550 | ) | | (379 | ) | | 79,699 | | 86,842 | | | | 605 | | 667 | | 7,293 | | 9,985 | | | (8,887 | ) | | (11,784 | ) | | 361,078 | | 310,316 | | | | — | | — | | — | | — | | | — | | | (1 | ) | | 14,868 | | 14,524 | | | | | | | | | | | | | — | | — | | — | | — | | | (4 | ) | | (60 | ) | | 65,464 | | 67,005 | | | | | | | | | | | | | — | | — | | 306 | | (78 | ) | | (266 | ) | | (206 | ) | | 287,697 | | 278,312 | | | | | | | | | | | | | — | | — | | — | | — | | | — | | | — | | | 61,864 | | 54,661 | | | | 46 | | 54 | | 171 | | 22 | | | (765 | ) | | (1,112 | ) | | 4,618 | | 5,324 | | | | 3,689 | | 3,876 | | 14,149 | | 11,931 | | | (15,227 | ) | | (11,994 | ) | | 49,764 | | 51,315 | | | | — | | 4 | | 9,265 | | 8,956 | | | (1,194 | ) | | (892 | ) | | 54,922 | | 59,203 | | | | — | | — | | 7,099 | | 6,428 | | | (864 | ) | | (947 | ) | | 16,362 | | 14,684 | | | |
| |
| |
| |
|
| |
|
| |
|
| |
| |
| | | | 4,340 | | 4,601 | | 39,996 | | 38,736 | | | (27,757 | ) | | (27,375 | ) | | 996,336 | | 942,186 | | | |
| |
| |
| |
|
| |
|
| |
|
| |
| |
| | | | Total equity | | | 56,890 | | 47,102 | | | | | | | | | | | | | | | | | | |
| |
| | | | Total liabilities and equity | | | 1,053,226 | | 989,288 | | | | | | | | | | | | | | | | | | |
| |
|
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Business Segment Information—Consolidated Income Statements
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Property-Casualty
| | | Life/Health
| | | Banking
| | | | | 2006
| | | 2005
| | | 2004
| | | 2006
| | | 2005
| | | 2004
| | | 2006
| | | 2005
| | | 2004
| | | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | Premiums earned (net) | | 37,950 | | | 37,685 | | | 37,385 | | | 20,574 | | | 19,997 | | | 19,404 | | | — | | | — | | | — | | Interest and similar income | | 4,096 | | | 3,747 | | | 3,615 | | | 12,972 | | | 12,057 | | | 11,493 | | | 7,312 | | | 7,321 | | | 6,545 | | Income from financial assets and liabilities carried at fair value through income (net) | | 189 | | | 164 | | | 25 | | | (361 | ) | | 258 | | | 198 | | | 1,335 | | | 1,163 | | | 1,509 | | Realized gains/losses (net) | | 1,792 | | | 1,421 | | | 1,055 | | | 3,282 | | | 2,731 | | | 2,007 | | | 492 | | | 1,020 | | | 543 | | Fee and commission income | | 1,014 | | | 989 | | | 782 | | | 630 | | | 507 | | | 224 | | | 3,598 | | | 3,397 | | | 3,237 | | Other income | | 69 | | | 53 | | | 288 | | | 43 | | | 45 | | | 44 | | | 25 | | | 11 | | | 4 | | Income from fully consolidated private equity investments | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Total income | | 45,110 | | | 44,059 | | | 43,150 | | | 37,140 | | | 35,595 | | | 33,370 | | | 12,762 | | | 12,912 | | | 11,838 | | | | |
|
| |
|
| |
|
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|
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|
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| |
|
| Claims and insurance benefits incurred (net) | | (24,672 | ) | | (25,331 | ) | | (25,271 | ) | | (17,625 | ) | | (17,439 | ) | | (17,535 | ) | | — | | | — | | | — | | Change in reserves for insurance and investment contracts (net) | | (425 | ) | | (707 | ) | | (611 | ) | | (10,525 | ) | | (10,443 | ) | | (8,746 | ) | | — | | | — | | | — | | Interest expense | | (273 | ) | | (339 | ) | | (417 | ) | | (280 | ) | | (452 | ) | | (452 | ) | | (4,592 | ) | | (5,027 | ) | | (4,189 | ) | Loan loss provisions | | (2 | ) | | (1 | ) | | (7 | ) | | (1 | ) | | — | | | (3 | ) | | (28 | ) | | 110 | | | (344 | ) | Impairments of investments (net) | | (200 | ) | | (95 | ) | | (144 | ) | | (390 | ) | | (199 | ) | | (281 | ) | | (215 | ) | | (184 | ) | | (509 | ) | Investment expenses | | (300 | ) | | (333 | ) | | (204 | ) | | (750 | ) | | (567 | ) | | (649 | ) | | (47 | ) | | (30 | ) | | (25 | ) | Acquisition and administrative expenses (net) | | (10,590 | ) | | (10,216 | ) | | (10,192 | ) | | (4,437 | ) | | (3,973 | ) | | (3,711 | ) | | (5,605 | ) | | (5,661 | ) | | (5,643 | ) | Fee and commission expenses | | (721 | ) | | (775 | ) | | (530 | ) | | (223 | ) | | (219 | ) | | (145 | ) | | (590 | ) | | (547 | ) | | (530 | ) | Amortization of intangible assets | | (1 | ) | | (11 | ) | | (403 | ) | | (26 | ) | | (13 | ) | | (168 | ) | | — | | | (1 | ) | | (281 | ) | Restructuring charges | | (362 | ) | | (68 | ) | | (32 | ) | | (174 | ) | | (18 | ) | | (24 | ) | | (424 | ) | | (13 | ) | | (292 | ) | Other expenses | | (4 | ) | | (17 | ) | | (39 | ) | | (9 | ) | | (1 | ) | | (43 | ) | | 14 | | | (33 | ) | | (117 | ) | Expenses from fully consolidated private equity investments | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
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|
| |
|
| |
|
| Total expenses | | (37,550 | ) | | (37,893 | ) | | (37,850 | ) | | (34,440 | ) | | (33,324 | ) | | (31,757 | ) | | (11,487 | ) | | (11,386 | ) | | (11,930 | ) | | | |
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|
| |
|
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|
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|
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|
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|
| |
|
| Income before income taxes and minority interests in earnings | | 7,560 | | | 6,166 | | | 5,300 | | | 2,700 | | | 2,271 | | | 1,613 | | | 1,275 | | | 1,526 | | | (92 | ) | Income taxes | | (2,075 | ) | | (1,804 | ) | | (1,751 | ) | | (641 | ) | | (488 | ) | | (458 | ) | | (263 | ) | | (387 | ) | | 302 | | Minority interests in earnings | | (739 | ) | | (827 | ) | | (681 | ) | | (416 | ) | | (425 | ) | | (333 | ) | | (94 | ) | | (102 | ) | | (101 | ) | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Net income (loss) | | 4,746 | | | 3,535 | | | 2,868 | | | 1,643 | | | 1,358 | | | 822 | | | 918 | | | 1,037 | | | 109 | | | | |
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| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Asset Management
| | | Corporate
| | | Consolidation
| | | Group
| | | | | 2006
| | | 2005
| | | 2004
| | | 2006
| | | 2005
| | | 2004
| | | 2006
| | | 2005
| | | 2004
| | | 2006
| | | 2005
| | | 2004
| | | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 58,524 | | | 57,682 | | | 56,789 | | | | | 112 | | | 90 | | | 63 | | | 509 | | | 416 | | | 395 | | | (1,045 | ) | | (987 | ) | | (915 | ) | | 23,956 | | | 22,644 | | | 21,196 | | | | | 38 | | | 19 | | | 11 | | | (334 | ) | | (441 | ) | | (61 | ) | | 73 | | | — | | | (5 | ) | | 940 | | | 1,163 | | | 1,677 | | | | | 7 | | | 6 | | | 17 | | | 861 | | | 172 | | | 1,225 | | | (283 | ) | | (372 | ) | | (279 | ) | | 6,151 | | | 4,978 | | | 4,568 | | | | | 4,186 | | | 3,746 | | | 3,096 | | | 190 | | | 164 | | | 137 | | | (762 | ) | | (641 | ) | | (663 | ) | | 8,856 | | | 8,162 | | | 6,813 | | | | | 11 | | | 11 | | | 14 | | | 28 | | | — | | | — | | | (90 | ) | | (28 | ) | | (21 | ) | | 86 | | | 92 | | | 329 | | | | | — | | | — | | | — | | | 1,392 | | | 598 | | | 175 | | | — | | | — | | | — | | | 1,392 | | | 598 | | | 175 | | | | |
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|
| | | | 4,354 | | | 3,872 | | | 3,201 | | | 2,646 | | | 909 | | | 1,871 | | | (2,107 | ) | | (2,028 | ) | | (1,883 | ) | | 99,905 | | | 95,319 | | | 91,547 | | | | |
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| | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (42,297 | ) | | (42,770 | ) | | (42,806 | ) | | | | — | | | — | | | — | | | — | | | — | | | (204 | ) | | (425 | ) | | (26 | ) | | 5 | | | (11,375 | ) | | (11,176 | ) | | (9,556 | ) | | | | (41 | ) | | (33 | ) | | (13 | ) | | (1,282 | ) | | (1,321 | ) | | (1,361 | ) | | 709 | | | 795 | | | 744 | | | (5,759 | ) | | (6,377 | ) | | (5,688 | ) | | | | — | | | — | | | — | | | (5 | ) | | — | | | — | | | — | | | — | | | — | | | (36 | ) | | 109 | | | (354 | ) | | | | (2 | ) | | — | | | — | | | 32 | | | (62 | ) | | (505 | ) | | — | | | — | | | (36 | ) | | (775 | ) | | (540 | ) | | (1,475 | ) | | | | — | | | (1 | ) | | (8 | ) | | (215 | ) | | (345 | ) | | (44 | ) | | 204 | | | 184 | | | 163 | | | (1,108 | ) | | (1,092 | ) | | (767 | ) | | | | (2,286 | ) | | (2,277 | ) | | (2,026 | ) | | (655 | ) | | (516 | ) | | (540 | ) | | 87 | | | 84 | | | 143 | | | (23,486 | ) | | (22,559 | ) | | (21,969 | ) | | | | (1,262 | ) | | (1,110 | ) | | (918 | ) | | (127 | ) | | (92 | ) | | (84 | ) | | 572 | | | 431 | | | 403 | | | (2,351 | ) | | (2,312 | ) | | (1,804 | ) | | | | (24 | ) | | (25 | ) | | (510 | ) | | — | | | — | | | — | | | — | | | — | | | — | | | (51 | ) | | (50 | ) | | (1,362 | ) | | | | (4 | ) | | (1 | ) | | — | | | — | | | — | | | — | | | — | | | — | | | 1 | | | (964 | ) | | (100 | ) | | (347 | ) | | | | — | | | — | | | (1 | ) | | — | | | — | | | — | | | — | | | — | | | — | | | 1 | | | (51 | ) | | (200 | ) | | | | — | | | — | | | — | | | (1,381 | ) | | (572 | ) | | (175 | ) | | — | | | — | | | — | | | (1,381 | ) | | (572 | ) | | (175 | ) | | | |
|
| |
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| |
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| |
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| |
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| |
|
| | | | (3,619 | ) | | (3,447 | ) | | (3,476 | ) | | (3,633 | ) | | (2,908 | ) | | (2,913 | ) | | 1,147 | | | 1,468 | | | 1,423 | | | (89,582 | ) | | (87,490 | ) | | (86,503 | ) | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
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| |
|
| |
|
| |
|
| |
|
| | | | 735 | | | 425 | | | (275 | ) | | (987 | ) | | (1,999 | ) | | (1,042 | ) | | (960 | ) | | (560 | ) | | (460 | ) | | 10,323 | | | 7,829 | | | 5,044 | | | | | (278 | ) | | (129 | ) | | 52 | | | 824 | | | 741 | | | 263 | | | 420 | | | 4 | | | (18 | ) | | (2,013 | ) | | (2,063 | ) | | (1,610 | ) | | | | (53 | ) | | (52 | ) | | (52 | ) | | (16 | ) | | (10 | ) | | (28 | ) | | 29 | | | 30 | | | 27 | | | (1,289 | ) | | (1,386 | ) | | (1,168 | ) | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| | | | 404 | | | 244 | | | (275 | ) | | (179 | ) | | (1,268 | ) | | (807 | ) | | (511 | ) | | (526 | ) | | (451 | ) | | 7,021 | | | 4,380 | | | 2,266 | | | | |
|
| |
|
| |
|
| |
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|
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Business Segment Information—Insurance
| | | | | | | | | | | | | | | | PROPERTY-CASUALTY
| | Premiums earned (net)
| | | Loss ratio(1)
| As of and for the years ended December 31,
| | 2006
| | | 2005
| | | 2004
| | | 2006
| | 2005
| | 2004
| | | | € mn | | | € mn | | | € mn | | | % | | % | | % | Europe | | | | | | | | | | | | | | | | Germany(2) | | 9,844 | | | 10,048 | | | 9,702 | | | 65.1 | | 63.0 | | 66.6 | France | | 4,429 | | | 4,375 | | | 4,484 | | | 71.0 | | 74.0 | | 73.5 | Italy | | 4,935 | | | 4,964 | | | 4,840 | | | 68.8 | | 69.3 | | 69.4 | United Kingdom | | 1,874 | | | 1,913 | | | 2,012 | | | 64.1 | | 65.4 | | 65.1 | Switzerland | | 1,706 | | | 1,708 | | | 1,659 | | | 69.3 | | 74.9 | | 72.9 | Spain | | 1,675 | | | 1,551 | | | 1,454 | | | 71.0 | | 71.4 | | 72.2 | Western and Southern Europe | | 2,819 | | | 2,863 | | | 2,985 | | | 61.7 | | 63.2 | | 67.0 | New Europe | | 1,388 | | | 1,313 | | | 1,151 | | | 61.0 | | 61.6 | | 67.7 | Subtotal | | 28,670 | | | 28,735 | | | 28,287 | | | — | | — | | — | NAFTA Region | | 3,623 | | | 3,566 | | | 3,901 | | | 58.4 | | 67.1 | | 64.4 | Asia-Pacific | | 1,336 | | | 1,280 | | | 1,243 | | | 68.7 | | 68.0 | | 72.7 | South America | | 623 | | | 510 | | | 378 | | | 64.8 | | 64.5 | | 64.7 | Other | | 32 | | | 30 | | | 33 | | | — | | — | | — | Specialty Lines | | | | | | | | | | | | | | | | Credit Insurance | | 1,113 | | | 997 | | | 901 | | | 49.7 | | 41.3 | | 40.8 | Allianz Global Corporate and Specialty(2) | | 1,545 | | | 1,633 | | | 1,779 | | | 62.5 | | 91.1 | | 70.5 | Travel Insurance and Assistance Services | | 1,008 | | | 934 | | | 863 | | | 58.7 | | 60.3 | | 59.7 | Subtotal | | 3,666 | | | 3,564 | | | 3,543 | | | — | | — | | — | Subtotal | | 37,950 | | | 37,685 | | | 37,385 | | | — | | — | | — | Consolidation adjustments(3) | | — | | | — | | | — | | | — | | — | | — | | | |
|
| |
|
| |
|
| |
| |
| |
| Total | | 37,950 | | | 37,685 | | | 37,385 | | | 65.0 | | 67.2 | | 67.6 | | | |
|
| |
|
| |
|
| |
| |
| |
| | | | LIFE/HEALTH
| | Statutory premiums(4)
| | | Statutory expense ratio(5)
| As of and for the years ended December 31,
| | 2006
| | | 2005
| | | 2004
| | | 2006
| | 2005
| | 2004
| | | | € mn | | | € mn | | | € mn | | | % | | % | | % | Europe | | | | | | | | | | | | | | | | Germany Life | | 13,009 | | | 12,231 | | | 10,938 | | | 9.1 | | 8.1 | | 9.9 | Germany Health | | 3,091 | | | 3,042 | | | 3,020 | | | 9.3 | | 9.1 | | 9.6 | Italy | | 8,555 | | | 9,313 | | | 8,738 | | | 6.4 | | 5.4 | | 3.0 | France | | 5,792 | | | 5,286 | | | 4,719 | | | 12.6 | | 15.1 | | 17.8 | Switzerland | | 1,005 | | | 1,058 | | | 1,054 | | | 9.9 | | 8.7 | | 10.2 | Spain | | 629 | | | 547 | | | 676 | | | 9.3 | | 7.4 | | 5.9 | Western and Southern Europe | | 1,655 | | | 1,546 | | | 1,749 | | | 14.8 | | 13.3 | | 17.6 | New Europe | | 828 | | | 479 | | | 391 | | | 19.6 | | 25.7 | | 27.0 | Subtotal | | 34,564 | | | 33,502 | | | 31,285 | | | — | | — | | — | United States | | 8,758 | | | 11,115 | | | 11,234 | | | 8.0 | | 4.8 | | 2.4 | Asia-Pacific | | 3,733 | | | 3,309 | | | 2,550 | | | 11.2 | | 12.0 | | 12.6 | South America | | 147 | | | 141 | | | 64 | | | 16.9 | | 17.7 | | 26.6 | Other(6) | | 439 | | | 455 | | | 911 | | | — | | — | | — | Subtotal | | 47,641 | | | 48,522 | | | 46,044 | | | — | | — | | — | Consolidation adjustments(3) | | (220 | ) | | (250 | ) | | (811 | ) | | — | | — | | — | | | |
|
| |
|
| |
|
| |
| |
| |
| Total | | 47,421 | | | 48,272 | | | 45,233 | | | 9.6 | | 8.4 | | 8.5 | | | |
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| |
|
| |
|
| |
| |
| |
|
(1)
| Represents claims and insurance benefits incurred (net) divided by premiums earned (net).
|
(2)
| With effect from the first quarter of 2006, we have combined the activities of the former Allianz Global Risks Re and Allianz Marine & Aviation, as well as the corporate customer business of Allianz Sach, which was formerly included within property-casualty Germany. Additionally, with effect from the second quarter of 2006, we have included Allianz Global Risks US, which was formerly presented within NAFTA, within the newly combined entity Allianz Global Corporate & Specialty. Prior year balances have been adjusted to reflect this reclassification and allow for comparability across periods.
|
(3)
| Represents elimination of intercompany transactions between Allianz Group subsidiaries in different geographic regions.
|
(4)
| Statutory premiums are gross premiums written from sales of life insurance policies, as well as gross receipts from sales of unit-linked and other investment-oriented products, in accordance with the statutory accounting practices applicable in the insurer’s home jurisdiction.
|
(5)
| Represents acquisition and administrative expenses (net) divided by statutory premiums (net).
|
(6)
| Contains, among others, the life/health business assumed by Allianz SE, which was previously reported under property-casualty Germany in the Property-Casualty segment. Prior year balances have been adjusted to reflect this reclassification and allow for comparability across periods.
|
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | Expense ratio(7)
| | | Operating profit (loss)
| | Total assets
| | | | | 2006
| | | 2005
| | | 2004
| | | 2006
| | | 2005
| | | 2004
| | 2006
| | | 2005
| | | | | % | | | % | | | % | | | € mn | | | € mn | | | € mn | | € mn | | | € mn | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 27.8 | | | 26.4 | | | 26.4 | | | 1,479 | | | 1,765 | | | 1,524 | | 49,570 | | | 46,625 | (8) | | | | 28.2 | | | 28.0 | | | 27.0 | | | 420 | | | 227 | | | 245 | | 14,395 | | | 15,627 | | | | | 23.0 | | | 24.3 | | | 25.0 | | | 816 | | | 741 | | | 686 | | 30,373 | | | 30,225 | | | | | 31.6 | | | 30.8 | | | 30.6 | | | 281 | | | 268 | | | 276 | | 7,344 | | | 7,026 | | | | | 23.5 | | | 22.9 | | | 20.5 | | | 228 | | | 153 | | | 148 | | 5,832 | | | 6,298 | | | | | 19.3 | | | 20.0 | | | 18.9 | | | 252 | | | 217 | | | 197 | | 3,990 | | | 3,797 | | | | | 28.5 | | | 28.0 | | | 27.7 | | | 550 | | | 494 | | | 434 | | 7,686 | | | 7,969 | | | | | 30.2 | | | 29.3 | | | 29.1 | | | 201 | | | 213 | | | 146 | | 3,427 | | | 3,049 | | | | | — | | | — | | | — | | | 4,227 | | | 4,078 | | | 3,656 | | 122,617 | | | 120,616 | | | | | 30.5 | | | 29.1 | | | 30.1 | | | 825 | | | 495 | | | 406 | | 13,591 | | | 8,018 | | | | | 27.2 | | | 27.2 | | | 27.3 | | | 244 | | | 252 | | | 154 | | 6,880 | | | 5,111 | | | | | 36.4 | | | 36.3 | | | 38.0 | | | 47 | | | 61 | | | 8 | | 1,295 | | | 1,228 | | | | | — | | | — | | | — | | | (7 | ) | | 7 | | | 10 | | 211 | | | 209 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 27.9 | | | 25.7 | | | 35.2 | | | 442 | | | 420 | | | 350 | | 4,674 | | | 4,763 | | | | | 29.7 | | | 31.3 | | | 29.2 | | | 404 | | | (254 | ) | | 178 | | 17,929 | | | 14,637 | (9) | | | | 43.1 | | | 33.0 | | | 35.8 | | | 90 | | | 77 | | | 59 | | 1,246 | | | 1,161 | | | | | — | | | — | | | — | | | 936 | | | 243 | | | 587 | | 23,849 | | | 20,561 | | | | | — | | | — | | | — | | | 6,272 | | | 5,136 | | | 4,821 | | 168,443 | | | 155,743 | | | | | — | | | — | | | — | | | (3 | ) | | 6 | | | 4 | | (17,703 | ) | | (9,979 | ) | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
| |
|
| |
|
| | | | 27.9 | | | 27.1 | | | 27.3 | | | 6,269 | | | 5,142 | | | 4,825 | | 150,740 | | | 145,764 | | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
| |
|
| |
|
| | | | | | | | | | Operating profit (loss)
| | | Total assets
| | | | | | | | | | | | | 2006
| | | 2005
| | | 2004
| | | 2006
| | | 2005
| | | | | | | | | | | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 521 | | | 347 | | | 262 | | | 154,178 | | | 146,946 | | | | | | | | | | | | | 184 | | | 159 | | | 137 | | | 19,022 | | | 18,136 | | | | | | | | | | | | | 339 | | | 334 | | | 276 | | | 49,905 | | | 50,085 | | | | | | | | | | | | | 582 | | | 558 | | | 359 | | | 69,231 | | | 67,076 | | | | | | | | | | | | | 50 | | | 55 | | | 35 | | | 9,053 | | | 9,305 | | | | | | | | | | | | | 92 | | | 71 | | | 66 | | | 5,840 | | | 5,639 | | | | | | | | | | | | | 182 | | | 166 | | | 206 | | | 16,693 | | | 15,833 | | | | | | | | | | | | | 50 | | | 34 | | | 23 | | | 2,537 | | | 1,924 | | | | | | | | | | | | | 2,000 | | | 1,724 | | | 1,364 | | | 326,459 | | | 314,944 | | | | | | | | | | | | | 418 | | | 257 | | | 376 | | | 56,371 | | | 55,466 | | | | | | | | | | | | | 81 | | | 27 | | | 62 | | | 13,061 | | | 11,497 | | | | | | | | | | | | | 1 | | | 2 | | | 4 | | | 259 | | | 272 | | | | | | | | | | | | | 74 | | | 92 | | | (8 | ) | | 286 | | | 250 | | | | | | | | | | | | | 2,574 | | | 2,102 | | | 1,798 | | | 396,436 | | | 382,429 | | | | | | | | | | | | | (9 | ) | | (8 | ) | | (10 | ) | | (1,032 | ) | | (4,402 | ) | | | | | | | | | | | |
|
| |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | 2,565 | | | 2,094 | | | 1,788 | | | 395,404 | | | 378,027 | | | | | | | | | | | | |
|
| |
|
| |
|
| |
|
| |
|
| | | | | | | | |
(7)
| Represents acquisition and administrative expenses (net) divided by premiums earned (net).
|
(8)
| Includes the corporate customer segment business of Allianz Sach.
|
(9)
| Does not include the corporate customer segment business of Allianz Sach, previously included within property-casualty Germany.
|
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Business Segment Information—Banking
BANKING SEGMENT—BY DIVISION
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Operating revenues
| | Operating profit
(loss)
| | | Cost-income ratio
| | | | | 2006
| | 2005
| | | 2004
| | 2006
| | 2005
| | | 2004
| | | 2006
| | | 2005
| | | 2004
| | | | | € mn | | € mn | | | € mn | | € mn | | € mn | | | € mn | | | % | | | % | | | % | | Private & Business Clients(1) | | 3,204 | | 3,033 | | | 2,974 | | 653 | | 470 | | | 187 | | | 76.6 | | | 80.0 | | | 86.5 | | Corporate & Investment Banking(1) | | 3,525 | | 3,038 | | | 3,005 | | 692 | | 513 | | | 515 | | | 80.0 | | | 83.6 | | | 81.1 | | Corporate Other(2) | | 82 | | (32 | ) | | 378 | | 16 | | (353 | ) | | (248 | ) | | — | (3) | | — | (3) | | — | (3) | | | |
| |
|
| |
| |
| |
|
| |
|
| |
|
| |
|
| |
|
| Dresdner Bank | | 6,811 | | 6,039 | | | 6,357 | | 1,361 | | 630 | | | 454 | | | 79.6 | | | 91.4 | | | 87.6 | | Other Banks(4) | | 277 | | 279 | | | 219 | | 61 | | 74 | | | (7 | ) | | 76.0 | | | 72.4 | | | 100.0 | | | | |
| |
|
| |
| |
| |
|
| |
|
| |
|
| |
|
| |
|
| Total | | 7,088 | | 6,318 | | | 6,576 | | 1,422 | | 704 | | | 447 | | | 79.5 | | | 90.6 | | | 88.0 | | | | |
| |
|
| |
| |
| |
|
| |
|
| |
|
| |
|
| |
|
|
(1)
| Our reporting by divisions reflects the organizational changes within Dresdner Bank in 2006, resulting in two operating divisions. Private & Business Clients combines all banking activities for private and corporate customers formerly provided by the Personal Banking and Private & Business Banking divisions. Furthermore, Corporate & Investment Banking combines the former Corporate Banking and Dresdner Kleinwort divisions. Prior year balances have been adjusted accordingly to reflect these reorganization measures and allow for comparability across periods. Effective starting with the first quarter of 2007, the future business model of Dresdner Bank will consist of two new operating divisions Private & Corporate Clients and Investment Banking. According to this future business model, we will integrate our business activities with medium-sized corporate clients into that with private and business clients. In the table above, our medium-sized business clients remain part of Corporate & Investment Banking. The future business model with the two new business divisions Private & Corporate Clients and Investment Banking is not reflected in the table above.
|
(2)
| The Corporate Other division contains income and expense items that are not assigned to Dresdner Bank’s operating divisions. These items include impacts from the accounting treatment for derivative financial instruments used as a hedge which do not qualify for hedge accounting as well as provisioning requirements for country and general risks. For the years ended December 31, 2006, 2005 and 2004 the impact from the accounting treatment for derivative financial instruments used as a hedge which do not qualify for hedge accounting on Corporate Other’s operating revenues amounted to €(47) mn, €(214) mn and €7 mn, respectively. With effect from the first quarter of 2006, the majority of expenses for support functions and central projects previously included within Corporate Other have been allocated to the operating divisions. Additionally, the non-strategic Institutional Restructuring Unit was closed down effective September 30, 2005, having successfully completed its mandate to free-up risk capital through the reduction of non-strategic risk-weighted assets. Furthermore, effective in the first quarter of 2006, and as a result of Dresdner Bank restructuring its divisions, the Institutional Restructuring Unit’s 2005 and 2004 results of operations were reclassified into Corporate Other. Prior year balances have been adjusted accordingly to reflect these reclassifications and allow for comparability across periods. |
(3)
| Presentation not meaningful.
|
(4)
| Consists of non-Dresdner Bank banking operations within our Banking segment, as well as the elimination of trading income (net) of €6 mn at Dresdner Bank resulting from Dresdner Bank’s trading activities in Allianz SE shares during the year ended December 31, 2006.
|
BANKING SEGMENT—BY GEOGRAPHIC REGION
| | | | | | | | | | | | | | | | | | Operating revenues
| | Operating profit (loss)
| | | | | 2006
| | 2005
| | 2004
| | 2006
| | 2005
| | | 2004
| | | | | € mn | | € mn | | € mn | | € mn | | € mn | | | € mn | | Germany | | 4,312 | | 4,340 | | 4,290 | | 853 | | 814 | | | 38 | | Rest of Europe | | 2,006 | | 1,620 | | 1,557 | | 237 | | (105 | ) | | (27 | ) | NAFTA | | 560 | | 176 | | 603 | | 251 | | (78 | ) | | 411 | | Rest of World | | 210 | | 182 | | 126 | | 81 | | 73 | | | 25 | | | | |
| |
| |
| |
| |
|
| |
|
| Total | | 7,088 | | 6,318 | | 6,576 | | 1,422 | | 704 | | | 447 | | | | |
| |
| |
| |
| |
|
| |
|
|
Business Segment Information – Operating Profit
The Allianz Group evaluates the results of its Property-Casualty, Life/Health, Banking, AssetManagement and Corporate segments using a
financial performance measure referred to herein as “operating profit”. The Allianz Group defines segment operating profit as earnings from ordinary
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
activities before taxes, excluding, as applicable for each respective segment, all or some of the following items: net capital gains and impairments on investments, net trading income, intra-Allianz Group dividends and profit transfer, interest expense on external debt, restructuring charges, other non-operating income/expenses, acquisition-related expenses and amortization of goodwill.
While these excluded items are significant components in understanding and assessing the Allianz Group’s consolidated financial performance, the Allianz Group believes that the presentation of operating results enhances the understanding and comparability of the performance of its operating segments by highlighting net income attributable to ongoing segment operations and the underlyingprofitability of its businesses. For example, the Allianz Group believes that trends in the underlying profitability of its segmentsbusiness can be more clearly identified without the fluctuating effects of the realized capital gains and losses or impairments onof investment securities, as these are largely dependent on market cycles or issuer-specific events over which the Allianz Group has little or no control, and can and do vary, sometimes materially, across periods. Further, the timing of sales that would result in such gains or losses is largely at the discretion of the Allianz Group’s discretion. Group. Similarly, restructuring charges
are excluded because the timing of the restructuring charges are largely within the control of the Allianz Group, and accordingly their exclusion provides additional insight into the operating trends of the underlying business. This differentiation is not made if the profit sources are shared with policyholders. Operating profit isshould be viewed as complementary to, and not a substitute for, earnings from ordinary activitiesincome before income taxes and minority interests in earnings or net income as determined in accordance with IFRS. The
Notes to the Allianz Group’s definition of operating profit may differ from similar measures used by other companies, and may change over time.Consolidated Financial Statements—(Continued) Allianz Group Business Segment Information—Consolidated Balance Sheets | | | | | | | | | | | | Property-Casualty | | Life/Health | As of December 31, | | 2008 | | 2007 | | 2008 | | 2007 | | | | € mn | | € mn | | € mn | | € mn | ASSETS | | | | | | | | | Cash and cash equivalents | | 2,669 | | 4,985 | | 4,827 | | 8,779 | Financial assets carried at fair value through income | | 1,998 | | 3,302 | | 11,739 | | 13,216 | Investments | | 75,563 | | 83,741 | | 186,794 | | 187,289 | Loans and advances to banks and customers | | 17,648 | | 20,712 | | 90,619 | | 91,188 | Financial assets for unit-linked contracts | | — | | — | | 50,450 | | 66,060 | Reinsurance assets | | 9,442 | | 10,317 | | 5,178 | | 5,043 | Deferred acquisition costs | | 3,723 | | 3,681 | | 18,693 | | 15,838 | Deferred tax assets | | 1,579 | | 1,442 | | 737 | | 316 | Other assets | | 23,876 | | 21,409 | | 18,085 | | 13,294 | Non-current assets and assets of disposal groups classified as held-for-sale | | — | | 455 | | — | | 777 | Intangible assets | | 2,384 | | 2,332 | | 2,300 | | 2,218 | | | | | | | | | | Total assets | | 138,882 | | 152,376 | | 389,422 | | 404,018 | | | | | | | | | | | | | | | | Property-Casualty | | Life/Health | As of December 31, | | 2008 | | 2007 | | 2008 | | 2007 | | | | € mn | | € mn | | € mn | | € mn | LIABILITIES AND EQUITY | | | | | | | | | Financial liabilities carried at fair value through income | | 103 | | 96 | | 5,833 | | 5,147 | Liabilities to banks and customers | | 530 | | 6,865 | | 1,274 | | 6,078 | Unearned premiums | | 12,984 | | 13,163 | | 2,258 | | 1,858 | Reserves for loss and loss adjustment expenses | | 55,616 | | 56,943 | | 8,320 | | 6,773 | Reserves for insurance and investment contracts | | 8,595 | | 8,976 | | 287,932 | | 283,139 | Financial liabilities for unit-linked contracts | | — | | — | | 50,450 | | 66,060 | Deferred tax liabilities | | 2,580 | | 2,606 | | 833 | | 946 | Other liabilities | | 20,523 | | 22,989 | | 16,625 | | 17,741 | Liabilities of disposal groups classified as held-for-sale | | — | | — | | — | | — | Certificated liabilities | | 167 | | 158 | | 2 | | 3 | Participation certificates and subordinated liabilities | | 846 | | 905 | | 65 | | 60 | | | | | | | | | | Total liabilities | | 101,944 | | 112,701 | | 373,592 | | 387,805 | | | | | | | | | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) The following table sets forth the total revenues, operating profit and net income for each of our business segments for the years ended December 31, 2006, 2005 and 2004, as well as consolidated net income of
| | | | | | | | | | | | | | | | | | | | | | Banking | | Asset Management | | Corporate | | Consolidation | | | Group | | 2008 | | 2007 | | 2008 | | 2007 | | 2008 | | 2007 | | 2008 | | | 2007 | | | 2008 | | 2007 | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | | € mn | | | € mn | | € mn | | | | | | | | | | | | | | | | | | | | | | | 892 | | 17,307 | | 860 | | 770 | | 515 | | 445 | | (805 | ) | | (949 | ) | | 8,958 | | 31,337 | | 112 | | 168,339 | | 639 | | 980 | | 631 | | 887 | | (879 | ) | | (1,263 | ) | | 14,240 | | 185,461 | | 2,670 | | 16,284 | | 818 | | 879 | | 101,455 | | 102,894 | | (107,153 | ) | | (104,135 | ) | | 260,147 | | 286,952 | | 13,931 | | 295,506 | | 382 | | 469 | | 5,958 | | 4,754 | | (12,883 | ) | | (15,927 | ) | | 115,655 | | 396,702 | | — | | — | | — | | — | | — | | — | | — | | | — | | | 50,450 | | 66,060 | | — | | — | | — | | — | | — | | — | | (21 | ) | | (48 | ) | | 14,599 | | 15,312 | | — | | — | | 147 | | 94 | | — | | — | | — | | | — | | | 22,563 | | 19,613 | | 95 | | 1,733 | | 173 | | 161 | | 1,457 | | 935 | | (45 | ) | | 184 | | | 3,996 | | 4,771 | | 1,947 | | 8,199 | | 3,388 | | 3,452 | | 7,684 | | 8,519 | | (20,976 | ) | | (16,848 | ) | | 34,004 | | 38,025 |
420,695 | | 4 | | — | | — | | 1,639 | | 2,267 | | (2,821 | ) | | — | | | 419,513 | | 3,503 | | 200 | | 2,379 | | 6,327 | | 6,227 | | 240 | | 257 | | — | | | — | | | 11,451 | | 13,413 | | | | | | | | | | | | | | | | | | | | | | | | 440,542 | | 509,751 | | 12,734 | | 13,032 | | 119,579 | | 120,958 | | (145,583 | ) | | (138,986 | ) | | 955,576 | | 1,061,149 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Banking | | Asset Management | | Corporate | | Consolidation | | | Group | | 2008 | | 2007 | | 2008 | | 2007 | | 2008 | | 2007 | | 2008 | | | 2007 | | | 2008 | | 2007 | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | | € mn | | | € mn | | € mn | | | | | | | | | | | | | | | | | | | | | | | 50 | | 120,383 | | — | | — | | 873 | | 1,376 | | (615 | ) | | (949 | ) | | 6,244 | | 126,053 | | 16,260 | | 320,388 | | 702 | | 807 | | 5,970 | | 13,023 | | (6,285 | ) | | (10,667 | ) | | 18,451 | | 336,494 | | — | | — | | — | | — | | — | | — | | (9 | ) | | (1 | ) | | 15,233 | | 15,020 | | — | | — | | — | | — | | — | | — | | (12 | ) | | (10 | ) | | 63,924 | | 63,706 | | — | | — | | — | | — | | 227 | | 358 | | (197 | ) | | (229 | ) | | 296,557 | | 292,244 | | — | | — | | — | | — | | — | | — | | — | | | — | | | 50,450 | | 66,060 | | 2 | | 102 | | 28 | | 35 | | 433 | | 88 | | (43 | ) | | 196 | | | 3,833 | | 3,973 | | 879 | | 11,010 | | 3,307 | | 3,647 | | 16,329 | | 13,333 | | (24,733 | ) | | (20,689 | ) | | 32,930 | | 48,031 | | 414,360 | | 1 | | — | | — | | 1,347 | | 1,292 | | (3,891 | ) | | — | | | 411,816 | | 1,293 | | 1,279 | | 34,778 | | — | | — | | 13,497 | | 9,567 | | (5,401 | ) | | (2,436 | ) | | 9,544 | | 42,070 | | 185 | | 7,966 | | 14 | | 14 | | 8,493 | | 7,069 | | (257 | ) | | (1,190 | ) | | 9,346 | | 14,824 | | | | | | | | | | | | | | | | | | | | | | | | 433,015 | | 494,628 | | 4,051 | | 4,503 | | 47,169 | | 46,106 | | (41,443 | ) | | (35,975 | ) | | 918,328 | | 1,009,768 | | | | | | | | | | | | | | | | | | | | | | | | Total equity | | | 37,248 | | 51,381 | | | | | | | | | | | | | | | | | | | | | | | Total liabilities and equity | | | 955,576 | | 1,061,149 | | | | | | | | | | | | | | | | | | | | | |
Notes to the Allianz Group.Group’s Consolidated Financial Statements—(Continued) Allianz Group Business Segment Information – Total Revenues and Operating ProfitInformation—Consolidated Income Statements | | | | | | | | | | | | | | | | | | | | | | | | | Property-
Casualty
| | | Life/
Health
| | | Banking
| | | Asset
Management
| | | Corporate
| | | Consolidation
| | | Allianz
Group
| | | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | 2006 | | | | | | | | | | | | | | | | | | | | | | Total revenues(1) | | 43,674 | | | 47,421 | | | 7,088 | | | 3,044 | | | — | | | (98 | ) | | 101,129 | | Operating profit (loss) | | 6,269 | | | 2,565 | | | 1,422 | | | 1,290 | | | (831 | ) | | (329 | ) | | 10,386 | | Non-operating items | | 1,291 | | | 135 | | | (147 | ) | | (555 | ) | | (156 | ) | | (631 | ) | | (63 | ) | Income (loss) before income taxes and minority interests in earnings | | 7,560 | | | 2,700 | | | 1,275 | | | 735 | | | (987 | ) | | (960 | ) | | 10,323 | | Income taxes | | (2,075 | ) | | (641 | ) | | (263 | ) | | (278 | ) | | 824 | | | 420 | | | (2,013 | ) | Minority interests in earnings | | (739 | ) | | (416 | ) | | (94 | ) | | (53 | ) | | (16 | ) | | 29 | | | (1,289 | ) | | | |
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| Net income (loss) | | 4,746 | | | 1,643 | | | 918 | | | 404 | | | (179 | ) | | (511 | ) | | 7,021 | | | | |
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| 2005 | | | | | | | | | | | | | | | | | | | | | | Total revenues(1) | | 43,699 | | | 48,272 | | | 6,318 | | | 2,722 | | | — | | | (44 | ) | | 100,967 | | Operating profit (loss) | | 5,142 | | | 2,094 | | | 704 | | | 1,132 | | | (881 | ) | | (188 | ) | | 8,003 | | Non-operating items | | 1,024 | | | 177 | | | 822 | | | (707 | ) | | (1,118 | ) | | (372 | ) | | (174 | ) | Income (loss) before income taxes and minority interests in earnings | | 6,166 | | | 2,271 | | | 1,526 | | | 425 | | | (1,999 | ) | | (560 | ) | | 7,829 | | Income taxes | | (1,804 | ) | | (488 | ) | | (387 | ) | | (129 | ) | | 741 | | | 4 | | | (2,063 | ) | Minority interests in earnings | | (827 | ) | | (425 | ) | | (102 | ) | | (52 | ) | | (10 | ) | | 30 | | | (1,386 | ) | | | |
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| Net income (loss) | | 3,535 | | | 1,358 | | | 1,037 | | | 244 | | | (1,268 | ) | | (526 | ) | | 4,380 | | | | |
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| 2004 | | | | | | | | | | | | | | | | | | | | | | Total revenues(1) | | 42,942 | | | 45,233 | | | 6,576 | | | 2,245 | | | — | | | (47 | ) | | 96,949 | | Operating profit (loss) | | 4,825 | | | 1,788 | | | 447 | | | 839 | | | (870 | ) | | (28 | ) | | 7,001 | | Non-operating items | | 475 | | | (175 | ) | | (539 | ) | | (1,114 | ) | | (172 | ) | | (432 | ) | | (1,957 | ) | Income (loss) before income taxes and minority interests in earnings | | 5,300 | | | 1,613 | | | (92 | ) | | (275 | ) | | (1,042 | ) | | (460 | ) | | 5,044 | | Income taxes | | (1,751 | ) | | (458 | ) | | 302 | | | 52 | | | 263 | | | (18 | ) | | (1,610 | ) | Minority interests in earnings | | (681 | ) | | (333 | ) | | (101 | ) | | (52 | ) | | (28 | ) | | 27 | | | (1,168 | ) | | | |
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| Net income (loss) | | 2,868 | | | 822 | | | 109 | | | (275 | ) | | (807 | ) | | (451 | ) | | 2,266 | | | | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Property-Casualty | | | Life/Health | | | Banking | | | | | 2008 | | | 2007 | | | 2006 | | | 2008 | | | 2007 | | | 2006 | | | 2008 | | | 2007 | | | 2006 | | | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | Premiums written | | 43,387 | | | 44,289 | | | 43,674 | | | 22,809 | | | 21,522 | | | 21,614 | | | — | | | — | | | — | | Ceded premiums written | | (4,972 | ) | | (5,320 | ) | | (5,415 | ) | | (527 | ) | | (637 | ) | | (816 | ) | | — | | | — | | | — | | Change in unearned premiums | | (202 | ) | | (416 | ) | | (309 | ) | | (51 | ) | | (76 | ) | | (224 | ) | | — | | | — | | | — | | Premiums earned (net) | | 38,213 | | | 38,553 | | | 37,950 | | | 22,231 | | | 20,809 | | | 20,574 | | | — | | | — | | | — | | Interest and similar income | | 4,477 | | | 4,473 | | | 4,096 | | | 13,772 | | | 13,417 | | | 12,972 | | | 989 | | | 883 | | | 734 | | Income from financial assets and liabilities carried at fair value through income (net) | | (116 | ) | | 85 | | | 189 | | | (261 | ) | | (940 | ) | | (361 | ) | | (5 | ) | | 2 | | | 45 | | Realized gains/losses (net) | | 2,386 | | | 1,479 | | | 1,792 | | | 835 | | | 3,716 | | | 3,282 | | | (6 | ) | | 18 | | | 15 | | Fee and commission income | | 1,247 | | | 1,178 | | | 1,014 | | | 571 | | | 701 | | | 630 | | | 430 | | | 528 | | | 503 | | Other income | | 271 | | | 122 | | | 69 | | | 140 | | | 182 | | | 43 | | | — | | | — | | | — | | Income from fully consolidated private equity investments | | 3 | | | — | | | — | | | 18 | | | — | | | — | | | — | | | — | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total income | | 46,481 | | | 45,890 | | | 45,110 | | | 37,306 | | | 37,885 | | | 37,140 | | | 1,408 | | | 1,431 | | | 1,297 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Claims and insurance benefits incurred (gross) | | (28,157 | ) | | (28,131 | ) | | (27,028 | ) | | (20,146 | ) | | (18,292 | ) | | (18,520 | ) | | — | | | — | | | — | | Claims and insurance benefits incurred (ceded) | | 2,171 | | | 2,646 | | | 2,356 | | | 473 | | | 655 | | | 895 | | | — | | | — | | | — | | Claims and insurance benefits incurred (net) | | (25,986 | ) | | (25,485 | ) | | (24,672 | ) | | (19,673 | ) | | (17,637 | ) | | (17,625 | ) | | — | | | — | | | — | | Change in reserves for insurance and investment contracts (net) | | 3 | | | (339 | ) | | (425 | ) | | (5,122 | ) | | (10,268 | ) | | (10,525 | ) | | — | | | — | | | — | | Interest expense | | (295 | ) | | (402 | ) | | (273 | ) | | (283 | ) | | (374 | ) | | (280 | ) | | (677 | ) | | (558 | ) | | (443 | ) | Loan loss provisions | | (17 | ) | | (6 | ) | | (2 | ) | | (13 | ) | | 3 | | | (1 | ) | | (29 | ) | | (5 | ) | | 3 | | Impairments of investments (net) | | (2,449 | ) | | (343 | ) | | (200 | ) | | (6,161 | ) | | (827 | ) | | (390 | ) | | (120 | ) | | (3 | ) | | — | | Investment expenses | | (207 | ) | | (322 | ) | | (300 | ) | | (673 | ) | | (833 | ) | | (750 | ) | | 9 | | | 6 | | | 6 | | Acquisition and administrative expenses (net) | | (10,356 | ) | | (10,616 | ) | | (10,590 | ) | | (4,375 | ) | | (4,588 | ) | | (4,437 | ) | | (552 | ) | | (589 | ) | | (550 | ) | Fee and commission expenses | | (1,141 | ) | | (967 | ) | | (721 | ) | | (253 | ) | | (209 | ) | | (223 | ) | | (193 | ) | | (233 | ) | | (235 | ) | Amortization of intangible assets | | (17 | ) | | (14 | ) | | (1 | ) | | (3 | ) | | (3 | ) | | (26 | ) | | (2 | ) | | — | | | — | | Restructuring charges | | (75 | ) | | (122 | ) | | (362 | ) | | (50 | ) | | (45 | ) | | (174 | ) | | (2 | ) | | (2 | ) | | (2 | ) | Other expenses | | (2 | ) | | (13 | ) | | (4 | ) | | (7 | ) | | (2 | ) | | (9 | ) | | (3 | ) | | (2 | ) | | — | | Expenses from fully consolidated private equity investments | | (3 | ) | | — | | | — | | | (20 | ) | | — | | | — | | | — | | | — | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total expenses | | (40,545 | ) | | (38,629 | ) | | (37,550 | ) | | (36,633 | ) | | (34,783 | ) | | (34,440 | ) | | (1,569 | ) | | (1,386 | ) | | (1,221 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Income (loss) from continuing operations before income taxes and minority interests in earnings | | 5,936 | | | 7,261 | | | 7,560 | | | 673 | | | 3,102 | | | 2,700 | | | (161 | ) | | 45 | | | 76 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Income taxes | | (1,489 | ) | | (1,656 | ) | | (2,075 | ) | | (260 | ) | | (897 | ) | | (641 | ) | | 54 | | | 10 | | | (1 | ) | Minority interests in earnings | | (112 | ) | | (431 | ) | | (739 | ) | | (86 | ) | | (214 | ) | | (416 | ) | | (7 | ) | | — | | | (6 | ) | Net income (loss) from continuing operations | | 4,335 | | | 5,174 | | | 4,746 | | | 327 | | | 1,991 | | | 1,643 | | | (114 | ) | | 55 | | | 69 | | Net income (loss) from discontinued operations, net of income taxes and minority interests in earnings | | — | | | — | | | — | | | — | | | — | | | — | | | (6,304 | ) | | 322 | | | 849 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income (loss) | | 4,335 | | | 5,174 | | | 4,746 | | | 327 | | | 1,991 | | | 1,643 | | | (6,418 | ) | | 377 | | | 918 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Asset Management | | | Corporate | | | Consolidation | | | Group | | | | | 2008 | | | 2007 | | | 2006 | | | 2008 | | | 2007 | | | 2006 | | | 2008 | | | 2007 | | | 2006 | | | 2008 | | | 2007 | | | 2006 | | | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | | — | | | — | | | — | | | — | | | — | | | — | | | (25 | ) | | (23 | ) | | (13 | ) | | 66,171 | | | 65,788 | | | 65,275 | | | | — | | | — | | | — | | | — | | | — | | | — | | | 25 | | | 23 | | | 13 | | | (5,474 | ) | | (5,934 | ) | | (6,218 | ) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (253 | ) | | (492 | ) | | (533 | ) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 60,444 | | | 59,362 | | | 58,524 | | | | 98 | | | 135 | | | 112 | | | 883 | | | 855 | | | 509 | | | (1,147 | ) | | (1,139 | ) | | (993 | ) | | 19,072 | | | 18,624 | | | 17,430 | | | | (77 | ) | | 31 | | | 38 | | | 112 | | | 51 | | | (334 | ) | | (339 | ) | | (46 | ) | | 53 | | | (686 | ) | | (817 | ) | | (370 | ) | | | 5 | | | 2 | | | 7 | | | 245 | | | 980 | | | 861 | | | 138 | | | (187 | ) | | (36 | ) | | 3,603 | | | 6,008 | | | 5,921 | | | | 4,032 | | | 4,403 | | | 4,186 | | | 221 | | | 198 | | | 190 | | | (469 | ) | | (455 | ) | | (498 | ) | | 6,032 | | | 6,553 | | | 6,025 | | | | 28 | | | 14 | | | 11 | | | 1 | | | 15 | | | 28 | | | (32 | ) | | (116 | ) | | (90 | ) | | 408 | | | 217 | | | 61 | | | | — | | | — | | | — | | | 2,528 | | | 2,367 | | | 1,392 | | | — | | | — | | | — | | | 2,549 | | | 2,367 | | | 1,392 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 4,086 | | | 4,585 | | | 4,354 | | | 3,990 | | | 4,466 | | | 2,646 | | | (1,849 | ) | | (1,943 | ) | | (1,564 | ) | | 91,422 | | | 92,314 | | | 88,983 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | — | | | — | | | — | | | — | | | — | | | 16 | | | 14 | | | 25 | | | (48,287 | ) | | (46,409 | ) | | (45,523 | ) | | | — | | | — | | | — | | | — | | | — | | | — | | | (16 | ) | | (14 | ) | | (25 | ) | | 2,628 | | | 3,287 | | | 3,226 | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (45,659 | ) | | (43,122 | ) | | (42,297 | ) | | | — | | | — | | | — | | | — | | | — | | | — | | | (21 | ) | | (78 | ) | | (425 | ) | | (5,140 | ) | | (10,685 | ) | | (11,375 | ) | | | (35 | ) | | (55 | ) | | (41 | ) | | (1,580 | ) | | (1,586 | ) | | (1,282 | ) | | 977 | | | 905 | | | 686 | | | (1,893 | ) | | (2,070 | ) | | (1,633 | ) | | | — | | | — | | | — | | | — | | | (10 | ) | | (5 | ) | | — | | | — | | | — | | | (59 | ) | | (18 | ) | | (5 | ) | | | (19 | ) | | (1 | ) | | (2 | ) | | (697 | ) | | (11 | ) | | 32 | | | (49 | ) | | — | | | — | | | (9,495 | ) | | (1,185 | ) | | (560 | ) | | | (1 | ) | | 1 | | | — | | | 11 | | | (115 | ) | | (215 | ) | | 216 | | | 226 | | | 204 | | | (645 | ) | | (1,037 | ) | | (1,055 | ) | | | (2,239 | ) | | (2,391 | ) | | (2,286 | ) | | (444 | ) | | (642 | ) | | (655 | ) | | 44 | | | 38 | | | 50 | | | (17,922 | ) | | (18,788 | ) | | (18,468 | ) | | | (1,158 | ) | | (1,270 | ) | | (1,262 | ) | | (170 | ) | | (130 | ) | | (127 | ) | | 413 | | | 496 | | | 528 | | | (2,502 | ) | | (2,313 | ) | | (2,040 | ) | | | (1 | ) | | — | | | (24 | ) | | — | | | — | | | — | | | — | | | — | | | — | | | (23 | ) | | (17 | ) | | (51 | ) | | | — | | | (4 | ) | | (4 | ) | | (2 | ) | | (9 | ) | | — | | | — | | | — | | | — | | | (129 | ) | | (182 | ) | | (542 | ) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (12 | ) | | (17 | ) | | (13 | ) | | | — | | | — | | | — | | | (2,452 | ) | | (2,317 | ) | | (1,381 | ) | | 5 | | | — | | | — | | | (2,470 | ) | | (2,317 | ) | | (1,381 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (3,453 | ) | | (3,720 | ) | | (3,619 | ) | | (5,334 | ) | | (4,820 | ) | | (3,633 | ) | | 1,585 | | | 1,587 | | | 1,043 | | | (85,949 | ) | | (81,751 | ) | | (79,420 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 633 | | | 865 | | | 735 | | | (1,344 | ) | | (354 | ) | | (987 | ) | | (264 | ) | | (356 | ) | | (521 | ) | | 5,473 | | | 10,563 | | | 9,563 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (249 | ) | | (342 | ) | | (278 | ) | | 631 | | | 217 | | | 824 | | | 26 | | | 96 | | | 451 | | | (1,287 | ) | | (2,572 | ) | | (1,720 | ) | | | (5 | ) | | (25 | ) | | (53 | ) | | (12 | ) | | (21 | ) | | (16 | ) | | 3 | | | 16 | | | 27 | | | (219 | ) | | (675 | ) | | (1,203 | ) | | | 379 | | | 498 | | | 404 | | | (725 | ) | | (158 | ) | | (179 | ) | | (235 | ) | | (244 | ) | | (43 | ) | | 3,967 | | | 7,316 | | | 6,640 | | | | — | | | — | | | — | | | — | | | — | | | — | | | (107 | ) | | 328 | | | (468 | ) | | (6,411 | ) | | 650 | | | 381 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 379 | | | 498 | | | 404 | | | (725 | ) | | (158 | ) | | (179 | ) | | (342 | ) | | 84 | | | (511 | ) | | (2,444 | ) | | 7,966 | | | 7,021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Allianz Group Business Segment Information—Insurance | | | | | | | | | | | | | | | | | | | PROPERTY-CASUALTY | | Premiums earned (net) | | | Loss ratio1) | | As of and for the years ended December 31, | | 2008 | | | 2007 | | | 2006 | | | 2008 | | | 2007 | | | 2006 | | | | | € mn | | | € mn | | | € mn | | | % | | | % | | | % | | Europe | | | | | | | | | | | | | | | | | | | Germany | | 10,191 | | | 9,245 | | | 9,843 | | | 67.3 | | | 64.8 | | | 65.1 | | Italy | | 4,647 | | | 4,902 | | | 4,935 | | | 73.1 | | | 71.2 | | | 68.8 | | France | | 3,281 | | | 4,422 | | | 4,429 | | | 69.3 | | | 70.9 | | | 71.0 | | United Kingdom | | 1,769 | | | 1,989 | | | 1,874 | | | 60.7 | | | 66.3 | | | 64.1 | | Spain | | 1,863 | | | 1,820 | | | 1,675 | | | 69.9 | | | 71.6 | | | 71.0 | | Switzerland | | 1,190 | | | 1,595 | | | 1,706 | | | 70.2 | | | 69.5 | | | 69.3 | | Western and Southern Europe | | 2,822 | | | 2,768 | | | 2,819 | | | 63.9 | | | 67.4 | | | 61.7 | | New Europe | | 2,312 | | | 2,067 | | | 1,388 | | | 59.0 | | | 60.8 | | | 61.1 | | | | | | | | | | | | | | | | | | | | | Subtotal | | 28,075 | | | 28,808 | | | 28,669 | | | — | | | — | | | — | | | | | | | | | | | | | | | | | | | | | NAFTA | | 3,380 | | | 3,426 | | | 3,622 | | | 74.3 | | | 61.6 | | | 58.4 | | Asia-Pacific | | 1,397 | | | 1,415 | | | 1,336 | | | 71.1 | | | 69.5 | | | 68.7 | | South America | | 764 | | | 692 | | | 623 | | | 65.1 | | | 62.9 | | | 64.8 | | Other | | 62 | | | 53 | | | 35 | | | — | 2) | | — | 2) | | — | 2) | Specialty Lines | | | | | | | | | | | | | | | | | | | Allianz Global Corporate and Specialty | | 1,981 | | | 1,800 | | | 1,545 | | | 59.7 | | | 67.9 | | | 62.5 | | Credit Insurance | | 1,360 | | | 1,268 | | | 1,113 | | | 77.6 | | | 47.9 | | | 49.7 | | Travel Insurance and Assistance Services | | 1,196 | | | 1,093 | | | 1,008 | | | 57.6 | | | 58.1 | | | 58.7 | | | | | | | | | | | | | | | | | | | | | Subtotal | | 4,537 | | | 4,161 | | | 3,666 | | | — | | | — | | | — | | | | | | | | | | | | | | | | | | | | | Subtotal | | 38,215 | | | 38,555 | | | 37,951 | | | — | | | — | | | — | | Consolidation3) | | (2 | ) | | (2 | ) | | (1 | ) | | — | | | — | | | — | | | | | | | | | | | | | | | | | | | | | Total | | 38,213 | | | 38,553 | | | 37,950 | | | 68.0 | | | 66.1 | | | 65.0 | | | | | | | | | | | | | | | | | | | | | | | | LIFE/HEALTH | | Statutory premiums4) | | | Statutory expense ratio5) | | As of and for the years ended December 31, | | 2008 | | | 2007 | | | 2006 | | | 2008 | | | 2007 | | | 2006 | | | | | € mn | | | € mn | | | € mn | | | % | | | % | | | % | | Europe | | | | | | | | | | | | | | | | | | | Germany Life | | 13,487 | | | 13,512 | | | 13,009 | | | 8.5 | | | 5.8 | | | 9.1 | | Germany Health | | 3,119 | | | 3,123 | | | 3,091 | | | 9.0 | | | 9.8 | | | 9.3 | | Italy | | 5,996 | | | 9,765 | | | 8,555 | | | 8.9 | | | 5.8 | | | 6.4 | | France | | 7,991 | | | 6,550 | | | 5,792 | | | 14.9 | | | 15.4 | | | 12.6 | | Switzerland | | 1,205 | | | 992 | | | 1,005 | | | 9.9 | | | 10.6 | | | 9.9 | | Spain | | 843 | | | 738 | | | 629 | | | 8.8 | | | 9.2 | | | 9.3 | | Western and Southern Europe | | 1,852 | | | 1,762 | | | 1,655 | | | 14.5 | | | 12.1 | | | 14.8 | | New Europe | | 1,141 | | | 1,039 | | | 828 | | | 24.4 | | | 20.0 | | | 19.6 | | | | | | | | | | | | | | | | | | | | | Subtotal | | 35,634 | | | 37,481 | | | 34,564 | | | — | | | — | | | — | | | | | | | | | | | | | | | | | | | | | NAFTA | | 6,111 | | | 6,968 | | | 8,758 | | | (0.1 | ) | | 11.9 | | | 8.0 | | Asia-Pacific | | 3,465 | | | 4,638 | | | 3,733 | | | 13.8 | | | 10.2 | | | 11.2 | | South America | | 190 | | | 78 | | | 147 | | | 10.3 | | | 32.6 | | | 16.9 | | Other | | 422 | | | 418 | | | 439 | | | — | 2) | | — | 2) | | — | 2) | | | | | | | | | | | | | | | | | | | | Subtotal | | 45,822 | | | 49,583 | | | 47,641 | | | — | | | — | | | — | | Consolidation3) | | (207 | ) | | (216 | ) | | (220 | ) | | — | | | — | | | — | | | | | | | | | | | | | | | | | | | | | Total | | 45,615 | | | 49,367 | | | 47,421 | | | 9.7 | | | 9.4 | | | 9.6 | | | | | | | | | | | | | | | | | | | | |
(1)1)
| Represents claims and insurance benefits incurred (net) divided by premiums earned (net). |
2) | Presentation not meaningful. |
3) | Represents elimination of intercompany transactions between Allianz Group subsidiaries in different geographic regions. |
4) | Statutory premiums are gross premiums written from sales of life insurance policies, as well as gross receipts from sales of unit-linked and other investment-oriented products, in accordance with the statutory accounting practices applicable in the insurer’s home jurisdiction. |
5) | Represents acquisition and administrative expenses (net) divided by statutory premiums (net). |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) | | | | | | | | | | | | | | | | | | | | | | | | | | | Expense ratio6) | | | Operating profit (loss) | | Total assets | | | | | 2008 | | | 2007 | | | 2006 | | | 2008 | | | 2007 | | | 2006 | | 2008 | | | 2007 | | | | | % | | | % | | | % | | | € mn | | | € mn | | | € mn | | € mn | | | € mn | | | | | | | | | | | | | | | | | | | | | | | | | | | | 25.7 | | | 26.8 | | | 27.8 | | | 1,865 | | | 1,628 | | | 1,478 | | 42,112 | | | 52,034 | | | | 23.6 | | | 23.6 | | | 23.0 | | | 690 | | | 719 | | | 816 | | 13,480 | | | 14,307 | | | | 27.9 | | | 26.4 | | | 28.2 | | | 280 | | | 486 | | | 420 | | 26,648 | | | 25,748 | | | | 34.3 | | | 33.3 | | | 31.6 | | | 253 | | | 207 | | | 280 | | 4,841 | | | 6,434 | | | | 20.5 | | | 19.8 | | | 19.3 | | | 286 | | | 253 | | | 252 | | 4,028 | | | 4,185 | | | | 22.6 | | | 25.6 | | | 23.5 | | | 145 | | | 218 | | | 228 | | 4,128 | | | 5,678 | | | | 26.4 | | | 28.0 | | | 28.5 | | | 376 | | | 482 | | | 550 | | 9,819 | | | 7,952 | | | | 33.7 | | | 33.5 | | | 30.9 | | | 300 | | | 256 | | | 184 | | 5,744 | | | 5,773 | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | — | | | — | | | 4,195 | | | 4,249 | | | 4,208 | | 110,800 | | | 122,111 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 26.7 | | | 29.6 | | | 30.5 | | | 293 | | | 663 | | | 825 | | 11,535 | | | 10,818 | | | | 25.9 | | | 26.5 | | | 27.2 | | | 288 | | | 312 | | | 244 | | 4,841 | | | 6,073 | | | | 33.4 | | | 36.1 | | | 36.4 | | | 82 | | | 55 | | | 47 | | 1,363 | | | 1,340 | | | | — 2) | | | — | 2) | | — | 2) | | 12 | | | 10 | | | 9 | | 990 | | | 236 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 29.1 | | | 28.1 | | | 29.7 | | | 486 | | | 414 | | | 404 | | 15,878 | | | 16,362 | | | | 26.7 | | | 28.6 | | | 27.9 | | | 144 | | | 496 | | | 442 | | 4,991 | | | 4,814 | | | | 35.7 | | | 35.6 | | | 43.1 | | | 106 | | | 97 | | | 90 | | 1,437 | | | 1,376 | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | — | | | — | | | 736 | | | 1,007 | | | 936 | | 22,306 | | | 22,552 | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | — | | | — | | | 5,606 | | | 6,296 | | | 6,269 | | 151,835 | | | 163,130 | | | | — | | | — | | | — | | | 43 | | | 3 | | | — | | (12,953 | ) | | (10,754 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | 27.1 | | | 27.5 | | | 27.9 | | | 5,649 | | | 6,299 | | | 6,269 | | 138,882 | | | 152,376 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Operating profit | | | Total assets | | | | | | | | | | 2008 | | | 2007 | | | 2006 | | | 2008 | | | 2007 | | | | | | | | | | | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 620 | | | 695 | | | 521 | | | 146,920 | | | 154,903 | | | | | | | | | | | | 112 | | | 164 | | | 184 | | | 20,041 | | | 20,637 | | | | | | | | | | | | 206 | | | 372 | | | 339 | | | 43,794 | | | 50,294 | | | | | | | | | | | | 128 | | | 632 | | | 582 | | | 73,172 | | | 74,321 | | | | | | | | | | | | 71 | | | 66 | | | 50 | | | 9,967 | | | 8,930 | | | | | | | | | | | | 103 | | | 104 | | | 92 | | | 6,089 | | | 5,818 | | | | | | | | | | | | 78 | | | 184 | | | 182 | | | 17,513 | | | 17,316 | | | | | | | | | | | | 48 | | | 61 | | | 50 | | | 3,391 | | | 3,165 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,366 | | | 2,278 | | | 2,000 | | | 320,887 | | | 335,384 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (228 | ) | | 385 | | | 418 | | | 56,192 | | | 54,728 | | | | | | | | | | | | 41 | | | 300 | | | 81 | | | 12,534 | | | 14,260 | | | | | | | | | | | | 10 | | | — | | | 1 | | | 291 | | | 234 | | | | | | | | | | | | 23 | | | 37 | | | 48 | | | 4,677 | | | 327 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,212 | | | 3,000 | | | 2,548 | | | 394,581 | | | 404,933 | | | | | | | | | | | | (6 | ) | | (5 | ) | | 17 | | | (5,159 | ) | | (915 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,206 | | | 2,995 | | | 2,565 | | | 389,422 | | | 404,018 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
6) | Represents acquisition and administrative expenses (net) divided by premiums earned (net). |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Allianz Group Business Segment Information—Banking | | | | | | | | | | | | | | | | | | | | | | | | | | | | As of and for the years ended
December 31, | | Operating revenues | | Operating profit (loss) | | | Cost-income ratio | | Total assets | | | 2008 | | 2007 | | 2006 | | 2008 | | | 2007 | | | 2006 | | | 2008 | | | 2007 | | 2006 | | 2008 | | | 2007 | | | | € mn | | € mn | | € mn | | € mn | | | € mn | | | € mn | | | % | | | % | | % | | € mn | | | € mn | Germany | | 325 | | 326 | | 320 | | 4 | | | (12 | ) | | (4 | ) | | 92.8 | | | 104.1 | | 102.6 | | 11,165 | 1) | | 501,797 | Italy | | 176 | | 219 | | 201 | | 55 | | | 76 | | | 47 | | | 66.7 | | | 64.0 | | 75.1 | | 4,143 | | | 3,711 | France | | — | | 46 | | 64 | | (58 | ) | | (21 | ) | | 18 | | | — | 2) | | 145.2 | | 74.1 | | 3,298 | | | 3,392 | New Europe | | 43 | | 31 | | 19 | | (32 | ) | | (11 | ) | | 2 | | | 164.8 | | | 126.4 | | 86.2 | | 1,241 | | | 851 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | 544 | | 622 | | 604 | | (31 | ) | | 32 | | | 63 | | | 100.4 | | | 94.1 | | 90.1 | | 19,847 | | | 509,751 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
1) | Does not include €420,695 mn assets of disposal groups classified as held-for-sale of Dresdner Bank as of December 31, 2008. |
2) | Presentation not meaningful. |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) [THIS PAGE INTENTIONALLY LEFT BLANK] Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Allianz Group Business Segment Information—Total revenues and reconciliation of Operating profit (loss) to Net income (loss) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Property-Casualty1) | | | Life/Health1) | | | Banking | | | | | 2008 | | | 2007 | | | 2006 | | | 2008 | | | 2007 | | | 2006 | | | 2008 | | | 2007 | | | 2006 | | | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | Total revenues2) | | 43,387 | | | 44,289 | | | 43,674 | | | 45,615 | | | 49,367 | | | 47,421 | | | 544 | | | 622 | | | 604 | | Premiums earned (net) | | 38,213 | | | 38,553 | | | 37,950 | | | 22,231 | | | 20,809 | | | 20,574 | | | — | | | — | | | — | | Interest and similar income | | 4,477 | | | 4,473 | | | 4,096 | | | 13,772 | | | 13,417 | | | 12,972 | | | 989 | | | 883 | | | 734 | | Operating income from financial assets and liabilities carried at fair value through income (net) | | (158 | ) | | 144 | | | 106 | | | (235 | ) | | (945 | ) | | (361 | ) | | (5 | ) | | 2 | | | 45 | | Operating realized gains/losses (net) | | 37 | | | 46 | | | 46 | | | 874 | | | 3,579 | | | 3,087 | | | — | | | — | | | — | | Fee and commission income | | 1,247 | | | 1,178 | | | 1,014 | | | 571 | | | 701 | | | 630 | | | 430 | | | 528 | | | 503 | | Other income | | 271 | | | 122 | | | 69 | | | 140 | | | 182 | | | 43 | | | — | | | — | | | — | | Income from fully consolidated private equity investments | | 3 | | | — | | | — | | | 18 | | | — | | | — | | | — | | | — | | | — | | Claims and insurance benefits incurred (net) | | (25,986 | ) | | (25,485 | ) | | (24,672 | ) | | (19,673 | ) | | (17,637 | ) | | (17,625 | ) | | — | | | — | | | — | | Change in reserves for insurance and investment contracts (net) | | 3 | | | (339 | ) | | (425 | ) | | (5,122 | ) | | (10,268 | ) | | (10,525 | ) | | — | | | — | | | — | | Interest expenses, excluding interest expenses from external debt | | (295 | ) | | (402 | ) | | (273 | ) | | (283 | ) | | (374 | ) | | (280 | ) | | (677 | ) | | (558 | ) | | (443 | ) | Loan loss provisions | | (17 | ) | | (6 | ) | | (2 | ) | | (13 | ) | | 3 | | | (1 | ) | | (29 | ) | | (5 | ) | | 3 | | Operating impairments of investments (net) | | (437 | ) | | (67 | ) | | (25 | ) | | (5,747 | ) | | (824 | ) | | (390 | ) | | — | | | — | | | — | | Investment expenses | | (207 | ) | | (322 | ) | | (300 | ) | | (673 | ) | | (833 | ) | | (750 | ) | | 9 | | | 6 | | | 6 | | Acquisition and administrative expenses (net), excluding acquisition-related expenses | | (10,356 | ) | | (10,616 | ) | | (10,590 | ) | | (4,375 | ) | | (4,588 | ) | | (4,437 | ) | | (552 | ) | | (589 | ) | | (550 | ) | Fee and commission expenses | | (1,141 | ) | | (967 | ) | | (721 | ) | | (253 | ) | | (209 | ) | | (223 | ) | | (193 | ) | | (233 | ) | | (235 | ) | Operating restructuring charges | | — | | | — | | | — | | | 1 | | | (16 | ) | | (140 | ) | | — | | | — | | | — | | Other expenses | | (2 | ) | | (13 | ) | | (4 | ) | | (7 | ) | | (2 | ) | | (9 | ) | | (3 | ) | | (2 | ) | | — | | Expenses from fully consolidated private equity investments | | (3 | ) | | — | | | — | | | (20 | ) | | — | | | — | | | — | | | — | | | — | | Reclassification of tax benefits | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Operating profit (loss) | | 5,649 | | | 6,299 | | | 6,269 | | | 1,206 | | | 2,995 | | | 2,565 | | | (31 | ) | | 32 | | | 63 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Non-operating income from financial assets and liabilities carried at fair value through income (net) | | 42 | | | (59 | ) | | 83 | | | (26 | ) | | 5 | | | — | | | — | | | — | | | — | | Non-operating realized gains/losses (net) | | 2,349 | | | 1,433 | | | 1,746 | | | (39 | ) | | 137 | | | 195 | | | (6 | ) | | 18 | | | 15 | | Non-operating impairments of investments (net) | | (2,012 | ) | | (276 | ) | | (175 | ) | | (414 | ) | | (3 | ) | | — | | | (120 | ) | | (3 | ) | | — | | Interest expenses from external debt | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | Acquisition-related expenses | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | Amortization of intangible assets | | (17 | ) | | (14 | ) | | (1 | ) | | (3 | ) | | (3 | ) | | (26 | ) | | (2 | ) | | — | | | — | | Non-operating restructuring charges | | (75 | ) | | (122 | ) | | (362 | ) | | (51 | ) | | (29 | ) | | (34 | ) | | (2 | ) | | (2 | ) | | (2 | ) | Reclassification of tax benefits | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | Non-operating items | | 287 | | | 962 | | | 1,291 | | | (533 | ) | | 107 | | | 135 | | | (130 | ) | | 13 | | | 13 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Income (loss) from continuing operations before income taxes and minority interests in earnings | | 5,936 | | | 7,261 | | | 7,560 | | | 673 | | | 3,102 | | | 2,700 | | | (161 | ) | | 45 | | | 76 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Income taxes | | (1,489 | ) | | (1,656 | ) | | (2,075 | ) | | (260 | ) | | (897 | ) | | (641 | ) | | 54 | | | 10 | | | (1 | ) | Minority interests in earnings | | (112 | ) | | (431 | ) | | (739 | ) | | (86 | ) | | (214 | ) | | (416 | ) | | (7 | ) | | — | | | (6 | ) | Net income (loss) from continuing operations | | 4,335 | | | 5,174 | | | 4,746 | | | 327 | | | 1,991 | | | 1,643 | | | (114 | ) | | 55 | | | 69 | | Net income (loss) from discontinued operations, net of income taxes and minority interests in earnings | | — | | | — | | | — | | | — | | | — | | | — | | | (6,304 | ) | | 322 | | | 849 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income (loss) | | 4,335 | | | 5,174 | | | 4,746 | | | 327 | | | 1,991 | | | 1,643 | | | (6,418 | ) | | 377 | | | 918 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
1) | Since the first quarter 2008, health business in Belgium and France is shown within Life/Health segment. Prior year balances have not been adjusted. |
2) | Total revenues comprise Property-Casualty segment’s gross premiums written, Life/Health segment’s statutory premiums (including unit-linked and other investment-oriented products), Banking segment’s operating revenues and Asset Management segment’s operating revenues. |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Asset Management | | | Corporate | | | Consolidation | | | Group | | | | | 2008 | | | 2007 | | | 2006 | | | 2008 | | | 2007 | | | 2006 | | | 2008 | | | 2007 | | | 2006 | | | 2008 | | | 2007 | | | 2006 | | | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | | 2,887 | | | 3,259 | | | 3,044 | | | — | | | — | | | — | | | 115 | | | 144 | | | 130 | | | 92,548 | | | 97,681 | | | 94,873 | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 60,444 | | | 59,362 | | | 58,524 | | | | 98 | | | 135 | | | 112 | | | 883 | | | 855 | | | 509 | | | (1,147 | ) | | (1,139 | ) | | (993 | ) | | 19,072 | | | 18,624 | | | 17,430 | | | | (77 | ) | | 31 | | | 38 | | | (98 | ) | | (26 | ) | | (60 | ) | | (160 | ) | | 12 | | | (4 | ) | | (733 | ) | | (782 | ) | | (236 | ) | | | — | | | — | | | — | | | — | | | — | | | — | | | 36 | | | 4 | | | (25 | ) | | 947 | | | 3,629 | | | 3,108 | | | | 4,032 | | | 4,403 | | | 4,186 | | | 221 | | | 198 | | | 190 | | | (469 | ) | | (455 | ) | | (498 | ) | | 6,032 | | | 6,553 | | | 6,025 | | | | 28 | | | 14 | | | 11 | | | 1 | | | 15 | | | 28 | | | (32 | ) | | (116 | ) | | (90 | ) | | 408 | | | 217 | | | 61 | | | | — | | | — | | | — | | | 2,528 | | | 2,367 | | | 1,392 | | | — | | | — | | | — | | | 2,549 | | | 2,367 | | | 1,392 | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (45,659 | ) | | (43,122 | ) | | (42,297 | ) | | | — | | | — | | | — | | | — | | | — | | | — | | | (21 | ) | | (78 | ) | | (425 | ) | | (5,140 | ) | | (10,685 | ) | | (11,375 | ) | | |
|
(35) | | (55 | ) | | (41 | ) | | (635 | ) | | (535 | ) | | (507 | ) | | 977 | | | 905 | | | 686 | | | (948 | ) | | (1,019 | ) | | (858 | ) | | | — | | | — | | | — | | | — | | | (10 | ) | | (5 | ) | | — | | | — | | | — | | | (59 | ) | | (18 | ) | | (5 | ) | | | — | | | — | | | — | | | — | | | — | | | — | | | (15 | ) | | — | | | 1 | | | (6,199 | ) | | (891 | ) | | (414 | ) | | | (1 | ) | | 1 | | | — | | | 11 | | | (115 | ) | | (215 | ) | | 216 | | | 226 | | | 204 | | | (645 | ) | | (1,037 | ) | | (1,055 | ) | | | (1,961 | ) | | (1,900 | ) | | (1,754 | ) | | (477 | ) | | (627 | ) | | (655 | ) | | 44 | | | 38 | | | 50 | | | (17,677 | ) | | (18,282 | ) | | (17,936 | ) | | | (1,158 | ) | | (1,270 | ) | | (1,262 | ) | | (170 | ) | | (130 | ) | | (127 | ) | | 413 | | | 496 | | | 528 | | | (2,502 | ) | | (2,313 | ) | | (2,040 | ) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 1 | | | (16 | ) | | (140 | ) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (12 | ) | | (17 | ) | | (13 | ) | | | — | | | — | | | — | | | (2,452 | ) | | (2,317 | ) | | (1,381 | ) | | 5 | | | — | | | — | | | (2,470 | ) | | (2,317 | ) | | (1,381 | ) | | | — | | | — | | | — | | | — | | | — | | | — | | | 24 | | | 60 | | | 429 | | | 24 | | | 60 | | | 429 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 926 | | | 1,359 | | | 1,290 | | | (188 | ) | | (325 | ) | | (831 | ) | | (129 | ) | | (47 | ) | | (137 | ) | | 7,433 | | | 10,313 | | | 9,219 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | — | | | — | | | 210 | | | 77 | | | (274 | ) | | (179 | ) | | (58 | ) | | 57 | | | 47 | | | (35 | ) | | (134 | ) | | | 5 | | | 2 | | | 7 | | | 245 | | | 980 | | | 861 | | | 102 | | | (191 | ) | | (11 | ) | | 2,656 | | | 2,379 | | | 2,813 | | | | (19 | ) | | (1 | ) | | (2 | ) | | (697 | ) | | (11 | ) | | 32 | | | (34 | ) | | — | | | (1 | ) | | (3,296 | ) | | (294 | ) | | (146 | ) | | | — | | | — | | | — | | | (945 | ) | | (1,051 | ) | | (775 | ) | | — | | | — | | | — | | | (945 | ) | | (1,051 | ) | | (775 | ) | | | (278 | ) | | (491 | ) | | (532 | ) | | 33 | | | (15 | ) | | — | | | — | | | — | | | — | | | (245 | ) | | (506 | ) | | (532 | ) | | | (1 | ) | | — | | | (24 | ) | | — | | | — | | | — | | | — | | | — | | | — | | | (23 | ) | | (17 | ) | | (51 | ) | | | — | | | (4 | ) | | (4 | ) | | (2 | ) | | (9 | ) | | — | | | — | | | — | | | — | | | (130 | ) | | (166 | ) | | (402 | ) | | | — | | | — | | | — | | | — | | | — | | | — | | | (24 | ) | | (60 | ) | | (429 | ) | | (24 | ) | | (60 | ) | | (429 | ) | | | (293 | ) | | (494 | ) | | (555 | ) | | (1,156 | ) | | (29 | ) | | (156 | ) | | (135 | ) | | (309 | ) | | (384 | ) | | (1,960 | ) | | 250 | | | 344 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 633 | | | 865 | | | 735 | | | (1,344 | ) | | (354 | ) | | (987 | ) | | (264 | ) | | (356 | ) | | (521 | ) | | 5,473 | | | 10,563 | | | 9,563 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (249 | ) | | (342 | ) | | (278 | ) | | 631 | | | 217 | | | 824 | | | 26 | | | 96 | | | 451 | | | (1,287 | ) | | (2,572 | ) | | (1,720 | ) | | | (5 | ) | | (25 | ) | | (53 | ) | | (12 | ) | | (21 | ) | | (16 | ) | | 3 | | | 16 | | | 27 | | | (219 | ) | | (675 | ) | | (1,203 | ) | | | 379 | | | 498 | | | 404 | | | (725 | ) | | (158 | ) | | (179 | ) | | (235 | ) | | (244 | ) | | (43 | ) | | 3,967 | | | 7,316 | | | 6,640 | | | | — | | | — | | | — | | | — | | | — | | | — | | | (107 | ) | | 328 | | | (468 | ) | | (6,411 | ) | | 650 | | | 381 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 379 | | | 498 | | | 404 | | | (725 | ) | | (158 | ) | | (179 | ) | | (342 | ) | | 84 | | | (511 | ) | | (2,444 | ) | | 7,966 | | | 7,021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Property-Casualty Segment1) | | | | 2006
| | 2005
| | 2004
| | | 2008 | | 2007 | | 2006 | | | | | € mn | | € mn | | € mn | | | € mn | | € mn | | € mn | | Gross premiums written(1) | | 43,674 | | | 43,699 | | | 42,942 | | | Gross premiums written2) | | | 43,387 | | | 44,289 | | | 43,674 | | Ceded premiums written | | (5,415 | ) | | (5,529 | ) | | (5,299 | ) | | (4,972 | ) | | (5,320 | ) | | (5,415 | ) | Change in unearned premiums | | (309 | ) | | (485 | ) | | (258 | ) | | (202 | ) | | (416 | ) | | (309 | ) | Premiums earned (net) | | 37,950 | | | 37,685 | | | 37,385 | | | 38,213 | | | 38,553 | | | 37,950 | | Interest and similar income | | 4,096 | | | 3,747 | | | 3,615 | | | 4,477 | | | 4,473 | | | 4,096 | | Income from financial assets and liabilities designated at fair value through income (net)(2) | | 106 | | | 132 | | | 5 | | | Realized gains/losses (net) from investments, shared with policyholders(3) | | 46 | | | 273 | | | 58 | | | Operating income from financial assets and liabilities carried at fair value through income (net)3) | | | (158 | ) | | 144 | | | 106 | | Operating realized gains/losses (net)4) | | | 37 | | | 46 | | | 46 | | Fee and commission income | | 1,014 | | | 989 | | | 782 | | | 1,247 | | | 1,178 | | | 1,014 | | Other income | | 69 | | | 53 | | | 288 | | | 271 | | | 122 | | | 69 | | Income from fully consolidated private equity investments | | | 3 | | | — | | | — | | | | |
|
| |
|
| |
|
| | | | | | | | | | Operating revenues | | 43,281 | | | 42,879 | | | 42,133 | | | 44,090 | | | 44,516 | | | 43,281 | | | | |
|
| |
|
| |
|
| | | | | | | | | | Claims and insurance benefits incurred (net) | | (24,672 | ) | | (25,331 | ) | | (25,271 | ) | | (25,986 | ) | | (25,485 | ) | | (24,672 | ) | Changes in reserves for insurance and investment contracts (net) | | (425 | ) | | (707 | ) | | (611 | ) | | 3 | | | (339 | ) | | (425 | ) | Interest expense | | (273 | ) | | (339 | ) | | (417 | ) | | Interest expenses | | | (295 | ) | | (402 | ) | | (273 | ) | Loan loss provisions | | (2 | ) | | (1 | ) | | (7 | ) | | (17 | ) | | (6 | ) | | (2 | ) | Impairments of investments (net), shared with policyholders(4) | | (25 | ) | | (18 | ) | | (37 | ) | | Operating impairments of investments (net)5) | | | (437 | ) | | (67 | ) | | (25 | ) | Investment expenses | | (300 | ) | | (333 | ) | | (204 | ) | | (207 | ) | | (322 | ) | | (300 | ) | Acquisition and administrative expenses (net) | | (10,590 | ) | | (10,216 | ) | | (10,192 | ) | | (10,356 | ) | | (10,616 | ) | | (10,590 | ) | Fee and commission expenses | | (721 | ) | | (775 | ) | | (530 | ) | | (1,141 | ) | | (967 | ) | | (721 | ) | Other expenses | | (4 | ) | | (17 | ) | | (39 | ) | | (2 | ) | | (13 | ) | | (4 | ) | Expenses from fully consolidated private equity investments | | | (3 | ) | | — | | | — | | | | |
|
| |
|
| |
|
| | | | | | | | | | Operating expenses | | (37,012 | ) | | (37,737 | ) | | (37,308 | ) | | (38,441 | ) | | (38,217 | ) | | (37,012 | ) | | | |
|
| |
|
| |
|
| | | | | | | | | | Operating profit | | 6,269 | | | 5,142 | | | 4,825 | | | 5,649 | | | 6,299 | | | 6,269 | | Income from financial assets and liabilities held for trading (net)(2) | | 83 | | | 32 | | | 20 | | | Realized gains/losses (net) from investments, not shared with policyholders(3) | | 1,746 | | | 1,148 | | | 997 | | | Impairments of investments (net), not shared with policyholders(4) | | (175 | ) | | (77 | ) | | (107 | ) | | | | | | | | | | | | | Non-operating income from financial assets and liabilities carried at fair value through income (net)3) | | | 42 | | | (59 | ) | | 83 | | Non-operating realized gains/losses (net)4) | | | 2,349 | | | 1,433 | | | 1,746 | | Non-operating impairments of investments (net)5) | | | (2,012 | ) | | (276 | ) | | (175 | ) | Amortization of intangible assets | | (1 | ) | | (11 | ) | | (403 | ) | | (17 | ) | | (14 | ) | | (1 | ) | Restructuring charges | | (362 | ) | | (68 | ) | | (32 | ) | | (75 | ) | | (122 | ) | | (362 | ) | | | | | | | | | | | | Non-operating items | | 1,291 | | | 1,024 | | | 475 | | | 287 | | | 962 | | | 1,291 | | | | | | | | | | | | | Income before income taxes and minority interests in earnings | | 7,560 | | | 6,166 | | | 5,300 | | | 5,936 | | | 7,261 | | | 7,560 | | Income taxes | | (2,075 | ) | | (1,804 | ) | | (1,751 | ) | | (1,489 | ) | | (1,656 | ) | | (2,075 | ) | Minority interests in earnings | | (739 | ) | | (827 | ) | | (681 | ) | | (112 | ) | | (431 | ) | | (739 | ) | | | |
|
| |
|
| |
|
| | | | | | | | | | Net income | | 4,746 | | | 3,535 | | | 2,868 | | | 4,335 | | | 5,174 | | | 4,746 | | | | |
|
| |
|
| |
|
| | | | | | | | | | Loss ratio(5) in % | | 65.0 | | | 67.2 | | | 67.6 | | | Expense ratio(6)in % | | 27.9 | | | 27.1 | | | 27.3 | | | Loss ratio6)in % | | | 68.0 | | | 66.1 | | | 65.0 | | Expense ratio7)in % | | | 27.1 | | | 27.5 | | | 27.9 | | | | |
|
| |
|
| |
|
| | | | | | | | | | Combined ratio(7) in % | | 92.9 | | | 94.3 | | | 94.9 | | | Combined ratio8)in % | | | 95.1 | | | 93.6 | | | 92.9 | | | | |
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| |
|
| |
|
| | | | | | | | | |
(1)1)
| Since 2008, health business in Belgium and France is shown within Life/Health segment. Prior year balances have not been adjusted. |
2) | For the Property-Casualty segment, total revenues are measured based upon gross premiums written. |
(2)3)
| The total of these items equals income from financial assets and liabilities carried at fair value through income (net) in the segment income statement. |
(3)4)
| The total of these items equals realized gains/losses (net) in the segment income statement. |
(4)5)
| The total of these items equals impairments of investments (net) in the segment income statement. |
(5)6)
| Represents claims and insurance benefits incurred (net) divided by premiums earned (net). |
(6)7)
| Represents acquisition and administrative expenses (net) divided by premiums earned (net). |
(7)8)
| Represents the total of acquisition and administrative expenses (net) and claims and insurance benefits incurred (net) divided by premiums earned (net). |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Life/Health Segment1) | | | | | | | | | | | | | 2006
| | | 2005
| | | 2004
| | | | | € mn | | | € mn | | | € mn | | Statutory premiums(1) | | 47,421 | | | 48,272 | | | 45,233 | | Ceded premiums written | | (840 | ) | | (942 | ) | | (1,309 | ) | Change in unearned premiums | | (221 | ) | | (168 | ) | | (69 | ) | Statutory premiums (net) | | 46,360 | | | 47,162 | | | 43,855 | | Deposits from SFAS 97 insurance and investment contracts | | (25,786 | ) | | (27,165 | ) | | (24,451 | ) | Premiums earned (net) | | 20,574 | | | 19,997 | | | 19,404 | | Interest and similar income | | 12,972 | | | 12,057 | | | 11,493 | | Income from financial assets and liabilities carried at fair value through income (net) | | (361 | ) | | 258 | | | 198 | | Realized gains/losses (net) from investments, shared with policyholders(2) | | 3,087 | | | 2,523 | | | 1,990 | | Fee and commission income | | 630 | | | 507 | | | 224 | | Other income | | 43 | | | 45 | | | 44 | | Operating revenues | | 36,945 | | | 35,387 | | | 33,353 | | Claims and insurance benefits incurred (net) | | (17,625 | ) | | (17,439 | ) | | (17,535 | ) | Changes in reserves for insurance and investment contracts (net) | | (10,525 | ) | | (10,443 | ) | | (8,746 | ) | Interest expense | | (280 | ) | | (452 | ) | | (452 | ) | Loan loss provisions | | (1 | ) | | — | | | (3 | ) | Impairments of investments (net), shared with policyholders | | (390 | ) | | (199 | ) | | (281 | ) | Investment expenses | | (750 | ) | | (567 | ) | | (649 | ) | Acquisition and administrative expenses (net) | | (4,437 | ) | | (3,973 | ) | | (3,711 | ) | Fee and commission expenses | | (223 | ) | | (219 | ) | | (145 | ) | Other expenses | | (9 | ) | | (1 | ) | | (43 | ) | Operating restructuring charges(3) | | (140 | ) | | — | | | — | | Operating expenses | | (34,380 | ) | | (33,293 | ) | | (31,565 | ) | | | |
|
| |
|
| |
|
| Operating profit | | 2,565 | | | 2,094 | | | 1,788 | | | | |
|
| |
|
| |
|
| Realized gains/losses (net) from investments, not shared with policyholders(2) | | 195 | | | 208 | | | 17 | | Amortization of intangible assets | | (26 | ) | | (13 | ) | | (168 | ) | Non-operating restructuring charges(3) | | (34 | ) | | (18 | ) | | (24 | ) | Non-operating items | | 135 | | | 177 | | | (175 | ) | Income before income taxes and minority interests in earnings | | 2,700 | | | 2,271 | | | 1,613 | | Income taxes | | (641 | ) | | (488 | ) | | (458 | ) | Minority interests in earnings | | (416 | ) | | (425 | ) | | (333 | ) | | | |
|
| |
|
| |
|
| Net income | | 1,643 | | | 1,358 | | | 822 | | | | |
|
| |
|
| |
|
| Statutory expense ratio(4) in % | | 9.6 | | | 8.4 | | | 8.5 | | | | |
|
| |
|
| |
|
|
| | | | | | | | | | | | | 2008 | | | 2007 | | | 2006 | | | | | € mn | | | € mn | | | € mn | | Statutory premiums2) | | 45,615 | | | 49,367 | | | 47,421 | | Ceded premiums written | | (588 | ) | | (644 | ) | | (840 | ) | Change in unearned premiums | | (54 | ) | | (61 | ) | | (221 | ) | Statutory premiums (net) | | 44,973 | | | 48,662 | | | 46,360 | | Deposits from SFAS 97 insurance and investment contracts | | (22,742 | ) | | (27,853 | ) | | (25,786 | ) | Premiums earned (net) | | 22,231 | | | 20,809 | | | 20,574 | | Interest and similar income | | 13,772 | | | 13,417 | | | 12,972 | | Operating income from financial assets and liabilities carried at fair value through income (net)3) | | (235 | ) | | (945 | ) | | (361 | ) | Operating realized gains/losses (net)4) | | 874 | | | 3,579 | | | 3,087 | | Fee and commission income | | 571 | | | 701 | | | 630 | | Other income | | 140 | | | 182 | | | 43 | | Income from fully consolidated private equity investments | | 18 | | | — | | | — | | | | | | | | | | | | Operating revenues | | 37,371 | | | 37,743 | | | 36,945 | | | | | | | | | | | | Claims and insurance benefits incurred (net) | | (19,673 | ) | | (17,637 | ) | | (17,625 | ) | Changes in reserves for insurance and investment contracts (net) | | (5,122 | ) | | (10,268 | ) | | (10,525 | ) | Interest expenses | | (283 | ) | | (374 | ) | | (280 | ) | Loan loss provisions | | (13 | ) | | 3 | | | (1 | ) | Operating impairments of investments (net)5) | | (5,747 | ) | | (824 | ) | | (390 | ) | Investment expenses | | (673 | ) | | (833 | ) | | (750 | ) | Acquisition and administrative expenses (net) | | (4,375 | ) | | (4,588 | ) | | (4,437 | ) | Fee and commission expenses | | (253 | ) | | (209 | ) | | (223 | ) | Operating restructuring charges6) | | 1 | | | (16 | ) | | (140 | ) | Other expenses | | (7 | ) | | (2 | ) | | (9 | ) | Expenses from fully consolidated private equity investments | | (20 | ) | | — | | | — | | | | | | | | | | | | Operating expenses | | (36,165 | ) | | (34,748 | ) | | (34,380 | ) | | | | | | | | | | | Operating profit | | 1,206 | | | 2,995 | | | 2,565 | | | | | | | | | | | | Non-operating income from financial assets and liabilities carried at fair value through income (net)3) | | (26 | ) | | 5 | | | — | | Non-operating realized gains/losses (net)4) | | (39 | ) | | 137 | | | 195 | | Non-operating impairments of investments (net)5) | | (414 | ) | | (3 | ) | | — | | Amortization of intangible assets | | (3 | ) | | (3 | ) | | (26 | ) | Non-operating restructuring charges6) | | (51 | ) | | (29 | ) | | (34 | ) | Non-operating items | | (533 | ) | | 107 | | | 135 | | | | | | | | | | | | Income before income taxes and minority interests in earnings | | 673 | | | 3,102 | | | 2,700 | | Income taxes | | (260 | ) | | (897 | ) | | (641 | ) | Minority interests in earnings | | (86 | ) | | (214 | ) | | (416 | ) | | | | | | | | | | | Net income | | 327 | | | 1,991 | | | 1,643 | | | | | | | | | | | | Statutory expense ratio7)in % | | 9.7 | | | 9.4 | | | 9.6 | | | | | | | | | | | |
| 1) | (1)Since 2008, health business in Belgium and France is shown within Life/Health segment. Prior year balances have not been adjusted.
|
| 2) | For the Life/Health segment, total revenues are measured based upon statutory premiums. Statutory premiums are gross premiums written from sales of life insurance policies, as well as gross receipts from sales of unit linkedunit-linked and other investment-oriented products, in accordance with the statutory accounting practices applicable in the insurer’s home jurisdiction. |
| 3) | (2)The total of these items equals income from financial assets and liabilities carried at fair value through income (net) in the segment income statement.
|
| 4) | The total of these items equals realized gains/losses (net) in the segment income statement. |
| 5) | (3)The total of these items equals impairments of investments (net) in the segment income statement.
|
| 6) | The total of these items equals restructuring charges in the segment income statement. |
(4)
7) | Represents acquisition and administrative expenses (net) divided by statutory premiums (net). |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Banking Segment | | | | | | | | | | | | | | | | | | | | | | 2006
| | | 2005
| | | 2004
| | | | | Banking
Segment(1)
| | | Dresdner
Bank
| | | Banking
Segment(1)
| | | Dresdner
Bank
| | | Banking
Segment(1)
| | | Dresdner Bank
| | | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | Net interest income(2) | | 2,720 | | | 2,645 | | | 2,294 | | | 2,218 | | | 2,356 | | | 2,264 | | Net fee and commission income(3) | | 3,008 | | | 2,841 | | | 2,850 | | | 2,693 | | | 2,707 | | | 2,574 | | Trading income (net)(4) | | 1,282 | | | 1,248 | | | 1,170 | | | 1,123 | | | 1,518 | | | 1,524 | | Income from financial assets and liabilities designated at fair value through income (net)(4) | | 53 | | | 53 | | | (7 | ) | | (6 | ) | | (9 | ) | | (9 | ) | Other income | | 25 | | | 24 | | | 11 | | | 11 | | | 4 | | | 4 | | Operating revenues(5) | | 7,088 | | | 6,811 | | | 6,318 | | | 6,039 | | | 6,576 | | | 6,357 | | Administrative expenses | | (5,605 | ) | | (5,384 | ) | | (5,661 | ) | | (5,452 | ) | | (5,643 | ) | | (5,416 | ) | Investment expenses | | (47 | ) | | (53 | ) | | (30 | ) | | (37 | ) | | (25 | ) | | (32 | ) | Other expenses | | 14 | | | 14 | | | (33 | ) | | (33 | ) | | (117 | ) | | (118 | ) | Operating expenses | | (5,638 | ) | | (5,423 | ) | | (5,724 | ) | | (5,522 | ) | | (5,785 | ) | | (5,566 | ) | Loan loss provisions | | (28 | ) | | (27 | ) | | 110 | | | 113 | | | (344 | ) | | (337 | ) | Operating profit | | 1,422 | | | 1,361 | | | 704 | | | 630 | | | 447 | | | 454 | | Realized gains/losses (net) | | 492 | | | 491 | | | 1,020 | | | 1,020 | | | 543 | | | 533 | | Impairments of investments (net) | | (215 | ) | | (215 | ) | | (184 | ) | | (183 | ) | | (509 | ) | | (505 | ) | Amortization of intangible assets | | — | | | — | | | (1 | ) | | — | | | (281 | ) | | (281 | ) | Restructuring charges | | (424 | ) | | (422 | ) | | (13 | ) | | (12 | ) | | (292 | ) | | (290 | ) | Non-operating items | | (147 | ) | | (146 | ) | | 822 | | | 825 | | | (539 | ) | | (543 | ) | Income (loss) before income taxes and minority interests in earnings | | 1,275 | | | 1,215 | | | 1,526 | | | 1,455 | | | (92 | ) | | (89 | ) | Income taxes | | (263 | ) | | (239 | ) | | (387 | ) | | (373 | ) | | 302 | | | 296 | | Minority interests in earnings | | (94 | ) | | (81 | ) | | (102 | ) | | (82 | ) | | (101 | ) | | (60 | ) | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Net income | | 918 | | | 895 | | | 1,037 | | | 1,000 | | | 109 | | | 147 | | | | |
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| |
|
| |
|
| |
|
| |
|
| |
|
| Cost-income ratio(6) in % | | 79.5 | | | 79.6 | | | 90.6 | | | 91.4 | | | 88.0 | | | 87.6 | | | | |
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|
| | | | | | | | | | | | | 2008 | | | 2007 | | | 2006 | | | | | € mn | | | € mn | | | € mn | | Net interest income1) | | 312 | | | 325 | | | 291 | | Net fee and commission income2) | | 237 | | | 295 | | | 268 | | Trading income (net)3) | | (5 | ) | | 2 | | | 45 | | Income from financial assets and liabilities designated at fair value through income
(net)3) | | — | | | — | | | — | | | | | | | | | | | | Operating revenues4) | | 544 | | | 622 | | | 604 | | | | | | | | | | | | Administrative expenses | | (552 | ) | | (589 | ) | | (550 | ) | Investment expenses | | 9 | | | 6 | | | 6 | | Other expenses | | (3 | ) | | (2 | ) | | — | | | | | | | | | | | | Operating expenses | | (546 | ) | | (585 | ) | | (544 | ) | | | | | | | | | | | Loan loss provisions | | (29 | ) | | (5 | ) | | 3 | | | | | | | | | | | | Operating profit (loss) | | (31 | ) | | 32 | | | 63 | | | | | | | | | | | | Realized gains/losses (net) | | (6 | ) | | 18 | | | 15 | | Impairments of investments (net) | | (120 | ) | | (3 | ) | | — | | Amortization of intangible assets | | (2 | ) | | — | | | — | | Restructuring charges | | (2 | ) | | (2 | ) | | (2 | ) | | | | | | | | | | | Non-operating items | | (130 | ) | | 13 | | | 13 | | | | | | | | | | | | Income (loss) from continuing operations before income taxes and minority interests in earnings | | (161 | ) | | 45 | | | 76 | | Income taxes | | 54 | | | 10 | | | (1 | ) | Minority interests in earnings | | (7 | ) | | — | | | (6 | ) | | | | | | | | | | | Net income (loss) from continuing operations | | (114 | ) | | 55 | | | 69 | | | | | | | | | | | | Net income (loss) from discontinued operations, net of income taxes and minority interests in earnings | | (6,304 | ) | | 322 | | | 849 | | | | | | | | | | | | Net income (loss) | | (6,418 | ) | | 377 | | | 918 | | | | | | | | | | | | Cost-income ratio5)in % | | 100.4 | | | 94.1 | | | 90.1 | | | | | | | | | | | |
(1)
| Consists of Dresdner Bank and non-Dresdner Bank banking operations within our Banking segment, as well as the elimination of trading income (net) of €6 mn at Dresdner Bank resulting from Dresdner Bank’s trading activities in Allianz SE shares during the year ended December 31, 2006.
|
(2)1)
| Represents interest and similar income less interest expense. expenses. |
(3)
| Represents fee and commission income less fee and commission expense.
|
(4)
| The total of these items equals income from financial assets and liabilities carried at fair value through income (net) in the segment income statement.
|
(5)
| For the Banking segment, total revenues are measured based upon operating revenues.
|
(6)
| Represents operating expenses divided by operating revenues.
|
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Asset Management Segment
| | | | | | | | | | | | | | | | | | | | | | 2006
| | | 2005
| | | 2004
| | | | | Asset
Management
Segment
| | | Allianz Global Investors
| | | Asset
Management
Segment
| | | Allianz Global Investors
| | | Asset
Management
Segment
| | | Allianz Global Investors
| | | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | Net fee and commission income(1) | | 2,924 | | | 2,874 | | | 2,636 | | | 2,597 | | | 2,178 | | | 2,176 | | Net interest income(2) | | 71 | | | 66 | | | 56 | | | 51 | | | 42 | | | 41 | | Income from financial assets and liabilities carried at fair value through income (net) | | 38 | | | 37 | | | 19 | | | 18 | | | 11 | | | 10 | | Other income | | 11 | | | 12 | | | 11 | | | 11 | | | 14 | | | 14 | | Operating revenues(3) | | 3,044 | | | 2,989 | | | 2,722 | | | 2,677 | | | 2,245 | | | 2,241 | | Administrative expenses, excluding acquisition-related expenses(4) | | (1,754 | ) | | (1,713 | ) | | (1,590 | ) | | (1,560 | ) | | (1,405 | ) | | (1,406 | ) | Other expenses | | — | | | — | | | — | | | — | | | (1 | ) | | (1 | ) | Operating expenses | | (1,754 | ) | | (1,713 | ) | | (1,590 | ) | | (1,560 | ) | | (1,406 | ) | | (1,407 | ) | Operating profit | | 1,290 | | | 1,276 | | | 1,132 | | | 1,117 | | | 839 | | | 834 | | Realized gains/losses (net) | | 7 | | | 5 | | | 6 | | | 5 | | | 17 | | | 17 | | Impairments of investments (net) | | (2 | ) | | (2 | ) | | — | | | — | | | — | | | — | | Acquisition-related expenses, thereof:(4) | | | | | | | | | | | | | | | | | | | Deferred purchases of interests in PIMCO | | (523 | ) | | (523 | ) | | (677 | ) | | (677 | ) | | (501 | ) | | (501 | ) | Other acquisition-related
expenses(5) | | (9 | ) | | (9 | ) | | (10 | ) | | (10 | ) | | (120 | ) | | (120 | ) | Subtotal | | (532 | ) | | (532 | ) | | (687 | ) | | (687 | ) | | (621 | ) | | (621 | ) | Amortization of intangible assets(6) | | (24 | ) | | (23 | ) | | (25 | ) | | (25 | ) | | (510 | ) | | (510 | ) | Restructuring charges | | (4 | ) | | (4 | ) | | (1 | ) | | (1 | ) | | — | | | — | | Non-operating items | | (555 | ) | | (556 | ) | | (707 | ) | | (708 | ) | | (1,114 | ) | | (1,114 | ) | Income (loss) before income taxes and minority interests in earnings | | 735 | | | 720 | | | 425 | | | 409 | | | (275 | ) | | (280 | ) | Income taxes | | (278 | ) | | (276 | ) | | (129 | ) | | (127 | ) | | 52 | | | 53 | | Minority interests in earnings | | (53 | ) | | (49 | ) | | (52 | ) | | (48 | ) | | (52 | ) | | (52 | ) | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Net income (loss) | | 404 | | | 395 | | | 244 | | | 234 | | | (275 | ) | | (279 | ) | | | |
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|
| Cost-income ratio(7) in % | | 57.6 | | | 57.3 | | | 58.4 | | | 58.3 | | | 62.6 | | | 62.8 | | | | |
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| |
|
| |
|
|
(1)2)
| Represents fee and commission income less fee and commission expense. |
(2)
| Represents interest and similar income less interest expense and investment expenses.
|
(3)
| For the Asset Management segment, total revenues are measured based upon operating revenues.
|
(4)
| The total of these items equals acquisition and administration expenses (net) in the segment income statement.
|
(5)
| Consists of retention payments for the management and employees of PIMCO and Nicholas Applegate. These retention payments largely expired in 2005.
|
(6)
| Includes primarily the impairment of the dit brand name and amortization charges relating to capitalized bonuses for PIMCO management. These amortization charges expired in 2005. Until December 31, 2005, these amortization charges were classified as acquisition-related expenses. Prior year balances have been reclassified to allow for comparability across periods.
|
(7)
| Represents operating expenses divided by operating revenues.
|
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Corporate Segment
| | | | | | | | | | | | | 2006
| | | 2005
| | | 2004
| | | | | € mn | | | € mn | | | € mn | | Interest and similar income | | 509 | | | 416 | | | 395 | | Income from financial assets and liabilities designated at fair value through income (net)(1) | | (60 | ) | | — | | | — | | Fee and commission income | | 190 | | | 164 | | | 137 | | Other income | | 28 | | | — | | | — | | Income from fully consolidated private equity investments | | 1,392 | | | 598 | | | 175 | | Operating revenues | | 2,059 | | | 1,178 | | | 707 | | Change in reserves for insurance and investment contracts | | — | | | — | | | (204 | ) | Interest expense, excluding interest expense from external debt(2) | | (507 | ) | | (534 | ) | | (530 | ) | Loan loss provisions | | (5 | ) | | — | | | — | | Investment expenses | | (215 | ) | | (345 | ) | | (44 | ) | Acquisition and administrative expenses (net) | | (655 | ) | | (516 | ) | | (540 | ) | Fee and commission expenses | | (127 | ) | | (92 | ) | | (84 | ) | Expenses from fully consolidated private equity investments | | (1,381 | ) | | (572 | ) | | (175 | ) | Operating expenses | | (2,890 | ) | | (2,059 | ) | | (1,577 | ) | Operating profit (loss) | | (831 | ) | | (881 | ) | | (870 | ) | Income from financial assets and liabilities held for trading (net)(1) | | (274 | ) | | (441 | ) | | (61 | ) | Realized gains/losses (net) | | 861 | | | 172 | | | 1,225 | | Impairments of investments (net) | | 32 | | | (62 | ) | | (505 | ) | Interest expense from external debt(2) | | (775 | ) | | (787 | ) | | (831 | ) | Non-operating items | | (156 | ) | | (1,118 | ) | | (172 | ) | Loss before income taxes and minority interests in earnings | | (987 | ) | | (1,999 | ) | | (1,042 | ) | Income taxes | | 824 | | | 741 | | | 263 | | Minority interests in earnings | | (16 | ) | | (10 | ) | | (28 | ) | Net income (loss) | | (179 | ) | | (1,268 | ) | | (807 | ) |
(1)3)
| The total of these items equals income from financial assets and liabilities carried at fair value through income (net) in the segment income statement. |
(2)4)
| For the Banking segment, total revenues are measured based upon operating revenues. |
5) | Represents operating expenses divided by operating revenues. |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Asset Management Segment | | | | | | | | | | | | | | | | | | | | | | 2008 | | | 2007 | | | 2006 | | | | | Asset
Management | | | Allianz
Global
Investors | | | Asset
Management | | | Allianz
Global
Investors | | | Asset
Management | | | Allianz
Global
Investors | | | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | Net fee and commission income1) | | 2,874 | | | 2,812 | | | 3,133 | | | 3,060 | | | 2,924 | | | 2,874 | | Net interest income2) | | 62 | | | 54 | | | 81 | | | 75 | | | 71 | | | 66 | | Income from financial assets and liabilities carried at fair value through income (net) | | (77 | ) | | (80 | ) | | 31 | | | 29 | | | 38 | | | 37 | | Other income | | 28 | | | 27 | | | 14 | | | 14 | | | 11 | | | 12 | | | | | | | | | | | | | | | | | | | | | Operating revenues3) | | 2,887 | | | 2,813 | | | 3,259 | | | 3,178 | | | 3,044 | | | 2,989 | | | | | | | | | | | | | | | | | | | | | Administrative expenses, excluding acquisition-related expenses4) | | (1,961 | ) | | (1,909 | ) | | (1,900 | ) | | (1,857 | ) | | (1,754 | ) | | (1,713 | ) | | | | | | | | | | | | | | | | | | | | Operating expenses | | (1,961 | ) | | (1,909 | ) | | (1,900 | ) | | (1,857 | ) | | (1,754 | ) | | (1,713 | ) | | | | | | | | | | | | | | | | | | | | Operating profit | | 926 | | | 904 | | | 1,359 | | | 1,321 | | | 1,290 | | | 1,276 | | | | | | | | | | | | | | | | | | | | | Realized gains/losses (net) | | 5 | | | 5 | | | 2 | | | 4 | | | 7 | | | 5 | | Impairments of investments (net) | | (19 | ) | | (13 | ) | | (1 | ) | | (1 | ) | | (2 | ) | | (2 | ) | Acquisition-related expenses4), thereof: | | | | | | | | | | | | | | | | | | | Deferred purchases of interests in PIMCO | | (278 | ) | | (278 | ) | | (488 | ) | | (488 | ) | | (523 | ) | | (523 | ) | Other acquisition-related expenses | | — | | | — | | | (3 | ) | | (3 | ) | | (9 | ) | | (9 | ) | Subtotal | | (278 | ) | | (278 | ) | | (491 | ) | | (491 | ) | | (532 | ) | | (532 | ) | Amortization of intangible assets | | (1 | ) | | (1 | ) | | — | | | — | | | (24 | ) | | (23 | ) | Restructuring charges | | — | | | — | | | (4 | ) | | (4 | ) | | (4 | ) | | (4 | ) | Non-operating items | | (293 | ) | | (287 | ) | | (494 | ) | | (492 | ) | | (555 | ) | | (556 | ) | | | | | | | | | | | | | | | | | | | | Income before income taxes and minority interests in earnings | | 633 | | | 617 | | | 865 | | | 829 | | | 735 | | | 720 | | Income taxes | | (249 | ) | | (246 | ) | | (342 | ) | | (337 | ) | | (278 | ) | | (276 | ) | Minority interests in earnings | | (5 | ) | | (2 | ) | | (25 | ) | | (22 | ) | | (53 | ) | | (49 | ) | | | | | | | | | | | | | | | | | | | | Net income | | 379 | | | 369 | | | 498 | | | 470 | | | 404 | | | 395 | | | | | | | | | | | | | | | | | | | | | Cost-income ratio5)in % | | 67.9 | | | 67.9 | | | 58.3 | | �� | 58.4 | | | 57.6 | | | 57.3 | | | | | | | | | | | | | | | | | | | | |
1) | Represents fee and commission income less fee and commission expenses. |
2) | Represents interest and similar income less interest expenses and investment expenses. |
3) | For the Asset Management segment, total revenues are measured based upon operating revenues. |
4) | The total of these items equals acquisition and administrative expenses (net) in the segment income statement. |
5) | Represents operating expenses divided by operating revenues |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Corporate Segment | | | | | | | | | | | | | 2008 | | | 2007 | | | 2006 | | | | | € mn | | | € mn | | | € mn | | Interest and similar income | | 883 | | | 855 | | | 509 | | Operating income from financial assets and liabilities carried at fair value through income (net)1) | | (98 | ) | | (26 | ) | | (60 | ) | Fee and commission income | | 221 | | | 198 | | | 190 | | Other income | | 1 | | | 15 | | | 28 | | Income from fully consolidated private equity investments | | 2,528 | | | 2,367 | | | 1,392 | | | | | | | | | | | | Operating revenues | | 3,535 | | | 3,409 | | | 2,059 | | | | | | | | | | | | Interest expenses, excluding interest expenses from external debt2) | | (635 | ) | | (535 | ) | | (507 | ) | Loan loss provision | | — | | | (10 | ) | | (5 | ) | Investment expenses | | 11 | | | (115 | ) | | (215 | ) | Acquisition and administrative expenses (net), excluding acquisition-related expenses3) | | (477 | ) | | (627 | ) | | (655 | ) | Fee and commission expenses | | (170 | ) | | (130 | ) | | (127 | ) | Expenses from fully consolidated private equity investments | | (2,452 | ) | | (2,317 | ) | | (1,381 | ) | Operating expenses | | (3,723 | ) | | (3,734 | ) | | (2,890 | ) | | | | | | | | | | | Operating loss | | (188 | ) | | (325 | ) | | (831 | ) | | | | | | | | | | | Non-operating income from financial assets and liabilities carried at fair value through income (net)1) | | 210 | | | 77 | | | (274 | ) | Realized gains/losses (net) | | 245 | | | 980 | | | 861 | | Interest expenses from external debt2) | | (945 | ) | | (1,051 | ) | | (775 | ) | Impairments of investments (net) | | (697 | ) | | (11 | ) | | 32 | | Acquisition-related expenses3) | | 33 | | | (15 | ) | | — | | Restructuring charges | | (2 | ) | | (9 | ) | | — | | Non-operating items | | (1,156 | ) | | (29 | ) | | (156 | ) | | | | | | | | | | | Loss before income taxes and minority interests in earnings | | (1,344 | ) | | (354 | ) | | (987 | ) | Income taxes | | 631 | | | 217 | | | 824 | | Minority interests in earnings | | (12 | ) | | (21 | ) | | (16 | ) | | | | | | | | | | | Net loss | | (725 | ) | | (158 | ) | | (179 | ) | | | | | | | | | | |
1) | The total of these items equals income from financial assets and liabilities carried at fair value through income (net) in the segment income statement. |
2) | The total of these items equals interest expenseexpenses in the segment income statement. |
3) | The total of these items equals acquisition and administrative expenses (net) in the segment income statement. |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Supplementary Information to the Consolidated Balance Sheets 67 Cash and cash equivalents
| As of December 31,
| | 2006
| | 2005
| | 20081) | | 2007 | | | | € mn | | € mn | | € mn | | € mn | Balances with banks payable on demand | | 26,915 | | 26,640 | | 7,760 | | 23,848 | Balances with central banks | | 4,945 | | 3,807 | | 456 | | 6,301 | Cash on hand | | 919 | | 1,045 | | 169 | | 918 | Treasury bills, discounted treasury notes, similar treasury securities and checks | | 224 | | 23 | | Bills of exchange | | 28 | | 132 | | Treasury bills, discounted treasury notes, similar treasury securities, bills of exchange and checks | | | 573 | | 270 | | | |
| |
| | | | | Total | | 33,031 | | 31,647 | | 8,958 | | 31,337 | | | |
| |
| | | | |
1) | Does not include cash and cash equivalents of Dresdner Bank which were classified as held-for-sale. See Note 4. |
As of December 31, 2006,2008, compulsory deposits on accounts with national central banks under restrictions due to required reserves from the European Central Bank totaled €4,176€363 mn (2005: €3,232 mn)(2007: €5,473mn). 78 Financial assets carried at fair value through income
| As of December 31,
| | 2006
| | 2005
| | 20081) | | 2007 | | | | € mn | | € mn | | € mn | | € mn | Financial assets held for trading | | | | | | Debt securities | | 81,881 | | 109,384 | | 547 | | 59,715 | Equity securities | | 31,266 | | 30,788 | | 99 | | 30,596 | Derivative financial instruments | | 24,835 | | 26,012 | | 1,978 | | 73,230 | | | |
| |
| | | | | Subtotal | | 137,982 | | 166,184 | | 2,624 | | 163,541 | | | |
| |
| | | | | Financial assets designated at fair value through income | | | | | | Debt securities | | 14,414 | | 10,686 | | Debt securities2) | | | 8,589 | | 15,924 | Equity securities | | 3,834 | | 3,476 | | 3,027 | | 4,232 | Loans to banks and customers | | 639 | | — | | — | | 1,764 | | | |
| |
| | | | | Subtotal | | 18,887 | | 14,162 | | 11,616 | | 21,920 | | | |
| |
| | | | | Total | | 156,869 | | 180,346 | | 14,240 | | 185,461 | | | |
| |
| | | | |
1) | Does not include financial assets carried at fair value through income of Dresdner Bank which were classified as held-for-sale. See Note 4. |
2) | Debt securities designated at fair value through income include €0.2 bn of asset-backed securities of the Life/Health segment as of December 31, 2008. |
Debt and equity securities included in financial assets held for trading Equity and debt securities heldincluded in financial assets held for trading are primarily marketable and listed securities. As of December 31, 2006,2008, the debt securities include €21,924€55 mn (2005: €38,375(2007: €17,281 mn) from public-sectorpublic sector issuers and €59,957€492 mn (2005: €71,009(2007: €42,434 mn) from other issuers. Credit risk exposure of loans to banks and customers designated at fair value through income As of December 31, 2008 all of the loans to banks and customers designated at fair value through income related to the discontinued operations of Dresdner Bank and thus have been reclassified and presented as “Non-current assets and assets from disposal groups held-for-sale” in accordance with IFRS 5. 89 Investments
| As of December 31,
| | 2006
| | 2005
| | 20081) | | 2007 | | | | € mn | | € mn | | € mn | | € mn | Available-for-sale investments | | 277,898 | | 266,953 | | 242,099 | | 268,001 | Held-to-maturity investments | | 4,748 | | 4,826 | | 4,934 | | 4,659 | Funds held by others under reinsurance contracts assumed | | 1,033 | | 1,572 | | 1,039 | | 1,063 | Investments in associates and joint ventures | | 4,900 | | 2,095 | | 4,524 | | 5,471 | Real estate held for investment | | 9,555 | | 9,569 | | 7,551 | | 7,758 | | | |
| |
| | | | | Total | | 298,134 | | 285,015 | | 260,147 | | 286,952 | | | |
| |
| | | | |
1) | Does not include investments of Dresdner Bank which were classified as held-for-sale. See Note 4. |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Available-for-sale investments | As of December 31,
| | 2006
| | 2005
| | 2008 | | 2007 | | | | Amortized
Cost
| | Unrealized
Gains
| | Unrealized
Losses
| | Fair
Value
| | Amortized
Cost
| | Unrealized
Gains
| | Unrealized
Losses
| | Fair
Value
| | Amortized
Cost | | Unrealized
Gains | | Unrealized
Losses | | Fair
Value | | Amortized
Cost | | Unrealized
Gains | | Unrealized
Losses | | Fair
Value | | | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | Debt securities | | | | | | | | | | | | | | | | | | Government and agency mortgage-backed securities (residential and commercial) | | 8,757 | | 16 | | (218 | ) | | 8,555 | | 9,894 | | 10 | | (253 | ) | | 9,651 | | Corporate mortgage-backed securities (residential and commercial) | | 4,768 | | 38 | | (53 | ) | | 4,753 | | 3,265 | | 37 | | (31 | ) | | 3,271 | | Other asset-backed securities | | 3,911 | | 25 | | (40 | ) | | 3,896 | | 3,381 | | 56 | | (22 | ) | | 3,415 | | Government and agency mortgage-backed securities (residential and commercial)1) | | | 7,814 | | 177 | | (2 | ) | | 7,989 | | 7,628 | | 30 | | (112 | ) | | 7,546 | Corporate mortgage-backed securities (residential and commercial)1) | | | 8,714 | | 14 | | (1,417 | ) | | 7,311 | | 6,663 | | 39 | | (101 | ) | | 6,601 | Other asset-backed securities1) | | | 4,858 | | 16 | | (385 | ) | | 4,489 | | 5,384 | | 34 | | (92 | ) | | 5,326 | Government and government agency bonds | | | | | | | | | | | | | | | | | | Germany | | 14,523 | | 335 | | (139 | ) | | 14,719 | | 15,801 | | 825 | | (32 | ) | | 16,594 | | 10,786 | | 748 | | (11 | ) | | 11,523 | | 12,987 | | 127 | | (187 | ) | | 12,927 | Italy | | 23,722 | | 560 | | (127 | ) | | 24,155 | | 23,479 | | 1,339 | | (39 | ) | | 24,779 | | 22,101 | | 428 | | (353 | ) | | 22,176 | | 23,090 | | 232 | | (259 | ) | | 23,063 | France | | 15,353 | | 798 | | (133 | ) | | 16,018 | | 16,250 | | 1,656 | | (13 | ) | | 17,893 | | 13,628 | | 1,240 | | (42 | ) | | 14,826 | | 13,452 | | 596 | | (255 | ) | | 13,793 | United States | | 5,219 | | 28 | | (135 | ) | | 5,112 | | 9,527 | | 202 | | (85 | ) | | 9,644 | | 3,996 | | 343 | | (22 | ) | | 4,317 | | 4,544 | | 114 | | (20 | ) | | 4,638 | Spain | | 8,322 | | 337 | | (42 | ) | | 8,617 | | 8,484 | | 823 | | (3 | ) | | 9,304 | | 5,414 | | 299 | | (16 | ) | | 5,697 | | 6,717 | | 150 | | (79 | ) | | 6,788 | Belgium | | | 4,571 | | 217 | | (2 | ) | | 4,786 | | 5,050 | | 38 | | (114 | ) | | 4,974 | All other countries | | 36,865 | | 736 | | (281 | ) | | 37,320 | | 35,824 | | 1,604 | | (117 | ) | | 37,311 | | 34,246 | | 1,298 | | (574 | ) | | 34,970 | | 32,445 | | 77 | | (565 | ) | | 31,957 | | | |
| |
| |
|
| |
| |
| |
| |
|
| |
| | | | | | | | | | | | | | | | | | | Subtotal | | 104,004 | | 2,794 | | (857 | ) | | 105,941 | | 109,365 | | 6,449 | | (289 | ) | | 115,525 | | 94,742 | | 4,573 | | (1,020 | ) | | 98,295 | | 98,285 | | 1,334 | | (1,479 | ) | | 98,140 | | | |
| |
| |
|
| |
| |
| |
| |
|
| |
| | | | | | | | | | | | | | | | | | | Corporate bonds | | 81,946 | | 1,482 | | (769 | ) | | 82,659 | | 73,136 | | 3,331 | | (214 | ) | | 76,253 | | 98,864 | | 1,367 | | (7,028 | ) | | 93,203 | | 86,095 | | 660 | | (2,356 | ) | | 84,399 | Other | | 2,122 | | 215 | | (18 | ) | | 2,319 | | 1,556 | | 154 | | (2 | ) | | 1,708 | | 1,283 | | 58 | | (18 | ) | | 1,323 | | 2,933 | | 99 | | (104 | ) | | 2,928 | Subtotal | | 205,508 | | 4,570 | | (1,955 | ) | | 208,123 | | 200,597 | | 10,037 | | (811 | ) | | 209,823 | | 216,275 | | 6,205 | | (9,870 | ) | | 212,610 | | 206,988 | | 2,196 | | (4,244 | ) | | 204,940 | | | |
| |
| |
|
| |
| |
| |
| |
|
| |
| | | | | | | | | | | | | | | | | | | Equity securities | | 43,139 | | 26,795 | | (159 | ) | | 69,775 | | 38,157 | | 19,161 | | (188 | ) | | 57,130 | | 23,802 | | 6,538 | | (851 | ) | | 29,489 | | 40,794 | | 22,734 | | (467 | ) | | 63,061 | | | |
| |
| |
|
| |
| |
| |
| |
|
| |
| | | | | | | | | | | | | | | | | | | Total | | 248,647 | | 31,365 | | (2,114 | ) | | 277,898 | | 238,754 | | 29,198 | | (999 | ) | | 266,953 | | 240,077 | | 12,743 | | (10,721 | ) | | 242,099 | | 247,782 | | 24,930 | | (4,711 | ) | | 268,001 | | | |
| |
| |
|
| |
| |
| |
| |
|
| |
| | | | | | | | | | | | | | | | | | |
1) | Includes asset-backed-securities of the Property-Casualty segment of €4.4 bn and of the Life/Health segment of €14.5 bn as of December 31, 2008. |
Held-to-maturity investments | As of December 31,
| | 2006
| | 2005
| | 2008 | | 2007 | | | | Amortized Cost
| | Unrealized Gains
| | Unrealized
Losses
| | Fair
Value
| | Amortized Cost
| | Unrealized Gains
| | Unrealized
Losses
| | Fair
Value
| | Amortized
Cost | | Unrealized
Gains | | Unrealized
Losses | | Fair
Value | | Amortized
Cost | | Unrealized
Gains | | Unrealized
Losses | | Fair
Value | | | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | Government and government agency bonds | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Germany | | 104 | | 2 | | — | | | 106 | | 140 | | 8 | | — | | 148 | | 15 | | 3 | | — | | | 18 | | 130 | | — | | — | | | 130 | Italy | | 437 | | 18 | | — | | | 455 | | 427 | | 42 | | — | | 469 | | 374 | | 9 | | (1 | ) | | 382 | | 447 | | 9 | | — | | | 456 | All other countries | | 1,561 | | 56 | | (1 | ) | | 1,616 | | 1,604 | | 72 | | — | | 1,676 | | 1,575 | | 64 | | (6 | ) | | 1,633 | | 1,555 | | 26 | | (17 | ) | | 1,564 | | | |
| |
| |
|
| |
| |
| |
| |
| |
| | | | | | | | | | | | | | | | | | | Subtotal | | 2,102 | | 76 | | (1 | ) | | 2,177 | | 2,171 | | 122 | | — | | 2,293 | | 1,964 | | 76 | | (7 | ) | | 2,033 | | 2,132 | | 35 | | (17 | ) | | 2,150 | | | |
| |
| |
|
| |
| |
| |
| |
| |
| | | | | | | | | | | | | | | | | | | Corporate bonds | | 2,620 | | 92 | | (3 | ) | | 2,709 | | 2,619 | | 154 | | — | | 2,773 | | Corporate bonds1) | | | 2,957 | | 84 | | (21 | ) | | 3,020 | | 2,500 | | 31 | | (3 | ) | | 2,528 | Other | | 26 | | — | | — | | | 26 | | 36 | | — | | — | | 36 | | 13 | | — | | — | | | 13 | | 27 | | — | | — | | | 27 | | | |
| |
| |
|
| |
| |
| |
| |
| |
| | Total | | 4,748 | | 168 | | (4 | ) | | 4,912 | | 4,826 | | 276 | | — | | 5,102 | | 4,934 | | 160 | | (28 | ) | | 5,066 | | 4,659 | | 66 | | (20 | ) | | 4,705 | | | |
| |
| |
|
| |
| |
| |
| |
| |
| | | | | | | | | | | | | | | | | | |
1) | Includes also corporate mortgage-backed securities. |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Unrealized losses on available-for-sale investments and held-to-maturity investments The following table sets forth gross unrealized losses on available-for-sale investments and held-to-maturity investments and the related fair value, segregated by investment category and length of time such investments have been in a continuous unrealized loss position as of December 31, 20062008 and 2005.2007. | | | | Less than 12 months
| | Greater than 12
months
| | Total
| | | Less than 12 months | | Greater than
12 months | | Total | | As of December 31,
| | Fair Value
| | Unrealized
Losses
| | Fair Value
| | Unrealized
Losses
| | Fair Value
| | Unrealized
Losses
| | | Fair
Value | | Unrealized
Losses | | Fair
Value | | Unrealized
Losses | | Fair
Value | | Unrealized
Losses | | | | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | 2006 | | | | | | | | | | 2008 | | | | | | | | | | | | | | Debt securities | | | | | | | | | | | | | | | | | | | | | Government and agency mortgage-backed securities (residential and commercial) | | 2,706 | | (66 | ) | | 4,815 | | (152 | ) | | 7,521 | | (218 | ) | | 29 | | (1 | ) | | 133 | | (1 | ) | | 162 | | (2 | ) | Corporate mortgage-backed securities (residential and commercial) | | 1,738 | | (13 | ) | | 1,078 | | (40 | ) | | 2,816 | | (53 | ) | | 3,749 | | (763 | ) | | 3,196 | | (655 | ) | | 6,945 | | (1,418 | ) | Other asset-backed securities | | 1,447 | | (19 | ) | | 728 | | (21 | ) | | 2,175 | | (40 | ) | | 2,014 | | (193 | ) | | 1,673 | | (192 | ) | | 3,687 | | (385 | ) | Government and government agency bonds | | 37,923 | | (554 | ) | | 9,833 | | (304 | ) | | 47,756 | | (858 | ) | | 7,964 | | (416 | ) | | 8,300 | | (611 | ) | | 16,264 | | (1,027 | ) | Corporate bonds | | 31,888 | | (516 | ) | | 6,397 | | (256 | ) | | 38,285 | | (772 | ) | | 24,370 | | (2,509 | ) | | 25,911 | | (4,539 | ) | | 50,281 | | (7,048 | ) | Other | | 481 | | (7 | ) | | 100 | | (11 | ) | | 581 | | (18 | ) | | 406 | | (18 | ) | | — | | — | | | 406 | | (18 | ) | | | |
| |
|
| |
| |
|
| |
| |
|
| | | | | | | | | | | | | | | | Subtotal | | 76,183 | | (1,175 | ) | | 22,951 | | (784 | ) | | 99,134 | | (1,959 | ) | | 38,532 | | (3,900 | ) | | 39,213 | | (5,998 | ) | | 77,745 | | (9,898 | ) | Equity securities | | 3,607 | | (159 | ) | | — | | — | | | 3,607 | | (159 | ) | | 8,184 | | (838 | ) | | 96 | | (13 | ) | | 8,280 | | (851 | ) | | | |
| |
|
| |
| |
|
| |
| |
|
| | | | | | | | | | | | | | | | Total | | 79,790 | | (1,334 | ) | | 22,951 | | (784 | ) | | 102,741 | | (2,118 | ) | | 46,716 | | (4,738 | ) | | 39,309 | | (6,011 | ) | | 86,025 | | (10,749 | ) | | | |
| |
|
| |
| |
|
| |
| |
|
| | | | | | | | | | | | | | | | 2005 | | | | | | | | | | 2007 | | | | | | | | | | | | | | Debt securities | | | | | | | | | | | | | | | | | | | | | Government and agency mortgage-backed securities (residential and commercial) | | 6,465 | | (185 | ) | | 2,443 | | (68 | ) | | 8,908 | | (253 | ) | | 1,371 | | (22 | ) | | 4,115 | | (90 | ) | | 5,486 | | (112 | ) | Corporate mortgage-backed securities (residential and commercial) | | 1,474 | | (31 | ) | | — | | — | | | 1,474 | | (31 | ) | | 2,720 | | (50 | ) | | 1,902 | | (51 | ) | | 4,622 | | (101 | ) | Other asset-backed securities | | 1,190 | | (19 | ) | | 113 | | (3 | ) | | 1,303 | | (22 | ) | | 1,527 | | (50 | ) | | 979 | | (42 | ) | | 2,506 | | (92 | ) | Government and government agency bonds | | 23,006 | | (260 | ) | | 1,154 | | (29 | ) | | 24,160 | | (289 | ) | | 36,587 | | (699 | ) | | 18,522 | | (797 | ) | | 55,109 | | (1,496 | ) | Corporate bonds | | 13,073 | | (187 | ) | | 695 | | (27 | ) | | 13,768 | | (214 | ) | | 33,724 | | (1,075 | ) | | 20,183 | | (1,284 | ) | | 53,907 | | (2,359 | ) | Other | | 210 | | (2 | ) | | — | | — | | | 210 | | (2 | ) | | 1,062 | | (50 | ) | | 487 | | (54 | ) | | 1,549 | | (104 | ) | | | |
| |
|
| |
| |
|
| |
| |
|
| | | | | | | | | | | | | | | | Subtotal | | 45,418 | | (684 | ) | | 4,405 | | (127 | ) | | 49,823 | | (811 | ) | | 76,991 | | (1,946 | ) | | 46,188 | | (2,318 | ) | | 123,179 | | (4,264 | ) | Equity securities | | 3,667 | | (188 | ) | | — | | — | | | 3,667 | | (188 | ) | | 7,480 | | (467 | ) | | — | | — | | | 7,480 | | (467 | ) | | | |
| |
|
| |
| |
|
| |
| |
|
| | | | | | | | | | | | | | | | Total | | 49,085 | | (872 | ) | | 4,405 | | (127 | ) | | 53,490 | | (999 | ) | | 84,471 | | (2,413 | ) | | 46,188 | | (2,318 | ) | | 130,659 | | (4,731 | ) | | | |
| |
|
| |
| |
|
| |
| |
|
| | | | | | | | | | | | | | | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Government and agency mortgage-backed securities (residential and commercial) Total unrealized losses amounted to €218€2 mn atas of December 31, 2006.2008. The unrealized loss positions concern mostly issues of United States government agencies, which are primarily held by Allianz Group’s North American entities. These pay-through/pass-through securities are serviced by cash flows from pools of underlying loans to mostly private debtors. The unrealized losses of these mortgage-backed securities were partly caused by interest rate increases between purchase date of the individual securities and the balance sheet date. Also in various instances, price decreases were caused by increased prepayment risk for individual loan pools that were originated in a significantly higher interest rate environment. Because the decline in fair value is attributable to changes in interest rates and, to a lesser extent, instances of insignificant deterioration of credit quality and without immediate intent to sell the securities, the Allianz Group does not consider these investments to be impaired at December 31, 2006.2008. Corporate mortgage-backed securities (residential and commercial) Total unrealized losses amounted to €1,418 mn as of December 31, 2008. The unrealized loss positions primarily stem from issues in the US-American security market, which are mostly held be Allianz Group’s North American entities. The largest part of these issues is backed by mortgages on commercial rather than residential real estate. The unrealized losses of these mortgage-backed securities were mostly caused by the increased volatility in credit spreads. This effect is characterized by a general market trend and does not allow direct conclusions on the quality of these securities. Based on a detailed analysis of the underlying securities and collaterals the Allianz Group does not consider these investments to be impaired at December 31, 2008. Government and government agency bonds Total unrealized losses amounted to €858€1,027 mn at December 31, 2006.2008. The Allianz Group holds a large variety of government bonds, mostly of OECD countries (Organization of Economic Cooperation and Development). Given the fact that the issuers of these bonds are backed by the fiscal capacity of the issuers and the issuers typically hold an “investment grade” country- and/or issue-rating, credit risk is not a significant factor. Hence, the unrealized losses on Allianz Group’s investment in government bonds were mainly caused by interest rate increases between the purchase date of the individual securities and the balance sheet date. In 2008, interest rates decreased and thereby induced a positive effect on unrealized losses on government and government agency bonds by €469 mn. Because the decline in fair valueafter these positive effects still existing unrealized loss is attributable to changes in interest rates in prior years and, to a lesser extent, to instances of insignificant deterioration of credit quality, the Allianz Group does not consider these investments to be impaired at December 31, 2006.2008. Corporate bonds Total unrealized losses amounted to €772€7,048 mn atas of December 31, 2006.2008. The Allianz Group holds a large variety of bonds issued by corporations mostlydomiciledmostly domiciled in OECD countries. For the vast majority of the Allianz Group’s corporate bonds, issuers and/or issues are of “investment grade”. Therefore, the unrealized losses on Allianz Group’s investment in corporate debt securities were primarily caused by interest rate increases betweeneffects from credit spread widening in 2008. This effect is characterized by a general market trend and does not allow direct conclusions on the purchase datequality of these securities. Based on a detailed analysis of the individualunderlying securities compared to balance sheet date. As the decline in fair value is primarily attributable to changes in interest rates, the Allianz Group does not consider these investments to be impaired at December 31, 2006.2008. Equity securities As of December 31, 2006,2008, unrealized losses from equity securities amounted to €159€851 mn. These unrealized losses concern equity securities that did not meet the criteria of Allianz Group’s impairment policy for equity securities as described in Note 2. Substantially all of the unrealized losses have been in a continuous loss position for less than 6 months. In addition, only 2 securities have an aggregated unrealized loss greater than €10 mn.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Contractual term to maturity The amortized cost and estimated fair value of available-for-sale debt securities and held-to-maturity debt securities as of December 31, 2006,2008, by contractual term to maturity, are as follows: | | | | | As of December 31, 2006
| | Amortized Cost
| | Fair
Value
| | | | € mn | | € mn | Available-for-sale | | | | | Due in 1 year or less | | 12,924 | | 12,925 | Due after 1 year and in less than 5 years | | 66,687 | | 67,182 | Due after 5 years and in less than 10 years | | 61,923 | | 62,476 | Due after 10 years | | 63,974 | | 65,540 | | | |
| |
| Total | | 205,508 | | 208,123 | | | |
| |
| Held-to-maturity | | | | | Due in 1 year or less | | 206 | | 208 | Due after 1 year and in less than 5 years | | 1,476 | | 1,505 | Due after 5 years and in less than 10 years | | 2,191 | | 2,250 | Due after 10 years | | 875 | | 949 | | | |
| |
| Total | | 4,748 | | 4,912 | | | |
| |
|
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
| | | | | As of December 31, 2008 | | Amortized
Cost | | Fair
Value | | | | € mn | | € mn | Available-for-sale investments | | | | | Due in 1 year or less | | 16,400 | | 16,444 | Due after 1 year and in less than 5 years | | 68,640 | | 69,013 | Due after 5 years and in less than 10 years | | 60,462 | | 58,910 | Due after 10 years | | 70,773 | | 68,243 | | | | | | Total | | 216,275 | | 212,610 | | | | | | Held-to-maturity investments | | | | | Due in 1 year or less | | 600 | | 601 | Due after 1 year and in less than 5 years | | 1,343 | | 1,364 | Due after 5 years and in less than 10 years | | 1,560 | | 1,591 | Due after 10 years | | 1,431 | | 1,510 | | | | | | Total | | 4,934 | | 5,066 | | | | | |
Actual maturities may deviate from the contractually defined maturities, because certain security issuers have the right to call or repay certain obligations ahead of schedule, with or without redemption or early repayment penalties. Investments that are not due at a single maturity date are, in general, not allocated over various maturity buckets, but are shown within their final contractual maturity dates. Equity investments carried at cost As of December 31, 2006,2008, fair values could not be reliably measured for equity investments with carrying amounts totaling €1,486€473 mn (2005: €935(2007: €1,742 mn). These investments are primarily investments in privately held corporations and partnerships. During the year ended December 31, 2006,2008, such investments with carrying amounts of €12€18 mn (2005: €10(2007: €27 mn) were sold leading to gains of €32€1 mn (2005: €28(2007: €42 mn) and losses of €1 €—mn (2005: €–(2007: €6 mn). Investments in associates and joint ventures As of December 31, 2006,2008, loans to associated enterprises and joint ventures and debt securities available-for-sale issued by associated enterprises and joint ventures held by the Allianz Group amounted to €2,236€73 mn (2005: €12,618(2007: €1,232 mn). As of December 31, 2008, the fair value of investments in associates and joint ventures was €4,560 mn (2007: €5,654 mn). Real estate held for investment | | | | 2006
| | 2005
| | 2004
| | | 2008 | | 2007 | | 2006 | | | | | € mn | | € mn | | € mn | | | € mn | | € mn | | € mn | | Cost as of January 1, | | 13,090 | | | 13,655 | | | 12,617 | | | 10,114 | | | 13,039 | | | 13,090 | | Accumulated depreciation as of January 1, | | (3,521 | ) | | (3,027 | ) | | (2,116 | ) | | (2,356 | ) | | (3,484 | ) | | (3,521 | ) | | | | | | | | | | | | Carrying amount as of January 1, | | 9,569 | | | 10,628 | | | 10,501 | | | 7,758 | | | 9,555 | | | 9,569 | | | | | | | | | | | | | Additions | | 792 | | | 608 | | | 1,669 | | | 385 | | | 406 | | | 792 | | Changes in the consolidated subsidiaries of the Allianz Group | | 68 | | | 240 | | | 83 | | | 14 | | | 3 | | | 68 | | Disposals | | (746 | ) | | (740 | ) | | (709 | ) | | (296 | ) | | (564 | ) | | (746 | ) | Reclassifications | | 345 | | | (745 | ) | | — | | | (102 | ) | | 69 | | | 345 | | Reclassification into non-current assets and assets of disposal groups classified as held-for-sale | | | (62 | ) | | (1,382 | ) | | — | | Foreign currency translation adjustments | | (71 | ) | | 70 | | | (5 | ) | | 93 | | | (92 | ) | | (71 | ) | Depreciation | | (149 | ) | | (252 | ) | | (172 | ) | | (165 | ) | | (192 | ) | | (230 | ) | Impairments | | (253 | ) | | (240 | ) | | (739 | ) | | (128 | ) | | (51 | ) | | (252 | ) | Reversals of impairments | | | 54 | | | 6 | | | 80 | | | | | | | | | | | | | Carrying amount as of December 31, | | 9,555 | | | 9,569 | | | 10,628 | | | 7,551 | | | 7,758 | | | 9,555 | | | | | | | | | | | | | Accumulated depreciation as of December 31, | | 3,923 | | | 3,521 | | | 3,027 | | | 2,588 | | | 2,356 | | | 3,484 | | Cost as of December 31, | | 13,478 | | | 13,090 | | | 13,655 | | | 10,139 | | | 10,114 | | | 13,039 | |
As of December 31, 2006,2008, the fair value of real estate used by third partiesheld for investment was €13,494€11,995 mn (2005: €12,901(2007: €12,031 mn). As of December 31, 2006,2008, real estate used by third partiesheld for investment pledged as security, and other restrictions on title, were €55€143 mn (2005: €55(2007: €146 mn). 9 Loans and advances to banks and customers
| | | | | | | | | | | | | | | | | | | As of December 31,
| | 2006
| | | 2005
| | | | | Banks
| | | Customers
| | | Total
| | | Banks
| | | Customers
| | | Total
| | | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | Short-term investments and certificates of deposit | | 6,775 | | | — | | | 6,775 | | | 5,292 | | | — | | | 5,292 | | Reverse repurchase agreements | | 86,957 | | | 52,456 | | | 139,413 | | | 63,009 | | | 42,322 | | | 105,331 | | Collateral paid for securities borrowing transactions | | 17,612 | | | 23,419 | | | 41,031 | | | 6,369 | | | 18,659 | | | 25,028 | | Loans | | 69,211 | | | 129,319 | | | 198,530 | | | 65,488 | | | 114,933 | | | 180,421 | | Other | | 15,225 | | | 8,358 | | | 23,583 | | | 11,427 | | | 10,956 | | | 22,383 | | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Subtotal | | 195,780 | | | 213,552 | | | 409,332 | | | 151,585 | | | 186,870 | | | 338,455 | | Loan loss allowance | | (108 | ) | | (946 | ) | | (1,054 | ) | | (201 | ) | | (1,446 | ) | | (1,647 | ) | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Total | | 195,672 | | | 212,606 | | | 408,278 | | | 151,384 | | | 185,424 | | | 336,808 | | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) 10 Loans and advances to banks and customers | | | | | | | | | | | | | | | | | | As of December 31, | | 20081) | | | 2007 | | | | | Banks | | Customers | | | Total | | | Banks | | | Customers | | | Total | | | | | € mn | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | Short-term investments and certificates of deposit | | 9,622 | | — | | | 9,622 | | | 10,316 | | | — | | | 10,316 | | Reverse repurchase agreements | | 1,612 | | 5 | | | 1,617 | | | 68,340 | | | 56,991 | | | 125,331 | | Collateral paid for securities borrowing transactions | | — | | — | | | — | | | 16,664 | | | 23,714 | | | 40,378 | | Loans | | 63,734 | | 37,501 | | | 101,235 | | | 74,944 | | | 125,403 | | | 200,347 | | Other | | 3,223 | | 77 | | | 3,300 | | | 14,012 | | | 7,148 | | | 21,160 | | | | | | | | | | | | | | | | | | | | Subtotal | | 78,191 | | 37,583 | | | 115,774 | | | 184,276 | | | 213,256 | | | 397,532 | | Loan loss allowance | | — | | (119 | ) | | (119 | ) | | (3 | ) | | (827 | ) | | (830 | ) | | | | | | | | | | | | | | | | | | | Total | | 78,191 | | 37,464 | | | 115,655 | | | 184,273 | | | 212,429 | | | 396,702 | | | | | | | | | | | | | | | | | | | |
1) | Does not include loans and advances to banks and customers of Dresdner Bank which were classified as held-for-sale. See Note 4. |
Loans and advances to banks and customers by contractual maturity | As of December 31, 2006
| | Less
than
3 months
| | 3 months
to less
than
1 year
| | 1 year
to less
than
3 years
| | 3 years
to less
than 5 years
| | Greater
than 5 years
| | Total
| | As of December 31, 2008 | | | Up to
3 months | | > 3 months
up to
1 year | | > 1 year
up to
3 years | | > 3 years
up to
5 years | | Greater
than
5 years | | Total | | | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | Loans and advances to banks | | 115,657 | | 16,221 | | 21,979 | | 14,384 | | 27,539 | | 195,780 | | 12,258 | | 7,180 | | 13,907 | | 9,164 | | 35,682 | | 78,191 | Loans and advances to customers | | 103,921 | | 18,974 | | 18,342 | | 20,430 | | 51,885 | | 213,552 | | 2,706 | | 3,598 | | 4,603 | | 4,689 | | 21,987 | | 37,583 | | | |
| |
| |
| |
| |
| |
| | | | | | | | | | | | | Total | | 219,578 | | 35,195 | | 40,321 | | 34,814 | | 79,424 | | 409,332 | | 14,964 | | 10,778 | | 18,510 | | 13,853 | | 57,669 | | 115,774 | | | |
| |
| |
| |
| |
| |
| | | | | | | | | | | | |
Loans and advances to banks and customers by geographic region | As of December 31,
| | 2006
| | 2005
| | | 2008 | | 2007 | | | | | Germany
| | Other countries
| | Total
| | Germany
| | Other countries
| | Total
| | | Germany | | Other
countries | | Total | | Germany | | Other
countries | | Total | | | | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | Short-term investments and certificates of deposit | | 1,124 | | | 5,651 | | | 6,775 | | | 1,590 | | | 3,702 | | | 5,292 | | | 2,957 | | | 6,665 | | | 9,622 | | | 3,188 | | | 7,128 | | | 10,316 | | Reverse repurchase agreements | | 31,884 | | | 107,529 | | | 139,413 | | | 23,474 | | | 81,857 | | | 105,331 | | | — | | | 1,617 | | | 1,617 | | | 23,980 | | | 101,351 | | | 125,331 | | Collateral paid for securities borrowing transactions | | 7,087 | | | 33,944 | | | 41,031 | | | 2,925 | | | 22,103 | | | 25,028 | | | — | | | — | | | — | | | 6,415 | | | 33,963 | | | 40,378 | | Loans | | 146,333 | | | 52,197 | | | 198,530 | | | 148,010 | | | 32,411 | | | 180,421 | | | 86,211 | | | 15,024 | | | 101,235 | | | 148,063 | | | 52,284 | | | 200,347 | | Other | | 2,875 | | | 20,708 | | | 23,583 | | | 3,473 | | | 18,910 | | | 22,383 | | | 287 | | | 3,013 | | | 3,300 | | | 3,409 | | | 17,751 | | | 21,160 | | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | | | | | | | Subtotal | | 189,303 | | | 220,029 | | | 409,332 | | | 179,472 | | | 158,983 | | | 338,455 | | | 89,455 | | | 26,319 | | | 115,774 | | | 185,055 | | | 212,477 | | | 397,532 | | Loan loss allowance | | (834 | ) | | (220 | ) | | (1,054 | ) | | (1,154 | ) | | (493 | ) | | (1,647 | ) | | (62 | ) | | (57 | ) | | (119 | ) | | (534 | ) | | (296 | ) | | (830 | ) | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | | | | | | | Total | | 188,469 | | | 219,809 | | | 408,278 | | | 178,318 | | | 158,490 | | | 336,808 | | | 89,393 | | | 26,262 | | | 115,655 | | | 184,521 | | | 212,181 | | | 396,702 | | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | | | | | | |
Loans and advances to customers by type of customer | As of December 31,
| | 2006
| | 2005
| | 2008 | | 2007 | | | | € mn | | € mn | | € mn | | € mn | Corporate customers | | 146,750 | | 123,015 | | 10,448 | | 148,848 | Private customers | | 59,505 | | 59,316 | | 23,309 | | 55,761 | Public authorities | | 7,297 | | 4,539 | | 3,826 | | 8,647 | | | |
| |
| | | | | Total | | 213,552 | | 186,870 | | 37,583 | | 213,256 | | | |
| |
| | | | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Loans and advances to customers (prior to loan loss allowances) by economic sector | | | | | As of December 31, | | 2008 | | 2007 | | | | € mn | | € mn | Germany | | | | | Corporate Customers | | | | | Manufacturing industry | | 792 | | 7,023 | Construction | | 271 | | 1,128 | Wholesale and retail trade | | 425 | | 4,999 | Financial institutions (excluding banks) and insurance companies | | 148 | | 9,626 | Service providers | | 1,126 | | 7,701 | Other | | 1,169 | | 4,469 | | | | | | Subtotal | | 3,931 | | 34,946 | | | | | | Public authorities | | 3,665 | | 3,766 | Private customers | | 18,387 | | 49,580 | | | | | | Subtotal | | 25,983 | | 88,292 | | | | | | Other countries | | | | | Corporate Customers | | | | | Industry, wholesale and retail trade and service providers | | 4,129 | | 11,748 | Financial institutions (excluding banks) and insurance companies | | 614 | | 91,369 | Other | | 1,774 | | 10,785 | | | | | | Subtotal | | 6,517 | | 113,902 | | | | | | Public authorities | | 161 | | 4,881 | Private customers | | 4,922 | | 6,181 | | | | | | Subtotal | | 11,600 | | 124,964 | | | | | | Total | | 37,583 | | 213,256 | | | | | |
Finance lease receivables As of December 31, 2008 all finance lease receivables included in loans to banks and customers related to the discontinued operations of Dresdner Bank and thus have been reclassified and presented as “Non-current assets and assets from disposal groups held-for-sale” in accordance with IFRS 5.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Loans and advances to customers,Reconciliation of allowances for credit losses by economic sector
| | | | | As of December 31,
| | 2006
| | 2005
| | | | € mn | | € mn | Germany | | | | | Corporate Customers | | | | | Manufacturing industry | | 6,383 | | 5,425 | Construction | | 916 | | 721 | Wholesale and retail trade | | 4,306 | | 5,023 | Financial institutions (excluding banks) and insurance companies | | 7,740 | | 5,988 | Service providers | | 10,091 | | 10,425 | Other | | 3,615 | | 3,351 | | | |
| |
| Subtotal | | 33,051 | | 30,933 | | | |
| |
| Public authorities | | 3,578 | | 2,739 | Private customers | | 51,084 | | 57,218 | Subtotal | | 87,713 | | 90,890 | Other countries | | | | | Corporate Customers | | | | | Industry, wholesale and retail trade and service providers | | 13,474 | | 10,732 | Financial institutions (excluding banks) and insurance companies | | 93,155 | | 75,957 | Other | | 7,070 | | 5,393 | | | |
| |
| Subtotal | | 113,699 | | 92,082 | | | |
| |
| Public authorities | | 3,719 | | 1,800 | Private customers | | 8,421 | | 2,098 | | | |
| |
| Subtotal | | 125,839 | | 95,980 | | | |
| |
| Total | | 213,552 | | 186,870 | | | |
| |
|
Asclass of December 31, 2006, unearned income related to discounts deducted from loan balances was €69 mn (2005: €85 mn).
Finance lease receivables
Loans and advances to customers include amounts receivable under finance leases at their net investment value of €2,081 mn (2005: €1,500 mn).
| | | | | | | | | | 2006
| | | 2005
| | | | | € mn | | | € mn | | Gross investment in the lease | | | | | | | 2007 | | 372 | | | 158 | | 2008 | | 176 | | | — | | 2009 | | 261 | | | 878 | | 2010 | | 222 | | | — | | 2011 | | 677 | | | — | | Thereafter | | 1,036 | | | 1,141 | | | | |
|
| |
|
| Subtotal(1) | | 2,744 | | | 2,177 | | | | |
|
| |
|
| Unrealized finance income | | | | | | | 2007 | | (98 | ) | | (3 | ) | 2008 | | (103 | ) | | — | | 2009 | | (70 | ) | | (285 | ) | 2010 | | (58 | ) | | — | | 2011 | | (83 | ) | | — | | Thereafter | | (251 | ) | | (389 | ) | | | |
|
| |
|
| Subtotal | | (663 | ) | | (677 | ) | | | |
|
| |
|
| Net investment in the lease | | | | | | | 2007 | | 274 | | | 155 | | 2008 | | 73 | | | — | | 2009 | | 191 | | | 593 | | 2010 | | 164 | | | — | | 2011 | | 594 | | | — | | Thereafter | | 785 | | | 752 | | | | |
|
| |
|
| Total | | 2,081 | | | 1,500 | | | | |
|
| |
|
|
(1)
| As of December 31, 2006 and 2005, the residual values of the entire leasing portfolio were fully guaranteed.
|
During the year ended December 31, 2006, lease payments received were recognized as income in the amount of €154 mn (2005: €122 mn; 2004: €42 mn). As of December 31, 2006 and 2005, an allowance for uncollectible lease payments was not recorded.
Loan loss allowancefinancial assets
As of December 31, 2006,2008, the overall volume of risk provisionsallowance for credit losses includes loan loss allowances deducted from loans and advances to banks and customers in the amount of €1,054€119 mn (2005: €1,647(2007: €830 mn; 2004: €4,1352006: €1,054 mn) and provisions for contingent liabilities, such as guarantees, loan commitments and other obligationscredit losses included in other liabilities in the amount of €261€8 mn (2005: €117(2007: €201 mn; 2004: €3712006: €261 mn). | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Loan loss allowance | | | Provision for credit
losses | | | Total | | | | | 2008 | | | 2007 | | | 2006 | | | 2008 | | | 2007 | | | 2006 | | | 2008 | | | 2007 | | | 2006 | | | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | As of January 1, | | 830 | | | 1,054 | | | 1,647 | | | 201 | | | 261 | | | 117 | | | 1,031 | | | 1,315 | | | 1,764 | | Changes in the consolidated subsidiaries of the Allianz Group | | — | | | — | | | (1 | ) | | — | | | — | | | — | | | — | | | — | | | (1 | ) | Additions charged to the income statement | | 76 | | | 537 | | | 456 | | | 3 | | | 35 | | | 77 | | | 79 | | | 572 | | | 533 | | Unwinding-interest income1) | | — | | | (8 | ) | | (6 | ) | | — | | | — | | | — | | | — | | | (8 | ) | | (6 | ) | Charge-offs | | (23 | ) | | (376 | ) | | (605 | ) | | — | | | — | | | (10 | ) | | (23 | ) | | (376 | ) | | (615 | ) | Releases | | (39 | ) | | (397 | ) | | (272 | ) | | (4 | ) | | (88 | ) | | (45 | ) | | (43 | ) | | (485 | ) | | (317 | ) | Other additions (reductions) | | (1 | ) | | 35 | | | (152 | ) | | — | | | (6 | ) | | 126 | | | (1 | ) | | 29 | | | (26 | ) | Foreign currency translation adjustments | | (3 | ) | | (15 | ) | | (13 | ) | | — | | | (1 | ) | | (4 | ) | | (3 | ) | | (16 | ) | | (17 | ) | Reclassifications to non-current assets and assets of disposal groups classified as held-for-sale | | (721 | ) | | — | | | — | | | (192 | ) | | — | | | — | | | (913 | ) | | — | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, | | 119 | | | 830 | | | 1,054 | | | 8 | | | 201 | | | 261 | | | 127 | | | 1,031 | | | 1,315 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
1) | The unwinding-interest income for the year ended December 31, 2006 relates to loans in the non-homogeneous portfolio belonging to the Allianz Group in Germany that have been called in and for which the process of realising the collateral has started. For the year ended December 31, 2007 the unwinding interest income additionally includes loans in the homogeneous portfolio belonging to the Allianz Group in Germany. |
Reconciliation of allowances for credit losses by specific and general allowance | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Specific allowance1) | | | General allowance1),2) | | | Total | | | | | 2008 | | | 2007 | | | 2006 | | | 2008 | | | 2007 | | | 2006 | | | 2008 | | | 2007 | | | 2006 | | | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | As of January 1, | | 573 | | | 593 | | | 880 | | | 458 | | | 722 | | | 884 | | | 1,031 | | | 1,315 | | | 1,764 | | Changes in the consolidated subsidiaries of the Allianz Group | | — | | | — | | | (1 | ) | | — | | | — | | | — | | | — | | | — | | | (1 | ) | Additions charged to the income statement | | 47 | | | 559 | | | 511 | | | 32 | | | 13 | | | 22 | | | 79 | | | 572 | | | 533 | | Unwinding-interest income3) | | — | | | (8 | ) | | (6 | ) | | — | | | — | | | — | | | — | | | (8 | ) | | (6 | ) | Charge-offs | | (23 | ) | | (376 | ) | | (615 | ) | | — | | | — | | | — | | | (23 | ) | | (376 | ) | | (615 | ) | Releases | | (16 | ) | | (215 | ) | | (191 | ) | | (27 | ) | | (270 | ) | | (126 | ) | | (43 | ) | | (485 | ) | | (317 | ) | Other additions (reductions) | | 1 | | | 29 | | | 19 | | | (2 | ) | | — | | | (45 | ) | | (1 | ) | | 29 | | | (26 | ) | Foreign currency translation adjustments | | — | | | (9 | ) | | (4 | ) | | (3 | ) | | (7 | ) | | (13 | ) | | (3 | ) | | (16 | ) | | (17 | ) | Reclassifications to non-current assets and assets of disposal groups classified as held-for-sale | | (517 | ) | | — | | | — | | | (396 | ) | | — | | | — | | | (913 | ) | | — | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, | | 65 | | | 573 | | | 593 | | | 62 | | | 458 | | | 722 | | | 127 | | | 1,031 | | | 1,315 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
1) | The category country risk allowance, disclosed separately in previous years financial statements, has been, due to simplicity and materiality reasons, allocated to the categories of specific and general allowances going forward, using objective criteria. The amount of €95 mn as of December 31, 2006 has been allocated completely to general allowance. |
2) | Includes portfolio allowances. |
3) | The unwinding-interest income for the year ended December 31, 2006 relates to loans in the non-homogeneous portfolio belonging to the Allianz Group in Germany that have been called in and for which the process of realising the collateral has started. For the year ended December 31, 2007 the unwinding interest income additionally includes loans in the homogeneous portfolio belonging to the Allianz Group in Germany. |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Specific allowances
| | | Country risk
allowances
| | | General
allowances(1)
| | | Total
| | | | | 2006
| | | 2005
| | | 2004
| | | 2006
| | | 2005
| | | 2004
| | | 2006
| | | 2005
| | | 2004
| | | 2006
| | | 2005
| | | 2004
| | | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | As of January 1, | | 880 | | | 3,685 | | | 5,304 | | | 225 | | | 261 | | | 270 | | | 659 | | | 560 | | | 700 | | | 1,764 | | | 4,506 | | | 6,274 | | Changes in the consolidated subsidiaries of the Allianz Group | | (1 | ) | | (3 | ) | | (251 | ) | | — | | | — | | | — | | | — | | | — | | | (62 | ) | | (1 | ) | | (3 | ) | | (313 | ) | Additions charged to the income statement | | 511 | | | 604 | | | 1,313 | | | 11 | | | 83 | | | 117 | | | 11 | | | 87 | | | 9 | | | 533 | | | 774 | | | 1,439 | | Charge-offs | | (615 | ) | | (2,829 | ) | | (1,900 | ) | | — | | | — | | | — | | | (1 | ) | | — | | | — | | | (616 | ) | | (2,829 | ) | | (1,900 | ) | Releases/recoveries | | (192 | ) | | (641 | ) | | (756 | ) | | (86 | ) | | (90 | ) | | (119 | ) | | (39 | ) | | (51 | ) | | (98 | ) | | (317 | ) | | (782 | ) | | (973 | ) | Other additions/reductions | | 13 | | | 40 | | | 6 | | | (43 | ) | | (48 | ) | | 1 | | | (2 | ) | | 63 | | | 13 | | | (32 | ) | | 55 | | | 20 | | Foreign currency translation adjustments | | (3 | ) | | 24 | | | (31 | ) | | (12 | ) | | 19 | | | (8 | ) | | (1 | ) | | — | | | (2 | ) | | (16 | ) | | 43 | | | (41 | ) | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| As of December 31, | | 593 | | | 880 | | | 3,685 | | | 95 | | | 225 | | | 261 | | | 627 | | | 659 | | | 560 | | | 1,315 | | | 1,764 | | | 4,506 | | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(1)
| includes portfolio allowances.
|
The following tables present information relating to the Allianz Group’s impaired and non-accrual loans: | As of December 31,
| | 2006
| | 2005
| | 2008 | | 2007 | | | | € mn | | € mn | | € mn | | € mn | Impaired loans | | 2,072 | | 2,888 | | 654 | | 2,240 | Impaired loans with specific allowances | | 1,428 | | 1,754 | | 645 | | 1,301 | Impaired loans with portfolio allowances | | 532 | | 562 | | — | | 420 | Non-accrual loans | | 1,801 | | 2,102 | | 204 | | 1,555 | | | | | | | | | | | 2006
| | 2005
| | | | | € mn | | € mn | | Average balance of impaired loans | | 2,390 | | 4,581 | | Interest income recognized on impaired loans | | 28 | | 36 | | Interest income not recognized from non-accrual loans | | 86 | | 102 | | Interest collected and recorded on non-accrual loans | | 7 | | 4 | |
| | | | | | | | 2008 | | 2007 | | | | € mn | | € mn | Average balance of impaired loans | | 652 | | 2,448 | Interest income recognized on impaired loans | | 6 | | 29 | Interest income not recognized from non- accrual loans | | 19 | | 77 | Interest collected and recorded on non-accrual loans | | — | | 3 |
As of December 31, 2006,2008, the Allianz Group had €34€— mn (2005: €39(2007: €40 mn) of commitments to lend additional funds to borrowers whose loans are non-performing or whose terms have been previously restructured. 1011 Reinsurance assets
| As of December 31,
| | 2006
| | 2005
| | 2008 | | 2007 | | | | € mn | | € mn | | € mn | | € mn | Unearned premiums | | 1,317 | | 1,448 | | 1,294 | | 1,342 | Reserves for loss and loss adjustment expenses | | 9,719 | | 10,874 | | 8,180 | | 8,561 | Aggregate policy reserves | | 8,223 | | 9,772 | | 5,018 | | 5,319 | Other insurance reserves | | 101 | | 26 | | 107 | | 90 | | | |
| |
| | | | | Total | | 19,360 | | 22,120 | | 14,599 | | 15,312 | | | |
| |
| | | | |
Changes in aggregate policy reserves ceded to reinsurers are as follows: | | | | | | | | | | 2006
| | | 2005
| | | | | € mn | | | € mn | | Carrying amount as of January 1, | | 9,772 | | | 10,276 | | Foreign currency translation adjustments | | (340 | ) | | 443 | | Change recorded in insurance and investment contract benefits (net) | | (7 | ) | | 135 | | Other changes(1) | | (1,202 | ) | | (1,082 | ) | | | |
|
| |
|
| Carrying amount as of December 31, | | 8,223 | | | 9,772 | | | | |
|
| |
|
|
| | | | | | | | | | | | | 2008 | | | 2007 | | | 2006 | | | | | € mn | | | € mn | | | € mn | | Carrying amount as of January 1, | | 5,319 | | | 8,223 | | | 9,772 | | Foreign currency translation adjustments | | 150 | | | (311 | ) | | (340 | ) | Changes recorded in
consolidated income statements | | (47 | ) | | 108 | | | (7 | ) | Other changes1) | | (404 | ) | | (2,701 | ) | | (1,202 | ) | Carrying amount as of December 31, | | 5,018 | | | 5,319 | | | 8,223 | | | | | | | | | | | |
(1)1)
| Primarily relatesrelating to novationchanges of quota share reinsurance agreement.agreements. |
The Allianz Group reinsures a portion of the risks it underwrites in an effort to control its exposure to losses and events and protect capital resources. ForIn general international corporate risks exposures exceeding the relevant retention levels of the Allianz Group’s subsidiaries are reinsured internallybusiness is either underwritten directly or assumed by Allianz Global Corporate & Specialty AG (“AGCS”) where(AGCS) from other Allianz Group’s subsidiaries. AGCS buys global reinsurance cover in the portfolio is pooled and with risks exceeding retention limits cededexternal reinsurance market, other parts are reinsured internally by external reinsurance.Allianz SE. The Allianz Group maintains a centralized program for natural catastrophe events whichthat pools exposures from a number of subsidiaries by internal reinsurance agreements with Allianz SE. Allianz SE limits exposures in this portfolio through external reinsurance. For other risks, the subsidiaries of the Allianz Group maintain individual reinsurance programs. Allianz SE participates as a reinsurer on an arms’ length basis in these programs. Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Reinsurance involves credit risk and is subject to aggregate loss limits. Reinsurance does not legally discharge the Allianz Group from primary liability under the reinsured policies. Although the reinsurer is liable to the Allianz Group to the extent of the reinsurance ceded, the Allianz Group remains primarily liable as the direct insurer on all risks it underwrites, including the portion that is reinsured. The Allianz Group monitors the financial condition of its reinsurers on an ongoing basis and reviews its reinsurance arrangements periodically in order to evaluate the reinsurer’s ability to fulfill its obligations to the Allianz Group under existing and planned reinsurance contracts. The Allianz Group’s evaluation criteria, which includes the credit risk claims-paying and debt ratings, capital and surplus levels, and marketplacemarket-place reputation of its reinsurers, are such that the Allianz Group believes that its reinsurance credit risk is not significant, and historically has not experienced noteworthy difficulty in collecting from their reinsurers. Additionally, and as appropriate, the Allianz Group may also require letters of credit, deposits, or other financial measures to further minimize its exposure to credit risk. In certain cases, however, the Allianz Group does establish an allowance for doubtful amounts related to reinsurance as appropriate, although this amount was not significant as of December 31, 20062008 and 2005. Concentrations2007. The relationships with reinsurers of the Allianz Group has with individual reinsurers includefocus on Munich Re and Swiss Reinsurance Company and SCOR. As of December 31, 2006, amounts ceded to reinsurers for insurance and investment contracts includes €6,297 mn (2005: €7,613 mn) related to Munich Re. 11 Deferred acquisition costs
| | | | | As of December 31,
| | 2006
| | 2005
| | | | € mn | | € mn | Deferred acquisition costs | | | | | Property-Casualty | | 3,692 | | 3,550 | Life/Health | | 13,619 | | 12,712 | Asset Management | | 50 | | 28 | Subtotal | | 17,361 | | 16,290 | Present value of future profits | | 1,227 | | 1,336 | Deferred sales inducements | | 547 | | 515 | | | |
| |
| Total | | 19,135 | | 18,141 | | | |
| |
|
Deferred acquisition costs
| | | | | | | | | | | | | 2006
| | | 2005
| | | 2004
| | | | | € mn | | | € mn | | | € mn | | Property-Casualty | | | | | | | | | | Carrying amount as of January 1, | | 3,550 | | | 3,434 | | | 3,380 | | Additions | | 3,357 | | | 2,582 | | | 1,732 | | Changes in the consolidated subsidiaries of the Allianz Group | | — | | | — | | | (60 | ) | Foreign currency translation adjustments | | (35 | ) | | 78 | | | (51 | ) | Amortization | | (3,180 | ) | | (2,544 | ) | | (1,567 | ) | Carrying amount as of December 31, | | 3,692 | | | 3,550 | | | 3,434 | | Life/Health | | | | | | | | | | Carrying amount as of January 1, | | 12,712 | | | 10,681 | | | 9,705 | | Additions | | 2,783 | | | 2,895 | | | 2,957 | | Changes in the consolidated subsidiaries of the Allianz Group | | — | | | (26 | ) | | (158 | ) | Foreign currency translation adjustments | | (464 | ) | | 541 | | | (712 | ) | Amortization | | (1,412 | ) | | (1,379 | ) | | (1,111 | ) | Carrying amount as of December 31, | | 13,619 | | | 12,712 | | | 10,681 | | Asset Management | | 50 | | | 28 | | | — | | | | |
|
| |
|
| |
|
| Total | | 17,361 | | | 16,290 | | | 14,115 | | | | |
|
| |
|
| |
|
|
Present value of future profits
| | | | | | | | | | | | | 2006
| | | 2005
| | | 2004
| | | | | € mn | | | € mn | | | € mn | | Cost as of January 1, | | 2,374 | | | 2,361 | | | 2,306 | | Accumulated amortization as of January 1, | | (1,038 | ) | | (839 | ) | | (648 | ) | Carrying amount of January 1, | | 1,336 | | | 1,522 | | | 1,658 | | Additions | | — | | | — | | | 47 | | Changes in the consolidated subsidiaries of the Allianz Group | | — | | | — | | | (4 | ) | Foreign currency translation adjustments | | (6 | ) | | 7 | | | (5 | ) | Amortization(1) | | (103 | ) | | (193 | ) | | (174 | ) | Carrying amount as of December 31, | | 1,227 | | | 1,336 | | | 1,522 | | Accumulated amortization as of December 31, | | 1,132 | | | 1,038 | | | 839 | | | | |
|
| |
|
| |
|
| Cost as of December 31, | | 2,359 | | | 2,374 | | | 2,361 | | | | |
|
| |
|
| |
|
|
(1)
| During the year ended December 31, 2006, includes interest accrued on unamortized PVFP €62 mn (2005: €74 mn; 2004: €94 mn).
|
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) 12 Deferred acquisition costs | | | | | As of December 31, | | 2008 | | 2007 | | | | € mn | | € mn | Deferred acquisition costs | | | | | Property-Casualty | | 3,721 | | 3,675 | Life/Health | | 16,709 | | 14,118 | Asset Management | | 147 | | 94 | | | | | | Subtotal | | 20,577 | | 17,887 | | | | | | Present value of future profits | | 1,239 | | 1,206 | Deferred sales inducements | | 747 | | 520 | | | | | | Total | | 22,563 | | 19,613 | | | | | |
Deferred acquisition costs | | | | | | | | | | | | | 2008 | | | 2007 | | | 2006 | | | | | € mn | | | € mn | | | € mn | | Property-Casualty | | | | | | | | | | Carrying amount as of January 1, | | 3,675 | | | 3,692 | | | 3,550 | | Additions | | 3,754 | | | 4,161 | | | 3,357 | | Changes in the consolidated subsidiaries of the Allianz Group | | (13 | ) | | 66 | | | — | | Foreign currency translation adjustments | | (85 | ) | | (72 | ) | | (35 | ) | Amortization | | (3,610 | ) | | (4,172 | ) | | (3,180 | ) | | | | | | | | | | | Carrying amount as of December 31, | | 3,721 | | | 3,675 | | | 3,692 | | | | | | | | | | | | Life/Health | | | | | | | | | | Carrying amount as of January 1, | | 14,118 | | | 13,619 | | | 12,712 | | Additions | | 2,400 | | | 2,649 | | | 2,783 | | Changes in the consolidated subsidiaries of the Allianz Group | | 18 | | | — | | | — | | Foreign currency translation adjustments | | 53 | | | (555 | ) | | (464 | ) | Amortization1) | | 120 | | | (1,595 | ) | | (1,412 | ) | | | | | | | | | | | Carrying amount as of December 31, | | 16,709 | | | 14,118 | | | 13,619 | | | | | | | | | | | | Asset Management | | 147 | | | 94 | | | 50 | | | | | | | | | | | | Total | | 20,577 | | | 17,887 | | | 17,361 | | | | | | | | | | | |
1) | For the year ended December 31, 2008, consists of amortization of €(1,240) mn (2007: €(1,577) mn; 2006: €(1,628) mn) and of shadow accounting of €1,360 mn (2007: €(18) mn; 2006: €216 mn). |
Present value of future profits | | | | | | | | | | | | | 2008 | | | 2007 | | | 2006 | | | | | € mn | | | € mn | | | € mn | | Cost as of January 1, | | 2,344 | | | 2,359 | | | 2,374 | | Accumulated amortization as of January 1, | | (1,138 | ) | | (1,132 | ) | | (1,038 | ) | | | | | | | | | | | Carrying amount as of January 1, | | 1,206 | | | 1,227 | | | 1,336 | | | | | | | | | | | | Changes in the consolidated subsidiaries of the Allianz Group | | 54 | | | 5 | | | — | | Foreign currency translation adjustments | | 3 | | | (6 | ) | | (6 | ) | Amortization1) | | (24 | ) | | (20 | ) | | (103 | ) | | | | | | | | | | | Carrying amount as of December 31, | | 1,239 | | | 1,206 | | | 1,227 | | | | | | | | | | | | Accumulated amortization as of December 31, | | 1,176 | | | 1,138 | | | 1,132 | | Cost as of December 31, | | 2,415 | | | 2,344 | | | 2,359 | |
1) | During the year ended December 31, 2008, includes interest accrued on unamortized PVFP of €65 mn (2007: €70 mn; 2006: €62 mn). |
As of December 31, 2006,2008, the percentage of PVFP that is expected to be amortized in 20072009 is 13.79% (13.66% in 2008, 12.36% in 2009, 10.74%12.03% (11.06% in 2010, 10.43% in 2011, 9.50% in 2012 and 9.96%8.89% in 2011)2013). Deferred sales inducements | | | | | | | | | | | | | 2006
| | | 2005
| | | 2004
| | | | | € mn | | | € mn | | | € mn | | Carrying amounts as of January 1, | | 515 | | | 303 | | | — | | Transfer from insurance reserves | | — | | | — | | | 89 | | Cumulative effect adjustment due to implementation of SOP 03-1 | | — | | | — | | | 23 | | Additions | | 120 | | | 209 | | | 222 | | Foreign currency translation adjustment | | (56) | | | 52 | | | — | | Amortization | | (32 | ) | | (49 | ) | | (31 | ) | | | |
|
| |
|
| |
|
| Carrying amount as of December 31, | | 547 | | | 515 | | | 303 | | | | |
|
| |
|
| |
|
|
| | | | | | | | | | | | 2008 | | 2007 | | | 2006 | | | | | € mn | | € mn | | | € mn | | Carrying amount as of January 1, | | 520 | | 547 | | | 515 | | Additions | | 91 | | 86 | | | 120 | | Foreign currency translation adjustments | | 28 | | (59 | ) | | (56 | ) | Amortization1) | | 108 | | (54 | ) | | (32 | ) | | | | | | | | | | Carrying amount as of
December 31, | | 747 | | 520 | | | 547 | | | | | | | | | | |
12 Other assets
| | | | | | | As of December 31,
| | 2006
| | | 2005
| | | | | € mn | | | € mn | | Receivables | | | | | | | Policyholders | | 4,292 | | | 4,105 | | Agents | | 3,698 | | | 3,852 | | Reinsurers | | 2,832 | | | 2,489 | | Other | | 6,283 | | | 6,772 | | Less allowance for doubtful accounts | | (330 | ) | | (317 | ) | Subtotal | | 16,775 | | | 16,901 | | Tax receivables | | | | | | | Income tax | | 1,995 | | | 1,523 | | Other tax | | 690 | | | 600 | | Subtotal | | 2,685 | | | 2,123 | | Accrued dividends, interest and rent | | 5,658 | | | 5,474 | | Prepaid expenses | | | | | | | Interest and rent | | 2,678 | | | 2,518 | | Other prepaid expenses | | 173 | | | 139 | | Subtotal | | 2,851 | | | 2,657 | | Derivative financial instruments used for hedging that meet the criteria for hedge accounting and firm commitments | | 463 | | | 849 | | Property and equipment | | | | | | | Real estate held for use | | 4,758 | | | 4,391 | | Equipment | | 1,597 | | | 1,385 | | Software | | 1,078 | | | 1,091 | | Subtotal | | 7,433 | | | 6,867 | | Non-current assets and disposal groups held for sale | | — | | | 3,292 | | Other assets(1) | | 3,028 | | | 4,130 | | Total | | 38,893 | | | 42,293 | |
(1)1)
| As ofFor the year ended December 31, 2006, includes prepaid benefit costs for defined benefit plans2008, consists of €265 mn.amortization of €10 mn (2007: €(52) mn; 2006: €(39) mn) and of shadow accounting of €98 mn (2007: €(2) mn; 2006: €7 mn).
|
Other assets due within one year amounted to €30,255 mn (2005: €34,196 mn), and those due after more than one year totaled €8,638 mn (2005: €8,097 mn).
Property and equipment
Real estate held for use
| | | | | | | | | | | | | 2006
| | | 2005
| | | 2004
| | | | | € mn | | | € mn | | | € mn | | Cost as of January 1, | | 5,894 | | | 7,499 | | | 6,527 | | Accumulated depreciation as of January 1, | | (1,503 | ) | | (1,457 | ) | | (1,507 | ) | Carrying amount as of January 1, | | 4,391 | | | 6,042 | | | 5,020 | | Additions | | 284 | | | 540 | | | 1,373 | | Changes in the consolidated subsidiaries of the Allianz Group | | 819 | | | (2,493 | ) | | 691 | | Disposals | | (248 | ) | | (318 | ) | | (789 | ) | Reclassification | | (345 | ) | | 745 | | | — | | Foreign currency translation adjustments | | (24 | ) | | 84 | | | (19 | ) | Depreciation | | (119 | ) | | (209 | ) | | (234 | ) | Carrying amount as of December 31, | | 4,758 | | | 4,391 | | | 6,042 | | Accumulated depreciation as of December 31, | | 1,395 | | | 1,503 | | | 1,457 | | | | |
|
| |
|
| |
|
| Cost as of December 31, | | 6,153 | | | 5,894 | | | 7,499 | | | | |
|
| |
|
| |
|
|
As of December 31, 2006, the fair value of real estate held for use was €6,379 mn (2005: €6,227 mn). As of December 31, 2006, assets pledged as security and other restrictions on title were €27 mn (2005: €25 mn).
Software
| | | | | | | | | | | | | 2006
| | | 2005
| | | 2004
| | | | | € mn | | | € mn | | | € mn | | Cost as of January 1, | | 3,472 | | | 3,320 | | | 2,991 | | Accumulated amortization as of January 1, | | (2,381 | ) | | (2,348 | ) | | (1,927 | ) | Carrying amount as of January 1, | | 1,091 | | | 972 | | | 1,064 | | Additions | | 523 | | | 577 | | | 757 | | Changes in the consolidated subsidiaries of the Allianz Group | | 73 | | | (2 | ) | | (70 | ) | Disposals | | (70 | ) | | (38 | ) | | (232 | ) | Foreign currency translation adjustments | | (10 | ) | | 14 | | | (6 | ) | Amortization | | (529 | ) | | (432 | ) | | (541 | ) | Carrying amount as of December 31,(1) | | 1,078 | | | 1,091 | | | 972 | | Accumulated amortization as of December 31, | | 2,686 | | | 2,381 | | | 2,348 | | | | |
|
| |
|
| |
|
| Cost as of December 31, | | 3,764 | | | 3,472 | | | 3,320 | | | | |
|
| |
|
| |
|
|
(1)
| As of December 31, 2006, includes €683 mn (2005: €772 mn; 2004: €608 mn) for software developed in-house and €395 mn (2005: €319 mn; 2004: €364 mn) for software purchased from third parties.
|
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) 13 Other assets | | | | | | | As of December 31, | | 20081) | | | 2007 | | | | | € mn | | | € mn | | Receivables | | | | | | | Policyholders | | 4,467 | | | 4,616 | | Agents | | 4,129 | | | 3,956 | | Reinsurers | | 2,989 | | | 2,676 | | Other | | 3,068 | | | 4,994 | | Less allowance for doubtful accounts | | (499 | ) | | (389 | ) | | | | | | | | Subtotal | | 14,154 | | | 15,853 | | | | | | | | | Tax receivables | | | | | | | Income tax | | 2,467 | | | 2,536 | | Other tax | | 813 | | | 731 | | | | | | | | | Subtotal | | 3,280 | | | 3,267 | | | | | | | | | Accrued dividends, interest and rent | | 5,918 | | | 8,782 | | Prepaid expenses | | | | | | | Interest and rent | | 28 | | | 29 | | Other prepaid expenses | | 313 | | | 261 | | | | | | | | | Subtotal | | 341 | | | 290 | | | | | | | | | Derivative financial instruments used for hedging that meet the criteria for hedge accounting and firm commitments | | 1,101 | | | 344 | | Property and equipment | | | | | | | Real estate held for own use | | 3,122 | | | 3,708 | | Equipment | | 1,242 | | | 1,666 | | Software | | 1,116 | | | 1,165 | | | | | | | | | Subtotal | | 5,480 | | | 6,539 | | | | | | | | | Other assets2) | | 3,730 | | | 2,950 | | | | | | | | | Total | | 34,004 | | | 38,025 | | | | | | | | |
1) | Does not include other assets of Dresdner Bank which were classified as held-for-sale. See Note 4. |
2) | As of December 31, 2008, includes prepaid benefit costs for defined benefit plans of €256 mn (2007: €402 mn). |
Other assets due within one year amounted to €29,490 mn (2007: €30,229 mn), and those due after more than one year totaled €4,514 mn (2007: €7,796 mn). Non-current assetsProperty and disposal groups held for saleequipment
During the year endedReal estate held for own use
| | | | | | | | | | | | | 2008 | | | 2007 | | | 2006 | | | | | € mn | | | € mn | | | € mn | | Cost as of January 1, | | 4,847 | | | 6,153 | | | 5,894 | | Accumulated depreciation as of January 1, | | (1,139 | ) | | (1,395 | ) | | (1,503 | ) | | | | | | | | | | | Carrying amount as of January 1, | | 3,708 | | | 4,758 | | | 4,391 | | | | | | | | | | | | Additions | | 227 | | | 194 | | | 284 | | Changes in the consolidated subsidiaries of the Allianz Group | | 27 | | | (159 | ) | | 819 | | Disposals | | (61 | ) | | (248 | ) | | (248 | ) | Reclassifications | | 239 | | | (61 | ) | | (345 | ) | Reclassification into non-current assets and assets of disposal groups classified as held-for-sale | | (902 | ) | | (574 | ) | | — | | Foreign currency translation adjustments | | (40 | ) | | (47 | ) | | (24 | ) | Depreciation | | (78 | ) | | (139 | ) | | (117 | ) | Impairments | | (9 | ) | | (17 | ) | | (3 | ) | Reversals of impairments | | 11 | | | 1 | | | 1 | | | | | | | | | | | | Carrying amount as of December 31, | | 3,122 | | | 3,708 | | | 4,758 | | | | | | | | | | | | Accumulated depreciation as of December 31, | | 936 | | | 1,139 | | | 1,395 | | Cost as of December 31, | | 4,058 | | | 4,847 | | | 6,153 | |
As of December 31, 2005, the Allianz Group reclassified the assets, including goodwill, and liabilities related to its ownership of Four Seasons Health Care Ltd., Wilmslow and BetterCare Group Limited, Kingston upon Thames to disposal groups held for sale as the classification criteria in IFRS 5 were met. On the date of reclassification, as2008, the fair value less costof real estate held for own use was €4,497 mn (2007: €5,070 mn). As of December 31, 2008, assets pledged as security and other restrictions on title were €216 mn (2007: €107 mn).
Notes to sell was in excess of the carrying amount a gain or loss was not recognized. The disposal of Four Seasons Health Care Ltd., WilmslowAllianz Group’s Consolidated Financial Statements—(Continued) Software | | | | | | | | | | | | | 2008 | | | 2007 | | | 2006 | | | | | € mn | | | € mn | | | € mn | | Cost as of January 1, | | 3,946 | | | 3,764 | | | 3,472 | | Accumulated amortization as of January 1, | | (2,781 | ) | | (2,686 | ) | | (2,381 | ) | | | | | | | | | | | Carrying amount as of January 1, | | 1,165 | | | 1,078 | | | 1,091 | | | | | | | | | | | | Additions | | 540 | | | 582 | | | 523 | | Changes in the consolidated subsidiaries of the Allianz Group | | (10 | ) | | (9 | ) | | 73 | | Disposals | | (55 | ) | | (58 | ) | | (70 | ) | Foreign currency translation adjustments | | 1 | | | (21 | ) | | (10 | ) | Amortization | | (288 | ) | | (406 | ) | | (496 | ) | Impairments | | (3 | ) | | (1 | ) | | (33 | ) | Reclassification into non-current assets and assets of disposal groups classified as held-for-sale | | (234 | ) | | — | | | — | | | | | | | | | | | | Carrying amount as of
December 31,1) | | 1,116 | | | 1,165 | | | 1,078 | | | | | | | | | | | | Accumulated amortization as of December 31, | | 2,284 | | | 2,781 | | | 2,686 | | Cost as of December 31, | | 3,400 | | | 3,946 | | | 3,764 | |
1) | As of December 31, 2008, includes €701 mn (2007: €746 mn; 2006: €683 mn;) for software developed in house and €415 mn (2007: €419 mn; 2006: €395 mn) for software purchased from third parties. |
14 Non-current assets and BetterCare Group Limited, Kingston upon Thames occurred August 31, 2006. In 2005, the assets and liabilities of the disposal group held for sale related to Four Seasons Health Care Ltd., Wilmslow and BetterCaregroups classified as held-for-sale | | | | | As of December 31, | | 2008 | | 2007 | | | | € mn | | € mn | Non-current assets and assets of disposal groups classified as held-for-sale | | | | | Dresdner Bank Group | | 417,874 | | — | Selecta AG | | 1,639 | | 1,543 | Real estate held for investment and real estate held for own use in Germany | | — | | 1,950 | Other | | — | | 10 | | | | | | Total | | 419,513 | | 3,503 | | | | | | Liabilities of disposal groups classified as held-for-sale | | | | | Dresdner Bank Group | | 410,469 | | — | Selecta AG | | 1,347 | | 1,292 | Other | | — | | 1 | | | | | | Total | | 411,816 | | 1,293 | | | | | |
Dresdner Bank Group Limited, Kingston upon Thames were included in the Corporate segment. As a resultdescribed in detail in Note 4, with the announcement of the agreements describedsale of Dresdner Bank Group as of August 31, 2008, Dresdner Bank Group has been classified in Note 45,accordance with IFRS 5 prospectively as disposal group held-for-sale in the Allianz Group reclassified the carrying amountconsolidated balance sheet as of its ownership interest in Eurohypo AG to assets held for sale during the year ended December 31, 2005. On2008. As of January 12, 2009 the agreement date, as the fair value less costs to sell of the Eurohypo AG ownership interestsale was greater than the Allianz Group’s carrying amount, a gain or loss was not recognized. Therefore, both on December 15, 2005, the date of derecognition of the first tranche, and March 31, 2006, the date of derecognition of the second tranche, the Allianz Group recognized gains on disposal which are included in realized gains from associates and joint ventures for the years ended December 31, 2006 and 2005, respectively. The assets held for sale related to Eurohypo AG have been fully derecognized.completed. 1315 Intangible assets
| As of December 31,
| | 2006
| | 2005
| | 20081) | | 2007 | | | | € mn | | € mn | | € mn | | € mn | Goodwill | | 12,007 | | 12,023 | | 11,221 | | 12,453 | Brand names | | 717 | | 740 | | 24 | | 737 | Other | | 211 | | 195 | | Other2) | | | 206 | | 223 | | | |
| |
| | | | | Total | | 12,935 | | 12,958 | | 11,451 | | 13,413 | | | |
| |
| | | | |
1) | Does not include intangible assets of Dresdner Bank which were classified as held-for-sale. See Note 4. |
2) | Includes primarily research and development costs, renewal rights and bancassurance agreements. |
Amortization expense of intangible assets with finite useful lives is estimated to be €42 mn in 2007, €42 mn in 2008, €42 mn in 2009, €42€41 mn in 2010, and €42€40 mn in 2011.2011, €40 mn in 2012 and €40 mn in 2013. Goodwill | | | | 2006
| | 2005
| | 2004
| | | 2008 | | 2007 | | 2006 | | | | | € mn | | € mn | | € mn | | | € mn | | € mn | | € mn | | Cost as of January 1, | | 12,247 | | | 11,901 | | | 12,594 | | | 12,677 | | | 12,368 | | | 12,384 | | Accumulated impairments as of January 1, | | (224 | ) | | (224 | ) | | (224 | ) | | (224 | ) | | (224 | ) | | (224 | ) | | | | | | | | | | | | Carrying amount as of January 1, | | 12,023 | | | 11,677 | | | 12,370 | | | 12,453 | | | 12,144 | | | 12,160 | | | | | | | | | | | | | Additions | | 315 | | | 70 | | | 803 | | | 247 | | | 1,153 | | | 315 | | Disposals | | — | | | (45 | ) | | (62 | ) | | Foreign currency translation adjustments | | (368 | ) | | 479 | | | (270 | ) | | 32 | | | (372 | ) | | (368 | ) | Reclassification | | 37 | | | (158 | ) | | — | | | — | | | — | | | 37 | | Amortization | | — | | | — | | | (1,164 | ) | | Reclassification into non-current assets and assets of disposal groups classified as held-for-sale | | | (1,511 | ) | | (472 | ) | | — | | | | | | | | | | | | | Carrying amount as of December 31, | | 12,007 | | | 12,023 | | | 11,677 | | | 11,221 | | | 12,453 | | | 12,144 | | | | | | | | | | | | | Accumulated impairments as of December 31, | | 224 | | | 224 | | | 224 | | | 224 | | | 224 | | | 224 | | | | |
|
| |
|
| |
|
| | Cost as of December 31, | | 12,231 | | | 12,247 | | | 11,901 | | | 11,445 | | | 12,677 | | | 12,368 | | | | |
|
| |
|
| |
|
| |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Additions include goodwill from the acquisition of 100.0% participation in MAN Roland Druckmaschinen AG, Offenbach,
the acquisition of 100.0% participation in Home & Legacy Limited, London,
the acquisition of 100.0% interest in 1. Pensionssparkasse, a.s., Bratislava,
increasing the interest in PremierLine Direct Ltd.Allianz Sigorta AŞ, Lancaster,Istanbul, from 20.0%37.1% to 100.0%84.2%, increasing the interest in Ann Arbor Annuity Exchange Inc.Allianz Hayat ve Emeklilik AŞ, Ann Arbor,Istanbul, from 40.0%38.0% to 100.0%,89.0%. increasing2008
The reclassification affects the interest in Roster Financial LLC, Quincy, from 49.0%goodwill of Dresdner Bank AG, Frankfurt am Main, which was reclassified to 100.0%“Non-current assets and assets of disposal groups classified as held-for-sale”. 2007 The reclassification affects the goodwill of Selecta AG, Muntelier, which was reclassified to “Non-current assets and assets of disposal groups classified as held-for-sale”. 2006 The reclassification affects intangible assets of Allianz-Slovenská poist’ovna a.s., Bratislava, as they were reclassified to goodwill due to a change in the accounting treatment. 2005
The reclassification affects the goodwill of Four Seasons Health Care Ltd., Wilmslow and BetterCare Group Limited, Kingston upon Thames as these subsidiaries were reclassified to disposal groups held for sale.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Impairment tests for goodwill and intangible assets with indefinite useful lives For purposes of impairment testing, the Allianz Group has allocated goodwill to cash generating units. These cash generating units represent the lowest level at which goodwill is monitored for internal measurement purposes. During 2006, the Allianz Group realigned its cash generating units in the Property-Casualty and Life/ Health segments to ensure consistency with the management responsibilities of the Board of Management. As a result, theThe Allianz Group has allocated goodwill to nine cash generating units in the Property- CasualtyProperty-Casualty segment, six cash generating units in the Life/Health segment, threeone cash generating unitsunit in the Banking segment, one cash generating unit in the Asset Management segment and one cash generating unit in the Corporate segment. In addition,2007 the goodwill of Dresdner Bank and the brand name “Dresdner Bank” has been‘Dresdner Bank’ were allocated to two cash generating units in the Banking segment and to one cash generating unit in the Asset Management segment. In 2008 the goodwill of Dresdner Bank and the brand name ‘Dresdner Bank’ are reclassified to Non-current assets and assets of disposal groups classified as held-for-sale. The goodwill for Oldenburgische Landesbank AG is allocated to the cash generating unit Banking. The groups of cashCash generating units of the Property-Casualty segment are: Insurance Germany; are
German Speaking Countries, Europe I, including Italy, Spain, Portugal, Switzerland, AustriaGreece and Greece; Turkey, Europe II, including France, Netherlands, Belgium, Luxemburg,Luxembourg and Africa, New Europe including Bulgaria, Croatia, Czech Republic, Hungary, Slovakia, Poland, Romania and Russia, Anglo Broker Markets including United Kingdom, Ireland and Australia; NAFTA Markets, including the United States and Mexico; Asia Pacific; Eastern Europe; & Global Lines Specialty Lines I, including Allianz Global Corporate & Specialty, and Specialty Lines II, including Credit Insurance, Travel Insurance and Assistance Services. The cashCash generating units of the Life/Health segment are: Insuranceare
German Speaking Countries, Health Germany, Life; Insurance Germany Health; Europe I, including Italy, Spain, Portugal, Switzerland, AustriaGreece and Greece; Turkey, Europe II, including France, Netherlands, Belgium, LuxemburgLuxembourg and South America; NAFTAAfrica, Anglo Broker Markets including the United States; and Asia Pacific.& Global Lines. The cash generating units of the Banking segment are Private & Business Clients; Corporate & Investment Banking and Other Banking. The Asset Management segment is considered a cash generating unit. The cash generating unit of the Corporate segment is Private Equity. The recoverable amounts of all cash generating units excluding Private Equity are determined on the basis of value in use calculations. The recoverable amount of the cash generating unit Private Equity is determined on the basis of the fair values of the Private Equity investments. The goodwill of Dresdner Bank and the brand name “Dresdner Bank” are separately tested for impairment according to IFRS 5.1)
1) | For further information please refer Note 4. |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) The Allianz Group applies generally acknowledged valuation principles to determine the value in use. In this regard, the Allianz Group utilizes the capitalized earnings method to derive the value in use for all cash generating units in the Property-Casualty segment and Banking segments andsegment as well as for the Asset Management Insuranceand Health Germany Health and Private Equity cash generating units. Generally, the basis for the determination of the capitalized earnings value is the business plan (“detailed planning period”) as well as the estimate of the sustainable returns and eternal growth rates which can be assumed to be realistic on a long term basis (“terminal value”) of the companies included in the cash generating units. The capitalized earnings value is calculated by discounting the future earnings using an appropriate discount rate. The business plans applied in the value in use are the results of the structured management dialogues between the Board of Management of the Allianz Group and the companies in connection with a reporting process integrated into these dialogues. Generally, the business plans comprise a planning horizon of three years.years and are based on current market environment. The terminal values are largely based on the expected profits of the final year of the detailed planning period. Where necessary, the planned profits are adjusted so that long term sustainable earnings are reflected. The financing of the assumed eternal growth in the terminal values is accounted for by appropriate profit retention. The discount rate is based on the capital asset pricing model.model and appropriate eternal growth rates. The assumptions, including the risk free interest rate, market risk premium, segment beta and leverage ratio, used to calculate the discount rates are in general consistent with the parameters used in the Allianz Group’s planning and controlling process, specifically those utilized in the calculation of Economic Value Added.Added®. The discount rates and eternal growth rates for the significant cash generating units used for the allocation of the fair values are as follows: | | | | | | | Cash generating unit | | Discount
rate | | | Eternal
growth rate | | Property-Casualty | | | | | | | German Speaking Countries | | 8.1 | % | | 2.0 | % | Europe I | | 8.2 | % | | 2.0 | % | Europe II | | 8.1 | % | | 2.0 | % | New Europe | | 11.2 | % | | 3.0 | % | Anglo Broker Markets & Global Lines | | 8.6 | % | | 1.0 | % | Life/Health | | | | | | | Health Germany | | 8.3 | % | | 1.5 | % | Anglo Broker Markets & Global Lines | | 8.3 | % | | n.a. | | Asset Management | | 8.4 | % | | 2.0 | % |
Sensitivity analysis with regards to discount rates and/or key value drivers of the business plans were performed. Changes of capitalized earnings values of Property-Casualty cash generating units due to changes in applied long term sustainable combined ratios and changes of capitalized earnings values of the Asset Management cash generating units due to changes in assumptions regarding cost income ratios were analyzed. For all cash generating units excluding New Europe, Property-Casualty Asia & Middle East and Banking respective capitalized earnings value sensitivities still exceeded respective carrying values. For all cash generating units in the Life/Health segment, with the exception of Insurance Germany Health,U.S. the fair value for the goodwill impairment test is based on an Appraisal Value which is derived from the Market Consistent Embedded Value, specifically Appraisalcorresponding sensitivities and a multiple of the Market Consistent Value approach is utilized to determine the value in use. of new business. The Market Consistent Embedded valueValue is an industry-specific valuation method to determine the fair value of the current in force portfolio and is in compliance with the general principles of the discounted earnings methods. The Market Consistent Embedded Value approach utilized is based on the Allianz Group’s Market Consistent Embedded Value guidelines.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Due to the unusual economic circumstances at year-end for Taiwan the calculation was based on sensitivities that reflected the average interest level of the last five years. For the U.S. instead of the Market Consistent Embedded Value the Appraisal Value was derived from a traditional Embedded Value Calculation. Taiwan is included in the cash generating unit Asia & Middle East, U.S. is included in the cash generating unit Anglo Broker Market & Global Lines. Sensitivity analysis with regard to considered new business values are performed. For all Life cash generating units excluding Asia & Middle East, respective Appraisal Value sensitivities still exceeded respective carrying values.
The carrying amounts of goodwill and brand names allocated to Allianz Group’s cash generating units as of December 31, 20062008 and 20052007 are as follows: | As of December 31,
| | 2006
| | 2005
| | 2008 | | 2007 | | | | Goodwill
| | Brand names
| | Goodwill
| | Brand names
| | Goodwill | | Brand names | | Goodwill | | Brand names | | Cash generating units | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | Property-Casualty | | | | | | | | | | | | | | | | | Insurance Germany | | 243 | | — | | 243 | | — | | Germany Speaking Countries | | | 277 | | — | | 277 | | — | Europe I | | 123 | | — | | 123 | | — | | 230 | | — | | 90 | | — | Europe II | | 632 | | — | | 632 | | — | | 638 | | — | | 638 | | — | NAFTA Markets | | 115 | | — | | 115 | | — | | Asia Pacific | | 31 | | — | | 31 | | — | | Eastern Europe | | 108 | | — | | 71 | | — | | Anglo Broker Markets | | 304 | | — | | 200 | | — | | South America | | | 21 | | — | | 21 | | — | Asia & Middle East | | | 79 | | — | | 79 | | — | New Europe | | | 603 | | 24 | | 679 | | 20 | Anglo, Broker & Global Lines | | | 388 | | — | | 410 | | — | Specialty Lines I | | 5 | | — | | 5 | | — | | 8 | | — | | 7 | | — | Specialty Lines II | | 19 | | — | | 20 | | — | | 28 | | — | | 27 | | — | | | | | | | | | | | Subtotal | | 1,580 | | — | | 1,440 | | — | | 2,272 | | 24 | | 2,228 | | 20 | | | | | | | | | | | Life/Health | | | | | | | | | | | | | | | | | Insurance Germany Life | | 634 | | — | | 634 | | — | | Insurance Germany Health | | 325 | | — | | 325 | | — | | Germany Speaking Countries | | | 554 | | — | | 554 | | — | Health Germany | | | 325 | | — | | 325 | | — | Europe I | | 132 | | — | | 132 | | — | | 110 | | — | | 43 | | — | Europe II | | 538 | | — | | 538 | | — | | 538 | | — | | 538 | | — | NAFTA Markets | | 436 | | — | | 405 | | — | | Asia Pacific | | 320 | | — | | 320 | | — | | Asia & Middle East | | | 320 | | — | | 320 | | — | Anglo, Broker & Global Lines | | | 435 | | — | | 425 | | — | | | | | | | | | | | Subtotal | | 2,385 | | — | | 2,354 | | — | | 2,282 | | — | | 2,205 | | — | | | | | | | | | | | Banking | | | | | | | | | | 199 | | — | | 1,714 | | 656 | Private & Business Clients | | 1,391 | | 377 | | 1,390 | | 377 | | Corporate & Investment Banking | | 183 | | 279 | | 183 | | 279 | | Other Banking | | 52 | | — | | 52 | | — | | Subtotal | | 1,626 | | 656 | | 1,625 | | 656 | | Asset Management | | 6,272 | | 61 | | 6,604 | | 84 | | 6,325 | | — | | 6,165 | | 61 | Corporate | | | | | | | | | | 143 | | — | | 141 | | — | Private Equity | | 144 | | — | | — | | — | | Subtotal | | 144 | | — | | — | | — | | | | |
| |
| |
| |
| | | | | | | | | Total | | 12,007 | | 717 | | 12,023 | | 740 | | 11,221 | | 24 | | 12,453 | | 737 | | | |
| |
| |
| |
| | | | | | | | |
Brand name 14 Financial liabilities carried at fair value through income2008
| | | | | As of December 31,
| | 2006
| | 2005
| | | | € mn | | € mn | Financial liabilities held for trading | | | | | Obligations to deliver securities | | 39,951 | | 49,029 | Derivative financial instruments | | 27,823 | | 28,543 | Other trading liabilities | | 10,988 | | 8,820 | | | |
| |
| Subtotal | | 78,762 | | 86,392 | Financial liabilities designated at fair value through income | | 937 | | 450 | | | |
| |
| Total | | 79,699 | | 86,842 | | | |
| |
|
The brand name “Dresdner Bank” is reclassified to held-for-sale and is separately tested for impairment according to IFRS 5. 2007 The brand name “Dresdner Bank” has an indefinite life, as there is no foreseeable end to its economic life; therefore, it is not subject to amortization and it is recorded at cost less accumulated impairments. The fair value of this brand name, registered as a trade name, was determined using a royalty savings approach.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) 1516 Financial liabilities carried at fair value through income
| | | | | As of December 31, | | 20081) | | 2007 | | | | € mn | | € mn | Financial liabilities held for trading | | | | | Obligations to deliver securities | | — | | 34,795 | Derivative financial instruments | | 6,242 | | 76,819 | Other trading liabilities | | 2 | | 12,469 | | | | | | Subtotal | | 6,244 | | 124,083 | Financial liabilities designated at fair value through income | | — | | 1,970 | | | | | | Total | | 6,244 | | 126,053 | | | | | |
1) | Does not include financial liabilities carried at fair value through income of Dresdner Bank which were classified as held-for-sale. See Note 4. |
Change in fair value of financial liabilities designated at fair value through income attributable to changes in credit risk As of December 31, 2008 all of the financial liabilities designated at fair value through income related to the discontinued operations of Dresdner Bank and thus have been reclassified and presented as “Liabilities of disposal groups classified as held-for-sale” in accordance with IFRS 5.
17 Liabilities to banks and customers | | | | 2006
| | 2005
| | 20081) | | 2007 | As of December 31,
| | Banks
| | Customers
| | Total
| | Banks
| | Customers
| | Total
| | Banks | | Customers | | Total | | Banks | | Customers | | Total | | | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | Payable on demand | | 18,216 | | 68,677 | | 86,893 | | 14,534 | | 57,624 | | 72,158 | | 311 | | 4,096 | | 4,407 | | 11,204 | | 60,443 | | 71,647 | Savings deposits | | — | | 5,421 | | 5,421 | | — | | 5,608 | | 5,608 | | — | | 1,790 | | 1,790 | | — | | 5,304 | | 5,304 | Term deposits and certificates of deposit | | 68,429 | | 50,380 | | 118,809 | | 73,189 | | 45,968 | | 119,157 | | 1,296 | | 3,035 | | 4,331 | | 64,129 | | 72,938 | | 137,067 | Repurchase agreements | | 68,189 | | 49,403 | | 117,592 | | 50,850 | | 39,156 | | 90,006 | | — | | 568 | | 568 | | 50,444 | | 42,145 | | 92,589 | Collateral received from securities lending transactions | | 19,914 | | 8,703 | | 28,617 | | 11,369 | �� | 7,908 | | 19,277 | | 627 | | — | | 627 | | 16,235 | | 4,729 | | 20,964 | Other | | 876 | | 2,870 | | 3,746 | | 2,015 | | 2,095 | | 4,110 | | 3,194 | | 3,534 | | 6,728 | | 5,513 | | 3,410 | | 8,923 | | | |
| |
| |
| |
| |
| |
| | | | | | | | | | | | | Total | | 175,624 | | 185,454 | | 361,078 | | 151,957 | | 158,359 | | 310,316 | | 5,428 | | 13,023 | | 18,451 | | 147,525 | | 188,969 | | 336,494 | | | |
| |
| |
| |
| |
| |
| | | | | | | | | | | | |
1) | Does not include liabilities to banks and customers of Dresdner Bank which were classified as held-for-sale. See Note 4. |
Liabilities to banks and customers by contractual maturity | As of December 31, 2006
| | Less
than 3 months
| | 3 months to less
than 1 year
| | 1 year to less
than 3 years
| | 3 years to less
than 5 years
| | Greater
than 5 years
| | Total
| | As of December 31, 2008 | | | Up to
3 months | | > 3 months
up to 1 year | | > 1 year
up to 3 years | | > 3 years
up to 5 years | | Greater
than 5 years | | Total | | | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | Liabilities to banks | | 142,225 | | 22,776 | | 3,392 | | 2,727 | | 4,504 | | 175,624 | | 2,940 | | 800 | | 410 | | 569 | | 709 | | 5,428 | Liabilities to customers | | 165,704 | | 10,547 | | 1,997 | | 3,021 | | 4,185 | | 185,454 | | 10,244 | | 1,496 | | 610 | | 191 | | 482 | | 13,023 | | | |
| |
| |
| |
| |
| |
| | | | | | | | | | | | | Total | | 307,929 | | 33,323 | | 5,389 | | 5,748 | | 8,689 | | 361,078 | | 13,184 | | 2,296 | | 1,020 | | 760 | | 1,191 | | 18,451 | | | |
| |
| |
| |
| |
| |
| | | | | | | | | | | | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Liabilities to banks and customers by type of customer and geographic region | As of December 31,
| | Germany
| | Other
countries
| | Total
| | 2008 | | 2007 | | | | € mn | | € mn | | € mn | | Germany | | Other
countries | | Total | | Germany | | Other
countries | | Total | 2006 | | | | | | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | Liabilities to banks | | 54,546 | | 121,078 | | 175,624 | | 2,854 | | 2,574 | | 5,428 | | 46,137 | | 101,388 | | 147,525 | Liabilities to customers | | | | | | | | | | | | | | Corporate customers | | 48,332 | | 92,879 | | 141,211 | | 2,052 | | 2,051 | | 4,103 | | 55,935 | | 75,644 | | 131,579 | Public authorities | | 1,886 | | 5,994 | | 7,880 | | 168 | | 8 | | 176 | | 5,593 | | 6,894 | | 12,487 | Private customers | | 28,438 | | 7,925 | | 36,363 | | 5,410 | | 3,334 | | 8,744 | | 34,284 | | 10,619 | | 44,903 | Subtotal | | 78,656 | | 106,798 | | 185,454 | | 7,630 | | 5,393 | | 13,023 | | 95,812 | | 93,157 | | 188,969 | | | |
| |
| |
| | | | | | | | | | | | | Total | | 133,202 | | 227,876 | | 361,078 | | 10,484 | | 7,967 | | 18,451 | | 141,949 | | 194,545 | | 336,494 | | | |
| |
| |
| | | | | | | | | | | | | 2005 | | | Liabilities to banks | | 61,919 | | 90,038 | | 151,957 | | Liabilities to customers | | | Corporate customers | | 44,973 | | 71,356 | | 116,329 | | Public authorities | | 1,026 | | 6,105 | | 7,131 | | Private customers | | 27,762 | | 7,137 | | 34,899 | | Subtotal | | 73,761 | | 84,598 | | 158,359 | | | | |
| |
| |
| | Total | | 135,680 | | 174,636 | | 310,316 | | | | |
| |
| |
| |
As of December 31, 2006,2008, liabilities to customers include €33,302€633 mn (2005: €30,049(2007: €27,091 mn) of noninterest bearing deposits. 1618 Unearned premiums
| As of December 31,
| | 2006
| | 2005
| | | 2008 | | 2007 | | | | | € mn | | € mn | | | € mn | | € mn | | Property-Casualty | | 12,994 | | 12,945 | | | 12,984 | | | 13,163 | | Life/Health | | 1,874 | | 1,580 | | | 2,258 | | | 1,858 | | Consolidation adjustments | | — | | (1 | ) | | Consolidation | | | (9 | ) | | (1 | ) | | | |
| |
|
| | | | | | | Total | | 14,868 | | 14,524 | | | 15,233 | | | 15,020 | | | | |
| |
|
| | | | | | |
1719 Reserves for loss and loss adjustment expenses
| | | | | | | As of December 31,
| | 2006
| | | 2005
| | | | | € mn | | | € mn | | Property-Casualty | | 58,664 | | | 60,259 | | Life/Health | | 6,804 | | | 6,806 | | Consolidation adjustments | | (4 | ) | | (60 | ) | | | |
|
| |
|
| Total | | 65,464 | | | 67,005 | | | | |
|
| |
|
|
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
| | | | | | | As of December 31, | | 2008 | | | 2007 | | | | | € mn | | | € mn | | Property-Casualty | | 55,616 | | | 56,943 | | Life/Health | | 8,320 | | | 6,773 | | Consolidation | | (12 | ) | | (10 | ) | | | | | | | | Total | | 63,924 | | | 63,706 | | | | | | | | |
Changes in the reserves for loss and loss adjustment expenses for the Property-Casualty segment | | | | 2006
| | 2005
| | 2004
| | | 2008 | | 2007 | | 2006 | | | | | Gross
| | Ceded
| | Net
| | Gross
| | Ceded
| | Net
| | Gross
| | Ceded
| | Net
| | | Gross | | Ceded | | Net | | Gross | | Ceded | | Net | | Gross | | Ceded | | Net | | | | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | As of January 1, | | 60,259 | | | (10,604 | ) | | 49,655 | | | 55,528 | | | (10,049 | ) | | 45,479 | | | 56,750 | | | (12,067 | ) | | 44,683 | | | 56,943 | | | (8,266 | ) | | 48,677 | | | 58,664 | | | (9,333 | ) | | 49,331 | | | 60,259 | | | (10,604 | ) | | 49,655 | | Loss and loss adjustment expenses incurred | | | | | | | | | | | | | | | | | | | | Current year | | 28,214 | | | (2,573 | ) | | 25,641 | | | 30,111 | | | (3,580 | ) | | 26,531 | | | 28,693 | | | (2,965 | ) | | 25,728 | | | 30,398 | | | (2,969 | ) | | 27,429 | | | 29,839 | | | (2,994 | ) | | 26,845 | | | 28,214 | | | (2,573 | ) | | 25,641 | | Prior year | | (1,186 | ) | | 217 | | | (969 | ) | | (1,633 | ) | | 433 | | | (1,200 | ) | | (1,293 | ) | | 836 | | | (457 | ) | | Prior years | | | (2,241 | ) | | 798 | | | (1,443 | ) | | (1,708 | ) | | 348 | | | (1,360 | ) | | (1,186 | ) | | 217 | | | (969 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Subtotal | | 27,028 | | | (2,356 | ) | | 24,672 | | | 28,478 | | | (3,147 | ) | | 25,331 | | | 27,400 | | | (2,129 | ) | | 25,271 | | | 28,157 | | | (2,171 | ) | | 25,986 | | | 28,131 | | | (2,646 | ) | | 25,485 | | | 27,028 | | | (2,356 | ) | | 24,672 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Loss and loss adjustment expenses paid | | | | | | | | | | | | | | | | | | | | Current year | | (12,436 | ) | | 675 | | | (11,761 | ) | | (12,742 | ) | | 861 | | | (11,881 | ) | | (12,290 | ) | | 845 | | | (11,445 | ) | | (14,049 | ) | | 919 | | | (13,130 | ) | | (13,749 | ) | | 1,118 | | | (12,631 | ) | | (12,436 | ) | | 675 | | | (11,761 | ) | Prior year | | (14,696 | ) | | 2,455 | | | (12,241 | ) | | (13,284 | ) | | 2,568 | | | (10,716 | ) | | (14,384 | ) | | 2,576 | | | (11,808 | ) | | Prior years | | | (13,607 | ) | | 1,602 | | | (12,005 | ) | | (14,206 | ) | | 1,952 | | | (12,254 | ) | | (14,696 | ) | | 2,455 | | | (12,241 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Subtotal | | (27,132 | ) | | 3,130 | | | (24,002 | ) | | (26,026 | ) | | 3,429 | | | (22,597 | ) | | (26,674 | ) | | 3,421 | | | (23,253 | ) | | (27,656 | ) | | 2,521 | | | (25,135 | ) | | (27,955 | ) | | 3,070 | | | (24,885 | ) | | (27,132 | ) | | 3,130 | | | (24,002 | ) | Foreign currency translation adjustments and other | | (1,491 | ) | | 497 | | | (994 | ) | | 2,278 | | | (837 | ) | | 1,441 | | | (1,132 | ) | | 534 | | | (598 | ) | | Change in the consolidated subsidiaries of the Allianz Group | | — | | | — | | | — | | | 1 | | | — | | | 1 | | | (816 | ) | | 192 | | | (624 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Foreign currency translation adjustments and other changes1) | | | (497 | ) | | 48 | | | (449 | ) | | (2,022 | ) | | 666 | | | (1,356 | ) | | (1,491 | ) | | 497 | | | (994 | ) | Changes in the consolidated subsidiaries of the Allianz Group | | | 127 | | | (39 | ) | | 88 | | | 125 | | | (23 | ) | | 102 | | | — | | | — | | | — | | Reclassifications2) | | | (1,458 | ) | | 87 | | | (1,371 | ) | | — | | | — | | | — | | | — | | | — | | | — | | | | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, | | 58,664 | | | (9,333 | ) | | 49,331 | | | 60,259 | | | (10,604 | ) | | 49,655 | | | 55,528 | | | (10,049 | ) | | 45,479 | | | 55,616 | | | (7,820 | ) | | 47,796 | | | 56,943 | | | (8,266 | ) | | 48,677 | | | 58,664 | | | (9,333 | ) | | 49,331 | | | | |
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| 1) | Includes effects of foreign currency translation adjustments for loss and loss adjustment expenses for prior years claims of gross €(313) mn (2007: €(1,690) mn; 2006: €(1,141) mn) and net of €(284) mn (2007: €(1,052) mn; 2006: €(962) mn). |
| 2) | Since the first Quarter of 2008, health business in Belgium and France is shown within Life/Health segment. Prior year balances have not been adjusted |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Prior year’syears’ loss and loss adjustment expenses incurred reflectsreflect the changes in estimation charged or credited to the consolidated income statement in each year with respect to the reserves for loss and loss adjustment expenses established as of the beginning of that year. During the year ended December 31,2006,31, 2008, the Allianz Group recorded additional income of €969€1,443 mn (2005: €1,200(2007: €1,360 mn; 2004: €4572006: €969 mn) with respect of losses occurring in prior years. During the year ended December 31, 2006,2008, these amounts as percentages of the net balance of the beginning of the year were 2.0% (2005: 2.6%3.0% (2007: 2.8%; 2004: 1.0%2006: 2.0%). Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
LossDevelopment of the reserves for loss and loss adjustment expenses development for the Property-Casualty segment
The following table illustrates the development of the Allianz Group’s reserves for loss and loss adjustment expenses over the past five years. The table presents calendar year data, not accident year data. In addition, the table includes (excludes) subsidiaries from the date acquired (disposed). | | | | 2001
| | 2002
| | 2003
| | 2004
| | 2005
| | 2006
| | 2003 | | 2004 | | 2005 | | 2006 | | 2007 | | 2008 | | | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | Loss and loss adjustment expenses | | | | Net | | 45,727 | | | 45,466 | | | 44,683 | | | 45,479 | | | 49,655 | | | 49,331 | | Ceded | | 16,156 | | | 14,588 | | | 12,067 | | | 10,049 | | | 10,604 | | | 9,333 | | Gross | | 61,883 | | | 60,054 | | | 56,750 | | | 55,528 | | | 60,259 | | | 58,664 | | Reserves for loss and loss adjustment expenses (net) | | | 44,683 | | | 45,480 | | | 49,655 | | | 49,331 | | | 48,677 | | | 47,796 | Reserves for loss and loss adjustment expenses (ceded) | | | 12,067 | | | 10,049 | | | 10,604 | | | 9,333 | | | 8,266 | | | 7,820 | Reserves for loss and loss adjustment expenses (gross) | | | 56,750 | | | 55,529 | | | 60,259 | | | 58,664 | | | 56,943 | | | 55,616 | Paid (cumulative) as of | | | | | | | | | | | | | | | One year later | | 15,945 | | | 16,357 | | | 14,384 | | | 13,282 | | | 14,696 | | | | 14,384 | | | 13,282 | | | 14,696 | | | 14,206 | | | 13,607 | | | | Two years later | | 24,567 | | | 24,093 | | | 21,157 | | | 20,051 | | | | 21,157 | | | 20,051 | | | 21,909 | | | 20,659 | | | | | | Three years later | | 29,984 | | | 29,007 | | | 26,149 | | | | 26,149 | | | 24,801 | | | 26,583 | | | | | | | | Four years later | | 33,586 | | | 32,839 | | | | 29,847 | | | 28,206 | | | | | | | | | | Five years later | | 36,431 | | | | 32,570 | | | | | | | | | | | | Liability re-estimated as of | | | | Reserves reestimated as of | | | | | | | | | | | | | | One year later | | 58,571 | | | 56,550 | | | 54,103 | | | 56,238 | | | 57,932 | | | | 54,103 | | | 56,238 | | | 57,932 | | | 55,266 | | | 52,931 | | | | Two years later | | 56,554 | | | 55,704 | | | 55,365 | | | 53,374 | | | | 55,365 | | | 53,374 | | | 54,437 | | | 51,809 | | | | | | Three years later | | 56,056 | | | 57,387 | | | 53,907 | | | | 53,907 | | | 51,895 | | | 52,676 | | | | | | | | Four years later | | 57,640 | | | 56,802 | | | | 53,181 | | | 50,767 | | | | | | | | | | Five years later | | 57,006 | | | | 52,356 | | | | | | | | | | | | Cumulative surplus (deficiency) | | | | Gross surplus | | 4,877 | | | 3,252 | | | 2,843 | | | 2,154 | | | 2,327 | | | | Cumulative surplus | | | | | | | | | | | | | | Gross surplus1) | | | 4,394 | | | 4,761 | | | 7,583 | | | 6,855 | | | 4,012 | | | | Gross surplus after changes in the consolidated subsidiaries of the Allianz Group | | 4,970 | | | 3,252 | | | 2,303 | | | 2,154 | | | 2,327 | | | | 3,854 | | | 4,761 | | | 7,583 | | | 6,855 | | | 2,554 | | | | Net surplus | | 3,916 | | | 833 | | | 1,522 | | | 1,772 | | | 1,931 | | | | Net surplus1) | | | 3,046 | | | 4,191 | | | 6,037 | | | 5,347 | | | 3,098 | | | | Net surplus after changes in the consolidated subsidiaries of the Allianz Group | | 4,005 | | | 833 | | | 1,070 | | | 1,772 | | | 1,931 | | | | 2,593 | | | 4,191 | | | 6,037 | | | 5,347 | | | 1,727 | | | | Percent | | 8.8 | % | | 1.8 | % | | 2.4 | % | | 3.9 | % | | 3.9 | % | | | Net Surplus as percentage of initial reserves | | | 5.8 | % | | 9.2 | % | | 12.2 | % | | 10.8 | % | | 3.5 | % | | |
1) | Gross/net surplus represents the cumulative surplus from reestimating the reserves for loss and loss adjustment expenses for prior years claims and includes foreign currency translation adjustments of gross €313 mn (2007: €1,690 mn) and net €284 mn (2007: €1,052 mn). This leads to an effective run off result excluding effects of foreign currency translation of gross €2,241 mn (2007: €1,708 mn) and net €1,443 mn (2007: €1,360 mn) which can be found in the table for changes in the reserves for loss and loss adjustment expenses within this footnote. Please note that the 2007 numbers refer to the surplus presented in the consolidated financial statements 2007 and not the cumulative surplus of the calendar year 2007 presented in the table above. |
Discounted loss and loss adjustment expenses As of December 31, 20062008 and 2005,2007, the Allianz Group Property-Casualty reserves for loss and loss adjustment expenses reflected discounts of €1,377€1,139 mn and €1,326€1,100 mn, respectively. The discount reflected in the reserves is related to annuities for certain long-tailed liabilities, primarily in workers’ compensation, personal accident, general liability, motor liability, individual and group health disability and employers’ liability. All of the reserves that have been discounted have payment amounts that are fixed and timing that is reasonably determinable.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) The following table shows, by country,line of business, the carrying amounts of reserves for loss and loss adjustment expenses that have been discounted, and the interest rates used for discounting: | | | | | | | | | | | | | | | | Discounted reserves for loss and loss
adjustment expenses
| | Amount of the
discount
| | Interest rate used for
discounting
| As of December 31,
| | 2006
| | 2005
| | 2006
| | 2005
| | 2006
| | 2005
| | | | € mn | | € mn | | € mn | | € mn | | % | | % | France | | 1,325 | | 1,404 | | 349 | | 357 | | 3.25 | | 3.25 | Germany | | 504 | | 445 | | 346 | | 298 | | 2.75 – 4.00 | | 2.75 – 4.00 | Switzerland | | 427 | | 414 | | 253 | | 237 | | 3.25 | | 3.25 | United States | | 181 | | 213 | | 200 | | 230 | | 6.00 | | 6.00 | United Kingdom | | 139 | | 116 | | 133 | | 110 | | 4.00 – 4.25 | | 4.00 – 4.25 | Belgium | | 91 | | 91 | | 26 | | 28 | | 3.20 – 4.68 | | 4.68 | Portugal | | 79 | | 57 | | 47 | | 44 | | 4.00 | | 4.00 | Hungary | | 74 | | 67 | | 23 | | 22 | | 1.40 | | 1.40 | | | |
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| Total | | 2,820 | | 2,807 | | 1,377 | | 1,326 | | — | | — | | | |
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| | | | | | | | | | | | | | | | Discounted reserves for loss
and loss adjustment expenses | | Amount of the
discount | | Interest rate used for
discounting | As of December 31, | | 2008 | | 2007 | | 2008 | | 2007 | | 2008 | | 2007 | | | | € mn | | € mn | | € mn | | € mn | | % | | % | Motor—Third-party liability | | 632 | | 589 | | 446 | | 414 | | 1.40 – 5.25 | | 1.40 – 5.25 | General liability | | 190 | | 170 | | 164 | | 150 | | 1.40 – 5.25 | | 1.40 – 5.25 | Personal accident | | 325 | | 293 | | 201 | | 182 | | 2.25 – 4.00 | | 2.25 – 4.00 | Workers compensation / Employers liability | | 539 | | 520 | | 309 | | 335 | | 3.00 – 5.25 | | 3.00 – 5.25 | Others | | 26 | | 29 | | 19 | | 19 | | 1.40 – 5.25 | | 1.40 – 5.25 | | | | | | | | | | | | | | Total | | 1,712 | | 1,601 | | 1,139 | | 1,100 | | — | | — | | | | | | | | | | | | | |
1820 Reserves for insurance and investment contracts
| As of December 31,
| | 2006
| | 2005
| | 2008 | | 2007 | | | | € mn | | € mn | | € mn | | € mn | Aggregate policy reserves | | 256,333 | | 249,012 | | 278,700 | | 264,243 | Reserves for premium refunds | | 30,689 | | 28,510 | | 17,195 | | 27,225 | Other insurance reserves | | 675 | | 790 | | 662 | | 776 | | | |
| |
| | | | | Total | | 287,697 | | 278,312 | | 296,557 | | 292,244 | | | |
| |
| | | | |
Aggregate policy reserves | | | | | As of December 31,
| | 2006
| | 2005
| | | | € mn | | € mn | Traditional participating insurance contracts (SFAS 120) | | 123,835 | | 120,967 | Long-duration insurance contracts (SFAS 60) | | 45,390 | | 39,679 | Universal-Life type insurance contracts (SFAS 97) | | 86,681 | | 88,078 | Non unit linked investment contracts | | 427 | | 288 | | | |
| |
| Total | | 256,333 | | 249,012 | | | |
| |
|
Changes in aggregate policy reserves for traditional participating insurance contracts and long-duration insurance contracts for the year ended December 31, 2006 were as follows:
| | | | | | | | | | Traditional
participating
insurance
contracts (SFAS 120)
| | | Long-
duration
insurance
contracts (SFAS 60)
| | | | | € mn | | | € mn | | As of December 31, 2005 | | 120,967 | | | 39,679 | | Reclassifications | | — | | | 4,945 | | As of January 1, 2006 | | 120,967 | | | 44,624 | | Foreign currency translation adjustments | | (119 | ) | | (356 | ) | Changes recorded in consolidated income statements | | 2,393 | | | 927 | | Novation of reinsurance agreements | | (420 | ) | | — | | Dividends allocated to policyholders | | 1,029 | | | 198 | | Other changes | | (15 | ) | | (3 | ) | | | |
|
| |
|
| As of December 31, 2006 | | 123,835 | | | 45,390 | | | | |
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|
|
| | | | | As of December 31, | | 2008 | | 2007 | | | | € mn | | € mn | Traditional participating insurance contracts
(SFAS 120) | | 129,859 | | 127,502 | Long-duration insurance contracts (SFAS 60) | | 46,943 | | 46,337 | Universal life-type insurance contracts (SFAS 97) | | 101,059 | | 89,840 | Non unit-linked investment contracts | | 839 | | 564 | | | | | | Total | | 278,700 | | 264,243 | | | | | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Changes in aggregate policy reserves for universal-life typetraditional participating insurance contracts and non unit linked investmentlong-duration insurance contracts for the yearyears ended December 31, 20062008 and 2007 were as follows: | | | | | | | | | | Universal-
life type
insurance
contracts
(SFAS 97)
| | | Non unit
linked
investment
contracts
| | | | | € mn | | | € mn | | As of December 31, 2005 | | 88,078 | | | 288 | | Reclassifications | | (4,945 | ) | | — | | | | |
|
| |
|
| As of January 1, 2006 | | 83,133 | | | 288 | | Foreign currency translation adjustments | | (3,686 | ) | | (12 | ) | Premiums collected | | 13,092 | | | 142 | | Separation of embedded derivatives | | (543 | ) | | — | | Interest credited | | 3,106 | | | 20 | | Releases upon death, surrender and withdrawal | | (7,785 | ) | | (104 | ) | Policyholder charges | | (541 | ) | | (2 | ) | Transfers | | (95 | ) | | 95 | | | | |
|
| |
|
| As of December 31, 2006 | | 86,681 | | | 427 | | | | |
|
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|
|
| | | | | | | | | | | | | | | | 2008 | | | 2007 | | | | | Traditional
participating
insurance
contracts
(SFAS 120) | | | Long-
duration
insurance
contracts
(SFAS 60) | | | Traditional
participating
insurance
contracts
(SFAS 120) | | | Long-
duration
insurance
contracts
(SFAS 60) | | | | | € mn | | | € mn | | | € mn | | | € mn | | As of January 1, | | 127,502 | | | 46,337 | | | 123,835 | | | 45,390 | | Foreign currency translation adjustments | | 390 | | | (929 | ) | | (104 | ) | | (755 | ) | Changes in the consolidated subsidiaries of the Allianz Group | | — | | | 266 | | | — | | | 10 | | Changes recorded in consolidated income statements | | 1,187 | | | 828 | | | 2,445 | | | 954 | | Dividends allocated to policyholders | | 1,153 | | | 244 | | | 1,278 | | | 207 | | Additions and disposals | | (160 | ) | | (34 | ) | | — | | | (2 | ) | Other changes | | (213 | )1) | | 231 | | | 48 | | | 533 | 2) | | | | | | | | | | | | | | As of December 31, | | 129,859 | | | 46,943 | | | 127,502 | | | 46,337 | | | | | | | | | | | | | | |
1) | For the year ended December 31, 2008, consists of shadow accounting of €(135) mn. |
2) | Mainly relating to a reclassification from reserves for premium refunds and other insurances reserves. |
Changes in aggregate policy reserves for universal life-type insurance contracts and financial liabilities for unit linkednon unit-linked investment contracts for the yearyears ended December 31, 20052008 and 2007 were as follows: | | | | | | | | | | | | 2005
| | | | | SFAS 120
| | | SFAS 60
| | SFAS 97
| | | | | € mn | | | € mn | | € mn | | As of January 1, 2005 | | 117,439 | | | 38,442 | | 114,900 | | Foreign currency translation adjustments | | (28 | ) | | 280 | | 7,378 | | Changes in the consolidated subsidiaries of the Allianz Group | | 77 | | | — | | (99 | ) | Deposits from SFAS 97 contracts | | — | | | — | | 27,179 | | Changes recorded in premiums earned (net) | | — | | | — | | (2,414 | ) | Changes recorded in changes in reserves for insurance and investment contracts (net) | | 2,698 | | | 558 | | 2,125 | | Changes recorded in income from financial assets and liabilities carried at fair value through income (net) | | — | | | — | | 3,551 | | Other changes | | 781 | | | 399 | | (9,593 | ) | | | |
|
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|
| As of December 31, 2005 | | 120,967 | | | 39,679 | | 143,027 | | | | |
|
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|
| Comprised of: | | | | | | | | | Universal life type insurance contracts | | | | | | | 88,078 | | Non unit linked investment contracts | | | | | | | 288 | | Unit linked insurance contracts | | | | | | | 30,320 | | Unit linked investment contracts | | | | | | | 24,341 | | | | | | | | | |
|
| Total | | | | | | | 143,027 | | | | | | | | | |
|
|
| | | | | | | | | | | | | | | | 2008 | | | 2007 | | | | | Universal
life-type
insurance
contracts
(SFAS 97) | | | Non unit-
linked
investment
contracts | | | Universal
life-type
insurance
contracts
(SFAS 97) | | | Non unit-
linked
investment
contracts | | | | | € mn | | | € mn | | | € mn | | | € mn | | As of January 1, | | 89,840 | | | 564 | | | 86,681 | | | 427 | | Foreign currency translation adjustments | | 1,655 | | | (16 | ) | | (3,933 | ) | | (12 | ) | Premiums collected | | 12,810 | | | 395 | | | 12,579 | | | 231 | | Separation of embedded derivatives | | (472 | ) | | — | | | (473 | ) | | — | | Interest credited | | 3,938 | | | 70 | | | 3,178 | | | 47 | | Releases upon death, surrender and withdrawal | | (9,770 | ) | | (164 | ) | | (8,650 | ) | | (105 | ) | Policyholder charges | | (1,024 | ) | | (13 | ) | | (715 | ) | | (28 | ) | Additions | | — | | | — | | | 81 | | | — | | Portfolio acquisitions and disposals | | (14 | ) | | — | | | (37 | ) | | — | | Reclassifications1) | | 4,096 | | | 3 | | | 1,129 | | | 4 | | | | | | | | | | | | | | | As of December 31, | | 101,059 | | | 839 | | | 89,840 | | | 564 | | | | | | | | | | | | | | |
1) | The reclassifications mainly relate to insurance contracts when policies transfer from a separate account contract to a universal life-type contract. |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) As of December 31, 2006,2008, participating life business represented approximately 62% (2005: 62%65% (2007: 65%) of the Allianz Group’s gross insurance in-force.inforce. During the year ended December 31, 2006,2008, participating policies represented approximately 66% (2005: 66%64% (2007: 61%) of gross statutory premiums written and 63% (2005: 63%64% (2007: 60%) of life premiums earned. As of December 31, 2006,2008, reserves for conventional participating policies were approximately 54% (2005: 53%(2007: 54%) of the Allianz Group’s consolidated aggregate policy reserves. Reserves for premium refunds | | | | 2006
| | 2005
| | 2004
| | 2008 | | 2007 | | 2006 | | | | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | Amounts already allocated under local statutory or contractual regulations: | | | Amounts already allocated under local statutory or contractual regulations | | | | | | | | As of January 1, | | 10,915 | | | 8,794 | | | 7,326 | | 13,438 | | | 12,764 | | | 10,915 | | Foreign currency translation adjustments | | (9 | ) | | 14 | | | 6 | | 6 | | | (15 | ) | | (9 | ) | Changes in the consolidated subsidiaries of the Allianz Group | | — | | | — | | | 27 | | Change | | 1,858 | | | 2,107 | | | 1,435 | | Changes | | | (986 | ) | | 689 | | | 1,858 | | | | | | | | | | | | | As of December 31, | | 12,764 | | | 10,915 | | | 8,794 | | 12,458 | | | 13,438 | | | 12,764 | | Latent reserves for premium refunds: | | | | | | | | | | | | | | Latent reserves for premium refunds | | | | | | | | As of January 1, | | 17,595 | | | 12,443 | | | 8,001 | | 13,787 | | | 17,260 | | | 16,930 | | Foreign currency translation Adjustments | | (24 | ) | | (4 | ) | | 6 | | Foreign currency translation adjustments | | | 67 | | | (19 | ) | | (24 | ) | Changes due to fluctuations in market value | | (50 | ) | | 4,094 | | | 3,771 | | (7,024 | ) | | (4,099 | ) | | (50 | ) | Changes in the consolidated subsidiaries of the Allianz Group | | (491 | ) | | 6 | | | 71 | | — | | | — | | | (491 | ) | Changes due to valuation differences charged (credited) to income | | 895 | | | 1,056 | | | 594 | | Changes due to valuation differences charged to income | | | (2,093 | ) | | 645 | | | 895 | | | | | | | | | | | | | As of December 31, | | 17,925 | | | 17,595 | | | 12,443 | | 4,737 | | | 13,787 | | | 17,260 | | | | |
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| | | | | | | | | | Total | | 30,689 | | | 28,510 | | | 21,237 | | 17,195 | | | 27,225 | | | 30,024 | | | | |
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| | | | | | | | | |
Concentration of insurance risk in the Life/Health segment The Allianz Group’s Life/Health segment provides a wide variety of insurance and investment contracts to individuals and groups in approximately 30 countries around the world. Individual contracts include both traditional contracts and unit-linked contracts. Without consideration of policyholderpolicy holder participation, traditional contracts generally incorporate significant investment risk for the Allianz Group. Traditional contracts include life, endowment, annuity, and supplemental health contracts. Traditional annuity contracts are issued in both deferred and immediate types. In addition, the Allianz Group’s Life/Healthlife insurance operations in the United States issue a significant amount of equity indexedequity-indexed deferred annuities. Unit-linked contracts generally result in the contract holder assuming investment risk. In addition, in certain markets, the Allianz Group issues contracts for group life, group health and group pension contracts.products.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) As of December 31, 20062008 and 2005,2007, the Allianz Group’s deferred acquisition costs and reserves for insurance and investment contracts for the Life/Health segment are summarized as follows: | As of December 31,
| | Deferred
acquisition costs
| | Aggregate
policy
reserves
| | Reserves
for
premium
refunds
| | Other
insurance
reserves
| | Total
non-
unit
linked
reserves
| | Unit
linked
liabilities
| | Total
| | Deferred
acquisition
costs | | Aggregate
policy
reserves | | Reserves
for
premium
refunds | | Other
insurance
reserves | | Total
non
unit-
linked
reserves | | Liabilities
for unit-
linked
contracts | | Total | | | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | 2006 | | | | | | | | | | | | | | | | Countries with legal or contractual policyholder participation in insurance, investment and/or expense risk: | | | | | | | | | | | | | | | | 2008 | | | | | | | | | | | | | | | | Countries with legal or contractual policyholder participation in insurance, investment and/or expense risk | | | | | | | | | | | | | | | | Germany Life | | 5,331 | | 112,103 | | 18,844 | | 3 | | 130,950 | | 1,095 | | 132,045 | | 6,249 | | 121,146 | | 10,782 | | | 3 | | 131,931 | | 1,660 | | 133,591 | Germany Health | | 857 | | 12,070 | | 3,369 | | 3 | | 15,442 | | — | | 15,442 | | 897 | | 14,159 | | 4,095 | | | 5 | | 18,259 | | — | | 18,259 | France | | 1,238 | | 41,622 | | 4,837 | | 59 | | 46,518 | | 12,430 | | 58,948 | | 1,378 | | 45,420 | | 786 | | | 163 | | 46,369 | | 11,021 | | 57,390 | Italy | | 1,148 | | 19,640 | | 408 | | 2 | | 20,050 | | 24,779 | | 44,829 | | 948 | | 18,946 | | (191 | ) | | 36 | | 18,791 | | 20,307 | | 39,098 | Switzerland | | 267 | | 5,707 | | 689 | | 117 | | 6,513 | | 558 | | 7,071 | | 237 | | 6,635 | | 589 | | | 121 | | 7,345 | | 512 | | 7,857 | Austria | | 126 | | 3,050 | | 365 | | — | | 3,415 | | 194 | | 3,609 | | 269 | | 3,232 | | 124 | | | 1 | | 3,357 | | 347 | | 3,704 | South Korea | | 786 | | 5,847 | | 58 | | — | | 5,905 | | 970 | | 6,875 | | 590 | | 4,781 | | 34 | | | — | | 4,815 | | 499 | | 5,314 | | | |
| |
| |
| |
| |
| |
| |
| | | | | | | | | | | | | | | | Subtotal | | 9,753 | | 200,039 | | 28,570 | | 184 | | 228,793 | | 40,026 | | 268,819 | | 10,568 | | 214,319 | | 16,219 | | | 329 | | 230,867 | | 34,346 | | 265,213 | | | |
| |
| |
| |
| |
| |
| |
| | | | | | | | | | | | | | | | Other Countries: | | | | | | | | | | | | | | | | Other Countries | | | | | | | | | | | | | | | | Belgium | | 118 | | 5,035 | | 26 | | — | | 5,061 | | 325 | | 5,386 | | 110 | | 5,632 | | (55 | ) | | 38 | | 5,615 | | 235 | | 5,850 | Spain | | 24 | | 4,637 | | 451 | | 1 | | 5,089 | | 114 | | 5,203 | | 23 | | 5,065 | | 308 | | | — | | 5,373 | | 47 | | 5,420 | Other Western and Southern Europe | | 305 | | 2,188 | | 126 | | — | | 2,314 | | 3,564 | | 5,878 | | 346 | | 1,978 | | (29 | ) | | 13 | | 1,962 | | 3,365 | | 5,327 | Eastern Europe | | 236 | | 1,465 | | 27 | | 11 | | 1,503 | | 668 | | 2,171 | | 353 | | 1,869 | | 9 | | | 4 | | 1,882 | | 789 | | 2,671 | United States | | 4,601 | | 32,762 | | — | | — | | 32,762 | | 15,063 | | 47,825 | | 6,873 | | 38,627 | | — | | | — | | 38,627 | | 8,473 | | 47,100 | Taiwan | | 209 | | 1,883 | | — | | — | | 1,883 | | 1,868 | | 3,751 | | 200 | | 1,617 | | — | | | — | | 1,617 | | 2,419 | | 4,036 | Other Asia-Pacific | | 131 | | 434 | | 45 | | — | | 479 | | 176 | | 655 | | 212 | | 810 | | 76 | | | 5 | | 891 | | 771 | | 1,662 | South America | | — | | 88 | | — | | — | | 88 | | 58 | | 146 | | 2 | | 226 | | — | | | — | | 226 | | — | | 226 | Other | | 4 | | 716 | | 7 | | 6 | | 729 | | 2 | | 731 | | 6 | | 862 | | 8 | | | 2 | | 872 | | 5 | | 877 | | | | | | | | | | | | | | | | | | Subtotal | | 5,628 | | 49,208 | | 682 | | 18 | | 49,908 | | 21,838 | | 71,746 | | 8,125 | | 56,686 | | 317 | | | 62 | | 57,065 | | 16,104 | | 73,169 | | | |
| |
| |
| |
| |
| |
| |
| | | | | | | | | | | | | | | | Total | | 15,381 | | 249,247 | | 29,252 | | 202 | | 278,701 | | 61,864 | | 340,565 | | 18,693 | | 271,005 | | 16,536 | | | 391 | | 287,932 | | 50,450 | | 338,382 | | | |
| |
| |
| |
| |
| |
| |
| | | | | | | | | | | | | | | | 2005 | | | | | | | | | | | | | | | | Countries with legal or contractual policyholder participation in insurance, investment and/or expense risk: | | | | | | | | | | | | | | | | 2007 | | | | | | | | | | | | | | | | Countries with legal or contractual policyholder participation in insurance, investment and/or expense risk | | | | | | | | | | | | | | | | Germany Life | | 5,196 | | 107,977 | | 15,735 | | 3 | | 123,715 | | 681 | | 124,396 | | 5,907 | | 117,478 | | 17,070 | | | 3 | | 134,551 | | 1,831 | | 136,382 | Germany Health | | 819 | | 11,370 | | 3,049 | | 3 | | 14,422 | | — | | 14,422 | | 867 | | 13,339 | | 3,949 | | | 4 | | 17,292 | | — | | 17,292 | France | | 1,096 | | 40,987 | | 5,358 | | 67 | | 46,412 | | 9,692 | | 56,104 | | 1,189 | | 42,830 | | 3,603 | | | 202 | | 46,635 | | 14,285 | | 60,920 | Italy | | 1,175 | | 19,212 | | 963 | | 2 | | 20,177 | | 23,886 | | 44,063 | | 1,146 | | 19,120 | | 14 | | | — | | 19,134 | | 25,682 | | 44,816 | Switzerland | | 292 | | 5,894 | | 657 | | 129 | | 6,680 | | 464 | | 7,144 | | 238 | | 5,695 | | 610 | | | 107 | | 6,412 | | 583 | | 6,995 | Austria | | 108 | | 2,924 | | 323 | | — | | 3,247 | | 119 | | 3,366 | | 142 | | 3,195 | | 273 | | | 3 | | 3,471 | | 277 | | 3,748 | South Korea | | 694 | | 5,679 | | 68 | | — | | 5,747 | | 484 | | 6,231 | | 785 | | 5,978 | | 47 | | | — | | 6,025 | | 904 | | 6,929 | | | |
| |
| |
| |
| |
| |
| |
| | | | | | | | | | | | | | | | Subtotal | | 9,380 | | 194,043 | | 26,153 | | 204 | | 220,400 | | 35,326 | | 255,726 | | 10,274 | | 207,635 | | 25,566 | | | 319 | | 233,520 | | 43,562 | | 277,082 | | | |
| |
| |
| |
| |
| |
| |
| | | | | | | | | | | | | | | | Other Countries: | | | | | | | | | | | | | | | | Other Countries | | | | | | | | | | | | | | | | Belgium | | 93 | | 4,782 | | 62 | | — | | 4,844 | | 368 | | 5,212 | | 112 | | 5,327 | | 17 | | | — | | 5,344 | | 302 | | 5,646 | Spain | | 21 | | 4,394 | | 716 | | — | | 5,110 | | 131 | | 5,241 | | 25 | | 4,857 | | 138 | | | — | | 4,995 | | 92 | | 5,087 | Other Western and Southern Europe | | 321 | | 2,194 | | 44 | | — | | 2,238 | | 3,258 | | 5,496 | | 318 | | 1,865 | | 151 | | | — | | 2,016 | | 3,819 | | 5,835 | Eastern Europe | | 200 | | 1,270 | | 17 | | 10 | | 1,297 | | 289 | | 1,586 | | 291 | | 1,596 | | 25 | | | 4 | | 1,625 | | 1,076 | | 2,701 | United States | | 4,217 | | 32,218 | | — | | — | | 32,218 | | 13,751 | | 45,969 | | 4,394 | | 32,291 | | — | | | — | | 32,291 | | 13,954 | | 46,245 | Taiwan | | 170 | | 1,778 | | — | | — | | 1,778 | | 1,325 | | 3,103 | | 250 | | 1,841 | | — | | | — | | 1,841 | | 2,710 | | 4,551 | Other Asia-Pacific | | 107 | | 296 | | 29 | | — | | 325 | | 120 | | 445 | | 172 | | 565 | | 58 | | | — | | 623 | | 529 | | 1,152 | South America | | — | | 90 | | — | | 1 | | 91 | | 92 | | 183 | | — | | 93 | | — | | | — | | 93 | | 12 | | 105 | Other | | 41 | | 1,127 | | 2 | | 3 | | 1,132 | | 1 | | 1,133 | | 2 | | 776 | | 10 | | | 5 | | 791 | | 4 | | 795 | | | | | | | | | | | | | | | | | | Subtotal | | 5,170 | | 48,149 | | 870 | | 14 | | 49,033 | | 19,335 | | 68,368 | | 5,564 | | 49,211 | | 399 | | | 9 | | 49,619 | | 22,498 | | 72,117 | | | |
| |
| |
| |
| |
| |
| |
| | | | | | | | | | | | | | | | Total | | 14,550 | | 242,192 | | 27,023 | | 218 | | 269,433 | | 54,661 | | 324,094 | | 15,838 | | 256,846 | | 25,965 | | | 328 | | 283,139 | | 66,060 | | 349,199 | | | |
| |
| |
| |
| |
| |
| |
| | | | | | | | | | | | | | | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) A significant partmajority of the Allianz Group’s Life/Health segment operations is conducted in Western Europe. Insurance laws and regulations in Western Europe have historically been characterized by legal or contractual minimum participation of contract holders in the profits of the insurance company issuing the contract. In particular, Germany, Switzerland and Austria, which comprise approximately 42%48% and 41%47%, of the Allianz Group’s reserves for insurance and investment contracts as of December 31, 20062008 and 20052007, respectively, include a significantsubstantial level of policyholder participation in all sources of profit including mortality/morbidity, investment and expense. As a result of this policyholder participation, the Allianz Group’s exposure to insurance, investment and expense risk is mitigated. Furthermore, a significant portionall of the Allianz Group’s traditional and unit-linked contractsannuity policies issued in the United States meet the criteria for classification as insurance contracts under IFRS 4, on an individual contract basis, because these contractsthey include options for contract holders to elect a life-contingent annuity. These contracts currently do not expose the Allianz Group to significant insurancelongevity risk, nor are they expected to do so in the future, as the projected and observed annuitization rates are not significant.very low. Additionally, a significant portionmany of the Allianz Group’s traditional contracts issued in France and Italy do not incorporate significant insurance risk, despite the fact thatalthough they are accounted for as insurance contracts, due tobecause of their discretionary participation features. Furthermore,Similarly, a significant portion of the Allianz Group’s unit-linked contracts in France and Italy are investment contracts, which neither meet the definition of an “insurance contract” in accordance with IFRS (as they do not incorporate significant insurance risk) nor do they have discretionary participation features, and accordingly the Allianz Group does not account for these contracts under IFRS 4. These unit-linked contracts are accounted for as financial instruments in accordance with IAS 39,Financial Instruments: Recognition and Measurement.risk. As a result of the significantconsiderable diversity in types of contracts issued, including the offsetting effects of mortality risk and longevity risk inherent in a combined portfolio of life insurance and annuityproducts,annuity products, and the geographic diversity of the Allianz Group’s Life/Health segment, as well as the significantsubstantial level of policyholder participation in mortality/morbidity risk in certain countries in Western Europe, the Allianz Group does not believe its Life/Health segment has any significant concentrations of insurance risk, nor does it believe its net income or shareholders’ equity is highly sensitive to insurance risk. The Allianz Group’s Life/Health segment is exposed to significant investment risk as a result of guaranteed minimum interest rates included in most of its traditional contracts. A summary of theThe weighted average guaranteed minimum interest rates of the Allianz Group’s most significantlargest operating entities in the Life/Health segment can be summarized by country is as follows: | As of December 31,
| | 2006
| | 2005
| | 2008 | | 2007 | | | | % | | % | | % | | % | Country | | | | | | | | | Germany Life | | 3.44 | | 3.49 | | 3.38 | | 3.46 | France | | 2.44 | | na | | 1.31 | | 1.99 | Italy | | 2.50 | | 2.85 | | 2.87 | | 2.49 | Switzerland | | 2.86 | | 3.05 | | 2.89 | | 2.87 | Spain | | 5.38 | | 5.39 | | 4.74 | | 5.05 | Netherlands | | 0.82 | | 0.84 | | 0.93 | | 0.82 | Austria | | 3.11 | | 3.10 | | 3.00 | | 3.00 | Belgium | | 4.06 | | 4.18 | | 3.80 | | 3.95 | United States | | — | | — | | 2.35 | | 2.70 | South Korea | | 6.06 | | 6.34 | | 5.43 | | 5.29 | Taiwan | | 3.74 | | 4.84 | | Taiwan1) | | | 6.17 | | 5.52 |
1) | Guarantees only on 10.4% of reserves in 2008 and 5.3% in 2007. |
In most of these markets, the effective interest rates being earned on the investment portfolio exceed these guaranteed minimum interest rates. In addition, the operations in these markets may also have significant mortality and expense margins. As a result, as of December 31, 20062008 and 2005,2007, the Allianz Group does not believe that it is exposed to a significant risk of premium deficiencies in its Life/Health segment. However, the Allianz Group’s life/healthLife/Health operations in Switzerland, Belgium, South Korea and Taiwan, have high guaranteed minimum interest rates on older contracts in their portfolios and, as a result, may be sensitive to any declines in investment rates or a prolonged low interest rate environment. 21 Financial liabilities for unit-linked contracts | | | | | As of December 31, | | 2008 | | 2007 | | | | € mn | | € mn | Unit-linked insurance contracts | | 29,056 | | 39,323 | Unit-linked investment contracts | | 21,394 | | 26,737 | | | | | | Total | | 50,450 | | 66,060 | | | | | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Changes in financial liabilities for unit-linked insurance contracts and unit-linked investment contracts for the years ended December 31, 2008 and 2007 were as follows: | | | | | | | | | | | | | | | | 2008 | | | 2007 | | | | | Unit-linked
insurance
contracts | | | Unit-linked
investment
contracts | | | Unit-linked
Insurance
contracts | | | Unit-linked
investment
contracts | | | | | € mn | | | € mn | | | € mn | | | € mn | | As of January 1, | | 39,323 | | | 26,737 | | | 36,296 | | | 25,568 | | Foreign currency translation adjustments | | 697 | | | (15 | ) | | (1,954 | ) | | (2 | ) | Changes in the consolidated subsidiaries of the Allianz Group | | — | | | 152 | | | — | | | — | | Premiums collected | | 7,775 | | | 3,963 | | | 9,381 | | | 7,903 | | Interest credited | | (10,650 | ) | | (2,815 | ) | | 1,508 | | | (149 | ) | Releases upon death, surrender and withdrawal | | (3,323 | ) | | (6,314 | ) | | (3,740 | ) | | (6,286 | ) | Policyholder charges | | (838 | ) | | (141 | ) | | (1,130 | ) | | (222 | ) | Portfolio acquisitions and disposals | | (1 | ) | | (1 | ) | | 20 | | | — | | Reclassifications1) | | (3,927 | ) | | (172 | ) | | (1,058 | ) | | (75 | ) | | | | | | | | | | | | | | As of December 31, | | 29,056 | | | 21,394 | | | 39,323 | | | 26,737 | | | | | | | | | | | | | | |
1) | The reclassifications mainly relate to insurance contracts when policies transfer from a separate account contract to a universal life-type contract. |
Liquidity Risk Tabular disclosure of contractual obligations The table sets forth the Allianz Group’s contractual obligations as of December 31, 2008. Contractual obligations do not include contingent liabilities or commitments. Only transactions with parties outside the Allianz Group are considered. With the announcement of the sale of Dresdner Bank from Allianz to Commerzbank as of August 31, 2008, Dresdner Bank was classified as a disposal group held-for-sale and discontinued operations. Following this classification, contractual obligations of Dresdner Bank are presented as part of the disposal group held-for-sale and discontinued operations. The following table includes only continuing operations. The table includes only liabilities that represent fixed and determinable amounts. The table excludes interest on floating rate long-term debt obligations and interest on money market securities, as the contractual interest rate on floating rate interest is not fixed and determinable. The amount and timing of interest on money market securities is not fixed and determinable since these instruments have a daily maturity. For further information, see Notes 23 and 24 to the consolidated financial statements. Furthermore, reserves for insurance and investment contracts presented in the table include contracts where the timing and amount of payments are considered fixed and determinable and contracts which have no specified maturity dates and may result in a payment to the contract holder depending on mortality and morbidity experience and the incidence of surrenders, lapses, or maturities. For contracts which do not have payments that are fixed and determinable, the Allianz Group has made assumptions to estimate the undiscounted cash flows of contractual policy benefits including mortality, morbidity, interest crediting rates, policyholder participation in profits, and future lapse rates. These assumptions represent current best estimates, and may differ from the estimates originally used to establish the reserves for insurance and investment contracts as a result of the lock-in of assumptions on the issue dates of the contracts as required by the Allianz Group’s established accounting policy. For further information, see Note 2 to the consolidated financial statements. Due to the uncertainty of the assumptions used, the amount presented could be materially different from the actual incurred payments in future periods. Furthermore, these amounts do not include premiums and fees expected to be received, investment income earned, expenses incurred to parties other than the policyholders such
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) as agents, or administrative expenses. In addition, these amounts are presented net of reinsurance expected to be received as a result of these cash flows. The amounts presented in this table are undiscounted and therefore exceed the reserves for insurance and investment contracts presented in the consolidated balance sheet. For further information on reserves for insurance and investment contracts, see Note 20 to the consolidated financial statements.
As of December 31, 2008, the income tax obligations amounted to €1,446 mn. Thereof €1,106 mn the Allianz Group expects to pay within the twelve months after the balance sheet date. For the remaining amount of €340 mn an estimate of the timing of cash outflows is not reasonably possible. The income tax obligations are not included in the table below. | | | | | | | | | | | | | | Payments due by period as of December 31, 2008 | | | | Less than
1 year | | 1–3 years | | 3–5 years | | More than
5 years | | Total | | | | € mn | | € mn | | € mn | | € mn | | € mn | Long-term debt obligations1) | | 5,191 | | 329 | | 2,479 | | 10,891 | | 18,890 | Interest on long-term debt obligations2) | | 21 | | 9 | | 129 | | 285 | | 444 | Operating lease obligations3) | | 261 | | 470 | | 371 | | 1,108 | | 2,210 | Purchase obligations4) | | 166 | | 258 | | 116 | | 203 | | 743 | Liabilities to banks and customers5) | | 15,480 | | 1,020 | | 760 | | 1,191 | | 18,451 | Future policy benefits | | 34,376 | | 99,114 | | 63,172 | | 642,805 | | 839,467 | Reserves for loss and loss adjustment expenses6) | | 17,271 | | 14,455 | | 7,212 | | 16,678 | | 55,616 | | | | | | | | | | | | Total contractual obligations | | 72,766 | | 115,655 | | 74,239 | | 673,161 | | 935,821 | | | | | | | | | | | |
1) | For further information, see Notes 23 and 24 to the consolidated financial statements. Total obligations of €56,894 mn at December 31, 2007 included obligations of Dresdner Bank, which are no longer obligations of the Allianz Group. |
2) | Amounts included in the table reflect estimates of interest on fixed rate long-term debt obligations to be made to lenders based upon the contractually fixed interest rates. |
3) | The amount of €2,210 mn is gross of €43 mn related to subleases, which represent cash inflow to the Allianz Group. |
4) | Purchase obligations only include transactions related to goods and services; purchase obligations for financial instruments are excluded. |
5) | Liabilities to banks and customers include €311 mn and €4,096 mn of payables on demand, respectively. For further information, see Note 17 to the consolidated financial statements. Total liabilities of €336,494 at December 31, 2007 included liabilities of Dresdner Bank, which are no longer liabilities of the Allianz Group. |
6) | Comprise reserves for loss and loss adjustment expenses from the Property-Casualty insurance operations. Due to the uncertainty of the assumptions used, the amounts presented could be materially different from the actual incurred payments in future periods. The amounts presented in the table above are gross of reinsurance ceded. The corresponding amounts, net of reinsurance ceded, are €14,621 mn, €12,339 mn, €6,215 mn and €14,620 mn for the periods less than 1 year, 1-3 years, 3-5 years and more than 5 years, respectively. For further information on reserves for loss and loss adjustment expenses, see Note 19 to the consolidated financial statements. |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Reconciliation of future policy benefits The following table presents a reconciliation of future policy benefits to the total balance sheet positions, which include reserves for insurance and investment contracts and financial liabilities for unit-linked contracts, as presented in the consolidated balance sheet: | | | | As of December 31, | | 2008 | | | | € mn | | Future policy benefits | | 839,467 | | Effect of discounting and differences between locked-in and best estimate assumptions | | (363,279 | ) | Expected future premiums and expenses | | (147,731 | ) | | | | | Total consolidated balance sheet positions | | 328,457 | | | | | | Thereof: | | | | Reserves for insurance and investment contracts | | 296,557 | | Financial liabilities for unit-linked contracts | | 50,450 | | Market value liability options | | 5,163 | | Less: | | | | Deferred acquisition costs | | 18,695 | | Ceded reserves to reinsurers | | 5,018 | | | | | | Total consolidated balance sheet positions | | 328,457 | | | | | |
Reconciling items related to the effect of discounting and differences between locked-in and best estimate assumptions occur because future policy benefits are presented on an undiscounted basis, while reserves for insurance and investment contracts in the consolidated balance sheet reflect the time value of money. Furthermore, future policy benefits are based on current best estimate assumptions such as mortality, morbidity, interest rates, policy-holder participation in profits and future lapse rates. For certain contracts (SFAS 60 and SFAS 97), current best estimate assumptions may differ from the locked-in estimates required to be used to establish the reserves for insurance and investment contracts in the consolidated balance sheet, which also include provisions for adverse deviations as required by the Allianz Group’s established accounting policy. Reconciling items related to expected future premiums and expenses occur because future policy benefits take into account best estimates of future premiums expected to be received and future expenditures expected to be incurred. Future policy benefits implicitly include embedded derivatives or market value liability options (MVLO) of our equity-indexed annuity business that are accounted for as derivatives and are presented within financial liabilities carried at fair value through income in our consolidated balance sheet. Deferred acquisition costs comprise deferred acquisition costs for our Life/Health segment, present value of future profits and deferred sales inducements. See Note 12 to our consolidated financial statements for more information. Ceded reserves to reinsurers are presented within reinsurance assets in our consolidated balance sheet.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) 22 Other liabilities | | | | | As of December 31, | | 20081) | | 2007 | | | | € mn | | € mn | Payables | | | | | Policyholders | | 4,695 | | 4,806 | Reinsurance | | 2,062 | | 1,844 | Agents | | 1,485 | | 1,743 | | | | | | Subtotal | | 8,242 | | 8,393 | | | | | | Payables for social security | | 316 | | 196 | Tax payables | | | | | Income tax | | 1,446 | | 2,563 | Other | | 971 | | 1,012 | | | | | | Subtotal | | 2,417 | | 3,575 | | | | | | Accrued interest and rent | | 723 | | 4,226 | Unearned income | | | | | Interest and rent | | 10 | | 6 | Other | | 361 | | 351 | | | | | | Subtotal | | 371 | | 357 | | | | | | Provisions | | | | | Pensions and similar obligations | | 3,867 | | 4,184 | Employee related | | 1,904 | | 2,956 | Share-based compensation | | 1,295 | | 1,761 | Restructuring plans | | 343 | | 541 | Loan commitments | | 8 | | 201 | Contingent losses from non-insurance business | | 109 | | 134 | Other provisions | | 1,481 | | 1,857 | | | | | | Subtotal | | 9,007 | | 11,634 | | | | | | Deposits retained for reinsurance ceded | | 2,852 | | 3,227 | Derivative financial instruments used for hedging that meet the criteria for hedge accounting and firm commitments | | 208 | | 2,210 | Financial liabilities for puttable equity instruments | | 2,718 | | 4,162 | Other liabilities | | 6,076 | | 10,051 | | | | | | Total | | 32,930 | | 48,031 | | | | | |
1) | Does not include other liabilities of Dresdner Bank which were classified as held-for-sale. See Note 4. |
Other liabilities due within one year amounted to 24,766 mn (2007: €38,151 mn) and those due after more than one year totaled €8,164 mn (2007: €9,880 mn).
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) 19 Financial liabilities for unit linked contracts
| | | | | As of December 31,
| | 2006
| | 2005
| | | | € mn | | € mn | Unit linked insurance contracts | | 36,296 | | 30,320 | Unit linked investment contracts | | 25,568 | | 24,341 | | | |
| |
| Total | | 61,864 | | 54,661 | | | |
| |
|
Changes in financial liabilities for unit linked insurance contracts and unit linked investment contracts for the year ended December 31, 2006 were as follows:
| | | | | | | | | | Unit
linked
insurance
contracts
| | | Unit
linked investment
contracts
| | | | | € mn | | | € mn | | As of January 1, 2006 | | 30,320 | | | 24,341 | | Foreign currency translation adjustments | | (1,765 | ) | | (6 | ) | Premiums collected | | 8,313 | | | 5,987 | | Interest credited | | 3,013 | | | 705 | | Releases upon death, surrender, and withdrawal | | (2,584 | ) | | (5,257 | ) | Policyholder charges | | (914 | ) | | (289 | ) | Transfer | | (87 | ) | | 87 | | | | |
|
| |
|
| As of December 31, 2006 | | 36,296 | | | 25,568 | | | | |
|
| |
|
|
20 Other liabilities
| | | | | As of December 31,
| | 2006
| | 2005
| | | | € mn | | € mn | Payables | | | | | Policyholders | | 5,322 | | 6,295 | Agents | | 1,494 | | 1,764 | Reinsurance | | 1,868 | | 1,648 | Social security | | 219 | | 176 | Subtotal | | 8,903 | | 9,883 | Tax payables | | | | | Income tax | | 2,076 | | 2,150 | Other | | 968 | | 1,004 | Subtotal | | 3,044 | | 3,154 | Accrued interest and rent | | 793 | | 513 | Unearned income | | | | | Interest and rent | | 2,645 | | 2,257 | Other | | 279 | | 236 | Subtotal | | 2,924 | | 2,493 | | | |
| |
| Provisions | | | | | Pensions and similar obligations | | 4,120 | | 5,594 | Employee related | | 3,120 | | 2,737 | Share-based compensation | | 1,898 | | 1,703 | Restructuring plans | | 887 | | 186 | Loan commitments | | 261 | | 117 | Other provisions | | 1,943 | | 1,947 | Subtotal | | 12,229 | | 12,284 | Deposits retained for reinsurance ceded | | 5,716 | | 7,105 | Derivative financial instruments used for hedging purposes that meet the criteria for hedge accounting and firm commitments | | 907 | | 1,019 | Financial liabilities for puttable equity instruments | | 3,750 | | 3,137 | Disposal groups held for sale | | — | | 1,389 | Other liabilities | | 11,498 | | 10,338 | Total | | 49,764 | | 51,315 | | | |
| |
|
Other liabilities due within one year amounted to €40,839 mn (2005: €43,635 mn) and those due after more than one year totaled €8,925 mn (2005: €7,680 mn).
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
2123 Certificated liabilities
| | | | | | | | | | | | | | | | | | | | | | | | | | Contractual Maturity Date
| | | As of
December 31,
2006
| | As of
December 31,
2005
| | | | 2007
| | | 2008
| | | 2009
| | | 2010
| | | 2011
| | | Thereafter
| | | | | | | € mn(1) | | | € mn(1) | | | € mn(1) | | | € mn(1) | | | € mn(1) | | | € mn(1) | | | € mn(1) | | € mn(1) | Allianz SE(2) | | | | | | | | | | | | | | | | | | | | | | | Senior bonds: | | | | | | | | | | | | | | | | | | | | | | | Fixed rate | | 2,198 | | | 1,626 | | | — | | | — | | | — | | | 2,371 | | | 6,195 | | 4,781 | Contractual interest rate | | 5.19 | % | | 5.00 | % | | — | | | — | | | — | | | 4.61 | % | | | | | Exchangeable bonds: | | | | | | | | | | | | | | | | | | | | | | | Fixed rate | | — | | | 1,262 | | | — | | | — | | | — | | | — | | | 1,262 | | 2,326 | Contractual interest rate | | — | | | 0.75 | % | | — | | | — | | | — | | | — | | | | | | Money market securities: | | | | | | | | | | | | | | | | | | | | | | | Fixed rate | | 870 | | | — | | | — | | | — | | | — | | | — | | | 870 | | 1,131 | Contractual interest rate | | 3.69 | % | | — | | | — | | | — | | | — | | | — | | | | | | Total Allianz SE(2) | | 3,068 | | | 2,888 | | | — | | | — | | | — | | | 2,371 | | | 8,327 | | 8,238 | Banking subsidiaries | | | | | | | | | | | | | | | | | | | | | | | Senior bonds: | | | | | | | | | | | | | | | | | | | | | | | Fixed rate | | 6,000 | | | 3,553 | | | 2,510 | | | 504 | | | 500 | | | 1,541 | | | 14,608 | | 15,260 | Contractual interest rate | | 5.12 | % | | 4.75 | % | | 5.26 | % | | 4.14 | % | | 6.04 | % | | 6.20 | % | | | | | Floating rate | | 1,220 | | | 1,436 | | | 1,361 | | | 877 | | | 2,239 | | | 1,596 | | | 8,729 | | 11,002 | Current interest rate | | 4.41 | % | | 4.07 | % | | 3.72 | % | | 4.66 | % | | 3.31 | % | | 4.06 | % | | | | | Subtotal | | 7,220 | | | 4,989 | | | 3,871 | | | 1,381 | | | 2,739 | | | 3,137 | | | 23,337 | | 26,262 | Money market securities: | | | | | | | | | | | | | | | | | | | | | | | Fixed rate | | 17,677 | | | — | | | — | | | — | | | — | | | — | | | 17,677 | | 17,306 | Contractual interest rate | | 5.13 | % | | — | | | — | | | — | | | — | | | — | | | | | | Floating rate | | 4,978 | | | — | | | — | | | — | | | — | | | — | | | 4,978 | | 6,981 | Current interest rate | | 2.98 | % | | — | | | — | | | — | | | — | | | — | | | | | | Subtotal | | 22,655 | | | — | | | — | | | — | | | — | | | — | | | 22,655 | | 24,287 | Total banking subsidiaries | | 29,875 | | | 4,989 | | | 3,871 | | | 1,381 | | | 2,739 | | | 3,137 | | | 45,992 | | 50,549 | All other subsidiaries | | | | | | | | | | | | | | | | | | | | | | | Certificated liabilities: | | | | | | | | | | | | | | | | | | | | | | | Fixed rate | | — | | | — | | | — | | | — | | | — | | | 4 | | | 4 | | 16 | Contractual interest rate | | — | | | — | | | — | | | — | | | — | | | 2.22 | % | | | | | Money market securities: | | | | | | | | | | | | | | | | | | | | | | | Fixed rate | | 599 | | | — | | | — | | | — | | | — | | | — | | | 599 | | 400 | Contractual interest rate | | 3.51 | % | | — | | | — | | | — | | | — | | | — | | | | | | Total all other subsidiaries | | 599 | | | — | | | — | | | — | | | — | | | 4 | | | 603 | | 416 | Total | | 33,542 | | | 7,877 | | | 3,871 | | | 1,381 | | | 2,739 | | | 5,512 | | | 54,922 | | 59,203 |
| | | | | | | | | | | | | | | | | | | | | | | | | | Contractual Maturity Date | | | As of
December 31,
20081) | | As of
December 31,
2007 | | | | 2009 | | | 2010 | | | 2011 | | | 2012 | | | 2013 | | | Thereafter | | | | | | | € mn2) | | | € mn2) | | | € mn2) | | | € mn2) | | | € mn2) | | | € mn2) | | | € mn | | € mn | Allianz SE3) | | | | | | | | | | | | | | | | | | | | | | | Senior bonds | | | | | | | | | | | | | | | | | | | | | | | Fixed rate | | — | | | — | | | — | | | 882 | | | 1,482 | | | 1,484 | | | 3,848 | | 4,007 | Contractual interest rate | | — | | | — | | | — | | | 5.63 | % | | 5.00 | % | | 4.00 | % | | — | | — | Floating rate | | 287 | | | — | | | — | | | — | | | — | | | — | | | 287 | | 272 | Current interest rate | | 4.05 | % | | — | | | — | | | — | | | — | | | — | | | — | | — | | | | | | | | | | | | | | | | | | | | | | | | Subtotal | | 287 | | | — | | | — | | | 882 | | | 1,482 | | | 1,484 | | | 4,135 | | 4,279 | Exchangeable bonds | | | | | | | | | | | | | | | | | | | | | | | Fixed rate | | — | | | — | | | — | | | — | | | — | | | — | | | — | | 450 | Contractual interest rate | | — | | | — | | | — | | | — | | | — | | | — | | | — | | — | Money market securities | | | | | | | | | | | | | | | | | | | | | | | Fixed rate | | 4,103 | | | — | | | — | | | — | | | — | | | — | | | 4,103 | | 2,929 | Contractual interest rate | | 4.47 | % | | — | | | — | | | — | | | — | | | — | | | — | | — | | | | | | | | | | | | | | | | | | | | | | | | Total Allianz SE3) | | 4,390 | | | — | | | — | | | 882 | | | 1,482 | | | 1,484 | | | 8,238 | | 7,658 | | | | | | | | | | | | | | | | | | | | | | | | Banking subsidiaries | | | | | | | | | | | | | | | | | | | | | | | Senior bonds | | | | | | | | | | | | | | | | | | | | | | | Fixed rate | | 564 | | | 172 | | | 57 | | | 23 | | | 22 | | | 3 | | | 841 | | 11,436 | Contractual interest rate | | 3.77 | % | | 3.73 | % | | 3.75 | % | | 3.28 | % | | 2.93 | % | | 4.48 | % | | — | | — | Floating rate | | 237 | | | 25 | | | 30 | | | — | | | — | | | 145 | | | 437 | | 6,675 | Current interest rate | | 4.15 | % | | 5.35 | % | | 4.97 | % | | — | | | — | | | 2.84 | % | | — | | — | | | | | | | | | | | | | | | | | | | | | | | | Subtotal | | 801 | | | 197 | | | 87 | | | 23 | | | 22 | | | 148 | | | 1,278 | | 18,111 | Money market securities | | | | | | | | | | | | | | | | | | | | | | | Fixed rate | | — | | | — | | | — | | | — | | | — | | | — | | | — | | 16,289 | Contractual interest rate | | — | | | — | | | — | | | — | | | — | | | — | | | — | | — | Floating rate | | — | | | — | | | — | | | — | | | — | | | — | | | — | | 9 | Current interest rate | | — | | | — | | | — | | | — | | | — | | | — | | | — | | — | | | | | | | | | | | | | | | | | | | | | | | | Subtotal | | — | | | — | | | — | | | — | | | — | | | — | | | — | | 16,298 | | | | | | | | | | | | | | | | | | | | | | | | Total banking subsidiaries | | 801 | | | 197 | | | 87 | | | 23 | | | 22 | | | 148 | | | 1,278 | | 34,409 | | | | | | | | | | | | | | | | | | | | | | | | All other subsidiaries | | | | | | | | | | | | | | | | | | | | | | | Certificated liabilities | | | | | | | | | | | | | | | | | | | | | | | Fixed rate | | — | | | — | | | — | | | — | | | — | | | 3 | | | 3 | | 3 | Contractual interest rate | | — | | | — | | | — | | | — | | | — | | | 2.11 | % | | — | | — | Floating rate | | — | | | 25 | | | — | | | — | | | — | | | — | | | 25 | | — | Current interest rate | | — | | | 4.05 | % | | — | | | — | | | — | | | — | | | — | | — | | | | | | | | | | | | | | | | | | | | | | | | Total all other subsidiaries | | — | | | 25 | | | — | | | — | | | — | | | 3 | | | 28 | | 3 | | | | | | | | | | | | | | | | | | | | | | | | Total | | 5,191 | | | 222 | | | 87 | | | 905 | | | 1,504 | | | 1,635 | | | 9,544 | | 42,070 | | | | | | | | | | | | | | | | | | | | | | | |
(1)1)
| Does not include certificated liabilities of Dresdner Bank which were classified as held-for-sale. See Note 4. |
2) | Except for the interest rates. The interest rates represent the weighted-average.weighted average. |
(2)3)
| Includes senior bonds and exchangeable bonds and money market securities issued by issued by Allianz Finance B.V. and Allianz Finance II B.V., guaranteed by Allianz SE and money market securities issued by Allianz Finance Corporation, a wholly-owned subsidiary of Allianz SE, which are fully and unconditionally guaranteed by Allianz SE. |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) 2224 Participation certificates and subordinated liabilities
| | | | | | | | | | | | | | | | | | | | | | | | | | Contractual Maturity Date
| | | As of
December 31,
2006
| | As of
December 31,
2005
| | | | 2007
| | | 2008
| | | 2009
| | | 2010
| | | 2011
| | | Thereafter
| | | | | | | € mn(1) | | | € mn(1) | | | € mn(1) | | | € mn(1) | | | € mn(1) | | | € mn(1) | | | € mn(1) | | € mn(1) | Allianz SE(2) | | | | | | | | | | | | | | | | | | | | | | | Subordinated bonds | | | | | | | | | | | | | | | | | | | | | | | Fixed rate | | — | | | — | | | — | | | — | | | — | | | 1,164 | | | 1,164 | | 1,984 | Contractual interest rate | | — | | | — | | | — | | | — | | | — | | | 5.99 | % | | | | | Floating rate | | — | | | — | | | — | | | — | | | — | | | 5,719 | | | 5,719 | | 4,236 | Current interest rate | | — | | | — | | | — | | | — | | | — | | | 5.61 | % | | | | | Subtotal | | — | | | — | | | — | | | — | | | — | | | 6,883 | | | 6,883 | | 6,220 | Participation certificates | | | | | | | | | | | | | | | | | | | | | | | Floating rate(3) | | — | | | — | | | — | | | — | | | — | | | 85 | | | 85 | | 85 | Total Allianz SE(2) | | — | | | — | | | — | | | — | | | — | | | 6,968 | | | 6,968 | | 6,305 | Banking subsidiaries | | | | | | | | | | | | | | | | | | | | | | | Subordinated bonds: | | | | | | | | | | | | | | | | | | | | | | | Fixed rate | | 709 | | | 385 | | | 203 | | | 122 | | | 20 | | | 1,182 | | | 2,621 | | 3,078 | Contractual interest rate | | 6.46 | % | | 5.75 | % | | 5.33 | % | | 6.40 | % | | 6.75 | % | | 6.27 | % | | | | | Floating rate | | 92 | | | 54 | | | 304 | | | 32 | | | 63 | | | 503 | | | 1,048 | | 1,195 | Current interest rate | | 4.33 | % | | 4.12 | % | | 3.87 | % | | 3.95 | % | | 5.08 | % | | 4.79 | % | | | | | Subtotal | | 801 | | | 439 | | | 507 | | | 154 | | | 83 | | | 1,685 | | | 3,669 | | 4,273 | Hybrid equity: | | | | | | | | | | | | | | | | | | | | | | | Fixed rate | | — | | | — | | | — | | | — | | | 500 | | | 2,013 | | | 2,513 | | 1,614 | Contractual interest rate | | — | | | — | | | — | | | — | | | 5.79 | % | | 7.23 | % | | | | | Participation certificates(4) | | | | | | | | | | | | | | | | | | | | | | | Fixed rate | | 680 | | | 837 | | | — | | | — | | | — | | | 745 | | | 2,262 | | 1,499 | Contractual interest rate | | 7.84 | % | | 6.95 | % | | — | | | — | | | — | | | 5.39 | % | | | | | Floating rate | | — | | | — | | | — | | | — | | | — | | | — | | | — | | 18 | Current interest rate | | — | | | — | | | — | | | — | | | — | | | — | | | | | | Subtotal | | 680 | | | 837 | | | — | | | — | | | — | | | 745 | | | 2,262 | | 1,517 | Total banking subsidiaries | | 1,481 | | | 1,276 | | | 507 | | | 154 | | | 583 | | | 4,443 | | | 8,444 | | 7,404 | All other subsidiaries | | | | | | | | | | | | | | | | | | | | | | | Subordinated liabilities: | | | | | | | | | | | | | | | | | | | | | | | Fixed rate | | — | | | 60 | | | — | | | — | | | — | | | 620 | | | 680 | | 705 | Contractual interest rate | | — | | | 6.84 | % | | — | | | — | | | — | | | 5.35 | % | | | | | Floating rate | | — | | | — | | | — | | | — | | | — | | | 225 | | | 225 | | 225 | Current interest rate | | — | | | — | | | — | | | — | | | — | | | 3.23 | % | | | | | Subtotal | | — | | | 60 | | | — | | | — | | | — | | | 845 | | | 905 | | 930 | Hybrid equity: | | | | | | | | | | | | | | | | | | | | | | | Fixed rate | | — | | | — | | | — | | | — | | | — | | | 45 | | | 45 | | 45 | Contractual interest rate | | — | | | — | | | — | | | — | | | — | | | 3.58 | % | | | | | Total all other subsidiaries | | — | | | 60 | | | — | | | — | | | — | | | 890 | | | 950 | | 975 | Total | | 1,481 | | | 1,336 | | | 507 | | | 154 | | | 583 | | | 12,301 | | | 16,362 | | 14,684 | | | |
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| |
|
| | | | | | | | | | | | | | | | | | | | | | | Contractual Maturity Date | | | As of
December 31, | | As of
December 31, | | | | 2009 | | 2010 | | | 2011 | | 2012 | | 2013 | | | Thereafter | | | 20081) | | 2007 | | | | € mn2) | | € mn2) | | | € mn2) | | € mn2) | | € mn2) | | | € mn2) | | | € mn | | € mn | Allianz SE3) | | | | | | | | | | | | | | | | | | | | Subordinated bonds | | | | | | | | | | | | | | | | | | | | Fixed rate | | — | | — | | | — | | — | | — | | | 2,548 | | | 2,548 | | 1,129 | Contractual interest rate | | — | | — | | | — | | — | | — | | | 7.28 | % | | — | | — | Floating rate | | — | | — | | | — | | — | | — | | | 5.649 | | | 5,649 | | 5,724 | Current interest rate | | — | | — | | | — | | — | | — | | | 5.60 | % | | — | | — | | | | | | | | | | | | | | | | | | | | | Subtotal | | — | | — | | | — | | — | | — | | | 8,197 | | | 8,197 | | 6,853 | Participation certificates4) | | | | | | | | | | | | | | | | | | | | Floating rate | | — | | — | | | — | | — | | — | | | 85 | | | 85 | | 85 | | | | | | | | | | | | | | | | | | | | | Total Allianz SE3) | | — | | — | | | — | | — | | — | | | 8,282 | | | 8,282 | | 6,938 | | | | | | | | | | | | | | | | | | | | | Banking subsidiaries | | | | | | | | | | | | | | | | | | | | Subordinated bonds | | | | | | | | | | | | | | | | | | | | Fixed rate | | — | | 20 | | | — | | — | | 70 | | | 83 | | | 173 | | 1,815 | Contractual interest rate | | — | | 3.75 | % | | — | | — | | 5.66 | % | | 5.14 | % | | — | | — | Floating rate | | — | | — | | | — | | — | | — | | | — | | | — | | 1,007 | Current interest rate | | — | | — | | | — | | — | | — | | | — | | | — | | — | | | | | | | | | | | | | | | | | | | | | Subtotal | | — | | 20 | | | — | | — | | 70 | | | 83 | | | 173 | | 2,822 | Hybrid equity | | | | | | | | | | | | | | | | | | | | Fixed rate | | — | | — | | | — | | — | | — | | | — | | | — | | 2,429 | Contractual interest rate | | — | | — | | | — | | — | | — | | | — | | | — | | — | Participation certificates | | | | | | | | | | | | | | | | | | | | Fixed rate | | — | | — | | | — | | — | | — | | | — | | | — | | 1,686 | Contractual interest rate | | — | | — | | | — | | — | | — | | | — | | | — | | — | | | | | | | | | | | | | | | | | | | | | Total banking subsidiaries | | — | | 20 | | | — | | — | | 70 | | | 83 | | | 173 | | 6,937 | | | | | | | | | | | | | | | | | | | | | All other subsidiaries | | | | | | | | | | | | | | | | | | | | Subordinated liabilities | | | | | | | | | | | | | | | | | | | | Fixed rate | | — | | — | | | — | | — | | — | | | 621 | | | 621 | | 678 | Contractual interest rate | | — | | — | | | — | | — | | — | | | 5.34 | % | | — | | — | Floating rate | | — | | — | | | — | | — | | — | | | 225 | | | 225 | | 226 | Current interest rate | | — | | — | | | — | | — | | — | | | 4.45 | % | | — | | — | | | | | | | | | | | | | | | | | | | | | Subtotal | | — | | — | | | — | | — | | — | | | 846 | | | 846 | | 904 | Hybrid equity | | | | | | | | | | | | | | | | | | | | Fixed rate | | — | | — | | | — | | — | | — | | | 45 | | | 45 | | 45 | Contractual interest rate | | — | | — | | | — | | — | | — | | | 6.43 | % | | — | | — | | | | | | | | | | | | | | | | | | | | | Total all other subsidiaries | | — | | — | | | — | | — | | — | | | 891 | | | 891 | | 949 | | | | | | | | | | | | | | | | | | | | | Total | | — | | 20 | | | — | | — | | 70 | | | 9,256 | | | 9,346 | | 14,824 | | | | | | | | | | | | | | | | | | | | |
(1)1)
| Does not include participation certificated and subordinated liabilities of Dresdner Bank which were classified as held-for-sale. See Note 4. |
2) | Except for interest rates. Interest rates represent the weighted-average.weighted average. |
(2)3)
| Includes subordinated bonds issued by Allianz Finance B.V. and Allianz Finance II B.V. and guaranteed by Allianz SE. |
(3)4)
| The terms of the profit participation certificates provide for an annual cash distribution of 240% of the dividend paid by Allianz SE per one Allianz SE share. Holders of profit participation certificates do not have voting rights, or any rights to convert the certificates into Allianz SE shares, or rights to liquidation proceeds. Profit participation certificates are unsecured and rank pari passu with the claims of other unsecured creditors. Profit participation certificates can be redeemed by holders upon twelve months prior notice every fifth year. |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
| Allianz SE has the right to call the profit participation certificates for redemption, upon six months’months prior notice every year. The next call date is December 31, 2007.2009. Upon redemption by Allianz SE, the cash redemption price per certificate would be equal to 122.9% of the then current price of one Allianz SE share during the last three months preceding the recallcall of the participation certificate. In lieu of redemption for cash, Allianz SE may offer 10 Allianz SE ordinary shares per 8 profit participation certificates. |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) 25 Equity | | | | | | | As of December 31, | | 2008 | | | 2007 | | | | | € mn | | | € mn | | Shareholders’ equity | | | | | | | Issued capital | | 1,160 | | | 1,152 | | Capital reserve | | 27,409 | | | 27,169 | | Revenue reserves | | 7,257 | | | 12,790 | | Treasury shares | | (147 | ) | | (172 | ) | Foreign currency translation adjustments | | (4,006 | ) | | (3,656 | ) | Unrealized gains and losses (net)1) | | 2,011 | | | 10,470 | | Subtotal | | 33,684 | | | 47,753 | | | | | | | | | Minority interests | | 3,564 | | | 3,628 | | | | | | | | | Total | | 37,248 | | | 51,381 | | | | | | | | |
(4)1)
| Participation certificates issued by the Dresdner Bank Group entitle holders to annual interest payments, which take priority over its shareholders’ dividend entitlements. They are subordinated to obligations for all other creditors of the respective issuer, except those similarly subordinated, and share in losses of the respective issuers in accordance with the conditions attached to the participation certificates. The profit participation certificates will be redeemed subject to the provisions regarding loss sharing.
|
23 Equity
| | | | | | | As of December 31,
| | 2006
| | | 2005
| | | | | € mn | | | € mn | | Shareholders’ equity | | | | | | | Issued capital | | 1,106 | | | 1,039 | | Capital reserve | | 24,292 | | | 20,577 | | Revenue reserves | | 14,070 | | | 9,930 | | Treasury shares | | (441 | ) | | (1,351 | ) | Foreign currency translation adjustments | | (2,210 | ) | | (1,032 | ) | Unrealized gains and losses (net)(1) | | 13,664 | | | 10,324 | | | | |
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| Subtotal | | 50,481 | | | 39,487 | | Minority interests | | 6,409 | | | 7,615 | | | | |
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| Total | | 56,890 | | | 47,102 | | | | |
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(1)
| As of December 31, 20062008 includes €140€203 mn related to cash flow hedges (2005: €139(2007: €175 mn). |
Issued capital Issued capital at December 31, 20062008 amounted to €1,106,304,000€1,159,808,000 divided into 432,150,000453,050,000 registered shares. The shares have no par value but a mathematical per share value of €2.56 each as a proportion of the issued capital. Authorized capital As of December 31, 2006,2008, Allianz SE had €450,000,000 (175,781,250€406,545,646 (158,806,893 shares) of authorized unissued capital (Authorized Capital 2006/I) which can be issued at any time up to February 7, 2011. The Board of Management, with approval of the Supervisory Board, is authorized to exclude the pre-emptivepreemptive rights of shareholders if the shares areissuedare issued against a contribution in kind and, in certain cases, if they are issued against a cash contribution. As of December 31, 2006,2008, Allianz SE had €12,473,943 (4,872,634€8,056,297 (3,146,991 shares) of authorized unissued capital (Authorized Capital 2006/II) which can be issued at any time up to February 7, 2011. The Board of Management, with approval of the Supervisory Board, is authorized to exclude the pre-emptivepreemptive rights of shareholders if the shares are issued to employees of the Allianz Group. Further, as of December 31, 2006,2008, Allianz SE had €5,632,000 (2,200,000an unissued conditional capital in the amount of €250,000,000 (97,656,250 shares), authorized in 2006. In February 2008 the remaining 2.2 mn warrants were exercised which the Allianz Group had issued in February 2005 as part of the “All-in-One” transaction. In conjunction with the exercise, 2.2 mn new shares of Allianz SE resulting from conditional capital were issued leading to proceeds from this increased equity of €202 mn. The new shares are entitled to dividend as of the financial year 2008. A capital increase out of unissued conditional authorized capital which will be carried out only to the extent that conversion or option rights are exercised by holders of bonds issued by Allianz SE or any of its subsidiaries or that mandatory conversion obligations are fulfilled. Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Changes toin the number of issued shares outstanding | | | | 2006
| | 2005
| | 2004
| | | 2008 | | 2007 | | 2006 | | Issued shares outstanding as of January 1, | | 405,298,397 | | | 366,859,799 | | 366,472,698 | | | 448,910,648 | | | 429,336,291 | | | 405,298,397 | | Capital increase for merger with RAS | | 25,123,259 | | | — | | — | | | — | | | — | | | 25,123,259 | | Capital increase for tender offer AGF | | | — | | | 16,974,357 | | | — | | Exercise of warrants | | — | | | 9,000,000 | | — | | | 2,200,000 | | | — | | | — | | Capital increase for cash | | — | | | 10,116,850 | | — | | | Capital increase for employee shares | | 986,741 | | | 1,148,150 | | 1,056,250 | | | 700,000 | | | 1,025,643 | | | 986,741 | | Change in treasury shares held for non-trading purposes | | (57,232 | ) | | 17,165,510 | | (2,861 | ) | | (96,521 | ) | | (86,431 | ) | | (57,232 | ) | Change in treasury shares held for trading purposes | | (2,014,874 | ) | | 1,008,088 | | (666,288 | ) | | (223,904 | ) | | 1,660,788 | | | (2,014,874 | ) | | | | | | | | | | | | Issued shares outstanding as of December 31, | | 429,336,291 | | | 405,298,397 | | 366,859,799 | | | 451,490,223 | | | 448,910,648 | | | 429,336,291 | | Treasury shares | | 2,813,709 | | | 741,603 | | 18,915,201 | | | 1,559,777 | | | 1,239,352 | | | 2,813,709 | | | | | | | | | | | | | Total number of issued shares | | 432,150,000 | | | 406,040,000 | | 385,775,000 | | | 453,050,000 | | | 450,150,000 | | | 432,150,000 | | | | |
|
| |
| |
|
| | | | | | | | | |
In November 2006, 986,741 (2005: 1,148,150)2008, 700,000 (2007: 1,025,643) shares were issued at a price of €131.00 (2005: €103.50)€64.30 (2007: €154.07) per share, enabling employees of Allianz Group subsidiaries in Germany and abroad to purchase 929,509 (2005: 1,144,196)660,700 (2007: 881,980) shares at prices ranging from €91.70 (2005: €72.45)€45.01 (2007: €107.85) to €111.35 (2005: €87.98)€53.58 (2007: €128.39) per share. The remaining 57,232 (2005: 3,954)39,300 (2007:143,663) shares were warehoused and booked
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) as treasury shares for further subscriptions by employees in the context of the employee share purchase plan in 2007.2009. As a result, issued capital increased by €3€2 mn and capital reserve increased by €126€43 mn. In April 2007 16,974,357 new Allianz SE shares were issued for the execution of the minority buy-out of AGF shares. The increase in share capital due to the minority buyout of AGF amounts to €43 mn; the additional paid-in capital increased by €2,722 mn. On October 13, 2006, Allianz AG and RAS merged resulting in the issuance of 25,123,259 shares of Allianz SE to the shareholders of RAS. As a result, share capital increased by €64 mn and capital reserve increased by €3,589 mn. In September 2005, the Allianz Group issued 10,116,850 shares for proceeds of €1,062 mn, which increased issued capital by €26 mn and capital reserve of €1,036 mn.
On February 18, 2005, the Allianz Group issued a subordinated bond with 11.2 mn detachablewarrants, which allow the holder to purchase a share of Allianz SE. The warrants are exercisable at any time during their three year term and have an exercise price of €92 per share. The warrants were recorded in capital reserve at the premium received of €174 mn on their issuance date. During the year ended December 31, 2005, as a result of the exercise of 9 mn warrants the Allianz Group received consideration of €828 mn, which increased issued capital by €23 mn and capital reserve by €805 mn.
All shares issued during the years ended December 31, 2006, 20052008, 2007 and 20042006 are qualifying shares from the beginning of the year of issue. Dividends For the year ended December 31, 2006,2008, the Board of Management will propose to shareholders at the Annual General Meeting the distribution of a dividend of €3.80€3.50 per qualifying share. During the years ended December 31, 20052007 and 2004,2006, Allianz SE paid a dividend of €2.00€5.50 and €1.75,€3.80 , respectively, per qualifying share. Treasury shares The Annual General Meeting on May 3, 2006 (2005: May 4),21, 2008, authorized Allianz SE to acquire its own shares for other purposes pursuant to clause 71(1) no. 8 of the German Stock Corporation Law (“Aktiengesetz”). During the year ended December 31, 20062008 the authorization was used to acquire 57,23239,300 (2007: 143,663) shares of Allianz SE. In order to enable Dresdner Bank Group to trade in shares of Allianz SE, the Annual General Meeting on May 3, 200621, 2008 authorized the Allianz Group’s domestic or foreign credit institutions in which Allianz SE has a majority holding to acquire treasury shares for trading purposes pursuant to clause 71(1) no. 7 of the Aktiengesetz. During the year ended December 31, 2006,2008, in accordance with this authorization, the credit institutions of the Allianz Group purchased 44,741,900 (2005: 83,202,188)30,227,150 (2007:24,780,668) of Allianz SE’s shares at an average price of €131.45€106.73 per share (2005: €104.66)(2007: €131.55), which included previously held Allianz SE shares. During the year ended December 31, 2006, 42,180,9352008, 30,977,574 shares (2005: 87,652,805)(2007: 25,348,169) were disposed of holdings at an average price of €132.76€100.87 per share (2005: €105.06)(2007: €127.39). During Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
the year ended December 31, 2006,2008, the gains arising from treasury share transactions and in consideration of the holding, were €29€21 mn (2005:(2007: losses of €31€110 mn), which were recorded directly in revenue reserves. In 2005, the Dresdner Bank Group placed 17,155,008 shares of Allianz SE in the market.
The resulting short position in own shares is hedged by the use of derivatives and is reflected in the revenue reserves. Due to written put options the Allianz Group is obliged to buy own shares amounting to €2 mn (2005: €1,261 mn), in case the put options are exercised.
Composition of the treasury shares | As of December 31,
| | Acquisition
costs
| | Number of
shares
| | Issued capital
| | Acquisition
costs | | Number of
shares | | Issued
capital | | | | € mn | | | | % | | € mn | | % | 2006 | | | | | | | | 2008 | | | | | | | | Allianz SE | | 57 | | 481,267 | | 0.11 | | 65 | | 545,807 | | 0.12 | Dresdner Bank Group | | 382 | | 2,332,442 | | 0.54 | | 69 | | 895,558 | | 0.20 | Dresdner Bank Group (obligation for written put options on Allianz SE shares) | | 2 | | — | | — | | Other | | | 13 | | 118,412 | | 0.02 | | | |
| |
| |
| | | | | | | Total | | 441 | | 2,813,709 | | 0.65 | | 147 | | 1,559,777 | | 0.34 | | | |
| |
| |
| | | | | | | 2005 | | | | | | | | 2007 | | | | | | | | Allianz SE | | 50 | | 424,035 | | 0.10 | | 72 | | 567,698 | | 0.13 | Dresdner Bank Group | | 40 | | 317,568 | | 0.08 | | 100 | | 671,654 | | 0.15 | Dresdner Bank Group (obligation for written put options on Allianz SE shares) | | 1,261 | | — | | — | | | | |
| |
| |
| | | | | | | Total | | 1,351 | | 741,603 | | 0.18 | | 172 | | 1,239,352 | | 0.28 | | | |
| |
| |
| | | | | | |
Minority interests | | | | | As of December 31, | | 2008 | | 2007 | | | | € mn | | € mn | Unrealized gains and losses (net) | | 20 | | 95 | Share of earnings | | 258 | | 748 | Other equity components | | 3,286 | | 2,785 | | | | | | Total | | 3,564 | | 3,628 | | | | | |
Capital Requirements The Allianz Group’s capital requirements are primarily dependent on our growth and the type of
(1)
| Representative of the difference between fair value and amortized cost of real estate used by third parties and investments in associates and joint ventures, net of deferred taxes, policyholders’ participation and minority interests.
|
(2)
| Represents the ratio of eligible capital to required capital.
|
business that it underwrites, as well as the industry and geographic locations in which it operates. In addition, the allocation of the Allianz Group’s investments plays an important role. During the Allianz Group’s annual planning dialogues with its operating entities, capital requirements are determined through business plans regarding the levels and timing of capital expenditures and
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) investments. Regulators impose minimum capital rules on the level of both the Allianz Group’s operating entities and the Allianz Group as a whole. On January 1, 2005, the Financial Conglomerates Directive, a supplementary European Union (or “EU”)(EU) directive, became effective in Germany. Under this directive, a financial conglomerate is defined as any financial parent holding company that, together with its subsidiaries, has significant cross-border and cross-sector activities. The Allianz Group is a financial conglomerate within the scope of the directive and the related German law. The law requires that the financial conglomerate calculates the capital needed to meet the respective solvency requirements on a consolidated basis. At December 31, 2006,2008, based on the current status, of discussion, our eligible capital for the solvency margin, required for our insurance segments and our banking and asset management business, was €50.5€39.5 bn (2005: €39.3(2007: €46.5 bn) including off-balance sheet reserves(1)1), surpassing the minimum legally stipulated level by €24.4€9.9 bn (2005: €15.1(2007: €17.6 bn). This margin resulted in a preliminary cover ratio(2)2) of 194%133% at December 31, 2006 (2005: 162%2008 (2007: 161%). In 2006,2008, all Allianz Group companies also have met their local solvency requirements. At December 31, 2006,Starting with the third quarter 2008, unrealized gains and losses on bonds are excluded from the calculation of our eligible capital for the solvency margin, required for insurance groups under German law, was €54.0 bn (2005: €43.6 bn), surpassing the minimum legally stipulated level by €38.5 bn (2005: €29.4 bn).capital. This margin resulted in preliminary cover ratio(2) of 349% (2005: 307%).
Notesnew methodology, which better reflects economic reality, added around 6 (2007: 4) percentage points to the Allianz Group’s Consolidated Financial Statements—(Continued)
Dresdner Bank is subject to the risk-adjusted capital guidelines (or “Basle Accord”) promulgated by the Basle Committee on Banking Supervision (or “BIS-rules”) and therefore calculates and reports under such guidelines to the German Federal Financial Supervisory Authority (the Bundesanstalt für Finanzdienstleistungsaufsicht, or “BaFin”) and the Deutsche Bundesbank, the German central bank. These guidelines are used to evaluate capital adequacy based primarily on the perceived credit risk associated with balance sheet assets, as well as certain off-balance sheet exposures such as unfunded loan commitments, letters of credit, and derivative and foreign exchange contracts. In addition, for Allianz SE to maintain its status as a “financial holding company” under the U.S. Gramm-Leach-Bliley Financial Modernization Act of 1999, Dresdner Bank must be considered “well capitalized” under guidelines issued by the Board of Governors of the Federal Reserve System. To be considered “well capitalized” for these purposes, Dresdner Bank must have a Tier I Capital Ratio of a least 6% and a combined Tier I and Tier II Capital Ratio of at least 10%, and not be subject to a directive, order or written agreement to meet and maintain specific capital levels. As shown in the table below, Dresdner Bank maintained a “well capitalized” position during both 2006 and 2005.
The following table sets forth Dresdner Bank’s BIS capital ratios:
| | | | | As of December 31,
| | 2006
| | 2005(1)
| | | | € mn | | € mn | Tier I capital (core capital) | | 12,469 | | 11,126 | Tier I & Tier II capital | | 18,668 | | 18,211 | Tier III capital (supplementary capital) | | — | | — | Total capital | | 18,668 | | 18,211 | Risk-weighted assets—banking book | | 117,355 | | 108,659 | Risk-weighted assets—trading book | | 2,625 | | 2,875 | Total risk-weighted assets | | 119,980 | | 111,534 | Tier I capital ratio (core capital) in % | | 10.39 | | 9.98 | Tier I & Tier II capital ratio in % | | 15.56 | | 16.33 | Total capital ratio in % | | 15.56 | | 16.33 |
(1)
| Effective June 2005, Dresdner Bank changed the accounting basis for calculation and disclosure of BIS-figures from German GAAP to IFRS.
|
The distinction between “core capital” and “supplementary capital” in the table above reflects the ability of the capital components to cover losses. Core capital, with the highest ability to cover losses, corresponds to Tier I capital, while supplementary capital corresponds to Tier II capital as such terms are defined in applicable U.S. capital adequacy rules.Solvency Ratio.
In addition to regulatory capital requirements, Allianz SE also uses an internal risk capital model to determine how much capital is required to absorb any unexpected volatility in results of operations. 1) | Represents the difference between fair value and amortized cost of real estate held for investment and investments in associates and joint ventures, net of deferred taxes, policyholders’ participation and minority interests. |
2) | Represents the ratio of eligible capital to required capital. |
Certain of the Allianz Group’s insurance subsidiaries prepare individual financial statements based on local laws and regulations. These laws establish restrictions on the minimum level of capital and surplus an insurance entity must maintain and the amount of dividends that may be paid to shareholders. The minimum capital requirements and dividend restrictions vary by jurisdiction. The minimum capital requirements are based on various criteria including, but not limited to, volume of premiums written or claims paid, amount of insurance reserves, asset risk, mortality risk, credit risk, underwriting risk and off-balance sheet risk. As of December 31, 2006,2008, the Allianz Group’s insurance subsidiaries were in compliance with all applicable solvency and capital adequacy requirements. Certain insurance subsidiaries are subjected to regulatory restrictions on the amount of dividends which can be remitted to Allianz SE without prior approval by the appropriate regulatory body. Such restrictions provide that a company may only pay dividends up to an amount in excess of certain regulatory capital levels or based on the levels of undistributed earned surplus or current year income or a percentage thereof. By way of example only, the operations of ourAllianz Group’s insurance subsidiaries located in the United States are subject to limitations on the payment of dividends to their parent company under applicable state insurance laws. Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Dividends paid in excess of these limitations generally require prior approval of the insurance commissioner of the state of domicile. The Allianz Group believes that these restrictions will not affect the ability of Allianz SE to pay dividends to its shareholders in the future. In addition, Allianz SE is not subject to legal restrictions on the amount of dividends it can pay to its shareholders, except the legal reserve in the appropriated retained earnings, which is required according to clause 150 (1) of the German Stock Corporation Act (AktG).Aktiengesetz. Minority interests
| | | | | As of December 31,
| | 2006
| | 2005
| | | | € mn | | € mn | Unrealized gains and losses | | 840 | | 1,321 | Share of earnings | | 1,289 | | 1,386 | Other equity components | | 4,280 | | 4,908 | Total | | 6,409 | | 7,615 |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Supplementary Information to the Consolidated Income Statements 2426 Premiums earned (net)
| | | | Property-Casualty
| | Life/Health
| | Consolidation
| | Total
| | | Property-Casualty | | Life/Health | | Consolidation | | Total | | | | | € mn | | € mn | | € mn | | € mn | | | € mn | | € mn | | € mn | | € mn | | 2006 | | | | 2008 | | | | | | | | | | Premiums written | | | | | | | | | | | Direct | | 40,967 | | | 21,252 | | | — | | | 62,219 | | | 40,116 | | | 22,442 | | | — | | | 62,558 | | Assumed | | 2,707 | | | 362 | | | (13 | ) | | 3,056 | | | 3,271 | | | 367 | | | (25 | ) | | 3,613 | | | | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | Subtotal | | 43,674 | | | 21,614 | | | (13 | ) | | 65,275 | | | 43,387 | | | 22,809 | | | (25 | ) | | 66,171 | | | | | | | | | | | | | | | | Ceded | | (5,415 | ) | | (816 | ) | | 13 | | | (6,218 | ) | | (4,972 | ) | | (527 | ) | | 25 | | | (5,474 | ) | | | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | Net | | 38,259 | | | 20,798 | | | — | | | 59,057 | | | 38,415 | | | 22,282 | | | — | | | 60,697 | | | | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | Change in unearned premiums | | | | | | | | | | | Direct | | (351 | ) | | (225 | ) | | — | | | (576 | ) | | (93 | ) | | (49 | ) | | — | | | (142 | ) | Assumed | | 156 | | | 1 | | | — | | | 157 | | | (36 | ) | | (2 | ) | | 1 | | | (37 | ) | | | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | Subtotal | | (195 | ) | | (224 | ) | | — | | | (419 | ) | | (129 | ) | | (51 | ) | | 1 | | | (179 | ) | | | | | | | | | | | | | | | Ceded | | (114 | ) | | — | | | — | | | (114 | ) | | (73 | ) | | — | | | (1 | ) | | (74 | ) | | | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | Net | | (309 | ) | | (224 | ) | | — | | | (533 | ) | | (202 | ) | | (51 | ) | | — | | | (253 | ) | | | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | Premiums earned | | | | | | | | | | | Direct | | 40,616 | | | 21,027 | | | — | | | 61,643 | | | 40,023 | | | 22,393 | | | — | | | 62,416 | | Assumed | | 2,863 | | | 363 | | | (13 | ) | | 3,213 | | | 3,235 | | | 365 | | | (24 | ) | | 3,576 | | | | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | Subtotal | | 43,479 | | | 21,390 | | | (13 | ) | | 64,856 | | | 43,258 | | | 22,758 | | | (24 | ) | | 65,992 | | | | | | | | | | | | | | | | Ceded | | (5,529 | ) | | (816 | ) | | 13 | | | (6,332 | ) | | (5,045 | ) | | (527 | ) | | 24 | | | (5,548 | ) | | | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | Net | | 37,950 | | | 20,574 | | | — | | | 58,524 | | | 38,213 | | | 22,231 | | | — | | | 60,444 | | | | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | 2005 | | | | 2007 | | | | | | | | | | Premiums written | | | | | | | | | | | Direct | | 40,547 | | | 20,707 | | | — | | | 61,254 | | | 41,526 | | | 21,241 | | | — | | | 62,767 | | Assumed | | 3,152 | | | 386 | | | (26 | ) | | 3,512 | | | 2,763 | | | 281 | | | (23 | ) | | 3,021 | | | | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | Subtotal | | 43,699 | | | 21,093 | | | (26 | ) | | 64,766 | | | 44,289 | | | 21,522 | | | (23 | ) | | 65,788 | | | | | | | | | | | | | | | | Ceded | | (5,529 | ) | | (926 | ) | | 26 | | | (6,429 | ) | | (5,320 | ) | | (637 | ) | | 23 | | | (5,934 | ) | | | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | Net | | 38,170 | | | 20,167 | | | — | | | 58,337 | | | 38,969 | | | 20,885 | | | — | | | 59,854 | | | | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | Change in unearned premiums | | | | | | | | | | | Direct | | (378 | ) | | (161 | ) | | — | | | (539 | ) | | (352 | ) | | (77 | ) | | — | | | (429 | ) | Assumed | | (246 | ) | | (6 | ) | | — | | | (252 | ) | | (68 | ) | | 2 | | | 1 | | | (65 | ) | | | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | Subtotal | | (624 | ) | | (167 | ) | | — | | | (791 | ) | | (420 | ) | | (75 | ) | | 1 | | | (494 | ) | | | | | | | | | | | | | | | Ceded | | 139 | | | (3 | ) | | — | | | 136 | | | 4 | | | (1 | ) | | (1 | ) | | 2 | | | | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | Net | | (485 | ) | | (170 | ) | | — | | | (655 | ) | | (416 | ) | | (76 | ) | | — | | | (492 | ) | | | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | Premiums earned | | | | | | | | | | | Direct | | 40,169 | | | 20,546 | | | — | | | 60,715 | | | 41,174 | | | 21,164 | | | — | | | 62,338 | | Assumed | | 2,906 | | | 380 | | | (26 | ) | | 3,260 | | | 2,695 | | | 283 | | | (22 | ) | | 2,956 | | | | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | Subtotal | | 43,075 | | | 20,926 | | | (26 | ) | | 63,975 | | | 43,869 | | | 21,447 | | | (22 | ) | | 65,294 | | | | | | | | | | | | | | | | Ceded | | (5,390 | ) | | (929 | ) | | 26 | | | (6,293 | ) | | (5,316 | ) | | (638 | ) | | 22 | | | (5,932 | ) | | | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | Net | | 37,685 | | | 19,997 | | | — | | | 57,682 | | | 38,553 | | | 20,809 | | | — | | | 59,362 | | | | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) 2426 Premiums earned (net) – —continued
| | | | Property-Casualty
| | Life/Health
| | Consolidation
| | Total
| | | Property-Casualty | | Life/Health | | Consolidation | | Total | | | | | € mn | | € mn | | € mn | | € mn | | | € mn | | € mn | | € mn | | �� | € mn | | 2004 | | | | 2006 | | | | | | | | | | Premiums written | | | | | | | | | | | Direct | | 40,460 | | | 20,246 | | | — | | | 60,706 | | | 40,967 | | | 21,252 | | | — | | | 62,219 | | Assumed | | 2,482 | | | 526 | | | (24 | ) | | 2,984 | | | 2,707 | | | 362 | | | (13 | ) | | 3,056 | | | | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | Subtotal | | 42,942 | | | 20,772 | | | (24 | ) | | 63,690 | | | 43,674 | | | 21,614 | | | (13 | ) | | 65,275 | | | | | | | | | | | | | | | | Ceded | | (5,299 | ) | | (1,294 | ) | | 24 | | | (6,569 | ) | | (5,415 | ) | | (816 | ) | | 13 | | | (6,218 | ) | | | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | Net | | 37,643 | | | 19,478 | | | — | | | 57,121 | | | 38,259 | | | 20,798 | | | — | | | 59,057 | | | | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | Change in unearned premiums | | | | | | | | | | | Direct | | (304 | ) | | (72 | ) | | — | | | (376 | ) | | (351 | ) | | (225 | ) | | — | | | (576 | ) | Assumed | | 10 | | | (2 | ) | | — | | | 8 | | | 156 | | | 1 | | | — | | | 157 | | | | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | Subtotal | | (294 | ) | | (74 | ) | | — | | | (368 | ) | | (195 | ) | | (224 | ) | | — | | | (419 | ) | | | | | | | | | | | | | | | Ceded | | 36 | | | — | | | — | | | 36 | | | (114 | ) | | — | | | — | | | (114 | ) | | | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | Net | | (258 | ) | | (74 | ) | | — | | | (332 | ) | | (309 | ) | | (224 | ) | | — | | | (533 | ) | | | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | Premiums earned | | | | | | | | | | | Direct | | 40,156 | | | 20,174 | | | — | | | 60,330 | | | 40,616 | | | 21,027 | | | — | | | 61,643 | | Assumed | | 2,492 | | | 524 | | | (24 | ) | | 2,992 | | | 2,863 | | | 363 | | | (13 | ) | | 3,213 | | | | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | Subtotal | | 42,648 | | | 20,698 | | | (24 | ) | | 63,322 | | | 43,479 | | | 21,390 | | | (13 | ) | | 64,856 | | | | | | | | | | | | | | | | Ceded | | (5,263 | ) | | (1,294 | ) | | 24 | | | (6,533 | ) | | (5,529 | ) | | (816 | ) | | 13 | | | (6,332 | ) | | | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | Net | | 37,385 | | | 19,404 | | | — | | | 56,789 | | | 37,950 | | | 20,574 | | | — | | | 58,524 | | | | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
2527 Interest and similar income
| | | | 2006
| | 2005
| | 2004
| | 2008 | | 2007 | | 2006 | | | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | Interest from held-to-maturity investments | | 233 | | 253 | | 269 | | 243 | | | 223 | | 233 | Dividends from available-for-sale investments | | 2,119 | | 1,469 | | 1,320 | | 1,864 | | | 2,282 | | 2,086 | Interest from available-for-sale investments | | 9,160 | | 8,592 | | 7,689 | | 10,164 | | | 9,164 | | 8,741 | Share of earnings from investments in associates and joint ventures | | 287 | | 253 | | 253 | | (37 | ) | | 284 | | 223 | Rent from real estate held for investment | | 930 | | 993 | | 964 | | 703 | | | 780 | | 805 | Interest from loans to banks and customers | | 11,058 | | 10,875 | | 10,475 | | 5,928 | | | 5,670 | | 5,177 | Other interest | | 169 | | 209 | | 226 | | 207 | | | 221 | | 165 | | | |
| |
| |
| | | | | | | | Total | | 23,956 | | 22,644 | | 21,196 | | 19,072 | | | 18,624 | | 17,430 | | | |
| |
| |
| | | | | | | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) 2628 Income from financial assets and liabilities carried at fair value through income (net)
| | | | | | | | | | | | | | | | | | | | | | | | | Property-
Casualty
| | | Life/
Health
| | | Banking
| | | Asset
Management
| | | Corporate
| | | Consolidation
| | | Group
| | | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | 2006 | | | | | | | | | | | | | | | | | | | | | | Income (expense) from financial assets and liabilities held for trading | | 83 | | | (808 | ) | | 1,282 | | | 7 | | | (273 | ) | | 72 | | | 363 | | Income (expense) from financial assets designated at fair value through income | | 121 | | | 742 | | | 95 | | | (105 | ) | | 4 | | | — | | | 857 | | Expense from financial liabilities designated at fair value through income | | (1 | ) | | (2 | ) | | (42 | ) | | — | | | — | | | 1 | | | (44 | ) | Income (expense) from financial liabilities for puttable equity instruments (net) | | (14 | ) | | (293 | ) | | — | | | 136 | | | (65 | ) | | — | | | (236 | ) | Total | | 189 | | | (361 | ) | | 1,335 | | | 38 | | | (334 | ) | | 73 | | | 940 | | 2005 | | | | | | | | | | | | | | | | | | | | | | Income (expense) from financial assets and liabilities held for trading | | 32 | | | (324 | ) | | 1,170 | | | 3 | | | (441 | ) | | (3 | ) | | 437 | | Income from financial assets designated at fair value through income | | 128 | | | 780 | | | 74 | | | 247 | | | — | | | — | | | 1,229 | | Expense from financial liabilities designated at fair value through income | | — | | | — | | | (81 | ) | | — | | | — | | | 3 | | | (78 | ) | Income (expense) from financial liabilities for puttable equity instruments (net) | | 4 | | | (198 | ) | | — | | | (231 | ) | | — | | | — | | | (425 | ) | Total | | 164 | | | 258 | | | 1,163 | | | 19 | | | (441 | ) | | — | | | 1,163 | | 2004 | | | | | | | | | | | | | | | | | | | | | | Income (expense) from financial assets and liabilities held for trading | | 20 | | | 116 | | | 1,518 | | | 11 | | | (61 | ) | | (5 | ) | | 1,599 | | Income from financial assets designated at fair value through income | | 12 | | | 159 | | | 54 | | | — | | | — | | | — | | | 225 | | Expense from financial liabilities designated at fair value through income | | — | | | — | | | (63 | ) | | — | | | — | | | — | | | (63 | ) | Income (expense) from financial liabilities for puttable equity instruments (net) | | (7 | ) | | (77 | ) | | — | | | — | | | — | | | — | | | (84 | ) | Total | | 25 | | | 198 | | | 1,509 | | | 11 | | | (61 | ) | | (5 | ) | | 1,677 | |
| | | | | | | | | | | | | | | | | | | | | | | | | Property-
Casualty | | | Life/
Health | | | Banking | | | Asset
Management | | | Corporate | | | Consolidation | | | Group | | | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | 2008 | | | | | | | | | | | | | | | | | | | | | | Income (expenses) from financial assets and liabilities held for trading | | (33 | ) | | 1,082 | | | (5 | ) | | (7 | ) | | 135 | | | (339 | ) | | 833 | | Expense from financial assets designated at fair value through income | | (112 | ) | | (2,108 | ) | | — | | | (236 | ) | | (24 | ) | | — | | | (2,480 | ) | Income from financial liabilities designated at fair value through income | | — | | | — | | | — | | | — | | | — | | | — | | | — | | Income from financial liabilities for puttable equity instruments (net) | | 29 | | | 765 | | | — | | | 166 | | | 1 | | | — | | | 961 | | | | | | | | | | | | | | | | | | | | | | | | Total | | (116 | ) | | (261 | ) | | (5 | ) | | (77 | ) | | 112 | | | (339 | ) | | (686 | ) | | | | | | | | | | | | | | | | | | | | | | | 2007 | | | | | | | | | | | | | | | | | | | | | | Income (expenses) from financial assets and liabilities held for trading | | (51 | ) | | (1,337 | ) | | 2 | | | — | | | 44 | | | (37 | ) | | (1,379 | ) | Income from financial assets designated at fair value through income | | 150 | | | 345 | | | — | | | 64 | | | 7 | | | (8 | ) | | 558 | | Income from financial liabilities designated at fair value through income | | 3 | | | 11 | | | — | | | — | | | — | | | (1 | ) | | 13 | | Income (expenses) from financial liabilities for puttable equity instruments (net) | | (17 | ) | | 41 | | | — | | | (33 | ) | | — | | | — | | | (9 | ) | | | | | | | | | | | | | | | | | | | | | | | Total | | 85 | | | (940 | ) | | 2 | | | 31 | | | 51 | | | (46 | ) | | (817 | ) | | | | | | | | | | | | | | | | | | | | | | | 2006 | | | | | | | | | | | | | | | | | | | | | | Income (expenses) from financial assets and liabilities held for trading | | 83 | | | (808 | ) | | 45 | | | 7 | | | (274 | ) | | 52 | | | (895 | ) | Income (expenses) from financial assets designated at fair value through income | | 121 | | | 742 | | | — | | | (105 | ) | | 5 | | | — | | | 763 | | Expenses from financial liabilities designated at fair value through income | | (1 | ) | | (2 | ) | | — | | | — | | | — | | | 1 | | | (2 | ) | Income (expenses) from financial liabilities for puttable equity instruments (net) | | (14 | ) | | (293 | ) | | — | | | 136 | | | (65 | ) | | — | | | (236 | ) | | | | | | | | | | | | | | | | | | | | | | | Total | | 189 | | | (361 | ) | | 45 | | | 38 | | | (334 | ) | | 53 | | | (370 | ) | | | | | | | | | | | | | | | | | | | | | | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Income from financial assets and liabilities held for trading (net) Life/Health Segment Income from financial assets and liabilities held for trading for the year ended December 31, 20062008 includes in the Life/ Health segment income of €1,149 mn (2007: expenses of €811€1,352 mn; 2006: expenses of €834 mn) from derivative financial instruments. This includes income of €1,769 mn (2005: €377(2007: expenses of €756 mn; 2004: €1042006: expenses of €513 mn) from forward sales of equities and the purchase of forward contracts for fixed-income of German entities. Also included are expenses from derivative financial instruments in the Life/Health insurance segment. This includes expenses from derivative financial instrumentsU.S.A. amongst others related to equity indexedequity-indexed annuity contracts and guaranteed benefits under unit-linked contracts of €350€1,304 mn (2005: €199(2007: €622 mn; 2004: €1282006: €350 mn) and expensesincome from other derivative financial instruments of €461€684 mn (2005: €178(2007: income of €26 mn; 2004: income: €242006: income of €29 mn). Banking Segment
Income from financial assets and liabilities held for trading of the Banking segment comprises:
| | | | | | | | | | | 2006
| | | 2005
| | 2004
| | | | € mn | | | € mn | | € mn | Trading in interest products | | 777 | | | 473 | | 771 | Trading in equity products | | 217 | | | 274 | | 219 | Foreign exchange/precious metals trading | | 354 | | | 222 | | 149 | Other trading activities | | (66 | ) | | 201 | | 379 | | | |
|
| |
| |
| Total | | 1,282 | | | 1,170 | | 1,518 | | | |
|
| |
| |
|
Corporate Segment Income from financial assets and liabilities held for trading for the year ended December 31, 2006,2008, includes in the Corporate segment expenses of €152€186 mn (2005: €332(2007: €15 mn; 2004: €1492006: €152 mn) from derivative financial instruments. In 2008 thereof expenses of €166 mn (2007: €15 mn; 2006: €152 mn) are related to financial derivative instruments in the Corporate segment for which hedge accounting is not applied. This includes expensesincome from financial derivative financial instruments embedded in exchangeable bonds of €570€133 mn (2005: €605(2007: expenses of €222 mn; 2004: €112006: expenses of €570 mn), incomeexpenses from derivative financial instruments of €7 mn (2007: income of €164 mn; 2006: income of €290 mn) which partially hedge the exchangeable bonds, however which do not qualify for hedge accounting, of €290mn (2005: €288 mn; 2004: €17 mn), and incomeexpenses from other derivative financial instruments of €292 mn (2007: income of €43 mn; 2006: income of €128 mn). Additionally income from financial assets and liabilities held for trading for the year ended December 31, 2008 includes income of €324 mn (2005: expense: €15(2007: €60 mn; 2004: expense: €1552006: expenses of €122 mn). from the hedges of share based compensation plans granted by restricted stock units. 2729 Realized gains/losses (net)
| | | | | | | | | | | | | 2006
| | | 2005
| | | 2004
| | | | | € mn | | | € mn | | | € mn | | Realized gains | | | | | | | | | | Available-for-sale investments | | | | | | | | | | Equity securities | | 5,052 | | | 3,348 | | | 3,579 | | Debt securities | | 739 | | | 968 | | | 1,109 | | | | |
|
| |
|
| |
|
| Subtotal | | 5,791 | | | 4,316 | | | 4,688 | | | | |
|
| |
|
| |
|
| Investments in associates and joint ventures(1) | | 891 | | | 1,218 | | | 868 | | Loans to banks and customers | | 47 | | | 116 | | | (6 | ) | Real estate held for investment | | 766 | | | 373 | | | 357 | | | | |
|
| |
|
| |
|
| Subtotal | | 7,495 | | | 6,023 | | | 5,907 | | | | |
|
| |
|
| |
|
| Realized losses | | | | | | | | | | Available-for-sale investments | | | | | | | | | | Equity securities | | (342 | ) | | (566 | ) | | (517 | ) | Debt securities | | (795 | ) | | (332 | ) | | (373 | ) | | | |
|
| |
|
| |
|
| Subtotal | | (1,137 | ) | | (898 | ) | | (890 | ) | | | |
|
| |
|
| |
|
| Investments in associates and joint ventures(2) | | (15 | ) | | (32 | ) | | (302 | ) | Loans to banks and customers | | (57 | ) | | (93 | ) | | (95 | ) | Real estate held for investment | | (135 | ) | | (22 | ) | | (52 | ) | | | |
|
| |
|
| |
|
| Subtotal | | (1,344 | ) | | (1,045 | ) | | (1,339 | ) | | | |
|
| |
|
| |
|
| Total | | 6,151 | | | 4,978 | | | 4,568 | | | | |
|
| |
|
| |
|
|
| | | | | | | | | | | | | 2008 | | | 2007 | | | 2006 | | | | | € mn | | | € mn | | | € mn | | Realized gains | | | | | | | | | | Available-for-sale investments | | | | | | | | | | Equity securities | | 5,890 | | | 6,852 | | | 5,003 | | Debt securities | | 716 | | | 421 | | | 742 | | | | | | | | | | | | Subtotal | | 6,606 | | | 7,273 | | | 5,745 | | | | | | | | | | | | Investments in associates and joint ventures1) | | 158 | | | 197 | | | 723 | | Real estate held for investment | | 268 | | | 371 | | | 653 | | Loans to banks and customers | | 101 | | | 52 | | | 26 | | | | | | | | | | | | Subtotal | | 7,133 | | | 7,893 | | | 7,147 | | | | | | | | | | | | Realized losses | | | | | | | | | | Available-for-sale investments | | | | | | | | | | Equity securities | | (2,608 | ) | | (577 | ) | | (326 | ) | Debt securities | | (789 | ) | | (1,120 | ) | | (737 | ) | | | | | | | | | | | Subtotal | | (3,397 | ) | | (1,697 | ) | | (1,063 | ) | | | | | | | | | | | Investments in associates and joint ventures2) | | (6 | ) | | (84 | ) | | (4 | ) | Real estate held for investment | | (99 | ) | | (46 | ) | | (134 | ) | Loans to banks and customers | | (28 | ) | | (58 | ) | | (25 | ) | | | | | | | | | | | Subtotal | | (3,530 | ) | | (1,885 | ) | | (1,226 | ) | | | | | | | | | | | Total | | 3,603 | | | 6,008 | | | 5,921 | | | | | | | | | | | |
(1)1)
| During the year ended December 31, 2006,2008, includes realized gains from the disposal of subsidiaries and businesses of €613€143 mn (2005: €394(2007: €164 mn; 2004: €1832006: €567 mn). |
(2)2)
| During the year ended December 31, 2006,2008, includes realized losses from the disposal of subsidiaries of €3€1 mn (2005: €14(2007: €83 mn; 2004: €2512006: €2 mn). |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) 2830 Fee and commission income
| | | | | | | | | | | | | | | | | | | | | | | | | 2006
| | 2005
| | 2004
| | | | Segment
| | Consolidation
| | | Group
| | Segment
| | Consolidation
| | | Group
| | Segment
| | Consolidation
| | | Group
| | | | € mn | | € mn | | | € mn | | € mn | | € mn | | | € mn | | € mn
| | € mn | | | € mn | Property-Casualty | | | | | | | | | | | | | | | | | | | | | | Fees from credit and assistance business | | 681 | | — | | | 681 | | 662 | | — | | | 662 | | 471 | | — | | | 471 | Service agreements | | 318 | | (37 | ) | | 281 | | 316 | | (42 | ) | | 274 | | 302 | | (84 | ) | | 218 | Investment advisory | | 15 | | — | | | 15 | | 11 | | — | | | 11 | | 9 | | — | | | 9 | | | |
| |
|
| |
| |
| |
|
| |
| |
| |
|
| |
| Subtotal | | 1,014 | | (37 | ) | | 977 | | 989 | | (42 | ) | | 947 | | 782 | | (84 | ) | | 698 | Life/Health | | | | | | | | | | | | | | | | | | | | | | Service agreements | | 191 | | (26 | ) | | 165 | | 176 | | (82 | ) | | 94 | | 175 | | (107 | ) | | 68 | Investment advisory | | 423 | | (28 | ) | | 395 | | 306 | | — | | | 306 | | 33 | | (4 | ) | | 29 | Other | | 16 | | (16 | ) | | — | | 25 | | (13 | ) | | 12 | | 16 | | (10 | ) | | 6 | | | |
| |
|
| |
| |
| |
|
| |
| |
| |
|
| |
| Subtotal | | 630 | | (70 | ) | | 560 | | 507 | | (95 | ) | | 412 | | 224 | | (121 | ) | | 103 | Banking | | | | | | | | | | | | | | | | | | | | | | Securities business | | 1,472 | | (186 | ) | | 1,286 | | 1,339 | | (151 | ) | | 1,188 | | 1,203 | | (153 | ) | | 1,050 | Investment advisory | | 611 | | (156 | ) | | 455 | | 558 | | (140 | ) | | 418 | | 524 | | (110 | ) | | 414 | Payment transactions | | 364 | | (2 | ) | | 362 | | 381 | | (3 | ) | | 378 | | 399 | | (4 | ) | | 395 | Mergers and acquisitions advisory | | 284 | | — | | | 284 | | 256 | | — | | | 256 | | 182 | | — | | | 182 | Underwriting business | | 133 | | — | | | 133 | | 102 | | — | | | 102 | | 97 | | (2 | ) | | 95 | Other | | 734 | | (77 | ) | | 657 | | 761 | | (19 | ) | | 742 | | 832 | | (12 | ) | | 820 | | | |
| |
|
| |
| |
| |
|
| |
| |
| |
|
| |
| Subtotal | | 3,598 | | (421 | ) | | 3,177 | | 3,397 | | (313 | ) | | 3,084 | | 3,237 | | (281 | ) | | 2,956 | Asset Management | | | | | | | | | | | | | | | | | | | | | | Management fees | | 3,420 | | (112 | ) | | 3,308 | | 2,987 | | (93 | ) | | 2,894 | | 2,493 | | (75 | ) | | 2,418 | Loading and exit fees | | 341 | | — | | | 341 | | 338 | | — | | | 338 | | 318 | | — | | | 318 | Performance fees | | 107 | | 1 | | | 108 | | 123 | | (2 | ) | | 121 | | 56 | | — | | | 56 | Other | | 318 | | (6 | ) | | 312 | | 298 | | (2 | ) | | 296 | | 229 | | (5 | ) | | 224 | | | |
| |
|
| |
| |
| |
|
| |
| |
| |
|
| |
| Subtotal | | 4,186 | | (117 | ) | | 4,069 | | 3,746 | | (97 | ) | | 3,649 | | 3,096 | | (80 | ) | | 3,016 | Corporate | | | | | | | | | | | | | | | | | | | | | | Service agreements | | 190 | | (117 | ) | | 73 | | 164 | | (94 | ) | | 70 | | 137 | | (97 | ) | | 40 | | | |
| |
|
| |
| |
| |
|
| |
| |
| |
|
| |
| Subtotal | | 190 | | (117 | ) | | 73 | | 164 | | (94 | ) | | 70 | | 137 | | (97 | ) | | 40 | | | |
| |
|
| |
| |
| |
|
| |
| |
| |
|
| |
| Total | | 9,618 | | (762 | ) | | 8,856 | | 8,803 | | (641 | ) | | 8,162 | | 7,476 | | (663 | ) | | 6,813 | | | |
| |
|
| |
| |
| |
|
| |
| |
| |
|
| |
|
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | 2008 | | 2007 | | 2006 | | | | Segment | | Consolidation | | | Group | | Segment | | Consolidation | | | Group | | Segment | | Consolidation | | | Group | | | | € mn | | € mn | | | € mn | | € mn | | € mn | | | € mn | | € mn | | € mn | | | € mn | Property-Casualty | | | | | | | | | | | | | | | | | | | | | | Fees from credit and assistance business | | 769 | | (2 | ) | | 767 | | 703 | | (2 | ) | | 701 | | 681 | | — | | | 681 | Service agreements | | 470 | | (32 | ) | | 438 | | 475 | | (24 | ) | | 451 | | 318 | | (37 | ) | | 281 | Investment advisory | | 8 | | — | | | 8 | | — | | — | | | — | | 15 | | — | | | 15 | | | | | | | | | | | | | | | | | | | | | | | Subtotal | | 1,247 | | (34 | ) | | 1,213 | | 1,178 | | (26 | ) | | 1,152 | | 1,014 | | (37 | ) | | 977 | | | | | | | | | | | | | | | | | | | | | | | Life/Health | | | | | | | | | | | | | | | | | | | | | | Service agreements | | 102 | | (42 | ) | | 60 | | 174 | | (15 | ) | | 159 | | 191 | | (26 | ) | | 165 | Investment advisory | | 459 | | (34 | ) | | 425 | | 513 | | (16 | ) | | 497 | | 423 | | (28 | ) | | 395 | Other | | 10 | | (10 | ) | | — | | 14 | | (14 | ) | | — | | 16 | | (16 | ) | | — | | | | | | | | | | | | | | | | | | | | | | | Subtotal | | 571 | | (86 | ) | | 485 | | 701 | | (45 | ) | | 656 | | 630 | | (70 | ) | | 560 | | | | | | | | | | | | | | | | | | | | | | | Banking | | | | | | | | | | | | | | | | | | | | | | Securities business | | 97 | | (1 | ) | | 96 | | 116 | | (2 | ) | | 114 | | 127 | | — | | | 127 | Investment advisory | | 147 | | (92 | ) | | 55 | | 215 | | (145 | ) | | 70 | | 287 | | (152 | ) | | 135 | Payment transactions | | 53 | | (1 | ) | | 52 | | 54 | | (1 | ) | | 53 | | 40 | | — | | | 40 | Underwriting business | | — | | — | | | — | | 3 | | — | | | 3 | | 3 | | — | | | 3 | Other | | 133 | | (20 | ) | | 113 | | 140 | | (6 | ) | | 134 | | 46 | | (5 | ) | | 41 | | | | | | | | | | | | | | | | | | | | | | | Subtotal | | 430 | | (114 | ) | | 316 | | 528 | | (154 | ) | | 374 | | 503 | | (157 | ) | | 346 | | | | | | | | | | | | | | | | | | | | | | | Asset Management | | | | | | | | | | | | | | | | | | | | | | Management fees | | 3,315 | | (112 | ) | | 3,203 | | 3,558 | | (126 | ) | | 3,432 | | 3,420 | | (112 | ) | | 3,308 | Loading and exit fees | | 257 | | — | | | 257 | | 313 | | — | | | 313 | | 341 | | — | | | 341 | Performance fees | | 83 | | — | | | 83 | | 206 | | (1 | ) | | 205 | | 107 | | 1 | | | 108 | Other | | 377 | | (2 | ) | | 375 | | 326 | | (11 | ) | | 315 | | 318 | | (6 | ) | | 312 | | | | | | | | | | | | | | | | | | | | | | | Subtotal | | 4,032 | | (114 | ) | | 3,918 | | 4,403 | | (138 | ) | | 4,265 | | 4,186 | | (117 | ) | | 4,069 | | | | | | | | | | | | | | | | | | | | | | | Corporate | | | | | | | | | | | | | | | | | | | | | | Service agreements | | 215 | | (115 | ) | | 100 | | 198 | | (92 | ) | | 106 | | 190 | | (117 | ) | | 73 | Other | | 6 | | (6 | ) | | — | | — | | — | | | — | | — | | — | | | — | | | | | | | | | | | | | | | | | | | | | | | Subtotal | | 221 | | (121 | ) | | 100 | | 198 | | (92 | ) | | 106 | | 190 | | (117 | ) | | 73 | | | | | | | | | | | | | | | | | | | | | | | Total | | 6,501 | | (469 | ) | | 6,032 | | 7,008 | | (455 | ) | | 6,553 | | 6,523 | | (498 | ) | | 6,025 | | | | | | | | | | | | | | | | | | | | | | |
2931 Other income
| | | | | | | | | | | 2006
| | 2005
| | 2004
| | | | | € mn | | € mn | | € mn | | Income from real estate held for use | | | | | | | | Realized gains from disposals of real estate held for use | | 82 | | 23 | | 191 | | Other income from real estate held for use | | 3 | | 33 | | 139 | | | | |
| |
| |
|
| Subtotal | | 85 | | 56 | | 330 | | Income from non-current assets and disposal groups held for sale | | 1 | | 35 | | — | | Other | | — | | 1 | | (1 | ) | | | |
| |
| |
|
| Total | | 86 | | 92 | | 329 | | | | |
| |
| |
|
|
30 Income from fully consolidated private equity investments
| | | | | | | | | | MAN Roland
Druckma-
schinen
AG
| | Four Seasons Health Care
Ltd.
| | Total
| | | | € mn | | € mn | | € mn | 2006 | | | | | | | Sales and service revenues | | 1,044 | | 327 | | 1,371 | Other operating revenues | | 15 | | — | | 15 | Interest income | | 5 | | 1 | | 6 | | | |
| |
| |
| Total | | 1,064 | | 328 | | 1,392 | | | |
| |
| |
| 2005 | | | | | | | Sales and service revenues | | — | | 597 | | 597 | Other operating revenues | | — | | — | | — | Interest income | | — | | 1 | | 1 | | | |
| |
| |
| Total | | — | | 598 | | 598 | | | |
| |
| |
| 2004 | | | | | | | Sales and service revenues | | — | | 173 | | 173 | Other operating revenues | | — | | — | | — | Interest income | | — | | 2 | | 2 | | | |
| |
| |
| Total | | — | | 175 | | 175 | | | |
| |
| |
|
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
31 Claims and insurance benefits incurred (net)
| | | | | | | | | | | | | | | | Property-Casualty
| | | Life/Health
| | | Consolidation
| | | Total
| | | | | € mn | | | € mn | | | € mn | | | € mn | | 2006 | | | | | | | | | | | | | Gross | | | | | | | | | | | | | Claims and insurance benefits paid | | (27,132 | ) | | (18,485 | ) | | 27 | | | (45,590 | ) | Change in loss and loss adjustment expenses | | 104 | | | (35 | ) | | (2 | ) | | 67 | | | | |
|
| |
|
| |
|
| |
|
| Subtotal | | (27,028 | ) | | (18,520 | ) | | 25 | | | (45,523 | ) | Ceded | | | | | | | | | | | | | Claims and insurance benefits paid | | 3,130 | | | 777 | | | (27 | ) | | 3,880 | | Change in loss and loss adjustment expenses | | (774 | ) | | 118 | | | 2 | | | (654 | ) | | | |
|
| |
|
| |
|
| |
|
| Subtotal | | 2,356 | | | 895 | | | (25 | ) | | 3,226 | | Net | | | | | | | | | | | | | Claims and insurance benefits paid | | (24,002 | ) | | (17,708 | ) | | — | | | (41,710 | ) | Change in loss and loss adjustment expenses | | (670 | ) | | 83 | | | — | | | (587 | ) | | | |
|
| |
|
| |
|
| |
|
| Total | | (24,672 | ) | | (17,625 | ) | | — | | | (42,297 | ) | | | |
|
| |
|
| |
|
| |
|
| 2005 | | | | | | | | | | | | | Gross | | | | | | | | | | | | | Claims and insurance benefits paid | | (26,026 | ) | | (18,281 | ) | | 8 | | | (44,299 | ) | Change in loss and loss adjustment expenses | | (2,452 | ) | | (51 | ) | | — | | | (2,503 | ) | | | |
|
| |
|
| |
|
| |
|
| Subtotal | | (28,478 | ) | | (18,332 | ) | | 8 | | | (46,802 | ) | Ceded | | | | | | | | | | | | | Claims and insurance benefits paid | | 3,429 | | | 875 | | | (8 | ) | | 4,296 | | Change in loss and loss adjustment expenses | | (282 | ) | | 18 | | | — | | | (264 | ) | | | |
|
| |
|
| |
|
| |
|
| Subtotal | | 3,147 | | | 893 | | | (8 | ) | | 4,032 | | Net | | | | | | | | | | | | | Claims and insurance benefits paid | | (22,597 | ) | | (17,406 | ) | | — | | | (40,003 | ) | Change in loss and loss adjustment expenses | | (2,734 | ) | | (33 | ) | | — | | | (2,767 | ) | | | |
|
| |
|
| |
|
| |
|
| Total | | (25,331 | ) | | (17,439 | ) | | — | | | (42,770 | ) | | | |
|
| |
|
| |
|
| |
|
| 2004 | | | | | | | | | | | | | Gross | | | | | | | | | | | | | Claims and insurance benefits paid | | (26,674 | ) | | (18,470 | ) | | (27 | ) | | (45,171 | ) | Change in loss and loss adjustment expenses | | (726 | ) | | (96 | ) | | (1 | ) | | (823 | ) | | | |
|
| |
|
| |
|
| |
|
| Subtotal | | (27,400 | ) | | (18,566 | ) | | (28 | ) | | (45,994 | ) | Ceded | | | | | | | | | | | | | Claims and insurance benefits paid | | 3,421 | | | 1,045 | | | 27 | | | 4,493 | | Change in loss and loss adjustment expenses | | (1,292 | ) | | (14 | ) | | 1 | | | (1,305 | ) | | | |
|
| |
|
| |
|
| |
|
| Subtotal | | 2,129 | | | 1,031 | | | 28 | | | 3,188 | | Net | | | | | | | | | | | | | Claims and insurance benefits paid | | (23,253 | ) | | (17,425 | ) | | — | | | (40,678 | ) | Change in loss and loss adjustment expenses | | (2,018 | ) | | (110 | ) | | — | | | (2,128 | ) | | | |
|
| |
|
| |
|
| |
|
| Total | | (25,271 | ) | | (17,535 | ) | | — | | | (42,806 | ) | | | |
|
| |
|
| |
|
| |
|
|
| | | | | | | | | | 2008 | | 2007 | | 2006 | | | | € mn | | €mn | | € mn | Income from real estate held for own use | | | | | | | Realized gains from disposals of real estate held for own use | | 374 | | 210 | | 58 | Other income from real estate held for own use | | 11 | | 2 | | 2 | | | | | | | | Subtotal | | 385 | | 212 | | 60 | | | | | | | | Income from non-current assets and disposal groups held-for-sale | | — | | 4 | | 1 | Other | | 23 | | 1 | | — | | | | | | | | Total | | 408 | | 217 | | 61 | | | | | | | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) 32 Change in reserves for insuranceIncome and investment contracts (net)expenses from fully consolidated private equity investments | | | | | | | | | | | | | | | | | | | Property-Casualty
| | | Life/Health
| | | Corporate
| | | Consolidation
| | | Total
| | | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | 2006 | | | | | | | | | | | | | | | | Gross | | | | | | | | | | | | | | | | Aggregate policy reserves | | (291 | ) | | (4,307 | ) | | — | | | (1 | ) | | (4,599 | ) | Other insurance reserves | | 31 | | | (78 | ) | | — | | | — | | | (47 | ) | Expenses for premium refunds | | (211 | ) | | (6,136 | ) | | — | | | (426 | ) | | (6,773 | ) | | | |
|
| |
|
| |
|
| |
|
| |
|
| Subtotal | | (471 | ) | | (10,521 | ) | | — | | | (427 | ) | | (11,419 | ) | Ceded | | | | | | | | | | | | | | | | Aggregate policy reserves | | 29 | | | (38 | ) | | — | | | 2 | | | (7 | ) | Other insurance reserves | | 2 | | | 11 | | | — | | | — | | | 13 | | Expenses for premium refunds | | 15 | | | 23 | | | — | | | — | | | 38 | | | | |
|
| |
|
| |
|
| |
|
| |
|
| Subtotal | | 46 | | | (4 | ) | | — | | | 2 | | | 44 | | Net | | | | | | | | | | | | | | | | Aggregate policy reserves | | (262 | ) | | (4,345 | ) | | — | | | 1 | | | (4,606 | ) | Other insurance reserves | | 33 | | | (67 | ) | | — | | | — | | | (34 | ) | Expenses for premium refunds | | (196 | ) | | (6,113 | ) | | — | | | (426 | ) | | (6,735 | ) | | | |
|
| |
|
| |
|
| |
|
| |
|
| Total | | (425 | ) | | (10,525 | ) | | — | | | (425 | ) | | (11,375 | ) | | | |
|
| |
|
| |
|
| |
|
| |
|
| 2005 | | | | | | | | | | | | | | | | Gross | | | | | | | | | | | | | | | | Aggregate policy reserves | | (225 | ) | | (5,162 | ) | | — | | | — | | | (5,387 | ) | Other insurance reserves | | (11 | ) | | (12 | ) | | — | | | — | | | (23 | ) | Expenses for premium refunds | | (521 | ) | | (5,409 | ) | | — | | | (26 | ) | | (5,956 | ) | | | |
|
| |
|
| |
|
| |
|
| |
|
| Subtotal | | (757 | ) | | (10,583 | ) | | — | | | (26 | ) | | (11,366 | ) | Ceded | | | | | | | | | | | | | | | | Aggregate policy reserves | | 17 | | | 118 | | | — | | | — | | | 135 | | Other insurance reserves | | (6 | ) | | 5 | | | — | | | — | | | (1 | ) | Expenses for premium refunds | | 39 | | | 17 | | | — | | | — | | | 56 | | | | |
|
| |
|
| |
|
| |
|
| |
|
| Subtotal | | 50 | | | 140 | | | — | | | — | | | 190 | | Net | | | | | | | | | | | | | | | | Aggregate policy reserves | | (208 | ) | | (5,044 | ) | | — | | | — | | | (5,252 | ) | Other insurance reserves | | (17 | ) | | (7 | ) | | — | | | — | | | (24 | ) | Expenses for premium refunds | | (482 | ) | | (5,392 | ) | | — | | | (26 | ) | | (5,900 | ) | | | |
|
| |
|
| |
|
| |
|
| |
|
| Total | | (707 | ) | | (10,443 | ) | | — | | | (26 | ) | | (11,176 | ) | | | |
|
| |
|
| |
|
| |
|
| |
|
| 2004 | | | | | | | | | | | | | | | | Gross | | | | | | | | | | | | | | | | Aggregate policy reserves | | (251 | ) | | (4,244 | ) | | — | | | (1 | ) | | (4,496 | ) | Other insurance reserves | | (57 | ) | | (31 | ) | | — | | | — | | | (88 | ) | Expenses for premium refunds | | (372 | ) | | (4,523 | ) | | (204 | ) | | 5 | | | (5,094 | ) | | | |
|
| |
|
| |
|
| |
|
| |
|
| Subtotal | | (680 | ) | | (8,798 | ) | | (204 | ) | | 4 | | | (9,678 | ) | Ceded | | | | | | | | | | | | | | | | Aggregate policy reserves | | 26 | | | 40 | | | — | | | 1 | | | 67 | | Other insurance reserves | | 1 | | | (1 | ) | | — | | | — | | | — | | Expenses for premium refunds | | 42 | | | 13 | | | — | | | — | | | 55 | | | | |
|
| |
|
| |
|
| |
|
| |
|
| Subtotal | | 69 | | | 52 | | | — | | | 1 | | | 122 | | Net | | | | | | | | | | | | | | | | Aggregate policy reserves | | (225 | ) | | (4,204 | ) | | — | | | — | | | (4,429 | ) | Other insurance reserves | | (56 | ) | | (32 | ) | | — | | | — | | | (88 | ) | Expenses for premium refunds | | (330 | ) | | (4,510 | ) | | (204 | ) | | 5 | | | (5,039 | ) | | | |
|
| |
|
| |
|
| |
|
| |
|
| Total | | (611 | ) | | (8,746 | ) | | (204 | ) | | 5 | | | (9,556 | ) | | | |
|
| |
|
| |
|
| |
|
| |
|
|
| | | | | | | | | | | | | | | | | | | manroland
AG | | | Selecta
AG | | | Four
Seasons
Health
Care
Ltd. | | | Other | | | Total | | | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | 2008 | | | | | | | | | | | | | | | | Income | | | | | | | | | | | | | | | | Sales and service revenues | | 1,727 | | | 749 | | | — | | | 40 | | | 2,516 | | Other operating revenues | | 19 | | | — | | | — | | | 1 | | | 20 | | Interest income | | 12 | | | — | | | — | | | 1 | | | 13 | | | | | | | | | | | | | | | | | | Subtotal | | 1,758 | | | 749 | | | — | | | 42 | | | 2,549 | | | | | | | | | | | | | | | | | | Expenses | | | | | | | | | | | | | | | | Cost of goods sold | | (1,379 | ) | | (238 | ) | | — | | | (27 | ) | | (1,644 | ) | Commissions | | (155 | ) | | — | | | — | | | — | | | (155 | ) | General and administrative expenses | | (87 | ) | | (391 | ) | | — | | | (3 | ) | | (481 | ) | Other operating expenses | | (96 | ) | | — | | | — | | | — | | | (96 | ) | Interest expenses | | (17 | ) | | (73 | ) | | — | | | (4 | ) | | (94 | ) | | | | | | | | | | | | | | | | | Subtotal | | (1,734 | ) | | (702 | ) | | — | | | (34 | ) | | (2,470 | ) | | | | | | | | | | | | | | | | | Total | | 24 | | | 47 | | | — | | | 8 | | | 79 | | | | | | | | | | | | | | | | | | 2007 | | | | | | | | | | | | | | | | Income | | | | | | | | | | | | | | | | Sales and service revenues | | 1,936 | | | 375 | | | — | | | 22 | | | 2,333 | | Other operating revenues | | 21 | | | — | | | — | | | — | | | 21 | | Interest income | | 13 | | | — | | | — | | | — | | | 13 | | | | | | | | | | | | | | | | | | Subtotal | | 1,970 | | | 375 | | | — | | | 22 | | | 2,367 | | | | | | | | | | | | | | | | | | Expenses | | | | | | | | | | | | | | | | Cost of goods sold | | (1,526 | ) | | (234 | ) | | — | | | (3 | ) | | (1,763 | ) | Commissions | | (164 | ) | | — | | | — | | | — | | | (164 | ) | General and administrative expenses | | (218 | ) | | (106 | ) | | — | | | — | | | (324 | ) | Other operating expenses | | — | | | — | | | — | | | — | | | — | | Interest expenses | | (26 | ) | | (40 | ) | | — | | | — | | | (66 | ) | | | | | | | | | | | | | | | | | Subtotal | | (1,934 | ) | | (380 | ) | | — | | | (3 | ) | | (2,317 | ) | | | | | | | | | | | | | | | | | Total | | 36 | | | (5 | ) | | — | | | 19 | | | 50 | | | | | | | | | | | | | | | | | | 2006 | | | | | | | | | | | | | | | | Income | | | | | | | | | | | | | | | | Sales and service revenues | | 1,044 | | | — | | | 327 | | | — | | | 1,371 | | Other operating revenues | | 15 | | | — | | | — | | | — | | | 15 | | Interest income | | 5 | | | — | | | 1 | | | — | | | 6 | | | | | | | | | | | | | | | | | | Subtotal | | 1,064 | | | — | | | 328 | | | — | | | 1,392 | | | | | | | | | | | | | | | | | | Expenses | | | | | | | | | | | | | | | | Cost of goods sold | | (849 | ) | | — | | | — | | | — | | | (849 | ) | Commissions | | (71 | ) | | — | | | — | | | — | | | (71 | ) | General and administrative expenses | | (40 | ) | | — | | | (264 | ) | | — | | | (304 | ) | Other operating expenses | | (93 | ) | | — | | | — | | | — | | | (93 | ) | Interest expenses | | (14 | ) | | — | | | (50 | ) | | — | | | (64 | ) | | | | | | | | | | | | | | | | | Subtotal | | (1,067 | ) | | — | | | (314 | ) | | — | | | (1,381 | ) | | | | | | | | | | | | | | | | | Total | | (3 | ) | | — | | | 14 | | | — | | | 11 | | | | | | | | | | | | | | | | | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) 33 Interest expense | | | | | | | | | | | | | 2006
| | | 2005
| | | 2004
| | | | | € mn | | | € mn | | | € mn | | Liabilities to banks and customers | | (2,818 | ) | | (3,102 | ) | | (2,099 | ) | Deposits retained on reinsurance ceded | | (120 | ) | | (279 | ) | | (311 | ) | Certificated liabilities | | (1,532 | ) | | (1,498 | ) | | (1,362 | ) | Participating certificates and subordinated liabilities | | (716 | ) | | (693 | ) | | (477 | ) | Other | | (573 | ) | | (805 | ) | | (1,439 | ) | | | |
|
| |
|
| |
|
| Total | | (5,759 | ) | | (6,377 | ) | | (5,688 | ) | | | |
|
| |
|
| |
|
|
34 Loan loss provisions
| | | | | | | | | | | | | 2006
| | | 2005
| | | 2004
| | | | | € mn | | | € mn | | | € mn | | Additions to allowances including direct impairments | | (533 | ) | | (774 | ) | | (1,439 | ) | Amounts released | | 317 | | | 782 | | | 973 | | Recoveries on loans previously impaired | | 180 | | | 101 | | | 112 | | | | |
|
| |
|
| |
|
| Total | | (36 | ) | | 109 | | | (354 | ) | | | |
|
| |
|
| |
|
|
35 Impairments of investmentsClaims and insurance benefits incurred (net)
| | | | | | | | | | | | | 2006
| | | 2005
| | | 2004
| | | | | € mn | | | € mn | | | € mn | | Impairments | | | | | | | | | | Available-for-sale investments | | | | | | | | | | Equity securities | | (479 | ) | | (245 | ) | | (722 | ) | Debt securities | | (106 | ) | | (10 | ) | | (29 | ) | Subtotal | | (585 | ) | | (255 | ) | | (751 | ) | Held-to-maturity investments | | (8 | ) | | (2 | ) | | (4 | ) | Investments in associates and joint ventures | | (12 | ) | | (50 | ) | | (59 | ) | Real estate held for investment | | (252 | ) | | (240 | ) | | (739 | ) | | | |
|
| |
|
| |
|
| Subtotal | | (857 | ) | | (547 | ) | | (1,553 | ) | Reversals of impairments | | | | | | | | | | Available-for-sale investments | | | | | | | | | | Debt securities | | 1 | | | 3 | | | 12 | | Held-to-maturity investments | | 1 | | | 3 | | | — | | Investments in associates and joint ventures | | — | | | — | | | 9 | | Real estate held for investment | | 80 | | | 1 | | | 57 | | | | |
|
| |
|
| |
|
| Subtotal | | 82 | | | 7 | | | 78 | | | | |
|
| |
|
| |
|
| Total | | (775 | ) | | (540 | ) | | (1,475 | ) | | | |
|
| |
|
| |
|
|
36 Investment expenses
| | | | | | | | | | | | | 2006
| | | 2005
| | | 2004
| | | | | € mn | | | € mn | | | € mn | | Investment management expenses | | (493 | ) | | (374 | ) | | (422 | ) | Depreciation from real estate held for investment | | (230 | ) | | (253 | ) | | (255 | ) | Other expenses from real estate held for investment | | (278 | ) | | (265 | ) | | (235 | ) | Foreign currency gains and losses (net) | | | | | | | | | | Foreign currency gains | | 473 | | | 417 | | | 481 | | Foreign currency losses | | (580 | ) | | (617 | ) | | (336 | ) | | | |
|
| |
|
| |
|
| Subtotal | | (107 | ) | | (200 | ) | | 145 | | | | |
|
| |
|
| |
|
| Total | | (1,108 | ) | | (1,092 | ) | | (767 | ) | | | |
|
| |
|
| |
|
|
| | | | | | | | | | | | | | | | Property-Casualty | | | Life/Health | | | Consolidation | | | Total | | | | | € mn | | | € mn | | | € mn | | | € mn | | 2008 | | | | | | | | | | | | | Gross | | | | | | | | | | | | | Claims and insurance benefits paid | | (27,656 | ) | | (20,057 | ) | | 13 | | | (47,700 | ) | Change in loss and loss adjustment expenses | | (501 | ) | | (89 | ) | | 3 | | | (587 | ) | | | | | | | | | | | | | | Subtotal | | (28,157 | ) | | (20,146 | ) | | 16 | | | (48,287 | ) | | | | | | | | | | | | | | Ceded | | | | | | | | | | | | | Claims and insurance benefits paid | | 2,521 | | | 490 | | | (13 | ) | | 2,998 | | Change in loss and loss adjustment expenses | | (350 | ) | | (17 | ) | | (3 | ) | | (370 | ) | | | | | | | | | | | | | | Subtotal | | 2,171 | | | 473 | | | (16 | ) | | 2,628 | | | | | | | | | | | | | | | Net | | | | | | | | | | | | | Claims and insurance benefits paid | | (25,135 | ) | | (19,567 | ) | | — | | | (44,702 | ) | Change in loss and loss adjustment expenses | | (851 | ) | | (106 | ) | | — | | | (957 | ) | | | | | | | | | | | | | | Total | | (25,986 | ) | | (19,673 | ) | | — | | | (45,659 | ) | | | | | | | | | | | | | | 2007 | | | | | | | | | | | | | Gross | | | | | | | | | | | | | Claims and insurance benefits paid | | (27,955 | ) | | (18,258 | ) | | 9 | | | (46,204 | ) | Change in loss and loss adjustment expenses | | (176 | ) | | (34 | ) | | 5 | | | (205 | ) | | | | | | | | | | | | | | Subtotal | | (28,131 | ) | | (18,292 | ) | | 14 | | | (46,409 | ) | | | | | | | | | | | | | | Ceded | | | | | | | | | | | | | Claims and insurance benefits paid | | 3,070 | | | 711 | | | (9 | ) | | 3,772 | | Change in loss and loss adjustment expenses | | (424 | ) | | (56 | ) | | (5 | ) | | (485 | ) | | | | | | | | | | | | | | Subtotal | | 2,646 | | | 655 | | | (14 | ) | | 3,287 | | | | | | | | | | | | | | | Net | | | | | | | | | | | | | Claims and insurance benefits paid | | (24,885 | ) | | (17,547 | ) | | — | | | (42,432 | ) | Change in loss and loss adjustment expenses | | (600 | ) | | (90 | ) | | — | | | (690 | ) | | | | | | | | | | | | | | Total | | (25,485 | ) | | (17,637 | ) | | — | | | (43,122 | ) | | | | | | | | | | | | | | 2006 | | | | | | | | | | | | | Gross | | | | | | | | | | | | | Claims and insurance benefits paid | | (27,132 | ) | | (18,485 | ) | | 27 | | | (45,590 | ) | Change in loss and loss adjustment expenses | | 104 | | | (35 | ) | | (2 | ) | | 67 | | | | | | | | | | | | | | | Subtotal | | (27,028 | ) | | (18,520 | ) | | 25 | | | (45,523 | ) | | | | | | | | | | | | | | Ceded | | | | | | | | | | | | | Claims and insurance benefits paid | | 3,130 | | | 777 | | | (27 | ) | | 3,880 | | Change in loss and loss adjustment expenses | | (774 | ) | | 118 | | | 2 | | | (654 | ) | | | | | | | | | | | | | | Subtotal | | 2,356 | | | 895 | | | (25 | ) | | 3,226 | | | | | | | | | | | | | | | Net | | | | | | | | | | | | | Claims and insurance benefits paid | | (24,002 | ) | | (17,708 | ) | | — | | | (41,710 | ) | Change in loss and loss adjustment expenses | | (670 | ) | | 83 | | | — | | | (587 | ) | | | | | | | | | | | | | | Total | | (24,672 | ) | | (17,625 | ) | | — | | | (42,297 | ) | | | | | | | | | | | | | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) 37 Acquisition34 Change in reserves for insurance and administrative expensesinvestment contracts (net)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2006
| | | 2005
| | | 2004
| | | | | Segment
| | | Consolidation
| | | Group
| | | Segment
| | | Consolidation
| | | Group
| | | Segment
| | | Consolidation
| | | Group
| | | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | Property-Casualty | | | | | | | | | | | | | | | | | | | | | | | | | | | | Acquisition costs | | | | | | | | | | | | | | | | | | | | | | | | | | | | Incurred | | (7,131 | ) | | — | | | (7,131 | ) | | (6,805 | ) | | — | | | (6,805 | ) | | (6,814 | ) | | — | | | (6,814 | ) | Commissions and profit received on reinsurance business ceded | | 722 | | | (1 | ) | | 721 | | | 953 | | | (1 | ) | | 952 | | | 908 | | | (1 | ) | | 907 | | Deferrals of acquisition costs | | 3,983 | | | — | | | 3,983 | | | 2,804 | | | — | | | 2,804 | | | 2,056 | | | — | | | 2,056 | | Amortization of deferred acquisition costs | | (3,843 | ) | | — | | | (3,843 | ) | | (2,686 | ) | | — | | | (2,686 | ) | | (1,888 | ) | | — | | | (1,888 | ) | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Subtotal | | (6,269 | ) | | (1 | ) | | (6,270 | ) | | (5,734 | ) | | (1 | ) | | (5,735 | ) | | (5,738 | ) | | (1 | ) | | (5,739 | ) | Administrative expenses | | (4,321 | ) | | 81 | | | (4,240 | ) | | (4,482 | ) | | 82 | | | (4,400 | ) | | (4,454 | ) | | 39 | | | (4,415 | ) | | | |
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| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Subtotal | | (10,590 | ) | | 80 | | | (10,510 | ) | | (10,216 | ) | | 81 | | | (10,135 | ) | | (10,192 | ) | | 38 | | | (10,154 | ) | Life/Health | | | | | | | | | | | | | | | | | | | | | | | | | | | | Acquisition costs | | | | | | | | | | | | | | | | | | | | | | | | | | | | Incurred | | (3,895 | ) | | — | | | (3,895 | ) | | (3,822 | ) | | — | | | (3,822 | ) | | (4,414 | ) | | — | | | (4,414 | ) | Commissions and profit received on reinsurance business ceded | | 150 | | | — | | | 150 | | | 115 | | | — | | | 115 | | | 174 | | | — | | | 174 | | Deferrals of acquisition costs | | 2,771 | | | — | | | 2,771 | | | 2,796 | | | — | | | 2,796 | | | 2,760 | | | — | | | 2,760 | | Amortization of deferred acquisition costs | | (1,772 | ) | | — | | | (1,772 | ) | | (1,393 | ) | | — | | | (1,393 | ) | | (1,195 | ) | | — | | | (1,195 | ) | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Subtotal | | (2,746 | ) | | — | | | (2,746 | ) | | (2,304 | ) | | — | | | (2,304 | ) | | (2,675 | ) | | — | | | (2,675 | ) | Administrative expenses | | (1,691 | ) | | (19 | ) | | (1,710 | ) | | (1,669 | ) | | 14 | | | (1,655 | ) | | (1,036 | ) | | 3 | | | (1,033 | ) | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Subtotal | | (4,437 | ) | | (19 | ) | | (4,456 | ) | | (3,973 | ) | | 14 | | | (3,959 | ) | | (3,711 | ) | | 3 | | | (3,708 | ) | Banking | | | | | | | | | | | | | | | | | | | | | | | | | | | | Personnel expenses | | (3,485 | ) | | — | | | (3,485 | ) | | (3,352 | ) | | — | | | (3,352 | ) | | (3,322 | ) | | — | | | (3,322 | ) | Non-personnel expenses | | (2,120 | ) | | 54 | | | (2,066 | ) | | (2,309 | ) | | 29 | | | (2,280 | ) | | (2,321 | ) | | 59 | | | (2,262 | ) | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Subtotal | | (5,605 | ) | | 54 | | | (5,551 | ) | | (5,661 | ) | | 29 | | | (5,632 | ) | | (5,643 | ) | | 59 | | | (5,584 | ) | Asset management | | | | | | | | | | | | | | | | | | | | | | | | | | | | Personnel expenses | | (1,657 | ) | | — | | | (1,657 | ) | | (1,679 | ) | | — | | | (1,679 | ) | | (1,462 | ) | | — | | | (1,462 | ) | Non-personnel expenses | | (629 | ) | | 16 | | | (613 | ) | | (598 | ) | | 8 | | | (590 | ) | | (564 | ) | | 17 | | | (547 | ) | | | |
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| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Subtotal | | (2,286 | ) | | 16 | | | (2,270 | ) | | (2,277 | ) | | 8 | | | (2,269 | ) | | (2,026 | ) | | 17 | | | (2,009 | ) | Corporate | | | | | | | | | | | | | | | | | | | | | | | | | | | | Administrative expenses | | (655 | ) | | (44 | ) | | (699 | ) | | (516 | ) | | (48 | ) | | (564 | ) | | (540 | ) | | 26 | | | (514 | ) | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Subtotal | | (655 | ) | | (44 | ) | | (699 | ) | | (516 | ) | | (48 | ) | | (564 | ) | | (540 | ) | | 26 | | | (514 | ) | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Total | | (23,573 | ) | | 87 | | | (23,486 | ) | | (22,643 | ) | | 84 | | | (22,559 | ) | | (22,112 | ) | | 143 | | | (21,969 | ) | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
| | | | | | | | | | | | | | | | Property-Casualty | | | Life/Health | | | Consolidation | | | Total | | | | | € mn | | | € mn | | | € mn | | | € mn | | 2008 | | | | | | | | | | | | | Gross | | | | | | | | | | | | | Aggregate policy reserves | | (154 | ) | | (4,045 | ) | | (1 | ) | | (4,200 | ) | Other insurance reserves | | 7 | | | (89 | ) | | — | | | (82 | ) | Expenses for premium refunds | | 142 | | | (1,118 | ) | | (22 | ) | | (998 | ) | | | | | | | | | | | | | | Subtotal | | (5 | ) | | (5,252 | ) | | (23 | ) | | (5,280 | ) | | | | | | | | | | | | | | Ceded | | | | | | | | | | | | | Aggregate policy reserves | | (18 | ) | | 110 | | | 2 | | | 94 | | Other insurance reserves | | 10 | | | 9 | | | — | | | 19 | | Expenses for premium refunds | | 16 | | | 11 | | | — | | | 27 | | | | | | | | | | | | | | | Subtotal | | 8 | | | 130 | | | 2 | | | 140 | | | | | | | | | | | | | | | Net | | | | | | | | | | | | | Aggregate policy reserves | | (172 | ) | | (3,935 | ) | | 1 | | | (4,106 | ) | Other insurance reserves | | 17 | | | (80 | ) | | — | | | (63 | ) | Expenses for premium refunds | | 158 | | | (1,107 | ) | | (22 | ) | | (971 | ) | | | | | | | | | | | | | | Total | | 3 | | | (5,122 | ) | | (21 | ) | | (5,140 | ) | | | | | | | | | | | | | | 2007 | | | | | | | | | | | | | Gross | | | | | | | | | | | | | Aggregate policy reserves | | (233 | ) | | (4,868 | ) | | — | | | (5,101 | ) | Other insurance reserves | | 24 | | | (260 | ) | | — | | | (236 | ) | Expenses for premium refunds | | (163 | ) | | (5,255 | ) | | (78 | ) | | (5,496 | ) | | | | | | | | | | | | | | Subtotal | | (372 | ) | | (10,383 | ) | | (78 | ) | | (10,833 | ) | | | | | | | | | | | | | | Ceded | | | | | | | | | | | | | Aggregate policy reserves | | 16 | | | 92 | | | — | | | 108 | | Other insurance reserves | | 2 | | | 5 | | | — | | | 7 | | Expenses for premium refunds | | 15 | | | 18 | | | — | | | 33 | | | | | | | | | | | | | | | Subtotal | | 33 | | | 115 | | | — | | | 148 | | | | | | | | | | | | | | | Net | | | | | | | | | | | | | Aggregate policy reserves | | (217 | ) | | (4,776 | ) | | — | | | (4,993 | ) | Other insurance reserves | | 26 | | | (255 | ) | | — | | | (229 | ) | Expenses for premium refunds | | (148 | ) | | (5,237 | ) | | (78 | ) | | (5,463 | ) | | | | | | | | | | | | | | Total | | (339 | ) | | (10,268 | ) | | (78 | ) | | (10,685 | ) | | | | | | | | | | | | | | 2006 | | | | | | | | | | | | | Gross | | | | | | | | | | | | | Aggregate policy reserves | | (291 | ) | | (4,307 | ) | | (1 | ) | | (4,599 | ) | Other insurance reserves | | 31 | | | (78 | ) | | — | | | (47 | ) | Expenses for premium refunds | | (211 | ) | | (6,136 | ) | | (426 | ) | | (6,773 | ) | | | | | | | | | | | | | | Subtotal | | (471 | ) | | (10,521 | ) | | (427 | ) | | (11,419 | ) | | | | | | | | | | | | | | Ceded | | | | | | | | | | | | | Aggregate policy reserves | | 29 | | | (38 | ) | | 2 | | | (7 | ) | Other insurance reserves | | 2 | | | 11 | | | — | | | 13 | | Expenses for premium refunds | | 15 | | | 23 | | | — | | | 38 | | | | | | | | | | | | | | | Subtotal | | 46 | | | (4 | ) | | 2 | | | 44 | | | | | | | | | | | | | | | Net | | | | | | | | | | | | | Aggregate policy reserves | | (262 | ) | | (4,345 | ) | | 1 | | | (4,606 | ) | Other insurance reserves | | 33 | | | (67 | ) | | — | | | (34 | ) | Expenses for premium refunds | | (196 | ) | | (6,113 | ) | | (426 | ) | | (6,735 | ) | | | | | | | | | | | | | | Total | | (425 | ) | | (10,525 | ) | | (425 | ) | | (11,375 | ) | | | | | | | | | | | | | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) 35 Interest expenses | | | | | | | | | | | | | 2008 | | | 2007 | | | 2006 | | | | | € mn | | | € mn | | | € mn | | Liabilities to banks and customers | | (753 | ) | | (882 | ) | | (488 | ) | Deposits retained on reinsurance ceded | | (71 | ) | | (101 | ) | | (120 | ) | Certificated liabilities | | (411 | ) | | (479 | ) | | (400 | ) | Participating certificates and subordinated liabilities | | (492 | ) | | (438 | ) | | (422 | ) | Other | | (166 | ) | | (170 | ) | | (203 | ) | | | | | | | | | | | Total | | (1,893 | ) | | (2,070 | ) | | (1,633 | ) | | | | | | | | | | |
36 Loan loss provisions | | | | | | | | | | | | | 2008 | | | 2007 | | | 2006 | | | | | € mn | | | € mn | | | € mn | | Additions to allowances including direct impairments | | (121 | ) | | (110 | ) | | (69 | ) | Amounts released | | 35 | | | 58 | | | 55 | | Recoveries on loans previously impaired | | 27 | | | 34 | | | 9 | | | | | | | | | | | | Total | | (59 | ) | | (18 | ) | | (5 | ) | | | | | | | | | | |
37 Impairments of investments (net) | | | | | | | | | | | | | 2008 | | | 2007 | | | 2006 | | | | | € mn | | | € mn | | | € mn | | Impairments | | | | | | | | | | Available-for-sale investments | | | | | | | | | | Equity securities | | (8,736 | ) | | (1,154 | ) | | (471 | ) | Debt securities1) | | (698 | ) | | (26 | ) | | (83 | ) | | | | | | | | | | | Subtotal | | (9,434 | ) | | (1,180 | ) | | (554 | ) | | | | | | | | | | | Held-to-maturity investments | | — | | | — | | | (8 | ) | Investments in associates and joint ventures | | (71 | ) | | (2 | ) | | (1 | ) | Real estate held for investment | | (128 | ) | | (23 | ) | | (2 | ) | | | | | | | | | | | Subtotal | | (9,633 | ) | | (1,205 | ) | | (565 | ) | | | | | | | | | | | Reversals of impairments | | | | | | | | | | Available-for-sale investments | | | | | | | | | | Debt securities | | 84 | | | 13 | | | 1 | | Held-to-maturity investments | | — | | | — | | | 1 | | Real estate held for investment | | 54 | | | 7 | | | 3 | | | | | | | | | | | | Subtotal | | 138 | | | 20 | | | 5 | | | | | | | | | | | | Total | | (9,495 | ) | | (1,185 | ) | | (560 | ) | | | | | | | | | | |
1) | Impairments on available-for-sale debt securities include impairments of asset-backed securities of €0.4 mn for the Property-Casualty segment and €15.6 mn for the Life/Health segment. |
38 Investment expenses | | | | | | | | | | | | | 2008 | | | 2007 | | | 2006 | | | | | € mn | | | € mn | | | € mn | | Investment management expenses | | (429 | ) | | (432 | ) | | (493 | ) | Depreciation from real estate held for investment | | (165 | ) | | (183 | ) | | (210 | ) | Other expenses from real estate held for investment | | (177 | ) | | (259 | ) | | (245 | ) | Foreign currency gains and losses (net) | | | | | | | | | | Foreign currency gains | | 1,255 | | | 687 | | | 473 | | Foreign currency losses | | (1,129 | ) | | (850 | ) | | (580 | ) | | | | | | | | | | | Subtotal | | 126 | | | (163 | ) | | (107 | ) | | | | | | | | | | | Total | | (645 | ) | | (1,037 | ) | | (1,055 | ) | | | | | | | | | | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) 38 Fee39 Acquisition and commissionadministrative expenses (net)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2006
| | | 2005
| | | 2004
| | | | | Segment
| | | Consolidation
| | Group
| | | Segment
| | | Consolidation
| | Group
| | | Segment
| | | Consolidation
| | | Group
| | | | | € mn | | | € mn | | € mn | | | € mn | | | € mn | | € mn | | | € mn | | | € mn | | | € mn | | Property-Casualty | | | | | | | | | | | | | | | | | | | | | | | | | | Fees from credit and assistance business | | (487 | ) | | 1 | | (486 | ) | | (594 | ) | | — | | (594 | ) | | (375 | ) | | 1 | | | (374 | ) | Service agreements | | (231 | ) | | 27 | | (204 | ) | | (172 | ) | | 10 | | (162 | ) | | (150 | ) | | — | | | (150 | ) | Investment advisory | | (3 | ) | | 2 | | (1 | ) | | (9 | ) | | 4 | | (5 | ) | | (5 | ) | | 2 | | | (3 | ) | | | |
|
| |
| |
|
| |
|
| |
| |
|
| |
|
| |
|
| |
|
| Subtotal | | (721 | ) | | 30 | | (691 | ) | | (775 | ) | | 14 | | (761 | ) | | (530 | ) | | 3 | | | (527 | ) | Life/Health | | | | | | | | | | | | | | | | | | | | | | | | | | Service agreements | | (88 | ) | | 27 | | (61 | ) | | (137 | ) | | 31 | | (106 | ) | | (134 | ) | | 63 | | | (71 | ) | Investment advisory | | (135 | ) | | 19 | | (116 | ) | | (82 | ) | | — | | (82 | ) | | (11 | ) | | — | | | (11 | ) | | | |
|
| |
| |
|
| |
|
| |
| |
|
| |
|
| |
|
| |
|
| Subtotal | | (223 | ) | | 46 | | (177 | ) | | (219 | ) | | 31 | | (188 | ) | | (145 | ) | | 63 | | | (82 | ) | Banking | | | | | | | | | | | | | | | | | | | | | | | | | | Securities business | | (120 | ) | | 1 | | (119 | ) | | (114 | ) | | — | | (114 | ) | | (98 | ) | | (1 | ) | | (99 | ) | Investment advisory | | (190 | ) | | 7 | | (183 | ) | | (178 | ) | | 5 | | (173 | ) | | (169 | ) | | 5 | | | (164 | ) | Payment transactions | | (22 | ) | | — | | (22 | ) | | (21 | ) | | — | | (21 | ) | | (20 | ) | | — | | | (20 | ) | Mergers and acquisitions advisory | | (49 | ) | | — | | (49 | ) | | (37 | ) | | — | | (37 | ) | | (27 | ) | | — | | | (27 | ) | Underwriting business | | (4 | ) | | — | | (4 | ) | | — | | | — | | — | | | — | | | — | | | — | | Other | | (205 | ) | | 49 | | (156 | ) | | (197 | ) | | 19 | | (178 | ) | | (216 | ) | | 23 | | | (193 | ) | | | |
|
| |
| |
|
| |
|
| |
| |
|
| |
|
| |
|
| |
|
| Subtotal | | (590 | ) | | 57 | | (533 | ) | | (547 | ) | | 24 | | (523 | ) | | (530 | ) | | 27 | | | (503 | ) | Asset Management | | | | | | | | | | | | | | | | | | | | | | | | | | Commissions | | (953 | ) | | 427 | | (526 | ) | | (862 | ) | | 350 | | (512 | ) | | (731 | ) | | 291 | | | (440 | ) | Other | | (309 | ) | | 4 | | (305 | ) | | (248 | ) | | 5 | | (243 | ) | | (187 | ) | | 13 | | | (174 | ) | | | |
|
| |
| |
|
| |
|
| |
| |
|
| |
|
| |
|
| |
|
| Subtotal | | (1,262 | ) | | 431 | | (831 | ) | | (1,110 | ) | | 355 | | (755 | ) | | (918 | ) | | 304 | | | (614 | ) | Corporate | | | | | | | | | | | | | | | | | | | | | | | | | | Service agreements | | (127 | ) | | 8 | | (119 | ) | | (92 | ) | | 7 | | (85 | ) | | (84 | ) | | 6 | | | (78 | ) | | | |
|
| |
| |
|
| |
|
| |
| |
|
| |
|
| |
|
| |
|
| Subtotal | | (127 | ) | | 8 | | (119 | ) | | (92 | ) | | 7 | | (85 | ) | | (84 | ) | | 6 | | | (78 | ) | | | |
|
| |
| |
|
| |
|
| |
| |
|
| |
|
| |
|
| |
|
| Total | | (2,923 | ) | | 572 | | (2,351 | ) | | (2,743 | ) | | 431 | | (2,312 | ) | | (2,207 | ) | | 403 | | | (1,804 | ) | | | |
|
| |
| |
|
| |
|
| |
| |
|
| |
|
| |
|
| |
|
|
39 Other expenses
| | | | | | | | | | 2006
| | 2005
| | 2004
| | | | € mn | | € mn | | € mn | Expenses from real estate held for use | | | | | | | Realized losses from disposals of real estate held for use | | (9) | | (8) | | (37) | Depreciation of real estate held for use | | (3) | | (9) | | (119) | Subtotal | | (12) | | (17) | | (156) | Other | | 13 | | (34) | | (44) | Total | | 1 | | (51) | | (200) | | | |
| |
| |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2008 | | | 2007 | | | 2006 | | | | | Segment | | | Consolidation | | | Group | | | Segment | | | Consolidation | | | Group | | | Segment | | | Consolidation | | | Group | | | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | Property-Casualty | | | | | | | | | | | | | | | | | | | | | | | | | | | | Acquisition costs | | | | | | | | | | | | | | | | | | | | | | | | | | | | Incurred | | (7,731 | ) | | — | | | (7,731 | ) | | (7,690 | ) | | — | | | (7,690 | ) | | (7,515 | ) | | — | | | (7,515 | ) | Commissions and profit received on reinsurance business ceded | | 643 | | | (5 | ) | | 638 | | | 671 | | | (2 | ) | | 669 | | | 717 | | | (1 | ) | | 716 | | Deferrals of acquisition costs | | 4,146 | | | — | | | 4,146 | | | 4,511 | | | — | | | 4,511 | | | 3,983 | | | — | | | 3,983 | | Amortization of deferred acquisition costs | | (4,089 | ) | | — | | | (4,089 | ) | | (4,384 | ) | | — | | | (4,384 | ) | | (3,843 | ) | | — | | | (3,843 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Subtotal | | (7,031 | ) | | (5 | ) | | (7,036 | ) | | (6,892 | ) | | (2 | ) | | (6,894 | ) | | (6,658 | ) | | (1 | ) | | (6,659 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Administrative expenses | | (3,325 | ) | | 6 | | | (3,319 | ) | | (3,724 | ) | | 64 | | | (3,660 | ) | | (3,932 | ) | | 81 | | | (3,851 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Subtotal | | (10,356 | ) | | 1 | | | (10,355 | ) | | (10,616 | ) | | 62 | | | (10,554 | ) | | (10,590 | ) | | 80 | | | (10,510 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Life/Health | | | | | | | | | | | | | | | | | | | | | | | | | | | | Acquisition costs | | | | | | | | | | | | | | | | | | | | | | | | | | | | Incurred | | (3,829 | ) | | 5 | | | (3,824 | ) | | (3,851 | ) | | 3 | | | (3,848 | ) | | (3,928 | ) | | — | | | (3,928 | ) | Commissions and profit received on reinsurance business ceded | | 83 | | | — | | | 83 | | | 146 | | | — | | | 146 | | | 150 | | | — | | | 150 | | Deferrals of acquisition costs | | 2,437 | | | — | | | 2,437 | | | 2,526 | | | — | | | 2,526 | | | 2,771 | | | — | | | 2,771 | | Amortization of deferred acquisition costs | | (1,392 | ) | | — | | | (1,392 | ) | | (1,643 | ) | | — | | | (1,643 | ) | | (1,772 | ) | | — | | | (1,772 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Subtotal | | (2,701 | ) | | 5 | | | (2,696 | ) | | (2,822 | ) | | 3 | | | (2,819 | ) | | (2,779 | ) | | — | | | (2,779 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Administrative expenses | | (1,674 | ) | | (5 | ) | | (1,679 | ) | | (1,766 | ) | | (72 | ) | | (1,838 | ) | | (1,658 | ) | | (19 | ) | | (1,677 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Subtotal | | (4,375 | ) | | — | | | (4,375 | ) | | (4,588 | ) | | (69 | ) | | (4,657 | ) | | (4,437 | ) | | (19 | ) | | (4,456 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Banking | | | | | | | | | | | | | | | | | | | | | | | | | | | | Personnel expenses | | (264 | ) | | 1 | | | (263 | ) | | (252 | ) | | — | | | (252 | ) | | (254 | ) | | — | | | (254 | ) | Non-personnel expenses | | (288 | ) | | 6 | | | (282 | ) | | (337 | ) | | 20 | | | (317 | ) | | (296 | ) | | 17 | | | (279 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Subtotal | | (552 | ) | | 7 | | | (545 | ) | | (589 | ) | | 20 | | | (569 | ) | | (550 | ) | | 17 | | | (533 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Asset Management | | | | | | | | | | | | | | | | | | | | | | | | | | | | Personnel expenses | | (1,441 | ) | | — | | | (1,441 | ) | | (1,705 | ) | | — | | | (1,705 | ) | | (1,657 | ) | | — | | | (1,657 | ) | Non-personnel expenses | | (798 | ) | | 13 | | | (785 | ) | | (686 | ) | | 16 | | | (670 | ) | | (629 | ) | | 16 | | | (613 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Subtotal | | (2,239 | ) | | 13 | | | (2,226 | ) | �� | (2,391 | ) | | 16 | | | (2,375 | ) | | (2,286 | ) | | 16 | | | (2,270 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Corporate | | | | | | | | | | | | | | | | | | | | | | | | | | | | Administrative expenses | | (444 | ) | | 23 | | | (421 | ) | | (642 | ) | | 9 | | | (633 | ) | | (655 | ) | | (44 | ) | | (699 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Subtotal | | (444 | ) | | 23 | | | (421 | ) | | (642 | ) | | 9 | | | (633 | ) | | (655 | ) | | (44 | ) | | (699 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | (17,966 | ) | | 44 | | | (17,922 | ) | | (18,826 | ) | | 38 | | | (18,788 | ) | | (18,518 | ) | | 50 | | | (18,468 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) 40 Expenses from fully consolidated private equity investmentsFee and commission expenses | | | | | | | | | | | | | MAN Roland
Druckma-
schinen AG
| | | Four Seasons Health Care Ltd.
| | | Total
| | | | | € mn | | | € mn | | | € mn | | 2006 | | | | | | | | | | Cost of goods sold | | (849 | ) | | — | | | (849 | ) | Commissions | | (71 | ) | | — | | | (71 | ) | General and administrative expenses | | (133 | ) | | (264 | ) | | (397 | ) | Interest expense | | (14 | ) | | (50 | ) | | (64 | ) | | | |
|
| |
|
| |
|
| Total | | (1,067 | ) | | (314 | ) | | (1,381 | ) | | | |
|
| |
|
| |
|
| 2005 | | | | | | | | | | Cost of goods sold | | — | | | — | | | — | | Commissions | | — | | | — | | | — | | General and administrative expenses | | — | | | (497 | ) | | (497 | ) | Interest expense | | — | | | (75 | ) | | (75 | ) | | | |
|
| |
|
| |
|
| Total | | — | | | (572 | ) | | (572 | ) | | | |
|
| |
|
| |
|
| 2004 | | | | | | | | | | Cost of goods sold | | — | | | — | | | — | | Commissions | | — | | | — | | | — | | General and administrative expenses | | — | | | (151 | ) | | (151 | ) | Interest expense | | — | | | (24 | ) | | (24 | ) | | | |
|
| |
|
| |
|
| Total | | — | | | (175 | ) | | (175 | ) | | | |
|
| |
|
| |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | 2008 | | | 2007 | | | 2006 | | | | | Segment | | | Consolidation | | Group | | | Segment | | | Consolidation | | Group | | | Segment | | | Consolidation | | Group | | | | | € mn | | | € mn | | € mn | | | € mn | | | € mn | | € mn | | | € mn | | | € mn | | € mn | | Property-Casualty | | | | | | | | | | | | | | | | | | | | | | | | | Fees from credit and assistance business | | (606 | ) | | — | | (606 | ) | | (615 | ) | | 1 | | (614 | ) | | (487 | ) | | 1 | | (486 | ) | Service agreements | | (535 | ) | | 34 | | (501 | ) | | (352 | ) | | 16 | | (336 | ) | | (231 | ) | | 27 | | (204 | ) | Investment advisory | | — | | | — | | — | | | — | | | — | | — | | | (3 | ) | | 2 | | (1 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Subtotal | | (1,141 | ) | | 34 | | (1,107 | ) | | (967 | ) | | 17 | | (950 | ) | | (721 | ) | | 30 | | (691 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Life/Health | | | | | | | | | | | | | | | | | | | | | | | | | Service agreements | | (66 | ) | | 41 | | (25 | ) | | (45 | ) | | 18 | | (27 | ) | | (88 | ) | | 27 | | (61 | ) | Investment advisory | | (187 | ) | | 19 | | (168 | ) | | (164 | ) | | 6 | | (158 | ) | | (135 | ) | | 19 | | (116 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Subtotal | | (253 | ) | | 60 | | (193 | ) | | (209 | ) | | 24 | | (185 | ) | | (223 | ) | | 46 | | (177 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Banking | | | | | | | | | | | | | | | | | | | | | | | | | Securities business | | (7 | ) | | — | | (7 | ) | | (10 | ) | | — | | (10 | ) | | (9 | ) | | — | | (9 | ) | Investment advisory | | (128 | ) | | — | | (128 | ) | | (169 | ) | | 3 | | (166 | ) | | (178 | ) | | 3 | | (175 | ) | Payment transactions | | (8 | ) | | — | | (8 | ) | | (5 | ) | | — | | (5 | ) | | (6 | ) | | — | | (6 | ) | Other | | (50 | ) | | 1 | | (49 | ) | | (49 | ) | | 5 | | (44 | ) | | (42 | ) | | 10 | | (32 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Subtotal | | (193 | ) | | 1 | | (192 | ) | | (233 | ) | | 8 | | (225 | ) | | (235 | ) | | 13 | | (222 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Asset Management | | | | | | | | | | | | | | | | | | | | | | | | | Commissions | | (794 | ) | | 298 | | (496 | ) | | (948 | ) | | 435 | | (513 | ) | | (953 | ) | | 427 | | (526 | ) | Other | | (364 | ) | | 14 | | (350 | ) | | (322 | ) | | 5 | | (317 | ) | | (309 | ) | | 4 | | (305 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Subtotal | | (1,158 | ) | | 312 | | (846 | ) | | (1,270 | ) | | 440 | | (830 | ) | | (1,262 | ) | | 431 | | (831 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Corporate | | | | | | | | | | | | | | | | | | | | | | | | | Service agreements | | (170 | ) | | 6 | | (164 | ) | | (130 | ) | | 7 | | (123 | ) | | (127 | ) | | 8 | | (119 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Subtotal | | (170 | ) | | 6 | | (164 | ) | | (130 | ) | | 7 | | (123 | ) | | (127 | ) | | 8 | | (119 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | (2,915 | ) | | 413 | | (2,502 | ) | | (2,809 | ) | | 496 | | (2,313 | ) | | (2,568 | ) | | 528 | | (2,040 | ) | | | | | | | | | | | | | | | | | | | | | | | | | |
41 Other expenses | | | | | | | | | | | | | 2008 | | | 2007 | | | 2006 | | | | | € mn | | | € mn | | | € mn | | Expenses from real estate held for own use | | | | | | | | | | Realized losses from disposals of real estate held for own use | | (1 | ) | | (4 | ) | | (9 | ) | Impairments of real estate held for own use | | (9 | ) | | (10 | ) | | (3 | ) | | | | | | | | | | | Subtotal | | (10 | ) | | (14 | ) | | (12 | ) | | | | | | | | | | | Other | | (2 | ) | | (3 | ) | | (1 | ) | | | | | | | | | | | Total | | (12 | ) | | (17 | ) | | (13 | ) | | | | | | | | | | |
42 Income taxes | | | | 2006
| | 2005
| | 2004
| | | 2008 | | 2007 | | 2006 | | | | | € mn | | € mn | | € mn | | | € mn | | € mn | | € mn | | Current income tax expense | | | | | | | | Germany | | 198 | | | (1,020 | ) | | (373 | ) | | (181 | ) | | (371 | ) | | 434 | | Other countries | | (1,888 | ) | | (1,025 | ) | | (930 | ) | | (925 | ) | | (2,066 | ) | | (1,886 | ) | | | | | | | | | | | | Subtotal | | (1,690 | ) | | (2,045 | ) | | (1,303 | ) | | (1,106 | ) | | (2,437 | ) | | (1,452 | ) | | | | | | | | | | | | Deferred income tax expense | | | | | | | | Germany | | 100 | | | 408 | | | (32 | ) | | (575 | ) | | 149 | | | 155 | | Other countries | | (423 | ) | | (426 | ) | | (275 | ) | | 394 | | | (284 | ) | | (423 | ) | | | | | | | | | | | | Subtotal | | (323 | ) | | (18 | ) | | (307 | ) | | (181 | ) | | (135 | ) | | (268 | ) | | | |
|
| |
|
| |
|
| | | | | | | | | | Total | | (2,013 | ) | | (2,063 | ) | | (1,610 | ) | | (1,287 | ) | | (2,572 | ) | | (1,720 | ) | | | |
|
| |
|
| |
|
| | | | | | | | | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) During the year ended December, 31, 2006,2008, current income tax expense included a benefitan expense of €51€6 mn (2005: charge(2007: an income of €44€20 mn; 2004: charge of €172006: an income €82 mn) related to prior periods. The dividend distribution for the year ended December 31, 2005, reduced corporate taxes for the year ended December 31, 2006, by €38 mn. Due to the “moratorium” introduced by the “bill on the reduction of tax privileges”, the dividend distribution for the year ended December 31, 2004, did not lead to a reduction of corporate taxes for the year ended December 31, 2005. The German Reorganization Tax Act (SEStEG) which entered into force in December 2006 stipulates that corporation tax credits accumulated under the pre-2001 corporation tax imputation system will be refunded in the future without regard to dividend distributions. The refunds are spread equally over a ten year period from 2008 to 2017. As a consequence of the tax law change Allianz Group’s total corporate tax credits were capitalised on a discounted basis as at December 31, 2006, and reduced current income tax expense by €571 mn.years.
Of the deferred tax charge for the year ended December 31, 2006,2008, an expense of €387 mn (2007: expense of €463 mn; 2006: income of €480 mn (2005: €468 mn; 2004: €2€485 mn) areis attributable to the recognition of deferred taxes on temporary differences and an income of €227 mn (2007: an expense of €785 mn (2005: €492€14 mn; 2004: € 3422006: an expense €747 mn) areis attributable to tax losses carried forward. The changeAdditionally, changes of applicable tax rates due to changes in tax law produced deferred tax expense of €18€21 mn (2005(2007 income of €7€341 mn; 20042006 expense of €5 mn). In 2007, in this amount is included a tax income of €34 Notes to€291 mn resulting from the Allianz Group’s Consolidated Financial Statements—(Continued)
mn).German corporate tax reform. Current and deferred tax benefit included in shareholders’ equity during the year ended December 31, 2006,2008, amounted to €740€1,084 mn (2005: charge of €101(2007: €870 mn; 2004: charge of €5782006: €740 mn).
The recognized income tax chargeexpense for the year ended December 31, 2006,2008, is €1,130€312 mn (2007: €557 mn; 2006: €1,183 mn) lower than the expected income tax charge (2005: lower than expected by €278 mn; 2004: higher than expected by €131 mn).expense. The following table shows the reconciliation offrom the expected income tax chargeexpense of the Allianz Group withto the effectively recognized tax charge.expense. The Allianz Group’s reconciliation is a summary of the individual company-related reconciliations, which are based on the respective country-specific tax rates after taking into consideration consolidation effects with impact on the group result. The expected tax rate for domestic Allianz Group subsidiariescompanies applied in the reconciliation includes corporate tax, trade tax and the solidarity surcharge and amounts to 26.38% (2005:31.00% (2007: 26.38%; 2004:2006: 26.38%), including corporate tax and solidarity surcharge in both prior periods). The German corporate tax reform in 2007 led to a decrease of corporate tax rate and an increase of trade tax rate. Due to the increased relative weight of trade tax and because trade tax ceased to be deductible for corporate tax purposes, trade tax has been included into the expected tax rate in reconciliations of the German Allianz companies. The effective tax rate is determined on the basis of the effective income tax chargeexpense on income before income taxes and minority interests in earnings. | | | | 2006
| | 2005
| | 2004
| | | 2008 | | 2007 | | 2006 | | | | | € mn | | € mn | | € mn | | | € mn | | € mn | | € mn | | Income before income taxes and minority interests in earnings | | | | | | | | | Germany | | 2,314 | | | 1,780 | | | 1,157 | | | 3,393 | | | 2,367 | | | 1,554 | | Other countries | | 8,009 | | | 6,049 | | | 3,887 | | | 2,080 | | | 8,196 | | | 8,009 | | | | |
|
| |
|
| |
|
| | | | | | | | | | Total | | 10,323 | | | 7,829 | | | 5,044 | | | 5,473 | | | 10,563 | | | 9,563 | | | | |
|
| |
|
| |
|
| | | | | | | | | | Expected income tax rate in % | | 30.4 | | | 29.9 | | | 29.3 | | | 29.2 | % | | 29.6 | % | | 30.4 | % | Expected income tax charge | | 3,143 | | | 2,340 | | | 1,478 | | | Expected income tax expense | | | 1,599 | | | 3,129 | | | 2,903 | | Municipal trade tax and similar taxes | | 208 | | | 280 | | | 227 | | | 166 | | | 405 | | | 151 | | Net tax exempt income | | (884 | ) | | (503 | ) | | (426 | ) | | (469 | ) | | (592 | ) | | (773 | ) | Amortization of goodwill | | — | | | — | | | 296 | | | Effects of tax losses | | (50 | ) | | (73 | ) | | (68 | ) | | 28 | | | (17 | ) | | (29 | ) | Effects of German tax law changes | | (571 | ) | | — | | | — | | | — | | | (291 | ) | | (521 | ) | Other tax settlements | | 167 | | | 19 | | | 103 | | | Other | | | (37 | ) | | (62 | ) | | (11 | ) | | | | | | | | | | | | Income taxes | | 2,013 | | | 2,063 | | | 1,610 | | | 1,287 | | | 2,572 | | | 1,720 | | | | | | | | | | | | | Effective tax rate in % | | 19.5 | | | 26.3 | | | 31.9 | | | 23.5 | % | | 24.4 | % | | 18.0 | % |
The effects of German tax law changes stem, in 2007, from decrease in tax rates due to German corporate tax reform and, in 2006, from the capitalization of corporate tax credits due to the German Reorganization Tax Act (“SEStEG”). During the year ended December 31, 2006,2008, a deferred tax chargeexpense of €35€5 mn (2005: €4(2007: €8 mn; 2004: €129 2006: €—mn) was recognized due to a devaluation of deferred tax assets on tax losses carried forward. Due to the use of tax losses carried forward for which no deferred tax asset was recognized, the current income tax chargeexpense diminished by €45€19 mn (2005: €64(2007: €43 mn; 2004: €1932006: €27 mn). The recognition of deferred tax assets on tax losses carried forward from earlier periods, for which no deferred taxes had yet been recognized or which had been devalued resulted in a deferred tax income of €54€4 mn (2005: €39(2007: €4 mn; 2004: €872006: €12 mn). The non-recognition of deferred taxes on tax losses for the current fiscal year increased the tax chargesexpense by €14€46 mn (2005: €26(2007: €22 mn; 2004: €832006: €10 mn). The above mentioned effects are shown in the reconciliation statement as “effects of tax losses”.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) The tax rates used in the calculation of the Allianz Group deferred taxes are the applicable national rates, which in 20062008 ranged from 10.0% to 46.1%42.05%. Changes to tax rates already adopted on December 31, 2006,2008, are taken into account. Deferred taxes on losses carried forward are recognized as an asset to the extent sufficient future taxable profits are available for realization. Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Deferred tax assets and liabilities | As of December 31,
| | 2006
| | 2005
| | | 20081) | | 20071) | | | | | € mn | | € mn | | | € mn | | € mn | | Deferred tax assets | | | | | | | Financial assets carried at fair value through income | | | 225 | | | 166 | | Investments | | | 4,080 | | | 2,501 | | Deferred acquisition costs | | | 473 | | | 546 | | Other assets | | | 833 | | | 932 | | Intangible assets | | 556 | | | 370 | | | 156 | | | 167 | | Investments | | 2,786 | | | 1,658 | | | Financial assets held for trading | | 236 | | | 332 | | | Deferred acquisition costs | | 351 | | | 187 | | | Tax losses carried forward | | 4,859 | | | 5,850 | | | 2,060 | | | 4,041 | | Other assets | | 955 | | | 1,205 | | | Insurance reserves | | 4,668 | | | 3,929 | | | 3,845 | | | 3,610 | | Pensions and similar obligations | | 384 | | | 351 | | | 177 | | | 357 | | Other liabilities | | 1,513 | | | 1,546 | | | 712 | | | 1,325 | | | | | | | | | | Total deferred tax assets | | 16,308 | | | 15,428 | | | 12,561 | | | 13,645 | | Valuation allowance for deferred tax assets on tax losses carried forward | | (731 | ) | | (832 | ) | | | | | | | | | | Non recognition or valuation allowance for deferred tax assets on tax losses carried forward | | | (197 | ) | | (814 | ) | Effect of netting | | (10,850 | ) | | (9,297 | ) | | (8,368 | ) | | (8,060 | ) | | | | | | | | | Net deferred tax assets | | 4,727 | | | 5,299 | | | 3,996 | | | 4,771 | | | | | | | | | | Deferred tax liabilities | | | | | | | Intangible assets | | 861 | | | 805 | | | Financial assets carried at fair value through income | | | 50 | | | 543 | | Investments | | 4,084 | | | 4,634 | | | 3,090 | | | 3,191 | | Financial assets held for trading | | 842 | | | 900 | | | Deferred acquisition costs | | 3,927 | | | 3,207 | | | 4,531 | | | 3,746 | | Other assets | | 1,076 | | | 736 | | | 680 | | | 751 | | Intangible assets | | | 115 | | | 349 | | Insurance reserves | | 3,152 | | | 2,402 | | | 2,465 | | | 2,389 | | Pensions and similar obligations | | 257 | | | 146 | | | 226 | | | 231 | | Other liabilities | | 1,269 | | | 1,791 | | | 1,044 | | | 833 | | | | | | | | | | Total deferred tax liabilities | | 15,468 | | | 14,621 | | | 12,201 | | | 12,033 | | | | | | | | | | Effect of netting | | (10,850 | ) | | (9,297 | ) | | (8,368 | ) | | (8,060 | ) | | | | | | | | | Net deferred tax liabilities | | 4,618 | | | 5,324 | | | 3,833 | | | 3,973 | | | | | | | | | | Net deferred tax assets/(liabilities) | | 109 | | | (25 | ) | | 163 | | | 798 | | | | | | | | | |
1) | Compared to the presentation in prior years notes to the financial statements, the presentation of the individual positions in the above table has been changed in order to better refer to the individual underlying balance sheet positions. |
Taxable temporary differences associated with investments in Allianz Group companies, for which no deferred tax liabilities are recognized because Allianz is able to control the timing of their reversal and they will not reverse in the foreseeable future amount to €267 mn (2007: €343 mn). Deductible temporary differences arising from investments in Allianz Group companies, for which no deferred tax assets are recognized because it is not probable that they reverse in the foreseeable future amount to €219 mn (2007: €588 mn). Tax losses carried forward Tax losses carried forward at December 31, 2006,2008, of €13,336€8,856 mn (2005: €15,740(2007: €7,169 mn) result in recognition of deferred tax assets to the extent there is sufficient certainty that the unused tax losses will be utilized. €10,414€8,244 mn (2005: €10,886(2007: €6,618 mn) of the tax losses carried forward can be utilized without time limitation. The Allianz Group believes that it is more likely than not that the results of future operations will generate sufficient taxable income to realize its deferred tax assets. Tax losses carried forward are scheduled according to their expiry periods as follows: | | | | | | € mn
| 2007 | | 185 | 2008 | | 71 | 2009 | | 232 | 2010 | | 42 | 2011 | | 126 | 2012 | | 13 | 2013 | | 8 | 2014 | | — | 2015 | | — | 2016 | | — | >10 years | | 2,245 | Unlimited | | 10,414 | | | |
| Total | | 13,336 | | | |
|
Other Information
42 Supplemental information on the Banking Segment
Net interest income from the Banking Segment
| | | | | | | | | | | | | Segment
| | | Consolidation
| | | Group
| | | | | € mn | | | € mn | | | € mn | | 2006 | | | | | | | | | | Interest and similar income | | 7,312 | | | (52 | ) | | 7,260 | | Interest expense | | (4,592 | ) | | 71 | | | (4,521 | ) | | | |
|
| |
|
| |
|
| Net interest income | | 2,720 | | | 19 | | | 2,739 | | | | |
|
| |
|
| |
|
| 2005 | | | | | | | | | | Interest and similar income | | 7,321 | | | (36 | ) | | 7,285 | | Interest expense | | (5,027 | ) | | 81 | | | (4,946 | ) | | | |
|
| |
|
| |
|
| Net interest income | | 2,294 | | | 45 | | | 2,339 | | | | |
|
| |
|
| |
|
| 2004 | | | | | | | | | | Interest and similar income | | 6,545 | | | (30 | ) | | 6,515 | | Interest expense | | (4,189 | ) | | 60 | | | (4,129 | ) | | | |
|
| |
|
| |
|
| Net interest income | | 2,356 | | | 30 | | | 2,386 | | | | |
|
| |
|
| |
|
|
| | | | | | 2008 | | | | € mn | 2009 | | 13 | 2010 | | 26 | 2011 | | 61 | 2012 | | 39 | 2013 | | 92 | 2014 | | 17 | 2015 | | 134 | 2016 | | 34 | 2017 | | 7 | 2018 | | 55 | >10 years | | 134 | Unlimited | | 8,244 | | | | Total | | 8,856 | | | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Net fee and commission income from the Banking SegmentOther Information
| | | | | | | | | | | | | Segment
| | | Consolidation
| | | Group
| | | | | € mn | | | € mn | | | € mn | | 2006 | | | | | | | | | | Fee and commission income | | 3,598 | | | (421 | ) | | 3,177 | | Fee and commission expense | | (590 | ) | | 57 | | | (533 | ) | | | |
|
| |
|
| |
|
| Net fee and commission income | | 3,008 | | | (364 | ) | | 2,644 | | | | |
|
| |
|
| |
|
| 2005 | | | | | | | | | | Fee and commission income | | 3,397 | | | (313 | ) | | 3,084 | | Fee and commission expense | | (547 | ) | | 24 | | | (523 | ) | | | |
|
| |
|
| |
|
| Net fee and commission income | | 2,850 | | | (289 | ) | | 2,561 | | | | |
|
| |
|
| |
|
| 2004 | | | | | | | | | | Fee and commission income | | 3,237 | | | (281 | ) | | 2,956 | | Fee and commission expense | | (530 | ) | | 27 | | | (503 | ) | | | |
|
| |
|
| |
|
| Net fee and commission income | | 2,707 | | | (254 | ) | | 2,453 | | | | |
|
| |
|
| |
|
|
The net fee and commission income of the Allianz Group’s Banking segment includes the following:
| | | | | | | | | | 2006
| | 2005
| | 2004
| | | | € mn | | € mn | | € mn | Securities business | | 1,352 | | 1,225 | | 1,105 | Investment advisory | | 421 | | 380 | | 355 | Payment transactions | | 342 | | 360 | | 379 | Merger and acquisitions advisory | | 235 | | 219 | | 155 | Underwriting business | | 129 | | 102 | | 97 | Other | | 529 | | 564 | | 616 | | | |
| |
| |
| Total | | 3,008 | | 2,850 | | 2,707 | | | |
| |
| |
|
Volume of foreign currency exposure from the Banking segment
The amounts reported constitute aggregate Euro equivalents of a wide variety of currencies outside the European Monetary Union (“EMU”). Any differences between assets and liabilities are a result of differing measurements under current accounting policies. Loans and advances to banks, loans and advances to customers, liabilities to banks and liabilities to customers are reported at amortized cost, while all derivative transactions are accounted for at fair value.
| | | | | | | | | | | As of December 31,
| | 2006
| | 2005
| | | | USD
| | GBP
| | Other
| | Total
| | Total
| | | | € mn | | € mn | | € mn | | € mn | | € mn | Balance sheet items | | | | | | | | | | | Assets | | 131,888 | | 64,610 | | 26,050 | | 222,548 | | 202,633 | Liabilities | | 115,794 | | 61,764 | | 30,134 | | 207,692 | | 185,469 |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Trustee business in the Banking segment
The following presents trustee business within the Allianz Group’s Banking segment not recorded in the balance sheet:
| | | | | As of December 31,
| | 2006
| | 2005
| | | | € mn | | € mn | Loans and advances to banks | | 1,956 | | 1,747 | Loans and advances to customers | | 1,205 | | 1,405 | Investments and other assets | | 729 | | 855 | Total assets(1) | | 3,890 | | 4,007 | Liabilities to banks | | 870 | | 1,035 | Liabilities to customers | | 3,020 | | 2,972 | Total liabilities | | 3,890 | | 4,007 |
(1)
| Including €1,964 mn (2005: €2,170 mn) of trustee loans.
|
Other banking information
As of December 31, 2006, the Allianz Group had deposits that have been reclassified as loan balances of €6,697 mn (2005: €6,131 mn) and deposits with related parties of €627 mn (2005: €2,297 mn). The Allianz Group received no deposits on terms other than those available in the normal course of banking operations. An amount of €– mn (2005: €132 mn) eligible for refinancing with the central bank is held in cash funds.
The aggregate amount of certificates of deposit and other time deposits in the amount of €100,000 or more issued by the Allianz Group’s German offices at December 31, 2006 was €67,136 mn (2005: €67,239 mn), including banks and customers.
The aggregate amount of certificates of deposit and other time deposits in the amount of €100,000 or more issued by the Allianz Group’s non-German offices at December 31, 2006 was €43,447 mn (2005: €24,528 mn), including banks and customers.
43 Derivative financial instruments Derivatives derive their fair values from one or more underlying assets or specified reference values. Examples of derivatives include contracts for future delivery in the form of futures or forwards, options on shares or indices, interest rate options such as caps and floors, and swaps relating to bothinterestboth interest rates and non-interest rate markets. The latter include agreements to exchange previously defined assets or payment series. Derivatives used by individual subsidiaries in the Allianz Group comply with the relevant supervisory regulations and the Allianz Group’s own internal guidelines. The Allianz Group’s investment and monitoring rules exceed regulations imposed by supervisory authorities. In addition to local management supervision, comprehensive financial and risk management systems are in force across the Allianz Group. Risk management is an integral part of the Allianz Group’s controlling process that includes identifying, measuring, aggregating and managing risks. Risk management objectives are implemented at both the Allianz Group level and by the local operational units. The use of derivatives is one key strategy used by the Allianz Group to manage its market and investment risks. Insurance subsidiaries in the Allianz Group use derivatives to manage the risk exposures in their investment portfolios based on general thresholds and targets. The most important purpose of these instruments is hedging against adverse market movements for selected securities or for parts of a portfolio. Specifically, the Allianz Group selectively uses derivative financial instruments such as swaps, options and forwards to hedge against changes in prices or interest rates in their investment portfolio. Within the Allianz Group’s banking business, derivatives are used both for trading purposes and to hedge against movements in interest rates, currency rates and other price risks of the Allianz Group’s investments, loans, deposit liabilities and other interest-sensitive assets and liabilities. Market and counterparty risks arising from the use of derivative financial instruments are subject to control procedures. Credit risks related to counterparties are assessed by calculating gross replacement values. Market risks are monitored by means of up-to-date value-at-risk calculations and stress tests and limited by specific stop-loss limits. The counterparty settlement risk is virtually excluded in the case of exchange-traded products, as these are standardized products. By contrast, Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
over-the-counter (“OTC”)(OTC) products, which are individually traded contracts, carry a theoretical credit risk amounting to the replacement value. The Allianz Group therefore closely monitors the credit rating of counterparties for OTC derivatives. In the derivatives portfolios of the Allianz Group’s banking operations 96% of the positive replacement values, which are essential for assessing counterparty risk,involve counterparties with “investment grade” ratings. To reduce the counterparty risk from trading activities, so-called cross-product netting master agreements with the business partners are established. In the case of a defaulting counterparty, netting makes it possible to offset claims and liabilities not yet due.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Property-Casualty, Life/Health and Corporate Segments | | | | | | | | | | | | | | | | | | | | | | | | 2006
| | | 2005
| | | | | Maturity by
notional amount
| | Notional
principal
amounts
| | Positive
fair values
| | Negative fair values
| | | Notional principal amounts
| | Positive fair values
| | Negative fair values
| | As of December 31,
| | Up to
1 year
| | 1–5 years
| | Over 5
years
| | | | | | | | | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | | € mn | | € mn | | € mn | | Interest rate contracts, consisting of: | | | | | | | | | | | | | | | | | | | | | OTC | | | | | | | | | | | | | | | | | | | | | Forwards | | 2,786 | | 2,233 | | 38 | | 5,057 | | 69 | | (163 | ) | | 6,776 | | 110 | | (10 | ) | Swaps | | 775 | | 9,300 | | 4,179 | | 14,254 | | 171 | | (89 | ) | | 9,643 | | 212 | | (95 | ) | Swaptions | | 707 | | 330 | | — | | 1,037 | | 8 | | (11 | ) | | 756 | | 12 | | (5 | ) | Caps | | 6,246 | | 8,146 | | 11 | | 14,403 | | — | | (83 | ) | | 14,407 | | — | | (102 | ) | Options | | 2 | | — | | — | | 2 | | — | | — | | | — | | — | | — | | Exchange traded | | | | | | | | | | | | | | | | | | | | | Forwards | | 236 | | 59 | | — | | 295 | | — | | (3 | ) | | — | | — | | — | | Futures | | 27,215 | | 5,996 | | — | | 33,211 | | 35 | | (39 | ) | | 1,361 | | 2 | | (2 | ) | Options | | 1,417 | | — | | — | | 1,417 | | — | | (3 | ) | | 1,084 | | 2 | | — | | | | |
| |
| |
| |
| |
| |
|
| |
| |
| |
|
| Subtotal | | 39,384 | | 26,064 | | 4,228 | | 69,676 | | 283 | | (391 | ) | | 34,027 | | 338 | | (214 | ) | | | |
| |
| |
| |
| |
| |
|
| |
| |
| |
|
| Equity index contracts, consisting of: | | | | | | | | | | | | | | | | | | | | | OTC | | | | | | | | | | | | | | | | | | | | | Forwards | | 5,636 | | 360 | | — | | 5,996 | | 316 | | (1,178 | ) | | 4,317 | | 200 | | (599 | ) | Swaps | | 295 | | — | | — | | 295 | | — | | — | | | 308 | | 3 | | — | | Floors | | 3 | | — | | — | | 3 | | 3 | | — | | | — | | — | | — | | Options(1) | | 74,361 | | 3,949 | | 55 | | 78,365 | | 1,242 | | (4,554 | ) | | 46,702 | | 1,190 | | (3,341 | ) | Exchange traded | | | | | | | | | | | | | | | | | | | | | Futures | | 9,820 | | — | | — | | 9,820 | | 2 | | (42 | ) | | 4,923 | | 4 | | (28 | ) | Options | | 691 | | — | | 1 | | 692 | | — | | (2 | ) | | 1,942 | | 2 | | (248 | ) | Forwards | | — | | 1,262 | | — | | 1,262 | | — | | (752 | ) | | 1,262 | | — | | (409 | ) | Warrants | | — | | 1 | | — | | 1 | | 4 | | — | | | 2 | | 1 | | — | | | | |
| |
| |
| |
| |
| |
|
| |
| |
| |
|
| Subtotal | | 90,806 | | 5,572 | | 56 | | 96,434 | | 1,567 | | (6,528 | ) | | 59,456 | | 1,400 | | (4,625 | ) | | | |
| |
| |
| |
| |
| |
|
| |
| |
| |
|
| Foreign exchange contracts, consisting of: | | | | | | | | | | | | | | | | | | | | | OTC | | | | | | | | | | | | | | | | | | | | | Forwards | | 5,157 | | 65 | | — | | 5,222 | | 965 | | (957 | ) | | 1,048 | | 9 | | (8 | ) | Swaps | | 8 | | 242 | | 32 | | 282 | | 13 | | (11 | ) | | 412 | | 35 | | (2 | ) | | | |
| |
| |
| |
| |
| |
|
| |
| |
| |
|
| Subtotal | | 5,165 | | 307 | | 32 | | 5,504 | | 978 | | (968 | ) | | 1,460 | | 44 | | (10 | ) | | | |
| |
| |
| |
| |
| |
|
| |
| |
| |
|
| Credit contracts, consisting of: | | | | | | | | | | | | | | | | | | | | | OTC | | | | | | | | | | | | | | | | | | | | | Options | | — | | 100 | | — | | 100 | | — | | (3 | ) | | — | | — | | — | | Swaps | | 40 | | 910 | | 188 | | 1,138 | | 2 | | (8 | ) | | 996 | | 4 | | (3 | ) | Exchange traded | | | | | | | | | | | | | | | | | | | | | Swaps | | 273 | | — | | — | | 273 | | 2 | | — | | | — | | — | | — | | | | |
| |
| |
| |
| |
| |
|
| |
| |
| |
|
| Subtotal | | 313 | | 1,010 | | 188 | | 1,511 | | 4 | | (11 | ) | | 996 | | 4 | | (3 | ) | | | |
| |
| |
| |
| |
| |
|
| |
| |
| |
|
| Total | | 135,668 | | 32,953 | | 4,504 | | 173,125 | | 2,832 | | (7,898 | ) | | 95,939 | | 1,786 | | (4,852 | ) | | | |
| |
| |
| |
| |
| |
|
| |
| |
| |
|
|
| | | | | | | | | | | | | | | | | | | | | As of December 31, | | 2008 | | | 2007 | | | | | Maturity by
notional amount | | Notional
principal
amounts | | Positive
fair
values | | Negative
fair
values | | | Notional
principal
amounts | | Positive
fair
values | | Negative
fair
values | | | | | Up to
1 year | | 1–5
years | | Over 5
years | | | | | | | | | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | | € mn | | € mn | | € mn | | Interest rate contracts, consisting of: | | | | | | | | | | | | | | | | | | | | | OTC | | | | | | | | | | | | | | | | | | | | | Forwards | | 450 | | 575 | | 702 | | 1,727 | | 38 | | (47 | ) | | 13,061 | | 10 | | (370 | ) | Swaps | | 541 | | 7,084 | | 3,988 | | 11,613 | | 429 | | (166 | ) | | 31,932 | | 160 | | (87 | ) | Swaptions | | 465 | | 200 | | — | | 665 | | 4 | | — | | | 920 | | 46 | | (17 | ) | Caps | | 481 | | 7,130 | | 11 | | 7,622 | | — | | (29 | ) | | 8,155 | | — | | (50 | ) | Floors | | — | | — | | 129 | | 129 | | 1 | | — | | | 106 | | — | | — | | Options | | — | | 20 | | — | | 20 | | — | | (1 | ) | | 13 | | — | | — | | Exchange traded | | | | | | | | | | | | | | | | | | | | | Futures | | 2,297 | | — | | — | | 2,297 | | 23 | | (1 | ) | | 15,720 | | 67 | | (62 | ) | Options | | — | | — | | — | | — | | — | | — | | | 21 | | — | | — | | | | | | | | | | | | | | | | | | | | | | | Subtotal | | 4,234 | | 15,009 | | 4,830 | | 24,073 | | 495 | | (244 | ) | | 69,928 | | 283 | | (586 | ) | | | | | | | | | | | | | | | | | | | | | | Equity index contracts, consisting of: | | | | | | | | | | | | | | | | | | | | | OTC | | | | | | | | | | | | | | | | | | | | | Forwards | | 1,647 | | 1,225 | | — | | 2,872 | | 520 | | (381 | ) | | 5,851 | | 39 | | (2,151 | ) | Swaps | | 339 | | — | | — | | 339 | | 122 | | — | | | 485 | | 12 | | (19 | ) | Floors | | — | | — | | — | | — | | — | | — | | | 5 | | 5 | | — | | Options1) | | 49,494 | | 1,055 | | 2,245 | | 52,794 | | 1,227 | | (5,567 | ) | | 61,382 | | 1,029 | | (4,493 | ) | Warrants | | — | | — | | — | | — | | — | | — | | | 13 | | 13 | | — | | Structured Note | | 5 | | — | | — | | 5 | | 4 | | — | | | — | | — | | — | | Exchange traded | | | | | | | | | | | | | | | | | | | | | Futures | | 2,312 | | — | | — | | 2,312 | | 21 | | (15 | ) | | 8,520 | | 24 | | (97 | ) | Options | | 48 | | — | | — | | 48 | | 14 | | — | | | 3 | | — | | (1 | ) | Forwards | | — | | — | | — | | — | | — | | — | | | 450 | | — | | (428 | ) | Warrants | | — | | 19 | | 1 | | 20 | | 9 | | — | | | 1 | | 3 | | — | | | | | | | | | | | | | | | | | | | | | | | Subtotal | | 53,845 | | 2,299 | | 2,246 | | 58,390 | | 1,917 | | (5,963 | ) | | 76,710 | | 1,125 | | (7,189 | ) | | | | | | | | | | | | | | | | | | | | | | Foreign exchange contracts, consisting of: | | | | | | | | | | | | | | | | | | | | | OTC | | | | | | | | | | | | | | | | | | | | | Forwards | | 11,529 | | 109 | | 20 | | 11,658 | | 550 | | (48 | ) | | 6,026 | | 61 | | (32 | ) | Swaps | | 800 | | 304 | | 417 | | 1,521 | | 15 | | (59 | ) | | 272 | | 10 | | (21 | ) | Options | | 11 | | — | | — | | 11 | | — | | — | | | 71 | | 2 | | (10 | ) | | | | | | | | | | | | | | | | | | | | | | Subtotal | | 12,340 | | 413 | | 437 | | 13,190 | | 565 | | (107 | ) | | 6,369 | | 73 | | (63 | ) | | | | | | | | | | | | | | | | | | | | | | Credit contracts, consisting of: | | | | | | | | | | | | | | | | | | | | | OTC | | | | | | | | | | | | | | | | | | | | | Swaps | | 414 | | 1,841 | | 524 | | 2,779 | | 46 | | (55 | ) | | 1,936 | | 6 | | (7 | ) | Exchange traded | | | | | | | | | | | | | | | | | | | | | Swaps | | — | | — | | — | | — | | — | | — | | | 257 | | 3 | | — | | | | | | | | | | | | | | | | | | | | | | | Subtotal | | 414 | | 1,841 | | 524 | | 2,779 | | 46 | | (55 | ) | | 2,193 | | 9 | | (7 | ) | | | | | | | | | | | | | | | | | | | | | | Total | | 70,833 | | 19,562 | | 8,037 | | 98,432 | | 3,023 | | (6,369 | ) | | 155,200 | | 1,490 | | (7,845 | ) | | | | | | | | | | | | | | | | | | | | | |
(1)1)
| As of December 31, 2006,2008, includes embedded derivatives related to equity indexedequity-indexed annuities with negative fair values of €4,199€5,163 mn (2005: €2,841(2007: €4,327 mn). |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Banking and Asset Management Segments | As of December 31,
| | 2006
| | 2005
| | | 2008 | | 2007 | | | | | Maturity by notional amount
| | Notional
principal
amounts
| | Positive
fair values
| | Negative fair values
| | | Notional
principal
amounts
| | Positive fair values
| | Negative fair values
| | | Maturity by
notional amount | | Notional
principal
amounts | | Positive
fair
values | | Negative
fair
values | | | Notional
principal
amounts | | Positive
fair
values | | Negative
fair
values | | | | | Up to 1
year
| | 1–5 years
| | Over 5
years
| | | Up to 1
year | | 1–5
years | | Over 5
years | | | | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | | € mn | | € mn | | € mn | | € mn | | €mn | | € mn | | € mn | | € mn | | € mn | | Interest rate contracts, consisting of: | | | | | | | | | | | | | | | | | | | | OTC | | | | | | | | | | | | | | | | | | | | Forwards | | 121,294 | | 1,414 | | — | | 122,708 | | 37 | | (30 | ) | | 117,765 | | 40 | | (33 | ) | | — | | — | | — | | — | | — | | — | | | 58,151 | | 43 | | (33 | ) | Swaps | | 997,593 | | 1,157,122 | | 1,209,833 | | 3,364,548 | | 41,870 | | (40,669 | ) | | 3,235,959 | | 58,931 | | (56,849 | ) | | 821 | | 359 | | 1,164 | | 2,344 | | 9 | | (67 | ) | | 3,474,925 | | 43,098 | | (41,487 | ) | Swaptions | | 23,001 | | 27,490 | | 42,447 | | 92,938 | | 858 | | (2,253 | ) | | 95,353 | | 1,094 | | (2,768 | ) | | — | | — | | — | | — | | — | | — | | | 98,242 | | 750 | | (1,928 | ) | Caps | | 4,590 | | 45,424 | | 11,761 | | 61,775 | | 172 | | (191 | ) | | 58,366 | | 141 | | (112 | ) | | 23 | | 71 | | 12 | | 106 | | — | | — | | | 56,982 | | 200 | | (300 | ) | Floors | | 8,600 | | 27,753 | | 5,089 | | 41,442 | | 203 | | (144 | ) | | 30,921 | | 404 | | (264 | ) | | — | | — | | — | | — | | — | | — | | | 27,762 | | 147 | | (119 | ) | Options | | 807 | | 550 | | 868 | | 2,225 | | 41 | | (32 | ) | | 1,581 | | 57 | | (62 | ) | | — | | — | | — | | — | | — | | — | | | 1,088 | | 35 | | (20 | ) | Other | | 3,923 | | 1,632 | | 6,644 | | 12,199 | | 2,316 | | (1,388 | ) | | 10,018 | | 64 | | (82 | ) | | — | | — | | — | | — | | — | | — | | | 10,170 | | 819 | | (579 | ) | Exchange traded | | | | | | | | | | | | | | | | | | | | Futures | | 99,259 | | 16,905 | | — | | 116,164 | | 7 | | (5 | ) | | 185,288 | | 105 | | (125 | ) | | 354 | | — | | — | | 354 | | 2 | | — | | | 110,309 | | 1 | | (1 | ) | Options | | 27,969 | | 1,940 | | — | | 29,909 | | 1,390 | | (915 | ) | | 42,985 | | 692 | | (262 | ) | | 13 | | — | | — | | 13 | | — | | — | | | 459,300 | | 1,432 | | (1,254 | ) | | | |
| |
| |
| |
| |
| |
|
| |
| |
| |
|
| | | | | | | | | | | | | | | | | | | | | Subtotal | | 1,287,036 | | 1,280,230 | | 1,276,642 | | 3,843,908 | | 46,894 | | (45,627 | ) | | 3,778,236 | | 61,528 | | (60,557 | ) | | 1,211 | | 430 | | 1,176 | | 2,817 | | 11 | | (67 | ) | | 4,296,929 | | 46,525 | | (45,721 | ) | | | |
| |
| |
| |
| |
| |
|
| |
| |
| |
|
| | | | | | | | | | | | | | | | | | | | | Equity index contracts, consisting of: | | | | | | | | | | | | | | | | | | | | OTC | | | | | | | | | | | | | | | | | | | | Swaps | | 22,897 | | 6,052 | | 13,080 | | 42,029 | | 1,059 | | (977 | ) | | 20,505 | | 642 | | (723 | ) | | — | | — | | — | | — | | — | | — | | | 28,209 | | 1,042 | | (1,246 | ) | Options | | 85,017 | | 103,590 | | 6,184 | | 194,791 | | 10,668 | | (11,091 | ) | | 220,286 | | 9,061 | | (9,429 | ) | | 39 | | — | | — | | 39 | | 15 | | — | | | 197,255 | | 11,080 | | (12,033 | ) | Forwards | | — | | — | | — | | — | | — | | — | | | 70 | | — | | (34 | ) | | Warrants | | | — | | — | | — | | — | | — | | — | | | — | | — | | — | | Other | | 33 | | 915 | | — | | 948 | | 5 | | (47 | ) | | 1,077 | | 4 | | (11 | ) | | — | | — | | — | | — | | — | | — | | | 25 | | 2 | | (117 | ) | Exchange traded | | | | | | | | | | | | | | | | | | | | Futures | | 9,160 | | — | | — | | 9,160 | | — | | (10 | ) | | 10,659 | | 1 | | (38 | ) | | — | | — | | — | | — | | — | | — | | | 8,706 | | — | | — | | Options | | 45,824 | | 44,536 | | 3,323 | | 93,683 | | 4,705 | | (3,911 | ) | | 81,115 | | 3,185 | | (3,063 | ) | | 215 | | — | | — | | 215 | | 10 | | (6 | ) | | 144,162 | | 6,197 | | (5,948 | ) | | | |
| |
| |
| |
| |
| |
|
| |
| |
| |
|
| | | | | | | | | | | | | | | | | | | | | Subtotal | | 162,931 | | 155,093 | | 22,587 | | 340,611 | | 16,437 | | (16,036 | ) | | 333,712 | | 12,893 | | (13,298 | ) | | 254 | | — | | — | | 254 | | 25 | | (6 | ) | | 378,357 | | 18,321 | | (19,344 | ) | | | |
| |
| |
| |
| |
| |
|
| |
| |
| |
|
| | | | | | | | | | | | | | | | | | | | | Foreign exchange contracts, consisting of: | | | | | | | | | | | | | | | | | | | | OTC | | | | | | | | | | | | | | | | | | | | Forwards | | 359,752 | | 14,487 | | 486 | | 374,725 | | 4,888 | | (4,900 | ) | | 410,566 | | 4,805 | | (4,976 | ) | | 279 | | 67 | | — | | 346 | | 21 | | (10 | ) | | 491,009 | | 6,358 | | (6,139 | ) | Swaps | | 22,602 | | 49,585 | | 23,376 | | 95,563 | | 3,588 | | (3,222 | ) | | 82,988 | | 2,888 | | (2,634 | ) | | — | | — | | — | | — | | — | | — | | | 93,415 | | 4,128 | | (3,203 | ) | Options | | 182,133 | | 32,321 | | 1,372 | | 215,826 | | 1,540 | | (1,755 | ) | | 148,183 | | 1,340 | | (1,637 | ) | | 7 | | 22 | | — | | 29 | | — | | — | | | 273,558 | | 2,978 | | (3,165 | ) | Warrants | | | — | | — | | — | | — | | — | | — | | | — | | — | | — | | Other | | — | | — | | — | | — | | — | | — | | | 590 | | 1 | | — | | | — | | — | | — | | — | | — | | — | | | 39 | | — | | — | | Exchange traded | | | | | | | | | | | | | | | | | | | | Futures | | 886 | | 887 | | — | | 1,773 | | 3 | | (5 | ) | | 2,387 | | 4 | | (5 | ) | | — | | — | | — | | — | | — | | — | | | 4,305 | | 21 | | (15 | ) | Options | | 722 | | — | | — | | 722 | | 4 | | (1 | ) | | 297 | | 10 | | (2 | ) | | — | | — | | — | | — | | — | | — | | | 1,200 | | 13 | | (4 | ) | | | |
| |
| |
| |
| |
| |
|
| |
| |
| |
|
| | | | | | | | | | | | | | | | | | | | | Subtotal | | 566,095 | | 97,280 | | 25,234 | | 688,609 | | 10,023 | | (9,883 | ) | | 645,011 | | 9,048 | | (9,254 | ) | | 286 | | 89 | | — | | 375 | | 21 | | (10 | ) | | 863,526 | | 13,498 | | (12,526 | ) | | | |
| |
| |
| |
| |
| |
|
| |
| |
| |
|
| | | | | | | | | | | | | | | | | | | | | Credit contracts, consisting of: | | | | | | | | | | | | | | | | | | | | OTC | | | | | | | | | | | | | | | | | | | | Credit default swaps | | 56,977 | | 602,864 | | 235,571 | | 895,412 | | 5,313 | | (5,025 | ) | | 483,348 | | 3,108 | | (2,711 | ) | | — | | — | | — | | — | | — | | — | | | 1,140,527 | | 11,525 | | (10,993 | ) | Total return swaps | | 4,961 | | 3,873 | | 2,685 | | 11,519 | | 937 | | (1,440 | ) | | 13,653 | | 769 | | (1,249 | ) | | — | | — | | — | | — | | — | | — | | | 12,879 | | 430 | | (857 | ) | | | |
| |
| |
| |
| |
| |
|
| |
| |
| |
|
| | | | | | | | | | | | | | | | | | | | | Subtotal | | 61,938 | | 606,737 | | 238,256 | | 906,931 | | 6,250 | | (6,465 | ) | | 497,001 | | 3,877 | | (3,960 | ) | | — | | — | | — | | — | | — | | — | | | 1,153,406 | | 11,955 | | (11,850 | ) | | | |
| |
| |
| |
| |
| |
|
| |
| |
| |
|
| | | | | | | | | | | | | | | | | | | | | Other contracts, consisting of: | | | | | | | | | | | | | | | | | | | | OTC | | | | | | | | | | | | | | | | | | | | Precious metals | | 9,081 | | 2,809 | | — | | 11,890 | | 440 | | (417 | ) | | 8,848 | | 503 | | (338 | ) | | — | | — | | — | | — | | — | | — | | | 15,044 | | 736 | | (640 | ) | Options | | 22 | | 2 | | — | | 24 | | — | | (1 | ) | | — | | — | | — | | | — | | — | | — | | — | | — | | — | | | 3,932 | | 554 | | (583 | ) | Other | | 3,678 | | 3,892 | | 48 | | 7,618 | | 126 | | (108 | ) | | 2,206 | | 48 | | (34 | ) | | — | | — | | — | | — | | — | | — | | | 155 | | — | | (25 | ) | Exchange traded | | | | | | | | | | | | | | | | | | | | Futures | | 1,759 | | 174 | | 5 | | 1,938 | | 1 | | — | | | 1,317 | | 8 | | — | | | — | | — | | — | | — | | — | | — | | | 2,197 | | — | | — | | Options | | — | | — | | — | | — | | — | | — | | | 16 | | 1 | | — | | | — | | — | | — | | — | | — | | — | | | — | | — | | — | | | | |
| |
| |
| |
| |
| |
|
| |
| |
| |
|
| | | | | | | | | | | | | | | | | | | | | Subtotal | | 14,540 | | 6,877 | | 53 | | 21,470 | | 567 | | (526 | ) | | 12,387 | | 560 | | (372 | ) | | — | | — | | — | | — | | — | | — | | | 21,328 | | 1,290 | | (1,248 | ) | | | |
| |
| |
| |
| |
| |
|
| |
| |
| |
|
| | | | | | | | | | | | | | | | | | | | | Total | | 2,092,540 | | 2,146,217 | | 1,562,772 | | 5,801,529 | | 80,171 | | (78,537 | ) | | 5,266,347 | | 87,906 | | (87,441 | ) | | 1,751 | | 519 | | 1,176 | | 3,446 | | 57 | | (83 | ) | | 6,713,546 | | 91,589 | | (90,689 | ) | | | |
| |
| |
| |
| |
| |
|
| |
| |
| |
|
| | | | | | | | | | | | | | | | | | | | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Derivative financial instruments used in accounting hedges The Allianz Group principally uses fair value hedging. Important hedging instruments used by the Banking segment are equity forward contracts, interest rate swaps, andinterest rate forwards, and currency swaps and currency forwards. Hedging instruments may be implemented for individual transactions (micro hedge) or for a portfolio of similar assets or liabilities (portfolio hedge). Fair value hedges The interest rate swaps used by the Banking segment inAllianz Group uses fair value hedges ofto hedge its equity portfolio against equity market risk. The financial instruments used in the interest rate risk of certificated and subordinated liabilitiesrelated fair value hedges had a total net fair value of €902 mn (2007: €(2,050) mn) as of December 31, 2006 of €247 mn (2005: €507 mn). Thereof, interest rate swaps with a positive2008. Additionally the Allianz Group uses fair value of €305 mn (2005: €537 mn) are recordedhedges to protect against the change in the Allianz Group’s consolidated balance sheet in other assets, and interest rate swaps with a negative fair value of €58 mn (2005: €30 mn) are recorded in other liabilities. During the year ended December 31, 2006, the fair value of the interest rate swaps decreased by €184 mn (2005: increase by €43 mn), whereas the certificated and subordinated liabilities hedged increased in fair value by €187 mn (2005: decrease by €24 mn), resulting in a net ineffectiveness of the hedge of €3 mn (2005: €19 mn) that is recognized in the Allianz Group’s consolidated income statement as income (expense) for financial assets and liabilities held for trading. For detailed information about certificated and subordinated liabilities, see Note 21 and Note 22, respectively. due to movements in interest rates or exchange rates. The derivative financial instruments used for allthe related fair value hedges of the Allianz Group had a total negative fair value as of December 31, 20062008 of €388€39 mn (2005: €102(2007: positive fair value of €168 mn). For the year ended December 31, 2008, the Allianz Group recognized for fair value hedges a net gain of €2,115 mn (2007: net loss of €462 mn; 2006: net loss of €687 mn) on the hedging instrument and a net loss of €2,027 mn (2007: net gain of €494 mn; 2006: net gain of €698 mn) on the hedged item attributable to the hedged risk. Cash flow hedges During the year ended December 31, 2006,2008, cash flow hedges were used to hedge variable cash flows exposed to interest rate and exchange rate fluctuations. As of December 31, 2006,2008, the interest rate swapsderivative instruments utilized had a positive fair value of €31 mn (2007: negative fair value of €55 mn (2005: €68€2 mn); other. Other reserves in shareholders’ equity increased by €1€27 mn (2005: €3(2007: €35 mn). Ineffectiveness Hedge of the cash flow hedges led to net realized losses of €2 mn (2005: €5 mn)investment in 2006.foreign operations As of December 31, 2002, foreign exchange hedging transactions in2008, the formAllianz Group hedges part of foreign currency forwardsits USD net investments through the issuance of USD denominated liabilities with a total fair valuenominal amount of €107 mn were outstanding with respect to hedges of currency risks related to a net investment in a foreign entity. This hedging strategy was terminated in the second quarter of 2003. Total unrealized gains of €182 mn related to this hedging strategy remain in other reserves.2.4 bn USD. Derivative financial instruments indexed to Allianz Group’s shares
The Allianz Group enters into various types of contracts indexed to Allianz Group shares with third-parties. Allianz Group uses such contracts as a hedge of its future obligations under its share-based compensation plans. In addition, in connection with various banking products offered by the Dresdner Bank Group, the Dresdner Bank Group has entered into various types of option contracts indexed to Allianz SE shares and AGF shares.
These contracts that are cash settled are accounted for as financial assets and liabilities held for trading. The contracts that are share settled are accounted for as equity transactions, with the exception of written put options and short forward contracts. The Allianz Group records a liability for the present value of its obligation to purchase the share with an offset to shareholders’ equity.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) The following table summarizes these option positions:
| | | | | | | | | | | | | | | | | | | | | | | | Total
shares
| | Maturity
| | Settlement
| | Fair Value
| | | Weighted
average
strike price/
forward
rate
| As of December 31,
| | | Up to
1 year
| | 1–5 years
| | More than
5 years
| | of which
cash settled
| | of which
share
settled
| | of which
cash settled
| | | of which
share
settled
| | | | | | | | | | | | | | | | | | € mn | | | € mn | | | € | 2006 | | | | | | | | | | | | | | | | | | | | | Derivatives on Allianz SE shares | | | | | | | | | | | | | | | | | | | | | Allianz SE activities | | | | | | | | | | | | | | | | | | | | | Long call options/warrants | | 22,300,720 | | 300,586 | | 22,000,134 | | — | | 22,300,720 | | — | | 708 | | | — | | | 100 | Forward purchase contracts | | 4,801,593 | | 4,801,593 | | — | | — | | 4,801,593 | | — | | 93 | | | — | | | 137 | Banking activities | | | | | | | | | | | | | | | | | | | | | Long call options | | 33,549,966 | | 16,230,456 | | 17,319,510 | | — | | 2,750,495 | | 30,799,471 | | 40 | | | 1,166 | | | 129 | Long put options | | 22,514,281 | | 8,986,781 | | 13,527,500 | | — | | 355,000 | | 22,159,281 | | 3 | | | 162 | | | 124 | Short call options/warrants | | 42,246,623 | | 20,106,000 | | 22,140,623 | | — | | 11,582,391 | | 30,664,232 | | (52 | ) | | (895 | ) | | 135 | Short put options | | 13,630,621 | | 6,384,889 | | 7,245,732 | | — | | 13,609,889 | | 20,732 | | (64 | ) | | — | | | 114 | Derivatives on AGF shares | | | | | | | | | | | | | | | | | | | | | Banking activities | | | | | | | | | | | | | | | | | | | | | Long call options | | 500,000 | | 500,000 | | — | | — | | — | | 500,000 | | — | | | 15 | | | 90 | Short call options | | 534,301 | | — | | 534,301 | | — | | 484,301 | | 50,000 | | 25 | | | (1 | ) | | 10 | 2005 | | | | | | | | | | | | | | | | | | | | | Derivatives on Allianz SE shares | | | | | | | | | | | | | | | | | | | | | Allianz SE activities | | | | | | | | | | | | | | | | | | | | | Long call options/warrants | | 22,518,424 | | 217,704 | | 21,300,720 | | 1,000,000 | | 22,518,424 | | — | | 487 | | | — | | | 102 | Forward purchase contracts | | 4,574,891 | | 4,574,891 | | — | | — | | 4,574,891 | | — | | 154 | | | — | | | 95 | Equity linked loan | | 10,700,000 | | 10,700,000 | | — | | — | | 10,700,000 | | — | | (243 | ) | | — | | | 105 | Banking activities | | | | | | | | | | | | | | | | | | | | | Long call options | | 24,357,414 | | 12,601,414 | | 11,756,000 | | — | | 6,148,170 | | 18,209,244 | | 188 | | | 447 | | | 112 | Long put options | | 18,495,959 | | 10,426,854 | | 8,069,105 | | — | | 4,240,775 | | 14,255,184 | | 38 | | | 115 | | | 114 | Short call options/warrants | | 23,326,959 | | 11,970,876 | | 11,356,083 | | — | | 5,506,227 | | 17,820,732 | | (127 | ) | | (335 | ) | | 122 | Short put options | | 18,307,643 | | 10,765,911 | | 7,541,732 | | — | | 4,627,880 | | 13,679,763 | | (18 | ) | | (63 | ) | | 97 | Derivatives on AGF shares | | | | | | | | | | | | | | | | | | | | | Banking activities | | | | | | | | | | | | | | | | | | | | | Long call options | | 540,000 | | 40,000 | | 500,000 | | — | | 540,000 | | — | | 4 | | | — | | | 89 | Long put options | | 3,000 | | 3,000 | | — | | — | | 3,000 | | — | | — | | | — | | | 83 | Short call options | | 599,154 | | 75,000 | | 524,154 | | — | | 524,154 | | 75,000 | | (16 | ) | | (3 | ) | | 6 |
44 Fair value of financial instruments Fair values and carrying amounts of financial instruments The following table presents a comparison of the carrying amount and the fair value of the Allianz Group’s classes of financial instruments: | | | | | | | | | As of December 31, | | 2008 | | 2007 | | | | Carrying
amount | | Fair
Value | | Carrying
amount | | Fair
Value | | | | € mn | | € mn | | € mn | | € mn | Financial assets | | | | | | | | | Cash and cash equivalents | | 8,958 | | 8,958 | | 31,337 | | 31,337 | Financial assets held for trading | | 2,624 | | 2,624 | | 163,541 | | 163,541 | Financial assets designated at fair value through income | | 11,616 | | 11,616 | | 21,920 | | 21,920 | Available-for-sale investments | | 242,099 | | 242,099 | | 268,001 | | 268,001 | Held-to-maturity investments | | 4,934 | | 5,066 | | 4,659 | | 4,705 | Loans and advances to banks and customers | | 115,655 | | 117,944 | | 396,702 | | 394,741 | Financial assets for unit-linked contracts | | 50,450 | | 50,450 | | 66,060 | | 66,060 | Derivative financial instruments and firm commitments included in other assets | | 1,101 | | 1,101 | | 344 | | 344 | | | | | | Financial liabilities | | | | | | | | | Financial liabilities held for trading | | 6,244 | | 6,244 | | 124,083 | | 124,083 | Financial liabilities designated at fair value through income | | — | | — | | 1,970 | | 1,970 | Liabilities to banks and customers | | 18,451 | | 18,494 | | 336,494 | | 335,394 | Investment contracts with policyholders | | 101,898 | | 101,898 | | 90,404 | | 90,404 | Financial liabilities for unit-linked contracts | | 50,450 | | 50,450 | | 66,060 | | 66,060 | Derivative financial instruments and firm commitments included in other liabilities | | 208 | | 208 | | 2,210 | | 2,210 | Financial liabilities for puttable equity instruments | | 2,718 | | 2,718 | | 4,162 | | 4,162 | Certificated liabilities, participation certificates and subordinated liabilities | | 18,890 | | 17,643 | | 56,894 | | 57,961 |
The fair value of a financial instrument is defined as the amount for which a financial instrumentasset could be exchanged, or a financial liability settled, between twoknowledgeable, willing parties in an arm’s length transaction. For the ordinary course of business. If market prices are not available,following financial instruments, carried at fair value in the consolidated balance sheet, the fair value is based on estimates using the present valuedetermined as described in Note 2 “Summary of future cash flows method or another appropriate valuation method. These methods are significantly influenced by the assumptions made, including the discount rate applied and the estimates of future cash flows. Specific financial instruments are discussed below.significant accounting policies”: The Allianz Group uses the following methods and assumptions to determine fair values:
Cash and cash equivalents The carrying amount corresponds to the fair value due to its short-term nature.
Investments (including financialFinancial assets and liabilities held for trading and financial
Financial assets and liabilities designated at fair value through income) The fair valueincome Available-for-sale investments Financial assets and liabilities for unit-linked contracts Derivative financial instruments and firm commitments included in other assets and other liabilities Investment contracts with policyholders Financial liabilities for puttable equity instruments
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Following is an explanation of debt securities is based on market prices, provided these are available. If debt securities are not actively traded, their fair value is determined on the basisdetermination of valuations by independent data suppliers. The fair value of equity securities is based on their stock-market prices. The carrying amount and the fair value for debt securitiesfinancial instruments that are not carried at fair value in the consolidated balance sheet but for which a fair value has to be disclosed under IFRS 7. Cash and equity securities do not includecash equivalents Cash and cash equivalents comprises cash and demand deposits with banks together with short-term highly liquid investments that are readily convertible to known amounts of cash and subject to insignificant risk of change in value. They are carried at nominal value, which represents a reasonable estimate of the fair value of derivative contracts used to hedge the related debt and equity securities.for these short term financial instruments. Held-to-maturity investments The fair value of derivativeheld-to-maturity investments is determined using the quoted market price as of the balance sheet date. Loans and advances to banks and customers For loans and advances to banks and customers quoted market prices are not available as there are no active markets where these instruments are traded. The fair value is determined using generally accepted valuation techniques with actual market parameters. For short-term loans the carrying amount represents a reasonable estimate of the fair value. For long-term loans the fair value is estimated by discounting future contractual cash flows using risk-adjusted discount rates. Additionally, the individually assessed component of the allowance for loan losses and the recoverable amounts of collateral are considered in the fair value determination of loans. Liabilities to banks and customers For short-term liabilities the carrying amount represents a reasonable estimate of the fair value. For long-term instruments the fair value is determined by discounting future cash flows. The fair value determination reflects current market interest rates and the credit rating of the Allianz Group. Certificated liabilities, participation certificates and subordinated liabilities The fair value of certificated liabilities, participation certificates and subordinated liabilities is determined using quoted market prices, if available. If quoted prices are not available, for short-term liabilities the carrying amount represents a reasonable estimate of the fair value. For long-term instruments the fair value is determined by discounting the remaining contractual future cash flows at a discount-rate at which Allianz Group could issue debt with similar remaining maturity. The fair value determination reflects current market interest rates and the credit rating of the Allianz Group. Fair value hierarchy of financial instruments is derived from the The fair value of a financial instrument is determined using quoted prices for an identical instrument in active markets (Level I). If quoted prices for an identical instrument in active markets are not available, the underlying assets and other market parameters. Exchange-traded derivative financial instruments are valuedfair value is determined using the fair-value method andvaluation-techniques based on observable market data (Level II). Otherwise valuation-techniques are used, for which any significant input is not based on observable market data (Level III).
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) publicly quoted market prices. Valuation models established in financial markets (such as present value models or option pricing models) are used to value OTC-traded derivatives. In addition to interest rate curves and volatilities, these models also take into account market and counterparty risks. Fair value represents the capital required to settle in full all the future rights and obligations arising from the financial contract.
Loans and advances to banks and customers The fair value of loans is calculated using the discounted cash flow method. This method uses the effective yield of similar debt instruments. Where there is doubt regarding the repayment of the loan, the anticipated cash flows are discounted using a reasonable discount rate and include a charge for an element of uncertainty in cash flows.
Financial assets and liabilities for unit linked contracts The fair values of financial assets for unit linked contracts were determined using the market value of the underlying investments. Fair values of financial liabilities for unit linked contracts are equal to the fair value of the financial assets for unit linked contracts.
Investment contracts with policyholders Fair values for investment and annuity contracts were determined using the cash surrender values of the policyholders’ and contract holders’ accounts.
Participation certificates, subordinated liabilities, and certificated liabilities The fair value of bonds and loans payable is estimated using discounted cash flow analyses, using interest rates currently offered for similar loans and other borrowings.
The following table presents the carrying amountfair value hierarchy for financial instruments carried at fair value in the consolidated balance sheet as of December 31, 2008. | | | | | | | | | | | As of December 31, | | 2008 | | 2007 | | | | Level I
Quoted
prices in
active
markets | | Level II
Valuation
technique
-market
observable
inputs | | Level III
Valuation
technique-
non market
observable
inputs | | Total fair
value | | Total fair
value1) | | | | € mn | | € mn | | € mn | | € mn | | € mn | Financial assets | | | | | | | | | | | Financial assets held for trading | | 1,020 | | 1,550 | | 54 | | 2,624 | | 163,541 | Financial assets designated at fair value through income | | 7,295 | | 4,129 | | 192 | | 11,616 | | 21,920 | Available-for-sale investments | | 190,820 | | 46,710 | | 4,569 | | 242,099 | | 268,001 | Financial assets for unit-linked contracts | | 47,171 | | 3,279 | | — | | 50,450 | | 66,060 | Derivative financial instruments used for hedging that meet the criteria for hedge accounting and firm commitments | | 365 | | 736 | | — | | 1,101 | | 344 | | | | | | | | | | | | Total financial assets | | 246,671 | | 56,404 | | 4,815 | | 307,890 | | 519,866 | | | | | | | | | | | | Financial liabilities | | | | | | | | | | | Financial liabilities held for trading | | 63 | | 1,018 | | 5,163 | | 6,244 | | 124,083 | Financial liabilities designated at fair value through income | | — | | — | | — | | — | | 1,970 | Investment contracts with policyholders2) | | 35,117 | | 1,037 | | 174 | | 36,328 | | 35,841 | Financial liabilities for unit-linked contracts | | 47,171 | | 3,279 | | — | | 50,450 | | 66,060 | Derivative financial instruments used for hedging that meet the criteria for hedge accounting and firm commitments | | 19 | | 189 | | — | | 208 | | 2,210 | Financial liabilities for puttable equity instruments | | 2,718 | | — | | — | | 2,718 | | 4,162 | | | | | | | | | | | | Total financial liabilities | | 85,088 | | 5,523 | | 5,337 | | 95,948 | | 234,326 | | | | | | | | | | | |
1) | Includes as of December 31, 2007 financial assets with a fair value of €201.8 bn and financial liabilities with a fair value of €140.6 bn related to the disposal group Dresdner Bank. |
2) | Excludes Universal Life-Type contracts under U.S. GAAP SFAS 97 |
For the vast majority of Allianz Group’s financial instruments carried at fair value in the consolidated balance sheet as of December 31, 2008, the fair value is determined using quoted prices in active markets for the identical instrument (Level I). Available-for-sale investments assigned to Level II included corporate bonds of €23 bn and estimatedABS-related instruments of €16 bn as of December 31, 2008 for which valuation techniques with observable market inputs are used. The fair value of the Allianz Group’scertain financial instruments:instruments is determined using valuation techniques with non market observable input parameters (Level III). Within financial assets designated at fair value through income these instruments comprise investments in private equity of €184 mn. Within available-for-sale investments these instruments relate to investments in private equity of €2.1 bn, investments in corporate bonds of €1.7 bn and corporate asset-backed-securities of €133 mn. Financial liabilities held for trading include €5.2 bn of embedded derivative financial instruments relating to annuity products. | | | | | | | | | | | | 2006
| | 2005
| As of December 31,
| | Carrying
Amount
| | Fair Value
| | Carrying
Amount
| | Fair Value
| | | | € mn | | € mn | | € mn | | € mn | Financial assets | | | | | | | | | Cash and cash equivalents | | 33,031 | | 33,031 | | 31,647 | | 31,647 | Financial assets held for trading | | 137,982 | | 137,982 | | 166,184 | | 166,184 | Financial assets designated at fair value through income | | 18,887 | | 18,887 | | 14,162 | | 14,162 | Available-for-sale investments | | 277,898 | | 277,898 | | 266,953 | | 266,953 | Held-to-maturity investments | | 4,748 | | 4,912 | | 4,826 | | 5,102 | Loans and advances to banks and customers | | 408,278 | | 410,040 | | 336,808 | | 338,407 | Financial assets for unit linked contracts | | 61,864 | | 61,864 | | 54,661 | | 54,661 | Derivative financial instruments and firm commitments included in other assets | | 463 | | 463 | | 849 | | 849 | | | | | | Financial liabilities | | | | | | | | | Financial liabilities held for trading | | 78,762 | | 78,762 | | 86,392 | | 86,392 | Financial liabilities designated at fair value through income | | 937 | | 937 | | 450 | | 450 | Liabilities to banks and customers | | 361,078 | | 361,278 | | 310,316 | | 310,591 | Investment contracts with policyholders | | 87,108 | | 87,267 | | 88,884 | | 91,092 | Financial liabilities for unit linked contracts | | 61,864 | | 61,864 | | 54,661 | | 54,661 | Derivative financial instruments and firm commitments included in other liabilities | | 907 | | 907 | | 1,019 | | 1,019 | Financial liabilities for puttable equity instruments | | 3,750 | | 3,750 | | 3,137 | | 3,137 | Certificated liabilities, participation certificates and subordinated liabilities | | 71,284 | | 73,212 | | 73,887 | | 76,454 |
Due to the sale of Dresdner Bank to Commerzbank on January 12, 2009 the table above
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) does not include certain CDOs that Allianz Group has repurchased from Dresdner Bank after the completion of the sale to Commerzbank. The amount of these assets as of December 31, 2008 was €1.1 bn and is presented in non-current assets and assets from disposal groups classified as held-for-sale. Day one profit During the year ended December 31, 2008 the Allianz Group did not recognize day one profits. The day one profits of the previous year all related to Dresdner Bank and were reclassified with the related assets to “Non-current assets and assets of disposal groups classified as held-for-sale”. 45 Related party transactions Allianz Group companies maintain various types of ordinary course business relations (particularly in the area of insurance, banking and asset management) with related enterprises. In particular, the business relations with associated companies, which are active in the insurance business, take on various forms and may also include special service, computing, reinsurance, cost-sharingcostsharing and asset management agreements, whose terms are deemed appropriate by management. Similar relationships may exist with pension funds, foundations, joint ventures and companies, which provide services to Allianz Group companies. Eurohypo
As of December 31, 2004, the Allianz Group held an ownership interest of 28.48% in Eurohypo and accounted for it using the equity method. In November 2005, agreements for a two-step transfer of the 28.48% participation of Allianz Group in Eurohypo AG to Commerzbank AG were signed. In the first step, on December 15, 2005, Commerzbank AG acquired 7.35% and in a second step on March 31, 2006, Commerzbank acquired the residual 21,13% of the 28.48% participation of Allianz Group in Eurohypo AG. Since March 31, 2006, there have been no mutual board interlocks between Eurohypo and Dresdner Bank AG or other Allianz Group companies. Therefore, we no longer consider Eurohypo as a related party since March 31, 2006. As of December 31, 2005, the Allianz Group had loans to and held debt securities available-for-sale issued by Eurohypo of €11,149 mn in the aggregate. All of such loans were made in the ordinary course of business and are subject to arm’s length conditions.
Schering Disposal
In June 2006, the Allianz Group sold its 10.6% shareholding in Schering AG for approximately €1.8 bn to Dritte BV GmbH, a 100% subsidiary of Bayer AG. Following this sale, Bayer AG acquired control of Schering AG. One member of the Board of Management of Allianz SE is a member of the Supervisory Board of Bayer AG, but this individual did not participate in the meeting of the SupervisoryBoard of Bayer AG that approved the acquisition of Schering AG. In addition, at the time of the transaction, the Chairman of the Supervisory Board of Bayer AG was also a member of Allianz’s Supervisory Board but was not involved in Allianz’s decision to sell its interest in Schering AG to Bayer AG, which occurred at the level of the Board of Management.
46 Contingent liabilities, commitments, guarantees, and assets pledged and collateral Contingent liabilities Litigation Allianz Group companies are involved in legal, regulatory and arbitration proceedings in Germany and a number of foreign jurisdictions, including the United States, involving claims by and against them, which arise in the ordinary course of their businesses, including in connection with their activities as insurance, banking and asset management companies, employers, investors and taxpayers. It is not feasible to predict or determine the ultimate outcome of the pending or threatened proceedings. Management does not believe that the outcome of these proceedings, including those discussed below, will have a material adverse effect on the financial position or results of operations of Allianz Group, after consideration of any applicable reserves. In July 2002, the German Federal Cartel Office (Bundeskartellamt) commenced an investigation against several property-casualty insurance companies in Germany, in connection with alleged coordinated behavior to achieve premium increases in parts of the commercial and industrial insurance business and imposed administrative fines against these German insurance companies, among them Allianz Versicherungs-AG, which received a notice imposing a fine on March 22, 2005. Allianz Versicherungs-AG has appealed this decision. The fine imposed on Allianz Versicherungs-AG is of an immaterial amount for the Allianz Group and has been fully reserved for in Allianz’s consolidated financial statements. Allianz’s appeal of the decision relates to the full amount of the fine.
On November 5, 2001, a lawsuit, Silverstein v. Swiss Re International Business Insurance Company Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Ltd., was filed in the United States District Court for the Southern District of New York against certain insurers and reinsurers, including a subsidiary of Allianz SE which is now named Allianz Global Risks USU.S. Insurance Company (AGR US)U.S.). The complaint sought a determination that the terrorist attack of September 11, 2001 on the World Trade Center (WTC) constituted two separate occurrences under the alleged terms of various coverages. Allianz SE was indirectly concerned by this lawsuit as reinsurer of AGR U.S. In connection with the terrorist attack of September 11, 2001, wethe Allianz Group recorded net claims expense of approximately €1.5 bn in 2001 for the Allianz Group on the basis of approximately €1.5bn in respect of all insurance and reinsurance policies, including the Silverstein policy.one occurrence. On October 18, 2006, the United States Court of Appeals for the Second Circuit of New York affirmed an earlier lower court decision in 2004 that had determined that the World Trade Center attack constituted two occurrences under the alleged terms of various coverages. Following this decision, we determined that no additional provisions on a net basis were necessary because additional liabilities arising from the decision were offset by positive developments in settling WTC claims and higher levels of reinsurance coverage due to Allianz under the two occurrence theory. On May 23, 2007, following a court-ordered mediation, AGR USU.S. reached a settlement with Silverstein Properties regarding the disputed insurance claims with Silverstein Properties.claims. The settlement amount is within our set case reserve and secured by letters of credit from SCOR, which is a reinsurer of AGR USU.S. for the relevant insurance policy. On May 24, 2007, SCOR announced that it considers the settlement agreed between AGR USU.S. and Silverstein Properties to not respect the terms and conditions of the Certificate of Reinsurance between SCOR and AGR USU.S. and that it will referreferred the case to arbitration as contemplated under the Certificate of Reinsurance. Currently, we doThe arbitration proceeding commenced in October 2007 and discovery is ongoing. Management does not expect any material negative financial impact for Allianz from any such arbitration. A dispute of Dresdner Bank with the insolvency administrator of KirchMedia GmbH & Co. KGaA (KirchMedia) with respect to a 25% shareholding in the Spanish television group Telecinco, was resolved in 2006. The shareholding had been pledged by subsidiaries of KirchMedia to Dresdner Bank as collateral for a loan and was acquired by Dresdner Bank in a forced auction sale. The insolvency administrator contended that the pledge was createdunder circumstances that cause it to be invalid or void. At the end of June 2004, the 25% shareholding in Telecinco was placed within Telecinco’s initial public offering. In October 2006, the insolvency administrator agreed to withdraw his claim against a settlement payment by Dresdner Bank AG. The settlement payment had no material impact on the situation or performance, financial or otherwise, of Dresdner Bank AG or the Allianz Group.
The insolvency administrator and the major limited partner of Heye KG have filed a complaint claiming damages of approximately €200 mn from Dresdner Bank, alleging a failure to execute transfer orders despite a purported line of credit. The claim was finally dismissed by court on April 18, 2007 without any obligation for Dresdner Bank.
In January 2006, a putative class action lawsuit alleging gender-based discrimination was filed against Dresdner Bank AG and some of its subsidiaries by six employees of Dresdner Kleinwort in the United States District Court for the Southern District of New York. In May 2007, the case was resolved out of court without admission of liability to the satisfaction of the parties involved.
On May 24, 2002, pursuant to a statutory squeeze-out procedure, the general meeting of Dresdner Bank AG resolved to transfer shares from its minority shareholders to Allianz SE as principal shareholder in return for payment of a cash settlement amounting to €51.50 per share. The amount of the cash settlement was established by
Notes to the Allianz SEGroup’s Consolidated Financial Statements—(Continued) Allianz on the basis of an expert opinion, and its adequacy was confirmed by a court appointed auditor. Some of the former minority shareholders applied for a court review of the appropriate amount of the cash settlement in a mediation procedure (Spruchverfahren)(“Spruchverfahren”), which is pending with the district court (Landgericht)(“Landgericht”) of Frankfurt. We believeThe Allianz Group believes that a claim to increase the cash settlement does not exist. In the event that the court were to determine a higher amount as an appropriate cash settlement, this would affect all of the approximately 16 mn shares that were transferred to Allianz SE.Allianz. Allianz Global Investors of America L.P. and somecertain of its subsidiaries have been named as defendants in multiple civil USU.S. lawsuits commenced Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
as putative class actions and other proceedings related to matters involving market timing and revenue sharing in the mutual fund industry. These proceedings are stilllawsuits have been consolidated into and transferred to a multi-district litigation proceeding in the U.S. District Court for the District of Maryland. The potential outcomes cannot be predicted at this time, but management currently does not expect any material negative financial outcome from these matters for the Allianz Group. Two nearly identical class action civil complaints were filed against Pacific Investment Management Company LLC (PIMCO), a preliminary stagesubsidiary of Allianz Global Investors of America L.P., in August 2005, in the Northern District of Illinois Eastern Division. The complaints alleged that the plaintiffs each purchased and sold a 10-year Treasury note futures contract and suffered damages from an alleged shortage when PIMCO held both physical and futures positions in 10-year Treasury notes for its client accounts. The two actions have been consolidated into one single action and the potentialtwo separate complaints have been replaced by a consolidated complaint, which claims that PIMCO violated the federal Commodity Exchange Act by engaging in market manipulation. In addition to PIMCO as a named defendant, PIMCO Funds has been added as a defendant to the consolidated action. In July 2007, the court granted class certification of a class consisting of those persons who purchased futures contracts to offset short positions between May 9, 2005 and June 30, 2005. In December 2007, the U.S. Court of Appeals for the Seventh Circuit granted the petition of PIMCO and PIMCO Funds for leave to appeal the class certification ruling. That appeal is pending. Management currently believes the complaint is without merit but the outcome can notof this action cannot be predicted at this time. The U.S. Department of Justice has alleged False Claims Act violations related to FFIC’sFireman’s Fund Insurance Company’s (FFIC) involvement as a provider of Federalfederal crop insurance from 1997 to 2003. The majority of the allegations concern falsified documentation in FFIC’s Lambert, Mississippi and Modesto, California field offices. Two former FFIC claims employees and one contract adjuster have pled guilty to assisting farmers in asserting fraudulent crop claims. In November 2006, the U.S. Department of Justice proposed to FFIC a resolution of all civil, criminal and administrative allegations in the form of an offer to settle. Discussions between FFIC is inand the processU.S. Department of evaluating the offer,Justice are continuing and the outcome of this matter cannot be predicted at this stage. Three members of the Fireman’s Fund group of companies in the United States, all subsidiaries of Allianz SE, are amongstamong the roughly 135 defendants named in a class action filed on August 1, 2005 in the United States District Court of New Jersey in connection with allegations relating to contingent commissions in the insurance industry. No class has been certified for this class action. The court dismissed withoutwith prejudice to refile, the federal lawcourt causes of action and dismissed without prejudice the state law causes of action. The plaintiffs have filed an amended complaint. Discovery is stayed pending a determinationappealed the ruling. Unless the Court of whetherAppeal reverses the suit can proceed in federal court. As a result, itlower court’s decision, the case will remain dismissed. It is not possible to predict potential outcomes or assess any eventual exposure at this point.time. Allianz Life Insurance Company of North America (“Allianz Life”) ishas been named as a defendant in various putative class action lawsuits, mainly in Minnesota and California, in connection with the marketing and sale of deferred annuity products. Two lawsuitsOne lawsuit in Minnesota and three in California have beenare currently pending as certified as class actions. The complaints allege that the defendant engaged in, among other practices, deceptive trade practices and misleading advertising in connection with the sale of such products, including, with the respectproducts. The Minnesota
Notes to the Minnesota Allianz Group’s Consolidated Financial Statements—(Continued) lawsuit thealleges violation of the Minnesota Consumer Fraud and Deceptive and Unlawful Trade Practices Act. In addition, in January 2007, the Minnesota Attorney General filed a lawsuitagainst Allianz Life alleging unsuitable sales of deferred annuities to senior citizens. Discovery has recently commenced. The potential outcome and exposure related to thesepending lawsuits are currently uncertain, because these proceedings have not yet progressed to a stage at which a potential outcome or exposure can be determined. In March 2006, certain shareholders of Allianz SE filed contestation suits against the resolution of the General Meeting approving the merger of RAS with and into Allianz AG. On July 19, 2006, Allianz SE reached a court settlement with these shareholders which called for the withdrawal of all contestation suits by the plaintiffs against reimbursement by Allianz SE of the attorney costs incurred by the plaintiffs. The merger of Riunione Adriatica di Sicurtà S.p.A. (RAS) with and into Allianz AG became effective on October 13, 2006.
Other contingencies Liquiditäts-Konsortialbank GmbH (“LIKO”) is a bank founded in 1974 in order to provide funding for German banks which experience liquidity problems. 30% of LIKO shares are held by Deutsche Bundesbank, while the remaining shares are being held by other German banks and banking associations. The shareholders have provided capital of €200 mn to fund LIKO; Dresdner Bank AG’s participation is €12.1 mn (6.05%). Dresdner Bank AG is contingently liable to pay future assessments to LIKO up to €60.5 mn (6.05%). In addition, under clause 5(4) of the Articles of Association of LIKO, Dresdner Bank AG is committed to a secondary liability, which arises if other shareholders do not fulfill their commitments to pay their respective future assessments. In all cases of secondary liability, the financial status of the other shareholders involved is sound.
Dresdner Bank AG is a member of the German banks’ Joint Fund for Securing Customer Deposits (Joint Fund), which covers liabilities to each respective creditor up to specified amounts. As a member of the Joint Fund, which is itself a
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
shareholder in LIKO, Dresdner Bank AG is liableaccordance with the other members of the Joint Fund for additional capital contributions, with the maximum being the amount of Dresdner Bank AG’s annual contribution. During the year ended December 31, 2006, the Joint Fund levied a contribution of €22 mn (2005: €21 mn). Under section 5 (10)Section 5(10) of the Statutes of the Joint Fund for Securing Customer Deposits the(“Einlagensicherungsfonds”), Allianz GroupSE has undertaken to indemnify the Federal Association of German Banks (Bundesverband(“Bundesverband deutscher Banken e.V.”) for any losses it may incur by reason of supporting measures taken in favour of Oldenburgische Landesbank AG (OLB), Münsterländische Bank Thie & Co.KG and Bankhaus W. Fortmann & Söhner KG.
With the sale of Dresdner Bank becoming effective on behalfJanuary 12, 2009, Allianz terminated the idemnification undertaking issued in 2001 in favour of any bank in which the Allianz Group ownsFederal Association of German Banks with respect to Dresdner Bank. As a majority interest.result, the indemnification is only relevant for supporting measures that are based on facts that were already existing at the time of the termination. Commitments Loan commitments The Allianz Group engages in various lending commitments to meet the financing needs of its customers. The following table represents the amounts at risk should customers draw fully on all facilities and then default, excluding the effect of any collateral. Since the majority of these commitments may expire without being drawn upon, the amounts shown may not be representative of actual liquidity requirements for such commitments. | As of December 31,
| | 2006
| | 2005
| | 2008 | | 2007 | | | | € mn | | € mn | | € mn | | € mn | Advances | | 35,149 | | 26,954 | | 160 | | 34,065 | Stand-by facilities | | 8,930 | | 9,496 | | 29 | | 1,635 | Guarantee credits | | 1,765 | | 1,733 | | 3 | | 1,604 | Discount credits | | 64 | | 46 | | — | | 64 | Mortgage loans/public-sector loans | | 662 | | 667 | | 85 | | 527 | | | |
| |
| | | | | Total | | 46,570 | | 38,896 | | 277 | | 37,895 | | | |
| |
| | | | |
Leasing commitments The Allianz Group occupies property in many locations under various long-term operating leases and has entered into various operating leases covering the long-term use of data processing equipment and other office equipment. As of December 31, 2006,2008, the future minimum lease payments under non-cancelable operating leases were as follows: | | | | 2006
| | | 2008 | | | | | € mn | | | € mn | | 2007 | | 544 | | | 2008 | | 501 | | | 2009 | | 413 | | | 261 | | 2010 | | 368 | | | 253 | | 2011 | | 312 | | | 217 | | 2012 | | | 196 | | 2013 | | | 175 | | Thereafter | | 1,771 | | | 1,108 | | | | |
|
| | | | Subtotal | | 3,909 | | | 2,210 | | Subleases | | (82 | ) | | (43 | ) | | | |
|
| | | | Total | | 3,827 | | | 2,167 | | | | |
|
| | | |
Rental expense net of sublease rental income received of €37€10 mn, for the year ending December 31, 2006,2008, was €518€253 mn (2005: €315(2007: €429 mn; 2004: €2802006: €518 mn). Purchase obligations The Allianz Group has commitments for mortgage loans and to buy multi-tranche loans of €5,102 mn (2007: €4,489 mn) as well as to invest in private equity funds totaling €1,675€2,455 mn (2005: €1,476(2007: €2,045 mn) as of December 31, 2006.2008. As of December 31, 2006,2008, commitments outstanding to purchase real estate used by third-parties and owned by the Allianz Group used for its own activities amounted to €325€650 mn (2005: €145(2007: €219 mn). As of December 31, 2006,2008, commitments outstanding to purchase items of equipment amounted to €112€3 mn (2005: €66(2007: €197 mn). In addition, as of December 31, 2006,2008, the Allianz Group has other commitments of €290€224 mn (2005: €244(2007: €229 mn) referringrelating to maintenance, real estate development, sponsoring and purchase obligations.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Other commitments Other principal commitments of the Allianz Group include the following: For Allianz of America Inc., Wilmington, Allianz Group posted a surety declaration for obligations in connection with the acquisition of Allianz Global Investors of America L.P., Delaware (“AGI L.P.”). The Allianz Group had originally acquired a 69.5% interest in AGI L.P., whereby
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
minority interest holders had the option of putting their shares to Allianz of America, Inc. On December 31, 2006, the remaining interest of Pacific Life (the minority interest holder) in AGI L.P. was 2.0%, resulting in a commitment to Pacific Life amounting to USD 0.3 bn on December 31, 2006.
Pursuant to para. 124 ff. of the German Insurance Supervision Act (Versicherungsaufsichtsgesetz, VAG)(“Versicherungsaufsichtsgesetz-VAG”), a mandatory insurance guarantee scheme (Sicherungsfonds)(“Sicherungsfonds”) for life insurers was implemented in Germany. Each member of the scheme is obliged to make to the scheme annual contributions as well as special payments under certain circumstances. The exact amount of obligations for each member is calculated according to the provisions of a Federal Regulation („(“Sicherungsfonds-Finanzierungs-Verordnung (Leben) – SichLVFinV“—SichLVFinV”). As of December 31, 2006,2008, the future liabilities of Allianz Lebensversicherungs-Aktiengesellschaft and its subsidiaries to the insurance guarantee scheme amount to annual contributions of €47€24 mn (2007: €36 mn) and an obligation for special payments of €78 mn.€95 mn (2007: €85 mn). Already inIn December 2002, Protektor Lebensversicherungs-AktiengesellschaftLebensversicherungs-Aktien-gesellschaft (“Protektor”), a life insurance company whose role is to protect policyholders of all German life insurers, was founded. Allianz Lebensversicherungs-AGLebensversicherungs-Aktiengesell-schaft and some of its subsidiaries are obligated to provide additional funds either to the mandatory insurance guarantee scheme or to Protektor, in the event that the funds provided to the mandatory insurance guarantee scheme are not sufficient to handle an insolvency case. Such obligation amounts to a maximum of 1% of the sum of the net underwriting reserve with deduction of payments already provided to the insurance guarantee scheme. AtAs of December 31, 2006,2008, and under inclusion of the contributions to the mandatory insurance scheme mentioned above, the aggregate outstanding commitment of Allianz Lebensversicherungs-Aktiengesellschaft and its subsidiaries to the insurance guarantee scheme and to Protektor was €751 mn.€877 mn (2007: €809 mn).
Guarantees A summary of guarantees issued by the Allianz Group by maturity and related collateral-held is as follows: | As of
December 31,
| | Letters of credit and
other financial
guarantees
| | Market- value guarantees
| | Indemnification
contracts
| | | | | € mn | | € mn | | € mn | | Letters of
credit and
other
financial
guarantees | | Market
value
guarantees | | Indemni-
fication
contracts | 2006 | | | | | | | € mn | | € mn | | € mn | 2008 | | | | | | | | Up to 1 year | | 12,157 | | 11 | | 200 | | 740 | | — | | 7 | 1-2 years | | 1,644 | | 66 | | 12 | | 1-3 years | | | 99 | | 439 | | 15 | 3-5 years | | 1,284 | | 464 | | 6 | | 18 | | 478 | | — | Over 5 years | | 1,498 | | 2,419 | | 268 | | 38 | | 1,224 | | 134 | | | |
| |
| |
| | | | | | | Total | | 16,583 | | 2,960 | | 486 | | 895 | | 2,141 | | 156 | | | |
| |
| |
| | | | | | | Collateral | | 7,537 | | — | | 4 | | 25 | | — | | 10 | | | |
| |
| |
| | | | | | | 2005 | | | 2007 | | | | | | | | Up to 1 year | | 10,680 | | — | | 167 | | 10,956 | | 59 | | — | 1-2 years | | 1,989 | | 76 | | 13 | | 1-3 years | | | 2,371 | | 451 | | 16 | 3-5 years | | 1,702 | | 154 | | 1 | | 2,042 | | 273 | | — | Over 5 years | | 1,477 | | 1,569 | | 228 | | 994 | | 2,528 | | 244 | | | |
| |
| |
| | | | | | | Total | | 15,848 | | 1,799 | | 409 | | 16,363 | | 3,311 | | 260 | | | |
| |
| |
| | | | | | | Collateral | | 7,154 | | — | | 7 | | 6,023 | | — | | 10 | | | |
| |
| |
| | | | | | |
The customers of the letters of credit and of the indemnification contracts have the following external credit ranking: | | | | | 2008 | | | € mn | AAA | | — | AA | | 4 | A | | 444 | BBB | | 6 | BB | | — | B and lower | | — | without rating | | 597 | | | | Total | | 1,051 | | | |
Letters of credit and other financial guarantees The majority of the Allianz Group’s letters of credit and other financial guarantees are issued to customers through the normal course of business of the Allianz Group’s Banking segment in return for fee and commission income, which is generally determined based on rates subject to the nominal
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) amount of the guarantees and inherent credit risks. Once a guarantee has been drawn upon, any amount paid by the Allianz Group to third-parties is treated as a loan to the customer, and is, therefore, principally subject to collateral pledged by the customer as specified in the agreement. Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Market value guarantees Market value guarantees represent assurances given to customers of certain mutual funds and fund management agreements, under which initial investment values and/or minimum market performance of such investments are guaranteed at levels as defined under the relevant agreements. The obligation to perform under a market value guarantee is triggered when the market value of such investments does not meet the guaranteed targets at pre-definedpredefined dates. The Allianz Group’s Asset Management segment, in the ordinary course of business, issues market value guarantees in connection with investment trust accounts and mutual funds it manages. The levels of market value guarantees, as well as the maturity dates, differ based on the separate governing agreements of the respective investment trust accounts and mutual funds. As of December 31, 2006,2008, the maximum potential amount of future payments of the market value guarantees was €1,874€785 mn (2005: €1,113(2007: €1,956 mn), which represents the total value guaranteed under the respective agreements including the obligation that would have been due had the investments matured on that date. The fair value of the investment trust accounts and mutual funds related to these guarantees as of December 31, 2006,2008, was €3,411€822 mn (2005: €2,285(2007: €2,151 mn). The Allianz Group’s banking operations in France, in the ordinary course of business, issue market value and performance-at-maturity guarantees in connection with mutual funds offered by the Allianz Group’s asset management operations in France. The levels of market value and performance-at-maturity guarantees, as well as the maturity dates, differ based on the underlying agreements. In most cases, the same mutual fund offers both a market value guarantee and a performance-at-maturity guarantee. Additionally, the performance-at-maturity guarantees are generally linked to the performance of an equity index or group of equity indexes. As of December 31, 2006,2008, the maximum potential amount of future payments of the market value and performance-at-maturity guarantees was €1,086€1,356 mn (2005: €686(2007: €1,355 mn), which represents the total value guaranteed under the respective agreements. The fair value of the mutual fundsrelatedfunds related to the market guarantees as of December 31, 2006,2008, was approximately €1,033€1,260 mn (2005: €777(2007: €1,316 mn). Such funds generally have a duration of five to eight years. Indemnification contracts Indemnification contracts are executed by the Allianz Group with various counterparties under existing service, lease or acquisition transactions. Such contracts may also be used to indemnify counterparties under various contingencies, such as changes in laws and regulations or litigation claims. In connection with the sale of various of the Allianz Group’s former private equity investments, subsidiaries of the Allianz Group provided indemnities to the respective buyers in the event that certain contractual warranties arise. The terms of the indemnity contracts cover ordinary contractual warranties, environmental costs and any potential tax liabilities the entity incurred while owned by the Allianz Group. Credit derivatives Credit derivatives consist of written credit default swaps, which require payment by the Allianz Group in the event of default of debt obligations, as well as written total return swaps, under which the Allianz Group guarantees the performance of the underlying assets. The notional principal amounts and fair values of the Allianz Group’s credit derivative positions as of December 31, 20062008 are provided in Note 43.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Assets pledged and collateral The carrying amount of the assets pledged as collateral where the secured party does not have the right by contract or custom to sell or repledge the assets are as follows: | | | | | As of December 31,
| | 2006
| | 2005
| | | | € mn | | € mn | Investments | | 932 | | 3,820 | Loans and advances to banks and customers | | 1,432 | | 1,161 | Financial assets carried at fair value through income | | 10,637 | | 16,189 | | | |
| |
| Total | | 13,001 | | 21,170 | | | |
| |
|
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
| | | | | As of December 31, | | 2008 | | 2007 | | | | € mn | | € mn | Investments | | 175 | | 597 | Loans and advances to banks and customers | | — | | 1,663 | Financial assets carried at fair value through income | | — | | 4,302 | | | | | | Total | | 175 | | 6,562 | | | | | |
As of December 31, 2006,2008, the Allianz Group has received collateral, consisting of fixed-income and equity securities, with a fair value of €254,653€1,672 mn (2005: €213,333(2007: €212,894 mn), respectively, which the Allianz Group has the right to sell or repledge. As of December 31, 2006, €134,0052008, €– mn (2005: €137,559(2007: €156,096 mn), respectively, related to collateral that the Allianz Group has received and sold or repledged. As of December 31, 2008 the Allianz Group took possession of collateral it holds as security with a carrying amount of €– mn. These financial assets will be systematically sold in the market. 47 Pensions and similar obligations Retirement benefits in the Allianz Group are either in the form of defined benefit or defined contribution plans. Employees, including agents in Germany, are granted such retirement benefits by the various legal entities of the Allianz Group. In Germany, these are primarily defined benefit plans in nature. For defined benefit plans, the participant is granted a defined benefit by the employer or via an external entity. In contrast to defined contribution arrangements, the future cost to the employer of a defined benefit plan is not known with certainty in advance. Defined benefit plans Amounts recognized in the Allianz Group’s consolidated balance sheets for defined benefit plans are as follows: | As of December 31,
| | 2006
| | 2005
| | | 2008 | | 2007 | | | | | € mn | | € mn | | | € mn | | € mn | | Prepaid benefit cost | | (265 | ) | | (262 | ) | | Accrued benefit cost | | 4,120 | | | 5,856 | | | Prepaid benefit costs | | | (256 | ) | | (402 | ) | Accrued benefit costs | | | 3,867 | | | 4,184 | | | | |
|
| |
|
| | | | | | | Net amount recognized | | 3,855 | | | 5,594 | | | 3,611 | | | 3,782 | | | | |
|
| |
|
| | | | | | |
The following table sets forth the changes in the projected benefit obligations, the changes in fair value of plan assets and the net amount recognized for the various Allianz Group defined benefit plans: | | | | | | | | | | 2006
| | | 2005
| | | | | € mn | | | € mn | | Change in projected benefit obligations: | | | | | | | Projected benefit obligations as of January 1, | | 17,159 | | | 14,279 | | Service cost | | 472 | | | 353 | | Interest cost | | 725 | | | 693 | | Plan participants’ contributions | | 61 | | | 66 | | Amendments | | (48 | ) | | (44 | ) | Actuarial (gains)/losses | | (689 | ) | | 2,268 | | Foreign currency translation adjustments | | (43 | ) | | 125 | | Benefits paid | | (678 | ) | | (655 | ) | Changes in the consolidated subsidiaries of the Allianz Group | | 321 | | | 74 | | Projected benefit obligations as of December 31,(1) | | 17,280 | | | 17,159 | | Change in fair value of plan assets: | | | | | | | Fair value of plan assets as of January 1, | | 8,287 | | | 7,149 | | Expected return on plan assets | | 557 | | | 411 | | Actuarial gains/(losses) | | (90 | ) | | 472 | | Employer contributions(2) | | 2,154 | | | 374 | | Plan participants’ contributions | | 61 | | | 66 | | Foreign currency translation adjustments | | (30 | ) | | 81 | | Benefits paid(3) | | (307 | ) | | (293 | ) | Changes in the consolidated subsidiaries of the Allianz Group | | 256 | | | 27 | | Fair value of plan assets as of December 31, | | 10,888 | | | 8,287 | | Funded status as of December 31, | | 6,392 | | | 8,872 | | Unrecognized net actuarial losses | | (2,556 | ) | | (3,283 | ) | Unrecognized prior service costs | | 19 | | | 5 | | Net amount recognized as of December 31, | | 3,855 | | | 5,594 | |
| | | | | | | | | | 2008 | | | 2007 | | | | | € mn | | | € mn | | Change in projected benefit obligations | | | | | | | Projected benefit obligations as of January 1, | | 16,142 | | | 17,280 | | Service cost | | 321 | | | 437 | | Interest cost | | 672 | | | 785 | | Plan participants’ contributions | | 65 | | | 67 | | Amendments | | 41 | | | (23 | ) | Actuarial (gains)/losses | | (774 | ) | | (1,316 | ) | Foreign currency translation adjustments | | (182 | ) | | (266 | ) | Benefits paid | | (570 | ) | | (685 | ) | Changes in the consolidated subsidiaries of the Allianz Group | | (38 | ) | | (137 | ) | Divestitures1) | | (3,430 | ) | | — | | | | | | | | | Projected benefit obligations as of December 31,2) | | 12,247 | | | 16,142 | | | | | | | | | Change in fair value of plan assets | | | | | | | Fair value of plan assets as of January 1, | | 10,931 | | | 10,888 | | Expected return on plan assets | | 448 | | | 577 | | Actuarial gains/(losses) | | (781 | ) | | (331 | ) | Employer contributions | | 500 | | | 342 | | Plan participants’ contributions | | 65 | | | 67 | | Foreign currency translation adjustments | | (150 | ) | | (229 | ) | Benefits paid3) | | (321 | ) | | (315 | ) | Changes in the consolidated subsidiaries of the Allianz Group | | (36 | ) | | (68 | ) | Divestitures1) | | (2,692 | ) | | — | | | | | | | | | Fair value of plan assets as of December 31, | | 7,964 | | | 10,931 | | | | | | | | | Funded status as of December 31, | | 4,283 | | | 5,211 | | Unrecognized net actuarial losses | | (685 | ) | | (1,444 | ) | Unrecognized prior service costs | | 13 | | | 15 | | | | | | | | | Net amount recognized as of December 31, | | 3,611 | | | 3,782 | | | | | | | | |
(1)1)
| Relates to the reclassification of Dresdner Bank Group to assets / liabilities of disposal groups classified as held for sale. |
2) | As of December 31, 2006,2008, includes direct commitments of the consolidated subsidiaries of the Allianz Group of €5,306€4,429 mn (2007: €4,953 mn) and commitments through plan assets of €7,818 mn (2007: €11,189 mn). |
3) | In addition, the Allianz Group paid €249 mn (2007: €370 mn) directly to plan participants. |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) | (2005: €8,164 mn) and commitments through plan assets of €11,974 mn (2005: €8,995 mn).
|
(2)
| During January 2006, the Allianz Group contributed €1,876 mn to the defined benefit plans of the Dresdner Bank Group.
|
(3)
| In addition, the Allianz Group paid €371 mn (2005: €362 mn) directly to plan participants.
|
As of December 31, 2006,2008, post-retirement health benefits included in the projected benefit obligation and in the net amount recognized amounted to €142€60 mn (2005: €165(2007: €109 mn) and €152€92 mn (2005: €151(2007: €138 mn), respectively. As of December 31, 2006, the accumulated benefit obligation for all defined benefit plans was €16,457 mn (2005: €16,188 mn). Defined benefit plans with an accumulated benefit obligation in excess of plan assets are summarized as follows:
| | | | | As of December 31,
| | 2006
| | 2005
| | | | € mn | | € mn | Projected benefit obligation | | 15,567 | | 16,069 | Accumulated benefit obligation | | 14,954 | | 15,242 | Fair value of plan assets | | 9,130 | | 7,215 |
The net periodic benefit cost related to defined benefit plans of the Allianz Group consists of the following components: | | | | 2006
| | 2005
| | 2004
| | | 2008 | | 2007 | | 2006 | | | | | € mn | | € mn | | € mn | | | € mn | | € mn | | € mn | | Service cost | | 472 | | | 353 | | | 313 | | | 321 | | | 382 | | | 417 | | Interest cost | | 725 | | | 693 | | | 676 | | | 672 | | | 617 | | | 571 | | Expected return on plan assets | | (557 | ) | | (411 | ) | | (366 | ) | | (448 | ) | | (432 | ) | | (407 | ) | Amortization of prior service costs | | (33 | ) | | (45 | ) | | 5 | | | Amortization of prior service cost | | | 38 | | | — | | | (33 | ) | Amortization of net actuarial loss | | 126 | | | 57 | | | 8 | | | 6 | | | 62 | | | 84 | | (Income)/expenses of plan curtailments or settlements | | (36 | ) | | (6 | ) | | 36 | | | — | | | (51 | ) | | (13 | ) | Net periodic benefit cost | | 697 | | | 641 | | | 672 | | | | | | | | | | | | | | Net periodic benefit cost1) | | | 589 | | | 578 | | | 619 | | | | | | | | | | | | |
1) | 2007 and 2006 adjusted due to the reclassification of net periodic benefit costs of Dresdner Bank Group to net income from discontinued operations |
During the year ended December 31, 2006,2008, net periodic benefit cost includes net periodic benefit cost related to post-retirement health benefits of €9€(7) mn (2005: €8(2007: €— mn; 2004: €72006: €4 mn). The actual return on plan assets amounted to €467€(333) mn, €883€246 mn €431and €467 mn during the years ended December 31, 2006, 20052008, 2007 and 2004.2006. A summary of amounts related to defined benefit plans is as follows: | | | | | 2006
| | | € mn | Projected benefit obligation
| | 17,280 | Fair value of plan assets
| | 10,888 | Funded status
| | 6,392 | Actuarial (gains) / losses from experience adjustments on:
| | | Plan obligations
| | 8 | Plan assets
| | 90 |
| | | | | | | | | | | | 2008 | | | 2007 | | | 2006 | | | | € mn | | | € mn | | | € mn | Projected benefit obligation | | 12,247 | | | 16,142 | | | 17,280 | Fair value of plan assets | | 7,964 | | | 10,931 | | | 10,888 | Funded status | | 4,283 | | | 5,211 | | | 6,392 | Actuarial (gains)/losses from experience adjustments on: | | | | | | | | | Plan obligations | | (42 | ) | | (56 | ) | | 8 | Plan assets | | 781 | | | 331 | | | 90 |
Assumptions The assumptions for the actuarial computation of the projected benefit obligation, accumulated benefit obligation and the net periodic benefit cost depend on the circumstances in the particular country where the plan has been established. The calculations are based on current actuarially calculated mortality estimates. Projected turnover depending on age and length of service have also been used, as well as internal Allianz Group retirement projections. The weighted-averageweighted average value of the assumptions for the Allianz Group’s defined benefit plans used to determine projected and accumulated benefit obligation: | As of December 31,
| | 2006
| | 2005
| | 2008 | | 2007 | | | | % | | % | | % | | % | Discount rate | | 4.6 | | 4.1 | | 5.8 | | 5.5 | Rate of compensation increase | | 2.6 | | 2.7 | | 2.5 | | 2.6 | Rate of pension increase | | 1.5 | | 1.4 | | 1.9 | | 1.8 |
The discount rate assumptions reflect the market yields at the balance sheet date of high-quality fixed incomefixed-income investments corresponding to the currency and duration of the liabilities. The weighted-averageweighted average value of the assumptions used to determine net periodic benefit cost: | | | | 2006
| | 2005
| | 2004
| | 2008 | | 2007 | | 2006 | | | | % | | % | | % | | % | | % | | % | Discount rate | | 4.1 | | 4.9 | | 5.5 | | 5.5 | | 4.6 | | 4.1 | Expected long-term return on plan assets | | 5.3 | | 5.8 | | 6.4 | | 5.5 | | 5.3 | | 5.3 | Rate of compensation increase | | 2.7 | | 2.7 | | 2.8 | | 2.6 | | 2.6 | | 2.7 | Rate of pension increase | | 1.4 | | 1.6 | | 1.9 | | 1.8 | | 1.5 | | 1.4 |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) For the year ended December 31, 2006,2008, the weighted expected long-term return on plan assets was derived from the following target allocation and expected long-term rate of return for each asset category: | | | | Target allocation
| | Weighted expected long-
term rate of return
| | Target
allocation | | Weighted
expected long-
term rate of
return | | | | % | | % | | % | | % | Equity securities | | 30.1 | | 7.7 | | 28.7 | | 7.6 | Debt securities | | 64.2 | | 4.2 | | 66.4 | | 4.6 | Real estate | | 5.3 | | 4.7 | | 4.2 | | 4.6 | Other | | 0.4 | | 0.7 | | 0.7 | | 3.5 | | | | | | | Total | | 100.0 | | 5.3 | | 100.0 | | 5.5 | | | | | | |
The determination of the expected long-term rate of return for the individual asset categories is based on capital market surveys. Plan assets The defined benefit plans’ weighted-averageweighted average asset allocations by asset category are as follows: | As of December 31,
| | 2006
| | 2005
| | 2008 | | 2007 | | | | % | | % | | % | | % | Equity securities | | 28.3 | | 28.4 | | 16.2 | | 28.1 | Debt securities | | 66.6 | | 66.0 | | 78.4 | | 65.1 | Real estate | | 2.9 | | 3.6 | | 3.6 | | 2.8 | Other | | 2.2 | | 2.0 | | 1.8 | | 4.0 | | | |
| |
| | | | | Total | | 100.0 | | 100.0 | | 100.0 | | 100.0 | | | |
| |
| | | | |
The bulk of the plan assets are held by the Allianz Versorgungskasse VVaG, Munich. This entity insures effectively all employees of the German insurance operations.operations and is not part of the Allianz Group. Plan assets do not include equity securities issued by the Allianz Group or real estate used by the Allianz Group. The Allianz Group plans to gradually increase in the long term its actual equity securities allocation for plan assets of defined benefit plans. Contributions During the year ending December 31, 2007,2009, the Allianz Group expects to contribute €254€226 mn to itsdefinedits defined benefit plans and pay €375€240 mn directly to plan participants of its defined benefit plans. Estimated future benefit payments
The following estimated future benefit payments are based on the same assumptions used to measure the Allianz Group’s projected and accumulated benefit obligations as of December 31, 2006, and reflect expected future service, as appropriate.
| | | | | | € mn
| 2007 | | 694 | 2008 | | 709 | 2009 | | 737 | 2010 | | 761 | 2011 | | 788 | Years 2012–2016 | | 4,363 |
Defined contribution plans Defined contribution plans are funded through independent pension funds or similar organizations. Contributions fixed in advance (e.g., based on salary) are paid to these institutions and the beneficiary’s right to benefits exists against the pension fund. The employer has no obligation beyond payment of the contributions. The main pension fund is the Versicherungsverein des Bankgewerbes a.G., Berlin, which covers most of the banking employees in Germany. During the year ended December 31, 2006,2008, the Allianz Group recognized expense for defined contribution plans of €227€212 mn (2005: €197(2007: €192 mn; 2004: €1742006: €136 mn). Additionally, the Allianz Group paid contributions for state pension schemes of €317 mn (2007: €294 mn; 2006: €277 mn). 48 Share-based compensation plans Group Equity Incentives Plans The Group Equity Incentives Plans (“GEI”)(GEI) of the Allianz Group support the orientation of senior management, in particular the Board of Management, toward the long-term increase of the value of the Allianz Group. The GEI include grants of stock appreciation rights (SAR) and restricted stock units.units (RSU). Stock appreciation rights The stock appreciation rightsSARs granted to a plan participant obligate the Allianz Group to pay in cash Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
the excess of the market price of an Allianz SE share over the reference price on the exercise date for each stock appreciation rightSAR granted. The excess is capped at 150% of the reference price. The reference price represents the average of the closing prices of an Allianz SE share onfor the ten trading days prior tofollowing the grant date.Financial Press Conference of Allianz SE in the year of issue. The stock appreciation rightsSARs vest after two years and expire after seven years. Upon vesting, the stock appreciation rightsSARs may be exercised by the plan participant if the following market conditions are attained: during their contractual term, the market price of Allianz SE share has outperformed the Dow Jones Europe STOXX Price Index at least once for a period of five consecutive trading days; and the Allianz SE market price is in excess of the reference price by at least 20% on the exercise date.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) In addition, upon death of plan participants, a change inof control of the Allianz Group or notice for operational reason the sale ofSARs vest immediately and will be exercised by the subsidiary that employscompany provided the plan participant, the stock appreciation rights vest immediately.above market conditions have been attained. Upon the expiration date, any unexercised stock appreciation rights that have not been exercisedSAR will be exercised automatically if the above market conditions have been attained. The stock appreciation rightsSARs are forfeited if the plan participant ceases to be employed by the Allianz Group or if the marketexercise conditions are not attained by the expiration date. The fair value of the optionsSARs at grant date is measured using a Cox-Rubinstein binomial tree option pricing model. Option valuation models require the input of subjective assumptions including the expected stock price volatility and the expected life of the options. Volatility was derived from observed historical market prices. In the absence of historical information regarding employee stock appreciation exercise patterns (all plans issued between 19992002 and 20022008 are significantly “out of the money”), the expected life has been estimated to equal the term to maturity of the stock appreciation rights.SARs. The following table provides the assumptions used in estimating the fair value of the stock appreciation rightsSARs at grant date: | | | | | | | | | | | | | | | | 2006
| | | 2005
| | | 2004
| | Expected volatility | | | 28.0 | % | | | 27.8 | % | | | 35.2 | % | Risk-free interest rate | | | 4.1 | % | | | 3.1 | % | | | 4.1 | % | Expected dividend rate | | | 1.6 | % | | | 1.9 | % | | | 1.8 | % | Share price | | € | 123.67 | | | € | 93.33 | | | € | 83.75 | | Expected life (years) | | | 7 | | | | 7 | | | | 7 | |
A summary of the number and the weighted-average grant date fair value of the nonvested stock appreciation rights are as follows:
| | | | | | | | | Number
| | | Weighted
average
grant date fair value
| | | | | | | € | Nonvested as of January 1, 2004 | | 2,107,070 | | | 51.38 | Granted | | 1,788,458 | | | 30.71 | Vested | | (588,963 | ) | | 110.53 | Forfeited | | (133,554 | ) | | 40.56 | Nonvested as of December 31, 2004 | | 3,173,011 | | | 29.21 | Granted | | 2,176,463 | | | 26.69 | Vested | | (1,398,426 | ) | | 27.35 | Forfeited | | (165,998 | ) | | 29.70 | Nonvested as of December 31, 2005 | | 3,785,050 | | | 28.42 | Granted | | 1,192,518 | | | 37.50 | Vested | | (1,591,320 | ) | | 30.71 | Forfeited | | (190,354 | ) | | 28.06 | Nonvested as of December 31, 2006 | | 3,195,894 | | | 30.69 |
As of December 31, 2006, there were 1,951,716 stock appreciation rights, with a weighted average reference price of €76.99, that were granted during the years ended December 31, 2003 and 2004, exercisable as the vesting and market conditions were met.
As of December 31, 2006, 1,103,025 stock appreciation rights, with a weighted average reference price of €285.62, that were granted before 2003, were not exercisable as the market conditions were not met.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
| | | | | | | | | | | | | | | | 2008 | | | 2007 | | | 2006 | | Expected volatility | | | 32.0 | % | | | 27.9 | % | | | 28.0 | % | Risk-free interest rate | | | 3.6 | % | | | 3.9 | % | | | 4.1 | % | Expected dividend rate | | | 5.3 | % | | | 3.0 | % | | | 1.6 | % | Share price | | € | 112.83 | | | € | 158.01 | | | € | 123,67 | | Expected life (years) | | | 7 | | | | 7 | | | | 7 | |
The stock appreciation rightsSARs are accounted for as cash settled plans by the Allianz Group. Therefore, the Allianz Group accrues the fair value of the stock appreciation rightsSARs as compensation expense over the vesting period. Upon vesting, any changes in the fair value of the unexercised stock appreciation rightsSARs are recognized as compensation expense. During the year ended December 31, 2006,2008, the Allianz Group recognized compensation expense related to the unexercised stock appreciation rightsSARs of €116€(116) mn (2005: €99(2007: €14 mn; 2004: €232006: €102 mn). During the year ended December 31, 2006, the Allianz Group recognized a deferred tax benefit related to the unexercised stock appreciation rights of €30 mn (2005: €24 mn; 2004: €6 mn). During the year ended December 31, 2006, the total amount paid related to stock appreciation rights exercised was €46 mn (2005: €11 mn; 2004: €-mn). As of December 31, 2006,2008, the Allianz Group recorded a liability, in other liabilities, for the unexercised stock appreciation rightsSARs of €276€37 mn (2005: €160(2007: €182 mn). Based upon the fair value of the stock appreciation rights as of December 31, 2006, the total compensation expense not yet recognized related to the nonvested stock appreciation rights, due to vesting requirements was €72 mn. The total compensation expense not yet recognized related to the nonvested stock appreciation rights is expected to be recognized over a weighted-average period of 1 year. Restricted stock units The restricted stock unitsRSUs granted to a plan participant obligate the Allianz Group to pay in cash the average market price of an Allianz SE share in the ten trading days preceding the vesting date or issue one Allianz SE share, or other equivalent equity instrument, for each restricted stock unitRSU granted. The restricted stock unitsRSUs vest after five years. The Allianz Group will exercise the restricted stock unitsRSUs on the first stock exchange day after their vesting date. On the exercise date, the Allianz Group can choose the settlement method for each restricted stock unit.RSU. In addition, upon death of plan participants, a change inof control of the Allianz Group or notice for operational reason the saleRSUs vest immediately and will be exercised by the company. The RSUs are notional stocks without dividend payments. The fair value is calculated by subtracting the net present value of expected future dividend payments until maturity of the subsidiary that employsRSUs from the plan participant,prevailing share price as of the restricted stock units vest immediately.valuation date. A summary ofThe following table provides the number andassumptions used in calculating the weighted-average grant date fair value of the nonvested restricted stock units are as follows:RSUs at grant date:
| | | | | | | | | Number
| | | Weighted
average
grant date fair value
| | | | | | | € | Nonvested as of January 1, 2004 | | 539,310 | | | 65.91 | Granted | | 749,030 | | | 77.02 | Vested | | (4,123 | ) | | 73.54 | Forfeited | | (39,805 | ) | | 69.74 | Nonvested as of December 31, 2004 | | 1,244,412 | | | 72.45 | Granted | | 1,023,600 | | | 85.28 | Forfeited | | (75,859 | ) | | 75.02 | Nonvested as of December 31, 2005 | | 2,192,153 | | | 78.35 | Granted | | 644,991 | | | 123.45 | Vested | | (1,848 | ) | | 72.56 | Forfeited | | (148,449 | ) | | 82.72 | Nonvested as of December 31, 2006 | | 2,686,847 | | | 88.94 |
| | | | | | | | | | | | | 2008 | | | 2007 | | | 2006 | | Average interest rate | | 3.4 | % | | 3.9 | % | | 3.8 | % | Average dividend yield | | 5.7 | % | | 3.2 | % | | 1.5 | % |
The restricted stock unitsRSUs are accounted for as cash settled plans as the Allianz Group intends to settle in cash. Therefore, the Allianz Group accrues the fair value of the restricted stock unitsRSUs as compensation expense over the vesting period. During the year ended December 31, 2006,2008, the Allianz Group recognized compensation expense related to the nonvested restricted stock unitsRSUs of €85€(19) mn (2005: €49(2007: €41 mn; 2004: €18 mn). During the year ended December 31, 2006, the Allianz Group recognized a deferred tax benefit related to the nonvested restricted stock units of €25 mn (2005: €14 mn; 2004: €5 mn). During the year ended December 31, 2006, the total amount paid related to restricted stock units exercised was €0.2 mn (2005: €– mn; 2004: €0.42006: €68 mn). As of December 31, 2006,2008, the Allianz Group recorded a liability, in other liabilities, of €157€87 mn (2005: €72(2007: €209 mn) for the nonvested restricted stock units. Based upon the fair value of the restricted stock units as of December 31, 2006, the total compensation expense not yet recognized related to the nonvested restricted stock units, due to vesting requirements, was €247 mn. The total compensation expense not yet recognized related to the nonvestedRSUs.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) restricted stock units is expected to be recognized over a weighted-average period of 3 years.
Share-based compensation plans of subsidiaries of the Allianz Group PIMCO LLC Class B Unit Purchase Plan When acquiring AGI L.P. during the year ended December 31, 2000, Allianz SE caused Pacific Investment Management Company LLC (“PIMCO LLC”)(PIMCO LLC) to enter into a Class B Purchase Plan (the “Class B Plan”) for the benefit of members of the management of PIMCO LLC. The plan participants of the Class B Plan have rights to a 15% priority claim on the adjusted operating profits of PIMCO LLC. The Class B equity units issued under the Class B Plan vest over three3 to five5 years and are subject to repurchase by AGI L.P. upon death, disability or termination of the participant prior to vesting. As of January 1, 2005, AGI L.P. has the right to repurchase, and the participants have the right to cause AGI L.P. to repurchase, a portion of the vested Class B equity units each year. The call or put right is only exercisable sixfor the first time 6 months after the initial vesting of each grant. On the repurchase date, the repurchase price will be based upon the determined value of the Class B equity units being repurchased. As the Class B equity units are puttable by the plan participants, the Class B Plan is accounted for as a cash settled plan. A summary of the number and the weighted-average grant date fair value of the outstanding Class B equity units are as follows:
| | | | | | | | | Number
| | | Weighted
average
grant date fair value
| | | | | | | € | Outstanding as of January 1, 2004 | | 120,000 | | | 5,461 | Granted | | 30,000 | | | 8,480 | Forfeited | | (4,695 | ) | | 5,169 | Outstanding as of December 31, 2004 | | 145,305 | | | 6,004 | Granted | | 4,695 | | | 9,733 | Called | | (5,427 | ) | | 3,998 | Forfeited | | (480 | ) | | 7,823 | Outstanding as of December 31, 2005 | | 144,093 | | | 5,900 | Granted | | 2,075 | | | 11,720 | Called | | (16,335 | ) | | 4,547 | Forfeited | | (4,501 | ) | | 7,264 | Outstanding as of December 31, 2006 | | 125,332 | | | 6,065 |
The Class B equity units are accounted for as cash settled plans. Therefore, the Allianz Group accrues the fair value of the Class B equity units as compensation expense over the vesting period. Upon vesting, any changes in the fair value of the Class B equity units are recognized as compensation expense. During the year ended December 31, 2006,2008, the Allianz Group recognized compensation expense related to the Class B equity units of €383€185 mn (2005: €536(2007: €362 mn; 2004: €3992006: €383 mn). In addition, the Allianz Group recognized expense related to the priority claim on the adjusted operating profits of PIMCO LLC of €140€93 mn (2005: €141(2007: €126 mn; 2004: €1012006: €140 mn). During the year ended December 31, 2006, the Allianz Group recognized a deferred tax benefit related to the Class B equity units of €156 mn (2005: €219 mn; 2004: €163 mn). During the year ended December 31, 2006,2008, the Allianz Group called 16,33527,826 Class B equity units. The total amount paid related to the call of the Class B equity units was €238€418 mn.
The total recognized compensation expense for Class B equity units that are outstanding is recorded as a liability in other liabilities. As of December 31, 2006,2008, the Allianz Group recorded a liability for the Class B equity units of €1,455€1,151 mn (2005: €1,473(2007: €1,350 mn). PIMCO LLC Class M-Unit Allianz Global Investors (AGI) has launched a new management share-based payment incentive plan for certain senior level executives of PIMCO LLC and certain of its affiliates. Participants in the plan are granted options to acquire a new class of equity instruments (M-Units), which vest in one-third increments on approximately the third, fourth and fifth anniversary of the option valuation date. Upon vesting, options will be automatically exercised in a cashless transaction. Participants may elect to defer the receipt of M-Units through the M-Unit Deferral Plan. With the M-Unit Plan, participants can directly participate in PIMCO’s performance. Class M-Units are non-voting common equity with limited information rights. They bear quarterly distributions equal to a pro-rata share of PIMCO’s net distributable income. Deferred M-Units have a right to receive quarterly cash compensation equal to and in lieu of quarterly dividend payments. The maximum of 250,000 M-Units are authorized for issuance under the M-Unit Plan. The fair value of the underlying M-Options was measured using the Black-Scholes option-pricing model. Volatility was derived in part by considering the average historical and implied volatility of a select group of peers. The expected life was calculated based upon treating the three vesting tranches (one third in years 3, 4, and 5) as three separate awards. The following table provides the assumptions used in calculating the fair value of the M-Options at grant date: | | | | | | | 2008 | | Weighted average fair value of options granted | | € | 577.44 | | Assumptions: | | | | | Expected term (years) | | | 3.85 | | Expected volatility | | | 32.5 | % | Expected dividends | | | 11.1 | % | Risk free rate of return | | | 2.7 | % |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) mn). As of December 31, 2006, the total compensation expense not yet recognized related to the nonvested Class B equity units was €842 mn (2005: €1,191 mn). The total compensation expense not yet recognized related to the Class B equity units is expected to be recognized over the remaining vesting period of up to 5 years.
Dresdner Kleinwort
The Allianz Group awarded eligible employees of Dresdner Kleinwort (“DrK”) a promise to deliver Allianz SE shares on the vesting dates (hereafter “nonvested shares”). In jurisdictions in which regulatory restrictions do not allow for delivery of shares, the awards are settled in cash. The awards vest in three instalments in each of the three years following the initial award. A portion of the awards is also subject to performance vesting conditions, which are based on the financial operating results of DrK. If all of the performance targets have not been met for the previous year, then immediately prior to vesting, some or all of the performance related shares for that year are forfeited.
A summary of the number and the weighted-average grant date fair valueweighted average exercise price of the nonvested share unitsM-Options outstanding and exercisable are as follows: | | | | Number
| | Weighted
average
grant date fair value
| | Number of
options | | Weighted
average
exercise
price | | | | | € | | | € | Nonvested as of January 1, 2004 | | — | | | — | | Outstanding as of January 1, 2008 | | | — | | | — | Granted | | 1,475,250 | | | 105.62 | | 27,674 | | | 6,230.05 | Forfeited | | (212,944 | ) | | 105.62 | | Nonvested as of December 31, 2004 | | 1,262,306 | | | 105.62 | | Granted | | 1,829,307 | | | 92.81 | | Vested | | (333,516 | ) | | 105.58 | | Forfeited | | (198,071 | ) | | 98.13 | | Nonvested as of December 31, 2005 | | 2,560,026 | | | 97.05 | | Granted | | 1,405,646 | | | 135.40 | | Vested | | (803,809 | ) | | 98.00 | | Exercised | | | — | | | — | Forfeited | | (499,370 | ) | | 112.83 | | (1,142 | ) | | 6,230.86 | | | |
|
| |
| | | | | | Nonvested as of December 31, 2006 | | 2,662,493 | | | 114.05 | | Outstanding as of December 31, 2008 | | | 26,532 | | | 6,230.01 | | | |
|
| |
| | | | | | Exercisable as of December 31, 2008 | | | — | | | — | | | | | | | |
The aggregate intrinsic value of share options outstanding was €(1) mn for the year ended December 31, 2008. The M-Units outstanding as of December 31, 2008 have an exercise price between of €6,190.13 and of €6,230.86 and a weighted average remaining contractual life of 4.46 years. The shares settled by delivery of Allianz SEPIMCO LLC shares are accounted for as equity settled plans by the Allianz Group.PIMCO LLC. Therefore, the Allianz GroupPIMCO LLC measures the total compensation expense to be recognized for the equity settled shares based upon their fair value as of the grant date. The total compensation expense is recognized over the three year vesting period. The shares settled in cash are accounted for as cash settled plans by the Allianz Group. Therefore, the Allianz Group accrues the fair value of the cash settled shares as compensation expense over the vesting period. During the year ended December 31, 2006, the Allianz Group recognized compensation expense related to the nonvested shares of €135 mn (2005: €102 mn). During the year ended December 31, 2006, the Allianz Group recognized a deferred tax benefit of €25 mn. During the year ended December 31, 2006, the total amount paid related to cash settled shares vested was €6 mn. During the year ended December 31, 2006, the total fair value of equity settled shares that vested was €117 mn. As of December 31, 2006,2008, the Allianz Group recorded a liability for the nonvested cash settled shares of €10 mn (2005: €6 mn). As of December 31, 2006, the total compensation expense not yet recognizedof €2 mn related to the nonvested shares was €75 mn (2005: €74 mn). The total compensation expense not yet recognized related to the nonvested shares is expected to be recognized over a weighted-average period of 2.5 years.these share options.
AGF Group share option plan The AGF Group has awarded share options on AGF shares to eligible AGF Group executives and managers of subsidiaries, as well as to certain employees, whose performance justified grants. The primary objective of the share option plan is to encourage the retention of key personnel of AGF Group and to link their compensation to the performance of AGF Group. These During the year ended December 31, 2007, Allianz acquired all of the remaining AGF shares from minority shareholders in the context of the Tender Offer and Squeeze-out. Under the terms of an agreement (the “Liquidity Agreement”) between Allianz SE, AGF and the beneficiaries of the AGF share option plans 2003-2006 (AGF employees), Allianz has the right to purchase all AGF shares issued through the exercise of these AGF share option plans after the put period (where the beneficiaries have the right to sell to Allianz). The price payable by Allianz per AGF share is a cash consideration equal to the Allianz 20-day-average share price prior to the date the right to buy or to sell is exercised, multiplied by a ratio representing the consideration proposed in the Tender Offer for each AGF share (€126.43) divided by the Allianz share price on January 16, 2007 (€155.72). This ratio is subject to adjustments in case of transactions impacting Allianz or AGF share capital or net equity. The cash settlement is based upon the initial offer proposed for each AGF share during the Tender Offer. As of December 31, 2007 all shares issued under these plans were fully vested and exercisable. Due to the change in settlement arising from the Liquidity Agreement, the Allianz Group accounts for the AGF share option plans as cash settled plans, as all AGF employees will receive cash for their AGF shares. Therefore, the Allianz Group recognizes any change in the fair value of the unexercised plans as compensation expense. The effects of these modifications that increased the total fair value of the AGF share option plan to the AGF employees were expensed at the date of modification and amounted to €15 mn in 2007. The modification of the settlement terms from an equity share to cash for vested options was recorded directly in equity, and amounted to €18 mn during 2007. Originally, the AGF share options are independent ofplans were granted independently from the remuneration plans of the Allianz Group. ShareAt their original grant dates, the AGF share options granted havehad an exercise price of at least 85% of the then prevailing market price on the day of grant.price. The original maximum term for the AGF share option plans granted iswas eight years.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) The fair value of thethese options at grant date is measuredwas calculated using a Cox-Rubinstein binomial tree option pricing model. Option valuation models require the input of subjective assumptions including the expected stock price volatility and the expectedlife of the options. Volatility was derived from observed historical market prices aligned with the expected life of the options. The expected life has been estimated to equal the term to maturity of the options. The following table provides theoriginal fair values at grant date fair value of the AGF share options and the assumptions used in calculating their fair value:them: | | | | | | 2006
| | 2005
| | 2004
| | 2006 | | 2005 | | Fair value | | € | | 24.87 | | 17.40 | | 14.38 | | € | 24.87 | | | € | 17.40 | | Assumptions: | | | | | | | | | | | | | Share price at grant date | | € | | 110.20 | | 77.95 | | 52.00 | | € | 110.20 | | | € | 77.95 | | Expected life (years) | | | | 5 | | 8 | | 8 | | | 5 | | | | 8 | | Risk free interest rate | | % | | 3.9 | | 2.7 | | 3.5 | | | 3.9 | % | | | 2.7 | % | Expected volatility | | % | | 28.0 | | 27.5 | | 30.0 | | | 28.0 | % | | | 27.5 | % | Dividend yield | | % | | 4.5 | | 4.0 | | 3.5 | | | 4.5 | % | | | 4.0 | % |
A summaryDue to the Liquidity Agreement which became effective on June 30, 2007, the parameters for the valuation of the number, weighted-average exercise price, weighted-average remaining contractual term and aggregate intrinsic valueAGF share option plans were changed.
The following table provides an overview about the underlying assumptions used for the valuation after taking into account the impact of the options outstanding and exercisable are as follows:Liquidity Agreement: | | | | | | | | | | | | | Number
| | | Weighted
average exercise price
| | Weighted
average
remaining
contractual term years
| | Aggregate
intrinsic value
| | | | | | | € | | | | € mn | Outstanding as of January 1, 2004 | | 5,972,401 | | | 43.79 | | | | | Granted | | 1,130,656 | | | 50.86 | | | | | Exercised | | (584,128 | ) | | 36.94 | | | | | Forfeited | | (11,952 | ) | | 23.05 | | | | | | | |
|
| |
| | | | | Outstanding as of December 31, 2004 | | 6,506,977 | | | 45.67 | | | | | Granted | | 1,398,000 | | | 78.24 | | | | | Exercised | | (2,131,928 | ) | | 46.47 | | | | | Forfeited | | (346,126 | ) | | 42.07 | | | | | | | |
|
| |
| | | | | Outstanding as of December 31, 2005 | | 5,426,923 | | | 53.97 | | | | | Granted | | 1,193,300 | | | 103.45 | | | | | Exercised | | (1,446,338 | ) | | 45.20 | | | | | Forfeited | | (5,175 | ) | | 42.07 | | | | | | | |
|
| |
| | | | | Outstanding as of December 31, 2006 | | 5,168,710 | | | 67.86 | | 5.9 | | 260 | | | |
|
| |
| |
| |
| Exercisable as of December 31, 2006 | | 3,975,410 | | | 57.18 | | 5.3 | | 242 | | | |
|
| |
| |
| |
|
| | | | | | | | | | | | 2006 | | | 2005 | | Fair value | | € | 48.38 | | | € | 64.73 | | Assumptions: | | | | | | | | | Share price at modification date | | € | 172.95 | | | € | 172.95 | | Expected life (years) | | | 6 | | | | 5 | | Risk free interest rate | | | 4.5 | % | | | 4.5 | % | Expected volatility | | | 28.0 | % | | | 30.0 | % | Dividend yield | | | 3.2 | % | | | 3.1 | % |
During the year ended December 31, 2006,2008, the Allianz Group recognized total intrinsic value of share options exercised was €77 mn (2005: €50 mn; 2004: €9 mn). During the year ended December 31, 2006, the AGF Group recorded compensation expenseexpenses related to the modified AGF share optionsoption plans of €30€(33) mn (2005: €14 mn; 2004: €16(2007: €15 mn).During the year ended December 31, 2006, the Allianz Group did not recognize a deferred tax benefit related to the share options as the share compensation expense is not tax deductible in France.. As of December 31, 2006, the total compensation expense not yet recognized related to Notes to2008, the Allianz Group’s Consolidated Financial Statements—(Continued)Group recorded a liability for the AGF plans of €11 mn (2007: €46 mn).
theRAS Group Allianz SE share options was €22 mn (2005: €5 mn). The total compensation expense not yet recognized related to the share options is expected to be recognized over a weighted-average period of 1 year.
option plan (modified RAS Group share option plan 2005) The RAS Group awarded eligible members of senior management with share purchase options on RAS ordinary shares. The share options had a vesting period of 18 months to 2 years and a term of 6.5 to 7 years. The share options allow for exercise at any time after the vesting period and before expiration, provided that: on the date of exercise, the RAS share price is at least 20% higher than the average share price in January of the grant year (for share options granted during the year ended December 31, 2001, the hurdle is 10%), and the performance of the RAS share in the year of grant exceeds the Milan Insurance Index in the same year. The fair value of the options at grant date was measured using a trinomial tree option pricing model. Option valuation models require the input of subjective assumptions including the expected stock price, volatility and the expected life of the options. Volatility was derived from observed historical market prices aligned with the expected life of the options. The expected life was estimated to be equal to the term to maturity of the options. The following table provides the grant date fair value and the assumptions used in calculating their fair value: | | | | | | | | | | | | 2005
| | 2004
| Fair value | | € | | 1.91 | | 1.51 | Assumptions: | | | | | | | Share price | | € | | 17.32 | | 14.56 | Expected life (years) | | | | 7 | | 7 | Risk free interest rate | | % | | 3.4 | | 3.3 | Expected volatility | | % | | 18.0 | | 17.0 | Dividend yield | | % | | 7.1 | | 6.8 |
| | | | | | | 2005 | | Fair value | | € | 1.91 | | Assumptions: | | | | | Share price at grant date | | € | 17.32 | | Expected life (years) | | | 7 | | Risk free interest rate | | | 3.4 | % | Expected volatility | | | 18.0 | % | Dividend yield | | | 7.1 | % |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) A summary of the number and weighted-averageweighted average exercise price of the options outstanding and exercisable are as follows: | | | | Number
| | Weighted
average exercise price
| | Number of
options | | Weighted
average
exercise
price | | | | | € | | | € | Outstanding as of January 1, 2005 | | 2,261,000 | | | 13.55 | | 2,261,000 | | | 13.55 | Granted | | 1,200,000 | | | 17.09 | | 1,200,000 | | | 17.09 | Exercised | | (2,041,000 | ) | | 13.47 | | (2,041,000 | ) | | 13.47 | Forfeited | | (467,000 | ) | | 15.78 | | (467,000 | ) | | 15.78 | | | |
|
| |
| | | | | | Outstanding RAS share options as of December 31, 2005 | | 953,000 | | | 17.09 | | 953,000 | | | 17.09 | Modification | | (953,000 | ) | | 17.09 | | (953,000 | ) | | 17.09 | | | | | | | | Outstanding as of December 31, 2006 | | — | | | — | | — | | | — | | | |
|
| |
| | | | | | Exercisable as of December 31, 2006 | | — | | | — | | — | | | — | | | |
|
| |
| | | | | |
On the effective date of the merger between Allianz SE and RAS, the RAS share option plan was modified. The outstanding share options, which were granted in 2005, on the date of the merger were replaced with Allianz SE share options on the basis of 1 Allianz SE option for every 5.55.501 RAS share options outstanding. The outstanding RAS Group options of 953,000 were replaced by 173,241 Allianz SE options. The Allianz SE share options have the same servicevesting period of 2 years; however, the market conditions noted above were replaced with a performance condition, which was already achieved on the date of the modification. During the year ended December 31, 2006, the Allianz Group recorded compensation expense of €1 mn (2005: €1 mn; 2004: €3 mn) related to these share options. During the year ended December 31, 2006, the Allianz Group did not recognize a deferred tax benefit related to the share options as the expenses are not tax deductible in Italy. After modification the valuation model for the RAS Group Allianz SE share option plan The fair value of remain unchanged. Nevertheless the options at grant date was measured using a trinomial tree option pricing model. Option valuation models require the input of subjectiveunderlying assumptions including the expected stock price volatility and the expected life of the options. Volatility was derived from observed historical market prices aligned with the expected life of the options. The expected life was estimatedhad to be equal the term to maturity of the options.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
adjusted. The following table provides the grant date fair value and the assumptions used in calculating their fair value: | | | | | | | | 2006 | | 2006
| Fair value | | € | 66.35 | 66.35 | Assumptions: | | | | | Share price on modification date | | € | 145.41 | 145.41 | Expected life (years) | | | 5 | 5 | Risk free interest rate | | % | | 3.9 | % | Expected volatility | | % | 30.5 | 30. 5% | Dividend yield | | % | | 1.5 | % |
A summary of the number weighted-averageand weighted average exercise price weighted-average remaining contractual term and aggregate intrinsic value of the options outstanding and exercisable are as follows: | | | | | | | | | | | | Number
| | Weighted
average exercise price
| | Weighted
average
remaining contractual term years
| | Aggregate
intrinsic value
| | | | | | € | | | | € mn | Outstanding as of January 1, 2006 | | — | | — | | | | | Granted | | 173,241 | | 93.99 | | | | | Outstanding as of December 31, 2006 | | 173,241 | | 93.99 | | 5 | | 11 | | | |
| |
| |
| |
| Exercisable as of December 31, 2006 | | — | | — | | — | | — | | | |
| |
| |
| |
|
| | | | | | | | | | | | | | | | | | 2008 | | 2007 | | 2006 | | | | Number
of
options | | | Weighted
average
exercise
price | | Number
of
options | | | Weighted
average
exercise
price | | Number
of
options | | Weighted
average
exercise
price | | | | | | | € | | | | | € | | | | € | Outstanding as of January 1, | | 131,249 | | | 80.74 | | 173,241 | | | 93.99 | | — | | — | Granted | | — | | | — | | — | | | — | | 173,241 | | 93.99 | Exercised | | (13,424 | ) | | 48.96 | | — | | | — | | — | | — | Forfeited | | — | | | — | | (41,992 | ) | | 84.74 | | — | | — | | | | | | | | | | | | | | | | Outstanding as of December 31, | | 117,825 | | | 48.96 | | 131,249 | | | 80.74 | | 173,241 | | 93.99 | | | | | | | | | | | | | | | | Exercisable as of December 31, | | 117,825 | | | 48.96 | | — | | | — | | — | | — | | | | | | | | | | | | | | | |
The aggregate intrinsic value of share options outstanding was €6 mn for the year ended December 31, 2008 (2007: €11 mn). The options outstanding as of December 31, 2008 have an exercise price of €48.96 and a weighted average remaining contractual life of 3 years.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) The shares settled by delivery of Allianz SE shares are accounted for as equity settled plans by the RAS Group. Therefore, the RAS Group measures the total compensation expense to be recognized for the equity settled shares based upon their fair value as of the grant date. The total compensation expense is recognized over the vesting period. During the year ended December 31, 2006,2008, the Allianz Group recorded compensation expense of €— mn (2007: €4 mn; 2006: €6 mnmn) related to these share options. During the year ended December 31, 2006, the Allianz Group did not recognize a deferred tax benefit related to the share options as the expenses are not tax deductible. As of December 31, 2006, the total compensation expense not yet recognized related to the share options was €4 mn. The total compensation expense not yet recognized related to the share options is expected to be recognized over a weighted-average period of 1 year. ShareEmployee Stock purchase plans
The Allianz Group offers Allianz SE shares in 22 countries to qualified employees at favorable conditions. The shares have a minimum holding period of one year1 to five5 years. During the year ended December 31, 2006,2008, the number of shares sold to employees under these plans was 929,509 (2005: 1,144,196; 2004: 1,051,191)721,830 (2007: 939,303; 2006: 929,509). During the year ended December 31,2006,31, 2008, the Allianz Group recognized compensation expense, the difference between the market price (lowest quoted price of the Allianz SE stock at the official market in Germany on October 10, 2008) and the offerdiscounted price of the shares purchased by employees, of €25€10 mn (2005: €24(2007: €30 mn; 2004: €182006: €25 mn). In addition, during the year ended December 31, 2006, the AGF Group offered AGF shares to qualified employees in France at favorable conditions. The shares have a minimum holding period of five years. During the year ended December 31, 2006 the number of shares sold to employees under this plan was 651,012 (2005: -; 2004: 787,685).651,012. During the year ended December 31, 2006 the compensation expense recorded was €12 mn (2005: €- mn; 2004: €8 mn).mn. Due to the Tender Offer all AGF shares were purchased by Allianz SE. Other share option and shareholding plans The Allianz Group has other local share-based compensation plans, including share option and employee share purchase plans, none of which, individually or in the aggregate, are material to the Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
consolidated financial statements. During the year ended December 31, 2006,2008, the total expense, in the aggregate, recorded for these plans was €3€2 mn (2005: €4(2007: €7 mn; 2004: €32006: €6 mn). 49 Restructuring plans As of December 31, 2006,2008, the Allianz Group has provisions for restructuring resulting from anumbera number of restructuring programs in various segments. These provisions for restructuring primarily include personnel costs, which result from severance payments for employee terminations, and contract termination costs, including those relating to the termination of lease contracts that will arise in connection with the implementation of the respective initiatives. Changes in the provisions for restructuring were:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2006
| | | 2005
| | | 2004
| | | | | Allianz Deutsch- land AG
| | | Dresdner Bank
Group
| | | Other
| | | Total
| | | Dresdner Bank Group
| | | Other
| | | Total
| | | Dresdner Bank Group
| | | Other
| | | Total
| | | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | As of January 1, | | — | | | 90 | | | 96 | | | 186 | | | 670 | | | 69 | | | 739 | | | 815 | | | 30 | | | 845 | | New provisions | | 526 | | | 328 | | | 41 | | | 895 | | | 22 | | | 86 | | | 108 | | | 132 | | | 57 | | | 189 | | Additions to existing provisions | | — | | | 9 | | | 1 | | | 10 | | | 29 | | | 3 | | | 32 | | | 143 | | | 1 | | | 144 | | Release of provisions recognized in previous years | | — | | | (15 | ) | | (5 | ) | | (20 | ) | | (48 | ) | | (2 | ) | | (50 | ) | | (62 | ) | | (11 | ) | | (73 | ) | Release of provisions via payments | | (2 | ) | | (13 | ) | | (83 | ) | | (98 | ) | | (288 | ) | | (68 | ) | | (356 | ) | | (274 | ) | | (8 | ) | | (282 | ) | Release of provisions via transfers | | (69 | ) | | (20 | ) | | — | | | (89 | ) | | (294 | ) | | — | | | (294 | ) | | — | | | — | | | — | | Changes in the consolidated subsidiaries of the Allianz Group | | — | | | — | | | 4 | | | 4 | | | — | | | — | | | — | | | (55 | ) | | — | | | (55 | ) | Foreign currency translation adjustments | | — | | | — | | | (1 | ) | | (1 | ) | | 12 | | | — | | | 12 | | | (6 | ) | | — | | | (6 | ) | Other | | — | | | — | | | — | | | — | | | (13 | ) | | 8 | | | (5 | ) | | (23 | ) | | — | | | (23 | ) | As of December 31, | | 455 | | | 379 | | | 53 | | | 887 | | | 90 | | | 96 | | | 186 | | | 670 | | | 69 | | | 739 | |
Allianz Deutschland AG’s provisions for restructuring
During the year ended December 31, 2006, Allianz Deutschland AG announced a restructuring plan for the insurance business in Germany, which is expected to continue through 2008. The objective of the restructuring program is to make the insurance business more customer focused, operate more efficiently and achieve growth.
The insurance business in Germany was formally reorganized in 2005 with the integration of the three companies, Allianz Versicherungs-AG, Allianz Lebensversicherungs-AG and Allianz Private Krankenversicherungs-AG under the newly foundedAllianz Deutschland AG. As part of the restructuring, the business and distribution structure has been changed and activities of central staff functions have been transferred to Allianz Deutschland AG.
The restructuring activities of Allianz Deutschland AG will result in the creation of a new business model. Administrative locations within Germany will be reduced from 21 to 12. In all locations a common IT-architecture will be introduced and the office work will be divided into customer service and counselling specialists. Teams in customer service will process all routine requests that can be handled through standardized procedures whereas the counselling specialists will deal with all non-routine cases.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) During the year ended December 31, 2006, Allianz Deutschland AG recorded restructuring charges of €526 mn. The reduction of staff within this program shall occur in consent with the employees. The plan includes a reduction of approximately 5.700 positions. Approximately 1,555 full time equivalent positions have already been terminated, a large majority of which are related to natural employee turnover and early retirement agreements (Altersteilzeit) that were agreed upon before the restructuring provision was recorded and are not part of the restructuring provision.
| | | | | 2006
| | | € mn | New provisions
| | 526 | Additions to existing provisions
| | — | Release of provisions recognized in previous years
| | — | Restructuring charges directly reflected in the consolidate income statement
| | — | Total restructuring charges during the year ended December 31, 2006
| | 526 | Total restructuring charges incurred to date
| | 526 |
Dresdner Bank Group’s provisions for restructuring
Dresdner Bank Group supplemented its existing restructuring programs introduced since 2000 with the program ‘New Dresdner Plus’. For these combined initiatives, Dresdner Bank Group has announced plans to eliminate an aggregate of approximately 19,500 positions. As of December 31, 2006, an aggregate of approximately 16,350 positions had been eliminated and approximately 425 additional employees had contractually agreed to leave Dresdner Bank Group under these initiatives.
During the year ended December 31, 2006, Dresdner Bank Group recorded restructuring charges for all restructuring programs of €422 mn. This amount includes new provisions, additions to existing provisions, releases of provisions recognized in previous years, and restructuring charges as reflected in the consolidated income statement. Total restructuring charges expected to be incurred include an additional €40 mn of charges that are part of the restructuring program, but have not yet met the requirements for recording as a provision. A summary of the restructuring charges related toDresdner Bank Group that are reflected in the Allianz Group’s consolidated income statement for the year ended December 31, 2006, by restructuring program is as follows:
| | | | | | | | | | | | 2006
| | | | | New Dresdner
Plus
| | Former
Programs
| | | Total
| | | | | € mn | | € mn | | | € mn | | New provisions | | 328 | | — | | | 328 | | Additions to existing provisions | | — | | 9 | | | 9 | | Release of provisions recognized in previous years | | — | | (15 | ) | | (15 | ) | Restructuring charges directly reflected in the consolidated income statement | | 80 | | 20 | | | 100 | | Total restructuring charges during the year ended December 31, 2006 | | 408 | | 14 | | | 422 | | Total restructuring charges incurred to date | | 408 | | 2,007 | | | 2,415 | |
A summary of the existing provisions for restructuring related to the Dresdner Bank Group is as follows:
New Dresdner Plus
During the year ended December 31, 2006, Dresdner Bank Group recorded restructuring charges of €408 mn for the announced restructuring initiative ‘New Dresdner Plus’, which isin addition to the “Former Programs” that include the measures “2005 Measures”, “2004 Measures”, “New Dresdner” and “Other programs”.
The newly created division Private & Corporate Clients (“PCC”) comprises the two areas “Clients & Products” and “Advisory & Sales”. Whereas the “Advisory & Sales” unit consolidates all sales related activities of the former units “Personal Banking”, “Private & Business Banking” and “Corporate Banking”, the “Clients & Products” unit concentrates on product-related activities to implement an integrated platform for products and clients. At the
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
same time the process flow within the branch network will be further automated, and the credit processes will be optimised by aligned workflows as well as further standardisation. Furthermore, a new client advisory concept will be implemented in order to transfer the existing advisory profiles to the requirements of the new client groups.
Our client support for multinational corporations and large clients, which have the greatest potential for capital markets products, will be integrated with Dresdner Kleinwort in the new Investment Banking Division (“IB”). In addition the client coverage follows a sectoral advisory approach with industry specific expertise. Thereby administrative activities will be reduced and concurrent functions will be eliminated. Furthermore, the trading of flow products will be consolidated and the equity business will be optimised in line with the new business model.
The organisational structure and the processes of the segment Business Services with its back-office functions Banking Services, IT and Human Recourses follow the new business model. In particular Banking Services is focused on establishing a consistent industrialization of itsrespective back office processes. Also the Corporate Function units will align their processes to the new business model.
Through the program “New Dresdner Plus”, Dresdner Bank Group plans to eliminate 2,480 positions. Approximately 85 employees had been terminated and approximately 170 additional employees had contractually agreed to leave Dresdner Bank Group pursuant to program “New Dresdner Plus” as of December 31, 2006.
Former programs
During the year ended December 31, 2006, Dresdner Bank Group recorded restructuring charges of €14 mn for previously announced restructuring initiatives. Of this total, €11 mn relates to the “New Dresdner” program. Through these “Former Programs”, Dresdner Bank Group plans to eliminate approximately 17,020 positions. Approximately 16,265 employees had been terminated and approximately 255 additional employees had contractually agreed to leave Dresdner Bank Group pursuant to the “Former Programs” as of December 31, 2006.
A summary of the changesChanges in the provisions for restructuring of the Dresdner Bank Group’s during the year ended December 31, 2006 is:were:
| | | | | | | | | | | | | | | | | | | | | | Provisions
as of
January 1, 2006
| | Provisions recorded during 2006
| | Release of
provisions
via
transfers
| | Foreign
currency
translation
adjustments
| | Other
| | Provisions
as of December 31,
2006
| | | | New
provisions
| | Additions
to existing
provisions
| | Release of
provisions
recognized
in previous
years
| | Release of
provisions
via cash
payments
| | | | | | | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | New Dresdner Plus | | | | | | | | | | | | | | | | | | | Personnel costs | | — | | 299 | | — | | — | | — | | — | | — | | — | | 299 | Contract termination costs | | — | | 27 | | — | | — | | — | | — | | — | | — | | 27 | Other | | — | | 2 | | — | | — | | — | | — | | — | | — | | 2 | Subtotal | | — | | 328 | | — | | — | | — | | — | | — | | — | | 328 | Former Programs | | | | | | | | | | | | | | | | | | | Personnel costs | | 86 | | — | | 3 | | (14) | | (11) | | (20) | | — | | — | | 44 | Contract termination costs | | 3 | | — | | — | | — | | (1) | | — | | — | | — | | 2 | Other | | 1 | | — | | 6 | | (1) | | (1) | | — | | — | | — | | 5 | Subtotal | | 90 | | — | | 9 | | (15) | | (13) | | (20) | | — | | — | | 51 | Total | | 90 | | 328 | | 9 | | (15) | | (13) | | (20) | | — | | — | | 379 |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
| | | | | | | | | | | | | | | | | | | Allianz
Deutschland
AG | | | Dresdner
Bank
Group | | | AGF
Group | | | Other | | | Total | | | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | As of January 1, 2006 | | — | | | 90 | | | — | | | 96 | | | 186 | | New provisions | | 526 | | | 328 | | | — | | | 41 | | | 895 | | Additions to existing provisions | | — | | | 9 | | | — | | | 1 | | | 10 | | Release of provisions recognized in previous years | | — | | | (15 | ) | | — | | | (5 | ) | | (20 | ) | Release of provisions via payments | | (2 | ) | | (13 | ) | | — | | | (83 | ) | | (98 | ) | Release of provisions via transfers | | (69 | ) | | (20 | ) | | — | | | — | | | (89 | ) | Changes in the consolidated subsidiaries of the Allianz Group | | — | | | — | | | — | | | 4 | | | 4 | | Foreign currency translation adjustments | | — | | | — | | | — | | | (1 | ) | | (1 | ) | | | | | | | | | | | | | | | | | As of December 31, 2006 | | 455 | | | 379 | | | — | | | 53 | | | 887 | | | | | | | | | | | | | | | | | | As of January 1, 2007 | | 455 | | | 379 | | | — | | | 53 | | | 887 | | New provisions | | — | | | 8 | | | — | | | 145 | | | 153 | | Additions to existing provisions | | 22 | | | 19 | | | — | | | 4 | | | 45 | | Release of provisions recognized in previous years | | (65 | ) | | (29 | ) | | — | | | (1 | ) | | (95 | ) | Release of provisions via payments | | (27 | ) | | (65 | ) | | — | | | (52 | ) | | (144 | ) | Release of provisions via transfers | | (159 | ) | | (140 | ) | | — | | | — | | | (299 | ) | Foreign currency translation adjustments | | — | | | (6 | ) | | — | | | — | | | (6 | ) | | | | | | | | | | | | | | | | | As of December 31, 2007 | | 226 | | | 166 | | | — | | | 149 | | | 541 | | | | | | | | | | | | | | | | | | As of January 1, 2008 | | 226 | | | 166 | | | — | | | 149 | | | 541 | | New provisions | | — | | | — | | | 77 | | | 31 | | | 108 | | Additions to existing provisions | | 3 | | | — | | | — | | | 16 | | | 19 | | Release of provisions recognized in previous years | | (10 | ) | | — | | | — | | | (1 | ) | | (11 | ) | Release of provisions via payments | | (10 | ) | | — | | | (2 | ) | | (70 | ) | | (82 | ) | Release of provisions via transfers | | (61 | ) | | — | | | — | | | (5 | ) | | (66 | ) | Reclassification to liabilities of disposal groups classified as held-for-sale | | — | | | (166 | ) | | — | | | — | | | (166 | ) | | | | | | | | | | | | | | | | | As of December 31, 2008 | | 148 | | | — | | | 75 | | | 120 | | | 343 | | | | | | | | | | | | | | | | | |
The development of the restructuring provisions reflects the implementation status of the restructuring initiatives. Based on the specific IFRS guidance, restructuring provisions are recognized earlier thanprior to when they would qualify to be recognized if they were recorded under the guidance for other types of provisions. In order to reflect the timely implementation of the various restructuring initiatives, restructuring provisions, as far as they are already ‘locked in’“locked in”, have been transferred to the provision type, which would have been used if there had not beenhaving a restructuring initiative in place. This applies for each single contract. For personnel costs, at the time an employee has contractually agreed to leave Dresdner BankAllianz Group by signing either an early retirement, a partial retirement (Altersteilzeit, which is a specific type of an early retirement program in Germany), or a termination arrangement the respective part of the restructuring provision has been transferred to provisions for employee expenses. In addition, provisions for vacant office spaces that result from restructuring initiatives have been transferred to ‘other’“other” provisions after the offices have been completely vacated. Allianz Deutschland AG´s provisions for restructuring In 2006, Allianz Deutschland AG announced a restructuring plan for the insurance business in Germany, that is expected to be completed in 2008. In the course of the fiscal year 2008 the restructuring plan has been extended for another year up to 2009.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) The objective of the restructuring program is to make the insurance business more customer focused, operate more efficiently and achieve growth. During the year ended December 31, 2008, Allianz Deutschland AG recorded restructuring charges of €(9) mn (2007: €(16) mn). This amount includes additions to existing provisions, release of provisions recognized in previous years, and restructuring charges as reflected in the consolidated income statement. The reduction of staff within this context, Dresdner Bank Groupprogram shall occur in consent with the employees. The plan includes a reduction of approximately 5,345 positions. Approximately 4,695 full time equivalent positions have already been terminated, a part of which are related to natural employee turnover and early retirement agreements (Altersteilzeit) that were agreed upon before the restructuring provision was recorded and are not part of the restructuring provision. | | | | | | 2008 | | | | € mn | | New provisions | | — | | Additions to existing provisions | | 3 | | Release of provisions recognized in previous years | | (10 | ) | Restructuring charges directly reflected in the consolidated income statement | | (2 | ) | | | | | Total restructuring charges during the year ended December 31, 2008 | | (9 | ) | | | | | Total restructuring charges incurred to date | | 501 | |
A summary of the changes in the provisions for restructuring of the Allianz Deutschland AG during the year ended December 31, 2008 is: | | | | | | | | | | | | | | | | | | | | | | | | | Provisions
as of
January 1,
2008 | | Provisions recorded during 2008 | | | Release of
provisions
via
transfer | | | Foreign
currency
translation
adjustments | | Other | | Provisions
as of
December 31,
2008 | | | | | New
provisions | | Additions
to existing
provisions | | Release of
provisions
recognized
in previous
years | | | Release of
provisions
via cash
payments | | | | | | | | | € mn | | € mn | | € mn | | € mn | | | € mn | | | € mn | | | € mn | | € mn | | € mn | Program 2006 | | | | | | | | | | | | | | | | | | | | | | Personnel costs | | 187 | | — | | 3 | | (10 | ) | | — | | | (61 | ) | | — | | — | | 119 | Contract termination costs | | 39 | | — | | — | | — | | | (10 | ) | | — | | | — | | — | | 29 | Other | | — | | — | | — | | — | | | — | | | — | | | — | | — | | — | | | | | | | | | | | | | | | | | | | | | | | Total | | 226 | | — | | 3 | | (10 | ) | | (10 | ) | | (61 | ) | | — | | — | | 148 | | | | | | | | | | | | | | | | | | | | | | |
Allianz Deutschland AG recorded releases of provisions via transfers to other provision categories of €20€61 mn as of December 31, 2006.2008 (2007: €159 mn). Assurance Générales de France (AGF Group)’s provisions for restructuring In 2008, the AGF Group announced a restructuring plan, so called “Comprehensive Adaptation Plan” (“Plan Global d’Adaptation”), for the insurance business in France which is expected to continue through 2011. The objectives of the restructuring program are to regain market shares and increase the quality of service, by increasing commercial staff and sales effectiveness, developing employees’ competencies, and implementing a comprehensive plan of competitiveness. The restructuring activities of the AGF Group will result in a reduction of locations within France from 14 to 10 and a relocation of workers and activities with critical team size purpose as well as a strong reduction of non-HR costs (especially IT, purchasing, facilities).
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Through the Comprehensive Adaptation Plan, the AGF Group plans to reduce the number of administrative jobs by 688 and increase the number of commercial employees by 506. The reduction of staff within this program includes measures for voluntary termination under restricted conditions and early retirement for the employees affected by the close-down of locations. During the year ended December 31, 2008, the AGF Group recorded restructuring charges of €81 mn as follows: | | | | | 2008 | | | € mn | New provisions | | 77 | Additions to existing provisions | | — | Release of provisions recognized in previous years | | — | Restructuring charges directly reflected in the consolidated income statement | | 4 | | | | Total restructuring charges during the year ended December 31, 2008 | | 81 | | | | Total restructuring charges incurred to date | | 81 |
A summary of the changes in the provisions for restructuring of the AGF Group during the year ended December 31, 2008 is: | | | | | | | | | | | | | | | | | | | | | | | Provisions
as of
January 1,
2008 | | Provisions recorded during 2008 | | | Release of
provisions
via
transfer | | Foreign
currency
translation
adjustments | | Other | | Provisions
as of
December 31,
2008 | | | | New
provisions | | Additions
to existing
provisions | | Release of
provisions
recognized
in previous
years | | Release of
provisions
via cash
payments | | | | | | | | | € mn | | € mn | | € mn | | € mn | | € mn | | | € mn | | € mn | | € mn | | € mn | Comprehensive Adaptation Plan | | | | | | | | | | | | | | | | | | | | Personnel costs | | — | | 76 | | — | | — | | (2 | ) | | — | | — | | — | | 74 | Contract termination costs | | — | | — | | — | | — | | — | | | — | | — | | — | | — | Other | | — | | 1 | | — | | — | | — | | | — | | — | | — | | 1 | | | | | | | | | | | | | | | | | | | | | Total | | — | | 77 | | — | | — | | (2 | ) | | — | | — | | — | | 75 | | | | | | | | | | | | | | | | | | | | |
Other restructuring plans For 2008, amongst others the following restructuring plans were reflected: Allianz S.p.A., Italy In 2007, the Boards of RAS, Lloyd Adriatico and AZ Subalpina announced a restructuring program for the integration of these three companies into Allianz S.p.A effective since October 1, 2007. The objective is to reorganize its strategic and commercial direction by aligning the underwriting strategies, refocusing some lines of business in the insurance business, as well as in the asset management segment, unifying all the support functions leveraging on best practices. Further some activities will be relocated within Italian sites whereas other operations will be integrated into one single organization. During the year ended December 31, 2008, Allianz S.p.A. together with its group companies recognized restructuring charges of €2 mn (2007: €73 mn). As of December 31, 2008 Allianz S.p.A. recorded a provision of €36 mn (2007: €52 mn).
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Allianz Shared Infrastructure Service SE (ASIC SE) During 2007, ASIC SE recorded a provision for restructuring. The reason for the restructuring program are outsourcing activities for the divisions Desktop, Network and Telecommunication Services of ASIC SE (former Allianz Shared Infrastructure Service GmbH), Munich. During the year ended December 31, 2008, ASIC SE recognized restructuring charges of €— mn (2007: €79 mn) in total. As of December 31, 2008 ASIC SE recorded a provision for restructuring of €15 mn (2007: €42 mn).
50 Earnings per share Basic earnings per share Basic earnings per share is computedare calculated by dividing net income (loss) by the weighted average number of common shares outstanding. Diluted earnings per share reflectsoutstanding for the effect of potentially dilutive securities. As of December 31, 2006, 1,175,554 (2005: 1,175,554) participation certificates issued by Allianz SE were outstanding which can potentially be converted to 1,469,443 (2005: 1,469,443) Allianz shares (on a weighted basis: 1,469,443 (2005: 1,469,443) Allianz SE shares) and therefore have a dilutive effect.period. The Allianz Group’s share compensation plans with potentially dilutive securities of 335,346 (2005: 493,229) are included in the calculation of diluted earnings per share for the year ended December 31, 2006.
Furthermore 4,868,560 (2005: 807,859) common shares from trading in derivatives on own shares have been included in the calculation of diluted earnings per share for the year ended December 31, 2006.
Reconciliation of basic and diluted earnings per share
| | | | | | | | | | | | | | 2006
| | | 2005
| | 2004
| | | | € mn | | | € mn | | € mn | Numerator for basic earnings per share (net income) | | | 7,021 | | | | 4,380 | | | 2,266 | Effect of dilutive securities | | | (3 | ) | | | — | | | 3 | | | |
|
|
| |
|
| |
|
| Numerator for diluted earnings per share (net income after assumed conversion) | | | 7,018 | | | | 4,380 | | | 2,269 | | | |
|
|
| |
|
| |
|
| Denominator for basic earnings per share (weighted-average shares) | | | 410,871,602 | | | | 389,756,350 | | | 365,930,584 | Dilutive securities: | | | | | | | | | | | Participation certificates | | | 1,469,443 | | | | 1,469,443 | | | 1,469,443 | Warrants | | | 737,847 | | | | 743,179 | | | — | Share-based compensation plans | | | 335,346 | | | | 493,229 | | | 729,596 | Derivatives on own shares | | | 4,868,560 | | | | 807,859 | | | — | Subtotal | | | 7,411,196 | | | | 3,513,710 | | | 2,199,039 | | | |
|
|
| |
|
| |
|
| Denominator for diluted earnings per share (weighted-average shares after assumed conversion) | | | 418,282,798 | | | | 393,270,060 | | | 368,129,623 | | | |
|
|
| |
|
| |
|
| Basic earnings per share | | | 17.09 | | | | 11.24 | | | 6.19 | Diluted earnings per share | | | 16.78 | | | | 11.14 | | | 6.16 | | | |
|
|
| |
|
| |
|
|
| | | | | | | | | | | 2008 | | | 2007 | | 2006 | | | | € mn | | | € mn | | € mn | Net income (loss) used to calculate basic earnings per share | | (2,444 | ) | | 7,966 | | 7,021 | from continuing operations | | 3,967 | | | 7,316 | | 6,640 | from discontinued operations | | (6,411 | ) | | 650 | | 381 | Weighted average number of common shares outstanding | | 450,161,145 | | | 442,544,977 | | 410,871,602 | Basic earnings per share (in €) | | (5.43 | ) | | 18.00 | | 17.09 | from continuing operations (in €) | | 8.81 | | | 16.53 | | 16.16 | from discontinued operations (in €) | | (14.24 | ) | | 1.47 | | 0.93 |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Diluted earnings per share Diluted earnings per share are calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period, both adjusted for the effects of potential dilutive common shares. Potential dilutive common shares arise from the assumed conversion of participation certificates issued by Allianz SE, warrants issued by Allianz SE and share-based compensation plans into Allianz shares, as well as from the conversion of derivatives on own shares. | | | | | | | | | | | | | 2008 | | | 2007 | | | 2006 | | | | | € mn | | | € mn | | | € mn | | Net income (loss) | | (2,444 | ) | | 7,966 | | | 7,021 | | Effect of potential dilutive common shares | | (49 | ) | | (4 | ) | | (3 | ) | | | | | | | | | | | Net income (loss) used to calculate diluted earnings per share | | (2,493 | ) | | 7,962 | | | 7,018 | | | | | | | | | | | | from continuing operations | | 3,918 | | | 7,312 | | | 6,637 | | from discontinued operations | | (6,411 | ) | | 650 | | | 381 | | Weighted average number of common shares outstanding | | 450,161,145 | | | 442,544,977 | | | 410,871,602 | | Potentially dilutive common shares resulting from assumed conversion of: | | | | | | | | | | Participation certificates | | 1,469,443 | | | 1,469,443 | | | 1,469,443 | | Warrants | | 36,338 | | | 962,547 | | | 737,847 | | Share-based compensation plans | | 3,226,670 | | | 1,321,100 | | | 335,346 | | Derivatives on own shares | | 1,139,945 | | | 3,265,298 | | | 4,868,560 | | Subtotal | | 5,872,396 | | | 7,018,388 | | | 7,411,196 | | | | | | | | | | | | Weighted average number of common shares outstanding after assumed conversion | | 456,033,541 | | | 449,563,365 | | | 418,282,798 | | | | | | | | | | | | Diluted earnings per share (in €) | | (5.47 | ) | | 17.71 | | | 16.78 | | from continuing operations (in €) | | 8.59 | | | 16.26 | | | 15.87 | | from discontinued operations (in €) | | (14.06 | ) | | 1.45 | | | 0.91 | |
During the year ended December 31, 2006,2008, the weighted average number of common shares does not include 730,391 (2005: 2,389,193; 2004: 18,915,201)2,004,155 (2007: 1,130,838; 2006: 730,391) treasury shares held by the Allianz Group. 51 Other Information Employee information | | | | | As of December 31, | | 2008 | | 2007 | Germany | | 71,267 | | 72,063 | Other countries | | 111,598 | | 109,144 | | | | | | Total1) | | 182,865 | | 181,207 | | | | | |
As of December 31, 2006, the Allianz Group employed a total of 166,505 people (2005: 177,625; 2004: 176,501). Of those people, 76,154 (2005: 72,195; 2004: 75,667) were employed in Germany and 90,351 (2005: 105,430; 2004: 100,834) abroad. During the year ended December 31, 2006, the number of employees undergoing training decreased by 68 to 3,955.
1) | Includes as of December 31, 2008, 27,597 employees of Dresdner Bank Group. |
The average total number of employees for the year ended December 31, 20062008 was 172,065181,549 people. Personnel expenses | | | | 2006
| | 2005
| | 2004
| | 2008 | | 2007 | | 2006 | | | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | Salaries and wages | | 10,230 | | 9,582 | | 9,277 | | 9,153 | | 9,741 | | 10,230 | Social security contributions and employee assistance | | 1,731 | | 1,628 | | 1,466 | | 1,298 | | 1,666 | | 1,731 | Expenses for pensions and other post-retirement benefits | | 1,005 | | 855 | | 806 | | 1,223 | | 1,028 | | 1,005 | | | |
| |
| |
| | | | | | | Total | | 12,966 | | 12,065 | | 11,549 | | 11,674 | | 12,435 | | 12,966 | | | |
| |
| |
| | | | | | |
In the table above are included the personnel expenses from the discontinued operations of Dresdner Bank, which amounted to 2,532 mn in 2008.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Issuance of the Declaration of Compliance with the German Corporate Governance Code according to clause 161 AktG On December 18, 2006,2008, the Board of Management and the Supervisory Board of Allianz SE issued the Declaration of Compliance according to clause 161 AktG and made it available on a permanent basis to the shareholders on the company’s website. The text of the Declaration of Compliance is also reproduced in the Corporate Governance section beginning on page 10 of this annual report. The Declaration of Compliance of the two publicly traded group companies Allianz Lebensversicherungs-Aktiengesellschaft andcompany Oldenburgische Landesbank AG werewas issued in December 2006, respectively,2008 and werewas made permanently available to the shareholders. Principal accountant fees and services For a summary of fees billed by the Allianz Group’s principal auditors, see page 109.176. The information provided there is considered part of these consolidated financial statements. Compensation for the Board of Management As of December 31, 2006,2008, the Board of Management had 11 (2005: 10)(2007: 11) members. Total compensation of the Board of Management for the year ended December 31, 20062008 amounts to €28.9€18.5 mn (2005: €20.4(2007: €26.5 mn). Furthermore 110,434 (2005: 222,125)120,707 (2007: 102,950) stock appreciation rights and 66,280 (127,207)58,580 (2007: 51,805) restricted stock units with a total fair value at grant date of €12.3€7.7 mn (2005: €16.8(2007: €12.3 mn) were granted to the Board of Management for the year ended December 31, 2006. 2008. Compensation to former members of the Board of Management and their beneficiaries totaled €4.3€7.0 mn (2005: €4.3(2007: €5.0 mn). Pension obligations to former members of the Board of Management and their beneficiaries are accrued in the amount of €47.0 mn (2005: €38.9(2007: €49.0 mn). Total compensation to the Supervisory Board amounts to €2.5€1.1 mn (2005: €2.6(2007: €1.6 mn). Board of Management and Supervisory Board compensation by individual is included in the Corporate Governance section of this Annual Report. The information provided there is considered part of these consolidated financial statements. Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
52 Subsequent events AcquisitionSale of minority interests in Assurances Générales de France and Allianz Lebensversicherungs-AktiengesellschaftDresdner Bank AG to Commerzbank AG
On January 18, 2007,August 31, 2008, Allianz SE announced its intentionand Commerzbank AG agreed on the sale of Dresdner Bank AG to acquireCommerzbank AG. The transaction agreement was adjusted on November 27, 2008, and January 9, 2009. For details on the outstandingtransaction agreement and financial effects please refer to Note 4 of the consolidated financial statements. The transaction was closed as scheduled on January 12, 2009. In exchange for Dresdner Bank AG, Allianz Group received a cash payment of €3.2 bn, 163.5 mn shares of Commerzbank AG accounted for as available-for-sale equity investments, and cominvest which will be first consolidated in Assurances Générales de France (or “AGF”, and together with its subsidiaries, the “AGF Group”) that it did not already own.first quarter of 2009. In addition, Commerzbank AG and Allianz AZL Vermögensverwaltung GmbH & Co. KG,Group entered into a subsidiarylong-term distribution agreement. According to IFRS 5, OCI components of Allianz Deutschland AG (or “ADAG”), Allianz SE’s wholly-owned German insurance holding company, announced its intention to acquire€(0.4) bn were realized with completion of the approximately 9% interest in Allianz Lebensversicherungs-Aktiengesellschaft (or “Allianz Leben”) that it does not already own.entire transaction. On February 28, 2007, Allianz AZL Vermögensverwaltung GmbH & Co. KG launched a tender offerSubsequent to the minority shareholders of Allianz Leben. The deadline for acceptance of the offer elapsed on March 29, 2007. Thesale, Allianz Group increased its ownership interest from the 91.03% interest already indirectly held by ADAG and Allianz SE, by 1.55% to a total of 92.58% of the share capital. Allianz Group’s interest therefore stays below the 95% level requiredrepurchased Colleraterized Debt Obligations (CDOs) for a squeeze-outconsideration of the remaining minority shareholders pursuantabout €1.1 bn from Dresdner Bank AG. Furthermore, Allianz will provide a silent participation of €750 mn in Dresdner Bank AG. The terms are identical to the German Stock Corporation Act.
On April 27, 2007 the French stock market authority Autorité des Marchés Financiers(“AMF”) announced, that following the closing of the tender offer for the outstanding shares of AGF, Allianz SE (directly and indirectly through its subsidiary AZ Holding France SAS) would hold 92.18% of AGF share capital and voting rights. Taking into account treasury shares held by AGF representing 3.21% of the share capital, minority shareholders hold 4.61% of the AGF share capital and voting rights following the tender offer. The Allianz Group is proceeding with a mandatory squeeze-out procedure pursuant to the conditions set forthSoFFin’s silent participation in the General Regulations of the AMF.
Further details are provided on page 141 of this annual report on Form 20-F.
Early partial redemption of BITES exchangeable bond
On January 29, 2007, the Allianz Group announced its intention to make an early redemption of 64.35% of the BITES bond issued in February 2005 with shares of Munich Re. The number of Munich Re shares used to redeem the bond was based on the averages of the DAX index and the Munich Re share price during a 20-day reference period which started on February 1, 2007 and ended on February 28, 2007. The delivery of the Munich Re shares took place on March 9, 2007.
This partial redemption means that each outstanding BITES bond was reduced to 35.65% of the original principal value. The number of outstanding bonds remained unchanged.
As a result of the partial redemption of this exchangeable bond, the Allianz Group’s shareholding in Munich Re was reduced from approximately 9.4% to approximately 4.9%.Commerzbank AG.
Net claims from the “Kyrill” winter stormstorms “Klaus” and “Quinten” in Southwest Europe and the bushfires in Australia The Allianz Group recorded net claims arising from the “Kyrill” winter storm in Europe in January 2007Until end of approximately €340 mn.
Disposal of subsidiaries of Kommanditgesellschaft Allgemeine Leasing GmbH & Co. (“KGAL”)
Kommanditgesellschaft Allgemeine Leasing GmbH & Co. (or “KGAL”) of which Allianz Group holds a 45% share, in mid January 2007 disposed of its shareholding in ASL Auto Service-Leasing GmbH and in Disko Group. The impact of the disposalFebruary 2009 several natural catastrophes took place. Based on the results of operations of KGAL were reflected in the first quarter 2007 results of Allianz Group.
Integration of the Allianz Group’s business operations in Italy
On February 1, 2007, the Boards of Directors of RAS S.p.A., Lloyd Adriatico S.p.A. and Allianz Subalpina S.p.A. announced their intention to integrate the Allianz Group’s business operations in Italy. On March 19, 2007, the Boards of Directors approved the integration plan for Allianz Group
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
operations in Italy. The integration will be achieved through the creation of a single company, Allianz S.p.A., that will operate on the market with three different brands (“Allianz RAS”, “Allianz Lloyd Adriatico” and “Allianz Subalpina”) and three separate distribution networks.
The completion of the company integration process is expected by fall 2007, depending on both the approval at shareholders’ meetings and clearance by regulatory authorities.
Sale of shares in BMW AG
On February 7, 2007, as a part of its active portfolio management, Allianz SE sold approximately 16.1 million ordinary shares in BMW AG. The shares were placed with institutional investors. The sale resulted in proceeds of approximately €736 mn.
Acquisition of majority in ROSNO
On February 21, 2006, Allianz SE acquired approximately 49.2% of the shares in ROSNO from Sistema. Together with its own stake of approximately 47.7%, Allianz SE holds now approximately 97.0% in ROSNO, one of the top four insurance companies in Russia that is active in the property/casualty, life/health and asset management business.
Acquisition of 50% in Sdu Group
On March 22, 2007, subsidiaries ofcurrent information the Allianz Group together acquired 50%expected net claims to an amount of Sdu Group from the Dutch State. The proportionate investment volume amounted to approximately €208 mn.€236 mn before taxes:
Additional purchase of PIMCO Class B Units
On March 31, 2007, the Allianz Group purchased 15,998 PIMCO Class B Units. The acquisition cost was €313 million.
Floating rate bond
Allianz Finance II B.V., a wholly owned subsidiary of the Allianz Group, issued a two year floating rate bond with a nominal value of USD 400 million and value date April 2, 2009.
Acquisition of Selecta AG
On May 12, 2007, a subsidiary of the Allianz Group has entered into an agreement to acquire 100% of Selecta AG on behalf of various Allianz Group subsidiaries. The investment volume amounts to approximately GBP 772 million. The acquisition is expected to be completed by the beginning of July 2007.
Acquisition of Russian insurer Progress-Garant
On May 21, 2007, the Allianz Group acquired 100% of the Russian insurer Progress-Garant from the management of the company. Progress-Garant is activeStorm “Klaus” in the property-casualty insurance businessSouthwest of France and parts of Spain (€163 mn)
Winterstorm “Quinten” in Russia and ranks among the top 20 Russian insurers, based on gross premiums writtenFrance (€32 mn) Bushfires in 2006.Australia (€41 mn). Sale of equity investment in Hana Financial Group Inc.
On June 11, 2007, we sold Allianz Group’s 4,7% equity investment in Hana Financial Group Inc., Korea, through an accelerated offering for proceeds of approximately €370 million.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) 53 Summary of significant differences between the accounting principles used in the preparation of the consolidated financial statementsSelected subsidiaries and accounting principles generally accepted in the United States of Americaother holdings The consolidated financial statements of the Allianz Group are presented in accordance with IFRS. IFRS differs in certain respects from US GAAP. The following table represents the reconciliation of the Allianz Group’s net income and shareholders’ equity between IFRS and US GAAP:
| | | | | | Operating Subsidiaries | | Equity | | % owned1) | | | | | € mn | | | | Germany | | | | | |  Allianz Capital Partners GmbH, Munich
| | 0.03 | | 100.0 | | Allianz Capital Partners Verwaltungs GmbH, Munich | | 632 | | 100.0 | | Allianz Climate Solutions GmbH, Munich | | 0.04 | | 100.0 | |  Allianz Dresdner Bauspar AG, Bad Vilbel2)
| | 99 | | 100.0 | |  Allianz Global Corporate & Specialty AG, Munich
| | 778 | | 100.0 | |  Allianz Global Investors Advisory GmbH, Frankfurt/Main
| | 3 | | 100.0 | | Allianz Global Investors AG, Munich | | 2,401 | | 100.0 | |  Allianz Global Investors Europe GmbH, Munich
| | 17 | | 100.0 | |  Allianz Global Investors Kapitalanlagegesellschaft mbH, Frankfurt/Main
| | 146 | | 100.0 | | Allianz Global Investors Product Solutions GmbH, Munich | | 0.1 | | 100.0 | |  Allianz Lebensversicherungs-Aktiengesellschaft, Stuttgart
| | 1,456 | | 100.0 | |  Allianz Pension Partners GmbH, Munich
| | 0.5 | | 100.0 | |  Allianz Pensionskasse Aktiengesellschaft, Munich
| | 182 | | 100.0 | |  Allianz Private Equity Partners GmbH, Munich
| | 0.04 | | 100.0 | |  Allianz Private Krankenversicherungs-Aktiengesellschaft, Munich
| | 360 | | 100.0 | | Allianz ProzessFinanz GmbH, Munich | | 0.4 | | 100.0 | | Allianz Real Estate Germany GmbH, Stuttgart | | 5 | | 100.0 | | Allianz Shared Infrastructure Services SE, Munich | | 111 | | 100.0 | | Allianz Treuhand GmbH, Munich | | 0.01 | | 100.0 | |  Allianz Versicherungs-Aktiengesellschaft, Munich
| | 2,566 | | 100.0 | | AZT Automotive GmbH, Ismaning | | 0.2 | | 100.0 | | Deutsche Lebensversicherungs-Aktiengesellschaft, Berlin | | 56 | | 100.0 | |  Dresdner Bank Aktiengesellschaft, Frankfurt/Main2)
| | 2,496 | | 100.0 | | Euler Hermes Kreditversicherungs-AG, Hamburg | | 220 | | 100.0 | | manroland AG, Offenbach | | 332 | | 100.0 | 3) | Münchener und Magdeburger Agraversicherung Aktiengesellschaft, Munich | | 7 | | 62.5 | | Oldenburgische Landesbank Aktiengesellschaft, Oldenburg | | 502 | | 89.6 | | Reuschel & Co. Kommanditgesellschaft, Munich2) | | 140 | | 97.5 | | risklab germany GmbH, Munich | | 0.03 | | 100.0 | |  Vereinte Spezial Krankenversicherung Aktiengesellschaft, Munich
| | 4 | | 100.0 | | Vereinte Spezial Versicherung AG, Munich | | 45 | | 100.0 | |
| | | | | | | | | | | | | | | | | | | Net Income
| | | Shareholders’
Equity(1)
| | | | | For the years ended
December 31,
| | | As of
December 31,
| | | | | 2006
| | | 2005
| | | 2004
| | | 2006
| | | 2005
| | | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | Amounts determined in accordance with IFRS | | 7,021 | | | 4,380 | | | 2,266 | | | 50,481 | | | 39,487 | | Adjustments in respect to: | | | | | | | | | | | | | | | | (a) Goodwill and intangible assets | | (314 | ) | | (265 | ) | | 815 | | | 6,426 | | | 4,924 | | (b) Employee benefit plans | | (22 | ) | | (63 | ) | | (22 | ) | | (2,537 | ) | | (2,402 | ) | (c) Investments | | (1,035 | ) | | (918 | ) | | (496 | ) | | (2,074 | ) | | 503 | | (d) Real estate | | (94 | ) | | (191 | ) | | (198 | ) | | (252 | ) | | (299 | ) | (e) Disposal of subsidiaries | | 110 | | | 50 | | | — | | | — | | | — | | (f) Restructuring charges | | 198 | | | (20 | ) | | 41 | | | 211 | | | 13 | | (g) Deferred compensation | | 34 | | | (4 | ) | | (16 | ) | | 58 | | | 24 | | (h) Guarantees | | 18 | | | (9 | ) | | (22 | ) | | (13 | ) | | (31 | ) | (i) Financial assets and liabilities designated at fair value through income | | (40 | ) | | (66 | ) | | 58 | | | (58 | ) | | (18 | ) | (j) Derivatives on own shares | | 62 | | | 77 | | | — | | | 2 | | | 1,272 | | (k) Insurance liabilities | | (82 | ) | | 8 | | | 37 | | | 286 | | | 301 | | (l) Provisions | | 17 | | | — | | | — | | | 17 | | | — | | (m) Share based compensation | | 378 | | | 435 | | | 210 | | | 971 | | | 842 | | | | |
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| Total US GAAP adjustments | | (770 | ) | | (966 | ) | | 407 | | | 3,037 | | | 5,129 | | (n) Income taxes | | 261 | | | 255 | | | 168 | | | (525 | ) | | (164 | ) | (o) Minority interests in earnings | | 5 | | | 24 | | | 40 | | | 6 | | | (69 | ) | | | |
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| |
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| Effect of US GAAP adjustments | | (504 | ) | | (687 | ) | | 615 | | | 2,518 | | | 4,896 | | | | |
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| Amount determined in accordance with US GAAP | | 6,517 | | | 3,693 | | | 2,881 | | | 52,999 | | | 44,383 | | | | |
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| Net income per share in accordance with US GAAP: | | | | | | | | | | | | | | | | Basic | | 15.59 | | | 9.33 | | | 7.87 | | | | | | | | | | |
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| | | | | | | Diluted | | 15.38 | | | 9.26 | | | 7.83 | | | | | | | | | | |
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(1)1)
| Shareholders’Percentage includes equity before minority interests. See reconciliationparticipations held by dependent enterprises in full, even if the Allianz Group’s share in the dependent enterprise is under 100.0%.
|
2) | No subsidiary of minority interests in shareholders’ equity following.the Allianz Group since January 12, 2009 |
3) | Group share through indirect holder Roland Holding GmbH, Munich: 62.0% |
| Property-Casualty |
| Life/Health |
| Banking |
| Asset Management |
| Corporate |
| Operating entity contributes a substantial portion of our total revenues within our primary geographic markets. Total revenues comprise Property-Casualty segment’s gross premiums written, Life/Health segment’s statutory premiums, Banking segment’s operating revenues and Asset Management segment’s operating revenues. |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) Valuation and recognition differences
| | | | | | Operating Subsidiaries—Other countries | | Equity | | | % owned1) | | | | € mn | | | | Argentina | | | | | | Allianz Argentina Compania de Seguros Generales S.A., Buenos Aires | | 19 | | | 100.0 | Australia | | | | | | Allianz Australia Limited, Sydney | | 803 | | | 100.0 | Austria | | | | | | Allianz Elementar Lebensversicherungs-Aktiengesellschaft, Vienna | | 73 | | | 100.0 | Allianz Elementar Versicherungs-Aktiengesellschaft, Vienna | | 368 | | | 100.0 | Privatinvest Bank AG, Salzburg | | 7 | | | 74.0 | Belgium | | | | | | Allianz Belgium Insurance S.A., Brussels | | 689 | | | 100.0 | Brazil | | | | | | Allianz Seguros S.A., Sao Paulo | | 163 | | | 72.5 | Bulgaria | | | | | | Allianz Bank Bulgaria JSC, Sofia | | 72 | | | 99.8 | Allianz Bulgaria Insurance and Reinsurance Company Ltd., Sofia | | 22 | | | 78.0 | Allianz Bulgaria Life Insurance Company Ltd., Sofia | | 12 | | | 99.0 | China | | | | | | Allianz China Life Insurance Co. Ltd., Shanghai | | 56 | | | 51.0 | Allianz Global Investors Hong Kong Ltd., Hong Kong | | 65 | | | 100.0 | Allianz Insurance (Hong Kong) Ltd., Hong Kong | | 3 | | | 100.0 | Dresdner Kleinwort (Japan) Limited, Hong Kong2) | | 378 | | | 100.0 | RCM Asia Pacific Ltd., Hong Kong | | 14 | | | 100.0 | Colombia | | | | | | Aseguradora Colseguros S.A., Bogota | | 39 | | | 100.0 | Croatia | | | | | | Allianz Zagreb d.d., Zagreb | | 26 | | | 83.2 | Czech Republic | | | | | | Allianz pojistovna a.s., Prague | | 108 | | | 100.0 | Egypt | | | | | | Allianz Egypt Insurance Company S.A.E., Cairo | | 2 | | | 85.0 | Allianz Egypt Life Company S.A.E., Cairo | | (1 | ) | | 100.0 | France | | | | | | AAAM S.A., Paris | | 15 | | | 84.9 | Allianz Global Corporate & Specialty France, Paris | | 238 | | | 100.0 | Allianz Global Investors S.A., Paris | | 93 | | | 99.8 | Assurances Générales de France IART S.A., Paris | | 2,719 | | | 100.0 | Assurances Générales de France Vie S.A., Paris | | 2,592 | | | 100.0 | Assurances Générales de France, Paris | | 6,821 | | | 100.0 | Banque AGF S.A., Paris | | 110 | | | 100.0 | Euler Hermes SFAC S.A., Paris | | 337 | | | 100.0 | Mondial Assistance S.A.S., Paris Cedex | | 244 | | | 100.0 | Greece | | | | | | Allianz Hellas Insurance Company S.A., Athen | | 65 | | | 100.0 | Hungary | | | | | | Allianz Hungária Biztosító Zrt., Budapest | | 206 | | | 100.0 | Indonesia | | | | | | PT Asuransi Allianz Life Indonesia p.l.c., Jakarta | | 28 | | | 99.8 | PT Asuransi Allianz Utama Indonesia Ltd., Jakarta | | 14 | | | 76.0 | Ireland | | | | | | Allianz Global Investors Ireland Ltd., Dublin | | 9 | | | 100.0 | Allianz Irish Life Holdings p.l.c., Dublin | | 285 | | | 66.4 | Allianz Re Dublin Limited, Dublin | | 93 | | | 100.0 | Allianz Worldwide Care Ltd., Dublin | | 6 | | | 100.0 |
The following describes the valuation and recognition differences presented in the reconciliation of the Allianz Group’s net income and shareholders’ equity between IFRS and US GAAP.
(a) Goodwill and intangible assets
A summary of the reconciliation adjustments relating to goodwill and intangible assets:
| | | | | | | | | | | | | | | | | Net Income
| | | Shareholders’
Equity(1)
| | | | For the years ended
December 31,
| | | As of
December 31,
| | | | 2006
| | | 2005
| | | 2004
| | | 2006
| | 2005
| | | | € mn | | | € mn | | | € mn | | | € mn | | € mn | Goodwill | | — | | | — | | | 1,137 | | | 4,710 | | 3,661 | Brand names | | — | | | — | | | (58 | ) | | 43 | | 43 | Core deposits | | (59 | ) | | (59 | ) | | (59 | ) | | 229 | | 288 | PVFP | | (34 | ) | | (1 | ) | | — | | | 378 | | 135 | Customer relationships | | (16 | ) | | — | | | — | | | 490 | | 16 | Customer base intangibles | | (205 | ) | | (205 | ) | | (205 | ) | | 576 | | 781 | | | |
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| Total | | (314 | ) | | (265 | ) | | 815 | | | 6,426 | | 4,924 | | | |
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(1)
| Shareholders’ equity before minority interests. See reconciliation of minority interests in shareholders’ equity following.
|
Goodwill
In accordance with US GAAP, goodwill is not subject to amortization; however, it is tested for impairment annually at a reporting unit level, or more frequently based upon facts and circumstances. For years through December 31, 2004, goodwill was amortized over its estimated useful life in accordance with IFRS. As of January 1, 2005, goodwill is no longer subject to amortization in accordance with IFRS. Therefore, the reconciliation adjustment to net income for the year ended December 31, 2004, represents the reversal of goodwill amortization recorded in accordance with IFRS and the effects of a different cost basis for disposals. The reconciliation adjustment to shareholders’ equity represents the effects of the reversal of accumulated amortization related to goodwill, in addition to the following effects. The reconciliation adjustment to shareholders’ equity includes the effect of a lower cost basis for goodwill in accordance with US GAAP as a result of the allocation of a portion of the purchase price of Dresdner Bank AG to core deposits and customer base intangibles. Finally, as further described under “Acquisitions and Disposals of Minority Interests”, the reconciliation adjustments to shareholders’ equity as of December 31, 2006 and2005, include goodwill of €1,325 mn and €1,202 mn, respectively, which has been recorded in accordance with US GAAP related to transactions with equity holders.
Brand names
In accordance with US GAAP, intangible assets with an indefinite life are not subject to amortization; however, they are tested for impairment annually, or more frequently based upon facts and circumstances. In connection with the Allianz Group’s acquisition of Dresdner Bank AG, a portion of the purchase price was allocated to the brand names “Dresdner Bank” and “dit”, which in accordance with US GAAP are considered to have an indefinite life. For years through December 31, 2004, these brand names were amortized over a period of 20 years in accordance with IFRS. As of January 1, 2005, in accordance with IFRS, brand names are considered to have an indefinite life, and therefore are no longer subject to amortization. Further, in connection with the Allianz Group’s annual impairment test in accordance with US GAAP during the year ended December 31, 2004, the Allianz Group recorded an impairment charge of €100 mn for brand names. Therefore, the
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
reconciliation adjustment to net income for the year ended December 31, 2004 includes the reversal of amortization expense and the recognition of the brand names impairment charge. The reconciliation adjustments to shareholders’ equity represent the effects of reversal of accumulated amortization and the recognition of the impairment charge.
Core deposits
In connection with the Allianz Group’s acquisition of Dresdner Bank AG, a portion of the purchase price was allocated to core deposits in accordance with US GAAP. In accordance with IFRS, a similar intangible asset was not recorded, resulting in a higher amount of the purchase price being allocated to goodwill. Core deposits are amortized over their expected useful lives, which range from 7.3 to 11.5 years. The weighted average original useful lives for the core deposits are 9.5 years. Amortization of core deposits is estimated to be €59 mn for each of the years 2007 through 2009 and €52 mn in 2010. Therefore, the reconciliation adjustments to net income and shareholders’ equity represent recognition of amortization expense and accumulated amortization, respectively, of core deposits.
PVFP
As further described under “Acquisitions and Disposals of Minority Interests”, the reconciliation adjustments to net income for the years ended December 31, 2006 and 2005 include the impact of amortization of PVFP, net of reduction of amortization of deferred acquisition costs, as a result of purchase accounting adjustments recorded in accordance with US GAAP related to transactions with equity holders. The reconciliation adjustments to shareholders’ equity as of December 31, 2006 and 2005 represent the recognition of PVFP, net of elimination of DAC, net of accumulated amortization expense recognized as a result of previously mentioned purchase accounting adjustments. Amortization expense of PVFP, net of elimination of amortization of deferred acquisition costs andrecognition of unearned revenue liabilities, is expected to be €113 mn in 2007, €96 mn in 2008, €82 mn in 2009, €69 mn in 2010 and €59 mn in 2011 as a result of this difference.
Customer relationships
As further described under “Acquisitions and Disposals of Minority Interests”, the reconciliation adjustments to net income for the years ended December 31, 2006 and 2005 include the impact of amortization of customer relationships for property-casualty insurance contracts as a result of purchase accounting adjustments recorded in accordance with US GAAP that are related to transactions with equity holders. The reconciliation adjustments to shareholders’ equity as of December 31, 2006 and 2005 represent the recognition of the customer relationships, net of accumulated amortization expense recognized as a result of previously mentioned purchase accounting adjustments. Amortization expense of the customer relationships, is expected to be €176 mn in 2007, €38 mn in 2008 and 2009, €39 mn in 2010 and €38 mn in 2011 as a result of this difference.
Customer base intangibles
In connection with the Allianz Group’s acquisition of Dresdner Bank AG, a portion of the purchase price was allocated to customer base intangibles in accordance with US GAAP. In accordance with IFRS, a similar intangible asset was not recorded, resulting in a higher amount of the purchase price being allocated to goodwill. Customer base intangibles are amortized over their expected useful lives, which range from 7.5 to 16.6 years. The weighted average original useful lives for the customer base intangibles are 8.9 years. Amortization of customer base intangibles is estimated to be €205 mn for each of the years 2007 and 2008 and €166 mn in 2009. Therefore, the reconciliation adjustment to net income and shareholders’ equity represents the recognition of amortization expense and accumulated amortization, respectively, of customer base intangibles.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
The Allianz Group’s goodwill has been allocated to its reporting segments. The changes in goodwill by reporting segment, in accordance with US GAAP, for the years ended December 31, 2006, 2005 and 2004 are as follows:
| | | | | | | | | | | | | | | | | | | | | | Property/
Casualty
| | | Life/
Health
| | | Banking
| | | Asset
Management
| | | Corporate
| | | Total
| | | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | Carrying amount as of January 1, 2004 | | 2,639 | | | 2,728 | | | 1,502 | | | 6,564 | | | — | | | 13,433 | | Additions | | 1 | | | 22 | | | 52 | | | 587 | | | 141 | | | 803 | | Disposals | | (72 | ) | | (17 | ) | | — | | | — | | | — | | | (89 | ) | Effects from exchange rate fluctuations | | (1 | ) | | (5 | ) | | — | | | (321 | ) | | — | | | (327 | ) | | | |
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| Carrying amount as of December 31, 2004 | | 2,567 | | | 2,728 | | | 1,554 | | | 6,830 | | | 141 | | | 13,820 | | Additions | | 950 | | | 167 | | | — | | | 388 | | | 17 | | | 1,522 | | Disposals | | (15 | ) | | (9 | ) | | (8 | ) | | (41 | ) | | — | | | (73 | ) | Reclassification to assets held for sale | | — | | | — | | | — | | | — | | | (158 | ) | | (158 | ) | Effects from exchange rate fluctuations | | 1 | | | 12 | | | — | | | 560 | | | — | | | 573 | | | | |
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| |
|
| Carrying amount as of December 31, 2005 | | 3,503 | | | 2,898 | | | 1,546 | | | 7,737 | | | — | | | 15,684 | | Additions | | 788 | | | 173 | | | 1 | | | 392 | | | 144 | | | 1,498 | | Disposals | | (8 | ) | | (7 | ) | | — | | | — | | | — | | | (15 | ) | Reclassification from intangible assets | | 37 | | | — | | | — | | | — | | | — | | | 37 | | Effects from exchange rate fluctuations | | — | | | (14 | ) | | — | | | (474 | ) | | — | | | (488 | ) | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Carrying amount as of December 31, 2006 | | 4,320 | | | 3,050 | | | 1,547 | | | 7,655 | | | 144 | | | 16,716 | | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(b) Employee benefit plans
A summary of the reconciliation adjustments relating to employee benefit plans is as follows:
| | | | | | | | | | | | | | | | | | | Net Income
| | | Shareholders’
Equity(1)
| | | | | For the years ended
December 31,
| | | As of
December 31,
| | | | | 2006
| | | 2005
| | | 2004
| | | 2006
| | | 2005
| | | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | Transition obligation | | — | | | (15 | ) | | (16 | ) | | — | | | — | | Prior service cost | | (22 | ) | | (48 | ) | | (6 | ) | | 35 | | | 57 | | Net of Funded Status and Current Balance Sheet Position (2005: Net of Additional minimum pension liability and intangible asset of €59 mn) | | — | | | — | | | — | | | (2,572 | ) | | (2,459 | ) | | | |
|
| |
|
| |
|
| |
|
| |
|
| Total | | (22 | ) | | (63 | ) | | (22 | ) | | (2,537 | ) | | (2,402 | ) | | | |
|
| |
|
| |
|
| |
|
| |
|
|
(1)
| Shareholders’ equity before minority interests. See reconciliation of minority interests in shareholders’ equity following.
|
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
The incremental effect of applying Statement SFAS 158 on individual line items in the Statement of Financial Position as of December 31, 2006 is as follows:
| | | | | | | | | | | | | Before
Statement
SFAS 158
| | | Adjustment
| | | After
Statement
SFAS 158
| | | | | € mn | | | € mn | | | € mn | | Intangible assets | | 35 | | | (35 | ) | | — | | Asset for overfunded pension plans(1) | | — | | | 47 | | | 47 | | Deferred tax asset | | 729 | | | 221 | | | 950 | | | | |
|
| |
|
| |
|
| Total assets(3) | | 1,063,445 | | | 233 | | | 1,063,678 | | | | |
|
| |
|
| |
|
| Liability for underfunded pension plans(2) | | 5,808 | | | 631 | | | 6,439 | | | | |
|
| |
|
| |
|
| Total liabilities(3) | | 999,043 | | | 631 | | | 999,674 | | Accumulated other comprehensive income, net of tax and policyholder participation | | (1,189 | ) | | (398 | ) | | (1,587 | ) | | | |
|
| |
|
| |
|
| Total liabilities and shareholders’ equity(3) | | 1,063,445 | | | 233 | | | 1,063,678 | |
(1)
| Included in Other assets in the consolidated balance sheet.
|
(2)
| Included in Other liabilities in the consolidated balance sheet.
|
(3)
| Amounts represent individual line items and do not total from above.
|
The amounts included in Accumulated Other Comprehensive Income (AOCI) as of December 31, 2006:
| | | | | | € mn
| | Transition obligation
| | — | | Prior service cost
| | (19 | ) | (Gains)/losses
| | 2,556 | | | |
|
| Total
| | 2,537 | | | |
|
|
The amounts for the Transition obligation, Prior service costs and Losses for the defined benefit plans that are expected to be recognized as components of Net periodic benefit cost during the year ending December 31, 2007, amount to €0 mn, €2 mn and €86 mn, respectively. No plan assets are expected to be returned to the Allianz Group during the year ending December 31, 2007.
Transition obligation
In accordance with IFRS, the Allianz Group did not record a transition adjustment upon the adoption of IAS 19,Employee Benefits, as the accrual at the time of adoption was equal to the difference between the projected benefit obligation and the plan assets at the time of adoption.
In accordance with US GAAP, a transition obligation was calculated as the difference between the projected benefit obligation less the plan assetsand the benefit accrual under domestic rules. The transition obligation must be amortized on a straight-line basis over the average remaining service period of plan participants or over 15 years if the average remaining service period is less than 15 years. For US GAAP purposes, the Allianz Group amortized the unrecognized transition obligation over 19 years, ending during the year ended December 31, 2005. The Allianz Group adopted SFAS No. 87,Employers’ Accounting for Pensions (“SFAS 87”), effective January 1, 1998. The Allianz Group was unable to adopt SFAS 87 as of its effective date, January 1, 1987, due to the unavailability of actuarial data. The 19 year amortization period was applied retroactively to January 1, 1987 to effectively extinguish the transition obligation at the same date as if SFAS 87 were adopted on the effective date.
Therefore, the reconciliation adjustment to net income for the years ended December 31, 2005 and 2004 represents recognition of amortization expense.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Prior service cost
In accordance with IFRS, the vested portion of past service cost, which is the increase in the present value of the obligation due to changes in the benefit entitlement that is allocated to prior periods’ service, is recognized immediately in full. The unvested portion of past service cost is amortized on a straight-line basis from the point in time when the past service cost arises until the obligation is anticipated to become vested. In accordance with US GAAP, both the vested and unvested portions are amortized on a straight-line basis over the average future service lives of the active participants. Therefore, the reconciliation adjustment to net income and shareholders’ equity represents recognition of amortization expense and unrecognized prior service cost, respectively.
Changes according to SFAS 158
SFAS No. 158 “Employers’Accounting for Defined Benefit Pension and Other Postretirement Plans” (“SFAS 158”) requires Allianz to recognize a balance sheet asset or liability for each of its pension or other postretirement benefit plans that is equal to the plan’s funded status. For pension plans, this measure is based on the Projected Benefit Obligation; for other postretirement plans, this measure is based on the Accumulated Postretirement Benefit Obligation. The difference between a plan’s funded status and its current balance sheet position will be charged, net of tax, to shareholders’ equity as a component of AOCI.
SFAS 158 does not change the calculation of pension expense under SFAS 87 or SFAS 106. Any Actuarial gains/losses, Prior service costs or
Transition obligations will continue to be amortized under existing rules.
Since the Allianz Group uses under IFRS the corridor approach for the recognition of actuarial gains or losses, there are no such requirements for the recognition of the net of funded status and the current balance sheet position. Therefore, the 2006 reconciliation adjustment to shareholders’ equity represents recognition of the net of funded status and the current balance sheet position.
Before SFAS 158 was introduced, an additional minimum pension liability was required to be recognized on the balance sheet. If the accumulated benefit obligation exceeded the fair value of plan assets, an additional minimum pension liability (including unfunded accrued pension cost) that was at least equal to the unfunded accumulated benefit obligation was to be recorded. Recognition of an additional minimum liability was required if an unfunded accumulated benefit obligation existed and (a) an asset had been recognized as prepaid pension cost, (b) the liability already recognized as unfunded accrued pension cost was less than the unfunded accumulated benefit obligation, or (c) no accrued or prepaid pension cost had been recognized. Also, in accordance with US GAAP, an equal amount was capitalized as an intangible asset up to the amount of any unrecognized net transition obligation plus the unrecognized prior service costs, with the remainder charged to shareholders’ equity as a component of other comprehensive income. In accordance with IFRS, there are no such requirements for the recognition of an additional minimum pension liability. Therefore, the 2005 reconciliation adjustment to shareholders’ equity represented recognition of an additional minimum pension liability net of the related intangible asset.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
(c) Investments
A summary of the reconciliation adjustments relating to investments is as follows:
| | | | | | | | | | | | | | | | | | | Net Income
| | | Shareholders’
Equity(1)
| | | | | For the years ended
December 31,
| | | As of
December 31,
| | | | | 2006
| | | 2005
| | | 2004
| | | 2006
| | | 2005
| | | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | Impairments of equity securities | | (211 | ) | | (737 | ) | | (351 | ) | | — | | | — | | Impairments of AFS debt securities | | (1,152 | ) | | — | | | — | | | (11 | ) | | — | | Reversal of impairments on debt securities | | — | | | 4 | | | (4 | ) | | — | | | — | | Reversal of realized gains from the disposal of available-for-sale debt and equity securities acquired in transactions between equity holders | | (41 | ) | | (9 | ) | | — | | | — | | | — | | Realized gains from equity securities | | — | | | — | | | (141 | ) | | — | | | — | | Foreign currency exchange differences from debt securities | | 369 | | | (176 | ) | | — | | | — | | | — | | Valuation of equity securities | | — | | | — | | | — | | | (386 | ) | | (354 | ) | Loans and receivables | | — | | | — | | | — | | | 199 | | | 857 | | Valuation of shares restricted from sale | | — | | | — | | | — | | | (1,876 | ) | | — | | | | |
|
| |
|
| |
|
| |
|
| |
|
| Total | | (1,035 | ) | | (918 | ) | | (496 | ) | | (2,074 | ) | | 503 | | | | |
|
| |
|
| |
|
| |
|
| |
|
|
(1)
| Shareholders’ equity before minority interests. See reconciliation of minority interests in shareholders’ equity following.
|
Impairments of equity securities
As described in Note 3, the adoption of IAS 39 revised required a change to the Allianz Group’s impairment criteria for available-for-sale equity securities. In addition, IAS 39 revised required that the Allianz Group no longer establish an adjusted cost basis upon the recognition of an impairment of equity security. IAS 39 revised required retrospective application of these changes. As of January 1, 2005, the Allianz Group adopted these changes to its accounting policies for US GAAP. However, under US GAAP, retrospective application of these policies was not allowed; therefore, the Allianz Group was required to apply these changes only prospectively under US GAAP.
Therefore, the reconciliation adjustments to net income for the years ended December 31, 2006 and 2005 represent the differences in impairments and realized gains and losses from equity securities, net of policyholder participation, recognized from the application of these accounting policies with different transition rules. The reconciliation adjustment to net income for the years ended December 31, 2004 represents the elimination of impairments of equity securities that result from the retrospectiveapplication of these changes to the Allianz Group’s accounting policies under IFRS.
Impairments of AFS debt securities
As described in the section “Recently adopted US accounting pronouncements”, the Allianz Group adopted FASB Staff Position FAS 115-1 and FAS 124-1,The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments (“FSP FAS 115-1”) on December 31, 2006. Under FSP FAS 115-1, the impairment of an AFS debt security is possible due to changes in general interest rates. An impairment is considered other-than-temporary if management does not have the ability or intent to hold the security to recovery. IFRS requires “objective evidence” of impairment as a result of a loss event that has an impact on estimated future cash flows. As management’s intent does not represent objective evidence, a loss is not recognized until the security is sold. Therefore, the reconciliation adjustment to net income for the year ended December 31, 2006 represents the difference in impairments from AFS debt securities, net of policyholder participation, recognized due to the adoption of FSP FAS 115-1.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Reversals of impairments of debt securities
In accordance with IFRS, if the amount of the impairment previously recorded on a debt security decreases and the decrease can be objectively related to an event occurring after the impairment, such as an improvement in the debtor’s credit rating, the impairment is reversed through net income. Such reversals can not result in a carrying amount of a security in excess of the carrying amount prior to the impairment. In accordance with US GAAP, reversals of impairments recorded on debt securities are not permitted. Therefore, the reconciliation adjustments to net income represent the elimination of the reversal of impairments on debt securities, net of policyholder participation.
Reversal of realized gains from the disposal of available-for-sale debt and equity securities acquired in transactions between equity holders
As further described under “Acquisitions and Disposals of Minority Interests”, the reconciliation adjustments to net income for the years ended December 31, 2006 and 2005, include the reversal of net realized gains, net of policyholder participation, related to disposals of debt and equity securities recorded under IFRS as a result of purchase accounting adjustments recorded in accordance with US GAAP related to transactions with equity holders. As of December 31, 2006 and 2005, the amount of the cost basis, net of policyholder participation and minority interests, of the related securities was €601 mn and €274 mn higher under US GAAP than under IFRS, respectively.
Realized gains from equity securities
On the date the Allianz Group no longer exercises significant influence over an investee accounted for under the equity method, the investment is transferred to securities available-for-sale and it is recorded at fair value with its previous carrying amount becoming its cost basis. The carrying amount prior to transfer, as determined in accordance with IFRS and US GAAP may be different. Subsequent to the transfer, these differences in cost basis are realized upon disposal of the equity securities. As a result of the sale of certain equity securities, which previously were accounted for as associated companies, a difference in the cost basisresulted in a lower amount of realized gains in accordance with US GAAP than in accordance with IFRS.
Foreign currency exchange differences from debt securities
In accordance with IFRS, foreign currency exchange differences from debt securities are recognized in net income. In accordance with US GAAP, foreign currency exchange differences from debt securities are recognized directly in equity as foreign currency translation adjustments. Therefore, the reconciliation adjustments to net income for the years ended December 31, 2006 and 2005 represent the elimination of the foreign currency exchange differences from debt securities, net of policyholder participation, under US GAAP. Beginning in 2005, the Allianz Group significantly increased its average balance of debt securities denominated in a foreign currency. This increase, together with volatility in the foreign currency exchange rates resulted in the significant foreign currency exchange losses and gains recognized in net income under IFRS during 2006 and 2005, respectively. During the year ended December 31, 2004, foreign currency exchange differences were not material to the Allianz Group’s net income.
Valuation of equity instruments
In accordance with IFRS, investments in equity instruments that do not have a quoted market price in an active market with fair values that can be reliably measured are recorded at fair value. In accordance with US GAAP, investments in equity instruments that do not have a quoted market price in an active market are recorded at cost. The Allianz Group has investments in equity instruments that do not have a quoted market price in an active market; however, which the Allianz Group can reliably measure. Therefore, for IFRS reporting purposes the Allianz Group records its investments in equity instruments at fair value with changes in fair value recorded through shareholders’ equity. Under US GAAP the Allianz Group records its investments in these equity instruments at cost. Therefore, the reconciliation adjustments to shareholders’ equity eliminate the unrealized gains recorded under IFRS for these equity instruments.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Loans and receivables
As described in Note 3, as a result of the adoption of IAS 39 revised, the Allianz Group reclassified certain available-for-sale debt securities to loans and advances to banks and loans and advances to customers. IAS 39 revised required retrospective application of this change to the Allianz Group’s accounting policies. In accordance with US GAAP, these securities continue to be classified as available-for-sale debt securities. Therefore, the reconciliation adjustments to shareholders’ equity represent the unrealized gains and losses related to the available-for-sale debt securities, net of policyholder participation, under US GAAP.
Valuation of shares restricted from sale
In accordance with IFRS, AFS equity securities are measured at fair value based on quoted prices inan active market. Under US GAAP, equity instruments for which sale is restricted by governmental or contractual requirement for longer than one year do not meet the definition of readily determinable fair value, and therefore, such instruments are recorded at cost. The Allianz Group has an investment in equity instruments that began to trade on an active market during 2006. Thus, the investment has a quoted price in an active market, but its sale is contractually restricted for longer than one year. For IFRS reporting purposes the Allianz Group records its investment in equity instruments at fair value with changes in fair value recorded through shareholders’ equity. Under US GAAP, the Allianz Group records its investment in these equity instruments at cost. Therefore, the reconciliation adjustment to shareholders’ equity eliminates the unrealized gains recorded under IFRS for these equity instruments.
(d) Real estate
A summary of the reconciliation adjustments relating to real estate is as follows:
| | | | | | | | | | | | | | | | | | | Net Income
| | | Shareholders’
Equity(1)
| | | | | For the years ended
December 31,
| | | As of
December 31,
| | | | | 2006
| | | 2005
| | | 2004
| | | 2006
| | | 2005
| | | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | Purchase accounting differences resulting from transactions between equity holders | | (28 | ) | | (1 | ) | | — | | | 230 | | | 117 | | Impairments of real estate | | (96 | ) | | 21 | | | (41 | ) | | (116 | ) | | (20 | ) | Realized gains from real estate | | 30 | | | (211 | ) | | (157 | ) | | (366 | ) | | (396 | ) | | | |
|
| |
|
| |
|
| |
|
| |
|
| Total | | (94 | ) | | (191 | ) | | (198 | ) | | (252 | ) | | (299 | ) | | | |
|
| |
|
| |
|
| |
|
| |
|
|
(1)
| Shareholders’ equity before minority interests. See reconciliation of minority interests in shareholders’ equity following.
|
Purchase accounting differences resulting from transactions between equity holders
As further described under “Acquisitions and Disposals of Minority Interests”, the reconciliation adjustments to net income for the year ended December 31, 2006 and 2005 and shareholders’ equity as of December 31, 2006 and 2005, include depreciation expense and a higher cost basis of real estate as a result of purchase accounting adjustments recorded in accordance with US GAAP related to transactions with equity holders.
Impairments of real estate
In accordance with IFRS, if the amount of a previously recognized impairment decreases, the impairment is reversed through net income. However, such reversals do not result in a carrying amount that exceeds what would have been the carrying amount had the impairment not been recorded. In accordance with US GAAP, reversals of impairments recorded on real estate are not permitted. Further, under IFRS to determine if real estate is impaired discounted cash flows are utilized,
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
whereas, under US GAAP undiscounted cash flows are utilized. As a result, certain impairments are recorded under IFRS that were not recorded under US GAAP. Therefore, the reconciliation adjustments to net income and shareholders’ equity represent the impairment differences, and the elimination of reversals of impairments of real estate less the related accumulated depreciation and differences in impairments recorded.
Realized gains from real estate
The Allianz Group entered into certain sales leaseback transactions that resulted in the Allianz Group recognizing realized gains from the sale of the real estate and treating the leases as operating leases in accordance with IFRS. In accordance with US GAAP, the Allianz Group is required to defer and amortize over the related lease term these realized gains. Therefore, the reconciliation adjustments to net income and shareholders’ equity represent the reversals of realized gains, net of accumulated amortization.
(e) Disposal of subsidiaries
As further described under “Acquisitions and Disposals of Minority Interests”, the reconciliation adjustment to net income for the years ended December 31, 2006 and 2005, includes €110 mn and €50 mn, respectively, of realized gains as a result of the disposal of treasury shares of a subsidiary under US GAAP. These realized gains were recorded directly in shareholders’ equity under IFRS.
(f) Restructuring charges
Under IFRS, restructuring provisions include certain partial or early retirement provisions that are recognized in their entirety upon the employee accepting the partial or early retirement offer. Under US GAAP, these partial or early retirement provisions are recognized over the service period. Therefore, the reconciliation adjustments to net income and shareholders’ equity represent the recognition of compensation expense.
(g) Deferred compensation
In accordance with terms of employment contracts, the Allianz Group has deferred the payment of certain amounts of incentivecompensation awards to employees. Employees vest in the deferred amounts over three years. In accordance with IFRS, these deferred amounts are recognized as expense in the year of the award, which is when the Allianz Group is constructively obligated to pay the award. In accordance with US GAAP, the deferred amounts are recognized as expense over the period in which the employee provides services to the Allianz Group, which is considered to be the three-year vesting period. Therefore, the reconciliation adjustments to net income and shareholder’s equity represent the recognition of compensation expense.
(h) Guarantees
Under IFRS, guarantees related to indemnifications are not recorded unless it is probable a loss will occur. In accordance with US GAAP, guarantees related to indemnification contracts are required to be recorded at fair value with changes in fair value recognized in the income statement. Related to the sale of certain investments the Allianz Group recorded a liability related to guarantees for US GAAP.
(i) Financial assets and liabilities designated at fair value through income
As described in Note 3, a result of the adoption of IAS 39 revised, the Allianz Group reclassified certain available-for sale securities to financial assets designated at fair value through income. Under US GAAP, these financial assets and liabilities will continue to be accounted for as available-for-sale securities. In addition, the Allianz Group reclassified certain financial liabilities to financial liabilities designated at fair value. IAS 39 required retrospective application of these changes. Therefore, the reclassification adjustments to net income and shareholders’ equity represent the elimination of these changes under US GAAP.
(j) Derivatives on own shares
Under IFRS, written put options on own shares which require physical settlement are recorded initially in shareholders’ equity for the option premium received and as a liability, with an offsetting decrease in shareholders’ equity, for the present value of the redemption amount. Until maturity, the liability is accreted to the redemption
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
amount with the change being recorded as interest expense. Under US GAAP, written put options are initially and subsequently recorded as liabilities at fair value with changes recorded in net income. Therefore, the reconciliation adjustment to net income includes the reversal of accretion recorded under IFRS andrecording changes in the fair value of the written put options required under US GAAP. The reconciliation adjustment to shareholders’ equity represents the impacts on net income and the reversal of the liability recorded under IFRS for the present value of the redemption amount.
(k) Insurance liabilities
A summary of the reconciliation adjustments relating to insurance liabilities is as follows:
| | | | | | | | | | | | | | | | Net Income
| | Shareholders’
Equity(1)
| | | | For the years ended
December 31,
| | As of
December 31,
| | | | 2006
| | | 2005
| | 2004
| | 2006
| | | 2005
| | | | € mn | | | € mn | | € mn | | € mn | | | € mn | Discretionary participation features | | 25 | | | 5 | | 37 | | 291 | | | 266 | Purchase accounting differences resulting from transactions between equity holders | | (107 | ) | | 3 | | — | | (5 | ) | | 35 | | | |
|
| |
| |
| |
|
| |
| Total | | (82 | ) | | 8 | | 37 | | 286 | | | 301 | | | |
|
| |
| |
| |
|
| |
|
(1)
| Shareholders’ equity before minority interests. See reconciliation of minority interests in shareholders’ equity following.
|
Discretionary participation features
As described in Note 3, the adoption of IFRS 4 resulted in the Allianz Group recognizing a liability for certain discretionary participating features. IFRS 4 requires retrospective application of these changes. Under US GAAP, these discretionary participating features are not recognized. Therefore, the reconciliation adjustments to net income and shareholders’ equity represent the elimination of these liabilities under US GAAP.
Purchase accounting differences resulting from transactions between equity holders
As further described under “Acquisitions and Disposals of Minority Interests”, the reconciliation adjustments to net income for the year ended December 31, 2006 and 2005 and shareholders’ equity as of December 31, 2006 and 2005, include adjustments to carrying amount of insurance liabilities, including utilization of different discount rates for aggregate policy reserves and discounting reserves for loss and loss adjustment expenses as a result of purchase accounting adjustments recorded in accordance with US GAAP related to transactions with equity holders.
(l) Provisions
A summary of the reconciliation adjustments relating to provisions is as follows:
| | | | | | | | | | Net Income
| | | Shareholders’
Equity(1)
| | | | | For the year ended
December 31,
2006
| | | As of
December 31,
2006
| | | | | € mn | | | € mn | | ATZ provisions | | 87 | | | 87 | | Discounting of provisions | | (70 | ) | | (70 | ) | | | |
|
| |
|
| Total | | 17 | | | 17 | |
(1)
| Shareholders’ equity before minority interests. See reconciliation of minority interests in shareholders’ equity following.
|
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
ATZ provisions
Under IFRS, Altersteilzeit (ATZ) provisions for certain partial or early retirement programs in Germany are recognized in their entirety upon the employee accepting the partial or early retirement offer. Under US GAAP, these partial or early retirement provisions are recognized over the active service period. Therefore, the reconciliation adjustment to net income and shareholders’ equity represents the timing difference for the recognition of compensation expense.
Discounting of provisions
In accordance with IFRS, the anticipated cash flows recognized as provisions are discounted using a pre-tax discount rate (or rates) that reflect(s) current market assessments of the time value of money and those risks specific to the liability if the effect is material. Under US-GAAP, a provision is only discounted when the timing of the cash flows is fixed and reliably determinable. Differences may also arise in the selection of the discount rate.
(m) Share based compensation
As described in Note 48, the Class B Plan, which issues the Class B equity units, is classified as a cash settled plan under IFRS because the equity units are puttable by the holders. Therefore, the Class B equity units issued under the Class B Plan are recognized as liabilities and measured at fair value with changes recognized in net income in the period.
Prior to the adoption of IFRS 2 in 2005 and as permitted under IAS 8, the Allianz Group applied US GAAP standards to account for share based compensation. Under SFAS 123 and APB 25, the Class B Plan was classified as an equity settled plan. On January 1, 2006, Allianz adopted SFAS 123R, which replaced SFAS 123 and superseded APB 25. The adoption of SFAS 123R had no effect on the accounting for the Class B Plan, as it continues to be accounted for as an equity settled plan under SFAS 123R. SFAS 123R provides that a puttable (orcallable) share awarded to an employee as compensation is classified as equity if the repurchase feature does not permit the employee to avoid bearing the risks and rewards normally associated with equity share ownership for areasonable period of time from the date the requisite service is rendered and the share is issued, or it is not probable that the Allianz Group would prevent the employee from bearing those risks and rewards for areasonable period of time from the date the share is issued.
For this purpose, SFAS 123R states that a period of six months or more is areasonable period of time. The call and put options in the Class B Plan can not be exercised until at least six months after the initial vesting of each grant of units. Therefore, the plan meets the criteria for an equity settled plan under SFAS 123R. As an equity settled plan, the Class B equity units issued are measured at fair value on the grant date. Compensation expense is recognized over the requisite service period during which the employee provides service in exchange for the award, which is the vesting period. As compensation expense is recognized, an offsetting amount is credited to equity. The reconciliation adjustments to net income and shareholders’ equity represent the elimination of the additional compensation expense recognized under IFRS for the Class B equity units granted under the Class B Plan.
(n) Income taxes
In accordance with IFRS, the effect on deferred taxes resulting from a change in tax laws or rates is recognized in the income statement except to the extent the change relates to transactions recognized directly in shareholders’ equity. The effect on deferred taxes for transactions originally recognized directly in shareholders’ equity are allocated directly to shareholders’ equity.
In accordance with US GAAP, the effect on deferred taxes of a change in tax laws or rates is recognized in the income statement including the effect for transactions originally recognized directly in shareholders’ equity.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
The following table indicates the amounts recognized in US GAAP net income for changes in tax laws and rates related to transactions recognized directly to shareholders’ equity under IFRS:
| | | | | | | | For the years ended December 31,
| | 2006
| | 2005
| | | 2004
| | | | € mn | | € mn | | | €mn | Before elimination of minority interests | | 71 | | (13 | ) | | — | After elimination of minority interests | | 38 | | (13 | ) | | — |
The adjustment concerning the change in tax laws and tax rates during the year ending December 31, 2006, primarily relates to tax rate changes regarding the long term capital gains in France and in respect of equity securities in Italy.
The tax effect of all other US GAAP adjustments, primarily investments and intangibles, during the years ended December 31, 2006, 2005 and 2004, amounted to tax benefits of €190 mn, €268 mn and €168 mn, respectively.
The Allianz Group has elected to utilize the portfolio method in its US GAAP accounting treatment for the accumulated deferred tax amounts recorded within shareholders’ equity which relate to the net unrealized gains of available-for-sale securities that are no longer taxable. Under theportfolio method, the accumulated deferred tax amounts recorded within stockholders’ equity will not be recognized in the income statement as income tax expense in future periods as long as the Allianz Group maintains an available-for-sale investment portfolio.
(o) Minority interest in earnings
The reconciliation adjustment to net income represents the effect of the US GAAP adjustments on minority interests in earnings. The reconciliation adjustment to shareholders’ equity represents effect of the US GAAP adjustments on minority interests in shareholders’ equity and the reclassification of minority interests in shareholders’ from equity under IFRS to liability under US GAAP and the reclassification of certain puttable instruments to liabilities.
The following table represents the reconciliation of the Allianz Group’s minority interests in shareholders’ equity between IFRS and US GAAP:
| | | | | | | | | Shareholders’
Equity
| As of December 31,
| | 2006
| | | 2005
| | | | € mn | | | € mn | Amounts determined in accordance with IFRS | | 6,409 | | | 7,615 | Valuation and recognition differences as noted above | | (6 | ) | | 69 | Reclassification of puttable instruments related to consolidated investment funds from liabilities | | 3,750 | | | 3,137 | Reclassification of puttable instruments related to share based compensation from liabilities | | 484 | | | 598 | Reclassification of puttable instruments related to redeemable instruments issued by a subsidiary | | 368 | | | — | | | |
|
| |
| Total | | 11,005 | | | 11,419 | | | |
|
| |
|
Acquisitions and Disposals of Minority Interests
As described in Note 3, as a result of the adoption of IAS 1, the Allianz Group changed its accounting policy for accounting for the acquisition or disposal of a minority interest in shareholders’ equity for subsidiaries, or companies under control,of the Allianz Group in 2005. The Allianz Group has adopted an accounting policy to treat these acquisitions as transactions between equity holders. Therefore, the acquisition of a minority interest does not result in an allocation of the acquisition cost to the respective fair value of the assets and liabilities
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
acquired. Rather, the excess of the acquisition cost over the Allianz Group’s carrying amount is recognized as a reduction of equity. Similarly, the disposal of a minority interest does not result in any realized gain or loss. The Allianz Group has applied this accounting policy to any acquisition of a minority interest in shareholders’ equity on or after January 1, 2005.
As required under US GAAP, the Allianz Group utilizes purchase accounting to allocate the acquisition cost of an acquisition of a minority interest to the fair value of the assets acquired and liabilities assumed. Further, for disposals of minority interests, the Allianz Group recognizes a realized gain or loss for any difference between the carryingamount of the minority interest disposed and the proceeds. As result, for transactions involving minority interests after January 1, 2005, the IFRS to US GAAP reconciliation includes the effects of these accounting policies.
The primary transactions impacted by this difference during the year ended December 31, 2006 include the acquisition of an additional interest of 23.7% in Riunione Adriactica di Sicurta S.p.A. (“RAS”) and the acquisition of an additional interest of .3% in Allianz Global Investors of America L.P. (“AGI LP”). Applicable transactions for the year ended December 31, 2005 include the acquisition of an additional interest of 20.7% in RAS and the acquisition of an additional interest of 3.4% in AGI LP.
For the 2005 acquisition of the additional interest of 20.7% in RAS, the final purchase accounting effects are as follows:
| | | | | | | | | | | | | RAS –2005 Initial
Allocation
| | | Adjustments
| | | RAS –2005
Final
Allocation
| | | | | € mn | | | € mn | | | € mn | | Goodwill | | 1,148 | | | (142 | ) | | 1,006 | | PVFP | | 334 | | | — | | | 334 | | Deferred acquisition costs | | (198 | ) | | — | | | (198 | ) | Customer relationships | | 16 | | | 234 | | | 250 | | Real estate | | 118 | | | 1 | | | 119 | | Reserves for loss and loss adjustment expenses | | 58 | | | 27 | | | 85 | | Aggregate policy reserves | | (30 | ) | | (49 | ) | | (79 | ) | Deferred tax liabilities | | (107 | ) | | (71 | ) | | (178 | ) | | | |
|
| |
|
| |
|
| Total | | 1,339 | | | — | | | 1,339 | | | | |
|
| |
|
| |
|
|
A summary of the preliminary purchase accounting effects, based upon preliminary valuations, recorded on the date of acquisition of the 2006 acquisitions of the additional interest of 23.7% in RAS and the additional .3% interest of AGI LP these interests under US GAAP is as follows:
| | | | | | | | | RAS – second
tranche in
2006
| | | AGI LP and
other
| | | | € mn | | | € mn | Goodwill | | 1,022 | | | 303 | PVFP | | 520 | | | — | Deferred acquisition costs | | (240 | ) | | — | Customer relationships | | 256 | | | — | Real estate | | 141 | | | — | Reserves for loss and loss adjustment expenses | | 144 | | | — | Aggregate policy reserves | | (90 | ) | | — | Deferred tax liabilities | | (252 | ) | | — | | | |
|
| |
| Total | | 1,501 | | | 303 | | | |
|
| |
|
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
The preliminary purchase accounting effects may be adjusted up to one year from the acquisition date upon the finalization of the valuation process. In addition, the Allianz Group continues to evaluate therecognition of separately identifiable intangible assets and the relevant amortization period for recognized intangible assets for the RAS second tranche in 2006.
The goodwill resulting from these transactions has been allocated to the segments expected to benefit from the transactions as follows:
| | | | | | | | | | RAS –
first
tranche in
2005
| | RAS –
second
tranche in
2006
| | AGI LP
| | | | € mn | | € mn | | € mn | Property-casualty | | 831 | | 802 | | — | Life/Health | | 99 | | 140 | | — | Banking | | — | | — | | — | Asset Management | | 76 | | 80 | | 303 | | | |
| |
| |
| Total | | 1,006 | | 1,022 | | 303 | | | |
| |
| |
|
Presentation Differences
In addition to the valuation and recognition differences, other differences, essentially related to presentation, exist between IFRS and US GAAP. Although there is no impact on IFRS and US GAAP reported net income or shareholders’ equity due to these differences, it may be useful to understand them to interpret the condensed consolidated financial statements presented in accordance with US GAAP in this note. As described in Note 3, Allianz changed the presentation of its consolidated IFRS financial statements. These changes in IFRS presentation reduce some of the presentation differences between the IFRS and US GAAP financial statements and in some cases affect the presentation under US GAAP. Prior periods have been reclassified to conform to the current period’s presentation.
The following is a summary of presentation differences that relate to the Allianz Group’s consolidated financial statements presented in accordance with IFRS and the condensed consolidated financial statement presented in accordance with US GAAP:
Balance sheet:
1. Two of the Allianz Group’s agribusiness insurance products in the United States are treated as weather derivatives under IFRS, which results in areclassification between derivative and insurance liabilities.
2. When the Allianz Group is the lender in a lending agreement and receives securities as collateral that can be pledged or sold, it recognizes the securities received and corresponding obligations to return them. These securities are reflected as assets in the US GAAP condensed balance sheet in the line “Securities received as collateral”. The offsetting liability is presented in the line “Obligation to return securities received as collateral”.
3. Assets and liabilities that qualify for separate account treatment under SOP 03-1 are classified separately on the balance sheet for US GAAP. Investment income related to financial assets for unit linked contracts that do not qualify for this treatment is presented gross in trading income with an offset in benefits, claims, and loss expenses incurred.
4. During 2005, Dresdner Bank AG completed the sale of certain portfolios of loans. For IFRS reporting purposes, the loans were derecognized. For US GAAP reporting purposes, the transactions did not meet the criteria to be derecognized. Therefore, the loans are included in loans held for sale with a corresponding amount included in other liabilities. In addition, Dresdner Bank AG completed a synthetic securitization of certain private equity investments. For IFRS reporting purposes the private equity
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
investments were derecognized. For US GAAP reporting purposes, the transactions did not meet the criteria to be derecognized. Loans to banks and customers are presented as loans (net).
5. Other assets are allocated among interest and fees receivable, premium and insurance balances receivables (net), reinsurance recoverables, and other assets.
6. Certificated liabilities, participation certificates and subordinated liabilities, registered bonds and amounts for repurchase agreements are presented as short-term borrowings and long-term debt.
7. Minority interests in consolidated subsidiaries are excluded from shareholders’ equity.
Income statement:
8. Interest and similar expenses are primarily allocated among interest on deposits, interest on short-term borrowings, and interest on long-term debt, as appropriate.
9. Administrative expenses from the Banking and Asset Management segments are presented in other expenses.
10. Impairments of investments are presented in Realized gains / losses (net).
11. Income from investments in associated enterprises and joint ventures is presented outside of revenues.
12. Results from discontinued operations is shown net in the income statement.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Condensed consolidated balance sheet information
The following is condensed consolidated balance sheet information of the Allianz Group, reformatted to reflect the impacts of the valuation, recording and presentation differences between IFRS and US GAAP:
| | | | | | | | | | | | | | | | US GAAP
| | IFRS Reformatted
| As of December 31,
| | Reference
| | 2006
| | 2005
| | 2006
| | 2005
| | | | | | € mn | | € mn | | € mn | | € mn | Assets | | | | | | | | | | | Cash and cash equivalents | | i | | 33,112 | | 31,647 | | 33,031 | | 31,647 | Trading account assets | | i, 3 | | 192,120 | | 212,463 | | 218,733 | | 235,007 | Investments | | c, d, i | | 362,450 | | 356,200 | | 297,101 | | 283,443 | Securities received as collateral | | 2 | | 4,577 | | 11,300 | | — | | — | Separate account assets | | 3 | | 24,544 | | 20,953 | | — | | — | Loans (net) | | c | | 343,757 | | 270,892 | | 408,278 | | 336,808 | Loans held for sale | | 4 | | 209 | | 677 | | — | | — | Interest and fees receivable | | 5 | | 5,658 | | 5,474 | | 5,658 | | 5,474 | Premium and insurance balances
receivables (net) | | 5 | | 7,660 | | 7,640 | | 7,660 | | 7,640 | Reinsurance assets | | | | 22,192 | | 24,609 | | 22,192 | | 24,609 | Deferred policy acquisition costs | | a | | 18,716 | | 17,944 | | 19,135 | | 18,141 | Goodwill and other intangible assets | | a | | 19,745 | | 18,138 | | 12,935 | | 12,958 | Net deferred tax assets | | a-d, f-m | | 4,691 | | 5,299 | | 4,727 | | 5,299 | Other assets | | b, d, g, h,
m, 1, 5 | | 24,247 | | 27,455 | | 23,776 | | 28,262 | | | | | |
| |
| |
| |
| Total assets | | | | 1,063,678 | | 1,010,691 | | 1,053,226 | | 989,288 | | | | | |
| |
| |
| |
| Liabilities and Shareholders’ Equity | | | | | | | | | | | Insurance loss and loss expense reserves | | | | 65,475 | | 67,005 | | 65,464 | | 67,005 | Insurance and investment contract reserves | | 1 | | 288,160 | | 315,000 | | 287,697 | | 278,312 | Deposits | | i | | 214,695 | | 201,211 | | 214,869 | | 201,033 | Liabilities held for separate accounts | | 3 | | 24,544 | | 20,953 | | — | | — | Unearned premiums | | c | | 14,861 | | 14,524 | | 14,868 | | 14,524 | Short-term borrowings | | 6 | | 170,333 | | 135,101 | | 170,333 | | 135,101 | Long-term debt | | 6 | | 47,945 | | 48,326 | | 47,160 | | 48,069 | Trading account liabilities | | i, j, 3 | | 112,349 | | 82,013 | | 141,563 | | 141,503 | Obligations to return securities | | 2 | | 4,577 | | 11,300 | | — | | — | Net deferred tax liabilities | | a-d, f-m | | 5,105 | | 5,525 | | 4,618 | | 5,324 | Other liabilities | | b, d, f, h, i,
l, m, 1, 4 | | 51,630 | | 53,931 | | 49,764 | | 51,315 | | | | | |
| |
| |
| |
| Total liabilities | | | | 999,674 | | 954,889 | | 996,336 | | 942,186 | Minority interests in consolidated subsidiaries | | c, d, i , m, 7 | | 11,005 | | 11,419 | | 6,409 | | 7,615 | Shareholders’ equity before minority interests | | a-d, f-m | | 52,999 | | 44,383 | | 50,481 | | 39,487 | | | | | |
| |
| |
| |
| Total liabilities and shareholders’ equity | | | | 1,063,678 | | 1,010,691 | | 1,053,226 | | 989,288 | | | | | |
| |
| |
| |
|
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Condensed consolidated income statement information
The following is condensed consolidated income statement information of the Allianz Group, reformatted to reflect the impacts of the valuation, recording and presentation differences between IFRS and US GAAP:
| | | | | | | | | | | | | | | | | | | | | | | | | | US GAAP
| | | IFRS Reformatted
| | For the years ended December 31,
| | Reference
| | 2006
| | | 2005
| | | 2004
| | | 2006
| | | 2005
| | | 2004
| | | | | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | Premiums earned (net) | | c, i | | 58,499 | | | 57,682 | | | 56,789 | | | 58,524 | | | 57,682 | | | 56,789 | | Interest and similar income | | c, i, 11 | | 23,710 | | | 22,365 | | | 21,030 | | | 23,669 | | | 22,391 | | | 20,945 | | Trading income | | i, j | | 2,164 | | | 3,517 | | | 2,832 | | | 940 | | | 1,163 | | | 1,677 | | Realized investment gains and losses (net) | | c, d, e, 10,
11 | | 2,576 | | | 2,389 | | | 1,776 | | | 5,110 | | | 3,434 | | | 2,567 | | Commissions and fees | | 9 | | 7,492 | | | 6,303 | | | 5,533 | | | 7,492 | | | 6,884 | | | 5,696 | | Other income | | d, h, l, m | | 197 | | | 90 | | | 352 | | | 86 | | | 92 | | | 329 | | Income from fully consolidated private equity investment. | | | | 1,392 | | | 598 | | | 175 | | | 1,392 | | | 598 | | | 175 | | | | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Total income | | | | 96,030 | | | 92,944 | | | 88,487 | | | 97,213 | | | 92,244 | | | 88,178 | | | | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Interest on deposits | | c, i, 8 | | (2,689 | ) | | (2,719 | ) | | (1,993 | ) | | (2,660 | ) | | (2,792 | ) | | (2,085 | ) | Interest on short-term borrowings | | c, i, 8 | | (995 | ) | | (793 | ) | | (1,380 | ) | | (995 | ) | | (1,283 | ) | | (1,691 | ) | Interest on long-term debt | | c, i, 8 | | (2,110 | ) | | (2,787 | ) | | (2,335 | ) | | (2,104 | ) | | (2,302 | ) | | (1,912 | ) | | | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Total interest expense | | | | (5,794 | ) | | (6,299 | ) | | (5,708 | ) | | (5,759 | ) | | (6,377 | ) | | (5,688 | ) | | | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Total income, net of interest expense | | | | 90,236 | | | 86,645 | | | 82,779 | | | 91,454 | | | 85,867 | | | 82,490 | | | | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Benefits, claims, and loss expenses incurred | | c, k | | (54,323 | ) | | (56,320 | ) | | (53,433 | ) | | (53,672 | ) | | (53,946 | ) | | (52,362 | ) | Provision for loan losses | | | | (36 | ) | | 109 | | | (354 | ) | | (36 | ) | | 109 | | | (354 | ) | | | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Total provisions for losses, loss expenses, and loan losses | | | | (54,359 | ) | | (56,211 | ) | | (53,787 | ) | | (53,708 | ) | | (53,837 | ) | | (52,716 | ) | | | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Insurance underwriting, acquisition and insurance expenses | | a, c, 12 | | (14,040 | ) | | (12,969 | ) | | (12,829 | ) | | (14,301 | ) | | (13,380 | ) | | (13,259 | ) | Investment, fee and commission expenses | | | | (3,090 | ) | | (3,580 | ) | | (2,571 | ) | | (3,459 | ) | | (3,404 | ) | | (2,571 | ) | Goodwill and other intangibles amortization | | a | | (315 | ) | | (314 | ) | | (547 | ) | | (51 | ) | | (50 | ) | | (1,362 | ) | Other expenses | | f, g, l, 9,
12 | | (8,147 | ) | | (7,480 | ) | | (8,057 | ) | | (8,784 | ) | | (8,053 | ) | | (8,141 | ) | Expenses from fully consolidated private equity investment | | | | (1,381 | ) | | (572 | ) | | (175 | ) | | (1,381 | ) | | (572 | ) | | (175 | ) | | | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Total operating expenses | | | | (26,973 | ) | | (24,915 | ) | | (24,179 | ) | | (27,976 | ) | | (25,459 | ) | | (25,508 | ) | | | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Income before income (net) from investments in associated enterprises and joint ventures, income tax expense, and minority interests | | | | 8,904 | | | 5,519 | | | 4,813 | | | 9,770 | | | 6,571 | | | 4,266 | | Income (net) from investments in associated enterprises and joint ventures | | d, h, 11, 12 | | 553 | | | 1,037 | | | 768 | | | 553 | | | 1,257 | | | 777 | | Income tax (expense)/benefit | | a-m, 12 | | (1,752 | ) | | (1,794 | ) | | (1,443 | ) | | (2,013 | ) | | (2,062 | ) | | (1,609 | ) | | | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Income before minority interests | | | | 7,705 | | | 4,762 | | | 4,138 | | | 8,310 | | | 5,766 | | | 3,434 | | Minority interests in income of consolidated subsidiaries | | c, d, e, i, k,
m, n, 12 | | (1,188 | ) | | (1,078 | ) | | (1,248 | ) | | (1,289 | ) | | (1,386 | ) | | (1,168 | ) | | | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Income from continuing operations | | | | 6,517 | | | 3,684 | | | 2,890 | | | 7,021 | | | 4,380 | | | 2,266 | | Discontinued operations | | 12 | | — | | | 9 | | | (9 | ) | | — | | | — | | | — | | | | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Net income | | | | 6,517 | | | 3,693 | | | 2,881 | | | 7,021 | | | 4,380 | | | 2,266 | | | | | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Net income per share
Net income per share is calculated excluding the effect of Allianz SE shares held by associated companies. During the years ended December 31, 2006, 2005 and 2004, associated companies did not hold any Allianz SE shares.
Recently issued US accounting pronouncements
In February 2006, the FASB issued SFAS 155,Accounting for Certain Hybrid Financial Instruments (“SFAS 155”). SFAS 155 permits fair value measurement for any hybrid financial instrument that contains an embedded derivative that would require bifurcation if the holder irrevocably elects to account for the whole investment on a fair value basis. SFAS 155 is effective for the year ending December 31, 2007.
In March 2006, the FASB issued SFAS 156,Accounting for Servicing of Financial Assets – an amendment of FASB Statement No. 140 (“SFAS 156”). SFAS 156 amends SFAS 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, with respect to the accounting for separately recognized servicing assets and servicing liabilities. SFAS 156 requires that all separately recognized servicing assets and servicing liabilities be initially measured at fair value, if practicable, and permits, but does not require, subsequent measurement at fair value. SFAS 156 is effective for the year ending December 31, 2007.
In July 2006, the FASB issued FASB interpretation No. 48,Accounting for Uncertainty in Income Taxes (“FIN 48”). FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. It also provides accounting guidance on derecognition, classification, interest and penalties in connection with income taxes, accounting in interim periods, disclosure and transition. FIN 48 is effective for the year ended December 31, 2007. The cumulative effect, if any, will be reported as an adjustment to the opening balance of retained earnings as of January 1, 2007, except for items that would not be recognized in earnings, such as effects of tax positions related to business combinations. We are currently evaluating the potential effect that the adoption of the Interpretation will have on Allianz Group’s consolidated financial statements.
In April 2006, the FASB issued FASB Staff Position FIN 46(R)-6,Determining the Variability to Be Considered in Applying FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities (“FSP FIN 46(R)-6”). FSP FIN 46(R)-6 provides accounting guidance on how to determine the variability to be considered in applying FIN 46. FSP FIN 46(R)-6 is effective for the year ending December 31, 2007.
In September 2005, AcSEC issued SOP 05-1,Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts (“SOP 05-1”). SOP 05-1 provides guidance on accounting by insurance enterprises for deferred acquisition costs on internal replacements of insurance and investment contracts other than those specifically described in FASB No. 97. SOP 05-1 defines an internal replacement as a modification in product benefits, features, rights, or coverages that occurs by the exchange of a contract for a new contract, or by amendment, endorsement, or rider to a contract, or by the election of a feature or coverage within a contract. SOP 05-1 is effective for the year ending December 31, 2007.
In September 2006, the FASB issued SFAS 157,Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. SFAS 157 is effective for the year ending December 31, 2008.
In February 2007, the FASB issued SFAS 159,The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115 (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. SFAS 159 is effective for the year ending December 31, 2008.
The Allianz Group is currently assessing the impact of the new standards on its condensed consolidated financial statements presented in accordance with US GAAP contained in this footnote. In instances where early adoption is allowed, Allianz has elected not to early adopt.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Recently adopted US accounting pronouncements
In May 2005, the FASB issued SFAS 154,Accounting Changes and Error Corrections – a replacement of APB Opinion No. 20 and FASB Statement No. 3 (“SFAS 154”). SFAS 154 changes the requirements for the accounting for and reporting of a change in accounting principle and applies to all voluntary changes in accounting principle, as well as to changes required by an accounting pronouncement that does not include specific transition provisions. It requires retrospective application to prior periods’ financial statements of a voluntary change in accounting principle unless it is impracticable, which is generally in line with the IFRS solution. SFAS 154 was effective for the year ended December 31, 2006; it did not effect the Allianz Group’s condensed consolidated financial statements presented in accordance with US GAAP contained in this footnote.
In September 2006, the FASB issued SFAS 158,Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106, and 132(R) (“SFAS 158”). SFAS 158 requires an employer to recognize overfunded or underfunded status of a defined benefit postretirement plan as an asset or liability in its financial statements and to recognize changes in that funded status through comprehensive income. These recognition requirements are effective for the fiscal year ending after December 15, 2006. See Note 53(b) Employee benefit plans, for the effect of adopting the recognition provisions of SFAS 158 on the Allianz Group’s condensed consolidated financial statements presented in accordance with US GAAP. SFAS 158 also requires an employer to measure the assets and liabilities of a defined benefit plan as of the date of its year-end statement of financial position, with limited exceptions. The measurement requirement of SFAS 158 is effective for public entities for the year ending December 31, 2008.
In March 2006, the FASB issued FASB Staff Position No. FTB 85-4-1,Accounting for Life Settlement Contracts by Third Party Investors (“FSP FTB 85-4-1”), which is also an amendment to FASB Technical Bulletin No. 85-4, Accounting for Purchases of Life Insurance, and FASB Statement No. 133, Accounting for Derivative Instruments andHedging Activities. FSP FTB 85-4-1 provides accounting guidance regarding the accounting treatment for investments in life settlement contracts. An investor may elect to account for those investments using either the investment method or the fair value method on an instrument by instrument basis. The Allianz Group adopted this policy for the year ended December 31, 2006 with no material effect on its condensed consolidated financial statements presented in accordance with US GAAP contained in this footnote.
In November 2005, the FASB issued FASB Staff Position FAS 115-1 and FAS 124-1,The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments (“FSP 115-1”). FSP 115-1 provides accounting guidance regarding the determination of when an impairment of debt and marketable equity securities and investments accounted for under the cost method should be considered other-than-temporary and recognized in income. FSP 115-1 was effective for the year ended December 31, 2006. See Note 53(c) Investments, for the effect of adopting this FASB Staff Position on the Allianz Group’s condensed consolidated financial statements presented in accordance with US GAAP.
In December 2004, the FASB issued SFAS 123 (revised 2004),Share-Based Payment (“SFAS 123R”), which replaces SFAS No. 123,Accounting for Stock-Based Compensation (“SFAS 123”) and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. SFAS 123R was effective for the year ended December 31, 2006 and did not have a material effect on the Allianz Group’s condensed consolidated financial statements presented in accordance with US GAAP contained in this footnote.
In June 2005, the EITF reached consensus on Issue No. 05-5,Accounting for Early Retirement or Postemployment Programs with Specific Features (Such as Terms specified in Altersteilzeit Early Retirement Arrangements) (“EITF 05-5”). EITF 05-5 provides accounting guidance on Alterszeit arrangements as they are offered mainly in Germany. EITF 05-5 was effective for the year ended December 31, 2006. See Note 53(l) Provisions, for the effect of adopting this EITF on the Allianz Group’s condensed consolidated financial statements presented in accordance with US GAAP.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
In June 2005, the EITF reached consensus on Issue No. 04-5,Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights (“EITF 04-5”). EITF 04-5 provides a framework for a general partner to determine whether it controls a partnership. EITF 04-5 was effective for the year ended December 31, 2006 and did not have a material impact on the Allianz Group’s condensed consolidated financial statements presented in accordance with US GAAP contained in this footnote.
In September 2005, the EITF reached consensus on Issue No. 05-6,Determining the Amortization Period for Leasehold Improvements Purchased after Lease Inception or Acquired in a Business Combination (“EITF 05-6”). EITF 05-6 requires leasehold improvements to be amortized over the shorter of the useful life or lease term including reasonably assured renewals. EITF 05-6 was effective for the year ended December 31, 2006 and did not have a material impact on the Allianz Group’s condensed consolidated financial statements presented in accordance with US GAAP contained in this footnote.
In September 2006, the SEC issued Staff Accounting Bulletin No. 108,Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (“SAB 108”). SAB 108 requires a company to consider the amount by which the current year income statement may be misstated (‘rollover approach’) and the cumulative amount by which the current year balance sheet may be misstated (‘iron-curtain approach’) when assessing prior year misstatements. SAB 108 is effective for the Allianz Group’s 2006 consolidated financial statements; its adoption did not effect the condensed consolidated financial statements presented in accordance with US GAAP contained in this footnote.
Variable Interest Entities
In December 2003, the FASB issued FASB Interpretation No. 46(R),Consolidation of Variable Interest Entities (“FIN 46R”), which revised the original FIN 46 guidance issued in January 2003. FIN 46R introduces a new concept of a variable interest entity (VIE) and determining when an entityshould include the assets, liabilities, noncontrolling interests and results of activities of a VIE in its consolidated financial statements. A VIE is an entity (1) that has a total equity investment at risk that is not sufficient to finance its activities without additional subordinated financial support from other parties, or (2) where the group of equity owners does not have the ability to make significant decisions about the entity’s activities through voting or similar rights, or the obligation to absorb the entity’s expected losses, or the right to receive the entity’s expected residual returns.
FIN 46R requires that a VIE be consolidated if a party with an ownership, contractual or other financial interest in the VIE is obligated to absorb a majority of the risk of loss from the VIE’s activities, is entitled to receive a majority of the VIE’s residual returns, or both. The holder of a variable interest that consolidates the VIE is the primary beneficiary. Upon consolidation, the primary beneficiary generally must initially record all of the VIE’s assets, liabilities and noncontrolling interests at fair value and subsequently account for the VIE as if it were consolidated based on majority voting interest.
The Allianz Group is involved with a variety of VIEs including asset securitization entities, investment funds and investment conduits. The Allianz Group is involved in asset securitization entities through arranging, facilitating, and in certain cases, managing investment conduits for banking customers in connection with asset-backed security transactions where the VIEs receive the underlying assets, such as trade or finance receivables from the Allianz Group’s banking customers and securitizes such assets to provide customers with cost-efficient financing.
In providing these services, the Allianz Group may in some instances have a financial interest in such financing structures. However, the risk of financial loss may be mitigated through participations in such losses by other third party investors.
The Allianz Group also engages in establishing and managing investment fund VIEs with a goal of developing, marketing and managing these funds. During the establishment phase of these funds, the
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Allianz Group may provide initial capital for the VIEs to acquire securities until sufficient third-party investors purchase participations in the funds or the VIEs are terminated. Certain of these VIE’s funds may include capital maintenance and/or performanceguarantees given to the investors. These guarantees differ both in terms of amount and duration according to the relevant arrangements. The Allianz Group receives fee and commission income from investors for the management of these VIEs.
The following table reflects all VIEs for which the Allianz Group is the primary beneficiary, however, does not hold a majority voting interest. These VIEs are consolidated in the Allianz Group’s consolidated financial statements for the year ended December 31, 2006.
| | | | | | | | | | | | Year ended December 31, 2006
| Type of VIE
| | Total assets
| | Consolidated assets
which are collateral
for VIE’s obligations
| | Amount of
consolidated
assets which are
collateral for
VIE’s obligations
| | Creditor’s
recourse to
Allianz Group
assets
| | | | € mn | | | | € mn | | € mn | Asset-backed securities transaction | | 24,138 | | Various receivables, corporate notes, index certificates and derivatives | | 24,138 | | — | Derivatives transactions | | 4,686 | | Derivatives, equity, leases and cash balances | | 4,686 | | — | Investment funds | | 2,677 | | Hedge fund units, bonds, investment funds and derivatives | | 2,677 | | — | Other | | 660 | | Real estate, equity instruments and cash and cash equivalents | | 660 | | — | | | |
| | | |
| |
| Total | | 32,161 | | | | 32,161 | | — | | | |
| | | |
| |
|
The following table reflects the VIEs for which the Allianz Group has a significant variable interest but which are not consolidated as the Allianz Group is not the primary beneficiary as of December 31, 2006.
| | | | | | | | | | As of December 31, 2006,
| Type of VIE
| | Nature of Allianz Group’s involvement with VIEs
| | Total assets
| | Allianz
Group’s
maximum
exposure
to loss
| | | | | | € mn | | € mn | Investment funds | | Guarantee obligations | | 3,342 | | 1,814 | Investment funds | | Investment manager and/or equity holder | | 9,354 | | 1,047 | Vehicles primarily used for asset-backed security transactions | | Arranger, establisher, servicer, liquidity provider and/or investment counterparty | | 33,067 | | 5,722 | Vehicles used for CBO and CDO transactions | | Investment manager and/or equity holder | | 8,398 | | 1 | Other | | Client financing transaction | | 3,240 | | 2,947 | | | | | |
| |
| Total | | | | 57,401 | | 11,531 | | | | | |
| |
|
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
54 Selected subsidiaries and other holdings
| | | | | OPERATING SUBSIDIARIES—GERMANY
| | Equity
| | % owned(1)
| | | | € mn | | | AGIS Allianz Dresdner Informationssysteme GmbH, Munich | | 212 | | 100.0 | Allianz Capital Partners GmbH, Munich | | 0.03 | | 100.0 | Allianz Capital Partners Verwaltungs GmbH, Munich | | 934 | | 100.0 | Allianz Dresdner Bauspar AG, Bad Vilbel | | 101 | | 100.0 | Allianz Global Corporate & Specialty AG, Munich | | 778 | | 100.0 | Allianz Global Investors Advisory GmbH, Frankfurt am Main | | 3 | | 100.0 | Allianz Global Investors AG, Munich | | 3,039 | | 100.0 | Allianz Global Investors Europe GmbH, Munich | | 17 | | 100.0 | Allianz Global Investors Kapitalanlagegesellschaft mbH, Frankfurt am Main | | 139 | | 100.0 | Allianz Immobilien GmbH, Stuttgart | | 5 | | 100.0 | Allianz Lebensversicherungs-Aktiengesellschaft, Stuttgart | | 1,411 | | 91.0 | Allianz Pensionskasse AG, Stuttgart | | 121 | | 100.0 | Allianz Pension Partners GmbH, Munich | | 0.5 | | 100.0 | Allianz Private Equity Partners GmbH, Munich | | 0.04 | | 100.0 | Allianz Private Krankenversicherungs-Aktiengesellschaft, Munich | | 340 | | 100.0 | Allianz ProzessFinanz GmbH, Munich | | 0.4 | | 100.0 | Allianz Versicherungs-Aktiengesellschaft, Munich | | 2,480 | | 100.0 | Allianz Zentrum für Technik GmbH, Munich | | 0.2 | | 100.0 | DEGI Deutsche Gesellschaft für Immobilienfonds m.b.H., Frankfurt am Main | | 23 | | 94.0 | Deutsche Lebensversicherungs-AG, Berlin | | 43 | | 100.0 | Dresdner Bank AG, Frankfurt am Main | | 8,031 | | 100.0 | Euler Hermes Kreditversicherungs-AG, Hamburg | | 201 | | 100.0 | MAN Roland Druckmaschinen AG, Offenbach | | 241 | | 100.0 | Münchener und Magdeburger Agraversicherung AG, Munich | | 6 | | 59.9 | Oldenburgische Landesbank Aktiengesellschaft, Oldenburg | | 506 | | 89.4 | Reuschel & Co. Kommanditgesellschaft, Munich | | 134 | | 97.5 | risklab germany GmbH, Frankfurt am Main | | 0.03 | | 100.0 | Vereinte Spezial Krankenversicherung AG, Munich | | 3 | | 100.0 | Vereinte Spezial Versicherung AG, Munich | | 45 | | 100.0 |
(1)1)
| Percentage includes equity participations held by dependent enterprises in full, even if the Allianz Group’s share in the dependent enterprise is under 100%100.0%. |
2) | No subsidiary of the Allianz Group since January 12, 2009 |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) | | | | | | OPERATING SUBSIDIARIES—OTHER COUNTRIES
| | Equity
| | % owned(1)
| | | | | € mn | | | | AAAM S.A., Paris | | 31 | | 84.9 | | Adriatica de Seguros C.A., Caracas | | 20 | | 98.3 | | AGF Allianz Argentina Compania de Seguros Generales S.A., Buenos Aires | | 16 | | 100.0 | | AGF Asset Management S.A., Paris | | 90 | | 99.8 | | AGF Belgium Insurance S.A., Brussels | | 390 | | 100.0 | | AGF Brasil Seguros S.A., Sao Paulo | | 151 | | 72.5 | | AFG La Lilloise S.A., Paris | | 85 | | 100.0 | | Alba Allgemeine Versicherungs-Gesellschaft, Basel | | 23 | | 100.0 | | Allianz Australia Limited, Sydney | | 972 | | 100.0 | | Allianz Bulgaria Insurance and Reinsurance Company Ltd., Sofia | | 21 | | 78.0 | | Allianz Bulgaria Life Insurance Company Ltd., Sofia | | 11 | | 99.0 | | Allianz Compañia de Seguros y Reaseguros S.A., Barcelona | | 676 | | 99.9 | | Allianz Cornhill Insurance plc., Guildford | | 1,182 | | 98.0 | (2) | Allianz China Life Insurance Co. Ltd., Shanghai | | 18 | | 51.0 | | Allianz Egypt Insurance Company S.A.E., Cairo | | 5 | | 85.0 | | Allianz Egypt Life Company S.A.E., Cairo | | 6 | | 99.4 | | Allianz Elementar Lebensversicherungs-Aktiengesellschaft, Vienna | | 61 | | 100.0 | | Allianz Elementar Versicherungs-Aktiengesellschaft, Vienna | | 458 | | 100.0 | | Allianz Europe Ltd., Amsterdam | | 5,245 | | 100.0 | | Allianz Fire and Marine Insurance Japan Ltd., Tokyo | | 0.03 | | 100.0 | | Allianz General Insurance Company S.A., Athens | | 38 | | 100.0 | | Allianz General Insurance Malaysia Berhad p.l.c., Kuala Lumpur | | 69 | | 98.7 | | Allianz Global Corporate & Specialty France, Paris | | 158 | | 100.0 | | Allianz Global Investors Distributors LLC, Stamford | | 16 | | 100.0 | | Allianz Global Investors Hong Kong Ltd., Hong Kong | | 67 | | 100.0 | | Allianz Global Investors Ireland Ltd., Dublin | | 1 | | 100.0 | | Allianz Global Investors Korea Limited, Seoul | | 22 | | 100.0 | | Allianz Global Investors Luxembourg S.A., Luxembourg | | 68 | | 100.0 | | Allianz Global Investors of America L.P., Delaware | | 1,511 | | 97.3 | | Allianz Global Investors Singapore Ltd., Singapore | | 4 | | 100.0 | | Allianz Global Investors Taiwan (SITE) Ltd., Taipei | | 11 | | 100.0 | | Allianz Global Risks US Insurance Company, Burbank | | 3,253 | | 100.0 | | Allianz Hungária Biztositó Rt., Budapest | | 185 | | 100.0 | | Allianz Insurance (Hong Kong) Ltd., Hong Kong | | 9 | | 100.0 | | Allianz Insurance Company of Singapore Pte. Ltd., Singapore | | 17 | | 100.0 | | Allianz Irish Life Holdings p.l.c., Dublin | | 328 | | 66.4 | | Allianz Life Insurance Co. Ltd., Seoul | | 590 | | 100.0 | | Allianz Life Insurance Company of North America, Minneapolis | | 2,611 | | 100.0 | | Allianz Life Insurance Company S.A., Athens | | 28 | | 100.0 | | Allianz Life Insurance Malaysia Berhad p.l.c., Kuala Lumpur | | 20 | | 100.0 | | Allianz México S.A. Compañia de Seguros, Mexico | | 69 | | 100.0 | | Allianz Nederland Asset Management B.V., Amsterdam | | 33 | | 100.0 | | Allianz Nederland Levensverzekering N.V., Utrecht | | 272 | | 100.0 | | Allianz Nederland Schadeverzekering N.V., Rotterdam | | 421 | | 100.0 | | Allianz of America Inc., Wilmington | | 9,109 | | 100.0 | |
| | | | | Operating Subsidiaries—Other countries | | Equity | | % owned1) | | | | € mn | | | Italy | | | | | ALLIANZ SUBALPINA HOLDINGS S.p.A., Torino | | 280 | | 98.0 | Allianz Global Investors Italia S.p.A, Milan | | 48 | | 100.0 | Allianz S.p.A., Trieste | | 2,924 | | 100.0 | Genialloyd S.p.A., Milan | | 280 | | 100.0 | Investitori SGR S.p.A., Milan | | 17 | | 98.3 | RB Vita S.p.A., Milano | | 209 | | 100.0 | Japan | | | | | RCM Japan Co. Ltd. , Tokyo | | 0.6 | | 100.0 | Laos | | | | | Assurances Générales du Laos Ltd., Vientiane | | 2 | | 51.0 | Luxembourg | | | | | Allianz Global Investors Luxembourg S.A., Senningerberg | | 70 | | 100.0 | Dresdner Bank Luxembourg S.A., Luxembourg2) | | 796 | | 100.0 | Malaysia | | | | | Allianz Life Insurance Malaysia Berhad p.l.c., Kuala Lumpur | | 25 | | 100.0 | Allianz Malaysia Berhad p.l.c., Kuala Lumpur | | 48 | | 100.0 | Mexico | | | | | Allianz México S.A. Compañia de Seguros, Mexico City | | 61 | | 100.0 | Netherlands | | | | | Allianz Europe Ltd., Amsterdam | | 27,315 | | 100.0 | Allianz Nederland Asset Management B.V., Amsterdam | | 33 | | 100.0 | Allianz Nederland Levensverzekering N.V., Utrecht | | 207 | | 100.0 | Allianz Nederland Schadeverzekering N.V., Rotterdam | | 260 | | 100.0 | Dresdner VPV N.V., Gouda2) | | 47 | | 100.0 | Poland | | | | | TU Allianz Polska S.A., Warsaw | | 154 | | 100.0 | TU Allianz Zycie Polska S.A., Warsaw | | 38 | | 100.0 | Portugal | | | | | Companhia de Seguros Allianz Portugal S.A., Lisboa | | 161 | | 64.8 | Republic of Korea | | | | | Allianz Global Investors Korea Limited, Seoul | | 14 | | 100.0 | Allianz Life Insurance Co. Ltd., Seoul | | 398 | | 100.0 | Romania | | | | | Allianz Tiriac Asigurari SA, Bukarest | | 120 | | 52.2 | Russia | | | | | Dresdner Bank ZAO, St. Petersburg2) | | 89 | | 100.0 | Insurance Company “Progress Garant”, Moscow | | 28 | | 100.0 | Insurance Joint Stock Company „Allianz”, Moscow | | 7 | | 100.0 | Russian People’s Insurance Society “ROSNO”, Moscow | | 107 | | 100.0 | Singapore | | | | | Allianz Global Investors Singapore Ltd., Singapore | | 2 | | 100.0 | Slovakia | | | | | Allianz-Slovenská poist’ovna a.s., Bratislava | | 501 | | 84.6 | Spain | | | | | Allianz Compañia de Seguros y Reaseguros S.A., Madrid | | 458 | | 99.9 | Euler Hermes Crédito Compañia de Seguros y Reaseguros, S.A., Madrid | | 7 | | 100.0 | Eurovida, S.A. Compañia de Seguros y Reaseguros, Madrid | | 94 | | 51.0 |
(1)1)
| Percentage includes equity participations held by dependent enterprises in full, even if the Allianz Group’s share in the dependent enterprise is under 100%100.0%. |
(2)2)
| 99.99%No subsidiary of the voting share capital.Allianz Group since January 12, 2009
|
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) | | | | | | OPERATING SUBSIDIARIES—OTHER COUNTRIES
| | Equity
| | % owned(1)
| | | | | € mn | | | | Allianz poistóvna a.s., Prague | | 121 | | 100.0 | | Allianz President Life Insurance Co. Ltd., Taipei | | 62 | | 50.0 | (2) | Allianz Re Dublin Limited, Dublin | | 17 | | 100.0 | | Allianz Risk Transfer AG, Zurich | | 402 | | 100.0 | | Allianz-Slovenská poist’ovna a.s., Bratislava | | 340 | | 84.6 | | ALLIANZ SUBALPINA S.p.A. SOCIETÀ DI ASSICURAZIONI E RIASSICURAZIONI, Turin | | 228 | | 98.0 | | Allianz Suisse Lebensversicherungs-Gesellschaft, Zurich | | 426 | | 100.0 | | Allianz Suisse Versicherungs-Gesellschaft, Zurich | | 554 | | 100.0 | | Allianz Tiriac Asigurari SA, Bukarest | | 44 | | 51.6 | | Allianz Underwriters Insurance Company, Burbank | | 41 | | 100.0 | | Allianz (UK) Limited, Guildford | | 733 | | 100.0 | | Allianz Worldwide Care Ltd., Dublin | | 12 | | 100.0 | | Allianz Zagreb d.d., Zagreb | | 17 | | 80.1 | | Assurances Générales de France, Paris | | 7,154 | | 60.2 | | Assurances Générales de France IART S. A., Paris | | 2,485 | | 100.0 | | Assurances Générales de France Vie S. A., Paris | | 2,600 | | 100.0 | | Assurances Générales du Laos Ltd., Laos | | 4 | | 51.0 | | Banque AGF S. A., Paris | | 270 | | 100.0 | | Colseguros Generales S. A., Bogota | | 32 | | 100.0 | | Commercial Bank Allianz Bulgaria Ltd., Sofia | | 32 | | 99.8 | | Compagnie d’Assurance de Protection Juridique S. A., Zug | | 14 | | 100.0 | | Companhia de Seguros Allianz Portugal S. A., Lisbon | | 186 | | 64.8 | | Dresdner Bank Luxembourg, S. A., Luxembourg | | 544 | | 100.0 | | Dreesdner Bank (Schweiz) AG, Zurich | | 112 | | 99.8 | | Dresdner Bank ZAO, St. Petersburg | | 82 | | 100.0 | | Dresdner Kleinwort Group Ltd., London | | 45 | | 100.0 | | Dresdner Kleinwort (Japan) Limited, Hong Kong | | 269 | | 100.0 | | Dresdner Kleinwort Securities Llc, Wilmington/Delaware | | 71 | | 100.0 | | ELVIA Reiseversicherungs-Gesellschaft AG, Zurich | | 191 | | 100.0 | | Euler Hermes Crédito Compañia de Seguros y Reaseguros, S. A., Madrid | | 5 | | 100.0 | | EULER HERMES SFAC. S. A., Paris | | 306 | | 100.0 | | Eurovida, S. A. Compañia de Seguros y Reaseguros, Madrid | | 59 | | 51.0 | | Fireman’s Fund Insurance Company, Novato | | 2,698 | | 100.0 | | GENIALLOYD S. p. A., Milan | | 74 | | 100.0 | | Insurance Joint Stock Company „Allianz”, Moscow | | 12 | | 100.0 | | INVESTITORI SGR S.p.A., Milan | | 17 | | 87.8 | | Kleinwort Benson Channel Islands Holdings Ltd., St. Peter Port/Guernsey | | 276 | | 100.0 | | Kleinwort Benson Private Bank Ltd., London | | 97 | | 100.0 | | Lloyd Adriatico S. p. A., Trieste | | 1,085 | | 99.7 | | Mondial Assistance S. A. S., Paris Cedex | | 79 | | 100.0 | | NFJ Investment Group LP, Dallas | | 4 | | 100.0 | | Nicholas Applegate Capital Management LLC, Delaware | | 15 | | 100.0 | | Oppenheimer Capital LLC, Delaware | | 7 | | 100.0 | | Pacific Investment Management Company LLC, Delaware | | 192 | | 85.0 | |
| | | | | | Operating Subsidiaries—Other countries | | Equity | | % owned1) | | | | | € mn | | | | Switzerland | | | | | | Alba Allgemeine Versicherungs-Gesellschaft, Basel | | 54 | | 100.0 | | Allianz Risk Transfer AG, Zurich | | 285 | | 100.0 | | Allianz Suisse Lebensversicherungs-Gesellschaft AG, Zurich | | 604 | | 100.0 | | Allianz Suisse Versicherungs-Gesellschaft, Zurich | | 450 | | 100.0 | | CAP Rechtsschutz-Versicherungsgesellschaft AG, Zürich | | 4 | | 100.0 | | Dresdner Bank (Schweiz) AG, Zurich2) | | 131 | | 99.8 | | ELVIA Reiseversicherungs-Gesellschaft AG, Wallisellen | | 224 | | 100.0 | | Selecta AG, Muntelier3) | | 113 | | 100.0 | | Taiwan | | | | | | Allianz Global Investors Taiwan Ltd., Taipei | | 29 | | 100.0 | | Allianz Taiwan Life Insurance Co. Ltd., Taipei | | 21 | | 99.7 | | Turkey | | | | | | Allianz Hayat ve Emeklilik AS, Istanbul | | 87 | | 89.0 | | Allianz Sigorta AS, Istanbul | | 157 | | 84.2 | | United Kingdom | | | | | | Allianz (UK) Limited, Guildford | | 418 | | 100.0 | | Allianz Insurance plc., Guildford | | 861 | | 98.0 | 4) | Dresdner Kleinwort Group Limited, London2) | | 45 | | 100.0 | | Dresdner Kleinwort Limited, London2) | | 258 | | 100.0 | | Kleinwort Benson Channel Islands Holdings Limited, St. Peter Port2) | | 225 | | 100.0 | | Kleinwort Benson Private Bank Limited, London2) | | 65 | | 100.0 | | RCM (UK) Ltd., London | | 18 | | 100.0 | | United States | | | | | | Allianz Global Investors of America L.P., Dover/Delaware | | 1,395 | | 100.0 | | Allianz Global Risks U.S. Insurance Company, Burbank/California | | 2,909 | | 100.0 | | Allianz Life Insurance Company of North America, Minneapolis/Minnesota | | 2,201 | | 100.0 | | Allianz of America Inc., Westport, CT | | 8,692 | | 100.0 | | Allianz Underwriters Insurance Company, Burbank/California | | 44 | | 100.0 | | Dresdner Kleinwort Securities LLC, Wilmington/Delaware2) | | 250 | | 100.0 | | Fireman’s Fund Insurance Company, Novato/California | | 2,272 | | 100.0 | | Nicholas Applegate Capital Management LLC, Dover/Delaware | | 11 | | 100.0 | | Pacific Investment Management Company LLC, Wilmington/Delaware | | 205 | | 92.1 | | RCM Capital Management LLC, Wilmington/Delaware | | 9 | | 100.0 | | Wm. H McGee & Co. Inc., New York/New York | | 4 | | 100.0 | |
(1)1)
| Percentage includes equity participations held by dependent enterprises in full, even if the Allianz Group’s share in the dependent enterprise is under 100%100.0%. |
(2)2)
| Controlled byNo subsidiary of the Allianz Group.Group since January 12, 2009
|
3) | Classified as “held-for-sale” |
4) | 99.99% of the voting share capital |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) | | | | | OPERATING SUBSIDIARIES—OTHER COUNTRIES
| | Equity
| | % owned(1)
| | | | € mn | | | Privatinvest Bank AG, Salzburg | | 14 | | 74.0 | PT Asuransi Allianz Life Indonesia p.l.c., Jakarta | | 20 | | 99.8 | PT Asuransi Allianz Utama Indonesia Ltd., Jakarta | | 19 | | 75.4 | RAS ASSET MANAGEMENT Socièta di gestione del risparmio S. p. A., Milan | | 46 | | 100.0 | RAS Tutela Giudiziaria S. p. A., Milan | | 11 | | 100.0 | RB Vita S. p. A., Milan | | 230 | | 100.0 | RCM Capital Management LLC, San Francisco | | 23 | | 100.0 | RCM (UK) Ltd., London | | 14 | | 100.0 | Riunione Adriatica di Sicurtà S.p.A., Milan | | 2,815 | | 100.0 | TU Allianz Polska S.A., Warsaw | | 75 | | 100.0 | TU Allianz Zycie Polska S.A., Warsaw | | 25 | | 100.0 | Veer Palthe Voûte NV, Gouda | | 42 | | 100.0 | Wm. H McGee & Co. Inc., New York | | 4 | | 100.0 |
| | | | | | Associated Enterprises1) | | Equity | | % owned2) | | | | | € mn | | | | Phenix Alternative Holding, Paris | | 2,007 | | 41.6 | | AGF SECURICASH L, Paris | | 1,583 | | 27.2 | | Allianz Euribor, Paris | | 1,162 | | 45.8 | | AGF Eurocash, Paris | | 848 | | 43.6 | | Allianz Euro Liquid, Paris | | 675 | | 42.5 | | Natinium 2007-1, Dublin | | 622 | | 48.4 | | Oddo, Paris | | 285 | | 20.0 | | Allianz-dit Euro Bond Total Return Fonds, Senningerberg | | 254 | | 49.9 | | Cofitem Cofimur, Paris | | 253 | | 22.1 | | AGF Peh Eur. IV FCPR, Paris | | 191 | | 43.5 | | Citylife Srl., Milano | | 191 | | 26.7 | | PHRV (Paris Hotels Roissy Vaugirard), Paris | | 181 | | 30.6 | | Henderson UK Outlet Mall Partnership LP., Edinburgh | | 174 | | 19.5 | 3) | Harwanne SA, Genève | | 174 | | 21.5 | | Bajaj Allianz Life Insurance Company Ltd., Pune | | 147 | | 26.0 | | Ayudhya Allianz C.P. Life Public Company Limited, Bangkok | | 146 | | 25.0 | | FONDO IMMOBILIARE DOMUS, Rome | | 133 | | 25.5 | | Allianz PIMCO Euro Bond Total Return, Luxemburg | | 112 | | 36.8 | | Argos, Paris | | 102 | | 47.4 | | OeKB EH Beteiligungss-und Management AG, Vienna, | | 92 | | 49.0 | | Bajaj Allianz General Insurance Company Ltd., Pune | | 82 | | 26.0 | | PGREF V 1301 SIXTH HOLDING LP, Wilmington | | 78 | | 24.5 | | SDU Finco B.V., Amsterdam | | 47 | | 49.7 | |
(1)1)
| Percentage includes equity participations held by dependent enterprises in full, even if the Allianz Group’s share in the dependent enterprise is under 100%.
|
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
| | | | | | ASSOCIATED ENTERPRISES(1)
| | Equity
| | % owned(2)
| | | | | € mn | | | | dit-Euro Bond Total Return Fonds | | 5,729 | | 22.6 | | AGF Euribor | | 3,461 | | 4.0 | (3) | Phenix Alternative Holding | | 3,275 | | 36.4 | | AGF Eurocash | | 1,827 | | 31.9 | | Deutsche Schiffsbank AG, Bremen und Hamburg | | 559 | | 40.0 | | Oddo, Paris | | 304 | | 20.0 | | Objectif Japon | | 302 | | 20.8 | | Cofitem Cofimur, Paris | | 236 | | 21.8 | | AGF Euro Credit Alpha | | 214 | | 29.4 | | FONCIERE DES 6 ET 7 PARIS | | 197 | | 23.6 | | PHRV (Paris Hotels Roissy Vaugirard), Paris | | 178 | | 24.9 | | MFG Flughafen-Grundstücksverwaltunggesellschaft mbH & Co. BETA KG, Gruenwald | | 171 | | 29.4 | | W Finance Europe | | 170 | | 14.8 | (3) | Dresdner-Cetelem Kreditbank GmbH, Munich | | 162 | | 49.9 | | Kommanditgesellschaft Allgemeine Leasing GmbH & Co, Gruenwald | | 152 | | 40.5 | | Citylife Srl., Milano | | 129 | | 26.7 | | Koç Allianz Sigorta T.A.S., Istanbul | | 117 | | 37.1 | | Russian People's Insurance Society “Rosno”, Moskau | | 116 | | 47.7 | | Depfa Holding III, Frankfurt | | 109 | | 22.4 | | AGF Haut Rendement | | 105 | | 25.9 | | Parv Tar Ret + Eur | | 84 | | 37.4 | | Bajaj Allianz Life Insurance Company Ltd., Pune | | 59 | | 26.0 | | AGF Peh Eur. IV FCPR | | 58 | | 49.2 | | Bajaj Allianz General Insurance Company Ltd., Pune | | 52 | | 26.0 | | UBF N.V., Hilversum | | 22 | | 39.7 | |
(1)
| Associated enterprises are all those enterprises other than affiliated enterprises or joint ventures, in which the Allianz Group has an interest of between 20%20.0% and 50%50.0% regardless of whether a significant influence is exercised or not. The presented associated enterprises represent 90%90.0% of total carrying amount of investments in associated enterprises. |
(2)2)
| Including shares held by dependent subsidiaries. |
(3)3)
| Significant influence due to Allianz’s role in the (funds’) management and its ownership share |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued) | | | | | | | | | | | | OTHER SELECTED HOLDINGS IN LISTED
COMPANIES(1)
| | Market
value
| | owned(2)
| | Group
equity
| | Net
profit
| | | Balance sheet
date
| | | | € mn | | % | | € mn | | € mn | | | | Banco BPI S.A., Porto | | 391 | | 8.8 | | 1,451 | | 309 | | | 12/31/2006 | Banco Popular Espanol S.A., Madrid | | 1,514 | | 9.4 | | 5,332 | | 878 | | | 12/31/2005 | BASF AG, Ludwigshafen | | 935 | | 2.5 | | 18,578 | | 3,215 | | | 12/31/2006 | Bayer AG, Leverkusen | | 1,146 | | 3.8 | | 11,157 | | 1,597 | | | 12/31/2005 | Bayerische Motorenwerke AG, Munich | | 1,195 | | 4.2 | | 16,973 | | 2,239 | | | 12/31/2005 | Beiersdorf AG, Hamburg | | 853 | | 6.9 | | 1,293 | | 329 | | | 12/31/2005 | BNP Paribas S.A., Paris | | 534 | | 0.7 | | 45,993 | | 5,852 | | | 12/31/2005 | Bollore Investissement S.A., Ergue-Gaberic | | 406 | | 10.1 | | 1,759 | | 87 | | | 12/31/2005 | Cofinimmo S.A., Brussels | | 135 | | 8.8 | | 1,218 | | 90 | | | 12/31/2005 | E.ON AG, Duesseldorf | | 2,211 | | 3.1 | | 49,218 | | 7,407 | | | 12/31/2005 | ENI S.p.A., Rom | | 864 | | 0.8 | | 39,217 | | 8,788 | | | 12/31/2005 | GEA Group AG, Bochum | | 333 | | 10.1 | | 1,585 | | (67 | ) | | 12/31/2005 | Heidelberger Druckmaschinen AG, Heidelberg | | 378 | | 12.7 | | 1,138 | | 135 | | | 03/31/2006 | Industrial and Commercial Bank of China Limited, Beijing | | 3,034 | | 1.9 | | 27,049 | | 3,541 | | | 12/31/2005 | KarstadtQuelle AG, Essen | | 344 | | 7.4 | | 290 | | (317 | ) | | 12/31/2005 | Linde AG, Wiesbaden | | 1,120 | | 9.1 | | 4,413 | | 501 | | | 12/31/2005 | Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in München, Munich | | 2,915 | | 9.7 | | 26,429 | | 3,440 | | | 12/31/2006 | Pirelli & Co. SpA, Mailand | | 176 | | 6.5 | | 5,614 | | 327 | | | 12/31/2005 | Rhön-Klinikum AG, Bad Neustadt/Saale | | 128 | | 6.8 | | 642 | | 84 | | | 12/31/2005 | Royal Dutch Shell plc, London | | 551 | | 0.3 | | 90,924 | | 25,311 | | | 12/31/2005 | RWE AG, Essen | | 1,480 | | 4.1 | | 14,111 | | 3,847 | | | 12/31/2006 | Sanofi-Aventis S.A., Paris | | 502 | | 0.5 | | 45,820 | | 7,040 | | | 12/31/2006 | Sequana Capital S.A., Paris | | 157 | | 13.8 | | 2,193 | | 348 | | | 12/31/2005 | Siemens Aktiengesellschaft, Munich | | 825 | | 1.2 | | 30,008 | | 3,033 | | | 09/30/2006 | Telefonica S.A., Madrid | | 508 | | 0.6 | | 20,001 | | 6,233 | | | 12/31/2006 | Total S.A., Paris | | 870 | | 0.7 | | 41,483 | | 12,273 | | | 12/31/2005 | Unicredito Italiano S.p.A., Mailand | | 2,216 | | 3.2 | | 39,106 | | 2,470 | | | 12/31/2005 | Unilever N.V., Rotterdam | | 509 | | 1.4 | | 11,672 | | 5,015 | | | 12/31/2006 | Zagrebacka banka d.d., Zagreb | | 374 | | 13.7 | | 6,540 | | 140 | | | 12/31/2005 |
| | | | | | | | | | | Other selected holdings in listed companies1) | | Market
value | | owned2) | | Group
equity | | Net
profit | | Balance
sheet date | | | | € mn | | % | | € mn | | € mn | | | Banco BPI, S.A., Porto | | 139 | | 8.8 | | 1,905 | | 372 | | 12/31/2007 | Banco Popular Espanol S.A., Madrid | | 706 | | 9.6 | | 6,641 | | 1,337 | | 12/31/2007 | BASF SE, Ludwigshafen | | 669 | | 2.6 | | 20,098 | | 4,326 | | 12/31/2007 | Bayer AG, Leverkusen | | 827 | | 2.6 | | 16,821 | | 4,716 | | 12/31/2007 | Beiersdorf AG, Hamburg | | 622 | | 5.9 | | 2,070 | | 442 | | 12/31/2007 | E.ON AG, Duesseldorf | | 1,459 | | 2.6 | | 55,130 | | 7,724 | | 12/31/2007 | GEA Group Aktiengesellschaft, Bochum | | 232 | | 10.2 | | 1,414 | | 284 | | 12/31/2007 | The Hartford Financial Services Group, Inc., Hartford | | 286 | | 8.1 | | 13,784 | | 2,117 | | 12/31/2007 | Industrial & Commercial Bank of China Limited, Beijing | | 2,433 | | 1.9 | | 56,996 | | 8,623 | | 12/31/2007 | Nestlé S.A., Vevey | | 634 | | 0.6 | | 35,114 | | 7,369 | | 12/31/2007 | SGS SA, Geneve | | 312 | | 5.4 | | 1,206 | | 462 | | 12/31/2008 | UniCredito Italiano S.p.A., Milan | | 535 | | 2.3 | | 62,464 | | 6,678 | | 12/31/2007 | Zagrebacka banka d.d., Zagreb | | 184 | | 11.7 | | 1,703 | | 178 | | 12/31/2007 |
(1)1)
| Market value greater than or equal to €100 mn and percentage of shares owned greater than or equal to 5%5.0%, or market value greater than or equal to €500 mn, excluding trading portfolio of banking business. |
(2)2)
| Including shares held by dependent subsidiaries (incl. consolidated investment funds). |
Disclosure of equity investments Information according to clause 313 (2) German Commercial Code is published together with the consolidated financial statements in the German Electronic Federal Gazette as well as on the Company’s website. Glossary The accounting terms explained here are intended to help the reader understand this Annual Report. Most of these terms concern the balance sheet or the income statement. Terminology relating to particular segments of the insurance or banking business has not been included. Acquisition cost The amount of cash or cash equivalents paid or the fair value of other consideration given to acquire an asset at the time of its acquisition. Affiliated enterprises The parent company of the Group and all consolidated subsidiaries. Subsidiaries are enterprises where the parent company can exercise a dominant influence over their corporate strategy in accordance with the control concept. This is possible, for example, where the parent Groupcompany holds, directly or indirectly, a majority of the voting rights, has the power to appoint or remove a majority of the members of the Board of Management or equivalent governing body, or where there are contractual rights of control. Aggregate policy reserves Policies in force – force—especially in life, health, and personal accident insurance – insurance—give rise to potential liabilities for which funds have to be set aside. The amount required is calculated actuarially. Allowance for loan losses The overall volume of provisions includes allowanceallowances for credit loss – deductedlosses-deducted from the asset side of the balance sheet – sheet—and provisions for risks associated with hedge derivatives and other contingencies, such as guarantees, loan commitments or other obligations, which are stated as liabilities. Identified counterparty risk is covered by specific credit risk allowances. The size of each allowance is determined by the probability of the borrower’s agreed payments regarding interest and installments, with the value of underlying collateral being taken into consideration. General allowancesforallowances for loan losses have been established on the basis of historical loss data. Country risk allowances are established for transfer risks. Transfer risk is a reflection of the ability of a certain country to serve its external debt. These country risk allowances are based on an internal country rating system which incorporates economic data as well as other facts to categorize countries. Where it is determined that a loan cannot be repaid, the uncollectable amount is written off against any existing specific loan loss allowance, or directly recognized as expense in the income statement. Recoveries on loans previously written off are recognized in the income statement under net loan loss provisions. Assets under management The total of all investments, valued at current market value, which the Group has under management with responsibility for maintaining and improving their performance. In addition to the Group’s own investments, they include investments held under management for third parties. Associated enterprises All enterprises, other than affiliated enterprises or joint ventures, in which the Group has an interest of between 20% and 50%, regardless of whether a significant influence is actually exercised or not. At amortized cost Under this accounting principle the difference between the acquisition cost and redemption value (of an investment) is added to or subtracted from the original cost figure over the period from acquisition to maturity and credited or charged to income over the same period. Available-for-sale investments Available-for-sale investments are securities which are neither held to maturity nor have been acquired for sale in the near term; available-for-sale investments are shown at fair value on the balance sheet. Business combination A business combination is the bringing together of separate entities or businesses into one reporting entity. Cash flow statement Statement showing movements of cash and cash equivalents during an accounting period, classified by three types of activity: normal operating activities
Certificated liabilities Certificated liabilities comprise debentures and other liabilities for which transferable certificates have been issued. Combined ratio Represents the total of acquisition and administrative expenses (net) and claims and insurance benefits incurred (net) divided by premiums earned (net). Consolidated interest (%) The consolidated interest is the total of all interests held by affiliated enterprises and joint ventures in affiliated enterprises, joint ventures, and associated enterprises. Contingent liabilities Financial obligations not shown as liabilities on the balance sheet because the probability of a liability actually being incurred is low. Example: guarantee obligations. Corridor approach With defined benefit plans, differences come about between the actuarial gains and losses which, when the corridor approach is applied, are not immediately recognized as income or expenses as they occur. Only when the cumulative actuarial gainsorgains or losses fall outside the corridor is redemption made from the following year onwards. The corridor is 10% of the present value of the pension rights accrued or of the market value of the pension fund assets, if this is higher. Cost-income ratio Represents operating expenses divided by operating revenues. Coverage ratio Represents ratio of total loan loss provisions to total risk elements according to SEC guide 3 (non-performing loans and potential problem loans). Credit risk The risk that one party to a contract will fail to discharge its obligations and thereby cause the other party to incur financial loss. Current employer service cost Net expense incurred in connection with a deferreddefined benefit plan less any contributions made by the beneficiary to a pension fund. Deferred acquisition costs Expenses of an insurance company which are incurred in connection with the acquisition of new insurance policies or the renewal of existing policies. They include commissions paid and the costs of processing proposals. Deferred tax assets/liabilities The calculation of deferred tax is based on temporary differences between the carrying amounts of assets or liabilities in the published balance sheet and their tax base, and on differences arising from applying uniform valuation policies for consolidation purposes. The tax rates used for the calculation are the local rates applicable in the countries of the enterprises included in the consolidation; changes to tax rates already adopted on the balance sheet date are taken into account. Defined benefit plans UnderFor defined benefit plans, the enterpriseparticipant is granted a defined benefit by the employer or via an external pension fund pledgesentity. In contrast to pay the beneficiary a benefit at a particular level; unlike the defined contribution plans,arrangements, the levelfuture cost to the employer of the contributions payable by the enterprise area defined benefit plan is not fixed from the start.known with certainty in advance. To determine the expense over the period, accounting regulations require that actuarial calculations are carried out according to a fixed set of rules.
Defined contribution plans Under retirement plans in the form of definedDefined contribution plans are funded through independent pension funds or similar organizations. Contributions fixed in advance (e.g., based on salary) are paid to these institutions and the enterprise pledgesbeneficiary’s right to paybenefits exists against the beneficiary benefits at a pre-defined level. This effectively releases the enterprise from any further obligationspension fund. The employer has no obligation beyond payment of the contributions payable and at the same time precludes the enterprise fromis not participating in the investment success of the contributions.
Derivative financial instruments (derivatives) Financial contracts, the values of which move in relationship to the price of an underlying financial or non-financial variable.asset. Derivative financial instruments can be classified in relation to their underlying variablesassets (e.g. interest rates, share prices, exchange rates or prices of goods). Important examples of derivative financial instruments are options, futures, forwards and swaps. Earnings per share (basic/diluted) Ratio calculated by dividing the consolidated profit or loss for the year by the average number of shares issued. For calculating diluted earnings per share the number of shares and the profit or loss for the year are adjusted by the dilutive effects of any rights to subscribe for shares which have been or can still be exercised. Subscription rights arise in connection with issues of convertible bonds or share options. Equity consolidation The relevant proportion of cost for the investment in a subsidiary is set off against the relevant proportion of the shareholders’ equity of the subsidiary. Equity method Investments in joint ventures and associated companies are accounted for by this method. They are valued at the Group’s proportionate share of the net assets of the companies concerned. In the case of investments in companies which prepare consolidated financial statements of their own, the valuation is based on the sub-group’s consolidated net assets. The valuation is subsequently adjusted to reflect the proportionate share of changes in the company’s net assets, a proportionate share of the company’s net earnings for the year being added to the Group’s consolidated income. Expense ratio Represents acquisition and administrative expenses (net) divided by premiums earned (net). Fair value The amount for which an asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction. FAS US Financial Accounting Standards on which the details of US GAAP (Generally Accepted Accounting Principles) are based. Financial assets carried at fair value through income Financial assets carried at fair value through income include debt and equity securities as well as other financial instruments (essentially derivatives, loans and precious metal holdings) which have been acquired solely for sale in the near term. They are shown in the balance sheet at fair value. Financial liabilities carried at fair value through income Financial liabilities carried at fair value through income include primarily negative market values from derivatives and short selling of securities. Short sales are made to generate income from short-term price changes. Shorts sales of securities are recorded at market value on the balance sheet date. Derivatives shown as financial liabilities carried at fair value through income are valued the same way as financial assets carried at fair value through income. Forwards The parties to this type of transaction agree to buy or sell at a specified future date. The price of the underlying assets is fixed when the deal is struck. Functional currency The functional currency is the currency of the primary economic environment in which the entity operates i.e. the one in which the entity primarily generates and expends cash. Funds held by/for others under reinsurance contracts Funds held by others are funds to which the reinsurer is entitled but which the ceding insurer retains as collateral for future obligations of the reinsurer. The ceding insurer shows these amounts as “funds held under reinsurance business ceded.” Futures Standardized contracts for delivery on a future date, traded on an exchange. Normally, rather than actually delivering the underlying asset on that date, the difference between closing market value and the exercise price is paid. Goodwill Difference between the purchase price of a subsidiary and the relevant proportion of its net assets valued at the current value of all assets and liabilities at the time of acquisition. Gross/Net In insurance terminology the terms gross and net mean before and after deduction of reinsurance, respectively. In the investment terminology the term “net” is used where the relevant expenses (e.g. depreciations and losses on the disposal of assets) have already been deducted. Hedging The use of special financial contracts, especially derivative financial instruments, to reduce losses which may arise as a result of unfavorable movements in rates or prices. Held for sale A non-current asset is classified as held for sale if its carrying amount will be recovered principally through sale rather than though continuing use. On the date a non-current asset meets the criteria as held for sale, it is measured at the lower of its carrying amount and fair value less costs to sell. Held-to-maturity investments Held-to-maturity investments comprise debt securities held with the intent and ability that they will be held-to-maturity. They are valued at amortized cost. IAS International Accounting Standards. IFRS International Financial Reporting Standards. Since 2002, the designation IFRS applies to the overall framework of all standards approved by the International Accounting Standards Board. Already approved standards will continue to be cited as International Accounting Standards (IAS). IFRS Framework The framework for International Financial Reporting Standards (IFRS) which sets out the concepts that underlie the preparation and presentation of financial statements for external users. Income from financial assets and liabilities carried at fair value through income (net) Income from financial assets and liabilities carried at fair value through income (net) includes all realized and unrealized profits and losses from financial assets carried at fair value through income and financial liabilities carried at fair value through income. In addition, it includes commissions as well as any interest or dividend income from trading activities as well as refinancing costs. Issued capital and capital reserve This heading comprises the capital stock, the premium received on the issue of shares, and amounts allocated when option rights are exercised. Joint venture An enterprise which is managed jointly by an enterprise in the Group and one or more enterprises not included in the consolidation. The extent of joint management control is more than the significant influence exercised over associated enterprises and less than the control exercised over affiliated enterprises. Loss frequency Number of losses in relation to the number of insured risks. Loss ratio Represents claims and insurance benefits incurred (net) divided by premiums earned (net). Market value The amount obtainable from the sale of an investment in an active market. Minority interests in earnings That part of net earnings for the year which is not attributable to the Group but to others outside the Group who hold shares in affiliated enterprises. Minority interests Those parts of the equity of affiliated enterprises which are not owned by companies in the Group. New cost basis Historical cost adjusted by depreciation to reflect permanent diminution in value. Options Derivative financial instruments where the holder is entitled – entitled—but not obliged – obliged—to buy (call option) or sell (put option) the underlying asset at a predetermined price sometime in the future. The grantor (writer) of the option, on the other hand, is obliged to transfer or buy the asset and receives a premium for granting the option to the purchaser. OTC derivatives Derivative financial instruments which are not standardized and not traded on an exchange but are traded directly between two counterparties via over-the-counter (OTC) transactions. Participating certificates Amount payable on redemption of participating certificates issued. The participating certificates of Allianz SE carry distribution rights based on the dividends paid, and subscription rights when the capital stock is increased; but they carry no voting rights, no rights to participate in any proceeds of liquidation, and no rights to be converted into shares. Pension and similar obligations Reserves for current and future post-employment benefits formed for the defined benefit plans of active and former employees. These also include reserves for health care benefits and processing payments. Premiums written/earned Premiums written represent all premium revenues in the year under review. Premiums earned represent that part of the premiums written used to provide insurance coverage in that year. In the case of life insurance products where the policyholder carries the investment risk (e.g. variable annuities), only that part of the premiums used to cover the risk insured and costs involved is treated as premium income. Reinsurance Where an insurer transfers part of the risk which he has assumed to another insurer. Repurchase and reverse repurchase agreements A repurchase (“repo”) transaction involves the sale of securities by the Group to a counterparty, subject to the simultaneous agreement to repurchase these securities at a certain later date, at an agreed price. The securities concerned are retained in the Group’s balance sheet for the entire lifetime of the transaction, and are valued in accordance with the accounting principles for financial assets carried at fair value through income or investment securities, respectively. The proceeds of the sale are reported in liabilities to banks or to customers, as appropriate. A reverse repo transaction involves the purchase of securities with the simultaneous obligation to sell these securities at a future date, at an agreed price. Such transactions are reported in loans and advances to banks, or loans and advances to customers, respectively. Interest income from reverse repos and interest expenses from repos are accrued evenly over the lifetime of the transactions and reported under interest and similar income or interest expenses. ReserveReserves for loss and loss adjustment expenses
Reserves for the cost of insurance claims incurred by the end of the year under review but not yet settled. Reserve for premium refunds That part of the operating surplus which will be distributed to policyholders in the future. This refund of premiums is made on the basis of statutory, contractual, or company by-law obligations, or voluntary undertaking. Revenue reserves In addition to the reserve required by law in the financial statements of the Group parent company, this item consists mainly of the undistributed profits of Group enterprises and amounts transferred from consolidated net income. Segment reporting Financial information based on the consolidated financial statements, reported by business segments (Property-Casualty, Life/Health, Banking, Asset Management and Corporate) and by regions. Subordinated liabilities Liabilities which, in the event of liquidation or bankruptcy, are not settled until after all other liabilities. Swaps Agreements between two counterparties to exchange payment streams over a specified period of time. Important examples include currency swaps (in which payment streams and capital in different currencies are exchanged) and interest rate swaps (in which the parties agree to exchange normally fixed interest payments for variable interest payments in the same currency). Unearned premiums Premiums written attributable to income of future years. The amount is calculated separately for each policy and for every day that the premium still has to cover. Unrecognized gains/losses Amount of actuarial gains or losses, in connection with defined benefit pension plans, which are not yet recognized as income or expenses (see also “corridor approach”). Unrecognized past service cost Present value of increases in pension benefits relating to previous years’ service, not yet recognized in the pension reserve. US GAAP Generally Accepted Accounting Principles in the United States of America. Variable annuities The benefits payable under this type of life insurance depend primarily on the performance of the investments in a mutual fund. The policyholder shares equally in the profits or losses of the underlying investments. SCHEDULE I SUMMARY OF INVESTMENTS(1) (2) As of December 31, 20062008 | | | | | | | | | | Amortized
cost
| | Fair
Value
| | Amount shown in balance sheet
| | | | € mn | | € mn | | € mn | Debt securities: | | | | | | | Government and agency mortgage-backed securities (residential and commercial) | | 8,757 | | 8,555 | | 8,555 | Corporate mortgage-backed securities (residential and commercial) | | 4,768 | | 4,753 | | 4,753 | Other asset-backed securities | | 3,911 | | 3,896 | | 3,896 | Government Bonds: | | | | | | | Germany | | 14,627 | | 14,825 | | 14,823 | Italy | | 24,159 | | 24,610 | | 24,592 | France | | 15,353 | | 16,018 | | 16,018 | United States | | 5,219 | | 5,112 | | 5,112 | Spain | | 8,322 | | 8,617 | | 8,617 | Belgium | | 5,209 | | 5,295 | | 5,295 | All other countries | | 33,217 | | 33,641 | | 33,586 | Corporate Bonds: | | | | | | | Public utilities | | 3,202 | | 3,220 | | 3,219 | All other corporate bonds | | 81,364 | | 82,148 | | 82,060 | Other | | 2,148 | | 2,345 | | 2,345 | | | |
| |
| |
| Total debt | | 210,256 | | 213,035 | | 212,871 | Equity securities: | | | | | | | Common stocks: | | | | | | | Public utilities | | 5,595 | | 9,886 | | 9,886 | Banks, insurance companies, funds | | 13,752 | | 21,477 | | 21,477 | Industrial, miscellaneous and all other | | 23,639 | | 38,205 | | 38,205 | Non-redeemable preferred stocks | | 153 | | 207 | | 207 | | | |
| |
| |
| Total equity securities | | 43,139 | | 69,775 | | 69,775 | Mortgage loans on real estate | | 26,254 | | 26,254 | | 26,254 | Real Estate | | 9,555 | | 13,494 | | 9,555 | Policy loans | | 1,841 | | 1,841 | | 1,841 | Certificates of deposit | | 1,763 | | 1,763 | | 1,763 | Short-term investments | | 5,012 | | 5,012 | | 5,012 | | | |
| |
| |
| Total investments | | 297,820 | | 331,174 | | 327,071 | | | |
| |
| |
|
| | | | | | | | | | Amortized
cost | | Fair
Value | | Amount shown
in balance sheet | | | | € mn | | € mn | | € mn | Debt securities: | | | | | | | Government and agency mortgage-backed securities (residential and commercial) | | 7,814 | | 7,989 | | 7,989 | Corporate mortgage-backed securities (residential and commercial) | | 8,714 | | 7,311 | | 7,311 | Other asset-backed securities | | 4,858 | | 4,489 | | 4,489 | Government Bonds: | | | | | | | Germany | | 10,801 | | 11,541 | | 11,538 | Italy | | 22,475 | | 22,558 | | 22,550 | France | | 13,628 | | 14,826 | | 14,826 | United States | | 3,996 | | 4,317 | | 4,317 | Spain | | 5,414 | | 5,697 | | 5,697 | Belgium | | 4,571 | | 4,786 | | 4,786 | All other countries | | 35,821 | | 36,603 | | 36,545 | Corporate Bonds: | | | | | | | Public utilities | | 3,872 | | 3,850 | | 3,813 | All other corporate bonds | | 97,949 | | 92,373 | | 92,347 | Other | | 1,296 | | 1,336 | | 1,336 | | | | | | | | Total debt | | 221,209 | | 217,676 | | 217,544 | | | | | Equity securities: | | | | | | | | | | | Common stocks: | | | | | | | Public utilities | | 2,616 | | 4,028 | | 4,028 | Banks, insurance companies, funds | | 4,508 | | 6,249 | | 6,249 | Industrial, miscellaneous and all other | | 16,228 | | 18,694 | | 18,694 | Non-redeemable preferred stocks | | 450 | | 518 | | 518 | | | | | | | | Total equity securities | | 23,802 | | 29,489 | | 29,489 | Real Estate | | 7,551 | | 11,995 | | 7,551 | Short-term investments and certificates of deposit | | 9,622 | | 9,622 | | 9,622 | | | | | | | | Total investments | | 262,184 | | 268,782 | | 264,206 | | | | | | | |
(1) | Includes all Allianz Group investments exceptDresdner Bank financial assets and portfolios carried at fair value through income.income are excluded.
|
(2) | The total of investments on the balance sheet of €260,147 mn includes total debt securities, total equity securities and real estate shown above, as well as investments in associates and joint ventures of €4,524 mn and funds held by others under reinsurance contracts assumed of €1,039 mn. Short-term investments and certificates of deposit (shown above) and policy loans (not shown) are included in loans and advances to banks and customers on the balance sheet. |
SCHEDULE II ALLIANZ SOCIETAS EUROPAEASE PARENT ONLY CONDENSED FINANCIAL STATEMENTS BALANCE SHEETS (IFRS BASIS)SHEET | As of December 31,
| | 2006
| | 2005
| | 2008 | | 2007 | | | | € mn | | € mn | | € mn | | € mn | Assets: | | | | | | | | | Investment in subsidiaries and affiliates | | 75,605 | | 68,324 | | 63,609 | | 67,488 | Other invested assets | | 19,387 | | 16,048 | | 19,903 | | 19,236 | Insurance reserves ceded | | 3,211 | | 3,310 | | 2,058 | | 2,896 | Cash funds and cash equivalents | | 72 | | 59 | | 169 | | 81 | Other assets | | 6,447 | | 4,861 | | 5,656 | | 7,804 | | | |
| |
| | | | | | | | 104,722 | | 92,602 | | 91,395 | | 97,505 | | | |
| |
| | | | | Liabilities and Shareholders’ Equity: | | | | | | | | | Insurance reserves | | 11,654 | | 13,540 | | 10,319 | | 10,404 | Participation certificates and subordinated liabilities | | 7,336 | | 6,629 | | 6,660 | | 7,306 | Certificated liabilities | | 1,799 | | 1,912 | | 9,801 | | 4,829 | Other liabilities | | 33,452 | | 31,034 | | 30,931 | | 27,213 | | | |
| |
| | | | | | | | 54,241 | | 53,115 | | 57,711 | | 49,752 | Shareholders’ equity | | 50,481 | | 39,487 | | 33,684 | | 47,753 | | | |
| |
| | | | | | | | 104,722 | | 92,602 | | 91,395 | | 97,505 | | | |
| |
| | | | |
SCHEDULE II ALLIANZ SOCIETAS EUROPAEASE PARENT ONLY CONDENSED FINANCIAL STATEMENTS STATEMENTS OF INCOME (IFRS BASIS) | For the years ended December 31,
| | 2006
| | 2005
| | 2004
| | | 2008 | | 2007 | | 2006 | | | | | € mn | | € mn | | € mn | | | € mn | | € mn | | € mn | | Revenues: | | | | | | | | | | | Net premiums earned | | 2,887 | | | 3,291 | | 3,627 | | | 2,770 | | | 2,294 | | | 2,887 | | Investment income | | 475 | | | 2,704 | | 1,134 | | | 1,363 | | | 1,708 | | | 475 | | Other income | | 20 | | | 0 | | 0 | | | 1 | | | 15 | | | 20 | | | | |
|
| |
| |
|
| | | | | | | | | | | | | 3,382 | | | 5,995 | | 4,761 | | | 4,134 | | | 4,017 | | | 3,382 | | Expenses: | | | | | | | | | | | Insurance benefits | | 2,013 | | | 2,195 | | 2,601 | | | 1,863 | | | 1,622 | | | 2,013 | | Acquisition costs and administrative expenses | | 1,392 | | | 1,249 | | 1,423 | | | 1,103 | | | 1,202 | | | 1,392 | | Investment expense | | 1,639 | | | 1,661 | | 1,999 | | | 1,594 | | | 1,851 | | | 1,639 | | Other expense | | 37 | | | 0 | | 0 | | | 3 | | | — | | | 37 | | | | |
|
| |
| |
|
| | | | | | | | | | | | | 5,081 | | | 5,105 | | 6,023 | | | 4,563 | | | 4,675 | | | 5,081 | | | | |
|
| |
| |
|
| | | | | | | | | | Income before tax | | (1,699 | ) | | 892 | | (1,262 | ) | | (429 | ) | | (658 | ) | | (1,699 | ) | Taxes | | 808 | | | 571 | | 120 | | | 109 | | | 210 | | | 808 | | | | |
|
| |
| |
|
| | | | | | | | | | Income before equity in undistributed net income of subsidiaries | | (891 | ) | | 1,463 | | (1,142 | ) | | (320 | ) | | (448 | ) | | (891 | ) | Equity in undistributed net income of subsidiaries | | 7,912 | | | 2,917 | | 3,408 | | | (2,124 | ) | | 8,414 | | | 7,912 | | | | |
|
| |
| |
|
| | | | | | | | | | Net Income | | 7,021 | | | 4,380 | | 2,266 | | | (2,444 | ) | | 7,966 | | | 7,021 | | | | |
|
| |
| |
|
| | | | | | | | | |
SCHEDULE II ALLIANZ SOCIETAS EUROPAEASE PARENT ONLY CONDENSED FINANCIAL STATEMENTS STATEMENT OF CASH FLOWS (IFRS BASIS) | For the years ended December 31,
| | 2006
| | 2005
| | 2004
| | | 2008 | | 2007 | | 2006 | | | | | € mn | | € mn | | € mn | | | € mn | | € mn | | € mn | | Cash flows from operating activities: | | | | | | | | | Net income | | 7,021 | | | 4,380 | | | 2,266 | | | (2,444 | ) | | 7,966 | | | 7,021 | | Adjustments to reconcile net income to cash provided by operating activities: | | | | | | | | | Equity in undistributed net income of consolidated subsidiaries | | (7,912 | ) | | (2,917 | ) | | (3,408 | ) | | 2,124 | | | (8,414 | ) | | (7,912 | ) | Change in insurance reserves—net | | (1,787 | ) | | (2,330 | ) | | (631 | ) | | 753 | | | (935 | ) | | (1,787 | ) | Change in other assets | | (1,586 | ) | | (225 | ) | | 2,518 | | | 2,148 | | | (1,357 | ) | | (1,586 | ) | Change in other liabilities | | 2,418 | | | 5,448 | | | (14,434 | ) | | (4,442 | ) | | (6,239 | ) | | 2,418 | | | | |
|
| |
|
| |
|
| | | | | | | | | | Net cash (used) provided by operating activities | | (1,846 | ) | | 4,356 | | | (13,690 | ) | | (1,861 | ) | | (8,979 | ) | | (1,846 | ) | | | |
|
| |
|
| |
|
| | | | | | | | | | Cash flows from investing activities: | | | | | | | | | Change in investments in subsidiaries | | (7,280 | ) | | (17,429 | ) | | 4,835 | | | 2340 | | | (45 | ) | | (7,280 | ) | Change in other invested assets | | (3,340 | ) | | 3,839 | | | 4,663 | | | (667 | ) | | 151 | | | (3,340 | ) | | | |
|
| |
|
| |
|
| | | | | | | | | | Net cash provided (used) in investing activities | | (10,620 | ) | | (13,590 | ) | | 9,498 | | | 1,673 | | | 106 | | | (10,620 | ) | | | |
|
| |
|
| |
|
| | | | | | | | | | Cash flows from financing activities: | | | | | | | | | Change in certificated liabilities, participation certificates and subordinated liabilities | | 595 | | | 1,224 | | | 1,075 | | | 4,326 | | | 2,999 | | | 595 | | Net proceeds from issuance of common stocks and additional paid in capital | | 98 | | | 2,159 | | | 69 | | | 239 | | | 115 | | | 98 | | Dividends paid | | (811 | ) | | (674 | ) | | (551 | ) | | (2,472 | ) | | (1,642 | ) | | (811 | ) | Other changes in shareholders’ capital | | 12,597 | | | 6,544 | | | 3,626 | | | (1,817 | ) | | 7,410 | | | 12,597 | | | | |
|
| |
|
| |
|
| | | | | | | | | | Net cash provided (used) by financing activities | | 12,479 | | | 9,253 | | | 4,219 | | | 276 | | | 8,882 | | | 12,479 | | | | |
|
| |
|
| |
|
| | | | | | | | | | Net increase (decrease) in cash | | 13 | | | 19 | | | 27 | | | 88 | | | 9 | | | 13 | | Cash at January 1 | | 59 | | | 40 | | | 13 | | | 81 | | | 72 | | | 59 | | | | |
|
| |
|
| |
|
| | | | | | | | | | Cash at December 31 | | 72 | | | 59 | | | 40 | | | 169 | | | 81 | | | 72 | | | | |
|
| |
|
| |
|
| | | | | | | | | |
Note to Parent Only Condensed Financial Statements Contingent liabilities and other financial commitments AsGuarantees to group companies
The guarantees as described below are provided by Allianz SE to secure liabilities of December 31, 2006 the company had contingent liabilities under guarantees amounting of €7,561 thousand, matched by rights of recourse for the same amount.group companies to third parties: Bonds for €1.1 bn issued by Allianz Finance B.V., Amsterdam in 1997 and increased in 2000, Bonds issued in 1998 for €1.6 bn by Allianz Finance B.V., Amsterdam
Bonds issued in 2002 for €2.0 bn by Allianz Finance II B.V., Amsterdam, for €9.7 bn, thereof €5.6 bn on a subordinated basis.
Subordinated bondsCommercial Papers issued in 2002 for €2.0 bn by Allianz Finance II B.V., Amsterdam
Subordinated bonds issued in 2002 for €1.0 bn by Allianz Finance II B.V., Amsterdam
Subordinated bonds issued in 2002 for US Dollar 500 mn by Allianz Finance II B.V., Amsterdam
Loan taken out for Australian Dollar 100 mn by Allianz Australia Ltd., Sydney
Bonds issued in 2005 by Allianz Finance II B.V., Amsterdam with a repayment dependent onCorporation, USA. At the developmentend of the German share index (DAX) issue volume €1.262year USD 0.4 bn
Subordinated bonds in commercial papers were issued in 2006 for €800 mn by Allianz Finance II B.V., Amsterdam
Bonds issued in 2006 for €1.5 bn by Allianz Finance II B.V., Amsterdam
Subordinated bonds issued in 2005 for €1.4 bn by Allianz Finance II B.V., Amsterdam
Guarantee declaration for Allianz Cornhill in favouras part of Lloyds TSB amounting British Pound 40 millionthe program.
Letters of credit for liabilities ofCredit issued to various operating Allianz Global Corporate & Specialty AG, Munich, amounting to US Dollar 512 mn Letters of credit for liabilities of Allianz Global Corporate & Specialty AG, Munich, amounting to US Dollar 100 mnentities totaling €0.8 bn.
Allianz SE is committed to making future capital payments in favor of our North American holding company, Allianz of America, Inc., Wilmington. This will place Allianz of America Inc., Wilmington, in a position to provide sufficient capital to AGR U.S.Allianz Global Risks US Insurance Company, Los Angeles, so that this company can meet its payment obligations for claims received in connection with the attack on the World Trade Center. These future capital payments are limited to US Dollar 167USD 143 mn and are secured by pledges in securities. Allianz SE provides a guarantee to Allianz Argos 14 GmbH to secure the payment obligations under the derivative contract entered into with Blue Fin Ltd. in the context of the issuance of a catastrophe bond. Allianz SE provides a maximum €1.0 bn guarantee for the obligations of AGF Vie, Paris, under a unit linked pension insurance contract. As of December 31, 2008 the guaranteed obligations amounted €537 mn. With respect to Fireman’s Fund Insurance Co., Novato, there is a conditional commitment to make capital payments which must, in particular, be made in case of future negative developments of the reserves for the year 2003 and before. They are limited to US Dollar 1.1 bn. A commitment to make capital payments in theThe remaining guarantee amount of €27 mn also exists with respect to Allianz Global Corporate & Specialty France, Paris.
In connection with the capital increase of the U.S. subsidiaries Allianz Life of North America, Fireman’s Fund Insurance Co. and AGR US Insurance Company, guarantees to acquire shares of Allianz Life of North America and Allianz Insurance Company in the amount of US Dollar 650 mn were given. This guarantee expired during the fiscal year.
For Allianz of America, Inc., Wilmington, a guarantee declaration was made for liabilities in connection with the acquisition of PIMCO Advisors L.P. Allianz originally acquired from its subsidiary Allianz of America Inc., Wilmington, a stake of 69.5 percent in PIMCO, whereby minority shareholders held the option to tender their share of Allianz of America Inc., Wilmington. On December 31, 2006 the stake of Pacific Life in PIMCO was still 2.0 percent, so that the liabilities of Pacific Life as of December 31, 2006 amounted to US Dollar 0.3 bn.2008 is USD 141 mn.
A guarantee declaration was given to Dresdner Bank AG, Frankfurt, amounting to €50 mn, for the acquisition of receivables from payments for the rights to use a name in connection with Allianz Arena.
Guarantee declarations in a total of €1.4 bn have also been given for deferred annuity agreements signed by Allianz-RAS Seguros y Reaseguros S.A., Madrid. For the US Dollar Commercial Paper Program a guarantee was given to investors by Allianz Finance Corporation, USA. At the end of the year US Dollar 105 mn in commercial papers was issued as part of the program.
In the context of a Securities Lending Agreement, Allianz SE gaveprovides guarantees in favor of Marsh, Inc. for coverage of potential liabilities for various Allianz subsidiaries. These guarantees have a payment guarantee to PIMCO fundsyearly maturity and Abu Dhabi Investment Authority to fulfill financial obligations of Dresdner Bank AG.are unlimited.
There is an agreement between Allianz Risk Transfer AG, Zurich, and Allianz SE regarding a target minimum capitalization in the form of a Net Worth Maintenance Agreement. There is a conditional commitment to repay dividends received to Allianz Capital Partner GmbH, in order to ensure that company’s ability to meet warranty obligationsare financial commitments in connection with the disposalpromise of a shareholding. Rental guarantees for a property portfoliocompensation to holders of Dresdner Bank, which is limited to €400 mn.rights under stock option programs of Assurances Générales de France.
There are also value asset liabilities of €75.8€136 mn for the phased-in retirement liabilities of German group companies. In connection with the sale of holdings in individual cases, guarantees were given covering the various bases used to determine purchase prices. These can for example relate to tax risks. In respectconnection with the acquisition of USD 1.75 bn subordinated debentures of The Hartford Financial Services Group Allianz SE provided a guarantee to group companies. Allianz Bank Zrt., Hungary, received a guarantee from Allianz SE in the saleamount of CHF 120 mn in connection with a loan granted. Commitments of Allianz Nederland Schadeverzekering N.V. arising from an insurance contract are guaranteed by Allianz SE with a maximum exposure of Canada, which took place in 2005, these also relate to additional elements of purchase price fixing and, secondly, to the business insured by AGR U.S. Re Canada branch.€350 mn. A contingent indemnity agreement was entered with respectIn addition Allianz SE issued guarantees to securities issued by HT1 Funding GmbH in case HT1 Funding GmbH can not serve the agreed coupon of the bond partly or in total.various group companies totaling €50 mn.
Allianz SE has also provided several subsidiaries and associates with either a standard indemnity guarantee or such guarantee as is required by the supervisory authorities, which cannot be quantified in figures. This includes in particular a deed of general release for Dresdner Bank AG in accordance with Clause 5 (10)§ 5(10) of the Statute of Deposit Security Arrangement Fund.Fund which was withdrawn with effect of January 9, 2009.
Guarantees to third parties (Dresdner Bank AG as of January 12, 2009) A guarantee was given to Dresdner Bank AG, Frankfurt, amounting to €50 mn, for the acquisition of receivables from payments for the rights to use a name in connection with Allianz Arena. In the context of a Securities Lending Agreement, Allianz SE gave a payment guarantee with respect to the obligations of Dresdner Bank AG, Frankfurt. A contingent indemnity agreement was entered with respect to securities issued by HT1 Funding GmbH in case HT1 Funding GmbH cannot serve the agreed coupon of the bond partly or in total. As of December 31, 2008 Allianz SE had contingent liabilities under guarantees amounting to €9 mn. Legal obligations Legal obligations to assume any losses arise on account of management control agreements and/ortransfer-of-profitor transfer-of-profit agreements with the following companies: Allianz Alternative Assets Holding GmbH Allianz Finanzbeteiligungs GmbH Allianz Global Corporate & Specialty AG Allianz ProzessFinanz GmbHInvestment Management SE
AZ-Arges Vermögensverwaltungsgesellschaft mbH AZ-Argos 3 Vermögensverwaltungsgesellschaft mbH (merged as of December 11, 2008) AZ-Argos 10 Vermögensverwaltungsgesellschaft mbH (merged as of December 31, 2007/January 1, 2008) IDS GmbH-Analysis and Reporting Services META Finanz-Informationssysteme GmbH Any other control and transfer-of-profit agreements were not concluded by Allianz Capital Partners Management GmbH (contract cancelled by merger as of January 24, 2007)SE in 2008. Allianz Global Risks Rückversicherungs-AG (contract cancelled by merger as of August 31, 2006)
Allianz Private Equity Partners GmbH (contract cancelled as of December 31, 2006)
AZ-Argos 15 AG (contract cancelled by merger as of January 24, 2007)
AZ-Argos 2 Vermögensverwaltungsgesellschaft mbH (contract cancelled by merger as of August 10, 2006)
Bayerische Versicherungsbank AG (contract cancelled by merger as of January 30, 2006)
There are financial commitmentsOn February 17, 2009 Allianz SE has concluded a control and transfer-of-profit agreement with Allianz Shared Infrastructure Services SE that now requires the consent of the Supervisory Board and the General Meeting of Allianz SE. The contract will come into effect with its registration in connection with the promiseCommercial register of compensation to holders of rights under stock option programs of Assurances Générales de France.the controlled company.
Financial liabilities of €256€203 mn arose in 20062008 from advertising agreements. Potential liabilities amounting to €29.9€30 mn were outstanding at the balance sheet date for calls on equity stocks not fully paid up with respect to affiliated enterprises. Security deposits for leasing contracts amount to €0.3 mn financial commitments.
SCHEDULE III SUPPLEMENTARY INSURANCE INFORMATION(1) | | | | | | | | | | | | | | Deferred policy acquisition Costs GROSS
| | Future policy benefits, losses, claims and loss expense GROSS
| | Unearned premiums GROSS
| | Other policy claims and benefits payable GROSS
| | Premium revenue (earned) NET
| | | | € mn | | € mn | | € mn | | € mn | | € mn | At and for the year ended December 31, 2006: | | | | | | | | | | | Life/Health | | 13,779 | | 256,051 | | 1,874 | | 29,454 | | 20,574 | Property-Casualty | | 4,127 | | 65,813 | | 12,994 | | 1,807 | | 37,950 | | | |
| |
| |
| |
| |
| Total | | 17,906 | | 321,864 | | 14,868 | | 31,261 | | 58,524 | | | |
| |
| |
| |
| |
| At and for the year ended December 31, 2005: | | | | | | | | | | | Life/Health | | 12,959 | | 248,997 | | 1,580 | | 27,242 | | 19,997 | Property-Casualty | | 3,899 | | 67,120 | | 12,945 | | 2,300 | | 37,685 | | | |
| |
| |
| |
| |
| Total | | 16,858 | | 316,117 | | 14,525 | | 29,542 | | 57,682 | | | |
| |
| |
| |
| |
| At and for the year ended December 31, 2004: | | | | | | | | | | | Life/Health | | 11,017 | | 228,709 | | 1,372 | | 20,424 | | 19,404 | Property-Casualty | | 4,000 | | 63,032 | | 11,821 | | 1,919 | | 37,385 | | | |
| |
| |
| |
| |
| Total | | 15,017 | | 291,741 | | 13,193 | | 22,343 | | 56,789 | | | |
| |
| |
| |
| |
|
(1)
| After eliminating intra-Allianz Group transactions between segments.
|
| | | | | | | | | | | | | | Deferred
policy
acquisition
Costs
GROSS | | Future
policy
benefits,
losses, claims
and loss
expense
GROSS | | Unearned
premiums
GROSS | | Other policy
claims and
benefits
payable
GROSS | | Premium
revenue
(earned)
NET | | | | € mn | | € mn | | € mn | | € mn | | € mn | As of and for the year ended December 31, 2008: | | | | | | | | | | | Life/Health | | 16,752 | | 279,325 | | 2,258 | | 16,928 | | 22,231 | Property-Casualty | | 4,026 | | 63,336 | | 12,984 | | 874 | | 38,213 | | | | | | | | | | | | Total | | 20,778 | | 342,661 | | 15,242 | | 17,802 | | 60,444 | | | | | | | | | | | | As of and for the year ended December 31, 2007: | | | | | | | | | | | Life/Health | | 14,130 | | 263,621 | | 1,858 | | 26,291 | | 20,809 | Property-Casualty | | 4,059 | | 64,399 | | 13,163 | | 1,519 | | 38,553 | | | | | | | | | | | | Total | | 18,189 | | 328,020 | | 13,163 | | 27,810 | | 59,362 | | | | | | | | | | | | As of and for the year ended December 31, 2006: | | | | | | | | | | | Life/Health | | 13,779 | | 256,051 | | 1,874 | | 29,454 | | 20,574 | Property-Casualty | | 4,127 | | 65,813 | | 12,994 | | 1,807 | | 37,950 | | | | | | | | | | | | Total | | 17,906 | | 321,864 | | 14,868 | | 31,261 | | 58,524 | | | | | | | | | | | |
SCHEDULE III SUPPLEMENTARY INSURANCE INFORMATION(1) | | | | | | | | | | | | | | Investment income NET
| | Benefits claims, losses and settlement expenses NET
| | Amortization of deferred policy acquisition costs NET
| | Other operating expenses NET
| | Premiums written NET
| | | | € mn | | € mn | | € mn | | € mn | | € mn | At and for the year ended December 31, 2006: | | | | | | | | | | | Life/Health | | 15,121 | | 28,150 | | 1,627 | | 2,810 | | 20,799 | Property-Casualty | | 5,592 | | 25,097 | | 3,838 | | 6,752 | | 38,259 | | | |
| |
| |
| |
| |
| Total | | 20,713 | | 53,247 | | 5,465 | | 9,562 | | 59,058 | | | |
| |
| |
| |
| |
| At and for the year ended December 31, 2005: | | | | | | | | | | | Life/Health | | 14,295 | | 27,882 | | 1,285 | | 2,688 | | 20,167 | Property-Casualty | | 4,801 | | 26,038 | | 2,683 | | 7,533 | | 38,170 | | | |
| |
| |
| |
| |
| Total | | 19,096 | | 53,920 | | 3,968 | | 10,221 | | 58,337 | | | |
| |
| |
| |
| |
| At and for the year ended December 31, 2004: | | | | | | | | | | | Life/Health | | 12,761 | | 26,281 | | 1,025 | | 2,686 | | 19,478 | Property-Casualty | | 4,079 | | 25,882 | | 1,883 | | 8,309 | | 37,643 | | | |
| |
| |
| |
| |
| Total | | 16,840 | | 52,163 | | 2,908 | | 10,995 | | 57,121 | | | |
| |
| |
| |
| |
|
(1)
| After eliminating intra-Allianz Group transactions between segments.
|
| | | | | | | | | | | | | | Investment
income
NET | | Benefits claims,
losses and
settlement
expenses
NET | | Amortization
of deferred
policy
acquisition
costs
NET | | Other
operating
expenses
NET | | Premiums
written
NET | | | | € mn | | € mn | | € mn | | € mn | | € mn | As of and for the year ended December 31, 2008: | | | | | | | | | | | Life/Health | | 6,793 | | 24,510 | | 1,310 | | 3,066 | | 22,282 | Property-Casualty | | 4,194 | | 25,984 | | 3,596 | | 6,760 | | 38,414 | | | | | | | | | | | | Total | | 10,987 | | 50,494 | | 4,906 | | 9,826 | | 60,696 | | | | | | | | | | | | As of and for the year ended December 31, 2007: | | | | | | | | | | | Life/Health | | 14,675 | | 27,905 | | 1,555 | | 3,033 | | 20,885 | Property-Casualty | | 5,364 | | 25,824 | | 4,042 | | 6,574 | | 38,969 | | | | | | | | | | | | Total | | 20,039 | | 53,729 | | 5,597 | | 9,607 | | 59,854 | | | | | | | | | | | | As of and for the year ended December 31, 2006: | | | | | | | | | | | Life/Health | | 15,121 | | 28,150 | | 1,627 | | 2,810 | | 20,799 | Property-Casualty | | 5,592 | | 25,097 | | 3,838 | | 6,752 | | 38,259 | | | | | | | | | | | | Total | | 20,713 | | 53,247 | | 5,465 | | 9,562 | | 59,058 | | | | | | | | | | | |
SCHEDULE IV SUPPLEMENTARY REINSURANCE INFORMATION(3) | | | | | | | | | | | | | | | | Direct gross amount
| | Ceded to other companies
| | | Assumed from other companies
| | Net amount
| | Amount assumed to net
| | | | | € mn | | € mn | | | € mn | | € mn | | | | 2006: | | | | | | | | | | | | | Life insurance in force | | 699,975 | | 83,752 | | | 20,056 | | 636,279 | | 3.15 | % | | | |
| |
|
| |
| |
| | | | Premiums earned: | | | | | | | | | | | | | Life/Health insurance(1) | | 21,027 | | (816 | ) | | 363 | | 20,574 | | 1.76 | % | Property-Casualty insurance, including title insurance(2) | | 40,616 | | (5,529 | ) | | 2,863 | | 37,950 | | 7.54 | % | | | |
| |
|
| |
| |
| | | | Total premiums | | 61,643 | | (6,345 | ) | | 3,226 | | 58,524 | | 5.51 | % | | | |
| |
|
| |
| |
| | | | 2005: | | | | | | | | | | | | | Life insurance in force | | 702,597 | | 66,062 | | | 23,081 | | 659,616 | | 3.50 | % | | | |
| |
|
| |
| |
| | | | Premiums earned: | | | | | | | | | | | | | Life/Health insurance(1) | | 20,546 | | (929 | ) | | 380 | | 19,997 | | 1.90 | % | Property-Casualty insurance, including title insurance(2) | | 40,169 | | (5,390 | ) | | 2,906 | | 37,685 | | 7.71 | % | | | |
| |
|
| |
| |
| | | | Total premiums | | 60,715 | | (6,319 | ) | | 3,286 | | 57,682 | | 5.70 | % | | | |
| |
|
| |
| |
| | | | 2004: | | | | | | | | | | | | | Life insurance in force | | 649,619 | | 65,167 | | | 43,949 | | 628,401 | | 7.00 | % | | | |
| |
|
| |
| |
| | | | Premiums earned: | | | | | | | | | | | | | Life/Health insurance(1) | | 20,174 | | (1,294 | ) | | 524 | | 19,404 | | 2.70 | % | Property-Casualty insurance, including title insurance(2) | | 40,156 | | (5,263 | ) | | 2,492 | | 37,385 | | 6.67 | % | | | |
| |
|
| |
| |
| | | | Total premiums | | 60,330 | | (6,557 | ) | | 3,016 | | 56,789 | | 5.31 | % | | | |
| |
|
| |
| |
| | | |
| | | | | | | | | | | | | | | | Direct gross
amount | | Ceded to
other
companies | | | Assumed
from other
companies | | Net
amount | | Amount
assumed to
net | | | | | € mn | | € mn | | | € mn | | € mn | | | | 2008: | | | | | | | | | | | | | Life insurance in force | | 790,365 | | (78,792 | ) | | 18,425 | | 729,998 | | 2.52 | % | | | | | | | | | | | | | | Premiums earned: | | | | | | | | | | | | | Life/Health insurance(1) | | 22,393 | | (527 | ) | | 365 | | 22,231 | | 1.64 | % | Property-Casualty insurance, including title insurance(2) | | 40,023 | | (5,045 | ) | | 3,235 | | 38,213 | | 8.47 | % | | | | | | | | | | | | | | Total premiums | | 62,416 | | (5,572 | ) | | 3,600 | | 60,444 | | 5.96 | % | | | | | | | | | | | | | | 2007: | | | | | | | | | | | | | Life insurance in force | | 706,754 | | (53,169 | ) | | 20,496 | | 674,081 | | 3.04 | % | | | | | | | | | | | | | | Premiums earned: | | | | | | | | | | | | | Life/Health insurance(1) | | 21,164 | | (638 | ) | | 283 | | 20,809 | | 1.36 | % | Property-Casualty insurance, including title insurance(2) | | 41,174 | | (5,316 | ) | | 2,695 | | 38,553 | | 6.99 | % | | | | | | | | | | | | | | Total premiums | | 62,338 | | (5,954 | ) | | 2,978 | | 59,362 | | 5.02 | % | | | | | | | | | | | | | | 2006: | | | | | | | | | | | | | Life insurance in force | | 699,975 | | (83,752 | ) | | 20,056 | | 636,279 | | 3.15 | % | | | | | | | | | | | | | | Premiums earned: | | | | | | | | | | | | | Life/Health insurance(1) | | 21,027 | | (816 | ) | | 363 | | 20,574 | | 1.76 | % | Property-Casualty insurance, including title insurance(2) | | 40,616 | | (5,529 | ) | | 2,863 | | 37,950 | | 7.54 | % | | | | | | | | | | | | | | Total premiums | | 61,643 | | (6,345 | ) | | 3,226 | | 58,524 | | 5.51 | % | | | | | | | | | | | | | |
(1) | Life/Health have been combined for this schedule.schedule |
(2) | Title insurance has been combined with Property-Casualty insurance.insurance |
(3) | After eliminating intra-Allianz Group transactions between segments.segments |
SIGNATURES The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf. | Allianz SE | | | /s/ MICHAEL DIEKMANN | Name: Michael Diekmann | Title:Chief Executive Officer | | | /s/ DR. HELMUT PERLET | Name: Dr. Helmut Perlet | Title: Chief Financial Officer |
Date: June 14, 2007March 31, 2009 |
