Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock at December 31, 2006:
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
The following table sets forth the income statements and cost-income ratios for both our Banking segment as a whole and Dresdner Bank for the years ended December 31, 2007, 2006 2005 and 2004.2005.
The following table sets forth the income statements and cost-income ratios for both our Asset Management segment as a whole and AGI for the years ended December 31, 2007, 2006 2005 and 2004.2005.
| | | | | | | | |
| | | Price per
ordinary share(1) | | DAX |
| | | High | | Low | | High | | Low |
| | | € | | € | | | | |
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 | | | | | | | | |
(through March 10, 2008) | | 145.9 | | 108.7 | | 7,949.1 | | 6,439.2 |
| | | |
Monthly highs and lows | | | | | | |
2007 | | | | | | | | |
September | | 163.9 | | 148.7 | | 7,861.5 | | 7,375.4 |
October | | 165.4 | | 150.5 | | 8,041.3 | | 7,794.9 |
November | | 151.8 | | 133.9 | | 7,880.9 | | 7,512.0 |
December | | 148.0 | | 137.6 | | 8,076.1 | | 7,808.9 |
| | | | |
2008 | | | | | | | | |
January | | 145.9 | | 111.3 | | 7,949.1 | | 6,439.2 |
February | | 121.7 | | 113.1 | | 7,002.3 | | 6,733.7 |
March 10 | | 116.0 | | 108.7 | | 6,690.0 | | 6,448.1 |
(1) | Adjusted to reflect the capital increase in April 2003. |
On May 18, 2007,March 10, 2008, the closing sale price per Allianz SE ordinary share on XETRA was €161.36,108.70, which was equivalent to $218.01$167.06 per ordinary share, translated at the closing noon buying rate for Euros on such 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, 20072008 and May 18, 2007March 10, 2008 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 | | 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 (through March 10, 2008) | | | 21.4 | | 16.4 |
| Quarterly highs and lows | | | | | | | | |
2005 | | | | | |
First quarter | | 13.4 | | 11.7 | |
Second quarter | | 12.6 | | 11.5 | |
Third quarter | | 13.8 | | 11.4 | |
Fourth quarter | | 15.4 | | 13.3 | |
| 2006 | | | | | | | | |
First quarter | | 17.0 | | 15.1 | | 17.0 | | 15.1 |
Second quarter | | 17.5 | | 13.9 | | 17.5 | | 13.9 |
Third quarter | | 17.5 | | 14.6 | | 17.5 | | 14.6 |
Fourth quarter | | 20.6 | | 17.3 | | 20.6 | | 17.3 |
| 2007 | | | | | | | | |
First quarter | | 22.2 | | 19.2 | | 22.2 | | 19.2 |
Second quarter | | | 23.8 | | 20.7 |
Third quarter | | | 24.0 | | 20.3 |
Fourth quarter | | | 23.5 | | 19.6 |
| 2008 | | | | | |
(through March 10) | | | 21.4 | | 16.4 |
| Monthly highs and lows | | | | | | | | |
2006 | | | | | |
2007 | | | | | |
September | | 17.5 | | 16.7 | | 23.3 | | 20.7 |
October | | 18.6 | | 17.3 | | 23.5 | | 21.5 |
November | | 19.8 | | 18.4 | | 22.0 | | 19.6 |
December | | 20.6 | | 19.5 | | 21.5 | | 20.2 |
| 2007 | | | | | |
2008 | | | | | |
January | | 21.0 | | 19.2 | | 21.4 | | 16.9 |
February | | 22.2 | | 20.0 | | 18.5 | | 16.4 |
March | | 21.0 | | 19.9 | |
April | | 22.7 | | 20.7 | |
March (through March 10) | | | 17.6 | | 16.6 |
On May 18, 2007,March 10, 2008, 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.$16.62.
ITEM 10. Additional Information
Articles of Association (Statutes)
Allianz SE’s current statutes are filed as an exhibit to this annual report. See also “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,February 29, 2008, the capital stock of Allianz SE amounts to €1,149,758,353.92.€1,158,016,000. It is sub-divided into 449,124,357452,350,000 shares with no par value, of which 446,665,928450,755,801 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), of which an amount of €406,545,646 remains as of May 22, 2007. If the capital stock is increased against contributions in cash, the shareholders are to be granted preemptive rights. However, the Board of Management is authorized, upon the approval of the Supervisory Board, to exclude shareholders’ preemptive rights:
| no-par value shares against contributions in cash and/or in kind (Authorized Capital 2006/1), of which an amount of €406,545,646 remains as of February 29, 2008. If the capital stock is increased against contributions in cash, the shareholders are to be granted a subscription right. However, the Board of Management is authorized, upon the approval of the Supervisory Board, to exclude such shareholders’ 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€9,848,297 remains as of May 22, 2006.February 29, 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 AG or Allianz SE or itstheir Group companies have issued against paymentcash payments in cash pursuantaccordance with the resolution of the General Meeting as of February 8, 2006, or that conversion obligations under such bonds are fulfilled, and only in so far as no other methods of performance are used in serving these rights. The Board of Management is authorized to determine further details of the authorization approved byconditional share capital increase.
At the Annual General Meeting on May 5, 2004, orthe 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 extent that mandatory conversion obligations are fulfilled, and insofar as no other methodsbeginning of servicing these rights are used.the financial year of their issuance (Conditional Capital 2004). Of this conditional capital, an amount of up to €5,632,000 through issuance of up to 2,200,000 new registered no-par shares remains asremained December 31, 2007. The conditional capital increase shall be carried out only to the extent that conversion or option rights are exercised by holders of conversion or option rights attached to bonds that Allianz AG or Allianz SE or their Group companies have issued against cash payments in accordance with the resolution of the General Meeting of Allianz AG of May 22, 2007.5, 2004, or that conversion obligations under such bonds are fulfilled, and only insofar as no other methods of performance are used in serving these rights. The Board of Management is authorized to determine further details of the conditional share capital increase. All option rights resulting from bonds which Allianz SE or its subsidiaries have issued on the basis of this authority have been exercised until
February 15, 2008, so that this contingent capital has been fully carried out.
With respect to purchases of our own ordinary shares, see Note 23 to our consolidated financial statements.
Capital Increase
For information regarding capital increases see Note 23 to our consolidated financial statements.
Material Contracts
For information on material contracts to which Allianz AG or Allianz SE or any 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 include 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 currently 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 been 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 dependsapproximately between 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 the trade tax will no longer be deductible for corporate income tax and trade tax purposes.
From 2004 onwards, taxTax 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 anindividual German resident,dividends will be taxed as investment income (Einkunfte aus Kapitalvermögen). These dividends received are included in the tax basis by 50% only. However, income related expenses (e.g. custody fees or interest for a debt financed portfolio)
are also deductible by 50% only. The amount of such payments after deduction of related expenses will be subject to progressive income tax plus solidarity surcharge thereon. Since 2007, a personal annual exemption (Sparer-Freibetrag) of 750 Euro (1,500 Euro for married couples filing their tax return jointly) is available for the first timeaggregate amount of the investment income, including the dividends. In addition, an individual is 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 foraGerman 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 are held as business assets (Betriebsvermögen) by aGerman resident individuals are required to recognize 50% ofpartnership, the dividends received are included in the tax basis by 50% only. For trade tax purposes the same rules apply as taxable income.for corporate investors.
In the course of the reform of business taxation the taxation of dividends has been changed for individuals and partnerships. From 1 January 2009 onwards a final flat-rate tax (Abgeltungssteuer) amounting to 25% (plus a 5.5% solidarity surcharge) on all types of investment income (including dividends) will be established. This withholding tax levied on the income from capital investment shall generally be final and only be included in the relevant tax assessment for individuals upon application, especially if the personal income tax rate falls below 25%. The personal annual exemption (Sparer-Freibetrag) and the standard deduction will be 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 will not be possible any more.
For German nonresidents (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
Dividend distributions on or after January 1, 2002 by a German corporation with a calendar year that equals fiscal year are subject to a 20% withholding tax. In addition, a solidarity surcharge at a rate of 5.5% on the withholding tax is 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.
If you areAs part of the reform of business taxation, from 1 January 2009 onwards the withholding tax amounts to 25% (plus a 5.5% solidarity surcharge) on all types of investment income, including dividends.
For a Non-German Holder, the withholding tax rate may be reduced in accordance with an applicable income tax treaty. For 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 1 January 2009 onwards two-fifth of the withholding tax will 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 partnerships, the capital gains are treated as the dividends.
For non-corporate investors, a 50% tax exemption on realized gains on the disposal of shares arise only if they sell 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; within the 12 month speculative period or which were held as business assets in a partnership. Due to the Business Tax Reform Act 2008 capital gains from individuals are subject to taxation irrespective of any holding period with a 25% withholding tax .
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;
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 shares represented by those ADSs. Exchanges of shares for ADRs, and ADRs for 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 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 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 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 noncorporate 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. See “—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 constitute 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 “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 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 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 shares or ADSs and of any gains realized upon the disposition of our 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 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 Broad 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 one of our core competencies. It is therefore an integrated part of our business processes. The key elements of our risk management are:
Promotion of a strong risk 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, 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 business 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, on the other hand. Risk oversight consists of independent risk identification, assessment, reporting and monitoring, but 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.
InvestmentThe risk managementgovernance structure is implemented jointlyfurther complemented by Group Audit, Group Compliance and Legal Services functions. 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 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).support from other departments. Legal risks also include legislative changes, 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 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 study and evaluateopportunities evaluating long-term trends and changes that may have a significant impact on the Allianz Group’s risk situation. Committee member are senior managers representing Allianz Group Center and selective business units whose work is also supported by regular risk reports and analyses from external consultants.
profile. In 2005, we establishedaddition, the 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 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.
Internal Risk Capital Framework
We define internal risk capital as the capital required to protect against unexpected, extreme economic losses. We aggregate internal risk capital consistently across all business segments (Property-Casualty, Life/Health, Banking, Asset Management and Corporate), providing a common standard for measuring and comparing risks across the wide range of different activities that we undertake as an integrated financial service provider.
Value-at-Risk approach
We use an internal risk capital model based on a Value-at-Risk (“VaR”) approach, determining a maximum loss in the value of our portfolio of businesses covered within the scope of the model (the “covered business”) due to adverse market, credit, insurance and other business events, within a specified timeframe (holding period) and probability (confidence level). More specifically, we calculate the net fair asset value of our covered business based on values (i) under current best estimate conditions and (ii) under adverse conditions defined by scenarios for each risk category. The required internal risk capital per risk category is defined as the difference between the value of the portfolio under the best estimate scenario and under the adverse 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 effect across risk categories and regions.
To calculate internal risk capital using the VaR approach at the Allianz Group level, we assume a confidence level of 99.97% and a holding period of one year, which is assumed to be equivalent to an “AA” rating of Standard & Poor’s. We apply a holding period of one year because it is generally assumed that it may take up to one year to identify a counterparty to whom to transfer the liabilities in our portfolio. This 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 provides 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 level, in order to reflect that not all of our potential losses are likely to be
realized at the same time. This 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 it is exposed to limit the impact of any single source of risk and to help ensure that the positive developments of some businesses operate in such a manner to neutralize the possible negative developments of others.
The degree to which diversification can be realized depends in part on the level of relative concentration of those risks. For example, the greatest diversification is in general obtained in a balanced portfolio without any disproportionately large exposures to any one or more risks. In addition, the diversification effect depends upon the relationship between sources of risks. The degree of relationship between two sources of risk is referred 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 sufficient historical data is unavailable, we use conservative professional judgment, ruling out negative correlations, and, in general, we set the correlation parameters to represent the level of interdependency of risks under adverse conditions.
Scope
Our internal risk capital model takes into account the following sources of risk, classified as risk categories per segment:
| | | | | | | | | | | | | | | | | |
Risk category | | Insurance | | | Banking | | | Asset
Management | | | Corporate | | Description |
Market risk: | | | | | | | | | | ü | (3 | ) | | | | | Possible losses caused by changes in interest rates, equity prices, real estate values, commodity prices and exchange rates |
—interest rate | | ü | | | | ü | | | | | | | | ü | | |
—equity | | ü | | | | ü | | | | | | | | ü | | |
—real estate | | ü | | | | ü | | | | | | | | ü | | |
—currency(1) | | ü | | | | ü | (2 | ) | | | | | | ü | | | |
| | | | | |
Credit risk: | | | | | | | | | | ü(3) | | ü(3) | | | | | Possible losses caused by the failure of our debtors, bond issuers, reinsurance partners or counter parties to meet payment obligations or by changes in their creditworthiness |
—investment | | ü | | | | ü | (5 | ) | | | | | | ü | | |
—reinsurance | | ü | (4 | ) | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | |
Actuarial risk: | | | | | | | | | | | | | | | | | Unexpected financial losses due to the inadequacy of premiums for catastrophe and non-catastrophe risks, due to the inadequacy of reserves or due to the unpredictability of mortality or longevity |
—premium CAT | | ü | | | | | | | | | | | | | | |
—premium non-CAT | | ü | | | | | | | | | | | | | | |
—reserve | | ü | | | | | | | | | | | | | | |
—biometric | | ü | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | |
Business risk: | | | | | | | | | | | | | | | | | Cost risks, as well as operational risks which is the risk of a loss resulting from inadequate or failed internal processes, or from personnel and systems, or from external events |
—operational | | ü | | | | ü | | | | ü | | | | ü | | |
—cost | | ü | | | | ü | | | | ü | | | | ü | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
(1) | Foreign currency risks are mainly allocated to the Corporate segment. |
(2) | As commodity risk is not significant on the Group level, it is covered in our internal risk capital model within currency risk. |
(3) | 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. |
(4) | Reinsurance credit risk 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. |
(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 Dresdner Bank or Allianz Life United States) or if they have a significant impact on the resulting internal risk capital (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, using the same risk categories as for our internal risk capital model, thereby allowing us to consistently aggregate internal risk capital for all segments to 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. Furthermore, Dresdner Bank represents substantially all of the internal risk capital of our Banking segment accounting for 96% of our total Banking segment’s internal risk capital. Therefore, the detailed risk discussion in the Banking segment below relates to Dresdner Bank only.
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 in currencies different to Euro. 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.
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 2007 credit 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 value of each item. For certain assets and liabilities, we apply a mark-to-model approach without having available a current market price for that instrument or similar instruments. For our liabilities, the accuracy of fair values also depends on the quality of the actuarial cash flow estimates. Despite these limitations, we believe the estimated fair values are appropriately assessed in the aggregate.
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
WeThe 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 which are conducted throughas well as to optimize capital allocation across the Allianz Group. Internal risk capital is a key parameter of our local operating units. Risk capital, which is required to protect against unexpected losses, is one of the key parameters of this approach.EVA-approach.
Internal risk capital, as described below, forms the central element for our local risk-oriented control performance measurement processes. However, inIn managing our capital position, we have toalso consider additional conditions imposed by our regulator (the BaFin)external requirements of regulators and rating agencies. While meeting rating agencies’ capital requirements formforms 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 BaFin form a constraint with whichlevel of both 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 risksGroup’s operating entities 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 whole.
AsInternal 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 Financial Conglomeratesolvency probability of 99.97% over a holding period of one year. In support of this objective, we require 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. In doing so, 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 published shareholders’ equity 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 European Union,Life/Health segment and hybrid capital are added to shareholders’ equity, whereas goodwill and other intangible assets are subtracted therefrom.
Available capital(1) and internal risk capital
in € bn
Our available capital at December 31, 2007 amounted to €63.8 billion (2006: €70.2 billion(1)), while our regulatory solvencyinternal capital requirements at December 31, 2007 amounted to €33.4 billion (2006: €35.8 billion), resulting in a capital adequacy ratio of 191.0% at December 31, 2007, compared to 196.1% at December 31, 2006. The decrease of 9.1% in available capital was primarily driven by a decrease of shareholders’ equity due to the buy-out by Allianz of the minority interests in AGF.
The Allianz Group-wide internal risk capital after Group diversification and before minority interests of €33.4 billion at December 31, 2007 reflects a realized diversification benefit on the Group level of approximately 54%. Non-diversified and Group diversified internal risk capital are definedbroken down as follows:
(1) | The figure for available capital in 2006 has been adjusted. See Note 3 to our consolidated financial statements for further information. |
Allocated internal risk capital by risk category (total
portfolio before minority interest)
in € mn
Allocated internal risk capital by segment (total portfolio
before minority interest)
in € mn
The overall decrease of 6.8% in internal risk capital in 2007 was due to a decline in market risk, which is discussed in more detail in the respective section.
Regulatory capital adequacy
Under the EU Financial ConglomerateConglomerates Directive, (or “FCD”), which was issued in 2002a 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 transposed intocross-sector activities. The Allianz Group is a financial conglomerate within the scope of the Directive and related German nationallaw. The law effective atrequires that a financial conglomerate calculates the end of 2005.
As of December 31, 2006, our regulatory capital required by the FCD amountedneeded to €26.1 billion in comparison to our admissible capital of €50.5 billion.meet its solvency requirements on a consolidated basis.
Stress TestsAt December 31, 2007, 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 is €45.5 billion (2006: €49.5 billion(1)) including off-balance sheet reserves(2), surpassing the minimum legally stipulated level by €16.6 (2006: €23.4 billion). This margin results in a preliminary cover ratio(3) of 157% at December 31, 2007 (2006: 190%). The decrease of 8.1% in eligible capital was primarily driven by a decrease of shareholders’ equity due to the buy-out by Allianz of the minority interests in AGF. See Note 23 to our consolidated financial statements for further information with respect to capital requirements.
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, 2007, the financial strength of Allianz SE was rated
(1) | The figure for available capital in 2006 has been adjusted. See Note 3 to our consolidated financial statements for further information. |
(2) | Off-balance sheet reserves represent the difference between the fair value and the 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. |
(3) | Represents the ratio of eligible capital to required capital. |
by Standard & Poor’s as “AA” (stable outlook), by A. M. Best as “A+” (stable outlook), and by Moody’s as “Aa3” (stable outlook). Subsequently to December 31, 2007, Standard & Poor’s changed the outlook on its rating of Dresdner Bank (“A+”) from stable to negative.
In addition to its long-term financial strength rating, Standard & Poor’s has introduced a new rating category for “Enterprise Risk Management” (ERM) which is rated separately. Standard & Poor’s commenced its analysis of the Allianz risk management approach in 2006 and continued the review in 2007. Currently Standard & Poor’s has assigned Allianz a “Strong” rating for the ERM capabilities for our insurance operations. This rating indicates that Standard & Poor’s regards it “unlikely that Allianz SE will experience 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 whichthat act as early-warning indicators in monitoring the Allianz Group’s regulatory solvency capital ratios for the Allianz Group.and its capital position required by rating agencies. We also apply regular stress tests on a local operating unitentity level in order to monitor capital requirements imposed by local regulators and rating-agencies locally.rating agencies.
AFor 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, 20062007 would have resulted in a €3.1€2.7 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€3.6 billion, if we take into account the available-for-sale fixed income securities are taken into account 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
Internal risk capital, which is the capital required to protect against unexpected economic losses, is a key parameter of our EVA-approach, consistently applied to all segments. In 2006, we used an integrated 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.
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 a maximum loss in the value of our portfolio of assets and liabilities within a given timeframe and with a certain specified probability, or frequency, in the event of adverse market movements. More specifically, for each risk category, we calculate the net fair value of our assets and liabilities in terms of (i) a best estimate under current market conditions and (ii) an adverse value under adverse market conditions over a certain holding period. 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 options and guarantees under current and adverse market conditions using statistical models. Internal risk capital results per category are aggregated in a manner that takes diversification effects across risk categories and/or regions into account. The required internal risk capital is determined on a quarterly basis.
2007.
Assumptions
On the Allianz Group level, our objective is to maintain capital according to a confidence level or solvency probabilityConcentration of 99.97% over a holding period of one year, which is 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 at one year, as it is generally assumed that it may take a year to find a counterparty to whom to transfer the liabilities in our portfolio. In support of 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 units 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 because not all of our potential losses are likely to be realized at the same time. An operating unit which ensures a solvency probability of 99.93% over one year, meets the “A” target rating level requirement of Standard & Poor’s. This requirement implies that the portfolio could suffer a loss that exceeds the adverse value assumed in the value-at-risk calculation in seven out 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.
The Allianz Group’s policy is that all loans and deposits in foreign currencies should generally be funded and reinvested in investments in the same currency with matching maturities. Therefore, our residual foreign currency risk results primarily from the net fair value base of financial instruments denominated in foreign currency and the net asset value of our local non-Euro operating units. This currency market risk is generally managed centrally at the Allianz Group level and is, therefore, allocated to the Corporate segment.
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,
|
| • | | Liabilities—Cash flow profile of all technical reserves as well as deposits and issued securities.
|
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);
|
| • | | Credit risks—Possible losses caused by the inability to pay or a downgrade in the credit rating of debtors or counterparties;
|
| • | | Actuarial risks—Unexpected financial losses from the sale of insurance protection; and
|
| • | | 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.
|
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 judgment of assumptions. In general, the diversification parameters represent worst case correlations, and negative dependencies are ruled out.
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 MeasurementRisks
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
|
(2)
| 2005 figures adjusted as coverage of internal risk capital model has been extended.
|
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”,As 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.
|
Asare an integrated financial service provider we are exposedoffering a variety of products across different business segments and geographic regions, diversification is key to a wide rangeour business model. Diversification helps us to manage our risks efficiently by limiting the economic impact of different risksany single event and by contributing to relatively stable results and risk profile 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 measuringgeneral. 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 taking, thus making them comparable.profile without any one or more disproportionately large risks.
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 productsDisproportionately large risks that might be partly repaid inaccumulate and have 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 allocatedpotential 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
|
(2)
| 2005 figures adjusted as coverage of internal risk capital model has been extended.
|
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)produce substantial losses (e.g., 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)catastrophes or credit events) are closely monitored on a regular basis. In addition, underwriting guidelines define maximumstandalone 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 segment’s risk exposure. Reinsuranceplanned operating profit and the limits on operating entity level are based on the Property-Casualty net asset value. Traditional reinsurance coverage is obtainedand dedicated financial transactions on Group level are examples of two instruments to mitigate the peak risks resulting from natural catastrophes and to limit the impact of adverse conditions on profit and lossour financial results 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 partSimilarly, the Group monitors and limits credit exposures to single obligors and groups. We identify and measure risk concentrations in terms 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, ournon-diversified 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 approachline 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 liabilitiescategories covered in our internal risk capital model may result in an overall lowermodel. In the subsequent sections all risks are presented before and after diversification and concentrations of single sources of risk for individual business segments compared to the former sensitivity approach.are discussed accordingly.
Market Risk
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 Market 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 |
| | | | |
| | | | | | | | | | | | |
| | | Non-diversified | | | Group diversified | |
As of December 31, | | 2007 | | | 2006 | | | 2007 | | | 2006 | |
| | | € mn | | | € mn | | | € mn | | | € mn | |
Total Group | | 22,738 | | | 27,297 | | | 13,913 | | | 17,457 | |
Percentage of total Group internal risk capital | | 32 | % | | 36 | % | | 42 | % | | 49 | % |
Interest rate | | 6,691 | | | 8,590 | | | 655 | | | 1,259 | |
Equity | | 13,508 | | | 16,307 | | | 10,885 | | | 13,790 | |
Real estate | | 2,238 | | | 2,265 | | | 1,088 | | | 1,083 | |
Currency(1) | | 301 | | | 135 | | | 1,285 | | | 1,325 | |
Property-Casualty | | 11,066 | | | 12,958 | | | 6,477 | | | 8,379 | |
Interest rate | | 2,758 | | | 2,916 | | | 270 | | | 427 | |
Equity | | 6,835 | | | 8,633 | | | 5,508 | | | 7,300 | |
Real estate | | 1,385 | | | 1,290 | | | 673 | | | 617 | |
Currency(1) | | 88 | | | 119 | | | 26 | | | 35 | |
Life/Health | | 5,533 | | | 6,219 | | | 2,836 | | | 3,244 | |
Interest rate | | 2,100 | | | 2,613 | | | 206 | | | 383 | |
Equity | | 3,006 | | | 3,092 | | | 2,422 | | | 2,615 | |
Real estate | | 427 | | | 514 | | | 208 | | | 246 | |
Currency(1) | | 0 | | | 0 | | | 0 | | | 0 | |
Banking | | 2,814 | | | 2,940 | | | 1,962 | | | 2,090 | |
Interest rate | | 205 | | | 374 | | | 20 | | | 55 | |
Equity | | 2,239 | | | 2,205 | | | 1,804 | | | 1,865 | |
Real estate | | 157 | | | 345 | | | 76 | | | 165 | |
Currency(2) | | 213 | | | 16 | | | 62 | | | 5 | |
Asset Management(3) | | 0 | | | 0 | | | 0 | | | 0 | |
Corporate | | 3,325 | | | 5,180 | | | 2,638 | | | 3,744 | |
Interest rate | | 1,628 | | | 2,687 | | | 159 | | | 394 | |
Equity | | 1,428 | | | 2,377 | | | 1,151 | | | 2,010 | |
Real estate | | 269 | | | 116 | | | 131 | | | 55 | |
Currency(1) | | 0 | | | 0 | | | 1,197 | | | 1,285 | |
(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 “Internal Risk Capital Framework—Scope” for further information).
|
(2) | AccordingAs commodity exposure is limited to the Allianz Group’s policy, foreign currency risks are generally managed centrally at the Allianz Group levelBanking segment only 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.
|
(3)
| For our Banking segment, internal risk capital for real estate risk was introduced in 2006.
|
(4)
| 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.
|
As previously discussed, we develop internal risk capital figures on a quarterly basis. The table below presents the average internal risk capital calculated over the four quarters of 2006 and 2005, as well as the high and low quarterly internal risk capital amounts calculated in both years.
Average, High and Low Allocated Internal Risk Capital by Business Segment and Source of Risk(1)
– Total Portfolio Before Minority Interests –
| | | | | | | | | | | | | | | | | | |
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 | |
(1)
| Internal risk capital is calculated as value-at-risk with a one-year holding period and a confidence level of 99.97%.
|
(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.
|
(3) | The internal risk capital calculationrequirements for the Asset Management segment atonly reflect business risk (please see “Internal Risk Capital Framework—Scope” for further information). |
The decrease in market risk mainly results from the sale of a significant portion of our strategic equity participations, in particular on the Corporate level and in the Property-Casualty segment. Furthermore, an increase in interest rates in Europe reduced our exposure to risk in connection with the minimum guaranteed crediting rate that we must provide to policyholders for certain of our Life/Health products.
As previously discussed, we determine 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 2007 and 2006, as well as the high and low quarterly internal risk capital amounts calculated in both years.
Average, High and Low Allocated Internal Market Risk Capital By Business Segment and
Source of Risk
– Total Portfolio Before Minority Interests and After Group Diversification –
| | | | | | | | | | | | | | | |
As of December 31, | | 2007 | | 2006 | |
| | Over quarterly results | | Over quarterly results | |
| | | Average | | High | | Low | | Average | | | High | | | Low | |
| | | € mn | | € mn | | € mn | | € mn | | | € mn | | | € mn | |
Total Group | | 15,559 | | 16,800 | | 13,913 | | 17,438 | | | 18,565 | | | 16,738 | |
Interest rate | | 713 | | 764 | | 655 | | 1,403 | | | 1,492 | | | 1,259 | |
Equity | | 12,424 | | 13,662 | | 10,885 | | 13,713 | | | 14,908 | | | 12,913 | |
Real estate | | 1,072 | | 1,103 | | 1,038 | | 967 | | | 1,083 | | | 910 | |
Currency(1) | | 1,350 | | 1,409 | | 1,285 | | 1,355 | | | 1,433 | | | 1,317 | |
| | | | | | | | | | | | | | | |
Property-Casualty | | 7,299 | | 7,948 | | 6,476 | | 8,595 | | | 9,458 | | | 8,243 | |
Interest rate | | 301 | | 330 | | 270 | | 456 | | | 478 | | | 427 | |
Equity | | 6,331 | | 7,020 | | 5,508 | | 7,481 | | | 8,291 | | | 7,137 | |
Real estate | | 636 | | 673 | | 593 | | 624 | | | 672 | | | 599 | |
Currency(1) | | 31 | | 33 | | 26 | | 34 | | | 35 | | | 33 | |
| | | | | | | | | | | | | | | |
Life/Health | | 3,074 | | 3,215 | | 2,835 | | 3,177 | | | 3,247 | | | 3,094 | |
Interest rate | | 210 | | 226 | | 195 | | 468 | | | 517 | | | 383 | |
Equity | | 2,650 | | 2,781 | | 2,422 | | 2,478 | | | 2,615 | | | 2,369 | |
Real estate | | 214 | | 223 | | 208 | | 238 | | | 246 | | | 233 | |
Currency(1) | | 0 | | 0 | | 0 | | 0 | | | 0 | | | 0 | |
| | | | | | | | | | | | | | | |
Banking | | 2,116 | | 2,326 | | 1,962 | | 2,103 | | | 2,198 | | | 1,929 | |
Interest rate | | 25 | | 33 | | 20 | | 60 | | | 68 | | | 55 | |
Equity | | 1,933 | | 2,136 | | 1,804 | | 2,000 | | | 2,137 | | | 1,865 | |
Real estate | | 113 | | 159 | | 76 | | – | (4) | | – | (4) | | – | (4) |
Currency(2) | | 45 | | 62 | | 28 | | – | (4) | | – | (4) | | – | (4) |
| | | | | | | | | | | | | | | |
Asset Management(3) | | 0 | | 0 | | 0 | | 0 | | | 0 | | | 0 | |
| | | | | | | | | | | | | | | |
Corporate | | 3,071 | | 3,521 | | 2,639 | | 3,562 | | | 3,931 | | | 3,202 | |
Interest rate | | 177 | | 185 | | 159 | | 422 | | | 448 | | | 394 | |
Equity | | 1,510 | | 1,988 | | 1,151 | | 1,757 | | | 2,192 | | | 1,285 | |
Real estate | | 109 | | 131 | | 63 | | 65 | | | 75 | | | 55 | |
Currency(1) | | 1,275 | | 1,339 | | 1,197 | | 1,319 | | | 1,400 | | | 1,283 | |
(1) | Foreign currency risks are mainly allocated to the Corporate segment (please see “Internal Risk Capital Framework – Scope” for further information). |
(2) | As commodity exposure is limited to the Banking segment only and not significant on the Group level, it is based on a standard model of Standard & Poor’s. This approach does not provide separatecovered in our internal risk capital figures for marketmodel within currency 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 |
(3) | The internal risk capital calculatedrequirements for the Asset Management segment is allocated toonly reflect business risk in its entirety.(please see “Internal Risk Capital Framework – Scope” for further information). |
(4) | Only year-end results available for 2005 and 2006. |
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, Life/Health and Life/HealthCorporate segments. 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 common shares and preferred shares.
Interestshares), interest rate risk:risk (from bonds, loans and mortgages serving as collateral for liabilities resulting from our Banking, Property-Casualtymortgages) and Life/Health segments.
Foreigncurrency risk (especially the impact of foreign exchange rate risk:movements on the net asset value impact of the difference in fair value between assets and liabilities of our non-Euro denominated operating units.entities).
Property-Casualty and Life/Health and Corporate Segmentssegments
MostAs of December 31, 2007, most of the Allianz Group’s insurance-related equity investments are intended to be held forlong-term. 63% of 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 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 (47% as of December 31, 2007), 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.contracts (e.g., in Germany, France, U.S., Italy and South Korea). As interest rates may fall below the guaranteed crediting rates in those markets, we are exposed to interest rate risk. The valuation of these guarantees, which take into account the interaction of assetsinvestment strategy and policyholder obligations to policyholders, forms an integral part of our internal risk management framework. Our primary interest rate exposure iscapital model.
Banking Segment
The market risk in the risk that interest rates in Germany, France, U.S., Italy and South Korea may fall belownon-trading portfolio of the guaranteed credit minimums for certain of our Life/Health policies in those markets. In 2006, thisBanking segment comprises interest rate risk decreased asand equity risk. The interest rates increased in the Euro-zone and the U.S. and as the difference between interest rates and the average guaranteed levels also increased.
Interest rate risk in the non-trading portfolio arises from loans and deposits, issued securities, interest rate related investment securities as well as corresponding hedges and also from long-term fixed rate loans funded in part by short-term deposits. The equity risk arises from available-for-sale securities with equity characteristics. Dresdner Bank manages this risk by setting VaR limits. At December 31, 2007, the Dresdner Bank diversified VaR, with a 99% confidence level and 10-day holding period, for market risks in the non-trading portfolio amounted to €15.8 million, compared to €15.5 million at December 31, 2006.
Asset Management segment
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, equity and foreign 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 and South Korean Won. Local laws generally require that the insurance policy obligations
Trading portfolios
The trading portfolios of the Allianz Group’s subsidiariesGroup consist of all assets and the investments covering themliabilities classified as “held for trading” positions, most of which are to be found in the same currency. When this is not the case (e.g.Banking segment. Activities 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, Life/Health and Life/
Health segments’ risk management strategies locally,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 active management of currency risks is performed centrally atthey are not internally classified as trading. Trading activities in the Asset Management segment are immaterial. In our worldwide hedging and trading activities, the Allianz Group leveluses financial derivatives for the management of market risks and as a component of structured financial transactions. In terms of volume, the primary derivative products entered into by the Allianz Group are interest rate swaps, futures and options as well as foreign exchange forwards and equity derivatives.
Property-Casualty, Life/Health and Corporate segments
The Property-Casualty, Life/Health and Corporate segments generally do not engage in trading activities. In general, for accounting purposes and from a management perspective, financial instruments are 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, the accounting classification may differ from Allianz Group’s management view. The market risk data for the trading portfolios of these 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.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”.
Banking Segmentsegment
The Banking segment’ssegment is active in trading equities, interest rate risk arises frominstruments, foreign exchange, commodities and derivatives. The Banking segment
uses derivatives in its non-trading portfolio of loans and deposits, issued securities, interest rate-related investment securities,trading portfolios primarily to meet customer demands as well as corresponding hedgesto hedge market and credit risks. Derivatives are also used to take advantage of market opportunities. Dresdner Bank has expanded its use of credit and foreign exchange derivatives in order to meet client demands in this product field.
Although our internal risk capital model generally uses a one-year holding period and a confidence level of 99.93% for local operating entities, Dresdner Bank calculates market VaR figures based on different confidence level and holding period assumptions for its regulatory reporting as well as for the other banks forming partpurposes of the Allianz Group. The marketinternal limit setting and risk in the non-trading portfolio is also primarily interest rate riskmanagement. These assumptions take into account 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.can be transferred significantly faster than insurance liabilities.
MarketDresdner Bank’s VaR model, which is used to evaluate capital adequacy for regulatory purposes and which produces the input for the Group’s internal risk capital model, applies a confidence level of 99% and a 10-day holding period. This model has been approved by the German regulator, BaFin. For the purpose of risk management and internal limit setting, Dresdner Bank calculates its VaR with a confidence level of 95% and a one-day holding period. Unlike the VaR calculation required by the BaFin, this model assigns greater weight to the most recent market fluctuations. In doing so, Dresdner Bank endeavors to reflect current market trends on a timely basis.
VaR 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 that are specifically adapted to the risk situation of the trading units. Current limit utilization is determined and monitored on a daily basis. Limit breaches, if any, are immediately communicated to management so that corrective action can be taken.
The VaR for market risks within Dresdner Bank’s participations result from unanticipated adverse movements intrading portfolio is calculated based on the valueindustry-standard and Basel II compliant confidence level of these positions due99% and holding period of 10 days. The Dresdner Bank diversified VaR amounted to general market fluctuations or issuer-specific factors. The reduction in internal risk capital for equity investments from 2005€44 million at December 31, 2007, compared to 2006 is mainly driven by the sale of remaining parts of the Eurohypo AG by Dresdner Bank.€57 million at December 31, 2006. This decrease was partially offsetmainly caused by appreciation of the share prices of the remaining portfolio.lower interest rate risks due to an adjusted risk exposure.
VaR Statistics for Market Risks within Dresdner Bank’s Trading Portfolio (99% Confidence Level, 10-day Holding Period)
Dresdner Bank limits currency risks by applying the Allianz Group-wide policy that all loans and
| | | | | | | | | | | | | | | | | | | | |
| | | 2007 | | 2006 | | 2007 | | | 2006 | |
| | As of December 31, | | Over daily results | | | Over daily results | |
| | | Average | | High | | | Low | | | Average | | High | | | Low | |
| | | € mn | | € mn | | € mn | | € mn | | | € mn | | | € mn | | € mn | | | € mn | |
Non-diversified | | 85 | | 100 | | 83 | | — | (1) | | — | (1) | | 87 | | — | (1) | | — | (1) |
Interest rate | | 30 | | 43 | | 35 | | 55 | | | 22 | | | 51 | | 77 | | | 32 | |
Equity | | 41 | | 44 | | 32 | | 63 | | | 15 | | | 23 | | 85 | | | 8 | |
Commodity | | 5 | | 4 | | 5 | | 34 | | | 3 | | | 3 | | 17 | | | 1 | |
Currency | | 9 | | 9 | | 11 | | 22 | | | 3 | | | 10 | | 25 | | | 1 | |
Dresdner Bank diversified | | 44 | | 57 | | 42 | | 67 | | | 26 | | | 46 | | 89 | | | 26 | |
(1) | Last year’s disclosure value has been restatedThe high and low values for reasons of comparability with current value-at-risk figure, which according to new methodology includes fornon-diversified VaR can not be reasonably calculated as a sum, since the first time equity positions (without participation intention).single values are measured on different dates.
|
deposits in foreign currenciesThese market risks are refinanced or reinvested inintegrated into the same currency with matching maturities.
Asset Management Segment
TheAllianz Group-wide internal risk capital calculationmodel. To this end, Dresdner Bank converts its VaR calculated using a 99% confidence interval and 10-day holding period to match Allianz’s Group-wide internal risk capital standards for the Asset Management segment at Grouptime horizon (one year) and confidence level (99.93%). The conversion is based on a standard modelthe methodology used by industry regulators to convert VaR into regulatory capital requirements. Through this conversion, we achieve the comparability and integration of Standard & Poor’s. This approach does not provide separate risk capital figures for market risk. Approximately 99% ofDresdner Bank results into 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.Group-wide analysis.
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, | | 2007 | | 2006 |
| | | €mn | | €mn |
Property-Casualty | | 6,360 | | 8,307 |
Interest rate | | 265 | | 418 |
Equity | | 5,396 | | 7,237 |
Real estate(1) | | 673 | | 617 |
Currency(2) | | 26 | | 35 |
| | | | |
Life/Health | | 2,625 | | 3,014 |
Interest rate | | 205 | | 383 |
Equity | | 2,212 | | 2,385 |
Real estate(1) | | 208 | | 246 |
Currency(2) | | 0 | | 0 |
| | | | |
Banking | | 1,885 | | 2,030 |
Interest rate | | 11 | | 47 |
Equity | | 1,743 | | 1,818 |
Real estate(1) | | 76 | | 165 |
Currency(3) | | 55 | | 0 |
| | | | |
Asset Management(4) | | 0 | | 0 |
| | | | |
Corporate | | 2,482 | | 3,604 |
Interest rate | | 159 | | 394 |
Equity | | 1,029 | | 1,872 |
Real estate(1) | | 131 | | 55 |
Currency(2) | | 1,163 | | 1,283 |
| | | | |
Total | | 13,352 | | 16,955 |
| | | | |
(1) | Internal risk capital is calculated as value-at-risk with a one-year holding period and a confidence level of 99.97%.All real estate assets are non-trading.
|
(2) | All real estate assetsForeign currency risks are non-trading. For our Bankingmainly allocated to the Corporate segment internal risk capital(please see “Internal Risk Capital Framework—Scope” for real estate risk was introduced in 2006.further information).
|
(3) | 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.
|
(4) | 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. |
Trading Portfolios
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.
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 are taken into account because the high and low values were measured on different dates.(please see “Internal Risk Capital Framework – Scope” for further information).
|
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 Market Risk Capital byBy Business Segment and Source of Risk(1)
– Trading Portfolio Before Minority Interests and After Group Diversification –
| | | | |
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 |
| | | | |
| | | | |
As of December 31, | | 2007 | | 2006 |
| | | €mn | | €mn |
Property-Casualty | | 117 | | 72 |
Interest rate | | 5 | | 9 |
Equity | | 112 | | 63 |
Real estate(1) | | 0 | | 0 |
Currency(2) | | 0 | | 0 |
| | | | |
Life/Health | | 211 | | 230 |
Interest rate | | 1 | | 0 |
Equity | | 210 | | 230 |
Real estate(1) | | 0 | | 0 |
Currency(2) | | 0 | | 0 |
| | | | |
Banking | | 77 | | 60 |
Interest rate | | 9 | | 8 |
Equity | | 61 | | 47 |
Real estate(1) | | 0 | | 0 |
Currency(3) | | 7 | | 5 |
| | | | |
Asset Management(4) | | 0 | | 0 |
| | | | |
Corporate | | 156 | | 140 |
Interest rate | | 0 | | 0 |
Equity | | 122 | | 138 |
Real estate(1) | | 0 | | 0 |
Currency(2) | | 34 | | 2 |
| | | | |
Total | | 561 | | 502 |
| | | | |
(1) | Internal risk capital is calculated as value-at-risk with a one-year holding period and a confidence level of 99.97%.All real estate assets are non-trading.
|
(2) | All real estate assetsForeign currency risks are non-trading. For our Bankingmainly allocated to the Corporate segment internal risk capital(please see “Internal Risk Capital Framework—Scope” for real estate risk was introduced in 2006.further information).
|
(3)(3)
| 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.
|
(4)(4)
| 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 see “Internal Risk Capital Framework—Scope” for further information). |
Credit Risk Measurement
Credit risk arises from claims against various obligors likesuch as borrowers, counterparties, issuers, guarantors orand insurers. Losses may result infrom the following events:
FailureChanges in creditworthiness of an obligor, including ultimately its failure to meet payment obligations (default and migration risk);
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, etcetc. (country risk including transfer risk); and
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
approximate have defaulted when the losses thatvalue of its total assets is lower than its total liabilities. Since changes in the Allianz Group’s portfolio may incur. In accordance with our internal risk capital model, we consider losses within a one-year horizon. The model recognizes certain parameters that influence the riskasset value of a portfolio. Values of variables likecompany determine whether it defaults or migrates from one credit class to another, the exposure amount atcorrelation between different firms’ asset values determines the time of default orcorrelation between the probability of default of a counterparty are estimated.
We assume probability distributionsfirms’ defaults and estimate theirmigrations. Estimating these 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 performallows us to aggregate credit risk across 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.
Allocated Internal Risk Capital by Business Segment and Source of Risk(1)
– Total Portfolio Before Minority Interests –capital model.
| | | | |
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%.
|
(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.
|
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, reinsurance recoverables and our capitalfixed income investments and serves as the basis for controlling the risk on an Allianz Group-wide basis by detectingbasis.
Allocated Internal Credit Risk Capital By Business Segment and Source of Risk
– Total Portfolio Before Minority Interests –
| | | | | | | | | | | | |
As of December 31, | | Non-diversified | | | Group diversified | |
| | 2007 | | | 2006 | | | 2007 | | | 2006 | |
| | | € mn | | | € mn | | | € mn | | | € mn | |
Total Group | | 7,983 | | | 8,005 | | | 5,701 | | | 5,767 | |
Percentage of total Group internal risk capital | | 11 | % | | 11 | % | | 17 | % | | 16 | % |
Investment | | 5,839 | | | 5,949 | | | 4,128 | | | 4,307 | |
Reinsurance | | 2,144 | | | 2,056 | | | 1,573 | | | 1,460 | |
Property-Casualty | | 2,779 | | | 2,583 | | | 2,016 | | | 1,844 | |
Investment | | 832 | | | 719 | | | 588 | | | 521 | |
Reinsurance | | 1,947 | | | 1,864 | | | 1,428 | | | 1,323 | |
Life/Health | | 936 | | | 949 | | | 668 | | | 685 | |
Investment | | 739 | | | 757 | | | 523 | | | 548 | |
Reinsurance | | 197 | | | 192 | | | 145 | | | 137 | |
Banking | | 4,216 | | | 4,470 | | | 2,981 | | | 3,236 | |
Asset Management(1) | | 0 | | | 0 | | | 0 | | | 0 | |
Corporate | | 52 | | | 3 | | | 36 | | | 2 | |
(1) | The internal risk capital requirements for the Asset Management segment only reflect business risk (please see “Internal Risk Capital Framework—Scope” for further information). |
In spite of the overall difficult credit risksmarket worldwide in the second half of 2007, our internal credit risk capital remained rather stable in 2007 in comparison with 2006, mainly due to risk mitigating measures such as the closing of a non-investment grade commercial paper portfolio at anDresdner Bank early stage.in 2007.
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.
Reinsurance credit risk
Reinsurance credit risk 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, 2007, it represented 61% of our total Group non-diversified internal risk capital allocated to credit reinsurance risk.
We take steps to limit our liability from insurance business by ceding part of the risks we assume to the international reinsurance market. When selecting our reinsurance partners, we consider 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%2007, 77% 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 23% of credit, deposits or other financial measuresthe total reinsurance recoverables at December 31, 2007, which is a reduction of 8% in non-rated exposure from December 31, 2006. 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, 2007, 13% 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.
Reinsurance recoverables by rating class(1)as of
December 31, 2007
in € bn
Ceded reserves by rating class as of December 31, 2006(1)
in€ bn
(1) | Represents netted amounts pergross exposure broken down by reinsurer. |
Investment credit risk
As of December 31, 2007, our operating entities in the U.S. accounted for 20% of the non-diversified internal risk capital allocated to our Property-Casualty, Life/Health and Corporate segments for credit investment risk.
We limit the credit risk of our fixed income investment credit riskinvestments 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, 2006,2007, approximately 91%95% of the fixed income investments of the insurance companies of the Allianz Group had an investment grade rating. More than 86%rating and approximately 90% of these 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, 20062007
fair values in€ bn
In addition to these fixed income investments, Allianz Group has also non-tradable mortgage loan portfolios in Germany and the U.S. At December 31, 2007, 98% of the German mortgage portfolio obligors were assigned a Standard & Poor’s equivalent investment grade rating of at least “A” 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-tradeable commercial mortgage loans since 1994, and we thus regard the portfolio as investment grade. The North American Allianz insurance companies have a residential mortgage portfolio exposure of less than $2,000,000.
Banking Segmentsegment
As of December 31, 2007, approximately half (51%) of total Group non-diversified internal credit risk capital was represented by Dresdner Bank. In the Banking Segment,segment, credit risks include creditdefault and counterpartymigration risks inarising from the lending business, issuer risks from ourand securities business counterpartyand our derivatives trading activities; for the latter, settlement risk is additionally taken into account. Furthermore, credit risks from trading activities andinclude country risks.(and transfer) risk.
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 areis represented in the form of rating classes. To categorize the defaultclasses with each class representing a different average probability of a borrower, wedefault. We use a system with 16 differentdistinct rating classes.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€299 billion includes loansloan limits from lending business and market values of trading positions, in the case ofwhich for derivatives it containsis the positive replacement valuesvalue plus risk-based add-ons. As ofadd-ons to reflect possible future changes in market prices. At December 31, 2006,2007, approximately 82%74.6% of overall counterparty limits in the trading and non-trading portfoliostotal credit risk exposure of Dresdner
Bank werewas included in the rating classes I to VI, compared to 81% as of77.1% at 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 view by rating class as of December 31, 2006 (Dresdner Bank)
in %2006.
OfCredit profile of Dresdner Bank’s lending activities measured by limitsrated portfolio 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.2007
in %
Increasing 
Despite the difficult market conditions in certain business segments—especially in the second half of the year—loan volumes have been accompanied by a reduction of important risk parameters such as average probability of default, expected loss and internal risk capital. Dresdner Bank has made an effort to improve its loan quality supported by state-of-the-art loan processes, theremained stable. The implementation of a value-oriented growth strategy as well as better economic environment. As offurther enhancements in loan processes contributed to this stable development. At December 31, 2006,2007, approximately 68 % (2005: 64%68% (2006: 68%) of Dresdner Bank’s loans (measured by limits) were with investment grade counterparties.obligors.
In line with 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€2.0 billion as ofat December 31, 20052006 to €2.0€1.8 billion as ofat December 31, 2006.2007.
Asset Management Segmentsegment
As part of the investment management process, the Asset Management segment’s unitsentities assess credit risk affecting their customers’ portfolios.
Though our asset 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 companies analyze the creditworthiness 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 –
| | | | | | | | | | | | |
As of December 31, | | Non-diversified | | | Group diversified | |
| | 2007 | | | 2006 | | | 2007 | | | 2006 | |
| | | € mn | | | € mn | | | € mn | | | € mn | |
Total Group | | 23,038 | | | 21,928 | | | 6,521 | | | 5,846 | |
Percentage of total Group internal risk capital | | 32 | % | | 29 | % | | 20 | % | | 16 | % |
Premium CAT | | 5,780 | | | 5,261 | | | 1,077 | | | 831 | |
Premium non-CAT | | 8,284 | | | 8,315 | | | 3,249 | | | 3,172 | |
Reserve | | 8,037 | | | 7,485 | | | 2,170 | | | 1,823 | |
Biometric | | 937 | | | 867 | | | 25 | | | 20 | |
Property-Casualty | | 21,705 | | | 20,981 | | | 6,389 | | | 5,807 | |
Life/Health | | 950 | | | 947 | | | 29 | | | 39 | |
Corporate(2) | | 383 | | | 0 | | | 103 | | | 0 | |
(1) | As risks are measured by an integrated approach on an economic basis, internal risk capital takes reinsurance effects into account. |
(2) | Allianz SE has a conditional commitment to make capital payments to Fireman’s Fund Insurance Co. In particular, Allianz SE is required to make these payments in case of future negative developments of the reserves for the year 2003 and before. They are limited to US Dollar 1.1 billion. |
Internal reserve risk capital increased, as we changed the reinsurance structure and further improved our internal risk capital model. The rise of the internal premium catastrophe risk capital was mainly due to an enhancement of the respective simulation models and their coverage.
The table below presents the average internal risk capital calculated for actuarial risks over the four quarters of 2007 and 2006, as well as the high and low quarterly internal risk capital amounts calculated in both years.
Average, High and Low Allocated Internal Actuarial Risk Capital by Source of Risk
– Total Portfolio Before Minority Interests and After Group Diversification –
| | | | | | | | | | | | |
| | | 2007 | | 2006 |
| | Over quarterly results | | Over quarterly results |
| | Average | | High | | Low | | Average | | High | | Low |
| | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn |
Total Group | | 6,311 | | 6,521 | | 6,111 | | 6,166 | | 6,752 | | 5,846 |
Premium CAT | | 1,007 | | 1,077 | | 953 | | 887 | | 993 | | 828 |
Premium non-CAT | | 3,210 | | 3,249 | | 3,143 | | 3,334 | | 3,677 | | 3,172 |
Reserve | | 2,071 | | 2,170 | | 1,984 | | 1,926 | | 2,063 | | 1,823 |
Biometric | | 23 | | 25 | | 21 | | 20 | | 20 | | 18 |
Property-Casualty segment
A substantial portion of the Property-Casualty segment’s non-diversified internal actuarial risk capital was assigned to our operating entities in Germany, Italy, France and the U.S. (47% as of December 31, 2007).
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 risk in Germany), we use a scenario-based methodology.
In order to manage exposures dueNearly a third (31% as of December 31, 2007) 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 European windstorm is our largest exposure to natural catastrophe, followed by U.S. hurricane and California earthquake.
Our loss potential net of Allianz SE has defined an earnings volatility limitreinsurance for these exposures. These limitations are basedEuropean wind-storm is approximately €900 million, 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.
|
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, external events (such as interruption of business operations due to a break-down of electricity or from external events. The definition includes legal risk, whereasa flood), damage caused by employee fraud or the losses caused by court cases. Operational risks do not include strategic risk and reputational riskrisks, which are excluded in accordance with the requirements of Solvency II and Basel II.
Cost risks. These risks consist of unanticipated fluctuations in earnings arising from a decline in income without a corresponding decrease in expenses and 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 –
| | | | |
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 |
| | | | |
| | | | | | | | | | | | |
As of December 31, | | Non-diversified | | | Group
diversified | |
| | 2007 | | | 2006 | | | 2007 | | | 2006 | |
| | | € mn | | | € mn | | | € mn | | | € mn | |
Total Group | | 18,365 | | | 18,145 | | | 7,233 | | | 6,716 | |
Percentage of total Group internal risk capital | | 25 | % | | 24 | % | | 22 | % | | 19 | % |
Property-Casualty | | 6,425 | | | 6,480 | | | 2,064 | | | 1,941 | |
Life/Health | | 4,288 | | | 3,896 | | | 1,840 | | | 1,509 | |
Banking | | 1,630 | | | 1,497 | | | 634 | | | 570 | |
Asset Management(1) | | 5,576 | | | 5,662 | | | 2,621 | | | 2,605 | |
Corporate | | 446 | | | 610 | | | 74 | | | 91 | |
(1) | InternalThe internal risk capital is calculated as value-at-risk with one-year holding period and confidence level of 99.97%requirements for the Asset Management segment only reflect business risk (please see “Internal Risk Capital Framework—Scope” for further information).
|
Property-Casualty,The increase of internal business risk capital for the Life/Health segment is mainly due to expanding the scope of our internal risk capital model by systematically taking into account the unit-linked business in our operating entities. In addition, the regular update of assumptions (e.g., lapse and Corporate Segmentsmortality rates) at the beginning of the year contributed to the overall increase, as we take into account the experience of the previous year when determining the adverse scenarios.
Internal business risk capital for the Asset Management segment remained to be the highest Group-diversified figure compared with other segments. This is due to the high volume of third party assets under management coupled with the inherent conservative risk factor incorporated within the aforementioned approach similar to Standard & Poor’s standard model. As 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 credit risk in the Asset Management segment. As a result, the internal risk capital requirements for the Asset Management segment only reflect business risk.
Allianz has developed ana Group-wide operational risk 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 through a bottom-up approach via self-assessment.
a structured self assessment. Complementing our pro-active local management approach, operational losses are collected in a central loss database and 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 relevant local operating units.
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.
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.entities.
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.
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. 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 segment
Banking segment.In this segment, the treasury function is responsible for liquidity management and the risk function is responsible for monitoring liquidity risk. The Dresdner Bank Grouprisk for regulatory as well as internal purposes. Liquidity Policy implements both internal standards and regulatory requirements. The liquidity risk measures includemonitoring includes a reporting process for limit breaches and provisions for emergency planning. Liquidity risk measurement is based on Dresdner Bank’s liquidity management system, which models the maturities of all cash flows under different scenario assumptions and compiles a scenario-based liquidity balance sheet,maturity mismatch profile (i.e., net cash flow for different maturities) taking into account available prime-rated securities.securities as additional source of liquidity. Limits on liquidity gaps are established to manage short-term liquidity risk. Funding ratio limits are established for managing medium- and long-term structural liquidity risk for maturities of more than one year.
Asset Management segment
Asset Management segment.We endeavor to 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.
Group Risk identifies and assesses this 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 strive2008. 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 catastrophes 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.catastrophe risk.
In 2007, the Group Risk function at Allianz SE plans to embark on a multi-year projectkey initiative started to consolidate all Allianz Group-related risk information, calculationsinfrastructure and analysis onto one technologyto establish a best practice technical platform. ThisOnce fully operational, this platform will be centrally hostedallow for efficient and availableauditable processes and enhanced capabilities to support risk staff both inanalyze, aggregate and manage risks across 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.Group.
Furthermore in 2007,In early 2008, we expect to introduce a revisedintroduced our enhanced internal risk capital model for life insurance business.the purpose of quarterly risk reporting and risk related-performance measurement EVA in the Life/ Health segment. The newenhanced model is part of an integrated frameworkapproach addressing also the calculation of Market Consistent Embedded Value (MCEV) calculation,(“MCEV”), which, on an economic basis, is considered the assessment of risk capital andshareholders’ future profit embedded in the estimation of sensitivity analyses for our life portfolios. When fully introduced, thisissued Life/Health business. This model change, applied per January 1, 2008, is expected to provide significant support toresult in an increase of Group diversified internal risk capital for the Life/Health segment by approximately €2.2 billion.
In 2007, we reviewed the risk managementfactor incorporated within the model used to derive business risk capital for the Asset Management segment. As a result, a level of our life insurance business.
We also planconservatism within this factor will be reduced starting in 2008 to continue our project to evaluate derivatives onbetter reflect the basisrisk capital needs of an Allianz Group-wide uniform IT system. In addition, we will further strengthen and clarify our guidelines for handling derivatives.this segment.
We are monitoring the Solvency II Projectis a major European project and is expected to prepare for the anticipatedlead to significant changes to the European insurance solvency requirements. In particular,requirements in the coming years; therefore, the Allianz Group is actively participating in the process. We are continuously providing feedback on the proposals 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, as well as our risk management practices, comply with the forthcoming internal and supervisory requirements at an early stage, and accordingly, we are continuously updatingconstantly reviewing them on the methodologybasis of our internal risk model to meet future requirements on internal models resulting from this project.the evolving standards.
ITEM 12. Description of Securities Other than Equity Securities
| ITEM 12. | Description of Securities other than Equity Securities |
Not applicable.applicable
ITEM 13. Defaults, Dividend Arrearages and Delinquencies | Defaults, Dividend Arrearages and Delinquencies |
None
| ITEM 14. | Material Modifications to the Rights of Security Holders and Use of Proceeds |
None.
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, 2006,2007, 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, 2006.2007.
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”)(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.
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, 2006.2007. 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, 2006.2007.
Report of Independent Registered Public Accounting Firm
To the Board of Management and Supervisory Board of Allianz SE:
We have audited management’s assessment, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting, that Allianz SE and its subsidiaries (collectively, “the Allianz Group”) maintained effective internal control over financial reporting as of December 31, 2006,2007, 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
191
(1) | as issued by the IASB and adopted by the European Union |
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, 2006,2007, 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, 20062007 and 2005,2006, 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, 2006,2007 including the disclosures provided in the Qualitative and Quantitative Disclosures about Market Risk on pages 167 to 189, and our report
dated June 14, 2007,March 19, 2008, expressed an unqualified opinion on those consolidated financial statements.
KPMG Deutsche Treuhand-Gesellschaft
Aktiengesellschaft
Wirtschaftsprüfungsgesellschaft
Munich, Germany
June 14, 2007
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
Munich, Germany
June 14,March 19, 2008
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 2007, 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 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 aggregate fees billed for each of the last two fiscal years by KPMG DTG or KPMG DTG 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 of KPMG worldwide
| | | | |
| | | 2007 | | 2006 |
| | | € mn | | € mn |
Audit fees | | 49.0 | | 57.8 |
Audit-related fees | | 9.8 | | 8.1 |
Tax fees | | 4.2 | | 6.0 |
All other fees | | 4.1 | | 7.0 |
| | | | |
Total(1) | | 67.1 | | 78.9 |
| | | | |
(1) | Fees attributable to KPMG DTG and affiliated entities for audit fees were € 24.3 mn (2006: € 24.7), audit-related fees € 7.9 mn (2006: € 3.6 mn), tax fees € 2.7 mn (2006: € 2.7 mn) and all other fees € 2.5 mn (2006: € 3.6 mn) for the year ended December 31, 2007. Effective October 1, 2007, KPMG operations in Germany and the United Kingdom became affiliated entities. Fee amounts pertaining to the year 2007 therefore include both entities. |
Audit Fees KPMG billed the Allianz Group an aggregate of € 49.0 million in 2007 and € 57.8 million in 2006 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-relatedfees KPMG billed the Allianz Group an aggregate of € 9.8 million in 2007 and € 8.1 million in 2006 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 € 4.2 million in 2007 and € 6.0 million in 2006 for professional services, primarily for tax advice.
All other fees KPMG billed the Allianz Group an aggregate of € 4.1 million in 2007 and € 7.0 million in 2006 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 2007, 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, 2007.
| | | | | | | | | | | | |
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 1/1/07-1/31/07 | | — | | | — | | | N/A | | N/A |
February 2/1/07-2/28/07 | | — | | | — | | | | | |
March 3/1/07-3/31/07 | | — | | | — | | | | | |
April 4/1/07-4/30/07 | | — | | | — | | | | | |
May 5/1/07-5/31/07 | | — | | | — | | | | | |
June 6/1/07-6/30/07 | | — | | | — | | | | | |
July 7/1/07-7/31/07 | | — | | | — | | | | | |
August 8/1/07-8/31/07 | | — | | | — | | | | | |
September 9/1/07-9/30/07 | | — | | | — | | | | | |
October 10/1/07-10/31/07 | | — | | | — | | | | | |
November 11/1/07-11/30/07 | | 1,025,643 | (2) | | 154,07 | (2) | | | | |
December 12/1/07-12/31/07 | | — | | | — | | | | | |
| | | | | | | | | | | | |
Total | | 1,025,643 | | | 154,07 | | | | | |
| | | | | | | | | | | | |
(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 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 2007 |
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, 2007 and 2006, 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, 2007 including the disclosures provided in the Qualitative and Quantitative Disclosures about Market Risk on pages 167 to 189. 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, 2007 and 2006, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2007, 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), the Allianz Group’s internal control over financial reporting as of December 31, 2007, 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 19, 2008, expressed an unqualified opinion on the effectiveness of the Allianz Group’s internal control over financial reporting.
KPMG Deutsche Treuhand-Gesellschaft
Aktiengesellschaft
Wirtschaftsprüfungsgesellschaft
Munich, Germany
March 19, 2008
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, | | | | 2007 | | 2006 |
| | | Note | | € mn | | € mn |
ASSETS | | | | | | |
Cash and cash equivalents | | 6 | | 31,337 | | 33,031 |
Financial assets carried at fair value through income1) | | 7 | | 185,461 | | 198,992 |
Investments2) | | 8 | | 286,952 | | 298,134 |
Loans and advances to banks and customers | | 9 | | 396,702 | | 423,765 |
Financial assets for unit linked contracts | | | | 66,060 | | 61,864 |
Reinsurance assets | | 10 | | 15,312 | | 19,360 |
Deferred acquisition costs | | 11 | | 19,613 | | 19,135 |
Deferred tax assets | | 41 | | 4,771 | | 4,727 |
Other assets | | 12 | | 41,528 | | 38,001 |
Intangible assets | | 13 | | 13,413 | | 13,072 |
| | | | | | |
Total assets | | | | 1,061,149 | | 1,110,081 |
| | | | | | |
| | | | | | |
As of December 31, | | | | 2007 | | 2006 |
| | | Note | | € mn | | € mn |
LIABILITIES AND EQUITY | | | | | | |
Financial liabilities carried at fair value through income | | 14 | | 126,053 | | 121,822 |
Liabilities to banks and customers | | 15 | | 336,494 | | 376,565 |
Unearned premiums | | 16 | | 15,020 | | 14,868 |
Reserves for loss and loss adjustment expenses | | 17 | | 63,706 | | 65,464 |
Reserves for insurance and investment contracts | | 18 | | 292,244 | | 287,032 |
Financial liabilities for unit linked contracts | | 19 | | 66,060 | | 61,864 |
Deferred tax liabilities | | 41 | | 3,973 | | 4,588 |
Other liabilities | | 20 | | 49,324 | | 49,764 |
Certificated liabilities | | 21 | | 42,070 | | 54,922 |
Participation certificates and subordinated liabilities | | 22 | | 14,824 | | 16,362 |
| | | | | | |
Total liabilities | | | | 1,009,768 | | 1,053,251 |
| | | | | | |
| | | |
Shareholders’ equity | | 23 | | 47,753 | | 49,650 |
Minority interests | | 23 | | 3,628 | | 7,180 |
| | | | | | |
Total equity | | | | 51,381 | | 56,830 |
| | | | | | |
Total liabilities and equity | | | | 1,061,149 | | 1,110,081 |
| | | | | | |
(1)1)
| As of December 31, 2006, €90,2112007, €23,163 mn are pledged to creditors and can be sold or repledged (2005: €77,954(2006: €90,211 mn). |
(2)2)
| As of December 31, 2006, €3,1562007, €7,384 mn are pledged to creditors and can be sold or repledged (2005: €5,079(2006: €3,156 mn). |
Allianz Group
Consolidated Income Statements
| | | | Note | | 2006
| | 2005
| | 2004
| | | | | 2007 | | 2006 | | 2005 | |
| | | € mn | | € mn | | € mn | | | Note | | € mn | | € mn | | € mn | |
Premiums written | | | | 65,275 | | | 64,766 | | | 63,690 | | | | | 65,788 | | | 65,275 | | | 64,766 | |
Ceded premiums written | | | | (6,218 | ) | | (6,429 | ) | | (6,569 | ) | | | | (5,934 | ) | | (6,218 | ) | | (6,429 | ) |
Change in unearned premiums | | | | (533 | ) | | (655 | ) | | (332 | ) | | | | (492 | ) | | (533 | ) | | (655 | ) |
Premiums earned (net) | | 24 | | 58,524 | | | 57,682 | | | 56,789 | | | 24 | | 59,362 | | | 58,524 | | | 57,682 | |
Interest and similar income | | 25 | | 23,956 | | | 22,644 | | | 21,196 | | | 25 | | 26,047 | | | 23,956 | | | 22,644 | |
Income from financial assets and liabilities carried at fair value through income (net) | | 26 | | 940 | | | 1,163 | | | 1,677 | | | 26 | | (1,247 | ) | | 940 | | | 1,163 | |
Realized gains/losses (net) | | 27 | | 6,151 | | | 4,978 | | | 4,568 | | | 27 | | 6,548 | | | 6,151 | | | 4,978 | |
Fee and commission income | | 28 | | 8,856 | | | 8,162 | | | 6,813 | | | 28 | | 9,440 | | | 8,856 | | | 8,162 | |
Other income | | 29 | | 86 | | | 92 | | | 329 | | | 29 | | 217 | | | 86 | | | 92 | |
Income from fully consolidated private equity investments | | 30 | | 1,392 | | | 598 | | | 175 | | | 30 | | 2,367 | | | 1,392 | | | 598 | |
| | | | |
|
| |
|
| |
|
| | | | | | | | | | | |
Total income | | | | 99,905 | | | 95,319 | | | 91,547 | | | | | 102,734 | | | 99,905 | | | 95,319 | |
| | | | |
|
| |
|
| |
|
| | | | | | | | | | | |
Claims and insurance benefits incurred (gross) | | 31 | | (45,523 | ) | | (46,802 | ) | | (45,994 | ) | | | | (46,409 | ) | | (45,523 | ) | | (46,802 | ) |
Claims and insurance benefits incurred (ceded) | | 31 | | 3,226 | | | 4,032 | | | 3,188 | | |
Claims and Insurance benefits incurred (ceded) | | | | | 3,287 | | | 3,226 | | | 4,032 | |
Claims and insurance benefits incurred (net) | | 31 | | (42,297 | ) | | (42,770 | ) | | (42,806 | ) | | 31 | | (43,122 | ) | | (42,297 | ) | | (42,770 | ) |
Change in reserves for insurance and investment contracts (net) | | 32 | | (11,375 | ) | | (11,176 | ) | | (9,556 | ) | | 32 | | (10,685 | ) | | (11,375 | ) | | (11,176 | ) |
Interest expense | | 33 | | (5,759 | ) | | (6,377 | ) | | (5,688 | ) | | 33 | | (6,672 | ) | | (5,759 | ) | | (6,377 | ) |
Loan loss provisions | | 34 | | (36 | ) | | 109 | | | (354 | ) | | 34 | | 113 | | | (36 | ) | | 109 | |
Impairments of investments (net) | | 35 | | (775 | ) | | (540 | ) | | (1,475 | ) | | 35 | | (1,272 | ) | | (775 | ) | | (540 | ) |
Investment expenses | | 36 | | (1,108 | ) | | (1,092 | ) | | (767 | ) | | 36 | | (1,057 | ) | | (1,108 | ) | | (1,092 | ) |
Acquisition and administrative expenses (net) | | 37 | | (23,486 | ) | | (22,559 | ) | | (21,969 | ) | | 37 | | (23,218 | ) | | (23,486 | ) | | (22,559 | ) |
Fee and commission expenses | | 38 | | (2,351 | ) | | (2,312 | ) | | (1,804 | ) | | 38 | | (2,673 | ) | | (2,351 | ) | | (2,312 | ) |
Amortization of intangible assets | | | | (51 | ) | | (50 | ) | | (1,362 | ) | | | | (17 | ) | | (51 | ) | | (50 | ) |
Restructuring charges | | 49 | | (964 | ) | | (100 | ) | | (347 | ) | | 49 | | (232 | ) | | (964 | ) | | (100 | ) |
Other expenses | | 39 | | 1 | | | (51 | ) | | (200 | ) | | 39 | | (14 | ) | | 1 | | | (51 | ) |
Expenses from fully consolidated private equity investments | | 40 | | (1,381 | ) | | (572 | ) | | (175 | ) | | 40 | | (2,317 | ) | | (1,381 | ) | | (572 | ) |
| | | | |
|
| |
|
| |
|
| | | | | | | | | | | |
Total expenses | | | | (89,582 | ) | | (87,490 | ) | | (86,503 | ) | | | | (91,166 | ) | | (89,582 | ) | | (87,490 | ) |
| | | | |
|
| |
|
| |
|
| | | | | | | | | | | |
Income before income taxes and minority interests in earnings | | | | 10,323 | | | 7,829 | | | 5,044 | | | | | 11,568 | | | 10,323 | | | 7,829 | |
Income taxes | | 41 | | (2,013 | ) | | (2,063 | ) | | (1,610 | ) | | 41 | | (2,854 | ) | | (2,013 | ) | | (2,063 | ) |
Minority interests in earnings | | | | (1,289 | ) | | (1,386 | ) | | (1,168 | ) | | | | (748 | ) | | (1,289 | ) | | (1,386 | ) |
| | | | |
|
| |
|
| |
|
| | | | | | | | | | | |
Net income | | | | 7,021 | | | 4,380 | | | 2,266 | | | | | 7,966 | | | 7,021 | | | 4,380 | |
| | | | |
|
| |
|
| |
|
| | | | | | | | | | | |
| | | | | | €
| | €
| | €
| | | | | € | | € | | € | |
Basic earnings per share | | 50 | | 17.09 | | | 11.24 | | | 6.19 | | | 50 | | 18.00 | | | 17.09 | | | 11.24 | |
Diluted earnings per share | | 50 | | 16.78 | | | 11.14 | | | 6.16 | | | 50 | | 17.71 | | | 16.78 | | | 11.14 | |
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) | | | Shareholders’
equity | | | Minority
interests | | | Total
equity | |
| | € mn | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | |
Balance as of January 1, 2005, as previously reported | | 19,433 | | 5,893 | | | (2,634 | ) | | 7,303 | | | 29,995 | | | 7,696 | | | 37,691 | |
Adjustments (Note 3) | | — | | (559 | ) | | — | | | (272 | ) | | (831 | ) | | 771 | | | (60 | ) |
| | | | | | | | | | | | | | | | | | | | |
Balance as of January 1, 2005 | | 19,433 | | 5,334 | | | (2,634 | ) | | 7,031 | | | 29,164 | | | 8,467 | | | 37,631 | |
Foreign currency translation adjustments | | — | | — | | | 1,601 | | | 50 | | | 1,651 | | | 33 | | | 1,684 | |
Available-for-sale investments | | | | | | | | | | | | | | | | | | | | |
Unrealized gains and losses (net) arising during the year1) | | — | | — | | | — | | | 3,805 | | | 3,805 | | | 549 | | | 4,354 | |
Transferred to net income on disposal2) | | — | | — | | | — | | | (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 | | 8,020 | | | (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 disposal2) | | — | | — | | | — | | | (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 disposal2) | | — | | — | | | — | | | (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 | |
| | | | | | | | | | | | | | | | | | | | |
(1)1)
| During the year ended December 31, 20062007 unrealized gains and losses (net) arising during the year included in shareholders’ equity are net of deferred tax benefit of €720 mn (2006: deferred tax benefit of €478 mn (2005:mn; 2005: deferred tax charge of €568 mn; 2004: deferred tax charge of €868 mn). |
(2)2)
| During the year ended December 31, 2006,2007, realized gains/losses (net) transferred to net income on disposal are net of income tax charge of €206 mn (2006: €308 mn (2005: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
| | | 2007 | | 2006 | | 2005 | |
| | | € mn | | € mn | | € mn | | | € mn | | € mn | | € mn | |
Summary | | | |
Net cash flow provided by (used in) operating activities | | 20,265 | | | 47,311 | | | 1,293 | | |
Summary: | | | | | | | |
Net cash flow provided by operating activities | | | 12,706 | | | 20,681 | | | 47,200 | |
Net cash flow provided by (used in) investing activities | | (34,450 | ) | | (22,922 | ) | | (9,155 | ) | | (4,643 | ) | | (34,866 | ) | | (22,811 | ) |
Net cash flow provided by (used in) financing activities | | 15,647 | | | (8,442 | ) | | (2,014 | ) | | (9,642 | ) | | 15,647 | | | (8,442 | ) |
Effect of exchange rate changes on cash and cash equivalents | | (78 | ) | | 72 | | | (24 | ) | | (115 | ) | | (78 | ) | | 72 | |
Change in cash and cash equivalents | | 1,384 | | | 16,019 | | | (9,900 | ) | | (1,694 | ) | | 1,384 | | | 16,019 | |
Cash and cash equivalents at beginning of period | | 31,647 | | | 15,628 | | | 25,528 | | | 33,031 | | | 31,647 | | | 15,628 | |
Cash and cash equivalents at end of period | | 33,031 | | | 31,647 | | | 15,628 | | | 31,337 | | | 33,031 | | | 31,647 | |
| Cash flow from operating activities: | | | | | | | | |
Net income | | 7,021 | | | 4,380 | | | 2,266 | | | 7,966 | | | 7,021 | | | 4,380 | |
Adjustments to reconcile net income to net cash flow provided by (used in) operating activities: | | | |
Adjustments to reconcile net income to net cash flow provided by operating activities | | | | | | | |
Minority interests in earnings | | 1,289 | | | 1,386 | | | 1,168 | | | 748 | | | 1,289 | | | 1,386 | |
Share of earnings from investments in associates and joint ventures | | (287 | ) | | (253 | ) | | (253 | ) | | (521 | ) | | (287 | ) | | (253 | ) |
Realized gains/losses (net) and impairments of investments (net) of: | | | | | | | | |
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 | ) | | (5,276 | ) | | (5,376 | ) | | (4,438 | ) |
Other investments, mainly financial assets held for trading and designated at fair value through income | | (947 | ) | | (1,557 | ) | | (1,651 | ) | |
Other investments, mainly financial assets held for trading and designated at fair value through in-come | | | 681 | | | (938 | ) | | (1,546 | ) |
Depreciation and amortization | | 916 | | | 723 | | | 1,236 | | | 891 | | | 983 | | | 787 | |
Amortization of goodwill | | — | | | — | | | 1,164 | | |
Loan loss provision | | 36 | | | (109 | ) | | 354 | | | (113 | ) | | 36 | | | (109 | ) |
Interest credited to policyholder accounts | | 3,126 | | | 2,748 | | | 2,523 | | | 3,225 | | | 3,126 | | | 2,748 | |
Net change in: | | | | | | | | |
Financial assets and liabilities held for trading | | 19,265 | | | 10,371 | | | (30,174 | ) | | 18,948 | | | 19,265 | | | 10,371 | |
Reverse repurchase agreements and collateral paid for securities borrowing transactions | | (50,096 | ) | | 43,508 | | | (19,368 | ) | | 30,215 | | | (27,294 | ) | | 72,504 | |
Repurchase agreements and collateral received from securities lending transactions | | 36,990 | | | (18,692 | ) | | 33,488 | | | (48,143 | ) | | 14,188 | | | (47,688 | ) |
Reinsurance assets | | 663 | | | 428 | | | 1,499 | | | 716 | | | 663 | | | 428 | |
Deferred acquisition costs | | (1,434 | ) | | (1,753 | ) | | (1,171 | ) | | (932 | ) | | (1,434 | ) | | (1,753 | ) |
Unearned premiums | | 593 | | | 876 | | | 286 | | | 341 | | | 593 | | | 876 | |
Reserves for losses and loss adjustment expenses | | (188 | ) | | 2,621 | | | 1,274 | | | (389 | ) | | (188 | ) | | 2,621 | |
Reserves for insurance and investment contracts | | 7,025 | | | 7,634 | | | 7,049 | | | 6,675 | | | 7,025 | | | 7,634 | |
Deferred tax assets/liabilities | | 292 | | | (39 | ) | | 470 | | | 55 | | | 292 | | | (39 | ) |
Other (net) | | 1,377 | | | (523 | ) | | 4,226 | | | (2,381 | ) | | 1,717 | | | (709 | ) |
Subtotal | | 13,244 | | | 42,931 | | | (973 | ) | | 4,740 | | | 13,662 | | | 42,820 | |
| | |
|
| |
|
| |
|
| | | | | | | | | |
Net cash flow provided by (used in) operating activities | | 20,265 | | | 47,311 | | | 1,293 | | |
Net cash flow provided by operating activities | | | 12,706 | | | 20,681 | | | 47,200 | |
| | |
|
| |
|
| |
|
| | | | | | | | | |
Cash flow from investing activities: | | | |
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 | | | 8,219 | | | 7,207 | | | 9,981 | |
Available-for-sale investments | | 118,747 | | | 137,915 | | | 124,481 | | | 130,421 | | | 118,747 | | | 137,915 | |
Held-to-maturity investments | | 336 | | | 534 | | | 781 | | | 317 | | | 336 | | | 534 | |
Investments in associates and joint ventures | | 730 | | | 3,938 | | | 1,876 | | | 1,902 | | | 730 | | | 3,938 | |
Assets held for sale | | 2,253 | | | 792 | | | — | | |
Non-current assets and disposal groups held for sale | | | 4 | | | 2,253 | | | 792 | |
Real estate held for investment | | 1,376 | | | 1,091 | | | 890 | | | 889 | | | 1,376 | | | 1,091 | |
Loans and advances to banks and customers (purchased loans) | | 8,365 | | | 5,195 | | | 3,739 | | | 8,689 | | | 8,365 | | | 5,195 | |
Property and equipment | | 453 | | | 113 | | | 667 | | | 607 | | | 453 | | | 113 | |
| | |
|
| |
|
| |
|
| | | | | | | | | |
Subtotal | | 139,467 | | | 159,559 | | | 133,766 | | | 151,048 | | | 139,467 | | | 159,559 | |
| | |
|
| |
|
| |
|
| | | | | | | | | |
Allianz Group
Consolidated Statements of Cash Flows—(Continued)
| | | | 2006
| | 2005
| | 2004
| | | 2007 | | 2006 | | 2005 | |
| | | € mn | | € mn | | € mn | | | € mn | | € mn | | € mn | |
Payments for the purchase or origination of: | | | | | | | | |
Financial assets designated at fair value through income | | (9,680 | ) | | (11,278 | ) | | (2,297 | ) | | (11,220 | ) | | (9,680 | ) | | (11,278 | ) |
Available-for-sale investments | | (130,949 | ) | | (161,583 | ) | | (135,005 | ) | | (129,060 | ) | | (131,290 | ) | | (161,418 | ) |
Held-to-maturity investments | | (280 | ) | | (255 | ) | | (1,071 | ) | | (301 | ) | | (280 | ) | | (255 | ) |
Investments in associates and joint ventures | | (491 | ) | | (934 | ) | | (526 | ) | | (1,509 | ) | | (491 | ) | | (934 | ) |
Assets held for sale | | — | | | (178 | ) | | — | | |
Non-current assets and disposal groups held for sale | | | (1,073 | ) | | — | | | (178 | ) |
Real estate held for investment | | (860 | ) | | (1,064 | ) | | (1,752 | ) | | (430 | ) | | (860 | ) | | (1,064 | ) |
Loans and advances to banks and customers (purchased loans) | | (10,598 | ) | | (5,493 | ) | | (6,172 | ) | | (12,286 | ) | | (10,598 | ) | | (5,493 | ) |
Property and equipment | | (1,588 | ) | | (1,126 | ) | | (2,345 | ) | | (832 | ) | | (1,588 | ) | | (1,126 | ) |
Subtotal | | (154,446 | ) | | (181,911 | ) | | (149,168 | ) | | (156,711 | ) | | (154,787 | ) | | (181,746 | ) |
Business combinations (Note 4): | | | | | | | | |
Proceeds from sale, net of cash disposed | | — | | | 2,029 | | | (886 | ) | | 372 | | | — | | | 2,029 | |
Acquisition, net of cash acquired | | (344 | ) | | — | | | (416 | ) | | (670 | ) | | (344 | ) | | — | |
Change in other loans and advances to banks and customers (originated loans) | | (19,224 | ) | | (1,877 | ) | | 10,287 | | | 43 | | | (19,224 | ) | | (1,877 | ) |
Other (net) | | 97 | | | (722 | ) | | (2,738 | ) | | 1,275 | | | 22 | | | (776 | ) |
| | |
|
| |
|
| |
|
| | | | | | | | | |
Net cash flow provided by (used in) investing activities | | (34,450 | ) | | (22,922 | ) | | (9,155 | ) | |
Net cash flow used in investing activities | | | (4,643 | ) | | (34,866 | ) | | (22,811 | ) |
| | |
|
| |
|
| |
|
| | | | | | | | | |
Cash flow from financing activities: | | | |
Cash flow from financing activities | | | | | | | |
Policyholders’ account deposits | | 13,234 | | | 14,118 | | | 10,364 | | | 12,810 | | | 13,234 | | | 14,118 | |
Policyholders’ account withdrawals | | (8,432 | ) | | (5,560 | ) | | (4,232 | ) | | (9,365 | ) | | (8,432 | ) | | (5,560 | ) |
Net change in liabilities to banks and customers | | 13,524 | | | (19,167 | ) | | (14,597 | ) | | 9,007 | | | 13,524 | | | (19,167 | ) |
Proceeds from the issuance of certificated liabilities, participation certificates and subordinated liabilities | | 103,429 | | | 115,422 | | | 107,861 | | | 59,191 | | | 103,429 | | | 115,422 | |
Repayments of certificated liabilities, participation certificates and subordinated liabilities | | (103,946 | ) | | (111,737 | ) | | (100,698 | ) | | (71,627 | ) | | (103,946 | ) | | (111,737 | ) |
Cash inflow from capital increases | | 98 | | | 2,159 | | | 69 | | | 115 | | | 98 | | | 2,159 | |
Transactions between equity holders | | (70 | ) | | (2,932 | ) | | (598 | ) | | (7,326 | ) | | (70 | ) | | (2,932 | ) |
Dividends paid to shareholders | | (1,463 | ) | | (1,403 | ) | | (1,069 | ) | | (1,995 | ) | | (1,463 | ) | | (1,403 | ) |
Net cash from sale or purchase of treasury shares | | (458 | ) | | 2,061 | | | (53 | ) | | (34 | ) | | (458 | ) | | 2,061 | |
Other (net) | | (269 | ) | | (1,403 | ) | | 939 | | | (418 | ) | | (269 | ) | | (1,403 | ) |
| | |
|
| |
|
| |
|
| | | | | | | | | |
Net cash flow provided by (used in) financing activities | | 15,647 | | | (8,442 | ) | | (2,014 | ) | | (9,642 | ) | | 15,647 | | | (8,442 | ) |
| | |
|
| |
|
| |
|
| | | | | | | | | |
Supplementary information on the consolidated statement of cash flows: | | | |
Supplementary information on the consolidated statement of cash flows | | | | | | | |
Income taxes paid | | (2,241 | ) | | (1,644 | ) | | (1,691 | ) | | (2,856 | ) | | (2,241 | ) | | (1,644 | ) |
Dividends received | | 1,946 | | | 1,476 | | | 1,339 | | | 2,526 | | | 1,946 | | | 1,476 | |
Interest received | | 20,598 | | | 19,796 | | | 18,780 | | | 22,256 | | | 20,552 | | | 19,770 | |
Interest paid | | (5,556 | ) | | (6,332 | ) | | (5,687 | ) | | (6,697 | ) | | (5,556 | ) | | (6,332 | ) |
| Significant non-cash transactions: | | | | | | | | |
Settlement of exchangeable bonds issued by Allianz Finance II B.V. with shares: | | | | | | | | |
Available-for-sale investments | | (1,074 | ) | | — | | | (989 | ) | | (812 | ) | | (1,074 | ) | | — | |
Certificated liabilities | | (1,074 | ) | | — | | | (989 | ) | | (812 | ) | | (1,074 | ) | | — | |
Novation of quota share reinsurance agreement: | | | | | | | | |
Reinsurance assets | | (1,111 | ) | | (1,117 | ) | | — | | | (2,469 | ) | | (1,111 | ) | | (1,117 | ) |
Deferred acquisition costs | | 76 | | | 76 | | | — | | | 145 | | | 76 | | | 76 | |
Payables from reinsurance contracts | | (1,035 | ) | | (1,041 | ) | | — | | | (2,324 | ) | | (1,035 | ) | | (1,041 | ) |
Effects from the merger of RAS with and into Allianz AG (Note 4): | | | | | | | | |
Revenue reserves | | (2,362 | ) | | — | | | — | | | — | | | (2,362 | ) | | — | |
Minority interests | | (1,659 | ) | | — | | | — | | | — | | | (1,659 | ) | | — | |
Paid-in capital | | 3,653 | | | — | | | — | | | — | | | 3,653 | | | — | |
Unrealized gains and losses (net) | | 368 | | | — | | | — | | | — | | | 368 | | | — | |
Effects from buy-out of AGF minorities (Note 4): | | | | | | | |
Revenue reserves | | | (1,843 | ) | | — | | | — | |
Unrealized gains and losses (net) | | | 146 | | | — | | | — | |
Minority interests | | | (1,068 | ) | | — | | | — | |
Paid-in capital | | | 2,765 | | | — | | | — | |
Proceeds from sales of available-for-sale investments: | | | | | | | | |
Debt securities | | 89,813 | | | 107,929 | | | 101,239 | | | 89,355 | | | 89,813 | | | 107,929 | |
Equity securities | | 21,696 | | | 24,800 | | | 17,462 | | | 27,485 | | | 21,696 | | | 24,800 | |
| | |
|
| |
|
| |
|
| | | | | | | | | |
Total | | 111,509 | | | 132,729 | | | 118,701 | | | 116,840 | | | 111,509 | | | 132,729 | |
| | |
|
| |
|
| |
|
| | | | | | | | | |
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.Ger-many. 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 Königinstraße 28, 80802 Munich.
Basis of presentation
The consolidated financial statements of the Allianz Group have been prepared in conformity with International Financial Reporting Standards (“IFRS”), as adopted under European Union (“EU”) regulations in accordance with section 315a of the German Commercial Code (“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 optionsIFRSs results in no material differences between IFRS as adopted by the EU and IFRS as adoptedissued by the International Accounting Standard Board (“IASB”).IASB. Within these consolidated financial statements, the Allianz Group has applied all standards and interpretations issued by the IASB that are compulsory as of December 31, 2007.
IFRS does not provide specific guidance concerning all aspects of the recognition and measurement of insurance and reinsurance contracts. 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”) have been applied to those aspects where specific guidance is not provided by IFRS 4, Insurance Contracts. See Note 3 regarding changes to IFRS effective JanuaryJanu-ary 1, 2006.2007. The consolidated financial statements are presented in millions of Euro (€).
2 Summary of significant accounting policies
Principles 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”). 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. 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 subsidiaries whose fiscal year is other than December 31, but not exceeding a lag of three months. The effects of intra-Allianz Group transactions have been eliminated.
A business combination occurs when the Allianz Group obtains control over a business. Business combinations are accounted for by applying 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 consideration given and any costs directly attributable to the business combination. 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 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.
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
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
recorded at the minority’s proportion of the pre-acquisition carrying amounts of the identifiable assets and liabilities.
The Allianz Group transfers financial assets to certain SPEs in revolving securitizations 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.
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. 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.
Foreign currency translation and transactions
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)(foreigncurrencies) are recorded at the rate of exchange 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.
Currency gains and losses arising from foreign currency transactions are reported in investment expenses.
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.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Real estate held for investment
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.
Financial assets and liabilities
Recognition and classification
Financial assets and liabilities are generally recognized on trade date, when the Allianz Group has entered into contractual arrangements with counterparties to purchase securities or incur a liability.
Financial assets are either carried at fair value through income, or they are categorized into available-for-sale investments, held-to-maturity investments, loans and advances to banks and customers, financial assets for unit-linked assets or funds held by others under reinsurance contracts assumed.
Fair value of financial assets and liabilities
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 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 liabilities carried at fair value is calculated by discounting future cash flows at a rate which incorporates the group’s observable credit spreads.
The fair values of financial instruments that are not traded in an active market are 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 identicalinstruments 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 the portfolio of ABS-based products, primarily consisting of residential mortgage backed securities (“RMBS”) and collateralized debt obligations (“CDOs”) that were affected by the financial market crisis, the availability of price quotations from a functioning market were limited during the second half of 2007 and as of December 31, 2007. Therefore, the valuations for these financial instruments were derived based on the market values of similar financial instruments. The market quotations used were taken from other market participants and competitors, which management believes are representative of the market. If this were not possible due to a lack of price quotations, the vintage and rating-specific valuations of the ABX.HE (Home Equity) index were used. The Allianz Group strictly adhered to these ABX.HE valuations.
Financial assets and liabilities carried at fair value through income
Financial assets 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.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Financial assets held for trading consist of debt and equity securities, promissory notes and precious
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
metal holdings, which have been acquired principally for the purpose of generating a profit from short-term fluctuations in price, and derivative financial instruments with positive fair values that do not meet the criteria for hedge accounting. Financial assets held for trading are reported at fair value. Changes in fair value are recognized directly in net income for the period.
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 assets and liabilities designated at fair value through income are recorded at fair value with changes in fair value recorded in net income for the period. A financial instrument may only be designated at inception as held at fair value through income and cannot 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 are securities that are designated as available-for-sale or are not classified as held-to-maturity, loans and advances to banks and customers, or financial assets carried at fair value through income. Available-for-sale securities 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. 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 atpartnershipsat 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 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.
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 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
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
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 the 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 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 liveslifes 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 aretermsare 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.
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.
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
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
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 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 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.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
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.
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 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.
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 orfinancial 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.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
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 recognized in net income, 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 counter-party and the Allianz Group intends to settle on a net basis.
Derecognition of financial assets and liabilities
A financial asset is derecognized when the contractual rights to the cash flows from the financialasset 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.
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 under the provisions of US 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
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
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 policyholders for the portion reinsured. Consequently, allowances are made for receivables on reinsurance contracts which are deemed uncollectible.
Deferred acquisition costs
Deferred acquisition costs (“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% to 15%. Interest accrues on the PVFP balance based upon the policy liability rate or contract rate. Interest accrues on PVFP at rates between 3.5%2.4% and 8.5%9.8%.
Deferred sales inducements on insurance contracts that meet the following criteria are deferred and amortized using the same methodology and assumptions used to amortizeamortized 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
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
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 fallinto 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 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.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
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 formortality, 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 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 lifetype 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.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
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 | % | | 5 – 6 | % |
Aggregate policy reserves | | 2.5 – 6 | % | | 2.8 – 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 | % |
Health1) | | investments | | 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 an adequate participation in all other sources of profit. |
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 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.
Property and equipment includes real estate held for own use, equipment and software.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Property and equipment includes realReal estate held for use, equipment and software.
Real estate held forown use (e.g., real property 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.
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, liabilities and certain contingentliabilities.contingent liabilities. Goodwill resulting from business combinations is not subject to amortization. It is initiallyisinitially 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 life are not subject to amortization and are subsequently recorded at cost less accumulated impairments. Intangible assets with a definite useful life 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 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 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.
Any foreign curency 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.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
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 includesalsoincludes commissions received in relation to private placements, syndicated loans and financial advisory services. Other fees reflect fees from underwriting 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.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
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 averageexpectedaverage 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 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)
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 amendment to IAS 39, Financial Instruments: Recognition and
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 to IAS 39 and IFRS 4, Insurance Contracts, relating to the recognition and measurement of financial guarantee contracts. The amendments require that financial guarantee contracts be initially measured at fair value. After initial recognition, the financial guarantee contracts are measured at the higher of the amount determined in accordance with IAS 37, Provisions, Contingent Liabilities and Contingent Assets, and the amount initially recognized less cumulative amortization recognized in accordance with IAS 18, Revenue. The amendment is effective January 1, 2006; however, 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 its financial results or financial position.
Recently issued accounting pronouncements (effective on or after January 1, 2007)
In August 2005, the IASB issued an amendment to IAS 1, Presentation of Financial Statements. The amendment requires additional disclosures relating to
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
the Allianz Group’s capital. In addition, in August 2005, the IASB issued IFRS 7, Financial Instruments: Disclosures. This standard requires additional disclosuresDisclosures, relating to disclosure requirements for financial instruments. The Allianz Group adopted the Allianz Group’s financial instruments and insurance contracts. The amendmentamendments to IAS 1 and IFRS 7 are effective for the year ended December 31,as of January 1, 2007. The adoptions are not expected toAllianz Group’s consolidated financial statements have an impactbeen presented with the effect of these changes.
Impact of IFRS 7 on the Allianz Group’s consolidated financial resultsstatements
IFRS 7 applies to all risks arising from financial instruments. IFRS 7 requires disclosure of:
| (a) | the significance of financial instruments for an entity’s financial position and performance |
| (b) | qualitative and quantitative information about exposure to risks arising from 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. IFRS 7 requires to group financial instruments into classes that are appropriate to the nature of the information disclosed and take into account the characteristics of those financial instruments. The classes of financial instruments generated within Allianz Group are mainly in line with those according to IAS 39.
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)
Overall, IFRS 7 leads to enlarged disclosure requirements for financial instruments and associated risks. While some of the disclosures required by IFRS 7 were already included in the consolidated financial statements and notes in 2006, disclosures were added mainly in the appropriate notes dealing with financial instruments and include enlarged and more detailed information on:
Financial assets and financial liabilities designated at fair value through income including information on credit risk exposure
Fair value disclosures including fair values determined if there is non-observable market data, “day 1” profit or loss, equity instruments at amortized costs and derecognition
Credit risk as well as collaterals and other credit enhancements
Furthermore, the enlarged risk disclosure requirements of IFRS 7 are reflected in the Quantitative and Qualitative Disclosures about Market Risk (ITEM 11) on pages 167 to 189 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 190, is an integral part of the audited consolidated financial position.statements.
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.been recognized. 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 iswas no expectedsignificant 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 iswas no expectedsignificant impact on the Allianz Group’s financial results or financial position.
Recently issued accounting pronouncements (effective on or after January 1, 2008)
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., 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.
In November 2006,March 2007, the IFRICIASB issued IFRIC 11, Group and Treasury Share Transactions. IFRIC 11amendments 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
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
amendment is expected to have no impact the Allianz Group’s consolidated financial statements.
In June 2007, 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 application of IFRS 2 to share-based payment arrangements in three cases. When an entity choosescustomers redeem the points. Customers are implicitly paying for the points they receive when they buy other goods or is required to buy its own equity instruments to settle the share-based payment obligation, the arrangementservices. Some revenue should be accounted for as equity-settled share-based payment transactions. When a parent grants employeesallocated to the points. Therefore, IFRIC 13 requires companies to estimate the value of a subsidiary rightsthe points 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 instrumentscustomer and defer this amount of its parent, the subsidiary should record the transactionrevenue as a cash-settled share-based payment transaction.liability until they have fulfilled their obligations to supply awards. IFRIC 1113 is effectivemandatory for annual periods beginning on or after MarchJuly 1, 2007.2008. Earlier application is permitted. The interpretation does notis expected to have no material impact the Allianz Group’s consolidated financial statements.
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 of 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 as a liability in addition to that otherwise recognized under IAS 19. The interpretation is mandatory for annual periods beginning on or after January 1, 2008. Earlier application is permitted. The interpretation is expected to have no material impact the Allianz Group’s consolidated financial statements.
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 ofthe 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.
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 recognised as expenses and are not included in goodwill.
Contingent consideration must be recognised and measured at fair value at the acquisition date. Subsequent changes in fair value are recognised 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.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
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 the potential impact that the adoption of the standards will have on the Group’s financial statements.
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.
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 issue 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 co-operative 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 Allianz Group is currently evaluating the potential impact, if any, that the adoption of the amendments of IAS 32 and IAS 1 will have on the Group’s financial statements.
Changes in the presentation of the consolidated financial statements
The Allianz Group comprehensively reviewed its financial reporting methodology to improve the transparencyhas identified certain prior period errors through an analysis of its financial results and ensure consistency with its peers. As a result of this review, the Allianz Group implemented numerous revisions to its financial reporting that were effective on January 1, 2006.various balance sheet accounts (the “Errors”). The Allianz Group’s financial reporting reflects reclassifications in the consolidated balance sheets and consolidated income statements, changes to segment reporting, changes to operating profit methodology and changes to the consolidated statements of cash flows that reflects the continuous review of our evolving business.
Reclassifications
A significant portion of these revisions to financial reportingErrors resulted primarily from the implementation of changes to the presentation of certain financial information of the Allianz Group’s consolidated balance sheets and consolidated income statements. These revisions were implemented to improve transparency and result in the following:following issues:
The line itemsAccounting for the purchase of Dresdner Bank in 2001 and 2002, which included realized gains and losses on investments which did not reflect the consolidated income statements include aggregations of items which are similarly aggregated ascorrect purchase price allocation for the line items utilized for determining operating profit.Dresdner Bank opening balance sheet.
The line itemsConsolidation of dividends for special funds in the consolidated income statements include aggregationsyear 2001, which resulted in the recognition of itemsamounts for reserves for premium refunds, that allowdid not properly take into account the Allianz Group’s key performance indicators to be directly derived fromdifferent financial years of the Allianz Group’s external financial results.sponsor and the special funds.
The line itemsOther errors, related to the accounting for minority interests and reserves for premium refunds, occurred 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.combination with mergers.
As a result, the Allianz Group’s previously reported consolidated balance sheets and consolidated income statementsThe Errors 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 presentationincluded in the Allianz Group’s consolidatedfinancial statements for each of the years from 2001 through 2006. The Allianz Group quantified the Errors based on the amount of the error originating in the current year income statement, as well as the effects of correcting the error in the balance sheets are:
Financial assetssheet at the end of the year (the “rollover” and liabilities for unit linked contracts are presented as separate line items.
Investments“iron curtain” method of evaluating errors, respectively). The Allianz Group evaluated the Errors individually and in associatesthe aggregate, 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 basisconcluded that they were immaterial to the extent the requirements of IAS 12financial statements for offset are met.all years in which they were included.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
The key changesfollowing table summarizes the effects of the Errors on net income as reported for the years 2005 and 2006, and the cumulative effect of the Errors on net income for the years 2001 through 2004.
| | | | | | | | | |
| | | Net income | |
| | | 2006 | | | 2005 | | | 2001-2004 | |
| | | € mn | | | € mn | | | € mn | |
Description of error | | | | | | | | | |
Dresdner Bank purchase accounting | | (78 | ) | | (42 | ) | | (182 | ) |
Special funds consolidation | | — | | | — | | | 29 | |
Other | | — | | | — | | | (4 | ) |
| | | | | | | | | |
Total | | (78 | ) | | (42 | ) | | (157 | ) |
| | | | | | | | | |
As the majority of the Errors related to the previous presentationyears 2001 through 2004, and their correction has been determined to be immaterial, the Errors from these periods have been accounted for in 2007 by adjusting the Allianz Group’s consolidatedopening balance sheet as of January 1, 2005. The Errors for 2005 and 2006 have been corrected through an out-of-period adjustment to net income statements are:
Interest and similar income includes share of earnings from investments in associates and joint ventures.
Realized gains and realized losses are presented net as a separate line item. Realized gains/losses (net) include realized gains and losses from disposals of associates 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 in the consolidated income statements. Fully consolidated private equity investments include the Four Seasons Health Care Ltd., Wilmslow and MAN Roland Druckmaschinen AG, Offenbach.
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.
Changes in reserves for insurance and investment contracts (net) are presented as a separate line item.
Fee and commission expenses and investment expenses are presented as separate line items.
Foreign currency 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 portion of the amounts previously reported in other income and other expense. Acquisition and administrative expenses (net) include other taxes previously included in taxes.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)2007.
Summary ofThe following table summarizes the impact of the reclassificationsErrors by issue and by their effect on the consolidated opening balance sheet and the consolidated statement of changes in equity as of January 1, 2005 as well as on the subsequent consolidated balance sheets and consolidated statements of changes in equity as of December 31, 2006 and 2007.
| | | | | | | | | | | | |
| | | Dresdner
Bank | | | Special
Funds | | | Other | | | Total | |
| | | € mn | | | € mn | | | € mn | | | € mn | |
Other assets | | (892 | ) | | — | | | — | | | (892 | ) |
Intangible assets (Goodwill) | | 306 | | | (169 | ) | | — | | | 137 | |
| | | | | | | | | | | | |
Total assets | | (586 | ) | | (169 | ) | | — | | | (755 | ) |
| | | | | | | | | | | | |
Reserves for insurance and investment contracts (Reserves for premium refunds) | | — | | | (668 | ) | | 3 | | | (665 | ) |
Deferred tax liabilities | | — | | | (30 | ) | | — | | | (30 | ) |
Shareholders’ equity | | | | | | | | | | | | |
Revenue reserves | | (894 | ) | | 458 | | | (123 | ) | | (559 | ) |
Unrealized gains/losses (net) | | (272 | ) | | — | | | — | | | (272 | ) |
Minority interest | | 580 | | | 71 | | | 120 | | | 771 | |
Total shareholders equity | | (586 | ) | | 529 | | | (3 | ) | | (60 | ) |
| | | | | | | | | | | | |
Total liabilities and equity | | (586 | ) | | (169 | ) | | — | | | (755 | ) |
| | | | | | | | | | | | |
The adjustment impacted certain asset and liability accounts previously reported within the consolidated balance sheet, consolidated statement of changes in equity and the consolidated segment balance sheet as of December 31, 2005:2006. The following table summarizes the impact of correcting the Errors on the relevant line items on the face of the consolidated balance sheet and consolidated statement of changes in equity as of December 31, 2006:
| | | | | | | |
| | | 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 |
| | |
| |
|
| |
|
| | | | | | | |
As of December 31, 2006 | | As
previously
reported | | Adjustment | | | As
adjusted1) |
| | | € mn | | € mn | | | € mn |
Other assets | | 38,893 | | (892 | ) | | 38,001 |
Intangible assets (Goodwill) | | 12,935 | | 137 | | | 13,072 |
| | | | | | | |
Total assets | | 1,053,226 | | (755 | ) | | 1,052,471 |
| | | | | | | |
Reserves for insurance and investment contracts (Reserves for premium refunds) | | 287,697 | | (665 | ) | | 287,032 |
Deferred tax liabilities | | 4,618 | | (30 | ) | | 4,588 |
Shareholders’ equity | | | | | | | |
Revenue reserves | | 13,629 | | (559 | ) | | 13,070 |
Unrealized gains/losses (net) | | 13,664 | | (272 | ) | | 13,392 |
Minority interest | | 6,409 | | 771 | | | 7,180 |
Total shareholders equity | | 56,890 | | (60 | ) | | 56,830 |
| | | | | | | |
Total liabilities and equity | | 1,053,226 | | (755 | ) | | 1,052,471 |
| | | | | | | |
(1)1)
| Includes investmentsExcludes the change in associated enterprises and joint ventures previously reported as a separate balance sheet line item.
|
(2)
| Includes loans and advancespresentation due to banks and loans and advances to customers previously reported as two separate balance sheet line items.
|
(3)
| Formerly “Amounts ceded to reinsurers from reserves for insurance and investment contracts”.
|
(4)
| 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.the reclassification of certain financial instruments
|
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Summary ofThe following table summarizes the impact of correcting the reclassificationsErrors on the relevant line items of the face of the business segment information—consolidated income statements for the years endedbalance sheets as of December 31, 2005 and 2004:2006:
| | | | | | | | | | | | | | | | | | |
| | | 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 | |
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
| | | | | | | |
As of December 31, 2006 | | Prior to
adjustment | | Adjustment | | | As
adjusted |
| | | € mn | | € mn | | | € mn |
Property Casualty | | | | | | | |
Other assets | | 17,737 | | — | | | 17,737 |
Intangible assets (Goodwill) | | 1,653 | | — | | | 1,653 |
| | | | | | | |
Total assets | | 150,740 | | — | | | 150,740 |
| | | | | | | |
Reserves for insurance and investment contracts (Reserves for premium refunds) | | 8,956 | | (2 | ) | | 8,954 |
Deferred tax liabilities | | 3,902 | | (8 | ) | | 3,894 |
| | | | | | | |
Total liabilities | | 111,020 | | (10 | ) | | 111,010 |
| | | | | | | |
Life/Health | | | | | | | |
Other assets | | 12,891 | | — | | | 12,891 |
Intangible assets (Goodwill) | | 2,399 | | (169 | ) | | 2,230 |
| | | | | | | |
Total assets | | 395,404 | | (169 | ) | | 395,235 |
| | | | | | | |
Reserves for insurance and investment contracts (Reserves for premium refunds) | | 278,701 | | (663 | ) | | 278,038 |
Deferred tax liabilities | | 1,181 | | (22 | ) | | 1,159 |
| | | | | | | |
Total liabilities | | 379,504 | | (685 | ) | | 378,819 |
| | | | | | | |
Banking | | | | | | | |
Other assets | | 9,571 | | (892 | ) | | 8,679 |
Intangible assets (Goodwill) | | 2,285 | | 92 | | | 2,377 |
| | | | | | | |
Total assets | | 506,080 | | (800 | ) | | 505,280 |
| | | | | | | |
Deferred tax liabilities | | 83 | | — | | | 83 |
| | | | | | | |
Total liabilities | | 489,233 | | — | | | 489,233 |
| | | | | | | |
Asset Management | | | | | | | |
Other assets | | 3,471 | | — | | | 3,471 |
Intangible assets (Goodwill) | | 6,334 | | 214 | | | 6,548 |
| | | | | | | |
Total assets | | 12,944 | | 214 | | | 13,158 |
| | | | | | | |
Deferred tax liabilities | | 46 | | — | | | 46 |
| | | | | | | |
Total liabilities | | 4,340 | | — | | | 4,340 |
| | | | | | | |
Total adjustments | | | | | | | |
Other assets | | | | (892 | ) | | |
Intangible assets (Goodwill) | | | | 137 | | | |
| | | | | | | |
Total assets | | | | (755 | ) | | |
| | | | | | | |
Reserves for insurance and investment contracts (Reserves for premium refunds) | | | | (665 | ) | | |
Deferred tax liabilities | | | | (30 | ) | | |
| | | | | | | |
Total liabilities | | | | (695 | )1) | | |
| | | | | | | |
(1)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 “AmortizationGroup level equity adjustments of goodwill”.
|
(7)
| Formerly “Taxes”.€(60) mn are not included in this table, as equity is not reported in the segment balance sheets.
|
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Segment ReportingChange in the presentation of financial instruments
Effective January 1, 2006,In accordance with 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 derivativepolicy, certain financial instruments held by Allianz SE or one of its subsidiaries. The activities included inare presented on a net basis when there is a legally enforceable right to offset with the Corporate segment were previously reported in the Property-Casualty segment.
In addition,same counter-party, and the Allianz Group reclassified its lifeintends to settle on a net basis. At our Dresdner Bank subsidiary, certain master netting agreements give Dresdner Bank the legal right of offset, but only under certain conditions. The financial instruments related to these agreements, consisting of derivatives, repurchase agreements and health reinsurance assumed businessreverse repurchase agreements, have previously been reported on a net basis. These agreements have been evaluated and it has been determined that due to thelimits to the Life/Health segment. This business was previouslyright of offset, the relevant financial assets and liabilities should be reported in the Property-Casualty segment.on a gross basis.
Finally, the Allianz Group revisedPartially offsetting these reclassifications from net to gross presentation is a change in the presentation of eliminationCollateral paid for intra-Allianz Group dividends. Intra-Allianz Group dividends are now eliminated bysecurities borrowing transactions and Collateral received for securities lending transactions from gross to net presentation. In this case, the subsidiary receivinglogic in the dividend. Intra-Allianz Group dividends were previously eliminated within the segment if the dividend-involved subsidiaries were withinrelevant system did not distinguish between open trades and offsetting borrowing/lending activities with the same segment or eliminated in the consolidation adjustments if the dividend-involved subsidiaries were in different segments.counterparty.
The effects of all of these changes to segment reporting were implemented retrospectively; therefore, allfollowing table summarizes the impact that this reclassification has had on the 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.financial statements:
| | | | | | | |
As of December 31, 2006 | | As previously
reported | | Adjustment | | | As adjusted1) |
| | | € mn | | € mn | | | € mn |
Financial assets carried at fair value through income | | 156,869 | | 42,123 | | | 198,992 |
Collateral paid for securities borrowing transactions | | 41,031 | | (6,719 | ) | | 34,312 |
Reverse repurchase agreements | | 139,413 | | 22,206 | | | 161,619 |
Loans and advances to banks and customers | | 408,278 | | 15,487 | | | 423,765 |
| | | | | | | |
Total assets | | 1,053,226 | | 57,610 | | | 1,110,836 |
| | | | | | | |
Financial liabilities carried at fair value through income | | 79,699 | | 42,123 | | | 121,822 |
Collateral received for securities lending transactions | | 28,617 | | (6,719 | ) | | 21,898 |
Repurchase agreements | | 117,592 | | 22,206 | | | 139,798 |
Liabilities to banks and customers | | 361,078 | | 15,487 | | | 376,565 |
| | | | | | | |
Total liabilities and equity | | 1,053,226 | | 57,610 | | | 1,110,836 |
| | | | | | | |
Operating Profit Methodology
1) | Excludes the correction of other errors. |
As a result of the reclassifications and changesThe change 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)presentation 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 expensesnet to gross basis has had no effect 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 investingreported earnings or financing activities in order to consistently present changes in interest-bearing assets and liabilities:equity.
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.
4 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, 2007, 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 activites 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 | | 2007 | | 2006 | | 2005 |
Number of fully consolidated companies (subsidiaries) | | | | | | |
Germany | | 172 | | 143 | | 169 |
Other countries1) | | 1,003 | | 824 | | 840 |
| | | | | | |
Total | | 1,175 | | 967 | | 1,009 |
| | | | | | |
Number of fully consolidated investment funds | | | | | | |
Germany | | 47 | | 51 | | 67 |
Other countries | | 12 | | 21 | | 26 |
| | | | | | |
Total | | 59 | | 72 | | 93 |
| | | | | | |
Number of fully consolidated Special Purpose Entities (“SPE”) | | 55 | | 46 | | 35 |
Total of fully consolidated entities | | 1,289 | | 1,085 | | 1,137 |
Number of joint ventures valued at equity | | 4 | | 9 | | 10 |
| | | | | | |
Number of associated entities valued at equity | | 218 | | 177 | | 150 |
| | | | | | |
1) | Includes 8 (2006: 9; 2005: 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”) 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 | | |
2007 | | | | | | | | | | |
Russian People’s Insurance Society, 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 | | | | | | | | | | |
MAN Roland Druckmaschinen AG, Offenbach | | 100.0 | | 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. |
(3)consolidation
| Income from service agreements (not included in total revenues of the Allianz Group).
|
2007 Significant acquisitions
Russian People’s Insurance Society, Moscow
On February 21, 2007, the Allianz Group acquired additional 49.8% of Russian People´s Insurance Society, Moscow at a purchase price of €572 mn. Russian People´s Insurance Society, Moscow is the second largest insurance company in Russia which offers products in the business segments Property-Casualty, Life/Health and Asset Management.
The impact of the acquisition of Russian People’s Insurance Society, Moscow, net of cash acquired, on the consolidated statement of cash flows for the year ended December 31, 2007 was:
| | | |
| | 2007 | |
| | € 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
| | |
As of December 31, | | 2007 |
| | € mn |
Purchase price (49.8 % interest) | | 571 |
Subsequent acquisition costs | | 1 |
| | |
Total purchase price | | 572 |
| | |
The impact on the Group’s net income as of December 31, 2007 was €(11) mn.
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.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
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:
| | | |
| | 2007 | |
| | € 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
| | |
As of December 31, | | 2007 |
| | € mn |
Purchase price (100.0% interest) | | 1,126 |
Transaction costs | | — |
| | |
Total purchase price | | 1,126 |
| | |
The impact on the Group’s net income as of December 31, 2007 was €(11) mn.
During the fourth quarter ended December 31, 2007, Selecta AG, Muntelier was reclassified to disposal groups held for sale.
2006 AcquisitionsSignificant acquisitions
MAN Roland Druckmaschinen AG, Offenbach
On July 18, 2006, the Allianz Group acquired 100.0% of MAN Roland Druckmaschinen AG, Offenbach, at a purchase price of €554 mn. MAN Roland is the world’s second largest manufacturer of printing systems.
The impact of the acquisition of MAN Roland DruckmaschinenDruck-maschinen 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 | |
| | | |
2004 Acquisitions
Four Seasons Health Care Ltd., WilmslowComponents of costs
| | |
As of December 31, | | 2006 |
| | € mn |
Purchase price (100.0% interest) | | 553 |
Transaction costs | | 1 |
| | |
Total purchase price | | 554 |
| | |
On August 18, 2004,
The impact on the Allianz Group acquired 100.0%Group’s net income as of Four Seasons Health Care Ltd., Wilmslow at a purchase price of €347December 31, 2006 was €26 mn. Four Seasons Health Care Ltd., Wilmslow operates care homes and specialist centres in England, Scotland and Northern Ireland.
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 | | |
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 |
| | | | | | |
2005 | | | | | | | | | | | | |
DresdnerGrund-Fonds, Frankfurt am Main | | 100.0 | | 12/22/2005 | | 2,029 | | Banking | | — | | Sale to third
party |
Cadence Capital Management Inc., Delaware | | 100.0 | | 8/31/2005 | | — | | Asset
Managment | | 39 | | Liquidation |
Acquisitions and disposals of significant minority interests
2006
| | | | | | | | | | | | | |
| | | Date of
acquisition/
disposal | | Equity
interest
change | | | Costs of
acquisition | | Increase
(decrease)
in share-
holders’
equity | | | Increase
(decrease)
of minority
interests | |
| | | | | % | | | € mn | | € mn | | | € mn | |
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 | ) | | — | |
| | | | | |
2005 | | | | | | | | | | | | | |
Riunione Adriatica di Sicurtà S.p.A., Milan (“RAS”) | | 11/30/2005 | | 20.7 | | | 2,701 | | (1,339 | ) | | (1,362 | ) |
Allianz Global Investors of America L.P., Delaware | | during 2005 | | 3.4 | | | 209 | | (209 | ) | | — | |
Bayerische Versicherungsbank AG, Munich | | 11/15/2005 | | 10.0 | | | 22 | | 82 | | | (104 | ) |
Assurances Générales de France, Paris | | during 2005 | | (1.0 | ) | | — | | 19 | | | 127 | |
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.
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.1) | Impact on shareholders’ equity includes increase in equity due to financing of AGF minority buy-out in the year 2007 of €2,765mn and RAS minority buy-out in the year 2006 of €3,653mn. |
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.
5 Segment reporting
As a result of the Allianz Group’s worldwide organization, the 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 operationalissuesoperational issues associated with operating entities in jurisdictions worldwide, the segments of the Allianz Group are also further analyzed by geographical areas or regions in matrixes that comprise a number of profit and service-center segments (see following pages).segments. This geographic analysis is performed to provide further understanding of trends and results underlying the segment data.
Property-Casualty
The Allianz Group is the largest German property-casualty insurance company based on gross premiums written during the year ended December 31, 2006.2007. Principal product lines offered primarily within Germany include automobile liability and other automobile insurance, fire and property insurance, personal accident insurance, liability insurance and legal expense insurance. The Allianz Group is also among the largest property-casualty insurance companies in other countries, including France, Italy, the United Kingdom, Switzerland and Spain. The Allianz Group conducts its property-casualty insurance operations in these countries through five main groups of operating entitiesentities: 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 lines in particular personal automobile insurance; 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 warranty and pet insurance; Switzerland, offering property-casualty insurance, travel and assistance insurance, conventional reinsurance as well as a variety of alternativeofalternative 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.
Life/Health
The Allianz Group is the largest provider of life insurance and the third largest provider of health insurance in Germany as measured bybased on gross statutory premiums written during the year ended December 31, 2006.2007. Germany is the Allianz Group’s
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
most important market for life/health insurance.insurance business. The Allianz Group’s German life insurance companies offer a comprehensive and unified range of life insurance and life insurance-related products on both an individual and group basis. The main classes of coverage offered include endowment life 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 healthcarehealthca-re 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 linked and investment-oriented products, health insurance and individual and group life insurance.
Banking
The Allianz Group’s banking operations primarily comprise the operations of the Dresdner Bank AG and subsidiaries, hereafter “Dresdner Bank Group”, whose principal banking products and services include traditional commercial banking
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
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 and abroad, some of which also have branch networks.
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€765 bn of third-party assets on a worldwide basis as of December 31, 2006,2007, with key management centers incentersin Munich, Frankfurt, London, Paris, Singapore, Hong Kong, Milan, Westport (Connecticut) and San Francisco, San Diego and Newport Beach (California). The United States is the Allianz Group’s largest geographic region for third-party assets under management accounting for approximately 56.2% (2006: 57.1% (2005:; 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, 2006,2007, the Allianz Group is one of the five largest asset managers in the world.
Corporate
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.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Business Segment Information—Consolidated Balance Sheets
| | | | Property-Casualty
| | Life/Health
| | Banking
| | Property-Casualty | | Life/Health | | Banking |
As of December 31,
| | 2006
| | 2005
| | 2006
| | 2005
| | 2006
| | 2005
| | 2007 | | 2006 | | 2007 | | 2006 | | 2007 | | 2006 |
| | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn |
ASSETS | | | | | | | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | 4,100 | | 3,793 | | 6,998 | | 5,874 | | 21,528 | | 21,848 | | 4,985 | | 4,100 | | 8,779 | | 6,998 | | 17,307 | | 21,528 |
Financial assets carried at fair value through income | | 4,814 | | 2,243 | | 11,026 | | 10,564 | | 139,505 | | 165,928 | | 3,302 | | 4,814 | | 13,216 | | 11,026 | | 168,339 | | 181,628 |
Investments | | 88,819 | | 87,587 | | 190,607 | | 183,350 | | 17,803 | | 17,323 | | 83,741 | | 88,819 | | 187,289 | | 190,607 | | 16,284 | | 17,803 |
Loans and advances to banks and customers | | 16,825 | | 15,873 | | 85,769 | | 84,072 | | 313,709 | | 249,212 | | 20,712 | | 16,825 | | 91,188 | | 85,769 | | 295,506 | | 329,196 |
Financial assets for unit linked contracts | | — | | — | | 61,864 | | 54,661 | | — | | — | | — | | — | | 66,060 | | 61,864 | | — | | — |
Reinsurance assets | | 11,437 | | 12,728 | | 7,966 | | 9,494 | | — | | — | | 10,317 | | 11,437 | | 5,043 | | 7,966 | | — | | — |
Deferred acquisition costs | | 3,704 | | 3,563 | | 15,381 | | 14,550 | | — | | — | | 3,681 | | 3,704 | | 15,838 | | 15,381 | | — | | — |
Deferred tax assets | | 1,651 | | 1,775 | | 503 | | 567 | | 1,679 | | 2,016 | | 1,442 | | 1,651 | | 316 | | 503 | | 1,733 | | 1,679 |
Other assets | | 17,737 | | 16,607 | | 12,891 | | 12,505 | | 9,571 | | 12,273 | | 21,864 | | 17,737 | | 14,071 | | 12,891 | | 8,203 | | 8,679 |
Intangible assets | | 1,653 | | 1,595 | | 2,399 | | 2,390 | | 2,285 | | 2,283 | | 2,332 | | 1,653 | | 2,218 | | 2,230 | | 2,379 | | 2,377 |
| | |
| |
| |
| |
| |
| |
| | | | | | | | | | | | |
Total assets | | 150,740 | | 145,764 | | 395,404 | | 378,027 | | 506,080 | | 470,883 | | 152,376 | | 150,740 | | 404,018 | | 395,235 | | 509,751 | | 562,890 |
| | |
| |
| |
| |
| |
| |
| | | | | | | | | | | | |
| | | | Property-Casualty
| | Life/Health
| | Banking
| | Property-Casualty | | Life/Health | | Banking |
As of December 31,
| | 2006
| | 2005
| | 2006
| | 2005
| | 2006
| | 2005
| | 2007 | | 2006 | | 2007 | | 2006 | | 2007 | | 2006 |
| | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € 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 | | 96 | | 1,070 | | 5,147 | | 5,251 | | 120,383 | | 114,338 |
Liabilities to banks and customers | | 4,473 | | 4,383 | | 7,446 | | 5,479 | | 350,148 | | 301,586 | | 6,865 | | 4,473 | | 6,078 | | 7,446 | | 320,388 | | 365,635 |
Unearned premiums | | 12,994 | | 12,945 | | 1,874 | | 1,580 | | — | | — | | 13,163 | | 12,994 | | 1,858 | | 1,874 | | — | | — |
Reserves for loss and loss adjustment expenses | | 58,664 | | 60,259 | | 6,804 | | 6,806 | | — | | — | | 56,943 | | 58,664 | | 6,773 | | 6,804 | | — | | — |
Reserves for insurance and investment contracts | | 8,956 | | 9,161 | | 278,701 | | 269,433 | | — | | 2 | | 8,976 | | 8,954 | | 283,139 | | 278,038 | | — | | — |
Financial liabilities for unit linked contracts | | — | | — | | 61,864 | | 54,661 | | — | | — | | — | | — | | 66,060 | | 61,864 | | — | | — |
Deferred tax liabilities | | 3,902 | | 4,155 | | 1,181 | | 1,800 | | 83 | | 405 | | 2,606 | | 3,894 | | 946 | | 1,159 | | 102 | | 83 |
Other liabilities | | 18,699 | | 16,491 | | 16,314 | | 18,454 | | 12,140 | | 12,557 | | 22,989 | | 18,699 | | 17,741 | | 16,314 | | 11,011 | | 12,140 |
Certificated liabilities | | 657 | | 412 | | 3 | | 4 | | 46,191 | | 50,719 | | 158 | | 657 | | 3 | | 3 | | 34,778 | | 46,191 |
Participation certificates and subordinated liabilities | | 1,605 | | 1,634 | | 66 | | 141 | | 8,456 | | 7,428 | | 905 | | 1,605 | | 60 | | 66 | | 7,966 | | 8,456 |
| | |
| |
| |
| |
| |
| |
| | | | | | | | | | | | |
Total liabilities | | 111,020 | | 109,572 | | 379,504 | | 361,875 | | 489,233 | | 454,777 | | 112,701 | | 111,010 | | 387,805 | | 378,819 | | 494,628 | | 546,843 |
| | |
| |
| |
| |
| |
| |
| | | | | | | | | | | | |
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 |
| | | | | | | | | | | | | | | | | |
| |
|
| | | | | | | | | | | | | | | | |
| Asset Management | | Corporate | | Consolidation | | | Group |
| 2007 | | 2006 | | 2007 | | 2006 | | 2007 | | | 2006 | | | 2007 | | 2006 |
| € mn | | € mn | | € mn | | € mn | | € mn | | | € mn | | | € mn | | € mn |
| | | | | | | | | | | | | | | | |
| 770 | | 767 | | 445 | | 536 | | (949 | ) | | (898 | ) | | 31,337 | | 33,031 |
| | | | | | | |
| 980 | | 985 | | 887 | | 1,158 | | (1,263 | ) | | (619 | ) | | 185,461 | | 198,992 |
| 879 | | 774 | | 102,894 | | 96,652 | | (104,135 | ) | | (96,521 | ) | | 286,952 | | 298,134 |
| 469 | | 367 | | 4,754 | | 2,963 | | (15,927 | ) | | (11,355 | ) | | 396,702 | | 423,765 |
| — | | — | | — | | — | | — | | | — | | | 66,060 | | 61,864 |
| — | | — | | — | | — | | (48 | ) | | (43 | ) | | 15,312 | | 19,360 |
| 94 | | 50 | | — | | — | | — | | | — | | | 19,613 | | 19,135 |
| 161 | | 196 | | 935 | | 1,473 | | 184 | | | (775 | ) | | 4,771 | | 4,727 |
| 3,452 | | 3,471 | | 10,786 | | 7,020 | | (16,848 | ) | | (11,797 | ) | | 41,528 | | 38,001 |
| 6,227 | | 6,548 | | 257 | | 264 | | — | | | — | | | 13,413 | | 13,072 |
| | | | | | | | | | | | | | | | | |
| 13,032 | | 13,158 | | 120,958 | | 110,066 | | (138,986 | ) | | (122,008 | ) | | 1,061,149 | | 1,110,081 |
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| | | |
| Asset Management | | Corporate | | Consolidation | | | Group |
| 2007 | | 2006 | | 2007 | | 2006 | | 2007 | | | 2006 | | | 2007 | | 2006 |
| € mn | | € mn | | € mn | | € mn | | € mn | | | € mn | | | € mn | | € mn |
| | | | | | | | | | | | | | | | |
| | | | | | | |
| — | | — | | 1,376 | | 1,713 | | (949 | ) | | (550 | ) | | 126,053 | | 121,822 |
| 807 | | 605 | | 13,023 | | 7,293 | | (10,667 | ) | | (8,887 | ) | | 336,494 | | 376,565 |
| — | | — | | — | | — | | (1 | ) | | — | | | 15,020 | | 14,868 |
| | | | | | | |
| — | | — | | — | | — | | (10 | ) | | (4 | ) | | 63,706 | | 65,464 |
| | | | | | | |
| — | | — | | 358 | | 306 | | (229 | ) | | (266 | ) | | 292,244 | | 287,032 |
| — | | — | | — | | — | | — | | | — | | | 66,060 | | 61,864 |
| 35 | | 46 | | 88 | | 171 | | 196 | | | (765 | ) | | 3,973 | | 4,588 |
| 3,647 | | 3,689 | | 14,625 | | 14,149 | | (20,689 | ) | | (15,227 | ) | | 49,324 | | 49,764 |
| — | | — | | 9,567 | | 9,265 | | (2,436 | ) | | (1,194 | ) | | 42,070 | | 54,922 |
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| 14 | | — | | 7,069 | | 7,099 | | (1,190 | ) | | (864 | ) | | 14,824 | | 16,362 |
| | | | | | | | | | | | | | | | | |
| 4,503 | | 4,340 | | 46,106 | | 39,996 | | (35,975 | ) | | (27,757 | ) | | 1,009,768 | | 1,053,251 |
| | | | | | | | | | | | | | | | | |
| Total equity | | | 51,381 | | 56,830 |
| | | | | | | | | | | | | | | | |
| Total liabilities and equity | | | 1,061,149 | | 1,110,081 |
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Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Business Segment Information—Consolidated Income Statements
| | | | Property-Casualty
| | Life/Health
| | Banking
| | | Property-Casualty | | Life/Health | | Banking | |
| | | 2006
| | 2005
| | 2004
| | 2006
| | 2005
| | 2004
| | 2006
| | 2005
| | 2004
| | | 2007 | | 2006 | | 2005 | | 2007 | | 2006 | | 2005 | | 2007 | | 2006 | | 2005 | |
| | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | |
Premiums written | | | 44,289 | | | 43,674 | | | 43,699 | | | 21,522 | | | 21,614 | | | 21,093 | | | — | | | — | | | — | |
Ceded premiums written | | | (5,320 | ) | | (5,415 | ) | | (5,529 | ) | | (637 | ) | | (816 | ) | | (926 | ) | | — | | | — | | | — | |
Change in unearned premiums | | | (416 | ) | | (309 | ) | | (485 | ) | | (76 | ) | | (224 | ) | | (170 | ) | | — | | | — | | | — | |
Premiums earned (net) | | 37,950 | | | 37,685 | | | 37,385 | | | 20,574 | | | 19,997 | | | 19,404 | | | — | | | — | | | — | | | 38,553 | | | 37,950 | | | 37,685 | | | 20,809 | | | 20,574 | | | 19,997 | | | — | | | — | | | — | |
Interest and similar income | | 4,096 | | | 3,747 | | | 3,615 | | | 12,972 | | | 12,057 | | | 11,493 | | | 7,312 | | | 7,321 | | | 6,545 | | | 4,473 | | | 4,096 | | | 3,747 | | | 13,417 | | | 12,972 | | | 12,057 | | | 8,370 | | | 7,312 | | | 7,321 | |
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 | | | 85 | | | 189 | | | 164 | | | (940 | ) | | (361 | ) | | 258 | | | (431 | ) | | 1,335 | | | 1,163 | |
Realized gains/losses (net) | | 1,792 | | | 1,421 | | | 1,055 | | | 3,282 | | | 2,731 | | | 2,007 | | | 492 | | | 1,020 | | | 543 | | | 1,479 | | | 1,792 | | | 1,421 | | | 3,716 | | | 3,282 | | | 2,731 | | | 83 | | | 492 | | | 1,020 | |
Fee and commission income | | 1,014 | | | 989 | | | 782 | | | 630 | | | 507 | | | 224 | | | 3,598 | | | 3,397 | | | 3,237 | | | 1,178 | | | 1,014 | | | 989 | | | 701 | | | 630 | | | 507 | | | 3,651 | | | 3,598 | | | 3,397 | |
Other income | | 69 | | | 53 | | | 288 | | | 43 | | | 45 | | | 44 | | | 25 | | | 11 | | | 4 | | | 122 | | | 69 | | | 53 | | | 182 | | | 43 | | | 45 | | | — | | | 25 | | | 11 | |
Income from fully consolidated private equity investments | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
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Total income | | 45,110 | | | 44,059 | | | 43,150 | | | 37,140 | | | 35,595 | | | 33,370 | | | 12,762 | | | 12,912 | | | 11,838 | | | 45,890 | | | 45,110 | | | 44,059 | | | 37,885 | | | 37,140 | | | 35,595 | | | 11,673 | | | 12,762 | | | 12,912 | |
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Claims and insurance benefits incurred (gross) | | | (28,131 | ) | | (27,028 | ) | | (28,478 | ) | | (18,292 | ) | | (18,520 | ) | | (18,332 | ) | | — | | | — | | | — | |
Claims and insurance benefits incurred (ceded) | | | 2,646 | | | 2,356 | | | 3,147 | | | 655 | | | 895 | | | 893 | | | — | | | — | | | — | |
Claims and insurance benefits incurred (net) | | (24,672 | ) | | (25,331 | ) | | (25,271 | ) | | (17,625 | ) | | (17,439 | ) | | (17,535 | ) | | — | | | — | | | — | | | (25,485 | ) | | (24,672 | ) | | (25,331 | ) | | (17,637 | ) | | (17,625 | ) | | (17,439 | ) | | — | | | — | | | — | |
Change in reserves for insurance and investment contracts (net) | | (425 | ) | | (707 | ) | | (611 | ) | | (10,525 | ) | | (10,443 | ) | | (8,746 | ) | | — | | | — | | | — | | | (339 | ) | | (425 | ) | | (707 | ) | | (10,268 | ) | | (10,525 | ) | | (10,443 | ) | | — | | | — | | | — | |
Interest expense | | (273 | ) | | (339 | ) | | (417 | ) | | (280 | ) | | (452 | ) | | (452 | ) | | (4,592 | ) | | (5,027 | ) | | (4,189 | ) | | (402 | ) | | (273 | ) | | (339 | ) | | (374 | ) | | (280 | ) | | (452 | ) | | (5,266 | ) | | (4,592 | ) | | (5,027 | ) |
Loan loss provisions | | (2 | ) | | (1 | ) | | (7 | ) | | (1 | ) | | — | | | (3 | ) | | (28 | ) | | 110 | | | (344 | ) | | (6 | ) | | (2 | ) | | (1 | ) | | 3 | | | (1 | ) | | — | | | 126 | | | (28 | ) | | 110 | |
Impairments of investments (net) | | (200 | ) | | (95 | ) | | (144 | ) | | (390 | ) | | (199 | ) | | (281 | ) | | (215 | ) | | (184 | ) | | (509 | ) | | (343 | ) | | (200 | ) | | (95 | ) | | (827 | ) | | (390 | ) | | (199 | ) | | (90 | ) | | (215 | ) | | (184 | ) |
Investment expenses | | (300 | ) | | (333 | ) | | (204 | ) | | (750 | ) | | (567 | ) | | (649 | ) | | (47 | ) | | (30 | ) | | (25 | ) | | (322 | ) | | (300 | ) | | (333 | ) | | (833 | ) | | (750 | ) | | (567 | ) | | (14 | ) | | (47 | ) | | (30 | ) |
Acquisition and administrative expenses (net) | | (10,590 | ) | | (10,216 | ) | | (10,192 | ) | | (4,437 | ) | | (3,973 | ) | | (3,711 | ) | | (5,605 | ) | | (5,661 | ) | | (5,643 | ) | | (10,616 | ) | | (10,590 | ) | | (10,216 | ) | | (4,588 | ) | | (4,437 | ) | | (3,973 | ) | | (5,061 | ) | | (5,605 | ) | | (5,661 | ) |
Fee and commission expenses | | (721 | ) | | (775 | ) | | (530 | ) | | (223 | ) | | (219 | ) | | (145 | ) | | (590 | ) | | (547 | ) | | (530 | ) | | (967 | ) | | (721 | ) | | (775 | ) | | (209 | ) | | (223 | ) | | (219 | ) | | (603 | ) | | (590 | ) | | (547 | ) |
Amortization of intangible assets | | (1 | ) | | (11 | ) | | (403 | ) | | (26 | ) | | (13 | ) | | (168 | ) | | — | | | (1 | ) | | (281 | ) | | (14 | ) | | (1 | ) | | (11 | ) | | (3 | ) | | (26 | ) | | (13 | ) | | — | | | — | | | (1 | ) |
Restructuring charges | | (362 | ) | | (68 | ) | | (32 | ) | | (174 | ) | | (18 | ) | | (24 | ) | | (424 | ) | | (13 | ) | | (292 | ) | | (122 | ) | | (362 | ) | | (68 | ) | | (45 | ) | | (174 | ) | | (18 | ) | | (52 | ) | | (424 | ) | | (13 | ) |
Other expenses | | (4 | ) | | (17 | ) | | (39 | ) | | (9 | ) | | (1 | ) | | (43 | ) | | 14 | | | (33 | ) | | (117 | ) | | (13 | ) | | (4 | ) | | (17 | ) | | (2 | ) | | (9 | ) | | (1 | ) | | 1 | | | 14 | | | (33 | ) |
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 | ) | | (38,629 | ) | | (37,550 | ) | | (37,893 | ) | | (34,783 | ) | | (34,440 | ) | | (33,324 | ) | | (10,959 | ) | | (11,487 | ) | | (11,386 | ) |
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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 (loss) before income taxes and minority interests in earnings | | | 7,261 | | | 7,560 | | | 6,166 | | | 3,102 | | | 2,700 | | | 2,271 | | | 714 | | | 1,275 | | | 1,526 | |
Income taxes | | (2,075 | ) | | (1,804 | ) | | (1,751 | ) | | (641 | ) | | (488 | ) | | (458 | ) | | (263 | ) | | (387 | ) | | 302 | | | (1,656 | ) | | (2,075 | ) | | (1,804 | ) | | (897 | ) | | (641 | ) | | (488 | ) | | (266 | ) | | (263 | ) | | (387 | ) |
Minority interests in earnings | | (739 | ) | | (827 | ) | | (681 | ) | | (416 | ) | | (425 | ) | | (333 | ) | | (94 | ) | | (102 | ) | | (101 | ) | | (431 | ) | | (739 | ) | | (827 | ) | | (214 | ) | | (416 | ) | | (425 | ) | | (71 | ) | | (94 | ) | | (102 | ) |
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Net income (loss) | | 4,746 | | | 3,535 | | | 2,868 | | | 1,643 | | | 1,358 | | | 822 | | | 918 | | | 1,037 | | | 109 | | | 5,174 | | | 4,746 | | | 3,535 | | | 1,991 | | | 1,643 | | | 1,358 | | | 377 | | | 918 | | | 1,037 | |
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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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| | | (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 | ) |
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| | | 404 | | | 244 | | | (275 | ) | | (179 | ) | | (1,268 | ) | | (807 | ) | | (511 | ) | | (526 | ) | | (451 | ) | | 7,021 | | | 4,380 | | | 2,266 | |
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| | | Asset Management | | | Corporate | | | Consolidation | | | Group | |
| | | 2007 | | 2006 | | | 2005 | | | 2007 | | | 2006 | | | 2005 | | | 2007 | | | 2006 | | | 2005 | | | 2007 | | | 2006 | | | 2005 | |
| | | € mn | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | |
| | — | | — | | | — | | | — | | | — | | | — | | | (23 | ) | | (13 | ) | | (26 | ) | | 65,788 | | | 65,275 | | | 64,766 | |
| | — | | — | | | — | | | — | | | — | | | — | | | 23 | | | 13 | | | 26 | | | (5,934 | ) | | (6,218 | ) | | (6,429 | ) |
| | — | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (492 | ) | | (533 | ) | | (655 | ) |
| | — | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 59,362 | | | 58,524 | | | 57,682 | |
| | 135 | | 112 | | | 90 | | | 855 | | | 509 | | | 416 | | | (1,203 | ) | | (1,045 | ) | | (987 | ) | | 26,047 | | | 23,956 | | | 22,644 | |
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| | 31 | | 38 | | | 19 | | | 51 | | | (334 | ) | | (441 | ) | | (43 | ) | | 73 | | | — | | | (1,247 | ) | | 940 | | | 1,163 | |
| | 2 | | 7 | | | 6 | | | 980 | | | 861 | | | 172 | | | 288 | | | (283 | ) | | (372 | ) | | 6,548 | | | 6,151 | | | 4,978 | |
| | 4,403 | | 4,186 | | | 3,746 | | | 198 | | | 190 | | | 164 | | | (691 | ) | | (762 | ) | | (641 | ) | | 9,440 | | | 8,856 | | | 8,162 | |
| | 14 | | 11 | | | 11 | | | 15 | | | 28 | | | — | | | (116 | ) | | (90 | ) | | (28 | ) | | 217 | | | 86 | | | 92 | |
| | | | | | | | | | | | |
| | — | | — | | | — | | | 2,367 | | | 1,392 | | | 598 | | | — | | | — | | | — | | | 2,367 | | | 1,392 | | | 598 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 4,585 | | 4,354 | | | 3,872 | | | 4,466 | | | 2,646 | | | 909 | | | (1,765 | ) | | (2,107 | ) | | (2,028 | ) | | 102,734 | | | 99,905 | | | 95,319 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | — | | — | | | — | | | — | | | — | | | — | | | 14 | | | 25 | | | 8 | | | (46,409 | ) | | (45,523 | ) | | (46,802 | ) |
| | | | | | | | | | | | |
| | — | | — | | | — | | | — | | | — | | | — | | | (14 | ) | | (25 | ) | | (8 | ) | | 3,287 | | | 3,226 | | | 4,032 | |
| | | | | | | | | | | | |
| | — | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (43,122 | ) | | (42,297 | ) | | (42,770 | ) |
| | | | | | | | | | | | |
| | — | | — | | | — | | | — | | | — | | | — | | | (78 | ) | | (425 | ) | | (26 | ) | | (10,685 | ) | | (11,375 | ) | | (11,176 | ) |
| | (55) | | (41 | ) | | (33 | ) | | (1,586 | ) | | (1,282 | ) | | (1,321 | ) | | 1,011 | | | 709 | | | 795 | | | (6,672 | ) | | (5,759 | ) | | (6,377 | ) |
| | — | | — | | | — | | | (10 | ) | | (5 | ) | | — | | | — | | | — | | | — | | | 113 | | | (36 | ) | | 109 | |
| | (1) | | (2 | ) | | — | | | (11 | ) | | 32 | | | (62 | ) | | — | | | — | | | — | | | (1,272 | ) | | (775 | ) | | (540 | ) |
| | 1 | | — | | | (1 | ) | | (115 | ) | | (215 | ) | | (345 | ) | | 226 | | | 204 | | | 184 | | | (1,057 | ) | | (1,108 | ) | | (1,092 | ) |
| | | | | | | | | | | | |
| | (2,391) | | (2,286 | ) | | (2,277 | ) | | (642 | ) | | (655 | ) | | (516 | ) | | 80 | | | 87 | | | 84 | | | (23,218 | ) | | (23,486 | ) | | (22,559 | ) |
| | (1,270) | | (1,262 | ) | | (1,110 | ) | | (130 | ) | | (127 | ) | | (92 | ) | | 506 | | | 572 | | | 431 | | | (2,673 | ) | | (2,351 | ) | | (2,312 | ) |
| | — | | (24 | ) | | (25 | ) | | — | | | — | | | — | | | — | | | — | | | — | | | (17 | ) | | (51 | ) | | (50 | ) |
| | (4) | | (4 | ) | | (1 | ) | | (9 | ) | | — | | | — | | | — | | | — | | | — | | | (232 | ) | | (964 | ) | | (100 | ) |
| | — | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (14 | ) | | 1 | | | (51 | ) |
| | | | | | | | | | | | |
| | — | | — | | | — | | | (2,317 | ) | | (1,381 | ) | | (572 | ) | | — | | | — | | | — | | | (2,317 | ) | | (1,381 | ) | | (572 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | (3,720) | | (3,619 | ) | | (3,447 | ) | | (4,820 | ) | | (3,633 | ) | | (2,908 | ) | | 1,745 | | | 1,147 | | | 1,468 | | | (91,166 | ) | | (89,582 | ) | | (87,490 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | 865 | | 735 | | | 425 | | | (354 | ) | | (987 | ) | | (1,999 | ) | | (20 | ) | | (960 | ) | | (560 | ) | | 11,568 | | | 10,323 | | | 7,829 | |
| | (342) | | (278 | ) | | (129 | ) | | 217 | | | 824 | | | 741 | | | 90 | | | 420 | | | 4 | | | (2,854 | ) | | (2,013 | ) | | (2,063 | ) |
| | (25) | | (53 | ) | | (52 | ) | | (21 | ) | | (16 | ) | | (10 | ) | | 14 | | | 29 | | | 30 | | | (748 | ) | | (1,289 | ) | | (1,386 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 498 | | 404 | | | 244 | | | (158 | ) | | (179 | ) | | (1,268 | ) | | 84 | | | (511 | ) | | (526 | ) | | 7,966 | | | 7,021 | | | 4,380 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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 |
| | |
|
| |
|
| |
|
| |
| |
| |
|
| | | | | | | | | | | | | | | | | | |
PROPERTY-CASUALTY | | Premiums earned (net) | | | Loss ratio1) | |
As of and for the years ended December 31, | | 2007 | | | 2006 | | | 2005 | | | 2007 | | | 2006 | | | 2005 | |
| | | € mn | | | € mn | | | € mn | | | % | | | % | | | % | |
Europe | | | | | | | | | | | | | | | | | | |
Germany | | 9,245 | | | 9,844 | | | 10,048 | | | 64.8 | | | 65.1 | | | 63.0 | |
Italy | | 4,902 | | | 4,935 | | | 4,964 | | | 71.2 | | | 68.8 | | | 69.3 | |
France | | 4,422 | | | 4,429 | | | 4,375 | | | 70.9 | | | 71.0 | | | 74.0 | |
United Kingdom | | 1,989 | | | 1,874 | | | 1,913 | | | 66.3 | | | 64.1 | | | 65.4 | |
Spain | | 1,820 | | | 1,675 | | | 1,551 | | | 71.6 | | | 71.0 | | | 71.4 | |
Switzerland | | 1,595 | | | 1,706 | | | 1,708 | | | 69.5 | | | 69.3 | | | 74.9 | |
Western and Southern Europe | | 2,768 | | | 2,819 | | | 2,863 | | | 67.4 | | | 61.7 | | | 63.2 | |
New Europe | | 2,067 | | | 1,388 | | | 1,313 | | | 60.8 | | | 61.1 | | | 61.7 | |
Subtotal | | 28,808 | | | 28,670 | | | 28,735 | | | — | | | — | | | — | |
NAFTA | | 3,427 | | | 3,623 | | | 3,566 | | | 61.6 | | | 58.4 | | | 67.1 | |
Asia-Pacific | | 1,415 | | | 1,336 | | | 1,280 | | | 69.5 | | | 68.7 | | | 68.0 | |
South America | | 692 | | | 623 | | | 510 | | | 62.9 | | | 64.8 | | | 64.5 | |
Other | | 50 | | | 32 | | | 30 | | | — | 2) | | — | 2) | | — | 2) |
Specialty Lines | | | | | | | | | | | | | | | | | | |
Allianz Global Corporate and Specialty | | 1,800 | | | 1,545 | | | 1,633 | | | 67.9 | | | 62.5 | | | 91.1 | |
Credit Insurance | | 1,268 | | | 1,113 | | | 997 | | | 47.9 | | | 49.7 | | | 41.3 | |
Travel Insurance and Assistance Services | | 1,093 | | | 1,008 | | | 934 | | | 58.1 | | | 58.7 | | | 60.3 | |
Subtotal | | 4,161 | | | 3,666 | | | 3,564 | | | — | | | — | | | — | |
Subtotal | | 38,553 | | | 37,950 | | | 37,685 | | | — | | | — | | | — | |
Consolidation3) | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | | |
Total | | 38,553 | | | 37,950 | | | 37,685 | | | 66.1 | | | 65.0 | | | 67.2 | |
| | | | | | | | | | | | | | | | | | |
| | |
LIFE/HEALTH | | Statutory premiums4) | | | Statutory expense ratio5) | |
As of and for the years ended December 31, | | 2007 | | | 2006 | | | 2005 | | | 2007 | | | 2006 | | | 2005 | |
| | | € mn | | | € mn | | | € mn | | | % | | | % | | | % | |
Europe | | | | | | | | | | | | | | | | | | |
Germany Life | | 13,512 | | | 13,009 | | | 12,231 | | | 5.8 | | | 9.1 | | | 8.1 | |
Germany Health | | 3,123 | | | 3,091 | | | 3,042 | | | 9.8 | | | 9.3 | | | 9.1 | |
Italy | | 9,765 | | | 8,555 | | | 9,313 | | | 5.8 | | | 6.4 | | | 5.4 | |
France | | 6,550 | | | 5,792 | | | 5,286 | | | 15.4 | | | 12.6 | | | 15.1 | |
Switzerland | | 992 | | | 1,005 | | | 1,058 | | | 10.6 | | | 9.9 | | | 8.7 | |
Spain | | 738 | | | 629 | | | 547 | | | 9.2 | | | 9.3 | | | 7.4 | |
Western and Southern Europe | | 1,762 | | | 1,655 | | | 1,546 | | | 12.1 | | | 14.8 | | | 13.3 | |
New Europe | | 1,039 | | | 828 | | | 479 | | | 20.0 | | | 19.6 | | | 25.7 | |
Subtotal | | 37,481 | | | 34,564 | | | 33,502 | | | — | | | — | | | — | |
NAFTA | | 6,968 | | | 8,758 | | | 11,115 | | | 11.9 | | | 8.0 | | | 4.8 | |
Asia-Pacific | | 4,638 | | | 3,733 | | | 3,309 | | | 10.2 | | | 11.2 | | | 12.0 | |
South America | | 78 | | | 147 | | | 141 | | | 32.6 | | | 16.9 | | | 17.7 | |
Other | | 418 | | | 439 | | | 455 | | | — | 2) | | — | 2) | | — | 2) |
Subtotal | | 49,583 | | | 47,641 | | | 48,522 | | | — | | | — | | | — | |
Consolidation3) | | (216 | ) | | (220 | ) | | (250 | ) | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | | |
Total | | 49,367 | | | 47,421 | | | 48,272 | | | 9.4 | | | 9.6 | | | 8.4 | |
| | | | | | | | | | | | | | | | | | |
(1)1)
| Represents claims and insurance benefits incurred (net) divided by premiums earned (net). |
(2)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.Presentation not meaningful.
|
(3)3)
| Represents elimination of intercompany transactions between Allianz Group subsidiaries in different geographic regions. |
(4)4)
| 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. |
(5)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 | | | | | | | | | |
| | |
|
| |
|
| |
|
| |
|
| |
|
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Expense ratio6) | | | Operating profit (loss) | | | Total assets | |
| | | 2007 | | | 2006 | | | 2005 | | | 2007 | | | 2006 | | | 2005 | | | 2007 | | | 2006 | |
| | | % | | | % | | | % | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | 26.8 | | | 27.8 | | | 26.4 | | | 1,628 | | | 1,479 | | | 1,765 | | | 52,034 | | | 49,570 | |
| | 23.6 | | | 23.0 | | | 24.3 | | | 719 | | | 816 | | | 741 | | | 14,307 | | | 14,395 | |
| | 26.4 | | | 28.2 | | | 28.0 | | | 486 | | | 420 | | | 227 | | | 25,748 | | | 30,373 | |
| | 33.3 | | | 31.6 | | | 30.8 | | | 208 | | | 281 | | | 268 | | | 6,434 | | | 7,344 | |
| | 19.8 | | | 19.3 | | | 20.0 | | | 253 | | | 252 | | | 217 | | | 4,185 | | | 3,990 | |
| | 25.6 | | | 23.5 | | | 22.9 | | | 218 | | | 228 | | | 153 | | | 5,678 | | | 5,832 | |
| | 28.0 | | | 28.5 | | | 28.0 | | | 482 | | | 550 | | | 494 | | | 7,952 | | | 7,686 | |
| | 33.5 | | | 30.9 | | | 29.3 | | | 256 | | | 184 | | | 213 | | | 5,773 | | | 3,427 | |
| | — | | | — | | | — | | | 4,250 | | | 4,210 | | | 4,078 | | | 122,111 | | | 122,617 | |
| | 29.6 | | | 30.5 | | | 29.1 | | | 663 | | | 825 | | | 495 | | | 10,818 | | | 12,457 | |
| | 26.5 | | | 27.2 | | | 27.2 | | | 312 | | | 244 | | | 252 | | | 6,073 | | | 6,880 | |
| | 36.1 | | | 36.4 | | | 36.3 | | | 55 | | | 47 | | | 61 | | | 1,340 | | | 1,295 | |
| | — | 2) | | — | 2) | | — | 2) | | 9 | | | 9 | | | 7 | | | 236 | | | 211 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | 28.1 | | | 29.7 | | | 31.3 | | | 414 | | | 404 | | | (254 | ) | | 16,362 | | | 17,929 | |
| | 28.6 | | | 27.9 | | | 25.7 | | | 496 | | | 442 | | | 420 | | | 4,814 | | | 4,674 | |
| | 35.6 | | | 43.1 | | | 33.0 | | | 97 | | | 90 | | | 77 | | | 1,376 | | | 1,246 | |
| | — | | | — | | | — | | | 1,007 | | | 936 | | | 243 | | | 22,552 | | | 23,849 | |
| | — | | | — | | | — | | | 6,296 | | | 6,271 | | | 5,136 | | | 163,130 | | | 167,309 | |
| | — | | | — | | | — | | | 3 | | | (2 | ) | | 6 | | | (10,754 | ) | | (16,569 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | 27.5 | | | 27.9 | | | 27.1 | | | 6,299 | | | 6,269 | | | 5,142 | | | 152,376 | | | 150,740 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | |
| | | Operating profit | | | Total assets | | | | | | | | | | |
| | | 2007 | | | 2006 | | | 2005 | | | 2007 | | | 2006 | | | | | | | | | | |
| | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | 695 | | | 521 | | | 347 | | | 154,903 | | | 154,009 | | | | | | | | | | |
| | 164 | | | 184 | | | 159 | | | 20,637 | | | 19,022 | | | | | | | | | | |
| | 372 | | | 339 | | | 334 | | | 50,294 | | | 49,905 | | | | | | | | | | |
| | 632 | | | 582 | | | 558 | | | 74,321 | | | 69,231 | | | | | | | | | | |
| | 66 | | | 50 | | | 55 | | | 8,930 | | | 9,053 | | | | | | | | | | |
| | 104 | | | 92 | | | 71 | | | 5,818 | | | 5,840 | | | | | | | | | | |
| | 184 | | | 182 | | | 166 | | | 17,316 | | | 16,693 | | | | | | | | | | |
| | 61 | | | 50 | | | 34 | | | 3,165 | | | 2,537 | | | | | | | | | | |
| | 2,278 | | | 2,000 | | | 1,724 | | | 335,384 | | | 326,290 | | | | | | | | | | |
| | 385 | | | 418 | | | 257 | | | 54,728 | | | 56,371 | | | | | | | | | | |
| | 300 | | | 81 | | | 27 | | | 14,260 | | | 13,061 | | | | | | | | | | |
| | — | | | 1 | | | 2 | | | 234 | | | 259 | | | | | | | | | | |
| | 30 | | | 74 | | | 92 | | | 327 | | | 286 | | | | | | | | | | |
| | 2,993 | | | 2,574 | | | 2,102 | | | 404,933 | | | 396,267 | | | | | | | | | | |
| | 2 | | | (9 | ) | | (8 | ) | | (915 | ) | | (1,032 | ) | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | 2,995 | | | 2,565 | | | 2,094 | | | 404,018 | | | 395,235 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
(7)6)
| 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 | |
| | |
| |
|
| |
| |
| |
|
| |
|
| |
|
| |
|
| |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Operating revenues | | | Operating profit (loss) | | | Cost-income ratio | | | Total Assets |
| | | 2007 | | 2006 | | 2005 | | | 2007 | | | 2006 | | 2005 | | | 2007 | | | 2006 | | | 2005 | | | 2007 | | 2006 |
| | | € mn | | € mn | | € mn | | | € mn | | | € mn | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | € mn |
Private & Corporate Clients1) | | 3,625 | | 3,624 | | 3,464 | | | 884 | | | 783 | | 626 | | | 74.0 | | | 74.9 | | | 77.2 | | | 61,900 | | 62,700 |
Investment Banking1) | | 1,628 | | 3,111 | | 2,613 | | | (659 | ) | | 548 | | 351 | | | 137.0 | | | 82.9 | | | 88.1 | | | 422,300 | | 475,800 |
Corporate Other2) | | 171 | | 69 | | (38 | ) | | 505 | | | 23 | | (347 | ) | | — | 3) | | — | 3) | | — | 3) | | 17,597 | | 16,323 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Dresdner Bank | | 5,424 | | 6,804 | | 6,039 | | | 730 | | | 1,354 | | 630 | | | 89.0 | | | 79.7 | | | 91.4 | | | 501,797 | | 554,823 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other Banks4) | | 297 | | 284 | | 279 | | | 43 | | | 68 | | 74 | | | 83.5 | | | 75.7 | | | 72.4 | | | 7,954 | | 8,067 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | 5,721 | | 7,088 | | 6,318 | | | 773 | | | 1,422 | | 704 | | | 88.7 | | | 79.5 | | | 90.6 | | | 509,751 | | 562,890 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1)1)
| Our reporting by divisionsdivision reflects the organizational changes within Dresdner Bank in 2006,effective starting with 1Q 2007, resulting in two operating divisions.divisions, Private & BusinessCorporate Clients (“PCC”) and Investment Banking (“IB”). PCC combines all banking activities for private and corporate customers formerly provided by the Personal Banking and Private & Business Banking divisions. Furthermore,(including Private Wealth Management) divisions as well as our activities with medium-sized business clients from our former Corporate & Investment Banking combinesdivision. IB, with Global Banking and Capital Markets, unites the activities formerly provided by the Dresdner Kleinwort Wasserstein division and the remaining activities of the former Corporate Banking and Dresdner Kleinwort divisions.division. 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)2)
| The Corporate Other division contains income and expense items that are not assigned to Dresdner Bank’s operating divisions. These items include, in particular, 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, 2007, 2006 2005 and 20042005 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 €(54) mn, €(47) mn and €(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)3)
| Presentation not meaningful. |
(4)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.segment. |
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 | |
| | |
| |
| |
| |
| |
|
| |
|
|
| | | | | | | | | | | | | | |
| | | Operating revenues | | Operating profit (loss) | |
| | | 2007 | | 2006 | | 2005 | | 2007 | | | 2006 | | 2005 | |
| | | € mn | | € mn | | € mn | | € mn | | | € mn | | € mn | |
Germany | | 4,321 | | 4,312 | | 4,340 | | 1,488 | | | 853 | | 814 | |
The Americas | | 433 | | 560 | | 176 | | 77 | | | 251 | | (78 | ) |
Europe | | 664 | | 1,944 | | 1,571 | | (907 | ) | | 234 | | (110 | ) |
New Europe | | 72 | | 60 | | 47 | | 8 | | | 2 | | 3 | |
Asia-Pacific | | 231 | | 212 | | 184 | | 107 | | | 82 | | 75 | |
| | | | | | | | | | | | | | |
Total | | 5,721 | | 7,088 | | 6,318 | | 773 | | | 1,422 | | 704 | |
| | | | | | | | | | | | | | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Business Segment Information – Operating ProfitBUSINESS SEGMENT INFORMATION—OPERATING PROFIT
The Allianz Group evaluates the results of its Property-Casualty, Life/Health, Banking, AssetManagementAsset Management 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.intangible assets.
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 comparabilityandcomparability of the performance of its operating segments by highlighting net income attributable to ongoingon- going segment operations and the underlyingprofitabilityunderlying profitability of its businesses. For example, the Allianz Group believes that trends in the underlying profitability of its segments can be more clearly identified without the fluctuating effects of the realized capital gains and losses or impairments on investmentinvest- ment 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 Allianz Group’s discretion. Operating profit is not a substitute for earnings from ordinary activities before taxes or net income as determined in accordance with IFRS. The Allianz Group’s definition of operating profit may differ from similar measures used by other companies, and may change over time.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Segment Information—Total Revenues and Operating Profit
The following table sets forth thesummarizes total revenues, operating profit and net income for each of our businessthe segments and the Allianz Group for the years ended December 31, 2007, 2006 2005 and 2004, as well as consolidated net income of the Allianz Group.2005.
Segment Information – Total Revenues and Operating Profit
| | | | | | | | | | | | | | | | | | | | | |
| | | Property-
Casualty | | | Life/
Health | | | Banking | | | Asset
Management | | | Corporate | | | Consolidation | | | Group | |
| | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | |
2007 | | | | | | | | | | | | | | | | | | | | | |
Total revenues1) | | 44,289 | | | 49,367 | | | 5,721 | | | 3,259 | | | — | | | (38 | ) | | 102,598 | |
Operating profit (loss) | | 6,299 | | | 2,995 | | | 773 | | | 1,359 | | | (325 | ) | | (186 | ) | | 10,915 | |
Non-operating items | | 962 | | | 107 | | | (59 | ) | | (494 | ) | | (29 | ) | | 166 | | | 653 | |
| | | | | | | | | | | | | | | | | | | | | |
Income (loss) before income taxes and minority interests in earnings | | 7,261 | | | 3,102 | | | 714 | | | 865 | | | (354 | ) | | (20 | ) | | 11,568 | |
Income taxes | | (1,656 | ) | | (897 | ) | | (266 | ) | | (342 | ) | | 217 | | | 90 | | | (2,854 | ) |
Minority interests in earnings | | (431 | ) | | (214 | ) | | (71 | ) | | (25 | ) | | (21 | ) | | 14 | | | (748 | ) |
| | | | | | | | | | | | | | | | | | | | | |
Net income (loss) | | 5,174 | | | 1,991 | | | 377 | | | 498 | | | (158 | ) | | 84 | | | 7,966 | |
| | | | | | | | | | | | | | | | | | | | | |
2006 | | | | | | | | | | | | | | | | | | | | | |
Total revenues1) | | 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 | ) |
| | | | | | | | | | | | | | | | | | | | | |
Net income (loss) | | 4,746 | | | 1,643 | | | 918 | | | 404 | | | (179 | ) | | (511 | ) | | 7,021 | |
| | | | | | | | | | | | | | | | | | | | | |
2005 | | | | | | | | | | | | | | | | | | | | | |
Total revenues1) | | 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 | ) |
| | | | | | | | | | | | | | | | | | | | | |
Net income (loss) | | 3,535 | | | 1,358 | | | 1,037 | | | 244 | | | (1,268 | ) | | (526 | ) | | 4,380 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | 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 | ) |
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Net income (loss) | | 4,746 | | | 1,643 | | | 918 | | | 404 | | | (179 | ) | | (511 | ) | | 7,021 | |
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
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 | ) |
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Net income (loss) | | 3,535 | | | 1,358 | | | 1,037 | | | 244 | | | (1,268 | ) | | (526 | ) | | 4,380 | |
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
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 | ) |
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Net income (loss) | | 2,868 | | | 822 | | | 109 | | | (275 | ) | | (807 | ) | | (451 | ) | | 2,266 | |
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(1)1)
| 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)
Property-Casualty Segment
| | | | 2006
| | 2005
| | 2004
| | | 2007 | | 2006 | | 2005 | |
| | | € mn | | € mn | | € mn | | | € mn | | € mn | | € mn | |
Gross premiums written(1) | | 43,674 | | | 43,699 | | | 42,942 | | |
Gross premiums written1) | | | 44,289 | | | 43,674 | | | 43,699 | |
Ceded premiums written | | (5,415 | ) | | (5,529 | ) | | (5,299 | ) | | (5,320 | ) | | (5,415 | ) | | (5,529 | ) |
Change in unearned premiums | | (309 | ) | | (485 | ) | | (258 | ) | | (416 | ) | | (309 | ) | | (485 | ) |
Premiums earned (net) | | 37,950 | | | 37,685 | | | 37,385 | | | 38,553 | | | 37,950 | | | 37,685 | |
Interest and similar income | | 4,096 | | | 3,747 | | | 3,615 | | | 4,473 | | | 4,096 | | | 3,747 | |
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 | | |
Income from financial assets and liabilities designated at fair value through income (net)2) | | | 136 | | | 106 | | | 132 | |
Income from financial assets and liabilities held for trading (net), shared with policyholders2) | | | 8 | | | — | | | — | |
Realized gains/losses (net) from investments, shared with policyholders3) | | | 46 | | | 46 | | | 273 | |
Fee and commission income | | 1,014 | | | 989 | | | 782 | | | 1,178 | | | 1,014 | | | 989 | |
Other income | | 69 | | | 53 | | | 288 | | | 122 | | | 69 | | | 53 | |
| | |
|
| |
|
| |
|
| | | | | | | | | |
Operating revenues | | 43,281 | | | 42,879 | | | 42,133 | | | 44,516 | | | 43,281 | | | 42,879 | |
| | |
|
| |
|
| |
|
| | | | | | | | | |
Claims and insurance benefits incurred (net) | | (24,672 | ) | | (25,331 | ) | | (25,271 | ) | | (25,485 | ) | | (24,672 | ) | | (25,331 | ) |
Changes in reserves for insurance and investment contracts (net) | | (425 | ) | | (707 | ) | | (611 | ) | | (339 | ) | | (425 | ) | | (707 | ) |
Interest expense | | (273 | ) | | (339 | ) | | (417 | ) | | (402 | ) | | (273 | ) | | (339 | ) |
Loan loss provisions | | (2 | ) | | (1 | ) | | (7 | ) | | (6 | ) | | (2 | ) | | (1 | ) |
Impairments of investments (net), shared with policyholders(4) | | (25 | ) | | (18 | ) | | (37 | ) | |
Impairments of investments (net), shared with policyholders4) | | | (67 | ) | | (25 | ) | | (18 | ) |
Investment expenses | | (300 | ) | | (333 | ) | | (204 | ) | | (322 | ) | | (300 | ) | | (333 | ) |
Acquisition and administrative expenses (net) | | (10,590 | ) | | (10,216 | ) | | (10,192 | ) | | (10,616 | ) | | (10,590 | ) | | (10,216 | ) |
Fee and commission expenses | | (721 | ) | | (775 | ) | | (530 | ) | | (967 | ) | | (721 | ) | | (775 | ) |
Other expenses | | (4 | ) | | (17 | ) | | (39 | ) | | (13 | ) | | (4 | ) | | (17 | ) |
| | |
|
| |
|
| |
|
| | | | | | | | | |
Operating expenses | | (37,012 | ) | | (37,737 | ) | | (37,308 | ) | | (38,217 | ) | | (37,012 | ) | | (37,737 | ) |
| | |
|
| |
|
| |
|
| | | | | | | | | |
Operating profit | | 6,269 | | | 5,142 | | | 4,825 | | | 6,299 | | | 6,269 | | | 5,142 | |
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 | ) | |
| | | | | | | | | | |
Income from financial assets and liabilities held for trading (net), not shared with policyholders2) | | | (59 | ) | | 83 | | | 32 | |
Realized gains/losses (net) from investments, not shared with policyholders3) | | | 1,433 | | | 1,746 | | | 1,148 | |
Impairments of investments (net), not shared with policyholders4) | | | (276 | ) | | (175 | ) | | (77 | ) |
Amortization of intangible assets | | (1 | ) | | (11 | ) | | (403 | ) | | (14 | ) | | (1 | ) | | (11 | ) |
Restructuring charges | | (362 | ) | | (68 | ) | | (32 | ) | | (122 | ) | | (362 | ) | | (68 | ) |
| | | | | | | | | | |
Non-operating items | | 1,291 | | | 1,024 | | | 475 | | | 962 | | | 1,291 | | | 1,024 | |
| | | | | | | | | | |
Income before income taxes and minority interests in earnings | | 7,560 | | | 6,166 | | | 5,300 | | | 7,261 | | | 7,560 | | | 6,166 | |
Income taxes | | (2,075 | ) | | (1,804 | ) | | (1,751 | ) | | (1,656 | ) | | (2,075 | ) | | (1,804 | ) |
Minority interests in earnings | | (739 | ) | | (827 | ) | | (681 | ) | | (431 | ) | | (739 | ) | | (827 | ) |
| | |
|
| |
|
| |
|
| | | | | | | | | |
Net income | | 4,746 | | | 3,535 | | | 2,868 | | | 5,174 | | | 4,746 | | | 3,535 | |
| | |
|
| |
|
| |
|
| | | | | | | | | |
Loss ratio(5) in % | | 65.0 | | | 67.2 | | | 67.6 | | |
Expense ratio(6)in % | | 27.9 | | | 27.1 | | | 27.3 | | |
Loss ratio5) in % | | | 66.1 | | | 65.0 | | | 67.2 | |
Expense ratio6) in % | | | 27.5 | | | 27.9 | | | 27.1 | |
| | |
|
| |
|
| |
|
| | | | | | | | | |
Combined ratio(7) in % | | 92.9 | | | 94.3 | | | 94.9 | | |
Combined ratio7) in % | | | 93.6 | | | 92.9 | | | 94.3 | |
| | |
|
| |
|
| |
|
| | | | | | | | | |
(1)1)
| For the Property-Casualty segment, total revenues are measured based upon gross premiums written. |
(2)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. |
(3)3)
| The total of these items equals realized gains/losses (net) in the segment income statement. |
(4)4)
| The total of these items equals impairments of investments (net) in the segment income statement. |
(5)5)
| Represents claims and insurance benefits incurred (net) divided by premiums earned (net). |
(6)6)
| Represents acquisition and administrative expenses (net) divided by premiums earned (net). |
(7)7)
| 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 Segment
| | | | | | | | | |
| | | 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 | |
| | |
|
| |
|
| |
|
|
| | | | | | | | | |
| | | 2007 | | | 2006 | | | 2005 | |
| | | € mn | | | € mn | | | € mn | |
Statutory premiums1) | | 49,367 | | | 47,421 | | | 48,272 | |
Ceded premiums written | | (644 | ) | | (840 | ) | | (942 | ) |
Change in unearned premiums | | (61 | ) | | (221 | ) | | (168 | ) |
Statutory premiums (net) | | 48,662 | | | 46,360 | | | 47,162 | |
Deposits from SFAS 97 insurance and investment contracts | | (27,853 | ) | | (25,786 | ) | | (27,165 | ) |
Premiums earned (net) | | 20,809 | | | 20,574 | | | 19,997 | |
Interest and similar income | | 13,417 | | | 12,972 | | | 12,057 | |
Income (loss) from financial assets and liabilities carried at fair value through income (net), shared with policyholders2) | | (945 | ) | | (361 | ) | | 258 | |
Realized gains/losses (net) from investments, shared with policyholders3) | | 3,579 | | | 3,087 | | | 2,523 | |
Fee and commission income | | 701 | | | 630 | | | 507 | |
Other income | | 182 | | | 43 | | | 45 | |
| | | | | | | | | |
Operating revenues | | 37,743 | | | 36,945 | | | 35,387 | |
| | | | | | | | | |
Claims and insurance benefits incurred (net) | | (17,637 | ) | | (17,625 | ) | | (17,439 | ) |
Changes in reserves for insurance and investment contracts (net) | | (10,268 | ) | | (10,525 | ) | | (10,443 | ) |
Interest expense | | (374 | ) | | (280 | ) | | (452 | ) |
Loan loss provisions | | 3 | | | (1 | ) | | — | |
Impairments of investments (net), shared with policyholders4) | | (824 | ) | | (390 | ) | | (199 | ) |
Investment expenses | | (833 | ) | | (750 | ) | | (567 | ) |
Acquisition and administrative expenses (net) | | (4,588 | ) | | (4,437 | ) | | (3,973 | ) |
Fee and commission expenses | | (209 | ) | | (223 | ) | | (219 | ) |
Operating restructuring charges5) | | (16 | ) | | (140 | ) | | — | |
Other expenses | | (2 | ) | | (9 | ) | | (1 | ) |
| | | | | | | | | |
Operating expenses | | (34,748 | ) | | (34,380 | ) | | (33,293 | ) |
| | | | | | | | | |
Operating profit | | 2,995 | | | 2,565 | | | 2,094 | |
| | | | | | | | | |
Income from financial assets and liabilities carried at fair value through income (net), not shared with policyholders2) | | 5 | | | — | | | — | |
Realized gains/losses (net) from investments, not shared with policyholders3) | | 137 | | | 195 | | | 208 | |
Impairments of investments (net), not shared with policyholders4) | | (3 | ) | | — | | | — | |
Amortization of intangible assets | | (3 | ) | | (26 | ) | | (13 | ) |
Non-operating restructuring charges5) | | (29 | ) | | (34 | ) | | (18 | ) |
Non-operating items | | 107 | | | 135 | | | 177 | |
| | | | | | | | | |
Income before income taxes and minority interests in earnings | | 3,102 | | | 2,700 | | | 2,271 | |
Income taxes | | (897 | ) | | (641 | ) | | (488 | ) |
Minority interests in earnings | | (214 | ) | | (416 | ) | | (425 | ) |
| | | | | | | | | |
Net income | | 1,991 | | | 1,643 | | | 1,358 | |
| | | | | | | | | |
Statutory expense ratio6) in % | | 9.4 | | | 9.6 | | | 8.4 | |
| | | | | | | | | |
(1)1)
| 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 linked and other investment-oriented products, in accordance with the statutory accounting practices applicable in the insurer’s home jurisdiction. |
(2)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. |
3) | The total of these items equals realized gains/losses (net) in the segment income statement. |
(3)4)
| The total of these items equals impairments of investments (net) in the segment income statement. |
5) | The total of these items equals restructuring charges in the segment income statement. |
(4)6)
| 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 | |
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Cost-income ratio(6) in % | | 79.5 | | | 79.6 | | | 90.6 | | | 91.4 | | | 88.0 | | | 87.6 | |
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
| | | | | | | | | | | | | | | | | | |
| | | 2007 | | | 2006 | | | 2005 | |
| | | Banking
Segment | | | Dresdner
Bank | | | Banking
Segment | | | Dresdner
Bank1) | | | Banking
Segment | | | Dresdner
Bank | |
| | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | |
Net interest income2) | | 3,104 | | | 2,987 | | | 2,720 | | | 2,645 | | | 2,294 | | | 2,218 | |
Net fee and commission income3) | | 3,048 | | | 2,866 | | | 3,008 | | | 2,841 | | | 2,850 | | | 2,693 | |
Trading income (net)4) | | (464 | ) | | (461 | ) | | 1,282 | | | 1,242 | | | 1,170 | | | 1,123 | |
Income from financial assets and liabilities designated at fair value through income (net)4) | | 33 | | | 33 | | | 53 | | | 53 | | | (7 | ) | | (6 | ) |
Other income | | — | | | (1 | ) | | 25 | | | 23 | | | 11 | | | 11 | |
| | | | | | | | | | | | | | | | | | |
Operating revenues5) | | 5,721 | | | 5,424 | | | 7,088 | | | 6,804 | | | 6,318 | | | 6,039 | |
| | | | | | | | | | | | | | | | | | |
Administrative expenses | | (5,061 | ) | | (4,809 | ) | | (5,605 | ) | | (5,384 | ) | | (5,661 | ) | | (5,452 | ) |
Investment expenses | | (14 | ) | | (20 | ) | | (47 | ) | | (53 | ) | | (30 | ) | | (37 | ) |
Other expenses | | 1 | | | 3 | | | 14 | | | 14 | | | (33 | ) | | (33 | ) |
| | | | | | | | | | | | | | | | | | |
Operating expenses | | (5,074 | ) | | (4,826 | ) | | (5,638 | ) | | (5,423 | ) | | (5,724 | ) | | (5,522 | ) |
| | | | | | | | | | | | | | | | | | |
Loan loss provisions | | 126 | | | 132 | | | (28 | ) | | (27 | ) | | 110 | | | 113 | |
| | | | | | | | | | | | | | | | | | |
Operating profit | | 773 | | | 730 | | | 1,422 | | | 1,354 | | | 704 | | | 630 | |
| | | | | | | | | | | | | | | | | | |
Realized gains/losses (net) | | 83 | | | 70 | | | 492 | | | 492 | | | 1,020 | | | 1,020 | |
Impairments of investments (net) | | (90 | ) | | (89 | ) | | (215 | ) | | (215 | ) | | (184 | ) | | (183 | ) |
Amortization of intangible assets | | — | | | — | | | — | | | — | | | (1 | ) | | — | |
Restructuring charges | | (52 | ) | | (51 | ) | | (424 | ) | | (422 | ) | | (13 | ) | | (12 | ) |
| | | | | | | | | | | | | | | | | | |
Non-operating items | | (59 | ) | | (70 | ) | | (147 | ) | | (145 | ) | | 822 | | | 825 | |
| | | | | | | | | | | | | | | | | | |
Income before income taxes and minority interests in earnings | | 714 | | | 660 | | | 1,275 | | | 1,209 | | | 1,526 | | | 1,455 | |
Income taxes | | (266 | ) | | (232 | ) | | (263 | ) | | (236 | ) | | (387 | ) | | (373 | ) |
Minority interests in earnings | | (71 | ) | | (62 | ) | | (94 | ) | | (82 | ) | | (102 | ) | | (82 | ) |
| | | | | | | | | | | | | | | | | | |
Net income | | 377 | | | 366 | | | 918 | | | 891 | | | 1,037 | | | 1,000 | |
| | | | | | | | | | | | | | | | | | |
Cost-income ratio6) in % | | 88.7 | | | 89.0 | | | 79.5 | | | 79.7 | | | 90.6 | | | 91.4 | |
| | | | | | | | | | | | | | | | | | |
(1)1)
| ConsistsWe have enhanced the presentation of revenues and operating profit stemming from trades in shares of Allianz SE and its affiliates. From 2007 onwards, these results are eliminated on Dresdner Bank level, whereas in 2006 they were adjusted on segment level only. At Dresdner Bank this led to reduced operating revenues and non-Dresdner Bank banking operations within our Banking segment, as well as the elimination of trading income (net)reduced operating profit of €6 mn at Dresdner Bank resulting from Dresdner Bank’s trading activitiesand €6 mn, respectively, compared to the figures as stated in Allianz SE shares during the year ended December 31, 2006. As a result income taxes decreased by €3 mn. All other changes are related to rounding.
|
(2)2)
| Represents interest and similar income less interest expense. |
(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 | ) |
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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)3)
| 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)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. |
(2)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
| | | | | | | | | | | | | | | | | | |
| | | 2007 | | | 2006 | | | 2005 | |
| | | 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 income1) | | 3,133 | | | 3,060 | | | 2,924 | | | 2,874 | | | 2,636 | | | 2,597 | |
Net interest income2) | | 81 | | | 75 | | | 71 | | | 66 | | | 56 | | | 51 | |
Income from financial assets and liabilities carried at fair value through income (net) | | 31 | | | 29 | | | 38 | | | 37 | | | 19 | | | 18 | |
Other income | | 14 | | | 14 | | | 11 | | | 12 | | | 11 | | | 11 | |
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Operating revenues3) | | 3,259 | | | 3,178 | | | 3,044 | | | 2,989 | | | 2,722 | | | 2,677 | |
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Administrative expenses, excluding acquisition-related expenses4) | | (1,900 | ) | | (1,857 | ) | | (1,754 | ) | | (1,713 | ) | | (1,590 | ) | | (1,560 | ) |
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Operating expenses | | (1,900 | ) | | (1,857 | ) | | (1,754 | ) | | (1,713 | ) | | (1,590 | ) | | (1,560 | ) |
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Operating profit | | 1,359 | | | 1,321 | | | 1,290 | | | 1,276 | | | 1,132 | | | 1,117 | |
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Realized gains/losses (net) | | 2 | | | 4 | | | 7 | | | 5 | | | 6 | | | 5 | |
Impairments of investments (net) | | (1 | ) | | (1 | ) | | (2 | ) | | (2 | ) | | — | | | — | |
Acquisition-related expenses4), thereof: | | | | | | | | | | | | | | | | | | |
Deferred purchases of interests in PIMCO | | (488 | ) | | (488 | ) | | (523 | ) | | (523 | ) | | (677 | ) | | (677 | ) |
Other acquisition-related expenses5) | | (3 | ) | | (3 | ) | | (9 | ) | | (9 | ) | | (10 | ) | | (10 | ) |
Subtotal | | (491 | ) | �� | (491 | ) | | (532 | ) | | (532 | ) | | (687 | ) | | (687 | ) |
Amortization of intangible assets | | — | | | — | | | (24 | ) | | (23 | ) | | (25 | ) | | (25 | ) |
Restructuring charges | | (4 | ) | | (4 | ) | | (4 | ) | | (4 | ) | | (1 | ) | | (1 | ) |
Non-operating items | | (494 | ) | | (492 | ) | | (555 | ) | | (556 | ) | | (707 | ) | | (708 | ) |
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Income before income taxes and minority interests in earnings | | 865 | | | 829 | | | 735 | | | 720 | | | 425 | | | 409 | |
Income taxes | | (342 | ) | | (337 | ) | | (278 | ) | | (276 | ) | | (129 | ) | | (127 | ) |
Minority interests in earnings | | (25 | ) | | (22 | ) | | (53 | ) | | (49 | ) | | (52 | ) | | (48 | ) |
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Net income | | 498 | | | 470 | | | 404 | | | 395 | | | 244 | | | 234 | |
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Cost-income ratio6) in % | | 58.3 | | | 58.4 | | | 57.6 | | | 57.3 | | | 58.4 | | | 58.3 | |
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1) | Represents fee and commission income less fee and commission expenses. |
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 administrative expenses (net) in the segment income statement. |
5) | Consists of retention payments for the management and employees of PIMCO and Nicholas Applegate. |
6) | Represents operating expenses divided by operating revenues. |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Corporate Segment
| | | | | | | | | |
| | | 2007 | | | 2006 | | | 2005 | |
| | | € mn | | | € mn | | | € mn | |
Interest and similar income | | 855 | | | 509 | | | 416 | |
Income from financial assets and liabilities designated at fair value through income (net)1) | | 7 | | | (60 | ) | | — | |
Operating income from financial assets and liabilities held for trading (net)1) | | (33 | ) | | — | | | — | |
Fee and commission income | | 198 | | | 190 | | | 164 | |
Other income | | 15 | | | 28 | | | — | |
Income from fully consolidated private equity investments | | 2,367 | | | 1,392 | | | 598 | |
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Operating revenues | | 3,409 | | | 2,059 | | | 1,178 | |
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Interest expense, excluding interest expense from external debt2) | | (535 | ) | | (507 | ) | | (534 | ) |
Loan loss provisions | | (10 | ) | | (5 | ) | | — | |
Investment expenses | | (115 | ) | | (215 | ) | | (345 | ) |
Acquisition and administrative expenses (net), excluding acquisition-related expenses3) | | (627 | ) | | (655 | ) | | (516 | ) |
Fee and commission expenses | | (130 | ) | | (127 | ) | | (92 | ) |
Expenses from fully consolidated private equity investments | | (2,317 | ) | | (1,381 | ) | | (572 | ) |
Operating expenses | | (3,734 | ) | | (2,890 | ) | | (2,059 | ) |
| | | | | | | | | |
Operating profit (loss) | | (325 | ) | | (831 | ) | | (881 | ) |
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Non-operating income from financial assets and liabilities held for trading (net)1) | | 77 | | | (274 | ) | | (441 | ) |
Realized gains/losses (net) | | 980 | | | 861 | | | 172 | |
Interest expense from external debt2) | | (1,051 | ) | | (775 | ) | | (787 | ) |
Impairments of investments (net) | | (11 | ) | | 32 | | | (62 | ) |
Acquisition-related expenses3) | | (15 | ) | | — | | | — | |
Restructuring charges | | (9 | ) | | — | | | — | |
Non-operating items | | (29 | ) | | (156 | ) | | (1,118 | ) |
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Loss before income taxes and minority interests in earnings | | (354 | ) | | (987 | ) | | (1,999 | ) |
Income taxes | | 217 | | | 824 | | | 741 | |
Minority interests in earnings | | (21 | ) | | (16 | ) | | (10 | ) |
| | | | | | | | | |
Net loss | | (158 | ) | | (179 | ) | | (1,268 | ) |
| | | | | | | | | |
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 expense 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
6 Cash and cash equivalents
| As of December 31,
| | 2006
| | 2005
| |
As of December 31, 2007 | | | 2007 | | 2006 |
| | | € mn | | € mn | | € mn | | € mn |
Balances with banks payable on demand | | 26,915 | | 26,640 | | 23,848 | | 26,915 |
Balances with central banks | | 4,945 | | 3,807 | | 6,301 | | 4,945 |
Cash on hand | | 919 | | 1,045 | | 918 | | 919 |
Treasury bills, discounted treasury notes, similar treasury securities and checks | | 224 | | 23 | | 264 | | 224 |
Bills of exchange | | 28 | | 132 | | 6 | | 28 |
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Total | | 33,031 | | 31,647 | | 31,337 | | 33,031 |
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As of December 31, 2006,2007, compulsory deposits on accounts with national central banks under restrictions due to required reserves from the European Central Bank totaled €4,176€5,473 mn (2005: €3,232(2006: €4,176 mn).
7 Financial assets carried at fair value through income
| As of December 31,
| | 2006
| | 2005
| | 2007 | | 2006 |
| | | € mn | | € mn | | € mn | | € mn |
Financial assets held for trading | | | | | |
Debt securities | | 81,881 | | 109,384 | |
Debt securities1) | | | 59,715 | | 81,881 |
Equity securities | | 31,266 | | 30,788 | | 30,596 | | 31,266 |
Derivative financial instruments | | 24,835 | | 26,012 | | 73,230 | | 66,958 |
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Subtotal | | 137,982 | | 166,184 | | 163,541 | | 180,105 |
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Financial assets designated at fair value through income | | | | | |
Debt securities | | 14,414 | | 10,686 | |
Debt securities2)3) | | | 15,924 | | 14,414 |
Equity securities | | 3,834 | | 3,476 | | 4,232 | | 3,834 |
Loans to banks and customers | | 639 | | — | | 1,764 | | 639 |
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Subtotal | | 18,887 | | 14,162 | | 21,920 | | 18,887 |
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Total | | 156,869 | | 180,346 | | 185,461 | | 198,992 |
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1) | Debt securities held for trading include €15.1 bn of asset-backed securities of Dresdner Bank as of December 31, 2007. |
2) | Debt securities designated at fair value through income include €2.8 bn of credit investment related conduits (“CIRC”) of Dresdner Bank as of December 31, 2007. |
3) | Debt securities designated at fair value through income include €0.8 bn of asset-backed securities of the Life/Health segment as of December 31, 2007. |
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, 2006,2007, the debt securities include €21,924€17,281 mn (2005: €38,375(2006: €21,924 mn) from public-sectorpublic sector issuers and €59,957€42,434 mn (2005: €71,009(2006: €59,957 mn) from other issuers.
Credit risk exposure of loans to banks and customers designated at fair value through income
The maximum credit exposure of the loans to banks and customers designated at fair value through income amounts to €1,779 mn (2006: €630 mn) as of December 31, 2007. The Allianz Group hedged the credit exposure using credit derivatives with a notional value of €1,468 mn (2006: €379 mn).
The change in fair value of loans to banks and customers attributable to changes in credit risk amounts to a loss of €23 mn (2006: gain of €10 mn) for the year ended December 31, 2007 and cumulatively to a loss of €13 mn (2006: gain of €10 mn).
The change in fair value of the credit derivatives attributable to changes in credit risk amounts to a gain of €8 mn for the year ended December 31, 2007 and cumulatively to a gain of €8 mn.
The change in fair value of loans to banks and customers attributable to changes in credit risk has been calculated using a credit spread function. The credit spread function is based on various parameters, primarily on the default probability and recovery rate of the loan holder. In most cases the fair value of the financial assets is determined using quoted marked prices, while in some cases specific valuation models based on the above parameters are used.
8 Investments
| As of December 31,
| | 2006
| | 2005
| | 2007 | | 2006 |
| | | € mn | | € mn | | € mn | | € mn |
Available-for-sale investments | | 277,898 | | 266,953 | | 268,001 | | 277,898 |
Held-to-maturity investments | | 4,748 | | 4,826 | | 4,659 | | 4,748 |
Funds held by others under reinsurance contracts assumed | | 1,033 | | 1,572 | | 1,063 | | 1,033 |
Investments in associates and joint ventures | | 4,900 | | 2,095 | | 5,471 | | 4,900 |
Real estate held for investment | | 9,555 | | 9,569 | | 7,758 | | 9,555 |
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Total | | 298,134 | | 285,015 | | 286,952 | | 298,134 |
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Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Available-for-sale investments
| As of December 31,
| | 2006
| | 2005
| | 2007 | | 2006 |
| | | 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) | | | 7,628 | | 30 | | (112 | ) | | 7,546 | | 8,757 | | 16 | | (218 | ) | | 8,555 |
Corporate mortgage-backed securities (residential and commercial)1) | | | 6,663 | | 39 | | (101 | ) | | 6,601 | | 4,768 | | 38 | | (53 | ) | | 4,753 |
Other asset-backed securities1) | | | 5,384 | | 34 | | (92 | ) | | 5,326 | | 3,911 | | 25 | | (40 | ) | | 3,896 |
Government and government agency bonds | | | | | | | | | | | | | | | | | |
Germany | | 14,523 | | 335 | | (139 | ) | | 14,719 | | 15,801 | | 825 | | (32 | ) | | 16,594 | | 12,987 | | 127 | | (187 | ) | | 12,927 | | 14,523 | | 335 | | (139 | ) | | 14,719 |
Italy | | 23,722 | | 560 | | (127 | ) | | 24,155 | | 23,479 | | 1,339 | | (39 | ) | | 24,779 | | 23,090 | | 232 | | (259 | ) | | 23,063 | | 23,722 | | 560 | | (127 | ) | | 24,155 |
France | | 15,353 | | 798 | | (133 | ) | | 16,018 | | 16,250 | | 1,656 | | (13 | ) | | 17,893 | | 13,452 | | 596 | | (255 | ) | | 13,793 | | 15,353 | | 798 | | (133 | ) | | 16,018 |
United States | | 5,219 | | 28 | | (135 | ) | | 5,112 | | 9,527 | | 202 | | (85 | ) | | 9,644 | | 4,544 | | 114 | | (20 | ) | | 4,638 | | 5,219 | | 28 | | (135 | ) | | 5,112 |
Spain | | 8,322 | | 337 | | (42 | ) | | 8,617 | | 8,484 | | 823 | | (3 | ) | | 9,304 | | 6,717 | | 150 | | (79 | ) | | 6,788 | | 8,322 | | 337 | | (42 | ) | | 8,617 |
Belgium | | | 5,050 | | 38 | | (114 | ) | | 4,974 | | 5,210 | | 124 | | (38 | ) | | 5,296 |
All other countries | | 36,865 | | 736 | | (281 | ) | | 37,320 | | 35,824 | | 1,604 | | (117 | ) | | 37,311 | | 32,445 | | 77 | | (565 | ) | | 31,957 | | 31,655 | | 612 | | (243 | ) | | 32,024 |
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Subtotal | | 104,004 | | 2,794 | | (857 | ) | | 105,941 | | 109,365 | | 6,449 | | (289 | ) | | 115,525 | | 98,285 | | 1,334 | | (1,479 | ) | | 98,140 | | 104,004 | | 2,794 | | (857 | ) | | 105,941 |
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Corporate bonds | | 81,946 | | 1,482 | | (769 | ) | | 82,659 | | 73,136 | | 3,331 | | (214 | ) | | 76,253 | | 86,095 | | 660 | | (2,356 | ) | | 84,399 | | 82,061 | | 1,367 | | (769 | ) | | 82,659 |
Other | | 2,122 | | 215 | | (18 | ) | | 2,319 | | 1,556 | | 154 | | (2 | ) | | 1,708 | | 2,933 | | 99 | | (104 | ) | | 2,928 | | 2,122 | | 215 | | (18 | ) | | 2,319 |
Subtotal | | 205,508 | | 4,570 | | (1,955 | ) | | 208,123 | | 200,597 | | 10,037 | | (811 | ) | | 209,823 | | 206,988 | | 2,196 | | (4,244 | ) | | 204,940 | | 205,623 | | 4,455 | | (1,955 | ) | | 208,123 |
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Equity securities | | 43,139 | | 26,795 | | (159 | ) | | 69,775 | | 38,157 | | 19,161 | | (188 | ) | | 57,130 | | 40,794 | | 22,734 | | (467 | ) | | 63,061 | | 43,248 | | 26,686 | | (159 | ) | | 69,775 |
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| |
| | | | | | | | | | | | | | | | | | |
Total | | 248,647 | | 31,365 | | (2,114 | ) | | 277,898 | | 238,754 | | 29,198 | | (999 | ) | | 266,953 | | 247,782 | | 24,930 | | (4,711 | ) | | 268,001 | | 248,871 | | 31,141 | | (2,114 | ) | | 277,898 |
| | |
| |
| |
|
| |
| |
| |
| |
|
| |
| | | | | | | | | | | | | | | | | | |
1) | includes asset-backed-securities of the Property-Casualty segment of €4.9 bn and of the Life/Health segment of €13.0 bn as of December 31, 2007. |
Held-to-maturity investments
| As of December 31,
| | 2006
| | 2005
| | 2007 | | 2006 |
| | | 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 | | 130 | | — | | — | | | 130 | | 104 | | 2 | | — | | | 106 |
Italy | | 437 | | 18 | | — | | | 455 | | 427 | | 42 | | — | | 469 | | 447 | | 9 | | — | | | 456 | | 437 | | 18 | | — | | | 455 |
All other countries | | 1,561 | | 56 | | (1 | ) | | 1,616 | | 1,604 | | 72 | | — | | 1,676 | | 1,555 | | 26 | | (17 | ) | | 1,564 | | 1,561 | | 56 | | (1 | ) | | 1,616 |
| | |
| |
| |
|
| |
| |
| |
| |
| |
| | | | | | | | | | | | | | | | | | |
Subtotal | | 2,102 | | 76 | | (1 | ) | | 2,177 | | 2,171 | | 122 | | — | | 2,293 | | 2,132 | | 35 | | (17 | ) | | 2,150 | | 2,102 | | 76 | | (1 | ) | | 2,177 |
| | |
| |
| |
|
| |
| |
| |
| |
| |
| | | | | | | | | | | | | | | | | | |
Corporate bonds | | 2,620 | | 92 | | (3 | ) | | 2,709 | | 2,619 | | 154 | | — | | 2,773 | | 2,500 | | 31 | | (3 | ) | | 2,528 | | 2,620 | | 92 | | (3 | ) | | 2,709 |
Other | | 26 | | — | | — | | | 26 | | 36 | | — | | — | | 36 | | 27 | | — | | — | | | 27 | | 26 | | — | | — | | | 26 |
| | |
| |
| |
|
| |
| |
| |
| |
| |
| |
Total | | 4,748 | | 168 | | (4 | ) | | 4,912 | | 4,826 | | 276 | | — | | 5,102 | | 4,659 | | 66 | | (20 | ) | | 4,705 | | 4,748 | | 168 | | (4 | ) | | 4,912 |
| | |
| |
| |
|
| |
| |
| |
| |
| |
| | | | | | | | | | | | | | | | | | |
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, 20062007 and 2005.2006.
| | | | 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 | |
2007 | | | | | | | | | | | | | |
Debt securities | | | | | | | | | | | | | |
Government and agency mortgage-backed securities (residential and commercial) | | | 1,371 | | (22 | ) | | 4,115 | | (90 | ) | | 5,486 | | (112 | ) |
Corporate mortgage-backed securities (residential and commercial) | | | 2,720 | | (50 | ) | | 1,902 | | (51 | ) | | 4,622 | | (101 | ) |
Other asset-backed securities | | | 1,527 | | (50 | ) | | 979 | | (42 | ) | | 2,506 | | (92 | ) |
Government and government agency bonds | | | 36,587 | | (699 | ) | | 18,522 | | (797 | ) | | 55,109 | | (1,496 | ) |
Corporate bonds | | | 33,724 | | (1,075 | ) | | 20,183 | | (1,284 | ) | | 53,907 | | (2,359 | ) |
Other | | | 1,062 | | (50 | ) | | 487 | | (54 | ) | | 1,549 | | (104 | ) |
| | | | | | | | | | | | | | | | |
Subtotal | | | 76,991 | | (1,946 | ) | | 46,188 | | (2,318 | ) | | 123,179 | | (4,264 | ) |
Equity securities | | | 7,480 | | (467 | ) | | — | | — | | | 7,480 | | (467 | ) |
| | | | | | | | | | | | | | | | |
Total | | | 84,471 | | (2,413 | ) | | 46,188 | | (2,318 | ) | | 130,659 | | (4,731 | ) |
| | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | | | | | | | | | | | | | | | |
2006 | | | | | | | | | | | | | | | | | | | | |
Debt securities | | | | | | | | | | | | | | | | | | | | |
Government and agency mortgage-backed securities (residential and commercial) | | 2,706 | | (66 | ) | | 4,815 | | (152 | ) | | 7,521 | | (218 | ) | | 2,706 | | (66 | ) | | 4,815 | | (152 | ) | | 7,521 | | (218 | ) |
Corporate mortgage-backed securities (residential and commercial) | | 1,738 | | (13 | ) | | 1,078 | | (40 | ) | | 2,816 | | (53 | ) | | 1,738 | | (13 | ) | | 1,078 | | (40 | ) | | 2,816 | | (53 | ) |
Other asset-backed securities | | 1,447 | | (19 | ) | | 728 | | (21 | ) | | 2,175 | | (40 | ) | | 1,447 | | (19 | ) | | 728 | | (21 | ) | | 2,175 | | (40 | ) |
Government and government agency bonds | | 37,923 | | (554 | ) | | 9,833 | | (304 | ) | | 47,756 | | (858 | ) | | 37,923 | | (554 | ) | | 9,833 | | (304 | ) | | 47,756 | | (858 | ) |
Corporate bonds | | 31,888 | | (516 | ) | | 6,397 | | (256 | ) | | 38,285 | | (772 | ) | | 31,888 | | (516 | ) | | 6,397 | | (256 | ) | | 38,285 | | (772 | ) |
Other | | 481 | | (7 | ) | | 100 | | (11 | ) | | 581 | | (18 | ) | | 481 | | (7 | ) | | 100 | | (11 | ) | | 581 | | (18 | ) |
| | |
| |
|
| |
| |
|
| |
| |
|
| | | | | | | | | | | | | | | |
Subtotal | | 76,183 | | (1,175 | ) | | 22,951 | | (784 | ) | | 99,134 | | (1,959 | ) | | 76,183 | | (1,175 | ) | | 22,951 | | (784 | ) | | 99,134 | | (1,959 | ) |
Equity securities | | 3,607 | | (159 | ) | | — | | — | | | 3,607 | | (159 | ) | | 3,607 | | (159 | ) | | — | | — | | | 3,607 | | (159 | ) |
| | |
| |
|
| |
| |
|
| |
| |
|
| | | | | | | | | | | | | | | |
Total | | 79,790 | | (1,334 | ) | | 22,951 | | (784 | ) | | 102,741 | | (2,118 | ) | | 79,790 | | (1,334 | ) | | 22,951 | | (784 | ) | | 102,741 | | (2,118 | ) |
| | |
| |
|
| |
| |
|
| |
| |
|
| | | | | | | | | | | | | | | |
2005 | | | | | | | | | |
Debt securities | | | | | | | | | |
Government and agency mortgage-backed securities (residential and commercial) | | 6,465 | | (185 | ) | | 2,443 | | (68 | ) | | 8,908 | | (253 | ) | |
Corporate mortgage-backed securities (residential and commercial) | | 1,474 | | (31 | ) | | — | | — | | | 1,474 | | (31 | ) | |
Other asset-backed securities | | 1,190 | | (19 | ) | | 113 | | (3 | ) | | 1,303 | | (22 | ) | |
Government and government agency bonds | | 23,006 | | (260 | ) | | 1,154 | | (29 | ) | | 24,160 | | (289 | ) | |
Corporate bonds | | 13,073 | | (187 | ) | | 695 | | (27 | ) | | 13,768 | | (214 | ) | |
Other | | 210 | | (2 | ) | | — | | — | | | 210 | | (2 | ) | |
| | |
| |
|
| |
| |
|
| |
| |
|
| |
Subtotal | | 45,418 | | (684 | ) | | 4,405 | | (127 | ) | | 49,823 | | (811 | ) | |
Equity securities | | 3,667 | | (188 | ) | | — | | — | | | 3,667 | | (188 | ) | |
| | |
| |
|
| |
| |
|
| |
| |
|
| |
Total | | 49,085 | | (872 | ) | | 4,405 | | (127 | ) | | 53,490 | | (999 | ) | |
| | |
| |
|
| |
| |
|
| |
| |
|
| |
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€112 mn atas of December 31, 2006.2007. 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, the Allianz Group does not consider these investments to be impaired at December 31, 2006.2007.
Government and government agency bonds
Total unrealized losses amounted to €858€1,496 mn at DecemberDecem-ber 31, 2006.2007. 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. Because the decline in fair value is attributable to changes in interest rates 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, 2006.2007.
Corporate bonds
Total unrealized losses amounted to €772€2,359 mn atas of December 31, 2006.2007. The Allianz Group holds a large variety of bonds issued by corporations mostlydomiciled 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 between the purchase date of the individual securities compared toand the 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, 2006.2007.
Equity securities
As of December 31, 2006,2007, unrealized losses from equity securities amounted to €159€467 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.
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, 2006,2007, by contractual term to maturity, are as follows:
| As of December 31, 2006
| | Amortized Cost
| | Fair
Value
| |
As of December 31, 2007 | | | Amortized
Cost | | Fair
Value |
| | | € mn | | € mn | | € mn | | € mn |
Available-for-sale | | |
Available-for-sale investments | | | | | |
Due in 1 year or less | | 12,924 | | 12,925 | | 16,333 | | 16,459 |
Due after 1 year and in less than 5 years | | 66,687 | | 67,182 | | 64,716 | | 64,612 |
Due after 5 years and in less than 10 years | | 61,923 | | 62,476 | | 59,781 | | 59,048 |
Due after 10 years | | 63,974 | | 65,540 | | 66,158 | | 64,821 |
| | |
| |
| | | | |
Total | | 205,508 | | 208,123 | | 206,988 | | 204,940 |
| | |
| |
| | | | |
Held-to-maturity | | |
Held-to-maturity investments | | | | | |
Due in 1 year or less | | 206 | | 208 | | 336 | | 340 |
Due after 1 year and in less than 5 years | | 1,476 | | 1,505 | | 1,406 | | 1,422 |
Due after 5 years and in less than 10 years | | 2,191 | | 2,250 | | 1,436 | | 1,437 |
Due after 10 years | | 875 | | 949 | | 1,481 | | 1,506 |
| | |
| |
| | | | |
Total | | 4,748 | | 4,912 | | 4,659 | | 4,705 |
| | |
| |
| | | | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
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, 2006,2007, fair values could not be reliably measured for equity investments with carrying amounts totaling €1,486€1,742 mn (2005: €935(2006: €1,486 mn). These investments are primarily investments in privately held corporations and partnerships. During the year ended December 31, 2006,2007, such investments with carrying amounts of €12€27 mn (2005: €10(2006: €12 mn) were sold leading to gains of €32€42 mn (2005: €28(2006: €32 mn) and losses of €1€6 mn (2005: €–(2006: €1 mn).
Investments in associates and joint ventures
As of December 31, 2006,2007, 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 €1,232 mn (2006: €2,236 mn). As of December 31, 2007, the fair value of investments in associates and joint ventures was €5,654 mn (2005: €12,618(2006: €4,941 mn).
Real estate held for investment
| | | | 2006
| | 2005
| | 2004
| | | 2007 | | 2006 | | 2005 | |
| | | € mn | | € mn | | € mn | | | € mn | | € mn | | € mn | |
Cost as of January 1, | | 13,090 | | | 13,655 | | | 12,617 | | | 13,039 | | | 13,090 | | | 13,655 | |
Accumulated depreciation as of January 1, | | (3,521 | ) | | (3,027 | ) | | (2,116 | ) | | (3,484 | ) | | (3,521 | ) | | (3,027 | ) |
Carrying amount as of January 1, | | 9,569 | | | 10,628 | | | 10,501 | | | 9,555 | | | 9,569 | | | 10,628 | |
Additions | | 792 | | | 608 | | | 1,669 | | | 406 | | | 792 | | | 608 | |
Changes in the consolidated subsidiaries of the Allianz Group | | 68 | | | 240 | | | 83 | | | 3 | | | 68 | | | 240 | |
Disposals | | (746 | ) | | (740 | ) | | (709 | ) | | (564 | ) | | (746 | ) | | (740 | ) |
Reclassifications | | 345 | | | (745 | ) | | — | | |
Reclassifications1) | | | (1,313 | ) | | 345 | | | (745 | ) |
Foreign currency translation adjustments | | (71 | ) | | 70 | | | (5 | ) | | (92 | ) | | (71 | ) | | 70 | |
Depreciation | | (149 | ) | | (252 | ) | | (172 | ) | | (192 | ) | | (230 | ) | | (253 | ) |
Impairments | | (253 | ) | | (240 | ) | | (739 | ) | | (51 | ) | | (252 | ) | | (240 | ) |
Reversals of impairments | | | 6 | | | 80 | | | 1 | |
Carrying amount as of December 31, | | 9,555 | | | 9,569 | | | 10,628 | | | 7,758 | | | 9,555 | | | 9,569 | |
Accumulated depreciation as of December 31, | | 3,923 | | | 3,521 | | | 3,027 | | | 2,356 | | | 3,484 | | | 3,521 | |
Cost as of December 31, | | 13,478 | | | 13,090 | | | 13,655 | | | 10,114 | | | 13,039 | | | 13,090 | |
1) | The reclassifications for the year ended December 31, 2007 relate mainly to a portfolio of real estaste held for investment, that was classified as disposal group held for sale. |
As of December 31, 2006,2007, the fair value of real estate used by third partiesheld for investment was €13,494€12,031 mn (2005: €12,901(2006: €13,494 mn). As of December 31, 2006,2007, real estate used by third partiesheld for investment pledged as security, and other restrictions on title, were €55€146 mn (2005:(2006: €55 mn).
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
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)
| | | | | | | | | | | | | | | | | | |
As of December 31, | | 2007 | | | 2006 | |
| | | Banks | | | Customers | | | Total | | | Banks | | | Customers | | | Total | |
| | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | |
Short-term investments and certificates of deposit | | 10,316 | | | — | | | 10,316 | | | 6,775 | | | — | | | 6,775 | |
Reverse repurchase agreements | | 68,340 | | | 56,991 | | | 125,331 | | | 95,770 | | | 65,849 | | | 161,619 | |
Collateral paid for securities borrowing transactions | | 16,664 | | | 23,714 | | | 40,378 | | | 15,191 | | | 19,121 | | | 34,312 | |
Loans | | 74,944 | | | 125,403 | | | 200,347 | | | 69,211 | | | 129,319 | | | 198,530 | |
Other | | 14,012 | | | 7,148 | | | 21,160 | | | 15,225 | | | 8,358 | | | 23,583 | |
| | | | | | | | | | | | | | | | | | |
Subtotal | | 184,276 | | | 213,256 | | | 397,532 | | | 202,172 | | | 222,647 | | | 424,819 | |
Loan loss allowance | | (3 | ) | | (827 | ) | | (830 | ) | | (108 | ) | | (946 | ) | | (1,054 | ) |
| | | | | | | | | | | | | | | | | | |
Total | | 184,273 | | | 212,429 | | | 396,702 | | | 202,064 | | | 221,701 | | | 423,765 | |
| | | | | | | | | | | | | | | | | | |
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, 2007 | | | 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 | | 95,456 | | 23,124 | | 21,539 | | 9,265 | | 34,892 | | 184,276 |
Loans and advances to customers | | 103,921 | | 18,974 | | 18,342 | | 20,430 | | 51,885 | | 213,552 | | 117,865 | | 14,573 | | 17,988 | | 10,865 | | 51,965 | | 213,256 |
| | |
| |
| |
| |
| |
| |
| | | | | | | | | | | | |
Total | | 219,578 | | 35,195 | | 40,321 | | 34,814 | | 79,424 | | 409,332 | | 213,321 | | 37,697 | | 39,527 | | 20,130 | | 86,857 | | 397,532 |
| | |
| |
| |
| |
| |
| |
| | | | | | | | | | | | |
Loans and advances to banks and customers by geographic region
| As of December 31,
| | 2006
| | 2005
| | | 2007 | | 2006 | |
| | | 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 | | | 3,188 | | | 7,128 | | | 10,316 | | | 1,124 | | | 5,651 | | | 6,775 | |
Reverse repurchase agreements | | 31,884 | | | 107,529 | | | 139,413 | | | 23,474 | | | 81,857 | | | 105,331 | | | 23,980 | | | 101,351 | | | 125,331 | | | 31,884 | | | 129,735 | | | 161,619 | |
Collateral paid for securities borrowing transactions | | 7,087 | | | 33,944 | | | 41,031 | | | 2,925 | | | 22,103 | | | 25,028 | | | 6,415 | | | 33,963 | | | 40,378 | | | 7,087 | | | 27,225 | | | 34,312 | |
Loans | | 146,333 | | | 52,197 | | | 198,530 | | | 148,010 | | | 32,411 | | | 180,421 | | | 148,063 | | | 52,284 | | | 200,347 | | | 146,333 | | | 52,197 | | | 198,530 | |
Other | | 2,875 | | | 20,708 | | | 23,583 | | | 3,473 | | | 18,910 | | | 22,383 | | | 3,409 | | | 17,751 | | | 21,160 | | | 2,875 | | | 20,708 | | | 23,583 | |
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | | | | | | |
Subtotal | | 189,303 | | | 220,029 | | | 409,332 | | | 179,472 | | | 158,983 | | | 338,455 | | | 185,055 | | | 212,477 | | | 397,532 | | | 189,303 | | | 235,516 | | | 424,819 | |
Loan loss allowance | | (834 | ) | | (220 | ) | | (1,054 | ) | | (1,154 | ) | | (493 | ) | | (1,647 | ) | | (534 | ) | | (296 | ) | | (830 | ) | | (834 | ) | | (220 | ) | | (1,054 | ) |
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | | | | | | |
Total | | 188,469 | | | 219,809 | | | 408,278 | | | 178,318 | | | 158,490 | | | 336,808 | | | 184,521 | | | 212,181 | | | 396,702 | | | 188,469 | | | 235,296 | | | 423,765 | |
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | | | | | | |
Loans and advances to customers by type of customer
| As of December 31,
| | 2006
| | 2005
| | 2007 | | 2006 |
| | | € mn | | € mn | | € mn | | € mn |
Corporate customers | | 146,750 | | 123,015 | | 148,848 | | 155,845 |
Private customers | | 59,505 | | 59,316 | | 55,761 | | 59,505 |
Public authorities | | 7,297 | | 4,539 | | 8,647 | | 7,297 |
| | |
| |
| | | | |
Total | | 213,552 | | 186,870 | | 213,256 | | 222,647 |
| | |
| |
| | | | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Loans and advances to customers by economic sector
| As of December 31,
| | 2006
| | 2005
| | 2007 | | 2006 |
| | | € mn | | € mn | | € mn | | € mn |
Germany | | | | | | | | |
Corporate Customers | | | | | | | | |
Manufacturing industry | | 6,383 | | 5,425 | | 7,023 | | 6,383 |
Construction | | 916 | | 721 | | 1,128 | | 916 |
Wholesale and retail trade | | 4,306 | | 5,023 | | 4,999 | | 4,306 |
Financial institutions (excluding banks) and insurance companies | | 7,740 | | 5,988 | | 9,626 | | 7,740 |
Service providers | | 10,091 | | 10,425 | | 7,701 | | 10,091 |
Other | | 3,615 | | 3,351 | | 4,469 | | 3,615 |
| | |
| |
| | | | |
Subtotal | | 33,051 | | 30,933 | | 34,946 | | 33,051 |
| | |
| |
| | | | |
Public authorities | | 3,578 | | 2,739 | | 3,766 | | 3,578 |
Private customers | | 51,084 | | 57,218 | | 49,580 | | 51,084 |
Subtotal | | 87,713 | | 90,890 | | 88,292 | | 87,713 |
Other countries | | | | | | | | |
Corporate Customers | | | | | | | | |
Industry, wholesale and retail trade and service providers | | 13,474 | | 10,732 | | 11,748 | | 13,474 |
Financial institutions (excluding banks) and insurance companies | | 93,155 | | 75,957 | | 91,369 | | 102,250 |
Other | | 7,070 | | 5,393 | | 10,785 | | 7,070 |
| | |
| |
| | | | |
Subtotal | | 113,699 | | 92,082 | | 113,902 | | 122,794 |
| | |
| |
| | | | |
Public authorities | | 3,719 | | 1,800 | | 4,881 | | 3,719 |
Private customers | | 8,421 | | 2,098 | | 6,181 | | 8,421 |
| | |
| |
| | | | |
Subtotal | | 125,839 | | 95,980 | | 124,964 | | 134,934 |
| | |
| |
| | | | |
Total | | 213,552 | | 186,870 | | 213,256 | | 222,647 |
| | |
| |
| | | | |
As of December 31, 2006,2007, unearned income related to discounts deducted from loan balances was €69€58 mn (2005: €85(2006: €69 mn).
Finance lease receivables
Loans and advances to customers include amounts receivable under finance leases at their net investment value of €2,081€1,256 mn (2005: €1,500(2006: €2,081 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 | |
| | |
|
| |
|
|
| | | | | | |
As of December 31, | | 2007 | | | 2006 | |
| | | € mn | | | € mn | |
Gross investment in the lease | | | | | | |
Due in one year or less | | 168 | | | 372 | |
Due after one year and not later than five years | | 900 | | | 1,336 | |
Due after five years | | 947 | | | 1,036 | |
| | | | | | |
Subtotal1) | | 2,015 | | | 2,744 | |
| | | | | | |
Unearned finance income | | | | | | |
Due in one year or less | | (95 | ) | | (98 | ) |
Due after one year and not later than five years | | (367 | ) | | (314 | ) |
Due after five years | | (297 | ) | | (251 | ) |
| | | | | | |
Subtotal | | (759 | ) | | (663 | ) |
| | | | | | |
Net investment in the lease | | | | | | |
Due in one year or less | | 73 | | | 274 | |
Due after one year and not later than five years | | 533 | | | 1,022 | |
Due after five years | | 650 | | | 785 | |
| | | | | | |
Total | | 1,256 | | | 2,081 | |
| | | | | | |
(1)1)
| As of December 31, 20062007 and 2005,2006, the residual values of the entire leasing portfolio were fully guaranteed. |
During the year ended December 31, 2006,2007, lease payments received were recognized as income in the amount of €174 mn (2006: €154 mn (2005:mn; 2005: €122 mn; 2004: €42 mn). As of December 31, 20062007 and 2005,2006, an allowance for uncollectible lease payments was not recorded.required.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Loan loss allowanceReconciliation of allowances for credit losses by class of financial assets
As of December 31, 2006,2007, 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 €830 mn (2006: €1,054 mn (2005:mn; 2005: €1,647 mn; 2004: €4,135 mn) and provisions for contingent liabilities, such as guarantees, loan commitments and other obligationscredit losses included in other liabilities in the amount of €201 mn (2006: €261 mn; 2005: €117 mn). The provision for credit losses includes provisions for irrevocable loan commitments in the amount of €67 mn (2005: €117(2006: €126 mn; 2004: €3712005: €36 mn), provisions for financial guarantees and contingent liabilities in the amount of €74 mn (2006: €65 mn; 2005: €72 mn) and other provisions for credit losses of €60 mn (2006: €70 mn; 2005: €9 mn).
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Loan loss allowance | | | Provision for credit
losses | | | Total | |
| | | 2007 | | | 2006 | | | 2005 | | | 2007 | | | 2006 | | | 2005 | | | 2007 | | | 2006 | | | 2005 | |
| | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | |
As of January 1, | | 1,054 | | | 1,647 | | | 4,135 | | | 261 | | | 117 | | | 371 | | | 1,315 | | | 1,764 | | | 4,506 | |
Changes in the consolidated subsidiaries of the Allianz Group | | — | | | (1 | ) | | (3 | ) | | — | | | — | | | — | | | — | | | (1 | ) | | (3 | ) |
Additions charged to the income statement | | 537 | | | 456 | | | 659 | | | 35 | | | 77 | | | 115 | | | 572 | | | 533 | | | 774 | |
Unwinding—interest income1) | | (8 | ) | | (6 | ) | | — | | | — | | | — | | | — | | | (8 | ) | | (6 | ) | | — | |
Charge-offs | | (376 | ) | | (605 | ) | | (2,571 | ) | | — | | | (10 | ) | | (258 | ) | | (376 | ) | | (615 | ) | | (2,829 | ) |
Releases | | (397 | ) | | (272 | ) | | (659 | ) | | (88 | ) | | (45 | ) | | (123 | ) | | (485 | ) | | (317 | ) | | (782 | ) |
Other additions (reductions) | | 35 | | | (152 | ) | | 46 | | | (6 | ) | | 126 | | | 9 | | | 29 | | | (26 | ) | | 55 | |
Foreign currency translation adjustments | | (15 | ) | | (13 | ) | | 40 | | | (1 | ) | | (4 | ) | | 3 | | | (16 | ) | | (17 | ) | | 43 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
As of December 31, | | 830 | | | 1,054 | | | 1,647 | | | 201 | | | 261 | | | 117 | | | 1,031 | | | 1,315 | | | 1,764 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
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 | |
| | | 2007 | | | 2006 | | | 2005 | | | 2007 | | | 2006 | | | 2005 | | | 2007 | | | 2006 | | | 2005 | |
| | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | | | € mn | |
As of January 1, | | 593 | | | 880 | | | 3,685 | | | 722 | | | 884 | | | 821 | | | 1,315 | | | 1,764 | | | 4,506 | |
Changes in the consolidated subsidiaries of the Allianz Group | | — | | | (1 | ) | | (3 | ) | | — | | | — | | | — | | | — | | | (1 | ) | | (3 | ) |
Additions charged to the income statement | | 559 | | | 511 | | | 604 | | | 13 | | | 22 | | | 170 | | | 572 | | | 533 | | | 774 | |
Unwinding—interest income3) | | (8 | ) | | (6 | ) | | | | | — | | | — | | | — | | | (8 | ) | | (6 | ) | | — | |
Charge-offs | | (376 | ) | | (615 | ) | | (2,829 | ) | | — | | | — | | | — | | | (376 | ) | | (615 | ) | | (2,829 | ) |
Releases | | (215 | ) | | (191 | ) | | (641 | ) | | (270 | ) | | (126 | ) | | (141 | ) | | (485 | ) | | (317 | ) | | (782 | ) |
Other additions (reductions) | | 29 | | | 19 | | | 39 | | | — | | | (45 | ) | | 16 | | | 29 | | | (26 | ) | | 55 | |
Foreign currency translation adjustments | | (9 | ) | | (4 | ) | | 25 | | | (7 | ) | | (13 | ) | | 18 | | | (16 | ) | | (17 | ) | | 43 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
As of December 31, | | 573 | | | 593 | | | 880 | | | 458 | | | 722 | | | 884 | | | 1,031 | | | 1,315 | | | 1,764 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
1) | The category country risk allowance, disclosed separately in previous years financial statements, has been be due to simplicity and materiality reasons allocated to the categories of specific and general allowances going forward, using objective criteria. The amounts of €95 mn and €225 mn as of December 31, 2006 and 2005 have 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
| | 2007 | | 2006 |
| | | € mn | | € mn | | € mn | | € mn |
Impaired loans | | 2,072 | | 2,888 | | 2,240 | | 2,072 |
Impaired loans with specific allowances | | 1,428 | | 1,754 | | 1,301 | | 1,428 |
Impaired loans with portfolio allowances | | 532 | | 562 | | 420 | | 532 |
Non-accrual loans | | 1,801 | | 2,102 | | 1,555 | | 1,801 |
| | | | | | |
| | | 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 | |
| | | | |
| | | 2007 | | 2006 |
| | | € mn | | € mn |
Average balance of impaired loans | | 2,448 | | 2,390 |
Interest income recognized on impaired loans | | 29 | | 28 |
Interest income not recognized from non- accrual loans | | 77 | | 86 |
Interest collected and recorded on non- accrual loans | | 3 | | 7 |
As of December 31, 2006,2007, the Allianz Group had €34€40 mn (2005: €39(2006: €34 mn) of commitments to lend additional funds to borrowers whose loans are non-performing or whose terms have been previously restructured.
10 Reinsurance assets
| As of December 31,
| | 2006
| | 2005
| | 2007 | | 2006 |
| | | € mn | | € mn | | € mn | �� | € mn |
Unearned premiums | | 1,317 | | 1,448 | | 1,342 | | 1,317 |
Reserves for loss and loss adjustment expenses | | 9,719 | | 10,874 | | 8,561 | | 9,719 |
Aggregate policy reserves | | 8,223 | | 9,772 | | 5,319 | | 8,223 |
Other insurance reserves | | 101 | | 26 | | 90 | | 101 |
| | |
| |
| | | | |
Total | | 19,360 | | 22,120 | | 15,312 | | 19,360 |
| | |
| |
| | | | |
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 | |
| | |
|
| |
|
|
| | | | | | | | | |
| | | 2007 | | | 2006 | | | 2005 | |
| | | € mn | | | € mn | | | € mn | |
Carrying amount as of January 1, | | 8,223 | | | 9,772 | | | 10,276 | |
Foreign currency translation adjustments | | (311 | ) | | (340 | ) | | 443 | |
Changes recorded in
consolidated income statements | | 108 | | | (7 | ) | | 135 | |
Other changes1) | | (2,701 | ) | | (1,202 | ) | | (1,082 | ) |
Carrying amount as of December 31, | | 5,319 | | | 8,223 | | | 9,772 | |
| | | | | | | | | |
(1)1)
| Primarily relatesrelating to novation of quota share reinsurance agreement. |
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. For internationalInternational corporate risksrisk exposures exceeding the relevant retention levels of the Allianz Group’s subsidiaries are reinsured internally by Allianz Global Corporate & Specialty AG (“AGCS”) where the portfolio is pooled and with risks exceeding the retention limits ceded bywere retroceded to the external reinsurance.reinsurance market. 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 claims-paying and debt ratings, capital and surplus levels, and marketplace 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, 20062007 and 2005.2006. Concentrations the Allianz Group has with individual reinsurers include Munich Re, 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)
11 Deferred acquisition costs
| | | | |
As of December 31, | | 2007 | | 2006 |
| | | € mn | | € mn |
Deferred acquisition costs | | | | |
Property-Casualty | | 3,675 | | 3,692 |
Life/Health | | 14,118 | | 13,619 |
Asset Management | | 94 | | 50 |
Subtotal | | 17,887 | | 17,361 |
Present value of future profits | | 1,206 | | 1,227 |
Deferred sales inducements | | 520 | | 547 |
| | | | |
Total | | 19,613 | | 19,135 |
| | | | |
Deferred acquisition costs
| | | | | | | | | |
| | | 2007 | | | 2006 | | | 2005 | |
| | | € mn | | | € mn | | | € mn | |
Property-Casualty | | | | | | | | | |
Carrying amount as of January 1, | | 3,692 | | | 3,550 | | | 3,434 | |
Additions | | 4,161 | | | 3,357 | | | 2,582 | |
Changes in the consolidated subsidiaries of the Allianz Group | | 66 | | | — | | | — | |
Foreign currency translation adjustments | | (72 | ) | | (35 | ) | | 78 | |
Amortization | | (4,172 | ) | | (3,180 | ) | | (2,544 | ) |
Carrying amount as of December 31, | | 3,675 | | | 3,692 | | | 3,550 | |
Life/Health | | | | | | | | | |
Carrying amount as of January 1, | | 13,619 | | | 12,712 | | | 10,681 | |
Additions | | 2,649 | | | 2,783 | | | 2,895 | |
Changes in the consolidated subsidiaries of the Allianz Group | | — | | | — | | | (26 | ) |
Foreign currency translation adjustments | | (555 | ) | | (464 | ) | | 541 | |
Amortization | | (1,595 | ) | | (1,412 | ) | | (1,379 | ) |
Carrying amount as of December 31, | | 14,118 | | | 13,619 | | | 12,712 | |
Asset Management | | 94 | | | 50 | | | 28 | |
| | | | | | | | | |
Total | | 17,887 | | | 17,361 | | | 16,290 | |
| | | | | | | | | |
Present value of future profits
| | | | | | | | | |
| | | 2007 | | | 2006 | | | 2005 | |
| | | € mn | | | € mn | | | € mn | |
Cost as of January 1, | | 2,359 | | | 2,374 | | | 2,361 | |
Accumulated amortization as of January 1, | | (1,132 | ) | | (1,038 | ) | | (839 | ) |
Carrying amount as of January 1, | | 1,227 | | | 1,336 | | | 1,522 | |
Changes in the consolidated subsidiaries of the Allianz Group | | 5 | | | — | | | — | |
Foreign currency translation adjustments | | (6 | ) | | (6 | ) | | 7 | |
Amortization1) | | (20 | ) | | (103 | ) | | (193 | ) |
Carrying amount as of December 31, | | 1,206 | | | 1,227 | | | 1,336 | |
Accumulated amortization as of December 31, | | 1,138 | | | 1,132 | | | 1,038 | |
Cost as of December 31, | | 2,344 | | | 2,359 | | | 2,374 | |
1) | During the year ended December 31, 2007, includes interest accrued on unamortized PVFP of €70 mn (2006: €62 mn; 2005: €74 mn). |
As of December 31, 2006,2007, the percentage of PVFP that is expected to be amortized in 20072008 is 13.79% (13.66% in 2008, 12.36%14.29% (12.84% in 2009, 10.74%11.46% in 2010, 10.49% in 2011 and 9.96%9.72% in 2011)2012).
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 | |
| | |
|
| |
|
| |
|
|
| | | | | | | | | |
| | | 2007 | | | 2006 | | | 2005 | |
| | | € mn | | | € mn | | | € mn | |
Carrying amount as of January 1, | | 547 | | | 515 | | | 303 | |
Additions | | 86 | | | 120 | | | 209 | |
Foreign currency translation adjustments | | (59 | ) | | (56 | ) | | 52 | |
Amortization | | (54 | ) | | (32 | ) | | (49 | ) |
Carrying amount as of December 31, | | 520 | | | 547 | | | 515 | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
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 | |
| | | | | | |
As of December 31, | | 2007 | | | 2006 | |
| | | € mn | | | € mn | |
Receivables | | | | | | |
Policyholders | | 4,616 | | | 4,292 | |
Agents | | 3,956 | | | 3,698 | |
Reinsurers | | 2,676 | | | 2,832 | |
Other | | 4,994 | | | 5,365 | |
Less allowance for doubtful accounts | | (389 | ) | | (330 | ) |
Subtotal | | 15,853 | | | 15,857 | |
Tax receivables | | | | | | |
Income tax | | 2,536 | | | 1,995 | |
Other tax | | 731 | | | 690 | |
Subtotal | | 3,267 | | | 2,685 | |
Accrued dividends, interest and rent | | 5,503 | | | 5,658 | |
Prepaid expenses | | | | | | |
Interest and rent | | 3,308 | | | 2,678 | |
Other prepaid expenses | | 261 | | | 173 | |
Subtotal | | 3,569 | | | 2,851 | |
Derivative financial instruments used for hedging that meet the criteria for hedge accounting and firm commitments | | 344 | | | 463 | |
Property and equipment | | | | | | |
Real estate held for own use | | 3,708 | | | 4,758 | |
Equipment | | 1,666 | | | 1,597 | |
Software | | 1,165 | | | 1,078 | |
Subtotal | | 6,539 | | | 7,433 | |
Non-current assets and disposal groups held for sale | | 3,503 | | | — | |
Other assets1) | | 2,950 | | | 3,054 | |
| | | | | | |
Total | | 41,528 | | | 38,001 | |
| | | | | | |
(1)1)
| As of December 31, 2006,2007, includes prepaid benefit costs for defined benefit plans of €402 mn (2006: €265 mn.mn). |
Other assets due within one year amounted to €30,255€33,732 mn (2005: €34,196(2006: €29,399 mn), and those due after more than one year totaled €8,638€7,796 mn (2005: €8,097(2006: €8,602 mn).
Property and equipment
Real estate held for own use
| | | | 2006
| | 2005
| | 2004
| | | 2007 | | 2006 | | 2005 | |
| | | € mn | | € mn | | € mn | | | € mn | | € mn | | € mn | |
Cost as of January 1, | | 5,894 | | | 7,499 | | | 6,527 | | | 6,153 | | | 5,894 | | | 7,499 | |
Accumulated depreciation as of January 1, | | (1,503 | ) | | (1,457 | ) | | (1,507 | ) | | (1,395 | ) | | (1,503 | ) | | (1,457 | ) |
Carrying amount as of January 1, | | 4,391 | | | 6,042 | | | 5,020 | | | 4,758 | | | 4,391 | | | 6,042 | |
Additions | | 284 | | | 540 | | | 1,373 | | | 194 | | | 284 | | | 540 | |
Changes in the consolidated subsidiaries of the Allianz Group | | 819 | | | (2,493 | ) | | 691 | | | (159 | ) | | 819 | | | (2,493 | ) |
Disposals | | (248 | ) | | (318 | ) | | (789 | ) | | (248 | ) | | (248 | ) | | (318 | ) |
Reclassification | | (345 | ) | | 745 | | | — | | |
Reclassifications1) | | | (635 | ) | | (345 | ) | | 745 | |
Foreign currency translation adjustments | | (24 | ) | | 84 | | | (19 | ) | | (47 | ) | | (24 | ) | | 84 | |
Depreciation | | (119 | ) | | (209 | ) | | (234 | ) | | (139 | ) | | (117 | ) | | (200 | ) |
Impairments | | | (17 | ) | | (3 | ) | | (9 | ) |
Reversals of impairments | | | 1 | | | 1 | | | — | |
Carrying amount as of December 31, | | 4,758 | | | 4,391 | | | 6,042 | | | 3,708 | | | 4,758 | | | 4,391 | |
Accumulated depreciation as of December 31, | | 1,395 | | | 1,503 | | | 1,457 | | | 1,139 | | | 1,395 | | | 1,503 | |
| | |
|
| |
|
| |
|
| |
Cost as of December 31, | | 6,153 | | | 5,894 | | | 7,499 | | | 4,847 | | | 6,153 | | | 5,894 | |
| | |
|
| |
|
| |
|
| |
1) | The reclassifications for the year ended December 31, 2007 relate mainly to a portfolio of real estate held for own use, that was classified as disposal group held for sale. |
As of December 31, 2006,2007, the fair value of real estate held for own use was €6,379€5,070 mn (2005: €6,227(2006: €6,379 mn). As of December 31, 2006,2007, assets pledged as security and other restrictions on title were €27€107 mn (2005: €25(2006: €27 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)
Software
| | | | | | | | | |
| | | 2007 | | | 2006 | | | 2005 | |
| | | € mn | | | € mn | | | € mn | |
Cost as of January 1, | | 3,764 | | | 3,472 | | | 3,320 | |
Accumulated amortization as of January 1, | | (2,686 | ) | | (2,381 | ) | | (2,348 | ) |
Carrying amount as of January 1, | | 1,078 | | | 1,091 | | | 972 | |
Additions | | 582 | | | 523 | | | 577 | |
Changes in the consolidated subsidiaries of the Allianz Group | | (9 | ) | | 73 | | | (2 | ) |
Disposals | | (58 | ) | | (70 | ) | | (38 | ) |
Foreign currency translation adjustments | | (21 | ) | | (10 | ) | | 14 | |
Amortization | | (406 | ) | | (496 | ) | | (432 | ) |
Impairments | | (1 | ) | | (33 | ) | | — | |
Carrying amount as of December 31,1) | | 1,165 | | | 1,078 | | | 1,091 | |
Accumulated amortization as of December 31, | | 2,781 | | | 2,686 | | | 2,381 | |
Cost as of December 31, | | 3,946 | | | 3,764 | | | 3,472 | |
1) | As of December 31, 2007, includes €746 mn (2006: €683 mn; 2005: €772 mn) for software developed in house and €419 mn (2006: €395 mn; 2005: €319 mn) for software purchased from third parties. |
Non-current assets and disposal groups held for sale
| | | | |
As of December 31, | | 2007 | | 2006 |
| | | € mn | | € mn |
Non-current assets and disposal groups held for sale | | | | |
Real estate held for investment and real estate held for own use in Germany | | 1,950 | | — |
Selecta AG | | 1,543 | | — |
Other | | 10 | | — |
| | | | |
Total | | 3,503 | | — |
| | | | |
Liabilities associated with non-current assets and disposal groups held for sale | | | | |
Selecta AG | | 1,292 | | — |
Other | | 1 | | — |
| | | | |
Total | | 1,293 | | — |
| | | | |
During the yearsecond quarter ended June 30, 2007 the Allianz Group reclassified two portfolios of real estate held for investment and real estate held for own use in the Property-Casualty, Life/Health and Corporate segment in Germany to disposal groups held for sale as the classification criteria of IFRS 5 were met. The real estate held for own use is expected to be disposed of through sale-leaseback transactions. No gain or loss was recognised on reclassification as fair value less costs to sell exceded the carrying amount. Partly the portfolio of real estate held for own use has already been disposed in 2007.
During the fourth quarter ended December 31, 2005,2007, 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 ThamesSelecta AG in the Corporate segment to disposal groups held for sale as the classification criteria inof IFRS 5 were met. On the dateThe Allianz Group is seeking to dispose of reclassification, as the fair value less cost to sell wasSelecta AG in excess of the carrying amount a2008. No gain or loss was not recognized. The disposal of Four Seasons Health Care Ltd., Wilmslow 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 BetterCare Group Limited, Kingston upon Thames were included in the Corporate segment.
As a result of the agreements described in Note 45, the Allianz Group reclassified the carrying amount of its ownership interest in Eurohypo AG to assets held for sale during the year ended December 31, 2005. On the agreement date,recognised on reclassification as the fair value less costs to sell ofexceded the Eurohypo AG ownership interest 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.amount.
13 Intangible assets
| As of December 31,
| | 2006
| | 2005
| | 2007 | | 2006 |
| | | € mn | | € mn | | € mn | | € mn |
Goodwill | | 12,007 | | 12,023 | | 12,453 | | 12,144 |
Brand names | | 717 | | 740 | | 737 | | 717 |
Other | | 211 | | 195 | | 223 | | 211 |
| | |
| |
| | | | |
Total | | 12,935 | | 12,958 | | 13,413 | | 13,072 |
| | |
| |
| | | | |
Amortization expense of definite life intangible assets is estimated to be €42 mn in 2007, €42€36 mn in 2008, €42€36 mn in 2009, €42€35 mn in 2010, and €42€17 mn in 2011.2011 and €17 mn in 2012.
Goodwill
| | | | 2006
| | 2005
| | 2004
| | | 2007 | | 2006 | | 2005 | |
| | | € mn | | € mn | | € mn | | | € mn | | € mn | | € mn | |
Cost as of January 1, | | 12,247 | | | 11,901 | | | 12,594 | | | 12,368 | | | 12,384 | | | 12,038 | |
Accumulated impairments as of January 1, | | (224 | ) | | (224 | ) | | (224 | ) | | (224 | ) | | (224 | ) | | (224 | ) |
Carrying amount as of January 1, | | 12,023 | | | 11,677 | | | 12,370 | | | 12,144 | | | 12,160 | | | 11,814 | |
Additions | | 315 | | | 70 | | | 803 | | | 1,153 | | | 315 | | | 70 | |
Disposals | | — | | | (45 | ) | | (62 | ) | | — | | | — | | | (45 | ) |
Foreign currency translation adjustments | | (368 | ) | | 479 | | | (270 | ) | | (372 | ) | | (368 | ) | | 479 | |
Reclassification | | 37 | | | (158 | ) | | — | | |
Amortization | | — | | | — | | | (1,164 | ) | |
Reclassifications | | | — | | | 37 | | | — | |
Reclassifications into held for sale | | | (472 | ) | | — | | | (158 | ) |
Carrying amount as of December 31, | | 12,007 | | | 12,023 | | | 11,677 | | | 12,453 | | | 12,144 | | | 12,160 | |
Accumulated impairments as of December 31, | | 224 | | | 224 | | | 224 | | | 224 | | | 224 | | | 224 | |
| | |
|
| |
|
| |
|
| |
Cost as of December 31, | | 12,231 | | | 12,247 | | | 11,901 | | | 12,677 | | | 12,368 | | | 12,384 | |
| | |
|
| |
|
| |
|
| |
Additions include goodwill from
increasing the interest in Russian People’s Insurance Society, Moscow, from 47.4% to 97.2%,
the acquisition of a 100.0% participation in Selecta AG, Muntelier,
the acquisition of a 100.0% participation in Commerce Assurance Bhd., Kuala Lumpur,
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
the acquisition of 100.0% participation in MAN Roland Druckmaschinen AG, Offenbach,Insurance Company “Progress Garant”, Moscow,
the acquisition of a 100.0% participation in SC Tour Michelet, Paris,
the acquisition of a 100.0% participation in Insurance Company JTS Insurance Company “ATF POLICY”, Almaty,
the acquisition of 100.0% participation in Home & Legacy Limited, London,United Mercantile Agencies, Inc., Kentucky.
the acquisition of 100.0% interest in 1. Pensionssparkasse, a.s., Bratislava,2007
increasingThe reclassifications affect the interest in PremierLine Direct Ltd., Lancaster, from 20.0%goodwill of Selecta AG, Muntelier as this subsidiary was reclassified to 100.0%,disposal groups held for sale.
increasing the interest in Ann Arbor Annuity Exchange Inc., Ann Arbor, from 40.0% to 100.0%,
increasing the interest in Roster Financial LLC, Quincy, from 49.0% to 100.0%.
2006
The reclassification affects intangible assets of Allianz-SlovenskáAllianz 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 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 2006,2007, 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, the 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, three cash generating units in the Banking segment one cash generating unit in the Asset Management segment and one cash generating unit in the Corporate segment. In addition,The goodwill of Dresdner Bank and the brand name “Dresdner Bank” hashave been allocated to two cash generating units in the Banking segment and to one cash generating unit in the Asset Management segment.
The groups of cash generating units of the Property-Casualty segment are: Insurance Germany;Germany,Austria & Switzerland; Europe I, including Italy, Spain, Portugal Switzerland, Austria and Greece; Europe II, including France, Netherlands, Belgium, Luxemburg and Africa; South America; Asia Pacific & Middle East; Eastern Europe; Insurance Anglo, BrokerNAFTA Markets & Global Lines, including United Kingdom, Ireland, and Australia; NAFTA Markets, including theAustralia, United States and Mexico; Asia Pacific; Eastern Europe; Specialty Lines I, including Allianz Global Corporate & Specialty and Specialty Lines II, including Credit Insurance, Travel Insurance and Assistance Services.
The cash generating units of the Life/Health segment are: Insurance Germany, Life;Austria & Switzerland; Insurance Germany Health; Europe I,I; including Italy, Spain, Portugal Switzerland, Austria and Greece; Europe II, including France, Netherlands, Belgium, Luxemburg and South America;Africa; Asia Pacific & Middle East and Insurance Anglo NAFTA Markets & Global Lines, including the United States;Kingdom, Ireland, Australia, United States and Asia Pacific.Mexico.
The cash generating units of the Banking segment are Private & BusinessCorporate Clients; Corporate & Investment Banking and Corporate Other 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 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 and Banking segments andas well as for the Asset Management, Insurance 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 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
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
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 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 consistent with the parameters used in the Allianz Group’s planning and controlling process, specifically those utilized in the calculation of Economic Value Added.
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 of Banking cash generating unit as well as Asset Management cash generating units due to changes in assumptions regarding cost income rations were analyzed. For all cash generating units respective capitalized earnings value sensitivities in combination with fair value analysis still exceeded respective carrying values.
For all cash generating units in the Life/Health segment, with the exception of Insurance Germany Health, the Market Consistent Embedded Value, specifically Appraisal Value, approach is utilized to determine the value in use. The Market Consistent Embedded value is an industry-specific valuation method 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.
Sensitivity analysis with regard to considered new business values are performed. For all Life cash generating units, respective Appraisal Value sensitivities still exceeded respective carrying values.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
The carrying amounts of goodwill and brand names allocated to Allianz Group’s cash generating units as of December 31, 20062007 and 20052006 are as follows:
| As of December 31,
| | 2006
| | 2005
| | 2007 | | 2006 |
| | | 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 | | — | |
Insurance Germany, Austria & Switzerland | | | 277 | | — | | 277 | | — |
Europe I | | 123 | | — | | 123 | | — | | 90 | | — | | 90 | | — |
Europe II | | 632 | | — | | 632 | | — | | 638 | | — | | 611 | | — |
NAFTA Markets | | 115 | | — | | 115 | | — | |
Asia Pacific | | 31 | | — | | 31 | | — | |
South America | | | 21 | | — | | 21 | | — |
Asia Pacific & Middle East | | | 79 | | — | | 31 | | — |
Eastern Europe | | 108 | | — | | 71 | | — | | 679 | | 20 | | 108 | | — |
Anglo Broker Markets | | 304 | | — | | 200 | | — | |
Insurance Anglo, NAFTA Markets & Global Lines | | | 410 | | — | | 419 | | — |
Specialty Lines I | | 5 | | — | | 5 | | — | | 7 | | — | | 5 | | — |
Specialty Lines II | | 19 | | — | | 20 | | — | | 27 | | — | | 19 | | — |
Subtotal | | 1,580 | | — | | 1,440 | | — | | 2,228 | | 20 | | 1,581 | | — |
Life/Health | | | | | | | | | | | | | | | | |
Insurance Germany Life | | 634 | | — | | 634 | | — | |
Insurance Germany, Austria & Switzerland | | | 554 | | — | | 554 | | — |
Insurance Germany Health | | 325 | | — | | 325 | | — | | 325 | | — | | 325 | | — |
Europe I | | 132 | | — | | 132 | | — | | 43 | | — | | 43 | | — |
Europe II | | 538 | | — | | 538 | | — | | 538 | | — | | 538 | | — |
NAFTA Markets | | 436 | | — | | 405 | | — | |
Asia Pacific | | 320 | | — | | 320 | | — | |
Asia Pacific & Middle East | | | 320 | | — | | 320 | | — |
Insurance Anglo, NAFTA Markets & Global Lines | | | 425 | | — | | 436 | | — |
Subtotal | | 2,385 | | — | | 2,354 | | — | | 2,205 | | — | | 2,216 | | — |
Banking | | | | | | | | | | | | | | | | |
Private & Business Clients | | 1,391 | | 377 | | 1,390 | | 377 | |
Corporate & Investment Banking | | 183 | | 279 | | 183 | | 279 | |
Private & Corporate | | | 1,479 | | 656 | | 1,482 | | 656 |
Investment Banking | | | 183 | | — | | 183 | | — |
Other Banking | | 52 | | — | | 52 | | — | | 52 | | — | | 52 | | — |
Subtotal | | 1,626 | | 656 | | 1,625 | | 656 | | 1,714 | | 656 | | 1,717 | | 656 |
Asset Management | | 6,272 | | 61 | | 6,604 | | 84 | | 6,165 | | 61 | | 6,486 | | 61 |
Corporate | | | | | | | | | | 141 | | — | | 144 | | — |
Private Equity | | 144 | | — | | — | | — | |
Subtotal | | 144 | | — | | — | | — | |
| | |
| |
| |
| |
| | | | | | | | |
Total | | 12,007 | | 717 | | 12,023 | | 740 | | 12,453 | | 737 | | 12,144 | | 717 |
| | |
| |
| |
| |
| | | | | | | | |
Brand name
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.
14 Financial liabilities carried at fair value through income
| As of December 31,
| | 2006
| | 2005
| | 2007 | | 2006 |
| | | € mn | | € mn | | € mn | | € mn |
Financial liabilities held for trading | | | | | | | | |
Obligations to deliver securities | | 39,951 | | 49,029 | | 34,795 | | 39,951 |
Derivative financial instruments | | 27,823 | | 28,543 | | 76,819 | | 69,946 |
Other trading liabilities | | 10,988 | | 8,820 | | 12,469 | | 10,988 |
| | |
| |
| | | | |
Subtotal | | 78,762 | | 86,392 | | 124,083 | | 120,885 |
Financial liabilities designated at fair value through income | | 937 | | 450 | | 1,970 | | 937 |
| | |
| |
| | | | |
Total | | 79,699 | | 86,842 | | 126,053 | | 121,822 |
| | |
| |
| | | | |
As of December 31, 2007, the carrying amount of financial liabilities designated at fair value through income was €63 mn lower (2006: €14 mn lower) than the contractually required payment at maturity. The amount of the change in fair value attributable to changes in credit risk for the year ended December 31, 2007 was €10 mn (2006: €(4) mn) and €6 mn (2006: €(4) mn) cumulatively.
The change in fair value of financial liabilities designated at fair value through income attributable to changes in credit risk has been calculated as the amount of change in fair value that is not attributable to changes in market conditions, but has been caused by a change in the entities own credit spread.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
15 Liabilities to banks and customers
| | | | 2006
| | 2005
| | 2007 | | 2006 |
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 | | 11,204 | | 60,443 | | 71,647 | | 18,216 | | 68,677 | | 86,893 |
Savings deposits | | — | | 5,421 | | 5,421 | | — | | 5,608 | | 5,608 | | — | | 5,304 | | 5,304 | | — | | 5,421 | | 5,421 |
Term deposits and certificates of deposit | | 68,429 | | 50,380 | | 118,809 | | 73,189 | | 45,968 | | 119,157 | | 64,129 | | 72,938 | | 137,067 | | 68,429 | | 50,380 | | 118,809 |
Repurchase agreements | | 68,189 | | 49,403 | | 117,592 | | 50,850 | | 39,156 | | 90,006 | | 50,444 | | 42,145 | | 92,589 | | 77,002 | | 62,796 | | 139,798 |
Collateral received from securities lending transactions | | 19,914 | | 8,703 | | 28,617 | | 11,369 | �� | 7,908 | | 19,277 | | 16,235 | | 4,729 | | 20,964 | | 17,493 | | 4,405 | | 21,898 |
Other | | 876 | | 2,870 | | 3,746 | | 2,015 | | 2,095 | | 4,110 | | 5,513 | | 3,410 | | 8,923 | | 876 | | 2,870 | | 3,746 |
| | |
| |
| |
| |
| |
| |
| | | | | | | | | | | | |
Total | | 175,624 | | 185,454 | | 361,078 | | 151,957 | | 158,359 | | 310,316 | | 147,525 | | 188,969 | | 336,494 | | 182,016 | | 194,549 | | 376,565 |
| | |
| |
| |
| |
| |
| |
| | | | | | | | | | | | |
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, 2007 | | | 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 | | 108,964 | | 24,153 | | 7,647 | | 2,532 | | 4,229 | | 147,525 |
Liabilities to customers | | 165,704 | | 10,547 | | 1,997 | | 3,021 | | 4,185 | | 185,454 | | 187,961 | | 386 | | 397 | | 21 | | 204 | | 188,969 |
| | |
| |
| |
| |
| |
| |
| | | | | | | | | | | | |
Total | | 307,929 | | 33,323 | | 5,389 | | 5,748 | | 8,689 | | 361,078 | | 296,925 | | 24,539 | | 8,044 | | 2,553 | | 4,433 | | 336,494 |
| | |
| |
| |
| |
| |
| |
| | | | | | | | | | | | |
Liabilities to banks and customers by type of customer and geographic region
| As of December 31,
| | Germany
| | Other
countries
| | Total
| |
| | | € mn | | € mn | | € mn | | 2007 | | 2006 |
2006 | | |
| | | | Germany | | Other
countries | | Total | | Germany | | Other
countries | | Total |
| | | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn |
Liabilities to banks | | 54,546 | | 121,078 | | 175,624 | | 46,137 | | 101,388 | | 147,525 | | 54,546 | | 127,470 | | 182,016 |
Liabilities to customers | | | | | | | | | | | | | |
Corporate customers | | 48,332 | | 92,879 | | 141,211 | | 55,935 | | 75,644 | | 131,579 | | 48,332 | | 101,974 | | 150,306 |
Public authorities | | 1,886 | | 5,994 | | 7,880 | | 5,593 | | 6,894 | | 12,487 | | 1,886 | | 5,994 | | 7,880 |
Private customers | | 28,438 | | 7,925 | | 36,363 | | 34,284 | | 10,619 | | 44,903 | | 28,438 | | 7,925 | | 36,363 |
Subtotal | | 78,656 | | 106,798 | | 185,454 | | 95,812 | | 93,157 | | 188,969 | | 78,656 | | 115,893 | | 194,549 |
| | |
| |
| |
| | | | | | | | | | | | |
Total | | 133,202 | | 227,876 | | 361,078 | | 141,949 | | 194,545 | | 336,494 | | 133,202 | | 243,363 | | 376,565 |
| | |
| |
| |
| | | | | | | | | | | | |
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, 2006,2007, liabilities to customers include €33,302€27,091 mn (2005: €30,049(2006: €33,302 mn) of noninterest bearing deposits.
16 Unearned premiums
| As of December 31,
| | 2006
| | 2005
| | | 2007 | | 2006 |
| | | € mn | | € mn | | | € mn | | € mn |
Property-Casualty | | 12,994 | | 12,945 | | | 13,163 | | | 12,994 |
Life/Health | | 1,874 | | 1,580 | | | 1,858 | | | 1,874 |
Consolidation adjustments | | — | | (1 | ) | |
Consolidation | | | (1 | ) | | — |
| | |
| |
|
| | | | | |
Total | | 14,868 | | 14,524 | | | 15,020 | | | 14,868 |
| | |
| |
|
| | | | | |
17 Reserves for loss and loss adjustment expenses
| As of December 31,
| | 2006
| | 2005
| | | 2007 | | 2006 | |
| | | € mn | | € mn | | | € mn | | € mn | |
Property-Casualty | | 58,664 | | | 60,259 | | | 56,943 | | | 58,664 | |
Life/Health | | 6,804 | | | 6,806 | | | 6,773 | | | 6,804 | |
Consolidation adjustments | | (4 | ) | | (60 | ) | |
Consolidation | | | (10 | ) | | (4 | ) |
| | |
|
| |
|
| | | | | | |
Total | | 65,464 | | | 67,005 | | | 63,706 | | | 65,464 | |
| | |
|
| |
|
| | | | | | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Changes in the reserves for loss and loss adjustment expenses for the Property-Casualty segment
| | | | 2006
| | 2005
| | 2004
| | | 2007 | | 2006 | | 2005 | |
| | | 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 | | | 58,664 | | | (9,333 | ) | | 49,331 | | | 60,259 | | | (10,604 | ) | | 49,655 | | | 55,528 | | | (10,049 | ) | | 45,479 | |
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 | | | 29,839 | | | (2,994 | ) | | 26,845 | | | 28,214 | | | (2,573 | ) | | 25,641 | | | 30,111 | | | (3,580 | ) | | 26,531 | |
Prior year | | (1,186 | ) | | 217 | | | (969 | ) | | (1,633 | ) | | 433 | | | (1,200 | ) | | (1,293 | ) | | 836 | | | (457 | ) | |
Prior years | | | (1,708 | ) | | 348 | | | (1,360 | ) | | (1,186 | ) | | 217 | | | (969 | ) | | (1,633 | ) | | 433 | | | (1,200 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | 27,028 | | | (2,356 | ) | | 24,672 | | | 28,478 | | | (3,147 | ) | | 25,331 | | | 27,400 | | | (2,129 | ) | | 25,271 | | | 28,131 | | | (2,646 | ) | | 25,485 | | | 27,028 | | | (2,356 | ) | | 24,672 | | | 28,478 | | | (3,147 | ) | | 25,331 | |
Loss and loss adjustment expenses paid | | | | | | | | | | | | | | | | | | | |
Current year | | (12,436 | ) | | 675 | | | (11,761 | ) | | (12,742 | ) | | 861 | | | (11,881 | ) | | (12,290 | ) | | 845 | | | (11,445 | ) | | (13,749 | ) | | 1,118 | | | (12,631 | ) | | (12,436 | ) | | 675 | | | (11,761 | ) | | (12,742 | ) | | 861 | | | (11,881 | ) |
Prior year | | (14,696 | ) | | 2,455 | | | (12,241 | ) | | (13,284 | ) | | 2,568 | | | (10,716 | ) | | (14,384 | ) | | 2,576 | | | (11,808 | ) | |
Prior years | | | (14,206 | ) | | 1,952 | | | (12,254 | ) | | (14,696 | ) | | 2,455 | | | (12,241 | ) | | (13,284 | ) | | 2,568 | | | (10,716 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | (27,132 | ) | | 3,130 | | | (24,002 | ) | | (26,026 | ) | | 3,429 | | | (22,597 | ) | | (26,674 | ) | | 3,421 | | | (23,253 | ) | | (27,955 | ) | | 3,070 | | | (24,885 | ) | | (27,132 | ) | | 3,130 | | | (24,002 | ) | | (26,026 | ) | | 3,429 | | | (22,597 | ) |
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) | | | (2,022 | ) | | 666 | | | (1,356 | ) | | (1,491 | ) | | 497 | | | (994 | ) | | 2,278 | | | (837 | ) | | 1,441 | |
Changes in the consolidated subsidiaries of the Allianz Group | | | 125 | | | (23 | ) | | 102 | | | — | | | — | | | — | | | 1 | | | — | | | 1 | |
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
As of December 31, | | 58,664 | | | (9,333 | ) | | 49,331 | | | 60,259 | | | (10,604 | ) | | 49,655 | | | 55,528 | | | (10,049 | ) | | 45,479 | | | 56,943 | | | (8,266 | ) | | 48,677 | | | 58,664 | | | (9,333 | ) | | 49,331 | | | 60,259 | | | (10,604 | ) | | 49,655 | |
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
1) | Includes effects of foreign currency translation adjustments for loss and loss adjustment expenses for prior years claims of gross €(1,690) mn (2006: €(1,141) mn; 2005: €2,371 mn) and net of €(1,052)mn (2006: €(962) mn; 2005: €1,348 mn). |
Prior year’syears’ loss and loss adjustment expenses incurred reflects 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, 2007, the Allianz Group recorded additional income ofincomeof €1,360 mn (2006: €969 mn (2005:mn; 2005: €1,200 mn; 2004: €457 mn) with respect of losses occurring in prior years. During the year ended December 31, 2006,2007, these amounts as percentages of the net balance of the beginning of the year were 2.8% (2006: 2.0% (2005: 2.6%; 2004: 1.0%2005: 2.6%).
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
| | 2002 | | 2003 | | 2004 | | 2005 | | 2006 | | 2007 |
| | | € 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) | | | 45,466 | | | 44,683 | | | 45,479 | | | 49,655 | | | 49,331 | | | 48,677 |
Reserves for loss and loss adjustment expenses (ceded) | | | 14,588 | | | 12,067 | | | 10,049 | | | 10,604 | | | 9,333 | | | 8,266 |
Reserves for loss and loss adjustment expenses (gross) | | | 60,054 | | | 56,750 | | | 55,528 | | | 60,259 | | | 58,664 | | | 56,943 |
Paid (cumulative) as of | | | | | | | | | | | | | | |
One year later | | 15,945 | | | 16,357 | | | 14,384 | | | 13,282 | | | 14,696 | | | | 16,357 | | | 14,384 | | | 13,282 | | | 14,696 | | | 14,206 | | | |
Two years later | | 24,567 | | | 24,093 | | | 21,157 | | | 20,051 | | | | 24,093 | | | 21,157 | | | 20,051 | | | 21,918 | | | | | |
Three years later | | 29,984 | | | 29,007 | | | 26,149 | | | | 29,007 | | | 26,149 | | | 24,812 | | | | | | | |
Four years later | | 33,586 | | | 32,839 | | | | 32,839 | | | 29,859 | | | | | | | | | |
Five years later | | 36,431 | | | | 35,845 | | | | | | | | | | | |
Liability re-estimated as of | | | |
Reserves reestimated as of | | | | | | | | | | | | | |
One year later | | 58,571 | | | 56,550 | | | 54,103 | | | 56,238 | | | 57,932 | | | | 56,550 | | | 54,103 | | | 56,238 | | | 57,932 | | | 55,266 | | | |
Two years later | | 56,554 | | | 55,704 | | | 55,365 | | | 53,374 | | | | 55,704 | | | 55,365 | | | 53,374 | | | 54,270 | | | | | |
Three years later | | 56,056 | | | 57,387 | | | 53,907 | | | | 57,387 | | | 53,907 | | | 51,760 | | | | | | | |
Four years later | | 57,640 | | | 56,802 | | | | 56,802 | | | 53,068 | | | | | | | | | |
Five years later | | 57,006 | | | | 56,053 | | | | | | | | | | | |
Cumulative surplus (deficiency) | | | |
Gross surplus | | 4,877 | | | 3,252 | | | 2,843 | | | 2,154 | | | 2,327 | | | |
Gross surplus after changes in the consolidated subsidiaries of the Allianz Group | | 4,970 | | | 3,252 | | | 2,303 | | | 2,154 | | | 2,327 | | | |
Net surplus | | 3,916 | | | 833 | | | 1,522 | | | 1,772 | | | 1,931 | | | |
Net surplus after changes in the consolidated subsidiaries of the Allianz Group | | 4,005 | | | 833 | | | 1,070 | | | 1,772 | | | 1,931 | | | |
Percent | | 8.8 | % | | 1.8 | % | | 2.4 | % | | 3.9 | % | | 3.9 | % | | |
Cumulative surplus | | | | | | | | | | | | | |
Gross surplus before changes in the consolidated subsidiaries of the Allianz Group | | | 4,001 | | | 3,682 | | | 3,768 | | | 5,989 | | | 3,398 | | | |
Gross surplus1) | | | 4,001 | | | 3,142 | | | 3,768 | | | 5,989 | | | 3,398 | | | |
Net surplus before changes in the consolidated subsidiaries of the Allianz Group | | | 1,365 | | | 2,397 | | | 3,204 | | | 4,582 | | | 2,412 | | | |
Net surplus1) | | | 1,365 | | | 1,945 | | | 3,204 | | | 4,582 | | | 2,412 | | | |
Net Surplus as percentage of initial reserves | | | 3.0 | % | | 4.4 | % | | 7.0 | % | | 9.2 | % | | 4.9 | % | | |
1) | Gross/net surplus represents the cumulative surplus from re-estimating the reserves for loss and loss adjustment expenses for prior years claims and includes foreign currency translation adjustments of gross €1,690 mn (2006: €1,141 mn) and net €1,052 mn (2006: €962 mn). This leads to an effective run off result excluding effects of foreign currency translation of gross €1,708 mn (2006: €1,186 mn) and net €1,360 mn (2006: €969 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 2006 numbers refer to the surplus presented in the consolidated financial statements 2006 and not the cumulative surplus of the calendar year 2006 presented in the table above. |
Discounted loss and loss adjustment expenses
As of December 31, 20062007 and 2005,2006, the Allianz Group Property-Casualty reserves for loss and loss adjustment expenses reflected discounts of €1,466 mn and €1,377 mn, and €1,326 mn, respectively.
The discount reflected in the reserves is related to annuities for certainforcertain 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, 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
| | 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
| | 2007 | | 2006 | | 2007 | | 2006 | | 2007 | | 2006 |
| | | € mn | | € mn | | € mn | | € mn | | % | | % | | € mn | | € mn | | € mn | | € mn | | % | | % |
France | | 1,325 | | 1,404 | | 349 | | 357 | | 3.25 | | 3.25 | | 1,321 | | 1,325 | | 400 | | 349 | | 3.25 | | 3.25 |
Germany | | 504 | | 445 | | 346 | | 298 | | 2.75 – 4.00 | | 2.75 – 4.00 | | 559 | | 504 | | 372 | | 346 | | 2.25 – 4.00 | | 2.75 – 4.00 |
Switzerland | | 427 | | 414 | | 253 | | 237 | | 3.25 | | 3.25 | | 430 | | 427 | | 258 | | 253 | | 3.00 | | 3.25 |
United States | | 181 | | 213 | | 200 | | 230 | | 6.00 | | 6.00 | | 155 | | 181 | | 170 | | 200 | | 5.25 | | 6.00 |
United Kingdom | | 139 | | 116 | | 133 | | 110 | | 4.00 – 4.25 | | 4.00 – 4.25 | | 160 | | 139 | | 163 | | 133 | | 4.00 – 4.75 | | 4.00 – 4.25 |
Belgium | | 91 | | 91 | | 26 | | 28 | | 3.20 – 4.68 | | 4.68 | | 94 | | 91 | | 28 | | 26 | | 4.50 | | 3.20 – 4.68 |
Portugal | | 79 | | 57 | | 47 | | 44 | | 4.00 | | 4.00 | | 64 | | 79 | | 49 | | 47 | | 4.00 | | 4.00 |
Hungary | | 74 | | 67 | | 23 | | 22 | | 1.40 | | 1.40 | | 79 | | 74 | | 26 | | 23 | | 1.40 | | 1.40 |
| | |
| |
| |
| |
| |
| |
| | | | | | | | | | | | |
Total | | 2,820 | | 2,807 | | 1,377 | | 1,326 | | — | | — | | 2,862 | | 2,820 | | 1,466 | | 1,377 | | — | | — |
| | |
| |
| |
| |
| |
| |
| | | | | | | | | | | | |
18 Reserves for insurance and investment contracts
| As of December 31,
| | 2006
| | 2005
| | 2007 | | 2006 |
| | | € mn | | € mn | | € mn | | € mn |
Aggregate policy reserves | | 256,333 | | 249,012 | | 264,243 | | 256,333 |
Reserves for premium refunds | | 30,689 | | 28,510 | | 27,225 | | 30,024 |
Other insurance reserves | | 675 | | 790 | | 776 | | 675 |
| | |
| |
| | | | |
Total | | 287,697 | | 278,312 | | 292,244 | | 287,032 |
| | |
| |
| | | | |
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 | |
| | |
|
| |
|
|
| | | | |
As of December 31, | | 2007 | | 2006 |
| | | € mn | | € mn |
Traditional participating insurance contracts (SFAS 120) | | 127,502 | | 123,835 |
Long-duration insurance contracts (SFAS 60) | | 46,337 | | 45,390 |
Universal life-type insurance contracts (SFAS 97) | | 89,840 | | 86,681 |
Non unit linked investment contracts | | 564 | | 427 |
| | | | |
Total | | 264,243 | | 256,333 |
| | | | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Changes in aggregate policy reserves for universal-life typetraditional participating insurance contracts and long-duration insurance contracts for the years ended December 31, 2007 and 2006 were as follows:
| | | | | | | | | | | | |
| | | 2007 | | | 2006 | |
| | | 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, | | 123,835 | | | 45,390 | | | 120,967 | | | 44,624 | |
Foreign currency translation adjustments | | (104 | ) | | (755 | ) | | (119 | ) | | (356 | ) |
Changes in the consolidated subsidiaries of the Allianz Group | | — | | | 10 | | | — | | | — | |
Changes recorded in consolidated income statements | | 2,445 | | | 954 | | | 2,393 | | | 927 | |
Novation of reinsurance agreements | | — | | | — | | | (420 | ) | | — | |
Dividends allocated to policyholders | | 1,278 | | | 207 | | | 1,029 | | | 198 | |
Additions and disposals | | — | | | (2 | ) | | — | | | — | |
Other changes | | 48 | | | 533 | 1) | | (15 | ) | | (3 | ) |
| | | | | | | | | | | | |
As of December 31, | | 127,502 | | | 46,337 | | | 123,835 | | | 45,390 | |
| | | | | | | | | | | | |
1) | Mainly relating to a reclassification from reserves for premium refunds and other insurance reserves. |
Changes in aggregate policy reserves for universal life-type insurance contracts and non unit linked investment contracts for the yearyears ended December 31, 2007 and 2006 were as follows:
| | | | Universal-
life type
insurance
contracts
(SFAS 97)
| | Non unit
linked
investment
contracts
| | | 2007 | | 2006 | |
| | | € mn | | € mn | | | Universal
life-type
insurance
contracts
(SFAS 97) | | Non unit
linked
investment
contracts | | Universal
life-type
insurance
contracts
(SFAS 97) | | Non unit
linked
investment
contracts | |
As of December 31, 2005 | | 88,078 | | | 288 | | |
Reclassifications | | (4,945 | ) | | — | | |
| | |
|
| |
|
| | € mn | | € mn | | € mn | | € mn | |
As of January 1, 2006 | | 83,133 | | | 288 | | |
As of January 1, | | | 86,681 | | | 427 | | | 83,133 | | | 288 | |
Foreign currency translation adjustments | | (3,686 | ) | | (12 | ) | | (3,933 | ) | | (12 | ) | | (3,686 | ) | | (12 | ) |
Premiums collected | | 13,092 | | | 142 | | | 12,579 | | | 231 | | | 13,092 | | | 142 | |
Separation of embedded derivatives | | (543 | ) | | — | | | (473 | ) | | — | | | (543 | ) | | — | |
Interest credited | | 3,106 | | | 20 | | | 3,178 | | | 47 | | | 3,106 | | | 20 | |
Releases upon death, surrender and withdrawal | | (7,785 | ) | | (104 | ) | | (8,650 | ) | | (105 | ) | | (7,785 | ) | | (104 | ) |
Policyholder charges | | (541 | ) | | (2 | ) | | (715 | ) | | (28 | ) | | (541 | ) | | (2 | ) |
Transfers | | (95 | ) | | 95 | | |
Additions | | | 81 | | | — | | | — | | | — | |
Portfolio acquisitions and disposals | | | (37 | ) | | — | | | — | | | — | |
Reclassifications1) | | | 1,129 | | | 4 | | | (95 | ) | | 95 | |
| | |
|
| |
|
| | | | | | | | | | | | |
As of December 31, 2006 | | 86,681 | | | 427 | | |
As of December 31, | | | 89,840 | | | 564 | | | 86,681 | | | 427 | |
| | |
|
| |
|
| | | | | | | | | | | | |
Changes in aggregate policy reserves and financial liabilities for unit linked contracts for the year ended December 31, 2005 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 | ) |
| | |
|
| |
| |
|
|
As of December 31, 2005 | | 120,967 | | | 39,679 | | 143,027 | |
| | |
|
| |
| |
|
|
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 | |
| | | | | | | |
|
|
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, 2006,2007, participating life business represented approximately 62% (2005:65% (2006: 62%) of the Allianz Group’s gross insurance in-force.inforce. During the year ended December 31, 2006,2007, participating policies represented approximately 66% (2005:61% (2006: 66%) of gross statutory premiums written and 63% (2005:60% (2006: 63%) of life premiums earned. As of December 31, 2006,2007, reserves for conventional participating policies were approximately 54% (2005: 53%(2006: 54%) of the Allianz Group’s consolidated aggregate policy reserves.
Reserves for premium refunds
| | | | 2006
| | 2005
| | 2004
| | 2007 | | 2006 | | 2005 | |
| | | € 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 | | 12,764 | | | 10,915 | | | 8,794 | |
Foreign currency translation adjustments | | (9 | ) | | 14 | | | 6 | | (15 | ) | | (9 | ) | | 14 | |
Changes in the consolidated subsidiaries of the Allianz Group | | — | | | — | | | 27 | |
Change | | 1,858 | | | 2,107 | | | 1,435 | |
Changes | | | 689 | | | 1,858 | | | 2,107 | |
| | | | | | | | | | |
As of December 31, | | 12,764 | | | 10,915 | | | 8,794 | | 13,438 | | | 12,764 | | | 10,915 | |
Latent reserves for premium refunds: | | |
Latent reserves for premium refunds | | | | | | | |
As of January 1, | | 17,595 | | | 12,443 | | | 8,001 | | 17,260 | | | 16,930 | | | 11,779 | |
Foreign currency translation Adjustments | | (24 | ) | | (4 | ) | | 6 | |
Foreign currency translation adjustments | | | (19 | ) | | (24 | ) | | (4 | ) |
Changes due to fluctuations in market value | | (50 | ) | | 4,094 | | | 3,771 | | (4,099 | ) | | (50 | ) | | 4,094 | |
Changes in the consolidated subsidiaries of the Allianz Group | | (491 | ) | | 6 | | | 71 | | — | | | (491 | ) | | 6 | |
Changes due to valuation differences charged (credited) to income | | 895 | | | 1,056 | | | 594 | |
Changes due to valuation differences charged to income | | | 645 | | | 895 | | | 1,055 | |
| | | | | | | | | | |
As of December 31, | | 17,925 | | | 17,595 | | | 12,443 | | 13,787 | | | 17,260 | | | 16,930 | |
| | |
|
| |
|
| |
| | | | | | | | | |
Total | | 30,689 | | | 28,510 | | | 21,237 | | 27,225 | | | 30,024 | | | 27,845 | |
| | |
|
| |
|
| |
| | | | | | | | | |
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-linkedunit linked contracts. Without consideration of policyholder 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 indexed deferred annuities. Unit-linkedUnit linked contracts generally result in the contract holder assuming investment risk. In addition, in certain markets, the Allianz Group issues group life, health, and pension contracts.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
As of December 31, 20062007 and 2005,2006, 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: | | | | | | | | | | | | | | | |
2007 | | | | | | | | | | | | | | | |
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 | | 5,907 | | 117,478 | | 17,070 | | 3 | | 134,551 | | 1,831 | | 136,382 |
Germany Health | | 857 | | 12,070 | | 3,369 | | 3 | | 15,442 | | — | | 15,442 | | 867 | | 13,339 | | 3,949 | | 4 | | 17,292 | | — | | 17,292 |
France | | 1,238 | | 41,622 | | 4,837 | | 59 | | 46,518 | | 12,430 | | 58,948 | | 1,189 | | 42,830 | | 3,603 | | 202 | | 46,635 | | 14,285 | | 60,920 |
Italy | | 1,148 | | 19,640 | | 408 | | 2 | | 20,050 | | 24,779 | | 44,829 | | 1,146 | | 19,120 | | 14 | | — | | 19,134 | | 25,682 | | 44,816 |
Switzerland | | 267 | | 5,707 | | 689 | | 117 | | 6,513 | | 558 | | 7,071 | | 238 | | 5,695 | | 610 | | 107 | | 6,412 | | 583 | | 6,995 |
Austria | | 126 | | 3,050 | | 365 | | — | | 3,415 | | 194 | | 3,609 | | 142 | | 3,195 | | 273 | | 3 | | 3,471 | | 277 | | 3,748 |
South Korea | | 786 | | 5,847 | | 58 | | — | | 5,905 | | 970 | | 6,875 | | 785 | | 5,978 | | 47 | | — | | 6,025 | | 904 | | 6,929 |
| | |
| |
| |
| |
| |
| |
| |
| | | | | | | | | | | | | | |
Subtotal | | 9,753 | | 200,039 | | 28,570 | | 184 | | 228,793 | | 40,026 | | 268,819 | | 10,274 | | 207,635 | | 25,566 | | 319 | | 233,520 | | 43,562 | | 277,082 |
| | |
| |
| |
| |
| |
| |
| |
| | | | | | | | | | | | | | |
Other Countries: | | | | | | | | | | | | | | | |
Other Countries | | | | | | | | | | | | | | | |
Belgium | | 118 | | 5,035 | | 26 | | — | | 5,061 | | 325 | | 5,386 | | 112 | | 5,327 | | 17 | | — | | 5,344 | | 302 | | 5,646 |
Spain | | 24 | | 4,637 | | 451 | | 1 | | 5,089 | | 114 | | 5,203 | | 25 | | 4,857 | | 138 | | — | | 4,995 | | 92 | | 5,087 |
Other Western and Southern Europe | | 305 | | 2,188 | | 126 | | — | | 2,314 | | 3,564 | | 5,878 | | 318 | | 1,865 | | 151 | | — | | 2,016 | | 3,819 | | 5,835 |
Eastern Europe | | 236 | | 1,465 | | 27 | | 11 | | 1,503 | | 668 | | 2,171 | | 291 | | 1,596 | | 25 | | 4 | | 1,625 | | 1,076 | | 2,701 |
United States | | 4,601 | | 32,762 | | — | | — | | 32,762 | | 15,063 | | 47,825 | | 4,394 | | 32,291 | | — | | — | | 32,291 | | 13,954 | | 46,245 |
Taiwan | | 209 | | 1,883 | | — | | — | | 1,883 | | 1,868 | | 3,751 | | 250 | | 1,841 | | — | | — | | 1,841 | | 2,710 | | 4,551 |
Other Asia-Pacific | | 131 | | 434 | | 45 | | — | | 479 | | 176 | | 655 | | 172 | | 565 | | 58 | | — | | 623 | | 529 | | 1,152 |
South America | | — | | 88 | | — | | — | | 88 | | 58 | | 146 | | — | | 93 | | — | | — | | 93 | | 12 | | 105 |
Other | | 4 | | 716 | | 7 | | 6 | | 729 | | 2 | | 731 | | 2 | | 776 | | 10 | | 5 | | 791 | | 4 | | 795 |
| | | | | | | | | | | | | | | |
Subtotal | | 5,628 | | 49,208 | | 682 | | 18 | | 49,908 | | 21,838 | | 71,746 | | 5,564 | | 49,211 | | 399 | | 9 | | 49,619 | | 22,498 | | 72,117 |
| | |
| |
| |
| |
| |
| |
| |
| | | | | | | | | | | | | | |
Total | | 15,381 | | 249,247 | | 29,252 | | 202 | | 278,701 | | 61,864 | | 340,565 | | 15,838 | | 256,846 | | 25,965 | | 328 | | 283,139 | | 66,060 | | 349,199 |
| | |
| |
| |
| |
| |
| |
| |
| | | | | | | | | | | | | | |
2005 | | | | | | | | | | | | | | | |
Countries with legal or contractual policyholder participation in insurance, investment and/or expense risk: | | | | | | | | | | | | | | | |
2006 | | | | | | | | | | | | | | | |
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 | | 5,331 | | 112,103 | | 18,235 | | 3 | | 130,341 | | 1,095 | | 131,436 |
Germany Health | | 819 | | 11,370 | | 3,049 | | 3 | | 14,422 | | — | | 14,422 | | 857 | | 12,070 | | 3,372 | | 3 | | 15,445 | | — | | 15,445 |
France | | 1,096 | | 40,987 | | 5,358 | | 67 | | 46,412 | | 9,692 | | 56,104 | | 1,238 | | 41,622 | | 4,837 | | 59 | | 46,518 | | 12,430 | | 58,948 |
Italy | | 1,175 | | 19,212 | | 963 | | 2 | | 20,177 | | 23,886 | | 44,063 | | 1,148 | | 19,640 | | 408 | | 2 | | 20,050 | | 24,779 | | 44,829 |
Switzerland | | 292 | | 5,894 | | 657 | | 129 | | 6,680 | | 464 | | 7,144 | | 267 | | 5,707 | | 689 | | 117 | | 6,513 | | 558 | | 7,071 |
Austria | | 108 | | 2,924 | | 323 | | — | | 3,247 | | 119 | | 3,366 | | 126 | | 3,050 | | 308 | | — | | 3,358 | | 194 | | 3,552 |
South Korea | | 694 | | 5,679 | | 68 | | — | | 5,747 | | 484 | | 6,231 | | 786 | | 5,847 | | 58 | | — | | 5,905 | | 970 | | 6,875 |
| | |
| |
| |
| |
| |
| |
| |
| | | | | | | | | | | | | | |
Subtotal | | 9,380 | | 194,043 | | 26,153 | | 204 | | 220,400 | | 35,326 | | 255,726 | | 9,753 | | 200,039 | | 27,907 | | 184 | | 228,130 | | 40,026 | | 268,156 |
| | |
| |
| |
| |
| |
| |
| |
| | | | | | | | | | | | | | |
Other Countries: | | | | | | | | | | | | | | | |
Other Countries | | | | | | | | | | | | | | | |
Belgium | | 93 | | 4,782 | | 62 | | — | | 4,844 | | 368 | | 5,212 | | 118 | | 5,035 | | 26 | | — | | 5,061 | | 325 | | 5,386 |
Spain | | 21 | | 4,394 | | 716 | | — | | 5,110 | | 131 | | 5,241 | | 24 | | 4,637 | | 451 | | 1 | | 5,089 | | 114 | | 5,203 |
Other Western and Southern Europe | | 321 | | 2,194 | | 44 | | — | | 2,238 | | 3,258 | | 5,496 | | 305 | | 2,188 | | 126 | | — | | 2,314 | | 3,564 | | 5,878 |
Eastern Europe | | 200 | | 1,270 | | 17 | | 10 | | 1,297 | | 289 | | 1,586 | | 236 | | 1,465 | | 27 | | 11 | | 1,503 | | 668 | | 2,171 |
United States | | 4,217 | | 32,218 | | — | | — | | 32,218 | | 13,751 | | 45,969 | | 4,601 | | 32,762 | | — | | — | | 32,762 | | 15,063 | | 47,825 |
Taiwan | | 170 | | 1,778 | | — | | — | | 1,778 | | 1,325 | | 3,103 | | 209 | | 1,883 | | — | | — | | 1,883 | | 1,868 | | 3,751 |
Other Asia-Pacific | | 107 | | 296 | | 29 | | — | | 325 | | 120 | | 445 | | 131 | | 434 | | 45 | | — | | 479 | | 176 | | 655 |
South America | | — | | 90 | | — | | 1 | | 91 | | 92 | | 183 | | — | | 88 | | — | | — | | 88 | | 58 | | 146 |
Other | | 41 | | 1,127 | | 2 | | 3 | | 1,132 | | 1 | | 1,133 | | 4 | | 716 | | 7 | | 6 | | 729 | | 2 | | 731 |
| | | | | | | | | | | | | | | |
Subtotal | | 5,170 | | 48,149 | | 870 | | 14 | | 49,033 | | 19,335 | | 68,368 | | 5,628 | | 49,208 | | 682 | | 18 | | 49,908 | | 21,838 | | 71,746 |
| | |
| |
| |
| |
| |
| |
| |
| | | | | | | | | | | | | | |
Total | | 14,550 | | 242,192 | | 27,023 | | 218 | | 269,433 | | 54,661 | | 324,094 | | 15,381 | | 249,247 | | 28,589 | | 202 | | 278,038 | | 61,864 | | 339,902 |
| | |
| |
| |
| |
| |
| |
| |
| | | | | | | | | | | | | | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
A significantmajority 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 legal or contractual minimum participation of contract holders in the profits of the insurance company issuing the contract. In particular, Germany, SwitzerlandSwitzer-land and Austria, which comprise approximately 42%47% and 41%46%, of the Allianz Group’s reserves for insurance and investment contracts as of December 31, 20062007 and 20052006 respectively, include a significantsubstantial level of policyholder participation in all sources of profit including mortality/morbidity, investment and expense. As a result of this policyholderpoli-cyholder 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 insurance 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-linkedunit 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 by country iscan be summarized as follows:
| As of December 31,
| | 2006
| | 2005
| | 2007 | | 2006 |
| | | % | | % | | % | | % |
Country | | | | | |
Country1) | | | | | |
Germany Life | | 3.44 | | 3.49 | | 3.41 | | 3.45 |
France | | 2.44 | | na | | 1.99 | | 2.44 |
Italy | | 2.50 | | 2.85 | | 2.49 | | 2.50 |
Switzerland | | 2.86 | | 3.05 | | 2.87 | | 2.86 |
Spain | | 5.38 | | 5.39 | | 5.05 | | 5.38 |
Netherlands | | 0.82 | | 0.84 | |
Austria | | 3.11 | | 3.10 | | 3.00 | | 3.11 |
Belgium | | 4.06 | | 4.18 | | 3.95 | | 4.06 |
United States | | — | | — | |
South Korea | | 6.06 | | 6.34 | | 5.29 | | 6.06 |
Taiwan | | 3.74 | | 4.84 | | 3.61 | | 3.74 |
1) | The life operations of the Allianz Group in the United States only grant minimum guaranteed interest rates on approximately 15% of their existing business, the weighted average minimum interest rate for these contracts as of December 31, 2007 is 2.7% (2006: 2.7%). |
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, 20062007 and 2005,2006, 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.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
19 Financial liabilities for unit linked contracts
| As of December 31,
| | 2006
| | 2005
| | 2007 | | 2006 |
| | | € mn | | € mn | | € mn | | € mn |
Unit linked insurance contracts | | 36,296 | | 30,320 | | 39,323 | | 36,296 |
Unit linked investment contracts | | 25,568 | | 24,341 | | 26,737 | | 25,568 |
| | |
| |
| | | | |
Total | | 61,864 | | 54,661 | | 66,060 | | 61,864 |
| | |
| |
| | | | |
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 yearyears ended December 31, 2007 and 2006 were as follows:
| | | | Unit
linked
insurance
contracts
| | Unit
linked investment
contracts
| | | 2007 | | 2006 | |
| | | € mn | | € mn | | | Unit linked
insurance
contracts | | Unit linked
investment
contracts | | Unit linked
insurance
contracts | | Unit linked
investment
contracts | |
As of January 1, 2006 | | 30,320 | | | 24,341 | | |
| | | | € mn | | € mn | | € mn | | € mn | |
As of January 1, | | | 36,296 | | | 25,568 | | | 30,320 | | | 24,341 | |
Foreign currency translation adjustments | | (1,765 | ) | | (6 | ) | | (1,954 | ) | | (2 | ) | | (1,765 | ) | | (6 | ) |
Premiums collected | | 8,313 | | | 5,987 | | | 9,381 | | | 7,903 | | | 8,313 | | | 5,987 | |
Interest credited | | 3,013 | | | 705 | | | 1,508 | | | (149 | ) | | 3,013 | | | 705 | |
Releases upon death, surrender, and withdrawal | | (2,584 | ) | | (5,257 | ) | |
Releases upon death, surrender and withdrawal | | | (3,740 | ) | | (6,286 | ) | | (2,584 | ) | | (5,257 | ) |
Policyholder charges | | (914 | ) | | (289 | ) | | (1,130 | ) | | (222 | ) | | (914 | ) | | (289 | ) |
Transfer | | (87 | ) | | 87 | | |
Portfolio acquisitions and disposals | | | 20 | | | — | | | — | | | — | |
Reclassifications1) | | | (1,058 | ) | | (75 | ) | | (87 | ) | | 87 | |
| | |
|
| |
|
| | | | | | | | | | | | |
As of December 31, 2006 | | 36,296 | | | 25,568 | | |
As of December 31, | | | 39,323 | | | 26,737 | | | 36,296 | | | 25,568 | |
| | |
|
| |
|
| | | | | | | | | | | | |
1) | The reclassifications mainly relate to insurance contracts when policies transfer from a separate account contract to a universal life-type contract. |
20 Other liabilities
| As of December 31,
| | 2006
| | 2005
| | 2007 | | 2006 |
| | | € mn | | € mn | | € mn | | € mn |
Payables | | | | | | | | |
Policyholders | | 5,322 | | 6,295 | | 4,806 | | 5,322 |
Reinsurance | | | 1,844 | | 1,868 |
Agents | | 1,494 | | 1,764 | | 1,743 | | 1,494 |
Reinsurance | | 1,868 | | 1,648 | |
Social security | | 219 | | 176 | |
| | | | | |
Subtotal | | 8,903 | | 9,883 | | 8,393 | | 8,684 |
Payables for social security | | | 263 | | 219 |
Tax payables | | | | | | | | |
Income tax | | 2,076 | | 2,150 | | 2,563 | | 2,076 |
Other | | 968 | | 1,004 | | 1,012 | | 968 |
| | | | | |
Subtotal | | 3,044 | | 3,154 | | 3,575 | | 3,044 |
Accrued interest and rent | | 793 | | 513 | | 779 | | 793 |
Unearned income | | | | | | | | |
Interest and rent | | 2,645 | | 2,257 | | 3,453 | | 2,645 |
Other | | 279 | | 236 | | 351 | | 279 |
| | | | | |
Subtotal | | 2,924 | | 2,493 | | 3,804 | | 2,924 |
| | |
| |
| |
Provisions | | | | | | | | |
Pensions and similar obligations | | 4,120 | | 5,594 | | 4,184 | | 4,120 |
Employee related | | 3,120 | | 2,737 | | 2,956 | | 3,120 |
Share-based compensation | | 1,898 | | 1,703 | | 1,761 | | 1,898 |
Restructuring plans | | 887 | | 186 | | 541 | | 887 |
Loan commitments | | 261 | | 117 | | 201 | | 261 |
Other provisions | | 1,943 | | 1,947 | | 1,991 | | 1,943 |
| | | | | |
Subtotal | | 12,229 | | 12,284 | | 11,634 | | 12,229 |
Deposits retained for reinsurance ceded | | 5,716 | | 7,105 | | 3,227 | | 5,716 |
Derivative financial instruments used for hedging purposes that meet the criteria for hedge accounting and firm commitments | | 907 | | 1,019 | | 2,210 | | 907 |
Financial liabilities for puttable equity instruments | | 3,750 | | 3,137 | | 4,162 | | 3,750 |
Disposal groups held for sale | | — | | 1,389 | | 1,293 | | — |
Other liabilities | | 11,498 | | 10,338 | | 9,984 | | 11,498 |
| | | | | |
Total | | 49,764 | | 51,315 | | 49,324 | | 49,764 |
| | |
| |
| | | | |
Other liabilities due within one year amounted to €40,839€39,444 mn (2005: €43,635(2006: €40,839 mn) and those due after more than one year totaled €8,925€9,880 mn (2005: €7,680(2006: €8,925 mn).
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
21 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,
2007 | | As of
December 31,
2006 |
| | | 2008 | | | 2009 | | | 2010 | | | 2011 | | | 2012 | | | Thereafter | | | |
| | | € mn1) | | | € mn1) | | | € mn1) | | | € mn1) | | | € mn1) | | | € mn1) | | | € mn | | € mn |
Allianz SE2) | | | | | | | | | | | | | | | | | | | | | | |
Senior bonds | | | | | | | | | | | | | | | | | | | | | | |
Fixed rate | | 1,631 | | | — | | | — | | | — | | | 893 | | | 1,483 | | | 4,007 | | 6,195 |
Contractual interest rate | | 5.00 | % | | — | | | — | | | — | | | 5.63 | % | | 4.00 | % | | — | | — |
Floating rate | | — | | | 272 | | | — | | | — | | | — | | | — | | | 272 | | — |
Current interest rate | | — | | | 5.23 | % | | — | | | — | | | — | | | — | | | — | | — |
| | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | 1,631 | | | 272 | | | — | | | — | | | 893 | | | 1,483 | | | 4,279 | | 6,195 |
Exchangeable bonds | | | | | | | | | | | | | | | | | | | | | | |
Fixed rate | | 450 | | | — | | | — | | | — | | | — | | | — | | | 450 | | 1,262 |
Contractual interest rate | | 0.75 | % | | — | | | — | | | — | | | — | | | — | | | — | | — |
Money market securities | | | | | | | | | | | | | | | | | | | | | | |
Fixed rate | | 2,929 | | | — | | | — | | | — | | | — | | | — | | | 2,929 | | 870 |
Contractual interest rate | | 4.19 | % | | — | | | — | | | — | | | — | | | — | | | — | | — |
| | | | | | | | | | | | | | | | | | | | | | |
Total Allianz SE2) | | 5,010 | | | 272 | | | — | | | — | | | 893 | | | 1,483 | | | 7,658 | | 8,327 |
Banking subsidiaries | | | | | | | | | | | | | | | | | | | | | | |
Senior bonds | | | | | | | | | | | | | | | | | | | | | | |
Fixed rate | | 5,206 | | | 2,807 | | | 2,031 | | | 270 | | | 484 | | | 638 | | | 11,436 | | 14,608 |
Contractual interest rate | | 6.50 | % | | 4.61 | % | | 4.45 | % | | 5.64 | % | | 4.57 | % | | 5.65 | % | | — | | — |
Floating rate | | 2,009 | | | 1,122 | | | 793 | | | 913 | | | 1,191 | | | 647 | | | 6,675 | | 8,729 |
Current interest rate | | 5.16 | % | | 4.35 | % | | 4.90 | % | | 4.48 | % | | 4.86 | % | | 4.24 | % | | — | | — |
| | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | 7,215 | | | 3,929 | | | 2,824 | | | 1,183 | | | 1,675 | | | 1,285 | | | 18,111 | | 23,337 |
Money market securities | | | | | | | | | | | | | | | | | | | | | | |
Fixed rate | | 16,289 | | | — | | | — | | | — | | | — | | | — | | | 16,289 | | 17,677 |
Contractual interest rate | | 4.50 | % | | — | | | — | | | — | | | — | | | — | | | — | | — |
Floating rate | | 9 | | | — | | | — | | | — | | | — | | | — | | | 9 | | 4,978 |
Current interest rate | | 6.80 | % | | — | | | — | | | — | | | — | | | — | | | — | | — |
| | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | 16,298 | | | — | | | — | | | — | | | — | | | — | | | 16,298 | | 22,655 |
| | | | | | | | | | | | | | | | | | | | | | |
Total banking subsidiaries | | 23,513 | | | 3,929 | | | 2,824 | | | 1,183 | | | 1,675 | | | 1,285 | | | 34,409 | | 45,992 |
All other subsidiaries | | | | | | | | | | | | | | | | | | | | | | |
Certificated liabilities | | | | | | | | | | | | | | | | | | | | | | |
Fixed rate | | — | | | — | | | — | | | — | | | — | | | 3 | | | 3 | | 4 |
Contractual interest rate | | — | | | — | | | — | | | — | | | — | | | 2.11 | % | | — | | — |
Money market securities | | | | | | | | | | | | | | | | | | | | | | |
Fixed rate | | — | | | — | | | — | | | — | | | — | | | — | | | — | | 599 |
Contractual interest rate | | — | | | — | | | — | | | — | | | — | | | — | | | — | | — |
| | | | | | | | | | | | | | | | | | | | | | |
Total all other subsidiaries | | — | | | — | | | — | | | — | | | — | | | 3 | | | 3 | | 603 |
| | | | | | | | | | | | | | | | | | | | | | |
Total | | 28,523 | | | 4,201 | | | 2,824 | | | 1,183 | | | 2,568 | | | 2,771 | | | 42,070 | | 54,922 |
| | | | | | | | | | | | | | | | | | | | | | |
(1)1)
| Except for the interest rates. The interest rates represent the weighted-average. |
(2)2)
| Includes senior bonds, 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)
22 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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|
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|
| |
|
| |
|
| |
|
| |
|
| |
| |
|
| | | | | | | | | | | | | | | | | | | | | | |
| | | Contractual Maturity Date | | | As of
December 31, | | As of
December 31, |
| | | 2008 | | | 2009 | | | 2010 | | | 2011 | | | 2012 | | | Thereafter | | | 2007 | | 2006 |
| | | € mn1) | | | € mn1) | | | € mn1) | | | € mn1) | | | € mn1) | | | € mn1) | | | € mn | | € mn |
Allianz SE2) | | | | | | | | | | | | | | | | | | | | | | |
Subordinated bonds | | | | | | | | | | | | | | | | | | | | | | |
Fixed rate | | — | | | — | | | — | | | — | | | — | | | 1,129 | | | 1,129 | | 1,164 |
Contractual interest rate | | — | | | — | | | — | | | — | | | — | | | 5.94 | % | | — | | — |
Floating rate | | — | | | — | | | — | | | — | | | — | | | 5,724 | | | 5,724 | | 5,719 |
Current interest rate | | — | | | — | | | — | | | — | | | — | | | 5.61 | % | | — | | — |
| | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | — | | | — | | | — | | | — | | | — | | | 6,853 | | | 6,853 | | 6,883 |
Participation certificates3) | | | | | | | | | | | | | | | | | | | | | | |
Floating rate | | — | | | — | | | — | | | — | | | — | | | 85 | | | 85 | | 85 |
| | | | | | | | | | | | | | | | | | | | | | |
Total Allianz SE2) | | — | | | — | | | — | | | — | | | — | | | 6,938 | | | 6,938 | | 6,968 |
Banking subsidiaries | | | | | | | | | | | | | | | | | | | | | | |
Subordinated bonds | | | | | | | | | | | | | | | | | | | | | | |
Fixed rate | | 342 | | | 297 | | | 116 | | | 20 | | | 36 | | | 1,004 | | | 1,815 | | 2,621 |
Contractual interest rate | | 5.87 | % | | 5.34 | % | | 6.31 | % | | 6.76 | % | | 5.83 | % | | 6.30 | % | | — | | — |
Floating rate | | 171 | | | 282 | | | 32 | | | 59 | | | 21 | | | 442 | | | 1,007 | | 1,048 |
Current interest rate | | 5.62 | % | | 4.70 | % | | 4.91 | % | | 5.22 | % | | 6.15 | % | | 5.24 | % | | — | | — |
| | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | 513 | | | 579 | | | 148 | | | 79 | | | 57 | | | 1,446 | | | 2,822 | | 3,669 |
Hybrid equity | | | | | | | | | | | | | | | | | | | | | | |
Fixed rate | | — | | | — | | | — | | | 500 | | | — | | | 1,929 | | | 2,429 | | 2,513 |
Contractual interest rate | | — | | | — | | | — | | | 5.79 | % | | — | | | 7.20 | % | | — | | — |
Participation certificates4) | | | | | | | | | | | | | | | | | | | | | | |
Fixed rate | | 903 | | | 51 | | | — | | | — | | | — | | | 732 | | | 1,686 | | 2,262 |
Contractual interest rate | | 7.87 | % | | 6.13 | % | | — | | | — | | | — | | | 5.39 | % | | — | | — |
| | | | | | | | | | | | | | | | | | | | | | |
Total banking subsidiaries | | 1,416 | | | 630 | | | 148 | | | 579 | | | 57 | | | 4,107 | | | 6,937 | | 8,444 |
All other subsidiaries | | | | | | | | | | | | | | | | | | | | | | |
Subordinated liabilities | | | | | | | | | | | | | | | | | | | | | | |
Fixed rate | | 60 | | | — | | | — | | | — | | | — | | | 618 | | | 678 | | 680 |
Contractual interest rate | | 6.84 | % | | — | | | — | | | — | | | — | | | 5.35 | % | | — | | — |
Floating rate | | — | | | — | | | — | | | — | | | — | | | 226 | | | 226 | | 225 |
Current interest rate | | — | | | — | | | — | | | — | | | — | | | 5.66 | % | | — | | — |
| | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | 60 | | | — | | | — | | | — | | | — | | | 844 | | | 904 | | 905 |
Hybrid equity | | | | | | | | | | | | | | | | | | | | | | |
Fixed rate | | — | | | — | | | — | | | — | | | — | | | 45 | | | 45 | | 45 |
Contractual interest rate | | — | | | — | | | — | | | — | | | — | | | 5.58 | % | | — | | — |
| | | | | | | | | | | | | | | | | | | | | | |
Total all other subsidiaries | | 60 | | | — | | | — | | | — | | | — | | | 889 | | | 949 | | 950 |
| | | | | | | | | | | | | | | | | | | | | | |
Total | | 1,476 | | | 630 | | | 148 | | | 579 | | | 57 | | | 11,934 | | | 14,824 | | 16,362 |
| | | | | | | | | | | | | | | | | | | | | | |
(1)1)
| Except for interest rates. Interest rates represent the weighted-average. |
(2)2)
| Includes subordinated bonds issued by Allianz Finance B.V. and Allianz Finance II B.V. and guaranteed by Allianz SE. |
(3)3)
| 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, 2007.2008. 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 recall of the participation certificate. In lieu of redemption for cash, Allianz SE may offer 10 Allianz SE ordinary shares per 8 profit participation certificates. |
(4)4)
| 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. |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
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 | |
| | |
|
| |
|
|
Subtotal | | 50,481 | | | 39,487 | |
Minority interests | | 6,409 | | | 7,615 | |
| | |
|
| |
|
|
Total | | 56,890 | | | 47,102 | |
| | |
|
| |
|
|
| | | | | | |
As of December 31, | | 2007 | | | 2006 | |
| | | € mn | | | € mn | |
Shareholders’ equity | | | | | | |
Issued capital | | 1,152 | | | 1,106 | |
Capital reserve | | 27,169 | | | 24,292 | |
Revenue reserves | | 12,790 | | | 13,511 | |
Treasury shares | | (172 | ) | | (441 | ) |
Foreign currency translation adjustments | | (3,656 | ) | | (2,210 | ) |
Unrealized gains and losses (net)1) | | 10,470 | | | 13,392 | |
Subtotal | | 47,753 | | | 49,650 | |
Minority interests | | 3,628 | | | 7,180 | |
Total | | 51,381 | | | 56,830 | |
(1)1)
| As of December 31, 20062007 includes €140€175 mn related to cash flow hedges (2005: €139(2006: €140 mn). |
Issued capital
Issued capital at December 31, 20062007 amounted to €1,106,304,000€1,152,384,000 divided into 432,150,000450,150,000 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, 2006,2007, 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, 2006,2007, Allianz SE had €12,473,943 (4,872,634€9,848,297 (3,846,991 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, 2006,2007, Allianz SE had an unissued conditional capital in the amount of €250,000,000 (97,656,250 shares), authorized in 2006 and in the amount of €5,632,000 (2,200,000 shares), authorized in 2004. A capital increase out of unissued conditional authorized capital which will be carriedbecarried 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
| | | 2007 | | 2006 | | 2005 |
Issued shares outstanding as of January 1, | | 405,298,397 | | | 366,859,799 | | 366,472,698 | | | 429,336,291 | | | 405,298,397 | | | 366,859,799 |
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 | | — | | | — | | | — | | | 9,000,000 |
Capital increase for cash | | — | | | 10,116,850 | | — | | | — | | | — | | | 10,116,850 |
Capital increase for employee shares | | 986,741 | | | 1,148,150 | | 1,056,250 | | | 1,025,643 | | | 986,741 | | | 1,148,150 |
Change in treasury shares held for non-trading purposes | | (57,232 | ) | | 17,165,510 | | (2,861 | ) | |
Change in treasury shares held for non- trading purposes | | | (86,431 | ) | | (57,232 | ) | | 17,165,510 |
Change in treasury shares held for trading purposes | | (2,014,874 | ) | | 1,008,088 | | (666,288 | ) | | 1,660,788 | | | (2,014,874 | ) | | 1,008,088 |
| | | | | | | | | |
Issued shares outstanding as of December 31, | | 429,336,291 | | | 405,298,397 | | 366,859,799 | | | 448,910,648 | | | 429,336,291 | | | 405,298,397 |
Treasury shares | | 2,813,709 | | | 741,603 | | 18,915,201 | | | 1,239,352 | | | 2,813,709 | | | 741,603 |
| | | | | | | | | |
Total number of issued shares | | 432,150,000 | | | 406,040,000 | | 385,775,000 | | | 450,150,000 | | | 432,150,000 | | | 406,040,000 |
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|
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|
| | | | | | | | |
In November 2006, 986,741 (2005: 1,148,150)2007, 1,025,643 (2006: 986,741) shares were issued at a price of €131.00 (2005: €103.50)€154.07 (2006: €131.00) per share, enabling employees of Allianz Group subsidiaries in Germany and abroad to purchase 929,509 (2005: 1,144,196)881,980 (2006: 929,509) shares at prices ranging from €91.70 (2005: €72.45)€107.85 (2006: €91.70) to €111.35 (2005: €87.98)€128.39 (2006: €111.35) per share. The remaining 57,232 (2005: 3,954)143,663 (2006: 57,232) shares were warehoused and booked as treasury shares for further subscriptions by employees in the context of the employee share purchase plan in 2007.2008. As a result, issued capital increased by €3 mn and capital reserve increased by €126€155 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.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
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,detachable warrants, 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. On February 15, 2008 the remaining 2.2 mn warrants were exercised.
All shares issued during the years ended December 31, 2007, 2006 2005 and 20042005 are qualifying shares from the beginning of the year of issue.
Dividends
For the year ended December 31, 2006,2007, the Board of Management will propose to shareholders at the Annual General Meeting the distribution of a dividend of €3.80€5.50 per qualifying share. During the years ended December 31, 20052006 and 2004,2005, Allianz SE paid a dividend of €2.00€3.80 and €1.75,€2.00, respectively, per qualifying share.
Treasury shares
The Annual General Meeting on May 3, 2006 (2005:2, 2007 (2006: May 4)3), 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, 20062007 the authorization was used to acquire 57,232143,663 (2006: 57,232) shares of Allianz SE.
In order to enable Dresdner Bank Group to trade in shares of Allianz SE, the Annual General Meeting onMeetingon May 3, 20062, 2007 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, 2006,2007, in accordance with this authorization, the credit institutions of the Allianz Group purchased 44,741,900 (2005: 83,202,188)24,780,668 (2006: 44,741,900) of Allianz SE’s shares at an average price of €131.45€131.55 per share (2005: €104.66)(2006: €131.45), which included previously held Allianz SE shares. During the year ended December 31, 2006, 42,180,9352007, 25,348,169 shares (2005: 87,652,805)(2006: 42,180,935) were disposed of holdings at an average price of €132.76€127.39 per share (2005: €105.06)(2006: €132.76). During
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
the year ended December 31, 2006,2007, the gainslosses arising from treasury share transactions and in consideration of the holding, were €29€110 mn (2005: losses of €31(2006: gains €29 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 €-mn (2006: €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 | | % |
2007 | | | | | | | |
Allianz SE | | | 72 | | 567,698 | | 0.13 |
Dresdner Bank Group | | | 100 | | 671,654 | | 0.15 |
Dresdner Bank Group (obligation for written put options on Allianz SE shares) | | | — | | — | | — |
| | | | | | | |
Total | | | 172 | | 1,239,352 | | 0.28 |
| | | € mn | | | | % | | | | | | |
2006 | | | | | | | | | | | | |
Allianz SE | | 57 | | 481,267 | | 0.11 | | 57 | | 481,267 | | 0.11 |
Dresdner Bank Group | | 382 | | 2,332,442 | | 0.54 | | 382 | | 2,332,442 | | 0.54 |
Dresdner Bank Group (obligation for written put options on Allianz SE shares) | | 2 | | — | | — | | 2 | | — | | — |
| | |
| |
| |
| | | | | | |
Total | | 441 | | 2,813,709 | | 0.65 | | 441 | | 2,813,709 | | 0.65 |
| | |
| |
| |
| | | | | | |
2005 | | | | | | | |
Allianz SE | | 50 | | 424,035 | | 0.10 | |
Dresdner Bank Group | | 40 | | 317,568 | | 0.08 | |
Dresdner Bank Group (obligation for written put options on Allianz SE shares) | | 1,261 | | — | | — | |
| | |
| |
| |
| |
Total | | 1,351 | | 741,603 | | 0.18 | |
| | |
| |
| |
| |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
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 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”) 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, 2006,2007, 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€45.5 bn (2005: €39.3(2006: €49.5 bn) including off-balance sheet reserves(1)1), surpassing the minimum legally stipulated level by €24.4€16.6 bn (2005: €15.1(2006: €23.4 bn). This margin resulted in a preliminary cover ratio(2)2) of 194%157% at December 31, 2006 (2005: 162%2007 (2006: 190%). In 2006,2007, all Allianz Group companies also have met their local solvency requirements.
At December 31, 2006,2007, our eligible capital for the solvency margin, required for insurance groups under German law, was €54.0€50.9 bn (2005: €43.6(2006: €53.3 bn),surpassing the minimum legally stipulated level by €38.5€32.8 bn (2005: €29.4(2006: €37.9 bn). This margin resulted in preliminary cover ratio(2)2) of 349% (2005: 307%281% (2006: 345%).
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Dresdner Bank is subject to the risk-adjusted capital guidelines (or “Basle Accord”German Banking Act (“Kreditwesengesetz”) promulgated byas well as to the Basle Committee on Banking Supervision (or “BIS-rules”new Solvency Regulation (“Solvabilitäts-Verordnung”) and therefore Dresdner Bank 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 20062007 and 2005.2006.
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 |
| | | | |
As of December 31, | | 2007 | | 2006 |
| | | € mn | | € mn |
Tier I capital (core capital) | | 11,234 | | 12,469 |
Tier I & Tier II capital | | 16,964 | | 18,668 |
Tier III capital (supplementary capital) | | — | | — |
| | | | |
Total capital | | 16,964 | | 18,668 |
Risk-weighted assets—banking book | | 119,477 | | 117,355 |
Risk-weighted assets—trading book | | 3,638 | | 2,625 |
| | | | |
Total risk-weighted assets | | 123,115 | | 119,980 |
Tier I capital ratio (core capital)
in % | | 9.1 | | 10.4 |
Tier I & Tier II capital ratio
in % | | 13.8 | | 15.6 |
Total capital ratio in % | | 13.8 | | 15.6 |
F-78
(1)1)
| Effective June 2005, Dresdner Bank changedRepresents the accounting basisdifference between fair value and amortized cost of real estate held for calculationinvestment and disclosureinvestments in associates and joint ventures, net of BIS-figures from German GAAP to IFRS.deferred taxes, policyholders’ participation and minority interests.
|
2) | Represents the ratio of eligible capital to required capital. |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
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.
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.
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, 2006,2007, 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 restrictionsSuchrestrictions 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 our 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).
Minority interests
| As of December 31,
| | 2006
| | 2005
| | 2007 | | 2006 |
| | | € mn | | € mn | | € mn | | € mn |
Unrealized gains and losses | | 840 | | 1,321 | |
Unrealized gains and losses (net) | | | 95 | | 888 |
Share of earnings | | 1,289 | | 1,386 | | 748 | | 1,289 |
Other equity components | | 4,280 | | 4,908 | | 2,785 | | 5,003 |
| | | | | |
Total | | 6,409 | | 7,615 | | 3,628 | | 7,180 |
| | | | | |
The reduction in minority interests includes the impact of the minority buy-out of AGF with an amount of €(3,868) mn.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Supplementary Information to the Consolidated Income Statements
24 Premiums earned (net)
| | | | Property-Casualty
| | Life/Health
| | Consolidation
| | Total
| | | Property-Casualty | | Life/Health | | Consolidation | | Total | |
| | | € mn | | € mn | | € mn | | € mn | | | € mn | | € mn | | € mn | | € mn | |
2006 | | | |
2007 | | | | | | | | | |
Premiums written | | | | | | | | | | |
Direct | | 40,967 | | | 21,252 | | | — | | | 62,219 | | | 41,526 | | | 21,241 | | | — | | | 62,767 | |
Assumed | | 2,707 | | | 362 | | | (13 | ) | | 3,056 | | | 2,763 | | | 281 | | | (23 | ) | | 3,021 | |
| | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
Subtotal | | 43,674 | | | 21,614 | | | (13 | ) | | 65,275 | | | 44,289 | | | 21,522 | | | (23 | ) | | 65,788 | |
| | | | | | | | | | | | | |
Ceded | | (5,415 | ) | | (816 | ) | | 13 | | | (6,218 | ) | | (5,320 | ) | | (637 | ) | | 23 | | | (5,934 | ) |
| | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
Net | | 38,259 | | | 20,798 | | | — | | | 59,057 | | | 38,969 | | | 20,885 | | | — | | | 59,854 | |
| | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
Change in unearned premiums | | | | | | | | | | |
Direct | | (351 | ) | | (225 | ) | | — | | | (576 | ) | | (352 | ) | | (77 | ) | | — | | | (429 | ) |
Assumed | | 156 | | | 1 | | | — | | | 157 | | | (68 | ) | | 2 | | | 1 | | | (65 | ) |
| | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
Subtotal | | (195 | ) | | (224 | ) | | — | | | (419 | ) | | (420 | ) | | (75 | ) | | 1 | | | (494 | ) |
| | | | | | | | | | | | | |
Ceded | | (114 | ) | | — | | | — | | | (114 | ) | | 4 | | | (1 | ) | | (1 | ) | | 2 | |
| | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
Net | | (309 | ) | | (224 | ) | | — | | | (533 | ) | | (416 | ) | | (76 | ) | | — | | | (492 | ) |
| | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
Premiums earned | | | | | | | | | | |
Direct | | 40,616 | | | 21,027 | | | — | | | 61,643 | | | 41,174 | | | 21,164 | | | — | | | 62,338 | |
Assumed | | 2,863 | | | 363 | | | (13 | ) | | 3,213 | | | 2,695 | | | 283 | | | (22 | ) | | 2,956 | |
| | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
Subtotal | | 43,479 | | | 21,390 | | | (13 | ) | | 64,856 | | | 43,869 | | | 21,447 | | | (22 | ) | | 65,294 | |
| | | | | | | | | | | | | |
Ceded | | (5,529 | ) | | (816 | ) | | 13 | | | (6,332 | ) | | (5,316 | ) | | (638 | ) | | 22 | | | (5,932 | ) |
| | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
Net | | 37,950 | | | 20,574 | | | — | | | 58,524 | | | 38,553 | | | 20,809 | | | — | | | 59,362 | |
| | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
2005 | | | |
2006 | | | | | | | | | |
Premiums written | | | | | | | | | | |
Direct | | 40,547 | | | 20,707 | | | — | | | 61,254 | | | 40,967 | | | 21,252 | | | — | | | 62,219 | |
Assumed | | 3,152 | | | 386 | | | (26 | ) | | 3,512 | | | 2,707 | | | 362 | | | (13 | ) | | 3,056 | |
| | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
Subtotal | | 43,699 | | | 21,093 | | | (26 | ) | | 64,766 | | | 43,674 | | | 21,614 | | | (13 | ) | | 65,275 | |
| | | | | | | | | | | | | |
Ceded | | (5,529 | ) | | (926 | ) | | 26 | | | (6,429 | ) | | (5,415 | ) | | (816 | ) | | 13 | | | (6,218 | ) |
| | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
Net | | 38,170 | | | 20,167 | | | — | | | 58,337 | | | 38,259 | | | 20,798 | | | — | | | 59,057 | |
| | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
Change in unearned premiums | | | | | | | | | | |
Direct | | (378 | ) | | (161 | ) | | — | | | (539 | ) | | (351 | ) | | (225 | ) | | — | | | (576 | ) |
Assumed | | (246 | ) | | (6 | ) | | — | | | (252 | ) | | 156 | | | 1 | | | — | | | 157 | |
| | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
Subtotal | | (624 | ) | | (167 | ) | | — | | | (791 | ) | | (195 | ) | | (224 | ) | | — | | | (419 | ) |
| | | | | | | | | | | | | |
Ceded | | 139 | | | (3 | ) | | — | | | 136 | | | (114 | ) | | — | | | — | | | (114 | ) |
| | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
Net | | (485 | ) | | (170 | ) | | — | | | (655 | ) | | (309 | ) | | (224 | ) | | — | | | (533 | ) |
| | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
Premiums earned | | | | | | | | | | |
Direct | | 40,169 | | | 20,546 | | | — | | | 60,715 | | | 40,616 | | | 21,027 | | | — | | | 61,643 | |
Assumed | | 2,906 | | | 380 | | | (26 | ) | | 3,260 | | | 2,863 | | | 363 | | | (13 | ) | | 3,213 | |
| | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
Subtotal | | 43,075 | | | 20,926 | | | (26 | ) | | 63,975 | | | 43,479 | | | 21,390 | | | (13 | ) | | 64,856 | |
| | | | | | | | | | | | | |
Ceded | | (5,390 | ) | | (929 | ) | | 26 | | | (6,293 | ) | | (5,529 | ) | | (816 | ) | | 13 | | | (6,332 | ) |
| | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
Net | | 37,685 | | | 19,997 | | | — | | | 57,682 | | | 37,950 | | | 20,574 | | | — | | | 58,524 | |
| | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
24 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 | | | |
2005 | | | | | | | | | |
Premiums written | | | | | | | | | | |
Direct | | 40,460 | | | 20,246 | | | — | | | 60,706 | | | 40,547 | | | 20,707 | | | — | | | 61,254 | |
Assumed | | 2,482 | | | 526 | | | (24 | ) | | 2,984 | | | 3,152 | | | 386 | | | (26 | ) | | 3,512 | |
| | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
Subtotal | | 42,942 | | | 20,772 | | | (24 | ) | | 63,690 | | | 43,699 | | | 21,093 | | | (26 | ) | | 64,766 | |
| | | | | | | | | | | | | |
Ceded | | (5,299 | ) | | (1,294 | ) | | 24 | | | (6,569 | ) | | (5,529 | ) | | (926 | ) | | 26 | | | (6,429 | ) |
| | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
Net | | 37,643 | | | 19,478 | | | — | | | 57,121 | | | 38,170 | | | 20,167 | | | — | | | 58,337 | |
| | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
Change in unearned premiums | | | | | | | | | | |
Direct | | (304 | ) | | (72 | ) | | — | | | (376 | ) | | (378 | ) | | (161 | ) | | — | | | (539 | ) |
Assumed | | 10 | | | (2 | ) | | — | | | 8 | | | (246 | ) | | (6 | ) | | — | | | (252 | ) |
| | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
Subtotal | | (294 | ) | | (74 | ) | | — | | | (368 | ) | | (624 | ) | | (167 | ) | | — | | | (791 | ) |
| | | | | | | | | | | | | |
Ceded | | 36 | | | — | | | — | | | 36 | | | 139 | | | (3 | ) | | — | | | 136 | |
| | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
Net | | (258 | ) | | (74 | ) | | — | | | (332 | ) | | (485 | ) | | (170 | ) | | — | | | (655 | ) |
| | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
Premiums earned | | | | | | | | | | |
Direct | | 40,156 | | | 20,174 | | | — | | | 60,330 | | | 40,169 | | | 20,546 | | | — | | | 60,715 | |
Assumed | | 2,492 | | | 524 | | | (24 | ) | | 2,992 | | | 2,906 | | | 380 | | | (26 | ) | | 3,260 | |
| | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
Subtotal | | 42,648 | | | 20,698 | | | (24 | ) | | 63,322 | | | 43,075 | | | 20,926 | | | (26 | ) | | 63,975 | |
| | | | | | | | | | | | | |
Ceded | | (5,263 | ) | | (1,294 | ) | | 24 | | | (6,533 | ) | | (5,390 | ) | | (929 | ) | | 26 | | | (6,293 | ) |
| | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
Net | | 37,385 | | | 19,404 | | | — | | | 56,789 | | | 37,685 | | | 19,997 | | | — | | | 57,682 | |
| | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
25 Interest and similar income
| | | | 2006
| | 2005
| | 2004
| | 2007 | | 2006 | | 2005 |
| | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn |
Interest from held-to-maturity investments | | 233 | | 253 | | 269 | | 223 | | 233 | | 253 |
Dividends from available-for-sale investments | | 2,119 | | 1,469 | | 1,320 | | 2,332 | | 2,119 | | 1,469 |
Interest from available-for-sale investments | | 9,160 | | 8,592 | | 7,689 | | 9,709 | | 9,160 | | 8,592 |
Share of earnings from investments in associates and joint ventures | | 287 | | 253 | | 253 | | 521 | | 287 | | 253 |
Rent from real estate held for investment | | 930 | | 993 | | 964 | | 835 | | 930 | | 993 |
Interest from loans to banks and customers | | 11,058 | | 10,875 | | 10,475 | | 12,200 | | 11,058 | | 10,875 |
Other interest | | 169 | | 209 | | 226 | | 227 | | 169 | | 209 |
| | |
| |
| |
| | | | | | |
Total | | 23,956 | | 22,644 | | 21,196 | | 26,047 | | 23,956 | | 22,644 |
| | |
| |
| |
| | | | | | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
26 Income from financial assets and liabilities carried at fair value through income (net)
| | | | Property-
Casualty
| | Life/
Health
| | Banking
| | Asset
Management
| | Corporate
| | Consolidation
| | Group
| | | Property-
Casualty | | Life/
Health | | Banking | | Asset
Managment | | Corporate | | Consolidation | | Group | |
| | | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | |
2007 | | | | | | | | | | | | | | | |
Income (expense) from financial assets and liabilities held for trading | | | (51 | ) | | (1,337 | ) | | (464 | ) | | — | | | 44 | | | (35 | ) | | (1,843 | ) |
Income from financial assets designated at fair value through income | | | 150 | | | 345 | | | 67 | | | 64 | | | 7 | | | (8 | ) | | 625 | |
Income (expense) from financial liabilities designated at fair value through income | | | 3 | | | 11 | | | (34 | ) | | — | | | — | | | — | | | (20 | ) |
Income (expense) from financial liabilities for puttable equity instruments (net) | | | (17 | ) | | 41 | | | — | | | (33 | ) | | — | | | — | | | (9 | ) |
| | | | | | | | | | | | | | | | | | | | | | |
Total | | | 85 | | | (940 | ) | | (431 | ) | | 31 | | | 51 | | | (43 | ) | | (1,247 | ) |
| | | € 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 | | | 83 | | | (808 | ) | | 1,282 | | | 7 | | | (274 | ) | | 72 | | | 362 | |
Income (expense) from financial assets designated at fair value through income | | 121 | | | 742 | | | 95 | | | (105 | ) | | 4 | | | — | | | 857 | | | 121 | | | 742 | | | 95 | | | (105 | ) | | 5 | | | — | | | 858 | |
Expense from financial liabilities designated at fair value through income | | (1 | ) | | (2 | ) | | (42 | ) | | — | | | — | | | 1 | | | (44 | ) | | (1 | ) | | (2 | ) | | (42 | ) | | — | | | — | | | 1 | | | (44 | ) |
Income (expense) from financial liabilities for puttable equity instruments (net) | | (14 | ) | | (293 | ) | | — | | | 136 | | | (65 | ) | | — | | | (236 | ) | | (14 | ) | | (293 | ) | | — | | | 136 | | | (65 | ) | | — | | | (236 | ) |
| | | | | | | | | | | | | | | | | | | | | | |
Total | | 189 | | | (361 | ) | | 1,335 | | | 38 | | | (334 | ) | | 73 | | | 940 | | | 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 | | | 32 | | | (324 | ) | | 1,170 | | | 3 | | | (441 | ) | | (3 | ) | | 437 | |
Income from financial assets designated at fair value through income | | 128 | | | 780 | | | 74 | | | 247 | | | — | | | — | | | 1,229 | | | 128 | | | 780 | | | 74 | | | 247 | | | — | | | — | | | 1,229 | |
Expense from financial liabilities designated at fair value through income | | — | | | — | | | (81 | ) | | — | | | — | | | 3 | | | (78 | ) | | — | | | — | | | (81 | ) | | — | | | — | | | 3 | | | (78 | ) |
Income (expense) from financial liabilities for puttable equity instruments (net) | | 4 | | | (198 | ) | | — | | | (231 | ) | | — | | | — | | | (425 | ) | | 4 | | | (198 | ) | | — | | | (231 | ) | | — | | | — | | | (425 | ) |
| | | | | | | | | | | | | | | | | | | | | | |
Total | | 164 | | | 258 | | | 1,163 | | | 19 | | | (441 | ) | | — | | | 1,163 | | | 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 | | |
| | | | | | | | | | | | | | | | | | | | | | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Income from financial assets and liabilities carried at fair value through income (net) comprises:
| | | | | | | | | | | | |
| | | Interest and
dividend
income
(expense) | | | Net realized
gains
(losses) | | | Net
valuation
result | | | Total | |
| | | € mn | | | € mn | | | € mn | | | € mn | |
2007 | | | | | | | | | | | | |
Financial assets and liabilities held for trading | | (334 | ) | | 433 | | | (1,942 | ) | | (1,843 | ) |
Financial assets designated at fair value through income | | 511 | | | 182 | | | (68 | ) | | 625 | |
Financial liabilities designated at fair value through income | | (117 | ) | | 52 | | | 45 | | | (20 | ) |
Financial liabilities for puttable equity instruments (net) | | — | | | — | | | (9 | ) | | (9 | ) |
| | | | | | | | | | | | |
Total | | (219 | ) | | 667 | | | (1,695 | ) | | (1,247 | ) |
| | | | | | | | | | | | |
2006 | | | | | | | | | | | | |
Financial assets and liabilities held for trading | | (577 | ) | | 927 | | | 12 | | | 362 | |
Financial assets designated at fair value through income | | 316 | | | 167 | | | 375 | | | 858 | |
Financial liabilities designated at fair value through income | | (89 | ) | | 45 | | | — | | | (44 | ) |
Financial liabilities for puttable equity instruments (net) | | — | | | — | | | (236 | ) | | (236 | ) |
| | | | | | | | | | | | |
Total | | (350 | ) | | 1,139 | | | 151 | | | 940 | |
| | | | | | | | | | | | |
2005 | | | | | | | | | | | | |
Financial assets and liabilities held for trading | | 244 | | | 567 | | | (374 | ) | | 437 | |
Financial assets designated at fair value through income | | 211 | | | 117 | | | 901 | | | 1,229 | |
Financial liabilities designated at fair value through income | | (73 | ) | | (5 | ) | | — | | | (78 | ) |
Financial liabilities for puttable equity instruments (net) | | — | | | — | | | (425 | ) | | (425 | ) |
| | | | | | | | | | | | |
Total | | 382 | | | 679 | | | 102 | | | 1,163 | |
| | | | | | | | | | | | |
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, 20062007 includes in the Life/ Health segment expenses of €811€1,352 mn (2005:(2006: €834 mn; 2005: €377 mn; 2004: €104 mn) from derivative financial instruments ininstruments. Expenses of €756 mn (2006: €513 mn; 2005: €50 mn) result from the Life/Health insurance segment. This includespurchase of forward contracts for interest bonds and forward sales of shares. Also included are expenses from derivative financial instruments related to equity indexed annuity contracts and guaranteed benefits under unit-linked contracts of €622 mn (2006: €350 mn (2005:mn; 2005: €199 mn; 2004: €128 mn) and expensesincome from other derivative financial instruments of €461€26 mn (2005: €178(2006: €29 mn; 2004: income: €242005: €128 mn).
Banking Segment
Income from financial assets and liabilities held for trading of the Banking segment comprises:
| | | | 2006
| | 2005
| | 2004
| | 2007 | | 2006 | | 2005 |
| | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn |
Trading in interest products | | 777 | | | 473 | | 771 | |
Trading in interest products1) | | | 411 | | | 637 | | | 569 |
Trading in loan products2) | | | (1,231 | ) | | 241 | | | 146 |
Trading in equity products | | 217 | | | 274 | | 219 | | 309 | | | 304 | | | 224 |
Foreign exchange/precious metals trading | | 354 | | | 222 | | 149 | |
Foreign exchange/ precious metals trading | | | 256 | | | 209 | | | 112 |
Other trading activities | | (66 | ) | | 201 | | 379 | | (209 | ) | | (109 | ) | | 119 |
| | |
|
| |
| |
| | | | | | | | |
Total | | 1,282 | | | 1,170 | | 1,518 | | (464 | ) | | 1,282 | | | 1,170 |
| | |
|
| |
| |
| | | | | | | | |
1) | For the year ended December 31, 2007 includes impairments of €(23) mn for asset-backed securities held for trading of Dresdner Bank. |
2) | For the year ended December 31, 2007 includes impairments of €(1,252) mn for asset-backed securities held for trading of Dresdner Bank. |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Corporate Segment
Income from financial assets and liabilities held for trading for the year ended December 31, 2006,2007, includes in the Corporate segment expenses of €15 mn (2006: €152 mn (2005:mn; 2005: €332 mn; 2004: €149 mn) from derivative financial instruments in the Corporate segment for which hedge accounting is not applied. This includes expenses from derivative financial instruments embedded in exchangeable bonds of €222 mn (2006: €570 mn (2005:mn; 2005: €605 mn; 2004: €11 mn), income from derivative financial instruments which partially hedge the exchangeable bonds, however which do not qualify for hedge accounting, of €290mn (2005:€164 mn (2006: €290 mn; 2005: €288 mn; 2004: €17 mn), and income from other derivative financial instruments of €43 mn (2006: €128 mn (2005: expense:mn; 2005: expense of €15 mn; 2004: expense: €155 mn).
27 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 | |
| | |
|
| |
|
| |
|
|
| | | | | | | | | |
| | | 2007 | | | 2006 | | | 2005 | |
| | | € m | | | € m | | | € m | |
Realized gains | | | | | | | | | |
Available-for-sale investments | | | | | | | | | |
Equity securities | | 7,744 | | | 5,052 | | | 3,348 | |
Debt securities | | 423 | | | 739 | | | 968 | |
| | | | | | | | | |
Subtotal | | 8,167 | | | 5,791 | | | 4,316 | |
| | | | | | | | | |
Investments in associates and joint ventures1) | | 220 | | | 891 | | | 1,218 | |
Loans to banks and customers | | 80 | | | 47 | | | 116 | |
Real estate held for investment | | 371 | | | 766 | | | 373 | |
| | | | | | | | | |
Subtotal | | 8,838 | | | 7,495 | | | 6,023 | |
| | | | | | | | | |
Realized losses | | | | | | | | | |
Available-for-sale investments | | | | | | | | | |
Equity securities | | (598 | ) | | (342 | ) | | (566 | ) |
Debt securities | | (1,433 | ) | | (795 | ) | | (332 | ) |
| | | | | | | | | |
Subtotal | | (2,031 | ) | | (1,137 | ) | | (898 | ) |
| | | | | | | | | |
Investments in associates and joint ventures2) | | (93 | ) | | (15 | ) | | (32 | ) |
Loans to banks and customers3) | | (120 | ) | | (57 | ) | | (93 | ) |
Real estate held for investment | | (46 | ) | | (135 | ) | | (22 | ) |
| | | | | | | | | |
Subtotal | | (2,290 | ) | | (1,344 | ) | | (1,045 | ) |
| | | | | | | | | |
Total | | 6,548 | | | 6,151 | | | 4,978 | |
| | | | | | | | | |
(1)1)
| During the year ended December 31, 2006,2007, includes realized gains from the disposal of subsidiaries and businesses of €185 mn (2006: €613 mn (2005:mn; 2005: €394 mn; 2004: €183 mn). |
(2)2)
| During the year ended December 31, 2006,2007, includes realized losses from the disposal of subsidiaries of €83 mn (2006: €3 mn (2005:mn; 2005: €14 mn; 2004: €251 mn). |
3) | During the year ended December 31, 2007, includes realized losses from leveraged buy-out transactions of Dresdner Bank of €30 mn. |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
28 Fee and commission income
| | | | 2006
| | 2005
| | 2004
| | 2007 | | 2006 | | 2005 |
| | | Segment
| | Consolidation
| | Group
| | Segment
| | Consolidation
| | Group
| | Segment
| | Consolidation
| | Group
| | Segment | | Consolidation | | Group | | Segment | | Consolidation | | Group | | Segment | | Consolidation | | Group |
| | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn
| | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn |
Property-Casualty | | | | | | | | | | | | | | | | | | | |
Fees from credit and assistance business | | 681 | | — | | | 681 | | 662 | | — | | | 662 | | 471 | | — | | | 471 | | 703 | | (2 | ) | | 701 | | 681 | | — | | | 681 | | 662 | | — | | | 662 |
Service agreements | | 318 | | (37 | ) | | 281 | | 316 | | (42 | ) | | 274 | | 302 | | (84 | ) | | 218 | | 475 | | (24 | ) | | 451 | | 318 | | (37 | ) | | 281 | | 316 | | (42 | ) | | 274 |
Investment advisory | | 15 | | — | | | 15 | | 11 | | — | | | 11 | | 9 | | — | | | 9 | | — | | — | | | — | | 15 | | — | | | 15 | | 11 | | — | | | 11 |
| | |
| |
|
| |
| |
| |
|
| |
| |
| |
|
| |
| | | | | | | | | | | | | | | | | | | | | |
Subtotal | | 1,014 | | (37 | ) | | 977 | | 989 | | (42 | ) | | 947 | | 782 | | (84 | ) | | 698 | | 1,178 | | (26 | ) | | 1,152 | | 1,014 | | (37 | ) | | 977 | | 989 | | (42 | ) | | 947 |
| | | | | | | | | | | | | | | | | | | | | | |
Life/Health | | | | | | | | | | | | | | | | | | | |
Service agreements | | 191 | | (26 | ) | | 165 | | 176 | | (82 | ) | | 94 | | 175 | | (107 | ) | | 68 | | 174 | | (15 | ) | | 159 | | 191 | | (26 | ) | | 165 | | 176 | | (82 | ) | | 94 |
Investment advisory | | 423 | | (28 | ) | | 395 | | 306 | | — | | | 306 | | 33 | | (4 | ) | | 29 | | 513 | | (16 | ) | | 497 | | 423 | | (28 | ) | | 395 | | 306 | | — | | | 306 |
Other | | 16 | | (16 | ) | | — | | 25 | | (13 | ) | | 12 | | 16 | | (10 | ) | | 6 | | 14 | | (14 | ) | | — | | 16 | | (16 | ) | | — | | 25 | | (13 | ) | | 12 |
| | |
| |
|
| |
| |
| |
|
| |
| |
| |
|
| |
| | | | | | | | | | | | | | | | | | | | | |
Subtotal | | 630 | | (70 | ) | | 560 | | 507 | | (95 | ) | | 412 | | 224 | | (121 | ) | | 103 | | 701 | | (45 | ) | | 656 | | 630 | | (70 | ) | | 560 | | 507 | | (95 | ) | | 412 |
| | | | | | | | | | | | | | | | | | | | | | |
Banking | | | | | | | | | | | | | | | | | | | |
Securities business | | 1,472 | | (186 | ) | | 1,286 | | 1,339 | | (151 | ) | | 1,188 | | 1,203 | | (153 | ) | | 1,050 | | 1,519 | | (184 | ) | | 1,335 | | 1,472 | | (186 | ) | | 1,286 | | 1,339 | | (151 | ) | | 1,188 |
Investment advisory | | 611 | | (156 | ) | | 455 | | 558 | | (140 | ) | | 418 | | 524 | | (110 | ) | | 414 | | 534 | | (145 | ) | | 389 | | 611 | | (156 | ) | | 455 | | 558 | | (140 | ) | | 418 |
Payment transactions | | 364 | | (2 | ) | | 362 | | 381 | | (3 | ) | | 378 | | 399 | | (4 | ) | | 395 | | 372 | | (3 | ) | | 369 | | 364 | | (2 | ) | | 362 | | 381 | | (3 | ) | | 378 |
Mergers and acquisitions advisory | | 284 | | — | | | 284 | | 256 | | — | | | 256 | | 182 | | — | | | 182 | | 233 | | — | | | 233 | | 284 | | — | | | 284 | | 256 | | — | | | 256 |
Underwriting business | | 133 | | — | | | 133 | | 102 | | — | | | 102 | | 97 | | (2 | ) | | 95 | | 80 | | (1 | ) | | 79 | | 133 | | — | | | 133 | | 102 | | — | | | 102 |
Other | | 734 | | (77 | ) | | 657 | | 761 | | (19 | ) | | 742 | | 832 | | (12 | ) | | 820 | | 913 | | (57 | ) | | 856 | | 734 | | (77 | ) | | 657 | | 761 | | (19 | ) | | 742 |
| | |
| |
|
| |
| |
| |
|
| |
| |
| |
|
| |
| | | | | | | | | | | | | | | | | | | | | |
Subtotal | | 3,598 | | (421 | ) | | 3,177 | | 3,397 | | (313 | ) | | 3,084 | | 3,237 | | (281 | ) | | 2,956 | | 3,651 | | (390 | ) | | 3,261 | | 3,598 | | (421 | ) | | 3,177 | | 3,397 | | (313 | ) | | 3,084 |
| | | | | | | | | | | | | | | | | | | | | | |
Asset Management | | | | | | | | | | | | | | | | | | | |
Management fees | | 3,420 | | (112 | ) | | 3,308 | | 2,987 | | (93 | ) | | 2,894 | | 2,493 | | (75 | ) | | 2,418 | | 3,558 | | (126 | ) | | 3,432 | | 3,420 | | (112 | ) | | 3,308 | | 2,987 | | (93 | ) | | 2,894 |
Loading and exit fees | | 341 | | — | | | 341 | | 338 | | — | | | 338 | | 318 | | — | | | 318 | | 313 | | — | | | 313 | | 341 | | — | | | 341 | | 338 | | — | | | 338 |
Performance fees | | 107 | | 1 | | | 108 | | 123 | | (2 | ) | | 121 | | 56 | | — | | | 56 | | 206 | | (1 | ) | | 205 | | 107 | | 1 | | | 108 | | 123 | | (2 | ) | | 121 |
Other | | 318 | | (6 | ) | | 312 | | 298 | | (2 | ) | | 296 | | 229 | | (5 | ) | | 224 | | 326 | | (11 | ) | | 315 | | 318 | | (6 | ) | | 312 | | 298 | | (2 | ) | | 296 |
| | |
| |
|
| |
| |
| |
|
| |
| |
| |
|
| |
| | | | | | | | | | | | | | | | | | | | | |
Subtotal | | 4,186 | | (117 | ) | | 4,069 | | 3,746 | | (97 | ) | | 3,649 | | 3,096 | | (80 | ) | | 3,016 | | 4,403 | | (138 | ) | | 4,265 | | 4,186 | | (117 | ) | | 4,069 | | 3,746 | | (97 | ) | | 3,649 |
| | | | | | | | | | | | | | | | | | | | | | |
Corporate | | | | | | | | | | | | | | | | | | | |
Service agreements | | 190 | | (117 | ) | | 73 | | 164 | | (94 | ) | | 70 | | 137 | | (97 | ) | | 40 | | 198 | | (92 | ) | | 106 | | 190 | | (117 | ) | | 73 | | 164 | | (94 | ) | | 70 |
| | |
| |
|
| |
| |
| |
|
| |
| |
| |
|
| |
| | | | | | | | | | | | | | | | | | | | | |
Subtotal | | 190 | | (117 | ) | | 73 | | 164 | | (94 | ) | | 70 | | 137 | | (97 | ) | | 40 | | 198 | | (92 | ) | | 106 | | 190 | | (117 | ) | | 73 | | 164 | | (94 | ) | | 70 |
| | |
| |
|
| |
| |
| |
|
| |
| |
| |
|
| |
| | | | | | | | | | | | | | | | | | | | | |
Total | | 9,618 | | (762 | ) | | 8,856 | | 8,803 | | (641 | ) | | 8,162 | | 7,476 | | (663 | ) | | 6,813 | | 10,131 | | (691 | ) | | 9,440 | | 9,618 | | (762 | ) | | 8,856 | | 8,803 | | (641 | ) | | 8,162 |
| | |
| |
|
| |
| |
| |
|
| |
| |
| |
|
| |
| | | | | | | | | | | | | | | | | | | | | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
29 Other income
| | | | 2006
| | 2005
| | 2004
| | | 2007 | | 2006 | | 2005 |
| | | € mn | | € mn | | € mn | | | € 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 | | |
Income from real estate held for own use | | | | | | | |
Realized gains from disposals of real estate held for own use | | | 210 | | 82 | | 23 |
Other income from real estate held for own use | | | 2 | | 3 | | 33 |
| | |
| |
| |
|
| | | | | | |
Subtotal | | 85 | | 56 | | 330 | | | 212 | | 85 | | 56 |
| | | | | | | |
Income from non-current assets and disposal groups held for sale | | 1 | | 35 | | — | | | 4 | | 1 | | 35 |
Other | | — | | 1 | | (1 | ) | | 1 | | — | | 1 |
| | |
| |
| |
|
| | | | | | |
Total | | 86 | | 92 | | 329 | | | 217 | | 86 | | 92 |
| | |
| |
| |
|
| | | | | | |
30 Income from fully consolidated private equity investments
| | | | MAN Roland
Druckma-
schinen
AG
| | Four Seasons Health Care
Ltd.
| | Total
| | MAN
Roland
Druck-
maschinen
AG | | Selecta
AG | | Four
Seasons
Health
Care
Ltd. | | Other | | Total |
| | | | € mn | | € mn | | € mn | | € mn | | € mn |
2007 | | | | | | | | | | | |
Sales and service revenues | | | 1,936 | | 375 | | — | | 22 | | 2,333 |
Other operating revenues | | | 21 | | — | | — | | — | | 21 |
Interest income | | | 13 | | — | | — | | — | | 13 |
| | | | | | | | | | | |
Total | | | 1,970 | | 375 | | — | | 22 | | 2,367 |
| | | € mn | | € mn | | € mn | | | | | | | | | | |
2006 | | | | | | | | | | | | | | | | |
Sales and service revenues | | 1,044 | | 327 | | 1,371 | | 1,044 | | — | | 327 | | — | | 1,371 |
Other operating revenues | | 15 | | — | | 15 | | 15 | | — | | — | | — | | 15 |
Interest income | | 5 | | 1 | | 6 | | 5 | | — | | 1 | | — | | 6 |
| | |
| |
| |
| | | | | | | | | | |
Total | | 1,064 | | 328 | | 1,392 | | 1,064 | | — | | 328 | | — | | 1,392 |
| | |
| |
| |
| | | | | | | | | | |
2005 | | | | | | | | | | | | | | | | |
Sales and service revenues | | — | | 597 | | 597 | | — | | — | | 597 | | — | | 597 |
Other operating revenues | | — | | — | | — | | — | | — | | — | | — | | — |
Interest income | | — | | 1 | | 1 | | — | | — | | 1 | | — | | 1 |
| | |
| |
| |
| | | | | | | | | | |
Total | | — | | 598 | | 598 | | — | | — | | 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
| | | Property-Casualty | | Life/Health | | Consolidation | | Total | |
| | | | € mn | | € mn | | € mn | | € mn | |
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 | ) |
| | | € mn | | € mn | | € mn | | € mn | | | | | | | | | | | | | |
2006 | | | | | | | | | | |
Gross | | | | | | | | | | |
Claims and insurance benefits paid | | (27,132 | ) | | (18,485 | ) | | 27 | | | (45,590 | ) | | (27,132 | ) | | (18,485 | ) | | 27 | | | (45,590 | ) |
Change in loss and loss adjustment expenses | | 104 | | | (35 | ) | | (2 | ) | | 67 | | | 104 | | | (35 | ) | | (2 | ) | | 67 | |
| | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
Subtotal | | (27,028 | ) | | (18,520 | ) | | 25 | | | (45,523 | ) | | (27,028 | ) | | (18,520 | ) | | 25 | | | (45,523 | ) |
| | | | | | | | | | | | | |
Ceded | | | | | | | | | | |
Claims and insurance benefits paid | | 3,130 | | | 777 | | | (27 | ) | | 3,880 | | | 3,130 | | | 777 | | | (27 | ) | | 3,880 | |
Change in loss and loss adjustment expenses | | (774 | ) | | 118 | | | 2 | | | (654 | ) | | (774 | ) | | 118 | | | 2 | | | (654 | ) |
| | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
Subtotal | | 2,356 | | | 895 | | | (25 | ) | | 3,226 | | | 2,356 | | | 895 | | | (25 | ) | | 3,226 | |
| | | | | | | | | | | | | |
Net | | | | | | | | | | |
Claims and insurance benefits paid | | (24,002 | ) | | (17,708 | ) | | — | | | (41,710 | ) | | (24,002 | ) | | (17,708 | ) | | — | | | (41,710 | ) |
Change in loss and loss adjustment expenses | | (670 | ) | | 83 | | | — | | | (587 | ) | | (670 | ) | | 83 | | | — | | | (587 | ) |
| | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
Total | | (24,672 | ) | | (17,625 | ) | | — | | | (42,297 | ) | | (24,672 | ) | | (17,625 | ) | | — | | | (42,297 | ) |
| | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
2005 | | | | | | | | | | |
Gross | | | | | | | | | | |
Claims and insurance benefits paid | | (26,026 | ) | | (18,281 | ) | | 8 | | | (44,299 | ) | | (26,026 | ) | | (18,281 | ) | | 8 | | | (44,299 | ) |
Change in loss and loss adjustment expenses | | (2,452 | ) | | (51 | ) | | — | | | (2,503 | ) | | (2,452 | ) | | (51 | ) | | — | | | (2,503 | ) |
| | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
Subtotal | | (28,478 | ) | | (18,332 | ) | | 8 | | | (46,802 | ) | | (28,478 | ) | | (18,332 | ) | | 8 | | | (46,802 | ) |
| | | | | | | | | | | | | |
Ceded | | | | | | | | | | |
Claims and insurance benefits paid | | 3,429 | | | 875 | | | (8 | ) | | 4,296 | | | 3,429 | | | 875 | | | (8 | ) | | 4,296 | |
Change in loss and loss adjustment expenses | | (282 | ) | | 18 | | | — | | | (264 | ) | | (282 | ) | | 18 | | | — | | | (264 | ) |
| | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
Subtotal | | 3,147 | | | 893 | | | (8 | ) | | 4,032 | | | 3,147 | | | 893 | | | (8 | ) | | 4,032 | |
| | | | | | | | | | | | | |
Net | | | | | | | | | | |
Claims and insurance benefits paid | | (22,597 | ) | | (17,406 | ) | | — | | | (40,003 | ) | | (22,597 | ) | | (17,406 | ) | | — | | | (40,003 | ) |
Change in loss and loss adjustment expenses | | (2,734 | ) | | (33 | ) | | — | | | (2,767 | ) | | (2,734 | ) | | (33 | ) | | — | | | (2,767 | ) |
| | |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
Total | | (25,331 | ) | | (17,439 | ) | | — | | | (42,770 | ) | | (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 | ) | |
| | |
|
| |
|
| |
|
| |
|
| |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
32 Change in reserves for insurance and investment contracts (net)
| | | | Property-Casualty
| | Life/Health
| | Corporate
| | Consolidation
| | Total
| | | Property-Casualty | | Life/Health | | Consolidation | | Total | |
| | | | € mn | | € mn | | € mn | | € mn | |
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 | ) |
| | | € mn | | € mn | | € mn | | € mn | | € mn | | | | | | | | | | | | | |
2006 | | | | | | | | | | |
Gross | | | | | | | | | | |
Aggregate policy reserves | | (291 | ) | | (4,307 | ) | | — | | | (1 | ) | | (4,599 | ) | | (291 | ) | | (4,307 | ) | | (1 | ) | | (4,599 | ) |
Other insurance reserves | | 31 | | | (78 | ) | | — | | | — | | | (47 | ) | | 31 | | | (78 | ) | | — | | | (47 | ) |
Expenses for premium refunds | | (211 | ) | | (6,136 | ) | | — | | | (426 | ) | | (6,773 | ) | | (211 | ) | | (6,136 | ) | | (426 | ) | | (6,773 | ) |
| | |
|
| |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
Subtotal | | (471 | ) | | (10,521 | ) | | — | | | (427 | ) | | (11,419 | ) | | (471 | ) | | (10,521 | ) | | (427 | ) | | (11,419 | ) |
| | | | | | | | | | | | | |
Ceded | | | | | | | | | | |
Aggregate policy reserves | | 29 | | | (38 | ) | | — | | | 2 | | | (7 | ) | | 29 | | | (38 | ) | | 2 | | | (7 | ) |
Other insurance reserves | | 2 | | | 11 | | | — | | | — | | | 13 | | | 2 | | | 11 | | | — | | | 13 | |
Expenses for premium refunds | | 15 | | | 23 | | | — | | | — | | | 38 | | | 15 | | | 23 | | | — | | | 38 | |
| | |
|
| |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
Subtotal | | 46 | | | (4 | ) | | — | | | 2 | | | 44 | | | 46 | | | (4 | ) | | 2 | | | 44 | |
| | | | | | | | | | | | | |
Net | | | | | | | | | | |
Aggregate policy reserves | | (262 | ) | | (4,345 | ) | | — | | | 1 | | | (4,606 | ) | | (262 | ) | | (4,345 | ) | | 1 | | | (4,606 | ) |
Other insurance reserves | | 33 | | | (67 | ) | | — | | | — | | | (34 | ) | | 33 | | | (67 | ) | | — | | | (34 | ) |
Expenses for premium refunds | | (196 | ) | | (6,113 | ) | | — | | | (426 | ) | | (6,735 | ) | | (196 | ) | | (6,113 | ) | | (426 | ) | | (6,735 | ) |
| | |
|
| |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
Total | | (425 | ) | | (10,525 | ) | | — | | | (425 | ) | | (11,375 | ) | | (425 | ) | | (10,525 | ) | | (425 | ) | | (11,375 | ) |
| | |
|
| |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
2005 | | | | | | | | | | |
Gross | | | | | | | | | | |
Aggregate policy reserves | | (225 | ) | | (5,162 | ) | | — | | | — | | | (5,387 | ) | | (225 | ) | | (5,162 | ) | | — | | | (5,387 | ) |
Other insurance reserves | | (11 | ) | | (12 | ) | | — | | | — | | | (23 | ) | | (11 | ) | | (12 | ) | | — | | | (23 | ) |
Expenses for premium refunds | | (521 | ) | | (5,409 | ) | | — | | | (26 | ) | | (5,956 | ) | | (521 | ) | | (5,409 | ) | | (26 | ) | | (5,956 | ) |
| | |
|
| |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
Subtotal | | (757 | ) | | (10,583 | ) | | — | | | (26 | ) | | (11,366 | ) | | (757 | ) | | (10,583 | ) | | (26 | ) | | (11,366 | ) |
| | | | | | | | | | | | | |
Ceded | | | | | | | | | | |
Aggregate policy reserves | | 17 | | | 118 | | | — | | | — | | | 135 | | | 17 | | | 118 | | | — | | | 135 | |
Other insurance reserves | | (6 | ) | | 5 | | | — | | | — | | | (1 | ) | | (6 | ) | | 5 | | | — | | | (1 | ) |
Expenses for premium refunds | | 39 | | | 17 | | | — | | | — | | | 56 | | | 39 | | | 17 | | | — | | | 56 | |
| | |
|
| |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
Subtotal | | 50 | | | 140 | | | — | | | — | | | 190 | | | 50 | | | 140 | | | — | | | 190 | |
| | | | | | | | | | | | | |
Net | | | | | | | | | | |
Aggregate policy reserves | | (208 | ) | | (5,044 | ) | | — | | | — | | | (5,252 | ) | | (208 | ) | | (5,044 | ) | | — | | | (5,252 | ) |
Other insurance reserves | | (17 | ) | | (7 | ) | | — | | | — | | | (24 | ) | | (17 | ) | | (7 | ) | | — | | | (24 | ) |
Expenses for premium refunds | | (482 | ) | | (5,392 | ) | | — | | | (26 | ) | | (5,900 | ) | | (482 | ) | | (5,392 | ) | | (26 | ) | | (5,900 | ) |
| | |
|
| |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
Total | | (707 | ) | | (10,443 | ) | | — | | | (26 | ) | | (11,176 | ) | | (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 | ) | |
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
33 Interest expense
| | | | 2006
| | 2005
| | 2004
| | | 2007 | | 2006 | | 2005 | |
| | | € mn | | € mn | | € mn | | | € mn | | € mn | | € mn | |
Liabilities to banks and customers | | (2,818 | ) | | (3,102 | ) | | (2,099 | ) | | (3,406 | ) | | (2,818 | ) | | (3,102 | ) |
Deposits retained on reinsurance ceded | | (120 | ) | | (279 | ) | | (311 | ) | | (101 | ) | | (120 | ) | | (279 | ) |
Certificated liabilities | | (1,532 | ) | | (1,498 | ) | | (1,362 | ) | | (2,063 | ) | | (1,532 | ) | | (1,498 | ) |
Participating certificates and subordinated liabilities | | (716 | ) | | (693 | ) | | (477 | ) | | (584 | ) | | (716 | ) | | (693 | ) |
Other | | (573 | ) | | (805 | ) | | (1,439 | ) | | (518 | ) | | (573 | ) | | (805 | ) |
| | |
|
| |
|
| |
|
| | | | | | | | | |
Total | | (5,759 | ) | | (6,377 | ) | | (5,688 | ) | | (6,672 | ) | | (5,759 | ) | | (6,377 | ) |
| | |
|
| |
|
| |
|
| | | | | | | | | |
34 Loan loss provisions
| | | | 2006
| | 2005
| | 2004
| | | 2007 | | 2006 | | 2005 | |
| | | € mn | | € mn | | € mn | | | € mn | | € mn | | € mn | |
Additions to allowances including direct impairments | | (533 | ) | | (774 | ) | | (1,439 | ) | |
Additions to allowances including direct
impairments1) | | | (572 | ) | | (533 | ) | | (774 | ) |
Amounts released | | 317 | | | 782 | | | 973 | | | 485 | | | 317 | | | 782 | |
Recoveries on loans previously impaired | | 180 | | | 101 | | | 112 | | | 200 | | | 180 | | | 101 | |
| | |
|
| |
|
| |
|
| | | | | | | | | |
Total | | (36 | ) | | 109 | | | (354 | ) | | 113 | | | (36 | ) | | 109 | |
| | |
|
| |
|
| |
|
| | | | | | | | | |
1) | Additions to allowances for the year ended December 31, 2007 include allowances of €70 mn related to sub-prime crisis. |
35 Impairments of investments (net)
| | | | 2006
| | 2005
| | 2004
| | | 2007 | | 2006 | | 2005 | |
| | | € mn | | € mn | | € mn | | | € mn | | € mn | | € mn | |
Impairments | | | | | | | | |
Available-for-sale investments | | | | | | | | |
Equity securities | | (479 | ) | | (245 | ) | | (722 | ) | | (1,155 | ) | | (479 | ) | | (245 | ) |
Debt securities | | (106 | ) | | (10 | ) | | (29 | ) | |
Debt securities1) | | | (75 | ) | | (106 | ) | | (10 | ) |
Subtotal | | (585 | ) | | (255 | ) | | (751 | ) | | (1,230 | ) | | (585 | ) | | (255 | ) |
Held-to-maturity investments | | (8 | ) | | (2 | ) | | (4 | ) | | — | | | (8 | ) | | (2 | ) |
Investments in associates and joint ventures | | (12 | ) | | (50 | ) | | (59 | ) | | (10 | ) | | (12 | ) | | (50 | ) |
Real estate held for investment | | (252 | ) | | (240 | ) | | (739 | ) | | (51 | ) | | (252 | ) | | (240 | ) |
| | |
|
| |
|
| |
|
| | | | | | | | | |
Subtotal | | (857 | ) | | (547 | ) | | (1,553 | ) | | (1,291 | ) | | (857 | ) | | (547 | ) |
| | | | | | | | | | |
Reversals of impairments | | | | | | | | |
Available-for-sale investments | | | | | | | | |
Debt securities | | 1 | | | 3 | | | 12 | | | 13 | | | 1 | | | 3 | |
Held-to-maturity investments | | 1 | | | 3 | | | — | | | — | | | 1 | | | 3 | |
Investments in associates and joint ventures | | — | | | — | | | 9 | | |
Real estate held for investment | | 80 | | | 1 | | | 57 | | | 6 | | | 80 | | | 1 | |
| | |
|
| |
|
| |
|
| | | | | | | | | |
Subtotal | | 82 | | | 7 | | | 78 | | | 19 | | | 82 | | | 7 | |
| | |
|
| |
|
| |
|
| | | | | | | | | |
Total | | (775 | ) | | (540 | ) | | (1,475 | ) | | (1,272 | ) | | (775 | ) | | (540 | ) |
| | |
|
| |
|
| |
|
| | | | | | | | | |
1) | Impairments on available-for-sale debt securities include impairments of asset-backed securities of €12 mn for the Property-Casualty segment and €7 mn for the Life/Health segment. |
36 Investment expenses
| | | | 2006
| | 2005
| | 2004
| | | 2007 | | 2006 | | 2005 | |
| | | € mn | | € mn | | € mn | | | € mn | | € mn | | € mn | |
Investment management expenses | | (493 | ) | | (374 | ) | | (422 | ) | | (432 | ) | | (493 | ) | | (374 | ) |
Depreciation from real estate held for investment | | (230 | ) | | (253 | ) | | (255 | ) | | (192 | ) | | (230 | ) | | (253 | ) |
Other expenses from real estate held for investment | | (278 | ) | | (265 | ) | | (235 | ) | | (270 | ) | | (278 | ) | | (265 | ) |
Foreign currency gains and losses (net) | | | | | | | | |
Foreign currency gains | | 473 | | | 417 | | | 481 | | | 687 | | | 473 | | | 417 | |
Foreign currency losses | | (580 | ) | | (617 | ) | | (336 | ) | | (850 | ) | | (580 | ) | | (617 | ) |
| | |
|
| |
|
| |
|
| | | | | | | | | |
Subtotal | | (107 | ) | | (200 | ) | | 145 | | | (163 | ) | | (107 | ) | | (200 | ) |
| | |
|
| |
|
| |
|
| | | | | | | | | |
Total | | (1,108 | ) | | (1,092 | ) | | (767 | ) | | (1,057 | ) | | (1,108 | ) | | (1,092 | ) |
| | |
|
| |
|
| |
|
| | | | | | | | | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
37 Acquisition and administrative expenses (net)
| | | | 2006
| | 2005
| | 2004
| | | 2007 | | 2006 | | 2005 | |
| | | Segment
| | Consolidation
| | Group
| | Segment
| | Consolidation
| | Group
| | Segment
| | Consolidation
| | Group
| | | Segment | | Consolidation | | Group | | Segment | | Consolidation | | Group | | Segment | | Consolidation | | Group | |
| | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | | € 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 | ) | | (7,310 | ) | | — | | | (7,310 | ) | | (7,131 | ) | | — | | | (7,131 | ) | | (6,805 | ) | | — | | | (6,805 | ) |
Commissions and profit received on reinsurance business ceded | | 722 | | | (1 | ) | | 721 | | | 953 | | | (1 | ) | | 952 | | | 908 | | | (1 | ) | | 907 | | | 691 | | | (2 | ) | | 689 | | | 722 | | | (1 | ) | | 721 | | | 953 | | | (1 | ) | | 952 | |
Deferrals of acquisition costs | | 3,983 | | | — | | | 3,983 | | | 2,804 | | | — | | | 2,804 | | | 2,056 | | | — | | | 2,056 | | | 4,511 | | | — | | | 4,511 | | | 3,983 | | | — | | | 3,983 | | | 2,804 | | | — | | | 2,804 | |
Amortization of deferred acquisition costs | | (3,843 | ) | | — | | | (3,843 | ) | | (2,686 | ) | | — | | | (2,686 | ) | | (1,888 | ) | | — | | | (1,888 | ) | | (4,384 | ) | | — | | | (4,384 | ) | | (3,843 | ) | | — | | | (3,843 | ) | | (2,686 | ) | | — | | | (2,686 | ) |
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | (6,269 | ) | | (1 | ) | | (6,270 | ) | | (5,734 | ) | | (1 | ) | | (5,735 | ) | | (5,738 | ) | | (1 | ) | | (5,739 | ) | | (6,492 | ) | | (2 | ) | | (6,494 | ) | | (6,269 | ) | | (1 | ) | | (6,270 | ) | | (5,734 | ) | | (1 | ) | | (5,735 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Administrative expenses | | (4,321 | ) | | 81 | | | (4,240 | ) | | (4,482 | ) | | 82 | | | (4,400 | ) | | (4,454 | ) | | 39 | | | (4,415 | ) | | (4,124 | ) | | 64 | | | (4,060 | ) | | (4,321 | ) | | 81 | | | (4,240 | ) | | (4,482 | ) | | 82 | | | (4,400 | ) |
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | (10,590 | ) | | 80 | | | (10,510 | ) | | (10,216 | ) | | 81 | | | (10,135 | ) | | (10,192 | ) | | 38 | | | (10,154 | ) | | (10,616 | ) | | 62 | | | (10,554 | ) | | (10,590 | ) | | 80 | | | (10,510 | ) | | (10,216 | ) | | 81 | | | (10,135 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Life/Health | | | | | | | | | | | | | | | | | | | |
Acquisition costs | | | | | | | | | | | | | | | | | | | |
Incurred | | (3,895 | ) | | — | | | (3,895 | ) | | (3,822 | ) | | — | | | (3,822 | ) | | (4,414 | ) | | — | | | (4,414 | ) | | (3,823 | ) | | 3 | | | (3,820 | ) | | (3,895 | ) | | — | | | (3,895 | ) | | (3,822 | ) | | — | | | (3,822 | ) |
Commissions and profit received on reinsurance business ceded | | 150 | | | — | | | 150 | | | 115 | | | — | | | 115 | | | 174 | | | — | | | 174 | | | 146 | | | — | | | 146 | | | 150 | | | — | | | 150 | | | 115 | | | — | | | 115 | |
Deferrals of acquisition costs | | 2,771 | | | — | | | 2,771 | | | 2,796 | | | — | | | 2,796 | | | 2,760 | | | — | | | 2,760 | | | 2,526 | | | — | | | 2,526 | | | 2,771 | | | — | | | 2,771 | | | 2,796 | | | — | | | 2,796 | |
Amortization of deferred acquisition costs | | (1,772 | ) | | — | | | (1,772 | ) | | (1,393 | ) | | — | | | (1,393 | ) | | (1,195 | ) | | — | | | (1,195 | ) | | (1,643 | ) | | — | | | (1,643 | ) | | (1,772 | ) | | — | | | (1,772 | ) | | (1,393 | ) | | — | | | (1,393 | ) |
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | (2,746 | ) | | — | | | (2,746 | ) | | (2,304 | ) | | — | | | (2,304 | ) | | (2,675 | ) | | — | | | (2,675 | ) | | (2,794 | ) | | 3 | | | (2,791 | ) | | (2,746 | ) | | — | | | (2,746 | ) | | (2,304 | ) | | — | | | (2,304 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Administrative expenses | | (1,691 | ) | | (19 | ) | | (1,710 | ) | | (1,669 | ) | | 14 | | | (1,655 | ) | | (1,036 | ) | | 3 | | | (1,033 | ) | | (1,794 | ) | | (72 | ) | | (1,866 | ) | | (1,691 | ) | | (19 | ) | | (1,710 | ) | | (1,669 | ) | | 14 | | | (1,655 | ) |
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | (4,437 | ) | | (19 | ) | | (4,456 | ) | | (3,973 | ) | | 14 | | | (3,959 | ) | | (3,711 | ) | | 3 | | | (3,708 | ) | | (4,588 | ) | | (69 | ) | | (4,657 | ) | | (4,437 | ) | | (19 | ) | | (4,456 | ) | | (3,973 | ) | | 14 | | | (3,959 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Banking | | | | | | | | | | | | | | | | | | | |
Personnel expenses | | (3,485 | ) | | — | | | (3,485 | ) | | (3,352 | ) | | — | | | (3,352 | ) | | (3,322 | ) | | — | | | (3,322 | ) | | (2,979 | ) | | — | | | (2,979 | ) | | (3,485 | ) | | — | | | (3,485 | ) | | (3,352 | ) | | — | | | (3,352 | ) |
Non-personnel expenses | | (2,120 | ) | | 54 | | | (2,066 | ) | | (2,309 | ) | | 29 | | | (2,280 | ) | | (2,321 | ) | | 59 | | | (2,262 | ) | | (2,082 | ) | | 62 | | | (2,020 | ) | | (2,120 | ) | | 54 | | | (2,066 | ) | | (2,309 | ) | | 29 | | | (2,280 | ) |
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | (5,605 | ) | | 54 | | | (5,551 | ) | | (5,661 | ) | | 29 | | | (5,632 | ) | | (5,643 | ) | | 59 | | | (5,584 | ) | | (5,061 | ) | | 62 | | | (4,999 | ) | | (5,605 | ) | | 54 | | | (5,551 | ) | | (5,661 | ) | | 29 | | | (5,632 | ) |
Asset management | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Asset Management | | | | | | | | | | | | | | | | | | | |
Personnel expenses | | (1,657 | ) | | — | | | (1,657 | ) | | (1,679 | ) | | — | | | (1,679 | ) | | (1,462 | ) | | — | | | (1,462 | ) | | (1,705 | ) | | — | | | (1,705 | ) | | (1,657 | ) | | — | | | (1,657 | ) | | (1,679 | ) | | — | | | (1,679 | ) |
Non-personnel expenses | | (629 | ) | | 16 | | | (613 | ) | | (598 | ) | | 8 | | | (590 | ) | | (564 | ) | | 17 | | | (547 | ) | | (686 | ) | | 16 | | | (670 | ) | | (629 | ) | | 16 | | | (613 | ) | | (598 | ) | | 8 | | | (590 | ) |
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | (2,286 | ) | | 16 | | | (2,270 | ) | | (2,277 | ) | | 8 | | | (2,269 | ) | | (2,026 | ) | | 17 | | | (2,009 | ) | | (2,391 | ) | | 16 | | | (2,375 | ) | | (2,286 | ) | | 16 | | | (2,270 | ) | | (2,277 | ) | | 8 | | | (2,269 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Corporate | | | | | | | | | | | | | | | | | | | |
Administrative expenses | | (655 | ) | | (44 | ) | | (699 | ) | | (516 | ) | | (48 | ) | | (564 | ) | | (540 | ) | | 26 | | | (514 | ) | | (642 | ) | | 9 | | | (633 | ) | | (655 | ) | | (44 | ) | | (699 | ) | | (516 | ) | | (48 | ) | | (564 | ) |
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | (655 | ) | | (44 | ) | | (699 | ) | | (516 | ) | | (48 | ) | | (564 | ) | | (540 | ) | | 26 | | | (514 | ) | | (642 | ) | | 9 | | | (633 | ) | | (655 | ) | | (44 | ) | | (699 | ) | | (516 | ) | | (48 | ) | | (564 | ) |
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | (23,573 | ) | | 87 | | | (23,486 | ) | | (22,643 | ) | | 84 | | | (22,559 | ) | | (22,112 | ) | | 143 | | | (21,969 | ) | | (23,298 | ) | | 80 | | | (23,218 | ) | | (23,573 | ) | | 87 | | | (23,486 | ) | | (22,643 | ) | | 84 | | | (22,559 | ) |
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
38 Fee and commission expenses
| | | | 2006
| | 2005
| | 2004
| | | 2007 | | 2006 | | 2005 | |
| | | Segment
| | Consolidation
| | Group
| | Segment
| | Consolidation
| | Group
| | Segment
| | Consolidation
| | Group
| | | Segment | | Consolidation | | Group | | Segment | | Consolidation | | Group | | Segment | | Consolidation | | Group | |
| | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn | | | € 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 | ) | | (615 | ) | | 1 | | (614 | ) | | (487 | ) | | 1 | | (486 | ) | | (594 | ) | | — | | (594 | ) |
Service agreements | | (231 | ) | | 27 | | (204 | ) | | (172 | ) | | 10 | | (162 | ) | | (150 | ) | | — | | | (150 | ) | | (352 | ) | | 16 | | (336 | ) | | (231 | ) | | 27 | | (204 | ) | | (172 | ) | | 10 | | (162 | ) |
Investment advisory | | (3 | ) | | 2 | | (1 | ) | | (9 | ) | | 4 | | (5 | ) | | (5 | ) | | 2 | | | (3 | ) | | — | | | — | | — | | | (3 | ) | | 2 | | (1 | ) | | (9 | ) | | 4 | | (5 | ) |
| | |
|
| |
| |
|
| |
|
| |
| |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | (721 | ) | | 30 | | (691 | ) | | (775 | ) | | 14 | | (761 | ) | | (530 | ) | | 3 | | | (527 | ) | | (967 | ) | | 17 | | (950 | ) | | (721 | ) | | 30 | | (691 | ) | | (775 | ) | | 14 | | (761 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Life/Health | | | | | | | | | | | | | | | | | | | |
Service agreements | | (88 | ) | | 27 | | (61 | ) | | (137 | ) | | 31 | | (106 | ) | | (134 | ) | | 63 | | | (71 | ) | | (45 | ) | | 18 | | (27 | ) | | (88 | ) | | 27 | | (61 | ) | | (137 | ) | | 31 | | (106 | ) |
Investment advisory | | (135 | ) | | 19 | | (116 | ) | | (82 | ) | | — | | (82 | ) | | (11 | ) | | — | | | (11 | ) | | (164 | ) | | 6 | | (158 | ) | | (135 | ) | | 19 | | (116 | ) | | (82 | ) | | — | | (82 | ) |
| | |
|
| |
| |
|
| |
|
| |
| |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | (223 | ) | | 46 | | (177 | ) | | (219 | ) | | 31 | | (188 | ) | | (145 | ) | | 63 | | | (82 | ) | | (209 | ) | | 24 | | (185 | ) | | (223 | ) | | 46 | | (177 | ) | | (219 | ) | | 31 | | (188 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Banking | | | | | | | | | | | | | | | | | | | |
Securities business | | (120 | ) | | 1 | | (119 | ) | | (114 | ) | | — | | (114 | ) | | (98 | ) | | (1 | ) | | (99 | ) | | (172 | ) | | 1 | | (171 | ) | | (120 | ) | | 1 | | (119 | ) | | (114 | ) | | — | | (114 | ) |
Investment advisory | | (190 | ) | | 7 | | (183 | ) | | (178 | ) | | 5 | | (173 | ) | | (169 | ) | | 5 | | | (164 | ) | | (177 | ) | | 8 | | (169 | ) | | (190 | ) | | 7 | | (183 | ) | | (178 | ) | | 5 | | (173 | ) |
Payment transactions | | (22 | ) | | — | | (22 | ) | | (21 | ) | | — | | (21 | ) | | (20 | ) | | — | | | (20 | ) | | (22 | ) | | — | | (22 | ) | | (22 | ) | | — | | (22 | ) | | (21 | ) | | — | | (21 | ) |
Mergers and acquisitions advisory | | (49 | ) | | — | | (49 | ) | | (37 | ) | | — | | (37 | ) | | (27 | ) | | — | | | (27 | ) | | (19 | ) | | — | | (19 | ) | | (49 | ) | | — | | (49 | ) | | (37 | ) | | — | | (37 | ) |
Underwriting business | | (4 | ) | | — | | (4 | ) | | — | | | — | | — | | | — | | | — | | | — | | | (2 | ) | | — | | (2 | ) | | (4 | ) | | — | | (4 | ) | | — | | | — | | — | |
Other | | (205 | ) | | 49 | | (156 | ) | | (197 | ) | | 19 | | (178 | ) | | (216 | ) | | 23 | | | (193 | ) | | (211 | ) | | 9 | | (202 | ) | | (205 | ) | | 49 | | (156 | ) | | (197 | ) | | 19 | | (178 | ) |
| | |
|
| |
| |
|
| |
|
| |
| |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | (590 | ) | | 57 | | (533 | ) | | (547 | ) | | 24 | | (523 | ) | | (530 | ) | | 27 | | | (503 | ) | | (603 | ) | | 18 | | (585 | ) | | (590 | ) | | 57 | | (533 | ) | | (547 | ) | | 24 | | (523 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Asset Management | | | | | | | | | | | | | | | | | | | |
Commissions | | (953 | ) | | 427 | | (526 | ) | | (862 | ) | | 350 | | (512 | ) | | (731 | ) | | 291 | | | (440 | ) | | (948 | ) | | 435 | | (513 | ) | | (953 | ) | | 427 | | (526 | ) | | (862 | ) | | 350 | | (512 | ) |
Other | | (309 | ) | | 4 | | (305 | ) | | (248 | ) | | 5 | | (243 | ) | | (187 | ) | | 13 | | | (174 | ) | | (322 | ) | | 5 | | (317 | ) | | (309 | ) | | 4 | | (305 | ) | | (248 | ) | | 5 | | (243 | ) |
| | |
|
| |
| |
|
| |
|
| |
| |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | (1,262 | ) | | 431 | | (831 | ) | | (1,110 | ) | | 355 | | (755 | ) | | (918 | ) | | 304 | | | (614 | ) | | (1,270 | ) | | 440 | | (830 | ) | | (1,262 | ) | | 431 | | (831 | ) | | (1,110 | ) | | 355 | | (755 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Corporate | | | | | | | | | | | | | | | | | | | |
Service agreements | | (127 | ) | | 8 | | (119 | ) | | (92 | ) | | 7 | | (85 | ) | | (84 | ) | | 6 | | | (78 | ) | | (130 | ) | | 7 | | (123 | ) | | (127 | ) | | 8 | | (119 | ) | | (92 | ) | | 7 | | (85 | ) |
| | |
|
| |
| |
|
| |
|
| |
| |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | (127 | ) | | 8 | | (119 | ) | | (92 | ) | | 7 | | (85 | ) | | (84 | ) | | 6 | | | (78 | ) | | (130 | ) | | 7 | | (123 | ) | | (127 | ) | | 8 | | (119 | ) | | (92 | ) | | 7 | | (85 | ) |
| | |
|
| |
| |
|
| |
|
| |
| |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
Total | | (2,923 | ) | | 572 | | (2,351 | ) | | (2,743 | ) | | 431 | | (2,312 | ) | | (2,207 | ) | | 403 | | | (1,804 | ) | | (3,179 | ) | | 506 | | (2,673 | ) | | (2,923 | ) | | 572 | | (2,351 | ) | | (2,743 | ) | | 431 | | (2,312 | ) |
| | |
|
| |
| |
|
| |
|
| |
| |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
39 Other expenses
| | | | 2006
| | 2005
| | 2004
| | 2007 | | 2006 | | 2005 | |
| | | € mn | | € mn | | € mn | | € 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) | |
Expenses from real estate held for own use | | | | | | | |
Realized losses from disposals of real estate held for own use | | | (4 | ) | | (9 | ) | | (8 | ) |
Impairments of real estate held for own use | | | (17 | ) | | (3 | ) | | (9 | ) |
| | | | | | | | | | |
Subtotal | | (12) | | (17) | | (156) | | (21 | ) | | (12 | ) | | (17 | ) |
| | | | | | | | | | |
Other | | 13 | | (34) | | (44) | | 7 | | | 13 | | | (34 | ) |
| | | | | | | | | | |
Total | | 1 | | (51) | | (200) | | (14 | ) | | 1 | | | (51 | ) |
| | |
| |
| |
| | | | | | | | | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
40 Expenses from fully consolidated private equity investments
| | | | MAN Roland
Druckma-
schinen AG
| | Four Seasons Health Care Ltd.
| | Total
| | | MAN
Roland
Druck-
maschinen
AG | | Selecta
AG | | Four
Seasons
Health
Care
Ltd. | | Other | | Total | |
| | | | € mn | | € mn | | € mn | | € mn | | € mn | |
2007 | | | | | | | | | | | |
Cost of goods sold | | | (1,526 | ) | | (234 | ) | | — | | | (3 | ) | | (1,763 | ) |
Commissions | | | (164 | ) | | — | | | — | | | — | | | (164 | ) |
General and administrative expenses | | | (218 | ) | | (106 | ) | | — | | | — | | | (324 | ) |
Interest expense | | | (26 | ) | | (40 | ) | | — | | | — | | | (66 | ) |
| | | | | | | | | | | | | | | | |
Total | | | (1,934 | ) | | (380 | ) | | — | | | (3 | ) | | (2,317 | ) |
| | | € mn | | € mn | | € mn | | | | | | | | | | | | | | | | |
2006 | | | | | | | | | | | | |
Cost of goods sold | | (849 | ) | | — | | | (849 | ) | | (849 | ) | | — | | | — | | | — | | | (849 | ) |
Commissions | | (71 | ) | | — | | | (71 | ) | | (71 | ) | | — | | | — | | | — | | | (71 | ) |
General and administrative expenses | | (133 | ) | | (264 | ) | | (397 | ) | | (133 | ) | | — | | | (264 | ) | | — | | | (397 | ) |
Interest expense | | (14 | ) | | (50 | ) | | (64 | ) | | (14 | ) | | — | | | (50 | ) | | — | | | (64 | ) |
| | |
|
| |
|
| |
|
| | | | | | | | | | | | | | | |
Total | | (1,067 | ) | | (314 | ) | | (1,381 | ) | | (1,067 | ) | | — | | | (314 | ) | | — | | | (1,381 | ) |
| | |
|
| |
|
| |
|
| | | | | | | | | | | | | | | |
2005 | | | | | | | | | | | | |
Cost of goods sold | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Commissions | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
General and administrative expenses | | — | | | (497 | ) | | (497 | ) | | — | | | — | | | (497 | ) | | — | | | (497 | ) |
Interest expense | | — | | | (75 | ) | | (75 | ) | | — | | | — | | | (75 | ) | | — | | | (75 | ) |
| | |
|
| |
|
| |
|
| | | | | | | | | | | | | | | |
Total | | — | | | (572 | ) | | (572 | ) | | — | | | — | | | (572 | ) | | — | | | (572 | ) |
| | |
|
| |
|
| |
|
| | | | | | | | | | | | | | | |
2004 | | | |
Cost of goods sold | | — | | | — | | | — | | |
Commissions | | — | | | — | | | — | | |
General and administrative expenses | | — | | | (151 | ) | | (151 | ) | |
Interest expense | | — | | | (24 | ) | | (24 | ) | |
| | |
|
| |
|
| |
|
| |
Total | | — | | | (175 | ) | | (175 | ) | |
| | |
|
| |
|
| |
|
| |
41 Income taxes
| | | | 2006
| | 2005
| | 2004
| | | 2007 | | 2006 | | 2005 | |
| | | € mn | | € mn | | € mn | | | € mn | | € mn | | € mn | |
Current income tax expense | | | | | | | |
Germany | | 198 | | | (1,020 | ) | | (373 | ) | | (738 | ) | | 198 | | | (1,020 | ) |
Other countries | | (1,888 | ) | | (1,025 | ) | | (930 | ) | | (2,066 | ) | | (1,888 | ) | | (1,025 | ) |
| | | | | | | | | | |
Subtotal | | (1,690 | ) | | (2,045 | ) | | (1,303 | ) | | (2,804 | ) | | (1,690 | ) | | (2,045 | ) |
| | | | | | | | | | |
Deferred income tax expense | | | | | | | |
Germany | | 100 | | | 408 | | | (32 | ) | | 234 | | | 100 | | | 408 | |
Other countries | | (423 | ) | | (426 | ) | | (275 | ) | | (284 | ) | | (423 | ) | | (426 | ) |
| | | | | | | | | | |
Subtotal | | (323 | ) | | (18 | ) | | (307 | ) | | (50 | ) | | (323 | ) | | (18 | ) |
| | |
|
| |
|
| |
|
| | | | | | | | | |
Total | | (2,013 | ) | | (2,063 | ) | | (1,610 | ) | | (2,854 | ) | | (2,013 | ) | | (2,063 | ) |
| | |
|
| |
|
| |
|
| | | | | | | | | |
During the year ended December, 31, 2006,2007, current income tax expense included a benefit of €5 mn (2006: benefit of €51 mn (2005:mn; 2005: charge of €44 mn; 2004: charge of €17 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.years.
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 capitalisedcapitalized on a discounted basis as atof December 31, 2006, and reduced current income tax expense in 2006 by €571 mn.
Of the deferred tax charge for the year ended December 31, 2006,2007, an expense of €178 mn (2006: income of €480 mn (2005:mn; 2005: income of €468 mn; 2004: €2 mn) areis attributable to the recognition of deferred taxes on temporary differences and expense of €57 mn (2006: €785 mn (2005:mn; 2005: €492 mn; 2004: € 342 mn) areis attributable to tax losses carried forward. The changeAdditionally, changes of applicable tax rates due to changes in tax law produced deferred tax income of €185 mn (2006 expense of €18 mn (2005mn; 2005 income of €7 mn; 2004mn). In this amount is included a tax income of €34
Notes to€152 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, 2006,2007, amounted to €870 mn (2006: benefit of €740 mn (2005:mn; 2005: charge of €101 mn; 2004: charge of €578 mn).
The recognized income tax charge for the year ended December 31, 2006,2007, is €524 mn (2006: €1,130 mnmn; 2005: €278 mn) lower than the expected income tax charge (2005: lower than expected by €278 mn; 2004: higher than expected by €131 mn).charge. The following table shows the reconciliation offrom the expected income tax charge of the Allianz Group withto the effectively recognized tax charge. 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 subsidiaries applied in the reconciliation includes corporate tax and the solidarity surcharge and amounts to 26.38% (2005:(2006: 26.38%; 2004:2005: 26.38%).
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
The effective tax rate is determined on the basis of the effective income tax charge on income before income taxes and minority interests in earnings.
| | | | 2006
| | 2005
| | 2004
| | | 2007 | | 2006 | | 2005 | |
| | | € mn | | € mn | | € mn | | | € mn | | € mn | | € mn | |
Income before income taxes and minority interests in earnings | | | | | | | | |
Germany | | 2,314 | | | 1,780 | | | 1,157 | | | 3,373 | | | 2,314 | | | 1,780 | |
Other countries | | 8,009 | | | 6,049 | | | 3,887 | | | 8,195 | | | 8,009 | | | 6,049 | |
| | |
|
| |
|
| |
|
| | | | | | | | | |
Total | | 10,323 | | | 7,829 | | | 5,044 | | | 11,568 | | | 10,323 | | | 7,829 | |
| | |
|
| |
|
| |
|
| | | | | | | | | |
Expected income tax rate in % | | 30.4 | | | 29.9 | | | 29.3 | | | 29.2 | | | 30.4 | | | 29.9 | |
Expected income tax charge | | 3,143 | | | 2,340 | | | 1,478 | | | 3,378 | | | 3,143 | | | 2,340 | |
Municipal trade tax and similar taxes | | 208 | | | 280 | | | 227 | | | 522 | | | 208 | | | 280 | |
Net tax exempt income | | (884 | ) | | (503 | ) | | (426 | ) | | (1,022 | ) | | (884 | ) | | (503 | ) |
Amortization of goodwill | | — | | | — | | | 296 | | |
Effects of tax losses | | (50 | ) | | (73 | ) | | (68 | ) | | 226 | | | (50 | ) | | (73 | ) |
Effects of German tax law changes | | (571 | ) | | — | | | — | | | (152 | ) | | (571 | ) | | — | |
Other tax settlements | | 167 | | | 19 | | | 103 | | |
Other | | | (98 | ) | | 167 | | | 19 | |
| | | | | | | | | | |
Income taxes | | 2,013 | | | 2,063 | | | 1,610 | | | 2,854 | | | 2,013 | | | 2,063 | |
| | | | | | | | | | |
Effective tax rate in % | | 19.5 | | | 26.3 | | | 31.9 | | | 24.7 | | | 19.5 | | | 26.3 | |
During the year ended December 31, 2006,2007, a deferred tax charge of €8 mn (2006: €35 mn (2005:mn; 2005: €4 mn; 2004: €129 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 charge diminished by €52 mn (2006: €45 mn (2005:mn; 2005: €64 mn; 2004: €193 mn). The recognition of deferred tax assets on 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 €207 mn (2006: €54 mn (2005:mn; 2005: €39 mn; 2004: €87 mn). The non-recognition of deferred taxes on tax losses for the current fiscal year increased tax charges by €477 mn (2006: €14 mn (2005:mn; 2005: €26 mn; 2004: €83 mn). The above mentioned effects are shown in the reconciliation statement as “effects of tax losses”.
The tax rates used in the calculation of the Allianz Group deferred taxes are the applicable national rates, which in 20062007 ranged from 10.0% to 46.1%45.4%. Changes to tax rates already adopted on December 31, 2006,2007, 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
| | | 2007 | | 2006 | |
| | | € mn | | € mn | | | € mn | | € mn | |
Deferred tax assets | | | | | | |
Intangible assets | | 556 | | | 370 | | | 471 | | | 556 | |
Investments | | 2,786 | | | 1,658 | | | 2,533 | | | 2,786 | |
Financial assets held for trading | | 236 | | | 332 | | | 134 | | | 236 | |
Deferred acquisition costs | | 351 | | | 187 | | | 244 | | | 351 | |
Tax losses carried forward | | 4,859 | | | 5,850 | | | 4,041 | | | 4,859 | |
Other assets | | 955 | | | 1,205 | | | 932 | | | 955 | |
Insurance reserves | | 4,668 | | | 3,929 | | | 3,608 | | | 4,668 | |
Pensions and similar obligations | | 384 | | | 351 | | | 357 | | | 384 | |
Other liabilities | | 1,513 | | | 1,546 | | | 1,325 | | | 1,513 | |
| | | | | | | |
Total deferred tax assets | | 16,308 | | | 15,428 | | | 13,645 | | | 16,308 | |
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 | | | (814 | ) | | (731 | ) |
Effect of netting | | (10,850 | ) | | (9,297 | ) | | (8,060 | ) | | (10,850 | ) |
| | | | | | | |
Net deferred tax assets | | 4,727 | | | 5,299 | | | 4,771 | | | 4,727 | |
| | | | | | | |
Deferred tax liabilities | | | | | | |
Intangible assets | | 861 | | | 805 | | | 614 | | | 861 | |
Investments | | 4,084 | | | 4,634 | | | 3,244 | | | 4,055 | |
Financial assets held for trading | | 842 | | | 900 | | | 490 | | | 842 | |
Deferred acquisition costs | | 3,927 | | | 3,207 | | | 3,486 | | | 3,927 | |
Other assets | | 1,076 | | | 736 | | | 751 | | | 1,076 | |
Insurance reserves | | 3,152 | | | 2,402 | | | 2,383 | | | 3,152 | |
Pensions and similar obligations | | 257 | | | 146 | | | 231 | | | 257 | |
Other liabilities | | 1,269 | | | 1,791 | | | 834 | | | 1,268 | |
| | | | | | | |
Total deferred tax liabilities | | 15,468 | | | 14,621 | | | 12,033 | | | 15,438 | |
| | | | | | | |
Effect of netting | | (10,850 | ) | | (9,297 | ) | | (8,060 | ) | | (10,850 | ) |
| | | | | | | |
Net deferred tax liabilities | | 4,618 | | | 5,324 | | | 3,973 | | | 4,588 | |
| | | | | | | |
Net deferred tax assets/(liabilities) | | 109 | | | (25 | ) | | 798 | | | 139 | |
| | | | | | | |
Tax losses carried forward
Tax losses carried forward at December 31, 2006,2007, of €13,336€14,079 mn (2005: €15,740(2006: €13,336 mn) result in
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
recognition of deferred tax assets to the extent there is sufficient certainty that the unused tax losses will be utilized. €10,414€12,271 mn (2005: €10,886(2006: €10,414 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 |
2007 | | 185 | |
| | | | € mn |
2008 | | 71 | | 64 |
2009 | | 232 | | 120 |
2010 | | 42 | | 63 |
2011 | | 126 | | 120 |
2012 | | 13 | | 149 |
2013 | | 8 | | 7 |
2014 | | — | | 58 |
2015 | | — | | 2 |
2016 | | — | | 6 |
2017 | | | 10 |
>10 years | | 2,245 | | 1,209 |
Unlimited | | 10,414 | | 12,271 |
| | |
| | |
Total | | 13,336 | | 14,079 |
| | |
| | |
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 | |
| | |
|
| |
|
| |
|
|
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
| | | | | | | | | |
| | | Segment | | | Consolidation | | | Group | |
| | | € mn | | | € mn | | | € mn | |
2007 | | | | | | | | | |
Interest and similar income | | 8,370 | | | (66 | ) | | 8,304 | |
Interest expense | | (5,266 | ) | | 178 | | | (5,088 | ) |
| | | | | | | | | |
Net interest income | | 3,104 | | | 112 | | | 3,216 | |
| | | | | | | | | |
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 | |
| | | | | | | | | |
Net fee and commission income from the Banking Segment
| | | | Segment
| | Consolidation
| | Group
| | | Segment | | Consolidation | | Group | |
| | | | € mn | | € mn | | € mn | |
2007 | | | | | | | |
Fee and commission income | | | 3,651 | | | (390 | ) | | 3,261 | |
Fee and commission expense | | | (603 | ) | | 18 | | | (585 | ) |
| | | | | | | | | | |
Net fee and commission income | | | 3,048 | | | (372 | ) | | 2,676 | |
| | | € mn | | € mn | | € mn | | | | | | | | | | |
2006 | | | | | | | |
Fee and commission income | | 3,598 | | | (421 | ) | | 3,177 | | | 3,598 | | | (421 | ) | | 3,177 | |
Fee and commission expense | | (590 | ) | | 57 | | | (533 | ) | | (590 | ) | | 57 | | | (533 | ) |
| | |
|
| |
|
| |
|
| | | | | | | | | |
Net fee and commission income | | 3,008 | | | (364 | ) | | 2,644 | | | 3,008 | | | (364 | ) | | 2,644 | |
| | |
|
| |
|
| |
|
| | | | | | | | | |
2005 | | | | | | | |
Fee and commission income | | 3,397 | | | (313 | ) | | 3,084 | | | 3,397 | | | (313 | ) | | 3,084 | |
Fee and commission expense | | (547 | ) | | 24 | | | (523 | ) | | (547 | ) | | 24 | | | (523 | ) |
| | |
|
| |
|
| |
|
| | | | | | | | | |
Net fee and commission income | | 2,850 | | | (289 | ) | | 2,561 | | | 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
| | 2007 | | 2006 | | 2005 |
| | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn |
Securities business | | 1,352 | | 1,225 | | 1,105 | | 1,347 | | 1,352 | | 1,225 |
Investment advisory | | 421 | | 380 | | 355 | | 357 | | 421 | | 380 |
Payment transactions | | 342 | | 360 | | 379 | | 350 | | 342 | | 360 |
Merger and acquisitions advisory | | 235 | | 219 | | 155 | | 214 | | 235 | | 219 |
Underwriting business | | 129 | | 102 | | 97 | | 78 | | 129 | | 102 |
Other | | 529 | | 564 | | 616 | | 702 | | 529 | | 564 |
| | |
| |
| |
| | | | | | |
Total | | 3,008 | | 2,850 | | 2,707 | | 3,048 | | 3,008 | | 2,850 |
| | |
| |
| |
| | | | | | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
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)
| | | | | | | | | | |
| | | 2007 | | 2006 |
| | | USD | | GBP | | Other | | Total | | Total |
| | | € mn | | € mn | | € mn | | € mn | | € mn |
Balance sheet items | | | | | | | | | | |
Assets | | 93,906 | | 45,067 | | 30,815 | | 169,788 | | 222,548 |
Liabilities | | 108,159 | | 39,425 | | 33,343 | | 180,927 | | 207,692 |
Trustee business in the Banking segment
The following presents trustee business within the Allianz Group’s Banking segment not recorded in the consolidated 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 |
| | | | |
As of December 31, | | 2007 | | 2006 |
| | | € mn | | € mn |
Loans and advances to banks | | 2,030 | | 1,956 |
Loans and advances to customers | | 959 | | 1,205 |
Investments and other assets | | 564 | | 729 |
| | | | |
Total assets1) | | 3,553 | | 3,890 |
| | | | |
Liabilities to banks | | 655 | | 870 |
Liabilities to customers | | 2,898 | | 3,020 |
| | | | |
Total liabilities | | 3,553 | | 3,890 |
| | | | |
(1)1)
| Including €1,964€1,554 mn (2005: €2,170(2006: €1,964 mn) of trustee loans. |
Other banking information
As of December 31, 2006,2007, the Allianz Group had deposits that have been reclassified as loan balances of €6,697€8,152 mn (2005: €6,131(2006: €6,697 mn) and deposits with related parties of €627€302 mn (2005: €2,297(2006: €627 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
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
control procedures. Credit risks related to counterparties are assessed by calculating gross replacement values. Market risks are monitored by means of up-to-dateup-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”) products, which are individuallyareindividually 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 counterpartycounter-party 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.
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 | ) |
| | |
| |
| |
| |
| |
| |
|
| |
| |
| |
|
|
| | | | | | | | | | | | | | | | | | | | |
| | | 2007 | | | 2006 | |
| | | 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 | | 11,177 | | 1,884 | | — | | 13,061 | | 10 | | (370 | ) | | 5,057 | | 69 | | (163 | ) |
Swaps | | 2,132 | | 16,066 | | 13,734 | | 31,932 | | 160 | | (87 | ) | | 14,254 | | 171 | | (89 | ) |
Swaptions | | 340 | | 580 | | — | | 920 | | 46 | | (17 | ) | | 1,037 | | 8 | | (11 | ) |
Caps | | 621 | | 7,524 | | 10 | | 8,155 | | — | | (50 | ) | | 14,403 | | — | | (83 | ) |
Floors | | — | | — | | 106 | | 106 | | — | | — | | | — | | — | | — | |
Options | | 13 | | — | | — | | 13 | | — | | — | | | 2 | | — | | — | |
Exchange traded | | | | | | | | | | | | | | | | | | | | |
Forwards | | — | | — | | — | | — | | — | | — | | | 295 | | — | | (3 | ) |
Futures | | 10,966 | | 4,754 | | — | | 15,720 | | 67 | | (62 | ) | | 33,211 | | 35 | | (39 | ) |
Options | | 21 | | — | | — | | 21 | | — | | — | | | 1,417 | | — | | (3 | ) |
| | | | | | | | | | | | | | | | | | | | |
Subtotal | | 25,270 | | 30,808 | | 13,850 | | 69,928 | | 283 | | (586 | ) | | 69,676 | | 283 | | (391 | ) |
| | | | | | | | | | | | | | | | | | | | |
Equity index contracts, consisting of: | | | | | | | | | | | | | | | | | | | | |
OTC | | | | | | | | | | | | | | | | | | | | |
Forwards | | 4,295 | | 1,556 | | — | | 5,851 | | 39 | | (2,151 | ) | | 5,996 | | 316 | | (1,178 | ) |
Swaps | | 146 | | 339 | | — | | 485 | | 12 | | (19 | ) | | 295 | | — | | — | |
Floors | | 5 | | — | | — | | 5 | | 5 | | — | | | 3 | | 3 | | — | |
Options1) | | 59,476 | | 1,851 | | 55 | | 61,382 | | 1,029 | | (4,493 | ) | | 78,365 | | 1,242 | | (4,554 | ) |
Warrants | | — | | — | | 13 | | 13 | | 13 | | — | | | — | | — | | — | |
Exchange traded | | | | | | | | | | | | | | | | | | | | |
Futures | | 8,520 | | — | | — | | 8,520 | | 24 | | (97 | ) | | 9,820 | | 2 | | (42 | ) |
Options | | — | | 1 | | 2 | | 3 | | — | | (1 | ) | | 692 | | — | | (2 | ) |
Forwards | | 450 | | — | | — | | 450 | | — | | (428 | ) | | 1,262 | | — | | (752 | ) |
Warrants | | — | | 1 | | — | | 1 | | 3 | | — | | | 1 | | 4 | | — | |
| | | | | | | | | | | | | | | | | | | | |
Subtotal | | 72,892 | | 3,748 | | 70 | | 76,710 | | 1,125 | | (7,189 | ) | | 96,434 | | 1,567 | | (6,528 | ) |
| | | | | | | | | | | | | | | | | | | | |
Foreign exchange contracts, consisting of: | | | | | | | | | | | | | | | | | | | | |
OTC | | | | | | | | | | | | | | | | | | | | |
Forwards | | 6,001 | | 25 | | — | | 6,026 | | 61 | | (32 | ) | | 5,222 | | 965 | | (957 | ) |
Swaps | | — | | 245 | | 27 | | 272 | | 10 | | (21 | ) | | 282 | | 13 | | (11 | ) |
Options | | 71 | | — | | — | | 71 | | 2 | | (10 | ) | | — | | — | | — | |
| | | | | | | | | | | | | | | | | | | | |
Subtotal | | 6,072 | | 270 | | 27 | | 6,369 | | 73 | | (63 | ) | | 5,504 | | 978 | | (968 | ) |
| | | | | | | | | | | | | | | | | | | | |
Credit contracts, consisting of: | | | | | | | | | | | | | | | | | | | | |
OTC | | | | | | | | | | | | | | | | | | | | |
Options | | — | | — | | — | | — | | — | | — | | | 100 | | — | | (3 | ) |
Swaps | | 242 | | 1,112 | | 582 | | 1,936 | | 6 | | (7 | ) | | 1,138 | | 2 | | (8 | ) |
Exchange traded | | | | | | | | | | | | | | | | | | | | |
Swaps | | — | | 257 | | — | | 257 | | 3 | | — | | | 273 | | 2 | | — | |
| | | | | | | | | | | | | | | | | | | | |
Subtotal | | 242 | | 1,369 | | 582 | | 2,193 | | 9 | | (7 | ) | | 1,511 | | 4 | | (11 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total | | 104,476 | | 36,195 | | 14,529 | | 155,200 | | 1,490 | | (7,845 | ) | | 173,125 | | 2,832 | | (7,898 | ) |
| | | | | | | | | | | | | | | | | | | | |
(1)1)
| As of December 31, 2006,2007, includes embedded derivatives related to equity indexed annuities with negative fair values of €4,327 mn (2006: €4,199 mn (2005: €2,841 mn). |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Banking and Asset Management Segments
| As of December 31,
| | 2006
| | 2005
| | | 2007 | | 2006 | |
| | | 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 | ) | | 53,445 | | 4,706 | | — | | 58,151 | | 43 | | (33 | ) | | 122,708 | | 37 | | (30 | ) |
Swaps | | 997,593 | | 1,157,122 | | 1,209,833 | | 3,364,548 | | 41,870 | | (40,669 | ) | | 3,235,959 | | 58,931 | | (56,849 | ) | | 1,049,672 | | 1,171,006 | | 1,254,247 | | 3,474,925 | | 43,098 | | (41,487 | ) | | 3,364,548 | | 41,870 | | (40,669 | ) |
Swaptions | | 23,001 | | 27,490 | | 42,447 | | 92,938 | | 858 | | (2,253 | ) | | 95,353 | | 1,094 | | (2,768 | ) | | 16,416 | | 29,209 | | 52,617 | | 98,242 | | 750 | | (1,928 | ) | | 92,938 | | 858 | | (2,253 | ) |
Caps | | 4,590 | | 45,424 | | 11,761 | | 61,775 | | 172 | | (191 | ) | | 58,366 | | 141 | | (112 | ) | | 11,401 | | 34,707 | | 10,874 | | 56,982 | | 200 | | (300 | ) | | 61,775 | | 172 | | (191 | ) |
Floors | | 8,600 | | 27,753 | | 5,089 | | 41,442 | | 203 | | (144 | ) | | 30,921 | | 404 | | (264 | ) | | 5,909 | | 17,278 | | 4,575 | | 27,762 | | 147 | | (119 | ) | | 41,442 | | 203 | | (144 | ) |
Options | | 807 | | 550 | | 868 | | 2,225 | | 41 | | (32 | ) | | 1,581 | | 57 | | (62 | ) | | 102 | | 454 | | 532 | | 1,088 | | 35 | | (20 | ) | | 2,225 | | 41 | | (32 | ) |
Other | | 3,923 | | 1,632 | | 6,644 | | 12,199 | | 2,316 | | (1,388 | ) | | 10,018 | | 64 | | (82 | ) | | 3,724 | | 1,107 | | 5,339 | | 10,170 | | 819 | | (579 | ) | | 12,199 | | 2,316 | | (1,388 | ) |
Exchange traded | | | | | | | | | | | | | | | | | | | |
Futures | | 99,259 | | 16,905 | | — | | 116,164 | | 7 | | (5 | ) | | 185,288 | | 105 | | (125 | ) | | 89,404 | | 20,876 | | 29 | | 110,309 | | 1 | | (1 | ) | | 116,164 | | 7 | | (5 | ) |
Options | | 27,969 | | 1,940 | | — | | 29,909 | | 1,390 | | (915 | ) | | 42,985 | | 692 | | (262 | ) | | 458,934 | | 366 | | — | | 459,300 | | 1,432 | | (1,254 | ) | | 29,909 | | 1,390 | | (915 | ) |
| | |
| |
| |
| |
| |
| |
|
| |
| |
| |
|
| | | | | | | | | | | | | | | | | | | | |
Subtotal | | 1,287,036 | | 1,280,230 | | 1,276,642 | | 3,843,908 | | 46,894 | | (45,627 | ) | | 3,778,236 | | 61,528 | | (60,557 | ) | | 1,689,007 | | 1,279,709 | | 1,328,213 | | 4,296,929 | | 46,525 | | (45,721 | ) | | 3,843,908 | | 46,894 | | (45,627 | ) |
| | |
| |
| |
| |
| |
| |
|
| |
| |
| |
|
| | | | | | | | | | | | | | | | | | | | |
Equity index contracts, consisting of: | | | | | | | | | | | | | | | | | | | |
OTC | | | | | | | | | | | | | | | | | | | |
Swaps | | 22,897 | | 6,052 | | 13,080 | | 42,029 | | 1,059 | | (977 | ) | | 20,505 | | 642 | | (723 | ) | | 15,584 | | 8,119 | | 4,506 | | 28,209 | | 1,042 | | (1,246 | ) | | 42,029 | | 1,059 | | (977 | ) |
Options | | 85,017 | | 103,590 | | 6,184 | | 194,791 | | 10,668 | | (11,091 | ) | | 220,286 | | 9,061 | | (9,429 | ) | | 104,037 | | 84,067 | | 9,151 | | 197,255 | | 11,080 | | (12,033 | ) | | 194,791 | | 10,668 | | (11,091 | ) |
Forwards | | — | | — | | — | | — | | — | | — | | | 70 | | — | | (34 | ) | |
Other | | 33 | | 915 | | — | | 948 | | 5 | | (47 | ) | | 1,077 | | 4 | | (11 | ) | | 6 | | 4 | | 15 | | 25 | | 2 | | (117 | ) | | 948 | | 5 | | (47 | ) |
Exchange traded | | | | | | | | | | | | | | | | | | | |
Futures | | 9,160 | | — | | — | | 9,160 | | — | | (10 | ) | | 10,659 | | 1 | | (38 | ) | | 8,663 | | 43 | | — | | 8,706 | | — | | — | | | 9,160 | | — | | (10 | ) |
Options | | 45,824 | | 44,536 | | 3,323 | | 93,683 | | 4,705 | | (3,911 | ) | | 81,115 | | 3,185 | | (3,063 | ) | | 76,888 | | 63,107 | | 4,167 | | 144,162 | | 6,197 | | (5,948 | ) | | 93,683 | | 4,705 | | (3,911 | ) |
| | |
| |
| |
| |
| |
| |
|
| |
| |
| |
|
| | | | | | | | | | | | | | | | | | | | |
Subtotal | | 162,931 | | 155,093 | | 22,587 | | 340,611 | | 16,437 | | (16,036 | ) | | 333,712 | | 12,893 | | (13,298 | ) | | 205,178 | | 155,340 | | 17,839 | | 378,357 | | 18,321 | | (19,344 | ) | | 340,611 | | 16,437 | | (16,036 | ) |
| | |
| |
| |
| |
| |
| |
|
| |
| |
| |
|
| | | | | | | | | | | | | | | | | | | | |
Foreign exchange contracts, consisting of: | | | | | | | | | | | | | | | | | | | |
OTC | | | | | | | | | | | | | | | | | | | |
Forwards | | 359,752 | | 14,487 | | 486 | | 374,725 | | 4,888 | | (4,900 | ) | | 410,566 | | 4,805 | | (4,976 | ) | | 473,173 | | 17,358 | | 478 | | 491,009 | | 6,358 | | (6,139 | ) | | 374,725 | | 4,888 | | (4,900 | ) |
Swaps | | 22,602 | | 49,585 | | 23,376 | | 95,563 | | 3,588 | | (3,222 | ) | | 82,988 | | 2,888 | | (2,634 | ) | | 24,579 | | 44,794 | | 24,042 | | 93,415 | | 4,128 | | (3,203 | ) | | 95,563 | | 3,588 | | (3,222 | ) |
Options | | 182,133 | | 32,321 | | 1,372 | | 215,826 | | 1,540 | | (1,755 | ) | | 148,183 | | 1,340 | | (1,637 | ) | | 238,872 | | 30,696 | | 3,990 | | 273,558 | | 2,978 | | (3,165 | ) | | 215,826 | | 1,540 | | (1,755 | ) |
Other | | — | | — | | — | | — | | — | | — | | | 590 | | 1 | | — | | | 39 | | — | | — | | 39 | | — | | — | | | — | | — | | — | |
Exchange traded | | | | | | | | | | | | | | | | | | | |
Futures | | 886 | | 887 | | — | | 1,773 | | 3 | | (5 | ) | | 2,387 | | 4 | | (5 | ) | | 2,895 | | 1,410 | | — | | 4,305 | | 21 | | (15 | ) | | 1,773 | | 3 | | (5 | ) |
Options | | 722 | | — | | — | | 722 | | 4 | | (1 | ) | | 297 | | 10 | | (2 | ) | | 1,082 | | 118 | | — | | 1,200 | | 13 | | (4 | ) | | 722 | | 4 | | (1 | ) |
| | |
| |
| |
| |
| |
| |
|
| |
| |
| |
|
| | | | | | | | | | | | | | | | | | | | |
Subtotal | | 566,095 | | 97,280 | | 25,234 | | 688,609 | | 10,023 | | (9,883 | ) | | 645,011 | | 9,048 | | (9,254 | ) | | 740,640 | | 94,376 | | 28,510 | | 863,526 | | 13,498 | | (12,526 | ) | | 688,609 | | 10,023 | | (9,883 | ) |
| | |
| |
| |
| |
| |
| |
|
| |
| |
| |
|
| | | | | | | | | | | | | | | | | | | | |
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 | ) | | 56,977 | | 831,150 | | 252,400 | | 1,140,527 | | 11,525 | | (10,993 | ) | | 895,412 | | 5,313 | | (5,025 | ) |
Total return swaps | | 4,961 | | 3,873 | | 2,685 | | 11,519 | | 937 | | (1,440 | ) | | 13,653 | | 769 | | (1,249 | ) | | 6,850 | | 4,776 | | 1,253 | | 12,879 | | 430 | | (857 | ) | | 11,519 | | 937 | | (1,440 | ) |
| | |
| |
| |
| |
| |
| |
|
| |
| |
| |
|
| | | | | | | | | | | | | | | | | | | | |
Subtotal | | 61,938 | | 606,737 | | 238,256 | | 906,931 | | 6,250 | | (6,465 | ) | | 497,001 | | 3,877 | | (3,960 | ) | | 63,827 | | 835,926 | | 253,653 | | 1,153,406 | | 11,955 | | (11,850 | ) | | 906,931 | | 6,250 | | (6,465 | ) |
| | |
| |
| |
| |
| |
| |
|
| |
| |
| |
|
| | | | | | | | | | | | | | | | | | | | |
Other contracts, consisting of: | | | | | | | | | | | | | | | | | | | |
OTC | | | | | | | | | | | | | | | | | | | |
Precious metals | | 9,081 | | 2,809 | | — | | 11,890 | | 440 | | (417 | ) | | 8,848 | | 503 | | (338 | ) | | 11,830 | | 3,214 | | — | | 15,044 | | 736 | | (640 | ) | | 11,890 | | 440 | | (417 | ) |
Options | | 22 | | 2 | | — | | 24 | | — | | (1 | ) | | — | | — | | — | | | 1,188 | | 2,562 | | 182 | | 3,932 | | 554 | | (583 | ) | | 24 | | — | | (1 | ) |
Other | | 3,678 | | 3,892 | | 48 | | 7,618 | | 126 | | (108 | ) | | 2,206 | | 48 | | (34 | ) | | 68 | | — | | 87 | | 155 | | — | | (25 | ) | | 7,618 | | 126 | | (108 | ) |
Exchange traded | | | | | | | | | | | | | | | | | | | |
Futures | | 1,759 | | 174 | | 5 | | 1,938 | | 1 | | — | | | 1,317 | | 8 | | — | | | 1,738 | | 459 | | — | | 2,197 | | — | | — | | | 1,938 | | 1 | | — | |
Options | | — | | — | | — | | — | | — | | — | | | 16 | | 1 | | — | | |
| | |
| |
| |
| |
| |
| |
|
| |
| |
| |
|
| | | | | | | | | | | | | | | | | | | | |
Subtotal | | 14,540 | | 6,877 | | 53 | | 21,470 | | 567 | | (526 | ) | | 12,387 | | 560 | | (372 | ) | | 14,824 | | 6,235 | | 269 | | 21,328 | | 1,290 | | (1,248 | ) | | 21,470 | | 567 | | (526 | ) |
| | |
| |
| |
| |
| |
| |
|
| |
| |
| |
|
| | | | | | | | | | | | | | | | | | | | |
Total | | 2,092,540 | | 2,146,217 | | 1,562,772 | | 5,801,529 | | 80,171 | | (78,537 | ) | | 5,266,347 | | 87,906 | | (87,441 | ) | | 2,713,476 | | 2,371,586 | | 1,628,484 | | 6,713,546 | | 91,589 | | (90,689 | ) | | 5,801,529 | | 80,171 | | (78,537 | ) |
| | |
| |
| |
| |
| |
| |
|
| |
| |
| |
|
| | | | | | | | | | | | | | | | | | | | |
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 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 in fair value hedges of the interest rate risk of certificated and subordinated liabilities had a total net fair value as of December 31, 20062007 of €247€176 mn (2005: €507(2006: €247 mn). Thereof, interest rate swaps with a positive fair value of €305€241 mn (2005: €537(2006: €305 mn) are recorded in the Allianz Group’s consolidated balance sheet in other assets, and interest rate swaps with a negative fair value of €58€65 mn (2005: €30(2006: €58 mn) are recorded in other liabilities. During the year ended DecemberDe-cember 31, 2006,2007, the fair value of the interest rate swaps decreased by €184€91 mn (2005: increase by €43(2006: €184 mn), whereas the certificated and subordinated liabilities hedged increased in fair value by €187€84 mn (2005: decrease by €24(2006: €187 mn), resulting in a net ineffectiveness of the hedge of €3€(7) mn (2005: €19(2006: €3 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.
The derivativeProperty-Casualty and the Life/Health segments use fair value hedges to hedge forward sales of shares. The financial instruments used in the fair value hedges had a total fair value of €(2,050) mn (2006: €(67) mn) as of December 31, 2007.
Additionally the Allianz Group uses fair value hedges to protect against the change in the fair value of financial assets due to movements in interest rates or exchange rate. The derivative financialinstruments used for all fair value hedges of the Allianz Group had a total negativepositive fair value as of December 31, 20062007 of €168 mn (2006: negative fair value of €388 mn).
For the year ended December 31, 2007, the Allianz Group recognised for fair value hedges a net loss of €462 mn (2005: €102(2006: €687 mn; 2005: €359 mn). on the hedging instrument and a net gain of €494 mn (2006: €698 mn; 2005: €400 mn) on the hedged item attributable to the hedged risk.
Cash flow hedges
During the year ended December 31, 2006,2007, cash flow hedges were used to hedge variable cash flows exposed to interest rate fluctuations. As of December 31, 2006,2007, the interest rate swaps utilized had a negative fair value of €55€2 mn (2005: €68(2006: €55 mn); other reserves in shareholders’ equity increased by €1€35 mn (2005: €3(2006: €1 mn). Ineffectiveness of the cash flow hedges led to net realized losses of €1 mn in 2007 (2006: €2 mn (2005: €5 mn).
The majority of the cash flow hedges originate from the Banking Segment. The cash flows of variable interest rate loans (hedge item) are hedged with interest rate swaps. The interest payments of the loans are based on the Libor and mature in 2006.June/July 2010. At the time of the interest payment the effective portion of the hedge, depending on the reference interest rate at that time, is recognised in the consolidated income statements.
Hedge of net investment in foreign operations
As of December 31, 2002, foreign exchange hedging transactions in the form of foreign currency forwards with a total fair value 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.
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
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, | | 2007 | | 2006 |
| | | Carrying
amount | | Fair
Value | | Carrying
amount | | Fair
Value |
| | | € mn | | € mn | | € mn | | € mn |
Financial assets | | | | | | | | |
Cash and cash equivalents | | 31,337 | | 31,337 | | 33,031 | | 33,031 |
Financial assets held for trading | | 163,541 | | 163,541 | | 180,105 | | 180,105 |
Financial assets designated at fair value through income | | 21,920 | | 21,920 | | 18,887 | | 18,887 |
Available-for-sale investments | | 268,001 | | 268,001 | | 277,898 | | 277,898 |
Held-to-maturity investments | | 4,659 | | 4,705 | | 4,748 | | 4,912 |
Loans and advances to banks and customers | | 396,702 | | 394,741 | | 423,765 | | 425,527 |
Financial assets for unit linked contracts | | 66,060 | | 66,060 | | 61,864 | | 61,864 |
Derivative financial instruments and firm commitments included in other assets | | 344 | | 344 | | 463 | | 463 |
| | | | |
Financial liabilities | | | | | | | | |
Financial liabilities held for trading | | 124,083 | | 124,083 | | 120,885 | | 120,885 |
Financial liabilities designated at fair value through income | | 1,970 | | 1,970 | | 937 | | 937 |
Liabilities to banks and customers | | 336,494 | | 335,394 | | 376,565 | | 376,765 |
Investment contracts with policyholders | | 90,404 | | 90,404 | | 87,108 | | 87,267 |
Financial liabilities for unit linked contracts | | 66,060 | | 66,060 | | 61,864 | | 61,864 |
Derivative financial instruments and firm commitments included in other liabilities | | 2,210 | | 2,210 | | 907 | | 907 |
Financial liabilities for puttable equity instruments | | 4,162 | | 4,162 | | 3,750 | | 3,750 |
Certificated liabilities, participation certificates and subordinated liabilities | | 56,894 | | 57,961 | | 71,284 | | 73,212 |
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 the ordinary course of business. If market prices are not available,an arm’s length transaction. Whenever possible the fair value is determined using the market prices available in active markets. If there is no quoted market price available, valuation techniques are used which are based on estimates using the present valuemarket prices of future cash flows methodcomparable instruments or another appropriateparameters from comparable active markets (market observable inputs). If no observable market inputs are available valuation method. These methodsmodels 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.
The Allianz Group uses the following methods and assumptions to determine fair values:used (non-market observable inputs).
Cash and cash equivalents The carrying amount corresponds to the fair value due to its short-term nature.Financial assets
Investments (includingCash and cash equivalents
Cash and cash equivalents comprises cash and demand deposits with banks together with short-termhighly liquid investments that are readily convertible to known amounts of cash and subject to insignificant risk of change in value.
Financial assets held for trading
A financial assets and liabilitiesasset is classified as held for trading if it is acquired principally for the purpose of selling in the near term, or forms part of a portfolio of financial instruments that are managed together and for which there is evidence of short-term profit taking, or it is a derivative (not in a qualifying hedge relationship). Held for trading financial assets are initially recognized at fair value with transaction costs being recognized in profit or loss. Subsequently they are measured at fair value. Gains and liabilitieslosses on held for trading financial assets are recognized in profit or loss as they arise.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Financial assets designated as at fair value through income)income The
Financial assets that the Group designates on initial recognition as being at fair value through income are recognized at fair value, with transaction costs being recognized in income and are subsequently measured at fair value. Gains and losses on financial assets that are designated as at fair value through income are recognized in profit or loss as they arise. Financial assets may be designated as at fair value through income only if such designation (a) eliminates or significantly reduces a measurement or recognition inconsistency; or (b) applies to a group of debt securitiesfinancial assets, financial liabilities or both that the Group manages and evaluates on a fair value basis; or (c) relates to an instrument that contains an embedded derivative which is basednot evidently closely related to the host contract. Fair value designation significantly reduces the measurement inconsistency that would arise if these assets were classified as available-for-sale.
Available-for-sale investments
Available-for-sale investments are financial assets that are designated as available-for-sale on market prices, provided these are available. If debt securitiesinitial recognition or are not actively traded, theirclassified as held-to-maturity, held for trading, designated as at fair value is determined on the basis of valuations by independent data suppliers. Thethrough income, or loans and receivables. Available-for-sale financial assets are initially recognized at fair value ofplus directly related transaction costs. They are subsequently measured at fair value. Unquoted equity securities is based on their stock-market prices. The carrying amount and theinvestments whose fair value for debt securitiescannot be measured reliably are carried at cost and equity securities do not includeclassified as available-for-sale financial assets. Impairment losses and exchange differences resulting from retranslating the amortized cost of currency monetary available-for-sale financial assets are recognized in profit or loss together with interest calculated using the effective interest method. Other changes in the fair value of derivativeavailable-for-sale financial assets are reported in a separate component of shareholders’ equity until disposal, when the cumulative gain or loss is recognized in profit or loss.
Held-to-maturity investments
A financial asset is classified as a held-to-maturity investment only if it has fixed or determinable payments, a fixed maturity and theGroup has the positive intention and ability to hold to maturity. Held-to-maturity investments are initially recognized at fair value plus directly related transaction costs. They are subsequently measured at amortized cost using the effective interest method, less any impairment losses.
Loans and advances to banks and customers
Non-derivative financial assets with fixed or determinable repayments that are not quoted in an active market are classified as loans, except for those that are classified as available-for-sale or as held for trading, or are designated as at fair value through income. Loans are initially recognized at fair value plus directly related transaction costs. They are subsequently measured at amortized cost using the effective interest method less any impairment losses.
Financial assets for unit linked contracts used to hedge
The fair values of financial assets for unit linked contracts were determined using the related debtmarket value of the underlying investment.
Derivative financial instruments and equity securities.firm commitments included in other assets and other liabilities
The fair value of a derivative financial instrumentsinstrument is derived from the value of the underlying assets and other market parameters. Exchange-traded derivative financial instruments are valued using the fair-value method, and the fair value is based on
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.
Financial liabilities
LoansFinancial liabilities held for trading
On initial recognition a financial liability is classified as held for trading if it is incurred principally for the purpose of selling in the near term,
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
forms part of a portfolio of financial instruments that are managed together and advancesfor which there is evidence of short-term profit taking, or is a derivative (not in a qualifying hedge relationship). Held for trading financial liabilities are recognized at fair value with transaction costs being recognized in profit or loss. Subsequently they are measured at fair value. Gains and losses are recognized in profit or loss as they arise.
Financial liabilities designated as at fair value through income
Financial liabilities that the Group designates on initial recognition as being at fair value through income are recognized at fair value, with transaction costs being recognized in profit or loss, and are subsequently measured at fair value. Gains and losses on financial liabilities that are designated as at fair value through income are recognized in profit or loss as they arise. Financial liabilities may be designated as at fair value through income only if such designation (a) eliminates or significantly reduces a measurement or recognition inconsistency; or (b) applies to a group of financial assets, financial liabilities or both that the Group manages and evaluates on a fair value basis; or (c) relates to an instrument that contains an embedded derivative which is not evidently closely related to the host contract.
Liabilities to banks and customers The
Financial liabilities due to banks and customers which are not held for trading, not designated as at fair value of loans is calculatedthrough income, not financial guarantee contracts, not commitments to provide a loan at a below-market interest rate and not designated as hedged items are measured at amortized cost using the discounted cash floweffective interest 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.
Investment contracts with policyholders
Fair values for investment and annuity contracts are determined using the cash surrender values of policyholders’ and contract holders’ accounts.
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 valuesFinancial liabilities for investment and annuity contracts were determined usingputtable equity instruments
A puttable equity instrument is a financial instrument that gives the holder the right to put the instrument back to the issuer for cash surrender values of the policyholders’ and contract holders’ accounts.or another financial asset. IAS 32 classifies any puttable instrument as a financial instrument.
ParticipationCertificated liabilities, participation certificates and subordinated liabilities and certificated liabilities
The fair value of bonds and loans payable is estimated using discounteddetermined by discounting future cash flow analyses, using interestflows to present value at market rates currently offered for similar loans and other borrowings.
Day one profit
During the year ended December 31, 2007 the Allianz Group entered into transactions, where the fair value of financial instruments is determined using valuation techniques for which not all inputs are market observable rates or prices. The difference between transaction price and the model fair value is called day one profit.
The following table presentsshows the carrying amountreconciliation of day one profit and estimated fair value ofloss for the Allianz Group’s financial instruments:years ended December 31, 2007, 2006 and 2005:
| | | | | | | | |
| | | 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 |
| | | | | | | | | |
| | | 2007 | | | 2006 | | | 2005 | |
| | | € mn | | | € mn | | | € mn | |
Day one profit as of January 1, | | 42 | | | 42 | | | 68 | |
Additions from new transactions | | 2 | | | 22 | | | 11 | |
Realeases to income statements | | (16 | ) | | (22 | ) | | (37 | ) |
Day one profit as of December 31, | | 28 | | | 42 | | | 42 | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
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 SupervisoryBoardSupervisory Board 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’sAllianz SE’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. Managementproceedings.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,March 2005, Allianz Versicherungs-AG, among other German insurance companies, was fined by the German Federal Cartel Office (Bundeskartellamt) commenced an investigation against several property-casualty insurance companies in Germany, in connection with(“Bundeskartellamt”) for alleged coordinated behaviorbehaviour to achieve premium increases in parts of the commercial and industrial insurance business and imposed administrative finessubsequently filed an appeal against these German insurance companies, among themthis decision. In August 2007, Allianz Versicherungs-AG which received a notice imposing awithdrew its appeal and paid the fully reserved fine, on March 22, 2005. Allianz Versicherungs-AG has appealed this decision. The fine imposed on Allianz Versicherungs-AGwhich 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.Group.
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 US Insurance Company (AGR US)(“AGR US”). 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 US. In connection with the terrorist attack of September 11, 2001, we 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 US 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
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
reinsurer of AGR US for the relevant insurance policy. On May 24, 2007, SCOR announced that it considers the settlement agreed between AGR US and Silverstein Properties to not respect the terms and conditions of the Certificate of Reinsurance between SCOR and AGR US and that it will referreferred the case to arbitration as contemplated under the Certificate of Reinsurance. Currently, weThe arbitration proceeding commenced in October 2007 and discovery is ongoing. We do 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 Allianz SE 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 believe 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 US 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 stillThe consolidated lawsuits concerning revenue sharing allegations were dismissed by the court on September 18, 2007. The plaintiffs have not appealed this decision, which is final now. The lawsuits relating to market timing have been consolidated into and transferred to a multi-district litigation proceeding in the US 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.
In August 2005, two nearly identical class action complaints were filed in the Northern District of Illinois Eastern Division against Pacific Investment Management Company LLC (“PIMCO”), a preliminary stagesubsidiary of Allianz Global Investors of America L.P. The complaints have been consolidated into a single case, and PIMCO Funds, a trust that is an open end investment company with multiple separate portfolios managed by PIMCO (the “Trust”), was added as a defendant. Plaintiffs, who each purchased 10-year Treasury note futures contracts, claim that they suffered damages from an alleged shortage of such notes when PIMCO held both physical and futures positions in 10-year Treasury notes for its client accounts. The complaint makes the allegation that PIMCO violated the federal Commodity Exchange Act by engaging in market manipulation. On July 31, 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. On October 17, 2007, PIMCO and the potentialTrust each filed a motion for summary judgment. The briefing of those motions was completed on February 6, 2008, and the motions are pending. On December 10, 2007, the U.S. Court of Appeals for the Seventh Circuit granted the petition of PIMCO and the Trust for seeking leave to appeal the class certification ruling. The appeal has not yet been briefed or argued. The Allianz Group believes the complaint is without merit, but given the early stage of the court proceedings, 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 Federal 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 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 processDepartment of evaluating the offer,Justice are continuing and the outcome of this matter cannot be predicted at this stage.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
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”) is 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 lawsuits in Minnesota and three in California have been 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 respect to one of the Minnesota lawsuit,lawsuits, the violation of the Minnesota Consumer Fraud and Deceptive and Unlawful Trade Practices Act. In addition,November 2007, the court granted final approval of settlement in January 2007,the other of the Minnesota cases. Another lawsuit that was filed by the Minnesota Attorney General filed a lawsuitagainstin January 2007 against Allianz Life alleging unsuitable sales of deferred annuities to senior citizens. Discovery has recently commenced.citizens was settled in October 2007. The potential outcome and exposure related to thesestill pending 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%(6.07%). Dresdner Bank AG is contingently liable to pay future assessments to LIKOtoLIKO up to €60.5€60.7 mn (6.05%(6.07%). 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)(“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 liable 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, 2006,2007, the Joint Fund levied a contribution of €22€24 mn (2005: €21(2006: €22 mn). Under section 5 (10) of the Statutes of the Joint Fund for Securing Customer Deposits, the Allianz Group 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 measures taken on behalf of any bank in which the Allianz Group owns a majority interest.
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
| | 2007 | | 2006 |
| | | € mn | | € mn | | € mn | | € mn |
Advances | | 35,149 | | 26,954 | | 34,065 | | 35,149 |
Stand-by facilities | | 8,930 | | 9,496 | | 1,635 | | 8,930 |
Guarantee credits | | 1,765 | | 1,733 | | 1,604 | | 1,765 |
Discount credits | | 64 | | 46 | | 64 | | 64 |
Mortgage loans/public-sector loans | | 662 | | 667 | | 527 | | 662 |
| | |
| |
| | | | |
Total | | 46,570 | | 38,896 | | 37,895 | | 46,570 |
| | |
| |
| | | | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Moreover the Allianz Group has extended a loan commitment of €245 mn to the purchaser of a real estate portfolio (“Charlotte”). Title transfer of the real estate as well as disbursement of the loan occurred on March 1, 2008.
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, 2006,2007, the future minimum lease payments under non-cancelable operating leases were as follows:
| | | | 2006
| | | 2007 | |
| | | € mn | | | € mn | |
2007 | | 544 | | |
2008 | | 501 | | | 567 | |
2009 | | 413 | | | 408 | |
2010 | | 368 | | | 399 | |
2011 | | 312 | | | 343 | |
2012 | | | 304 | |
Thereafter | | 1,771 | | | 1,631 | |
| | |
|
| | | |
Subtotal | | 3,909 | | | 3,652 | |
Subleases | | (82 | ) | | (120 | ) |
| | |
|
| | | |
Total | | 3,827 | | | 3,532 | |
| | |
|
| | | |
Rental expense net of sublease rental income received of €37€16 mn, for the year ending December 31, 2006,2007, was €429 mn (2006: €518 mn (2005:mn; 2005: €315 mn; 2004: €280 mn).
Purchase obligations
The Allianz Group has commitments for mortgage loans and to buy multi-tranche loans of €4,489 mn (2006: €4,337 mn) as well as to invest in private equity funds totaling €1,675€2,045 mn (2005: €1,476(2006: €1,675 mn) as of December 31, 2006.2007. As of December 31, 2006,2007, commitments outstanding to purchase real estate used by third-parties and owned by the Allianz Group used for its own activities amounted to €325€219 mn (2005: €145(2006: €325 mn). As of December 31, 2006,2007, commitments outstanding to purchase items of equipment amounted to €112€197 mn (2005: €66(2006 €112 mn). In addition, as of December 31, 2006,2007, the Allianz Group has other commitments ofof€229 mn (2006: €290 mn (2005: €244 mn) referring to maintenance, real estate development, sponsoring and purchase obligations.
Other commitments
Other principal commitments of the Allianz Group include the following:
For Allianz of America, Inc., Wilmington, Allianz Group posted a suretyguarantee declaration was made for obligationsliabilities in connection with the acquisition of PIMCO Advisors L.P. Allianz Global Investorsoriginally acquired through its subsidiary Allianz of America L.P.Inc., Delaware (“AGI L.P.”). The Allianz Group had originally acquiredWilmington, a stake of 69.5% interest in AGI L.P.,PIMCO, whereby
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
minority interest holders hadshareholders held the option of puttingto tender their sharesshare to Allianz of America Inc.,Wilmington. On December 31, 2006,2007 the remaining intereststake of Pacific Life (the minority interest holder) in AGI L.P.PIMCO was still 2.0%, resulting in a commitment toso that the liabilities towards Pacific Life amounting to USD 0.3 bn onas of December 31, 2006.2007 amounted to US Dollar 0.3 bn.
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, 2006,2007, the future liabilities of Allianz Lebensversicherungs-Aktiengesellschaft and its subsidiaries to the insurance guarantee scheme amount to annual contributions of €36 mn (2006: €47 mnmn) and an obligation for special payments of €85 mn (2006: €78 mn.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-Aktiengesellschaft 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
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
reserve with deduction of payments already provided to the insurance guarantee scheme. AtAs of December 31, 2006,2007, 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 €809 mn (2006: €751 mn.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 |
2007 | | | | | | | |
Up to 1 year | | 12,157 | | 11 | | 200 | | 10,956 | | 59 | | — |
1-2 years | | 1,644 | | 66 | | 12 | |
1-3 years | | | 2,371 | | 451 | | 16 |
3-5 years | | 1,284 | | 464 | | 6 | | 2,042 | | 273 | | — |
Over 5 years | | 1,498 | | 2,419 | | 268 | | 994 | | 2,528 | | 244 |
| | |
| |
| |
| | | | | | |
Total | | 16,583 | | 2,960 | | 486 | | 16,363 | | 3,311 | | 260 |
| | |
| |
| |
| | | | | | |
Collateral | | 7,537 | | — | | 4 | | 6,023 | | — | | 10 |
| | |
| |
| |
| | | | | | |
2005 | | |
2006 | | | | | | | |
Up to 1 year | | 10,680 | | — | | 167 | | 12,157 | | 11 | | 200 |
1-2 years | | 1,989 | | 76 | | 13 | |
1-3 years | | | 1,644 | | 66 | | 12 |
3-5 years | | 1,702 | | 154 | | 1 | | 1,284 | | 464 | | 6 |
Over 5 years | | 1,477 | | 1,569 | | 228 | | 1,498 | | 2,419 | | 268 |
| | |
| |
| |
| | | | | | |
Total | | 15,848 | | 1,799 | | 409 | | 16,583 | | 2,960 | | 486 |
| | |
| |
| |
| | | | | | |
Collateral | | 7,154 | | — | | 7 | | 7,537 | | — | | 4 |
| | |
| |
| |
| | | | | | |
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 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, 2006,2007, the maximum potential amount of future payments of the market value guarantees was €1,874€1,956 mn (2005: €1,113(2006:€1,874 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, 2006,2007, was €3,411€2,151 mn (2005: €2,285(2006 €1,882 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, 2006,2007, the maximum potential amount of future payments of the market value and performance-at-maturity guarantees was €1,086€1,355 mn (2005: €686(2006: €1,086 mn), which represents the total value guaranteed under the respective agreements. The fair value of the mutual fundsrelatedfunds
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
related to the market guarantees as of December 31, 2006,2007, was approximately €1,033€1,316 mn (2005: €777(2006 €1,033 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, 20062007 are provided in Note 43.
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, | | 2007 | | 2006 |
| | | € mn | | € mn |
Investments | | 597 | | 932 |
Loans and advances to banks and customers | | 1,663 | | 1,432 |
Financial assets carried at fair value through income | | 4,302 | | 10,637 |
| | | | |
Total | | 6,562 | | 13,001 |
| | | | |
As of December 31, 2006,2007, the Allianz Group has received collateral, consisting of fixed income and equity securities, with a fair value of €212,894 mn (2006: €254,653 mn (2005: €213,333 mn), respectively, which the Allianz Group has the right to sell or repledge. As of December 31, 2006,2007, €156,096 mn (2006: €134,005 mn (2005: €137,559 mn), respectively, related to collateral that the Allianz Group has received and sold or repledged.
As of December 31, 2007 the Allianz Group took possession of collateral it holds as security with a carrying amount of €174 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 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
| | | 2007 | | 2006 | |
| | | € mn | | € mn | | | € mn | | € mn | |
Prepaid benefit cost | | (265 | ) | | (262 | ) | |
Accrued benefit cost | | 4,120 | | | 5,856 | | |
Prepaid benefit costs | | | (402 | ) | | (265 | ) |
Accrued benefit costs | | | 4,184 | | | 4,120 | |
| | |
|
| |
|
| | | | | | |
Net amount recognized | | 3,855 | | | 5,594 | | | 3,782 | | | 3,855 | |
| | |
|
| |
|
| | | | | | |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
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 | |
| | | | | | |
| | | 2007 | | | 2006 | |
| | | € mn | | | € mn | |
Change in projected benefit obligations | | | | | | |
Projected benefit obligations as of January 1, | | 17,280 | | | 17,159 | |
Service cost | | 437 | | | 472 | |
Interest cost | | 785 | | | 725 | |
Plan participants’ contributions | | 67 | | | 61 | |
Amendments | | (23 | ) | | (48 | ) |
Actuarial (gains)/losses | | (1,316 | ) | | (689 | ) |
Foreign currency translation adjustments | | (266 | ) | | (43 | ) |
Benefits paid | | (685 | ) | | (678 | ) |
Changes in the consolidated subsidiaries of the Allianz Group | | (137 | ) | | 321 | |
| | | | | | |
Projected benefit obligations as of December 31,1) | | 16,142 | | | 17,280 | |
| | | | | | |
Change in fair value of plan assets | | | | | | |
Fair value of plan assets as of January 1, | | 10,888 | | | 8,287 | |
Expected return on plan assets | | 577 | | | 557 | |
Actuarial gains/(losses) | | (331 | ) | | (90 | ) |
Employer contributions2) | | 342 | | | 2,154 | |
Plan participants’ contributions | | 67 | | | 61 | |
Foreign currency translation adjustments | | (229 | ) | | (30 | ) |
Benefits paid3) | | (315 | ) | | (307 | ) |
Changes in the consolidated subsidiaries of the Allianz Group | | (68 | ) | | 256 | |
| | | | | | |
Fair value of plan assets as of December 31, | | 10,931 | | | 10,888 | |
| | | | | | |
Funded status as of December 31, | | 5,211 | | | 6,392 | |
Unrecognized net actuarial losses | | (1,444 | ) | | (2,556 | ) |
Unrecognized prior service costs | | 15 | | | 19 | |
| | | | | | |
Net amount recognized as of December 31, | | 3,782 | | | 3,855 | |
| | | | | | |
(1)1)
| As of December 31, 2006,2007, includes direct commitments of the consolidated subsidiaries of the Allianz Group of €4,953 mn (2006: €5,306 mn |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
| (2005: €8,164 mn) and commitments through plan assets of €11,974€11,189 mn (2005: €8,995(2006: €11,974 mn).
|
(2)2)
| During January 2006, the Allianz GroupDresdner Bank AG contributed €1,876 mn to a contractual trust arrangement for the defined benefit plans of the Dresdner Bank Group. |
(3)3)
| In addition, the Allianz Group paid €371€370 mn (2005: €362(2006: €371 mn) directly to plan participants. |
As of December 31, 2006,2007, post-retirement health benefits included in the projected benefit obligation and net amount recognized amounted to €142€109 mn (2005: €165(2006: €142 mn) and €152€138 mn (2005: €151(2006: €152 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 consists of the following components:
| | | | 2006
| | 2005
| | 2004
| | | 2007 | | 2006 | | 2005 | |
| | | € mn | | € mn | | € mn | | | € mn | | € mn | | € mn | |
Service cost | | 472 | | | 353 | | | 313 | | | 437 | | | 472 | | | 353 | |
Interest cost | | 725 | | | 693 | | | 676 | | | 785 | | | 725 | | | 693 | |
Expected return on plan assets | | (557 | ) | | (411 | ) | | (366 | ) | | (577 | ) | | (557 | ) | | (411 | ) |
Amortization of prior service costs | | (33 | ) | | (45 | ) | | 5 | | |
Amortization of prior service cost | | | (25 | ) | | (33 | ) | | (45 | ) |
Amortization of net actuarial loss | | 126 | | | 57 | | | 8 | | | 101 | | | 126 | | | 57 | |
(Income)/expenses of plan curtailments or settlements | | (36 | ) | | (6 | ) | | 36 | | | (65 | ) | | (36 | ) | | (6 | ) |
| | | | | | | | | | |
Net periodic benefit cost | | 697 | | | 641 | | | 672 | | | 656 | | | 697 | | | 641 | |
| | | | | | | | | | |
During the year ended December 31, 2006,2007, net periodic benefit cost includes net periodic benefit cost related to post-retirement health benefits of €4 mn (2006: €9 mn (2005:mn; 2005: €8 mn; 2004: €7 mn).
The actual return on plan assets amounted to €246 mn, €467 mn and €883 mn, €431 mn during the years ended December 31, 2007, 2006 2005 and 2004.2005.
A summary of amounts related to defined benefit plans is as follows:
| | |
| | 2006 | | | | | | | | | 2007 | | | 2006 | | | | € mn | | | € mn | Projected benefit obligation | | 16,142 | | | 17,280 | Fair value of plan assets | | 10,931 | | | 10,888 | Funded status | | 5,211 | | | 6,392 | Actuarial (gains) / losses from experience adjustments on: | | | | | | Plan obligations | | (56 | ) | | 8 | Plan assets | | 331 | | | 90 |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
|
| | € 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 |
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-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
| | 2007 | | 2006 |
| | | % | | % | | % | | % |
Discount rate | | 4.6 | | 4.1 | | 5.5 | | 4.6 |
Rate of compensation increase | | 2.6 | | 2.7 | | 2.6 | | 2.6 |
Rate of pension increase | | 1.5 | | 1.4 | | 1.8 | | 1.5 |
The discount rate assumptions reflect the market yields at the balance sheet date of high-quality fixed income investments corresponding to the currency and duration of the liabilities.
The weighted-average value of the assumptions used to determine net periodic benefit cost:
| | | | | | |
| | | 2006
| | 2005
| | 2004
|
| | | % | | % | | % |
Discount rate | | 4.1 | | 4.9 | | 5.5 |
Expected long-term return on plan assets | | 5.3 | | 5.8 | | 6.4 |
Rate of compensation increase | | 2.7 | | 2.7 | | 2.8 |
Rate of pension increase | | 1.4 | | 1.6 | | 1.9 |
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
| | | | | | |
| | | 2007 | | 2006 | | 2005 |
| | | % | | % | | % |
Discount rate | | 4.6 | | 4.1 | | 4.9 |
Expected long-term return on plan assets | | 5.3 | | 5.3 | | 5.8 |
Rate of compensation increase | | 2.6 | | 2.7 | | 2.7 |
Rate of pension increase | | 1.5 | | 1.4 | | 1.6 |
For the year ended December 31, 2006,2007, 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 | | 30.9 | | 7.6 |
Debt securities | | 64.2 | | 4.2 | | 64.4 | | 4.3 |
Real estate | | 5.3 | | 4.7 | | 4.2 | | 3.5 |
Other | | 0.4 | | 0.7 | | 0.5 | | 0.8 |
| | | | | |
Total | | 100.0 | | 5.3 | | 100.0 | | 5.3 |
| | | | | |
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-average asset allocations by asset category are as follows:
| As of December 31,
| | 2006
| | 2005
| | 2007 | | 2006 |
| | | % | | % | | % | | % |
Equity securities | | 28.3 | | 28.4 | | 28.1 | | 28.3 |
Debt securities | | 66.6 | | 66.0 | | 65.1 | | 66.6 |
Real estate | | 2.9 | | 3.6 | | 2.8 | | 2.9 |
Other | | 2.2 | | 2.0 | | 4.0 | | 2.2 |
| | |
| |
| | | | |
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.
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 its actual equity securities allocation for plan assets of defined benefit plans.
Contributions
During the year ending December 31, 2007,2008, the Allianz Group expects to contribute €254€303 mn to itsdefinedits defined benefit plans and pay €375€382 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, 2006,2007, the Allianz Group recognized expense for defined
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
contribution plans of €227€282 mn (2005: €197(2006: €223 mn; 2004: €1742005: €192 mn). Additionally, the Allianz Group paid contributions for state pension schemes of €398 mn (2006: €381 mn; 2005: €362 mn).
48 Share-based compensation plans
Group Equity Incentives Plans
The Group Equity Incentives Plans (“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 and restricted stock units.
Stock appreciation rights
The stock appreciation rights 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 right 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 rights vest after two years and expire after seven years. Upon vesting, the stock appreciation rights 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.
In addition, upon death of plan participants, a change inof control of the Allianz Group or the sale of the subsidiary that employs the plan participant,notice for operational reason the stock appreciation rights vest immediately.immediately and will be exercised by the company provided the above market conditions have been attained.
Upon the expiration date, any unexercised stock appreciation rights that have not been exercisedright will be exercised automatically if theifthe above market conditions have been attained. The stock appreciation rights 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 optionsstock appreciation rights 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 1999 and 2002 are significantly “out of the money”), the expected life has been estimated to equal the term to maturity of the stock appreciation rights.
The following table provides the assumptions used in estimating the fair value of the stock appreciation rights 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)
| | | | | | | | | | | | |
| | | 2007 | | | 2006 | | | 2005 | |
Expected volatility | | | 27.9 | % | | | 28.0 | % | | | 27.8 | % |
Risk-free interest rate | | | 3.9 | % | | | 4.1 | % | | | 3.1 | % |
Expected dividend rate | | | 3.0 | % | | | 1.6 | % | | | 1.9 | % |
Share price | | € | 158.01 | | | € | 123.67 | | | € | 99.33 | |
Expected life (years) | | | 7 | | | | 7 | | | | 7 | |
The stock appreciation rights are accounted for as cash settled plans by the Allianz Group. Therefore, the Allianz Group accrues the fair value of the stock appreciation rights as compensation expense over the vesting period. Upon vesting, any changes in the fair value of the unexercised stock appreciation rights are recognized as compensation expense. During the year ended December 31, 2006,2007, the Allianz Group recognized compensation expense related to the unexercised stock appreciation rights of €18 mn (2006: €116 mn (2005:mn; 2005: €99 mn; 2004: €23 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, 2006,2007, the Allianz Group recorded a liability, in other liabilities, for the unexercised stock appreciation rights of €182 mn (2006: €276 mn (2005: €160 mn). Based upon the fair value of the stock appreciation rights as of December 31, 2006, the total compensation expense not yet recognized related
Notes 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.Allianz Group’s Consolidated Financial Statements—(Continued)
Restricted stock units
The restricted stock units 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 unit granted. The restricted stock units vest after five years. The Allianz Group will exercise the restricted stock units 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.
In addition, upon death of plan participants, a change inof control of the Allianz Group or the sale of the subsidiary that employs the plan participant,notice for operational reason the restricted stock units vest immediately.immediately and will be exercised by the company.
A summaryThe restricted stock units 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 number andrestricted stock units from the weighted-average grant dateprevailing share price as of the valuation date.
The following table provides the assumptions used in calculating the fair value of the nonvested restricted stock units are as follows: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 |
| | | | | | | | | |
| | | 2007 | | | 2006 | | | 2005 | |
Average interest rate | | 3.9 | % | | 3.8 | % | | 2.8 | % |
Average dividend yield | | 3.2 | % | | 1.5 | % | | 1.9 | % |
The restricted stock units 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 units as compensation expense over the vesting period. During the year ended December 31, 2006,2007, the Allianz Group recognized compensation expense related to the nonvested restricted stock units of €55 mn (2006: €85 mn (2005:mn; 2005: €49 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: €0.4 mn).
As of December 31, 2006,2007, the Allianz Group recorded a liability, in other liabilities, of €157€209 mn (2005: €72(2006: €157 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 nonvested
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”) 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 three to five 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 for the first time six 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, 2006,2007, the Allianz Group recognized compensation expense related to the Class B equity units of €362 mn (2006: €383 mn (2005:mn; 2005: €536 mn; 2004: €399 mn). In addition, the Allianz Group recognized expense related to the priority claim on the adjusted operating profits of PIMCO LLC of €126 mn (2006: €140 mn (2005:mn; 2005: €141 mn; 2004: €101 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, 2006,2007, the Allianz Group called 16,33522,155 Class B equity units. The total amount paid related to the call of the Class B equity units was €238€324 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, 2006,2007, the Allianz Group recorded a liability for the Class B equity units of €1,350 mn (2006: €1,455 mn (2005: €1,473mn).
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 instalmentsinstallments in each of the three years following the initial award. The number of shares to be disbursed depends on beneficiaries leaving the company and the operating results for the following years. If the results are positive, additional shares will be distributed, whereas if the results are negative, the number of shares to be disbursed will be reduced. 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 value of theIn 2007 Dresdner Kleinwort granted 1,164,377 (2006: 1,405,646) nonvested share units in total. The weighted average fair value at grant date was €162.78 (2006: €135.40). Thereof 1,068,189 (2006: 1,303,856) non-vested share units are as follows:equity settled and 96,188 (2006: 101,791) share units are cash settled.
| | | | | |
| | | Number
| | | Weighted
average
grant date fair value
|
| | | | | | € |
Nonvested as of January 1, 2004 | | — | | | — |
Granted | | 1,475,250 | | | 105.62 |
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 |
Forfeited | | (499,370 | ) | | 112.83 |
| | |
|
| |
|
Nonvested as of December 31, 2006 | | 2,662,493 | | | 114.05 |
| | |
|
| |
|
The shares settled by delivery of Allianz SE shares are accounted for as equity settled plans by the Allianz Group. Therefore, the Allianz 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 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. Upon vesting, any changes in the fair value of the unexercised nonvested shares settled in cash are recognized as compensation expense. During the year ended December 31, 2006,2007, the Allianz Group recognized compensation expense related to the nonvested shares of €135€103 mn (2005: €102(2006: €135 mn). During the year ended December 31, 2006, the Allianz GroupThereof €95 mn (2006: €125 mn) were 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 offor equity settled shares that vested was €117 mn.share options.
As of December 31, 2006,2007, the Allianz Group recorded a liability for the nonvested cash settled shares of €13 mn (2006: €10 mn (2005: €6 mn). As of December 31, 2006, the total compensation expense not yet recognized 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.
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 share options are independent
During the year ended December 31. 2007, Allianz acquired all of the remuneration plansremaining AGF shares from minority shareholders in the context of the Tender Offer and Squeeze-out (see Note 4 regarding the AGF acquisition and disposal of minority interests). Under the terms of an agreement (the ”Liquidity Agreement”) between Allianz Group. Share options granted have an exercise price of at least 85%SE, AGF and the beneficiaries of the marketAGF 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 dayinitial offer proposed for each AGF share during the Tender Offer. As of grant. The maximum termDecember 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 granted is eight years.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.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
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 plans were granted independently from the remuneration plans of the Allianz Group. At their original grant dates, the AGF share options had an exercise price of at least 85% of the then prevailling market price. The original maximum term for the AGF share option plans granted was eight years.
The fair value of these 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, 2006,2007, 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 mn (2005: €14 mn; 2004: €16 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.€15 mn. As of December 31, 2006, the total compensation expense not yet recognized related to
Notes to2007, the Allianz Group’s Consolidated Financial Statements—(Continued)
Group recorded a liability for the 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 periodAGF plans of 1 year.€46 mn.
RAS Group Allianz SE share 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-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 ofbasisof 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 service 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: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 and 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 | | — | | — | | — | | — |
| | |
| |
| |
| |
|
| | | | | | | | | |
| | | 2007 | | 2006 |
| | | Number
of
options | | | Weighted
average
exercise
price | | Number
of
options | | Weighted
average
exercise
price |
| | | | | | € | | | | € |
Outstanding as of January 1, | | 173,241 | | | 93.99 | | — | | — |
Granted | | — | | | — | | 173,241 | | 93.99 |
Exercised | | — | | | — | | — | | — |
Forfeited | | (41,992 | ) | | 84.51 | | — | | — |
Expired | | — | | | — | | — | | — |
| | | | | | | | | |
Outstanding as of December 31, | | 131,249 | | | 80.74 | | 173,241 | | 93.99 |
| | | | | | | | | |
Exercisable as of December 31, | | — | | | — | | — | | — |
| | | | | | | | | |
The aggregate intrinsic value of share options outstanding was €11 mn for the year ended December 31, 2007 (2006: €11 mn).
The options outstanding as of December 31, 2007 have an exercise price of €80.74 and a weighted average remaining contractual life of 4 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, 2006,2007, the Allianz Group recorded compensation expense of €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 24 countries to qualified employees at favorable conditions. The shares have a minimum holding period of one year to five years. During the year ended December 31, 2006,2007, the number of shares sold to employees under these plans was 929,509 (2005: 1,144,196; 2004: 1,051,191)939,303 (2006: 929,509; 2005: 1,144,196). During the year ended December 31,2006,31, 2007, the Allianz Group recognized as compensation expense, the difference between the market price (lowest quoted price of the Allianz SE stock at the official market in Germany on September 6, 2007) and the offerdiscounted price of the shares purchased by employees, of €30 mn (2006: €25 mn (2005:mn; 2005: €24 mn; 2004: €18 mn).
In addition, during the year ended December 31, 2006, the AGF Group offered AGF shares to qualifiedtoqualified 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, 2006,2007, the total expense, in the aggregate, recorded for these plans was €4 mn (2006: €3 mn (2005:mn; 2005: €4 mn; 2004: €3 mn).
49 Restructuring plans
As of December 31, 2006,2007, 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.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
Changes in the provisions for restructuring were:
| | | | 2006
| | 2005
| | 2004
| | | Allianz
Deutschland
AG | | Dresdner
Bank
Group | | Other | | Total | |
| | | 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 | | € mn | | € mn | | € mn | | € mn | | |
As of January 1, | | — | | | 90 | | | 96 | | | 186 | | | 670 | | | 69 | | | 739 | | | 815 | | | 30 | | | 845 | | |
As of January 1, 2005 | | | — | | | 670 | | | 69 | | | 739 | |
New provisions | | | — | | | 22 | | | 86 | | | 108 | |
Additions to existing provisions | | | — | | | 29 | | | 3 | | | 32 | |
Release of provisions recognized in previous years | | | — | | | (48 | ) | | (2 | ) | | (50 | ) |
Release of provisions via payments | | | — | | | (288 | ) | | (68 | ) | | (356 | ) |
Release of provisions via transfers | | | — | | | (294 | ) | | — | | | (294 | ) |
Foreign currency translation adjustments | | | — | | | 12 | | | — | | | 12 | |
Other | | | — | | | (13 | ) | | 8 | | | (5 | ) |
As of December 31, 2005 | | | — | | | 90 | | | 96 | | | 186 | |
As of January 1, 2006 | | | — | | | 90 | | | 96 | | | 186 | |
New provisions | | 526 | | | 328 | | | 41 | | | 895 | | | 22 | | | 86 | | | 108 | | | 132 | | | 57 | | | 189 | | | 526 | | | 328 | | | 41 | | | 895 | |
Additions to existing provisions | | — | | | 9 | | | 1 | | | 10 | | | 29 | | | 3 | | | 32 | | | 143 | | | 1 | | | 144 | | | — | | | 9 | | | 1 | | | 10 | |
Release of provisions recognized in previous years | | — | | | (15 | ) | | (5 | ) | | (20 | ) | | (48 | ) | | (2 | ) | | (50 | ) | | (62 | ) | | (11 | ) | | (73 | ) | | — | | | (15 | ) | | (5 | ) | | (20 | ) |
Release of provisions via payments | | (2 | ) | | (13 | ) | | (83 | ) | | (98 | ) | | (288 | ) | | (68 | ) | | (356 | ) | | (274 | ) | | (8 | ) | | (282 | ) | | (2 | ) | | (13 | ) | | (83 | ) | | (98 | ) |
Release of provisions via transfers | | (69 | ) | | (20 | ) | | — | | | (89 | ) | | (294 | ) | | — | | | (294 | ) | | — | | | — | | | — | | | (69 | ) | | (20 | ) | | — | | | (89 | ) |
Changes in the consolidated subsidiaries of the Allianz Group | | — | | | — | | | 4 | | | 4 | | | — | | | — | | | — | | | (55 | ) | | — | | | (55 | ) | | — | | | — | | | 4 | | | 4 | |
Foreign currency translation adjustments | | — | | | — | | | (1 | ) | | (1 | ) | | 12 | | | — | | | 12 | | | (6 | ) | | — | | | (6 | ) | | — | | | — | | | (1 | ) | | (1 | ) |
Other | | — | | | — | | | — | | | — | | | (13 | ) | | 8 | | | (5 | ) | | (23 | ) | | — | | | (23 | ) | |
As of December 31, | | 455 | | | 379 | | | 53 | | | 887 | | | 90 | | | 96 | | | 186 | | | 670 | | | 69 | | | 739 | | |
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 | |
The development of the restructuring provisions reflects the implementation status of the restructuring initiatives. Based on the specific IFRS guidance, restructuring provisions are recognized prior to when they qualify to be recognized 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”, have been transferred to the provision type, which would have been used not having a restructuring initiative in place. This applies for each single contract. For personnel costs, at the time an employee has contractually agreed to leave Allianz 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 toprovisions for employee expenses. In addition, provisions for vacant office spaces that result from restructuring initiatives have been transferred to “other” provisions after the offices have been completely vacated.
Allianz Deutschland AG’sAG´s provisions for restructuring
During the year ended December 31,In 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 withDuring 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 ofyear ended December 31, 2007, Allianz Deutschland AG will result in the creationrecorded restructuring charges 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.€(16) mn. This amount includes additions
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
During the year ended December 31, 2006, Allianz Deutschland AG recordedto existing provisions, release of provisions recognized in previous years, and restructuring charges of €526 mn.as reflected in the consolidated income statement. The reduction of staff within this program shall occur in consent with the employees. The plan includes a reduction of approximately 5.7005,700 positions. Approximately 1,5553,176 full time equivalent positions have already been terminated, a large majoritypart 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.
| | | |
| | | 20062007
| |
| | | € mn | |
New provisions | | 526— | |
Additions to existing provisions | | —22 | |
Release of provisions recognized in previous years | | — (65 | ) |
Restructuring charges directly reflected in the consolidateconsolidated income statement | | —27 | |
Total restructuring charges during the year ended December 31, 20062007 | | 526(16 | ) |
Total restructuring charges incurred to date | | 526510 | |
A summary of the changes in the provisions for restructuring of the Allianz Deutschland AG during the year ended December 31, 2007 is:
| | | | | | | | | | | | | | | | | | | | | |
| | | Provisions
as of
January 1,
2007 | | Provisions recorded during 2007 | | | Release of
provisions
via
transfer | | | Foreign
currency
translation
adjustments | | Other | | Provisions
as of
December 31,
2007 |
| | | 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 | | 353 | | — | | 18 | | (25 | ) | | — | | | (159 | ) | | — | | — | | 187 |
Contract termination costs | | 102 | | — | | 4 | | (40 | ) | | (27 | ) | | — | | | — | | — | | 39 |
Other | | — | | — | | — | | — | | | — | | | — | | | — | | — | | — |
| | | | | | | | | | | | | | | | | | | | | |
Total | | 455 | | — | | 22 | | (65 | ) | | (27 | ) | | (159 | ) | | — | | — | | 226 |
| | | | | | | | | | | | | | | | | | | | | |
Allianz Deutschland AG recorded releases of provisions via transfers to other provision categories of €159 mn as of December 31, 2007.
Dresdner Bank Group’s provisions for restructuring
Dresdner Bank Group supplemented its existing restructuring programs introduced since 2000 with the program ‘New Dresdner Plus’initiative “Programs 2007”. For these combined initiatives, Dresdner Bank Group has announced plans to eliminate an aggregate of approximately 19,50019,650 positions. As of December 31, 2006, an aggregate2007, anaggregate of approximately 16,35017,810 positions had been eliminated and approximately 425550 additional employees had contractually agreed to leave Dresdner Bank Group under these initiatives.
During the year ended December 31, 2006,2007, Dresdner Bank Group recorded restructuring charges for all restructuring programs of €422€51 mn. This amount includes new provisions, additions to existing provisions, releasesrelease of provisions recognized in previous years, and restructuring charges as reflected in the consolidated income statement. Total restructuring charges expected
Notes 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. Allianz Group’s Consolidated Financial Statements—(Continued)
A summary of the restructuring charges related toDresdnerto Dresdner Bank Group that are reflected in the Allianz Group’s consolidated income statement for the year ended December 31, 2006,2007, by restructuring program is as follows:
| | | | 2006
| | | 2007 | |
| | | New Dresdner
Plus
| | Former
Programs
| | Total
| | | Programs
2007 | | New
Dresdner
Plus | | Former
Programs | | Total | |
| | | € mn | | € mn | | € mn | | | € mn | | € mn | | € mn | | € mn | |
New provisions | | 328 | | — | | | 328 | | | 8 | | — | | | — | | | 8 | |
Additions to existing provisions | | — | | 9 | | | 9 | | | — | | 19 | | | — | | | 19 | |
Release of provisions recognized in previous years | | — | | (15 | ) | | (15 | ) | | — | | (24 | ) | | (5 | ) | | (29 | ) |
Restructuring charges directly reflected in the consolidated income statement | | 80 | | 20 | | | 100 | | | 40 | | 9 | | | 4 | | | 53 | |
Total restructuring charges during the year ended December 31, 2006 | | 408 | | 14 | | | 422 | | |
Total restructuring charges during the year ended December 31, 2007 | | | 48 | | 4 | | | (1 | ) | | 51 | |
Total restructuring charges incurred to date | | 408 | | 2,007 | | | 2,415 | | | 48 | | 412 | | | 1,560 | | | 2,020 | |
A summary of the existing provisions for restructuring related to the Dresdner Bank Group is as follows:
New Dresdner PlusPrograms 2007
During the year ended December 31, 2006,2007, Dresdner Bank Group recorded restructuring charges of €408€48 mn for the announced restructuring initiative ‘New Dresdner Plus’“Programs 2007”, which isinis in addition to and separately from the initiative “New Dresdner Plus” and 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 activitiesAs a result of the former units “Personal Banking”, “Private & Business Banking” and “Corporate Banking”,recent developments in the “Clients & Products” unit concentrates on product-related activitiesCredit Markets Dresdner Kleinwort, the InvestmentBanking Division (IB) of Dresdner Bank Group, decided to implement an integrated platform for products and clients. At the
Notesrestructure parts of their Credit Business. This decision lead to the Allianz Group’s Consolidated Financial Statements—(Continued)exit of specific market segments and to the alignment of the product range to the current market environment within the respective Credit Business. Hereby were impacted the areas Credit Flow Trading, Exotic Credit Derivatives, and Debt Capital Markets as well as the respective support areas within the front-office.
Through the “Credit Initiative” and further restructuring initiatives within the Investment Banking Division (IB) the Dresdner Bank Group plans to reduce approximately 150 positions globally. Approximately 10 employees had been terminated and approximately 100 additional employees had contractually agreed to leave Dresdner Bank Group pursuant to “Credit Initiative” as of December 31, 2007.
New Dresdner Plus and Former Programs
same timeDuring the process flow withinyear ended December 31, 2007, Dresdner Bank Group recorded combined restructuring charges of €3 mn for the branch network will be further automated,announced restructuring initiative “New Dresdner Plus” and the credit processes will be optimised by aligned workflows as well as further standardisation. Furthermore, a new client advisory concept will be implemented“Former Programs”, which are in orderaddition to transferand separately from 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”)“Programs 2007”. 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 851,000 employees had been terminated and approximately 170300 additional employees had contractually agreed to leave Dresdner Bank Group pursuant to program “New Dresdner Plus” as of December 31, 2006.2007.
Former programs
DuringThrough 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 16,26516,800 employees had been terminated and approximately 255150 additional employees had contractually agreed to leave Dresdner Bank Group pursuant to the “Former Programs” as of December 31, 2006.2007.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
A summary of the changes in the provisions for restructuring of the Dresdner Bank Group’sGroup during the year ended December 31, 20062007 is:
| | | | | | | | | | | | | | | | | | |
| | | 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)
| | | | | | | | | | | | | | | | | | | | | | |
| | | Provisions
as of
January 1,
2007 | | Provisions recorded during 2007 | | | Release of
provisions
via
transfer | | | Foreign
currency
translation
adjustments | | | Other | | Provisions as
of
December 31,
2007 |
| | | 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 |
Programs 2007 | | | | | | | | | | | | | | | | | | | | | | |
Personnel costs | | — | | 8 | | — | | — | | | — | | | — | | | — | | | — | | 8 |
Contract termination costs | | — | | — | | — | | — | | | — | | | — | | | — | | | — | | — |
Other | | — | | — | | — | | — | | | — | | | — | | | — | | | — | | — |
| | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | — | | 8 | | — | | — | | | — | | | — | | | — | | | — | | 8 |
| | | | | | | | | | | | | | | | | | | | | | |
New Dresdner Plus | | | | | | | | | | | | | | | | | | | | | | |
Personnel costs | | 299 | | — | | 18 | | (17 | ) | | (47 | ) | | (114 | ) | | (5 | ) | | — | | 134 |
Contract termination costs | | 27 | | — | | 1 | | (7 | ) | | (1 | ) | | (5 | ) | | (1 | ) | | — | | 14 |
Other | | 2 | | — | | — | | — | | | — | | | — | | | — | | | — | | 2 |
| | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | 328 | | — | | 19 | | (24 | ) | | (48 | ) | | (119 | ) | | (6 | ) | | — | | 150 |
| | | | | | | | | | | | | | | | | | | | | | |
Former Programs | | | | | | | | | | | | | | | | | | | | | | |
Personnel costs | | 44 | | — | | — | | (5 | ) | | (11 | ) | | (20 | ) | | — | | | — | | 8 |
Contract termination costs | | 2 | | — | | — | | — | | | (1 | ) | | (1 | ) | | — | | | — | | — |
Other | | 5 | | — | | — | | — | | | (5 | ) | | — | | | — | | | — | | — |
| | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | 51 | | — | | — | | (5 | ) | | (17 | ) | | (21 | ) | | — | | | — | | 8 |
| | | | | | | | | | | | | | | | | | | | | | |
Total | | 379 | | 8 | | 19 | | (29 | ) | | (65 | ) | | (140 | ) | | (6 | ) | | — | | 166 |
| | | | | | | | | | | | | | | | | | | | | | |
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 than 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’, have been transferred to the provision type, which would have been used if there had not been 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 Bank 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’ provisions after the offices have been completely vacated. In this context, Dresdner Bank Group recorded releases of provisions via transfers to other provision categories of €20€140 mn as of December 31, 2006.2007.
Other restructuring plans
For 2007, amongst others the following restructuring plans were announced:
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 supportfunctions 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, 2007, Allianz S.p.A. together with its group companies recorded restructuring charges of €73 mn.
Allianz Shared Infrastructure Service GmbH
During 2007, Allianz Deutschland AG recorded another provision for restructuring of €42 mn. The reason for the restructuring program are outsourcing activities for the devisions Desktop, Network and Telecommunication Services of Allianz Shared Infrastructure Service GmbH (former Allianz Dresdner Informationssysteme GmbH), Munich
During the year ended December 31, 2007, Allianz Group recorded restructuring charges of €79 mn in total.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
50 Earnings per share
Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding. Diluted earnings per share reflects the effect of potentially dilutive securities. As of December 31, 2006,2007, 1,175,554 (2005:(2006: 1,175,554) participation certificates issued by Allianz SE were outstanding which can potentially be converted to 1,469,443 (2005:(2006: 1,469,443) Allianz shares (on a weighted basis: 1,469,443 (2005:(2006: 1,469,443) Allianz SE shares) and therefore have a dilutive effect.
The Allianz Group’s share compensation plans with potentially dilutive securities of 335,346 (2005: 493,229)1,321,100 (2006: 335,346) are included in the calculation of diluted earnings per share for the year ended December 31, 2006.2007.
Furthermore 4,868,560 (2005: 807,859)3,265,298 (2006: 4,868,560) 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, 2006.2007.
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 |
| | |
|
|
| |
|
| |
|
|
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
| | | | | | | | | | | |
| | | 2007 | | | 2006 | | | 2005 |
| | | € mn | | | € mn | | | € mn |
Numerator for basic earnings per share (net income) | | | 7,966 | | | | 7,021 | | | | 4,380 |
Effect of dilutive securities | | | (4 | ) | | | (3 | ) | | | — |
| | | | | | | | | | | |
Numerator for diluted earnings per share (net income after assumed conversion) | | | 7,962 | | | | 7,018 | | | | 4,380 |
| | | | | | | | | | | |
Denominator for basic earnings per share (weighted-average shares) | | | 442,544,977 | | | | 410,871,602 | | | | 389,756,350 |
Dilutive securities: | | | | | | | | | | | |
Participation certificates | | | 1,469,443 | | | | 1,469,443 | | | | 1,469,443 |
Warrants | | | 962,547 | | | | 737,847 | | | | 743,179 |
Share-based compensation plans | | | 1,321,100 | | | | 335,346 | | | | 493,229 |
Derivatives on own shares | | | 3,265,298 | | | | 4,868,560 | | | | 807,859 |
Subtotal | | | 7,018,388 | | | | 7,411,196 | | | | 3,513,710 |
| | | | | | | | | | | |
Denominator for diluted earnings per share (weighted-average shares after assumed conversion) | | | 449,563,365 | | | | 418,282,798 | | | | 393,270,060 |
| | | | | | | | | | | |
Basic earnings per share | | € | 18.00 | | | € | 17.09 | | | € | 11.24 |
Diluted earnings per share | | € | 17.71 | | | € | 16.78 | | | € | 11.14 |
| | | | | | | | | | | |
During the year ended December 31, 2006,2007, the weighted average number of shares does not include 730,391 (2005: 2,389,193; 2004: 18,915,201)1,130,838 (2006: 730,391; 2005: 2,389,193) treasury shares held by the Allianz Group.
51 Other Information
Employee information
| | | | |
As of December 31, | | 2007 | | 2006 |
Germany | | 72,063 | | 76,790 |
Other countries | | 109,144 | | 89,715 |
Total | | 181,207 | | 166,505 |
thereof undergoing training | | 4,332 | | 3,955 |
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.
The average total number of employees for the year ended December 31, 20062007 was 172,065176,257 people.
Personnel expenses
| | | | 2006
| | 2005
| | 2004
| | 2007 | | 2006 | | 2005 |
| | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn |
Salaries and wages | | 10,230 | | 9,582 | | 9,277 | | 9,741 | | 10,230 | | 9,582 |
Social security contributions and employee assistance | | 1,731 | | 1,628 | | 1,466 | | 1,666 | | 1,731 | | 1,628 |
Expenses for pensions and other post-retirement benefits | | 1,005 | | 855 | | 806 | | 1,028 | | 1,005 | | 855 |
| | |
| |
| |
| | | | | | |
Total | | 12,966 | | 12,065 | | 11,549 | | 12,435 | | 12,966 | | 12,065 |
| | |
| |
| |
| | | | | | |
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, 2006,20, 2007, 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 and Oldenburgische Landesbank AG were issued in December 2006,2007, respectively, and were 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 109.192 and 193. The information provided there is considered part of these consolidated financial statements.
Compensation for the Board of Management
As of December 31, 2006,2007, the Board of Management had 11 (2005: 10)(2006: 11) members.
Total compensation of the Board of Management for the year ended December 31, 20062007 amounts to €28.9€26.5 mn (2005: €20.4(2006: €28.9 mn). Furthermore 110,434 (2005: 222,125)102,950 (2006: 110,434) stock appreciation rights and 66,280 (127,207)51,805 (2006: 66,280) restricted stock units with a total fair value at grant date of €12.3 mn (2005: €16.8(2006: €12.3 mn) were granted to the Board of Management for the year ended December 31, 2006. 2007.
Compensation to former members of the Board of Management and their beneficiaries totaled €4.3€5.0 mn (2005:(2006: €4.3 mn).
Pension obligations to former members of the Board of Management and their beneficiaries are accrued in the amount of €47.0€49.0 mn (2005: €38.9(2006: €52.0 mn).
Total compensation to the Supervisory Board amounts to €2.5€1.6 mn (2005: €2.6(2006: €2.5 mn).
Board of Management and Supervisory Board compensation by individual is included in the Corporate Governance section of this Annual Report. TheReport.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
AcquisitionDisposal of minority interests in Assurances Générales de France and Allianz Lebensversicherungs-Aktiengesellschafttranche of properties to IVG Group
On January 18,In August 2007, Allianz SE announced its intention to acquire the outstanding shares in Assurances Générales de France (or “AGF”, and together with its subsidiaries, the “AGF Group”) that it did not already own. In addition, Allianz AZL Vermögensverwaltung GmbH & Co. KG, a subsidiary of Allianz Deutschland AG (or “ADAG”), Allianz SE’s wholly-owned German insurance holding company, announced its intention to acquire the approximately 9% interest in Allianz Lebensversicherungs-Aktiengesellschaft (or “Allianz Leben”) that it does not already own.
On February 28, 2007, Allianz AZL Vermögensverwaltung GmbH & Co. KG launched a tender offer to the minority shareholders of Allianz Leben. The deadline for acceptance of the offer elapsed on March 29, 2007. The Allianz Group increased its ownership interest from the 91.03% interest already indirectlysold five held by ADAG and Allianz SE, by 1.55%for use properties for €876 mn to a total of 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.
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.IVG Group. The Allianz Group is proceeding with a mandatory squeeze-out procedure pursuant to the conditions set forthsale will be finalized in the General Regulationsfirst half of 2008. After the AMF.
Further details are provided on page 141 of this annual report on Form 20-F.sale, the properties will be leased back and will continue to be used by the Al-lianz Group.
Early partial redemptionDisposal of property portfolio to Whitehall Funds
In December 2007 the Allianz Group closed a contract with Whitehall Funds to sell a property portfolio for €1.7 bn. The sale was finalized on March 1, 2008. No immediate gain was recognized on the sale due to the seller financing that the Allianz Group extended to the buyer.
Allianz redeems remaining part of the BITES exchangeable bond
On January 29, 2007,14, 2008, the Allianz Group announced its intention to make an early redemption of 64.35%redeem the remaining 35.7% of the BITES bond issued in February 2005 with shares of Munich Re. The number of Munich Re shares used to redeemfor the bondredemption 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, 2007January 22, 2008 and ended on February 28, 2007.18, 2008. 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.
February 27, 2008. As a result of the partial redemption of thisthe index-linked exchangeable bond, the Allianz Group’s shareholding in Munich Re was reduced from approximately 9.4% to approximately 4.9%under 2%.
Net claims from the “Kyrill” winter storm in Europe
The Allianz Group recorded net claims arising from the “Kyrill” winter storm in Europe in January 2007 of approximately €340 mn.
Disposal of subsidiaries of Kommanditgesellschaft Allgemeine Leasing GmbH & Co.Deutschland AG announces squeeze-out on Allianz Lebensversicherungs-Aktiengesellschaft, Stuttgart (“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 disposal 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 ItalyLeben”)
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 integrateJanuary 18, 2008 the Allianz Group’s business operationsGroup´s subsidiary Allianz Deutschland AG announced that it has signed contracts via an investment management company regarding the acquisition of further shares in Italy. On March 19, 2007,Allianz Leben. Following this transaction, Allianz Deutschland AG’s equity stake in Allianz Leben will increase to more than 95%. Allianz Leben intends to present a resolution regarding the Boards of Directors approved the integration plan for Allianz Groupsqueeze-out procedure at its next Annual General Meeting.
Notes to the Allianz Group’s Consolidated Financial Statements—(Continued)
operationsAcquisition of minority interests in Italy. The integration will be achieved through the creationAllianz Global Investors of a single company, Allianz S.p.A.America L.P., that will operate on the market with three different brands (“Allianz RAS”, “Allianz Lloyd Adriatico” and “Allianz Subalpina”) and three separate distribution networks.Delaware
In January 2008, the Allianz Group increased its interest in Allianz Global Investors of America L.P., Delaware by approximately 1.86%. The completion ofacquisition cost for the company integration process is expected by fall 2007, depending on both the approval at shareholders’ meetings and clearance by regulatory authorities.additional interest amounted to approximately €194 mn.
SaleExercise of shares in BMW AGwarrants
On February 7, 2007,15, 2008, the remaining 2.2 mn warrants were exercised which the Allianz Group had issued in February 2005 as a part of its active portfolio management,the “All-in-One” transaction. In conjunction with the exercise 2.2 mn new shares of Allianz SE sold approximately 16.1 million ordinaryresulting 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.
Financial market turbulences
The Allianz Group expects to experience further mark-downs in BMW AG. the first quarter of 2008 due to further deterioration of observable market prices and credit indexes.
Net claims estimate from “Emma” winter storm in Europe
The shares were placed with institutional investors. The sale resultedAllianz Group estimates net claims before taxes from the “Emma” winter storm in proceedsEurope in March 2007 of approximately €736above €200 mn.
AcquisitionIssue of majority in ROSNO
On February 21, 2006,5% senior bond by Allianz SE acquired approximately 49.2% of the shares in ROSNO from Sistema. Together with its own stake of approximately 47.7%Finance II B.V., 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 GroupAmsterdam
On March 22, 2007, subsidiaries6, 2008 Allianz Finance II B.V., Amsterdam issued €1.5 bn of thesenior bonds, guaranteed by Allianz Group together acquired 50%SE, under our debt issuance program. The bond has a coupon rate of Sdu Group from the Dutch State. The proportionate investment volume amounted to approximately €208 mn.5% and its maturity is March 6, 2013.
AdditionalDresdner Bank provides support to K2
On March 18, 2008, Dresdner Bank and K2 Corporation entered into an agreement through which Dresdner Bank will provide a support facility to the Structured Investment Vehicle, K2. The agreement, which consists of a U.S.$1,500,000,000 committed revolving mezzanine credit facility and a ‘backstop’ facility, follows the announcement by Dresdner Bank on February 21, 2008 that it intended to offer support to K2 .
The mezzanine credit facility provides K2 with immediate additional liquidity, allowing K2 to draw-down funds for terms up to the maturity date of its longest dated senior debt obligations. Under the terms of the backstop facility, Dresdner Bank has undertaken to provide to K2 firm prices at which it will purchase assets from K2 in the event that K2 is unable to obtain better prices for such assets on the open market. The aggregate of such prices provided by Dresdner Bank will at all times equate to an amount that ensures K2 has sufficient funds to repay its senior debt in full.
AGI of America LLC intends to call further PIMCO Class B Units
On March 31, 2007, the Allianz Group purchased 15,998Global Investors of America LLC intends to call 23,946 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 AGunits 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 active in the property-casualty insurance business in Russia and ranks among the top 20 Russian insurers, based on gross premiums written in 2006.
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 offeringMarch 31, 2008 for proceeds of approximately €370 million.U.S.$555 mn.
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 statements and accounting principles generally accepted in the United States of America
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:
| | | | | | | | | | | | | | | |
| | | 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 | |
| | |
|
| |
|
| |
|
| |
|
| |
|
|
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 | ) |
| | |
|
| |
|
| |
|
| |
|
| |
|
|
Effect of US GAAP adjustments | | (504 | ) | | (687 | ) | | 615 | | | 2,518 | | | 4,896 | |
| | |
|
| |
|
| |
|
| |
|
| |
|
|
Amount determined in accordance with US GAAP | | 6,517 | | | 3,693 | | | 2,881 | | | 52,999 | | | 44,383 | |
| | |
|
| |
|
| |
|
| |
|
| |
|
|
Net income per share in accordance with US GAAP: | | | | | | | | | | | | | | | |
Basic | | 15.59 | | | 9.33 | | | 7.87 | | | | | | | |
| | |
|
| |
|
| |
|
| | | | | | |
Diluted | | 15.38 | | | 9.26 | | | 7.83 | | | | | | | |
| | |
|
| |
|
| |
|
| | | | | | |
(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)
Valuation and recognition differences
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 |
| | |
|
| |
|
| |
|
| |
| |
|
Total | | (314 | ) | | (265 | ) | | 815 | | | 6,426 | | 4,924 |
| | |
|
| |
|
| |
|
| |
| |
|
(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 | ) |
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
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 | |
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
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 |
| | | | |
Operating Subsidiaries | | Equity | | % owned1) |
| | | € mn | | |
Germany | | | | |
 Allianz Capital Partners GmbH, Munich
| | 0.03 | | 100.0 |
Allianz Capital Partners Verwaltungs GmbH, Munich | | 685 | | 100.0 |
 Allianz Dresdner Bauspar AG, Bad Vilbel
| | 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 | | 2,592 | | 100.0 |
 Allianz Global Investors Europe GmbH, Munich
| | 17 | | 100.0 |
 Allianz Global Investors Kapitalanlagegesellschaft mbH, Frankfurt/Main
| | 139 | | 100.0 |
Allianz Global Investors Produkt Solutions GmbH, Munich | | 0.1 | | 100.0 |
 Allianz Immobilien GmbH, Stuttgart
| | 5 | | 100.0 |
 Allianz Lebensversicherungs-Aktiengesellschaft, Stuttgart
| | 1,456 | | 94.8 |
 Allianz Pension Partners GmbH, Stuttgart
| | 0.5 | | 100.0 |
 Allianz Pensionskasse Aktiengesellschaft, Munich
| | 146 | | 100.0 |
Allianz Private Equity Partners GmbH, Munich | | 0.04 | | 100.0 |
 Allianz Private Krankenversicherungs-Aktiengesellschaft, Munich
| | 360 | | 100.0 |
Allianz ProzessFinanz GmbH, Munich | | 0.04 | | 100.0 |
Allianz Shared Infrastructure Services GmbH, Munich | | 219 | | 100.0 |
 Allianz Versicherungs-Aktiengesellschaft, Munich
| | 2,512 | | 100.0 |
AZT Automotive GmbH, Munich | | 0.2 | | 100.0 |
Deutsche Lebensversicherungs-Aktiengesellschaft, Berlin | | 45 | | 100.0 |
 Dresdner Bank AG, Frankfurt am Main
| | 8,674 | | 100.0 |
Euler Hermes Kreditversicherungs-AG, Hamburg | | 246 | | 100.0 |
MAN Roland Druckmaschinen AG, Offenbach | | 289 | | 100.0 |
Münchener und Magdeburger Agraversicherung Aktiengesellschaft, Munich | | 8 | | 59.9 |
Oldenburgische Landesbank Aktiengesellschaft, Oldenburg | | 531 | | 89.4 |
Reuschel & Co. Kommanditgesellschaft, Munich | | 149 | | 97.5 |
risklab germany GmbH, Frankfurt am Main | | 0.03 | | 100.0 |
 Vereinte Spezial Krankenversicherung Aktiengesellschaft, 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%. |
| 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 AssetManagement segment’s operating revenues. |
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 | | |
Argentina | | | | |
AGF Allianz Argentina Compania de Seguros Generales S.A., Buenos Aires | | 13 | | 100.0 |
Australia | | | | |
Allianz Australia Limited, Sydney | | 1,005 | | 100.0 |
Austria | | | | |
Allianz Elementar Lebensversicherungs-Aktiengesellschaft, Vienna | | 62 | | 100.0 |
Allianz Elementar Versicherungs-Aktiengesellschaft, Vienna | | 375 | | 100.0 |
Privatinvest Bank AG, Salzburg | | 15 | | 74.0 |
Belgium | | | | |
Allianz Belgium Insurance S.A., Brüssel | | 441 | | 100.0 |
Brazil | | | | |
AGF Brasil Seguros S.A., Sao Paulo | | 138 | | 72.5 |
Bulgaria | | | | |
Allianz Bulgaria Insurance and Reinsurance Company Ltd., Sofia | | 26 | | 78.0 |
Allianz Bulgaria Life Insurance Company Ltd., Sofia | | 13 | | 99.0 |
Commercial Bank Allianz Bulgaria Ltd., Sofia | | 50 | | 99.8 |
China | | | | |
Allianz China Life Insurance Co. Ltd., Shanghai | | 18 | | 51.0 |
Allianz Global Investors Hong Kong Ltd., Hong Kong | | 65 | | 100.0 |
Allianz Insurance (Hong Kong) Ltd., Hong Kong | | 9 | | 100.0 |
Dresdner Kleinwort (Japan) Limited, Hong Kong | | 288 | | 100.0 |
RCM Asia Pacific Ltd., Hong Kong | | 14 | | 100.0 |
Colombia | | | | |
Colseguros Generales S.A., Bogota | | 35 | | 100.0 |
Croatia | | | | |
Allianz Zagreb d.d., Zagreb | | 17 | | 80.1 |
Czech Republic | | | | |
Allianz poistóvna a.s., Prague | | 121 | | 100.0 |
Egypt | | | | |
Allianz Egypt Insurance Company S.A.E., Cairo | | 6 | | 85.0 |
Allianz Egypt Life Company S.A.E., Cairo | | 8 | | 99.4 |
France | | | | |
AAAM S.A., Paris | | 32 | | 84.9 |
AGF Asset Management S.A., Paris | | 93 | | 99.8 |
Allianz Global Corporate & Specialty France, Paris | | 179 | | 100.0 |
Assurances Générales de France IART S.A., Paris | | 2,267 | | 100.0 |
Assurances Générales de France Vie S.A., Paris | | 2,361 | | 100.0 |
Assurances Générales de France, Paris | | 7,287 | | 100.0 |
Banque AGF S.A., Paris | | 179 | | 100.0 |
Euler Hermes SFAC S.A., Paris | | 337 | | 100.0 |
Mondial Assistance S.A. S., Paris Cedex | | 205 | | 100.0 |
Greece | | | | |
Allianz Hellas Insurance Company S.A., Athen | | 71 | | 100.0 |
Hungary | | | | |
Allianz Hungária Biztosító Zrt., Budapest | | 220 | | 100.0 |
Indonesia | | | | |
PT Asuransi Allianz Life Indonesia p.l.c., Jakarta | | 20 | | 99.8 |
PT Asuransi Allianz Utama Indonesia Ltd., Jakarta | | 19 | | 76.0 |
Ireland | | | | |
Allianz Global Investors Ireland Ltd., Dublin | | 5 | | 100.0 |
Allianz Irish Life Holdings p.l.c., Dublin | | 488 | | 66.4 |
Allianz Re Dublin Limited, Dublin | | 17 | | 100.0 |
Allianz Worldwide Care Ltd., Dublin | | 12 | | 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% |
(2)
| 99.99% of the voting share capital.100.0%.
|
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 | | |
Italy | | | | |
ALLIANZ SUBALPINA S.p.A. SOCIETÀ DI ASSICURAZIONI E RIASSICURAZIONI, Turin | | 246 | | 98.0 |
Allianz Global Investors Italia S.p.A, Milan | | 48 | | 100.0 |
Allianz S.p.A., Trieste | | 3,016 | | 100.0 |
GENIALLOYD S.p.A., Milan | | 72 | | 100.0 |
INVESTITORI SGR S.p.A., Milan | | 17 | | 87.7 |
Lloyd Adriatico S.p.A., Trieste | | 989 | | 99.9 |
RAS Tutela Giudiziaria S.p.A., Milan | | 9 | | 100.0 |
RB Vita S.p.A., Milan | | 209 | | 100.0 |
Japan | | | | |
Allianz Global Investors Japan Co. Ltd. , Tokyo | | 0.6 | | 100.0 |
Laos | | | | |
Assurances Générales du Laos Ltd., Laos | | 3 | | 51.0 |
Luxembourg | | | | |
Allianz Global Investors Luxembourg S.A., Luxembourg | | 69 | | 100.0 |
Dresdner Bank Luxembourg S.A., Luxembourg | | 530 | | 100.0 |
Malaysia | | | | |
Allianz General Insurance Malaysia Berhad p.l.c., Kuala Lumpur | | 30 | | 100.0 |
Allianz Life Insurance Malaysia Berhad p.l.c., Kuala Lumpur | | 44 | | 100.0 |
Mexico | | | | |
Allianz México S.A. Compañia de Seguros, Mexico | | 93 | | 100.0 |
Netherlands | | | | |
Allianz Europe Ltd., Amsterdam | | 28,961 | | 100.0 |
Allianz Nederland Asset Management B.V., Amsterdam | | 33 | | 100.0 |
Allianz Nederland Levensverzekering N.V., Utrecht | | 263 | | 100.0 |
Allianz Nederland Schadeverzekering N.V., Rotterdam | | 346 | | 100.0 |
Dresdner VPV N.V., Gouda | | 48 | | 100.0 |
Poland | | | | |
TU Allianz Polska S.A., Warsaw | | 100 | | 100.0 |
TU Allianz Zycie Polska S.A., Warsaw | | 31 | | 100.0 |
Portugal | | | | |
Companhia de Seguros Allianz Portugal S.A., Lisbon | | 199 | | 64.8 |
Republic of Korea | | | | |
Allianz Global Investors Korea Limited, Seoul | | 19 | | 100.0 |
Allianz Life Insurance Co. Ltd., Seoul | | 513 | | 100.0 |
Romania | | | | |
Allianz Tiriac Asigurari SA, Bukarest | | 126 | | 52.1 |
Russia | | | | |
Dresdner Bank ZAO, St. Petersburg | | 75 | | 100.0 |
Insurance Company “Progress Garant”, Moscow | | 35 | | 100.0 |
Insurance Joint Stock Company „Allianz”, Moscow | | 11 | | 100.0 |
Russian People’s Insurance Society “ROSNO”, Moscow | | 152 | | 97.2 |
Singapore | | | | |
Allianz Global Investors Singapore Ltd., Singapore | | 1 | | 100.0 |
Slovakia | | | | |
Allianz-Slovenská poist’ovna a.s., Bratislava | | 417 | | 84.6 |
Spain | | | | |
Allianz Compañia de Seguros y Reaseguros S.A., Madrid | | 502 | | 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 | | 59 | | 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)
| Controlled by the Allianz Group.
|
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 |
| | | | | |
Operating Subsidiaries—Other countries | | Equity | | % owned1) | |
| | | € mn | | | |
Switzerland | | | | | |
Alba Allgemeine Versicherungs-Gesellschaft, Basel | | 32 | | 100.0 | |
Allianz Risk Transfer AG, Zurich | | 309 | | 100.0 | |
Allianz Suisse Lebensversicherungs-Gesellschaft, Zurich | | 484 | | 100.0 | |
Allianz Suisse Versicherungs-Gesellschaft, Zurich | | 559 | | 100.0 | |
Compagnie d’Assurance de Protection Juridique S.A., Zug | | 13 | | 100.0 | |
Dresdner Bank (Schweiz) AG, Zurich | | 114 | | 99.8 | |
ELVIA Reiseversicherungs-Gesellschaft AG, Zurich | | 218 | | 100.0 | |
Selecta AG, Muntelier2) | | 135 | | 100.0 | |
Taiwan | | | | | |
Allianz Global Investors Taiwan Ltd., Taipei | | 27 | | 100.0 | |
Allianz Taiwan Life Insurance Co. Ltd., Taipei | | 63 | | 99.6 | |
United Kingdom | | | | | |
Allianz (UK) Limited, Guildford | | 588 | | 100.0 | |
Allianz Insurance plc., Guildford | | 1,085 | | 98.0 | 3) |
Dresdner Kleinwort Group Ltd., London | | 45 | | 100.0 | |
Dresdner Kleinwort Limited, London | | 344 | | 100.0 | |
Kleinwort Benson Channel Islands Holdings Ltd., St. Peter Port/Guernsey | | 280 | | 100.0 | |
Kleinwort Benson Private Bank Ltd., London | | 73 | | 100.0 | |
RCM (UK) Ltd., London | | 14 | | 100.0 | |
United States | | | | | |
Allianz Global Investors of America L.P., Dover/Delaware | | 1,436 | | 97.5 | |
Allianz Global Investors U.S. Retail LLC, Dover/Delaware | | 37 | | 100.0 | |
Allianz Global Risks US Insurance Company, Burbank/California | | 2,910 | | 100.0 | |
Allianz Life Insurance Company of North America, Minneapolis/Minnesota | | 2,636 | | 100.0 | |
Allianz of America Inc., Wilmington/Delaware | | 9,868 | | 100.0 | |
Allianz Underwriters Insurance Company, Burbank/California | | 41 | | 100.0 | |
Dresdner Kleinwort Securities Llc, Wilmington/Delaware | | 182 | | 100.0 | |
Fireman’s Fund Insurance Company, Novato/California | | 2,427 | | 100.0 | |
NFJ Investment Group LP, Dover/Delaware | | 4 | | 100.0 | |
Nicholas Applegate Capital Management LLC, Dover/Delaware | | 12 | | 100.0 | |
Pacific Investment Management Company LLC, Wilmington/Delaware | | 246 | | 85.0 | |
RCM Capital Management LLC, Wilmington/Delaware | | 15 | | 100.0 | |
Wm. H McGee & Co. Inc., New York/New York | | 2 | | 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) | Classified as “held for sale” |
3) | 99.99% of the voting share capital |
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 | |
| | | | | |
Associated Enterprises1) | | Equity | | % owned2) | |
| | | € mn | | | |
Phenix Alternative Holding | | 3,275 | | 32.8 | |
Allianz-dit Euro Bond Total Return Fonds | | 2,923 | | 38.8 | |
AGF Jour | | 2,705 | | 12.6 | 3) |
AGF Euribor | | 2,242 | | 35.4 | |
AGF Eurocash | | 1,480 | | 7.4 | 3) |
Natinium 2007-1 | | 1,146 | | 48.4 | |
AGF SECURICASH L | | 755 | | 15.7 | 3) |
Allianz PIMCO Euro Bond Total Return | | 713 | | 30.3 | |
Deutsche Schiffsbank AG, Bremen und Hamburg | | 552 | | 40.0 | |
AGF Peh Eur. IV FCPR | | 306 | | 49.2 | |
Oddo, Paris | | 289 | | 20.0 | |
Cofitem Cofimur, Paris | | 230 | | 22.1 | |
PHRV (Paris Hotels Roissy Vaugirard), Paris | | 163 | | 24.9 | |
Bajaj Allianz Life Insurance Company Ltd., Pune | | 153 | | 26.0 | |
Koç Allianz Sigorta T.A.S., Istanbul | | 147 | | 37.1 | |
Dresdner-Cetelem Kreditbank GmbH, Munich | | 138 | | 49.9 | |
FONDO IMMOBILIARE DOMUS | | 133 | | 25.5 | |
Citylife Srl., Milano | | 129 | | 26.7 | |
Ayudhya Allianz C.P. Life Public Company Limited, Bangkok | | 113 | | 25.0 | |
Kommanditgesellschaft Allgemeine Leasing GmbH & Co, Gruenwald | | 104 | | 40.5 | |
Bajaj Allianz General Insurance Company Ltd., Pune | | 89 | | 26.0 | |
Scandferries Holding GmbH, Hamburg | | 60 | | 38.1 | |
Euro Media Télévision S.A., Bry-sur_Marne | | 17 | | 21.4 | |
(1)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% 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 | | 360 | | 8.8 | | 1,905 | | 355 | | | 12/31/2007 |
Banco Popular Espanol S.A., Madrid | | 1,331 | | 9.4 | | 5,914 | | 1,026 | | | 12/31/2006 |
BASF SE, Ludwigshafen | | 1,246 | | 2.5 | | 18,578 | | 3,215 | | | 12/31/2006 |
Bayer AG, Leverkusen | | 1,737 | | 3.6 | | 12,851 | | 1,683 | | | 12/31/2006 |
Beiersdorf AG, Hamburg | | 883 | | 6.6 | | 1,790 | | 664 | | | 12/31/2006 |
Bollore Investissement S.A., Ergue-Gaberic | | 206 | | 6.0 | | 3,894 | | 583 | | | 12/31/2006 |
E.ON AG, Duesseldorf | | 2,956 | | 2.9 | | 52,762 | | 5,057 | | | 12/31/2006 |
ENI S.p.A., Rom | | 592 | | 0.6 | | 41,199 | | 9,217 | | | 12/31/2006 |
GEA Group AG, Bochum | | 458 | | 10.4 | | 1,261 | | (288 | ) | | 12/31/2006 |
Heidelberger Druckmaschinen AG, Heidelberg | | 243 | | 13.4 | | 1,202 | | 263 | | | 03/31/2007 |
Industrial & Commercial Bank of China Limited, Beijing | | 3,138 | | 1.9 | | 44,378 | | 4,642 | | | 12/31/2006 |
Linde AG, Munich | | 1,307 | | 8.8 | | 8,225 | | 1,838 | | | 12/31/2006 |
Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in München, Munich | | 1,422 | | 4.9 | | 26,429 | | 3,440 | | | 12/31/2006 |
Nestlé S.A., Vevey | | 827 | | 0.7 | | 31,805 | | 5,535 | | | 12/31/2006 |
Rhön Klinikum AG, Bad Neustadt/Saale | | 142 | | 6.4 | | 729 | | 105 | | | 12/31/2006 |
Royal Dutch Shell plc, London | | 533 | | 0.3 | | 79,892 | | 17,683 | | | 12/31/2006 |
RWE AG, Essen | | 2,232 | | 4.1 | | 14,111 | | 3,847 | | | 12/31/2006 |
Sanofi-Aventis S.A., Paris | | 521 | | 0.6 | | 45,820 | | 4,006 | | | 12/31/2006 |
Sequana Capital S.A., Paris | | 131 | | 11.8 | | 1,244 | | 958 | | | 12/31/2006 |
SGS S.A., Geneve | | 336 | | 5.3 | | 958 | | 267 | | | 12/31/2006 |
Siemens Aktiengesellschaft, Munich | | 1,049 | | 1.1 | | 29,627 | | 3,806 | | | 09/30/2007 |
Total S.A., Paris | | 897 | | 0.7 | | 41,148 | | 11,768 | | | 12/31/2006 |
UniCredito Italiano S.p.A., Milan | | 1,819 | | 2.4 | | 38,468 | | 5,448 | | | 12/31/2006 |
Zagrebacka Banka d.d., Zagreb | | 624 | | 11.7 | | 1,026 | | 134 | | | 12/31/2006 |
(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 – losses—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)1)2)
As of December 31, 20062007
| | | | Amortized
cost
| | Fair
Value
| | Amount shown in balance sheet
| | Amortized
cost
| | Fair
Value
| | Amount shown
in balance sheet
|
| | | € mn | | € mn | | € mn | | € mn | | € mn | | € mn |
Debt securities: | | | | | | | | | | | | |
Government and agency mortgage-backed securities (residential and commercial) | | 8,757 | | 8,555 | | 8,555 | | 7,628 | | 7,546 | | 7,546 |
Corporate mortgage-backed securities (residential and commercial) | | 4,768 | | 4,753 | | 4,753 | | 6,663 | | 6,601 | | 6,601 |
Other asset-backed securities | | 3,911 | | 3,896 | | 3,896 | | 5,384 | | 5,326 | | 5,326 |
Government Bonds: | | | | | | | | | | | | |
Germany | | 14,627 | | 14,825 | | 14,823 | | 13,117 | | 13,057 | | 13,057 |
Italy | | 24,159 | | 24,610 | | 24,592 | | 23,537 | | 23,519 | | 23,510 |
France | | 15,353 | | 16,018 | | 16,018 | | 13,452 | | 13,793 | | 13,793 |
United States | | 5,219 | | 5,112 | | 5,112 | | 4,544 | | 4,638 | | 4,638 |
Spain | | 8,322 | | 8,617 | | 8,617 | | 6,717 | | 6,788 | | 6,788 |
Belgium | | 5,209 | | 5,295 | | 5,295 | | 5,050 | | 4,974 | | 4,974 |
All other countries | | 33,217 | | 33,641 | | 33,586 | | 34,000 | | 33,521 | | 33,512 |
Corporate Bonds: | | | | | | | | | | | | |
Public utilities | | 3,202 | | 3,220 | | 3,219 | | 2,581 | | 2,553 | | 2,553 |
All other corporate bonds | | 81,364 | | 82,148 | | 82,060 | | 86,014 | | 84,374 | | 84,346 |
Other | | 2,148 | | 2,345 | | 2,345 | | 2,960 | | 2,955 | | 2,955 |
| | |
| |
| |
| |
| |
| |
|
Total debt | | 210,256 | | 213,035 | | 212,871 | | 211,647 | | 209,645 | | 209,599 |
| Equity securities: | | | | | | | | | | | | |
| Common stocks: | | | | | | | | | | | | |
Public utilities | | 5,595 | | 9,886 | | 9,886 | | 4,963 | | 9,549 | | 9,549 |
Banks, insurance companies, funds | | 13,752 | | 21,477 | | 21,477 | | 12,451 | | 16,964 | | 16,964 |
Industrial, miscellaneous and all other | | 23,639 | | 38,205 | | 38,205 | | 22,485 | | 35,666 | | 35,666 |
Non-redeemable preferred stocks | | 153 | | 207 | | 207 | | 156 | | 281 | | 281 |
| | |
| |
| |
| |
| |
| |
|
Total equity securities | | 43,139 | | 69,775 | | 69,775 | | 40,794 | | 63,061 | | 63,061 |
Mortgage loans on real estate | | 26,254 | | 26,254 | | 26,254 | | 26,661 | | 26,661 | | 26,661 |
Real Estate | | 9,555 | | 13,494 | | 9,555 | | 7,758 | | 12,031 | | 7,758 |
Policy loans | | 1,841 | | 1,841 | | 1,841 | | 1,765 | | 1,765 | | 1,765 |
Certificates of deposit | | 1,763 | | 1,763 | | 1,763 | | 2,756 | | 2,756 | | 2,756 |
Short-term investments | | 5,012 | | 5,012 | | 5,012 | | 7,560 | | 7,560 | | 7,560 |
| | |
| |
| |
| |
| |
| |
|
Total investments | | 297,820 | | 331,174 | | 327,071 | | 298,941 | | 323,479 | | 319,160 |
| | |
| |
| |
| |
| |
| |
|
(1)1)
| Includes all Allianz Group investments except portfolios carried at fair value through income. |
2) | The total of investments on the balance sheet of €286,952 mn includes total debt, total equity securities and real estate shown above. Plus investments in associates and joint ventures of €5,471 mn and funds held by others under reinsurance contracts assumed of €1,063 mn. The other items included in the above summary of investments are recorded in loans to banks and customers. |
SCHEDULE II
ALLIANZ SOCIETAS EUROPAEA
PARENT ONLY CONDENSED FINANCIAL STATEMENTS BALANCE SHEETS (IFRS BASIS)
| As of December 31,
| | 2006
| | 2005
| | 2007
| | 2006
|
| | | € mn | | € mn | | € mn | | € mn |
Assets: | | | | | | | | |
Investment in subsidiaries and affiliates | | 75,605 | | 68,324 | | 67,488 | | 74,774 |
Other invested assets | | 19,387 | | 16,048 | | 19,236 | | 19,387 |
Insurance reserves ceded | | 3,211 | | 3,310 | | 2,896 | | 3,211 |
Cash funds and cash equivalents | | 72 | | 59 | | 81 | | 72 |
Other assets | | 6,447 | | 4,861 | | 7,804 | | 6,447 |
| | |
| |
| |
| |
|
| | | 104,722 | | 92,602 | | 97,505 | | 103,891 |
| | |
| |
| |
| |
|
Liabilities and Shareholders’ Equity: | | | | | | | | |
Insurance reserves | | 11,654 | | 13,540 | | 10,404 | | 11,654 |
Participation certificates and subordinated liabilities | | 7,336 | | 6,629 | | 7,306 | | 7,336 |
Certificated liabilities | | 1,799 | | 1,912 | | 4,829 | | 1,799 |
Other liabilities | | 33,452 | | 31,034 | | 27,213 | | 33,452 |
| | |
| |
| |
| |
|
| | | 54,241 | | 53,115 | | 49,752 | | 54,241 |
Shareholders’ equity | | 50,481 | | 39,487 | | 47,753 | | 49,650 |
| | |
| |
| |
| |
|
| | | 104,722 | | 92,602 | | 97,505 | | 103,891 |
| | |
| |
| |
| |
|
SCHEDULE II
ALLIANZ SOCIETAS EUROPAEA
PARENT ONLY CONDENSED FINANCIAL STATEMENTS
STATEMENTS OF INCOME (IFRS BASIS)
| For the years ended December 31,
| | 2006
| | 2005
| | 2004
| | | 2007
| | 2006
| | 2005
|
| | | € mn | | € mn | | € mn | | | € mn | | € mn | | € mn |
Revenues: | | | | | | |
Net premiums earned | | 2,887 | | | 3,291 | | 3,627 | | | 2,294 | | | 2,887 | | | 3,291 |
Investment income | | 475 | | | 2,704 | | 1,134 | | | 1,708 | | | 475 | | | 2,704 |
Other income | | 20 | | | 0 | | 0 | | | 15 | | | 20 | | | — |
| | |
|
| |
| |
|
| |
|
| |
|
| |
|
| | | 3,382 | | | 5,995 | | 4,761 | | | 4,017 | | | 3,382 | | | 5,995 |
Expenses: | | | | | | |
Insurance benefits | | 2,013 | | | 2,195 | | 2,601 | | | 1,622 | | | 2,013 | | | 2,194 |
Acquisition costs and administrative expenses | | 1,392 | | | 1,249 | | 1,423 | | | 1,202 | | | 1,392 | | | 1,249 |
Investment expense | | 1,639 | | | 1,661 | | 1,999 | | | 1,851 | | | 1,639 | | | 1,661 |
Other expense | | 37 | | | 0 | | 0 | | | — | | | 37 | | | — |
| | |
|
| |
| |
|
| |
|
| |
|
| |
|
| | | 5,081 | | | 5,105 | | 6,023 | | | 4,675 | | | 5,081 | | | 5,105 |
| | |
|
| |
| |
|
| |
|
| |
|
| |
|
Income before tax | | (1,699 | ) | | 892 | | (1,262 | ) | | (658 | ) | | (1,699 | ) | | 891 |
Taxes | | 808 | | | 571 | | 120 | | | 210 | | | 808 | | | 572 |
| | |
|
| |
| |
|
| |
|
| |
|
| |
|
Income before equity in undistributed net income of subsidiaries | | (891 | ) | | 1,463 | | (1,142 | ) | | (448 | ) | | (891 | ) | | 1,463 |
Equity in undistributed net income of subsidiaries | | 7,912 | | | 2,917 | | 3,408 | | | 8,414 | | | 7,912 | | | 2,917 |
| | |
|
| |
| |
|
| |
|
| |
|
| |
|
Net Income | | 7,021 | | | 4,380 | | 2,266 | | | 7,966 | | | 7,021 | | | 4,380 |
| | |
|
| |
| |
|
| |
|
| |
|
| |
|
SCHEDULE II
ALLIANZ SOCIETAS EUROPAEA
PARENT ONLY CONDENSED FINANCIAL STATEMENTS
STATEMENT OF CASH FLOWS (IFRS BASIS)
| For the years ended December 31,
| | 2006
| | 2005
| | 2004
| | | 2007
| | 2006
| | 2005
| |
| | | € mn | | € mn | | € mn | | | € mn | | € mn | | € mn | |
Cash flows from operating activities: | | | | |
Net income | | 7,021 | | | 4,380 | | | 2,266 | | | 7,966 | | | 7,021 | | | 4,380 | |
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 | ) | | (8,414 | ) | | (7,912 | ) | | (2,917 | ) |
Change in insurance reserves—net | | (1,787 | ) | | (2,330 | ) | | (631 | ) | | (935 | ) | | (1,787 | ) | | (2,330 | ) |
Change in other assets | | (1,586 | ) | | (225 | ) | | 2,518 | | | (1,357 | ) | | (1,586 | ) | | (225 | ) |
Change in other liabilities | | 2,418 | | | 5,448 | | | (14,434 | ) | | (6,239 | ) | | 2,418 | | | 5,448 | |
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Net cash (used) provided by operating activities | | (1,846 | ) | | 4,356 | | | (13,690 | ) | | (8,979 | ) | | (1,846 | ) | | 4,356 | |
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Cash flows from investing activities: | | | | |
Change in investments in subsidiaries | | (7,280 | ) | | (17,429 | ) | | 4,835 | | | (45 | ) | | (7,280 | ) | | (17,429 | ) |
Change in other invested assets | | (3,340 | ) | | 3,839 | | | 4,663 | | | 151 | | | (3,340 | ) | | 3,839 | |
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Net cash provided (used) in investing activities | | (10,620 | ) | | (13,590 | ) | | 9,498 | | | 106 | | | (10,620 | ) | | (13,590 | ) |
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Cash flows from financing activities: | | | | |
Change in certificated liabilities, participation certificates and subordinated liabilities | | 595 | | | 1,224 | | | 1,075 | | | 2,999 | | | 595 | | | 1,224 | |
Net proceeds from issuance of common stocks and additional paid in capital | | 98 | | | 2,159 | | | 69 | | | 115 | | | 98 | | | 2,159 | |
Dividends paid | | (811 | ) | | (674 | ) | | (551 | ) | | (1,642 | ) | | (811 | ) | | (674 | ) |
Other changes in shareholders’ capital | | 12,597 | | | 6,544 | | | 3,626 | | | 7,410 | | | 12,597 | | | 6,544 | |
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Net cash provided (used) by financing activities | | 12,479 | | | 9,253 | | | 4,219 | | | 8,882 | | | 12,479 | | | 9,253 | |
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Net increase (decrease) in cash | | 13 | | | 19 | | | 27 | | | 9 | | | 13 | | | 19 | |
Cash at January 1 | | 59 | | | 40 | | | 13 | | | 72 | | | 59 | | | 40 | |
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Cash at December 31 | | 72 | | | 59 | | | 40 | | | 81 | | | 72 | | | 59 | |
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Note to Parent Only Condensed Financial Statements
Contingent liabilities and other financial commitments
As of December 31, 20062007 the company had contingent liabilities under guarantees amounting of €7,561 thousand,€8 million, matched by rights of recourse for the same amount.
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 bnbillion by Allianz Finance B.V., Amsterdam
Bonds issued in 2002 for €2.0 bn€900 million by Allianz Finance II B.V., Amsterdam
Subordinated bonds issued in 2002 for €2.0 bn€3.0 billion 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 DollarUSD 500 mnmillion by Allianz Finance II B.V., Amsterdam
Loan taken out in 2002 for Australian DollarAUD 100 mnmillion by Allianz Australia Ltd., Sydney
Bonds issued in 2005 by Allianz Finance II B.V., Amsterdam with a repayment dependent on the development of the German share index (DAX) issue volume €1.262 bn€450 million
Subordinated bonds issued in 2005 for €1.4 billion by Allianz Finance II B.V., Amsterdam
Subordinated bonds issued in 2006 for €800 mnmillion by Allianz Finance II B.V., Amsterdam
Bonds issued in 2006 for €1.5 bnbillion by Allianz Finance II B.V., Amsterdam
Subordinated bondsBonds issued in 20052007 for €1.4 bnUSD 400 million by Allianz Finance II B.V., Amsterdam
In the context of the Minority buyout of AGF, Allianz SE guarantees debt obligations of Allianz Holding France amounting to €4.5 billion.
Guarantee declaration for Allianz Cornhill Insurance, Guildford in favour of Lloyds TSB amounting British Pound 40 millionGBP 78 million.
Letters of credit for liabilities of Allianz Global Corporate & Specialty AG, Munich, amounting to US Dollar 512 mnUSD 642 million.
Letters of credit for liabilities of Allianz Global Corporate & Specialty AG, Munich, amounting to US Dollar 100 mn
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 167 mnUSD 152 million and are secured by pledges in securities.
Letters of credit for liabilities of Allianz Global Risks US Insurance Company, Los Angeles, amounting to USD 330 million.
Allianz SE provides a guarantee to Allianz Argos14 to secure the payment obligations under the derivative contract entered into with Blue Fin Ltd., a Cayman Islands exempted SPE, in the context of the issuance of a catastrophe bond.
Allianz SE provides a maximum €1 billion guarantee for the obligations of AGF Vie, Paris, under a unit linked pension insurance contract (as of December 31, 2007: €211 million utilized).
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 DollarUSD 1.1 bn.billion.
A commitment to make capital payments in the amount of €27 mnmillion 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 fromthrough 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 ofto Allianz of America Inc.,Wilmington. On December 31, 20062007 the stake of Pacific Life in PIMCO was still 2.0 percent,%, so that the liabilities oftowards Pacific Life as of December 31, 20062007 amounted to US DollarUSD 0.3 bn.billion.
A guarantee declaration was given to Dresdner Bank AG, Frankfurt, amounting to €50 mn,million, for the acquisition of receivables from payments for the rights to use a name in connection with Allianz Arena.
Guarantee declarations have also been given for deferred annuity agreements signed by Allianz-RAS Seguros y Reaseguros S.A., Madrid.
Allianz SE provides guarantees in favour of Marsh, Inc. for coverage of potential liabilities for various Allianz subsidiaries.
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 mnUSD 1.0 billion in commercial papers was issued as part of the program.
In the context of a Securities Lending Agreement, Allianz SE gave a payment guarantee to PIMCO funds and Abu Dhabi Investment Authority to fulfill financial obligations of Dresdner Bank AG.AG, Frankfurt.
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 PartnerPartners GmbH, in order to ensure that company’s ability to meet warranty obligations in connection with the disposal of a shareholding.
Rental guarantees for a property portfolio of Dresdner Bank, which is limited to €400 mn.
There are also value asset liabilities of €75.8 mn€76 million 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 respect of the sale of Allianz 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. ReAllianz Global Risks US Reinsurance Canada branch.Branch.
A contingent indemnity agreement was entered with respect 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.
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 in accordance with Clause§ 5 (10) of the Statute of Deposit Security Arrangement Fund.
Allianz SE guarantees the commitments of Allianz Argos 14 GmbH under a payment guarantee from November 7, 2007 which relates to a counterparty agreement and a reimbursement agreement. In addition, Allianz SE provides common warranties in the context of capital market transactions. The liability of this obligation amounts to total €41 million.
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 Immobilien GmbH (agreement cancelled as of December 31, 2007)
Allianz ProzessFinanz GmbH (agreement cancelled as of December 31, 2007)
AZ-Arges Vermögensverwaltungsgesellschaft mbH
AZ-Argos 3 Vermögensverwaltungsgesellschaft mbH
AZ-Argos 10 Vermögensverwaltungsgesellschaft mbH
IDS GmbH-Analysis and Reporting Services
META Finanz-Informationssysteme GmbH
Control and transfer-of-profit agreements were concluded by Allianz Capital PartnersSE with Allianz Investment Management SE on October 8, 2007 and with Allianz Argos 14 GmbH (contract cancelled by mergeron October 31, 2007. These agreements require the consent of the General Meeting of Allianz SE to be granted in the General Meeting on May 21, 2008 and registration in the Commercial Register to become effective. The control and transfer-of-profit agreement with Allianz Investment Management SE shall apply as of January 24, 2007)
from July 1, 2007, the agreement with Allianz Global Risks Rückversicherungs-AG (contract cancelled by mergerArgos 14 GmbH as of August 31, 2006)
Allianz Private Equity Partners GmbH (contract cancelledfrom November 1, 2007, provided that the control under the agreements applies only as of December 31, 2006)from registration in the respective Commercial Register.
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 commitments in connection with the promise of compensation to holders of rights under stock option programs of Assurances Générales de France.
Financial liabilities of €256 mn€223 million arose in 20062007 from advertising agreements.
Potential liabilities amounting to €29.9 mn€30 million were outstanding at the balance sheet date for calls on equity stocks not fully paid up with respect to affiliated enterprises.
In the course of the sale of an real estate portfolio comprising objects from different Allianz Group entities, Allianz SE agreed to provide under certain cirmumstances guarantees to the buyer for the purchase price of the objects in an amount of up to €1.6 billion.
Security deposits for leasing contracts amount to €0.2 million financial commitments.
SCHEDULE III
SUPPLEMENTARY INSURANCE INFORMATION(1)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
| | 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 | | € mn | | € mn | | € mn | | € mn | | € mn |
At and for the year ended December 31, 2006: | | | | | | | | | | | |
As of and for the year ended December 31, 2007: | | | | | | | | | | | |
Life/Health | | 13,779 | | 256,051 | | 1,874 | | 29,454 | | 20,574 | | 14,130 | | 263,621 | | 1,858 | | 26,291 | | 20,809 |
Property-Casualty | | 4,127 | | 65,813 | | 12,994 | | 1,807 | | 37,950 | | 4,059 | | 64,399 | | 13,163 | | 1,519 | | 38,553 |
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|
Total | | 17,906 | | 321,864 | | 14,868 | | 31,261 | | 58,524 | | 18,189 | | 328,020 | | 15,021 | | 27,810 | | 59,362 |
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|
At and for the year ended December 31, 2005: | | | | | | | | | | | |
As of and for the year ended December 31, 2006: | | | | | | | | | | | |
Life/Health | | 12,959 | | 248,997 | | 1,580 | | 27,242 | | 19,997 | | 13,779 | | 256,051 | | 1,874 | | 28,791 | | 20,574 |
Property-Casualty | | 3,899 | | 67,120 | | 12,945 | | 2,300 | | 37,685 | | 4,127 | | 65,813 | | 12,994 | | 1,807 | | 37,950 |
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|
Total | | 16,858 | | 316,117 | | 14,525 | | 29,542 | | 57,682 | | 17,906 | | 321,864 | | 14,868 | | 30,598 | | 58,524 |
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|
At and for the year ended December 31, 2004: | | | | | | | | | | | |
As of and for the year ended December 31, 2005: | | | | | | | | | | | |
Life/Health | | 11,017 | | 228,709 | | 1,372 | | 20,424 | | 19,404 | | 12,959 | | 248,997 | | 1,580 | | 26,579 | | 19,997 |
Property-Casualty | | 4,000 | | 63,032 | | 11,821 | | 1,919 | | 37,385 | | 3,899 | | 67,120 | | 12,945 | | 2,300 | | 37,685 |
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|
Total | | 15,017 | | 291,741 | | 13,193 | | 22,343 | | 56,789 | | 16,858 | | 316,117 | | 14,525 | | 28,879 | | 57,682 |
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(1)1)
| After eliminating intra-Allianz Group transactions between segments. |
SCHEDULE III
SUPPLEMENTARY INSURANCE INFORMATION(1)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
| | 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 | | € mn | | € mn | | € mn | | € mn | | € mn |
At and for the year ended December 31, 2006: | | | | | | | | | | | |
As of and for the year ended December 31, 2007: | | | | | | | | | | | |
Life/Health | | 15,121 | | 28,150 | | 1,627 | | 2,810 | | 20,799 | | 14,675 | | 27,905 | | 1,555 | | 3,033 | | 20,885 |
Property-Casualty | | 5,592 | | 25,097 | | 3,838 | | 6,752 | | 38,259 | | 5,364 | | 25,824 | | 4,042 | | 6,574 | | 38,969 |
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|
Total | | 20,713 | | 53,247 | | 5,465 | | 9,562 | | 59,058 | | 20,040 | | 53,729 | | 5,597 | | 9,607 | | 59,854 |
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|
At and for the year ended December 31, 2005: | | | | | | | | | | | |
As of and for the year ended December 31, 2006: | | | | | | | | | | | |
Life/Health | | 14,295 | | 27,882 | | 1,285 | | 2,688 | | 20,167 | | 15,121 | | 28,150 | | 1,627 | | 2,810 | | 20,799 |
Property-Casualty | | 4,801 | | 26,038 | | 2,683 | | 7,533 | | 38,170 | | 5,592 | | 25,097 | | 3,838 | | 6,752 | | 38,259 |
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Total | | 19,096 | | 53,920 | | 3,968 | | 10,221 | | 58,337 | | 20,713 | | 53,247 | | 5,465 | | 9,562 | | 59,058 |
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At and for the year ended December 31, 2004: | | | | | | | | | | | |
As of and for the year ended December 31, 2005: | | | | | | | | | | | |
Life/Health | | 12,761 | | 26,281 | | 1,025 | | 2,686 | | 19,478 | | 14,295 | | 27,882 | | 1,285 | | 2,688 | | 20,167 |
Property-Casualty | | 4,079 | | 25,882 | | 1,883 | | 8,309 | | 37,643 | | 4,801 | | 26,038 | | 2,683 | | 7,533 | | 38,170 |
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Total | | 16,840 | | 52,163 | | 2,908 | | 10,995 | | 57,121 | | 19,096 | | 53,920 | | 3,968 | | 10,221 | | 58,337 |
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(1)1)
| After eliminating intra-Allianz Group transactions between segments. |
SCHEDULE IV
SUPPLEMENTARY REINSURANCE INFORMATION(3)3)
| | | | Direct gross amount
| | Ceded to other companies
| | Assumed from other companies
| | Net amount
| | Amount assumed to net
| | | Direct gross
amount
| | Ceded to
other
companies
| | Assumed
from other
companies
| | Net
amount
| | Amount
assumed to
net
| |
| | | | € mn | | € mn | | € mn | | € mn | | |
2007: | | | | | | | | | |
Life insurance in force | | | 706,754 | | 53,169 | | | 20,496 | | 674,081 | | 3.04 | % |
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Premiums earned: | | | | | | | | | |
Life/Health insurance1) | | | 21,164 | | (638 | ) | | 283 | | 20,809 | | 1.36 | % |
Property-Casualty insurance, including title insurance2) | | | 41,174 | | (5,316 | ) | | 2,695 | | 38,553 | | 6.99 | % |
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|
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Total premiums | | | 62,338 | | (5,954 | ) | | 2,978 | | 59,362 | | 5.02 | % |
| | | € mn | | € mn | | € mn | | € mn | | | |
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|
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2006: | | | | | | | | | | | | | | | | |
Life insurance in force | | 699,975 | | 83,752 | | | 20,056 | | 636,279 | | 3.15 | % | | 699,975 | | 83,752 | | | 20,056 | | 636,279 | | 3.15 | % |
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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 | % | |
Life/Health insurance1) | | | 21,027 | | (816 | ) | | 363 | | 20,574 | | 1.76 | % |
Property-Casualty insurance, including title insurance2) | | | 40,616 | | (5,529 | ) | | 2,863 | | 37,950 | | 7.54 | % |
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Total premiums | | 61,643 | | (6,345 | ) | | 3,226 | | 58,524 | | 5.51 | % | | 61,643 | | (6,345 | ) | | 3,226 | | 58,524 | | 5.51 | % |
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2005: | | | | | | | | | | | | | | | | |
Life insurance in force | | 702,597 | | 66,062 | | | 23,081 | | 659,616 | | 3.50 | % | | 702,597 | | 66,062 | | | 23,081 | | 659,616 | | 3.50 | % |
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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 | % | |
Life/Health insurance1) | | | 20,546 | | (929 | ) | | 380 | | 19,997 | | 1.90 | % |
Property-Casualty insurance, including title insurance2) | | | 40,169 | | (5,390 | ) | | 2,906 | | 37,685 | | 7.71 | % |
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Total premiums | | 60,715 | | (6,319 | ) | | 3,286 | | 57,682 | | 5.70 | % | | 60,715 | | (6,319 | ) | | 3,286 | | 57,682 | | 5.70 | % |
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2004: | | | | | | | | | |
Life insurance in force | | 649,619 | | 65,167 | | | 43,949 | | 628,401 | | 7.00 | % | |
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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 | % | |
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|
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Total premiums | | 60,330 | | (6,557 | ) | | 3,016 | | 56,789 | | 5.31 | % | |
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(1)1)
| Life/Health have been combined for this schedule. |
(2)2)
| Title insurance has been combined with Property-Casualty insurance. |
(3)3)
| After eliminating intra-Allianz Group transactions between 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 19, 2008
