We have already prepared for this next phase in 2018 and have established the new position of Chief Business Transformation
Group’s consolidated financial statements including the respective auditor‘s reports, the half-yearly as well as the quarterly reports were reviewed in detail by the Supervisory Board and the Audit Committee.
The Risk Committee held two meetings in 2018. In both meetings, the committee discussed the current risk situation of the Allianz Group and Allianz SE with the Board of Management. The risk report and other riskrelated statements in the annual Allianz SE and consolidated financial statements as well as management and group management reports were reviewed with the auditor and the Audit Committee was informed of the result. The appropriateness of the early risk recognition system at Allianz and the result of further, voluntary risk assessments by the auditor were also discussed. The committee took a detailed look at the risk strategy and capital management, as well as the effectiveness of the risk management system for the Allianz Group and
PwC’s assurance report were discussed in the plenary session of the Supervisory Board on 7 March 2019. The auditors from PwC participated in these discussions and presented the results of their assurance engagement.
GROUP MERGERS AND ACQUISITIONS COMMITTEE Dr. Helga Jung (Chairwoman), Oliver Bäte, Jacqueline Hunt, Giulio Terzariol.
Managing and overseeing Group M & Atransactions, including approval of individual transactions within certain thresholds.
STANDING COMMITTEE 5 members – Chairman: Chairman of the Supervisory Board (Michael Diekmann)
NOMINATION COMMITTEE 3 members – Chairman: Chairman of the Supervisory Board (Michael Diekmann)
Employee representation within Allianz SE according to the Agreement concerning the Participation of Employees in Allianz SE contributes to the diversity of work experience and cultural background. Pursuant to the provisions of the German SE Participation Act (SEBG), the number of women and men appointed as German employee representatives should be proportional to the number of women and men working in the German companies. However, the Supervisory Board does not have the right to select the employee representatives.
According to regulatory provisions, no more than two former Allianz SE Management Board members shall be members of the Supervisory Board.
Board. The current composition of the Supervisory Board and its committees is described on page 7.
Allianz Group’s website. Our website also provides a financial calendar listing the dates of major publications and events, such as annual reports, half-yearly financial reports and quarterly statements, AGMs, and analyst conference calls as well as financial press conferences.
With regard to the Supervisory Boards of the subsidiaries concerned, the target quotas for eight out of nine subsidiaries concerned were set at 30 % and the target quota for the remaining subsidiary concerned was set at 33 % until 31 December 2018. All subsidiaries concerned reached this target. The target quotas for the respective
Board of Management of the subsidiaries concerned were between 11 % and 25 % (19 % on average) and were met by only six of the nine companies. For the two management levels below the Board of Management, the respective Boards of Management of the subsidiaries concerned had set target quotas between 17 % and 33 % (23 % on average) for the first management level and target quotas between 18 % and 33 % (24 % on average) for the second management level below the Board of Management. As of 31 December 2018, the targets were met by four of the nine subsidiaries concerned at the first management level, while five of the nine companies met the targets set for the second management level. Despite increased efforts to promote women in the Allianz Group and also at the individual subsidiaries, it was not possible to achieve the targets in these cases, as it was not always possible to identify suitable female candidates for all vacant positions.
“Restricted Stock Units” (RSUs) with a deferred payout after four years. The grant value of the RSUs allocated equals the annual bonus of the previous year, i.e. the grant value is also capped at 150 % of the respective target level. The number of RSUs allocated is derived by dividing the grant value by the fair value of an RSU at the time of grant.
The transition payment comprises an amount corresponding to the most recent base salary, covering a period of six months, plus 25 % of the target variable remuneration at the notice date. A board member with a base salary of € 750 thou would receive a maximum
Allianz Standards for Underwriting (ASU) and the Allianz ESG Functional Rule for Investments (EFRI). An overview of the Group’s key
We are committed to making climate protection an integral part of our core business, as well as to setting ourselves long-term climate targets for our proprietary investments and business operations that are in line with the Paris Climate Agreement’s goal to limit global warming to well below 2°C. Our Climate Change Strategy anticipates the risks associated with a changing climate across all our lines of business. For the investment business, we consider climate-related criteria such as carbon emissions, energy efficiency, climate change vulnerability, or opportunities in clean tech as part of our ESG
− Status/progress: In 2018, we achieved a share of 93 % green electricity of total electricity used (2017: 100 %). SE data now includes further SE locations for which no green electricity was available in 2018.
Please refer to our ESG approach on page 42 for further details on the concepts.
− Status/progress: − Human rights matters have been taken into account within the 2018 ESG risk assessment process. For further details, please refer to our Sustainability Report 2018, section
This section describes the impacts of employee matters on our business activities and relationships as well as the impact of Allianz’s activities and relationships on employees. Furthermore, we describe the concepts and achievements related to the management of these impacts. All employee matters are managed by the Group HR function.
As 2018 targets have not been fully reached for Allianz SE, the VOICE
purchased approximately 15.8 million in own shares (with a total volume of € 3.0 bn9) in the course of 2018 as part of two recent sharebuy -back programs. Our Solvency II capitalization ratio remained stable compared to year-end 2017.
RECENT ORGANIZATIONAL CHANGES Effective 1 January 2018 and 1 April 2018, the Allianz Group reorganized the structure of its insurance activities to reflect the changes in the responsibilities of the Board of Management. Middle East and Africa were reallocated to the reportable segment Global Insurance Lines
4_In this section, our comments in the following section on the development of statutory gross premiums written refer to values determined “on an internal basis”, i.e. adjusted for foreign currency translation and (de-) consolidation effects, in order to provide more comparable information
Loadings from premiums grew as sales increased, driven particularly by capital-efficient products in our German life business. Higher sales in Italy and the Asia-Pacific region also contributed to this development. The rise in loadings from reserves was mainly due to higher reserve volumes in the United States, in our German life business, and higher average reserves in France. Unit-linked management fees went up, predominantly in Italy and Taiwan, supported by the increase in the assets under management.
Negative effects from “market and dividends”4 amounted to € 67 bn. € 38 bn were due to PIMCO and mainly related to fixedincome assets. € 28 bn mostly referred to AllianzGI’s equities and –
Property-Casualty Growth in gross premiums written: approximately 2 % on an internal basis.
Operating investment income (net) increased, as a slightly lower interest income was more than offset by one-off effects.
Life/Health Continue with focus on profitable growth and further shift new business mix towards capital-efficient, unit-linked, and protection products. Revenues are expected to be in the range of € 62.0 bn to € 68.0 bn.
Asset Management Moderate increase in total AuM due to solid third-party net inflows at both AllianzGI and PIMCO, supported by a slightly positive market return.
Reserve is getting closer to the peak in the current rate hiking cycle.
In the non-life sector, a slight premium growth slowdown is expected, against the backdrop of cooling economies. As in previous years, emerging markets are the main driver of growth. Overall, we expect global premium growth of around 5 % in 2019 (in nominal terms and adjusted for foreign currency translation effects). As cata strophe losses may continue to be elevated and investment income to be impacted by volatile markets and still low yields, overall profitability is likely to remain under pressure.
Overall, we expect our 2019 operating profit to be in the range of € 5.4 bn to € 6.0 bn (2018: € 5.7 bn).
Net cash outflow used in financing activities amounted to € 6.8 bn, compared to € 5.0 bn in 2017. This increase was largely driven by net cash outflows from our refinancing activities – after net cash inflows in 2017 –, mainly due to the redemption of a senior bond in the first quarter of 2018. Higher net cash inflows from liabilities to banks and customers partly offset this effect.
Both capitalization and amortization are included in the line item premiums earned (net) in the Group income statement.
− Integration of risk considerations and capital needs into management and decision-making processes by attributing risk and allocating capital to business segments, products, and strategies.
Our financial strength coupled with ongoing transformation renders us resilient and allows us to profit from new opportunities in a fastchanging business environment. For example,
− We are building expertise and business models to profit from new risk pools, including cyber risk (insurance, risk mitigation, and recovery services) and mobility fleets.
Casualty2 business segment as well as biometric risks in the Life/Health3 business segment. Underwriting risks are not relevant for the Asset
Premium risk is estimated based on actuarial models that are used to derive loss distributions. Non-catastrophe risks are modeled using attritional loss models for frequency losses as well as frequency and severity models for large losses. Natural disasters, such as earthquakes, storms, and floods, represent a significant challenge for risk management due to their accumulation potential and occurrence volatility. For natural catastrophe risks, we use special modeling techniques which combine portfolio data (geographic location, characteristics of insured objects, and their values) with simulated natural disaster scenarios to estimate the magnitude and frequency of potential losses. Where such stochastic models do not exist, we use deterministic, scenario-based approaches to estimate potential losses. Similar approaches are used to evaluate risk concentrations for terror and man-made catastrophes including losses from cyber incidents and industrial concentrations.
Requirement (SCR) covers all major insurance operations1. This includes the relevant assets (including fixed income, equities, real estate, and derivatives) and liabilities (including the run-off of all current and planned technical provisions as well as deposits, issued debt and other liabilities). For with-profit products in the Life/Health business segment, the options and guarantees embedded in insurance contracts – including policyholder behavior – are taken into account.
European Economic Area with only an immaterial impact on the Group’s risk profile are accounted for by means of book value deduction.2
Solvency Capital Requirement is minor, risk management with respect to Asset Management is not discussed in more detail.
Therefore Allianz’s risk capital framework covers all material and quantifiable risks. Risks specifically not covered by the internal model include strategic, liquidity, and reputational risks.
IMPACT OF MODEL CHANGES ON ELIGIBLE GROUP OWN FUNDS The regulatory and model changes in 2018 resulted in a € 0.7 bn increase of Own Funds, mainly driven by a change in the ZZR
Allianz Ayudhya Assurance (Thailand), based on their standard formula results, and the reduction of the ultimate forward rate. Business evolution also slightly increased the SCR, due to higher net earned premiums in the Property-Casualty business segment. This was partially offset by the effect of management actions and exposure updates such as the buyout of Euler Hermes and the sale of Oldenburgische Landesbank Aktiengesellschaft as well as market develdevelopments – specifically the decrease in equity indices.
However, these impacts would have been partially offset by policyholder participation. In addition, the Solvency II Own Funds effect is much more limited due to our active duration management, limiting our duration mismatch to a positive 0.2 years, representing assets of longer duration than Solvency II liabilities.
INTERNAL CONTROL SYSTEM APPROACH Our approach can be summarized as follows: − We use a top-down, risk-based approach to determine the accounts and operating entities that should fall under the scope of our system of internal control over financial reporting (as well as IRCS). The methodology is described in our ICOFR manual and the IRCS Guideline. During the scoping process, both materiality and susceptibility to a misstatement are considered simultaneously. In addition to the quantitative calculation, we also consider qualitative criteria – such as expected increase in business volume – which are provided by different Group centers, Group
Non-current assets and assets of disposal groups classified as held for sale 3 125 14,329
Allianz Group documents the hedge relationship, as well as its risk management objective and strategy for entering into the hedge transaction. The Allianz Group assesses, both at the hedge’s inception and on an ongoing basis, whether the hedging instruments used are highly effective in offsetting changes in fair values or cash flows of the hedged items.
asset. At inception, DAC is tested to ensure that it is recoverable over the life of the contracts. Subsequently, loss recognition tests at the end of each reporting period ensure that the DAC is covered by future profits.
In 2018, Allianz Group adjusted its measurement approach for specific products within the US fixed index annuity (FIA) portfolio to periodically review and unlock, as necessary, assumptions used in calculating the underlying aggregate policy reserves. Previously, assumptions used for calculating the aggregate policy reserve were locked in at inception of each contract. In this context, some assumptions used in the amortization of DAC were not consistently updated for new information. This also impacted the timing of revision of some assumptions used in the valuation of the bifurcated market based embedded derivative. The adjustment was made in the fourth quarter of 2018 and is immaterial with regard to the current year as well as prior year consolidated financial statements.
The amendments to IFRS 4, Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts, issued in September 2016, allow entities that issue insurance contracts within the scope of IFRS 4 to defer the implementation of IFRS 9 until 1 January 2021 under certain circumstances. It is to be noted that the IASB has recently proposed to defer the IFRS 9 effective date for such entities in scope by another year until 2022.
Given the strong interrelation between the measurement of direct participating insurance contracts and the underlying assets held, the Allianz Group has decided to use the option to defer the full implementation of IFRS 9 until IFRS 17 becomes effective.
as well as subordinated liabilities and financial liabilities carried at fair value through income related to certain derivatives. No change in the activities of the Allianz Group occurred subsequently that would have required a reassessment.
Carrying amounts of financial assets that meet the SPPI1 criterion by rating € mn
The Allianz Group’s investments in associates and joint ventures that are insurance entities also apply the temporary exemption of applying IFRS 9 to the extent they qualify. The entities underlying all other investments in associates and joint ventures already adopted
The financial impacts from implementing IFRS 16 will not be significant for the Allianz Group. IFRS 16 will lead to the recognition of new assets and liabilities for the previously classified operating leases in the amount of approximately € 2.5 bn. As of 31 December 2018, the
CORPORATE AND OTHER The reportable segment Holding & Treasury includes the management and support of the Allianz Group’s businesses through its strategy, risk, corporate finance, treasury, financial reporting, controlling, communication, legal, human resources, technology, and other functions. The reportable segment Banking consists of the banking activities in Germany (until February 2018), France, Italy, and Bulgaria. The banks offer a wide range of products for corporate and retail clients, with a primary focus on the latter. The reportable segment Alternative
REPORTABLE SEGMENTS MEASURE OF PROFIT OR LOSS The Allianz Group uses operating profit to evaluate the performance of its reportable segments as well as of the Allianz Group as a whole.
RECENT ORGANIZATIONAL CHANGES Effective 1 January and 1 April 2018, the Allianz Group reorganized the structure of its insurance activities to reflect the changes in the responsibilities of the Board of Management. Middle East and Africa were reallocated to the reportable segment Global Insurance Lines &
Non-operating income from financial assets and liabilities carried at fair value through income (net) 40 (5) 16 46
Government and government agency bonds1 180,094 19,106 (1,669) 197,531 177,186 22,551 (827) 198,911 1_As of December 2018, fair value and amortized cost of bonds from countries with a rating below AA amount to € 71,260 mn (2017: € 74,132 mn) and € 68,667 mn (2017: € 68,638 mn), respectively.
2_As of 31 December 2018, fair value and amortized cost of debt securities with a contractual maturity of less than one year amount to € 408 mn (2017: € 186 mn) and € 400 mn (2017: € 184 mn), respectively.
(2017: € 9,587 mn) as of 31 December 2018. Their change is shown in the respective table in note 14.
For entities included in the CGUs of the Property-Casualty business segment, the business plans are mainly based on key assumptions including expense ratio, loss ratio, investment income, risk capital, market share, premium rate changes, and taxes. The bases for determining the values assigned to the key assumptions are current market trends and earnings projections.
IFRS 7 are reflected in the following sections of the Risk and Opportunity Report within the Group Management Report: − Internal risk capital framework,
The resulting total benefits for insurance and investment contracts in the amount of € 1,414 bn include contracts where the timing and amount of payments are considered fixed and determinable, as well as contracts which have no specified maturity dates and may result in a payment to the contract beneficiary, depending on mortality and morbidity experience and the incidence of surrenders, lapses, or maturities. Furthermore, the amounts are undiscounted and do not include any expected future premiums; therefore they exceed the reserves for insurance and investment contracts presented in the consolidated balance sheet.
The table shows the fair value and notional amounts of all freestanding derivatives, as well as derivatives for which hedge accounting is applied by the Allianz Group, as of 31 December 2018 and 2017, respectively.
DERIVATIVE FINANCIAL INSTRUMENTS USED IN ACCOUNTING HEDGES As of 31 December 2018, derivatives which form part of hedge accounting relationships, and which are included in the line items other assets and other liabilities, had a notional amount of € 20.7 bn
Net gains (losses) recognized in other comprehensive income - 148 543 - 691
INVESTMENTS IN ASSET-BACKED SECURITIES (ABS) AND MORTGAGE-BACKED SECURITIES (MBS) ISSUED BY SECURITIZATION VEHICLES The Allianz Group acts as investor in ABS- or MBS-issuing securitization vehicles which purchase pools of assets including commercial mortgage loans (CMBS), auto loans, credit card receivables, and others. These securitization vehicles refinance the purchase of assets by issuing tranches of ABS or MBS whose repayment is linked to the performance of the assets held by the vehicles.
Income derived from investments in securitization vehicles mainly includes interest income generated from ABS and MBS, as well as realized gains and losses from disposals of these securities.
requirements to hold investments in specific assets, market segments or regions. Within the insurance business, policyholder money is partly invested in investment funds, which include funds managed by
On 24 May 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 as principal shareholder in return for payment of a cash settlement amounting to € 51.50 per share. Allianz established the amount of the cash settlement 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”). In September 2013, the district court (“Landgericht”) of Frankfurt dismissed the minority shareholders’ claims in their entirety. This decision has been appealed to the higher regional court (“Oberlandesgericht”) of
GmbH. The original nominal amount of the Tier 1 Capital Securities of € 1,000 mn was reduced in 2012 to approximately € 416 mn. This reduces the amount of coupon payments of the Tier 1 Capital Securities and the contingent payment obligation of Allianz accordingly. Since
Remeasurements recognized in the consolidated statements of comprehensive income (before deferred taxes) (485) 202 (178) 358 (4) 14 (311) (142)
Due to a well-diversified portfolio of approximately 137,000 (2017: 138,000) plan participants, there is no reasonable uncertainty of future cash flows to be expected that could have an impact on the liquidity of the Allianz Group. The chart below shows the asset allocation: Asset allocation of plan assets € mn
Allianz Group intends to settle in cash. Therefore, the Allianz Group accrues the fair value of the RSUs as compensation expenses over the service period of one year and afterwards over the vesting period.
As of 31 December 2018, the M-unit options outstanding have an exercise price between € 9,901.59 and € 21,005.12 and a weighted-average remaining contractual life of 3.08 years.
EMPLOYEE STOCK PURCHASE PLANS The Allianz Group offers Allianz SE shares in 32 countries to entitled employees at favorable conditions. The shares have a minimum holding period of three to five years. During the year ended 31 December 2018, the number of shares sold to employees under these plans was 407,495 (2017: 562,546 ). From 2018 onwards, the employees are no longer able to buy shares at a discounted price, but receive one bonus share for three shares bought. For the year ended 31 December 2018, these bonus shares had an equivalent value of € 15 mn. During the year ended 31 December 2017, the
as the external auditing firm for the Allianz Group and successor to
On 14 May 2018, the Supervisory Board’s Audit Committee engaged PwC GmbH as external auditor, starting from the fiscal year
Annual Report by the external auditors, thus numbers are based on a best estimate.
WP/vBP”) as well as the Standard on Quality Control 1 published by the
For the part of our work engaged to provide limited assurance the assurance procedures are less in extent than for the part of our work engaged to provide reasonable assurance, and therefore a substantially lower level of assurance is obtained.
− Performance of site visits as part of the inspection of processes for collecting, analyzing and aggregating selected data: INDEPENDENT PRACTITIONER’S REPORT
The People Fact Book is the official and most comprehensive report on our workforce facts and figures, highlighting major HR achievements over the past year and revealing the outlook for 2019. Date of publication: 18 March 2019. www.allianz.com/hrfactbook