 We continued our productivity improvement and managed to further reduce our expense ratio in the Property-Casualty business – true to our promise of 2018 to focus on what adds value for customers. As an acknowledgement for this achievement, we are rewarding our employees with a free Allianz share in 2020 – true to our promise to them, that they should benefit from our efforts.
In the meeting of 7 March 2019, the Supervisory Board discussed the audited annual Allianz SE and consolidated financial statements including market value balance sheets, as well as the Board of Management’s recommendation for the appropriation of earnings for the financial year 2018. The auditors confirmed that there were no discrepancies compared to their February report, and issued an unqualified auditor’s report for the individual and consolidated financial statements. The Supervisory Board also reviewed and approved the separate non-financial report for both Allianz SE and the Group, taking into account the report of the external auditor.
Wirtschaftsprüfungsgesellschaft (PwC) as auditor for the 2019 individual and consolidated financial statements, the auditor’s review of the 2019 half-yearly financial report, and the assurance engagement of the combined separate non-financial report. Furthermore, the Supervisory Board dealt with and approved the control and profit transfer agreement with Allsecur Deutschland AG. The Supervisory Board also received reports on Allianz’s global strategy in the health insurance business and the new Allianz Digital Health unit.
At the meeting on 27 June 2019, the Board of Management first reported in detail on the course of business in fiscal year 2019 to date and provided an outlook on the expected half-year results. In addition, the Board of
The Risk Committee held two meetings in 2019. 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 risk-related 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 SE and Allianz Group and the result of further risk assessments by the auditor were also discussed. The committee took a detailed look at the risk strategy, including risk appetite and capital management, as well as the effectiveness of the risk management system for the
Allianz Direct platform. Apart from these new strategic initiatives like the strategic data use in Allianz Group, opportunities presented by the use of artificial intelligence as well as the cloud strategy for Allianz Group were discussed.
The Board of Management of Allianz SE has ten members. It is responsible for setting business objectives and the strategic direction, for coordinating and supervising the operating entities, and for implementing and overseeing an efficient risk management system.
In the financial year 2019, the following Group committees were in place: Group committees
The Supervisory Board regularly reviews the efficiency of its activities. The Supervisory Board discusses recommendations for improvements and adopts appropriate measures on the basis of recommendations from the Standing Committee. This self-assessment also includes an evaluation of the fitness and propriety of the individual members.
– Initial review of the Risk Report and other riskrelated statements in the annual financial statements and management reports of Allianz SE and the Allianz Group, informing the Audit Committee of the results of such reviews
OBJECTIVES OF THE SUPERVISORY BOARD REGARDING ITS COMPOSITION The objectives for the composition of the Supervisory Board in the version of August 2017, as specified to implement a recommendation by the Code, are set out below. In light of the new German Corporate
Supervisory Board and the reduction of the term of membership from 15 to 12 years. In addition to the skills profile for the overall Supervisory
“The aim of Allianz SE’s Supervisory Board is to have members who are equipped with the necessary skills and competence to properly supervise and advise Allianz SE’s management. Supervisory Board candidates should possess the professional expertise and experience, integrity, motivation and commitment, independence, and personality required to successfully carry out the responsibilities of a Supervisory Board member in a financial services institution with international operations.
CODE OF CONDUCT Our Code of Conduct for Business Ethics and Compliance and the internal Compliance policies and guidelines derived from it provide all employees, managers, and executive board members with clear and practical guidance, enabling them to act in line with the values of the
on average) for 31 December 2021 for the second management level below the Board of Management. As of 31 December 2019, the targets were met by six 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. Allianz works further to achieve these targets.
This diversity concept is implemented in the appointment procedure for members of the Board of Management by the Supervisory Board.
Given Allianz’s relative size, complexity, and sustained performance, compensation levels are oriented towards the fourth quartile of the compensation of that peer group.
The Group financial targets are based on equally weighted targets for
NPS), employee engagement (e.g., Allianz Engagement Survey) and leadership quality, including strategic priorities. The assessment of the individual leadership quality also includes a review of behavioral aspects, such as customer orientation, collaborative leadership, entrepreneurship, and trust (e.g., corporate social responsibility, integrity, diversity as well as sustainability as measured by the reduction of the carbon footprint, the greenhouse gas reduction as well as a step-bystep plan to achieve net-zero compliant asset allocation until 2050, at the latest).
The long-term share-based compensation component takes the highest share within the variable compensation. It fosters shareholder alignment and takes the implementation of the long-term strategy into account. Furthermore, the company’s long-term development is reflected by the deferred sustainability assessment.
 In order to avoid incentivizing excessive risk taking, the relative
•TSR relative performance factor: 2 x (TSR Allianz: 15 % – TSR Stoxx Europe 600 Insurance: 40 %) + 100 % 50%
Corporate Governance Code announced for 2020, a shorter period of up to three years is provided. Severance payments made to board members in case of early termination are restricted according to the
TRANSITION PAYMENT Board members appointed before 1 January 2010 are eligible for a transition payment after leaving the Board of Management. The transition payment comprises an amount corresponding to the most recent base salary (paid for a period of six months), plus a one-time payment of 25 % of the target variable remuneration at notice date.
Where an Allianz pension is immediately payable, such pension is deducted from the monthly transition payments.
Equity Incentive (AEI) payouts result from grants related to performance years 2013 and 2014. To enhance remuneration transparency for performance years 2018 and 2019, an additional column “Actual grant” was inserted: It includes the fixed compensation components, the annual bonuses paid for both performance years, the tranche of the MTB 2016 – 2018 accrued for the 2018 performance year, and the fair value of the RSU grant for 2018 and 2019 (granted under the
Standard No. 17 is composed of the same components but includes the payout of the MTB 2016 – 2018:  Oliver Bäte: € 9,386 thou,
Management, Renate Wagner, has been set at the same level as for the other regular members of the Board of Management.
Climate change is a major risk for the societies in which we operate. It also directly affects our business, including everything from our inhouse operations to our investments and our insurance products. We are committed to tackling the climate challenge by supporting the transition to a low-carbon economy through our investments and insurance solutions. In addition, we manage the emissions from our operations and strive to remain a carbon-neutral company.
We care for our customers and advise them on how to reduce risks and minimize damage, while compensating those who have suffered losses. We are also developing insurance solutions for climate-vulnerable people in developing countries.
We enable positive change as an insurer, developing and offering insurance solutions for renewables technologies and energy efficiency.
 Status/progress: Allianz continues to expand its access to emerging consumers with new digital offerings by collaborating with insurtechs, mobile network operators, mobility platforms, and other digitally operating partners. Following the investment in 2017, the strategic partnership with BIMA was deepened further in 2019 when
and the general public’s trust in our integrity. This trust depends on the quality of our products, the way we inform and advise our customers, and the personal conduct and capability of our sales employees and representatives.
CONCEPTS We are committed to applying key human rights principles such as the
Allianz purpose and strategy;  EmpowerAZ – an internal crowdsourcing platform to foster a more innovative culture;  Help-to-Optimize (H2O) – a process optimization effort aiming to enhance the onboarding and employee experience of incoming colleagues.
Anti-Corruption Program, established in 2010, is a group-wide program that defines the standards for a consistent and comprehensive approach in every jurisdiction.
 Targets:  Complete the fourth cycle of the integrated compliance risk scoping and assessment activities as part of the company’s
1_For further information on organizational changes, please refer to the Executive Summary of 2019 Results.
& Specialty (AGCS), Allianz Partners (AP), and Euler Hermes – are run globally.
Our operating profit increased by 3.0 % and was in the upper half of the target range for 2019. Much of this improvement was owed to the Life/Health business segment, which recorded a higher investment margin, an extension of the DAC amortization period in the fixed index annuity business, and volume growth. Our Asset Management business segment also increased its operating profit, mainly due to higher average third-party AuM and positive foreign currency translation effects. By contrast, our Property-Casualty business segment was affected by lower run-off (due to a strengthening of reserves at AGCS) as well as a lower operating investment income, slightly offset by a lower expense ratio. The Corporate and Other business segment recorded an improved operating result, much of which was owed to profitability improvements at our internal IT service provider.
Our operating investment result increased by € 4,565 mn to € 23,854 mn, due to a higher trading result, lower equity impairments, and higher realizations on debt securities.
Italy: 0.1 percentage points. This was due to a higher level of large losses.
Pacific region. This was partly offset by lower unit-linked sales in Italy and a shift towards less expensive distribution channels in France.
Our net income increased by € 686 mn. This was largely attributable to the higher operating profit in 2019. The sale of our traditional life insurance portfolio in Taiwan in 2018 – which had generated a negative net impact of € 218 mn in the previous year – also supported this development.
The nominal increase in administrative expenses was mostly driven by PIMCO and due to investments in business growth and infrastructure.
Our cost-income ratio decreased slightly as a consequence of higher operating revenue growth, compared to a lower increase in operating expenses.
ASSET MANAGEMENT Moderate increase in total AuM, with third-party net inflows expected to decrease at PIMCO and now solid net inflows at AllianzGI, compared to 2019, combined with a slight positive AuM market return.
ASSET MANAGEMENT For 2020, we envisage overall moderate third-party net inflows and market returns at both PIMCO and AllianzGI, with relatively stable margins and stable performance fees, resulting in modest growth in operating revenues. We also assume the U.S. Dollar to remain relatively stable compared to 2019. All things considered, we expect our 2020 operating profit to range between € 2.4 bn and € 3.0 bn (2019: Our cost-income ratio is expected to be below 64 % in 2020 (2019: 62.3 %), as we continue to invest in business growth. In the mid-term, we expect our cost-income ratio to remain below 63 %.
For details on the regulatory capitalization of the Allianz Group, please refer to our Risk and Opportunity Report from page 76 onwards.
Generally, our investments in fixed-income securities are sequenced to mature when funds are expected to be needed.
3_Two senior bonds of EUR 0.75 bn each were issued in the first quarter of 2019.
Euro Commercial Paper Program at an average rate for each tranche below Euribor, and under the U.S. Dollar Commercial Paper Program at an average rate for each tranche below U.S. Libor.
RISK MANAGEMENT FRAMEWORK As a provider of financial services, we consider risk management to be a core competency and an integral part of our business. Our risk management framework covers all operations and subsidiaries within the
Related undertakings1 are responsible for their own risk management, including adherence to both external requirements (for example, those imposed by local regulators) and internal standards. Their
Other entities are reflected based on standard formula results, others under the deduction and aggregation approach as well as on sectoral or local requirements for non-insurance operations, in accordance with the Solvency II framework.
UNDERWRITING, BUSINESS AND OPERATIONAL RISKS The changes to these risk categories shown in the table above are driven by minor and immaterial model changes as well as by the update in the central correlation matrix.
In addition, the EU Commission has commissioned EIOPA to carry out investigations into the upcoming review of the Solvency II directive in 2020. The order contains an extensive list of topics from a wide variety of areas, from capital requirements to reporting and on to proportionality. Based on a holistic impact study to be carried out in
 Finally, the Group has the additional advantage of being welldiversified, both geographically and across a broad range of businesses and products.
SOLVENCY II REGULATORY CAPITALIZATION The Allianz Group’s Own Funds and capital requirements are based on the market value balance sheet approach, which is consistent with the economic principles of Solvency II1. Our regulatory capitalization is shown in the following table.
Compared to year-end 2018, our Solvency II capitalization ratio decreased by 17 %-p to 212 % (2018: 229 %) as the increase in Solvency II Capital Requirement was only partially offset by the increase in Own Funds. Over the course of the year, Solvency II earnings combined with business growth had a positive impact on our Solvency II
Third country equivalent 3,218 3,132 1_2018 risk profile figures adjusted based on the 2019 model changes impact.
Due to effective product design and the diversity of our products, there were no significant concentrations of underwriting risks within our Life/Health business segment.
GOVERNANCE The Group center functions, the Group Disclosure Committee, and our operating entities support the Allianz SE Board of Management to ensure the completeness, accuracy, and reliability of our Consolidated
Financial assets carried at fair value through income 5 13,187 7,611
Change in reserves for insurance and investment contracts (net) 26 (13,726) (9,684)
Share of earnings from investments in associates and joint ventures (422) (228)
Proceeds from the sale, maturity or repayment of: Financial assets designated at fair value through income 3,157 2,956
Changes in the consolidated subsidiaries of the Allianz Group (3) - 22 19
Financial Reporting Standards (IFRS), as adopted under European Union (E.U.) regulations in accordance with § 315e (1) of the German
The consolidated financial statements were authorized for issue by the Board of Management on 20 February 2020.
Financial assets and liabilities are offset and the net amount is presented in the balance sheet only when there is a legally enforceable right to offset the recognized amounts and when there is an intention to either settle on a net basis or to realize the asset and settle the liability simultaneously.
For fair value measurements categorized as level 2 and level 3, the Allianz Group uses valuation techniques consistent with the three widely used valuation techniques listed in IFRS 13:  Market approach: Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
 Cost approach: Amount that would currently be required to replace the service capacity of an asset (replacement cost).
DAC, and maintenance expenses exceeds related unearned premiums while considering anticipated investment income.
Reinsurance). Actuarial judgment is applied where necessary, especially in cases where data is unreliable, scanty, or unavailable. The judgment of Property-Casualty actuaries is based on past experience of the characteristics of each line of business, the current stage of the underwriting cycle, and the external environment in which the subsidiary operates.
Allianz Group recognizes right-of-use assets and lease liabilities for most leases – i.e. these leases are on the balance sheet.
Financial assets for unit1_Excluding any financial asset that meets the definition of held for trading in IFRS 9, or that is managed and whose performance is evaluated on a fair value basis.
Financial assets that meet the SPPI criterion are those with contractual terms that give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
ALLIANZ SAKURA MULTIFAMILY LUX SCSP, LUXEMBOURG As of 31 December 2019, all requirements were fulfilled to present
Acquisition and administrative expenses (net), excluding acquisition-related expenses (14,119) (13,542) (6,449) (5,635)
3_Include € 892 mn (2018: € 695 mn) assets for deferred compensation programs which are mainly level 2 for fair value measurement.
Changes in the consolidated subsidiaries of the Allianz Group - -
As of 31 December 2019 and 2018, the Allianz Group’s reserves for insurance and investment contracts for the business segment
Life/Health are summarized per reportable segment as follows: Concentration of insurance risk in the Life/Health business segment per reportable segment € mn
Derivative financial instruments used for hedging that meet the criteria for hedge accounting, and firm commitments1 532 330
Hybrid equity4 1_Except for interest rates. Interest rates represent the weighted average.
DE000A0GNPZ3 2006 EUR 800 5.375 Perpetual bond 1_On 7 January 2020, Allianz Finance II B.V. called for redemption the certificated liability in accordance with the terms and conditions of the bond. The bond was redeemed on 21 January 2020.
TREASURY SHARES As of 31 December 2019, Allianz SE held 595,677 (2018: 961,636)
2_For the year ended 31 December 2019 include € 95 mn changes in assets and € (95) mn changes in liabilities related to certain deferred compensation programs, entirely offsetting each other.
The recognized income taxes for the year ended 31 December 2019 are € 47 mn below (2018: € 100 mn above) the calculated income taxes, which are determined by multiplying the respective income before income taxes with the applicable country-specific tax rates. The following table shows the reconciliation from the calculated income taxes to the effectively recognized income taxes for the Allianz Group.
Black-Scholes-Merton model. Main observable input parameters include volatilities, yield curves observable at commonly quoted intervals, and credit spreads observable in the market.
For level 3, the fair value is determined using the income or the market approach. Valuation techniques applied for the income approach mainly include discounted cash flow models. A significant proportion of level 3 liabilities represent derivatives embedded in certain life insurance and annuity contracts. Significant non-market observable input parameters include mortality rates and surrender rates. A significant decrease (increase) in surrender rates, in mortality rates, or in the utilization of annuitization benefits could result in a higher (lower) fair value. For products with a high death benefit, surrender rates may show an opposite effect. However, a 10 % stress of the main non-market observable inputs has only immaterial impact on fair value.
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.
under operating leases because they do not transfer substantially all of the risks and rewards incidental to the ownership of the assets. Investment property comprises a number of commercial properties that are leased to third parties.
There is also a partly funded defined benefit pension plan for agents (VertreterVersorgungsWerk, VVW), which has been closed for new entrants as of 31 December 2011. A part of the pension plan serves as a replacement for the compensatory claim of agents according to German Commercial Code (§ 89b). VVW is similar to a final salary benefit plan and pension increases are broadly linked to inflation.
(2018: 137,000) plan participants, no reasonable uncertainty is expected with regard to future cash flows that could affect the liquidity of the Allianz Group. The chart below shows the asset allocation: Asset allocation of plan assets € mn
share. The Allianz Group can choose the settlement method for each unit. The payout is capped at a 200 % share price growth above the grant price.
Allianz Renewable Energy Fund III Lux GP S.à r.l., Senningerberg 100.0
PIMCO RAFI Dynamic Multi-Factor Global Developed Equity Fund, Dublin 100.0 3
Wildlife Works Carbon LLC, San Francisco, CA 9.2 8 1_Percentage includes equity participations held by dependent entities in full, even if the Allianz Group's share in the dependent entity is below 2_Classified as affiliate according to IFRS 10. 3_Investment fund. 4_Releasing impact according to § 264 (3) HGB through the Allianz Group's consolidated financial statements.
Group’s position and, in all material respects, is consistent with the consolidated financial statements and the knowledge obtained in the audit, complies with the German legal requirements and appropriately presents the opportunities and risks of future development, as well as to issue an auditor’s report that includes our audit opinions on the consolidated financial statements and on the group management report.
 Identify and assess the risks of material misstatement of the consolidated financial statements and of the group management report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our audit opinions.
Group to express audit opinions on the consolidated financial statements and on the group management report. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinions.