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.
Unearned premiums for Property-Casualty and Life/Health contracts are calculated separately for each individual policy to cover the unexpired portion of written premiums.
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.
Payments made under operating leases to the lessor are charged to administrative expenses using 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.
– Debt instruments, classified as “held for trading” (“at fair value through income”) or “available-for-sale” may be reclassified to the “loans and receivable” category, if they meet the definition of loans and receivables at the reclassification date and where the Allianz Group has now the intent and ability to hold the assets for the foreseeable future or until maturity.
change in the fair value of any unexercised awards is recognized as compensation expense.
Group has a detailed formal plan for the 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. The income statement line item, restructuring charges, includes additional restructuring related expenditures that are necessarily entailed by the restructuring and not associated with the ongoing activities of the entity but which are not included in the restructuring provisions.
Group has no longer the intention to sell or trade the assets in the short term. The IASB acknowledged, that the deterioration of the world’s financial markets, that has occurred during the third quarter of 2008 is a possible example of a “rare circumstance”.
Allianz Group adopted the amended IAS 39 and IFRS 7 in the third quarter 2008. The adoption of amended IAS 39 and
Concession Arrangements. IFRIC 12 addresses how service concession operators should apply existing IFRSs to account for the obligations they undertake and rights they receive in service concession arrangements. Service concession arrangements are arrangements whereby a government or other body grants contracts for the supply of public services, such as roads, energy distribution, prisons or hospitals, to private operators. The grantor controls or regulates what services the operator must provide using the assets, to whom, and at what price, and also controls any significant residual interest in the assets at the end of the term of the arrangement. An operator recognises a financial asset and/or an intangible asset in respect of the consideration received or receivable by it, measured at the fair value of the construction or upgrade services it provides. IFRIC 12 is effective for annual periods beginning on or after January 1, 2008. The interpretation does not have a material impact the Allianz Group’s consolidated financial statements.
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 has not yet been endorsed by the EU, but does not have an impact on the Allianz Group’s consolidated financial statements.
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.
In September 2007, the IASB issued the revised IAS 1, Presentation of Financial Statements. The revised standard requires information in financial statements to be aggregated on the basis of shared characteristics and introduces a statement of comprehensive income. The revised standard gives preparers of financial statements the option of presenting items of income and expense and components of other comprehensive income either in a single statement of comprehensive income with subtotals, or in two separate statements. The revisions also include changes in the titles of some of the financial statements to reflect their function more clearly. The new titles will be used in accounting standards, but are not mandatory for use in financial statements.
Group is currently evaluating the potential impact, if any, that the adoption of revised IAS 1 will have on the presentation of the Group’s financial statements.
IFRS 3, Business Combinations - revised and IAS 27, Consolidated and Separate Financial Statements - revised
– 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.
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
Financial Instruments: Presentation, and IAS 1, Presentation of Financial Statements. IAS 32 requires a financial instrument to be classified as a liability if the holder of that instrument can require the issuer to redeem it for cash. The consequence is that some financial instruments that would usually be considered equity allow the holder to “put” the instrument and are, therefore, considered liabilities rather than equity. The amendments to IAS 32 address this issue and require entities to classify the following types of financial instruments as equity provided they have particular features and meet specific conditions: – puttable financial instruments (e.g., some shares issued by cooperative entities)
In May 2008, the IASB issued Improvements to IFRSs. The improvements to IFRS project is an annual process that the
The following table summarizes the changes relating to Part I that are applicable to Allianz Group.
IFRS 5 If an entity plans to sell the controlling interest in a subsidiary, all of the subsidiary’s assets and liabilities will be classified as held for sale under IFRS 5 even when the entity retains a non-controlling interest in the subsidiary after the sale.
IAS 16 Net selling price is replaced by fair value less costs to sell. Property, plant and equipment held for rental that are routinely sold in the course of business after rental are transferred to inventory when rental ceases and they are held for sale. Proceeds of the sale are shown as revenue. Cash payments on initial recognition of such items, cash receipts from rents and subsequent sales are shown as cash flows from operating activities.
IAS 19 The definition of past service cost is revised to include reductions in benefits related to past services and to exclude reductions in benefits related to future services that arise from plan amendments. Amendments to plans that result in a reduction in benefits related to future services are accounted for as a curtailment. The definition of return on plan assets now excludes plan administration costs if they have already been included in the actuarial assumptions used to measure the defined benefit obligation. The definition of “short-term” and “other long-term”employee benefits is revised to focus on the point in time at which the liability is due to be settled. The reference to the recognition of contingent liabilities is deleted to ensure consistency with IAS 37.
IAS 27 When an entity accounts for a subsidiary at fair value in its separate financial statements, this treatment continues when the subsidiary is subsequently classified as held for sale
IAS 28 Certain disclosures are required when investments in associates are accounted for at fair value through profit or loss. For the purpose of testing an investment in an associate for impairment, the investment is considered a single asset. Therefore, any impairment is not separately allocated to goodwill included in the investment.
IAS 31 Disclosures are required when interests in jointly controlled entities are accounted for at fair value through profit or loss
Annual periods beginning on or after 1 July 2009; impact on Allianz Group’s consolidated financial statements currently being evaluated
– the fair value measurements resulting from the use of significant unobservable inputs to valuation techniques.
According to the exposure draft an entity shall apply the amendments for annual periods beginning on or after 1 July 2009. Earlier application is permitted.
An earlier adoption is allowed. In anticipation of the new standard the Allianz Group disclosed voluntarily amendments regarding the fair value hierarchy in the Annual
Programmes. IFRIC 13 addresses how companies, that grant their customers loyalty award credits (often called “points”)
In July 2008, the IFRIC issued IFRIC 15, Agreements for the
Affected agreements will be mainly those accounted for in accordance with IAS 11 that do not meet the definition of a construction contract as interpreted by the IFRIC and do not result in a “continuous transfer” (i.e. agreements in which the entity transfers to the buyer control and the significant risks and rewards of ownership of the work in progress in its current state as construction progresses). IFRIC 15 is effective for annual periods beginning on or after 1 January 2009 and must be applied retrospectively. Earlier application is permitted. The interpretation is expected to have no material impact the Allianz Group’s consolidated financial statements.
IFRIC 16, Hedges of a Net Investment in a Foreign Operation
In July 2008, the IFRIC issued IFRIC 16, Hedges of a Net Investment in a Foreign Operation. IFRIC 16 provides guidance on: – identifying the foreign currency risks that qualify as a hedged risk in the hedge of a net investment in a foreign operation; – where, within a group, hedging instruments that are hedges of a net investment in a foreign operation can be held to qualify for hedge accounting; and
– how an entity should determine the amounts to be reclassified from equity to profit or loss for both the hedging instrument and the hedged item.
IFRIC 16 concludes that the presentation currency does not create an exposure to which an entity may apply hedge accounting. Consequently, a parent entity may designate as a hedged risk only the foreign exchange differences arising from a difference between its own functional currency and that of its foreign operation. In addition, the hedging instrument(s) may be held by any entity or entities within the group. While IAS 39 must be applied to determine the amount that needs to be reclassified to profit or loss from the foreign currency translation reserve in respect of the hedging instrument, IAS 21 must be applied in respect of the hedged item. IFRIC 16 is effective for annual periods beginning on or after 1 October 2008 and is to be applied
Notes to the Consolidated Financial Statements Allianz Group Annual Report 2008 prospectively. The amendments are expected to have no material impact on Allianz Group’s consolidated financial statements.
– an entity should measure the dividend payable at the fair value of the net assets to be distributed.
The Interpretation also requires an entity to provide additional disclosures if the net assets being held for distribution to owners meet the definition of a discontinued operation.
– the recognition of the asset and measurement of its cost on initial recognition,
The following table summarizes the impact on the consolidated income statements for the year ended December 31, 2007 and 2006, respectively: As previously reported
Income from financial assets and liabilities carried at fair value through income (net) (1,247) 430 (817) 940 (1,310) (370)
Acquisition and administrative expenses (net) (23,218) 4,430 (18,788) (23,486) 5,018 (18,468)
Expenses from fully consolidated private equity investments (2,317) — (2,317) (1,381) — (1,381)
Allianz Group discloses the acquisition costs and administrative expenses (net) in the consolidated income statement. Acquisition costs and administrative expenses are disaggregated according to segment and type of costs in
Note 39. Acquisition costs relate to the acquisition and administration of insurance policies and include commissions and other acquisition costs paid, commissions and profit received on reinsurance ceded, deferrals of acquisition costs and amortizations of deferred acquisition costs.
Administrative expenses include personnel expenses, operating expenses, and other administrative expenses.
Commissions and profit received on reinsurance business ceded 722 (5) 717 721 (5) 716 Deferrals of acquisition costs 3,983 — 3,983 3,983 — 3,983 Amortization of deferred acquisition costs (3,843) — (3,843) (3,843) — (3,843)
Bank AG (“Dresdner Bank”) to Commerzbank. The transaction was planned to take place in two steps. In the first step,
Bank from Allianz. In exchange Allianz would receive cash, the Asset Manager cominvest, a long-term distribution agreement and 163.5 mn new shares in Commerzbank generated from a capital increase against contribution in kind which was equivalent to a share of 18.4 % of the increased share capital of Commerzbank. Of the total cash payment of � 2.54 bn, � 975 mn would be provided to a trust account to cover ultimate losses for specific ABS assets. In the second step, which was subject to the approval by the
General Meetings of both entities, Dresdner Bank would be merged with Commerzbank and Allianz would receive shares in Commerzbank. The expected stake that Allianz would have held in Commerzbank would have amounted to nearly 30 %. The fair value of these considerations amounted to � 7.8 bn as of September 30, 2008. Lastly, it was agreed that Oldenburgische Landesbank AG (“OLB”) and the banking clients that were introduced through our tied agent’s channel as well as some other bank participations would remain within the Allianz Group.
Obligations (CDOs) by Allianz for a consideration of � 1.1 bn.
SoFFin will receive a 25 % plus one share participation in
With the agreement of the sale transaction Dresdner Bank qualifies as disposal group held for sale and discontinued operation according to the requirements of IFRS 5, “Noncurrent Assets Held for Sale and Discontinued Operations”.
Thus, almost all assets and liabilities of Dresdner Bank have been reclassified and presented as separate line items “Noncurrent assets and assets of disposal groups classified as held for sale” and “Liabilities of disposal groups classified as held for sale”, respectively, on the face of the consolidated balance sheet as of December 31, 2008. Comparative information has not been adjusted in accordance with IFRS 5.
Cash and cash equivalents 30,238 Financial assets carried at fair value through income 201,911 Investments 11,113 Loans and advances to banks and customers 166,718 Deferred tax assets 37 Other assets 7,056 Intangible assets 801 Total assets of disposal groups classified as held for sale 417,874
The following table shows the accumulated other comprehensive income and expenses, net of tax
Due to the structure of the transaction, Allianz ceased to be exposed to changes in the results of Dresdner Bank from the signing date. Instead Allianz is exposed to changes in the fair value of its stake in Commerzbank. Therefore, the loss from discontinued operations is mainly subject to changes in the fair value of the consideration received.
As disclosed in our interim report for the third quarter of 2008, the loss from discontinued operations amounted to
Net income (loss) from discontinued operations for the years ended December 31, 2008, 2007 and 2006, respectively is comprised of: � mn � mn � mn
2) No income taxes were related to the impairment loss of September 30, 2008 and to the result from transaction between September 30, 2008 and December 31, 2008. 3) All numbers are stated on a consolidated basis.
In addition to Allianz SE, the consolidated financial statements for the period ended December 31, 2008, generally include all German and foreign operating companies in which Allianz SE directly or indirectly holds a majority of voting rights, or whose activities it can in some other way control. The companies are consolidated from the date on which Allianz SE is able to exercise control.
Total of fully consolidated entities 1,204 1,289 1,085 thereof: Related to the discontinued operation of Dresdner Bank 365 Number of joint ventures valued at equity 10 4 9 thereof: Related to the discontinued operation of Dresdner Bank 1 — — Number of associated entities valued at equity 167 218 177 thereof: Related to the discontinued operation of Dresdner Bank 15 — —
1) Includes 10 (2007: 8; 2006: 9) subsidiaries where the Allianz Group owns less than majority of the voting power of the subsidiary, including CreditRas Vita S.p.A. (“CreditRas”) and Antoniana Veneta Popolare Vita S.p.A. (“Antoniana”). The Allianz Group controls these entities on the basis of shareholder agreements between the Allianz Group subsidiary owning 50 % of each such entity and the other shareholders. Pursuant to these shareholder agreements, the Allianz Group has the power to govern the financial and operating policies of these subsidiaries and the right to appoint the general manager, in the case of CreditRas, and the CEO, in the case of Antoniana, who have been given unilateral authority over all aspects of the financial and operating policies of these entities, including the hiring and termination of staff and the purchase and sale of assets. Furthermore, all management functions of these subsidiaries are performed by the employees of the Allianz Group and all operations are undertaken in Allianz Group’s facilities. The Allianz Group also develops all insurance products written through these subsidiaries. Although the Allianz Group and the other shareholders each have the right to appoint half of the directors of each subsidiary, the rights of the other shareholders are limited to matters specifically reserved to the board of directors and shareholders under Italian law, such as decisions concerning capital increases, amendments to articles and similar matters. In addition, in the case of Antoniana, the Allianz Group has the right to appoint the Chairman, who has double board voting rights, thereby giving the Allianz Group a majority of board votes. The shareholder agreements for CreditRas and Antoniana are subject to automatic renewal and are not terminable prior to their stated terms.
All subsidiaries, joint ventures and associated enterprises are individually listed in the disclosure of equity investments that will be published together with the consolidated financial statements in the German Electronic Federal
514 Increase in equity interest Selecta AG, Muntelier 1) 100.0 07/03/2007 Corporate 472 Purchase Insurance Company “Progress Garant”, Moscow 100.0 05/31/2007 Property-
8 Purchase manroland AG, Offenbach 100.0 3) 7/18/2006 Corporate 144 Purchase Home & Legacy Limited, London 100.0 6/15/2006 Property-
Allianz Sigorta AŞ, Istanbul, and 51.0 % of the shares in the life-insurance and pension company Allianz Hayat ve
Intangible assets (247) Other assets (914) Other liabilities 870 Minority interests 38 Less: previous investment in Allianz Sigorta and Hayat 101 Acquisition of subsidiary, net of cash acquired (152)
Purchase price Allianz Sigorta AŞ (47.1 %) 248 Purchase price Allianz Hayat ve Emeklilik AŞ (51.0 %) 125 Transaction costs — Total purchase price 373
Emeklilik AŞ on the Allianz Group’s net income for the year ended December 31, 2008 was � 8.3 mn.
The impact of the acquisition of ROSNO net of cash acquired, on the consolidated statement of cash flows for the year ended December 31, 2007 was: � mn
Intangible assets (530) Other assets (798) Other liabilities 717 Deferred tax liabilities 15 Minority interests 10 Less: previous investment in Rosno 78 Acquisition of subsidiary, net of cash acquired (508)
The amounts recognized for major classes of assets and liabilities are as follows: Fair value Carrying amount
Reinsurance assets 55 55 Deferred acquisition costs 73 71 Other assets 303 279 Intangible assets 16 — Total assets 919 877
Unearned premiums 350 350 Reserves for loss and loss adjustments 122 120 Other liabilities 258 252 Total equity 189 155 Total liabilities and equity 919 877
At the date of acquisition the goodwill reflects mainly the market position and growth potential of the russian insurance market.
ROSNO) for the year ended December 31, 2007 would have been � 102,785 mn, if the acquisition date had been on January 1, 2007. The net income of the combined entity for the year ended December 31, 2007 would have been � 7,969 mn if the acquisition date had been on January 1, 2007.
Unearned premiums 249 249 Reserves for loss and loss adjustments 117 117 Reserves for insurance and investment contracts 269 263 Financial liabilities for unit-linked contracts 150 150 Other liabilities 91 85 Total equity 270 206 Total liabilities and equity 1 145 1 070
The premiums written and premiums earned (net) of the combined entity (Allianz Group including Allianz Hayat and
Allianz Sigorta) for the year ended December 31, 2008 would have been � 66,417 mn and � 60,660 mn, respectively, if the acquisition date had been on January 1, 2008. The net loss of the combined entity for the year ended December 31, 2008 would have been � 2,415 mn if the acquisition date had been on January 1, 2008.
On February 21, 2007, the Allianz Group acquired additional 49.8 % of Russian People´s Insurance Society “ROSNO”,
On July 3, 2007, the Allianz Group acquired 100.0 % of
The impact of the acquisition of Selecta AG, Muntelier, net of cash acquired, on the consolidated statement of cash flows for the year ended December 31, 2007 was: � mn
Cash and cash equivalents 53 53 Other assets 404 360 Intangible assets 683 46 Total assets 1,140 459
Other liabilities 448 230 Total equity 692 229 Total liabilities and equity 1,140 459
January 1, 2007. The net income of the combined entity for the year ended December 31, 2007 would have been � 8,013 mn if the acquisition date had been on January 1, 2007.
On July 18, 2006, the Allianz Group acquired 100.0 % (Group share through indirect holder Roland Holding GmbH, Munich at the date of first-time consolidation: 65,0 % ) of manroland
The impact on the Group’s net income for the year ended
Other liabilities 1,230 1,115 Total equity 431 311 Total liabilities and equity 1,661 1,426
Grundstücksgesellschaft der Vereinten Versicherungen mbH & Co. Besitz- und Betriebs KG, Munich
1) Impact on shareholders’ equity includes increase in equity due to financing of AGF minority buy-out in the year 2007 of � 2,765 mn and RAS minority buy-out in the year 2006 of � 3,653 mn.
Further, the timing of sales that would result in such gains or losses is largely at the discretion of the Allianz Group.
Thus, the Allianz Group’s segments are structured as Property -Casualty, Life/Health, Banking, Asset Management and
Transfer prices between business segments are set on an arm’s length basis in a manner similar to transactions with third parties. Transfers between business segments are eliminated in the consolidation.
In the Property-Casualty segment, a wide variety of insurance products is offered to both private and corporate customers, including motor liability and own damage, accident, general liability, fire and property, legal expense, credit and travel insurance. The core markets for the Property-Casualty business are Germany, France, Italy and other European countries, like the United Kingdom, Switzerland and Spain. Further operations are run in particular in the United States, Central and Eastern Europe and Asia-Pacific.
Cash and cash equivalents 2,669 4,985 4,827 8,779 Financial assets carried at fair value through income 1,998 3,302 11,739 13,216
Reserves for loss and loss adjustment expenses 55,616 56,943 8,320 6,773 Reserves for insurance and investment contracts 8,595 8,976 287,932 283,139 Financial liabilities for unit-linked contracts — — 50,450 66,060
Liabilities of disposal groups classified as held for sale — — — —
� mn � mn � mn � mn � mn � mn � mn � mn � mn � mn
Income from financial assets and liabilities carried at fair value through income (net) (116) 85 189 (261) (940) (361) (5) 2 45
Change in reserves for insurance and investment contracts (net) 3 (339) (425) (5,122) (10,268) (10,525) — — —
Acquisition and administrative expenses (net) (10,356) (10,616) (10,590) (4,375) (4,588) (4,437) (552) (589) (550)
Expenses from fully consolidated private equity investments (3) — — (20) — — — — —
Travel Insurance and Assistance Services 1,196 1,093 1,008 57.6 58.1 58.7
Europe 1) Represents claims and insurance benefits incurred (net) divided by premiums earned (net). 2) Presentation not meaningful. 3) Represents elimination of intercompany transactions between Allianz Group subsidiaries in different geographic regions. 4) Statutory premiums are gross premiums written from sales of life insurance policies, as well as gross receipts from sales of unit-linked and other investment-oriented products, in accordance with the statutory accounting practices applicable in the insurer’s home jurisdiction. 5) Represents acquisition and administrative expenses (net) divided by statutory premiums (net). 6) Represents acquisition and administrative expenses (net) divided by premiums earned (net).
Allianz Group Business Segment Information – Total revenues and reconciliation of Operating profit (loss) to Net income (loss)
Operating restructuring charges — — — 1 (16) (140) — — —
Non-operating income from financial assets and liabilities carried at fair value through income (net) 42 (59) 83 (26) 5 — — — — Non-operating realized gains/losses (net) 2,349 1,433 1,746 (39) 137 195 (6) 18 15 Non-operating impairments of investments (net) (2,012) (276) (175) (414) (3) — (120) (3) — Interest expenses from external debt — — — — — — — — — Acquisition-related expenses — — — — — — — — —
Net income (loss) from discontinued operations, net of income taxes and minority interests in earnings — — — — — — (6,304) 322 849 1) Since the first quarter 2008, health business in Belgium and France is shown within Life/Health segment. Prior year balances have not been adjusted. 2) Total revenues comprise Property-Casualty segment’s gross premiums written, Life/Health segment’s statutory premiums (including unit-linked and other investment-oriented products),
Ceded premiums written (4,972) (5,320) (5,415) Change in unearned premiums (202) (416) (309) Premiums earned (net) 38,213 38,553 37,950
5) The total of these items equals impairments of investments (net) in the segment income statement. 6) Represents claims and insurance benefits incurred (net) divided by premiums earned (net).
Ceded premiums written (588) (644) (840) Change in unearned premiums (54) (61) (221) Statutory premiums (net) 44,973 48,662 46,360 Deposits from SFAS 97 insurance and investment contracts (22,742) (27,853) (25,786) Premiums earned (net) 22,231 20,809 20,574
3) The total of these items equals income from financial assets and liabilities carried at fair value through income (net) in the segment income statement. 4) The total of these items equals realized gains/losses (net) in the segment income statement. 5) The total of these items equals impairments of investments (net) in the segment income statement. 6) The total of these items equals restructuring charges in the segment income statement.
Net income (loss) from discontinued operations, net of income taxes and minority interests in earnings (6,304) 322 849
2) Represents fee and commission income less fee and commission expenses. 3) The total of these items equals income from financial assets and liabilities carried at fair value through income (net) in the segment income statement. 4) For the Banking segment, total revenues are measured based upon operating revenues. 5) Represents operating expenses divided by operating revenues.
Acquisition-related expenses 4), thereof: Deferred purchases of interests in PIMCO (278) (278) (488) (488) (523) (523) Other acquisition-related expenses — — (3) (3) (9) (9)
2) Represents interest and similar income less interest expenses and investment expenses. 3) For the Asset Management segment, total revenues are measured based upon operating revenues. 4) The total of these items equals acquisition and administrative expenses (net) in the segment income statement. 5) Represents operating expenses divided by operating revenues
Acquisition and administrative expenses (net), excluding acquisition-related expenses 3) (477) (627) (655) Fee and commission expenses (170) (130) (127) Expenses from fully consolidated private equity investments (2,452) (2,317) (1,381)
Non-operating income from financial assets and liabilities carried at fair value through income (net) 1) 210 77 (274) Realized gains/losses (net) 245 980 861 Interest expenses from external debt 2) (945) (1,051) (775) Impairments of investments (net) (697) (11) 32 Acquisition-related expenses 3) 33 (15) — Restructuring charges (2) (9) — Non-operating items (1,156) (29) (156)
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 expenses in the segment income statement. 3) The total of these items equals acquisition and administrative expenses (net) in the segment income statement.
Balances with banks payable on demand 7,760 23,848 Balances with central banks 456 6,301 Cash on hand 169 918 Treasury bills, discounted treasury notes, similar treasury securities, bills of exchange and checks 573 270 1) Does not include cash and cash equivalents of Dresdner Bank which were classified as held for sale. See Note 4.
As of December 31, 2008, compulsory deposits on accounts with national central banks under restrictions due to required reserves from the European Central Bank totaled
Credit risk exposure of loans to banks and customers designated at fair value through income
Debt securities 547 59,715 Equity securities 99 30,596 Derivative financial instruments 1,978 73,230
As of December 31, 2008, the debt securities include � 55 mn
Government and government agency bonds 1) includes also corporate mortgage-backed securities.
Total unrealized losses amounted to � 2 mn as of December 31, 2008. The unrealized loss positions concern mostly issues of United States government agencies, which are primarily held by Allianz Group’s North American entities.
The largest part of these issues is backed by mortgages on commercial rather than residential real estate. The unrealized losses of these mortgage-backed securities were mostly caused by the increased volatility in credit spreads. This effect is characterized by a general market trend and does not allow direct conclusions on the quality of these securities.
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, 2008 and 2007.
Government and agency mortgage-backed securities (residential and commercial) 29 (1) 133 (1) 162 (2) Corporate mortgage-backed securities (residential and commercial) 3,749 (763) 3,196 (655) 6,945 (1,418)
“investment grade” country- and/or issue-rating, credit risk is not a significant factor. Hence, the unrealized losses on
As of December 31, 2008, unrealized losses from equity securities amounted to � 851 mn. These unrealized losses concern equity securities that did not meet the criteria of Allianz Group’s impairment policy for equity securities as described in Note 2. Substantially all of the unrealized losses have been in a continuous loss position for less than
Due in 1 year or less 600 601 Due after 1 year and in less than 5 years 1,343 1,364 Due after 5 years and in less than 10 years 1,560 1,591 Due after 10 years 1,431 1,510
As of December 31, 2008, fair values could not be reliably measured for equity investments with carrying amounts totaling � 473 mn (2007: � 1,742 mn). These investments are primarily investments in privately held corporations and partnerships. During the year ended December 31, 2008, such investments with carrying amounts of � 18 mn (2007: � 27 mn) were sold leading to gains of � 1 mn (2007: � 42 mn)
Collateral paid for securities borrowing transactions — — — 16,664 23,714 40,378 1) Does not include loans and advances to banks and customers of Dresdner Bank which were classified as held for sale. See Note 4.
Cost as of January 1, 10,114 13,039 13,090 Accumulated depreciation as of January 1, (2,356) (3,484) (3,521) Carrying amount as of January 1, 7,758 9,555 9,569
Changes in the consolidated subsidiaries of the Allianz Group 14 3 68
Accumulated depreciation as of December 31, 2,588 2,356 3,484 Cost as of December 31, 10,139 10,114 13,039
December 31, 2008, real estate held for investment pledged as security, and other restrictions on title, were � 143 mn
Wholesale and retail trade 425 4,999 Financial institutions (excluding banks) and insurance companies 148 9,626 Service providers 1,126 7,701
Industry, wholesale and retail trade and service providers 4,129 11,748 Financial institutions (excluding banks) and insurance companies 614 91,369
Reconciliation of allowances for credit losses by class of financial assets
As of December 31, 2008, the overall volume of allowance for credit losses includes loan loss allowances deducted from loans and advances to banks and customers in the amount of � 119 mn (2007: � 830 mn; 2006: � 1,054 mn) and provisions for credit losses included in other liabilities in the amount of � 8 mn (2007: � 201 mn; 2006: � 261 mn).
Reclassifications to non-current assets and assets of disposal groups classified as held for sale (721) — — (192) — — (913) — —
Unearned premiums 1,294 1,342 Reserves for loss and loss adjustment expenses 8,180 8,561 Aggregate policy reserves 5,018 5,319 Other insurance reserves 107 90
Foreign currency translation adjustments 150 (311) (340) Changes recorded in consolidated income statements (47) 108 (7)
Carrying amount as of December 31, 5,018 5,319 8,223 1) Primarily relating to changes of quota share reinsurance agreements.
The Allianz Group reinsures a portion of the risks it underwrites in an effort to control its exposure to losses and events and protect capital resources. In general international corporate business is either underwritten directly or assumed by Allianz Global Corporate & Specialty (“AGCS”)
from other Allianz Group’s subsidiaries. AGCS buys global reinsurance cover in the external reinsurance market, other parts are reinsured internally by Allianz SE. The Allianz
Allianz SE participates as a reinsurer on an arms’ length basis in these programs.
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, 2008 and 2007. The relationships with reinsurers of the Allianz
Impaired loans 654 2,240 Impaired loans with specific allowances 645 1,301 Impaired loans with portfolio allowances — 420 Non-accrual loans 204 1,555
Average balance of impaired loans 652 2,448 Interest income recognized on impaired loans 6 29 Interest income not recognized from nonaccrual loans 19 77 Interest collected and recorded on nonaccrual loans — 3
(2007: � 40 mn) of commitments to lend additional funds to borrowers whose loans are non-performing or whose terms have been previously restructured.
Cost as of January 1, 2,344 2,359 2,374 Accumulated amortization as of January 1, (1,138) (1,132) (1,038) Carrying amount as of January 1, 1,206 1,227 1,336
Notes to the Consolidated Financial Statements Allianz Group Annual Report 2008 13 Other assets
Derivative financial instruments used for hedging that meet the criteria for hedge accounting and firm commitments 1,101 344
2) As of December 31, 2008, includes prepaid benefit costs for defined benefit plans of � 256 mn (2007: � 402 mn).
Changes in the consolidated subsidiaries of the Allianz Group 27 (159) 819
Reclassifications into noncurrent assets and assets of disposal groups classified as held for sale (902) (574) — Foreign currency translation adjustments (40) (47) (24)
Reversals of impairments 11 1 1 Carrying amount as of December 31, 3,122 3,708 4,758
Accumulated depreciation as of December 31, 936 1,139 1,395 Cost as of December 31, 4,058 4,847 6,153
Dresdner Bank Group 417,874 — Selecta AG 1,639 1,543 Real estate held for investment and real estate held for own use in Germany — 1,950 Other — 10
Dresdner Bank Group has been classified in accordance with IFRS 5 prospectively as disposal group held for sale in the consolidated balance sheet as of December 31, 2008.
Amortization expense of intangible assets with finite useful lives is estimated to be � 42 mn in 2009, � 41 mn in 2010,
� 40 mn in 2011, � 40 mn in 2012 and � 40 mn in 2013.
Foreign currency translation adjustments 32 (372) (368) Reclassification — — 37 Reclassification into noncurrent assets and assets of disposal groups classified as held for sale (1 511) (472) — Carrying amount as of December 31, 11,221 12,453 12,144
Cost as of January 1, 3,946 3,764 3,472 Accumulated amortization as of January 1, (2,781) (2,686) (2,381) Carrying amount as of January 1, 1,165 1,078 1,091
Impairment tests for goodwill and intangible assets with indefinite useful lives
The recoverable amounts of all cash generating units excluding Private Equity are determined on the basis of value in use calculations. The recoverable amount of the cash generating unit Private Equity is determined on the basis of the fair values of the Private Equity investments. The goodwill of Dresdner Bank and the brand name “Dresdner Bank”
The Allianz Group applies generally acknowledged valuation principles to determine the value in use. In this regard, the
Property-Casualty segment and Banking segment as well as for the Asset Management and Health Germany cash generating units. Generally, the basis for the determination of the capitalized earnings value is the business plan (“detailed planning period”) as well as the estimate of the sustainable returns and eternal growth rates which can be assumed to be realistic on a long term basis (“terminal value”) of the companies included in the cash generating units. The capitalized earnings value is calculated by discounting the future earnings using an appropriate discount rate.
The business plans applied in the value in use are the results of the structured management dialogues between the
Board of Management of the Allianz Group and the companies in connection with a reporting process integrated into these dialogues. Generally, the business plans comprise a planning horizon of three years and are based on current market environment.
For all cash generating units in the Life/ Health segment, with the exception of US the fair value for the goodwill impairment test is based on an Appraisal Value which is derived from the Market Consistent Embedded Value, corresponding sensitivities and a multiple of the Market
The Market Consistent Embedded Value is an industryspecific valuation method to determine the fair value of the current in force portfolio and is in compliance with the general principles of the discounted earnings methods. The
Due to the unusual economic circumstances at year end for Taiwan the calculation was based on sensitivities that reflected the average interest level of the last five years. For the US instead of the Market Consistent Embedded Value the
Europe II 638 — 638 — South America 21 — 21 — Asia & Middle East 79 — 79 —
ot es 16 Financial liabilities carried at fair value through income
Obligations to deliver securities — 34,795 Derivative financial instruments 6,242 76,819 Other trading liabilities 2 12,469
Financial liabilities designated at fair value through income — 1,970 1) Does not include financial liabilities carried at fair value through income of Dresdner Bank which were classified as held for sale. See Note 4.
Change in fair value of financial liabilities designated at fair value through income attributable to changes in credit risk
Term deposits and certificates of deposit 1,296 3,035 4,331 64,129 72,938 137,067
Collateral received from securities lending transactions 627 — 627 16,235 4,729 20,964 1) Does not include liabilities to banks and customers of Dresdner Bank which were classified as held for sale. See Note 4.
Liabilities to banks and customers by type of customer and geographic region
As of December 31, 2008, liabilities to customers include � 633 mn (2007: � 27,091 mn) of noninterest bearing deposits.
December 31, 2008, the Allianz Group recorded additional income of � 1,443 mn (2007: � 1,360 mn; 2006: � 969 mn)
with respect of losses occurring in prior years. During the year ended December 31, 2008, these amounts as percentages of the net balance of the beginning of the year were
As of December 31, 2008 and 2007, the Allianz Group Property-
The following table illustrates the development of the 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).
Three years later 26,149 24,801 26,583 Four years later 29,847 28,206 Five years later 32,570 Reserves reestimated as of
Three years later 53,907 51,895 52,676 Four years later 53,181 50,767 Five years later 52,356 Cumulative surplus
Gross surplus after changes in the consolidated subsidiaries of the Allianz Group 3,854 4,761 7,583 6,855 2,554
Net surplus after changes in the consolidated subsidiaries of the Allianz Group 2,593 4,191 6,037 5,347 1,727 Net Surplus as percentage of initial reserves 5.8 % 9.2 % 12.2 % 10.8 % 3.5 %
Notes to the Consolidated Financial Statements Allianz Group Annual Report 2008 20 Reserves for insurance and investment contracts
Aggregate policy reserves 278,700 264,243 Reserves for premium refunds 17,195 27,225 Other insurance reserves 662 776
Changes in aggregate policy reserves for traditional participating insurance contracts and long-duration insurance contracts for the years ended December 31, 2008 and 2007 were as follows: Traditional participating insurance contracts (SFAS 120)
Additions — — 81 — Portfolio acquisitions and disposals (14) — (37) —
1) The reclassifications mainly relate to insurance contracts when policies transfer from a separate account contract to a universal life-type contract.
As of December 31, 2008, participating life business represented approximately 65 % (2007: 65 %) of the Allianz Group’s gross insurance inforce. During the year ended December 31, 2008, participating policies represented approximately 64 % (2007: 61 %) of gross statutory premiums written and 64 % (2007: 60 %) of life premiums earned. As of December 31, 2008, reserves for conventional participating policies were approximately 54 % (2007: 54 %) of the Allianz Group’s consolidated aggregate policy reserves.
Foreign currency translation adjustments 67 (19) (24) Changes due to fluctuations in market value (7,024) (4,099) (50) Changes in the consolidated subsidiaries of the Allianz Group — — (491) Changes due to valuation differences charged to income (2,093) 645 895
The Allianz Group’s Life/Health segment provides a wide variety of insurance and investment contracts to individuals and groups in approximately 30 countries around the world.
Individual contracts include both traditional contracts and unit-linked contracts. Without consideration of policyholder participation, traditional contracts generally incorporate significant investment risk for the Allianz Group. Traditional contracts include life, endowment, annuity, and health contracts. Traditional annuity contracts are issued in both deferred and immediate types. In addition, the Allianz
Group’s life insurance operations in the United States issue a significant amount of equity indexed deferred annuities.
Unit-linked contracts generally result in the contract holder assuming investment risk. In addition, in certain markets, the Allianz Group issues contracts for group life, group health and group pension products.
As of December 31, 2008 and 2007, the Allianz Group’s deferred acquisition costs and reserves for insurance and investment contracts for the Life/Health segment are summarized as follows: Deferred acquisition costs
Other Western and Southern Europe 346 1,978 (29) 13 1,962 3,365 5,327
Furthermore, all of the Allianz Group’s annuity policies issued in the United States meet the criteria for classification as insurance contracts under IFRS 4, because they include options for contract holders to elect a life-contingent annuity.
These contracts currently do not expose the Allianz Group to significant longevity risk, nor are they expected to do so in the future, as the projected and observed annuitization rates are very low. Additionally, many of the Allianz Group’s traditional contracts issued in France and Italy do not incorporate significant insurance risk, although they are accounted for as insurance contracts, because of their discretionary participation features. Similarly, a significant portion of the
As a result of the considerable 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 annuity products, and the geographic diversity of the Allianz Group’s Life/Health segment, as well as the substantial level of policyholder participation in mortality/
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.
The weighted average guaranteed minimum interest rates of the Allianz Group’s largest operating entities in the Life/
Health segment can be summarized by country as follows: As of December 31, 2008 2007
In most of these markets, the effective interest rates being earned on the investment portfolio exceed these guaranteed minimum interest rates. In addition, the operations in these markets may also have significant mortality and expense margins. As a result, as of December 31, 2008 and 2007, the Allianz Group does not believe that it is exposed to a significant risk of premium deficiencies in its Life/Health segment. However, the Allianz Group’s Life/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 declines in investment rates or a prolonged low interest rate environment.
Changes in financial liabilities for unit-linked insurance contracts and unit-linked investment contracts for the years ended December 31, 2008 and 2007 were as follows: Unitlinked
Foreign currency translation adjustments 697 (15) (1,954) (2) Changes in the consolidated subsidiaries of the Allianz Group — 152 — —
The table sets forth the Allianz Group’s contractual obligations as of December 31, 2008. Contractual obligations do not include contingent liabilities or commitments. Only transactions with parties outside the Allianz Group are considered. With the announcement of the sale of Dresdner
Furthermore, reserves for insurance and investment contracts presented in the table include contracts where the timing and amount of payments are considered fixed and determinable and contracts which have no specified maturity dates and may result in a payment to the contract holder depending on mortality and morbidity experience and the incidence of surrenders, lapses, or maturities. For contracts which do not have payments that are fixed and determinable, the Allianz Group has made assumptions to estimate the undiscounted cash flows of contractual policy benefits including mortality, morbidity, interest crediting rates, policyholder participation in profits, and future lapse rates. These assumptions represent current best estimates, and may differ from the estimates originally used to establish the reserves for insurance and investment contracts as a result of the lock-in of assumptions on the issue dates of the contracts as required by the Allianz Group’s established accounting policy. For further information, see Note 2 to the consolidated financial statements. Due to the uncertainty of the assumptions used, the amount presented could be materially different from the actual incurred payments in future periods. Furthermore, these amounts do not include premiums and fees expected to be received, investment income earned, expenses incurred to parties other than the policyholders such as agents, or administrative expenses. In addition, these amounts are presented net of reinsurance expected to be received as a result of these cash flows. The amounts presented in this table are undiscounted and therefore exceed the reserves for insurance and investment contracts presented in the consolidated balance sheet. For further information on reserves for insurance and investment contracts, see Note 20 to the consolidated financial statements.
Liabilities to banks and customers 5) 15,480 1,020 760 1,191 18,451
Reserves for loss and loss adjustment expenses 6) 17,271 14,455 7,212 16,678 55,616 1) For further information, see Notes 23 and 24 to the consolidated financial statements. Total obligations of � 56,894 at December 31, 2007 included obligations of Dresdner Bank, which are no longer obligations of the Allianz Group.
2) Amounts included in the table reflect estimates of interest on fixed rate long-term debt obligations to be made to lenders based upon the contractually fixed interest rates. 3) The amount of � 2,210 mn is gross of � 43 mn related to subleases, which represent cash inflow to the Allianz Group. 4) Purchase obligations only include transactions related to goods and services; purchase obligations for financial instruments are excluded. 5) Liabilities to banks and customers include � 311 mn and � 4,096 mn of payables on demand, respectively. For further information, see Note 17 to the consolidated financial statements. Total liabilities of � 336,494 at December 31, 2007 included liabilities of Dresdner Bank, which are no longer liabilities of the Allianz Group. 6) Comprise reserves for loss and loss adjustment expenses from the Property-Casualty insurance operations. Due to the uncertainty of the assumptions used, the amounts presented could be materially different from the actual incurred payments in future periods. The amounts presented in the table above are gross of reinsurance ceded. The corresponding amounts, net of reinsurance ceded, are � 14,621 mn, � 12,339 mn, � 6,215 mn and � 14,620 mn for the periods less than 1 year, 1-3 years, 3-5 years and more than 5 years, respectively. For further information on reserves for loss and loss adjustment expenses, see Note 19 to the consolidated financial statements.
Effect of discounting and differences between locked-in and best estimate assumptions (363,279) Expected future premiums and expenses (147,731) Total consolidated balance sheet positions 328,457
Notes to the Consolidated Financial Statements Allianz Group Annual Report 2008 22 Other liabilities
Pensions and similar obligations 3,867 4,184 Employee related 1,904 2,956 Share-based compensation 1,295 1,761 Restructuring plans 343 541 Loan commitments 8 201 Contingent losses from noninsurance business 109 134 Other provisions 1,481 1,857
Other liabilities 6,076 10,051 1) Does not include other liabilities of Dresdner Bank which were classified as held for sale. See Note 4.
Deferred acquisition costs comprise deferred acquisition costs for our Life/Health segment, present value of future profits and deferred sales inducements. See Note 12 to our consolidated financial statements for more information.
Ceded reserves to reinsurers are presented within reinsurance assets in our consolidated balance sheet.
Fixed rate — — — — — — — 450 Contractual interest rate — — — — — — — —
Contractual interest rate — — — — — 2.11 % — — Floating rate — 25 — — — — 25 — Current interest rate — 4.05 % — — — — — —
Finance Corporation, a wholly-owned subsidiary of Allianz SE, which are fully and unconditionally guaranteed by Allianz SE.
Current interest rate — — — — — 4.45 % — —
Total all other subsidiaries — — — — — 891 891 949 1) Does not include particiaption certificated and subordinated liabilities of Dresdner Bank which were classified as held for sale. See Note 4.
4) The terms of the profit participation certificates provide for an annual cash distribution of 240 % of the dividend paid by Allianz SE per one Allianz SE share. Holders of profit participation certificates do not have voting rights, or any rights to convert the certificates into Allianz SE shares, or rights to liquidation proceeds. Profit participation certificates are unsecured and rank pari passu with the claims of other unsecured creditors. Profit participation certificates can be redeemed by holders upon twelve months prior notice every fifth year. Allianz SE has the right to call the profit participation certificates for redemption, upon six months prior notice every year. The next call date is December 31, 2009. Upon redemption by Allianz SE, the cash redemption price per certificate would be equal to 122.9 % of the then current price of one Allianz SE share during the last three months preceding the call of the participation certificate. In lieu of redemption for cash, Allianz SE may offer 10 Allianz SE ordinary shares per 8 profit participation certificates.
February 7, 2011. The Board of Management, with approval of the Supervisory Board, is authorized to exclude the preemptive rights of shareholders if the shares are issued against a contribution in kind and, in certain cases, if they are issued against a cash contribution.
A capital increase out of unissued conditional capital will be carried out only to the extent that conversion or option rights are exercised by holders of bonds issued by Allianz SE
or any of its subsidiaries or that mandatory conversion obligations are fulfilled.
Capital increase for merger with RAS — — 25,123,259 Capital increase for tender offer AGF — 16,974,357 — Exercise of warrants 2,200,000 — — Capital increase for employee shares 700,000 1,025,643 986,741 Change in treasury shares held for non-
Change in treasury shares held for trading purposes (223,904) 1,660,788 (2,014,874) Issued shares outstanding as of December 31, 451,490,223 448,910,648 429,336,291
In April 2007, 16,974,357 new Allianz SE shares were issued for the execution of the minority buy-out of AGF shares.
AGF amounts to � 43 mn; the additional paid-in capital increased by � 2,722 mn.
Meeting the distribution of a dividend of � 3.50 per qualifying share. During the years ended December 31, 2007 and 2006, Allianz SE paid a dividend of � 5.50 and � 3.80 , respectively, per qualifying share.
In order to enable Dresdner Bank Group to trade in shares of Allianz SE, the Annual General Meeting on May 21, 2008 authorized the Allianz Group’s domestic or foreign credit institutions in which Allianz SE has a majority holding to acquire treasury shares for trading purposes pursuant to clause 71(1) no. 7 of the Aktiengesetz. During the year ended December 31, 2008, in accordance with this authorization, the credit institutions of the Allianz Group purchased 30,227,150 (2007:24,780,668) of Allianz SE’s shares at an average price of � 106.73 per share (2007: � 131.55), which included previously held Allianz SE shares. During the year ended December 31, 2008, 30,977,574 shares (2007: 25,348,169) were disposed of holdings at an average price of � 100.87 per share (2007: � 127.39). During the year ended
� 21 mn (2007: losses � 110 mn), which were recorded directly in revenue reserves.
Unrealized gains and losses (net) 20 95 Share of earnings 258 748 Other equity components 3,286 2,785
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
This margin resulted in a preliminary cover ratio2) of 133 %
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, 2008, the Allianz Group’s insurance subsidiaries were in compliance with all applicable solvency and capital adequacy requirements.
Certain insurance subsidiaries are subjected to regulatory restrictions on the amount of dividends which can be remitted to Allianz SE without prior approval by the appropriate regulatory body. Such restrictions provide that a company may only pay dividends up to an amount in excess of certain regulatory capital levels or based on the levels of undistributed earned surplus or current year income or a percentage thereof. By way of example only, the operations of Allianz Group’s insurance subsidiaries located in the 1) Represents the difference between fair value and amortized cost of real estate held for investment and investments in associates and joint ventures, net of deferred taxes, policyholders‘ participation and minority interests.
United States are subject to limitations on the payment of dividends to their parent company under applicable state insurance laws.
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,
Notes to the Consolidated Financial Statements Allianz Group Annual Report 2008 28 Income from financial assets and liabilities carried at fair value through income (net)
Income (expenses) from financial assets and liabilities held for trading (33) 1,082 (5) (7) 135 (339) 833 Expenses from financial assets designated at fair value through income (112) (2,108) — (236) (24) — (2,480) Income from financial liabilities designated at fair value through income — — — — — — — Income from financial liabilities for puttable equity instruments (net) 29 765 — 166 1 — 961
Income from financial assets and liabilities held for trading for the year ended December 31, 2008 includes in the Life/
� 1,352 mn; 2006: expenses of � 834 mn) from derivative financial instruments. This includes income of � 1,769 mn
from forward sales of equities and the purchase of forward contracts for fixed income of German entities. Also included are expenses from derivative financial instruments in the
USA amongst others related to equity indexed annuity contracts and guaranteed benefits under unit-linked contracts of � 1,304 mn (2007: � 622 mn; 2006: � 350 mn) and income from other derivative financial instruments of � 684 mn
Income from financial assets and liabilities held for trading for the year ended December 31, 2008, includes in the Corporate segment expenses of � 186 mn (2007: � 15 mn; 2006: � 152 mn) from derivative financial instruments. In 2008 thereof expenses of � 166 mn (2007: � 15 mn; 2006: � 152 mn)
� 292 mn (2007: income of � 43 mn; 2006: income of � 128 mn). Additionally income from financial assets and liabilities held for trading for the year ended December 31, 2008 includes income of � 324 mn (2007: � 60 mn; 2006: expenses of
1) During the year ended December 31, 2008, includes realized gains from the disposal of subsidiaries and businesses of � 143 mn (2007: � 164 mn; 2006: � 567 mn).
General and administrative expenses (87) (391) — (3) (481) Other operating expenses (96) — — — (96)
Sales and service revenues 1,936 375 — 22 2,333 Other operating revenues 21 — — — 21 Interest income 13 — — — 13
Notes to the Consolidated Financial Statements Allianz Group Annual Report 2008 33 Claims and insurance benefits incurred (net)
Claims and insurance benefits paid (25,135) (19,567) — (44,702) Change in loss and loss adjustment expenses (851) (106) — (957)
Claims and insurance benefits paid 3,070 711 (9) 3,772 Change in loss and loss adjustment expenses (424) (56) (5) (485)
Claims and insurance benefits paid (24,885) (17,547) — (42,432) Change in loss and loss adjustment expenses (600) (90) — (690)
Claims and insurance benefits paid (24,002) (17,708) — (41,710) Change in loss and loss adjustment expenses (670) 83 — (587)
ot es 34 Change in reserves for insurance and investment contracts (net)
Liabilities to banks and customers (753) (882) (488) Deposits retained on reinsurance ceded (71) (101) (120)
Recoveries on loans previously impaired 27 34 9 37 Impairments of investments (net)
Real estate held for investment 54 7 3 1) Impairments on available-for-sale debt securities include impairments of asset-backed securities of � 0.4 mn for the Property-Casualty segment and � 15.6 mn for the Life/Health segment.
Other expenses from real estate held for investment (177) (259) (245)
Foreign currency gains 1,255 687 473 Foreign currency losses (1,129) (850) (580)
Commissions and profit received on reinsurance business ceded 83 — 83 146 — 146 150 — 150
Notes to the Consolidated Financial Statements Allianz Group Annual Report 2008 40 Fee and commission expenses
Realized losses from disposals of real estate held for own use (1) (4) (9) Impairments of real estate held for own use (9) (10) (3)
During the year ended December, 31, 2008, current income tax expense included an expense of � 6 mn (2007: an income of � 20 mn; 2006: an income � 82 mn) related to prior years.
Of the deferred tax charge for the year ended December 31, 2008, an expense of � 387 mn (2007: expense of � 463 mn; 2006: income of � 485 mn) is attributable to the recognition of deferred taxes on temporary differences and an income of � 227 mn (2007: an expense of � 14 mn; 2006: an expense
Additionally, changes of applicable tax rates due to changes in tax law produced deferred tax expense of � 21 mn (2007 income of � 341 mn; 2006 expense of � 5 mn). In 2007, in this amount is included a tax income of � 291 mn resulting from the German corporate tax reform. Current and deferred tax benefit included in shareholders’ equity during the year ended December 31, 2008, amounted to � 1 084 mn (2007: The recognized income tax expense for the year ended
The effective tax rate is determined on the basis of the effective income tax expense on income before income taxes and minority interests in earnings.
The effects of German tax law changes stem, in 2007, from decrease in tax rates due to German corporate tax reform and, in 2006, from the capitalization of corporate tax credits due to the German Reorganization Tax Act (“SEStEG”).
During the year ended December 31, 2008, a deferred tax expense of � 5 mn (2007: � 8 mn; 2006: � — mn) was recognized due to 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 expense diminished by � 19 mn (2007: � 43 mn; 2006: � 27 mn). The recognition of deferred tax assets on tax losses carried forward from earlier periods, for which no deferred taxes had yet been recognized or which had been devalued resulted in a deferred tax income of � 4 mn (2007: � 4 mn; 2006: � 12 mn). The non-recognition of deferred taxes on tax losses for the current fiscal year increased the tax expense by � 46 mn (2007: � 22 mn; 2006: � 10 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 2008 ranged from 10.0 % to 42.05 %. Changes to tax rates already adopted on December 31, 2008, are taken into account.
Deferred acquisition costs 473 546 Other assets 833 932 Intangible assets 156 167 Tax losses carried forward 2,060 4,041 Insurance reserves 3,845 3,610 Pensions and similar obligations 177 357 Other liabilities 712 1,325 Total deferred tax assets 12,561 13,645
Non recognition or valuation allowance for deferred tax assets on tax losses carried forward (197) (814) Effect of netting (8,368) (8,060) Net deferred tax assets 3,996 4,771
Deferred acquisition costs 4,531 3,746 Other assets 680 751 Intangible assets 115 349 Insurance reserves 2,465 2,389 Pensions and similar obligations 226 231 Other liabilities 1,044 833 Total deferred tax liabilities 12,201 12,033
Effect of netting (8,368) (8,060) Net deferred tax liabilities 3,833 3,973
Taxable temporary differences associated with investments in Allianz Group companies, for which no deferred tax liabilities are recognized because Allianz is able to control the timing of their reversal and they will not reverse in the foreseeable future amount to � 267 mn (2007: � 343 mn). Deductible temporary differences arising from investments in Allianz
� 8,856 mn (2007: � 7,169 mn) result in recognition of deferred tax assets to the extent there is sufficient certainty that the unused tax losses will be utilized. � 8,244 mn
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.
The counterparty settlement risk is virtually excluded in the case of exchange-traded products, as these are standardized products. By contrast, over-the-counter (“OTC”)
Credit default swaps — — — — — — 1,140,527 11,525 (10,993) Total return swaps — — — — — — 12,879 430 (857)
Futures — — — — — — 2,197 — — Options — — — — — — — — —
(2007: net loss of � 462 mn; 2006: net loss of � 687 mn) on the hedging instrument and a net loss of � 2,027 mn
The following table presents a comparison of the carrying amount and the fair value of the Allianz Group’s classes of financial instruments: As of December 31, 2008 2007
Cash and cash equivalents 8,958 8,958 31,337 31,337 Financial assets held for trading 2,624 2,624 163,541 163,541 Financial assets designated at fair value through income 11,616 11,616 21,920 21,920 Available-for-sale investments 242,099 242,099 268,001 268,001 Held-to-maturity investments 4,934 5,066 4,659 4,705 Loans and advances to banks and customers 115,655 117,944 396,702 394,741 Financial assets for unit-linked contracts 50,450 50,450 66,060 66,060 Derivative financial instruments and firm commitments included in other assets 1,101 1,101 344 344
For the following financial instruments, carried at fair value in the consolidated balance sheet, the fair value is determined as described in Note 2 “Summary of significant accounting policies”: – Financial assets and liabilities held for trading
– Financial assets and liabilities designated at fair value through income
– Derivative financial instruments and firm commitments included in other assets and other liabilities
They are carried at nominal value, which represents a reasonable estimate of the fair value for these short term financial instruments.
The fair value of held-to-maturity investments is determined using the quoted market price as of the balance sheet date.
For loans and advances to banks and customers quoted market prices are not available as there are no active markets, where these instruments are traded. The fair value is determined using generally accepted valuation techniques with actual market parameters. For short-term loans the carrying amount represents a reasonable estimate of the fair value. For long-term loans the fair value is estimated by discounting future contractual cash flows using risk-adjusted discount rates. Additionally, the individually assessed
Financial assets held for trading 1,020 1,550 54 2,624 163,541 Financial assets designated at fair value through income 7,295 4,129 192 11,616 21,920
Financial liabilities for unit-linked contracts 47,171 3,279 — 50,450 66,060 Derivative financial instruments used for hedging that meet the criteria for hedge accounting and firm commitments 19 189 — 208 2,210 Financial liabilities for puttable equity instruments 2,718 — — 2,718 4,162 1) Includes as of December 31, 2007 financial assets with a fair value of � 201.8 bn and financial liabilities with a fair value of � 140.6 bn related to the disposal group Dresdner Bank. 2) Excludes Universal Life-Type contracts under US GAAP SFAS 97 component of the allowance for loan losses and the recoverable amounts of collateral was considered in the fair value determination of loans.
The fair value of certain financial instruments is determined using valuation techniques with non market observable input parameters (Level III). Within financial assets designated at fair value through income these instruments comprise investments in private equity of � 184 mn. Within available-for-sale investments these instruments relate to investments in private equity of � 2.1 bn, investments in corporate bonds of � 1.7 bn and corporate asset-backedsecurities of � 133 mn. Financial liabilities held for trading include � 5.2 bn of embedded derivative financial instruments relating to annuity products.
During the year ended December 31, 2008 the Allianz Group did not recognize day one profits. The day one profits of the previous year all related to Dresdner Bank and were reclassified with the related assets to “Non-current assets and assets of disposal groups classified as held for sale”.
Allianz Group companies are involved in legal, regulatory and arbitration proceedings in Germany and a number of foreign jurisdictions, including the United States, involving claims by and against them, which arise in the ordinary course of their businesses, including in connection with their activities as insurance, banking and asset management companies, employers, investors and taxpayers. It is not feasible to predict or determine the ultimate outcome of the pending or threatened proceedings. Management does not believe that the outcome of these proceedings, including those discussed below, will have a material adverse effect on the financial position or results of operations of Allianz
Risks US Insurance Company (“AGR US”). The complaint sought a determination that the terrorist attack of September 11, 2001 on the World Trade Center 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, the Allianz Group recorded net claims expense of approximately � 1.5 bn in 2001 for the
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. On May 23, 2007, following a courtordered mediation, AGR US reached a settlement with Silverstein Properties regarding the disputed insurance claims.
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 referred the case to arbitration as contemplated under the Certificate of Reinsurance.
The arbitration proceeding commenced in October 2007 and discovery is ongoing. Management does not expect any material negative financial impact for Allianz from such arbitration.
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 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 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 ”), which is pending with the district court (“Landgericht ”) of Frankfurt. The Allianz Group believes that a claim to increase the cash settlement does not exist. In the event that the court were to determine a higher amount as an appropriate cash settlement, this would affect all of the approximately 16 mn shares that were transferred to Allianz.
In July 2007, the court granted class certification of a class consisting of those persons who purchased futures contracts to offset short positions between May 9, 2005 and
June 30, 2005. In December 2007, the U.S. Court of Appeals for the Seventh Circuit granted the petition of PIMCO and
Appeal reverses the lower court’s decision, the case will remain dismissed. It is not possible to predict potential outcomes or assess any eventual exposure at this time.
Act. The pending lawsuits have not yet progressed to a stage at which a potential outcome or exposure can be determined.
As of December 31, 2008, the future minimum lease payments under non-cancelable operating leases were as follows: � mn
as well as to invest in private equity funds totaling � 2,455 mn
As of December 31, 2008, commitments outstanding to purchase items of equipment amounted to � 3 mn (2007: � 197 mn). In addition, as of December 31, 2008, the Allianz
Other principal commitments of the Allianz Group include the following: Pursuant to para. 124 ff. of the German Insurance Supervision Act (“Versicherungsaufsichtsgesetz – VAG”), a mandatory insurance guarantee scheme (“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)
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
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 predefined 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, 2008, the maximum potential amount of future payments of the market value guarantees was � 785 mn (2007: � 1,956 mn), which represents the total value guaranteed under the respective agreements including the obligation that would have been due had the investments matured on that date. The fair value of the investment trust accounts and mutual funds related to these guarantees as of
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.
As of December 31, 2008 the Allianz Group took possession of collateral it holds as security with a carrying amount of
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, 2008 are provided in
Employees, including agents in Germany, are granted such retirement benefits by the various legal entities of the
Prepaid benefit costs (256) (402) Accrued benefit costs 3,867 4,184 Net amount recognized 3,611 3,782
Actuarial (gains)/losses (774) (1,316) Foreign currency translation adjustments (182) (266) Benefits paid (570) (685) Changes in the consolidated subsidiaries of the Allianz Group (38) (137)
Fair value of plan assets as of January 1, 10,931 10,888
Expected return on plan assets 448 577 Actuarial gains/(losses) (781) (331) Employer contributions 500 342 Plan participants’ contributions 65 67 Foreign currency translation adjustments (150) (229)
Unrecognized net actuarial losses (685) (1,444) Unrecognized prior service costs 13 15 Net amount recognized as of December 31, 3,611 3,782 1) Relates to the reclassification of Dresdner Bank Group to assets / liabilities of disposal groups classified as held for sale.
2) As of December 31, 2008, includes direct commitments of the consolidated subsidiaries of the Allianz Group of � 4,429 mn (2007: � 4,953 mn) and commitments through plan assets of � 7,818 mn (2007: � 11,189 mn).
As of December 31, 2008, post-retirement health benefits included in the projected benefit obligation and in the net amount recognized amounted to � 60 mn (2007: � 109 mn)
During the year ended December 31, 2008, net periodic benefit cost includes net periodic benefit cost related to postretirement health benefits of � (7) mn (2007: � — mn; 2006: The actual return on plan assets amounted to � (333) mn,
A summary of amounts related to defined benefit plans is as follows: � mn � mn � mn
Allianz Group’s defined benefit plans used to determine projected benefit obligation: As of December 31, 2008 2007
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.
� 212 mn (2007: � 192 mn; 2006: � 136 mn). Additionally, the Allianz Group paid contributions for state pension schemes of � 317 mn (2007: � 294 mn; 2006: � 277 mn).
Group support the orientation of senior management, in particular the Board of Management, toward the long-term increase of the value of the Allianz Group. The GEI include grants of stock appreciation rights (“SAR”) and restricted stock units (“RSU”).
STOXX Price Index at least once for a period of five consecutive trading days; and
The fair value of the SARs at grant date is measured using a
Cox-Rubinstein binomial tree option pricing model. Volatility was derived from observed historical market prices. In the absence of historical information regarding employee stock appreciation exercise patterns (all plans issued between 2002 and 2008 are significantly “out of the money”), the expected life has been estimated to equal the term to maturity of the SARs.
The SARs are accounted for as cash settled plans by the
During the year ended December 31, 2008, the Allianz Group recognized compensation expense related to the unexercised SARs of � (116) mn (2007: � 14 mn; 2006: � 102 mn).
As of December 31, 2008, the Allianz Group recorded a liability, in other liabilities, for the unexercised SARs of � 37 mn
The fair value is calculated by substracting the net present value of expected future dividend payments until maturity of the RSUs from the prevailing share price as of the valuation date.
The following table provides the assumptions used in calculating the fair value of the RSUs at grant date: Share-based compensation plans of subsidiaries of the
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 3 to 5 years and are subject to repurchase by AGI L.P.
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, 2008, the
Allianz Group recognized compensation expense related to the Class B equity units of � 185 mn (2007: � 362 mn; 2006: � 383 mn). In addition, the Allianz Group recognized expense related to the priority claim on the adjusted operating profits of PIMCO LLC of � 93 mn (2007: � 126 mn; 2006: � 140 mn). During the year ended December 31, 2008, the Allianz Group called 27,826 Class B equity units. The total amount paid related to the call of the Class B equity units was � 418 mn.
PIMCO LLC measures the total compensation expense to be recognized for the equity settled shares based upon their fair value as of the grant date. The total compensation expense is recognized over the vesting period.
During the year ended December 31, 2008, the Allianz Group recorded compensation expense of � 2 mn related to these share options.
During the year ended December 31, 2007, Allianz acquired all of the remaining AGF shares from minority shareholders in the context of the Tender Offer and Squeeze-out. Under the terms of an agreement (the ”Liquidity Agreement”) between
Offer for each AGF share (� 126.43) divided by the Allianz share price on January 16, 2007 (� 155.72). This ratio is subject to adjustments in case of transactions impacting Allianz or AGF share capital or net equity. The cash settlement is based upon the initial offer proposed for each AGF share during the Tender Offer. As of December 31, 2007 all shares issued under these plans were fully vested and exercisable.
Agreement, the Allianz Group accounts for the AGF share option plans as cash settled plans, as all AGF employees will receive cash for their AGF shares. Therefore, the Allianz
Group recognizes any change in the fair value of the unexercised plans as compensation expense.
The effects of these modifications that increased the total fair value of the AGF share option plan to the AGF employees were expensed at the date of modification and amounted to
� 15 mn in 2007. The modification of the settlement terms from an equity share to cash for vested options was recorded directly in equity, and amounted to � 18 mn during 2007.
Group. At their original grant dates, the AGF share options had an exercise price of at least 85 % of the then prevailing market price. The original maximum term for the AGF share option plans granted was eight years.
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.
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 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 %
Allianz SE share option plan remain unchanged. Nevertheless the underlying assumptions had to be adjusted. The following table provides the grant date fair value and the assumptions used in calculating their fair value: Fair value � 66.35 Assumptions: Share price on modification date � 145.41 Expected life (years) 5 Risk free interest rate 3.9 % Expected volatility 30.5 % Dividend yield 1.5 %
Exercisable as of December 31, 117,825 48.96 — — — —
The Allianz Group offers Allianz SE shares in 22 countries to qualified employees at favorable conditions. The shares have a minimum holding period of 1 to 5 years. During the year ended December 31, 2008, the number of shares sold to employees under these plans was 721,830 (2007: 939,303; 2006: 929,509). During the year ended December 31, 2008, the Allianz Group recognized compensation expense, the difference between the market price (lowest quoted price of the Allianz SE stock at the official market in Germany on
France at favorable conditions. During the year ended December 31, 2006 the number of shares sold to employees under this plan was 651,012. During the year ended December 31, 2006 the compensation expense recorded was � 12 mn.
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 consolidated financial statements. During the year ended December 31, 2008, the total expense, in the aggregate, recorded for these plans was � 2 mn (2007: � 7 mn; The aggregate intrinsic value of share options outstanding was � 6 mn for the year ended December 31, 2008 (2007: � 11 mn).
During the year ended December 31, 2008, the Allianz Group recorded compensation expense of � — mn (2007: � 4 mn; 2006: � 6 mn) related to these share options.
The development of the restructuring provisions reflects the implementation status of the restructuring initiatives.
As of December 31, 2008, the Allianz Group has provisions for restructuring resulting from a 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.
Additions to existing provisions — 9 — 1 10 Release of provisions recognized in previous years — (15) — (5) (20) Release of provisions via payments (2) (13) — (83) (98) Release of provisions via transfers (69) (20) — — (89) Changes in the consolidated subsidiaries of the Allianz Group — — — 4 4 Foreign currency translation adjustments — — — (1) (1)
Additions to existing provisions 3 — — 16 19 Release of provisions recognized in previous years (10) — — (1) (11) Release of provisions via payments (10) — (2) (70) (82) Release of provisions via transfers (61) — — (5) (66) Reclassification to liabilities of disposal groups classified as held for sale — (166) — — (166)
In 2006, Allianz Deutschland AG announced a restructuring plan for the insurance business in Germany, that should be terminated in 2008. In the course of the fiscal year 2008 the restructuring plan has been extended for another year up to 2009. The objective of the restructuring program is to make the insurance business more customer focused, operate more efficiently and achieve growth.
During the year ended December 31, 2008, Allianz Deutschland AG recorded restructuring charges of � (9) mn (2007: � (16) mn). This amount includes additions to existing provisions, release of provisions recognized in previous years, and restructuring charges as reflected in the consolidated income statement. The reduction of staff within this program shall occur in consent with the employees. The plan includes a reduction of approximately 5,345 positions.
In 2008, the AGF Group announced a restructuring plan, so called “Comprehensive Adaptation Plan” (“Plan Global d’Adaptation”), for the insurance business in France which is expected to continue through 2011. The objectives of the restructuring program are to regain market shares and increase the quality of service, by
Group plans to reduce the number of administrative jobs by 688 and increase the number of commercial employees by 506 . The reduction of staff within this program includes measures for voluntary termination under restricted conditions and early retirement for the employees affected by the close-down of locations.
During the year ended December 31, 2008, the AGF Group recorded restructuring charges of � 81 mn as follows: � mn
A summary of the changes in the provisions for restructuring of the AGF Group during the year ended December 31, 2008 is: Provisions as of
Contract termination costs — — — — — — — — —
together with its group companies recognized restructuring charges of � 2 mn (2007: � 73 mn). As of December 31, 2008
Allianz S.p.A. recorded a provision of � 36 mn (2007: � 52 mn).
The reason for the restructuring program are outsourcing activities for the divisions Desktop, Network and Telecommunication Services of ASIC SE (former Allianz Shared Infrastructure Service GmbH), Munich.
Net income (loss) used to calculate basic earnings per share (2,444) 7,966 7,021 from continuing operations 3,967 7,316 6,640 from discontinued operations (6,411) 650 381
Diluted earnings per share are calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period, both adjusted for the effects of potential dilutive common shares. Potential dilutive common shares arise from the assumed conversion of participation certificates issued by Allianz SE, warrants issued by Allianz SE
Effect of potential dilutive common shares (49) (4) (3) Net income (loss) used to calculate diluted earnings per share (2,493) 7,962 7,018 from continuing operations 3,918 7,312 6,637 from discontinued operations (6,411) 650 381
Diluted earnings per share (in �) (5.47) 17.71 16.78 from continuing operations (in �) 8.59 16.26 15.87 from discontinued operations (in �) (14.06) 1.45 0.91
Notes to the Consolidated Financial Statements Allianz Group Annual Report 2008 51 Other Information
Salaries and wages 9,153 9,741 10,230 Social security contributions and employee assistance 1,298 1,666 1,731 Expenses for pensions and other post-retirement benefits 1,223 1,028 1,005
Compliance according to clause 161 AktG and made it available on a permanent basis to the shareholders on the company ’s website.
The Declaration of Compliance of the publicly traded group company Oldenburgische Landesbank AG was issued in
Total compensation of the Board of Management for the year ended December 31, 2008 amounts to � 18.5 mn (2007: � 26.5 mn). Furthermore 120,707 (2007: 102,950) stock appreciation rights and 58,580 (2007: 51,805) restricted stock units with a total fair value at grant date of � 7.7 mn (2007: � 12.3 mn) were granted to the Board of Management for the year ended December 31, 2008.
Compensation to former members of the Board of Management and their beneficiaries totaled � 7.0 mn (2007: � 5.0 mn). Pension obligations to former members of the
Dresdner Bank AG, Allianz Group received a cash payment of � 3.2 bn, 163.5 mn shares of Commerzbank AG accounted for as available-for-sale equity investments, and cominvest which will be first consolidated in the first quarter of 2009.
Until end of February 2009 several natural catastrophes took place. Based on the current information the Allianz
◽ Münchener und Magdeburger Agraversicherung Aktiengesellschaft, Munich 7 62.5 ◽ Oldenburgische Landesbank Aktiengesellschaft, Oldenburg 502 89.6 ◽ Reuschel & Co. Kommanditgesellschaft, Munich 2) 140 97.5 ◽ risklab germany GmbH, Munich 0.03 100.0 ◽ Vereinte Spezial Krankenversicherung Aktiengesellschaft, Munich 4 100.0 ◽ Vereinte Spezial Versicherung AG, Munich 45 100.0 1) Percentage includes equity participations held by dependent enterprises in full, even if the Allianz Group’s share in the dependent enterprise is under 100.0 %. 2) No subsidiary of the Allianz Group since January 12, 2009 3) Group share through indirect holder Roland Holding GmbH, Munich: 62,0 %
Property-Casualty Life/Health Banking Asset Management Corporate Operating entity contributes a substantial portion of our total revenues within our primary geographic markets. Total revenues comprise Property-Casualty segment’s gross premiums written, Life/Health segment’s statutory premiums, Banking segment’s operating revenues and Asset Management segment’s operating revenues.
◽ Allianz Bank Bulgaria JSC, Sofia 72 99.8 ◽ Allianz Bulgaria Insurance and Reinsurance Company Ltd., Sofia 22 78.0 ◽ Allianz Bulgaria Life Insurance Company Ltd., Sofia 12 99.0 China
◽ Allianz China Life Insurance Co. Ltd., Shanghai 56 51.0 ◽ Allianz Global Investors Hong Kong Ltd., Hong Kong 65 100.0 ◽ Allianz Insurance (Hong Kong) Ltd., Hong Kong 3 100.0 ◽ Dresdner Kleinwort (Japan) Limited, Hong Kong 2) 378 100.0 ◽ RCM Asia Pacific Ltd., Hong Kong 14 100.0 Colombia
◽ Allianz Egypt Insurance Company S.A.E., Cairo 2 85.0 ◽ Allianz Egypt Life Company S.A.E., Cairo (1) 100.0 France
◽ ◽ ◽ ALLIANZ SUBALPINA HOLDINGS S.p.A., Torino 280 98.0 ◽ Allianz Global Investors Italia S.p.A, Milan 48 100.0 ◽ ◽ ◽ Allianz S.p.A., Trieste 2,924 100.0 ◽ Genialloyd S.p.A., Milan 280 100.0 ◽ Investitori SGR S.p.A., Milan 17 98.3 ◽ RB Vita S.p.A., Milano 209 100.0 Japan
◽ ◽ Assurances Générales du Laos Ltd., Vientiane 2 51.0 Luxembourg
◽ Allianz Life Insurance Malaysia Berhad p.l.c., Kuala Lumpur 25 100.0 ◽ Allianz Malaysia Berhad p.l.c., Kuala Lumpur 48 100.0 Mexico
◽ ◽ Allianz México S.A. Compañia de Seguros, Mexico City 61 100.0 Netherlands
◽ Dresdner Bank ZAO, St. Petersburg 2) 89 100.0 ◽ Insurance Company “Progress Garant”, Moscow 28 100.0 ◽ Insurance Joint Stock Company „Allianz”, Moscow 7 100.0 ◽ Russian People’s Insurance Society “ROSNO”, Moscow 107 100.0 Singapore
◽ Allianz Life Insurance Company of North America, Minneapolis/Minnesota 2,201 100.0 ◽ Allianz of America Inc., Westport, CT 8,692 100.0 ◽ Allianz Underwriters Insurance Company, Burbank/California 44 100.0 ◽ Dresdner Kleinwort Securities LLC, Wilmington/Delaware 2) 250 100.0
◽ Fireman’s Fund Insurance Company, Novato/California 2,272 100.0 ◽ Nicholas Applegate Capital Management LLC, Dover/Delaware 11 100.0 ◽ Pacific Investment Management Company LLC, Wilmington/Delaware 205 92.1
◽ RCM Capital Management LLC, Wilmington/Delaware 9 100.0 ◽ Wm. H McGee & Co. Inc., New York/New York 4 100.0 1) Percentage includes equity participations held by dependent enterprises in full, even if the Allianz Group’s share in the dependent enterprise is under 100.0 %. 2) No subsidiary of the Allianz Group since January 12, 2009. 3) Classified as “held for sale”. 4) 99.99 % of the voting share capital.
Harwanne SA, Genève 174 21.5 Bajaj Allianz Life Insurance Company Ltd., Pune 147 26.0 Ayudhya Allianz C.P. Life Public Company Limited, Bangkok 146 25.0 FONDO IMMOBILIARE DOMUS, Rome 133 25.5 Allianz PIMCO Euro Bond Total Return, Luxemburg 112 36.8 Argos, Paris 102 47.4 OeKB EH Beteiligungss- und Management AG, Vienna, 92 49.0 Bajaj Allianz General Insurance Company Ltd., Pune 82 26.0 PGREF V 1301 SIXTH HOLDING LP, Wilmington 78 24.5 SDU Finco B.V., Amsterdam 47 49.7 1) Associated enterprises are all those enterprises other than affiliated enterprises or joint ventures, in which the Allianz Group has an interest of between 20.0 % and 50.0 % regardless of whether a significant influence is exercised or not. The presented associated enterprises represent 90.0 % of total carrying amount of investments in associated enterprises.
2) Including shares held by dependent subsidiaries. 3) Significant influence due to Allianz’s role in the (funds’) management and its ownership share.
Information according to clause 313 (2) German Commercial Code is published together with the consolidated financial statements in the German Electronic Federal
1) Market value greater than or equal to � 100 mn and percentage of shares owned greater than or equal to 5.0 %, or market value greater than or equal to � 500 mn, excluding trading portfolio of banking business.
To the best of our knowledge, and in accordance with the applicable reporting principles, the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the group, and the group management report includes a fair review of the development and performance of the business and the position of the group, together with a description of the principal opportunities and risks associated with the expected development of the group.
Institute of Public Auditors in Germany), and in supplementary compliance with the Standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the consolidated financial statements in accordance with the applicable financial reporting framework and in the group management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Group and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the group management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements of those entities included in the consolidation, the determination of entities to be included in consolidation, the accounting and consolidation principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements and the group management report. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, based on the findings of our audit, the consolidated financial statements comply with IFRS as adopted by the EU, the additional requirements of German commercial law pursuant to § 315 a Abs. 1 HGB and supplementary provisions of the articles of incorporation and full
Group’s position and suitably presents the opportunities and risks of future development.
Membership in other statutory supervisory boards and SE administrative councils in Germany Axel Springer AG,
Membership in other statutory supervisory boards and SE administrative councils in Germany adidas AG
Membership in other statutory supervisory boards and SE administrative councils in Germany Bayer AG, RWE AG
Membership in other statutory supervisory boards and SE administrative councils in Germany
Membership in other statutory supervisory boards and SE administrative councils in Germany GEA Group AG
Membership in Group bodies Allianz Life Insurance Company of North America, Allianz of America, Inc., Allianz S.p.A.,
Membership in Group bodies Allianz Beratungs- und Vertriebs -AG (Chairman), Allianz Lebensversicherungs-AG
Membership in Group bodies Allianz Elementar Lebensversicherungs -AG (Chairman), Allianz Elementar Versicherungs -AG (Chairman), Allianz Investmentbank AG
Membership in other statutory supervisory boards and SE administrative councils in Germany Deutsche
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.
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.
The overall volume of provisions includes allowances for credit losses – deducted from the asset side of the balance 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.
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.
Statement showing movements of cash and cash equivalents during an accounting period, classified by three types of activity: – operating activities
Certificated liabilities comprise debentures and other liabilities for which transferable certificates have been issued.
The consolidated interest is the total of all interests held by affiliated enterprises and joint ventures in affiliated enterprises, joint ventures, and associated enterprises.
Represents ratio of total loan loss provisions to total risk elements according to SEC guide 3 (non-performing loans and potential problem loans).
Net expense incurred in connection with a defined benefit plan less any contributions made by the beneficiary to a pension fund.
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.
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 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 and is not participating in the investment success of the contributions.
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.
Investments in joint ventures and associated companies are accounted for by this method. They are valued at the
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 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.
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.
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.
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.
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) 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.
The amount obtainable from the sale of an investment in an active market.
Those parts of the equity of affiliated enterprises which are not owned by companies in the Group.
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.
Reserves for the cost of insurance claims incurred by the end of the year under review but not yet settled.
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 bylaw obligations, or voluntary undertaking.
Financial information based on the consolidated financial statements, reported by business segments (Property-Casualty, Life/Health, Banking, Asset Management and Corporate)
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”).
E Earnings per share 45 Economic Value Added® 92, 108 Employees 110-113
T Talent management 110, 111 Total revenues 42 Travel insurance and Assistance services 53, 121