21 Takeover-Related Statements and Explanations (part of the Group Management Report)
C _ Group Management Report Pages 51 – 92 52 Business Operations 55 Business Environment 56 Executive Summary of 2019 Results 57 Property-Casualty Insurance Operations 59 Life/Health Insurance Operations 62 Asset Management 64 Corporate and Other 69 Balance Sheet Review 71 Liquidity and Funding Resources 76 Risk and Opportunity Report 92 Integrated Risk and Control System for Financial Reporting
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 101 General Information 121 Notes to the Consolidated Balance Sheet 138 Notes to the Consolidated Income Statement 143 Other Information 170 Responsibility Statement 171 Independent Auditor’s Report 175 Independent Practitioner’s Reasonable Assurance Report
It takes a strong base to remain confident even in uncertain times. We have therefore written down our company purpose and, over the past two years, established it throughout our global organization units. Employees worldwide have worked to put into words what inspires everyone at Allianz to dedicate their best efforts to our customers day by day: WE SECURE YOUR FUTURE
Through actions like these we gain leading positions in key sustainability rankings like the Dow Jones Sustainability Indices year after year.
Like every year, 2019 also presented some challenges. Foremost among them was the low interest rate environment, with rates even turning negative in a growing number of instances. To continue delivering high value to our customers, we moved into alternative asset classes early on, reaching € 161 bn in assets under management by the end of 2019. As we carefully adjust our portfolio, we manage to keep our balance sheet strong even under unfavorable conditions such as these, continually confirmed by very good ratings.
OVERVIEW In the financial year 2019 the Supervisory Board held six meetings and adopted one written resolution. The regular meetings took place in February, March, May, June, September, and December.
Other focal points of reporting were strategic topics such as the new Allianz strategy “Simplicity Wins” with its three pillars “Outperform”, “Transform” and “Rebalance”, the risk strategy, the Allianz Customer Model (ACM), the launch of the European direct insurer Allianz Direct and the business strategy in China. In addition, the Supervisory
Board of Management, the requirements of the new German Corporate Governance Code announced for 2020, and the Act Implementing the Second Shareholders’ Rights Directive (ARUG II).
infrastructure in Allianz Group, the life insurance business in Asia, ongoing M&A activities, and the Board of
Management’s deliberations on a potential new share buyback program. The Supervisory Board also dealt with succession planning for the Board of Management.
On 8 May 2019, just before the AGM, the Board of Management briefed the Supervisory Board on business performance in the first quarter of 2019 as well as on the current situation of both the Allianz Group and
Allianz SE, in particular with regard to share price development, capitalization, and capital management.
Popular” and the acquisition of the property insurance business of Legal & General in the UK, and gave an overview of Allianz’s role in ESG issues. The Board of Management then presented the new Allianz strategy
solutions for external insurance companies. In addition, the Board of Management provided its regular status report on the issue of cyber risk security. Furthermore, the Supervisory Board dealt in detail with personnel matters relating to the Board of Management. Ms. Renate Wagner was appointed to the Board of Management with effect from 1 January 2020, to replace Dr. Helga Jung, who left the Board of Management at her own request at the end of 2019. Dr. Günther Thallinger’s term on the Board of Management, likewise expiring at the end of 2019, was extended for five years.
Allianz Group and Allianz SE (solo). In particular, the strategic direction and transformation issues for the
“Transformation” pillar were discussed: the Allianz Customer Model (ACM), the European direct insurer Allianz
Direct and the orientation of Allianz Partners. With regard to the “Rebalance” pillar, the Board of Management presented and subsequently discussed the China strategy in detail. The Board of Management report on the course of business covered the successful acquisition of Brazilian motor and property insurance operations from
Board discussed the planning for fiscal year 2020 and the three-year plan for 2020 to 2022. With the risk strategy and the considerations on the strategic development of the Asset Management segment, the Board of
Management presented the follow-up on outstanding issues regarding the new Allianz strategy. In addition, the
Board of Management provided a status report on the issue of cyber risk security. The Supervisory Board also discussed the declaration of conformity with the German Corporate Governance Code and various corporate governance issues, and dealt with the requirements profile for the Supervisory Board and the Act Implementing
DECLARATION OF CONFORMITY WITH THE GERMAN CORPORATE GOVERNANCE CODE On 13 December 2019, the Board of Management and the Supervisory Board issued the Declaration of Conformity in accordance with § 161 of the German Stock Corporation Act (“Aktiengesetz”). The declaration was posted on the company website, where it is available to shareholders at all times. Allianz SE fully complies and will continue to fully comply with the recommendations of the German Corporate Governance Code in its version of
Report starting on page 12, as well as in the Statement on Corporate Management pursuant to § 315d and
§ 289f of the HGB, which starts on page 18. More details on corporate governance are provided on the Allianz website, specifically: www.allianz.com/corporate-governance.
The Standing Committee held four meetings in 2019. These were concerned primarily with corporate governance issues, the preparations for the Annual General Meeting, the Supervisory Board self-evaluation as required by supervisory law and associated development plan, and the efficiency review of the Supervisory Board. Collective and, if necessary, individual trainings are continuously carried out as part of the implementation of the development plan. In addition, the Standing Committee had to pass resolutions approving the granting of loans to senior executives.
Ms. Jaqueline Hunt and Dr. Günther Thallinger. Other key topics included the preparatory review of the Board of
The Audit Committee held five regular meetings in 2019. In the presence of the auditors, the committee discussed both Allianz SE’s annual financial statements and the Allianz Group’s consolidated financial statements, as well as the management and auditor’s reports and the half-yearly financial report. These reviews revealed no reasons for objection. The Audit Committee further received the Board of Management’s reports on quarterly results. It prepared the engagement of the external advisor and defined key audit areas for the 2019 financial year. The committee also discussed the assignments of non-audit services to the auditors and approved an updated appropriate positive list of pre-authorized audit and non-audit services. In addition, it dealt extensively with the compliance system, the internal audit system, and the financial reporting process as well as the respective internal controls. Regular reports on legal and compliance issues in the Group and individual subsidiaries as well as on the work of the Internal Audit department were presented and discussed in detail. Furthermore the head of the actuarial department (Group Actuarial, Planning & Controlling) presented his annual report. In addition, the Audit
At one meeting in the fiscal year 2019, the Nomination Committee dealt in detail with the objectives for the composition of the Supervisory Board and prepared a revision of the objectives to bring them into line with the requirements of the new German Corporate Governance Code. In addition, the preparation process for the
Supervisory Board elections at the Annual General Meeting 2022 was discussed and next steps were defined.
Risk Committee: Michael Diekmann (Chairman), Christine Bosse, Dr. Friedrich Eichiner, Godfrey Hayward,
(PwC) as statutory auditor for the annual Allianz SE and consolidated financial statements, as well as for the review of the half-yearly financial report of the financial year 2019. PwC audited the financial statements of
Allianz SE and the Allianz Group as well as the respective management reports. They issued an auditor’s report without any reservations. The consolidated financial statements were prepared on the basis of the International
Financial Reporting Standards (IFRS) as adopted in the European Union. PwC performed a review of the halfyearly financial report. In addition, PwC was also mandated to perform an audit of the market value balance sheet according to Solvency II as of 31 December 2019 for Allianz SE and the Allianz Group.
All Supervisory Board members received the documentation relating to the annual financial statements and the auditor’s reports from PwC on schedule. The preliminary financial statements and PwC’s preliminary audit results were discussed in the Audit Committee on 19 February 2020 as well as in the Supervisory Board’s plenary session on 20 February 2020. The finalized financial statements and PwC’s audit reports (dated 24 February 2020) were reviewed by the Audit Committee on 4 March 2020, and in the Supervisory Board plenary session on 5 March 2020. The auditors participated in the discussions and presented key results from their audit. Particular emphasis was placed on the key audit matters described in the auditor’s report and on the audit procedures performed. No material weaknesses in the internal financial reporting control process were discovered. There were no circumstances that might give cause for concern about the auditor’s independence. In addition, the market value balance sheets dated 31 December 2019 for both Allianz SE and the Allianz Group as well as the respective PwC reports were addressed by the Audit Committee and the Supervisory Board.
On the basis of its own reviews of the annual Allianz SE and consolidated financial statements, the management and group management reports, and the recommendation for the appropriation of earnings, the Supervisory
Allianz SE and consolidated financial statements prepared by the Board of Management. The financial statements have thus been formally adopted. The Supervisory Board agrees with the Board of Management’s proposal on the appropriation of earnings.
ASSURANCE ENGAGEMENT OF THE COMBINED SEPARATE NON-FINANCIAL REPORT In the financial year 2019, the company was required to issue a separate non-financial report. This report was combined for Allianz SE and the Allianz Group. The Supervisory Board commissioned PwC to perform an assurance engagement of this report. All Supervisory Board members received the combined separate non-financial report and the independent practitioner’s assurance report in due time. The report and PwC’s assurance report were discussed in the plenary session of the Supervisory Board on 5 March 2020. The auditors from PwC participated in these discussions and presented the results of their assurance engagement. Based on its own review of the combined separate non-financial report, the Supervisory Board did not raise any objections and approved by acknowledgement the results of the PwC assurance engagement.
Statement on Corporate Management pursuant to § 315d and § 289f of the HGB starting on page 18.
regulations and the German SE Implementation Act (“SE-Ausführungsgesetz ”) in addition to the German SE Employee Involvement Act
(Board of Management and Supervisory Board) and the principle of equal employee representation on the Supervisory Board – have been maintained by Allianz SE.
The members of the Board of Management are jointly responsible for management and for complying with legal requirements. Notwithstanding this overall responsibility, the individual members head the departments they have been assigned independently. There are divisional responsibilities for business segments as well as functional responsibilities. The latter include the Finance, Risk Management and
GROUP IT COMMITTEE Dr. Christof Mascher (Chairman), Niran Peiris, Giulio Terzariol, Dr. Günther Thallinger, Dr. Axel Theis.
Developing, proposing, implementing and monitoring a group-wide IT strategy, approving external IT contracts and businessrelated IT contracts with strategic and group relevance.
General Meeting (AGM). Supervisory Board approval is required, for example, for certain capital transactions, intercompany agreements, and the launch of new business segments or the closure of existing ones. Approval is also required for acquisitions of companies and holdings in companies, as well as for divestments of Group companies that exceed certain threshold levels. The Agreement concerning the Participation of Employees in Allianz SE, in the version dated 3 July 2014 (hereinafter “SE Agreement”), requires the approval of the
Supervisory Board for the appointment of the member of the Board of
France and the United Kingdom. According to § 17 (2) of the
– Initial review of the annual Allianz SE and consoli- dated financial statements, management reports (incl. Risk Report) and the dividend proposal, review of half-yearly reports or, where applicable, quarterly financial reports or statements
– Preparation of plenary session resolutions on the compensation system and the overall compensation of Board of Management members
– Conclusion, amendment, and termination of service contracts of Board of Management members unless reserved for the plenary session
– In-depth monitoring of the Board of Management’s technology and innovation strategy
December 2019 amended the objectives for its composition, effective 1 January 2020, to reflect the specifications of the new Code.
The amendment in particular relates to the skills and expertise of the
Board, also to be established due to a new recommendation of the
These objectives take into account the regulatory requirements for the composition of the Supervisory Board as well as the relevant recommendations of the German Corporate Governance Code (“GCGC”). In addition to the requirements for each individual member, a profile of skills and expertise (“Kompetenzprofil”) as well as a diversity concept are provided for the entire Supervisory Board.
Employee representation within Allianz SE, according to the Agreement concerning the Participation of Employees in Allianz SE, contributes to the diversity of work experience and cultural background. Pursuant to the provisions of the German SE Participation Act (SEBG), the number of women and men appointed as German employee representatives should be proportional to the number of women and men working in the German companies. However, the Supervisory Board does not have the right to select the employee representatives.
With respect to the Allianz SE mandate, the members shall ensure that
In addition to the expertise-related requirements for the individual members, the following shall apply with respect to the expertise and experience of the entire Supervisory Board: – familiarity of members in their entirety with the insurance and financial services sector; – adequate expertise of the entire board with respect to investment management, insurance actuarial practice, and accounting (since 1.1.2020: and technology); – at least one member with considerable experience in the fields of insurance and financial services; – at least one member with comprehensive expertise in the fields of accounting or auditing; (since 1.1.2020: at least one member with comprehensive expertise in the field of digital transformation); – specialist expertise or experience in other economic sectors; – managerial or operational experience.
To promote an integrative cooperation among the Supervisory Board members, the Supervisory Board strives for an adequate diversity with respect to gender, internationality, different occupational backgrounds, professional expertise, and experience: – The Supervisory Board shall be composed of at least 30 % women and at least 30 % men. The representation of women is generally considered to be the joint responsibility of the shareholder and employee representatives.
Independence1 ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓
✓ Criteria met. Expertise criteria based on yearly self-assessment. Tick means at least “Good knowledge” and implies the capacity to well understand the relevant matters and to take educated decisions. Good knowledge may result from existing qualifications and from the training measures regularly attended by all members of the Supervisory Board. On a scale from A-E this requires at least grade B.
The current composition of the Supervisory Board and its committees is described on page 7.
Federal Financial Supervisory Authority any transactions involving shares or debt securities of Allianz SE or financial derivatives or other instruments based on them, as soon as the value of the securities acquired or divested by the member amounts to five thousand Euros or more within a calendar year. These disclosures are published on our website at www.allianz.com/directorsdealings.
Management and the Supervisory Board. It decides on the use of profits, capital transactions, the approval of intercompany agreements, the remuneration of the Supervisory Board, and changes to the company’s
Statutes, changes to the Statutes require a two-thirds majority of votes cast in case less than half of the share capital is represented in the
AGM. Each year, an ordinary AGM takes place at which the Board of
European Union. The annual financial statements of Allianz SE are prepared in accordance with German law and accounting rules.
In compliance with the special legal provisions that apply to insurance companies, the auditor of the annual financial statements and of the half-yearly financial report is appointed by the Supervisory Board, not the AGM. The audit of the financial statements covers the individual financial statements of Allianz SE and the consolidated financial statements of the Allianz Group.
We inform our shareholders, financial analysts, the media, and the general public about the company’s situation on a regular basis and in a timely manner. The annual financial statements of Allianz SE, the
Information is also made available at the AGM, at press and analysts’
You can find the 2020 financial calendar on our website at www.allianz.com/financialcalendar.
The regulatory requirements for corporate governance applicable for insurance companies, insurance groups, and financial conglomerates are also important. Specifically, they include the establishment and further design of significant control functions (risk management, actuarial function, compliance, and internal audit) as well as general principles for a sound business organization. These regulatory requirements are applicable throughout the Group in principle and have been implemented using written guidelines issued by the Board of
Management of Allianz SE. Solvency II requires the publication of qualitative and quantitative information including a market value balance sheet. Details on the implementation of the regulatory requirements for corporate governance by Allianz SE and by the
Allianz Group can be found in the Solvency and Financial Condition
Report of Allianz SE and of the Allianz Group, which are published on our website at www.allianz.com/sfcr.
Declaration of Conformity with the German Corporate Governance Code On 13 December 2019, the Board of Management and the
Allianz SE with the German Corporate Governance Code (hereinafter the “Code”): Declaration of Conformity in accordance with § 161 of the German Stock Corporation Act
Since the last Declaration of Conformity as of December 12, 2018, Allianz SE has complied with all recommendations of the German Corporate Governance Code in the version of
For the Management Board: Signed Oliver Bäte Signed Dr. Helga Jung
COMPLIANCE MANAGEMENT SYSTEM Integrity is at the core of our compliance programs and the basis for the trust of our customers, shareholders, business partners, and employees. The compliance function fosters a corporate culture of individual and collective responsibility for ethical conduct and adherence to the rules by:  Advising the board of management, managers, and employees on business conduct that is lawful and ethical;  Identifying and assessing material compliance risks and overseeing the implementation of adequate and effective internal controls to mitigate them;  Providing a speak-up facility that employees and third parties can use to confidentially address irregularities;  Communicating transparently and trustfully with supervisory authorities.
Compliance with applicable laws, rules, and regulations in all countries in which Allianz SE and Allianz Group operate as well as with internal policies and guidelines is key. The global compliance programs coordinated by Allianz SE’s central Group Compliance function support our employees, managers, and executive board members to act responsi-
for ensuring the effective implementation and monitoring of the compliance programs within the Allianz Group, as well as for investigating potential compliance infringements. Furthermore, as a key function, the compliance function carries out the advisory, risk identification and assessment, monitoring, and early warning tasks required under the
COMPLIANCE PROGRAMS Allianz SE’s central Group Compliance function has set up internal guidelines for the following identified compliance risk areas: bribery and corruption, money laundering and terrorism financing, economic sanctions, capital markets integrity, sales compliance/customer protection, antitrust, internal fraud, data privacy, and US Foreign Account Tax
Report for Allianz Group and Allianz SE starting on page 41 of the
description of the composition of the Board of Management can be found on page 10, while the composition of the Committees of the
Corporate Governance Report starting on page 12, and on our website at www.allianz.com/corporate-governance.
at least. The Supervisory Board currently in office fulfils this requirement as it includes four women (33 %) and eight men (67 %).
In August 2017, the Supervisory Board set a target for the percentage of women on Allianz SE’s Board of Management at 30 % to be achieved by 31 December 2021. As of 31 December 2019, the percentage of women on Allianz SE’s Board of Management was to 20 %. As regards the proportion of women on the first and second management levels below the Board of Management, the Board of Management of Allianz SE has set a target of 20 % and 30 %, respectively, to be met by 31 December 2021. As of 31 December 2019, this target was already met for the first management level, with a percentage of women of 22 %, but could not yet be met on the second level with a percentage of 24 %. The first two management levels below the Board of Management comprise a very small comparative group of executives. No suitable female candidates could be identified for the very few positions that became vacant in the period considered.
With regard to the Supervisory Boards of the subsidiaries concerned, the target quotas for eight out of nine subsidiaries concerned were set at 30 % and the target quota for the remaining subsidiary concerned was set at 33 % for 31 December 2021. All subsidiaries concerned reached this target as of 31 December 2019. The target quotas for the respective Board of Management of the subsidiaries concerned were between 20 % and 30 % (24 % on average) for 31 December 2021 and were met by eight of the nine companies. For the two management levels below the Board of Management, the respective Boards of
Management of the subsidiaries concerned had set target quotas between 17 % and 33 % (23 % on average) for 31 December 2021 for the first management level and target quotas between 20 % and 33 % (26 %
Directive, the diversity concepts for the Board of Management and the
Supervisory Board, their objectives, implementation, and results achieved are to be reported for the 2019 financial year.
The Supervisory Board adopted the following diversity concept for the Board of Management of Allianz SE in August 2017: “For the composition of the Management Board, the Supervisory
The diversity concept for the Supervisory Board was approved by the
Supervisory Board pursues these objectives, and thus also the diversity concept, when nominating candidates for shareholder representatives. As employee representatives are appointed according to different national provisions, there is only limited potential influence to the selection of employee representatives. The Supervisory Board is currently composed in accordance with the diversity concept. For details please see the Corporate Governance Report on page 12.
The following information is provided pursuant to § 289a (1) and
Shares acquired by employees of the Allianz Group as part of the employee stock purchase plan are generally subject to a three-year lock-up period. During the lock-up period, employees can exercise their voting rights.
SHARES WITH SPECIAL RIGHTS CONFERRING POWERS OF CONTROL There are no shares with special rights conferring powers of control.
Management is governed by Articles 9 (1), 39 (2) and 46 of the SE
Statutes. According to the Statutes, the Board of Management shall consist of at least two persons; the Supervisory Board determines the number of any additional members (§ 5 (1) of the Statutes). The members of the Board of Management are appointed by the Supervisory
Amendments to the Statutes are governed by Article 59 SE Regulation, § 179 AktG, and the Statutes § 13 (4) of the Statutes of Allianz SE
stipulates that, unless mandatory law requires otherwise, changes to the Statutes require a two-thirds majority of the votes cast at a General
Meeting or, if at least one half of the share capital is represented, a simple majority of the votes cast. Where the law requires a majority in capital for a shareholder resolution, a simple majority of the capital represented at the General Meeting is sufficient, provided this is in line with legal requirements. The Supervisory Board may alter the wording of the Statutes (§ 179 (1) AktG and § 10 of the Statutes).
AUTHORIZATION OF THE BOARD OF MANAGEMENT TO ISSUE AND REPURCHASE SHARES The Board of Management is authorized to issue shares as well as to acquire and use treasury shares as follows: It may increase the company’s share capital on or before 8 May 2023, with the approval of the Supervisory Board, by issuing new registered no-par value shares against contributions in cash and/or in kind, on one or more occasions:  Up to a total of € 334,960,000 (Authorized Capital 2018/I): In case of a capital increase against cash contribution, the Board of Management may exclude the shareholders’ subscription rights for these shares with the consent of the Supervisory Board (i) for fractional amounts, (ii) in order to safeguard the rights pertaining to holders of convertible bonds or bonds with warrants, including mandatory convertible bonds, and (iii) in the event of a capital increase of up to 10 %, if the issue price of the new shares is not significantly below the stock market price. The Board of Management may furthermore exclude the shareholders’ subscription rights with the consent of the Supervisory Board in the event of a capital increase against contributions in kind.
AktG, such shares may not exceed 10 % of the share capital at any time.
The shares acquired pursuant to this authorization may be used, under exclusion of the shareholders’ subscription rights, for any legally admissible purposes, in particular those specified in the authorization.
 Allianz SE is also party to various bancassurance distribution agreements for insurance products in various regions. These distribution agreements normally include a clause under which the parties have an extraordinary termination right in the event of a change of control of the other party’s ultimate holding company.
 Shareholder agreements and joint ventures to which Allianz SE is a party often contain change-of-control clauses that provide, as the case may be, for the termination of the agreement, or for put or call rights that one party can exercise with regard to the joint venture or the target company, if there is a change of control of the other party.
 The framework agreements between Allianz SE and the subsidiaries of various car manufacturers relating to the distribution of car insurance by the respective car manufacturers each include a clause under which each party has an extraordinary termination right in case there is a change of control of the other party.
Übernahmegesetz – WpÜG”). Where such termination rights are exercised, the respective credit lines have to be replaced by new credit lines under conditions then applicable.
Allianz SE’s Board of Management cease to have effect as soon as the new German Corporate Governance Code expected in 2020 is published in the official part of the Federal Gazette (Bundesanzeiger). For further details, please refer to the Remuneration Report starting on
Stock Units (RSUs) – i.e. virtual Allianz shares – are granted to senior management of the Allianz Group worldwide as a stock-based remuneration component. The conditions for these RSU contain change-ofcontrol clauses, which apply when a majority of the voting share capital in Allianz SE is directly or indirectly acquired by one or more third parties who do not belong to the Allianz Group, and which provide for an exception from the usual vesting and exercise periods. In line with the relevant general conditions, the company will release the RSUs to plan participants on the day of the change of control, without observing any vesting period that would otherwise apply. The cash amount payable per RSU must equal the average market value of the Allianz share and must equal or exceed the price offered per Allianz share in a preceding tender offer. By providing for the non-application of the vesting period in the event of a change of control, the terms take into account the fact that the conditions influencing the share price are substantially different when there is a change of control.
RESPONSIBILITY FOR BOARD OF MANAGEMENT REMUNERATION The Board of Management’s remuneration is decided upon by the entire Supervisory Board, based on proposals prepared by the Personnel
KEY PRINCIPLES  Alignment of pay and performance: The performance-based, variable component of the Board remuneration forms a significant portion of the overall remuneration (70 %).
1_If required, outside advice is sought from independent external consultants. The Personnel Committee and the Supervisory
ADEQUACY OF THE BOARD OF MANAGEMENT REMUNERATION The structure, weighting, and level of each remuneration component shall be adequate and appropriate.
VERTICAL APPROPRIATENESS This comparison is based on the total direct compensation of a member of the Board of Management and the average direct compensation of an employee of the Allianz workforce in Germany. For the fiscal year 2019, the factor resulting from this comparison for the Chairman of
REMUNERATION STRUCTURE The current structure became effective on 1 January 2019. It was approved by the Annual Shareholder Meeting of Allianz SE on 8 May 2019 with a majority vote of 92 %.
However, in order to ensure that the remuneration system is also in line with the new version of the German Corporate Governance
Code announced for 2020, the special severance payment rule for the event of a change of control has been deleted without replacement and, in the event of a contractually agreed non-competition clause, provision has been made for a severance payment due to early termination of a Management Board member to be set off against a non-competition compensation (Karenzentschädigung).
The annual bonus is based on the achievement of Group financial targets for the respective financial year for which the annual bonus is granted, and adjusted by an individual contribution factor (ICF), taking into account individual and business division performance.
For each board member, the Group financial target achievement is multiplied by the ICF. The ICF is based on an overall discretionary assessment by the Allianz SE Supervisory Board, as well as on KPIs that take into account the specific area of responsibility of the respective board member and the personal contribution of the board member. It is limited to a range of 0.8 to 1.2.
For board members with business-related division responsibilities, the contribution to the financial performance considers various indicators of profitability (e.g., operating profit and net income) and productivity (e.g., expense ratio) for the respective business division. For board members with a functional focus, quantitative division-specific performance targets are determined based on their key responsibilities.
Following the end of the respective financial year for which the bonus is granted, the annual bonus is settled in cash and may range between zero and 150 % of the target amount.
TSR performance factor is limited: It can vary between zero (for underperformance of the index by - 50 %-points or lower) and 200 % (for outperformance of the index by + 50 %-points or higher).
 The relative TSR performance factor is calculated as follows: Allianz TSR at the end of the contractual vesting period in %points minus index TSR at the end of the contractual vesting period in %-points, the result times two, plus 100 %.
Following the sustainability assessment, the LTI payout amount may be reduced to zero, if the performance of a board member was not deemed sustainable. It compares the development of the annual bonus KPIs in the grant year with the pay-out year of the LTI, additionally taking into account extraordinary events, the Solvency II ratio, and balance sheet strength.
RSUs granted are settled in cash based on the ten-day average Xetra closing price of the Allianz SE share following the annual financial media conference in the year the respective RSU plan vests, multiplied by the relative TSR performance factor and adjusted by the sustainability assessment as described above. The payout per RSU is capped at twice the share price at grant. Taking into account the overall compensation cap, the LTI payout, relative to the LTI target, is limited to 255 % for the Chairman of the Board of Management and 272 % for a regular board member Overall cap and sensitivity of total compensation.
1_For accounting purposes, the determination of the fair value of RSUs is based on an option pricing model taking into account additional input parameters, including the term structure of interest rates and the expected relative performance of the Allianz share price compared to the peer index. For the latter, simulation techniques are applied at the valuation date to determine the volatility of the Allianz stock, the volatility of the peer index, their correlation, and the expected dividends. The value of the RSUs used for the board members compensation may deviate from this IFRS value, as a simplified calculation method was applied to increase transparency and traceability.
LTI payout at vesting based on: •RSU x share price at vesting (€ 250) 2,515
•TSR relative performance factor: 2 x (TSR Allianz: 45 % – TSR Stoxx Europe 600 Insurance: 40 %) + 100 % 110%
•LTI allocation value: annual bonus achievement factor applied to LTI target 90% 1,317
LTI payout at vesting based on: •RSU x share price at vesting (€ 190) 1,564
Variable remuneration components may not be paid, or payment may be restricted, in the case of a significant breach of the Allianz Code of Conduct or regulatory Solvency II policies or standards, including risk limits. In the same way, for three years after payout, variable remuneration components already paid may be subject to a clawback.
PENSION CONTRIBUTION AND SIMILAR BENEFITS To provide competitive and cost-effective retirement and disability benefits, company contributions to the current defined-contribution pension plan “My Allianz Pension” are invested in a fund with a guarantee for the contributions paid, but no further interest guarantee. Each year the Supervisory Board decides whether and to what extent a budget is provided, also taking into account the target pension level.
The current pension contribution generally represents 15 % of the target compensation of the board members.
Apart from cases of occupational or general disability for medical reasons, the earliest age a pension can be drawn is 62. Should board membership cease before the retirement age is reached, accrued pension rights are maintained if vesting requirements are met.
MAXIMUM TOTAL COMPENSATION (OVERALL CAP) The sum of variable compensation and base salary payout including pension contributions, which is paid in relation to one financial performance year, will be capped at a maximum amount of € 6,000 thou for a regular member of the Board of Management and at € 10,000 thou for the Chairman of the Board of Management.
SHAREHOLDING REQUIREMENTS AND TOTAL SHAREHOLDING EXPOSURE Members of the Board of Management must build share ownership within three years, with the minimum level defined as follows:  Chairman of the Board of Management: two times base salary,
plan, the Allianz SE Board of Management has significant economic exposure to the Allianz stock: It amounts to approx. € 14,000 thou for the Chairman (= 240 % of total target direct compensation) and approx. € 7,000 thou for a regular board member (= 210 % of total target direct compensation).
SEVERANCE PAYMENT CAP Payments for early termination to board members with a remaining term of contract of more than two years are capped at twice the annual compensation, consisting of last year’s base salary and 100 %
Governance Code announced for 2020, severance payments in case of a change of control are discontinued.
Net income attributable to shareholders 3.80 7.50 9.35 7.91 111.19 50
INDIVIDUAL CONTRIBUTION FACTOR To calculate the annual bonus, the combined target achievement level of the financial Group targets is multiplied by the individual contribution factor (ICF) which is determined by the Supervisory Board for each board member. In determining the ICF, which is provided as a multiplier of 0.8 to 1.2 in the remuneration system, the Supervisory Board, following the proposal of the Personnel Committee, has used almost the entire range from 0.8 to 1.13. In addition to business segmentspecific quantitative targets, qualitative targets such as customer satisfaction, employee engagement, leadership quality, and the achievement of strategic milestones were considered.
The fulfilment of quantitative targets in the life sector and in asset management and in many property-casualty companies had a positive effect. Productivity targets were overachieved in all business divisions.
The Supervisory Board values very positively the progress made in the strategic positioning in China, the progressing diversification in investments, and the systematic implementation of the Allianz Customer
Supervisory Board paid special tribute to Allianz's leading position in the Dow Jones Sustainability Index for the third consecutive year and its first-time leading position as worldwide most valuable insurance brand in the Interbrand Best Global Brands 2019 ranking.
A missed target in property and casualty business in Spain and the technical difficulties in introducing the European direct insurer in
REMUNERATION FOR 2019 The following remuneration disclosure, which is compliant with the disclosure requirements stipulated by the German Corporate Governance Code as well as the German Accounting Standard No. 17, shows the individual board members’ remuneration for 2018 and 2019, including fixed and variable remuneration and pension service cost.
The 2018 payout is significantly higher than in 2019 because it includes the MTB 2016 – 2018 and thus payments for three performance years. The MTB is discontinued from 2019, therefore no MTB
7_Helga Jung received a payment of € 156 thou in 2018 for 25 years of service to Allianz.
7_Iván de la Sota joined the Allianz SE Board of Management on 1 April 2018. He received a pro-rated base salary, annual bonus, MTB tranche, and equity-related compensation. The different pro-rated amounts for base salary and target amounts result from different pro-rating methodologies, which are generally applied.
8_Iván de la Sota received a one-time payment of € 50 thou to reimburse him for relocation cost.
Accounting Standard No. 17 is shown in the column “Actual grant” of the 2019 individual remuneration tables. The “total” excluding pension service cost, comprises the following relevant components: the base salary, perquisites, the annual bonus, and the fair value of the RSU
The sum of the total remuneration of the Board of Management for 2019, excluding the pension service cost, amounts to € 39 mn (2018, including the payments of the MTB 2016 – 2018: € 51 mn). The corresponding amount, including pension service cost, equals € 44 mn
Grants, outstanding holdings, and equity compensation expense under the Allianz Equity Program (AEI, until and including 2019) and the LTI
2_Grants of share-based remuneration are accounted for as cash-settled awards. The fair value of the RSUs granted is remeasured at each reporting date and accrued, as a compensation expense, proportionately over the vesting period.
PENSIONS Company contributions to the current pension plan “My Allianz Pension”
are generally 15 % of total target direct compensation, reduced by an amount covering the death and occupational or general disability risk.
For members with pension rights under the now frozen definedbenefit plan, the above contribution rates are reduced by 19 % of the expected annual pension from that frozen plan. In 2019, Allianz Group paid € 5 mn (2018: € 4 mn) to increase reserves for pensions and similar benefits for active members of the Board of Management. As of 31 December 2019, reserves for pensions and similar benefits for active members of the Board of Management amounted to € 41 mn
Individual pensions: 2019 and 2018 € thou (total might not sum up due to rounding)
Expected annual pension payment4 SC5 DBO6 SC5 DBO6 SC5 DBO6 SC5 DBO6 SC5 DBO6 SC5 DBO6 1_The service cost of the frozen contribution-based pension plan reflects the continued death and disability cover.
Before Allianz’s founding of the APV in 1998, both Allianz and the plan participants were contributing to the AVK.
3_For details on the transition payment, see section “Termination of service”. In any event a death benefit is included.
4_Expected annual pension payment at assumed retirement age for the frozen defined-benefit pension plan, excluding current pension plan.
5_SC = service cost. Service costs are calculatory costs for the DBO related to the business year reported.
LOANS TO MEMBERS OF THE BOARD OF MANAGEMENT As of 31 December 2019, there were no outstanding loans by
The remuneration of the Supervisory Board is governed by the Statutes of Allianz SE and the German Stock Corporation Act. The structure of the Supervisory Board’s remuneration is regularly reviewed with regard to its compliance with German, European, and international corporate governance recommendations and regulations.
REMUNERATION PRINCIPLES  Set total remuneration at a level both aligned with the scale and scope of the Supervisory Board’s duties and appropriate in view of the company’s activities and its business and financial situation.
 Establish a remuneration structure that takes into account the individual functions and responsibilities of Supervisory Board members, such as chair, vice chair, or committee mandates.
REMUNERATION STRUCTURE AND COMPONENTS The remuneration structure, which comprises fixed and committeerelated remuneration only, was approved by the Annual General
FIXED ANNUAL REMUNERATION The remuneration of a Supervisory Board member consists of a fixed cash amount paid pro rata temporis after the end of the respective quarter of the business year for services rendered over that period. In 2019 each regular Supervisory Board member received a fixed compensation amounting to € 125 thou per year. Each Vice Chairperson received € 187.5 thou, the Chairperson received € 250 thou.
REMUNERATION FOR MANDATES IN OTHER ALLIANZ COMPANIES AND FOR OTHER FUNCTIONS As remuneration for his membership in the Supervisory Board of
Allianz Deutschland AG, Mr. Frank Kirsch received € 40 thou for the 2019 financial year. Mr. Jürgen Lawrenz did not receive any remuneration for his service on the Supervisory Board of Allianz Technology SE.
LOANS TO MEMBERS OF THE SUPERVISORY BOARD As of 31 December 2019, there were no outstanding loans by
OUTLOOK 2020 The remuneration of the Supervisory Board of Allianz SE was last amended by the Annual General Meeting on 9 May 2018. In light of the development of the supervisory board remuneration at peer companies, an amended remuneration of the Supervisory Board as well as a remuneration for members of the Nomination Committee will be proposed to the Annual General Meeting on 6 May 2020.
Responsibility (CSR) Directive Implementation Act (EU Directive 2014/95/EU). It focuses on the concepts and key performance indicators (KPIs) that reflect our current most material sustainability issues.
The KPIs included are the Net Promoter Score (NPS), the Inclusive
Meritocracy Index (IMIX), and our environmental indicators (greenhouse gas (GHG) emissions per employee and percentage of green electricity). Based on our commitment to setting ourselves long-term climate targets, we are currently developing indicators and intermediary targets for the carbon performance of our proprietary investment portfolio for future reporting. For more information, please see www.allianz.com/en/sustainability/low-carbon-economy/decarbonization. html.
(PwC) has been engaged to perform a reasonable assurance engagement on the 2019 non-financial information. All 2019 data included in this report was assessed based on a reasonable-assurance engagement, whereas 2018 and baseline data on GHG emissions and Green electricity was assessed based on a limited-assurance engagement.
At Allianz, we aim to create sustainable economic value by pursuing a long-term approach to corporate governance, social responsibility, and environmental stewardship. This is critical to our business success, as we are committed to delivering on our promises to our stakeholders, in particular our customers, investors, and society as a whole. To deliver on our purpose “We Secure Your Future” and the ambition to be a global sustainability leader, we continually strive to adapt our business strategy to any issues that arise.
board members and meets quarterly. The Group ESG Board is responsible for the whole Corporate Responsibility agenda, including climaterelated topics, the integration of ESG into our business lines and into the core processes related to insurance and investment, and the
 The Group Underwriting Committee monitors the underwriting business and related risk management. It also develops new underwriting policies and strategies.
Communications and Corporate Responsibility at Allianz SE, who in turn reports directly to the CEO of Allianz SE. This ensures close alignment with the CEO’s agenda.
RISK MANAGEMENT As regards the requirements introduced through the CSR Directive
Implementation Act in 2017, we have not identified any remaining principal risks resulting from our operations, business activities, and business relations that could have severe adverse effects on material non-financial matters. Any potential risks and impacts identified throughout our risk assessment have been addressed by the respective concepts we have in place, which we describe in this report.
Rule for Investments (EFRI). An overview of the Group’s key ESG integration processes is described below:  In the field of underwriting and investments in non-listed asset classes, ESG risks have been managed through the ESG-sensitive business guidelines outlined in the AS RRIM since 2014. For investments in listed asset classes, the Allianz ESG Scoring Approach (defined in EFRI) is applied to manage related risks. Since December 2016, the ESG Scoring has provided Allianz investment and asset managers with ESG performance information to be included in investment decisions.
 For its Property-Casualty insurance business, Allianz has decided to no longer cover single-site coal-fired power plants and coal mines that are being operated or planned as of 2018. Existing contracts with such facilities will not be renewed when they expire.
 Further ESG-related measures include our systematic engagement with investee companies, launched in 2017 and rolled out in 2018, as well as ESG considerations in our selection and management of asset managers.
Data related to our ESG integration approach will be included in our
Group Sustainability Report 2019, to be published in April 2020. An in-depth overview of our approach and processes to integrating ESG
CLIMATE CHANGE STRATEGY At Allianz, we anticipate the risks of climate change. We care for our customers through our insurance products, while using our leverage as one of the world’s largest institutional investors to enable the transition to a low-carbon economy.
We are committed to making climate protection an integral part of our core business, as well as to setting ourselves long-term climate targets for our proprietary investments and business operations that are in line with the goals of the Paris Climate Agreement. Specifically, we are committed to the long-term target of reducing the carbon emissions from our proprietary investments to net-zero by 2050. To achieve this target and to support the real economy in their low-carbon transition, we participate in the UN-convened Net Zero Asset Owner Alliance.
Our Climate Change Strategy anticipates the risks associated with a changing climate across our lines of business. For the investment business, we consider climate-related criteria such as carbon emissions, energy efficiency, vulnerability to climate change, and opportunities in clean tech as part of our ESG integration approach for listed and nonlisted assets. We systematically engage with investee companies exposed to high ESG risks. Furthermore, we enter into active dialog with companies, encouraging them to define and implement their own climate strategies in line with the latest scientific findings. For further insights into Allianz’s ESG engagement approach, please refer to our Sustainability Report 2019, section 03.2 www.allianz.com/sustainability.
climate-related disclosures. We report on climate-related opportunities and risks based on the framework developed by the G20’s Task
Force on Climate related Financial Disclosures (TCFD). The disclosure can be found in our Sustainability Report 2019, section 05.1 www.allianz.com/sustainability.
2_Utilities generating 30 % or more of their electricity from thermal coal and/or planning more than 0.5 gigawatts of coal capacity additions, and/or having to retire more than 50 % of their generation capacities in the next ten years to be in line with the 2°C ceiling, as well as mining companies generating 30 % or more of their revenue from thermal coal.
 Status/progress:  We actively contributed to setting up the UN-convened Net-
Zero Asset Owner Alliance, a group of asset owners committed to reduce the carbon emissions of their investment portfolios to net-zero by 2050.
 We further worked on the implementation of our coal exclusion approach in proprietary investments and property-casualty underwriting.
 Fully phase out coal-based business models across our proprietary investments and property-casualty portfolios by 2040 at the latest.
 Reduce carbon emissions from proprietary investments to netzero by 2050.
ENVIRONMENTAL CONCEPT At Allianz, we are committed to effectively managing our most significant impact on the environment, which includes prevention of pollution. We work to continually improve the environmental performance of our operations. Specifically, we seek to:  reduce the amount and carbon intensity of the energy consumed by our operations, for instance by ensuring an energy-efficient planning, construction, and operation of buildings,
 minimize the environmental impact of waste by avoiding, reducing, re-using, and recycling it as appropriate.
Further, we include various environmental factors in our sourcing and procurement processes. By doing that, we seek to raise suppliers’ and contractors’ awareness of our environmental commitment and to encourage them to act accordingly.
Environmental Officer, and supported by the Board of Management of Allianz SE.
To ensure effective and coherent actions, we have set the following targets for the most material topics.
 Target: Reduce carbon emissions by 30 % per employee by 2020, against a 2010 baseline1.
 Status/progress: In 2019, we achieved a share of 100 % green electricity in the total electricity used (2018: 100 %) at our Munich headquarters, which are certified to ISO 14001.
This enables performance monitoring as well as comparison and benchmarking of entities using comparable system boundaries.
Please note that the reported CO2 values refer to the sum of Scope 1, 2, and 3 based on the Greenhouse Gas (GHG) Protocol. CO2 emissions considered for Scope 3 are business travel, paper use, and energy-related emissions such as transmission and distribution losses. Scope 2 emissions are calculated based on market-based factors and Allianz applies CO2 conversion factors mainly from IEA and DEFRA.
2_2016 baseline and 2018 Allianz SE data was adjusted to the physical scope of our Munich headquarter location. Allianz RE
We believe that social inclusion is one of the most important challenges society faces today, which is why we have made it one of the three top priorities for our Corporate Responsibility Strategy as of 2016. True to our role as an insurer, employer, and committed corporate citizen, we want to contribute to creating more inclusive societies. We offer a range of solutions to emerging consumers, which are designed to provide people access to financial services suited to their needs. Inside the company, we support social inclusion through our diversity and well-being programs, as well as by supporting specific groups such as women in management and people with disabilities.
Social inclusion activities are reviewed at Group level by the Group
Corporate Citizen, we annually report our progress in each role in the
Emerging Consumers Report, the People Fact Book, and the Sustainability Report.
ENCOURAGING FUTURE GENERATIONS PROGRAM (CONCEPT) We believe social inclusion – particularly among children and youth –
Our group-wide initiatives are:  a partnership with SOS Children’s Villages International,
 Status/Progress:  After a successful pilot in 2018, the Online Mentoring Program with SOS Children’s Villages was expanded by another 100 mentors in 2019. The program aims to develop young people’s employability and their transition into the job market by providing them with relevant guidance and building their self-confidence.
 Target:  Increase our reach to children and youth by 2020 in line with our Corporate Citizenship strategy.
As many of those markets lack an established financial services infrastructure, our emerging consumers approach places a key focus on digitalization. To make the most of existing opportunities, we are partnering with digital businesses to distribute and expand our reach in these markets, for example through mobile-phone-based insurance products. Further information on the Allianz Emerging Consumer concept is disclosed in the Emerging Consumers Report.
 Target: We aim to continue our expansion in Africa, Asia, and Latin
Compliance team. Recent initiatives include an enhancement of product governance principles and guidance to deal with the low-interestrate environment in life insurance; in this context, we have implemented the Allianz Standard for Retail Risk Management in 2018.
Net Promoter Score (NPS). NPS measures our customers’ willingness to recommend Allianz, and the top-down NPS is applied regularly according to global cross-industry standards, allowing benchmarking against competitors in the respective markets. In 2016 we refined the
In 2018 and 2019, we have taken this structured collection of insights to the next level: We established a more continuous approach to monitoring and improving customer journeys by introducing the five-star rating program – a standard rating method allowing customers to state their satisfaction level on a five-point scale, and to do this on various touchpoints along the claims journey. Whenever customers make a claim against us, after its settlement we ask them to rate their satisfaction on a five-star scale. When their rating is three stars or less, we follow up to ensure we resolve whatever issue there may be, and to prevent the same thing from happening with other customers. We aim at publishing all customer feedback online for full transparency, visible to our existing and prospective customers.
 Target: Adjust the overall Sales Compliance Framework to simplify and consolidate this framework.
Allianz Group’s entities scored above market or in a loyalty leader position (2018: 74 %). This drop in share of outperforming segments is due to four segments having decreased to “at market,” while two improved from an “at market” to an “above market” position.
”NPS activation workshops” will continue to be organized in 2020 with all operating entities in scope to identify performance gaps and set up concrete action plans.
Agenda in 2015. Digitalization, however, also comes with data privacy and protection risks. Data privacy matters are managed by the Data
Privacy function. We take these risks very seriously, and we are enforcing robust security and privacy controls to give our customers comfort that their personal data is safe and secure.
The Allianz Privacy Standard defines rules and principles for collecting and processing personal data. Established in 2018, it sets out six privacy principles we expect all our employees to respect: due care, purpose specification, reasonable limitation, transparency and openness, choice and consent, and privacy by design. We also publish a Privacy
Equally important is the security of the personal data we handle.
Standard for information security management. This standard specifies various requirements for three fields: vulnerability assessment along the software development value chain (including penetration tests and security audits), systems monitoring via multi-level security systems, and effective IT security management and business continuity management.
 Status/Progress:  During 2019, we continued the efforts begun in 2016, as we worked with Allianz Group companies and other Group centers on the group-wide implementation of the APRP. As we approached full implementation of the APRP in the European Economic
 Accordingly, the emphasis and, along with it, resources have been shifted from the implementation of the privacy program to monitoring activities, including onsite reviews. These efforts focus on the maturation of our group-wide privacy activities.
 In 2020, we will target a sample of Allianz operating entities for data privacy reviews.
This section describes the impact of human rights issues on our business activities and relationships, as well as the impact of Allianz’s activities and relationships on human rights issues. We describe the concepts and achievements related to the management of those impacts. As a financial services provider, these relate mainly to insurance transactions, direct investments, and our supply chain.
United Nations Universal Declaration of Human Rights across our entire organization. As a participant in the United Nations Global Compact since 2002, we have integrated its ten principles into our globally binding
As part of our support and engagement for these human rights principles, we also take an active stance against modern slavery and human trafficking through a risk-based approach across our business and supply chain. In its 2018 Allianz Group – Modern Slavery Statement, the Group confirms that over the five preceding years, no incident of modern slavery, human trafficking, or child labor has been found involving any of the Allianz Group entities.
 Status/progress:  Human rights are integrated into our ESG risk framework and are therefore part of our core due diligence processes on sensitive business transactions. For further details, please refer to our Sustainability Report 2019, section 02.4 or our
 No issues were raised in regard to human rights issues in accordance with the Modern Slavery Act in 2019.
 The consultation draft for the PSI-ESG in Underwriting project that includes human rights-relevant criteria was published in
CONCEPTS Our employees are one of our most valuable assets and key to the success of our company. Without them, it would be impossible to deliver on our business strategy and achieve our goals. Therefore, the importance of retaining our best people and keeping them motivated and committed by managing and rewarding talent, promoting inclusivity and employee rights, and supporting employees’ well-being and engagement cannot be overstated.
We make employee engagement a high priority as we work to build a committed workforce that excels by integrity and maintains a strong customer focus. In all these aspects, the Allianz Engagement
As of 2015, the IMIX comprises 10 AES items covering the areas of leadership, performance, and corporate culture.
The results of the AES (and thus the IMIX) are directly linked to the performance objectives of the Group’s Board of Management. The
VOICE initiative brought together employees from different levels and functions to work on key focus areas within the field of employee engagement. In the course of the ongoing implementation of 2018 ideas, three new ideas were developed and implemented in the VOICE 2019 initiative:
Our Board of Management has continually shown strong commitment to inclusion and diversity (I&D). The Allianz Global Inclusion Council
IMIX for Allianz Group:  Status/progress: 73 % IMIX score in 2019 (+ 2 %-p).
Although 2021 targets were already reached this year for Allianz SE, the VOICE initiative will be continued to improve results further.
This section describes the impact of compliance matters on Allianz’s business activities and relationships as well as the impact of Allianz’s activities and relationships on compliance. Furthermore, the concepts and achievements related to the management of these impacts are described, with a focus on the compliance management system, anticorruption, and bribery matters. All compliance matters are overseen by the Compliance team.
German Institute for Compliance and the Global Insurance Chief Compliance Officers Forum (CCO Forum) to enhance our understanding of compliance issues and to share best practices.
In view of new and upcoming regulatory requirements, and expectations, the compliance risks associated with IT regulations, increased oversight requirements and conduct-related standards are growing in significance.
Allianz SE Supervisory Board and to the Integrity Committee, which coordinates the Allianz SE and Group activities concerning integrityrelated topics, such as the prevention and detection of corruption and fraud or the handling of whistleblowing cases.
As part of our global compliance program, we follow international standards and applicable laws related to corruption and bribery, money laundering and terrorism financing, trade and financial sanctions, capital markets, data privacy, customer protection, antitrust, and other relevant compliance risk areas. We investigate allegations of breaches of laws as well as breaches of Allianz rules.
Allianz SE and its subsidiaries (the Allianz Group) offer property-casualty insurance, life/health insurance, and asset management products and services in over 70 countries, with the largest of our operations located in Europe. The Allianz Group serves more than 100 million private and corporate customers. Allianz SE, the parent company of the
The Allianz Group’s structure reflects both our business segments and geographical regions. Business activities are organized by product and type of service, based on how these are strategically managed: insurance activities, asset management activities, and corporate and other activities. Due to differences in the nature of products, risks, and capital allocation, insurance activities are further divided into property -casualty and life/health categories. In accordance with the responsibilities of the Board of Management, each of the insurance categories is grouped into regional reportable segments. In 2019, the
– Global Insurance Lines & Anglo Markets, Middle East and Africa
We offer a wide range of property-casualty and life/health insurance products to both retail and corporate customers. For the Property-Casualty business segment, these include motor, accident, property, general liability, travel insurances, and assistance services; the Life/Health business segment offers savings and investment-oriented products in addition to life and health insurance. We are the leading property-casualty insurer worldwide and rank among the top five in the life/health insurance business2. Our key markets (in terms of premiums) are
AllianzGI, operate under the governance of Allianz Asset Management (AAM). We are one of the largest asset managers in the world that actively manage assets. Our offerings cover a wide range of equity, fixed income, cash, and multi-assets products as well as a strongly growing number of alternative investment products, such as infrastructure debt/equity, real assets, liquid alternatives, and solution business. Our core markets are the United States, Canada, Germany,
The Corporate and Other business segment’s activities include the management and support of the Allianz Group’s businesses through its central Holding functions, Banking and Alternative as well as Digital
Investments. The Holding functions manage and support the Group’s businesses through its strategy, risk, corporate finance, treasury, financial reporting, controlling, communication, legal, human resources, technology, and other functions. Our Banking operations, which place a primary focus on retail clients, support our insurance business and complement the products we offer in Italy, France, and
Alternative Investments provides global alternative investment management services in the real estate sector, mostly on behalf of our insurance operations.
Allianz SE has a divisional Board structure based on functional and business responsibilities. Business-related divisions reflect our business segments Property-Casualty, Life/Health, Asset Management, and
TARGET SETTING AND MONITORING The Allianz Group steers its operating entities and business segments via an integrated management and control process. It begins with the definition of a business-specific strategy and goals, which are discussed and agreed upon between the Holding and operating entities.
Based on this strategy, our operating entities prepare three-year plans which are then aggregated to form the financial plans for the business divisions and for the Allianz Group as a whole. This plan also forms the basis for our capital management. The Supervisory Board approves the plan and sets corresponding targets for the Board of Management. The performance-based remuneration of the Board of Management is linked to short-term and long-term targets to ensure effectiveness and emphasize sustainability. For further details about our remuneration structure, including target setting and performance assessment, please refer to the Remuneration Report starting on page 23.
Besides performance steering, we also have a risk steering process in place, which is described in the Risk and Opportunity Report starting on page 76.
Non-financial key performance indicators (KPIs) are used to assess the organizational health of Allianz and are reflected in the annual bonus. In line with our Renewal Agenda 2.0 motto “Simplicity
(NPS3) and the Inclusive Meritocracy Index. For further information on non-financial KPIs, please refer to the Combined Separate Non-
§§ 289b (3), 315b (3), sentence 1, sentence 2 in conjunction with
and 1.2 % respectively, in 2019, compared to 2.9 % and 1.9 % in 2018.
Protests escalated across regions, such as in Hong Kong and several countries in Latin America (Chile, Colombia), while the Yellow
Vests’ protests continued in France in the first half year 2019. Geopolitical tensions also prevailed in the Middle East, particularly between
In the property-casualty sector, underwriting discipline and market hardening helped to restore underwriting profitability across the board. The biggest market, however – the US property-casualty market – was still challenged by the phenomenon called “social inflation”
where significant increases in jury awards led to spiraling claims costs in some business lines. On the other hand, overall and insured losses caused by natural catastrophes were in line with the long-term average – despite an elevated number of events. As a result, industry profitability remained at least stable – despite the drag of low investment 1_At the date of the publication of this report, not all general market data for the year 2019 used in the chapter Business
In the life sector, the industry has finally come to grips with the low-yield environment, revamping their business model and product suite accordingly. Thus and against the backdrop of booming stock markets, demand for savings products in advanced markets at last stabilized. Emerging markets, on the other hand, showed significantly higher growth, as China rebounded after the regulatory-induced slump in the previous year. Overall and at a global scale, premiums rose by an estimated 4.5 % to 5.5 % in 2019 (in nominal terms and adjusted for foreign currency translation effects). Global industry profitability, however, remained challenging as yields sank ever deeper in negative territory.
Beginning 2019, the asset management industry was severely affected by the market downturn in the fourth quarter of 2018. Despite ongoing political and economic uncertainties, we saw a strong rebound of capital markets – already at the beginning of 2019 – spurred by an accommodative monetary policy throughout the year. Both bonds and especially global equities saw a year of stellar returns with the MSCI World Index increasing by 28 % in 2019, more than wiping out the capital market dip in the fourth quarter of 2018.
In view of the volatile, overall positive capital market development, long-term net inflows were recorded throughout the year in almost all asset classes: Long-term net inflows in Europe were driven by bonds and multi-assets funds, while the U.S. profited from strong net inflows in bonds in active and in passive products; overall, actively managed equities recorded net outflows. Passive products recorded strong net inflows in the U.S. in almost all asset classes.
Key figures Allianz Group1 thereof: attributable to shareholders € mn 7,914 7,462 452
Our total revenues grew 5.9 % on an internal basis6, compared to 2018.
Our Life/Health business segment recorded a strong sales increase for single premium capital-efficient products in Germany, as well as higher sales of non-traditional variable annuity products in the United States.
Our non-operating result improved by € 335 mn to a loss of € 778 mn, due to higher non-operating realized gains/losses (net)
1_For further information on Allianz Group figures, please refer to note 4 to the Consolidated Financial Statements.
Life/Health statutory gross premiums written, operating revenues in Asset Management, and total revenues in Corporate and Other (Banking). Total revenues in Property-Casualty now include fee and commission income. Prior year figures were adjusted accordingly.
Income taxes increased by € 80 mn to € 2,776 mn, due to higher income before taxes. The effective tax rate decreased to 25.1 % (2018: 25.9 %), mostly due to higher tax-free income.
Net income increased as a result of the growth in our operating profit and non-operating result, as well as a slightly lower tax rate.
For a more detailed description of the results generated by our business segments – specifically, Property-Casualty insurance operations,
Due to the immateriality of the former reportable segments Banking and Alternative Investments, in 2019 they were combined with the former reportable segment Holding & Treasury to form the new reportable segment Corporate and Other. Previously reported information has been adjusted to reflect this change.
In the course of 2019, there were some more, albeit minor reallocations between the reportable segments.
6_Internal total revenue growth excludes the effects of foreign currency translation as well as acquisitions and disposals.
Please refer to page 74 for a reconciliation of nominal total revenue growth to internal total revenue growth for each of our business segments and the Allianz Group as a whole.
On a nominal basis, we recorded a significant increase in total revenues compared to the previous year.
This includes favorable foreign currency translation effects of € 196 mn7 and positive (de)consolidation effects of € 969 mn. On an internal basis, our revenues went up 4.7 %, driven by a positive price effect of 2.6 % and a positive volume effect of 2.0 %.
Allianz Partners: Total revenues went up 6.8 % on an internal basis, totaling € 6,650 mn. Much of this increase was owed to positive volume effects in our U.S. travel business.
Germany: Total revenues amounted to € 10,736 mn, an internal growth of 2.3 %. It was mainly caused by positive volume and price effects in our retail motor and property lines of business.
1_For further information on Allianz Property-Casualty figures, please refer to note 4 to the Consolidated Financial Statements.
2_Total revenues in Property-Casualty include fee and commission income. Prior year figures were adjusted accordingly.
3_Represents claims and insurance benefits incurred (net) divided by premiums earned (net).
Our accident year loss ratio8 was 70.1 % as in the previous year. Losses from natural catastrophes were € 771 mn, compared to € 934 mn in 2018. This translates into a positive effect on our combined ratio of 0.4 percentage points, as the impact from natural catastrophes decreased from 1.9 percentage points in 2018 to 1.5 percentage points in 2019; however, higher large losses offset this improvement.
6_We comment on the development of our total revenues on an internal basis, which means figures have been adjusted for foreign currency translation and (de-)consolidation effects to provide more comparable information.
Total expenses amounted to € 14,119 mn in 2019, after € 13,542 mn in the previous year. Our expense ratio improved significantly by 0.5 percentage points to 27.5 %, benefiting from strong premium growth and productivity initiatives. Both the acquisition as well as the administrative expense ratio contributed positively.
Interest and similar income (net of interest expenses) 3,314 3,329 (15)
1_Refers to policyholder participation, mainly from APR business (accident insurance with premium refunds), reported within “change in reserves for insurance and investment contracts (net)”. For further information, please refer to note 26 to the Consolidated Financial Statements.
Germany there had been a one-off change in policyholder participation in APR business in 2018, which had partly been offset in the underwriting result.
On a nominal basis, statutory premiums went up 8.5 %. This includes favorable foreign currency translation effects of € 833 mn as well as positive (de-)consolidation effects of € 29 mn. On an internal basis, statutory premiums increased by 7.3 % – or € 5,114 mn – to
Statutory premiums in the German life business grew to € 27,743 mn, a 23.2 % rise on an internal basis. It was largely attributable to higher single premium sales in our business with capital-efficient products. In the German health business, statutory premiums reached € 3,575 mn – a 3.5 % increase on an internal basis, which was due to the acquisition of new customers in supplementary health care coverage as well as premium adjustments in comprehensive health care coverage.
In the United States, statutory premiums amounted to € 12,265 mn. This 7.5 % growth on an internal basis was mainly driven by sales initiatives resulting in higher sales for non-traditional variable annuity products.
In the Asia-Pacific region, statutory premiums stood at € 5,586 mn. Most of this drop – 7.3 % on an internal basis – was due to a sales decrease in unit-linked products in Taiwan, and could not entirely be compensated by higher sales in both unit-linked products in
1_For further information on Allianz Life/Health figures, please refer to note 4 to the Consolidated Financial Statements.
2_Statutory premiums are gross premiums written from sales of life and health 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.
Our PVNBP increased by € 7,937 mn to € 70,898 mn, most of which resulted from higher sales of our capital-efficient products in the German life business and of our non-traditional variable annuities in the
Present value of new business premiums (PVNBP) by lines of business %
Our operating profit increased mainly due to an improved investment margin, which was driven by lower impairments and higher realizations especially in France and Germany. Another contributing factor was a change in the amortization period for deferred acquisition costs in the United States: It was extended from 20 to 25 years for fixed index annuities with lifetime income, as an experience analysis had revealed an increase in persistency rates. Finally, we also recorded volume growth in the German life business, the United States, and the Asia-
4_In this section, our comments in the following section on the development of statutory gross premiums written refer to values determined “on an internal basis”, i.e. adjusted for foreign currency translation and (de-) consolidation effects, in order to provide more comparable information.
6_Prior year figures changed in order to reflect the roll-out of profit source reporting to Mexico.
7_The purpose of the analysis of Life/Health operating profit sources is to explain movements in IFRS results by analyzing underlying drivers of performance, consolidated for the Life/Health business segment.
Unit-linked management fees as % of average unit-linked reserves2,3 0.5 0.5 1_Aggregate policy reserves and unit-linked reserves.
3_Unit-linked management fees, excluding asset management fees, divided by unit-linked reserves.
Loadings from premiums increased in line with higher sales, mainly of capital-efficient products in our German life business, but also in the
Asia-Pacific region and in our business with protection & health products in France. Loadings from reserves went up, mostly due to higher reserve volumes in our German life business and in the United States, and remained stable in relation to reserves. Unit-linked management fees also grew, particularly in Italy, supported by an increase in assets under management.
1_Loadings and fees include premium and reserve based fees, unit-linked management fees, and policyholder participation in expenses.
Operating income from financial assets and liabilities carried at fair value through income (net) (1,707) (3,351) 1,645
Consolidated Financial Statements in the Annual Report 2018, chapter "Reserves for insurance and investment contracts", paragraph "Aggregate policy reserves" and Reconciliations.
2_The investment margin is defined as IFRS investment income net of expenses, less interest credited to IFRS reserves and policyholder participation (including policyholder participation beyond contractual and regulatory requirements mainly for the German life business).
Acquisition expenses and commissions as % of PVNBP1 (7.9) (8.3) 0.4
Administrative and other expenses as % of average reserves2,3 (0.3) (0.3) 1_PVNBP before non-controlling interests.
TECHNICAL MARGIN2 Our technical margin declined, particularly because the combined ratio in our protection & health business in France worsened. Positive effects from the Asia-Pacific region and the United States partly compensated for this development.
2_The technical margin comprises the risk result (risk premiums less benefits in excess of reserves less policyholder participation ), the lapse result (surrender charges and commission clawbacks) and the reinsurance result.
The operating profit in our guaranteed savings & annuities line of business increased, largely due to improved investment margins in the
& health line of business was most driven by the lower technical margin in France. Our operating profit in the unit-linked without guarantee line of business went up, much of which was a consequence of higher unit-linked management fees in Italy and in France. The increase in operating profit in the capital-efficient products line of business was mostly due to an improved investment margin in the German life business.
Our return on equity went up by 1.3 percentage points to reach 12.7 %.
Total assets under management as of 31 December € bn 2,268 1,961 307 thereof: Third-party assets under management as of 31 December € bn 1,686 1,436 250
Positive effects from consolidation, deconsolidation, and other adjustments added € 12.1 bn to total AuM. This was mostly attributable to PIMCO’s first consolidation of Gurtin Municipal Bond Management
Favorable foreign currency translation effects amounted to € 26.9 bn and, for the most part, supported PIMCO’s AuM.
3_Three-year rolling investment outperformance reflects the mandate-based and volume-weighted three-year investment success of all third-party assets that are managed by Allianz Asset Management’s portfolio-management units. For separate accounts and mutual funds, the investment success (valued on the basis of the closing prices) is compared with the investment success prior to cost deduction of the respective benchmark, based on various metrics.
For some mutual funds, the investment success, reduced by fees, is compared with the investment success of the median of the respective Morningstar peer group (a position in the first and second quartile is equivalent to outperformance).
1_For further information on our Asset Management figures, please refer to note 4 to the Consolidated Financial Statements.
3_Net flows represent the sum of new client assets, additional contributions from existing clients – including dividend reinvestment –, withdrawals of assets from and termination of client accounts, and distributions to investors.
4_Market and dividends represents current income earned on the securities held in client accounts, as well as changes in the fair value of these securities. This also includes dividends from net investment income and from net realized capital gains to investors of both open-ended mutual funds and closed-end funds.
An increase of € 70 mn in our net income was due to the higher operating profit, partially offset by a lower non-operating result – including higher restructuring expenses – and higher income taxes related to the operating profit development.
1_Operating revenues/operating profit adjusted for foreign currency translation and (de-)consolidation effects.
1_For further information on Allianz Corporate and Other figures, please refer to note 4 to the Consolidated Financial Statements.
Our net loss decreased. The improved operating result was partly offset by a lower non-operating investment result, which was affected by a decrease in our non-operating realized gains and losses (net), and a lower income tax result.
Allianz Group Operating profit of € 11.5 bn, plus or minus € 0.5 bn. Operating profit of € 11.9 bn, in the upper half of our target range.
Return on equity (RoE)1 amounted to 13.6 % (2018: 13.2 %). Proposed dividend at € 9.60 (2018: € 9.00) per share. Stable payout ratio of at least 50 %, based on expected number of eligible shares at the Annual General Meeting.
Achievement of our combined ratio of 94 % or better. Combined ratio was at 95.5 %, missing our target. Despite a stable accident year loss ratio and improvements in our expense ratio the lower level of run-off led to a shortfall against our target.
Operating investment income (net) decreased, driven by a higher allocation to premium refunds in Germany for the accident business with premium refund guarantee.
Operating investment result reached € 20.0 bn, due to lower impairments, a better trading result (as a consequence of recovery of equity markets) and higher realized gains from portfolio management.
Operating profit in the range of € 2.2 bn to € 2.8 bn. Operating profit amounted to € 2.7 bn, at the upper end of the target range and € + 0.2 bn above mid-point, due to higher AuM-driven fees.
Cost-income ratio below 64 %. At 62.3 %, the cost-income ratio is clearly below 64 %.
1_Represents the ratio of net income attributable to shareholders to the average shareholders’ equity excluding unrealized gains/losses on bonds, net of shadow accounting, at the beginning of the year and at the end of the year.
2_Represents the ratio of net income to the average total equity, excluding unrealized gains/losses on bonds, net of shadow accounting, at the beginning of the year and at the end of the year.
Global growth is expected to muddle through in the next two years.
Monetary policies will remain a safety net for growth and markets.
U.S. manufacturing sector. The European Central Bank is likely to implement another deposit rate cut of 10 basis points in the first half of 2020 as well to - 0.6 %. Monthly Quantitative Easing purchases will be maintained at the current pace of € 20 bn per month until the end of the year.
On the markets, political risk will remain the main volatility driver. In a context of wait-and-see posture of investors linked to U.S. elections and progressive erosion of profits, the global equity market is expected to register an inflexion in its upward (monetary driven) trend.
On the surface, 2020 promises to be very similar to 2019, with moderate premium growth despite continuing headwinds such as low yields, high political uncertainty, and weak global growth and trade. Under the surface, however, three fundamental changes are about to gather speed.
First, the pivot to Asia: Asia's rising middle class emerges as the consumer of last resort with huge pent-up demand, reflecting weak social security systems and protection gaps in natural catastrophes, health, retirement, and mortality. Second, the pivot to digital ecosystems for better customer interaction, accelerating the shift from pure risk management to risk prevention and from single products to comprehensive solutions. Key for success, in particular in Europe, will be that regulation and supervision keep pace with the business transformation. Third, the pivot to higher claim costs, reflecting climate change (natural catastrophes ), social change (litigation and class action) and technology change (connectivity), ushering in a new era of cost cutting (automatization ) and consolidation. The flip side of these changes, however, is that the topic of sustainability moves mainstream in public debates, creating new opportunities for insurance.
In the non-life sector, premium growth is expected to remain more or less stable. As in previous years, emerging markets are the main driver of growth. Overall, we expect global premium growth of around 4 % in 2020 (in nominal terms and adjusted for foreign currency translation effects). The two opposing effects of higher rates on the one, but low investment income on the other hand point toward unchanged industry profitability.
Monetary easing policy especially in the U.S. and Europe provide some stimulus for capital market development, driving equity and fixed-income markets. Market volatility is likely to persist and many investors are expected to stay alert, potentially nervous, and very cautious. We therefore expect a volatile and therefore overall moderate capital market contribution to AuM growth.
Protect shareholder value while continuing to provide attractive returns and dividends.
 Level of claims from natural catastrophes at expected average levels,
For further information on our ambitions for the period 2019 - 2021, please see section “Our business aspirations” in the Risk and
Management’s assessment of expected revenues and earnings for 2020 In 2019, our total revenues were € 142.4 bn, a 7.6 % increase on a nominal and a 5.9 % increase on an internal basis1 compared to 2018. For 2020 we envisage moderate growth, with Property-Casualty and Asset
PROPERTY-CASUALTY INSURANCE We expect our revenues to increase by approximately 6 % in 2020
(2019: 4.7 %), of which 4 % will come from our acquisitions in the United
The underlying assumption is that the aggregate effect of improvements in pricing, claims management, and productivity will compensate for any inflation in underlying claims. As for impacts from natural catastrophes, despite the highly volatile nature of such catastrophes in recent years we assume claims to continue at comparable levels going forward.
Overall, we expect our 2020 operating profit to be in the range of
Life/Health business segment is RoE. In 2020, we expect it to be be-
Financing, liquidity development, and capitalization The Allianz Group benefits from its very robust liquidity position and excellent financial strength, with its capitalization well above regulatory requirements.
We also monitor the Group’s and each of our operating entities’
capital positions very closely. In addition, we will continue to optimize the sensitivity of our Solvency II capitalization ratio to changes in interest rates and spreads through prudent asset/liability management and life product design.
The share buy-back is based on the authorization granted by the General Meeting on 9 May 2018. The share buy-back program, which starts in March 2020, shall be finalized by 31 December 2020, at the latest. Allianz SE will cancel all repurchased shares.
All of the above remains subject to our sustainable Solvency II
capitalization ratio of 160 % or higher – which is considerably below our year-end 2019 level of 212 %, and 20 percentage points below our minimum solvency ambition for the Solvency II capitalization ratio of
As of 31 December 2019, total assets amounted to € 1,011.2 bn and total liabilities were € 933.8 bn. Compared to year-end 2018, total assets and total liabilities increased by € 113.6 bn and € 99.9 bn, respectively.
Germany, Italy, and Spain that represented 17.1 %, 13.5 %, 7.6 % and 6.1 % of our portfolio shares. Our corporate bonds portfolio contained bonds from the United States, Eurozone, and Europe excl. Eurozone.
(€ 7.9 bn before foreign currency translation effects). Reserves for premium refunds increased by € 26.5 bn (before foreign currency translation effects), due to higher unrealized gains to be shared with policyholders. Foreign currency translation effects increased the balance sheet value by € 3.0 bn, mainly due to the stronger U.S. Dollar
The Allianz Group enters into various commitments including loan commitments, purchase obligations, and other commitments. For more details please refer to note 37 to the Consolidated Financial Statements.
Please refer to the Risk and Opportunity Report from page 76 onwards for a description of the main concentrations of risk and other relevant risk positions.
The Allianz Group’s liquidity management is based on policies and guidelines approved by the Allianz SE Board of Management.
INSURANCE OPERATIONS Major sources of liquidity for our operational activities are primary and reinsurance premiums received, reinsurance receivables collected, investment income, and proceeds generated from the maturity or sale of investments. These funds are mainly used to pay claims arising from the Property-Casualty insurance business and related expenses, life policy benefits, surrenders and cancellations, acquisition costs, and operating costs.
The overall liquidity of our insurance operations depends on capital market developments, interest rate levels, and our ability to realize the market value of our investment portfolio to meet insurance claims and policyholder benefits. Other factors affecting the liquidity of our
SHARE CAPITAL As of 31 December 2019, the issued share capital as registered at the
Commercial Register was € 1,169,920,000. This was divided into 417,172,859 no-par value shares. As of 31 December 2019, the
2_For issuance of shares to employees with exclusion of shareholders’ subscription rights.
For further information on our share capital and regarding authorizations to issue and repurchase shares, please refer to the chapter
LONG-TERM DEBT FUNDING As of 31 December 2019, Allianz SE had senior and subordinated bonds with a variety of maturities outstanding, reflecting our focus on long-term financing. As the cost and availability of external funding may be negatively affected by general market conditions or by matters specific to the financial services industry or the Allianz Group, we seek to reduce refinancing risk by actively steering the maturity profile of our funding structure.
2_Senior bonds of EUR 1.5 bn were redeemed in the third quarter of 2019.
4_ Includes a buyback of EUR 0.9 bn subordinated bonds, the redemption of CHF 0.5 bn subordinated bonds at first call date as well as the issuance of EUR 1.0 bn subordinated bonds in the third quarter of 2019.
1_For further information on Allianz SE debt (issued or guaranteed) as of 31 December 2019, please refer to note 18 to the Consolidated Financial Statements.
(2018: 18.5 %) of the long-term debt was issued or guaranteed by
Change in cash and cash equivalents1 3,986 (416) 4,402 1_Includes effects of exchange rate changes on cash and cash equivalents of € 90 mn and € 41 mn in 2019 and 2018, respectively.
Net cash flow provided by operating activities increased by € 10.8 bn to € 36.4 bn in 2019. This figure comprises net income plus adjustments for non-cash charges, credits, and other items included in net earnings, as well as cash flows related to the net change in operating assets and liabilities. Net income after adding back non-cash charges and similar items decreased to € 12.2 bn in 2019. Operating cash flows from net changes in operating assets and liabilities rose by € 13.8 bn to € 24.2 bn. This was mainly driven by higher reserves for insurance and investment contracts in our Life/Health business segment in Germany,
Net cash outflow used in investing activities increased by € 8.4 bn to € 27.7 bn. The main driver was higher net cash outflows from available -for-sale investments, particularly at Allianz SE, France and the
Cash and cash equivalents, including cash and cash equivalents reclassified to assets of disposal groups held for sale, increased by € 4.4 bn, mainly stemming from our Life/Health business segment in the United States and Germany and from our operations in the United
For further information, please refer to note 4 to the Consolidated
Total revenues comprise total revenues in Property-Casualty, statutory premiums in Life/Health, operating revenues in Asset Management, and total revenues in Corporate and Other (Banking).1
Reconciliation of nominal total revenue growth to internal total revenue growth %
OPERATING PROFIT The reconciling item scope comprises the effects from out-of-scope entities in the profit sources reporting compilation. Operating profit from operating entities that are out of scope is included in the investment margin. Currently, 22 entities – comprising the vast majority of
The delta shown as definitions in acquisition expenses and commissions represents commission clawbacks, which are allocated to the technical margin. The delta shown as definitions in administrative and other expenses mainly represents restructuring charges, which are stated in a separate line item in the Group income statement.
Administrative expenses on reinsurance business ceded 9 14 1_Prior year figures have been changed in order to reflect the roll-out of profit source reporting to Mexico.
4_For further information on the FIA adjustment, please refer to note 2 to the Consolidated Financial Statements in the
IMPACT OF CHANGE IN DEFERRED ACQUISITION COSTS (DAC) “Impact of change in DAC” includes the effects of changes in DAC, unearned revenue reserves (URR), and value of business acquired
URR capitalized: capitalization amount of unearned revenue reserves (URR) and deferred profit liabilities (DPL) for FAS 97 LP.
Allianz aims to ensure that the Group is adequately capitalized at all times and that all related undertakings at least meet their respective regulatory capital requirements for the benefit of both shareholders and policyholders.
In addition, we take into account the requirements of rating agencies. While capital requirements imposed by regulators constitute a binding constraint, meeting rating agencies’ capital requirements and maintaining strong credit ratings are strategic business objectives of the Allianz Group.
We closely monitor the capital position and risk concentrations of the Group and its related undertakings and apply regular stress tests
Group in proportion to the inherent risks of their activities, ensuring that risks across the Group are consistently identified, analyzed, assessed, and managed. The primary goals of our risk management framework are:  Promotion of a strong risk management culture, supported by a robust risk governance structure.
 Transform: We seek to become simpler and deeply digital, and to make our businesses more scalable.
 Rebalance: We seek to build market-leading positions in large, profitable, and fast-growing geographies as well as in new areas of business.
 Digital by Default: Build legacy-free platforms with core processes automation.
 Technical Excellence: Move to data-driven product design, pricing, and claims handling.
 Inclusive Meritocracy: We reinforce a culture where both people and performance matter.
The Board of Management of Allianz SE has also defined a strategy for the management of risk. This risk strategy places particular emphasis on protecting the Allianz brand and reputation, remaining solvent even in the event of extremely adverse scenarios, maintaining sufficient liquidity to meet financial obligations, and providing resilient profitability.
 We seek to grow in fast-growing regions, including Asia-Pacific, and want to profit from consolidation in Europe.
 We are building expertise and business models to profit from new risk pools, including cyber risk (insurance, risk mitigation, and recovery services) and mobility fleets.
 As the world’s population ages, we are improving our offerings in the retirement savings markets.
In a continuously evolving market where the demands of customers constantly change, our knowledge of the industry and our expertise in product development and risk management offers us great opportunities to create customer-focused solutions. For further details on opportunities envisaged by the Allianz Group in the various segments, please refer to Outlook 2020.
SUPERVISORY BOARD AND BOARD OF MANAGEMENT Allianz’s approach to risk governance permits integrated management of local and global risks and ensures that our risk profile remains consistent with both our risk strategy and our capacity to bear risks.
Board of Management of Allianz SE have both Allianz SE and groupwide responsibilities. The Board of Management formulates business objectives and a corresponding risk strategy; the core elements of the risk framework are set out in the Allianz Group Risk Policy and approved by the Board of Management. The Supervisory Board advises, challenges, and supervises the Board of Management in the execution of its management activities. The following committees support the Board and the Supervisory Board on risk issues: Supervisory Board Risk Committee
The Risk Committee reports to the Supervisory Board, where the information and the findings are discussed with the Board of Management.
also ensures that an adequate relationship between return and risk is maintained. Additionally, the GFRC defines risk standards, is the limitsetting authority within the framework set by the Board of Management, and approves major financing and capital management transactions. Finally, the GFRC supports the Board of Management with recommendations regarding the capital structure, capital allocation, liquidity position, and investment strategy, including strategic asset allocation.
Group Risk also supports the Board of Management in developing the risk management framework – which covers risk governance, risk strategy and appetite – and risk monitoring and reporting. Group
Risk’s operational responsibility encompasses assessing risks and monitoring limits and accumulations of specific risks across business lines, including natural and man-made disasters and exposures to financial markets and counterparties.
Group Risk strengthens and maintains the Group’s risk network through regular and close interaction with the management of related undertakings and other key stakeholders such as the local finance, risk, actuarial and investment departments. A strong group-wide risk network enables the Allianz Group to influence risk culture across the
Group, identify risks at an early stage, and make management aware of these risks.
2_From a formalistic perspective, the German Supervisory Authority deems our model to be “partial” because not all our entities are using the internal model. Some of our smaller entities report under the standard formula and others under the deduction and aggregation approach. Without loss of generality, we might use the term internal model in the following chapters, e.g., in case descriptions also referring to entities that use the internal model, or descriptions focusing on processes with respect to the internal model components.
Group Compliance – in conjunction with Group Legal and other experts involved – is responsible for integrity management, which aims to protect the Allianz Group as well as our related undertakings and employees from regulatory risks.
Group Actuarial, Planning and Controlling contributes towards assessing and managing risks in line with regulatory requirements, in particular for those risks whose management requires actuarial expertise. The range of tasks includes, amongst others, the calculation and monitoring of technical provisions, technical actuarial assistance in business planning, reporting and monitoring of the results, and supporting the effective implementation of the risk management system.
The Allianz Group is exposed to a variety of risks through its core insurance and asset management activities, including market, credit, underwriting, business, operational, strategic, liquidity, and reputational risks.
Group as of 1 January 2016, our risk profile is measured and steered based on our approved Solvency II internal model2. We have introduced a target solvency ratio in accordance with Solvency II, based on pre-defined stress scenarios for both the Group and related undertakings, supplemented by ad-hoc scenarios, historical and reverse stress tests, and sensitivity analyses.
In addition, central elements of Allianz’s dividend policy are linked to Solvency II capitalization based on the internal model. This helps us ensure a consistent view on risk steering and capitalization in line with the Solvency II framework.
As a consequence, the internal model is fully integrated in business steering and its application satisfies the so-called “use test”
MARKET RISK As an inherent part of our insurance operations, we collect premiums from our policyholders and invest them in a wide variety of assets; the resulting investment portfolios back the future claims payments and benefits to our customers. In addition, we also invest shareholders’ capital, which is required to support the business. Finally, we use derivatives, mostly to hedge our portfolio against adverse market movements (for example, protective puts) or to reduce our reinvestment risk
(for example, by using forwards, swaps, or swaptions). Asset/liability management (ALM) decisions are taken based on the internal model, considering both the risks and the returns on the financial market.
To measure these market risks, real-world stochastic models2 for the relevant risk factors are calibrated using historical time series to generate possible future market developments. After the scenarios for all the risk factors are generated, the asset and liability positions are revalued under each scenario. The worst-case outcome of the sorted portfolio profit and loss distribution at a certain confidence level
1_The return on risk capital is defined as the present value of future real world profits on the capital requirement (including buffer to regulatory requirements) held at local level.
INFLATION RISK As an insurance company, we are exposed to changing inflation rates, predominantly due to our Non-Life insurance obligations but also due to inflation-indexed internal pension obligations. While inflation assumptions are taken into account in our product development and pricing, unexpected inflation increases both future claims and expenses, leading to high liabilities; conversely, if future inflation rates were to be lower than assumed, liabilities would be lower than anticipated. The risk of changing inflation rates is incorporated in our internal model.
This implies that short-term changes in market prices do not affect us.
In our capacity as a long-term investor, this gives us the opportunity to invest in bonds yielding spreads over the risk-free return and earning this additional yield component.
The Group’s credit risk profile originates from three sources: our investment portfolio, our credit insurance business, and our external reinsurance.
Our credit insurance portfolio is modeled by Euler Hermes, based on a proprietary model component which is a local adaptation of the central internal credit risk model. Euler Hermes’ loss profile is integrated in the Group’s internal credit risk model to capture the concentration and diversification effects.
Our group-wide country and obligor group limit management framework (CRisP1) allows us to manage counterparty concentration risk, covering both credit and equity exposures at the Group and operating -entity levels. This limit framework forms the basis for discussions on credit actions and provides notification services featuring the quick and broad communication of credit-related decisions across the
Clearly defined processes ensure that exposure concentrations and limit utilizations are appropriately monitored and managed. The setting of country and obligor exposure limits from the Group’s perspective (i.e. the maximum concentration limit) takes into account the
Premium risk is the risk that actual claims for the business in the current year develop adversely relative to expected claims ratios. Premium risk can be mitigated by reinsurance as well as by technical excellence in underwriting. Assessing risks as part of the underwriting process is a key element of our risk management framework. There are clear underwriting limits and restrictions which are defined centrally and applied across the Group.
Premium risk is estimated based on actuarial models that are used to derive loss distributions. Non-catastrophe risks are modeled using frequency and severity models for large losses and aggregate loss distribution models for attritional losses. Natural disasters such as earthquakes, storms, and floods represent a significant challenge for risk management due to their accumulation potential and occurrence volatility. For natural catastrophe risks, we use special modeling techniques which combine portfolio data (geographic location, characteristics of insured objects, and their values) with simulated natural disaster scenarios to estimate the magnitude and frequency of potential losses. Where such stochastic models do not exist, we use deterministic, scenario-based approaches to estimate potential losses. Similar approaches are used to evaluate risk concentrations for terror and man-made catastrophes, including losses from cyber incidents and industrial concentrations.
Similar to premium risk, reserve risk is calculated based on actuarial models. The reserve distributions derived are then used within the internal model to calculate potential losses based on a predefined confidence level of 99.5 %.
We measure these risks within our internal model, distinguishing, where appropriate, between risks affecting the absolute level and trend development of the actuarial assumptions on the one hand and pandemic risk scenarios on the other. Depending on the nature and complexity of the risk involved, our health business is represented in the internal model according to Property-Casualty or Life/Health calculation methods and is therefore included in the relevant Property-Casualty and Life/Health figures accordingly. However, most of our health business is attributable to the Life/Health business segment.
BUSINESS RISK Business risks include cost risks and policyholder behavior risks. They are mostly driven by the Life/Health business and to a lesser extent by the Property-Casualty business. Cost risks are associated with the risk that expenses incurred in administering policies are higher than expected or that new business volume decreases to a level that does not allow Allianz to absorb its fixed costs. Business risk is measured relative to baseline plans.
For the Life/Health business, policyholder behavior risks are risks related to the unpredictable, adverse behavior of policyholders in exercising their contractual options, such as, for instance, early termination of contracts, surrenders, partial withdrawals, renewals, and annuity take-up options.
Assumptions on policyholder behavior are set in line with accepted actuarial methods and based on own historical data, where available. If there is no historical data, assumptions are based on industry data or expert judgment. It is used as a basis to determine the economic impact of policyholder behavior under different scenarios within our internal model.
OPERATIONAL RISK Operational risks refer to losses resulting from inadequate or failed internal processes, human errors, system failures, and external events, and can stem from a wide variety of sources, including the following:  “Clients, Products & Business Practices”: potential losses due to a failure to meet the professional obligations or from the design of products. Examples include misselling, non-compliance with internal or external requirements related to products, anti-trust behavior, data protection, sanctions and embargoes, etc. These losses tend to be less frequent but, when they occur, can have high financial impact.
The Group’s operational risk capital is dominated (more than 80 %) by the risk of potential losses within the categories “Clients, Products, and
Business Practices” and “Execution, Delivery, and Process Management ”. With regard to the largest category “Clients, Products, and Business Practices”, key external drivers are changes in laws and regulations. Internal drivers reflect potential failures of internal processes.
Operational risk capital is calculated using a scenario-based approach based on expert judgment as well as internal and external operational loss data. The estimates for frequency and severity of potential loss events for each material operational risk category are assessed and used as a basis for our internal model calibration.
Allianz has developed a consistent operational risk management framework, which is applied across the Group based on proportionality and focuses on the early recognition and proactive management of material operational risks. The framework defines roles and responsibilities as well as management processes and methods: Local risk managers, in their capacity as the “Second Line of Defense”, identify and evaluate relevant operational risks and control weaknesses via a dialog with the “First Line of Defense”, report operational risk events in a central database, and ensure that the framework is implemented in their respective operating entity.
This framework triggers specific mitigating control programs. For example, compliance risks are addressed with written policies and dedicated compliance programs monitored by the Group Compliance function at Allianz Group. The risk of financial misstatement is mitigated by a system of internal controls covering financial reporting.
OTHER RISKS NOT MODELED IN THE INTERNAL MODEL There are risks which, due to their nature, cannot be adequately addressed or mitigated by setting aside dedicated capital and are therefore not considered in the internal model. For the identification, analysis, assessment, monitoring, and management of these risks we also use a systematic approach, with risk assessment generally based on qualitative criteria or scenario analyses. The most important of these other risks are strategic, liquidity, and reputational risk.
STRATEGIC RISK Strategic risk is the risk of a decrease in the company’s value that will arise from adverse management decisions on business strategies and their implementation.
Strategic risks are identified and evaluated as part of the Group’s
Engines, and Inclusive Meritocracy. Progress on mitigating strategic risks and meeting the Renewal Agenda objectives is monitored and evaluated in the course of the Strategic and Planning Dialogs between
LIQUIDITY RISK Liquidity risk is defined as the risk that current or future payment obligations cannot be met or can only be met on the basis of adversely altered conditions. Liquidity risk can arise primarily if there are mismatches in the timing of cash in- and out-flows.
Allianz SE reflects the overall operating, financing, and investing strategy of the Allianz Group and is subject to the approval of the Board of
The identification and assessment of reputational risks is part of the annual Top Risk Assessment process. During this process, senior management decides on a risk management strategy for the most significant risks facing the company, including those with a potentially severe reputational impact.
GENERAL APPROACH For the management of our risk profile and solvency position, we utilize an approach that reflects the Solvency II rules in that it comprises our approved internal model and covers all major insurance operations.
1_The Allianz Environmental, Social, Governance (ESG) Board and the ESG office are constituted as advisor to the Board of
Requirement (SCR) covers all major insurance operations2. This includes both relevant assets (including fixed-income, equities, real estate, and derivatives) and liabilities (including the run-off of all current and planned technical provisions as well as deposits, issued debt and other liabilities). For with-profit products in the Life/Health business segment, the options and guarantees embedded in insurance contracts – including policyholder behavior – are taken into account.
3_Under book value deduction, the book value of the respective entity is deducted from eligible Own Funds of the Group.
Requirement is minor, risk management with respect to Asset Management is not discussed in greater detail.
In view of the above, Allianz’s risk capital framework covers all material and quantifiable risks. Risks not specifically covered by the internal model include strategic, liquidity, and reputational risks.
In addition, we adjust the risk-free yield curves by a volatility adjustment (VA) in most markets where a volatility adjustment is defined by EIOPA and approved by the local regulator. This is done to better reflect the underlying economics of our business, as the cash flows of our insurance liabilities are largely predictable. The advantage of being a long-term investor is the opportunity to invest in bonds yielding spreads over the risk-free return and earning this additional yield component over the duration of the bonds. Being a long-term investor mitigates much of the risk of having to sell debt instruments at a loss prior to maturity.
DIVERSIFICATION AND CORRELATION ASSUMPTIONS Our internal model considers concentration, accumulation, and correlation effects when aggregating results at the Group level. The resulting diversification reflects the fact that all potential worst-case losses are not likely to materialize at the same time. As we are an integrated financial services provider offering a variety of products across different business segments and geographic regions, diversification is key to our business model.
Diversification typically occurs when looking at combined risks that are not, or only partly, interdependent. Important diversification factors include regions (for example, windstorm in Australia vs. windstorm in Germany), risk categories (for example, market risk vs. underwriting risk), and subcategories within the same risk category (for example, commercial vs. personal lines of property and casualty risk). Ultimately, diversification is driven by the specific features of the investment or insurance products in question and their respective risk exposures. For example, an operational risk event at an Australian entity can be considered to be highly independent of a change in credit spreads for a French government bond held by a German entity.
Where possible, we derive correlation parameters for each pair of market risks through statistical analysis of historical data, considering quarterly observations over more than a decade. In case historical data or other portfolio-specific observations are insufficient or unavailable, correlations are set by the Correlation Settings Committee, which combines the expertise of risk and business experts in a well-defined and controlled process. In general, when using expert judgment we set the correlation parameters to represent the joint movement of risks under adverse conditions. Based on these correlations, we use an industry -standard approach, the Gaussian copula, to determine the dependency structure of quantifiable sources of risk within the applied
MODEL LIMITATIONS As the internal model is based on a 99.5 % confidence level, there is a low statistical probability of 0.5 % that actual losses could exceed this threshold at the Group level in the course of one year.
Furthermore, we validate the model and parameters through sensitivity analyses, independent internal peer reviews, and, where appropriate, independent external reviews, focusing on methods for selecting parameters and control processes. To ensure that the model is validated adequately, we have established an Independent Validation
REGULATORY AND MODEL CHANGES IN 2019 In 2019, our internal model was further enhanced based on regulatory developments, model validation results, and the feedback received in the course of our consultations with regulators.
The net impact of regulatory and model changes on the Solvency II risk capital of the Group in 2019 was € 0.2 bn. This is mainly driven by the positive impact of the regulatory change for the reduction in the ultimate forward rate (UFR) and a refinement of our crosseffect modeling as well as the modeling of surplus funds in Allianz Lebensversicherungs -Aktiengesellschaft. This was partly offset by the introduction of several minor and immaterial model changes at both the
In all subsequent sections, the figures including model changes will form the basis for the movement analysis of our risk profile in 2019.
 Property-Casualty premium and reserve risks resulting from natural and man-made catastrophes as well as from claims uncertainty.
United Kingdom, the potential rise of Euroscepticism, and the global trade situation – in order to manage our overall risk profile to specific event risks.
Based on our assessments, the Allianz Group is well prepared for the
Brexit and confident that it will have only minimal direct impact on both the Group and its activities. This is because our insurance, asset management, and investment management entities have taken actions to ensure that they will be in a position to handle various Brexit scenarios. Examples:  Allianz insurance and asset management entities will be able to continue coverage and services by using legal possibilities such as temporary permission, run-off regimes, and/or branch solutions, depending on the respective business case.
 No issues are expected regarding derivatives, as we are in the process of shifting our derivatives to EU markets as appropriate. In addition, we expect that all outstanding derivatives will be valid for a reasonable time period post Brexit.
 Even under conservative assumptions (driven by assumed adverse financial market developments), the Group will remain well-capitalized.
March 2020, EIOPA will carry out impact assessments and submit its recommendations to the European Commission by 30 June 2020. According to the required trilog negotiations at European level as well as transposition into national law, final implementation is not expected before 2022. In this context, the Allianz Group actively participates in discussions with the EU Commission, EIOPA, local regulators, Insurance
Therefore, future Solvency II Capital Requirements might change depending on the outcome of the 2020 review of the Solvency II framework by EIOPA. Concrete effects of the Solvency II review for the Group, however, can only be assessed after final results are available.
Finally, the potential for a multiplicity of different regulatory regimes, capital standards, and reporting requirements will increase operational complexity and costs.
 Allianz is well positioned to deal with potentially adverse future events – due, in part, to our strong internal limit framework, stress testing, internal model, and risk management practices.
The following table summarizes our Solvency II regulatory capitalization ratios disclosed over the course of the year 2019: Allianz Group: Solvency II regulatory capitalization ratios %
31 Dec 2019 30 Sept 2019 30 Jun 2019 31 Mar 2019 31 Dec 2018
capitalization. This was supported by management actions such as asset de-risking and mitigating measures that improved our interest rate risk profile in the current low interest rate environment. However,
Insurance Limited. Unfavorable market developments – predominantly characterized by lower interest rates – as well as regulatory and model changes also contributed to the reduction of our Solvency II ratio.
Combined scenario: Equity prices down by 30 % Interest rate down by 0.5 %1 190 217 1_Non-parallel interest rate shifts due to extrapolation of the yield curve beyond the last liquid point in line with
Financial Conglomerate Directive (FCD). The FCD does not impose a materially different capital requirement on Allianz Group compared to
As of 31 December 2019, the Group diversified risk capital, which reflects our risk profile before considering non-controlling interests, amounted to € 39.5 bn (2018: € 33.5 bn). This represents a slight increment in the diversification benefit – before tax – of 0.4 % to 23.8 %. The increase in Solvency II Capital Requirement was mainly due to market impacts that are essentially driven by the strong decrease in interest rates and the increase in equity indices over the year. Business evolution also increased the SCR as net earned premiums in the Property-
Casualty business segment increased and the Life/Health business segment grew. Management actions – such as the acquisition of ADAC
Autoversicherung AG, Liverpool Victoria General Insurance Group Limited, Legal & General Insurance Limited, and Taikang – also contributed to the increase in the Capital Requirement of the Group. Some targeted asset de-risking measures we implemented created an offsetting effect.
Allianz Group: Risk profile – market risk by business segment and source of risk (total portfolio before tax and non-controlling interests) pre-diversified, € mn
1_2018 risk profile figures adjusted based on the 2019 model changes impact.
EQUITY RISK As of 31 December 2019, our investments excluding unit-linked business that are sensitive to changing equity markets – amounting to a market value of € 75.7 bn3 (2018: € 59.4 bn) – would have lost € 20.0 bn4 (2018: € 12.4 bn) in value assuming equity markets had declined by 30 %. However, this impact would have been partially offset by policyholder participation.
REAL ESTATE RISK As of 31 December 2019, about 5.5 % (2018: 6.0 %) of the total prediversified risk was related to real estate exposures.
Share of total Group pre-diversified risk % 9.6 10.0 1_2018 risk profile figures adjusted based on the 2019 model changes impact.
The overall credit risk for the Allianz Group increased by € 0.6 bn to € 5.5 bn (2018: € 4.9 bn). This was mainly driven by the low interest rate environment compared to the previous year, which generally increased credit risk exposures thereby increasing credit risk. This also contributed to a decrease in the loss-absorbing capacity of technical provisions in the traditional life business, which increased the credit risk after considering policyholder participation.
3_The stated market value includes all assets whose market value is sensitive to equity movements (excluding unit-linked business) reflecting the Solvency II framework, and therefore is not based on classifications given by accounting principles.
CREDIT RISK – INVESTMENTS As of 31 December 2019, the credit risk arising from our investment portfolio accounted for 80.6 % (2018: 79.2 %) of our total Group prediversified internal credit risk1.
Credit risk in the Life/Health business segment is primarily driven by long-term assets covering long-term liabilities. Typical investments are government bonds, senior corporate bonds, covered bonds, selforiginated mortgages and loans, and a modest amount of derivatives.
CREDIT RISK – CREDIT INSURANCE As of 31 December 2019, 11.0 % (2018: 11.5 %) of our total Group prediversified internal credit risk was allocated to Euler Hermes credit insurance exposures.
Of the Allianz Group’s reinsurance recoverables, 82.4 % (2018: 76.9 %) were distributed among reinsurers that had been assigned an investment-grade rating; the remaining 17.5 % (2018: 23.1 %) were nonrated reinsurance recoverables. For substantial exposures to non-rated captives, risk-mitigating techniques such as collateral agreements or funds-withheld concepts are in place.
Non-investment grade 0.03 0.01 1_Represents gross exposure for external reinsurance, broken down by reinsurer. Overall exposure increases mainly due to changed methodology for determining reinsurance exposure subject to credit risk.
2_2018 risk profile figures adjusted based on the impact of the 2019 model changes.
PROPERTY-CASUALTY The increase in Property-Casualty underwriting risk was mainly driven by exposure growth (including purchase of Liverpool Victoria General
Overall, the underwriting risk profile for the Allianz Group is not expected to change much, as we do not plan to significantly change our underwriting standards (Allianz Standard for P&C Underwriting) or our risk appetite with regards to natural catastrophe, man-made, or terror risks and our corresponding retrocession reinsurance strategy.
The loss ratios for the Property-Casualty business segment are presented in the following table: Property-Casualty loss ratios1 for the past ten years %
BUSINESS RISK The risk capital contribution of business risk decreased by € 0.3 bn compared to the previous year. This is driven by the impact of lower interest rates on the lapse and lapse mass risk for most major
The following information is provided pursuant to § 289 (4) and
ACCOUNTING AND CONSOLIDATION PROCESSES The accounting and consolidation processes we use to produce our
Consolidated Financial Statements are based on a central consolidation and reporting IT solution and local general ledger solutions. The latter are largely harmonized throughout the Group, using standardized processes, master data, posting logics, and interfaces for data delivery to the Holding. Access rights to accounting systems are managed according to strict authorization procedures.
INTERNAL RISK AND CONTROL SYSTEM APPROACH Our approach can be summarized as follows:  We use a centrally developed risk catalog which is linked to individual accounts. This risk catalog is reviewed on a yearly basis and is the starting point for the definition of the Group’s as well as the operating entities’ scope on financial reporting risks. The methodology is described in our IRCS Guideline. In the course of the scoping process, both materiality and susceptibility to a misstatement are considered simultaneously. In addition to the quantitative calculation, we also consider qualitative criteria, such as the expected increase in business volume or the complexity of transactions.
 Based on the centrally provided risk catalog, our local entities identify risks that could lead to material financial misstatements.
Non-current assets and assets of disposal groups classified as held for sale 3 3,555 125
Liabilities of disposal groups classified as held for sale 3 2,236 62
Items that may be reclassified to profit or loss in future periods
Changes in actuarial gains and losses on defined benefit plans (1,064) 326
3_For further information regarding the share buy-back program 2019, please refer to note 19.
Payments for the purchase or origination of: Financial assets designated at fair value through income (4,150) (3,070)
Non-current assets and disposal groups classified as held for sale - -
Business combinations (note 3): Proceeds from sale of subsidiaries, net of cash disposed - (208)
Change in other loans and advances to banks and customers (originated loans) (5,483) (7,094)
Net cash from sale or purchase of treasury shares 5 16
Treasury bills, discounted treasury notes, similar treasury securities, bills of exchange and checks 6,952 6,526
Reverse repurchase agreements (due in three months or less) 2,598 -
The accompanying consolidated financial statements present the operations of Allianz SE with its registered office in Königinstrasse 28, 80802 Munich, Germany, and its subsidiaries (the Allianz Group).
The consolidated financial statements have been prepared as of and for the year ended 31 December 2019. The Allianz Group’s presentation currency is the Euro (€). Amounts are rounded to the nearest million (€ mn) unless otherwise stated.
SIGNIFICANT ACCOUNTING POLICIES AND USE OF ESTIMATES AND ASSUMPTIONS The following paragraphs describe important accounting policies as well as significant estimates and assumptions that are relevant for the
Allianz Group’s consolidated financial statements. Estimates and assumptions particularly influence the inclusion method as well as the accounting treatment of financial instruments and insurance contracts, goodwill, pension liabilities and similar obligations, and deferred taxes. Significant estimates and assumptions are explained in the respective paragraphs.
The following balances are generally considered to be noncurrent: investments, deferred tax assets, intangible assets, and deferred tax liabilities.
Allianz Group and the other shareholders in these companies or voting rights held by the Allianz Group are sufficient to direct the relevant activities unilaterally.
There are some entities where the Allianz Group holds a majority stake but where management has assessed that the Allianz Group does not control these entities because it has no majority representation in the governing bodies and/or it requires at least the confirmative vote of another investor to pass any decisions over relevant activities.
For certain investment funds in which the Allianz Group holds a stake of above 20 %, management has assessed that the Allianz Group has no significant influence because it is not represented in the governing bodies of these investment funds or their investment activities are largely predetermined.
The individual financial statements of each of the Allianz Group’s subsidiaries are prepared in their respective functional currency. The functional currency is the currency of the primary economic environment in which the subsidiary operates. Transactions recorded in currencies other than the functional currency (foreign currencies) are recorded at the exchange rate prevailing on the date of the transaction. At the balance sheet date, monetary assets and liabilities denominated in foreign currencies are translated into the functional currency using the closing exchange rate. While non-monetary items denominated in foreign currencies and measured at historical cost are translated at historical rates, non-monetary items measured at fair value are translated using the closing rate. Foreign currency gains and losses arising from foreign currency transactions are reported in income from financial assets and liabilities carried at fair value through income (net), except when the gain or loss on a non-monetary item measured at fair value is recognized in other comprehensive income. In this case, any foreign exchange component of that gain or loss is also recognized in other comprehensive income.
For the consolidated financial statements, the results and financial position of each of the Allianz Group’s subsidiaries are expressed in
Euro, the presentation currency of the Allianz Group. Assets and liabilities of subsidiaries not reporting in Euro are translated at the closing rate on the balance sheet date; income and expenses are translated at the quarterly average exchange rate. Any foreign currency translation differences, including those arising from the equity method, are recorded in other comprehensive income.
Market observable inputs also include interest rate yield curves, volatilities, and foreign currency exchange rates.
 Income approach: Conversion of future amounts such as cash flows or income to a single current amount (present value technique ).
Estimates and assumptions of fair values and hierarchies are particularly significant when determining the fair value of financial instruments for which at least one significant input is not based on observable market data (classified as level 3 of the fair value hierarchy). The availability of market information is determined by the relative trading levels of identical or similar instruments in the market, with emphasis placed on information that represents actual market activity or binding quotations from brokers or dealers.
The evaluation of whether a financial debt instrument is impaired requires analysis of the underlying credit risk/quality of the relevant issuer and involves significant management judgment. In particular, current publicly available information with regard to the issuer and the particular security is considered relating to factors including, but not limited to, evidence of significant financial difficulty of the issuer and breach of contractual obligations of the security, such as a default or delinquency on interest or principal payments. The Allianz Group also considers other factors that could provide objective evidence of a loss event, including the probability of bankruptcy and the lack of an active market due to financial difficulty. The presence of either a decline in fair value below amortized cost or the downgrade of an issuer’s credit rating does not in itself represent objective evidence of a loss event, but may represent objective evidence of a loss event when considered with other available information.
An available-for-sale equity security is considered to be impaired if there is objective evidence that the cost may not be recovered. The
CASH AND CASH EQUIVALENTS Cash and cash equivalents include balances with banks payable on demand, balances with central banks, cash on hand, treasury bills to the extent they are not included in financial assets held for trading, and checks and bills of exchange that are eligible for refinancing at central banks, subject to a maximum term of three months from the date of acquisition.
While the former category includes trading instruments and financial derivatives, the latter category is mainly designated at fair value to avoid accounting mismatches.
Held-to-maturity investments are debt securities with fixed or determinable payments and fixed maturities for which the Allianz Group has the positive intent and ability to hold to maturity. These assets are initially measured at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at amortized cost using the effective interest method.
Funds held by others under reinsurance contracts assumed relate to cash deposits to which the Allianz Group is entitled, but which the ceding insurer retains as collateral for future obligations of the
Real estate held for investment is carried at cost less accumulated depreciation and impairments. Real estate held for investment is depreciated on a straight-line basis over its useful life, with a maximum of 50 years, and regularly tested for impairment.
These assets are carried at cost less accumulated depreciation and impairments. They are depreciated on a straight-line basis over the useful life, with a maximum of 30 years, and regularly tested for impairment.
LOANS AND ADVANCES TO BANKS AND CUSTOMERS Loans and advances are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and which are not classified as financial assets held for trading, designated at fair value through income, or designated as available for sale. These assets are initially measured at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at amortized cost using the effective interest method.
Assets and liabilities related to reinsurance are reported on a gross basis. Reinsurance assets include balances expected to be recovered from reinsurance companies. The amount of reserves ceded to reinsurers is estimated in a manner consistent with the claim liability associated with the reinsured risks. To the extent that the assuming reinsurers are unable to meet their obligations, the respective ceding insurers of the Allianz Group remain liable to their policyholders for the portion reinsured. Consequently, allowances are made for receivables on reinsurance contracts which are deemed uncollectible.
Costs that vary with and are directly related to the acquisition and renewal of insurance contracts and investment contracts with discretionary participation features are deferred by recognizing a DAC asset.
At inception, DAC is tested to ensure that it is recoverable over the life of the contracts. Subsequently, loss recognition tests at the end of each reporting period ensure that the DAC is covered by future profits.
Acquisition costs for unit-linked investment contracts are deferred in accordance with IFRS 15, if the costs are incremental. For non-unitlinked investment contracts accounted for under IAS 39 at amortized cost, acquisition costs that meet the definition of transaction costs under IAS 39 are considered in the aggregate policy reserves.
Goodwill is accounted for at the acquiree in the acquiree’s functional currency. There is an at least annual evaluation whether it is deemed recoverable.
LAE relating to such claims. These estimates reflect the informed judgment of claims personnel based on general insurance reserving practices and knowledge of the nature and value of a specific type of claim.
Allianz Group relies on its past experience, adjusted for current trends and any other relevant factors, in estimating IBNR reserves.
The aggregate policy reserves for universal life-type insurance contracts are equal to the account balance, which represents premiums received and investment return credited to the policy, less deductions for mortality costs and expense charges. The aggregate policy reserve also includes reserves for investment contracts with discretionary participation features as well as for liabilities for guaranteed minimum mortality and morbidity benefits related to non-traditional contracts with annuitization options and unit-linked insurance contracts. For contracts with a discretionary participation feature, the whole contract is classified as one liability rather than separately recognizing the participation feature.
For contracts where the policyholder has the option to transfer the amounts invested in unit-linked funds to non-unit-linked funds, the insurance contract is reported in both aggregate policy reserves and financial liabilities for unit-linked contracts based upon the investment election at the reporting date.
Reserves for premium refunds include the amounts allocated under the relevant local statutory/contractual regulations or, at the entity’s discretion, to the accounts of the policyholders and the amounts resulting from the differences between these IFRS-based financial statements and the local financial statements (latent reserves for premium refunds), which will reverse and enter into future profit participation calculations. Unrealized gains and losses recognized for available-forsale investments are recognized in the latent reserves for premium refunds to the extent that policyholders will participate in such gains and losses on the basis of statutory or contractual regulations when they are realized, based on and similar to shadow accounting. The profit participation allocated to participating policyholders or disbursed to them reduces the reserves for premium refunds.
RESERVING PROCESS For the business segments Life/Health and Property-Casualty, the central oversight process around reserve estimates includes the setting of group-wide standards and guidelines, regular site visits, as well as regular quantitative and qualitative reserve monitoring.
(mortality, longevity, and morbidity risk) and on the development of interest rates and investment returns (asset-liability mismatch risk). These assumptions also have an impact on the presentation of costs arising from the origination of insurance business (acquisition costs and sales inducements) and the value of acquired insurance business (PVFP). To ensure consistency in the application of actuarial methods and assumptions in the Life/Health reserving process, the Allianz Group has designed a two-stage reserving process: Stage one: Life/Health reserves are calculated by qualified local staff experienced in the subsidiaries’ business. Actuaries in the local entities also conduct tests of the adequacy of the premiums and reserves to cover future claims and expenses (liability adequacy tests). The process follows group-wide standards for applying consistent and plausible assumptions. The appropriateness of the reserves and their compliance with group-wide standards is confirmed by the local actuary.
Stage two: The Allianz Group Actuarial function regularly reviews the local reserving processes, including the appropriateness and consistency of the assumptions, and analyzes the movements of the reserves. Any adjustments to the reserves and other insurance-related reporting items are reported to and analyzed together with the
Stage two: The Allianz Group Actuarial function forms an opinion on the adequacy of the reserves proposed by the local entities. The
The share-based compensation plans of the Allianz Group are classified as either equity-settled or cash-settled plans. Equity-settled plans are measured at fair value on the grant date (grant-date fair value) and the grant-date fair value is recognized as an expense over the vesting period. Where equity-settled plans involve equity instruments of
Allianz Group accrues the fair value of the award as compensation expenses over the vesting period. Upon vesting, any change in the fair value of any unexercised awards is also recognized as a compensation expense. Where expected tax deductions differ, in terms of amount and timing, from the cumulative share-based payment expense recognized in profit or loss, deferred taxes are recognized on temporary differences.
The Allianz Group has elected not to recognize right-of-use assets and lease liabilities for short-term leases and leases of low-value assets. Furthermore, the Allianz Group does not recognize right-of-use assets and lease liabilities for car leases. The expenses relating to the short-term leases and leases of low-value assets including car leases are expensed on a straight-line basis over the lease term.
EQUITY Issued capital represents the mathematical per-share value received at the issuance of shares. Additional paid-in capital represents the premium exceeding the issued capital received at the issuance of shares.
Please refer to the section above for an explanation of foreign currency changes that are recognized in equity. The effective portion of gains and losses of hedging instruments designated as hedges of a net investment in a foreign operation is recognized in foreign currency translation adjustments.
PREMIUMS Premiums for short-duration insurance contracts are recognized as revenues over the period of the contract in proportion to the amount of insurance protection provided. Premiums for long-duration insurance contracts are recognized as earned when due.
Revenues for universal life-type and investment contracts represent charges assessed against the policyholders’ account balances for front-end loads, net of the change in unearned revenue liabilities and cost of insurance, surrenders, and policy administration, and are included within premiums earned (net).
INTEREST AND SIMILAR INCOME AND INTEREST EXPENSES Interest income and interest expenses are recognized on an accrual basis using the effective interest method. This line item also includes dividends from available-for-sale equity securities as well as income from investments in associates and joint ventures. Dividends are recognized in income when the right to receive the dividend is established.
(carried interest) are not recognized as revenue prior to the date of the official declaration of distribution by the fund. The transaction price for asset management services is determined by the fees contractually agreed.
CLAIMS AND INSURANCE BENEFITS INCURRED These expenses consist of claims and insurance benefits incurred during the period, including benefit claims in excess of policy account balances and interest credited to policy account balances. Furthermore, it includes claims handling costs directly related to the processing and settlement of claims. Reinsurance recoveries are deducted from claims and insurance benefits.
INCOME TAXES Current income taxes are calculated based on the respective local taxable income and local tax rules for the period. In addition, current income taxes presented for the period include adjustments for uncertain tax payments or tax refunds for periods not yet finally assessed, excluding interest expenses and penalties on the underpayment of taxes. In the event that amounts included in the tax return are considered unlikely to be accepted by the tax authorities (uncertain tax positions ), a provision for income taxes is recognized. The amount is based on the best possible assessment of the tax payment expected. Tax refund claims from uncertain tax positions are recognized when it is probable that they can be realized.
The analysis and forecasting required in this process are performed for individual jurisdictions by qualified local tax and financial professionals. Given the potential significance surrounding the underlying estimates and assumptions, group-wide policies and procedures have been designed to ensure consistency and reliability around the recoverability assessment process. Forecast operating results are based upon approved business plans, which are themselves subject to a welldefined process of control. As a matter of policy, especially strong evidence supporting the recognition of deferred tax assets is required if an entity has suffered a loss in either the current or the preceding period. Recognition and recoverability of all significant deferred tax assets are reviewed by tax professionals at Group level and by the
IAS 17, IFRIC 4, SIC-15, and SIC-27. IFRS 16 introduces a single, on-balance sheet lease accounting model for lessees. A lessee recognizes a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments.
On transition to IFRS 16, the Allianz Group elected to apply the practical expedient to grandfather the assessment of which transactions are leases. It applied IFRS 16 only to contracts previously identified as leases. Contracts that had not been identified as leases under IAS 17 and IFRIC 4 were not reassessed for whether there is a lease. Therefore, the definition of a lease under IFRS 16 was applied only to contracts entered into or changed on or after 1 January 2019.
IAS 17:  Applied a single discount rate to a portfolio of leases with similar characteristics.
 Adjusted the right-of-use assets by the amount of the IAS 37 onerous contract provision immediately before the date of initial application, as an alternative to an impairment review.
 Excluded initial direct costs from measuring the right-of-use assets at the date of initial application.
For leases classified as finance leases under IAS 17, the carrying amount of the right-of-use asset and the lease liability at 1 January 2019 were determined at the carrying amount of the lease asset and lease liability under IAS 17 immediately before that date.
The Allianz Group was not required to make any adjustments on transition to IFRS 16 for leases for which it acts as a lessor, except for subleases. The Allianz Group has accounted for its (sub)leases in accordance with IFRS 16 from the date of initial application. Under IFRS 16, the Allianz Group is required to assess the classification of subleases with reference to the right-of-use assets, not the underlying assets. On transition, the Allianz Group reassessed the classification of sublease contracts previously classified as operating leases under IAS 17. The
Allianz Group concluded that the sublease is a finance lease under
The operating lease commitment reported under IAS 17 can be reconciled to the lease liabilities according to IFRS 16 as follows: Reconciliation of lease commitment to lease liabilities € mn
Recognition exemption for short-term leases or leases expiring before 31 December 2019, leases of low value assets, car leases, and leases for intangible assets (183)
The following amendments and revisions to existing standards became effective for the Allianz Group’s consolidated financial statements as of 1 January 2019:  IAS 19, Plan Amendment, Curtailment or Settlement,
(Amendments to IFRS 3, IFRS 11, IAS 12 and IAS 23).
These changes had no material impact on the Allianz Group's financial results or financial position.
published the Exposure Draft Amendments to IFRS 17 in June 2019, which proposed to defer the mandatory effective date of IFRS 17 by one year, so that IFRS 17 should be applied after 1 January 2022
The Allianz Group is currently assessing the impact of the application of IFRS 17. As of the date of the publication of these consolidated financial statements, it is not practicable to quantify the effect on the
IFRS 9, Financial instruments, issued by the IASB in July 2014, fully replaces IAS 39 and provides a new approach on how to classify financial instruments based on their cash flow characteristics and the business model under which they are managed. Furthermore, the standard introduces a new forward-looking impairment model for debt instruments and provides new rules for hedge accounting.
It can be assumed that the main impact from IFRS 9 will arise from the new classification rules leading to more financial instruments being measured at fair value through income as well as the new impairment model. Interdependencies with IFRS 17 will need to be considered to assess the ultimate combined impact of both standards.
The amendments to IFRS 4, Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts, issued in September 2016, allow entities that issue insurance contracts within the scope of IFRS 4 to defer the implementation of IFRS 9 until 1 January 2021 under certain circumstances. In this context, it is to be noted that the Exposure Draft
Given the strong interrelation between the measurement of direct participating insurance contracts and the underlying assets held, the
Thereof, non-derivative investment contract liabilities measured at fair value through income applying IAS 39 amounted to € 107 bn, mostly consisting of financial liabilities for unit-linked contracts. Other insurance -related liabilities amounted to € 40 bn and included mainly other liabilities (e.g. payables as well as employee-related liabilities) as well as subordinated liabilities and financial liabilities carried at fair value through income related to certain derivatives. No change in the activities of the Allianz Group occurred subsequently that would have required a reassessment.
SPPI criterion and for all other financial assets: Financial assets under IFRS 9 classification rules € mn
The following table provides information about the credit risk exposures for financial assets with contractual terms that meet the
SPPI criterion. It includes the carrying amounts applying IAS 39 (in the case of financial assets measured at amortized cost before adjusting for any impairment allowances):
The fair values of financial assets included in the table above that are non-investment grade, and thus do not have low credit risk as of 31 December 2019, approximately equal the respective carrying amounts.
The publicly available IFRS 9 information disclosed by some subsidiaries that already apply IFRS 9 is not material from the
Allianz Group’s perspective. Furthermore, the vast majority of the financial instruments of these subsidiaries are financial assets for unitlinked contracts that are recorded at fair value through income under
The Allianz Group’s investments in associates and joint ventures that are insurance entities also apply the temporary exemption of applying IFRS 9 to the extent they qualify. All other investments in associates and joint ventures held by the Allianz Group already adopted
IFRS 9 as of 1 January 2018. The impact of adopting or deferring the application of IFRS 9 for the investments in associates or joint ventures is not material for the Allianz Group.
IFRS 3, Definition of a Business Annual periods beginning on or after 1 January 2020
IAS 1 and IAS 8, Definition of Material Annual periods beginning on or after 1 January 2020
IFRS 9, IAS 39 and IFRS 7, Interest Rate Benchmark Reform
2019 Effective 31 December 2019, Allianz UK acquired 100 % in each Liverpool Victoria General Insurance Group Limited (“LV GIG”) and Legal &
General Insurance Limited (“LGIL”). The main rationale for both acquisitions is to significantly increase the position of Allianz in the UK personal lines and in particular in the motor and household insurance segments, diversifying customer, product and distribution mix and unlocking synergies across Allianz businesses in the UK. The scale of the combined entities is considered to provide a competitive advantage.
The following table summarizes the total consideration transferred and the goodwill recognized at the acquisition date: Total consideration transferred and determination of goodwill € mn
Had LV GIG and LGIL been consolidated from 1 January 2019, the consolidated income statement would have included premiums earned (net) of € 1,613 mn and net income of € 23 mn.
Latin America (Life/Health), as a disposal group classified as held for sale.
As of 31 December 2019, cumulative gains of € 8 mn were reported in other comprehensive income relating to this disposal group classified as held for sale. No impairment loss has been recognized in connection with this transaction. A sales contract for the Allianz shares in
Allianz Sakura Multifamily Lux SCSp, Luxembourg, allocated to the reportable segments German Speaking Countries and Central & Eastern
No impairment loss has been recognized in connection with this transaction. The closing of the transaction is expected during the first half year of 2020. After completion of the transaction, the Allianz Group will
The business activities of the Allianz Group are organized by product and type of service: insurance activities, asset management activities, and corporate and other activities. Due to differences in the nature of products, risks, and capital allocation, insurance activities are further divided into the business segments Property-Casualty and Life/Health.
In accordance with the responsibilities of the Board of Management, each of the insurance business segments is grouped into the following reportable segments:  German Speaking Countries and Central & Eastern Europe,
Both asset management as well as corporate and other activities represent separate reportable segments. In total, the Allianz Group has identified 11 reportable segments in accordance with IFRS 8.
States, Canada, Europe, and the Asia-Pacific region represent the primary asset management markets.
Bulgaria, global alternative investment management services in the real estate sector, mainly on behalf of the Allianz Group’s insurance operations, as well as digital investments.
except for intragroup lease transactions which are classified as operating leases (i.e. off-balance sheet treatment by lessee) for internal and segment reporting purposes. Transactions between reportable segments are eliminated in the consolidation. Financial information is recorded based on reportable segments; cross-segmental countryspecific information is not determined.
Effective 1 January 2019, the Allianz Group amended its operating profit definition to exclude certain costs that arise directly from integration measures associated with external acquisitions of a certain magnitude or Group internal business combinations of entities with large business activities. Due to the one-off nature of integration expenses, the Allianz Group believes that the updated definition of operating profit provides more reliable and relevant information to the external audience, and accordingly, their exclusion provides additional insight into the operating profit trends of the underlying business.
belong to policyholders, the corresponding expenses for premium refunds are shown as non-operating as well.
Financial liabilities carried at fair value through income 114 126 17,900 11,421
Reserves for loss and loss adjustment expenses 65,414 61,442 12,184 11,672
Liabilities of disposal groups classified as held for sale 10 35 1,958 27
Operating income from financial assets and liabilities carried at fair value through income (net) (57) (49) (1,707) (3,351)
Interest expenses, excluding interest expenses from external debt (150) (97) (121) (104)
Operating change in reserves for insurance and investment contracts (net)2 (465) (235) (13,291) (9,349)
Non-operating income from financial assets and liabilities carried at fair value through income (net) (15) 40 109 16
Net income (loss) attributable to: 1_Total revenues comprise gross premiums written and (due to a definition change at the beginning of 2019) fee and commission income in Property-Casualty, statutory gross premiums in Life/ Health, operating revenues in Asset Management, and total revenues in Corporate and Other (Banking). Prior year figures have been adjusted accordingly.
2_For the year ended 31 December 2019, includes expenses for premium refunds (net) in Property-Casualty of € (153) mn (2018: € 86 mn).
Western & Southern Europe and Asia Pacific 12,320 12,513 1,518 1,776 1,083 1,339
Iberia & Latin America and Allianz Partners 12,547 10,741 457 498 274 320
Western & Southern Europe and Asia Pacific 28,053 29,335 1,620 1,359 1,235 823
Global Insurance Lines & Anglo Markets, Middle East and Africa 885 711 59 49 (55) 29
2_As of 31 December 2019, fair value and amortized cost of debt securities with a contractual maturity of less than one year amount to € 35,645 mn (2018: € 31,226 mn) and € 34,333 mn (2018: € 29,873 mn), respectively.
Government and government agency bonds 2,347 245 (1) 2,591 2,538 189 (46) 2,681 1_Also include corporate mortgage-backed securities.
2_As of 31 December 2019, fair value and amortized cost of debt securities with a contractual maturity of less than one year amount to € 215 mn (2018: € 408 mn) and € 212 mn (2018: € 400 mn), respectively.
EQUITY SECURITIES As of 31 December 2019, unrealized losses amounted to € 255 mn, a decrease of € 633 mn compared to 31 December 2018. They concern equity securities that did not meet the criteria of the
1_Includes loans and advances to banks and customers due within one year of € 11,031 mn (2018: € 12,674 mn).
The reserves for loss and loss adjustment expenses ceded to reinsurers in the business segment Property-Casualty amounted to € 9,496 mn
(2018: € 8,966 mn) as of 31 December 2019. Their change is shown in the respective table in note 14.
The Allianz Group reinsures a portion of the risks it underwrites in an effort to control its exposure to losses and events and to protect its capital resources. For natural catastrophe events, the Allianz Group has a centralized program in place that pools exposures from its subsidiaries by internal reinsurance agreements. Allianz SE limits exposures in this portfolio through external reinsurance. For other risks, the subsidiaries of the Allianz Group have individual reinsurance programs in place. Allianz SE participates with up to 100 % on an arm’s length basis in these cessions, in line with local requirements. The risk coming from these cessions is also limited by external retrocessions.
Reinsurance involves credit risk and is subject to aggregate loss limits. Reinsurance does not legally discharge the respective Allianz company from primary liability under the reinsured policies. Although the reinsurer is liable to this company to the extent of the business ceded, the Allianz company remains primarily liable as the direct insurer for all the risks it underwrites, including the share that is reinsured.
The Allianz Group monitors the financial condition of its reinsurers on a regular basis and reviews its reinsurance arrangements periodically in order to evaluate the reinsurer’s ability to fulfill its obligations to the
Allianz Group companies under existing and planned reinsurance contracts. The Allianz Group’s evaluation criteria, which include the degree of creditworthiness, capital levels, and marketplace reputation of its reinsurers, are such that the Allianz Group believes that its reinsurance credit risk is not significant, and historically has not experienced noteworthy difficulty in collecting claims from its reinsurers. Additionally, and as appropriate, the Allianz Group may also require letters of credit, deposits, or other financial guarantees 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 31 December 2019 and 2018. The Allianz Group primarily maintains business relations with highly rated reinsurers.
Derivative financial instruments used for hedging that meet the criteria for hedge accounting, and firm commitments1 702 489
Changes in the consolidated subsidiaries of the Allianz Group - 104 1 26 - 6 18 -
Carrying amount as of 31 December 2,8481 3,1832 1,379 2,4163 2,856 2,934 1,378 -
Accumulated depreciation/amortization as of 31 December 1,025 5,667 2,629 4233 1,014 4,879 2,880 1_As of 31 December 2019, assets pledged as security and other restrictions on title were € 103 mn (2018: € 104 mn).
3_Consists mainly of real estate. For information on the first application of IFRS 16, please refer to note 2.
Intangible assets € mn 1_Primarily includes the long-term distribution agreement with Commerzbank AG.
 Global Insurance Lines & Anglo Markets, Middle East and Africa including Australia, Ireland, the United Kingdom, Middle East and
 Specialty Lines I, including Allianz Re, Allianz Global Corporate &
Global Insurance Lines & Anglo Markets, Middle East and Africa 16 16
The terminal values are largely based on the expected profits of the final year of the detailed planning period. Where necessary, the planned profits are adjusted to reflect long-term sustainable earnings.
Embedded Value and new-business value calculation. As a starting point for the impairment test for the CGUs in the Life/Health business segment, the Market Consistent Embedded Value (MCEV) and a multiple of the Market Consistent Value of New Business is used. MCEV is an industry-specific valuation method to assess the current value of the in-force portfolio. The Allianz Group uses an economic balance sheet approach to derive the MCEV, which is directly taken out of the market value balance sheet (MVBS) as determined using Solvency II guidance. In case where no adequate valuation reflecting a long-term view in line with management judgment and market experience could be derived from market-consistent methodology, the Appraisal Value can be derived from a Traditional Embedded Value (TEV). This was the case for the CGU US Life Insurance in 2019.
CGUs in the Property-Casualty business segment Discount rate Eternal growth rate
Specialty Lines II 7.9 0.5 1_The table provides an overview of weighted key parameters on CGU level of the country-specific discount rates and eternal growth rates used.
MVBS are measured at their market value as of the reporting date.
Technical provisions are an essential part of the liabilities included in the MVBS and generally consist of the best estimate plus a risk margin.
The following table provides an overview of the reference rates for the CGUs in the Life/Health business segment: Reference rates for the CGUs in the Life/Health business segment
Euro swap curve minus 10 bps credit risk adjustment plus 7 bps volatility adjustment CHF swap curve minus 10 bps credit risk adjustment plus 5 bps volatility adjustment
For those entities reporting in Euro: Euro swap curve minus 10 bps credit risk adjustment plus 7 bps volatility adjustment
For those entities reporting in Euro: Euro swap curve minus 10 bps credit risk adjustment plus 7 bps volatility adjustment For other entities: Local swap curve minus 10 bps credit risk adjustment plus volatility adjustment for the following currencies only (CZK: 12 bps, HUF: 1 bps, PLN: 8 bps)
The new-business value calculation is based on a best estimate of one year of value of new business, multiplied by a factor (multiple) to capture expected future new business. The best estimate of new business is generally derived from the achieved value of new business. The new business multiple accounts for the risk and the growth associated with future new business in analogy to the discount rate and the growth rate in a discounted earnings method. For all CGUs in the Life/Health business segment, a multiple of not more than ten times the value of new business is applied.
In the Life/Health business segment, sensitivity analyses were performed based on MCEV sensitivity testing on the reference rate. The analyses have shown that in case of a decrease in reference rates by 50 basis points, the appraisal value of each CGU still exceeds its carrying amount.
In the Corporate and Other business segment, a sensitivity analysis was performed with respect to interest rates. The analysis has shown that in case of an increase in the interest rates by 50 basis points and under consideration of a holding period usual for the asset class, the recoverable amount approximates its carrying value.
Balance carry forward of discounted loss reserves 4,157 (274) 3,883 4,096 (287) 3,809
Foreign currency translation adjustments and other changes1 895 (91) 803 567 (125) 442
1_Include effects of foreign currency translation adjustments for prior year's claims of gross € 493 mn (2018: € 26 mn) and of net € 391 mn (2018: € (70) mn) and for current year claims of gross € 31 mn (2018: € (44) mn) and of net € 40 mn (2018: Prior years’ net loss and loss adjustment expenses incurred reflect the changes in estimation charged or credited to the consolidated income statement in each year with respect to the reserves for loss and loss adjustment expenses established as of the beginning of that year.
During the year ended 31 December 2019, the Allianz Group recorded additional income of € 1,059 mn (2018: € 1,981 mn) net in respect of losses occurring in prior years. During the year ended 31 December 2019, this amount, expressed as a percentage of the net balance of the beginning of the year, was 1.9 % (2018: 3.5 %).
by accident year, the effect in the consolidated income statement in the respective calendar year combines the accident year loss ratio for the current year with the favorable or adverse development from prior years (run-off).
The run-off triangle, also known as the “loss triangle”, is a tabular representation of loss-related data (such as payments, loss reserves, ultimate losses) in two time-related dimensions. One of these is the calendar year, the other is the accident year (year of loss occurrence).
The data is only presented on a net basis, as this is considered to be more meaningful in order to represent the retained impact on
Group results. The run-off triangles are not prepared on a currency-adjusted basis. This means all figures are translated from the respective local currency into the Allianz Group presentation currency (Euro), consistently using the exchange rates applicable at the respective reporting date. This ensures that the reserves reconcile with reserves in the consolidated balance sheet.
LOSS PAYMENTS FOR THE INDIVIDUAL ACCIDENT YEARS (PER CALENDAR YEAR, NET)
2_The total development 2019 to 2018 of € (361) mn represents the cumulative change from re-estimating the ultimate loss for prior year claims. Considering foreign currency translation adjustments of net € 391 mn as well as changes in the consolidated subsidiaries of the Allianz Group and other changes of in total € 1,030 mn, this leads to an effective run-off of net € 1,059 mn, which can be found in the table "Change in reserves for loss and loss adjustment expenses" within this note.
The ultimate loss of an accident year comprises all payments made for that accident year up to the reporting date, plus the loss reserves at the reporting date. Given complete information regarding all losses incurred up to the reporting date, the ultimate loss for each accidentyear period would remain unchanged. In practice, however, the ultimate loss (based on estimates) is exposed to fluctuations that reflect the increase in knowledge regarding the loss cases. The loss ratio presented above deviates from the reported loss ratio because the ultimate loss in the table above is based on the sum of the payments plus the loss reserves, not the incurred loss as stated in the consolidated income statement. This means that effects like changes in consolidated subsidiaries, foreign currency translation and unwinding of discounted loss reserves are presented differently.
CONCENTRATION OF INSURANCE RISK IN THE PROPERTY-CASUALTY BUSINESS SEGMENT Further risk disclosure requirements of IFRS 4 in connection with IFRS 7 are reflected in the following sections of the Risk and Opportunity Report within the Group Management Report:  Internal risk capital framework,
 Underwriting risk in the section Quantifiable risks and opportunities by risk category.
CONTRACTUAL CASH FLOWS As of 31 December 2019, the reserves for loss and loss adjustment expenses which are expected to be due in 2020 amounted to € 18,298 mn, while those expected to be due between 2021 and 2024
amounted to € 22,258 mn and those expected to be due after 2024 amounted to € 19,565 mn.
Global Insurance Lines & Anglo Markets, Middle East and Africa 1,642 366 2,008 1,560 284 1,844
The majority of the Allianz Group’s Life/Health business segment operations are conducted in Western Europe. Insurance laws and regulations in Europe have historically been characterized by legal or contractual minimum participation of contract holders in the profits of the insurance company issuing the contract. In particular, life insurance business in Germany, Switzerland, and Austria, which comprises approximately 52 % (2018: 50 %) of the Allianz Group’s reserves for insurance and investment contracts as of 31 December 2019, includes a substantial level of policyholder participation in all sources of profit, including mortality/morbidity, investment, and expense. As a result of this policyholder participation, the Allianz Group’s exposure to insurance, investment and expense risk is mitigated.
Furthermore, 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 expose the Allianz Group to a certain longevity risk, however, adverse developments can be counteracted by using the flexible crediting options on the in-force book. 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 Allianz Group’s unit-linked contracts in France and Italy do not incorporate significant insurance risk.
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, the geographic diversity of the Allianz Group’s Life/Health business segment and the substantial level of policyholder participation in mortality /morbidity risk in certain countries in Western Europe, the
The Allianz Group’s Life/Health business segment is exposed to significant investment risk as a result of guaranteed minimum interest rates being included in most of its non-unit-linked contracts. The weighted average guaranteed minimum interest rates of the
Life/Health, comprising 86 % (2018: 86 %) of the aggregate policy reserves in this business segment in 2019, can be summarized by country as follows: Weighted average guaranteed minimum interest rates of life insurance entities
IFRS 7 are reflected in the following sections of the Risk and Opportunity Report within the Group Management Report:  Internal risk capital framework,
Allianz Group has made assumptions in estimating 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 used to establish the reserves for insurance and investment contracts in accordance with the Allianz Group’s established accounting policy. Due to the uncertainty of the assumptions used, the amount presented could be materially different from the actual incurred payments in future periods.
Changes in the consolidated subsidiaries of the Allianz Group - 130
2_Consists of € 82,584 mn (2018: € 71,586 mn) unit-linked insurance contracts and € 49,584 mn (2018: € 43,774 mn) unitlinked investment contracts.
2_For further information regarding the first application of IFRS 16, please refer to note 2.
134 Annual Report 2019 − Allianz Group 18 _ Certificated and subordinated liabilities
As of 31 December 2018 Up to 1 year 1 - 5 years Over 5 years
2_Includes the issuance of two € 0.75 bn certificated bonds in the first quarter of 2019 and the redemption of a € 1.5 bn certificated bond in the third quarter of 2019.
Allianz SE, Munich DE000A1RE1Q3 2012 EUR 1,500 5.625 17 October 2042
(Aktiengesetz) do not exceed 10 % of the share capital, and (iii) to the extent necessary to grant a subscription right for new shares to the holders of bonds that carry conversion or option rights or provide for mandatory conversion. The subscription rights for new shares from the Authorized Capital 2018/I and the Conditional Capital 2010/2018 may only be excluded for the proportionate amount of the share capital of up to € 117 mn (corresponding to 10 % of the share capital at year-end 2019).
In addition, Allianz SE has authorized capital (Authorized Capital 2018/II) for the issuance of new shares against contributions in cash until 8 May 2023. The shareholders’ subscription rights are excluded.
(AGM) on 5 May 2010 or 9 May 2018, are exercised or the conversion obligations under such bonds are fulfilled, and only to the extent that the conversion or option rights or conversion obligations are not serviced through treasury shares or through shares from authorized capital.
Within 10 years after the issuance a mandatory conversion of the notes into Allianz shares at the then prevailing share price may apply if certain events occur, subject to a floor price of at least € 74.90 per share. Within the same period, investors have the right to convert the notes into Allianz shares at a price of € 187.26 per share. Both conversion prices are as of inception and subject to anti-dilution provisions.
Number of issued shares outstanding as of 1 January 423,498,025 438,879,929
Number of issued shares outstanding as of 31 December 416,577,182 423,498,025
Total number of issued shares 417,172,859 424,459,661 1_Thereof 595,677 (2018: 961,636) own shares held by Allianz SE.
The proposal for appropriation of net earnings reflects the 595,677 treasury shares held directly and indirectly by the company as of 31 December 2019. Such treasury shares are not entitled to the dividend pursuant to § 71b of the German Stock Corporation Act (AktG).
As of 31 December 2019, the remaining treasury shares of Allianz SE
The treasury shares of Allianz SE and its subsidiaries represented € 1.7 mn (2018: € 2.7 mn) or 0.14 % (2018: 0.23 %) of the issued capital as of 31 December 2019.
Program 2019 have been redeemed according to the simplified procedure without reduction of the share capital.
CAPITAL REQUIREMENTS The Allianz Group’s capital requirements primarily depend on the type of business that it underwrites, the industry and geographic locations in which it operates, and the allocation of the Allianz Group’s investments. During the Allianz Group’s annual planning and strategic dialogs with its related undertakings, internal capital requirements are determined through business plans regarding the levels and timing of capital expenditures and investments. These plans also form the basis for the Allianz Group’s capital management. Resilience under stress conditions is also considered when determining the internal capital requirements of the Group. The regulators impose minimum capital requirements on the Group and its related undertakings. For further details on how Allianz Group manages its capital, please refer to the section “Target and strategy of risk management” of the Risk and Opportunity Report.
Group as of 1 January 2016, the risk profile is measured and steered based on the approved Solvency II internal model1. The Allianz Group has introduced a target Solvency ratio in accordance with Solvency II, based on pre-defined stress scenarios for both the Group and related undertakings, supplemented by ad-hoc scenarios, historical and reverse stress tests, and sensitivity analyses.
The Allianz Group’s Own Funds are composed of the eligible Own
Compared to year-end 2018, the Solvency II capitalization ratio decreased by 17 %-p to 212 % (2018: 229 %) as the increase in Solvency II capital requirement was only partially offset by the increase in
prepare individual financial statements based on local laws and regulations. The local regulations establish additional restrictions on the minimum level of capital and the amount of dividends that may be paid to shareholders. The respective local minimum capital requirements are based on various criteria including, but not limited to, the volume of premiums written or claims paid, amount of insurance reserves, investment risks, mortality risks, credit risks, and underwriting risks.
As of 31 December 2019, the Allianz Group believes that there are no outstanding regulatory capital or compliance matters that would have materially adverse effects on the financial position or the results of operations of the Allianz Group.
1_Include € 699 mn (2018: € 559 mn) ceded acquisition costs.
During the year ended 31 December 2019, current income taxes included expenses of € 149 mn (2018: income of € 329 mn) related to prior years, deferred income taxes included income of € 102 mn (2018: expenses of € 239 mn) related to prior years.
Income taxes relating to components of other comprehensive income € mn
Share of other comprehensive income of associates and joint ventures 14 (10)
Changes in actuarial gains and losses on defined benefit plans 411 (73)
For the year ended 31 December 2019, the write-down of deferred taxes on tax losses increased the tax expenses by € 137 mn (2018: € 14 mn). The reversal of write-down of deferred tax assets on tax losses carried forward resulted in deferred tax income of € 66 mn
(2018: € 4 mn). Due to the use of tax losses carried forward, for which deferred tax assets had previously been written off, the current income tax expenses decreased by € 1 mn (2018: € 1 mn). Deferred tax income increased by € 48 mn (2018: € 9 mn) due to the use of tax losses carried forward, for which deferred tax assets had previously been written off. 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’s deferred taxes are the applicable national rates, which in 2019 ranged from 10.0 % to 40.0 %, with changes to tax rates that had already been adopted in Argentina, France, Greece, Luxembourg, Netherlands, Slovakia and Switzerland by 31 December 2019 taken into account.
142 Annual Report 2019 − Allianz Group arising from investments in Allianz Group companies for which no deferred tax assets are recognized, as it is not probable that they will reverse in the foreseeable future, amounted to € 68 mn (2018: € 92 mn).
TAX LOSSES CARRIED FORWARD Tax losses carried forward at 31 December 2019 of € 7,379 mn (2018: € 7,531 mn) resulted in the recognition of deferred tax assets to the extent that there is sufficient certainty that the unused tax losses will be utilized. At the reporting date, this prerequisite was not fulfilled for a partial amount of € 2,803 mn (2018: € 2,737 mn). According to tax legislation as of 31 December 2019, an amount of € 2,510 mn (2018: € 2,514 mn) of these tax losses may be carried forward indefinitely and in unlimited amounts, whereas an amount of € 293 mn (2018: € 224 mn) of these tax losses carried forward will expire over the next 20 years if not utilized.
The table shows the fair value and notional amounts of all freestanding derivatives, as well as derivatives for which hedge accounting is applied by the Allianz Group, as of 31 December 2019 and 2018, respectively.
DERIVATIVE FINANCIAL INSTRUMENTS USED IN ACCOUNTING HEDGES As of 31 December 2019, derivatives which form part of hedge accounting relationships, and which are included in the line items other assets and other liabilities, had a notional amount of € 21.1 bn (2018: € 20.7 bn) as well as a positive fair value of € 702 mn (2018: € 489 mn)
and a negative fair value of € 532 mn (2018: € 330 mn). These hedging instruments mainly include interest rate forwards with a total positive fair value of € 374 mn (2018: € 193 mn).
FAIR VALUE HEDGES The Allianz Group uses fair value hedges to hedge the exposure to changes in the fair value of financial assets due to movements in interest or exchange rates and to hedge its equity portfolio against equity market risk. As of 31 December 2019, the derivative financial instruments used for the related fair value hedges of the Allianz Group had a total negative fair value of € 24 mn (2018: total positive fair value of
CASH FLOW HEDGES During the year ended 31 December 2019, cash flow hedges were used to hedge the exposure to the variability of cash flows arising from interest rate or exchange rate fluctuations as well as inflation. As of 31 December 2019, the derivative instruments utilized had a total positive fair value of € 503 mn (2018: € 202 mn).
OFFSETTING The Allianz Group enters into enforceable master netting arrangements and similar arrangements mainly for derivatives transactions.
Credit risk associated with netting arrangements is further mitigated by collateral. For further information on collateral, please refer to note 34. The maximum credit risk exposure is represented by the carrying amount of the financial assets.
Certain risk disclosure requirements of IFRS 7 are reflected in the following sections of the Risk and Opportunity Report within the Group
FAIR VALUES AND CARRYING AMOUNTS The following table compares the carrying amount and fair value of the Allianz Group’s financial assets and financial liabilities: Fair values and carrying amounts of financial instruments € mn
As of 31 December 2019, fair values could not reliably be measured for equity investments with carrying amounts totaling € 81 mn (2018: € 61 mn). These investments are primarily investments in privately held corporations and partnerships. During the year ended 31 December 2019, such investments with carrying amounts of € 61 mn (2018: € 119 mn) were sold. The gains and losses from these disposals were immaterial.
FAIR VALUE MEASUREMENT ON A RECURRING BASIS The following financial assets and liabilities are carried at fair value on a recurring basis:  Financial assets and liabilities held for trading,
Government and government agency bonds 17,836 204,721 843 223,400 18,234 178,530 766 197,531
Financial assets for unit-linked contracts 103,695 27,314 1,159 132,168 90,856 23,676 829 115,361
This position mainly includes derivative financial instruments. The fair value of these derivatives is mostly determined based on the income approach, using present value techniques and the Black-Scholes-Merton model. Primary inputs for the valuation include volatilities, interest rates, yield curves, and foreign exchange rates observable at commonly quoted intervals. In some cases, it is determined based on the market approach.
Level 3 investments are mainly priced based on the income approach. The primary non-market observable input used in the discounted cash flow method is an option-adjusted spread taken from a set of benchmark securities with similar characteristics. A significant yield increased of the benchmark securities in isolation could result in a decreased fair value, while a significant yield decrease could result in an increased fair value. However, a 10 %
FINANCIAL LIABILITIES HELD FOR TRADING This position mainly includes derivative financial instruments.
Quantitative description of non-market observable input(s) used for the level 3 portfolios
FINANCIAL LIABILITIES FOR PUTTABLE FINANCIAL INSTRUMENTS Financial liabilities for puttable financial instruments are generally required to be recorded at the redemption amount with changes recognized in income or equity. The fair value is based on the net asset value or the use of present value techniques.
Net gains (losses) recognized in consolidated income statement 527 (142) 9 37 431
Net gains (losses) recognized in other comprehensive income - 2,065 1,026 - 3,091
Changes in the consolidated subsidiaries of the Allianz Group - 306 (237) - 68
Carrying value (fair value) as of 31 December 2019 231 33,418 18,173 1,159 52,982
Net gains (losses) recognized in consolidated income statement held at the reporting date (49) 77 1 37 67 1_Primarily include corporate bonds.
Net losses (gains) recognized in consolidated income statement 2,614 37 - 2,651
FAIR VALUE MEASUREMENT ON A NON-RECURRING BASIS Certain financial assets are measured at fair value on a non-recurring basis when events or changes in circumstances indicate that the carrying amount may not be recoverable.
If financial assets are measured at fair value on a non-recurring basis at the time of impairment, or if fair value less cost to sell is used as the measurement basis under IFRS 5, corresponding disclosures can be found in note 28.
Investments in associates and joint ventures 1 661 16,092 16,754 2 185 15,097 15,284
Real estate held for investment - - 23,463 23,463 - - 21,545 21,545
Loans and advances to banks and customers 6,493 66,708 58,015 131,216 6,333 66,911 48,595 121,839
assets transferred in the context of repurchase agreement and securities lending transactions are mainly available-for-sale debt and equity securities for which substantially all of the risks and rewards are retained. As of 31 December 2019, the carrying amount of the assets transferred for securities lending transactions amounted to € 9,009 mn (2018: € 9,570 mn). For repurchase agreements, the carrying amount of the assets transferred amounted to € 910 mn
(2018: € 857 mn) and the carrying amount of the associated liabilities
The Allianz Group engages in some business activities that involve the use of entities that meet the above-mentioned definition of structured entities. Primarily, the Allianz Group is involved with such entities due to its investment activities associated with its insurance business and due to its asset management activities. Furthermore, structured entities are used by the Allianz Group to source out certain risks to investors as part of its reinsurance business. Generally, the classification of an entity as a structured entity may require significant judgement.
Income derived from the management of securitization vehicles comprises asset management fees.
INVESTMENTS IN INVESTMENT FUNDS Considering the broad variety of investment funds across different jurisdictions, the classification of investment funds as structured entities based on the definition in IFRS 12 is judgmental. As a general rule, the management of relevant activities of an investment fund is delegated to the fund manager via asset management agreements. In contrast, influence from investors on the relevant activities of investment funds is usually either precluded by legal or regulatory provisions or not deemed substantial.
Investment funds are generally subject to stringent regulatory requirements from financial authorities in all jurisdictions across the world. Comprehensive regulation of funds protects fund investors and also helps to limit investment risk. These mechanisms result in a legal set-up of funds, agreed and accepted by investors and investment managers, that may lead to a classification as structured entities under
requirements to hold investments in specific assets, market segments, or regions. Within the insurance business, policyholder money is partly invested in investment funds, which include funds managed by
Allianz’s group-internal asset managers as well as funds set up and managed by third parties. Investment funds managed or invested in by Allianz Group may include mutual funds, special funds, and other funds.
Investment funds managed by group-internal asset managers can be reasonably associated with the Allianz Group. The use of the Allianz name for investment funds is another indicator that the Allianz Group has acted as a sponsor for the respective funds. Information on the management fees generated in the asset management business are disclosed in note 24.
2_Thereof rated AAA or AA € 26,445 mn (2018: € 22,121 mn).
As of the reporting date, the Allianz Group has receivables from unconsolidated investment funds, which are mainly due in return for asset management services, amounting to € 1,036 mn (2018: € 796 mn). Furthermore, the Allianz Group has entered commitments to invest in private equity funds and further financial instruments of up to € 20,691 mn as of 31 December 2019 (2018:€ 17,199 mn).
Besides the above-mentioned investments in investment funds, the Allianz Group also holds investment funds to fund unit-linked insurance contracts. However, these holdings are held on behalf and for the benefit of unit-linked policyholders only. For that reason, these holdings are not included in the above-mentioned table. As of 31 December 2019, the volume of unit-linked assets amounted to € 132,168 mn
Management does not believe that the outcome of these proceedings, including those discussed below, will have a material adverse effect on the financial position and the results of operations of the
Company of North America (Allianz Life) making allegations similar to those made in prior class actions regarding the sale of Allianz Life’s annuity products, including allegations of breach of contract and violation of California unfair competition law. In one matter, the Court denied class certification. The case, which continued as an individual action, was settled between the parties with no effect on
Allianz Group’s financial position. The ultimate outcome of the remaining case cannot yet be determined.
Since June 2017, the annual coupon is the 12-month Euribor plus a margin of 2.0 % p.a., the coupon payable on 30 June 2020 is 1.787 % p.a. The securities have no scheduled maturity and the security holders have no right to call for their redemption. Since June 2017, the securities may be redeemed annually on 30 June at the option of the issuer. On 18 November 2019, HT1 has issued a call notice with respect to the securities, effective on 30 June 2020. The call is subject to the absence of an obligation to write-down the silent participation on 31 December 2019 between HT1 Funding GmbH and Commerzbank
Lebensversicherungs-AG and some of its subsidiaries have assumed a contractual obligation to provide, if required, further funds to Protektor
The Allianz Group occupies property in many locations under various long-term leases and has entered into various leases covering the long-term use of data processing equipment and other office equipment.
For the year ended 31 December 2019, the total cash outflow for leases amounted to € 563 mn.
The Allianz Group leases out its investment properties (see note 6)
As of 31 December 2019, the maturities for the future minimum lease payments of operating leases were as follows: Operating leases - maturities for the future minimum lease payments € mn
The Allianz Group provides competitive and cost-effective retirement and disability benefits using risk appropriate vehicles. The plans may vary from country to country due to the different legal, fiscal and economic environment.
Risks typically associated with defined benefit plans are biometric risks such as longevity, disability, and death as well as economic risks such as interest rates, inflation and compensation increases. New plans are primarily based on contributions and may include, in some cases, guarantees such as the preservation of contributions or minimum interest rates.
Group Actuarial, Planning & Controlling, Group Risk and AIM met four times to provide global governance and pre-align pension-related topics such as risk management and Solvency II prior to relevant
Allianz Group decides each year whether and to which extent a budget for the contribution-based pension plans is provided.
Independently of this decision, an additional risk premium is paid to cover death and disability. Generally the accruals of the contributionbased pension plans are wholly funded, whereas the grandfathered plans are funded to a minor extent. On retirement, the accumulated capital is paid as a lump sum or converted to a lifetime annuity.
AVK is subject to German insurance regulation. The assets of the
contribution-based pension plans are allocated to a trust (Methusalem Trust e.V.) and managed by a board of trustees. For the AVK the annual minimum interest rate guaranteed is 1.75 % – 3.50 %, depending on the date of joining the Allianz Group, and for the closed part of the contribution-based pension plan it is 2.75 %.
Expenses recognized in the consolidated income statement 857 884 295 264 - - 563 621
Return on plan assets greater/(less) than interest income on plan assets - - 1,172 (178) - - (1,172) 178
Change in effect of asset ceiling in excess of interest - - - - 2 (4) 2 (4)
4_As of 31 December 2019, € 6,199 mn (2018: € 5,406 mn) of the defined benefit obligation are wholly unfunded, while € 20,285 mn (2018: € 18,030 mn) are wholly or partly funded.
Life insurance investment products 1,077 998 1_Includes as of 31 December 2019 € 521 mn in cash and cash equivalents in the Netherlands due to a plan change.
VVaG, Munich, which is not part of the Allianz Group. Plan assets do not include any real estate used by the Allianz Group and include only € 3.3 mn (2018: 39.1 mn) of own transferable financial instruments.
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.
During the year ended 31 December 2019, the Allianz Group recognized expenses for defined contribution plans of € 273 mn (2018: € 257 mn). Additionally, the Allianz Group paid contributions for state pension schemes of € 355 mn (2018: € 329 mn).
ALLIANZ EQUITY INCENTIVE PLAN (AEI PLAN) The AEI plan is granted in the form of restricted stock units (RSUs) and is part of the variable compensation component for the plan beneficiaries.
The RSU granted to a plan participant obligate the Allianz Group to pay in cash the ten-day average Xetra closing price of the Allianz SE
The RSUs are subject to a contractual vesting period of four years and the payout per RSU is fixed on the last day of the contractual vesting period, which ends on the tenth trading day following the annual financial media conference in the year the respective AEI plan expires.
The RSUs are virtual stocks without dividend payments and with a capped payout. The fair value is calculated by subtracting the net present value of expected future dividend payments until maturity as well as the fair value of the cap from the prevailing share price as of the valuation date. The cap is valued as a European short call option, using prevailing market data as of the valuation date.