During the fourth quarter ended December 31, 2007, Selecta AG, Muntelier was reclassified to disposal groups held for sale.
The impact of the acquisition of MAN Roland Druckmaschinen AG, Offenbach, net of cash acquired, on the consolidated statement of cash flows for the year ended December 31, 2006 was: � mn
Intangible assets 268 Loans and advances to banks and customers 386 Other assets 931 Liabilities to banks and customers (491) Other liabilities (625) Deferred tax liabilities (125) Acquisition of subsidiary, net of cash acquired 344
The impact on the Group’s net income as of December 31, 2006 was � 26 mn.
Four Seasons Health Care Ltd., Wilmslow 100.0 8/31/2006 863 Corporate 158 Sale to third party
DresdnerGrund-Fonds, Frankfurt am Main 100.0 12/22/2005 2,029 Banking — Sale to third party Cadence Capital Management Inc., Delaware 100.0 8/31/2005 — Asset
Riunione Adriatica di Sicurtà S.p.A., Milan (“RAS”) 1) 10/13/2006 23.7 3,653 1,659 (1,659) Allianz Global Investors of America L.P., Delaware during 2006 0.3 70 (70) —
Riunione Adriatica di Sicurtà S.p.A., Milan (“RAS”) 11/30/2005 20.7 2,701 (1,339) (1,362) Allianz Global Investors of America L.P., Delaware during 2005 3.4 209 (209) — Bayerische Versicherungsbank AG, Munich 11/15/2005 10.0 22 82 (104) Assurances Générales de France, Paris during 2005 (1.0) — 19 127 1) Impact on shareholders’ equity includes increase in equity due to financing of AGF minority buy-out in the year 2007 of � 2,765mn and RAS minority buy-out in the year 2006 of � 3,653mn.
Asset Management The Allianz Group’s Asset Management segment operates as a global provider of institutional and retail asset management products and services to third-party investors and provides investment management services to the Allianz Group’s insurance operations. The Allianz Group managed � 765 bn of third-party assets on a worldwide basis as of December 31, 2007, with key management centers in Munich, Frankfurt, London, Paris, Singapore, Hong Kong, Milan, Westport (Connecticut) and San Francisco, San Diego and Newport Beach (California). The United States is the Allianz Group’s largest geographic region for third-party assets under management accounting for approximately 56.2 % (2006: 57.1 %; 2005: 59.6 %) of the total third-party assets under management. As measured by total assets under management at December 31, 2007, the Allianz Group is one of the five largest asset managers in the world.
Financial assets carried at fair value through income 3,302 4,814 13,216 11,026 168,339 181,628
LIABILITIES AND EQUITY Financial liabilities carried at fair value through income 96 1,070 5,147 5,251 120,383 114,338 Liabilities to banks and customers 6,865 4,473 6,078 7,446 320,388 365,635
Reserves for loss and loss adjustment expenses 56,943 58,664 6,773 6,804 — — Reserves for insurance and investment contracts 8,976 8,954 283,139 278,038 — — Financial liabilities for unit linked contracts — — 66,060 61,864 — —
Participation certificates and subordinated liabilities 905 1,605 60 66 7,966 8,456
Acquisition and administrative expenses (net) (10,616) (10,590) (10,216) (4,588) (4,437) (3,973) (5,061) (5,605) (5,661)
Income (loss) before income taxes and minority interests in earnings 7,261 7,560 6,166 3,102 2,700 2,271 714 1,275 1,526
As of and for the years 2007 2006 2005 2007 2006 2005 ended December 31, � mn � mn � mn % % %
� mn � mn � mn � mn � mn � mn � mn � mn � mn � mn � mn 1) Our reporting by division reflects the organizational changes within Dresdner Bank effective starting with 1Q 2007, resulting in two operating divisions, Private & Corporate Clients (“PCC“) and Investment Banking (“IB“). PCC combines all banking activities formerly provided by the Personal Banking and Private & Business Banking (including Private Wealth Management) divisions as well as our activities with medium-sized business clients from our former Corporate Banking division. IB, with Global Banking and Capital Markets, unites the activities formerly provided by the Dresdner Kleinwort Wasserstein division and the remaining activities of the former Corporate Banking division. Prior year balances have been adjusted accordingly to reflect these reorganization measures and allow for comparability across periods.
2) The Corporate Other division contains income and expense items that are not assigned to Dresdner Bank’s operating divisions. These items include, in particular, impacts from the accounting treatment for derivative financial instruments which do not qualify for hedge accounting as well as provisioning requirements for country and general risks. For the years ended December 31, 2007, 2006 and 2005 the impact from the accounting treatment for derivative financial instruments which do not qualify for hedge accounting on Corporate Other’s operating revenues amounted to � (54) mn, � (47) mn and � (214) mn, respectively.
Income (loss) before income taxes and minority interests in earnings 6,166 2,271 1,526 425 (1,999) (560) 7,829 1) Total revenues comprise Property-Casualty segment’s gross premiums written, Life/Health segment’s statutory premiums, Banking segment’s operating revenues and Asset Management segment’s operating revenues.
Ceded premiums written (5,320) (5,415) (5,529) Change in unearned premiums (416) (309) (485) Premiums earned (net) 38,553 37,950 37,685 Interest and similar income 4,473 4,096 3,747 Income from financial assets and liabilities designated at fair value through income (net) 2) 136 106 132 Income from financial assets and liabilities held for trading (net), shared with policyholders 2) 8 — — Realized gains/losses (net) from investments, shared with policyholders 3) 46 46 273 Fee and commission income 1,178 1,014 989
1) For the Property-Casualty segment, total revenues are measured based upon gross premiums written. 2) The total of these items equals income from financial assets and liabilities carried at fair value through income (net) in the segment income statement. 3) The total of these items equals realized gains/losses (net) in the segment income statement. 4) The total of these items equals impairments of investments (net) in the segment income statement. 5) Represents claims and insurance benefits incurred (net) divided by premiums earned (net). 6) Represents acquisition and administrative expenses (net) divided by premiums earned (net).
6) Represents acquisition and administrative expenses (net) divided by statutory premiums (net).
4) The total of these items equals income from financial assets and liabilities carried at fair value through income (net) in the segment income statement. 5) For the Banking segment, total revenues are measured based upon operating revenues. 6) Represents operating expenses divided by operating revenues.
Income from financial assets and liabilities carried at fair value through income (net) 31 29 38 37 19 18
Acquisition and administrative expenses (net), excluding acquisition-related expenses 3) (627) (655) (516) Fee and commission expenses (130) (127) (92) Expenses from fully consolidated private equity investments (2,317) (1,381) (572)
Loss before income taxes and minority interests in earnings (354) (987) (1,999)
1) The total of these items equals income from financial assets and liabilities carried at fair value through income (net) in the segment income statement. 2) The total of these items equals interest expense in the segment income statement. 3) The total of these items equals acquisition and administrative expenses (net) in the segment income statement.
As of December 31, 2007, compulsory deposits on accounts with national central banks under restrictions due to required reserves from the European Central Bank totaled � 5,473 mn (2006: � 4,176 mn).
The change in fair value of the credit derivatives attributable to changes in credit risk amounts to a gain of � 8 mn for the year ended December 31, 2007 and cumulatively to a gain of � 8 mn.
The change in fair value of loans to banks and customers attributable to changes in credit risk has been calculated using a credit spread function. The credit spread function is based on various parameters, primarily on the default probability and recovery rate of the loan holder. In most cases the fair value of the financial assets is determined using quoted marked prices, while in some cases specific valuation models based on the above parameters are used.
Equity securities 4,232 3,834 Loans to banks and customers 1,764 639 1) Debt securities held for trading include � 15.1 bn of asset-backed securities of Dresdner Bank as of December 31, 2007.
2) Debt securities designated at fair value through income include � 2.8 bn of credit investment related conduits (“CIRC”) of Dresdner Bank as of December 31, 2007.
3) Debt securities designated at fair value through income include � 0.8 bn of asset-backed securities of the Life/Health segment as of December 31, 2007.
Debt and equity securities included in financial assets held for trading Equity and debt securities included in financial assets held for trading are primarily marketable and listed securities. As of December 31, 2007, the debt securities include � 17,281 mn (2006: � 21,924 mn) from public sector issuers and � 42,434 mn (2006: � 59,957 mn) from other issuers.
Government and government agency bonds 1) includes asset-backed-securities of the Property-Casualty segment of � 4.9 bn and of the Life/Health segment of � 13.0 bn as of December 31, 2007.
Government and agency mortgage-backed securities (residential and commercial) 1,371 (22) 4,115 (90) 5,486 (112) Corporate mortgage-backed securities (residential and commercial) 2,720 (50) 1,902 (51) 4,622 (101)
Investments in associates and joint ventures As of December 31, 2007, loans to associated enterprises and joint ventures and debt securities available-for-sale issued by associated enterprises and joint ventures held by the Allianz Group amounted to � 1,232 mn (2006: � 2,236 mn). As of December 31, 2007, the fair value of investments in associates and joint ventures was � 5,654 mn (2006: � 4,941 mn).
Reversals of impairments 6 80 1 Carrying amount as of December 31, 7,758 9,555 9,569 Accumulated depreciation as of December 31, 2,356 3,484 3,521 Cost as of December 31, 10,114 13,039 13,090 1) The reclassifications for the year ended December 31, 2007 relate mainly to a portfolio of real estaste held for investment, that was classified as disposal group held for sale.
Loans and advances to banks 95,456 23,124 21,539 9,265 34,892 184,276 Loans and advances to customers 117,865 14,573 17,988 10,865 51,965 213,256
Short-term investments and certificates of deposit 3,188 7,128 10,316 1,124 5,651 6,775
Collateral paid for securities borrowing transactions 6,415 33,963 40,378 7,087 27,225 34,312
Wholesale and retail trade 4,999 4,306 Financial institutions (excluding banks) and insurance companies 9,626 7,740 Service providers 7,701 10,091
Industry, wholesale and retail trade and service providers 11,748 13,474 Financial institutions (excluding banks) and insurance companies 91,369 102,250
Gross investment in the lease Due in one year or less 168 372 Due after one year and not later than five years 900 1,336 Due after five years 947 1,036
Net investment in the lease Due in one year or less 73 274 Due after one year and not later than five years 533 1,022 Due after five years 650 785 1) As of December 31, 2007 and 2006, the residual values of the entire leasing portfolio were fully guaranteed.
Reconciliation of allowances for credit losses by class of financial assets As of December 31, 2007, the overall volume of allowance for credit losses includes loan loss allowances deducted from loans and advances to banks and customers in the amount of � 830 mn (2006: � 1,054 mn; 2005: � 1,647 mn) and provisions for credit losses included in other liabilities in the amount of � 201 mn (2006: � 261 mn; 2005: � 117 mn). The provision for credit losses includes provisions for irrevocable loan commitments in the amount of � 67 mn (2006: � 126 mn; 2005: � 36 mn), provisions for financial guarantees and contingent liabilities in the amount of � 74 mn (2006: � 65 mn; 2005: � 72 mn) and other provisions for credit losses of � 60 mn (2006: � 70 mn; 2005: � 9 mn).
Impaired loans 2,240 2,072 Impaired loans with specific allowances 1,301 1,428 Impaired loans with portfolio allowances 420 532 Non-accrual loans 1,555 1,801
Average balance of impaired loans 2,448 2,390 Interest income recognized on impaired loans 29 28 Interest income not recognized from nonaccrual loans 77 86 Interest collected and recorded on nonaccrual loans 3 7
The Allianz Group reinsures a portion of the risks it underwrites in an effort to control its exposure to losses and events and protect capital resources. International corporate risk exposures exceeding the relevant retention levels of the Allianz Group’s subsidiaries are reinsured internally by Allianz Global Corporate & Specialty AG (“AGCS”) where the portfolio is pooled and risks exceeding the retention limits were retroceded to the external reinsurance market. The Allianz Group maintains a centralized program for natural catastrophe events that pools exposures from a number of subsidiaries by internal reinsurance agreements with Allianz SE. Allianz SE limits exposures in this portfolio through external reinsurance. For other risks, the subsidiaries of the Allianz Group maintain individual reinsurance programs. Allianz SE participates as a reinsurer on an arms’ length basis in these programs.
Reinsurance involves credit risk and is subject to aggregate loss limits. Reinsurance does not legally discharge the Allianz Group from primary liability under the reinsured policies. Although the reinsurer is liable to the Allianz Group to the extent of the reinsurance ceded, the Allianz Group remains primarily liable as the direct insurer on all risks it underwrites, including the portion that is reinsured. The Allianz Group monitors the financial condition of its reinsurers on an ongoing basis and reviews its reinsurance arrangements periodically in order to evaluate the reinsurer’s ability to fulfill its obligations to the Allianz Group under existing and planned reinsurance contracts. The Allianz Group’s evaluation criteria, which includes the claims-paying and debt ratings, capital and surplus levels, and marketplace reputation of its reinsurers, are such that the Allianz Group believes that its reinsurance credit risk is not significant, and historically has not experienced noteworthy difficulty in collecting from their reinsurers. Additionally, and as appropriate, the Allianz Group may also require letters of credit, deposits, or other financial measures to further minimize its exposure to credit risk. In certain cases, however, the Allianz Group does establish an allowance for doubtful amounts related to reinsurance as appropriate, although this amount was not significant as of December 31, 2007 and 2006. Concentrations the Allianz Group has with individual reinsurers include Munich Re, Swiss Reinsurance Company and SCOR.
Cost as of January 1, 2,359 2,374 2,361 Accumulated amortization as of January 1, (1,132) (1,038) (839) Carrying amount as of January 1, 1,227 1,336 1,522 Changes in the consolidated subsidiaries of the Allianz Group 5 — — Foreign currency translation adjustments (6) (6) 7
Carrying amount as of December 31, 1,206 1,227 1,336 Accumulated amortization as of December 31, 1,138 1,132 1,038 Cost as of December 31, 2,344 2,359 2,374 1) During the year ended December 31, 2007, includes interest accrued on unamortized PVFP of � 70 mn (2006: � 62 mn; 2005: � 74 mn).
As of December 31, 2007, the percentage of PVFP that is expected to be amortized in 2008 is 14.29 % (12.84 % in 2009, 11.46 % in 2010, 10.49 % in 2011 and 9.72 % in 2012).
Cost as of January 1, 6,153 5,894 7,499 Accumulated depreciation as of January 1, (1,395) (1,503) (1,457) Carrying amount as of January 1, 4,758 4,391 6,042
Reversals of impairments 1 1 — Carrying amount as of December 31, 3,708 4,758 4,391 Accumulated depreciation as of December 31, 1,139 1,395 1,503 Cost as of December 31, 4,847 6,153 5,894 1) The reclassifications for the year ended December 31, 2007 relate mainly to a portfolio of real estaste held for own use, that was classified as disposal group held for sale.
As of December 31, 2007, the fair value of real estate held for own use was � 5,070 mn (2006: � 6,379 mn). As of December 31, 2007, assets pledged as security and other restrictions on title were � 107 mn (2006: � 27 mn).
Carrying amount as of December 31,1) 1,165 1,078 1,091 Accumulated amortization as of December 31, 2,781 2,686 2,381 Cost as of December 31, 3,946 3,764 3,472 1) As of December 31, 2007, includes � 746 mn (2006: � 683 mn; 2005: � 772 mn) for software developed inhouse and � 419 mn (2006: � 395 mn; 2005: � 319 mn) for software purchased from third parties.
1) As of December 31, 2007, includes prepaid benefit costs for defined benefit plans of � 402 mn (2006: � 265 mn).
During the second quarter ended June 30, 2007 the Allianz Group reclassified two portfolios of real estate held for investment and real estate held for own use in the PropertyCasualty, Life/Health and Corporate segment in Germany to disposal groups held for sale as the classification criteria of IFRS 5 were met. The real estate held for own use is expected to be disposed of through sale-leaseback transactions. No gain or loss was recognised on reclassification as fair value less costs to sell exceded the carrying amount. Partly the portfolio of real estate held for own use has already been disposed in 2007.
– the acquisition of a 100.0 % participation in Selecta AG, Muntelier,
– the acquisition of a 100.0 % participation in Commerce Assurance Bhd., Kuala Lumpur,
– the acquisition of 100.0 % participation in Insurance Company “Progress Garant”, Moscow,
– the acquisition of a 100.0 % participation in Insurance Company JTS Insurance Company “ATF POLICY”, Almaty,
Impairment tests for goodwill and intangible assets with indefinite lives For purposes of impairment testing, the Allianz Group has allocated goodwill to cash generating units. These cash generating units represent the lowest level at which goodwill is monitored for internal measurement purposes. During 2007, the Allianz Group realigned its cash generating units in the Property-Casualty and Life/ Health segments to ensure consistency with the management responsibilities of the Board of Management. As a result, the Allianz Group has allocated goodwill to nine cash generating units in the Property- Casualty segment, six cash generating units in the Life/Health segment, three cash generating units in the Banking segment one cash generating unit in the Asset Management segment and one cash generating unit in the Corporate segment. The goodwill of Dresdner Bank and the brand name “Dresdner Bank” have been allocated to two cash generating units in the Banking segment and to one cash generating unit in the Asset Management segment.
The groups of cash generating units of the Property-Casualty segment are: Insurance Germany, Austria & Switzerland; Europe I, including Italy, Spain, Portugal and Greece; Europe II, including France, Netherlands, Belgium, Luxemburg and Africa; South America; Asia Pacific & Middle East; Eastern Europe; Insurance Anglo, NAFTA Markets & Global Lines, including United Kingdom, Ireland, Australia, United States and Mexico; Specialty Lines I, including Allianz Global Corporate & Specialty and Specialty Lines II, including Credit Insurance, Travel Insurance and Assistance Services.
The cash generating units of the Banking segment are Private & Corporate Clients; Investment Banking and Corporate Other and Other Banking. The Asset Management segment is considered a cash generating unit. The cash generating unit of the Corporate segment is Private Equity.
The Allianz Group applies generally acknowledged valuation principles to determine the value in use. In this regard, the Allianz Group utilizes the capitalized earnings method to derive the value in use for all cash generating units in the Property-Casualty and Banking segments as well as for the Asset Management, Insurance Germany Health cash generating units. Generally, the basis for the determination of the capitalized earnings value is the business plan (“detailed planning period”) as well as the estimate of the sustainable returns which can be assumed to be realistic on a long term basis (“terminal value”) of the companies included in the cash generating units. The capitalized earnings value is calculated by discounting the future earnings using an appropriate discount rate.
Sensitivity analysis with regards to discount rates and/or key value drivers of the business plans were performed. Changes of capitalized earnings values of Property-Casualty cash generating units due to changes in applied long term sustainable combined ratios and of Banking cash generating unit as well as Asset Management cash generating units due to changes in assumptions regarding cost income rations were analyzed. For all cash generating units respective capitalized earnings value sensitivities in combination with fair value analysis still exceeded respective carrying values.
The carrying amounts of goodwill and brand names allocated to Allianz Group’s cash generating units as of December 31, 2007 and 2006 are as follows: As of December 31, 2007 2006
For all cash generating units in the Life/Health segment, with the exception of Insurance Germany Health, the Market Consistent Embedded Value, specifically Appraisal Value, approach is utilized to determine the value in use. The Market Consistent Embedded value is an industry-specific valuation method and is in compliance with the general principles of the discounted earnings methods. The Market
Consistent Embedded Value approach utilized is based on the Allianz Group’s Market Consistent Embedded Value guidelines.
Allianz Group Annual Report 2007 Notes to the Consolidated Financial Statements 15 Liabilities to banks and customers
Banks Customers Total Banks Customers Total � mn � mn � mn � mn � mn � mn
Term deposits and certificates of deposit 64,129 72,938 137,067 68,429 50,380 118,809
As of December 31, 2007, liabilities to customers include � 27,091 mn (2006: � 33,302 mn) of noninterest bearing deposits.
Financial liabilities held for trading Obligations to deliver securities 34,795 39,951 Derivative financial instruments 76,819 69,946 Other trading liabilities 12,469 10,988
The change in fair value of financial liabilities designated at fair value through income attributable to changes in credit risk has been calculated as the amount of change in fair value that is not attributable to changes in market conditions, but has been caused by a change in the entities own credit spread.
Gross Ceded Net Gross Ceded Net Gross Ceded Net � mn � mn � mn � mn � mn � mn � mn � mn � mn
Reserves for loss and loss adjustment expenses (net) 45,466 44,683 45,479 49,655 49,331 48,677 Reserves for loss and loss adjustment expenses (ceded) 14,588 12,067 10,049 10,604 9,333 8,266 Reserves for loss and loss adjustment expenses (gross) 60,054 56,750 55,528 60,259 58,664 56,943 Paid (cumulative) as of
Three years later 57,387 53,907 51,760 Four years later 56,802 53,068 Five years later 56,053 Cumulative surplus Gross surplus before changes in the consolidated subsidiaries of the Allianz Group 4,001 3,682 3,768 5,989 3,398
Net surplus before changes in the consolidated subsidiaries of the Allianz Group 1,365 2,397 3,204 4,582 2,412
Notes to the Consolidated Financial Statements Allianz Group Annual Report 2007 18 Reserves for insurance and investment contracts
1) Mainly relating to a reclassification from reserves for premium refunds and other insurance reserves.
Concentration of insurance risk in the Life/Health segment The Allianz Group’s Life/Health segment provides a wide variety of insurance and investment contracts to individuals and groups in approximately 30 countries around the world. Individual contracts include both traditional contracts and unit linked contracts. Without consideration of policyholder participation, traditional contracts generally incorporate significant investment risk for the Allianz Group. Traditional contracts include life, endowment, annuity, and supplemental health contracts. Traditional annuity contracts are issued in both deferred and immediate types. In addition, the Allianz Group’s life insurance operations in the United States issue a significant amount of equity indexed deferred annuities. Unit linked contracts generally result in the contract holder assuming investment risk. In addition, in certain markets, the Allianz Group issues group life, health, and pension contracts.
As of December 31, 2007 and 2006, the Allianz Group’s deferred acquisition costs and reserves for insurance and investment contracts for the Life/Health segment are summarized as follows: Deferred acquisition costs
Countries with legal or contractual policyholder participation in insurance, investment and/or expense risk
A majority part of the Allianz Group’s Life/Health segment operations is conducted in Western Europe. Insurance laws and regulations in Western Europe have historically been characterized by legal or contractual minimum participation of contract holders in the profits of the insurance company issuing the contract. In particular, Germany, Switzerland and Austria, which comprise approximately 47 % and 46 %, of the Allianz Group’s reserves for insurance and investment contracts as of December 31, 2007 and 2006 respectively, include 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.
The Allianz Group’s Life/Health segment is exposed to significant investment risk as a result of guaranteed minimum interest rates included in most of its traditional contracts. The weighted average guaranteed minimum interest rates of the Allianz Group’s largest operating entities in the Life/ Health segment by country can be summarized as follows: As of December 31, 2007 2006
In most of these markets, the effective interest rates being earned on the investment portfolio exceed these guaranteed minimum interest rates. In addition, the operations in these markets may also have significant mortality and expense margins. As a result, as of December 31, 2007 and 2006, the Allianz Group does not believe that it is exposed to a significant risk of premium deficiencies in its Life/Health segment. However, the Allianz Group’s Life/Health operations in Switzerland, Belgium, South Korea and Taiwan, have high guaranteed minimum interest rates on older contracts in their portfolios and, as a result, may be sensitive to any declines in investment rates or a prolonged low interest rate environment.
Unit linked insurance contracts 39,323 36,296 Unit linked investment contracts 26,737 25,568
Changes in financial liabilities for unit linked insurance contracts and unit linked investment contracts for the years ended December 31, 2007 and 2006 were as follows: Unit linked insurance contracts
Deposits retained for reinsurance ceded 3,227 5,716 Derivative financial instruments used for hedging purposes that meet the criteria for hedge accounting and firm commitments 2,210 907 Financial liabilities for puttable equity in-
Disposal groups held for sale 1,293 — Other liabilities 9,984 11,498
Allianz Group Annual Report 2007 Notes to the Consolidated Financial Statements 21 Certificated liabilities
Floating rate — 272 — — — — 272 — Current interest rate — 5.23 % — — — — — —
Contractual interest rate 4.19 % — — — — — — —
Current interest rate 6.80 % — — — — — — —
Current interest rate — — — — — 5.61 % — —
Current interest rate — — — — — 5.66 % — —
Contractual interest rate — — — — — 5.58 % — —
Total all other subsidiaries 60 — — — — 889 949 950 1) Except for interest rates. Interest rates represent the weighted-average.
2) Includes subordinated bonds issued by Allianz Finance B.V. and Allianz Finance II B.V. and guaranteed by Allianz SE. 3) The terms of the profit participation certificates provide for an annual cash distribution of 240 % of the dividend paid by Allianz SE per one Allianz SE share. Holders of profit participation certificates do not have voting rights, or any rights to convert the certificates into Allianz SE shares, or rights to liquidation proceeds. Profit participation certificates are unsecured and rank pari passu with the claims of other unsecured creditors. Profit participation certificates can be redeemed by holders upon twelve months prior notice every fifth year. Allianz SE has the right to call the profit participation certificates for redemption, upon six months prior notice every year. The next call date is December 31, 2008. Upon redemption by Allianz SE, the cash redemption price per certificate would be equal to 122.9 % of the then current price of one Allianz SE share during the last three months preceding the recall of the participation certificate. In lieu of redemption for cash, Allianz SE may offer 10 Allianz SE ordinary shares per 8 profit participation certificates.
Allianz Group Annual Report 2007 Notes to the Consolidated Financial Statements 23 Equity
Authorized capital As of December 31, 2007, Allianz SE had � 406,545,646 (158,806,893 shares) of authorized unissued capital (Authorized Capital 2006/I) which can be issued at any time up to February 7, 2011. The Board of Management, with approval of the Supervisory Board, is authorized to exclude the preemptive rights of shareholders if the shares are issued against a contribution in kind and, in certain cases, if they are issued against a cash contribution.
As of December 31, 2007, Allianz SE had � 9,848,297 (3,846,991 shares) of authorized unissued capital (Authorized Capital 2006/II) which can be issued at any time up to February 7, 2011. The Board of Management, with approval of the Supervisory Board, is authorized to exclude the preemptive rights of shareholders if the shares are issued to employees of the Allianz Group. Further, as of December 31, 2007, Allianz SE had an unissued conditional capital in the amount of � 250,000,000 (97,656,250 shares), authorized in 2006 and in the amount of � 5,632,000 (2,200,000 shares), authorized in 2004. A capital increase out of unissued conditional capital will be carried out only to the extent that conversion or option rights are exercised by holders of bonds issued by Allianz SE or any of its subsidiaries or that mandatory conversion obligations are fulfilled.
Issued shares outstanding as of January 1, 429,336,291 405,298,397 366,859,799 Capital increase for merger with RAS — 25,123,259 — Capital increase for tender offer AGF 16,974,357 — — Exercise of warrants — — 9,000,000 Capital increase for cash — — 10,116,850 Capital increase for employee shares 1,025,643 986,741 1,148,150 Change in treasury shares held for non-
Change in treasury shares held for trading purposes 1,660,788 (2,014,874) 1,008,088 Issued shares outstanding as of December 31, 448,910,648 429,336,291 405,298,397
In November 2007, 1,025,643 (2006: 986,741) shares were issued at a price of � 154.07 (2006: � 131.00) per share, enabling employees of Allianz Group subsidiaries in Germany and abroad to purchase 881,980 (2006: 929,509) shares at prices ranging from � 107.85 (2006: � 91.70) to � 128.39 (2006: � 111.35) per share. The remaining 143,663 (2006: 57,232) shares were warehoused and booked as treasury shares for further subscriptions by employees in the context of the employee share purchase plan in 2008. As a result, issued capital increased by � 3 mn and capital reserve increased by � 155 mn.
In September 2005, the Allianz Group issued 10,116,850 shares for proceeds of � 1,062 mn, which increased issued capital by � 26 mn and capital reserve of � 1,036 mn.
Notes to the Consolidated Financial Statements Allianz Group Annual Report 2007 have an exercise price of � 92 per share. The warrants were recorded in capital reserve at the premium received of � 174 mn on their issuance date. During the year ended December 31, 2005, as a result of the exercise of 9 mn warrants the Allianz Group received consideration of � 828 mn, which increased issued capital by � 23 mn and capital reserve by � 805 mn. On February 15, 2008 the remaining 2.2 mn warrants were exercised.
All shares issued during the years ended December 31, 2007, 2006 and 2005 are qualifying shares from the beginning of the year of issue.
Dividends For the year ended December 31, 2007, the Board of Management will propose to shareholders at the Annual General Meeting the distribution of a dividend of � 5.50 per qualifying share. During the years ended December 31, 2006 and 2005, Allianz SE paid a dividend of � 3.80 and � 2.00, respectively, per qualifying share.
In 2005, the Dresdner Bank Group placed 17,155,008 shares of Allianz SE in the market.
Dresdner Bank Group 100 671,654 0.15 Dresdner Bank Group (obligation for written put options on Allianz SE shares) — — —
Allianz Group Annual Report 2007 Notes to the Consolidated Financial Statements management business, was � 45.5 bn (2006: � 49.5 bn) including off-balance sheet reserves 1), surpassing the minimum legally stipulated level by � 16.6 bn (2006: � 23.4 bn). This margin resulted in a preliminary cover ratio 2) of 157 % at December 31, 2007 (2006: 190 %). In 2007, all Allianz Group companies also have met their local solvency requirements.
At December 31, 2007, our eligible capital for the solvency margin, required for insurance groups under German law, was � 50.9 bn (2006: � 53.3 bn), surpassing the minimum legally stipulated level by � 32.8 bn (2006: � 37.9 bn). This margin resulted in preliminary cover ratio2) of 281 % (2006: 345 %).
Tier I capital ratio (core capital) in % 9.1 10.4 Tier I & Tier II capital ratio in % 13.8 15.6 Total capital ratio in % 13.8 15.6
The distinction between “core capital” and “supplementary capital” in the table above reflects the ability of the capital components to cover losses. Core capital, with the highest ability to cover losses, corresponds to Tier I capital, while supplementary capital corresponds to Tier II capital as such terms are defined in applicable U.S. capital adequacy rules.
As of December 31, 2007, the Allianz Group’s insurance subsidiaries were in compliance with all applicable solvency and capital adequacy requirements.
Dividends paid in excess of these limitations generally require prior approval of the insurance commissioner of the state of domicile. The Allianz Group believes that these restrictions will not affect the ability of Allianz SE to pay dividends to its shareholders in the future. In addition, Allianz SE is not subject to legal restrictions on the amount of dividends it can pay to its shareholders, except the legal reserve in the appropriated retained earnings, which is required according to clause 150 (1) of the German Stock Corporation Act (AktG).
Supplementary Information to the Consolidated Income Statements 24 Premiums earned (net)
Allianz Group Annual Report 2007 Notes to the Consolidated Financial Statements 26 Income from financial assets and liabilities carried at fair value through income (net)
Income from financial assets and liabilities carried at fair value through income (net) comprises: Interest and dividend income
Financial assets and liabilities held for trading (334) 433 (1,942) (1,843) Financial assets designated at fair value through income 511 182 (68) 625 Financial liabilities designated at fair value through income (117) 52 45 (20) Financial liabilities for puttable equity instruments (net) — — (9) (9)
2) For the year ended December 31, 2007 includes impairments of � (1,252) mn for asset-backed securities held for trading of Dresdner Bank.
Corporate Segment Income from financial assets and liabilities held for trading for the year ended December 31, 2007, includes in the Corporate segment expenses of � 15 mn (2006: � 152 mn; 2005: � 332 mn) from derivative financial instruments for which hedge accounting is not applied. This includes expenses from derivative financial instruments embedded in exchangeable bonds of � 222 mn (2006: � 570 mn; 2005: � 605 mn), income from derivative financial instruments which partially hedge the exchangeable bonds, however which do not qualify for hedge accounting, of � 164 mn (2006: � 290 mn; 2005: � 288 mn), and income from other derivative financial instruments of � 43 mn (2006: � 128 mn; 2005: expense of � 15 mn).
2) During the year ended December 31, 2007, includes realized losses from the disposal of subsidiaries of � 83 mn (2006: � 3 mn; 2005: � 14 mn).
3) During the year ended December 31, 2007, includes realized losses from leveraged buy-out transactions of Dresdner Bank of � 30 mn.
Allianz Group Annual Report 2007 Notes to the Consolidated Financial Statements 28 Fee and commission income
Property-Casualty Fees from credit and assistance business 703 (2) 701 681 — 681 662 — 662
Notes to the Consolidated Financial Statements Allianz Group Annual Report 2007 29 Other income
Sales and service revenues 1,044 — 327 — 1,371 Other operating revenues 15 — — — 15
Sales and service revenues — — 597 — 597 Other operating revenues — — — — — Interest income — — 1 — 1
Allianz Group Annual Report 2007 Notes to the Consolidated Financial Statements 31 Claims and insurance benefits incurred (net)
Net Aggregate policy reserves (217) (4,776) — (4,993) Other insurance reserves 26 (255) — (229) Expenses for premium refunds (148) (5,237) (78) (5,463)
Net Aggregate policy reserves (208) (5,044) — (5,252) Other insurance reserves (17) (7) — (24) Expenses for premium refunds (482) (5,392) (26) (5,900)
Allianz Group Annual Report 2007 Notes to the Consolidated Financial Statements 33 Interest expense
Liabilities to banks and customers (3,406) (2,818) (3,102) Deposits retained on reinsurance ceded (101) (120) (279)
Recoveries on loans previously impaired 200 180 101 1) Additions to allowances for the year ended December 31, 2007 include allowances of � 70 mn related to sub-prime crisis.
Held-to-maturity investments — 1 3 Real estate held for investment 6 80 1 1) Impairments on available-for-sale debt securities include impairments of asset-backed securities of � 12 mn for the Property-Casualty segment and � 7 mn for the Life/Health segment.
Investment management expenses (432) (493) (374) Depreciation from real estate held for investment (192) (230) (253) Other expenses from real estate held for investment (270) (278) (265) Foreign currency gains and losses (net)
Foreign currency gains 687 473 417 Foreign currency losses (850) (580) (617)
Allianz Group Annual Report 2007 Notes to the Consolidated Financial Statements 38 Fee and commission expenses
Property-Casualty Fees from credit and assistance business (615) 1 (614) (487) 1 (486) (594) — (594)
During the year ended December, 31, 2007, current income tax expense included a benefit of � 5 mn (2006: benefit of � 51 mn; 2005: charge of � 44 mn) related to prior years.
Cost of goods sold — — — — — Commissions — — — — — General and administrative expenses — — (497) — (497) Interest expense — — (75) — (75)
Financial assets held for trading 134 236 Deferred acquisition costs 244 351 Tax losses carried forward 4,041 4,859 Other assets 932 955 Insurance reserves 3,608 4,668 Pensions and similar obligations 357 384 Other liabilities 1,325 1,513 Total deferred tax assets 13,645 16,308 Non recognition or valuation allowance for deferred tax assets on tax losses carried forward (814) (731) Effect of netting (8,060) (10,850) Net deferred tax assets 4,771 4,727 Deferred tax liabilities Intangible assets 614 861
Financial assets held for trading 490 842 Deferred acquisition costs 3,486 3,927 Other assets 751 1,076 Insurance reserves 2,383 3,152 Pensions and similar obligations 231 257 Other liabilities 834 1,268 Total deferred tax liabilities 12,033 15,438 Effect of netting (8,060) (10,850) Net deferred tax liabilities 3,973 4,588 Net deferred tax assets/(liabilities) 798 139
Tax losses carried forward Tax losses carried forward at December 31, 2007, of � 14,079 mn (2006: � 13,336 mn) result in recognition of deferred tax assets to the extent there is sufficient certainty that the unused tax losses will be utilized. � 12,271 mn (2006: � 10,414 mn) of the tax losses carried forward can be utilized without time limitation. The Allianz Group believes that it is more likely than not that the results of future operations will generate sufficient taxable income to realize its deferred tax assets.
Tax losses carried forward are scheduled according to their expiry periods as follows: � mn >10 years 1,209 Unlimited 12,271 Total 14,079
Fee and commission income 3,651 (390) 3,261 Fee and commission expense (603) 18 (585) Net fee and commission income 3,048 (372) 2,676
Trustee business in the Banking segment The following presents trustee business within the Allianz Group’s Banking segment not recorded in the consolidated balance sheet: As of December 31, 2007 2006 � mn � mn
Loans and advances to banks 2,030 1,956 Loans and advances to customers 959 1,205 Investments and other assets 564 729
Liabilities to banks 655 870 Liabilities to customers 2,898 3,020 Total liabilities 3,553 3,890 1) Including � 1,554 mn (2006: � 1,964 mn) of trustee loans.
The counterparty settlement risk is virtually excluded in the case of exchange-traded products, as these are standardized products. By contrast, over-the-counter (“OTC”) products, which are individually traded contracts, carry a theoretical credit risk amounting to the replacement value. The Allianz Group therefore closely monitors the credit rating of counterparties for OTC derivatives. To reduce the counterparty risk from trading activities, so-called crossproduct netting master agreements with the business partners are established. In the case of a defaulting counterparty, netting makes it possible to offset claims and liabilities not yet due.
1) As of December 31, 2007, includes embedded derivatives related to equity indexed annuities with negative fair values of � 4,327 mn (2006: � 4,199 mn).
Derivative financial instruments used in accounting hedges The Allianz Group principally uses fair value hedging. Important hedging instruments are interest rate swaps, interest rate forwards, currency swaps and currency forwards. Hedging instruments may be implemented for individual transactions (micro hedge) or for a portfolio of similar assets or liabilities (portfolio hedge).
Fair value hedges The interest rate swaps used by the Banking segment in fair value hedges of the interest rate risk of certificated and subordinated liabilities had a total net fair value as of December 31, 2007 of � 176 mn (2006: � 247 mn). Thereof, interest rate swaps with a positive fair value of � 241 mn (2006: � 305 mn) are recorded in the Allianz Group’s consolidated balance sheet in other assets, and interest rate swaps with a negative fair value of � 65 mn (2006: � 58 mn) are recorded in other liabilities. During the year ended December 31, 2007, the fair value of the interest rate swaps decreased by � 91 mn (2006: � 184 mn), whereas the certificated and subordinated liabilities hedged increased in fair value by � 84 mn (2006: � 187 mn), resulting in a net ineffectiveness of the hedge of � (7) mn (2006: � 3 mn) that is recognized in the Allianz Group’s consolidated income statement as income (expense) for financial assets and liabilities held for trading. For detailed information about certificated and subordinated liabilities, see Note 21 and Note 22, respectively.
Additionally the Allianz Group uses fair value hedges to protect against the change in the fair value of financial assets due to movements in interest rates or exchange rate. The derivative financial instruments used for all fair value hedges of the Allianz Group had a total positive fair value as of December 31, 2007 of � 168 mn (2006: negative fair value of � 388 mn).
The majority of the cash flow hedges originate from the Banking Segment. The cash flows of variable interest rate loans (hedge item) are hedged with interest rate swaps. The interest payments of the loans are based on the Libor and mature in June/July 2010. At the time of the interest payment the effective portion of the hedge, depending on the reference interest rate at that time, is recognised in the consolidated income statements.
Hedge of net investment in foreign operations As of December 31, 2002, foreign exchange hedging transactions in the form of foreign currency forwards with a total fair value of � 107 mn were outstanding with respect to hedges of currency risks related to a net investment in a foreign entity. This hedging strategy was terminated in the second quarter of 2003. Total unrealized gains of � 182 mn related to this hedging strategy remain in other reserves.
Notes to the Consolidated Financial Statements Allianz Group Annual Report 2007 44 Fair value of financial instruments
The following table presents a comparison of the carrying amount and the fair value of the Allianz Group’s classes of financial instruments: As of December 31, 2007 2006
Financial assets Cash and cash equivalents 31,337 31,337 33,031 33,031 Financial assets held for trading 163,541 163,541 180,105 180,105 Financial assets designated at fair value through income 21,920 21,920 18,887 18,887 Available-for-sale investments 268,001 268,001 277,898 277,898 Held-to-maturity investments 4,659 4,705 4,748 4,912 Loans and advances to banks and customers 396,702 394,741 423,765 425,527 Financial assets for unit linked contracts 66,060 66,060 61,864 61,864 Derivative financial instruments and firm commitments included in other assets 344 344 463 463
The fair value of a financial instrument is defined as the amount for which a financial asset could be exchanged, or a financial liability settled, between knowledgeable, willing parties in an arm’s length transaction. Whenever possible the fair value is determined using the market prices available in active markets. If there is no quoted market price available, valuation techniques are used which are based on market prices of comparable instruments or parameters from comparable active markets (market observable inputs). If no observable market inputs are available valuation models are used (non-market observable inputs).
Cash and cash equivalents Cash and cash equivalents comprises cash and demand deposits with banks together with short-term highly liquid investments that are readily convertible to known amounts of cash and subject to insignificant risk of change in value.
Derivative financial instruments and firm commitments included in other assets and other liabilities
Financial liabilities held for trading On initial recognition a financial liability is classified as held for trading if it is incurred principally for the purpose of selling in the near term, forms part of a portfolio of financial instruments that are managed together and for which there is evidence of short-term profit taking, or is a derivative (not in a qualifying hedge relationship). Held for trading financial liabilities are recognized at fair value with transaction costs being recognized in profit or loss. Subsequently they are measured at fair value. Gains and losses are recognized in profit or loss as they arise.
Financial liabilities that the Group designates on initial recognition as being at fair value through income are recognized at fair value, with transaction costs being recognized in profit or loss, and are subsequently measured at fair value. Gains and losses on financial liabilities that are designated as at fair value through income are recognized in profit or loss as they arise. Financial liabilities may be designated as at fair value through income only if such designation (a) eliminates or significantly reduces a measurement or recognition inconsistency; or (b) applies to a group of financial assets, financial liabilities or both that the Group manages and evaluates on a fair value basis; or (c) relates to an instrument that contains an embedded derivative which is not evidently closely related to the host contract.
Liabilities to banks and customers Financial liabilities due to banks and customers which are not held for trading, not designated as at fair value through income, not financial guarantee contracts, not commitments to provide a loan at a below-market interest rate and not designated as hedged items are measured at amortized cost using the effective interest method.
Financial liabilities for puttable equity instruments A puttable equity instrument is a financial instrument that gives the holder the right to put the instrument back to the issuer for cash or another financial asset. IAS 32 classifies any puttable instrument as a financial instrument.
The fair value of bonds and loans payable is determined by discounting future cash flows to present value at market rates for similar loans and other borrowings.
Day one profit as of January 1, 42 42 68 Additions from new trans-
Allianz Group Annual Report 2007 Notes to the Consolidated Financial Statements 46 Contingent liabilities, commitments, guarantees, and assets pledged and collateral
Litigation Allianz Group companies are involved in legal, regulatory and arbitration proceedings in Germany and a number of foreign jurisdictions, including the United States, involving claims by and against them, which arise in the ordinary course of their businesses, including in connection with their activities as insurance, banking and asset management companies, employers, investors and taxpayers. It is not feasible to predict or determine the ultimate outcome of the pending or threatened proceedings. Management does not believe that the outcome of these proceedings, including those discussed below, will have a material adverse effect on the financial position or results of operations of Allianz Group, after consideration of any applicable reserves.
On November 5, 2001, a lawsuit, Silverstein v. Swiss Re International Business Insurance Company Ltd., was filed in the United States District Court for the Southern District of New York against certain insurers and reinsurers, including a subsidiary of Allianz SE which is now named Allianz Global Risks US Insurance Company (“AGR US”). The complaint sought a determination that the terrorist attack of September 11, 2001 on the World Trade Center constituted two separate occurrences under the alleged terms of various coverages.
Allianz SE was indirectly concerned by this lawsuit as reinsurer of AGR US. In connection with the terrorist attack of September 11, 2001, we recorded net claims expense of approximately � 1.5 bn in 2001 for the Allianz Group on the basis of one occurrence. On October 18, 2006, the United States Court of Appeals for the Second Circuit of New York affirmed an earlier lower court decision in 2004 that had determined that the World Trade Center attack constituted two occurrences under the alleged terms of various coverages. Following this decision, we determined that no additional provisions on a net basis were necessary because additional liabilities arising from the decision were offset by positive developments in settling WTC claims and higher levels of reinsurance coverage due to Allianz under the two occurrence theory. On May 23, 2007, following a court-ordered mediation, AGR US reached a settlement with Silverstein Properties regarding the disputed insurance claims. The settlement amount is within our set case reserve and secured by letters of credit from SCOR, which is a reinsurer of AGR US for the relevant insurance policy. On May 24, 2007, SCOR announced that it considers the settlement agreed between AGR US and Silverstein Properties to not respect the terms and conditions of the Certificate of Reinsurance between SCOR and AGR US and referred the case to arbitration as contemplated under the Certificate of Reinsurance. The arbitration proceeding commenced in October 2007 and discovery is ongoing. We do not expect any material negative financial impact for Allianz from such arbitration.
(“PIMCO”), a subsidiary of Allianz Global Investors of America L.P. The complaints have been consolidated into a single case, and PIMCO Funds, a trust that is an open end investment company with multiple separate portfolios managed by PIMCO (the “Trust”), was added as a defendant. Plaintiffs, who each purchased 10-year Treasury note futures contracts, claim that they suffered damages from an alleged shortage of such notes when PIMCO held both physical and futures positions in 10-year Treasury notes for its client accounts. The complaint makes the allegation that PIMCO violated the federal Commodity Exchange Act by engaging in market manipulation. On July 31, 2007, the court granted class certification of a class consisting of those persons who purchased futures contracts to offset short positions between May 9, 2005 and June 30, 2005. On October 17, 2007, PIMCO and the Trust each filed a motion for summary judgment. The briefing of those motions was completed on February 6, 2008, and the motions are pending. On December 10, 2007, the U.S. Court of Appeals for the Seventh Circuit granted the petition of PIMCO and the Trust for seeking leave to appeal the class certification ruling. The appeal has not yet been briefed or argued. The Allianz Group believes the complaint is without merit, but given the early stage of the court proceedings, the outcome of this action cannot be predicted at this time.
Allianz Life Insurance Company of North America (“Allianz Life”) is named as a defendant in various putative class action lawsuits, mainly in Minnesota and California, in connection with the marketing and sale of deferred annuity products. Two lawsuits in Minnesota and three in California have been certified as class actions. The complaints allege that the defendant engaged in, among other practices, deceptive trade practices and misleading advertising in connection with the sale of such products, including, with the respect to one of the Minnesota lawsuits, the violation of the Minnesota Consumer Fraud and Deceptive and Unlawful Trade Practices Act. In November 2007, the court granted final approval of settlement in the other of the Minnesota cases. Another lawsuit that was filed by the Minnesota Attorney General in January 2007 against Allianz Life alleging unsuitable sales of deferred annuities to senior citizens was settled in October 2007. The still pending lawsuits have not yet progressed to a stage at which a potential outcome or exposure can be determined.
Dresdner Bank AG is a member of the German banks’ Joint Fund for Securing Customer Deposits (“Joint Fund”), which covers liabilities to each respective creditor up to specified amounts. As a member of the Joint Fund, which is itself a shareholder in LIKO, Dresdner Bank AG is liable with the other members of the Joint Fund for additional capital contributions, with the maximum being the amount of Dresdner Bank AG’s annual contribution. During the year ended December 31, 2007, the Joint Fund levied a contribution of � 24 mn (2006: � 22 mn). Under section 5 (10) of the Statutes of the Joint Fund for Securing Customer Deposits, the Allianz Group has undertaken to indemnify the Federal Association of German Banks (“Bundesverband deutscher Banken e.V.”) for any losses it may incur by reason of measures taken on behalf of any bank in which the Allianz Group owns a majority interest.
Loan commitments The Allianz Group engages in various lending commitments to meet the financing needs of its customers. The following table represents the amounts at risk should customers draw fully on all facilities and then default, excluding the effect of any collateral. Since the majority of these commitments may expire without being drawn upon, the amounts shown may not be representative of actual liquidity requirements for such commitments.
As of December 31, 2007, the future minimum lease payments under non-cancelable operating leases were as follows: � mn
as well as to invest in private equity funds totaling � 2,045 mn (2006: � 1,675 mn) as of December 31, 2007. As of December 31, 2007, commitments outstanding to purchase real estate used by third-parties and owned by the Allianz Group used for its own activities amounted to � 219 mn (2006: � 325 mn). As of December 31, 2007, commitments outstanding to purchase items of equipment amounted to � 197 mn (2006: � 112 mn). In addition, as of December 31, 2007, the Allianz Group has other commitments of � 229 mn (2006: � 290 mn) referring to maintenance, real estate development, sponsoring and purchase obligations.
Pursuant to para. 124 ff. of the German Insurance Supervision Act (“Versicherungsaufsichtsgesetz - VAG”), a mandatory insurance guarantee scheme (“Sicherungsfonds”) for life insurers was implemented in Germany. Each member of the scheme is obliged to make to the scheme annual contributions as well as special payments under certain circumstances.
The exact amount of obligations for each member is calculated according to the provisions of a Federal Regulation (“Sicherungsfonds-Finanzierungs-Verordnung (Leben) – SichLVFinV”). As of December 31, 2007, the future liabilities of Allianz Lebensversicherungs-Aktiengesellschaft and its subsidiaries to the insurance guarantee scheme amount to annual contributions of � 36 mn (2006: � 47 mn) and an obligation for special payments of � 85 mn (2006: � 78 mn).
In December 2002, Protektor Lebensversicherungs-Aktien gesellschaft (“Protektor”), a life insurance company whose role is to protect policyholders of all German life insurers, was founded. Allianz Lebensversicherungs-Aktiengesellschaft and some of its subsidiaries are obligated to provide additional funds either to the mandatory insurance guarantee scheme or to Protektor, in the event that the funds provided to the mandatory insurance guarantee scheme are not sufficient to handle an insolvency case. Such obligation amounts to a maximum of 1 % of the sum of the net under-
Notes to the Consolidated Financial Statements Allianz Group Annual Report 2007 writing reserve with deduction of payments already provided to the insurance guarantee scheme. As of December 31, 2007, and under inclusion of the contributions to the mandatory insurance scheme mentioned above, the aggregate outstanding commitment of Allianz Lebensversicherungs -Aktiengesellschaft and its subsidiaries to the insurance guarantee scheme and to Protektor was � 809 mn (2006: � 751 mn).
Market value guarantees Market value guarantees represent assurances given to customers of certain mutual funds and fund management agreements, under which initial investment values and/or minimum market performance of such investments are guaranteed at levels as defined under the relevant agreements. The obligation to perform under a market value guarantee is triggered when the market value of such investments does not meet the guaranteed targets at predefined dates.
The Allianz Group’s banking operations in France, in the ordinary course of business, issue market value and performance -at-maturity guarantees in connection with mutual funds offered by the Allianz Group’s asset management operations in France. The levels of market value and performance -at-maturity guarantees, as well as the maturity dates, differ based on the underlying agreements. In most cases, the same mutual fund offers both a market value guarantee and a performance-at-maturity guarantee. Additionally, the performance-at-maturity guarantees are generally linked to the performance of an equity index or group of equity indexes. As of December 31, 2007, the maximum potential amount of future payments of the market value and performance-atmaturity guarantees was � 1,355 mn (2006: � 1,086 mn), which represents the total value guaranteed under the respective agreements. The fair value of the mutual funds related to the market guarantees as of December 31, 2007, was approximately � 1,316 mn (2006: � 1,033 mn). Such funds generally have a duration of five to eight years.
Credit derivatives Credit derivatives consist of written credit default swaps, which require payment by the Allianz Group in the event of default of debt obligations, as well as written total return swaps, under which the Allianz Group guarantees the performance of the underlying assets. The notional principal amounts and fair values of the Allianz Group’s credit derivative positions as of December 31, 2007 are provided in Note 43.
Loans and advances to banks and customers 1,663 1,432 Financial assets carried at fair value through income 4,302 10,637
As of December 31, 2007, the Allianz Group has received collateral, consisting of fixed income and equity securities, with a fair value of � 212,894 mn (2006: � 254,653 mn), which the Allianz Group has the right to sell or repledge. As of December 31, 2007, � 156,096 mn (2006: � 134,005 mn) related to collateral that the Allianz Group has received and sold or repledged.
Notes to the Consolidated Financial Statements Allianz Group Annual Report 2007 47 Pensions and similar obligations
Retirement benefits in the Allianz Group are either in the form of defined benefit or defined contribution plans. Employees, including agents in Germany, are granted such retirement benefits by the various legal entities of the Allianz Group. In Germany, these are primarily defined benefit in nature.
Defined benefit plans Amounts recognized in the Allianz Group’s consolidated balance sheets for defined benefit plans are as follows: As of December 31, 2007 2006 � mn � mn
Prepaid benefit costs (402) (265) Accrued benefit costs 4,184 4,120 Net amount recognized 3,782 3,855
The following table sets forth the changes in the projected benefit obligations, the changes in fair value of plan assets and the net amount recognized for the various Allianz Group defined benefit plans: � mn � mn
Plan participants’ contributions 67 61 Foreign currency translation adjustments (229) (30)
Changes in the consolidated subsidiaries of the Allianz Group (68) 256 Fair value of plan assets as of December 31, 10,931 10,888 Funded status as of December 31, 5,211 6,392 Unrecognized net actuarial losses (1,444) (2,556) Unrecognized prior service costs 15 19 Net amount recognized as of December 31, 3,782 3,855 1) As of December 31, 2007, includes direct commitments of the consolidated subsidiaries of the Allianz Group of � 4,953 mn (2006: � 5,306 mn) and commitments through plan assets of � 11,189 mn (2006: � 11,974 mn).
3) In addition, the Allianz Group paid � 370 mn (2006: � 371 mn) directly to plan participants.
As of December 31, 2007, post-retirement health benefits included in the projected benefit obligation and net amount recognized amounted to � 109 mn (2006: � 142 mn) and � 138 mn (2006: � 152 mn), respectively.
The net periodic benefit cost related to defined benefit plans consists of the following components: � mn � mn � mn
The actual return on plan assets amounted to � 246 mn, � 467 mn and � 883 mn during the years ended December 31, 2007, 2006 and 2005.
A summary of amounts related to defined benefit plans is as follows: � mn � mn
Projected benefit obligation 16,142 17,280 Fair value of plan assets 10,931 10,888 Funded status 5,211 6,392 Actuarial (gains) / losses from experience adjustments on: Plan obligations (56) 8 Plan assets 331 90
Assumptions The assumptions for the actuarial computation of the projected benefit obligation and the net periodic benefit cost depend on the circumstances in the particular country where the plan has been established.
The weighted-average value of the assumptions for the Allianz Group’s defined benefit plans used to determine projected benefit obligation: As of December 31, 2007 2006
Discount rate 5.5 4.6 Rate of compensation increase 2.6 2.6 Rate of pension increase 1.8 1.5
Equity securities 30.9 7.6 Debt securities 64.4 4.3 Real estate 4.2 3.5
Equity securities 28.1 28.3 Debt securities 65.1 66.6 Real estate 2.8 2.9
The bulk of the plan assets are held by the Allianz Versorgungskasse VVaG, Munich. This entity insures effectively all employees of the German insurance operations.
Defined contribution plans Defined contribution plans are funded through independent pension funds or similar organizations. Contributions fixed in advance (e.g., based on salary) are paid to these institutions and the beneficiary’s right to benefits exists against the pension fund. The employer has no obligation beyond payment of the contributions. The main pension fund is the Versicherungsverein des Bankgewerbes a.G., Berlin, which covers most of the banking employees in Germany.
Stock appreciation rights The stock appreciation rights granted to a plan participant obligate the Allianz Group to pay in cash the excess of the market price of an Allianz SE share over the reference price on the exercise date for each stock appreciation right granted. The excess is capped at 150 % of the reference price. The reference price represents the average of the closing prices of an Allianz SE share for the ten trading days following the Financial Press Conference of Allianz SE in the year of issue. The stock appreciation rights vest after two years and expire after seven years. Upon vesting, the stock appreciation rights may be exercised by the plan participant if the following market conditions are attained: – during their contractual term, the market price of Allianz SE share has outperformed the Dow Jones Europe STOXX Price Index at least once for a period of five consecutive trading days; and
Upon the expiration date, any unexercised stock appreciation right will be exercised automatically if the above market conditions have been attained. The stock appreciation rights are forfeited if the plan participant ceases to be employed by the Allianz Group or if the exercise conditions are not attained by the expiration date.
The following table provides the assumptions used in estimating the fair value of the stock appreciation rights at grant date: Expected life (years) 7 7 7
The restricted stock units are notional stocks without dividend payments. The fair value is calculated by substracting the net present value of expected future dividend payments until maturity of the restricted stock units from the prevailing share price as of the valuation date.
The following table provides the assumptions used in calculating the fair value of the restricted stock units at grant date: The restricted stock units are accounted for as cash settled plans as the Allianz Group intends to settle in cash. Therefore, the Allianz Group accrues the fair value of the restricted stock units as compensation expense over the vesting period. During the year ended December 31, 2007, the Allianz Group recognized compensation expense related to the nonvested restricted stock units of � 55 mn (2006: � 85 mn; 2005: � 49 mn).
The Class B equity units issued under the Class B Plan vest over three to five years and are subject to repurchase by AGI L.P. upon death, disability or termination of the participant prior to vesting. As of January 1, 2005, AGI L.P. has the right to repurchase, and the participants have the right to cause AGI L.P. to repurchase, a portion of the vested Class B equity units each year. The call or put right is exercisable for the first time six months after the initial vesting of each grant. On the repurchase date, the repurchase price will be based upon the determined value of the Class B equity units being repurchased. As the Class B equity units are puttable by the plan participants, the Class B Plan is accounted for as a cash settled plan.
During the year ended December 31. 2007, Allianz acquired all of the remaining AGF shares from minority shareholders in the context of the Tender Offer and Squeeze-out (see Note 4 regarding the AGF acquisition and disposal of minority interests). Under the terms of an agreement (the ”Liquidity Agreement”) between Allianz SE, AGF and the beneficiaries of the AGF share option plans 2003-2006 (AGF employees), Allianz has the right to purchase all AGF shares issued through the exercise of these AGF share option plans after the put period (where the beneficiaries have the right to sell to Allianz). The price payable by Allianz per AGF share is a cash consideration equal to the Allianz 20-day-average share price prior to the date the right to buy or to sell is exercised, multiplied by a ratio representing the consideration proposed in the Tender Offer for each AGF share (� 126.43) divided by the Allianz share price on January 16, 2007 (� 155.72). This ratio is subject to adjustments in case of transactions impacting Allianz or AGF share capital or net equity. The cash settlement is based upon the initial offer proposed for each AGF share during the Tender Offer. As of December 31, 2007 all shares issued under these plans were fully vested and exercisable.
The effects of these modifications that increased the total fair value of the AGF share option plan to the AGF employees were expensed at the date of modification and amounted to � 15 mn in 2007. The modification of the settlement the Class B equity units of � 362 mn (2006: � 383 mn; 2005: � 536 mn). In addition, the Allianz Group recognized expense related to the priority claim on the adjusted operating profits of PIMCO LLC of � 126 mn (2006: � 140 mn; 2005: � 141 mn). During the year ended December 31, 2007, the Allianz Group called 22,155 Class B equity units. The total amount paid related to the call of the Class B equity units was � 324 mn.
The total recognized compensation expense for Class B equity units that are outstanding is recorded as a liability in other liabilities. As of December 31, 2007, the Allianz Group recorded a liability for the Class B equity units of � 1,350 mn (2006: � 1,455 mn).
Dresdner Kleinwort The Allianz Group awarded eligible employees of Dresdner Kleinwort (“DrK”) a promise to deliver Allianz SE shares on the vesting dates (hereafter “nonvested shares”). In jurisdictions in which regulatory restrictions do not allow for delivery of shares, the awards are settled in cash. The awards vest in three installments in each of the three years following the initial award. The number of shares to be disbursed depends on beneficiaries leaving the company and the operating results for the following years. If the results are positive, additional shares will be distributed, whereas if the results are negative, the number of shares to be disbursed will be reduced. A portion of the awards is also subject to performance vesting conditions, which are based on the financial operating results of DrK. If all of the performance targets have not been met for the previous year, then immediately prior to vesting, some or all of the performance related shares for that year are forfeited.
The shares settled by delivery of Allianz SE shares are accounted for as equity settled plans by the Allianz Group. Therefore, the Allianz Group measures the total compensation expense to be recognized for the equity settled shares based upon their fair value as of the grant date. The total compensation expense is recognized over the three year vesting period. The shares settled in cash are accounted for as cash settled plans by the Allianz Group. Therefore, the Allianz Group accrues the fair value of the cash settled shares as compensation expense over the vesting period. Upon vesting, any changes in the fair value of the unexercised nonvested shares settled in cash are recognized as
The RAS Group awarded eligible members of senior management with share purchase options on RAS ordinary shares. The share options had a vesting period of 18 months to 2 years and a term of 6.5 to 7 years.
The fair value of the options at grant date was measured using a trinomial tree option pricing model. Volatility was derived from observed historical market prices aligned with the expected life of the options. The expected life was estimated to be equal to the term to maturity of the options.
The following table provides the grant date fair value and the assumptions used in calculating their fair value: Fair value � 1.91 Assumptions: Share price at grant date � 17.32 Expected life (years) 7 Risk free interest rate 3.4 % Expected volatility 18.0 % Dividend yield 7.1 %
Outstanding as of December 31, 2006 — — Exercisable as of December 31, 2006 — —
Originally, the AGF share options plans were granted independently from the remuneration plans of the Allianz Group. At their original grant dates, the AGF share options had an exercise price of at least 85 % of the then prevailling market price. The original maximum term for the AGF share option plans granted was eight years.
The fair value of these options at grant date was calculated using a Cox-Rubinstein binomial tree option pricing model. Volatility was derived from observed historical market prices aligned with the expected life of the options. The expected life has been estimated to equal the term to maturity of the options.
During the year ended December 31, 2007, the Allianz Group recognized total compensation expenses related to the modified AGF share option plans of � 15 mn. As of December 31, 2007, the Allianz Group recorded a liability for the AGF plans of � 46 mn.
A summary of the number and weighted-average exercise price of the options outstanding and exercisable are as follows: Number of options
The shares settled by delivery of Allianz SE shares are accounted for as equity settled plans by the RAS Group. Therefore, the RAS Group measures the total compensation expense to be recognized for the equity settled shares based upon their fair value as of the grant date. The total compensation expense is recognized over the vesting period.
During the year ended December 31, 2007, the Allianz Group recorded compensation expense of � 4 mn (2006: � 6 mn) related to these share options.
Employee Stock purchase plans The Allianz Group offers Allianz SE shares in 24 countries to qualified employees at favorable conditions. The shares have a minimum holding period of one year to five years. During the year ended December 31, 2007, the number of shares sold to employees under these plans was 939,303 (2006: 929,509; 2005: 1,144,196). During the year ended December 31, 2007, the Allianz Group recognized as compensation expense, the difference between the market price (lowest quoted price of the Allianz SE stock at the official market in Germany on September 6, 2007) and the discounted price of the shares purchased by employees, of � 30 mn (2006: � 25 mn; 2005: � 24 mn).
Allianz Group Annual Report 2007 Notes to the Consolidated Financial Statements 49 Restructuring plans
As of December 31, 2007, the Allianz Group has provisions for restructuring resulting from a number of restructuring programs in various segments. These provisions for restructuring primarily include personnel costs, which result from severance payments for employee terminations, and contract termination costs, including those relating to the termination of lease contracts that will arise in connection with the implementation of the respective initiatives.
Additions to existing provisions — 29 3 32 Release of provisions recognized in previous years — (48) (2) (50) Release of provisions via payments — (288) (68) (356) Release of provisions via transfers — (294) — (294) Foreign currency translation adjustments — 12 — 12
Allianz Deutschland AG recorded releases of provisions via transfers to other provision categories of � 159 mn as of December 31, 2007.
Dresdner Bank Group’s provisions for restructuring Dresdner Bank Group supplemented its existing restructuring programs introduced since 2000 with the initiative “Programs 2007”. For these combined initiatives, Dresdner Bank Group has announced plans to eliminate an aggregate of approximately 19,650 positions. As of December 31, 2007, an aggregate of approximately 17,810 positions had been eliminated and approximately 550 additional employees had contractually agreed to leave Dresdner Bank Group under these initiatives.
During the year ended December 31, 2007, Dresdner Bank Group recorded restructuring charges for all restructuring programs of � 51 mn. This amount includes new provisions, additions to existing provisions, release of provisions recognized in previous years, and restructuring charges as reflected in the consolidated income statement.
Through the “Credit Initiative” and further restructuring initiatives within the Investment Banking Division (IB) the Dresdner Bank Group plans to reduce approximately 150 positions globally. Approximately 10 employees had been terminated and approximately 100 additional employees had contractually agreed to leave Dresdner Bank Group pursuant to “Credit Initiative” as of December 31, 2007.
New provisions 8 — — 8 Additions to existing provisions — 19 — 19 Release of provisions recognized in previous years — (24) (5) (29) Restructuring charges directly reflected in the consolidated income statement 40 9 4 53 Total restructuring charges during the year ended December 31, 2007 48 4 (1) 51 Total restructuring charges incurred to date 48 412 1,560 2,020
As a result of the recent developments in the Credit Markets Dresdner Kleinwort, the Investment Banking Division (IB) of Dresdner Bank Group, decided to restructure parts of their
Contract termination costs 2 — — — (1) (1) — — —
During the year ended December 31, 2007, Allianz S.p.A. together with its group companies recorded restructuring charges of � 73 mn.
Allianz Shared Infrastructure Service GmbH During 2007, Allianz Deutschland AG recorded another provision for restructuring of � 42 mn. The reason for the restructuring program are outsourcing activities for the devisions Desktop, Network and Telecommunication Services of Allianz Shared Infrastructure Service GmbH (former Allianz Dresdner Informationssysteme GmbH), Munich
Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding. Diluted earnings per share reflects the effect of potentially dilutive securities. As of December 31, 2007, 1,175,554 (2006: 1,175,554) participation certificates issued by Allianz SE were outstanding which can potentially be converted to 1,469,443 (2006: 1,469,443) Allianz shares (on a weighted basis: 1,469,443 (2006: 1,469,443) Allianz SE shares) and therefore have a dilutive effect.
Notes to the Consolidated Financial Statements Allianz Group Annual Report 2007 51 Other Information
The Declaration of Compliance of the two publicly traded group companies Allianz Lebensversicherungs-Aktiengesellschaft and Oldenburgische Landesbank AG were issued in December 2007, respectively, and were made permanently available to the shareholders.
Total compensation of the Board of Management for the year ended December 31, 2007 amounts to � 26.5 mn (2006: � 28.9 mn). Furthermore 102,950 (2006: 110,434) stock appreciation rights and 51,805 (2006: 66,280) restricted stock units with a total fair value at grant date of � 12.3 mn (2006: 52 Subsequent events
Allianz redeems remaining part of the BITES exchangeable bond On January 14, 2008, the Allianz Group announced its intention to redeem the remaining 35.7 % of the BITES bond issued in February 2005 with shares of Munich Re. The number of Munich Re shares used for the redemption was based on the averages of the DAX index and the Munich Re share price during a 20-day reference period which started on January 22, 2008 and ended on Feburary 18, 2008. The delivery of Munich Re shares took place on February 27, 2008. As a result of the redemption of the index-linked exchangeable bond, the Allianz Group‘s shareholding in Munich Re was reduced to under 2 %.
� 12.3 mn) were granted to the Board of Management for the year ended December 31, 2007.
Compensation to former members of the Board of Management and their beneficiaries totaled � 5.0 mn (2006: � 4.3 mn). Pension obligations to former members of the Board of Management and their beneficiaries are accrued in the amount of � 49.0 mn (2006: � 52.0 mn).
Total compensation to the Supervisory Board amounts to � 1.6 mn (2006: � 2.5 mn).
Acquisition of minority interests in Allianz Global Investors of America L.P., Delaware In January 2008, the Allianz Group increased its interest in Allianz Global Investors of America L.P., Delaware by approximately 1.86 %. The acquisition cost for the additional interest amounts to approximately � 194 mn.
On February 21, 2008, Dresdner Bank decided to offer the Structured Investment Vehicle (“SIV”) K2 a support facility. The offer is intended to ensure the repayment of all senior debt of K2. Dresdner Bank will take over the assets that remain after the restructuring. The impact on the consolidated financial statements will depend on the specific restructuring alternative selected and implemented.
Exercise of warrants On February 15, 2008, the remaining 2.2 mn warrants were exercised which the Allianz Group had issued in February 2005 as part of the „All-in-One” transaction. In conjunction with the exercise 2.2 mn new shares of Allianz SE resulting from conditional capital were issued leading to proceeds from this increased equity of � 202 mn. The new shares are entitled to dividend as of the financial year 2008.
Germany ◽ Allianz Capital Partners GmbH, Munich 0.03 100.0 ◽ Allianz Capital Partners Verwaltungs GmbH, Munich 685 100.0 ◽ Allianz Dresdner Bauspar AG, Bad Vilbel 99 100.0 ◽◽ Allianz Global Corporate & Specialty AG, Munich 778 100.0 ◽ Allianz Global Investors Advisory GmbH, Frankfurt/Main 3 100.0 ◽ Allianz Global Investors AG, Munich 2,592 100.0 ◽ Allianz Global Investors Europe GmbH, Munich 17 100.0 ◽ ◽ Allianz Global Investors Kapitalanlagegesellschaft mbH, Frankfurt/Main 139 100.0 ◽ Allianz Global Investors Produkt Solutions GmbH, Munich 0.1 100.0 ◽ Allianz Immobilien GmbH, Stuttgart 5 100.0 ◽ ◽ Allianz Lebensversicherungs-Aktiengesellschaft, Stuttgart 1,456 94.8 ◽ Allianz Pension Partners GmbH, Stuttgart 0.5 100.0 ◽ Allianz Pensionskasse Aktiengesellschaft, Munich 146 100.0 ◽ Allianz Private Equity Partners GmbH, Munich 0.04 100.0 ◽ ◽ Allianz Private Krankenversicherungs-Aktiengesellschaft, Munich 360 100.0 ◽ Allianz ProzessFinanz GmbH, Munich 0.04 100.0 ◽ Allianz Shared Infrastructure Services GmbH, Munich 219 100.0 ◽ ◽ Allianz Versicherungs-Aktiengesellschaft, Munich 2,512 100.0 ◽ AZT Automotive GmbH, Munich 0.2 100.0 ◽ Deutsche Lebensversicherungs-Aktiengesellschaft, Berlin 45 100.0 ◽ ◽ Dresdner Bank AG, Frankfurt am Main 8,674 100.0 ◽ ◽ Euler Hermes Kreditversicherungs-AG, Hamburg 246 100.0 ◽ MAN Roland Druckmaschinen AG, Offenbach 289 100.0 ◽ Münchener und Magdeburger Agraversicherung Aktiengesellschaft, Munich 8 59.9 ◽ Oldenburgische Landesbank Aktiengesellschaft, Oldenburg 531 89.4 ◽ Reuschel & Co. Kommanditgesellschaft, Munich 149 97.5 ◽ risklab germany GmbH, Frankfurt am Main 0.03 100.0 ◽ Vereinte Spezial Krankenversicherung Aktiengesellschaft, Munich 3 100.0 ◽ Vereinte Spezial Versicherung AG, Munich 45 100.0 1) Percentage includes equity participations held by dependent enterprises in full, even if the Allianz Group’s share in the dependent enterprise is under 100.0 %.
Allianz Group Annual Report 2007 Notes to the Consolidated Financial Statements 1) Percentage includes equity participations held by dependent enterprises in full, even if the Allianz Group’s share in the dependent enterprise is under 100.0 %.
Operating Subsidiaries – Other countries Equity � mn % owned 1)
Argentina ◽ AGF Allianz Argentina Compania de Seguros Generales S.A., Buenos Aires 13 100.0 Australia ◽ ◽ Allianz Australia Limited, Sydney 1,005 100.0 Austria ◽ Allianz Elementar Lebensversicherungs-Aktiengesellschaft, Vienna 62 100.0 ◽ Allianz Elementar Versicherungs-Aktiengesellschaft, Vienna 375 100.0 ◽ Privatinvest Bank AG, Salzburg 15 74.0 Belgium ◽ ◽ Allianz Belgium Insurance S.A., Brüssel 441 100.0 Brazil ◽ ◽ AGF Brasil Seguros S.A., Sao Paulo 138 72.5 Bulgaria ◽ Allianz Bulgaria Insurance and Reinsurance Company Ltd., Sofia 26 78.0 ◽ Allianz Bulgaria Life Insurance Company Ltd., Sofia 13 99.0 ◽ Commercial Bank Allianz Bulgaria Ltd., Sofia 50 99.8 China ◽ Allianz China Life Insurance Co. Ltd., Shanghai 18 51.0 ◽ Allianz Global Investors Hong Kong Ltd., Hong Kong 65 100.0 ◽ Allianz Insurance (Hong Kong) Ltd., Hong Kong 9 100.0 ◽ Dresdner Kleinwort (Japan) Limited, Hong Kong 288 100.0 ◽ RCM Asia Pacific Ltd., Hong Kong 14 100.0 Colombia ◽ Colseguros Generales S.A., Bogota 35 100.0 Croatia ◽ ◽ Allianz Zagreb d.d., Zagreb 17 80.1 Czech Republic ◽ ◽ Allianz poistóvna a.s., Prague 121 100.0 Egypt ◽ Allianz Egypt Insurance Company S.A.E., Cairo 6 85.0 ◽ Allianz Egypt Life Company S.A.E., Cairo 8 99.4 France ◽ AAAM S.A., Paris 32 84.9 ◽ AGF Asset Management S.A., Paris 93 99.8 ◽ Allianz Global Corporate & Specialty France, Paris 179 100.0 ◽◽ Assurances Générales de France IART S.A., Paris 2,267 100.0 ◽◽ Assurances Générales de France Vie S.A., Paris 2,361 100.0 ◽◽ Assurances Générales de France, Paris 7,287 100.0 ◽ Banque AGF S.A., Paris 179 100.0 ◽ Euler Hermes SFAC S.A., Paris 337 100.0 ◽ ◽ Mondial Assistance S.A. S., Paris Cedex 205 100.0 Greece ◽ Allianz Hellas Insurance Company S.A., Athen 71 100.0 Hungary ◽ ◽ Allianz Hungária Biztosító Zrt., Budapest 220 100.0 Indonesia ◽ PT Asuransi Allianz Life Indonesia p.l.c., Jakarta 20 99.8 ◽ PT Asuransi Allianz Utama Indonesia Ltd., Jakarta 19 76.0 Ireland ◽ Allianz Global Investors Ireland Ltd., Dublin 5 100.0 ◽ Allianz Irish Life Holdings p.l.c., Dublin 488 66.4 ◽ Allianz Re Dublin Limited, Dublin 17 100.0 ◽ Allianz Worldwide Care Ltd., Dublin 12 100.0
Notes to the Consolidated Financial Statements Allianz Group Annual Report 2007 1) Percentage includes equity participations held by dependent enterprises in full, even if the Allianz Group’s share in the dependent enterprise is under 100.0 %.
Notes to the Consolidated Financial Statements Allianz Group Annual Report 2007 1) Associated enterprises are all those enterprises other than affiliated enterprises or joint ventures, in which the Allianz Group has an interest of between 20.0 % and 50.0 % regardless of whether a significant influence is exercised or not. The presented associated enterprises represent 90 % of total carrying amount of investments in associated enterprises.
Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in München, Munich 1,422 4.9 26,429 3,440 12/31/2006
We have audited the consolidated financial statements prepared by Allianz SE, Munich, - comprising the balance sheet, the income statement, statement of changes in equity, statement of cash flows and the notes to the consolidated financial statements -, together with the group management report for the business year from January 1 to December 31, 2007. The preparation of the consolidated financial statements and the group management report in accordance with IFRS as adopted by the EU, and the additional requirements of German commercial law pursuant to § 315 a Abs. 1 HGB and supplementary provisions of the articles of incorporation are the responsibility of the parent company’s management. Our responsibility is to express an opinion on the consolidated financial statements and on the group management report based on our audit. In addition we have been instructed to express an opinion as to whether the consolidated financial statements comply with full IFRS.
Dr. Hans-Peter Keitel Chairman of the Board of Management, Hochtief AG (until March 31, 2007), Member of the Supervisory Board, Hochtief AG
Dr. h. c. Walter Scheel Former President of the Federal Republic of Germany
Dr. Jürgen Hambrecht Chairman of the Board of Executive Directors, BASF AG
Jean-Jacques Cette Membership in comparable 1) supervisory bodies Assurances Générales de France
Dr. Franz B. Humer Membership in other statutory supervisory boards and SE administrative councils in Germany
Prof. Dr. Renate Köcher Membership in other statutory supervisory boards and SE administrative councils in Germany BASF AG (until January 14, 2008), Infineon Technologies AG, MAN AG
Peter Kossubek since May 2, 2007 Membership in other statutory supervisory boards and SE administrative councils in Germany Allianz Versicherungs-AG
Jörg Reinbrecht Membership in other statutory supervisory boards and SE administrative councils in Germany SEB AG
Margit Schoffer until May 2, 2007 Membership in other statutory supervisory boards and SE administrative councils in Germany Dresdner Bank AG
Dr. Paul Achleitner Membership in other statutory supervisory boards and SE administrative councils in Germany Bayer AG, RWE AG
Membership in Group bodies Allianz Global Corporate & Specialty AG (Chairman)
Jan R. Carendi until December 31, 2007 Membership in comparable 1) supervisory bodies Membership in Group bodies Allianz Life Insurance Company of North America (Chairman) (until June 30, 2008), Fireman’s Fund Insurance Company (Chairman) (until December 31, 2007)
Dr. Joachim Faber Membership in other statutory supervisory boards and SE administrative councils in Germany Bayerische Börse AG
Dr. Helmut Perlet Membership in other statutory supervisory boards and SE administrative councils in Germany GEA-Group AG
Membership in comparable 1) supervisory bodies Membership in Group bodies Allianz Life Insurance Company of North America, Allianz of America, Inc., Allianz S.p.A., Fireman’s Fund Insurance Company, Lloyd Adriatico Holding S.p.A. (until January 31, 2008)
Dr. Gerhard Rupprecht Membership in other statutory supervisory boards and SE administrative councils in Germany Fresenius SE, Heidelberger Druckmaschinen AG
Membership in comparable 1) supervisory bodies Membership in Group bodies Allianz Elementar Lebensversicherungs -AG (since February 7, 2008), Allianz Elementar Versicherungs-AG (since February 7, 2008), Allianz Investmentbank AG (since February 7, 2008), Allianz Suisse Lebensversicherungs -Gesellschaft (since January 1, 2008), Allianz Suisse Versicherungs-Gesellschaft (since January 1, 2008)
Jean-Philippe Thierry Membership in comparable 1) supervisory bodies Baron Philippe de Rothschild, Compagnie Financière SaintHonoré, Eurazeo, Paris Orléans, Pinault Printemps Redoute, Société Financière et Foncière de participation
Membership in comparable 1) supervisory bodies Banco BPI S.A., Banco Popular Español S.A.
Dr. Werner Zedelius Membership in comparable 1) supervisory bodies Bajaj Allianz General Insurance Company Limited, Bajaj Allianz Life Insurance Company Limited
Membership in Group bodies Allianz Hungária Biztositó Rt. (Chairman), Allianz pojistovna a.s. (Chairman), AllianzSlovenska poistovna a.s. (Chairman), T. U. Allianz Polska S.A. (Chairman), T. U. Allianz Žycie Polska S.A. (Chairman), ROSNO (Vice Chairman)
Allowance for loan losses The overall volume of provisions includes allowances for credit losses – deducted from the asset side of the balance sheet – and provisions for risks associated with hedge derivatives and other contingencies, such as guarantees, loan commitments or other obligations, which are stated as liabilities.
Corridor approach With defined benefit plans, differences come about between the actuarial gains and losses which, when the corridor approach is applied, are not immediately recognized as income or expenses as they occur. Only when the cumulative actuarial gains or losses fall outside the corridor is redemption made from the following year onwards. The corridor is 10 % of the present value of the pension rights accrued or of the market value of the pension fund assets, if this is higher.
Defined contribution plans Defined contribution plans are funded through independent pension funds or similar organizations. Contributions fixed in advance (e.g., based on salary) are paid to these institutions and the beneficiary’s right to benefits exists against the pension fund. The employer has no obligation beyond payment of the contributions and is not participating in the investment success of the contributions.
Expense ratio Represents acquisition and administrative expenses (net) divided by premiums earned (net).
FAS US Financial Accounting Standards on which the details of US GAAP (Generally Accepted Accounting Principles) are based.
Financial assets carried at fair value through income Financial assets carried at fair value through income include debt and equity securities as well as other financial instruments (essentially derivatives, loans and precious metal holdings) which have been acquired solely for sale in the near term. They are shown in the balance sheet at fair value.
Goodwill Difference between the purchase price of a subsidiary and the relevant proportion of its net assets valued at the current value of all assets and liabilities at the time of acquisition.
Loss frequency Number of losses in relation to the number of insured risks.
Repurchase and reverse repurchase agreements A repurchase (“repo”) transaction involves the sale of securities by the Group to a counterparty, subject to the simultaneous agreement to repurchase these securities at a certain later date, at an agreed price. The securities concerned are retained in the Group’s balance sheet for the entire lifetime of the transaction, and are valued in accordance with the accounting principles for financial assets carried at fair value through income or investment securities, respectively. The proceeds of the sale are reported in liabilities to banks or to customers, as appropriate. A reverse repo transaction involves the purchase of securities with the simultaneous obligation to sell these securities at a future date, at an agreed price. Such transactions are reported in loans and advances to banks, or loans and advances to customers, respectively. Interest income from reverse repos and interest expenses from repos are accrued evenly over the lifetime of the transactions and reported under interest and similar income or interest expenses.
Reserve for premium refunds That part of the operating surplus which will be distributed to policyholders in the future. This refund of premiums is made on the basis of statutory, contractual, or company by- law obligations, or voluntary undertaking.
AGF Brasil Seguros 118 Allianz Companía de Seguros y Reaseguros 112 Allianz Cornhill Insurance plc. 112
Allianz Global Corporate & Specialty 45, 118, 119 Allianz Global Investors 60-61
N Net income 37 New Dresdner Plus program 57 Non-operating result 37
T Talent management 103-104 Total revenues 35 Travel and assistance insurance 44-45, 96
Share price as of December 31 � 147.95 (4.4) % 154.76 127.94 97.60 100.08 28 Market capitalization as of December 31 � mn 66,600 (0.4) % 66,880 51,949 35,936 5) 36,743 5) 29 Other Data Return on equity after income tax 6) % 16.4 0.5 pts 15.9 12.9 7.8 11.0 Third-party assets under management as of December 31 � mn 764,621 0.1 % 763,855 742,937 584,624 564,714 60 1) Total revenues comprise Property-Casualty segment’s gross premiums written, Life/Health segment’s statutory premiums, Banking segment’s operating revenues and Asset Management segment’s operating revenues.
Group Management Report 33 Detailed Index 34 Executive Summary and Outlook 44 Property-Casualty Insurance
Consolidated Financial Statements 127 Detailed Index 128 Consolidated Financial Statements 134 Notes to the Consolidated Financial
Financial Calendar for 2008/2009 please see inside back page 080358_02_Umschlag_englisch.indd 1 01.04.2008 13:55:03 Uhr