Operational risk ◼ ◼ ◼ Possible losses resulting from inadequate or failed internal processes, from personnel and systems, or from external events such as interruption of business operations due to a breakdown of electricity or a flood, damage caused by employee fraud or the losses caused by court cases; includes legal and compliance risk.
Internal controls, business continuity management, adequate product design 1 The premium risk which our credit insurance entity Euler Hermes is exposed to due to its business model is also covered here, as this type of risk is a special form of credit risk.
For our Asset Management segment we assign internal risk capital requirements based on the sectoral regulatory capital requirements in accordance with the current approach in Solvency II. We allocate these requirements to the risk categories of our internal risk capital model, thereby allowing us to consistently aggregate internal risk capital for all segments at the Group level. Approximately 99.8 % of the investments managed by the Asset Management operating entities are held for the benefit of third parties or Allianz Group insurance entities and, therefore, do not result in a significant additional market and credit risk for the segment. However, the assessment of market risk and credit 1 For further information about participating life business, please refer to note 20 to the consolidated financial statements.
risk on the account of third parties is an integral part of the risk management process of our local operating entities.
The capital requirements of smaller insurance operating entities, that have an immaterial impact on the Group’s risk profile, are either based on local regulatory requirements or on a risk factor based model. We allocate these to the risk categories of our internal risk capital model. This allows us to consistently aggregate internal risk capital for all segments at the Group level.
We use model and scenario parameters derived from historical data, where available, to characterize future possible risk events. If future market conditions differ substantially from the past, for example in an unprecedented crisis, our VaR approach may be too conservative or too liberal in ways that are too difficult to predict. In order to mitigate reliance on historical data we complement our VaR analysis with stress testing. Our ability to back-test the model’s accuracy is limited because of the high confidence level of 99.5 %, the one-year holding period as well as only limited data for some insurance risk events – such as natural catastrophes – being available. Furthermore, as historical data is used where possible to calibrate the model, it cannot be used for validation. Instead, we validate the model and para meters through sensitivity analyses, independent internal peer reviews and validation and, where appropriate, external reviews by independent consulting firms focusing on methods for selecting parameters and control processes. Overall, we believe that our validation efforts are effective and that our model adequately assesses the risks to which we are exposed.
Since internal risk capital takes into account the change in the economic fair value of our assets and liabilities, it is crucial to accurately estimate the fair market value of each item. For some assets and liabilities, it may be difficult, if not impossible – notably in distressed financial markets – to obtain either a current market price or to apply a meaningful mark-to-market approach. For certain assets and liabilities, where a market price for that instrument or similar instruments is currently not available, we apply a mark-tomodel approach. For some of our liabilities, the accuracy of fair values depends on the quality of the actuarial cash flow estimates. Despite these limitations, we believe the estimated fair values are appropriately assessed.
available caPital and inteRnal Risk caPital as of 31 deceMbeR 2011 by coMPaRison C 088 € bn
The change in the confidence level from 99.97 % to 99.5 % accounts for a € 7.8 bn decrease in risk capital as of 2011 year-end. To compensate for the resulting higher solvency ratio, we increased our internal solvency targets accordingly. Additional model updates improved our internal model solvency ratio, based on a 99.5 % confidence level, from 184 % to 191 %. This was driven by a reduction in required capital of € 3.5 bn and a decrease in available capital of € 4.9 bn. In the following section we present a breakdown of the model updates and their impacts in more detail.
Impact on available capital With respect to the recognition of available capital, we are now reporting our available capital including a conservative recognition of restrictions on transferability and fungibility as expected to be introduced by Solvency II, acknowledging that final regulation might apply deviating and potentially less conservative rules. The net impact of these restrictions has been partially offset by other model updates, including a change in the yield curve modeling following latest guidance of Solvency II.
Confidence level The forthcoming capital requirement imposed by Solvency II is designed to represent the worst-case loss within a 99.5 % confidence level. In order to align ourselves with this standard, we now disclose the results of our internal risk capital model based on the 99.5 % confidence level, as opposed to the 99.97 % we used before. The change from a 99.97 % to a 99.5 % confidence level leads to a decrease in our internal risk capital by € 7.8 bn (from € 34.5 bn to € 26.7 bn).
In addition and in line with the forthcoming Solvency II framework we changed our risk allowance for Asset Management. We integrate Asset Management now on the basis of the sectoral regulatory capital requirement and allocate it to market, credit and operational risk based on an internal exposure assessment (previously allocated to business risk).
Market risk model Changes to our market risk models contributed € 1.3 bn to the decrease in our internal risk capital. In particular, we included a change in the yield curve modeling, following the latest guidance of Solvency II, which was more than offset by the recognition of the risk mitigating effects of the Counter-Cyclical Premium for our life business affecting spread risk of fixed income positions. This approach is based on the fact that the cash flows of our insurance liabilities are to a large degree predictable. This limits the risk that we will be forced to sell these bonds prior to maturity at a loss and allows us to keep the bonds as a long-term investor till the maturity date.
Underwriting risk models The new life non-market risk framework models mortality, longevity, and morbidity risks as independent risk types instead of bundling them into a single source of risk in the past. The increase in risk capital due to these new methods has been compensated by parameter changes in other under writing risk types. In total, the internal risk capital has decreased by € 0.1 bn.
Credit risk model Credit risk capital increased by € 0.6 bn due to some updates of parameters and models. The main methodology updates are related to Exposure-at-Default calculations for derivatives and reinsurance that now include potential future exposure (PFE) in addition to the current exposure, and refinements in rating assessments.
ConCentration of risks As we are an integrated financial services provider offering a variety of products across different business segments and geographic regions, diversification is key to our busi­ ness model. Diversification helps us manage our risks effi­ ciently by limiting the economic impact of any single event and by contributing to relatively stable results and risk profile in general. As discussed in the Diversification and correlation assumptions section, the degree to which diver­ sification can be realized depends not only on the correla­ tion between risks but also on the relative concentration level of those risks. Therefore, our aim is to maintain a bal­ anced risk profile without any disproportionately large risks.
For example, the Management Board of Allianz SE has im­ plemented a framework of natural catastrophe limits at both operating entity and Group levels in an effort to reduce potential earnings volatility and restrict potential losses from single events as well as on an annual aggregate basis. The limits are defined on a net basis and on an occurrence
By implementing and performing clearly­defined processes we ensure that exposure concentrations and uses of limits are appropriately monitored and managed. The limit framework covers counterparty concentration risk that is related to credit and equity exposures.
It is the ultimate responsibility of the Board of Management to decide upon maximum country and obligor exposure limits from the Group’s perspective (i.e. the maximum con­ centration limit). This limit takes into account the Allianz Group’s portfolio size and structure as well as our overall risk strategy.
quantifiable Risks The following table shows an overview of Group-diversified risk capital figures by risk category.
gRouP-diveRsified inteRnal Risk caPital by Risk categoRy (total PoRtfolio befoRe tax and non-contRolling inteRests)1 C 090 € Mn
Market risk As part of our insurance operations, we collect premiums from our customers and invest them in a wide variety of assets. Therefore, the Allianz Group holds and uses many different financial instruments. The resulting investment portfolios ultimately cover the future claims and benefits to our customers. In addition we invest shareholders’ capital, which is required to support the risks underwritten. As the fair values of our investment portfolios depend on financial markets, which may change over time, we are exposed to market risks. For example, an unexpected overall increase in interest rates or an unanticipated drop in equity markets may result in a devaluation of portfolios.
Movements in financial markets also have an impact on the fair value of our insurance liabilities. Therefore, our exposure to market risks is ultimately determined by the net positions between assets and liabilities.
In order to limit the impact of any of these financial market changes, to ensure that assets adequately back policyholder liabilities and that they provide investment income in line with policyholders’ expectations, we have a limit system in place. The limit system is defined at the Group level separately for the Life/Health and the Property-Casualty segments and is based on a variety of different risk measures including Financial VaR, equity and interest rate sensitivities as well as investment limits around a benchmark portfolio approved by the Board of Management.
Furthermore, we have put in place standards for hedging activities due to exposures to fair value options embedded in life insurance products. Life/Health operating entities carrying these exposures are required to follow these standards, including making a conscious decision on the amount of hedging.
1 For further information about the concentration of life business, please refer to note 20 to the consolidated financial statements.
Interest rate risk Due to our insurance business model, interest rate risk is highly relevant for the Life/Health segment, bearing in mind that our life insurance entities – for example in Germany, France, Italy, the United States and South Korea – typically offer long-term asset accumulation and savings products subject to minimum guaranteed crediting rates. However, many local fixed income asset markets are not sufficiently liquid to adequately match our long-term life insurance obligations which gives rise to re-investment risk.
As interest rates may fall below the guaranteed rates in those markets, we are specifically exposed to interest rate risk when we have to reinvest maturing assets prior to the maturity of life contracts. This interaction of investment strategy and obligations to policyholders forms an integral part of our internal risk capital model. In addition, our asset liability management approach is closely linked to the internal risk capital framework and designed to achieve investment returns over the long term in excess of the obligations related to insurance and investment contracts.
These risks are reflected in the internal risk capital results and managed by interest rate sensitivity limits. A significant part of the Life/Health segment’s pre-diversified internal risk capital for interest rate risk lies in Western Europe – 79.8 % as of 31 December 2012 – mainly to cover traditional life insurance products with guarantees.
Due to the fact that we manage our net interest rate risk exposure from a Group perspective, including securities issued to fund the capital requirements of the Allianz Group, the assets and liabilities of the Corporate and Other segment are not necessarily matched in terms of interest rate duration.
The Corporate and Other segment contains the equity investments of Allianz SE and its finance subsidiary holding companies.
Real estate risk Because of our diversified real estate portfolio, real estate risk is currently of less relevance for the Allianz Group. About 4.1 % of the total pre-diversified internal risk capital is related to real estate exposures.
The Allianz Group’s internal credit risk capital model is an integral part of the overall internal risk capital framework. It measures credit risk as the potential economic loss in the value of our portfolio due to changes in the credit quality of our counterparts (“migration risk”) or the inability or unwillingness of the counterparty to fulfill contractual obligations (“default risk”). The model is centrally developed, parameterized and controlled. Group-wide credit data is collected following a centralized process and using standard obligor and obligor group mappings.
The internal credit risk capital model is a state-of-the-art tool which provides bottom-up analysis. The major drivers of credit risk for each instrument are exposure at default, ratings, seniority, collateral and maturity. Additional parameters assigned to obligors are migration probabilities and obligor asset correlations reflecting dependencies within the portfolio. Ratings are assigned to single obligors via an internal rating approach which is based on longterm ratings from rating agencies. It is dynamically adjusted using market implied ratings and the most recent information.
The loss profile of a given portfolio is obtained through a Monte-Carlo simulation taking into account interdependencies and exposure concentrations per obligor or segment.
To reflect portfolio specific-diversification effects, the loss profiles are calculated at different levels of the Allianz Group structure (pre-diversified). They are then fed into the overall internal risk capital model for further aggre gation across sources of risk to derive Group-diversified internal credit risk capital.
Base case 7,061 6,844 Rating down by 1 notch 8,349 7,969 Rating down by 2 notches 9,879 9,384 1 A notch is referred to rating sub-classes, such as AA+, AA, AA- at S & P scale or Aa1, Aa2, Aa3 at Moody’s scale.
Total Group internal credit risk capital: 7,061 [6,844] Share of total Group internal risk capital: 15.7 % [16.4 %] € Mn € Mn 12/31/2011 12/31/2012
Property-Casualty Life/Health Asset Management Corporate and Other 1 2011 figures recalculated based on model updates in 2012.
ReinsuRance RecoveRables by Rating class1 as of 31 deceMbeR 2012 C 097
Property-Casualty Life/Health Corporate and Other 1 2011 figures recalculated based on model updates in 2012. 2 As risks are measured by an integrated approach on an economic basis, internal risk capital takes reinsurance effects into account.
The table below presents the average internal risk capital calculated for underwriting risks over the four quarters of 2012 and 2011, as well as the high and low quarterly internal risk capital amounts calculated in both years.
Premium risk As part of our Property-Casualty business operations, we receive premiums from our customers and provide insurance protection in return. Changes in profitability over time are measured based on loss ratios and their fluctuations. 1
1 Please refer to the section Property-Casualty insurance operations – Property-Casualty operations by business division on page 138 for a regional breakdown of loss ratios over the past three years.
68.369.969.169.568.066.165.067.267.6 1 Represents claims and insurance benefits incurred (net) divided by premiums earned (net).
Premium risk is subdivided into natural catastrophe risk (“premium NatCat risk”), terror risk (“premium terror risk”) and non-catastrophe risk (“premium non-cat risk”). We calculate premium risk based on actuarial models that are used to derive loss distributions.
Premium risk relative to the underlying exposures is positively affected by the diversification effect between different lines of business at the local operating entity level, or different markets at the Group level. In addition, risks are mitigated by external reinsurance agreements.
Europe Windstorm 756 U.S. Hurricane 653 Germany Flood 528 Germany Earthquake 520 Germany Hail 520 1 Based on most recent estimates, exposures are calculated using either vendor or proprietary models developed by in-house experts. All models are subject to uncertainty arising from scientific assumptions and underlying data.
1 Net surplus represents the cumulative surplus from re-estimating the reserves for loss and loss adjustment expenses for previous years’ claims and includes foreign currency translation adjustments. For further information, please refer to note 19 to the consolidated financial statements.
3 For further information, please refer to note 19 to the consolidated financial statements.
1 For further information about insurance risk in the Life/Health segment, please refer to note 20 to the consolidated financial statements.
allocated inteRnal business Risk caPital by business segMent (total PoRtfolio befoRe tax and non-contRolling inteRests) as of 31 deceMbeR 2012 [31 deceMbeR 20111] C 102
Business risk remained mostly stable in the course of 2012. Small changes specifically in the Life/Health segment, were mostly driven by changes in business volume.
Total Group internal business risk capital: 3,026 [2,836] Share of total Group internal risk capital: 6.7 % [6.8 %] € Mn € Mn 12/31/2011 12/31/2012
Dedicated minimum-security standards are in place for IT systems across the Allianz Group to ensure the proper use and protection of the Group’s information assets. With respect to financial statements, our internal control system is designed to mitigate operational risks.1 In general, we aim to reduce process failures by clearly documenting and sharing relevant methods, procedures, structures and processes across the Group. Comprehensive and timely documentation across the Group is one of the fundamental principles of the Allianz Group Risk Policy.
As described under Risk governance structure, the Group’s Legal and Compliance department seeks to mitigate legal and regulatory risks with the support of other departments.
otheR Risks There are certain risks that cannot be fully quantified across the Group using our internal risk capital model. For these risks, we also pursue a systematic approach with respect to identification, analysis, assessment and monitoring. In general, the risk assessment is based on qualitative criteria or scenario analyses. The most important of these other risks include strategic, liquidity and reputational risk.
1 For additional information regarding our internal control over financial reporting, please refer to the chapter Controls and Procedures from page 214 onwards.
At the Group level, liquidity risks arise mainly from the capital requirements of subsidiaries and the necessary refinancing of expiring financial liabilities.
Liquidity risk relating to our banking operations is deemed to be insignificant at the Group level. This is because of the small size and defensive risk profile of Allianz banks reflected in risk-weighted assets and total assets (as of 31 December 2012, € 9.3 bn and € 21.5 bn, respectively).
Our insurance operating entities manage liquidity risk locally, using asset-liability management systems designed to ensure that assets and liabilities are adequately matched. This decentralized approach ensures sufficient flexibility in providing liquidity.
Liquidity risk in our Property-casualty and Life/Health segments is a secondary risk following external events, such as natural disasters, lapse, renewal rates, or costs that are generally reflected in our internal risk capital model. Therefore, limiting and monitoring the associated primary risks (such as through the use of reinsurance) also helps limit our liquidity risk related to such events.
The local investment strategies particularly focus on the quality of investments and ensure a significant portion of liquid assets (e. g. government bonds or covered bonds) in the portfolios. This helps us to meet high liquidity requirements in the case of unlikely events.
We employ actuarial methods for estimating our liabilities arising from insurance contracts. In the course of standard liquidity planning we reconcile the cash flows from our investment portfolio with the estimated liability cash flows. These analyses are performed at the operating entity level and aggregated at the Group level.
Reputational risk Allianz’s reputation rests on our behavior in a range of areas – such as product quality, corporate governance, financial performance, customer service, employee relations, intellectual capital and corporate responsibility. Reputational risk is the risk of an unexpected drop in the value of Allianz’s share price, the value of the in-force business or the value of future business caused by a decline in the reputation of Allianz. Direct reputational risk can be caused by any Allianz behavior which might have a negative impact on the perception of Allianz by important stakeholders.
Indirect reputational risk is caused by a risk event in one of the other major risk categories (i.e. operational, strategic, cost, insurance, liquidity, credit or market risk), which could trigger an additional loss in Allianz’s value due to the damage to our reputation.
With the support of Group Communications, Group Risk defines sensitive business areas and applicable risk guidelines, for example for defense-related activities, which are mandatory for all our operating entities. The guidelines are regularly updated and are aligned with the Allianz ESG
All affected Group and operating entity functions, such as the business, communications, compliance and risk departments, closely cooperate in the identification of reputational risk. A uniform qualitative rating approach is used in all operating entities for the assessment of the reputational risk. Single reputational risk management decisions are integrated in the overall risk management framework in the following way: Reputational risk identification and assessment is an important part of the quarterly “Top Risk Assessment”, in which senior management decides about a proposed risk strategy and related actions. In addition, reputational risk is managed on a case-by-case basis. Single cases which might endanger the reputation of other operating entities or the Allianz Group have to be reported to Allianz SE for pre-approval.
− Consistent application of an integrated risk capital framework across the Group to protect our capital base and to support effective capital management.
− Integration of risk considerations and capital needs into management and decision-making processes through the attribution of risk and allocation of capital to the various segments.
Risk reporting and monitoring: Our comprehensive qualitative and quantitative risk reporting and monitoring framework provides senior management with the transparency and risk indicators to help them decide our overall risk profile and whether it falls within delegated limits and authorities. For example, risk dashboards, internal risk capital allocation and limit consumption reports are regularly prepared, communicated and monitored.
Risk strategy and risk appetite: Our risk strategy clearly defines our risk appetite. It ensures that rewards are appropriate for the risks taken and that the delegated authorities are in line with our overall risk-bearing capacity. The riskreturn profile is improved through the integration of risk considerations and capital needs into decision-making processes. This also keeps risk strategy and business objectives consistent with each other and allows us to take opportunities within our risk tolerance.2
2 For additional information regarding opportunities, please refer to the chapter Outlook 2013 and 2014 from page 154 onwards.
There are clear underwriting limits, minimum standards and restrictions to protect Allianz from taking unwanted or excessive risks. They determine prohibited and restricted (subject to special approval) coverage and define clear approval requirements at different levels of the Allianz Group. In particular, they specify all activities that require approval by or reporting to the Group Underwriting Committee – which is a Group Committee of Allianz SE for Property- Casualty underwriting related topics, established by the Allianz SE Board of Management. These standards also document delegated underwriting authorities and establish mandatory rules for individual policies. Exceptions require approval by different bodies, for example the Group Underwriting Committee, the local Chief Underwriting Officer, and, where necessary, the Group Chief Risk Officer
Supervisory Board and Board of Management Within our risk governance system the Supervisory Board and Board of Management of Allianz SE have both Allianz SE and Group-wide responsibilities and have set up committees to provide them with support. Examples include: Supervisory Board
− The Audit Committee supervises the effectiveness of the Allianz risk management and monitoring framework.
− The Risk Committee focuses on the Allianz Group’s overall risk profile and monitors risk-related developments as well as general risks and specific risk exposures.
− The Group Capital Committee supports the Board of Management with recommendations regarding risk strategy, capital and limit allocation.
Operating entities Operating entities are responsible for their own risk management, including adherence to both external requirements (for example, those imposed by local regulators) and internal Group-wide minimum standards.
The operating entities’ Board of Management is responsible for (i) setting and approving an OE risk strategy during the annual Strategic and Planning Dialogues with the Group and (ii) ensuring operating entity adherence to this risk strategy.
All business line management functions with a direct profit and loss responsibility (i.e. first line of defense, or “risk taking units”) are in charge of active risk-return management through adherence to delegated limits and the OE policy framework. They also support, where applicable, the risk assessment and management activities carried out by the second and third lines of defense.
Other functions and bodies In addition to Group Risk and the OE Risk function, Actuarial, Legal and Compliance functions have been established at both the Group and OE level, constituting additional components of the second line of defense.
In order to adapt to a continually changing environment, the Global Issues Forum (GIF) supports the Group in the assessment of long-term trends changes in the risk landscape on a timely basis. This includes activities such as desk research, interviews with internal and external experts and workshops to evaluate potential impacts on our company and propose necessary actions to take. The process is jointly coordinated by Group Risk, the Group Risk Committee and the Group Underwriting Committee.
In addition to maintaining our high standards and practices in day-to-day risk control and risk management, the risk function has set three priorities for 2013.
Our first priority is to continue to refine and improve our operational business steering frameworks in light of the lessons learned from the recent financial market uncertainty – in particular associated with sovereign debt, including risk measurement and limits.
Secondly, we plan to take advantage of the delay in the implementation of Solvency II to finalize the industrialization of our internal risk capital model and Market Value Balance Sheet reporting processes. More specifically, after several years of project work and experience using our reporting systems infrastructure, we plan to meet our “Target Closing Process” for the internal risk capital model and Market Value Balance Sheet by the end of 2013. The target closing process will lead to shorter timelines, greater efficiency and greater controls. As a by-product, it will also allow the risk function to continue to move more from risk control to risk management, thereby supporting good risk/return decisions across the company on a daily basis.
Our third priority is to continue our preparations for the Solvency II internal model application process. To this end, we will continue to provide constructive feedback to EIOPA in order to influence a business-friendly final outcome and we will be participating in the Long Term Guarantee Impact Assessment in the first half of 2013. In addition, we will continue to actively participate in the voluntary pre-approval process for Solvency II with the relevant European supervisors.
Controls and Procedures Statements pursuant to § 289 (5) and § 315 (2) no. 5 of the German Commercial Code (“Handelsgesetzbuch – HGB”) and explanatory report.
Internal controls over financial reporting In line with both our prudent approach to risk governance and compliance with regulatory requirements, we have created a structure to identify and mitigate the risk of material errors in our consolidated financial statements. Our internal control system over financial reporting is based on the framework developed by the Committee of Sponsoring Organizations of the Treadway Commission and is regularly reviewed and updated.
− Key controls over the reporting process are put in place to ensure that if a potential risk materializes, the likelihood and potential impact of it resulting in a financial misstatement is reduced. In addition to these focused controls, we also establish controls over the Group as a whole, with an emphasis on the control environment, the effectiveness of information and communication flows, the risk assessment process and the ongoing monitoring of the internal control system. Given the heavy dependence of financial reporting processes upon IT systems, establishing controls over these is also vitally important.
Identification of risk scenarios that could result in a material financial misstatement
We have a robust and comprehensive risk governance structure that is supported by audit, compliance and independent review functions similar to our financial reporting governance. However, since our internal risk capital calculations incorporate economic factors not fully reflected in accounting results, we have put in place additional controls within our management reporting processes to ensure that these additional estimates are adequately controlled.
During 2012, we worked on further improving the internal control environment around the computation of our internal risk capital in anticipation of the future Solvency II regime. We will continue to make refinements as the Solvency II requirements evolve.
Overall, as with estimates and assumptions involving financial reporting, the management reporting processes that underpin our risk capital framework are well controlled, consistently applied and prudent.
The Group Disclosure Committee ensures that these board members are made aware of all material information that could affect our disclosures and determines the completeness and accuracy of the information provided in the quarterly and annual financial reports. The committee meets on a quarterly basis before the financial reports are issued.
Subsidiaries within the scope of our control system are individually responsible for adhering to the Group’s internal control policy and for creating local Disclosure Committees that are similar to the Group-level committee. The entities’ CEOs and CFOs provide periodic sign-offs to the management of Allianz SE, certifying the effectiveness of their local system of internal controls as well as the completeness, accuracy and reliability of financial data reported to the Group.
Further control mechanIsms In our opinion, a strong internal control environment as critical to managing our company successfully and reinforcing trust with our stakeholders. For example, we have therefore implemented an enhanced internal control environment similar to the one we currently have for financial reporting across our largest Life insurance operating entities for the Market Consistent Embedded Value (MCEV) reporting process.
Loans and advances to banks and customers 10 119,369 124,738 Financial assets for unit-linked contracts 71,197 63,500
Deferred acquisition costs 12 19,452 20,772 Deferred tax assets 42 1,270 2,321
Total assets 694,621 641,472 liabilities and eQUitY Financial liabilities carried at fair value through income 16 5,397 6,610 Liabilities to banks and customers 17 22,425 22,155
Reserves for loss and loss adjustment expenses 19 72,540 68,832 Reserves for insurance and investment contracts 20 390,987 361,954 Financial liabilities for unit-linked contracts 21 71,197 63,500 Deferred tax liabilities 42 5,169 3,881
Liabilities of disposal groups classified as held for sale 14 – –
Participation certificates and subordinated liabilities 24 11,614 11,173 Total liabilities 638,403 594,219
Gross premiums written 72,086 69,299 68,582 Ceded premiums written (5,336) (5,136) (4,873) Change in unearned premiums (705) (495) (372)
Income from fully consolidated private equity investments 32 789 1,618 1,701
Consolidated statements of Comprehensive inCome consolidated statements of comprehensive income D 003 € mn
Available-for-sale investments Reclassifications to net income (689) 623 (1,353) Changes arising during the year 6,270 (1,096) 925
Miscellaneous Reclassifications to net income – – (1) Changes arising during the year 176 4 194
€ mn sUmmarY Net cash flow provided by operating activities 17,793 16,642 15,414 Net cash flow used in investing activities (14,860) (17,043) (19,536) Net cash flow provided by (used in) financing activities (941) 2,035 4,465 Effect of exchange rate changes on cash and cash equivalents (47) 111 265 Change in cash and cash equivalents 1,945 1,745 608 Cash and cash equivalents at beginning of period 10,492 8,747 6,089
€ mn cash flow from investing activities Proceeds from the sale, maturity or repayment of: Financial assets designated at fair value through income 2,076 6,210 14,161 Available-for-sale investments 124,720 129,383 125,134 Held-to-maturity investments 990 181 242 Investments in associates and joint ventures 211 164 1,042 Non-current assets and assets of disposal groups classified as held for sale 276 142 – Real estate held for investment 425 916 682 Loans and advances to banks and customers (purchased loans) 11,424 8,090 9,248 Property and equipment 229 145 380
cash flow from financing activities Policyholders’ account deposits 17,467 17,508 20,061 Policyholders’ account withdrawals (16,372) (15,116) (12,958) Net change in liabilities to banks and customers (419) 378 (272) Proceeds from the issuance of certificated liabilities, participation certificates and subordinated liabilities 9,084 7,486 7,157 Repayments of certificated liabilities, participation certificates and subordinated liabilities (8,315) (5,953) (7,428) Cash inflow from capital increases 44 70 44 Transactions between equity holders (115) (64) (75) Dividends paid to shareholders (2,214) (2,198) (1,978) Net cash from sale or purchase of treasury shares 6 12 (21)
Significant non-cash transactions Effects from liquidation of Palmer Square 2 cdo Tranche
1 – Nature of operations and basis of presentation Nature of operatioNs Allianz SE and its subsidiaries (the Allianz Group) maintain Property-Casualty insurance, Life/Health insurance and Asset Management operations in over 70 countries, with the largest of its operations in Europe. The Allianz Group’s headquarters and Allianz SE as its parent company are located in Munich, Germany. Allianz SE is recorded in the Commercial Register of the municipal court in Munich under its registered address at Koeniginstraße 28, 80802 Munich.
IFRS does not provide specific guidance concerning all aspects of the recognition and measurement of insurance contracts, reinsurance contracts and investment contracts with discretionary participation features. Therefore, as envisioned in IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, to those aspects where specific guidance is not provided by IFRS 4, Insurance Contracts, the provisions embodied under accounting principles generally accepted in the United States of America (US GAAP) as at first-time adoption of IFRS 4 on 1 January 2005, have been applied.
The accounting policies adopted are consistent with those of the previous financial year, except for recently adopted IFRS effective 1 January 2012.
Scope of consolidation The consolidated financial statements of the Allianz Group comprise the financial statements of Allianz SE, its subsidiaries and certain investment funds and Special Purpose Entities (SPEs). Subsidiaries, investment funds and SPEs, hereafter “subsidiaries”, which are directly or indirectly controlled by the Allianz Group, are consolidated. Control exists when the Allianz Group has the power to govern the financial and operating policies of the subsidiary generally either when the Allianz Group owns directly or indirectly more than half of the voting rights of the subsidiary or when control can be legally evidenced otherwise because of an agreement with other investors or of a specific corporate charter. In order to determine whether control exists, potential voting rights that are currently exercisable or convertible are taken into consideration. If no control exists from a legal perspective, it is assessed whether control exists from an economic perspective, as in the case of SPEs.
Any additional acquired share of interest after having obtained control does not affect previously recognized goodwill.
Business combinations prior to 1 January 2010 are accounted for using the purchase method. The purchase method requires that the Allianz Group allocates the cost of a business combination on the date of acquisition by recognizing the acquired’s identifiable assets, liabilities and certain contingent liabilities at their fair values. The cost of a business combination represents the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the acquisition date, plus any costs directly attributable to the acquisition. If the acquisition cost of the business combination exceeds the Allianz Group’s proportionate share of the fair value of the net assets of the acquiree, the difference is recorded as goodwill. Any noncontrolling interest is recorded at the non-controlling interest’s proportion of the fair value of the net identifiable assets of the acquiree.
For Business combinations with an agreement date before 31 March 2004, non-controlling interests are recorded at their proportion of the pre-acquisition carrying amounts of the identifiable assets and liabilities.
the extent of the interest in the associate or joint venture. Accounting policies of associated enterprises and joint ventures have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Allianz Group.
Associated enterprises and joint ventures Associated enterprises are entities over which the Allianz Group can exercise significant influence and which are neither subsidiaries nor joint ventures. Significant influence is the power to participate in, but not to control, the financial and operating policies of an enterprise. Significant influence is presumed to exist where the Allianz Group has at least 20 % but not more than 50 % of the voting rights, unless it can be clearly demonstrated that this is not the case. If the Allianz Group holds less than 20 % of the voting power of the investee, it is presumed that the Allianz Group does not have significant influence unless such influence can be clearly demonstrated. In general, the Allianz Group accounts for its investments in limited partnerships with ownership interests of 20 % or greater using the equity method due to the rebuttable presumption that the limited partner has no control over the limited partnership. Joint ventures are entities over which the Allianz Group and one or more other parties have joint control.
Investments in associated enterprises and joint ventures are generally accounted for using the equity method of accounting, in which the results and the carrying amount of the investment represent the Allianz Group’s proportionate share of the entity’s net income and net assets, respectively.
The Allianz Group accounts for all material investments in associates on a time lag of no more than three months. Income from investments in associated enterprises and joint ventures, which reflects the earnings rather than the distributions of the associate or jointly-controlled entity, is included in interest and similar income. Profits or losses resulting from transactions between the Allianz Group and the associated enterprise or joint venture are eliminated to
Financial instruments are generally recognized and derecognized on trade date, i.e. when the Allianz Group commits to purchase or sell securities or incur a liability.
No active markets – Valuation techniques – Fair value Level 2: If the market for a financial instrument is not active, the fair value is determined by using valuation techniques. The valuation techniques used are based on market observable inputs when available. Such market inputs include references to formerly quoted prices for identical instruments from an active market, quoted prices for identical instruments from an inactive market, quoted prices for similar instruments from active markets and quoted prices for
casH aNd casH eQuiValeNts Cash and cash equivalents include balances with banks payable on demand, balances with central banks, cash on hand, treasury bills to the extent they are not included in financial assets held for trading, as well as checks and bills of exchange which are eligible for refinancing at central banks, subject to a maximum term of three months from the date of acquisition.
real estate Held for iNVestMeNt Real estate held for investment (i.e. real estate and rights equivalent to real property and buildings, including buildings on leased land) is carried at cost less accumulated depreciation and impairments. Real estate held for investment is depreciated on a straight-line basis over its estimated life, with a maximum of 50 years. At each reporting date or whenever there are any indications that the carrying amount may not be recoverable, real estate is tested for impairment by determining its fair value using discounted cash flow methods. Subsequent costs are capitalized if they extend the useful life or increase the value of the asset; otherwise they are expensed as incurred.
Classification, recognition and initial measurement Financial assets within the scope of IAS 39 are either classified as
suBseQueNt MeasureMeNt of fiNaNcial iNstruMeNts The subsequent measurement of financial instruments depends on their classification as follows: Financial assets and liabilities carried at fair value through income Financial assets and liabilities carried at fair value through income include financial assets and liabilities held for trading and financial assets and liabilities designated at fair value through income. Financial assets held for trading consist of debt and equity securities that have been principally acquired for the purpose of generating a profit from short-term fluctuations in price or for the purpose of selling in the near future and derivative financial instruments with positive fair values that do not meet the criteria for hedge accounting.
Derivative financial instruments include separated embedded derivatives of hybrid financial instruments.
Available-for-sale investments Available-for-sale investments comprise debt and equity securities that are designated as available-for-sale or are not classified as held-to-maturity, loans and advances to banks and customers, or financial assets carried at fair value through income. Available-for-sale investments are measured at fair value. Unrealized gains and losses, which are the difference between fair value and cost or amortized cost, are recognized as a separate component of other comprehensive income, net of deferred taxes and the latent reserve for premium refunds to the extent that policyholders will participate in such gains and losses on the basis of statutory or contractual regulations when they are realized. When an available-for-sale investment is derecognized or determined to be impaired, the cumulative gain or loss previously recorded in other comprehensive income is transsimilar instruments from inactive markets. Market observable inputs also include interest rate yield curves, option volatilities and foreign currency exchange rates.
No active markets – Valuation techniques – Fair value Level 3: Where observable market inputs are not available, fair value is based on appropriate valuation techniques using non-market observable inputs. Valuation techniques include net present value techniques, the discounted cash flow method, comparison to similar instruments for which observable market prices exist and other valuation models. In the process, appropriate adjustments are made for credit risks. In particular when observable market inputs are not available, the use of estimates and assumptions may have a high impact on the valuation outcome.
Amortized cost of financial instruments The amortized cost of a financial instrument is the amount at which the financial instrument is measured at initial recognition minus principal repayments, plus or minus the cumulative amortization using the effective interest rate method of any difference between that initial amount and the redemption amount, minus any subsequent reduction for impairment or uncollectability.
Recognition of a day one profit or loss A day one profit or loss is recognized when the fair value of a financial instrument differs from its initial transaction price. In this case the fair value is evidenced by comparison with other observable current market transactions in the same instrument class or is based on a valuation technique incorporating only observable market data.
amounts of cash disbursed are recorded under loans and advances to banks and customers. Interest income on reverse repo agreements is accrued over the duration of the agreements and is reported in interest and similar income.
Securities borrowing transactions generally require the Allianz Group to deposit cash with the security’s lender. Fees paid are reported as interest expenses.
In securities lending transactions, the Allianz Group generally receives cash collateral which is recorded as liabilities to banks or customers. Fees received are recognized as interest income.
ferred and recognized in the consolidated income statement. Realized gains and losses on securities are generally determined by applying the average cost method at the subsidiary level.
tively affected the estimated future cash flows, i.e. amounts due according to the contractual terms of the security are not considered collectible.
If an available-for-sale equity security is impaired, any further declines in the fair value at subsequent reporting dates are recognized as impairments. Therefore, at each reporting period, for an equity security that was determined to be impaired, additional impairments are recognized for the difference between the fair value and the
Financial liabilities for puttable equity instruments Financial liabilities for puttable equity instruments include the non-controlling interests in shareholders’ equity of certain consolidated investment funds. These interests qualify as a financial liability of the Allianz Group, as they give the holder the right to put the instrument back to the Allianz Group for cash or another financial asset (puttable instrument). These liabilities are generally required to be recorded at the redemption amount with changes recognized in income.
Derivative financial instruments that do not meet the criteria for hedge accounting are recognized at fair value as financial assets held for trading when the fair value is positive or financial liabilities held for trading when the fair value is negative. Gains or losses from valuation at fair value are included in income from financial assets and liabilities held for trading. This treatment is also applicable for bifurcated embedded derivatives of hybrid financial instruments.
A component that meets the definition of a derivative must be separated from its host contract (bifurcated) and measured as if it were a stand-alone derivative if its economic characteristics are not closely related to those of the host contract.
For derivative financial instruments used in hedge transactions that meet the criteria for hedge accounting (accounting hedges), the Allianz Group designates the derivative as a hedging instrument in a fair value hedge, cash flow hedge, or hedge of a net investment in a foreign entity. The Allianz Group documents the hedge relationship, as well as its risk management objective and strategy for entering into the hedge transaction. The Allianz Group assesses, both at the hedge’s inception and on an ongoing basis, whether the derivative financial instruments that are used for hedging transactions are highly effective in offsetting changes in fair values or cash flows of the hedged items. Derivative financial instruments used in accounting hedges are recognized as follows: Fair value hedges Fair value hedges are hedges of a change in the fair value of a recognized financial asset or liability or a firm commitment due to a specified risk. Changes in the fair value of a derivative financial instrument, together with the change original cost basis, less any previously recognized impairments.
The 2008 amendments to IAS 39 permit an entity to reclassify certain non-derivative financial assets out of the “held for trading” (at fair value through income) category and out of the “available-for-sale” category if the following specific conditions are met.
− Debt instruments, classified as “held for trading” (at fair value through income) or as “available for sale” may be reclassified to the “loans and receivables” category, if they meet the definition of loans and receivables at the reclassification date and where the Allianz Group has the intent and ability to hold the assets for the foreseeable future or until maturity.
− Any other debt instrument and any other equity instrument, classified as “held for trading” (at fair value through income) may be reclassified to the “held-tomaturity ” category (debt instruments) or to the “available -for-sale” category in rare circumstances (e.g. deterioration of the world’s financial markets in 2008) and where the Allianz Group does not have the intention to sell or trade the assets in the short term.
At the reclassification date, non-derivative financial assets have to be reclassified at their fair value, which becomes the new cost or amortized cost of the financial asset, as applicable. Previously recognized gains and losses cannot be reversed. After the reclassification date, the existing requirements of IAS 39 for measuring financial assets at cost or at amortized cost apply.
− Quantifiable risks including all subsections other than Business risk and Operational risk,
The Allianz Group discontinues hedge accounting prospectively when it is determined that the derivative financial instrument is no longer highly effective, when the derivative financial instrument or the hedged item expires, or is sold, terminated or exercised, or when the Allianz Group determines that designation of the derivative financial instrument as a hedging instrument is no longer appropriate. After a fair value hedge is discontinued, the Allianz Group continues to report the derivative financial instrument at its fair value with changes in fair value recognized in the consolidated income statement, but changes in the fair value of the hedged item are no longer recognized in the consolidated income statement. After hedge accounting for a cash flow hedge is discontinued, the Allianz Group continues to record the derivative financial instrument at
Measurement basis fiNaNcial assets Cash and cash equivalents Nominal value Financial assets carried at fair value through income – Financial assets held for trading Fair value – Financial assets designated at fair value through income Fair value Investments – Available-for-sale investments Fair value – Held-to-maturity investments Amortized cost Loans and advances to banks and customers (Loans and receivables) Amortized cost Financial assets for unit-linked contracts Fair value Other assets – Derivative financial instruments used for hedging that meet the criteria for hedge accounting and firm commitments Fair value Assets held in trust 1 Fair value fiNaNcial liaBilities Financial liabilities carried at fair value through income – Financial liabilities held for trading Fair value – Financial liabilities designated at fair value through income Fair value Liabilities to banks and customers (Other liabilities) Amortized cost Reserves for insurance and investment contracts – Non-unit-linked investment contracts Amortized cost Financial liabilities for unit-linked contracts Fair value Other liabilities – Derivative financial instruments used for hedging purposes that meet the criteria for hedge accounting and firm commitments Fair value – Financial liabilities for puttable equity instruments Redemption amount Certificated liabilities (Other liabilities) Amortized cost Participation certificates and subordinated liabilities (Other liabilities) Amortized cost Liabilities held in trust 1 Fair value off-BalaNce sHeet Financial guarantees Nominal value Irrevocable loan commitments Nominal value 1 Include receivables and obligations of deferred compensation plans outsourced to a trust.
risks. Revenues and expenses related to reinsurance agreements are recognized in a manner consistent with the underlying risk of the business reinsured.
To the extent that the assuming reinsurers are unable to meet their obligations, the respective ceding insurers of the Allianz Group remain liable to its policyholders for the portion reinsured. Consequently, allowances are made for receivables on reinsurance contracts which are deemed uncollectible.
Reinsurance contracts The Allianz Group’s consolidated financial statements reflect the effects of ceded and assumed reinsurance contracts.
Assumed reinsurance refers to the acceptance of certain insurance risks by the Allianz Group that other companies have underwritten. Ceded reinsurance refers to the transfer of insurance risk, along with the respective premiums, to one or more reinsurers who will share in the risks. When the reinsurance contracts do not transfer significant insurance risk, deposit accounting is applied as required under the related reinsurance accounting provisions of US GAAP or under IAS 39.
Premiums ceded for reinsurance and reinsurance recoveries on benefits and claims incurred are deducted from premiums earned and insurance and investment contract benefits, respectively. Assets and liabilities related to reinsurance are reported on a gross basis. The amount of reserves ceded to reinsurers are estimated in a manner consistent with the claim liability associated with the reinsured
Bifurcation Some of the Allianz Group’s universal life-type and investment -type insurance contracts contain features, which are not closely related to the underlying insurance contracts. These features are bifurcated from the insurance contracts and accounted for as derivatives in line with IFRS 4 and IAS 39.
The value of an insurance business or an insurance portfolio acquired is measured by the PVFP, which is the present value of net cash flows anticipated in the future from insurance contracts in force at the date of acquisition. It is amortized over the life of the related contracts. PVFP was determined using discount rates ranging from 8.0 % to 12.0 %. Interest accrues on the PVFP balance based upon the policy liability rate or contract rate. Interest currently accrues on PVFP at rates between 2.0 % and 6.5 %.
Sales inducements on insurance contracts that meet the following criteria are generally deferred and amortized using the same methodology and assumptions used for amortized deferred acquisition costs: − recognized as part of reserves for insurance and investment contracts,
− higher than the contract’s expected ongoing crediting rates for periods after the inducement.
Reserves for insurance and investment contracts Reserves for insurance and investment contracts include aggregate policy reserves, reserves for premium refunds and other insurance reserves.
Aggregate policy reserves for participating life insurance contracts The aggregate policy reserves for participating life insurance contracts are computed in accordance with the related insurance accounting provisions under US GAAP using the net level premium method. The method uses assumptions for mortality, morbidity and interest rates that are guaranteed in the contract or used in determining the policyholder dividends (or premium refunds). DAC and PVFP for traditional participating insurance products are amortized over the expected life of the contracts in proportion to EGMs based upon historical and anticipated future experience, which is determined on a best estimate basis and evaluated at the end of each reporting period. The present value of EGMs is computed using the expected investment yield. EGMs include premiums, investment income including realized gains and losses, insurance benefits, administration costs, changes in the aggregate reserves and policyholder dividends. The effect of changes in EGMs are recognized in net income in the period revised.
The process of estimating loss and LAE reserves is by nature uncertain due to the large number of variables affecting the ultimate amount of claims. The Allianz Group reduces the uncertainty in reserve estimates through the use of multiple actuarial and reserving techniques and certain Groupwide processes and controls. For further information please see note 3 Use of estimates and assumptions.
Reserves for premium refunds Reserves for premium refunds include the amounts allocated under the relevant local statutory or contractual regulations to the accounts of the policyholders and the amounts resulting from the differences between these IFRS based financial statements and the local financial statements (latent reserve for premium refunds), which will reverse and enter into future profit participation calculations.
Germany Life all sources of profit 90% Health all sources of profit 80% France Life all sources of profit 85% Italy Life investment result 85% Switzerland Group Life all sources of profit 90% Individual Life all sources of profit 100%
Aggregate policy reserves also consider liabilities for guaranteed minimum death and similar mortality and morbidity benefits related to non-traditional contracts with annuitization options. These liabilities are calculated based on contractual obligations using actuarial assumptions.
Assumptions used for aggregate policy reserves for participating life insurance contracts, traditional long-duration insurance contracts and universal life-type insurance contracts Current and historical client data, as well as industry data is used to determine the assumptions.
Real estate held for own use (e.g. real estate and buildings, including buildings on leased land) is carried at cost less accumulated depreciation and impairments. The capitalized cost of buildings is calculated on the basis of acquisition cost and depreciated on a straight-line basis over a maximum of 50 years in accordance with their useful lives. An impairment is recognized when the recoverable amount of these assets is less than their carrying amount. Where it is not possible to identify separate cash flows for estimating the recoverable amount of an individual asset, an estimate of the recoverable amount of the cash generating unit to which the asset belongs is used.
Equipment is carried at cost less accumulated depreciation and impairments. Depreciation is generally computed using the straight-line method over the estimated useful lives of the assets. The estimated useful life of equipment ranges from 2 to 10 years.
The Allianz Group also records the fixed assets of its fully consolidated private equity investments and Alternative Investments, e.g. wind parks, solar parks and vending machines, within property and equipment. These assets are carried at cost less accumulated depreciation and impairments. Depreciation is generally computed using the straight-line method over estimated useful lives of the assets. The estimated useful life for the wind parks ranges from 20 to 25 years and for the vending machines from 4 to 8 years.
otHer assets Other assets primarily consist of receivables, prepaid expenses, derivative financial instruments used for hedging that meet the criteria for hedge accounting, firm commitments, property and equipment and other assets.
diture incurred from the date when the intangible asset first meets the recognition criteria in the development phase.
eQuitY Issued capital represents the mathematical per share value received from the issuance of shares.
the asset or disposal group and the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification.
Non-current assets or disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Any subsequent increases in fair value less costs to sell are recognized as a gain but not in excess of the cumulative impairment loss that has been recognized previously. A non-current asset is not depreciated while classified as held for sale. A gain or loss on the date of the sale not previously recognized is recorded at the date of derecognition.
Separately acquired intangible assets are initially recorded at cost which is usually its purchase price and any directly attributable costs. Intangible assets acquired in business combinations are initially recorded at fair value on the acquisition date if the intangible asset is separable or arises from contractual or other legal rights and its fair value can be measured reliably. Internally generated intangible assets are initially recorded at cost which is the sum of expen-
fee aNd coMMissioN iNcoMe aNd eXpeNses Fee and commission income is recognized when the corresponding service is provided. Such fees comprise commission income received on security transactions, financial advisory services, trust and custody services, brokerage of insurance policies, and services related to credit cards, home loans, savings contracts and real estate.
Distribution, servicing and administration fees are recognized as the services are performed. Such fees are generally based on percentages of the market value of assets under management.
Unrealized gains and losses (net) include unrealized gains and losses from available-for-sale investments and derivative financial instruments that meet the criteria for hedge accounting, including cash flow hedges and hedges of a net investment in a foreign entity.
Revenues for universal life-type and investment contracts, such as universal life and variable annuity contracts, represent charges assessed against the policyholders’ account balances for the front-end loads, net of the change in unearned revenue liability, cost of insurance, surrenders and policy administration and are included within premiums earned (net).
The Allianz Group applies the corridor approach. For each individual defined benefit pension plan, the Allianz Group recognizes a portion of its actuarial gains and losses as an income or expense if the net cumulative unrecognized actuarial gains or losses at the end of the previous reporting period exceeded the greater of: a) 10 % of the defined benefit obligation at that date, or b) 10 % of the fair value of any plan assets at that date.
Any unrecognized actuarial net gain or loss exceeding the greater of these two values is generally recognized as an income or expense in the consolidated income statements over the expected average remaining working lives of the employees participating in the plans.
restructuriNG plaNs Provisions for restructuring plans are recognized when the Allianz Group has a detailed formal plan for the restructuring and has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement the plan or by announcing its main features. The detailed formal plan includes the business concerned, approximate number of employees who will be compensated for terminating their services, the expenses to be incurred and the time period over which the plan will be implemented. The detailed plan must be communicated such that those affected have an expectation that the plan will be implemented.
iNcoMe aNd eXpeNses froM fullY coNsolidated priVate eQuitY iNVestMeNts All of the income and expenses from fully consolidated private equity investments are presented in separate income and expense line items. Revenue from fully consolidated private equity investments is recognized upon customer acceptance of goods delivered and when services have been rendered.
leases Payments made under operating leases to the lessor are charged to administrative expenses using the straight-line method over the period of the lease. When an operating lease is terminated before the lease period has expired, any penalty is recognized in full as an expense at the time when such termination takes place.
peNsioNs aNd siMilar oBliGatioNs Contributions to defined contribution plans are recognized as an expense when employees have rendered services entitling them to the contributions.
For defined benefit plans, the Allianz Group uses the projected unit credit actuarial method to determine the present value of its defined benefit plans and the related service cost and, where applicable, past service cost. The principal assumptions used by the Allianz Group are included in
The measurement of a restructuring provision includes only the direct expenditures arising from the restructuring, i.e. those amounts that are both necessarily entailed by the restructuring and not associated with the ongoing activities of the entity. The income statement line item restructuring charges includes additional restructuring related expenditures that are necessarily entailed by the restructuring and not associated with the ongoing activities of the entity but which are not included in the restructuring provisions, such as impairments of assets affected by restructuring.
− reserves for insurance and investment contracts of € 390,987 MN mainly for the Life/Health operations and
− deferred acquisition costs of € 19,452 MN for both insurance operations.
actuarial methods and assumptions in the Life/Health reserving process, the Allianz Group has designed a two stage reserving process. In a first stage, Life/Health reserves are calculated by qualified local staff experienced in the business of the subsidiaries. Actuaries in the local entities also conduct tests of the adequacy of the premiums and reserves to cover future claims and expenses (liability adequacy tests). The process follows Group-wide standards for applying consistent and plausible assumptions. The appropriateness of the reserves and compliance with the Groupwide standards is confirmed by the local actuary. In a second stage, the Allianz Group Actuarial Department regularly reviews the local reserving processes, including the appropriateness and consistency of assumptions, and analyzes the movements of reserves. Any adjustments to reserves and other insurance related reporting items are reported to and analyzed together with the Allianz Group Reserve Committee.
As loss reserves represent estimates of uncertain future events, the local reserving actuaries determine a range of reasonably possible outcomes. To analyze the variability of loss reserve estimates, actuaries employ a range of methods and approaches, including simple sensitivity testing using alternative assumptions, as well as more sophisticated stochastic techniques. The Allianz Group’s reserving standards require that all local reserve committees in Allianz subsidiaries meet quarterly to discuss and document reserving decisions as well as to select the best estimate of the ultimate amount of reserves within a range of possible outcomes and to document the rationale for that selection for the particular entity.
Estimates and assumptions are particularly significant when determining the fair value of financial instruments for which at least one significant input is not based on observable market data (classified within Level 3 of the fair value hierarchy). The availability of market information is determined by the relative trading levels of identical or similar instruments in the market, with emphasis placed on information that represents actual market activity or binding quotations from brokers or dealers. When appropriate, values are adjusted on the basis of available market information including pricing, credit-related factors, volatility levels, and liquidity considerations. If sufficient market information is unavailable, management’s best estimate of a particular input is used to determine the value.
The evaluation of whether a financial debt security is impaired requires analysis of the underlying credit of the relevant issuer and involves significant management judgment.
In general, the subsidiaries assume responsibility for assessing fair values and evaluating impairments of financial instruments. This process is consistent with the decentralized organizational structure and reflects the fact that local managers are often best suited to analyze securities trading in local markets. Nevertheless, the subsidiaries are responsible for adhering to the Allianz Group’s internal control policy regarding impairment assessment, measurement and disclosure. Subsidiaries must report all impairment decisions on debt securities to the Allianz Group Accounting department, which then reviews them for consistency and resolves discrepancies.
The Allianz Group’s processes and controls around the estimation of recoverable amounts are generally applied at the Allianz Group level and are designed to minimize subjectivity.
For example, the assumptions used are required to be consistent with the parameters of the well defined planning and controlling processes. The recoverable amounts of all cash generating units are determined on the basis of value in use calculations. Important input factors for those calculations are the business plan, the estimate of the sustainable returns and eternal growth rates as is further explained in note 15. The Allianz Group also performs sensitivity tests with regard to key value drivers, such as projected long-term combined ratios or discount rates. Furthermore, the Allianz Group reviews market-based business transaction multiples where available. This information is used to assess reasonableness since directly 1 Please refer to note 2 Summary of significant accounting policies, and note 15 Intangible assets, for further details.
comparable market value information is not generally available. Although the Allianz Group believes short-term fluctuations in the market capitalization do not reflect the long-term value of the aggregate of the CGUs, the market capitalization is also compared to the aggregate of the CGU’s recoverable amounts as a high level test of the entire process. The Allianz Group believes that the controls over assessing the recoverability of goodwill ensure both consistent and reliable results.
deferred taX assets As of 31 December 2012, the Allianz Group reported deferred tax assets of € 1,270 MN. The deferred tax assets before netting with deferred tax liabilities amounted to € 13,139 MN. € 1,834 MN thereof resulted from tax losses which are carried forward to future periods.2
Deferred taxes are determined based on tax loss carry forwards, unused tax credits and on temporary differences between the Allianz Group’s carrying amounts of assets and liabilities in its consolidated balance sheet and their tax bases. Deferred tax assets are recognized only to the extent it is probable that sufficient future taxable income will be available for their realization. Assessments as to the recoverability of deferred tax assets require the use of judgment regarding assumptions related to estimated future taxable profits. This includes the character and amounts of taxable future profits, the periods in which those profits are expected to occur as well as the availability of tax planning opportunities.
The analysis and forecasting required in this process, and in result the determination of the deferred tax assets, is performed for individual jurisdictions by qualified local tax and financial professionals. Given the potential significance surrounding the underlying estimates and assumptions, Group-wide policies and procedures have been designed to ensure consistency and reliability around the recoverability assessment process. Forecasted operating results are based upon approved business plans which are themselves subject to a well defined process of control. As a matter of policy, especially strong evidence supporting the recognition of deferred tax assets is required if an entity has suffered a loss in either the current or preceding period.
2 Please refer to note 2 Summary of significant accounting policies, and note 42 Income taxes, for further details.
peNsioN liaBilities aNd siMilar oBliGatioNs As of 31 December 2012, the Allianz Group reported pension liabilities for defined benefit plans of € 19,228 MN which is offset by the fair value of plan assets of € 11,206 MN. 1
Liabilities for pension and similar obligations and related net pension expenses are determined in accordance with actuarial valuation models. These valuations rely on extensive assumptions. Key assumptions including discount rates, inflation rates, expected returns on plan assets, compensation increases, pension increases and rates of medical cost trend are defined centrally at the Allianz Group level considering the circumstances in the particular countries. In order to ensure their thorough and consistent determination all input parameters are discussed and defined, taking into consideration economic developments, peer reviews, currently available market and industry data as well as historical performance of the plans and their assets. The discount rate assumptions are determined by reference to yields of high-quality corporate bonds of appropriate duration and currency at the balance sheet date. In countries where there is no deep market in such bonds, market yields on government bonds are generally used as discount rates. Expected returns on plan assets are determined based on the plan asset mix and observed historical returns.
restructuriNG proVisioNs As of 31 December 2012, the Allianz Group reported a provision for restructuring programs of € 304 MN. 2
2 Please refer to note 2 Summary of significant accounting policies, and note 49 Restructuring plans, for further details.
ment the plan or by announcing its main features. The detailed formal plan of a restructuring program is in particular based on estimates and assumptions, such as the number of employees to be dismissed, amount of compensation payments, impacts of onerous contracts, possibilities of sub-leases, timing of the various steps of the program and in consequence timing of the expected cash flows.
Generally, the subsidiaries, which are undertaking the restructuring program, set up a formal plan and determine all underlying estimates and assumptions. Therefore, it is the Allianz Group’s policy that the subsidiaries are responsible for an adequate planning process, controlling the execution of the program, and for the fulfillment of all requirements of IFRS. The respective documentation has to be submitted to the Allianz Group Accounting department, where qualified staff members review all restructuring programs. This includes a review of all estimates and assumptions, and an assessment of whether all requirements for setting up a restructuring provision are satisfied including which cost components can be treated as restructuring charges.
IFRS 12, Disclosure of Interests in Other Entities, contains disclosure requirements previously set out in IASs 27, 28 and 31. The adoption of these standards and the amendments are not expected to have a material impact on the financial position and financial results of the Allianz Group.
− IAS 12, Income Tax: Deferred Tax – Recovery of underlying assets
The Allianz Group adopted the revisions, amendments and interpretations as of 1 January 2012, with no material impact on its financial result or financial position.
IFRS 9, Financial Instruments: Classification and Measurement IFRS 9, Financial Instruments: Classification and Measurement, was issued by the IASB in November 2009 and is part of the project to replace IAS 39 with a new standard. The project is divided into three phases, classification and measurement of financial instruments, impairment and hedge accounting. IFRS 9 will become effective for annual periods starting on or after 1 January 2015. The IASB recently issued exposure drafts on classification and measurement as well as on hedge accounting. For impairment, an exposure draft is expected to be released in 2013. The Allianz Group is currently evaluating the impact of IFRS 9 on its consolidated financial statements. Early adoption is generally allowed but not intended by the Allianz Group.
IFRS 7 Financial Instruments Disclosures: Amendments to Offsetting Financial Assets and Financial Liabilities
The amounts recognized for major classes of identifiable assets acquired and liabilities assumed are as follows: menSuRA – mAjoR clASSeS oF ASSetS AcquIRed And lIAbIlItIeS ASSumed D 012 € mn Fair value
Cash and cash equivalents 22 Investments 918 Reinsurance assets 30 Deferred acquisition costs 2 Deferred tax assets 5 Other assets 80 Total assets 1,057 Financial liabilities carried at fair value through income 4 Unearned premiums 26 Reserves for loss and loss adjustment expenses 992 Other liabilities 32 Total liabilities 1,054 Total identifiable net assets 3 Goodwill (3) Consideration paid in cash –
Insurance activities of Mensura ccA, Brussels – 8/1/2012 Property-Casualty (3) Acquisition Brokerage portfolio-related activities of Gan Eurocourtage, Paris – 10/1/2012 Property-Casualty 67 Acquisition
Insurance activities of Mensura CCA including Mensura Assurances SA, Brussels Effective as of 1 August 2012, Allianz Belgium acquired the assets and assumed the liabilities related to the insurance activities of Mensura CCA and its 100 % subsidiary Mensura Assurances SA. Through this acquisition, Allianz Belgium completed its range of products for the self-employed, SmEs and large companies with worker’s accident insurance.
The following table summarizes the fair values of identifiable assets acquired and liabilities assumed as of 1 October 2012 by major classes, the recognized goodwill and the consideration paid: gAn euRocouRtAge – mAjoR clASSeS oF ASSetS AcquIRed And lIAbIlItIeS ASSumed D 014 € mn Fair value
Cash and cash equivalents 130 Investments 1,313 Reinsurance assets 190 Deferred tax assets 20 Other assets 319 Intangible assets 34 Total assets 2,006 Reserves for loss and loss adjustment expenses 1,633 Reserves for insurance and investment contracts 1 Deferred tax liabilities 35 Other liabilities 244 Total liabilities 1,913 Total identifiable net assets 93 Goodwill 67 Consideration paid in cash 160
The impact of the insurance activities acquired from Mensura CCA, including Mensura Assurances SA, on the Allianz Group’s total revenues and net income since the acquisition was € 32 mn and € 21 mn, respectively.
D Consolidated Financial Statements 221 Consolidated Balance Sheets 222 Consolidated Income Statements 223 Consolidated Statements of Comprehensive Income 224 Consolidated Statements of Changes in Equity 225 Consolidated Statements of Cash Flows 228 Notes to the Consolidated Financial
The amounts recognized for major classes of assets and liabilities were as follows: euRopenSIoneS + populAR geStIon – mAjoR clASSeS oF ASSetS AcquIRed And lIAbIlItIeS ASSumed D 017 € mn Fair value
As of the acquisition date, the non-controlling interests in Europensiones and Popular Gestión, both unlisted companies, amounted to € 137 mn and were measured at the noncontrolling interest’s proportionate share of the acquirees’ identifiable net assets.
The impact of Europensiones S.A., Madrid, and Popular Gestión S.G.I.I.C. S.A., Madrid, on the Allianz Group’s net income for the year ended 31 December 2011, was € 11 mn.
The impact of the brokerage portfolio-related activities of Gan Eurocourtage, net of cash acquired, on the consolidated statement of cashflows for the year ended 31 December 2012, was: gAn euRocouRtAge – ImpAct on the conSolIdAted StAtement oF cASh FlowS D 015 € mn
Cash and cash equivalents 84 Contingent consideration arrangement 1 Total consideration transferred 85 Fair value of the Allianz Group's equity interest in Europensiones held before the business combination 120 Total consideration 205
The impact of the acquisition of Europensiones and Popular Gestión, net of cash acquired, on the consolidated statement of cashflows for the year ended 31 December 2011, was: SIgnIFIcAnt dISpoSAlS And deconSolIdAtIonS D 019
Other – Sale to third party Coparc, Paris 100.0 12/21/2011 27 Life/Health – Sale to third party Allianz Asset Management a.s., Bratislava 100.0 11/30/2011 – Asset
Intangible assets (368) Loans and advances to banks and customers (78) Other assets (8) Deferred tax liabilities 111 Other liabilities 17 Non-controlling interests 137 Less: fair value of previous investment in Europensiones 120 Acquisition of subsidiaries, net of cash acquired (69)
Investments 5 Loans to banks and customers 143 Intangible assets 86 Other assets 595 Liabilities to banks and customers (315) Other liabilities (560) Other comprehensive income 5 Non-controlling interests 8 Deconsolidation result 1 5 Effect from deconsolidation of subsidiaries, net of cash balances (28)
1 Thereof a gain of € 5 mn is attributable to the retained investment, which was remeasured to its fair value at the date of deconsolidation.
Allianz Bank Polska S.A., Warsaw In May 2011, the Allianz Group sold Allianz Bank Polska S.A., Warsaw. The impact of the disposal, net of cash disposed, on the consolidated statement of cash flows for the year ended 31 December 2011, was: AllIAnZ bAnk polSkA – ImpAct on the conSolIdAted StAtement oF cASh FlowS D 020 € mn
Non-current assets and assets of disposal groups classified as held for sale 220 Liabilities of disposal groups classified as held for sale (176) Other comprehensive income 11 Deconsolidation result (21) Consolidation (34) Disposal of subsidiary, net of cash disposed –
Financial assets carried at fair value through income 4 Investments 529 Financial assets for unit-linked contracts 490 Other assets 11 Reserves for loss and loss adjustment expenses (7) Reserves for insurance and investment contracts (519) Financial liabilities for unit-linked contracts (490) Deferred tax liabilities (1) Other liabilities (1) Other comprehensive income (2) Realized gain from the disposal 1 Less non-cash components: Impairment losses (3) Disposal of subsidiary, net of cash disposed 12
Date of disposal Equity interest change Price of sale Increase in shareholders’ equity Increase in noncontrolling interests
Euler Hermes Real Estate opcI, Paris 12/12/2012 (40.0) 55 7 48
Prices for transactions between reportable segments are set on an arm’s length basis in a manner similar to transac­ tions with third parties. Transactions between reportable segments are eliminated in Consolidation. For the report­ able segment Asset Management, interest revenues are reported net of interest expenses.
6 – Segment reporting identification of RepoRtable segments The business activities of the Allianz Group are first orga­ nized by product and type of service: insurance activities, asset management activities and corporate and other activ ities. Due to differences in the nature of products, risks and capital allocation, insurance activities are further di­ vided into Property­Casualty and Life/Health cat egories. In accordance with the responsibilities of the Board of Man­ agement, each of the insurance categories is grouped into the following reportable segments: − German Speaking Countries − Western & Southern Europe − Iberia & Latin America − USA − Global Insurance Lines & Anglo Markets − Growth Markets − Global Assistance (Property­Casualty only)
Property-Casualty In the Property­Casualty category, reportable segments of­ fer a wide variety of insurance products to both private and corporate customers, including motor liability and own damage, accident, general liability, fire and property, legal expense, credit and travel insurance.
business segment infoRmation - consolidated balance sheets € mn Property-Casualty Life/Health assets Cash and cash equivalents 2,707 2,405 5,574 5,301 Financial assets carried at fair value through income 624 1,187 6,150 6,518 Investments 90,168 84,195 301,111 262,126 Loans and advances to banks and customers 18,331 17,842 94,080 98,019 Financial assets for unit-linked contracts – – 71,197 63,500 Reinsurance assets 8,432 8,050 4,858 4,846 Deferred acquisition costs 4,323 4,197 14,990 16,429 Deferred tax assets 895 1,050 240 236 Other assets 22,044 20,772 16,756 16,085 Non-current assets and assets of disposal groups classified as held for sale – 3 12 4 € mn Property-Casualty Life/Health liabilities and eQuitY Financial liabilities carried at fair value through income 100 122 5,255 6,302 Liabilities to banks and customers 1,146 1,488 1,972 2,348 Unearned premiums 15,328 14,697 2,618 2,562 Reserves for loss and loss adjustment expenses 62,711 59,493 9,854 9,357 Reserves for insurance and investment contracts 10,174 9,520 380,995 352,558 Financial liabilities for unit-linked contracts – – 71,197 63,500 Deferred tax liabilities 2,584 2,246 3,272 2,186 Other liabilities 16,428 14,999 14,102 13,077 Liabilities of disposal groups classified as held for sale – – – – Certificated liabilities 25 25 – – Participation certificates and subordinated liabilities – – 95 65 Total liabilities 108,496 102,590 489,360 451,955
business segment infoRmation – total Revenues and Reconciliation of opeRating pRofit (loss) to net income (loss)
Premiums earned (net) 41,705 39,898 39,303 24,393 23,770 24,034 Operating investment result
Interest and similar income 3,770 3,771 3,680 16,832 16,107 15,085 Operating income from financial assets and liabilities carried at fair value through income (net) (46) 48 18 (727) (866) 19 Operating realized gains/losses (net) 168 21 42 3,044 2,188 2,125 Interest expenses, excluding interest expenses from external debt (47) (54) (92) (84) (108) (103) Operating impairments of investments (net) (17) (46) (9) (428) (1,684) (434) Investment expenses (307) (236) (240) (759) (745) (704) Subtotal 3,521 3,504 3,399 17,878 14,892 15,988
Income from fully consolidated private equity investments (net) – (3) – – – – Interest expenses from external debt – – – – – – Acquisition-related expenses – – – – – – Amortization of intangible assets (31) (107) (156) (4) (155) (3) Non-operating restructuring charges (146) (127) (178) (11) (21) (31) Reclassification of tax benefits – – – – – – Non-operating items 182 (179) 16 81 (488) (85)
Income (loss) before income taxes 4,901 4,017 4,320 3,036 1,932 2,783 Income taxes (1,430) (1,205) (1,216) (1,001) (734) (934) Net income (loss) 3,471 2,812 3,104 2,035 1,198 1,849
2 In 2012 includes expenses for premium refunds (net) in Property-Casualty of € (292) mn (2011: € (110) mn; 2010: € (181) mn).
Operating realized gains/losses (net) 168 21 42 – – – Fee and commission income 147 152 131 20 22 31 Other income 29 25 12 4 2 1 Operating revenues 11,211 10,876 10,747 9,580 9,408 9,459
Claims and insurance benefits incurred (net) (6,704) (7,023) (6,838) (5,642) (5,862) (6,301) Change in reserves for insurance and investment contracts (net) (385) (229) (280) – – –
Interest expenses (76) (73) (79) (9) (10) (48) Operating impairments of investments (net) (17) (46) (9) – – – Investment expenses (96) (87) (89) (86) (83) (82) Acquisition and administrative expenses (net) (2,590) (2,546) (2,475) (2,333) (2,266) (2,301) Fee and commission expenses (148) (150) (125) (34) (29) (29) Other expenses (18) (12) (9) (4) (2) – Operating expenses (10,034) (10,166) (9,904) (8,108) (8,252) (8,761)
5 The 2011 analysis of the Allianz Group’s asbestos risks resulted in a reduction of reserves and a positive run-off result of € 130 mn, which is included in claims and insurance benefits incurred (net) within Consolidation and Other.
6 Represents claims and insurance benefits incurred (net) divided by premiums earned (net). 7 Represents acquisition and administrative expenses (net) divided by premiums earned (net). 8 Represents the total of acquisition and administrative expenses (net) and claims and insurance benefits incurred (net) divided by premiums earned (net).
– – – – – – – – – – – –
Claims and insurance benefits incurred (net) (1,305) (1,164) (1,052) – 119 (9) (28,492) (27,920) (27,141)
Acquisition and administrative expenses (net) (690) (627) (581) 15 3 (1) (11,673) (11,115) (11,044)
Statutory premiums 1 20,758 21,004 21,070 16,897 16,462 18,590 1,520 1,377 1,276 Ceded premiums written (161) (176) (187) (1,102) (436) (329) (30) (49) (27) Change in unearned premiums (194) (183) (57) 45 30 39 – – (1) Statutory premiums (net) 20,403 20,645 20,826 15,840 16,056 18,300 1,490 1,328 1,248 Deposits from insurance and investment contracts (4,879) (5,246) (5,095) (11,572) (11,691) (13,875) (786) (760) (689) Premiums earned (net) 15,524 15,399 15,731 4,268 4,365 4,425 704 568 559 Interest and similar income 8,782 8,388 7,848 3,999 4,038 3,814 370 355 331 Operating income from financial assets and liabilities carried at fair value through income (net) 48 172 148 (50) (127) 65 22 2 4 Operating realized gains/losses (net) 2,277 1,464 1,331 587 544 593 (38) 1 4 Fee and commission income 44 40 30 350 366 405 6 4 5 Other income 134 94 65 20 5 2 – – –
Margin on reserves 2 in basis points 64 57 68 57 61 70 173 235 226 1 Statutory premiums are gross premiums written from sales of life and health insurance policies, as well as gross receipts from sales of unit-linked and other investmentoriented products, in accordance with the statutory accounting practices applicable in the insurer’s home jurisdiction.
2 Represents operating profit divided by the average of the current and previous yearend net reserves, whereby net reserves equal reserves for loss and loss adjustment expenses, reserves for insurance and investment contracts and financial liabilities for unit-linked contracts less reinsurance assets.
Income from financial assets and liabilities carried at fair value through income (net) 16 (11) 19
Interest expenses, excluding interest expenses from external debt (414) (438) (383) (350) (374) (333) Loan loss provisions – – – (111) (121) (56) Investment expenses (101) (98) (94) (1) (1) – Administrative expenses (net), excluding acquisition-related expenses (637) (566) (621) (511) (512) (591) Fee and commission expenses (249) (200) (215) (247) (221) (210) Other expenses – – – (3) (1) (3) Operating expenses (1,401) (1,302) (1,313) (1,223) (1,230) (1,193)
Cash and Cash equivalents D 033 € mn as of 31 December 2012 2011
9 – Investments investments D 035 € mn as of 31 December 2012 2011
Available-for-sale investments 383,254 333,880 Held-to-maturity investments 4,321 4,220 Funds held by others under reinsurance contracts assumed 1,188 1,123 Investments in associates and joint ventures 3,219 2,758 Real estate held for investment 9,646 8,664 8 – Financial assets carried at fair value through income
Financial assets held for trading Debt securities 328 238 Equity securities 153 135 Derivative financial instruments 1,865 2,096
Debt securities 2,349 3,375 Equity securities 2,588 2,622 debt and equity seCurities inCluded in FinanCial assets held For trading Debt and equity securities included in financial assets held for trading are primarily marketable and listed securities. As of 31 December 2012, the debt securities include € 29 mn (2011: € 74 mn) from public sector issuers and € 299 mn (2011: € 164 mn) from other issuers.
Debt securities Government and agency mortgage-backed securities (residential and commercial) 4,026 291 (2) 4,315 5,095 300 (1) 5,394 Corporate mortgage-backed securities (residential and commercial) 10,778 1,202 (107) 11,873 10,868 863 (182) 11,549
Government and government agency bonds 20,821 (1,728) 15,584 (2,403) 36,405 (4,131)
Corporate mortgage-backed securities (residential and commercial) Total unrealized losses amounted to € 107 mn as of 31 December 2012. The unrealized loss positions mainly stem from issues in the securities markets of certain European countries. Based on a detailed analysis of the underlying securities and collaterals, the Allianz Group did not consider these investments to be impaired as of 31 December 2012.
real estate held For investment real estate held For investment D 040 € mn
Changes in the consolidated subsidiaries of the Allianz Group 317 1 544
Reversals of impairments 33 35 35 Carrying amount As of 31 December 9,646 8,664 8,672 Accumulated depreciation as of 31 December 2,797 2,719 2,958 Cost as of 31 December 12,443 11,383 11,630 in a decrease of the unrealized losses of € 3,676 mn. Based on a detailed analysis of the underlying securities, the Allianz Group did not consider these investments to be impaired as of 31 December 2012.
ContraCtual term to maturity The amortized cost and fair value of available-for-sale debt securities and held-to-maturity debt securities as of 31 December 2012, by contractual term to maturity, are as follows: ContraCtual term to maturity D 039 € mn as of 31 December 2012 Amortized Cost Fair Value available-For-sale debt seCurities Due in 1 year or less 29,960 30,383 Due after 1 year and up to 5 years 93,455 98,507 Due after 5 years and up to 10 years 86,766 95,539 Due after 10 years 116,908 132,338 held-to-maturity debt seCurities Due in 1 year or less 252 248 Due after 1 year and up to 5 years 1,660 1,812 Due after 5 years and up to 10 years 886 997 Due after 10 years 1,523 1,662
Short-term investments and certificates of deposit 4,207 – 4,207 6,341 – 6,341
reConCiliation oF allowanCes For Credit losses by Class oF FinanCial assets As of 31 December 2012, the overall volume of allowances for credit losses includes loan loss allowances deducted from loans and advances to banks and customers totaling € 152 mn (2011: € 197 mn; 2010: € 146 mn) and provisions for credit losses included in other liabilities totaling € 67 mn (2011: € 24 mn; 2010: € 7 mn).
Short-term investments and certificates of deposit 848 3,359 4,207 1,510 4,831 6,341
Wholesale and retail trade 487 423 Financial institutions (excluding banks) and insurance companies 106 370 Service providers 4,174 3,200
Public authorities 6,955 7,143 Private customers 17,677 17,413 other Countries Corporate Customers
Industry, wholesale and retail trade and service providers 6,240 6,023 Financial institutions (excluding banks) and insurance companies 316 1,056
Changes in aggregate policy reserves ceded to reinsurers are as follows: Changes in aggregate poliCy reserves Ceded to reinsurers D 048 € mn
Carrying amount as of 1 January 4,364 4,674 4,613 Foreign currency translation adjustments (47) 102 193 Changes recorded in the consolidated income statements 66 (4) (46)
The Allianz Group reinsures a portion of the risks it underwrites in an effort to control its exposure to losses and events and to protect its capital resources. For natural catastrophe events, the Allianz Group maintains a centralized program that pools exposures from a number of subsidiaries by internal reinsurance agreements. Allianz SE limits exposures in this portfolio through external reinsurance. For other risks, the subsidiaries of the Allianz Group have individual reinsurance programs in place. Allianz SE participates as a reinsurer on an arm’s length basis in these programs.
Changes in the consolidated subsidiaries of the Allianz Group – – (19) – – (1) – – (20) Additions charged to the consolidated income statements 129 156 110 61 20 13 190 176 123
The following table presents information relating to the Allianz Group’s impaired loans: impaired loans D 046 € mn as of 31 December 2012 2011
Impaired loans 881 766 Impaired loans with specific allowances 875 762 Average balance of impaired loans 442 688 Interest income recognized on impaired loans 10 8
Changes in the consolidated subsidiaries of the Allianz Group – – (10) Foreign currency translation adjustments (27) 195 492
Carrying amount as of 31 December 13,521 14,579 14,459 present value oF Future proFits present value oF Future proFits D 051 € mn
Cost as of 1 January 2,778 2,782 2,694 Accumulated amortization as of 1 January (1,725) (1,602) (1,482) Carrying amount as of 1 January 1,053 1,180 1,212 Foreign currency translation adjustments 5 (10) 48
Reinsurance involves credit risk and is subject to aggregate loss limits. Reinsurance does not legally discharge the respective Allianz company from primary liability under the reinsured policies. Although the reinsurer is liable to this company to the extent of the business ceded, the Allianz company remains primarily liable as the direct insurer on all the risks it underwrites, including the share that is reinsured. The Allianz Group monitors the financial condition of its reinsurers on a regular basis and reviews its reinsurance arrangements periodically in order to evaluate the reinsurer’s ability to fulfill its obligations to the Allianz Group companies under existing and planned reinsurance contracts. The Allianz Group’s evaluation criteria, which include the degree of creditworthiness, capital 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 claims from its reinsurers. Additionally, and as appropriate, the Allianz Group may also require letters of credit, deposits, or other financial guarantees to further minimize its exposure to credit risk. In certain cases, however, the Allianz Group does establish an allowance for doubtful amounts related to reinsurance as appropriate, although this amount was not significant as of 31 December 2012 and 2011. The Allianz Group primarily maintains business relations with highly rated reinsurers.
12 – Deferred acquisition costs deFerred aCquisition Costs D 049 € mn as of 31 December 2012 2011
Present value of future profits 945 1,053 Deferred sales inducements 524 797
other assets D 053 € mn as of 31 December 2012 2011
As of 31 December 2012, other assets due within one year totaled € 27,367 mn (2011: € 27,746 mn), and those due in more than one year totaled € 8,259 mn (2011: € 6,600 mn).
Changes in the consolidated subsidiaries of the Allianz Group (1) (20) (5)
Carrying amount as of 31 December 1 1,590 1,393 1,287 Accumulated amortization as of 31 December 3,467 3,191 2,875 Cost as of 31 December 5,057 4,584 4,162 1 As of 31 December 2012, includes € 980 MN (2011: € 865 MN; 2010: 829 MN) for software developed in-house and € 610 MN (2011: € 528 MN; 2010: € 458 MN) for software purchased from third parties.
Cost as of 1 January 3,480 3,297 3,311 Accumulated depreciation as of 1 January (2,631) (2,562) (2,508) Carrying amount as of 1 January 849 735 803
Carrying amount as of 31 December 967 849 735 Accumulated depreciation as of 31 December 2,673 2,631 2,562 Cost as of 31 December 3,640 3,480 3,297 property and equipment
Reclassifications into non-current assets and assets of disposal groups classified as held for sale – – (11) Foreign currency translation adjustments 14 (5) 89
As of 31 December 2012, the fair value of real estate held for own use was € 4,189 mn (2011: € 4,128 mn). As of 31 December 2012, assets pledged as security and other restrictions on title were € 113 mn (2011: € 119 mn).
non-current assets at fair value less costs to sell an impairment loss of € 3 mn was recognized for the year ended 31 December 2012.
LLC Allianz Life, Moscow – 4 Seed money investments – 7 Subtotal – 11
Non-current assets classified as held for sale of € 15 mn comprise real estate held for investment allocated to the Life/Health segment in the U.S. and Corporate and Other segment in Germany, none of which is individually material. The sale of these assets is expected to be completed during the first quarter of 2013. Upon measurement of the
Cost as of 1 January 1,573 1,587 1,152 Accumulated depreciation as of 1 January (460) (470) (330) Carrying amount as of 1 January 1,113 1,117 822
15 – Intangible assets intangible assets D 059 € mn as of 31 December 2012 2011
Cost as of 1 January 12,527 12,603 12,291 Accumulated impairments as of 1 January (805) (583) (277) Carrying amount as of 1 January 11,722 12,020 12,014
Disposals – (28) – Foreign currency translation adjustments (26) 67 256
Reclassifications into non-current assets and assets of disposal groups classified as held for sale – (7) – Carrying amount as of 31 December 11,679 11,722 12,020 Accumulated impairments as of 31 December 894 805 583 Cost as of 31 December 12,573 12,527 12,603
Additions of 2012 mainly include goodwill from the acquisition relating to the brokerage portfolio of GAn Eurocourtage S.A., Paris.
The reclassification of 2011 affects the goodwill of Allianz Kazakhstan ZAO, Almaty, as this subsidiary was reclassified to non-current assets and assets and liabilities of disposal groups classified as held for sale.
The allocated goodwill of the CGU Banking Europe, Central and Eastern Europe in the Property-Casualty segment and manroland AG in the Corporate and Other segment was impaired as a result of the annual impairment test 2010.
Brand names The position brand names consists primarily of the brand name “Selecta”. The brand name “Selecta” has an indefinite life, as there is no foreseeable end to its economic life.
The fair value of this brand name, registered as a trade name, was determined using a royalty savings approach.
Allocation principles For the purpose of impairment testing, the Allianz Group has allocated goodwill to Cash Generating Units (CGU). These CGU represent the lowest level at which goodwill is monitored for internal management purposes.
Cash generating units in the Property-Casualty segment are: − German Speaking Countries, − Insurance Western & Southern Europe including France, the Netherlands, Turkey, Belgium, Italy, Greece, Luxembourg and Africa,
− Iberia & Latin America including South America, Mexico, Portugal and Spain,
Cash generating units in the Life/Health segment are: − German Speaking Countries, − Health Germany, − Insurance Western & Southern Europe including France, the Netherlands, Turkey, Belgium, Italy, Greece, Luxembourg and Africa,
Cash generating units in the Corporate and Other segment consist of Selecta AG.
Valuation techniques The recoverable amounts for all CGU are determined on the basis of value in use calculations. The Allianz Group applies generally acknowledged valuation principles to determine the value in use.
For all CGU in the Property-Casualty segment and for the CGU Asset Management, the Allianz Group uses the capitalized earnings method to derive the value in use. Generally, the basis for the determination of the capitalized earnings value is the business plan (“detailed planning period”) as well as the estimate of the sustainable returns and eternal growth rates which can be assumed to be realistic on a long-term basis (“terminal value”) for the operating enti1 The overview shows all CGU that contain goodwill.
The terminal values are largely based on the expected profits of the final year of the detailed planning period. Where necessary, the planned profits are adjusted to reflect long-
term sustainable earnings. The financing of the assumed eternal growth in the terminal values is accounted for by appropriate profit retention.
In cases where no adequate valuation reflecting a longterm view in line with management judgement and market experience could be derived from a market consistent methodology (mCEV), the Appraisal Value was derived from a Traditional Embedded Value and new business calculation. The Traditional Embedded Value and new business calculation was used in the impairment test in the Life/ Health segment for entities in Taiwan, the United States and Italy.
For entities included in the CGU of the Property-Casualty segment, the business plans are mainly based on key assumptions including expense ratio, loss ratio, investment income, risk capital, market share, premium rate changes and taxes. The basis for determining the values assigned to the key assumptions are current market trends and earnings projections.
German Speaking Countries 7.3 1.0 Insurance Western & Southern Europe 8.2 1.0 Iberia & Latin America 11.6 3.0 Asia-Pacific and Middle East 9.7 3.0 Central and Eastern Europe 9.9 2.0 Global Insurance Lines & Anglo Markets 7.0 1.0 Specialty Lines i 7.9 1.0 Specialty Lines ii 8.0 1.0
mCEV. For the calculation of the Traditional Embedded Value a discount rate based on 10-year government bonds plus 4.5 % Equity Risk Premium was used. For the valuation of the Traditional Embedded Value the underlying government bonds were consistently used for the valuation of starting asset values as well as for the projection of the cash flows. The following table provides an overview of the discount rates for the CGU in the Life/Health segment: reFerenCe rate and risk disCount rate For the Cgu in the liFe/health segment D 063
Reference rate for entities with Appraisal Value based on mCev and risk discount rate for entities with Appraisal Value based on Traditional Embedded Value (tev)
German Speaking Countries mCev: eur swap curve minus 10 bps credit risk adjustment plus 33 bps illiquidity premium ChF swap curve minus 10 bps credit risk adjustment plus 2 bps illiquidity premium
For entities included in the CGU of the Asset Management segment, key assumptions include assets under management growth, cost-income ratio and risk capital. The key assumptions are based on the current market environment. The discount rate is 9.0 % and the eternal growth rate is 1.0 % for the CGU Asset Management.
For the CGU in the segments Property-Casualty and Asset Management, sensitivity analyses were performed in respect to the long-term sustainable combined ratios and cost income ratios. For all CGU excluding Property-Casualty Asia-Pacific and Middle East as well as Property-Casualty Central and Eastern Europe, capitalized earnings value sensitivities still exceeded their respective carrying values. An increase of more than 0.5 % points in the discount rate or the combined ratio may result in the recoverable amount for the CGU Central and Eastern Europe getting close to its carrying value. The recoverable amount of the CGU AsiaPacific and Middle East may decline to its carrying value as a result of an increase in the combined ratio of more than 1.5 % points.
It has to be noted, however, that these sensitivity analyses for the Traditional Embedded Value with an adverse variation in the risk discount rate were performed on a ceteris paribus basis. Investment income and the respective associated profits underlying the Traditional Embedded Values were not adjusted correspondingly.
Financial liabilities carried at Fair value through income D 064 € mn as of 31 December 2012 2011
Financial liabilities held for trading Derivative financial instruments 5,395 6,608 Other trading liabilities 2 2
17 – Liabilities to banks and customers liabilities to banks and customers D 065 € mn as of 31 December 2012 2011
Collateral received from securities lending transactions and derivatives 1,793 – 1,793 2,151 – 2,151 liabilities to banks and customers by contractual maturity liabilities to banks and customers by contractual maturity D 066 € mn as of 31 December 2012 Up to 3 months > 3 months up to 1 year > 1 year up to 3 years > 3 years up to 5 years
reserves For loss and loss adjustment expenses D 069 € mn as of 31 December 2012 2011
liabilities to banks and customers by type oF customer and geographic region liabilities to banks and customers by type oF customer and geographic region D 067 € mn as of 31 December 2012 2011
As of 31 December 2012, liabilities to customers include € 1,625 mn (2011: € 1,049 mn) of non-interest bearing deposits.
change in reserves For loss and loss adjustment expenses The following table reconciles the beginning and ending reserves of the Allianz Group, including the effect of reinsurance ceded, for the Property-Casualty segment for each year in the three-year period ended 31 December 2012.
change in reserves For loss and loss adjustment expenses D 070 € mn
1 Includes effects of foreign currency translation adjustments for prior years claims of gross € 47 mn (2011: € 295 mn; 2010: € 1,999 mn) and of net € 70 mn (2011: € 247 mn; 2010: € 1,707 mn)
and for current year claims of gross € (156) mn (2011: € 444 mn; 2010: € 101 mn) and of net € (127) mn (2011: € 345 mn; 2010: € 63 mn).
Prior years’ net loss and loss adjustment expenses incurred reflect the changes in estimation charged or credited to the consolidated income statement in each year with respect to the reserves for loss and loss adjustment expenses established as of the beginning of that year. During the year ended 31 December 2012, the Allianz Group recorded additional income of € 1,207 mn (2011: € 1,660 mn; 2010: € 1,544 mn) net in respect of losses occurring in prior years. During the year ended 31 December 2012, this amount as a percentage of the net balance of the beginning of the year was 2.3 % (2011: 3.3 %; 2010: 3.2 %).
changes in historical reserves For loss and loss adjustment expenses (lae) The analysis of loss and LAE reserves by actuaries and management is conducted by line of business and separately for specific claim types such as asbestos and environmental claims. The origin year of losses is taken into consideration by analyzing each line of business by accident year. While this determines the estimates of reserves for loss and LAE by accident year, the effect in the consolidated income statement in the respective calendar year combines the accident year loss ratio for the current year with the favorable or adverse development from prior years (run-off). The tables below first show the loss development by accident year followed by the resulting change for the most recent calendar years.
ultimate loss For the individual accident years at the respective reporting date (net) D 073 € mn Accident year as of 31 December
1 Includes effects from foreign currency translation adjustments and other changes. 2 Presentation not meaningful.
calendar year premiums earned and ultimate loss ratio For the individual accident years at the respective reporting date (net) D 074
Each column of this table shows reserves as of a single reporting date and subsequent development of these reserves. The top section of each column shows reserves as initially established at the end of each stated year. The next section, reading down, shows the cumulative net amounts paid as of the end of the successive years with respect to the reserve initially established. The next section shows the retroactive re-estimation of the initially established net reserves for loss and LAE as of the end of each successive year. This re-estimation results primarily from additional facts and circumstances that pertain to open claims.
The bottom section compares the latest re-estimated gross and net reserves for loss and LAE to the gross and net reserves, respectively, as initially established, and indicates the cumulative development of the initially established reserves until 31 December 2012. The surplus shown in the table for each year represents the aggregate amount by which the original estimates of reserves at that year-end have changed in subsequent years. Accordingly, the cumulative surplus for a year-end relates only to reserves at that year-end and such amounts are not additive. Caution should be exercised in evaluating the information shown in this table, as each amount includes the effects of all changes in amounts for prior periods. For example, the development of the 2005 reserves during 2012 is shown in the cumulative surplus columns from 2005 to 2011.
Reserves for loss and loss adjustment expenses (gross) 55,528 60,259 58,664 56,943 55,616 55,715 57,509 59,493 62,711 Reserves for loss and loss adjustment expenses (ceded) 10,048 10,603 9,333 8,266 7,820 7,176 6,659 6,658 6,905 Reserves for loss and loss adjustment expenses (net) 45,480 49,656 49,331 48,677 47,796 48,539 50,850 52,835 55,806 Net paid (cumulative) as of
Six years later 26,719 28,254 27,670 Seven years later 27,867 29,661 Eight years later 29,077 Net liabilities re-estimated as of
Net surplus before adjustments as a % of initial reserves 5.8 % 9.3 % 8.6 % 6.5 % (0.4) % (0.5) % 0.6 % (1.5) %
1 Gross/Net surplus before adjustments represents the cumulative surplus from re-estimating the reserves for loss and loss adjustment expenses for prior years claims and includes changes in the consolidated subsidiaries of the Allianz Group of gross € 2,114 mn (2011: € (2) mn) and net € 1,924 mn (2011: € (2) mn), foreign currency translation adjustments, reclassifications and other changes. This leads to an effective run-off result of gross € 1,271 mn (2011: € 2,080 mn) and net € 1,207 mn (2011: € 1,660 mn), which can be found in the table “Change in the reserves for loss and loss adjustment expenses” within this section.
while long-tail claims, such as general liability, workers compensation, construction and professional liability claims take longer.
The Allianz Group estimates that loss and LAE reserves consist of approximately 10 % short-tail, 45 % medium-tail and 45 % long-tail business.
composition oF reserves For loss and lae by line oF business D 076 € mn
When reviewing the previous table, caution should be used in comparing the split between case and IBnR reserves across lines of business. The portion of IBnR on total loss reserves varies by line of business due to different reporting and settlement patterns. For short-tail lines of business, such as property, claims are generally reported immediately after occurrence and settled in a period of only a few years. For long-tail lines of business, such as product liability, it is not unusual that a claim is reported years after its occurrence and settlement can also take a significant length of time. This is particularly the case for bodily injury claims.
changes in reserves For loss and lae during 2012 As noted above, prior year loss and LAE reserves of the Allianz Group developed favorably during 2012 by € 1,271 mn gross of reinsurance and € 1,207 mn net of reinsurance, representing 2.1 % of gross reserves and 2.3 % of net reserves as of 31 December 2011. The following table provides a breakdown of these amounts by line of business.
Inwards and Group Internal Reinsurance 2,521 (55) (2.2) 4,722 73 1.5 1 In % of gross reserves as of 31 December 2011. 2 In % of net reserves as of 31 December 2011.
€ 108 mn at Allianz Spain. The reduction was driven by lower claim frequency and severity. This development is mainly due to the economic environment. Furthermore, Allianz Spain reached more favorable terms through improved price agreements with external suppliers, such as repair shops, lawyers and doctors. In addition, the number of claims managed directly by Allianz Global Assistance increased with the benefit of a lower cost to the company.
€ 70 mn at Allianz United Kingdom with savings mainly arising from more recent accident years; contributing to the savings are reductions in larger claims across the portfolio and favorable development of bodily injury claims.
General Liability For General Liability, net loss and LAE reserves developed unfavorably during 2012 by € 207 mn, or 2.1 % of reserves at 31 December 2011. This development was caused by different effects across several operating entities. The following subsidiaries were the largest contributors: € 209 mn at Fireman’s Fund Insurance Company, was driven mainly by € 124 mn in Professional Liability Lawyers, where results have been affected by an unfavorable economic environment and a change in portfolio mix towards slower emerging losses. Furthermore, an unfavorable run-off of
€ 72 mn unfavorable run-off at Allianz Germany due to an ongoing review of the related methods and assumptions.
€ 65 mn unfavorable development at Allianz Italy, mainly due to an allowance made for an increase in VAT and the uncertain economic conditions. Furthermore as part of the ongoing monitoring of the portfolio an additional IBnR of € 27 mn for latent man-made claims was booked during 2012.
Property For Property Insurance, net loss and LAE reserves developed favorably during 2012 by € 253 mn, or 7.8 % of reserves at 31 December 2011. Favorable development was caused by different effects across several operating entities. The following subsidiaries were the largest contributors: € 88 mn at Allianz Germany, mainly due to the release of IBnR for natural catastrophes, favorable development of large claims and overall improved claims handling.
€ 43 mn at Allianz France, mainly due to favorable development on large losses.
Inwards and Group Internal Reinsurance For Inwards and Group Internal Reinsurance, net loss and LAE reserves developed unfavorably during 2012 by € 73 mn or 1.5 % of reserves at December 2011. This development was caused by different effects across several operating entities. The largest contributor was Allianz Re with an increase of € 46 mn, driven by an unfavorable development of the claims arising from the 2011 floods in Thailand in the amount of approximately € 217 mn. This development was partially offset by a favorable development of the claims arising from the 2011 earthquake in Japan in the amount of € 49 mn.
Allianz Global Corporate and Specialty Allianz Global Corporate and Specialty (AGCS) is the Allianz Group’s global carrier for corporate and specialty risks and also includes the corporate branch of the German business. Overall, AGCS experienced a favorable development of € 348 mn in 2012, net of reinsurance, or 5.7 % of reserves as of 31 December 2011. The major contributors of the run-off included: € 91 mn favorable from the German branch corporate liability portfolio and € 65 mn from the German branch aviation portfolio due to the release of IBnR on prior year reserves based on better than expected experience.
discounting oF reserves For loss and lae As of 31 December 2012, 2011 and 2010, the Allianz Group’s consolidated Property-Casualty reserves included discounted reserves of € 3,583 mn, € 1,981 mn and € 1,846 mn, respectively.
In general, reserves for loss and loss adjustment expenses are not discounted, except when payment amounts are fixed and timing is reasonably determinable. Reserves are discounted to varying degrees in the United States, Germany, the United Kingdom, Switzerland, Portugal, Belgium and France. The reserve discounts relate to reserves for structured settlements in various lines of business. These lines of business include personal accident, general liability and motor liability in Germany and France, workers’ compensation, general liability and motor liability in the United Kingdom and the United States and workers’ compensation in Switzerland, Portugal and Belgium.
The following table shows, by line of business, the carrying amounts of reserves for loss and LAE that have been disdiscounting oF reserves For loss and lae D 078
Discounted reserves Amount of the discount Interest rate used for discounting 1 € mn € mn € mn € mn € mn € mn % % %
1 The wide range of interest rates is the result of the presentation of the above information by line of business thus each line reflecting interest rates used in various countries. Overall, due to the low interest rate environment, interest rates used for discounting reduced.
2 The development in workers compensation / employers liability in 2012 is due to the insurance activities of Mensura CCA acquired by Allianz Belgium with discounted reserves of € 1,410 mn and amount of the discount of € 451 mn.
asbestos and environmental (a&e) loss reserves There are significant uncertainties in estimating A&E reserves for loss and LAE. Reserves for asbestos-related illnesses and environmental clean up losses cannot be estimated using traditional actuarial techniques due to the long latency period and changes in the legal, socio-economic and regulatory environment. Case reserves are established when sufficient information is available to indicate the involvement of a specific insurance policy. In addition, IBnR reserves are established to cover additional exposures on both known and not yet reported claims. To the extent possible, A&E loss reserve estimates are based not only on claims reported to date, but also on a survey of policies that may be exposed to claims reported in the future (i. e. an exposure analysis).
Foreign currency translation adjustments 30 340 151 124 Changes recorded in consolidated income statements 3,623 990 2,037 1,170 Dividends allocated to policyholders 1,048 458 1,023 123 1 For the year ended 31 December 2012, includes changes in shadow accounting of € 128 mn (2011: € (26) mn) for participating life insurance contracts.
As percentage of the Allianz Group’s Property-Casualty gross reserves 4.9 % 5.3 % 5.7 %
As of 31 December 2012, participating life business represented approximately 56 % (2011: 57 %) of the Allianz Group’s gross insurance in force. During the year ended 31 December 2012, participating policies represented approximately 65 % (2011: 64 %) of gross statutory premiums written and 63 % (2011: 63 %) of life premiums earned. As of 31 December 2012, reserves for conventional participating policies were approximately 48 % (2011: 48 %) of the Allianz Group’s consolidated aggregate policy reserves.
Changes in aggregate policy reserves for universal life-type insurance contracts and non-unit-linked investment contracts for the years ended 31 December 2012 and 2011 were as follows: changes in aggregate policy reserves For universal liFe-type insurance contracts and non-unit-linked investment contracts D 084 € mn
Foreign currency translation adjustments (573) 14 1,912 (16) Changes in the consolidated subsidiaries of the Allianz Group – – (513) –
1 The reclassifications mainly relate to insurance contracts when policyholders change their contract from a unit-linked to a universal life-type contract.
Foreign currency translation adjustments 7 29 150 Changes in the consolidated subsidiaries of the Allianz Group – (22) (7) Changes due to fluctuations in market value 14,690 (2,886) (682) Changes due to valuation differences charged to income 2,613 386 1,755 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 over 30 countries around the world. Individual contracts include both traditional contracts and unit-linked contracts. Without taking policyholder participation into account, traditional contracts generally incorporate significant investment risk for the Allianz Group, while unit-linked contracts generally result in the contract holder assuming the investment risk. Traditional contracts include life, endowment, annuity, and health contracts. Traditional annuity contracts are issued in both deferred and immediate types. In addition, the Allianz Group’s life insurance operations in the United States issue a significant amount of equity-indexed deferred annuities. In certain markets, the Allianz Group also issues group life, group health and group pension contracts.
As of 31 December 2012 and 2011, the Allianz Group’s deferred acquisition costs and reserves for insurance and investment contracts for the Life/Health segment are summarized as follows: summary oF insurance risk in the liFe/health segment D 086 € mn as of 31 December
Other Western and Southern Europe 270 3,238 62 4 3,304 5,469 8,773
Other Western and Southern Europe 307 2,529 15 4 2,548 4,649 7,197
As a result of the considerable diversity in types of contracts issued, including the offsetting effects of mortality risk and longevity risk inherent in a combined portfolio of life insurance and annuity products, and the geographic diversity of the Allianz Group’s Life/Health segment, as well as the substantial level of policyholder participation in mortality/ morbidity risk in certain countries in Western Europe, the Allianz Group does not believe its Life/Health segment has any significant concentrations of insurance risk, nor does it believe its net income or shareholders’ equity is highly sensitive to insurance risk.
The Allianz Group’s Life/Health segment is exposed to significant investment risk as a result of guaranteed minimum interest rates included in most of its non-unit-linked contracts. The weighted average guaranteed minimum interest rates of the Allianz Group’s largest operating entities in the Life/Health segment (comprising 87 % of nonunit -linked reserves in both 2012 and 2011) can be summarized by country as follows: The majority of the Allianz Group’s Life/Health segment operations are 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 49 % (2011: 48 %) of the Allianz Group’s reserves for insurance and investment contracts as of 31 December 2012, 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.
Furthermore, all of the Allianz Group’s annuity policies issued in the United States meet the criteria for classification as insurance contracts under IFRS 4, because they include options for contract holders to elect a life-contingent annuity. These contracts currently do not expose the Allianz Group to significant longevity risk, nor are they expected to do so in the future, as the projected and observed annuitization rates are very low. Additionally, many of the Allianz Group’s traditional contracts issued in France and Italy do not incorporate significant insurance risk, although they are accounted for as insurance contracts because of their weighted average guaranteed minimum interest rates D 087 as of 31 December 2012 2011
% of nonunit -linked reserves 1 Excludes for 2011 L’Assicuratrice Italiana Vita S.p.A. (€ 283 mn of non-unit-linked reserves).
Financial liabilities For unit-linked contracts D 088 € mn as of 31 December 2012 2011
As of 31 December 2012, other liabilities due within one year amounted to € 25,121 mn (2011: € 23,181 mn) and those due after more than one year amounted to € 8,054 mn (2011: € 8,028 mn).
Total all other subsidiaries 25 – – – – – 25 25 1 Except for the interest rates. The interest rates represent the weighted average. 2 Includes senior bonds issued by Allianz Finance II B.V., guaranteed by Allianz SE and money market securities issued by Allianz Finance Corporation, a wholly-owned subsidiary of Allianz SE, which are fully and unconditionally guaranteed by Allianz SE.
Contractual interest rate – – – – – 6.89 % – –
Current interest rate – – – – – 2.33 % – –
In addition, Allianz SE had authorized capital (Authorized Capital 2010/II) for the issuance of shares against cash until 4 May 2015. The shareholders’ subscription rights can be excluded in order to issue new shares to employees of Allianz SE and its Group companies. As of 31 December 2012, the Authorized Capital 2010/II amounted to € 10 mn (3,809,375 shares).
Further, as of 31 December 2012, Allianz SE had conditional capital totaling € 250 mn (97,656,250 shares) (Conditional Capital 2010). This conditional capital increase will only be carried out if conversion or option rights attached to bonds which Allianz SE or its Group companies have issued against cash payments according to the resolution of the Annual General Meeting (AGm) on 5 May 2010, are exercised or the conversion obligations under such bonds are fulfilled, and only insofar as no other methods are used in serving these rights.
Convertible subordinated notes totaling € 500 mn which may be converted into Allianz shares were issued against cash in July 2011. Within 10 years after the issuance, a mandatory conversion of the notes into Allianz shares at the then prevailing share price may apply at the occurrence of certain events, subject to a floor price of at least € 75.39 per share. Within the same period, the investors have the right to convert the notes into Allianz shares at a price of € 188.47 per share. Both conversion prices are subject to anti-dilution provisions. The subscription rights of shareholders for these convertible notes have been excluded with the consent of the Supervisory Board and pursuant to the authorization of the AGm on 5 May 2010. The granting of new shares to persons entitled under such convertible notes is secured by the Conditional Capital 2010. On or before 31 December 2012, there was no conversion of any such notes into new shares.
25 – Equity equity D 093 € mn as of 31 December 2012 2011
Non-controlling interests 2,665 2,338 1 As of 31 December 2012, includes € (218) mn (2011: € (223) mn) related to treasury shares. 2 As of 31 December 2012, includes € 256 mn (2011: € 191 mn) related to cash flow hedges.
issued capital Issued capital as of 31 December 2012, amounted to € 1,167 mn divided into 455,950,000 registered shares. The shares have no par value but a mathematical per share value of € 2.56 each as a proportion of the issued capital.
Changes in the treasury shares were: changes in treasury shares D 095
In November 2012, 650,000 (2011: 800,000) shares were issued for cash out of the Authorized Capital 2010/II at a price of € 79.25 (2011: € 65.21) per share, enabling employees of Allianz Group subsidiaries in Germany and abroad to purchase shares. As a result, issued capital and capital reserves increased by € 52 mn. The Authorized Capital 2010/II was created to enable Allianz SE to issue new shares for such employee offerings. To be able to offer the new shares to employees, the shareholders’ subscription rights to these new shares were excluded with the consent of the Supervisory Board pursuant to the authorization granted by the AGm on 5 May 2010.
All shares issued during the years ending 31 December 2012, 2011, and 2010 are qualifying shares from the beginning of the year of issue.
Insurance subsidiaries of the Allianz Group including Allianz SE prepare individual financial statements based on local laws and regulations. These laws establish to some extent different restrictions on the minimum level of capital and the amount of dividends that may be paid to shareholders.
non-controlling interests non-controlling interests D 096 € mn as of 31 December 2012 2011
Unrealized gains and losses (net) 135 (13) Share of earnings 322 259 Other equity components 2,208 2,092 capital requirements The Allianz Group’s capital requirements are primarily dependent on the growth and the type of business that it underwrites, as well as the industry and geographic locations in which it operates. In addition, the allocation of the Allianz Group’s investments plays an important role. During the Allianz Group’s annual planning dialogues with its operating entities, capital requirements are determined through business plans regarding the levels and timing of capital expenditures and investments. Regulators impose minimum capital rules at the level of the Allianz Group’s operating entities and the Allianz Group as a whole.
Interest from held-to-maturity investments 204 188 177 Dividends from available-for-sale investments 1,156 1,145 1,001 Interest from available-for-sale investments 13,325 12,553 11,699 Share of earnings from investments in associates and joint ventures 143 201 183 Rent from real estate held for investment 740 754 699 Interest from loans to banks and customers 5,368 5,477 5,507 26 – Premiums earned (net) – continued
Premiums earned (net) D 097 € mn Property-Casualty Life/Health Consolidation Group
related to fixed-indexed annuity products and guaranteed benefits under unit-linked contracts of € 736 mn (2011: € 864 mn; 2010: € 681 mn) from U.S. entities.
Life/Health segment For the year ended 31 December 2012, income/(expenses) from financial assets and liabilities held for trading (net) in the Life/Health segment include expenses of € 878 mn (2011: € 735 mn; 2010: € 1,072 mn) from derivative financial instruments. This includes income of € 107 mn (2011: income of € 276 mn; 2010: expenses of € 366 mn) of German entities from financial derivative positions held for duration management and protection against equity and foreign exchange rate fluctuations. Also included are expenses 28 – 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) D 099 € mn
realized gains/losses (net) D 100 € mn realized gains Available-for-sale investments
Investments in associates and joint ventures 2 (8) (29) (21) Real estate held for investment (2) (8) (3) Loans and advances to banks and customers (6) (29) (82) Non-current assets and assets and liabilities of disposal groups classified as held for sale – (18) –
2 During the year ended 31 December 2012, includes realized losses from the disposal of subsidiaries of € 8 mN (2011: € 27 mN; 2010: € 15 mN).
Investment advisory 1 – 1 – – – – – –
income and exPenses from fully consolidated Private equity investments D 103 € mn
Income Sales and service revenues 789 1,552 1,684 Other operating revenues – 65 15 Interest income – 1 2
General and administrative expenses (524) (627) (573) Other operating expenses – (81) (112)
1 The presented subtotal for expenses and total income and expenses from fully consolidated private equity investments for the year ended 31 December 2012 differs from the amounts presented in the “Consolidated Income Statements” and in “Total revenues and reconciliation of Operating profit (loss) to Net income (loss)”. This difference is due to a consolidation effect of € (33) mN (2011: € 77 mN; 2010: € 113 mN) for the year ended 31 December 2012. This consolidation effect results from the deferred policyholder participation, recognized on the result from fully consolidated private equity investments within operating profit in the Life/Health segment, that was reclassified into expenses from fully consolidated private equity investments in non-operating profit to ensure a consistent presentation of the Allianz Group‘s operating profit.
Income from non-current assets and assets and liabilities of disposal groups classified as held for sale – 1 – Income from alternative investments 169 118 78
Claims and insurance benefits paid (28,657) (21,180) 15 (49,822) Change in loss and loss adjustment expenses (1,287) (266) (1) (1,554)
Ceded Claims and insurance benefits paid 2,112 481 (15) 2,578 Change in loss and loss adjustment expenses (88) 18 1 (69)
Net Claims and insurance benefits paid (26,545) (20,699) – (47,244) Change in loss and loss adjustment expenses (1,375) (248) – (1,623)
Claims and insurance benefits paid (28,759) (19,189) 11 (47,937) Change in loss and loss adjustment expenses 152 (258) 5 (101)
Aggregate policy reserves (157) (6,210) – (6,367) Other insurance reserves 10 (152) – (142) Expenses for premium refunds (118) (4,388) (103) (4,609)
Net Aggregate policy reserves (173) (6,097) – (6,270) Other insurance reserves 11 (140) – (129) Expenses for premium refunds (110) (4,381) (103) (4,594)
Aggregate policy reserves (146) (8,126) – (8,272) Other insurance reserves 3 (255) – (252) Expenses for premium refunds (185) (5,010) (242) (5,437)
Ceded Aggregate policy reserves 23 32 – 55 Other insurance reserves 1 12 – 13 Expenses for premium refunds 4 18 – 22
Recoveries on loans previously impaired 19 18 20 35 – Interest expenses interest expenses D 106 € mn
Real estate held for investment 33 35 35 Loans and advances to banks and customers 39 33 1 impairments of greek sovereign bond portfolio In 2011, Greek sovereign bonds were impaired and consequently written down to the current market value in accordance with IFRS impairment rules for available-for-sale debt securities.
Investment management expenses (525) (477) (466) Depreciation of real estate held for investment (190) (185) (171) Other expenses from real estate held for investment (161) (190) (190)
Segment Consolidation Group Segment Consolidation Group Segment Consolidation Group property-Casualty Acquisition costs
Commissions and profit received on reinsurance business ceded 498 (12) 486 490 (4) 486 509 (3) 506
Amortization of deferred acquisition costs (5,605) – (5,605) (5,186) – (5,186) (4,966) – (4,966)
Amortization of deferred acquisition costs (2,241) – (2,241) (2,302) – (2,302) (2,450) 1 (2,449)
Realized losses from disposals of real estate held for own use (3) – (3) Expenses from alternative investments (88) (64) (51)
Segment Consolidation Group Segment Consolidation Group Segment Consolidation Group property-Casualty Fees from credit and assistance business (711) 5 (706) (612) 4 (608) (597) – (597)
Investment advisory and Banking activities (247) 21 (226) (222) 2 (220) (209) 1 (208)
on the Group result. The expected tax rate for domestic Allianz Group companies applied in the reconciliation includes corporate tax, trade tax and the solidarity surcharge, and amounts to 31.0 % (2011: 31.0 %; 2010: 31.0 %).
In the tax reconciliation for 2012, the other effects of € 542 mn include € 373 mn current and deferred taxes for prior years and a one-off tax expense from a tax law change in France of € 64 mn.
For the year ended 31 December 2012, the write-down of deferred tax assets on tax losses carried forward resulted in deferred tax expenses of € – mn (2011: € 33 mn; 2010: € 153 mn). The non-recognition of deferred taxes on tax losses for the current fiscal year increased the tax expenses by € 52 mn (2011: € 161 mn; 2010: € 142 mn). Due to the use of tax losses carried forward for which no deferred tax asset was recognized, the current income tax expenses decreased by € 8 mn (2011: € 14 mn; 2010: € 15 mn). Deferred tax income of € 42 mn (2011: € 2 mn; 2010: € 1 mn) resulted from the recognition of deferred tax assets on tax losses carried forward from earlier periods for which no deferred taxes had yet been recognized.
The above mentioned effects are shown in the reconciliation statement as “effects of tax losses”.
The tax rates used in the calculation of the Allianz Group’s deferred taxes are the applicable national rates, which in 2012 ranged from 10.0 % to 40.0 %. Changes to tax rates already adopted on 31 December 2012 are taken into account.
For the years ended 31 December 2012, 2011 and 2010, the income taxes relating to components of other comprehensive income consist of the following: inCome taxes relating to Components of other Comprehensive inCome D 114 € mn
During the year ended 31 December 2012, current income taxes included expenses of € 264 mn (2011: expenses of € 92 mn, 2010: income of € 150 mn) related to prior years.
Due to the transition from the imputation system to the classical tax system in Germany (so called “Halbeinkünfteverfahren ”), provided by the Tax Reduction Act 2001, the Allianz Group lost potential tax savings. This has been corrected by the Annual German Tax Act published in December 2010, leading to a tax income of € 110 mn from the recognition of additional corporate tax credits. This tax benefit is included in current income taxes related to prior years in 2010.
Of the deferred income taxes for the year ended 31 December 2012, income of € 420 mn (2011: expenses of € 224 mn; 2010: income of € 69 mn) is attributable to the recognition of deferred taxes on temporary differences and expenses of € 233 mn (2011: income of € 25 mn; 2010: expenses of € 117 mn) are attributable to tax losses carried forward. Additionally, changes of applicable tax rates due to changes in tax law produced deferred tax expenses of € 3 mn (2011: expenses of € 46 mn; 2010: income of € 5 mn).
investments in Allianz Group companies, for which no deferred tax assets are recognized as it is not probable that they will reverse in the foreseeable future, amount to € 185 mn (2011: € 102 mn).
tax losses Carried forward Tax losses carried forward at 31 December 2012 of € 10,894 mn (2011: € 11,551 mn) resulted in recognition of deferred tax assets to the extent that there is sufficient certainty that the unused tax losses will be utilized. € 9,779 mn (2011: € 10,518 mn) of the tax losses carried forward can be used without time limitation.
Deferred tax assets on losses carried forward are recognized to the extent to which it is more likely than not that sufficient future taxable profits will be available for realization. Entities which suffered a tax loss in either the current or the preceding period recognized deferred tax assets in excess of deferred tax liabilities amounting to € 332 mn (2011: € 846 mn).
Taxable temporary differences associated with investments in Allianz Group companies, for which no deferred tax liabilities are recognized as the Allianz Group is able to control the timing of their reversal and which will not reverse in the foreseeable future, amount to € 520 mn (2011: € 596 mn). Deductible temporary differences arising from
Credit risks related to counterparties are assessed by calculating gross replacement values. Market risks are monitored by means of up-to-date value-at-risk calculations and stress tests, and are limited by specific stop-loss limits.
Derivatives used by individual subsidiaries in the Allianz Group comply with the relevant supervisory regulations and the Allianz Group’s own internal guidelines. The Allianz Group’s investment and monitoring rules exceed regulations imposed by supervisory authorities. In addition to local management supervision, comprehensive financial and risk management systems are in force across the Allianz Group. Risk management is an integral part of the Allianz Group’s controlling process that includes identifying, measuring, aggregating and managing risks. Risk management objectives are implemented at the Allianz Group level and by the local operational units. The use of derivatives is one key strategy used by the Allianz Group to manage its market and investment risks.
Within the Allianz Group’s Banking business, derivatives are used both for trading purposes and to hedge against movements in interest rates, currency rates and other price risks of the Allianz Group’s investments, loans, deposit liabilities and other interest-sensitive assets and liabilities.
2 Includes a correction of the determination of the notional amounts for a sub-portfolio (increases the notional amount by a total of € 58,492 mn).
D Consolidated Financial Statements 219 Consolidated Balance Sheets 220 Consolidated Income Statements 221 Consolidated Statements of Comprehensive Income 222 Consolidated Statements of Changes in Equity 223 Consolidated Statements of Cash Flows 226 Notes to the Consolidated Financial
Carrying amount Fair value Carrying amount Fair value financial assets Cash and cash equivalents 12,437 12,437 10,492 10,492 Financial assets held for trading 2,346 2,346 2,469 2,469 Financial assets designated at fair value through income 4,937 4,937 5,997 5,997 Available-for-sale investments 383,254 383,254 333,880 333,880 Held-to-maturity investments 4,321 4,719 4,220 4,422 Loans and advances to banks and customers 119,369 137,215 124,738 134,9161 Financial assets for unit-linked contracts 71,197 71,197 63,500 63,500 Derivative financial instruments and firm commitments included in other assets 129 129 430 430 financial liabilities Financial liabilities held for trading 5,397 5,397 6,610 6,610 Liabilities to banks and customers 22,425 23,140 22,155 22,6472 Investment contracts with policyholders 145,413 145,413 140,022 140,022 Financial liabilities for unit-linked contracts 71,197 71,197 63,500 63,500 Derivative financial instruments and firm commitments included in other liabilities 462 462 237 237 Financial liabilities for puttable equity instruments 2,601 2,601 2,881 2,881 Certificated liabilities, participation certificates and subordinated liabilities 19,574 21,174 18,822 18,299 1 Includes a correction of the determination of the risk adjusted discount rate for a sub-portfolio (increases the fair value by € 857 mn).
− Limitations, − Concentration of risks, − Quantifiable risks including all subsections other than
fair values anD carryinG amounts of financial instruments The following table compares the carrying amount with the fair value of the Allianz Group’s financial assets and financial liabilities.
Certificated liabilities, participation certificates and subordinated liabilities: The fair value of certificated liabilities, participation certificates and subordinated liabilities is determined using quoted market prices, if available. If quoted prices are not available, for short-term liabilities the carrying amount represents a reasonable estimate of the fair value. For longterm instruments the fair value is determined by discounting the remaining contractual future cash flows at a discount rate at which the Allianz Group could issue debt with a similar remaining maturity. The fair value determination reflects current market interest rates and considers the credit rating of the Allianz Group.
For a further explanation of the levels in the fair value hierarchy, please refer to note 2 – Summary of significant accounting policies.
Held-to-maturity investments: The fair value of held-to-maturity investments is determined using the quoted market price as of the balance sheet date.
Liabilities to banks and customers: For short-term liabilities, the carrying amount represents a reasonable estimate of the fair value. For long-term instruments, the fair value is determined by discounting future cash flows using risk specific interest rates.
Level 3 Valuation technique – non-market observable inputs Total fair value financial assets Financial assets carried at fair value through income
Financial assets for unit-linked contracts 68,508 2,504 185 71,197 Derivative financial instruments and firm commitments included in other assets – 129 – 129 Assets held in trust 232 – 140 372 financial liabilities Financial liabilities held for trading
Financial liabilities for unit-linked contracts 68,508 2,504 185 71,197 Derivative financial instruments and firm commitments included in other liabilities – 462 – 462 Financial liabilities for puttable equity instruments 2,495 26 80 2,601 Liabilities held in trust 232 – 140 372 1 Excludes universal life-type contracts.
Corporate bonds classified as Level 3 consist of various portfolios for which different valuation techniques with non-observable inputs, including broker quotes and pricing services, are used. While in total the effect of changing the valuation assumptions to reasonable possible alternative values might have a significant impact on the fair values, when considered individually for each portfolio, the impact would not be significant.
Financial liabilities held for trading include € 4.5 Bn of embedded derivative financial instruments relating to annuity products. Internal discounted cash flow models are used to determine the present value of the under lying insurance benefits and expenses. Sensitivity analyses of the fair value with regard to changes in input parameters to reasonable possible alternative assumptions are calculated by varying policyholder assumptions, such as annuitizations and surrenders that impact future projected benefits, by plus or minus 10 %. Assumption changes made to increase future projected benefits would increase the fair value by € 314 mn, whereas assumption changes made to decrease future projected benefits would decrease the fair value by € 339 mn.
Significant transfers of financial instruments carried at fair value between Level 1 and Level 2 transfers between level 1 anD level 2 D 122 € mn
Financial assets transferred from Level 1 to Level 2 Available-for-sale – Government and government agency bonds 1,182 Available-for-sale corporate bonds 2,005
Certain available-for-sale government and government agency as well as corporate bonds were transferred from Level 1 to Level 2 during the year ended 31 December 2012. These transfers were mainly due to decreased liquidity, trade frequency and activity of certain markets in which those bonds are traded, as well as refinements in policy.
Additionally, available-for-sale government and government agency bonds as well as certain corporate bonds were transferred from Level 2 to Level 1 during the year ended 31 December 2012 due to changes in the assessment of the liquidity of these bonds.
Level 3 portfolios The fair value of certain financial instruments is determined using valuation techniques with significant nonmarket observable input parameters (Level 3).
Disposals through sales and settlements financial assets Financial assets carried at fair value through income
Financial assets held for trading Debt securities 3 2 – (4) Derivative financial instruments 146 69 10 (502) Subtotal 149 71 10 (506)
Disposals through sales and settlements financial liabilities Financial liabilities held for trading
Derivative financial instruments 4,676 893 – (1,076) Investment contracts with policyholders 1 418 261 – (278) Financial liabilities for unit-linked contracts 183 9 3 (13) Financial liabilities for puttable equity instruments 49 – – – Liabilities held in trust 25 91 35 (8) Total financial liabilities at fair value 5,351 1,254 38 (1,375)
Net gains (losses) for financial instruments held at the reporting date
During the year ended 31 December 2012, the Allianz Group transferred certain corporate mortgage-backed securities from Level 3 into Level 2. This was due to the fact that the valuation techniques of these securities were modified and are no longer based on significant non-observable inputs.
The table includes only liabilities that represent fixed and determinable amounts. The table excludes interest on floating rate long-term debt obligations and interest on money market securities, as the contractual interest rate on floating rate obligations is not fixed and determinable. The amount and timing of interest on money market securities is not fixed and determinable since these instruments have a daily maturity. For further information, see notes 23 and 24 to the consolidated financial statements.
As of 31 December 2012, the income tax obligations amounted to € 2,680 mn. The Allianz Group expects to pay € 1,794 mn thereof within the twelve months after the balance sheet date. For the remaining amount of € 886 mn, an estimate of the timing of cash outflows is not reasonably possible. The income tax obligations are not included in the table below.
Future policy benefits Reserves for insurance and investment contracts of € 1,018,826 mn presented in the table include contracts where the timing and amount of payments are considered fixed and determinable, and contracts which have no specified maturity dates and may result in a payment to the contract holder depending on mortality and morbidity experience and the incidence of surrenders, lapses or maturities.
For contracts without fixed and determinable payments, the Allianz Group has made assumptions to estimate the undiscounted cash flows of contractual policy benefits including mortality, morbidity, interest crediting rates, policyholder participation in profits and future lapse rates. These assumptions represent current best estimates and may differ from the estimates originally used to establish the reserves for insurance and investment contracts as a result of the lock-in of assumptions on the issue dates of the contracts as required by the Allianz Group’s established accounting policy. The effect of discounting and the differences between locked-in and best estimate assumptions is € 393,221 mn. For further information, see note 2 to the consolidated financial statements. Due to the uncertainty of the assumptions used, the amount presented could be materially different from the actual incurred payments in future periods.
transfers of financial assets Amendments to IFRS 7: Disclosures – Transfers of financial assets – are effective for annual periods starting on or after July 2011. The amendments enhance disclosure requirements regarding transfers of financial assets that result in continued recognition or derecognition.
false claims to the government through various practices, including backdating and inappropriately designating new producer status. Two former FFIC claims employees and one contract adjuster have pled guilty to assisting farmers in asserting fraudulent crop claims. The DOJ and FFIC are in negotiations to reach a final resolution of this matter. The outcome cannot be predicted at this stage.
Other contingencies In accordance with § 5 (10) of the Statutes of the Joint Fund for Securing Customer Deposits (“Einlagensicherungsfonds ”), Allianz SE has undertaken to indemnify the Federal Association of German Banks (“Bundesverband deutscher Banken e.V.”) for any losses it may incur by reason of supporting measures taken in favor of Oldenburgische Landes bank AG (OLB), Münster ländische Bank Thie & CO. KG and Bankhaus W. Fortmann & Söhne KG.
On 24 May 2002, pursuant to a statutory squeeze-out procedure, the general meeting of Dresdner Bank AG resolved to transfer shares from its minority shareholders to Allianz as principal shareholder in return for payment of a cash settlement amounting to € 51.50 per share. Allianz established the amount of the cash settlement on the basis of an expert opinion, and its adequacy was confirmed by a court appointed auditor. Some of the former minority shareholders applied for a court review of the appropriate amount of the cash settlement in a mediation procedure (“Spruchverfahren ”), which is pending with the district court (“Landgericht ”) of Frankfurt. On 12 December 2012, this court held a hearing and a decision is expected during the first half of 2013. The Management believes that a claim to increase the cash settlement does not exist. In the event that the court were to determine a higher amount as an appropriate cash settlement, this would affect all of the approximately 16 mn shares that were transferred to Allianz.
The U.S. Department of Justice (DOJ) is conducting an investigation into whether certain employees of Fireman’s Fund Insurance Company (FFIC), a subsidiary of Allianz SE, engaged in violation (criminal or civil) of the False Claims Act in connection with FFIC’s involvement as a provider of federal crop insurance from 1997 to 2003. The investigation concerns the issue of whether FFIC employees submitted
Leasing commitments The Allianz Group occupies property in many locations under various long-term operating leases and has entered into various operating leases covering the long-term use of data processing equipment and other office equipment.
Purchase obligations The Allianz Group has commitments for mortgage loans and to buy multi-tranche loans of € 2,906 mn (2011: € 2,913 mn) as well as to invest in private equity funds and similar financial instruments totaling € 2,507 mn (2011: € 3,536 mn) as of 31 December 2012. As of 31 December 2012, commitments outstanding to invest in real estate used by third parties or used by the Allianz Group for its own activities and for infrastructure investments amounted to € 962 mn (2011: € 1,565 mn).
of German Banks with respect to Dresdner Bank. As a result, the indemnification is only relevant for supporting measures that are based on facts that were already existing at the time of the termination.
loan commitments D 126 € mn as of 31 December 2012 2011
Stand-by facilities – 29 Guarantee credits 95 97 Mortgage loans/Public-sector loans 445 100
Other commitments Other principal commitments of the Allianz Group include the following: Pursuant to §§ 124 ff. of the German Insurance Supervision Act (“Versicherungsaufsichtsgesetz” – VAG), a mandatory insurance guarantee scheme (“Sicherungsfonds”) for life insurers is implemented in Germany. Each member of the scheme is obliged to make annual contributions to the scheme 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 31 December 2012, the future liabilities of Allianz Lebens versicherungs-Aktiengesellschaft and its subsidiaries to the insurance guarantee scheme amount to annual contributions of € 6.7 mn (2011: € 5.3 mn) and an obligation for special payments of € 124 mn (2011: € 118 mn).
In December 2002, Protektor Lebensversicherungs-Aktiengesellschaft (“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 underwriting reserve with deduction of payments already provided to the insurance guarantee scheme. As of 31 December 2012, and under inclusion of the contributions to the mandatory insurance scheme mentioned above, the
The Allianz Group’s Asset Management segment, in the ordinary course of business, issues market value guarantees in connection with investment trust accounts and mutual funds it manages. The levels of market value guarantees and maturity dates differ based on the separate governing agreements of the respective investment trust accounts and mutual funds. As of 31 December 2012, the maximum potential amount of future payments of the market value guarantees was € 652 mn (2011: € 714 mn), which represents the total value guaranteed under the respective agreements including the obligation that would have been due had the investments matured on that date. The fair value of the investment trust accounts and mutual funds related to these guarantees as of 31 December 2012, was € 734 mn (2011: € 761 mn).
creDit Derivatives Credit derivatives consist of credit default swaps, which require payment in the event of default of debt obligations, as well as of total return swaps, under which the performance of underlying assets is guaranteed. The notional principal amounts and fair values of the Allianz Group’s credit derivative positions as of 31 December 2012 are provided in note 43.
assets pleDGeD anD collateral The carrying amounts of the assets pledged as collateral are as follows: assets pleDGeD as collateral D 129 € mn as of 31 December 2012 2011
For the AVK the annual minimum interest rate guaranteed is 1.75 %-3.50 % depending on the date of joining the Allianz Group and for the BPV it is 2.75 %.
In the case of death, a pension may be paid to dependents. Surviving dependents normally receive 60 % (widow/widower ) and 20 % (per child) of the original employee’s pension, in total not to exceed 100 %.
Net amount recognized as of 1 January 3,369 3,553 Changes in the consolidated subsidiaries of the Allianz Group 1 28 (216) Foreign currency translation adjustments 3 (3)
Net amount recognized as of 31 December 3,362 3,369 thereof assets (490) (385) thereof liabilities 3,852 3,754 1 For 2011, the amount consists of the defined benefit liability of the deconsolidated subsidiary manroland AG with an amount of € 197 mn.
Retirement benefits in the Allianz Group, which are granted to employees and in Germany also to agents, are either in the form of defined benefit or defined contribution plans. For defined benefit plans, the beneficiary is granted a defined benefit by the employer or via an external entity. In contrast to defined contribution arrangements, the future cost to the employer of a defined benefit plan is not known with certainty in advance.
The following table sets forth the changes in the defined benefit obligation, the changes in fair value of plan assets and the net amount recognized for the various Allianz Group defined benefit plans: Reconciliation DefineD benefit obligation anD plan assets D 131 € mn change in DefineD benefit obligation Defined benefit obligation as of 1 January 15,619 15,320 Current service costs 323 327 Interest costs 699 678 Plan participants’ contributions 97 93
Changes in the consolidated subsidiaries of the Allianz Group 4 4 (207) Divestitures – – Assets distributed on settlement (23) – Fair value of plan assets as of 31 December 11,206 10,136 Funded status as of 31 December 8,022 5,483 Unrecognized net actuarial gains/(losses) (4,724) (2,182) Unrecognized past service costs 9 11 Amount not recognized due to asset ceiling 55 57 Net amount recognized as of 31 December 3,362 3,369 1 For 2011, the amount mainly consists of the defined benefit obligation of the deconsolidated subsidiary manroland AG in the amount of € 411 mn.
3 In addition, the Allianz Group paid € 278 mn (2011: € 263 mn) directly to plan participants. 4 For 2011, the amount mainly consists of the plan assets of the deconsolidated subsidiary manroland AG in the amount of € 197 mn.
As of 31 December 2012, post-retirement health benefits included in the defined benefit obligation and in the net amount recognized amounted to € 15 mn (2011: € 11 mn) and € 15 mn (2011: € 11 mn), respectively.
The expense recognized in profit or loss related to defined benefit plans of the Allianz Group consists of the following components: DefineD benefit plans – expenses RecognizeD D 132 € mn
During the year ended 31 December 2012, the expense recognized in profit or loss includes expenses related to postretirement health benefits of € 3 mn (2011: € 1 mn; 2010: € 1 mn).
The expense recognized in profit and loss is recorded based on the assumptions of the corresponding previous year. For the assumptions regarding the expected long-term return on plan assets the value of the corresponding current year is relevant.
The discount rate assumption in particular results in uncertainty and a significant risk. An increase (a decrease) in the discount rate by 50 BPS would lead to a decrease of € 1.4 Bn (an increase of € 1.5 Bn) on the defined benefit obligation.
An increase of pre-retirement benefit assumptions (e.g. salary increase) by 25 BPS would have an effect on the defined benefit obligation by € 95 mn. However, the increase of post retirement assumptions (e.g. inflation linked increases of pension payments) by 25 BPS would affect the defined benefit obligation by € 325 mn.
Stock appreciation rights The SAR 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 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. SAR which were granted until 2008 vest after two years and expire after seven years. From the 2009 grant onwards, the SAR vest after four years and also expire after seven years. Upon vesting, the SAR may be exercised by the plan participant if the following market conditions are attained: A change in the medical cost trend rate by one percentage point would have an effect of € 2 mn on the defined benefit obligation and no material effect on the expense recognized in profit or loss.
Plan assets The defined benefit plans’ weighted average asset allocations by asset category are as follows: allocation of plan assets D 136
The bulk of the plan assets are held by the Allianz Versorgungskasse VVaG, Munich, which is not part of the Allianz Group.
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.
Restricted stock units The RSU granted to a plan participant obligate the Allianz Group to pay in cash the average market price of an Allianz SE share in the ten trading days preceding the vesting date or to issue one Allianz SE share, or other equivalent equity instrument, for each unit granted. The RSU vest after five years. The Allianz Group will exercise the RSU on the first stock exchange day after their vesting date. On the exercise date, the Allianz Group can choose the settlement method for each unit.
The following table provides the assumptions used in calculating the fair value of the RSU at grant date: assumptions of Rsu plans D 138
− during their contractual term, the market price of the Allianz SE share has outperformed the Dow Jones Europe STOXX Price Index at least once for a period of five consecutive trading days; and
− the Allianz SE market price is in excess of the reference price by at least 20 % on the exercise date.
In addition, upon death of a plan participant, a change of control or notice for operational reason, the SAR vest immediately and will be exercised by the company provided the above market conditions have been attained.
The fair value of the SAR at grant date is measured using a Cox-Ross-Rubinstein binomial tree option pricing model. Volatility was derived from observed historical market prices. In the absence of historical information regarding employee stock appreciation exercise patterns (especially all plans issued between 2006 and 2008 are significantly
Expected volatility % 29.0 Risk-free interest rate % 2.7 Expected dividend rate % 5.6 Share price € 88.09 Expected life (years) 7
As of 31 December 2012, the Allianz Group recorded a provision of € 117 mn (2011: € 42 mn) for these RSU in other liabilities.
shaRe-baseD compensation plans of subsiDiaRies of the allianz gRoup pimco llc Class B Unit Purchase Plan When acquiring Allianz Global Investors of America L.P. ( AllianzGI L.P.) during the year ended 31 December 2000, Allianz SE caused Pacific Investment Management Company LLC (PImCO LLC), a subsidiary of AllianzGI L.P., to enter into a Class B Purchase Plan (the “Class B Plan”) for the benefit of members of the management of PImCO LLC. The plan participants of the Class B Plan have rights to a 15 % priority claim on the adjusted operating profits of PImCO LLC.
The Class B equity units issued under the Class B Plan vest over 3 to 5 years and are subject to repurchase by AllianzGI L.P. upon death, disability or termination of the participant prior to vesting. Starting 1 January 2005, AllianzGI L.P. has the right to repurchase, and the participants have the right to cause AllianzGI 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 6 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.
The following table provides the assumptions used in calculating the fair value of the RSU at grant date: assumptions of aei plans D 139 1 The RSU 2013 are deemed to have been granted to participants as part of their 2012 remuneration. Consequently, the assumptions for RSU grants delivered in March 2013 are based on best estimation.
The RSU 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 RSU as a compensation expense over the service period of one year and afterwards over the vesting period. During the year ended 31 December 2012, the Allianz Group recognized a compensation expense related to the AEI plans of € 79 mn (2011: € 29 mn; 2010: € 17 mn).
The total recognized compensation expense for Class B equity units that are outstanding is recorded as a liability in other liabilities. As of 31 December 2012, the Allianz Group recorded a liability for the Class B equity units of € 206 mn (2011: € 614 mn).
pimco llc Class M-unit Plan In 2008, Allianz Global Investors of America L.P. ( AllianzGI L.P.) launched a new management share-based payment incentive plan for certain senior level executives and affiliates of PImCO LLC. Participants in the plan are granted options to acquire a new class of equity instruments (M-units), which vest in one-third increments on approximately the third, fourth and fifth anniversary of the option grant date. Upon vesting, options will be automatically exercised in a cashless transaction. Participants may elect to defer the receipt of M-units through the M-unit Deferral Plan until termination of their service as a maximum. With the M-unit Plan, participants can directly participate in PImCO’S performance. Class M-units are non-voting common equity with limited information rights. They bear quarterly distributions equal to a pro-rata share of PImCO’S net distributable income. Deferred M-units have a right to receive a quarterly cash compensation equal to and in lieu of quarterly dividend payments.
The following table provides the assumptions used in calculating the fair value of the M-options at grant date: assumptions of class m-unit plan D 140
The number and weighted average exercise price of the Moptions outstanding and exercisable are as follows: Reconciliation of outstanDing m-options D 141
The aggregate intrinsic value of share options outstanding was € 175 mn and € 202 mn for the years ended 31 December 2012 and 2011, respectively.
During the year ended 31 December 2012, the Allianz Group recorded a compensation expense of € 78 mn (2011: € 52 mn; 2010: € 28 mn) related to these share options.
During the year ended 31 December 2012, the Allianz Group recognized total compensation expenses related to the modified share option plans of € 7 mn (2011: income of € 4 mn; 2010: income of € 0.4 mn). As of 31 December 2012, the Allianz Group recorded a provision for these plans of € 9 mn (2011: € 4 mn).
The fair value of the options at grant date was measured using a trinomial 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.
On the effective date of the merger between Allianz SE and RAS, the RAS share option plan was modified. The outstanding share options, which were granted in 2005, were replaced with Allianz SE share options on the basis of 1 Allianz SE option for every 5.501 RAS share options outstanding. The outstanding RAS Group options of 953,000 were replaced by 173,241 Allianz SE options. The Allianz SE share options have the same vesting period of 2 years; however, the former market conditions were replaced with a performance condition, which was already achieved on the date of the modification.
The number and weighted average exercise price of the options outstanding and exercisable are as follows: Reconciliation of outstanDing allianz se options D 142
During the year ended 31 December 2012, the total expense recorded for these plans was € 2 mn (2011: € 1 mn; 2010: € 1 mn).
Changes in the provisions for restructuring plans: pRovisions foR RestRuctuRing plans D 143 € mn Allianz
Additions to existing provisions – – – – – – 102 102 Release of provisions recognized in prior years – – – – – – (17) (17) Utilization of provisions via payments – – – – – – (139) (139) Utilization of provisions via transfers – – – – – – (58) (58) Foreign currency translation adjustments – – – – – – 2 2
The development of the restructuring provisions reflects the implementation status of the restructuring initiatives. Based on the specific IFRS guidance, restructuring provisions are recognized prior to when they qualify to be recognized under the guidance for other types of provisions. In order to reflect the timely implementation of the various restructuring initiatives, restructuring provisions, as far as they are already “locked in”, have been transferred to the provision type, which would have been used if a restructuring initiative were not in place. This applies for each single contract. For personnel costs, at the time an employee has contractually agreed to leave the Allianz Group by signing either an early retirement, a partial retirement (Altersteilzeit, which is a specific type of an early retirement program in Germany), or a termination arrangement, the respective part of the restructuring provision has been transferred to employee related provisions. In addition, provisions for vacant office spaces that result from restructuring initiatives have been transferred to “other” provisions after the offices have been completely vacated.
allianz manageD opeRations anD seRvices’s RestRuctuRing plan (amos) AmOS is further aligning its delivery model to provide IT and other shared services to Allianz entities globally. This necessitates a change from locally focused delivery structures and processes to global delivery centers and globally standardized processes.
As of 31 December 2012, the ABV AG restructuring provision for these programs was € 14 mn. During the year ended 31 December 2012, the ABV AG recorded restructuring charges of € 44 mn.
Restructuring provisions of previous restructuring plans of ABV AG are included in other restructuring plans (€ 5 mn).
The project “Optimierung Stäbe” as part of the restructuring program “Zukunftsprogramm Sachversicherung” was implemented in order to reduce personnel and operating expenses by increasing efficiency in the Allianz Germany Group’s head office. By the end of 2014, headcount shall be reduced by about 380 full time equivalents (FTE). Negotiations with the works councils regarding the implementation of the project started in 2012, resulting in advance agreements (“Vorfeldvereinbarungen”) that were signed at the end of 2012.
In addition, clearly defined activities in the area of operational functions will be transferred to newly founded service companies with own employees. The project will therefore result in a reduction of approximately 200 FTE. Agreements with the works councils were reached in 2012.
The first phase of the restructuring initiated in the second quarter of 2011 included a voluntary retirement incentive program, involuntary reductions in force and closure of nine offices, which resulted in headcount decreasing by 7 % and the scope of business narrowing to focus on particular products, states and agents. The second phase of the restructuring initiated at the end of 2011 entailed the implementation of a customer centric structure that will facilitate better, more efficient decision-making in the field (versus at home office) and a decision to abandon development of a policy administration system to reduce expenses. In the fourth quarter of 2011, Fireman’s Fund started to consolidate unoccupied office space at the Novato, California, home office facility, which resulted in a vacant space provision for a long term lease expiring in 2018.
effect of the ReveRsal of Discounting For the year ended 31 December 2012, the effect of the reversal of discounting arising from the passage of time was € 9 mn.
euleR heRmes gRoup’s RestRuctuRing plans In 2010, the Euler Hermes Group launched the program “Excellence ” which will be executed over a period of four years. This program comprises several measures including voluntary leaver programs, early and partial retirements, involuntary dismissals and termination of rental contracts. From the original objective of reducing approximately 570 positions by 2013 in the regions concerned by the restructuring program, approximately 100 positions remain as of 31 December 2012. The remaining staff reduction concerns mainly Euler Hermes in Germany.
DiluteD earnings per share Diluted earnings per share are calculated by dividing net income attributable to shareholders by the weighted average number of common shares outstanding for the period, both adjusted for the effects of potentially dilutive common shares. Potentially dilutive common shares arise from various share-based compensation plans of the Allianz Group.
For the twelve months ended 31 December 2012, the weighted average number of common shares excludes 2,742,038 (2011: 2,879,816 ; 2010: 2,725,114) treasury shares.
Audit-related fees KPMG charged the Allianz Group an aggregate of € 7.9 Mn (2011: € 3.8 Mn) for assurance and related services that are reasonably related to the performance of the audit or review of the financial statements and are not reported within audit fees. These services consisted primarily of advisory and consulting services related to accounting and financial reporting standards and financial due diligence services.
51 – Other information numBer of employees numBer of employees D 146 as of 31 December 2012 2011
Tax fees KPMG fees for professional services, rendered for tax advice and tax compliance, amounted to € 2.3 Mn (2011: € 1.8 Mn) and resulted primarily from tax advice.
All other fees KPMG invoiced the Allianz Group an aggregate of € 2.2 Mn (2011: € 2.4 Mn) for other products and services, which consisted primarily of services under the guidance of Allianz Group management and general consulting services.
“Positive List” of activities decided by the Audit Committee and, in addition, a “Guiding Principles and User Test” is applied. Group Compliance and KPMG report to the Audit Committee periodically with respect to services performed.
remuneration for the BoarD of management As of 31 December 2012, the Board of Management is comprised of 11 members. The following values reflect the full Board of Management active in the respective year.
3 The disclosure in the Annual Report 2011 was based on a best estimate of the RSU grants. The figures shown here for 2011 now include the actual fair value as of the grant date (8 March 2012). These values therefore differ from those disclosed last year.
RSU with a total fair value of € 10.5 Mn (2011: € 6.4 Mn) were granted to the Board of Management for the year ended 31 December 2012.
Board of Management and Supervisory Board compensation by individual is included in the “Remuneration Report ”. The information provided there is considered part of these consolidated financial statements.
52 – Subsequent events allianz BanK ceases Business On 24 January 2013, it was announced that Allianz Bank is set to cease business operations on 30 June 2013. The bank’s business activities for employees and agents, as Allianz Bank customers, will be continued by Oldenburgische Landesbank AG. As of today, the Allianz Group expects that closure-related expenses could approximate € 100 Mn.
life insurance DistriBution agreement in turKey On 28 January 2013, Allianz SE and HSBC Bank plc agreed to a 10-year exclusive bancassurance distribution agreement for life insurance in Turkey. Allianz life insurance and pension products will be distributed by HSBC in Turkey. The upfront cash consideration by Allianz amounts to € 23 Mn. This local bancassurance agreement, which is subject to regulatory approval, is expected to be completed in the first half of 2013.
allianz capital partners (acp) sells sDu to eDitions lefeBvre sarrut (els) Allianz Capital Partners (ACP) and AAC Capital Partners (AAC) reached an agreement with the French publishing company Editions Lefebvre Sarrut (ELS) to sell the Dutch publishing company Sdu. The transaction was completed on 31 January 2013. Sdu was jointly acquired by ACP and AAC in 2007 in a privatization from the Dutch State. The disposal did not have a material effect on Allianz Group’s net income.
2 Controlled by the Allianz Group. 3 Mutual, private equity or special fund.
GeRMAnY Consolidated affiliated entities ACP GmbH & Co. Beteiligungen KG, Munich 0.0 2 ACP GmbH & Co. Beteiligungen KG II, Munich 0.0 2 ACP Vermögensverwaltung GmbH & Co. KG Nr. 4, Munich 100.0 ACP Vermögensverwaltung GmbH & Co. KG Nr. 4a, Munich 100.0 ACP Vermögensverwaltung GmbH & Co. KG Nr. 4c, Munich 100.0 ACP Vermögensverwaltung GmbH & Co. KG Nr. 4d, Munich 100.0 ACP Vermögensverwaltung GmbH Nr. 4 d. 1, Munich 99.3 ADEUS Aktienregister-Service-GmbH, Frankfurt am Main 79.6 ADIG Fondsvertrieb GmbH, Munich 100.0 Aequitas GmbH Allianz Equity - Alternative Strategies, Munich 100.0 AGI Total Germany Bond Portfolio, Frankfurt am Main 100.0 3 Alida Grundstücksgesellschaft mbH & Co. KG, Hamburg 94.8 Allianz AADB Fonds, Frankfurt am Main 100.0 4 Allianz ABS Fonds, Frankfurt am Main 100.0 4 Allianz AKR Fonds, Frankfurt am Main 100.0 4 Allianz ALD Fonds, Frankfurt am Main 100.0 4 Allianz ALIK Fonds, Frankfurt am Main 100.0 4 Allianz ALSI Fonds, Frankfurt am Main 100.0 4 Allianz Alternative Assets Holding GmbH, Munich 100.0 Allianz APAV Fonds, Frankfurt am Main 100.0 4 Allianz APKR Pimco Emerging Markets Fonds, Frankfurt am Main 100.0 4 Allianz Asset Management AG, Munich 100.0 Allianz Automotive Services GmbH, Aschheim 100.0 Allianz AVI 1 Fonds, Frankfurt am Main 100.0 4 Allianz AVM B Fonds, Frankfurt am Main 100.0 4 Allianz AZL Vermögensverwaltung GmbH & Co. KG, Munich 100.0 Allianz Beratungs- und Vertriebs-AG, Munich 100.0 Allianz Capital Partners GmbH, Munich 100.0 5 Allianz Capital Partners Verwaltungs GmbH, Munich 100.0 Allianz Climate Solutions GmbH, Munich 100.0 Allianz Deutschland AG, Munich 100.0 Allianz EEE Fonds, Frankfurt am Main 100.0 4 Allianz FAD Fonds, Frankfurt am Main 100.0 4 Allianz Finanzbeteiligungs GmbH, Munich 100.0 Allianz Global Assistance Service Deutschland GmbH, Munich 100.0 Allianz Global Corporate & Specialty AG, Munich 100.0 Allianz Global Investors Europe GmbH, Frankfurt am Main 100.0 Allianz Global Investors Holding GmbH, Munich 100.0 Allianz GLR Fonds, Frankfurt am Main 100.0 4 Allianz GLRS Fonds, Frankfurt am Main 100.0 4 Allianz GLU Fonds, Frankfurt am Main 100.0 4 Allianz GREQ Fonds, Frankfurt am Main 100.0 4 Allianz GRGB Fonds, Frankfurt am Main 100.0 4 Allianz Handwerker Services GmbH, Munich 95.0 Allianz Investment Management SE, Munich 100.0 5 Allianz LAD Fonds, Frankfurt am Main 100.0 4 Allianz Leben Private Equity Fonds 1998 GmbH, Munich 100.0 Allianz Leben Private Equity Fonds 2001 GmbH, Munich 100.0
Allianz Leben Private Equity Fonds 2008 GmbH, Munich 100.0 Allianz Leben Private Equity Fonds Plus GmbH, Munich 100.0 Allianz LEBENCO Fonds, Frankfurt am Main 100.0 4 Allianz Lebensversicherungs-Aktiengesellschaft, Stuttgart 100.0 Allianz LFE Fonds, Frankfurt am Main 100.0 4 Allianz Managed Operations & Services SE, Munich 100.0 Allianz of Asia-Pacific and Africa GmbH, Munich 100.0 Allianz Pension Partners GmbH, Munich 100.0 Allianz Pensionsfonds Aktiengesellschaft, Stuttgart 100.0 Allianz Pensionskasse Aktiengesellschaft, Stuttgart 100.0 Allianz Private Equity GmbH, Munich 100.0 Allianz Private Equity Partners Verwaltungs GmbH, Munich 100.0 Allianz Private Krankenversicherungs- Aktien gesellschaft, Munich 100.0 Allianz ProzessFinanz GmbH, Munich 100.0 Allianz PV 1 Fonds, Frankfurt am Main 100.0 4 Allianz PV WS Fonds, Frankfurt am Main 100.0 4 Allianz PV-RD Fonds, Frankfurt am Main 100.0 4 Allianz Re Asia, Frankfurt am Main 100.0 4 Allianz Real Estate Germany GmbH, Stuttgart 100.0 Allianz Real Estate GmbH, Munich 100.0 Allianz Rechtsschutz-Service GmbH, Munich 100.0 Allianz Renewable Energy Management GmbH, Munich 100.0 Allianz Renewable Energy Subholding GmbH & Co. KG, Haar 100.0 Allianz RFG Fonds, Frankfurt am Main 100.0 4 Allianz Risk Consulting GmbH, Munich 100.0 Allianz RMO 1 Fonds, Frankfurt am Main 100.0 4 Allianz SDR Fonds, Frankfurt am Main 100.0 4 Allianz Service Center GmbH, Munich 100.0 Allianz SOA Fonds, Frankfurt am Main 100.0 4 Allianz Strategiefonds Balance, Frankfurt am Main 99.7 3 Allianz Strategiefonds Stabilität, Frankfurt am Main 98.9 3 Allianz Strategiefonds Wachstum, Frankfurt am Main 99.8 3 Allianz Taunusanlage GbR, Stuttgart 99.5 Allianz Treuhand GmbH, Munich 100.0 Allianz UGD 1 Fonds, Frankfurt am Main 100.0 4 Allianz VAD Fonds, Frankfurt am Main 100.0 4 Allianz VAE Fonds, Frankfurt am Main 100.0 4 Allianz Venture Partners Beteiligungs-GmbH, Munich 100.0 Allianz Versicherungs-Aktiengesellschaft, Munich 100.0 Allianz VGI 1 Fonds, Frankfurt am Main 100.0 4 Allianz VGL Fonds, Frankfurt am Main 100.0 4 Allianz VKA Fonds, Frankfurt am Main 100.0 4 Allianz VKRD Fonds, Frankfurt am Main 100.0 4 Allianz VSR Fonds, Frankfurt am Main 100.0 4 AllSecur Deutschland AG, Munich 100.0 ALZGI-Ferrostaal Renten 1, Frankfurt am Main 56.7 3 ALZGI-Ferrostaal Renten 2, Frankfurt am Main 57.9 3 APKV Private Equity Fonds GmbH, Munich 100.0 Argos Autoversicherung AG, Munich 100.0 Atropos Vermögensverwaltungsgesellschaft mbH, Munich 100.0 AUG. PRIEN Immobilien PE Verwaltung BrahmsQuartier GmbH, Stuttgart 94.9
Auros GmbH, Munich 100.0 AZ-Arges Vermögensverwaltungsgesellschaft mbH, Munich 100.0 AZ-Argos 14 Vermögensverwaltungsgesellschaft mbH, Munich 100.0 AZ-Argos 41 Vermögensverwaltungsgesellschaft mbH, Munich 100.0 AZ-Argos 44 Vermögensverwaltungsgesellschaft mbH & Co. KG, Munich 100.0 AZ-Argos 50 Vermögensverwaltungsgesellschaft mbH & Co. KG, Munich 100.0 AZ-Argos 51 Vermögensverwaltungsgesellschaft mbH & Co. KG, Munich 100.0 AZ-Argos 57 Vermögensverwaltungsgesellschaft mbH & Co. KG, Munich 100.0 AZ-Argos 58 Vermögensverwaltungsgesellschaft mbH & Co. KG, Munich 100.0 AZ-Argos 61 Vermögensverwaltungsgesellschaft mbH & Co. KG, Munich 100.0 AZ-Argos 62 Vermögensverwaltungsgesellschaft mbH, Munich 100.0 AZ-Argos 64 Vermögensverwaltungsgesellschaft mbH & Co. KG, Munich 100.0 AZ-Argos 65 Vermögensverwaltungsgesellschaft mbH, Munich 100.0 AZ-Argos 67 Vermögensverwaltungsgesellschaft mbH, Munich 100.0 AZ-GARI Vermögensverwaltungsgesellschaft mbH & Co. KG, Munich 100.0 AZL AI Nr. 1 GmbH, Munich 100.0 AZL PE Nr. 1 GmbH, Munich 100.0 AZS-Arges Vermögensverwaltungsgesellschaft mbH, Munich 100.0 AZ-SGD Private Equity Fonds 2 GmbH, Munich 100.0 AZ-SGD Private Equity Fonds GmbH, Munich 100.0 AZT Automotive GmbH, Ismaning 100.0 BCA Betriebs Catering GmbH Verpflegungsdienste, Gerlingen 100.0 Brahms Beteiligungs GmbH & Co. KG, Stuttgart 94.9 BrahmsQ Objekt GmbH & Co. KG, Hamburg 95.0 Bürgel Wirtschaftsinformationen GmbH & Co. KG, Hamburg 50.1 Bürgel Wirtschaftsinformationen Verwaltungs-GmbH, Hamburg 50.4 dbi-Fonds ADPF2 , Frankfurt am Main 100.0 3 dbi-Fonds Ammerland, Frankfurt am Main 100.0 4 dbi-Fonds DAV, Frankfurt am Main 100.0 4 dbi-Fonds WE, Frankfurt am Main 100.0 4 Deutsche Lebensversicherungs- Aktiengesellschaft, Berlin 100.0 Donator Beratungs GmbH, Munich 100.0 Donator Beteiligungsverwaltung GmbH, Munich 100.0 Dresdner Kleinwort Capital Italia Beteiligungsverwaltung GmbH, Grünwald 100.0 ESA Cargo & Logistics GmbH, Bad Friedrichshall 100.0 esa EuroShip GmbH, Bad Friedrichshall 51.0 Euler Hermes Collections GmbH, Potsdam 100.0 Euler Hermes Deutschland Aktiengesellschaft, Hamburg 100.0 Euler Hermes Forderungsmanagement GmbH, Hamburg 100.0 Euler Hermes Rating GmbH, Hamburg 100.0 GA Global Automotive Versicherungsservice GmbH, Halle (Saale) 100.0 German Real Estate Equity Fund I, Frankfurt am Main 100.0 4 KVM ServicePlus - Kunden- und Vertriebsmanagement GmbH, Leipzig 100.0 Mondial Kunden Service GmbH, Munich 100.0 Münchener und Magdeburger Agrarversicherung Aktiengesellschaft, Munich 79.8
1 Percentage includes equity participations held by dependent entities in full, even if the Allianz Group’s share in the dependent entity is below 100 %.
Münsterländische Bank Thie & Co. KG, Münster 100.0 My Finance Coach Stiftung GmbH, Munich 100.0 Objekt Burchardplatz GmbH & Co. KG, Stuttgart 100.0 Oldenburgische Landesbank Aktiengesellschaft, Oldenburg 90.2 PIMCO Deutschland GmbH, Munich 100.0 5 REC Frankfurt zweite Objektverwaltungsgesellschaft mbH, Hamburg 60.0 rehacare GmbH, Munich 100.0 risklab GmbH, Munich 100.0 Roland Holding GmbH, Munich 74.1 Selecta Deutschland GmbH, Eschborn 100.0 Selecta Holding GmbH, Eschborn 100.0 Signa 12 Verwaltungs GmbH, Düsseldorf 94.9 Spherion Beteiligung GmbH & Co. KG, Stuttgart 94.9 Spherion Objekt GmbH & Co. KG, Stuttgart 100.0 UfS Beteiligungs-GmbH, Munich 100.0 Vereinte Spezial Krankenversicherung Aktiengesellschaft, Munich 100.0 VLS Versicherungslogistik GmbH, Munich 100.0 W. Fortmann & Söhne KG, Oldenburg 100.0 Windpark Aller-Leine-Tal GmbH & Co. KG, Husum 100.0 Windpark Berge-Kleeste GmbH & Co. KG, Haar 100.0 Windpark Büttel GmbH & Co. KG., Sehestedt 100.0 Windpark Eckolstädt GmbH & Co KG, Pinneberg 100.0 Windpark Emmendorf GmbH & Co. KG, Emmendorf 100.0 Windpark Halenbeck GmbH & Co. KG, Husum 100.0 Windpark Kesfeld - Heckhuscheid GmbH & Co. KG, Pinneberg 100.0 Windpark Kirf GmbH & Co. KG, Pinneberg 100.0 Windpark Kittlitz GmbH & Co. KG, Husum 100.0 Windpark Pröttlin GmbH & Co. KG, Sehestedt 100.0 Windpark Quitzow GmbH & Co. KG, Sehestedt 100.0 Windpark Redekin GmbH & Co. KG, Genthin 100.0 Windpark Schönwalde GmbH & Co. KG, Potsdam 100.0 Windpark Waltersdorf GmbH & Co. KG Renditefonds, Bremen 100.0 Windpark Werder Zinndorf GmbH & Co. KG, Sehestedt 100.0
Non-consolidated affiliated entities AERS Consortio AG, Stuttgart 52.2 Alida Grundstücksverwaltung GmbH, Hamburg 100.0 All Net GmbH, Stuttgart 100.0 Allianz Autowelt GmbH, Munich 100.0 Allianz Beteiligungs Management GmbH, Munich 100.0 Allianz Immobilienfonds GmbH, Stuttgart 100.0 Allianz Objektbeteiligungs-GmbH, Stuttgart 100.0 Allianz Pension Consult GmbH, Stuttgart 100.0 AZ-Argos 56 Vermögensverwaltungsgesellschaft mbH, Stuttgart 100.0 Bürgel Beteiligungs GmbH, Hamburg 100.0 Bürgel Erfurt Beteiligungsgesellschaft mbH, Erfurt 100.0 Bürgel Erfurt GmbH & Co. KG, Erfurt 100.0 Bürgel Internationale Inkassogesellschaft mbH, Hamburg 100.0 Bürgel Wirtschaftsinformationen Vertriebsgesellschaft mbH, Hamburg 100.0 Eurografica Systemplanungs-GmbH, Augsburg 100.0 EURO-Pro Gesellschaft für Data Processing mbH, Grävenwiesbach 75.2 grapho metronic Mess- und Regeltechnik GmbH, Munich 100.0 Grundstücksgesellschaft der Vereinten Versicherungen mbH, Munich 100.0 IDS GmbH - Analysis and Reporting Services, Munich 100.0
Infrastruktur Putlitz Ost GmbH, Putlitz 70.8 Lola Vermögensverwaltungsgesellschaft mbH & Co. KG, Munich 100.0 manroland 1. Verwaltungsgesellschaft mbH, Offenbach 100.0 manroland AG, Offenbach 100.0 6, 9 manroland Heusenstamm GmbH, Heusenstamm 100.0 manroland Versicherungsvermittlungs GmbH, Offenbach 100.0 manroland Vertrieb und Service Deutschland GmbH, Munich 100.0 manroland Vertrieb und Service GmbH, Mühlheim am Main 100.0 META Finanz-Informationssysteme GmbH, Munich 100.0 OLB-Immobiliendienst-GmbH, Oldenburg 100.0 OLB-Service GmbH, Oldenburg 100.0 ppi Media GmbH, Hamburg 100.0 Rhein-Main Metallverarbeitung GmbH, Mainhausen 100.0 Supercheck GmbH, Cologne 100.0 Werner Lies GmbH Großhandel für die Graphische Industrie, Neuhausen a.d.F. 100.0
Other Participations between 5 and 20 % of voting rights EXTREMUS Versicherungs-AG, Cologne 16.0 MLP AG, Wiesloch 8.9 Sana Kliniken AG, Ismaning 13.8
AGA Services (India) Private Limited, New Delhi 100.0 AGA Services Asia Pte Ltd., Singapore 100.0 AGA Services Thailand Co., Ltd., Bangkok 97.6 AGCS Marine Insurance Company, Chicago, IL 100.0 AGCS Participações Ltda., Rio de Janeiro 100.0 Agency "Allianz Life and Finance Rus" OOO, Moscow 100.0 AGF 2X S.A., Paris 100.0 AGF Balanced, Paris 99.7 3 AGF Benelux S.A., Luxembourg 100.0 AGF Capital Investissement, Paris 93.0 3 AGF Capital Investissement 2, Paris 85.3 3 AGF Euro Actions C et D S.A., Paris 50.1 3 AGF FCR, Paris 100.0 3 AGF Holdings (UK) Limited, Guildford 100.0 AGF Insurance Limited, Guildford 100.0 AGF Inversiones S.A., Buenos Aires 100.0 AGF Marches Emergents S.A., Paris 69.3 3 AGF Multi Alternatives L S.A., Paris 86.2 3 AGF Peh Europe VA, Paris 69.4 3 AGF Private Equity FCPR, Paris 56.0 3 AGF Ras Holding B.V., Amsterdam 100.0 AGFimo S.A., Paris 58.2 3 Agricola Holdings Pty Ltd., Melbourne 70.0 Agricola Underwriting Management Ltd. (NZ), Melbourne 100.0 Agricola Underwriting Pty Ltd., Melbourne 100.0 AIM Equity EMU 1, Paris 100.0 4 AIM Equity US, Paris 100.0 4 AIM Singapore Pte. Ltd., Singapore 100.0 AIM Underwriting Limited, Toronto, ON 100.0 Allegiance Marketing Group LLC, North Palm Beach, FL 100.0 Allianz (UK) Limited, Guildford 100.0 Allianz Actio France, Paris 77.0 3 Allianz Actions Aéquitas, Paris 57.2 3 Allianz Actions Euro Value, Paris 84.7 3 Allianz Actions France, Paris 70.2 3 Allianz Actions France MidCap, Paris 73.8 3 Allianz Actions Indice Japon (couvert), Paris 57.5 3 Allianz Actions Indice US (couvert), Paris 93.8 3 Allianz Actions Internationales, Paris 98.3 3 Allianz Actions Japon, Paris 71.7 3 Allianz Actions US, Paris 81.4 3 Allianz Actions Valeurs Moyennes, Paris 95.5 3 Allianz Actions VD, Paris 100.0 3 Allianz Africa S.A., Paris 100.0 Allianz Air France IFC, Paris 100.0 3 Allianz Alapkezelõ Zrt., Budapest 100.0 Allianz Alp Sp. z o.o., Warsaw 100.0 Allianz Alternative Asset Management, Milan 100.0 4 Allianz America Holding B.V., Amsterdam 100.0 Allianz Annuity Company of Missouri, Clayton, MO 100.0 Allianz Argentina Compania de Seguros Generales S.A., Buenos Aires 100.0 Allianz Argentina RE S.A., Buenos Aires 100.0 Allianz Asac Actions, Paris 100.0 4 Allianz Asset Management of America Holdings Inc., Dover, DE 100.0 Allianz Asset Management of America L.P., Dover, DE 100.0 Allianz Asset Management of America LLC, Dover, DE 100.0 Allianz Asset Management U.S. Holding II LLC, Dover, DE 100.0 Allianz Australia Advantage Ltd., Sydney 100.0 Allianz Australia Employee Share Plan Pty Ltd., Sydney 100.0 Allianz Australia Insurance Limited, Sydney 100.0 Allianz Australia Life Insurance Limited, Sydney 100.0
4 Investment fund. 5 Releasing impact according to § 264 (3) HGB through the
Allianz Australia Limited, Sydney 100.0 Allianz Australia Partnership Services Limited, Sydney 100.0 Allianz Australia Services (No. 2) Pty Ltd., Sydney 100.0 Allianz Australia Services Pty Limited, Sydney 100.0 Allianz Australia Workers Compensation (NSW) Limited, Sydney 100.0 Allianz Australia Workers Compensation (SA) Limited, Adelaide 100.0 Allianz Australia Workers Compensation (Victoria) Limited, Melbourne 100.0 Allianz Australian Claims Services Limited, Sydney 100.0 Allianz Aviation Managers LLC, Burbank, CA 100.0 Allianz Ayudhya Assurance Public Company Limited, Bangkok 62.6 Allianz Bank Bulgaria JSC, Sofia 99.9 Allianz Bank Financial Advisors S.p.A., Milan 100.0 Allianz Banque S.A., Courbevoie 100.0 Allianz Belgium S.A., Brussels 100.0 Allianz Bénin dommages SA, Cotonou 83.5 Allianz Bonds Diversified Euro, Paris 100.0 4 Allianz Bonds Euro High Yield, Paris 100.0 4 Allianz Bulgaria Holding Company Ltd., Sofia 66.2 Allianz Bulgaria Insurance and Reinsurance Company Ltd., Sofia 78.0 Allianz Bulgaria Life Insurance Company Ltd., Sofia 99.0 Allianz Bulgaria Pension Company AD, Sofia 65.9 Allianz Burkina dommages SA, Ouagadougou 60.3 Allianz Burkina vie SA, Ouagadougou 71.8 Allianz Business Services Limited, Lancaster 100.0 Allianz business services s.r.o., Bratislava 100.0 Allianz Cameroun dommages SA, Douala 75.4 Allianz Cameroun Vie SA, Douala 75.8 Allianz CAP ISR 2016, Paris 100.0 3 Allianz Capital Partners of America, Inc., New York, NY 100.0 Allianz Carbon Investments B.V., Amsterdam 100.0 Allianz Cash SAS, Paris 100.0 Allianz Centrafrique dommages, Bangui 88.3 Allianz China General Insurance Company Ltd., Guangzhou 100.0 Allianz China Life Insurance Co. Ltd., Shanghai 51.0 Allianz Citizen Care SRI, Paris 86.4 3 Allianz Colombia S.A., Bogotá D.C. 100.0 Allianz Compagnia Italiana Finanziamenti S.p.A., Milan 100.0 Allianz CompanÍa de Seguros y Reaseguros S.A., Barcelona 99.9 Allianz Congo Assurances SA, Brazzaville 100.0 Allianz Cornhill Information Services Private Ltd., Trivandrum 100.0 Allianz Côte d'Ivoire dommages, Abidjan 74.1 Allianz Côte d'Ivoire vie SA, Abidjan 71.0 Allianz Creactions 1, Paris 100.0 4 Allianz Creactions 2, Paris 100.0 4 Allianz Destination 2014, Paris 100.0 3 Allianz Direct s.r.o., Prague 100.0 Allianz do Brasil Ltda., São Paulo 100.0 Allianz EDUKACJA S.A., Bialobrzegi 100.0 Allianz Efficio, Paris 100.0 3 Allianz Efficio Confort, Paris 100.0 3 Allianz Efficio Plus, Paris 100.0 3 Allianz Elementar LebensversicherungsAktiengesellschaft, Vienna 100.0 Allianz Elementar Versicherungs-Aktiengesellschaft, Vienna 100.0 Allianz Engineering Services Limited, Guildford 100.0 Allianz Equity Emerging Markets 1, Paris 100.0 4 Allianz Equity Investments Ltd., Guildford 100.0