the internal credit risk capital model is based on obligor ratings and estimates of exposure at default, loss given default and default correlations. Default correlations capture dependencies between single obligors within the portfolio in terms of their default. these parameters are estimated using statistical analysis and professional judgment. our aggregation methodology is comparable to approaches widely used in the industry and known as the “structural model”. in a structural model, a company is deemed to have defaulted when the value of its total assets is lower than its total liabilities. since changes in the asset value of a company determine whether it defaults, the correlation between different firms’ asset values determines the correlation between the firms’ defaults. credit risk is aggregated across individual obligors using Monte carlo simulations to obtain the loss profile of a given portfolio, i.e. its loss probability distribution. the portfolio loss profiles are calculated at different levels of our portfolio hierarchy (e. g. at local operating entity or segment level). they are then fed into the overall internal risk capital model for further aggregation across sources of risk to derive Group-diversified internal credit risk capital.
total as of December 31, 2011 2010 € mn € mn
Base case 8,694 6,871 Rating down by 1 notch 3 9,839 7,867 Rating down by 2 notches 11,107 9,084
P r o P e r t y - C a s u a l t y segment. We do not consider credit risk related to our banking operations to be significant at the Group level.
Reinsurance portfolio credit risk to external reinsurers appears when insurance risk exposures are transferred by us to external reinsurance companies to mitigate insurance risk. potential losses can arise either due to non-recoverability of reinsurance receivables already present at the as-of date or default on benefits that are under reinsurance treaties in-force.
credit insurance portfolio credit risk arises from potential claim payments on limits granted by euler Hermes to its policyholders. euler Hermes protects its policyholders (partially) from credit risk associated with short-term trade credits advanced to clients of the policyholder. if the creditworthiness of the client of the policyholder deteriorates (up to default) such that the client is unable to meet its payment obligations then euler Hermes indemnifies the loss to the policyholder.
the u.s. commercial mortgage loan investments are subject to thorough credit assessment and conservative underwriting by the responsible credit manager. in 2011, there were no defaulting loans, foreclosures or deeds in lieu of foreclosure 1 in this portfolio. taking into account that there have been only five delinquent or foreclosed loans since 1994 and based on additional stress test analysis, we still regard the portfolio as investment grade.
� c R e D i t R i s k – R e i n s u R a n c e as of December 31, 2011, 3.8 % of our total Group pre-diversified internal credit risk capital is allocated to reinsurance exposures, 52.4 % of which is related to reinsurance counterparties in the united states and Germany.
a dedicated team selects our reinsurance partners and considers only companies with strong credit profiles. We may also require letters of credit, cash deposits or other financial measures to further mitigate our exposure to credit risk. as of December 31, 2011, 77.6 % (2010: 78.3 %) of the allianz Group’s reinsurance recoverables were distributed among reinsurers that had been assigned at least an “a” rating by standard & poor’s. non-rated reinsurance recoverables represented 21.6 % (2010: 21.3 %) of the total reinsurance recoverables as of December 31, 2011. Reinsurance recoverables without standard & poor’s rating include exposures to brokers, companies in run-off and pools – where no rating is available – as well as companies rated by a.M. Best.
� c R e D i t R i s k – c R e D i t i n s u R a n c e the parameters used to model credit insurance portfolios are estimated by euler Hermes based on proprietary models reviewed by the Group and provided as input to the Group’s internal credit risk capital model. in particular, since credit exposures are actively managed by euler Hermes, a proprietary rating system is applied as opposed to the long-term public ratings primarily used for investment portfolios. euler Hermes ratings evaluate the short-term creditworthiness of a company taking into account various key risk indicators available on the market and from policyholders.
◼ p R e - D i v e R s i F i e D
Total Group internal underwriting risk capital: 13,897 [12,028] Share of total Group internal risk capital: 27.9 % [26.6 %]
◼ G R o u p - D i v e R s i F i e D
Biometric 12/31/2010 12/31/2010 12/31/2011 12/31/2011 total Group-diversified internal underwriting risk capital increased primarily due to an increase in reserve risk. in 2011, we introduced a centrally developed and locally parameterized P r o P e r t y - C a s u a l t y insurance Risk Model for risk capital calculations. this stochastic state-of-the-art model framework aligns multiple aspects of actuarial portfolio assessment and provides high flexibility regarding scenario impact analysis for non-life insurance risks. the tool provides full predictive distributions for ultimate risk and risk emerging over the 1-year holding period. With the introduction of the tool we increased the scope of entities reporting internal risk capital figures and in particular increased modeling granularity which resulted in an enhanced aggregation methodology. the combination of these aspects contributes about 72.2 % to the risk capital increase. the remainder of 27.8 % is in line with underlying portfolio growth.
� p R e M i u M R i s k as part of our P r o P e r t y - C a s u a l t y 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
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 quantify premium risk based on actuarial models that are used to derive loss distributions.
premium risk is actively managed by the allianz Group and the local operating entities. assessing the risks as part of the underwriting process is a key element of our risk management framework. there are clear underwriting limits and restrictions centrally defined and in place across the Group. specialty lines risk carriers such as allianz Global corporate and specialty pool specific risks which require expert knowledge. in addition to the centrally defined underwriting limits, the local operating entities have local limits in place that take their individual business environment into account. 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.
natural disasters such as earthquakes, storms and floods represent a significant challenge for risk management due to their accumulation potential and occurrence volatility. in order to measure such risks and better estimate the potential effects of natural disasters, we use special modeling techniques in which we combine data about our portfolio (such as the geographic distribution and characteristics of insured objects and their values) with simulated natural disaster scenarios to estimate the magnitude and frequency of potential losses. Where such stochastic models do not exist (e. g. flood risk in italy), we use deterministic scenario-based approaches to estimate probable losses.
about 46.4 % of the pre-diversified internal premium risk capital allocated to natural catastrophe risk was borne by our top five perils: europe Windstorm, australia earthquake, Germany Flood, Germany Hail and u.s. Hurricane as of December 31, 2011. our largest exposures to natural catastrophes are provided in the following table.
� R e s e R v e R i s k
2 | net surplus represents the cumulative surplus from re-estimating the reserves for loss and loss adjustment expenses for prior years’ claims and includes foreign currency translation adjustments. For further information please refer to note 19 of our consolidated financial statements.
� B i o M e t R i c R i s k
We consider mortality, morbidity and longevity risks within biometric risk as they can cause variability in policyholder benefits resulting from the unpredictability of the timing and (non-)incidence of death or illness. For modeling these risks within our internal risk capital model, we distinguish level, trend and calamity risks. Biometric assumptions, such as life expectancy, play a significant role. 1
◼ B u s i n e s s R i s k
an ag em en t R ep or t allianz has developed a Group-wide operational risk management framework that focuses on early recognition and proactive management of operational risks. the framework defines roles and responsibilities, risk processes and methods and has been implemented at the major Group companies. local risk managers ensure this framework is implemented in the respective operating entities. the operating entities identify and evaluate relevant operational risks and control weaknesses via a structured self assessment. Furthermore, operational losses are collected in a central loss database by all our operating entities. an analysis of the causes of significant losses is used to enable the operating entities to implement measures for avoiding or reducing future losses. the measures adopted may include revising processes, improving failed or inappropriate controls, installing comprehensive security systems and strengthening emergency plans. this reporting is designed to provide comprehensive and timely information to senior management of the allianz Group and the relevant local operating entities.
Major failures and disasters which could cause a severe disruption to working environment, facilities and personnel, may represent significant operational risks for the allianz Group and its operating entities. our Business continuity Management (BcM) framework strives to protect critical business functions from these effects and enables them to carry out their core tasks in time and at the quality required. Regularly enhanced, BcM activities and knowledge are embedded within the organization’s culture.
o t H e R R i s k s 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 liquidity, reputational and strategic risk.
◼ s t R a t e G i c R i s k strategic risk is the risk of an unexpected negative change in the company value, arising from the adverse effect of management decisions regarding business strategies and their implementation. this risk reflects the compatibility between strategic goals, the business strategies and the resources deployed to achieve those goals. strategic risk also includes the lack of management’s ability to effectively analyze and react to external factors (e. g. market conditions), which could affect the future direction of the relevant operating entity or the Group as a whole.
◼ l i q u i D i t y R i s k liquidity risk has two aspects: the risk that short-term current or future payment obligations cannot be met or can only be met on the basis of altered conditions, and the risk that in the event of a company liquidity crisis, refinancing is only possible at higher interest rates or by liquidating assets at a discount. liquidity risk can arise primarily if there are mismatches in the timing of cash payments and funding obligations. liquidity risk does not include the risk of a change in market prices due to a worsening of the market liquidity of assets, as this is a component of market risk analyzed trough our internal risk capital model (e. g. the assumed volatility of real estate investments takes historical observations into account). Funding risk, a particular form of liquidity risk, arises when the necessary liquidity to fund illiquid asset positions cannot be obtained at the expected terms and when required.
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 unlikely events.
◼ R e p u t a t i o n a l R i s k
Reputational risk is the risk of direct loss or loss in future business caused by a decline in the reputation of the allianz Group or one or more of its operating entities among its stakeholders (i.e. shareholders, customers, staff, business partners or the general public). For example, every action, existing or new transaction or product can lead to losses in the value of our reputation – either directly or indirectly – and can also result in losses in other risk categories. in addition, every loss in other risk categories, irrespective of its size, can pose reputational risk to the allianz Group. therefore, reputational risk can both cause and result from losses in all risk categories such as market, credit or insurance risks.
R i s k M a n a G e M e n t F R a M e W o R k as a provider of financial services, we consider risk management to be one of our core competencies. it is therefore an integrated part of our business processes. the key elements of our risk management framework are: ◾ promotion of a strong risk management culture supported by a robust risk governance structure.
◾ 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.
For the benefit of shareholders and policyholders alike, our risk management framework adds value to allianz se and its operating entities through the following four primary components: r i s k u n d e r w r i t i n g a n d i d e n t i f i C a t i o n : a sound risk underwriting and identification framework forms the foundation for adequate risk taking and management decisions such as individual tran saction approval, new product approval, strategic or tactical asset allocation. the framework includes risk assessments, risk standards, valuation methods and clear minimum standards for underwriting.
r i s k r e P o r t i n g a n d M o n i t o r i n g : our comprehensive qualitative and quantitative risk reporting and monitoring framework provides transparency and risk indicators to senior management for 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.
C o M M u n i C a t i o n a n d t r a n s P a r e n C y : Finally, a transparent and robust risk disclosure provides a basis for communicating this strategy to our internal and external stakeholders, ensuring a sustainable positive impact on valuation and financing.
� p R o p e R t y - c a s u a l t y u n D e R W R i t i n G F R a M e W o R k our sound Group-wide underwriting framework forms the basis for adequate risk taking and management decisions and helps us limit individual potentially significant risks including reputational risks. the framework defines common minimum requirements for our underwriting activities in the international corporate and commercial property- casualty insurance business, both for direct and reinsurance business.
Dedicated minimum standards protect allianz from taking unwanted or excessive risks. they determine non-admitted coverages 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, established by the allianz se Board of Management. these standards also document dele gated underwriting authorities and establish mandatory rules for individual policies. exceptions require approval by the local chief underwriting officer and, if material, the Group chief Risk officer, as well as reporting to the Group insurance Risk committee.
� l i F e p R o D u c t M a n a G e M e n t F R a M e W o R k under our life product management framework, product development and approval are local processes at the operating entities. However, there are Group review requirements for new high-risk products or product features to ensure that the operating entities are aware of the associated risks. alternative risk mitigating product features are considered in the design phase and material real world assumptions are explicitly acknowledged as a core component of the business model. the framework also defines profitability standards, while at the same time allowing for individual exceptions approved for competitive reasons in light of local market characteristics. profitability of new and existing business is closely monitored and regularly reported to the Board of Management of allianz se.
1 | For additional information regarding opportunities, please refer to the section outlook 2012 and 2013.
Within our risk governance system the supervisory Board and Board of Management of allianz se have both allianz se-specific and Group-wide responsibilities and have authorized committees at their respective levels for support. examples include: � s u p e R v i s o R y B o a R D
◾ the audit committee supervises the effectiveness of the allianz risk management and monitoring framework.
� B o a R D o F M a n a G e M e n t
◾ the Group Finance committee has been authorized by the Board of Management to oversee the investment and financing activities, including the approval of significant transactions of allianz se and allianz Group companies.
as a general principle, the “first line of defense” rests with business managers in the local operating entities and allianz investment Management units. they are responsible in the first instance for both the risks and returns of their decisions. our “second line of defense” is made up of our independent, global oversight functions such as Risk, compliance and legal. Group audit forms the “third line of defense”. on a periodic basis, Group audit independently reviews risk governance implementation, performs quality reviews of risk processes and tests adherence to business standards.
� o p e R a t i n G e n t i t i e s operating entities assume responsibility for their own risk management, including adherence to both external requirements (e. g. requirements imposed by local regulators) and internal Group-wide minimum standards.
� o t H e R F u n c t i o n s a n D B o D i e s in addition to Group Risk and the oe Risk Function, actuarial, compliance and legal functions have been established at both the Group and oe level, constituting additional components of the second line of defense.
Group compliance is responsible for integrity management which aims to protect the allianz Group, our operating entities and employees from regulatory risks.
as active participant of the emerging Risk initiative of the chief Risk officer Forum, we monitor with other chief Risk officers of major european insurance companies and financial conglomerates the industry-wide risk landscape and raise awareness of major risks for the insurance industry.
this Risk Report, with the exception of the Risk Management priorities for 2012 section, is an integral part of the audited consolidated financial statements.
Risk Management priorities for 2012 our general objectives for 2012 include three priorities for risk management. First and foremost, to be as successful as we were in 2011 in meeting the risk management and reporting challenges. second, to continue developing and strengthening our risk management framework and network globally.
our third priority is to do what is necessary to meet forthcoming solvency ii internal model requirements, one of the Group’s top priorities set by the Board of Management. More specifically, we are focusing on the finalization of the internal risk capital methodology and its further embedding into relevant business processes. in addition, the documentation and further validation of the internal model as well as the completion of the enhancements to our risk analysis infrastructure will be a priority. in this context, we will also continue with our preparation for the new reporting and disclosure requirements and prepare our reporting architecture accordingly. With respect to the risk governance framework our emphasis will be on the regular and rigorous application of the relevant components. all these initiatives are subject to formal internal sign-off processes before final adoption.
internal controls over financial reporting in line with both our prudent approach to risk governance and compliance with regulatory requirements, we have implemented 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. We regularly review and update our internal control system.
f i n A n c i A l m i s s t A t e m e n t r i s k A s s e s s m e n t s c o p i n g determination of significant accounts and operating entities to be covered by systems of internal control r i s k s identification of risk scenarios that could result in a material financial misstatement k e y c o n t r o l s identification of key controls that prevent or detect errors or fraud resulting from risk scenarios
Assessment of the design and operating effectiveness of key controls our approach can be summarized as follows: ◾ We use a top-down, risk-based approach to determine the accounts and operating entities that should fall under the s c o p e o f o u r i n t e r n a l c o n t r o l s y s t e m s . We do so by carrying out an annual, qualitative and quantitative analysis of our consolidated financial statements and disclosures.
◾ then, our local entities i d e n t i f y r i s k s c e n a r i o s that could lead to material financial misstatements, taking into account the likelihood of a risk materializing and the potential impact of any resulting error.
the group disclosure committee ensures that the chairman of the Board of management and the board member responsible for controlling, reporting and risk of Allianz se are made aware of all material information that could affect our disclosures and ascertains 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 creating local disclosure committees that are similar to the group-level committee. the entities’ chief executive officers and chief financial officers 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.
We have implemented a robust and comprehensive r i s k g o v e r n a n c e s t r u c t u r e . this structure is supported by audit, compliance and independent review functions similar to our financial reporting governance. However, since our internal risk capital computations incorporate economic factors not fully reflected in accounting results, we have implemented additional controls within our management reporting processes to ensure that these additional estimates, including models used and relevant assumptions made, are adequately controlled.
these controls include the validation of models and assumptions by independent external reviews and continuous benchmarking to market and/or peer assumptions and practices. We benchmark and explain our non-market assumptions against practices in the industry, actuarial associations and guidance from supervisory authorities.
Consolidated FinanCial statements 181 Content 182 Consolidated Balance sheets 183 Consolidated income statements 184 Consolidated statements of
Changes in equity 186 Consolidated statements of Cash Flows 189 notes to the Consolidated Financial statements 2010: modern training concepts, a multiplicity of science and technology environments, research from a global perspec- tive – in the age of the knowledge society allianz resolutely focuses on passing on information and expertise to enhance the quality of life of our customers. 2011: Whether in asia, europe or south america, allianz’s customers are well covered and can sit back, relax and look forward to everything life has to offer.
Fi na nc ia l s ta te m en ts
◼ n o t e S t o t h e C o n S o l I d a t e d I n C o m e
◼ o t h e R I n F o R m a t I o n 285 44 derivative financial instruments 287 45 Financial instruments 296 46 Related party transactions 296 47 Contingent liabilities, commitments, guarantees, and assets pledged and collateral 301 48 Pensions and similar obligations 304 49 Share-based compensation plans 309 50 Restructuring plans 313 51 earnings per share 314 52 other information 316 53 Subsequent events 318 list of participations of the allianz Group as of december 31, 2011 according to § 313 (2) hGB
◼ G e n e R a l I n F o R m a t I o n 189 1 nature of operations and basis of presentation 189 2 Summary of significant accounting policies 208 3 Use of estimates and assumptions 213 4 Recently adopted and issued accounting pronouncements and changes in the presentation of the consolidated financial statements 222 6 Segment reporting
C o n S o l I d a t e d S t a t e m e n t S o F C o m P R e h e n S I V e I n C o m e 184
As of december 31, 2011 2010 note € mn € mn
Total liabilities and equity 641,472 624,945 1 | As of december 31, 2011, € — mn (2010: € 613 mn) are pledged to creditors and can be sold or repledged. 2 | As of december 31, 2011, € 2,541 mn (2010: € 90 mn) are pledged to creditors and can be sold or repledged.
Acquisition and administrative expenses (net) 39 (20,762) (20,883) (20,118) fee and commission expenses 40 (2,564) (2,561) (2,212) Amortization of intangible assets 15 (449) (327) (125)
Diluted earnings per share 51 5.48 11.12 9.30 from continuing operations 5.48 11.12 10.17 from discontinued operations — — (0.87)
Other comprehensive income Foreign currency translation adjustments reclassifications to net income 4 (9) 516 Changes arising during the year 344 1,347 (122)
Available-for-sale investments reclassifications to net income 623 (1,353) (753) Changes arising during the year (1,096) 925 4,242
Cash flow hedges reclassifications to net income (1) (2) (5) Changes arising during the year (4) 11 (11)
Miscellaneous reclassifications to net income — (1) — Changes arising during the year 4 194 (87)
Consolidated statements of Cash flows € mn € mn € mn s u m m A r Y net cash flow provided by operating activities 16,642 15,414 13,610 net cash flow used in investing activities (17,043) (19,536) (50,387) net cash flow provided by financing activities 2,035 4,465 3,649 effect of exchange rate changes on cash and cash equivalents 111 265 21 Change in cash and cash equivalents 1,745 608 (33,107) Cash and cash equivalents at beginning of period of continuing operations 8,747 6,089 8,958 Cash and cash equivalents at beginning of period reclassified to assets of disposal groups classified as held for sale — — 30,238
Adjustments to reconcile net income to net cash flow provided by operating activities share of earnings from investments in associates and joint ventures (201) (183) (80) realized gains/losses (net) and impairments of investments (net) of
Available-for-sale and held-to-maturity investments, investments in associates and joint ventures, real estate held for investment, loans and advances to banks and customers 226 (2,864) (684) other investments, mainly financial assets held for trading and designated at fair value through income 957 444 (1,008)
C A s h f l o w f r o m i n v e s t i n g A C t i v i t i e s Proceeds from the sale, maturity or repayment of financial assets designated at fair value through income 6,210 14,161 4,193 Available-for-sale investments 129,383 125,134 94,459 held-to-maturity investments 181 242 419 investments in associates and joint ventures 164 1,042 1,957 non-current assets and assets of disposal groups classified as held for sale 142 — — real estate held for investment 916 682 391 loans and advances to banks and customers (purchased loans) 8,090 9,248 11,537 property and equipment 145 380 210
Payments for the purchase or origination of financial assets designated at fair value through income (4,930) (8,973) (2,513) Available-for-sale investments (143,928) (153,527) (112,667) held-to-maturity investments (362) (463) (192) investments in associates and joint ventures (176) (448) (973) non-current assets and assets of disposal groups classified as held for sale — — (36) real estate held for investment (671) (1,610) (349) loans and advances to banks and customers (purchased loans) (8,485) (7,624) (20,584) property and equipment (1,201) (1,472) (1,160)
1 | includes reclassifications from loans and advances to banks and customers to cash and cash equivalents at the u.s. subsidiaries.
Business combinations (note 5) proceeds from sale of subsidiaries, net of cash disposed (14) 193 (26,975) Acquisitions of subsidiaries, net of cash acquired (69) — 77
Available-for-sale investments — — 746 Assets of disposal groups classified as held for sale — — (746)
Distribution channel intangible assets — — 480 Assets of disposal groups classified as held for sale — — (480)
Cominvest Available-for-sale investments — — 179 loans and advances to banks and customers — — 7 deferred tax assets — — 14 intangible assets — — 691 property and equipment — — 3 other assets — — 39 Assets of disposal groups classified as held for sale — — (933) liabilities to banks and customers — — 1 deferred tax liabilities — — (72) Certificated liabilities, participation certificates and subordinated liabilities — — (57) other liabilities — — (148) non-controlling interests — — (5) liabilities of disposal groups classified as held for sale — — 281
◼ n a t u r e o F o p e r a t i o n S
allianz Se is a stock corporation in the form of a european Company (Societas europaea). allianz Se shares are listed on all German stock exchanges and allianz Se american depositary receipts (adrs) are traded in the u.S.a. over the counter on otCQX.
◼ B a S i S o F p r e S e n t a t i o n the consolidated financial statements of the allianz Group have been prepared in conformity with international Financial reporting Standards (iFrS), as adopted under european union (e.u.) regulations in accordance with § 315 a of the German Commercial Code (hGB). within these consolidated financial statements, the allianz Group has applied all iFrS issued by the iaSB and endorsed by the e.u., that are compulsory as of december 31, 2011. iFrS comprise international Financial reporting Standards (iFrS), international accounting Standards (iaS) and interpretations developed by the international Financial reporting interpretations Committee (iFriC) or the former Standing interpretations Committee (SiC).
the consolidated financial statements are prepared as of and for the year ended december 31, and presented in millions of euro (€), unless otherwise stated.
third-party assets held in an agency or fiduciary capacity are not assets of the allianz Group and are not presented in these consolidated financial statements.
� B u S i n e S S C o m B i n a t i o n S i n C l u d i n G a C Q u i S i t i o n S a n d d i S p o S a l S o F n o n - C o n t r o l l i n G i n t e r e S t S
a business combination occurs when the allianz Group obtains control over a business.
B u s i n e s s c o m B i n a t i o n s f r o m J a n u a r y 1 , 2 0 1 0 are accounted for using the acquisition method. the cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value, and the amount of any non-controlling interest in the acquired. acquisition-related costs are generally recognized as expenses. For each business combination, the allianz Group has an option to measure any non-controlling interests in the acquired either at the acquisition date fair value or at the non-controlling interest’s proportionate share of the acquired’s identifiable net assets.
For B u s i n e s s c o m B i n a t i o n s w i t h a n a g r e e m e n t d a t e B e f o r e m a r c h 3 1 , 2 0 0 4 , non-controlling interests are recorded at their proportion of the pre-acquisition carrying amounts of the identifiable assets and liabilities.
� a S S o C i a t e d e n t e r p r i S e S a n d J o i n t v e n t u r e S
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 investments are initially recognized at cost and subsequently increased or decreased to recognize the allianz Group’s share in profit or loss after the date of acquisition. the investments are tested for impairment when respective triggering events occur. any impairment loss will correspond to the excess of the investment’s carrying amount over its recoverable amount. in general, the triggering events are similar to those used for impairment testing for financial instruments while the measurement of impairment losses is similar to the measurement of impairment losses for other assets.
the allianz Group accounts for all material investments in associates on a time lag of no more than three months. the positive difference between the cost of the investment and the allianz Group’s share of the net fair value of the associate’s or joint ventures identifiable assets and liabilities is accounted for as goodwill and included in the carrying amount of the investment. 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 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.
◼ F o r e i G n C u r r e n C y t r a n S l a t i o n
� t r a n S l a t i o n t o t h e p r e S e n t a t i o n C u r r e n C y
For the purposes of the consolidated financial statements, the results and financial position of each of the allianz Group’s subsidiaries are expressed in euro, the presentation currency of the allianz Group. assets and liabilities of subsidiaries not reporting in euro are translated at the closing rate on the balance sheet date and income and expenses
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.
◼ r e a l e S t a t e h e l d F o r i n v e S t m e n t 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. improvement costs are capitalized if they extend the useful life or increase the value of the asset; otherwise they are expensed as incurred.
◾ financial assets carried at fair value through income, ◾ available-for-sale investments, ◾ held-to-maturity investments, ◾ loans and advances to banks and customers, or ◾ derivative financial instruments used for hedging.
Financial liabilities within the scope of iaS 39 are either classified as
the classification depends on the nature and purpose of the financial instrument and is determined at initial recognition.
Fi na nc ia l S ta te m en ts a c t i v e m a r k e t s – q u o t e d m a r k e t p r i c e : the fair values of financial instruments that are traded in active markets are based on quoted market prices or dealer price quotations on the last exchange trading day prior to and at the balance sheet date. the quoted market price used for a financial asset held by the allianz Group is the current bid price; the quoted market price used for financial liabilities is the current ask price.
n o a c t i v e m a r k e t – e q u i t y i n s t r u m e n t s : equity securities are measured at fair value when the ownership interest is less than 20 % and no significant influence exists, and the fair value is reliably measurable. if the fair value cannot be measured reliably, unquoted equity instruments and derivatives linked to such instruments are stated at cost until a fair value can be measured reliably. these financial instruments are subject to the normal impairment procedures.
� a m o r t i z e d C o S t o F F i n a n C i a l i n S t r u m e n t S
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.
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 equity securities are measured at fair value when the ownership interest is less than 20 % and no significant influence exists, and the fair value is reliably measurable. available-for-sale equity securities include investments in limited partnerships. the allianz Group records its investments in limited partnerships at cost, where the ownership interest is less than 20 %, and when the limited partnerships do not have a quoted market price and fair value cannot be reliably measured.
� l o a n S a n d a d v a n C e S t o B a n K S a n d C u S t o m e r S
loans and advances to banks and customers are non-derivative financial assets with fixed or determinable payments, which are not quoted in an active market and which are not classified as available-for-sale investments or held-tomaturity investments, financial assets held for trading, or financial assets designated at fair value through income. loans to banks and customers are initially recognized at fair value. Subsequently they are recorded at amortized cost using the effective interest method. interest income is accrued on the unpaid principal balance, net of charge-offs. using the effective interest method, net deferred fees and premiums or discounts are recorded as an adjustment of interest income yield over the lives of the related loans.
� F u n d S h e l d B y o t h e r S u n d e r r e i n S u r a n C e C o n t r a C t S
Funds held by others under reinsurance contracts assumed relate to cash deposits to which the allianz Group is entitled, but which the ceding insurer retains as collateral for future obligations of the allianz Group. the cash deposits are recorded at face value, less any impairments for balances that are deemed not to be recoverable.
the fair value of financial liabilities for unit-linked contracts is equal to the fair value of the financial assets for unit-linked contracts.
� F i n a n C i a l l i a B i l i t i e S F o r p u t t a B l e e Q u i t y i n S t r u m e n t S
Certificated liabilities, participation certificates and subordinated liabilities are subsequently measured at amortized cost, using the effective interest method to amortize the premium or discount to the redemption value over the life of the liability.
Financial guarantee contracts issued by the allianz Group are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts which are not accounted for as insurance contracts are recognized initially at fair value. Subsequently, unless the financial guarantee contract was designated at inception as at fair value through income, the allianz Group measures it at the higher of the best estimate of the expenditure required to settle the present obligation and the amount initially recognized less cumulative amortization when appropriate.
if a held-to-maturity debt security or a loan is impaired, the related impairment loss is measured as the difference between the carrying amount and the present value of estimated future cash flows discounted at the original effective interest rate.
if the amount of the impairment of a held-to-maturity debt security or a loan subsequently increases or decreases due to an event occurring after the initial measurement of impairment, the change is recorded in the income statement.
if there is objective evidence that the cost may not be recovered, an available-for-sale equity security is considered to be impaired. objective evidence that the cost may not be recovered, in addition to qualitative impairment criteria, includes a significant or prolonged decline in the fair value below cost. the allianz Group’s policy considers a significant decline to be one in which the fair value is below the weighted average cost by more than 20 %. a prolonged decline is considered to be one in which the fair value is below the weighted average cost for a period of more than nine months.
◼ r e C l a S S i F i C a t i o n o F F i n a n C i a l i n S t r u m e n t S
◾ 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-to-maturity” 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.
◼ o F F S e t t i n G o F F i n a n C i a l i n S t r u m e n t S
◼ d e r e C o G n i t i o n o F F i n a n C i a l i n S t r u m e n t S
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 trans actions 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: � F a i r v a l u e h e d G e S
For all fair value hedges, cash flow hedges, and hedges of a net investment in a foreign entity, the derivative financial instruments are included in other assets or other liabilities.
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 its fair value; any net unrealized gains and losses accumulated in other comprehensive income are recognized in the consolidated income statement (i.e. recycled) when the planned transaction affects the consolidated income statement. after a hedge of a net investment in a foreign entity is discontinued, the allianz Group continues to report the derivative financial instrument at its fair value and any net unrealized gains or losses accumulated in other comprehensive income remain there until the disposal of the foreign entity.
◼ d i S C l o S u r e S r e l a t i n G t o F i n a n C i a l i n S t r u m e n t S
the risk report is an integral part of the consolidated financial statements.
the following table summarizes the relationship between the balance sheet positions and the classes of financial instruments according to iFrS 7. the balance sheet positions are the same as the iaS 39 categories except when noted in parenthesis.
– 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
Certificated liabilities (other liabilities) amortized cost participation certificates and subordinated liabilities (other liabilities) amortized cost liabilities held in trust 1 Fair value o F F - B a l a n C e S h e e t Financial guarantees nominal value irrevocable loan commitments nominal value 1 | include receivables and obligations of deferred compensation plans outsourced to a trust.
◼ i n S u r a n C e , i n v e S t m e n t a n d r e i n S u r a n C e C o n t r a C t S
◼ i n S u r a n C e a n d i n v e S t m e n t C o n t r a C t S
Contracts issued by insurance subsidiaries of the allianz Group are classified according to iFrS 4 as insurance or investment contracts. Contracts under which the allianz Group accepts significant insurance risk from a policyholder are classified as insurance contracts. Contracts under which the allianz Group does not accept significant insurance risk are classified as investment contracts. Certain investment contracts include discretionary participation features. all insurance contracts and investment contracts with discretionary participating features are accounted for under the related insurance accounting provisions of uS Gaap when iFrS 4 does not provide specific guidance. investment contracts without discretionary participation features are accounted for as financial instruments in accordance with iaS 39.
◼ r e i n S u r a n C e C o n t r a C t S
assumed reinsurance premiums, commissions and claim settlements, as well as the reinsurance element of technical provisions are accounted for in accordance with the conditions of the reinsurance contracts and with consideration of the original contracts for which the reinsurance was concluded.
Costs that vary with and are directly related to the acquisition and renewal of insurance contracts are deferred by recognizing a daC asset. daC generally consists of commissions, underwriting expenses and policy issuance costs. at inception, daC is tested to ensure that it is recoverable over the life of the contracts. Subsequently, loss recognition tests at the end of each reporting period ensure that only the amount of daC that is covered by future profits is carried on the consolidated balance sheet. For short-duration contracts, traditional long-duration contracts, and limited-payment contracts, daC is amortized in proportion to premium revenue recognized.
For universal life-type contracts, participating life insurance contracts and investment contracts with discretionary participation features, daC is amortized over the contract life of a book of contracts based on estimated gross profits (eGp) or estimated gross margins (eGm), as appropriate, based on historical and anticipated future experience, which is evaluated at the end of each reporting period.
For unit-linked investment contracts without discretionary participation features (dpF) accounted for under iaS 39 at fair value, acquisition costs are deferred in accordance with iaS 18, revenue, if the costs are incremental. acquisition costs are incremental, so long as no costs are incurred from non-issuance of the related contracts. For non-unit-linked investment contracts without discretionary participation features accounted for under iaS 39 at amortized cost, acquisition costs that meet the definition of transaction costs under iaS 39, are considered in the aggregate policy reserves.
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, ◾ explicitly identified in the contract at inception, ◾ incremental to amounts the allianz Group credits on similar contracts without sales inducements, and ◾ higher than the contract’s expected ongoing crediting rates for periods after the inducement.
please refer to note 3, where the processes and controls for ensuring an appropriate use of estimates and assumptions are explained.
For short-duration insurance contracts, like most of the property and casualty contracts, premiums to be earned in future years are recorded as unearned premiums according to the insurance accounting provisions of uS Gaap. these premiums are earned in subsequent periods in relation to the insurance coverage provided.
amounts charged as consideration for origination of certain long-duration insurance contracts (i.e. initiation or front-end fees) are reported as unearned revenue which are included in unearned premiums. according to the insurance accounting provisions of uS Gaap, these fees are recognized using the same amortization methodology as daC.
◼ u n B u n d l i n G
the deposit component of an insurance contract is unbundled when both of the following conditions are met: 1. the deposit component (including any embedded surrender options) can be measured separately (i. e. without taking into account the insurance component); and 2. the allianz Group’s accounting policies do not require the recognition of all obligations and rights arising from the deposit component.
◼ B i F u r C a t i o n
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.
◼ r e S e r v e S F o r l o S S a n d l o S S a d J u S t m e n t e X p e n S e S
Case reserves for reported claims are based on estimates of future payments that will be made with respect to claims, including lae relating to such claims. Such estimates are made on a case-by-case basis, based on the facts and circumstances available at the time the reserves are established. the estimates reflect the informed judgment of claims personnel based on general insurance reserving practices and knowledge of the nature and value of a specific type of claim. these case reserves are regularly re-evaluated in the ordinary course of the settlement process and adjustments are made as new information becomes available.
iBnr reserves are established to recognize the estimated cost of losses that have occurred but where the allianz Group has not yet been notified. iBnr reserves, similar to case reserves for reported claims, are established to recognize the estimated costs, including expenses, necessary to bring claims to final settlement. the allianz Group relies on its past experience, adjusted for current trends and any other relevant factors to estimate iBnr reserves. iBnr reserves are estimates based on actuarial and statistical projections of the expected cost of the ultimate settlement and administration of claims. the analyses are based on facts and circumstances known at the time, predictions of future events, estimates of future inflation and other societal and economic factors. trends in claim frequency, severity and time lag in reporting are examples of factors used in projecting the iBnr reserves. iBnr reserves are reviewed and revised periodically as additional information becomes available and actual claims are reported.
◼ r e S e r v e S F o r i n S u r a n C e a n d i n v e S t m e n t C o n t r a C t S
reserves for insurance and investment contracts include aggregate policy reserves, reserves for premium refunds and other insurance reserves.
� a G G r e G a t e p o l i C y r e S e r v e S F o r p a r t i C i p a t i n G l i F e i n S u r a n C e C o n t r a C t S
� a G G r e G a t e p o l i C y r e S e r v e S F o r u n i v e r S a l l i F e - t y p e i n S u r a n C e C o n t r a C t S
� r e S e r v e S F o r p r e m i u m r e F u n d S
Fi na nc ia l S ta te m en ts future profit participation calculations. unrealized gains and losses recognized for available-for-sale investments are recognized in 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. the profit participation allocated to participating policyholders or disbursed to them reduces the reserve for premium refunds.
switzerland Group life all sources of profit 90 % individual life all sources of profit 100 %
non-unit-linked investment contracts without dpF are accounted for under iaS 39. the aggregate policy reserve for those contracts is initially recognized at amortized cost, or the amount of the deposit by the contract holder, net of the transaction costs that are directly attributable to the issuance of the contract. Subsequently, those contracts are measured at amortized cost using the effective interest rate method.
� l i a B i l i t y a d e Q u a C y t e S t i n G
◼ o t h e r a S S e t S
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.
receivables are generally recorded at face value less any payments received, net of valuation allowances.
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.
◼ G o o d w i l l a n d o t h e r i n t a n G i B l e a S S e t S
Goodwill resulting from business combinations is initially recorded at cost and subsequently measured at cost less accumulated impairments. Goodwill is allocated to each of the allianz Group’s cash generating units expected to benefit from the business combination.
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 expenditure incurred from the date when the intangible asset first meets the recognition criteria in the development phase.
Fi na nc ia l S ta te m en ts than the recoverable 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.
other liabilities include payables, unearned income, provisions, deposits retained for reinsurance ceded, derivative financial instruments used for hedging, that meet the criteria for hedge accounting, firm commitments, financial liabilities for puttable equity instruments and other liabilities. these liabilities are reported at redemption value.
tax payables are calculated in accordance with relevant local tax regulations.
Capital reserves represent the premium, or additional paid-in capital, received from the issuance of shares.
Foreign currency translation differences, including those arising in the application of the equity method of accounting, are recorded as foreign currency translation adjustments directly in shareholders’ equity without affecting earnings.
non-controlling interests represent the proportion of equity that is attributable to the respective shareholders of subsidiaries.
◼ i n t e r e S t a n d S i m i l a r i n C o m e / e X p e n S e S
interest income and interest expenses are recognized on an accrual basis. interest income is recognized using the effective interest method. this line item also includes dividends from available-for-sale equity securities, interest recognized on finance leases and income from investments in associated entities and joint ventures. dividends are recognized in income when the right to receive the dividend is established. interest on finance leases is recognized in income over the term of the respective lease so that a constant period yield based on the net investment is attained.
income from investments in associated entities and joint ventures (net) represents the share of net income from entities accounted for using the equity method.
◼ F e e a n d C o m m i S S i o n i n C o m e a n d e X p e n S e S
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.
assets and liabilities held in trust by the allianz Group in its own name, but for the account of third parties, are not reported in its consolidated balance sheet. Commissions received from such business are shown in fee and commission income.
investment advisory fees are recognized as the services are performed. Such fees are primarily based on percentages of the market value of the assets under management. investment advisory fees receivable for private accounts consist primarily of accounts billed on a quarterly basis. private accounts may also generate a fee based on investment performance, which is recognized at the end of the respective contract period if the prescribed performance hurdles have been achieved.
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.
◼ i n C o m e a n d e X p e n S e S F r o m F u l l y C o n S o l i d a t e d p r i v a t e e Q u i t y i n v e S t m e n t S
income tax expense consists of current taxes on taxable income actually charged to the individual allianz Group companies and changes in deferred tax assets and liabilities. expense and income from interest and penalties to or from tax authorities are included in current taxes. the calculation of deferred taxes is based on tax loss carry forwards, unused tax credits and on temporary differences between the allianz Group’s carrying amounts of assets or liabilities in its consolidated balance sheet and their tax bases. the tax rates used for the calculation of deferred taxes are the local rates applicable in the countries concerned; changes to tax rates which have been substantively enacted prior to or as of the consolidated balance sheet date are taken into account. deferred tax assets on losses carried forward are recognized only to the extent it is probable that sufficient future taxable income will be available for their realization.
◼ p e n S i o n S a n d S i m i l a r o B l i G a t i o n S
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.
◼ S h a r e B a S e d C o m p e n S a t i o n p l a n S
the share-based compensation plans of the allianz Group are classified as either equity settled or cash settled plans. equity settled plans are measured at fair value on the grant date and recognized as an expense, with a corresponding increase to shareholders’ equity, over the vesting period. equity settled plans include a best estimate of the number of equity instruments that are expected to vest in determining the amount of expense to be recognized. For cash settled plans, the allianz Group accrues the fair value of the award as a compensation expense over the vesting period. upon vesting, any change in the fair value of any unexercised awards is also recognized as a compensation expense.
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. 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.
3 use of estimates and assumptions the preceding note 2 describes the accounting policies that the allianz Group follows in preparing their consolidated financial statements. the section below describes how certain reported figures can be significantly affected by the use of estimates and assumptions, and the processes the allianz Group has in place to control the judgments which are made.
Both sides of the allianz Group’s balance sheet have a high degree of estimation and numerous assumptions embedded in the valuation of assets and liabilities. the estimation process and selection of appropriate assumptions requires significant judgment to be applied and management decisions to be taken in order to establish appropriate values for these assets and liabilities. any change in the assumptions and estimates could, in certain circumstances, significantly affect the reported results and values because the range of reasonable judgment in some cases may be very large. the allianz Group understands the degree of impact that these judgments may have and has established a strong system of governance as well as controls, procedures and guidelines to ensure consistency and soundness over these judgments.
Subsidiaries of the allianz Group are required to establish controls which promote a culture of good judgment and sound decision-making around accounting estimates. these include providing training programs, hiring people with the right background for the job (i.e., certified or experienced accountants, actuaries and finance professionals), and providing formalized policies and procedures manuals for accounting and internal controls.
l i f e / h e a l t h reserves are dependent on estimates and assumptions, especially on the life expectancy of an insured individual (mortality and longevity risk) and on the development of interest rates and investment returns (asset-liability mismatch risk). these assumptions also have an impact on the presentation of costs arising from the origination of insurance business (acquisition costs and sales inducements) and the value of acquired insurance business (pvFp). to ensure consistency in the application of actuarial methods and assumptions in the life/health reserving process, the allianz Group has designed a two stage reserving process. 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 Group-wide 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.
p r o p e r t y - c a s u a l t y reserves are particularly dependent on the use of estimates and judgment regarding the development of loss reserves. Similar to life/health, a two stage reserving process is in place.
1 | please refer to note 2 Summary of significant accounting policies. For further details, please refer to note 12 deferred acquisition costs, note 19 reserves for loss and loss adjustment expenses, and note 20 reserves for insurance and investment contracts.
using the development patterns and expected loss ratios described above, local reserving actuaries produce estimates of ultimate loss and allocated loss adjustment expenses using several methods, such as loss development or Chainladder method, Bornhuetter-Ferguson method, or Frequency-Severity methods.
◾ the total loss and lae reserves, and ◾ the case reserves as established by claims adjusters on a case-by-case basis.
r e g u l a r s i t e v i s i t s : the allianz Group actuarial department regularly visits allianz subsidiaries in order to ensure that they apply the Group-wide standards and guidelines. the on-site review focuses on all significant changes in assumptions and methodologies as well as on procedures and professional practices relevant for the reserving process. Furthermore, these meetings are to update knowledge of the underlying local business developments.
r e g u l a r q u a n t i t a t i v e a n d q u a l i t a t i v e r e s e r v e m o n i t o r i n g : on a quarterly basis, the allianz Group actuarial department monitors reserve levels, movements and trends across the allianz Group. this monitoring is conducted on the basis of quarterly data submitted by the subsidiaries as well as through frequent dialogue with local actuaries.
the oversight and monitoring of the allianz Group’s reserves culminate in quarterly meetings of the allianz Group reserve Committee, which is the supervising body that governs all significant reserves. it particularly monitors key developments across the allianz Group affecting the adequacy of loss reserves.
◼ F a i r v a l u e a n d i m p a i r m e n t S o F F i n a n C i a l i n S t r u m e n t S
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 Financial reporting department, which then reviews them for consistency and resolves discrepancies.
1 | please refer to the consolidated financial statements note 2 Summary of significant accounting policies, note 37 impairments of investments (net), and note 45 Financial instruments, for further details regarding financial instruments and impairments.
2 | please refer to note 2 Summary of significant accounting policies, and note 15 intangible assets, for further details.
recognition and recoverability of all significant deferred tax assets are reviewed by tax professionals at Group level and the allianz Group tax Committee. the allianz Group tax Committee consists of senior Group financial staff and is chaired by the head of the allianz Group tax department.
as of december 31, 2011, the allianz Group reported pension liabilities for defined benefit plans of € 15,619 mn which is offset by the fair value of plan assets of € 10,136 mn. 2 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.
due to changing market and economic conditions the underlying assumptions may differ from actual developments. potential financial impacts from deviations in certain critical assumptions based on respective sensitivity analysis are disclosed in note 48.
1 | please refer to note 2 Summary of significant accounting policies, and note 43 income taxes, for further details. 2 | please refer to note 2 Summary of significant accounting policies, and note 48 pensions and similar obligations, for further details.
◼ r e S t r u C t u r i n G p r o v i S i o n S
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.
1 | please refer to note 2 Summary of significant accounting policies, and note 50 restructuring plans, for further details.
Fi na nc ia l S ta te m en ts 4 recently adopted and issued accounting pronouncements and changes in the presentation of the consolidated financial statements
◼ r e C e n t l y a d o p t e d a C C o u n t i n G p r o n o u n C e m e n t S | ef fe c t i ve Januar y 1, 2011 the following amendments and revisions to standards and interpretations became effective for the allianz Group’s consolidated financial statements as of January 1, 2011: ◾ iaS 32, Financial instruments: presentation – amendments relating to classification of rights issues
◾ annual improvements to iFrSs 2010 the allianz Group adopted the revisions, amendments and interpretations as of January 1, 2011, with no material impact on its financial result or financial position.
in June 2011, the iaSB issued an amended version of iaS 19 which will be effective for annual periods beginning on or after January 1, 2013. the amendments eliminate the corridor approach and require all actuarial gains and losses to be recognized in the other comprehensive income (oCi). While all remeasurements need to be recorded in the oCi, service and interest costs have to be recognized in the profit and loss account. the long-term return on plan assets has to be calculated using the same discount rate that is used to measure the defined benefit obligation (dBo). disclosure requirements are increased under the amended iaS 19, e.g. regarding plan characteristics and cash flow variations. the amendments are not expected to have a material impact on the financial position and financial results of the allianz Group. early adoption is generally allowed but not intended by the allianz Group.
in addition to the above mentioned recently issued accounting pronouncements, the following amendments and revisions to standards and interpretations have been issued by the iaSB but are not yet effective for or early adopted by the allianz Group: S t a n d a r d / i n t e r p r e t a t i o n e F F e C t i V e d a t e iFrS 7 Financial instruments: disclosures - amendment for transfers of Financial asset annual periods beginning on or after July 1, 2011 iaS 12 income taxes - amendment for deferred taxes: recovery of underlying asset annual periods beginning on or after January 1, 2012 iaS 1 presentation of Financial Statements: amendment for presentation of items of other Comprehensive income annual periods beginning on or after July 1, 2012 the amendments and interpretations are not expected to have a material impact on the financial position and financial results of the allianz Group. early adoption is generally allowed but not intended by the allianz Group.
Certain prior period amounts have been reclassified to conform to the current period presentation.
◼ S C o p e o F C o n S o l i d a t i o n in addition to allianz Se, the consolidated financial statements for the period ended december 31, 2011, generally include all German and foreign operating companies in which allianz Se directly or indirectly holds a majority of voting rights, or whose activities it can in some other way control. the companies are consolidated from the date on which allianz Se is able to exercise control.
Fi na nc ia l S ta te m en ts the companies listed in the table below are consolidated in addition to the parent company allianz Se.
all subsidiaries, joint ventures and associated enterprises are individually listed in the list of participations of the allianz Group from page 318 of this annual report onwards.
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 contingent consideration arrangement requires the allianz Group to pay the former owner 20 % of the difference between the net income and the agreed net income targets for eurovida S.a., europensiones S.a. and popular Gestión S.G.i.i.C. S.a. the contingent consideration will be paid out in five installments until 2026, each installment comprising a time period of three years. the minimum potential amount of all future payments that the allianz Group could be required to make under the contingent consideration agreement is zero, the maximum amount is unlimited.
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 december 31, 2011, was € 11 mn.
the impact of the acquisition of europensiones and popular Gestión, net of cash acquired, on the consolidated statement of cashflows for the year ended december 31, 2011, was: € mn 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)
if the acquisition date of the combined entity ( allianz Group including cominvest) had been on January 1, 2009, the revenues and net income for the year ended december 31, 2009, would have been immaterially different from the revenues and net income as presented in the consolidated income statement for the year ended december 31, 2009.
on June 29, 2009, the allianz Group obtained control of the thai life insurance company ayudhya allianz C.p. life public Company limited, Bangkok, by appointing the majority of the members of the board of directors.
Cash and cash equivalents 77 77 deferred acquisition costs (pVFp) 230 209 other assets 93 40 Total assets 2,108 2,040 unearned premiums 5 5 reserves for insurance and investment contracts 1,973 1,853 other liabilities 26 11 total equity 104 171 Total liabilities and equity 2,108 2,040
the premiums written of the combined entity ( allianz Group including ayudhya allianz C.p. life public Company limited) for the year ended december 31, 2009, would have been € 65,172 mn, if the acquisition date had been on January 1, 2009. the net income of the combined entity for the year ended december 31, 2009, would have been € 4,279 mn if the acquisition date had been on January 1, 2009.
— Sale to third party allianz Bank zrt., Budapest 100.0 9/30/2010 10 Corporate and other
Fi na nc ia l S ta te m en ts 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 december 31, 2011, was: € 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 —
in november 2011, the allianz Group deconsolidated manroland aG, offenbach, and its subsidiaries. the impact of the deconsolidation, net of cash balances, on the consolidated statement of cash flows for the year ended december 31, 2011, was: € mn 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 5 1
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.
� d r e S d n e r B a n K a G
Costs of acquisition decrease in shareholders’ equity decrease of noncontrolling interests allianz Seguros S.a., Sao paulo 1/14/2010 14.0 77 (14) (63)
in addition to the acquisitions of the shares in europensiones S.a., madrid, and popular Gestión S.G.i.i.C. S.a., madrid, the allianz Group acquired 9 % of the non-controlling interests of eurovida S.a. Compañía de Seguros y reaseguros, madrid, for a total consideration of € 61 mn so that the allianz Group now holds 60 % of the shares in this company.
◼ i d e n t i f i C A t i o n o f r e p o r t A b l e s e g m e n t s the business activities of the Allianz group are first organized 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 divided between property-Casualty and life/Health cat egories. in accordance with the responsibilities of the board of management, each of the insurance categories is grouped into the following reportable segments: ◾ german speaking Countries ◾ europe incl. south America ◾ nAftA markets ◾ global insurance lines & Anglo markets ◾ growth markets ◾ Assistance (property-Casualty only)
the types of products and services from which reportable segments derive revenue are described below.
� p r o p e r t y - C A s u A l t y in the property-Casualty category, reportable segments offer 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.
� l i f e / H e A l t H
� C o r p o r A t e A n d o t H e r the reportable segment Holding & treasury includes the management and support of the Allianz group’s businesses through its strategy, risk, corporate finance, treasury, financial control, communication, legal, human resources and technology functions. the reportable segment banking consists of the banking activities in germany, france, italy and bulgaria. the banks offer a wide range of products for corporate and retail clients with the main focus on the latter. the reportable segment Alternative investments provides global alternative investment management services in the private equity, real estate, renewable energy and infrastructure sectors mainly on behalf of the Allianz group’s insurance operations. the Alternative investments reportable segment also includes a fully consolidated private equity investment.
◼ r e p o r t A b l e s e g m e n t s m e A s u r e o f p r o f i t o r l o s s the Allianz group uses operating profit to evaluate the performance of its reportable segments and the Allianz group as a whole. operating profit highlights the portion of income before income taxes attributable to the ongoing core operations of the Allianz group. the Allianz group considers the presentation of operating profit to be useful and meaningful to investors because it enhances the understanding of the Allianz group’s underlying operating performance and the comparability of its operating performance over time.
to better understand the ongoing operations of the business, the Allianz group generally excludes the following nonoperating effects: ◾ acquisition-related expenses and the amortization of intangible assets, as these relate to business combinations; ◾ restructuring charges, because the timing of these is largely at the discretion of the Allianz group, and accordingly their exclusion provides additional insight into the operating trends of the underlying business; ◾ interest expenses from external debt, as these relate to the capital structure of the Allianz group; ◾ income from fully consolidated private equity investments (net), as this represents income from industrial holdings, which is outside the Allianz group’s normal scope of operating business; ◾ income from financial assets and liabilities carried at fair value through income (net), as this does not reflect the Allianz group’s long-term performance; ◾ realized capital gains and losses (net) or impairments of investments (net), as the timing of sales that would result in such realized gains or losses is largely at the discretion of the Allianz group and impairments are largely dependent on market cycles or issuer-specific events over which the Allianz group has little or no control and which can and do vary, sometimes materially, through time.
Against this general rule the following exceptions apply: ◾ in all segments, income from financial assets and liabilities carried at fair value through income (net) is treated as operating profit if the income refers to operating business; ◾ for life/Health insurance business and property-Casualty insurance products with premium refunds, all items listed above are included in operating profit if the profit sources are shared with policyholders. this is also applicable to tax benefits, which are shared with policyholders. ifrs requires that the consolidated income statements present all tax benefits in the income taxes line item, even though these belong to policyholders. in the segment reporting, the tax benefits are reclassified and shown within operating profit in order to properly reflect the policyholder participation in tax benefits.
operating profit should be viewed as complementary to, and not as a substitute for, income before income taxes or net income as determined in accordance with ifrs.
business segment information – Consolidated balance sheets property-Casualty life/Health Asset management Corporate and other Consolidation group € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn
Co ns ol id at ed fi na nc ia l s ta te m en ts business segment information – Consolidated balance sheets property-Casualty life/Health Asset management Corporate and other Consolidation group € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn
business segment information – total revenues and reconciliation of operating profit (loss) to net income (loss)
Claims and insurance benefits incurred (net) (27,920) (27,141) (26,320) (20,947) (18,955) (19,326) — — — — — — — — — (48,867) (46,096) (45,646) Change in reserves for insurance and investment contracts (net) 2 (272) (300) (355) (10,618) (13,329) (8,499) — — — — — — (103) (242) (906) (10,993) (13,871) (9,760)
Co ns ol id at ed fi na nc ia l s ta te m en ts business segment information – total revenues and reconciliation of operating profit (loss) to net income (loss)
Operating investment result operating income from financial assets and liabilities carried at fair value through income (net) 48 18 118 (866) 19 636 (11) 19 40 (11) (41) (106) (4) 4 38 (844) 19 726 operating realized gains/losses (net) 21 42 57 2,188 2,125 1,755 — — — — — — 11 2 (13) 2,220 2,169 1,799 interest expenses, excluding interest expenses from external debt (54) (92) (104) (108) (103) (127) (35) (30) (21) (811) (714) (838) 490 417 511 (518) (522) (579) operating impairments of investments (net) (46) (9) (75) (1,684) (434) (1,663) — — — — — — — 59 — (1,730) (384) (1,738)
Non-operating investment result non-operating income from financial assets and liabilities carried at fair value through income (net) (52) (64) (45) (24) (40) (22) — — — (426) 51 249 59 (4) (34) (443) (57) 148 non-operating realized gains/losses (net) 562 605 732 3 36 63 6 35 7 500 788 842 144 75 (27) 1,215 1,539 1,617 non-operating impairments of investments (net) (452) (191) (519) (291) (47) (76) (4) (1) (5) (1,005) (221) (394) (179) — — (1,931) (460) (994)
reportable segments – property-Casualty business german speaking Countries 1 europe incl. south America 2, 3 nAftA markets 3 global insurance lines & Anglo markets 2, 3, 4 growth markets 1, 2 Assistance Consolidation and other 4 property-Casualty € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn
Operating profit (loss) 710 843 964 1,680 1,136 926 (117) 278 355 1,478 1,844 1,453 224 106 267 94 97 95 Operating profit 127 — 4 4,196 4,304 4,064 loss ratio 6 in % 74.1 73.1 70.8 68.6 72.2 73.9 85.9 69.8 69.7 68.6 64.5 67.1 61.1 65.0 59.8 60.3 59.6 60.1 loss ratio 6 in % — 9 — 9 — 9 69.9 69.1 69.5 expense ratio 7 in % 26.9 26.5 27.0 26.1 26.3 26.3 28.7 32.3 29.8 27.6 27.6 27.5 35.3 36.0 33.8 35.9 36.0 35.4 expense ratio 7 in % — 9 — 9 — 9 27.9 28.1 27.9 Combined ratio 8 in % 101.0 99.6 97.8 94.7 98.5 100.2 114.6 102.1 99.5 96.2 92.1 94.6 96.4 101.0 93.6 96.2 95.6 95.5 Combined ratio 8 in % — 9 — 9 — 9 97.8 97.2 97.4 1 | in 2011, Allianz China general insurance Company ltd., a former branch of Allianz Versicherungs-Ag, was transferred from german speaking Countries to growth markets. prior year figures have not been adjusted. 2 | Corporate customer business in the netherlands and belgium as well as Allianz insurance (Hong Kong) ltd. and Allianz insurance Company of singapore pte. ltd. were transferred to AgCs in 2010 and 2011. prior year figures have not been adjusted. 3 | the reserve strengthening for asbestos risks in 2011 at Allianz s.p.A., at fireman’s fund insurance Company and at AgCs of in total € 153 mn had no impact on the financial results of the Allianz group and the single entities’ combined ratio under ifrs. 4 | Allianz risk transfer (Art) business shown within AgCs since 2011. prior year figures have been adjusted accordingly. 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. 6 | represents claims and insurance benefits incurred (net) divided by premiums earned (net).
german speaking Countries 1 europe incl. south America 2, 3 nAftA markets 3 global insurance lines & Anglo markets 2, 3, 4 growth markets 1, 2 Assistance Consolidation and other 4 property-Casualty € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn
Claims and insurance benefits incurred (net) (7,023) (6,838) (6,537) (8,092) (8,456) (8,566) (2,323) (1,955) (2,152) (8,156) (7,428) (6,859) (1,488) (1,570) (1,410) (957) (885) (785) Claims and insurance benefits incurred (net) 119 5 (9) (11) (27,920) (27,141) (26,320) Change in reserves for insurance and investment contracts (net) (229) (280) (312) (1) (1) (2) — — (1) (42) (18) (24) — (1) (15) — — (1)
Acquisition and administrative expenses (net) (2,546) (2,475) (2,497) (3,083) (3,083) (3,052) (777) (905) (920) (3,283) (3,174) (2,816) (858) (870) (797) (571) (536) (463) Acquisition and administrative expenses (net) 3 (1) 5 (11,115) (11,044) (10,540) fee and commission expenses (150) (125) (161) (28) (30) (50) — — — (521) (508) (450) (68) (75) (75) (367) (347) (328) fee and commission expenses 64 61 69 (1,070) (1,024) (995)
operating impairments of investments (net) (914) (274) (1,168) (763) (151) (427) 22 (8) (66) — — — (28) (1) (2) (1) — — (1,684) (434) (1,663)
Acquisition and administrative expenses (net) (1,524) (1,381) (1,759) (1,844) (1,854) (1,986) (525) (912) (959) (57) (58) (53) (1,075) (970) (834) (2) — — (5,027) (5,175) (5,591)
Margin on reserves 3 in basis points 57 68 52 70 78 97 50 67 91 126 102 127 28 104 80 — 4 — 4 — 4 58 73 74 1 | from 2011 on, the variable annuity business of Allianz global life is shown within germany, france and italy, respectively. prior year figures have not been adjusted. 2 | statutory premiums are gross premiums written from sales of life and health insurance policies, as well as gross receipts from sales of unit-linked and other investmentoriented products, in accordance with the statutory accounting practices applicable in the insurer’s home jurisdiction.
3 | represents operating profit divided by the average of the current and prior year net reserves, whereby net reserves equals reserves for loss and loss adjustment expenses, reserves for insurance and investment contracts and financial liabilities for unit-linked contracts less reinsurance assets.
Co ns ol id at ed fi na nc ia l s ta te m en ts reportable segments – life/Health business german speaking Countries 1 europe incl. south America 1 nAftA markets global insurance line & Anglo markets growth markets 1 Consolidation life/Health € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn € mn deposits from insurance and investment contracts (5,246) (5,095) (5,576) (12,365) (14,510) (13,416) (7,091) (7,456) (5,788) — — — (3,550) (5,312) (3,429) — — — (28,252) (32,373) (28,209)
operating income from financial assets and liabilities carried at fair value through income (net) 172 148 5 (128) 65 355 (855) (216) 216 (36) (35) 11 (10) 68 46 (9) (11) 3 (866) 19 636 operating realized gains/losses (net) 1,464 1,331 1,104 544 597 613 89 156 13 — — — 91 41 25 — — — 2,188 2,125 1,755
1 | represents fee and commission income less fee and commission expenses. 2 | represents interest and similar income less interest expenses. 3 | represents operating expenses divided by operating revenues.
Co ns ol id at ed fi na nc ia l s ta te m en ts reportable segments – Corporate and other business
Cost-income ratio 1 for the reportable segment Banking in % 90.7 101.4 122.5
Available-for-sale investments 333,880 318,315 Held-to-maturity investments 4,220 3,987 funds held by others under reinsurance contracts assumed 1,123 1,117 investments in associates and joint ventures 2,758 2,527 real estate held for investment 8,664 8,672 7 Cash and cash equivalents As of december 31, 2011 2010 € mn € mn
Balances with banks payable on demand 7,498 5,813 Balances with central banks 389 279 Cash on hand 263 169 treasury bills, discounted treasury notes, similar treasury securities, bills of exchange and checks 2,342 2,486
Financial assets designated at fair value through income debt securities 3,375 4,430 equity securities 2,622 3,312
◼ d e B t A n d e q u i t y s e C u r i t i e s i n C l u d e d i n f i n A n C i A l A s s e t s H e l d f o r t r A d i n g debt and equity securities included in financial assets held for trading are primarily marketable and listed securities. As of december 31, 2011, the debt securities include € 74 mn (2010: € 173 mn) from public sector issuers and € 164 mn (2010: € 373 mn) from other issuers.
Amortized Cost unrealized gains unrealized losses fair value Amortized Cost unrealized gains unrealized losses fair value € mn € mn € mn € mn € mn € mn € mn € mn
less than 12 months greater than 12 months total fair value unrealized losses fair value unrealized losses fair value unrealized losses
government and government agency bonds 20,821 (1,728) 15,584 (2,403) 36,405 (4,131)
Debt securities government and agency mortgage-backed securities (residential and commercial) 761 (6) 1 — 762 (6) Corporate mortgage-backed securities (residential and commercial) 627 (33) 1,230 (141) 1,857 (174)
government and government agency bonds 39,520 (1,366) 3,762 (892) 43,282 (2,258)
total unrealized losses amounted to € 182 mn as of december 31, 2011. the unrealized loss positions mainly stem from issues in the security market 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 december 31, 2011.
Co ns ol id at ed fi na nc ia l s ta te m en ts n o t e 9
� e q u i t y s e C u r i t i e s
As of december 31, 2011, unrealized losses from equity securities amounted to € 181 mn. these unrealized losses concern equity securities that did not meet the criteria of the Allianz group’s impairment policy for equity securities as described in note 2. substantially all of the unrealized losses have been in a continuous loss position for less than 6 months.
Actual maturities may deviate from the contractually defined maturities, because certain security issuers have the right to call or repay certain obligations ahead of schedule, with or without redemption or early repayment penalties. investments that are not due at a single maturity date are, in general, not allocated over various maturity buckets, but are shown within their final contractual maturity dates.
Changes in the consolidated subsidiaries of the Allianz group 1 544 —
reclassifications into non-current assets and assets of disposal groups classified as held for sale (238) (46) — foreign currency translation adjustments 48 292 14 reversals of impairments 35 35 14 Carrying amount as of December 31, 8,664 8,672 7,514 Accumulated depreciation as of december 31, 2,719 2,958 2,899 Cost as of december 31, 11,383 11,630 10,413
10 loans and advances to banks and customers As of december 31, 2011 2010
◼ l o A n s A n d A d v A n C e s t o B A n k s A n d C u s t o m e r s B y C o n t r A C t u A l m A t u r i t y
◼ l o A n s A n d A d v A n C e s t o B A n k s A n d C u s t o m e r s B y g e o g r A p H i C r e g i o n
Public authorities 7,143 6,824 Private customers 17,413 17,514 o t H e r C o u n t r i e s Corporate Customers industry, wholesale and retail trade and service providers 6,023 5,854 financial institutions (excluding banks) and insurance companies 1,056 1,521
As of december 31, 2011, the overall volume of allowances for credit losses includes loan loss allowances deducted from loans and advances to banks and customers totaling € 197 mn (2010: € 146 mn; 2009: € 144 mn) and provisions for credit losses included in other liabilities totaling € 24 mn (2010: € 7 mn; 2009: € 8 mn).
Carrying amount as of January 1, 4,674 4,613 5,018 foreign currency translation adjustments 102 193 (82) Changes recorded in the consolidated income statements (4) (46) (11)
Co ns ol id at ed fi na nc ia l s ta te m en ts 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 credit risk, claims-paying and debt ratings, capital and surplus levels, and marketplace reputation of its reinsurers, are such that the Allianz group believes that its reinsurance credit risk is not significant, and historically has not experienced noteworthy difficulty in collecting from 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 december 31, 2011 and 2010. the Allianz group primarily maintains business relations with highly rated reinsurers.
Deferred acquisition costs property-Casualty 4,197 4,121 life/Health 14,579 14,459 Asset management 146 152
Present value of future profits 1,053 1,180 Deferred sales inducements 797 821
Carrying amount as of December 31, 4,197 4,121 3,789 l i f e / H e A l t H Carrying amount as of January 1, 14,459 14,452 16,214
Changes in the consolidated subsidiaries of the Allianz group — (10) — foreign currency translation adjustments 195 492 (42)
Cost as of january 1, 2,782 2,694 2,415 Accumulated amortization as of january 1, (1,602) (1,482) (1,180) Carrying amount as of January 1, 1,180 1,212 1,235 Changes in the consolidated subsidiaries of the Allianz group — — 230 foreign currency translation adjustments (10) 48 (2)
Carrying amount as of December 31, 1,053 1,180 1,212 Accumulated amortization as of december 31, 1,725 1,602 1,482 Cost as of december 31, 2,778 2,782 2,694 1 | during the year ended december 31, 2011, includes interest accrued on unamortized pvfp of € 63 mn (2010: € 65 mn; 2009: € 40 mn).
Accrued dividends, interest and rent 7,672 7,356 Prepaid expenses interest and rent 18 16 other prepaid expenses 286 334
As of december 31, 2011, other assets due within one year totaled € 27,746 mn (2010: € 27,448 mn), and those due in more than one year totaled € 6,600 mn (2010: € 6,553 mn).
Changes in the consolidated subsidiaries of the Allianz group (124) (97) 27 reclassifications out of/(into) non-current assets and assets of disposal groups classified as held for sale — (11) 4 foreign currency translation adjustments (5) 89 31 reversals of impairments 2 1 — Carrying amount as of December 31, 2,806 3,075 2,916 Accumulated depreciation as of december 31, 1,216 1,194 1,092 Cost as of december 31, 4,022 4,269 4,008
As of december 31, 2011, the fair value of real estate held for own use was € 4,128 mn (2010: € 4,363 mn). As of december 31, 2011, assets pledged as security and other restrictions on title were € 119 mn (2010: € 266 mn).
� s o f t w A r e € mn € mn € mn
Cost as of january 1, 4,162 3,828 3,400 Accumulated amortization as of january 1, (2,875) (2,531) (2,284) Carrying amount as of January 1, 1,287 1,297 1,116
Cost as of january 1, 3,297 3,311 3,102 Accumulated depreciation as of january 1, (2,562) (2,508) (2,279) Carrying amount as of January 1, 735 803 823
� f i x e d A s s e t s o f A l t e r n A t i v e i n v e s t m e n t s 1 € mn € mn € mn
14 non-current assets and assets and liabilities of disposal groups classified as held for sale As of december 31, 2011 2010 € mn € mn
Assets of disposal groups classified as held for sale llC Allianz life, moscow 4 — Allianz Bank polska s.A. — 247
Liabilities of disposal groups classified as held for sale Allianz Bank polska s.A. — 188 Total — 188
� l l C A l l i A n z l i f e , m o s C o w during the fourth quarter of 2011, the Allianz group decided to dispose of llC Allianz life, moscow. thus, the assets and liabilities related to the Allianz group’s 100 % ownership of llC Allianz life, moscow and allocated to the segment life/ Health, were reclassified as disposal group held for sale. As of december 31, 2011, cumulative losses recognized in other comprehensive income relating to the disposal group classified as held for sale amounted to € 1 mn. the sale is expected to occur during the first quarter of 2012. upon measurement of the disposal group at fair value less costs to sell, no impairment loss was recognized in the consolidated income statement for the year ended december 31, 2011.
segment non-current assets € mn € mn € mn residential properties of Allianz iArd s.A. and Allianz vie s.A. in paris propertyCasualty
15 intangible assets As of december 31, 2011 2010 € mn € mn
Intangible assets with finite useful lives long-term distribution agreements 2 941 585 Customer relationships 207 287 1 | includes primarily the brand name of selecta Ag, muntelier. 2 | Consists of the long-term distribution agreements with Commerzbank Ag of € 539 mn (2010: € 585 mn) and Banco popular s.A. of € 402 mn (2010: € — mn). 3 | includes primarily acquired business portfolios of € 34 mn (2010: € 20 mn), other distribution rights of € 22 mn (2010: € 24 mn), bancassurance agreements of € 12 mn (2010: € 14 mn) and research and development costs of € 9 mn (2010: € 67 mn).
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 reclassification affects the goodwill of selecta Ag, muntelier, as this subsidiary was reclassified out of disposal groups held for sale.
Also for the purpose of impairment testing, the capitalized long-term distribution agreement with Commerzbank Ag has been allocated to the Cgu german speaking Countries in the life/Health segment since the cash flows are economically generated in this Cgu.
As a result of the impairment test in 2011, the goodwill of the Cgu property-Casualty nAftA markets was impaired by € 93 mn, the goodwill of the Cgu life/Health Asia-pacific and middle east was impaired by € 149 mn, the goodwill of the Cgu Banking germany was impaired by € 95 mn and the intangible asset of the Cgu Banking germany was impaired by € 19 mn.
these impairments were driven by revised projections for earnings, new business volumes and in force portfolios in the context of depressed financial markets as well as the persisting low interest environment in Asia.
Cash generating units in the life/Health segment are: ◾ german speaking Countries, ◾ Health germany, ◾ europe, including france, the netherlands, Belgium, luxembourg, italy, spain, portugal, greece, turkey and Africa, ◾ Asia-pacific and middle east, ◾ nAftA markets.
Cash generating units in the Corporate and other segment are: ◾ Banking germany, ◾ Banking europe, ◾ selecta Ag.
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, whereas the valuation methods applied for the Cgu selecta Ag are based on industry-specific standards.
the discount rate is based on the capital asset pricing model and appropriate eternal growth rates. the assumptions, including the risk free interest rate, market risk premium, segment beta and leverage ratio, used to calculate the discount rates are in general consistent with the parameters used in the Allianz group’s planning and controlling process.
the discount rates and eternal growth rates for the Cgu are as follows: discount rate eternal growth rate Cash generating unit % %
for all Cgu excluding property-Casualty Asia-pacific and middle east as well as Central and eastern europe, capitalized earnings value sensitivities still exceeded their respective carrying values.
for all Cgu in the life/Health segment the goodwill impairment test is based on an Appraisal value method which is derived from the market Consistent embedded value and a multiple of the market value of new business.
the market Consistent embedded value is an industry specific valuation method to assess the fair value of the current in force portfolio and is in compliance with the general principles of the discounted earnings methods. the market Consistent embedded value approach applied is based on the Cfo forum principles and the Allianz group’s embedded value guidelines.
Co ns ol id at ed fi na nc ia l s ta te m en ts the carrying amounts of goodwill and brand names are allocated to the Allianz group’s Cgu as of december 31, 2011 and 2010 as follows: As of december 31, 2011 2010 goodwill Brand names goodwill Brand names Cash generating units € mn € mn € mn € mn p r o p e r t y - C A s u A l t y german speaking Countries 284 — 283 —
◼ B r A n d n A m e s 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.
the long-term distribution agreements with Commerzbank Ag have useful lives of 13.5 years and 15 years, which were determined by contractual agreements. they are amortized on a straight line basis over the remaining useful life of 12 years. the long-term distribution agreements with Banco popular s.A. have useful lives of 25 years, which were determined by contractual agreements. they are amortized on a straight line basis over the remaining useful lives of 25 years.
Financial liabilities held for trading derivative financial instruments 6,608 5,012 other trading liabilities 2 1
◼ l i A B i l i t i e s t o B A n k s A n d C u s t o m e r s B y t y p e o f C u s t o m e r A n d g e o g r A p h i C r e g i o n
As of december 31, 2011 2010 germany other countries total germany other countries total € mn € mn € mn € mn € mn € mn
◼ r e s e r v e s f o r l o s s A n d l o s s A d j u s t m e n t e x p e n s e s f o r t h e p r o p e r t y - C A s u A l t y s e g m e n t
� C h A n g e i n t h e r e s e r v e s f o r l o s s A n d l o s s A d j u s t m e n t e x p e n s e s f o r t h e p r o p e r t y - C A s u A l t y s e g m e n t gross Ceded net gross Ceded net gross Ceded net € mn € mn € mn € mn € mn € mn € mn € mn € mn
1 | includes effects of foreign currency trans lation adjustments for prior years claims of gross € 295 mn (2010: € 1,999 mn; 2009: € 607 mn) and of net € 247 mn (2010: € 1,707 mn; 2009: € 536 mn) and for current year claims of gross € 444 mn (2010: € 101 mn; 2009: € 73 mn) and of net € 345 mn (2010: € 63 mn; 2009: € 77 mn).
2 | in the first quarter of 2011, Allianz kazakhstan zAo and in the third quarter of 2011, Allianz takaful were classified as held for sale. see note 14 for further information.
prior years’ 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 december 31, 2011, the Allianz group recorded additional income of € 1,660 mn (2010: € 1,544 mn; 2009: € 1,067 mn) with respect of losses occurring in prior years. during the year ended december 31, 2011, these amounts as percentages of the net balance of the beginning of the year were 3.3 % (2010: 3.2 %; 2009: 2.2 % ).
the analysis of loss and lAe reserves by actuaries and management is conducted by line of business and separately for specific claim type topics like asbestos claims. the origin year of losses is taken into consideration by analyzing each line of business also by accident year. While this determines the estimates of reserves for loss and lAe by accident year as recorded in the consolidated balance sheet, 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.
the run-off triangle, also known as “loss triangle” is a tabular representation of loss-related data (such as payments, loss reserves, ultimate losses) in two, time-related dimensions. one of these is the calendar year, while the other is the accident year (year of loss occurrence). run-off triangles – as the basis for measuring loss reserves – make clear how the loss reserves change over the course of time due to payments made and new estimates of the expected ultimate loss at the respective balance sheet date.
the run-off triangles are not prepared on a currency-adjusted basis. this means all figures are translated from the respective local currency into the Allianz group currency (euro), consistently using the exchange rates applicable at the reporting date. this ensures that the reserves reconcile with reserves in the consolidated balance sheet reserves.
� d e v e l o p m e n t o f r e s e r v e s f o r l o s s A n d l o s s A d j u s t m e n t e x p e n s e s the following table summarizes the development of the Allianz group’s loss and lAe reserves over the past seven years. the table presents calendar year data, not accident year data.
the bottom section compares the latest re-estimated gross and net reserves, respectively, for loss and lAe to the gross and net reserves, respectively, as initially established, and indicates the cumulative development of the initially established reserves through december 31, 2011. 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 2005 reserves during 2011 is included in the cumulative surplus of the 2005 through 2010 columns.
Companies acquired or divested during the period shown in the table, can lead to distortions in the cumulative surplus. the table starts with the presentation of net and gross liabilities for unpaid claims and claims expenses as accounted, as of the respective date of the balance sheet. over time, these liabilities are re-estimated. in addition, these liabilities will change if, through either acquisition, sale of a company or reclassification, entire new portfolios of claim payments and reserves are added to or subtracted from the data. in addition, changes in currency exchange rates can lead to distortions in the cumulative surplus.
in 2011, net loss and lAe reserves increased by € 1,985 mn or 3.9 % to € 52,835 mn, resulting partially from the impact of currency fluctuations during 2011. reserve developments during 2011 are described in further detail in the succeeding section “Changes in reserves for loss and lAe during 2011”.
◼ C o m p o s i t i o n o f r e s e r v e s f o r l o s s A n d l A e B y l i n e s o f B u s i n e s s the time required to learn of and settle claims is an important consideration in establishing reserves. short-tail claims, such as motor property damage claims, are typically reported within a few days or weeks and are generally settled within two to three years. medium-tail claims such as personal and commercial motor liability claims generally take four to six years to settle, while long-tail claims, such as general liability, workers compensation, construction and professional liability claims take longer.
the following table breaks down the loss and lAe reserves of the Allianz group, in total and separately by iBnr and case reserves, gross of reinsurance, by lines of business for the years ending december 31, 2011, 2010 and 2009.
Construction Damage and Liability 2,096 2,020 1,945 1 | other comprises primarily package/multiple perils, legal protection, Aviation and travel insurance lines of business. 2 | Alba and phenix were sold to an external party during 2010. As a result, the historical data for this unit was removed from the 2009 reporting period. the reduction in the gross reserves associated with the sale was € 214 mn in 2009. furthermore a portfolio from the spanish subsidiary was transferred to AgCs and hence the history for 2009 has been restated. the total gross reserves transferred to AgCs was € 154 mn.
When reviewing the foregoing tables, caution should be used in comparing the split between case and iBnr reserves across line 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, in particular for bodily injury claims.
gross reserves as of gross development related to prior years net reserves as of net development related to prior years 1 | in % of gross reserves as of december 31, 2010. 2 | in % of net reserves as of december 31, 2010.
� m o t o r for motor, net loss and lAe reserves developed favorably during 2011 by € 795 mn, or 4.6 % of reserves at december 31, 2010. favorable development was seen for different effects across several operating entities. the following subsidiaries were the largest contributors: € 166 mn at the Allianz group’s spanish subsidiary. the reduction was driven by lower than expected claim severity for three reasons: an increase was anticipated to respond to a legislative change which did not become effective, extraordinarily low inflation and the price conditions with external providers, especially repair shops, lawyers and doctors, reached more favorable agreements.
€ 122 mn at the Allianz group’s Australian subsidiary for motor third-party liability, mainly driven by better than expected incurred cost experience but also lower than expected claims frequency in 2011.
€ 105 mn at Allianz suisse. the release in reserves is due to allowance for change in claims management practice, effect of portfolio cleaning as well as more favorable judicial decisions for Bodily injury claims.
€ 51 mn at the Allianz group’s united kingdom subsidiary, mainly arising from the Commercial motor Classes where fewer large claims emerged than were expected.
Co ns ol id at ed fi na nc ia l s ta te m en ts € 103 mn at the Allianz group’s italian subsidiary. the increase in reserves was mainly driven by an increase in the observed average claim size, leading to a more pessimistic view of future payments being adopted in the projection.
€ 45 mn in the general liability line at fireman’s fund insurance Company driven primarily by higher than expected frequency and severity for some environmental claims, partially offset by minor developments from regular claims.
€ 78 mn from the german branch property portfolio due to the release of iBnr on prior year reserves following continued better than expected experience.
◼ d i s C o u n t i n g o f r e s e r v e s f o r l o s s A n d l A e
As of december 31, 2011, 2010 and 2009, the Allianz group’s consolidated property-Casualty reserves included discounted reserves of € 2,182 mn, € 2,031 mn and € 1,860 mn, respectively.
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. 2 | Additional reserves were included in 2011 for the first time and the historical figures were adjusted accordingly.
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).
in establishing liabilities for A&e claims, management considers facts currently known and the current state of the law and coverage litigation. however, given the expansion of coverage and liability by the courts and the legislatures in the past and the possibilities of similar interpretation in the future, there is significant uncertainty regarding the extent of remediation and insurer liability. As a result, the range of reasonable potential outcomes for A&e liabilities provided in these analyses is particularly large. given this inherent uncertainty in estimating A&e liabilities, significant deviation from the currently carried A&e reserve position is possible.
While the u.s. A&e claims still represent a majority of the total A&e claims reported to the Allianz group, the insurance industry is facing an increased prominence in exposures to A&e claims on a global basis. the Allianz group continues to monitor these A&e exposures. Allianz reviewed the A&e exposures in 2011. As a result, reserves developed favourably by € 130 mn for asbestos reserves outside of the united states, partially offset by an adverse development of environmental claims in the united states. the overall favorable development of € 24 mn or 0.7 % of the reserves as at december 31, 2010, supports the prior level of reserves for A&e claims.
Co ns ol id at ed fi na nc ia l s ta te m en ts 20 reserves for insurance and investment contracts As of december 31, 2011 2010 € mn € mn
Aggregate policy reserves 338,318 324,189 reserves for premium refunds 22,868 24,802 other insurance reserves 768 802
◼ A g g r e g A t e p o l i C y r e s e r v e s
the following table summarizes the gross and net loss and lAe reserves for A&e claims.
As percentage of the Allianz group’s property-Casualty gross reserves 5.3 % 5.7 % 5.6 %
Total asbestos and environmental: Loss and LAE reserves as of January 1, 3,272 3,099 3,140 – loss and lAe payments (124) (195) (166) + Change in loss and lAe reserves (24) 368 125 Loss and LAE reserves as of December 31, 3,124 3,272 3,099
1 | the transfers mainly relate to insurance contracts when policyholders change their contract from a unit-linked to a universal life-type contract.
As of december 31, 2011, participating life business represented approximately 57 % (2010: 59 %) of the Allianz group’s gross insurance in force. during the year ended december 31, 2011, participating policies represented approximately 64 % (2010: 64 %) of gross statutory premiums written and 63 % (2010: 63 %) of life premiums earned. As of december 31, 2011, reserves for conventional participating policies were approximately 48 % (2010: 49 %) of the Allianz group’s consolidated aggregate policy reserves.
Amounts already allocated under local statutory or contractual regulations foreign currency translation adjustments 5 35 4 Changes in the consolidated subsidiaries of the Allianz group (2) (20) —
furthermore, all of the Allianz group’s annuity policies issued in the united states meet the criteria for classification as insurance contracts under ifrs 4, because they include options for contract holders to elect a life-contingent annuity. these contracts currently do not expose the Allianz group to significant longevity risk, nor are they expected to do so in the future, as the projected and observed annuitization rates are very low. Additionally, many of the Allianz group’s traditional contracts issued in france and italy do not incorporate significant insurance risk, although they are accounted for as insurance contracts because of their discretionary participation features. similarly, a significant portion of the Allianz group’s unit-linked contracts in france and italy do not incorporate significant insurance risk.
As a result of the considerable diversity in types of contracts issued, including the offsetting effects of mortality risk and longevity risk inherent in a combined portfolio of life insurance and annuity products, 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.
in most of these markets, the effective interest rates earned on the investment portfolio exceed these guaranteed minimum interest rates. in addition, the operations in these markets may also have significant mortality and expense margins. As a result, as of december 31, 2011 and 2010, the Allianz group does not believe that it is exposed to a significant risk of premium deficiencies in its life/health segment. however, the Allianz group’s life/health operations in switzerland, Belgium, south korea and taiwan have high guaranteed minimum interest rates on older contracts in their portfolios and, as a result, may be sensitive to declines in investment rates or a prolonged low interest rate environment.
Provisions pensions and similar obligations 3,754 3,925 employee related 1,901 1,887 share-based compensation plans 792 1,099 restructuring plans 280 409 loan commitments 24 7 Contingent losses from non-insurance business 374 155 other provisions 1,430 1,564
Deposits retained for reinsurance ceded 1,760 2,320 Derivative financial instruments used for hedging that meet the criteria for hedge accounting and firm commitments 237 225 Financial liabilities for puttable equity instruments 2,881 3,111 Other liabilities 5,337 6,226
Certificated liabilities fixed rate — — — — — — — 3 Contractual interest rate — — — — — — — — floating rate — 25 — — — — 25 — Current interest rate — 2.58 % — — — — — —
Total all other subsidiaries — 25 — — — — 25 3 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.
24 participation certificates and subordinated liabilities Contractual maturity date As of
As of december € mn 1 € mn 1 € mn 1 € mn 1 € mn 1 € mn 1 € mn € mn
Current interest rate — — — — — 3.17 % — —
Total all other subsidiaries — — — — — 443 443 443 1 | except for interest rates. interest rates represent the weighted average.
Shareholders’ equity issued capital 1,166 1,164 Capital reserves 27,597 27,521 foreign currency translation adjustments (1,996) (2,339) unrealized gains and losses (net) 2 4,626 5,057
Non-controlling interests 2,338 2,071 1 | As of december 31, 2011, includes € (223) mn (2010: € (237) mn) related to treasury shares. 2 | As of december 31, 2011, includes € 191 mn (2010: € 196 mn) related to cash flow hedges.
◼ A u t h o r i z e d C A p i t A l
in addition, Allianz se had authorized capital (Authorized Capital 2010/ii) for the issuance of shares against cash until may 4, 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 december 31, 2011, the Authorized Capital 2010/ii amounted to € 11,416,000 (4,459,375 shares).
further, as of december 31, 2011, Allianz se had conditional capital totaling € 250,000,000 (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 general meeting on may 5, 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.
◼ C h A n g e s i n t h e n u m B e r o f i s s u e d s h A r e s o u t s t A n d i n g
Total number of issued shares 455,300,000 454,500,000 453,900,000 in november 2011, 800,000 (2010: 600,000) shares were issued at a price of € 65.21 (2010: € 83.34) per share, enabling employees of Allianz group subsidiaries in germany and abroad to purchase 651,613 (2010: 373,380) shares at prices ranging from € 45.65 (2010: € 58.34) to € 54.34 (2010: € 69.58) per share. the remaining 148,387 (2010: 226,620) shares continue to be recognized as treasury shares for further subscriptions by employees in the context of the employee stock purchase plan in 2012. As a result, issued capital increased by € 2 mn and capital reserves by € 50 mn. the shareholders ’ subscription rights to these new shares were excluded with the consent of the supervisory Board pursuant to the authorization granted by the general meeting on may 5, 2010.
All shares issued during the years ending december 31, 2011, 2010 and 2009 are qualifying shares from the beginning of the year of issue.
◼ t r e A s u r y s h A r e s
◼ n o n - C o n t r o l l i n g i n t e r e s t s
on january 1, 2005, the financial Conglomerates directive, a supplementary european union (e.u.) directive, became effective in germany. under this directive, a financial conglomerate is defined as any financial parent holding company that, together with its subsidiaries, has significant cross-border and cross-sector activities. the Allianz group is a financial conglomerate within the scope of the directive and the related german laws. the directive requires that the financial conglomerate calculates the capital needed to meet the respective solvency requirement on a consolidated basis.
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. the minimum capital requirements are based on various criteria including, but not limited to, volume of premiums written or claims paid, amount of insurance reserves, investment risks, mortality risks, credit risks, underwriting risks and off-balance sheet risks.
1 | off-balance sheet reserves are accepted by the authorities as eligible capital only upon request; Allianz se has not submitted an application so far. the solvency ratio excluding off-balance sheet reserves would be 170 % (2010: 164 %).
Premiums earned 27 interest and similar income € mn € mn € mn interest from held-to-maturity investments 188 177 171 dividends from available-for-sale investments 1,145 1,001 873 interest from available-for-sale investments 12,553 11,699 10,618 share of earnings from investments in associates and joint ventures 201 183 80 rent from real estate held for investment 754 699 693 interest from loans to banks and customers 5,477 5,507 5,617
group € mn € mn € mn € mn € mn € mn income (expenses) from financial assets and liabilities held for trading (net) (99) (731) (5) (427) 56 (1,206) income (expenses) from financial assets and liabilities designated at fair value through income (net) 59 (169) (40) (3) (1) (154) income (expenses) from financial liabilities for puttable equity instruments (net) 11 85 39 — — 135 foreign currency gains and losses (net) 25 (75) (5) (7) — (62)
income (expenses) from financial assets and liabilities held for trading (net) (114) (1,040) 1 76 3 (1,074) income (expenses) from financial assets and liabilities designated at fair value through income (net) 107 867 27 2 (1) 1,002 income (expenses) from financial liabilities for puttable equity instruments (net) (21) (286) (12) — — (319) foreign currency gains and losses (net) (18) 438 3 (68) (2) 353 income (expenses) from financial assets and liabilities held for trading (net) (23) (584) 5 293 4 (305) income (expenses) from financial assets and liabilities designated at fair value through income (net) 158 1,499 106 19 — 1,782 income (expenses) from financial liabilities for puttable equity instruments (net) (31) (400) (71) (4) — (506) foreign currency gains and losses (net) (31) 99 — (165) — (97)
foreign currency gains and losses are reported within income from financial assets and liabilities carried at fair value through income (net). these foreign currency gains and losses arise subsequent to initial recognition on all assets and liabilities denominated in a foreign currency, that are monetary items. this excludes exchange differences arising on financial assets and liabilities measured at fair value through profit or loss, which do not have to be disclosed separately. the Allianz group uses freestanding derivatives to hedge against foreign currency fluctuations, for which it recognized expenses of € (251) mn (2010: € (267) mn; 2009: income of € 89 mn) for the year ended december 31, 2011.
€ mn € mn € mn r e A l i z e d g A i n s Available-for-sale investments
Investments in associates and joint ventures 1 120 237 26 Real estate held for investment 285 277 206 Loans and advances to banks and customers 215 135 150 Non-current assets and assets and liabilities of disposal groups classified as held for sale 104 — —
r e A l i z e d l o s s e s Available-for-sale investments
Investments in associates and joint ventures 2 (29) (21) (8) Real estate held for investment (8) (3) (12) Loans and advances to banks and customers (29) (82) (102) Non-current assets and assets and liabilities of disposal groups classified as held for sale (18) — —
group € mn € mn € mn € mn € mn € mn € mn € mn € mn p r o p e r t y - C A s u A l t y fees from credit and assistance business 673 (4) 669 661 (4) 657 663 — 663 investment advisory — — — — — — — — —
C o r p o r A t e A n d o t H e r investment advisory and banking activities 549 (250) 299 563 (252) 311 512 (200) 312 31 other income € mn € mn € mn
Income sales and service revenues 1,552 1,684 1,812 other operating revenues 65 15 96
general and administrative expenses (627) (573) (704) other operating expenses (81) (112) (159)
Net Claims and insurance benefits paid (26,545) (20,699) — (47,244) Change in loss and loss adjustment expenses (1,375) (248) — (1,623)
Co ns ol id at ed fi na nc ia l s ta te m en ts 34 Change in reserves for insurance and investment contracts (net) property-Casualty life/Health Consolidation group € mn € mn € mn € mn
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)
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 18 20 35 37 impairments of investments (net)
€ mn € mn € mn i m p A i r m e n t s Available-for-sale investments
As of december 31, 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.
operating profit (81) non-operating result (573) Total net impairments (654) income taxes 140 Impact on net income (514)
group € mn € mn € mn € mn € mn € mn € mn € mn € mn p r o p e r t y - C A s u A l t y Acquisition costs
Commissions and profit received on reinsurance business ceded 490 (4) 486 509 (3) 506 555 (4) 551
Amortization of deferred acquisition costs (2,302) — (2,302) (2,450) 1 (2,449) (2,582) — (2,582)
A s s e t m A n A g e m e n t
Net income (loss) from discontinued operations attributable to: non-controlling interests — — — shareholders — — (395)
the net loss from discontinued operations, net of income taxes, for the year ended december 31, 2009, relates to the transfer of ownership of dresdner bank to Commerzbank Ag, which was completed on January 12, 2009. Accordingly, assets and liabilities of dresdner bank which were classified as held for sale as of december 31, 2008, were deconsolidated in the first quarter of 2009. the loss from derecognition of discontinued operations of € 395 mn in 2009 represents mainly the reclassification of components of other comprehensive income to net income.
in 2009, decisions of the european Court of Justice (steko case) and the german federal tax Court (bfH) ruled that impairments recognized in 2001 on certain investments should be considered tax deductible. these court decisions led in 2009 to a tax benefit for the group of € 283 mn and for the policyholders of € 730 mn. the tax benefit from these court decisions consisted of current and deferred taxes in respect of 2009 and prior years.
the recognized income taxes for the year ended december 31, 2011, are € 644 mn above (2010: € 135 mn below; 2009: € 1,007 mn below) the expected income taxes. the following table shows the reconciliation from the expected income taxes of the Allianz group to the effectively recognized taxes. the Allianz group’s reconciliation is a summary of the individual company-related reconciliations, which are based on the respective country-specific tax rates after taking into consideration consolidation effects with impact 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 % (2010: 31.0 %; 2009: 31.0 %).
Expected income taxes 1,398 2,099 1,547 trade tax and similar taxes 201 176 150 net tax exempt income (40) (571) (599) effects of tax losses 178 279 (59)
Deferred tax assets financial assets carried at fair value through income 103 84 deferred acquisition costs 1,449 958 other assets 923 845 intangible assets 136 137 tax losses carried forward 2,834 2,748 insurance reserves 3,824 3,763 pensions and similar obligations 171 225 other liabilities 810 842 Total deferred tax assets 13,847 12,471 non-recognition or valuation allowance for deferred tax assets on tax losses carried forward (753) (763) effect of netting (10,773) (9,045) Net deferred tax assets 2,321 2,663 Deferred tax liabilities financial assets carried at fair value through income 78 100 deferred acquisition costs 4,428 4,114 other assets 620 448 intangible assets 368 336 insurance reserves 2,375 2,468 pensions and similar obligations 218 228 other liabilities 633 702 Total deferred tax liabilities 14,654 13,021 effect of netting (10,773) (9,045) Net deferred tax liabilities 3,881 3,976 Net deferred tax assets/(liabilities) (1,560) (1,313)
taxable temporary differences associated with investments in Allianz group companies, for which no deferred tax liabilities are recognized because the Allianz group is able to control the timing of their reversal and they will not reverse in the foreseeable future, amount to € 596 (2010: € 521 mn). deductible temporary differences arising from investments in Allianz group companies, for which no deferred tax assets are recognized because it is not probable that they reverse in the foreseeable future amount to € 102 (2010: € 208 mn).
tax losses carried forward are scheduled according to their expiry periods as follows: € mn >10 years 210 unlimited 10,518 Total 11,551
examples of derivatives include contracts for future delivery in the form of futures or forwards, options on shares or indices, interest rate options such as caps and floors, and swaps relating to both interest rate and non-interest rate markets. the latter include agreements to exchange previously defined assets or payment series.
insurance subsidiaries in the allianz Group use derivatives to manage the risk exposures in their investment portfolios based on general thresholds and targets. the most important purpose of these instruments is hedging against adverse market movements for selected securities or for parts of a portfolio. Specifically, the allianz Group selectively uses derivative financial instruments such as swaps, options and forwards to hedge against changes in prices or interest rates in its investment portfolio.
market and counterparty risks arising from the use of derivative financial instruments are subject to control procedures. 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.
at the local level, allianz subsidiaries are obliged to assess whether the criteria for hedge accounting are met, in particular whether the hedge relationships are highly effective in offsetting changes in fair values or cash flows between the hedging instrument and the hedged item. Furthermore, the allianz subsidiaries have to prepare the required hedge documentation. at inception of all hedge relationships, the conclusions reached by the allianz subsidiaries must be approved at Group level to ensure that all hedge requirements are fulfilled and the hedge documentation is complete.
the allianz Group uses fair value hedges to hedge its equity portfolio against equity market risk. the financial instruments used in the related fair value hedges had a positive fair value of € 334 mn (2010: positive fair value of € 302 mn) as of december 31, 2011.
additionally, the allianz Group uses fair value hedges to protect against the change in the fair value of financial assets due to movements in interest rates or exchange rates. the derivative financial instruments used for the related fair value hedges of the allianz Group had a total negative fair value as of december 31, 2011 of € 139 mn (2010: negative fair value of € 92 mn).
� C a S h F l o W h e d G e S
as of december 31, 2011, the allianz Group hedges part of its u.S. dollar and australian dollar net investments through the issuance of u.S. dollar and australian dollar denominated liabilities with a nominal amount of uSd 700 mn and aud 200 mn.
◼ F a i r v a l u e S a N d C a r r y i N G a m o u N t S o F F i N a N C i a l i N S t r u m e N t S
the following table compares the carrying amount with the fair value of the allianz Group’s financial assets and financial liabilities.
F i N a N C i a l a S S e t S Cash and cash equivalents 10,492 10,492 8,747 8,747 Financial assets held for trading 2,469 2,469 2,101 2,101 Financial assets designated at fair value through income 5,997 5,997 7,742 7,742 available-for-sale investments 333,880 333,880 318,315 318,315 held-to-maturity investments 4,220 4,422 3,987 4,211 loans and advances to banks and customers 124,738 134,059 122,678 127,351 Financial assets for unit-linked contracts 63,500 63,500 64,847 64,847 derivative financial instruments and firm commitments included in other assets 430 430 452 452
F i N a N C i a l l i a B i l i t i e S Financial liabilities held for trading 6,610 6,610 5,013 5,013 liabilities to banks and customers 22,155 23,030 21,155 21,445 investment contracts with policyholders 140,022 140,022 130,741 130,741 Financial liabilities for unit-linked contracts 63,500 63,500 64,847 64,847 derivative financial instruments and firm commitments included in other liabilities 237 237 225 225 Financial liabilities for puttable equity instruments 2,881 2,881 3,111 3,111 Certificated liabilities, participation certificates and subordinated liabilities 18,822 18,299 17,227 17,534 1 | include receivables and obligations of deferred compensation plans outsourced to a trust.
the fair value of a financial instrument is defined as the amount for which a financial asset could be exchanged, or a financial liability settled, between knowledgeable, willing parties in an arm’s length transaction.
� h e l d - t o - m a t u r i t y i N v e S t m e N t S : the fair value of held-to-maturity investments is determined using the quoted market price as of the balance sheet date.
iFrS 7 requires that financial instruments carried at fair value in the consolidated balance sheets are classified into a three-level hierarchy (“the fair value hierarchy”) depending on the valuation techniques used and whether the inputs to those valuation techniques are observable in the market.
� l e v e l 2 Financial instruments for which the fair value is determined by using valuation-techniques, with any significant input being based on observable market data (observable inputs), are classified into this category.
� l e v e l 3 Financial instruments for which the fair value is determined by using valuation-techniques, with at least one significant input not being based on observable market data (non-observable inputs) are classified into this category.
the following tables present the fair value hierarchy for financial instruments carried at fair value in the consolidated balance sheets as of december 31, 2011 and 2010.
as of december 31, 2011 level 1 quoted prices in active markets level 2 valuation technique – market observable inputs level 3 valuation technique – non-market observable inputs total fair value € mn € mn € mn € mn
Financial assets for unit-linked contracts 61,082 2,235 183 63,500 Derivative financial instruments and firm commitments included in other assets — 430 — 430 Assets held in trust 241 — 25 266
F i N a N C i a l l i a B i l i t i e S Financial liabilities held for trading other trading liabilities — 2 — 2
2 | For the purpose of matching the disclosures made in note 9, the allianz Group‘s unlisted equity securities and investments in limited partnerships of € 418 mn, which are measured at cost less impairment charges because the fair value cannot be reliably measured, are included.
Government and agency mortgage-backed securities (residential and commercial) 1 5,271 — 5,272 Corporate mortgage-backed securities (residential and commercial) 24 10,251 199 10,474 other asset-backed securities 91 3,386 176 3,653 Government and government agency bonds 108,951 16,842 19 125,812
Certain government and government agency bonds were transfered from level 2 to level 1 during the year ended december 31, 2011 because of changes in the assessment of the liquidity of these bonds.
� l e v e l 3 p o r t F o l i o S
the fair value of certain financial instruments is determined using valuation techniques with non-market observable input parameters (level 3).
Financial liabilities held for trading include € 4.6 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. Sensitivities of the fair value to changes in inputs 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 € 267 mn, whereas assumption changes made to decrease future projected benefits would decrease the fair value by € 284 mn.
the following table shows a reconciliation of the financial instruments carried at fair value and classified as level 3: Carrying value (fair value)
Net losses (gains) recognized in other comprehensive income impairments Foreign currency transla tion adjustments
Total financial liabilities at fair value 4,842 933 109 (681) 10 (28) — 169 (3) 5,351 27 1 | excludes universal life-type contracts.
during the year ended december 31, 2011, 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.
◼ r e C l a S S i F i C a t i o N o F F i N a N C i a l a S S e t S
in January 2009, certain uSd-denominated Cdos with a fair value of € 1.1 bn (notional amount of € 2.2 bn) were retained from dresdner Bank. on January 31, 2009, subsequent to the derecognition of dresdner Bank, the Cdos were reclassified from financial assets held for trading to loans and advances to banks and customers in accordance with iaS 39. the fair value of € 1.1 bn became the new carrying amount of the Cdos at the reclassification date. the expected recoverable cash flows as of the date of reclassification were € 1.8 bn, leading to an effective interest rate of approximately 7 %.
during mid-2009, the Cdos were transferred to one of the allianz Group’s uSd functional currency subsidiaries. as of december 31, 2010, the carrying amount and fair value of the Cdos was € 808 mn and € 810 mn, respectively. as of december 31, 2011, the carrying amount and fair value of the Cdos was € 431 mn and € 428 mn, respectively. For 2011, the changes in carrying amount and fair value were primarily impacted by the liquidation of the palmer Square 2 Cdo tranche, which resulted in direct ownership of the underlying collateral securities and a € 22 mn loss on disposal. the loss on disposal of the palmer Square 2 Cdo tranche was the difference between the carrying value of the palmer Square 2 Cdo and the fair value of the collateral securities received, which are classified as available for sale. as of december 31, 2011, the carrying amount of the collateral securities received was € 301 mn. the portfolio of the collateral securities received consists of residential mortgage-backed securities and Cdos.
the disclosure requirements of iFrS 7 with regard to liquidity risk are reflected in the risk report in the group management report. this risk report is an integral part of the audited consolidated financial statements.
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 december 31, 2011, the income tax obligations amounted to € 1,504 mn. the allianz Group expects to pay € 1,019 mn thereof within the twelve months after the balance sheet date. For the remaining amount of € 485 mn an estimate of the timing of cash outflows is not reasonably possible. the income tax obligations are not included in the table below.
Contractual cash flows as of december 31, 2011 due in 2012 due in 2013 - 2016 due after 2016 total € mn € mn € mn € mn
Financial liabilities Financial liabilities carried at fair value through income please refer to note 44 liabilities to banks and customers 1 15,320 3,858 2,977 22,155 derivative financial instruments and firm commitments included in other liabilites please refer to note 44 Financial liabilities for puttable equity instruments 2,881 — — 2,881 Certificated liabilities, participation certificates and subordinated liabilities 1
reserves for insurance and investment contracts of € 994,049 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. Furthermore, the amounts presented in the table above are undiscounted and therefore exceed the reserves for insurance and investment contracts presented in the consolidated balance sheet that reflect the time value of the money.
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 € 422,084 mn. For further information, see note 2 of 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.
46 related party transactions information on the remuneration of Board members and transactions with these persons can be found in the “remuneration report”, starting on page 37.
transactions between allianz Se and its subsidiaries that are to be deemed related parties have been eliminated in the consolidation and are not disclosed in the notes.
� l i t i G a t i o N
allianz Group companies are involved in legal, regulatory, and arbitration proceedings in Germany and a number of foreign jurisdictions, including the united States. Such proceedings arise in the ordinary course of businesses, including, amongst others, their activities as insurance, banking and asset management companies, employers, investors and taxpayers. it is not feasible to predict or determine the ultimate outcome of the pending or threatened proceedings. management does not believe that the outcome of these proceedings, including those discussed below, will have a material adverse effect on the financial position and the results of operations of the allianz Group, after consideration of any applicable reserves.
on may 24, 2002, pursuant to a statutory squeeze-out procedure, the general meeting of dresdner Bank aG resolved to transfer shares from its minority shareholders to allianz as principal shareholder in return for payment of a cash settlement amounting to € 51.50 per share. the amount of the cash settlement was established by allianz on the basis of an expert opinion, and its adequacy was confirmed by a court appointed auditor. Some of the former minority shareholders applied for a court review of the appropriate amount of the cash settlement in a mediation procedure (“Spruchverfahren”), which is pending with the district court (“landgericht”) of Frankfurt. the 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’s (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 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.
in accordance with § 5 (10) of the Statutes of the Joint Fund for Securing Customer deposits (“einlagensiche rungsfonds”), 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.
� l e a S i N G C o m m i t m e N t S
For the year ended december 31, 2011, rental expenses totaled € 268 mn (2010: € 239 mn; 2009: € 271 mn), net of sublease rental income received of € 10 mn.
in addition, as of december 31, 2011, the allianz Group has other commitments of € 121 mn (2010: € 252 mn) referring to maintenance, real estate development, sponsoring and purchase obligations.
according to the German deposit Guarantee and investor Compensation act (eaeG – “einlagensicherungs- und anlegerentschädigungsgesetz”) all credit institutions and investment companies licenced to do business in Germany must adhere to a statutory compensation scheme. allianz Global investors kapitalanlagegesellschaft mbh and allianz Global investors europe Gmbh are currently members of edW (“entschädigungseinrichtung der Wertpapierhandelsunternehmen ”, Berlin). the annual contribution is determined in consideration of each member’s scope of business. in addition, edW may levy special contributions from investment companies, if the funds available to edW are insufficient to satisfy all eligible claims. Special contributions are determined by reference to the preceding yearly contribution. For
a summary of guarantees issued by the allianz Group by maturity and related collateral-held is as follows: letters of credit and other financial guarantees market value guarantees indemnification contracts performance guarantees € mn € mn € mn € mn
� m a r k e t v a l u e G u a r a N t e e S
� p e r F o r m a N C e G u a r a N t e e S
performance guarantees are given by the allianz Group to ensure third-party entitlements if certain performance obligations of the guarantee recipient are not fulfilled.
Collaterals without right to resell or repledge loans and advances to banks and customers 2,672 2,278
Fi na nc ia l S ta te m en ts 48 Pensions and similar obligations retirement benefits in the Allianz Group are either in the form of defined benefit or defined contribution plans. employees, including agents in Germany, are granted such retirement benefits by the various legal entities of the Allianz Group. In Germany, these are primarily defined benefit plans in nature.
◼ D e F I N e D b e N e F I t P l A N S
Net amount recognized as of January 1, 3,553 3,543 Changes in the consolidated subsidiaries of the Allianz Group 1 (216) — Foreign currency translation adjustments (3) 2
Net amount recognized as of December 31, 3,369 3,553 thereof assets (385) (372) thereof liabilities 3,754 3,925 1 | For 2011, the amount consists of the defined benefit liability of the deconsolidated subsidiary manroland with an amount of € 197 mn.
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: € mn € mn
Actuarial (gains)/losses 177 835 Foreign currency translation adjustments 80 240 benefits paid (606) (593) Changes in the consolidated subsidiaries of the Allianz Group 1 (443) 64 Divestitures — (43) Settlements, curtailments, termination benefits 2 (17) Defined benefit obligation as of December 31, 2 15,619 15,320
the expense recognized in profit or loss related to defined benefit plans of the Allianz Group consists of the following components: € mn € mn € mn expected return on plan assets (456) (454) (440) Amortization of past service costs (3) 3 (8) Amortization of net actuarial (gains)/losses 84 124 (55) effect of asset ceiling (10) (48) 99 (Income)/expenses of plan curtailments or settlements 2 — (8) Expense recognized in the consolidated income statements 622 658 571
Actuarial (gains)/ losses from experience adjustments on: � A S S u M P t I o N S
A change in the medical cost trend rate by one percentage point would have an effect of € 1 mn on the defined benefit obligation and no material effect on the expense recognized in profit or loss.
� P l A N A S S e t S
During the year ending December 31, 2012, the Allianz Group expects to contribute € 280 mn to its defined benefit plans and to pay € 274 mn directly to participants of its defined benefit plans.
the Group equity Incentive Plans (GeI) of the Allianz Group support the orientation of senior management, in particular the board of Management, toward the long-term increase of the value of the Allianz Group. until 2010, the GeI include grants of stock appreciation rights (SAr) and restricted stock units (rSu). From the 2011 grant onwards, the Allianz equity Incentive Plan (AeI) replaces the GeI plans. With the AeI Plan only restricted stock units (rSu) are granted to the plan participants.
� S t o C k A P P r e C I A t I o N r I G h t S
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. until the 2008 grant, the SAr 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: ◾ 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
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.
upon the expiration date, any unexercised SAr will be exercised automatically if the above market conditions have been attained. the SAr are forfeited if the plan participant ceases to be employed by the Allianz Group or if the exercise conditions are not attained by the expiration date.
the following table provides the assumptions used in estimating the fair value of the SAr at grant date: risk-free interest rate % 2.7 2.6 expected dividend rate % 5.6 6.2 expected life (years) 7 7 the SAr are accounted for as cash settled plans by the Allianz Group. therefore, the Allianz Group accrues the fair value of the SAr as a compensation expense over the vesting period. upon vesting, any changes in the fair value of the unexercised SAr are recognized as a compensation expense. During the year ended December 31, 2011, the Allianz Group recognized compensation income related to the unexercised SAr of € 10 mn (2010: expenses of € 5 mn; 2009: expenses of € 12 mn).
As of December 31, 2011, the Allianz Group recorded a provision of € 25 mn (2010: € 48 mn) in other liabilities for the unexercised SAr.
the rSu are virtual stocks without dividend payments. the fair value is calculated by subtracting the net present value of expected future dividend payments until maturity of the rSu from the prevailing share price as of the valuation date.
the following table provides the assumptions used in calculating the fair value of the rSu at grant date: Average interest rate 1.4 2.1 Average dividend yield 5.5 7.1 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 vesting period. During the year ended December 31, 2011, the Allianz Group recognized a compensation expense related to the non-vested rSu of € 29 mn (2010: € 58 mn; 2009: € 72 mn).
◼ A l l I A N z e q u I t y I N C e N t I v e P l A N
Since the 2011 grant year, the Allianz equity Incentive Plan (AeI) replaces the GeI plans. the AeI is granted in the form of restricted stock units (rSu) and is part of a new variable compensation component for the plan beneficiaries.
the rSu granted to a plan participant obligate the Allianz Group to pay in cash the average closing price of an Allianz Se share on the last day of the vesting period and the prior nine trading days or to convert one rSu to one Allianz Se share. the payout is capped at a 200 % share price growth above the grant price.
the rSu are subject to a vesting period of four years and will be released on the last day of the vesting period. the Allianz Group can choose the settlement method for each unit.
� P I M C o l l C C l A S S b u N I t P u r C h A S e P l A N
the total recognized compensation expense for Class b equity units that are outstanding is recorded as a liability in other liabilities. As of December 31, 2011, the Allianz Group recorded a liability for the Class b equity units of € 614 mn (2010: € 902 mn).
� P I M C o l l C C l A S S M - u N I t P l A N
the following table provides the assumptions used in calculating the fair value of the rSu at grant date: Average dividend yield % 5.3 4.8 Average interest rate % 1.2 2.0 expected volatility % 21.6 18.5 1 | the rSu 2012 are deemed to have been granted to participants as part of their 2011 remuneration. Consequently, the assumptions for rSu grants delivered in March 2012 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 December 31, 2011, the Allianz Group recognized a compensation expense related to the AeI plans of € 29 mn (2010: € 17 mn).
As of December 31, 2011, the Allianz Group recorded a provision of € 42 mn (2010: € 17 mn) for these rSu in other liabilities.
the fair value of the underlying M-options was measured using the black-Scholes option-pricing model. volatility was derived in part by considering the average historical and implied volatility of a selected group of peers. the expected life of one granted option was calculated based upon treating the three vesting tranches (one third in years 3, 4, and 5) as three separate awards.
the following table provides the assumptions used in calculating the fair value of the M-options at grant date: Weighted average fair value of options granted € 1,719.35 1,462.84 1,207.91 Assumptions: expected term (years) 3.84 3.83 3.85 risk free rate of return % 1.5 1.9 1.7
the aggregate intrinsic value of share options outstanding was € 202 mn and € 93 mn for the years ended December 31, 2011 and 2010, respectively.
� A l l I A N z F r A N C e S h A r e o P t I o N P l A N
Allianz France, formerly AGF, awarded options on its former holding (AGF S.A.) quoted shares to eligible AGF Group executives, managers of subsidiaries, as well as to some of the employees, whose performance justified grants.
During the year ended December 31, 2007, Allianz acquired all of the remaining AGF shares from non-controlling interests in the context of the tender offer and Squeeze-out. under the terms of an agreement (the ”liquidity Agreement ”) between Allianz Se, AGF and the beneficiaries of the AGF share option plans 2003-2006 (AGF employees), Allianz has the right to purchase all AGF shares issued through the exercise of these AGF share option plans after the put period (where the beneficiaries have the right to sell to Allianz). the price payable by Allianz per AGF share is a cash consideration equal to the Allianz 20-day-average share price prior to the date the right to buy or to sell is exercised, multiplied by a ratio representing the consideration proposed in the tender offer for each AGF share (€ 126.43) divided by the Allianz share price on January 16, 2007 (€ 155.72). this ratio is subject to adjustments in case of transactions impacting Allianz or AGF share capital or net equity. the cash settlement is based upon the initial offer proposed for each AGF share during the tender offer. As of December 31, 2007, all shares issued under these plans were fully vested and exercisable.
Due to the change in settlement arising from the liquidity Agreement, the Allianz Group accounts for the AGF share option plans as cash settled plans, as all AGF employees will receive cash for their AGF shares. therefore, the Allianz Group recognizes any change in the fair value of the unexercised plans as a compensation expense.
During the year ended December 31, 2011, the Allianz Group recognized total compensation income related to the modified share option plans of € 4 mn (2010: income of € 0.4 mn; 2009: expenses of € 3 mn). As of December 31, 2011, the Allianz Group recorded a provision for these plans of € 4 mn (2010: € 10 mn).
the former rAS Group awarded eligible members of senior management with share purchase options on rAS ordinary shares.
Granted — — — — — — exercised — — — — — —
the aggregate intrinsic value of share options outstanding was € 4 mn (2010: € 4 mn) for the year ended December 31, 2011.
◼ e M P l o y e e S t o C k P u r C h A S e P l A N S
the Allianz Group offers Allianz Se shares in 19 countries to qualified employees at favorable conditions. the shares have a minimum holding period of 1 to 5 years. During the year ended December 31, 2011, the number of shares sold to employees under these plans was 878,233 (2010: 623,412; 2009: 721,740). During the year ended December 31, 2011, the Allianz Group recognized a compensation expense, the difference between the market price (closing price of the Allianz Se stock in Xetra on September 7, 2011) and the discounted price of the shares purchased by employees, of € 12 mn (2010: € 10 mn; 2009: € 11 mn).
the Allianz Group has other local share-based compensation plans, including share option and employee share purchase plans, none of which, individually or in the aggregate, are material to the consolidated financial statements. During the year ended December 31, 2011, the total expense recorded for these plans was € 1 mn (2010: € 1 mn; 2009: € 2 mn).
As of December 31, 2011, the Allianz Group has provisions for restructuring resulting from a number of restructuring programs in various segments. these provisions for restructuring primarily include personnel costs, which result from severance payments for employee terminations, and contract termination costs, including those relating to the termination of lease contracts that will arise in connection with the implementation of the respective initiatives.
Group other total € mn € mn € mn € mn € mn € mn € mn
Additions to existing provisions 13 — 47 — — 42 102 release of provisions recognized in prior years — — — (5) — (12) (17) utilization of provisions via payments (7) — (44) — — (88) (139) utilization of provisions via transfers (13) — — (21) — (24) (58) Foreign currency translation adjustments — — — — — 2 2 release of provisions recognized in prior years — — — — (5) (5) (10) utilization of provisions via payments (5) (13) (27) — (11) (93) (149) utilization of provisions via transfers — — — (20) — (22) (42) Foreign currency translation adjustments — 3 — — — — 3 Changes in the consolidated subsidiaries of the Allianz Group — — (63) — — — (63)
In 2006, Allianz Deutschland AG announced a restructuring plan for the insurance business in Germany. With the exception of two insurance centers, the restructuring program ended on December 31, 2009. For the remaining two insurance centers, the restructuring measures will be completed by December 31, 2012, comprising a headcount reduction of approximately 50 employees. Further costs of the restructuring plan mainly relate to ongoing payments for onerous contracts until their expiration.
As of December 31, 2011, the Allianz Deutschland AG restructuring provision for this plan was € 44 mn (2010: € 48 mn). During the year ended December 31, 2011, the Allianz Deutschland AG recorded restructuring charges of € 2 mn (2010: € 15 mn).
In 2011, Fireman’s Fund, a u.S.-based property and casualty insurer, launched a restructuring plan which is expected to be completed by early 2013. the primary objective was to address declining premiums and a high expense ratio by aligning staff levels with a reduced volume of business, including changes that will enable the company to be more customer focused and effectively compete in its markets going forward.
� M A N r o l A N D A G ‘ S r e S t r u C t u r I N G P l A N
Fi na nc ia l S ta te m en ts been reorganized and centralized. the special sales department has been restructured in order to provide a better support to insurance agencies. the reduction of staff within this program mainly occurs by employee consent. From the original objective to reduce approximately 225 positions, approximately 14 positions remain as of December 31, 2011.
As of December 31, 2011, the Abv AG restructuring provision for the plan announced in 2009 was € 6 mn (2010: € 11 mn). During the year ended December 31, 2011, no (2010: € (5) mn) restructuring charges were recorded.
In 2010, the Abv AG announced a restructuring plan for the reorganization of the sales channel via part-time insurance agents in Germany that will be completed in 2014. the main objectives of the restructuring program are to increase quality and efficiency of the part-time insurance agents’ supervision and support, and to raise the attractiveness of this sales channel. the reduction of staff within this program is executed mainly by terminations in mutual consent with the employees. From the original objective of reducing approximately 454 district manager positions, approximately 240 positions remain as of December 31, 2011.
As of December 31, 2011, the euler hermes Group restructuring provision was € 46 mn (2010: € 57 mn). During the year ended December 31, 2011, euler hermes Group recorded restructuring charges of € 6 mn (2010: € 73 mn).
A summary of the changes in the provisions for other restructuring plans during the year ended December 31, 2011 is as follows: Provisions as of
Additions to existing provisions release of provisions recognized in prior years utilization of provisions via cash payments € mn € mn € mn € mn € mn € mn € mn
In 2011, Allianz life Japan decided to suspend new sales of its life insurance products, effective January 1, 2012, and restructure its business to focus on existing policies. this decision is primarily due to challenging local economic conditions such as low interest rates and a customer demand shift. the restructuring involves significant headcount reduction which will align staffing with business needs going forward.
Fi na nc ia l S ta te m en ts 51 earnings per share
◼ B A S I C e A r N I N g S p e r S h A r e
Basic earnings per share (in €) 5.63 11.20 9.33 from continuing operations 5.63 11.20 10.21 from discontinued operations — — (0.88)
Net income (loss) attributable to shareholders 2,545 5,053 4,207 effect of potentially dilutive common shares (61) (22) — Net income (loss) used to calculate diluted earnings per share 2,484 5,031 4,207 from continuing operations 2,484 5,031 4,602 from discontinued operations — — (395)
Weighted average number of common shares outstanding after assumed conversion 453,127,412 452,501,149 452,387,753
Diluted earnings per share (in €) 5.48 11.12 9.30 from continuing operations 5.48 11.12 10.17 from discontinued operations — — (0.87)
For the twelve months ended December 31, 2011, the weighted average number of common shares excludes 2,879,816 (2010: 2,725,114; 2009: 2,365,661) treasury shares.
� A u D I t - r e l A t e D F e e S
kpMg charged the Allianz group an aggregate of € 3.8 mn (2010: € 5.0 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.
kpMg fees for professional services, rendered for tax advice and tax compliance, amounted to € 1.8 mn (2010: € 1.9 mn) and resulted primarily from tax advice.
All services provided by kpMg to Allianz group companies must be approved by the Audit Committee of the Allianz Se Supervisory Board. Services other than audit services must be pre-approved by the Audit Committee. the Audit Committee pre-approval process is based on the use of a “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.
kpMg is the main auditing firm for the Allianz group and assigned in more than 75 % of all audit-related tasks. Auditing firms other than kpMg billed the Allianz group an aggregate of € 11.6 mn (2010: € 13.1 mn).
◼ r e M u N e r A t I o N F o r t h e B o A r D o F M A N A g e M e N t
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.
1 | According to his contract Dr. paul Achleitner receives a transition payment after leaving the Allianz Se Board of Management in the amount of € 1,027.5 thou. this amount is included in the total for 2011. 2 | the relevant share price to determine the final number of rSu granted is only available after sign-off by the auditors, thus numbers are based on a best estimate. 3 | the disclosure in the Annual report 2010 was based on a best estimate of the rSu grants. the figures shown here for 2010 now include the actual fair value as of the grant date (March 10, 2011). these values therefore differ from those disclosed last year.
the key terms of a voluntary greek sovereign bonds exchange offer were launched on February 21, 2012. If a sufficient percentage of investors relative to the aggregate nominal amount of outstanding greek sovereign bonds vote for the exchange offer, it could become mandatory for all bondholders. In this case, outstanding greek sovereign bonds will be exchanged for new low-interest greek sovereign bonds having a nominal amount equal to 31.5 % of the nominal amount of the exchanged bonds and short-term notes issued by the european Financial Stability Facility (eFSF) maturing within 24 months having a nominal amount equal to 15 % of the nominal amount of the debt exchanged. the greek sovereign bonds exchange is not expected to have a significant impact on the financial position and financial results of the Allianz group because greek government bonds have been written down to the current market value of 24.7 % of the nominal amount as of December 31, 2011.
◼ C o M p l e t I o N o F S A l e o F l l C A l l I A N z l I F e , M o S C o w
◼ A l l I A N z C o M p l e t e S A C q u I S I t I o N o F N o r w e g I A N g A S g r I D S t A k e on January 31, 2012 a consortium including the Allianz group completed the acquisition of a 24.1 % stake in the Norwegian gas grid gassled. the total value of the transaction was Nok 17.35 bn (€ 2.26 bn). the stake was acquired through Solveig gas Norway AS, a holding company, which is 40 % owned by Canada pension plan Investment Board, 30 % by the Allianz Investor Allianz Capital partners and 30 % by Infinity Investments SA, wholly owned by the Abu Dhabi Investment Authority.
◼ germAnY ConsolidAted AffiliAted entities ACp gmbH & Co. Beteiligungen Kg, munich 0.0 2
Atropos vermögensverwaltungsgesellschaft mbH, munich 100.0 Aug. prien immobilien pe verwaltung BrahmsQuartier gmbH, stuttgart 94.9
Az-Argos 55 vermögensverwaltungsgesellschaft mbH, 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 59 vermögensverwaltungsgesellschaft mbH, munich 100.0 Az-gAri vermögensverwaltungsgesellschaft mbH & Co. Kg, munich 100.0
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 10 dbi-fonds dAv, frankfurt am main 100.0 10 dbi-fonds We, frankfurt am main 100.0 10 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 forderungsmanagement gmbH, Hamburg 100.0 euler Hermes Kreditversicherungs-Aktiengesellschaft, Hamburg 100.0 euler Hermes rating gmbH, Hamburg 100.0 german real estate equity fund i, frankfurt am main 100.0 10 grundstücks-gesellschaft mbH, oldenburg 100.0
Jota-vermögensverwaltungsgesellschaft mbH, munich 100.0 mondial Kunden service, munich 100.0 münchener und magdeburger Agrarversicherung Aktiengesellschaft, munich 77.0 münsterländische Bank thie & Co. Kg, münster 100.0 my finance Coach stiftung gmbH, münchen, munich 100.0 objekt Burchardplatz gmbH & Co. Kg, stuttgart 100.0 olB-Beteiligungsgesellschaft mbH, oldenburg 98.8 olB-service gmbH, oldenburg 100.0 oldenburgische landesbank Aktiengesellschaft, oldenburg 89.6 pimCo deutschland gmbH, munich 100.0 reC frankfurt zweite objektverwaltungsgesellschaft mbH, Hamburg 60.0 rehacare gmbH, munich 74.9 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 sitiA Beteiligungs- und verwaltungs-gmbH, Cologne 100.0 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
Az-Argos 56 vermögensverwaltungsgesellschaft mbH, stuttgart 100.0 Beg Weser-ems Baugrund- und erschliessungsgesellschaft mbH & Co. oHg, oldenburg 50.0 2
Capiton iv Conflex Co-investment gmbH & Co.Kg, Berlin 25.0 3 fondsdepot Bank gmbH, Hof 49.0 mühl product & service und thüringer Baustoffhandel Beteiligungs- und verwaltungs gmbH, Kranichfeld 25.0 printCity gmbH, Augsburg 25.0 printCity gmbH & Co. Kg, Augsburg 27.9 reisegArAnt, Hamburg 24.0 scandferries Holding gmbH, Hamburg 47.7 umspannwerk putlitz gmbH & Co., putlitz 25.4 otHer pArtiCipAtions BetWeen 5 And 20 % of voting rigHts eXtremus versiCHerungs-Ag, Cologne 16.0
Heidelberger druckmaschinen Ag, Heidelberg 13.2 marschollek, lautenschläger u. partner Ag, Wiesloch 8.9 sana Kliniken Ag, munich 13.8
◼ foreign enterprises ConsolidAted AffiliAted entities AB servicios selecta espana s.l., madrid 100.0
Allianz france s.A., paris 100.0 Allianz general insurance Company (malaysia) Berhad p.l.c., Kuala lumpur 100.0
Allianz generalni sluzby s.r.o., prague 100.0 Allianz gestion sociedad gestora de instituciones de inversion Colectiva s.A., madrid 100.0
4 | releasing impact according to § 264 (3) HgB through the Allianz group’s consolidated financial statements.
Allianz south America Holding B.v., Amsterdam 100.0 AlliAnz speCiAl fiC de fi multimerCAdo CrÉdito privAdo, sao paulo 100.0 10
1 | percentage includes equity participations held by dependent enterprises in full, even if the Allianz group’s share in the dependent enterprise is under 100 %.
Az vers us private reit gp llC, new York, nY 100.0
Cepe de mont gimont, versailles 100.0 Challenging financial Careers insurance marketing Corp., llC, Huntington Beach, CA 100.0
Creditras vita s.p.A., milan 50.0 2 darta saving life Assurance ltd., dublin 100.0 deeside investments inc., Wilmington, de 100.0 delaware valley financial services llC, Berwyn, pA 100.0 delta technical services ltd., london 100.0 dresdner Kleinwort Capital Jersey ltd., st. Helier 100.0 dresdner rCm global investors (Jersey) ltd., Jersey 100.0 ef solutions llC, Wilmington, de 100.0 eH siAC information, rome 100.0 eH sigorta Anonim sirketi, istanbul 100.0 emerald global inv., paris 99.8 3 energie eolienne lusanger, orleans 100.0 euler do Brasil seguros exportacao, sao paulo 100.0 euler gestion, paris 100.0 10 euler Hermes ACi Holding, inc., new York, nY 100.0 euler Hermes ACi inc., Baltimore, md 100.0 euler Hermes ACi services llp, Baltimore, md 100.0 euler Hermes ACmAr services, Casablanca 100.0 euler Hermes ArgentinA, Buenos Aires 100.0 euler Hermes Canada services, montreal 100.0 euler Hermes Cescob service s.r.o., prague 100.0 euler Hermes Cescob uverová pojistovna a.s., prague 100.0 euler Hermes Chile servicios limitada, santiago de Chile 100.0 euler Hermes Collections sp. z o.o., Warsaw 100.0 euler Hermes Collections uK limited, london 100.0 euler Hermes Colombia, Bogota d.C. 100.0 euler Hermes Credit insurance Agency (s) pte. ltd., singapore 100.0 euler Hermes Credit insurance Belgium s.A., Brussels 100.0 euler Hermes Credit insurance nordic A.B., stockholm 100.0 euler Hermes Credit management services ireland ltd., Ballygowan 100.0 euler Hermes Credit services (Jp) ltd., tokyo 100.0 euler Hermes Credit underwriters Hong Kong ltd., Hong Kong 100.0 euler Hermes Crédito Compañía de seguros y reaseguros s.A., madrid 100.0 euler Hermes emporiKi s.A., Athens 60.0 euler Hermes emporiKi services ltd., Athens 100.0 euler Hermes Holdings uK plc, london 100.0 euler Hermes information Consulting (shanghai) Co. ltd., shanghai 100.0 euler Hermes Kreditverzekering n.v., Hertogenbosch 100.0 euler Hermes magyar Hitelbiztosító rt., Budapest 100.0 euler Hermes magyar Követeleskezelö Kft., Budapest 100.0 euler Hermes management services uK ltd., london 100.0 euler Hermes management uK limited, london 100.0 euler Hermes netherlands, Hertogenbosch 100.0 euler Hermes ré, s.A., senningerberg 100.0 euler Hermes reAl estAte opCi, paris 100.0 euler Hermes reinsurance Ag, zurich 100.0 euler Hermes risk services uK limited, london 100.0 euler Hermes risK YÖnetimi, istanbul 100.0 euler Hermes s.A., paris 70.4 euler Hermes seguros de Crédito s.A., sao paulo 100.0 euler Hermes seguros de Crédito s.A., santiago de Chile 100.0 euler Hermes seguros de Crédito s.A., mexico City 100.0 euler Hermes service AB, stockholm 100.0 euler Hermes services Ag, zurich 100.0 euler Hermes services B.v., Hertogenbosch 100.0 euler Hermes services Baltic uAB, vilnius 100.0 euler Hermes services Belgium s.A., Brussels 100.0 euler Hermes services india privat limited, mumbai 100.0 euler Hermes services s.A.s., paris 100.0 euler Hermes services sp. z o.o., Warsaw 100.0 euler Hermes servicii financiare s.r.l., Bucharest 100.0 euler Hermes servicios de Crédito s.l., madrid 100.0 euler Hermes servicios s.A., mexico City 100.0 euler Hermes servicos ltda, sao paulo 100.0 euler Hermes servis s.r.o., Bratislava 100.0 euler Hermes sfAC Crédit s.A.s., paris 100.0 euler Hermes sfAC recouvrement s.A.s., paris 100.0 euler Hermes sfAC s.A., paris 100.0 euler Hermes siAC s.p.A., rome 100.0 euler Hermes trade Credit limited, Auckland 100.0 euler Hermes trade Credit underwriting Agents, pty. ltd., sydney 100.0 euler Hermes uK plc, london 100.0 euler Hermes umA, louisville 100.0 euler Hermes World Agency sAsu, paris 100.0 euler Hermes, mierzejewska-Kancelaria prawna sp.k, Warsaw 100.0 euler sfAC Asset management, paris 100.0 euler tech, sAs, nanterre 100.0 eurl 20/22 le peletier, paris 100.0 euro garantie Ag, Bubikon 100.0 euro gestion, paris 100.0 10 europensiones s.A. - entidad gestora de fondos de pensiones, madrid 100.0 eurosol invest s.r.l., Buttrio 100.0 eurovida s.A. Compañía de seguros y reaseguros, madrid 100.0 eXpositio usluge d.o.o., zagreb 100.0 fAi Allianz ltd., sydney 100.0 fCpr fregate, paris 58.3 3 fenix directo Compania de seguros y reaseguros s.A., madrid 100.0 ferme eolienne de villemur-sur-tan, toulouse 100.0 ferme eolienne des Jaladeaux, toulouse 100.0 ffiC County mutual insurance Company, Corp., dallas, tX 100.0 fiduciaria Colseguros s.A., Bogota d.C. 100.0 finAnCiere AldeBArAn sAs, paris 100.0 finAnCiere CAllisto sAs, paris 100.0 finAnCiere sirius sAs, paris 100.0 finAnCiere soHo sAs, paris 100.0 fireman's fund financial services, llC, dallas, tX 100.0 fireman's fund indemnity Corporation, liberty Corner, nJ 100.0 fireman's fund insurance Company of Bermuda, Hamilton 100.0 fireman's fund insurance Company of Hawaii inc., Honolulu, Hi 100.0 fireman's fund insurance Company of louisiana, Corp., Harahan, lA 100.0 fireman's fund insurance Company of ohio, Corp., Cincinnati, oH 100.0 fireman's fund insurance Company, Corp., novato, CA 100.0 florAlis, paris 99.5 3 frAgonArd AssurAnCe, sACs, paris 100.0 gaipare Action, paris 98.8 3 gameplan financial marketing llC, Woodstock, gA 100.0 gAp reactif Canton A, paris 64.9 3 generation vie, la défense 52.5 genialloyd s.p.A., milan 100.0 gestion produits dyn, puteaux 60.7 3 gestion produits str, puteaux 79.8 3 gie Az investment management, paris 100.0 gie euler Hermes sfAC services, paris 100.0 global transport & Automotive insurance solutions pty limited, sydney 53.5 gts - gestion de teleseCurite et de serviCes s.A., Chatillon 100.0
Hunter premium funding ltd., sydney 100.0 idr Actions euros, paris 89.8 3 immovalor gestion s.A., paris 100.0 insurance and reinsurance Ag energy, sofia 50.9 insurance Company "progress garant", moscow 100.0 insurance Joint stock Company "Allianz", Aoot/oAo, moscow 100.0 intermediass s.r.l., milan 100.0 international film guarantors llC, santa monica, CA 100.0
international film guarantors ltd., london 100.0 interstate fire & Casualty Company, Chicago, il 100.0 investitori sgr s.p.a., milan 100.0 iteB B.v., rotterdam 100.0
Wm. H mcgee & Co. of puerto rico inc., san Juan 100.0
Allianz financial services s.A., Athens 100.0 Allianz global Corporate & specialty Ag escritorio de representacao no Brasil ltda., sao paulo 100.0
Cogar, paris 100.0 dealis fund operations s.A., luxembourg 95.0 first rate direct limited, Belfast 100.0 gesellschaft für vorsorgeberatung, Ag, Bern 100.0 gosman & Kraan B.v., Amsterdam 100.0 guangzhou printcom printing supplies Co. ltd., guangzhou 100.0 gWs printing service B.v., schijndel 100.0 gWs printing systems Holding B.v., schijndel 100.0 iCC evaluation, paris 100.0
Compania de seguro de Creditos s.A., lisbon 50.0 dorcasia ltd., sydney 50.0 euro nederland, Amsterdam 50.0 international shopping Centre investment s.A., luxembourg 50.0 market street trust, sydney 50.0 millea mondial Co ltd., tokyo 50.0 one Beacon Joint venture lp, Wilmington, de 50.0 previndustria - fiduciaria previdenza imprenditori s.p.A., milan 50.0 sC Holding, paris 50.0 toptorony ingatlanhasznosító zártköruen muködo részvénytársaság, Kft., Budapest 50.0 ute gesecopri servecarve, madrid 50.0
Broker on-line de productores de seguros s.A., Buenos Aires 30.0 Brunei national insurance Company Berhad ltd., Bandar seri Begawan 25.0
oddo europe, paris 44.3 3 oddo fr ind ACt A, paris 37.2 3 oddo generation C, paris 27.4 3 oddo gestion prudente, paris 31.2 3 oddo indice Japon, paris 34.7 3 oddo opportunites B, paris 78.4 3 oddo rendement 2015, paris 29.1 3 oddo us mid CAp, paris 40.1 3 oddo usA index Actif, paris 31.2 3 oddo valeurs rende, paris 53.7 3,6 oeKB eH Beteiligungss- und management Ag, vienna 49.0 pAr Holdings limited, Hamilton 20.6 perfeCtis i ltd., paris 27.3 3 pgref v 1301 siXtH Holding lp, Wilmington, de 24.5 pgress debt Holdings lp, Wilmington, de 20.0 pHrv (paris Hotels roissy vaugirard), paris 30.6 povolzhskiy leasing Center, moscow 20.0 red mountain Capital partners i l.p., los Angeles, CA 24.9 3 roskurort, moscow 50.0 scandferries Chartering A/s, Copenhagen 35.0 sdu finco B.v., Amsterdam 49.7 select multi. ger. Croissance, paris 46.1 3 sK versicherung Ag, vienna 25.8 societe de distributuin Automatique, tunis 49.0 sogesector energie, la défense 25.4 3 solveig gas Holdco As, oslo 30.0 sunderland ins. services inc., fargo, nd 40.0 tHe emerging Commo, paris 42.8 3 unim, paris 30.0 veroniA sHelf s.r.o., prague 49.0
XAnge Capital, s.à r.l., paris 21.0 3 otHer pArtiCipAtions BetWeen 5 And 20 % of voting rigHts Al nisr Al Arabi, Amman 18.0
Hartford financial services group inc, Hartford, Ct 5.2 zagrebacka Banka dd, zagreb 11.7
in our opinion, based on the findings of our audit, the consolidated financial statements comply with iFrSs, as adopted by the eu, the additional requirements of German commercial law pursuant to § 315 a abs. 1 hGb and supplementary provisions of the articles of incorporation and give a true and fair view of the net assets, financial position and results of operations of the Group in accordance with these requirements. the group management report is consistent with the consolidated financial statements and as a whole provides a suitable view of the Group’s position and suitably presents the opportunities and risks of future development.
Johannes pastor dr. Frank pfaffenzeller Wirtschaftsprüfer Wirtschaftsprüfer (independent auditor) (independent auditor)
D r . K u r t B o C K Chairman of the Board of management, BASF Se
D r . r ü D i g e r g r u B e Chairman of the Board of management, Deutsche Bahn Ag h e r B e r t h A i n e r Chairman of the Board of management, adidas Ag honorary professor, university of mannheim
D r . J ü r g e n h e r A e u S Chairman of the Supervisory Board, heraeus holding gmbh
Chief executive officer, SmS holding gmbh m A n F r e D W e n n e m e r Chairman of the Supervisory Board , hochtief Ag
A l F o n S o C o r t i n A D e A l C o C e r Vice Chairman, rothschild europe B.V. Senior Advisor, texas pacific group p e t e r C o S t e l l o managing Director, BKK partners Director, Australian Future Fund
D r . J ü r g e n h A m B r e C h t Chairman of the Board of executive Directors, BASF Se
F r e D h u Founder and Chairman, primavera Capital group
A n g e l r o n Chairman and Ceo, Banco popular
V. mandates of the members of the Supervisory Board 1 chairman Former chairman of the Board of management, Allianz Ag membership in other statutory supervisory boards and Se administrative boards in germany e.on Ag
J e A n - J A c q u e S c e t t e Secretary of the group Works council, Allianz France S.A. membership in comparable 1 supervisory bodies membership in group bodies Allianz France S.A.
Finance membership in other statutory supervisory boards and Se administrative boards in germany Bayer Ag Daimler Ag rWe Ag membership in group bodies Allianz Asset management Ag (formerly: Allianz global investors Ag) Allianz investment management Se (chairman)
m A n u e l B A u e r insurance growth markets membership in comparable 1 supervisory bodies Bajaj Allianz general insurance company limited Bajaj Allianz life insurance company limited zagrebacka Banka membership in group bodies Allianz hungária Biztosító zrt. (chairman) Allianz-Slovenská poist’ovna a.s. (chairman) Allianz tiriac Asigurari S.A. (chairman) oJSc ic Allianz (chairman) tu Allianz polska S.A. (chairman) tu Allianz Życie polska S.A. (chairman)
membership in comparable 1 supervisory bodies membership in group bodies Allianz Australia limited Allianz holdings plc (chairman) Allianz insurance plc (chairman) Allianz irish life holdings plc Allianz uK ltd (chairman) euler hermes S.A. (chairman)
Asset management (Worldwide) membership in other statutory supervisory boards and Se administrative boards in germany Deutsche Börse Ag membership in comparable 1 supervisory bodies membership in group bodies Allianz France S.A. Allianz S.p.A.
V. mandates of the members of the Board of management 1 1 | We regard memberships in other supervisory bodies as “comparable” if the company is listed on a stock exchange or has more than 500 employees.
1 | We regard memberships in other supervisory bodies as “comparable” if the company is listed on a stock exchange or has more than 500 employees.
membership in comparable 1 supervisory bodies membership in group bodies Allianz global Assistance SAS (chairman)
V. glossary the accounting terms explained here are intended to help the reader understand this annual report. Most of these terms concern the balance sheet or the income statement. terminology relating to particular segments has not been included.
subsidiaries are enterprises where the parent company can exercise a significant influence over their corporate strategy in accordance with the control concept. this is possible, for example, where the parent company holds, directly or indirectly, a majority of the voting rights, has the power to appoint or remove a majority of the members of the board of Management or equivalent governing body, or where there are contractual rights of control.
a t a M o r t I z e d c o s t ◾ under this accounting principle the difference between the acquisition cost and redemption value (of an investment) is added to or subtracted from the original cost figure over the period from acquisition to maturity and credited or charged to income over the same period.
c F o F o r u M ◾ the european Insurance cFo Forum is a high-level discussion group formed and attended by the chief Financial officers of major european listed insurance companies. Its aim is to influence the development of financial reporting, value based reporting, and related regulatory developments for insurance enterprises on behalf of its members, who represent a significant part of the european insurance industry.
(net) and claims and insurance benefits incurred (net) divided by premiums earned (net).
c o r r I d o r a p p r o a c h ◾ with defined benefit plans, differences come about between the actuarial gains and losses which, when the corridor approach is applied, are not immediately recognized as income or expenses as they occur. only when the cumulative actuarial gains or losses fall outside the corridor is recognition made from the following year onwards. the corridor is 10 % of the present value of the pension rights accrued or of the market value of the pension fund assets, if this is higher.
c o s t - I n c o M e r a t I o ◾ represents operating expenses divided by operating revenues.
d e F e r r e d t a x a s s e t s / l I a b I l I t I e s ◾ the calculation of deferred tax is based on tax loss carry forwards, tax credit carry forwards and temporary differences between the carrying amounts of assets or liabilities in the published balance sheet and their tax base, and on differences arising from applying uniform valuation policies for consolidation purposes. the tax rates used for the calculation are the local rates applicable in the countries of the enterprises included in the consolidation; changes to tax rates already adopted on the balance sheet date are taken into account.
d e F I n e d b e n e F I t p l a n s ◾ For defined benefit plans, the participant 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. to determine the expense over the period, accounting regulations require that actuarial calculations are carried out according to a fixed set of rules.