All references to chapters, pages, notes, internet pages, etc. within this report are also linked.
C _ Group Management Report Pages 35 – 78 36 Business Operations 39 Business Environment 41 Executive Summary of 2017 Results 43 Property-Casualty Insurance Operations 45 Life/Health Insurance Operations 48 Asset Management 50 Corporate and Other 55 Balance Sheet Review 57 Liquidity and Funding Resources 62 Risk and Opportunity Report 77 Controls over Financial Reporting
D _ Consolidated Financial Statements Pages 79 – 150 80 Consolidated Balance Sheets 81 Consolidated Income Statements 82 Consolidated Statements of Comprehensive Income 83 Consolidated Statements of Changes in Equity 84 Consolidated Statements of Cash Flows
The consolidated financial statements are presented in millions of Euros (€ mn) unless otherwise stated. Due to rounding, numbers presented may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.
The year 2017 looks to be the most expensive year for insurers in terms of natural catastrophes. And yet, for Allianz investors there is no cause for alarm. Even in a year marked by numerous natural disasters, persistent low interest rates, and political uncertainties, we delivered an operating profit of € 11.1 bn and achieved € 6.8 bn in net income attributable to shareholders. Our robust balance sheet demonstrates our strength and resilience: Our Solvency II capitalization ratio was again strong, amounting to 229 % as of 31 December 2017.
These are some of the joint achievements we are proud to report for 2017: − Asset Management delivered outstanding results, with PIMCO performing strongly and AllianzGI prospering as well.
− We have made some important investment decisions, most recently the increase in our stake in our credit insurer Euler
Our strength is also noticed by the general public: According to Brand Finance, Allianz’s brand value is the highest of all globally operating insurers. The Allianz brand stands for quality and expertise, trust and reliability – all attributes that have lost none of their appeal in the digital age.
In addition, as a further step to increase your company’s capital efficiency, we have launched another share buy-back program for 2018 worth up to € 2 bn. The program also shows how confident we are that we will continue to grow our value even in uncertain times. Note, however, that we do not intend to make this a habit – rather, we are taking advantage of current business conditions. Looking at the entire year 2017, the total return on your investment in Allianz shares (share price plus dividend payment) was 27.3 % – compared to an average total return across all STOXX Europe 600 Insurance stocks of 11.7 % and across all DAX stocks of 12.5 %.
We are very much aware that we continue to have a lot of work ahead of us. In particular, we need to become more productive and we need to be quicker and more rigorous in tackling necessary changes, especially in the area of digitalization.
This will be one of the most urgent goals to pursue this year and over the next few years. It specifically concerns our property -casualty insurance, but not only. The key levers are to reduce complexity and to consistently simplify products, structures, and sales processes; we also need to increase agility, establish scalable platforms, and, of course, continue digitalizing everything we do.
With the support from our Supervisory Board, our wonderful employees, and a sharp strategic focus, your Allianz is moving in the right direction. We are well prepared to meet future challenges and continue weathering difficult market environments. Thank you for trusting us to keep creating value for you in the future.
During the financial year 2017, the Supervisory Board fulfilled all its duties and obligations as laid out in the company statutes and applicable law. It monitored the management of the company, devoted particular attention to succession matters related to the Board of Management, and advised the Board of Management regarding the conduct of business.
Key reporting issues were strategic topics, such as the implementation of the Renewal Agenda and the portfolio strategy, the risk strategy and capital management, as well as the strategy in the Asset Management business segment and the global health insurance. In addition, the Supervisory Board was extensively involved in the
Cyber risk security was discussed regularly. A Technology Committee was established to carry out in-depth reviews of IT issues, the digitalization of the business model, and new technologies. In addition, the Supervisory
Board dealt with the implementation of the new recommendations of the German Corporate Governance Code
(Code), the legislation regarding the implementation of the EU guideline on corporate social responsibility
(CSR), as well as the supervisory authority’s (BaFin’s) new requirements for self-assessments by the Supervisory
Board. In November 2017, a conference call was held regarding the Board of Management’s considerations for a potential further share buy-back program.
Supervisory and Management Boards also had regular discussions about major developments and decisions.
In the meeting of 9 March 2017, the Supervisory Board discussed the audited annual Allianz SE and consolidated financial statements as well as the recommendation for the appropriation of earnings by the Board of Man-
Repor t agement for the financial year 2016. The auditors confirmed that there were no discrepancies to their February report, and issued an unqualified auditor’s report for the individual and consolidated financial statements. In addition, the Board of Management submitted its report on risk developments in 2016 and the head of internal audit presented his annual review. Furthermore, the Supervisory Board dealt with the agenda and the proposals for resolution for the 2017 AGM of Allianz SE. It also resolved to appoint KPMG as auditor for the individual and consolidated financial statements for the financial year 2017 and for the auditor’s review of the 2017 half-yearly financial report. Given the legally required rotation of the auditors, the Supervisory Board approved the proposal of the Audit Committee to select PriceWaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft (PwC)
On 3 May 2017, just before the AGM, the Board of Management briefed us on the first quarter 2017 performance and on the Group’s current situation. In addition, the Board dealt with the results of the BaFin’s review of the system of governance at Allianz SE in November 2016.
Due to the elections to the Supervisory Board at the AGM 2017, a constituent meeting was held on 3 May 2017, immediately after the AGM. At this constituent meeting Dr. Perlet was initially elected as Chairman of the Supervisory Board for the brief period until 6 May 2017. Mr. Diekmann was elected to succeed him, effective 7 May 2017. This transitional arrangement was necessary due to the two-year waiting period applicable for Mr.
At the meeting on 3 August 2017, the Board of Management first reported extensively on the half-yearly results.
It additionally addressed the upcoming investment in the UK property insurance firm Liverpool Victoria, the sale of the Allianz holding in Oldenburgische Landesbank AG, and the impact of Banco Santander’s acquisition of
Banco Popular, a long-standing distribution and joint venture partner in Spain. The Board of Management then reported on the strategic dialog with the Group companies, particularly regarding the progress of the Renewal
Agenda. In addition, the Board of Management provided a status report on cyber risk security. The Supervisory
Agenda, as well as the strategy of Allianz SE (solo). In addition, the Supervisory Board dealt in detail with the global health insurance business. The review of the Board of Management’s report on the development of business also covered the effects of the recent natural catastrophes in the Caribbean and Mexico, the implementation of the European Data Protection Regulation in the Allianz Group, and the change of the Chairman of the
At the meeting on 14 December 2017, the Board of Management briefed us on the results of the third quarter, further business developments and the situation of the Allianz Group, capital adequacy, and the planned tender offer to the minority shareholders of Euler Hermes S.A. The Supervisory Board additionally dealt with the
We then covered the Code’s Declaration of Conformity and the annual report on the succession planning for the
Board of Management. The Supervisory Board reviewed the appropriateness of the remuneration of the Board of Management based on a vertical and horizontal comparison, and decided to increase the remuneration of the Chairman of the Board of Management in accordance with the identified need for adjustment. Finally, it set targets for the variable remuneration of the members of the Board of Management for 2018.
Report starting on page 12 and the Statement on Corporate Management pursuant to § 315d and § 289f of the HGB starting on page 17. The Allianz website also provides more details on corporate governance:
The Standing Committee conducted three meetings in 2017. It dealt primarily with issues of corporate governance, particularly the implementation of the Code’s new recommendations, the modification of the Rules of
The Audit Committee held five regular meetings and adopted two resolutions by written procedure in 2017. In the presence of the auditors, it discussed the annual financial statements of Allianz SE and the consolidated financial statements of the Allianz Group, the management reports and auditor’s reports, and the half-yearly financial report. The Audit Committee saw no reason to raise any objections. In addition, the Board of Management submitted its report on the results of the first and third quarter. The committee also dealt with the auditor’s engagement and established audit areas of focus for the 2017 financial year. It further discussed assignments to the auditors for non-audit services and approved an appropriate positive list for audit and nonaudit services authorized in advance. In addition, it dealt extensively with the compliance system, the internal audit system, and the financial reporting process as well as the respective internal controls. The committee was also updated on the procedures and programs for complaints concerning matters in accounting, internal controls, and auditing. The committee received regular reports on legal and compliance issues and on the work of the Internal Audit department. In addition, the Audit Committee dealt with the preparations for the auditor rotation starting from the financial year 2018, including the process of transitioning to the new auditing compa-
The Risk Committee held two meetings in 2017, during which it discussed the current risk situation of the Allianz
Allianz SE. It also dealt extensively with the interest rate sensitivity in the life insurance business, discussed possible measures to reduce it, and addressed the investment risk currently associated with equity investments and credit spreads. Other matters considered included the risk strategy of Allianz SE and the Allianz Group, the changes planned in 2017 to the internal Solvency II model, and the report on the own risk and solvency assessment (ORSA). In addition, the Risk Committee dealt with the designation of Allianz as a systemically relevant insurer (G-SII).
The Nomination Committee had no reason to convene a meeting in the financial year 2017.
CHAIR AND COMMITTEES OF THE SUPERVISORY BOARD – AS OF 31 DECEMBER 2017 Chairman: Michael Diekmann
Standing Committee: Michael Diekmann (Chairman), Gabriele Burkhardt-Berg, Herbert Hainer, Jürgen Lawrenz,
AUDIT OF ANNUAL ACCOUNTS AND CONSOLIDATED FINANCIAL STATEMENTS In compliance with the special legal provisions applying to insurance companies, the statutory auditor and the auditor for the review of the half-yearly financial report are appointed by the Supervisory Board of Allianz SE, not by the AGM. The Supervisory Board appointed KPMG as statutory auditor for the annual Allianz SE and consolidated financial statements, as well as for the review of the half-yearly financial report of the financial year 2017. KPMG audited the financial statements of Allianz SE and the Allianz Group as well as the respective management reports. They issued an auditor’s report without any reservations. The consolidated financial statements were prepared on the basis of the International Financial Reporting Standards (IFRS), as adopted in the European Union. KPMG performed a review of the half-yearly financial report. In addition, KPMG was also mandated to perform an audit of the market value balance sheet according to Solvency II as of 31 December 2017, for Allianz SE and the Allianz Group.
All Supervisory Board members received the documentation relating to the annual financial statements and the auditor’s reports from KPMG on schedule. The preliminary financial statements and KPMG’s preliminary audit results were discussed in the Audit Committee on 14 February 2018 as well as in the plenary session of the
Supervisory Board on 15 February 2018. The final financial statements and KPMG’s audit reports (dated 28
Particular focus was given to the key audit matters described in the auditor’s report and the audit procedures performed. No material weaknesses in the internal financial reporting control process were discovered. There were no circumstances that might give cause for concern about the auditor’s independence. In addition, the market value balance sheets for Allianz SE and the Allianz Group as of 31 December 2017, as well as the respective KPMG reports were addressed by the Audit Committee and Supervisory Board.
On the basis of our own reviews of the annual Allianz SE and consolidated financial statements, the management and group management reports, and the recommendation for appropriation of earnings, we raised no objections and agreed with the results of the KPMG audit. We approved the Allianz SE and consolidated financial statements prepared by the Board of Management. The financial statements are thus adopted. We agree with the Board of Management’s proposal on the appropriation of earnings.
LIMITED ASSURANCE ENGAGEMENT OF THE COMBINED SEPARATE NON-FINANCIAL REPORT The financial year 2017 was the first year for which the company was required to issue a separate non-financial report. This report was combined for Allianz SE and the Allianz Group. The Supervisory Board commissioned
PwC to perform a limited assurance engagement of this report. All Supervisory Board members received the combined separate non-financial report and the independent practitioner´s limited assurance report from PwC
in due time. The report and PwC’s assurance report were discussed in the plenary session of the Supervisory
The Annual General Meeting 2017 elected the new shareholder representatives. The Supervisory Board mandates of Prof. Dr. Renate Köcher, Dante Barban, and Dr. Wulf H. Bernotat ended with the conclusion of the Annual General Meeting on 3 May 2017. Dr. Helmut Perlet resigned from the Supervisory Board with effect from the end of 6 May 2017. The Supervisory Board thanked all retired members for their many years of support for the
Allianz Group as well as for the valuable and trusting collaboration in this board.
GABRIELE BURKHARDT-BERG Chairwoman of the Group Works Council of Allianz SE
Allianz Technology SE (formerly named Allianz Managed Operations & Services SE), Chairman
Good corporate governance is essential for sustainable business performance. The Board of Management and the Supervisory Board of Allianz SE thus attach great importance to complying with the recommendations of the German Corporate Governance Code (referred to hereinafter as the “Code”). The Declaration of Conformity with the recommendations of the Code, issued by the Board of Management and the Supervisory Board on 14 December 2017, and the company’s position regarding the Code’s suggestions can be found in the Statement on Corporate Management pursuant to § 315d and
Corporate Constitution of the European Company (SE) As a European Company, Allianz SE is subject to special European SE
The Board of Management of Allianz SE comprises nine members. It is responsible for setting business objectives and the strategic direction, for coordinating and supervising the operating entities, and for implementing and overseeing an efficient risk management system.
Notwithstanding this overall responsibility, the individual members head the departments they have been assigned independently.
There are divisional responsibilities for business segments as well as functional responsibilities. The latter include the Finance, Risk Management and Controlling Functions, Investments, Operations – including IT –, Human Resources, Legal, Compliance, Internal Audit, and Mergers & Acquisitions. Business division responsibilities focus on geographical regions or Global Lines, such as Asset Management.
GROUP FINANCE AND RISK COMMITTEE Dr. Dieter Wemmer (Chairman), Sergio Balbinot, Dr. Günther Thallinger, Dr. Axel Theis.
GROUP MERGERS AND ACQUISITIONS COMMITTEE Dr. Helga Jung (Chairwoman), Oliver Bäte, Dr. Dieter Wemmer.
Managing and overseeing Group M & A transactions, including approval of individual transactions within certain thresholds.
They are responsible for preparing decisions for the Board of Management of Allianz SE, submitting proposals for resolutions, and ensuring a smooth flow of information within the Group.
Designing, monitoring, and improving group-wide compensation systems in line with regulatory requirements and sub- mitting an annual report on the results of its monitoring, along with proposals for improvement.
GROUP INVESTMENT COMMITTEE Members of the Board of Management and executives below Allianz SE Board level
Board’s consideration when setting targets for the performancebased remuneration of the members of the Board of Management.
Supervisory Board for the appointment of the member of the Board of Management responsible for employment and social welfare.
The German Co-Determination Act (“Mitbestimmungsgesetz”) does not apply to Allianz SE because it has the legal form of a European Company (SE). Instead, the size and composition of the Supervisory Board is determined by general European SE regulations. These regulations are implemented in the Statutes and by the SE Agreement.
The Supervisory Board comprises twelve members, including six shareholder representatives appointed by the AGM. The six employee representatives are appointed by the SE works council. The specific procedure for their appointment is laid down in the SE Agreement. This agreement stipulates that the six employee representatives must be allocated in proportion to the number of
Ausführungsgesetz”), the Supervisory Board of Allianz SE shall be composed of at least 30 % women and at least 30 % men.
The Supervisory Board takes all decisions based on a simple majority. The special requirements for appointing members to the Board of Management, as stipulated in the German Co-Determination Act, and the requirement to have a Conciliation Committee do not apply to an SE. In the event of a tie, the casting vote lies with the Chairman of the Supervisory Board, who at Allianz SE must be a shareholder representative. If the Chairman is not present in the event of a tie, the casting vote lies with the vice chairperson from the shareholder side.
SUPERVISORY BOARD COMMITTEES Part of the Supervisory Board’s work is carried out by its committees.
– Monitoring of the audit procedures, including the independence of the auditor and the services additionally rendered, awarding of the audit contract and determining the focal points of the audit
– Monitoring of the general risk situation and special risk developments in the Allianz Group
Dr. Helmut Perlet (Chairman and member until 6 May 2017) 4/4 100
Jim Hagemann Snabe (Vice Chairman from 3 May 2017) 7/7 100
Michael Diekmann (Chairman and member from 7 May 2017) 3/3 100
Michael Diekmann (Chairman and member from 7 May 2017) 1/1 100
Dr. Helmut Perlet (Chairman and member until 3 May 2017) 1/1 100
The Nomination Committee did not convene any meetings in the 2017 financial year.
“The aim of Allianz SE’s Supervisory Board is to have members who are equipped with the necessary skills and competence to properly supervise and advise Allianz SE’s management. Supervisory Board candidates should possess the professional expertise and experience, integrity, motivation and commitment, independence and personality required to successfully carry out the responsibilities of a Supervisory Board member in a financial services institution with international operations.
These objectives take into account the regulatory requirements for the composition of the Supervisory Board as well as the relevant recommendations of the German Corporate Governance Code (“GCGC”). In addition to the requirements for each individual member, a profile of skills and expertise (“Kompetenzprofil”) as well as a diversity concept is provided for the entire Supervisory Board.
– Regarding employee representatives, the mere fact of employee representation and the existence of a working relationship with the company shall not in itself affect the independence of the employee representatives.
Applying such definition, at least eight members of the Supervisory Board shall be independent. In case shareholder representatives and employee representatives are viewed separately, at least four members respectively should be independent.
Each member of the Supervisory Board must ensure that they have sufficient time to dedicate to the proper fulfilment of the mandate of this Supervisory Board position.
In addition to the mandatory mandate limitations and the GCGC recommendation for active Management Board members of listed companies (max. three mandates) the common capital markets requirements shall be considered.
To promote an integrative cooperation among the Supervisory Board members, the Supervisory Board aims at an adequate diversity with respect to gender, internationality, different occupational backgrounds, professional expertise, and experience: – The Supervisory Board shall be composed of at least 30 % women and at least 30 % men. The representation of women is generally considered to be the joint responsibility of the shareholder and employee representatives.
Diekmann, Dr. Eichiner, Mr. Hainer and Mr. Snabe, are independent within the meaning of the objectives (see No. I.3.). With four female
and the German Federal Financial Supervisory Authority any transactions involving shares or debt securities of Allianz SE or financial derivatives or other instruments based on them, as soon as the value of the securities acquired or divested by the member amounts to five thousand
Management and Supervisory Board give an account of the preceding financial year. For special decisions, the German Stock Corporation Act provides for the convening of an extraordinary AGM.
Board, not by the AGM. The audit of the financial statements covers the individual financial statements of Allianz SE and also the consolidated financial statements of the Allianz Group.
Allianz Group’s website. Our website also provides a financial calendar listing the dates of major publications and events, such as annual reports, half-yearly financial reports and quarterly statements, AGMs as well as analyst conference calls and financial press conferences.
You can find the 2018 financial calendar on our website at www.allianz.com/financialcalendar.
§ 317 (2), sentence 6 of the HGB, this Statement and therefore is not included within the scope of the audit.
Declaration of Conformity with the German Corporate Governance Code On 14 December 2017, the Board of Management and the Supervisory Board issued the following Declaration of Conformity of
Governance Code (Code) in the version of February 7, 2017 and will comply with them in the future.
2. Since the last Declaration of Conformity as of December 15, 2016, Allianz SE has complied with all recommendations of the German Corporate Governance Code in the version of May 5, 2015
Declaration of Conformity in December 2017, which states that it complies with all of the recommendations of the Code in the version
Report starting on page 12. This information is also available on our website at www.allianz.com/corporate-governance.
Information in accordance with the German Act on Equal Participation of Women and Men in Executive Positions in the Private and the Public Sector Allianz SE and the other companies of the Allianz Group in Germany that are either listed or subject to co-determination (the “subsidiaries concerned”) have set the following targets for the Supervisory Board, the Board of Management, and the two management levels below the Board of Management. We will begin by describing the targets that had been set for 30 June 2017 and their implementation.
Article 17 (2) of the German SE Implementation Act stipulates that as of 1 January 2016, the share of women and men among the members of the Supervisory Board of Allianz SE must each total up to 30 % at least. The Supervisory Board currently in office fulfils this requirement as it includes four women (33 %). For the Board of Management of Allianz SE, the Supervisory Board had set a target of 11 %
had been set. As of 30 June 2017, this target was met for the second management level, with a percentage of women being 24 %, but not on the first level, where the percentage was 17 %. The first management level below the Board of Management comprises a very small comparative group of executives. No suitable female candidates could be identified for the very few positions that became vacant in the period considered.
Management of the subsidiaries concerned were between 11 % and 25 % (18 % on average) and were met by only five of the ten companies. For the two management levels below the Board of Management, the Boards of Management of the subsidiaries concerned had set a target quota of at least 20 %. At the first management level, the target was met by three of the ten subsidiaries, while six of the ten companies met the target set for the second management level as of 30 June 2017. Despite increased efforts to promote women in the
Allianz Group and also at the individual subsidiaries, it was not possible to achieve the targets in these cases, as it was not always possible to identify suitable female candidates for all vacant positions.
The following new targets were set for Allianz SE and the subsidiaries concerned in the 2017 financial year: For the Supervisory Board of Allianz SE, the statutory minimum share requirement applies. With respect to the Board of Management of Allianz SE, the Supervisory Board adopted a resolution in
August 2017 setting the target for the share of women at 30 %, to be achieved by 31 December 2021. As regards the proportion of women on the first and second management levels below the Board of
Management, the Board of Management of Allianz SE set the targets at 20 % and 25 %, respectively, for 31 December 2018.
The Supervisory Boards of the subsidiaries concerned set a target share of women on the Supervisory Board at a minimum of 30 %, to be reached by the end of 2018. Given the targets achieved to date, the target quotas were raised for the Management Boards of three of the subsidiaries concerned. For the other companies, the current target quotas of between 11 % and 25 % (20 % on average) were maintained and extended to 31 December 2018. The Boards of
Directive, the diversity concepts for the Board of Management and the Supervisory Board, their objectives, implementation, and results achieved are to be reported on for the first time for the 2017 financial year.
The Supervisory Board stipulated the following diversity concept for the Board of Management of Allianz SE in August 2017: “For the composition of the Management Board, the Supervisory
Board aims for an adequate “Diversity of Minds”. This comprises broad diversity with regard to gender, internationality as well as educational and professional background.
The Supervisory Board assesses the achievement of such target, inter alia, on the basis of the following specific indicators: − adequate proportion of women on the Management Board: at least 30 % until December 31st, 2021; − adequate share of members with an international background
It is ensured that lists of successors shall comprise an appropriate percentage of female candidates as well as candidates with international experience. The Personnel Committee takes this into consideration especially in succession planning. The current composition of the
Board have international backgrounds. There is an adequate degree of variety as regards educational and professional background.
HGB”) and § 176 (1) of the German Stock Company Act (“Aktiengesetz – AktG”).
Shares acquired by employees of the Allianz Group as part of the Employee Stock Purchase Plan are, in principle, subject to a oneyear lock-up period. Outside Germany, the lock-up period may be up to five years in some cases. In some countries, the employee shares are held by a bank, another natural person, or a legal entity acting as a trustee throughout that period in order to ensure that the lock-up period is observed. Nevertheless, employees may instruct the trustee to exercise voting rights, or have power of attorney granted to them to exercise such voting rights. Lock-up periods serve the Employee
INTERESTS IN THE SHARE CAPITAL EXCEEDING 10 % OF THE VOTING RIGHTS We are not aware of any direct or indirect interests in the share capital of Allianz SE that exceed 10 % of the voting rights.
LEGAL AND STATUTORY PROVISIONS APPLICABLE TO THE APPOINTMENT AND REMOVAL OF MEMBERS OF THE BOARD OF MANAGEMENT AND TO AMENDMENTS OF THE STATUTES The Supervisory Board appoints the members of Allianz SE’s Board of
Management for a maximum term of five years (Articles 9 (1), 39 (2)
and 46 of the SE Regulation, §§ 84, 85 AktG and § 5 (3) of the Statutes ). Reappointments, for a maximum of five years each, are permitted. A simple majority of the votes cast in the Supervisory Board is required to appoint members of the Board of Management. In the case of a tie vote, the Chairperson of the Supervisory Board, who pursuant to Article 42 of the SE Regulation must be a shareholder representative, shall have the casting vote (§ 8 (3) of the Statutes). If the Chairperson does not participate in the vote the Vice Chairperson shall have the casting vote, provided he or she is a shareholder representative. A Vice Chairperson who is an employee representative has no casting vote (§ 8 (3) of the Statutes). If one of the required members of the Board of Management is missing, the courts must appoint such member in urgent cases upon the application of an interested party (§ 85 AktG). The Supervisory Board may dismiss members of the
According to § 5 (1) of the Statutes, the Board of Management shall consist of at least two persons. The Supervisory Board determines the number of any additional members. The Supervisory Board has appointed a Chairman of the Board of Management pursuant to
Board of Management have the reliability and professional competence needed to manage an insurance company. A person cannot become a member of the Board of Management if he or she is already a manager of two other insurance undertakings, pension funds, insurance holding companies, or insurance special-purpose vehicles.
Statutes thereby make use of the option set out in § 51 of the SE
AUTHORIZATION OF THE BOARD OF MANAGEMENT TO ISSUE AND REPURCHASE SHARES The Board of Management is authorized to issue shares as well as to acquire and use treasury shares as follows: It may increase the company’s share capital, on or before 6 May 2019, with the approval of the Supervisory Board, by issuing new registered no-par value shares against contributions in cash and/or in kind, on one or more occasions: − Up to a total of € 550,000,000 (Authorized Capital 2014/I). In case of a capital increase against cash contribution, the Board of
subscription rights, for any legally admissible purposes, in particular those specified in the authorization. Furthermore, the acquisition of treasury shares under this authorization may also be carried out using derivatives such as put options, call options, forward purchases, or a combination thereof, provided such derivatives do not relate to more than 5 % of the share capital.
− Shareholder agreements and joint ventures to which Allianz SE is a party often contain change-of-control clauses that provide, as the case may be, for the termination of the agreement, or for put or call rights that one party can exercise with regard to the joint venture or the target company, if there is a change of control of the other party.
The company has entered into the following compensation agreements with members of the Board of Management and certain employees providing for the event of a takeover bid: A change-of-control clause in the service contracts of the members of Allianz SE’s Board of Management provides that, if within twelve months after the acquisition of more than 50 % of the company’s share capital by one shareholder or several shareholders acting in concert (change of control) the appointment as a member of the Board of Management is revoked unilaterally by the Supervisory Board, or if the mandate is ended by mutual agreement, or if the Management
Board member resigns because his or her responsibilities as a Board member are significantly reduced through no fault of the Board member, he or she shall receive his or her contractual remuneration for the remaining term of the service contract, but limited, for the purpose hereof, to three years, in the form of a one-off payment.
Allianz share in a preceding tender offer. By providing for the nonapplication of the vesting period in the event of a change of control, the terms take into account the fact that the conditions influencing the share price are very different when there is a change of control.
GOVERNANCE SYSTEM The remuneration of the Board of Management is decided upon by the entire Supervisory Board, based on proposals prepared by the
REMUNERATION PRINCIPLES Key principles underlying the Board of Management remuneration are as follows: − Alignment of pay and performance: The performance-based, variable component shall form a significant portion of the overall remuneration.
− Variable remuneration focused on sustainability and aligned with shareholder interests: A major part of the variable remuneration shall reflect longer-term performance with an adequate deferred payout. Furthermore, a substantial portion shall reward the sustained performance of the share price.
BASE SALARY The base salary is not performance-based. It is paid in twelve monthly installments.
On the other hand, the payout of variable remuneration is subject to a limit and capped at 150 % of the respective target levels for the annual bonus and the mid-term bonus, as well as at a 200 %
increase in value of the grant price for the equity-related remuneration.
For Board of Management members with business division responsibilities, individual quantitative targets comprise operating profit, net income, Property-Casualty revenues, and Life new-business value. For Board of Management members with a functional focus, division-specific quantitative targets are determined based on their key responsibilities.
To support the assessment of the individual qualitative behavioral targets, a so-called multi-rater process has been introduced: Each member of the Board of Management collects, amongst others, feedback from his or her fellow Board members and his or her direct reports as well as the CEOs of the most important operating entities he or she is in charge of. Furthermore, they perform a self-assessment.
− Sustainable improvement/stabilization of return on equity (excluding unrealized gains/losses on bonds, net of shadow accounting ),
− Compliance with economic capitalization guidance (capitalization level and volatility limit).
For the MTB, an amount is typically accrued that is identical to the annual bonus. However, the accrual as such may be subject to adjustments, for example, if it is foreseeable that the mid-term sustainability criteria are not met or exceeded. The annual accrual is capped at 150 % of the respective target level.
The fair market value is calculated based on the ten-trading-day average Xetra closing price of the Allianz stock for the ten days following the financial press conference where our annual results are publicized. As RSUs are virtual stock without dividend payments during the vesting period, the average Xetra closing price is reduced1 by the net present value of the expected future dividend payments during the vesting period. The expected dividend stream is discounted with the swap rates as of the valuation day. Following the end of the four-year vesting period, the company makes a cash payment based on the number of RSUs granted, as well as on the ten-day average Xetra closing price of the Allianz stock following the annual financial press conference in the year of expiry of the respective RSU
plan. To avoid extreme payouts, the RSU payout level is capped at 200 % of the grant price.2 Outstanding RSU holdings are forfeited, should a Board member leave at his/her own request or be terminated for cause.
1_In addition, the fair market value of the RSUs is subject to a small reduction of a few Euro cents due to the 200 % cap on the RSU payout. This reduction is calculated based on a standard option pricing formula.
Board decides whether and to what extent a budget is provided, also taking into account the target pension level. This budget includes a risk premium paid to cover death and disability. The earliest age a pension can be drawn is 62, except for cases of occupational or general disability for medical reasons. In these cases, it may become payable earlier and an increase by projection may apply. In the case of death, a lump sum – again convertible into an annuity – will be paid to dependents. Should Board membership cease before retirement age for other reasons, the accrued pension rights are maintained if vesting requirements are met.
For members of the Allianz SE Board of Management who were born before 1 January 1958 and for the rights accrued before 2015, the guaranteed minimum interest rate remains at 2.75 % and the retirement age is still 60.
“Grant” column below shows the remuneration at target, minimum, and maximum levels. The “Payout” column discloses the 2016 and 2017 payments. The base salary, annual bonus, and perquisites are linked to the reported performance years, 2016 and 2017, whereas the Group Equity Incentive (GEI) and Allianz Equity Incentive (AEI)
All variable components are granted in accordance with the rules and conditions of the “Allianz Sustained Performance Plan”
(ASPP). Depending on individual and company performance, the amounts actually paid can vary between 0 % and 150 % of the respective target levels. If performance is rated at 0 % no variable component will be granted. Consequently, the minimum total direct compensation for a regular member of the Board of Management will equal the base salary of € 750 thou (excluding perquisites and pension contributions), while the maximum total direct compensation
3_Payout is capped at 200 % above grant price. The relevant share price used to determine the fair market value, and hence the final number of RSUs granted, and the 200 % cap are only available after sign-off by the external auditors.
Target Target Min Max Target Target Min Max 6_In addition to the amounts disclosed in the table, Sergio Balbinot received a buyout award of € 6 mn to compensate for forfeited grants from his previous employer: € 3 mn in cash and € 3 mn in RSUs. 50 % of the cash amount was paid in February 2015 and 50 % was paid in 2016 and are subject to clawback.
7_Jacqueline Hunt joined Allianz on 1 July 2016. She received a pro-rated base salary, annual bonus, MTB tranche, and equity-related compensation. The different pro-rated amounts for base salary and target amounts result from different pro-rating methodologies, which are generally applied. In addition to the amounts disclosed in the table, Jacqueline Hunt received a buyout award of € 170 thou in 2016 to compensate for forfeited grants from her previous employer.
8_Jacqueline Hunt received an off-cycle one-time payment of € 120 thou to reimburse her for relocation cost.
Individual remuneration: 2017 and 2016 € thou (total might not sum up due to rounding)
2_The MTB figure included in the Actual Grant column shows the annual accrual.
The sum total of the remuneration of the Board of Management for 2017 – excluding the notional accruals of the MTB 2016 – 2018 as well as the pension service cost, as outlined above – amounts to € 24 mn (2016: € 26 mn). If pension service cost is included, the sum
Grants, outstanding holdings, and equity compensation expense under the Allianz Equity Program
Number of RSU held at 31/12/20171 1_The relevant share price used to determine the fair market value, and hence the final number of RSUs granted, is only available after sign-off of the Annual Report by the external auditors, thus numbers are based on a best estimate. As disclosed in the Annual Report 2016, the equity-related grant in 2017 was made to participants as part of their 2016 remuneration. The disclosure in the Annual Report 2016 was based on a best estimate of the RSU grants. The actual grants deviated from the estimated values and have to be disclosed accordingly. The actual RSU grants as of 3 March 2017 under the Allianz Equity Incentive are as follows: Oliver Bäte: 11,038, Sergio Balbinot: 7,359, Jacqueline Hunt: 3,417, Dr. Helga Jung: 6,657, Dr. Christof Mascher: 6,516, Dr. Axel Theis: 7,289, Dr. Dieter Wemmer: 7,148, Dr. Werner 2_Grants of equity-related remuneration are accounted for as cash settled awards. The fair market value of the granted
RSUs and SARs is remeasured at each reporting date and accrued, as a compensation expense, proportionately over the vesting and service period. Upon vesting, any subsequent changes in the fair value of the unexercised SARs are also recognized as a compensation expense.
For members with pension rights in the frozen defined-benefit plan, the above contribution rates are reduced by 19 % of the expected annual pension from that frozen plan. The Allianz Group paid € 4 mn
(2016: € 5 mn) to increase reserves for pensions and similar benefits for active members of the Board of Management. As of 31 December 2017, reserves for pensions and similar benefits for active members of the Board of Management amounted to € 41 mn
Individual pensions: 2017 and 2016 € thou (total might not sum up due to rounding)
6_DBO = defined benefit obligation, end of year. The figures show the obligation for Allianz resulting from defined benefit plans, taking into account realistic assumptions with regard to interest rate, dynamics, and biometric probabilities.
TERMINATION OF SERVICE Board of Management contracts are limited to a period of five years.
Contracts do not contain provisions for any other cases of early termination of Board of Management service.
Payments for early termination to Board members with a remaining term of contract of more than two years are capped at twice the annual compensation – whereby the annual compensation: 1. is determined based on the previous year’s annual base salary plus 50 % of the target variable remuneration (annual bonus, annualized MTB, and equity-related remuneration: For a Board member with a fixed base salary of € 750 thou, the annual compensation would amount to € 1,875 thou. Hence, he/she would receive a maximum severance payment of € 3,750 thou) and 2. shall not exceed the latest year’s actual total compensation.
If the remaining term of contract is less than two years, the payment is pro-rated according to the remaining term of the contract.
In case of early termination as a result of a change of control, severance payments made to Board members generally amount to three times the annual compensation (as defined above) and shall not exceed 150 % of the severance payment cap. A Board member with a base salary of € 750 thou would receive a maximum of € 5,625 thou.
INTERNAL AND EXTERNAL BOARD APPOINTMENTS When a member of the Board of Management simultaneously holds an appointment at another company within the Allianz Group, the full amount of the respective remuneration is transferred to Allianz SE. In recognition of related benefits to the organization, Board of Management members are also allowed to accept a limited number of non-executive supervisory roles in appropriate external organizations. In these cases, 50 % of the remuneration received is paid to
Allianz SE. Only if the Allianz SE Supervisory Board classifies the appointment as a personal one will the respective Board member retain the full remuneration for that position. Any remuneration paid by external organizations will be itemized in those organizations’
OUTLOOK FOR 2018 The remuneration of the two new regular members of the Board of
Management, Niran Peiris and Giulio Terzariol, have been set at the same level as for the other regular members of the Board of Management.
Board agreed to an increase of the base salary of Oliver Bäte, in line with the well-established approach at Allianz, from € 1,125 thou to € 1,312.5 thou – i.e., from 1.5 times to 1.75 times of a regular Board member. The target values of his variable components increase accordingly with his total target compensation resulting in
REMUNERATION PRINCIPLES − Set total remuneration at a level both aligned with the scale and scope of the Supervisory Board’s duties and appropriate in view of the company’s activities and its business and financial situation.
FIXED ANNUAL REMUNERATION The remuneration of a Supervisory Board member consists of a fixed cash amount paid after the end of each business year for services rendered over that period. In 2017, as in 2016, each regular Supervisory Board member received a fixed compensation amounting to € 100 thou per year. Each Vice Chairperson received € 150 thou, the
Allianz Deutschland AG, Ms. Gabriele Burkhardt-Berg received € 61.8 thou for the financial year 2017. Mr. Jürgen Lawrenz did not receive any remuneration for his service on the Supervisory Board of
Life/Health business segment offers savings and investment-oriented products in addition to life and health insurance. We are the leading property-casualty insurer worldwide and rank among the top five in the life/health insurance business2. Our key markets (in terms of premiums ) for both property-casualty and life/health are Germany,
The Corporate and Other business segment’s activities include the management and support of the Allianz Group’s businesses through its central holding functions, as well as Banking and Alternative Investments.
BANKING Our banking operations, which place a primary focus on retail clients, support our insurance business and complement the products we offer in Germany, Italy, France, and Bulgaria. The sale of Oldenburgische Landesbank AG was closed on 7 February 2018. Hence, we now no longer have banking operations in Germany.
 Property-Casualty  Life/Health  Banking  Retail Asset Management  Institutional Asset Management 1_This overview is based on our organizational structure as of 31 December 2017. 2_Oldenburgische Landesbank AG in Germany is classified as “held for sale”.
TARGET SETTING AND MONITORING The Allianz Group steers its operating entities and business segments via an integrated management and control process. It begins with the definition of a business-specific strategy and goals, which are discussed and agreed upon between the Holding and operating entities. Based on this strategy, our operating entities prepare threeyear plans which are then aggregated to form the financial plans for the business divisions and for the Allianz Group as a whole. This plan also forms the basis for our capital management. The Supervisory
Property-Casualty, return on equity2 for Life/Health, and the costincome ratio for Asset Management. To steer and control new business in our business segments Property-Casualty and Life/Health, we use Return on Risk Capital (RoRC). We also use new business margins for Life/Health. For a comprehensive view of our business segment performance, please refer to the chapters from page 39 onwards.
Besides performance steering, we also have a risk steering process in place, which is described in the Risk and Opportunity Report starting on page 62.
1_This member of the Board of Management also oversees Allianz Partners.
CORPORATE RESPONSIBILITY GOVERNANCE Strong corporate governance is pivotal to our sustainability approach and features among our most important material issues.
Established in 2012, the Group ESG Board is the highest governing body for sustainability-related issues. It consists of three Allianz SE
The Group ESG Board is in charge of corporate responsibility and climate-related topics, and leads on associated stakeholder engagement. Functional departments provide regular updates on sustainability issues directly to the Group ESG Board.
CORPORATE RESPONSIBILITY APPROACH We want our stakeholders to know that Allianz is a financially solid and trustworthy company that embraces sustainable business as good business. To achieve this, we also need to understand our stakeholders’ needs and concerns, which is why we engage with a broad range of social and political players and organizations. The insight they provide enables us to focus our Corporate Responsibility strategy, activities, and reporting on the right areas.
Allianz SE and Allianz Group comply with the legal requirements to provide a non-financial statement and a non-financial Group statement according to §§ 289b (1), 315b (1) of the HGB by issuing a combined separate non-financial report for Allianz Group and Allianz SE
according to §§ 289b (3), 315b (3), sentence 1, sentence 2 in conjunction with § 298 (2) of the HGB. This report can be found on our website at: www.allianz.com/nf-report.
Please also refer to our 2017 Group Sustainability Report (to be published in April 2018) for full details of our corporate responsibility strategy, approach, and performance: www.allianz.com/
In terms of real economic growth, 2017 has been the best year for the global economy since 2011. Around the globe, many countries experienced a fairly strong cyclical upswing. Two factors drove much of last year´s positive development: the comeback of global trade and the expansionary credit cycle. In the United States, economic momentum increased in the course of 2017. Given the upturn in business investment as well as the rebound in exports, economic activity was on a broader footing than it had been in 2016. All in all, the U.S.
Business environment 2017 for the insurance industry 2017 was a mixed year for the insurance industry. On the one hand, the global economy gained momentum, supporting top-line growth across almost all regions and business lines. On the other hand, interest rates remained low, putting relentless pressure on investment returns. Above all, however, 2017 was a year of extreme natural catastrophes: Insured losses from natural catastrophes reached a new peak, almost tripling the previous year’s figure. Losses were 1_At the date of the publication of this report, not all general market data for the year 2017 used in the chapter Business
At the same time, the deep transformation of the business environment, much of which is driven by the digital revolution, continued unabatedly. For the insurance industry, it brings enormous challenges but also new opportunities. While overhauling the current business model requires sizeable resources, new technologies have helped insurers achieve quantum leaps in terms of customer centricity, product accessibility, and ease of doing business. Moreover, harnessing new technologies expanded the scope of insurance solutions offered to a wider range of threats, from cyber-attacks to health protection in emerging countries.
In the property-casualty sector, premium growth accelerated slightly in almost all markets, reflecting the broad-based recovery of the global economy. This general uptick in growth did not, however, change the growth differentials between regions: While Western
In the life sector, performance in the different regions was more mixed. While, for example, the U.S. market had to cope with lower premium growth, growth in Western Europe was on the up (albeit from a low base). Emerging markets, too, showed diverging growth trends: Eastern Europe experienced a rebound, Latin America a decline. Meanwhile, Emerging Asia remained unfazed and simply continued to show double-digit growth, with China leading the pack, clocking premium growth of around 20 %. Government policies boosting demand played a quite significant role in this growth story. Overall and at a global scale, premiums rose by an estimated 5 % in 2017
The global fixed-income market also enjoyed strong returns in 2017, driven by the U.S. bond market. The U.S. Federal Reserve Bank continued to gradually move away from its accommodative monetary policy and increased the federal funds rate in three steps. At the same time, the difference between short- and longer-dated U.S.
The favorable developments in global capital markets also stimulated fund flows in the asset management industry. This was particularly true for the United States, where the long-term inflows for the year strongly outweighed the outflows. Taxable bond funds – both actively and passively managed – profited most from these U.S. net inflows, reflecting a shift from equities into fixed-income products.
Brazil. Revenue growth in our Asset Management business segment was driven by higher third-party assets under management (AuM)
Our operating profit increased by 0.4 % compared to 2016 and was in the upper half of our 2017 target range. Our Asset Management business segment saw a strong increase in operating profit, mostly due to higher AuM-driven fees thanks to third-party net inflows. The operating profit in our Life/Health business segment increased due to a number of factors, including an improved technical margin in France and higher unit-linked management fees in Italy.
The operating result in our Corporate and Other business segment also improved across all three reportable segments. Our Property1_For further information on Allianz Group figures, please refer to note 4 to the consolidated financial statements.
4_Prior year figures have been adjusted in order to reflect the impact resulting from an accounting policy change to measure the Guaranteed Minimum Income Benefit (GMIB) liability at fair value for our life business. For further information, please refer to note 2 to the consolidated financial statements.
7_Risk capital figures are group diversified at 99.5 % confidence level. Allianz Life US included based on third country equivalence with 150 % of “Risk Based Capital Company Action Level” since 30 September 2015. The Solvency II
8_Represents the ratio of net income attributable to shareholders to the average shareholders’ equity excluding unrealized gains/losses on bonds, net of shadow accounting, at the beginning of the year and at the end of the year.
Please refer to page 60 for a reconciliation of nominal total revenue growth to internal total revenue growth for each of our business segments and the Allianz Group as a whole.
Casualty business segment experienced higher claims from natural catastrophes, resulting in a decline in operating profit. A lower investment result also contributed to the decrease.
Our non-operating result decreased by € 306 mn to a loss of € 949 mn. Non-operating realized gains (net) declined as a result of portfolio rebalancing actions in 2016. Impairments decreased as the prior year had included impairment losses on the South Korean
The lower non-operating result could only be partly offset by the lower income taxes, resulting in an overall decrease in net income.
For a more detailed description of the results generated by our business segments – specifically, Property-Casualty insurance operations, Life/Health insurance operations, Asset Management, and
Corporate and Other – please consult the respective chapters on the following pages.
RECENT ORGANIZATIONAL CHANGES Effective 1 January 2017, the Allianz Group reorganized the structure of its insurance activities to reflect the changes in the Board of Management responsibilities. The former reportable segment Asia Pacific was allocated to the reportable segment Western & Southern Europe, Middle East, Africa, Asia Pacific. Any previously reported information has been adjusted to reflect this change in reportable segments.
10_As of 31 December 2017, all requirements were still fulfilled to present Oldenburgische Landesbank AG, Oldenburg, allocated to the reportable segment Banking (Corporate and Other) as a disposal group classified as held for sale. The closing of the transaction was nearly completed as of 31 December 2017. Therefore, an impairment and a liability of € 233 mn were recognized in connection with the expected loss from the sale of the Oldenburgische Landesbank AG.
The Allianz shares in Oldenburgische Landesbank AG were transferred to the buyer on 7 February 2018. For further information, please refer to note 3 to the consolidated financial statements 11_For further information on shareholders‘ equity, please refer to page 55 of the Balance Sheet Review chapter.
12_For further information on the share buy-back program, please refer to note 19 to the consolidated financial statements.
Report: − Statement on Corporate Management pursuant to § 315d and
Spain: Gross premiums increased to € 2,376 mn – up 4.4 % on an internal basis. This was driven by positive volume and price effects across the portfolio.
The following operations weighed on internal growth: Turkey: Gross premiums decreased to € 1,222 mn. This decrease
Italy: Gross premiums amounted to € 4,512 mn. The decline of 1.3 % on an internal basis resulted from unfavorable price effects in our motor insurance business.
7_Based on the average exchange rates in 2017 compared to 2016.
on an internal basis. It was largely due to negative price impacts across both our corporate and specialty lines of business.
The underwriting result decrease was driven by an increase in losses from natural catastrophes such as the storms Harvey, Maria, and Irma in the third quarter, and the California wildfires in the fourth quarter of 2017. A lower contribution from run-off compared to the previous year also aggravated this development. As a consequence our combined ratio deteriorated by 0.9 percentage points to 95.2 %.
Change in reserves for insurance and investment contracts (net) (without expenses for premium refunds)1 (270) (306) 36 1_Consists of the underwriting-related part (aggregate policy reserves and other insurance reserves) of "change in reserves for insurance and investment contracts (net)". For further information, please refer to note 26 to the consolidated financial statements.
Excluding losses from natural catastrophes, our accident year loss ratio improved by 0.4 percentage points to 68.2 %. This was predominantly due to profitability improvements across the Allianz Group.
Total expenses amounted to € 13,537 mn in 2017, compared to € 13,352 mn in the previous year. Our expense ratio remained stable at 28.7 % as a higher administrative expense ratio was offset by a lower acquisition ratio.
Interest and similar income (net of interest expenses) 3,371 3,391 (20)
Operating income from financial assets and liabilities carried at fair value through income (net) (78) (23) (56)
Our operating investment income (net) decreased slightly, mainly due to an unfavorable foreign currency translation result net of hedging.
1_In light of the new operating profit definition, restructuring charges are reported outside of operating profit unless shared with policyholders. Prior year figures have been adjusted accordingly.
Net income decreased, which was driven by the decline in operating profit and a lower non-operating result that was partially offset by a decline in income taxes.
Statutory premiums in the German life business rose to € 21,124 mn, translating into 11.9 % growth on an internal basis –
In the United States, statutory premiums amounted to € 9,720 mn, down 16.3 % on an internal basis. This was caused by a decrease in sales of fixed-indexed annuities. Increased sales of traditional variable annuities partly compensated for this development.
3_Prior year figures have been adjusted in order to reflect the impact resulting from an accounting policy change to measure the Guaranteed Minimum Income Benefit (GMIB) liability at fair value for our life business. For further information please refer to note 2 to the consolidated financial statements.
4_In light of the new operating profit definition, restructuring charges are reported outside of operating profit unless shared with policyholders. Prior year figures have been adjusted accordingly.
5_From the classification of our Korean life business as “held for sale” in the second quarter of 2016 until its disposal in the fourth quarter of 2016, the total result of € (204) mn was considered as non-operating.
17.1 % on an internal basis – resulted mainly from higher unit-linked single-premium sales, and was partially offset by a decrease in traditional life business.
In the Asia-Pacific region, statutory premiums stood at € 5,170 mn, a 26.4 % rise on an internal basis. It was largely due to an increase in unit-linked sales in Taiwan. Statutory premiums in South
9_Prior year figures changed in order to reflect the roll-out of profit source reporting to Turkey.
Unit-linked management fees as % of average unit-linked reserves3,4 0.5 0.4 1_Prior year figures are presented excluding the effects from the South Korean business.
4_Unit-linked management fees, excluding asset management fees, divided by unit-linked reserves.
Loadings from premiums went up along with sales, much of which was driven by the Asia-Pacific region. The increase in loadings from reserves was largely attributable to a higher reserve volume in
France as well as to higher product fee income stemming from the growth in our non-traditional variable-annuity business in the United
States, due to favorable market movements. Unit-linked management fees rose, mainly in Italy, as a result of both higher performance fees and increased assets under management.
2_In light of the new operating profit definition, restructuring charges are reported outside of operating profit unless shared with policyholders. Prior year figures have been adjusted accordingly.
4_The purpose of the Life/Health operating profit sources analysis is to explain movements in IFRS results by analyzing underlying drivers of performance on a Life/Health business segment consolidated basis.
Operating income from financial assets and liabilities carried at fair value through income (net) (1,149) (864) (286)
1_Other comprises the delta of out-of-scope entities, on the one hand, which are added here with their respective operating profit and different line item definitions compared to the financial statements, such as interest paid on deposits for reinsurance, fee and commission income and expenses excluding unit-linked management fees on the other hand.
2_Prior year figures are presented excluding the effects from the South Korean business.
Acquisition expenses and commissions as % of PVNBP2 (8.3) (8.8) 0.4
We recorded lower acquisition expenses and commissions, predominantly due to declined sales in the fixed-indexed annuities business in 6_The investment margin is defined as IFRS investment income net of expenses, less interest credited to IFRS reserves and policyholder participation (including policyholder participation beyond contractual and regulatory requirements mainly for the German life business).
7_Expenses include acquisition expenses and commissions (excluding commission clawbacks, which are allocated to the technical margin) as well as administrative and other expenses.
Repor t the United States. This was partly offset by higher expenses due to sales growth in the Asia-Pacific region, in our German life business, and in Italy.
Operating loss – South Korea1 - (82) 82 1_The 2016 figure represents the operating loss of the first quarter only, as the negative result for the rest of 2016 was considered as non-operating.
Our return on equity increased by 1.4 percentage points to 12.1 %.
Among other reasons, this is due to the fact that the 2016 figure had been negatively impacted by the unfavorable development of our
Total assets under management as of 31 December € bn 1,960 1,871 89 thereof: Third-party assets under management as of 31 December € bn 1,448 1,361 87
2_Other is composed of other asset classes than equity, fixed income and multi-assets, e.g. money markets, commodities, real estate investment trusts, infrastructure investments, private equity investments, hedge funds, etc.
States and Europe. Strong third-party AuM net inflows were recorded in each quarter. AllianzGI also recorded third-party AuM net inflows
Favorable effects from Market and Other5 amounted to € 73 bn.
PIMCO and 23.2 % (31 December 2016: 23.9 %) attributable to
The share of fixed-income assets rose from 75.5 % at the beginning of the year to 76.4 %. This was mainly due to the high third-party
Market and Other, which outweighed the negative foreign currency translation effects. The share of equities declined from 10.3 % to 9.4 %.
(31 December 2016: 83 %). The increase was driven by both PIMCO
5_Market and Other represents current income earned on, and changes in the fair value of, securities held in client accounts. It also includes dividends from net investment income and from net realized capital gains to investors of open ended mutual funds and of closed end funds.
Morningstar peer group (a position in the first and second quartile is equivalent to outperformance).
Our operating revenues increased by 6.4 % on a nominal basis and 7.8 % on an internal basis1.
Other net fee and commission income rose, driven by increased average third-party AuM, mostly at PIMCO. Third-party AuM-driven margins declined mainly at AllianzGI.
Our operating profit increased by a strong 10.6 % on a nominal basis and 12.7 % on an internal basis1. This was mainly due to strong growth in operating revenues, which was only partly offset by increased administrative expenses.
Our cost-income ratio improved significantly, as revenue growth outpaced the increase in expenses.
1_Consolidation included. For further information about our Corporate and Other business segment, please refer to note 4 to the consolidated financial statements.
In Holding & Treasury, we saw an improvement of our operating result. It was largely driven by a higher net interest result, as well as by lower administrative expenses caused by a decline in pension costs.
The operating result generated by Alternative Investments increased, due to a higher net fee and commission result that was only partially offset by higher administrative expenses.
Protection of shareholders’ investments, while continuing to provide attractive returns and dividends.
Return on equity (RoE)1 amounted to 11.8 % (2016: 12.3 %). Proposed dividend at € 8.00 (2016: € 7.60) per share. Stable payout ratio of 50 %, based on expected number of eligible shares at the Annual General Meeting.
Selective profitable growth. Property-Casualty with continued sound risk selection and solid internal growth, Life/Health with growing asset base and strong new business margins, and Asset Management with strong net inflows.
Gross premiums written increased by 1.4 %. Internal growth of 2.3 % was mainly driven by Allianz Partners, Germany and Brazil.
Operating profit in the range of € 5.0 bn to € 5.6 bn. Operating profit of € 5.1 bn is in the lower half of our target range. Despite improvements in our underwriting result a high burden from natural catastrophes impacted our results.
Combined ratio was at 95.2 % and above our expectations. The shortfall in profitability was driven by the development of natural catastrophes.
RoE between 10.0 % and 12.0 %. RoE1 of 12.1 % above outlook range.
Operating investment result reached favorable € 20.0 bn, which is slightly lower than 2016, as the previous year had been supported by a high level of realized gains from our portfolio de-risking actions.
Asset Management Slight increase in total AuM due to positive market return, supported by moderate net inflows at PIMCO and at AllianzGI.
Total AuM grew by € 89 bn to € 1,960 bn as of 31 December 2017. The increase was driven by strong net inflows and positive market returns, together more than offsetting negative foreign currency translation effects. In the course of 2017, our Asset Management business segment saw outstanding third-party AuM net inflows of € 150 bn mainly due to PIMCO, but supported by AllianzGI.
Operating profit in the range of € 2.0 bn to € 2.6 bn. Operating profit amounted to € 2.4 bn, exceeding the mid-point of the target range.
Although political uncertainties linger, the global economic outlook for 2018 is favorable. The U.S. economy is expected to grow by 2.6 %.
The recently adopted tax reform package should contribute to higher growth. The net tax reductions will underpin companies' propensity to invest and support solid consumption growth. In the Eurozone, growth is likely to exceed 2 % again in 2018. In particular, apart from the favorable global backdrop, the fact that the loose European Central
Bank monetary policy continues to provide support, coupled with broadly neutral fiscal policy, points to an ongoing recovery. As in 2017, the emerging market economies are expected to grow by close to 5 %. Asian emerging markets continue to benefit from the revival of world trade and stable growth in China. The Eastern European countries capitalize on the continuing upturn in the Eurozone. We are currently faced with a rather high degree of synchronization, and for 1_For more detailed information on the previous year’s outlook for 2017, please see the Annual Report 2016 from page 51 onward.
Global output is expected to increase by 3.2 % in 2018.
Modestly rising yields on 10-year U.S. government bonds, the good economic situation in the Eurozone, and gradually rising inflation rates are likely to influence investors´ interest rate expectations and exert upward pressure on European benchmark bond yields. For 10year German government bonds, we see yields climbing modestly to about 1 % in the course of 2018; yields on 10-year U.S. government bonds may end the year at close to 3 %. While the ongoing Federal
We expect the Dollar-to-Euro exchange rate to close the year at
In the property-casualty sector, premium growth is expected to accelerate in 2018, reflecting higher inflation and the ongoing broadbased recovery of the global economy. As in previous years, emerging markets are the main driver of growth: All regions, from Latin America over Africa to Asia, should continue their recovery; in Emerging Asia, premium growth could top 10 %. In contrast, growth in advanced markets will be much slower, at around 3 %. Overall, we expect global premium growth of about 5 % in 2018 (in nominal terms and adjusted for foreign currency translation effects). Assuming average losses from natural catastrophes and more positive rate dynamics – particularly in business lines affected by last year’s losses – overall profitability is likely to increase, although investment income might remain a drag.
The industry’s profitability remains under pressure from both continuous flows into passive products and rising distribution costs, so the trend towards industry consolidation will continue. At the same time, digital channels are expected to continue gaining prominence.
Measures aimed at strengthening regulatory oversight and reporting could also affect profitability in the asset management sector. In order to continue growing, it is vital for asset managers to keep sufficient business volumes, ensure efficient operations, and maintain strong investment performance.
Protection of shareholders’ value, while continuing to provide attractive returns and dividends.
PROPERTY-CASUALTY Growth in gross premiums written: approximately 2 % on an internal basis.
LIFE/HEALTH Continue with focus on profitable growth and further shift new business mix towards capital efficient, unit-linked, and protection products. Revenues are expected to be in the range of € 62.0 bn to € 68.0 bn.
ASSET MANAGEMENT We expect a moderate increase in total AuM due to solid third-party net inflows at both AllianzGI and PIMCO in 2018, supported by a slightly positive market return.
Operating profit in the range of € 2.1 bn to € 2.7 bn.
ASSUMPTIONS Our outlook assumes no significant deviations from the following underlying assumptions: − Global economic growth is set to continue.
− A 10 % weakening or strengthening of the U.S. Dollar compared to our planned exchange rate of 1.22 to the Euro would have a negative or positive impact on operating profits of approximately € 0.3 bn, respectively.
Our operating profit was in the upper half of our target range in 2017, hitting € 11.1 bn. For 2018, we envisage an operating profit of € 11.1 bn, plus or minus € 0.5 bn, as we expect a favorable development in the Property-Casualty business segment, rather stable results in the Asset Management business segment, and a slightly negative development in the Life/Health and Corporate and Other business segments.
Our net income attributable to shareholders decreased slightly this past year, amounting to € 6.8 bn. Consistent with our disclosure practice in the past, and given the susceptibility of our non-operating results to adverse capital market developments, we refrain from providing a precise outlook for net income. That said, following the negative impact from the U.S. tax reform 2017 we expect a positive annual impact of approximately € 0.3 bn from the U.S. tax reform starting in 2018. As a consequence, and assuming no major disruptions to occur in the capital markets, we anticipate an increase in net income for 2018.
(2017: + 1.4 %), supported by favorable volume and price effects.
Lines such as Allianz Partners, where our B2B2C business activities are bundled. Further growth is expected in our core European markets such as Germany, Spain and Italy, as well as in Turkey.
We believe the overall slow rise in prices we witnessed in a number of markets in 2017 will continue in 2018. However, as in previous years we will keep our focus on achieving strong underwriting results by adhering to our strict underwriting discipline, and will be willing to accept a lower top line if target margins cannot be achieved.
In 2017, our combined ratio was at 95.2 %, falling short of our expectation. This shortfall in profitability was driven by a number of natural catastrophes. In 2018, we expect to achieve our target combined ratio of 94 %. The underlying assumption is that the aggregate effect of improvements in pricing, claims management, and productivity will compensate for any underlying claims inflation. Despite the high volatility of natural catastrophes in recent years, we assume impacts to revert back to our historic claims experience.
As the low-interest-rate environment is likely to persist, investment income will remain under pressure due to the rather short duration of investments in the Property-Casualty business segment. Going forward, we will continue to take measures to adapt our investment strategy to changing market conditions.
LIFE/HEALTH INSURANCE In 2017, our Life/Health operating profit was € 4.4 bn, thus exceeding the target range, mainly because of a higher net harvesting result and a higher technical margin. For 2018, we expect operating profit in our Life/Health business segment to be between € 3.9 bn and
It must be noted, however, that market volatility, along with the level of net harvesting, can significantly affect the Life/Health business segment results.
ASSET MANAGEMENT While we expect continued strong inflows in 2018 at both PIMCO
In 2018, we continue to expect a cost-income ratio of well below 65 % (2017: 61.9 %) despite the slightly negative impact on the costincome ratio related to the consolidation of Allianz Capital Partners into AllianzGI, supported by our focus on expense discipline and operational excellence. In the mid-term we expect our cost-income ratio to reach 60 %.
CORPORATE AND OTHER Our Corporate and Other business segment recorded an operating loss of € 0.8 bn in 2017. We predict an operating loss in the range of € 0.8 bn to € 1.0 bn for Corporate and Other (consolidation included)
Financing and liquidity development and capitalization The Allianz Group benefits from a very healthy liquidity position and excellent financial strength with a capitalization well above regulatory requirements.
All of the above remains subject to a sustainable Solvency II ratio above 160 %, which is substantially below our current level of 229 %2 and 20 percentage points lower than our target range for the Solvency II ratio of 180 to 220 %.
The statements contained herein may include prospects, statements of future expectations, and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties. Actual results, performance, or events may differ materially from those expressed or implied in such forward-looking statements.
Such deviations may arise due to, without limitation, (i) changes of the general economic conditions and competitive situation, particularly in the Allianz Group’s core business and core markets, (ii) performance of financial markets (particularly market volatility, liquidity and credit events), (iii) frequency and severity of insured loss events, including natural catastrophes, and the development of loss expenses, (iv) mortality and morbidity levels and trends, (v) persistency levels, (vi) particularly in the banking business, the extent of credit defaults, (vii) interest rate levels, (viii) currency exchange rates, including the Euro/U.S. Dollar exchange rate,
The company assumes no obligation to update any information or forward-looking statement contained herein, save for any information required to be disclosed by law.
1_This represents the management’s current intention and may be revised in the future. Also, the decision regarding dividend payments in any given year is subject to specific dividend proposals by the Management and Supervisory
Boards, each of which may elect to deviate if appropriate under the then prevailing circumstances, as well as to the approval of the Annual General Meeting.
Unrealized gains and losses (net) 12,175 11,830 344 1_Prior year figures have been adjusted in order to reflect the impact resulting from an accounting policy change to measure the Guaranteed Minimum Income Benefit (GMIB) liability at fair value for our life business. For further information, please refer to note 2 to the consolidated financial statements.
Compared to year-end 2016, our overall asset allocation slightly changed towards equities, where we recorded inflows supported by higher unrealized gains.
U.S. Dollar. About 94 % of this portfolio was invested in investmentgrade bonds and loans.3 Our government bonds portfolio contained, amongst others, bonds from Italy and Spain that represented 3.9 %, and 1.9 % shares of our debt instruments portfolio with unrealized gains (gross) of € 2,647 mn and € 842 mn. Of our covered bonds portfolio, 41.6 % (31 December 2016: 41.3 %) were German Pfandbriefe backed by either public-sector loans or mortgage loans.
Our exposure to equities increased due to strong performance on major equity markets. Our equity gearing41 remained almost 4_Equity gearing is defined as the ratio of our equity holdings allocated to the shareholder after policyholder participation and hedges to shareholders’ equity plus off-balance sheet reverses less goodwill.
LIFE/HEALTH LIABILITIES Life/Health reserves for insurance and investment contracts increased by € 8.3 bn to € 499.1 bn. An € 20.4 bn increase (before foreign currency translation effects) in aggregate policy reserves was mainly driven by our operations in Germany (€ 12.6 bn) and the United
States (€ 7.3 bn before foreign currency translation effects). Reserves for premium refunds increased slightly by € 1.3 bn (before foreign currency translation effects), due to higher unrealized gains to be shared with policyholders. Foreign currency translation effects reduced the balance sheet value by € 13.3 bn, mainly due to the weaker U.S. Dollar (€ (11.3) bn).
The Allianz Group enters into various commitments including loan and leasing commitments, purchase obligations, and other commitments. For more details please refer to note 37 to the consolidated financial statements.
1_For further information about changes in the reserves for loss and loss adjustment expenses for the Property-Casualty business segment, please refer to note 14 to the consolidated financial statements.
The Allianz Group’s liquidity management is based on policies and guidelines approved by the Allianz SE Board of Management. Allianz SE and each of the operating entities are responsible for managing their respective liquidity positions, while Allianz SE provides central cash pooling for the Group. Capital allocation is managed by
Generally, our investments in fixed income securities are sequenced to mature when funds are expected to be needed.
ASSET MANAGEMENT OPERATIONS Within our Asset Management operations, the most important sources of liquidity are fees generated from asset management activities. These are primarily used to cover operating expenses.
Interest expenses on senior bonds decreased, mainly due to lower funding costs on average in 2017. For subordinated bonds, the increase of interest expenses was primarily driven by higher outstanding volumes on average in 2017.
1_For further information on Allianz SE debt (issued or guaranteed) as of 31 December 2017, please refer to note 18 to the consolidated financial statements.
The table below details the long-term debt issuances and redemptions of Allianz SE during 2017 and 2016: Issuances and redemptions of Allianz SE’s senior and subordinated bonds € mn
Senior and subordinated bonds 16,450 3,715 20,165 1_Based on nominal value.
Program and the Commercial Paper Program. Money market securities increased in the use of commercial paper, compared to the previous year-end. Interest expenses on money market securities increased mainly due to higher funding costs on average in 2017.
The Group maintained its A-1+/Prime-1 ratings for short-term issuances. Thus we can continue funding our liquidity under the Euro
Allianz Group to fine-tune its capital structure are letter of credit facilities and bank credit lines.
Change in cash and cash equivalents 1 2,656 16 2,640 1_ Includes effects of exchange rate changes on cash and cash equivalents of € (749) mn and € 52 mn in 2017 and
Net cash flow provided by operating activities increased by € 11.7 bn to € 33.2 bn in 2017. This consists of net income plus adjustments for non-cash charges, credits and other items included in net earnings, and cash flows related to the net change in operating assets and liabilities. Net income after adding back non-cash charges and similar items increased by € 1.5 bn to € 10.6 bn in 2017. Furthermore, operating cash flows from net changes in operating assets and liabilities, including other items, rose by € 10.2 bn to € 22.6 bn. The development of assets and liabilities held for trading, particularly in our
Net cash outflow used in investing activities increased by € 5.0 bn to € 24.8 bn. The main drivers were higher net cash outflows from available-for-sale investments, particularly in Life/Health business segment in Germany. Moreover, new investments in associates and joint ventures required cash investments. Finally, the development of our position in loans and advances to banks and customers, mainly in our Life/Health business segment in Germany, led to net cash outflows.
The previous analysis is based on our consolidated financial statements and should be read in conjunction with them. In addition to our figures stated in accordance with the International Financial Reporting Standards (IFRS), the Allianz Group uses operating profit and internal growth to enhance the understanding of our results. These additional measures should be viewed as complementary to, rather than a substitute for, our figures determined according to IFRS.
For further information, please refer to note 4 to the consolidated financial statements.
Corporate and Other thereof: Total revenues (Banking) 562 551 consisting of: Interest and similar income 419 474
Allianz Group total revenues 126,149 122,416 1_Represents interest and similar income less interest expenses.
Administrative expenses on reinsurance business ceded 13 4 1_Prior year figures changed in order to reflect the roll-out of profit source reporting to Turkey.
1_Prior year figures have been adjusted in order to reflect the impact resulting from an accounting policy change to measure the Guaranteed Minimum Income Benefit (GMIB) liability at fair value for our life business. For further information please refer to note 2 to the consolidated financial statements.
IMPACT OF CHANGE IN DEFERRED ACQUISITION COSTS (DAC) Impact of change in DAC includes the effects of changes in DAC, unearned revenue reserves (URR), and value of business acquired
Policyholder participation is included within change in our reserves for insurance and investment contracts (net) in the group income statement.
1_Prior year figures changed in order to reflect the roll out of profit source reporting to Turkey.
Allianz aims to ensure that the Group is adequately capitalized at all times and that all related undertakings at least meet their respective regulatory capital requirements for the benefit of both shareholders and policyholders. Furthermore, risk capital reflecting the risk profile and the cost of capital are important aspects considered in business decisions.
− Integration of risk considerations and capital needs into management and decision-making process by attributing risk and allocating capital to business segments, products, and strategies.
− Risk strategy and risk appetite: Our risk strategy defines our risk appetite consistent with our business strategy. It ensures that rewards are appropriately based on the risks taken and capital required and that delegated authorities are in line with our overall risk-bearing capacity and strategy.
− Market leadership: maintaining a commanding position in each market with superior skills and scale.
− Customer centricity: practicing relentless execution centered on customers while outperforming competition.
With regard to financial performance, we strive for a return on equity of 13 % (excluding unrealized gains/losses on bonds net of shadow accounting), while growing our earnings per share at a compound annual growth rate of 5 %.
To ensure the sustainability of our performance, we have set ourselves health targets for customer loyalty and employee engagement: Our ambition is for at least 75 % of our businesses to be or become rated by their customers as Loyalty Leader or above-market in terms of Net Promoter Score (NPS). At the same time, we aim to have our Inclusive Meritocracy Index at 72 % (or above) in 2018, a level we reached already in 2017.
OUR BUSINESS STRATEGY In order to achieve these aspirations, the Board of Management of
− Technical Excellence: creating superior margins, innovation, and growth through best talents and state-of-the-art skills.
The Board of Management of Allianz SE has also defined a strategy for the management of risk. This risk strategy places a particular emphasis on protecting the Allianz brand and reputation, remaining solvent even in the event of extreme adverse scenarios, maintaining sufficient liquidity to always meet financial obligations, and providing resilient profitability.
SUPERVISORY BOARD AND BOARD OF MANAGEMENT Allianz’s approach to risk governance enables an integrated management of local and global risks and ensures that our risk profile remains consistent with both our risk strategy and our capacity to bear risks.
Board of Management of Allianz SE have both Allianz SE and groupwide responsibilities. The Board of Management formulates business objectives and a corresponding risk strategy; the core elements of the risk framework are set out in the Allianz Group Risk Policy, approved by the Board of Management. The Supervisory Board advises, challenges and supervises the Board of Management in the performance of its management activities. The following committees support the
Board and the Supervisory Board on risk issues: Supervisory Board Risk Committee
OVERALL RISK ORGANIZATION AND ROLES IN RISK MANAGEMENT A comprehensive system of risk governance is achieved by setting standards related to organizational structure, risk strategy and appetite, limit systems, documentation, and reporting. These standards ensure the accurate and timely flow of risk-related information and a disciplined approach towards decision-making and execution at both the global and local level.
As a general principle, the “first line of defense” rests with business managers in the related undertaking. They are responsible for both the risks and returns from their decisions. Our “second line of defense” is made up of independent global oversight functions including Risk, Actuarial, Compliance, and Legal, which support the
Board in defining the risk frameworks within which the business can operate. Audit forms the “third line of defense”, independently and regularly reviewing risk governance implementation, compliance with risk principles, performing quality reviews of risk processes, and testing adherence to business standards, including the internal control framework.
Group Risk is managed by the Group Chief Risk Officer and supports the Board of Management of Allianz SE, including its committees, through the analysis and communication of risk-managementrelated information and in implementing committee decisions.
Group Risk strengthens and maintains the Group’s risk network through regular and close interaction with the management of related undertakings and other key stakeholders such as the local finance, risk, actuarial and investment departments. A strong group-wide risk network allows the Allianz Group to identify risks at early stages and bring them to management’s attention.
Boards of Management are responsible for setting and approving a local risk strategy during the annual Strategic and Planning Dialogs with the Group, and for ensuring adherence to their risk strategy.
Consistent implementation of the Group’s risk management framework in the related undertakings, including regular dialog between the Group and the entity, is ensured through, for example, the Group Risk representation on local Risk Committees as well as the regular assessments of the local risk management framework and
Chief Risk Officers by Group Risk. Moreover, the Group Chief Risk
In addition to Group Risk and the local risk functions, legal, compliance, and actuarial functions established at both the Group and related entity level constitute additional components of the “second line of defense”.
Group Actuarial contributes towards assessing and managing risks in line with regulatory requirements, in particular for those risks whose management requires actuarial expertise. The range of tasks includes, among others, the calculation and monitoring of technical provisions, technical actuarial assistance in business planning, reporting and monitoring of the results, and supporting the effective implementation of the risk management system.
As an integrated financial services provider, we consider diversification across different business segments and regions to be a key element in managing our risks efficiently, limiting the economic impact of any single event and contributing to relatively stable results.
Group since 1 January 2016, our risk profile is measured and steered based on our approved Solvency II internal model1. We have introduced a target solvency ratio in accordance with Solvency II, based on pre-defined shock scenarios at the level of both the Group and related undertakings, supplemented by economic scenarios and sensitivity analysis.
In addition, central elements of Allianz’s dividend policy are linked to Solvency II capitalization based on our internal model. By that we allow for a consistent view on risk steering and capitalization under the Solvency II framework.
Allianz steers its portfolio using a comprehensive view of risk and return based on the internal model and including scenario analysis: Risk and concentrations are actively restricted by limits based on our model and there is a comprehensive analysis of the return on risk capital (RoRC) for all business activities. RoRC allows us to identify 1_From a formalistic perspective, the German Supervisory Authority deems our model to be “partial” because not all our entities are using the internal model. Some of our smaller entities report under the standard model and others under the deduction and aggregation approach. Without loss of generality, we might use the term internal model in the following chapters, e.g., in case descriptions also referring to entities that use the internal model, or descriptions focusing on processes with respect to the internal model components.
Strategic asset allocation benchmarks and risk limits, including financial VaR, stand-alone interest rate and equity sensitivity limits, and foreign exchange exposure limits, are defined for the Group and the related undertaking. Limits are closely monitored and, if a breach occurs, countermeasures are implemented which may include the escalation and/or closing of positions. Furthermore, we have put in place standards for hedging activities due to exposure to fair-value options embedded in life insurance products. Finally, guidelines are provided by the Group regarding certain investments, new investment products and the use of derivatives. Compliance with these guidelines is controlled by the respective risk and controlling functions.
INTEREST RATE RISK Allianz is a liability-driven investor. If the duration of our assets is shorter than our liabilities, we may suffer an economic loss in a falling -rate environment as we reinvest maturing assets at lower rates prior to the maturity of liability contracts. This risk is higher for longdated life investment and savings products, with a significant part of the Life/Health business segment’s interest rate risk coming from
Repor t than the rates guaranteed. Interest rate risk is managed within our asset/liability management process and controlled via interest rate sensitivity and duration mismatch limits for the Group and entities.
INFLATION RISK As an insurance company, we are exposed to changing inflation rates, predominantly due to our Non-Life insurance obligations but also due to inflation-indexed internal pension obligations. Inflation assumptions are taken into account in our product development and pricing. However, unexpected inflation increases both future claims and expenses, leading to greater liabilities; conversely, if future inflation rates were to be lower than assumed, liabilities would be lower than anticipated. The risk of changing inflation rates is incorporated in our internal model.
REAL ESTATE RISK Despite the risk of decreasing real estate values, real estate is a suitable addition to our investment portfolio due to good diversification benefits as well as to the contribution of relatively predictable, longterm cash flows.
− Investment portfolio: Credit risk results from our investments in fixed-income bonds, loans, derivatives, cash positions, and receivables whose value may decrease depending on the credit quality of the obligor. However, losses due to credit events can be shared with the policyholder for certain life insurance products.
The internal credit risk capital model takes into account the major determinants of credit risk for each instrument, including exposure at default, rating, seniority, collateral, and maturity. Additional parameters assigned to obligors are migration probabilities and obligor asset correlations reflecting dependencies within the portfolio. Ratings are assigned to single obligors via an internal rating approach. It is based on long-term ratings from rating agencies, which are dynamically adjusted using market-implied ratings and the most recent qualitative information available.
Carlo simulation, taking into account interdependencies and exposure concentrations per obligor segment. The loss profiles are calculated at different levels of the Allianz Group, and then fed into the internal model at each level for further aggregation across sources of risk to derive diversified credit risk.
To ensure effective credit risk management, credit VaR limits are derived from our internal risk capital framework, and rating bucket benchmarks are used to define our risk appetite for exposures in the lower investment grade and non-investment grade area.
UNDERWRITING RISK Underwriting risk consists of premium and reserve risks in the Property -Casualty 2 business segment as well as biometric risks in the
PROPERTY-CASUALTY Our Property-Casualty insurance businesses are exposed to premium risk related adverse developments in current year’s new and renewed business as well as reserve risks related to the business in force.
Premium risk is estimated based on actuarial models that are used to derive loss distributions. Non-catastrophe risks are modeled using attritional loss models for frequency losses as well as frequency and severity models for large losses. Natural disasters, such as earthquakes, storms, and floods, represent a significant challenge for risk management due to their accumulation potential and occurrence volatility. For natural catastrophe risks, we use special modeling techniques which combine portfolio data (geographic location, characteristics of insured objects, and their values) with simulated natural disaster scenarios to estimate the magnitude and frequency of potential losses. Where such stochastic models do not exist, we use 1_Credit Risk Platform.
deterministic, scenario-based approaches to estimate potential losses. Similar approaches are used to evaluate risk concentrations for man-made catastrophes, including losses from terrorism and industrial concentrations etc.
These loss distributions are then used within the internal model to calculate potential losses with a predefined confidence level of
In order to reduce the risk of unexpected reserve volatility, our operating entities constantly monitor the development of reserves for insurance claims on a line-of-business level. In addition, operating entities generally conduct annual reserve uncertainty analyses based on similar methods used for reserve risk calculations. The Allianz
Life/Health figures accordingly. However, most of our health business is attributable to the Life/Health business segment.
BUSINESS RISK Business risks include cost risks and policyholder behavior risks, and are mostly driven by the Life/Health business and to a lesser extent by
− Other operational risks, including, for example, internal or external fraud, financial misstatement risk, a breach of cyber security causing business disruption or fines, a potential failure at our outsourcing partners causing a disruption to our working environment, etc.
Allianz has developed a consistent operational risk management framework, which is applied across the Group and focuses on the early recognition and proactive management of material operational risks. The framework defines roles and responsibilities as well as management processes and methods: Local risk managers, in their capacity as the “second line of defense”, identify and evaluate relevant operational risks and control weaknesses via a dialog with the
This framework triggers specific mitigating control programs. For example, compliance risks are addressed via written policies and dedicated compliance programs monitored by the Group Compliance function at Allianz SE. The risk of financial misstatement is mitigated by a system of internal controls covering financial reporting.
OTHER RISKS NOT MODELED IN THE INTERNAL MODEL There are certain risks which are not adequately addressed or mitigated by additional capital and are therefore excluded from the internal model. For the identification, analysis, assessment, monitoring, and management of these risks we also use a systematic approach, with risk assessment generally based on qualitative criteria or scenario analyses. The most important of these other risks are strategic, liquidity, and reputational risk.
Top Risk Assessment process, and discussed in various Board of Management -level committees (e.g. Group Finance and Risk Committee).
Our related undertakings manage liquidity risk locally, using asset / liability management systems designed to ensure that assets and liabilities are adequately matched. Local investment strategies particularly focus on the quality of investments and ensure a significant portion of liquid assets (e.g. high-rated government bonds or covered bonds) in the portfolios. In the course of liquidity planning, we reconcile liquidity sources (e.g. cash from investments and premiums) and liquidity needs (e.g. payments due to insurance claims and expenses)
68 Annual Report 2017 − Allianz Group on liquidity risks. These analyses are performed at the operating entity level and are monitored by the Group.
With the support of Group Communications and Corporate Responsibility (GCORE), Group Compliance, and the ESG Office1, Group
All Group and local functions affected cooperate in the identification of reputational risk. GCORE is responsible for risk assessment, which is based on a group-wide methodology. Since 2015, Allianz has embedded conduct risk triggers for fair products and services into the reputational risk management process.
1_The Allianz Environmental, Social, Governance (ESG) Board and the ESG office are constituted as advisor to the Board of Management of Allianz SE and will further elevate environmental, social, and governance aspects in corporate governance and decision-making processes at the Allianz Group.
The required risk capital is defined as the difference between the current portfolio value and the portfolio value under adverse conditions at the 99.5 % confidence level. Because we consider the impact of a negative or positive event on all risk sources and covered businesses at the same time, diversification effects across products and regions are taken into account. The results of our Monte Carlo simulation allow us to analyze our exposure to each source of risk both separately and in aggregate. We also analyze several pre-defined stress scenarios representing historical events, reverse stress tests, and adverse scenarios relevant for our portfolio. Furthermore, we conduct ad-hoc stress tests monthly to reflect current political and financial developments or to analyze a non-financial risk category more deeply.
4_For further information about participating life business, please refer to note 15 to the consolidated financial statements.
5_Under book value deduction, the book value of the respective entity is deducted from eligible Own Funds of the Group.
Repor t imately 1.7 % (2016: 1.7 %) of our total pre-diversified Group solvency requirement. Therefore, risk management with respect to banking operations is not discussed in more detail.
For our Asset Management business segment, we assign internal risk capital requirements based on sectorial regulatory capital requirements. The Asset Management business is mainly affected by operational risks. However, since most of our Asset Management business is not located within the Eurozone, at Group level its participation value bears a foreign exchange rate risk. Our Asset Management business is covered by adequate risk controlling processes, including qualitative risk assessments (such as the Top Risk Assessment ) and regular reporting to the Group. As the impact on the
Group’s total solvency requirement is minor, risk management with respect to Asset Management is not discussed in more detail.
In addition, we adjust the risk-free yield curves by a volatility adjustment in most markets where a volatility adjustment is defined by
EIOPA and approved by the local regulator. This is done to better reflect the underlying economics of our business, as the cash flows of our insurance liabilities are largely predictable. The advantage of being a long-term investor, therefore, is the opportunity to invest in bonds yielding spreads over the risk-free return and earning this additional yield component over the duration of the bonds. Being a long-term investor mitigates much of the risk of forced selling of debt instruments at a loss prior to maturity.
VALUATION ASSUMPTIONS: REPLICATING PORTFOLIOS We replicate the liabilities of our Life/Health insurance business as well as for our internal pension obligations. This technique enables us to represent all product-related options and guarantees, both contractual and discretionary, by means of standard financial instruments.
In the risk calculation we use the replicating portfolio to determine and revalue these liabilities under all potentially adverse
1_Due to late availability of EIOPA publication, the risk-free interest rate term structure used might slightly differ from the one published by EIOPA.
DIVERSIFICATION AND CORRELATION ASSUMPTIONS Our internal model considers concentration, accumulation, and correlation effects when aggregating results at Group level. The resulting diversification reflects the fact that not all potential worst-case losses are likely to materialize at the same time. As we are an integrated financial services provider offering a variety of products across different business segments and geographic regions, diversification is key to our business model.
Germany), risk categories (e.g. market risk vs. underwriting risk), and subcategories within the same risk category (e.g. commercial vs.
Where possible, we derive correlation parameters for each pair of market risks through statistical analysis of historical data, considering quarterly observations over more than a decade. In case historical data or other portfolio-specific observations are insufficient or not available, correlations are set by the Correlation Settings Committee, which combines the expertise of risk and business experts in a welldefined and controlled process. In general, when using expert judgment we set the correlation parameters to represent the joint movement of risks under adverse conditions. Based on these correlations, we use an industry-standard approach, the Gaussian copula, to determine the dependency structure of quantifiable sources of risk within the applied Monte Carlo simulation.
Furthermore, we validate the model and parameters through sensitivity analyses, independent internal peer reviews and, where appropriate, independent external reviews, focusing on methods for
70 Annual Report 2017 − Allianz Group selecting parameters and control processes. To ensure proper validation we established an Independent Validation Unit (IVU) within
Group Risk, responsible for validating our internal model within a comprehensive model validation process. Overall, we believe that our validation efforts are effective and that the model adequately assesses the risks to which we are exposed.
The construction and application of the replicating portfolios mentioned are subject to the set of available replicating instruments and might be too simple or restrictive to capture all factors affecting the change in value of liabilities. As with other model components, the replications are subject to independent validation and to suitability assessments as well as to stringent data and process quality controls. Therefore, we believe that the liabilities are adequately represented by the replicating portfolios.
MODEL CHANGES IN 2017 In 2017, our internal model has been adjusted based on regulatory developments, validation of our model, and assessment of its appropriateness, as well as feedback received during the ongoing consultations with regulators. For the sake of clarity, all model changes and the resulting impacts on our risk profile are presented jointly within this section, based on data as of 31 December 2016.
The net impact of model changes in 2017 was € (82) mn. Behind this small net result were larger, offsetting impacts: risk capital increased by € 2 bn due to a change in real world credit spread scenarios and stochastic cash flow models for selected life entities, offset by favorable changes for own pensions, the inclusion of negative interest rate scenarios, and various minor and immaterial model changes.
We also updated the approach used for allocating risk capital to business segments and related undertakings by aligning it with the contributions derived from the tail scenarios underpinning our Group risk capital requirements. As a consequence, financial market risk categories (especially in the Life/Health segment) tend to be allocated more risk capital because they diversify less “in the tail” while the other risk categories are generally allocated less risk capital as they diversify more “in the tail”.
Allianz Group: Impact of model change – allocated risk according to the risk profile (total portfolio before non-controlling interests) € mn
Market risk Credit risk Underwriting risk Business risk Operational risk Diversification Total 1_2016 risk profile figures recalculated based on model changes in 2017 and the impact of minor and immaterial model changes were allocated proportionally.
In 2017, the changes to our internal model focused on the following risk categories: MARKET RISK Market risk was significantly affected by the negative interest rate, the credit spread, and the new cash flow model changes. The combined impact of the model changes on the total market risk was an increase of € 3.4 bn to € 24.9 bn (2016: € 21.5 bn).
Repor t tion approach (€ (0.7) bn). There was no central model change performed in 2017 for the Life/Health underwriting risk and the local changes for this module were either minor or immaterial. The remaining impact therefore results from changes that affect the local cash flow models, in particular the introduction of the negative interest rate modeling and a new local cash flow model.
The risk profile and relative contributions have changed in 2017, predominantly due to changes in the market environment as well as to management actions such as the decrease in asset durations, the reduction of exposures to some sovereign bond investments, and the significant increase in exposures to real estate and infrastructure investments.
POTENTIAL RISKS IN THE FINANCIAL MARKET AND IN OUR OPERATING ENVIRONMENT Financial markets are characterized by historically low interest rates and risk premiums, prompting investors to look for higher yielding – and potentially higher-risk – investments. In addition to sustained low interest rates, the challenges of implementing longterm structural reforms in key Eurozone countries and the uncertainty about the future path of monetary policy may lead to increasing market volatility. This could be accompanied by a flight to quality, combined with falling equity and bond prices due to rising spread levels, even in the face of potentially lower interest rates. Also, possible asset bubbles (as observed in the Chinese equity market) might spill over to other markets, or rising geopolitical tensions – e.g. caused by the North Korean missile program – might trigger market sell-offs, which would contribute to increasing volatility. We therefore continue to closely monitor political and financial developments – such as the
Brexit in the United Kingdom, the European migrant crisis and the rise of Euroscepticism, or the situation on the Korean peninsula – in order to manage our overall risk profile to specific event risks.
REGULATORY DEVELOPMENTS Following the approval of our internal model in November 2015, the model has been fully applied since the beginning of 2016. There is still uncertainty about the future capitalization requirements of
− Finally, the Group has the additional advantage of being welldiversified, both geographically and across a broad range of businesses and products.
The following table summarizes our Solvency II regulatory capitalization ratios disclosed over the course of the year 2017.
Compared to year-end 2016, our Solvency II capitalization increased by 11 percentage points to 229 % (2016: 218 %). This was driven by an increase in Own Funds and an overall decrease in the Solvency II
1_Own Funds and capital requirement are calculated under consideration of volatility adjustment and yield curve extension, as described in section Risk-free rate and volatility adjustment.
This Risk and Opportunity Report outlines the Group’s risk figures, reflecting its risk profile based on pre-diversified risk figures and group diversification effects.
The Group-diversified risk is broken down as follows: Allianz Group: Allocated risk according to the risk profile (total portfolio before non-controlling interests) € mn
capital requirement was mainly due to favorable market developments, specifically an increase in interest rates and a tightening of credit spreads. Management actions predominantly driven by M&A
transactions increased the SCR, which was mostly offset by the contribution of business evolution.
Total Group 2,481 3,941 (2,250) (2,489) 10,508 12,774 8,809 8,701 2,000 1,945 69 54 21,617 24,925 Share of total Group pre-diversified risk 42.9 % 46.1 %
REAL ESTATE RISK As of 31 December 2017, about 4.0 % (2016: 3.3 %) of the total prediversified risk was related to real estate exposures.
Share of total Group pre-diversified risk % 13.8 14.9 1_2016 risk profile figures recalculated based on model changes in 2017 and the impact of minor and immaterial model changes were allocated proportionally.
CREDIT RISK – INVESTMENTS As of 31 December 2017, the credit risk arising from our investment portfolio accounted for 85.2 % (2016: 86.4 %) of our total Group prediversified internal credit risk1.
CREDIT RISK – REINSURANCE As of 31 December 2017, 0.7 % (2016: 0.5 %) of our total Group prediversified internal credit risk was allocated to reinsurance exposures
As of 31 December 2017, 67.8 % (2016: 84.0 %) of the Allianz
Group’s reinsurance recoverables were distributed among reinsurers that had been assigned at least an “A-” rating. The non-rated reinsur-
The increase in total and non-rated exposure mainly results from the inclusion of reinsurance captive exposures in the rating overview 1_Additionally, 4.5 % (2016: 5.7 %) of our total Group pre-diversified internal credit risk is allocated to receivables, potential future exposure for derivatives and reinsurance, and other off-balance sheet exposures
Non-investment grade 0.01 1_Represents gross exposure broken down by reinsurer. For 2017 reinsurance captives exposure included.
Total Group 515 377 (16) 13 5,005 4,444 5,799 5,795 675 533 11,978 11,162 Share of total Group pre-diversified risk 23.76 % 20.63 %
BUSINESS RISK There was no significant impact on the overall business risk from regular model updates or the evolution of our business. The business risk contribution remained stable at € 4.4 bn.
LIQUIDITY RISK Detailed information regarding the Allianz Group’s liquidity risk exposure, liquidity, and funding – including changes in cash and cash equivalents – is provided in Liquidity and Funding Resources from page 57 onwards and in notes 12, 18 and 33 to the consolidated financial statements. As inferred from the section on management of liquidity risks and interest rate risks, they are properly managed and monitored but not quantified.
In line with both our prudent approach to risk governance and compliance with regulatory requirements, we have created a structure to identify and mitigate the risk of material errors in our consolidated financial statements (this also includes our market value balance sheet and risk capital controls). Our system of internal control over financial reporting (ICOFR) is regularly reviewed and updated.
IT General Controls (ITGC) and controls at process levels. The ELCA
IRCS). The methodology is described in our ICOFR manual and the IRCS Guideline. During the scoping process, both materiality and susceptibility to a misstatement are considered simultaneously. In addition to the quantitative calculation, we also consider qualitative criteria – such as expected increase in business volume – which are provided by different Group Centers, Group Audit, and external Audit.
− Preventive and detective key controls to address financial reporting risks have been put in place to reduce the likelihood and impact of financial misstatements. If a potential risk materializes, actions are taken to reduce the impact of the financial misstatement. Given the strong dependence of financial reporting processes on information technology systems, we also implement IT
− Finally, we focus on ensuring that controls are appropriately designed and effectively executed to mitigate risk. We have set consistent documentation requirements across the Allianz Group for elements such as processes, related key controls, and execution. We conduct an annual assessment of our control system to maintain and continuously enhance its effectiveness. Group Audit and local internal audit functions ensure that the overall quality of our control system is subjected to regular control-testing, to assure reasonable design and operating effectiveness. Internal Audit does so through a comprehensive risk-based approach, which assesses the key controls of the company’s internal procedures and processes, including local and group-internal controls over financial reporting risks, from an integrated perspective.
GOVERNANCE Responsibility for ensuring the completeness, accuracy, and reliability of our consolidated financial statements rests with the Chairman of the Allianz SE Board of Management, as well as the board member responsible for Finance, Controlling, and Risk, supported by Group
The Group Disclosure Committee ensures that these board members are made aware of all material information that could affect our disclosures, and assesses the completeness and accuracy of the information provided in the quarterly statements, half-year, and annual financial reports as well as in the Solvency II qualitative reports1. In 2017, the Group Disclosure Committee met on a quarterly basis before the quarterly statements and financial reports were issued. An additional meeting was held prior to issuance of the Solvency II qualitative reports.
Financial assets carried at fair value through income 5 8,177 8,333
Total liabilities and equity 901,300 883,809 1_Due to the change in accounting policies for GMIBs, the figures as of 31 December 2016 have been adjusted retrospectively. For further information please refer to note 2.
Change in reserves for insurance and investment contracts (net) 26 (14,427) (13,201)
Changes in actuarial gains and losses on defined benefit plans 100 (335)
For further information on the income taxes associated with different components of other comprehensive income, please see note 32.
interests Total equity 1_Due to the change in accounting policies for GMIBs, the balance as of 1 January 2016 has been adjusted retrospectively. For further information please refer to note 2.
2_Total comprehensive income in shareholders’ equity for the year ended 31 December 2017 comprises net income attributable to shareholders of € 6,803 mn (2016: € 6,962 mn).
Other investments, mainly financial assets held for trading and designated at fair value through income (2,481) 2,710
Net change in: Financial assets and liabilities held for trading 5,144 (3,026)
Reverse repurchase agreements and collateral paid for securities borrowing transactions 130 (696)
Repurchase agreements and collateral received from securities lending transactions 108 (1,278)
Non-current assets and disposal groups classified held for sale (199) (1)
Business combinations (note 3): Proceeds from sale of subsidiaries, net of cash disposed - (8)
Treasury bills, discounted treasury notes, similar treasury securities, bills of exchange and checks 6,331 6,241
Changes in the consolidated subsidiaries of the Allianz Group (180) - (180)
Allianz SE is recorded in the Commercial Register of the municipal court in Munich under the number HRB 164232.
They have been prepared in conformity with International Financial Reporting Standards (IFRS), as adopted under European Union
(E.U.) regulations in accordance with § 315e (1) of the German Commercial Code (HGB). Within these consolidated financial statements, the Allianz Group has applied all standards and interpretations issued by the IASB and endorsed by the E.U. that are compulsory as of
Life/Health insurance, and Asset Management products and services in over 70 countries.
Allianz SE, directly or indirectly, owns more than half of the voting rights or similar rights with the ability to affect the returns of the subsidiaries for its own benefit. In order to determine whether entities qualify as subsidiaries, potential voting rights that are currently exercisable or convertible are taken into consideration.
For some subsidiaries where the Allianz Group does not hold a majority stake, management has assessed that the Allianz Group controls these companies. The Allianz Group controls these entities based on distinctive rights stipulated by shareholder agreements between the Allianz Group and the other shareholders in these companies.
Allianz Group internal asset managers. In such cases, the investment fund qualifies as subsidiary if the Allianz Group is in a principal instead of an agent role with regard to the investment fund. Above all, this qualification takes into account kick-out rights held by third-party investors as well as the aggregate economic interest of the
Allianz Group no longer maintains control. Accounting policies of subsidiaries are adjusted as necessary to ensure consistency with the accounting policies adopted by the Allianz Group. The effects of intra-
Although the Allianz Group’s share in some companies is below 20 %, management has assessed that the Allianz Group has significant influence over these companies because it is represented in the governing bodies that decide on the relevant activities of these companies.
Allianz Group has no significant influence because it is not represented in the governing bodies of these investment funds.
Assets and liabilities of subsidiaries not reporting in Euro are translated at the closing rate on the balance sheet date; income and expenses are translated at the quarterly average exchange rate. Any foreign currency translation differences, including those arising from the equity method, are recorded in other comprehensive income.
A financial asset is derecognized when the contractual rights to the cash flows from the financial asset expire or the Allianz Group transfers the asset and substantially all of the risks and rewards of ownership. A financial liability is derecognized when it is extinguished.
The Allianz Group enters into securities lending transactions and repurchase agreements. Cash received in the course of those trans­actions is recognized together with a corresponding liability.
The evaluation of whether a financial debt instrument is impaired requires analysis of the underlying credit risk/quality of the relevant issuer and involves significant management judgment. In particular, current publicly available information with regard to the issuer and the particular security is considered relating to factors including, but not limited to, evidence of significant financial difficulty of the issuer and breach of contractual obligations of the security, such as a default or delinquency on interest or principal payments. The
Allianz Group’s policy considers a decline to be significant if the fair value is below the weighted average cost by more than 20 %. A decline is considered to be prolonged if the fair value is below the weighted average cost for a period of more than nine consecutive months. If an available-for-sale equity security is impaired, any further declines in the fair value at subsequent reporting dates are recognized as impairments.
These assets are accounted for as property, plant and equipment in line with IAS 16. Hence, they are carried at cost less accumulated depreciation and impairments.
LOANS AND ADVANCES TO BANKS AND CUSTOMERS Loans and advances are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and which are not classified as financial assets held for trading, designated at fair value through income, or designated as available for sale.
These assets are initially measured at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at amortized cost using the effective interest rate method.
FINANCIAL ASSETS AND LIABILITIES FOR UNITLINKED CONTRACTS Financial assets for unit-linked contracts are recorded at fair value, with changes in fair value recognized in the income statement together with the offsetting changes in fair value of the corresponding financial liabilities for unit-linked contracts.
For short-duration, traditional long-duration, and limitedpayment insurance contracts, DAC is amortized in proportion to premium revenue recognized. For universal life-type and participating life insurance contracts as well as investment contracts with discretionary participation features, DAC is generally amortized over the life of a book of contracts based on estimated gross profits (EGP) or estimated gross margins (EGM), respectively.
Acquisition costs for unit-linked investment contracts are deferred in accordance with IAS 18 if the costs are incremental. For nonunit -linked investment contracts accounted for under IAS 39 at amortized cost, acquisition costs that meet the definition of transaction costs under IAS 39 are considered in the aggregate policy reserves.
The table below summarizes estimated useful lives for real estate held for own use, equipment and software.
Acquired business portfolios 13 – 42 in proportion to the consumption of future economic benefit
The recoverable amounts of all cash generating units (CGUs) to test goodwill and other indefinite life intangible assets for impairment are typically determined on the basis of value in use calculations. The determination of a CGU’s recoverable amount requires significant judgment regarding the selection of appropriate valuation techniques and assumptions. These assumptions include, for example, the selection of input parameters for the projection of future earnings. Further explanations on the impairment test for goodwill and its significant assumptions as well as respective sensitivity analyses are given in note 11.
Insurance contracts and investment contracts with discretionary participating features are accounted for under the insurance accounting provisions of US GAAP, as have been applied at first-time adoption of IFRS 4 on 1 January 2005, wherever IFRS 4 does not provide specific guidance. Investment contracts without discretionary participation features are accounted for as financial instruments in accordance with IAS 39.
Liability adequacy tests are performed for each insurance portfolio, based on estimates of future claims, costs, premiums earned, and proportionate investment income. For short-duration contracts, a premium deficiency is recognized if the sum of expected claim costs and claim adjustment expenses, expected dividends to policyholders,
For long-duration contracts, a premium deficiency is recognized, if actual experience regarding investment yields, mortality, morbidity, terminations, or expense indicates that existing contract liabilities, along with the present value of future gross premiums, will not be sufficient to cover the present value of future benefits and to recover
These case reserves are regularly re-evaluated in the ordinary course of the settlement process and adjustments are made as new information becomes available.
The aggregate policy reserves for participating life insurance contracts are calculated using the net level premium method based on assumptions for mortality, morbidity and interest rates that are guaranteed in the contract or used in determining the policyholder dividends (or premium refunds).
Insurance contract features not closely related to the underlying insurance contracts are bifurcated from the insurance contracts and accounted for as derivatives in line with IFRS 4 and IAS 39.
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
Stage two: 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
Property-Casualty reserves are set by leveraging the use of actuarial techniques and educated judgment. A two-stage process exists for the setting of reserves in the Allianz Group: Stage one: Property-Casualty reserves are calculated by local reserving actuaries at the Allianz operating entities. Reserves are set based on a thorough analysis of historical data, enhanced by inter ­actions with other business functions (e.g. Underwriting, Claims and Reinsurance). Actuarial judgment is applied where necessary, especially in cases where data is unreliable, scanty or unavailable.
Repor t premium exceeding the issued capital received at the issuance of shares.
Revenues for universal life-type and investment contracts represent charges assessed against the policyholders’ account balances for front-end loads, net of the change in unearned revenue liabilities, cost of insurance, surrenders, and policy administration, and are included within premiums earned (net).
INCOME TAXES Current income taxes are calculated based on the respective local taxable income and local tax rules for the period. In addition, current income taxes presented for the period include adjustments for uncertain tax payments or tax refunds for periods not yet finally assessed, including interest expenses and penalties on the underpayment of taxes. In the event that amounts included in the tax return are considered unlikely to be accepted by the tax authorities (uncertain tax positions), a provision for income taxes is recognized. The amount is based on the best possible assessment of the tax payment expected.
Changes in deferred tax assets and liabilities are generally recognized through profit and loss in the consolidated income statement, except for changes recognized directly in equity.
(GMIBs), which were sold as part of its variable annuity portfolio. In order to mitigate accounting mismatches between the hedging derivatives and the GMIBs, the Allianz Group has started measuring the
GMIBs at fair value through profit or loss as of 1 January 2017. This change in measurement is permitted by IFRS 4 and represents an accounting policy change. Accounting policy changes have to be applied retrospectively. The total effect of the new measurement on prior period numbers is as follows: Changes to the consolidated balance sheet resulting from the change in accounting policies for GMIBs as of 1 January 2016 € mn
Financial liabilities carried at fair value through income 9,207 668 9,875
Changes to the consolidated balance sheet resulting from the change in accounting policies for GMIBs as of 31 December 2016 € mn
Financial liabilities carried at fair value through income 10,737 534 11,271
(net). Together with the increase of income taxes of € 42 mn, the net income increased by € 79 mn. This led to a 17 cent increase in earnings per share.
IFRS 17, Insurance Contracts, was issued by the IASB in May 2017, with the effective date of 1 January 2021 (retrospective application).
IFRS 17 provides comprehensive guidance on accounting for insurance contracts and investment contracts with discretionary participation features. For non-life insurance contracts, IFRS 17 introduces mandatory discounting of loss reserves as well as a risk adjustment for non-financial risk. Further, IFRS 17 will change the presentation of insurance contract revenue, a gross written premium will no longer be presented in the statement of comprehensive income.
Due to the strong interaction between underlying assets held and the measurement of direct participating insurance contracts, the
Allianz Group decided to use the option to defer the full implementation of IFRS 9 until IFRS 17 becomes effective on 1 January 2021. The amendment to IFRS 4, which allows this deferral, has been endorsed by the EU in November 2017.
It can be assumed that the main impact from IFRS 9 will arise from the new classification rules leading to more financial instruments being measured at fair value through profit and loss as well as from the new impairment model. In this context, interdependencies
Repor t with IFRS 17 have to be considered to come to a final conclusion on the combined impact of both standards.
The Allianz Group is currently assessing the impact of the application of both IFRS 17 and IFRS 9. As of the date of the publication of these consolidated financial statements it is not practicable to quantify the effect on the Allianz Group consolidated financial statements.
Customers. IFRS 15 supersedes IAS 18, IAS 11, and a number of revenue -related interpretations. With the introduction of IFRS 15, the IASB
pursued the objective of developing a single revenue standard containing comprehensive principles for recognizing revenue. The effective date is 1 January 2018.
The Allianz Group revenues in scope of IFRS 15 are fee and commission income primarily consisting of asset management and performance fees. The management fees are currently recognized when the services are provided. Performance fees are recognized as fee income after the respective benchmark period is completed.
Under IFRS 15, revenue will be recognized when (or as) the
The Allianz Group has completed an initial assessment of the potential impact on its consolidated financial statements but has not yet completed its detailed assessment. The actual impact of applying
Allianz Group will recognize new assets and liabilities for its operating leases. As at 31 December 2017, the Allianz Group future minimum lease payments under non-cancellable operating leases amounted to € 3.0 bn on an undiscounted basis (see note 37). In addition,
IFRS 16 replaces the straight-line operating lease expenses with a depreciation charge for right-of-use assets and interest expenses on lease liabilities.
In addition to the above-mentioned accounting pronouncements recently issued, the following amendments and revisions to standards and interpretations have been issued by the IASB but are not yet effective for or adopted early by the Allianz Group.
IFRS 10 and IAS 28, Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
IFRS 15, Clarification to IFRS 15 Annual periods beginning on or after 1 January 2018
SIGNIFICANT CHANGES IN NON-CONTROLLING INTERESTS In November and December 2017, the Allianz Group acquired approximately 15 % of Euler Hermes Group SA share capital for € 779 mn in cash, equivalent to € 122 per share. As a result, the
PROPERTY-CASUALTY In the business segment Property-Casualty, reportable segments offer a wide variety of insurance products to both private and corpo-
Repor t rate customers, including motor liability and own damage, accident, general liability, fire and property, legal expense, credit, and travel insurance.
Europe, and the Asia-Pacific region represent the primary asset management markets.
GENERAL SEGMENT REPORTING INFORMATION Prices for transactions between reportable segments are set on an arm’s length basis in a manner similar to transactions with third parties. Transactions between reportable segments are eliminated in the consolidation. Financial information is recorded based on reportable segments; cross-segmental country-specific information is not determined.
− profit (loss) of substantial subsidiaries classified as held for sale.
Southern Europe, Middle East, Africa, Asia Pacific. Previously reported information has been adjusted to reflect this change in the composition of the Allianz Group’s reportable segments.
Financial assets carried at fair value through income 604 539 7,442 7,427
Loans and advances to banks and customers 10,610 11,508 92,674 93,142
Non-current assets and assets of disposal groups classified as held for sale 23 97 204 146
Financial liabilities carried at fair value through income 133 129 11,021 10,928
BUSINESS SEGMENT INFORMATION – TOTAL REVENUES AND RECONCILIATION OF OPERATING PROFIT (LOSS) TO NET INCOME (LOSS)
Operating income from financial assets and liabilities carried at fair value through income (net) (78) (23) (1,149) (863)
Acquisition and administrative expenses (net), excluding acquisition-related expenses (13,537) (13,352) (6,565) (6,612)
Non-operating income from financial assets and liabilities carried at fair value through income (net) (5) (53) 46 26
Non-operating change in reserves for insurance and investment contracts (net) - - (61) -
Net income (loss) attributable to: 1_Total revenues comprise statutory gross premiums written in Property-Casualty and Life/ Health, operating revenues in Asset Management, and total revenues in Corporate and Other (Banking).
2_For the year ended 31 December 2017, includes expenses for premium refunds (net) in Property-Casualty of € (215) mn (2016: € (255) mn).
German Speaking Countries and Central & Eastern Europe 14,820 14,465 12,446 12,111 1,369 1,609 1,175 1,394
Western & Southern Europe, Middle East, Africa, Asia Pacific 12,675 12,915 11,477 11,522 1,950 1,707 1,327 1,146
Global Insurance Lines & Anglo Markets 21,842 22,113 15,386 15,725 1,281 1,900 1,077 1,560
Western & Southern Europe, Middle East, Africa, Asia Pacific1 28,781 26,191 6,990 7,114 1,356 1,233 975 545
Global Insurance Lines & Anglo Markets 573 587 372 390 38 30 26 25 1_From the classification of the Korean life business as "held for sale" in the second quarter of 2016 until its disposal in the fourth quarter of 2016, the total result was considered as non-operating.
Repor t 5 _ Financial assets carried at fair value through income
Government and government agency bonds1 177,186 22,551 (827) 198,911 173,456 27,121 (1,663) 198,914 1_As of December 2017, fair value and amortized cost of bonds from countries with a rating below AA amount to € 74,132 mn (2016: € 73,519 mn) and € 68,638 mn (2016: € 67,571 mn), respectively.
Government and government agency bonds 2,368 271 (19) 2,621 2,001 342 - 2,343 1_Also include corporate mortgage-backed securities.
2_As of 31 December 2017, fair value and amortized cost of debt securities with a contractual maturity of less than 12 months amount to € 186 mn (2016: € 294 mn) and € 184 mn (2016: € 287 mn), respectively.
The unrealized losses on the Allianz Group’s investments in government bonds are spread over several countries with the main part coming from Europe.
The main impact from unrealized losses on corporate bonds comes from the financial and consumer sector.
INVESTMENTS IN ASSOCIATES AND JOINT VENTURES As of 31 December 2017, loans to associates and joint ventures
Changes in the consolidated subsidiaries of the Allianz Group (193) (1)
1_Includes loans and advances to banks and customers due within one year of € 10,055 mn (2016: € 11,677 mn).
The reserves for loss and loss adjustment expenses ceded to reinsurers in the business segment Property-Casualty amounted to € 9,587 mn (2016: € 8,119 mn) as of 31 December 2017. Their change is shown in the respective table in note 14.
The Allianz Group reinsures a portion of the risks it underwrites in an effort to control its exposure to losses and events and to protect its capital resources. For natural catastrophe events, the Allianz Group has a centralized program in place that pools exposures from its subsidiaries by internal reinsurance agreements. Allianz SE limits exposures in this portfolio through external reinsurance. For other risks, the subsidiaries of the Allianz Group have individual reinsurance programs in place. Allianz SE participates with up to 100 % on an arm’s length basis in these cessions, in line with local requirements.
Changes in the consolidated subsidiaries of the Allianz Group - 31
Derivative financial instruments used for hedging that meet the criteria for hedge accounting, and firm commitments 538 677
Carrying amount as of 1 January 3,024 2,640 1,477 3,261 2,361 1,426
Carrying amount as of 31 December 2,9411 2,7862 1,432 3,024 2,640 1,477
2_As of 31 December 2017, includes € 1,838 mn (2016: € 1,708 mn) for self-developed software and € 948 mn (2016: € 932 mn) for software purchased from third parties.
Intangible assets € mn 1_Primarily include the long-term distribution agreements with Commerzbank AG of € 223 mn (2016: € 261 mn), Banco
Popular S.A. of € 352 mn (2016: € 371 mn), Yapi ve Kredi Bankasi A.S. of € 71 mn (2016: € 96 mn), Philippine National
Bank of € 67 mn (2016: € 83 mn) and HSBC Asia, HSBC Turkey, BTPN Indonesia and Maybank Indonesia of € 110 mn 2_Primarily include acquired business portfolios, customer relationships, heritable building rights, land use rights, lease rights, renewal rights and brand names.
CGUs in the Property-Casualty business segment are: − Insurance German Speaking Countries,
− Specialty Lines I, including Allianz Re, Allianz Global Corporate &
Insurance Western & Southern Europe, Middle East and Africa 1,371 1,418
Insurance Western & Southern Europe, Middle East and Africa 651 655
The recoverable amounts for all CGUs are determined on the basis of value in use calculations. The Allianz Group applies generally acknowledged valuation principles to determine the value in use.
For all CGUs in the Property-Casualty business segment and for the CGU Asset Management, the Allianz Group uses the discounted earnings method to derive the value in use. Generally, the basis for the determination of the discounted earnings value is the business plan (“detailed planning period”) as well as the estimate of the sustainable returns and eternal growth rates, which can be assumed to be realistic on a long-term basis (“terminal value”) for the operating entities included in the CGU. The discounted earnings value is calculated by discounting the future earnings using an appropriate discount rate. The business plans applied in the value in use calculations are the results of the structured management dialogues between the
Board of Management of Allianz SE and the operating entities in connection with a reporting process integrated into these dialogues.
Insurance Western & Southern Europe, Middle East and Africa 9.1 2.1
Repor t to the amount that the entity would be expected to require in order to take on and meet the insurance and reinsurance obligations.
CGUs in the Life/Health business segment Reference rate for entities with Appraisal Value based on MCEV
Euro swap curve minus 10 bps credit risk adjustment plus 4 bps volatility adjustment CHF swap curve minus 10 bps credit risk adjustment minus 3 bps volatility adjustment
For those entities reporting in Euro: Euro swap curve minus 10 bps credit risk adjustment plus 4 bps volatility adjustment For other entities: Local swap curve minus 10 bps credit risk plus volatility adjustment for the following currencies only (HRK: 4 bps, CZK: 4 bps, PLN: 11 bps)
For entities included in the CGU of the Asset Management business segment, key assumptions include assets under management growth, cost-income ratio, and risk capital. The key assumptions are based on the current market environment. The discount rate for the
Foreign currency translation adjustments and other changes1 (2,232) 646 (1,586) 407 (84) 323
CALENDAR YEAR PREMIUMS EARNED AND ULTIMATE LOSS RATIOS FOR THE INDIVIDUAL ACCIDENT YEARS AT THE RESPECTIVE REPORTING DATE (NET)
The ultimate loss of an accident year comprises all payments made for that accident year up to the reporting date, plus the loss reserves at the reporting date. Given complete information regarding all losses incurred up to the reporting date, the ultimate loss for each accident-year period would remain unchanged. In practice, however, the ultimate loss (based on estimates) is exposed to fluctuations that reflect the increase in knowledge regarding the loss cases. The loss ratio presented above deviates from the reported loss ratio because the ultimate loss in the table above is based on the sum of the payments plus the loss reserves, not the incurred loss from the consolidated income statement. This means that effects like changes in consolidated subsidiaries, foreign currency translation and unwinding of discounted loss reserves are presented differently.
Ending balance of discounted loss reserves 4,093 4,055 1_Mainly relate to insurance contracts when policyholders change their contract from an unit-linked to an universal lifetype contract.
As of 31 December 2017 and 2016, the Allianz Group’s reserves for insurance and investment contracts for the business segment
Western & Southern Europe, Middle East, Africa, Asia Pacific 120,632 84,545 205,177 121,386 75,000 196,386
Global Insurance Lines & Anglo Markets 903 - 903 1,038 - 1,038
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 on a portfolio level, 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.
Life/Health, comprising 86 % (2016: 86 %) of the aggregate policy reserves in this business segment in 2017, can be summarized by country as follows: Weighted average guaranteed minimum interest rates of life insurance entities
Allianz Finance II B.V., Amsterdam DE000A1HG1J8 2013 EUR 500 1.375 13 March 2018
AUTHORIZED CAPITAL As of 31 December 2017, Allianz SE had authorized capital with a notional amount of € 550 mn for the issuance of new shares until 6 May 2019 (Authorized Capital 2014/I). The shareholders’ subscription rights can be excluded for capital increases against contribution in kind. For a capital increase against contributions in cash, the shareholders’ subscription rights can be excluded: (i) for fractional amounts, (ii) if the issue price is not significantly below the market price and the shares issued under exclusion of the subscription rights pursuant to § 186 (3) sentence 4 of the German Stock Corporation Act
In addition, Allianz SE has authorized capital (Authorized Capital 2014/II) for the issuance of shares against cash until 6 May 2019. The shareholders’ subscription rights can be excluded in order to issue new shares to employees of Allianz SE and its Group companies. As of 31 December 2017, the Authorized Capital 2014/II amounted to
General Meeting (AGM) on 5 May 2010 or 7 May 2014, are exercised or the conversion obligations under such bonds are fulfilled, and only to the extent that the conversion or option rights or conversion obligations are not serviced through treasury shares or through shares from authorized capital.
Within 10 years after the issuance a mandatory conversion of the notes into Allianz shares at the then prevailing share price may apply if certain events occur, subject to a floor price of at least € 74.90 per share. Within the same period, the investors have the right to convert the notes into Allianz shares at a price of € 187.26 per share. Both conversion prices are as of inception and subject to anti-dilution provisions. The subscription rights of shareholders for these convertible notes have been excluded with the consent of the Supervisory
Number of issued shares outstanding as of 31 December 438,879,929 455,067,737
PROPOSAL FOR APPROPRIATION OF NET EARNINGS The Board of Management and the Supervisory Board propose that the net earnings (“Bilanzgewinn”) of Allianz SE of € 4,117,338,522.10 for the 2017 fiscal year shall be appropriated as follows: − Distribution of a dividend of € 8.00 per no-par share entitled to a
TREASURY SHARES As of 31 December 2017, Allianz SE held 1,369,131 (2016: 1,931,677)
shares were sold to employees of Allianz SE as well as its subsidiaries in Germany and abroad in the context of the Employee Stock Purchase Plan. These shares were taken from the stock of treasury shares dedicated to this purpose. In 2017, as in the previous year, no capital increase for the purpose of Employee Stock Purchase Plans was undertaken. Employees of the Allianz Group purchased shares at € 121.84) per share. As of 31 December 2017, the remaining treasury shares of Allianz SE held for covering subscriptions by employees in the context of the Employee Stock Purchase Plan of Allianz SE and its subsidiaries in Germany and abroad amounted to 343,102 shares.
The treasury shares of Allianz SE and its subsidiaries represent € 3.6 mn (2016: € 5 mn) or 0.31 % (2016: 0.42 %) of the issued capital as of 31 December 2017.
SHARE BUY-BACK PROGRAM 2017 In its meeting on 16 February 2017, the Board of Management of
Allianz SE has resolved to conduct a share buy-back program in an amount of up to € 3 bn within a period of twelve months. The share buy-back program is based on the authorization granted by the
Annual General Meeting on 7 May 2014. In the period between 17 February 2017 and 15 December 2017, total of 16,750,354 treasury shares with a market value of € 2,999,969,793.55 have been acquired for an average price of € 179.10. All of the treasury shares acquired within the share buy-back program 2017 have been redeemed according to the simplified procedure without reduction of the share capital.
The Allianz Group’s Own Funds as well as capital requirements are based on the market value balance sheet approach.1 The eligible
Compared to year-end 2016, our Solvency II capitalization increased by 11 percentage points to 229 % (2016: 218 %). This was driven by an increase in Own Funds and an overall decrease in the
capitalization, please refer to the section “Solvency II regulatory capitalization” of the Risk and Opportunity Report.
Some insurance subsidiaries of the Allianz Group are subject to regulatory restrictions on the amount of dividends which can be remitted to Allianz SE without prior approval by the appropriate regulatory body. Such restrictions require that a company may only pay dividends up to an amount in excess of certain regulatory capital levels, or based on the levels of undistributed earned surplus or current year income or a percentage thereof. The Allianz Group believes that these restrictions will not affect the ability of Allianz SE to pay dividends to its shareholders in the future.
Income from financial assets and liabilities designated at fair value through income (net) 300 139
Foreign currency gains and losses (net)1 (3,822) 1,272 1_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 and not measured at fair value through income.
Investment advisory and banking activities 916 735 25 _ Claims and insurance benefits incurred (net)
For the years ended 31 December 2017 and 2016, the income taxes relating to components of other comprehensive income consist of the following: Income taxes relating to components of other comprehensive income € mn
Changes in actuarial gains and losses on defined benefit plans (46) 148
The Allianz Group’s reconciliation is a summary of the individual company-related reconciliations, which are based on the respective country-specific tax rates taking into consideration consolidation effects with an impact on the Group result. The applicable tax rate used in the reconciliation for domestic Allianz Group companies includes corporate tax, trade tax and the solidarity surcharge, and
Deferred tax assets on losses carried forward are recognized to the extent to which it is more likely than not that sufficient future taxable profits will be available for realization. Entities which suffered a tax loss in either the current or the preceding period recognized deferred tax assets in excess of deferred tax liabilities amounting to € 351 mn (2016: € 334 mn), as there was convincing other evidence that sufficient taxable profit will be available.
Non-recognition or valuation allowance for deferred tax assets on tax losses carried forward (737) (807)
124 Annual Report 2017 − Allianz Group reform led to an increase in deferred tax assets and deferred tax liabilities in 2017 of € 669 mn before netting.
Tax losses carried forward are scheduled according to their expiry periods as follows: Tax losses carried forward € mn
Negative fair values Up to 1 year 1 - 5 years Over 5 years
The table shows the fair value and notional amounts of all freestanding derivatives, as well as derivatives for which hedge accounting is applied by the Allianz Group, as of 31 December 2017 and 2016, respectively. The notional principal amounts indicated in the table are cumulative, as they include the absolute value of the notional principal amounts of derivatives with positive and negative fair values.
Allianz Group’s involvement in derivative transactions, they do not represent amounts exposed to risk. Further information on the use of derivatives to hedge risk can be found in the sections on market and credit risk of the Risk and Opportunity Report, which forms part of the
The total negative fair value of these embedded derivatives amounts to € 10.2 bn (2016: € 9.9 bn). Further information on the fair value measurement of these derivatives can be found in note 34.
Allianz Group had a total positive fair value of € 12 mn (2016: total
CASH FLOW HEDGES During the year ended 31 December 2017, cash flow hedges were used to hedge the exposure to the variability of cash flows arising
126 Annual Report 2017 − Allianz Group from interest rate or exchange rate fluctuations as well as inflation. As of 31 December 2017, the derivative instruments utilized had a total positive fair value of € 229 mn (2016: € 540 mn).
OFFSETTING The Allianz Group mainly enters into enforceable master netting arrangements and similar arrangements for derivatives transactions.
Group Management Report: − Internal risk capital framework including all subsections,
Financial assets designated at fair value through income 5,101 5,101 5,426 5,426
FAIR VALUE MEASUREMENT ON A RECURRING BASIS The following financial assets and liabilities are carried at fair value on a recurring basis: − Financial assets and liabilities held for trading,
− Derivative financial instruments and firm commitments included in other assets and other liabilities, and
Government and government agency bonds 30,884 167,449 578 198,911 33,476 165,099 339 198,914
Financial liabilities for unit-linked contracts 95,224 23,324 592 119,141 91,071 19,877 377 111,325
Derivative financial instruments and firm commitments included in other liabilities 1 146 - 147 3 156 - 159
The fair value is mainly determined based on net asset values for funds and the market approach.
Level 3 investments are mainly priced based on the income approach. The primary non-market observable input used in the discounted cash flow method is an option-adjusted spread taken from a set of benchmark securities with similar characteristics. A significant yield increased of the benchmark securities in isolation could result in a decreased fair value, while a significant yield decrease could result in an increased fair value. However, a 10 % stress of the main nonmarket observable inputs has only immaterial impact on fair value.
For level 2, the fair value is mainly determined using the market approach or net asset value techniques for funds. For certain private equity investments, the funds are priced based on transaction prices using the cost approach. As there are only few holders of these funds, the market is not liquid and transactions are only known to participants.
SIGNIFICANT TRANSFERS OF FINANCIAL INSTRUMENTS CARRIED AT FAIR VALUE In general, financial assets and liabilities are transferred from level 1 to level 2 when their liquidity, trade frequency, and activity are no longer indicative of an active market. In 2017, this mainly affects a corporate bond portfolio with a transfer volume of € 12 bn. Conversely, the same policy applies for transfers from level 2 to level 1.
The following tables show reconciliations of the financial instruments carried at fair value and classified as level 3: Reconciliation of level 3 financial assets € mn
Carrying value (fair value) as of 1 January 2017 187 17,513 7,829 377 25,906
Net transfers into (out of) level 3 1 (262) 51 (24) (234)
Net gains (losses) in profit or loss attributable to a change in unrealized gains or losses for financial assets held at the reporting date 6 (129) - 5 (118)
Fair value hierarchy (items not carried at fair value) € mn
Real estate held for investment - - 18,913 18,913 - - 18,380 18,380
LIABILITIES TO BANKS AND CUSTOMERS Level 1 mainly consists of highly liquid liabilities, e.g. payables on demand. The fair value for liabilities in level 2 and level 3 is mainly derived based on the income approach, using future cash flows discounted with risk-specific interest rates. Main non-market observable inputs include credit spreads. In some cases, the carrying amount (amortized cost) is considered to be a reasonable estimate of the fair value.
Repor t transferred in the context of repurchase agreement and securities lending transactions are mainly available-for-sale debt and equity securities for which substantially all of the risks and rewards are retained. As of 31 December 2017, the carrying amount of the assets transferred for securities lending transactions amounted to € 6,424 mn (2016: € 6,526 mn). For repurchase agreements, the carrying amount of the assets transferred amounted to € 566 mn
In the following, the business activities involving unconsolidated structured entities are described.
INVESTMENTS IN ASSET-BACKED SECURITIES (ABS) AND MORTGAGE-BACKED SECURITIES (MBS) ISSUED BY SECURITIZATION VEHICLES The Allianz Group acts as investor in ABS- or MBS-issuing securitization vehicles which purchase pools of assets including commercial mortgage loans (CMBS), auto loans, credit card receivables and others. These securitization vehicles refinance the purchase of assets by issuing tranches of ABS or MBS, whose repayment is linked to the performance of the assets held by the vehicles.
Within the asset management business, the Allianz Group acts as asset manager for some securitization vehicles. The assets under management of these vehicles amounted to € 1,462 mn as of 31 December 2017 (2016: € 1,597 mn). Some of the affected vehicles have been set up by the Allianz Group whereas others have been set up by third parties. In this respect, the role of the Allianz Group is limited to asset management. The Allianz Group has not invested in these vehicles being managed.
INVESTMENTS IN INVESTMENT FUNDS Considering the broad variety of investment funds across different jurisdictions, the classification of investment funds as structured entities based on the definition in IFRS 12 and current industry practice is judgmental. As a general rule, the relevant activities of an investment fund are dedicated to the fund manager via asset management agreements. In contrast, influence from investors on the relevant activities of unconsolidated funds is usually either precluded by legal or regulatory provisions or is not deemed to be substantial.
Investment funds are generally subject to stringent regulatory requirements from financial authorities in all jurisdictions across the world. Comprehensive regulation of funds protects fund investors and also helps to limit investment risk. These mechanisms result in a legal set-up of funds, agreed and accepted by investors and investment managers, that may lead to a classification as structured entities under IFRS 12.
132 Annual Report 2017 − Allianz Group requirements to hold investments in specific assets, market segments or regions. Within the insurance business, policyholder money is partly invested in investment funds, which include funds managed by
Allianz Group internal asset managers as well as funds set up and managed by third parties. Investment funds managed or invested in by Allianz Group may include mutual funds, special funds and other funds.
The carrying amounts in the tables listed above correspond to an aggregated amortized cost amount of € 21,487 mn (2016: € 21,425 mn). This amortized cost amount represents the maximum exposure to loss for the Allianz Group from these investments. In the reporting period, the Allianz Group has not provided any financial or other support to these entities, nor does it have the intention to provide such support in the future.
Out of the total investment fund exposure, investments of € 11.2 bn
The carrying amounts in the tables listed above correspond to an aggregated amortized cost amount of € 21,731 mn (2016: € 18,279 mn). This amortized cost amount represents the maximum exposure to loss for the Allianz Group from these investments. In the reporting period, the Allianz Group has not provided any financial or other support to these entities, nor does it have the intention to provide such support in the future.
Besides the above-mentioned investments in investment funds, the Allianz Group also holds investment funds to fund unit-linked insurance contracts. However, these holdings are held on behalf and for the benefit of unit-linked policyholders only. For that reason, these holdings are not included in the above-mentioned table. As of 31 December 2017, the volume of unit-linked assets amounted to € 119,141 mn (2016: € 111,325 mn). The maximum exposure to loss on these investments is covered by liabilities recorded for unit-linked contracts.
Information on the remuneration of Board members and transactions with these persons can be found in the Remuneration Report, starting on page 23.
LITIGATION 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
Company of North America (Allianz Life) making allegations similar to those made in prior class actions regarding the sale of Allianz Life’s annuity products, including allegations of breach of contract and violation of California unfair competition law. The ultimate outcome of the cases cannot yet be determined.
GUARANTEES The guarantees issued by the Allianz Group consist of financial guarantees, indemnification contracts and performance contracts.
As of 31 December 2017, the financial guarantees amount to € 368 mn (2016: € 437 mn), € 326 mn of which are due within one year. The collateral held amounts to € 12 mn (2016: € 44 mn). Nearly all customers of the letters of credit have no external credit rating.
INDEMNIFICATION CONTRACTS Indemnification contracts are executed by the Allianz Group with various counterparties under existing service, lease, or acquisition transactions. Such contracts may also be used to indemnify counterparties under various contingencies, such as changes in laws and regulations or litigation claims.
In connection with the sale of various of the Allianz Group’s former private equity investments, subsidiaries of the Allianz Group provided indemnities to the respective buyers in the event that certain contractual warranties arise. The terms of the indemnity contracts cover ordinary contractual warranties, environmental costs, and any potential tax liabilities the entity incurred while owned by the
As of 31 December 2017, the indemnification contracts amount to € 33 mn (2016: € 29 mn), € 23 mn of which are due after five years.
LOAN COMMITMENTS The Allianz Group engages in various lending commitments to meet the financing needs of its customers. They consist of advances, standby facilities, guarantee credits, mortgage loans and public-sector loans. As of 31 December 2017, the total of loan commitments amounts to € 1,100 mn (2016: € 1,229 mn) and represents the amounts at risk in the event that customers draw fully on all facilities and then default, excluding the effect of any collateral. Since the majority of these commitments may expire without being drawn upon, these loan commitments are not representative of actual liquidity requirements for such commitments.
For the year ended 31 December 2017, the Allianz Group did not record any material finance leases. The finance lease disclosed in 2016 belonged to subsidiaries that were deconsolidated during 2017.
Other significant obligations including sponsoring, maintenance and IT services 2,470 2,413
(“Bundesverband deutscher Banken e.V.”) for any losses it may incur by reason of supporting measures taken in favor of Oldenburgische
GmbH. The contingent payment obligation of Allianz relates to the coupon payments of the Tier 1 Capital Securities issued by HT1 Funding GmbH. The original nominal amount of the Tier 1 Capital Securities of € 1,000 mn was reduced in 2012 to approximately € 416 mn.
This reduces the amount of coupon payments of the Tier 1 Capital
Pursuant to §§ 221 ff. of the German Insurance Supervision Act (“Versicherungsaufsichtsgesetz ” – VAG), mandatory insurance guarantee schemes (“Sicherungsfonds”) for life insurers as well as for health insurers are implemented in Germany, which are financed through their member undertakings.
The Allianz Group provides competitive and cost-effective retirement and disability benefits using risk appropriate vehicles. The
Repor t plans may vary from country to country due to the different legal, fiscal and economic environment.
GERMANY Most active German employees participate in contribution-based plans using different vehicles to cover the base salary both below and above the German social security ceiling (GSSC). Since 1 January 2015, the Allianz Group contributes for new entrants and for the majority of contribution-based pension plan beneficiaries above the GSSC to the low-risk pension plan “My Allianz Pension”, where only contributions are preserved. For salaries above the GSSC, the Allianz Group decides each year whether and to which extent a budget for the contribution-based pension plans is provided. Independently of this decision, an additional risk premium is paid to cover death and disability. Generally the accruals of the contribution-based pension plans are wholly funded, whereas the grandfathered plans are funded to a minor extent. On retirement, the accumulated capital is paid as a lump sum or converted to a lifetime annuity.
Plan (GPPP) outside of the Fund was established in 2015 and all future accrual of benefits has been via the GPPP from 1 July 2015.
Return on plan assets greater/(less) than interest income on plan assets - - 358 657 - - (358) (657)
Change in effect of asset ceiling in excess of interest - - - - 14 (37) 14 (37)
Remeasurements recognized in the consolidated statements of comprehensive income (before deferred taxes) 202 1,268 358 657 14 (37) (142) 574
Changes in the consolidated subsidiaries of the Allianz Group 34 1 42 - - - (8) 1
3_2016 related to the reclassification of the assets and liabilities of Oldenburgische Landesbank AG as held for sale.
4_Includes for 2016 € 50 mn for the Enhanced Value Transfer program in Ireland.
As of 31 December 2017, post-retirement health benefits included in the defined benefit obligation and in the net amount recognized amounted to € 10 mn (2016: € 10 mn) and € 10 mn (2016: € 10 mn), respectively.
An increase (or decrease) in the discount rate by 50 basis points would lead to a decrease of € 1.6 bn (or increase of € 1.8 bn) in the defined benefit obligation.
An increase of pre-retirement benefit assumptions (e.g. salary increase ) of 25 basis points would have an effect of € 68 mn on the defined benefit obligation. However, the increase of post-retirement assumptions (e.g. inflation-linked increases of pension payments) of 25 basis points would increase the defined benefit obligation by
A change in the medical cost trend rate by 100 basis points would have an effect of € 1 mn on the defined benefit obligation and no material effect on the defined benefit costs.
Allianz Group. The chart below shows the asset allocation: Asset allocation of plan assets € mn
The bulk of the plan assets are held by Allianz Versorgungskasse
CONTRIBUTIONS For the year ending 31 December 2018, the Allianz Group expects to contribute € 281 mn to its defined benefit plans and to pay € 313 mn directly to participants in its defined benefit plans.
During the year ended 31 December 2017, the Allianz Group recognized expenses for defined contribution plans of € 267 mn
(2016: € 316 mn). Additionally, the Allianz Group paid contributions for state pension schemes of € 331 mn (2016: € 335 mn).
Allianz Group. During the year ended 31 December 2017 until the exercise date, the Allianz Group recognized compensation expenses
Assumption of AEI plans 1_The RSUs 2018 are deemed to have been granted to participants as part of their 2017 remuneration. Consequently, the assumptions for RSU grants delivered in March 2018 are based on best estimate.
EMPLOYEE STOCK PURCHASE PLANS The Allianz Group offers Allianz SE shares in 20 countries to entitled employees at favorable conditions. The shares have a minimum holding period of one to five years. During the year ended 31 December 2017, the number of shares sold to employees under these plans was 562,546 (2016: 617,084). During the year ended 31 December 2017, the Allianz Group recognized the difference between the issue price charged to the subsidiaries of the
OTHER SHARE OPTION AND SHAREHOLDING PLANS 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.
ISSUANCE OF THE DECLARATION OF COMPLIANCE WITH THE GERMAN CORPORATE GOVERNANCE CODE ACCORDING TO § 161 AKTG On 14 December 2017, the Board of Management and the Supervisory Board of Allianz SE issued the Declaration of Compliance according to § 161 AktG, which has been made permanently available to shareholders on the company’s website.
The Declaration of Compliance of the publicly traded group company Oldenburgische Landesbank AG was issued in December 2017 and has been made available to shareholders on a permanent basis.
For services rendered by KPMG AG and the worldwide member firms of KPMG International (KPMG), the following fees were recognized as an expense in the fiscal year: KPMG fees € mn
Other attestation services refer to statutory filing services for regulatory purposes, the issuing of comfort letters and statutory or contractually agreed assessments, as well as required audits of funds, including contractually agreed assurance services.
Other services primarily refer to quality assurance support services and consulting services in connection with current developments in financial reporting and regulatory requirements based on concepts /solutions presented by the Allianz Group. In addition, IT quality assurance and advisory on non-financial information systems and forensic advisory services were provided. In respect to the other services, significant quality assurance services in relation to the initial application of new/prospective accounting standards such as IFRS 17 and IFRS 9 application were provided.
The sum of the total remuneration of the Allianz SE Board of
On 15 January 2018, Allianz launched a simplified cash tender offer to acquire all outstanding Euler Hermes shares which expired on 13 February 2018. As of 23 February 2018, the remaining float on the market represented less than 5 % of Euler Hermes share capital. In continuation with its initial tender offer, Allianz intends to launch a further simplified cash tender offer for all remaining Euler Hermes shares held by minority shareholders, which will be immediately followed by a squeeze-out procedure and delisting of Euler Hermes shares from the Euronext Paris stock exchange. The consideration for one Euler Hermes share will remain unchanged from the prior tender offer and will be € 122 in cash.
For further information on both events please refer to note 3.
Furthermore, beginning 2018 Allianz SE has started a new share buy-back program with a volume of up to € 2.0 bn. For further information, please refer to the section “Expected dividend development”
Moreover, the Allianz Group reached an agreement to sell a part of its traditional life insurance portfolio, held by Allianz Taiwan Life
Insurance Co. Ltd., Taipei, to China Life Insurance Co. on 19 October 2017. This transaction has received regulatory approval on 27 February 2018. The closing is expected for the second quarter of 2018. The transaction includes a portfolio with insurance liabilities of around € 1.2 bn. Allianz Group expects a negative net income effect of around € 0.2 bn in 2018.
2_The disclosure in the Annual Report 2016 was based on a best estimate of the RSU grants. The figures shown here for 2016 now includes the actual fair value as of the grant date (3 March 2017). The value therefore differs from the amount disclosed last year.
Infrastruktur Putlitz Ost GmbH & Co. KG, Husum 70.8 manroland AG, Offenbach am Main 100.0 5,6 manroland Vertrieb und Service GmbH, Mühlheim am Main 100.0 6
Allianz Life Insurance Company of New York, New York, NY 100.0
Allianz Popular Vida Compañía de Seguros y Reaseguros S.A., Madrid 100.0
Allianz Renewable Energy Fund III Lux GP S.à r.l., Senningerberg 100.0 owned1
Allianz US Private Credit Solutions GP II LLC, Wilmington, DE 100.0
AllianzGI Renewable Energy Fund III (US) GP LLC, Wilmington, DE 100.0
Euler Hermes North America Holding Inc., Owings Mills, MD 100.0 owned1
PIMCO Latin America Administradora de Carteiras Ltda., Rio de Janeiro 100.0
PIMCO RAE Fundamental Global Equities Plus Fundo de Investimento Multimercado Investimento no Exterior, Rio de Janeiro 99.9 3
PIMCO Select U.S. High Yield BB-B Bond Fund, Dublin 32.1 2,3
Allianz Global Corporate & Specialty SE Escritório de Representação no Brasil Ltda., Rio de Janeiro 100.0
Joint ventures 114 Venture LP, Wilmington, DE 49.5 7 1515 Broadway Realty LP, Dover, DE 34.6 7 1800 M Street Venture LP, Wilmington, DE 42.8 7
Columbia REIT - 333 Market Street LP, Wilmington, DE 22.4 7
Blue Vista Student Housing Select Strategies Fund L.P., Dover, DE 24.9
The Allianz Group refrains from disclosure of participations which are not included in one of the above categories as they are of minor importance for giving a true and fair view of the assets, liabilities, financial position and profit or loss of the Allianz Group.
OPINIONS We have audited the consolidated financial statements of Allianz SE,
Munich and its subsidiaries (the Group), which comprise the consolidated statement of financial position as at 31 December 2017, and the consolidated income statement, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the financial year from 1 January 2017 to 31 December 2017, and notes to the consolidated financial statements, including a summary of significant accounting policies. In addition, we have audited the group management report of Allianz SE, Munich, for the financial year from 1 January 2017 to 31 December 2017. In accordance with the German legal requirements, we have not audited the content of the Statement on corporate Management pursuant to § 315d and § 289f HGB which is included in section B (part of the group management report) of the annual report.
− the accompanying consolidated financial statements comply, in all material respects, with the IFRSs as adopted by the EU, and the additional requirements of German commercial law pursuant to § 315e (1) HGB [Handelsgesetzbuch: German Commercial
Group as at 31 December 2017, and of its financial performance for the financial year from 1 January 2017 to 31 December 2017, and
BASIS FOR THE OPINIONS We conducted our audit of the consolidated financial statements and of the group management report in accordance with § 317 HGB and the EU Audit Regulation No. 537/2014 (referred to subsequently as
Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany ] (IDW). Our responsibilities under those requirements and principles are further described in the “Auditor’s responsibilities for the audit of the consolidated financial statements and of the group management report” section of our auditor’s report. We are independent of the group entities in accordance with the requirements of
European law and German commercial and professional law, and we have fulfilled our other German professional responsibilities in accordance with these requirements. In addition, in accordance with
Article 10 (2) point (f) of the EU Audit Regulation, we declare that we have not provided non-audit services prohibited under Article 5 (1) of the EU Audit Regulation. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinions on the consolidated financial statements and on the group management report.
Goodwill as at 31 December 2017 amounts to EUR 11,848 million.
The proportionate goodwill attributable to the segments is as follows: Goodwill attributable to business segments EUR mn
Casualty and Asset Management segments, the recoverable amount is determined using the discounted earnings method. The business plans of the CGUs, which are influenced by significant estimates related to potential sustainable income as well as long-term growth rates, providing the basis for measurement of the recoverable amount. For the CGUs in the Life/Health segment, the recoverable amount is determined using the value in use based on the appraisal value, which generally results from the value of the insurance portfolio in existence using the market consistent embedded value (MCEV)
To audit the Impairment Test for Goodwill, we engaged our own valuation specialists and actuaries. In particular, we performed the following substantial audit procedures: − We assessed the appropriateness of the key internal controls established for the valuation process and verified their operating effectiveness by testing these controls. In doing so, we included controls in respect of planning assumptions, the determination and changes of CGUs and the use of assumptions, among other things.
− We assessed the appropriateness of the determination and changes of the CGUs and the allocation of the carrying amount to the CGUs determined.
− We assessed whether the explanations on the Impairment Test for Goodwill in the notes were sufficiently detailed and appropriate.
The assumptions of the legal representatives underlying the valuation have been determined appropriately as a whole. The valuation models used for the segments are appropriate. The assumptions and judgements of the legal representatives underlying the valuation are sufficiently detailed and appropriate.
DETERMINATION OF THE FAIR VALUE FOR REGULARLY WITH THE FAIR VALUE ASSESSED FINANCIAL ASSETS OF THE VALUATION CATEGORY LEVEL 3 For the accounting policies, significant estimates and assumptions used please refer to the explanations in the notes to the consolidated financial statements under note 34 and note 2, sub-section 'Financial
Instruments - Measurement at fair value' for explanatory notes on the fair value hierarchy. Risk disclosures on market and credit risk are included in the risks and opportunities report of the group management report.
Allianz Group held assets categorised as Level 3 under the fair value hierarchy of IFRS 13 with a fair value of EUR 31,416 million. This corresponds to 4.0 % of the total financial assets held by the Group.
Financial assets that are measured at fair value are classified in accordance with the fair value hierarchy in IFRS 13. An increased risk of material misstatement can be assumed for those financial assets in level 3 categorisation that have input parameters that are not observable on the market and have a significant impact on the fair value. This primarily relates to available-for-sale investments amounting to EUR 30,661 million, which consist of fixed-interest securities
(e.g. corporate bonds) or private equity fund investments and alternative investments. The fair values of fixed-interest securities are measured using either a market approach or an income approach.
For the use of the market approach, the quoted prices of identical or comparable assets on active markets are used as the most important inputs. The income approach is mostly a present value technique for which the credit and liquidity risks are considered using adjusted cash flows or discount curves. The fair values for private equity fund in-
As part of our approach to audit the level 3 financial assets, we engaged our own valuation specialists. In particular, we performed the following substantial audit procedures: − We verified the appropriateness of the key internal controls established for the valuation process and evaluated their operating effectiveness by testing functions.
− At Allianz Group level, we evaluated the appropriateness of the reporting which was presented to the legal representatives. We evaluated the reconciliations from the financial reporting-related systems for appropriateness and reconciled the input factors determined by us with the reporting.
The determination of the fair value for regularly with the fair value assessed financial assets of the valuation category level 3 is appropriate as a whole.
VALUATION OF RESERVES FOR LOSS AND LOSS ADJUSTMENT EXPENSES For the accounting policies, explanations on the use of estimates and assumptions used please refer to the explanations in the notes to the consolidated financial statements under note 2, sub-section 'Reserves for losses and loss adjustment expenses'. Further disclosures are also made on the financial statement items under note 14. Risk disclosures are included in the risks and opportunities report of the group management report.
The reserves for incurred but not reported claims (IBNR) are based on actuarial and statistical models for estimated costs necessary to bring claims to final settlement and management of losses.
The estimate of total loss expenditure is subject to considerable uncertainties and thus requires significant judgement. Uncertainties in the estimate arise particularly in respect of the forecasts of future events, estimates of future inflation developments as well as other social and economic factors. This includes the claims frequency, the claim amount, delays in reporting and the run-off period for claims. In this context, the notes, in particular the run-off triangles1, need to be considered.
− Furthermore, we evaluated the controls on group level performed by the Group Actuarial department for the assessment of the results of the subsidiaries.
− Using the schedule of adjusting entries at group level, we analysed whether adjusting entries were appropriately documented and justified.
− For risk based selected subsidiaries, we carried out our own actuarial calculations according to best estimates and determined a range for reserves.
VALUATION OF AGGREGATE POLICY RESERVES AS WELL AS THE DEFERRED ACQUISITION COSTS IN THE LIFE/HEALTH SEGMENT For the accounting policies, explanations on the use of estimates and assumptions used please refer to the explanations in the notes to the consolidated financial statements under note 2, sub-section 'Reserves 1_Run-off triangles are a tabular illustration of claims-related data (such as payments, claims reserves or estimated claims results) on two time-related levels (calendar year as well as the year of loss occurence).
EUR 499,060 million or 55.4 % of the balance sheet total of the Allianz
Group. Of this, EUR 428,497 million is attributable to aggregate policy reserves and thus corresponds to 47.5 % of the balance sheet total of the Allianz Group. The aggregate policy reserves also include reserves for investment contracts with discretionary profit participation.
Deferred acquisition costs attributable to the Life/Health segment amounted to EUR 18,469 million.
In this context, the disclosures in the notes, in particular the disclosures on estimation uncertainties and sensitivities, are also required to be made.
− At group level we evaluated the reporting of Group Actuarial for the purposes of the Group Reserve Committee.
− We verified that the Liability Adequacy Test was conducted properly, in particular concerning the suitability of the basis of calculation used and the appropriateness of the methods.
− We assessed whether the disclosures in the notes were sufficiently detailed and appropriate and particularly focused on whether the estimation uncertainties and sensitivities were presented appropriately.
Furthermore, management is responsible for the preparation of the group management report that, as a whole, provides an appropriate view of the Group’s position and is, in all material respects, consistent with the consolidated financial statements, complies with
The supervisory board is responsible for overseeing the Group’s financial reporting process for the preparation of the consolidated financial statements and of the group management report.
Group’s position and, in all material respects, is consistent with the consolidated financial statements and the knowledge obtained in the audit, complies with the German legal requirements and appropriately presents the opportunities and risks of future development, as well as to issue an auditor’s report that includes our opinions on the consolidated financial statements and on the group management report.
− Perform audit procedures on the prospective information presented by management in the group management report. On the basis of sufficient appropriate audit evidence we evaluate, in particular, the significant assumptions used by management as a basis for the prospective information, and evaluate the proper derivation of the prospective information from these assumptions. We do not express a separate opinion on the prospective information and on the assumptions used as a basis. There is a substantial unavoidable risk that future events will differ materially from the prospective information.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and
Committee of the supervisory board on 13 June 2017 for the audit of the consolidated financial statements as of 31 December 2017 and of the group management report for the financial year 2017. We have been the group auditor of the Allianz SE without interruption for more than 25 years.
We declare that the opinions expressed in this auditor’s report are consistent with the additional report to the audit committee pursuant to Article 11 of the EU Audit Regulation (long-form audit report).
German Public Auditor Responsible for the Engagement The German Public Auditor responsible for the engagement is
The HR Fact Book is the official and most comprehensive report on key human resources facts and figures, highlighting major HR achievements over the past year and revealing the outlook for 2018. Date of publication: 19 March 2018. www.allianz.com/hrfactbook
Allianz SE is committed to employment equity and therefore welcomes applications from men and women regardless of their race or ethnicity, age, nationality, religion, disability, sexual orientation or philosophy of life.
DO YOU DARE? Allianz believes the world would be better if people had the courage to grow rather than protecting the status quo.
The Allianz Group Sustainability Report “Responding to tomorrow’s challenges” covers our contribution to the environment, society and economy. It provides full details of our sustainability strategy, approach and progress as well as an outlook for 2018. Date of publication: April 2018. www.allianz.com/sustainability
GUIDELINE ON ALTERNATIVE PERFORMANCE MEASURES Further information on the definition of our Alternative Performance Measures and their components, as well as the basis of calculation adopted: www.allianz.com/results
Allianz SE – Königinstrasse 28 – 80802 Munich – Germany – Phone +49 89 3800 0 – info@allianz.com – www.allianz.com Front page design: hw.design GmbH – Photography: Wolfgang Stahr – Typesetting: Produced in­house with firesys – Printing: G. Peschke Druckerei GmbH – Annual Report on the internet: www.allianz.com/annualreport – Date of publication: 9 March 2018 This is a translation of the German Annual Report of Allianz Group. In case of any divergences, the German original is legally binding.