Although this year will go down in history as the year in which natural disasters caused the highest amount of insured damage ever, Allianz has kept all of its promises. We exceeded our objectives, significantly increased the value of your investment and made decisions that are of great importance to the future of your company.
Finally, I view as a negative that our restructuring plans for the German insurance business were so critically received by the public, specifically by the German public. Why were we not able to generate enthusiasm among our employees
Along with my colleagues on the Board of Management, I am convinced that we will master the challenges ahead. Your company has since reclaimed its position at the top among its international competitors. Now the objective is to build on this position. Why do we think we will be successful in doing so?
We are systematically exploiting the expertise that we already have to become even better.
In fiscal 2005, this idea not only started to take shape at Allianz, but also found acceptance in the financial markets. Our concept of a closely cooperating cross-border Group that continuously seeks out the best business practices and the most effective way to implement them
In the 2004 shareholder letter I made a few announcements. I promised additional impetus for our “3+One” program in fiscal 2005 and set the objective that our insurance agents in Germany would win 300,000 new bank customers. In the outlook section of the annual report, we forecast operating results of at least the 2004 level, a combined ratio in property and casualty insurance of under 95 % and operating results of at least € 1.5 billion in life/health insurance.
Dresdner Bank pledged to earn its cost of capital, and we aimed for an increase in operating results of 10 % in asset management.
The bank earned its cost of capital for the first time since its acquisition by Allianz, establishing a solid basis for strong increases in earnings in the coming years. Our insurance agents in Germany have demonstrated, with 360,000 new bank customers at year-end, how much power the idea of an integrated financial services provider can generate. All of these factors, along with favorable conditions in the capital markets, contributed to a significant strengthening of our capital base, which totalled € 39.5 billion at year-end. This renewed financial strength allows us to strategically develop your company and to invest in profitable growth.
When I write about promises kept, I do not forget that we were able to keep these promises only because our 177,625 employees in more than 70 countries, many of them Allianz shareholders themselves, once again worked unusually hard, showing commitment and professionalism, as was the case with our sales force and brokers. They have earned my most heartfelt thanks.
We have achieved a lot in 2005 and I hope we have demonstrated to you that your Allianz management team is not a storehouse of old values but rather a factory that creates new values for shareholders. But 2005 is now over, and of course we have long been looking at the future. In spite of the great progress we have made, we see that going forward we are still facing considerable challenges.
Allianz, and once again after I was named Chairman of the Board of Management. To answer them, I must take into consideration additional aspects that go beyond the internal advantages
of our Group. In the end it is this diversity of factors that makes an investment in this company worthwhile. In this respect, our actions are driven by four key insights: We know that the long-term and sustainable increase in the value of your equity stake is not only a critical mandate but also the basis for all future positive measures that a company can initiate for employees, clients and society. Here I am specifically speaking about the creation of value in an appropriate timeframe, not overnight. If Allianz is healthy and profitable in this respect, then this would have a positive effect on all stakeholders. An example: in 2003, which will remain unforgettable to us all as a rather unsatisfactory year for business, our tax payments in Germany financed on average the annual operating costs of 8 hospitals. In 2004, thanks to a considerably more robust and improved business model, we paid enough taxes for about 55 hospitals to operate for a year, and in 2005 this rose to 69. But if we get bogged down and unintentionally neglect the spirit and content of our employment contract with you, the owners of Allianz, we are endangering jobs, wasting opportunities and will not be able to serve our clients and society the way we would like to.
We know that we are neither in a position to direct the global economy nor do we have the power to influence the weather or to influence the erratic movements in the financial markets. But what we can control are our own business policies and the way that your money is spent. We are maintaining our cost containment policy and are not being tempted into trying to gain market share by competing on price. We charge a fair price for our services and we know when to say “NO” if the premiums do not reflect the risks. Consequently, we are only seeking growth where there are real opportunities for profitable growth.
Supervisory Board and the Board of Management – will be significantly more international in the future.
This means that in spite of the impressive results, there is still much to do. After entering 2006 with optimism and a thirst for action, we look back once again on what we have accomplished.
Articles of Association. It supervised the conduct of the Company ’s business, advised the Board of Management with respect to the management of the Company and was directly involved in decisions of fundamental importance.
Supervisory Board was regularly provided by the Board of Management with timely and comprehensive information on the economic and financial development of Allianz AG and the Allianz
with the conversion of Allianz AG into a European Company (Societas Europaea, SE). The Board of Management also reported to us on the financing of the transaction, the corporate valuations of
RAS and Allianz AG to determine the exchange ratio with respect to the merger and the business and synergy objectives pursued by the merger. We held extensive discussions on the consequences of the change of legal form for corporate governance, particularly for the employee co-determination in the Supervisory Board. The merger audit was explained to us by the court-appointed merger auditor Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft,
The Board of Management informed us about the reorganisation of the insurance business in Germany through the consolidation of
The Board of Management gave account to us in all of the meetings of the development of Group sales and profits, developments in the individual business segments and the financial situation, and these were discussed in our meetings. The positive trend of fiscal year 2004 continued in the year under review in spite of the negative effects of hurricanes and other natural catastrophes.
We found that operating profitability improved overall. This is also reflected in the encouraging performance of Allianz share prices.
We received a special report by the Board of Management on
Supervisory Board in December 2005. Under the new version of the Code dated June 2, 2005, Allianz AG will continue to comply with all the recommendations made by the Government Commission on the German Corporate Governance Code.
As part of the regular efficiency review, we submitted written questions this year to all members of the Supervisory Board on important aspects of the Supervisory Board activities. The major results of these inquiries and the consequent opportunities for improvement were discussed in the December meeting.
In the presence of the independent auditor, it discussed the annual financial statements of Allianz AG and of the Allianz Group, the audit reports and the “Form 20-F” filing required in the USA. It also reviewed the quarterly reports and, in the presence of the independent auditor, discussed the inspection by the independent auditor of the consolidated interim financial statements for the first half of 2005 and for the first nine months of 2005. It also dealt with the assignment of the mandate to the independent auditor and the setting of priorities for the audit. Other subjects of deliberation were the measures taken to comply with the requirements of the U.S. Sarbanes-Oxley Act on the effectiveness of internal control systems for financial reporting. The award of contracts to the auditors for non-auditing services was also discussed. The committee received special reports on the main results of internal audits in fiscal years 2004 and 2005.
AG as at September 30, 2005 was audited by KPMG in preparation of the merger of RAS and Allianz AG.
KPMG were made available to all members of the Supervisory Board in a timely manner. These documents were discussed by the Audit
Committee on March 10, 2006, as well as by the Supervisory Board at a meeting held for that purpose on March 15, 2006. The independent auditors participated in these discussions. They presented the results of the audits and were available to respond to questions and provide supplementary information.
On the basis of our own review of the financial statements of
Group management report and the recommendation for appropriation of earnings, we made no objections and concurred with the findings of the audit by KPMG. We approved the financial statements of Allianz AG and the Allianz Group prepared by the Board of Management; the individual accounts are thereby adopted. We
A number of changes have taken place in the Supervisory Board.
Allianz AG will end when the merger of RAS into Allianz AG
Board of the future Allianz SE will be appointed under the Statutes of Allianz SE, which form part of the merger plan passed by the
Board of Allianz SE will be appointed after completion of the negotiations on the involvement of the employees in the SE.
At the end of 2005 Detlev Bremkamp left the Board of Management and retired. The Board of Management mandate of
Dr. Reiner Hagemann also ended, at his request, at the end of 2005. The Supervisory Board appointed Dr. Gerhard Rupprecht to be his successor as Personnel Director in accordance with clause 33 of the German Co-Determination Act. The appointment of
Dr. Mario Greco was rescinded at his request after he decided to accept a position outside the Allianz Group before assuming office on May 1, 2005.
Adriatico S. p. A., is responsible in the Board of Management for the insurance markets Italy, Spain, Switzerland, Austria,
Portugal, Turkey and Greece, as well as for the sustainability program in property-casualty insurance. Mr. Thierry, who is also Chairman of the Board of Directors of French Group company AGF S. A., has taken over responsibility for the markets in
In our capacity as members of the Supervisory Board, we would like to take this opportunity to thank all members of the Allianz
Board. It keeps the Supervisory Board regularly and comprehensively informed of the company’s business development, financial position and results, planning and achievement of goals, as well as of the strategy and any existing risks. Some specific decisions by the Board of Management require the approval of the Supervisory
Co-Determination Act (Mitbestimmungsgesetz) is composed equally of representatives of the shareholders and of the employees. The last election to the Supervisory Board took place in 2003, for a five-year term of office. The Supervisory Board monitors and advises the Board of Management in the management of the business. It is also responsible, among other duties, for appointing the members of the Board of Management, for setting the remuneration of the Board of Management, for reviewing the annual financial statements of Allianz AG and the Group, and for dealing with the quarterly reports. An essential part of the Supervisory
The is responsible for the preliminary examination of the annual financial statement and the Group’s consolidated financial statement as well as the management report and the recommendation for appropriation of earnings. In addition, it examines the quarterly reports and the filing “Form 20-F” required
Members of the Board of Management of Allianz AG and senior employees of certain divisions, mainly in the field of finance, are subject further to a “Code of Ethics”, which contains rules that ensure in particular that high accounting and disclosure standards are met and potential conflicts of interest are avoided. In addition, in the past fiscal year, with the Allianz Group Policy, the
already satisfies to a large extent the requirements contained in the relevant legal regulations.
The is responsible for the approval of certain transactions that require the consent of the Supervisory Board.
Act (Aktiengesetz), and for regularly examining the corporate governance and the effectiveness of the work of the Supervisory
The prepares the appointment of members of the Board of Management and is responsible for personnel matters of members of the Board of Management, including their remuneration. It is also involved in the long-term succession planning for the Board of Management.
Pursuant to the German Co-Determination Act, the statutory meets only if the Supervisory Board fails to obtain the required two-thirds majority in a vote on the appointment or removal of a member of the Board of Management.
Shareholders exercise their rights in the General Meeting. Each share confers one vote in adoption of resolutions at the General
Supervisory Board and changes to the company’s Articles of Association. An ordinary General Meeting is held every year, at which the Board of Management and the Supervisory Board report on the past fiscal year. In special cases, the German Stock Corporation Act provides for the convocation of an extraordinary General
Based on a special regulation for insurance companies (clause 341 k para. 2 of the German Commercial Code – Handelsgesetzbuch ), the appointment of the independent auditor is carried out by the Supervisory Board and not through the General Meeting.
The Audit Committee of the Supervisory Board prepares this appointment. The financial statements audit includes the individual financial statement of Allianz AG and the German and U.S. consolidated financial statements. Provisions that became effective in 2005 provide for establishing independent professional supervision of the auditors of the financial statements. In addition, there is now the possibility to examine by way of supervision the annual financial statement (the so-called enforcement method).
In the course of the contemplated merger of Riunione Adriatica di
Allianz AG will take the legal form of a European Company (Societas Europaea, SE), and have the company name Allianz SE. This will also involve some changes in the corporate constitution.
The Statutes of the future Allianz SE provide for reducing the size of the Supervisory Board from 20 members to 12, with six members representing the employees to maintain parity. The shareholder representatives on the initial Allianz SE Supervisory
Allianz SE. A special negotiating body will negotiate the scope of employee involvement on the Supervisory Board with the management bodies of Allianz AG and RAS. If no agreement is reached by the established deadline, a statutorily-imposed solution provided for in the German Act on Employee Involvement in a European
Europäischen Gesellschaft) will apply. This statutorily-imposed solution can also be agreed upon in full or in part by the negotiating parties as a result of the negotiations.
The members of the Board of Management of Allianz SE will be appointed by the Supervisory Board with a majority of its members participating in the resolution. In the case of a tie, the Chairman’s vote shall be decisive.
Corporation Act, Boards of Management and Supervisory Boards of all listed companies in Germany are bound to issue an annual
The Code is increasingly being adopted in Germany as a yardstick of good business management and control. Analyses show that compliance with the German Corporate Governance Code is steadily increasing. At the end of 2005, the DAX 30 companies had implemented an average of 97 % of all recommendations, while the companies in the M-DAX complied with about 91 %
Code in its May 21, 2003 version, Allianz AG has complied with all recommendations made by the Government Commission on the German Corporate Governance Code then in force.
AG and Oldenburgische Landesbank AG issued their own Declarations of Compliance on December 6, 2005 and December 5, 2005, respectively. Allianz Lebensversicherungs-AG discloses therein, as in the previous year, the deviations from the recommendations concerning the individual disclosure of remuneration for the Board of Management and the Supervisory Board, and from the recommendation of a performance-based remuneration component for the Supervisory Board. The Declaration notes that the remuneration of the Chairman of the Board of Management was shown individually in the Group financial statement of Allianz
AG. The Declaration of Compliance of the Oldenburgische Landesbank AG contains the same restrictions as in the previous year
Board of Management and Supervisory Board, and no deductible in the Directors and Officers liability insurance).
The individual remuneration components for the Board of Management include: The amount of the fixed remuneration is, on the one hand, determined by the delegated function or responsibility. On the other hand, it is influenced by external market conditions.
This component consists of an annual and a mid-term three-year bonus, each of which is performance- and success-related and limited to a maximum amount.
The valuation of the stock-based remuneration is merely a mathematically calculated reference value. If and when the stock-based remuneration actually leads to payment depends on the future development of the share price, the strike price and the date of exercise. Exercise of SARs is possible, at the earliest, two years after their granting, and of RSUs after five years. The exercise, the number of rights issued and the development of the value of stockbased remuneration are shown in the income statement.
Board at the end of his mandate, old age pension is paid no earlier than upon completion of the 60th year of age, except for cases of professional disability or general disability for medical reasons, or payments to a beneficiary in the case of death. If the mandate is terminated for other reasons before the retirement age has been reached, a non-expiring pension claim is maintained. This does not mean, however, claim to pension payments must begin immediately.
The remuneration of the Supervisory Board is based on the size of the company, the functions and responsibilities of the members of the Supervisory Board and the financial situation of the company.
One has a short-term orientation and depends on corporate earnings per share in the previous fiscal year. The other is long-term and focuses on the cumulative trend in this indicator over the past three years.
This maximum limit would take effect when the previous year’s earnings per share have risen by more than 16 %, or when this indicator has improved by a total of 40 % over the past three years. If there has been no improvement in corporate profits per share during the applicable review period (i.e. the previous fiscal year or the past three years), no merit-based remuneration will be awarded.
Supervisory Board receives double, and his deputy one and a half times the remuneration of an ordinary member of the Supervisory
Board. Members of the Personnel Committee and Standing Committee receive an additional 25 %, and their respective chairmen 50 %. Members of the Audit Committee are entitled to a fixed sum of € 30,000 per year, and the committee’s chairman receives
The members of the Supervisory Board receive a € 500 attendance fee for each Supervisory Board or committee meeting that they personally attend. This sum remains unchanged if several meetings occur on one day or when various meetings are held on consecutive days. The total expenditure for attendance fees in the reporting year amounted to € 38,500.
The individual members of the Supervisory Board each received the following remuneration:
Trading Law (WpHG) to report the acquisition or sale of Allianz
AG securities, if the value of the acquisitions and sales by the member or parties closely related to it reaches or exceeds € 5,000 in one calendar year. These reports are published on our website
On December 31, 2005, the total holdings of all members of the
Memberships of Supervisory Board members and of Board of Management members in other corporate supervisory bodies are listed on pages 210 to 213 of this Annual Report.
Since 2004, a Disclosure Committee has operated at the management levels of Allianz AG. In this body the heads of the departments that are essential for the financial reporting examine and discuss the draft reports. The Disclosure Committee thus supports the Board of Management in financial reporting and especially the
The summary of these differences is published on our website at
Current information on corporate governance is also available on our website at .
RAS into Allianz AG, and converting Allianz AG into a company under European law, a Societas Europaea, or SE. By doing so, we can reorganize our Group activities in Europe and simplify our ownership structure. This enables us to dispense with disruptive complexity and to achieve a more manageable and leaner structure with clear responsibilities.
“multi-local” basis, is more unified than it used to be, thanks to its shared operating systems, co-initiatives and corporate culture.
These common goals ensure that Allianz is more than the sum of its parts.
At the beginning of this annual report, we gave a brief overview of just how far we have come in the realization of our plan.
How do we achieve the same level of operating excellence across all subsidiaries to achieve a performance level that is far superior to that of any competitor?
How will we become a high-performance organization in which our employees are motivated and work professionally in an exemplary management culture?
We address the first question through our Costumer Focus Program, which is being implemented across the entire group. The objective is to take a more customer-oriented approach towards our product and service offerings, and our flexibility and awareness. We want our customers to perceive us to be excellent, recommend us to others, and see us as the first answer to their financial service needs.
We are working intensively on measures that motivate our employees to excellent performance and to increase the reach of the Allianz brand. These initiatives and the organizational restructuring in Europe, in particular the new business model for our insurance activities in Germany, should allow the “3+One”
We are further differentiating our global portfolio and increasing its international orientation, particularly by expanding our presence in the U.S. and Asia, while not neglecting the home market of Europe.
We bring together the risk management of the global industrial insurance business, marine and aviation insurance, reinsurance and our alternative risk transfer offerings to make it even more effective.
We intend to transfer the success of our asset management units in the U.S. and in the German consumer business to all of
Here are a few examples: climate change and, related to this, trading in emissions rights and the promotion of renewable energy, will boost demand for alternative forms of insurance and financing. Anticipated legislative changes in various Asian markets will make the pension and health insurance business there more lucrative and establishing a market position in those countries more promising. The increase in the standard of living in Muslim regions will boost the development of financial products that are consistent with Islamic law. The aging societies in Europe and the U.S. offer considerable potential for growth and profitability.
concept company-wide. Adapted to the specific requirements of our industry and the needs of the Allianz Group, EVA® determines our company’s economic goals. It provides a measure of our performance and is a component in setting the remuneration of management.
With EVA®, we have a measuring instrument that takes into account our industry-specific risks, and establishes a relationship between corporate profit and the minimum return our investors expect from the capital they have invested.
Profits that exceed capital costs can be retained by our operating entities to finance their internal growth. That means: Our most profitable entities have direct access to considerable funds to finance their growth. This dividend model, which has been in use since 2004, provides for two exceptions: When an operating entity must be restructured, it can temporarily be exempted from the dividend rule in order to be able to build equity.
Certain operating entities that are currently building up business in strategically important future markets are, for the time being, not required to pay dividends – such as our operating entities in China and India.
shares to an attractive 16.6 % per year. To track the performance of your own investment in Allianz shares, you can use the share calculator that is available at .
With a market capitalization of € 52 billion at the end of 2005,
Allianz is one of the most highly valued financial services providers in Europe. Our shares are included in all the major European indexes: the DAX, the Dow Jones EURO STOXX 50 and the MSCI Europe. Our stock is also in the MSCI World Index.
The Allianz share is in the FTSE-4-Good and Dow Jones Sustainability indexes. The latter index lists only the 10 % of companies in a given industry that have obtained the best rankings in a sustainability rating. The ranking is based on economic, environmental and social criteria. For more information, visit
EURO STOXX 50 (21.3 %) and the German DAX index (27.1 %), our shares virtually matched the level of the Dow Jones EURO
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 80
up 93.3 % to € 4.4 billion. With this, basic earnings per share increased by 81.6 % to € 11.24, although at the same time the number of shares also increased. Adjusted for goodwill amortization in the previous year, net income rose by 30.7 %, and basic earnings per share by 22.7 %.
General Meeting, to issue a dividend of € 2.00 per share, which represents a € 0.25 increase or 14 % per share. With this we confirm our dividend policy, which rests on continuity. Because of the higher number of shares, the dividend payment will rise by
Meanwhile, 100 % of our shares are in free float. This proportion was only 86 % at the end of financial year 2004. Two especially important events influenced this outcome. First, Munich Re decreased its holdings in our company from the previous 9 % to less than 5 %. Secondly, at the beginning of 2005, we divested ourselves of 17.2 million treasury shares in our “All-in-One” capital market transactions (more details appear on page 89). Allianz shares are held by about 495,000 investors, making us one of the largest publicly held corporations in Europe. Higher free float increases liquidity, as shown by our average daily share turnover of 3.1 million. Moreover, a higher free float gives our shares a greater weighting in the most of the major indexes. For up-todate information on our shareholder structure, visit
Altogether we have met with investors in 17 cities and dedicated 29 days to discussions on current business development and to answering questions. Our “Capital Markets Day”, which takes place once a year separately from our analysts’ conference, has attracted lively interest. In 2005 we reported on our German and
products through a broad network of self-employed full-time tied agents, part-time tied agents, brokers, banks and other channels.
brand name. In other countries, we operate through our subsidiary insurers’ brand names, which are identified as part of the
Allianz Group’s subsidiaries allowing the Allianz Group to benefit from internal diversification effects. Allianz AG also assumes a relatively small amount of reinsurance from external cedents.
Please see the respective sections of “Property-Casualty Insurance Operations” and “Life/Health Insurance Operations” for breakdowns of our insurance operations by geographic region, including gross premiums written, statutory premiums, earnings and various key performance indicators, as well as a description of our largest property-casualty and life/health markets and companies.
In our Property-Casualty segment, we provide a wide array of products, including, among others, motor, homeowners, travel and other personal lines products. Furthermore, we are a leading provider of commercial and industrial coverage to enterprises of all sizes, including many of the world’s largest companies. Through our specialty lines of business, we offer credit insurance, marine, aviation and industrial transport insurance, international industrial risks reinsurance, as well as travel insurance and assistance services, which we manage on a worldwide basis.
Our Life/Health segment provides, among others, traditional life, endowment, annuity, including equity-indexed annuities, and term insurance products. Additionally, we serve individuals with a wide range of health, disability and related coverage and provide group life, group health and pension products to employers.
Bank, through which we offer a wide range of private, commercial and investment banking products and services for corporate, governmental and individual customers, primarily in the European market. Please see “International Presence” for a breakdown of selected operating entities within our primary markets and others.
While Dresdner Bank focuses on selected geographic regions worldwide, Germany is its primary market, which contains 66.1 %
Bank operates and distributes its products primarily through 959 branch offices, of which 927 are located in Germany and 32 outside of Germany. In 2005, we conducted our Dresdner Bank operations through six divisions: provides personalized financial services such as payments transactions, financing, investment advice, financial planning and insurance products.
provides access for its worldwide clients to its range of private banking services, such as wealth management, portfolio management, real estate investment advice and trust and estate advice, as well as business banking advisory services to assist corporate clients in arranging their private and business finances in an integrated and customized manner.
tutional and retail asset management products and services to third-party investors and provide investment management services to our insurance operations. We managed approximately € 743 billion of third-party assets on a worldwide basis at December 31, 2005, which includes fixed income, equity, money market and sector products, as well as alternative investments.
We serve a comprehensive range of retail and institutional asset management clients. Our institutional clients include corporate and public pension funds, insurance and other financial services companies, governments and charities, financial advisors and private individuals.
markets and services its institutional products through specialized personnel located primarily in its Frankfurt, London, Munich,
Beach (California) offices. European retail distribution is provided primarily through the proprietary channels of the Allianz Group, including branch bank advisors, full-time agents employed by affiliated insurance companies and other Allianz Group financial planners and advisors. In the United States, AGI asset managers also offer a wide range of retail products. AGI has committed substantial resources to the expansion of the third-party asset management business in the Asia-Pacific region with offices in Tokyo,
For a discussion of investment portfolios of our insurance, banking and asset management operations, which we refer to as
Competition is most pronounced in our more mature markets (Germany, France, Italy and the United States), while in recent years, competition in emerging markets has also increased as large insurance and other financial services participants from more developed countries have sought to establish themselves in markets perceived to offer higher growth potential, and as local institutions have become more sophisticated and have sought alliances, mergers or strategic relationships with our competitors.
We are subject to competition from both bank and non-bank institutions that provide financial services and, in some of our activities, from government agencies. Substantial competition exists among a large number of commercial banks, savings banks, other public sector banks, brokers and dealers, investment banking firms, insurance companies, investment advisors, mutual funds and hedge funds to provide the types of banking products and services that we offer in our banking operations.
While we continued to put profitability first, we succeeded in growing gross premiums written by € 281 million to € 44.1 billion, and achieved internal growth of 2.7 %. Particularly strong increases were experienced within the United States,
Statutory premiums increased by 6.5 % to € 48.1 billion, originating principally from investment-oriented and single-premium products. Strong growth rates were achieved in our core
European life markets, particularly in Germany, France and Italy, with growth rates in Germany and France well above 10 %. In the United States, statutory premiums remained strong. Internal growth was 6.0 %.
In 2005, our operating profit increased by 13.2 % to € 7.7 billion, thereby demonstrating our commitment to
Offsetting these losses were decreases in loss estimates for previous underwriting years that resulted in an increase in operating profit of 4.6 % to € 4.2 billion.
Group in 2001. Operating profit contributed in large part to this, increasing by 33.2 % to € 775 million. This growth was principally due to a favorable development within Dresdner Bank’s net loan loss provisions, resulting in a net release of € 113 million
(2004: net charge of € 337 million), driven predominantly by the reductions in our portfolios within our non-strategic IRU and the improved risk profile of Dresdner Bank’s strategic loan portfolio.
Net income increased significantly to € 4.4 billion from € 2.3 billion.
The impact of net capital gains and impairments, including non-operating net trading income, remained relatively stable at € 1.8 billion. Other non-operating items, in aggregate, improved by more than € 300 million to a net charge of € 1.7 billion, with restructuring charges declining by 71.2 % to € 100 million, due primarily to the absence of significant charges at Dresdner Bank.
Our tax expenses increased by € 27.2 to € 2.1 billion, representing an overall effective tax rate of 26.3 % (2004: 31.9 %). In 2005, our effective tax rate benefited from preferable tax treatment on dividend income and realized capital gains at various operating entities, as well as the discontinuation of non-tax deductible goodwill amortization. Minority interests in earnings increased by 18.7 % to € 1.4 billion, primarily due to increased earnings at our
In 2005, our shareholders’ equity increased by 25.0 % to € 47.1 billion at December 31, 2005, further .
equity before minority interests. In connection with the purchase of the minority interest of Riunione Adriatica di Sicurtà S.p.A. (or
Operations” for further discussion). The growth within our reserves for premium refunds principally resulted from changes due to fluctuations in fair value associated with group’s own investments.
ance sheets as of December 31, 2005, and 2004, and the respective changes*).
Insurance Operations” for further discussion of our Life/Health segment’s results of operations. Growth in our group’s own investments was partially offset by decreased financial assets held for trading, net. Additionally, investments in associated enterprises and joint ventures, which are classified as equity investments within group’s own investments, decreased principally as a result of sales of our shareholdings in MAN AG and Gecina S.A. in 1Q
to Commerzbank AG is scheduled for 1Q 2006, subject to the fulfilment of customary conditions.
The following table and graphs set forth our assets under management, excluding third-party assets.
December 31, 2005, the majority were invested in instruments of high credit quality, consisting of asset and mortgage-backed securities (e.g. Pfandbriefe), as well as loans to banks and customers. See
“Risk Report” for further information on risk management within our insurance business.
investments within our Banking segment are invested in financial assets and financial liabilities held for trading. At December 31, 2005, financial assets held for trading, net, amounted to approximately 81 %
(2004: approximately 81 %) of group’s own investments, net, within our Banking segment. See “Risk Report” for a discussion of risk management in connection with our trading activities within our banking business.
At December 31, 2005 At December 31, 2004 (Total: ¤100.7 billion)1) (Total: ¤89.3 billion)1)
EU regulations in accordance with clause 315a of the HGB, which we refer to below as “2005 IFRS.” Retrospective application has the effect of applying the new and revised IFRS to prior periods as if those accounting principles had always been used. We present below a brief overview of the major impacts from the retrospective application of 2005 IFRS. For more detailed information regarding the quantitative impacts of new and revised standards under 2005
Unit Purchase Plan (or “Class B Plan”) is considered a cash settled plan as the equity instruments issued are puttable at the holder’s option, resulting in changes in the fair value of the shares issued to be recognized as expense. The adoption of IFRS 2 led to additional charges in 2003 and 2004, shown as additional acquisition -related expenses and administrative expenses in our Asset
profitable correlation between premium rates and risks and our willingness to forego premium growth in markets with increasing pricing pressures, we were successful in slightly growing gross premiums written from € 43,780 million to € 44,061 million, despite the disposal of our Taiwanese, Chilean and Canadian operations in the second half of 2004. Based on internal growth, gross premiums written increased by 2.7 %.
Pound against the Euro. The increase at Allianz Australia resulted from its broker and agency channels as well as its financial institutions and direct divisions due to intensified customer relationship management and positive exchange rate effects.
resulted from our French, Italian and United States operations, as our customers in these regions increased their sales, producing increased receivables. Similarly, within travel insurance and assistance services, Mondial Assistance Group saw an increase of € 92 million (10.2 %), primarily driven by increased sales through the Internet as well as stronger sales through airline partners.
These increases were offset by decreased gross premiums written primarily in Germany, the United Kingdom, France, as well as at Allianz Global Risks Re, where gross premiums written decreased by € 373 million (2.9 %), € 166 million (6.3 %), € 178 mil-
The decline in Germany resulted largely from the commutation of an intra-Allianz Group reinsurance agreement between Allianz
Credit Insurance through Euler Hermes (€ 73 million), SGD (€ 67 million), as well as RAS in Italy (€ 42 million).
Fireman’s Fund, SGD and Allianz Suisse. Total estimated claims from natural catastrophes, net of reinsurance, were € 1.1 billion in 2005, increasing our accident year 2) to 70.2 % (2004: 69.0 %). These natural catastrophe losses were mitigated by positive net development on prior years’ loss reserves largely in the
United Kingdom, Italy, Slovakia, and in our specialty lines, comprising 2.6 % of our total carried net loss reserves at January 1, 2005; our calendar year loss ratio decreased to 67.1 % (67.7 %).
Fund had no net impact at the Allianz Group level as a result of already sufficient reserves, absent a USD 65 million loss caused by the increase in provisions for uncollectible reinsurance recoverables and unallocated loss adjustment expenses.
to € 10,840 million, due to increased expenses for service agreements from the consolidation of a non-insurance entity acquired in the latter part of 3Q 2004, which are not included in the calculation of our expense ratio.
increased by 2.4% to € 3,549 million, driven by our robust operating profitability, despite a decline in non-operating results of more than € 600 million.
declined to a loss of € 426 million, driven by negative changes in fair values of € 220 million from certain derivatives in connection with our “All-in-One” capital market transactions. However, economically, these negative fair value changes were offset by the increased market prices of shares of
Holding, receiving in 2004 a one-off dividend from our life/health operating entity, AGF Vie. The intra-group dividends and profit transfer were eliminated at the Allianz Group level.
million due to the sale of real estate used for own use in the prior year by SGD. Net income was positively impacted by the elimination of goodwill amortization brought about by a change in accounting under IFRS (2004: € 381 million).
The following table sets forth our Property-Casualty insurance segment’s income statement and key operating ratios for the years
Bank branches and the Internet is increasing in relative importance. With Germany being a rather mature market with a high degree of competition, one of the key challenges is successfully managing the trade-off between achieving growth while maintaining profitability. Please refer to “Reorganization of German
With a combined € 5.4 billion in gross premiums written, RAS and
Cornhill plc, which generated gross premiums written of € 2.5 billion, or 5 %, of our gross written premiums. Allianz Cornhill offers a broad range of property-casualty products, including a number of specialty products, which we offer through our personal, commercial and specialty lines. Allianz Cornhill distributes our products through a range of distribution channels, including affinity groups. Operating in a highly competitive market,
Allianz Compañía de Séguros and Fénix Directo, which are united under the name “Allianz Spain”, with gross premiums written of € 1.9 billion. Allianz Spain offers a wide variety of personal and commercial property-casualty insurance products, with an emphasis on motor business, comprising approximately two-thirds of our gross premiums written in Spain. In 2005, Allianz Spain continued to hold its second place rank in the Spanish market, based on gross premiums written in 20047). Market conditions have been characterized, however, by intense price competition in motor business, including decreasing average premiums.
Allianz Australia has strong positions in the workers compensation market and in rehabilitation and occupational health, safety and environment services, as well as operates in certain niche markets, including premium financing and pleasure craft insurance. Allianz
Australia markets our products through brokers, the major distribution channel for commercial business in Australia, as well as non-tied agents, including automobile dealers, accountants, banks and directly to customers. Allianz Australia is driving further its successful market segmentation technique, which includes diversifying its portfolio outside of the traditionally cyclical areas. We also maintain operations in Malaysia, Indonesia, as well as other
We offer a variety of specialty lines of business, namely credit/
Global Risks Re acts as our industrial reinsurance clearing house, assuming industrial insurance from Allianz Group operating entities and centralizing the placement of outgoing reinsurance with third-party carriers in the reinsurance market. Allianz Global Risks
Re achieved gross premiums written of € 1.3 billion in 2005. Our marine, aviation and industrial transport business in Germany,
Marine & Aviation operating entity, which recorded gross premiums written of € 1.1 billion in 2005. Through Mondial Assistance
Through Allianz Leben, Germany Life’s 11.8 % growth reflected the success it had achieved in the context of last year’s German
“Retirement Revenue Act” (“Alterseinkünftegesetz”), resulting in a considerable increase in recurring premiums which began in 4Q 2004 and continued over the course of 2005. Additionally, and equally as important, growth from single premium products, namely our corporate pension solutions business and short-term renewals, were contributing factors to the underlying growth at
In France, at AGF Vie, the increase was driven by strong sales of unit-linked products through our well-performing partnership and broker as well as our agent channels. Additionally, the acquisition of AVIP and Martin Maurel Vie on December 31, 2004 from Dresdner Bank was a contributing factor to France’s growth
Italy, 69 % of our total statutory premiums were comprised of investment oriented products in 2005 (2004: 65 %).
Korea Co. Ltd., Seoul (or “Alliance Life Korea”) was the result of strong sales of variable life products, a product line which had been launched in 2004.
“Allianz Life”) we experienced a 4.6 % increase in statutory premiums related to core business lines, led by strong fixed annuity sales. The overall 1.1 % decline in statutory premiums, however, was due to a novation (sale) of a non-core block of reinsurance business in 2005.
Allianz Leben. This effect overcompensated for a slight reduction in the policyholder participation rate, which itself had a positive effect on operating profit.
Act in 4Q 2004 and the regular unlocking of assumptions within our deferred policy acquisition cost assets in 2005. As a result of
, which is almost exclusively attributable to policyholders, decreased significantly to a loss of € 326 million, primarily from changes in fair values from freestanding derivatives at Allianz Leben, as well as embedded and freestanding derivatives at Allianz Life in connection with equity-indexed annuities it sold.
Net income was also positively affected by the elimination of the amortization of goodwill resulting from a change in accounting under IFRS (2004: € 159 million). of € 19 million resulted from an early retirement program at AGF Group.
Our remained stable at € 463 million. However, our effective tax rate declined considerably to 20.1 % from 27.3 %, largely due to tax-exempt income at various operating entities, including tax-exempt income from securities at Allianz Leben, a beneficial tax settlement at Allianz Life, the discontinuation of non-tax deductible goodwill amortization, as well as from the write-down of deferred tax assets at Allianz Life Korea in 2004.
increased to € 462 million, primarily due to improved earnings at our Italian and French Life entities.
In Germany, Allianz Leben is the market leader for life insurance based on statutory premiums in 20052). Besides Allianz Leben, we operate through a variety of smaller operating entities in the
German market. Together, our German life operating entities contributed € 12.2 billion, or 25 %, of our statutory premiums.
We are active both in the private and commercial markets and offer a comprehensive range of life insurance and life insurancerelated products on both an individual and group basis. The main classes of coverage offered include endowment, annuity and term insurance, which are provided as riders to other policies and on a stand-alone basis. Our private lines have enjoyed favorable development, especially though retirement savings products, also driven by recent changes in legislation. In particular, the German “Retirement Revenue Act” (“Alterseinkünftegesetz”) led to a strong increase of recurring premiums in 2005. In our commercial lines, we are offering group life insurance and are providing companies with services and solutions in connection with pension schemes and defined contribution plans.
Private Health”), we are the third-largest private health insurer in Germany based on statutory premiums in 20042) with more than 2 million customers. In 2005, Allianz Private Health contributed € 3.0 billion, or 6 %, of our statutory premiums. Allianz
Together, these two operating entities generated a statutory premium volume of € 9.3 billion in 2005. Products offered through these operating entities include individual life policies, primarily endowment policies, but also annuities and unit-linked products.
Phénix Vie. Together, these operating entities contributed € 1.1 billion, or 2 %, to our statutory premiums in 2005 and, in aggregate, represent the sixth largest life insurance provider in Switzerland based on statutory premiums in 20045) . Through these operating entities, we market a wide range of individual and group life insurance products, including retirement, death and disability products. Despite a challenging political and regulatory environment, coupled with low interest rates, our Swiss operations have experienced a positive trend in their results of operation through cost and pricing discipline.
Allianz Life Korea and Hana Life, our bancassurance joint venture with Hana Financial Group, Seoul. Overall, our South Korean operations contributed € 1.8 billion, or 4 %, of our statutory premiums in 2005. Allianz Life Korea is the fifth-largest life insurance company in South Korea based on statutory premiums in 20057).
Allianz Life Korea is faced with the challenge of identifying growth opportunities within a mature marketplace. Our South
President Life markets term life, whole life and endowment products. In addition, Allianz President Life increasingly offers investment -linked products. We also maintain operations in Malaysia,
Net interest income remained relatively stable at € 2,228 million. Excluding the negative effects from the reduction of our non-strategic IRU portfolio and from IAS 39, net interest income increased by 11.0 %, in particular driven by our structured finance business. At September 30, 2005, the IRU’s remaining risk assets amounted to € 1.4 billion, of which the majority was sold in 4Q 2005, resulting in a further decrease of these risk assets to approximately one-third at December 31, 2005.
Banking and Private & Business Banking divisions. At DrKW, client business also contributed to our increased net fee and commission income.
Net trading income declined by 25.6 % to € 1,116 million, largely due to the difficult capital market conditions in April and
The results of operations of our Banking segment are almost exclusively represented by Dresdner Bank, accounting for 95.5 % of our total Banking segment’s operating revenues for the year ended the discussion of our Banking segment’s results of operations relates solely to the operations of Dresdner Bank.
In our Personal Banking division, operating revenues increased by 2.0 % to € 1,883 million. Our Business Models 2 and 3, which comprise the sale of banking products through insurance agents, were successfully implemented with an improvement in revenues and growing client base. In 2005, we acquired approximately 360,000 new bank clients through this sales channel, which was well above our target of 300,000.
and the significantly improved risk profile of Dresdner Bank’s strategic loan portfolio. The net release in loan loss provisions, together with the reduction of our non-performing loan portfolio by approximately 58 %, led to a coverage ratio2) at December 31, 2005 of 56.8 % (2004: 60.4 %). Both personnel and non-personnel expenses remained stable at € 3,246 million (2004: € 3,247 million) and € 2,046 million (2004: € 2,060 million) despite focused investments in certain growth areas, such as infrastructure established for our Business Models 2 and 3.
Private & Business Banking and Corporate Banking also increased operating revenues and further improved their operating profitability, with cost-income ratios decreasing by 6.5 and 2.3 percentage points, respectively. These positive developments led to increases in operating profit by 35.4 % to € 440 million and by
These developments underline the need for a better re-alignment between our corporate banking and investment banking activities, a decision recently undertaken at Dresdner Bank; see
Further, net impairments on investments decreased heavily, primarily from improved capital market conditions. The sales of various assets in 2005 was in line with Dresdner Bank’s focus on its core business. The sale of the remaining 21.13 % participation in
Eurohypo AG to Commerzbank AG is subject to the fulfilment of customary conditions, in particular the approval by the German and various European antitrust authorities and the German
in 2005 improved significantly to an expense of € 9 million
(2004: expense of € 278 million), resulting from, among other factors, impairments on certain non-strategic assets in 2004. The increase in operating profit and non-operating results led to of € 382 million in 2005, compared to a tax credit of € 288 million in the previous year, including a one-off tax benefit.
ating ratio for both our Banking segment as a whole and Dresdner
Bank on a stand-alone basis for the years ended December 2005,
and earnings after taxes and before minority interests in earnings, which we refer to herein as “earnings after taxes and before minority interests”, by geographic region. Applicable only for 2004 and 2003, earnings after taxes and before minority interests by geographic region excludes amortization of goodwill. Consistent with our general practice, operating revenues and earnings after taxes and before minority interests by geographic region are presented before consolidation adjustments, representing the elimination of transactions between Allianz Group companies in different geographic regions and different segments.
The growth in third-party assets under management includes record net inflows of € 64 billion (2004: € 31 billion). Net inflows were particularly strong in our fixed income institutional business within the United States at PIMCO and within Germany at AGI
December 31, 2005, AGI managed approximately 95.2 % (December 31, 2004: 94.0 %) of our third-party assets. The remaining assets are managed by Dresdner Bank (approximately 2.3 % and 3.2 % at December 31, 2005 and 2004, respectively) and other
Allianz Group companies (approximately 2.5 % and 2.8 % at December 31, 2005 and 2004, respectively).
Our major achievements in 2005 included: PIMCO, our entity specializing in fixed income investments, significantly increased third-party assets by 36.8 % to € 468 billion, with record high net inflows of € 60 billion, market-related appreciation of € 12 billion and a positive foreign currency effect of € 54 billion.
Our PIMCO Total Return Fund continued to be the largest actively-managed fixed income fund in the world, with assets under management of USD 90.6 billion at December 31, 2005.
In February 2005, we launched the then largest closed-end equity fund, raising USD 2.5 billion. This fund’s investment strategy combines the expertise of our equity managers NFJ
Our major achievements in 2005 included: Record high net inflows, primarily in our fixed income institutional business at AGI Germany.
Dresdner Bank’s branch offices, increased significantly to € 13.8 billion (2004: € 2.3 billion), largely resulting from fixed income products. These numbers include net inflows from mutual funds at PIMCO Europe Ltd.
AGI further increased its market share in the institutional special funds (or “Spezialfonds”) business to 14.7 % based on assets under management1).
Our operating revenues increased by 17.3 % to € 2,698 million.
Internal growth was comparable at 17.5 %. As previously noted, these positive developments reflect favorable business developments worldwide, namely resulting in significant increases of management and loading fees as well as performance fees. Management and loading fees, net of commission, and performance fees rose by 16.5 % to € 2,423 million and 117.0 % to € 122 million, respectively. Overall, fees, net of commission, improved by 19.2 % to € 2,597 million, whereas other income remained relatively stable.
increased significantly by 32.1 % to € 1,124 million, primarily resulting from the aforementioned growth in our
. Operating profit development was particularly strong in the United States and Germany. Due in large part to strict cost management, the increase of our operating expenses was proportionally smaller compared to that of our operating revenues. As a result, our improved considerably to 58.3 % (2004: 63.0 %). The 8.6 % rise in operating expenses to € 1,574 million was due largely to increased performance-related compensation in the United States and Germany as a result of our strong business developments.
Nicholas Applegate, and € 25 million resulted from amortization charges relating to capitalized loyalty bonuses for PIMCO management. These expenses, in aggregate, decreased by € 213 million as they largely expired in 2005. Our net income also benefited from the elimination of goodwill amortization under IFRS, effective January 1, 2005 (2004: charge of € 380 million).
During 2005, a subsidiary of Allianz AG purchased a total of approximately USD 250 million of the remaining minority interest in Allianz Global Investors of America L.P. (or “AGI L.P.“), with payment therefore made in April 2005. Following this transaction, the remaining ownership interest that is held by AGI L.P.’s former parent company, Pacific Life, was reduced to approximately 2 %
at December 31, 2005 (December 31, 2004: 6 %). Further, and also during 2005, a subsidiary of Allianz AG called 5,427 Class B
on a stand-alone basis for the years ended December 2005, 2004 and 2003.
February 3, 2006, the extraordinary shareholders’ meetings of holders of RAS ordinary shares and holders of RAS savings shares and on February 8, 2006, the extraordinary shareholders’ meeting of Allianz AG agreed to the merger plan. Against the resolution of the shareholders’ meeting of Allianz AG regarding the agreements to the merger plan and the capital increase to implement the merger, contestation suits have been filed. The entry of the merger in the commercial register of Allianz AG may only take place once the competent court rejects the lawsuits, or if such lawsuits are withdrawn or if the competent court rules finally and conclusively that the lawsuits do not prevent the entry of the merger in the commercial register (so-called “Freigabeverfahren”).
AG shares for 19 RAS ordinary shares or 19 RAS savings shares.
AG purchased 139,719,262 RAS ordinary shares at a price of € 19 per share and 328,867 RAS savings shares at a price of € 55 per share. As another preparative step of the merger, RAS will, prior to the effectiveness of the merger, contribute its business with the exception of the participation in certain foreign subsidiaries to a newly incorporated (in October 2005), wholly-owned Italian subsidiary that, subsequently to the merger, will continue the corporate name “RAS S.p.A.”.
Allianz Group generated € 5.4 billion in gross premiums written and € 9.3 billion in statutory premiums from its Italian propertycasualty and life/health insurance operations, respectively. Additionally, Italy is the Allianz Group’s second most important
RAS and Lloyd Adriatico are the third-largest property-casualty and second-largest life insurer in the Italian market, based on gross premiums written and statutory premiums, respectively, in 20042).
Thereof, € 2.2 billion, in aggregate, was secured in 3Q 2005 from equity-based financing and the issuance of an equity-linked loan.
As part of our repositioning plan, in September 2005, we announced our decision to reorganize our major German operating entities which are active in our insurance operations. The new structure is designed to further develop our leading position in the
German insurance market by a joint presence, thus allowing us to provide an enhanced customer orientation and improved service, while at the same time cutting costs in the long-term through reduced complexity.
In Germany, and through the end of 2005, our propertycasualty and our life/health insurance operations were essentially conducted through five different corporations, each with its own sales organization. This structure had grown historically and had become complex. Consequently, and effective November 2005, the German insurance operations have been consolidated under a new holding company, Allianz Deutschland AG. This new holding company is a wholly-owned subsidiary of Allianz AG, the future Allianz SE. Allianz Versicherungs-AG (property-casualty insurance), Allianz Lebensversicherungs-AG (life insurance) and
Versicherungsbank AG in November 2005 from 90 % to 100 %.
Within our risk governance policy, local units assume independent responsibility for their own risk control, as ultimately, it is they who have to respond quickly to risk changes in a market-oriented manner. At the same time, this independent responsibility enables operating units to meet the applicable legal requirements at their respective locations. In 2005, local risk monitoring was further accelerated. Our large operating entities have established local risk committees and risk control units managed by the Chief Risk
Investment risk management is implemented jointly with local units as part of a structured investment process. The Allianz
In our business, successful risk management means controlling risks in order to protect the financial strength of the Allianz Group and increase its value on a sustainable basis. Therefore, the Board of Management of Allianz AG formulates the business objectives and allocates the capital resources of the Allianz Group according to return on investment and risk criteria.
It also provides timely information to the Board of Management of Allianz AG about risk relevant developments, sets risk limits, and is responsible for recommending and coordinating risk-containment measures. In 2005, we established a Group Insurance
The Trend Assessment Committee is responsible for the early recognition of new risks. Their role is to study and evaluate changes that may have a significant impact on the Allianz Group’s risk situation. In 2005, we established a panel of experts consisting of representatives from our insurance, banking and asset management segments, which is examining the possible effects of climate change on our business. Its task is to develop risk management strategies and identify potential opportunities resulting from climate change. We also belong to the Emerging Risk Initiative of the CRO Forum’s task force, which examines methods to identify, analyze and manage potential risks. The task force is comprised of representatives from ten international insurance and reinsurance companies.
Directors or Board of Management of the local operating entity or
The Group Risk Policy establishes the minimum requirements that are binding for all operating units. Specific minimum risk standards for our insurance, banking and asset management segments translate these requirements into action. In 2005, we supplemented our risk guidelines with standards for addressing natural disaster risks. Such standards are implemented by the operating entities worldwide and are monitored on a regular basis by Group
We manage our business activities through our respective local entities. The most important parameters used in our risk-oriented controlling process are Economic Value Added (or “EVA”®) and risk capital. Risk capital is used to hedge against unexpected economic losses. In 2005, we used our internal risk capital model as input for the value-oriented management framework of our insurance companies and Dresdner Bank. For asset management, we used a model based on a concept developed by the Standard
Our risk capital model quantifies the following risk categories: Possible losses caused by changes in interest rates, exchange rates, share prices and other relevant market prices
minority interests amounted to € 37.5 billion at December 31, 2005.
Unexpected losses due to a loss of reputation of our subsidiaries or the Allianz Group. Reputational risks derive from Allianz Group actions, transactions or products.
They may be caused by or result from losses in other risk categories.
We monitor market risks by means of sensitivity analyses and stress testing. As protection against exchange rate fluctuations, we back our insurance commitments, to a very large extent, with funds of the same currency.
In certain insurance lines, there is a direct link between investments and obligations to our customers. For example, life insurance is subject to the guaranteed interest risk in that we must credit interest to our customers pursuant to the underlying contracts. The close relationship between insurance obligations and investment of the capital related to these obligations is monitored by using specific models for asset-liability management which involves integrated management of investment and insurance liabilities. We are continuously developing our asset-liability management. In 2005, we revised our internal model for life insurance with the objective of creating an integrated system to assess our portfolio, calculate risk capital and conduct sensitivity analyses. Once completed, this model will provide significant support to the management of our life insurance business.
We limit our liability from insurance business by ceding part of the risks we assume to the international reinsurance market. When selecting our reinsurance partners, we consider only companies that offer excellent security. To control this credit risk, we compile
actuarial models used to calculate premiums and monitor claim patterns. In addition, we issue guidelines for underwriting insurance contracts and assuming insurance risks. Natural disasters such as earthquakes, storms and floods represent a special challenge for risk management. In order to manage such risks and better estimate the potential effects of natural disasters, we use special modelling techniques in which we combine data about our portfolio (e.g., the geographic distribution of insurance amounts), with simulated natural disaster scenarios in order to estimate the magnitude of potential damage. Where such models do not exist
Rita and Wilma, caused record losses to the insurance industry, in particular Hurricane Katrina with its disastrous impact on New
Orleans. The total loss for the Allianz Group was lower than the total risk capital budget of our operating entities for natural disasters, yet the disasters in 2005 and its results must be examined closely so that our simulation systems used to estimate the possible effects of natural disasters can be continually improved.
Actuarial risks in property-casualty insurance have led to fluctuations of the loss ratio in our property-casualty segment over time, as shown below.
Our are limited by a wide range of technical and organizational measures. We attempt to reduce any such risks by installing a comprehensive system of internal controls and security systems within each operational entity. In 2005, we introduced a self-assessment system to establish a uniform procedure to detect potential errors and identify internal control weaknesses. Each operating entity evaluates its key processes and existing controls at least once annually. Another instrument to identify weaknesses is through the systemic collection and recording of realized operational losses. An analysis of the causes of such losses assists the operating entity in adopting appropriate measures in order to avoid or limit such losses in the future. The measures to prevent and limit such operational risks are varied, including developing emergency plans, designing appropriate insurance policies, revising processes and adopting additional controls and responsibility assignments.
We understand the in our life insurance business to mean the unexpected economic losses due to early cancellation of contracts by our customers. We assess this risk by calculating technical reserves using probability data based on historic rates of cancellation in our respective local markets.
At December 31, 2005, the risk capital of our insurance companies, based on local solvency requirements and before Allianz
Group diversification and minority interests, was € 23.1 billion for property-casualty insurance (2004: € 21.9 billion) and € 9.5 billion for life/health insurance (2004: € 8.7 billion).
The market risks in our banking business are broken down into risks arising in our trading portfolio, banking book and equity holdings (i.e., shareholder risks).
For the purpose of setting internal limits and risk management, we calculate a value-at-risk with a confidence level of 95 % and a one-day holding period. Unlike the value-at-risk calculation required by the supervisory authority, which is based on historical market data, we thus assign greater weight to the most recent market fluctuations. By doing so, we ensure that the current market trends are reflected in the value-at-risk calculation on a timely basis.
Bank also uses operational risk indicators and limits, which are specifically adapted to the risk situation of the trading units. Trading is controlled by setting value-at-risk and operational market risk limits.
Controlling on a daily basis. Limit breaches are immediately indicated to management so that corrective action can be taken.
Market risks within Dresdner Bank’s trading portfolio had a value-at-risk, with a 99 % confidence level and a 10-day holding period, of € 66 million at December 31, 2005, compared to € 50 million at December 31, 2004.
Currency risks in the banking book of Dresdner Bank are limited by applying the principle that all loans and deposits in foreign currencies are refinanced or reinvested in the same currency with matching maturities.
These risks comprise unanticipated economic losses which can arise from providing equity capital to third parties. Following the reduction of substantially all of the equity investments held by the Institutional Restructuring Unit (or “IRU”), our risk exposure was significantly reduced compared to The IRU was closed on September 30, 2005.
Liquidity control and liquidity risk management are the responsibility of Treasury and Risk Controlling within Dresdner Bank, which establish principles for liquidity management within the framework of the Allianz Group’s liquidity policy. This liquidity policy meets both regulatory requirements and Allianz Group standards. The liquidity risk limits set include a reporting process for limit breaches and provisions for emergency planning. Liquidity risk measurement is based on Dresdner Bank’s liquidity management system. This system models the maturities of all cash flows
and compiles a scenario-based liquidity balance sheet, taking into account available prime-rated securities. Limits on liquidity gaps are established to manage short-term liquidity risk.
Credit risks include credit and counterparty risks from loans and advances, country risks, counterparty risks from trading activities and issuer risks from our securities business.
The central element of approval, monitoring and control process is the rating of our customers. In this process, the various creditworthiness characteristics of our customers are presented in the form of rating classes. To categorize the default probability of a borrower, a system with 16 different rating classes is used. The first six classes correspond to “investment grade”, classes VII to
XIV signify “non-investment grade”. Rating classes XV and XVI are default classes according to the Basle II definition. The rating procedures utilized are assessed and improved on an ongoing basis.
In 2005, Dresdner Bank further optimized this procedure in light of the Basle II requirements and aims at utilizing the Advanced
Internal Ratings-Based (or “IRB”) Approach for the calculation of future regulatory capital requirements.
(2004: 91 %) of Dresdner Bank’s trading business involved primarily transactions with counterparties from rating classes I to VI, i.e., with state and local agencies and financial services providers, at
Of the total credit and counterparty risks from loans and advances of Dresdner
Bank’s lending activities at December 31, 2005, 33 % was accounted for by the Personal Banking division, 13 % by the Private
I through VI (investment grade). In our loan business, the probability of average default was below the probability of default of the loan portfolio. The overall quality of our loan portfolio has improved significantly in recent years, as shown in the graph below.
Dresdner Bank’s IRU, which was responsible for reducing our non-strategic loan portfolio, completed its task faster than planned and was closed on September 30, 2005. The IRU’s remaining risk assets were re-transferred primarily to Dresdner Bank’s Corporate
Other division on October 1, 2005. Streamlining the loan portfolio has resulted in a significant improvement in portfolio quality. Our total non-performing loans and potential problem loans, which are two measurements utilized to assess the quality of the loan portfolio, decreased from € 7.4 billion at December 31, 2004 to
risks relating to cross-border transactions. We manage country risks using internal country ratings. These ratings are based upon macroeconomic data and key qualitative indicators. The latter takes into account the economic, social and political environment. The country rating system comprises 16 ratings classes. The country rating system divides countries into those without any discernible risk and those with increased or high risk potential.
Issuer risks arise from Dresdner Bank’s own holdings in securities such as fixed income and equity securities, as well as from synthetic positions assumed through purchasing credit derivatives. Such risks reflect the maximum possible loss in the event of an unexpected loss of a particular issuer. Issuer risks are managed comprehensively, in particular risks arising from creditsensitive issuers. In 2005, the share of issuer risks of the total loss risk for Dresdner Bank´s trading activities decreased 7 percentage points to 57 % at December 31, 2005.
Advanced Measurement Approach (or “AMA”), which shall also be used in the future to determine capital adequacy pursuant to
Cost risks comprise unanticipated fluctuations in earnings that arise due to a decline in income without a corresponding decrease in expenses. Cost-cutting measures implemented in the past have significantly reduced risks associated with fixed costs.
Allianz Group diversification was € 7.0 billion, compared to € 7.9 billion at December 31, 2004.
Risk control in asset management is an integral part of the processes of our operating entities and investment platform. The Allianz Global Investors Corporate Center is responsible for ensuring that Allianz Group-wide standards for asset management are applied at the local level. The individual asset management companies continually monitor the portfolio risks of the customer assets they manage by using analytical tools specifically adapted to the risk profile of the product concerned. At the same time, the performance of the various product lines is periodically monitored and analyzed at the Allianz Group level. At December 31, 2005, risk capital in our asset management segment, calculated according to the Standard & Poor’s model and before minority interests, was € 2.5 billion, compared to € 2.0 billion at December 31, 2004.
Supervisory authorities and rating agencies are additional risk monitoring bodies. Supervisory authorities stipulate the minimum precautions and capital requirements that must be accounted for in individual countries and on an international level. Rating agencies determine the relationship between the required risk capital of a company and the available safeguards. In their evaluation of capital resources, rating agencies include equity shown in the balance sheet, minority interests and other items representing additional securities in times of crisis. At December 31, 2005, this total was at a level that corresponds to our current ratings. At
December 31, 2005, the financial strength of the Allianz Group was rated by Standard & Poor’s as “AA–” (outlook stable), by
A. M. Best as “A+” (outlook stable), and by Moody’s as “Aa3”
We will continue to strengthen our risk management system in 2006. For example, we will introduce standards for underwriting large insurance risks and for developing and marketing new products. We will complete the analytical model for our life insurance business and introduce the limit system for natural disaster risks.
Dresdner Bank is targeting to implement advanced approaches by applying the Advanced IRB Approach for credit risks and the AMA
Finally, Dresdner Bank will introduce in 2006 a new validation process for its rating process, which will meet growing internal and external demands.
working capital is largely representative of our liquidity, we believe our working capital is sufficient for our present requirements.
At December 31, 2005, our eligible capital for the solvency margin, required for insurance groups under German law, was € 43.6 billion (2004: € 29.1 billion), surpassing the minimum legally stipulated level by € 29.4 billion. This margin resulted in a cover ratio1) of 307 % (2004: 217 %). In 2005, this solvency margin requirement applied only to our insurance segments and did not contain any capital requirements for our banking business.
On January 1, 2005, the Financial Conglomerates Directive, a supplementary EU directive, became effective in Germany. Under this directive, a financial conglomerate is defined as any financial parent holding company that, together with its subsidiaries, has significant cross-border and cross-sector activities. The Allianz
Group is a financial conglomerate within the scope of the directive and the related German law. The law requires that the financial conglomerate calculates the capital needed to meet the respective solvency requirements on a consolidated basis. The calculation methodology for the financial conglomerates solvency margin is still subject to uncertainties.
At December 31, 2005, based on the current status of discussion, our eligible capital for the solvency margin, required for our insurance segments and our banking and asset management business, was € 40.0 billion including off-balance sheet reserves2), surpassing the minimum legally stipulated level by € 16.3 billion. This margin resulted in a cover ratio of 169 % in 2005. In 2005, all Allianz Group companies also have met their local solvency requirements.
Allianz AG operates as both a holding company for the Allianz
Group’s insurance, banking and other subsidiaries and as a reinsurance company, primarily for other Allianz Group companies.
The amount of necessary capital depends on, among other factors, local capital and regulatory requirements, rating agency capital requirements and our own internal risk capital standards. As our operating entities grow, local requirements change or other factors intervene, the need for additional capital can arise. To the extent that these requirements cannot be financed by results from operations from the respective operating entities, in excess of dividends, Allianz AG can and does allocate additional capital.
Reserve System. To be considered “well capitalized” for these purposes, Dresdner Bank must have a Tier I Capital Ratio of a least 6 % and a combined Tier I and Tier II Capital Ratio of at least 10 %, and not be subject to a directive, order or written agreement to meet and maintain specific capital levels. As shown in the table below, Dresdner Bank maintained a “well capitalized” position during both 2005 and 2004.
The following table sets forth Dresdner Bank’s BIS capital ratios: The distinction between “core capital” and “supplementary capital ” in the table above reflects the ability of the capital components to cover losses. Core capital, with the highest ability to cover losses, corresponds to Tier I capital, while supplementary capital corresponds to Tier II capital as such terms are defined in applicable U.S. capital adequacy rules.
In addition to regulatory capital requirements, Allianz AG also uses an internal risk capital model to determine how much capital is required to absorb any unexpected volatility in results of operations. For further information regarding our internal risk capital model, please refer to our “Risk Report.”
In addition to regulatory requirements and our internal risk capital model, rating agencies use distinct methodologies to determine if our capital base is adequate. During the course of 2005, the rating agencies “Standard & Poor’s” and “A.M. Best” have recognized the considerable strengthening of our capital base and updated the outlooks for our ratings during 2005 accordingly. At
For our banking operations, our primary sources of liquidity include customer deposits and interest and similar income from our lending transactions, while our major uses of funds are for the issuance of new loans and advances to banks and customers, and the payment of interest on deposits and other operating costs. The liquidity of our banking operations is largely subject to the ability of individual customers, and various other enterprises to which we extend credit, to make payments to us based on their outstanding commitments and could, therefore, be negatively affected by unforeseeable losses due to problem loans.
Within our asset management operations, our primary sources of liquidity include fees generated from asset management activities, while the principal use of these funds is for the payment of operating costs.
From time to time, the Allianz Group, through Allianz AG, will raise funds on the capital markets through the issue of debt or other financial instruments in order to fund any liquidity need which cannot fully be covered by our operating or investment cash flows. See “Debt and Capital Funding” below for further information. We also have access to commercial paper, mediumterm notes and other credit facilities as additional sources of liquidity. At December 31, 2005, we had access to unused credit lines as a source of further liquidity.
Certain of the operating entities within the Allianz Group are subject to legal restrictions on the amount of dividends they can pay to their shareholders. In addition to the restrictions in respect of minimum capital and solvency requirements that are imposed by insurance and other regulators in the countries in which these companies operate, other limitations exist in certain countries.
For example, the operations of our insurance company subsidiaries located in the United States are subject to limitations on the payment of dividends to their parent company under applicable state insurance laws. Dividends paid in excess of these limitations generally require prior approval of the insurance commissioner of the state of domicile.
AG’s external debt financing was in the form of debentures and money market securities. Our total certificated liabilities outstanding at December 31, 2005 and 2004 were € 59,203 million and € 57,752 million, respectively. Of the certificated liabilities outstanding at December 31, 2005, € 33,097 million are due within one year. See Note 19 to our consolidated financial statements for further information. Our total participation certificates and subordinated liabilities outstanding at December 31, 2005 and 2004 were € 14,684 million and € 13,230 million, respectively. Of the participation certificates and subordinated liabilities at December 31, 2005, € 1,077 million are due within one year. See Note 15 to our consolidated financial statements for further information.
In order to further reduce our exposure to equities, Allianz AG, through Allianz Finance II B. V., issued a three-year index linked exchangeable bond of € 1.3 billion. The redemption value of this security, BITES (or “Basket
Index Tracking Equity-linked Securities”), is linked to the performance of the DAX Index and was issued at a DAX-reference level of 4,205.115. During the three-year term of this instrument, Allianz AG may choose to redeem the bond with shares of BMW AG, Munich Re or Siemens AG. Investors will receive an annual out-performance premium of 0.75 % on the prevailing future DAX level and a repayment premium of 1.75 %, based on the DAX level at redemption.
Allianz AG shares with a maturity of three years. The bond ex-warrants were placed with institutional investors. In 3Q
2005, warrants representing 9 million Allianz AG shares were exercised. The premiums received thereof were accounted for within shareholders’ equity.
Allianz AG, approximately € 2.2 billion, in aggregate, was secured in 3Q 2005 from equity-based financing and the issuance of an equity-linked loan. In this context, approximately € 1.1 billion was placed out of authorized capital without pre-emptive rights and a € 1.1 billion equity-linked loan was issued with a variable redemption amount linked to the share price of Allianz AG, which can be settled, at our option, in cash or Allianz AG shares.
AG was below the exercise price. Additionally, on August 26, 2005, we repaid the CHF 1.5 billion senior bond issued in 1999 and 2000. Our use of commercial paper as a short-term financing instrument was reduced by 21.4 % to € 1.1 billion in 2005 from € 1.4 billion in 2004. Interest expense on commercial paper declined marginally to € 31.3 million (2004: € 31.6 million) due to increasing interest rates in 2005.
The following table describes the Allianz AG issued debt outstanding at December 31, 2005 at nominal values. For further information, see Notes 15, 19 and 32 to our consolidated financial statements.
(2004: reduction of € 10,136 million), largely as a result of reduced business volume. Conversely, the reduction of liabilities from repurchase agreements and collateral received from securities lending transactions reduced operating cash flow by € 18,692 million (2004: increase of € 35,255 million). This development was primarily caused by declining business volume, which lead to a reduction in the respective liabilities.
Net cash flow used in investing activities amounted to € 22,452 million (2004: € 15,378 million), primarily due to an increase in investments held at fair value by € 28,983 million (2004: € 12,661 million), resulting from a significant inflow of funds from business underwritten.
Net cash flow provided by financing activities increased by € 3,922 million to € 6,228 million (2004: € 2,306 million). Cash inflow from capital increases amounted to € 2,183 million (2004: € 86 million). Further, the issuance of subordinated debt and the sale of treasury shares contributed to the increased cash flow provided by financing activities.
In total, cash and cash equivalents increased by € 16,019 million (2004: decrease of € 9,900 million).
The Allianz Group holds cash and cash equivalents in more than 30 different currencies, although such cash and cash equivalents are held primarily in Euros, followed by U.S. Dollars, Swiss Francs and British Pounds. At December 31, 2005, 2004 and 2003, the Allianz Group held € 31,647 million, € 15,628 million and € 25,528 million, respectively, of cash and cash equivalents. See
Note 11 to our consolidated financial statements for additional information on the Allianz Group’s cash and cash equivalents.
gram and the initiatives resulting from it (see page 22 of this
ideas in core processes of our HR activities. For instance, skills profiles, tools for agreeing on targets and assessment procedures that are carried out throughout the Allianz Group and improve the efficiency of our HR activities around the globe.
In 2003 we introduced our “Leadership Values” that are uniform throughout the world. These have at their heart a culture of leadership and performance that is oriented towards customers and employees. Year after year we check whether and to what extent these Leadership Values are working in our company. The results of the last poll in October 2005, which showed further improvement, demonstrate that the Leadership Values give a sense of direction to managers in the Allianz Group around the world.
Managing staff at the Allianz Group is a matter of agreeing on individual objectives. We want to create a noticeable link between the achievement of objectives and pay. Compensation for upper and middle management is already largely tied to the realization of operating and strategic goals accordingly.
In the year under review, we once again launched an employee stock purchase plan, which offered Allianz AG shares on preferential conditions to 122,000 employees in 21 countries. The number of employees opting for Allianz AG shares raised by 5.1 percentage points to 29.9 % of those entitled.
Board of Management remuneration is provided on pages 15 to 17 of this Annual Report.
The Allianz Group Management Institute (or “AMI Group”) has the task of developing our top managers and candidates for senior management responsibilities. This task has three components: “Top Management Dialog” ensures that the uppermost level of management at Allianz throughout the world has a common understanding of Allianz Group strategy and its implementation.
“Leadership Development” provides our top performers with the best training and development currently available anywhere in the world at the time.
“Cultural Change” program promotes an international corporate culture amongst our managers.
Program” is a good example of this. It is directed at experienced managers working on strategic projects to solve business policy issues with one of the top business schools. The projects are sponsored by members of the Allianz AG’s Board of Management.
measures and procedures for improving the efficiency of business processes and project tasks, as well as change management. The approach is based on the Six Sigma method that has been introduced in the industrial field, i. e. at the General Electric Company.
International experience and intercultural competence are a key qualification for Allianz Group employees and an advantage in international competition. As a result, we promote international deployment and exchange of specialists and managers. Cross-border deployment between Group companies is also an effective instrument for taking advantage of the superior business concepts and procedures of one unit and introducing them throughout the Group. This is used intensively as part of our Sustainability
Program. Today there are about 400 experts from 30 countries working on this project that spans the globe. The internationally oriented development of our employees improves in particular the potential of our internal labour market and the attractiveness of the Allianz Group as an employer.
For 2006, we expect the global economy to maintain a rate of growth consistent with the previous year, but with decreasing differences between the industrialized countries. The current trade deficit in the United States and the effect it will have on future exchange rates against the U.S. dollar remain uncertain. While the more restrictive monetary policy of the various central banks around the world are working to thwart off the risk of inflation, it is also restricting economic growth. Overall this is a positive business environment for financial service providers.
Our economists forecast world economic growth in 2006 at 3.2 % (2005: 3.2 %). This should allow world trade to maintain its current dynamic and increase by approximately 8 %. We consider the emerging markets, with growth of 5.5 %, to have particular potential. Industrialized countries should see expansion of approximately 2.6 %, consistent with the previous year.
Growth in Asia of 6.7 % will continue to drive the global economy. We assume that the expansion in South Korea in 2006 will accelerate further. In contrast, economic growth in India will decline slightly to 7.0 % (2005: 7.5 %), and in China to 8.5 %
(2005: 9.9 %); this will reduce the risk of the economies in these countries from expanding at an over-accelerated pace. In Japan, the largest economy in Asia, we predict continued stable growth
EU countries and the Euro zone should also see a comparable level of growth.
The need for people to make provisions for their retirement and the virtually worldwide increase in the standard of living are also leading to a rise in the business. The total assets that must be managed for personal or corporate retirement schemes is steadily increasing. The U.S. and European markets present particular opportunities, where “baby boomers”
United States in five to ten years, Europeans still have fifteen to twenty years to make their own provisions for retirement. Another growth area is Asia, whose middle class is increasingly gaining importance with its economic upturn.
Please see “Strategy” on pages 22 to 23 of this Annual Report for information on our growth strategy.
We expect an overall increase in operating profit and net income of 10 %. Within our Property-Casualty segment we are striving to maintain a strong combined ratio of approximately 93 %. We are also confident that our Life/Health and Banking segments will achieve an operating profit of € 1.7 billion and € 1.3 billion, respectively. For our Asset Management segment, we are targeting an increase of third-party assets under management of more than 10 %, when adjusting for currency impacts. However, as always, natural catastrophes and adverse developments in the capital markets, as well as the factors stated below in our cautionary note regarding forward-looking statements, may severely impact our profitability.
Our definition of operating profit in our various segments may differ from similar measures used by other companies, and may change further over time.
As previously stated, this does not apply to our Life/Health segment.
Clear distinction between results of operations of our Property-Casualty segment and corporate activities through the introduction of a Corporate segment.
All key performance indicators, including a re-defined combined ratio encompassing additional costs, will be able to be directly derived from the income statement.
Annual General Meeting may increase or decrease the number of shares eligible for dividends. In this case, an amended proposal for the appropriation of profit based upon an unchanged dividend in the amount of € 2.00 per eligible share will be submitted to the
Certain of the statements contained herein may be 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 that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. In addition to statements which are forward-looking by reason of context, the words “may”, “will”, “should”, “expects”, “plans”,
mental, social and cultural objectives in almost every region of the world. As a Group holding, we manage the Allianz Environmental
Mente, Kulturstiftung Dresden, Allianz Care Foundation Indonesia, AGF Athena Foundation, Fireman’s Fund Foundation, PIMCO
Foundation and AGF Brasil Charity and Relief Association. In addition to the work of our foundations, we initiated two special projects in 2005 dedicated to environmental protection and fighting poverty.
After preparing a report together with the Worldwide Funds for Nature (or “WWF”) on the opportunities and risks of climate change for the financial services industry, we formed a core task force in the year under review, which is examinating these climatic effects in-depth. It is evaluating risks and new business opportunities, for example in trading emissions rights and in the area of renewable energies.
In cooperation with the “Gesellschaft für Technische Zusammenarbeit ” (or “GTZ”), we have developed microinsurance schemes, that are suitable to ease poverty in emerging markets and developing countries, such as India or Indonesia. Microinsurance is life insurance that offers protection for only a few euro cents a month. Our Indian company, Bajaj Allianz, sold 80,000 such polices in 2005 in cooperation with Activists for Social Alternatives (or “ASA”), a local non-governmental organization. We are currently reviewing whether we should also offer microinsurance in other Asian markets.
Compliance that updates the rules that had been in place and aligns them with the principles of the Global Compact and OECD
KPMG billed the Allianz Group an aggregate of € 60.1 million in 2005 and € 38.6 million in 2004 in connection with professional services rendered for the audit of our annual consolidated financial statements and services normally provided by
KPMG in connection with statutory and regulatory filings or engagements. These services consisted mainly of periodic review engagements and the annual audit.
KPMG billed the Allianz Group an aggregate of € 11.0 million in 2005 and € 16.1 million in 2004 for assurance and related services. These services consisted primarily of advisory and consulting services related to accounting and financial reporting standards, financial due diligence services, and review procedures associated with SOX 404 implementation.
KPMG billed the Allianz Group an aggregate of € 4.0 million in 2005 and € 3.2 million in 2004 for professional services, primarily for tax advice and tax compliance.
All services provided by KPMG to Allianz Group companies, other than audit services, must be pre-approved separately by the Audit
KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft (or “KPMG DTG”) serves as the external auditing firm for the Allianz Group.
Group’s consolidated financial statements, the statutory audits of the financial statements of Allianz AG and its subsidiaries or services that are normally provided in connection with statutory and regulatory filings or engagements; (ii) Audit-Related Fees, which comprise fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the financial statements and which are not reported under (i); (iii) Tax Fees, which comprise fees billed for professional services rendered for tax compliance, tax advice and tax planning; and (iv)
All Other Fees, which comprise fees billed for all other products and services provided other than the services reported under (i)