CONTENT A _ To our Investors Pages 1 – 10 2 Letter to the Investors 4 Supervisory Board Report 9 Mandates of the Members of the Supervisory Board 10 Mandates of the Members of the Board of Management 12 Corporate Governance Report 18 Statement on Corporate Management pursuant to § 315d and § 289f of the HGB
D _ Consolidated Financial Statements Pages 93 – 168 94 Consolidated Balance Sheet 95 Consolidated Income Statement 96 Consolidated Statement of Comprehensive Income 97 Consolidated Statement of Changes in Equity 98 Consolidated Statement of Cash Flows
The Consolidated Financial Statements are presented in millions of Euros (€ mn) unless otherwise stated.
Due to rounding, numbers presented may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.
While the world around us remains turbulent, we keep building on our strengths. In 2019 we have grown to new record levels: Our revenues reached € 142.4 bn, our operating profit € 11.9 bn. Our healthy business mix and global diversification allowed us to outperform yet another year despite challenges in the performance of our industrial insurance segment.
There are many sources to our success. We achieved growth by gaining market share in mature but relatively saturated markets and through strategic expansion in selected regions. In Germany, for example, we grew by 15 % – the rest of the market by 4 %. Not only is our German life insurance business continuing its success story; also, our Property-Casualty segment can grow its customer base after several years of stagnation. At the same time, we are strengthening our presence in growing markets such as Brazil and China; e.g., through our partnership with JD.com. Our Asset Management segment reached € 1,686 bn in third-party assets under management, a level unprecedented in our history – another strong indicator of how much trust clients worldwide extend to us. We are with them for the long run, celebrating our 130th anniversary in 2020. Our sustained and sustainable business success allows us to gratify you, our shareholders: As we achieved a net income attributable to shareholders of € 7.9 bn, we are in the position to propose another increase in dividends to € 9.60 per share – the seventh increase in a row.
Our financial performance is strong, and so is our organizational health: Our people and leaders are bringing to life our strategy “Simplicity Wins.” We are creating an environment that is open to and promoting constant change – an essential success factor in highly volatile times like these. The new spirit can be felt throughout the organization, and it is expressed in our Inclusive Meritocracy Index, which measures leadership and performance culture, reaching an all-time high of 73 %. Still, we want to do more to mobilize in particular our frontline employees. They are the face to our customers. Their outstanding commitment is one of the reasons in a comprehensive set of initiatives, which helped us to manage the growth of number of businesses, where Allianz is loyalty leader when customers are asked about their willingness to recommend us to their family and friends. Nevertheless, we must become even better in customer service excellence. Our focus on productivity can never be an excuse to compromise on customer experience.
Apart from the innumerable everyday activities through which Allianz employees fill our company purpose with life, there were some achievements this past year that we are particularly proud of:  We made a series of acquisitions to strategically rebalance our portfolio. To name just a few: In Brazil, we are expanding our presence to become one of the country’s top insurers in Property-Casualty insurance. In the UK, we effected two transactions that made us the second largest general insurer in the market. Our asset manager PIMCO completed its acquisition of Gurtin Municipal Bond Management to offer clients a more extensive and enhanced suite of strategies and services.
 For the first time, Allianz was ranked the number one insurance brand in the Interbrand Best Global Brands Ranking. In the Top 100 of global brands, we moved up six places to number 43.
 As part of our continued efforts to safeguard a sustainable future, Allianz initiated the UN-convened Net-Zero Asset
Owner Alliance – a group of the world’s largest pension funds and insurers which have committed to reduce the carbon emissions from their investment portfolios to net-zero by 2050. Along the same lines, we also co-chair the Global Investors for Sustainable Development (GISD) initiative, which aims to scale up finance and investment in sustainable development.
These achievements are the best proof for the exceptional quality of our people. On behalf of my Board of Management colleagues – and, I assume, on your behalf as well – I want to express my sincere thanks to our employees and partners around the globe for their unfailing dedication and great work.
Our resilience is fostered by our strategy “Simplicity Wins”. We are making insurance and investing simpler for our clients. We are slimming down our products, our processes, and our IT. We are starting to get rid of old technologies and to prepare for a future-oriented digitization, which is not designed to fit with legacy systems but to accommodate future customer needs.
We look to the next year with utmost confidence – not because it is going to be an easy one (it certainly isn’t) but because we are well prepared for what lies ahead.
During the financial year 2019, the Supervisory Board fulfilled all its duties and obligations as laid out in the company statutes and applicable law. It monitored the activities of the company’s Board of Management, dealt with the succession planning for the Board of Management and advised it on business management issues.
In all of the meetings in 2019, the Board of Management reported on Group revenues and results as well as developments in individual business segments. The Board of Management informed the Supervisory Board on the course of business as well as on the development of Allianz SE and the Allianz Group, including deviations in actual business developments from the planning. In this context, the adequacy of capitalization, the solvency ratio, and the respective stress scenarios were discussed. The annual Allianz SE and the Group’s consolidated financial statements including the respective auditor‘s reports, the half-yearly as well as the quarterly reports were reviewed in detail by the Supervisory Board after preparation by the Audit Committee.
Board of Management’s verbal reports at the meetings were accompanied by written documents, which were sent to each member of the Supervisory Board in time for the relevant meeting. The Board of Management also informed the Supervisory Board in writing about important events that occurred between meetings. The chairmen of the Supervisory and Management Boards also had regular discussions about major developments and decisions. The Chairman of the Supervisory Board also had individual discussions with each member of the Board of Management about their respective half-year as well as full-year performance. In the financial year 2019, again individual trainings and group events were held for example on actuarial and accounting aspects of the life insurance business, on the basis of an agreed development plan for further training of the members of the
ISSUES DISCUSSED IN THE SUPERVISORY BOARD PLENARY SESSIONS In the meeting of 14 February 2019, the Supervisory Board comprehensively dealt with the preliminary financial figures for the financial year 2018 as well as the Board of Management’s dividend proposal. The appointed audit firm, PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft (PwC), Munich, reported in detail on the preliminary results of their audit. In the further course of the meeting, the Supervisory Board also discussed the target achievement of each individual member of the Board of Management and, on this basis, set their variable remuneration for the financial year 2018. As part of this performance assessment, the fitness and propriety of the members of the Board of Management were also confirmed. In addition, various special topics were discussed, such as the status of the implementation of the EU Data Protection Directive, the harmonization of the IT
Further presentations concerned the Board of Management’s report on risk development in 2018, the annual compliance report, and the annual report of the Head of Group Audit. Next, the Supervisory Board reviewed the agenda and proposals for resolution for Allianz SE’s 2019 Annual General Meeting (AGM). At the recommendation of the Audit Committee, the Supervisory Board appointed PricewaterhouseCoopers GmbH
Management reported on various M&A activities, such as the sale of the stake in the Spanish joint venture “Allianz
The meeting on 27 September 2019 focused on the continuation of the presentation on the strategic direction of
Sul América and the strategic realignment of Allianz in South America. In addition, the Supervisory Board dealt with corporate governance issues, the self-evaluation of the Supervisory Board required by supervisory law, and the Supervisory Board’s development plan based on this. The Supervisory Board also decided to extend the Board of Management term of Ms. Jacqueline Hunt, expiring at the end of 2019, for three years.
At the meeting on 12 December 2019, the Board of Management first provided information about the thirdquarter results, the further course of business, and the situation of Allianz Group. Furthermore, the Supervisory
6 Annual Report 2019 − Allianz Group the Second Shareholders’ Rights Directive (ARUG II). Furthermore, the Supervisory Board set targets for the variable remuneration of members of the Board of Management for 2020 and debated succession planning with regard to the Board of Management. The members of the Supervisory Board discussed the introductions of the potential candidates with the Board of Management that took place on two evenings. Finally, the results of this year’s efficiency review of the Supervisory Board’s activities were discussed and appropriate measures for improvement were decided and subsequently implemented.
After previous discussion, a new version of the objectives for the composition of the Supervisory Board was adopted by written procedure in December 2019. This new version came into effect as of 1 January 2020 and takes into account the requirements of the new German Corporate Governance Code expected for 2020.
Committee discussed the internal audit plan for 2020, current developments in data protection, and the forthcoming amendments to the IFRS 9 and 17 accounting standards.
Allianz Group and Allianz SE. Other matters considered included the report on Allianz’s own risk and solvency assessment (ORSA), and the changes to the internal Solvency II model. Moreover, the Risk Committee dealt extensively with the company’s exposure to cyber risks, activities to ensure information security and the specific risks of the cyber insurance industry. Besides political risks like the Brexit and the trade conflict between China and the United States, topics such as Reinsurance, industrial insurance and money laundering were dealt with.
The Technology Committee had two meetings in the fiscal year 2019 in which it dealt in detail with the main elements of the IT strategy. In the first meeting the committee got an overview of the IT strategy. Therefore, the realignment of the IT platform based on harmonization and standardization of processes and products as part of the transformation project Allianz Customer Model (ACM) was presented on the one hand. On the other hand the committee was informed about key central IT-projects and the ambitions for the year 2019. In the second meeting the technology committee dealt intensively with strategic IT transformation topics, such as the business master platform for the Allianz Customer Model (ACM) including a decommissioning strategy for old systems and the
The Supervisory Board was informed regularly and comprehensively of the committees’ work.
CHAIR AND COMMITTEES OF THE SUPERVISORY BOARD – AS OF 31 DECEMBER 2019 Chairman: Michael Diekmann
Standing Committee: Michael Diekmann (Chairman), Jean-Claude Le Goaër, Herbert Hainer, Jürgen Lawrenz,
AUDIT OF ANNUAL ACCOUNTS AND CONSOLIDATED FINANCIAL STATEMENTS In compliance with the special legal provisions applying to insurance companies, the statutory auditor and the auditor for the review of the half-yearly financial report are appointed by the Supervisory Board of Allianz SE, not by the AGM. The Supervisory Board appointed PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft
MEMBERS OF THE SUPERVISORY BOARD AND BOARD OF MANAGEMENT There were no changes in the composition of the Supervisory Board in fiscal year 2019.
As already mentioned, Dr. Helga Jung left the Board of Management of Allianz SE as of 31 December 2019.
Ms. Renate Wagner was appointed as her successor with effect from 1 January 2020.
Membership in other statutory supervisory boards and SE administrative boards in Germany
Good corporate governance is essential for sustainable business performance. The Board of Management and the Supervisory Board of
Allianz SE therefore attach great importance to complying with the recommendations of the German Corporate Governance Code (hereinafter referred to as the “Code”). The Declaration of Conformity with the recommendations of the Code, as issued by the Board of Management and the Supervisory Board on 13 December 2019, and the company ’s position regarding the Code’s suggestions can be found in the
As a European Company, Allianz SE is subject to special European SE
The Board of Management also prepares the annual financial statements of Allianz SE, the Allianz Group’s consolidated financial statements, the market value balance sheet, and the interim report.
Acquisitions. Business division responsibilities focus on geographical regions or Global Lines. Rules of procedure specify in more detail the structure and departmental responsibilities of the Board of Management.
Board of Management meetings are led by the Chairman. Each member of the Board may request a meeting, providing notification of the proposed subject. The Board makes decisions by a simple majority of participating members. In the event of a tie, the Chairman casts the deciding vote. The Chairman can also veto decisions, but he cannot impose any decisions against the majority vote.
BOARD OF MANAGEMENT AND GROUP COMMITTEES In the financial year 2019, the following Board of Management committees were in place: Board Committees
GROUP MERGERS AND ACQUISITIONS COMMITTEE Dr. Helga Jung (Chairwoman), Oliver Bäte, Niran Peiris, Giulio Terzariol.
GROUP INVESTMENT COMMITTEE Board members of Allianz SE and Allianz Group executives.
Implementing the Group investment strategy, including monitoring group-wide invest- ment activities as well as approving invest- ment-related frameworks and guidelines and individual investments within certain thresholds.
The Allianz Group runs its operating entities and business segments via an integrated management and control process. First, the Holding and the operating entities define the business strategies and goals. On this basis, joint plans are then prepared for the Supervisory Board’s consideration when setting targets for the performance-based remuneration of the members of the Board of Management. For details, see the
Important decisions of the Board of Management require approval by the Supervisory Board. These requirements are stipulated by law, by the Statutes, or in individual cases by decisions of the Annual
The Supervisory Board comprises twelve members, including six shareholder representatives appointed by the AGM. The six employee representatives are appointed by the SE works council. The specific procedure for their appointment is laid down in the SE Agreement. This agreement stipulates that the six employee representatives must be allocated in proportion to the number of Allianz employees in the different countries. The Supervisory Board currently in office includes four employee representatives from Germany and one each from
German SE Implementation Act (“SE-Ausführungsgesetz”), the Supervisory Board of Allianz SE shall be composed of at least 30 % women and at least 30 % men.
The Supervisory Board oversees and advises the Board of Management on managing the business. It is also responsible for appointing the members of the Board of Management, determining their overall remuneration, succession planning for the Board of Management, and reviewing Allianz SE’s and the Allianz Group’s annual financial statements. The Supervisory Board’s activities in the 2019 financial year are described in the Supervisory Board Report starting on
The Supervisory Board makes all decisions based on a simple majority. The special requirements for appointing members to the Board of Management, as stipulated in the German Co-Determination Act, and the requirement to have a Conciliation Committee do not apply to an SE. In the event of a tie, the casting vote lies with the Chairman of the Supervisory Board, who at Allianz SE must be a shareholder representative. If the Chairman is not present in the event of a tie, the casting vote lies with the vice chairperson from the shareholder side. A second vice chairperson is elected at the employee representatives’ proposal.
– Setting of concrete objectives for the composition of the Supervisory Board
(in addition to Jim Hagemann Snabe: Michael Diekmann, Dr. Friedrich Eichiner)
– Support of the Supervisory Board in monitoring the implementation of the Board of Management’s technology and innovation strategy
Code, the diversity concept in accordance with the legislation on the implementation of the European guideline as regards the disclosure of non-financial and diversity information (CSR Directive) is also included: Objectives of Allianz SE’s Supervisory Board regarding its composition1
The GCGC defines a person as independent who, in particular, does not have any business or personal relations with Allianz SE or its executive bodies, a controlling shareholder, or an enterprise associated with the latter, which may cause a substantial and not merely temporary conflict of interest.
– Members of the Supervisory Board of Allianz SE in office for more than 15 years (since 1.1.2020: 12 years) shall not be deemed independent.
In addition to the mandatory mandate limitations and the GCGC recommendation for active Management Board members of listed companies (max. three mandates – since 1.1.2020: two mandates), the common capital markets requirements shall be considered.
The continuous period of membership for any member of the Supervisory Board should, as a rule, not exceed 15 years (since 1.1.2020: 12 years).
The composition of the Supervisory Board of Allianz SE reflects these objectives. According to the assessment by the Supervisory Board, all shareholder representatives, i.e. Ms. Boissard, Ms. Bosse as well as Mr.
Diekmann, Dr. Eichiner, Mr. Hainer and Mr. Snabe, are independent within the meaning of the objectives (see No. I.3). With four female and eight male Supervisory Board members, the current legislation for equal participation of women and men in leadership positions (statutory gender quota of 30 %) is being met. In addition, the Supervisory
Board has five members with international backgrounds. The skills profile is also met by all current members of the Supervisory Board.
✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓
Diversity Gender male male female female male male female male female male male male
Nationality German Danish French Danish German German German French German British German German
Accounting ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓
Europe (EU) ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓
Market Abuse Directive to disclose to both Allianz SE and the German
Supervisory Board and approves the actions taken by the Board of
Statutes. Resolutions of the General Meeting shall be passed, unless mandatory legal provisions require otherwise, by a simple majority of the valid votes cast. In accordance with European regulations and the
Management and the Supervisory Board give an account of the preceding financial year. For special decisions, the German Stock
The Allianz Group prepares its accounts according to § 315e of the German Commercial Code (“Handelsgesetzbuch – HGB”) on the basis of the International Financial Reporting Standards (IFRS) adopted by the
Allianz Group’s consolidated financial statements, and the respective management reports are published within 90 days of the end of each financial year. Additional information is provided in the
conferences, and on the Allianz Group’s website. Our website also provides a financial calendar listing the dates of major publications and events, such as annual reports, half-yearly financial reports, and quarterly statements, AGMs, and analyst conference calls as well as financial press conferences.
forms part of the Group Management Report. However, according to § 317 (2) sentence 6 of the HGB, this Statement is not included within the scope of the audit.
Declaration of Conformity by the Management Board and the Supervisory Board of Allianz SE with the recommendations of the German Corporate Governance Code Commission in accordance with § 161 of the German Stock Corporation Act (AktG)
February 7, 2017 and will comply with them in the future.
The Allianz Group has an effective internal risk and control system for verifying and monitoring its operating activities and business processes, in particular financial reporting, as well as compliance with regulatory requirements. The requirements placed on the internal control system are essential not only for the resilience and franchise value of the company, but also to maintain the confidence of the capital market, our customers, and the public. A comprehensive risk and control management system regularly also assesses the effectiveness and appropriateness of the internal control system as part of the
System of Governance. For further information on our risk organization and risk principles, please refer to page 76. For further information on our Integrated Risk and Control System for Financial Reporting, please refer to page 92.
In addition, the quality of our internal control system is assessed by the Allianz Group’s Internal Audit function. This function conducts independent, objective assurance and consulting activities, analyzing the structure and efficiency of the internal control system as a whole.
(OECD Guidelines) for Multinational Enterprises, we integrate sustainability and corporate responsibility into our business. By accepting and complying with European and international standards and applicable laws, Allianz aims to avoid the risks that arise from non-compliance. To enhance our understanding of compliance issues and share best practices, we work with organizations such as the German Institute for
Allianz Group. The rules of conduct established by the Code of
Conduct are binding for all employees worldwide and build the basis for our compliance programs. The Code of Conduct is available on our website at www.allianz.com/corporate-governance.
SPEAK UP A major component of the Allianz Group’s compliance management system is a speak-up facility that allows employees and third parties to notify the relevant compliance department confidentially about potential irregularities. No employee voicing concerns about irregularities in good faith needs to fear retribution, even if the concerns later turn out to be unfounded. Third parties can contact the compliance department via an electronic mailbox on our website at: www.allianz.com/complaint-system.
Allianz Group’s Annual Report 2019 and the Sustainability Report on our website at www.allianz.com/sustainability.
An anti-corruption training is compulsory for all Allianz employees worldwide. The same is true for the antitrust training to exposed employees. Further trainings exist for the other compliance programs.
DESCRIPTION OF THE FUNCTIONS OF THE BOARD OF MANAGEMENT AND THE SUPERVISORY BOARD AND OF THE COMPOSITION AND FUNCTIONS OF THEIR COMMITTEES A description of the composition of the Supervisory Board and its committees can be found on page 9 and 7 of the Annual Report. A
A general description of the functions of the Board of Management, the Supervisory Board, and their committees can be found in the
Article 17 (2) of the German SE Implementation Act stipulates that as of 1 January 2016, the share of women and men among the members of the Supervisory Board of Allianz SE must each total up to 30 %
In the longer term, Allianz aims to place women in at least 30 % of the positions at these two management levels throughout the Group.
Diversity concepts for the Board of Management and Supervisory Board In accordance with the legislation to implement the European CSR
The Supervisory Board assesses the achievement of such target, inter alia, on the basis of the following specific indicators:  Adequate proportion of women on the Management Board: at
(e.g. based on origin or extensive professional experience abroad), ideally with a connection to the regions in which Allianz Group is operating;  Adequate diversity with regard to educational and professional background, taking into account the limitations for the Supervisory
It is ensured that lists of successors will comprise appropriate percentages of female candidates as well as of candidates with international experience. The Personnel Committee takes this into consideration especially in succession planning. The share of women on the Management Board is currently 20 %. Six members of the Management Board have international backgrounds. There is an adequate degree of variety as regards educational and professional backgrounds.
Supervisory Board in August 2017, and included in the objectives for the composition of the Supervisory Board (see No. II.2 of the objectives for the composition of the Supervisory Board on page 15). The
HGB”) and § 176 (1) of the German Stock Company Act (“Aktiengesetz
COMPOSITION OF SHARE CAPITAL As of 31 December 2019, the share capital of Allianz SE was € 1,169,920,000. It was divided into 417,172,859 registered and fully paid-up shares with no par value. All shares carry the same rights and obligations. Each no-par value share carries one vote.
INTERESTS IN THE SHARE CAPITAL EXCEEDING 10 % OF THE VOTING RIGHTS Allianz SE is not aware of any direct or indirect interests in the share capital that exceed 10 % of the voting rights.
LEGAL AND STATUTORY PROVISIONS APPLICABLE TO THE APPOINTMENT AND REMOVAL OF MEMBERS OF THE BOARD OF MANAGEMENT AND TO AMENDMENTS OF THE STATUTES The appointment and removal of members of Allianz SE’s Board of
Regulation, §§ 84, 85 AktG, § 24 (3) and § 47 No. 1 German Insurance
Board for a term of up to five years; reappointment is permitted for a maximum of five years in each case (§ 5 (3) of the Statutes). A simple majority of the votes cast in the Supervisory Board is required to appoint members of the Board of Management. In the case of a tie vote, the Chairperson of the Supervisory Board, who pursuant to Article 42 of the SE Regulation must be a shareholder representative, shall have the casting vote (§ 8 (3) of the Statutes). If the Chairperson does not participate in the vote the Vice Chairperson shall have the casting vote, provided he or she is a shareholder representative. A Vice Chairperson who is an employee representative has no casting vote (§ 8 (3)
 Up to a total of € 15,000,000 (Authorized Capital 2018/II): The shareholders’ subscription rights are excluded. New shares may only be issued to employees of Allianz SE and its Group companies.
The company’s share capital is conditionally increased by up to € 250,000,000 (Conditional Capital 2010/2018). This conditional capital increase will only be carried out to the extent that the holders of convertible bonds, bonds with warrants, convertible participation rights, participation rights, and subordinated financial instruments issued against cash by Allianz SE or its subsidiaries, based on the authorizations granted by the General Meeting on 5 May 2010 or 9 May 2018, exercise their conversion or option rights, or to the extent that conversion obligations from such bonds are fulfilled, and to such extent that treasury shares or shares from authorized capital are not used for such purpose.
Under an authorization by the General Meeting of 9 May 2018, the Board of Management may, until 8 May 2023, buy back Allianz shares corresponding to up to 10 % of the lower of (i) the share capital at the moment of the shareholder resolution and (ii) the share capital at the moment of the buy-back, and to use those shares for other purposes (§ 71 (1) No. 8 AktG). Together with other treasury shares that are held by Allianz SE, or which are attributable to it under §§ 71a et seq.
may buy and sell Allianz shares for trading purposes (§ 71 (1) No. 7 and
(2) AktG) under an authorization of the General Meeting valid until 8 May 2023. The total number of shares acquired thereunder, together with treasury shares held by Allianz SE or attributable to it under §§ 71a et seq. AktG, shall at no time exceed 10 % of the share capital of
ESSENTIAL AGREEMENTS OF ALLIANZ SE WITH CHANGE-OF-CONTROL CLAUSES AND COMPENSATION AGREEMENTS PROVIDING FOR TAKEOVER SCENARIOS The following essential agreements of the company are subject to a change-of-control condition following a takeover bid:  Our reinsurance contracts, in principle, include a clause under which both parties to the contract have an extraordinary termination right, if and when the counterparty merges with another entity or its ownership or control situation changes materially. Agreements with brokers regarding services connected with the purchase of reinsurance cover also provide for termination rights in case of a change of control. Such clauses are standard market practice.
 Bilateral credit agreements in some cases provide for termination rights in the event of a change of control, mostly defined as the acquisition of at least 30 % of the voting rights within the meaning of § 29 (2) of the German Takeover Act (“Wertpapiererwerbs- und
The company has entered into the following compensation agreements with members of the Board of Management and certain employees, providing for the event of a takeover bid: A change-of-control clause in the service contracts of the members of Allianz SE’s Board of Management provides that, if within twelve months after the acquisition of more than 50 % of the company ’s share capital by one shareholder or several shareholders acting in concert (change of control) the appointment as a member of the
Board, or if the mandate is ended by mutual agreement, or if the Management Board member resigns because his or her responsibilities as a board member are significantly reduced through no fault of the board member, he or she shall receive his or her contractual remuneration for the remaining term of the service contract, but for the purpose hereof limited to two years, in the form of a one-off payment. The oneoff payment is based on the fixed remuneration plus the variable remuneration, with this basis being limited, however, to the amount paid for the last fiscal year. This applies accordingly if, within twelve months of a change of control, a mandate in the Board of Management comes to an end and is not extended: The one-off payment will then be granted for the period between the end of the mandate and the end of the two-year period following the change of control. The change of control clauses in the service contracts of the members of
This remuneration report describes the remuneration structure and arrangements for the Board of Management and the Supervisory
All information provided here concerning Allianz SE Board of Management remuneration as well as additional information can also be found on our remuneration website at www.allianz.com/remuneration.
Committee of the Supervisory Board2. The Supervisory Board designs the remuneration system for the members of the Board of Management in accordance with the applicable laws and regulations, in particular the requirements of the German Stock Corporation Act (AktG) in the currently valid version, regulatory requirements as well as the provisions of the German Corporate Governance Code, while ensuring clarity and comprehensibility. The Supervisory Board determines the total target remuneration on the basis of the remuneration system.
 Sustainability of performance and alignment with shareholder interests: A major part of the variable remuneration reflects longer-term performance with deferred payout (64 %) and is linked to the absolute and relative performance of the share price.
 Support of the Group’s strategy: The design of the performance targets reflects the Allianz Group’s business strategy.
Board consult with the Chairman of the Board of Management, as appropriate, in assessing the performance and remuneration of Board of Management members – with one exception: The Chairman of the Board of Management is not involved in the discussion about his own remuneration.
HORIZONTAL APPROPRIATENESS The Supervisory Board regularly benchmarks the Allianz SE Board of Management’s remuneration against other DAX 30 companies.
Board of Management to employee is “77” and the factor regular board member to employee is “42”.
BASE SALARY The base salary, which is not performance-related, is paid in twelve equal monthly installments.
PERQUISITES Perquisites mainly consist of contributions to accident and liability insurances, tax consultant fees (if in the interest of Allianz) and the provision of a company car. Perquisites are not linked to performance; a contractual annual cap applies. Each member of the Board of
Management is responsible for paying the income tax due on these perquisites. The Supervisory Board regularly reviews the level of perquisites.
VARIABLE REMUNERATION Variable remuneration includes the annual bonus and a long-term incentive (LTI).
Group operating profit and Group net income attributable to shareholders. Both key performance indicators (KPIs) are important steering parameters for the Allianz Group. Operating profit highlights the underlying performance of ongoing core operations. Net income attributable to shareholders is the profit after tax and non-controlling interests (minorities). Furthermore, the net income forms the basis for the dividend payout and for the return on equity calculation. The Group financial targets therefore reflect the level of implementation of the
The ICF takes into account each board member’s individual contribution to the implementation of the business strategy.
The LTI is granted annually in the form of virtual Allianz shares, so-called restricted stock units (RSUs), with a four-year contractual vesting period. The LTI allocation amount is derived by multiplying the LTI
target amount by the annual bonus achievement factor, and capped at 150 % of the LTI target level. To determine the number of RSUs to be granted, the LTI allocation amount is divided by the allocation value of an RSU at grant. The RSU allocation value is based on the ten-dayaverage Xetra closing price of the Allianz stock following the annual financial media conference1.As RSUs are virtual stock without dividend payments, the relevant share price is reduced by the net present value of the expected future dividend payments during the contractual vesting period.
The LTI payout takes Allianz’s relative performance into account:  The Allianz SE total shareholder return (TSR) is benchmarked against the TSR of the STOXX Europe 600 insurance index by reflecting the relation of the total performance of the Allianz share
 Example: 5 %-points outperformance results in a relative performance factor of 110 %, 5 %-points underperformance results in a relative performance factor of 90 %.
•LTI allocation value: annual bonus achievement factor applied to LTI target 110% 1,609
•RSU grant based on share price at grant (€ 200), reduced by the net present value of estimated future dividends (€ 40) 10,058 -
OVERALL CAP AND SENSITIVITY OF TOTAL COMPENSATION The variable remuneration is designed to help achieve the operational targets and to reward sustainable performance. Therefore, payout of almost two thirds of the annual variable compensation will not occur for a period of four years; such payout is subject to sustainability assessment adjustments. A failure to meet targets may result in a maximum reduction of the variable compensation to zero, with the overall payout being capped: Compensation sensitivity € thou CEO/RBM
Members of the Board of Management may have pension entitlements under former pension plans or based on previous positions in the Allianz Group or due to membership of the Board of Management
Management. Shares will be acquired through mandatory pay component conversion. The holding obligation ceases with the end of the mandate.
of the variable target compensation. If the remaining term of contract is less than two years, the payment is pro-rated for the remaining term of the contract. Contracts do not contain provisions for any other cases of early termination of Board of Management service. In particular, to comply with the recommendation by the German Corporate
INTERNAL AND EXTERNAL BOARD APPOINTMENTS When a member of the Board of Management simultaneously holds an appointment at another company within the Allianz Group or their joint ventures with outside partners, the full amount of the respective remuneration is transferred to Allianz SE. In recognition of related benefits to the organization and subject to prior approval by the
Supervisory Board of Allianz SE, board members are also allowed to accept a limited number of non-executive supervisory roles at appropriate external organizations. In these cases, 50 % of the remuneration received is paid to Allianz SE. Only if the Allianz SE Supervisory
Board classifies the appointment as a personal one (ad personam), the respective board member will retain the full remuneration for that position. Any remuneration paid by external organizations will be itemized in those organizations’ annual reports; its level will be determined by the governing body of the relevant organization.
GROUP FINANCIAL TARGETS The combined target achievement level of the Group's financial targets is calculated as the simple average of the achievement of the targets for the Group operating profit and Group net income attributable to shareholders. The solid achievement of the operating profit and the significant over-achievement of the net income attributable to shareholders led to an overall achievement of these Group
A negative factor was the poor result in the international industrial insurance business AGCS, which was well below plan in a difficult market with increasing claims frequency and severity. This development could not be compensated by the division's otherwise very committed and successful work.
Annual bonus payout in € thou LTI allocation value in € thou 1_Group target achievement is based on an operating profit of € 11,855,449.63 thou and net income attributable to shareholders of € 7,914,009.88 thou.
3_In accordance with the German Corporate Governance Code, the annual bonus disclosed for performance year 2019 is paid in 2020 and for performance year 2018 in 2019. The payments for share-based deferred compensation (AEI and LTI), however, are disclosed for the year in which the actual payment was made.
6_Pension service cost in accordance with IAS 19: represents the company cost, not the actual entitlement or a payment. The German Corporate Governance Code requires that the pension service cost be included in all columns.
7_Sergio Balbinot received in 2015 a buyout award to compensate for forfeited grants from his previous employer. Half of this compensation was granted in the form of RSUs which vested in March 2019. A payment of € 4,807 thou was made.
8_The appointment of Helga Jung as member of the Board of Management of Allianz SE ended as of 31 December 2019. Helga Jung is bound by a broad post-contractual one year non-competition obligation under her service agreement. As compensation for this non-compete obligation she obtains a payment of 50 % of her total target direct compensation (sum of base salary and target variable compensation), i.e. € 1,625.5 thou.
Individual remuneration: 2019 and 2018 € thou (total might not sum up due to rounding)
Deferred compensation 1_The disclosed LTI target/min/max and LTI actual 2019 figures represent the LTI fair values, which differs from the LTI allocation value. The determination of the LTI fair values is based on an option pricing model taking into account additional input parameters, including the term structure of interest rates and the expected relative performance of the Allianz share price compared to the peer index. For the latter, simulation techniques are applied at the valuation date to determine the volatility of the Allianz stock, the volatility of the peer index and their correlation.
2_The column “Actual grant 2019" is in line with the disclosure requirements under the German Accounting Standard No. 17. To reconcile figures with said requirements for 2018, the total as shown in column “Actual grant 2018” has to be adjusted to exclude the MTB accrual for 2018 and to include the payout from the MTB 2016 - 2018 as disclosed in column "Payout 2018".
GERMAN ACCOUNTING STANDARD NO. 17 DISCLOSURE The total remuneration to be disclosed for 2019 under the German
(2018, including the payments of the MTB 2016 – 2018: € 55 mn).
SHARE-BASED REMUNERATION In accordance with the method described earlier, a number of RSUs were granted to each member of the Board of Management in March 2020. They will vest and be settled in 2024.
Iván de la Sota 8,176 15,217 1,322 1_The relevant value of an RSU is only available after sign-off of the Annual Report by the external auditors, therefore numbers are based on a best estimate. As disclosed in the Annual Report 2018, the share-based grant in 2019 was made to participants as part of their 2018 remuneration. The disclosure in the Annual Report 2018 was based on a best estimate of the RSU grants. The actual grants deviated from the estimated values and have to be disclosed accordingly. The actual RSU grants as of 1 March 2019 under the Allianz Equity Incentive are as follows: Oliver Bäte: 10,422, Sergio Balbinot: 6,016, Jacqueline Hunt: 5,834, Dr. Helga Jung: 5,592, Dr. Christof Mascher: 5,290, Niran Peiris: 5,592, Iván de la Sota: 4,941, Giulio Terzariol: 5,713, Dr. Günther Thallinger: 5,834, Dr. Axel Theis: 6,016.
They are invested in a fund with a guarantee on the contributions paid, but no further interest guarantee.
In 2019 former members of the Board of Management and their dependents received remunerations and other benefits totaling € 8 mn (2018: € 8 mn), while reserves for current pension obligations and accrued pension rights totaled € 159 mn (2018: € 152 mn).
6_DBO = defined-benefit obligation, end of year. The figures show the obligation for Allianz resulting from defined benefit plans, taking into account realistic assumptions with regard to interest rate, dynamics, and biometric probabilities.
Management must build share ownership within three years, i.e., a third every year shareholding requirements. As of 31 December 2019, the members of the Board of Management held the following numbers of shares: Board members Number of shares
NEW BOARD MEMBER The remuneration of the new regular member of the Board of
 Establish a remuneration structure that allows proper oversight of business as well as independent decisions on executive personnel and remuneration.
ATTENDANCE FEES AND EXPENSES In addition to the fixed and committee-related remuneration, members of the Supervisory Board receive an attendance fee of € 1,000 for each Supervisory Board or committee meeting they attend. Should several meetings be held on the same or consecutive days, the attendance fee will only be paid once. In addition, Allianz SE reimburses the
Supervisory Board members for their out-of-pocket expenses and the VAT payable on their Supervisory Board service. The company provides insurance coverage and technical support to the Supervisory
REMUNERATION FOR 2019 The total remuneration for all Supervisory Board members, including attendance fees, amounted to € 2,685 thou (2018: € 2,684 thou). The following table shows the individual remuneration for 2019 and 2018: Individual remuneration: 2019 and 2018 € thou (total might not sum up due to rounding)
Legend: C = Chairperson of the respective committee, M = Member of the respective committee 1_Abbreviations: A - Audit, N - Nomination, P - Personnel, R - Risk, S - Standing, T - Technology 6_Since 1 September 2018.
5_Since 1 August 2018. 10_The total reflects the remuneration of the full Supervisory Board in the respective year.
All current employee representatives of the Supervisory Board, except for Ms. Martina Grundler, are employed by Allianz Group companies and receive a market-based remuneration for their services.
This section has been compiled in accordance with the Corporate Social
The concepts contained in this report are in line with the content of our 2019 Group Sustainability Report, which is compiled in accordance with the standards set out by the Global Reporting Initiative (GRI)
Allianz Group and also includes the relevant non-financial information for Allianz SE. Where Allianz SE’s concepts and processes differ from those applied by the Allianz Group, they are described separately. All measures, activities, and key figures refer to the 2019 financial year
(1 January 2019 to 31 December 2019). Unless otherwise stated, we use the control principle defined by the International Financial Reporting Standards when determining the scope of our reporting on behalf of our consolidated entities.
Any references to information published outside the Group Management Report and Allianz SE's Management Report are supplementary, do not form an integral part of this non-financial information, and are not subject to an assurance engagement (unless specified in the respective document).
CORPORATE RESPONSIBILITY GOVERNANCE The highest governing body at Allianz when it comes to sustainabilityrelated issues is the Group ESG Board (ESG = Environment, Social, and
Governance). Established in 2012, it is composed of three Allianz SE
Allianz Group’s corporate citizenship activities. The three board members each assume responsibility for specific sustainability topics; functional departments directly provide the Group ESG Board with regular updates on sustainability issues.
In addition to the Group ESG Board, there are other committees under board member leadership that play an important role in our decisionmaking processes:  The Group Finance and Risk Committee oversees risk management and monitoring, including sustainability risk. The Committee is the point of escalation for ESG-related risk management, based on analysis and deliberations within the ESG Board.
Our group-level Corporate Responsibility (CR) management team is responsible for managing the strategic framework for all group-wide sustainability activities, developing and introducing relevant policies, reporting on non-financial matters, and supporting operating entities in integrating the Group’s strategic approach and policies.
STAKEHOLDER ENGAGEMENT & MATERIALITY As we are a multinational business, the challenges we face are increasingly diverse and interconnected. We therefore ensure that our Corporate Responsibility Strategy takes into account our stakeholders' feedback, enabling us to respond to the most material issues we face. Related activities focus on the four stakeholder groups most immediately affected by our business activities: customers, employees, investors, and society as a whole. For lasting and sustainable success, we need to understand and respond to the changing world in which we operate.
Our most recent materiality assessment was performed in 2019 to identify the issues our stakeholders believe to be most important to our business (for more details, please see our Sustainability Report 2019, section 02.6 www.allianz.com/sustainability).
Survey results showed that of the megatrends and risks Allianz should be addressing through its Corporate Responsibility Strategy, these three are perceived as being most important:  Climate change,
The material topics and KPIs addressing those risks and megatrends are covered in this report. To understand the development, performance, and position of Allianz, it is necessary to consider these topics and the impact our business activities can have on them. All climateand environment-related topics are covered in the section “Environmental matters”; product-related issues are covered in multiple sections such as “Social matters – emerging consumers concept and data privacy concepts”.
(Low-Carbon Economy, Social Inclusion, and Business Integration), we address risks and trends that might affect Allianz. Through our ESG
Business Integration approach, we also look into social and environmental effects arising from our business activities and business relations. Finally, we seize business opportunities associated with sustainability matters; for example, in the areas of sustainable solutions and renewable energy investments.
ESG issues allows Allianz to reduce risks and capture opportunities in underwriting, claims, investment management, and asset management. We describe our ESG approach in the following section; our concepts for all other matters for which reporting is required will be addressed in subsequent chapters. The ESG approach provides part of the foundation for these concepts.
ESG topics are integrated in our insurance, investment, and asset management business through multiple instruments. They include internal standards, guidelines, and processes such as the Allianz Standard for Reputational Risk and Issue Management (AS RRIM), the Allianz
 As far as investments are concerned, Allianz has excluded investments in companies involved in controversial weapons1 since 2011, and in coal-based business models2 since November 2015.
PIMCO have developed and implemented their own processes to manage risks and capture opportunities from ESG issues. For proprietary assets that AllianzGI and PIMCO manage on behalf of other
Allianz Group entities, group-level requirements are complemented by the asset management entities’ own approaches.
This section describes the impact of environmental matters on our business activities and relationships, as well as the impact of Allianz’s activities and relationships on the environment. Furthermore, we describe our concepts for the management of these impacts and related achievements.
Carbon Economy” addresses climate change and environmental issues, which were both identified among the three most material risks and megatrends. As a company dealing with risk, managing the impact on environmental matters is an important part of our approach.
In addition, we have decided in 2015 to stop financing coal-based business models. Also, we no longer insure single-site coal-fired power plants and coal mines that are operated or planned as of 2018. We are committed to fully phasing out coal-based business models across our proprietary investments and property-casualty portfolios by 2040 at the latest, and are further developing our approach to reach this target.
For instance, we contribute to financing a low-carbon economy by making equity and debt investments in renewable energies. Allianz also offers a variety of funds for institutional investors seeking to invest in low-carbon assets such as renewable energy or green bonds. For further information on renewable energy investments, please refer to note 6 to our Consolidated Financial Statements.
 Targets:  Set long-term and intermediary climate targets for our proprietary investments and business operations in line with the goals of the Paris Climate Agreement in 2020.
Our group-wide Environmental Management System (EMS) provides standards and controls, supports environmental data collection, and promotes transparent reporting on environmental impacts across our operations. It guides us in monitoring and managing our use of resources. Operational implementation is monitored by the Group
 Status/progress: In 2019, our carbon footprint per employee was 2.4 tons (2018: 2.7). This represents a 35 % reduction mainly as a result of energy efficiency through data center consolidation, against a 2010 baseline. We are well on track to achieve our 2020 targets.
 Status/progress: In 2019, our carbon footprint per employee was 2.7 tons (2018: 3.0). This represents a 4 % reduction against the 2016 baseline1, due to improvements in energy efficiency, internal initiatives to manage business travel and an increase in headcount.
 Status/progress: In 2019, we achieved a share of 49 % green electricity in the total electricity used (2018: 45 %); this is due to the expansion of green electricity use in the U.S. and Europe.
 Target: Achieve 100 % green electricity for our operations by 2023.
Allianz undertakes reasonable efforts to collect relevant environmental data from all its entities and their operations. Within the scope of our environmental reporting are entities that have been part of Allianz for a full reporting year at minimum. In 2019, Allianz collected environmental data for 95.5 % of the total employee base. Data is based on source information including meter readings (where available), invoice amounts (where available) and estimations from entities. Where data could not be determined with reasonable effort through measuring, calculating, or estimating, it is extrapolated based on employee headcount. Data is extrapolated for either part of an entity or for entire entities. The basis for these extrapolations is the total headcount of the individual entity or of the Group and, for extrapolating:  part of an entity, the entity's average values are used,
and international hubs are included in our Group reporting. The majority of the environmental impacts reported are in scope of an SE environmental management system certified to ISO14001.
This section describes the impact of social matters on our business activities and relationships as well as the impact of Allianz’s activities and relationships on society as a whole. In addition, we describe the concepts and achievements related to the management of these impacts with a focus on social inclusion, emerging consumers, responsible consumer/sales policies, and data privacy.
SOCIAL INCLUSION CONCEPTS As a global insurer, we rely on the principle of solidarity. Pooling risks is at the heart of our business model, and we have a keen interest in creating stable communities. Civil unrest, social tensions, and societal upheaval all represent major business risks for Allianz. Of course, we are also interested in empowering people and improving their access to employment, which, in turn, provides a basis for creating the talented and diverse workforce we rely on.
Corporate Responsibility Team. The Group ESG Board is informed regularly on the progress made. As an Insurer, Employer, and Committed
must be encouraged to tackle the complex challenge of social instability and increasing polarization of societies. Therefore, Allianz’s Encouraging Future Generations Program, which was launched in 2016, aims to break down barriers facing children and young people and invests in social ventures to increase their impact and create a multiplier effect. Building on successful projects carried out by our operating entities, the program provides the global framework and focus to scale up Allianz’s social contribution.
 In the past three years, we granted funds to 26 social projects across the globe through our Social Innovation Fund, and collaborated with impact-oriented ventures through the Allianz
Future Generations Award. For further details on our Encouraging Future Generations Program, please refer to our Sustainability Report 2019, section 02.3 and section 04.9.
EMERGING CONSUMERS CONCEPT We continue to support low-income consumers in Asia, Africa, and
Latin America, where a majority of people are still severely underinsured. Responsibility for managing the emerging-consumers business lies with the local Allianz operating entities. We are determined to expand our range of offerings to emerging consumers, in order to continue closing the protection gap for people who need access to lowcost financial services tailored to their needs.
Since 2011, we have had a global Sales Compliance Program in place, which describes standardized processes and controls for communication, monitoring, and review. The program is managed by the
Allianz Broker Remuneration Principles, which state that “Allianz commits itself not to devise or agree to remuneration schemes that are aimed at inducing brokers to act to the detriment of our customers or to distort fair competition.” We have defined Minimum Standards for Asset Management Marketing Practices, which, among other things, include the principles of truthful, clear, and accurate information on investment styles and philosophies. These responsible sales controls are in line with the Allianz Code of Conduct for Business Ethics and Compliance, which is globally binding. The Code specifies that Allianz Group employees must not, either by their actions or statements, seek to mislead the market or individual customers; also, when establishing a customer relationship or providing financial services to a client, the customer must be provided with the information needed to make a reasonable decision. A responsible sales approach is more likely to create customer satisfaction – and satisfied customers, in turn, are more likely to be loyal and to recommend us. Our customers’ interests take priority whenever they seek advice from us and exemplary sales practices are of particular importance.
NPS methodology and established a group-wide standard for retail end customer NPS, which helps to rate Allianz businesses along key business drivers like brand, product, price and service. At the same time, we introduced our Customer Excellence Program to systematically measure customer experience, identify key areas for improvement, and pursue an integrated approach to enhance the drivers of customer satisfaction along the entire customer journey, as opposed to at individual touch points.
Complaints are another important source of customer feedback and we analyze them closely to identify potential improvements. All
Responsible sales:  Status/progress: The Allianz Standard for Retail Risk Management outlines rules and principles to ensure that Allianz companies offer fair and transparent products. We will continue the review of new products so that these are in line with the parameters set out in the
Global NPS performance, Allianz Group:  Status/progress: In 2019, 70 % of the business segments of
 Ambition: 75 % plus of Allianz Group business segments of our entities score above market or in a loyalty leader position in 2021.
In order to ensure we will meet our global ambitions for 2021, dedicated
Our Allianz Privacy Framework includes a global standard for data privacy, a privacy impact assessment and risk management process, integration with information security core functions, and employee training programs on the appropriate procedures to process our customers ’, employees’, and third-party partners’ personal data. All measures are subject to regular audit and assurance activities.
As part of our Privacy Risk Management, we consider the identification and management of privacy risks an integral part of our operational processes. Therefore, we measure, monitor, and remediate risks across Allianz’s core businesses. For so-called high exposure processes that use personal data, we carry out so-called Privacy Impact Assessments (PIAs) to allow early identification of high-risk areas and ensure they are appropriately managed over the project lifecycle, including when changing an existing product or service.
In 2016, we introduced an application across all Allianz Group companies to facilitate the execution of PIAs. In conjunction with training sessions, the PIA tool permits a more uniform approach to the assessment and mitigation of privacy risks across the Allianz Group. Privacy risks are also included in Allianz’s Integrated Risk and Control System
As part of our robust Information Security Framework, we globally apply strict security processes, standards, and tools. The framework also defines minimum requirements that are based on the ISO 27001
We keep abreast of regulatory and industry developments and aim to reflect these in our operational and governance processes and procedures. For example, in response to the changes in the E.U.
– a major effort to align our privacy practices with the requirements of the GDPR. More recently, we have addressed new data privacy developments in Brazil, India, and the United States, among other jurisdictions.
Digital Privacy Guidelines provide guidance on privacy-related topics impacting digital projects – both privacy by design (as part of new product and service design processes) and privacy by default
(which means that wherever individuals are given choices on the use and sharing of their personal data, default settings restrict disclosure).
In response to the unique ethical issues posed by Allianz’s digital endeavors, in 2019, a data ethics working group was established to guide the ethical implementation of digital solutions into our businesses.
 Targets:  Implement the APRP across all Allianz Group companies by
Code of Conduct. We annually communicate our progress, covering both human rights and labor standards.
For insurance transactions and direct investments such as real estate, infrastructure, and private equity, we address ESG risks using our sensitive business referral process. This mandatory process is triggered via specific sectors of business transactions or through the country the transaction is taking place in. Please refer to our ESG approach on page 42 for further details on the concepts.
 Targets:  Continue to apply ESG Sector Guidelines and Human Rights
Guidelines for sensitive countries into all business lines and core processes dealing with insurance and investment decisions.
 Conduct a review of U.K. and Group Modern Slavery Statement in 2020.
 Publish a full first version of the PSI-ESG in Underwriting Guidance for property-casualty insurance by the second quarter of
This section describes the impact of employee matters on our business activities and relationships as well as the impact of Allianz’s business activities and relationships on employees. Furthermore, we describe the concepts and achievements related to the management of these impacts. All employee matters are managed by the Group HR function.
These aspirations are underpinned by our strategic HR frameworks, principles, and tools, including our globally consistent 4x3 People
Attributes – Customer and Market Excellence, Collaborative Leadership, Entrepreneurship and Trust – along the entire people value chain: from recruiting and talent management to learning and performance management.
As part of the AES, we use the Inclusive Meritocracy Index (IMIX)
Group’s Chief HR Officer is responsible for all people-related activities and is a member of the Board of Management as of 1 January 2020.
 Meet Me in the Middle – a strategic communication toolbox to support managers and teams in discussing and engaging on the
(composed of senior leaders such as board members, regional CEOs, the Global Head of Communications, and Communities from different entities) sets annual priorities, determines the global diversity strategy, and accepts sponsorships for various diversity programs. In 2019, we continued to focus on three priorities: gender equality, employee networks, and inclusion. Many supporting initiatives were directed at generating dialog around the topic of inclusion and inviting employees to reflect on their motivation for inclusion.
With this ambitious IMIX target, we intend to further drive the change towards an inclusive meritocracy within Allianz. We are well on track to achieve our 2021 targets for the Allianz Group and continue to roll out global initiatives with the goal to maintain, if not further improve, the results.
IMIX for Allianz SE:  Status/progress: 73 % IMIX score in 2019 (+ 4 %-p).
CONCEPTS AND PROGRAMS One key element of our risk management framework is our Compliance
Management System (CMS), which helps to ensure compliance with internationally recognized laws, rules and regulations, and to promote a culture of integrity in order to safeguard the company's reputation.
We take a proactive stance, working with organizations such as the
Compliance risk is covered as part of the operational risk in
Allianz’s Integrated Risk and Control System (IRCS). Since 2017, all relevant entities conducted an annual compliance risk assessment based on the compliance risk scenarios, which together with the maturity assessments form the annual cycle of our integrated compliance risk scoping and assessment activities. In 2019, for the third cycle, the following top inherent compliance risks were identified:  Data privacy,
To ensure continuous improvement in how we address compliance risks, these risks are regularly assessed, monitored, and reported throughout the Group. Our Compliance Quality Assurance Program, rolled out in 2012, is comprised of self-assessments (risk and maturity assessments), independent on-site reviews, local spot checks, and testing of key controls. An online compliance issue management tool provides an overview of mitigating activities and key risk indicator tracking. In addition, our online compliance case management tool provides consistent group-wide management of and oversight over all compliance cases. It also facilitates reporting to the Audit Committee of the
We continue to strengthen the risk-based focus of compliance control reviews and testing. We also continue to improve the supporting
IT solutions in place to optimize and harmonize these activities, including our reporting across the Group and the quality of the data collected.
Our compliance assurance approach includes baseline reviews to assess the compliance of newly acquired entities, risk-based targeted and baseline reviews of existing entities, and key control testing.
We take a zero-tolerance approach to fraud and corruption, which includes adherence to local and international anti-corruption and anti-bribery laws. Above and beyond mere compliance, the Allianz
Directed at both our employees and third parties, the Anti-Corruption policy and program prohibits the offer, acceptance, payment, or authorization of any bribe or other form of corruption in dealing with either the private sector or government authorities. Anti-corruption training is compulsory for all employees.
The obligations laid down in the various compliance programs are derived from the Allianz Code of Conduct for Business Ethics and
 Status/progress: Completed the third cycle of our integrated compliance risk scoping and assessment activities as part of the company ’s IRCS.
 Continue to focus on assessing the effectiveness of the implemented mitigating measures via the risk and maturity assessment.
Most of our insurance markets are served by local Allianz companies. However, some business lines – such as Allianz Global Corporate
Bulgaria. Digital Investments identifies and invests in digital growth companies and provides digital investment management services and an interface between portfolio companies and the Allianz Group.
Global insurance lines & Anglo markets, Insurance Middle East and Africa
 United States  Property-Casualty  Life/Health  Banking  Retail Asset Management  Institutional Asset Management 1_This overview is based on our organizational structure as of 31 December 2019. 2_Property-Casualty business belongs to Allianz Global Corporate & Specialty.
Corporate and Other. In 2019 they were overseen by five board members. The following divisions focus on Group functions and come with business-related responsibilities: Chairman of the Board of Management; Finance, Controlling and Risk; Investment Management; Operations and Allianz Services; Human Resources, Legal, Compliance and
For further information on Board of Management members and their responsibilities, please refer to Mandates of the Members of the
For a comprehensive view of our business segment performance, please refer to the chapters from page 52 onwards.
Wins”, Customer Centricity and employee commitment – the two key levers identified – are reflected in two KPIs: the Net Promoter Score
Financial Report for the Allianz Group and Allianz SE (according to 1_This member of the Board of Management also oversees Insurance Iberia & Latin America, Allianz Partners, and Allianz
3_NPS is a measurement of customers’ willingness to recommend Allianz. Top-down NPS is measured regularly according to global cross-industry standards and allows benchmarking against competitors in the respective markets.
Uncertainty cost more in terms of GDP growth than the tariffs (world
GDP grew by 2.5 % in 2019 compared with 3.1 % in 2018). Companies faced a very rapid increase of their inventories because of a mismatch between global supply and demand. The trade conflict coupled with the difficulties of the automotive sector pushed global trade in goods into recession. Hence, global manufacturing production fell into recession as well in the third quarter of 2019. In this context, both the US and the
A more broad-based recession did not occur, thanks to swift and sizeable monetary policy reactions. The number of central banks initiating a monetary policy easing in 2019 reached a record high since 2009. There was no hesitation to use unconventional tools to inject liquidity both at the Fed and the ECB levels as they decided to restart purchase of securities in 3Q 2019 at a pace of USD 60 bn per month and € 20 bn per month respectively. Alongside more fiscal support, this accommodative stance of economic policies has supported domesticoriented sectors, notably construction activities and services. The easing of monetary policies triggered a downward movement in government bond yields. Between December 2018 and December 2019, the 10 -year US Treasury yield declined from 2.7 % to 1.9 %, while the 10 year Bund yield declined from + 0.2 % to - 0.3 %.
The industry, however, proved to be remarkably resilient: In 2019, too, it kept on growing and remained profitable.
Our Property-Casualty business segment also registered strong premium growth, mainly at AGCS, Allianz Partners, and in Germany. In our Asset
and a lower amortization of intangible assets (after 2018 had been burdened by a negative impact from the sale of our traditional life insurance portfolio in Taiwan).
2_Total revenues comprise Property-Casualty total revenues (gross premiums written and fee and commission income),
Our shareholders’ equity7 grew € 12.8 bn to € 74.0 bn, largely due to a € 10.7 bn increase in unrealized gains and losses (net) and a net income attributable to shareholders of € 7.9 bn. A dividend payout of € 3.8 bn and completion of our fourth share-buy-back program (with a total volume of € 1.5 bn8 and 7.3 million shares) partly offset this increase. Our Solvency II capitalization ratio was strong at 212 %.
Life/Health insurance operations, Asset Management, and Corporate and Other – please consult the respective chapters on the following pages.
The Group Management Report also entails the following sections:  Statement on Corporate Management pursuant to § 315d and
 Takeover-Related Statements and Explanations starting on page 21, and the
7_For further information on shareholders‘ equity, please refer to the Balance Sheet Review.
8_For further information on the share buy-back program, please refer to note 19 to the Consolidated Financial
The following operations contributed positively to internal growth: AGCS: Total revenues grew to € 9,117 mn – an increase of 9.5 %
on an internal basis. Main drivers were price increases in our Property,
One operation weighed on internal growth: Spain: Total revenues fell to € 2,398 mn, a decrease of 1.6 % on an internal basis. It was largely due to negative volume effects in our motor business.
4_Represents acquisition and administrative expenses (net) divided by premiums earned (net).
5_Represents the total of acquisition and administrative expenses (net) plus claims and insurance benefits incurred (net), divided by premiums earned (net).
We saw a strong decrease in operating profit, most of it driven by our underwriting result, with some additional negative impact from our operating investment income.
A decrease in our underwriting result was due to a lower level of run-off, partially offset by a lower expense ratio which benefited from premium growth and productivity initiatives, with our accident year loss ratio remaining stable. Our combined ratio deteriorated by 1.5 percentage points to 95.5 %.
Change in reserves for insurance and investment contracts (net) (without expenses for premium refunds)1 (312) (320) 8 1_Consists of the underwriting-related part (aggregate policy reserves and other insurance reserves) of “change in reserves for insurance and investment contracts (net)”. For further information, please refer to note 26 to the
Leaving aside the losses from natural catastrophes, our accident year loss ratio deteriorated by 0.4 percentage points to 68.6 % due to said rise in large losses.
7_Based on the average exchange rates in 2019 compared to 2018.
The following operations weighed on the development of our accident year loss ratio: Reinsurance: 0.2 percentage points. The deterioration was largely driven by a rise in internal exposure to large losses.
One operation contributed positively to the development of our accident year loss ratio: AGCS: 0.4 percentage points. The accident year loss ratio benefited from a very benign impact from natural catastrophes and weather-related claims.
Our run-off result was € 1,059 mn – after € 1,981 mn in 2018 –, translating into a run-off ratio of 2.1 %. Reserve releases stemmed from our operations in Italy, Reinsurance, and Australia, whereas a strengthening of reserves at AGCS in our Liability and Financial Lines lines of business caused lower run-off compared to 2018. Excluding AGCS’s runoff, our run-off ratio would have been 3.2 % in 2019.
Operating income from financial assets and liabilities carried at fair value through income (net) (57) (49) (8)
Our net income decreased by € 319 mn, mainly due to the decline in operating profit. The effect was only partially offset by lower income taxes and a higher non-operating result, with the latter benefiting from an increase in our non-operating investment result.
In Italy, statutory premiums dropped to € 10,816 mn, translating into a 6.7 % decrease on an internal basis. This was predominantly due to lower sales in our business with unit-linked products, where we had seen a high base value in 2018.
In France, statutory premiums declined to € 8,119 mn, a 2.9 %
drop on an internal basis. This was largely driven by a decline in sales of our unit-linked products without guarantee, part of which was compensated by higher sales in our business with protection & health products.
3_Represents the ratio of net income to the average total equity, excluding unrealized gains/losses on bonds, net of shadow accounting, at the beginning of the year and at the end of the year.
United States. The positive effects were partly offset by lower sales of unit-linked products in Italy, Taiwan, as well as in France.
Loadings from premiums as % of statutory premiums 5.7 5.6 0.1
Investment margin in basis points2,3 86 86 1_ "Other" comprises the delta of out-of-scope entities, on the one hand, which are added here with their respective operating profit and different line item definitions compared to the financial statements, such as interest paid on deposits for reinsurance, fee and commission income, and expenses excluding unit-linked management fees on the other hand. For 2018, it also includes a change in our U.S. fixed index annuity business, with € 683 mn shifted from
"Impact of change in DAC" into the "Investment margin" – for further information please refer to note 2 to the
2_Investment margin divided by the average of current end-of-period and previous end-of-period aggregate policy reserves.
Our investment margin went up: In France, lower impairments on both equities and debt securities, due to favorable market conditions, as well as higher realized gains were only partly offset by an increase in policyholder participation. In the United States, positive developments included favorable foreign currency translation effects and an unlocking of assumptions in the variable annuity business. In our German life business, we recorded higher realizations mainly from debt instruments, lower impairments predominantly from equities, and an increased interest income, which together outweighed higher policyholder participations.
Acquisition expenses and commissions went up as sales increased, above all, in our German and U.S. life business as well as in the Asia-
An improvement in the impact of change in DAC was attributable to the extension of the DAC amortization period in our U.S. business.
United States and in France. A lower operating profit in our protection
3_The impact of change in DAC includes effects of the change in DAC, unearned revenue reserves (URR), and the value of business acquired (VOBA). It represents the net impact of deferral and amortization of acquisition costs and front-end loadings on operating profit and therefore deviates from the IFRS financial statements.
As of 31 December 1_The term “multi-assets” refers to a combination of several asset classes (e.g. bonds, stocks, cash and real property)
Net inflows3 of total assets under management (AuM) amounted to € 74.2 bn in 2019 (2018: € 15.4 bn net outflows) – third-party net inflows were € 75.8 bn (2018: € 3.5 bn net outflows). The full year’s net inflows were attributable to PIMCO (€ 79.5 bn total and € 83.3 bn third-party). AllianzGI, on the other hand, recorded total net outflows of € 5.3 bn and third-party net outflows of € 7.5 bn for the year, with the fourth quarter 2019 having seen net inflows again.
Positive effects from market and dividends4 totaled € 193.5 bn. Of these, € 132.3 bn came from PIMCO and were mainly related to fixedincome assets, while € 61.2 bn came from AllianzGI and were contributed by all asset classes.
Overall three-year rolling investment outperformance3 % 92 85 7 %-p 1_Mutual funds are investment vehicles (in the United States, investment companies subject to the U.S. code; in Germany, vehicles subject to the “Standard-Anlagerichtlinien des Fonds” Investmentgesetz) where the money of several individual investors is pooled into one account to be managed by the asset manager, e.g. open-end funds, closed-end funds. Separate accounts are investment vehicles where the money of a single investor is directly managed by the asset manager in a separate dedicated account (e.g. public or private institutions, high net worth individuals, and corporates).
Our operating revenues increased by 6.4 % on a nominal basis. This development was driven by higher average third-party AuM, mainly at
AllianzGI. At PIMCO this positive development was largely due to stronger performance fees from hedge funds.
Other net fee and commission income rose on a nominal basis, driven by higher average third-party AuM mainly at PIMCO.
Other operating revenues decreased, mainly due to a less favorable foreign currency translation result as well as lower net interest and similar income.
Our operating profit increased by 6.9 % on a nominal basis, as growth in operating revenues by far exceeded an increase in operating expenses. On an internal basis,1 our operating profit went up by 2.6 %, which was due to higher average third-party AuM as well as higher performance fees.
Overview: 2019 results versus previous year’s outlook1 2019 results versus previous year’s outlook for 2019
Protection of shareholder value while continuing to provide attractive returns and dividends.
Selective profitable growth. Total revenues grew by 5.9 % on an internal basis, compared to 2018. Our Life/Health business segment registered strong volume growth in Germany and USA and we recorded a strong internal premium growth in our Property-Casualty business segment. An outstanding market return supported by strong net inflows led to revenue growth in our Asset Management business segment.
Property-Casualty Revenue growth of approximately 3 %. Total revenues increased by 6.8 %. Internal growth of 4.7 % was mainly driven by AGCS, Allianz Partners and Germany.
Operating profit in the range of € 5.4 bn to € 6.0 bn. Operating profit of € 5.0 bn was below our target range. Our underwriting result was negatively impacted by reserve strengthening at AGCS.
Life/Health Continue with focus on profitable growth; keep developing capital-efficient products; expand to new markets. Revenues are expected to be in the range of € 67.0 bn to € 73.0 bn.
Revenues of € 76.4 bn are above the range indicated in our outlook, mainly due to the strong growth of capital-efficient products in Germany and in the United States.
Operating profit between € 3.9 bn and € 4.5 bn. At € 4.7 bn, our operating profit was above the target range, driven by the investment margin, a one-off effect due to the increase of the DAC amortization period in the United States, volume growth, and higher unit-linked management fees.
RoE between 10.0 % and 12.0 %. Our 12.7 % RoE2 is above the outlook range.
Total AuM recorded a strong growth of + 15.6 % (excluding positive currency effects and AuM consolidation effects: + 13.7 %) due to an outstanding market return (€+ 193 bn) and strong third-party net inflows (€+ 76 bn).
Monetary policies have to deal with a threefold series of disturbances, i.e. political risk, an external shock on trade, and structural issues related to ecological transition. Monetary policy only is particularly illequipped to tackle these kinds of shocks, which have long-lasting impacts. Global growth is likely to converge towards but remain below its potential of + 3.0 % at the horizon of 2021: we expect the GDP to further decelerate in 2020 at + 2.4 % from + 2.5 % in 2019.
US-China trade tensions should neither escalate nor de-escalate much further in 2020. The deal is not a game changer, but it announces slightly lower uncertainty as a tariff escalation is unlikely in a U.S. electoral year.
1_For more detailed information on the previous year’s outlook for 2019, please see the Annual Report 2018 from page 63 onwards.
The U.S. Federal Reserve will continue easing its monetary policy, with one rate cut in the first half of 2020 to cope with the recession of the
2_The information presented in the sections “Economic outlook”, “Insurance industry outlook”, and “Asset management industry outlook” is based on our own estimates.
In the life sector, premium growth is expected to slightly accelerate as demand in emerging markets continues to grow and demand in advanced economies should at least stabilize, reflecting the increasing supply of new savings products. Overall, we expect global premium growth to increase by about 6 % in 2020 (in nominal terms and adjusted for foreign currency translation effects). Given the challenging investment environment, however, industry profitability is likely to remain under pressure.
The asset management industry’s profitability remains under pressure from continuous flows into passive products, new pricing models, and rising distribution costs, and we expect the trend towards industry consolidation and increasing cost awareness, including respective restructuring activities, to continue. At the same time, digital channels such as robo-advisory platforms are likely to continue gaining prominence. The strengthening of regulatory oversight and reporting could also affect profitability in the asset management sector. Opportunities in the area of active asset management will continue to exist, particularly in alternative and solutions-oriented strategies, but also in equity and fixed-income. In order to continue growing, it is vital for asset managers to keep sufficient business volumes, ensure efficient operations, and maintain a strong investment performance.
PROPERTY-CASUALTY Revenue growth of approximately 6 % of which 4 % come from our acquisitions in the United Kingdom.
Operating profit in the range of € 5.2 bn to € 6.0 bn.
Pressure on investment income due to low and even negative interest rates and continued capital market volatility.
ASSUMPTIONS Our outlook assumes no significant deviations from our underlying assumptions – specifically:  Global economic growth to be stable albeit slightly decelerating
 A 100 basis point increase (decrease) in interest rates would raise (lower) the expected operating profit by approximately € 0.1 bn in the first year that follows the rate change.
 An average U.S. Dollar to Euro exchange rate of 1.09.
 A 10 % weakening (strengthening) of the U.S. Dollar, compared to the assumed exchange rate of 1.09 to the Euro, would have a negative (positive) effect on operating profits of
Management revenues trending upward and Life/Health revenues remaining stable, due to our selective focus on profitable growth.
Our operating profit was in the upper half of our target range in 2019, amounting to € 11.9 bn. For 2020, we envisage an operating profit of € 12.0 bn plus or minus € 0.5 bn, as we expect strong performance in all business segments.
Our net income attributable to shareholders was € 7.9 bn, a strong increase from the previous year’s level. Consistent with our disclosure practice in the past, and given the susceptibility of our nonoperating results to capital market developments, we refrain from providing a precise outlook for net income. However, since our outlook presumes no major disruptions in our capital markets, we anticipate a rather stable net income development for 2020.
Kingdom. Organic growth will be supported by favorable price and volume effects.
Partners, where we have pooled our B2B2C activities. Further growth can be expected in Germany and Turkey, as well as in Asian markets such as China and Malaysia.
We believe that the overall rise in prices that we saw in a number of markets in the past year will continue in 2020. Nevertheless, we will maintain our focus on achieving strong underwriting results by adhering to our strict underwriting discipline, as we have in previous years, and we will be prepared to accept a lower top line if target margins cannot be achieved.
Our combined ratio was 95.5 % in 2019, missing our target. This was due to reserve strengthening at AGCS, which led to a lower run-off figure. In 2020, we envisage a combined ratio of approximately 94 %.
As the low-interest-rate environment is likely to stay, investment income will remain under pressure due to the rather short duration of investments in the Property-Casualty business segment. Going forward, we will continue to actively adapt our investment strategy to changing market conditions.
States, volume growth, and higher unit-linked management fees. For 2020, we expect this business segment’s operating profit to range be-
Allianz continuously works to make the Life/Health business model more resilient to market volatility, for instance, by adjusting our products to market needs while keeping in line with our strategy. Going forward, we will continue to pursue profitable growth and to improve our capital-efficient products – always with a particular focus on the customer – while exploring new market opportunities and building on our strong track record of product innovation. In addition, we will continue to actively manage both our new and our in-force business through continuous price reviews, expense management, asset /liability management, and crediting strategies. As in the past years, this should allow us to mitigate the impacts of difficult market conditions, in particular negative interest rates, and achieve our profitability targets.
CORPORATE AND OTHER (INCLUDING CONSOLIDATION) In Corporate and Other, we recorded an operating loss of € 0.6 bn in 2019. For 2020, we envisage an operating loss in the range of € 0.6 bn to € 0.8 bn for this business segment.
Through prudent capital management, the Allianz Group aims to maintain a healthy balance between achieving an attractive yield and investing in profitable growth. Of the Group’s net income attributable to shareholders, we will continue to pay out 50 % as a regular dividend.
In the interest of dividend continuity, we aim to keep the regular dividend per share at least at the previous year’s level. For 2019, the
Allianz SE Board of Management and the Supervisory Board propose a dividend of € 9.60 per share.
In addition, Allianz SE has decided to launch a share buy-back program in an amount of up to € 1.5 bn, as part of the previously announced policy to return capital to the shareholders on a flexible basis.
Management’s overall assessment of the current economic situation of the Allianz Group At the date of issuance of this Annual Report, and based on current information regarding natural catastrophes and capital market trends
– in particular foreign currency, interest rates, and equities –, the Board of Management has no indication that the Allianz Group is facing any major adverse developments.
1_This represents management’s current state of planning and may be revised in the future. Also, note that the decision regarding dividend payments in any given year is subject to specific dividend proposals by the Management and Supervisory Boards, each of which may elect to deviate, if and as appropriate under the then prevailing circumstances, as well as to the approval of the Annual General Meeting.
This document includes forward-looking statements, such as prospects or expectations, that are based on management's current views and assumptions and subject to known and unknown risks and uncertainties.
Actual results, performance figures, or events may differ significantly from those expressed or implied in such forward-looking statements.
Deviations may arise due to changes in factors including, but not limited to, the following: (i) the general economic and competitive situation in the Allianz Group's core business and core markets, (ii) the performance of financial markets (in particular market volatility, liquidity, and credit events), (iii) the frequency and severity of insured loss events, including those resulting from natural catastrophes, and the development of loss expenses, (iv) mortality and morbidity levels and trends, (v) persistency levels, (vi)
particularly in the banking business, the extent of credit defaults, (vii) interest rate levels, (viii) currency exchange rates, most notably the EUR/USD exchange rate, (ix) changes in laws and regulations, including tax regulations, (x) the impact of acquisitions including and related integration issues and reorganization measures, and (xi) the general competitive conditions that, in each individual case, apply at a local, regional, national, and/or global level. Many of these changes can be exacerbated by terrorist activities.
The Allianz Group assumes no obligation to update any information or forward-looking statement contained herein, save for any information we are required to disclose by law.
Shareholders’ equity increased largely due to higher unrealized gains and losses (net) and net income attributable to shareholders of € 7,914 mn. The dividend payout in May 2019 (€ 3,767 mn) and the share buy-back program2, with a total amount of € 1.5 bn, partly offset this increase.
Compared to year-end 2018, our overall asset allocation remained rather stable with a modest increase in our equity investments.
Our well-diversified exposure to debt instruments increased compared to year-end 2018, mainly due to decreased interest rates. About 93 % of this portfolio was invested in investment-grade bonds and loans.3 Our government bonds portfolio contained bonds from France,
They represented 38.0 %, 34.0 % and 12.6 % of our portfolio shares.
Our exposure to equities increased mainly due to a strong performance on major equity markets.
1_This does not include non-controlling interests of € 3,363 mn and € 2,447 mn as of 31 December 2019 and 31 December 2018, respectively. For further information, please refer to note 19 to the Consolidated Financial Statements.
PROPERTY-CASUALTY LIABILITIES As of 31 December 2019, the business segment’s gross reserves for loss and loss adjustment expenses as well as discounted loss reserves amounted to € 70.0 bn, compared to € 65.6 bn at year-end 2018. On a net basis, our reserves, including discounted loss reserves, increased
LIFE/HEALTH LIABILITIES Life/Health reserves for insurance and investment contracts increased by € 57.4 bn to € 572.9 bn. A € 27.9 bn increase (before foreign currency translation effects) in aggregate policy reserves was mainly driven by our operations in Germany (€ 16.9 bn) and the United States
In the normal course of business, the Allianz Group may enter into arrangements that do not lead to the recognition of assets and liabilities in the Consolidated Financial Statements under IFRS. Since the
The Allianz Group has also entered into contractual relationships with various types of structured entities. They have been designed in such a way that their relevant activities are directed by means of contractual arrangements rather than voting or similar rights. Typically, structured entities have been set up in connection with asset-backed financing and certain investment fund products. For more details on our involvement with structured entities, please refer to note 35 to the Consolidated Financial Statements.
1_For further information about changes in the reserves for loss and loss adjustment expenses for the Property-Casualty business segment, please refer to note 14 to the Consolidated Financial Statements.
Allianz SE and each of the operating entities are responsible for managing their respective liquidity positions, while Allianz SE provides central cash pooling for the Group. Capital allocation is managed by
Allianz SE for the entire Group. This structure allows the efficient use of liquidity and capital resources and enables Allianz SE to achieve the desired liquidity and capitalization levels for the Group and its operating entities.
Property-Casualty insurance operations include the timing, frequency, and severity of losses underlying our policies and policy renewal rates.
In our Life operations, liquidity needs are generally influenced by trends in actual mortality rates compared to the assumptions underlying our life insurance reserves. Market returns, crediting rates, and the behavior of our life insurance clients – for example, regarding the level of surrenders and withdrawals – can also have significant impacts.
LIQUIDITY RESOURCES AND USES Allianz SE ensures adequate access to liquidity and capital for our operating subsidiaries. The main sources of liquidity available for
Allianz SE’s capital authorizations as of 31 December 2019: Capital authorizations of Allianz SE
As of 31 December Up to 1 year 1 – 5 years Over 5 years Total 1_Based on carrying value.
Interest expenses on senior bonds decreased, mainly due to lower funding costs on average in 2019. For subordinated bonds, the decrease of interest expenses was primarily driven by lower volumes outstanding as well as lower funding costs on average, partially offset by unfavorable foreign currency translation effects.
As of 31 December € mn € mn € mn %
The following table details the long-term debt issuances and redemptions of Allianz SE during 2019 and 2018: Issuances and redemptions of Allianz SE’s senior and subordinated bonds € mn
Funding in non-Euro currencies enables us to diversify our investor base or to take advantage of favorable funding costs in those markets.
Funds raised in non-Euro currencies are incorporated in our general hedging strategy. As of 31 December 2019, approximately 17.1 %
Senior and subordinated bonds 17,550 3,991 21,541 1_Based on nominal value.
SHORT-TERM DEBT FUNDING Available short-term funding sources are the Medium-Term Note
Program and the Commercial Paper Program. Money market securities decreased in the use of commercial paper, compared to the previous year-end. Interest expenses on money market securities decreased mainly due to lower funding costs on average in 2019.
France and the United States. In addition, we recorded higher reserves for loss and loss adjustment expenses, mainly driven by the propertycasualty business in Germany and France, and lower net cash outflows from assets and liabilities held for trading.
Net cash outflow used in financing activities was lower in 2019 by € 2.0 bn and amounted to € 4.9 bn. This decrease was largely driven by lower net cash outflows from transactions between equity holders, in particular from the Allianz SE share-buy-back program and the acquisition of Euler Hermes shares held by non-controlling interests in 2018. Higher dividend payments to our shareholders partly compensated these effects.
The previous analysis is based on our Consolidated Financial Statements and should be read in conjunction with them. In addition to our figures stated in accordance with the International Financial Reporting
Standards (IFRS), the Allianz Group uses operating profit and internal growth to enhance the understanding of our results. These additional measures should be viewed as complementary to, rather than a substitute for, our figures determined according to IFRS.
Income from financial assets and liabilities carried at fair value through income (net) 1 5
thereof: Total revenues (Banking) 239 275 consisting of: Interest and similar income 73 95
Income from financial assets and liabilities carried at fair value through income (net)1 3 3
1_Since 2019, total revenues in Property-Casualty include fee and commission income. Prior year figures were adjusted accordingly.
Foreign currency translation Nominal growth 1_Prior year figures have not been adjusted in light of the new total revenues definition.
3_For German Speaking Countries, policyholder participation on revaluation of DAC/URR capitalization/amortization.
Annual Report 2018, chapter "Reserves for insurance and investment contracts", paragraph "Aggregate policy reserves".
(VOBA). As such, it is the net impact of the deferral and amortization of acquisition costs and front-end loadings on operating profit.
URR amortized: total amount of URR amortized includes scheduled URR amortization, true-up, and unlocking.
Policyholder participation is included in “Change in our reserves for insurance and investment contracts (net)” in the Group income statement.
1_Prior year figures have been changed in order to reflect the roll-out of profit source reporting to Mexico.
(including standardized, historical, and reverse stress test scenarios as well as monthly stress and scenario analyses focusing on current and possible future developments). These analyses allow us to take appropriate measures to preserve our continued capital and solvency strength. Furthermore, the risk capital reflecting the risk profile and the cost of capital is an important aspect considered in business decisions.
In addition, our liquidity risk framework ensures that all legal entities in scope are responsible for the management of their liquidity risks and to maintain a sufficient liquidity position under both market conditions (expected as well as stressed) and business conditions.
 Consistent and proportional application of an integrated risk capital framework to protect our capital base and support effective capital management.
 Integration of risk considerations and capital needs into management and decision-making processes by attributing risk and allocating capital to business segments, products, and strategies.
Our risk management system is based on the following four pillars:  Risk identification and underwriting: A robust system of risk identification and underwriting forms the foundation for adequate risk management decisions. Supporting activities include standards for underwriting, valuation methods, individual transaction and new product approvals, emerging-/operational-/top-risk assessments, liquidity risk and scenario analyses, amongst others.
 Risk strategy and risk appetite: Our risk strategy defines our risk appetite consistent with our business strategy. It ensures that rewards are appropriate based on the risks taken and the capital required, and that delegated decision-making bodies are in line with our overall risk-bearing capacity and strategy.
 Risk reporting and monitoring: Our comprehensive qualitative and quantitative risk monitoring and reporting framework provides management with the transparency needed to assess whether our risk profile remains within the approved limits and to identify emerging issues and risks quickly. For example, risk dashboards and limit utilization reports as well as scenario analyses and stress tests are regularly prepared and communicated.
 Communication and transparency: Transparent risk disclosure provides the basis for communicating our strategy and performance to internal and external stakeholders, ensuring a sustainable positive impact on valuation and financing. It also strengthens the risk awareness and risk culture throughout the entire
OUR BUSINESS ASPIRATIONS The Board of Management of Allianz SE has defined the following objectives for Allianz’s medium-term strategy with the motto “Simplicity wins”:  Outperform: We seek to move ahead of our competitors, both traditional businesses and disruptors.
These objectives have been translated into clear ambitions for the period 2019 - 2021. With regard to financial performance, we strive for a return on equity (excluding unrealized gains/losses on bonds) of more than 13 %, while growing our earnings per share at a compound annual growth rate of more than 5 % (baseline full year 2018).
To ensure the sustainability of our performance, we have set ourselves non-financial health targets: For customer loyalty, our ambition is for more than 75 % of the business segments of our entities to be or become rated by their customers as loyalty leader or above-market in terms of Net Promoter Score (NPS). In terms of employee engagement, our ambition is to have the Inclusive Meritocracy Index above 73 %. At the same time, we have also set a number of sustainability targets such as the reduction of our carbon footprint, the reduction of greenhouse gases, and a step-by-step plan to achieve net-zero compliant asset allocation by 2050 at the latest.
OUR BUSINESS STRATEGY To implement these strategic objectives, we have defined a number of strategic priorities, and are implementing initiatives and programs to address the five dimensions of our Renewal Agenda.
 True Customer Centricity: Design intuitive products and processes to achieve loyalty leadership in our core markets.
Our financial strength, coupled with ongoing transformation, renders us resilient and allows us to profit from new opportunities in a fastchanging business environment. Examples:  By combining close customer understanding and evolving data analytics techniques, we provide superior insurance products and extend tailor-made services offerings as well as raising productivity.
 As a diversified financial group that is active in over 70 countries, we can innovate locally, then spread ideas and best practice across the Group in order to exploit economies of scale.
It monitors the effectiveness of the Allianz risk management framework. Furthermore, it focuses on risk-related developments as well as general risks and specific risk exposures.
For more information please refer to the paragraph “Risk Committee ” of the Supervisory Board Report on page 7.
A comprehensive system of risk governance is achieved by setting standards related to organizational structure, risk strategy and appetite, limit systems, documentation, and reporting. These standards ensure the accurate and timely flow of risk-related information and a disciplined approach towards decision-making and execution at both the global and the local level.
As a general principle, the responsibility for the “First Line of
They are responsible for both the risks taken and the returns from their decisions. Our “Second Line of Defense” is made up of independent global oversight functions including Risk, Actuarial, Compliance, and
Legal, which support the Board in defining the risk frameworks within which the business can operate. Group Audit forms the “Third Line of
Defense”, independently and regularly reviewing risk governance implementation, compliance with risk principles, performing quality reviews of risk processes, and testing adherence to business standards, including the internal control framework.
Group Risk is managed by the Group Chief Risk Officer and supports the Board of Management of Allianz SE, including its committees, by performing various analyses, communicating risk management related information, and implementing committee decisions.
Consistent implementation of the Group’s risk management framework in the related undertakings, including regular dialog between the Group and the entity, is ensured, for example, through Group
Risk representation on local Risk Committees and through regular assessment of the local risk management framework and Chief Risk Officers by Group Risk. Moreover, the Group Chief Risk Officer must be consulted on decisions regarding the staffing, objectives, and performance evaluation of local Chief Risk Officers.
In addition to Group Risk and the local risk functions, legal, compliance, and actuarial functions established at both the Group and the entity level constitute additional components of the “Second Line of
Group Legal and Group Compliance seek to mitigate legal risks with support from other departments. The objectives of both functions are to ensure that laws and regulations are observed, to react appropriately to all impending legislative changes or new court rulings, to attend to legal disputes and litigation, and to provide legally appropriate solutions for transactions and business processes. In addition,
As an integrated financial services provider, we consider diversification across different business segments and regions to be an important element in managing our risks efficiently, as it limits the economic impact of any single event and contributes to relatively stable results. Our aim is to maintain a balanced risk profile without any disproportionately large risk concentrations and accumulations.
Allianz steers its portfolio taking a comprehensive view at risk and return, which is based on the internal model and includes scenario analysis: Risk and concentrations are actively restricted by limits based on our internal model and there is a comprehensive analysis of the return on risk capital1 (RoRC). RoRC allows us to identify profitable lines of business and products on a sustainable basis, reflecting the capital commitment over the life time of the products, and is a key criterion for capital allocation decisions.
As the fair values of our investment portfolios and liabilities depend on the changes observed in the financial markets, we are exposed to the risk of adverse financial market developments. The long-dated liabilities in our Life/Health business segment and those attributable to internal pensions contribute to interest rate risk, in particular if they cannot be fully matched by available investments due to long maturities. In addition, we are also exposed to adverse changes in equity and real estate prices, credit spread levels, inflation, implied volatilities, and currencies, which might impact the value of our portfolios.
(99.5 %) defines the market Value at Risk (VaR). For entities modeled using the standard formula, the market risk is based on aggregating the losses under specified standard formula shocks.
INTEREST RATE RISK Allianz is a liability-driven investor. We may suffer an economic loss in the event of falling interest rates as we reinvest maturing assets at lower rates prior to the maturity of liability contracts, if the duration of our assets is shorter than our liabilities. This risk is higher for long-dated life investment and savings products as well as for internal pensions, with a significant part of the Life/Health business segment’s interest rate risk coming from Western Europe, mainly from traditional life insurance products with guarantees. Conversely, opportunities may arise when interest rates increase, as this may result in returns from reinvestments being higher than the rates guaranteed. Interest rate risk is managed within our asset/liability management process and controlled via interest rate sensitivity and duration mismatch limits for the Group and the local entities.
EQUITY RISK The Group’s insurance-focused operating entities may hold equity investments to diversify their portfolios and take advantage of expected long-term returns. Strategic asset allocation benchmarks and investment limits are used to manage and monitor these exposures. In addition, equity investments fall within the scope of the credit risk platform to avoid single-name risk concentrations. Risks from changes in equity prices are normally associated with decreasing share prices and increasing equity price volatilities. As stock markets might also increase, opportunities may arise from equity investments.
CREDIT SPREAD RISK Fixed-income assets such as bonds may lose value if credit spreads widen. However, our risk appetite for credit spread risk takes into account the underlying economics of our business model: As a liabilitydriven investor, we typically hold fixed-income assets until maturity.
2_Internal pensions are evaluated and modelled based on deterministic models, following IAS19 principles.
CURRENCY RISK Our operating entities typically invest in assets which are denominated in the same currency as their liabilities; however, some foreign currency exposures are allowed to support portfolio diversification and tactical investment decisions. Our largest exposure to foreign currency risk comes from our ownership of non-Euro entities: Whenever the Euro strengthens, the Euro equivalent net asset value of our foreign subsidiaries will decline from a Group perspective; however, at the same time the capital requirements in Euro will decrease, partially mitigating the total impact on Group capitalization. Based on our foreign exchange management limit framework, currency risk is monitored and managed at both the local and Group level.
The Allianz’s Group Investment Committee has defined a framework for standard transactions for real estate equity and commercial real estate loan investments. These standards outline diversification targets, minimum-return thresholds, and other qualitative and quantitative requirements. All transactions that do not meet these standards or have a total investment volume (including costs) exceeding a defined threshold must be reviewed individually by Group Risk and other Group center functions. In addition, all applicable limits must be respected, in particular those resulting from strategic asset allocation as well as its leeways and risk limits, with regards to an investing entity’s portfolio.
 Investment portfolio: Credit risk results from our investments in fixed-income bonds, loans, derivatives, cash positions, and receivables whose value may decrease depending on the credit quality of the obligor. However, losses due to credit events can be shared with the policyholder for certain life insurance products.
 Credit insurance: Credit risk arises from potential claim payments on limits granted by Euler Hermes to its policyholders. Euler
Hermes insures its policyholders against credit risk associated with short-term trade credits advanced to clients of the policyholder.
When the client of the policyholder is unable to meet its payment obligations, Euler Hermes indemnifies the loss to the policyholder.
 Reinsurance: Credit risk arises from potential losses from nonrecoverability of reinsurance receivables or due to default on benefits under in-force reinsurance treaties. Our reinsurance partners are carefully selected by a dedicated team. Besides focusing on companies with strong credit profiles, we may also require letters of credit, cash deposits, or other financial measures to further mitigate our exposure to credit risk.
The loss profile of a given portfolio is obtained through Monte
Life/Health2 business segment. Underwriting risks are not relevant for the Asset Management business segment and our banking operations.
PROPERTY-CASUALTY Our Property-Casualty insurance businesses are exposed to premiumrisk -related adverse developments in the current year’s new and renewed business as well as to reserve risks related to the business in force.
These loss distributions are then used within the internal model to calculate potential losses with a predefined confidence level of 99.5 %.
Reserve risk represents the risk of adverse developments in best-estimate reserves over a one-year time horizon, resulting from fluctuations in the timing and/or amount of claims settlement. We estimate and hold reserves for claims resulting from past events that have not yet been settled. In case of unexpected developments, we will experience a reserve gain or loss dependent on the assumptions applied for the estimate.
include mortality, disability, morbidity, and longevity risks. Mortality, disability, and morbidity risks are associated with the unexpected increase in the occurrence of death, disability, or medical claims. Longevity risk is the risk that the reserves covering life annuities and group pension products might not be sufficient due to longer life expectancies of the insured.
Life/Health underwriting risk arises from profitability being lower than expected. As profitability calculations are based on several parameters – such as historical loss information and assumptions on inflation, mortality, or morbidity – realized parameters may differ from the ones used for underwriting. For example, higher-than-expected inflation may lead to higher medical claims in the future. However, beneficial deviations are also possible; for example, a lower morbidity rate than expected will most likely result in lower claims in income protection products.
 “Execution, Delivery and Process Management”: potential losses arising from transaction or process management failures. Examples include interest and penalties from non-payment or underpayment of taxes or losses associated with broker and agent distribution processes. These losses tend to be of a relatively higher frequency but with little financial impact (although single largeloss events can occur).
 Other operational risks including, for example, internal or external fraud, financial misstatement risk, a cyber security incident causing business disruption or fines, a potential failure at our outsourcing partners causing a disruption to our working environment, etc.
Agreements, and Business Continuity and Crisis Management programs to protect critical business functions from these events. Cyber risks are mitigated through investments in cyber security, cyber insurance that Allianz buys from third-party insurers, and a variety of ongoing control activities.
Top Risk Assessment process, and discussed in various Board of Management -level committees (for example GFRC). We also monitor market and competitive conditions, capital market requirements, regulatory conditions, etc., to decide if strategic adjustments are necessary.
Allianz’s Renewal Agenda, which focuses on five themes: True Customer Centricity, Digital by Default, Technical Excellence, Growth
Each legal entity of the Allianz Group manages liquidity risk locally, using asset/liability management systems designed to ensure that assets and liabilities are adequately matched. Local investment strategies particularly focus on the quality of the investments and ensure a significant portion of liquid assets (e.g. high-rated government bonds or covered bonds) in the portfolios. In the course of liquidity planning, liquidity sources (e.g. cash from investments and premiums ) and liquidity needs (e.g. payments due to insurance claims and expenses) are reconciled under a best-estimate plan, as well as under idiosyncratic and systemic adverse liquidity scenarios, to allow for a group-wide consistent view on liquidity risk. These analyses are performed at legal entity level and are monitored by the Group.
Allianz SE. Major contingent liquidity requirements arise mainly from market risk scenarios for Allianz SE and its subsidiaries, from the nonavailability of external capital markets, and from reinsurance risk scenarios for Allianz SE.
In addition, the cash position of the Group cash pool investment portfolio is monitored and forecast on a daily basis and is subject to an absolute minimum amount and an absolute alert amount. Both limits are defined for the Allianz SE cash pool in order to be protected against short-term liquidity crises.
Management. Liquidity planning is constantly monitored and regularly reported on to the Board of Management.
Reputational risk is the risk of an unexpected drop in the value of the Allianz SE share price, the value of the in-force business, or the value of future business caused by a decline in our reputation in external stakeholders’ judgment.
ESG for assessment and decision-making, with the GFRC acting as the ultimate escalation/decision-making body.
Management of Allianz SE and will further elevate environmental, social, and governance aspects in corporate governance and decision-making processes at the Allianz Group.
INTERNAL MODEL Our internal model is based on a VaR approach using a Monte Carlo simulation. Following this approach, we determine the maximum loss in portfolio value in scope of the model within a specified timeframe
(“holding period”, set at one year) and probability of occurrence (“confidence level”, set at 99.5 %). We simulate risk events from all risk categories (“sources of risk”) modeled and calculate the portfolio value based on the net fair value of assets minus liabilities, including risk-mitigating measures such as reinsurance contracts or derivatives, under each scenario.
The risk capital required is defined as the difference between the current portfolio value and the portfolio value under adverse conditions at the 99.5 % confidence level. As we consider the impacts of a negative or positive event on all risk sources and covered businesses at the same time, diversification effects across products and regions are taken into account. The results of our Monte Carlo simulation allow us to analyze our exposure to each source of risk both separately and in aggregate. We also analyze several pre-defined stress scenarios representing historical events, reverse stress tests, and adverse scenarios relevant for our portfolio. Furthermore, we conduct ad-hoc stress tests monthly to reflect current political and financial developments and to analyze specific non-financial risks more closely.
COVERAGE OF THE RISK CAPITAL CALCULATIONS The Allianz Group’s internal model to calculate our Solvency Capital
Smaller related undertakings in the European Economic Area which are not covered by the internal model are reflected with their standard formula results. At the Group level, the Solvency Capital Requirements for smaller insurance undertakings outside the European
Risk capital related to our European banking operations is allocated to the Corporate and Other business segment and calculated based on the approach applied by banks in accordance with the local requirements resulting from the Basel regulation (Basel standards). As the capital requirements for the banking business are only approximately 0.9 % (2018: 0.9 %) of our total pre-diversified Group Solvency
RISK-FREE RATE AND VOLATILITY ADJUSTMENT When calculating the fair values of assets and liabilities, the assumptions regarding the underlying risk-free yield curve are crucial in determining and discounting future cash flows. For liability valuation, we apply the methodology provided by the European Insurance and
We take account of this by applying volatility adjustment to mitigate the credit spread risk, which we consider to be less meaningful for long-term investors than the default risk. Allianz also models the volatility adjustment dynamically within our approved internal model, which differs from the static EIOPA VA concept applied in the standard formula. For risk capital calculations, we assume a dynamic movement of the volatility adjustment broadly consistent with the way the VA
would react in practice; however, we base the movement on our own portfolio rather than the EIOPA portfolio. To account for this deviation,
Allianz applies a more conservative, reduced application ratio for the dynamic volatility adjustment. Validation is performed regularly to verify the appropriateness and prudency of the approach.
VALUATION ASSUMPTIONS: REPLICATING PORTFOLIOS We replicate the liabilities of our Life/Health insurance business. This technique enables us to represent all product-related options and guarantees, both contractual and discretionary, by means of standard financial instruments. In the risk calculation, we use the replicating portfolio to determine and revalue these liabilities under all potentially adverse Monte Carlo scenarios.
ACTUARIAL ASSUMPTIONS Our internal model also includes assumptions on claims trends, liability inflation, mortality, longevity, morbidity, policyholder behavior, expense, etc. We use our own internal historical data for actuarial assumptions wherever possible, additionally considering recommendations from the insurance industry, supervisory authorities, and actuarial associations. The derivation of our actuarial assumptions is based on generally accepted actuarial methods. Within our internal risk capital and financial reporting framework, comprehensive processes and controls exist for ensuring the reliability of these assumptions.
We use model and scenario parameters derived from historical data, where available, to characterize future possible risk events. If future market conditions were to differ substantially from the past, for example in an unprecedented crisis, our VaR approach might be too conservative or too liberal in ways that are difficult to predict. In order to mitigate reliance on historical data, we complement our VaR analysis with stress testing.
The construction and application of the replicating portfolios mentioned are subject to the set of replicating instruments available and might be too simple or restrictive to capture all factors affecting the change in value of liabilities. As with other model components, the replication framework is subject to independent validation and to suitability assessments as well as to stringent data and process quality controls. Therefore, we believe that our liabilities are adequately represented by the replicating portfolios.
Group and entity levels. Cross-effects are defined as the effects arising due to the interaction between different risk categories. In addition, in an effort to enhance its explanatory power, our approach for allocating risk capital to business segments, related undertakings, and risk types was updated to reduce artificial volatility in risk contributions over time. The presentation of risk capital was also updated by explicitly showing risk capital attributed to capital add-ons, sectoral requirements, and third-country equivalent entities, in line with the Solvency II
Third country equivalent 3,132 3,132 1_2018 risk profile figures adjusted based on the 2019 model changes impact.
2_2018 risk profile figures as reported previously. However, capital add-on, sectoral requirement and third country equivalent figures have been isolated.
In 2019, the impact of model changes to our internal model concerned the following risk categories: MARKET RISK The negative effects of minor and immaterial model changes as well as regulatory changes – mostly allocated to market risk including the reduction in the ultimate forward rate – compensated the positive effect of the cross-effect model change. This resulted in an overall increase of market risk which affected all business segments, with the largest impact concerning the Life/Health business segment. The combined impact on the total market risk of Allianz Group was an increase of € 0.1 bn to € 19.0 bn (2018: € 18.9 bn).
CREDIT RISK No material model change was applied to the risk capital model for credit risk in 2019. However, minor model changes and model updates in the credit risk model as well as model changes in other risk modules that affect the credit risk model resulted in a decrease of credit risk by
CAPITAL ADD-ONS The increase of the risk capital requirement of € 0.3 bn is mainly driven by the introduction of a capital add-on to reflect not modeled crosseffects in the surplus funds of Allianz Lebensversicherungs-Aktiengesellschaft.
IMPACT OF MODEL CHANGES ON ELIGIBLE GROUP OWN FUNDS The regulatory and model changes in 2019 resulted in a € 0.2 bn decrease of Own Funds, mainly driven by the modeling of dynamic cost inflation at Lebensversicherungs-Aktiengesellschatft, the adjustment of the UFR by -15 basis points, and the update of contract boundaries at Allianz Vie, partially offset by the first-time recognition of the unallocated mathematical reserve (provision pour participation aux excédents, PPE) as surplus funds at Allianz Vie.
RISK PROFILE AND MARKET ENVIRONMENT The Allianz Group is exposed to a variety of risks. The largest risks in terms of their contribution to Allianz’s risk profile are:  Financial risk, especially equity risk, credit and credit spread risks driven by assets backing long-term liabilities, which we take to benefit from the expected risk premium. The interest rate risk has increased due to the low interest rate environment.
Our risk profile and relative contributions changed in 2019, predominantly due to changes in the market environment, management actions, and regulatory and model changes. Please refer to the section “Solvency II regulatory capitalization” for further details.
POTENTIAL RISKS IN THE FINANCIAL MARKET AND IN OUR OPERATING ENVIRONMENT Financial markets are characterized by historically low interest rates and risk premiums, causing some investors to look for higher-yielding
– and potentially higher-risk – investments. In addition to sustained low interest rates, the challenges of implementing long-term structural reforms in key Eurozone countries, the uncertainty about future monetary and fiscal policies, rising populism, and increased trade tension may lead to increasing market volatility. The increasing reliance on digital technologies – to enhance efficiency and competitiveness – increases the risk of cyber attacks, data breaches, and system failures. There is also the risk of noncompliance with increasing regulation covering IT-related business processes. This could be accompanied by a flight to quality, combined with falling equity and bond prices due to rising spread levels, even in the face of potentially lower interest rates. We therefore continue to closely monitor political and financial developments – such as the Brexit in the
Political risk is the risk that returns could suffer as a result of political changes or instability in a country, a region, or globally. One current example is the Brexit (i.e., the withdrawal of the United Kingdom from the European Union). The Allianz Group is exposed to it through business and insurance / derivative contract continuity risk, and the impact on earnings and solvency.
MANAGEMENT ASSESSMENT The Allianz Group’s management feels comfortable with the Group’s overall risk profile, and confident that the effectiveness of its risk management framework meets both the challenges of a rapidly changing environment and day-to-day business needs. This confidence is based on several factors:  Due to its effective capital management, the Allianz Group is well capitalized and has met its internal, rating agency, and regulatory solvency targets as of 31 December 2019. Allianz remains one of the most highly rated insurance groups in the world, as reflected by our external ratings.
88 Annual Report 2019 − Allianz Group the positive effects were partly offset by capital management activities such as the share buy-back program and the dividend accrual, as well as the acquisition of shares of Taikang and of businesses from Liverpool Victoria General Insurance Group Limited and Legal & General
Additional impacts such as taxes, changes in transferability restrictions, and diversification effects were broadly offsetting.
The Allianz Group is a financial conglomerate within the scope of the
This Risk and Opportunity Report outlines the Group’s risk figures, reflecting its risk profile based on pre-diversified risk figures and Group diversification effects.
At the Allianz Group, we measure and steer risk based on an approved internal model which measures the potential adverse developments of Own Funds. This results in an overview of how our risk profile is distributed over different risk categories, and determines the regulatory capital requirements in accordance with Solvency II.
As mentioned earlier, the Asset Management business segment is predominantly exposed to operational and market risks and to a lesser extent to credit risk. The risk capital for the Asset Management business segment is allocated to sectoral requirement.
Market risk Credit risk Underwriting risk Business risk Operational risk Diversification Total
The following sections explain the evolution of our risk profile per modeled risk category. All risks are presented on a pre-diversified basis and concentrations of single sources of risk are discussed accordingly.
The Group’s total pre-diversified market risk increased by € 6.4 bn, which was mainly driven by equity, credit spread, interest rate and real estate risks, especially in the Life/Health business segment. In the course of the year, the increase in equity prices and the tightening of credit spreads observed in financial markets, the reduction of the volatility adjuster spreads and the corresponding changes in the equity and fixed-income investment portfolios resulted in a higher contribution of market risk. Significant decreases in interest rates, which decrease policyholder participation, also contributed to higher interest rate and credit spread risks. However, this was slightly dampened by management actions – in particular duration management measures – that improved the interest rate risk profile. Real estate risk increased due to higher exposure in real estate and infrastructure investments. The overall increase in market risk was also supported by business growth and the acquisition activities, while exposure changes due to asset/liability management measures and the corresponding effects on the diversification between market risk factors minimized the impact to some extent.
INTEREST RATE RISK As of 31 December 2019, our interest-rate-sensitive investments excluding unit-linked business – amounting to a market value of € 460.8 bn (2018: € 421.3 bn)1 – would have gained € 49.8 bn (2018: € 42.1 bn) or lost € 42.8 bn (2018: € 36.4 bn)2 in value in the event of interest rates shifting by -100 and +100 basis points, respectively. However, these impacts would have been partially offset by policyholder participation. In addition, the Solvency II Own Funds effect is much more limited due to our active duration management, limiting the duration mismatch of the Group to negative 0.1 years, representing Solvency II liabilities of longer duration than assets.
CREDIT RISK The following table presents our group-wide risk figures for credit risks by business segment.
Allianz Group: Risk profile – allocated credit risk by business segment (total portfolio before tax and non-controlling interests) pre-diversified
Throughout 2019, the credit environment remained stable with regard to credit migration risk and default risk.
In the Property-Casualty business segment, fixed-income securities tend to be short- to mid-term, due to the nature of the business, which explains the lower credit risk in this segment.
The counterparty credit risk arising from derivatives is low, since derivatives usage is governed by the group-wide internal guideline for collateralization of derivatives, which stipulates master netting and collateral agreements with each counterparty and requires high-quality and liquid collateral. In addition, Allianz closely monitors counterparties ’ credit ratings and exposure movements.
As of 31 December 2019, the rating distribution based on issue
agency Covered bond Corporate Banks ABS / MBS Short-term loan Other Total 1_In accordance with practice adhered to in our Group Management Report, figures stated include investments of Banking and Asset Management. Table excludes private loans. Stated market values include investments not in scope of the Solvency II framework.
CREDIT RISK – REINSURANCE As of 31 December 2019, 1.1 % (2018: 1.3 %) of our total Group prediversified internal credit risk was allocated to reinsurance exposures.
1_Additionally, 7.4 % (2018: 7.9 %) of our total Group pre-diversified internal credit risk is allocated to receivables, potential future exposure for derivatives and reinsurance, and other off-balance sheet exposures.
During 2019, the total Group pre-diversified underwriting risk capital increased by € 1.0 bn.
Loss ratio excluding natural catastrophes 66.5 64.0 64.2 64.2 64.6 65.1 63.0 66.6 65.5 65.9 1_Represents claims and insurance benefits incurred (net), divided by premiums earned (net).
The top three perils contributing to the natural catastrophe risk as of 31 December 2019 were: windstorms in Europe, floods in
LIFE/HEALTH The risk capital contribution of biometric risk increased by € 0.1 bn compared to the previous year. This is mainly due to the impact of lower interest rates on the longevity risk for most major Life/Health portfolios. Contributions from the Property-Casualty and the Corporate and Other business segments are generated by the longevity risk of the internal pension schemes they contain.
OPERATIONAL RISK The decrease in risk capital for operational risks was driven by the regular annual update of local and central parameters. The decrease is largely due to improved precision of the assessment processes, which led to a reduction in the level of prudence in several operational risk categories, especially for the category “Monitoring and Reporting”.
LIQUIDITY RISK Detailed information regarding the Allianz Group’s liquidity risk exposure, liquidity, and funding – including changes in cash and cash equivalents – is provided in Liquidity and Funding Resources from page 71 onwards and in notes 12, 18 and 33 to the Consolidated
In line with both our prudent approach to risk governance and compliance with regulatory requirements, we have created a framework and processes to identify and mitigate the risk of material errors in our Consolidated Financial Statements (this also includes our market value balance sheet and risk capital calculation risks). The Integrated Risk and Control System (IRCS) is regularly reviewed and updated. It covers three buckets of risks: financial reporting risks, compliance risks, and other operational risks (incl. IT risks). The IT controls are based on COBIT 5 and include, for example, controls for access right management, project and change management. In addition, our Entitiy -Level Control Assessments (ELCA) framework contains controls to monitor the effectiveness of our system of governance.
 Preventive and detective key controls addressing financial reporting risks have been put in place to reduce the likelihood and impact of financial misstatements. When a potential risk materializes, actions are taken to reduce the impact of the financial misstatement. Given the strong dependence of financial reporting processes on information technology systems, we have also implemented IT controls.
 Last but not least, we focus on ensuring that controls are appropriately designed and effectively executed to mitigate risks. We have set consistent documentation requirements across the
Allianz Group for elements such as key controls, execution and related control design and effectiveness testing. We conduct an annual assessment of our internal control system to maintain and continuously enhance its effectiveness. Group Audit and local internal audit functions ensure that the overall quality of our control system is subjected to regular control testing, in order to assure reasonable design and operating effectiveness. Internal Audit does so through a comprehensive risk-based approach that assesses the key controls of the company’s internal procedures and processes, including local and group-internal controls over financial reporting risks, from an integrated perspective.
The Group Disclosure Committee ensures that these board members are made aware of all material information that could affect our disclosures, and assesses the completeness and accuracy of the information provided in the quarterly statements, half-yearly, and annual financial reports as well as in the Solvency II qualitative reports1. In 2019, the Group Disclosure Committee met on a quarterly basis before the quarterly statements and financial reports were issued. An additional meeting was held prior to issuance of the Solvency II qualitative reports.
Subsidiaries within the scope of our control system are individually responsible for adhering to the Group’s internal governance and control policy and for creating local Disclosure Committees that are similar to the Group-level committee. The entities’ CEOs and CFOs provide periodic sign-offs to the management of Allianz SE, certifying the effectiveness of their local systems of internal control as well as the completeness, accuracy, and reliability of financial data reported to the
Total liabilities and equity 1,011,185 897,567 1_Include mainly derivative financial instruments.
Income from financial assets and liabilities carried at fair value through income (net) 22 (1,609) (3,301)
interests Total equity 1_Total comprehensive income in shareholders’ equity for the year ended 31 December 2019 comprises net income attributable to shareholders of € 7,914 mn (2018: € 7,462 mn).
2_In the second quarter of 2019, a dividend of € 9.00 (2018: € 8.00) per qualifying share was paid to the shareholders.
Effect of exchange rate changes on cash and cash equivalents 90 41
Cash and cash equivalents reclassified to assets of disposal groups held for sale and disposed of in 2018 - 531
Realized gains/losses (net) and impairments of investments (net) of: Available-for-sale and held-to-maturity investments, investments in associates and joint ventures, real estate held for investment, loans and advances to banks and customers, non-current assets and disposal groups classified as held for sale (5,593) (2,945)
Other investments, mainly financial assets held for trading and designated at fair value through income 2,074 5,256
Net change in: Financial assets and liabilities held for trading (674) (3,368)
Reverse repurchase agreements and collateral paid for securities borrowing transactions (595) (605)
Repurchase agreements and collateral received from securities lending transactions 322 232
Non-current assets and disposal groups classified as held for sale 4 357
Loans and advances to banks and customers (purchased loans) 5,459 5,867
Loans and advances to banks and customers (purchased loans) (2,996) (1,388)
Proceeds from the issuance of certificated liabilities and subordinated liabilities 5,506 4,527
Changes in the consolidated subsidiaries of the Allianz Group (1) - - (1)
Commercial Code (HGB). Within these consolidated financial statements, the Allianz Group has applied all standards and interpretations issued by the IASB and endorsed by the E.U. that are compulsory as of
The Allianz Group’s consolidated balance sheet is not presented using a current/non-current classification. The following balances are generally considered to be current: cash and cash equivalents, deferred acquisition costs on property & casualty contracts, noncurrent assets and assets of disposal groups classified as held for sale, and liabilities of disposal groups classified as held for sale.
In accordance with IFRS 10, the Allianz Group’s consolidated financial statements include the financial statements of Allianz SE and its subsidiaries. The Allianz Group controls a subsidiary when it is exposed to, or has rights to, variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. Subsidiaries are usually entities where Allianz SE, directly or indirectly, owns more than half of the voting rights or similar rights with the ability to affect the returns of these entities for its own benefit. In order to determine whether entities qualify as subsidiaries, potential voting rights that are currently exercisable or convertible are taken into consideration.
For some subsidiaries where the Allianz Group does not hold a majority stake, management has assessed that the Allianz Group controls these entities. The Allianz Group controls these entities based on distinctive rights stipulated by shareholder agreements between the
Allianz Group no longer maintains control. Accounting policies of subsidiaries are adjusted as necessary to ensure consistency with the
102 Annual Report 2019 − Allianz Group accounting policies adopted by the Allianz Group. The effects of intra-
Although the Allianz Group’s share in some entities is below 20 %, management has assessed that the Allianz Group has significant influence over these entities because it is sufficiently represented in the governing bodies that decide on the relevant activities of these entities.
Pursuant to IFRS 11, investments in joint arrangements have to be classified as either joint operations or joint ventures, depending on the contractual rights and obligations of each investor. The Allianz Group has assessed the nature of all its joint arrangements and determined them to be joint ventures in most cases. Those are generally accounted for using the equity method.
The Allianz Group accounts for investments in associates and joint arrangements with a time lag of no more than three months. Income from investments in associates and joint arrangements – excluding distributions – is included in interest and similar income. Accounting policies of associates and joint arrangements are generally adjusted where necessary to ensure consistency with the accounting policies adopted by the Allianz Group.
The Allianz Group enters into securities lending transactions and repurchase agreements. Cash received in the course of those transactions is recognized together with a corresponding liability. Securities received as collateral under lending transactions are not recognized, and securities sold under repurchase agreements are not derecognized, if risks and rewards have not been transferred. Securities borrowing transactions generally require the Allianz Group to deposit cash with the securities lender. Fees paid are reported as interest expenses.
The Allianz Group carries certain financial instruments at fair value and discloses the fair value of all financial instruments. The fair value of an asset or liability is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date.
Assets and liabilities measured or disclosed at fair value in the consolidated financial statements are measured and classified in accordance with the fair value hierarchy in IFRS 13, which categorizes
Level 1 inputs of financial instruments traded in active markets are based on unadjusted quoted market prices or dealer price quotations for identical assets or liabilities on the last exchange trading day prior to or at the reporting date, if the latter is a trading day.
Level 2 applies if the market for a financial instrument is not active or when the fair value is determined by using valuation techniques based on observable input parameters. Such market inputs are observable substantially over the full term of the asset or liability and include references to formerly quoted prices for identical instruments from an active market, quoted prices for identical instruments from an inactive market, quoted prices for similar instruments from active markets, and quoted prices for similar instruments from inactive markets.
Level 3 applies if not all input parameters are observable in the market. Accordingly, the fair value is based on valuation techniques using non-market observable inputs. Valuation techniques include the discounted cashflow method, comparison to similar instruments for which observable market prices exist and other valuation models. Appropriate adjustments are made, for example, for credit risks.
For held-to-maturity investments and loans, the impairment loss is measured as the difference between the amortized cost and the expected future cash flows using the original effective interest rate.
Derivative financial instruments designated in hedge accounting relationships are included in the line items Other assets and Other liabilities. Freestanding derivatives are included in the line item Financial assets or liabilities held for trading.
FINANCIAL ASSETS AND LIABILITIES CARRIED AT FAIR VALUE THROUGH INCOME Financial assets and liabilities carried at fair value through income include financial assets and liabilities held for trading as well as financial assets and liabilities designated at fair value through income.
FINANCIAL ASSETS AND LIABILITIES FOR UNITLINKED CONTRACTS Financial assets for unit-linked contracts are recorded at fair value, with changes in fair value recognized in the income statement together with the offsetting changes in fair value of the corresponding financial liabilities for unit-linked contracts. They are included in the line item income from financial assets and liabilities carried at fair value through income (net).
For insurance contracts and investment contracts with discretionary participation features, shadow accounting is applied to DAC, PVFP, and deferred sales inducements, in order to include the effect of unrealized gains or losses in the measurement of these assets in the same way as it is done for realized gains or losses. Accordingly, the assets are adjusted with corresponding charges or credits recognized directly in other comprehensive income as a component of the related unrealized gain or loss. When the gains or losses are realized, they are recognized in the income statement through recycling and prior adjustments due to shadow accounting are reversed.
OTHER ASSETS Other assets primarily consist of receivables, accrued dividends, interest, rent and deferred compensation amounts as well as leased or own used real estate, software and equipment. Depreciation is generally computed using the straight-line method over the estimated useful lives of the assets. The right-of-use assets related to leased property and equipment are depreciated generally over the lease term.
The table below summarizes estimated useful lives for real estate held for own use, software, and equipment.
The table below summarizes estimated useful lives and the amortization methods for each class of intangible assets with finite useful lives: Estimated useful lives (in years) and amortization methods
Acquired business portfolios 6 – 42 in proportion to the consumption of future economic benefit
For business combinations, goodwill is recognized in the amount of the consideration transferred plus the amount of any non-controlling interest in the acquiree held by the direct parent in excess of the fair values assigned to the identifiable assets acquired and liabilities assumed.
Insurance contracts and investment contracts with discretionary participation features are accounted for under the insurance accounting provisions of US GAAP, as have been applied at first-time adoption of
IFRS 4 on 1 January 2005, wherever IFRS 4 does not provide specific guidance. Investment contracts without discretionary participation features are accounted for as financial instruments in accordance with
The Allianz Group’s consolidated financial statements reflect the effects of ceded and assumed reinsurance contracts. Assumed reinsurance premiums, commissions, and claim settlements, as well as the reinsurance element of technical provisions, are accounted for in accordance with the conditions of the reinsurance contracts, and in consideration of the original contracts for which the reinsurance was concluded. When the reinsurance contracts do not transfer significant insurance risk, deposit accounting is applied as required under the related reinsurance accounting provisions of US GAAP or under IAS 39.
Liability adequacy tests are performed for each insurance portfolio, based on estimates of future claims, costs, premiums earned, and proportionate expected investment income. For short-duration contracts, a premium deficiency is recognized if the sum of expected claim costs and claim adjustment expenses, expected dividends to policyholders,
For long-duration contracts, a premium deficiency is recognized, if actual experience regarding investment yields, mortality, morbidity, terminations, or expense indicates that existing contract liabilities, along with the present value of future gross premiums, will not be sufficient to cover the present value of future benefits and to recover DAC.
Amounts charged as consideration for origination of certain longduration insurance contracts (i.e. initiation or front-end fees) are reported as unearned revenues and, as such, included in unearned premiums. These fees are recognized using the same amortization methodology as DAC, including shadow accounting.
Case reserves for reported claims are based on estimates of future payments that will be made with respect to these claims, including
RESERVES FOR INSURANCE AND INVESTMENT CONTRACTS Reserves for insurance and investment contracts include aggregate policy reserves, reserves for premium refunds, and other insurance reserves.
The aggregate policy reserves for participating life insurance contracts are calculated using the net level premium method based on assumptions for mortality, morbidity, and interest rates that are guaranteed in the contract or used in determining the policyholder dividends (or premium refunds).
Non-unit-linked investment contracts without discretionary participation features are accounted for under IAS 39. The aggregate policy reserves for those contracts are initially recognized at fair value, or the amount of the deposit by the contract holder, net of the transaction
costs, that are directly attributable to the issuance of the contract. Subsequently, those contracts are measured at amortized cost using the effective interest method.
The reserves are proposed to a local reserve committee, whereat the rationale of the selections are discussed and subsequently documented.
Allianz Group Actuarial function challenges the operating entities’ selection through their continuous interaction with local teams and quarterly attendance in the local reserve committees. The ability to form a view on reserve adequacy is further enabled by regular reviews of the local reserving practices. Such reviews consist of an evaluation of the reserving process as well as of the appropriateness and consistency of the assumptions, and an analysis of the movements of the reserves. Significant findings from these reviews are communicated in the Allianz Group
Pensions and similar obligations are measured at present value and presented net of plan assets by applying the provisions of IAS 19. These valuations rely on extensive assumptions. Key assumptions such as discount rates, inflation rates, compensation increases, pension increases, and rates of medical cost trends are defined centrally at the
Allianz Group level, considering the circumstances in the individual countries. In order to ensure their thorough and consistent determination, all input parameters are discussed and defined taking into consideration economic developments, peer reviews, and currently available market and industry data.
Allianz SE, a corresponding increase in shareholders’ equity is recognized. Where equity-settled plans involve equity instruments of subsidiaries of the Allianz Group, the corresponding increase is recognized in non-controlling interests. Equity-settled plans include a best estimate of the number of equity instruments that are expected to vest in determining the amount of expense to be recognized. For cash-settled plans, the
The Allianz Group records financial liabilities where non-controlling shareholders have the right to put their financial instruments back to the Allianz Group (puttable instruments). If these non-controlling shareholders still have present access to the risks and rewards associated with the underlying ownership interests, the non-controlling interests remain recognized and profit and loss is allocated between controlling and non-controlling interests. The financial liabilities for puttable instruments are generally required to be recorded at the redemption amount, with changes recognized in equity where the non-controlling shareholders have present access to risks and rewards of ownership and in the income statement in all other cases. As an exception, for puttable instruments that are to be classified as equity instruments in the separate or individual financial statements of the issuer in accordance with IAS 32.16A-16B and are to be presented as liabilities in the consolidated financial statements of the Allianz Group instead of non-controlling interests, valuation changes of these liabilities are always recognized in the income statement. This is the case for puttable instruments issued by mutual funds controlled but not wholly owned by the Allianz Group.
For further information on these expenses, please refer to note 38.
Retained earnings comprise the net income of the current year and of prior years not yet distributed, treasury shares, amounts recognized in other comprehensive income, and any amounts directly recognized in equity according to IFRS. Treasury shares are deducted from shareholders’ equity. No gain or loss is recognized on the sale, issuance, acquisition, or cancellation of these shares. Any consideration paid or received is recorded directly in shareholders’ equity.
The share of earnings from investments in associates and joint ventures represents the share of net income from entities accounted for using the equity method.
FEE AND COMMISSION INCOME Fee and commission income primarily consists of asset management fees which are recognized when the service is provided. For those fees, the service is considered to be provided periodically. Performance fees may not be recognized as fee income before the respective benchmark period is completed because before its completion, the obligation to pay the fee is conditional, the fund performance is regularly not reliably estimable, and related service is not fully performed. In any
In January 2016, the IASB issued IFRS 16, Leases, which supersedes
There are recognition exemptions for short-term leases and leases of low-value items. Lessor accounting remains similar to the current standard – i.e. lessors continue to classify leases as finance or operating leases.
The Allianz Group has applied IFRS 16 using the modified retrospective approach; therefore, any comparative information has not been restated and continues to be reported under IAS 17 and IFRIC 4.
As a lessee, the Allianz Group had previously classified leases as operating or finance leases based on its assessment of whether the lease transferred substantially all of the risks and rewards incidental to ownership of the underlying asset to the Allianz Group. Under IFRS 16, the
The Allianz Group has elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value assets (e.g. tablets, personal computers, telephones, office furniture, copy and fax machines) as well as car leases as these are considered not to be material for
Allianz Group. The Allianz Group recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.
At transition, lease liabilities were measured at the present value of the remaining lease payments, discounted at the Allianz Group’s incremental borrowing rate as at 1 January 2019. Right-of-use assets were measured at an amount equal to the lease liability and adjusted by the amount of any prepaid or accrued lease payments. The
 Used hindsight in determining the lease term, if the contract contains options to extend or terminate the lease.
Customers to allocate consideration in the contracts to each lease and non-lease component.
When measuring lease liabilities, the Allianz Group discounted lease payments using a country- and asset-specific incremental borrowing rate at 1 January 2019, ranging between 0.1 % and 19.7 %.
Discounted using the incremental borrowing rate at 1 January 2019 (268)
In May 2017, the IASB issued IFRS 17, Insurance Contracts. The IASB
(retrospective application). IFRS 17 provides comprehensive guidance on accounting for insurance contracts and investment contracts with discretionary participation features. For non-life insurance contracts,
IFRS 17 introduces mandatory discounting of loss reserves as well as a risk adjustment for non-financial risk. Further, IFRS 17 will change the presentation of insurance contract revenue, a gross written premium will no longer be presented in the statement of comprehensive income.
Amendments to IFRS 17 that was published in June 2019, proposes to further extend the expiry date in IFRS 4 for the temporary exemption from applying IFRS 9 to 1 January 2022.
Allianz Group has decided to use the option to defer the full implementation of IFRS 9 until IFRS 17 becomes effective.
In order to qualify for the temporary exemption, an entity has to prove that its activities are predominantly connected to insurance as of 31 December 2015. Under the amended IFRS 4, this condition is met if the insurer carries significant liabilities arising from contracts within the scope of IFRS 4. Significant insurance-related liabilities are given, among others, if the percentage of the total carrying amount of liabilities connected with insurance relative to the total carrying amount of all liabilities is greater than 90 %. A reassessment at a subsequent annual reporting date is required if, and only if, there was a change in the entity's activities during the annual period that ended on that date.
The following table provides an overview of the fair values as of 31 December 2019 and the amounts of change in the fair values during the reporting period separately for financial assets that meet the
The amounts recognized as of the acquisition date for major classes of identifiable assets acquired and liabilities assumed are as follows: Identifiable assets acquired and liabilities assumed € mn
Fair value of Allianz UK’s previously held equity interest in LV GIG held before the business combination 681 -
Allianz UK recognized a gain of € 62 mn as a result of measuring at fair value its previously held 49 % equity interest in LV GIG before the business combination which is reported in realized gains/losses (net) for the year ending 31 December 2019.
The total goodwill of € 635 mn arising from both acquisitions consists largely of new business, economies of scale and synergies expected from combining the operations of LV GIG and LGIL.
None of the goodwill recognized is expected to be deductible for income tax purposes.
For the year ended 31 December 2019, acquisition-related expenses in the amount of € 7 mn were included in administrative expenses.
Non-current assets and disposal groups classified as held for sale € mn
ALLIANZ POPULAR, MADRID As of 31 December 2019, all requirements were fulfilled to present
Allianz Popular was signed on 24 June 2019. The closing of the transaction was on 31 January 2020.
Europe (Life/Health) and Corporate and Other, as a disposal group classified as held for sale.
114 Annual Report 2019 − Allianz Group retain a 50 % stake in Allianz Sakura Multifamily Lux SCSp, Luxembourg, subject to at-equity accounting.
 Global Insurance Lines & Anglo Markets, Middle East and Africa.
LIFE/HEALTH In the business segment Life/Health, reportable segments offer a comprehensive range of life and health insurance products on both an individual and a group basis, including annuities, endowment and term insurance, unit-linked and investment-oriented products, as well as full private health, supplemental health, and long-term care insurance.
ASSET MANAGEMENT The reportable segment Asset Management operates as a global provider of institutional and retail asset management products and services to third-party investors. It also provides investment management services to the Allianz Group’s insurance operations. The products for retail and institutional customers include equity and fixed-income funds as well as multi-assets and alternative products. The United
CORPORATE AND OTHER The reportable segment Corporate and Other includes the management and support of the Allianz Group’s businesses through its strategy, risk, corporate finance, treasury, financial reporting, controlling, communication, legal, human resources, technology, and other functions. Furthermore, it includes the banking activities in France, Italy, and
GENERAL SEGMENT REPORTING INFORMATION Prices for transactions between reportable segments are set on an arm’s length basis in a manner similar to transactions with third parties. Lease transactions are accounted for in accordance with IFRS
Allianz Group. The Allianz Group considers the presentation of operating profit to be useful and meaningful to investors because it enhances the understanding of the Allianz Group’s underlying operating performance and the comparability of its operating performance over time.
Allianz Group generally excludes the following non-operating effects:  income from financial assets and liabilities carried at fair value through income (net),
 profit (loss) of substantial subsidiaries classified as held for sale.
The following exceptions apply to this general rule:  In all reportable segments, income from financial assets and liabilities carried at fair value through income (net) is treated as operating profit if the income relates to operating business.
 For life/health insurance business and property-casualty insurance products with premium refunds, all items listed above are included in operating profit if the profit sources are shared with policyholders. There is one exception from this general rule with regard to policyholder participation in extraordinary tax benefits and expenses. As IFRS require that the consolidated income statement present all tax effects in the line item income taxes, even when they
RECENT ORGANIZATIONAL CHANGES Due to the immateriality of the former reportable segments Banking and Alternative Investments, they were combined in 2019 with the former reportable segment Holding & Treasury to form the new reportable segment Corporate and Other, which is identical to the respective business segment. Previously reported information has been adjusted to reflect this change.
Additionally, some minor reallocations between the reportable segments have been made.
Financial assets carried at fair value through income 1,415 768 11,661 6,620
Loans and advances to banks and customers 11,016 10,773 100,466 95,808
Non-current assets and assets of disposal groups classified as held for sale 100 48 3,016 77
Non-operating change in reserves for insurance and investment contracts (net) - - 2 (22)
Global Insurance Lines & Anglo Markets, Middle East and Africa 25,177 24,058 1,159 1,826 982 1,448
German Speaking Countries and Central & Eastern Europe 34,380 28,758 1,649 1,620 1,132 1,097
Government and government agency bonds1 189,229 34,743 (573) 223,400 180,094 19,106 (1,669) 197,531 1_As of 31 December 2019, fair value and amortized cost of bonds from countries with a rating below AA amount to € 84,788 mn (2018: € 71,260 mn) and € 74,997 mn (2018: € 68,667 mn), respectively.
DEBT SECURITIES Total unrealized losses amounted to € 1,020 mn as of 31 December 2019. The Allianz Group holds a large variety of government and government agency bonds and corporate bonds, mostly of or domiciled in OECD countries.
In general, the credit risk of government and government agency bonds is rather moderate since they are backed by the fiscal capacity of the issuers, who typically hold an investment-grade country- and/or issue-rating. During 2019, interest rates of most government and government agency bonds held by Allianz Group decreased. This development, supported by purchases and realizations, led to a decrease in unrealized losses on government and government agency bonds of € 1,141 mn.
For the majority of corporate bonds, the issuer/issues have an investment-grade rating. The decrease in unrealized losses of € 3,569 mn compared to 31 December 2018 is due to decreasing interest rates.
The main impact from unrealized losses on corporate bonds comes from the financial, consumer and energy sector.
Allianz Group did not consider these investments to be impaired as of
INVESTMENTS IN ASSOCIATES AND JOINT VENTURES As of 31 December 2019, loans to associates and joint ventures
Changes in the consolidated subsidiaries of the Allianz Group 118 343
Disposals and reclassifications into non-current assets and assets of disposal groups classified as held for sale (570) (316)
Cost as of 31 December 3,868 3,240 7 _ Loans and advances to banks and customers
Changes in the consolidated subsidiaries of the Allianz Group (1) -
4_Includes other assets due within one year of € 37,337 mn (2018: € 32,802 mn).
Accumulated depreciation/amortization as of 1 January (1,014) (4,879) (2,880) - (997) (4,633) (2,887) -
Carrying amount as of 1 January 2,856 2,934 1,378 2,290 2,941 2,786 1,432 -
Disposals and reclassifications into non-current assets and assets of disposal groups classified as held for sale (56) (57) (45) (42) (14) (56) (61) -
2_As of 31 December 2019, includes € 2,156 mn (2018: € 1,926 mn) for self-developed software and € 1,027 mn (2018: € 1,007 mn) for software purchased from third parties.
Cost as of 31 December 13,499 12,622 2019 Additions are mainly related to goodwill arising from the acquisitions of Liverpool Victoria General Insurance Group Limited, Guildford and
2018 Additions are mainly related to goodwill arising from the acquisition of
CGUs in the Property-Casualty business segment are:  Insurance German Speaking Countries, including Germany and
CGUs in the Life/Health business segment are:  Insurance German Speaking Countries, including Germany and
Allianz Group’s CGUs as of 31 December 2019 and 2018 as follows: Allocation of carrying amounts of goodwill to CGUs € mn
For all CGUs in the Property-Casualty business segment and for the CGU Asset Management, the Allianz Group mainly uses the discounted earnings method to derive the value in use. Generally, the basis for the determination of the discounted earnings value is the business plan (“detailed planning period”) as well as the estimate of the sustainable returns and eternal growth rates, which can be assumed to be realistic on a long-term basis (“terminal value”) for the operating entities included in the CGU. The discounted earnings value is calculated by discounting the future earnings using an appropriate discount rate. The business plans applied in the value in use calculations are the results of the structured management dialogues between the Board of Management of Allianz SE and the operating entities in connection with a reporting process integrated into these dialogues.
The financing of the assumed eternal growth in the terminal values is accounted for by appropriate profit retention.
For all CGUs in the Life/Health business segment, the value in use is based on an Appraisal Value method, which is derived from the
In the Corporate and Other business segment, the Value in use for in the Digital Investments is derived by using the discounted cash flow and multiple method. Discounted cash flows are calculated based on the companies‘ business plan as well as an estimate of sustainable returns and eternal growth rates (Terminal Value). The discounted earnings value is calculated by discounting the future earnings using an appropriate discount rate. For the multiple method transactions and revenues of comparable companies are used.
The discount rate is based on the capital asset pricing model
Global Insurance Lines & Anglo Markets, Middle East and Africa 8.9 1.4
The best estimate corresponds to the probability-weighted average of future cash flows considering the time value of money, using the relevant risk-free interest rate term structure. The calculation of the best estimate is based on assumptions made for demographic factors (e.g.
mortality, morbidity, lapse/surrender rates), expense allowances, taxation, assumptions on market conditions for market consistent projections (e.g. reference rates, volatilities) as well as investment strategy and asset allocation of the entity. The risk margin ensures that the value of the technical provisions is equivalent to the amount that the entity would be expected to require in order to take on and meet the insurance and reinsurance obligations.
US Life Insurance Local swap curve minus 13 bps credit risk adjustment plus 28 bps volatility adjustment
CGU Asset Management is 10.6 % and the eternal growth rate is 1.6 %.
For the Digital Investments included in the Corporate and Other business segment, the bases for determining the values assigned to the key assumptions are current market trends and earnings projections. The discount rate and the eternal growth rates are calculated in line with market practice and are subject to company-specific factors, its development status and the markets in which the company operates.
SENSITIVITY ANALYSIS Sensitivity analyses were performed with regard to discount rates and key value drivers of the business plans.
For the CGUs in the Property-Casualty business segment and for the CGU Asset Management, sensitivity analyses were performed with respect to the long-term sustainable combined ratios and cost-income ratios. For all CGUs discounted earnings, value sensitivities still exceeded their respective carrying amounts – though for the CGU Insurance Asia in the business segment Property-Casualty, an increase of 0.5 % points in the discount rate and/or the combined ratio results in the recoverable amount of the CGU getting close to its respective carrying value.
Repurchase agreements and collateral received from securities lending transactions and derivatives 4,551 4,173 1_For the year ended 31 December 2019, € 1.9 bn of liabilities to banks and customers related to some saving contracts were reclassified to aggregate policy reserves.
2_Consists of liabilities to banks and customers due within one year of € 11,914 mn (2018: € 12,653 mn), 1 - 5 years of € 898 mn (2018: € 819 mn) and over 5 years of € 633 mn (2018: € 750 mn).
128 Annual Report 2019 − Allianz Group 14 _ Reserves for loss and loss adjustment expenses As of 31 December 2019, the reserves for loss and loss adjustment expenses of the Allianz Group totaled € 77,541 mn (2018: € 73,054mn).
The following table reconciles the beginning and ending reserves for the Property-Casualty business segment for the years ended 31 De-
Ending balance of discounted loss reserves (4,552) 348 (4,204) (4,157) 274 (3,883)
CHANGES IN HISTORICAL RESERVES FOR LOSS AND LOSS ADJUSTMENT EXPENSES (LAE) The analysis of loss and LAE reserves by actuaries and management is conducted by line of business and separately for specific claim types such as asbestos and environmental claims. The origin year of losses is taken into consideration by analyzing each line of business by accident year. While this determines the estimates of reserves for loss and LAE
“Reserves for insurance and investment contracts” in the balance sheet, the underlying business development of these non-life reserves is still considered in the loss ratio. Therefore the tables below show the loss development by accident year including the business development of discounted loss reserves.
Calendar year 2010 1_Includes effects from foreign currency translation adjustments and other changes.
Ending balance of discounted loss reserves 4,552 4,157 1_They partly relate to insurance contracts, when policyholders change their contract from an unit-linked to an universal life-type contract. Furthermore, for the year ended 31 December 2019, € 1.9 bn related to some saving contracts were reclassified from liabilities to banks and customers to aggregate policy reserves.
German Speaking Countries and Central & Eastern Europe 334,285 11,414 345,699 293,849 9,693 303,542
Western & Southern Europe and Asia Pacific 126,811 97,241 224,052 118,101 83,904 202,005
In addition, the operations in these markets may also have significant mortality and expense margins. However, the Allianz Group’s
Life/Health operations in Switzerland and Belgium have high guaranteed minimum interest rates on older contracts in their portfolios and, as a result, may be sensitive to declines in investment rates or a prolonged low interest rate environment.
FUTURE POLICY BENEFITS As of 31 December 2019, benefits for insurance and investment contracts which are expected to be due in 2020 amounted to € 61 bn, while those expected to be due between 2021 and 2024 amounted to € 202 bn and those expected to be due after 2024 amounted to
The resulting total benefits for insurance and investment contracts in the amount of € 1,457 bn include contracts where the timing and amount of payments are considered fixed and determinable, as well as contracts which have no specified maturity dates and may result in a payment to the contract beneficiary, depending on mortality and morbidity experience and the incidence of surrenders, lapses, or maturities. Furthermore, the amounts are undiscounted and do not include any expected future premiums; therefore they significantly exceed the reserves for insurance and investment contracts presented in the consolidated balance sheet.
Financial liabilities for puttable financial instruments 2,073 1,993 1_Mainly level 2 for fair value measurement.
3_Includes other liabilities due within one year of € 31,982 mn (2018: € 27,001 mn).
3_Includes a € 0.9 bn partial buyback and the redemption of CHF 0.5 bn subordinated bonds and the issuance of € 1.0 bn subordinated bonds in the third quarter of 2019.
ISIN Year of issue Currency Notional amount Coupon in % Maturity date
Allianz Finance II B.V., Amsterdam DE000A180B72 2016 EUR 750 0.000 21 April 20201
Non-controlling interests 3,363 2,447 1_As of 31 December 2019, include € (55) mn (2018: € (84) mn) related to treasury shares.
2_As of 31 December 2019, include € 415 mn (2018: € 267 mn) related to cash flow hedges.
AUTHORIZED CAPITAL As of 31 December 2019, Allianz SE had authorized capital with a notional amount of € 335 mn for the issuance of new shares until 8 May 2023 (Authorized Capital 2018/I). The shareholders’ subscription rights can be excluded for capital increases against contribution in kind. For a capital increase against contributions in cash, the shareholders ’ subscription rights can be excluded: (i) for fractional amounts, (ii) if the issue price is not significantly below the market price and the shares issued under exclusion of the subscription rights pursuant to § 186 (3) sentence 4 of the German Stock Corporation Act
The new shares may only be offered to employees of Allianz SE and its Group companies. As of 31 December 2019, the Authorized Capital 2018/II amounted to € 15 mn.
The subscription rights of shareholders for these convertible notes have been excluded with the consent of the Supervisory Board and pursuant to the authorization of the AGM on 5 May 2010. The granting of new shares to persons entitled under such convertible notes is secured by the Conditional Capital 2010/2018. On or before 31 December 2019, there was no conversion of any such notes into new shares.
PROPOSAL FOR APPROPRIATION OF NET EARNINGS The Board of Management and the Supervisory Board propose that the net earnings (“Bilanzgewinn”) of Allianz SE of € 4,480,281,669.73 for the 2019 fiscal year shall be appropriated as follows:  Distribution of a dividend of € 9.60 per no-par share entitled to a
Should there be any change in the number of shares entitled to the dividend by the date of the Annual General Meeting, the above proposal will be amended accordingly and presented for resolution on the appropriation of net earnings at the Annual General Meeting, with an unchanged dividend of € 9.60 per each share entitled to dividend.
treasury shares. Of these, 395,677 (2018: 761,636) were held for covering future subscriptions by employees in Germany and abroad in the context of Employee Stock Purchase Plans, whereas 200,000 (2018: 200,000) were held as a hedge for obligations from the
In 2019, 365,959 (2018: 407,495) treasury shares were sold to employees of Allianz SE and its subsidiaries in Germany and abroad in the context of the Employee Stock Purchase Plan. These shares were taken from the stock of treasury shares dedicated to this purpose. In 2019, as in the previous year, no capital increase for the purpose of Employee Stock Purchase Plans was undertaken. Employees of the
Allianz Group purchased approximately 75 % of these shares at a reference price of € 210.21 per share and were allocated one additional share per three shares purchased, which is equivalent to a discount of approximately 25 %. The shares were sold to employees at prices be-
Employee Stock Purchase Plan of Allianz SE and its subsidiaries in
SHARE BUY-BACK PROGRAM 2019 In its meeting on 14 February 2019, the Board of Management of
In the period between 4 March 2019 and 30 July 2019, a total of 7,286,802 treasury shares with a market value of € 1,499,999,871.33 were acquired for an average price of € 205.85.
Funds relating to the Group of internal model and standard formula entities, the sectoral Own Funds of entities from other financial sectors, as well as the equivalent Own Funds of entities included via the deduction and aggregation (D&A) method. The eligible Own Funds relating to the Group of internal model and standard formula entities essentially consist of the MVBS excess of assets over liabilities plus qualifying subordinated liabilities, less deductions for foreseeable dividends as well as further deductions relating for example, to tier limits or transferability restrictions.
Own Funds. Over the course of the year, Solvency II earnings combined with business growth had a positive impact on the Solvency II capitalization. This was supported by management actions such as asset de-risking and mitigating measures that improved the interest rate risk profile in the current low interest rate environment. However, the positive effects were partly offset by capital management activities such as the share buy-back program and the dividend accrual as well as 1_From a formalistic perspective, the German Supervisory Authority deems the model to be “partial” because not all entities are using the internal model. Some of the smaller entities report under the standard formula and others under the deduction and aggregation approach. Without loss of generality,the term internal model might be used in the following chapters, e.g., in case descriptions also referring to entities that use the internal model, or descriptions focusing on processes with respect to the internal model components.
acquisition of shares of Taikang and businesses of LV General Insurance Group and Legal & General Insurance Limited. Unfavorable market developments – predominantly characterized by lower interest rates – as well as regulatory and model changes also contributed to the reduction of the Solvency II ratio. Additional impacts such as taxes, changes in transferability restrictions, and diversification effects were broadly offsetting. For further information on Solvency II capitalization, please refer to the section “Solvency II regulatory capitalization”
Some insurance subsidiaries of the Allianz Group are subject to regulatory restrictions on the amount of dividends that can be remitted to Allianz SE without prior approval by the appropriate regulatory body. Such restrictions require that a company may only pay dividends up to an amount in excess of certain regulatory capital levels, or based on the levels of undistributed earned surplus or current year income or a percentage thereof. The Board of Management of the Allianz Group believes that these restrictions will not affect the ability of Allianz SE to pay dividends to its shareholders in the future.
Rent from real estate held for investment 929 892 22 _ Income from financial assets and liabilities carried at fair value through income (net)
Income from financial assets and liabilities held for trading (net) (2,709) (4,372)
Income from financial assets and liabilities designated at fair value through income (net) 557 (485)
Income from financial liabilities for puttable financial instruments (net) (199) 344
Foreign currency gains and losses (net)1 741 1,212 1_These foreign currency gains and losses arise subsequent to initial recognition on all assets and liabilities denominated in a foreign currency that are monetary items and not measured at fair value through income.
Investment advisory and banking activities 705 691 25 _ Claims and insurance benefits incurred (net)
Non-current assets and assets of disposal groups classified as held for sale (10) (12)
Of the deferred income taxes for the year ended 31 December 2019, income of € 326 mn (2018: expenses of € 566 mn) is attributable to the recognition of deferred taxes on temporary differences, and expenses of € 93 mn (2018: € 145 mn) are attributable to tax losses carried forward. Changes of applicable tax rates due to changes in tax law lead to deferred tax expenses of € 3 mn (2018: income of € 8 mn).
For the years ended 31 December 2019 and 2018, the income taxes relating to components of other comprehensive income consist of the following:
The Allianz Group’s reconciliation is a summary of the individual company-related reconciliations, which are based on the respective country-specific tax rates taking into consideration consolidation effects with an impact on the Group result. The applicable tax rate used in the reconciliation for domestic Allianz Group companies includes corporate tax, trade tax, and the solidarity surcharge, and amounted to 31.0 % (2018: 31.0 %). The applied weighted income tax rate for the Group considers tax rates on income of foreign
The reconciling item “other effects” includes expenses of € 29 mn
(2018: € 6 mn) related to the write-down of deferred tax assets on temporary differences and tax credits. Deferred tax income increased by € 12 mn (2018: € 23 mn) due to the reversal of write-down of deferred tax assets on temporary differences and tax credits.
Deferred tax assets on losses carried forward are recognized to the extent to which it is more likely than not that sufficient future taxable profits will be available for realization. Entities which suffered a tax loss in either the current or the preceding period recognized deferred tax assets in excess of deferred tax liabilities amounting to € 646 mn
Non-recognition or valuation allowance for deferred tax assets on tax losses carried forward (742) (720)
Allianz Group companies for which no deferred tax liabilities are recognized, as the Allianz Group is able to control the timing of their reversal, and which will not reverse in the foreseeable future, amounted to € 1,951 mn (2018: € 1,844 mn). Deductible temporary differences
FREESTANDING DERIVATIVE FINANCIAL INSTRUMENTS As of 31 December 2019, freestanding derivatives, which are included in the line item financial assets and liabilities held for trading, had a notional principal amount of € 560.3 bn (2018: € 398.0 bn) as well as a positive fair value of € 6.9 bn (2018: € 2.7 bn) and a negative fair value of € 18.0 bn (2018: € 11.6 bn). Out of the total allocated to the freestanding derivatives, € 119.9 bn (2018: € 114.1 bn) of the notional principal relate to annuity products. Annuity products are equityindexed or contain certain embedded options or guarantees which are considered embedded derivatives under IAS 39. For these embedded derivatives, the notional principal amounts included in the table refer to the account value of the related insurance contracts. The total negative fair value of these embedded derivatives amounts to € 13.5 bn (2018: € 10.0 bn). Further information on the fair value measurement of these derivatives can be found in note 34.
144 Annual Report 2019 − Allianz Group 34 _ Fair values and carrying amounts of financial instruments
Financial assets designated at fair value through income 5,620 5,620 4,258 4,258
The following table presents the fair value hierarchy for financial instruments carried at fair value in the consolidated balance sheet as of
Financial assets held for trading 394 7,099 73 7,566 1,341 1,888 123 3,353
Financial assets designated at fair value through income 3,740 1,723 158 5,620 3,112 985 161 4,258
Financial liabilities for unit-linked contracts 103,695 27,314 1,159 132,168 90,856 23,676 829 115,361
Financial liabilities for puttable financial instruments 1,674 85 314 2,073 1,665 108 221 1,993 1_Quoted prices in active markets.
146 Annual Report 2019 − Allianz Group approach in most cases means that a present value technique is applied where either the cash flow or the discount curve is adjusted to reflect credit risk and liquidity risk. Depending on the observability of these risk parameters in the market, the security is classified as level 2 or level 3.
Level 3 mainly comprise private equity fund investments as well as alternative investments of the Allianz Group, and in most cases are delivered as net asset values by the fund managers. These net asset values are calculated using material, non-public information about the respective private equity companies. The Allianz Group has only limited insight into the specific inputs used by the fund managers hence a narrative sensitivity analysis is not applicable. The fund’s asset manager generally prices the underlying single portfolio companies in line with the International Private Equity and Venture Capital Valuation (IPEV) guidelines, using discounted cash flow (income approach)
or multiple methods (market approach). For certain investments, the capital invested is considered to be a reasonable proxy for the fair value. In these cases, sensitivity analyses are also not applicable.
FINANCIAL ASSETS FOR UNIT-LINKED CONTRACTS For level 2, the fair value is determined using the market or the income approach. Valuation techniques applied for the income approach mainly include discounted cash flow models as well as the Black-
Scholes-Merton model. Financial liabilities for unit-linked contracts are valued based on their corresponding assets.
SIGNIFICANT TRANSFERS OF FINANCIAL INSTRUMENTS CARRIED AT FAIR VALUE In general, financial assets and liabilities are transferred from level 1 to level 2 when their liquidity, trade frequency, and activity are no longer indicative of an active market. The same policy applies conversely for transfers from level 2 to level 1.
Carrying value (fair value) as of 1 January 2019 284 25,399 13,595 829 40,107
Net transfers into (out of) level 3 (1) 427 (294) (3) 129
Carrying value (fair value) as of 1 January 2019 10,023 829 221 11,073
Net transfers into (out of) level 3 - (3) - (3)
Changes in the consolidated subsidiaries of the Allianz Group - - (9) (9)
Carrying value (fair value) as of 31 December 2019 13,087 1,159 314 14,561
Net losses (gains) recognized in consolidated income statement held at the reporting date 2,496 37 - 2,533
Liabilities to banks and customers 7,362 3,343 2,770 13,475 6,294 5,319 2,622 14,235 1_Quoted prices in active markets.
HELD-TO-MATURITY INVESTMENTS For level 2 and level 3, the fair value is mainly determined based on the market approach using quoted market prices, and the income approach using deterministic discounted cash flow models.
INVESTMENTS IN ASSOCIATES AND JOINT VENTURES For level 2 and level 3, fair values are mainly based on an income approach, using a discounted cash flow method or net asset values as provided by third-party vendors.
REAL ESTATE HELD FOR INVESTMENT Fair values are mostly determined using the market or the income approach. Valuation techniques applied for the market approach include market prices of identical or comparable assets in markets that are not active. The fair values are either calculated internally and validated by external experts, or derived from expert appraisals with internal controls in place to monitor these valuations.
LIABILITIES TO BANKS AND CUSTOMERS Level 1 mainly consists of highly liquid liabilities, e.g. payables on demand. The fair value for liabilities in level 2 and level 3 is mainly derived based on the income approach, using future cash flows discounted with risk-specific interest rates. Main non-market observable inputs include credit spreads. In some cases, the carrying amount
TRANSFERS OF FINANCIAL ASSETS As of 31 December 2019, the Allianz Group substantially retained all the risks and rewards from the ownership of transferred assets. There have not been any transfers of financial assets that were derecognized in full or partly, in which Allianz continues to control the transferred assets. Transfers of financial assets mainly relate to securities lending and repurchase agreement transactions. Financial
ASSETS PLEDGED AS COLLATERAL The carrying amounts of the assets pledged as collateral are displayed in the following table: Assets pledged as collateral € mn
In addition, as part of these transactions, the Allianz Group has received collateral that it is permitted to sell or repledge in the absence of default. As of 31 December 2019, the Allianz Group received collateral consisting of fixed income and equity securities with a fair value of € 8,972 mn (2018: € 9,261 mn), which the
Allianz Group has the right to sell or repledge. For the years ended 31 December 2019 and 2018, no previously received collateral was sold or repledged by the Allianz Group.
These securitization vehicles refinance the purchase of assets by issuing tranches of ABS or MBS whose repayment is linked to the performance of the assets held by the vehicles.
Within the asset management business, the Allianz Group acts as asset manager for some securitization vehicles. The assets under management of these vehicles amounted to € 1,034 mn as of 31 December 2019 (2018: € 1,137 mn). Some of the affected vehicles have been set up by the Allianz Group, others by third parties. In this context, the role of the Allianz Group is limited to asset management. The
Income derived from the management of investment funds mainly includes asset management fees and performance based fees.
Investment funds launched by group-internal asset managers can be considered to be sponsored by the Allianz Group. As a sponsor, the
Allianz Group through its asset management subsidiaries is involved in the legal set-up and marketing of internally managed investment funds. This may include providing seed capital to the funds and providing administrative services to ensure the investment funds’ operation.
The carrying amounts in the tables listed above correspond to an aggregated amortized cost amount of € 28,162 mn (2018: € 24,443 mn). This amortized cost amount represents the maximum exposure to loss for the Allianz Group from these investments. In the reporting period, the Allianz Group has not provided any financial or other support to these entities, nor does it intend to provide such support in the future.
Of the total investment fund exposure, investments of € 14.1 bn (2018: € 11.6 bn) relate to listed investment funds, whereas investments of € 24.2 bn (2018: € 18.8 bn) relate to unlisted investment funds.
The carrying amounts in the tables listed above correspond to an aggregated amortized cost amount of € 32,421 mn (2018: € 26,493 mn). This amortized cost amount represents the maximum exposure to loss for the Allianz Group from these investments. In the reporting period, the Allianz Group has not provided any financial or other support to these entities, nor does it have the intention to provide such support in the future.
(2018: € 115,361 mn). The maximum exposure to loss on these investments is covered by liabilities recorded for unit-linked contracts.
The following table sets out the remuneration of the board members according to IAS 24.17: Remuneration of the board members according to IAS 24.17 € mn
Further information on the remuneration of board members and transactions with these persons can be found in the Remuneration Report.
LITIGATION Allianz Group companies are involved in legal, regulatory, and arbitration proceedings in Germany and a number of foreign jurisdictions, including the United States. Such proceedings arise in the ordinary course of businesses, including, amongst others, their activities as insurance, banking and asset management companies, employers, investors and taxpayers. It is not feasible to predict or determine the ultimate outcome of the pending or threatened proceedings.
Commitments to acquire interests in associates and available-for-sale investments 20,691 17,199
The contingent payment obligation of Allianz relates to the coupon payments of the Tier 1 Capital Securities issued by HT1 Funding GmbH.
The original nominal amount of the Tier 1 Capital Securities of € 1,000 mn was reduced in 2012 to approximately € 416 mn. This reduces the amount of coupon payments of the Tier 1 Capital Securities and the contingent payment obligation of Allianz accordingly.
Pursuant to §§ 221 ff. of the German Insurance Supervision Act
As of 31 December 2019, the future liabilities of Allianz Lebensversicherungs -AG and its subsidiaries to the insurance guarantee scheme pursuant to the SichLVFinV amount to annual contributions of € 19.5 mn (2018: € 22.7 mn) and potential special contributions of, in principle, € 210 mn (2018: € 203 mn) per year. In addition, Allianz
Lebensversicherungs-AG (“Protektor”), a life insurance company that has assumed the task of the mandatory insurance guarantee scheme for life insurers. Such obligation is, in principle, based on a maximum of 1 % of the sum of the net underwriting reserves with deduction of payments already provided to the insurance guarantee scheme. As of 31 December 2019, and under inclusion of the contributions to the mandatory insurance scheme mentioned above for a limited period of time, and assuming that no other life insurer is exempted from payments, the aggregate outstanding commitment of Allianz Lebensversicherungs -AG and its subsidiaries to the insurance guarantee scheme and to Protektor is € 1,910 mn (2018: € 1,846 mn).
AS A LESSEE As of 31 December 2019, the maturities for lease liabilities were as follows: Maturities for lease liabilities € mn
AS A LESSOR For the year ended 31 December 2019, the lease income for operating leases amounted to € 955 mn.
Between 4 and up to 5 years 575 453 39 _ Pensions and similar obligations
Most active German employees participate in contributionbased plans using different vehicles to cover the base salary both below and above the German social security ceiling (GSSC). Since 1 January 2015, the Allianz Group contributes for new entrants and for the majority of contribution-based pension plan beneficiaries above the GSSC to the low-risk pension plan “My Allianz Pension”, where only contributions are preserved. For salaries above the GSSC, the
The period in which a retirement benefit can be drawn is usually between the ages of 60 and 67. Disability benefits are granted until retirement pension is paid. In the case of death under the previous plans, surviving dependents normally receive 60 % (widow/widower)
and 20 % (per child) of the original employee’s pension, in total not to exceed 100 %. Under the “My Allianz Pension” plan, the surviving dependents receive the capital accrued.
Additionally, the Allianz Group offers a deferred compensation program, “Pensionszusage durch Entgeltumwandlung (PZE)”, for active employees. Within some boundaries they convert at their discretion parts of their gross income and, in exchange, receive a pension commitment of equal value. PZE is qualified as a defined benefit plan with small risk exposure.
Remeasurements recognized in the consolidated statement of comprehensive income (before deferred taxes) 2,640 (485) 1,172 (178) 2 (4) 1,469 (311)
Settlement payments/assets distributed on settlement (1) (3) - (3) - - (1) -
Changes in the consolidated subsidiaries of the Allianz Group 13 (4) 12 (2) - - 1 (2)
Thereof allotted to: 1_The asset ceiling is determined by taking into account the reduction of future contributions.
2_Includes for 2019 € 48 mn due to a plan change in the Netherlands.
3_Includes for 2018 € 278 mn in Germany due to the change in mortality tables.
As of 31 December 2019, post-retirement health benefits included in the defined benefit obligation and in the net amount recognized amounted to € 11 mn (2018: € 10 mn) and € 11 mn (2018: € 10 mn), respectively.
ASSUMPTIONS The assumptions for the actuarial computation of the defined benefit obligation and the recognized expense depend on the circumstances in the country where the plan has been established.