The following table shows, by country, the carrying amounts of reserves for loss and loss adjustment expenses that have been discounted, and the interest rates used for discounting: Discounted reserves for loss and loss adjustment expenses
Changes in aggregate policy reserves for traditional participating insurance contracts and long-duration insurance contracts for the year ended December 31, 2006 were as follows: Traditional participating insurance contracts
Changes in the consolidated subsidiaries of the Allianz Group 77 — (99) Deposits from SFAS 97 contracts — — 27,179 Changes recorded in premiums earned (net) — — (2,414) Changes recorded in changes in reserves for insurance and investment
Changes recorded in income from financial assets and liabilities carried at fair value through income (net) — — 3,551
Changes in the consolidated subsidiaries of the Allianz Group — — 27
Changes due to fluctuations in market value (50) 4,094 3,771 Changes in the consolidated subsidiaries of the Allianz
Changes due to valuation differences charged (credited) to income 895 1,056 594
As of December 31, 2006 and 2005, the Allianz Group’s deferred acquisition costs and reserves for insurance and investment contracts for the Life/Health segment are summarized as follows: As of December 31,
A significant part of the Allianz Group’s Life/Health segment operations is conducted inWestern Europe. Insurance laws and regulations inWestern Europe have historically been characterized by legal or contractual minimumparticipation of contract holders in the profits of the insurance company issuing the contract. In particular, Germany, Switzerland and Austria, which comprise approximately 42% and 41%, of the Allianz Group’s reserves for insurance and investment contracts as of December 31, 2006 and 2005 respectively, include a significant level of policyholder participation in all sources of profit includingmortality/morbidity, investment and expense. As a result of this policyholder participation, the Allianz Group’s exposure to insurance, investment and expense risk is mitigated.
Furthermore, a significant portion of the Allianz Group’s traditional and unit-linked contracts issued in the United States meet the criteria for classification as insurance contracts under IFRS 4 on an individual contract basis, because these contracts include options for contract holders to elect a life-contingent annuity. These contracts currently do not expose the Allianz Group to significant insurance risk, nor are they expected to do so in the future, as the projected annuitization rates are not significant. Additionally, a significant portion of the Allianz Group’s traditional contracts issued in France and Italy do not incorporate significant insurance risk despite the fact that they are accounted for as insurance contracts, due to their discretionary participation features. Similarly, a significant portion of the Allianz Group’s unit-linked contracts in France and Italy do not incorporate significant insurance risk.
Provisions Pensions and similar obligations 4,120 5,594 Employee related 3,120 2,737 Share-based compensation 1,898 1,703 Restructuring plans 887 186 Loan commitments 261 117 Other provisions 1,943 1,947
Senior bonds: Contractual interest rate 5.19% 5.00% — — — 4.61% Exchangeable bonds: Contractual interest rate — 0.75% — — — — Money market securities: Contractual interest rate 3.69% — — — — —
Total all other subsidiaries 599 — — — — 4 603 416 1) Except for the interest rates. The interest rates represent the weighted-average. 2) Includes senior bonds, exchangeable bonds and money market securities issued by issued by Allianz Finance B.V. and Allianz Finance II B.V. guaranteed by
Total Allianz SE2) — — — — — 6,968 6,968 6,305 Banking subsidiaries
Contractual interest rate 7.84% 6.95% — — — 5.39% Floating rate — — — — — — — 18 Current interest rate — — — — — —
Subordinated liabilities: Contractual interest rate — 6.84% — — — 5.35%
Hybrid equity: Contractual interest rate — — — — — 3.58%
Minority interests 6,409 7,615 1) As of December 31, 2006 includes € 140 mn related to cash flow hedges
In November 2006, 986,741 (2005: 1,148,150) shareswere issued at a price of € 131.00 (2005: € 103.50) per share, enabling employees of AllianzGroup subsidiaries in Germany and abroad to purchase 929,509 (2005: 1,144,196) shares at prices ranging from € 91.70 (2005: € 72.45) to
On October 13, 2006, Allianz AG and RASmerged resulting in the issuance of 25,123,259 shares of Allianz SE to the shareholders of RAS. As a result, share capital increased by € 64mn and capital reserve increased by
On February 18, 2005, the AllianzGroup issued a subordinated bondwith 11.2mndetachablewarrants, which allow the holder to purchase a share of Allianz SE. Thewarrants are exercisable at any time during their three year termand have an exercise price of € 92 per share. The warrantswere recorded in capital reserve at the premium received of € 174mnon their issuance date. During the year endedDecember 31, 2005, as a result of the exercise of 9mnwarrants the AllianzGroup received consideration of € 828mn, which increased issued capital by € 23mnand capital reserve by € 805mn.
All shares issued during the years ended December 31, 2006, 2005 and 2004 are qualifying shares from the beginning of the year of issue.
Treasury shares The Annual General Meeting on May 3, 2006 (2005: May 4), authorized Allianz SE to acquire its own shares for other purposes pursuant to clause 71(1) no. 8 of the German Stock Corporation Law (“Aktiengesetz”). During the year ended December 31, 2006 the authorization was used to acquire 57,232 shares of Allianz SE.
On January 1, 2005, the Financial Conglomerates Directive, a supplementary European Union (or “EU”) directive, became effective in Germany. Under this directive, a financial conglomerate is defined as any financial parent holding company that, together with its subsidiaries, has significant cross-border and crosssector activities. The Allianz Group is a financial conglomerate within the scope of the directive and the related German law. The law requires that the financial conglomerate calculates the capital needed to meet the respective solvency requirements on a consolidated basis.
At December 31, 2006, based on the current status of discussion, our eligible capital for the solvency margin, required for our insurance segments and our banking
and asset management business, was € 50.5 bn (2005: € 39.3 bn) including off-balance sheet reserves1), surpassing theminimum legally stipulated level by € 24.4 bn (2005: € 15.1 bn). This margin resulted in a preliminary cover ratio2) of 194% at December 31, 2006 (2005: 162%). In 2006, all Allianz Group companies also have met their local solvency requirements.
Risk-weighted assets—banking book 117,355 108,659 Risk-weighted assets—trading book 2,625 2,875 Total risk-weighted assets 119,980 111,534
Tier I capital ratio (core capital) in % 10.39 9.98 Tier I & Tier II capital ratio in % 15.56 16.33 Total capital ratio in % 15.56 16.33 1) Effective June 2005, Dresdner Bank changed the accounting basis for calculation and disclosure of BIS-figures from German GAAP to IFRS.
Certain of the Allianz Group’s insurance subsidiaries prepare individual financial statements based on local laws and regulations. These laws establish restrictions on theminimum level of capital and surplus an insurance entity must maintain and the amount of dividends that may be paid to shareholders. The minimum capital requirements and dividend restrictions vary by jurisdiction. Theminimum capital requirements are based on various criteria including, but not limited to, volume of premiums written or claims paid, amount of insurance reserves, asset risk, mortality risk, credit risk, underwriting risk and off-balance sheet risk.
As of December 31, 2006, the Allianz Group’s insurance subsidiaries were in compliance with all applicable solvency and capital adequacy requirements.
Certain insurance subsidiaries are subjected to regulatory restrictions on the amount of dividends which can be remitted to Allianz SE without prior approval by
Unrealized gains and losses 840 1,321 Share of earnings 1,289 1,386 Other equity components 4,280 4,908
Premiums earned 25 Interest and similar income € mn € mn € mn
26 Income from financial assets and liabilities carried at fair value through income (net)
Income (expense) from financial assets and liabilities held for trading 20 116 1,518 11 (61) (5) 1,599 Income from financial assets designated at fair value through
Banking Segment Income from financial assets and liabilities held for trading of the Banking segment comprises: € mn € mn € mn
Trading in equity products 217 274 219 Foreign exchange/ precious metals trading 354 222 149 Other trading activities (66) 201 379
Corporate Segment Income from financial assets and liabilities held for trading for the year ended December 31, 2006, includes expenses of € 152 mn (2005: € 332 mn; 2004: € 149 mn) from derivative financial instruments in the Corporate segment for which hedge accounting is not applied. This includes expenses from derivative financial instruments embedded in exchangeable bonds of € 570 mn (2005: € 605 mn; 2004: € 11 mn), income from derivative financial instruments which partially hedge the exchangeable bonds, however which do not qualify for hedge accounting, of € 290 mn (2005: € 288 mn; 2004: € 17 mn), and income from other derivative financial instruments of € 128 mn (2005: expense: € 15 mn; 2004: expense: € 155 mn).
Investments in associates and joint ventures1) 891 1,218 868 Loans to banks and
Income from non-current assets and disposal groups held for sale 1 35 —
Sales and service revenues 1,044 327 1,371 Other operating revenues 15 — 15
Sales and service revenues — 597 597 Other operating revenues — — — Interest income — 1 1
Claims and insurance benefits paid (26,026) (18,281) 8 (44,299) Change in loss and loss adjustment expenses (2,452) (51) — (2,503)
Net Claims and insurance benefits paid (22,597) (17,406) — (40,003) Change in loss and loss adjustment expenses (2,734) (33) — (2,767)
Net Claims and insurance benefits paid (23,253) (17,425) — (40,678) Change in loss and loss adjustment expenses (2,018) (110) — (2,128)
Other insurance reserves 31 (78) — — (47) Expenses for premium refunds (211) (6,136) — (426) (6,773)
Other insurance reserves 33 (67) — — (34) Expenses for premium refunds (196) (6,113) — (426) (6,735)
Ceded Aggregate policy reserves 17 118 — — 135 Other insurance reserves (6) 5 — — (1) Expenses for premium refunds 39 17 — — 56
Net Aggregate policy reserves (208) (5,044) — — (5,252) Other insurance reserves (17) (7) — — (24) Expenses for premium refunds (482) (5,392) — (26) (5,900)
Other insurance reserves 1 (1) — — — Expenses for premium refunds 42 13 — — 55
Depreciation from real estate held for investment (230) (253) (255) Other expenses from real estate held for investment (278) (265) (235) Foreign currency gains and losses (net)
Foreign currency gains 473 417 481 Foreign currency losses (580) (617) (336)
The German Reorganization Tax Act (SEStEG) which entered into force in December 2006 stipulates that corporation tax credits accumulated under the pre-2001 corporation tax imputation systemwill be refunded in the future without regard to dividend distributions. The refunds are spread equally over a ten year period from 2008 to 2017. As a consequence of the tax law change Allianz Group’s total corporate tax credits were capitalised on a discounted basis as at December 31, 2006, and reduced current income tax expense by
Of the deferred tax charge for the year ended December 31, 2006, income of € 480 mn (2005: € 468 mn; 2004: € 2 mn) are attributable to the recognition of deferred taxes on temporary differences and expense of attributable to tax losses carried forward. The change of applicable tax rates due to changes in tax law produced deferred tax expense of € 18 mn (2005 income of € 7mn; 2004 income of € 34 mn). Current and deferred tax benefit included in shareholders’ equity during the year ended December 31, 2006, amounted to € 740 mn (2005: charge of € 101 mn; 2004: charge of € 578 mn).
The recognized income tax charge for the year ended December 31, 2006, is € 1,130 mn lower than the expected income tax charge (2005: lower than expected by € 278 mn; 2004: higher than expected by € 131 mn). The following table shows the reconciliation of the expected income tax charge of the Allianz Group with the effectively recognized tax charge. The Allianz Group’s reconciliation is a summary of the individual companyrelated reconciliations, which are based on the respective country-specific tax rates after taking into consideration consolidation effects with impact on the group result. The expected tax rate for domestic Allianz Group subsidiaries applied in the reconciliation includes corporate tax and the solidarity surcharge and amounts
The effective tax rate is determined on the basis of the effective income tax charge on income before income taxes andminority interests in earnings.
Expected income tax rate in % 30.4 29.9 29.3 Expected income tax charge 3,143 2,340 1,478 Municipal trade tax and similar
During the year ended December 31, 2006, a deferred tax charge of € 35 mn (2005: € 4 mn; 2004: € 129 mn) was recognized due to a devaluation of deferred tax assets on tax losses carried forward. Due to the use of tax losses carried forward for which no deferred tax asset was recognized, the current income tax charge diminished by € 45mn (2005: € 64 mn; 2004: € 193 mn). The recognition of deferred tax assets on losses carried forward from earlier periods, for which no deferred taxes had yet been recognized or which had been devalued resulted in a deferred tax income of € 54 mn (2005: € 39 mn; 2004: € 87 mn). The non-recognition of deferred taxes on tax losses for the current fiscal year increased tax charges by € 14mn (2005: € 26 mn; 2004: € 83 mn). The above mentioned effects are shown in the reconciliation statement as “effects of tax losses”.
Deferred taxes on losses carried forward are recognized as an asset to the extent sufficient future taxable profits are available for realization.
Financial assets held for trading 236 332 Deferred acquisition costs 351 187 Tax losses carried forward 4,859 5,850 Other assets 955 1,205 Insurance reserves 4,668 3,929 Pensions and similar obligations 384 351 Other liabilities 1,513 1,546 Total deferred tax assets 16,308 15,428 Valuation allowance for deferred tax assets on tax losses carried forward (731) (832) Effect of netting (10,850) (9,297) Net deferred tax assets 4,727 5,299 Deferred tax liabilities Intangible assets 861 805
Financial assets held for trading 842 900 Deferred acquisition costs 3,927 3,207 Other assets 1,076 736 Insurance reserves 3,152 2,402 Pensions and similar obligations 257 146 Other liabilities 1,269 1,791 Total deferred tax liabilities 15,468 14,621 Effect of netting (10,850) (9,297) Net deferred tax liabilities 4,618 5,324 Net deferred tax assets/(liabilities) 109 (25)
Tax losses carried forward Tax losses carried forward at December 31, 2006, of € 13,336 mn (2005: € 15,740 mn) result in recognition of deferred tax assets to the extent there is sufficient certainty that the unused tax losses will be utilized. € 10,414 mn (2005: € 10,886 mn) of the tax losses carried forward can be utilized without time limitation. The Allianz Group believes that it is more likely than not that the results of future operations will generate sufficient taxable income to realize its deferred tax assets.
Loans and advances to banks 1,956 1,747 Loans and advances to customers 1,205 1,405 Investments and other assets 729 855 Total assets1) 3,890 4,007
The aggregate amount of certificates of deposit and other time deposits in the amount of € 100,000 or more issued by the Allianz Group’s German offices at December 31, banks and customers.
Derivatives derive their fair values from one or more underlying assets or specified reference values.
Derivatives used by individual subsidiaries in the Allianz Group comply with the relevant supervisory regulations and the Allianz Group’s own internal guidelines. The Allianz Group’s investment andmonitoring rules exceed regulations imposed by supervisory authorities. In addition to local management supervision, comprehensive financial and riskmanagement systems are in force across the Allianz Group. Risk management is an integral part of the Allianz Group’s controlling process that includes identifying, measuring, aggregating andmanaging risks. Risk management objectives are implemented at both the Allianz Group level and by the local operational units. The use of derivatives is one key strategy used by the Allianz Group tomanage its market and investment risks.
Insurance subsidiaries in the Allianz Group use derivatives to manage the risk exposures in their investment portfolios based on general thresholds and targets. Themost important purpose of these instruments is hedging against adverse market movements for selected securities or for parts of a portfolio. Specifically, the Allianz Group selectively uses derivative financial instruments such as swaps, options and forwards to hedge against changes in prices or interest rates in their investment portfolio.
Market and counterparty risks arising from the use of derivative financial instruments are subject to control procedures. Credit risks related to counterparties are assessed by calculating gross replacement values. Market risks are monitored bymeans of up-to-date value-at-risk calculations and stress tests and limited by specific stoploss limits.
Exchange traded 1) As of December 31, 2006, includes embedded derivatives related to equity indexed annuities with negative fair values of € 4,199 mn (2005: € 2,841 mn).
Derivative financial instruments used in accounting hedges The Allianz Group principally uses fair value hedging. Important hedging instruments used by the Banking segment are interest rate swaps and forwards and currency swaps and forwards. Hedging instrumentsmay be implemented for individual transactions (micro hedge) or for a portfolio of similar assets or liabilities (portfolio hedge).
The derivative financial instruments used for all fair value hedges of the Allianz Group had a total negative fair value as of December 31, 2006 of € 388 mn (2005: During the year ended December 31, 2006, cash flow hedges were used to hedge variable cash flows exposed to interest rate fluctuations. As of December 31, 2006, the interest rate swaps utilized had a negative fair value of € 55 mn (2005: € 68 mn); other reserves in shareholders’ equity increased by € 1mn (2005: € 3 mn). Ineffectiveness of the cash flow hedges led to net realized losses of € 2 mn (2005: € 5 mn) in 2006.
More than 5 years of which cash settled of which share settled of which cash settled € mn of which share settled € mn
The Allianz Group uses the followingmethods and assumptions to determine fair values: Cash and cash equivalents The carrying amount corresponds to the fair value due to its short-term nature.
Loans and advances to banks and customers The fair value of loans is calculated using the discounted cash flowmethod. This method uses the effective yield of similar debt instruments. Where there is doubt regarding the repayment of the loan, the anticipated cash flows are discounted using a reasonable discount rate and include a charge for an element of uncertainty in cash flows.
Investment contracts with policyholders Fair values for investment and annuity contracts were determined using the cash surrender values of the policyholders’ and contract holders’ accounts.
Financial assets Cash and cash equivalents 33,031 33,031 31,647 31,647 Financial assets held for trading 137,982 137,982 166,184 166,184 Financial assets designated at fair value through income 18,887 18,887 14,162 14,162 Available-for-sale investments 277,898 277,898 266,953 266,953 Held-to-maturity investments 4,748 4,912 4,826 5,102 Loans and advances to banks and customers 408,278 410,040 336,808 338,407 Financial assets for unit linked contracts 61,864 61,864 54,661 54,661 Derivative financial instruments and firm commitments included in other
Allianz Group companies maintain various types of ordinary course business relations (particularly in the area of insurance, banking and asset management) with related enterprises. In particular, the business relations with associated companies, which are active in the insurance business, take on various forms andmay also include special service, computing, reinsurance, costsharing and asset management agreements, whose terms are deemed appropriate bymanagement. Similar relationshipsmay exist with pension funds, foundations, joint ventures and companies, which provide services to Allianz Group companies.
Litigation Allianz Group companies are involved in legal, regulatory and arbitration proceedings in Germany and a number of foreign jurisdictions, including the United States, involving claims by and against them, which arise in the ordinary course of their businesses, including in connection with their activities as insurance, banking and asset management companies, employers, investors and taxpayers. It is not feasible to predict or determine the ultimate outcome of the pending or threatened proceedings. Management does not believe that the outcome of these proceedings, including those discussed below, will have amaterial adverse effect on the financial position or results of operations of Allianz Group, after consideration of any applicable reserves.
In July 2002, the German Federal Cartel Office (Bundeskartellamt) commenced an investigation against several property-casualty insurance companies in Germany, in connection with alleged coordinated behavior to achieve premium increases in parts of the commercial and industrial insurance business and imposed administrative fines against these German insurance companies, among them Allianz Versicherungs-AG, which received a notice imposing a fine on March 22, 2005. Allianz Versicherungs-AG has appealed this decision. The fine imposed on Allianz Versicherungs-AG is of an immaterial amount for the Allianz Group and has been fully reserved for in Allianz’s consolidated financial statements. Allianz’s appeal of the decision relates to the full amount of the fine.
On November 5, 2001, a lawsuit, Silverstein v. Swiss Re International Business Insurance Company Ltd., was filed in the United States District Court for the Southern District of New York against certain insurers and reinsurers, including a subsidiary of Allianz SE which is now named Allianz Global Risks US Insurance Company (AGR US). The complaint sought a determination that the terrorist attack of September 11, 2001 on theWorld Trade Center constituted two separate occurrences under the alleged terms of various coverages. Allianz SE is indirectly concerned by this lawsuit as reinsurer of AGR US. In connection with the terrorist attack of September 11, 2001 we recorded net claims expense of approximately € 1.5 bn in 2001 for the Allianz Group on the basis of one occurrence. On December 6, 2004, a New York jury rendered a verdict that theWorld Trade Center attack constituted two occurrences under the alleged terms of various coverages. Following this decision, the Allianz Group determined that no additional provisions on a net basis were necessary because the additional liabilities arising from the decision were offset by positive developments in settlingWorld Trade Center claims and higher levels of reinsurance coverage due to Allianz under the two occurrence theory. On October 18, 2006, the United States Court of Appeals for the Second Circuit of New York affirmed the decision of the lower court. We currently estimate the financial effect on the Allianz Group resulting from the Court of Appeals’ decision to be USD 186mnwhich is covered by the overall reserve.
The insolvency administrator and themajor limited partner of Heye KG have filed a complaint claiming damages of approximately € 200 mn fromDresdner Bank, alleging a failure to execute transfer orders despite a purported line of credit. In March 2006, the claim was dismissed at first instance. However, the decision was appealed and therefore is not yet final.
In January 2006, a putative class action lawsuit was filed against Dresdner Bank AG and some of its subsidiaries by six employees of Dresdner Kleinwort in the United States District Court for the Southern District of New York. The plaintiffs are claiming an amount of USD 1.4 bn alleging gender-based discrimination. We believe that the claims are without merit.
On May 24, 2002, pursuant to a statutory squeeze-out procedure, the general meeting of Dresdner Bank AG
Allianz Global Investors of America L.P. and some of its subsidiaries have been named as defendants inmultiple civil US lawsuits commenced as putative class actions and other proceedings related to matters involving market timing and revenue sharing in themutual fund industry. These proceedings are still in a preliminary stage and the potential outcome can not be predicted at this time.
In 2005 and 2006, Allianz Life Insurance Company of North America (“Allianz Life”) was named as a defendant in various putative class action lawsuits in Minnesota and California in connection with themarketing and sale of deferred annuity products. One lawsuit in Minnesota and three in California have been certified as a class actions. The complaints allege that the defendant engaged in, among other practices, deceptive trade practices andmisleading advertising in connection with the sale of such products, including, with the respect to the Minnesota lawsuit, the violation of the Minnesota Consumer Fraud and Deceptive and Unlawful Trade Practices Act. In addition, in January 2007, the Minnesota Attorney General filed a lawsuit against Allianz Life alleging unsuitable sales of deferred annuities to senior citizens. Discovery has recently commenced. The potential outcome and exposure related to these lawsuits are currently uncertain, because these proceedings have not yet progressed to a stage at which a potential outcome or exposure can be determined.
In March 2006, certain shareholders of Allianz SE filed contestation suits against the resolution of the General Meeting approving themerger of RAS with and into Allianz AG. On July 19, 2006, Allianz SE reached a court settlement with these shareholders which called for the withdrawal of all contestation suits by the plaintiffs against reimbursement by Allianz SE of the attorney costs incurred by the plaintiffs. Themerger of Riunione Adriatica di Sicurtà S.p.A. (RAS) with and into Allianz AG became effective on October 13, 2006.
Other contingencies Liquiditäts-Konsortialbank GmbH (“LIKO”) is a bank founded in 1974 in order to provide funding for German banks which experience liquidity problems. 30% of LIKO shares are held by Deutsche Bundesbank, while the remaining shares are being held by other German banks and banking associations. The shareholders have provided capital of € 200 mn to fund LIKO; Dresdner Bank AG’s participation is € 12.1 mn (6.05%). Dresdner Bank AG is contingently liable to pay future assessments to LIKO up to € 60.5 mn (6.05%). In addition, under clause 5(4) of the Articles of Association of LIKO, Dresdner Bank AG is committed to a secondary liability, which arises if other shareholders do not fulfill their commitments to pay their respective future assessments. In all cases of secondary liability, the financial status of the other shareholders involved is sound.
which covers liabilities to each respective creditor up to specified amounts. As amember of the Joint Fund, which is itself a shareholder in LIKO, Dresdner Bank AG is liable with the other members of the Joint Fund for additional capital contributions, with themaximumbeing the amount of Dresdner Bank AG’s annual contribution. During the year ended December 31, 2006, the Joint Fund levied a contribution of € 22 mn (2005: € 21 mn). Under section 5 (10) of the Statutes of the Joint Fund for Securing Customer Deposits, the Allianz Group has undertaken to indemnify the Federal Association of German Banks (Bundesverband deutscher Banken e.V.) for any losses it may incur by reason of measures taken on behalf of any bank in which the Allianz Group owns a majority interest.
Loan commitments The Allianz Group engages in various lending commitments to meet the financing needs of its customers. The following table represents the amounts at risk should customers draw fully on all facilities and then default, excluding the effect of any collateral. Since themajority of these commitmentsmay expire without being drawn upon, the amounts shownmay not be representative of actual liquidity requirements for such commitments.
Stand-by facilities 8,930 9,496 Guarantee credits 1,765 1,733 Discount credits 64 46 Mortgage loans/public-sector loans 662 667
Leasing commitments The Allianz Group occupies property inmany locations under various long-term operating leases and has entered into various operating leases covering the longterm use of data processing equipment and other office equipment.
As of December 31, 2006, the futureminimum lease payments under non-cancelable operating leases were as follows: € mn
Rental expense net of sublease rental income received of € 37 mn, for the year ending December 31, 2006, was
Purchase obligations The Allianz Group has commitments to invest in private equity funds totaling € 1,675 mn (2005: € 1,476 mn) as of December 31, 2006. As of December 31, 2006, commitments outstanding to purchase real estate used by third-parties and owned by the Allianz Group used for its own activities amounted to € 325 mn (2005: € 145 mn). As of December 31, 2006, commitments outstanding to purchase items of equipment amounted to € 112 mn (2005: € 66 mn). In addition, as of December 31, 2006, the Allianz Group has other commitments of € 290 mn (2005: € 244 mn) referring to maintenance, real estate development, sponsoring and purchase obligations.
Already in December 2002, Protektor Lebensversicherungs-Aktiengesellschaft (“Protektor”), a life insurance company whose role is to protect policyholders of all German life insurers, was founded. Allianz Lebensversicherungs-AG and some of its subsidiaries are obligated to provide additional funds either to themandatory insurance guarantee scheme or to Protektor, in the event that the funds provided to the mandatory insurance guarantee scheme are not sufficient to handle an insolvency case. Such obligation amounts to amaximum of 1% of the sum of the net underwriting reserve with deduction of payments already provided to the insurance guarantee scheme. At December 31, 2006, and under inclusion of the contributions to themandatory insurance scheme mentioned above, the aggregate outstanding commitment of Allianz LebensversicherungsAktiengesellschaft and its subsidiaries to the insurance guarantee scheme and to Protektor was € 751 mn.
Guarantees A summary of guarantees issued by the Allianz Group by maturity and related collateral-held is as follows: As of December 31,
The Allianz Group’s banking operations in France, in the ordinary course of business, issuemarket value and performance-at-maturity guarantees in connection with mutual funds offered by the Allianz Group’s asset management operations in France. The levels of market value and performance-at-maturity guarantees, as well as thematurity dates, differ based on the underlying agreements. Inmost cases, the samemutual fund offers both amarket value guarantee and a performance-at-maturity guarantee. Additionally, the
performance-at-maturity guarantees are generally linked to the performance of an equity index or group of equity indexes. As of December 31, 2006, themaximum potential amount of future payments of themarket value and performance-at-maturity guarantees was € 1,086 mn (2005: € 686 mn), which represents the total value guaranteed under the respective agreements. The fair value of themutual funds related to themarket guarantees as of December 31, 2006, was approximately € 1,033 mn (2005: € 777 mn). Such funds generally have a duration of five to eight years.
Indemnification contracts Indemnification contracts are executed by the Allianz Group with various counterparties under existing service, lease or acquisition transactions. Such contracts may also be used to indemnify counterparties under various contingencies, such as changes in laws and regulations or litigation claims.
Credit derivatives Credit derivatives consist of written credit default swaps, which require payment by the Allianz Group in the event of default of debt obligations, as well as written total return swaps, under which the Allianz Group guarantees the performance of the underlying assets. The notional principal amounts and fair values of the Allianz Group’s credit derivative positions as of December 31, 2006 are provided in Note 43.
Change in fair value of plan assets: Fair value of plan assets as of
Expected return on plan assets 557 411 Actuarial gains/(losses) (90) 472 Employer contributions2) 2,154 374 Plan participants’ contributions 61 66 Foreign currency translation
Funded status as of December 31, 6,392 8,872 Unrecognized net actuarial losses (2,556) (3,283) Unrecognized prior service costs 19 5 Net amount recognized as of 1) As of December 31, 2006, includes direct commitments of the consolidated subsidiaries of the Allianz Group of € 5,306 mn (2005: € 8,164 mn) and commitments through plan assets of € 11,974 mn (2005: € 8,995 mn).
2) During January 2006, the Allianz Group contributed € 1,876 mn to the defined benefit plans of the Dresdner Bank Group.
3) In addition, the Allianz Group paid € 371 mn (2005: € 362 mn) directly to plan participants.
Defined benefit plans with an accumulated benefit obligation in excess of plan assets are summarized as follows: As of December 31, 2006 € mn € mn
During the year ended December 31, 2006, net periodic benefit cost includes net periodic benefit cost related to post-retirement health benefits of € 9 mn (2005: € 8 mn;
Discount rate 4.6 4.1 Rate of compensation increase 2.6 2.7 Rate of pension increase 1.5 1.4
The discount rate assumptions reflect themarket yields at the balance sheet date of high-quality fixed income investments corresponding to the currency and duration of the liabilities.
For the year ended December 31, 2006, the weighted expected long-term return on plan assets was derived from the following target allocation and expected longterm rate of return for each asset category: Target allocation
Equity securities 30.1 7.7 Debt securities 64.2 4.2 Real estate 5.3 4.7
Plan assets The defined benefit plans’ weighted-average asset allocations by asset category are as follows: As of December 31, 2006 %
Estimated future benefit payments The following estimated future benefit payments are based on the same assumptions used to measure the Allianz Group’s projected and accumulated benefit obligations as of December 31, 2006, and reflect expected future service, as appropriate.
Stock appreciation rights The stock appreciation rights granted to a plan participant obligate the Allianz Group to pay in cash the excess of themarket price of an Allianz SE share over the reference price on the exercise date for each stock appreciation right granted. The excess is capped at 150%
• the Allianz SEmarket price is in excess of the reference price by at least 20% on the exercise date.
The following table provides the assumptions used in estimating the fair value of the stock appreciation rights at grant date: Risk-free interest rate 4.1% 3.1% 4.1% Expected dividend rate 1.6% 1.9% 1.8%
A summary of the number and the weighted-average grant date fair value of the nonvested restricted stock units are as follows: Number Weighted average grant date fair value €
The Class B equity units are accounted for as cash settled plans. Therefore, the Allianz Group accrues the fair value of the Class B equity units as compensation expense over the vesting period. Upon vesting, any changes in the fair value of the Class B equity units are recognized as compensation expense. During the year ended December 31, 2006, the Allianz Group recognized compensation expense related to the Class B equity units of € 383 mn (2005: € 536 mn; 2004: € 399 mn). In addition, the Allianz Group recognized expense related to the priority claim on the adjusted operating profits of PIMCO LLC of € 140 mn (2005: € 141 mn; 2004: € 101 mn). During the year ended December 31, 2006, the Allianz Group recognized a deferred tax benefit related to the Class B equity units of € 156 mn (2005: € 219 mn; 2004: € 163 mn). During the year ended December 31, 2006, the Allianz Group called 16,335 Class B equity units. The total amount paid related to the call of the Class B equity units was € 238 mn.
The total recognized compensation expense for Class B equity units that are outstanding is recorded as a liability in other liabilities. As of December 31, 2006, the Allianz Group recorded a liability for the Class B equity units of € 1,455 mn (2005: € 1,473 mn). As of December 31, 2006, the total compensation expense not yet recognized related to the nonvested Class B equity units was € 842 mn (2005: € 1,191 mn). The total compensation expense not yet recognized related to the Class B equity units is expected to be recognized over the remaining vesting period of up to 5 years.
The shares settled by delivery of Allianz SE shares are accounted for as equity settled plans by the Allianz Group. Therefore, the Allianz Groupmeasures the total compensation expense to be recognized for the equity settled shares based upon their fair value as of the grant date. The total compensation expense is recognized over the three year vesting period. The shares settled in cash are accounted for as cash settled plans by the Allianz Group. Therefore, the Allianz Group accrues the fair value of the cash settled shares as compensation expense over the vesting period. During the year ended December 31, 2006, the Allianz Group recognized compensation expense related to the nonvested shares of € 135 mn (2005: € 102 mn). During the year ended December 31, 2006, the Allianz Group recognized a deferred tax benefit of € 25 mn. During the year ended December 31, 2006, the total amount paid related to cash settled shares vested was € 6mn. During the year ended December 31, 2006, the total fair value of equity settled shares that vested was € 117 mn.
The following table provides the grant date fair value of options and the assumptions used in calculating their fair value: Assumptions: Share price at grant date € 110.20 € 77.95 € 52.00 Expected life (years) 5 8 8 Risk free interest rate 3.9% 2.7% 3.5%
RAS Group share option plan The RAS Group awarded eligible members of senior management with share purchase options on RAS ordinary shares. The share options had a vesting period of 18 months to 2 years and a term of 6.5 to 7 years.
• the performance of the RAS share in the year of grant exceeds the Milan Insurance Index in the same year.
A summary of the number and weighted-average exercise price of the options outstanding and exercisable are as follows: Number Weighted average exercise price €
RAS Group Allianz SE share option plan The fair value of the options at grant date wasmeasured using a trinomial tree option pricingmodel. Option valuationmodels require the input of subjective assumptions including the expected stock price volatility and the expected life of the options. Volatility was derived from observed historical market prices aligned with the expected life of the options. The expected life was estimated to be equal the term tomaturity of the options.
The restructuring activities of Allianz Deutschland AG will result in the creation of a new businessmodel. Administrative locations within Germany will be reduced from 21 to 12. In all locations a common IT-architecture will be introduced and the office work will be divided into customer service and counselling specialists. Teams in customer service will process all routine requests that can be handled through standardized procedures whereas the counselling specialists will deal with all non-routine cases.
During the year ended December 31, 2006, Allianz Deutschland AG recorded restructuring charges of € 526mn. The reduction of staff within this program shall occur in consent with the employees. The plan includes a reduction of approximately 5.700 positions.
Approximately 1,555 full time equivalent positions have already been terminated, a large majority of which are related to natural employee turnover and early retirement agreements (Altersteilzeit) that were agreed upon before the restructuring provision was recorded and are not part of the restructuring provision.
New provisions 526 Additions to existing provisions — Release of provisions recognized in previous years — Restructuring charges directly reflected in the consolidate income statement — Total restructuring charges during the year ended
Release of provisions recognized in previous years — (15) (15) Restructuring charges directly reflected in the consolidated income
A summary of the existing provisions for restructuring related to the Dresdner Bank Group is as follows: New Dresdner Plus During the year ended December 31, 2006, Dresdner Bank Group recorded restructuring charges of € 408 mn for the announced restructuring initiative ‘New Dresdner Plus’, which is in addition to the “Former Programs” that
The newly created division Private & Corporate Clients (“PCC”) comprises the two areas “Clients & Products” and “Advisory & Sales”. Whereas the “Advisory & Sales” unit consolidates all sales related activities of the former units “Personal Banking”, “Private & Business Banking” and “Corporate Banking”, the “Clients & Products” unit concentrates on product-related activities to implement an integrated platform for products and clients. At the same time the process flow within the branch network will be further automated, and the credit processes will be optimised by aligned workflows as well as further standardisation. Furthermore, a new client advisory concept will be implemented in order to transfer the existing advisory profiles to the requirements of the new client groups.
Our client support for multinational corporations and large clients, which have the greatest potential for capital markets products, will be integrated with Dresdner Kleinwort in the new Investment Banking Division (“IB”). In addition the client coverage follows a sectoral advisory approach with industry specific expertise. Thereby administrative activities will be reduced and concurrent functions will be eliminated. Furthermore, the trading of flow products will be consolidated and the equity business will be optimised in line with the new business model.
Former programs During the year ended December 31, 2006, Dresdner Bank Group recorded restructuring charges of € 14 mn for previously announced restructuring initiatives. Of this total, € 11 mn relates to the “New Dresdner” program. Through these “Former Programs”, Dresdner Bank Group plans to eliminate approximately 17,020 positions. Approximately 16,265 employees had been terminated and approximately 255 additional employees had contractually agreed to leave Dresdner Bank Group pursuant to the “Former Programs” as of December 31, 2006.
A summary of the changes in the provisions for restructuring of the Dresdner Bank Group’s during the year ended December 31, 2006 is: Provisions as of
Release of provisions via cash payments € mn New Dresdner Plus
Personnel costs — 299 — — — — — — 299 Contract termination
The development of the restructuring provisions reflects the implementation status of the restructuring initiatives. Based on the specific IFRS guidance, restructuring provisions are recognized earlier than they would qualify to be recognized if they were recorded under the guidance for other types of provisions. In order to reflect the timely implementation of the various restructuring initiatives, restructuring provisions, as far as they are already ‘locked in’, have been transferred to the provision type, which would have been used if there had not been a restructuring initiative in place. This applies for each single contract. For personnel costs, at the time an employee has contractually agreed to leave Dresdner Bank Group by signing either an early retirement, a partial retirement (Altersteilzeit, which is a specific type of an early retirement program in Germany), or a termination arrangement, the respective part of the restructuring provision has been transferred to provisions for employee expenses. In addition, provisions for vacant office spaces that result from restructuring initiatives have been transferred to ‘other’ provisions after the offices have been completely vacated. In this context, Dresdner Bank Group recorded releases of provisions via transfers to other provision categories of € 20 mn as of December 31, 2006.
Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding. Diluted earnings per share reflects the effect of potentially dilutive securities. As of participation certificates issued by Allianz SE were outstanding which can potentially be converted to 1,469,443 (2005: 1,469,443) Allianz shares (on a weighted basis: 1,469,443 (2005: 1,469,443) Allianz SE shares) and therefore have a dilutive effect.
Furthermore 4,868,560 (2005: 807,859) common shares from trading in derivatives on own shares have been included in the calculation of diluted earnings per share for the year ended December 31, 2006.
Reconciliation of basic and diluted earnings per share € mn € mn € mn
Numerator for basic earnings per share (net income) 7,021 4,380 2,266 Effect of dilutive securities (3) — 3 Numerator for diluted earnings per share (net income after assumed conversion) 7,018 4,380 2,269 Denominator for basic earnings per share (weighted-average shares) 410,871,602 389,756,350 365,930,584 Dilutive securities: Share-based compensation plans 335,346 493,229 729,596 Derivatives on own shares 4,868,560 807,859 —
During the year ended December 31, 2006, the weighted average number of shares does not include 730,391 (2005: 2,389,193; 2004: 18,915,201) treasury shares held by the Allianz Group.
Compensation for the Board of Management As of December 31, 2006, the Board of Management had
Pension obligations to formermembers of the Board of Management and their beneficiaries are accrued in the amount of € 47.0 mn (2005: € 38.9 mn).
Acquisition of minority interests in Assurances Générales de France and Allianz Lebensversicherungs-Aktiengesellschaft On January 18, 2007, Allianz SE announced its intention to acquire the outstanding shares in Assurances Générales de France (or “AGF”, and together with its subsidiaries, the “AGF Group”) that it does not already own. In addition, Allianz AZL Vermögensverwaltung GmbH& Co. KG a subsidiary of Allianz Deutschland AG, Allianz SE’s wholly-owned German insurance holding company, announced its intention to acquire the approximately 9% interest in Allianz Lebensversicherungs-Aktiengesellschaft (or “Allianz Leben”) that it does not already own. The aggregate volume of the transactions is expected to amount to approximately € 10.5 bn. Further details are provided on page 5 of this annual report.
Disposal of subsidiaries of Kommanditgesellschaft Allgemeine Leasing GmbH & Co. (“KGAL”) Kommanditgesellschaft Allgemeine Leasing GmbH& Co. (or “KGAL”) of which Allianz Group holds a 45% share, inmid January 2007 disposed of its shareholding in ASL Auto Service-Leasing GmbH and in Disko Group. The impact of the disposal on the results of operations of KGAL will be reflected in the first quarter 2007 results of Allianz Group.
Integration of the Allianz Group’s business operations in Italy On February 1, 2007, the Boards of Directors of RAS S.p.A., Lloyd Adriatico S.p.A. and Allianz Subalpina S.p.A. announced their intention to integrate the Allianz Group’s business operations in Italy. The integration will be achieved through the creation of a single company, Allianz S.p.A., that will operate on themarket with three different brands (“Allianz RAS”, “Allianz Lloyd Adriatico” and “Allianz Subalpina”) and three separate distribution networks.
The completion of the company integration process is expected by fall 2007, depending on both the approval at shareholders’ meetings and clearance by regulatory authorities.
Acquisition of majority in ROSNO On February 21, 2006, Allianz SE acquired approximately 49.2% of the shares in ROSNO from Sistema. Together with its own stake of approximately 47.7%, Allianz SE holds now approximately 97.0% in ROSNO, one of the top four insurance companies in Russia that is active in the property/casualty, life/ health and asset management business.
AGIS Allianz Dresdner Informationssysteme GmbH, Munich 212 100.0 Allianz Capital Partners GmbH, Munich 0.03 100.0 Allianz Capital Partners Verwaltungs GmbH, Munich 934 100.0 Allianz Dresdner Bauspar AG, Bad Vilbel 101 100.0 Allianz Global Corporate & Specialty AG, Munich 778 100.0 Allianz Global Investors Advisory GmbH, Frankfurt am Main 3 100.0 Allianz Global Investors AG, Munich 3,039 100.0 Allianz Global Investors Europe GmbH, Munich 17 100.0 Allianz Global Investors Kapitalanlagegesellschaft mbH, Frankfurt am Main 139 100.0 Allianz Immobilien GmbH, Stuttgart 5 100.0 Allianz Lebensversicherungs-Aktiengesellschaft, Stuttgart 1,411 91.0 Allianz Pensionskasse AG, Stuttgart 121 100.0 Allianz Pension Partners GmbH, Munich 0.5 100.0 Allianz Private Equity Partners GmbH, Munich 0.04 100.0 Allianz Private Krankenversicherungs-Aktiengesellschaft, Munich 340 100.0 Allianz ProzessFinanz GmbH, Munich 0.4 100.0 Allianz Versicherungs-Aktiengesellschaft, Munich 2,480 100.0 Allianz Zentrum für Technik GmbH, Munich 0.2 100.0 DEGI Deutsche Gesellschaft für Immobilienfonds m.b.H., Frankfurt am Main 23 94.0 Deutsche Lebensversicherungs-AG, Berlin 43 100.0 Dresdner Bank AG, Frankfurt am Main 8,031 100.0 Euler Hermes Kreditversicherungs-AG, Hamburg 201 100.0 MAN Roland Druckmaschinen AG, Offenbach 241 100.0 Münchener und Magdeburger Agraversicherung AG, Munich 6 59.9 Oldenburgische Landesbank Aktiengesellschaft, Oldenburg 506 89.4 Reuschel & Co. Kommanditgesellschaft, Munich 134 97.5 risklab germany GmbH, Frankfurt am Main 0.03 100.0 Vereinte Spezial Krankenversicherung AG, Munich 3 100.0 Vereinte Spezial Versicherung AG, Munich 45 100.0 1) Percentage includes equity participations held by dependent enterprises in full, even if the Allianz Group’s share in the dependent enterprise is under 100%.
Allianz China Life Insurance Co. Ltd., Shanghai 18 51.0 Allianz Egypt Insurance Company S.A.E., Cairo 5 85.0 Allianz Egypt Life Company S.A.E., Cairo 6 99.4 Allianz Elementar Lebensversicherungs-Aktiengesellschaft, Vienna 61 100.0 Allianz Elementar Versicherungs-Aktiengesellschaft, Vienna 458 100.0 Allianz Europe Ltd., Amsterdam 5,245 100.0 Allianz Fire and Marine Insurance Japan Ltd., Tokyo 0.03 100.0 Allianz General Insurance Company S.A., Athens 38 100.0 Allianz General Insurance Malaysia Berhad p.l.c., Kuala Lumpur 69 98.7 Allianz Global Corporate & Specialty France, Paris 158 100.0 Allianz Global Investors Distributors LLC, Stamford 16 100.0 Allianz Global Investors Hong Kong Ltd., Hong Kong 67 100.0 Allianz Global Investors Ireland Ltd., Dublin 1 100.0 Allianz Global Investors Korea Limited, Seoul 22 100.0 Allianz Global Investors Luxembourg S.A., Luxembourg 68 100.0 Allianz Global Investors of America L.P., Delaware 1,511 97.3 Allianz Global Investors Singapore Ltd., Singapore 4 100.0 Allianz Global Investors Taiwan (SITE) Ltd., Taipei 11 100.0 Allianz Global Risks US Insurance Company, Burbank 3,253 100.0 Allianz Hungária Biztositó Rt., Budapest 185 100.0 Allianz Insurance (Hong Kong) Ltd., Hong Kong 9 100.0 Allianz Insurance Company of Singapore Pte. Ltd., Singapore 17 100.0 Allianz Irish Life Holdings p.l.c., Dublin 328 66.4 Allianz Life Insurance Co. Ltd., Seoul 590 100.0 Allianz Life Insurance Company of North America, Minneapolis 2,611 100.0 Allianz Life Insurance Company S.A., Athens 28 100.0 Allianz Life Insurance Malaysia Berhad p.l.c., Kuala Lumpur 20 100.0 Allianz México S.A. Compañia de Seguros, Mexico 69 100.0 Allianz Nederland Asset Management B.V., Amsterdam 33 100.0 Allianz Nederland Levensverzekering N.V., Utrecht 272 100.0 Allianz Nederland Schadeverzekering N.V., Rotterdam 421 100.0 Allianz of America Inc., Wilmington 9,109 100.0 Allianz poistóvna a.s., Prague 121 100.0 1) Percentage includes equity participations held by dependent enterprises in full, even if the Allianz Group’s share in the dependent enterprise is under 100% 2) 99.99% of the voting share capital.
Allianz Re Dublin Limited, Dublin 17 100.0 Allianz Risk Transfer AG, Zurich 402 100.0 Allianz-Slovenská poist’ovna a.s., Bratislava 340 84.6 ALLIANZ SUBALPINA S.p.A. SOCIETÀ DI ASSICURAZIONI E RIASSICURAZIONI, Turin 228 98.0 Allianz Suisse Lebensversicherungs-Gesellschaft, Zurich 426 100.0 Allianz Suisse Versicherungs-Gesellschaft, Zurich 554 100.0 Allianz Tiriac Asigurari SA, Bukarest 44 51.6 Allianz Underwriters Insurance Company, Burbank 41 100.0 Allianz (UK) Limited, Guildford 733 100.0 Allianz Worldwide Care Ltd., Dublin 12 100.0 Allianz Zagreb d.d., Zagreb 17 80.1 Assurances Générales de France, Paris 7,154 60.2 Assurances Générales de France IART S. A., Paris 2,485 100.0 Assurances Générales de France Vie S. A., Paris 2,600 100.0 Assurances Générales du Laos Ltd., Laos 4 51.0 Banque AGF S. A., Paris 270 100.0 Colseguros Generales S. A., Bogota 32 100.0 Commercial Bank Allianz Bulgaria Ltd., Sofia 32 99.8 Compagnie d’Assurance de Protection Juridique S. A., Zug 14 100.0 Companhia de Seguros Allianz Portugal S. A., Lisbon 186 64.8 Dresdner Bank Luxembourg, S. A., Luxembourg 544 100.0 Dreesdner Bank (Schweiz) AG, Zurich 112 99.8 Dresdner Bank ZAO, St. Petersburg 82 100.0 Dresdner Kleinwort Group Ltd., London 45 100.0 Dresdner Kleinwort (Japan) Limited, Hong Kong 269 100.0 Dresdner Kleinwort Securities Llc, Wilmington/Delaware 71 100.0 ELVIA Reiseversicherungs-Gesellschaft AG, Zurich 191 100.0 Euler Hermes Crédito Compañia de Seguros y Reaseguros, S. A., Madrid 5 100.0 EULER HERMES SFAC. S. A., Paris 306 100.0 Eurovida, S. A. Compañia de Seguros y Reaseguros, Madrid 59 51.0 Fireman’s Fund Insurance Company, Novato 2,698 100.0 GENIALLOYD S. p. A., Milan 74 100.0 Insurance Joint Stock Company „Allianz”, Moscow 12 100.0 INVESTITORI SGR S.p.A., Milan 17 87.8 Kleinwort Benson Channel Islands Holdings Ltd., St. Peter Port/Guernsey 276 100.0 Kleinwort Benson Private Bank Ltd., London 97 100.0 Lloyd Adriatico S. p. A., Trieste 1,085 99.7 Mondial Assistance S. A. S., Paris Cedex 79 100.0 NFJ Investment Group LP, Dallas 4 100.0 Nicholas Applegate Capital Management LLC, Delaware 15 100.0 Oppenheimer Capital LLC, Delaware 7 100.0 Pacific Investment Management Company LLC, Delaware 192 85.0 Privatinvest Bank AG, Salzburg 14 74.0 PT Asuransi Allianz Life Indonesia p.l.c., Jakarta 20 99.8 PT Asuransi Allianz Utama Indonesia Ltd., Jakarta 19 75.4 RAS ASSET MANAGEMENT Socièta di gestione del risparmio S. p. A., Milan 46 100.0 RAS Tutela Giudiziaria S. p. A., Milan 11 100.0 RB Vita S. p. A., Milan 230 100.0 1) Percentage includes equity participations held by dependent enterprises in full, even if the Allianz Group’s share in the dependent enterprise is under 100%. 2) Controlled by the Allianz Group.
RCM Capital Management LLC, San Francisco 23 100.0 RCM (UK) Ltd., London 14 100.0 Riunione Adriatica di Sicurtà S.p.A., Milan 2,815 100.0 TU Allianz Polska S.A., Warsaw 75 100.0 TU Allianz Zycie Polska S.A., Warsaw 25 100.0 Veer Palthe Voûte NV, Gouda 42 100.0 Wm. H McGee & Co. Inc., New York 4 100.0 1) Percentage includes equity participations held by dependent enterprises in full, even if the Allianz Group’s share in the dependent enterprise is under 100%.
GEA Group AG, Bochum 333 10.1 1,585 (67) 12/31/2005 Heidelberger Druckmaschinen AG, Heidelberg 378 12.7 1,138 135 03/31/2006 Industrial and Commercial Bank of China Limited, Beijing 3,034 1.9 27,049 3,541 12/31/2005
Disclosure of equity investments Information according to clause 313 (2) German Commercial Code is published together with the consolidated financial statements in the German Electronic Federal Gazette as well as on the Company’s website.
We have audited the consolidated financial statements prepared by Allianz Societas Europaea, Munich – comprising the balance sheet, the income statement, statement of changes in equity, cash flow statement and the notes to the consolidated financial statements – together with the groupmanagement report for the business year from January 1 to December 31, 2006. The preparation of the consolidated financial statements and the groupmanagement report in accordance with IFRS, as adopted by the EU, and the additional requirements of German commercial law pursuant to § 315a Abs. 1 HGB and supplementary provisions of the articles of incorporation are the responsibility of the parent company’s management. Our responsibility is to express an opinion on the consolidated financial statements and on the groupmanagement report based on our audit.
Associated enterprises All enterprises, other than affiliated enterprises or joint ventures, in which the Group has an interest of between 20% and 50%, regardless of whether a significant influence is actually exercised or not.
Available-for-sale investments Available-for-sale investments are securities which are neither held to maturity nor have been acquired for sale in the near term; available-for-sale investments are shown at fair value on the balance sheet.
Corridor approach With defined benefit plans, differences come about between the actuarial gains and losses which, when the corridor approach is applied, are not immediately recognized as income or expenses as they occur. Only when the cumulative actuarial gains or losses fall outside the corridor is redemptionmade from the following year onwards. The corridor is 10% of the present value of the pension rights accrued or of themarket value of the pension fund assets, if this is higher.
Defined benefit plans Under defined benefit plans, the enterprise or an external pension fund pledges to pay the beneficiary a benefit at a particular level; unlike the defined contribution plans, the level of the contributions payable by the enterprise are not fixed from the start. To determine the expense over the period, accounting regulations require that actuarial calculations are carried out according to a fixed set of rules.
Defined contribution plans Under retirement plans in the form of defined contribution plans, the enterprise pledges to pay the beneficiary benefits at a pre-defined level. This effectively releases the enterprise from any further obligations beyond the contributions payable and at the same time precludes the enterprise from participating in the investment success of the contributions.
Derivative financial instruments (derivatives) Financial contracts, the values of whichmove in relationship to the price of an underlying asset. Derivative financial instruments can be classified in relation to their underlying assets (e.g. interest rates, share prices, exchange rates or prices of goods).
Earnings per share (basic/diluted) Ratio calculated by dividing the consolidated profit or loss for the year by the average number of shares issued. For calculating diluted earnings per share the number of shares and the profit or loss for the year are adjusted by the dilutive effects of any rights to subscribe for shares which have been or can still be exercised. Subscription rights arise in connection with issues of convertible bonds or share options.
Equity consolidation The relevant proportion of cost for the investment in a subsidiary is set off against the relevant proportion of the shareholders’ equity of the subsidiary.
Financial assets carried at fair value through income Financial assets carried at fair value through income include debt and equity securities as well as other financial instruments (essentially derivatives, loans and preciousmetal holdings) which have been acquired solely for sale in the near term. They are shown in the balance sheet at fair value.
Functional currency The functional currency is the currency of the primary economic environment in which the entity operates i.e. the one in which the entity primarily generates and expends cash.
Futures Standardized contracts for delivery on a future date, traded on an exchange. Normally, rather than actually delivering the underlying asset on that date, the difference between closingmarket value and the exercise price is paid.
Held-to-maturity investments Held-to-maturity investments comprise debt securities held with the intent and ability that they will be held-tomaturity. They are valued at amortized cost.
Loss ratio Represents claims and insurance benefits incurred (net) divided by premiums earned (net).
New cost basis Historical cost adjusted by depreciation to reflect permanent diminution in value.
risk (e.g. variable annuities), only that part of the premiums used to cover the risk insured and costs involved is treated as premium income.
Variable annuities The benefits payable under this type of life insurance depend primarily on the performance of the investments in amutual fund. The policyholder shares equally in the profits or losses of the underlying investments.
Dr. Henning Schulte-Noelle Chairman Chairman of the Supervisory Board Allianz SE
Professor Dr. Peter Gruss President Max-Planck-Gesellschaft zur Förderung der Wissenschaften e.V.
Dr. Jürgen Hambrecht Chairman of the Board of Management BASF AG
Professor Dr. h. c. Hans-Olaf Henkel Senior Advisor, Bank of America
Dr. Hans-Peter Keitel Chairman of the Board of Management Hochtief AG
Professor Dr. Klaus Pohle until April 2006 Deutsches Rechnungslegungs Standards Committee e. V. (German Accounting Standards Committee)
Dr. Manfred Schneider since January 1, 2007 Chairman of the Supervisory Board Bayer AG
Dr. Dr. h.c. Heinrich von Pierer Chairman of the Supervisory Board Siemens AG
Norbert Blix until October 13, 2006 Membership in other statutory supervisory boards in Germany Allianz Versorgungskasse VVaG (Vice Chairman)
Dr. Diethart Breipohl until October 13, 2006 Membership in other statutory supervisory boards in Germany Continental AG, KarstadtQuelle AG, KM Europa Metal AG (Chairman) Membership in comparable *) supervisory bodies Assurances Générales de France, Atos Origin S. A., LCL (Le Crédit Lyonnais), Euler Hermes S. A.
Claudia Eggert-Lehmann Membership in other statutory supervisory boards in Germany Dresdner Bank AG
Peter Haimerl until October 13, 2006 Membership in other statutory supervisory boards in Germany Dresdner Bank AG (Vice Chairman)
Igor Landau Membership in other statutory supervisory boards in Germany adidas AG, Dresdner Bank AG (until December 31,
Membership in comparable *) supervisory bodies Essilor S. A., HSBC France, Sanofi-Aventis S. A.
Michael Diekmann Membership in other statutory supervisory boards in Germany BASF AG, Deutsche Lufthansa AG, Linde AG (Vice Chairman) Membership in Group bodies Allianz Deutschland AG (Chairman), Allianz Global Investors AG (Chairman), Dresdner Bank AG (Chairman) Membership in comparable*) supervisory bodies Membership in Group bodies Assurances Générales de France (Vice President), Riunione Adriatica di Sicurtà S. p. A. (Vice President)
Dr. Paul Achleitner Membership in other statutory supervisory boards in Germany Bayer AG, RWE AG Membership in Group bodies Allianz Deutschland AG, Allianz Global Investors AG, Allianz Lebensversicherungs-AG Membership in comparable*) supervisory bodies Membership in Group bodies Allianz Elementar Lebensversicherungs-AG (Chairman), Allianz Elementar Versicherungs-AG (Chairman), Allianz Investmentbank AG (Vice Chairman)
Jan R. Carendi Membership in comparable*) supervisory bodies Membership in Group bodies Allianz Life Insurance Company of North America (Chairman), Fireman’s Fund Insurance Company (Chairman)
Enrico Cucchiani Membership in comparable*) supervisory bodies ACEGAS-APS S. p. A., Banca Antonveneta Membership in Group bodies Allianz Companía de Seguros S. A. Barcelona (Vice Chairman), Allianz Elementar Lebensversicherungs-AG (Vice Chairman), Allianz Elementar Versicherungs-AG (Vice Chairman), Allianz Investmentbank AG, Allianz Suisse Lebensversicherungsgesellschaft, Allianz Suisse Versicherungsgesellschaft, Companhia de Seguros Allianz Portugal S. A. (Vice Chairman), Koc Allianz Hayat ve Emeklilik A. S., Koc Allianz Sigorta T. A. S., Lloyd Adriatico S. p. A. (Chairman), Riunione Adriatica di Sicurtà S. p. A.
Dr. Joachim Faber Membership in other statutory supervisory boards in Germany Bayerische Börse AG Membership in Group bodies Allianz Beratungs- und Vertriebs-AG (Vice Chairman), Deutscher InvestmentTrust Gesellschaft für WertpapieranlagenmbH (Chairman) Membership in comparable*) supervisory bodies Membership in Group bodies Assurances Générales de France, Riunione Adriatica di Sicurtà S. p. A.
Dr. Gerhard Rupprecht Membership in other statutory supervisory boards in Germany Fresenius AG, Heidelberger Druckmaschinen AG Membership in Group bodies Allianz Beratungs- und Vertriebs-AG (Chairman), Allianz Lebensversicherungs-AG (Chairman), Allianz Private Krankenversicherungs-AG (Chairman), Allianz Versicherungs-AG (Chairman) Membership in comparable *) supervisory bodies Membership in Group bodies Allianz Life Insurance Co. Ltd. Seoul
Dr. Herbert Walter Membership in other statutory supervisory boards in Germany Deutsche Börse AG, E.ON Ruhrgas AG Membership in Group bodies Allianz Beratungs- und Vertriebs-AG Membership in comparable *) supervisory bodies Banco Popular Español S. A., Banco Portugues de Investimento S. A.
B Banca Popolare Veneta 44 Banking 54-57 Brazil 104 Business model 88-90
F Financial calendar 31 Fireman’s Fund 43, 106 Four Seasons Health Care Ltd. 37, 50, 64
Remuneration of the Board of Management 15-19 „Riester” products 54 Risk capital 75 Risk Report 74-87
OTHER EUROPE – WESTERN AND SOUTHERN EUROPE Austria � Allianz Elementar Lebensversicherungs-
Spain �� �� Allianz Compañía de Seguros y Reaseguros S.A. 99.9%
� � AGF Allianz Argentina Compañía de Seguros Generales S.A. 100.0%