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To Our Investors 2 Letter to the Investor 6 Supervisory Board Report 12 Members of the Board of Management 13 International Executive Committee 15 Members of the Supervisory Board 16 Allianz Share 20 Services for Allianz Investors
Your company always takes a cautious, conservative stance and, above all, seeks stability – today more than ever, given the high volatility in the market, continuing uncertainty regarding future regulations and accounting rules as well as rapidly changing customer behavior. We do not base our decisions on fads and quick, ephemeral fixes. We
Another major issue is Solvency II, the new capital requirements for insurers. They are expected to take effect in 2013 and are intended to make the industry better able to withstand crises while better protecting customers. And yet, unlike banks and other providers of financial services, the insurance business remained stable during the crisis. If we are now forced to come up with additional, unnecessary capital because of excessive caution, this will cost a great deal of money and will hurt everyone. Customers will be forced to accept higher prices. In their old age, holders of life insurance policies will receive lower payouts. Salary increases for employees, government tax receipts and dividend payments to you as shareholders could be more modest. We still don’t know how the various proposed regulations will shape up in the end, but we are working hard to persuade supervisory agencies and regulators that there is no reason to penalize our industry and its beneficiaries.
Our holistic entrepreneurial approach has long been recognized and resulted in our stock’s inclusion in major sustainability indices, including the Dow Jones Sustainability Index and the FTSE4Good. These indices, as well as other research results, regularly rank Allianz in top positions, demonstrating that we are considered one of the most sustainable insurance groups worldwide. This is testimony to the attractiveness of Allianz shares for investors interested in sustainable investments. More information on sustainability in the Allianz Group is provided in the Group Management Report on page 64 of this Annual Report and on the internet at www.allianz.com/responsibility.
Corporate Governance Report and Statement on Corporate Management Good Corporate Governance and transparency are key to gaining and holding the trust of our shareholders, business partners and employees.
The Chairman of the Board of Management coordinates the Board’s activities. As a consequence of the transformation into Allianz SE, the Chairman’s position was strengthened under the Statutes by conferring a right of veto of the Board of Management’s decisions. If he objects to a decision, that resolution is not adopted. However, the Chairman of the Board of Management cannot impose any decision against the majority vote on the Board of Management. In the event of a tie, the Chairman casts the deciding vote.
The responsibilities and composition of the Board of Management’s committees are set out in the respective rules of procedure, which require the approval of the Board of Management.
Certain important decisions of the Board of Management require approval by the Supervisory Board. Some of these approval requirements are stipulated by law or by decisions of the General Meeting. These include approval for the Board of Management to increase the share capital (Authorized Capital), acquire treasury stock, or issue convertible bonds or bonds with warrants. In addition to these approval requirements, in accordance with § 9 of the Statutes, the Supervisory Board must also approve intercompany agreements and the launch of new business segments or closure of existing ones, insofar as such actions are material to the Group. Approval is also required for acquiring companies and holdings in companies as well as divestments of equity stakes, which result in a company leaving the Group. Such transactions, unless qualifying as a financial investment, are subject to approval provided that, in a particular case, the market value or, in the absence of the market value, the book value of the acquired or divested investment amounts to at least 10 % of the equity in the most recent consolidated balance sheet. The Supervisory Board’s rules of procedure require its approval for the appointment of the member of the Board of Management responsible for employment and social welfare.
The size of the Supervisory Board is stipulated by the Statutes as twelve members appointed by the General Meeting. Six of these twelve members are appointed on the proposal of the employees. The General Meeting is bound to accept the proposal of the employees.
“Declaration of the Board of Management and the Supervisory Board regarding the Recommendations of the “Government Commission on the German Corporate Governance Code” in accordance with § 161 of the German Stock Corporation Act (Aktiengesetz)
Essential agreements of Allianz SE with change of control clauses and compensation agreements providing for takeover scenarios
For full details on Pensions, please see the pension discussion, table and footnotes on page 42.
1 Due to changes in the remuneration system as of January 1, 2010, the variable remuneration components for 2010 are weighted differently from those applying to 2009. The 2010 and 2009 values are therefore of limited comparability relative to the performance achievement. The remuneration system in use until December 31, 2009 is disclosed in the Annual Report 2009 (pages 17ff.).
Loans to members of the Board of Management As of December 31, 2010, there were no outstanding loans granted by Allianz Group companies to members of the Board of Management. When granted, loans and overdrafts are provided according to standard market conditions or the conditions prevailing for Allianz employees. They do not involve any more than normal risks of repayment and do not provide any other favorable features.
– On December 15, 2010 the Supervisory Board approved a base salary adjustment for those members of the Board of Management who had not received an increase since 2006: the base salaries of Clement B. Booth, Enrico Cucchiani, Dr. Joachim Faber and Dr. Werner Zedelius shall each be increased by € 50,000, which leads to a base salary of € 750,000 as of January 1, 2011.
The duties of the Group-level Compensation Committee (Group Compensation Committee or GCC) are to assist the Allianz SE Board in discharging its responsibilities for all compensation matters relating to the Chief Executive Officers and Board Members of the International Executive Committee (IEC) companies and the heads of the major functions of Allianz SE. In addition, the committee and representatives of companies classified as significant according to the German Insurance Remuneration Regulation effective October 13, 2010 have identified and approved a list of other key executives for additional review. These executives may either have a material impact on the company’s financial or risk positions, or lead critical operations of the Group.
Performance measurement for variable remuneration will include evaluations of appropriate solvency ratios.
The “One” Concept – Guided by our strategy, in recent years we have transformed the existing Allianz organizational structure into more customer and market­oriented entities. With the “One” concept, we are now taking the next step and placing the customer at the center of our communications by dealing with real people, sharing real experiences, advice and knowledge.
Source: Focus Media Research, Infoadex, Marktest, Kantar, TNS Media Intelligence www.allianz.com/annualreport
Employee Engagement In 2010, we carried out for the first time a globally standardized employee survey which enables us to compare results across our subsidiaries. The results are now taken into account in the remu­ neration of the Board of Management and affect part of the variable remuneration for top management.
Diversity Given an aging society and a foreseeable shortage of skilled per­ sonnel, it is necessary to realize the workforce’s full potential. Embracing diversity begins with our international workforce and cross­border cooperation. Promoting women is also part of our bid to increase diversity. Overall, 32 % of positions across all manage­ ment levels in the Allianz Group were held by women 1.
Basic Diluted 1 Net income from continuing operations. 2 Net income. 3 For further information please refer to note 51 of our consolidated financial statements.
As of December 31, 2010, our eligible capital for solvency purposes 5, required for our insurance segments and our Banking and Asset Management businesses, was € 39.6 billion, including off-balance sheet reserves 6 of € 2.1 billion, surpassing the minimum legally stipulated level by € 16.7 billion. This margin resulted in a cover ratio of 173 % as of December 31, 2010, an increase of 9 percentage points compared to December 31, 2009. Eligible capital as of December 31, 2010 also includes a deduction for proposed dividends of € 2.0 billion for the fiscal year 2010, which represents 40 % of net income attributable to shareholders. Our solvency position is strong.
Income (loss) from continuing operations before income taxes 7,173 5,190 5,599
– We distribute our products via a broad network of self-employed agents, brokers, banks and direct channels.
In South America gross premiums rose by 16.7 %. All countries in the region contributed positively to the gross premiums written of € 1,563 million, in particular Brazil, where growth stemmed mainly from Health and other non-motor commercial lines. In addition, our motor business in Brazil recovered from the tariff pressure in the first half of 2010 and achieved doubledigit growth. Including a positive foreign currency translation effect of € 220 million, the nominal growth was 35.8 %.
– In 12 countries we are one of the market leaders based on premiums.
Total premiums in Belgium/Luxembourg amounted to € 1,160 million.4 Growth of 39.1 % was driven by high unit-linked sales resulting from good distribution partnerships in Luxembourg and an increase in consumer demand for long-term investments in Belgium.
3 Before elimination of transactions between Allianz Group companies in different geographic regions and different segments.
2 Statutory premiums are gross premiums written from sales of life insurance policies, as well as gross receipts from sales of unit-linked and other investment-oriented products, in accordance with the statutory accounting practices applicable in the insurer’s home jurisdiction.
89 58 Your Allianz 65 Management Discussion and Analysis 118 Risk Report and Financial Control
Banking operations contributed € 101 million to this improvement. Holding & Treasury and Alternative Investments losses increased slightly compared to the previous year.
In these times of high uncertainty we must strive not only to protect the investments of our shareholders but continue to provide attractive returns and dividends.
Operating profit in the range of € 1.1 billion to € 1.3 billion. Operating profit of € 2.1 billion, surpassed the upper end of our target range by € 0.8 billion, due to strong growth in assets under management and exceptionally high performance fees.
As always we must strive not only to protect the investments of our shareholders but continue to provide attractive returns and dividends.
Gross premiums written are expected to grow slightly in 2011 after two years without positive growth effects (based on internal growth). The anticipated growth will be driven by the positive development in our Growth Markets, Global Insurance Lines & Anglo Markets as well as the improvement of some of our core markets such as Italy. As underwriting prices in Property-Casualty insurance depend on market cycles, which vary from country to country, and with the expectation that soft market conditions will continue in some of our core markets in 2011, we will adhere to our strict underwriting discipline. We will be prepared to let top line go in these markets if target margins are not being achieved.
Financing and Liquidity Development All external financing activities of the Allianz Group are centralized at Allianz SE. The potential sources of financing include the issuance of commercial papers, medium- and long-term notes and ordinary shares. In addition, Allianz SE has access to bank loans and longterm credit lines, which provide flexibility and allow Allianz to fine tune its funding structure.
Serving “today’s customer”: The past two decades saw the proliferation of mobile phones, laptop computers, broadband connections and email traffic mainly driven by younger, affluent, higher educated and predominantly male members of so-called “ developed societies”. We have entered an age where the mastery and use of information technologies and devices is effectively part of all our stakeholders’ DNA, no matter where they live, work and interact with Allianz. Today, our customers, investors and partners want to make their own decisions and expect easy, user-friendly access to information. While we continue to invest in electronic solutions in the front- and back-office in order to improve automation and efficiency, we predominantly aim to provide real value to our customers and investors.
10-year interest rates of all major countries decreased during the first nine months of 2010. In the fourth quarter of 2010 this trend reversed as economies showed signs of recovery. Overall interest rates were still low in 2010, even lower than 2009, putting pressure on interest and similar income.
At € 844 million impairments (net), decreased by € 1,888 million compared to 2009. In the first quarter of 2009, we had to take equity impairments of considerable size. In 2010, impaired equity investments mainly stemmed from the banking sector.
The main components of the Asset Management’s asset base are cash and cash pool assets and debt securities. In 2010 the asset base increased by € 0.3 billion to € 3.3 billion.
Further potential sources of short-term funding, allowing the Allianz Group to fine tune its capital structure, are bank credit lines as well as letter of credit facilities.
financial assets and liabilities held for trading partially offset these positive effects.
Total revenues comprise statutory gross premiums written in Property-Casualty and Life/Health, operating revenues in Asset Management and total revenues in Corporate and Other (Banking).
For the benefit of shareholders and policyholders alike, our aim is to ensure that the Allianz Group is adequately capitalized at all times, even after significant adverse events, and that all operating entities meet their respective capital requirements. Risk capital and cost of capital are important aspects for making business decisions.
58 Your Allianz 65 Management Discussion and Analysis 118 Risk Report and Financial Control
The overview below presents selected ratings, assigned to Allianz SE by major rating agencies, as of December 31, 2010. All ratings remained stable compared to the previous year.
1 Includes ratings for securities issued by Allianz Finance II B.V. and Allianz Finance Corporation.
Within the old framework, internal risk capital was aggregated across the different sources of risk and levels of our portfolio hierarchy up to the Group level, based on pre-selected adverse scenarios. In the new framework, we significantly enhanced the risk aggregation by implementing a Gaussian Copula approach to determine the dependency structure of all sources of risk. This approach allows for a more granular modeling of dependencies and thereby better reflects the diversification effect across all sources of risks and regions. In addition, we now use extended historical market data to estimate market correlations.
Our internal risk capital model considers both concentration and correlation when aggregating results across the different levels of our portfolio hierarchy up to the Group level, in order to reflect that not all potential worst case losses are likely to be realized at the same time. This effect is known as diversification. Managing diversification forms a central element of our risk management framework. The Allianz Group strives to diversify the risks to which it is exposed in order to limit the impact of any single source of risk and to help ensure that the positive developments of some businesses neutralize the possibly negative developments of others.
Unexpected financial losses due to the inadequacy of premiums for catastrophe and non-catastrophe risks, due to the inadequacy of reserves or due to the unpredictability of mortality or longevity.
By design, our internal risk capital model takes into account the following sources of risk, classified as risk categories per segment:
Our primary exposures to foreign currency risk are related to the U.S. Dollar, Swiss Franc, Australian Dollar and South Korean Won.
In the Property-Casualty and Life/Health segments, credit risk arises from reinsurance counterparties as well as from issuers and counterparties related to our investment activities. For the Corporate and Other segment, our internal risk capital model covers only investment credit risk, as reinsurance activities are generally allocated to the Property-Casualty segment. We do not consider credit risk relating to our Banking operations to be significant at the Group level.
other financial measures to further mitigate our exposure to credit risk. As of December 31, 2010, 78 % (2009: 76 %) of the Allianz Group’s reinsurance recoverables were distributed among reinsurers that had been assigned at least an “A” rating by Standard & Poor’s. Non-rated reinsurance recoverables represented 21 % (2009: 23 %) of the total reinsurance recoverables as of December 31, 2010. Reinsurance recoverables without Standard & Poor’s rating include exposures to brokers, companies in run-off and pools, where no rating is available, and companies rated by A.M. Best.
Credit risk – investment As part of our insurance operations, we collect premiums from our customers and invest them to a great extent in fixed income instruments. These investment portfolios ultimately cover the future claims to our customers. We also need to invest shareholders’ capital, which is required to support the risks underwritten. As a result, we are exposed to credit risk.
Premium risk As part of these operations, we receive premiums from our customers and provide insurance protection to them. If the premiums do not cover the claims incurred due to unexpected events over a time horizon of one year, we will face losses (“premium risk”), i. e. the underwriting profitability is lower than expected. Changes in profitability over time are measured based on loss ratios and their fluctuations.1
Underwriting in the corporate and commercial businesses Our sound Group-wide underwriting framework forms the basis for adequate risk taking and management decisions and helps us proactively limit individual potentially significant risks including reputational risks. The framework defines common minimum requirements for our underwriting activities in the international corporate and commercial PropertyCasualty insurance business, both for direct and reinsurance business.
Dedicated minimum standards protect Allianz from taking unwanted or excessive risks. They determine non-admitted coverages and define clear approval requirements at different levels of the Allianz Group. In particular, they specify all activities that require approval by or reporting to the Group Insurance Risk Committee, which is a sub-committee of the Group Risk Committee. These standards also document delegated underwriting authorities and lay down mandatory rules for individual policies. Exceptions require approval by the local Chief Underwriting Officer and reporting to the Group Insurance Risk Committee.
In general, our operating entities constantly monitor the development of reserves for insurance claims on a line of business level.3 Results are discussed by local reserve committees at least on a quarterly basis. If necessary, we re-estimate reserves in line with actuarial standards. In addition, the operating entities generally conduct annual reserve uncertainty analyses. The approaches applied are similar to the methods used for reserve risk calculations. The Allianz Group performs regular independent reviews 1 Based on most recent estimates, exposures are calculated using either vendor or proprietary models developed by in-house experts. All models are subject to uncertainty arising from scientific assumptions and underlying data.
Corporate and Other segment On the Group level, liquidity risks arise mainly from capital requirements of subsidiaries and necessary refinancing of expiring strategic financial liabilities.
Strategic risk is the risk of an unexpected negative change in the company value, arising from the adverse effect of management decisions regarding business strategies and their implementation. This risk reflects the compatibility between strategic goals, the business strategies and the resources deployed to achieve those goals. Strategic risk also includes the management’s ability to effectively analyze and react to external factors (e.g. market conditions), which could affect the future direction of the relevant operating entity or the Group as a whole.
Loans and advances to banks and customers 10 122,678 128,996 116,990 Financial assets for unit-linked contracts 64,847 56,963 50,450
Income from fully consolidated private equity investments 32 1,701 1,910 2,549
For further details concerning income taxes relating to components of the other comprehensive income please see note 43.
Fi na nc ia l S ta te m en ts 2 Summary of significant accounting policies
Fi na nc ia l S ta te m en ts made for credit risks. In particular when observable market inputs are not available, the use of estimates and assumptions may have a high impact on the valuation outcome. Please refer to note 3, where the processes and controls for ensuring an appropriate use of estimates and assumptions is explained.
No active market – equity instruments: Equity securities are measured at fair value where the ownership interest is less than 20 % and the fair value is reliably measurable. If the fair value cannot be measured reliably, unquoted equity instruments and derivatives linked to such instruments are stated at cost until a fair value can be measured reliably. These financial instruments are subject to the normal impairment procedures.
Amortized cost of financial instruments The amortized cost of a financial instrument is the amount at which the financial instrument is measured at initial recognition minus principal repayments, plus or minus the cumulative amortization using the effective interest rate method of any difference between that initial amount and the redemption amount and minus any subsequent reduction for impairment or uncollectability.
– Financial assets held for trading Fair value – Financial assets designated at fair value through income Fair value
For unit-linked investment contracts without discretionary participation features (DPF) accounted for under IAS 39 at fair value, acquisition costs are deferred in accordance with IAS 18, Revenue, if the costs are incremental. Acquisition costs are incremental if the costs would not have been incurred if the related contracts would not have been issued. For non-unit-linked investment contracts without discretionary participation features accounted for under IAS 39 at amortized cost, acquisition costs that meet the definition of transaction costs under IAS 39, are considered in the aggregate policy reserves.
Income taxes Income tax expense consists of current taxes on taxable income actually charged to the individual Allianz Group companies and changes in deferred tax assets and liabilities. Expense and income from interest and penalties to or from tax authorities are included in current taxes. The calculation of deferred taxes is based on temporary differences between the Allianz Group’s carrying amounts of assets or liabilities in its consolidated balance sheet and their tax bases, on unused tax credits and on tax loss carry forwards. The tax rates used for the calculation of deferred taxes are the local rates applicable in the countries concerned; changes to tax rates which have been substantively enacted prior to or as of the consolidated balance sheet date are taken into account. Deferred tax assets are recognized only to the extent it is probable that sufficient future taxable income will be available for their realization.
– Under the former version of IFRS 3, if control was achieved in stages, it was required to measure at fair value every asset and liability at each step for the purpose of calculating additional goodwill. The revised version requires that goodwill is measured once when control is obtained. After gaining control, no additional goodwill is recognized related to the additional ownership interests acquired. Any previously held equity interest is remeasured to fair value at the date of obtaining control with the difference being recorded in the consolidated income statement.
– Acquisition-related costs are generally recognized as expenses and are not included in goodwill.
As reported € mn € mn € mn € mn € mn € mn
LIABILITIES AND EQUITY Financial liabilities carried at fair value through income 6,743 (1,852) 4,891 6,244 (2,113) 4,131 Liabilities to banks and customers 21,248 — 21,248 18,451 — 18,451
Participation certificates and subordinated liabilities 9,347 — 9,347 9,346 — 9,346
Expenses from fully consolidated private equity investments (2,142) — (2,142) (2,470) — (2,470)
— Sale to third party 2010 Significant disposals Alba Allgemeine Versicherungs-Gesellschaft AG (Alba), Basel, Phenix Compagnie d’assurances SA (Phenix), Lausanne and Phenix Compagnie d’assurances sur la vie SA (Phenix Vie), Lausanne On November 1, 2010, the Allianz Group sold Alba, Phenix and Phenix Vie. The impact of the disposal, net of cash disposed, on the consolidated statement of cash flows for the year ended December 31, 2010, was: € mn
Gross premiums written 11,292 11,432 11,485 13,094 12,950 13,745 Ceded premiums written (1,956) (2,133) (2,130) (1,356) (1,452) (1,793) Change in unearned premiums 18 (58) (75) (18) 100 131 Premiums earned (net) 9,354 9,241 9,280 11,720 11,598 12,083 Interest and similar income 1,180 1,185 1,500 1,037 1,002 1,414 Operating income from financial assets and liabilities carried at fair value through income (net) 28 37 8 60 115 (8)
Operating realized gains/losses (net) 42 57 37 — — — Fee and commission income 131 182 350 33 49 55 Other income 12 4 242 1 10 14 Operating revenues 10,747 10,706 11,417 12,851 12,774 13,558
As of December 31, 2010, compulsory deposits on accounts with national central banks under restrictions due to required reserves from the European Central Bank totaled € 279 mn (2009: € 198 mn).
Available-for-sale investments 318,315 279,045 Held-to-maturity investments 3,987 3,475 Funds held by others under reinsurance contracts assumed 1,117 1,193 Investments in associates and joint ventures 2,527 3,025 Real estate held for investment 8,672 7,514
1 In 2010, € 2,050 mn were reclassified from short-term investments to cash and cash equivalents at the U.S. subsidiaries.
As of December 31, 2010, the percentage of PVFP that is expected to be amortized in 2011 is 13.02 % (12.01 % in 2012, 10.51 % in 2013, 9.26 % in 2014 and 8.37 % in 2015).
Cost as of January 1, 4,008 4,136 4,847 Accumulated depreciation as of January 1, (1,092) (1,014) (1,139) Carrying amount as of January 1, 2,916 3,122 3,708
Allianz Bank Polska S.A. 247 — Real estate held for investment (Property-Casualty) 22 — Real estate held for investment (Life/Health) 24 — Real estate held for own use (Property-Casualty) 6 —
Cash generating units in the Property-Casualty segment are: – German Speaking Countries, – Europe, including France, the Netherlands, Belgium,
As of December 31, 2003 & Prior € mn € mn € mn € mn € mn € mn € mn € mn € mn
Four years later 41,315 43,183 43,248 Five years later 41,187 43,086 Six years later 41,181 Cumulative surplus (deficiency)
The Allianz Group estimates that loss and LAE reserves consist of approximately 10 % short-tail, 50 % mediumtail and 40 % long-tail business.
Other 2 3,598 3,638 4,201 Case Reserves 2,221 2,129 2,064 IBNR Reserves 1,377 1,509 2,137
2 Other comprises primarily Package / Multiple Perils, Legal Protection, Aviation and Travel Insurance lines of business.
Credit insurance Credit insurance is underwritten in the Allianz Group by Euler Hermes. During 2010, Euler Hermes experienced favorable development of € 199 mn net of reinsurance mainly driven by the recovery in the economic environment during 2010 resulting in less insolvencies than expected for France, Germany, U.K. and Italy.
Asbestos and environmental gross loss and loss adjustment expenses € mn € mn € mn
Other changes 2 (338) 1 1,416 3 86 1 466 As of December 31, 138,588 54,860 132,774 50,948 1 For the year ended December 31, 2010, includes changes of shadow accounting of € (9) mn (2009: € 87 mn). 2 Includes for the year ended December 31, 2010, transfers from participating life insurance contracts to traditional long-duration insurance contracts of € 270 mn. 3 Includes transfers from universal life-type insurance contracts to traditional long-duration insurance contracts of € 913 mn.
Furthermore, all of the Allianz Group’s annuity policies issued in the U.S.A. meet the criteria for classification as insurance contracts under IFRS 4, because they include options for contract holders to elect a life-contingent annuity. These contracts currently do not expose the Allianz Group to significant longevity risk, nor are they expected to do so in the future, as the projected and observed annuitization rates are very low. Additionally, many of the Allianz Group’s traditional contracts issued in France and Italy do not incorporate significant insurance risk, although they are accounted for as insurance contracts because of their discretionary participation features. Similarly, a significant portion of the Allianz Group’s unit-linked contracts in France and Italy do not incorporate significant insurance risk.
As a result of the considerable diversity in types of contracts issued, including the offsetting effects of mortality risk and longevity risk inherent in a combined portfolio of life insurance and annuity products, and the geographic diversity of the Allianz Group’s Life/Health segment, as well as the substantial level of policyholder participation in mortality/morbidity risk in certain countries in Western Europe, the Allianz Group does not believe its Life/Health segment has any significant concentrations of insurance risk, nor does it believe its net income or shareholders’ equity is highly sensitive to insurance risk.
Deposits retained for reinsurance ceded 2,320 2,547 Derivative financial instruments used for hedging that meet the criteria for hedge accounting and firm commitments 225 310 Financial liabilities for puttable equity instruments 3,111 3,451 Other liabilities 6,226 5,724
Further, as of December 31, 2010, Allianz SE had a conditional capital in the amount of € 250,000,000 (97,656,250 shares) (Conditional Capital 2010). This conditional capital increase will only be carried out to the extent that conversion or option rights attached to bonds which Allianz SE or its group companies have issued against cash payments according to the resolution of the general meeting of May 5, 2010, are exercised, or that conversion obligations under such bonds are fulfilled, and only insofar as no other methods are used in serving these rights.
Real estate held for investment 35 14 54 Loans and advances to banks and customers 1 — —
Investment management expenses (466) (394) (429) Depreciation of real estate held for investment (171) (174) (165) Other expenses for real estate held for investment (190) (187) (177)
Realized losses from disposals of real estate held for own use (3) — (1) Impairments of real estate held for own use — — (9)
Tax losses carried forward are scheduled according to their expiry periods as follows: € mn >10 years 226 Unlimited 9,572 Total 10,829
Level 1 Financial instruments for which the fair value is determined by using quoted prices (unadjusted) in active markets for identical assets or liabilities are classified into this category. According to IAS 39 a financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available and those prices represent actual and regularly occurring market transactions on an arm’s length basis.
Certain government and government agency bonds were transfered from Level 1 to Level 2 during the year ended December 31, 2010 because of changes in the assessment of the liquidity of these bonds.
Equity securities within financial assets designated at fair value through income and available-for-sale investments mainly comprise private equity fund investments of the Allianz Group. Private equity fund investments are usually priced on net asset values calculated by the fund asset manager and are thus based on unobservable market data. The fund asset manager prices the underlying single portfolio companies generally on discounted cash flow or multiple approaches. The access to company specific data is the limitation with regard to valuation of the fund investments. Furthermore, any transaction of a fund, thus a further investment or divestment, has an impact on the sensitivity of a fund valuation. Due to these constraints a reasonable sensitivity calculation is not feasible.
With the sale of Dresdner Bank becoming effective on January 12, 2009, Allianz terminated the indemnification undertaking issued in 2001 in favor of the Federal Association of German Banks with respect to Dresdner Bank. As a result, the indemnification is only relevant for supporting measures that are based on facts that were already existing at the time of the termination.
Stand-by facilities 28 26 Guarantee credits 89 101 Mortgage loans/Public-sector loans 59 68
Change in defined benefit obligation Defined benefit obligation as of January 1, 13,727 12,247 Service cost 340 288 Interest cost 693 695 Plan participants’ contributions 72 68
The fair value of the underlying M-options was measured using the Black-Scholes option-pricing model. Volatility was derived in part by considering the average historical and implied volatility of a select group of peers. The expected life was calculated based upon treating the three vesting tranches (one third in years 3, 4, and 5) as three separate awards.
AGF Group’s share option plan (currently known as Allianz France) The former AGF Group awarded share options on AGF shares to eligible AGF Group executives and managers of subsidiaries, as well as to certain employees, whose performance justified grants.
The average total number of employees for the year ended December 31, 2010, was 151,642.
KPMG is the main auditing firm for the Allianz Group and assigned in more than 75 % of all audit-related tasks. Auditing firms other than KPMG billed the Allianz Group an aggregate of € 13.1 mn (2009: € 12.3 mn).
OOO Euler Hermes Credit Management, Moscow 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 %.
Dr.-Ing. e. h. Heinrich Weiss Chairman of the Board of Management, SMS GmbH
Manfred Wennemer Former Chairman of the Board of Management , Continental AG
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-forsale investments are carried at fair value in the balance sheet.
IFRS International Financial Reporting Standards. Since 2002, the designation IFRS applies to the overall framework of all standards approved by the International Accounting Standards Board. Already approved standards will continue to be cited as International Accounting Standards (IAS).