On 9 May 2018, just before the AGM, the Board of Management briefed the Supervisory Board on business performance in the first quarter of 2018 as well as on the current situation of both the Allianz Group and
Other key topics included the preparatory review and revision of the Board of Management’s remuneration system, target achievement of the Board of Management members in the financial year 2017, and defining the targets for the 2019 variable remuneration. The committee also looked at various mandate matters of individual board members and at the succession planning for the Board of Management.
Allianz SE. Other matters considered included the risk strategy pursued by both Allianz SE and the
transformation and the IT harmonization across the Allianz Group. Both meetings also dealt with recent technological developments, such as block chain and open-platform solutions, and the resulting opportunities for Allianz. Another key topic in both meetings was IT security.
Financial Reporting Standards (IFRS), as adopted in the European Union. PwC performed a review of the halfyearly financial report. In addition, PwC was also mandated to perform an audit of the market value balance sheet according to Solvency II as of 31 December 2018, for Allianz SE and the Allianz Group.
MEMBERS OF THE SUPERVISORY BOARD AND BOARD OF MANAGEMENT Mr. Jean-Jacques Cette's membership in the Supervisory Board ended on 31 July 2018. Mr. Jean-Claude Le
– Approval of certain transactions which require the approval of the Supervisory Board, e.g. capital measures, acquisitions, and disposals of participations
Jean-Claude Le Goaër (Member as of 1 August 2018) 3/3 100
The continuous period of membership for any member of the Supervisory Board should, as a rule, not exceed 15 years.
Members of the Board of Management and the Supervisory Board are obliged by the E.U. Market Abuse Directive to disclose to both
Board aims for an adequate “Diversity of Minds”. This comprises broad diversity with regard to gender, internationality, as well as educational and professional background.
(e.g. based on origin or extensive professional experience abroad), ideally with a connection to the regions in which
It is ensured that lists of successors will comprise an appropriate percentage of female candidates as well as candidates with international experience. The Personnel Committee takes this into consideration especially in succession planning. The share of women on the Management Board is currently 20 %. Six members of the Management
Übernahmegesetz – WpÜG”). If such termination rights are exercised, the respective credit lines have to be replaced by new credit lines under conditions then applicable.
Under the Allianz Sustained Performance Plan (ASPP), Restricted Stock Units (RSUs) – i.e. virtual Allianz shares – are granted to senior management of the Allianz Group worldwide as a stockbased remuneration component. The conditions for these RSU
REMUNERATION STRUCTURE, COMPONENTS AND TARGET SETTING PROCESS There are four remuneration components in total, which all have the same weighting: the base salary and three variable components –
the annual bonus, the annualized mid-term bonus, and the equityrelated remuneration. The target level of each variable component does not exceed the base salary, so the total target variable compensation is three times the base salary.
“Grant” column below shows the remuneration at target, minimum, and maximum levels. The “Payout” column discloses the 2017 and 2018 payments. The base salary, annual bonus, and perquisites are linked to the reported performance years, 2017 and 2018, whereas the Group Equity Incentive (GEI) and Allianz Equity Incentive (AEI)
2_Grants of equity-related remuneration are accounted for as cash settled awards. The fair value of the granted RSUs is remeasured at each reporting date and accrued, as a compensation expense, proportionately over the vesting and service period.
PENSIONS Company contributions for the current pension plan are set at 50 % of the base salary, reduced by an amount covering the disability and death risk. They are invested in a fund and include a guarantee for the contributions paid, but no further interest guarantee. For members with pension rights in the frozen defined-benefit plan, the above contribution rates are reduced by 19 % of the expected annual pension from that frozen plan. The Allianz Group paid € 4 mn (2017: € 4 mn) to increase reserves for pensions and similar benefits for active members of the Board of Management. As of 31 December 2018, reserves for pensions and similar benefits for active members of the Board of
REMUNERATION OUTLOOK FOR 2019 The Board of Management’s remuneration policy has remained stable for nine years; it was last presented to the Annual General
Starting in 2019, the non-performance-related base salary amounts to € 1,706 thou for the Chairman of the Allianz SE Board of Management and € 975 thou for a regular board member and is paid in twelve equal monthly installments.
− In order to avoid incentivizing excessive risk taking, the relative
Shares will be acquired through mandatory pay component conversion to avoid insider trading.
Moreover, the remuneration levels for regular board members have remained unchanged since their last adjustment in 2014. Therefore, the Supervisory Board deemed an increase of the total target compensation (without pension) necessary to maintain its attractiveness to talents. Specifically, the amount 2 for regular board members 2_Based on the allocation value as described in detail in the LTI section “Allianz share price performance” on page 37.
Repor t increased from € 3,000 thou to € 3,251 thou; the amount1 for the
Chairman of the Board of Management and € 6,750 thou for a regular member of the Board of Management.
Allianz Deutschland AG, Ms. Gabriele Burkhardt-Berg (three months in 2018) received € 15.9 thou for the financial year 2018 and
LOANS TO MEMBERS OF THE SUPERVISORY BOARD As of 31 December 2018, there were no outstanding loans granted by
ESG APPROACH The types of ESG risks Allianz considers to be material in its insurance and investment activities are summarized in the Allianz ESG Integration Framework. ESG risks can turn into legal risks, reputational risks, supply chain and business disruption risks, quality risks, operational risks, human rights risks, financial risks, and/or investment risks for
− We further strengthened the coal exclusion approach in investments in 2018.
EMERGING CONSUMERS CONCEPT We continue to support low-income consumers in Asia, Africa and Latin
− Target: We aim to continue our expansion in Africa, Asia and Latin
46 Annual Report 2018 − Allianz Group personal data of our customers, employees, and third-party partners.
(meaning that wherever individuals are given choices on the use and sharing of their personal data, the initial settings restrict disclosure).
sets annual priorities, determines the global diversity strategy, and accepts sponsorships for various diversity programs. For 2018, we had determined the following priorities: gender equality, employee networks, and inclusion. Specific initiatives were implemented to address these priorities – such as the JET-program, an integrated development program for non-executive women (implemented in 2017 in
IT solutions in place to optimize and harmonize all these activities, as well as our reporting across the Group and the quality of the data collected. In 2018, we rolled out an enhanced compliance assurance approach that now includes baseline reviews to fast-track compliance onboarding of newly acquired entities, risk-based targeted reviews of existing entities, and key control testing.
In the life sector, global premium growth was held back by developments in China, the second biggest life insurance market: Tighter regulation of certain wealth-management-products led to market stagnation in terms of premium growth. Most other markets, however, saw a modest uptick in premium growth. Overall and at a global scale, premiums rose by an estimated 3 % to 4 % in 2018 (in nominal terms and adjusted for foreign currency translation effects). Global industry profitability remained challenging as the low yield environment continued in 2018.
Please refer to page 72 for a reconciliation of nominal total revenue growth to internal total revenue growth for each of our business segments and the Allianz Group as a whole.
Allianz Partners: Gross premiums went up 4.7 % on an internal basis, totaling € 4,693 mn. Much of this increase was owed to positive volume effects at our U.S. travel business and Worldwide Care.
Operating investments income (net)2 3,017 2,905 112 1_Refers to policyholder participation, mainly from APR business (accident insurance with premium refunds), and consists of the investment-related part of “change in reserves for insurance and investment contracts (net)”. For further information, please refer to note 26 to the Consolidated Financial Statements.
The improvement in the impact of change in DAC was due to a higher capitalization of DAC, mainly resulting from increased sales of fixed index annuities in the United States and increased production in
used as an investment. Multi-asset class investments increase the diversification of an overall portfolio by distributing investments over several asset classes.
Net outflows3 of total assets under management (AuM) amounted to € 15 bn in 2018, of which € 3 bn concerned third-party AuM (2017: € 150 bn net inflows). The outflows were attributable to PIMCO
Allianz Capital Partners (ACP), which was transferred from the Corporate and Other business segment to the Asset Management business segment (AllianzGI) as of 1 January 2018, adding Allianz Group assets of € 23 bn to AllianzGI’s total AuM.
on an internal basis2. This was mainly due to growth in operating revenues. This positive development was only partly offset by increased operating expenses.
Landesbank AG in February 2018. Lower contribution from our reportable segment Alternative Investments was mainly related to the transfer of Allianz Capital Partners (ACP) from the Corporate and Other business segment to the Asset Management business segment (AllianzGI), effective 1 January 2018.
− level of claims from natural catastrophes at expected average levels,
PROPERTY-CASUALTY INSURANCE We expect our revenues to increase by approximately 3 % in 2019 (2018: 2.6 %), supported by favorable volume and price effects.
1_This does not include non-controlling interests of € 2,447 mn and € 3,049 mn as of 31 December 2018 and 31 December 2017, respectively. For further information, please refer to note 19 to the Consolidated Financial Statements.
The Allianz Group has also entered into contractual relationships with various types of structured entities. They have been designed in such a way that their relevant activities are directed by means of contractual arrangements rather than voting or similar rights. Typically, structured entities have been set up in connection with assetbacked financings and certain investment fund products. For more details on our involvement with structured entities, please refer to note 35 to the Consolidated Financial Statements.
Allianz SE to achieve the desired liquidity and capitalization levels for the Group and its operating entities.
Allianz SE has the option to increase its share capital according to authorizations provided by the AGM. The following table outlines
The Group maintained its A-1+/Prime-1 ratings for short-term issuances. We can therefore continue funding our liquidity under the
For further information, please refer to note 4 to the Consolidated Financial Statements.
OUR BUSINESS STRATEGY To implement these strategic objectives, we have defined a number of strategic priorities, and are implementing initiatives and programs to address the five dimensions of our Renewal Agenda 2.0.
− True Customer Centricity: design intuitive products and processes to achieve loyalty leadership in our core markets.
Group Risk is managed by the Group Chief Risk Officer and supports the Board of Management of Allianz SE, including its committees, through the analysis and communication of risk management related information and in implementing committee decisions.
Western Europe, mainly from traditional life insurance products with guarantees. By contrast, opportunities may arise when interest rates increase. This may result in returns from reinvestments being higher than the rates guaranteed. Interest rate risk is managed within our asset/liability management process and controlled via interest rate sensitivity and duration mismatch limits for the Group and entities.
− Reinsurance: Credit risk arises from potential losses from nonrecoverability of reinsurance receivables or due to default on benefits under in-force reinsurance treaties. Our reinsurance partners are carefully selected by a dedicated team. Besides focusing on companies with strong credit profiles, we may further require letters of credit, cash deposits, or other financial measures to further mitigate our exposure to credit risk.
However, beneficial deviations can also occur; for example, a lower morbidity rate than expected will most likely result in lower claims.
under a best-estimate plan, as well as under idiosyncratic and systemic adverse liquidity scenarios, to allow for a group-wide consistent view on liquidity risks. These analyses are performed at the entity level and are monitored by the Group.
Allianz SE. Major contingent liquidity requirements include market risk scenarios for Allianz SE and its subsidiaries, non-availability of external capital markets, and reinsurance risk scenarios for Allianz SE.
REGULATORY DEVELOPMENTS As Solvency II became effective in 2016, our approved Group internal model has been applied since the beginning of that year. There is still uncertainty about future regulatory requirements, as the future capital requirements for Global Systemically Important Insurers (so-called
CREDIT RISK – INVESTMENTS As of 31 December 2018, the credit risk arising from our investment portfolio accounted for 79.2 % (2017: 85.2 %) of our total Group prediversified internal credit risk1, with the relative decrease mainly driven by the introduction of the cross effect model change.
LIQUIDITY RISK Detailed information regarding the Allianz Group’s liquidity risk exposure, liquidity, and funding – including changes in cash and cash equivalents – is provided in Liquidity and Funding Resources from page 69 onwards and in notes 13, 19 and 35 to the Consolidated
Total liabilities and equity 897,567 901,300 1_For 2018, the amounts include the impact from changes related to fixed index annuities. For further information, please refer to note 2, chapter reserves for insurance and investment contracts, paragraph aggregate policy reserves.
Non-current assets and disposal groups classified held for sale - (199)
Level 3 applies if not all input parameters are observable in the market. Accordingly, the fair value is based on valuation techniques using non-market observable inputs. Valuation techniques include the discounted cash flow method, comparison to similar instruments for which observable market prices exist and other valuation models.
The recoverable amounts of all cash generating units (CGUs) to test goodwill and other indefinite life intangible assets for impairment are typically determined on the basis of value in use calculations. The determination of a CGU’s recoverable amount requires significant judgment regarding the selection of appropriate valuation techniques and assumptions.
The share-based compensation plans of the Allianz Group are classified as either equity-settled or cash-settled plans. Equity-settled plans are measured at fair value on the grant date (grant-date fair value)
The following amendments and revisions to existing standards became effective for the Allianz Group’s consolidated financial statements as of 1 January 2018: − IFRS 2, Classification and Measurement of Share-based Payment
Allianz Group has elected not to recognize right-of-use assets and lease liabilities for short-term leases with a lease term of 12 months or less, leases of low-value assets (e.g. tablets, personal computers, telephones, office furniture, copy and fax machines), and car leases.
Annual Improvements to IFRSs 2015-2017 Cycle (Amendments to IFRS 3 and 11 and IAS 12 and 23)
Landesbank AG. In 2018, the Allianz Group received proceeds from the sale of its 90.2 % stake of € 323 mn and recognized a deconsolidation loss of € 24 mn.
Proceeds from sale of the subsidiary, net of cash disposed1 (208)
− Global Insurance Lines & Anglo Markets, Middle East and Africa.
2_As of December 2018, fair value and amortized cost of debt securities with a contractual maturity of less than one year amount to € 31,226 mn (2017: € 30,037 mn) and € 29,873 mn (2017: € 29,222 mn), respectively.
Accumulated depreciation as of 1 January (997) (4,633) (2,887) (971) (4,643) (2,904)
Prior years’ net loss and loss adjustment expenses incurred reflect the changes in estimation charged or credited to the consolidated income statement in each year with respect to the reserves for loss and loss adjustment expenses established as of the beginning of that year. During the year ended 31 December 2018, the Allianz Group recorded additional income of € 1,981 mn (2017: € 1,927 mn) net in respect of losses occurring in prior years. During the year ended 31 December 2018, this amount, expressed as a percentage of the net balance of the beginning of the year, was 3.5 % (2017: 3.4 %).
Calendar year 2009 1_Includes effects from foreign currency translation adjustments and other changes.
The majority of the Allianz Group’s Life/Health business segment operations are conducted in Western Europe. Insurance laws and regulations in Europe have historically been characterized by legal or contractual minimum participation of contract holders in the profits of the insurance company issuing the contract. In particular, life insurance business in Germany, Switzerland, and Austria, which comprises approximately 50 % (2017: 51 %) of the Allianz Group’s reserves for insurance and investment contracts as of 31 December 2018, includes a substantial level of policyholder participation in all sources of profit, including mortality/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, all of the Allianz Group’s annuity policies issued in the United States meet the criteria for classification as insurance contracts under IFRS 4 because they include options for contract holders to elect a life-contingent annuity. These contracts currently do not expose the Allianz Group to significant longevity risk on a portfolio level, nor are they expected to do so in the future, as the projected and observed annuitization rates are very low. Additionally, many of the
Allianz Group’s traditional contracts issued in France and Italy do not incorporate significant insurance risk, although they are accounted for as insurance contracts because of their discretionary participation features. Similarly, a significant portion of the Allianz Group’s unitlinked contracts in France and Italy do not incorporate significant insurance risk.
Board and pursuant to the authorization of the AGM on 5 May 2010.
In 2018, 407,495 (2017: 562 546) treasury shares were sold to employees of Allianz SE as well as its subsidiaries in Germany and abroad in the context of the Employee Stock Purchase Plan. These shares were taken from the stock of treasury shares dedicated to this purpose. In 2018, as in the previous year, no capital increase for the purpose of Employee Stock Purchase Plans was undertaken.
Allianz Group’s investments. During the Allianz Group’s annual planning and strategic dialogs with its related undertakings, internal capital requirements are determined through business plans regarding the levels and timing of capital expenditures and investments. These plans also form the basis for the Allianz Group’s capital management.
The tax rates used in the calculation of the Allianz Group’s deferred taxes are the applicable national rates, which in 2018 ranged from 10.0 % to 40.0 %, with changes to tax rates that had already been adopted in Brazil, Greece, Netherlands, Slovakia and Taiwan by 31 December 2018 taken into account.
Level 3 investments are mainly priced based on the income approach. The primary non-market observable input used in the discounted cash flow method is an option-adjusted spread taken from a set of benchmark securities with similar characteristics. A
Changes in the consolidated subsidiaries of the Allianz Group - 89 209 - 298
In addition, as part of these transactions, the Allianz Group has received collateral that it is permitted to sell or repledge in the absence of default. As of 31 December 2018, the Allianz Group received collateral, consisting of fixed income and equity securities, with a fair value of € 9,261 mn (2017: € 1,904 mn), which the
As of 31 December 2018, the future minimum lease payments under non-cancelable operating leases were as follows: Future minimum lease payments – operating leases € mn
OVERVIEW Retirement benefits in the Allianz Group, which are granted to employees and in Germany also to agents, are either in the form of defined benefit or defined contribution plans. For defined benefit plans, the beneficiary is granted a defined benefit by the employer or via an external entity. In contrast to defined contribution arrangements, the future cost to the employer of a defined benefit plan is not known with certainty in advance.
Each of the pension plans in Germany, the U.K. and Switzerland contributes more than 5 % to the Allianz Group’s defined benefit obligation or its plan assets. As the Allianz Retirement and Death
During the year ended 31 December 2018, the defined benefit costs related to post-retirement health benefits amounted to € - mn
During the year ended 31 December 2018, the Allianz Group recognized compensation expenses related to the AEI plans of € 96 mn
With the M-unit Plan, participants can directly participate in PIMCO’s performance. Class M-units are non-voting common equity with limited information rights. They bear quarterly distributions equal to a pro-rata share of PIMCO’s net distributable income. Deferred M-units have a right to receive a quarterly cash compensation equal to and in lieu of quarterly dividend payments.
PIMCO LLC measures the total compensation expense to be recognized for the equity-settled shares based on their fair value as of the grant date. The total compensation expense is recognized over the vesting period.
Audit services by PwC IL primarily relate to services rendered for the audit of the Allianz Group’s consolidated financial statements, the audit of the statutory financial statements of Allianz SE and its subsidiaries, the audit of the Allianz Group’s solvency balance sheet as well as the solvency balance sheets of Allianz SE and its subsidiaries. In addition, reviews of interim financial statements were performed.
− Measurement of certain technical assets and liabilities in life and health insurance,
Due to the material significance of these provisions for the assets, liabilities and financial performance of the Group as well as the considerable scope for judgment on the part of the executive directors and the associated uncertainties in the estimations made, the measurement of the technical provisions in property-casualty insurance was of particular significance to our audit.
Company. The reasonable assurance engagement and the limited assurance engagement have been performed for purposes of the
The Allianz Group Sustainability Report “Shaping our sustainable future” covers our contribution to the environment, society and economy. It provides full details of our sustainability strategy, approach and progress in 2018 as well as an outlook for 2019. Date of publication: 11 April 2019. www.allianz.com/sustainability
Allianz SE – Königinstrasse 28 – 80802 Munich – Germany – Phone +49 89 3800 0 – info@allianz.com – www.allianz.com Front page design: hw.design GmbH – Photography: Andreas Pohlmann – Typesetting: Produced in-house with firesys – Printing: G. Peschke Druckerei GmbH – Annual Report on the internet: www.allianz.com/annualreport – Date of publication: 8 March 2019 This is a translation of the German Annual Report of Allianz Group. In case of any divergences, the German original is legally binding.