Interim Report First Quarter of 2009
Table of Contents

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

Report of Foreign Private Issuer

Pursuant to Rules 13a-16 or 15d-16 under

the Securities Exchange Act of 1934

for the period ended March 31, 2009

Commission file Number: 1-15154

ALLIANZ SE

Königinstrasse 28

80802 Munich

Germany

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F  x            Form 40-F  ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):             

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):             

THIS REPORT ON FORM 6-K (EXCEPT FOR ANY NON-GAAP FINANCIAL MEASURE AS SUCH TERM IS DEFINED IN REGULATION G UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED) SHALL BE DEEMED TO BE INCORPORATED BY REFERENCE IN THE REGISTRATION STATEMENTS ON FORM S-8 (FILE NO. 333-13462 AND NO. 333-139900) AND ON FORM F-3 (FILE NO. 333-151308) OF ALLIANZ SE AND TO BE A PART THEREOF FROM THE DATE ON WHICH THIS REPORT IS FURNISHED, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY FILED OR FURNISHED. FOR THE AVOIDANCE OF DOUBT, THE DISCLOSURE CONTAINING ANY NON-GAAP FINANCIAL MEASURE CONTAINED IN THE ATTACHED REPORT, INCLUDING WITHOUT LIMITATION REFERENCES TO “CONSOLIDATED OPERATING PROFIT” AND OPERATING PROFIT AS IT RELATES TO THE ALLIANZ GROUP, INCLUDING THE TABLES ENTITLED “OPERATING PROFIT” AND “OPERATING PROFIT—SEGMENTS” ON PAGE 4 (AS THEY RELATE TO THE ALLIANZ GROUP) AND THE SECTION ENTITLED “RECONCILIATION OF CONSOLIDATED OPERATING PROFIT AND INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS IN EARNINGS”, AND TO ANY OTHER NON-GAAP FINANCIAL MEASURES, IS NOT INCORPORATED BY REFERENCE INTO THE ABOVE-MENTIONED REGISTRATION STATEMENTS FILED BY ALLIANZ SE.


Table of Contents

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Table of Contents

 

Content

 

Group Management Report        
Executive Summary and Outlook   2  
Property-Casualty Insurance Operations   11  
Life/Health Insurance Operations   16  
Financial Services   20  
Corporate Activities   24  
Balance Sheet Review   25  
Other Information   34  
Condensed Consolidated Interim Financial
Statements for the First Quarter of 2009
       
Detailed Index   37  
Condensed Consolidated Interim Financial Statements   38  
Notes to the Condensed Consolidated Interim Financial Statements   44  

 

Allianz Share

 

Development of the Allianz share price since January 1, 2008

indexed on the Allianz share price in

LOGO

Source: Thomson Reuters Datastream

Current information on the development of the Allianz share price is available at www.allianz.com/share.

 

Basic Allianz share information

 

         
Share type     Registered share with restricted transfer
Denomination     No-par-value share
Stock exchanges     All German stock exchanges, London, Paris, Zurich, Milan, New York
Security Codes    

WKN 840 400

ISIN DE 000 840 400 5

Bloomberg     ALV GY
Reuters       ALVG.DE

Investor Relations

We endeavor to keep our shareholders up-to-date on all company developments. Our Investor Relations Team is pleased to answer any questions you may have.

Allianz SE

Investor Relations

Koeniginstrasse 28

80802 Muenchen

Germany

Fax:     + 49 89 3800 3899

E-Mail: investor.relations@allianz.com

Internet: www.allianz.com/investor-relations

For telephone enquiries, our “Allianz Investor Line” is available:

  + 49 1802 2554269

  + 49 1802 ALLIANZ



Table of Contents

 

Allianz Group Key Data

 

Three months ended March 31,             2009        2008        Change from
previous year
INCOME STATEMENT                      
Total revenues 1)    mn     27,725     26,958     2.8%
Operating profit 2)    mn     1,424     2,208     (35.5)%
Net income from continuing operations 3)    mn     424     1,380     (69.3)%
Net loss from discontinued operations, net of income taxes and minority interests in earnings 3)    mn     (395)     (232)     (70.3)%
Net income 3)    mn     29     1,148     (97.5)%
                       
SEGMENTS (Continuing Operations) 4)                      
Property-Casualty                      
Gross premiums written   mn     13,886     13,710     1.3%
Operating profit 2)   mn     970     1,479     (34.4)%
Net income    mn     431     1,057     (59.2)%
Combined ratio   %     98.5     94.8     3.7 pts
                       
Life/Health                      
Statutory premiums   mn     13,013     12,327     5.6%
Operating profit 2)   mn     402     589     (31.7)%
Net income   mn     321     452     (29.0)%
Cost-income ratio   %     97.3     96.1     1.2 pts
                       
Financial Services                      
Operating revenues   mn     860     916     (6.1)%
Operating profit 2)   mn     198     255     (22.4)%
Net income from continuing operations 3)   mn     72     66     9.1%
Net loss from discontinued operations, net of income taxes and minority interests in earnings 3)   mn     (395)     (514)     23.2%
Net loss 3)   mn     (323)     (448)     27.9%
Cost-income ratio   %     76.2     71.4     4.8 pts
                       
BALANCE SHEET                      
Total assets as of March 31, 5)   mn     545,729     955,576     (42.9)%
Shareholders’ equity as of March 31, 5)   mn     33,030     33,684     (1.9)%
Minority interests as of March 31, 5)    mn     2,065     3,564     (42.1)%
                       
SHARE INFORMATION                      
Basic earnings per share       0.06     2.55     (97.6)%
Diluted earnings per share       0.04     2.48     (98.4)%
Share price as of March 31, 5)       63.26     75.00     (15.7)%
Market capitalization as of March 31, 5)   bn     28.7     34.0     (15.7)%
                       
OTHER DATA                      
Third-party assets under management as of March 31, 5)    bn       766       703       9.0%

 

1) 

Total revenues comprise Property-Casualty segment’s gross premiums written, Life/Health segment’s statutory premiums and Financial Services segment’s operating revenues.

2) 

The Allianz Group uses operating profit to evaluate the performance of its business segments and the Group as a whole.

3) 

Following the announcement of the sale on August 31, 2008, Dresdner Bank was qualified as held-for-sale and discontinued operations. The transfer of ownership of Dresdner Bank to Commerzbank was completed on January 12, 2009 as scheduled. Accordingly, assets and liabilities of Dresdner Bank have been deconsolidated in the first quarter 2009. The loss from derecognition of discontinued operations amounts to 395 mn and represents mainly the recycling of components of other comprehensive income. All income and expenses relating to the discontinued operations of Dresdner Bank have been reclassified and presented in a separate line item “Net loss from discontinued operations, net of income taxes and minority interests in earnings” in the consolidated income statements for all years presented in accordance with IFRS 5.

4) 

The Allianz Group operates and manages its activities through four segments: Property-Casualty, Life/Health, Financial Services and Corporate. For further information please refer to Note 5 of our condensed consolidated interim financial statements.

5) 

2008 figures as of December 31, 2008.

 

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Executive Summary and Outlook

– Strong revenues of 27.7 billion.

– Robust operating profit of 1.4 billion, all business segments contribute positively.

– Strong solvency ratio of 159 %.

– Net income from continuing operations of 424 million.

 

First Quarter 2009 at a Glance

All business segments contribute positively to operating profit

In the first quarter 2009, Allianz generated total revenues of € 27,725 million, an increase of 2.8 % or € 767 million compared to the first quarter 2008. Operating profit was € 1,424 million, with all business segments contributing positively. This compared to € 2,208 million in the first quarter 2008. While net income from continuing operations was € 424 million, a loss from discontinued operations amounting to € 395 million marked the end of the accounting for the sale of Dresdner Bank. Total net income for the the first quarter 2009 was € 29 million.

Difficult economic environment

The first quarter 2009 was impacted by the ongoing financial markets crisis. Equity markets dropped materially. Similarly, structured credit continued to weaken, responding to pessimism surrounding the viability of the banking system and economic recovery. Interest rates world wide were on a general downward trend, albeit we observed recoveries in some areas, especially in the United States. The U.S. Dollar strengthened in the first quarter 2009 compared to the Euro.

In common with the whole financial services industry, Allianz was affected by this market environment, which impacted both asset values and results. However, the impact varied across our business segments. Our operations were impacted by impairments on equity securities, losses from credit insurance as well as lower sales of asset management products. Our investment portfolio remains of high quality, is well diversified, liquid and fungible. For further information on our asset quality please refer to the Balance Sheet Review in this Management Report.

 

 

New segment structure

Starting with the first quarter 2009, IFRS 8 “Operating Segments”, has been implemented at Allianz Group. According to IFRS 8 we have changed the reporting of our business segments to be in line with our management view. Allianz continues to use operating profit 1) to measure the performance of its business segments and business divisions internally, and this is now fully reflected in our external reporting in accordance with IFRS 8. Information about net income, non-operating items as well as taxes and minorities are presented at the Group level.

The new segment structure is divided into four segments: the insurance business segments Property-Casualty and Life/Health, the Financial Services business segment and the Corporate segment. Following the sale of Dresdner Bank on January 12, 2009, which represented 95% of our banking activities, we have grouped our Asset Management, ongoing Banking and Alternative Investment Management activities together under the umbrella of a new Financial Services business segment. The activities of the asset managers of Alternative Investments were previously reported within the Corporate segment. Furthermore, our private equity assets are now allocated across the respective insurance segments, with the vast majority going into Life/Health. A small portion remains in Corporate. Both insurance business segments are further subdivided into five business divisions reflecting the responsibility of different members of the Board of Management.

 

1) 

Please refer to our definition of operating profit in the condensed consolidated interim financial statements of this Report.


 

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Allianz Group Interim Report First Quarter of 2009     Group Management Report

 

New segment structure

 

Property-Casualty

 

   

 

Life/Health

 

   

 

Financial Services

 

   

 

Corporate

 

                         
– German Speaking Countries     – German Speaking Countries     – Asset Management    
– Europe I incl. South America     – Europe I incl. South America     – Banking    
– Europe II incl. Africa     – Europe II incl. Africa     – Alternative Investment    
– Anglo Broker Markets/Global Lines     – Anglo Broker Markets/Global Lines        Management    
– Growth Markets     – Growth Markets        

 

Allianz Group’s Consolidated Results of Operations

Total revenues 1)

Total revenues

in bn

LOGO

On an internal basis 2), total revenues increased by 1.5 %. Both insurance segments contributed to this growth: 1.1% in our Property-Casualty operations and 3.6 % in our Life/Health operations. As a result of the difficult market conditions revenues in the Financial Services segment decreased on an internal basis by 17.6 %.

 

1) 

Total revenues comprise Property-Casualty segment’s gross premiums written, Life/Health segment’s statutory premiums and Financial Services segment’s operating revenues.

2) 

Internal total revenue growth excludes the effects of foreign currency translation as well as acquisitions and disposals. Please refer to page 35 for a reconciliation of nominal total revenue growth to internal total revenue growth for each of our segments and the Allianz Group as a whole.

 

Foreign currency exchange effects increased total revenues by € 218 million. Consolidation effects, resulting from our subsidiary in Turkey and of cominvest, amounted to € 156 million. At € 27,725 million, total revenues were up by 2.8 % on a nominal basis.

Total revenues – Segments

in mn

LOGO

Gross premiums written from Property-Casualty operations increased 1.1% on an internal basis, mostly due to higher business volumes. On a nominal basis, gross premiums written were up by 1.3% to € 13,886 million; this premium growth reflects the consolidation of our subsidiary in Turkey.

 

3) 

Total revenues include (34) mn, 5 mn and 21 mn from consolidation for 1Q 2009, 2008 and 2007 respectively.


 

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Group Management Report     Allianz Group Interim Report First Quarter of 2009

 

Life/Health statutory premiums grew by 3.6 %, on an internal basis. While we observed a decline in demand for regular unit-linked and other non-participating products, there was a strong interest in participating products with minimum guarantees. On a nominal basis, statutory premiums amounted to € 13,013 million, up 5.6 %.

Revenues in our Financial Services segment amounted to

€ 860 million, down 17.6 % on an internal basis and down 6.1 % on a nominal basis compared to the prior year period. Impacts from the financial markets crisis affected revenue development in all three financial services activities. Asset management revenues from fixed income business developed well, while the remaining business suffered in line with the markets. The acquisition of cominvest in our asset management business added € 35 million to operating revenues in the first quarter.

Operating profit

Operating profit

in mn

LOGO

Operating profit of € 1,424 million was down by 35.5 % mainly due to ongoing impairments in the Life/Health segment and a lower underwriting result in the Property-Casualty segment.

 

Operating profit – Segments

in  mn

LOGO

At € 970 million, the Property-Casualty segment operating profit decreased by 34.4 % compared to the previous year. This decline was attributable to less favorable developments of prior year claims, higher accident year claims, of which half of the increase was attributable to the credit insurance business of Euler Hermes, and a positive prior year one-off effect from the sale of own-use real estate in Germany.

 

1) 

Operating profit includes 26 mn, 3 mn and (28) mn from consolidation for 1Q 2009, 2008 and 2007 respectively.


 

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Allianz Group Interim Report First Quarter of 2009     Group Management Report

 

At € 402 million, operating profit from the Life/Health business declined by 31.7 %, reflecting the continuing impact from the financial markets crisis, namely high impairments and lower harvesting.

We recorded an operating profit of € 198 million in the Financial Services segment compared to € 255 million in the respective quarter one year ago, mainly reflecting a shortfall from asset management business.

The operating loss from Corporate activities increased by 45.8 % to € 172 million, due to lower interest income.

Non-operating result

Non-operating items amounted to a loss of € 979 million in the first quarter 2009. This was mainly due to impairments of equity investments (€ 708 million). Furthermore, net realized gains amounted to € 254 million, a decline of € 156 million in comparison to 2008, and we incurred a net loss from financial assets and liabilities carried at fair value through income of € 105 million.

Acquisition related expenses declined to € 9 million (first quarter 2008 € 107 million). This development was almost exclusively attributable to our Financial Services segment.

 

Net income (loss) from continuing operations

Net income (loss) from continuing operations

in mn

LOGO

Net income from continuing operations was € 424 million compared to €1,380 million in the first quarter 2008.

Income taxes amounted to € 21 million. The application of a European Court of Justice decision resulted in tax benefits of € 57 million which together with tax exempt income items reduced the effective tax rate to 4.8 %.


 

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Group Management Report     Allianz Group Interim Report First Quarter of 2009

 

Net income (loss) from discontinued operations

The loss from discontinued operations of € 395 million is the final effect from the deconsolidation of Dresdner Bank. As reported in our Annual Report for 2008 results in the first quarter 2009 were affected by unrealized gains and losses and foreign exchange movements resulting from the sale of the Dresdner Bank, which according to IFRS could only be recognised at the completion of the transaction.

The 2008 loss from the sale of Dresdner Bank was computed based on the transactional values as of the closing date (January 12, 2009). Therefore, the losses of Dresdner Bank during the first twelve days of 2009 are already reflected in our financial statements as of December 31, 2008.

Net income (loss)

Net income for the first quarter 2009 amounted to € 29 million compared to € 1,148 million one year ago.

Earnings per share 1)

in

LOGO

The net income translates into basic earnings per share of € 0.06 (diluted: € 0.04).

 

1) 

For further information please refer to Note 38 to our condensed consolidated interim financial statements.

 

Shareholders’ equity

Shareholders’ equity 2)

in mn

LOGO

As of March 31, 2009, shareholders’ equity amounted to € 33.0 billion, down 1.9 % from December 31, 2008. The change was driven by a reduction of unrealized gains of € 1.1 billion and the net income from continuing operations in the first quarter of € 0.4 billion. Our capital base remains strong, with a 159 % solvency ratio.

 

2) 

Does not include minority interests.


 

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Allianz Group Interim Report First Quarter of 2009    Group Management Report

 

Total revenues and reconciliation of operating profit to net income

 

Three months ended March 31,       

2009

mn

      

2008

mn

Total revenues 1)     27,725     26,958
             
Premiums earned (net)     14,680     14,762
Interest and similar income     4,414     4,456
Operating income from financial assets and liabilities carried at fair value through income (net)     (255)     227
Operating realized gains/losses (net)     165     649
Fee and commission income     1,336     1,505
Other income     4     351
Claims and insurance benefits incurred (net)     (11,779)     (11,314)
Change in reserves for insurance and investment contracts (net)     (621)     (1,845)
Interest expenses, excluding interest expenses from external debt     (172)     (241)
Loan loss provisions     (15)     (5)
Operating impairments of investments (net)     (1,138)     (1,073)
Investment expenses     62     (436)
Acquisition and administrative expenses (net), excluding acquisition-related expenses     (4,770)     (4,288)
Fee and commission expenses     (491)     (551)
Operating restructuring charges     (1)     (1)
Other expenses     (1)     (1)
Reclassification of tax benefits     6     13
Operating profit     1,424     2,208
             
Non-operating income from financial assets and liabilities carried at fair value through income (net)     (105)     145
Non-operating realized gains/losses (net)     254     410
Income from fully consolidated private equity investments (net)     (56)     23
Non-operating impairments of investments (net)     (752)     (397)
Interest expenses from external debt     (238)     (252)
Acquisition-related expenses     (9)     (107)
Amortization of intangible assets     (4)     (5)
Non-operating restructuring charges     (63)     6
Reclassification of tax benefits     (6)     (13)
Non-operating items     (979)     (190)
             
Income from continuing operations before income taxes and minority interests in earnings     445     2,018
Income taxes     (21)     (572)
Minority interests in earnings         (66)
Net income from continuing operations     424     1,380
Net loss from discontinued operations, net of income taxes and minority interests in earnings     (395)     (232)
Net income       29       1,148

 

1) 

Total revenues comprise Property-Casualty segment’s gross premiums written, Life/Health segment’s statutory premiums (including unit-linked and other investment-oriented products) and Financial Services segment’s operating revenues.

 

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Group Management Report     Allianz Group Interim Report First Quarter of 2009

 

Risk Management

Risk management is an integral part of our business processes and supports our value-based management. As our internal risk capital model provides management with information which allows for active asset-liability management and monitoring, risk is well controlled and managed.

The information contained in the risk report in our 2008 Annual Report is still valid.

Events After the Balance Sheet Date

Sale of Industrial and Commercial Bank of China (“ICBC”) shares

Allianz sold 3.2 billion ICBC shares on April 28, 2009 to a selected group of investors through a private sale. The sale resulted in a capital gain of approximately € 0.7 billion.

For further information see Note 41 to the condensed consolidated interim financial statements. For other further information see “Outlook”.

 

Outlook

Economic Outlook

In the first quarter 2009 first signs of a recovery began to appear. This sentiment among analysts improved, stock markets rose and corporate bond spreads narrowed. In the banking markets, credit spreads and money market rates are decreasing.

Nonetheless there are always risks of setbacks especially to a nascent recovery, and for this reason we remain cautious about making predictions. Therefore the outlook at the end of March 2009 provided below is largely unchanged from the one given in our 2008 Annual Report.

Continuing uncertainty

In 2008, the global economy entered the deepest recession it has seen in decades. The situation is expected to stabilize in the next few months, as the massive global expansion of monetary and fiscal policy takes full effect. Nevertheless despite these policy actions, gross national product in the industrialized countries is expected to fall markedly for the year as a whole. In contrast, the emerging economies will show at least weak growth. The financial markets will not be calm in 2009. The distortions from the boom years have not yet fully worked through, particularly in the banking sector. The process of adjustment and consolidation that is required will continue to create an atmosphere of great uncertainty in the markets. Central banks and governments remain obligated to avert the risk of a systemic crisis. Taken together, these developments create a very challenging environment for financial services providers in 2009.

Stabilization

We believe that, following an expansion of nearly 2 % last year, the global economy will contract in 2009 (even including the emerging markets). We expect the industrialized countries to shrink by about 2.9 %, while growth will slow down to around 1.0 % (2008: 5.2 %) in the emerging markets.


 

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Allianz Group Interim Report First Quarter of 2009     Group Management Report

 

The performance in the emerging markets, however, will be very uneven. Asia remains the most dynamic region, with gains of 2.7%. China leads the way here, although it is expected to turn in its lowest growth rate since 1990. We estimate that Eastern European countries will contract by 1.8%, primarily because recent growth in many Eastern European countries has been financed by the rapid expansion of credit, partly in foreign currencies. These countries have been hit so hard by the financial crisis that some of them have already turned to the International Monetary Fund and the European Union for support. Latin America will not escape the downturn, we expect economic activity to shrink by 0.7%.

In the group of the industrialized countries, we estimate the drop in Japan at 5.7%. Although the Japanese economy itself has been relatively untouched by the financial crisis, its dependence on export demand has a noticeable impact on the economy’s performance, given the current environment. The same will hold true for Germany, where we expect economic activity to decline by 3.5%. Also the economy of the United States will shrink in 2009. We forecast a drop of about 2.3% there. However, the negative figures for the entire year obscure the fact that a gradual stabilization is expected to take place in the course of the year. The industrialized countries should be back on the path to growth in the second half of the year. There are three reasons – all of them valid globally – that such a recovery is likely: extensive public economic programs designed to stimulate demand, low interest rates resulting from an extremely expansionary monetary policy and gains in consumer purchasing power due to lower commodity prices.

The financial markets will remain volatile in 2009 because of heavy losses, particularly in the banking sector. Additional public measures may be required to stabilize the financial sector. In any case, a rapid normalization of the markets is not foreseen, but we expect investor confidence to return if the economy picks up during the year. Given the rapid increase in government indebtedness, the focus will likely shift to inflation and rising interest rates. An economic recovery should have a positive impact on the equity markets.

 

Challenging environment for financial services providers

Financial services providers will continue to face major challenges in 2009 as a result of the global economic crisis. The most obvious of these are gloomy economic prospects, possible impairments on all types of securities and the loss of consumer confidence. It is imperative that providers restore their customers’ faith in a reliable long-term partnership.

Property-Casualty will likely see new business slowing because of the weak economy; individual sectors such as credit insurance are being directly affected by the crisis.

The difficulties on the capital markets and, in particular, the low interest rates could increase pricing discipline among providers.

The aging of society continues. Sustainable retirement and healthcare cannot be built solely on a pay-as-you-go basis (inter-generational contract) – capital markets are required. The long term fundamentals of the Life/Health insurance operations remain intact, but they will be affected by how effectively mandatory health insurance systems are complemented by privately funded health insurance.

Asset Management operations once again have a solid long-term growth and profit outlook, too. First, however, the fund industry will need to provide convincing arguments to customers wary of highly volatile markets.

2009 will clearly be an extremely difficult year for banks. After the direct impact of the financial crisis, additional impairments are now threatening the traditional lending business, where more defaults are expected during the economic downturn. In 2009, banks will attempt to shore up liquidity and capital, though it is far from clear how long it will take for the changed regulations to provide relief and the degree of impact these changes will have.


 

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Group Management Report     Allianz Group Interim Report First Quarter of 2009

 

Outlook for the Allianz Group

Whilst the challenging environment described above will clearly impact our business in 2009, Allianz is well positioned, with a solid platform for delivering earnings in the core insurance and asset accumulation businesses. We are strongly capitalized, and with a solvency ratio of 159% net of a € 1.6 billion dividend accrual for 2008 and € 0.2 billion for the first quarter 2009, we are able to withstand a prolonged difficult market environment.

The underlying fundamentals in our operations are healthy. The major part of our operating profit is driven by our Property-Casualty business, which is least affected by the financial markets crisis. Our combined ratio is expected to benefit from the ongoing efficiency and effectiveness improvements we are realizing from our operational transformation program and sustainability initiative. This will serve to mitigate claims and cost inflation. Even if a severe recession would cause a shortfall in revenues, the short-term impact on operating profit would not be significant. The level of dividend and interest income is robust.

In the Life/Health operations we expect a consistently positive development in traditional business, and a recovery in investment-oriented products over time. The investment margins will remain vulnerable to adverse financial market developments.

 

The investment assets of the Allianz Group are held in a defensive portfolio, managed under a sustainable investment strategy and are generating a reliable stream of coupons and dividend yields. Whilst this portfolio includes a significantly reduced level of equity exposure, in the ongoing financial crisis, we cannot rule out further impairments, or indeed credit defaults on corporate bonds.

Our asset management business was managing € 766 billion of third-party assets at the end of March, 2009. Whilst the equities side has been badly affected by the turmoil and investors’ loss of confidence, the fixed-income side remains resilient, and we expect that to continue.

As always, natural catastrophes and adverse developments in the capital markets, as well as the factors stated in our cautionary note regarding forward-looking statements, may severely impact our results of operations.


 

Cautionary note regarding forward-looking statements

The statements contained herein may include statements of future expectations and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. In addition to statements which are forward-looking by reason of context, the words “may”, “will”, “should”, “expects”, “plans”, “intends”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”, or “continue” and similar expressions identify forward-looking statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation, (i) general economic conditions, including in particular economic conditions in the Allianz Group’s core business and core markets, (ii) performance of financial markets, including emerging markets, and including market volatility, liquidity and credit events (iii) the frequency and severity of insured loss events, including from natural catastrophes and including the development of loss expenses, (iv) mortality and morbidity levels and trends, (v) persistency levels, (vi) the extent of credit defaults, (vii) interest rate levels, (viii) currency exchange rates including the Euro/U.S. Dollar exchange rate, (ix) changing levels of competition, (x) changes in laws and regulations, including monetary convergence and the European Monetary Union, (xi) changes in the policies of central banks and/or foreign governments, (xii) the impact of acquisitions, including related integration issues, (xiii) reorganization measures, and (xiv) general competitive factors, in each case on a local, regional, national and/or global basis. Many of these factors may be more likely to occur, or more pronounced, as a result of terrorist activities and their consequences. The matters discussed herein may also be affected by risks and uncertainties described from time to time in Allianz SE’s filings with the U.S. Securities and Exchange Commission. The company assumes no obligation to update any forward-looking statement.

 

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Property-Casualty Insurance Operations

– Robust operating profit of 970 million in soft markets.

– Selective premium growth of 1.3% with continued underwriting discipline.

– Combined ratio of 98.5%.

 

Earnings Summary

Gross premiums written 1)

At € 13,886 million, gross premiums written were 1.3% higher, and 1.1% ahead of previous year on an internal basis. Of this development 0.6% was driven by higher volumes, and 0.2% related to overall price changes. We currently see price hardening in several markets. This positive trend is also reflected in our first quarter renewals, where we measured a positive price impact of approximately 0.8% for our major operating entities which we view as an important lead indicator. Discussion about overall price changes in the paragraphs below relate to developments in the respective operating entity or country.

While our motor business, representing about 44% of our portfolio, reported € 224 million less premiums, our non-motor business increased by € 401 million. On a nominal basis, premium growth was also driven by the consolidation of our subsidiary in Turkey. Negative currency translation effects amounted to € 72 million.

 

1) 

We comment on the development of our gross premiums written on an internal basis; meaning adjusted for foreign currency translation and (de-)consolidation effects in order to provide more comparable information.

 

Gross premiums written – Internal growth rates 2)

in%

LOGO

Gross premiums written at Allianz Sach in Germany decreased by 1.2% or € 51 million. This decline was attributable to the motor business, where both price and volume came down. A portfolio cleaning exercise, particularly in non-profitable fleet business was conducted, resulting in intentionally reduced volume. We estimate the positive overall price effect to be 1.0%.

In Italy, revenues declined by 13.9% or € 162 million. This development was also due to motor business, where less car registrations and the persistency of a soft market in a highly competitive environment led to lower premiums. Prices were still impacted by the Bersani law. We estimate the negative price effect on premiums written to be 2.9%.

 

2) 

Before elimination of transactions between Allianz Group companies in different countries and geographic regions.


 

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Table of Contents

Group Management Report     Allianz Group Interim Report First Quarter of 2009

 

In Spain, premiums decreased by 5.2% or € 36 million. This shortfall was mainly driven by the current recession and by fierce competition in motor and commercial lines. Despite a negative price impact – we estimate it to be around 7.9% – our Spanish operation is one of our most profitable businesses.

In New Europe, revenues declined on an internal basis by 2.9% or € 25 million. This development was basically due to the current financial crisis, affecting negatively both price and volume, especially in Russia, Romania and Hungary, where new car registrations declined significantly. The estimated negative price effect on premiums written was 1.4%.

On an internal basis, revenues in France were up by 0.9% or € 13 million, supported by a positive price effect of approximately 2.5%, in both personal and commercial lines.

In the United States gross premiums written grew by 2.2% or € 15 million on an internal basis. This growth was a result of increased volume in the crop insurance business; whereas in personal and other commercial lines we observed declining revenues. We estimate the negative price effect on premiums written to be 2.8%.

In the United Kingdom gross premiums written increased by 2.8% or € 14 million. We estimate the positive price effect to be 4.1%.

In South America, revenues increased by € 54 million or 22.8%, mainly due to growth in all lines of business in Brazil – with motor and fire insurances being the main drivers.

In Australia, where we grew in motor insurance in particular, we recorded revenue growth of 10.3% or € 36 million on an internal basis. There was a positive price effect of an estimated 6.4%.

At AGCS premiums increased by 13.5% or € 123 million driven among other factors by marine, aviation and pharma liability insurances. In addition, Fireman’s Fund Insurance Company in the United States transferred the renewal rights for their marine business to AGCS.

 

Operating profit

Operating profit

in  mn

LOGO

Challenging market conditions continued in the first quarter and impacted our operating profit, which decreased by 34.4% to € 970 million. The decline was mainly attributable to a lower underwriting result, reflected in an increased combined ratio and a one-off effect in the first quarter 2008 when we sold own-use offices in Germany with a net gain of € 238 million.

The combined ratio of 98.5% was 3.7 percentage points above the respective quarter in 2008. Our calendar year loss ratio was up by 2.4 percentage points to 71.1%. Of this increase, 1.1 percentage points were attributable to a higher accident year loss ratio. Approximately half of that increase was attributable to higher claims in the credit insurance business of Euler Hermes. Quarter-on-quarter the net development in prior years’ loss reserves accounted for a further 1.3%.

The accident year loss ratio increased to 73.4%. A lower impact from natural catastrophes (0.7 percentage points) and other large claims (1.1 percentage points) were more than compensated by the claims from our credit insurance business and increased frequency and severity, in particular in our property business.

The macroeconomic environment resulted in a significantly higher frequency of defaults and delayed payments which affected our credit insurance business at Euler Hermes. This development represents almost 50% of the overall segment’s deterioration in the accident year loss ratio in this quarter.

The overall impact from natural catastrophes was € 200 million, including the windstorms in France and Spain – Klaus and Quinten – as well the bushfires in Australia.


 

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Allianz Group Interim Report First Quarter of 2009     Group Management Report

 

Acquisition and administrative expenses increased by 7.0% to € 2,558 million. This movement was mainly driven by a favorable technical effect in the previous year’s quarter affecting acquisition expenses. As a result our expense ratio increased by 1.3 percentage points to 27.4%.

Operating net investment income

 

Three months ended March 31,       

2009

 mn

      

2008

mn

Interest and similar income     933     1,051
Operating income from financial assets and liabilities carried at fair value through income (net)     (30)     14
Operating realized gains/losses (net)     (4)     (3)
Operating impairments of investments (net)     (62)     (93)
Investment expenses     22     (123)
Operating net investment income     859     846

Net investment income increased by € 13 million to € 859 million. Interest and similar income decreased by 11.2% primarily due to lower dividend income. In contrast, lower operating impairments of investments on German UBR business (where the policyholder bears the investment risk, similar to life insurances) than in the first quarter 2008 contributed to the increase of the net investment income. Finally the investment expenses profited from favorable foreign exchange effects.


 

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Group Management Report     Allianz Group Interim Report First Quarter of 2009

 

Property-Casualty segment information

 

Three months ended March 31,       

2009

mn

      

2008

mn

Gross premiums written 1)     13,886     13,710
Ceded premiums written     (1,370)     (1,285)
Change in unearned premiums     (3,184)     (3,252)
Premiums earned (net)     9,332     9,173
Interest and similar income     933     1,051
Operating income from financial assets and liabilities carried at fair value through income (net)     (30)     14
Operating realized gains/losses (net)     (4)     (3)
Fee and commission income     272     267
Other income     3     250
Operating revenues     10,506     10,752
             
Claims and insurance benefits incurred (net)     (6,633)     (6,301)
Changes in reserves for insurance and investment contracts (net)     (30)     (29)
Interest expenses     (34)     (88)
Loan loss provisions     (6)    
Operating impairments of investments (net)     (62)     (93)
Investment expenses     22     (123)
Acquisition and administrative expenses (net)     (2,558)     (2,391)
Fee and commission expenses     (234)     (248)
Other expenses     (1)    
Operating expenses     (9,536)     (9,273)
             
Operating profit     970     1,479
             
Loss ratio 2) in %     71.1     68.7
Expense ratio 3) in %     27.4     26.1
Combined ratio 4) in %       98.5       94.8

 

1) 

For the Property-Casualty segment, total revenues are measured based upon gross premiums written.

2) 

Represents claims and insurance benefits incurred (net) divided by premiums earned (net).

3) 

Represents acquisition and administrative expenses (net) divided by premiums earned (net).

4) 

Represents the total of acquisition and administrative expenses (net) and claims and insurance benefits incurred (net) divided by premiums earned (net).

 

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Table of Contents

Allianz Group Interim Report First Quarter of 2009     Group Management Report

 

Property-Casualty Operations by Business Divisions

 

        Gross premiums written       

Premiums earned

(net)

       Operating profit        Combined ratio        Loss ratio        Expense ratio
                         internal 1)                                                                                

Three months ended

March 31,

      

2009

mn

      

2008

mn

      

2009

mn

      

2008

mn

      

2009

mn

      

2008

mn

      

2009

mn

      

2008

mn

      

2009

%

      

2008

%

      

2009

%

      

2008

%

      

2009

%

      

2008

%

Germany     4,034     4,085     4,034     4,085     1,778     1,789     278     466     94.5     97.0     67.0     73.3     27.5     23.7
Switzerland     833     775     779     772     340     309     46     50     93.5     90.8     72.4     68.0     21.1     22.8
Austria     339     342     337     342     181     182     18     18     95.3     97.1     69.6     74.1     25.7     23.0
German Speaking Countries     5,206     5,202     5,150     5,199     2,299     2,280     342     534     94.4     96.1     67.9     72.6     26.5     23.5
                                                                                     
Italy     1,003     1,173     1,003     1,165     1,063     1,156     111     166     98.9     93.1     75.8     69.7     23.1     23.4
Spain     658     694     658     694     453     462     76     76     89.5     89.0     70.0     70.0     19.5     19.0
South America     258     237     291     237     183     181     17     17     100.3     98.3     68.0     63.4     32.3     34.9
Portugal     81     87     81     87     60     61     10     10     90.8     89.8     65.0     63.8     25.8     26.0
Turkey 2)     124                 63         1         113.5         87.3         26.2    
Greece     23     22     23     22     12     13     3     3     84.9     85.5     57.6     56.1     27.3     29.4
Europe I incl. South America     2,147     2,213     2,056     2,205     1,834     1,873     218     272     96.8     92.4     73.5     68.9     23.3     23.5
                                                                                     
France     1,407     1,394     1,407     1,394     802     830     (55)     59     112.0     99.4     85.8     72.3     26.2     27.1
Credit Insurance     531     532     531     532     310     343     8     77     114.4     89.1     84.3     63.2     30.1     25.9
Travel Insurance and Assistance Services     350     327     350     327     295     275     13     25     97.2     93.5     61.2     58.0     36.0     35.5
Netherlands     312     298     312     298     198     193     15     19     99.2     97.3     69.6     66.3     29.6     31.0
Belgium     114     111     114     111     64     65     8     10     99.8     96.1     64.4     57.4     35.4     38.7
Africa     26     25     26     25     7     6     2     1     92.4     75.2     73.0     65.3     19.4     9.9
Europe II incl. Africa     2,740     2,687     2,740     2,687     1,676     1,712     (5) 3)     198 3)     107.9     96.1     78.5     67.1     29.4     29.0
                                                                                     

United States

    788     772     685     670     762     685     102     89     98.3     97.4     64.4     66.7     33.9     30.7

Mexico

    50     38     58     38     20     19     4     4     91.6     86.8     67.6     63.4     24.0     23.4
NAFTA     838     810     743     708     782     704     106     93     98.2     97.1     64.5     66.6     33.7     30.5
Reinsurance PC     1,484     1,251     1,497     1,251     771     637     3     110     105.8     86.6     76.4     67.0     29.4     19.6
Allianz Global Corporate & Specialty     1,035     842     1,035     912     561     406     138     46     85.5     97.3     64.2     71.7     21.3     25.6
AZ Insurance plc     433     506     520     506     384     460     45     58     95.7     96.3     62.9     62.2     32.8     34.1
Australia     327     351     387     351     253     308     30     41     106.0     103.8     81.6     80.6     24.4     23.2
Ireland     190     200     190     200     142     150     (5)     30     112.1     90.2     84.8     65.5     27.3     24.7
ART     80     21     57     21     45     19     13     7     82.6     82.1     45.8     48.7     36.8     33.4
Anglo Broker Markets/ Global Lines     4,387     3,981     4,429     3,949     2,938     2,684     330     385     98.5     94.8     69.5     68.1     29.0     26.7
                                                                                     

Russia/CIS 4)

    174     225     210     225     135     174     7     (2)     98.1     100.7     55.4     61.2     42.7     39.5

Hungary

    147     183     167     183     101     113     17     18     103.8     94.3     77.4     63.3     26.4     31.0

Poland

    86     106     108     106     70     76     4     7     99.0     95.0     61.9     63.6     37.1     31.4

Romania

    76     93     88     93     35     37     0     3     106.4     103.1     85.0     76.4     21.4     26.7

Slovakia

    122     110     122     110     76     67     21     29     79.2     64.4     50.4     40.4     28.8     24.0

Czech Republic

    77     82     83     82     51     54     13     12     79.7     82.3     60.2     60.0     19.5     22.3

Bulgaria

    19     25     20     25     19     20     5     4     76.2     82.1     47.8     53.1     28.4     29.0

Croatia

    27     26     27     26     19     19     1     2     103.5     93.7     66.9     64.9     36.6     28.8
New Europe 5)     728     850     825     850     507     559     62     67     94.6     91.8     62.7     60.2     31.9     31.6
Asia-Pacific (excl. Australia)     126     102     119     102     64     53     5     3     99.5     100.7     59.4     60.9     40.1     39.8
Middle East     19     14     17     14     8     6     (0)     2     138.4     113.4     65.9     65.8     72.5     47.6
Growth Markets     873     966     961     966     579     618     67     72     95.7     92.6     62.4     60.2     33.3     32.4
                                                                                     
Consolidation 6)     (1,467)     (1,339)     (1,519)     (1,340)     6     6     18     18                        
Total       13,886       13,710       13,817       13,666       9,332       9,173       970       1,479       98.5       94.8       71.1       68.7       27.4       26.1

 

1) 

Reflect gross premiums written on an internal basis (adjusted for foreign currency translation and (de-) consolidation effects).

2) 

Effective July 21, 2008, Koç Allianz Sigorta AS was consolidated following the acquisition of approximately 47.1% of the shares in Koç Allianz Sigorta AS by the Allianz Group, increasing our holding to approximately 84.2%.

3) 

Contains 3 mn and 5 mn for 1Q 2009 and 1Q 2008, respectively, from a former operating entity located in Luxembourg and also 1 mn and 1 mn for 1Q 2009 and 1Q 2008, respectively, from AGF UK.

4) 

Contains operations in Kazakhstan and Ukraine.

5) 

Contains income and expense items from a management holding.

6) 

Represents elimination of transactions between Allianz Group companies in different geographic regions.

 

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Life/Health Insurance Operations

– Top line increases, revenues of 13.0 billion.

402 million operating profit after a loss of 302 million in the fourth quarter 2008.

 

Earnings Summary

The economic environment during the first quarter 2009 remained challenging, but we were able to achieve robust revenue growth with statutory premiums reaching € 13,013 million, and an operating profit of € 402 million after a loss in the fourth quarter of 2008.

Statutory premiums 1)

Our statutory premiums grew by 3.6% on an internal basis. Bancassurance business, in particular in Italy, picked up again, driven by strong demand for products with minimum guarantees and participating components. The normal unit-linked business is still suffering from the economic crisis in Europe and Asia.

 

1) 

We comment on the development of our statutory premiums written on an internal basis; meaning adjusted for foreign currency translation and (de-)consolidation effects in order to provide more comparable information.

 

Statutory premiums – Internal growth rates 2)

in%

LOGO

In Germany, one of our key markets, our business declined by 1.9% or € 83 million, mainly due to a positive prior year impact on sales of “Riester”-products and of premiums from large corporate business. Our cooperation with Commerz-bank will begin in 2010.

In Italy, we recorded premium growth of 38.4% or € 625 million due to the launch of a product with a minimum guarantee and a participating component. This product is successfully sold solely via our banking channel, which clearly outperformed the market.

Up 33.9% or € 62 million, the premium development in Spain also benefitted from a banking joint-venture following the launch of an investment product at the beginning of the year, as well as from strong sales via our agents’ network.

 

2) 

Before elimination of transactions between Allianz Group companies in different countries and geographic regions.


 

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Allianz Group Interim Report First Quarter of 2009     Group Management Report

 

As a consequence of a decrease in the unit-linked business our operations in France generated 19.3% or € 427 million lower revenues. In the first quarter 2008 we secured a large single premium group contract which drove the premium result in that quarter. Also sales of unit-linked contracts from tied agents and brokers declined in the current quarter.

In Asia-Pacific sales went down by 26.6% or € 290 million. Our business in this region was especially impacted by developments in Taiwan and South Korea. In Taiwan regulatory restrictions stopped the sale of our main unit-linked product and initial sales of newly launched products started slowly. Our business in South Korea was still impacted by the financial markets downturn and a decline in sales of unit-linked and single premium savings contracts.

In the United States premiums were up 37.8% or € 508 million. As announced at year end 2008 we have actively addressed our product issues in the United States. Some products have been discontinued, others were modified and re-priced. The first quarter saw a spike in the sales of variable annuity products, and we expect significantly lower sales of these products throughout the rest of the year.

Operating profit

Operating profit

in  mn

LOGO

Operating profit at € 402 million was down by 31.7% mainly reflecting the impact from the financial markets crisis.

 

However, compared to the fourth quarter 2008 when we recorded an operating loss, this represented a strong turn around.

Net impairments on investments amounted to € 1,076 million, an increase of € 96 million which was to a large extent attributable to the “once impaired, always impaired” rule (IAS 39) following the prolonged decline of equity prices. The highest impairments were recorded in Germany Life (€ 598 million) and in France (€ 253 million).

Net realized gains stood at € 171 million representing a sharp drop of 73.7%, reflecting fewer opportunities for realizing gains in the current market environment. Main contributor to the realized gains was the sale of debt securities in France.

The prior period’s operating gain of € 231 million turned to a € 233 million net loss from financial assets and liabilities carried at fair value through income. This swing was primarily due to an unfavorable result from foreign exchange currency hedging. The corresponding foreign exchange gains of the hedged securities are shown under investment expenses.

Interest and similar income remained stable at € 3,305 million and even under current market conditions delivered a yield of 1.2% 1).

Changes in reserves for insurance and investment contracts (net) amounted to € 585 million, € 1,218 million less than in the first quarter 2008. This was driven by a reduction of reserves for premium refunds to policyholders following a significantly lower investment result.

Net claims and insurance benefits incurred were up 2.7% to € 5,146 million.

Acquisition and administrative expenses (net) amounted to € 1,427 million, up 28.8%. Whereas administrative expenses declined, acquisition expenses went up due to increased amortization of deferred acquisition costs at Allianz Life in the United States and also in Germany.

Our cost income ratio was 97.3%, up 1.2 percentage points.

 

1) 

On debt securities including cash components, based on an average asset base of  260.3 billion.


 

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Group Management Report     Allianz Group Interim Report First Quarter of 2009

 

Life/Health segment information

 

Three months ended March 31,       

2009

 mn

      

2008

 mn

Statutory premiums 1)     13,013     12,327
Ceded premiums written     (143)     (143)
Change in unearned premiums     (29)     (37)
Statutory premiums (net)     12,841     12,147
Deposits from SFAS 97 insurance and investment contracts     (7,493)     (6,558)
Premiums earned (net)     5,348     5,589
Interest and similar income     3,305     3,200
Operating income from financial assets and liabilities carried at fair value through income (net)     (233)     231
Operating realized gains/losses (net)     171     649
Fee and commission income     119     171
Other income     3     110
Operating revenues     8,713     9,950
             
Claims and insurance benefits incurred (net)     (5,146)     (5,013)
Changes in reserves for insurance and investment contracts (net)     (585)     (1,803)
Interest expenses     (44)     (70)
Loan loss provisions     (2)     2
Operating impairments of investments (net)     (1,076)     (980)
Investment expenses     34     (328)
Acquisition and administrative expenses (net)     (1,427)     (1,108)
Fee and commission expenses     (64)     (60)
Operating restructuring charges     (1)     (1)
Operating expenses     (8,311)     (9,361)
             
Operating profit     402     589
             
Cost-income ratio 2) in %       97.3       96.1

 

1) 

For the Life/Health segment, total revenues are measured based upon statutory premiums. Statutory premiums are gross premiums written from sales of life and health 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.

2) 

Represents deposits from SFAS 97 insurance and investment contracts, claims and insurance benefits incurred (net), changes in reserves for insurance and investment contracts (net) and acquisition and administrative expenses (net) divided by statutory premiums (net), interest and similar income, operating income from financial assets and liabilities carried at fair value through income (net), operating realized gains/losses (net), fee and commission income, other income, interest expenses, loan loss provisions, operating impairments of investments (net), investment expenses, fee and commission expenses and operating restructuring charges.

 

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Allianz Group Interim Report First Quarter of 2009     Group Management Report

 

Life/Health Operations by Business Divisions

 

         Statutory premiums1)        Premiums earned (net)        Operating profit        Cost-income ratio
Three months ended March 31,      

2009
mn

              internal2)                                                
              2008
mn
       2009
mn
       2008
mn
       2009
mn
       2008
mn
       2009
 mn
       2008
 mn
       2009
%
       2008
%
Germany Life     3,479     3,578     3,479     3,578     2,360     2,624     165     187     96.1     96.3
Germany Health3)     791     775     791     775     792     776     19     37     98.0     96.2
Switzerland     693     663     648     663     236     194     8     17     98.9     97.5
Austria     118     108     118     108     89     82     4     8     96.9     93.4
German Speaking Countries     5,081     5,124     5,036     5,124     3,477     3,676     196     249     96.8     96.4
                                                             
Italy     2,254     1,629     2,254     1,629     187     214     9     30     99.6     98.3
Spain     245     183     245     183     110     112     27     26     90.9     89.5
Portugal     35     25     35     25     20     19     5     5     87.8     82.7
Greece     30     29     30     29     18     18     1     1     96.3     95.7
South America     11     30     12     30     9     29     5     6     75.2     82.6
Turkey4)     21                 9         1         95.8    
Europe I incl. South America     2,596     1,896     2,576     1,896     353     392     48     68     98.3     96.8
                                                             
France     1,784     2,211     1,784     2,211     709     697     123     160     93.5     93.7
Belgium     155     203     155     203     87     89     7     30     96.4     88.9
Netherlands     105     99     105     99     48     33     10     9     91.4     91.8
Luxembourg     12     23     12     23     7     7     2     1     89.3     95.5
Africa     11     14     11     14     6     6     1     1     91.9     94.6
Global Life     39         39                         99.2    
Europe II incl. Africa     2,106     2,550     2,106     2,550     857     832     143     201     93.7     93.2
                                                             

United States

    2,130     1,344     1,852     1,344     170     174     3     6     99.9     99.6

Mexico

    13     34     15     34     7     7     1         94.8     98.5
NAFTA     2,143     1,378     1,867     1,378     177     181     4     6     99.8     99.6
AZ Reinsurance LH     73     74     73     74     76     71     1     1     98.8     99.2
Anglo Broker Markets/Global Lines     2,216     1,452     1,940     1,452     253     252     5     7     99.8     99.6
                                                             

South Korea

    299     484     385     484     153     210     16     30     95.6     94.6

Taiwan

    298     455     279     455     29     27     5     2     98.5     99.5

Malaysia

    38     31     37     31     34     28     2     2     94.3     93.3

Indonesia

    39     45     42     45     17     10     4     3     89.4     93.6

Other

    71     75     57     75     18     6     (20)     (10)     129.5     112.5
Asia-Pacific     745     1,090     800     1,090     251     281     7     27     99.2     97.7

Hungary

    22     44     25     44     15     20     5     4     80.7     92.5

Slovakia

    68     80     68     80     41     42     9     9     87.9     89.4

Czech Republic

    40     27     43     27     13     16     1     4     96.8     85.8

Poland

    149     63     188     63     40     38     2     4     98.8     93.8

Romania

    6     7     8     7     4     3         1     93.6     88.3

Bulgaria

    6     7     6     7     6     6         1     95.8     91.6

Croatia

    11     13     11     13     10     9         2     96.9     86.4

Russia

    4     4     4     4     4     4     (1)     (3)     146.3     163.0
New Europe     306     245     353     245     133     138     16     22     94.8     91.7
Middle East     24     23     21     23     24     18     (9)     1     158.2     93.7
Growth Markets     1,075     1,358     1,174     1,358     408     437     14     50     98.8     96.6
                                                             
Consolidation5)     (61)     (53)     (62)     (53)             (4)     14        
Total       13,013       12,327       12,770       12,327       5,348       5,589       402       589       97.3       96.1

 

1) 

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.

2) 

Reflect statutory premiums on an internal basis (adjusted for foreign currency translation and (de-) consolidation effects).

3) 

Loss ratios were 79.5% and 79.4% for the three months ended March 31, 2009 and 2008, respectively.

4) 

Effective July 21, 2008, Koç Allianz Hayat ve Emeklilik AS was consolidated following the acquisition of approximately 51% of the shares in Koç Allianz Hayat ve Emeklilik AS by the Allianz Group, increasing our holding to approximately 89%.

5) 

Represents elimination of transactions between Allianz Group companies in different geographic regions.

 

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Financial Services

 

New Financial Services segment implemented for reporting.
Acquisition of cominvest.
Strong fixed income performance.
Operating profit of 198 million.

 

New Financial Services segment

Following the completion of the sale of Dresdner Bank on January 12, 2009, Allianz has modified its segment structure and introduced a new Financial Services segment starting with the first quarter 2009. Under the umbrella of Financial Services we have grouped our activities from Asset Management, Banking and Alternative Investment Management.

Earnings Summary

Operating revenues in our Financial Services segment amounted to € 860 million, down 6.1% compared to the prior year period. This decline is attributable to the capital market crisis which affected revenue development in all three Financial Services activities. Asset management from fixed-income business developed well, while the remaining business suffered in line with the markets. Therefore revenues in Asset Management were down 1.7% to € 714 million, Banking revenues were down 17.1% to € 116 million and Alternative Investment Management revenues were down 42.3% to € 30 million.

We recorded an operating profit of € 198 million compared to € 255 million in the respective quarter one year ago driven mainly by the lower operating revenues. Operating expenses of € 655 million (1Q 2008: € 654 million) and loan loss provisions from our banking business, of € 7 million in both periods, remained flat overall.

The results of operations of our Financial Services segment are predominantly represented by our Asset Management business, accounting for 83.0% (1Q 2008: 79.3%) and 106.6% (1Q 2008: 94.5%) of our total Financial Services segment’s operating revenues and operating profit in the first three months of 2009, respectively. Accordingly, we discuss the results of our Asset Management business in the following section.

 

 

 

Asset Management

Third-party assets under management

As part of the sale of Dresdner Bank to Commerzbank, Allianz acquired cominvest whose third-party assets under management amounted to € 47 billion (thereof € 15 billion equity assets and € 32 billion fixed-income assets) as of March 31, 2009, and those were integrated into our asset management business in the first quarter 2009.

Development of third-party assets under management

in bn

LOGO

As of March 31, 2009 our asset base amounted to € 766 billion and was therefore € 63 billion higher than at December 31, 2008. We recorded net inflows for the first quarter of 2009 of € 7 billion with a positive contribution from fixed-income products of € 11 billion, partly offset by outflows from our equity business. The decline in market values especially at the beginning of the year led to market-related losses of € 11 billion in the first three months, which impacted equities by € 9 billion and fixed-income by € 2 billion. The total change in the scope of consolidation and decon-solidation resulted in additional assets under management of € 40 billion. Furthermore, the strengthening U.S. Dollar versus the Euro led to a positive currency translation effect


 

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Allianz Group Interim Report First Quarter of 2009     Group Management Report

 

of € 27 billion. For further information on our third-party assets under management please refer to page 22.

Operating revenues

At € 714 million, operating revenues were € 12 million below prior year’s level despite the first consolidation of com-invest, with € 35 million operating revenues, and favorable movements of exchange rates. Adjusted for these effects, operating revenues were down by 16.1%.

 

Three months ended March 31,        2009
 mn
       2008
 mn
Management fees     820     841
Loading and exit fees     59     66
Performance fees     14     13
Other income     14     66
Fee and commission income     907     986
             
Commissions     (193)     (212)
Other expenses     (5)     (68)
Fee and commission expenses     (198)     (280)
             
Net fee and commission income       709       706

Net fee and commission income amounted to € 709 million, up 0.4% on a nominal basis. On an internal basis it was a decline of 14.4%. The reduction in management fees, down by € 21 million to € 820 million was mainly attributable to the decline of our average third-party assets under management compared to the first quarter 2008. As a result of lower flows and third-party assets under management, our loading fee income declined as well as our fee and commission expenses.

Net loss from financial assets and liabilities carried at fair value through income amounted to € 10 million and comprised effects of mark-to-market valuation of seed money investments. In the first quarter 2008 a gain of € 21 million from foreign currency hedging lowered the seed money effect.

 

Operating profit

Operating profit

in mn

LOGO

In an ongoing difficult market environment, operating profit amounted to € 211 million in the first quarter 2009, a decline of 27.4% on an internal basis. On a nominal basis the decline was 12.4% partly due to a positive prior year impact of the above mentioned foreign currency hedge. In addition we incurred higher operating expenses which were mainly attributable to the acquisition of cominvest.

Administrative expenses, excluding acquisition related expenses, were down 10.3% on an internal basis. At € 504 million, they were 3.7% higher than in the first quarter 2008 on a nominal basis. Personnel expenses at € 310 million increased by 2.6% as reduced bonus costs were offset by higher personnel costs due to higher headcount following the acquisition of cominvest. Non-personnel expenses amounted to € 194 million (1Q 2008: € 184 million).

At 70.4%, our cost-income ratio increased by 3.6 percentage points.


 

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Group Management Report     Allianz Group Interim Report First Quarter of 2009

 

Third-party assets under management of the Allianz Group

Third-party assets under management by geographic region as of March 31, 2009 (December 31, 2008)1)

in %

LOGO

The acquisition of cominvest increased the proportion of investments originating in Germany, which now account for nearly 17% of Allianz’s third-party assets under management.

The relation between equity and fixed-income assets remained almost unchanged. The latter made up for 86% of third-party assets under management – an increase of 1 percentage point versus the year end 2008 – with equity assets accounting for the balance.

The weighting of retail and institutional clients shifted towards retail customers which accounted for 30% of our third-party assets as of March 31, 2009 (December 31, 2008: 26%).

 

 

1) 

Based on the origination of assets.

2) 

Consists of third-party assets managed by other Allianz Group companies (approximately 21 bn as of March 31, 2009 and 22 bn as of December 31, 2008, respectively) and Dresdner Bank (approximately  9 bn as of December 31, 2008).

 

Rolling investment performance of Allianz Global Investors3)

in %

LOGO

Compared to year-end 2008, the performance of Allianz Global Investors’ (AGI) assets under management slightly recovered and remained robust. 66% (December 31, 2008: 62%) of our equity products achieved an outperformance against benchmarks. Our fixed-income products were severely hit by the market disruptions since the second half of 2008 and 51% (December 31, 2008: 48%) outperformed their respective benchmarks.

 

 

3) 

AGI account-based, asset-weighted 3-year investment performance of 3rd party assets vs. benchmark including all accounts managed on a discretionary basis by equity and fixed-income managers of AGI (including direct accounts, Spezialfonds and CPMs of Allianz with AGI Germany). For some retail funds the net of fee performance is compared to the median performance of an appropriate peer group (Micropal or Lipper; 1st and 2nd quartile mean out-performance). For all other retail funds and for all institutional accounts performance is calculated gross of fees using closing prices (revaluated) where appropriate and compared to the benchmark of each individual fund or account. Other than under GIPS, the performance of closed funds/accounts is not included in the analysis. Also not included: AGI Taiwan, AGI Singapore, GTJA Allianz China, AGI Korea, AGI France, AGI Netherlands and AGI Italy.


 

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Allianz Group Interim Report First Quarter of 2009     Group Management Report

 

Financial Services segment information

 

Three months ended March 31,       Asset Management        Banking       

Alternative

Investment

Management

      

Financial

Services1)

         

2009

 mn

      

2008

 mn

      

2009

mn

      

2008

mn

      

2009

mn

      

2008

 mn

      

2009

mn

      

2008

mn

Net fee and commission income2)     709     706     35     74     30     54     774     833
Net interest income3)     12     19     80     78     1         93     96
Income from financial assets and liabilities carried at fair value through income (net)     (10)     (4)     1     (12)     (1)     (2)     (10)     (18)
Other income     3     5                     3     5
Operating revenues4)     714     726     116     140     30     52     860     916
                                                 
Administrative expenses (net), excluding acquisition-related expenses     (504)     (486)     (118)     (138)     (32)     (33)     (654)     (655)
Investment expenses     1     1     (1)     3     (1)     (2)     (1)     2
Other expenses                 (1)                 (1)
Operating expenses     (503)     (485)     (119)     (136)     (33)     (35)     (655)     (654)
                                                 
Loan loss provisions             (7)     (7)             (7)     (7)
Operating profit (loss)     211     241     (10)     (3)     (3)     17     198     255
                                                 
Cost-income ratio5) in %       70.4       66.8       102.6       97.1       110.0       67.3       76.2       71.4

 

1) 

Including consolidation in between the financial services segment as recorded in the segment information in Note 5 to the condensed consolidated interim financial statements.

2) 

Represents fee and commission income less fee and commission expenses.

3) 

Represents interest and similar income less interest expenses.

4) 

For the Financial Services segment, total revenues are measured based upon operating revenues.

5) 

Represents operating expenses divided by operating revenues.

 

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Table of Contents

Corporate Activities

– Operating loss increased due to lower net interest income.

 

Earnings Summary

Operating loss

The aggregate operating loss increased from € 118 million by 45.8% to € 172 million mainly driven by a lower net interest income due to a lower level of short term interest rates compared to the previous year.

 

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Table of Contents

Balance Sheet Review

– Strong solvency ratio of 159%.

– Shareholders’ equity of 33.0 billion.

 

Shareholders’ Equity1)

Shareholders’ equity

in mn

LOGO

As of March 31, 2009, shareholders’ equity amounted to € 33.0 billion, 1.9% lower than for the year-end 2008. The change was driven by a reduction of unrealized gains of € 1.1 billion and the net income from continuing operations of € 424 million.

 

1) 

Does not include minority interests of 2.1 bn, 3.6 bn and 3.6 bn as of March 31, 2009, December 31, 2008 and December 31, 2007, respectively. For further information please refer to Note 21 to the condensed consolidated interim financial statements.

2) 

Include foreign currency translation adjustments.

 

 

Shareholders’ equity

 

          Shareholders’
equity
 mn
Balance as of December 31, 2008     33,684
Total comprehensive income3)     (670)
Paid-in capital    
Treasury shares     21
Transactions between equity holders     (5)
Dividends paid    
Balance as of March 31, 2009       33,030

Regulatory capital adequacy

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 cross-sector activities. Allianz Group is a financial conglomerate within the scope of the directive and the related German law. The law requires that a financial conglomerate calculates the capital needed to meet the respective solvency requirements on a consolidated basis.

 

3) 

Total comprehensive income comprises net income (after taxes and after minority interests in earnings) and other comprehensive income resulting from foreign currency translation adjustments, available for sale investments, cashflow hedges, share of other comprehensive income of associates and miscellaneous. For further information on our total comprehensive income please refer to our condensed consolidated interim financial statements.


 

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Group Management Report     Allianz Group Interim Report First Quarter of 2009

 

Conglomerate solvency1)

in bn

LOGO

As of March 31, 2009 our available funds for the solvency margin, required for our insurance segments and our banking and asset management business were € 32.9 billion including off-balance sheet reserves 3), surpassing the minimum legally stipulated level by € 12.2 billion. This margin resulted in a cover ratio 4) of 159% at March 31, 2009.

 

1) 

Solvency computed according to the adjusted FkSolV published by the BaFin, which revises the treatment of unrealized gains/losses on the bond portfolio. Reported solvency ratio under the old method was 157% and available funds were 45.5 bn as of December 31, 2007.

2) 

Available funds and requirement as of December 31, 2008 including discontinued operations were adjusted to reflect the pro-forma view. For example, we removed hybrid capital related to Dresdner Bank from available funds and adjusted the deduction of goodwill and other intangible assets. Furthermore, we deleted the requirement of our discontinued operations.

3) 

Represents the difference between fair value and amortized cost of real estate held for investment and investments in associates and joint ventures, net of deferred taxes, policyholders’ participation and minority interests.

4) 

Represents the ratio of available funds to required capital.

 

Total Assets and Total Liabilities

In the following sections, we show our asset allocation for our insurance portfolio and analyze important developments within the balance sheets of our Property-Casualty, Life/Health, Financial Services and Corporate segments as presented on pages 52 and 53.

Total assets and liabilities decreased by € 409.9 billion and € 407.7 billion, respectively. This decrease was almost entirely attributable to the deconsolidation of Dresdner Bank on January 12, 2009. For the year-end 2008 we recorded Dresdner Bank in our consolidated balance sheet as “Non-current assets and assets of disposal groups classified as held for sale” and “Liabilities of disposal groups classified as held for sale” with the amounts of € 417.9 billion and € 410.5 billion.

Due to timing differences between premium payments and claims or contractual fulfillment, insurers invest the money they collected from their clients net of acquisition costs and administration expenses. Therefore, insurance assets, including financial assets and liabilities carried at fair value through income, investments, loans and advances to banks and customers, and for the Life/Health segment financial assets for unit-linked contracts, account for the largest part of the assets in our consolidated balance sheet.

We have changed the definition of the asset bases to better reflect economic reality: from the first quarter 2009 onwards we include cash and cash equivalents and receivables from cash pooling net of liabilities from securities lending in our asset bases.

Liabilities in the insurance business are recorded to account for the obligation to policyholders for claims and insurance benefits.


 

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Allianz Group Interim Report First Quarter of 2009     Group Management Report

 

Asset allocation of Property-Casualty, Life/Health and Corporate segments

Investment assets from our Property-Casualty, Life/Health and Corporate segments amounted to € 374.1 billion as of March 31, 2009. Thereof, the fixed-income portfolio which comprised bonds and loans 1) accounted for € 331.3 billion, equities for € 28.8 billion and other investment categories for € 14.0 billion.

Fixed-income portfolio by investment country

in %

LOGO

From a regional perspective our fixed-income portfolio is well diversified. The regional split in the first quarter remained stable.

Fixed-income portfolio by type of issuer

in %

LOGO

 

1) 

Excluding internal loans.

2) 

Including 11.8 billion subordinated debt securities; thereof 9.3 bn related to our exposure in banks as of March 31, 2009.

3) 

5%-pts are mainly seasoned self-originated German Private Retail Mortgage Loans and 4%-pts are short-term deposits at banks.

4) 

Includes 8.5 bn U.S. Agency MBS.

5) 

Type of covered bond issued in Germany.

 

We consider our fixed-income portfolio to be both of high quality and well diversified. A share of more than 60% relates to government and covered bonds that help mitigate against possible future deteriorations in the credit markets. The relatively high share in government bonds amounting to € 113.8 billion and German Pfandbriefe at € 60.4 billion secure a high fungibility of the portfolio as they are eligible as collateral and markets for government bonds are still liquid. Higher ABS in the first quarter were mainly attributable to the sale of Dresdner Bank to Commerzbank and the commitment of Allianz to purchase certain CDOs as part of the transaction.

Government exposures

in %

LOGO

Nearly 80% of our government exposure was attributable to the Eurozone. This quota remained stable compared to year-end 2008.

Pfandbrief and covered bond portfolio

in %

LOGO


 

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Group Management Report     Allianz Group Interim Report First Quarter of 2009

 

69 % of covered bonds are German Pfandbriefe backed by either public sector loans or mortgage loans. On these as well as on all other covered bond exposures, minimum required security buffers as well as voluntary over-collateralization offer a substantial cushion for house price deterioration and payment defaults.

Assets and liabilities of the Property-Casualty segment

Property-Casualty assets

Property-Casualty asset base 1)

fair values 2) in bn

LOGO

Our Property-Casualty asset base increased by € 1.0 billion. An increase in debt securities of € 2.0 billion to € 53.6 billion outweighed the decline in equity investments, which were down 20.3 % to € 5.1 billion, due to market movements and disposals. In addition cash and cash pool assets were € 1.0 billion above the year-end, and amounted to € 8.5 billion.

 

1) 

We have changed the definition of the asset bases to better reflect the economic reality: from 1Q 2009 onwards we include cash and cash equivalents and receivables from cash pooling net of liabilities from securities lending in our asset bases.

2) 

Loans and advances to banks and customers, held-to-maturity investments, and real estate held for investment are stated at amortized cost. Investments in associates and joint ventures are stated at either amortized cost or equity, depending upon, among other factors, our ownership percentage.

 

Composition of the Property-Casualty asset base

fair values 2)

 

          As of
March 31,
2009
 bn
      

As of
December 31,
2008

bn

Financial assets and liabilities carried at fair value through income            

Equities

    0.1     0.2

Debt securities

    1.4     1.5

Other

    0.1     0.2

Subtotal

    1.6     1.9
Investments 3)            

Equities

    5.1     6.4

Debt securities

    53.6     51.6

Cash and cash pool assets 4)

    8.5     7.5

Other

    6.9     6.9

Subtotal

    74.1     72.4
Loans and advances to banks and customers     17.2     17.6
Property-Casualty asset base       92.9       91.9

Of our Property-Casualty asset base, ABS made up € 4.9 billion as of March 31, 2009, which is around 5 % of our asset-base. CDOs accounted for € 0.1 billion of this amount.

 

3) 

Do not include affiliates of 10.6 bn and 10.7 bn as of March 31, 2009 and December 31, 2008, respectively.

4) 

Including cash and cash equivalents as stated in our segment balance sheet of 2.9 bn and 2.7 bn and receivables from cash pooling amounting to 5.6 bn and 5.0 bn net of liabilities from securities lending of 0 bn and (0.2) bn as of March 31, 2009 and December 31, 2008, respectively.


 

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Allianz Group Interim Report First Quarter of 2009     Group Management Report

 

Property-Casualty liabilities

Development of reserves for loss and loss adjustment expenses1)

in bn

LOGO

In the first quarter 2009, the segment’s gross reserves for loss and loss adjustment expenses decreased by 0.2% to € 55.5 billion. On a net basis reserves were up 0.4% to € 48.0 billion. Foreign currency translation effects and other changes accounted for € 0.5 billion.

 

1) 

After group consolidation. For further information about changes in the reserves for loss and loss adjustment expenses for the Property-Casualty segment please refer to Note 16 to the condensed consolidated interim financial statements.

Assets and liabilities of the Life/Health segment

Life/Health assets

Life/Health asset base2)

fair values3) in bn

LOGO

Our Life/Health asset base increased by 0.4% to € 343.4 billion. A reduction in equity investments of € 3.7 billion to € 18.5 billion due to the weak market environment, which led to market-related effects of € (2.0) billion, together with disposals, was mostly offset by an increase of € 3.2 billion in debt securities to € 157.6 billion. Furthermore, loans and advances to banks and customers increased by 5.1% to € 95.2 billion. Assets for unit-linked contracts declined by € 1.3 billion to € 49.1 billion.

 

2) 

We have changed the definition of the asset bases to better reflect the economic reality: from 1Q 2009 onwards we include cash and cash equivalents and receivables from cash pooling net of liabilities from securities lending in our asset bases.

3) 

Loans and advances to banks and customers, held-to-maturity investments, and real estate held for investment are stated at amortized cost. Investments in associates and joint ventures are stated at either amortized cost or equity, depending upon, among other factors, our ownership percentage.


 

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Group Management Report     Allianz Group Interim Report First Quarter of 2009

 

Composition of the Life/Health asset base

fair values1)

 

         

As of
March 31,
2009

bn

      

As of
December 31,
2008

bn

Financial assets and liabilities carried at fair value through income            

Equities

    2.3     2.5

Debt securities

    6.3     7.7

Other

    (5.0)     (4.3)

Subtotal

    3.6     5.9
Investments 2)            

Equities

    18.5     22.2

Debt securities

    157.6     154.4

Cash and cash pool assets3)

    11.8     11.0

Other

    7.6     7.7

Subtotal

    195.5     195.3
Loans and advances to banks and customers     95.2     90.6
Financial assets for unit-linked contracts 4)     49.1     50.4
Life/Health asset base       343.4       342.2

Within our Life/Health asset base, ABS amounted to € 15.8 billion as of March 31, 2009, which is less than 5% of total Life/Health assets. Thereof, € 0.3 billion are CDOs. Unrealized losses on CDOs of € 8 million were recorded in shareholders’ equity.

 

1) 

Loans and advances to banks and customers, held-to-maturity investments, and real estate held for investment are stated at amortized cost. Investments in associates and joint ventures are stated at either amortized cost or equity, depending upon, among other factors, our ownership percentage.

2) 

Do not include affiliates of  1.6 bn and  2.5 bn as of March 31, 2009 and December 31, 2008, respectively.

3) 

Including cash and cash equivalents as stated in our segment balance sheet of  2.8 bn and  4.8 bn and receivables from cash pooling amounting to  9.0 bn and  6.6 bn net of liabilities from securities lending of  0 bn and  (0.4) bn as of March 31, 2009 and December 31, 2008, respectively.

4) 

Financial assets for unit-linked contracts represent assets owned by, and managed on the behalf of, policyholders of the Allianz Group, with all appreciation and depreciation in these assets accruing to the benefit of policyholders. As a result, the value of financial assets for unit-linked contracts in our balance sheet corresponds to the value of financial liabilities for unit-linked contracts.

Life/Health liabilities

Development of reserves for insurance and investment contracts

in bn

LOGO

Life/Health reserves for insurance and investment contracts increased in the first quarter by € 2.4 billion to € 290.3 billion. Additional reserves in Italy of € 1.3 billion, in the United States of € 0.5 billion, in France (€ 0.4 billion), in Germany (€ 0.3 billion) and foreign currency gains of € 1.7 billion mainly stemming from the U.S. Dollar, were partly compensated by reductions of reserves for premium refunds, down € 2.7 billion, mostly in Germany and France.


 

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Allianz Group Interim Report First Quarter of 2009     Group Management Report

 

Assets and liabilities of the Financial Services segment

Financial Services assets

Assets in our Financial Services segment relate mostly to our continuing banking business. Our Asset Management segment’s results of operations stem primarily from its management of third-party assets.1)

Loans and advances to banks and customers2)

in bn

LOGO

Loans and advances to banks and customers amounted to € 13.9 billion as of March 31, 2009, down 2.8% from the year-end. Thereof, € 13.5 billion relate to our continuing banking operations.

Financial Services liabilities

Liabilities to banks and customers amounted to € 15.2 billion (down 10.1%). Thereof, liabilities payable on demand accounted for € 3.0 billion, repurchase agreements for € 1.2 billion, term deposits and certificates of deposit for € 3.8 billion and savings deposits for € 1.8 billion.

 

1) 

For further information on the development of these third-party assets please refer to pages 20 and 22.

2) 

Includes loan loss allowance of  (0.1) bn as of March 31, 2009 and December 31, 2008, respectively.

Assets and liabilities of the Corporate segment

Corporate assets

Corporate asset base3)

fair values4) in bn

LOGO

Our Corporate asset base increased by 7.3% compared to the year-end 2008 mainly driven by higher loans and advances to banks and customers of € 9.1 billion (December 31, 2008 € 6.0 billion). Thereof, short-term investments and certificates of deposit went up by € 2.1 billion to € 6.4 billion. Additionally, Allianz Group retained CDOs from Dresdner Bank which amounted to € 1.0 billion as of March 31, 2009. Investments were down by € 1.9 billion, mainly as equities were down by € 0.6 billion and cash and cash pool assets declined by € 1.4 billion.

 

3) 

We have changed the definition of the asset bases to better reflect the economic reality: from 1Q 2009 onwards we include cash and cash equivalents and receivables from cash pooling net of liabilities from securities lending in our asset bases.

4) 

Loans and advances to banks and customers, held-to-maturity investments, and real estate held for investment are stated at amortized cost. Investments in associates and joint ventures are stated at either amortized cost or equity, depending upon, among other factors, our ownership percentage.


 

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Group Management Report     Allianz Group Interim Report First Quarter of 2009

 

Composition of the Corporate asset base

fair values1)

 

         

As of
March 31,
2009

bn

      

As of
December 31,
2008

bn

Financial assets and liabilities carried at fair value through income              

Equities

         

Debt securities

    0.2       0.2

Other

          (0.4)

Subtotal

    0.2       (0.2)
Investments 2)              

Equities

    5.2       5.8

Debt securities

    8.5       8.4

Cash and cash pool assets3)

    0.3       1.7

Other

    0.1       0.1

Subtotal

    14.1       16.0
Loans and advances to banks and customers     9.1       6.0
Corporate asset base       23.4       21.8

ABS in our Corporate asset base, amounted to € 1.8 billion as of March 31, 2009, which is around 8% of our asset-base. CDOs accounted for € 1.0 billion of this amount, which were retained from Dresdner Bank and classified as loans and advances to banks and customers.

 

1) 

Loans and advances to banks and customers, held-to-maturity investments, and real estate held for investment are stated at amortized cost. Investments in associates and joint ventures are stated at either amortized cost or equity, depending upon, among other factors, our ownership percentage.

2) 

Do not include affiliates of  65.8 bn and 87.1 bn as of March 31, 2009 and December 31, 2008, respectively.

3) 

Including cash and cash equivalents as stated in our segment balance sheet of  0.2 bn and  0.5 bn and receivables from cash pooling amounting to  0.1 bn and  1.2 bn net of liabilities from securities lending of  0 bn and  0 bn as of March 31, 2009 and December 31, 2008, respectively.

Corporate liabilities

Other liabilities amounted to € 18.0 billion after € 16.3 billion at year-end 2008. Thereof, liabilities from cash pooling went up by € 2.4 billion to € 7.4 billion. In the first quarter 2009 certificated liabilities decreased by € 2.1 billion to € 11.4 billion. This was mainly attributable to the Allianz SE issued debt outstanding4) which went down from € 8.2 billion as of December 31, 2008 to € 6.1 billion as of March 31, 2009.

 

4) 

For further information on Allianz SE issued debt outstanding as of March 31, 2009, please refer to page 33 and to Note 19 and 20 to our condensed consolidated interim financial statements.


 

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Allianz Group Interim Report First Quarter of 2009     Group Management Report

 

Allianz SE issued debt outstanding as of March 31, 20091)

 

1. Senior bonds2)        

Floating coupon rate bond

issued by Allianz Finance II B.V., Amsterdam

     
Volume     USD 0.4 bn
Year of issue     2007
Maturity date     4/2/2009
ISIN     XS 029 027 0056
         

5.625% bond

issued by Allianz Finance II B.V., Amsterdam

     
Volume     0.9 bn
Year of issue     2002
Maturity date     11/29/2012
ISIN     XS 015 879 238 1
         

5.0% bond

issued by Allianz Finance II B.V., Amsterdam

     
Volume     1.5 bn
Year of issue     2008
Maturity date     3/6/2013
ISIN     DE 000 A0T R7K 7
         

4.0% bond

issued by Allianz Finance II B.V., Amsterdam

     
Volume     1.5 bn
Year of issue     2006
Maturity date     11/23/2016
ISIN     XS 027 588 026 7
2. Subordinated bonds3)      

6.125% bond

issued by Allianz Finance II B.V., Amsterdam

     
Volume     2.0 bn
Year of issue     2002
Maturity date     5/31/2022
ISIN     XS 014 888 756 4
         

6.5% bond

issued by Allianz Finance II B.V., Amsterdam

     
Volume     1.0 bn
Year of issue     2002
Maturity date     1/13/2025
ISIN     XS 015 952 750 5
         

7.25% bond

issued by Allianz Finance II B.V., Amsterdam

     
Volume     USD 0.5 bn
Year of issue     2002
Maturity date     Perpetual Bond
ISIN     XS 015 915 072 0
         

 

1) 

For further information on Allianz SE issued debt outstanding as of March 31, 2009, please refer to Note 19 and 20 to our condensed consolidated interim financial statements.

2) 

Senior bonds and commercial papers provide for early termination rights in case of non-payment of amounts due under the bond (interest and principal) as well as in case of insolvency of the relevant issuer or, if applicable, the relevant guarantor (Allianz SE).

   The same applies to two subordinated bonds issued in 2002.

3) 

The terms of the subordinated bonds (except for the two subordinated bonds mentioned in footnote 2 above) do not provide for early termination rights in favor of the bond holder. Interest payments are subject to certain conditions which are linked, inter alia, to our net income, and may have to be deferred. Nevertheless, the terms of the relevant bonds provide for alternative settlement mechanisms which allow us to avoid an interest deferral using cash raised from the issuance of specific newly issued instruments.

 

5.5% bond

issued by Allianz SE

       
Volume     1.5 bn
Year of issue     2004
Maturity date     Perpetual Bond
ISIN     XS 018 716 232 5
         

4.375% bond

issued by Allianz Finance II B.V., Amsterdam

     
Volume     1.4 bn
Year of issue     2005
Maturity date     Perpetual Bond
ISIN     XS 021 163 783 9
         

5.375% bond

issued by Allianz Finance II B.V., Amsterdam

     
Volume     0.8 bn
Year of issue     2006
Maturity date     Perpetual Bond
ISIN     DE000A0GNPZ3
         

8.375% bond

issued by Allianz SE

     
Volume     USD 2.0 bn
Year of issue     2008
Maturity date     Perpetual Bond
ISIN       US 018 805 200 7
3. Participation certificates      
Allianz SE participation certificate      
Volume     85.1 mn
ISIN     DE 000 840 405 4
         

 

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Table of Contents

Other Information

 

 

Reconciliation of Consolidated Operating Profit and Income Before Income Taxes and Minority Interests in Earnings

The previous analysis is based on our consolidated financial statements and should be read in conjunction with them. The Allianz Group uses operating profit to evaluate the performance of its business segments and the Group as a whole. The Allianz Group considers the presentation of operating profit to be useful and meaningful to investors because it enhances the understanding of the Allianz Group’s underlying operating performance and the comparability of its operating performance over time. Operating profit highlights the portion of income before income taxes and minority interests in earnings attributable to the ongoing core operations of the Allianz Group. To better understand the on-going operations of the business, we exclude the effects of acquisition-related expenses and the amortization of intangible assets, as these relate to business combinations; and we exclude interest expense from external debt and non-operating income from financial assets and liabilities carried at fair value through income (net) as these relate to our capital structure.

We believe that trends in the underlying profitability of our business can be more clearly identified without the fluctuating effects of the realized capital gains and losses or impairments of investment securities, as these are largely dependent on market cycles or issuer-specific events over which we have little or no control, and can and do vary, sometimes materially, across periods. Furthermore, the timing of sales that would result in such gains or losses is largely at our discretion.

We also exclude income from fully consolidated private equity investments (net) as this represents income from industrial holdings, which is outside the Allianz Group’s normal scope of business.

 

Similarly, we exclude restructuring charges because the timing of the restructuring charges are largely within our control, and accordingly their exclusion provides additional insight into the operating trends of the underlying business. This differentiation is not made if the profit sources are shared with the policyholder.

Operating profit should be viewed as complementary to, and not a substitute for income before income taxes and minority interests in earnings or net income as determined in accordance with IFRS.

Reconciliation of operating profit on a consolidated basis to the Allianz Group’s income before income taxes and minority interests in earnings

 

Three months ended March 31,        2009
 mn
       2008
 mn
Operating profit     1,424     2,208
Non-operating realized gains/losses (net) and impairments of investments (net)     (498)     13
Non-operating income from financial assets and liabilities carried at fair value through income (net)     (105)     145
Income (loss) from fully consolidated private equity investments (net)     (56)     23
Interest expenses from external debt     (238)     (252)
Non-operating restructuring charges     (63)     6
Acquisition-related expenses     (9)     (107)
Amortization of intangible assets     (4)     (5)
Reclassification of tax benefits     (6)     (13)
Income before income taxes and minority interests in earnings       445       2,018

 

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Allianz Group Interim Report First Quarter of 2009     Group Management Report

 

Composition of Total Revenue1) Growth

We also believe that an understanding of our total revenue performance is enhanced when the effects of foreign currency translation as well as acquisitions and disposals (or “changes in scope of consolidation”) are excluded. Accordingly, in addition to presenting “nominal growth”, we also present “internal growth”, which excludes the effects of foreign currency translation and changes in scope of consolidation.

Reconciliation of nominal total revenue growth to internal total revenue growth

 

Three months ended

March 31, 2009

     

Nominal

growth

      

Changes
in scope

of consoli-

dation

       Foreign
currency
translation
      

Internal

growth

        %       %       %       %
Property-Casualty     1.3     0.7     (0.5)     1.1
Life/Health     5.6     0.2     1.8     3.6
Financial Services     (6.1)     4.0     7.5     (17.6)

thereof:

Asset Management

    (1.7)     5.0     9.4     (16.1)
Allianz Group       2.8       0.5       0.8       1.5

 

1)

 Total revenues comprise Property-Casualty segment’s gross premiums written, Life/Health segment’s statutory premiums and Financial Services segment’s operating revenues. Segment growth rates are presented before the elimination of transactions between Allianz Group companies in different segments.

 


 

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Group Management Report     Allianz Group Interim Report First Quarter of 2009

 

 

 

 

 

 

[THIS PAGE INTENTIONALLY LEFT BLANK]

 

36


Table of Contents

Allianz Group Interim Report First Quarter of 2009

 

Allianz Group

Condensed Consolidated Interim Financial Statements Contents

 

38   Consolidated Balance Sheets

39

  Consolidated Income Statements

40

  Consolidated Statements of Comprehensive Income

41

  Consolidated Statements of Changes in Equity

42

  Condensed Consolidated Statements of Cash Flows
Notes to the Condensed Consolidated Interim Financial Statements

44

  1    Basis of presentation

44

  2    Recently adopted accounting pronouncements and changes in the presentation of the condensed consolidated interim financial statements

49

  3    Assets and liabilities of disposal groups classified as held for sale and discontinued operations

51

  4    Consolidation

52

  5    Segment reporting
Supplementary Information to the Consolidated Balance Sheets

64

  6    Financial assets carried at fair value through income

64

  7    Investments

65

  8    Loans and advances to banks and customers

65

  9    Reinsurance assets

65

  10    Deferred acquisition costs

65

  11    Other assets

66

  12    Non-current assets and assets and liabilities of disposal groups classified as held for sale

66

  13    Intangible assets

67

  14    Financial liabilities carried at fair value through income

67

  15    Liabilities to banks and customers

67

  16    Reserves for loss and loss adjustment expenses

68

  17    Reserves for insurance and investment contracts

68

  18    Other liabilities

68

  19    Certificated liabilities

68

  20    Participation certificates and subordinated liabilities

68

  21    Equity

 

 

 

 

 

Supplementary Information to the Consolidated
Income Statements

69

  22    Premiums earned (net)

70

  23    Interest and similar income

70

  24    Income from financial assets and liabilities carried at fair value through income (net)

71

  25    Realized gains/losses (net)

72

  26    Fee and commission income

72

  27    Other income

73

  28    Income and expenses from fully consolidated private equity investments

74

  29    Claims and insurance benefits incurred (net)

75

  30    Change in reserves for insurance and investment contracts (net)

76

  31    Interest expenses

76

  32    Loan loss provisions

76

  33    Impairments of investments (net)

76

  34    Investment expenses

77

  35    Acquisition and administrative expenses (net)

78

  36    Fee and commission expenses

78

  37    Income taxes

79

  38    Earnings per share
Other Information

80

  39    Supplemental information on the condensed consolidated statements of cash flows

80

  40    Other information

81

  41    Subsequent events

82

     Review report

 

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Condensed Consolidated Interim Financial Statements    Allianz Group Interim Report First Quarter of 2009

 

Allianz Group

Consolidated Balance Sheets

As of March 31, 2009 and as of December 31, 2008

 

          Note       

As of March 31,
2009

mn

      

As of
December 31,
2008

mn

ASSETS                  
Cash and cash equivalents           6,700     8,958
Financial assets carried at fair value through income     6     12,629     14,240
Investments     7     260,635     260,147
Loans and advances to banks and customers     8     125,357     115,655
Financial assets for unit-linked contracts           49,123     50,450
Reinsurance assets     9     14,473     14,599
Deferred acquisition costs     10     23,520     22,563
Deferred tax assets           4,327     3,996
Other assets     11     34,673     34,004
Non-current assets and assets of disposal groups classified as held for sale     3, 12     1,627     419,513
Intangible assets     13     12,665     11,451
Total assets               545,729       955,576
           
          Note       

As of March 31,
2009

mn

      

As of
December 31,
2008

mn

LIABILITIES AND EQUITY                  
Financial liabilities carried at fair value through income     14     6,513     6,244
Liabilities to banks and customers     15     19,354     18,451
Unearned premiums           18,966     15,233
Reserves for loss and loss adjustment expenses     16     63,765     63,924
Reserves for insurance and investment contracts     17     298,894     296,557
Financial liabilities for unit-linked contracts           49,123     50,450
Deferred tax liabilities           3,569     3,833
Other liabilities     18     32,232     32,930
Liabilities of disposal groups classified as held for sale     3, 12     1,362     411,816
Certificated liabilities     19     7,372     9,544
Participation certificates and subordinated liabilities     20     9,484     9,346
Total liabilities           510,634     918,328
                   
Shareholders’ equity           33,030     33,684
Minority interests           2,065     3,564
Total equity     21     35,095     37,248
                   
Total liabilities and equity               545,729       955,576

 

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Allianz Group Interim Report First Quarter of 2009     Condensed Consolidated Interim Financial Statements

 

Allianz Group

Consolidated Income Statements

For the three months ended March 31, 2009 and 2008

 

Three months ended March 31,        Note       

2009

mn

      

2008

mn

Premiums written           19,390     19,468
Ceded premiums written           (1,496)     (1,416)
Change in unearned premiums           (3,214)     (3,290)
Premiums earned (net)     22     14,680     14,762
Interest and similar income     23     4,414     4,456
Income from financial assets and liabilities carried at fair value through income (net)     24     (360)     372
Realized gains/losses (net)     25     419     1,059
Fee and commission income     26     1,336     1,505
Other income     27     4     351
Income from fully consolidated private equity investments     28     469     579
Total income           20,962     23,084
                   
Claims and insurance benefits incurred (gross)           (12,391)     (11,986)
Claims and insurance benefits incurred (ceded)           612     672
Claims and insurance benefits incurred (net)     29     (11,779)     (11,314)
Change in reserves for insurance and investment contracts (net)     30     (621)     (1,845)
Interest expenses     31     (410)     (493)
Loan loss provisions     32     (15)     (5)
Impairments of investments (net)     33     (1,890)     (1,470)
Investment expenses     34     62     (436)
Acquisition and administrative expenses (net)     35     (4,779)     (4,395)
Fee and commission expenses     36     (491)     (551)
Amortization of intangible assets           (4)     (5)
Restructuring charges           (64)     5
Other expenses           (1)     (1)
Expenses from fully consolidated private equity investments     28     (525)     (556)
Total expenses           (20,517)     (21,066)
                   
Income from continuing operations before income taxes and minority interests in earnings           445     2,018
Income taxes     37     (21)     (572)
Minority interests in earnings               (66)
Net income from continuing operations           424     1,380
Net loss from discontinued operations, net of income taxes and minority interests in earnings     3     (395)     (232)
Net income               29       1,148
           
Three months ended March 31,        Note       

2009

      

2008

Basic earnings per share     38     0.06     2.55

from continuing operations

          0.94     3.07

from discontinued operations

          (0.88)     (0.52)
Diluted earnings per share     38     0.04     2.48

from continuing operations

          0.91     2.99

from discontinued operations

              (0.87)       (0.51)

 

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Condensed Consolidated Interim Financial Statements     Allianz Group Interim Report First Quarter of 2009

 

Allianz Group

Consolidated Statements of Comprehensive Income

For the three months ended March 31, 2009 and 2008

 

Three months ended March 31,       

2009

mn

      

2008

mn

Net income (after taxes before minority interests in earnings)     29     1,228
             
Other comprehensive income            

Foreign currency translation adjustments

           

Reclassifications to net income

    548    

Changes arising during the period

    151     (957)

Subtotal

    699     (957)

Available for sale investments

           

Reclassifications to net income

    351       (138)

Changes arising during the period

    (1,655)       (2,826)

Subtotal

    (1,304)     (2,964)

Cashflow hedges

           

Reclassifications to net income

    1      

Changes arising during the period

    (34)       40

Subtotal

    (33)     40

Share of other comprehensive income of associates

           

Reclassifications to net income

         

Changes arising during the period

    9       (42)

Subtotal

    9     (42)

Miscellaneous

           

Reclassifications to net income

       

Changes arising during the period

    (72)     (37)

Subtotal

    (72)     (37)

Total other comprehensive loss

    (701)     (3,960)
             
Total comprehensive loss     (672)     (2,732)
             
Minority interests     2     82
Total comprehensive loss (shareholders’ interest)       (670)       (2,650)

For further details concerning income taxes relating to components of the other comprehensive income please see Note 37.

 

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Allianz Group Interim Report First Quarter of 2009    Condensed Consolidated Interim Financial Statements

 

Allianz Group

Consolidated Statements of Changes in Equity

For the three months ended March 31, 2009 and 2008

 

       

Paid-in
capital

 

      

Revenue
reserves

 

       Foreign
currency
translation
adjustments
       Unrealized
gains and
losses (net)
           

Shareholders’
equity

&