Form 6-K
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 June 30, 2008

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 whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes  ¨            No  x

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333-151308) OF ALLIANZ SE AND TO BE A PART THEREOF FROM THE DATE ON WHICH THIS REPORT IS FURNISHED, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY FILED OR FURNISHED.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” ON PAGE 2 AND PAGE 4 (AS IT RELATES 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

LOGO


Table of Contents

 

Content

 

Group Management Report        
Executive Summary and Outlook   2  
Property-Casualty Insurance Operations   12  
Life/Health Insurance Operations   18  
Banking Operations   24  
Asset Management Operations   28  
Corporate Activities   32  
Balance Sheet Review   34  
Other Information   38  
Condensed Consolidated Interim Financial Statements for the Second Quarter and the First Half of 2008      
Detailed Index   41    
Condensed Consolidated Interim Financial Statements   42    
Notes to the Condensed Consolidated Interim Financial Statements   47    

 

Allianz Share

 

Development of the Allianz share price since January 1, 2008

indexed on the Allianz share price in

LOGO

Source: Thomson Financial Datastream

Current information on the development of the Allianz share price is available on the internet 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 June 30,        Six months ended June 30,
               2008        2007       

Change
from
previous

year

       2008        2007       

Change

from
previous
year

INCOME STATEMENT                                        
Total revenues 1)    mn     22,037     24,337     (9.5)%     49,690     53,660     (7.4)%
Operating profit 2)    mn     2,104     3,288     (36.0)%     3,960     6,158     (35.7)%
Net income    mn     1,542     2,140     (27.9)%     2,690     5,380     (50.0)%
                                         
SEGMENTS                                        
Property-Casualty                                        
Gross premiums written    mn     9,842     9,982     (1.4)%     23,552     24,093     (2.2)%
Operating profit 2)   mn     1,683     1,894     (11.1)%     3,162     3,161     0.0%
Net income   mn     1,822     1,380     32.0%     2,879     2,560     12.5%
Combined ratio   %     93.5     92.9     0.6 pts     94.1     94.8     (0.7) pts
                                         
Life/Health                                        
Statutory premiums   mn     10,729     11,758     (8.8)%     23,056     24,084     (4.3)%
Operating profit 2)   mn     703     758     (7.3)%     1,292     1,508     (14.3)%
Net income   mn     425     479     (11.3)%     877     1,032     (15.0)%
Statutory expense ratio   %     12.2     9.6     2.6 pts     10.5     8.4     2.1 pts
                                         
Banking                                        
Operating revenues   mn     694     1,850     (62.5)%     1,472     3,951     (62.7)%
Operating profit 2)   mn     (568)     448     n.m.     (1,024)     1,148     n.m.
Net income   mn     (552)     411     n.m.     (1,090)     1,036     n.m.
Cost-income ratio   %     172.0     72.3     99.7 pts     164.1     69.4     94.7 pts
                                         
Asset Management                                        
Operating revenues   mn     738     797     (7.4)%     1,465     1,577     (7.1)%
Operating profit 2)   mn     281     325     (13.5)%     522     637     (18.1)%
Net income   mn     120     134     (10.4)%     198     233     (15.0)%
Cost-income ratio   %     61.9     59.2     2.7 pts     64.4     59.6     4.8 pts
                                         
BALANCE SHEET                                        
Total assets as of June 30, 3)   mn     1,016,396     1,061,149     (4.2)%     1,016,396     1,061,149     (4.2)%
Shareholders’ equity as of June 30, 3)   mn     40,457     47,753     (15.3)%     40,457     47,753     (15.3)%
Minority interests as of June 30, 3)   mn     3,398     3,628     (6.3)%     3,398     3,628     (6.3)%
                                         
SHARE INFORMATION                                        
Basic earnings per share       3.44     4.85     (29.1)%     5.98     12.32     (51.5)%
Diluted earnings per share       3.39     4.75     (28.6)%     5.85     12.08     (51.6)%
Share price as of June 30, 3)       111.90     147.95     (24.4)%     111.90     147.95     (24.4)%
Market capitalization as of June 30, 3)   bn     50.6     66.6     (24.0)%     50.6     66.6     (24.0)%
                                         
OTHER DATA                                        
Third-party assets under management as of June 30, 3)   bn       740       765       (3.3)%       740       765       (3.3)%

 

1) 

Total revenues comprise Property-Casualty segment’s gross premiums written, Life/Health segment’s statutory premiums, Banking segment’s operating revenues and Asset Management 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) 

2007 figures as of December 31, 2007.

 

1


Table of Contents

 

Executive Summary and Outlook 1)

– Revenues were 7.4 % lower as a tough environment resulted in a slowdown in sales of unit-linked life insurance    products and a net dealing loss in Banking.

– Operating profit decreased by 1.2 billion mainly attributable to Banking. Other segments were resilient.

– Net income was 0.6 billion lower as a result of reduced operating profit.

– Capital position remains strong.

 

LOGO

1) 

The Allianz Group operates and manages its activities primarily through four operating segments: Property-Casualty, Life/Health, Banking and Asset Management. Effective January 1, 2006, in addition to our four operating segments and with retrospective application, we introduced a fifth business segment named Corporate.

2) 

Does not include minority interests.

 

2


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008     Group Management Report

 

Allianz Group’s Consolidated Results of Operations

In the second quarter of 2008 (2Q 2008), we recorded revenues of € 22,037 million, and delivered € 2,104 million of operating profit and € 1,542 million of net income. Compared to the second quarter of 2007 (2Q 2007), results declined significantly.

Operating profit declined by 36.0 % to € 2,104 million. This shortfall is almost entirely due to banking operations. Mark-downs on asset-backed securities (“ABS”), counterparty default adjustments on monoliners and mark-to-market valuations of other trading positions led to a net dealing loss at Dresdner Bank of € 627 million after a net trading income of € 351 million a year ago. In contrast, operating profit from our insurance and Asset Management businesses was resilient despite the credit crisis.

With income from non-operating items relatively flat at € 82 million, net income was almost entirely driven by operating profit.

 

Total revenues 1)

Total revenues – Segments

in mn

LOGO

Total revenues decreased by 9.5 % to € 22,037 million. On an internal basis2), growth declined by 7.4 %. This was due to decreased revenues from the sale of unit-linked life insurance products, lower contribution from our bancassurance sales channels and the net dealing loss from our investment bank.

Property-Casualty

At € 10,114 million, gross premiums written were 3.1 % ahead of previous year on an internal basis. On a nominal basis, revenues were down by 1.4 % to € 9,842 million, mainly reflecting the reclassification of AGF’s health business which was transferred to the Life/Health segment. Adjusted for the health business transferred, revenues increased by 1.4 %. With the exception of Italy and Credit Insurance, we saw growth in almost all regions and lines of business, though

 

1) 

Total revenues comprise Property-Casualty segment’s gross premiums written, Life/Health segment’s statutory premiums, Banking segment’s operating revenues and Asset Management 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 39 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. Starting in 2Q 2008 we will focus our comments on internal growth, in order to provide more comparable information.


 

3


Table of Contents

Group Management Report     Allianz Group Interim Report Second Quarter and First Half of 2008

 

premium growth at Allianz Sach in Germany was flat. A key growth driver was our activities in the emerging markets 1), where our expansion strategy continued to pay off.

For the first half year, gross premiums written increased by 1.1 % on an internal basis to € 23,827 million. Nominal growth amounted to (2.2) %, with premiums of € 23,552 million. Adjusted for the health business transferred, the premium growth rate was flat at 0.1 %.

Life/Health

Statutory premiums from our life/health business decreased by 8.0 % on an internal basis to € 11,070 million in the second quarter 2008. On a nominal basis revenues dropped by 8.8 % to € 10,729 million. Adjusted for the health business transferred, premiums declined by 10.9 %. Premiums from unit-linked products and revenues from our bancassurance sales channels declined whereas traditional life insurance products recorded strong growth in Germany, Switzerland and Belgium.

On a year-to-date basis the reduction of statutory premiums was lower – down 3.8 % to € 23,727 million on an internal basis, and down 4.3 % to € 23,056 on a nominal basis. Adjusted for the transfer of AGF’s health business, premiums declined by 6.5 %.

Banking

In the second quarter, revenues in our banking segment decreased to a nominal € 694 million. This development was mainly driven by the financial markets turbulence which led to significant shortfalls, resulting in a net dealing loss of € (630) million coming from a gain of € 354 million. Net fee and commission income showed weak development for the same reason, whereas net interest income was stable.

In the first six months revenues were down 62.7 % to a nominal € 1,472 million, mostly driven by a net dealing loss of € 1,192 million, after a gain of € 695 million a year earlier.

 

1) 

New Europe, Asia-Pacific, South America, Mexico, Middle East, Northern Africa and Africa/Near East.

 

Asset Management

Net inflows of € 33 billion exceeded the prior year performance by far, however negative foreign currency effects alone more than outweighed the high net inflows. With € 740 billion as of June 30, 2008 third party assets under management were € 25 billion below the year end 2007 level.

Operating revenues dropped by a nominal 7.4 % and 7.1 % on a quarter-over-quarter and year-to-date basis to € 738 million and € 1,465 million, respectively. A shortfall in net fee and commission income, unfavorable currency effects as well as lower mark-to-market valuation of seed money investments in the United States were the main reasons for this development.

Operating profit

Operating profit – Segments

in mn

 

LOGO

Operating profit amounted to € 2,104 million, a decline of €1,184 million compared to the record quarter of 2Q 2007.

Property-Casualty

Operating profit decreased by 11.1 % to € 1,683 million, mainly due to reduced investment income and a high impact from smaller natural catastrophes. Our combined ratio increased to 93.5 %.


 

4


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008     Group Management Report

 

On a six months basis, operating profit was stable at € 3,162 million.

Life/Health

Despite the tough economic environment, we generated an operating profit of € 703 million. Maintaining operating profit on such levels attests to the underlying strength of our business. Nevertheless, turbulence in the financial markets affected our operating profit through higher impairments and lower realized gains.

On a six months basis, operating profit was down by 14.3 % to € 1,292 million. In the prior year, we recorded large realized gains in the first quarter due to the favorable market conditions existing at the time.

Banking

As a result of the weak revenue situation operating profit declined by € 1,016 million (1H 2008: € (2,172) million) leading to an operating loss of € 568 million (1H 2008: € (1,024) million). We achieved significant cost savings in almost every expense category. Administrative expenses were down 12.7 % to € 1,165 million in 2Q 2008 and down 13.2 % to € 2,383 million in the first half.

Asset Management

At € 281 million, operating profit decreased by € 44 million from a year ago in the quarter-over-quarter comparison, with foreign exchange having a significant impact. Operating revenues increased by 4.3% on an internal basis. Underlying operating expenses reflect our continuous investment in business expansion and future growth. The cost-income ratio increased by 2.7 percentage points to 61.9 %. On a year-to-date basis, it amounted to 64.4 %, up 4.8 percentage points.

 

Corporate Segment

Operating profit amounted to € 5 million coming from a loss of € 10 million and the operating loss for the first half stood at € 71 million, 36.0 % lower than in the respective period in 2007.

Non-operating result

Non-operating items showed a gain of € 82 million after a non-operating loss of € 90 million a year ago.

Impairments on investments were € 498 million higher than in 2Q 2007, however the increase was outweighed by the higher level of realized gains of € 604 million. A large portion of these gains resulted from large scale transactions at profits already locked-in in prior years, plus smaller, planned divestment activities. Lower interest expense from external debt and decreased acquisition expenses contributed to the improvement in non-operating items.

We recorded a non-operating gain of € 128 million for the first half of 2008, representing a decline of € 1,468 million as impairments on investments increased significantly by € 894 million and realized gains declined by € 791 million. In the prior year, we recorded realized gains net of impairments of € 2,446 million stemming primarily from the sales of equity investments in a very favorable market environment.

Net income

Net income of € 1,542 million was almost entirely derived from operating profit. Lower income tax expenses mainly resulting from lower income tax rates applied on lower taxable income in 2Q 2008, and lower minorities in earnings due to the minority buy-out at AGF in France completed last year positively contributed to net income development. The effective tax rate was down by 1.5 percentage points to 25.3 %.

On a six months basis, net income of € 2,690 million was also derived mainly from operating profit. Lower income tax expenses and reduced minority interests in earnings contributed positively to net income.


 

5


Table of Contents

Group Management Report     Allianz Group Interim Report Second Quarter and First Half of 2008

 

Earnings per share 1)

in

LOGO

 

1) 

See note 35 to our condensed consolidated interim financial statements for further details.


 

Segment Information – Total Revenues and Operating Profit

 

        Property-
Casualty
       Life/Health        Banking        Asset
Management
       Corporate       

Consolidation

      

Group

         

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

      

2008

mn

      

2007

 mn

      

2008

 mn

      

2007

 mn

      

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

Three months ended June 30,                                                                                    
Total revenues 1)     9,842     9,982     10,729     11,758     694     1,850     738     797             34     (50)     22,037     24,337
Operating profit (loss)     1,683     1,894     703     758     (568)     448     281     325     5     (10)         (127)     2,104     3,288
Non-operating items     626     180     (58)     15     68     39     (89)     (82)     (244)     (74)     (221)     (168)     82     (90)
Income (loss) before income taxes and minority interests in earnings     2,309     2,074     645     773     (500)     487     192     243     (239)     (84)     (221)     (295)     2,186     3,198
Income taxes     (432)     (578)     (200)     (234)     (37)     (56)     (71)     (101)     184     80     4     31     (552)     (858)
Minority interests in earnings     (55)     (116)     (20)     (60)     (15)     (20)     (1)     (8)     (3)     (4)     2     8     (92)     (200)
Net income (loss)       1,822       1,380       425       479       (552)       411       120       134       (58)       (8)       (215)       (256)       1,542       2,140
Six months ended June 30,                                                                                    
Total revenues 1)     23,552     24,093     23,056     24,084     1,472     3,951     1,465     1,577             145     (45)     49,690     53,660
Operating profit (loss)     3,162     3,161     1,292     1,508     (1,024)     1,148     522     637     (71)     (111)     79     (185)     3,960     6,158
Non-operating items     721     844     (40)     118     116     156     (204)     (204)     (346)     437     (119)     245     128     1,596
Income (loss) before income taxes and minority interests in earnings     3,883     4,005     1,252     1,626     (908)     1,304     318     433     (417)     326     (40)     60     4,088     7,754
Income taxes     (910)     (1,115)     (336)     (435)     (153)     (224)     (117)     (181)     270     55     20     75     (1,226)     (1,825)
Minority interests in earnings     (94)     (330)     (39)     (159)     (29)     (44)     (3)     (19)     (10)     (8)     3     11     (172)     (549)
Net income (loss)       2,879       2,560       877       1,032       (1,090)       1,036       198       233       (157)       373       (17)       146       2,690       5,380

 

1) 

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

 

6


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008     Group Management Report

 

Impact of the financial markets turbulence

The crisis in the mortgage market in the United States led to a devaluation of prices for various asset-backed securities (“ABS”), even for those with a high rating. Primarily, this affected collateralized debt obligations (“CDO”), and residential mortgage-backed securities especially those originating in the United States (“U.S. RMBS”).

The turbulence in the financial markets also impacted our business development, however the impact varied in each business segment.

The major impact of this crisis occurs in the Banking segment, with the substantial portion being attributable to some business units of Dresdner Bank’s investment banking activities. In contrast, impacts on our insurance operations have been far less severe although sales of our unit-linked life insurance products were depressed by the current market conditions. The investment activities of the insurance segments were only impacted to a very limited extent, reflecting the high quality of the asset bases with no material CDO and subprime exposure. Similarly, the direct impact on our Asset Management segment was of minor importance.

Impact on insurance assets

Of our Property-Casualty asset base, ABS made up € 4.7 billion, as of June 30, 2008, which is around 5 %. CDOs accounted for € 0.1 billion of this amount. Unrealized losses on CDOs of € 3 million were recorded in our equity.

Within our Life/Health asset base, ABS amounted to € 13.6 billion, as of June 30, 2008, which is 4 % of total Life/Health assets. Of these, € 0.2 billion are CDOs. Unrealized losses on CDOs of € 12 million were recorded in our equity.

Subprime expenses within CDOs were negligible.

Impact on investment banking activities of Dresdner Bank

Dresdner Bank is engaged in various business activities involving structured products. These comprise ABS of the trading book, credit enhancements, conduits, leveraged buy-out commitments and structured investment vehicles.

Furthermore, Dresdner Bank has sold credit protection for third party ABS and has re-insured these positions with monoline insurers (“monoliners”).

Net asset-backed securities of the trading book1)

As of June 30, 2008, Dresdner Bank carried ABS trading assets of a net notional € 6.9 billion. The majority of these ABS are of a high quality, with 68 % of them rated A or better.

Breakdown of exposure by rating class

in %

LOGO

After write-downs, the net exposure after monoliner protection amounts to € 4.6 billion as of June 30, 2008. It contains € 0.9 billion CDOs, € 0.7 billion U.S. RMBS and € 3.0 billion other ABS. Because the financial markets turbulence mainly affected CDOs and U.S. RMBS, these net exposures are classified as “critical ABS”. We took substantial write-downs on CDOs and U.S. RMBS, recognizing the different quality and characteristics of the assets.

 

Exposure type       Exposure 1)
as of
31/12/2007
      

Exposure 1)

as of
30/06/2008

       Markdowns
2Q 2008
      

Remaining

book value

as of
30/06/2008

          mn        mn                  mn
U.S. RMBS                        
Prime     713     664     34     446
Midprime     336     316     62     84
Subprime     617     554     81     149
Total U.S. RMBS     1,666     1,534     177     679
CDO                        
High grade     1,615     1,508     97     864
Mezzanine     667     622        
Total CDO       2,282       2,130       97       864

 

1) 

Before markdowns

 

 

1) 

Net of monoline exposures. In respect of the monoliner protection and our indirect ABS exposure please refer to page 8 of this report.


 

7


Table of Contents

Group Management Report     Allianz Group Interim Report Second Quarter and First Half of 2008

 

Credit enhancements

Credit enhancements are one or more initiatives taken by the originator in a securitization structure to enhance the security, credit or the rating of the securitized instrument. In this context, Dresdner Bank offered second loss protection for credit investment related conduits (“CIRC”). This structure primarily contains ABS.

Under the CIRC structures, Dresdner Bank provides second loss protection, whereas the first loss stays with the client. Additionally, the Bank is entitled to sell the portfolio to the market, if the value of this portfolio falls below a pre-defined threshold. Here as well, the exposure was reduced and as of June 30, 2008, was a notional amount of € 2.1 billion.

Conduits

A conduit is a special purpose entity that securitizes its financial assets, e.g. receivables, by means of commercial papers.

Since the late nineties, Dresdner Bank has arranged the securitization of third party and own asset portfolios through asset-backed commercial paper programmes (“ABCP”) via several conduits. The underlying pool of assets exhibits a good quality, with 79 % having at least an A rating. Dresdner Bank has provided liquidity back-up lines of € 10.6 billion of which € 6.5 billion were undrawn, as of June 30, 2008.

Leveraged buy-out

A leveraged buy-out is a financing transaction involving a significant amount of debt.

Dresdner Bank provides credit lines for these transactions, the bulk of which are typically syndicated. As of June 30, 2008, Dresdner Bank’s LBO exposure amounted to € 4.2 billion containing drawn and undrawn amounts.

Monoliner

Dresdner Bank has entered into business relations with monoliners – companies that guarantee the repayment of a security and the corresponding interest in the event that the issuer defaults – in order to hedge the exposure from ABS.

 

In addition, Dresdner Bank has provided credit protection via Credit Default Swaps (“CDS”) for ABS exposures. According to our risk policies, most of these CDS positions are re-insured with monoliners.

Only in the case of a default of payment from the underlying assets and a breach of contractual duties of the monoliners, will an ultimate loss occur. This loss amounts to the difference between the guaranteed amount from the monoliner and the value of the underlying assets.

We bought net protection for ABS with a net notional of € 13.0 billion, of which € 8.9 billion have no primary reference to the US mortgage market. In addition, the secured ABS portfolio contains € 4.1 billion of exposures to the US mortgage market, of which we consider € 3.3 billion to be critical and expect – based on today’s knowledge – that we have to rely here partially on the monoliner protection. The remaining € 0.8 billion are U.S. RMBS.

Dresdner Bank’s gross counterparty risk amounted to € 2.4 billion. In order to hedge the monoliner default risk, the bank bought Credit Default Swaps from third parties on the various monoliners in a total amount of € 0.4 billion, leaving us with net a counterparty exposure of € 2.0 billion.

The positive market value of the protection bought from monoliners amounted to € 1.1 billion. In addition to that, we built up Counterparty Default Adjustments (CDAs) against the positive market value of € 0.4 billion, leaving us with a net book value of € 0.7 billion.

Breakdown of net book value

 

          Mark-to-
market
       CDA        Net book
value as of
30/06/2008
Monoliner 1     490     249     241
Monoliner 2     306     125     181
Monoliner 3     101     2     99
Monoliner 4     68     15     53
Monoliner 5     62     10     52
Monoliner 6     36     15     21
Monoliner 7     17     7     10
Monoliner 8     4     1     3
Monoliner 9            
Total       1,084       424       660

 

8


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008     Group Management Report

 

The underlyings show a good quality, with 88 % of them being investment grade (having at least an A rating):

Breakdown of exposure by rating class

in %

LOGO

As disclosed in our subsequent event section on page 88 we have entered into restructuring discussions with one mono-liner.

Structured Investment Vehicles (“SIV”)

A structured investment vehicle is an entity that primarily invests in long-term, high quality securities. The investments are refinanced by medium term notes (“MTN”) or commercial papers (“CP”).

On March 18, 2008, Dresdner Bank and K2 Corporation entered into an agreement through which Dresdner Bank will provide a support facility to the Structured Investment Vehicle K2 for the benefit of the senior note holders. The agreement consists of a U.S.$ 1.5 billion committed revolving mezzanine credit facility and a ‘backstop’ facility.

We have fully consolidated K2 since the end of 1Q 2008.

K2 has a well diversified portfolio that is predominantly composed of MBS, CLO and ABS and holds no direct exposure to subprime assets or CDOs on ABS/MBS. In the second quarter, the volume of K2 has been further reduced by 34.8 % to € 8.8 billion. The remaining assets are of a high quality with 91 % having at least an AA rating.

 

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 there are no identified risks which could in the future pose a threat to the existence of the Allianz Group.

The impacts from the subprime-crisis are described in the paragraph “Impacts from the financial markets turbulence”.

The information contained in the risk report in our 2007 Annual Report is still valid.

Events After the Balance Sheet Date

See “Outlook” below and Note 39 to the consolidated financial statements.

Opportunities

As presented in our 2007 Annual Report, we remain confident that the business prospects for financial service providers remain positive.


 

9


Table of Contents

Group Management Report     Allianz Group Interim Report Second Quarter and First Half of 2008

 

Outlook

In macro-economic terms, conditions are challenging for business and consumers. Both are confronted with weak and volatile capital markets, increasing inflation, high oil prices, the risk of recession or even stagflation, a weak U.S. dollar, illiquid credit markets, falling property prices and increasing interest rates. This has created a sentiment of risk-aversion in the minds of consumers and tough trading conditions for businesses.

As discussed in our first quarter 2008 results, the further achievement of our targets was subject to a positive swing in financial markets. This has not materialized up to now. Although our underlying fundamentals remain healthy, these further deteriorating markets also affect Allianz.

We expect this difficult market environment to continue to 2009, therefore our 2006 long-term operating profit growth target of 10 % CAGR1) through 2009 cannot be maintained.

Due to expected market conditions accurate earnings predictions, especially for Banking, are not feasible. However our underlying operating profitability in Insurance and Asset Management is stable enough to generate a run rate before Banking of € 9 billion plus in 2008 and 2009.

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, (iii) the frequency and severity of insured loss events, (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.

 

1) 

Compound Annual Growth Rate


 

10


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008     Group Management Report

 

 

[THIS PAGE INTENTIONALLY LEFT BLANK]

 

 

 

 

 

 

11


Table of Contents

 

Property-Casualty Insurance Operations

– 3.1% internal revenue growth.

– Segment’s performance is at target level, with strong operating profit of  1.7 billion despite high level of weather-

   related claims in the second quarter.

– Combined ratio of 93.5% achieved.

 

Earnings Summary

Gross premiums written1)

2008 to 2007 second quarter comparison

Gross premiums written on an internal basis were 3.1% ahead of previous year at € 10,114 million. We maintained our focus on profitability and selectively wrote only those risks which we believe will generate adequate returns. This disciplined underwriting approach limited the negative pricing impacts stemming from still softening markets, while at the same time achieving organic growth.

On a nominal basis, gross premiums written were down by 1.4% to € 9,842 million with the decline mainly caused by the reclassification of € 284 million of AGF’s health business to the Life/Health segment, and negative currency translation effects of € 307 million. Positive impacts resulting from last year’s acquisitions in Russia and Kazakhstan could not compensate for these effects. Adjusted for the health business transferred, revenues were up by 1.4%.

Gross premiums written by region 1)

in %

LOGO

 

1) 

After elimination of transactions between Allianz Group companies in different geographic regions and different segments. Gross premiums written from our specialty lines have been allocated to the respective geographic regions.

 

 

1)   In order to provide more comparable information, starting in 2Q 2008 we will comment the development of our gross premiums written on an internal basis, meaning adjusted for foreign currency translation and (de-) consolidation effects.

 

We grew in most of our markets, with the exception of Italy and global credit insurance. Revenue development at Allianz Sach in Germany was flat.

In Italy, our operations showed a decline in gross premiums written of € 108 million or 8.1%. Here, a new regulation led to significantly decreased sales volumes from the agents network. Furthermore, prices in Italy were impacted by the Bersani-law, which resulted in a market-wide price reduction.

Our strategy of expansion into emerging markets 2) continued to pay off as premiums grew strongly by € 173 million on a like-for-like basis. Together, these markets contributed € 1,221 million (2Q 2007: € 1,048 million) or 12.1% (2Q 2007: 10.7%) to total gross premiums written.

New Europe contributed € 81 million to revenue growth, adjusted for the full consolidation of Progress Garant in Russia and ATF-Polis in Kazakhstan. The main driver for the growth was motor insurance business in Poland.

At Allianz Global Corporate & Specialty (“AGCS”) internal revenues were up by 10.7% or € 75 million, driven by new business. This growth was to some extent offset by the currency depreciation of the U.S. Dollar and the GBP compared to the Euro.

 

2)

 New Europe, Asia-Pacific, South America, Mexico, Middle East, Northern Africa and Africa/Near East.


 

12


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008     Group Management Report

 

Gross premiums written – Internal growth rates 1)

in %

LOGO

 

1) 

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

2) 

Together with our property-casualty reinsurance business assumed, primarily attributable to Allianz SE, within Germany there was an increase of 3.1 % for 2Q 2008 over 2Q 2007 and a decrease of 0.9 % for 1H 2008 over 1H 2007.

2008 to 2007 first half comparison

For the first six months our gross premiums written on an internal basis increased by 1.1% to € 23,827 million. On a nominal basis, revenues were down by 2.2%. Adjusted for the reclassification of € 573 million of AGF’s health business, revenue growth was flat at 0.1%. The developments in most of our markets were largely consistent with the 2008 to 2007 second quarter comparison, while our operations in Germany and at AGCS showed declining revenues.

 

Operating profit

Operating profit

in mn

LOGO

2008 to 2007 second quarter comparison

Operating profit remained strong at € 1,683 million, 11.1% below previous year’s quarter. The main reason behind this decline is lower investment income, stemming from the upstreaming of excess capital to the parent company Allianz SE, resulting in a lower asset base. In addition, we recorded higher losses from weather-related claims than in 2Q 2007. Administrative expenses were € 204 million lower compared to last year’s quarter.

We achieved a combined ratio of 93.5%, well inside our target range.

Our accident year loss ratio increased by 1.5 percentage points to 70.9% mostly driven by losses from hailstorms in Germany and the earthquake in China, amounting to € 222 million combined, as well as increasing claims inflation. At 4.8% the positive net development in prior years’ loss reserves was almost unchanged. Overall, the calendar year loss ratio increased by 1.2 percentage points to 66.1%.

Acquisition and administrative expenses decreased by 4.3% to € 2,589 million. Further efficiency improvements contributed € 43 million to the reduction of administrative expenses. Due to this positive development, our expense ratio improved by 0.6 percentage points to 27.4%.

Interest and similar income was down by 3.6% to € 1,331 million. The reason for this was mainly the 2007 equity investments reduction program resulting in an outflow of € 5.6 billion. € 2.8 billion of these proceeds were used for capital upstreaming to the holding and thereby reduced the segment’s asset base and the current dividend income by about € 80 million. In addition, we recorded € 59 million higher losses from our assets designated at fair value as a result of weak market conditions.


 

13


Table of Contents

Group Management Report     Allianz Group Interim Report Second Quarter and First Half of 2008

 

2008 to 2007 first half comparison

On a six months basis, operating profit proved to be stable at € 3,162 million. Our expense ratio improved by 1.6 percentage points to 26.7% and our combined ratio was down by 0.7 percentage points to 94.1%.

Non-operating result

2008 to 2007 second quarter comparison

The non-operating result increased to a gain of € 626 million. This development was mainly due to much higher net realized gains which were only partly offset by increased impairments of investments.

Net realized gains from investments increased significantly to € 961 million compared to the previous year when no major single sales transaction was recorded. In the second quarter 2008 we recorded gains mainly from large scale transactions which were already locked-in in prior years as well as a number of smaller planned divestment activities.

Non-operating net impairments of investments increased to € 341 million, reflecting the overall weakness in financial markets.

2008 to 2007 first half comparison

In contrast to the second quarter comparison, the non-operating result decreased by 14.6% to a gain of € 721 million for the first six months of 2008. The combined result of significantly lower net realized gains and higher impairments of investments recorded in the first quarter was not outweighed by the positive movements in the second quarter.

Net income

2008 to 2007 second quarter comparison

Net income increased by 32.0% to € 1,822 million. Higher non-operating items as well as lower income tax expenses and minority interests in earnings contributed to this improvement.

 

Income tax expenses were down to € 432 million, leading to a reduction of the effective tax rate from 27.9% to 18.7%. This resulted mainly from a higher tax-exempt income than in the second quarter 2007.

Lower minority interests in earnings amounted to € 55 million, mainly reflecting the minority buy-out at AGF.

2008 to 2007 first half comparison

For the first six months, net income increased by 12.5% to € 2,879 million.

Income taxes were down to € 910 million, and the effective tax rate fell from 27.8% to 23.4% for the reason mentioned above.

Minority interests in earnings were also lower on a six months basis, amounting to € 94 million.


 

14


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008     Group Management Report

 

Property-Casualty segment’s income statement and ratios 1)

 

        Three months ended June 30,        Six months ended June 30,
         

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

Gross premiums written 2)     9,842     9,982     23,552     24,093
Ceded premiums written     (1,115)     (1,245)     (2,400)     (2,831)
Change in unearned premiums     721     919     (2,531)     (2,248)
Premiums earned (net)     9,448     9,656     18,621     19,014
Interest and similar income     1,331     1,380     2,382     2,386
Operating income from financial assets and liabilities carried at fair value through income (net) 3)     (60)     (1)     (46)     16
Operating realized gains/losses (net) 4)     61     1     58     35
Fee and commission income     293     280     560     552
Other income     7     11     257     95
Operating revenues     11,080     11,327     21,832     22,098
                         
Claims and insurance benefits incurred (net)     (6,247)     (6,266)     (12,548)     (12,649)
Changes in reserves for insurance and investment contracts (net)     (70)     (97)     (99)     (178)
Interest expenses     (91)     (92)     (179)     (184)
Loan loss provisions     (1)     (9)     (1)     (9)
Operating impairments of investments (net) 5)     (72)     (5)     (165)     (7)
Investment expenses     (79)     (69)     (202)     (143)
Acquisition and administrative expenses (net)     (2,589)     (2,705)     (4,980)     (5,380)
Fee and commission expenses     (248)     (190)     (496)     (387)
Operating expenses     (9,397)     (9,433)     (18,670)     (18,937)
                         
Operating profit     1,683     1,894     3,162     3,161
                         
Non-operating income from financial assets and liabilities carried at fair value through income (net) 3)     14     (1)     77     (30)
Non-operating realized gains/losses (net) 4)     961     216     1,333     949
Non-operating impairments of investments (net) 5)     (341)     (23)     (683)     (47)
Amortization of intangible assets     (3)     (4)     (7)     (6)
Restructuring charges     (5)     (8)     1     (22)
Non-operating items     626     180     721     844
                         
Income before income taxes and minority interests in earnings     2,309     2,074     3,883     4,005
                         
Income taxes     (432)     (578)     (910)     (1,115)
Minority interests in earnings     (55)     (116)     (94)     (330)
Net income     1,822     1,380     2,879     2,560
                         
Loss ratio 6) in %     66.1     64.9     67.4     66.5
Expense ratio 7) in %     27.4     28.0     26.7     28.3
Combined ratio 8) in %       93.5       92.9       94.1       94.8

 

1) 

Since 2008, health business in Belgium and France is shown within Life/Health segment. Prior year balances have not been adjusted.

2) 

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

3) 

The total of these items equals income from financial assets and liabilities carried at fair value through income (net) in the segment income statement included in Note 3 to the condensed consolidated interim financial statements.

4) 

The total of these items equals realized gains/losses (net) in the segment income statement included in Note 3 to the condensed consolidated interim financial statements.

5) 

The total of these items equals impairments of investments (net) in the segment income statement included in Note 3 to the condensed consolidated interim financial statements.

6) 

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

7) 

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

8) 

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

 

15


Table of Contents

Group Management Report     Allianz Group Interim Report Second Quarter and First Half of 2008

 

Property-Casualty Operations by Geographic Region

The following table sets forth our Property-Casualty gross premiums written, premiums earned (net), operating profit, combined ratio, loss ratio and expense ratio by geographic region for the three and six months ended June 30, 2008 and 2007. Consistent with our general practice, these figures are presented before consolidation adjustments, representing the elimination of transactions between Allianz Group companies in different geographic regions and different segments.

 

        Gross premiums written       

Premiums earned

(net)

      

Operating

profit

      

Combined

ratio

        Loss ratio         Expense ratio
Three months ended
June 30,
      

2008

as

stated

 mn

      

2007

as

stated

 mn

      

2008

internal

1)

 mn

      

2007

internal

1)

mn

      

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

      

2008

%

      

2007

%

        2008
%
        2007
%
        2008
%
        2007
%
Germany 2)3)     2,136     1,959     2,136     2,072     2,603     2,325     357     467     96.8     92.6      69.1      64.9      27.7      27.7
Italy     1,232     1,340     1,232     1,340     1,171     1,234     301     264     93.2     93.8      69.2      69.8      24.0      24.0
France 4)     842     1,143     842     836     808     1,103     114     163     96.1     96.8      69.1      69.3      27.0      27.5
United Kingdom     528     613     617     613     443     498     66     64     94.6     98.5      61.5      65.3      33.1      33.2
Spain     522     502     522     502     469     452     67     65     91.6     90.9      70.4      71.3      21.2      19.6
Switzerland 2)3)     124     305     121     115     289     402     26     71     94.1     92.3      71.5      66.3      22.6      26.0
                                                                                         
Netherlands     222     228     222     228     203     204     24     32     94.1     89.6      63.6      59.0      30.5      30.6
Austria     197     201     197     201     177     183     28     31     92.2     92.9      68.7      69.6      23.5      23.3
Ireland     163     165     163     165     146     154     29     29     93.0     94.7      65.8      70.0      27.2      24.7
Belgium 5)     73     83     73     73     65     75     13     15     97.3     97.9      59.9      63.1      37.4      34.8
Portugal     71     67     71     67     62     62     10     11     91.6     89.9      64.4      62.7      27.2      27.2
Greece     20     19     20     19     14     12     2     1     93.3     97.1      61.4      65.4      31.9      31.7

Western and Southern

Europe

    746     763     746     753     667     690     111 6)     124 6)     93.5     92.7      65.2      65.2      28.3      27.5
                                                                                         
Russia 7)     261     200     252     200     171     155     4     3     107.6     103.6      64.7      65.0      42.9      38.6
Hungary     118     127     118     127     118     125     11     17     100.2     95.8      70.1      68.2      30.1      27.6
Poland     122     95     109     95     83     61     17     7     82.8     93.0      55.4      57.6      27.4      35.4
Romania     83     83     92     83     33     39     1     5     106.8     86.5      83.7      72.1      23.1      14.4
Slovakia     78     70     73     70     76     68     28     32     71.1     61.6      42.3      35.2      28.8      26.4
Czech Republic     66     54     58     54     52     46     7     13     89.8     75.5      67.8      52.4      22.0      23.1
Bulgaria     28     24     28     24     16     15     1     2     100.1     93.1      57.8      47.1      42.3      46.0
Croatia     25     21     25     21     19     14     1         99.3     105.9      62.2      69.9      37.1      36.0
New Europe 8)     781     674     755     674     568     523     62     74     96.2     92.0      62.6      60.1      33.6      31.9
Other Europe     1,527     1,437     1,501     1,427     1,235     1,213     173     198     94.7     91.4      64.0      62.6      30.7      28.8
                                                                                         
United States     1,061     1,030     1,230     1,195     743     804     141     189     90.9     87.8      63.4      56.0      27.5      31.8
Mexico 9)     74     53     82     53     21     22     1     2     94.7     94.0      68.7      69.1      26.0      24.9
NAFTA     1,135     1,083     1,312     1,248     764     826     142     191     91.0     88.0      63.6      56.4      27.4      31.6
                                                                                         
Australia     391     390     399     390     303     311     95     84     89.2     90.8      64.5      65.0      24.7      25.8
Other     109     80     110     80     53     39     5     8     97.7     86.0      60.9      51.0      36.8      35.0
Asia-Pacific     500     470     509     470     356     350     100     92     90.5     90.2      64.0      63.4      26.5      26.8
South America     244     242     242     219     187     180     22     14     96.9     98.7      64.6      63.6      32.3      35.1
Other     30     22     32     22     16     15     4     1     10)     10)      — 10)      — 10)      — 10)      — 10)
Specialty lines                                                                                        
Allianz Global Corporate & Specialty 2)     778     623     775     700     466     462     166     116     81.8     94.4      57.9      74.3      23.9      20.1
Credit Insurance     437     446     437     446     333     330     112     161     87.3     73.1      60.2      43.4      27.1      29.7
Travel Insurance and Assistance Services     306     270     306     270     308     266     33     24     89.1     107.7      53.6      58.8      35.5      48.9
Subtotal     10,341     10,455     10,584     10,280     9,448     9,656     1,683     1,891                            
Consolidation 11)     (499)     (473)     (470)     (473)                 3                            
Total       9,842       9,982       10,114       9,807       9,448       9,656       1,683       1,894       93.5       92.9        66.1        64.9        27.4        28.0

 

1) 

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

2) 

Effective 1Q 2008, Allianz Risk Transfer AG is shown within Germany and Allianz Global Corporate & Specialty. Prior year balances have not been adjusted.

3) 

Reinsurance business of Allianz Suisse was transferred to Allianz SE. Effective 1Q 2008, renewal business is shown in Germany, run-off business is shown in Switzerland.

4) 

Effective 1Q 2008, health business in France is shown within Life/ Health segment. Prior year balances have not been adjusted.

5

Effective 1Q 2008, health business in Belgium is shown within Life/ Health segment. Prior year balances have not been adjusted.

6) 

Contains 5 mn and 5 mn for 2Q 2008 and 2Q 2007 respectively and 11 mn and 10 mn for 1H 2008 and 1H 2007 respectively from a former operating entity located in Luxembourg. To be continued on page 17.

 

16


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008     Group Management Report

 

        Gross premiums written        Premiums earned (net)        Operating profit        Combined ratio        Loss ratio        Expense ratio
Six months ended
June 30,
      

2008

as

stated

mn

      

2007

as

stated

mn

      

2008

internal

1)

mn

      

2007

internal

1)

mn

      

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

      

2008

%

      

2007

%

      

2008

%

      

2007

%

      

2008

%

      

2007

%

Germany 2)3)     6,774     6,575     6,774     6,833     5,035     4,592     952     582     95.6     97.8     70.4     69.2     25.2     28.6
Italy     2,406     2,586     2,406     2,586     2,328     2,431     467     439     93.2     93.6     69.5     69.9     23.7     23.7
France 4)     2,236     2,838     2,236     2,215     1,639     2,217     173     237     97.7     99.0     70.7     71.5     27.0     27.5
United Kingdom     1,034     1,152     1,188     1,152     903     989     124     127     95.9     97.4     62.3     64.1     33.6     33.3
Spain     1,217     1,193     1,217     1,193     931     885     143     135     90.3     90.5     70.2     71.3     20.1     19.2
Switzerland 2)3)     898     1,272     886     867     598     806     76     122     92.4     94.9     69.7     68.3     22.7     26.6
                                                                                     
Netherlands     520     534     520     534     396     401     43     57     95.7     91.6     65.0     60.6     30.7     31.0
Austria     539     551     539     551     359     366     46     52     94.7     95.1     71.5     73.1     23.2     22.0
Ireland     363     369     363     369     296     305     59     128     91.6     93.9     65.6     69.3     26.0     24.6
Belgium 5)     184     207     184     181     130     150     23     21     96.7     103.5     58.6     69.2     38.1     34.3
Portugal     158     147     158     147     123     124     20     20     90.7     89.7     64.1     61.8     26.6     27.9
Greece     41     40     41     40     27     24     5     4     89.5     91.6     58.8     61.1     30.7     30.5
Western and Southern Europe     1,805     1,848     1,805     1,822     1,331     1,370     207 6)     292 6)     94.0     94.3     66.0     67.0     28.0     27.3
                                                                                     
Russia 7)     486     268     310     268     344     199     2     4     104.2     103.8     63.0     65.3     41.2     38.5
Hungary     301     321     306     321     231     251     29     41     97.3     93.9     66.7     66.5     30.6     27.4
Poland     227     181     206     181     159     117     24     12     88.6     94.6     59.3     60.5     29.3     34.1
Romania     175     173     194     173     70     75     4     4     104.8     94.8     79.8     76.3     25.0     18.5
Slovakia     188     175     179     175     143     135     57     60     67.9     64.0     41.4     37.8     26.5     26.2
Czech Republic     149     132     134     132     107     91     19     25     86.0     77.6     63.9     54.9     22.1     22.7
Bulgaria     54     47     54     47     36     31     5     7     89.9     84.9     55.1     42.8     34.8     42.1
Croatia     51     44     51     44     37     29     3     1     96.5     101.7     63.5     69.2     33.0     32.5
New Europe 8)     1,631     1,341     1,434     1,341     1,127     928     129     143     94.0     91.2     61.4     60.3     32.6     30.9
Other Europe     3,436     3,189     3,239     3,163     2,458     2,298     336     435     94.0     92.3     63.9     64.1     30.1     28.2
                                                                                     
United States     1,833     1,912     2,110     2,077     1,428     1,605     230     355     94.0     89.3     65.0     56.5     29.0     32.8
Mexico 9)     112     91     125     92     40     42     5     7     90.9     89.6     66.1     64.0     24.8     25.6
NAFTA     1,945     2,003     2,235     2,169     1,468     1,647     235     362     93.9     89.3     65.0     56.7     28.9     32.6
                                                                                     
Australia     742     741     747     741     610     615     136     134     96.6     96.5     72.7     71.3     23.9     25.2
Other     211     162     206     162     106     75     8     11     99.2     93.1     60.9     55.6     38.3     37.5
Asia-Pacific     953     903     953     903     716     690     144     145     97.0     96.1     70.9     69.6     26.1     26.5
South America     481     479     473     432     368     347     38     28     97.6     99.4     64.0     64.4     33.6     35.0
Other     69     57     72     57     28     26     6     4     10)     10)     — 10)     — 10)     — 10)     — 10)
Specialty lines                                                                                    
Allianz Global Corporate & Specialty 2)     1,641     1,556     1,639     1,703     891     929     220     211     88.9     94.2     64.0     70.3     24.9     23.9
Credit Insurance     969     934     969     934     675     631     189     278     88.2     74.6     61.7     45.8     26.5     28.8
Travel Insurance and Assistance Services     633     566     633     566     583     526     59     55     91.2     104.2     55.7     56.9     35.5     47.3
Subtotal     24,692     25,303     24,920     24,773     18,621     19,014     3,162     3,160                        
Consolidation 11)     (1,140)     (1,210)     (1,093)     (1,210)                 1                        
Total       23,552       24,093       23,827       23,563       18,621       19,014       3,162       3,161       94.1       94.8       67.4       66.5       26.7       28.3

 

  7) 

Effective February 21, 2007, Russian People’s Insurance Society “Rosno” was consolidated following the acquisition of approximately 49.2 % of the shares in ROSNO by the Allianz Group, increasing our holding to approximately 97 %. Effective May 21, 2007, we consolidated Progress Garant for the first time.

 8) 

Contains income and expense items from a management holding in both 2008 and 2007.

 9) 

Effective Q1 2007, life business in Mexico is shown within the Life/Health segment.

10) 

Presentation not meaningful.

11) 

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

 

17


Table of Contents

 

Life/Health Insurance Operations

– Strength of our underlying business reflected in resilient operating profit of 703 million.

– Challenging financial markets negatively impacted sales of unit-linked products.

 

Earnings Summary

Statutory premiums1)

2008 to 2007 second quarter comparison

At € 11,070 million statutory premiums were down 8.0 % on an internal basis compared to the prior year period. The current capital market situation resulted in a significant slow-down in our unit-linked business, that could not be outweighed by positive revenue developments from our traditional life insurance products.

On a nominal basis statutory premiums dropped 8.8 % to € 10,729 million. Adjusted for the reclassification of AGF’s health business of € 284 million from the property-casualty segment revenues were down by 10.9 %.

Statutory premiums by region 1)

in %

LOGO

 

1)

After elimination of transactions between Allianz Group companies in different geographic regions and different segments.

 

1)

In order to provide more comparable information we will comment the development of our gross premiums written on an internal basis; meaning adjusted for foreign currency translation and (de-)consolidation effects starting in 2Q 2008.

 

Our traditional life insurance business continued to produce dynamic sales with single premium products being the main growth driver. Mostly these benefited from acquisitions of large group insurance contracts e.g. in Germany. Thereby, we achieved premium growth in the German life business (+ € 302 million), in Spain (+ € 65 million), Austria (+ € 44 million) and Switzerland (+ € 34 million).

This favorable development partly compensated the downturn in sales of unit-linked products. These were heavily depressed as customers were cautious about these products due to the weak situation in the equity markets.

In Italy, statutory premiums deteriorated by 36.8 % as a result of a shortfall in distribution capacity and the overall weakness of the Italian unit-linked market.

The 10.0 % decline in statutory premiums in the United States was primarily attributable to less business with fixed index annuity products. A year ago we ran a sales promotion which was not repeated this year. In addition, revenues from variable annuity products suffered from weak equity markets.

Revenues in Asia-Pacific were down 11.7 % compared to the prior year period, mainly caused by developments in Taiwan and Korea. In Taiwan new regulations with regards to unitlinked products slowed revenue growth. In addition we lost one of our major local bancassurance partners. In Korea we started seeing the effects of a strike that has lasted over six months, impacting sales growth and retention.


 

18


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008     Group Management Report

 

Statutory premiums – Internal growth rates 1)

in %

LOGO

 

1)

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

2008 to 2007 first half comparison

On a year-to-date comparison, statutory premiums were down 3.8 % to € 23,727 million . Adjusted for the reclassification of AGF’s health business of € 573 million, premiums declined by 6.5 %. On a nominal basis revenues decreased by 4.3 %.

 

Operating profit

Operating profit

in mn

LOGO

2008 to 2007 second quarter comparison

Operating profit amounted to € 703 million proving the strength of our underlying business and its resilience to the tough market environment.

The challenging financial market conditions negatively affected investment income. Net impairments on investments increased by € 842 million and realized gains decreased by € 373 million.

Operating income from financial assets and liabilities carried at fair value through income showed an expense of € 352 million mainly as a result of positive effects from hedge accounting treatment for certain derivative instruments that was not available a year ago.

Due to the reclassification of AGF’s health business in France from the Property-Casualty to the Life/Health segment, net claims and insurance benefits incurred increased by 9.2% to € 4,540 million.

In aggregate, acquisition and administrative expenses increased by 15.2% to € 1,285 million mainly due to higher acquisition expenses resulting from the transfer of the health business. The statutory expense ratio was up by 2.6 percentage points to 12.2%.


 

19


Table of Contents

Group Management Report     Allianz Group Interim Report Second Quarter and First Half of 2008

 

2008 to 2007 first half comparison

Operating profit for the first half year of 2008 decreased by 14.3% to € 1,292 million. The various line item developments were largely consistent with those described for the second quarter.

Non-operating result

2008 to 2007 second quarter comparison

The non-operating result was a loss of € 58 million. This was almost entirely made up of realized losses of € 47 million arising in Italy and Korea, not shared with policyholders,

2008 to 2007 first half comparison

We recorded a non-operating loss of € 40 million compared to a non-operating gain of € 118 million a year earlier.

Net income

2008 to 2007 second quarter comparison

Net income amounted to € 425 million. Both lower operating profit and the non-operating loss contributed to the 11.3% decline.

The effective tax rate rose by 0.7 percentage points to 31.0% mainly due to lower tax exempted income in 2Q 2008.

Minority interests in earnings were down by € 40 million mainly reflecting the minority buy-out at AGF in France.

2008 to 2007 first half comparison

Net income for the first six months of 2008 came to € 877 million, 15.0% lower than in the comparison period. Consistent with the development in the second quarter, the decrease stemmed from lower operating profit and the swing in non-operating items.

Income tax expenses were down by € 99 million, driven by the lower pre-tax profits. Our effective tax rate remained stable at 26.8%.

 

As in the second quarter, minority interests in earnings reflected the minority buy-out in France and were € 120 million lower than a year earlier.


 

20


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008    Group Management Report

 

Life/Health segment’s income statement and ratios 1)

 

        Three months ended June 30,        Six months ended June 30,
         

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

Statutory premiums2)     10,729     11,758     23,056     24,084
Ceded premiums written     (124)     (186)     (267)     (379)
Change in unearned premiums     (29)     3     (66)     (24)
Statutory premiums (net)     10,576     11,575     22,723     23,681
Deposits from SFAS 97 insurance and investment contracts     (5,465)     (6,892)     (12,023)     (13,813)
Premiums earned (net)     5,111     4,683     10,700     9,868
Interest and similar income     3,814     3,783     7,014     6,938
Operating income from financial assets and liabilities carried at fair value through income (net)3)     (352)     (668)     (121)     (979)
Operating realized gains/losses (net)4)     273     646     922     1,734
Fee and commission income     168     164     339     335
Other income     5     9     115     63
Income from fully consolidated private equity investments     3         3    
Operating revenues     9,022     8,617     18,972     17,959
                         
Claims and insurance benefits incurred (net)     (4,540)     (4,158)     (9,553)     (8,860)
Changes in reserves for insurance and investment contracts (net)     (1,389)     (2,211)     (3,192)     (4,835)
Interest expenses     (55)     (111)     (125)     (202)
Loan loss provisions     4         6     (3)
Operating impairments of investments (net)5)     (898)     (56)     (1,878)     (93)
Investment expenses     (82)     (163)     (410)     (359)
Acquisition and administrative expenses (net)     (1,285)     (1,115)     (2,393)     (1,989)
Fee and commission expenses     (70)     (43)     (130)     (105)
Operating restructuring charges6)         (2)     (1)     (5)
Other expenses     (1)         (1)    
Expenses from fully consolidated private equity investments     (3)         (3)    
Operating expenses     (8,319)     (7,859)     (17,680)     (16,451)
                         
Operating profit     703     758     1,292     1,508
                         
Non-operating income from financial assets and liabilities carried at fair value through income (net)3)     (3)     (1)     8    
Non-operating realized gains/losses (net)4)     (47)     17     (35)     122
Non-operating impairments of investments (net)5)     (6)         (10)    
Amortization of intangible assets             (1)     (1)
Non-operating restructuring charges6)     (2)     (1)     (2)     (3)
Non-operating items     (58)     15     (40)     118
                         
Income before income taxes and minority interests in earnings     645     773     1,252     1,626
                         
Income taxes     (200)     (234)     (336)     (435)
Minority interests in earnings     (20)     (60)     (39)     (159)
Net income     425     479     877     1,032
Statutory expense ratio7) in %       12.2       9.6       10.5       8.4

 

1) 

Since 2008, health business in Belgium and France is shown within Life/Health segment. Prior year balances have not been adjusted.

2) 

For the Life/Health segment, total revenues are measured based upon statutory premiums. 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.

3) 

The total of these items equals income from financial assets and liabilities carried at fair value through income (net) in the segment income statement included in Note 3 to the condensed consolidated interim financial statements.

4) 

The total of these items equals realized gains/losses (net) in the segment income statement included in Note 3 to the condensed consolidated interim financial statements.

5) 

The total of these items equals impairments of investments (net) in the segment income statement included in Note 3 to the condensed consolidated interim financial statements.

6) 

The total of these items equals restructuring charges in the segment income statement included in Note 3 to the condensed consolidated interim financial statements.

7) 

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

 

21


Table of Contents

Group Management Report     Allianz Group Interim Report Second Quarter and First Half of 2008

 

Life/Health Operations by Geographic Region

The following table sets forth our Life/Health statutory premiums, premiums earned (net), operating profit and statutory expense ratio by geographic region for the three and six months ended June 30, 2008 and 2007. Consistent with our general practice, these figures are presented before consolidation adjustments, representing the elimination of transactions between Allianz Group companies in different geographic regions and different segments.

 

        Statutory premiums 1)        Premiums earned (net)        Operating profit        Statutory expense ratio
Three months ended June 30,       

2008 as
stated

mn

      

2007 as
stated

mn

      

2008
internal 2)

mn

      

2007
internal 2)

mn

       2008
mn
       2007
mn
      

2008

 mn

       2007
 mn
      

2008

%

      

2007

%

Germany Life     3,078     2,776     3,078     2,776     2,259     2,222     175     141     7.3     8.1
Germany Health 3)     779     783     779     783     778     783     23     41     7.7     9.4
Italy     1,625     2,572     1,625     2,572     232     255     96     102     7.7     5.7
France 4)     1,690     1,575     1,690     1,847     637     390     140     227     19.3     15.1
Switzerland     206     167     201     167     85     83     17     19     13.2     13.9
Spain     233     168     233     168     118     119     31     26     7.1     8.3
                                                             
Belgium 5)     185     155     185     166     76     71     22     28     9.3     10.4
Netherlands     98     101     98     101     33     34     12     12     20.1     13.4
Austria     139     95     139     95     68     71     6     6     8.1     8.8
Portugal     31     28     31     28     19     17     3     7     20.7     26.1
Greece     27     25     27     25     17     16     2     1     27.3     23.6
Luxembourg     12     37     12     37     7     7     1     2     16.9     7.6
Western and Southern Europe     492     441     492     452     220     216     46     55 6)     12.9     12.2
                                                             
Poland     58     66     52     66     44     16     (1)     3     52.0     19.1
Slovakia     65     64     61     64     43     40     8     9     16.8     12.3
Hungary     51     26     51     26     19     20     3     4     14.0     27.6
Czech Republic     22     24     20     24     15     13         3     22.2     15.5
Croatia     17     17     17     17     10     10             21.9     6.1
Bulgaria     8     7     8     7     7     6     1     1     16.7     16.4
Romania     9     7     9     7     3     4             24.6     41.6
Russia     4     3     4     3     4     3     (4)     (3)     135.4     126.1
New Europe     234     214     222     214     145     112     7     17     27.9     18.9
Other Europe     726     655     714     666     365     328     53     72     17.8     14.4
                                                             
Mexico 7)     13     9     15     9     8     8     1     1     13.5     14.0
United States     1,396     1,796     1,617     1,796     254     105     150     88     19.3     9.5
NAFTA     1,409     1,805     1,632     1,805     262     113     151     89     19.2     9.6
                                                             
South Korea     380     466     483     466     186     238     26     24     16.0     17.6
Taiwan     227     544     242     544     22     16     (1)     5     9.4     3.1
Indonesia     48     76     58     76     12     11     2     2     14.7     7.4
Malaysia     32     30     34     29     28     26     1     3     22.7     21.2
Other     237     82     240     82     25     4     (18)     (2)     30.3     10.1
Asia-Pacific     924     1,198     1,057     1,197     273     295     10     32     11.4     10.0
South America     9     14     9     10     6     8     1         66.3     47.3
Other     105     98     149     98     95     87     6     18     8)     8)
Subtotal     10,784     11,811     11,167     12,089     5,110     4,683     703     767        
Consolidation 9)     (55)     (53)     (97)     (53)                 (9)        
Total       10,729       11,758       11,070       12,036       5,110       4,683       703       758       12.2       9.6

 

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 72.1 % and 68.1 % for the three months ended June 30, 2008 and 2007 respectively and 75.7 % and 72.9 % for the six months ended June 30, 2008 and 2007 respectively.

4) 

Effective 1Q 2008, health business in France is shown within Life/ Health segment. Prior year balances have not been adjusted.

5) 

Effective 1Q 2008, health business in Belgium is shown within Life/ Health segment. Prior year balances have not been adjusted. To be continued on page 23.

 

22


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008     Group Management Report

 

        Statutory premiums 1)        Premiums earned (net)        Operating profit        Statutory expense ratio
Six months ended June 30,       

2008 as
stated

mn

      

2007 as
stated

mn

      

2008
internal 2)

mn

      

2007
internal 2)

mn

       2008
mn
       2007
mn
      

2008

 mn

       2007
 mn
      

2008

%

      

2007

%

Germany Life     6,656     5,815     6,656     5,815     4,884     4,788     363     332     7.3     4.6
Germany Health 3)     1,553     1,563     1,553     1,563     1,554     1,563     60     82     8.6     9.8
Italy     3,254     5,402     3,254     5,402     446     498     127     196     7.9     5.5
France 4)     3,902     3,065     3,902     3,618     1,334     825     300     362     15.9     14.4
Switzerland     869     665     857     665     279     278     34     35     5.4     6.9
Spain     416     324     416     324     230     229     57     53     8.2     9.4
                                                             
Belgium 5)     388     349     388     376     165     147     51     71     9.6     8.9
Netherlands     197     214     197     214     66     69     21     23     19.9     12.9
Austria     247     198     247     198     150     139     14     25     9.7     9.4
Portugal     56     50     56     50     38     36     8     17     23.6     28.4
Greece     56     54     56     54     35     32     3     2     24.3     20.2
Luxembourg     35     47     35     47     14     14     2     5     12.4     11.1
Western and Southern Europe     979     912     979     939     468     437     99     142 6)     13.3     11.8
                                                             
Poland     121     314     110     314     81     44     3     6     45.5     10.5
Slovakia     145     126     137     126     85     80     18     16     12.4     13.6
Hungary     95     56     96     56     39     40     6     8     15.0     23.8
Czech Republic     49     45     44     45     31     26     4     6     19.7     17.6
Croatia     30     29     30     29     20     19     2     2     24.2     10.6
Bulgaria     15     15     15     15     13     13     1     2     20.2     15.3
Romania     16     16     18     16     7     6     1     (1)     27.6     34.1
Russia     8     5     8     5     7     5     (7)     (3)     135.7     133.5
New Europe     479     606     458     606     283     233     28     36     25.2     14.7
Other Europe     1,458     1,518     1,437     1545     751     670     127     178     17.3     12.9
                                                             
Mexico 7)     47     16     53     16     15     16     2     2     7.1     15.0
United States     2,740     3,465     3,170     3,465     428     205     155     159     12.5     9.4
NAFTA     2,787     3,481     3,223     3,481     443     221     157     161     12.4     9.5
                                                             
South Korea     864     931     1,047     931     396     490     56     78     13.8     15.8
Taiwan     682     894     735     894     50     30     1     9     7.8     2.8
Indonesia     94     106     110     106     22     22     5     4     13.6     11.4
Malaysia     63     58     67     58     55     49     4     5     18.8     18.2
Other     311     131     318     130     31     9     (28)     (6)     20.2     11.4
Asia-Pacific     2,014     2,120     2,277     2,119     554     600     38     90     11.0     10.0
South America     39     47     39     39     35     17     7     (1)     24.4     27.5
Other     215     200     220     200     189     179     22     34     8)     8
Subtotal     23,163     24,200     23,834     24,771     10,699     9,868     1,292     1,522        
Consolidation 9)     (107)     (116)     (107)     (117)                 (14)        
Total       23,056       24,084       23,727       24,654       10,699       9,868       1,292       1,508       10.5       8.4

 

6) 

Contains run-off (1) mn 1Q 2007 from our former life insurance business in the United Kingdom which we sold in December 2004.

7) 

Effective 2007, life business in Mexico is shown within the Life/Health segment.

8) 

Presentation not meaningful.

9) 

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

 

23


Table of Contents

 

Banking Operations 1)

 

Further markdowns on asset-backed securities, counterparty default adjustments on monolines and mark-to-market valuations on other trading positions led to a net dealing loss of 627 million.
Dresdner Bank’s loan book quality remained strong.

 

Earnings Summary

Operating revenues

2008 to 2007 second quarter comparison

Operating revenues of € 635 million were significantly down compared to the second quarter 2007, as the ongoing financial market crisis severely impacted our net dealing income again.

Net interest income at € 703 million was stable, profiting from the positive development in our Private & Corporate Clients (“PCC”) division, where deposit business continued to compensate for slight shortfalls in loan business. PCC’s deposit business benefited from the shifts within the customer portfolios towards less riskier assets. In the Investment Bank Dresdner Kleinwort (“DKIB”) we recorded a lower result compared to the prior year period, in which higher income from structured finance transactions was generated. The impact from the accounting treatment for derivative financial instruments which do not qualify for hedge accounting amounted to € (12) million (2Q 2007: € 6 million).

Net fee and commission income declined 22.3 % to € 558 million as a result of low levels of customer activity in the challenging capital markets. This affected mainly PCC’s securities business, where our retail customers did fewer transactions, as well as the strategic advisory business at DKIB.

Net dealing income, which comprises net trading income and net income from financial assets and liabilities designated at fair value through income, was severely hit by the market deterioration and turned sharply negative to € 627 million after

 

1) 

The results of operations of our Banking segment are almost exclusively represented by Dresdner Bank, accounting for 92.0 % and 96.0 % of our total Banking segment’s operating revenues for the six months ended June 30, 2008 and 2007, respectively. Accordingly, the discussion of our Banking segment’s results of operations relates solely to the operations of Dresdner Bank.

 

€ 351 million in the prior year period. This development is almost entirely attributable to DKIB. Whereas the direct impact from the credit crisis resulting in mark-downs on ABS at € 286 million was significantly lower than in the previous quarters, the ongoing build-up of counter-party default adjustments for monolines of € 212 million (net), and other credit crisis related negative impacts of € 191 million, both increased.

Additionally, we experienced lower net dealing income stemming from our rates, credit and equity businesses, which all suffered from the current market conditions.

2008 to 2007 first half comparison

Dresdner Bank’s operating revenues decreased by 64.3 % to € 1,354 million due to the ongoing financial markets turbulence that started in the second half of 2007. The line item developments were largely consistent with those described for the second quarter comparison.

Operating profit (loss)

Operating profit (loss)

in mn

LOGO


 

24


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008     Group Management Report

 

2008 to 2007 second quarter comparison

Due to the weak revenue situation, especially in net dealing income as already described, we recorded an operating loss of € 566 million compared to an operating profit of € 427 million in the same period one year ago. The loss was driven by DKIB which recorded an operating loss of € 715 million as a result of the lower net dealing income. PCC produced an operating profit of € 121 million and a cost-income-ratio of 81.5 %.

We further reduced our operating expenses. Down 11.4 %, they amounted to € 1,135 million. Personnel expenses were reduced by 19.7 % to € 643 million, reflecting significantly lower performance-related expenses following the lower revenues. Non-personnel costs, included in administrative expenses, declined by 3.2 % to € 461 million due to further efficiency gains and strict adherence to cost discipline, mainly resulting in lower office und IT-costs.

Net loan loss provisions stayed at a moderate level with net additions of € 66 million being € 4 million higher than in the second quarter 2007.

2008 to 2007 first half comparison

Resulting from the weak revenue situation in the first half of 2008, operating profit turned negative to an operating loss of € 1,019 million. Although we managed down our operating expenses by 12.8 %, this development could not outweigh the decline in revenues.

Net loan loss provisions stayed at a moderate level, with net additions of € 76 million, up 38.2 %. The quality of Dresdner Bank’s loan book remained solid with a coverage ratio of 51.4 %.

 

Non-operating result

2008 to 2007 second quarter comparison

The non-operating result at € 67 million was up 123.3 %, mainly stemming from € 60 million higher net realized gains due to the further reduction of non-strategic investments of the bank. These more than compensated for impairments of € 35 million, mainly resulting from losses from the sale of loans.

2008 to 2007 first half comparison

Compared to a year ago, the non-operating result was down by 20.0 %, amounting to € 116 million, mainly reflecting lower capital gains.

Net income (loss)

2008 to 2007 second quarter comparison

Due to the operating loss, net income declined to a net loss of € 545 million. In the prior year period we recorded a positive net income of € 395 million.

Despite the negative pre-tax income, we recorded an income tax charge of € 35 million (2Q 2007: € 44 million) due to positive income in other jurisdictions. The non-recognition of deferred tax assets for losses led to an effective tax rate of (7.0) % (2Q 2007: 9.6 %).

2008 to 2007 first half comparison

Net income decreased by € 2,065 million to a net loss of € 1,058 million as we recorded a loss before income taxes and minority interests in earnings of € 903 million due to the developments explained in the second quarter comparison.


 

25


Table of Contents

Group Management Report     Allianz Group Interim Report Second Quarter and First Half of 2008

 

Banking Operations by Division

The following table sets forth our banking operating revenues, operating profit and cost-income ratio by division. Consistent with our general practice, these figures are presented before consolidation adjustments, representing the elimination of transactions between Allianz Group companies in different segments.


 

        Operating revenues   Operating profit (loss)   Cost-income ratio
          2008
 mn
      

2007

mn

      

2008

mn

      

2007

mn

      

2008

%

      

2007

%

Three months ended June 30,                                    
Private & Corporate Clients     839     879     121     173     81.5     77.1
Investment Banking     (222)     760     (715)     158     2)     74.5
Corporate Other 1)     18     131     28     96     2)     2)
Dresdner Bank     635     1,770     (566)     427     178.7     72.4
Other Banks 3)     59     80     (2)     21     100.0     70.0
Total       694       1,850       (568)       448       172.0       72.3
Six months ended June 30,                                    
Private & Corporate Clients     1,715     1,873     339     486     78.1     72.5
Investment Banking     (254)     1,649     (1,292)     376     2)     75.6
Corporate Other 1)     (107)     271     (66)     242     2)     2)
Dresdner Bank     1,354     3,793     (1,019)     1,104     169.6     69.4
Other Banks 3)     118     158     (5)     44     100.8     69.0
Total       1,472       3,951       (1,024)       1,148       164.1       69.4

 

1) 

These items include, in particular, impacts from the accounting treatment for derivative financial instruments which do not qualify for hedge accounting as well as provisioning requirements for country and general risks. For the three and six months ended June 30, 2008 the impact from the accounting treatment for derivative financial instruments which do not qualify for hedge accounting on Corporate Other’s operating revenues amounted to 6 mn and (22) mn, respectively (2007: 4 mn and (16) mn respectively).

2) 

Presentation not meaningful.

3) 

Consists of non-Dresdner Bank banking operations within our Banking segment.

 

26


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008     Group Management Report

 

Income statement and cost-income ratios for the Banking segment and Dresdner Bank

 

        Three months ended June 30,       Six months ended June 30,
    2008       2007     2008       2007
         

Banking
Segment

mn

      

Dresdner

Bank

mn

      

Banking

Segment

mn

      

Dresdner

Bank

mn

      

Banking
Segment

mn

      

Dresdner

Bank

mn

      

Banking

Segment

mn

      

Dresdner

Bank

mn

Net interest income 1)     727     703     730     701     1,423     1,372     1,658     1,601
Net fee and commission income 2)     597     558     766     718     1,241     1,162     1,598     1,507
Trading income (net) 3)     (697)     (694)     338     335     (1,403)     (1,392)     689     680
Income from financial assets and liabilities designated at fair value through income (net) 3)     67     67     16     16     211     211     6     5
Other income         1                 1        
Operating revenues 4)     694     635     1,850     1,770     1,472     1,354     3,951     3,793
                                                 
Administrative expenses     (1,165)     (1,104)     (1,334)     (1,277)     (2,383)     (2,260)     (2,744)     (2,632)
Investment expenses     1         (4)     (5)     3     (1)     (13)     (16)
Other expenses     (30)     (31)     1     1     (36)     (36)     14     14
Operating expenses     (1,194)     (1,135)     (1,337)     (1,281)     (2,416)     (2,297)     (2,743)     (2,634)
                                                 
Loan loss provisions     (68)     (66)     (65)     (62)     (80)     (76)     (60)     (55)
Operating profit (loss)     (568)     (566)     448     427     (1,024)     (1,019)     1,148     1,104
                                                 
Realized gains/losses (net)     104     103     51     43     166     166     190     180
Impairments of investments (net)     (35)     (35)     (9)     (9)     (65)     (65)     (22)     (22)
Restructuring charges     (1)     (1)     (3)     (4)     15     15     (12)     (13)
Non-operating items     68     67     39     30     116     116     156     145
                                                 
Income (loss) before income taxes and minority interests in earnings     (500)     (499)     487     457     (908)     (903)     1,304     1,249
                                                 
Income taxes     (37)     (35)     (56)     (44)     (153)     (129)     (224)     (202)
Minority interests in earnings     (15)     (11)     (20)     (18)     (29)     (26)     (44)     (40)
Net income (loss)     (552)     (545)     411     395     (1,090)     (1,058)     1,036     1,007
                                                 
Cost-income ratio 5) in %       172.0       178.7       72.3       72.4       164.1       169.6       69.4       69.4

 

1) 

Represents interest and similar income less interest expenses.

2) 

Represents fee and commission income less fee and commission expenses.

3) 

The total of these items equals income from financial assets and liabilities carried at fair value through income (net) in the segment income statement included in Note 3 to the condensed consolidated interim financial statements.

4) 

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

5) 

Represents operating expenses divided by operating revenues.

 

27


Table of Contents

 

Asset Management Operations

– Fixed income business robust.

– Consistent outperformance supports net flows.

– Stable underlying profitability.

 

Third-Party Assets Under Management of the Allianz Group

We continued with our successful investment performance. Around 80 % of our third party assets under management are consistently outperforming their respective benchmarks.

Rolling investment performance of Allianz Global Investors 1) in %

LOGO

This performance is the basis for strong net inflows which amounted to € 33 billion between year end 2007 and June 30, 2008.

 

Development of third-party assets under management in bn

LOGO

Fixed income business proved to be robust, contributing € 37 billion to total net inflows. In contrast, we recorded outflows of € 4 billion of our equity business, primarily due to the continuing risk aversion of many investors against the background of the financial market crisis. In total, assets under management were down by 3.3 %. Negative market effects and unfavorable currency translation effects resulting from the downward trend of the U.S. dollar versus the Euro, were the main reasons.


 

 

 

1) 

AGI account-based, asset-weighted 3-year investment performance of 3rd party assets vs. benchmark including all equity and fixed income 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: WRAP accounts and accounts of Caywood Scholl, AGI Taiwan, AGI Korea, AGF AM and RAS AM.

 

28


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008     Group Management Report

 

Third-party assets under management by geographic region as of June 30, 2008 (December 31, 2007) 1)

in %

LOGO

 

1) 

Based on the origination of assets.

2) 

Consists of third-party assets managed by Dresdner Bank (approximately 11 bn and 18 bn as of June 30, 2008 and December 31, 2007, respectively) and by other Allianz Group companies (approximately 20 bn and 22 bn as of June 30, 2008 and December 31, 2007 respectively).

There were no major movements in the geographic origination of third party assets under management. Also the weighting of retail and institutional clients remained almost stable at 35% and 65% respectively, with a slight shift towards institutional clients. In the first half of 2008 there was a marginal movement from equity assets to our fixed income business, which represent 19% and 81% of the total assets under management, respectively.

 

Earnings Summary 1)

Operating Revenues

2008 to 2007 second quarter comparison

At €725 million, operating revenues were down 6.8 % compared to the prior year period. This development was substantially impacted by €87 million unfavorable currency effects. At constant exchange rates and excluding deconsolidation effects, operating revenues would have been up by 4.7 %.

In line with the reduced asset base, management fees decreased by €40 million.

With €2 million, net income from financial assets and liabilities carried at fair value through income was down €13 million, primarily stemming from lower mark-to- market valuation of seed money investments related to equity products in the United States.

2008 to 2007 first half comparison

At €1,435 million, operating revenues declined by 6.6 %. The internal growth rate amounted to 2.8 %.

Net income from financial assets and liabilities carried at fair value through income turned negative to an expense of €1 million, €23 million below last year’s period. This drop primarily stemmed from lower mark-to-market valuation of seed money investments related to equity products in the United States.

 

 

1) 

The results of operations of our Asset Management segment are almost exclusively represented by AGI, accounting for 98.2 % (2Q 2007:97.6 %) and 97.5 % (2Q 2007: 96.6 %) of our total Asset Management segment’s operating revenues and operating profit in the second quarter of 2008 , respectively. Accordingly, the discussion of our Asset Management segment’s results of operations relates solely to the operations of AGI.


 

29


Table of Contents

Group Management Report     Allianz Group Interim Report Second Quarter and First Half of 2008

 

        Three months ended June 30,        Six months ended June 30,
         

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

Management fees     821     861     1,645     1,712
Loading and exit fees     63     78     126     159
Performance fees     30     20     43     35
Other income     113     94     178     196
Fee and commission income     1,027     1,053     1,992     2,102
                         
Commissions 1)     (208)     (239)     (416)     (471)
Other expenses     (114)     (71)     (178)     (160)
Fee and commission expenses     (322)     (310)     (594)     (631)
                         
Net fee and commission income       705       743       1,398       1,471

 

1) 

For the three months ended June 30, 2007 and the six months ended June 30, 2007,  13 million and  25 million, respectively, have been reclassified from other expenses to commission expenses.

 

Operating profit

Operating Profit

in mn

LOGO

2008 to 2007 second quarter comparison

At € 274 million operating profit was down 12.7 % compared to the prior year period, as a 2.8 % decrease in operating expenses could not compensate for the reduction of operating revenues. On an internal basis, operating profit was 3.1 % below the prior year period.

Administrative expenses declined by 2.8 % to € 451 million. However, adjusted for exchange rate effects the expenses increased by € 40 million as a consequence of our ongoing business expansion and investment in future growth.

Our cost-income ratio increased by 2.6 percentage points to 62.2 %.

 

2008 to 2007 first half comparison

On a year-to-date comparison operating profit was down by 17.2 % , amounting to € 512 million. On an internal basis, operating profit declined by 12.3 %.

Our cost-income ratio increased by 4.5 percentage points to 64.3 %.

Non-operating result

2008 to 2007 second quarter comparison

Acquisition-related expenses increased by € 4 million to € 87 million. This was primarily due to the favorable business development at PIMCO. The Allianz Group had acquired 67,863 of the 150,000 PIMCO LLC Class B Units originally outstanding, as of June 30 2008, compared to 37,760 as of June 30, 2007. There was no acquisition of B Units in the second quarter 2008.

2008 to 2007 first half comparison

At € 207 million, acquisition-related expenses were € 2 million higher than a year earlier. The positive development at PIMCO, as previously described, was the main driver behind this increase.

Net income

2008 to 2007 second quarter comparison

Net income of € 114 million was down 9.5 % . Excluding the effects of exchange rate movements and deconsolidation, the internal growth rate also decreased, but only by 4.3 %. The lower income resulted in a decline in tax charges which


 

30


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008     Group Management Report

 

amounted to € 71 million, roughly one forth less than a year ago. The effective tax rate was 38.4 % (2Q 2007: 43.1 %), primarily as a result of lower tax rates in Germany and Italy.

2008 to 2007 first half comparison

Net income dropped 13.2 % to € 190 million. On an internal basis, net income declined by 16.2 %. At €116 million tax charges were down €63 million for the same reasons as discussed in the quarter-to-quarter comparison . The effective

tax rate was 37.7 %, 5.5 percentage points less than for the first six months of 2007.


 

Income statement and cost-income ratios for the Asset Management segment and AGI

 

    Three months ended June 30,        Six months ended June 30,
  2008       2007     2008       2007
    

Asset
Management
Segment

mn

      

Allianz Global
Investors

mn

      

Asset
Management
Segment

mn

      

Allianz Global
Investors

mn

      

Asset
Management
Segment

mn

      

Allianz Global
Investors

mn

      

Asset
Management
Segment

mn

      

Allianz Global
Investors

mn

Net fee and commission income 1)     721     705     765     743     1,427     1,398     1,511     1,471
Net interest income 2)     7     11     13     17     27     26     36     36
Income from financial assets and liabilities carried at fair value through income (net)     3     2     16     15     (1)     (1)     23     22
Other income     7     7     3     3     12     12     7     7
Operating revenues 3)     738     725     797     778     1,465     1,435     1,577     1,536
                                                 
Administrative expenses, excluding acquisition-related expenses 4)     (457)     (451)     (472)     (464)     (943)     (923)     (940)     (918)
Operating expenses     (457)     (451)     (472)     (464)     (943)     (923)     (940)     (918)
                                                 
Operating profit     281     274     325     314     522     512     637     618
                                                 
Realized gains/losses (net)             1     1     8     8     3     3
Impairments of investments (net)     (2)     (2)             (5)     (5)        
Acquisition-related expenses 4), thereof:                                                

Deferred purchases of interests in PIMCO

    (87)     (87)     (80)     (80)     (207)     (207)     (202)     (202)

Other acquisition-related expenses

            (3)     (3)             (3)     (3)

Subtotal

    (87)     (87)     (83)     (83)     (207)     (207)     (205)     (205)
Restructuring charges                             (2)     (2)
Non-operating items     (89)     (89)     (82)     (82)     (204)     (204)     (204)     (204)
                                                 
Income before income taxes and minority interests in earnings     192     185     243     232     318     308     433     414
                                                 
Income taxes     (71)     (71)     (101)     (100)     (117)     (116)     (181)     (179)
Minority interests in earnings     (1)         (8)     (6)     (3)     (2)     (19)     (16)
Net income     120     114     134     126     198     190     233     219
                                                 
Cost-income ratio 5) in %       61.9       62.2       59.2       59.6       64.4       64.3       59.6       59.8

 

1) 

Represents fee and commission income less fee and commission expenses.

2) 

Represents interest and similar income less interest expenses and investment expenses.

3) 

For the Asset Management segment, total revenues are measured based upon operating revenues.

4) 

The total of these items equals acquisition and administrative expenses (net) in the segment income statement included in Note 3 to the condensed consolidated interim financial statements.

5) 

Represents operating expenses divided by operating revenues

 

31


Table of Contents

 

Corporate Activities

– Corporate Activities made a positive contribution to operating profit.

– Lower volume of realized gains affected net income.

 

Earnings Summary

The aggregate operating profit for the second quarter amounted to € 5 million coming from a loss of € 10 million. This development was attributable to a lower loss in the Holding Function which was only slightly offset by a lower profit in the Private Equity business. For the same reasons the operating loss of € 71 million for the first half of the year was 36.0 % lower than in the first six months of 2007.

At € 58 million, the overall net loss was € 50 million higher than in the respective quarter 2007, primarily due to a lower volume of realized gains and higher impairments of investments in the Holding Function. This development was also reflected in the first half year 2008 resulting in a net loss of € 157 million coming from a net gain of € 373 million in 2007.

Holding Function

Operating profit (loss)

At € 28 million the operating loss was € 18 million lower in the second quarter of 2008. This development was positively affected by interest and similar income that increased by € 55 million due to higher dividends received, however negative foreign currency exchange effects (– € 44 million) almost offset this.

In the first half of 2008 the same effects led to an operating loss of € 168 million that was slightly lower than last year (€ 178 million).

 

Non-operating result

The non-operating loss increased by € 232 million to € 293 million in the second quarter. The main driver for this development was significantly higher realized gains a year earlier which were not repeated in the period under review. Additionally, impairments increased due to the weak market conditions.

In the first half year comparison non-operating items showed a loss of € 383 million coming from a gain of € 451 million in the prior year. Similar to the second quarter, significantly lower realized gains and higher impairments were the reason for this development.

Net income

Due to the movements in non-operating items we recorded a net loss of € 127 million in the second quarter compared to a net loss of € 1 million in the prior year. Income tax amounted to a € 194 million income, partly compensating the negative impact from non-operating items.

In the first half of 2008, the holding function recorded a net loss of € 264 million coming from a net income of € 363 million in 2007. Income tax amounted to an income of € 287 million.

Private Equity

Operating profit

In the second quarter operating profit slightly decreased to €33 million. A higher margin from consolidated private equity investments was more than offset by lower interest and similar income.


 

32


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008     Group Management Report

 

For the first six months, operating profit increased by 44.8 % from € 67 million to € 97 million. In addition to the effects also observed in the second quarter, fee and commission income rose due to several real estate transactions in the first quarter 2008.

Non-operating result

In the second quarter comparison non-operating items turned into a positive result of € 49 million coming from a negative result of € 13 million in 2Q 2007, mainly due to higher realized gains.

 

The development in the first six months was consistent with the second quarter.

Net income

Driven by the development in non-operating items and lower income taxes net income amounted € 69 million in the second quarter coming from a loss € 7 million in 2Q 2007.

On a half year basis, net income increased by € 97 million to € 107 million due to higher operating profit, the increased non-operating result and also lower income tax expense.


        Holding Function                Private Equity                Total    
Three months ended June 30,       

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

Operating profit (loss)     (28)     (46)     33     36     5     (10)
Non-operating items     (293)     (61)     49     (13)     (244)     (74)
Income (loss) before income taxes and minorities     (321)     (107)     82     23     (239)     (84)
Net income (loss)     (127)     (1)     69     (7)     (58)     (8)
Six months ended June 30,                                    
Operating profit (loss)     (168)     (178)     97     67     (71)     (111)
Non-operating items     (383)     451     37     (14)     (346)     437
Income (loss) before income taxes and minorities     (551)     273     134     53     (417)     326
Net income (loss)       (264)       363       107       10       (157)       373

 

33


Table of Contents

Balance Sheet Review

– Shareholders’ equity decreased due to 2007 dividend payment and reduced unrealized gains resulting from difficult financial markets.

 

Shareholders’ Equity

Shareholders’ equity1)

in mn

LOGO

 

1) 

Does not include minority interests of 3.4 bn, 3.5 bn and 3.6 bn as of June 30, 2008, March 31, 2008 and December 31, 2007, respectively. Please see note 18 to the condensed consolidated interim financial statements for further information.

2) 

Includes foreign currency translation adjustments.

As of June 30, 2008 shareholders’ equity was down 10.1 % to € 40.5 billion compared to March 31, 2008 (down € 7.3 billion compared to year-end 2007). For the second quarter, net income increased our equity by € 1.5 billion (1H 2008: € 2.7 billion). However, dividends for the fiscal year 2007 amounting to € 2.5 billion, which were paid in the second quarter 2008 and a reduction of unrealized gains of € 3.6 billion (1H 2008: € 6.5 billion) led in sum to lower shareholders’ equity as of June 30, 2008.

 

Total Assets and Total Liabilities

In the first half of 2008 total assets and liabilities decreased by € 44.8 billion and € 37.2 billion, respectively. In the following sections we analyze important developments within the balance sheets of our Property-Casualty, Life/Health and Banking segments as presented on pages 48 and 49. Relative to the Allianz Group’s total assets and total liabilities, we consider the total assets and total liabilities from our Asset Management segment as immaterial and have, accordingly, excluded these assets and liabilities from the following discussion. Our Asset Management segment’s results of operations stem primarily from its business with third-party assets. Please see pages 28 and 29 for further information on the development of our third-party assets.


 

34


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008     Group Management Report

 

Assets and Liabilities of the Property-Casualty segment

Property-Casualty assets

Property-Casualty asset base

fair values1) in bn

LOGO

 

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) 

Does not include affiliates of 9.8 bn, 9.8 bn and 10.0 bn as of June 30, 2008, March 31, 2008 and December 31, 2007, respectively.

3) 

Includes debt securities of 2.5 bn, 2.3 bn and 2.7 bn as of June 30, 2008, March 31, 2008 and December 31, 2007, respectively, equity securities of 0.5 bn, 0.4 bn and 0.4 bn as of June 30, 2008, March 31, 2008 and December 31, 2007, respectively, and derivative financial instruments of 0.1 bn, 0.1 bn and 0.1 bn as of June 30, 2008, March 31, 2008 and December 31, 2007, respectively.

In the second quarter, our Property-Casualty asset base decreased by 3.7 %, or € 3.4 billion to € 88.4 billion (1H 2008: € (9.2) billion). Downward movements were seen in all asset categories, with the major impact in our investments, excluding affiliates. These were down 4.1 % or € 2.9 billion to € 67.1 billion (1H 2008: decline of 9.0 % or € 6.6 billion). Equity investments included in this balance decreased by 18.3 % to € 10.7 billion (1H 2008: (35.2) %) mainly caused by a strategic decision to actively decrease our equity exposure in order to reduce equity gearing. In addition, the asset base was reduced as a result of upstreaming € 2.8 billion of capital to the holding in the second quarter 2008.

 

Of our Property-Casualty asset base, ABS made up € 4.7 billion, as of June 30, 2008, which is around 5 %. CDOs accounted for € 0.1 billion of this amount. Unrealized losses on CDOs of € 3 million were recorded in equity.

Property-Casualty liabilities

Reserves for loss and loss adjustment expenses in our Property-Casualty segment increased by 0.6 % to € 54.8 billion in the second quarter (1H 2008: decline of 3.7 %) due to currency translation effects. Main contributors for the half year development were the change in presentation of AGF’s health insurance business which were previously recorded within the Property-Casualty segment and are now recorded in the Life/Health segment, and foreign currency translation effects.


 

35


Table of Contents

Group Management Report     Allianz Group Interim Report Second Quarter and First Half of 2008

 

Assets and Liabilities of the Life/Health segment

Life/Health assets

Life/Health asset base

fair values1) in bn

LOGO

 

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) 

Does not include affiliates of 2.9 bn, 2.9 bn and 2.7 bn as of June 30, 2008, March 31, 2008 and December, 31, 2007, respectively.

3) 

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 with the value of financial liabilities for unit- linked contracts.

4) 

Includes debt securities of 7.9 bn, 8.0 bn and 9.3 bn as of June 30, 2008, March 31, 2008 and December 31, 2007, respectively, equity securities of 3.3 bn, 3.1 bn and 3.3 bn as of June 30, 2008, March 31, 2008 and December 31, 2007, respectively, and derivative financial instruments of  (3.9) bn, (4.1) bn and (4.5) bn as of June 30, 2008, March 31, 2008 and December 31, 2007, respectively.

The asset base of our Life/Health segment was down 1.1 % or € 3.6 billion (1H 2008: down 3.2 % or € 11.1 billion) amounting to € 338.9 billion as of June 30, 2008. Financial assets for unit-linked contracts declined by 1.7 % to € 59.4 billion, as the market conditions impacted the fair value of our assets in this category (1H 2008: decline of 10.1 %). In addition, the segment’s investments, excluding affiliates, decreased by 1.0 % to € 179.7 billion (1H 2008: decrease of 2.7 %). This resulted mainly from reduced equity market values (2Q 2008: down by 2.9 % or € 1.0 billion; 1H 2008: down by 18.7 % or € 7.7 billion) due to poor equity market conditions.

 

Within our Life/Health asset base, ABS amounted to € 13.6 billion, as of June 30, 2008, which is 4 % of total Life/Health assets. Of these, € 0.2 billion are CDOs. Unrealized losses on CDOs of € 12 million were recorded in equity.

Life/Health liabilities

Life/Health reserves for insurance and investment contracts were down 0.3 % since March 31, 2008 (1H 2008: down 1.3 %) to € 279.3 billion driven mainly by a reduction of premium refund reserves in Germany of € (1.3) billion (1H 2008: € (4.1) billion) and France of € (1.4) billion (1H 2008: € (2.1) billion) in the second quarter due to impairments of investments, and foreign currency translation effects of € (0.3) billion (1H 2008: € (3.3) billion from the United States and Korea). Furthermore due to the change in presentation of AGF’s health insurance business previously recorded in the Property-Casualty segment and now recorded in the Life/Health segment, reserves for loss and loss adjustment expenses increased by € 1,378 million.


 

36


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008     Group Management Report

 

Assets and Liabilities of the Banking segment

Banking loans and advances to banks and customers1)

in bn

LOGO

 

1) 

Includes loan loss allowance of (0.8) bn , (0.8) bn and (0.8) bn as of June 30, 2008, March 31, 2008 and December 31, 2007, respectively.

Banking loans and advances to banks and customers

In our Banking segment, loans and advances to banks and customers were down € 83.3 billion to € 257.1 billion (1H 2008: decrease of € 38.4 billion). This development was caused primarily by lower volume in the collateralized refinancing business at Dresdner Bank.

Banking liabilities to banks and customers

In the second quarter the liabilities to banks and customers declined by 25.4 % to € 279.0 billion, mainly as term deposits and certificates of deposit were down by 18.7 % or € 24.5 billion to € 106.5 billion. In addition, lower business in the form of repurchase agreements contributed to this development.

For the first half year, banking liabilities to banks and customers also experienced a decrease of 12.9 % due to developments similar to the second quarter.


 

37


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 those statements. 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 on-going 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. Further, the timing of sales that would result in such gains or losses is largely at our discretion.

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 June 30,        Six months ended June 30,
         

2008

mn

      

2007

mn

      

2008

 mn

      

2007

mn

Operating profit     2,104     3,288     3,960     6,158
Non-operating realized gains/losses (net) and impairments of investments (net)     507     401     761     2,446
Non-operating income from financial assets and liabilities carried at fair value through income (net)     (92)     (37)     55     (3)
Interest expenses from external debt     (233)     (278)     (485)     (500)
Non-operating restructuring charges     (8)     (12)     14     (39)
Acquisition-related expenses     (79)     (135)     (186)     (257)
Amortization of intangible assets     (3)     (4)     (8)     (7)
Reclassification of tax benefits     (10)     (25)     (23)     (44)
Income before income taxes and minority interests in earnings       2,186       3,198       4,088       7,754

 

38


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008     Group Management Report

 

Composition of Total Revenue Growth

We further 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 1) growth to internal total revenue 1) growth.

 

        Three months ended June 30, 2008        Six months ended June 30, 2008
        Nominal
growth
      

Changes in
scope

of consoli-
dation

       Foreign
currency
translation
       Internal
growth
    Nominal
growth
      

Changes in
scope

of consoli-
dation

       Foreign
currency
translation
      

Internal

growth

          %        %        %        %        %        %        %        %
Property-Casualty     (1.4)     (1.4)     (3.1)     3.1     (2.2)     (1.3)     (2.0)     1.1
Life/Health     (8.8)     2.1     (2.9)     (8.0)     (4.3)     2.3     (2.8)     (3.8)
Banking     (62.5)         5.9     (68.4)     (62.7)         2.0     (64.7)
thereof: Dresdner Bank     (64.1)         6.2     (70.3)     (64.3)         2.0     (66.3)
Asset Management     (7.4)     (0.6)     (11.1)     4.3     (7.1)     (0.5)     (9.0)     2.4
thereof: Allianz Global Investors     (6.8)     (0.2)     (11.3)     4.7     (6.6)     (0.1)     (9.3)     2.8
Allianz Group       (9.5)       0.6       (2.7)       (7.4)       (7.4)       0.5       (2.3)       (5.6)

 

1)

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

 

39


Table of Contents

Group Management Report     Allianz Group Interim Report Second Quarter and First Half of 2008

 

 

[THIS PAGE INTENTIONALLY LEFT BLANK]

 

 

 

 

 

 

 

40


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008

 

Allianz Group

Condensed Consolidated Interim Financial Statements Contents

 

 

42

  Consolidated Balance Sheets

43

  Consolidated Income Statements

44

  Consolidated Statements of Changes in Equity

45

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

47

  1   Basis of presentation

47

  2   Changes in the presentation of the condensed consolidated interim financial statements

48

  3   Segment reporting
Supplementary Information to the Consolidated Balance Sheets

64

  4   Financial assets carried at fair value through income

64

  5   Investments

65

  6   Loans and advances to banks and customers

65

  7   Reinsurance assets

65

  8   Deferred acquisition costs

66

  9   Other assets

66

  10   Intangible assets

66

  11   Financial liabilities carried at fair value through income

67

  12   Liabilities to banks and customers

67

  13   Reserves for loss and loss adjustment expenses

68

  14   Reserves for insurance and investment contracts

68

  15   Other liabilities

68

  16   Certificated liabilities

68

  17   Participation certificates and subordinated liabilities

69

  18   Equity

 

 

 

 

Supplementary Information to the Consolidated Income Statements

70

  19   Premiums earned (net)

71

  20   Interest and similar income

72

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

73

  22   Realized gains/losses (net)

74

  23   Fee and commission income

75

  24   Other income

76

  25   Income and expenses from fully consolidated private equity investments

78

  26   Claims and insurance benefits incurred (net)

79

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

81

  28   Interest expenses

81

  29   Loan loss provisions

81

  30   Impairments of investments (net)

82

  31   Investment expenses

82

  32   Acquisition and administrative expenses (net)

84

  33   Fee and commission expenses

85

  34   Income taxes

86

  35   Earnings per share
Other Information

87

  36   Supplemental information on the Banking Segment

88

  37   Supplemental information on the condensed consolidated statements of cash flows

88

  38   Other information

88

  39   Subsequent events

89

    Responsibility statement

90

    Review report

 

41


Table of Contents

Condensed Consolidated Interim Financial Statements     Allianz Group Interim Report Second Quarter and First Half of 2008

 

Allianz Group

Consolidated Balance Sheets

As of June 30, 2008 and as of December 31, 2007

 

          Note       

As of June 30,
2008

mn

      

As of
December 31,
2007

mn

ASSETS                  
Cash and cash equivalents           35,555     31,337
Financial assets carried at fair value through income     4     198,400     185,461
Investments     5     271,171     286,952
Loans and advances to banks and customers     6     359,462     396,702
Financial assets for unit linked contracts           59,446     66,060
Reinsurance assets     7     14,512     15,312
Deferred acquisition costs     8     20,512     19,613
Deferred tax assets           4,977     4,771
Other assets     9     39,160     41,528
Intangible assets     10     13,201     13,413
Total assets               1,016,396       1,061,149
           
          Note       

As of June 30,
2008

mn

      

As of

December 31,

2007

mn

LIABILITIES AND EQUITY                  
Financial liabilities carried at fair value through income     11     158,059     126,053
Liabilities to banks and customers     12     288,732     336,494
Unearned premiums           17,954     15,020
Reserves for loss and loss adjustment expenses     13     63,099     63,706
Reserves for insurance and investment contracts     14     287,924     292,244
Financial liabilities for unit linked contracts           59,446     66,060
Deferred tax liabilities           3,473     3,973
Other liabilities     15     44,679     49,324
Certificated liabilities     16     34,130     42,070
Participation certificates and subordinated liabilities     17     15,045     14,824
Total liabilities           972,541     1,009,768
                   
Shareholders’ equity           40,457     47,753
Minority interests           3,398     3,628
Total equity     18     43,855     51,381
                   
Total liabilities and equity               1,016,396       1,061,149

 

42


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008     Condensed Consolidated Interim Financial Statements

 

Allianz Group

Consolidated Income Statements

For the three months and six months ended June 30, 2008 and 2007

 

                  Three months ended June 30,        Six months ended June 30,
          Note       

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

Premiums written           159,092     14,833     34,560     34,336
Ceded premiums written           (1,225)     (1,415)     (2,641)     (3,176)
Change in unearned premiums           692     921     (2,598)     (2,278)
Premiums earned (net)     19     14,559     14,339     29,321     (28,882)
Interest and similar income     20     7,226     7,316     13,636     13,582
Income from financial assets and liabilities carried at fair value through income (net)     21     (1,121)     (343)     (1,173)     (228)
Realized gains/losses (net)     22     1,394     1,088     2,721     4,297
Fee and commission income     23     2,103     2,322     4,204     4,678
Other income     24     15     6     366     99
Income from fully consolidated private equity investments     25     627     470     1,206     941
Total income           24,803     25,198     50,281     52,251
                               
Claims and insurance benefits incurred (gross)           (11,313)     (11,421)     (23,299)     (23,468)
Claims and Insurance benefits incurred (ceded)           526     997     1,198     1,959
Claims and insurance benefits incurred (net)     26     (10,787)     (10,424)     (22,101)     (21,509)
Change in reserves for insurance and investment contracts (net)     27     (1,466)     (2,332)     (3,311)     (5,068)
Interest expenses     28     (1,620)     (1,841)     (3,446)     (3,439)
Loan loss provisions     29     (65)     (74)     (75)     (72)
Impairments of investments (net)     30     (1,526)     (102)     (3,023)     (169)
Investment expenses     31     (160)     (202)     (597)     (463)
Acquisition and administrative expenses (net)     32     (5,641)     (5,950)     (11,087)     (11,588)
Fee and commission expenses     33     (712)     (601)     (1,367)     (1,235)
Amortization of intangible assets           (3)     (4)     (8)     (7)
Restructuring charges           (8)     (14)     13     (44)
Other expenses           (31)         (37)     13
Expenses from fully consolidated private equity investments     25     (598)     (456)     (1,154)     (916)
Total expenses           (22,617)     (22,000)     (46,193)     (44,497)
                               
Income before income taxes and minority interests in earnings           2,186     3,198     4,088     7,754
Income taxes     34     (552)     (858)     (1,226)     (1,825)
Minority interests in earnings           (92)     (200)     (172)     (549)
Net income               1,542     2,140     2,690     5,380
                   
            Three months ended June 30,       Six months ended June 30,
          Note       

2008

      

2007

      

2008

      

2007

Basic earnings per share     35     3.44     4.85     5.98     12.32
Diluted earnings per share       35       3.39       4.75       5.85       12.08

 

43


Table of Contents

Condensed Consolidated Interim Financial Statements    Allianz Group Interim Report Second Quarter and First Half of 2008

 

Allianz Group

Consolidated Statements of Changes in Equity

For the six months ended June 30, 2008 and 2007

 

       

Paid-in
capital

 

      

Revenue
reserves

 

       Foreign
currency
translation
adjustments
       Unrealized
gains and
losses (net)
           

Shareholders’
equity

 

      

Minority
interests

 

           

Total

equity

 

          mn        mn        mn        mn             mn        mn             mn
Balance as of December 31, 2006     25,398     13,070     (2,210)     13,392         49,650     7,180         56,830
Foreign currency translation adjustments             (262)     (7)         (269)     (42)         (311)
Available-for-sale investments                                                  

Unrealized gains and losses (net) arising during the period

                (559)         (559)     (52)         (611)

Transferred to net income on disposal

                (2,202)         (2,202)     (97)         (2,299)
Cash flow hedges                 (9)         (9)             (9)
Miscellaneous         (136)                 (136)     9         (127)
Total income and expense recognized directly in shareholders’ equity         (136)     (262)     (2,777)         (3,175)     (182)         (3,357)
Net income         5,380                 5,380     549         5,929
Total recognized income and expense for the period         5,244     (262)     (2,777)         2,205     367         2,572
Paid-in capital                                    
Treasury shares         200                 200             200
Transactions between equity holders     2,765     (6,051)     (62)     563         (2,785)     (3,242)         (6,027)
Dividends paid         (1,642)                 (1,642)     (246)         (1,888)
Balance as of June 30, 2007     28,163     10,821     (2,534)     11,178         47,628     4,059         51,687
Balance as of December 31, 2007     28,321     12,618     (3,656)     10,470         47,753     3,628         51,381
Foreign currency translation adjustments             (729)     6         (723)     (86)         (809)
Available-for-sale investments                                                  

Unrealized gains and losses (net) arising during the period

                (5,922)         (5,922)     (86)         (6,008)

Transferred to net income on disposal

                (627)         (627)     (3)         (630)
Cash flow hedges                 8         8     (1)         7
Miscellaneous         (357)                 (357)     22         (335)
Total income and expense recognized directly in shareholders’ equity         (357)     (729)     (6,535)         (7,621)     (154)         (7,775)
Net income         2,690                 2,690     172         2,862
Total recognized income and expense for the period         2,333     (729)     (6,535)         (4,931)     18         (4,913)
Paid-in capital     203                     203             203
Treasury shares         39                 39             39
Transactions between equity holders         (136)         1         (135)     (11)         (146)
Dividends paid         (2,472)                 (2,472)     (237)         (2,709)
Balance as of June 30, 2008       28,524       12,382       (4,385)       3,936           40,457       3,398           43,855

 

44


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008     Condensed Consolidated Interim Financial Statements

 

Allianz Group

Condensed Consolidated Statements of Cash Flows

For the six months ended June 30, 2008 and 2007

 

Six months ended June 30,      

2008

mn

      

2007

mn

Summary:                
Net cash flow provided by operating activities     27,506     9,573
Net cash flow used in investing activities     (4,559)     (6,212)
Net cash flow provided by financing activities     (18,699)     (3,437)
Effect of exchange rate changes on cash and cash equivalents     (30)     (28)
Change in cash and cash equivalents     4,218     (104)
Cash and cash equivalents at beginning of period     31,337     33,031
Cash and cash equivalents at end of period     35,555     32,927
             
Cash flow from operating activities:            
Net income     2,690     5,380
Adjustments to reconcile net income to net cash flow provided by operating activities            

Minority interests in earnings

    172     549

Share of earnings from investments in associates and joint ventures

    (68)     (331)

Realized gains/losses (net) and impairments of investments (net) of:

           

Available-for-sale and held-to-maturity investments, investments in associates and joint ventures, real estate held for investment, loans to banks and customers

    302     (4,128)

Other investments, mainly financial assets held for trading and designated at fair value through income

    1,846     449

Depreciation and amortization

    298     419

Loan loss provisions

    75     72

Interest credited to policyholder accounts

    1,680     1,268

Net change in:

           

Financial assets and liabilities held for trading

    3,054     10,266

Reverse repurchase agreements and collateral paid for securities borrowing transactions

    36,262     (41,316)

Repurchase agreements and collateral received from securities lending transactions

    (18,150)     34,231

Reinsurance assets

    314     (50)

Deferred acquisition costs

    (709)     (905)

Unearned premiums

    3,073     2,610

Reserves for losses and loss adjustment expenses

    (87)     (394)

Reserves for insurance and investment contracts

    876     3,389

Deferred tax assets/liabilities

    244     435

Financial assets designated at fair value through income (only banking)

    2,896     (1,049)

Financial liabilities designated at fair value through income (only banking)

    (4,028)     70

Other (net)

    (3,234)     (1,392)

Subtotal

    24,816     4,193
Net cash flow provided by operating activities     27,506     9,573
             
Cash flow from investing activities:            
Proceeds from the sale, maturity or repayment of:            

Financial assets designated at fair value through income

    1,904     3,791

Available-for-sale investments

    59,802     76,884

Held-to-maturity investments

    163     146

Investments in associates and joint ventures

    585     590

Non-current assets and disposal groups held for sale

    2,147     3

Real estate held for investment

    299     584

Loans and advances to banks and customers (purchased loans)

    3,779     4,381

Property and equipment

    290     269

Subtotal

      68,969       86,648

 

45


Table of Contents

Condensed Consolidated Interim Financial Statements    Allianz Group Interim Report Second Quarter and First Half of 2008

 

Six months ended June 30,       

2008

mn

      

2007

mn

Payments for the purchase or origination of:            

Financial assets designated at fair value through income

    (2,473)     (5,611)

Available-for-sale investments

    (62,297)     (77,828)

Held-to-maturity investments

    (450)     (142)

Investments in associates and joint ventures

    (351)     (401)

Non-current assets and disposal groups held for sale

    (37)    

Real estate held for investment

    (118)     (245)

Loans and advances to banks and customers (purchased loans)

    (5,641)     (6,764)

Property and equipment

    (434)     (389)

Subtotal

    (71,801)     (91,380)
Business combinations:            

Acquisitions of subsidiaries, net of cash acquired

        (507)
Change in other loans and advances to banks and customers (originated loans)     (1,875)     (1,145)
Other (net)     148     172
Net cash flow used in investing activities     (4,559)     (6,212)
             
Cash flow from financing activities:            
Policyholders’ account deposits     6,704     5,834
Policyholders’ account withdrawals     (5,134)     (4,786)
Net change in liabilities to banks and customers     (11,728)     2,750
Proceeds from the issuance of certificated liabilities, participation certificates and subordinated liabilities     97,930     58,116
Repayments of certificated liabilities, participation certificates and subordinated liabilities     (103,304)     (57,333)
Cash inflow from capital increases     203    
Transactions between equity holders     (146)     (6,027)
Dividends paid to shareholders     (2,709)     (1,888)
Net cash from sale or purchase of treasury shares     (23)     (290)
Other (net)     (492)     187
Net cash flow provided by financing activities       (18,699)       (3,437)

 

46


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008    Notes to the Condensed Consolidated Interim Financial Statements

 

Allianz Group

Notes to the Condensed Consolidated Interim Financial Statements

1 Basis of presentation

Basis of presentation

The condensed consolidated interim financial statements of the Allianz Group – comprising the consolidated balance sheet, income statement, condensed cash flow statement, statement of changes in equity and selected explanatory notes – are presented in accordance with the requirements of IAS 34, Interim Financial Reporting, and have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as adopted under European Union (“EU”) regulations in accordance with section 315a of the German Commercial Code (“HGB”). The condensed consolidated interim financial statements of the Allianz Group have also been prepared in accordance with IFRS as issued by the International Accounting Standard Board (“IASB”). The Allianz Group’s application of IFRS results in no differences between IFRS as adopted by the EU and IFRS as issued by the IASB.

The condensed consolidated interim financial statements comply with all new or amended IFRS, where application is compulsory for the first time for periods beginning on January 1, 2008.

For existing and unchanged IFRS the accounting policies for recognition, measurement, consolidation and presentation applied in the preparation of the condensed consolidated interim financial statements are consistent with the accounting policies that have been applied in the preparation of the consolidated financial statements for the year ended December 31, 2007.

IFRS do not provide specific guidance concerning all aspects of the recognition and measurement of insurance and reinsurance contracts. Therefore, as envisioned in IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, the provisions embodied under accounting principles generally accepted in the United States of America (“US GAAP”) have been applied to those aspects where specific guidance is not provided by IFRS 4, Insurance Contracts.

The condensed consolidated interim financial statements are presented in millions of Euro (€mn).

 

2 Changes in the presentation of the condensed consolidated interim financial statements

As presented in the Notes to the Allianz Group’s consolidated financial statements for the year ended December 31, 2007, the Allianz Group identified certain prior period errors in 2007. The Allianz Group evaluated the errors individually and in the aggregate, and concluded that they were immaterial to the consolidated financial statements for all years in which they were included, and the Allianz Group corrected the errors in the 2007 consolidated financial statements. For these condensed consolidated interim financial statements, the following items were corrected in the consolidated statement of changes in equity:

 

         

As of
June 30,
2007

mn

Shareholders’ equity      

Revenue reserves

    (559)

Unrealized gains and losses (net)

    (272)

Subtotal

    (831)
Minority interests     771
Total equity       (60)

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation.


 

47


Table of Contents

Notes to the Condensed Consolidated Interim Financial Statements    Allianz Group Interim Report Second Quarter and First Half of 2008

 

3 Segment reporting

Allianz Group

Business Segment Information – Consolidated Balance Sheets

As of June 30, 2008 and as of December 31, 2007

 

        Property-Casualty        Life/Health
         

As of

June 30,

2008

mn

      

As of

December 31,

2007

mn

      

As of

June 30,

2008

mn

      

As of

December 31,

2007

mn

ASSETS                        
Cash and cash equivalents     4,687     4,985     8,742     8,779
Financial assets carried at fair value through income     3,124     3,302     11,869     13,216
Investments     76,908     83,741     182,531     187,289
Loans and advances to banks and customers     18,247     20,712     92,517     91,188
Financial assets for unit linked contracts             59,446     66,060
Reinsurance assets     9,645     10,317     4,912     5,043
Deferred acquisition costs     3,993     3,681     16,361     15,838
Deferred tax assets     1,661     1,442     398     316
Other assets     22,842     21,864     14,436     14,071
Intangible assets     2,312     2,332     2,214     2,218
Total assets       143,419       152,376       393,426       404,018
               
        Property-Casualty        Life/Health
         

As of

June 30,

2008

mn

      

As of

December 31,

2007

mn

      

As of

June 30,

2008

mn

      

As of

December 31,

2007

mn

LIABILITIES AND EQUITY                        
Financial liabilities carried at fair value through income     78     96     4,573     5,147
Liabilities to banks and customers     4,921     6,865     6,123     6,078
Unearned premiums     15,793     13,163     2,162     1,858
Reserves for loss and loss adjustment expenses     54,843     56,943     8,264     6,773
Reserves for insurance and investment contracts     8,610     8,976     279,261     283,139
Financial liabilities for unit linked contracts             59,446     66,060
Deferred tax liabilities     2,381     2,606     731     946
Other liabilities     19,964     22,989     17,768     17,741
Certificated liabilities     160     158     2     3
Participation certificates and subordinated liabilities     845     905     65     60
Total liabilities       107,595       112,701       378,395       387,805

 

48


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008    Notes to the Condensed Consolidated Interim Financial Statements

 

Banking   Asset Management   Corporate   Consolidation   Group

As of
June 30,
2008

mn

      

As of

December 31,
2007

mn

      

As of

June 30,

2008

mn

      

As of

December 31,
2007

mn

      

As of

June 30,

2008

mn

      

As of
December 31,

2007

mn

      

As of

June 30,

2008

mn

      

As of

December 31,

2007

mn

      

As of

June 30,

2008

mn

      

As of

December 31,

2007

mn

                                                       
21,854     17,307     822     770     431     445     (981)     (949)     35,555     31,337
183,167     168,339     844     980     451     887     (1,055)     (1,263)     198,400     185,461
15,537     16,284     866     879     100,248     102,894     (104,919)     (104,135)     271,171     286,952
257,104     295,506     588     469     6,541     4,754     (15,535)     (15,927)     359,462     396,702
                                59,446     66,060
                        (45)     (48)     14,512     15,312
        158     94                     20,512     19,613
1,725     1,733     155     161     1,048     935     (10)     184     4,977     4,771
7,651     8,203     3,136     3,452     6,830     10,786     (15,735)     (16,848)     39,160     41,528
2,379     2,379     6,050     6,227     246     257             13,201     13,413
489,417       509,751       12,619       13,032       115,795       120,958       (138,280)       (138,986)       1,016,396       1,061,149

 

Banking   Asset Management   Corporate   Consolidation   Group

As of
June 30,

2008

mn

      

As of

December 31,

2007

mn

      

As of

June 30,

2008

mn

      

As of

December 31,

2007

mn

      

As of

June 30,

2008

mn

      

As of

December 31,

2007

mn

      

As of

June 30,

2008

mn

      

As of

December 31,

2007

mn

      

As of

June 30,

2008

mn

      

As of

December 31,

2007

mn

                                                       
153,361     120,383             717     1,376     (670)     (949)     158,059     126,053
278,984     320,388     965     807     8,089     13,023     (10,350)     (10,667)     288,732     336,494
                        (1)     (1)     17,954     15,020
                        (8)     (10)     63,099     63,706
                285     358     (232)     (229)     287,924     292,244
                                59,446     66,060
93     102     48     35     226     88     (6)     196     3,473     3,973
9,681     11,011     2,987     3,647     15,737     14,625     (21,458)     (20,689)     44,679     49,324
27,493     34,778             8,967     9,567     (2,492)     (2,436)     34,130     42,070
7,033     7,966     14     14     8,281     7,069     (1,193)     (1,190)     15,045     14,824
476,645       494,628       4,014       4,503       42,302       46,106       (36,410)       (35,975)     972,541     1,009,768
                        Total equity     43,855     51,381
                        Total liabilities and equity   1,016,396       1,061,149

 

49


Table of Contents

Notes to the Condensed Consolidated Interim Financial Statements    Allianz Group Interim Report Second Quarter and First Half of 2008

 

Allianz Group

Business Segment Information – Consolidated Income Statements

For the three months ended June 30, 2008 and 2007

 

        Property-Casualty        Life/Health
Three months ended June 30,       

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

Premiums written     9,842     9,982     5,255     4,856
Ceded premiums written     (1,115)     (1,245)     (115)     (175)
Change in unearned premiums     721     919     (29)     2
Premiums earned (net)     9,448     9,656     5,111     4,683
Interest and similar income     1,331     1,380     3,814     3,783
Income from financial assets and liabilities carried at fair value through income (net)     (46)     (2)     (355)     (669)
Realized gains/losses (net)     1,022     217     226     663
Fee and commission income     293     280     168     164
Other income     7     11     5     9
Income from fully consolidated private equity investments             3    
Total income     12,055     11,542     8,972     8,633
                         
Claims and insurance benefits incurred (gross)     (6,678)     (7,093)     (4,637)     (4,336)
Claims and insurance benefits incurred (ceded)     431     827     97     178
Claims and insurance benefits incurred (net)     (6,247)     (6,266)     (4,540)     (4,158)
Change in reserves for insurance and investment contracts (net)     (70)     (97)     (1,389)     (2,211)
Interest expenses     (91)     (92)     (55)     (111)
Loan loss provisions     (1)     (9)     4    
Impairments of investments (net)     (413)     (28)     (904)     (56)
Investment expenses     (79)     (69)     (82)     (163)
Acquisition and administrative expenses (net)     (2,589)     (2,705)     (1,285)     (1,115)
Fee and commission expenses     (248)     (190)     (70)     (43)
Amortization of intangible assets     (3)     (4)        
Restructuring charges     (5)     (8)     (2)     (3)
Other expenses             (1)    
Expenses from fully consolidated private equity investments             (3)    
Total expenses     (9,746)     (9,468)     (8,327)     (7,860)
                         
Income (loss) before income taxes and minority interests in earnings     2,309     2,074     645     773
Income taxes     (432)     (578)     (200)     (234)
Minority interests in earnings     (55)     (116)     (20)     (60)
Net income (loss)       1,822       1,380       425       479

 

50


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008    Notes to the Condensed Consolidated Interim Financial Statements

 

Banking   Asset Management   Corporate   Consolidation   Group

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

                        (5)     (5)     15,092     14,833
                        5     5     (1,225)     (1,415)
                                692     921
                                14,559     14,339
2,067     2,214     22     33     285     245     (293)     (339)     7,226     7,316
(630)     354     3     16     (118)     (44)     25     2     (1,121)     (343)
104     51         1     165     348     (123)     (192)     1,394     1,088
747     923     1,052     1,080     47     44     (204)     (169)     2,103     2,322
        7     3         9     (4)     (26)     15     6
                624     470             627     470
2,288     3,542     1,084     1,133     1,003     1,072     (599)     (724)     24,803     25,198
                                                       
                        2     8     (11,313)     (11,421)
                        (2)     (8)     526     997
                                (10,787)     (10,424)
                        (7)     (24)     (1,466)     (2,332)
(1,340)     (1,484)     (14)     (19)     (366)     (394)     246     259     (1,620)     (1,841)
(68)     (65)                             (65)     (74)
(35)     (9)     (2)         (121)     (9)     (51)         (1,526)     (102)
1     (4)     (1)     (1)     (50)     (20)     51     55     (160)     (202)
(1,165)     (1,334)     (544)     (555)     (73)     (251)     15     10     (5,641)     (5,950)
(150)     (157)     (331)     (315)     (37)     (26)     124     130     (712)     (601)
                                (3)     (4)
(1)     (3)                             (8)     (14)
(30)     1                         (1)     (31)    
                (595)     (456)             (598)     (456)
(2,788)     (3,055)     (892)     (890)     (1,242)     (1,156)     378     429     (22,617)     (22,000)
                                                       
(500)     487     192     243     (239)     (84)     (221)     (295)     2,186     3,198
(37)     (56)     (71)     (101)     184     80     4     31     (552)     (858)
(15)     (20)     (1)     (8)     (3)     (4)     2     8     (92)     (200)
(552)       411       120       134       (58)       (8)       (215)       (256)       1,542       2,140

 

51


Table of Contents

Notes to the Condensed Consolidated Interim Financial Statements    Allianz Group Interim Report Second Quarter and First Half of 2008

 

Allianz Group

Business Segment Information – Consolidated Income Statements

For the six months ended June 30, 2008 and 2007

 

        Property-Casualty        Life/Health
Six months ended June 30,       

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

Premiums written     23,552     24,093     11,019     10,251
Ceded premiums written     (2,400)     (2,831)     (252)     (353)
Change in unearned premiums     (2,531)     (2,248)     (67)     (30)
Premiums earned (net)     18,621     19,014     10,700     9,868
Interest and similar income     2,382     2,386     7,014     6,938
Income from financial assets and liabilities carried at fair value through income (net)     31     (14)     (113)     (979)
Realized gains/losses (net)     1,391     984     887     1,856
Fee and commission income     560     552     339     335
Other income     257     95     115     63
Income from fully consolidated private equity investments             3    
Total income     23,242     23,017     18,945     18,081
                         
Claims and insurance benefits incurred (gross)     (13,536)     (14,267)     (9,767)     (9,214)
Claims and insurance benefits incurred (ceded)     988     1,618     214     354
Claims and insurance benefits incurred (net)     (12,548)     (12,649)     (9,553)     (8,860)
Change in reserves for insurance and investment contracts (net)     (99)     (178)     (3,192)     (4,835)
Interest expenses     (179)     (184)     (125)     (202)
Loan loss provisions     (1)     (9)     6     (3)
Impairments of investments (net)     (848)     (54)     (1,888)     (93)
Investment expenses     (202)     (143)     (410)     (359)
Acquisition and administrative expenses (net)     (4,980)     (5,380)     (2,393)     (1,989)
Fee and commission expenses     (496)     (387)     (130)     (105)
Amortization of intangible assets     (7)     (6)     (1)     (1)
Restructuring charges     1     (22)     (3)     (8)
Other expenses             (1)    
Expenses from fully consolidated private equity investments             (3)    
Total expenses     (19,359)     (19,012)     (17,693)     (16,455)
                         
Income (loss) before income taxes and minority interests in earnings     3,883     4,005     1,252     1,626
Income taxes     (910)     (1,115)     (336)     (435)
Minority interests in earnings     (94)     (330)     (39)     (159)
Net income (loss)       2,879       2,560       877       1,032

 

52


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008    Notes to the Condensed Consolidated Interim Financial Statements

 

Banking   Asset Management   Corporate   Consolidation   Group

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

                        (11)     (8)     34,560     34,336
                        11     8     (2,641)     (3,176)
                                (2,598)     (2,278)
                                29,321     28,882
4,305     4,423     50     66     515     399     (630)     (630)     13,636     13,582
(1,192)     695     (1)     23     90     41     12     6     (1,173)     (228)
166     190     8     3     149     988     120     276     2,721     4,297
1,531     1,901     2,038     2,153     112     89     (376)     (352)     4,204     4,678
        12     7     1     14     (19)     (80)     366     99
                1,203     941             1,206     941
4,810     7,209     2,107     2,252     2,070     2,472     (893)     (780)     50,281     52,251
                                                       
                        4     13     (23,299)     (23,468)
                        (4)     (13)     1,198     1,959
                                (22,101)     (21,509)
                        (20)     (55)     (3,311)     (5,068)
(2,882)     (2,765)     (23)     (30)     (791)     (747)     554     489     (3,446)     (3,439)
(80)     (60)                             (75)     (72)
(65)     (22)     (5)         (166)         (51)         (3,023)     (169)
3     (13)             (94)     (54)     106     106     (597)     (463)
(2,383)     (2,744)     (1,150)     (1,145)     (219)     (368)     38     38     (11,087)     (11,588)
(290)     (303)     (611)     (642)     (66)     (61)     226     263     (1,367)     (1,235)
                                (8)     (7)
15     (12)         (2)                     13     (44)
(36)     14                         (1)     (37)     13
                (1,151)     (916)             (1,154)     (916)
(5,718)     (5,905)     (1,789)     (1,819)     (2,487)     (2,146)     853     840     (46,193)     (44,497)
                                                       
(908)     1,304     318     433     (417)     326     (40)     60     4,088     7,754
(153)     (224)     (117)     (181)     270     55     20     75     (1,226)     (1,825)
(29)     (44)     (3)     (19)     (10)     (8)     3     11     (172)     (549)
(1,090)       1,036       198       233       (157)       373       (17)       146       2,690       5,380

 

53


Table of Contents

Notes to the Condensed Consolidated Interim Financial Statements    Allianz Group Interim Report Second Quarter and First Half of 2008

 

Allianz Group

Business Segment Information – Total revenues and reconciliation of

Operating Profit and Net Income For the three months ended June 30, 2008

and 2007

 

        Property-Casualty 1)        Life/Health 1)
Three months ended June 30,       

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

Total revenues 2)     9,842     9,982     10,729     11,758
                         
Premiums earned (net)     9,448     9,656     5,111     4,683
Interest and similar income     1,331     1,380     3,814     3,783
Operating income from financial assets and liabilities carried at fair value through income (net)     (60)     (1)     (352)     (668)
Operating realized gains/losses (net)     61     1     273     646
Fee and commission income     293     280     168     164
Other income     7     11     5     9
Income from fully consolidated private equity investments             3    
Claims and insurance benefits incurred (net)     (6,247)     (6,266)     (4,540)     (4,158)
Change in reserves for insurance and investment contracts (net)     (70)     (97)     (1,389)     (2,211)
Interest expenses, excluding interest expenses from external debt     (91)     (92)     (55)     (111)
Loan loss provisions     (1)     (9)     4    
Operating impairments of investments (net)     (72)     (5)     (898)     (56)
Investment expenses     (79)     (69)     (82)     (163)
Acquisition and administrative expenses (net), excluding acquisition-related expenses     (2,589)     (2,705)     (1,285)     (1,115)
Fee and commission expenses     (248)     (190)     (70)     (43)
Operating restructuring charges                 (2)
Other expenses             (1)    
Expenses from fully consolidated private equity investments             (3)    
Reclassification of tax benefits                
Operating profit (loss)     1,683     1,894     703     758
                         
Non-operating income from financial assets and liabilities carried at fair value through income (net)     14     (1)     (3)     (1)
Non-operating realized gains/losses (net)     961     216     (47)     17
Non-operating impairments of investments (net)     (341)     (23)     (6)    
Interest expenses from external debt                
Acquisition-related expenses                
Amortization of intangible assets     (3)     (4)        
Non-operating restructuring charges     (5)     (8)     (2)     (1)
Reclassification of tax benefits                
Non-operating items     626     180     (58)     15
                         
Income (loss) before income taxes and minority interests in earnings     2,309     2,074     645     773
Income taxes     (432)     (578)     (200)     (234)
Minority interests in earnings     (55)     (116)     (20)     (60)
Net income (loss)       1,822       1,380       425       479

 

1) 

Since the first quarter 2008, health business in Belgium and France is shown within Life/Health segment. Prior year balances have not been adjusted.

2) 

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

 

54


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008    Notes to the Condensed Consolidated Interim Financial Statements

 

Banking   Asset Management   Corporate   Consolidation   Group

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

694     1,850     738     797             34     (50)     22,037     24,337
                                                       
                                14,559     14,339
2,067     2,214     22     33     285     245     (293)     (339)     7,226     7,316
(630)     354     3     16     (55)     39     65     (46)     (1,029)     (306)
                        14     (1)     348     646
747     923     1,052     1,080     47     44     (204)     (169)     2,103     2,322
        7     3         9     (4)     (26)     15     6
                624     470             627     470
                                (10,787)     (10,424)
                        (7)     (24)     (1,466)     (2,332)
(1,340)     (1,484)     (14)     (19)     (133)     (116)     246     259     (1,387)     (1,563)
(68)     (65)                             (65)     (74)
                        (17)         (987)     (61)
1     (4)     (1)     (1)     (50)     (20)     51     55     (160)     (202)
(1,165)     (1,334)     (457)     (472)     (81)     (199)     15     10     (5,562)     (5,815)
(150)     (157)     (331)     (315)     (37)     (26)     124     130     (712)     (601)
                                    (2)
(30)     1                         (1)     (31)    
                (595)     (456)             (598)     (456)
                        10     25     10     25
(568)     448     281     325     5     (10)         (127)     2,104     3,288
                                                       
                (63)     (83)     (40)     48     (92)     (37)
104     51         1     165     348     (137)     (191)     1,046     442
(35)     (9)     (2)         (121)     (9)     (34)         (539)     (41)
                (233)     (278)             (233)     (278)
        (87)     (83)     8     (52)             (79)     (135)
                                (3)     (4)
(1)     (3)                             (8)     (12)
                        (10)     (25)     (10)     (25)
68     39     (89)     (82)     (244)     (74)     (221)     (168)     82     (90)
                                                       
(500)     487     192     243     (239)     (84)     (221)     (295)     2,186     3,198
(37)     (56)     (71)     (101)     184     80     4     31     (552)     (858)
(15)     (20)     (1)     (8)     (3)     (4)     2     8     (92)     (200)
(552)       411       120       134       (58)       (8)       (215)       (256)       1,542       2,140

 

55


Table of Contents

Notes to the Condensed Consolidated Interim Financial Statements     Allianz Group Interim Report Second Quarter and First Half of 2008

 

Allianz Group

Business Segment Information – Total revenues and reconciliation of

Operating Profit and Net Income For the six months ended June 30, 2008

and 2007

 

        Property-Casualty 1)        Life/Health 1)
Six months ended June 30,       

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

Total revenues 2)     23,552     24,093     23,056     24,084
                         
Premiums earned (net)     18,621     19,014     10,700     9,868
Interest and similar income     2,382     2,386     7,014     6,938
Operating income from financial assets and liabilities carried at fair value through income (net)     (46)     16     (121)     (979)
Operating realized gains/losses (net)     58     35     922     1,734
Fee and commission income     560     552     339     335
Other income     257     95     115     63
Income from fully consolidated private equity investments             3    
Claims and insurance benefits incurred (net)     (12,548)     (12,649)     (9,553)     (8,860)
Change in reserves for insurance and investment contracts (net)     (99)     (178)     (3,192)     (4,835)
Interest expenses, excluding interest expenses from external debt     (179)     (184)     (125)     (202)
Loan loss provisions     (1)     (9)     6     (3)
Operating impairments of investments (net)     (165)     (7)     (1,878)     (93)
Investment expenses     (202)     (143)     (410)     (359)
Acquisition and administrative expenses (net), excluding acquisition-related expenses     (4,980)     (5,380)     (2,393)     (1,989)
Fee and commission expenses     (496)     (387)     (130)     (105)
Operating restructuring charges             (1)     (5)
Other expenses             (1)    
Expenses from fully consolidated private equity investments             (3)    
Reclassification of tax benefits                
Operating profit (loss)     3,162     3,161     1,292     1,508
                         
Non-operating income from financial assets and liabilities carried at fair value through income (net)     77     (30)     8    
Non-operating realized gains/losses (net)     1,333     949     (35)     122
Non-operating impairments of investments (net)     (683)     (47)     (10)    
Interest expenses from external debt                
Acquisition-related expenses                
Amortization of intangible assets     (7)     (6)     (1)     (1)
Non-operating restructuring charges     1     (22)     (2)     (3)
Reclassification of tax benefits                
Non-operating items     721     844     (40)     118
                         
Income (loss) before income taxes and minority interests in earnings     3,883     4,005     1,252     1,626
Income taxes     (910)     (1,115)     (336)     (435)
Minority interests in earnings     (94)     (330)     (39)     (159)
Net income (loss)       2,879       2,560       877       1,032

 

1) 

Since the first quarter 2008, health business in Belgium and France is shown within Life/Health segment. Prior year balances have not been adjusted.

2) 

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

 

56


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008    Notes to the Condensed Consolidated Interim Financial Statements

 

Banking   Asset Management   Corporate   Consolidation   Group

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

1,472     3,951     1,465     1,577             145     (45)     49,690     53,660
                                                       
                                29,321     28,882
4,305     4,423     50     66     515     399     (630)     (630)     13,636     13,582
(1,192)     695     (1)     23     (45)     40     177     (20)     (1,228)     (225)
                        17     13     997     1,782
1,531     1,901     2,038     2,153     112     89     (376)     (352)     4,204     4,678
        12     7     1     14     (19)     (80)     366     99
                1,203     941             1,206     941
                                (22,101)     (21,509)
                        (20)     (55)     (3,311)     (5,068)
(2,882)     (2,765)     (23)     (30)     (306)     (247)     554     489     (2,961)     (2,939)
(80)     (60)                             (75)     (72)
                        (17)         (2,060)     (100)
3     (13)             (94)     (54)     106     106     (597)     (463)
(2,383)     (2,744)     (943)     (940)     (240)     (316)     38     38     (10,901)     (11,331)
(290)     (303)     (611)     (642)     (66)     (61)     226     263     (1,367)     (1,235)
                                (1)     (5)
(36)     14                         (1)     (37)     13
                (1,151)     (916)             (1,154)     (916)
                        23     44     23     44
(1,024)     1,148     522     637     (71)     (111)     79     (185)     3,960     6,158
                                                       
                135     1     (165)     26     55     (3)
166     190     8     3     149     988     103     263     1,724     2,515
(65)     (22)     (5)         (166)         (34)         (963)     (69)
                (485)     (500)             (485)     (500)
        (207)     (205)     21     (52)             (186)     (257)
                                (8)     (7)
15     (12)         (2)                     14     (39)
                        (23)     (44)     (23)     (44)
116     156     (204)     (204)     (346)     437     (119)     245     128     1,596
                                                       
(908)     1,304     318     433     (417)     326     (40)     60     4,088     7,754
(153)     (224)     (117)     (181)     270     55     20     75     (1,226)     (1,825)
(29)     (44)     (3)     (19)     (10)     (8)     3     11     (172)     (549)
(1,090)       1,036       198       233       (157)       373       (17)       146       2,690       5,380

 

57


Table of Contents

Notes to the Condensed Consolidated Interim Financial Statements    Allianz Group Interim Report Second Quarter and First Half of 2008

 

Operating Profit

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.

The Allianz Group believes that trends in the underlying profitability of it’s 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 the Allianz Group has little or no control, and can and do vary, sometimes materially, across periods. Further, the timing of sales that would result in such gains or losses is largely at the discretion of the Allianz Group. Similarly, restructuring charges are excluded because the timing of the restructuring charges are largely within the control of the Allianz Group, 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 policyholders.

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.


 

58


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008    Notes to the Condensed Consolidated Interim Financial Statements

 

Property-Casualty Segment1)

 

        Three months ended June 30,            Six months ended June 30,    
         

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

Gross premiums written2)     9,842     9,982     23,552     24,093
Ceded premiums written     (1,115)     (1,245)     (2,400)     (2,831)
Change in unearned premiums     721     919     (2,531)     (2,248)
Premiums earned (net)     9,448     9,656     18,621     19,014
Interest and similar income     1,331     1,380     2,382     2,386
Operating income from financial assets and liabilities carried at fair value through income (net)3)     (60)     (1)     (46)     16
Operating realized gains/losses (net)4)     61     1     58     35
Fee and commission income     293     280     560     552
Other income     7     11     257     95
Operating revenues     11,080     11,327     21,832     22,098
                         
Claims and insurance benefits incurred (net)     (6,247)     (6,266)     (12,548)     (12,649)
Changes in reserves for insurance and investment contracts (net)     (70)     (97)     (99)     (178)
Interest expenses     (91)     (92)     (179)     (184)
Loan loss provisions     (1)     (9)     (1)     (9)
Operating impairments of investments (net)5)     (72)     (5)     (165)     (7)
Investment expenses     (79)     (69)     (202)     (143)
Acquisition and administrative expenses (net)     (2,589)     (2,705)     (4,980)     (5,380)
Fee and commission expenses     (248)     (190)     (496)     (387)
Operating expenses     (9,397)     (9,433)     (18,670)     (18,937)
                         
Operating profit     1,683     1,894     3,162     3,161
                         
Non-operating income from financial assets and liabilities carried at fair value through income (net)3)     14     (1)     77     (30)
Non-operating realized gains/losses (net)4)     961     216     1,333     949
Non-operating impairments of investments (net)5)     (341)     (23)     (683)     (47)
Amortization of intangible assets     (3)     (4)     (7)     (6)
Restructuring charges     (5)     (8)     1     (22)
Non-operating items     626     180     721     844
                         
Income before income taxes and minority interests in earnings     2,309     2,074     3,883     4,005
                         
Income taxes     (432)     (578)     (910)     (1,115)
Minority interests in earnings     (55)     (116)     (94)     (330)
Net income     1,822     1,380     2,879     2,560
                         
Loss ratio6) in %     66.1     64.9     67.4     66.5
Expense ratio7) in %     27.4     28.0     26.7     28.3
Combined ratio8) in %       93.5       92.9       94.1       94.8

 

1) 

Since 2008, health business in Belgium and France is shown within Life/Health segment. Prior year balances have not been adjusted.

2) 

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

3) 

The total of these items equals income from financial assets and liabilities carried at fair value through income (net) in the segment income statement.

4) 

The total of these items equals realized gains/losses (net) in the segment income statement.

5) 

The total of these items equals impairments of investments (net) in the segment income statement.

6) 

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

7) 

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

8) 

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

 

59


Table of Contents

Notes to the Condensed Consolidated Interim Financial Statements     Allianz Group Interim Report Second Quarter and First Half of 2008

 

Life/Health Segment1)

 

        Three months ended June 30,            Six months ended June 30,    
         

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

Statutory premiums2)     10,729     11,758     23,056     24,084
Ceded premiums written     (124)     (186)     (267)     (379)
Change in unearned premiums     (29)     3     (66)     (24)
Statutory premiums (net)     10,576     11,575     22,723     23,681
Deposits from SFAS 97 insurance and investment contracts     (5,465)     (6,892)     (12,023)     (13,813)
Premiums earned (net)     5,111     4,683     10,700     9,868
Interest and similar income     3,814     3,783     7,014     6,938
Operating income from financial assets and liabilities carried at fair value through income (net)3)     (352)     (668)     (121)     (979)
Operating realized gains/losses (net)4)     273     646     922     1,734
Fee and commission income     168     164     339     335
Other income     5     9     115     63
Income from fully consolidated private equity investments     3         3    
Operating revenues     9,022     8,617     18,972     17,959
                         
Claims and insurance benefits incurred (net)     (4,540)     (4,158)     (9,553)     (8,860)
Changes in reserves for insurance and investment contracts (net)     (1,389)     (2,211)     (3,192)     (4,835)
Interest expenses     (55)     (111)     (125)     (202)
Loan loss provisions     4         6     (3)
Operating impairments of investments (net)5)     (898)     (56)     (1,878)     (93)
Investment expenses     (82)     (163)     (410)     (359)
Acquisition and administrative expenses (net)     (1,285)     (1,115)     (2,393)     (1,989)
Fee and commission expenses     (70)     (43)     (130)     (105)
Operating restructuring charges6)         (2)     (1)     (5)
Other expenses     (1)         (1)    
Expenses from fully consolidated private equity investments     (3)         (3)    
Operating expenses     (8,319)     (7,859)     (17,680)     (16,451)
                         
Operating profit     703     758     1,292     1,508
                         
Non-operating income from financial assets and liabilities carried at fair value through income (net)3)     (3)     (1)     8    
Non-operating realized gains/losses (net)4)     (47)     17     (35)     122
Non-operating impairments of investments (net)5)     (6)         (10)    
Amortization of intangible assets             (1)     (1)
Non-operating restructuring charges6)     (2)     (1)     (2)     (3)
Non-operating items     (58)     15     (40)     118
                         
Income before income taxes and minority interests in earnings     645     773     1,252     1,626
                         
Income taxes     (200)     (234)     (336)     (435)
Minority interests in earnings     (20)     (60)     (39)     (159)
Net income     425     479     877     1,032
                         
Statutory expense ratio7) in %       12.2       9.6       10.5       8.4

 

1) 

Since 2008, health business in Belgium and France is shown within Life/Health segment. Prior year balances have not been adjusted.

2) 

For the Life/Health segment, total revenues are measured based upon statutory premiums. 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.

3) 

The total of these items equals income from financial assets and liabilities carried at fair value through income (net) in the segment income statement.

4) 

The total of these items equals realized gains/losses (net) in the segment income statement.

5) 

The total of these items equals impairments of investments (net) in the segment income statement.

6) 

The total of these items equals restructuring charges in the segment income statement.

7) 

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

 

60


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008    Notes to the Condensed Consolidated Interim Financial Statements

 

Banking Segment

 

        Three months ended June 30,        Six months ended June 30,
        2008       2007       2008       2007
         

Banking
Segment

mn

      

Dresdner

Bank

mn

      

Banking
Segment

mn

      

Dresdner

Bank

mn

      

Banking
Segment

mn

      

Dresdner

Bank

mn

      

Banking
Segment

mn

      

Dresdner

Bank

mn

Net interest income1)     727     703     730     701     1,423     1,372     1,658     1,601
Net fee and commission income2)     597     558     766     718     1,241     1,162     1,598     1,507
Trading income (net)3)     (697)     (694)     338     335     (1,403)     (1,392)     689     680
Income from financial assets and liabilities designated at fair value through income (net)3)     67     67     16     16     211     211     6     5
Other income         1                 1        
Operating revenues4)     694     635     1,850     1,770     1,472     1,354     3,951     3,793
                                                 
Administrative expenses     (1,165)     (1,104)     (1,334)     (1,277)     (2,383)     (2,260)     (2,744)     (2,632)
Investment expenses     1         (4)     (5)     3     (1)     (13)     (16)
Other expenses     (30)     (31)     1     1     (36)     (36)     14     14
Operating expenses     (1,194)     (1,135)     (1,337)     (1,281)     (2,416)     (2,297)     (2,743)     (2,634)
                                                 
Loan loss provisions     (68)     (66)     (65)     (62)     (80)     (76)     (60)     (55)
Operating profit (loss)     (568)     (566)     448     427     (1,024)     (1,019)     1,148     1,104
                                                 
Realized gains/losses (net)     104     103     51     43     166     166     190     180
Impairments of investments (net)     (35)     (35)     (9)     (9)     (65)     (65)     (22)     (22)
Restructuring charges     (1)     (1)     (3)     (4)     15     15     (12)     (13)
Non-operating items     68     67     39     30     116     116     156     145
                                                 
Income (loss) before income taxes and minority interests in earnings     (500)     (499)     487     457     (908)     (903)     1,304     1,249
                                                 
Income taxes     (37)     (35)     (56)     (44)     (153)     (129)     (224)     (202)
Minority interests in earnings     (15)     (11)     (20)     (18)     (29)     (26)     (44)     (40)
Net income (loss)     (552)     (545)     411     395     (1,090)     (1,058)     1,036     1,007
                                                 
Cost-income ratio5) in %       172.0       178.7       72.3       72.4       164.1       169.6       69.4       69.4

 

1) 

Represents interest and similar income less interest expenses.

2) 

Represents fee and commission income less fee and commission expenses.

3) 

The total of these items equals income from financial assets and liabilities carried at fair value through income (net) in the segment income statement.

4) 

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

5) 

Represents operating expenses divided by operating revenues.

 

61


Table of Contents

Notes to the Condensed Consolidated Interim Financial Statements     Allianz Group Interim Report Second Quarter and First Half of 2008

 

Asset Management Segment

 

        Three months ended June 30,        Six months ended June 30,
        2008       2007       2008       2007
         

Asset
Management
Segment

mn

      

Allianz

Global
Investors

mn

      

Asset
Management
Segment

mn

      

Allianz

Global
Investors

mn

      

Asset
Management
Segment

 mn

      

Allianz

Global
Investors

mn

      

Asset
Management
Segment

 mn

      

Allianz

Global
Investors

 mn

Net fee and commission income1)     721     705     765     743     1,427     1,398     1,511     1,471
Net interest income2)     7     11     13     17     27     26     36     36
Income from financial assets and liabilities carried at fair value through income (net)     3     2     16     15     (1)     (1)     23     22
Other income     7     7     3     3     12     12     7     7
Operating revenues3)     738     725     797     778     1,465     1,435     1,577     1,536
                                                 
Administrative expenses, excluding acquisition-related expenses4)     (457)     (451)     (472)     (464)     (943)     (923)     (940)     (918)
Operating expenses     (457)     (451)     (472)     (464)     (943)     (923)     (940)     (918)
                                                 
Operating profit     281     274     325     314     522     512     637     618
                                                 
Realized gains/losses (net)             1     1     8     8     3     3
Impairments of investments (net)     (2)     (2)             (5)     (5)        
Acquisition-related expenses4), thereof:                                                

Deferred purchases of interests in PIMCO

    (87)     (87)     (80)     (80)     (207)     (207)     (202)     (202)

Other acquisition-related expenses

            (3)     (3)             (3)     (3)

Subtotal

    (87)     (87)     (83)     (83)     (207)     (207)     (205)     (205)
Restructuring charges                             (2)     (2)
Non-operating items     (89)     (89)     (82)     (82)     (204)     (204)     (204)     (204)
                                                 
Income before income taxes and minority interests in earnings     192     185     243     232     318     308     433     414
                                                 
Income taxes     (71)     (71)     (101)     (100)     (117)     (116)     (181)     (179)
Minority interests in earnings     (1)         (8)     (6)     (3)     (2)     (19)     (16)
Net income     120     114     134     126     198     190     233     219
                                                 
Cost-income ratio5) in %       61.9       62.2       59.2       59.6       64.4       64.3       59.6       59.8

 

1) 

Represents fee and commission income less fee and commission expenses.

2) 

Represents interest and similar income less interest expenses and investment expenses.

3) 

For the Asset Management segment, total revenues are measured based upon operating revenues.

4) 

The total of these items equals acquisition and administrative expenses (net) in the segment income statement.

5) 

Represents operating expenses divided by operating revenues

 

62


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008     Notes to the Condensed Consolidated Interim Financial Statements

 

Corporate Segment

 

        Three months ended June 30,          Six months ended June 30,  
         

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

Interest and similar income     285     245     515     399
Operating income from financial assets and liabilities carried at fair value through income (net)1)     (55)     39     (45)     40
Fee and commission income     47     44     112     89
Other income         9     1     14
Income from fully consolidated private equity investments     624     470     1,203     941
Operating revenues     901     807     1,786     1,483
                         
Interest expenses, excluding interest expenses from external debt2)     (133)     (116)     (306)     (247)
Investment expenses     (50)     (20)     (94)     (54)
Acquisition and administrative expenses (net), excluding acquisition-related expenses3)     (81)     (199)     (240)     (316)
Fee and commission expenses     (37)     (26)     (66)     (61)
Expenses from fully consolidated private equity investments     (595)     (456)     (1,151)     (916)
Operating expenses     (896)     (817)     (1,857)     (1,594)
                         
Operating profit (loss)     5     (10)     (71)     (111)
                         
Non-operating income from financial assets and liabilities carried at fair value through income (net)1)     (63)     (83)     135     1
Realized gains/losses (net)     165     348     149     988
Interest expenses from external debt2)     (233)     (278)     (485)     (500)
Impairments of investments (net)     (121)     (9)     (166)    
Acquisition-related expenses3)     8     (52)     21     (52)
Non-operating items     (244)     (74)     (346)     437
                         
Income (loss) before income taxes and minority interests in earnings     (239)     (84)     (417)     326
                         
Income taxes     184     80     270     55
Minority interests in earnings     (3)     (4)     (10)     (8)
Net income (loss)       (58)       (8)       (157)       373

 

1) 

The total of these items equals income from financial assets and liabilities carried at fair value through income (net) in the segment income statement.

2) 

The total of these items equals interest expenses in the segment income statement.

3) 

The total of these items equals acquisition and administrative expenses (net) in the segment income statement.

 

63


Table of Contents

Notes to the Condensed Consolidated Interim Financial Statements     Allianz Group Interim Report Second Quarter and First Half of 2008

 

Supplementary Information to the Consolidated Balance Sheets

4 Financial assets carried at fair value through income

 

         

As of

June 30,

2008

mn

      

As of
December 31,

2007

mn

Financial assets held for trading            

Debt securities 1)

    52,694     59,715

Equity securities

    16,263     30,596

Derivative financial instruments

    98,046     73,230

Subtotal

    167,003     163,541
Financial assets designated at fair value through income            

Debt securities 2)3)4)

    20,476     15,924

Equity securities

    4,403     4,232

Loans to banks and customers

    6,518     1,764

Subtotal

    31,397     21,920
Total       198,400       185,461

 

1) 

Debt securities held for trading include 11.1 bn (2007: 15.1 bn) of asset-backed securities of Dresdner Bank as of June 30, 2008.

2) 

Debt securities designated at fair value through income include 5.7 bn (2007: 2.8 bn) of credit investment related conduits (“CIRC”) of Dresdner Bank as of June 30, 2008.

3) 

Debt securities designated at fair value through income include 0.8 bn (2007: 0.8 bn) of asset-backed securities of the Life/Health segment as of June 30, 2008.

4) 

The increase in debt securities at fair value through income is mainly related to the application of the fair value option for money market business.

 

5 Investments

 

         

As of

June 30,

2008

mn

      

As of
December 31,
2007

mn

Available-for-sale investments     251,495     268,001
Held-to-maturity investments     5,065     4,659
Funds held by others under reinsurance contracts assumed     1,074     1,063
Investments in associates and joint ventures     5,805     5,471
Real estate held for investment     7,732     7,758
Total       271,171       286,952

 

Available-for-sale investments

 

        As of June 30, 2008        As of December 31, 2007
        Amortized       Unrealized       Unrealized       Fair Value       Amortized       Unrealized       Unrealized       Fair Value
         

Cost

mn

      

Gains

mn

      

Losses

mn

       mn       

Cost

mn

      

Gains

mn

      

Losses

mn

       mn
Debt securities                                                

Government and agency mortgage-backed securities (residential and commercial) 1)

    7,326     20     (161)     7,185     7,628     30     (112)     7,546

Corporate mortgage-backed securities (residential and commercial) 1)

    6,673         (304)     6,369     6,663     39     (101)     6,601

Other asset-backed securities 1)

    5,433     13     (197)     5,249     5,384     34     (92)     5,326

Government and government agency bonds

    93,216     598     (3,137)     90,677     98,285     1,334     (1,479)     98,140

Corporate bonds

    97,743     303     (4,702)     93,344     86,095     660     (2,356)     84,399

Other

    1,603     47     (45)     1,605     2,933     99     (104)     2,928

Subtotal

    211,994     981     (8,546)     204,429     206,988     2,196     (4,244)     204,940
Equity securities     34,537     13,882     (1,353)     47,066     40,794     22,734     (467)     63,061
Total       246,531       14,863       (9,899)       251,495       247,782       24,930       (4,711)       268,001

 

1)  

Includes asset-backed securities of the Property-Casualty segment of 4.6 bn (2007: 4.9 bn) and of the Life/Health segment of 12.8 bn (2007: 13.0 bn) as of June 30, 2008.

 

64


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008     Notes to the Condensed Consolidated Interim Financial Statements

 

6 Loans and advances to banks and customers

 

        As of June 30, 2008        As of December 31, 2007
         

Banks

mn

      

Customers

mn

      

Total

mn

      

Banks

mn

      

Customers

mn

      

Total

mn

Short-term investments and certificates of deposit     9,503         9,503     10,316         10,316
Reverse repurchase agreements     53,942     47,232     101,174     68,340     56,991     125,331
Collateral paid for securities borrowing transactions     12,270     16,002     28,272     16,664     23,714     40,378
Loans     76,625     124,643     201,268     74,944     125,403     200,347
Other     9,210     10,859     20,069     14,012     7,148     21,160
Subtotal     161,550     198,736     360,286     184,276     213,256     397,532
Loan loss allowance     (3)     (821)     (824)     (3)     (827)     (830)
Total       161,547       197,915       359,462       184,273       212,429       396,702

 

Loans and advances to customers by type of customer

 

         

As of

June 30,

2008

mn

      

As of
December 31,
2007

mn

Corporate customers     132,768     148,848
Private customers     54,749     55,761
Public authorities     11,219     8,647
Total       198,736       213,256

7 Reinsurance assets

 

         

As of

June 30,

2008

mn

      

As of
December 31,
2007

mn

Unearned premiums     1,663     1,342
Reserves for loss and loss adjustment expenses     8,015     8,561
Aggregate policy reserves     4,735     5,319
Other insurance reserves     99     90
Total       14,512       15,312

 

8 Deferred acquisition costs

 

         

As of

June 30,

2008

mn

      

As of
December 31,
2007

mn

Deferred acquisition costs            

Property-Casualty

    3,989     3,675

Life/Health

    14,632     14,118

Asset Management

    158     94

Subtotal

    18,779     17,887
Present value of future profits     1,209     1,206
Deferred sales inducements     524     520
Total       20,512       19,613

 

65


Table of Contents

Notes to the Condensed Consolidated Interim Financial Statements     Allianz Group Interim Report Second Quarter and First Half of 2008

 

9 Other assets

 

         

As of

June 30,

2008

mn

      

As of
December 31,
2007

mn

Receivables            

Policyholders

    4,421     4,616

Agents

    3,960     3,956

Reinsurers

    2,389     2,676

Other

    4,500     4,994

Less allowance for doubtful accounts

    (455)     (389)

Subtotal

    14,815     15,853
Tax receivables            

Income tax

    2,270     2,536

Other tax

    734     731

Subtotal

    3,004     3,267
Accrued dividends, interest and rent     8,905     8,782
Prepaid expenses            

Interest and rent

    26     29

Other prepaid expenses

    393     261

Subtotal

    419     290
Derivative financial instruments used for hedging that meet the criteria for hedge accounting and firm commitments     436     344
Property and equipment            

Real estate held for own use

    3,730     3,708

Equipment

    1,584     1,666

Software

    1,191     1,165

Subtotal

    6,505     6,539
Non-current assets and disposal groups held for sale     1,587     3,503
Other assets 1)     3,489     2,950
Total       39,160       41,528

 

1) 

As of June 30, 2008, includes prepaid benefit costs for defined benefit plans of 535 mn.

Non-current assets and disposal groups held for sale as of June 30, 2008 include assets related to Selecta AG of €1,579 mn (2007: €1,543 mn) with related liabilities of €1,305 mn (2007: €1,292 mn).

 

10 Intangible assets

 

         

As of

June 30,

2008

mn

      

As of
December 31,
2007

mn

Goodwill     12,238     12,453
Brand names     745     737
Other     218     223
Total       13,201       13,413

Changes in goodwill for the six months ended June 30, 2008, were as follows:

 

         

2008

mn

Cost as of January 1,     12,677
Accumulated impairments as of January 1,     (224)
Carrying amount as of January 1,     12,453
Additions     1
Foreign currency translation adjustments     (216)
Carrying amount as of June 30,     12,238
Accumulated impairments as of June 30,     224
Cost as of June 30,       12,462

11 Financial liabilities carried at fair value through income

 

         

As of

June 30,

2008

mn

      

As of
December 31,
2007

mn

Financial liabilities held for trading            

Obligations to deliver securities

    22,348     34,795

Derivative financial instruments

    98,760     76,819

Other trading liabilities

    11,189     12,469

Subtotal

    132,297     124,083
Financial liabilities designated at fair value through income 1)     25,762     1,970
Total       158,059       126,053

 

1) 

The increase in financial liabilities designated at fair value through income is mainly related to the application of the fair value option for money market business.


 

66


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008     Notes to the Condensed Consolidated Interim Financial Statements

 

12 Liabilities to banks and customers

 

        As of June 30, 2008   As of December 31, 2007
         

Banks

mn

      

Customers

mn

      

Total

mn

      

Banks

mn

       Customers
mn
      

Total

mn

Payable on demand     14,666     61,191     75,857     11,204     60,443     71,647
Savings deposits         5,297     5,297         5,304     5,304
Term deposits and certificates of deposit     36,150     69,897     106,047     64,129     72,938     137,067
Repurchase agreements     37,041     38,111     75,152     50,444     42,145     92,589
Collateral received from securities lending transactions     13,566     6,685     20,251     16,235     4,729     20,964
Other     3,186     2,942     6,128     5,513     3,410     8,923
Total       104,609       184,123       288,732       147,525       188,969       336,494

13 Reserves for loss and loss adjustment expenses

 

         

As of

June 30,

2008

mn

      

As of
December 31,
2007

mn

Property-Casualty     54,843     56,943
Life/Health     8,264     6,773
Consolidation     (8)     (10)
Total       63,099       63,706

 

Changes in the reserves for loss and loss adjustment expenses for the Property-Casualty segment for the six months ended June 30, 2008 and June 30, 2007, are as follows:

 

        2008   2007
         

Gross

mn

      

Ceded

mn

      

Net

mn

      

Gross

mn

      

Ceded

mn

      

Net

mn

As of January 1,     56,943     (8,266)     48,677     58,664     (9,333)     49,331
Loss and loss adjustment expenses incurred                                    

Current year

    14,684     (1,350)     13,334     15,114     (1,822)     13,292

Prior years

    (1,148)     362     (786)     (847)     204     (643)

Subtotal

    13,536     (988)     12,548     14,267     (1,618)     12,649
Loss and loss adjustment expenses paid                                    

Current year

    (4,747)     238     (4,509)     (5,086)     402     (4,684)

Prior years

    (8,769)     1,052     (7,717)     (9,384)     1,199     (8,185)

Subtotal

    (13,516)     1,290     (12,226)     (14,470)     1,601     (12,869)
Foreign currency translation adjustments and other changes     (640)     218     (422)     (617)     358     (259)
Changes in the consolidated subsidiaries of the Allianz Group     1         1     122     (14)     108
Reclassifications 1)     (1,481)     90     (1,391)            
As of June 30,       54,843       (7,656)       47,187       57,966       (9,006)       48,960

 

1) 

Since 1Q 2008, health business in Belgium and France is shown within Life/Health segment. Prior year balances have not been adjusted.

 

67


Table of Contents

Notes to the Condensed Consolidated Interim Financial Statements     Allianz Group Interim Report Second Quarter and First Half of 2008

 

14 Reserves for insurance and investment contracts

 

         

As of
June 30,
2008

mn

      

As of
December 31,
2007

mn

Aggregate policy reserves     267,792     264,243
Reserves for premium refunds     19,525     27,225
Other insurance reserves     607     776
Total       287,924       292,244

15 Other liabilities

 

         

As of
June 30,
2008

mn

      

As of
December 31,
2007

mn

Payables            

Policyholders

    4,452     4,806

Reinsurance

    1,685     1,844

Agents

    1,458     1,743

Subtotal

    7,595     8,393
Payables for social security     376     196
Tax payables            

Income tax

    1,512     2,563

Other

    1,536     1,012

Subtotal

    3,048     3,575
Accrued interest and rent     3,302     4,226
Unearned income            

Interest and rent

    22     6

Other

    707     351

Subtotal

    729     357
Provisions            

Pensions and similar obligations

    3,939     4,184

Employee related

    2,196     2,956

Share-based compensation

    1,335     1,761

Restructuring plans

    397     541

Loan commitments

    168     201

Contingent losses from non-insurance business

    155     134

Other provisions

    1,812     1,857

Subtotal

    10,002     11,634
Deposits retained for reinsurance ceded     2,819     3,227
Derivative financial instruments used for hedging that meet the criteria for hedge accounting and firm commitments     1,350     2,210
Financial liabilities for puttable equity instruments     3,515     4,162
Disposal groups held for sale     1,305     1,293
Other liabilities     10,638     10,051
Total       44,679       49,324

 

16 Certificated liabilities

 

         

As of

June 30,

2008

mn

      

As of

December 31,

2007

mn

Allianz SE 1)            

Senior bonds

    4,073     4,279

Exchangeable bonds

        450

Money market securities

    2,875     2,929

Subtotal

    6,948     7,658
Banking subsidiaries            

Senior bonds

    14,931     18,111

Money market securities

    12,223     16,298

Subtotal

    27,154     34,409
All other subsidiaries            

Certificated liabilities

    28     3

Subtotal

    28     3
Total       34,130       42,070

 

1) 

Includes senior bonds, exchangeable bonds and money market securities issued by Allianz Finance B.V. and Allianz Finance II B.V. guaranteed by Allianz SE and money market securities issued by Allianz Finance Corporation, a wholly-owned subsidiary of Allianz SE, which are fully and unconditionally guaranteed by Allianz SE.

17 Participation certificates and subordinated liabilities

 

         

As of

June 30,

2008

mn

      

As of

December 31,

2007

mn

Allianz SE 1)            

Subordinated bonds 2)

    8,065     6,853

Participation certificates

    85     85

Subtotal

    8,150     6,938
Banking subsidiaries            

Subordinated bonds

    2,854     2,822

Hybrid equity

    2,383     2,429

Participation certificates

    768     1,686

Subtotal

    6,005     6,937
All other subsidiaries            

Subordinated liabilities

    845     904

Hybrid equity

    45     45

Subtotal

    890     949
Total       15,045       14,824

 

1) 

Includes subordinated bonds issued by Allianz Finance B.V. and Allianz Finance II B.V. and guaranteed by Allianz SE.

2) 

In June 2008 Allianz SE issued undated subordinated bond in the aggregate principal amount of USD 2,000 mn at a coupon rate of 8.375 % p.a.


 

68


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008    Notes to the Condensed Consolidated Interim Financial Statements

 

18 Equity

 

         

As of
June 30,
2008

mn

      

As of
December 31,
2007

mn

Shareholders’ equity            

Issued capital

    1,158     1,152

Capital reserve

    27,366     27,169

Revenue reserves

    12,515     12,790

Treasury shares

    (133)     (172)

Foreign currency translation adjustments

    (4,385)     (3,656)

Unrealized gains and losses (net) 1)

    3,936     10,470

Subtotal

    40,457     47,753
Minority interests     3,398     3,628
Total       43,855       51,381

 

1) 

As of June 30, 2008 includes 190 mn related to cash flow hedges (2007: 175 mn).

 

Dividends

In the second quarter of 2008 a total dividend of €2,472 mn (2007: €1,642 mn) or €5.50 (2007: €3.80) per qualifying share was paid to the shareholders.


 

69


Table of Contents

Notes to the Condensed Consolidated Interim Financial Statements     Allianz Group Interim Report Second Quarter and First Half of 2008

 

Supplementary Information to the Consolidated Income Statements

19 Premiums earned (net)

 

Three months ended June 30,      

Property-
Casualty

mn

      

Life/Health

 

mn

      

Consolidation

 

mn

      

Group

 

mn

2008                                
Premiums written                        

Direct

    8,987     5,169         14,156

Assumed

    855     86     (5)     936

Subtotal

    9,842     5,255     (5)     15,092

Ceded

    (1,115)     (115)     5     (1,225)

Net

    8,727     5,140         13,867
Change in unearned premiums                        

Direct

    837     (23)         814

Assumed

    (188)     (4)         (192)

Subtotal

    649     (27)         622

Ceded

    72     (2)         70

Net

    721     (29)         692
Premiums earned                        

Direct

    9,824     5,146         14,970

Assumed

    667     82     (5)     744

Subtotal

    10,491     5,228     (5)     15,714

Ceded

    (1,043)     (117)     5     (1,155)

Net

      9,448       5,111             14,559
2007                        
Premiums written                        

Direct

    9,347     4,794         14,141

Assumed

    635     62     (5)     692

Subtotal

    9,982     4,856     (5)     14,833

Ceded

    (1,245)     (175)     5     (1,415)

Net

    8,737     4,681         13,418
Change in unearned premiums                        

Direct

    936             936

Assumed

    (55)     3     1     (51)

Subtotal

    881     3     1     885

Ceded

    38     (1)     (1)     36

Net

    919     2         921
Premiums earned                        

Direct

    10,283     4,794         15,077

Assumed

    580     65     (4)     641

Subtotal

    10,863     4,859     (4)     15,718

Ceded

    (1,207)     (176)     4     (1,379)

Net

      9,656       4,683             14,339

 

70


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008    Notes to the Condensed Consolidated Interim Financial Statements

 

19 Premiums earned (net) (continued)

 

Six months ended June 30,      

Property-
Casualty

mn

      

Life/Health

 

mn

      

Consolidation

 

mn

      

Group

 

mn

2008                                
Premiums written                        

Direct

    22,125     10,842         32,967

Assumed

    1,427     177     (11)     1,593

Subtotal

    23,552     11,019     (11)     34,560

Ceded

    (2,400)     (252)     11     (2,641)

Net

    21,152     10,767         31,919
Change in unearned premiums                        

Direct

    (2,625)     (61)         (2,686)

Assumed

    (286)     (6)         (292)

Subtotal

    (2,911)     (67)         (2,978)

Ceded

    380             380

Net

    (2,531)     (67)         (2,598)
Premiums earned                        

Direct

    19,500     10,781         30,281

Assumed

    1,141     171     (11)     1,301

Subtotal

    20,641     10,952     (11)     31,582

Ceded

    (2,020)     (252)     11     (2,261)

Net

      18,621       10,700             29,321
2007                        
Premiums written                        

Direct

    22,811     10,105         32,916

Assumed

    1,282     146     (8)     1,420

Subtotal

    24,093     10,251     (8)     34,336

Ceded

    (2,831)     (353)     8     (3,176)

Net

    21,262     9,898         31,160
Change in unearned premiums                        

Direct

    (2,562)     (38)         (2,600)

Assumed

    (94)     7     1     (86)

Subtotal

    (2,656)     (31)     1     (2,686)

Ceded

    408     1     (1)     408

Net

    (2,248)     (30)         (2,278)
Premiums earned                        

Direct

    20,249     10,067         30,316

Assumed

    1,188     153     (7)     1,334

Subtotal

    21,437     10,220     (7)     31,650

Ceded

    (2,423)     (352)     7     (2,768)

Net

      19,014       9,868             28,882

20 Interest and similar income

 

        Three months ended June 30,          Six months ended June 30,   
         

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

Interest from held-to-maturity investments     61     55     118     111
Dividends from available-for-sale investments     1,240     1,347     1,517     1,654
Interest from available-for-sale investments     2,581     2,402     5,110     4,770
Share of earnings from investments in associates and joint ventures     47     72     68     331
Rent from real estate held for investment     166     220     355     429
Interest from loans to banks and customers     3,084     3,155     6,387     6,153
Other interest     47     65     81     134
Total       7,226       7,316       13,636       13,582

 

71


Table of Contents

Notes to the Condensed Consolidated Interim Financial Statements     Allianz Group Interim Report Second Quarter and First Half of 2008

 

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

 

Three months ended June 30,       

Property-
Casualty

mn

      

Life/Health

 

mn

      

Banking

 

mn

      

Asset
Managment

mn

      

Corporate

 

mn

      

Consolidation

 

mn

      

Group

 

mn

2008                                          
Expenses from financial assets and liabilities held for trading     (62)     (162)     (697)         (116)     25     (1,012)
Income (expenses) from financial assets designated at fair value through income     16     (283)     22     7     (2)         (240)
Income from financial liabilities designated at fair value through income             23                 23
Income (expenses) from financial liabilities for puttable equity instruments (net)         90     22     (4)             108
Total       (46)       (355)       (630)       3       (118)       25       (1,121)
2007                                          
Income (expenses) from financial assets and liabilities held for trading     (42)     (775)     338     4     (46)     9     (512)
Income from financial assets designated at fair value through income     42     181     42     47     2     (8)     306
Income (expenses) from financial liabilities designated at fair value through income         1     (26)             1     (24)
Expenses from financial liabilities for puttable equity instruments (net)     (2)     (76)         (35)             (113)
Total       (2)       (669)       354       16       (44)       2       (343)

 

Six months ended June 30,       

Property-
Casualty

mn

      

Life/Health

 

mn

      

Banking

 

mn

      

Asset
Managment

mn

      

Corporate

 

mn

      

Consolidation

 

mn

      

Group

 

mn

2008                                          
Income (expenses) from financial assets and liabilities held for trading     28     396     (1,403)     16     92     12     (859)
Income (expenses) from financial assets designated at fair value through income     (7)     (814)     154     (67)     (2)         (736)
Income from financial liabilities designated at fair value through income             57                 57
Income from financial liabilities for puttable equity instruments (net)     10     305         50             365
Total       31       (113)       (1,192)       (1)       90       12       (1,173)
2007                                          
Income (expenses) from financial assets and liabilities held for trading     (86)     (1,189)     689     3     36     13     (534)
Income from financial assets designated at fair value through income     72     320     74     69     5     (8)     532
Income (expenses) from financial liabilities designated at fair value through income     2     9     (68)             1     (56)
Expenses from financial liabilities for puttable equity instruments (net)     (2)     (119)         (49)             (170)
Total       (14)       (979)       695       23       41       6       (228)

 

Income from financial assets and liabilities held for trading (net)

Life/Health Segment

Income from financial assets and liabilities held for trading for the six months ended June 30, 2008 includes in the Life/Health segment income of €407 mn (2007: expenses of €1,208 mn) from derivative financial instruments. Expenses of €64 mn (2007: €771 mn) results from the purchase of forward contracts for interest bonds and forward sales of shares. Also included are expenses from derivative financial instruments related to equity indexed annuity contracts and guaranteed benefits under unit-linked contracts of €208 mn (2007: €142 mn) and income from other derivative financial instruments of €679 mn (2007: expenses of €295 mn).


 

72


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008     Notes to the Condensed Consolidated Interim Financial Statements

 

Banking Segment

Income from financial assets and liabilities held for trading of the Banking segment comprises:

 

        Three months ended June 30,          Six months ended June 30,   
         

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

Trading in interest products     (49)     128     (46)     283
Trading in loan products 1)     (622)     41     (1,314)     125
Trading in equity products     5     137     (97)     260
Foreign exchange/ precious metals trading     54     40     203     92
Other trading activities     (85)     (8)     (149)     (71)
Total       (697)       338       (1,403)       689

 

1) 

For the three and six months ended June 30, 2008 includes write-downs of 286 mn (2007: 36 mn) and of 1,131 mn (2007: 36 mn) for asset-backed securities held for trading of Dresdner Bank, respectively.

 

Corporate Segment

Income from financial assets and liabilities held for trading for the six months ended June 30, 2008, includes in the Corporate segment expenses of €82 mn (2007: income of €86 mn) from derivative financial instruments for which hedge accounting is not applied. This includes income from derivative financial instruments embedded in exchangeable bonds of €133 mn

(2007: expenses of €216 mn), expenses from derivative financial instruments which partially hedge the exchangeable bonds, however, which do not qualify for hedge accounting, of €7 mn (2007: income of €164 mn), and expenses from other derivative financial instruments of €208 mn (2007: income of €138 mn).


 

22 Realized gains/losses (net)

 

        Three months ended June 30,          Six months ended June 30,   
         

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

Realized gains                        
Available-for-sale investments                        

Equity securities

    1,960     1,427     3,580     4,585

Debt securities

    89     103     267     242

Subtotal

    2,049     1,530     3,847     4,827
Investments in associates and joint ventures1)     2     38     68     45
Real estate held for investment     11     108     177     217
Loans to banks and customers     28     16     37     25
Subtotal     2,090     1,692     4,129     5,114
Realized losses                        
Available-for-sale investments                        

Equity securities

    (409)     (90)     (970)     (144)

Debt securities

    (237)     (450)     (323)     (586)

Subtotal

    (646)     (540)     (1,293)     (730)
Investments in associates and joint ventures2)     (2)     (3)     (5)     (6)
Real estate held for investment     2     (33)     (50)     (40)
Loans to banks and customers     (50)     (28)     (60)     (41)
Subtotal     (696)     (604)     (1,408)     (817)
Total       1,394       1,088       2,721       4,297

 

1) 

During the three and six months ended June 30, 2008, includes realized gains from the disposal of subsidiaries and businesses of — mn (2007: 6 mn) and 66 mn (2007: 7 mn) respectively.

2) 

During the three and six months ended June 30, 2008, includes realized losses from the disposal of subsidiaries of — mn (2007: 1 mn) and 1 mn (2007: 1 mn) respectively.

 

73


Table of Contents

Notes to the Condensed Consolidated Interim Financial Statements     Allianz Group Interim Report Second Quarter and First Half of 2008

 

23 Fee and commission income

 

Three months ended June 30,       2008   2007
         

Segment

 mn

      

Consolidation

 mn

      

Group

 mn

      

Segment

 mn

      

Consolidation

 mn

      

Group

 mn

Property-Casualty                                    
Fees from credit and assistance business     184     (1)     183     183     (1)     182
Service agreements     109     (16)     93     97     (6)     91
Subtotal     293     (17)     276     280     (7)     273
Life/Health                                    
Service agreements     40     (11)     29     37     4     41
Investment advisory     126     (10)     116     122     1     123
Other     2     (2)         5     (5)    
Subtotal     168     (23)     145     164         164
Banking                                    
Securities business     347     (43)     304     362     (45)     317
Investment advisory     77     (24)     53     154     (38)     116
Payment transactions     91     (1)     90     91     (1)     90
Mergers and acquisitions advisory     17         17     72         72
Underwriting business     17         17     19         19
Other     198     (40)     158     225     (22)     203
Subtotal     747     (108)     639     923     (106)     817
Asset Management                                    
Management fees     840     (33)     807     876     (30)     846
Loading and exit fees     64         64     80         80
Performance fees     30         30     21         21
Other     118         118     103     (2)     101
Subtotal     1,052     (33)     1,019     1,080     (32)     1,048
Corporate                                    
Service agreements     52     (23)     29     44     (24)     20
Other     (5)         (5)            
Subtotal     47     (23)     24     44     (24)     20
Total       2,307       (204)       2,103       2,491       (169)       2,322

 

74


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008     Notes to the Condensed Consolidated Interim Financial Statements

 

23 Fee and commission income (continued)

 

Six months ended June 30,       2008   2007
         

Segment

 mn

       Consolidation
 mn
      

Group

 mn

      

Segment

 mn

      

Consolidation

 mn

      

Group

 mn

Property-Casualty                                    
Fees from credit and assistance business     355     (1)     354     356     (1)     355
Service agreements     205     (19)     186     196     (11)     185
Subtotal     560     (20)     540     552     (12)     540
Life/Health                                    
Service agreements     74     (14)     60     91     (7)     84
Investment advisory     260     (19)     241     236     (7)     229
Other     5     (5)         8     (8)    
Subtotal     339     (38)     301     335     (22)     313
Banking                                    
Securities business     695     (88)     607     827     (94)     733
Investment advisory     163     (53)     110     308     (76)     232
Payment transactions     182     (2)     180     182     (1)     181
Mergers and acquisitions advisory     40         40     113         113
Underwriting business     27         27     42         42
Other     424     (59)     365     429     (31)     398
Subtotal     1,531     (202)     1,329     1,901     (202)     1,699
Asset Management                                    
Management fees     1,681     (60)     1,621     1,742     (60)     1,682
Loading and exit fees     130         130     162         162
Performance fees     43         43     37         37
Other     184     (1)     183     212     (4)     208
Subtotal     2,038     (61)     1,977     2,153     (64)     2,089
Corporate                                    
Service agreements     111     (54)     57     89     (52)     37
Other     1     (1)                
Subtotal     112     (55)     57     89     (52)     37
Total       4,580       (376)       4,204       5,030       (352)       4,678

24 Other income

 

        Three months ended June 30,           Six months ended June 30,   
         

2008

 mn

      

2007

 mn

      

2008

 mn

      

2007

 mn

Income from real estate held for own use                        
Realized gains from disposals of real estate held for own use     4     3     352     94
Other income from real estate held for own use     6         6    
Subtotal     10     3     358     94
Income from non-current assets and disposal groups held for sale         1         3
Other     5     2     8     2
Total       15       6       366       99

 

75


Table of Contents

Notes to the Condensed Consolidated Interim Financial Statements     Allianz Group Interim Report Second Quarter and First Half of 2008

 

25 Income and expenses from fully consolidated private equity investments

 

Three months ended June 30,       

manroland AG

mn

      

Selecta AG

mn

      

Other

 mn

      

Total

mn

2008                        
Income                        

Sales and service revenues

    426     184     8     618

Other operating revenues

    4         1     5

Interest income

    4             4

Subtotal

    434     184     9     627
Expenses                        

Cost of goods sold

    (329)     (113)     (12)     (454)

Commissions

    (45)             (45)

General and administrative expenses

    (2)     (25)     (1)     (28)

Other operating expenses

    (44)             (44)

Interest expenses

    (5)     (19)     (3)     (27)

Subtotal

    (425)     (157)     (16)     (598)
Total       9       27       (7)       29
2007                        
Income                        

Sales and service revenues

    456         1     457

Other operating revenues

    11             11

Interest income

    2             2

Subtotal

    469         1     470
Expenses                        

Cost of goods sold

    (358)         (1)     (359)

Commissions

    (40)             (40)

General and administrative expenses

    (20)             (20)

Other operating expenses

    (30)             (30)

Interest expenses

    (7)             (7)

Subtotal

    (455)         (1)     (456)
Total       14                   14

 

76


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008    Notes to the Condensed Consolidated Interim Financial Statements

 

25 Income and expenses from fully consolidated private equity investments (continued)

 

Six months ended June 30,       

manroland AG

mn

      

Selecta AG

mn

      

Other

 mn

      

Total

 mn

2008                        
Income                        

Sales and service revenues

    800     368     22     1,190

Other operating revenues

    8         1     9

Interest income

    7             7

Subtotal

    815     368     23     1,206
Expenses                        

Cost of goods sold

    (619)     (226)     (14)     (859)

Commissions

    (81)             (81)

General and administrative expenses

    (41)     (80)     (1)     (122)

Other operating expenses

    (44)             (44)

Interest expense

    (9)     (36)     (3)     (48)

Subtotal

    (794)     (342)     (18)     (1,154)
Total     21     26     5     52
2007                        
Income                        

Sales and service revenues

    909         4     913

Other operating revenues

    23             23

Interest income

    5             5

Subtotal

    937         4     941
Expenses                        

Cost of goods sold

    (710)         (1)     (711)

Commissions

    (79)             (79)

General and administrative expenses

    (42)             (42)

Other operating expenses

    (70)             (70)

Interest expense

    (14)             (14)

Subtotal

    (915)         (1)     (916)
Total       22             3       25

 

77


Table of Contents

Notes to the Condensed Consolidated Interim Financial Statements     Allianz Group Interim Report Second Quarter and First Half of 2008

 

26 Claims and insurance benefits incurred (net)

 

Three months ended June 30,        Property-
Casualty
 mn
      

Life/Health

 

mn

      

Consolidation

 

mn

      

Group

 

mn

2008                        
Gross                        

Claims and insurance benefits paid

    (6,576)     (4,529)     2     (11,103)

Change in loss and loss adjustment expenses

    (102)     (108)         (210)

Subtotal

    (6,678)     (4,637)     2     (11,313)
Ceded                        

Claims and insurance benefits paid

    604     89     (2)     691

Change in loss and loss adjustment expenses

    (173)     8         (165)

Subtotal

    431     97     (2)     526
Net                        

Claims and insurance benefits paid

    (5,972)     (4,440)         (10,412)

Change in loss and loss adjustment expenses

    (275)     (100)         (375)

Total

      (6,247)       (4,540)             (10,787)
2007                        
Gross                        

Claims and insurance benefits paid

    (6,766)     (4,294)     7     (11,053)

Change in loss and loss adjustment expenses

    (327)     (42)     1     (368)

Subtotal

    (7,093)     (4,336)     8     (11,421)
Ceded                        

Claims and insurance benefits paid

    689     180     (7)     862

Change in loss and loss adjustment expenses

    138     (2)     (1)     135

Subtotal

    827     178     (8)     997
Net                        

Claims and insurance benefits paid

    (6,077)     (4,114)         (10,191)

Change in loss and loss adjustment expenses

    (189)     (44)         (233)

Total

      (6,266)       (4,158)             (10,424)
               
Six months ended June 30,       

Property-
Casualty

mn

      

Life/Health

 

mn

      

Consolidation

 

 mn

      

Group

 

mn

2008                        
Gross                        

Claims and insurance benefits paid

    (13,516)     (9,708)     4     (23,220)

Change in loss and loss adjustment expenses

    (20)     (59)         (79)

Subtotal

    (13,536)     (9,767)     4     (23,299)
Ceded                        

Claims and insurance benefits paid

    1,290     230     (4)     1,516

Change in loss and loss adjustment expenses

    (302)     (16)         (318)

Subtotal

    988     214     (4)     1,198
Net                        

Claims and insurance benefits paid

    (12,226)     (9,478)         (21,704)

Change in loss and loss adjustment expenses

    (322)     (75)         (397)

Total

      (12,548)       (9,553)             (22,101)
2007                        
Gross                        

Claims and insurance benefits paid

    (14,470)     (9,182)     13     (23,639)

Change in loss and loss adjustment expenses

    203     (32)         171

Subtotal

    (14,267)     (9,214)     13     (23,468)
Ceded                        

Claims and insurance benefits paid

    1,601     382     (13)     1,970

Change in loss and loss adjustment expenses

    17     (28)         (11)

Subtotal

    1,618     354     (13)     1,959
Net                        

Claims and insurance benefits paid

    (12,869)     (8,800)         (21,669)

Change in loss and loss adjustment expenses

    220     (60)         160

Total

      (12,649)       (8,860)             (21,509)

 

78


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008     Notes to the Condensed Consolidated Interim Financial Statements

 

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

 

Three months ended June 30,       

Property-

Casualty

 mn

      

Life/Health

 

 mn

      

Consolidation

 

 mn

      

Group

 

 mn

2008                        
Gross                        

Aggregate policy reserves

    (67)     (887)         (954)

Other insurance reserves

    5     (29)         (24)

Expenses for premium refunds

    (12)     (481)     (8)     (501)

Subtotal

    (74)     (1,397)     (8)     (1,479)
Ceded                        

Aggregate policy reserves

    3     5     1     9

Other insurance reserves

        1         1

Expenses for premium refunds

    1     2         3

Subtotal

    4     8     1     13
Net                        

Aggregate policy reserves

    (64)     (882)     1     (945)

Other insurance reserves

    5     (28)         (23)

Expenses for premium refunds

    (11)     (479)     (8)     (498)

Total

    (70)     (1,389)     (7)     (1,466)
2007                        
Gross                        

Aggregate policy reserves

    (93)     (1,337)         (1,430)

Other insurance reserves

    (2)     (29)         (31)

Expenses for premium refunds

    (15)     (906)     (24)     (945)

Subtotal

    (110)     (2,272)     (24)     (2,406)
Ceded                        

Aggregate policy reserves

    9     57         66

Other insurance reserves

    1     (1)        

Expenses for premium refunds

    3     5         8

Subtotal

    13     61         74
Net                        

Aggregate policy reserves

    (84)     (1,280)         (1,364)

Other insurance reserves

    (1)     (30)         (31)

Expenses for premium refunds

    (12)     (901)     (24)     (937)

Total

      (97)       (2,211)       (24)       (2,332)

 

79


Table of Contents

Notes to the Condensed Consolidated Interim Financial Statements     Allianz Group Interim Report Second Quarter and First Half of 2008

 

27 Change in reserves for insurance and investment contracts (net) (continued)

 

Six months ended June 30,       

Property-

Casualty

mn

      

Life/Health

 

 mn

      

Consolidation

 

 mn

      

Group

 

 mn

2008                        
Gross                        

Aggregate policy reserves

    (132)     (2,167)         (2,299)

Other insurance reserves

    2     (41)         (39)

Expenses for premium refunds

    29     (1,004)     (21)     (996)

Subtotal

    (101)     (3,212)     (21)     (3,334)
Ceded                        

Aggregate policy reserves

    (14)     9     1     (4)

Other insurance reserves

    7     3         10

Expenses for premium refunds

    9     8         17

Subtotal

    2     20     1     23
Net                        

Aggregate policy reserves

    (146)     (2,158)     1     (2,303)

Other insurance reserves

    9     (38)         (29)

Expenses for premium refunds

    38     (996)     (21)     (979)

Total

    (99)     (3,192)     (20)     (3,311)
2007                        
Gross                        

Aggregate policy reserves

    (155)     (1,841)         (1,996)

Other insurance reserves

    (2)     (123)         (125)

Expenses for premium refunds

    (36)     (2,952)     (55)     (3,043)

Subtotal

    (193)     (4,916)     (55)     (5,164)
Ceded                        

Aggregate policy reserves

    8     76         84

Other insurance reserves

    2     (5)         (3)

Expenses for premium refunds

    5     10         15

Subtotal

    15     81         96
Net                        

Aggregate policy reserves

    (147)     (1,765)         (1,912)

Other insurance reserves

        (128)         (128)

Expenses for premium refunds

    (31)     (2,942)     (55)     (3,028)

Total

      (178)       (4,835)       (55)       (5,068)

 

80


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008     Notes to the Condensed Consolidated Interim Financial Statements

 

28 Interest expenses

 

        Three months ended June 30,         Six months ended June 30, 
         

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

Liabilities to banks and customers     (964)     (929)     (1,834)     (1,762)
Deposits retained on reinsurance ceded     (10)     (34)     (36)     (54)
Certificated liabilities     (412)     (417)     (899)     (797)
Participating certificates and subordinated liabilities     (186)     (181)     (351)     (359)
Other     (48)     (280)     (326)     (467)
Total       (1,620)       (1,841)       (3,446)       (3,439)

29 Loan loss provisions

 

        Three months ended June 30,         Six months ended June 30, 
         

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

Additions to allowances including direct impairments     (131)     (153)     (249)     (259)
Amounts released     16     38     73     89
Recoveries on loans previously impaired     50     41     101     98
Total       (65)       (74)       (75)       (72)

30 Impairments of investments (net)

 

        Three months ended June 30,        Six months ended June 30,
         

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

Impairments                        
Available-for-sale investments                        

Equity securities

    (1,465)     (95)     (2,909)     (176)

Debt securities

    (56)     (1)     (109)     (1)

Subtotal

    (1,521)     (96)     (3,018)     (177)
Investments in associates and joint ventures     (5)         (5)    
Real estate held for investment     (2)     (7)     (20)     (9)
Subtotal     (1,528)     (103)     (3,043)     (186)
Reversals of impairments                        
Available-for-sale investments                        

Debt securities

                13
Real estate held for investment     2     1     20     4
Subtotal     2     1     20     17
Total       (1,526)       (102)       (3,023)       (169)

 

81


Table of Contents

Notes to the Condensed Consolidated Interim Financial Statements     Allianz Group Interim Report Second Quarter and First Half of 2008

 

31 Investment expenses

 

        Three months ended June 30,          Six months ended June 30,   
         

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

Investment management expenses     (94)     (119)     (198)     (222)
Depreciation from real estate held for investment     (43)     (50)     (87)     (104)
Other expenses from real estate held for investment     (47)     (58)     (74)     (130)
Foreign currency gains and losses (net)                        

Foreign currency gains

    174     155     484     282

Foreign currency losses

    (150)     (130)     (722)     (289)

Subtotal

    24     25     (238)     (7)
Total       (160)       (202)       (597)       (463)

32 Acquisition and administrative expenses (net)

 

Three months ended June 30,       2008        2007
         

Segment

mn

      

Consolidation

mn

      

Group

mn

      

Segment

mn

      

Consolidation

mn

      

Group

mn

Property-Casualty                                    
Acquisition costs                                    

Incurred

    (1,847)         (1,847)     (1,810)         (1,810)

Commissions and profit received on reinsurance business ceded

    132         132     194     (1)     193

Deferrals of acquisition costs

    1,005         1,005     890         890

Amortization of deferred acquisition costs

    (1,053)         (1,053)     (950)         (950)

Subtotal

    (1,763)         (1,763)     (1,676)     (1)     (1,677)
Administrative expenses     (826)     3     (823)     (1,029)     28     (1,001)
Subtotal     (2,589)     3     (2,586)     (2,705)     27     (2,678)
Life/Health                                    
Acquisition costs                                    

Incurred

    (892)         (892)     (928)         (928)

Commissions and profit received on reinsurance business ceded

    17         17     40         40

Deferrals of acquisition costs

    572         572     634         634

Amortization of deferred acquisition costs

    (571)         (571)     (455)         (455)

Subtotal

    (874)         (874)     (709)         (709)
Administrative expenses     (411)     (3)     (414)     (406)     (25)     (431)
Subtotal     (1,285)     (3)     (1,288)     (1,115)     (25)     (1,140)
Banking                                    
Personnel expenses     (666)     2     (664)     (820)         (820)
Non-personnel expenses     (499)     7     (492)     (514)     23     (491)
Subtotal     (1,165)     9     (1,156)     (1,334)     23     (1,311)
Asset Management                                    
Personnel expenses     (373)         (373)     (383)         (383)
Non-personnel expenses     (171)     5     (166)     (172)     7     (165)
Subtotal     (544)     5     (539)     (555)     7     (548)
Corporate                                    
Administrative expenses     (73)     1     (72)     (251)     (22)     (273)
Subtotal     (73)     1     (72)     (251)     (22)     (273)
Total       (5,656)       15       (5,641)       (5,960)       10       (5,950)

 

82


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008     Notes to the Condensed Consolidated Interim Financial Statements

 

32 Acquisition and administrative expenses (net) (continued)

 

Six months ended June 30,       2008        2007
         

Segment

mn

      

Consolidation

mn

      

Group

mn

      

Segment

mn

      

Consolidation

mn

      

Group

mn

Property-Casualty                                    
Acquisition costs                                    

Incurred

    (3,987)         (3,987)     (3,963)         (3,963)

Commissions and profit received on reinsurance business ceded

    348     (1)     347     362     (1)     361

Deferrals of acquisition costs

    2,456         2,456     2,477         2,477

Amortization of deferred acquisition costs

    (2,167)         (2,167)     (2,217)         (2,217)

Subtotal

    (3,350)     (1)     (3,351)     (3,341)     (1)     (3,342)
Administrative expenses     (1,630)     12     (1,618)     (2,039)     44     (1,995)
Subtotal     (4,980)     11     (4,969)     (5,380)     43     (5,337)
Life/Health                                    
Acquisition costs                                    

Incurred

    (1,875)     1     (1,874)     (1,845)     1     (1,844)

Commissions and profit received on reinsurance business ceded

    42         42     88         88

Deferrals of acquisition costs

    1,192         1,192     1,261         1,261

Amortization of deferred acquisition costs

    (939)         (939)     (637)         (637)

Subtotal

    (1,580)     1     (1,579)     (1,133)     1     (1,132)
Administrative expenses     (813)     1     (812)     (856)     (35)     (891)
Subtotal     (2,393)     2     (2,391)     (1,989)     (34)     (2,023)
Banking                                    
Personnel expenses     (1,410)     2     (1,408)     (1,727)         (1,727)
Non-personnel expenses     (973)     7     (966)     (1,017)     32     (985)
Subtotal     (2,383)     9     (2,374)     (2,744)     32     (2,712)
Asset Management                                    
Personnel expenses     (795)         (795)     (808)         (808)
Non-personnel expenses     (355)     4     (351)     (337)     13     (324)
Subtotal     (1,150)     4     (1,146)     (1,145)     13     (1,132)
Corporate                                    
Administrative expenses     (219)     12     (207)     (368)     (16)     (384)
Subtotal     (219)     12     (207)     (368)     (16)     (384)
Total       (11,125)       38       (11,087)       (11,626)       38       (11,588)

 

83


Table of Contents

Notes to the Condensed Consolidated Interim Financial Statements     Allianz Group Interim Report Second Quarter and First Half of 2008

 

33 Fee and commission expenses

 

Three months ended June 30,       2008   2007
         

Segment

mn

      

Consolidation

mn

      

Group

mn

      

Segment

mn

      

Consolidation

mn

      

Group

mn

Property-Casualty                                    
Fees from credit and assistance business     (155)         (155)     (116)     1     (115)
Service agreements     (93)     2     (91)     (74)     4     (70)
Subtotal     (248)     2     (246)     (190)     5     (185)
Life/Health                                    
Service agreements     (23)     14     (9)     (7)         (7)
Investment advisory     (47)     3     (44)     (36)     2     (34)
Subtotal     (70)     17     (53)     (43)     2     (41)
Banking                                    
Securities business     (59)         (59)     (45)         (45)
Investment advisory     (38)         (38)     (50)     2     (48)
Payment transactions     (6)         (6)     (6)         (6)
Mergers and acquisitions advisory     3         3     (9)         (9)
Underwriting business                 (1)         (1)
Other     (50)     15     (35)     (46)     7     (39)
Subtotal     (150)     15     (135)     (157)     9     (148)
Asset Management                                    
Commissions     (214)     83     (131)     (241)     110     (131)
Other     (117)     5     (112)     (74)     1     (73)
Subtotal     (331)     88     (243)     (315)     111     (204)
Corporate                                    
Service agreements     (38)     2     (36)     (26)     3     (23)
Other     1         1            
Subtotal     (37)     2     (35)     (26)     3     (23)
Total       (836)       124       (712)       (731)       130       (601)

 

84


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008     Notes to the Condensed Consolidated Interim Financial Statements

 

33 Fee and commission expenses (continued)

 

Six months ended June 30,       2008   2007
         

Segment

mn

      

Consolidation

mn

      

Group

mn

      

Segment

mn

      

Consolidation

mn

      

Group

mn

Property-Casualty                                    
Fees from credit and assistance business     (293)         (293)     (234)     1     (233)
Service agreements     (203)     3     (200)     (153)     8     (145)
Subtotal     (496)     3     (493)     (387)     9     (378)
Life/Health                                    
Service agreements     (43)     18     (25)     (28)     8     (20)
Investment advisory     (87)     8     (79)     (77)     3     (74)
Subtotal     (130)     26     (104)     (105)     11     (94)
Banking                                    
Securities business     (99)         (99)     (85)         (85)
Investment advisory     (78)         (78)     (96)     4     (92)
Payment transactions     (12)         (12)     (11)         (11)
Mergers and acquisitions advisory                 (12)         (12)
Underwriting business                 (1)         (1)
Other     (101)     18     (83)     (98)     10     (88)
Subtotal     (290)     18     (272)     (303)     14     (289)
Asset Management                                    
Commissions     (426)     167     (259)     (476)     222     (254)
Other     (185)     9     (176)     (166)     2     (164)
Subtotal     (611)     176     (435)     (642)     224     (418)
Corporate                                            
Service agreements     (66)     3     (63)     (61)     5     (56)
Subtotal     (66)     3     (63)     (61)     5     (56)
Total       (1,593)     226     (1,367)       (1,498)       263       (1,235)

34 Income taxes

 

        Three months ended June 30,           Six months ended June 30,   
         

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

Current income tax expense     (371)     (654)     (818)     (1,340)
Deferred income tax expense     (181)     (204)     (408)     (485)
Total       (552)       (858)       (1,226)       (1,825)

 

85


Table of Contents

Notes to the Condensed Consolidated Interim Financial Statements     Allianz Group Interim Report Second Quarter and First Half of 2008

 

35 Earnings per share

Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects

the effect of dilutive securities. Dilutive securities include participation certificates issued by Allianz SE which can potentially be converted to Allianz shares, warrants issued by Allianz SE, share-based compensation plans, and derivatives on own shares.


 

Reconciliation of basic and diluted earnings per share

 

        Three months ended June 30,         Six months ended June 30, 
         

 

2008

mn

       

 

2007

mn

       

 

2008

mn

       

 

2007

mn

Numerator for basic earnings per share (net income)         1,542         2,140         2,690         5,380
Effect of dilutive securities       (10)             (32)       1
Numerator for diluted earnings per share (net income after assumed conversion)       1,532       2,140       2,658       5,381
Denominator for basic earnings per share (weighted-average shares)       448,412,817       441,507,123       449,818,651       436,618,651
Dilutive securities                                

Participation certificates

      1,469,443       1,469,443       1,469,443       1,469,443

Warrants

            1,051,153       140,715       1,008,321

Share-based compensation plans

      1,178,270       42,837       1,664,019       93,698

Derivatives on own shares

      935,570       6,790,408       1,322,705       6,291,475

Subtotal

      3,583,283       9,353,841       4,596,882       8,862,937
Denominator for diluted earnings per share (weighted-average shares after assumed conversion)       451,996,100       450,860,964       454,415,533       445,481,588
Basic earnings per share     3.44     4.85     5.98      12.32
Diluted earnings per share       3.39       4.75       5.85        12.08

 

For the six months ended June 30, 2008, the weighted average number of shares excludes 1,975,305 (2007: 1,251,988) treasury shares.


 

86


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008     Notes to the Condensed Consolidated Interim Financial Statements

 

Other Information

36 Supplemental information on the Banking Segment

Net interest income from the Banking Segment

 

        Three months ended June 30,        Six months ended June 30,
         

Segment

mn

      

Consolidation

 mn

      

Group

mn

      

Segment

mn

      

Consolidation

 mn

      

Group

mn

2008                                    
Interest and similar income     2,067     (13)     2,054     4,305     (59)     4,246
Interest expense     (1,340)     40     (1,300)     (2,882)     109     (2,773)
Net interest income     727     27     754     1,423     50     1,473
2007                                    
Interest and similar income     2,214     (32)     2,182     4,423     (43)     4,380
Interest expense     (1,484)     53     (1,431)     (2,765)     84     (2,681)
Net interest income       730       21       751       1,658       41       1,699

Net fee and commission income from the Banking Segment

 

        Three months ended June 30,        Six months ended June 30,
         

Segment

 mn

      

Consolidation

mn

      

Group

 mn

      

Segment

 mn

      

Consolidation

mn

      

Group

 mn

2008                                    
Fee and commission income     747     (108)     639     1,531     (202)     1,329
Fee and commission expense     (150)     15     (135)     (290)     18     (272)
Net fee and commission income     597     (93)     504     1,241     (184)     1,057
2007                                    
Fee and commission income     923     (106)     817     1,901     (202)     1,699
Fee and commission expense     (157)     9     (148)     (303)     14     (289)
Net fee and commission income       766       (97)       669       1,598       (188)       1,410

The net fee and commission income of the Allianz Group’s Banking segment includes the following:

 

        Three months ended June 30,           Six months ended June 30,   
         

2008

mn

      

2007

mn

      

2008

mn

      

2007

mn

Securities business     288     317     596     742
Investment advisory     39     104     85     212
Payment transactions     85     85     170     171
Merger and acquisitions advisory     20     63     40     101
Underwriting business     17     18     27     41
Other     148     179     323     331
Total       597       766       1,241       1,598

 

87


Table of Contents

Notes to the Condensed Consolidated Interim Financial Statements     Allianz Group Interim Report Second Quarter and First Half of 2008

 

37 Supplemental information on the condensed consolidated statements of cash flows

 

Six months ended June 30,

 

      

2008

mn

      

2007

mn

Income taxes paid     (1,604)     (1,147)
Dividends received     1,384     1,460
Interest received     11,671     11,043
Interest paid     (4,359)     (3,359)
Significant non-cash transactions:            

Settlement of exchangeable bonds issued by Allianz Finance II B.V. for shares:

           

Available-for-sale investments

    (450)     (812)

Certificated liabilities

    (450)     (812)

Novation of quota share reinsurance agreement:

           

Reinsurance assets

    (29)     (1,216)

Deferred acquisition costs

    1     71

Payables from reinsurance contracts

    (28)     (1,145)

Effects from buy-out of AGF minorities:

           

Revenue reserves

        (1,843)

Unrealized gains and losses (net)

        146

Minority interests

        (1,068)

Paid-in capital

        2,765

Effects from first consolidation of K2:

           

Financial assets held for trading

    107    

Financial assets designated at fair value through income

    8,665    

Loans and advances to banks and customers

    1,714    

Other assets

    51    

Financial liabilities held for trading

    497    

Financial liabilities designated at fair value through income

    8,889    

Liabilities to banks and customers

    1,076    

Other liabilities

      75      

38 Other information

Number of employees

 

         

As of

June 30,

2008

      

As of

December 31,

2007

Germany     70,702     72,063
Other countries     110,605     109,144
Total       181,307       181,207

 

39 Subsequent events

Acquisition of further stakes in Koç Allianz Sigorta AŞ and Koç Allianz Hayat ve Emeklilik

In April 2008, the Allianz Group signed a share purchase agreement regarding the acquisition of a shareholding in Koç Allianz Sigorta AŞ and Koç Allianz Hayat ve Emeklilik. The transaction has been approved by the relevant regulatory and competition board on July 20, 2008.

With this transaction, the Allianz Group acquired 47.1% of shares in the non-life insurer Koç Allianz Sigorta AŞ and 49.0% of the shares in the life-insurance and pension company Koç Allianz Hayat ve Emeklilik for a total consideration of €373 mn so that Allianz Group now controls 84.2% and 87.0% respectively.

Monoline insurer XL Capital Assurance

CDOs which Dresdner Bank issued in 2005/2006 are hedged using credit default swaps written by the monoline insurer XL Capital Assurance (XLCA). XLCA is currently negotiating the conditions of its restructuring with some counterparties of credit derivatives and insurance contracts. Dresdner Bank has participated in the negotiations since August 1, 2008. Its outcome is uncertain at present and not expected to be finalized before mid of October 2008.

Munich, August 6, 2008

Allianz SE

The Board of Management

LOGO


 

88


Table of Contents

Allianz Group Interim Report Second Quarter and First Half of 2008     Responsibility statement

 

Responsibility statement

To the best of our knowledge, and in accordance with the applicable reporting principles for interim financial reporting, the condensed consolidated interim financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the group, and the interim group management report includes a fair review of the development and performance of the business and the position of the group,

together with a description of the principal opportunities and risks associated with the expected development of the group for the remaining months of the financial year.

Munich, August 6, 2008

Allianz SE

The Board of Management

LOGO


 

89


Table of Contents

Review report     Allianz Group Interim Report Second Quarter and First Half of 2008

 

Review report

To Allianz SE, Munich

We have reviewed the condensed consolidated interim financial statements of the Allianz SE, Munich - comprising balance sheet, income statement, condensed cash flow statement, statement of changes in equity and selected explanatory notes - together with the interim group management report of the Allianz SE, Munich for the period from January 1 to June 30, 2008 that are part of the half year financial report according to § 37 w WpHG [“Wertpapier-handelsgesetz”: “German Securities Trading Act”]. The preparation of the condensed consolidated interim financial statements in accordance with those IFRS applicable to interim financial reporting as adopted by the EU and in accordance with the IFRS for interim financial reporting as issued by the International Accounting Standards Board (“IASB”), and of the interim group management report in accordance with the requirements of the WpHG applicable to interim group management reports, is the responsibility of the Company’s management. Our responsibility is to issue a report on the condensed consolidated interim financial statements and on the interim group management report based on our review.

We performed our review of the condensed consolidated interim financial statements and the interim group management report in accordance with the German generally accepted standards for the review of financial statements promulgated by the Institut der Wirtschaftsprüfer (“IDW”). Those standards require that we plan and conduct the review so that we can preclude through critical evaluation, with a certain level of assurance, that the condensed consolidated interim financial statements have not been prepared, in material aspects, in accordance with the IFRS

applicable to interim financial reporting as adopted by the EU and in accordance with the IFRS for interim financial reporting as issued by the IASB, and that the interim group management report has not been prepared, in material aspects, in accordance with the requirements of the WpHG applicable to interim group management reports. A review is limited primarily to inquiries of company employees and analytical assessments and therefore does not provide the assurance attainable in a financial statement audit. Since, in accordance with our engagement, we have not performed a financial statement audit, we cannot issue an auditor’s report.

Based on our review, no matters have come to our attention that cause us to presume that the condensed interim consolidated financial statements have not been prepared, in all material respects, in accordance with the IFRS applicable to interim financial reporting as adopted by the EU and in accordance with the IFRS for interim financial reporting as issued by the IASB, or that the interim group management report has not been prepared, in all material respects, in accordance with the requirements of the WpHG applicable to interim group management reports.

Munich, August 6, 2008

KPMG Deutsche Treuhand-Gesellschaft

Aktiengesellschaft

Wirtschaftsprüfungsgesellschaft

 

LOGO   LOGO

Johannes Pastor

  Dirk Hildebrand

Independent Auditor

  Independent Auditor

 

90


Table of Contents

 

 

 

 

 

Allianz SE

Koeniginstrasse 28

80802 Muenchen

Germany

Telephone +49 89 38 00 0

Telefax +49 89 38 00 3425

info@allianz.com

www.allianz.com


Table of Contents

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: August 11, 2008

ALLIANZ SE
By  

/s/ Burkhard Keese

  Name:   Burkhard Keese
  Title:  

Executive Vice President

Group Financial Reporting

   
ALLIANZ SE
By  

/s/ Harold Michael Langley-Poole

  Name:   Harold Michael Langley-Poole
  Title:   Head of Group Management Reporting