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                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                             ---------------------
                                   FORM 20-F


         
                               (MARK ONE)
   [ ]      REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR(g) OF
            THE SECURITIES EXCHANGE ACT OF 1934
            OR
   [X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
            SECURITIES EXCHANGE ACT OF 1934
            FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003
            OR
   [ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
            SECURITIES EXCHANGE ACT OF 1934


                         COMMISSION FILE NUMBER 1-15154

                           ALLIANZ AKTIENGESELLSCHAFT
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                          FEDERAL REPUBLIC OF GERMANY
                (JURISDICTION OF INCORPORATION OR ORGANIZATION)

                    KONIGINSTRASSE 28, 80802 MUNICH, GERMANY
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:



          TITLE OF EACH CLASS              NAME OF EACH EXCHANGE ON WHICH REGISTERED
---------------------------------------    -----------------------------------------
                                        
 ORDINARY SHARES (WITHOUT PAR VALUE)*         THE NEW YORK STOCK EXCHANGE, INC.


---------------

* Not for trading, but only in connection with the listing of American
  Depositary Shares, pursuant to the requirements of the New York Stock
  Exchange.

SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                                      NONE

 SECURITIES FOR WHICH THERE IS A REPORTING OBLIGATION PURSUANT TO SECTION 15(d)
                                OF THE ACT: NONE

     Indicate the number of outstanding shares of each of the issuer's classes
of capital or common stock at December 31, 2003:

               Ordinary shares, without par value....................384,718,750
shares

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.


                   
       YES [X]             NO [ ]


     Indicate by check mark which financial statement item the registrant has
elected to follow.


                   
     Item 17 [ ]         Item 18 [X]


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                               TABLE OF CONTENTS



ITEM                                                                         PAGE
----                                                                         ----
                                                                       
TABLE OF CONTENTS.........................................................     1
PRESENTATION OF FINANCIAL AND OTHER INFORMATION...........................     3
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS.................     4
ITEM 1.       IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS.......     5
ITEM 2.       OFFER STATISTICS AND EXPECTED TIMETABLE.....................     5
ITEM 3.       KEY INFORMATION.............................................     5
              Selected Consolidated Financial Data........................     5
              Dividends...................................................     7
              Exchange Rate Information...................................     7
              Risk Factors................................................     8
              INFORMATION ON THE COMPANY AND OPERATING AND FINANCIAL
ITEM 4-5.     REVIEW AND PROSPECTS........................................    16
              Introduction................................................    16
              Summary Financial Information...............................    17
              Recent Developments.........................................    19
              Factors Affecting Results of Operations.....................    20
              Critical Accounting Policies and Estimates..................    22
              Off-Balance Sheet Arrangements..............................    29
              Tabular Disclosure of Contractual Obligations...............    30
              Changes to Accounting and Valuation Policies................    31
              Consolidated Results of Operations..........................    31
              Consolidated Assets and Liabilities.........................    33
              Investment Portfolio Impairments and Unrealized Losses......    34
              Discussion of Operations by Business Segment................    41
              Property-Casualty Insurance Operations......................    42
              Property-Casualty Operations By Geographic Region...........    47
              Life/Health Insurance Operations............................    69
              Life/Health Operations By Geographic Region.................    72
              Banking Operations..........................................    85
              Banking Operations By Division..............................    98
              Asset Management Operations.................................   108
              Property-Casualty Insurance Reserves........................   123
              Reconciliation of Loss and LAE Reserves.....................   126
              Changes in Historical Reserves for Unpaid Loss and LAE
              Property-Casualty Insurance Segment Gross of Reinsurance....   131
              A&E Gross Loss and LAE History..............................   134
              Selected Statistical Information Relating to Our Banking
              Operations..................................................   135
              Liquidity and Capital Resources.............................   161
              Consolidated Cash Flows.....................................   162
              Regulation and Supervision..................................   164
ITEM 6.       DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES..................   184
              Corporate Governance........................................   184
              Management Board............................................   186
              Supervisory Board...........................................   188
              Compensation of Directors and Officers......................   192
              Board Practices.............................................   193
              Share Ownership.............................................   193
              Employees...................................................   193
              Stock-based Compensation Plans..............................   194
ITEM 7.       MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS...........   194
              Major Shareholders..........................................   194


                                        1




ITEM                                                                         PAGE
----                                                                         ----
                                                                       
              Related Party Transactions..................................   195
ITEM 8.       FINANCIAL INFORMATION.......................................   198
              Consolidated Statements and Other Financial Information.....   198
              Legal Proceedings...........................................   198
              Dividend Policy.............................................   199
              Significant Changes.........................................   200
ITEM 9.       THE OFFER AND LISTING.......................................   201
              Trading Markets.............................................   201
              Market Price Information....................................   201
ITEM 10.      ADDITIONAL INFORMATION......................................   204
              Articles of Association.....................................   204
              Capital Increase............................................   205
              Material Contracts..........................................   205
              Exchange Controls...........................................   205
              Taxation....................................................   206
              United States Taxation......................................   208
              Documents on Display........................................   210
              QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
ITEM 11.      RISK........................................................   210
              Risk Management Organization................................   211
              Market Risk Measurement.....................................   217
              Allianz Group Market Risk Exposure Estimates................   218
              Risk Monitoring by Third Parties............................   221
ITEM 12.      DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES......   222
ITEM 13.      DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.............   222
              MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND
ITEM 14.      USE OF PROCEEDS.............................................   222
ITEM 15.      CONTROLS AND PROCEDURES.....................................   222
ITEM 16A.     AUDIT COMMITTEE FINANCIAL EXPERT............................   222
ITEM 16B.     CODE OF ETHICS..............................................   222
ITEM 16C.     PRINCIPAL ACCOUNTANT FEES AND SERVICES......................   222
              EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT
ITEM 16D.     COMMITTEES..................................................   223
              PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
ITEM 16E.     PURCHASERS..................................................   223
ITEM 17.      FINANCIAL STATEMENTS........................................   225
ITEM 18.      FINANCIAL STATEMENTS........................................   225
ITEM 19.      EXHIBITS....................................................   225
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES..................   F-1


                                        2


                PRESENTATION OF FINANCIAL AND OTHER INFORMATION

     In this Annual Report, the terms "we," "us" and "our" refer to Allianz
Aktiengesellschaft (or Allianz AG, and together with its consolidated
subsidiaries, the Allianz Group), unless the context requires otherwise.

     Unless otherwise indicated, when we use the term "consolidated financial
statements," we are referring to the consolidated financial statements
(including the related notes) of Allianz AG as of December 31, 2003 and 2002 and
for each of the years in the three-year period ended December 31, 2003, which
have been audited by KPMG Deutsche Treuhand-Gesellschaft AG
Wirtschaftsprufungsgesellschaft. The consolidated financial statements have been
prepared in accordance with International Financial Reporting Standards (or
IFRS), which differ in certain respects from accounting principles generally
accepted in the United States of America (U.S. GAAP). For a discussion of
significant differences between IFRS and U.S. GAAP and a reconciliation of net
income and shareholders' equity under IFRS and U.S. GAAP, you should read Note
47 to the consolidated financial statements. In addition, the amounts set forth
in some of the tables may not add up to the total amounts given in those tables
due to rounding.

     References herein to "$", "U.S.$" and "U.S. dollars" are to United States
dollars and references to "E" and "Euro" are to the Euro, the single currency
established for participants in the third stage of the European Economic and
Monetary Union (or EMU), commencing January 1, 1999. We refer to the countries
participating in the third stage of the EMU as the "Euro zone."

     For convenience only (except where noted otherwise), some of the Euro
figures have been translated into U.S. dollars at the rate of $1.2118 = E1.00,
the noon buying rate in New York for cable transfers in Euros certified by the
Federal Reserve Bank of New York for customs purposes on June 18, 2004. These
translations do not mean that the Euro amounts actually represent those U.S.
dollar amounts or could be converted into U.S. dollars at those rates. See "Key
Information -- Exchange Rate Information" for information concerning the noon
buying rates for the Euro from January 1, 1999 through June 18, 2004.

     Unless otherwise indicated, when we use the terms "gross premiums," "gross
premiums written" and "gross written premiums," we are referring to premiums
(whether or not earned) for insurance policies written during a specific period,
without deduction for premiums ceded to reinsurers, and when we use the terms
"net premiums," "net premiums written" and "net written premiums," we are
referring to premiums (whether or not earned) for insurance policies written
during a specified period, after deduction for premiums ceded to reinsurers.

     Unless otherwise indicated, we have obtained data regarding the relative
size of various national insurance markets from annual reports prepared by
SIGMA, an independent organization which publishes market research data on the
insurance industry. In addition, unless otherwise indicated, insurance market
share data are based on gross premiums written. Data on position and market
share within particular countries are based on our own internal estimates.

                                        3


           CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     This annual report includes "forward-looking statements" within the meaning
of the safe harbor provisions of The Private Securities Litigation Reform Act of
1995. These include statements under "Information on the Company and Operating
and Financial Review and Prospects," "Quantitative and Qualitative Disclosures
About Market Risk" and elsewhere in this annual report relating to, among other
things, our future financial performance, plans and expectations regarding
developments in our business, growth and profitability, and general industry and
business conditions applicable to the Allianz Group. These forward-looking
statements can generally be identified by terminology such as "may," "will,"
"should," "expects," "plans," "intends," "anticipates," "believes," "estimates,"
"predicts," "potential," or "continue" or other similar terminology. We have
based these forward-looking statements on our current expectations, assumptions,
estimates and projections about future events. These forward-looking statements
are subject to a number of risks, uncertainties, assumptions and other factors
that may cause our actual results, performance or achievements or those of our
industry to be materially different from or worse than those expressed or
implied by these forward-looking statements. These factors include, without
limitation:

     - general economic conditions, including in particular economic conditions
       in our core business areas and core markets;

     - function and performance of global financial markets, including emerging
       markets;

     - frequency and severity of insured loss events, including terror attacks,
       environmental and asbestos claims;

     - mortality and morbidity levels and trends;

     - persistency levels;

     - interest rate levels;

     - currency exchange rate developments, including the Euro/U.S. dollar
       exchange rate;

     - levels of additional loan loss provisions;

     - further impairments of investments;

     - general competitive factors, in each case on a local, regional, national
       and global level;

     - changes in laws and regulations, including in the United States and in
       the European Union;

     - changes in the policies of central banks and/or foreign governments;

     - the impact of acquisitions, including related integration and
       restructuring issues; and

     - terror attacks, events of war, and their respective consequences.

                                        4


                                     PART I

ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

     Not applicable.

ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE

     Not applicable.

ITEM 3.  KEY INFORMATION

                      SELECTED CONSOLIDATED FINANCIAL DATA

     The selected consolidated financial data set forth below are derived from
our consolidated financial statements, which have been audited by KPMG Deutsche
Treuhand-Gesellschaft AG Wirtschaftsprufungsgesellschaft.

     We prepare our consolidated financial statements in accordance with IFRS,
which differ in certain significant respects from U.S. GAAP. For a description
of the significant differences between IFRS and U.S. GAAP and a reconciliation
of net income and shareholders' equity under IFRS to U.S. GAAP, you should read
Note 47 to the consolidated financial statements.

     You should read the information below in conjunction with our consolidated
financial statements and the other financial information we have included
elsewhere in this annual report.



                                               AT OR FOR THE YEAR ENDED DECEMBER 31,
                                    -----------------------------------------------------------
                                     2003(1)     2003      2002      2001      2000      1999
                                    ---------   -------   -------   -------   -------   -------
                                        $          E         E         E         E         E
                                               (IN MILLIONS, EXCEPT PER SHARE DATA)
                                                                      
IFRS CONSOLIDATED INCOME STATEMENT
  DATA
Gross premiums written(2)
  Property-Casualty...............     52,616    43,420    43,294    42,137    38,382    36,027
  Life/Health.....................     25,071    20,689    20,663    20,145    20,239    18,473
  Consolidation adjustments(3)....       (875)     (722)     (804)     (694)     (736)     (693)
                                    ---------   -------   -------   -------   -------   -------
     Total........................     76,812    63,387    63,153    61,588    57,885    53,807
Premiums earned (net).............     67,834    55,978    55,133    52,745    49,907    46,182
Total income
  Property-Casualty...............     61,474    50,730    55,556    48,770    45,197    42,079
  Life/Health.....................     44,391    36,632    36,536    34,092    37,251    32,723
  Banking Operations..............     16,776    13,844    21,275    12,755     1,722     1,795
  Asset Management Operations.....      3,707     3,059     3,185     2,738     1,722       693
  Consolidation adjustments(3)....     (3,269)   (2,698)   (8,876)   (2,705)   (2,103)   (1,471)
                                    ---------   -------   -------   -------   -------   -------
     Total........................    123,079   101,567   107,676    95,650    83,789    75,819
Net income (loss).................      1,958     1,890    (1,496)    1,585     3,448     2,317
Basic earnings per share..........       6.77      5.59     (5.40)     6.51     14.05      9.46
Diluted earnings per share........       6.75      5.57     (5.40)     6.51     14.05      9.46
U.S. GAAP CONSOLIDATED INCOME
  STATEMENT DATA
Net income (loss).................      2,720     2,245    (1,260)    4,246     6,519     2,870
Basic earnings per share..........       8.13      6.71     (4.79)    16.30     28.85     11.70
Diluted earnings per share........       8.12      6.70     (4.79)    16.30     28.85     11.70


                                        5




                                               AT OR FOR THE YEAR ENDED DECEMBER 31,
                                    -----------------------------------------------------------
                                     2003(1)     2003      2002      2001      2000      1999
                                    ---------   -------   -------   -------   -------   -------
                                        $          E         E         E         E         E
                                               (IN MILLIONS, EXCEPT PER SHARE DATA)
                                                                      
IFRS CONSOLIDATED BALANCE SHEET
  DATA
Group's own investments(4)........    478,444   394,821   395,321   462,219   337,793   318,880
Total assets......................  1,134,138   935,912   852,133   942,986   440,008   410,690
Total insurance reserves..........    377,441   311,471   305,763   299,512   284,824   268,064
Total liabilities.................  1,089,351   898,953   822,145   911,373   404,416   381,014
Issued capital and capital
  reserves........................     23,445    19,347    14,785    14,769     7,994     7,811
Shareholders' equity..............     34,648    28,592    21,674    31,613    35,592    29,676
Shareholders' equity per share....        103        85        78       114       127       106
Weighted average number of shares
  outstanding
  Basic...........................      409.8     338.2     276.9     277.8     279.8     279.4
  Diluted.........................      411.4     339.8     276.9     277.8     279.8     279.4
U.S. GAAP CONSOLIDATED BALANCE
  SHEET DATA
Shareholders' equity..............     37,354    30,825    22,836    31,655    35,102    30,003
Shareholders' equity per share....        110        91        83       114       125       107
OTHER FINANCIAL AND OPERATING DATA
Combined ratio....................       97.0%     97.0%    105.7%    108.8%    104.9%    104.5%
Third-party assets................    684,320   564,714   560,588   620,458   336,424    29,506
Market capitalization.............     44,397    36,637    22,111    64,156    97,813    81,920


---------------

(1) Amounts given in Euros have been translated for convenience only into U.S.
    dollars at the rate of $1.2118 = E1.00, the noon buying rate in New York for
    cable transfers in Euros certified by the Federal Reserve Bank of New York
    for customs purposes on June 18, 2004. See "Presentation of Financial and
    Other Information."

(2) In some countries, health insurance operations are reflected in either or
    both of the property-casualty and life/health segments in accordance with
    local practice and regulatory considerations.

(3) Represents the elimination of intercompany transactions between Allianz
    Group companies in different segments.

(4) For additional information on Group's own investments, see "Information on
    the Company and Operating and Financial Review and Prospects -- Asset
    Management Operations -- Group's Own Investments."

                                        6


                                   DIVIDENDS

     The following table sets forth the annual dividends paid per ordinary share
and American Depositary Share (or ADS) equivalent for 1999 through 2003. The
table does not reflect the related tax credits available to German taxpayers.
See "Additional Information -- Taxation -- German Taxation -- Taxation of
Dividends."



                                                           DIVIDEND PER    DIVIDEND PAID
                                                             ORDINARY         PER ADS
                                                               SHARE        EQUIVALENT
                                                           -------------   -------------
                                                             E     $(1)      E     $(1)
                                                                       
1999.....................................................  1.25    1.18    0.125   0.118
2000.....................................................  1.50    1.42    0.150   0.142
2001.....................................................  1.50    1.42    0.150   0.142
2002.....................................................  1.50    1.76    0.150   0.176
2003.....................................................  1.50    1.82    0.150   0.182


---------------

(1) Dividend amounts given in Euros have been translated for convenience only
    into U.S. dollars at the rate of $1.2118 = E1.00, the noon buying rate in
    New York for cable transfers in Euros certified by the Federal Reserve Bank
    of New York for customs purposes on June 18, 2004. See "Presentation of
    Financial and Other Information."

     Although the ability to pay future dividends will depend upon our future
earnings, financial condition (including our cash needs), prospects and other
factors, we do not presently anticipate any changes to our current dividend
policy. However, you should not assume that any dividends will actually be paid
or make any assumptions about the amount of dividends which will be paid in any
given year. See "Financial Information -- Dividend Policy."

                           EXCHANGE RATE INFORMATION

     The table below sets forth, for the periods indicated, information
concerning the noon buying rates for the Euro expressed in U.S. dollars per
E1.00. No representation is made that the Euro or U.S. dollar amounts referred
to herein could be or could have been converted into U.S. dollars or Euros, as
the case may be, at any particular rate or at all.



                                                                       PERIOD     PERIOD
                                                    HIGH     LOW     AVERAGE(1)    END
                                                   ------   ------   ----------   ------
                                                               ($ PER E1.00)
                                                                      
1999.............................................  1.1812   1.0016     1.0588     1.0070
2000.............................................  1.0335   0.8270     0.9207     0.9388
2001.............................................  0.9535   0.8370     0.8952     0.8901
2002.............................................  1.0485   0.8594     0.9454     1.0485
2003.............................................  1.2597   1.0361     1.1321     1.2597
  October........................................  1.1833   1.1596     1.1714     1.1609
  November.......................................  1.1995   1.1417     1.1710     1.1995
  December.......................................  1.2597   1.1956     1.2298     1.2597
2004.............................................  1.2853   1.1802     1.2347     1.1885
  January........................................  1.2853   1.2389     1.2638     1.2452
  February.......................................  1.2848   1.2426     1.2640     1.2441
  March..........................................  1.2431   1.2088     1.2261     1.2292
  April..........................................  1.2358   1.1802     1.1989     1.1975
  May............................................  1.2274   1.1801     1.2000     1.2217
  June (until June 18, 2004).....................  1.2320   1.2006     1.2151     1.2118


---------------

(1) Computed using the average of the noon buying rates for Euros on the last
    business day of each month during the relevant annual period or on the first
    and last business days of each month during the relevant monthly period.

     On June 18, 2004, the noon buying rate for the Euro was $1.2118.

                                        7


                                  RISK FACTORS

     You should carefully review the following risk factors together with the
other information contained in this annual report before making an investment
decision. Our financial position and results of operations may be materially
adversely affected by each of these risks. The market price of our ADSs may
decline as a result of each of these risks and investors may lose the value of
their investment in whole or in part. Additional risks not currently known to us
or that we now deem immaterial may also adversely affect our business and your
investment.

INTEREST RATE VOLATILITY MAY ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.

     Changes in prevailing interest rates (including changes in the difference
between the levels of prevailing short- and long-term rates) can affect our
insurance, asset management and banking results.

     Over the past several years, movements in both short- and long-term
interest rates have affected the level and timing of recognition of gains and
losses on securities held in our various investment portfolios. Our investment
portfolios are heavily weighted toward Euro-denominated fixed-income
investments. Accordingly, interest rate movements in the Euro zone will
significantly affect the value of our investment portfolios. Excluding trading
portfolios, fixed income securities constituted 76.5% of our Group's own
investment at December 31, 2003. For additional information on our fixed-income
investments, see "Information on the Company and Operating and Financial Review
and Prospects -- Asset Management Operations -- Group's Own
Investments -- Insurance Operations Investments -- Fixed-Income Investments." An
increase in interest rates could substantially decrease the value of our fixed
income portfolio, and any unexpected change in interest rates could materially
adversely affect our bond and interest rate derivative positions.

     The short-term impact of interest rate fluctuations on our life/health
insurance business may be reduced in part by products designed to partly or
entirely transfer our exposure to interest rate movements to the policyholder.
While product design reduces our exposure to interest rate volatility, changes
in interest rates will impact this business to the extent they result in changes
to current interest income, impact the value of our fixed income portfolio, and
affect the levels of new product sales or surrenders of business in force. In
addition, reductions in the investment income below the rates assumed in product
pricing, or below the regulatory minimum required rates in countries such as
Germany and Switzerland, would reduce or eliminate the profit margins on the
life/health insurance business written by our life/health subsidiaries.

     Results of our asset management business may also be affected by movements
in interest rates, since management fees are generally based on the value of
assets under management, which fluctuate with changes in the level of interest
rates.

     In addition, our management of interest rate risks affects the results of
our banking operations. The composition of our banking assets and liabilities,
and any mismatches resulting from that composition, cause the net income of our
banking operations to vary with changes in interest rates. We are particularly
impacted by changes in interest rates as they relate to different maturities of
contracts and the different currencies in which we hold interest rate positions.
A mismatch with respect to maturity of interest-earning assets and
interest-bearing liabilities in any given period can have a material adverse
effect on the financial position or results of operations of our banking
business.

MARKET RISKS COULD IMPAIR THE VALUE OF OUR PORTFOLIO AND ADVERSELY IMPACT OUR
FINANCIAL POSITION AND RESULTS OF OPERATIONS.

     We hold a significant equity portfolio, which represented approximately
16.4% of our Group's own investments at December 31, 2003. For additional
information on our equity investment, see "Information on the Company and
Operating and Financial Review and Prospects -- Asset Management
Operations -- Group's Own Investments -- Insurance Operations
Investments -- Equity Investments." Our equity investment portfolio includes, in
particular, large stakes in a number of major German companies, including
Munchener Ruckversicherungs-Gesellschaft Aktiengesellschaft in Munchen (or
Munich Re), and Eurohypo AG, as well as significant holdings in companies in
France and Italy and equity investments in companies in virtually all

                                        8


major financial markets of the world. Fluctuations in equity markets affect the
market value and liquidity of these holdings.

     We also have significant real estate holdings in our investment portfolio,
the value of which is likewise exposed to changes in real estate market prices
and volatility.

     Most of our assets and liabilities are recorded at fair value, including
trading assets and liabilities, and securities available-for-sale. Changes in
the value of securities held for trading purposes are recorded through the
consolidated income statement. Changes in the market value of securities
available-for-sale are recorded directly in consolidated shareholders' equity.
Securities available-for-sale are reviewed regularly for impairment, with
writedowns to fair value charged to income if an other than temporary diminution
in value occurs. If a decline in the market value below the original cost of an
available-for-sale security is considered other-than-temporary, the decline in
value will be recorded in the consolidated income statement.

MARKET FACTORS, AS WELL AS A LACK OF IMPROVEMENT IN OUR OPERATING PERFORMANCE,
COULD ADVERSELY AFFECT GOODWILL, DEFERRED POLICY ACQUISITION COSTS AND DEFERRED
TAX ASSETS; OUR DEFERRED TAX ASSETS ARE ALSO POTENTIALLY IMPACTED BY CHANGES IN
TAX LEGISLATION.

     Business and market conditions may impact the amount of goodwill we carry
in our consolidated accounts. As of December 31, 2003 we have recorded goodwill
in an aggregate amount of E12,370 million, of which E1,825 million relates to
our banking business, E6,229 million to our asset management business and E4,316
million relates to our insurance business.

     Our banking operations, of which Dresdner Bank AG (or Dresdner Bank, and
together with its consolidated subsidiaries, the Dresdner Bank Group) represents
by far the most significant component, reported a net loss of E1,279 million for
the year ended December 31, 2003. See "Information on the Company and Operating
and Financial Review and Prospects -- Banking Operations -- Results of
Operations." Notwithstanding such loss, at December 31, 2003, we concluded that
an impairment and writedown of goodwill relating to Dresdner Bank was not
required for IFRS or U.S. GAAP purposes. If conditions in our banking operations
do not improve, an impairment test for the fiscal year 2004 could result in a
significant writedown of goodwill, adversely impacting our results of
operations. As the value of certain other parts of our businesses, including in
particular our asset management business, are also significantly impacted by
such factors as the state of financial markets and ongoing operating
performance, significant declines in financial markets or operating performance
could also result in impairment of other goodwill carried by us and result in
further significant writedowns, which could be material. Based on our annual
goodwill impairment test for 2003, we recorded an impairment charge of E224
million under IFRS relating to Allianz Life Insurance Company Ltd., Seoul. The
resulting impairment was derived from an evaluation of future cash flows from
the existing contract portfolio and new business and reflects the effects of
persistently low interest rates in the capital markets and the overall
unsatisfactory earnings performance of the subsidiary.

     The assumptions we made with respect to recoverability of deferred policy
acquisition costs (or DAC), are also affected by such factors as operating
performance and market conditions. DAC is incurred in connection with the
production of new and renewal insurance business and is deferred and amortized
generally in proportion to profits or to premium income expected to be generated
over the life of the underlying policies, depending on the classification of the
product. If the assumptions on which expected profits are based prove to be
incorrect, it may be necessary to accelerate amortization of DAC, even to the
extent of writing down DAC through impairments, which could materially adversely
affect results of operations. In 2003 we recorded impairments of DAC in our
German property-casualty companies totaling E24 million.

     As of December 31, 2003, we had a total of E14,364 million in deferred tax
assets and E13,509 million in deferred tax liabilities. The calculation of the
respective tax assets and liabilities is based on current tax laws and
accounting standards and depends on the performance of the Allianz Group as a
whole and certain business units in particular. At December 31, 2003, E5,753
million (2002: E4,910 million) of deferred tax assets depended on the ability to
use existing tax-loss carry forwards.

                                        9


     Changes in German or other tax legislation or regulations or an operating
performance below currently anticipated levels may lead to a significant
impairment of deferred tax assets, in which case we could be obligated to
writeoff certain tax assets. Tax assets may also need to be written down if
certain assumptions of profitability prove to be incorrect, as losses incurred
for longer than expected will make the usability of tax assets more unlikely.
Any such development may have a material adverse impact on our results of
operations.

ALLIANZ AG OPERATES BOTH AS A REINSURANCE COMPANY AND AS A HOLDING COMPANY FOR
THE ALLIANZ GROUP, AND IS EXPOSED TO VARIOUS LIQUIDITY RISKS.

     Allianz AG acts as the principal reinsurer for the Allianz Group companies.
At the same time, Allianz AG is a holding company, conducting its insurance and
financial services operations through direct and indirect subsidiaries. In
addition to premiums from our reinsurance operations, the principal sources of
Allianz AG's funds are dividends received from subsidiaries, associated
companies and other equity investments as well as funds that we may raise from
time to time through the issuance of debt or equity securities or through bank
or other borrowings. Allianz AG's uses of funds include payment of interest on
our outstanding debt, obligations arising in our reinsurance business, which may
include large and unpredictable claims including catastrophe claims, as well as
the funding of potential capital requirements of our operating subsidiaries or
of acquisitions.

     Allianz AG expects that premiums from its own reinsurance business,
together with dividends and other amounts received from subsidiaries, associated
companies and other investments, will continue to cover its operating expenses,
including interest payments on its outstanding debt, together with its
reinsurance and other obligations. As a holding company, Allianz AG can offer no
assurance, however, that funds available to it will continue to be sufficient to
meet its operating expenses, funding obligations and interest payments in the
future, and that it will not need to raise additional funds from time to time
through the issuance of debt or equity securities, through bank or other
borrowings or through dispositions of assets or other transactions, nor as to
the adequacy or timing of any such measures.

LOSS RESERVES FOR OUR PROPERTY-CASUALTY INSURANCE AND REINSURANCE POLICIES ARE
BASED ON ESTIMATES AS TO FUTURE CLAIMS LIABILITIES. ADVERSE DEVELOPMENTS
RELATING TO CLAIMS COULD LEAD TO FURTHER RESERVE ADDITIONS AND MATERIALLY
ADVERSELY IMPACT OUR RESULTS OF OPERATIONS.

     In accordance with industry practice and accounting and regulatory
requirements, we establish reserves for loss and loss adjustment expenses
related to our property-casualty insurance and reinsurance businesses, including
property-casualty business in run-off. Reserves are based on estimates of future
payments that will be made in respect of claims, including expenses relating to
such claims. Such estimates are made both on a case-by-case basis, based on the
facts and circumstances available at the time the reserves are established, as
well as in respect of losses that have been incurred but not reported (or IBNR)
to the Allianz Group. These reserves represent the estimated ultimate cost
necessary to bring all pending reported and IBNR claims to final settlement.

     Reserves, including IBNR reserves, are subject to change due to a number of
variables which affect the ultimate cost of claims, such as changes in the legal
environment, results of litigation, changes in medical costs, costs of repairs
and other factors such as inflation and exchange rates. Our earnings depend
significantly upon the extent to which our actual claims experience is
consistent with the assumptions we use in setting the prices for products and
establishing the liabilities for obligations for technical provisions and
claims. To the extent that our actual claims experience is less favorable than
the underlying assumptions used in establishing such liabilities, we may be
required to increase our reserves, which may materially adversely affect
earnings.

     Established loss reserves estimates are periodically adjusted in the
ordinary course of settlement, using the most current information available to
management, and any adjustments resulting from changes in reserve estimates are
reflected in current results of operations. We also conduct reviews of various
lines of business to consider the adequacy of reserve levels. Based on current
information available to us and on the basis of our internal procedures, our
management considers that these reserves are adequate. However, because the

                                        10


establishment of reserves for loss and loss adjustment expenses is an inherently
uncertain process, there can be no assurance that ultimate losses will not
materially exceed the established reserves for loss and loss adjustment expenses
and have a material adverse effect on our earnings. See "Information on the
Company and Operating and Financial Review and Prospects -- Property-Casualty
Insurance Reserves -- General."

     Asbestos-related and Environmental Pollution Claims.  In relation to
asbestos-related and environmental pollution, it has been necessary, and may
over time continue to be necessary, to revise estimated potential loss exposure
and, therefore, the related loss reserves. Changes in law, novel or changing
policy interpretations, evolving judicial theories as well as developments in
class action litigation add to the uncertainties inherent in claims of this
nature. As a result, we continue to monitor developments in asbestos-related and
environmental claims and may determine that further adjustments in the reserve
amounts are required in the future. In 2002, reserves were increased for
asbestos and environmental claims in the United States by E762 million following
external and internal actuarial reviews. In 2003 no revision of the loss
reserves related to asbestos and environmental claims was necessary. For further
information see "Information on the Company and Operating and Financial Review
and Prospects -- Property-Casualty Insurance Reserves -- Asbestos and
Environmental Reserves in the United States."

     Run-off Insurance Businesses.  We maintain loss reserves in our run-off
insurance businesses to cover our estimated ultimate liability for losses and
loss adjustment expenses for reported and unreported losses incurred as of the
end of each fiscal year. In 2002, we ceased underwriting certain lines of
business formerly pursued by Fireman's Fund Insurance Company (or Fireman's
Fund) in the United States, including the surety, national accounts, diversified
risk and medical malpractice lines of business. We believe that reserves
associated with lines in run-off are adequate. However, the costs and
liabilities associated with these divested and run-off businesses and other
contingent liabilities could cause us to take additional charges that could be
material to our results of operations.

ACTUARIAL EXPERIENCE AND OTHER FACTORS COULD DIFFER FROM THAT ASSUMED IN THE
CALCULATION OF LIFE/HEALTH ACTUARIAL RESERVES AND PENSION LIABILITIES.

     The assumptions we make in assessing our life/health insurance reserves may
differ from what we experience in the future. We derive our life/health
insurance reserves using "best estimate" actuarial practices and assumptions.
These assumptions include the assessment of the long-term development of
interest rates, investment returns, the allocation of investments between
equity, fixed income and other categories, policyholder bonus rates (some of
which are guaranteed), mortality and morbidity rates, policyholder lapses and
future expense levels. We monitor our actual experience of these assumptions and
to the extent that we consider that this experience will continue in the longer
term we refine our long-term assumptions. Similarly, estimates of our own
pension obligations necessarily depend on assumptions concerning future
actuarial, demographic, macroeconomic and financial markets developments.
Changes in any such assumptions may lead to changes in the estimates of
life/health insurance reserves or pension obligations.

     We have a substantial portfolio of contracts with guaranteed investment
returns, including endowment and annuity products for the German market as well
as certain guaranteed contracts in other markets. The amounts payable by us at
maturity of an endowment policy in Germany and in certain other markets include
a "guaranteed benefit," an amount that, in practice, is equal to a legally
mandated maximum rate of return on actuarial reserves. See "Information on the
Company and Operating and Financial Review and Prospects -- Regulation and
Supervision -- Insurance -- Germany -- Life Insurance." If interest rates should
remain at current historically low levels, we could be required to provide
additional funds to our life/health subsidiaries to support their obligations in
respect of products with higher guaranteed returns, or increase reserves in
respect of such products, which could in turn have a material adverse effect on
our results of operations.

     In the United States, we have a substantial portfolio of contracts with
guaranteed investment returns indexed to equity markets. We enter into hedging
arrangements in order to meet the expected returns of the contracts. There can
be no assurance that the hedging arrangements will satisfy the returns
guaranteed to policyholders.

                                        11


OUR FINANCIAL RESULTS MAY BE MATERIALLY ADVERSELY AFFECTED BY THE OCCURRENCE OF
CATASTROPHES.

     Portions of our property-casualty insurance may cover losses from
unpredictable events such as hurricanes, windstorms, hailstorms, earthquakes,
fires, industrial explosions, freezes, riots, floods and other man-made or
natural disasters, including acts of terrorism. The incidence and severity of
these catastrophes in any given period are inherently unpredictable.

     Although we monitor our overall exposure to catastrophes and other
unpredictable events in each geographic region, each of our subsidiaries
independently determines its own underwriting limits related to insurance
coverage for losses from catastrophic events. We generally seek to reduce our
exposure to these events through the purchase of reinsurance, selective
underwriting practices and by monitoring risk accumulation. However, such
efforts to reduce exposure may not be successful and claims relating to
catastrophes may result in unusually high levels of losses and could have a
material adverse effect on our financial position or results of operations.
During 2002 and 2001 we incurred significant catastrophe losses, in particular
net claims costs of approximately E1.5 billion relating to the terrorist attack
of September 11, 2001. We also suffered losses from severe flooding in Germany
and Central and Eastern Europe, which adversely affected our results by E710
million in 2002. If catastrophes affecting properties insured by us continue to
occur with such frequency or with greater frequency or severity than has
historically been the case, related claims could have a material adverse effect
on our consolidated financial position, results of operations and cash flows. In
2003, we did not experience losses from catastrophe events at the levels seen in
2002 or 2001.

WE HAVE SIGNIFICANT COUNTERPARTY RISK EXPOSURE.

     We are subject to a variety of counterparty risks, including:

     General Credit Risks.  Third parties that owe us money, securities or other
assets may not pay or perform under their obligations. These parties include the
issuers whose securities we hold, borrowers under loans made, customers, trading
counterparties, counterparties under swaps, credit default and other derivative
contracts, clearing agents, exchanges, clearing houses and other financial
intermediaries. These parties may default on their obligations to us due to
bankruptcy, lack of liquidity, downturns in the economy or real estate values,
operational failure or other reasons.

     Changes in trends and the investment climate in financial markets may
result in an increase in investment impairments on our investment assets due to
defaults and credit downgrades, and a further downturn in the economy generally
could result in increased impairments. In addition, we are subject to geographic
and industry concentrations with respect to our credit exposures, and as a
result developments in particular geographic regions or industries may adversely
impact us. In particular, we have extended significant credit to financial
institutions in Germany, and as a result any systemic risk materializing in the
German financial industry could have a material adverse effect on our results of
operations.

     Reinsurers.  We transfer our exposure to certain risks in our
property-casualty and life insurance business to others through reinsurance
arrangements. Under these arrangements, other insurers assume a portion of our
losses and expenses associated with reported and unreported losses in exchange
for a portion of policy premiums. The availability, amount and cost of
reinsurance depend on general market conditions and may vary significantly. Any
decrease in the amount of our reinsurance will increase our risk of loss. When
we obtain reinsurance, we are still liable for those transferred risks if the
reinsurer cannot meet its obligations. Therefore, the inability of our
reinsurers to meet their financial obligations could materially affect our
results of operations. Although we conduct periodic reviews of the financial
statements and reputations of our reinsurers, the reinsurers may become
financially unsound by the time they are called upon to pay amounts due, which
may not occur for many years. For a discussion of our external reinsurance
relationships, see "Information on the Company and Operating and Financial
Review and Prospects -- Property-Casualty Operations By Geographic
Region -- Germany -- Allianz AG."

                                        12


DEVELOPMENTS AT DRESDNER BANK, INCLUDING THE DEVELOPMENT OF OPERATING
PERFORMANCE, LOAN LOSS LEVELS OR WRITEDOWNS AND IMPAIRMENTS, COULD ADVERSELY
AFFECT OUR RESULTS AND MAY RESULT IN CAPITAL REQUIREMENTS THAT COULD CONSTRAIN
OUR OPERATIONS.

     In July 2001, we acquired Dresdner Bank. Our banking operations, of which
Dresdner Bank is the most significant component, suffered significant net losses
in 2002 and 2003. If improvements seen in the bank's operating performance do
not continue and stabilize, our results would continue to be adversely affected.
The future success of our banking business depends in large part on our ability
to restore the profitability of Dresdner Bank. In the event that management is
unable to successfully complete the implementation of the restructuring and
cost-cutting measures announced and started to date, our financial performance
and results of operations may be materially adversely affected.

     Dresdner Bank may need to make additional loan loss provisions or recognize
further credit losses as a result of continuing weak economic conditions,
declines in collateral value, inability to enforce security interests in
collateral, an increase in corporate or personal bankruptcies, in particular in
Germany, further deterioration of the financial position of borrowers or changes
in reserve and risk management requirements.

     Dresdner Bank has established the Institutional Recovery Unit (IRU) as a
new division that started its activities in January 2003. The IRU's task is to
develop individual solutions for loan exposures and restructuring cases. The
goal is to reduce risk capital requirements over the coming years by sale of
credit or portfolio, reduction of credit limits, work-out of loans,
restructuring of operative units, including possible sales of business
activities and modern capital market instruments. Difficulties or delays in
achieving their goal could lead to higher capital requirements for the Group.
The result of operations could be adversely affected by any need for further
reserving for potential loan losses arising in the process of selling or
restructuring loans.

     Capital ratios for Dresdner Bank at December 31, 2003 were 6.6% (2002:
6.0%) in the case of consolidated Tier 1 capital and 13.4% (2002: 10.6%) in the
case of consolidated total capital under the risk adjusted capital guidelines
(or Basle Accord) promulgated by the Basle Committee on Banking Supervision
(BIS-rules). There can be no assurance that Dresdner Bank will be able to
maintain its capital ratios at the above mentioned levels. Failure to do so
could require us to restrict our banking operations, or further support our
banking operations through injection of additional capital. Further, the
BIS-rules, which have an important impact on the capital adequacy guidelines of
the German Federal Financial Supervisory Authority (the Bundesanstalt fur
Finanzdienstleistungsaufsicht, or BaFin), are being revised and implementation
is planned for 2006. At this time, we are unable to predict how the revised
guidelines will affect our requirements for capital and the impact of these
revisions on our banking or other operations. See "Information on the Company
and the Operating and Financial Review and Prospects -- Regulation and
Supervision -- Banking, Asset Management and Investment Services
Germany -- Capital Adequacy Requirements" for a discussion of the capital
adequacy guidelines applicable to our banking operations.

MANY OF OUR BUSINESSES ARE DEPENDENT ON THE FINANCIAL STRENGTH AND CREDIT
RATINGS ASSIGNED TO US AND OUR BUSINESSES BY VARIOUS RATING AGENCIES. THEREFORE,
A DOWNGRADE IN OUR RATINGS MAY MATERIALLY ADVERSELY AFFECT RELATIONSHIPS WITH
CUSTOMERS AND INTERMEDIARIES, NEGATIVELY IMPACT SALES OF OUR PRODUCTS AND
INCREASE OUR COST OF BORROWING.

     Standard & Poor's Ratings Services (or Standard & Poor's), Moody's Investor
Services (or Moody's) and A.M. Best assign ratings to various obligations of
certain Allianz Group companies. On March 20, 2003, Standard & Poor's cut the
Allianz Group's financial strength ratings from AA to AA-, citing the Allianz
Group's negative performance and reduced capital base resulting from significant
writedowns and losses in the period to December 31, 2002, and noted that Allianz
AG continued to be on "negative outlook." Likewise, on July 25, 2003, Moody's
lowered its rating for the senior unsecured debt securities issued by Allianz
Group's finance subsidiaries from Aa2 to Aa3. This downgrade came after the
rating had been placed "under review" on May 22, 2003. The outlook on the Aa3
rating is now "stable." On March 21, 2003 A.M. Best also cut the Allianz Group's
financial strength rating from A++ to A+, and noted that Allianz AG continued to
be on "negative outlook." Rating agencies can be expected to continue to monitor
our financial

                                        13


strength, and no assurances can be given that further ratings downgrades will
not occur, whether due to changes in our performance, changes in rating
agencies' industry views or ratings methodologies, or a combination of such
factors.

     Claims paying ability and financial strength ratings are a factor in
establishing the competitive position of insurers. Our financial strength rating
has a significant impact on the individual ratings of key subsidiaries. If a
rating of certain subsidiaries falls below a certain threshold, the respective
operating business may be significantly impacted. A ratings downgrade, or the
potential for such a downgrade, of the Allianz Group or any of its insurance
subsidiaries could, among other things, adversely affect relationships with
agents, brokers and other distributors of our products and services, thereby
negatively impacting new sales, adversely affect our ability to compete in our
markets and increase our cost of borrowing. In particular, in those countries
where primary distribution of our products is done through independent agents,
such as the United States, further ratings downgrades could adversely impact
sales of our life insurance products. Any further ratings downgrades will also
materially adversely affect our cost of raising capital, and could, in addition,
give rise to additional financial obligations or accelerate existing financial
obligations which are dependent on maintaining specified rating levels.

IF OUR ASSET MANAGEMENT BUSINESS UNDERPERFORMS, IT MAY EXPERIENCE A DECLINE IN
ASSETS UNDER MANAGEMENT AND RELATED FEE INCOME.

     While the assets under management in our asset management segment include a
significant amount of funds related to affiliated Allianz Group insurance
operations, a growing portion of our assets under management, particularly
following the acquisitions of PIMCO in May 2000, Nicholas-Applegate in January
2001 and Dresdner Bank in July 2001, represents third-party funds. Results of
our asset management activities are affected by share prices, share valuation,
interest rates and market volatility. In addition, third-party funds are subject
to withdrawal in the event our investment performance is not competitive with
other asset management firms. Accordingly, fee income from the asset management
business might decline if the level of our third-party assets under management
were to decline due to investment performance or otherwise.

INCREASED GEOPOLITICAL RISKS FOLLOWING THE TERRORIST ATTACK OF SEPTEMBER 11,
2001, AND ANY FUTURE TERRORIST ATTACKS, COULD HAVE A CONTINUING NEGATIVE IMPACT
ON OUR BUSINESSES.

     After September 11, 2001, reinsurers generally either put terrorism
exclusions into their policies or drastically increased the price for such
coverage. Although we have attempted to exclude terrorist coverage from policies
we write, this has not been possible in all cases, including as a result of
legislative developments such as the Terrorism Risk Insurance Act (or TRIA) in
the U.S. Furthermore, even if terrorism exclusions are permitted in our primary
insurance policies, we may still have liability for fires and other
consequential damage claims that follow an act of terrorism itself. As a result
we may have liability under primary insurance policies for acts of terrorism and
may not be able to recover a portion or any from our reinsurers.

     At this time, we cannot assess the future effects of terrorist attacks,
potential ensuing military and other responsive actions, and the possibility of
further terrorist attacks, on our businesses. Such matters have significantly
adversely affected general economic, market and political conditions, increasing
many of the risks in our businesses noted in the previous risk factors. This may
have a material negative effect on our businesses and results of operations over
time.

CHANGES IN EXISTING, OR NEW, GOVERNMENT REGULATIONS IN THE COUNTRIES IN WHICH WE
OPERATE MAY MATERIALLY IMPACT US.

     Our insurance, banking and asset management businesses are subject to
detailed, comprehensive regulation and supervision in all the countries in which
we do business. Changes in existing laws and regulations may affect the way in
which we conduct our business and the products we may offer. Changes in
regulations relating to pensions and employment, social security, financial
services including reinsurance

                                        14


business, taxation, securities products and transactions may materially
adversely affect our insurance, banking and asset management businesses by
restructuring our activities, imposing increased costs or otherwise.

     In December 2002, the European Union (EU) adopted a directive that provides
for assessment of the capital requirements of a financial conglomerate on the
group level, supervision of risk concentration and intra-group transactions and
prevention of double-leveraging of the capital of the holding or parent company,
i.e., once in the holding or parent company and a second time in the subsidiary
("double-gearing"). We are a financial conglomerate within the scope of this
directive. The directive will only be adopted as part of German law in October
2004. The first evidence of compliance with the new rules is due as of year-end
2005. It is as yet unclear how the directive will be implemented in Germany in
detail. Therefore, it is still impossible to perform the necessary calculations
to determine what future impact these requirements will have on our capital
requirements, but there can be no assurance that the current and future level of
capital will be sufficient to meet such requirements. For more information, see
"Information on the Company and Operating and Financial Review and
Prospects -- Regulation and Supervision."

CHANGES IN TAX LEGISLATION COULD ADVERSELY AFFECT OUR BUSINESS.

     Changes to tax laws may affect the attractiveness of certain of our
products that currently receive favorable tax treatment. Under current German
tax regulations, payments received at the maturity of a life insurance policy
with a term of at least 12 years and on which premiums have been paid for at
least five years are not taxable, and the life insurance premiums are deductible
from the insured's income in the year paid, subject to certain limitations.

     In June 2004, the Law on Taxation of Pensions and Annuities
(Alterseinkunftegesetz) was adopted in Germany. Under the new law, taking effect
as from 2005, the tax exemption for payments under life insurance has been
abolished for new policies written. Instead, half of the interest income from
life insurance will be taxed as of 2005, provided the insurance runs for at
least 12 years and does not mature before age 60.

     On the other hand, the new law provides for the introduction of a so called
"basic provision scheme" which will benefit from favorable tax rules. From 2005
onwards, private pensions will be taxed at a lower tax rate than today. Based on
the new "basic provision scheme" and on further improvements relating to private
pensions which are additionally provided by the new law, new life insurance and
pension products are being developed. However, it is too early yet to reliably
assess the impact on new business.

     From time to time, governments in other jurisdictions in which we do
business have also considered changes to tax laws which could adversely affect
the tax advantages of certain of our products, and if enacted, could result in a
significant reduction in the sale of such products.

CHANGES IN VALUE RELATIVE TO THE EURO OF NON-EURO ZONE CURRENCIES IN WHICH WE
GENERATE REVENUES AND INCUR EXPENSES COULD ADVERSELY AFFECT OUR REPORTED
EARNINGS AND CASH FLOW.

     We prepare our consolidated financial statements in Euro. However, a
significant portion of the revenues and expenses from our subsidiaries outside
the Euro zone, including in the United States, Switzerland and the United
Kingdom, originates in currencies other than the Euro. We expect this trend to
continue as we expand our business into growing non-Euro zone markets. For the
year ended December 31, 2003, approximately 28.4% of our gross premiums written
originated in currencies other than the Euro.

     As a result, although our non-Euro zone subsidiaries generally record their
revenues and expenses in the same currency, changes in the exchange rates used
to translate foreign currencies into Euro may adversely affect our reported
results.

     While our non-Euro assets and liabilities, and revenues and related
expenses, are generally denominated in the same currencies, we do not generally
engage in hedging transactions with respect to dividends or cash flows in
respect of our non-Euro subsidiaries.

                                        15


THE SHARE PRICE OF ALLIANZ AG HAS BEEN AND MAY CONTINUE TO BE VOLATILE.

     The share price of Allianz AG has been volatile in the past due in part to
the high volatility in the securities markets generally, and in financial
institutions' shares in particular, as well as developments which impact its
financial results. Factors other than our financial results that may affect our
share price include but are not limited to: market expectations of the
performance and capital adequacy of financial institutions generally; investor
perception of, as well as the actual performance of, other financial
institutions; investor perception of the success and impact of the strategy,
described in this annual report; a downgrade or rumored downgrade of our credit
ratings; potential litigation or regulatory action involving the Allianz Group
or any of the industries we have exposure to through our insurance and banking
activities; announcements concerning the bankruptcy or other similar
reorganization proceedings involving, or any investigations into the accounting
practices of, other insurance or reinsurance companies or banks; and general
market volatility.

ITEM 4 - 5.  INFORMATION ON THE COMPANY AND OPERATING AND FINANCIAL REVIEW AND
             PROSPECTS

     You should read the following discussion in conjunction with our
consolidated financial statements including the notes thereto. We prepare our
consolidated financial statements in accordance with IFRS, which differ in
certain significant respects from U.S. GAAP. For a description of the
significant differences between IFRS and U.S. GAAP and a reconciliation of net
income and shareholders' equity under IFRS to U.S. GAAP, you should read Note 47
to the consolidated financial statements. Unless otherwise indicated, the
financial information we have included in this annual report is presented on a
consolidated basis under IFRS. Unless otherwise indicated, we have obtained data
regarding the relative size of various national insurance markets from annual
reports prepared by SIGMA, an independent organization which publishes market
research data on the insurance industry. In addition, unless otherwise
indicated, insurance market share data are based on gross premiums written. Data
on market share within particular countries are based on our own internal
estimates.

                                  INTRODUCTION

     Allianz AG is a stock corporation organized in the Federal Republic of
Germany under the German Stock Corporation Act. It was incorporated as Allianz
Versicherungs-Aktiengesellschaft in Berlin, Germany on February 5, 1890. It is
registered in the Commercial Register in Munich, Germany under the entry number
HR B 7158. Our registered office is located at Koniginstrasse 28, 80802 Munich,
Germany, telephone (49)(89) 3800-0. Allianz AG is the ultimate parent company of
the Allianz Group.

     The Allianz Group is among the world's largest financial services
providers, offering insurance, banking and asset management products and
services through property-casualty, life/health, banking and asset management
business segments. We are one of the largest insurance groups in the world based
on gross premiums written in 2003. We are the largest German property-casualty
and life/health insurance company based on gross premiums written in 2003. We
are also among the largest insurance companies in other countries, including
France, Italy, the United Kingdom, Switzerland and Spain. We are the
second-largest German financial institution, based on market capitalization at
March 31, 2004. We believe that we are well capitalized relative to our
competitors. As of June 18, 2004, we had financial strength ratings of A+ from
A.M. Best an AA- from Standard & Poor's, both with a negative outlook and an Aa3
senior unsecured debt rating with a stable outlook from Moody's. Our investment
portfolio includes a number of significant equity participations, primarily in
major German companies, including both financial institutions and industrial
enterprises.

     We were founded in 1890 in Berlin, Germany, and since that time we have
become the largest German insurer. Through our international expansion strategy,
we have sought to bring into the Allianz Group companies that are
well-positioned in their domestic markets and that have leading positions in
particular business lines and attractive earnings prospects. In the last several
years, our non-German insurance business has grown substantially in importance.
Gross premiums written by our non-German business represented approximately
62.5% of our total gross premiums written in 2003. We now operate in more than
70 countries worldwide and have leading market positions in many of them.

                                        16


     In 1998, building on over a century's experience in managing our extensive
insurance investment portfolio, we established financial services as our third
core business segment, in addition to our property-casualty and life/health
insurance businesses. In 2001, following our acquisition of Dresdner Bank, we
reorganized our financial services segment into separate asset management and
banking segments. Based on total assets under management as of December 31,
2003, we were one of the five largest asset managers in the world. In our
banking segment, which is now our fourth core business segment, our acquisition
of Dresdner Bank made us one of the major banks in Germany and provided us with
significantly expanded bank distribution channels for our property-casualty,
life/health and asset management products and services.

     Our German property-casualty and life/health insurance businesses are
managed by subsidiaries located primarily in Munich and Stuttgart. Our
non-German insurance businesses are locally managed. Among our largest
non-German markets are France, Italy, the United Kingdom, Switzerland, Spain and
the United States. In contrast, each of our specialty lines of credit insurance,
marine and aviation insurance, international industrial reinsurance through
Allianz Global Risks Ruckversicherungs -- AG (or Allianz Global Risks Re) and
travel insurance and assistance services is managed and operates on a global
basis. Our asset management segment also operates on a worldwide basis, with key
management centers in Munich, Hong Kong, Paris, Milan, Westport, Connecticut,
and San Diego and Newport Beach, California. Our banking segment operates
through the approximately 950 German and non-German branch offices of Dresdner
Bank and various subsidiaries, with significant operations in Germany, the
United Kingdom, other European countries and the United States.

     At December 31, 2003, we employed more than 173,000 persons in our
insurance, banking and asset management businesses worldwide, of whom more than
91,000 were based outside Germany. Through interdisciplinary and
multi-jurisdictional training and advancement programs, we seek to develop and
promote a corporate culture that emphasizes technical expertise, dedication to
client service and an international outlook.

     Our headquarters are located in Munich, Germany. In addition, we have
subsidiary, branch, representative and similar offices worldwide. We own
substantially all of the land and buildings that are used in the normal course
of our business in Europe and lease office space in various locations throughout
the world. We also have part of our investment portfolio invested in land and
buildings. We believe that our facilities are adequate for our present needs in
all material respects.

                         SUMMARY FINANCIAL INFORMATION

     The following table shows the relative contributions of our
property-casualty, life/health, banking and asset management segments and
related geographic and other subsegments to our gross premiums written, total
income and earnings after taxes before goodwill amortization in 2003, 2002 and
2001. The table also shows the impact of consolidation adjustments, amortization
of goodwill and minority interests. Consistent with our general practice, gross
premiums written, total income and earnings after taxes before goodwill

                                        17


amortization by geographic region are presented before consolidation adjustments
representing the elimination of transactions between Allianz Group companies in
different geographic regions and different segments.


                                                   YEAR ENDED DECEMBER 31,
                          -------------------------------------------------------------------------
                                         2003                                  2002
                          -----------------------------------   -----------------------------------
                                                   EARNINGS                              EARNINGS
                                                 AFTER TAXES                           AFTER TAXES
                            GROSS                   BEFORE        GROSS                   BEFORE
                           PREMIUMS     TOTAL      GOODWILL      PREMIUMS     TOTAL      GOODWILL
                          WRITTEN(1)   INCOME    AMORTIZATION   WRITTEN(1)   INCOME    AMORTIZATION
                          ----------   -------   ------------   ----------   -------   ------------
                                                       (E IN MILLIONS)
                                                                     
Property-Casualty
  Germany...............    12,646      18,645       4,239        12,314      24,019       9,068(2)
  Rest of Europe........    21,496      23,191       1,536        20,494      22,653       1,889
  NAFTA.................     5,344       4,892         (95)        5,992       5,819        (944)
  Rest of World.........     2,329       1,969         114         2,428       2,118          38
  Specialty Lines.......     4,801       4,185         278         4,948       3,712        (200)
  Consolidation
  adjustments(3)........    (3,196)     (2,110)       (601)       (2,882)     (2,765)     (1,680)
                            ------     -------      ------        ------     -------      ------
    Subtotal............    43,420      50,772       5,471        43,294      55,556       8,171
  Amortization of
  goodwill..............        --          --        (383)           --          --        (370)
  Minority interests....        --          --        (407)           --          --        (806)
                            ------     -------      ------        ------     -------      ------
                            43,420      50,772       4,681        43,294      55,556       6,995
Life/Health
  Germany...............    12,884      20,686          (4)       12,234      21,247         119
  Rest of Europe........     5,242      12,285         494         5,181      10,903        (110)
  Rest of World.........     2,564       3,725         185         3,251       4,388         (40)
  Consolidation
  adjustments(3)........        (1)         (4)         (4)           (3)         (2)         (2)
                            ------     -------      ------        ------     -------      ------
    Subtotal............    20,689      36,692         671        20,663      36,536         (33)
  Amortization of
  goodwill..............        --          --        (398)           --          --        (174)
  Minority interests....        --          --        (235)           --          --         184
                            ------     -------      ------        ------     -------      ------
    Total Life/Health...    20,689      36,692          38        20,663      36,536         (23)
Banking(4)
  Operations............        --      13,830        (912)           --      21,275      (1,142)
  Amortization of
  goodwill..............        --          --        (263)           --          --        (241)
  Minority interests....        --          --        (104)           --          --          25
                            ------     -------      ------        ------     -------      ------
    Total Banking.......        --      13,830      (1,279)           --      21,275      (1,358)(5)
Asset Management
  Operations............        --       3,059         282            --       3,185         140
  Amortization of
  goodwill..............        --          --        (369)           --          --        (377)
  Minority interests....        --          --        (183)           --          --        (230)
                            ------     -------      ------        ------     -------      ------
    Total Asset
    Management..........        --       3,059        (270)           --       3,185        (467)
                            ------     -------      ------        ------     -------      ------
Subtotal................    64,109     104,535       3,170        63,957     116,552       5,147
Consolidation
adjustments(6)..........      (722)     (2,698)     (1,280)         (804)     (8,876)     (6,643)
                            ------     -------      ------        ------     -------      ------
Total...................    63,387     101,655       1,890        63,153     107,676      (1,496)
                            ======     =======      ======        ======     =======      ======


                               YEAR ENDED DECEMBER 31,
                          ----------------------------------
                                         2001
                          ----------------------------------
                                                  EARNINGS
                                                AFTER TAXES
                            GROSS                  BEFORE
                           PREMIUMS    TOTAL      GOODWILL
                          WRITTEN(1)   INCOME   AMORTIZATION
                          ----------   ------   ------------
                                   (E IN MILLIONS)
                                       
Property-Casualty
  Germany...............    12,644     18,382       3,773
  Rest of Europe........    19,606     20,553         848
  NAFTA.................     6,822     6,837       (1,030)
  Rest of World.........     2,401     1,787           39
  Specialty Lines.......     2,321     2,303           94
  Consolidation
  adjustments(3)........    (1,657)    (1,092)       (265)
                            ------     ------      ------
    Subtotal............    42,137     48,770       3,459
  Amortization of
  goodwill..............        --        --         (349)
  Minority interests....        --        --         (746)
                            ------     ------      ------
                            42,137     48,770       2,364
Life/Health
  Germany...............    11,660     19,809         127
  Rest of Europe........     5,486     10,430         381
  Rest of World.........     3,010     3,856          (49)
  Consolidation
  adjustments(3)........       (11)       (3)          --
                            ------     ------      ------
    Subtotal............    20,145     34,092         459
  Amortization of
  goodwill..............        --        --         (146)
  Minority interests....        --        --          (84)
                            ------     ------      ------
    Total Life/Health...    20,145     34,092         229
Banking(4)
  Operations............        --     12,755         303
  Amortization of
  goodwill..............        --        --          (70)
  Minority interests....        --        --         (453)
                            ------     ------      ------
    Total Banking.......        --     12,755        (220)
Asset Management
  Operations............        --     2,738           39
  Amortization of
  goodwill..............        --        --         (243)
  Minority interests....        --        --         (182)
                            ------     ------      ------
    Total Asset
    Management..........        --     2,738         (386)
                            ------     ------      ------
Subtotal................    62,282     98,355       1,987
Consolidation
adjustments(6)..........      (694)    (2,705)       (402)
                            ------     ------      ------
Total...................    61,588     95,650       1,585
                            ======     ======      ======


---------------

(1) Represents gross premiums written for both direct business and reinsurance
    assumed between Allianz Group companies in different countries and segments,
    as well as from third parties. Our gross premiums written in respect of
    reinsurance assumed from Allianz Group companies are eliminated in
    consolidation.

                                        18


(2) Includes significant investment related results. See "-- Property-Casualty
    Insurance Operations -- Year Ended December 31, 2002 Compared to Year Ended
    December 31, 2001 -- Net Income"

(3) Represents elimination of intercompany transactions between Allianz Group
    companies in different geographic regions.

(4) Reflects the inclusion of Dresdner Bank in our consolidated financial
    statements for the full twelve months of 2002, compared to 2001, where
    Dresdner Bank was consolidated only from July 23, 2001, the date of
    acquisition.

(5) Includes a realized gain of E1,912 million resulting from the transfer in
    August 2002 of substantially all of German asset management subsidiaries of
    Dresdner Bank to Allianz Dresdner Asset Management (or ADAM). See
    "-- Banking Operations." The gain on this transfer was eliminated at the
    group level. In addition, this item includes a realized gain of E224 million
    resulting from the merger of Deutsche Hyp into Eurohypo AG (or Eurohypo) in
    August 2002. See "-- Banking Operations -- Banking Operations By
    Division -- Other -- Description of Business."

(6) Represents elimination of intercompany transactions between Allianz Group
    companies in different segments.

                              RECENT DEVELOPMENTS

     In December 2003, the minority shareholders of PIMCO exercised their option
of offering for sale a further tranche with a volume of U.S.$250 million. The
settlement of this transaction in January 2004 has further increased the Allianz
Group's interest in PIMCO. On March 31, 2004, Allianz exercised its right to
call U.S.$250 million of the remaining ownership interest that is held by the
former parent company of PIMCO, with payment therefor made in April 2004.

     On January 29, 2004, the full Management Board of Dresdner Bank AG decided
on a reorientation of the open-ended real estate fund GRUNDWERT-FONDS managed by
DEGI GmbH (of which Dresdner Bank AG holds 94% of the nominal capital). In the
course of this reorientation, Dresdner Bank AG and its subsidiaries will acquire
a real estate portfolio from the fund with a total volume of E1.8 billion.

     In a contract signed October 21, 2003, the AGF Group sold its 72.15%
interest in the bank Entenial to Credit Foncier for E418 million, with a
resulting loss of E55 million, before tax and minority interest. The required
authorization by the French supervisory authority was granted on February 4,
2004. As of this date, which was also the legal closing date, the Allianz Group
deconsolidated Entenial.

     In February 2004, Allianz AG placed a subordinated bond with a total volume
of E1.5 billion. The bond has an unlimited maturity and will pay a fixed coupon
of 5.5% for the first ten years. Allianz AG has the right to redeem the bond
after ten years. If Allianz AG does not exercise this right, the interest rate
will convert to a floating rate with a step-up of 100 basis points over the
initial credit spread. The issue was announced within the context of the Allianz
Group's 2003 capital increase and was part of a long-term plan for strengthening
the capital base of Allianz AG. Standard & Poor's has assigned the bond issue a
rating of "A-" and Moody's of "A2."

     During February and March 2004, the Allianz Group further reduced its
shareholdings in Beiersdorf AG resulting in consideration received of E994
million.

     On March 2, 2004, a further reduction of ownership interest in Munich Re
occurred as a result of the final amortization of the MILES-bond via Munich Re
shares so that Allianz Group's ownership interest in Munich Re's share capital
was reduced to 9.4 %.

     At the Annual General Meeting on May 5, 2004, shareholders approved a new
structure of authorized (authorized capital 2004/1 and 2004/2) and conditional
capital (conditional capital 2004). Details can be found in the Articles of
Association of the Allianz Aktiengesellschaft dated June 18, 2004 under Article
2. The Articles of Association are filed as exhibit 1.1 to this annual report.

     On May 6, 2004, the Allianz Group sold its participation in Messer
Griesheim Group for E623 million.

                                        19


     In June 14, 2004, Dresdner Bank Group's Institutional Restructuring Unit
(IRU) sold a E142 million loan portfolio consisting of non-strategic loans to
various sectors in continental Europe.

     At the end of June 2004, IRU sold its entire 25% shareholding in Spanish
broadcasting company Telecinco. The shares were placed within Telecinco's
initial public offering. The offer price valued the shareholding at E625
million.

     On July 5, 2004, Allianz Capital Partners GmbH, the private-equity arm of
Allianz Group, purchased nursing-home operator Four Seasons Group for GBP 775
million.

                    FACTORS AFFECTING RESULTS OF OPERATIONS

     Our results of operations are affected by demographics (particularly with
respect to life insurance) and by a variety of market conditions, including
economic cycles, insurance industry cycles (particularly with respect to
property-casualty insurance) and fluctuations in interest rates. We believe that
the impact of these factors will continue to affect our results of operations.
For the year ended December 31, 2003, approximately 37.5% of our gross premiums
were derived from our German operations. As a result, economic, demographic and
market developments in Germany have materially impacted and can be expected to
continue to materially impact our results. In addition, fluctuations in exchange
rates in non-euro zone countries in which we do business affect our
euro-denominated reported results. See "-- Exchange Rates." Our German net
income includes investment income and realized capital gains on the substantial
equity portfolio held at Allianz AG, which is part of our German
property-casualty segment.

     Global economic expectations were not met in 2003. Germany experienced
stagnation for the third consecutive year, and economic growth in the European
Union only amounted to 0.7%. We believe that the main reason for this slowdown
lies in the Iraq conflict which prevented a quick economic recovery. Employment
markets in industrialized countries also remained slow and only improved in the
second half of 2003.

     However, we believe that global markets show some signs of impending
recovery. At 2.2%, economic growth in Japan exceeded that of Europe (0.7%) for
the first time in several years. With the economy expanding by 3.1% in the
U.S.A., 2.7% in Australia and 1.7% in Canada, the industrial nations reached an
average expansion rate of 2.0% which is above expectations. Positive impulses
further came from the economies of Asia, which are rapidly catching up. Above
all, robust growth in China (8.8%) positively influenced the entire region,
increasing local performance by an average of 5.8%. With a solid 5% growth, the
Eastern European economy also made remarkable progress. Accelerated growth in
Russia (6.4%) due to higher oil prices was another major factor. Several Eastern
European economies, however, were negatively affected by the stagnation in the
European Union and registered only moderate growth. Latin America, suffered from
the political crisis in Venezuela but expanded by a modest 1.5%.

GENERAL MARKET CONDITIONS

     Property-Casualty.  This business segment was able to carry over its
positive outlook from the previous year into 2003. It is favored by risk
aversion on the part of customers and their readiness to sign up for insurance
protection. Under these circumstances, property-casualty insurers in most
business lines were able to impose rate adjustments corresponding to the actual
risk. Higher premium income and only moderate increase of the claims ratio
improved earnings for us and our competitors. During 2003 it emerged, however,
that property-casualty insurance continues to be an area of highly intensive
competition, which in some cases made it impossible to enforce the necessary
rate increases. Nonetheless, most insurers were able to improve their combined
ratio. Disciplined cost management, risk-adequate pricing and, to some extent,
more restrictive contractual conditions with clear coverage limits instead of
unlimited risk transfers all contributed to lower the combined ratio. Higher
underwriting capacities on the part of reinsurers allowed primary insurers to
spread their risks over a broader base. The most important property and casualty
line, automobile insurance, developed quite differently in various markets: in
Germany, it grew by about 2% after close to 3% in the

                                        20


previous year, mainly due to the lower number of new car registrations.
Simultaneously, Spanish automobile insurers enjoyed an extraordinarily increase
of over 6%.

     Life/Health.  In most industrialized countries, citizens are becoming
increasingly aware of changing demographics and the resulting problems for
retirement and other social benefits previously provided by government.
Additional private and corporate retirement insurance has become a widely
acknowledged topic, and frequently, life insurance plays a predominant role in
this discussion. Consequently this business segment continues to attract strong
demand, for example in Germany. This demand is concentrated on the major,
financially strong providers; a reaction to unstable capital markets making it
very difficult for a number of smaller insurers to generate expected returns on
investment. A drop in performance at the beginning of 2003 and persistently low
interest rates put noticeable pressure on the investment income of many life
insurers. While interest rates slightly increased in the second half of 2003,
they remain at a low level, a challenge for the financial management of life
insurers.

     Several positive developments were provided by changes in legislation in
Germany, including the retirement system reform and the concomitant reevaluation
of company retirement provision schemes. However, the 2003 sale of private
provision instruments, such as the state sponsored "Riester" pension plans, did
not meet our expectations. Overall, industry-wide premium income increased 3%.
The development in other markets such as Italy and France, however, was
positive. Generally, life insurance industry still feels the reluctance of
customers with respect to unit-linked life insurance, which is a natural
reaction to developments in the financial markets.

     Mandatory health insurance is also undergoing a financial crisis, at least
in Germany. The resulting discussion about future financing concepts and the
curtailed scope of benefits, which ultimately brought about a change of law, has
proved a driving factor for the entire insurance industry. Driven by rate
adjustments and rising health care costs, they outpaced the already good growth
of the prior year by a solid 6%. The introduction of a higher income limit for
mandatory health insurance, which reduced the number of voluntarily insured
policyholders likely to opt for private insurance, however, affected our results
negatively.

     Asset Management.  The fund management industry was severely impacted by
the uncertainty in capital markets. Investor confidence only returned in the
second half of 2003. Unsteady price development in the stock and fixed-interest
markets made money market funds as popular and successful as in 2002. Total fund
assets increased after having suffered a decline in each of the two previous
years. That rekindled the hope of a return to the growth rates of the past.

     In nearly all industrialized nations, citizens have to make private
retirement insurance arrangements to compensate for the cut in benefits provided
by state pension systems. In a number of countries such as Sweden and nearly all
new members of the European Union, workers are required by law to make
retirement provisions by paying into pension funds. A part of these
contributions is directly invested in pension funds that are managed by
institutional asset managers and not by the state. The funds industry also
benefits from the fact that the baby boomer generation is now growing into a
phase of life where retirement planning is receiving increasing attention. This
effect was observed in nearly all major markets, although there are some
significant time lags. Overall, providing for the baby boomers' retirement needs
is a particularly strong growth engine for asset management in Europe and the
U.S.A., and to an increasing extent also in Asia.

     Banking:  The German banking sector has entered a phase of fundamental
transformation. The liberalization of the financial market and, even more,
technical progress, are opening the door to vast economies of scale and thereby
increase the pressure towards consolidation. To a growing extent, banks are
concentrating their efforts on profitable core business areas, a process that is
accelerated by the prospect of new equity rules ("Basel II"). They are reducing
vertical integration and breaking up the value-creation chain to make more
effective use of available capital. Simultaneously, they are cutting costs
through process automation, product standardization, outsourcing and other
efficiency measures. Risk management is being improved in order to level off
risk costs, despite the still high number of insolvencies. These measures have
strengthened the operating base of the banking business.

                                        21


     At the same time, the general business context is showing signs of
improvement. While the gradual recovery of the economy in the second half was
not sufficient to bring about a decisive revitalization of the retail business,
the overall brighter picture in the capital markets had a positive impact on
trading income and lent support to the securities business.

     German Banks continue to suffer from the highly fragmented market. Even the
four biggest institutions combined have a market share of less than 16%. In
other European countries, the corresponding figure is three or four times as
high. This deprives German banks of the strong domestic earnings base that
international competitors have. But the current restructuring and cost cutting
efforts helped by economic recovery should ensure that German banks compensate
for this handicap.

CAPITAL MARKETS

     The development of capital markets plays a major role for our operations.
It is reflected in our turnover and our earnings positions, but also influences
shareholders' equity because the valuation of reserves fluctuates along with
market performance. In view of the uncertainties in the first half of 2003,
customers remained cautious and preferred low-risk investments.

STOCK MARKETS

     Stock indexes moved significantly over the course of 2003. After a
three-year decline they came under heavy pressure in the spring of 2003, mainly
due to the Iraq crisis and the subsequent war. In this situation, investors
shielded away from risk. The result was clearly evidenced by the development of
indexes in March 2003: the German stock index DAX slipped to 2,200 points,
Standard & Poor's to 800 points. After the realization that the military
confrontation in Iraq would be short, a significant recovery began. Positive
economic indicators and corporate profits in the U.S.A. helped the turnaround.
Over the course of 2003, the DAX rose 37% and Standard & Poor's closed with a
plus of 26%.

BOND MARKETS

     The markets for fixed-interest securities which are a main factor
influencing our operations moved took a different turn than the stock markets.
Until March 2003, investors showed increased interest in highly rated bonds. The
main beneficiaries of this risk-averse behavior were government bonds with
yields for ten-year maturities declining to a historic low of 3.3% in Germany
and 3.1% in the U.S.A. This trend was supported by the central banks' money
policy: The U.S. Federal Reserve lowered its funds rate to 1%, while the
European Central Bank cut its prime rate to 2%. Fears of deflation helped to
accelerate the decline in yield of fixed-interest paper. When these fears had
diminished and inflation once again became a factor in the second half of the
year, fixed-interest securities came under heavy pressure. In only six weeks,
yields climbed 130 basis points in the U.S.A. and 80 in Germany.

EXCHANGE RATES

     Despite the insecurity at the beginning of 2003 over the course of events
in Iraq, the U.S. dollar was relatively strong with respect to the euro. After
the end of the Iraq crisis, markets undertook a strong revaluation of the euro.
While the exchange rate decreased slightly over the summer of 2003, the trend
reversed in September and the euro strongly gained towards the dollar. During
2003 the value of the euro increased more than 15% with respect to the dollar.
The euro also gained 8.3% on the pound sterling and 7% on the Swiss franc.

                   CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     We have identified the accounting policies and estimates that are critical
to our business operations and the understanding of its results of operations.
These critical accounting policies and estimates are those which involve the
most complex or subjective decisions or assessments, and relate to
property-casualty and life/health insurance reserves, loan loss allowances, the
determination of the fair value of financial assets and

                                        22


liabilities (including impairment charges), goodwill, deferred policy
acquisition costs and deferred taxes. In each case, the determination of these
items is fundamental to our financial position and results of operations, and
requires management to make complex judgments based on information and financial
data that may change in future periods. As a result, determinations regarding
these items necessarily involve the use of assumptions and subjective judgments
as to future events and are subject to change, and the use of different
assumptions or data could produce materially different results.

PROPERTY-CASUALTY INSURANCE RESERVES

     Loss and loss adjustment expense reserves, including estimates of costs for
claims related to reinsured events that have occurred but have not yet been
reported (or IBNR), are recorded for when insured events occur. Loss and loss
adjustment expense reserves are derived from best estimate assumptions and
appropriate actuarial methods, and are based on the estimated ultimate cost of
settling claims, using past experience adjusted for current trends and other
relevant factors. The establishment of loss and loss adjustment expense reserves
is an inherently uncertain process and subject to variability, involving
assumptions as to factors such as court decisions, changes in laws, social,
economic and demographic trends, inflation and other factors affecting claim
costs. Assumptions underlying the loss and loss adjustment expense reserve may
not in fact materialize as expected, and even if future conditions do develop as
anticipated, random events may occur which lead to different results than
originally estimated.

     These reserves are estimates based on actuarial and statistical projections
of the expected cost of the ultimate settlement and administration of claims.
The analyses are based on facts and circumstances known at the time, predictions
of future events, estimates of future inflation and other societal and economic
factors. Late reported claim trends, claim severity, exposure growth and future
inflation are examples of factors used in projecting the IBNR reserve
requirements. These reserves are reviewed and revised periodically as additional
information becomes available and actual claims are reported.

     When actual claims experience differs from previous estimates, the
resulting difference will generally be reflected in the Allianz Group's reported
results for the period of the change in estimate. In recent years, the Allianz
Group's property-casualty loss and loss adjustment expense reserves in the
United States have been significantly impacted by claims relating to asbestos
and environmental exposures. For a further discussion of our property-casualty
insurance reserves, see "-- Property-Casualty Insurance Reserves" and "Key
Information -- Risk Factors -- Loss reserves for our property-casualty insurance
and reinsurance policies are based on estimates as to future claims liabilities.
Adverse developments relating to claims could lead to further reserve additions
and materially adversely impact our results of operations."

LIFE/HEALTH INSURANCE RESERVES

     The provision for aggregate policy reserves for traditional life/health
insurance products is computed using the net level premium method. It represents
the present value of estimated future policy benefits to be paid less the
present value of estimated future net premiums to be collected from
policyholders. The method uses best estimate assumptions for mortality,
morbidity, expected investment yields, lapses, surrenders and expenses at the
policy inception date, which remain locked-in thereafter. The reserve is
adjusted for a provision of adverse deviation, which is used to provide a margin
for fluctuation and uncertainty inherent in the assumption setting process.

     The provision for aggregate policy reserves for traditional participating
life insurance products is also computed using the net level premium method. The
method in this case uses best estimate assumptions for mortality, morbidity and
interest rates that are guaranteed in the contract or are used in determining
the dividends.

     The provision for aggregate policy reserves for non-traditional life
products is equal to the account balance, which represents premiums received and
allocated investment return credited to the policy less deductions for mortality
costs and expense charges. Best estimate assumptions include, but are not
limited to, interest, expenses, lapses, surrenders, mortality, morbidity and
future bonuses. Current and historical client data, as well as industry data,
are used to determine these assumptions. Assumptions for interest reflect

                                        23


expected earnings on assets, which back the future policyholder benefits. The
information used by our qualified actuaries in setting such assumptions
includes, but is not limited to, pricing assumptions, available experience
studies, profitability analysis and embedded value assumptions. The level of
conservatism built into the assumptions and estimates will impact the current
earnings and emergence of future profits.

LOAN LOSS ALLOWANCES

     Impaired loans represent loans, for which, based upon current information
and events, it is probable that the Allianz Group will not be able to collect
all interest and principal amounts due in accordance with the contractual terms
of the loan agreements.

     The allowance for loan losses represents management's estimate of probable
losses that have occurred in the loan portfolio and other lending-related
commitments as of the date of the consolidated financial statements. The
allowance for loan losses is reported as a reduction of assets and the
provisions for contingent liabilities, such as guarantees, loan commitments and
other obligations are carried as liabilities.

     To allow management to determine the appropriate level of the allowance for
loan losses, all significant counterparty relationships are periodically
reviewed. A specific allowance is established to provide for specifically
identified counterparty risks. Specific allowances are established for impaired
loans. The amount of the impairment is based on the present value of expected
future cash flows or based on the fair value of the collateral if the loan is
collateralized and foreclosure is probable. If the amount of the impairment
subsequently increases or decreases due to an event occurring after the initial
measurement of impairment, a change in the allowance is recognized in earnings
by a charge or a credit to net loan loss provisions.

     A general allowance is established to provide for incurred but unidentified
losses that are inherent in the loan portfolio as of December 31, 2003. General
allowances for loan losses are established for loans not specifically identified
as impaired. The amount of the allowance is based on historical loss experience
and management's evaluation of the loan portfolio under current events and
economic conditions.

     A country risk allowance is established for transfer risk. Transfer risk is
a measure of the likely ability of a borrower in a certain country to repay its
foreign currency-denominated debt in light of the economic or political
situation prevailing in the country. Country risk allowances are based on a
country risk rating system that incorporates current and historical economic,
political and other data to categorize countries by risk profile.

     Loans are charged-off when, based on management's judgement, all
economically sensible means of recovery have been exhausted. At the point of
charge-off, the loan as well as any specific allowance associated with the loan
must be removed from the balance sheet or a charge may be recorded to directly
charge-off the loan. A charge-off may be full or partial. Subsequent to a
charge-off, recoveries, if any, are recognized in the income statement as a
credit to net loan loss provisions.

     The provision for loan loss, which is charged to net income, is the amount
necessary to adjust the allowance to a level determined through the process
described above.

FAIR VALUES AND IMPAIRMENTS

     A significant portion of our assets and liabilities is recorded at fair
value, including trading assets and liabilities, and securities
available-for-sale. Fair value determinations for financial assets and
liabilities are based generally on listed market prices or broker or dealer
price quotations. If prices are not readily determinable, fair value is based on
either internal valuation models or management's estimate of amounts that could
be realized under current market conditions. Fair values of certain financial
instruments, including over-the-counter (OTC) derivative instruments, are
determined using pricing models that consider, among other factors, contractual
and market prices, correlations, time value, credit, yield curve volatility
factors and/or prepayment rates of the underlying positions. The use of
different pricing models and assumptions could lead to different estimates of
fair value.

                                        24


VALUATION OF SECURITIES AVAILABLE-FOR-SALE

     All investments in our investment portfolio are subject to regular
impairment reviews. Generally, the carrying value of our investments is reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. Impairments are measured as the
difference between the amortized cost of a particular investment and the current
fair value (for equity instruments) or the recoverable amount (for debt
instruments).

     Securities available-for-sale are recorded at fair value, and are reviewed
regularly for impairments. Impairments recorded on investments to bring the
investment to its current fair value are charged to income if an
other-than-temporary diminution in value occurs. As of the closing date for each
quarter and year-end, we identify, on an Allianz Group-wide basis, all
securities whose market values are other-than-temporarily below amortized cost
based on our policy guidelines. Fair value determinations for financial assets
and liabilities are based generally on listed market prices, broker or dealer
price quotations or internal valuations if none of the aforementioned pricing
information exists.

FIXED INCOME SECURITIES

     Fixed income securities classified as available-for-sale are valued at
current fair value. We record an impairment on a fixed income security if a
decline in the fair value of a fixed income security is other-than-temporary.
Objective evidence that decline in the fair value of a fixed income security is
other-than-temporary or uncollectible includes information that comes to the
attention of the Allianz Group regarding:

     - significant financial difficulty of the issuer;

     - an actual breach of contract, such as a default or delinquency in
       interest or principal payments;

     - granting by the lender to the borrower, for economic or legal reasons
       relating to the borrower's financial difficulty, of a concession that the
       lender would not otherwise consider;

     - a high probability of bankruptcy or other financial reorganization of the
       issuer;

     - recognition of an impairment loss on that asset in a prior financial
       reporting period;

     - the disappearance of an active market for that financial asset due to
       financial difficulties; or

     - a historical pattern of collections of accounts receivable that indicates
       that the entire face amount of a portfolio of accounts receivable will
       not be collected.

     However, the disappearance of an active market because an issuer's
securities are no longer publicly traded is not evidence of impairment. A
downgrade of an issuer's credit rating is not, of itself, evidence of
impairment, though it may be evidence of impairment when considered with other
available information.

     Additionally, if no positive intention or ability of Allianz Group's
management to hold a security through the anticipated recovery period exists, an
impairment is recorded. The Allianz Group analyzes all fixed income securities
whose recoverable amount has been permanently for more than 6 months by more
than 20% below amortized cost. In such instances, additional subjective criteria
for diminution in value are taken into account, including:

     - significant downgrade (already occurred or imminent) by one or several
       rating agencies;

     - accumulation of defaults within a certain industry or geographic region;

     - change in recommendations of investment advisors of market analysts.

     Generally, we do not consider fixed income instruments impaired if the
decline in value is caused solely by changes in interest rates.

                                        25


EQUITY SECURITIES

     Equity securities categorized as securities available-for-sale are valued
at current fair value. We record an impairment on an equity security if a
decline in the fair value of an equity security is other-than-temporary. An
impairment is required to be recorded on our equity securities if we determine
that one or more of the following objective criteria applies:

     - significant financial difficulty of the issuer;

     - a high probability of bankruptcy or other financial reorganization of the
       issuer;

     - the disappearance of an active market for the financial asset due to
       financial difficulties;

     - discontinuation of the basis for business or of a substantial part of the
       basis for business for technological, economic or legal reasons;

     - not existing intention or ability of Allianz Group's management to hold
       the security through the anticipated recovery period.

     In 2001, we generally considered a decline in fair value in an equity
security classified as available-for-sale to be other-than-temporary if the fair
value of the security was continuously for a period of more than six months more
than 30% below both the weighted-average amortized cost of the individual
Allianz Group company that held the security and the Allianz Group's
weighted-average amortized cost. In these instances we recorded an impairment on
equity securities held by Allianz Group companies that were in an unrealized
loss position.

     In 2002, we modified our policy and generally considered a decline to be
other-than-temporary if the fair value was continuously for a period of more
than six months 20% or more below both the weighted-average amortized cost of
the individual Allianz Group company that held the security and the Allianz
Group's weighted-average amortized cost.

     As of December 31, 2003, we applied a further criterion and generally
considered a decline in fair value to be other-than-temporary for all publicly
traded equity securities which have been permanently in an unrealized loss
position for more than 12 months.

     Finally, if one or more of the following indicators applies, equity
investments are subject to further in-depth review:

     - deterioration in recommendations of investment advisors or market
       analysts;

     - issuer's industry or region is in a sustained recession, which is also
       reflected in the respective stock indices;

     - decline in the issuer's price-to earnings (P/E) ratio;

     - losses recently incurred by the issuer;

     - change in the issuer's dividend policy; or

     - specific events which impact the business operations of the issuer.

     Moreover, an impairment loss is recorded, if the fair value of an equity
security has declined more than 80% below amortized cost as of the end of any
fiscal quarter.

     Additionally, the Allianz Group also applies subjective criteria when
analyzing equity securities for potential impairment.

     Management Judgment Analysis.  If the criteria mentioned above indicate an
impairment but recovery of the amortized cost is still expected in the
medium-term, the decrease in value may still be considered temporary based on
management's judgment, provided we have the positive intent and ability to hold
the

                                        26


investment for a period of time sufficient to allow for a recovery in fair
value. The following information is required to support any decision not to
record an impairment in such cases:

     - positive evaluations of market analysts including fundamental analysis
       and future price targets;

     - relative performance of the investment compared to regional and industry
       benchmarks indicate that the decrease in value is attributable to
       industry or market conditions, rather than issuer-specific problems;

     - historical share price development -- in particular taking into account
       high and low market prices during the last 12 months -- and volatility in
       share prices indicate that amortized cost may be recovered in the near
       future; and

     - specific positive intentions and ability to hold the investment exist.

     A decision based on management judgment is required to follow these
guidelines, is required to be supported by full documentation and is required to
be updated at regular intervals. To ensure consistency, decisions based on
management judgment may only be taken at the Allianz Group level and not by any
of the Allianz Group's subsidiaries.

     Private Equity Investments.  Direct private equity investments, which are
mostly non-traded securities, are carried by the Allianz Group at fair value
based on quarterly valuations. These valuations, which also serve the purpose of
impairment tests, are based on multiples such as earnings before interest,
taxes, depreciation and amortization (EBITDA), earnings before interest and
taxes (EBIT) or P/E ratios. If appropriate, discounted cash flow models or
leveraged buyout (LBO) models are applied as well as part of the impairment
testing. Moreover, additional information from the financial reports of the
companies held within our private equity investment portfolio, which Allianz
Capital Partners is invested in, are taken into consideration. If a decline in
the fair value of an investment is ultimately determined to be other-than-
temporary, an impairment is recorded.

     Investments In Private Equity Funds.  The Allianz Group's valuation of
investments in private equity funds, or funds of funds, relies primarily on
information relating to net asset value (NAV) provided by the general partners
of such funds. In the case of an insolvency or the filing for Chapter 11
(liquidation) of a fund, the Allianz Group records an impairment. In addition,
the Allianz Group also analyses subjective criteria when assessing whether an
other-than-temporary diminution in value has occurred. Specifically, all funds
whose commitments are invested by more than 40% and whose running time exceeds 3
years, are subject to an impairment test. An impairment is recorded if the NAV
provided by the general partner has continuously been for a period of more than
six months 20% or more below the amortized cost. The impairment recorded by the
Allianz Group constitutes the difference between the amortized costs, reduced by
all or a portion of the relevant management fee, and the NAV of the fund.

VALUATIONS OF SECURITIES HELD-TO-MATURITY

     The fair value of individual securities held-to-maturity can fall
temporarily below their carrying value, but, provided there is no risk resulting
from changes in financial standing, no impairment is recorded for such
securities.

     For a discussion of impairment charges taken in 2003, see "-- Investment
Portfolio Impairments and Unrealized Losses" and "Key Information -- Risk
Factors -- Market risks could impair the value of our portfolio and adversely
impact our financial position and results of operations."

GOODWILL

     Goodwill is tested for impairment on an annual basis, or more frequently if
there are indications that the goodwill may be impaired.

     Present value, other valuation techniques, or a combination thereof to
derive a fair value, require our management to make subjective judgments and
assumptions. Factors we consider in determining the fair values of reporting
units include quoted market prices, current share values in the market place for
similar

                                        27


publicly traded entities, prices of comparable businesses, recent acquisitions
of similar entities in the market place, recent trends in our share price and
that of our competitors, estimates of our future earnings potential and the
level of interest rates.

     The single most significant amount of goodwill relates to the acquisition
of Dresdner Bank. The valuation model used to determine the fair values is
sensitive to changes in assumptions about the discount rate, growth rate and
expected cash flows (i.e. assumptions about the future performance of the
business). Adverse changes relating to any of these factors could require us to
record a goodwill impairment charge.

     Indications of impairment include any events or changes in circumstances
that indicate that the carrying amount of goodwill may not be recoverable.
Therefore, an element of judgment in (i) evaluating when the indication of an
impairment is significant enough to require a full test to be undertaken, and
(ii) determining the market value to be used to assess recoverability of the
carrying value, is necessary. Should a market value not be available, a fair
value in use will be determined and compared to the carrying value.

     For further information see "Key Information -- Risk Factors -- Market
factors, as well as a lack of improvement in our operating performance, could
adversely affect goodwill, deferred policy acquisition costs and deferred tax
assets; our deferred tax assets are also potentially impacted by changes in tax
legislation."

DEFERRED POLICY ACQUISITION COSTS

     Deferred policy acquisition costs consist primarily of commissions,
underwriting expenses and policy issuance costs, which vary with and are
directly related to the acquisition and renewal of insurance contracts. Such
acquisition costs are deferred and amortized to the extent they are recoverable.

     Deferred policy acquisition costs for property-casualty insurance products
are amortized over the periods in which the related premiums are earned.

     Deferred policy acquisition costs for traditional life/health products are
amortized over the premium paying period of the related policies in proportion
to the net level premium using assumptions consistent with those used in
computing the provision for aggregate policy reserves as previously noted. The
methods use best estimate assumptions for mortality, morbidity, expected
investment yields, terminations and expenses at the policy inception date and
remain locked-in thereafter. These assumptions are adjusted for a provision of
adverse deviation, which is used to provide a margin for fluctuation and
uncertainty inherent in the assumption setting process.

     Deferred policy acquisition costs on participating traditional life
insurance products are amortized over the expected life of the contracts in
proportion to the estimated gross margins (or EGMs). The present value of
estimated gross margins is computed using the expected investment yield. EGMs
include estimates of premiums to be received, expected earned investment income,
benefits to be paid, administration costs, changes in reserve for death and
other benefits, expected annual policyholder dividends and realized gains and
losses. Estimates of expected gross margins are determined on a best estimate
basis without provisions for adverse deviation and are re-evaluated on a regular
basis where actual margins replace estimated margins when actual profits emerge.

     Deferred policy acquisition costs on non-traditional life products are
amortized over the expected life of the contracts as a constant percentage of
estimated gross profits (or EGPs). The present value of EGPs is computed using
the interest that accrues to the policyholders, known as the contract rate. EGPs
include estimates regarding mortality, administration costs, expected investment
income to be earned less interest credited to policyholders, surrender charges
and realized gains and losses.

     The level of conservatism built into the assumptions and estimates used
will impact the current earnings and the emergence of future profits. Management
regularly reviews the potential for changes in the estimates (both positive and
negative) and uses the results of these evaluations to adjust recorded
amortization expenses and to adjust underwriting criteria, which could be
material to the Allianz Group's insurance operations.

     Loss recognition analysis is performed by line of business, in accordance
with our manner of acquiring, servicing and measuring the profitability of our
insurance contracts. Net unearned premiums are tested to

                                        28


determine whether they are sufficient to cover related expected claims, loss
adjustment expenses, policyholder dividends, commission, amortization and
maintenance expenses. If there is a premium deficiency, the deferred policy
acquisition cost is written down by the amount of the deficiency. If after
writing down all of the deferred policy acquisition cost asset for a line of
business a premium deficiency still exists, a premium deficiency reserve is
recorded to provide for the deficiency in excess of the deferred policy
acquisition cost asset written down.

     For further information see "Key Information -- Risk Factors -- Market
factors, as well as a lack of improvement in our operating performance, could
adversely affect the levels of goodwill, deferred policy acquisition costs and
deferred tax assets; our deferred tax assets are also potentially impacted by
changes in tax legislation."

DEFERRED TAXES

     Deferred tax assets are recognized on deductible temporary differences
between the tax bases and the carrying amounts of assets and liabilities in the
Allianz Group's IFRS consolidated balance sheet and tax losses carried forward
as of the balance sheet date. Deferred taxes are calculated based on the current
income tax rates enacted in the respective country.

     The realization of deferred tax assets on temporary differences depends on
the generation of sufficient taxable profits in the period in which the
underlying asset or liability is recovered or settled. The realization of
deferred tax assets on tax losses carried forward requires that sufficient
taxable profits are available prior to the expiration of such tax losses carried
forward. As of each balance sheet date, management evaluates the recoverability
of deferred tax assets, whereby projected future taxable profits and tax
planning strategies are considered. If management considers it is more likely
than not that all or portion of a deferred tax asset will not be realized, a
corresponding valuation allowance is taken.

     The accounting estimates related to the valuation allowance are based on
management's judgment and currently available information, primarily with
regards to projected taxable profits. Assumptions about matters which are
uncertain and partly beyond management's control are taken into account. These
assumptions may change from period to period. If the Allianz Group is not able
to generate sufficient future taxable profits, a corresponding adjustment to the
valuation allowance is recorded.

     For further information "Key Information -- Risk Factors -- Market factors,
as well as a lack of improvement in our operating performance, could adversely
affect the levels of goodwill, deferred policy acquisition costs and deferred
tax assets; our deferred tax assets are also potentially impacted by changes in
tax legislation."

                         OFF-BALANCE SHEET ARRANGEMENTS

     In the ordinary course of business, the Allianz Group enters into
arrangements that, under IFRS, are not recognized on the consolidated balance
sheet and do not affect the consolidated income statement. Such arrangements
remain off-balance sheet as long as the Allianz Group does not incur an
obligation from them or become entitled to an asset itself. As soon as an
obligation is incurred, it is recognized on the Allianz Group's consolidated
balance sheet, with the corresponding loss recorded in the consolidated income
statement. However, in such cases, the amount recognized on the consolidated
balance sheet may or may not, in many instances, represent the full loss
potential inherent in such off-balance sheet arrangements. The importance of
such arrangements to the Allianz Group as it concerns liquidity, capital
resources or market and credit risk support, is not overly significant.
Additionally, the Allianz Group does not heavily rely on off-balance sheet
arrangements as a significant source of revenue. Similarly, the Allianz Group
has not incurred significant expenses from such arrangements and does not
reasonably expect to do so in the future. The following discusses distinct areas
the Allianz Group is involved in off-balance sheet arrangements as of December
31, 2003.

                                        29


     GUARANTEES

     See Note 43 to our consolidated financial statements.

     SYNTHETIC SECURITIZATION

     The Dresdner Bank Group, in order to seek a Tier-1 capital release,
conducted a synthetic securitization to place credit risk from a designated loan
portfolio on the open market. As of December 31, 2003, credit risks in the
amount of E1,000 million had been transferred to third-parties using a special
purpose vehicle, which is not consolidated within the Allianz Group's
consolidated IFRS financial statement, or U.S. GAAP condensed financial
statements in Note 47.

     DERIVATIVE INSTRUMENTS RECORDED IN SHAREHOLDERS' EQUITY

     We have no derivative contracts linked to our own shares that are accounted
for within shareholders' equity. We do enter into various types of option
contracts indexed to Allianz AG shares with third-parties, both as a hedge of
Allianz Group's future obligations under our Stock Appreciation Right incentive
plans and in connection with the various banking products offered by the
Dresdner Bank Group. See Note 40 to our consolidated financial statements for
further information.

     VARIABLE INTEREST ENTITIES (VIES)

     See Note 47 to our consolidated financial statements.

     In the context of the "Silver Tower" asset-backed program of the Dresdner
Bank Group, in which third-party receivables and receivables of the Dresdner
Bank Group are securitized, and which is refinanced by commercial paper,
Dresdner Bank Group has granted short-term credit lines in the amount of E9.4
billion in the event that a refinancing through commercial paper is not
possible. As of December 31, 2003, E1.3 billion of such credit lines had been
used for refinancing instead of the placement of commercial paper. The risk
exists that the Dresdner Bank Group would be required to use its own credit
lines by up to further E8.1 billion, which would accordingly raise its
regulatory risk-weighted assets.

                 TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS



                                           PAYMENTS DUE BY PERIOD AT DECEMBER 31, 2003(1)
                                     -----------------------------------------------------------
                                              LESS THAN                                MORE THAN
                                     TOTAL     1 YEAR     1 - 3 YEARS   3 - 5 YEARS     5 YEARS
                                     ------   ---------   -----------   ------------   ---------
                                                           (E IN MILLIONS)
                                                                        
Long-term Debt Obligations(2)......  13,738       641        4,363         4,020         4,714
Capital (finance) Lease
  Obligations......................       0         0            0             0             0
Operating Lease Obligations........   2,092       273          429           280         1,110
Purchase Obligations(3)............   2,016     1,911           84             5            16
Other Long-term Liabilities(4).....   5,777       732        1,089         1,061         2,895
  Total Contractual Obligations....  23,623     3,557        5,965         5,366         8,735


---------------

(1) The table sets forth the Allianz Group's contractual obligations as of
    December 31, 2003. Contractual obligations do not include contingent
    liabilities or commitments and only transactions with parties outside the
    Allianz Group are considered.

(2) Long-term debt obligations also include future payments due as well as
    capital leases.

(3) Purchase obligations only include transactions related to goods and
    services; purchase obligations for financial instruments are excluded.

(4) Other long term liabilities, which include accumulation of payment
    information on any other long term liabilities based on classifications in
    the IFRS balance sheet, comprise mainly estimated future benefit payments in
    an aggregate of E5,264 million. For detailed information see Note 21 of the
    our consolidated financial statements.

                                        30


                  CHANGES TO ACCOUNTING AND VALUATION POLICIES

     See Note 2 to our consolidated financial statements.

                       CONSOLIDATED RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002

     Our total income decreased by E6,021 million, or 5.6%, to E101,655 million
in 2003 from E107,676 million in 2002, due primarily to decreased interest and
similar income in our banking segment attributable to the deconsolidation of
Deutsche Hyp in the second half of 2002 and the reduction of risk-weighted
assets in 2003. Our earnings from ordinary activities before taxation increased
by E4,494 million, or 375.2%, to E2,861 million in 2003 from a loss of E1,633
million in 2002. We had a consolidated tax expense of E146 million in 2003,
representing an overall effective tax rate of 3.3%, compared to statutory rates
for our primary German and other operating subsidiaries that ranged from 12.5%
to 45.5% and averaged 31.3%. The low effective tax rate in 2003, as compared to
the average statutory tax rate, was due primarily to tax exempted income and to
the utilization of tax losses carried forward for which no deferred tax asset
was recognized as well as due to the recognition of deferred tax assets on tax
losses carried forward previously not recognized. In 2002, we had a consolidated
tax benefit of E807 million, representing overall effective tax rate of (60.9)%,
compared to statutory rates for our primary German and other operating
subsidiaries that ranged from 12.5% to 45.5% and averaged 32.6%. The
consolidated tax benefit in 2002 was due primarily to tax exempted income.

     Net income increased significantly by E3,386 million to E1,890 million in
2003, compared to a net loss of E1,496 million in 2002, reflecting primarily
improvements in our property-casualty segment's underwriting results, decreased
net loan loss provisions in our banking segment and realized gains from the
reductions in investments in associates. Our property-casualty insurance
business was positively affected by a significant decrease in net claims,
reflecting the comparative lower levels of natural catastrophes and other major
claim events in 2003, as compared to 2002, which reflected the asbestos and
environmental reserve-strengthening measures of Fireman's Fund and severe
flooding in Germany and Central and Eastern Europe in 2002. Net loan loss
provisions in our banking segment decreased to E1,014 million in 2003 from
E2,222 million in 2002, reflecting primarily optimized rating procedures and
restructured loan portfolio and reduced defaults from large loan exposures.
Total results from investments increased by E1,773 million, or 11.2%, to E17,583
million in 2003 from E15,810 million in 2002, due primarily to the recovery in
the equity markets, offset in part by impairment writedowns on securities
available-for-sale and decreased trading income. For additional information on
our results from investments, see "-- Asset Management Operations -- Group's Own
Investments -- Year Ended December 31, 2003 Compared to Year Ended December 31,
2002." Impairments on securities available-for-sale totaled E4,412 million in
2003, as compared to E6,287 million in 2002, reflecting primarily the weak
equity markets in the first quarter of 2003 as well as impairments relating to
certain equity securities in the fourth quarter of 2003. Net trading income
decreased by E1,264 million, 83.9%, to E243 million in 2003 from E1,507 million
in 2002, reflecting primarily expenses of E1,359 million from derivative
financial instruments used by our insurance operating entities which do not
qualify for hedge accounting.

                                        31


     The following table sets forth the percentage changes for 2003 over 2002 in
our total income, total expenses and net income by segment, which are discussed
in greater detail below, and for the Allianz Group as a whole.



                                                              % CHANGE 2003/2002
                                                  ------------------------------------------
                                                  TOTAL INCOME   TOTAL EXPENSES   NET INCOME
                                                  ------------   --------------   ----------
                                                                         
Property-Casualty...............................      (8.6)%           (6.6)%        (33.1)%
Life/Health.....................................       0.4%            (2.3)%       (265.2)%
Banking.........................................       (35)%          (29.7)%          5.8%
Asset Management................................      (4.0)%          (10.0)%         42.2%
Consolidated Allianz Group......................      (5.6)%           (9.6)%       (226.3)%


YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

     Our total income increased by E12,026 million, or 12.6%, to E107,676
million in 2002 from E95,650 million in 2001, due primarily to the full-year
consolidation of Dresdner Bank in 2002, offset in part by the effects of
weakness in the capital markets and the global economy, which affected all of
our operating segments and our banking segment in particular. Our earnings from
ordinary activities before taxation decreased by E3,401 million, or 192.4%, to a
loss of E1,633 million in 2002 from income of E1,768 million in 2001. We had a
consolidated tax benefit of E807 million in 2002 and a consolidated tax benefit
of E861 million in 2001, representing overall effective tax rates of (60.9)% and
(55.2)%, respectively, compared to statutory rates for our primary German and
other operating subsidiaries that ranged from 12.5% to 45.5% and averaged 32.6%.
The consolidated tax benefit in 2002 was due primarily to tax exempted income.

     Net income decreased E3,081 million, or 194.4%, to a loss of E1,496 million
in 2002, compared to income of E1,585 million in 2001, reflecting primarily
weakness in the capital markets and the global economy, offset in part by the
tax benefit discussed above. This weakness was particularly evident in
impairments of available-for-sale investments, which increased significantly to
E6,287 million in 2002. In our banking segment, earnings were negatively
affected by additional net loan loss provisions of E2,222 million. Our
property-casualty insurance business was negatively impacted by significant
claims, including primarily E762 million relating to asbestos and environmental
reserve-strengthening measures at Fireman's Fund and E710 million in net claims
relating to severe floods that struck Germany and Central and Eastern Europe in
July and August 2002. These negative effects in our property-casualty segment
were offset in part by significant investment-related gains and rate increases
in most of our major property-casualty markets.

     The following table sets forth the percentage changes for 2002 over 2001 in
our total income, total expenses and net income by segment, which are discussed
in greater detail below, and for the Allianz Group as a whole. Changes in
results in our banking and asset management segments related primarily to the
full-year consolidation of Dresdner Bank in 2002. Percentage changes for 2002
over 2001 for our banking segment, which we established as a separate segment in
2001, reflect the inclusion of Dresdner Bank in our consolidated financial
statements as of July 23, 2001 and are therefore not comparable. See "-- Banking
Operations."



                                                              % CHANGE 2002/2001
                                                  ------------------------------------------
                                                  TOTAL INCOME   TOTAL EXPENSES   NET INCOME
                                                  ------------   --------------   ----------
                                                                         
Property-Casualty...............................      13.9%            4.1%          195.9%
Life/Health.....................................       7.2%            8.9%         (110.0)%
Banking.........................................      66.8%           82.1%         (517.3)%
Asset Management................................      16.3%           12.2%          (21.0)%
Consolidated Allianz Group......................      12.6%           16.4%         (194.4)%


     In April 2001, the Allianz Group, Dresdner Bank (an Allianz Group
subsidiary as of July 2001), a Dresdner Bank subsidiary and others entered into
a series of transactions whereby Allianz Group provided Munich Re shares to be
delivered to ERGO Versicherungsgruppe AG (Ergo) shareholders in connection with

                                        32


Munich Re's acquisition of the minority interest of Ergo pursuant to the public
cash and share offers described below. The purpose of this transaction,
including all individual agreement components, was to allow Munich Re to acquire
Ergo in July 2001 and at the same time achieve the previously agreed reduction
in cross-shareholdings between the Allianz Group and Munich Re. Additionally,
the transaction structure was designed to come within recently enacted changes
in German tax law which took effect as of January 1, 2002, and under which
capital gains on the disposal of equity interests were treated as tax-free.

     The framework agreement for this transaction (the "Ergo Framework
Agreement") was executed by the Allianz Group and all other parties on April 19,
2001, establishing the basic terms of: (i) a public cash tender offer for shares
of Ergo; (ii) parallel share offer by Munich Re for shares of Ergo; (iii) a
series of share lending agreements between DME Umtauschgesellschaft (DME) and
Dresdner Bank, a Dresdner Bank subsidiary and a third-party entity (the "Lending
Agreement"; and (iv) a forward sale agreement between DME and the Allianz Group,
pursuant to which DME acquired Munich Re shares to use, in part, in repayment of
the shares under the Lending Agreement (the "Forward Sale Agreement").

     In accordance with the Ergo Framework Agreement, the Allianz Group
delivered 7,065,563 Munich Re shares (an approximate 4% interest of Munich Re)
to DME in July 2001, which were then delivered to Ergo shareholders. In January
2002, DME acquired 11,213,035 Munich Re shares (an approximate 6.3% interest in
Munich Re) from the Allianz Group via the Forward Sale Agreement. Of the
11,213,035 shares delivered by the Allianz Group under the Forward Sale
Agreement in January 2002, 7,065,563 shares were immediately used by DME, as
required by the Ergo Framework Agreement, to satisfy its return obligation to
the Allianz Group under the Lending Agreement.

     Based on the specific facts and circumstances of this transaction, under
both IFRS and U.S. GAAP, the Allianz Group recorded a sale of the 7,065,563
shares delivered under the Lending Agreement in July 2001 resulting in: (i)
derecognition of the 7,065,563 shares of Munich Re; and (ii) recording a 2001
capital gain of E866 million, before tax and minority interest. The delivery of
the 11,213,135 Munich Re shares under the Forward Sale Agreement in January 2002
was recorded as an inter-Allianz Group transfer of 7,065,563 Munich Re shares
and a sale of the remaining 4,147,472 Munich Re shares resulting in: (i)
derecognition of the 4,147,472 shares of Munich Re; and (ii) recording a 2002
capital gain of E1,317 million.

                      CONSOLIDATED ASSETS AND LIABILITIES

YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002

     Total assets increased by E83,779 million, or 9.8%, to E935,912 million at
December 31, 2003, from E852,133 million at December 31, 2002, primarily as a
result of increased loans and advances to banks and customers and trading
assets. Total loans and advances to banks and customers increased by E45,864
million, or 16.7%, to E320,770 million at December 31, 2003, from E274,906
million at December 31, 2002, due primarily to increased reverse repurchase
transactions, which increased by E56,378 million to E154,441 million at December
31, 2003, more than offsetting reductions in the loan portfolios at Dresdner
Bank. Group's own investments decreased slightly by E500 million, or 0.1%, to
E394,821 million at December 31, 2003, from E395,321 million at December 31,
2002. For additional information on Group's own investments, see "-- Asset
Management Operations -- Group's Own Investments."

     Total liabilities increased by E76,861 million, or 9.3%, to E907,320
million at December 31, 2003, from E830,459 million at December 31, 2002, mainly
attributable to increased liabilities to banks and customers and trading
liabilities. Total liabilities to banks and customers increased E48,446 million,
or 17.0%, to E333,044 million at December 31, 2003, from E284,598 million at
December 31, 2002, due primarily to increased repurchase transactions, which
increased by E29,303 million to E92,876 million at December 31, 2003. Insurance
reserves increased by E5,708 million, or 1.9%, to E311,471 million at December
31, 2003, from E305,763 million at December 31, 2002. For additional information
on insurance reserves, see "-- Property-Casualty Insurance Reserves."

     Our shareholders' equity increased by 31.9% to E28,592 million at December
31, 2003 compared to E21,674 million at December 31, 2002. This increase
resulted primarily from our capital increase in April
                                        33


2003, which increased our shareholders' equity by E4,562 million, the positive
fair value valuation of our available-for-sale securities, attributable to the
recovery in the equity markets from the second quarter of 2003, as well as the
net income for the year. These more than offset negative currency translation
differences of E1,699 million, mainly resulting from the negative exchange rate
movement of the U.S. dollar as compared to the Euro during 2003.

YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

     Total assets decreased by E90,853 million, or 9.6%, to E852,133 million at
December 31, 2002, from E942,986 million at December 31, 2001, primarily as a
result of the deconsolidation of Deutsche Hyp and price declines in the capital
markets. Total loans and advances to banks and customers decreased by E26,061
million, or 8.7%, to E274,906 million at December 31, 2002, from E300,967
million at December 31, 2001, due primarily to the deconsolidation of Deutsche
Hyp. Group's own investments decreased by E66,898 million, or 14.5%, to E395,321
million in 2002 from E462,219 million in 2001, primarily due to a decrease in
our available-for-sale securities attributable to the weakness in the capital
markets. For additional information on Group's own investments, see "-- Asset
Management Operations -- Group's Own Investments."

     Total liabilities increased by E80,914 million, or 8.9%, to E830,459
million at December 31, 2002, from E911,373 million at December 31, 2001, mainly
as a result of decreased certificated liabilities and liabilities to banks and
customers. Certificated liabilities decreased by E55,920 million, or 41.5%, to
E78,750 million at December 31, 2002, from E134,670 million at December 31,
2001, mainly attributable to the deconsolidation of Deutsche Hyp. Total
liabilities to banks and customers decreased by E28,127 million, or 9.0%, to
E284,598 million at December 31, 2002, from E312,725 million at December 31,
2001, due primarily the deconsolidation of Deutsche Hyp. Insurance reserves
increased by E6,251 million, or 2.1%, to E305,763 million at December 31, 2002,
from E299,512 million at December 31, 2001. For additional information on
insurance reserves, see Note 16 to our consolidated financial statements.

     Our shareholders' equity decreased by 31.4% to E21,674 million at December
31, 2002 compared to E31,613 million at December 31, 2001. This decrease
resulted primarily from a decrease in net unrealized gains of E6,930 million
from E8,276 million at December 31, 2001 to E1,317 million (adjusted for
currency translation) at December 31, 2002, reflecting generally adverse
conditions in the capital markets.

             INVESTMENT PORTFOLIO IMPAIRMENTS AND UNREALIZED LOSSES

VALUATION OF SECURITIES AVAILABLE-FOR-SALE

     All investments in our investment portfolio are subject to regular
impairment reviews. Generally, the carrying value of our investments is reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. Impairments are measured as the
difference between the amortized cost of a particular investment and the current
fair value (for equity instruments) or the recoverable amount (for debt
instruments).

     Securities available-for-sale are recorded at fair value, and are reviewed
regularly for impairments. Impairments recorded on investments to bring the
investment to its current fair value are charged to income if an
other-than-temporary diminution in value occurs. As of the closing date for each
quarter and year-end, we identify, on an Allianz Group-wide basis, all
securities whose market values are other-than-temporarily below amortized cost
based on our policy guidelines. Fair value determinations for financial assets
and liabilities are based generally on listed market prices, broker or dealer
price quotations or internal valuations if none of the aforementioned pricing
information exists.

FIXED INCOME SECURITIES

     Fixed income securities classified as available-for-sale are valued at
current fair value. We record an impairment on a fixed income security if a
decline in the fair value of a fixed income security is other-than-

                                        34


temporary. Objective evidence that decline in the fair value of a fixed income
security is other-than-temporary or uncollectible includes information that
comes to the attention of the Allianz Group regarding:

     - significant financial difficulty of the issuer;

     - an actual breach of contract, such as a default or delinquency in
       interest or principal payments;

     - granting by the lender to the borrower, for economic or legal reasons
       relating to the borrower's financial difficulty, of a concession that the
       lender would not otherwise consider;

     - a high probability of bankruptcy or other financial reorganization of the
       issuer;

     - recognition of an impairment loss on that asset in a prior financial
       reporting period;

     - the disappearance of an active market for that financial asset due to
       financial difficulties; or

     - a historical pattern of collections of accounts receivable that indicates
       that the entire face amount of a portfolio of accounts receivable will
       not be collected.

     However, the disappearance of an active market because an issuer's
securities are no longer publicly traded is not evidence of impairment. A
downgrade of an issuer's credit rating is not, of itself, evidence of
impairment, though it may be evidence of impairment when considered with other
available information.

     Additionally, if no positive intention or ability of Allianz Group's
management to hold a security through the anticipated recovery period exists, an
impairment is recorded. The Allianz Group analyses all fixed income securities
whose recoverable amount has been permanently for more than 6 months by more
than 20% below amortized cost. In such instances, additional subjective criteria
for diminution in value are taken into account, including:

     - significant downgrade (already occurred or imminent) by one or several
       rating agencies;

     - accumulation of defaults within a certain industry or geographic region;

     - change in recommendations of investment advisors of market analysts.

     Generally, we do not consider fixed income instruments impaired if the
decline in value is caused solely by changes in interest rates.

EQUITY SECURITIES

     Equity securities categorized as securities available-for-sale are valued
at current fair value. We record an impairment on an equity security if a
decline in the fair value of an equity security is other-than-temporary. An
impairment is required to be recorded on our equity securities if we determine
that one or more of the following objective criteria applies:

     - significant financial difficulty of the issuer;

     - a high probability of bankruptcy or other financial reorganization of the
       issuer;

     - the disappearance of an active market for the financial asset due to
       financial difficulties;

     - discontinuation of the basis for business or of a substantial part of the
       basis for business for technological, economic or legal reasons;

     - not existing intention or ability of Allianz Group's management to hold
       the security through the anticipated recovery period.

     In 2001, we generally considered a decline in fair value in an equity
security classified as available-for-sale to be other-than-temporary if the fair
value of the security was continuously for a period of more than six months more
than 30% below both the weighted-average amortized cost of the individual
Allianz Group company that held the security and the Allianz Group's
weighted-average amortized cost. In these instances we recorded an impairment on
equity securities held by Allianz Group companies that were in an unrealized
loss position.

                                        35


     In 2002, we modified our policy and generally considered a decline to be
other-than-temporary if the fair value was continuously for a period of more
than six months 20% or more below both the weighted-average amortized cost of
the individual Allianz Group company that held the security and the Allianz
Group's weighted-average amortized cost.

     As of December 31, 2003, we applied a further criterion and generally
considered a decline in fair value to be other-than-temporary for all publicly
traded equity securities which have been permanently in an unrealized loss
position for more than 12 months.

     Finally, if one or more of the following indicators applies, equity
investments are subject to further in-depth review:

     - deterioration in recommendations of investment advisors or market
       analysts;

     - issuer's industry or region is in a sustained recession, which is also
       reflected in the respective stock indices;

     - decline in the issuer's price-to earnings (P/E) ratio;

     - losses recently incurred by the issuer;

     - change in the issuer's dividend policy; or

     - specific events which impact the business operations of the issuer.

     Moreover, an impairment loss is recorded, if the fair value of an equity
security has declined more than 80% below amortized cost as of the end of any
fiscal quarter.

     Additionally, the Allianz Group also applies subjective criteria when
analyzing equity securities for potential impairment.

     Management Judgment Analysis.  If the criteria mentioned above indicate an
impairment but recovery of the amortized cost is still expected in the
medium-term, the decrease in value may still be considered temporary based on
management's judgment, provided we have the positive intent and ability to hold
the investment for a period of time sufficient to allow for a recovery in fair
value. The following information is required to support any decision not to
record an impairment in such cases:

     - positive evaluations of market analysts including fundamental analysis
       and future price targets;

     - relative performance of the investment compared to regional and industry
       benchmarks indicate that the decrease in value is attributable to
       industry or market conditions, rather than issuer-specific problems;

     - historical share price development -- in particular taking into account
       high and low market prices during the last 12 months -- and volatility in
       share prices indicate that amortized cost may be recovered in the near
       future; and

     - specific positive intentions and ability to hold the investment exist.

     A decision based on management judgment is required to follow these
guidelines, is required to be supported by full documentation and is required to
be updated at regular intervals. To ensure consistency, decisions based on
management judgment may only be taken at the Allianz Group level and not by any
of the Allianz Group's subsidiaries.

     Private Equity Investments.  The IFRS carrying value of the Allianz Group's
available-for-sale private equity investments was E1,532 million at December 31,
2003 and E1,723 million at December 31, 2002.

     Direct private equity investments, which are mostly non-traded securities,
are carried by the Allianz Group at fair value based on quarterly valuations.
These valuations, which also serve the purpose of impairment tests, are based on
multiples such as earnings before interest, taxes, depreciation and amortization
(EBITDA), earnings before interest and taxes (EBIT) or P/E ratios. If
appropriate, discounted cash flow models or leveraged buyout (LBO) models are
applied as well as part of the impairment testing. Moreover, additional
information from the financial reports of the companies held within our private
equity investment

                                        36


portfolio, which Allianz Capital Partners is invested in, are taken into
consideration. If a decline in the fair value of an investment is ultimately
determined to be other-than-temporary, an impairment is recorded.

     Investments In Private Equity Funds.  The Allianz Group's valuation of
investments in private equity funds, or funds of funds, relies primarily on
information relating to net asset value (NAV) provided by the general partners
of such funds. In the case of an insolvency or the filing for Chapter 11
(liquidation) of a fund, the Allianz Group records an impairment. In addition,
the Allianz Group also analyses subjective criteria when assessing whether an
other-than-temporary diminution in value has occurred. Specifically, all funds
whose commitments are invested by more than 40% and whose running time exceeds 3
years, are subject to an impairment test. An impairment is recorded if the NAV
provided by the general partner has continuously been for a period of more than
six months 20% or more below the amortized cost. The impairment recorded by the
Allianz Group constitutes the difference between the amortized costs, reduced by
all or a portion of the relevant management fee, and the NAV of the fund.

VALUATIONS OF SECURITIES HELD-TO-MATURITY

     The fair value of individual securities held-to-maturity can fall
temporarily below their carrying value, but, provided there is no risk resulting
from changes in financial standing, no impairment is recorded for such
securities. Impairment charges on securities held-to-maturity totaled E10
million at December 31, 2003 and E31 million in 2002.

IMPAIRMENT CHARGES

     For the year ended December 31, 2003, other expenses for investments
totaled E9,848 million, of which E5,125 million related to realized losses and
E4,723 million related to depreciation and impairments. Of the total amount of
realized losses in 2003, E5,018 million related to securities
available-for-sale, E3 million to securities held-to-maturity, E102 million to
real estate used by third parties and E2 million to other investments. Of the
amount related to depreciation and impairments, E4,412 million was attributable
to impairments recorded on securities available-for-sale, E10 million to
impairments recorded on securities held-to-maturity, E297 million to
depreciation recorded on real estate used by third-parties and E4 million to
impairments recorded on other investments. Of the available-for-sale impairments
we recorded in 2003, E4,326 million related to equity securities, E64 million to
corporate bonds, E9 million to government bonds and E13 million to other
available-for-sale securities.

     For the year ended December 31, 2002, other expenses for investments
totaled E14,866 million, of which E8,204 million related to realized losses and
E6,662 million related to depreciation and impairments. Of the total amount of
realized losses in 2002, E8,063 million related to securities
available-for-sale, E4 million to securities held-to-maturity, E131 million to
real estate used by third parties and E6 million to other investments. Of the
amount related to depreciation and impairments, E6,287 million was attributable
to impairments recorded on securities available-for-sale, E31 million to
impairments recorded on securities held-to-maturity, E333 million to
depreciation recorded on real estate used by third-parties and E11 million to
impairments recorded on other investments. Of the available-for-sale impairments
we recorded in 2002, E5,717 million related to equity securities, E345 million
to corporate bonds, E202 million to government bonds and E23 million to other
available-for-sale securities.

UNREALIZED LOSSES

     As of December 31, 2003, unrealized losses from securities
available-for-sale totaled E2,077 million, of which E1,139 million were
attributable to equity securities, E301 million to corporate bonds, E626 million
to government bonds and E11 million to other securities. As of December 31,
2002, we recorded a total of E9,759 million unrealized losses. Of this amount,
E9,303 million related to equity securities, E326 million to corporate bonds,
E106 million to government bonds and E24 million to other securities. As of
December 31, 2001, we recorded a total of E7,390 million unrealized losses. Of
this amount, E5,601 million related to equity securities, E1,139 million to
government bonds and E650 million to corporate bonds.

                                        37


     The following tables set forth further details regarding the duration and
amount below amortized cost of the Allianz Group's unrealized loss positions for
equity securities as of December 31, 2003 and 2002. The length of time criterion
reflects the period of time over which an equity security had continually been
in the actual percentage decline category it was in on December 31, 2003 and
December 31, 2002, respectively. We believe the following tables provide
meaningful disclosure, as they capture the actual percentage decline category
and related time period applicable at December 31, 2003 and December 31, 2002,
respectively.

                                        38


 EQUITY SECURITIES AGING TABLE: DURATION AND AMOUNT OF UNREALIZED LOSSES AS OF
                               DECEMBER 31, 2003



                                0-6 MONTHS   6-12 MONTHS   12-18 MONTHS   > 18 MONTHS    TOTAL
                                ----------   -----------   ------------   ------------   ------
                                                        (E IN MILLION)
                                                                          
LESS THAN 20%
Market Value..................    6,972          820             156           608        8,556
Amortized Cost................    7,701          960             177           664        9,502
Unrealized Loss...............     (729)        (140)            (21)          (56)        (946)
                                  -----         ----         -------          ----       ------
20% TO 50%
Market Value..................      161            9              55            83          308
Amortized Cost................      232           13              88           119          452
Unrealized Loss...............      (71)          (4)            (33)          (36)        (144)
                                  -----         ----         -------          ----       ------
GREATER THAN 50%
Market Value..................       10            2               4            22           38
Amortized Cost................       42            5              10            30           87
Unrealized Loss...............      (32)          (3)             (6)           (8)         (49)
                                  -----         ----         -------          ----       ------
TOTAL
Market Value..................    7,143          831             215           713        8,902
Amortized Cost................    7,975          978             275           813       10,041
Unrealized Loss...............     (832)        (147)            (60)         (100)      (1,139)


 EQUITY SECURITIES AGING TABLE: DURATION AND AMOUNT OF UNREALIZED LOSSES AS OF
                               DECEMBER 31, 2002



                                0-6 MONTHS   6-12 MONTHS   12-18 MONTHS   > 18 MONTHS    TOTAL
                                ----------   -----------   ------------   ------------   ------
                                                        (E IN MILLION)
                                                                          
LESS THAN 20%
Market Value..................    16,497        1,596          169            152        18,414
Amortized Cost................    19,639        1,968          185            165        21,957
Unrealized Loss...............    (3,142)        (372)         (16)           (13)       (3,543)
                                  ------        -----          ---            ---        ------
20% TO 50%
Market Value..................    10,858          567            6              2        11,433
Amortized Cost................    16,065          584            7              2        16,658
Unrealized Loss...............    (5,207)         (17)          (1)            (0)       (5,225)
                                  ------        -----          ---            ---        ------
GREATER THAN 50%
Market Value..................       426            1            1              0           428
Amortized Cost................       954            5            2              2           963
Unrealized Loss...............      (528)          (4)          (1)            (2)         (535)
                                  ------        -----          ---            ---        ------
TOTAL
Market Value..................    27,781        2,164          176            154        30,275
Amortized Cost................    36,658        2,557          194            169        39,578
Unrealized Loss...............    (8,877)        (393)         (18)           (15)       (9,303)


                                        39


  DEBT SECURITIES AGING TABLE: DURATION AND AMOUNT OF UNREALIZED LOSSES AS OF
                               DECEMBER 31, 2003



                                0-6 MONTHS   6-12 MONTHS   12-18 MONTHS   > 18 MONTHS    TOTAL
                                ----------   -----------   ------------   ------------   ------
                                                        (E IN MILLIONS)
                                                                          
LESS THAN 20%
Market Value..................    38,200        8,237          444            573        47,454
Amortized Cost................    38,759        8,505          465            597        48,326
Unrealized Loss...............      (559)        (268)         (21)           (24)         (872)
                                  ------        -----          ---            ---        ------
20% TO 50%
Market Value..................         5            7            7            125           144
Amortized Cost................         7           10            9            166           192
Unrealized Loss...............        (2)          (3)          (2)           (41)          (48)
                                  ------        -----          ---            ---        ------
GREATER THAN 50%
Market Value..................         1            0            0              3             4
Amortized Cost................         1            1            0              9            11
Unrealized Loss...............        (0)          (1)           0             (6)           (7)
                                  ------        -----          ---            ---        ------
TOTAL
Market Value..................    38,206        8,244          451            701        47,602
Amortized Cost................    38,767        8,516          474            772        48,529
Unrealized Loss...............      (561)        (272)         (23)           (71)         (927)


  DEBT SECURITIES AGING TABLES: DURATION AND AMOUNT OF UNREALIZED LOSSES AS OF
                               DECEMBER 31, 2002



                                           0-6 MONTHS   6-12 MONTHS   > 12 MONTHS    TOTAL
                                           ----------   -----------   ------------   ------
                                                            (E IN MILLION)
                                                                         
LESS THAN 20%
Market Value.............................    6,023         2,422         2,219       10,664
Amortized Cost...........................    6,144         2,509         2,299       10,952
Unrealized Loss..........................     (121)          (87)          (80)        (288)
                                             -----         -----         -----       ------
20% TO 50%
Market Value.............................       79            63            60          202
Amortized Cost...........................      113            94            91          298
Unrealized Loss..........................      (34)          (31)          (31)         (96)
                                             -----         -----         -----       ------
GREATER THAN 50%
Market Value.............................        2            11            14           27
Amortized Cost...........................       15            25            35           75
Unrealized Loss..........................      (13)          (14)          (21)         (48)
                                             -----         -----         -----       ------
TOTAL
Market Value.............................    6,104         2,496         2,293       10,893
Amortized Cost...........................    6,272         2,628         2,425       11,325
Unrealized Loss..........................     (168)         (132)         (132)        (432)


REVERSALS OF IMPAIRMENTS

     For equity securities, if, in a subsequent period, the amount of the
impairment previously recorded on a security decreases, the impairment is
reversed through other income for investments in the Allianz Group's

                                        40


consolidated income statement. For fixed income securities, if, in a subsequent
period, the amount of the impairment previously recorded on a security decreases
and the decrease can be objectively related to an event occurring after the
impairment, such as an improvement in the debtor's credit rating, the impairment
is reversed through other income for investments in the Allianz Group's
consolidated income statement. For both equity and fixed income securities, such
reversals do not result in a carrying amount of a security that exceeds what
would have been, had the impairment not been recorded, at the date of the
impairment is reversed. For the years ended December 31, 2003, 2002 and 2001, we
recorded reversals of impairments of E2,132 million (AFS E2,129 million; HTM E3
million), E681 million (AFS E679 million; HTM E2 million) and E191 million (AFS
E184 million; HTM E7 million), respectively.

                  DISCUSSION OF OPERATIONS BY BUSINESS SEGMENT

INSURANCE OPERATIONS

     We provide property-casualty and life/health products and services on an
individual and group basis in more than 70 countries worldwide. In our
property-casualty business, we provide, among other things, automobile,
homeowners, travel and other personal lines products and are a leading provider
of commercial and industrial coverage to business enterprises of all sizes,
including many of the world's largest companies. Our life/health insurance
businesses provide endowment, annuity and term insurance products and a wide
range of health, disability and related coverage to individual insured, as well
as group life, group health and pension products to employers. In addition to
strong local positions, we have established leading positions in certain
specialty lines on a global basis, including credit insurance, marine and
aviation insurance, international industrial reinsurance through Allianz Global
Risks Re, and travel and assistance insurance.

     Our products are marketed in Germany primarily under the "Allianz" brand
name. In other countries we generally operate through our subsidiary insurers'
brand names, which are identified as part of the Allianz Group. We believe that
our brand name is one of the best-known and most highly respected in the German
marketplace, combining a reputation for excellent customer service with an image
of superior financial strength.

     Our philosophy is to provide considerable latitude to our operating
entities in product design, underwriting, distribution, marketing and operations
while providing various levels of centralized support in such areas as financial
and strategic planning, investment management, knowledge transfer, accounting
and reinsurance to our subsidiaries from our headquarters in Munich. We refer to
this combination of centralized strategic management and local business autonomy
as a "multi-local" approach to our global insurance business. We believe that
this gives our subsidiary operations the flexibility to best respond to local
market conditions and allows us to implement strategic goals and create
incentives for our employees on a country-by-country basis.

                                        41


                     PROPERTY-CASUALTY INSURANCE OPERATIONS

     The following table sets forth certain financial information for our
property-casualty operations for the years indicated:



                                                                    YEAR ENDED DECEMBER 31,
                                                           ------------------------------------------
                                                            2003             2002              2001
                                                           -------          -------           -------
                                                                        (E IN MILLIONS)
                                                                                     
Gross premiums written...................................   43,420           43,294            42,137
Premiums earned(net)(1)..................................   37,277           36,458            34,428
Interest and similar income..............................    4,165            4,473             5,068
Income from affiliated enterprises, joint ventures and
  associated enterprises.................................    3,611(2)         8,494(4)            889
Other income from investments............................    4,892(3)         3,652             4,307
Trading income...........................................   (1,490)             207             1,451
Fee and commission income, and income from service
  activities.............................................      522              521             1,425
Other income.............................................    1,795            1,751             1,202
                                                           -------          -------           -------
  Total income...........................................   50,772           55,556            48,770
                                                           -------          -------           -------
Insurance benefits(net)(5)...............................  (26,923)         (28,932)          (28,200)
Interest and similar expenses............................   (1,566)          (1,564)           (1,323)
Other expenses for investments...........................   (3,141)          (3,857)           (2,888)
Loan loss allowance......................................      (10)              (7)               (4)
Acquisition costs and administrative expenses(6).........   (9,972)         (10,521)          (10,042)
Amortization of goodwill.................................     (383)            (370)             (349)
Other expenses...........................................   (3,048)          (2,999)           (3,555)
                                                           -------          -------           -------
  Total expenses.........................................  (45,043)         (48,250)          (46,361)
                                                           -------          -------           -------
Earnings from ordinary activities before taxation........    5,729            7,306             2,409
Taxes....................................................     (641)             495               701
Minority interests in earnings...........................     (407)            (806)             (746)
                                                           -------          -------           -------
Net income...............................................    4,681            6,995             2,364
                                                           =======          =======           =======


---------------

(1) Net of earned premiums ceded to reinsurers of E5,539 million, E6,236 million
    and E6,609 million in 2003, 2002 and 2001, respectively. (Written premiums
    ceded to reinsurers, after eliminating intra-Group transactions, were E5,404
    million, E6,150 million, and E6,669 million in 2003, 2002, and 2001,
    respectively.)

(2) Includes realized gains of E2,839 million and E78 million from sales of
    Beiersdorf AG and Munich Re shares, respectively.

(3) Includes realized gains of E858 million and E246 million from sales of
    Munich Re and Credit Lyonnais shares, respectively.

(4) Includes realized gains of E1,886 million from sales of Munich Re shares and
    E713 million on the sale of a real estate subsidiary in Italy, as well as
    significant income from intercompany transactions, including realized gains
    of E3,332 million from the transfer of Munich Re shares from Allianz AG to
    Dresdner Bank and dividend income of E382 million from Dresdner Bank. The
    gains on these intercompany transactions were eliminated at the Allianz
    Group level.

(5) Includes loss and loss adjustment expenses of E26,659 million, E28,502
    million and E27,919 million in 2003, 2002 and 2001, respectively.

(6) Includes net underwriting costs of E9,511 million, E10,015 million, E9,543
    million in 2003, 2002 and 2001, respectively.

                                        42


YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002

     Gross Premiums Written.  Our gross premiums written from property-casualty
operations in 2003 increased by E126 million, or 0.3%, to E43,420 million from
E43,294 million in 2002. Eliminating the effect of exchange rate movements,
which decreased 2003 gross premiums written by E1,690 million, and changes in
the scope of consolidation, which increased 2003 gross premiums written by E166
million, gross premiums written increased by 4.0%. This increase was primarily
as a result of rate increases, particularly in Germany, France, Spain and the
United States, and growth in new business, particularly in Central and Eastern
Europe. The increase was offset in part by a more selective underwriting policy
and portfolio review measures, particularly in France, the United States and in
our international industrial reinsurance business.

     Premiums Earned (Net).  On an Allianz Group-wide basis, property-casualty
net premiums earned in 2003 and 2002 reflected earned premiums ceded to
reinsurers of E5,539 million and E6,236 million, respectively. Net premiums
earned increased by E819 million, or 2.2%, to E37,277 million in 2003 from
E36,458 million in 2002, due primarily to the decrease in premium ceded to
reinsurers, resulting from, among others, a decrease in proportional reinsurance
coverage and an increase in non-proportional reinsurance coverage. See Note 11
to our consolidated financial statements.

     Trading Income.  Trading income from our property-casualty operations
decreased significantly by E1,697 million, to a loss of E1,490 million in 2003
from income of E207 million in 2002, due primarily to E1,351 million in losses
in the first half of 2003 relating to the use of certain derivative financial
instruments to hedge our equity exposure but do not qualify for hedge
accounting. For additional information, see "-- Asset Management
Operations -- Group's Own Investments -- Year Ended December 31, 2003 Compared
to Year Ended December 31, 2002." Gains or losses on such financial instruments
arising from valuation at fair value are included in trading income while gains
or losses on the fair value valuation of the hedged equity investments are
included in shareholders' equity.

     Insurance Benefits (Net).  Net insurance benefits for our worldwide
property-casualty business, which consist of claims paid, changes in reserves
for loss and loss adjustment expenses, changes in other reserves and expenses of
premium refunds, decreased by E2,009 million, or 6.9%, to E26,923 million in
2003 from E28,932 million in 2002. The decrease in net insurance benefits was
due primarily to improved claims experience in 2003, reflecting portfolio review
and other underwriting measures, particularly in France, the United States and
in our international industrial reinsurance business, as well as the high level
of net insurance benefits in 2002, which reflected asbestos and environmental
reserve-strengthening measures at Fireman's Fund and net claims related to
severe flooding in Germany and Central and Eastern Europe. See "-- Year Ended
December 31, 2002 Compared to Year Ended December 31, 2001 -- Insurance Benefits
(Net)."

     Acquisition Costs and Administrative Expenses.  Acquisition costs and
administrative expenses consist primarily of changes in deferred policy
acquisition costs, administrative expenses, and net underwriting costs. Net
underwriting costs of E9,511 million in 2003 decreased by E504 million, or 5.0%,
over 2002 levels of E10,015 million, due primarily to increased operating
efficiencies as well as cost reduction measures at Allianz Group companies.

     The following table sets forth net loss, expense and combined ratio
information for our property-casualty operations by geographic region for the
years 2003 and 2002:



                                                  YEAR ENDED DECEMBER 31, 2003
                                     -------------------------------------------------------
                                               REST OF           REST OF   SPECIALTY
                                     GERMANY   EUROPE    NAFTA    WORLD      LINES     TOTAL
                                     -------   -------   -----   -------   ---------   -----
                                                                     
Loss ratio(1)......................   71.4%     73.6%    70.0%    71.2%      61.6%     71.5%
Expense ratio(2)...................   25.7%     24.1%    28.2%    26.4%      29.3%     25.5%
                                      ----      ----     ----     ----       ----      ----
Combined ratio.....................   97.1%     97.7%    98.2%    97.6%      90.9%     97.0%


                                        43




                                                 YEAR ENDED DECEMBER 31, 2002
                                    -------------------------------------------------------
                                              REST OF           REST OF   SPECIALTY
                                    GERMANY   EUROPE    NAFTA    WORLD      LINES     TOTAL
                                    -------   -------   -----   -------   ---------   -----
                                                                    
Loss ratio(1).....................    74.2%     76.8%   94.6%     74.5%      75.9%     78.2%
Expense ratio(2)..................    28.3%     24.6%   32.9%     28.1%      32.5%     27.5%
                                     -----     -----    -----    -----      -----     -----
Combined ratio....................   102.5%    101.4%   127.5%   102.6%     108.4%    105.7%


---------------

(1) Represents ratio of total loss and loss adjustment expenses to net earned
    premium.

(2) Represents ratio of net underwriting costs to net earned premium.

     The overall decrease in the Allianz Group combined ratio to 97.0% in 2003
from 105.7% in 2002 reflects the decrease in the Allianz Group's loss ratio to
71.5% in 2003 from 78.2% in 2002, as well as the decrease in the Allianz Group's
expense ratio to 25.5% in 2003 from 27.5% in 2002. The Allianz Group loss ratio
was affected primarily by improved loss ratios in most of our major markets,
particularly in Germany, the United States and France and in our international
industrial reinsurance specialty line. The decrease in the loss ratio in our
German property-casualty operations was due to improved claims experience in
2003 as compared to 2002, which reflected net claims related to severe flooding
in Germany and Central and Eastern Europe. The improved loss ratios in our
property-casualty operations in France, the United States and our international
industrial reinsurance business reflected the successful turnaround programs
implemented in 2003, which included rate increases, adequate risk pricing, more
selective underwriting policies and portfolio review measures. The improvement
of the United States loss ratio in 2003 also reflects the absence of the
asbestos and environmental reserve-strengthening measures that was recorded in
2002. See "-- Year Ended December 31, 2003 Compared to Year Ended December 31,
2002 -- Insurance Benefits (Net)." The Allianz Group expense ratio decreased to
25.5% in 2003 compared to 27.5% in 2002, reflecting both the increase in net
premiums earned and improvements in operating efficiencies in many of our major
markets, including, in particular, reduced administrative expenses and
distribution costs in Germany, which in 2002 included expenses relating to the
development of the distribution capacity in Germany, as well as in the United
States, which was primarily due to headcount reductions as the result of our
turnaround program.

     Net Income.  Net income from property-casualty insurance operations in 2003
decreased by E2,314 million, or 33.1%, to E4,681 million in 2003 compared with
E6,995 million in 2002. The decrease was attributable primarily to decreased
investment results, reflecting the E1,697 decrease in net trading income
discussed above, the high levels of investment-related realized gains and
intercompany transactions recorded in 2002. See "-- Year Ended December 31, 2002
Compared to Year Ended December 31, 2001 -- Net Income" for further information.
In 2003, the segment recorded realized gains in connection with the sale of our
shareholdings in Beiersdorf AG (E2,839 million), Munich Re (E936 million) and
Credit Lyonnais (E246 million), as well as the sale of other shareholdings in
our equity portfolio, due primarily to our decision to reduce our exposure to
equity investments. As our shareholdings in Beiersdorf AG and Munich Re were
reduced to less than 20% following the dispositions in 2003, we ceased to
account for these companies using the equity method with effect from December
31, 2003 and March 31, 2003, respectively. Despite the recovery of the stock
markets starting from the second quarter of 2003, depreciation and impairments
recorded on investments were E1,834 million in 2003, as compared to E2,340
million in 2002, primarily due to the weak stock markets during the first
quarter of 2003 as well as impairments recorded on certain equity investments in
the fourth quarter of 2003. For additional information, see "-- Investment
Portfolio Impairments and Unrealized Losses -- Unrealized Losses."

     Amortization of Goodwill.  Amortization of goodwill in our banking
operations was E263 million in 2003, an increase of E22 million, or 9.1%, from
E241 million in 2002, attributable primarily to the acquisitions of additional
shareholdings in Dresdner Bank during 2002. See Note 3 to our consolidated
financial statements.

                                        44


YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

     Gross Premiums Written.  Our gross premiums written from property-casualty
operations in 2002 increased by E1,157 million, or 2.7%, to E43,294 million from
E42,137 million in 2001. Eliminating the effect of exchange rate movements and
changes in the scope of consolidation, which decreased 2002 gross premiums
written by E246 million, gross premiums written increased by 3.2%. This increase
came primarily as a result of rate increases in all of our major markets, offset
in part by a more selective underwriting policy, particularly in our industrial
reinsurance business and in the United States, but also in other major markets.

     Premiums Earned (Net).  On an Allianz Group-wide basis, property-casualty
net premiums earned in 2002 and 2001 reflected earned premiums ceded to
reinsurers of E6,236 million and E6,609 million, respectively. Net premiums
earned increased by E2,030 million, or 5.9%, to E36,458 million in 2002 from
E34,428 million in 2001, which exceeded the 2.7% increase in gross premiums
written and reflected the decrease in earned premiums ceded to reinsurers.

     Trading Income.  Trading income from our property-casualty operations
decreased by E1,244 million, to E207 million in 2002 from E1,451 million in
2001, due primarily to the decrease of E1,212 million in gains from certain
derivative financial instruments. These gains relate to derivative financial
instruments embedded in outstanding exchangeable bonds that do not qualify for
hedge accounting and from forward contracts that are used to hedge investments.
Gains or losses on such financial instruments arising from valuation at fair
value are included in trading income. The decrease in 2002 reflected primarily
long positions on index futures entered into in late 2001, which substantially
offset the market value gains from outstanding short positions. We had entered
into short positions on these index futures in connection with our issuance of
certain exchangeable bonds in 2001 and prior years.

     Insurance Benefits (Net).  Net insurance benefits for our worldwide
property-casualty business, which consist of claims paid, changes in reserves
for loss and loss adjustment expenses, changes in other reserves and expenses of
premium refunds, increased by E732 million, or 2.6%, to E28,932 million in 2002
from E28,200 million in 2001. Of this amount in 2002, E762 million related to
asbestos and environmental reserve-strengthening measures at Fireman's Fund. An
additional approximately E710 million was attributable to net claims relating to
severe flooding in Germany and Central and Eastern Europe in July and August
2002. The increase in net insurance benefits in 2002 followed on an already high
level of net insurance benefits in 2001, which reflected claims from the
terrorist attack of September 11, 2001. For additional information on reserve-
strengthening measures at our U.S. property-casualty insurance subsidiaries, see
"-- Property-Casualty Insurance Reserves -- Asbestos and Environmental Reserves
in the United States."

     Acquisition Costs and Administrative Expenses.  Acquisition costs and
administrative expenses consist primarily of changes in deferred policy
acquisition costs, administrative expenses, and net underwriting costs. Net
underwriting costs of E10,015 million in 2002 increased E472 million, or 4.9%,
over 2001 levels of E9,543 million, which slightly exceeded our
property-casualty premium growth rate of 2.7% due primarily to reduced
commission income from reinsurance business ceded, reflecting higher overall
retention levels. The increased expenses were offset in part by increased
operating efficiencies at Allianz Group companies and cost reduction measures.

     The following table sets forth net loss, expense and combined ratio
information for our property-casualty operations by geographic region for the
years 2002 and 2001:



                                                 YEAR ENDED DECEMBER 31, 2002
                                    -------------------------------------------------------
                                              REST OF           REST OF   SPECIALTY
                                    GERMANY   EUROPE    NAFTA    WORLD      LINES     TOTAL
                                    -------   -------   -----   -------   ---------   -----
                                                                    
Loss ratio(1).....................    74.2%     76.8%   94.6%     74.5%      75.9%     78.2%
Expense ratio(2)..................    28.3%     24.6%   32.9%     28.1%      32.5%     27.5%
                                     -----     -----    -----    -----      -----     -----
Combined ratio....................   102.5%    101.4%   127.5%   102.6%     108.4%    105.7%


                                        45




                                                 YEAR ENDED DECEMBER 31, 2001
                                    -------------------------------------------------------
                                              REST OF           REST OF   SPECIALTY
                                    GERMANY   EUROPE    NAFTA    WORLD      LINES     TOTAL
                                    -------   -------   -----   -------   ---------   -----
                                                                    
Loss ratio(1).....................    76.2%     80.3%   99.9%     72.8%      66.5%     81.1%
Expense ratio(2)..................    26.8%     26.2%   29.2%     32.9%      39.5%     27.7%
                                     -----     -----    -----    -----      -----     -----
Combined ratio....................   103.0%    106.5%   129.1%   105.7%     106.0%    108.8%


---------------

(1) Represents ratio of total loss and loss adjustment expenses to net earned
    premium.

(2) Represents ratio of net underwriting costs to net earned premium.

     The overall decrease in the Allianz Group combined ratio to 105.7% in 2002
from 108.8% in 2001 reflects the decrease in the Allianz Group's loss ratio to
78.2% in 2002 from 81.1% in 2001. The Allianz Group loss ratio was affected
primarily by improved loss ratios in the Allianz Group's reinsurance operations
at Allianz AG and in many of the Allianz Group's major markets, reflecting rate
increases, particularly in our automobile lines, and decreased claim frequency.
These improvements were offset in part by increased net claims related to severe
flooding in Germany and Central and Eastern Europe in July and August 2002 and a
series of other storms, asbestos and environmental reserve-strengthening
measures at Fireman's Fund and increased net claims in our credit insurance.
Excluding the effect of the flooding-related claims and the asbestos and
environmental reserve-strengthening measures in 2002 and the effects of the
September 11, 2001 terrorist attack in 2001, the Allianz Group loss ratio would
have decreased to 74.2% in 2002 from 76.7% in 2001. The Allianz Group expense
ratio was largely unchanged at 27.5% in 2002 compared to 27.7% in 2001.
Increased expenses relating to the development of the distribution capacity in
Germany were offset by increased operating efficiencies at other Allianz Group
companies.

     Net Income.  Net income from property-casualty insurance operations in 2002
increased by E4,631 million, or 195.9%, to E6,995 million in 2002 compared with
E2,364 million in 2001. The increase was due primarily to investment-related
items, including realized gains of E1,886 million from open market sales of
Munich Re shares, approximately E1,100 million from open market sales of
Vodafone AG shares and E713 million on the sale of a real estate subsidiary in
Italy, as well as realized gains from the sale of other shareholdings in the
Allianz Group's German equity portfolio. The segment also recorded significant
income from intercompany transactions, including realized gains of E3,332
million from the transfer of Munich Re shares from Allianz AG to Dresdner Bank,
dividend income of E382 million from Dresdner Bank and E224 million from the
sale of Vereinte Lebensversicherung AG from Vereinte Versicherung AG to Allianz
Lebensversicherungs -- AG (or Allianz Leben). The gains on these intercompany
transactions were eliminated at the Allianz Group level. These increases were
offset in part by realized losses of E1,536 million and net investment
writedowns of E2,027 million, reflecting weakness in the capital markets.
Excluding these investment related items, net income from property-casualty
operations in 2002 reflected significantly increased net insurance benefits,
including primarily E762 million relating to asbestos and environmental
reserve-strengthening measures at Fireman's Fund and E710 million in net claims
relating to severe flooding in Germany and Central and Eastern Europe in July
and August 2002, offset in part by the increase in net insurance premiums
attributable to rate increases in most of our major markets.

     Amortization of goodwill was E370 million in 2002, an increase of E21
million, or 6.0%, from E349 million in 2001, largely as a result of the
amortization of goodwill associated with our acquisition of additional
shareholdings in Frankfurter Versicherungs -- AG and Bayerische
Versicherungsbank AG in June 2002. Minority interests in earnings increased to
E816 million in 2002 from E746 million in 2001.

PROPERTY-CASUALTY LOSS RESERVES

     We establish loss reserves in our property-casualty business to cover our
future payment obligations under insurance claims where either the amount of
benefits to be paid or the date when payments are to be made is not yet fixed.
The reserve is calculated using recognized actuarial methods to arrive at an
estimated amount necessary to settle claims in full. For additional information
on our property-casualty loss reserves,

                                        46


including discussion of our reserves by region and line of business, see
"-- Property-Casualty Insurance Reserves" and Note 16 to our consolidated
financial statements.

     In 2003, our gross consolidated IFRS loss reserves decreased by E3,410
million, or 5.7%, to E56,244 million compared to E59,654 million in 2002,
reflecting primarily the strengthening of the Euro relative to the U.S. dollar,
the British pound sterling and the Swiss franc during 2003, which decreased the
reserves denominated in the latter three currencies by E2.8 billion in 2003.
Reserves in the U.S. dollar also reflected the exit from some lines of business,
including surety at Fireman's Fund and general liability at Allianz Global Risks
US Insurance Company Burbank.

     In 2002, our gross consolidated IFRS loss reserves decreased by E1,822
million, or 2.9%, to E59,654 million compared to E61,476 million in 2001,
reflecting primarily a decrease from the high levels of 2001 that resulted from
the terrorist attack of September 11, 2001. The decrease in 2002 was offset in
part primarily by asbestos and environmental reserve-strengthening measures in
our U.S. operations, as well as smaller reserve increases in France and Italy.
In the United States, we recorded a net increase of E762 million relating to
asbestos and environmental exposures at our U.S. subsidiary Fireman's Fund for
accident years 1987 and prior. We recorded this increase in September 2002
following completion of a study by external and internal actuaries of Fireman's
Funds asbestos and environmental liabilities, which reflected deteriorating
industry-wide loss trends. See "-- Property-Casualty Insurance
Reserves -- Asbestos and Environmental Reserves in the United States." Following
the re-evaluation of certain lines of business in 2002, we also increased
reserves relating to liability and workers' compensation at Fireman's Fund for
accident years 2000 and 1999. In addition, we increased general liability
reserves by E921 million at Allianz Insurance Co. for accident years 1997 to
2001 as a result of an actuarial analysis and more conservative re-underwriting
in 2002, and property reserves at Allianz Insurance Co. by E184 million due to
additional provisions relating to the terrorist attack of September 11, 2001.
These increases were offset in part by favorable developments in commercial
multi-peril and surety reserves at Fireman's Fund for the accident year 2000. In
France, we increased gross loss reserves by E360 million in 2002, reflecting
adverse reserve development in AGF's motor liability (E185 million), general
liability (E105 million) and property (E50 million) lines, offset by favorable
development at Euler Hermes and Allianz Marine & Aviation. In Italy, we
strengthened reserves in 2002 relating to motor liability and general liability
at RAS Group.

               PROPERTY-CASUALTY OPERATIONS BY GEOGRAPHIC REGION

     The following table sets forth our property-casualty gross premiums written
and earnings after taxes and before goodwill amortization by geographic region.
Consistent with our general practice, gross premiums written and earnings after
taxes and before goodwill amortization by geographic region are presented before

                                        47


consolidation adjustments representing the elimination of transactions between
Allianz Group companies in different geographic regions and different segments.



                                                      YEAR ENDED DECEMBER 31,
                            ---------------------------------------------------------------------------
                                     2003                      2002                      2001
                            -----------------------   -----------------------   -----------------------
                                         EARNINGS                  EARNINGS                  EARNINGS
                                       AFTER TAXES               AFTER TAXES               AFTER TAXES
                             GROSS      AND BEFORE     GROSS      AND BEFORE     GROSS      AND BEFORE
                            PREMIUMS     GOODWILL     PREMIUMS     GOODWILL     PREMIUMS     GOODWILL
                            WRITTEN    AMORTIZATION   WRITTEN    AMORTIZATION   WRITTEN    AMORTIZATION
                            --------   ------------   --------   ------------   --------   ------------
                                                          (E IN MILLIONS)
                                                                         
Germany(1)................   12,646       4,239        12,314         9,068      12,644        3,773
Rest of Europe(1).........   21,496       1,536        20,494         1,889      19,606          848
NAFTA.....................    5,344         (95)        5,992          (944)      6,822       (1,030)
Rest of World.............    2,329         114         2,428            38       2,401           39
Specialty Lines(1)........    4,801         278         4,948          (200)      2,321           94
Consolidation
  adjustments.............   (3,196)       (601)       (2,882)       (1,680)     (1,657)        (265)
                             ------       -----        ------      --------      ------       ------
  Subtotal................   43,420       5,471        43,294         8,171      42,137        3,459
Amortization of
  goodwill................       --        (383)           --          (370)         --         (349)
Minority interests........       --        (407)           --          (806)         --         (746)
                             ------       -----        ------      --------      ------       ------
  Total...................   43,420       4,681        43,294         6,995      42,137        2,364
                             ======       =====        ======      ========      ======       ======


---------------

(1) Reflects the transfers, effective January 1, 2002, of marine, aviation and
    industrial transport insurance business and international industrial
    reinsurance business to our Marine and Aviation and International Industrial
    Risks Reinsurance specialty lines, respectively. See "-- Specialty Lines."

                                    GERMANY

DESCRIPTION OF BUSINESS

     Germany is one of the world's largest property-casualty insurance markets,
based on gross premiums written in 2003. We were the largest provider of
property-casualty insurance in Germany, as measured by gross premiums written in
2003. Germany is our most important single market for property-casualty
insurance. As a percentage of our total property-casualty gross premiums written
worldwide, Germany accounted for 27.1% in 2003, 26.7% in 2002 and 28.9% in 2001.

     We conduct our property-casualty insurance operations in Germany primarily
through the Sachversicherungsgruppe Deutschland (or the German Property-Casualty
Group), which handles most of our lines of property-casualty insurance in
Germany, other than credit insurance and marine and aviation insurance. Allianz
AG, the parent company of the Allianz Group, acts as the Allianz Group's
reinsurer for almost all of the Allianz Group's insurance operations, other than
international industrial reinsurance. In addition, Allianz AG underwrites a
relatively small amount of reinsurance with customers outside of the Allianz
Group. The Allianz Group's international industrial reinsurance needs are
largely handled by Allianz Global Risks Re. See "-- Specialty
Lines -- Description of Business -- Allianz Global Risks Ruckversicherungs-AG."

GERMAN PROPERTY-CASUALTY GROUP

     The German Property-Casualty Group comprises a number of different
operating entities, some of which offer a full range of property-casualty lines
and one which provides specialized coverage:

     - Allianz Versicherungs-AG (or Allianz Versicherung), which is the German
       Property-Casualty Group's primary full-line property-casualty insurer;

     - Frankfurter Versicherungs-AG, a full-line property-casualty insurer based
       in Frankfurt;

     - Bayerische Versicherungsbank AG, a full-line property-casualty insurer
       based in Munich; and

                                        48


     - Vereinte Spezial Versicherung AG, primarily a specialist provider of
       automobile insurance.

     In 2003, we merged Kraft Versicherungs-AG into Vereinte Spezial
Versicherung AG, with retroactive effect from January 1, 2003.

PRODUCTS

     The operating companies that make up the German Property-Casualty Group
together offer a comprehensive range of property-casualty insurance products and
related services to customers primarily in Germany. The German Property-Casualty
Group's principal product lines are automobile liability and other automobile
insurance, fire and property insurance, personal accident insurance, liability
insurance and legal expense insurance.

     The German Property-Casualty Group's policy terms and conditions largely
conform to those offered by other insurers in the German market. While the
German Property-Casualty Group does seek to develop new policy types, given its
position as the market leader in the German property-casualty insurance market,
any competitive advantage gained by the introduction of new policy types tends
to be short-lived, as competitors introduce equivalent forms of coverage.

     In all of our German business lines, policy persistency is an important
factor in our profitability. Accordingly, we seek to ensure that our
policyholders maintain their policies in force with us for long periods of time.
Based on German industry statistics, we believe that our persistency rates are
generally higher than those of most other German companies. In the
property-casualty area, we have found that customers with multiple policies with
us generally keep their policies in force for longer periods of time.
Accordingly, the German Property-Casualty Group provides its customers with
substantial discounts to the extent they hold multiple Allianz insurance
policies. We estimate that currently more than 50% of the German
Property-Casualty Group's German personal lines customers have more than one
Allianz policy in force.

     While our insurance operations in Germany generally operate on a
decentralized basis through separate operating entities, many of our products in
Germany are distributed through common or overlapping distribution systems. The
importance of these distribution channels varies by type of business. For the
German Property-Casualty Group's personal and commercial lines, the network of
full-time tied agents is our most important distribution channel. For industrial
lines, the brokerage channel predominates. In connection with our acquisition of
Dresdner Bank in 2001, we have placed approximately 1,020 insurance specialists
to sell both life insurance products and property-casualty insurance products at
Dresdner Bank branches throughout Germany at December 31, 2003. The relative
importance of each of these distribution channels also varies by region and by
product mix.

     The following sets forth certain key data concerning our German insurance
distribution systems as they related to property-casualty insurance at and for
the year ended December 31, 2003:



                                                                            % OF 2003
                                                                        PROPERTY-CASUALTY
                                                            NUMBER(1)       PREMIUMS
                                                            ---------   -----------------
                                                                  
Full-time tied agents.....................................   11,487            65.8
Part-time tied agents.....................................   43,717             6.3
Brokers...................................................    6,157            13.7
Banks.....................................................    2,440(2)          3.4
Other(3)..................................................       --            10.8
                                                             ------           -----
  Total...................................................       --           100.0
                                                             ======           =====


---------------

(1) Represents the total number in Germany for all Allianz Group segments.

(2) Represents the number of German branches at Dresdner Bank (783),
    Oldenburgische Landesbank (177), Reuschel Bank (10), and at unaffiliated
    banks, comprising Volks- und Raiffeisenbanken (1,463) and

                                        49


    Industrie Kredit-Bank (7), with which we have distribution agreements
    covering our property-casualty and life/health insurance products.

(3) Includes all Allianz Group employees in Germany, who are able to sell
    Allianz policies.

     In our German property-casualty insurance business, we distribute our
products primarily through a network of self-employed, full-time tied agents. We
believe that our network of tied agents is the largest full-time insurance sales
force in Europe. These agents, who have an average of more than ten years'
experience selling Allianz products, receive a full range of support from the
Allianz Group, from initial support in establishing an office and a portfolio to
pension benefits based upon the volume and product mix of their portfolios.
Apart from pension provisions, agent compensation is based primarily on volume,
although we also utilize a number of incentive schemes to encourage sales of
strategically more important policy types. Our full-time tied agents follow
centralized underwriting and pricing guidelines, allowing us to carefully
segment and monitor our German book of business.

ALLIANZ AG

     Allianz AG, the parent company of the Allianz Group, acts as the Allianz
Group's reinsurer for almost all of our insurance operations, other than
international industrial reinsurance. In addition, Allianz AG assumes a
relatively small amount of reinsurance from non-Allianz Group companies. Each
subsidiary is able to place reinsurance directly with reinsurers other than
Allianz AG, but Allianz AG has a preferred partnership with respect to
reinsurance cessions of its subsidiaries based on ordinary market terms and
conditions. For the years ended December 31, 2003, 2002 and 2001, Allianz AG
assumed 39.1%, 39.4% and 41.5%, respectively, of all reinsurance ceded by
Allianz Group companies.

     While the Allianz Group remains liable as a primary insurer notwithstanding
the ceding of reinsurance to third parties, our evaluation criteria, which
include the claims-paying and debt ratings, capital and surplus levels, and
marketplace reputation of our reinsurers, are such that we believe any risks of
collectibility to which we are exposed are not significant, and historically
Allianz Group companies have not experienced difficulty in collecting from their
reinsurers. Munich Re is our primary outside reinsurer. For the fiscal years
ended December 31, 2003, 2002 and 2001, the Munich Re Group assumed E2,250
million, E2,300 million and E2,400 million in written premiums from us,
representing 33.9%, 31.3% and 30.6%, respectively, of our total written premiums
ceded to reinsurers. See Note 11 and 41 to the consolidated financial statements
for further information.

     The following table sets forth ceded written premiums ceded by the Allianz
Group to the Munich Re Group and other reinsurers for the years indicated:



                                                     YEAR ENDED DECEMBER 31,
                                          ---------------------------------------------
                                              2003            2002            2001
                                          -------------   -------------   -------------
                                            E       %       E       %       E       %
                                          -----   -----   -----   -----   -----   -----
                                                         (E IN MILLIONS)
                                                                
Munich Re Group.........................  2,250    33.9   2,300    31.3   2,400    30.6
Other Reinsurers........................  4,394    66.1   5,057    68.7   5,438    69.4
                                          -----   -----   -----   -----   -----   -----
  Total.................................  6,644   100.0   7,357   100.0   7,838   100.0
                                          =====   =====   =====   =====   =====   =====


     Allianz AG acts as the primary reinsurer of our German property-casualty
subsidiaries, other than our credit insurance subsidiary, Euler Hermes, and our
international industrial reinsurance unit, Allianz Global Risks Re, for which
Munich Re is the primary reinsurer. See "-- Specialty Lines Description of
Business -- Allianz Global Risks Ruckversicherungs-AG." In the life/health area,
Allianz AG and Munich Re each assume 50% of the reinsurance ceded by Allianz
Lebensversicherungs-AG, the main operating company for our German life insurance
operations. Outside of Germany, Allianz AG acts as a reinsurer of Allianz Group
subsidiaries, with a preferred partnership on all business ceded, and provides
centralized advice to subsidiaries on structuring their own reinsurance
programs, establishing lists of permitted reinsurers, and monitoring aggregate
exposures to catastrophes and other events.

                                        50


     The following table sets forth the reinsurance assumed by Allianz AG by
gross premiums written for the years shown:



                                                              YEAR ENDED DECEMBER 31,
                                                              ------------------------
                                                               2003     2002     2001
                                                              ------   ------   ------
                                                                  (E IN MILLIONS)
                                                                       
From German Property-Casualty Group subsidiaries............  2,909    3,028    3,024
From German life/health subsidiaries........................    589      638      539
From Euler Hermes...........................................    173      155      107
From other subsidiaries.....................................  1,161    1,190    1,170
                                                              -----    -----    -----
  Subtotal..................................................  4,832    5,011    4,840
From non-Allianz Group companies............................    653      589      847
                                                              -----    -----    -----
  Total.....................................................  5,485    5,600    5,687
                                                              =====    =====    =====


     Allianz AG writes a limited amount of third-party reinsurance, with
premiums totaling E653 million in 2003, E589 million in 2002 and E847 million in
2001. Other than Munich Re Group, which represented E301 million, E240 million
and E511 million, or 46.1%, 40.7% and 60.3% of Allianz AG's third-party assumed
reinsurance in 2003, 2002 and 2001, respectively, no single third party
accounted for any significant amount of reinsurance assumed in such years. See
"Major Shareholders and Related Party Transactions."

RESULTS OF OPERATIONS

     The following table shows key financial data for our German
property-casualty operations. Gross premiums written and earnings after taxes
and before goodwill amortization by operating company are presented before
consolidation adjustments representing the elimination of transactions between
Allianz Group companies in different countries and different segments.

                     GERMANY -- PROPERTY-CASUALTY: KEY DATA



                                                      YEAR ENDED DECEMBER 31,
                            ---------------------------------------------------------------------------
                                     2003                      2002                      2001
                            -----------------------   -----------------------   -----------------------
                                         EARNINGS                  EARNINGS                  EARNINGS
                                       AFTER TAXES               AFTER TAXES               AFTER TAXES
                             GROSS      AND BEFORE     GROSS      AND BEFORE     GROSS      AND BEFORE
                            PREMIUMS     GOODWILL     PREMIUMS     GOODWILL     PREMIUMS     GOODWILL
                            WRITTEN    AMORTIZATION   WRITTEN    AMORTIZATION   WRITTEN    AMORTIZATION
                            --------   ------------   --------   ------------   --------   ------------
                                                          (E IN MILLIONS)
                                                                         
German Property-Casualty
  Group...................   10,109          586        9,782        1,869       10,075       1,660
Allianz AG................    5,485        4,829        5,600        9,360(1)     5,687       2,516
Consolidation
  adjustments.............   (2,948)      (1,176)      (3,068)      (2,161)      (3,118)       (403)
                             ------       ------       ------       ------       ------       -----
Total.....................   12,646        4,239       12,314        9,068       12,644       3,773
                             ======       ======       ======       ======       ======       =====


---------------

(1) Includes significant investment related results. See "-- Property-Casualty
    Insurance Operations -- Year Ended December 31, 2002 Compared to Year Ended
    December 31, 2001 -- Net Income."

                                        51


     The following table shows the composition of the German Property-Casualty
Group's gross premiums written by product line for each of the years shown:

 GERMAN PROPERTY-CASUALTY GROUP: GROSS PREMIUMS WRITTEN BY LINE OF BUSINESS(1)



                                                     YEAR ENDED DECEMBER 31,
                                          ---------------------------------------------
                                              2003            2002            2001
                                          -------------   -------------   -------------
                                            E       %       E       %       E       %
                                          -----   -----   -----   -----   -----   -----
                                                 (E IN MILLIONS, EXCEPT % DATA)
                                                                
Automobile liability....................  2,401    24.0   2,376    24.7   2,330    23.9
Fire and property(2)....................  1,584    15.9   1,528    15.9   1,514    15.5
Other automobile........................  1,562    15.6   1,481    15.4   1,468    15.0
Personal accident.......................  1,497    15.0   1,440    14.9   1,401    14.4
Liability(3)............................  1,264    12.7   1,209    12.6   1,293    13.3
Legal Expense...........................    394     3.9     384     3.9     382     3.9
Transport and aviation(4)...............     79     0.8      70     0.7     259     2.7
Other(5)................................  1,205    12.1   1,148    11.9   1,102    11.3
                                          -----   -----   -----   -----   -----   -----
  Total.................................  9,986   100.0   9,636   100.0   9,749   100.0
                                          =====   =====   =====   =====   =====   =====


---------------

(1) Does not reflect business assumed through reinsurance operations in the
    amount of E123 million in 2003, E146 million in 2002 and E326 million in
    2001.

(2) Includes fire, household goods, building and other property insurance.

(3) Excludes aviation liability insurance with effect from January 1, 2002 due
    to the transfer of our aviation insurance activities into our specialty
    line, Marine and Aviation (see "-- Specialty Lines -- Description of
    Business -- Marine and Aviation").

(4) Includes only commercial transport insurance with effect from January 1,
    2002, due to the transfer of our industrial transport and aviation insurance
    activities into our specialty line, Marine and Aviation (see "-- Specialty
    Lines -- Description of Business -- Marine and Aviation").

(5) Includes multi-line policies with individual customers in the former German
    Democratic Republic that were acquired through the acquisition of Deutsche
    Versicherungs-AG, as well as commercial multi-line property insurance.

YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002

     Gross Premiums Written.  Property-casualty gross premiums written in 2003
were E12,646 million, an increase of E332 million, or 2.7%, from 2002 levels of
E12,314 million, reflecting growth in almost all lines of business, in
particular automobile insurance. Growth in our automobile insurance line
resulted mainly from rate increases and the increase of our share in the
business contracted through the insurance service company of a large automobile
group in Germany, offset in part by a more selective underwriting policy.

     Automobile liability and other automobile gross premiums written in Germany
increased by E106 million, or 2.7%, to E3,963 in 2003 from E3,857 million in
2002, due primarily to rate increases and the increase of our share in the
business contracted through the insurance service company of a large automobile
group in Germany, offset in part by a more selective underwriting policy. The
number of vehicles insured decreased to 8.80 million in 2003 from 8.97 million
in 2002. Fire and property gross premiums written in Germany increased by E56
million, or 3.7%, to E1,584 million in 2003 from E1,528 million in 2002,
primarily as a result of the introduction of multi-coverage fire and property
policies to replace the existing single coverage policies. Personal accident
gross premiums written increased by E57 million, or 4.0%, to E1,497 million in
2003 from E1,440 million in 2002, due primarily to continuing increases in new
business. Liability gross premiums written increased by E55 million, or 4.5%, to
E1,264 million in 2003 from E1,209 million in 2002, reflecting primarily rate
increases. Premiums in our other lines of insurance increased by 4.9% due to the
replacement of single-coverage policies by multi-coverage policies. Reinsurance
assumed
                                        52


by the German Property-Casualty Group decreased by E23 million, or 15.8%, to
E123 million in 2003 from E146 million in 2002, resulting from the German
aviation reinsurance business.

     Reinsurance assumed by Allianz AG decreased by E115 million, or 2.1%, to
E5,485 million in 2003 from E5,600 million in 2002, reflecting primarily an
increase in the self-retention of companies in the German Property-Casualty
Group, which led to a reduction in reinsurance ceded to Allianz AG. The decrease
was offset in part by increased gross premiums written from expanded reinsurance
relationships.

     Earnings After Taxes and Before Goodwill Amortization.  In Germany,
property-casualty earnings after taxes and before goodwill amortization
decreased by E4,829 million, or 53.3%, to E4,239 million in 2003 from E9,068
million in 2002. The decrease was due primarily to decreased investment results,
reflecting the high levels of realized gains and intercompany transactions in
2002. The gains on intercompany transactions were eliminated at the Allianz
Group level. See "-- Year Ended December 31, 2002 Compared to Year Ended
December 31, 2001 -- Net Income." Investment results in 2003 reflected realized
gains of E2,839 million and E936 million on the sales of our shareholding in
Beiersdorf AG in December 2003 and Munich Re in 2003, respectively, and of other
equity investments, as well as of intercompany transactions, including E342
million from the transfer of International Reinsurance Company S.A., Luxembourg,
from Allianz AG to Allianz Europe Limited. The gains on intercompany
transactions were eliminated at the Allianz Group level. Underwriting results
also improved in 2003 due to rate increases as well as a lower level of large
claims compared to 2002. Total net insurance benefits in Germany decreased by
E485 million, or 6.1%, to E7,453 million in 2003 from E7,938 million in 2002,
reflecting primarily the high levels of net insurance benefits in 2002, as well
as reduced large claims and decreased claims in our automobile liability,
property and other automobile lines. The loss ratio decreased to 71.4% in 2003
from 74.2% in 2002, reflecting primarily the decrease in claims in comparison to
2002 and increased net premiums earned. The expense ratio decreased to 25.7% in
2003 from 28.3% in 2002, due primarily to a reduction of administrative expenses
and distribution costs, particularly at our administrative headquarters, in
comparison to 2002, which reflected expenses incurred in connection with the
build-out and integration of the distribution capacities of the Allianz Group
and Dresdner Bank Group.

YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

     Gross Premiums Written.  Property-casualty gross premiums written in 2002
were E12,314 million, a decrease of E330 million, or 2.6%, from 2001 levels of
E12,644 million, reflecting primarily the transfers effective January 1, 2002 of
our marine, aviation and industrial transport business into Allianz Marine &
Aviation, our separately reporting marine and aviation specialty line (see
"-- Specialty Lines -- Description of Business -- Marine and Aviation") and of
our international industrial reinsurance activities from Allianz AG to Allianz
Global Risks Re, our separately reporting international industrial reinsurance
specialty line (see "-- Specialty Lines -- Description of Business Allianz
Global Risks Ruckversicherungs-AG"). This decrease was offset in part by
increases in gross premiums written in our automobile and other lines due to
rate increases.

     Automobile liability and other automobile gross premiums written in Germany
increased by E59 million, or 1.6%, to E3,857 in 2002 from E3,798 million in
2001, due primarily to rate increases, offset in part by a more selective
underwriting policy. The number of vehicles insured decreased slightly to 8.97
million in 2002 from 9.17 million in 2001. Fire and property gross premiums
written in Germany increased by E14 million, or 0.9%, to E1,528 million in 2002
from E1,514 million in 2001, primarily as a result of increases in residential
fire insurance and other property insurance. Personal accident gross premiums
written increased by E39 million, or 2.8%, to E1,440 million in 2002 from E1,401
million in 2001, due primarily to continuing increases in new business.
Liability gross premiums written decreased by E84 million, or 6.5%, to E1,209
million in 2002 from E1,293 million in 2001, reflecting primarily the transfer
of our aviation liability business to our marine and aviation specialty line
(see "-- Specialty Lines -- Description of Business -- Marine and Aviation"),
continued strong competition in commercial liability lines and portfolio review
measures in our large industrial and corporate lines. Reinsurance assumed by the
German Property-Casualty Group decreased by E180 million, or 55.2%, to E146
million in 2002 from E326 million in 2001, reflecting

                                        53


primarily the transfer of our marine, aviation and industrial transport business
into our marine and aviation specialty line. Premiums in our other lines of
insurance showed slight increases from 2001 levels.

     Reinsurance assumed by Allianz AG decreased by E87 million, or 1.5%, to
E5,600 million in 2002 from E5,687 million in 2001, reflecting primarily the
transfer effective January 1, 2002 of our international industrial reinsurance
activities from Allianz AG into Allianz Global Risks Re, a decrease in
reinsurance assumed from Munich Re Group related to the restructuring of the
respective shareholdings of Allianz AG and Munich Re in certain jointly owned
subsidiaries and affiliates in 2002 and a market-wide shift from proportional to
non-proportional reinsurance coverage. See "Major Shareholders and Related Party
Transactions -- Related Party Transactions -- Munchener
Ruckversicherungs-Gesellschaft Aktiengesellschaft." The decrease was offset in
part by strong rate increases in almost all lines of business and increased
gross premiums written from expanded reinsurance relationships, predominantly
with Allianz Group companies outside of Germany.

     Earnings After Taxes and Before Goodwill Amortization.  In Germany,
property-casualty earnings after taxes and before goodwill amortization
increased by E5,295 million, or 140.3%, to E9,068 million in 2002 from E3,773
million in 2001. The increase was due primarily to increased investment results,
including realized gains of E1,886 million from sales of Munich Re shares and
approximately E1,100 million from sales of Vodafone AG shares, as well as
realized gains from the sale of other shareholdings in the Allianz Group's
German equity portfolio. We also recorded significant income from intercompany
transactions, including realized gains of E3,332 million from the transfer of
Munich Re shares from Allianz AG to Dresdner Bank, dividend income of E382
million from Dresdner Bank and E224 million from the sale of Vereinte
Lebensversicherung AG from Vereinte Versicherung AG to Allianz Leben. The gains
on these intercompany transactions were eliminated at the Allianz Group level.
Total net insurance benefits in Germany decreased by E167 million, or 2.1%, to
E7,938 million in 2002 from E8,105 million in 2001, due primarily to the
transfers effective January 1, 2002 of our international industrial reinsurance
and marine, aviation and industrial transport activities into our international
industrial reinsurance and marine and aviation specialty lines, respectively.
The decrease in net insurance benefits in Germany in 2002 also reflected
decreased reinsurance claims at Allianz AG in comparison to the high level of
net insurance benefits in 2001, which reflected claims from the terrorist attack
of September 11, 2001. The decrease was partially offset by a substantial
increase in natural catastrophe claims, including approximately E490 million in
net claims related to flooding in Germany and Central and Eastern Europe in July
and August 2002, as well as additional net claims related to Hurricane Isidore
in Mexico in September 2002 (E25 million) and the windstorm "Jeanett" in Western
Europe in October 2002 (E134 million). The loss ratio decreased to 74.2% in 2002
from 76.2% in 2001, reflecting primarily the decrease in claims in comparison to
2001 and the transfers of our industrial reinsurance and marine, aviation and
transport activities into our industrial reinsurance and marine and aviation
specialty lines, respectively. The expense ratio increased to 28.3% in 2002 from
26.8% in 2001, due primarily to increased personnel costs relating to employee
pensions and expenses incurred in connection with the build-out and integration
of distribution capacities of the Allianz Group and the Dresdner Bank Group.

                                 REST OF EUROPE

DESCRIPTION OF BUSINESS

     The Rest of Europe is, in the aggregate, our largest market for
property-casualty insurance. As a percentage of our total property-casualty
gross premiums written worldwide, the Rest of Europe accounted for of 46.1% in
2003, 44.4% in 2002 and 44.8% in 2001.

     We conduct our property-casualty insurance operations in the Rest of Europe
through five main groups of operating companies in France, Italy, the United
Kingdom, Switzerland and Spain. In the remainder of the Rest of Europe, we
operate through approximately 35 Allianz subsidiaries in more than 17 other
European countries. The property-casualty insurance products we offer in the
Rest of Europe are in each case generally similar to those we offer in Germany.

     France.  We conduct our property-casualty insurance operations in France
through Assurances Generales de France (or AGF, and together with its
subsidiaries, the AGF Group). The AGF Group is the third-largest
                                        54


property-casualty insurance provider in France as measured by gross premiums
written in 2003. The primary property-casualty insurance products which we offer
in France are automobile, property, injury and liability for both individual and
corporate customers. As of December 31, 2003, we held 58.5% of the share capital
of AGF (or 63.5% after deduction of own shares held by AGF), with the remainder
being publicly traded in France. We distribute our property-casualty products
and services in France primarily through a network of general agents and
brokers. We also utilize bancassurance and other direct sales channels.

     Italy.  We conduct our property-casualty insurance operations in Italy
primarily through Riunione Adriatica di Sicurta (or RAS, and together with its
subsidiaries, the RAS Group) and Lloyd Adriatico, which we refer to together
with our other Italian subsidiaries as our "Italian Subsidiaries." Taken
together, the Italian Subsidiaries are the third-largest property-casualty
insurer in the Italian market as measured by gross premiums written in 2003. The
RAS Group operates in all personal and commercial property-casualty lines
throughout Italy, while Lloyd Adriatico underwrites mainly personal lines. As of
December 31, 2003, we held 55.5% of the voting rights of RAS, with the remainder
being publicly traded in Italy, and 99.7% of the share capital of Lloyd
Adriatico. The Italian Subsidiaries distribute our property-casualty products
and services primarily through an extensive network of general agents, brokers
and through Internet and telephone-based direct sales channels.

     United Kingdom.  We are the sixth-largest provider of property-casualty
insurance in the United Kingdom as measured by gross premiums written in 2003.
We operate our property-casualty insurance business in the United Kingdom
primarily through our wholly owned subsidiary Allianz Cornhill Insurance plc (or
Allianz Cornhill). The primary property-casualty insurance products that Allianz
Cornhill offers in the United Kingdom are generally similar to those offered by
the German Property-Casualty Group in Germany. In addition, we sell a number of
specialty products in the United Kingdom, including extended warranty and pet
insurance. We distribute our property-casualty products and services in the
United Kingdom through a range of distribution channels, including brokers and
various product specific distribution channels, including affinity groups.

     Switzerland.  We are the fourth-largest provider of property-casualty
insurance in Switzerland as measured by gross premiums written in 2003, not
including travel insurance. We conduct our property-casualty insurance
operations in Switzerland primarily through the Allianz Suisse
Versicherungsgesellschaft and its subsidiaries, which together we refer to as
our "Swiss Property-Casualty Subsidiaries." The Swiss Property-Casualty
Subsidiaries handle our lines of property-casualty insurance in Switzerland
other than travel insurance. In addition, our wholly owned subsidiary Allianz
Risk Transfer (or ART) sells conventional reinsurance as well as a variety of
alternative risk transfer products for corporate customers worldwide. Our travel
and assistance insurance subsidiary Mondial Assistance Group operates and is
managed on a global basis and is discussed separately (see "-- Specialty
Lines"). The Swiss Property-Casualty Subsidiaries and ART distribute our
products and services through a wide range of tied and general agents, and also
through brokers, bancassurance and other direct channels.

     Spain.  We are the second-largest provider of property-casualty insurance
in Spain as measured by gross premiums written in 2003. We serve the Spanish
property-casualty insurance market through Allianz Compania de Seguros (Allianz
Spain), and Fenix Directo. Allianz Spain has headquarters in Madrid and
Barcelona, with regional offices throughout Spain. Allianz Spain offers a wide
variety of traditional personal and commercial property-casualty insurance
products, with an emphasis on automobile insurance. Allianz Spain distributes
its products through agents, brokers and direct distribution channels.

     Netherlands.  Our most important subsidiary in the Netherlands is Allianz
Nederland Verzekeringsgroep. Our most important products are automobile and fire
insurance. Our Netherlands subsidiaries distribute their products through
independent agents and brokers.

     Austria.  Allianz Elementar offers a broad range of property-casualty and
health insurance products to individual and group customers in Austria. We
distribute our property-casualty products in Austria primarily through employee
agents, tied agents and brokers.

                                        55


     Ireland.  Our subsidiary Allianz Irish Life offers a wide variety of
traditional property-casualty insurance products, including mainly automobile
and commercial/industrial lines. Allianz Irish Life Holdings distributes its
products primarily through brokers, and to a lesser extent through agents and
banks as well as through telephone-based direct sales channels.

     Belgium.  We conduct our property-casualty insurance business in Belgium
primarily through AGF Belgium Insurance and Euler Hermes Credit Insurance
Belgium, S.A. (N.V.). Our primary emphasis is on industrial insurance. We also
have a significant position in the market in automobile insurance. We distribute
our property-casualty products in Belgium mainly through brokers.

     Other.  In addition, we have property-casualty insurance operations in
Hungary, Slovakia, Portugal, the Czech Republic, Luxembourg, Poland, Romania,
Greece, Bulgaria, Croatia and Russia. Except for Poland, we are one of the top
three insurers in the Central- and Eastern European markets, and in Hungary,
Slovakia and Bulgaria we are the largest insurer by market share. The primary
products sold in these countries are mandatory third-party liability coverage
and related additional coverage. We expect further increases in
property-casualty gross premiums written as we work to build up our sales
organization and exploit other synergies in our insurance operations in the rest
of Europe. With Hungary, Poland, the Czech Republic and Slovakia having joined
the European Union on May 1, 2004, we expect our business prospects for the
coming years to be even more promising.

RESULTS OF OPERATIONS

     The following table shows key financial data for our Rest of Europe
property-casualty operations. Consistent with our general practice, gross
premiums written and earnings after taxes and before goodwill amortization by
geographic region are presented before consolidation adjustments representing
the elimination of transactions between Allianz Group companies in different
countries and different segments.

                 REST OF EUROPE -- PROPERTY-CASUALTY: KEY DATA



                                                      YEAR ENDED DECEMBER 31,
                            ---------------------------------------------------------------------------
                                     2003                      2002                      2001
                            -----------------------   -----------------------   -----------------------
                                         EARNINGS                  EARNINGS                  EARNINGS
                                       AFTER TAXES               AFTER TAXES               AFTER TAXES
                             GROSS      AND BEFORE     GROSS      AND BEFORE     GROSS      AND BEFORE
                            PREMIUMS     GOODWILL     PREMIUMS     GOODWILL     PREMIUMS     GOODWILL
                            WRITTEN    AMORTIZATION   WRITTEN    AMORTIZATION   WRITTEN    AMORTIZATION
                            --------   ------------   --------   ------------   --------   ------------
                                                          (E IN MILLIONS)
                                                                         
France....................    5,367         321         4,941(1)      371         5,392          31
Italy.....................    5,117         474         4,939         893         4,585         487
United Kingdom............    2,538         206         2,711         256         2,507          94
Switzerland...............    1,742          60         1,747          62         1,750         155
Spain.....................    1,681          96         1,490          62         1,278          32
Other.....................    5,262         604         4,836         418         4,256         402
Consolidation
  adjustments.............     (211)       (225)         (170)       (173)         (162)       (353)
                             ------       -----        ------       -----        ------        ----
  Total...................   21,496       1,536        20,494       1,889        19,606         848
                             ======       =====        ======       =====        ======        ====


---------------

(1) Reflects the transfer, effective January 1, 2002 of our French marine,
    aviation and industrial transport business to our marine and aviation
    specialty line. See "-- Specialty Lines -- Description of Business -- Marine
    and Aviation."

                                        56


              OTHER REST OF EUROPE -- PROPERTY-CASUALTY: KEY DATA



                                                      YEAR ENDED DECEMBER 31,
                            ---------------------------------------------------------------------------
                                     2003                      2002                      2001
                            -----------------------   -----------------------   -----------------------
                                         EARNINGS                  EARNINGS                  EARNINGS
                                       AFTER TAXES               AFTER TAXES               AFTER TAXES
                             GROSS      AND BEFORE     GROSS      AND BEFORE     GROSS      AND BEFORE
                            PREMIUMS     GOODWILL     PREMIUMS     GOODWILL     PREMIUMS     GOODWILL
                            WRITTEN    AMORTIZATION   WRITTEN    AMORTIZATION   WRITTEN    AMORTIZATION
                            --------   ------------   --------   ------------   --------   ------------
                                                          (E IN MILLIONS)
                                                                         
Netherlands...............   1,093          454        1,023         284           873         284
Austria...................     906           32          852         (36)          844          16
Ireland...................     856          102          860         168           738          (4)
Belgium...................     374           59          362         (65)          391           8
Portugal..................     305            7          263         (19)          235          --
Luxembourg................     142         (145)         194          35           176          92
Greece....................      75           (2)          66           2            62         (11)
                             -----         ----        -----         ---         -----         ---
  Western and Southern
     Europe...............   3,751          507        3,620         369         3,319         385
                             -----         ----        -----         ---         -----         ---
Hungary...................     546           54          511          35           411          31
Slovakia..................     324            5          158          (7)           45           4
Czech Republic............     227            5          213         (10)          173         (10)
Poland....................     158            7          128          14           137         (11)
Romania...................     131           14           93           5            71           2
Bulgaria..................      64           10           56          10            45           8
Croatia...................      40            0           38           1            37          (4)
Russia....................      20            2           17           1            18          (3)
Cyprus....................       1           --            2          --            --          --
                             -----         ----        -----         ---         -----         ---
  Central and Eastern
     Europe...............   1,511           97        1,216          49           937          17
                             -----         ----        -----         ---         -----         ---
  Total...................   5,262          604        4,836         418         4,256         402
                             =====         ====        =====         ===         =====         ===


YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002

     Gross Premiums Written.  In Rest of Europe, property-casualty gross
premiums written increased by E1,002 million, or 4.9%, to E21,496 million in
2003 from E20,494 million in 2002. This increase reflected growth in gross
premiums written in most of our primary property-casualty markets in Rest of
Europe, especially France, Spain and Italy, due primarily to rate increases in a
number of lines and increased efficiency of distribution channels, as well as in
our growth in our property-casualty operations in Central and Eastern Europe.
The increase was offset in part by negative effects of exchange rate movements,
particularly in the United Kingdom.

     Earnings After Taxes and Before Goodwill Amortization.  Property-casualty
earnings after taxes and before goodwill amortization in Rest of Europe
decreased by E353 million, or 18.7%, to E1,536 million in 2003 from E1,889
million in 2002, primarily as a result of decreased investment results, in
particular in Italy, reflecting the high levels of realized gains in 2002. See
"-- Year Ended December 31, 2002 Compared to Year Ended December 31,
2001 -- Earnings After Taxes and Before Goodwill Amortization." The decrease was
partially offset by improved underwriting results in our major Rest of Europe
markets. Net insurance benefits in Rest of Europe decreased by E307 million, or
2.3%, to E13,492 million in 2003 from E13,185 million in 2002, while net
premiums earned increased by 5.6% to E18,063 million in 2003 from E17,108
million in 2002. The loss ratio in Rest of Europe decreased to 73.6% in 2003
from 76.8% in 2002,

                                        57


reflecting the decrease in net insurance benefits coupled with the increase in
net premiums earned. The expense ratio decreased to 24.1% in 2003 from 24.6% in
2002.

     The following table sets forth net loss, expense and combined ratio
information for our property-casualty operations in the Rest of Europe by
geographic area for the years 2003 and 2002:



                                                   YEAR ENDED DECEMBER 31, 2003
                                  --------------------------------------------------------------
                                                   UNITED
                                  FRANCE   ITALY   KINGDOM   SWITZERLAND   SPAIN   OTHER   TOTAL
                                  ------   -----   -------   -----------   -----   -----   -----
                                                                      
Loss ratio......................   79.8%   70.9%    67.1%       71.0%      75.9%   73.3%   73.6%
Expense ratio...................   24.4%   22.9%    29.0%       25.3%      19.6%   23.9%   24.1%
Combined ratio..................  104.2%   93.8%    96.1%       96.3%      95.5%   97.2%   97.7%




                                                   YEAR ENDED DECEMBER 31, 2002
                                  --------------------------------------------------------------
                                                   UNITED
                                  FRANCE   ITALY   KINGDOM   SWITZERLAND   SPAIN   OTHER   TOTAL
                                  ------   -----   -------   -----------   -----   -----   -----
                                                                      
Loss ratio......................   84.5%   74.8%    68.1%       70.3%      77.0%   77.9%   76.8%
Expense ratio...................   26.4%   22.7%    30.0%       23.8%      20.6%   24.0%   24.6%
Combined ratio..................  110.9%   97.5%    98.1%       94.1%      97.6%   101.9%  101.4%


     France.  In France, property-casualty gross premiums written increased by
E426 million, or 8.6%, to E5,367 million in 2003 from E4,941 million in 2002,
reflecting primarily substantial rate increases in all lines of business,
particularly in our large industrial business and commercial property and
liability lines. In the individual lines, gross premiums written increased due
primarily to rate increases in our automobile and household insurance lines,
while overall portfolio volumes remained roughly stable. Our distribution
arrangement with Credit Lyonnais continued to contribute to the increase in
individual lines and remains exclusive until 2009.

     Earnings after taxes and before goodwill amortization decreased by E50
million, or 13.5%, to E321 million in 2003 from E371 million in 2002. The
decrease resulted primarily from impairments recorded on investment securities
and higher tax charges, offset in part by improved underwriting results and a
realized gain of E246 million from the sale of our shareholding in Credit
Lyonnais in the second quarter of 2003. Our loss ratio in France improved to
79.8% in 2003 from 84.5% in 2002, largely due to increased earned premiums
reflecting rate increases and reduced claims attributable to a stricter
underwriting policy. Our expense ratio improved to 24.4% in 2003 from 26.4% in
2002 primarily as a result of streamlining of our information technology
operations and reduced administrative expenses.

     Italy.  In Italy, property-casualty gross premiums written were E5,117
million in 2003, an increase of E178 million, or 3.6%, from E4,939 million in
2002, due primarily to an increase in automobile and general liability premiums.
Automobile premiums increased by E145 million, or 4.5%, in 2003, reflecting rate
increases in the Italian market and an increase in the number of vehicles
insured. General liability premiums increased by E39 million, or 11.4%, in 2003,
reflecting primarily substantial rate increases in the Italian commercial and
corporate clients market as well as growth in new business, despite a selective
underwriting policy and portfolio review measures. We saw moderate increases in
our other main lines of business, including fire and personal accident, while
our health premiums decreased due to the termination of unprofitable group
contracts.

     Earnings after taxes and before goodwill amortization decreased by E419
million, or 46.9%, to E474 million in 2003 from E893 million in 2002, reflecting
primarily decreased investment results, despite the recovery of the stock
markets, attributable to a realized gain of E713 million recorded in 2002 in
connection with the sale of a real estate subsidiary (see "-- Year Ended
December 31, 2002 Compared to Year Ended December 31, 2001 -- Italy") and
writedowns on investments in 2003. The decrease in earnings after taxes and
before goodwill amortization was offset in part by improved underwriting results
reflecting lower net claims, as well as a realized gain of E58 million in
connection with the disposition of a derivative financial instrument that was
used to hedge an investment but did not qualify for hedge accounting. The loss
ratio decreased to 70.9% in 2003 from 74.8% in 2002, reflecting the overall
reduction in claim frequency,

                                        58


particularly in the automobile line, due to a more selective underwriting policy
in recent years, portfolio review measures and the introduction of a more
stringent points-based regulation of drivers' licenses in Italy.

     United Kingdom.  In the United Kingdom, property-casualty gross premiums
written decreased by E173 million, or 6.4%, to E2,538 million in 2003 from
E2,711 million in 2002 as a result of the negative effects of exchange rate
movements (E249 million), offset in part by increases in almost all of our
business lines, but particularly in commercial lines, due to increased business
volume and increased premium rates.

     Earnings after taxes and before goodwill amortization decreased by E50
million, or 19.5% to E206 million in 2003 from E256 million in 2002, due
primarily to the negative effects of exchange rate movements (E30 million).
Excluding the effects of exchange rate movements, earnings after taxes and
before goodwill amortization decreased by 7.8%, attributable to lower realized
gains on investments and higher tax charges, offset in part by improved
underwriting results reflecting increased rates and a lower level of major claim
events. The loss ratio improved to 67.1% in 2003 from 68.1% in 2002, reflecting
the comparatively lower decrease in net premiums earned as well as the absence
of major claim events.

     Switzerland.  In Switzerland, property-casualty gross premiums written
decreased slightly to E1,742 million in 2003, compared with E1,747 million in
2002, due primarily to decreased premiums at ART and in our accident and health
lines, offset in part by increased premiums in our automobile line and
reinsurance business assumed. An additional approximately E34 million was
attributable to the negative effect of exchange rate movements.

     Earnings after taxes and before goodwill amortization decreased by E2
million, or 3.2%, to E60 million in 2003 from E62 million in 2002, reflecting
primarily a E32 million writeoff of deferred tax assets, offset by improved
investment results. The loss ratio increased to 71.0% in 2003 from 70.3% in 2002
due to increased losses in the ART business, offset in part by a more favorable
loss experience and portfolio review in our health and accident insurance lines.
The expense ratio increased to 25.3% in 2003 from 23.8% in 2002, primarily due
to higher commissions in the ART business as well as costs incurred in
connection with the acquisition and implementation of new information technology
systems to improve our operational workflow.

     Spain.  In Spain, property-casualty gross premiums written increased by
E191 million, or 12.8%, to E1,681 million in 2003 from E1,490 million in 2002,
as a result of increased sales in all lines of business, particularly automobile
lines, where gross premiums written increased by E129 million, or 12.8%. The
increased sales resulted primarily from new business in our automobile lines as
well as a reduction in our cancellation rate.

     Earnings after taxes and before goodwill amortization increased by E34
million, or 56.8%, to E96 million in 2003 from E62 million in 2002. The increase
reflected primarily improved underwriting and investment results. The loss ratio
improved slightly to 75.9% in 2003 from 77.0% in 2002, due primarily to
increased premium income, offset in part by an increase in claims frequency in
the automobile line. The expense ratio also improved to 19.6% in 2003 from 20.6%
in 2002, due to proportionately lower underwriting expenses as a result of cost
reduction measures.

     Other.  Property-casualty gross premiums written in Rest of Europe
countries other than France, Italy, Switzerland, the United Kingdom and Spain
(which we refer to as Other Rest of Europe) increased by E426 million, or 8.8%,
to E5,262 million in 2003 from E4,836 million in 2002, primarily as a result of
growth in the Netherlands, Portugal, Hungary and Slovakia. Earnings after taxes
and before goodwill amortization in Other Rest of Europe increased by E186
million, or 44.5%, to E604 million in 2003 from E418 million in 2002, primarily
as a result of growth in Austria, Belgium and Hungary, offset in part by
decreased earnings after taxes and before goodwill amortization in Ireland and
Luxembourg, due primarily to a change in structure of ownership in Ireland and
security writeoffs in Luxembourg.

YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

     Gross Premiums Written.  In Rest of Europe, property-casualty gross
premiums written increased by E888 million, or 4.5%, to E20,494 million in 2002
from E19,606 million in 2001. This increase reflected

                                        59


growth in gross premiums written in most of our primary property-casualty
markets in Rest of Europe, especially Italy, Spain and the United Kingdom, due
primarily to rate increases in a number of lines.

     Earnings After Taxes and Before Goodwill Amortization.  Property-casualty
earnings after taxes and before goodwill amortization in Rest of Europe
increased by E1,041 million, or 122.8%, to E1,889 million in 2002 from E848
million in 2001, primarily as a result of realized gains of E713 million on the
sale of a real estate subsidiary and E156 million on the intercompany transfer
of our property-casualty subsidiary Allianz Irish Life Holdings from Allianz
Holdings Ireland to Allianz AG, as well as improved underwriting results in our
major Rest of Europe markets. Partially offsetting the increase was a broad
decline in investment results due to weakness in the capital markets. Net
insurance benefits in Rest of Europe rose by E387 million, or 3.0%, to E13,185
million in 2002 from E12,798 million in 2001, which was less than the 6.2%
increase in net premiums earned, which increased to E17,108 million in 2002 from
E16,106 million in 2001. The loss ratio in Rest of Europe decreased to 76.8% in
2002 from 80.3% in 2001, reflecting the comparatively smaller increase in net
insurance benefits than net premiums earned. The expense ratio decreased to
24.6% in 2002 from 26.2% in 2001.

     The following table sets forth net loss, expense and combined ratio
information for our property-casualty operations in the Rest of Europe by
geographic area for the years 2002 and 2001:



                                                YEAR ENDED DECEMBER 31, 2002
                              ----------------------------------------------------------------
                                               UNITED
                              FRANCE   ITALY   KINGDOM   SWITZERLAND   SPAIN   OTHER    TOTAL
                              ------   -----   -------   -----------   -----   ------   ------
                                                                   
Loss ratio..................   84.5%   74.8%    68.1%       70.3%      77.0%    77.9%    76.8%
Expense ratio...............   26.4%   22.7%    30.0%       23.8%      20.6%    24.0%    24.6%
Combined ratio..............  110.9%   97.5%    98.1%       94.1%      97.6%   101.9%   101.4%




                                                YEAR ENDED DECEMBER 31, 2001
                              ----------------------------------------------------------------
                                               UNITED
                              FRANCE   ITALY   KINGDOM   SWITZERLAND   SPAIN   OTHER    TOTAL
                              ------   -----   -------   -----------   -----   ------   ------
                                                                   
Loss ratio..................   83.0%   76.7%    73.2%       79.1%      78.7%    86.1%    80.3%
Expense ratio...............   29.3%   22.5%    31.0%       26.9%      21.2%    25.7%    26.2%
Combined ratio..............  112.3%   99.2%   104.2%      106.0%      99.9%   111.8%   106.5%


     France.  In France, property-casualty gross premiums written decreased by
E451 million, or 8.4%, to E4,941 million in 2002 from E5,392 million in 2001,
reflecting primarily the transfer of our French marine, aviation and transport
business effective January 1, 2002 into Allianz Marine & Aviation, our
separately reported specialty line. See "-- Specialty Lines -- Description of
Business -- Marine and Aviation." This decrease was offset in part by rate
increases in all lines of business, particularly in our large industrial
business and commercial property and liability lines. In the individual lines,
gross premiums written also increased due to rate increases and growth in new
business in our automobile insurance line. Our distribution arrangement with
Credit Lyonnais Bank continued to contribute to the increase in individual
lines.

     Earnings after taxes and before goodwill amortization increased
significantly by E340 million to E371 million in 2002 from E31 million in 2001.
The increase resulted primarily from improved underwriting results attributable
to a decrease in acquisition costs and administrative expenses, realized gains
on investments, as well as a tax benefit. Our loss ratio in France worsened to
84.5% in 2002 from 83.0% in 2001, largely due to strengthening of reserves for
prior-year claims. Our expense ratio improved to 26.4% in 2002 from 29.3% in
2001 primarily as a result of streamlining of our information technology
operations.

     Italy.  In Italy, property-casualty gross premiums written were E4,939
million in 2002, an increase of E354 million, or 7.7%, from E4,585 million in
2001, due primarily to an increase in automobile premiums. Automobile premiums
increased by E256 million, or 8.7%, in 2002, reflecting rate increases in the
Italian market and an increase in the number of vehicles insured, despite a
selective underwriting policy. We saw moderate increases in our other main lines
of business, including fire, health and personal accident.

                                        60


     Earnings after taxes and before goodwill amortization increased by E406
million, or 83.4%, to E893 million in 2002 from E487 million in 2001, due
primarily to increased investment results reflecting a realized gain of E713
million on the sale of a real estate subsidiary, as well as improved
underwriting results reflecting lower net claims. The loss ratio decreased to
74.8% in 2002 from 76.7% in 2001, reflecting the overall reduction in claim
frequency, particularly in the automobile line, due to a more selective
underwriting policy in recent years.

     United Kingdom.  In the United Kingdom, property-casualty gross premiums
written increased by E204 million, or 8.1%, to E2,711 million in 2002 from
E2,507 million in 2001 as a result of increases in almost all of our business
lines, but particularly in commercial and industrial business, due primarily to
increased rates in the commercial, industrial and automobile insurance lines,
reflecting the claims experience of insurers in the United Kingdom in general.
The increase was offset in part by the negative effects of exchange rate
movements (E34 million).

     Earnings after taxes and before goodwill amortization increased by E162
million, or 172.3% to E256 million in 2002 from E94 million in 2001, due
primarily to improved underwriting results reflecting increased rates and the
absence of major claim events in comparison to 2001, which reflected claims from
the terrorist attack of September 11, 2001, as well as increased realized gains
on investments due to dispositions. Net insurance benefits decreased by E24
million, or 1.8%, to E1,276 million in 2002 from E1,300 million in 2001. The
loss ratio improved to 68.1% in 2002 from 73.2% in 2001, reflecting the
comparatively greater increase in premiums as well as the absence of major claim
events.

     Switzerland.  In Switzerland, property-casualty gross premiums written were
largely unchanged at E1,747 million in 2002, compared with E1,750 million in
2001, due primarily to decreased premiums in our technical, health and personal
accident lines reflecting portfolio review measures, offset in part by increased
premiums at ART and in our automobile, property and liability lines as a result
of increased rates. Gross premiums written in 2002 reflected a decrease of E46
million attributable to the one-time effect of a change in our method of
recording assumed reinsurance premiums. We began recording such premiums on a
current-year basis in 2001, with the result that two years' premiums were
recorded in 2001, compared to the single-year premiums recorded in 2002. An
additional approximately E40 million was attributable to the positive effect of
exchange rate movements.

     Earnings after taxes and before goodwill amortization decreased by E93
million, or 60.0%, to E62 million in 2002 from E155 million in 2001, reflecting
primarily impairments recorded on investment and realized losses on investments,
particularly equity securities, due to the weakness of the capital markets,
offset in part by improved underwriting results. The loss ratio improved to
70.3% in 2002 from 79.1% in 2001 due to more favorable loss experience and
portfolio review in our health and accident insurance lines.

     Spain.  In Spain, property-casualty gross premiums written increased by
E212 million, or 16.6%, to E1,490 million in 2002 from E1,278 million in 2001,
as a result of increased sales in all lines of business, particularly automobile
lines, where premium income increased by E127 million, or 14.4%. The increased
sales resulted from new business in our automobile lines and the ongoing
reorganization of our distribution channels to increase productivity and
efficiency by expanding our sales agent network and better incentivizing agents.

     Earnings after taxes and before goodwill amortization increased by E30
million, or 93.8%, to E62 million in 2002 from E32 million in 2001. The increase
reflected primarily improved underwriting results and a writeup of a real estate
property in Spain, offset in part by decreased investment results. The loss
ratio improved to 77.0% in 2002 from 78.7% in 2001, due primarily to increased
premium income as a result of rate increases, together with a decrease in claims
frequency in the automobile line due to a more selective underwriting policy.
The expense ratio also improved to 20.6% in 2002 from 21.2% in 2001, due to
proportionately lower underwriting expenses as a result of cost reduction
measures.

     Other.  Property-casualty gross premiums written in Rest of Europe
countries other than France, Italy, Switzerland, the United Kingdom and Spain
(which we refer to as Other Rest of Europe) increased by E580 million, or 13.6%,
to E4,836 million in 2002 from E4,256 million in 2001, primarily as a result of

                                        61


growth in the Netherlands, Ireland, Hungary and the Slovak Republic. Earnings
after taxes and before goodwill amortization in Other Rest of Europe increased
by E16 million, or 4.0%, to E418 million in 2002 from E402 million in 2001,
primarily as a result of increased earnings after taxes and before goodwill
amortization in Ireland, due primarily to a realized gain of E156 million on the
intercompany transfer of our property-casualty subsidiary Allianz Irish Life
Holdings from Allianz Holdings Ireland to Allianz AG, offset in part by
decreased earnings after taxes and before goodwill amortization in Austria and
Belgium, due primarily to decreased investment results in Austria and
deteriorating underwriting results and decreased investment results in Belgium.

                                     NAFTA

DESCRIPTION OF BUSINESS

     Our property-casualty insurance markets in the NAFTA zone are the United
States, Canada and Mexico. As a percentage of our total property-casualty gross
premiums written worldwide, the NAFTA zone accounted for 11.5%, 13.0% and 15.6%
in 2003, 2002 and 2001, respectively.

     United States.  Our property-casualty operations in the United States are
organized under the umbrellas of Allianz Global Risks US Insurance Company,
Burbank (formerly Allianz Insurance Co.) and Allianz of America, Inc. (or
Allianz of America). We have been present in the United States since 1977, when
we established Allianz Insurance Co., an important provider of commercial
insurance to major corporate customers, as one of our first U.S. subsidiaries.
In 1991, we acquired Fireman's Fund Insurance Company, an important personal and
commercial lines property-casualty insurance company founded in 1864. In
November 2003, we renamed Allianz Insurance Co. as Allianz Global Risks US
Insurance Company in order to reflect the principal operations of the company,
which is international industrial insurance, as well as to align with the global
brand representing our international industrial insurance business line, which
is Allianz Global Risks. Allianz of America comprises a group of companies
writing a wide variety of property-casualty lines of business. Our operations in
the United States accounted for 85.5% of our gross written property-casualty
insurance premiums in the NAFTA zone in 2003.

     Other.  We also conduct property-casualty operations in Canada and Mexico.
Our property-casualty products are generally similar to those we offer and sell
in the United States.

RESULTS OF OPERATIONS

     The following table shows key financial data for our NAFTA zone
property-casualty operations. Consistent with our general practice, gross
premiums written and earnings after taxes and before goodwill amortization by
geographic region are presented before consolidation adjustments representing
the elimination of transactions between Allianz Group companies in different
countries and different segments.

                      NAFTA -- PROPERTY-CASUALTY: KEY DATA



                                                      YEAR ENDED DECEMBER 31,
                            ---------------------------------------------------------------------------
                                     2003                      2002                      2001
                            -----------------------   -----------------------   -----------------------
                                         EARNINGS                  EARNINGS                  EARNINGS
                                       AFTER TAXES               AFTER TAXES               AFTER TAXES
                             GROSS      AND BEFORE     GROSS      AND BEFORE     GROSS      AND BEFORE
                            PREMIUMS     GOODWILL     PREMIUMS     GOODWILL     PREMIUMS     GOODWILL
                            WRITTEN    AMORTIZATION   WRITTEN    AMORTIZATION   WRITTEN    AMORTIZATION
                            --------   ------------   --------   ------------   --------   ------------
                                                          (E IN MILLIONS)
                                                                         
United States.............   4,597         (121)       5,330         (938)       6,171          (986)
Canada....................     568           14          549           (6)         539           (40)
Mexico....................     214           12          132           --          135            (4)
Consolidated
  adjustments.............     (35)          --          (19)          --          (23)           --
                             -----         ----        -----         ----        -----        ------
  Total...................   5,344          (95)       5,992         (944)       6,822        (1,030)
                             =====         ====        =====         ====        =====        ======


                                        62


YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002

     Gross Premiums Written.  Gross premiums written in the NAFTA zone decreased
by E648 million, or 10.8%, to E5,344 million in 2003 from E5,992 million in
2002, due primarily to decreases in the United States. Gross premiums written in
the United States decreased by E733 million, or 13.8%, to E4,597 million in 2003
from E5,330 million in 2002. Excluding the effect of exchange rate movements
(E904 million), gross premiums written in the United States increased by 3.2%,
due primarily to rate increases in all lines of business, offset in part by a
more selective underwriting policy and portfolio review measures reflecting a
renewed focus at Fireman's Fund on core business lines.

     Earnings After Taxes and Before Goodwill Amortization.  In the NAFTA zone,
earnings after taxes and before goodwill amortization increased by E849 million
to a loss of E95 million in 2003 from a loss of E944 million in 2002, due
primarily to significantly reduced losses in the United States. Earnings after
taxes and before goodwill amortization from property-casualty operations in the
United States increased by E817 million, to a loss of E121 million in 2003 from
a loss of E938 million in 2002, due primarily to reduced net insurance benefits
compared to 2002, which reflected asbestos and environmental reserve
strengthening measures at Fireman's Fund. Also contributing to the increase in
earnings after taxes and before goodwill amortization in 2003 were increased net
investment income, improved underwriting results and reduced general and
administrative expenses. The loss ratio in the NAFTA zone decreased to 70.0% in
2003 from 94.6% in 2002, largely due to our focus on core business lines and a
more selective underwriting policy, as well as the absence of major claims and
asbestos and environmental reserve strengthening measures at Fireman's Fund in
comparison to 2002. See "-- Year Ended December 31, 2002 Compared to Year Ended
December 31, 2001." The expense ratio in the NAFTA zone decreased to 28.2% in
2003 from 32.9% in 2002, primarily due to continued cost reduction efforts, exit
of certain high commission businesses, as well as termination of redundant
positions, all of which were attributable to our turnaround program.

YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

     Gross Premiums Written.  Gross premiums written in the NAFTA zone decreased
E830 million, or 12.2%, to E5,992 million in 2002 from E6,822 million in 2001,
due primarily to decreases in the United States. Gross premiums written in the
United States decreased E841 million or 13.6% to E5,330 million in 2002 from
E6,171 million in 2001. Excluding the effect of exchange rate movements (E279
million), gross premiums written decreased by 9.1%, due primarily to a more
selective underwriting policy and portfolio review measures reflecting a renewed
focus at Fireman's Fund on core business lines, offset in part by rate increases
in all lines of business. The decrease in gross premiums written reflected
decreased premium income in our workers' compensation insurance business at
Fireman's Fund, which continued to reduce its exposure to this line of business
in 2002, as well as decreases in our automobile line reflecting our
determination to exit unprofitable markets. On a constant currency basis, our
workers' compensation gross written premiums decreased by 58.5%.

     Earnings After Taxes and Before Goodwill Amortization.  In the NAFTA zone,
earnings after taxes and before goodwill amortization increased by E86 million
to a loss of E944 million in 2002 from a loss of E1,030 million in 2001, due
primarily to reduced losses in the United States and Canada. Earnings after
taxes and before goodwill amortization from property-casualty operations in the
United States increased by E48 million, to a loss of E938 million in 2002 from a
loss of E986 million in 2001, due primarily to reduced net insurance benefits
compared to 2001, which reflected claims from the terrorist attack of September
11, 2001, offset in part by impairments recorded on investments due to weakness
in the capital markets. Earnings after taxes and before goodwill amortization
was negatively affected by net insurance benefits of E762 million relating to
asbestos and environmental reserve-strengthening measures at Fireman's Fund, and
two major claims in the surety business (E108 million), which we discontinued in
December 2001. The loss ratio in the NAFTA zone decreased to 94.6% in 2002 from
99.9% in 2001, largely due to our focus on core business lines and a more
selective underwriting policy, as well as the absence of major claims in
comparison to 2001, which reflected claims from the terrorist attack of
September 11, 2001.

                                        63


                                 REST OF WORLD

DESCRIPTION OF BUSINESS

     The primary property-casualty insurance markets in which we operate in the
Rest of World are Asia-Pacific and South America. As a percentage of our total
property-casualty gross premiums written worldwide, Rest of World accounted for
5.0%, 5.2% and 5.5% in 2003, 2002 and 2001, respectively.

ASIA-PACIFIC

     Australia.  Through the Allianz Australia Group, we serve the markets of
Australia, New Zealand and Papua New Guinea. The Allianz Australia Group's
insurance operations comprise exclusively property-casualty insurance products
and services. We are the second-largest workers' compensation insurer in
Australia, based on gross premiums written in 2003, and a major provider of
rehabilitation and occupational health, safety and environment services. We also
operate in certain niche areas including premium financing and pleasure craft
insurance. We market our products through brokers, which are the major
distribution channels for commercial business in Australia, as well as non-tied
agents (including automobile dealers, accountants and banks) and directly to the
customer. The Allianz Australia Group had gross premiums written of E1,254
million in 2003.

     Other.  We also market property-casualty insurance products and services
through our subsidiaries in Taiwan, Malaysia, Japan, Hong Kong, Indonesia, Laos,
Singapore, Vietnam and China, and through signed joint venture agreements with
Bajaj Auto, a large manufacturing company in India and the CP Group, a large
conglomerate in Thailand.

SOUTH AMERICA

     Brazil.  We conduct our property-casualty operations in Brazil through our
subsidiary AGF Seguros. With gross premiums written of E270 million in 2003, AGF
Seguros is our largest property-casualty operation in South America and the
sixth-largest property-casualty insurance provider in Brazil. The company writes
primarily automobile insurance, together with fire, transportation and other
lines. Distribution is primarily through brokers.

     Other.  In addition to the markets described above, we sell
property-casualty products in Colombia, Argentina, Chile and Venezuela.

RESULTS OF OPERATIONS

     The following table shows key financial data for our Rest of World
property-casualty operations. Consistent with our general practice, gross
premiums written and earnings after taxes and before goodwill amortization by
geographic region are presented before consolidation adjustments representing
the elimination of transactions between Allianz Group companies in different
countries and different segments.

                  REST OF WORLD -- PROPERTY-CASUALTY: KEY DATA



                                                         YEAR ENDED DECEMBER 31,
                         ---------------------------------------------------------------------------------------
                                    2003                          2002                          2001
                         ---------------------------   ---------------------------   ---------------------------
                                     EARNINGS AFTER                EARNINGS AFTER                EARNINGS AFTER
                          GROSS     TAXES AND BEFORE    GROSS     TAXES AND BEFORE    GROSS     TAXES AND BEFORE
                         PREMIUMS       GOODWILL       PREMIUMS       GOODWILL       PREMIUMS       GOODWILL
                         WRITTEN      AMORTIZATION     WRITTEN      AMORTIZATION     WRITTEN      AMORTIZATION
                         --------   ----------------   --------   ----------------   --------   ----------------
                                              (E IN MILLIONS)
                                                                              
Asia-Pacific...........   1,654            92           1,596           (18)          1,344            11
South America..........     614            13             768            47             962            29
Other..................      61             9              64             9              95            (1)
                          -----           ---           -----           ---           -----           ---
  Total................   2,329           114           2,428            38           2,401            39
                          =====           ===           =====           ===           =====           ===


                                        64


YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002

     Gross Premiums Written.  Gross premiums written in Rest of World decreased
by E99 million, or 4.1%, to E2,329 million in 2003 from E2,428 million in 2002.
The decrease was primarily attributable to decreased premium income in South
America due to the negative effect of exchange rate movements and the selected
run-off of business in that region, offset in part by increased gross premiums
written in Asia-Pacific, reflecting rate increases and in particular due to
continuing favorable market conditions in Australia.

     Earnings After Taxes and Before Goodwill Amortization.  In Rest of World,
earnings after taxes and before goodwill amortization increased significantly by
E76 million to E114 million in 2003 from E38 million in 2002, due primarily to
increases in our Australian operations in Asia-Pacific, mainly reflecting
improved claims experience. This increase was offset in part by decreases in
earnings after taxes and before goodwill amortization in South America,
especially in Venezuela and Chile. The loss ratio decreased to 71.2% in 2003,
compared with 74.5% in 2002, reflecting primarily improved claims experience in
our Australian operations in Asia-Pacific.

YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

     Gross Premiums Written.  Gross premiums written in Rest of World increased
by E27 million, or 1.1%, to E2,428 million in 2002 from E2,401 million in 2001.
The increase was primarily attributable to increased gross premiums written in
Asia-Pacific, reflecting rate increases in all lines of business and the
full-year consolidation of our property-casualty subsidiary in Malaysia, which
was consolidated for the first time in October 2001, offset in part by decreased
premium income in South America due to the negative effect of exchange rate
movements and the scaling down of our property-casualty operations in Argentina.

     Earnings After Taxes and Before Goodwill Amortization.  In Rest of World,
earnings after taxes and before goodwill amortization decreased by E1 million to
E38 million in 2002 from E39 million in 2001, due primarily to decreased
investment results in our Australian operations in Asia-Pacific, reflecting
weakness in the capital markets. This decrease was offset in part by increased
income in South America attributable to cost reduction measures and an improved
investment strategy, particularly in Colombia and Venezuela. The loss ratio
increased to 74.5% in 2002, compared with 72.8% in 2001, reflecting
deteriorating underwriting results in South America, offset in part by improved
underwriting results in our Australian operations in Asia-Pacific.

                                SPECIALTY LINES

DESCRIPTION OF BUSINESS

     In addition to our multi-local approach to our global insurance business,
under which our non-German insurance businesses are locally managed, we manage
our specialty lines of credit/ trade insurance, marine, aviation and industrial
transport insurance, international industrial reinsurance and travel insurance
and assistance services on a worldwide basis.

CREDIT INSURANCE

     In July 2002, we consolidated our French subsidiary, Euler, and our German
subsidiary, Hermes, into a new corporate entity, Euler Hermes. The consolidation
of Euler and Hermes, which complemented each other in terms of product mix and
geographical penetration, further strengthened our presence in the marketplace.
Through Euler Hermes, we are the largest credit insurer in the world based on
gross premiums written in 2003. Our credit operations generated gross premiums
written of E1,564 million in 2003, E1,579 million in 2002 and E1,589 million in
2001.

     Euler Hermes is the largest credit insurer in terms of gross premiums
written and one of the major European companies in factoring. Euler Hermes's
credit insurance operations are rated A+ by Standard & Poor's.

                                        65


     Euler Hermes cedes a large portion of its gross premiums written to
reinsurers. The percentage of gross premiums written ceded in reinsurance was
45.6% in 2003, 45.0% in 2002 and 42.7% in 2001, of which 11.1%, 9.8% and 6.7%,
respectively, was ceded to Allianz AG.

     Euler Hermes provides customers around the world with a wide range of
credit insurance and related products and services, including commercial credit
insurance and reinsurance, factoring services, guarantee insurance, fidelity
insurance and consumer credit insurance, and manages, and derives fee income
from, the German federal governments export credit guarantee program.

MARINE AND AVIATION

     Effective January 1, 2002, we reorganized our marine, aviation and
industrial transport insurance business in Germany, France and the United
Kingdom under Allianz Marine & Aviation, a new specialty line. Our marine,
aviation and industrial transport insurance activities in these countries, which
we had previously included in the property-casualty insurance results of our
respective subsidiaries, were integrated into Allianz Marine & Aviation as a
single European marine, aviation and industrial transport unit. Allianz Globus
MAT Versicherungs-AG, our former German specialty insurer for marine, aviation
and industrial transport insurance, was renamed Allianz Marine & Aviation
Versicherungs-AG, and AGF MAT, our French specialty unit for marine, aviation
and transport insurance, was renamed Allianz Marine & Aviation (France). Allianz
Marine & Aviation generated gross premiums written of E1,073 million in 2003.

INTERNATIONAL INDUSTRIAL RISKS REINSURANCE

     We launched Allianz Global Risks Re on January 1, 2002 to establish our
international industrial risks reinsurance business as a globally managed
segment. While our operating subsidiaries around the world continue to conduct
our direct industrial insurance business, Allianz Global Risks Re acts as our
industrial reinsurance clearing house, assuming industrial insurance from
Allianz Group companies and centralizing the placement of outgoing reinsurance
with third-party carriers, primarily Munich Re, in the reinsurance market.
Allianz Global Risks Re generated gross premiums written of E1,346 million in
2003, of which approximately E118 million, or 8.8% was ceded to Munich Re.

     Through Allianz Global Risks Re, we aim to increase the efficiency and
transparency of our international industrial reinsurance activities through
economies of scale and a consistent reinsurance structure, including a selective
underwriting policy, appropriate rates and coverage limits, natural catastrophe
control, a new underwriting tool for property, tight risk management and
centralized policies and standards throughout the Allianz Group. We have also
introduced new products tailored for specific risks, such as our specialized
liability products for the pharmaceutical and chemical industries and policies
covering Internet risks. Through these and other measures, we intend to
reestablish our international industrial risks reinsurance business as a
profitable market leader.

TRAVEL INSURANCE AND ASSISTANCE SERVICES

     Through Mondial Assistance Group, which is owned equally by our
subsidiaries AGF and RAS, we are among the world's largest providers of travel
insurance and assistance services (or travel and assistance) based on gross
premiums written in 2003. Our travel and assistance operations generated gross
premiums written of E818 million in 2003, E808 million in 2002 and E732 million
in 2001. We believe that internal growth and recent acquisitions in our travel
insurance and assistance business will enable us to strengthen our leading
market position and achieve enhanced efficiencies in this dynamic market. With a
view toward establishing long-term partnerships, our travel and assistance
business provides business-to-business services to clients in the travel,
insurance, automobile and banking industries.

                                        66


RESULTS OF OPERATIONS

     The following table shows key financial data for our specialty insurance
operations. Consistent with our general practice, gross premiums written and
earnings after taxes and before goodwill amortization by geographic region are
presented before consolidation adjustments representing the elimination of
transactions between Allianz Group companies in different countries and
different segments.

                         SPECIALTY INSURANCE: KEY DATA



                                                         YEAR ENDED DECEMBER 31,
                         ---------------------------------------------------------------------------------------
                                    2003                          2002                          2001
                         ---------------------------   ---------------------------   ---------------------------
                                     EARNINGS AFTER                EARNINGS AFTER                EARNINGS AFTER
                          GROSS     TAXES AND BEFORE    GROSS     TAXES AND BEFORE    GROSS     TAXES AND BEFORE
                         PREMIUMS       GOODWILL       PREMIUMS       GOODWILL       PREMIUMS       GOODWILL
                         WRITTEN      AMORTIZATION     WRITTEN      AMORTIZATION     WRITTEN      AMORTIZATION
                         --------   ----------------   --------   ----------------   --------   ----------------
                                                             (E IN MILLIONS)
                                                                              
Credit insurance.......   1,564           119           1,579             15          1,589            91
Marine and Aviation....   1,073            64           1,424             21             --            --
International
  Industrial Risks
  Reinsurance..........   1,346            77           1,136           (257)            --            --
Travel and
  assistance...........     818            18             808             21            732             3
                          -----           ---           -----           ----          -----            --
                          4,801           278           4,947           (200)         2,321            94
                          =====           ===           =====           ====          =====            ==


YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002

     Gross Premiums Written.  Gross premiums written in our specialty lines
decreased E146 million, or 3.0%, to E4,801 million in 2003 from E4,947 million
in 2002, reflecting a decrease of E351 million in our marine and aviation line,
offset in part by increases in our Allianz Global Risks line. Premiums in
international industrial reinsurance reflected significant rate increases in all
lines of business. Despite an unfavorable environment, characterized by the war
in Iraq, the severe acute respiratory syndrome (SARS) epidemic and lingering
weakness in the global economy, gross premiums written in the travel and
assistance line increased slightly by 1.2% compared to 2002, due primarily to
the expansion of our operations in several European countries (particularly in
France and Italy), in North America and in Brazil. In our marine and aviation
specialty line, gross premiums written decreased reflecting a weaker US dollar
exchange rate and portfolio review and re-underwriting measures in our French
business as well as exchange-rate effects. Excluding the negative effect of
exchange rate movements (E33 million), gross premiums written in our credit
insurance line increased by 1.1%, due primarily to rate increases, new business
and a higher persistency rate.

     Earnings After Taxes and Before Goodwill Amortization.  In our specialty
lines, earnings after taxes and before goodwill amortization increased
significantly by E478 million to E278 million in 2003 from a loss of E200
million in 2002, due primarily to significant improvements in our international
industrial reinsurance and credit insurance specialty lines. Earnings after
taxes and before goodwill amortization of our international industrial
reinsurance line improved mainly due to lower rates for our reinsurance
coverage, progress in claims experience primarily attributable to a significant
improvement of the business portfolio and a lower level of natural catastrophe
claims, as well as reduced administrative expenses. Earnings after taxes and
before goodwill amortization in our credit insurance line increased due
primarily to significantly reduced net insurance benefits, which decreased by
E201 million to E455 million in 2003, from E656 million in 2002, reflecting more
selective underwriting policies and portfolio review measures, offset in part by
decreased investment results due to reduced realized gains from investments.
Earnings after taxes and before goodwill amortization in our travel insurance
and assistance line decreased due primarily to an increase in tax expense,
offset in part by improvement in the underwriting results. In our marine and
aviation specialty line, earnings after taxes and before goodwill amortization
increased, due to portfolio review and re-underwriting measures and lower
incidents of major claims. The loss ratio decreased to 61.6% in 2003 from 75.9%
in 2002, largely reflecting decreased claims in all of our specialty lines,
particularly in international industrial reinsurance, where the loss ratio
improved to 70.9% in 2003 as compared to 100.8% in 2002.

                                        67


YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

     Gross Premiums Written.  Gross premiums written in our specialty lines
increased E2,626 million, or 113.1%, to E4,947 million in 2002 from E2,321
million in 2001, reflecting primarily the inclusion of our international
industrial reinsurance and marine and aviation specialty lines effective January
1, 2002. Premiums in international industrial reinsurance reflected significant
rate increases, particularly in property and liability reinsurance. Increased
gross premiums in the travel and assistance line was due largely to the
expansion of our travel and assistance business in the United Kingdom and the
full-year consolidation of travel and assistance providers in Australia and
Thailand, which were consolidated in September 2001, offset in part by the
ongoing downturn in the international travel market in 2002. In our marine and
aviation specialty line, gross premiums written increased due to rate increases,
offset in part by portfolio review measures. The slight decrease in the credit
line was attributable primarily to more selective underwriting policies and
weakness in the global economy.

     Earnings After Taxes and Before Goodwill Amortization.  In our specialty
lines, earnings after taxes and before goodwill amortization decreased
significantly by E294 million to a loss of E200 million in 2002 from income of
E94 million in 2001, due primarily to the inclusion of our international
industrial reinsurance specialty line, which experienced net claims of E564
million related primarily to flooding in Central and Eastern Europe in July and
August 2002, and expenses incurred in building up the industrial reinsurance
business, as well as reduced earnings after taxes and before goodwill
amortization in the credit line, resulting from reduced investment results and
an increase in the frequency and severity of claims. Earnings after taxes and
before goodwill amortization in our travel and assistance line increased due to
the absence of major claims in comparison to 2001, which reflected claims from
the terrorist attack of September 11, 2001. In our marine and aviation specialty
line, earnings after taxes and before goodwill amortization increased,
reflecting primarily the absence of major claims compared to 2001. The loss
ratio increased to 75.9% in 2002 from 66.5% in 2001, largely reflecting
increased net claims attributable to the inclusion of our international
industrial reinsurance specialty line and the increased claims in the credit
line.

                                        68


                        LIFE/HEALTH INSURANCE OPERATIONS

     The following table sets forth certain financial information for our
life/health insurance operations for the years indicated:



                                                             YEAR ENDED DECEMBER 31,
                                                           ---------------------------
                                                            2003      2002      2001
                                                           -------   -------   -------
                                                                 (E IN MILLIONS)
                                                                      
Gross premiums written(1)................................   20,689    20,663    20,145
                                                           -------   -------   -------
Premiums earned (net)(2).................................   18,701    18,675    18,317
Interest and similar income..............................   11,106    11,215    10,765
Income from affiliated enterprises joint ventures and
  associated enterprises.................................      712       445       525
Other income from investments............................    4,294(3)   4,932    3,562
Trading income...........................................      218       244      (117)
Fee and commission income, and income from service
  activities.............................................      234       200       268
Other income.............................................    1,427       825       772
                                                           -------   -------   -------
  Total income...........................................   36,692    36,536    34,092
                                                           -------   -------   -------
Insurance benefits (net).................................  (23,528)  (21,013)  (21,979)
Interest and similar expenses............................     (368)     (434)     (492)
Other expenses for investments...........................   (5,622)   (8,989)   (5,537)
Loan loss allowance......................................       (3)      (10)       (4)
Acquisition costs and administrative expenses............   (3,713)   (4,263)   (4,259)
Amortization of goodwill.................................     (398)     (174)     (146)
Other expenses...........................................   (2,204)   (1,806)   (1,263)
                                                           -------   -------   -------
  Total expenses.........................................  (35,836)  (36,689)  (33,680)
                                                           -------   -------   -------
Earnings from ordinary activities before taxation........      856      (153)      412
Taxes....................................................     (583)      (54)      (99)
Minority interests in earnings...........................     (235)      184       (84)
                                                           -------   -------   -------
Net income...............................................       38       (23)      229
                                                           =======   =======   =======


---------------

(1) Under the Allianz Group's accounting policies for life insurance contracts,
    which we have adopted U.S. GAAP accounting standards, gross written premiums
    include only the cost- and risk-related components of premiums generated
    from unit-linked and other investment-oriented products, but do not include
    the full amount of statutory premiums written on these products. Statutory
    premiums are total revenues from sales of life insurance policies, in
    accordance with the statutory accounting practices applicable in the
    insurer's home jurisdiction. On a statutory premium basis, total premiums
    written were E42,319 million, E40,176 million and E33,687 million in 2003,
    2002 and 2001, respectively.

(2) Net of earned premiums ceded to reinsurers of E1,953 million, E1,989 million
    and E1,846 million in 2003, 2002 and 2001, respectively. (Written premiums
    ceded to reinsurers, after eliminating intra-Group transactions, were E1,240
    million, E1,207 million, and E1,169 million in 2003, 2002, and 2001,
    respectively.)

(3) Includes realized gains of E743 million from sales of Credit Lyonnais
    shares.

YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002

     Gross Premiums Written.  Gross premiums written of our life/health
operations in 2003 increased slightly by E26 million to E20,689 million in 2003
from E20,663 million in 2002. Disregarding the effects of exchange rate
movements and changes in the scope of consolidation, which decreased 2003
life/health gross

                                        69


premiums written by E485 million and increased by E44 million, respectively,
gross premiums written would have increased by E508 million, or 2.5%. On a
statutory premium basis, gross premiums written increased by E2,143 million, or
5.3%, to E42,319 million in 2003 from E40,176 million in 2002, due to
significant increases in sales of investment-oriented products, reflecting the
general trend towards investment-oriented insurance products in particular in
Italy and Taiwan. Gross premiums written for investment-oriented insurance
products increased by E2,117 million, or 10.8%, to E21,630 million.

     Premiums Earned (Net).  On an Allianz Group-wide basis, life/health net
premiums earned in 2003 and 2002 reflected earned premiums ceded to reinsurers
of E1,953 million and E1,989 million, respectively. Net premiums earned
increased slightly in 2003, generally consistent with the increase in gross
premiums written in this period.

     Other Income.  Other income increased by E602 million to E1,427 million in
2003, from E825 million in 2002, due primarily to reversal of amortization
deferred policy acquisition costs (net) of E215 million (2002: nil), reversal of
amortization of PVFP of E50 million (2002: nil), income from reinsurance ceded
of E220 million (2002: E8 million), foreign currency gains of E234 million
(2002: E108 million).

     Insurance Benefits (Net).  Net insurance benefits for our worldwide
life/health business consist of benefits paid, changes in aggregate policy
reserves, and expenses of premium refunds to policyholders. Net life/health
insurance benefits increased by E2,515 million, or 12%, to E23,528 million in
2003 from E21,013 million in 2002, primarily as a result of increased income
from investments in 2003 resulting from the recovery of the stock markets. The
increase in income from investments in turn resulted in increased policyholder
participation benefits, which are included in benefits paid and changes in
aggregate policy reserves, due to the participatory nature of our life insurance
business. See, for example, "-- Life/Health Operations By Geographic
Region -- Germany -- Life Insurance."

     Acquisition Costs and Administrative Expenses.  Acquisition costs and
administrative expenses which consist primarily of payments and changes in
deferred policy acquisition costs, administrative expenses, and net underwriting
costs, decreased significantly by E550 million, or 12.9%, to E3,713 million in
2003, compared with E4,263 million in 2002, reflecting improved cost management,
reduced agents' commissions in the United States and lower amortization of
deferred policy acquisition costs in Germany.

     Other Expenses.  Other expenses increased by E398 million to E2,204 million
in 2003, from E1,806 million in 2002, due primarily to increased other expenses
at our life and health operations in Germany mainly as a result of a
reclassification of previous years' deferred tax liabilities.

     Net Income.  Net income from life/health insurance increased by E61 million
to a gain of E38 million in 2003 from a loss of E23 million in 2002, primarily
as a result of improved investment results attributable to a decrease in other
expenses for investments, reflecting lower realized losses and writedowns on
investments as a result of the recovery of the stock market in 2003, offset in
part by increased net insurance benefits and goodwill amortization. Investment
results in 2003 also reflected a realized gain of E743 million from the sale of
our shareholding in Credit Lyonnais. Net income from life/health insurance
operations was also negatively affected by increased tax charges in 2003,
reflecting primarily a change in tax laws in Germany, as a result of which the
tax exempt status of dividends and capital gains from the sale of interests in
equity investments was abolished. In addition, deductions for certain realized
losses and writedowns on interests in investment funds are no longer permitted.
The effect of such change resulted in an income tax charge of E428 million in
the life/health segment.

     Amortization of Goodwill.  Amortization of goodwill in our life/health
lines increased by E224 million, or 128.7%, to E398 million in 2003, compared
with E174 million in 2002, primarily due to a E224 million impairment writedown
of the goodwill relating to Allianz Life Insurance Company Ltd., Seoul. Minority
interests in earnings were E216 million in 2003, compared to a credit of E177
million in 2002, primarily as a result of increased in earnings from our French
life/health insurance operations in 2003. Minority interests in earnings were a
credit of E177 million in 2002, primarily due to significant losses recorded at
certain investment funds in France, which are 100% accounted for in minority
interests, as well as losses recorded at our French life/health insurance
operations.

                                        70


YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

     Gross Premiums Written.  Gross premiums written of our life/health
operations in 2002 increased by E518 million, or 2.6%, to E20,663 million in
2002 from E20,145 million in 2001. Disregarding the effects of exchange rate
movements and changes in the scope of consolidation, which increased 2002
life/health gross premiums written by E32 million, gross premiums written would
have increased by E486 million or 2.4%. On a statutory premium basis, gross
premiums written increased by E6,489 million, or 19.3%, to E40,176 million in
2002 from E33,687 million in 2001, due to significant increases in sales of
investment-oriented products, reflecting the general trend towards
investment-oriented insurance products in particular in the United States and
Italy. Gross premiums written for investment-oriented insurance products
increased by E5,971 million, or 44.1%, to E19,513 million.

     Premiums Earned (Net).  On an Allianz Group-wide basis, life/health net
premiums earned in 2002 and 2001 reflected earned premiums ceded to reinsurers
of E1,989 million and E1,846 million, respectively. Net premiums earned
increased by E358 million, or 2.0%, to E18,675 million in 2002 from E18,317
million in 2001, generally consistent with the increase in gross premiums
written in this period.

     Insurance Benefits (Net).  Net insurance benefits for our worldwide
life/health business consist of benefits paid, changes in aggregate policy
reserves, and expenses of premium refunds to policyholders. Net life/health
insurance benefits decreased by E966 million, or 4.4%, to E21,013 million in
2002 from E21,979 million in 2001, primarily as a result of reduced income from
investments in 2002 resulting from weakness in the capital markets. The
reduction in income from investments in turn resulted in reduced policyholder
participation benefits, which are included in benefits paid and changes in
aggregate policy reserves, due to the participatory nature of our life insurance
business. See, for example, "-- Life/Health Operations By Geographic
Region -- Germany -- Life Insurance."

     Acquisition Costs and Administrative Expenses.  Acquisition costs and
administrative expenses which consist primarily of payments and changes in
deferred policy acquisition costs, administrative expenses, and net underwriting
costs, remained relatively constant at E4,263 million in 2002, compared with
E4,259 million in 2001.

     Net Income.  Net income from life/health insurance decreased by E252
million, or 110%, to a loss of E23 million in 2002 from E229 million in 2001,
primarily as a result of reduced income from investments, particularly in our
operations in Germany, France and Switzerland. See "-- Asset Management
Operations -- Group's Own Investments -- Investment Income" for a discussion of
investment results for life/health insurance investments.

     Amortization of Goodwill.  Amortization of goodwill in our life/health
lines increased to E174 million in 2002 from E146 million in 2001, while
minority interests in earnings were a credit of E177 million in 2002, compared
to a debit of E84 million in 2001, primarily as a result of the increase in our
shareholding in Allianz Leben and decreased earnings. Minority interests in
earnings was a credit of E177 million in 2002, primarily due to significant
losses recorded at certain special funds in France, which are 100% accounted for
in minority interests, as well as losses recorded at our France's life/health
insurance operations.

                                        71


                  LIFE/HEALTH OPERATIONS BY GEOGRAPHIC REGION

     The following table sets forth our gross life/health premiums written and
earnings after taxes and before goodwill amortization by geographic region for
the years indicated. Consistent with our general practice, gross premiums
written by geographic region are presented before consolidation adjustments
representing the elimination of transactions between Allianz Group companies in
different geographic regions and different segments.



                                                         YEAR ENDED DECEMBER 31,
                         ---------------------------------------------------------------------------------------
                                    2003                          2002                          2001
                         ---------------------------   ---------------------------   ---------------------------
                                     EARNINGS AFTER                EARNINGS AFTER                EARNINGS AFTER
                          GROSS     TAXES AND BEFORE    GROSS     TAXES AND BEFORE    GROSS     TAXES AND BEFORE
                         PREMIUMS       GOODWILL       PREMIUMS       GOODWILL       PREMIUMS       GOODWILL
                         WRITTEN      AMORTIZATION     WRITTEN      AMORTIZATION     WRITTEN      AMORTIZATION
                         --------   ----------------   --------   ----------------   --------   ----------------
                                                             (E IN MILLIONS)
                                                                              
Germany
  Life.................    9,924            (6)          9,369            62           8,969            65
  Health...............    2,960             6           2,865            64           2,691            48
  Consolidation
     adjustments.......       --            (4)             --            (7)             --            14
                          ------          ----          ------          ----          ------          ----
     Total.............   12,884            (4)         12,234           119          11,660           127
Rest of Europe.........    5,242           494           5,181          (110)          5,486           381
Rest of World..........    2,564           185           3,251           (40)          3,010           (49)
Consolidation
  adjustments..........       (1)           (4)             (3)           (2)            (11)           --
                          ------          ----          ------          ----          ------          ----
     Subtotal..........   20,689           671          20,663           (33)         20,145           459
Amortization of
  goodwill.............       --          (398)             --          (174)             --          (146)
Minority interests.....       --          (235)             --           184              --           (84)
                          ------          ----          ------          ----          ------          ----
     Total.............   20,689            38          20,663           (23)         20,145           229
                          ======          ====          ======          ====          ======          ====


     A significant portion of our life/health operations in Rest of Europe and
Rest of World consists of sales of unit-linked products. Only the cost- and
risk-related components of premiums generated from the sale of such products is
included in gross premiums written under U.S. GAAP, which we have adopted to
account for our insurance contracts.

                                    GERMANY

DESCRIPTION OF BUSINESS

     We are the largest provider of life insurance and the third-largest
provider of health insurance in Germany as measured by gross premiums written in
2003. Germany is by far our most important market for life/health insurance. As
a percentage of our total life/health gross premiums written worldwide, Germany
accounted for 62.3% in 2003, 59.2% in 2002 and 57.8% in 2001. On a statutory
premium basis, Germany accounted for 31.7% of our total life/health gross
premiums written in 2003.

     We conduct our life/health insurance operations in Germany through:

     - Allianz Lebensversicherungs-AG, the main operating company for our German
       life insurance operations. At December 31, 2003, we owned 91.0% of
       Allianz Lebensversicherungs-AG;

     - Deutsche Lebensversicherungs-AG, a wholly owned subsidiary of Allianz
       Lebensversicherungs-AG, which is our vehicle for selling standardized,
       low-cost term insurance in Germany;

     - Allianz PensionskasseAG (or Allianz Pensionskasse), a wholly owned
       subsidiary of Allianz Lebensversicherungs-AG, which offers a variety of
       pension products (together referred to as "Allianz Leben"); and

                                        72


     - Allianz Private Krankenversicherungs-AG (or Allianz Private Health), our
       health insurance subsidiary, formerly known as Vereinte
       Krankenversicherung AG, which we renamed in January 2003.

     Our life/health insurance operations in Germany employed 9,829 people at
the end of 2003.

DISTRIBUTION

     Our distribution channels for our life/health products in Germany are
similar to those used for our property-casualty products. Many of our products
in Germany are distributed through common or overlapping distribution systems.
In our German life/health insurance businesses, we distribute our products
primarily through a network of self-employed, full-time tied agents. For our
individual life, health and mutual fund products, the network of full-time tied
agents is our most important distribution channel. Brokers are also an important
channel for the distribution of Allianz Leben's and Allianz Private Health's
group life and health products. The bank distribution channel is utilized
primarily in our life insurance business. We distribute our life insurance
products through Dresdner Bank, and under contractual arrangements with Volks-
und Raiffeisenbanken, a network of cooperative banks in southern Germany, as
well as through Industrie Kredit-Bank (or IKB), a German industrial credit bank.
Since 2001, we have placed approximately 1,020 insurance specialists (as of
December 31, 2003) to sell both life insurance products and property-casualty
insurance products at Dresdner Bank branches throughout Germany.

     The following table sets forth certain key data concerning our distribution
systems as they relate to life and health insurance at and for the year ended
December 31, 2003:



                                                                   % OF 2003
                                                        -------------------------------
                                                                      LIFE      HEALTH
                                                        NUMBER(1)   PREMIUMS   PREMIUMS
                                                        ---------   --------   --------
                                                                      
Full-time tied agents.................................   11,487       56.1%      82.2%
Part-time tied agents.................................   43,717        5.2%       7.3%
Brokers...............................................    6,157       11.8%       5.7%
Banks.................................................    2,440(2)    18.6%       0.2%
Other(3)..............................................       --        8.3%       4.6%
                                                         ------      -----      -----
  Total...............................................       --      100.0      100.0
                                                         ======      =====      =====


---------------

(1) Represents the total number in Germany for all Allianz Group segments.

(2) Represents the number of German branches at Dresdner Bank, (970), and at
    unaffiliated banks, comprising Volks- und Raiffeisenbanken (1,463) and
    Industrie Kredit-Bank (7), with which we have distribution agreements
    covering our property-casualty and life/health insurance products.

(3) Includes all Allianz Group employees in Germany, who are able to sell
    Allianz policies.

LIFE INSURANCE

     Life insurance is the most popular form of savings for old age in Germany.
With the demographic shift toward an aging German population, we see increasing
opportunities for our life insurance business as private sector products are
used to supplement decreasing levels of state provisions. In addition, the
demand for insurance against financial loss resulting from occupational
disability has grown rapidly in Germany in recent years as the German statutory
social insurance system has provided declining levels of support.

     On January 1, 2002, a new law (the Altersvermogensgesetz) took effect,
providing incentives for private retirement plans and company pension funds
beginning in 2002. The law, provides for direct state subsidies or, in certain
circumstances, tax-free premium payments, and it requires that life-long benefit
payments be guaranteed. The benefit payments will be subject to income tax. In
July 2001, we started selling through Allianz Lebensversicherungs-AG, specially
designed products that satisfy the legal requirements of the
Altersvermogensgesetz, primarily the requirement that the sum of premium
payments be fixed at the beginning of the benefit payment period. We established
Allianz Pensionskasse AG, a wholly owned subsidiary of Allianz
Lebensversicherungs-AG, and Allianz Dresdner Pensionsfonds AG, a wholly owned
subsidiary of

                                        73


Allianz AG, in 2002 in order to more aggressively sell a variety of pension
products in accordance with the Altersvermogensgesetz.

     In June 2004, the Law on Pensions and Annuities (Alterseinkunftegesetz) was
adopted in Germany. It is too early yet to reliably assess the impact of this
new law on new business. For additional information, see "-- Risk
Factors -- Changes in tax legislation could adversely affect our business."

     In the life insurance area, our policy surrender rates were 4.0% in 2003,
3.7% in 2002 and 3.6% in 2001, compared to German industry-wide surrender rates
of 5.5%, 4.9% and 4.6%, (based on information provided by Gesamtverband der
Deutschen Versicherungswirtschaft), respectively. We believe that this is in
large part due to our widely recognized and well respected brand name, our
position as a market leader in most German insurance lines, our reputation for
superior customer service and our financial strength. We also pay close
attention to promoting follow-on business, which involves persuading
policyholders to reinvest funds. This typically takes the form of using the
benefits paid out on an endowment policy as the single premium for an immediate
annuity that ensures a guaranteed income for the rest of the policyholder's
life, or investing in a fund managed by our asset management subsidiary ADAM.
See "-- Asset Management Operations." The proportion of funds paid by our German
life insurance operations that were reinvested in other Allianz Group products
has increased significantly over the past three years.

PRODUCTS

     Our German life insurance companies offer a comprehensive and unified range
of life insurance and life insurance-related products on both an individual and
group basis. The main classes of coverage offered are: endowment life insurance,
annuity policies, term life insurance, unit-linked annuities, and other life
insurance-related forms of cover, which are provided as riders to other policies
and on a stand-alone basis. Allianz Leben also assumes reinsurance of each of
these individual and group life insurance products.

     Our endowment life products for the German market include policies both
with unchanging levels of premiums and guaranteed benefits and with premiums and
guaranteed benefits that rise automatically in accordance with contributions to
the German statutory pension system in Germany. Amounts payable at maturity of
an endowment policy include a "guaranteed benefit," an amount established by
reference to a legally mandated maximum guaranteed technical interest rate on
actuarial reserves. This interest rate is currently 2.75% per year for policies
issued on or after January 1, 2004, having declined from 3.25% per year. For
additional information, see "-- Regulation and Supervision -- Insurance --
Germany -- Life Insurance." The future profit participation credited to
policyholders is not guaranteed. The total amount payable at the maturity of a
policy, which is calculated based on the total expected profit participation, is
the principal basis of competition between life insurance providers in the
German market. Under current German law, the policyholder must be credited with
at least 90% of each year's statutory net investment result plus an appropriate
share in other profit components. In the current competitive environment,
however, the rate of profit participation exceeds this statutory minimum and is
subject to periodic adjustment by insurers in light of competitive conditions
prevailing from time to time. In conformity with prevailing market conditions,
we recently credited between 91% and 94% of each year's profits to
policyholders.

                                        74


RESULTS OF OPERATIONS

     The following table sets forth the components of life insurance gross
premiums written in Germany for the years 2003, 2002 and 2001:



                                                            YEAR ENDED DECEMBER 31,
                           ------------------------------------------------------------------------------------------
                                       2003                           2002                           2001
                           ----------------------------   ----------------------------   ----------------------------
                             NEW      RECURRING             NEW      RECURRING             NEW      RECURRING
                           BUSINESS   PREMIUMS    TOTAL   BUSINESS   PREMIUMS    TOTAL   BUSINESS   PREMIUMS    TOTAL
                           --------   ---------   -----   --------   ---------   -----   --------   ---------   -----
                                                                (E IN MILLIONS)
                                                                                     
Individual policies
  Endowment..............     346       3,905     4,251      236       4,330     4,566      208       4,501     4,709
  Annuities..............   1,527       1,672     3,199    1,452       1,438     2,890    1,176       1,320     2,496
  Term...................      21          85       106       18          78        96       16          73        89
                            -----       -----     -----    -----       -----     -----    -----       -----     -----
    Subtotal.............   1,894       5,662     7,556    1,706       5,846     7,552    1,400       5,894     7,294
  Group policies.........     997       1,371     2,368      695       1,122     1,817      617       1,058     1,675
                            -----       -----     -----    -----       -----     -----    -----       -----     -----
    Total................   2,891       7,033     9,924    2,401       6,968     9,369    2,017       6,952     8,969
                            =====       =====     =====    =====       =====     =====    =====       =====     =====


YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002

     Gross Premiums Written.  In Germany, life insurance premiums increased E555
million, or 5.9%, to E9,924 million in 2003 from E9,369 million in 2002, due
primarily to a substantial increase in new business, reflecting the increased
efficiency of our life insurance distribution channels, including Dresdner Bank,
brokerage distribution channels and Allianz Pensionskasse.

     Individual life insurance policies, which include endowment, term and
annuity policies, accounted for 65.5% of our gross life insurance premiums
written in Germany in 2003. Gross premiums written on individual life insurance
remained fairly stable at E7,556 as compared to E7,551 million in 2002. New
individual business increased to E1,894 million in 2003 from E1,706 million in
2002. The increase in new individual business was attributable to premium income
from new Altersvermogensgesetz policies. Allianz Pensionskasse, in particular,
was successful in acquiring new business.

     Group life insurance gross premiums written increased E550 million, or
30.3%, to E2,368 million in 2003 from E1,818 million in 2002, due primarily to
successful development of new distribution capacities for occupational pension
schemes.

     Earnings After Taxes and Before Goodwill Amortization.  In Germany,
earnings after taxes and before goodwill amortization from life insurance
operations decreased by E68 million, or 162.5%, to a loss of E6 million in 2003
from income of E62 million in 2002, reflecting significantly lower realized
gains on the disposition of investments and higher tax charges, offset in part
by reduced impairments recorded on investments and lower acquisition costs and
administrative expenses. Tax charges in 2003 amounted to E222 million and
reflected the change in tax laws in Germany as a result of which the tax-exempt
status of dividends and capital gains from the sale of interests in equity
investments was abolished. In addition, deductions for certain realized losses
and writedowns on interests in investment funds are no longer permitted. The
statutory expense ratio decreased to 6.8% in 2003 from 9.4% in 2002, reflecting
primarily a lower amortization of deferred policy acquisition costs due to a
change in the calculation assumptions. The statutory expense ratio represents
net underwriting expenses as a percentage of statutory net premiums earned.
Under the Allianz Group's accounting policies for life insurance contracts,
which we have adopted the U.S. GAAP accounting standards, premiums earned
include only the cost- and risk-related components of premiums generated from
unit-linked and other investment-oriented products, but do not include the full
amount of statutory premiums earned on these products. Statutory premiums earned
are total revenues earned from sales of life insurance policies, in accordance
with the statutory accounting practices applicable in the insurer's home
jurisdiction.

                                        75


YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

     Gross Premiums Written.  In Germany, life insurance premiums increased E400
million, or 4.5%, to E9,369 million in 2002 from E8,969 million in 2001, due
primarily to a substantial increase in new business, reflecting the increased
efficiency of our life insurance distribution channels, including Dresdner Bank.

     Individual life insurance policies, which include endowment, term and
annuity policies, accounted for 80.6% of our gross life insurance premiums
written in Germany in 2002. Gross premiums written on individual life insurance
increased by 3.5%, to E7,551 million in 2002 from E7,294 million in 2001, due
primarily to increased individual pension business. New individual business
increased to E1,706 million in 2002 from E1,400 million in 2001. The increase in
new individual business was attributable to premium income from new
Altersvermogensgesetz policies, many of which were sold in 2001 but had premium
payments that began on January 1, 2002. Sales of such policies slowed
market-wide in 2002 as a result of weakening customer demand for such policies
due to the complexity of such policies, public skepticism regarding the
Altersvermogensgesetz scheme and public discussion of the possibility of further
pension-related reforms.

     Group life insurance gross premiums written increased E143 million, or
8.5%, to E1,818 million in 2001 from E1,675 million in 2001, due primarily to
successful development of new distribution capacities for occupational pension
schemes.

     Earnings After Taxes and Before Goodwill Amortization.  In Germany,
earnings after taxes and before goodwill amortization from life insurance
operations decreased by E3 million, or 4.6%, to E62 million in 2002 from E65
million in 2001, due primarily to reduced costs and a lower tax expense, offset
in part by substantial impairments recorded on investments as a result of
weakness in the capital markets. Despite the increase in new business,
acquisition costs decreased by 26.2%, and the expense ratio decreased to 9.4% in
2002 from 13.7% in 2001, reflecting primarily lower amortization of deferred
policy acquisition costs.

HEALTH INSURANCE

     Allianz Private Health is the third-largest private health insurer in
Germany, with approximately 2.3 million customers in 2003. Allianz Private
Health has strong ties to the German medical profession and is the largest
health insurer for this profession in Germany and is a major provider of group
health insurance.

     The German statutory healthcare system operates as a mandatory system for
persons with incomes below a specified threshold (Versicherungspflichtgrenze)
and allows persons with incomes above the threshold to voluntarily opt out of
the statutory system and use the private healthcare system. Currently, the
German healthcare system is dominated by the German statutory schemes, while
private providers of health insurance, including Allianz Private Health, compete
for the remainder.

     In January 2003, this specified income threshold was raised by the German
legislator in order to stabilize and maintain the statutory healthcare system.
As a consequence, the number of individuals who are able to choose protection
under the private healthcare system decreased. While this measure reduces new
business for full private health coverage for salaried employees, it also
creates new business opportunities for supplementary insurance for individuals
insured under statutory health insurance plans. Further changes to the German
healthcare system are currently being considered, in particular with a view to
reducing costs. Enactment into law of any such changes may have an impact on
private health insurance providers, as the amount of new business written under
full private health coverage may further decrease.

     Allianz Private Health provides a wide range of health insurance products,
including full private healthcare coverage for the self-employed, salaried
employees and civil servants; supplementary insurance for people insured under
statutory health insurance plans; daily sickness allowance for the self-employed
and salaried employees; hospital daily allowance; supplementary care insurance;
and foreign travel medical expenses insurance.

     Like endowment and other life insurance products, health insurance products
include mandatory profit-sharing features, whereby Allianz Private Health, like
any other German private health insurer, returns 80% of

                                        76


the statutory profit on its health business, after the payment of claims and
claims costs, the establishment of reserves, payment of taxes and other
expenses, to policyholders annually, generally in the form of premium subsidies
or rebates. Since the beginning of 2000, Allianz Private Health has also been
required by law to allocate to its policyholders 90% of interest surplus which
is a component of statutory profits. As with our endowment policies in Germany,
the actual level of profit sharing we provide our policyholders is, for
competitive reasons, in excess of the statutory minimum and has been between 85%
and 90% of statutory profits in recent years.

RESULTS OF OPERATIONS

     The following table sets forth the components of health insurance gross
premiums written in Germany for the years 2003, 2002, and 2001:



                                                              YEAR ENDED DECEMBER 31,
                                                              ------------------------
                                                               2003     2002     2001
                                                              ------   ------   ------
                                                                  (E IN MILLIONS)
                                                                       
Individual policies.........................................  2,233    2,180    2,054
Group policies..............................................    727      685      637
                                                              -----    -----    -----
  Total.....................................................  2,960    2,865    2,691
                                                              =====    =====    =====
Medical expense insurance...................................  2,136    2,029    1,853
Other personal supplementary insurance......................    379      370      370
Compulsory long-term care insurance.........................    209      230      230
Other health insurance......................................    236      236      238
                                                              -----    -----    -----
  Total.....................................................  2,960    2,865    2,691
                                                              =====    =====    =====


YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002

     Gross Premiums Written.  Health insurance premiums in Germany increased by
E95 million, or 3.3%, to E2,960 million in 2003 from E2,865 million in 2002.
This increase was due primarily to rate increases in medical expense insurance
and to new business.

     Gross premiums written on medical expense insurance, which accounted for
72.2% of health insurance premiums in Germany in 2003, increased by E107
million, or 5.3% to E2,136 million in 2003 from E2,029 million in 2002. The
increase was attributable primarily to rate increases and new business. Gross
premiums written on other personal supplementary insurance increased to E379
million in 2003 compared to E370 million in 2002. Gross premiums written on
compulsory long-term care insurance decreased to E209 million in 2003 compared
to E230 million in 2002 due to a mandatory industry-wide reduction in long-term
care premium rates. Gross premiums written on other health insurance in Germany
remained unchanged E236 million in 2003.

     Earnings After Taxes and Before Goodwill Amortization.  In Germany,
earnings after taxes and before goodwill amortization from health insurance
operations decreased significantly by E58 million, or 90.6%, to E6 million in
2003 from E64 million in 2002, due primarily to higher tax charges as a result
of the changes in German tax law discussed above, offset in part by improved
underwriting and investment results. Tax charges in total amounted to E200
million.

YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

     Gross Premiums Written.  Health insurance premiums in Germany increased
E174 million, or 6.5%, to E2,865 million in 2002 from E2,691 million in 2001.
This increase was due primarily to rate increases in medical expense insurance
and new business.

     Gross premiums written on medical expense insurance, which accounted for
70.8% of health insurance premiums in Germany in 2002, increased by E176
million, or 9.5% to E2,029 million in 2002 from

                                        77


E1,853 million in 2001. The increase was attributable primarily to rate
increases and new business. Gross premiums written on other personal
supplementary insurance and compulsory long-term care insurance remained
unchanged at E370 million and E230 million, respectively, in 2002 compared to
E370 million and E230 million, respectively, in 2001. Gross premiums written on
other health insurance in Germany decreased to E236 million in 2002 from E238
million in 2001.

     Earnings After Taxes and Before Goodwill Amortization.  In Germany,
earnings after taxes and before goodwill amortization from health insurance
operations increased by E16 million, or 33.3%, to E64 million in 2002 from E48
million in 2001, reflecting primarily improved investment results.

                                 REST OF EUROPE

DESCRIPTION OF BUSINESS

     The Rest of Europe is our second-largest market for life/health insurance.
As a percentage of our total life/health gross premiums written worldwide, the
Rest of Europe accounted for 25.3% in 2003, 25.1% in 2002 and 27.2% in 2001.

     We conduct our life/health insurance operations in the Rest of Europe
through four main groups of operating companies in France, Italy, Spain and
Switzerland. The life products we write in our various Rest of Europe markets
are written on both an individual and group basis and include traditional term
and annuity products, unit-linked products and endowment and pension products.
The design and features of these products vary by country, depending on local
tax laws, product regulation and market conditions, and are designed to pay
death benefits, optimize inheritances, provide for retirement, pay annuities or
build capital, or combinations of these.

     France.  We conduct our life/health insurance operations in France through
the companies of the AGF Group. The AGF Group is the eighth-largest life
insurance provider in France based on gross premiums written in 2003. The AGF
Group provides a broad line of life insurance and other financial products,
including short-term investment and savings products. An important portion of
AGF Group's life premiums is generated through the sale of unit-linked policies
and investment-oriented products, for which only the cost-and risk-related
components of premiums are reflected in gross premiums written under U.S. GAAP,
which we have adopted to account for our insurance contracts.

     The AGF Group also operates in the French health insurance market through a
separate business unit responsible for both group insurance and health insurance
and offers a wide variety of health products, which are designed to pay benefits
that complement those of the mandatory French social security plan. The results
of our health operations in France are included in part in our property-casualty
segment and in part in our life segment.

     Italy.  We conduct our life/health insurance operations in Italy primarily
through the Italian Subsidiaries. Taken together, the Italian Subsidiaries are
the second-largest life insurer in the Italian market based on gross premiums
written in 2003. The Italian Subsidiaries' individual life policies are
primarily endowment policies but also include annuities and other policies,
including capitalization and other products. Consistent with trends in the
Italian market generally, the Italian Subsidiaries' products include an
increasing amount of unit-linked policies, where policyholders participate
directly in the performance of policy-related investments, and a decreasing
amount of endowment products. In 2003, sales of unit-linked and equity-linked
products sold through banks represented 74% of our total statutory life premiums
in Italy, reflecting the importance of this distribution channel. The Italian
Subsidiaries' unit-linked policies include products linked to funds managed by
the Italian Subsidiaries, as well as by third-party investment managers, and
index-linked products.

     Spain.  We are the eighth-largest life insurance provider in Spain based on
gross premiums written in 2003. We conduct our life/health operations in Spain
primarily through Allianz Spain and through Eurovida, our joint venture with
Banco Popular. Our Spanish life insurance subsidiaries sell mainly traditional
life insurance and pensions and unit-linked products.

                                        78


     Switzerland.  We conduct our life/health operations in Switzerland
primarily through the Allianz Suisse Lebensversicherungs-Gesellschaft and Phenix
Vie, which together we refer to as our "Swiss Life/Health Subsidiaries." Taken
together, the Swiss Life/Health Subsidiaries are the sixth-largest life
insurance provider in Switzerland based on gross premiums written in 2003. The
Swiss Life/Health Subsidiaries sell a wide range of individual and group life
insurance products, including retirement and old age, death and disability
products.

     Other.  We conduct significant life/health operations in the remainder of
the Rest of Europe through approximately 18 Allianz subsidiaries in more than 13
other European countries. In Austria, we operate through our life insurance
subsidiary Allianz Elementar Leben. We serve the Belgian life insurance market
primarily through AGF Belgium Insurance and the Netherlands life insurance
market primarily through Allianz Nederland Levensverzekering N.V. Our largest
life insurance subsidiaries in other countries in the Rest of Europe by premiums
written are located in Belgium, Austria, Great Britain, Netherlands and
Slovakia. Our life insurance products in Other Rest of Europe are generally the
same as the life products we offer in the German market. Our life insurance
operations in Other Rest of Europe had gross premiums written of E1,356 million
in 2003, E1,260 million in 2002 and E1,148 million in 2001. With Hungary,
Poland, the Czech Republic and Slovakia joining the European Union with effect
from May 1, 2004, our business prospects for the coming years should be even
more promising.

RESULTS OF OPERATIONS

     The following table shows key financial data for our Rest of Europe
life/health operations. Consistent with our general practice, gross premiums
written and earnings after taxes and before goodwill amortization by geographic
region are presented before consolidation adjustments representing the
elimination of transactions between Allianz Group companies in different
countries and different segments.

                    REST OF EUROPE -- LIFE/HEALTH: KEY DATA



                                                         YEAR ENDED DECEMBER 31,
                         ---------------------------------------------------------------------------------------
                                    2003                          2002                          2001
                         ---------------------------   ---------------------------   ---------------------------
                                     EARNINGS AFTER                EARNINGS AFTER                EARNINGS AFTER
                          GROSS     TAXES AND BEFORE    GROSS     TAXES AND BEFORE    GROSS     TAXES AND BEFORE
                         PREMIUMS       GOODWILL       PREMIUMS       GOODWILL       PREMIUMS       GOODWILL
                         WRITTEN      AMORTIZATION     WRITTEN      AMORTIZATION     WRITTEN      AMORTIZATION
                         --------   ----------------   --------   ----------------   --------   ----------------
                                                             (E IN MILLIONS)
                                                                              
France.................   1,572           208           1,493           (231)         1,556            97
Italy..................   1,239           223           1,298            287          1,336           261
Switzerland............     557            (8)            651            (80)           584           (17)
Spain..................     540            33             502             30            879            28
Other..................   1,356            38           1,260           (114)         1,148            12
Consolidation
  adjustments..........     (22)           --             (23)            (2)           (17)           --
                          -----           ---           -----           ----          -----           ---
  Total................   5,242           494           5,181           (110)         5,486           381
                          =====           ===           =====           ====          =====           ===


                                        79


                 OTHER REST OF EUROPE -- LIFE/HEALTH: KEY DATA



                                                         YEAR ENDED DECEMBER 31,
                         ---------------------------------------------------------------------------------------
                                    2003                          2002                          2001
                         ---------------------------   ---------------------------   ---------------------------
                                     EARNINGS AFTER                EARNINGS AFTER                EARNINGS AFTER
                          GROSS     TAXES AND BEFORE    GROSS     TAXES AND BEFORE    GROSS     TAXES AND BEFORE
                         PREMIUMS       GOODWILL       PREMIUMS       GOODWILL       PREMIUMS       GOODWILL
                         WRITTEN      AMORTIZATION     WRITTEN      AMORTIZATION     WRITTEN      AMORTIZATION
                         --------   ----------------   --------   ----------------   --------   ----------------
                                                             (E IN MILLIONS)
                                                                              
Belgium................     324           (62)            314            (70)           316           (21)
Netherlands............     138            11             145            (33)           157            34
Austria................     305             4             294              8            274             6
Great Britain..........     143            67             153            (13)           130            --
Greece.................      70             1              71             (1)            63           (18)
Luxembourg.............      40            (9)             26             (7)            27             4
Portugal...............      59             7              52              8             47             6
                          -----           ---           -----           ----          -----           ---
  Western and Southern
     Europe............   1,079            19           1,055           (108)         1,014            11
                          -----           ---           -----           ----          -----           ---
Slovakia...............     121             6              71              4             15             1
Hungary................      53             4              51              3             44             5
Czech Republic.........      43             2              35             (9)            35            (1)
Poland.................      30             1              27             (3)            29            (4)
Croatia................      19             5              14             --              8             1
Bulgaria...............       8             1               6             --              3            --
Romania................       3            --               1             (1)            --            (1)
                          -----           ---           -----           ----          -----           ---
  Central and Eastern
     Europe............     277            19             205             (6)           134             1
                          -----           ---           -----           ----          -----           ---
     Total.............   1,356            38           1,260           (114)         1,148            12
                          =====           ===           =====           ====          =====           ===


YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002

     Gross Premiums Written.  In Rest of Europe, life/health gross premiums
written increased by E61 million, or 1.2%, to E5,242 million in 2003 from E5,181
million in 2002, reflecting primarily increases in gross premiums written in
France, Slovakia and Spain, offset in part by decreases in gross premiums
written in Switzerland and Italy.

     Earnings After Taxes and Before Goodwill Amortization.  In Rest of Europe,
earnings after taxes and before goodwill amortization from life/health insurance
operations increased substantially by E604 million to E494 million in 2003 from
a loss of E110 million in 2002, due primarily to increases in France and
Switzerland.

     France.  In France, life/health gross premiums written, which include fees
from unit-linked products and investment-oriented products with guaranteed
interest, increased slightly by E79 million, or 5.3%, to E1,572 million in 2003
from E1,493 million in 2002. The increase was due primarily to increased premium
income in our health and group life businesses, reflecting rate increases in our
health line and strong growth in the group life market. We also experienced
moderate growth in our individual life business, reflecting the growth in the
French life insurance market. Earnings after taxes and before goodwill
amortization in France increased by E439 million to E208 million in 2003 from a
loss of E231 million in 2002, primarily as a result of improved investment
results reflecting primarily a realized gain of E743 million on the sale of our
shareholding in Credit Lyonnais in the second quarter of 2003 and the recovery
of the stock markets, as well as reduced policyholders' crediting rates and
administrative expenses.

                                        80


     Italy.  In Italy, life gross premiums written, which include fees from
unit-linked products, decreased E59 million, or 4.5%, to E1,239 million in 2003
from E1,298 million in 2002. This decrease was primarily attributable to higher
maturities in our traditional life insurance portfolio, partially offset in part
by growth in new business, mainly in investment-oriented products with capital
protection features. Our bancassurance distribution channel was the main
contributor to the growth in new business. Earnings after taxes and before
goodwill amortization in Italy decreased to E223 million in 2003 from E287
million in 2002, due primarily to decreased investment results, despite the
recovery of the stock markets, as a result of a realized gain of E186 million
from the sale of a real estate subsidiary in 2002. Earnings after taxes and
before goodwill amortization were positively affected by a gain of E19 million
in connection with the disposition of a derivative financial instrument that was
used to hedge an investment but did not qualify for hedge accounting.

     Spain.  In Spain, life gross premiums written increased by E38 million, or
7.6%, to E540 million in 2003 from E502 million in 2002, primarily due to an
increase in our group pension business, reflecting the underwriting of several
large group policies, as well as increases in gross premiums written in other
group business and individual life business. Earnings after taxes and before
goodwill amortization increased by E3 million, or 10.0%, to E33 million in 2003
from E30 million in 2002, due primarily to improved investment results.

     Switzerland.  In Switzerland, life/health gross premiums written decreased
by E94 million, or 14.4%, to E557 million in 2003 from E651 million in 2002.
This decrease was attributable primarily loan improved actuarial method to
calculate the premium collapsing. In Switzerland, earnings after taxes and
before goodwill amortization increased to a loss of E8 million in 2003 from a
loss of E80 million in 2002, due primarily to improved investment results and
reduced acquisition costs and administrative expenses, offset in part by high
net insurance benefits attributable to the high guaranteed interest rate for
life insurance policies in Switzerland. Earnings after taxes and before goodwill
amortization in 2003 also reflected lower tax benefits as compared to 2002,
which was positively affected by the capitalization of tax losses carried
forward.

     Other.  Life/health gross premiums written in Other Rest of Europe
increased by E96 million, or 7.6%, to E1,356 million in 2003 from E1,260 million
in 2002. Earnings after taxes and before goodwill amortization in Other Rest of
Europe increased by E152 million to E38 million in 2003, compared with a loss of
E114 million in 2002, reflecting primarily increases in the Netherlands and
Great Britain.

YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

     Gross Premiums Written.  In Rest of Europe, life/health gross premiums
written decreased by E305 million, or 5.6%, to E5,181 million in 2002 from
E5,486 in 2001, reflecting primarily decreases in gross premiums written in
Spain, France and Italy, offset in part by increases in Other Rest of Europe and
Switzerland.

     Earnings After Taxes and Before Goodwill Amortization.  In Rest of Europe,
earnings after taxes and before goodwill amortization from life/health insurance
operations decreased by E491 million, or 128.9%, to a loss of E110 million in
2002 from income of E381 million in 2001. This was due to decreases in France,
Other Rest of Europe and Switzerland, offset in part by increases in Italy and
Spain.

     France.  In France, life/health gross premiums written, which include fees
from unit-linked products and investment-oriented products with guaranteed
interest, decreased by E63 million, or 4.0%, to E1,493 million in 2002 from
E1,556 million in 2001. The decrease was due primarily to decreased premium
income in our group life business, reflecting the sale of a large group policy
in France in 2001. In addition, we experienced decreased sales in our individual
life business of conventional unit-linked life insurance products, reflecting
the continuing weakness in the capital markets, offset in part by an increase in
investment-oriented products with guaranteed interest. Earnings after taxes and
before goodwill amortization in France decreased significantly by E328 million
to a loss of E231 million in 2002 from income of E97 million in 2001, primarily
as a result of substantial realized losses and impairments recorded on
investments due to unfavorable conditions in the capital markets.

                                        81


     Italy.  In Italy, life gross premiums written, which include fees from
unit-linked products, decreased E38 million, or 2.8%, to E1,298 million in 2002
from E1,336 million in 2001. This decrease was attributable primarily to
decreased sales of traditional life insurance policies in favor of
investment-oriented products with guaranteed interest. Sales of traditional
unit-linked products slowed in 2002 compared to 2001 as a result of weakness in
the capital markets. Earnings after taxes and before goodwill amortization in
Italy increased to E287 million in 2002 from E261 million in 2001, due primarily
to a realized gain of E186 million from the sale of a real estate subsidiary.

     Spain.  In Spain, life gross premiums written decreased by E377 million, or
42.9%, to E502 million in 2002 from E879 million in 2001, primarily attributable
to a substantial decrease in our pension group business as a result of a
one-time premium recorded in 2001 in connection with the underwriting of a large
group policy, offset in part by increases in gross premiums written in other
group business and individual life business. Earnings after taxes and before
goodwill amortization increased by E2 million, or 7.1%, to E30 million in 2002
from E28 million in 2001, due primarily to improved investment results, offset
in part by decreased underwriting results.

     Switzerland.  In Switzerland, life/health gross premiums written increased
by E67 million, or 11.5%, to E651 million in 2002 from E584 million in 2001.
This increase was attributable primarily to an increase in individual business
with high single premiums. In Switzerland, earnings after taxes and before
goodwill amortization decreased to a loss of E80 million in 2002 from a loss of
E17 million in 2001, due primarily to realized losses and impairments recorded
on investments, particularly on equity securities. This decrease was offset by a
tax benefit of approximately E95 million relating to the accrual of deferred tax
benefits attributable to the capitalization of tax losses carried forward.

     Other.  Life/health gross premiums written in Other Rest of Europe
increased by E112 million, or 9.8%, to E1,260 million in 2002 from E1,148
million in 2001. Earnings after taxes and before goodwill amortization in Other
Rest of Europe decreased significantly by E126 million to a loss of E114 million
in 2002, compared with income of E12 million in 2001, reflecting primarily
reduced earnings after taxes and before goodwill amortization in the Netherlands
and Belgium as a result of weakness in capital markets.

                                 REST OF WORLD

DESCRIPTION OF BUSINESS

     As a percentage of our total life/health gross premiums written worldwide,
Rest of World accounted for 12.4% in 2003, 15.7% in 2002 and 14.9% in 2001. Our
primary life/health markets in Rest of World are the United States and the
Asia-Pacific region.

     United States.  We serve the United States life/health insurance market
through Allianz Life Insurance Company of North America (or Allianz Life), which
is headquartered in Minneapolis, Minnesota. Allianz Life and its subsidiaries
are licensed to write business in all 50 states, the District of Columbia and
Guam. Allianz Life markets a wide variety of life insurance, fixed and variable
annuity contracts, and long-term care insurance to individual and corporate
customers. Allianz Life is a major company in providing fixed annuities
(including equity-indexed annuities) to individuals. Allianz Life also provides
healthcare excess of loss coverage. During 2003, our subsidiary Allianz Life
exited the traditional life reinsurance business. For additional information,
see Note 12 to our consolidated financial statements. In 2003, our total
statutory premiums written from life/health insurance in the United States,
which include sales of investment-oriented products, were E8,566 million, down
from E9,530 million in 2002.

     Asia-Pacific.  The primary life, health insurance markets in which we
operate in the Asia-Pacific area are as follows:

     South Korea.  Our insurance operations in South Korea consist of our two
subsidiaries, Allianz Life Insurance Korea Co. Ltd., Seoul, and Hana Allianz,
our newly formed bancassurance joint venture with Hana Bank, Seoul. We refer to
these subsidiaries and joint venture enterprise together as the South Korean
operating entities. The South Korean operating entities market a wide variety of
life insurance products
                                        82


including individual whole life insurance polices, annuities, individual
endowment insurance, education insurance, protection insurance, group life
insurance protection and employee severance plans. Together, the South Korean
Subsidiaries generated E1,609 million in annual statutory premiums in 2003.

     Other Asia-Pacific.  In addition to the primary markets described above, we
conduct life and accident insurance operations in Taiwan, China, Thailand,
Indonesia, India and Malaysia. We also market a range of health insurance
products in Indonesia and Pakistan.

     Other.  In view of the prevailing uncertainties in South America we have
abandoned most of our life insurance activities in this region and sold our
companies in Chile in the first half of 2003 and in Brazil in the first quarter
of 2004. In Colombia we are expanding the sale of investment-oriented products.

RESULTS OF OPERATIONS

     The following table shows key financial data for our Rest of World
life/health operations. Consistent with our general practice, gross premiums
written and earnings after taxes and before goodwill amortization by geographic
region are presented before consolidation adjustments representing the
elimination of transactions between Allianz Group companies in different
countries and different segments.

                     REST OF WORLD -- LIFE/HEALTH: KEY DATA



                                                         YEAR ENDED DECEMBER 31,
                           ------------------------------------------------------------------------------------
                                      2003                         2002                         2001
                           --------------------------   --------------------------   --------------------------
                                      EARNINGS AFTER               EARNINGS AFTER               EARNINGS AFTER
                            GROSS    TAXES AND BEFORE    GROSS    TAXES AND BEFORE    GROSS    TAXES AND BEFORE
                           PREMIUM       GOODWILL       PREMIUM       GOODWILL       PREMIUM       GOODWILL
                           WRITTEN     AMORTIZATION     WRITTEN     AMORTIZATION     WRITTEN     AMORTIZATION
                           -------   ----------------   -------   ----------------   -------   ----------------
                                                             (E IN MILLIONS)
                                                                             
United States............   1,078          165           1,411          (18)          1,478          (24)
Asia-Pacific.............   1,372           18           1,639          (25)          1,229           (5)
Other....................     114            2             201            3             303          (20)
                            -----          ---           -----          ---           -----          ---
  Total..................   2,564          185           3,251          (40)          3,010          (49)
                            =====          ===           =====          ===           =====          ===


YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002

     Gross Premiums Written.  Life/health gross written premiums for Rest of
World decreased by E687 million, or 21.1%, to E2,564 million in 2003 from E3,251
million in 2002. Life/health gross premiums written in the United States were
E1,078 million in 2003, a decrease of E333 million from E1,411 million in 2002.
On a constant currency basis, gross premiums written in the United States
decreased by E121 million, or 8.6%, due primarily to the termination of certain
group accident and health business in 2002, the sale of our traditional life
reinsurance business in 2003 and a decrease in premiums from our fixed annuity
business, offset in part by higher sales of variable annuity products through
our recently expanded distribution channels. Life/health gross premiums written
in the Asia-Pacific region decreased by E267 million, or 16.3%, to E1,372
million in 2003 from E1,639 million in 2002. On a constant currency basis, gross
premiums written in the Asia-Pacific region decreased by E65 million, or 4.0%,
due primarily to decreases in our operations in Taiwan as a result of a change
in the composition of business underwritten from traditional life insurance to
unit-linked insurance business. Life/health gross premiums written in Other Rest
of World decreased by E87 million, or 43.3%, to E114 million in 2003 from E201
million in 2002.

     Earnings After Taxes and Before Goodwill Amortization.  Life/health
earnings after taxes and before goodwill amortization in Rest of World increased
by E225 million to E185 million in 2003 from a loss of E40 million in 2002. The
increase was primarily the result of higher earnings in the United States, which
increased to E165 million in 2003 from a loss of E18 million in 2002. Improved
investment and capital market performance in the United States drove the higher
earnings through increased realized gains, write-ups of previously impaired
investments and improved operating results on fixed and variable annuity
business. Earnings after taxes and before goodwill amortization in Asia-Pacific
increased by E43 million, to E18 million

                                        83


in 2003 from a loss of E25 million in 2002, due primarily to a substantial
increase in earnings after taxes and before goodwill amortization in Taiwan by
E66 million, primarily as a result of the distribution of unit-linked products,
offset in part by a decrease in earnings after taxes and before goodwill
amortization in South Korea by E42 million, reflecting comparatively high
guaranteed interest rates under current capital market conditions. In 2003,
earnings after taxes and before goodwill amortization from life/health
operations in the United States was E165 million, compared to a loss of E18
million in 2002. The increase in earnings after taxes and before goodwill
amortization was primarily attributable to improved investment and capital
market performance, which resulted in increased realized gains, writeups of
previously impaired investments and improved operating results on fixed and
variable annuity business.

YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

     Gross Premiums Written.  Life/health gross written premiums for Rest of
World increased by E241 million, or 8.0%, to E3,251 million in 2002 from E3,010
million in 2001. Life/health gross premiums written in the United States were
E1,411 million in 2002, a decrease of E67 million from E1,478 million in 2001.
On a constant currency basis, gross premiums written in the United States
increased slightly by E9 million, or 0.6%, in 2002. The slight increase was
primarily attributable to growth in our fixed annuity business at Allianz Life
and the expansion of our distribution channels, offset in part primarily by
decreased premium income from other life and health insurance business.
Life/health gross premiums written in Asia-Pacific increased by E410 million, or
33.4%, to E1,639 million in 2002 from E1,229 million in 2001, primarily as a
result of increases in our operations in South Korea, where gross premiums
written increased by E182 million, or 17.2%, to E1,242 million in 2002 from
E1,060 million in 2001, as a result of a significant increase in new business
and Taiwan. Life/health gross premiums written in Other Rest of World decreased
by E102 million, or 33.7%, to E201 million in 2002 from E303 million in 2001,
primarily due to decreased premium income in Brazil, Colombia and Chile.

     Earnings After Taxes and Before Goodwill Amortization.  Life/health
earnings after taxes and before goodwill amortization in Rest of World increased
by E9 million to a loss of E40 million in 2002 from a loss of E49 million in
2001. The increase was primarily the result of increased earnings after taxes
and before goodwill amortization in South America due to lower acquisition costs
and administrative expenses. Earnings after taxes and before goodwill
amortization in Asia-Pacific decreased by E20 million, to a loss of E25 million
in 2002 from a loss of E5 million in 2001, due primarily to decreased earnings
after taxes and before goodwill amortization in South Korea, reflecting
primarily higher tax expense. In 2002, losses from life/health operations in the
United States were E18 million, compared to a loss of E24 million in 2001, due
primarily to improved underwriting results and a higher volume of business,
offset in part by impairments recorded on investment as a result of weakness in
the capital markets.

COMPETITION

     There is substantial competition in Germany and the other countries in
which we do business for the types of insurance products and services that we
provide. This competition is most pronounced in our more mature
markets -- Germany, France, Italy and the United States. In recent years,
however, competition in emerging markets has also increased as large insurance
and other financial services participants from more developed countries have
sought to establish themselves in markets perceived to offer higher growth
potential, and as local institutions have become more sophisticated and have
sought alliances, mergers or strategic relationships with our competitors.

     In Germany, which is our largest market for insurance operations, there is
intense competition for virtually all of the products and services that we
provide. In addition, the German insurance sector is a mature market in which we
already have significant market shares in most lines of business.

                                        84


                               BANKING OPERATIONS

     Through our subsidiary Dresdner Bank, we offer a wide range of private,
commercial and investment banking products and services for corporate,
governmental and individual customers, primarily in the European market. Based
on total assets at December 31, 2003, Dresdner Bank was one of the largest banks
in Germany.

     We established banking as our fourth core business segment alongside
property-casualty insurance, life/health insurance and asset management
following our acquisition of Dresdner Bank in 2001. We have included Dresdner
Bank in our consolidated financial statements since July 23, 2001, the date of
the acquisition. Our banking segment consists primarily of the banking
operations of Dresdner Bank. Total operating income of our banking segment,
which consists of net interest and similar income, trading income, net fee and
commission income and income resulting from service activities, decreased from
E7,566 million in 2002 to E6,743 million in 2003. Total operating income of our
banking segment was E3,853 million in 2001. The asset management operations of
Dresdner Bank are included in our asset management segment. For a discussion of
our asset management operations, including those of Dresdner Bank, see "-- Asset
Management Operations."

     The selected statistical information on our banking operations set forth in
"-- Selected Statistical Information Relating to Our Banking Operations" differs
in significant respects from, and may not be comparable to, the financial
information presented below. Although we have included Dresdner Bank in our
consolidated financial statements since July 23, 2001, the statistical
information includes the banking operations of Dresdner Bank for all periods
presented. The statistical information for all periods presented also includes
the asset management operations of Dresdner Bank, which we do not include in our
banking segment. In addition, the statistical information presents the assets
and liabilities of Dresdner Bank without reflecting the adjustments that are
necessary to apply purchase accounting, which we have applied in the financial
information presented below. For additional information, see "-- Selected
Statistical Information Relating to Our Banking Operations."

     Dresdner Bank was founded in 1872 in Dresden, Germany, and grew by
acquisition and branch expansion throughout Germany to become a leading German
bank. In 1952, Dresdner Bank was split into three separate institutions, which
were subsequently reunified to form Dresdner Bank Aktiengesellschaft, Frankfurt
am Main, in 1957. In recent years, Dresdner Bank has made significant
acquisitions in investment banking, including British merchant bank Kleinwort
Benson Group plc in 1995 and U.S.-based investment bank Wasserstein Perella &
Co. in January 2001, and asset management, including U.S. asset manager RCM
Capital Management in 1995.

     With approximately 1,040 branch offices and 42,000 employees at December
31, 2003, Dresdner Bank is focused on selected customer groups, geographic
regions and business areas in which the bank traditionally holds a strong
position. Our principal banking products and services include traditional
commercial banking activities such as deposit taking, lending (including
residential mortgage lending) and cash management, as well as corporate finance
advisory services, mergers and acquisitions advisory services, capital and money
market services, securities underwriting and securities trading and derivatives
business on our own account and for our customers.

     We operate through the domestic and international branch network of
Dresdner Bank and through various subsidiaries both in Germany and abroad, some
of which also have branch networks. At December 31, 2003, our branch banking
network comprised approximately 950 German branches, giving us a presence
throughout Germany, and 90 non-German branches.

     For 2003, Germany, the Rest of Europe and the NAFTA zone accounted for
approximately 51%, 36% and 6%, respectively, of our operating income from
banking operations.

REORGANIZATION OF BUSINESS DIVISIONS

     We have reorganized our banking operations significantly since 2001. We
currently conduct our banking business through five divisions, Private and
Business Clients, Corporate Banking, Dresdner Kleinwort
                                        85


Wasserstein, Institutional Restructuring Unit ("IRU") and Other. In 2002, our
main operating divisions were Private and Business Clients and Corporates &
Markets. Since then, effective January 1, 2003, we split our former Corporates &
Markets division into Corporate Banking, to primarily serve our domestic
corporate customers, and Dresdner Kleinwort Wasserstein, to primarily serve our
international corporate customers and to provide investment banking services,
and in the second half of 2003, we integrated our mid-sized corporate clients
business into our Private and Business Clients division, which we had previously
included within our former Corporates & Markets division, in order to serve our
mid-sized corporate clients more effectively.

     In September 2002 we announced the establishment of the IRU division,
effective January 1, 2003, with the aim to free up risk capital through the
reduction of risk-weighted assets. For the calculation of risk-weighted assets,
see "-- Regulation and Supervision -- Banking, Asset Management and Investment
Services -- Germany -- Capital Adequacy Requirements." The initial plan to
achieve this aim was to restructure non-performing loans to strategic customers
and to return them to the originating business units, and to maximize the
recovery from the remaining non-performing loans, non-strategic customer loans
and private equity investments, through repayment, sale, hedging, securitization
and other means. During the course of 2003 management decided to maintain the
restructuring of non-performing loans to strategic customers at the originating
business units. For additional information on our IRU division, see "-- Banking
Operations by Division -- IRU -- Description of Business."

     In our Other division during 2003, we disposed of our institutional custody
business, with the transfer of such business occurring in the first quarter of
2004. In addition we are currently discussing with a third party to outsource
our domestic retail securities processing (including custody) and payment
processing activities, and expect to complete such transaction in the second
half of 2004. In 2002, we also merged our mortgage banking subsidiary, Deutsche
Hyp, with the mortgage banking subsidiaries of Commerzbank and Deutsche Bank
into a single entity, Eurohypo AG (or Eurohypo). The assets and liabilities of
the former Deutsche Hyp were accordingly deconsolidated as of August 1, 2002. We
account for our remaining interest of 28.5% of Eurohypo using the equity method.
See "-- Banking Operations By Division -- Other -- Description of Business."

COST-CUTTING AND RESTRUCTURING MEASURES

     In 2003, in order to further increase operating efficiency and cut costs in
our banking segment, Dresdner Bank supplemented its existing restructuring
programs, introduced since 2000, with new initiatives affecting major parts of
its banking operations. Through these combined initiatives, Dresdner Bank has
announced plans to eliminate an aggregate of approximately 15,700 positions and
to significantly improve the operating efficiency and profitability of Dresdner
Bank. As of December 31, 2003, an aggregate of approximately 9,910 positions had
been eliminated under these initiatives. We believe that we have made
significant progress in 2003 toward reaching our goals, and we intend to
continue striving in 2004 and 2005 toward the successful completion of our
cost-cutting initiatives.

     For additional information on restructuring charges recorded in 2003, see
"-- Results of Operations -- Year Ended December 31, 2003 Compared to Year Ended
December 31, 2002 -- Other Expenses." For additional information on
restructuring charges generally, see also Note 21 to our consolidated financial
statements.

     The principal cost-cutting and restructuring measures implemented in 2003
were as follows:

     In August 2003, as part of our cost-cutting program, we announced an
initiative to eliminate an additional approximately 4,700 positions in our
banking segment by the end of 2005. The focus of this initiative is on our
back-office areas and our support functions, which will primarily affect
Dresdner Bank's head office. The initiative also includes the elimination of
positions at Advance Bank and the outsourcing of certain activities within our
transaction banking business. The aim of the initiative is to eliminate
approximately E1 billion of annual administrative expenses by 2006 through work
force reductions and increased efficiency in our back office areas and support
functions. We recorded restructuring charges of E380 million in 2003 in
connection with the elimination of approximately 3,500 positions of the total
initiative. We expect to record the remaining charges under these plans in 2004,
when such charges qualify
                                        86


under IFRS. Of the aggregate 4,700 positions to be eliminated under this
initiative, approximately 1,100 positions had been eliminated as of April 30,
2004.

     Included within the 4,700 positions from the August 2003 initiative, we
plan to eliminate approximately 700 positions in connection with outsourcing our
domestic retail securities processing (including custody) and payment processing
activities. As of April 30, 2004, approximately 300 positions had been
eliminated pursuant to this initiative. We recorded approximately E44 million of
restructuring charges in 2003 in addition to the E380 million of restructuring
charges recorded in the August 2003 initiative. Further, approximately E47
million of impairment charges were recorded relating to our information
technology systems.

     In February 2003, as part of our efforts to focus on the Allianz and
Dresdner Bank brands, we announced a plan to integrate the activities of our
direct banking subsidiary Advance Bank into the Allianz Group in 2003. Also
included within the 4,700 positions from the August 2003 initiative, we expect
to eliminate approximately 400 positions by mid-2004. In connection with this
initiative, we recorded restructuring charges of approximately E20 million in
2003, which is included within the E380 million of restructuring charges
recorded in conjunction with the August 2003 initiative. Of the aggregate 400
positions to be eliminated under this plan, approximately 300 positions had been
eliminated as of April 30, 2004.

     Over the course of 2003, we also continued to implement the comprehensive
restructuring plans introduced by Dresdner Bank in 2002, 2001 and 2000 to reduce
administrative expenses:

     In September 2002, we announced initiatives involving the elimination of an
additional approximately 3,000 positions in our banking segment, including
approximately 2,100 positions in our former Corporates & Markets division, 300
positions in our Private and Business Clients division and 600 positions in our
Other division. In connection with the elimination of the first 1,500 of these
positions, we recorded restructuring charges of approximately E199 million in
2002. In 2003 we recorded an additional approximately E344 million in charges
associated with the termination of the remaining 1,500 positions. Of the
aggregate 3,000 positions to be eliminated under these initiatives,
approximately 2,500 positions had been eliminated as of April 30, 2004.

     In September 2001, we announced plans involving an aggregate reduction of
approximately 1,300 positions throughout our banking segment. In the course of
2001, only our restructuring plans at our German subsidiaries were sufficiently
detailed to qualify for restructuring charges to be recorded under IFRS.
Pursuant to such qualifying plans, we recorded charges of E31 million in 2001
for the elimination of approximately 240 positions in branch and support
functions at our German subsidiaries. Pursuant to plans that qualified for
restructuring charges in 2002, we recorded further charges of E73 million in
connection with the elimination of approximately 1,000 positions. In addition,
we recorded charges of approximately E3 million for the elimination of the
approximately 60 remaining positions in 2003. Of the aggregate 1,300 positions
to be eliminated under these plans, approximately 1,200 positions had been
eliminated as of April 30, 2004.

     In 2000, Dresdner Bank announced a restructuring plan calling for
consolidation of its German branch network and related back-office activities in
Germany, including closing approximately 300 of our German branches, and the
discontinuation of commercial lending activities outside of Europe that are not
directly related to investment banking, by 2004. These measures included
aggregate job cuts of approximately 5,000 employees. Restructuring charges for
the plan were initially recorded by Dresdner Bank in 2000, with further charges
of approximately E21 million and approximately E10 million recognized during
2003 and 2002, respectively. Of the charges recorded in 2000, we recorded
releases of E7 million in 2003, E76 million in 2002 and E5 million in 2001. The
releases recorded in 2003 reflect management's decision based on review of the
previous plan estimates. The releases recorded in 2002 reflected primarily a
decision not to implement plans to relocate certain banking operations in New
York and changes in estimates of costs associated with the consolidation of
back-office functions in Germany. The releases recorded in 2001 were
attributable to changes in estimates of employee termination costs in connection
with the discontinuation of our commercial lending activities outside Europe. As
a result of this plan, we reduced the total number of German branches from
approximately 1,350 at December 31, 1999 to approximately 1,000 at December 31,
2002. Of the aggregate 5,000 employees to be terminated under this initiative,
all 5,000 employees had been terminated as of April 30, 2004.
                                        87


     The following restructuring plans introduced by Dresdner Bank since 2000,
have been completed:

     In February 2003, as part of the continued reorganization of our business
structure to focus on our core operating divisions, we publicly announced the
closure of our wholly owned subsidiary Lombardkasse AG (or Lombardkasse), a
broker-dealer specializing in securities custody and clearing transactions. The
closure involved the termination of approximately 80 employees. Charges of
approximately E40 million were recorded within other expenses in 2002 in
connection with the termination of certain service contracts associated with the
closure. All 80 positions had been eliminated as of December 31, 2003.

     In April 2002, as part of our ongoing cost-cutting measures, we announced
the elimination of an additional approximately 200 positions in our former
Corporates & Markets division. Costs associated with eliminating these positions
of approximately E17 million were recorded within Acquisition costs and
administrative expenses in 2002 without establishing restructuring provisions.
All 200 of these positions had been eliminated as of December 31, 2002. See
"-- Results of Operations -- Year Ended December 31, 2002 Compared to Year Ended
December 31, 2001 -- Acquisition Costs and Administrative Expenses."

     In 2001, in connection with the reorganization of our former Corporates &
Markets division, we recorded charges of approximately E118 million for the
elimination of approximately 1,500 positions, primarily in front and back office
support functions. Associated with the reorganization, additional charges of
approximately E14 million and approximately E6 million were recorded in 2003 and
2002 respectively to reflect a revised estimate of costs associated with leased
property. Of the charges recorded in 2001, we recorded releases of approximately
E6 million and approximately E5 million in 2003 and 2002, respectively. For
additional information on the restructuring charges recorded in 2001, see
"-- Results of Operations -- Year Ended December 31, 2002 Compared to Year Ended
December 31, 2001 -- Other Expenses." Of the 1,500 positions to be reduced under
this reorganization, all 1,500 had been eliminated as of December 31, 2002.

     We had approximately 45,000 employees at December 31, 2003 in our banking
segment, compared to approximately 47,000 employees (including part-time
employees and employees on leave) at December 31, 2002.

COMPETITION

     We are subject to intense competition in all aspects of our banking
business from both bank and non-bank institutions that provide financial
services and, in some of our activities, from government agencies. Substantial
competition exists among a large number of commercial banks, savings banks,
other public sector banks, brokers and dealers, investment banking firms,
insurance companies, investment advisors, mutual funds and hedge funds to
provide the types of banking products and services that we offer in our banking
operations. In our Private and Business Clients division, our main competitors
are Deutsche Bank, HypoVereinsbank, Commerzbank, Deutsche Postbank, Citibank and
German savings and cooperative banks. In our Corporate Banking division, our
main competitors are Deutsche Bank, Citigroup, Commerzbank and HypoVereinsbank,
as well as the German public state banks and savings and cooperative banks. In
our Dresdner Kleinwort Wasserstein division, our main competitors are Deutsche
Bank, Commerzbank, BNP Paribas, ING and Royal Bank of Scotland. Competition is
based on a number of factors, including distribution systems, transaction
execution, products and services, innovation, reputation and price. In recent
years, we have generally experienced intensifying price competition as
competitors have sought to increase their market share. We believe this trend
will continue.

                                        88


RESULTS OF OPERATIONS

     The following table sets forth certain financial information for our
banking operations for the years indicated.



                                                             YEAR ENDED DECEMBER 31
                                                           ---------------------------
                                                            2003      2002     2001(1)
                                                           -------   -------   -------
                                                                 (E IN MILLIONS)
                                                                      
Interest and similar income..............................    8,089    13,336     9,085
Income (net) from investments in affiliated enterprises,
  joint ventures, and associated enterprises.............       27     2,071(2)   1,016
Other income from investments............................      751     1,430       628
Trading income...........................................    1,486     1,081       244
Fee and commission income, and income resulting from
  service activities.....................................    2,956     2,925     1,474
Other income.............................................      521       432       308
                                                           -------   -------   -------
Total income.............................................   13,830    21,275    12,755
                                                           -------   -------   -------
Interest and similar expenses............................   (5,284)   (9,509)   (6,766)
Other expenses for investments...........................     (912)   (2,225)     (465)
Loan loss provisions.....................................   (1,014)   (2,222)     (588)
Acquisition costs and administrative expenses............   (6,590)   (7,581)   (3,446)
Amortization of goodwill.................................     (263)     (241)      (70)
Other expenses...........................................   (1,967)   (1,034)   (1,193)
                                                           -------   -------   -------
Total expenses...........................................  (16,030)  (22,812)  (12,528)
                                                           -------   -------   -------
Earnings from ordinary activities before taxation........   (2,200)   (1,537)      227
Taxes....................................................    1,025       154         6
Minority interests in earnings...........................     (104)       25      (453)
                                                           =======   =======   =======
Net income (loss)........................................   (1,279)   (1,358)     (220)


---------------

(1) Reflects the inclusion of Dresdner Bank in our consolidated financial
    statements as of July 23, 2001.

(2) Includes a realized gain of E1,912 million resulting from the transfer in
    August 2002 of substantially all of Dresdner Bank's German asset management
    subsidiaries to ADAM. See "-- Asset Management Operations." The gain on this
    transfer was eliminated at the Allianz Group level. In addition, this item
    includes a realized gain of E244 million resulting from the merger of
    Deutsche Hyp into Eurohypo in August 2002. See "-- Banking Operations By
    Division -- Other -- Description of Business."

YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002

     In the following section, we discuss the consolidated results of our
banking operations for the years ended December 31, 2003 and 2002. As discussed
below, our banking results in 2002 were significantly affected by the merger
into Eurohypo and deconsolidation on August 1, 2002 of our former mortgage
banking subsidiary Deutsche Hyp (see "-- Banking Operations By
Divison -- Other -- Description of Business"), as well as the E1,912 million of
realized gains recorded in connection with the transfer in August 2002 of
Dresdner Bank's German asset management subsidiaries to ADAM (see "-- Asset
Management Operations").

     Operating Income.  We measure operating income in our banking operations on
a net basis. Operating income consists of interest and similar income, trading
income, fee and commission income, and income resulting from service activities,
less interest and similar expenses and fee and commission expenses. Operating
income is a measure used by management to calculate and monitor the activities
and operating performance of its banking operations. This measure is used by
other banks, but other banks may calculate

                                        89


operating income on a different basis and accordingly may not be comparable to
operating income as used herein.

     The following table shows our banking segment operating income and its
income statement components for the years indicated:



                                                                YEAR ENDED
                                                               DECEMBER 31,
                                                              ---------------
                                                               2003     2002
                                                              ------   ------
                                                              (E IN MILLIONS)
                                                                 
Interest and similar income.................................   8,089   13,336
Trading income..............................................   1,486    1,081
Fee and commission income, and income resulting from service
  activities................................................   2,956    2,925
Interest and similar expenses...............................  (5,284)  (9,509)
Fee and commission expenses(1)..............................    (504)    (267)
                                                              ------   ------
Operating income............................................   6,743    7,566


---------------

(1) See "-- Year Ended December 31, 2003 Compared to Year Ended December 31,
    2002 -- Acquisition Costs and Administrative Expenses."

     Interest and Similar Income.  Interest and similar income consists
primarily of income from loans and advances to banks and to customers and
investment securities and the effects of derivatives qualifying for hedge
accounting treatment. Interest and similar income from our banking operations
was E8,089 million in 2003, a decrease of E5,247 million, or 39.3%, from E13,336
million in 2002, reflecting primarily, the deconsolidation of Deutsche Hyp on
August 1, 2002 and the reduction of risk-weighted interest earning assets in
2003. Interest and similar income from loans and advances to customers, was
E5,454 million, a decrease of E1,638 million, or 23.1%, from E7,092 million in
2002, reflecting the deconsolidation of Deutsche Hyp on August 1, 2002, and
decreased lending volumes primarily to corporate customers in the United States,
South America and Asia as well as the disposition of non-strategic loans through
the IRU. Interest income from lending and money market transactions,
substantially all of which relates to transactions with banks, was E709 million
in 2003, a decrease of E364 million, or 33.9%, from E1,073 million in 2002.
Interest income from lending and money market transactions in 2003 was adversely
affected by both a decrease in average interest yields and a decrease in average
volume. Interest and similar income from investment securities was E950 million,
a decrease of E1,282 million, or 57.4%, from E2,232 million in 2002,
substantially all of which resulted from a decrease in income from
fixed-interest government securities. Income from fixed-interest government
securities decreased to E669 million, a decrease of E1,282 million, or 65.7%,
from E1,951 million in 2002, primarily reflecting the deconsolidation of
Deutsche Hyp on August 1, 2002. Income from corporate debt securities remained
roughly stable at E51 million in 2003, as compared to E50 million in 2002.
Income from equity securities, which consists primarily of dividend income, was
E194 million, a decrease of E12 million, or 5.8%, from E206 million in 2002.

     Trading Income.  Trading income consists mainly of net interest income,
realized and unrealized gains and losses from trading in interest and equity
products, foreign exchange and precious metals, and the effects of derivative
contracts that do not qualify for hedge accounting. Trading income is net of
interest expense and includes both proprietary trading revenues and margins
realized from trades made on behalf of customers. Trading income was E1,486
million in 2003, an increase of E405 million, or 37.5%, from E1,081 million in
2002. Trading income from interest products was E632 million in 2003, a decrease
of E106 million, or 14.4%, from E738 million in 2002, primarily related to
realized losses on fixed-income government securities. Income from trading in
equity products increased to E178 million in 2003 from a loss of E49 million in
2002, as a result of the recovery in the equity securities markets during the
course of 2003. Income from foreign exchange and precious metals trading was
E359 million in 2003, an increase of E58 million, or 19.3%, from E301 million in
2002, primarily related to increased client business. Other trading income
increased to E317 million in 2003 from E90 million in 2002, due primarily to an
increase in net gains from the trading of financial derivatives contracts
attributable to interest products, and increases in income from the effects of

                                        90


derivative contracts that do not qualify for hedge accounting. Gains or losses
on such financial instruments arising from changes in fair value are included in
trading income. For additional information on trading income in our banking
operations, see Note 28 to our consolidated financial statements.

     Fee And Commission Income and Income from Service Activities.  Fee and
commission income and income from service activities comprises mainly fees and
commissions from our securities, lending, transaction banking, underwriting and
mergers and acquisitions advisory businesses. Fee and commission income, and
income from service activities was E2,956 million in 2003, an increase of E31
million, or 1.1%, from E2,925 million in 2002. Fee and commission income from
our securities business was E1,306 million in 2003, an increase of E240 million,
or 22.5%, from E1,066 million in 2002, reflecting commissions from the sale of
asset management products. Fee and commission income from our mergers and
acquisitions advisory businesses was negatively affected by a lower volume of
mergers and acquisitions activities in 2003, decreasing to E128 million in 2003
from E252 million in 2002. Fee and commission income from our underwriting
business remained unchanged at E104 million in 2003, comprised primarily of
underwriting of debt securities. In addition, fee and commission income included
income on account and payment transactions (E396 million in 2003 compared to
E390 million in 2002), insurance, real estate and other brokerage commissions
(E343 million in 2003 compared to E232 million in 2002), commissions earned from
lending activities (E160 million in 2003 compared to E196 million in 2002),
commissions earned for asset management products from third-party customers
(E158 million in 2003 compared to E207 million in 2002) and commissions earned
from our ADAM segment for marketing and selling their asset management products
(E74 million in 2003 compared to E113 million in 2002). Other fee and commission
income was E287 million in 2003, a decrease of E78 million or 21.4% from E365
million in 2002.

     Interest and Similar Expenses.  Interest and similar expense consists
primarily of interest expense on deposits, certificated liabilities and the
effects of derivatives qualifying for hedge accounting treatment. Interest and
similar expense was E5,284 million in 2003, a decrease of E4,225 million, or
44.4%, from E9,509 million in 2002, reflecting primarily, the deconsolidation of
Deutsche Hyp in August 2002, as well as the impact of a general decline in
interest rates and declining loan volumes. The decline in loan volumes was due
primarily to reduced funding requirements as a result of reduced lending
activities. Of the total amount of interest and similar expenses in 2003,
interest expense on deposits was E2,514 million, a decrease of E1,561 million,
or 38.3%, from E4,075 in 2002, due primarily to the general decline in interest
rates. Interest expense on certificated liabilities, consisting of long-term
bonds and certificated money-market instruments, was E1,832 million, a decrease
of E1,801 million, or 49.6%, from E3,633 million in 2002, reflecting primarily
the deconsolidation of Deutsche Hyp in August 2002, as well as reduced issuance
of commercial paper. Interest expense on subordinated liabilities and on profit
participation certificates decreased to E366 million and E111 million in 2003
from E578 million and E133 million in 2002, respectively, reflecting in each
case the impact of a general decline in interest rates as well as declining loan
volumes. See Note 15 to our consolidated financial statements for a discussion
of our subordinated liabilities and profit participation certificates. The
decline in volume was due primarily to reduced funding requirements as a result
of reduced lending activities. Other interest expense was E461 million, a
decrease of E629 million, or 57.7% from E1,090 million in 2002.

     Operating Income.  Operating income from our banking operations was E6,743
million in 2003, a decrease of E823 million, or 10.9%, from E7,566 million in
2002, reflecting primarily decreased interest and similar income in 2003 due to
lower interest rates and decreased lending volumes. These decreases were offset
in part by a decline in interest and similar expense due to decreased average
liability volumes and lower average interest rates.

     We define our net interest spread and our net interest margin by reference
to the information set forth in "-- Selected Statistical Information Relating to
Our Banking Operations -- Average Balance Sheet and Interest Rate Data." Our net
interest spread in 2003, which consists of the difference between the average
interest rate earned on average interest-earning assets of 3.5% and the average
interest rate paid on average interest-bearing liabilities of 3.0%, was 0.5%,
increasing from 0.3% at 2002. Our net interest margin, which we define as net
interest income, including net interest income on trading assets and trading
liabilities, as a percentage of average interest-earning assets, was 0.9% in
2003, compared to 0.7% in 2002. For further
                                        91


information concerning the net interest spread and net interest margin in our
banking business for 2003 and prior years, see "-- Selected Statistical
Information Relating to Our Banking Operation -- Net Interest Margin."

     Net Income From Investments In Affiliated Enterprises, Joint Ventures And
Associated Enterprises.  Net income from investments in affiliated enterprises,
joint ventures and associated enterprises, which consists primarily of realized
gains and losses from the disposition of such investments, was E27 million in
2003, a substantial decrease of E2,044 million, from E2,071 million in 2002,
reflecting the high levels of realized gains in 2002, attributable primarily to
the transfer of substantially all of Dresdner Bank's German asset management
subsidiaries to ADAM (E1,912 million) and the merger of Deutsche Hyp into
Eurohypo (E244 million). The gain on the transfer to ADAM was eliminated at the
Allianz Group level. See "-- Year Ended December 31, 2002 Compared to Year Ended
December 31, 2001 -- Interest and Similar Income."

     Other Income from Investments.  Other income from investments consists
primarily of realized gains on investments. Other income from investments was
E751 million in 2003, a decrease of E679 million, or 47.5%, from E1,430 million
in 2002, reflecting large amounts of realized gains in 2002 for the disposition
of equity securities, including intercompany transfers to reposition equity
investments within the Allianz Group, which were eliminated at the Allianz Group
level. Realized gains on the disposition of equity securities, government debt
securities and corporate debt securities available-for-sale were E227 million,
E81 million and E163 million, respectively, in 2003, compared to E1,265 million,
E116 million and E2 million, respectively, in 2002. Other income from
investments also includes the reversal of impairment writedowns on
available-for-sale investment securities recognized in previous years, of E247
million in 2003 compared to E41 million in 2002, generally reflecting the
improvement in global equity markets in the course of 2003.

     Other Income.  Other income from our banking operations was E521 million in
2003, an increase of E89 million, or 20.6%, from E432 million. Other income from
our banking operations in 2003 consisted primarily of income from releasing or
reducing miscellaneous accrued liabilities (E78 million), non-trading foreign
currency transaction gains (E73 million), gains from disposals of fixed assets
(E9 million), realized gains on the disposal of certain real estate activities
to Eurohypo (E23 million), realized gains related to the sale of the
institutional custody business (E40 million), realized gains from the sale of
certain properties (E37 million) and miscellaneous other income (E261 million).

     Other Expenses for Investments.  Other expenses for investments from our
banking operations consist of realized losses and impairments recorded on
securities and other investments. Other expenses for investments were E912
million in 2003, a decrease of E1,313 million, or 59%, from E2,225 million in
2002, primarily reflecting decreased impairment charges and realized losses
recorded on investment securities due to the recovery in the capital markets
after the first quarter of 2003. Impairment charges recorded in 2003, primarily
on equity securities, were E715 million, a decrease of E414 million, or 36.7%,
from E1,129 million in 2002. Realized losses, mainly on investments in equity
securities, were E243 million, a decrease of E853 million, or 77.8%, from E1,096
million the previous year.

     Loan Loss Provisions.  For the year ended December 31, 2003, additions to
net loan loss provisions in our banking segment were E1,014 million, a decrease
of E1,208 million, or 54.4%, from E2,222 million in 2002, reflecting primarily
improved rating procedures, restructuring of the loan portfolio and reduced
defaults from large loan exposures. Net loan loss provisions in 2003 consisted
of E2,186 million of new provisions, offset in part primarily by releases of
E1,103 million of existing provisions and recoveries of E69 million. The E1,014
million of net loan loss provisions is comprised of net specific loan loss
provisions of E1,216 million, net releases of general loan loss provisions of
E148 million and net releases of country risk provisions of E54 million. For
additional information see "-- Selected Statistical Information Relating to Our
Banking Operations" and Note 4 to our consolidated financial statements.

     We recorded new specific loan loss provisions of E2,140 million in 2003, a
significant decrease of E749 million, or 25.9%, from E2,889 million in 2002,
primarily as a result of reduced exposure in the corporate lending area. Of this
amount, E1,580 million related to corporate borrowers, a decrease of E571
million, or 26.5%, from E2,151 million in 2002. Provisions for corporate
borrowers related particularly to borrowers in Germany and North America within
the manufacturing, wholesale and retail trade and utility
                                        92


sectors, reflecting general deterioration in credit quality and continuing
insolvencies. We also recorded specific provisions relating to private
individuals, primarily in Germany, of E558 million in 2003, a decrease of E107
million, or 16.1%, from E665 million in 2002, reflecting implementation of
improved loan review tools and processes and restructuring of the loan
portfolio. We also recorded specific provisions relating to banks of E2 million,
compared to E73 million in 2002. Country loan loss provisions were a net release
of E54 million in 2003, compared to a net release of E97 million in 2002,
reflecting primarily decreased lending volumes and net reductions of exposures
subject to country risk provisions. Net general loan loss provisions were a
release of E148 million in 2003, compared to a provision of E89 million the
previous year, reflecting the reduction of loan portfolio and improved risk
management processes. Of the additional net loan loss provisions of E1,014
million in 2003, we recorded E884 million of total net loan loss provisions in
our IRU division primarily related to corporate customers in Germany, while
total of approximately E774 million of the net specific loan loss provisions in
2003 related to borrowers in Germany.

     At December 31, 2003, our non-performing loans and potential problem loans
were E9,581 million and E1,717 million, respectively reflecting net decreases of
E2,044 million, or 17.6%, in non-performing loans and E720 million, or 29.5%, in
potential problem loans from year-end 2002. For additional information on non-
performing loans and potential problem loans, see "-- Selected Statistical
Information Relating to Our Banking Operations -- Risk Elements." At December
31, 2003, the ratio of the total allowances for loan losses to total loans was
approximately 5.0%, reflecting a slight decrease from 5.2% at December 31, 2002,
while the ratio of the total allowances for loan losses to total non-performing
loans was approximately 60.1%, reflecting a slight increase from 59.9% at
December 31, 2002. For a discussion of the steps we are taking to improve the
quality of our loan portfolio, see "-- Banking Operations By Division -- IRU."

     In 2003, our banking segment's gross loan charge-offs were E1,971 million,
an increase of E34 million, or 1.8%, from E1,889 million in 2002, attributable
primarily to an increase in charge-offs related to loans to German private
individuals and foreign corporate borrowers, offset in part by a decrease in the
charge-offs related to German corporate borrowers. See "-- Selected Statistical
Information Relating to our Banking Operations -- Summary of Loan Loss
Experience."

     Acquisition Costs and Administrative Expenses.  Acquisition costs and
administrative expenses in our banking segment, which consist primarily of
personnel expenses, operating expenses and fee and commission expenses, were
E6,590 million in 2003, a decrease of E991 million, or 13.1%, from E7,581
million in 2002, primarily as a result of cost-cutting and restructuring
measures and the deconsolidation of Deutsche Hyp in August 2002. Personnel
expenses were E3,637 million in 2003, a decrease of E698 million, or 16.1%, from
E4,335 million, reflecting primarily decreased wages and salary expenses
(including bonuses), social security and pension expenses due to a reduction in
headcount as a result of our ongoing cost-cutting and restructuring measures.
Bonus and retention payments recorded in 2003 amounted in the aggregate to E820
million, compared to E1,058 million the previous year. Operating expenses were
E2,449 million in 2003, a decrease of E530 million, or 17.8%, from E2,979
million in 2002, primarily reflecting a decrease in occupancy-related costs,
attributable to the on-going restructuring measures, as well as a decrease in
marketing and advertising expenses. Operating expenses in 2003 consisted mainly
of occupancy-related costs (E1,049 million), depreciation expenses (E294
million), expenses for amortization of software and other intangible assets
(E210 million), consulting fees (E122 million), travel expenses (E107 million),
marketing and advertising expenses (E76 million), training costs (E80 million)
and other operating expenses (E511 million). Fee and commission expenses were
E504 million in 2003, an increase of E237 million, or 88.8%, from E267 million
in 2002, primarily due to the inclusion in 2003 of the activities of the banking
subsidiary of RAS within our banking segment. For a discussion of our
restructuring program to reduce administrative expenses, see "-- Cost-Cutting
and Restructuring Measures."

     Amortization of Goodwill.  Amortization of goodwill in our banking
operations was E263 million in 2003, an increase of E22 million, or 9.1%, from
E241 million in 2002, attributable primarily to the acquisitions of additional
shareholdings in Dresdner Bank during 2002. See Note 3 to our consolidated
financial statements.

                                        93


     Other Expenses.  Other expenses from our banking operations were E1,967
million in 2003, an increase of E933 million, or 90.2%, from E1,034 million in
2002, reflecting primarily restructuring charges of E892 million, writeoffs of
E714 million and E361 million of other expenses. The writeoffs related to
information technology systems, impairments of certain real estate investment
properties and businesses, and realized losses on business discontinuations.
Restructuring charges recorded in 2003 consisted primarily of charges relating
to cost-cutting measures at Dresdner Bank (E840 million). For a discussion of
our restructuring programs, see "-- Cost Cutting and Restructuring Measures."
See also Note 21 to our consolidated financial statements.

     Taxes.  Taxes on our banking segment were a tax credit of E1,025 million in
2003, compared to a tax credit of E154 million in 2002. The increase in the tax
credit in 2003 is primarily attributable to tax losses and loss carryforwards,
for which a deferred tax asset was recognized.

     Minority Interests in Earnings.  Minority interests in our banking segment
were E104 million in 2003, compared to a credit of E25 million in 2002 due to
significant increase in earnings of a French banking subsidiary of the AGF Group
in 2003.

     Net Income.  Net income for our banking operations was a loss of E1,279
million in 2003, compared to a loss of E1,358 million in 2002, reflecting lower
realized gains on investments and increased restructuring expenses, offset in
part by a significantly lower level of loan loss provisions, lower impairments
recorded on securities and other investments and reduced administrative
expenses. The decrease in realized gains on investments was attributable to the
high level of realized gains in 2002, due primarily to the transfer of
substantially all of Dresdner Bank's German asset management subsidiaries to
ADAM, the merger of Deutsche Hyp into Eurohypo and realized gains on equity
securities. See "-- Results of Operations -- Year Ended December 31, 2002
Compared to Year Ended December 31, 2001 -- Net Income." The amount of the loss
was positively affected by a reduced level of net loan loss provisions (E1,014
million) and negatively affected by increased restructuring costs (E892
million). As a result of our cost-cutting and restructuring measures (see
"-- Cost Cutting and Restructuring Measures"), we were able to further reduce
administrative expenses over the course of 2003.

YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

     In the following section, we discuss the consolidated results of our
banking operations for the years ended December 31, 2002 and 2001. This
discussion focuses on factors and trends that affected our consolidated banking
results for the full year 2002 compared to the part-year period after our
acquisition of Dresdner Bank on July 23, 2001, since our banking operations
prior to our acquisition of Dresdner Bank were not significant. As discussed
below, our banking results in 2002 were significantly affected by the merger
into Eurohypo and deconsolidation on August 1, 2002 of our former mortgage
banking subsidiary Deutsche Hyp (see "-- Banking Operations By
Division -- Other -- Description of Business"), as well as the E1,912 million of
realized gains recorded in connection with the transfer in August 2002 of
Dresdner Bank's German asset management subsidiaries to ADAM (see "-- Asset
Management Operations").

     Operating Income.  We measure operating income in our banking operations on
a net basis. Operating income consists of interest and similar income, trading
income, fee and commission income, and income resulting from service activities,
less interest and similar expenses and fee and commission expenses. Operating
income is a measure used by management to calculate and monitor the activities
and operating performance of its banking operations. This measure is used by
other banks but other banks may calculate the operating income on the basis of
different components and may, thus, not be comparable to the operating income as
used herein.

                                        94


     The following table shows operating income and its income statement
components for the years indicated:



                                                                 YEAR ENDED
                                                                DECEMBER 31,
                                                              ----------------
                                                               2002    2001(1)
                                                              ------   -------
                                                              (E IN MILLIONS)
                                                                 
Interest and similar income.................................  13,336    9,085
Trading income..............................................   1,081      244
Fee and commission income, and income resulting from service
  activities................................................   2,925    1,474
Interest and similar expenses...............................  (9,509)  (6,766)
Fee and commission expenses(2)..............................    (267)    (184)
                                                              ------   ------
Operating income............................................   7,566    3,853


---------------

(1) Reflects the inclusion of Dresdner Bank in our consolidated financial
    statements as of July 23, 2001.

(2) See "-- Year Ended December 31, 2002 Compared to Year Ended December 31,
    2001 -- Acquisition Costs and Administrative Expenses."

     Interest and Similar Income.  Interest and similar income from our banking
operations was E13,336 million in 2002, reflecting primarily a decrease of
approximately E79,700 million, or approximately 19%, of our average
interest-earning assets due to the deconsolidation of Deutsche Hyp as of August
1, 2002 and decreasing interest yields in the major markets in which we operate.
Of this amount, income from loans and advances to customers accounted for E7,092
million. Interest and similar income on loans and advances to customers was
adversely affected by both a decrease in average interest yields and a decrease
in average volume due primarily to the deconsolidation in August 2002 of
Deutsche Hyp, which affected primarily our German operations. Income from
lending and money market transactions was E1,073 million, substantially all of
which related to transactions with banks. Interest income from lending and money
market transactions was also adversely affected by both a decrease in average
interest yields and a decrease in average volume. Interest and similar income
from investment securities was E2,232 million, consisting primarily of income
from fixed-interest government securities of E1,951 million and corporate debt
securities of E50 million, reflecting the significance of fixed-income
securities in our portfolio despite decreased volume in our German operations
due to the deconsolidation in August 2002 of Deutsche Hyp. Income from equity
securities, which consists primarily dividend income, was E206 million,
reflecting primarily a decline in investments in equity securities.

     Trading Income.  Trading income was E1,081 million in 2002, reflecting
primarily the full-year consolidation of Dresdner Bank in 2002 and a significant
increase in trading income from interest products such as government bonds and
corporate bonds, as well as derivatives on interest products. Trading income
from interest products was E738 million in 2002, reflecting an increase in the
trading volume of interest products due to ongoing weakness in the equity
securities markets. Income from trading in equity products was a loss of E49
million. Income from foreign exchange and precious metals trading was E301
million, while income from the effects of derivative contracts that do not
qualify for hedge accounting declined to E90 million, reflecting the decrease in
income from derivative instruments that do not qualify for hedge accounting and
are therefore recorded at fair value. Gains or losses on such financial
instruments arising from valuation at fair value are included in trading income.
For additional information on trading income in our banking operations, see Note
28 to our consolidated financial statements.

     Fee and Commission Income, and Income from Service Activities.  Fee and
commission income, and income from service activities was E2,925 million in
2002. Fee and commission income from our securities business was E1,066 million
for this period, reflecting decreased transaction volume in our equity products
business due to the continuing reluctance of German clients to engage in equity
securities transactions in light of market conditions. Fee and commission income
from our mergers and acquisitions advisory businesses (E252 million) and our
underwriting business (E104 million) also was negatively affected as a result of
slowing market activity in the underwriting and advisory businesses in 2002. In
addition, fee and commission

                                        95


income included commission income on account and payment transactions (E390
million), insurance, real estate and other brokerage commissions (E232 million),
commissions earned from lending (E196 million), commissions earned for asset
management products from third-party customers (E207 million) and commissions
earned from our ADAM segment for marketing and selling their asset management
products (E113 million).

     Interest and Similar Expenses.  Interest and similar expense were E9,509
million in 2002, consisting primarily of interest expense of E4,075 million on
deposits, E3,633 million on certificated liabilities, consisting of long-term
bonds and certificated money-market instruments, as well as long-term
subordinated liabilities (E578 million) and profit participation certificates
(E133 million), which reflected in each case the impact of a general decline in
interest rates as well as declining volumes. The decline in volumes was due
primarily to a decrease of approximately E76,200 million, or 21%, in our average
interest-bearing liabilities due to the deconsolidation in August 2002 of
Deutsche Hyp and reduced funding requirements as a result of reduced lending
activities. The impact of the deconsolidation was particularly evident in
certificated liabilities and in liabilities to customers. Other interest expense
was E1,090 million.

     Operating Income.  Operating income from our banking operations was E7,566
million in 2002, reflecting primarily decreased interest and similar income due
to lower interest rates and decreased lending volumes, as well as decreased
interest and similar expense due to decreased average liability volumes and
lower average interest rates.

     We define our net interest spread and our net interest margin by reference
to the information set forth in "-- Selected Statistical Information Relating to
Our Banking Operations -- Average Balance Sheet and Interest Rate Data." Our net
interest spread, which consists of the difference between the average interest
rate earned on average interest-earning assets of 4.0% and the average interest
rate paid on average interest-bearing liabilities of 3.7%, was 0.3% in 2002,
reflecting an overall reduction in interest income from higher-yielding loans to
customers and investment securities, due primarily to the deconsolidation in
August 2002 of Deutsche Hyp, reduced lending volumes and an overall decline in
the interest rate environment. Our net interest margin, which we define as net
interest income, including net interest income on trading assets and trading
liabilities, as a percentage of average interest-earning assets, was 0.7% in
2002. For further information concerning the net interest spread and net
interest margin in our banking business for 2002 and prior years, see
"-- Selected Statistical Information Relating to Our Banking Operation -- Net
Interest Margin."

     Net Income from Investments in Affiliated Enterprises, Joint Ventures and
Associated Enterprises.  Net income from investments in affiliated enterprises,
joint ventures and associated enterprises was E2,071 million in 2002, reflecting
primarily a realized gain of E1,912 million resulting from the transfer in
August 2002 of substantially all of Dresdner Bank's German asset management
subsidiaries to ADAM. See "-- Asset Management Operations." The gain on this
transfer was eliminated at the Allianz Group level. In addition, net income from
investments in affiliated enterprises, joint ventures and associated enterprises
included a realized gain of E244 million resulting from the merger of Deutsche
Hyp into Eurohypo in August 2002. See "-- Banking Operations By
Division -- Other -- Description of Business."

     Other Income from Investments.  Other income from investments was E1,430
million in 2002, primarily as a result of E1,265 million of realized gains on
the disposition of equity securities available-for-sale, including intercompany
transfers to reposition equity investments within the Allianz Group in the
course of 2002, and an additional E116 million on the disposition of government
debt securities available-for-sale. The gains on these intercompany transfers
were eliminated at the Allianz Group level.

     Other Income.  Other income from our banking operations was E432 million,
consisting primarily of income from releasing or reducing miscellaneous accrued
liabilities (E53 million), non-trading foreign currency transaction gains (E36
million), gains from disposals of fixed assets (E28 million) and other income
(E279 million).

     Other Expenses for Investments.  Other expenses for investments were E2,225
million in 2002, reflecting E1,129 million of impairments recorded, primarily on
equity securities, and E1,096 million of realized losses,

                                        96


mainly on investments in equity securities. The realized losses on equity
securities reflected primarily realized losses on two major shareholdings as
part of intercompany transfers to reposition equity investments within the
Allianz Group in the course of 2002. The losses on intercompany transfers were
eliminated at the Allianz Group level.

     Loan Loss Provisions.  For the year ended December 31, 2002, additions to
net loan loss provisions in our banking segment were E2,222 million, consisting
of E3,106 million of new provisions, offset in part primarily by releases of
E810 million of existing provisions and recoveries of E74 million.

     We recorded new specific loan loss provisions of E2,889 million in 2002, of
which E2,151 million related to corporate borrowers, particularly in the
telecommunications, media and construction sectors, reflecting the continued
weakness in the global economy, deteriorating credit quality of borrowers and
increased insolvencies. We also recorded specific provisions of E665 million
relating to private individuals and E73 million relating to banks. Country loan
loss provisions were a net release of E97 million in 2002, reflecting releases
of E208 million, due primarily to country upgrades, decreased lending volumes
and other reductions of exposures subject to country risk provisions, offset in
part by increased provisions of E111 million primarily relating to exposures in
Brazil. Net general loan loss provisions were E89 million in 2002, based
primarily on historical loss experience and management's assessment of the
credit quality of the loan portfolio caused by the deteriorating condition of
the global economy. Of the additional net loan loss provisions of E2,222 million
in 2002, we recorded E1,592 million in our former Corporates & Markets division,
primarily in Germany, Latin America and the United States, E561 million in our
Private and Business Clients divisions, primarily in Germany, and E69 million in
our Other division. A total of approximately E1,259 million of the net specific
loan loss provisions in 2002 related to borrowers in Germany.

     The continuing weakness in the loan portfolio of our banking segment is
evidenced by the increase in our non-performing loans and potential problem
loans in 2002. For additional information on non-performing loans and potential
problem loans, see "-- Selected Statistical Information Relating to Our Banking
Operations -- Risk Elements." At December 31, 2001, our non-performing loans and
potential problem loans were E13,655 million and E2,876 million, respectively,
which included approximately E3,306 million of non-performing loans and E670
million of potential problem loans, respectively, attributable to the loan
portfolio of Deutsche Hyp. Excluding Deutsche Hyp, at December 31, 2001, our
non-performing loans and potential problem loans were E10,349 million and E2,206
million, respectively. At December 31, 2002, following the deconsolidation of
Deutsche Hyp on August 1, 2002, our non-performing loans and potential problem
loans were E11,625 million and E2,437 million, respectively. On a comparable
basis, excluding loans attributable to Deutsche Hyp, these amounts represented a
net increase of E1,276 million, or 12.3%, in non-performing loans and E231
million, or 10.5%, in potential problem loans from year-end 2001. At December
31, 2002, the ratio of the total allowances for loan losses to total loans was
approximately 5.2%, while the ratio of the total allowances for loan losses to
total non-performing loans was approximately 59.9%, in each case reflecting the
deconsolidation of Deutsche Hyp. These percentages represented an increase from
the corresponding ratio of 4.5% and a decrease from the corresponding ratio of
68.5%, respectively, at December 31, 2001, on a comparable basis excluding loans
and allowances for loan losses attributable to Deutsche Hyp.

     Since 2000, Dresdner Bank has charged off loans when, based on management's
judgment, all economically sensible means of recover have been exhausted. Prior
to 2000, Dresdner Bank charged off loans only when all legal means of recovery
had been exhausted. This change in practice has affected both the timing and
amount of charge-offs in the years 2000 to 2002, and in 2002 also affected the
level of our non-accrual loans. In 2002, our banking segment's gross charge-offs
were E1,889 million. See "-- Selected Statistical Information Relating to the
Our Banking Operations -- Summary of Loan Loss Experience."

     To reduce our exposure to credit risks, we have taken a variety of steps in
2002 and 2003, including reducing our loans to corporate borrowers in the United
States, Argentina and Brazil. In addition, in 2003, we began the process of
reorganizing certain performing loans to non-strategic customers, non-performing
loans and certain other non-strategic assets into the IRU. See "--
Reorganization of Business Divisions." For

                                        97


additional information, see "-- Selected Statistical Information Relating to Our
Banking Operations -- Summary of Loan Loss Experience."

     Acquisition Costs and Administrative Expenses.  Acquisition costs and
administrative expenses in our banking segment were E7,581 million in 2002.
Personnel expenses amounted to E4,335 million, reflecting primarily decreased
wages and salary expenses, social security and pension expenses due to a
reduction in headcount as a result of our ongoing cost-cutting and restructuring
measures and the expiration of the bonus and retention agreements with Dresdner
Bank executives and key management personnel made after merger negotiations with
Deutsche Bank in 2000. These decreases were offset in part by continuing bonus
and retention payments made in connection with the acquisition of Wasserstein
Perella & Co. in January 2001. Bonus and retention payments recorded in 2002
amounted in the aggregate to E1,058 million. Operating expenses were E2,979
million, consisting mainly of occupancy-related costs (E1,263 million),
depreciation expenses (E395 million), marketing and advertising expenses (E249
million), expenses for amortization of software and other intangible assets
(E235 million), travel expenses (E143 million), consulting fees (E134 million),
training costs (E125 million) and other operating expenses (E435 million). Fee
and commission expenses E267 million in 2002. For a discussion of our
restructuring program to reduce administrative expenses, see "-- Cost-Cutting
and Restructuring Measures."

     Amortization of Goodwill.  Amortization of goodwill in our banking
operations was E241 million in 2002, attributable primarily to the acquisition
of Dresdner Bank on July 23, 2001. See Note 3 to our consolidated financial
statements.

     Other Expenses.  Other expenses from our banking operations were E1,034
million in 2002, reflecting primarily restructuring charges of E245 million, and
impairments recorded of E202 million relating to an investment in a real estate
property owned by Dresdner Bank, as well as other expenses of E587 million,
including E40 million of costs recorded in connection with the termination of
certain service contracts associated with the closure of Lombardkasse.
Restructuring charges recorded in 2002 consisted primarily of charges relating
to cost-cutting measures in our Corporates & Markets division (E288 million),
offset in part by releases of E87 million from restructuring plans initiated by
Dresdner Bank in 2001 and 2000. For a discussion of our restructuring programs,
see "-- Cost Cutting and Restructuring Measures." See also Note 21 to our
consolidated financial statements.

     Taxes.  Taxes on our banking segment amounted to a tax credit of E154
million in 2002. The tax benefit was due to tax losses, for which a deferred tax
asset was recognized.

     Minority Interests in Earnings.  Minority interests in our banking segment
were a credit of E25 million in 2002.

     Net Income.  Net income for our banking operations was a loss of E1,358
million in 2002, reflecting the continued weakness in the capital markets and
the deteriorating credit quality of borrowers in Germany and our other major
markets. The loss was attributable primarily to a significant decline in income
in conjunction with a high level of net loan loss provisions (E2,222 million),
impairments recorded on investment securities (E1,129 million) and realized
losses on investment securities (E1,096 million), offset in part by realized
gains from the transfer of substantially all of Dresdner Bank's German asset
management subsidiaries to ADAM (E1,912 million), the merger of Deutsche Hyp
into Eurohypo (E244 million) and realized gains on equity securities (E1,265
million), as well as a tax credit (E154 million). Although we were able to
reduce administrative expenses significantly over the course of 2002 as a result
of cost-cutting and restructuring measures (see "-- Cost Cutting and
Restructuring Measures"), the reduction in costs was not sufficient to offset
the decline in income.

                         BANKING OPERATIONS BY DIVISION

     In 2002, we conducted our banking operations through two principal
operating divisions, Private and Business Clients and Corporates & Markets. In
2003, we significantly reorganized our banking divisions. See "-- Banking
Operations -- Reorganization of Business Divisions." Following the
reorganization, we conduct our banking operations through five divisions,
Private and Business Clients, Corporate Banking, Dresdner
                                        98


Kleinwort Wasserstein, IRU and Other. The Dresdner Kleinwort Wasserstein
division does not represent the legal entity Dresdner Kleinwort Wasserstein
Group, Ltd. Our Other division includes Dresdner Bank's corporate investments,
corporate items, which consists of income and expense items that are not
directly attributable to one of our other four divisions, and adjustments to
reflect elimination of transactions between divisions, as well as banking
operations that are not part of Dresdner Bank.

     To facilitate the comparison of the operating income and net income for
2002 and 2001, we have included the discussion of the results of operations for
our banking operations by division for the year ended December 31, 2003 as
compared to December 31, 2002 according to the former reporting structure.
Additionally, we present below the operating income and earnings after taxes and
before goodwill amortization for the year ended December 31, 2003 and a
discussion of the description of business and the results of operations in 2003
for the banking operations by division according to the new reporting structure.
We also provide information on the reclassification between the divisions as a
result of the reorganization.

     The following tables set forth certain key data concerning our banking
operations by division and by geographic region for the years indicated.
Consistent with our general practice, operating income and earnings after taxes
and before goodwill amortization by division, and total income, operating income
and earnings after taxes and before goodwill amortization by geographic region
are presented before consolidation adjustments representing the elimination of
transactions between Allianz Group companies in different geographic regions and
different segments.

    BANKING OPERATIONS -- KEY DATA BY DIVISION (2004 REPORTING STRUCTURE)(1)



                                                        YEAR ENDED DECEMBER 31, 2003
                                   -----------------------------------------------------------------------
                                                                         EARNINGS AFTER    EARNINGS AFTER
                                                                            TAXES AND         TAXES AND
                                                                         BEFORE GOODWILL   BEFORE GOODWILL
                                   OPERATING INCOME   OPERATING INCOME    AMORTIZATION      AMORTIZATION
                                   (2003 REPORTING    (2004 REPORTING    (2003 REPORTING   (2004 REPORTING
                                    STRUCTURE)(2)      STRUCTURE)(2)       STRUCTURE)        STRUCTURE)
                                   ----------------   ----------------   ---------------   ---------------
                                                               (E IN MILLIONS)
                                                                               
Private and Business Clients.....       3,229              3,019               (173)               53
Corporates and Markets...........       3,727                 --               (273)               --
Corporate Banking................          --              1,065                 --               208
Dresdner Kleinwort Wasserstein...          --              2,185                 --               238
IRU..............................          --                578                 --              (933)
Other(3).........................        (213)              (104)              (466)             (478)
Total............................       6,743              6,743               (912)             (912)
                                        -----              -----             ------            ------
Amortization of goodwill.........          --                 --               (263)             (263)
Minority Interests...............          --                 --               (104)             (104)
                                        -----              -----             ------            ------
  Total..........................       6,743              6,743             (1,279)           (1,279)
                                        =====              =====             ======            ======


---------------

(1) Reflects the reorganization of the banking divisions and formation of IRU in
    2003.

(2) Consists of net interest and similar income, net fee and commission income
    and net trading income. Operating income is a measure used by management to
    calculate and monitor the activities and operating performance of its
    banking operations. This measure is used by other banks but other banks may
    calculate the operating income on the basis of different components and may,
    thus, not be comparable to the operating income as used herein.

(3) Includes the operations, other than Dresdner Bank, of the remaining banks
    within our banking segment.

                                        99


    BANKING OPERATIONS -- KEY DATA BY DIVISION (2003 REPORTING STRUCTURE)(1)



                                                       YEAR ENDED DECEMBER 31,
                            ------------------------------------------------------------------------------
                                      2003                     2002(2)                    2001(3)
                            ------------------------   ------------------------   ------------------------
                                          EARNINGS                   EARNINGS                   EARNINGS
                                        AFTER TAXES                AFTER TAXES                AFTER TAXES
                                         AND BEFORE                 AND BEFORE                 AND BEFORE
                            OPERATING     GOODWILL     OPERATING     GOODWILL     OPERATING     GOODWILL
                            INCOME(4)   AMORTIZATION   INCOME(4)   AMORTIZATION   INCOME(4)   AMORTIZATION
                            ---------   ------------   ---------   ------------   ---------   ------------
                                                           (E IN MILLIONS)
                                                                            
Private and Business
  Clients.................    3,229          (173)       3,198          (304)       1,480         (160)
Corporates and Markets....    3,727          (273)       3,877        (1,642)       1,821         (797)
Other.....................     (213)         (466)         491           804          552        1,260
                              -----        ------        -----        ------        -----        -----
  Subtotal................    6,743          (912)       7,566        (1,142)       3,853          303
                              -----        ------        -----        ------        -----        -----
Amortization of
  goodwill................       --          (263)          --          (241)          --          (70)
Minority Interests........       --          (104)          --            25           --         (453)
                              -----        ------        -----        ------        -----        -----
  Total...................    6,743        (1,279)       7,566        (1,358)       3,853         (220)
                              =====        ======        =====        ======        =====        =====


---------------

(1) Does not reflect the reorganization of the banking divisions and formation
    of IRU in 2003.

(2) Includes a realized gain of E1,912 million resulting from the transfer in
    August 2002 of substantially all of Dresdner Bank's German asset management
    subsidiaries to ADAM. See "-- Asset Management Operations." The gain on this
    transfer was eliminated at the Allianz Group level. In addition, includes a
    realized gain of E244 million resulting from the merger of Deutsche Hyp into
    Eurohypo in August 2002. See "-- Other -- Description of Business."

(3) Reflects the inclusion of Dresdner Bank in our consolidated financial
    statements as of July 23, 2001.

(4) Consists of net interest and similar income, net fee and commission income
    and net trading income. Operating income is a measure used by management to
    calculate and monitor the activities and operating performance of its
    banking operations. This measure is used by other banks but other banks, may
    calculate operating income on a different basis and accordingly may not be
    comparable to operating income as used herein.

             BANKING OPERATIONS -- KEY DATA BY GEOGRAPHIC REGION(1)


                                                        YEAR ENDED DECEMBER 31,
                             ------------------------------------------------------------------------------
                                           2003                                2002                  2001(2)
                             ---------------------------------   ---------------------------------   ------
                                                    EARNINGS                            EARNINGS
                                                  AFTER TAXES                         AFTER TAXES
                                                   AND BEFORE                          AND BEFORE
                             TOTAL    OPERATING     GOODWILL     TOTAL    OPERATING     GOODWILL     TOTAL
                             INCOME   INCOME(3)   AMORTIZATION   INCOME   INCOME(3)   AMORTIZATION   INCOME
                             ------   ---------   ------------   ------   ---------   ------------   ------
                                                            (E IN MILLIONS)
                                                                                
Germany....................  8,362      3,413         (282)      15,976     4,571         1,858      12,515
Rest of Europe.............  5,697      2,397           26       6,687      1,700          (999)     3,853
NAFTA......................  1,182        385         (351)      2,483        854        (1,527)       984
Rest of World..............    760        548          197       1,164        441          (474)       544
Consolidation
  adjustments(4)...........  (2,171)       --         (502)      (5,035)       --            --      (5,141)
                             ------     -----         ----       ------     -----        ------      ------
  Total....................  13,830     6,743         (912)      21,275     7,566        (1,142)     12,755
                             ======     =====         ====       ======     =====        ======      ======


                             YEAR ENDED DECEMBER 31,
                             ------------------------
                                   2001(2)
                             ------------------------
                                           EARNINGS
                                         AFTER TAXES
                                          AND BEFORE
                             OPERATING     GOODWILL
                             INCOME(3)   AMORTIZATION
                             ---------   ------------
                                 (E IN MILLIONS)
                                   
Germany....................    2,813        1,931
Rest of Europe.............      655         (434)
NAFTA......................      270         (218)
Rest of World..............      116         (106)
Consolidation
  adjustments(4)...........       --         (870)
                               -----        -----
  Total....................    3,853          303
                               =====        =====


---------------

(1) Represents the location of the entity or branch that recorded the
    transaction.

(2) Reflects the inclusion of Dresdner Bank in our consolidated financial
    statements as of July 23, 2001.

(3) Consists of net interest and similar income, net fee and commission income
    and net trading income. Operating income is a measure used by management to
    calculate and monitor the activities and operating performance of its
    banking operations. This measure is used by other banks but other banks may

                                       100


    calculate the operating income on the basis of different components and may,
    thus, not be comparable to the operating income as used herein.

(4) Represents elimination of intercompany transactions between Allianz Group
    companies in different geographic regions.

                          PRIVATE AND BUSINESS CLIENTS

DESCRIPTION OF BUSINESS

     We serve our private, small business and mid-sized corporate customers
through our Private and Business Clients division. During 2003, we integrated
our mid-sized corporate clients from our former Corporates & Markets division,
as well as transferred approximately E1,800 million of non-strategic assets
within our Private and Business Clients division to our newly established
division, IRU. See "-- IRU." In addition, during 2003 we included the operations
of the banks within our banking division that are not part of Dresdner Bank,
that were included in our Private and Business Clients division, to our Other
division. In 2003, our Private and Business Clients division, under the new
reporting structure, accounted for approximately 44.8% of our operating income
from banking operations.

     Our Private and Business Clients business is one of our key strategic
divisions and an important distribution channel for the Allianz Group. We
believe that rising levels of private wealth, increasing emphasis on private
retirement provision and an interest in equity securities and investment funds
are increasing long-term demand not only in Germany, but throughout Europe, for
sophisticated, individualized investment and private retirement provision
advice. Focusing on structured investment and private retirement provision
advice is a core element of our Private and Business Clients strategy. Our
Private and Business Clients operations also continue to grow in importance for
the distribution of investment banking, asset management and insurance products.
As an integrated financial services provider, we offer Allianz insurance
products through our bank branches and Dresdner Bank asset management, financial
planning and other investment products through our insurance agents. We aim to
bundle our banking know-how to provide private individual and small business
corporate clients with similar advisory requirements with an all-around
selection of products and services for their business as well as private
financial needs. In 2003, we provided Private and Business Clients banking
products and services to approximately 5.3 million customers with more than E46
billion of deposits and more than E98 billion of assets held under custody.

     Our Private and Business Clients customer base consists of high net-worth
customers worldwide, individual customers in Germany (including affluent
customers), small business and mid-sized corporate customers.

PRODUCTS AND SERVICES

     We offer a wide range of banking, asset management and insurance products
and services for high net worth, affluent and other private individual
customers. For our high net worth customers, we offer sophisticated,
personalized solutions through Dresdner Private Banking International. Our
services include advisory and discretionary portfolio management, fund-based
portfolio management, administration of trusts and estates and structural asset
analysis, including tax planning. For our affluent customers, we provide
structured financial advice based on a variety of financial planning and
investment tools and products, such as mutual funds, mutual fund portfolio
management, tax-advantaged products and alternative investments. For our other
private individual customers, our banking products and services include
deposit-taking, the transmission of payments, commercial and consumer lending,
mortgage lending and other property-related financing services, credit card
operations, securities brokerage and asset management services and insurance
products. For our small business and mid-sized corporate customers, we provide
comprehensive financial advice for their private and business needs, including
assistance with credit facilities and securities investment, company pension
scheme and insurance products and services. Further, for our mid-sized corporate
customers we provide comprehensive solutions for the preparation of Basel II. We
allocate fees between our banking segment and our asset management and insurance
segments in the case of cross-segment

                                       101


sales and distribution activities, e.g., the sale of proprietary fund products
or insurance policies through our Private and Business Client distribution
channels.

DISTRIBUTION

     In our Private and Business Clients division, we distribute our products
primarily through our branch bank network and our on-site securities advisors.
We also offer our banking products and services through a variety of other
Internet and electronic banking channels, Allianz Group insurance agencies and
call centers.

RESULTS OF OPERATIONS

2004 REPORTING STRUCTURE: YEAR ENDED DECEMBER 31, 2003

     Operating Income.  Operating income in the Private and Business Clients
division was E3,019 million in 2003, relating primarily to net interest and
current income and fee and commission income from successful sales activities in
the domestic and foreign securities business.

     Earnings After Taxes and Before Goodwill Amortization.  Earnings after
taxes and before goodwill amortization in the Private and Business Clients
division was E53 million in 2003. Earnings after taxes and before goodwill
amortization was negatively affected by restructuring charges of E174 million in
connection with Dresdner Bank's 2003 initiative to eliminate positions in the
back-office areas and support functions.

2003 REPORTING STRUCTURE: YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED
DECEMBER 31, 2002

     Operating Income.  Operating income in our Private and Business Clients
division increased slightly to E3,229 million in 2003, as compared to E3,198
million in 2002, reflecting primarily a slight increase in fee and commission
income. The increase in fee and commission income resulted from successful sales
activities in the domestic and foreign securities businesses.

     Earnings After Taxes and Before Goodwill Amortization.  Earnings after
taxes and before goodwill amortization in our former Private and Business
Clients division was a loss of E173 million in 2003, an improvement of E131
million, or 43.1%, from a loss of E304 million in 2002, primarily as a result of
significant reduction in administrative expenses due to systematic cost
management. Loan loss provisions were also reduced over the prior year due to
implementation of improved loan review tools and processes and the restructuring
of the loan portfolio. Earnings after taxes and before goodwill amortization was
negatively affected by restructuring charges of E270 million in connection with
Dresdner Bank's 2003 initiative to eliminate positions in the back-office areas
and support functions.

YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

     Operating Income.  Operating income in our Private and Business Clients
division was E3,198 million in 2002, reflecting primarily flat net interest and
current income and fee and commission income, despite the weakness in the
capital markets, due primarily to the successful introduction of new products.

     Earnings After Taxes and Before Goodwill Amortization.  Earnings after
taxes and before goodwill amortization in our Private and Business Clients
division amounted to a loss of E304 million in 2002, primarily as a result of
flat income, in combination with a high level of loan loss provisions relating
to German borrowers, offset in part by reduced administrative expenses. The
increase in loan loss provisions was attributable in part to the inclusion in
2002 in our Private and Business Clients division of small business customers,
whose credit quality continued to deteriorate during the year.

                              CORPORATES & MARKETS

DESCRIPTION OF BUSINESS

     In 2002, we served our corporate and capital markets customers through our
former Corporates & Markets division, into which we combined our former
investment banking and corporate clients business

                                       102


divisions in 2001. Through this combination, we aimed to take advantage of our
access to corporate Europe, our strong credit rating, our extensive capital
markets experience around the world and our strong position in Germany and the
United Kingdom.

     In 2003, we integrated our mid-sized corporate clients into our Private and
Business Clients division, split our former Corporates & Market division into
two newly established divisions, Corporate Banking and Dresdner Kleinwort
Wasserstein, as well as transferred approximately E33,700 million of
non-strategic assets within our former Corporates & Markets division to our
newly established division, IRU. See "-- IRU." In addition, for reporting and
presentation purposes, we transferred the operations of the banks within our
banking division that are not part of Dresdner Bank, that were included in our
former Corporates & Markets division, to the Other division. The following
discussion is according to the former reporting structure and does not reflect
the reorganization or reclassification mentioned above.

     Our former Corporates & Markets division was focused on raising capital for
corporate and institutional customers in our core markets of Germany, the United
Kingdom and other countries in Western Europe and the United States. We offered
a wide range of investment banking, commercial banking and other capital markets
products and services to our Corporates & Markets customers. Our customer base
consisted of approximately 20,000 client groups, most of which were domiciled in
Germany.

PRODUCTS AND SERVICES

     Our former Corporates & Markets division offered corporate finance advisory
services on mergers and acquisitions, divestitures, restructurings and other
strategic matters, securities underwriting and market making, securities and
derivatives trading, portfolio management, custodial services, and other capital
markets products and services. We also provided corporate loans, took deposits,
and provided our corporate customers with payment, management consulting, real
estate and other corporate banking services.

DISTRIBUTION

     In our former Corporates & Markets division, we relied on relationship
managers and sales teams working together with product specialists to develop
in-depth corporate finance expertise in both investment banking and commercial
banking to meet the capital markets needs of our clients. The goal of this
division was to offer a full range of capital markets products and services to
our Corporates & Markets clients worldwide. Our customers were offered a choice
of three complementary distribution channels: standard "face-to-face" support by
professional advisory staff, the Internet, and our service centers.

RESULTS OF OPERATIONS

2003 REPORTING STRUCTURE: YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED
DECEMBER 31, 2002

     Operating Income.  Operating income in our Corporates & Market division was
E3,727 million in 2003, a decrease of E150 million, or 3.9%, from income of
E3,877 million in 2002.

     Earnings After Taxes and Before Goodwill Amortization.  Earnings after
taxes and before goodwill amortization in our former Corporates & Market
division improved significantly by E1,369 million to a loss of E273 million in
2003, from a loss of E1,642 million in 2002, primarily as a result of reduced
loan loss provisions and reduced administrative expenses related to cost-cutting
and restructuring measures.

YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

     Operating Income.  Operating income in our former Corporates & Markets
division was E3,877 million in 2002, reflecting mainly decreased net interest
earned and decreased fee and commission income, particularly in our mergers and
acquisitions and other advisory business. Trading income from interest products
was flat, reflecting a shift into interest products as a result of the poor
performance of many equity indices.

                                       103


     Earnings After Taxes and Before Goodwill Amortization.  Earnings after
taxes and before goodwill amortization in our former Corporates & Markets
division was a loss of E1,642 million in 2002. Earnings after taxes and before
goodwill amortization for our former Corporates & Markets business declined
primarily as a result of decreased net interest earned and fee and commission
income, in conjunction with significant increases in net loan loss provisions
and impairments recorded on private equity investments as a result of
deteriorating economic conditions. Although we were able to reduce
administrative expenses significantly as a result of cost-cutting and
restructuring measures, the reduction in costs was not sufficient to offset the
decline in income.

                               CORPORATE BANKING

DESCRIPTION OF BUSINESS

     We serve our large enterprises, groups and multinational customers through
our Corporate Banking division. Effective January 1, 2003, we split our former
Corporates & Markets division into Corporate Banking, to primarily serve our
domestic corporate customers, and Dresdner Kleinwort Wasserstein, to primarily
serve our international corporate customers and to provide investment banking
services. However, our customers still benefit from the entire range of our
corporate and investment banking products and services provided through the
client relationship managers. In 2003, our Corporate Banking division accounted
for approximately 15.8% of our operating income from banking operations.

     The core market for our Corporate Banking division is Germany. We also
assist our customers in Germany with their crossborder activities. We offer a
wide range of commercial banking, structured finance and other corporate finance
products and services to our Corporate Banking customers. We intend to increase
the profitability of the Corporate Banking division by strengthening corporate
finance, through the expansion of the Structured Finance Unit. Within this unit
we will focus on structured, mezzanine and lease financing transactions for
customers. Our customer base consists of approximately 9,000 client groups, most
of which are domiciled in Germany.

PRODUCTS AND SERVICES

     Our Corporate Banking division offers corporate loans, structured mezzanine
and lease financing, structured export financing, treasury and securities
products, insurance products, real estate investment solutions, and provides
corporate customers with payment services, global documentary services, asset
management solutions and advice on occupational pension plans.

DISTRIBUTION

     In our Corporate Banking division, we assign each client group a client
relationship manager (CRM). The CRM manages and coordinates the Corporate
Banking division's comprehensive expertise. All clients have access to the
entire product range of the Allianz Group via their CRMs and client action
teams, which are composed of product specialists tailored to each customer
individually. In addition, customer service units are set up to operate as
service providers and as direct contact partners for the client in accounting
and account maintenance matters.

RESULTS OF OPERATIONS

2004 REPORTING STRUCTURE: YEAR ENDED DECEMBER 31, 2003

     Operating Income.  Operating income in our Corporate Banking division was
E1,065 million in 2003, reflecting mainly net interest earned from lending
activities and fee and commission income from our securities, treasury and
transaction services.

     Earnings After Taxes and Before Goodwill Amortization.  Earnings after
taxes and before goodwill amortization in our Corporate Banking division was
E208 million in 2003, reflecting operating income, offset by loans loss
provisions, administrative expenses and restructuring charges of E90 million.

                                       104


                         DRESDNER KLEINWORT WASSERSTEIN

DESCRIPTION

     We serve our international corporate customers and provide investment
banking services through our Dresdner Kleinwort Wasserstein division. Effective
January 1, 2003, we split our former Corporates and Markets division into
Corporate Banking and Dresdner Kleinwort Wasserstein. Through our new Dresdner
Kleinwort Wasserstein division, we aim to take advantage of our access to
corporate Europe, our extensive capital markets experience around the world and
our strong positions in Germany and the United Kingdom. In 2003, our Dresdner
Kleinwort Wasserstein division accounted for approximately 32.4% of our
operating income from banking operations.

     Our Dresdner Kleinwort Wasserstein division is focused on raising capital
for corporate and financial institution customers in our core markets of
Germany, the United Kingdom, the United States and other countries in Western
Europe. We offer a wide range of investment banking, corporate finance and
advisory and other capital markets products and services to our Dresdner
Kleinwort Wasserstein customers.

PRODUCTS AND SERVICES

     Our Dresdner Kleinwort Wasserstein division offers corporate finance
advisory services on mergers and acquisitions, divestitures, restructurings and
other strategic matters, securities underwriting and market making,
securitization products and services, securities and derivatives trading,
portfolio management, and other capital markets products and services. Capital
markets combines Dresdner Kleinwort Wasserstein's equity, fixed-income and
foreign currency derivatives capabilities, offering our customers a full range
of structuring and over the counter solutions.

DISTRIBUTION

     In our Dresdner Kleinwort Wasserstein division, we rely on relationship
managers and sales teams working together with product specialists to develop
in-depth capital markets expertise in investment banking to meet the capital
markets needs of our clients. Our goal is to offer a full range of capital
markets products and services to our Dresdner Kleinwort Wasserstein clients
worldwide.

RESULTS OF OPERATIONS

2004 REPORTING STRUCTURE: YEAR ENDED DECEMBER 31, 2003

     Operating Income.  Operating income in our Dresdner Kleinwort Wasserstein
division was E2,185 million in 2003. This amount was comprised primarily of
trading income attributable to the turnaround in our equities and client
business in the area of capital markets and credit derivatives.

     Earnings After Taxes and Before Goodwill Amortization.  Earnings after
taxes and before goodwill amortization in our Dresdner Kleinwort Wasserstein
division was E238 million in 2003, reflecting operating income offset by
administrative expenses of E1,876 million.

                                      IRU

DESCRIPTION OF BUSINESS

     In September 2002 we announced the establishment of the IRU division,
effective January 1, 2003, with the aim to free up risk capital through the
reduction of risk-weighted assets. The initial plan to achieve this aim was to
restructure non-performing loans to strategic customers and to return them to
the originating business units, and to maximize the recovery from the remaining
non-performing loans, non-strategic customer loans and private equity
investments, through repayment, sale, hedging, securitization and other means.
During the course of 2003 management decided to maintain the restructuring of
non-performing loans to strategic customers at the originating business units.
The IRU division now includes the non-strategic business, including private
equity investments, from our Private and Business Clients division (E1,800
million)

                                       105


and our former Corporates & Markets division (E33,700 million). Individual
restructurings of operative units of the Bank are also part of its business. In
2003, our IRU division accounted for approximately 8.6% of our operating income
from banking operations.

     As of January 1, 2003, the IRU included approximately E35.5 billion of
assets and undrawn commitments, consisting of approximately E34.1 billion of
loans as well as approximately E1.4 billion of other non-strategic assets,
including private equity investments. Of the E34.1 billion of loans E24.6
billion were fully drawn, and include approximately E6.9 billion of
non-performing loans, approximately E1.1 billion of potential problem loans.
Approximately E9.5 billion of undrawn commitments existed in the IRU at the
beginning of the year. The total exposure in the IRU was reduced by E17.1
billion throughout the year. Approximately E14.5 billion of the reduction
related to performing loans, E1.8 billion to non-performing loans, E0.5 billion
to potential problem loans and E0.3 billion to other investments. During 2003,
some of the IRU's the most significant transactions within international capital
markets included:

     - E511 million in May for the disposal of loan portfolios consisting
       primarily of loans to borrowers in the United States and Europe;

     - E123 million in September relating to the loan and equity portfolio in
       Asia Pacific; and

     - E1.9 billion during November and December for the reduction of loan
       exposure in the North American portfolio.

     At December 31, 2003, the IRU included approximately E18.4 billion of
assets and undrawn commitments, consisting of approximately E17.3 billion of
loans and approximately E1.1 billion of other non-strategic assets, including
private equity investments. Of the E17.3 billion of loans E13.8 billion were
fully drawn, and included approximately E5.1 billion of non-performing loans and
approximately E0.6 billion of potential problem loans. Approximately E3.5
billion of undrawn commitments remained at December 31, 2003. As a result of the
significant dispositions throughout 2003, our risk-weighted assets were reduced
by E9.7 billion, at the end of 2003, as compared to E19.9 billion in at January
1, 2003.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2003

     Operating Income.  Operating income in our IRU division was E578 million in
2003, reflecting primarily net interest and current income on the IRU portfolio.

     Earnings After Taxes and Before Goodwill Amortization.  Earnings after
taxes and before goodwill amortization in our IRU division was a loss of E933
million in 2003, reflecting primarily operating income offset by loan loss
provisions of E884 million, restructuring charges of E145 million and
administrative expenses of E421 million.

                                     OTHER

DESCRIPTION OF BUSINESS

     Our banking segment's Other division contains income and expense items that
are not directly assigned to our operating divisions. Income and expense items
that are not directly assigned to our operating divisions include, in
particular, expenses for banking segment functions and projects affecting more
than one division, realized gains and losses from our strategic investment
portfolio and provisioning requirements for country and general risks. In
addition, other items contain charges for the restructuring measures that have
been introduced. See "-- Banking Operations -- Cost-Cutting and Restructuring
Measures."

     In 2003, we reclassified the banking operations, other than the Dresdner
Bank, that were previously included within our Private and Business Clients
division and our former Corporates & Markets division to our Other division. The
following discussion is according to the new reporting structure and reflects
the reorganization and reclassification mentioned above.

                                       106


     In our Other division during 2003, we disposed of our institutional custody
business, with the transfer of such business occurring in the first quarter of
2004. In addition we are currently discussing with a third party to outsource
our domestic retail securities processing (including custody) and payment
processing activities, and expect to complete such transaction in the second
half of 2004.

     Until August 2002, we served our real estate customers through our real
estate business line, which comprised primarily the business operations of our
mortgage bank Deutsche Hyp and our German real estate fund management
subsidiary, Deutsche Gesellschaft fur Immobilienfonds GmbH (or DEGI). On August
1, 2002, we merged Deutsche Hyp with Rheinische Hypothekenbank AG, the mortgage
banking subsidiary of Commerzbank, and Eurohypo, the mortgage banking subsidiary
of Deutsche Bank, into a single entity, which retained the name Eurohypo. We
deconsolidated Deutsche Hyp and dissolved our real estate business line on
August 1, 2002. We held an ownership interest of 28.5% in Eurohypo as of
December 31, 2003. Our German real estate fund management subsidiary DEGI
remained in our banking segment's Other division.

RESULTS OF OPERATIONS

2004 REPORTING STRUCTURE: YEAR ENDED DECEMBER 31, 2003

     Operating Income.  Operating income in our Other division was a loss of
E104 million in 2003, reflecting primarily net interest expense on our
investment portfolio and the aggregate negative effects from the application of
IAS 39.

     Earnings After Taxes and Before Goodwill Amortization.  Earnings after
taxes and before goodwill amortization in our Other division was a loss of E478
million in 2003, primarily as a result of restructuring charges and other
expenses, including impairment losses on information technology systems and real
estate.

2003 REPORTING STRUCTURE: YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED
DECEMBER 31, 2002

     Operating Income.  Operating income in our Other division was a loss of
E213 million in 2003, a decrease of E704 million, or 143.4%, from an income of
E491 million in 2002, reflecting primarily net interest expense on our
investment portfolio, the aggregate negative effect from the application of IAS
39 and negative consolidation effects.

     Earnings After Taxes and Before Goodwill Amortization.  Earnings after
taxes and before goodwill amortization in our Other division was a loss of E466
million in 2003, a decrease of E1,270 million, or 158.0%, from E804 million in
2002, primarily as a result of an increase in restructuring charges and other
expenses recorded in 2003, including, impairment losses on information
technology systems and real estate, and a decrease in realized gains recognized
in 2003.

     YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

     Operating Income.  Operating income in our Other division was E491 million
in 2002, reflecting primarily net interest income from the real estate business
operations of our former mortgage bank, Deutsche Hyp.

     Earnings After Taxes and Before Goodwill Amortization.  Earnings after
taxes and before goodwill amortization in our Other division was E804 million in
2002. Earnings after taxes and before goodwill amortization was positively
affected by realized gains of E1,912 million on the transfer in August 2002 of
substantially all of Dresdner Bank's German asset management subsidiaries to
ADAM, E1,265 million on intercompany transfers of equity securities and E244
million on the merger in August 2002 of Deutsche Hyp into Eurohypo, offset in
part primarily by realized losses on investment securities (E1,096 million),
impairments recorded on investment securities (E1,129 million) and the negative
effect on income attributable to the deconsolidation in August 2002 of Deutsche
Hyp.

                                       107


                          ASSET MANAGEMENT OPERATIONS

ASSET MANAGEMENT OPERATIONS

     Our asset management segment operates as a global provider of institutional
and retail asset management products and services to third-party investors and
provides investment management services to our insurance operations. We managed
approximately E996 billion of third-party assets, Group's own investments and
separate account assets on a worldwide basis as of December 31, 2003, with key
management centers in Munich, Frankfurt, London, Paris, Singapore, Hong Kong,
Milan, Westport, Connecticut, and San Francisco, San Diego and Newport Beach,
California. The acquisitions of Dresdner Bank on July 23, 2001 and
Nicholas-Applegate on January 31, 2001 increased our third-party assets under
management by E228 billion and E36 billion, respectively, as of the respective
dates of the acquisitions. Our third-party assets under management were
approximately E565 billion as of December 31, 2003. As measured by total assets
under management at December 31, 2003, we were among the five largest asset
managers in the world.

     The following table sets forth certain key data concerning our asset
management operations at December 31 for the years indicated:

                       ASSETS UNDER MANAGEMENT: KEY DATA



                                                              DECEMBER 31,
                                          -----------------------------------------------------
                                               2003              2002              2001(1)
                                          ---------------   ---------------   -----------------
                                             E        %        E        %         E         %
                                          -------   -----   -------   -----   ---------   -----
                                                             (E IN MILLIONS)
                                                                        
Third-party assets(2)...................  564,714    56.7   560,588    56.7     620,458    55.1
Group's own investments(3)..............  398,818    40.0   403,061    40.7     480,876    42.7
Separate account assets(2)(4)...........   32,460     3.3    25,657     2.6      24,692     2.2
                                          -------   -----   -------   -----   ---------   -----
  Total.................................  995,992   100.0   989,306   100.0   1,126,026   100.0
                                          =======   =====   =======   =====   =========   =====


---------------

(1) Reflects the inclusion of Dresdner Bank in our consolidated financial
    statements as of July 23, 2001.

(2) Assets are presented at fair value.

(3) Includes adjustments to reflect real estate and investments in affiliated
    enterprises, joint ventures and associated enterprises at fair value. These
    adjustments were made in order to reflect the definition of Group's own
    investments used by management for its controlling purposes. For further
    information on fair value see Notes 6 and 7 to our consolidated financial
    statements.

(4) Represents investments held on account and at risk of life insurance
    policyholders.

     Our asset management operations pursue two separate but related objectives.
In our third-party asset management business, we seek to leverage the power of
our portfolio management expertise, existing customer relationships and
distribution to maintain and further develop our position as a leading global
asset manager. In the management of the Allianz Group's own investments, we seek
to maximize long-term total return on our investments for the benefit of our
shareholders and policyholders, including the value of our portfolio of
financial and industrial equity participations, while remaining within the
Allianz Group's risk management guidelines.

     We manage our third-party asset management business primarily through ADAM,
our wholly owned asset management subsidiary. We reorganized our former
financial services segment in 2001 under ADAM in order to integrate the asset
management operations of Dresdner Bank, to achieve new economies of scale and to
extend the reach of our distribution networks for asset management products and
services. We consolidated the assets and liabilities and results of operations
of Dresdner Bank's asset management business into our asset management segment
as of July 23, 2001, the date of the acquisition. In 2002, we transferred
substantially all of Dresdner Bank's German asset management subsidiaries to
ADAM. The banking operations formerly included in our financial services segment
are now a part of our banking segment. See "-- Banking Operations." As of
December 31, 2003, ADAM managed approximately E523 billion, or 93%,

                                       108


of our third-party assets under management and approximately E210 billion, or
53%, of our Group's own investments. The remainder of our third-party assets are
managed by Dresdner Bank (approximately E20 billion, or 4%) and other Allianz
Group companies. The majority of our Group's own investments (approximately E189
billion, or 47%) continue to be managed by the respective investment management
units of Allianz Group insurance companies around the world.

     We conduct our third party asset management business primarily through our
operating companies worldwide under the umbrella brand ADAM. As part of our
multi-regional strategy, however, we operate under multiple brand names in
different regions. In the United States, our main operating companies include
PIMCO, Nicholas-Applegate, RCM Capital Management (formerly Dresdner RCM Global
Investors), and Oppenheimer Capital. In Europe, we operate primarily through AGF
Asset Management, RAS Asset Management, Deutscher Investment Trust (or dit) and
Dresdner Bank Investment Management (or dbi), as well as RCM Capital Management
and PIMCO. In Asia, our main brands are Allianz Dresdner Asset Management, PIMCO
and Meiji Dresdner Asset Management.

     In 2002, together with Guotai Junan Securities (or GTJA), we established
Guotai Junan Allianz Fund Management, a Shanghai-based joint venture that was
the first joint venture fund management company and the first licensed fund
manager with foreign participation in China. Through the combination of GTJA's
distribution network and our international asset management expertise, we
believe our joint venture is well positioned to make successful inroads into
this growth market.

RESULTS OF OPERATIONS

     The following table sets forth certain summarized financial information for
our asset management operations for the years indicated:



                                                               YEAR ENDED DECEMBER 31,
                                                              -------------------------
                                                               2003     2002    2001(1)
                                                              ------   ------   -------
                                                                   (E IN MILLIONS)
                                                                       
Interest and similar income.................................      60      119      129
Income from affiliated enterprises, joint ventures and
  associated enterprises....................................      10      (12)      (3)
Other income from investments...............................      16       35       44
Trading income..............................................      30       (1)      10
Fee and commission income, and income from service
  activities................................................   2,892    2,918    2,479
Other income................................................      51      126       79
                                                              ------   ------   ------
  Total income..............................................   3,059    3,185    2,738
                                                              ------   ------   ------
Interest and similar expenses...............................     (29)     (89)     (82)
Other expenses for investments..............................      (6)     (22)     (57)
Net loan loss provision.....................................      --       (2)      --
Acquisition costs and administrative expenses...............  (2,300)  (2,473)  (1,954)
Amortization of goodwill....................................    (369)    (377)    (243)
Other expenses..............................................    (458)    (551)    (795)
                                                              ------   ------   ------
Total expenses..............................................  (3,162)  (3,514)  (3,131)
                                                              ------   ------   ------
Earnings from ordinary activities before taxation...........    (103)    (329)    (393)
Taxes.......................................................      16       92      189
Minority interests in earnings..............................    (183)    (230)    (182)
                                                              ------   ------   ------
  Net income................................................    (270)    (467)    (386)
                                                              ======   ======   ======


---------------

(1) Reflects the inclusion of Dresdner Bank in our consolidated financial
    statements as of July 23, 2001.

                                       109


  Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

     Assets Under Management.  Third-party assets under management, Group's own
investments and investments held on account and at risk of life insurance
policyholders increased by E7 billion, or 0.7%, to E996 billion at the end of
2003 from E989 billion at the end of 2002. Third-party assets under management
increased by E4 billion, or 0.7%, to E565 billion at the end of 2003 from E561
billion at the end of 2002. The increase was due to significant net capital
inflows of approximately E25 billion, primarily into fixed income funds, and
capital market gains of approximately E47 billion, offset in part by exchange
rate movements of approximately E68 billion, particularly a decline in the U.S.
dollar. Allianz Group's own investments decreased by E4 billion, or 1.0%, to
E399 billion at the end of 2003 from E403 billion at the end of 2002.

     Net Income.  Asset management net income increased by E197 million, to a
net loss of E270 million in 2003 from a net loss of E467 million in 2002, due
primarily to decreases in other expenses and acquisition costs and
administrative expenses, which more than offset the decrease in fee and
commission income, and income from service activities in 2003. Total income,
which consists primarily of fee and commission income, and income from service
activities, decreased by E126 million, or 4.0%, to E3,059 million in 2003 from
E3,185 million in 2002, reflecting primarily the negative effects of movements
in exchange rates, offset in part by increased fee and commission income from
higher average assets under management. Total expenses decreased by E352
million, or 10.0%, to E3,162 million in 2003 from E3,514 million in 2002, due
primarily to restructuring measures implemented in 2003 and 2002 at virtually
all of our equity investment operations to increase operational efficiency by
reducing personnel and streamlining back-office operations and product lines.
Total expenses included acquisition-related expenses of E836 million recorded in
2003. The acquisition-related expenses consisted mainly of amortization of
goodwill of E369 million associated with the acquisitions of Dresdner Bank,
PIMCO and Nicholas-Applegate and amortization charges of E137 million relating
to capitalized retention payments to key executives of the PIMCO Group, which
are being amortized over periods of five to seven years from the date of the
acquisition. Another E330 million were primarily retention and compensation
payments for the management and employees of PIMCO and Nicholas-Applegate. In
addition, minority interest amounted to E183 million, of which E66 million
relates to PIMCO's former parent company, which continues to hold a minority
ownership interest in PIMCO. Excluding the effects of the acquisition-related
expenses of E836 million, earnings from ordinary activities before taxation from
our asset management operations would have been E733 million in 2003. Pursuant
to the restructuring of our ownership interest in PIMCO, beginning with the
quarter ended March 31, 2003, neither we nor PIMCO's former parent company could
put or call the entire ownership interest of PIMCO's former parent company in
PIMCO with effect prior to October 2004, although either party could put or call
up to $250 million of such ownership interest in any calendar quarter. In 2003,
the former parent company of PIMCO exercised its right to put a total of $1
billion of such ownership interest to Allianz, approximately $250 million in
each quarter of 2003. Payment for the put of such interests during the first
three quarters of 2003, which totaled $750 million, had been made as of December
31, 2003. The put for such interests during the fourth quarter of 2003, which
amounted to $250 million, had been made as of January 12, 2004. In addition, on
March 31, 2004, a subsidiary of Allianz AG exercised its right to call $250
million of the remaining ownership interest that is held by the former parent
company of PIMCO, with payment therefor made in April 2004. For additional
information, see Note 46 to our consolidated financial statements.

YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

     Assets Under Management.  Third-party assets under management, Group's own
investments and investments held on account and at risk of life insurance
policyholders decreased by E137 billion, or 12.2%, to E989 billion at the end of
2002 from E1,126 billion at the end of 2001. The decrease was due primarily to
exchange rate movements (E77 billion with respect to third-party assets),
particularly a decline in the U.S. dollar, and substantial price declines in the
capital markets (E25 billion with respect to third-party assets), offset in part
by significant net capital inflows of approximately E56 billion into fixed-
income funds. Of the decrease, E78 billion represented a decrease in Group's own
investments, while E59 billion represented a decrease in third-party assets
under management. Excluding the effects of exchange rate movements, our

                                       110


third-party assets under management would have increased by E18 billion, or
2.9%, to E638 billion at the end of 2002 due primarily to net inflows of E43
billion, primarily into fixed-income funds.

     Net Income.  Asset management net income decreased by E81 million, to a net
loss of E467 million in 2002 from a net loss of E386 million in 2001, due
primarily to increased amortization of goodwill reflecting the acquisition and
full-year consolidation in 2002 of Dresdner Bank, as well as minority interest
in earnings related to the PIMCO Group. Total income, which consists primarily
of fee and commission income, and income from service activities, increased by
E447 million, or 16.3%, to E3,185 million in 2002 from E2,738 million in 2001,
reflecting primarily the full-year consolidation in 2002 of Dresdner Bank's
former asset management operations, offset in part by the lower average assets
under management due to the effects of exchange rate movements and price
declines in the capital markets. Total expenses increased by E383 million or
12.2%, to E3,514 million in 2002 from E3,131 million in 2001, due primarily to
the full-year consolidation in 2002 of Dresdner Bank's former asset management
operations, offset in part by restructuring measures implemented in the course
of 2002 at virtually all of our equity investment operations to increase
operational efficiency by reducing personnel and streamlining back-office
operations and product lines. Total expenses included acquisition-related
expenses of E824 million recorded in 2002. The acquisition-related expenses
primarily consisted of amortization of goodwill of E377 million associated with
the acquisitions of Dresdner Bank, PIMCO and Nicholas-Applegate and amortization
charges of E155 million relating to capitalized retention payments to key
executives of the PIMCO Group, which are being amortized over periods of five to
seven years from the date of the acquisition. Another E292 million were
retention and compensation payments for the management and employees of PIMCO
and Nicholas-Applegate. In addition, minority interest of E230 million in our
asset management operations was accounted for mainly by the minority interest in
PIMCO (E162 million) of PIMCO's former parent company, which continues to hold a
minority ownership interest in PIMCO. Our ownership interest in PIMCO was
recently restructured. For additional information, see Note 46 to our
consolidated financial statements. Excluding the effects of the
acquisition-related expenses of E824 million, earnings from ordinary activities
before taxation from our asset management operations would have been E495
million in 2002.

                               THIRD-PARTY ASSETS

     The following table sets forth certain key data concerning our third-party
assets under management at December 31 for the years indicated:

        ASSET MANAGEMENT OPERATIONS -- KEY DATA BY GEOGRAPHIC REGION(1)



                                                           DECEMBER 31,
                                              ---------------------------------------
                                                 2003          2002          2001
                                              -----------   -----------   -----------
                                               E      %      E      %      E      %
                                              ---   -----   ---   -----   ---   -----
                                                  (E IN BILLIONS, EXCEPT % DATA)
                                                              
ADAM
  Germany...................................   84    14.9%   80    14.3%   96    15.5%
  Rest of Europe............................   39     6.9%   37     6.6%   53     8.5%
  NAFTA.....................................  392    69.4%  388    69.1%  409    66.0%
  Rest of World.............................    8     1.4%    8     1.4%   26     4.2%
     Subtotal...............................  523    92.6%  513    91.4%  584    94.2%
Other(2)....................................   42     7.4%   48     8.6%   36     5.8%
                                              ---   -----   ---   -----   ---   -----
     Total..................................  565   100.0%  561   100.0%  620   100.0%
                                              ===   =====   ===   =====   ===   =====


---------------

(1) Represents location of Allianz Group asset management operations.

(2) Consists of assets managed by Dresdner Bank (E20 billion, E24 billion and
    E27 billion in 2003, 2002 and 2001, respectively) and other Allianz Group
    companies (E22 billion, E24 billion and E9 billion in 2003, 2002 and 2001,
    respectively). The increase from 2001 to 2002 reflects a reclassification of
    certain companies from ADAM in 2001 to other Allianz Group companies in
    2002.

                                       111


     We have significantly grown our third-party assets under management in
recent years, both through acquisitions such as Dresdner Bank and
Nicholas-Applegate in 2001 and PIMCO in 2000, and through organic growth. We
intend to leverage the PIMCO, dit, Nicholas-Applegate and RCM Capital Management
franchises in further developing our third-party asset management business
through our flagship subsidiaries on a global basis. We believe that the
European markets offer especially attractive opportunities for third-party fund
managers. We also expect that investment fund products, in particular retirement
planning vehicles, will increase in importance in Europe. We expect this trend
to be supported by the increased demographic pressure that state-run pension
systems will face and the rising prevalence of defined contribution
arrangements. We believe that we are well positioned in third-party markets,
especially in Germany, France and Italy, and we are seeking to increase our
market share in these markets.

     We are also developing our insurance and banking distribution capabilities,
including our dedicated advisory, branch bank and insurance networks in Europe,
as asset accumulation arms to further our asset management capabilities. Leading
examples of our activities in this area include our operations through Dresdner
Bank, where we have approximately 7,000 financial advisors in branch offices to
distribute our asset management, life insurance and other financial products;
our operations at RAS Group in Italy, with its independent network of licensed
financial advisors who distribute life insurance and financial products; and our
operations at the AGF Group in France, with its network of advisors offering
comprehensive financial planning services. See also "-- Banking Operations."

     As a result of the reorganization of our asset management operations under
ADAM, we believe we are well positioned to deliver quality products and services
in all major asset classes for both retail and institutional clients. We aim to
provide our clients with first-class products on a global basis by fully
utilizing our distribution channels and leveraging the asset management
expertise of our specialized asset managers around the world.

     We serve a comprehensive range of retail and institutional asset management
clients, including corporate and public pension funds, insurance and other
financial services companies, governments and charities, financial advisors and
private individuals. Our third-party asset management includes primarily equity,
fixed income, money market and sector products, as well as alternative
investments.

     The following tables show our third-party assets under management by
investment category and by investor class at December 31 for the years
indicated:



                                                           DECEMBER 31,
                                              ---------------------------------------
                                                 2003          2002          2001
                                              -----------   -----------   -----------
                                               E      %      E      %      E      %
                                              ---   -----   ---   -----   ---   -----
                                                  (E IN BILLIONS, EXCEPT % DATA)
                                                              
Fixed income................................  409    72.4   405    72.2   377    60.8
Equity......................................  146    25.8   141    25.1   218    35.2
Other(1)....................................   10     1.8    15     2.7    25     4.0
                                              ---   -----   ---   -----   ---   -----
  Total.....................................  565   100.0   561   100.0   620   100.0
                                              ===   =====   ===   =====   ===   =====


---------------

(1) Includes primarily investments in real estate.



                                                           DECEMBER 31,
                                              ---------------------------------------
                                                 2003          2002          2001
                                              -----------   -----------   -----------
                                               E      %      E      %      E      %
                                              ---   -----   ---   -----   ---   -----
                                                  (E IN BILLIONS, EXCEPT % DATA)
                                                              
Institutional...............................  336    59.5   403    71.8   466    75.2
Retail......................................  229    40.5   158    28.2   154    24.8
                                              ---   -----   ---   -----   ---   -----
  Total.....................................  565   100.0   561   100.0   620   100.0
                                              ===   =====   ===   =====   ===   =====


                                       112


     Our third-party asset management subsidiary ADAM is organized globally into
two principal business lines: global equity and global fixed income. Both asset
management business lines are led by a global head. Together with ADAM's chief
executive officer and chief operating officer, who sets standards and
coordinates corporate controlling and administration, each of the global heads
is also a member of ADAM's executive committee, which is responsible for ADAM's
strategic development and financial performance. In addition, country
organizations led by country managers provide shared infrastructure and
services. ADAM's management structure has been designed to manage the complexity
of its multi-regional, multi-product and multi-channel business activities.
Within this structure, ADAM maintains significant incentives for
entrepreneurship and encourages its business units to operate autonomously.

PORTFOLIO MANAGEMENT

     ADAM has globally consistent, well-structured and transparent investment
processes that are based on fundamental primary research. ADAM's goal is to
provide its clients with portfolios that consistently offer superior performance
in accordance with its clients' investment objectives. ADAM aims for
outperformance through active portfolio management coupled with comprehensive
risk management at all levels of the investment process. At December 31, 2003,
we had more than 580 portfolio managers and approximately 200 analysts in major
markets worldwide providing a comprehensive range of actively managed
fixed-income and equity products and services.

     Global Fixed Income.  ADAM's fixed-income portfolio investment process is
led by PIMCO, one of the world's major fixed-income investment managers. Our
fixed-income product range includes total return, short and long duration,
regional, country-specific, global and other geographic products, sector
products including government and corporate bonds and specialty funds such as
high yield and emerging markets. We deliver our fixed-income products in a broad
range of investment vehicles, including separate accounts, fixed-income mutual
funds and investment trusts.

     Global Equity.  Our equity portfolio investment products include all major
investment styles: value investment, growth investment and core investment. Our
equity product range comprises regional, country-specific, global and other
geographic products, sector products such as technology, biotechnology, capital
equipment, consumer goods, energy and materials, and finance, as well as large,
medium and small market capitalization funds. We deliver our equity products in
a broad range of investment vehicles.

DISTRIBUTION

     In Europe, ADAM markets and services institutional products offered by its
asset management subsidiaries through specialized personnel located primarily in
its Frankfurt, London, Munich, Paris and Milan offices. European retail
distribution is provided primarily through the proprietary channels of the
Allianz Group, including branch bank advisors, full-time agents employed by
affiliated insurance companies and other Allianz Group financial planners and
advisors.

     In Germany, ADAM and its predecessors have offered mutual funds since 1949.
The funds are distributed primarily through our branch bank network and our
full-time insurance agents. To strengthen these channels, ADAM provides asset
management specialists and support services, including call centers and client
services.

     In France, AGF Asset Management markets a wide range of retail products to
individual investors through its own in-house network of financial advisors,
including full-time agents employed by AGF Group, brokers and specialist
networks.

     In Italy, RAS Asset Management offers mutual funds that are marketed
through affiliated financial planners, financial advisors, banks and via the
Internet.

     In the United Kingdom and the United States, each of our ADAM asset
managers markets and services its institutional products through its own
specialized personnel. The institutional markets in the United Kingdom and the
United States are dominated by consultants, who advise their clients with regard
to investment strategy and asset allocation, conduct due diligence on and rank
portfolio managers, and conduct
                                       113


searches. As a result, ADAM portfolio managers in these areas put emphasis on
servicing consultants. In addition, in the United States, ADAM asset managers
offer a wide range of retail products. The principal proprietary channel is
PIMCO Funds, which distributes mutual funds managed by its affiliates through
broker-dealers, financial planners, 401(k) funds and other intermediaries. We
also provide "wrap" services through broker-dealers, by managing all or a part
of separate accounts maintained by broker-dealers for their customers. In the
United States, ADAM also advises mutual funds sponsored by third parties,
including other mutual fund families and insurance companies offering variable
annuity products.

     ADAM has committed substantial resources to the build-out of a third-party
asset management business in Asia-Pacific. We have offices in Tokyo, Hong Kong,
Singapore, Taipei, Seoul and Sydney, which are being enlarged to accommodate
equity and fixed-income portfolio management as well as institutional and retail
distribution. In 2002, we rebranded our fund management operations across
Asia-Pacific under the umbrella brand ADAM. ADAM is also seeking to leverage its
brand, investment know-how and customer relationships in China and to exploit
the opportunities in this growing asset management market.

COMPETITION

     Our main competitors in the asset management business include Deutsche
Bank, AXA, UBS, Credit Suisse, Fidelity Investments, Citigroup, Merrill Lynch,
Capital Group and Amvescap. Each of these entities has large,
multi-jurisdictional and multi-product asset management operations, and most of
them compete with us for both retail and institutional clients.

                            GROUP'S OWN INVESTMENTS

     Our Group's own investments consist of the investment portfolios of our
insurance, banking and asset management operations. Our investment strategy with
regard to our Group's own investments is to maximize long-term total return
while remaining within the Allianz Group's risk management guidelines. These
guidelines relate primarily to the quality of the investments and the matching
of assets and liabilities. Our general policy is to closely match the maturities
and currencies of assets and liabilities. The investment policies of the
insurance subsidiaries reflect the different liability characteristics and tax
profiles of their respective operations. Our internationally integrated teams of
portfolio managers work closely with the regional asset management subsidiaries
to coordinate asset/liability management and product development activities.
Because our insurance investments mostly serve to cover liabilities in the
insurance business, our asset management professionals place a high priority on
high quality, liquid and widely marketable securities in our insurance
investments portfolio. For a discussion of the investment portfolios of our
banking operations, see "-- Selected Statistical Information Relating to Our
Banking Operations." For further discussion regarding our Group's investment
strategy and risk management practices, see "Quantitative and Qualitative
Disclosures about Market Risk."

     The following tables set forth the components of our Group's own investment
portfolios by investment category at the end of the years indicated. Consistent
with our general practice, amounts by investment category are presented before
consolidation adjustments representing the elimination of transactions between
Allianz Group companies in different segments. The tabular presentation has
changed from those used in prior years to better reflect the definition of the
Group's own investments as used by management for its controlling purposes. This
definition more closely parallels the European Union insurance accounting
guideline. Real estate owned by the Allianz Group and used for its own
activities is, however, not considered by management to be an investment and,
therefore, does not mirror the real estate category under Note 38 to

                                       114


our consolidated financial statements, which includes real estate owned by the
Allianz Group and used for its own activities in the real estate category.



                                                  YEAR ENDED DECEMBER 31, 2003(1)
                                --------------------------------------------------------------------
                                PROPERTY-    LIFE/                ASSET      CONSOLIDATION
                                CASUALTY    HEALTH    BANKING   MANAGEMENT    ADJUSTMENTS     TOTAL
                                ---------   -------   -------   ----------   -------------   -------
                                                          (E IN MILLIONS)
                                                                           
Investments in affiliated
  enterprises, joint ventures
  and associated
  enterprises.................    48,385      5,717     3,303        6          (50,969)       6,442
Investments
     Securities
       held-to-maturity.......       389      4,174       114        6               --        4,683
     Securities
       available-for-sale.....    69,295    186,040    26,524      558           (4,546)     277,871
     Real estate used by third
       parties................     3,391      6,014     1,094        2               --       10,501
     Funds held by others
       under reinsurance
       contracts assumed......     7,848        102        --       --           (5,938)       2,012
Trading portfolio
  Trading assets..............     1,375      1,646   143,167      125             (159)     146,154
  Trading liabilities.........      (353)    (1,396)  (83,307)      --              221      (84,835)
Other investments(2)..........    12,715     29,735        10       50          (10,517)      31,993
                                 -------    -------   -------      ---          -------      -------
Total investments.............   143,045    232,032    90,905      747          (71,908)     394,821
                                 =======    =======   =======      ===          =======      =======


---------------

(1) Group's own investments are stated at balance sheet value. Fair values
    amounted to E7,135 million on investments in affiliated enterprises, joint
    ventures and associated enterprises and to E13,804 million on real estate
    used by third parties.

(2) Consist of loans issued by Group enterprises within the Property-Casualty
    and Life/Health segments (E21,300 million), bank deposits (E10,686 million),
    as well as loans to affiliated enterprises, joint ventures and associated
    enterprises (E7 million).



                                                  YEAR ENDED DECEMBER 31, 2002(1)
                                --------------------------------------------------------------------
                                PROPERTY-    LIFE/                ASSET      CONSOLIDATION
                                CASUALTY    HEALTH    BANKING   MANAGEMENT    ADJUSTMENTS     TOTAL
                                ---------   -------   -------   ----------   -------------   -------
                                                          (E IN MILLIONS)
                                                                           
Investments in affiliated
  enterprises, joint ventures
  and associated
  enterprises.................    51,448      6,183     4,349        20         (50,655)      11,345
Investments
     Securities
       held-to-maturity.......       596      5,199       724        14              --        6,533
     Securities
       available-for-sale.....    64,500    177,480    27,586       977          (4,546)     265,997
     Real estate used by third
       parties................     3,695      6,395       655         2              --       10,747
     Funds held by others
       under reinsurance
       contracts assumed......     8,064         97        --        --          (6,098)       2,063
Trading portfolio
  Trading assets..............     1,404      1,177   122,139       156             (34)     124,842
  Trading liabilities.........      (544)      (825)  (52,152)       --               1      (53,520)
Other investments(2)..........     7,978     25,606        --        39          (6,309)      27,314
                                 -------    -------   -------     -----         -------      -------
  Total investments...........   137,141    221,312   103,301     1,208         (67,641)     395,321
                                 =======    =======   =======     =====         =======      =======


                                       115


---------------

(1) Group's own investments are stated at balance sheet value. Fair values
    amounted to E15,013 million on investments in affiliated enterprises, joint
    ventures and associated enterprises and to E14,818 million on real estate
    used by third parties.

(2) Consist of loans issued by Group enterprises within the Property-Casualty
    and Life/Health segments (E18,650 million), bank deposits (E8,328 million),
    as well as loans to affiliated enterprises, joint ventures and associated
    enterprises (E336 million).



                                                  YEAR ENDED DECEMBER 31, 2001(1)
                                --------------------------------------------------------------------
                                PROPERTY-    LIFE/                ASSET      CONSOLIDATION
                                CASUALTY    HEALTH    BANKING   MANAGEMENT    ADJUSTMENTS     TOTAL
                                ---------   -------   -------   ----------   -------------   -------
                                                          (E IN MILLIONS)
                                                                           
Investments in affiliated
  enterprises, joint ventures
  and associated
  enterprises.................    40,387      6,043     2,079       116         (38,378)      10,247
Investments
     Securities
       held-to-maturity.......     1,179      5,482     1,013        14              --        7,688
     Securities
       available-for-sale.....    76,703    168,030    83,576     1,339          (7,456)     322,192
     Real estate used by third
       parties................     5,058      6,394       545         7              --       12,004
     Funds held by others
       under reinsurance
       contracts assumed......     8,769        176        --        --          (5,527)       3,418
Trading portfolio
  Trading assets..............     1,373        775   125,741       539              (6)     128,422
  Trading liabilities.........      (448)       (50)  (44,052)       (2)             14      (44,538)
Other investments(2)..........     7,452     23,360        13        86          (8,123)      22,788
                                 -------    -------   -------     -----         -------      -------
  Total investments...........   140,473    210,210   168,915     2,099         (59,476)     462,221
                                 =======    =======   =======     =====         =======      =======


---------------

(1) Group's own investments are stated at balance sheet value. Fair values
    amounted to E24,134 million on investments in affiliated enterprises, joint
    ventures and associated enterprises and to E16,731 million on real estate
    used by third parties.

(2) Consist of loans issued by Group enterprises within the Property-Casualty
    and Life/Health segments (E16,662 million), bank deposits (E5,821 million),
    as well as loans to affiliated enterprises, joint ventures and associated
    enterprises (E303 million).

INSURANCE OPERATIONS INVESTMENTS

     The following is a discussion of the investment portfolio of our insurance
operations. For a discussion of the investment portfolios of our banking
operations, see "-- Selected Statistical Information Relating to Our Banking
Operations."

                                       116


     The following table sets forth our Group's own investment portfolios by
geographic region (according to the location of the operating entity that
recorded the investments) at the end of the years indicated:



                                                             DECEMBER 31,(1)
                                     ---------------------------------------------------------------
                                            2003                  2002                  2001
                                     -------------------   -------------------   -------------------
                                     PROPERTY-    LIFE/    PROPERTY-    LIFE/    PROPERTY-    LIFE/
                                     CASUALTY    HEALTH    CASUALTY    HEALTH    CASUALTY    HEALTH
                                     ---------   -------   ---------   -------   ---------   -------
                                                             (E IN MILLIONS)
                                                                           
Germany............................   106,223    125,017    100,764    119,786    100,337    117,199
Rest of Europe.....................    62,301     85,523     62,794     80,389     57,889     76,719
NAFTA..............................    18,184     16,926     19,522     16,095     20,398     12,035
Rest of World......................     3,352      4,571      2,848      5,088      2,507      4,357
Specialty Lines....................     5,782         --      4,278         --      2,997         --
Consolidated Adjustments...........   (52,797)        (5)   (53,065)       (46)   (43,655)      (100)
                                      -------    -------    -------    -------    -------    -------
  Total............................   143,045    232,032    137,141    221,312    140,473    210,210
                                      =======    =======    =======    =======    =======    =======


---------------

(1) Group's own investments are shown at balance sheet value.

FIXED-INCOME INVESTMENTS

     Excluding trading portfolio, fixed income securities constituted 62.4% of
our property-casualty investment portfolio (after eliminating intra-Group
investment holdings between segments) and 84.5% of our life/health investment
portfolio (after eliminating intra-Group investment holdings between segments)
as of December 31, 2003. The credit quality of our fixed income securities
portfolio has historically been strong. As of December 31, 2003, of the rated
fixed income securities in our Group's own investments portfolio, approximately
36.7% had a rating comparable to a Standard & Poor's rating of AAA,
approximately 72.1% were invested in securities with a Standard & Poor's rating
of AA or better and approximately 99.6% were invested in securities with a
Standard & Poor's rating of BBB or better.

     The following table analyzes the maturities of our held-to-maturity and
available-for-sale fixed income investments (including the fixed income
investments of our banking and asset management segments) at December 31, 2003:



                                             HELD-TO-MATURITY          AVAILABLE-FOR-SALE
                                         ------------------------   ------------------------
                                         AMORTIZED                  AMORTIZED
                                           COST      MARKET VALUE     COST      MARKET VALUE
                                         ---------   ------------   ---------   ------------
                                                           (E IN MILLIONS)
                                                                    
Contractual term to maturity
  Up to one year.......................      363          365         15,897       16,231
  Over one year through five years.....    1,963        2,015         79,921       82,558
  Over five years through ten years....    1,874        1,944         93,040       96,754
  Over ten years.......................      483          508         33,146       34,058
                                           -----        -----        -------      -------
     Total.............................    4,683        4,832        222,004      229,601
                                           =====        =====        =======      =======


EQUITY INVESTMENTS

     Excluding trading portfolio, equity investments constituted 21.4% of our
property-casualty investment portfolio (after eliminating intra-Group investment
holdings between segments) and 11.8% of our life/health investment portfolio
(after eliminating intra-Group investment holdings between segments) as of
December 31, 2003. We have a long-standing strategy of investing life
policyholders' and shareholders' funds and some amounts of property-casualty
cash flow in equities. Since the early 1900's, the life/health and property-
casualty investments in Germany have included equity positions in a number of
well-known German companies.

                                       117


     In view of recent weakness in the capital markets, we have reduced our
equity exposure through various divestments and hedging activities. In 2003, we
continued to reduce our exposure to equity investments through the divestments
of certain shareholdings, including our shareholdings in Munich Re and
Beiersdorf AG, which were reduced from 22.4% and 43.6% as of December 31, 2002
to 12.4% and 16.6% as of December 31, 2003.

SIGNIFICANT ALLIANZ GROUP EQUITY INVESTMENTS

     The following tables set forth information regarding our significant equity
investments in German and non-German companies at December 31, 2003. Except for
our investment in Eurohypo AG, which is valued by the equity method because we
hold more than a 20% interest, these investments are carried on our financial
statements at market value.



                                                               DECEMBER 31, 2003
                                                     --------------------------------------
                                                     CARRYING
                                                      VALUE     FAIR VALUE(1)   % OWNERSHIP
                                                     --------   -------------   -----------
                                                                (E IN MILLIONS)
                                                                       
Eurohypo AG........................................   1,985         1,987          28.5


---------------

(1) Based on internal valuation.



                                                                   DECEMBER 31, 2003
                                                             ------------------------------
                                                              MARKET VALUE     % OWNERSHIP
                                                             --------------   -------------
                                                             (E IN MILLIONS, EXCEPT % DATA)
                                                                        
GERMAN COMPANIES
  Munich Re................................................       2,767            12.4
  Beiersdorf AG............................................       1,339            16.6
  E.ON AG..................................................       1,275             3.6
  Bayer AG.................................................         960             5.6
  Bayerische Motorenwerke AG...............................         951             3.8
  Schering AG..............................................         917            11.8
  RWE AG...................................................         898             5.1
  Siemens AG...............................................         777             1.4
  BASF AG..................................................         643             2.6
  Linde AG.................................................         591            11.6
  HeidelbergCement AG......................................         510            15.1
NON-GERMAN COMPANIES
  UniCredito Italiano S.p.A. ..............................       1,337             4.9
  Banco Popular Espanol S.A. ..............................       1,014             9.4
  Credit Agricole S.A. ....................................         930             3.3
  Total S.A. ..............................................         742             1.2


                                       118


INVESTMENT INCOME

     The following tables set forth the components of our investment income and
expenses for each of the property-casualty, life/health, banking and asset
management segments for the years ended December 31, 2003, 2002 and 2001:



                                                     YEAR ENDED DECEMBER 31, 2003
                                  -------------------------------------------------------------------
                                  PROPERTY-   LIFE/                ASSET      CONSOLIDATION
                                  CASUALTY    HEALTH   BANKING   MANAGEMENT    ADJUSTMENTS     TOTAL
                                  ---------   ------   -------   ----------   -------------   -------
                                                            (E IN MILLIONS)
                                                                            
Income from investments
  Current income(1).............    4,340     11,669    1,080(2)     28          (1,606)       15,511
  Income from revaluations(1)...      600      1,287      254         1              --         2,142
  Realized investment
     gains(1)...................    7,963      3,704      584        24            (431)       11,844
     Subtotal...................   12,819     16,660    1,918        53          (2,037)       29,497
Investment expenses
  Depreciation and writedowns on
     investments(1).............   (1,911)    (2,352)    (691)       (1)           (123)       (4,978)
  Realized investment
     losses(1)..................   (1,501)    (3,871)    (344)       (4)           (169)       (5,889)
  Investment management,
     interest charges and other
     investment expenses(1).....   (1,285)      (516)      --       (14)            525        (1,290)
     Subtotal...................   (4,697)    (6,739)  (1,035)      (19)            333       (12,157)
Result from trading
  portfolio(3)..................   (1,490)       218    1,486        30              (1)          243
                                   ------     ------   ------       ---          ------       -------
Total result from investments...    6,716     10,139    2,369        64          (1,705)       17,583
                                   ======     ======   ======       ===          ======       =======


---------------

(1) Includes respective income and expenses from investments in affiliated
    enterprises, joint ventures and associated enterprises, and loans issued by
    the Allianz Group's enterprises within the Property-Casualty and Life/Health
    segments.

(2) Excludes interest and similar income from loans issued by the Allianz
    Group's banking enterprises.

(3) Represents net trading income.

                                       119




                                                     YEAR ENDED DECEMBER 31, 2002
                                 --------------------------------------------------------------------
                                 PROPERTY-    LIFE/                ASSET      CONSOLIDATION
                                 CASUALTY    HEALTH    BANKING   MANAGEMENT    ADJUSTMENTS     TOTAL
                                 ---------   -------   -------   ----------   -------------   -------
                                                           (E IN MILLIONS)
                                                                            
Income from investments
     Current income(1).........    5,930      11,298    2,387(2)     34          (1,841)       17,808
     Income from
       revaluations(1).........      297         361       53         5              --           716
     Realized investment
       gains(1)................   10,398       5,344    3,691        44          (6,380)       13,097
       Subtotal................   16,625      17,003    6,131        83          (8,221)       31,621
Investment expenses
     Depreciation and
       writedowns on
       investments(1)..........   (2,340)     (3,145)  (1,182)      (11)             --        (6,678)
     Realized investment
       losses(1)...............   (1,587)     (6,443)  (1,356)      (41)            466        (8,961)
     Investment management,
       interest charges and
       other investment
       expenses(1).............   (1,460)       (688)      --        --             469        (1,679)
       Subtotal................   (5,387)    (10,276)  (2,538)      (52)            935       (17,318)
Result from trading
  portfolio(3).................      207         244    1,081        (1)            (24)        1,507
                                  ------     -------   ------       ---          ------       -------
  Total result from
     investments...............   11,445       6,971    4,674        30          (7,310)       15,810
                                  ======     =======   ======       ===          ======       =======


---------------

(1) Includes respective income and expenses from investments in affiliated
    enterprises, joint ventures and associated enterprises, and loans issued by
    the Allianz Group's enterprises within the Property-Casualty and Life/Health
    segments.

(2) Excludes interest and similar income from loans issued by the Allianz
    Group's banking enterprises.

(3) Represents net trading income.



                                                     YEAR ENDED DECEMBER 31, 2001
                                  -------------------------------------------------------------------
                                  PROPERTY-   LIFE/                ASSET      CONSOLIDATION
                                  CASUALTY    HEALTH   BANKING   MANAGEMENT    ADJUSTMENTS     TOTAL
                                  ---------   ------   -------   ----------   -------------   -------
                                                            (E IN MILLIONS)
                                                                            
Income from investments
     Current income(1)..........    6,097     11,178    1,427(2)     52          (1,704)       17,050
     Income from
       revaluations(1)..........      103        178      135        11              --           427
     Realized investment
       gains(1).................    4,365      3,704    1,410        33             (53)        9,459
       Subtotal.................   10,565     15,060    2,972        96          (1,757)       26,936
Investment expenses
     Depreciation and writedowns
       on investments(1)........     (964)    (1,099)    (107)       (6)             --        (2,176)
     Realized investment
       losses(1)................   (2,159)    (4,639)    (306)      (52)             36        (7,120)
     Investment management,
       interest charges and
       other investment
       expenses(1)..............   (1,351)      (661)      --        --             427        (1,585)
       Subtotal.................   (4,474)    (6,399)    (413)      (58)            463       (10,881)
Result from trading
  portfolio(3)..................    1,451       (117)     244        10               4         1,592
                                   ------     ------    -----       ---          ------       -------
  Total result from
     investments................    7,542      8,544    2,803        48          (1,290)       17,647
                                   ======     ======    =====       ===          ======       =======


---------------

(1) Include respective income and expenses from investments in affiliated
    enterprises, joint ventures and associated enterprises, and loans issued by
    the Allianz Group's enterprises within the Property-Casualty and Life/Health
    segments.

                                       120


(2) Excludes interest and similar income from loans issued by the Allianz
    Group's banking enterprises.

(3) Represents net trading income.

YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002

     The total result from investments increased by E1,773 million, or 11.2%, to
E17,583 million in 2003 from E15,810 million in 2002, largely as a result of
higher net realized gains and lower net impairments recorded on investments,
offset in part by lower current income and trading income.

     Property-Casualty.  Property-casualty insurance investments increased by
E5,904 million, or 4.3%, to E143,045 million in 2003 from E137,141 million in
2002, due primarily to increases in securities available-for-sale and in other
investments, offset in part by a decrease in investments in affiliated
enterprises, joint ventures and associated enterprises. The total result from
property-casualty investments decreased by E4,729 million, or 41.3%, to E6,716
million in 2003 from E11,445 million in 2002, due primarily to decreased income
from investments, reflecting primarily the decrease in realized investment
gains, current income and result from trading portfolio. Realized investment
gains decreased by E2,437 million, or 23.4%, to E7,961 million in 2003 compared
with E10,398 million in 2002, reflecting the high level of realized investment
gains in 2002 and intercompany transactions. See "-- Year Ended December 31,
2002 Compared to Year Ended December 31, 2001." In 2003, realized investment
gains reflected primarily the sales of our interests in certain equity
investments, including Beiersdorf AG in December 2003 (E2,839 million), Munich
Re in 2003 (E936 million) and Credit Lyonnais in the second quarter of 2003
(E246 million), as well as the sale of other shareholdings in our equity
portfolio, due primarily to our decision to reduce our exposure to equity
investments. Current income decreased by E1,590 million, or 26.8%, to E4,340
million in 2003, compared with E5,930 million in 2002, due to lower current
income from our investments in affiliated enterprises, joint ventures and
associated enterprises following our recent divestments. The total income from
property-casualty insurance investments was also positively affected by an
increase in income from revaluation, reflecting the recovery in the stock
markets. Investment expenses decreased by E690 million, or 12.8%, to E4,697
million in 2003, compared with E5,387 million in 2002, due primarily to reduced
investment management, interest charges and other investment expenses, which
decreased to E1,285 million in 2003 compared to E1,460 million in 2002. Despite
the recovery of the stock markets starting from the second quarter of 2003,
depreciation and writedowns on investments was E1,911 million in 2003, as
compared to E2,340 million in 2002, primarily due to the weak stock markets
during the first quarter of 2003 as well as impairments recorded on certain
equity investments in the fourth quarter of 2003. For additional information,
see "-- Investment Portfolio Impairments and Unrealized Losses -- Unrealized
Losses." Result from trading portfolio decreased significantly by E1,697 million
to a loss of E1,490 million, as compared to income of E207 million in 2002,
primarily as a result of losses of E1,351 million relating to certain financial
derivative instruments that were used in a macro hedge for hedging our equity
exposure. Under IFRS, financial derivatives used in macro hedges do not qualify
for hedge accounting and changes in their fair value are recognized in trading
income. Changes in the fair value of the underlying equity investments are
recognized in shareholders' equity and are only recognized in the income
statement when they are sold.

     Life/Health.  Life/health insurance investments increased by E10,720
million, or 4.8%, to E232,032 million in 2003 from E221,312 million in 2002,
reflecting primarily an increase in securities available-for-sale. The total
result from life/health investments increased by E3,168 million, or 45.4%, to
E10,139 million in 2003 from E6,971 million in 2002, primarily due to lower
realized investment losses and increased income from revaluations. Current
income increased 3.3%, to E11,669 million in 2003, compared with E11,298 million
in 2002, while realized investment gains decreased 30.7%, to E3,704 million in
2003 (including E743 million from the sale of Credit Lyonnais), compared with
E5,344 million in 2002. Investment expenses decreased by E3,537 million, or
34.4%, to E6,739 million in 2003 from E10,276 million in 2002, due primarily a
decrease in realized investment losses, which were E3,871 million in 2003 from
E6,443 million in 2002, reflecting the recovery in the capital markets. Despite
the recovery in the stock markets starting from the second quarter of 2003,
depreciation and writedowns on investments was E2,352 million in 2003, as
compared to E3,145 million in 2002, primarily due to the weak stock markets
during the first quarter of 2003 as well as

                                       121


impairments recorded on certain equity investments in the fourth quarter of
2003. For additional information, see "-- Investment Portfolio Impairments and
Unrealized Losses -- Unrealized Losses."

     Banking.  Banking investments decreased by E12,396 million to E90,905
million in 2003 from E103,301 million in 2002, due primarily to a reduced
trading portfolio. The total result from banking investments decreased by E2,305
million, to E2,369 million in 2003 from E4,674 million in 2002, due primarily to
lower net realized investment gains and current income. Current income decreased
to E1,080 million in 2003, compared with E2,387 million in 2002, reflecting a
significant decrease in interest income from available-for-sale government fixed
income securities, which decreased by E1,251 million to E651 million in 2003
from E1,902 million in 2002, resulting from the deconsolidation of Deutsche Hyp
in 2002. Realized investment gains decreased to E584 million in 2003, compared
with E3,691 million in 2002, reflecting the high levels of realized investment
gains in 2002 for the disposition of equity securities, including intercompany
transfers to reposition equity investments within the Allianz Group, which were
eliminated at the Allianz Group level. Investment expenses decreased to E1,035
million in 2003 from E2,538 million in 2002. Depreciation and writedowns of
investments decreased significantly by E491 million, to E691 million in 2003,
compared with E1,182 million in 2002, due primarily to the recovery in the stock
markets, offset in part by impairments recorded on certain equity investments in
the fourth quarter of 2003. For additional information, see "-- Investment
Portfolio Impairments and Unrealized Losses -- Unrealized Losses."

     Asset Management.  Asset management investments decreased by E461 million,
or 38.1%, to E747 million in 2003 from E1,208 million in 2002, reflecting
primarily a decrease in securities available-for-sale. The total result from
asset management investments increased by E34 million to E64 million in 2003
from E30 million in 2002. Current income decreased by E6 million, or 17.6%, to
E28 million in 2003, compared with E34 million in 2002, while realized
investment gains decreased to E24 million in 2003 from E44 million in 2002.
Investment expenses decreased by E33 million, or 63.5%, to E19 million in 2003
from E52 million in 2002.

YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

     The total result from investments decreased by E1,837 million, or 10.4%, to
E15,810 million in 2002 from E17,647 million in 2001, largely as a result of
weakness in the capital markets in 2002, as reflected in the increase in
realized investment losses, which increased by E1,841 million, or 25.9%, in 2002
compared to 2001 and increased depreciation and writedowns of E6,678 million in
2002, compared to E2,176 million in 2001.

     Property-Casualty.  Property-casualty insurance investments decreased by
E3,332 million, or 2.4%, to E137,141 million in 2002 from E140,473 million in
2001, due primarily to a decrease in securities available-for-sale, largely
offset by an increase in investments in affiliated enterprises, joint ventures
and associate enterprises. The total result from property-casualty investments
increased by E3,903 million, or 51.8%, to E11,445 million in 2002 from E7,542
million in 2001, due primarily to realized investment gains of E1,886 million
from open market sales of Munich Re shares, approximately E1,100 million from
open market sales of Vodafone AG shares and E713 million on the sale of a real
estate subsidiary in Italy as well as realized gains from the sale of other
shareholdings in our German equity portfolio. The total result from
property-casualty investments also included significant investment income from
intercompany transactions, including realized investment gains of E3,332 million
from the transfer of Munich Re shares from Allianz AG to Dresdner Bank and E224
million from the sale of Vereinte Lebensversicherung AG from Vereinte
Versicherung AG to Allianz Leben. The gain on this intercompany transaction was
eliminated at the Allianz Group level. Realized investment gains increased to
E10,398 million in 2002, compared with E4,365 million in 2001. Current income
decreased 2.7% to 5,930 million in 2002, compared with E6,097 million in 2001.
The total result from property-casualty insurance investments was negatively
affected by price declines on the capital markets. Investment expenses increased
by E913 million, or 20.4%, to E5,387 million in 2002 from E4,474 million in
2001, reflecting primarily increased writedowns of investments as a result of
price declines in the capital markets. Depreciation and writedowns on
investments increased to E2,340 million in 2002, compared with E964 million in
2001.
                                       122


     Life/Health.  Life/health insurance investments increased by E11,102
million, or 5.3%, to E221,312 million in 2002 from E210,210 million in 2001,
reflecting primarily an increase in securities available-for-sale. The total
result from life/health investments decreased by E1,573 million, or 18.4%, to
E6,971 million in 2002 from E8,544 million in 2001, primarily due to an increase
in realized investment losses and depreciation and investment writedowns due to
price declines in the capital markets. Current income increased 1.1%, to E11,298
million in 2002, compared with E11,178 million in 2001, while realized
investment gains increased 44.3%, to E5,344 million in 2002, compared with
E3,704 million in 2001. Investment expenses increased by E3,833 million, or
59.9%, to E10,276 million in 2002 from E6,399 million in 2001, reflecting
primarily an increase in realized investment losses, which increased to E6,443
million in 2002 from E4,639 million in 2001, and depreciation and writedowns of
investments, which increased to E3,145 million in 2002 from E1,099 million in
2001.

     Banking.  Banking investments decreased by E65,614 million to E103,301
million in 2002 from E168,915 million in 2001, due primarily to a significant
decrease in securities available-for-sale. The total result from banking
investments increased by E1,871 million, to E4,674 million in 2002 from E2,803
million in 2001, due primarily to a realized investment gain of 1,912 million
resulting from the transfer in August 2002 of substantially all of Dresdner
Bank's German asset management subsidiaries to ADAM. The gain on this
intercompany transaction was eliminated at the Allianz Group level. Current
income increased to E2,387 million in 2002, compared with E1,420 million in
2001, while realized investment gains increased to E3,691 million in 2002,
compared with E1,410 million in 2001. The total result from banking investments
was negatively affected by price declines in the capital markets. Investment
expenses increased to E2,538 million in 2002 from E413 million in 2001.
Depreciation and writedowns of investments increased significantly by E1,075
million, to E1,182 million in 2002, compared with E107 million in 2001.

     Asset Management.  Asset management investments decreased by E891 million,
or 42.4%, to E1,208 million in 2002 from E2,099 million in 2001, reflecting
primarily decreases in trading assets and securities available-for-sale. The
total result from asset management investments decreased by E18 million to E30
million in 2002 from E48 million in 2001. Current income decreased by E18
million, or 34.6%, to E34 million in 2002, compared with E52 million in 2001,
while realized investment gains decreased to E44 million in 2002 from E33
million in 2001. Investment expenses decreased by E6 million, or 10.3%, to E52
million in 2002 from E58 million in 2001.

                      PROPERTY-CASUALTY INSURANCE RESERVES

GENERAL

     The Allianz Group establishes property-casualty loss reserves for the
payment of losses and loss adjustment expenses (LAE) on claims which have
occurred but are not yet settled. Loss and LAE reserves fall into two
categories: individual case reserves for reported claims and reserves for
incurred but not reported (IBNR) claims.

     Case reserves for reported claims are based on estimates of future payments
that will be made in respect of claims, including loss adjustment expenses
relating to such claims. Such estimates are made on a case-by-case basis, based
on the facts and circumstances available at the time the reserves are
established. The estimates reflect the informed judgment of claims personnel
based on general insurance reserving practices and knowledge of the nature and
value of a specific type of claim. These case reserves are regularly re-
evaluated in the ordinary course of the settlement process and adjustments are
made as new information becomes available.

     IBNR reserves are established to recognize the estimated cost of losses
that have occurred but about which the Allianz Group has not yet been notified.
These reserves, like the reserves for reported claims, are established to
recognize the estimated costs, including expenses, necessary to bring claims to
final settlement. Since nothing is known about the occurrence, the Allianz Group
relies on its past experience, adjusted for current trends and any other
relevant factors. These reserves are estimates based on actuarial and
statistical projections of the expected cost of the ultimate settlement and
administration of claims. The analyses are

                                       123


based on facts and circumstances known at the time, predictions of future
events, estimates of future inflation and other societal and economic factors.
Late reported claim trends, claim severity, exposure growth and future inflation
are examples of factors used in projecting the IBNR reserve requirements. These
reserves are reviewed and revised periodically as additional information becomes
available and actual claims are reported.

     The process of estimating loss and LAE reserves is by nature imprecise due
to the large number of variables affecting the ultimate amount of claims. Some
of these variables are internal, such as changes in claims handling procedures,
introduction of new IT systems or company acquisitions and divestitures. Others
are external, such as inflation, judicial trends, and legislative changes. The
Allianz Group attempts to reduce the uncertainty in reserve estimates through
the use of multiple actuarial and reserving techniques and analysis of the
assumptions underlying each technique.

     Loss and LAE reserves are estimated by line of business and by company. The
total reserves of the Allianz Group comprise hundreds of reviewed segments that
are individually reviewed as part of our reserving process. The Allianz Group
uses a variety of actuarial methods and assumptions to estimate and monitor
reserve levels. The assumptions used in these analyses are periodically reviewed
in light of new data, resulting in occasional reserve increases or decreases.

     During 2003, there were no significant changes in the mix of business
written. Moreover, there were no material changes to the amount and type of
reinsurance placed in respect of the Allianz Group's business.

     On the basis of currently available information, management believes that
the Allianz Group's property-casualty loss and LAE reserves are adequate.
However, the establishment of loss reserves is an inherently uncertain process,
and accordingly, there can be no assurance that ultimate losses will not differ
from these estimates.

LOSS AND LAE COMPOSITION BY REGION AND LINE OF BUSINESS

     The time required to learn of and settle claims is an important
consideration in establishing reserves. Short-tail claims, such as automobile
property damage claims, are typically reported within a few days or weeks and
are generally settled within two to three years. Medium-tail claims such as
personal and commercial motor liability claims generally take four to six years
to settle, while long-tail claims, such as general liability, workers
compensation, construction and professional liability claims take longer to
settle.

     The following table breaks out the loss and LAE reserves of the Allianz
Group, gross of reinsurance ceded, for the year ended December 31, 2003, on an
IFRS basis. The credit, travel and marine & aviation

                                       124


lines are written on a world-wide basis through multiple legal entities in
several countries, and as a result, as indicated, are not included in the
individual regional totals.

            LOSS AND LAE RESERVES BY REGION AND LINE OF BUSINESS(1)
                            AS OF DECEMBER 31, 2003



                                                             GROSS OF REINSURANCE
                               ---------------------------------------------------------------------------------
                                                                     OTHER         OTHER        OTHER
                               AUTOMOBILE    GENERAL               SHORT TAIL   MEDIUM TAIL   LONG TAIL
                               INSURANCE    LIABILITY   PROPERTY    LINES(2)     LINES(3)     LINES(4)    TOTAL
                               ----------   ---------   --------   ----------   -----------   ---------   ------
                                                                (E IN MILLIONS)
                                                                                     
Germany(5)...................     4,710       2,101        819          --         2,711           86     10,427
France(5)....................     1,961       1,597      1,496          58         3,242           97      8,451
Italy........................     3,929       1,366        486         163           449           14      6,407
Great Britain................       932         293        514          41           346          813      2,939
Switzerland(5)...............       884         252        110          --           867          772      2,885
Spain........................       806         187         57           1           177           --      1,228
Rest of Europe...............     2,930       1,128        775         320           367          626      6,146
NAFTA Region(6)..............       888       4,849      2,701         160           901        1,831     11,330
Asia-Pacific Region..........     1,304         288        213           6           158          492      2,461
South America, Africa and
  Rest of World..............       110          19        200           4            45           --        378
                                 ------      ------      -----       -----        ------        -----     ------
Subtotal of regions..........    18,454      12,080      7,371         753         9,263        4,731     52,652
                                 ------      ------      -----       -----        ------        -----     ------
Credit insurance.............        --          --         --       1,258           122           --      1,380
Travel insurance and
  assistance services........        --          --         --         110            --           --        110
Marine & aviation............        --          --         --          --           763        1,339      2,102
Subtotal of specific business
  (global)...................        --          --         --       1,368           885        1,339      3,592
                                 ------      ------      -----       -----        ------        -----     ------
  Allianz Group Total........    18,454      12,080      7,371       2,121        10,148        6,070     56,244
                                 ======      ======      =====       =====        ======        =====     ======


---------------

(1) By jurisdiction of individual Allianz Group subsidiary companies.

(2) Other Short Tail Lines are comprised of health, credit insurance, crop and
    hail.

(3) Other Medium Lines are comprised of personal accident, legal protection,
    marine hull, aviation hull, construction, packages, pools, multi-peril
    lines, assumed reinsurance and other business.

(4) Other Long Tail Lines are comprised of workers compensation, marine third
    party liability and aviation third party liability.

(5) For Germany, France and Switzerland Other Medium Tail class primarily
    contains assumed business.

(6) For the NAFTA Region Other Long Tail class primarily contains US workers
    compensation.

     The Allianz Group estimates that loss and LAE reserves consist of
approximately 25% short-tail, 45% medium-tail and 30% long-tail business.

                                       125


RECONCILIATION OF BEGINNING AND ENDING LOSS AND LAE RESERVES

     The following table reconciles the beginning and ending reserves of the
Allianz Group, including the effect of reinsurance ceded, for the
property-casualty insurance segment for each of the years in the three-year
period ended December 31, 2003, on an IFRS basis.

                    RECONCILIATION OF LOSS AND LAE RESERVES



                                                                YEAR ENDED DECEMBER 31,
                                                             ------------------------------
                                                              2003      2002        2001
                                                             ------   ---------   ---------
                                                                    (E IN MILLIONS)
                                                                         
Balance as of January 1....................................  59,654    61,476      54,047
Less reinsurance recoverable...............................  14,588    16,156      12,571
                                                             ------    ------      ------
Net........................................................  45,066    45,320      41,476
                                                             ------    ------      ------
Plus incurred related to:
  Current year.............................................  25,712    27,130      27,295
  Prior years..............................................     279(1)     646(2)      76
                                                             ------    ------      ------
Total incurred.............................................  25,991    27,776      27,371
                                                             ======    ======      ======
Less paid related to:
  Current year.............................................  11,860    12,642      11,895
  Prior years..............................................  13,155    12,143      12,462
                                                             ------    ------      ------
Total paid.................................................  25,015    24,785      24,357
                                                             ------    ------      ------
Effect of foreign exchange.................................  (1,822)   (3,367)        407
Effect of (divestitures)/acquisitions......................     (25)      122         423
Net balance at end of year(3)..............................  44,195    45,066      45,320
Plus reinsurance recoverable...............................  12,049    14,588      16,156
                                                             ------    ------      ------
Balance as of December 31..................................  56,244    59,654      61,476
                                                             ======    ======      ======


---------------

(1) The E279 million of unfavorable development during 2003 is the result of a
    large number of individual developments by region and line of business
    discussed below.

(2) The E646 million of unfavorable development during 2002 is due primarily to
    increases in asbestos and environmental reserves in the United States.

(3) Reserves for loss and LAE of subsidiaries purchased (or sold) are included
    (or excluded) as of the date of acquisition (or disposition).

                                       126


CHANGES IN LOSS AND LAE RESERVES DURING 2003

     As noted above, loss and LAE reserves of the Allianz Group included E279
million of incurred loss and LAE relating to prior years, representing 0.6% of
net loss and LAE reserves at January 1, 2003. The following table breaks this
amount down by region.

                  CHANGES IN LOSS AND LAE RESERVES DURING 2003



                                                NET RESERVES      NET DEVELOPMENT IN
                                             AS OF DECEMBER 31,    2003 RELATED TO
                                                    2002             PRIOR YEARS       IN %(1)
                                             ------------------   ------------------   -------
                                                             ( E IN MILLIONS )
                                                                              
Germany....................................         7,331                 (98)           (1.3)%
France.....................................         6,827                 429             6.3%
Italy......................................         5,750                 (69)           (1.2)%
Great Britain..............................         2,455                 (89)           (3.6)%
Switzerland................................         2,974                 (32)           (1.0)%
Spain......................................           962                 (51)           (5.3)%
Rest of Europe.............................         5,435                  78             1.4%
NAFTA Region...............................         9,388                 237             2.5%
Asia-Pacific Region........................         1,786                  44             2.5%
South America, Africa and Rest of World....           294                  11             3.7%
                                                   ------                ----           -----
Subtotal of regions........................        43,202                 460             1.1%
Credit insurance...........................           933                (256)          (27.4)%
Travel insurance and assistance services...           109                 (42)          (38.5)%
Marine & aviation..........................           822                 117            14.2%
                                                   ------                ----           -----
  Allianz Group Total......................        45,066                 279             0.6%
                                                   ======                ====           =====


---------------

(1) In percent of net reserves as of December 31, 2002.

     Within each region, these reserve developments represent the sum of amounts
for individual companies and lines of business. Because of the multitude of
these reviewed segments, it is not feasible, or meaningful to, provide detailed
information on each segment (e.g., claim frequencies, severities, settlement
rates). Discussed briefly below are the major highlights of the reserve
developments during the past year as they are recognized at the operative
entities. Most of these companies analyze loss and LAE reserves on a gross
basis. Therefore, unless otherwise indicated, the discussion is based on gross
loss and LAE reserves in the local currency of the company before consolidation
and converted to Euro using mid-year exchange rates. Consequently, the following
discussion is not meant to fully reconcile the individual amounts below to those
in the above table based on net loss and LAE reserves and net developments
during 2003.

GERMANY

     In Germany, net loss and LAE reserves developed favorably during 2003 by
approximately E98 million, or 1.3% of reserves at the beginning of the year.

     At Sachgruppe Deutschland (SGD), the property and casualty insurance group
of the Allianz Group in Germany, motor liability gross loss and LAE reserves
developed favorably by E183 million due to continuing favorable developments in
both claim frequency and severity. In addition, the business mix in personal
accident has shifted since 1997 from products paying long-term claims as a
lump-sum towards those making annuity payments. A refinement in the actuarial
analysis of projected ultimate loss costs reflecting this change in business mix
resulted in adverse development of E68 million during 2003 partially offsetting
the favorable development of motor liability.

                                       127


     Reserves for products liability coverages developed adversely by E65
million during 2003. As of the end of 2003, claims for pharmaceutical industry
coverages are approximately E108 million, representing the maximum possible
limit on exposed policies. In addition, claims from the 2002 floods and the
storm "Jeanette" developed adversely by E65 million during 2003 as more
information was received.

     During 2003, SGD assumed the management of a pool covering professional
liability for auditors and trustees (WT-Pool). A thorough reserve review on this
business led to a strengthening of reserves of E50 million.

     Also during 2003, Allianz AG, the Allianz Group reinsurance company,
experienced E198 million of favorable reserve development. Of this amount, E77
million is attributable to exchange rate movements. An additional E39 million is
due to favorable developments on two single large claims. The remainder is
attributable to a larger number of smaller reserve changes made as a result of
ongoing reserve reviews.

FRANCE

     In France, net loss and LAE reserves were strengthened by E429 million, or
6.3% of reserves during 2003. Due to a thorough reserve review, AGF IART, the
principal Allianz Group company in France, increased reserves on motor third
party liability by E110 million reflecting increased severities for bodily
injury claims and on general liability by E60 million to address greater
severities in reserves for medical malpractice claims. These increases were
partially offset by reserve reductions in several classes, notably motor first
party and pecuniary loss, totaling approximately E91 million. The Allianz Group
company La Lilloise also increased motor third party liability reserves by E36
million during the year due to increased bodily injury severities.

     A main portion of reserves for claims involving regular annuity payments
were allocated to accident years for the first time during 2003. These reserves
are carried at discounted value. During 2003, the discount rate used on these
reserves was changed from 3% (for annuities related to motor and individual
health business) and 4% (for annuities related to credit contracts) to a uniform
rate of 3% to reflect the changing economic environment. These changes, together
with the expected effect of amortizing the reserve discount, led to adverse
development on annuity claims of E130 million.

     French construction business experienced unfavorable development of E167
million during 2003. Of this amount, E73 million is attributable to a revised
case reserve methodology, whereby outstanding case reserves have been
reallocated by underwriting year rather than by accident year as in 2002. The
remainder arises from movements of the loss and LAE reserve and unfavorable
development of assumed business.

ITALY

     In Italy, the slight reduction in reserves by E69 million during 2003 is
the result of several offsetting developments. Whereas RAS Group experienced
unfavorable development of E95 million for motor third party liability and
general liability, Lloyd Adriatico experienced favorable development of E73
million on these same two lines.

GREAT BRITAIN

     In Great Britain, net loss and LAE reserves developed favorably during 2003
by E89 million or 3.6% of reserves at the beginning of the year. At Allianz
Cornhill, reserves for accident year 2002 developed favorably by E181 million
(L125 million), primarily from motor business, and property and pecuniary loss,
where a significant portion of the IBNR provision, in retrospect, proved to be
excessive. Offsetting this reduction was a E56 million (L39 million)
strengthening of bulk reserves for U.S. asbestos, pollution and health hazard
claims on marine and aviation business.

                                       128


SWITZERLAND

     In Switzerland Allianz Suisse Versicherungs-Gesellschaft introduced an
improved methodology to calculate discounted annuity reserves for workers'
compensation claims resulting in a favorable reserve development of E16 million
(CHF25 million).

     Loss and LAE reserves of Allianz Risk Transfer, the alternative risk
transfer carrier of the Allianz Group, decreased by E85 million primarily due to
the partial commutation of a major contract.

SPAIN

     Net Loss and LAE reserves developed favorably by E51 million. An
acceleration in the claim settlement rate allowed for a reduction of loss
reserves and an additional release of LAE reserves.

REST OF EUROPE

     Loss and LAE reserves in other European Allianz Group companies developed
unfavorably by E120 million in total. This figure represents the net result of
unfavorable as well as favorable developments for individual companies.

     Allianz Ireland p.l.c. experienced favorable development of E66 million. In
Ireland, the introduction of motor penalty points in October 2002 reduced claim
frequencies in motor by roughly 10%. Furthermore, case and IBNR reserves have
been reduced to reflect a trend towards lower court award payments. Following
these trends, motor reserves developed favorably by E34 million in personal and
by E16 million in commercial lines. Further favorable developments of E14
million in Fire/Property of Allianz Ireland p.l.c. and E17 million in employers'
liability have been partially offset by adverse development in public liability
by E15 million.

     Adverse development of E157 million arose in Luxemburg due to the
reclassification of unearned premium reserves to loss reserves in the context of
closing down the reinsurance entity AGF Re.

NAFTA REGION

     For the entire NAFTA region, Allianz Group net loss and LAE reserves
developed adversely during 2003 by E237 million, or 2.5% of the reserves at the
beginning of the year. The largest Allianz Group companies in this region are
Fireman's Fund Insurance Company (Fireman's Fund), Allianz Global Risk Insurance
Company (AGR U.S.) and Allianz Insurance Company of Canada (Allianz Canada).

     At Fireman's Fund, prior period (accident year 2002 and prior) net loss and
LAE reserve estimates increased by E278 million ($314 million). This is driven
primarily by E199 million in one large surety account and one large arbitration
loss relating to a 1995 fire claim of E36 million. Absent these two single
claims, prior period net loss and LAE reserve estimates increased by only E42
million ($48 million) in 2003, or less than 1% of carried reserves at January 1,
2003.

     The $48 million residual adverse development at Fireman's Fund was made up
of several partially offsetting components:

     - Prior period net loss and LAE reserves decreased for Commercial Business
       ($101 million), Personal Insurance ($39 million), and Marine ($3
       million), primarily driven by improvement in accident year 2002
       experience. Significant price increases and improvement in risk quality
       through selective underwriting have driven greater improvement in
       accident year 2002 results than had been recognized as of December 31,
       2002.

     - Estimated net reserves increased for other surety accounts ($68 million),
       other business in run-off ($66 million, primarily National Accounts and
       Diversified Risk), with smaller increases for Interstate ($7 million),
       Agribusiness ($12 million), structured settlements, involuntary pools,
       and other miscellaneous corporate accounts ($19 million), and unallocated
       loss expenses ($19 million).

     AGR U.S., formerly Allianz Insurance Company, experienced a gross loss and
LAE reserve decrease of E23 million ($26 million) on its discontinued liability
business, offset by an increase of E21 million
                                       129


($24 million) in Workers' Compensation. In addition, Property claims developed
favorably by E87 million ($98 million).

ASIA-PACIFIC

     Net loss and LAE reserves for the Asia-Pacific region developed adversely
during 2003 by approximately E44 million or 2.5% of reserves at the beginning of
the year. The largest Allianz Group property-casualty insurer in the region is
Allianz Australia, representing approximately 99% of the region's total
reserves.

     In Australia, the fire portfolio experienced a reserve release of E40
million (A$69 million) during 2003. This portfolio is significantly reinsured.
In setting reserves for 2002, the gross estimate was set at a level which, in
retrospect, proved to be excessive. This effect does not affect the ceded
reserves which have developed unfavorably by E41 million (A$71 million) in
total.

     In addition, for compulsory third party business in New South Wales and
Queensland, reserves developed favorably by E63 million (A$106 million). This
statutory coverage was subject to several legislative changes in 1995, 1999 and
2002. The experience to date has been favorable and has been slowly recognized
in the valuation basis. The number of large claims has also been lower than
expected. If the experience continues, further releases are likely. The run-off
workers compensation portfolio in Australia had an increase in estimates of E28
million (A$48 million). This increase relates to accident years prior to 1987
and comes (roughly equally) from increased assumptions for inflation, future
mesothelioma claims and future non-mesothelioma asbestos related claims. In
addition, the motor vehicle (non-third party liability) portfolio had a release
of E20 million (A$34 million). Computer conversions were carried out during 2002
and in late 2002 there was a dramatic fall in case reserves due to the
conversion. However, due to pending full review of data, this effect was not
recognized in setting reserves for December 31, 2002. During 2003, and after
further review, it became apparent that the decline in case reserves was
appropriate and the reserves were released during 2003.

CREDIT INSURANCE

     Credit insurance is underwritten primarily in France, Germany, Italy and
the United Kingdom. During 2002, claim frequencies increased in all markets as
well as the incidence of large losses. In 2003, claims emergence was less than
expected, leading to favorable development for underwriting year 2002.

CHANGES IN HISTORICAL LOSS AND LAE RESERVES

     The following table illustrates the development of the Allianz Group's loss
and LAE reserves, on an IFRS basis and gross of reinsurance, over the past seven
years. Since the Allianz Group adopted IFRS in 1997, historical loss development
data is available on an IFRS basis of accounting for the seven years 1997 to
2003 only.

     Each column of this table shows reserves as of a single balance sheet date,
with subsequent development of these reserves. The top row of each column shows
gross reserves as initially established at the end of each stated year. The next
section, reading down, shows the cumulative amounts paid as of the end of the
successive years with respect to the reserve initially established. The next
section shows the retroactive re-estimation of the initially established gross
reserves for loss and LAE as of the end of each successive year. This
re-estimation results primarily from additional facts and circumstances that
pertain to open claims.

     The bottom section compares the latest re-estimated gross reserves for loss
and LAE to the gross reserves as initially established and indicates the
cumulative development of the initially established gross reserves through
December 31, 2003. For instance, the surplus (deficiency) shown in the table for
each year represents the aggregate amount by which the original estimates of
reserves at that year-end have changed in subsequent years. Accordingly, the
cumulative surplus (deficiency) for a year-end relates only to reserves at that
year-end and such amounts are not additive. Caution should be exercised in
evaluating the information shown on this table, as each amount includes the
effects of all changes in amounts for prior periods. For

                                       130


example, the portion of the development shown for year-end 1999 reserves that
relates to 1997 losses is included in the cumulative surplus (deficiency) of the
1997 through 1999 columns.

     This table below presents calendar year data, not accident year data.
Conditions and trends that have affected development of liability in the past
may or may not necessarily occur in the future, and accordingly, conclusions
about future results may not be derived from information presented in this
table.

             CHANGES IN HISTORICAL RESERVES FOR UNPAID LOSS AND LAE
                      PROPERTY-CASUALTY INSURANCE SEGMENT
                              GROSS OF REINSURANCE



                                                                   DECEMBER 31, (1)
                                             ------------------------------------------------------------
                                              1997     1998     1999     2000     2001     2002     2003
                                             ------   ------   ------   ------   ------   ------   ------
                                                            (E IN MILLIONS, EXCEPT % DATA)
                                                                              
Gross liability for unpaid claims and
  claims expenses..........................  34,323   45,560   51,272   54,047   61,476   59,654   56,244
Paid (cumulative) as of:
  One year later...........................   8,573   12,996   15,949   16,639   17,384   16,019
  Two years later..........................  13,329   20,967   24,132   24,451   25,889
  Three years later........................  16,778   24,588   29,123   29,265
  Four years later.........................  19,562   27,829   32,423
  Five years later.........................  21,539   30,217
  Six years later..........................  22,902
Liability re-estimated as of:
  One year later...........................  32,200   46,768   52,663   55,357   60,195   56,092
  Two years later..........................  33,104   46,975   53,589   55,289   57,995
  Three years later........................  32,766   47,346   53,101   53,181
  Four years later.........................  33,455   46,687   51,281
  Five years later.........................  33,426   45,307
  Six years later..........................  32,052
Cumulative surplus (deficiency)............   2,271      253       (9)     866    3,481    3,562
Cumulative surplus (deficiency) excluding
  impact of foreign exchange...............   2,197    1,822     (769)  (1,675)  (1,721)     656
  Percent..................................     6.4%     4.0%    (1.5)%   (3.1)%   (2.8)%    1.1%


---------------

(1) Reserves for loss and LAE of subsidiaries purchased (or sold) are included
    (or excluded) as of the date of the acquisition (or disposition).

     The overall decrease in loss and LAE reserves between December 31, 2002 and
2003 is attributable primarily to the strengthening of the Euro relative to the
U.S. dollar, the British pound sterling and the Swiss franc during 2003.
Reserves in these three currencies decreased by E2.8 billion during 2003 due to
a stronger Euro and a reduction of reserves in U.S. dollar attributable to the
exit from some businesses segments, including surety at Fireman's Fund and
general liability at AGR U.S. Reserve developments during 2003 are described in
greater detail in the preceding section "-- Changes in Loss and LAE Reserves."

     The significant increase in the gross reserves for 2001 over 2000 is driven
by gross incurred losses and loss adjustment expenses related to the terrorist
attack of September 11, 2001. On a consolidated Allianz Group basis, the
terrorist attack of September 11, 2001 resulted in net claims costs of
approximately E1,500 million. Estimated losses are based on a policy-by-policy
analysis as well as a variety of actuarial techniques, coverage interpretations
and claim estimation methodologies, and include an estimate of incurred but not
reported, as well as estimated costs related to the settlement of claims. These
loss estimates are subject to considerable uncertainty.

     Because the terrorist attack of September 11, 2001 was a single coordinated
event, it is the belief of Allianz Group management that the losses at the World
Trade Center constitute one occurrence. An Allianz

                                       131


Group company is currently a defendant in a lawsuit brought by an insured
alleging that the attack constituted multiple occurrences. Based on the policy
wording, the Allianz Group believes it is clear that the attack constitutes one
occurrence and intends to defend this matter vigorously.

     The significant increase in reserves for 1999 over 1998 is attributable to
the acquisition of Allianz Australia and to exchange rate effects. As of
December 31, 1999, gross reserves increased by E1.2 billion as a result of the
completion of this acquisition and by E2.0 billion as a result of the
strengthening of the U.S. dollar and the pound sterling against the Euro.

     The increase in reserves for 1998 over 1997 is the result of the
acquisition of AGF, which increased loss and LAE reserves at December 31, 1998
by E10,658 million on a gross basis.

DISCOUNTING OF LOSS AND LAE RESERVES

     As of December 31, 2003, 2002 and 2001, the Allianz Group consolidated
property-casualty reserves reflected discounts of E1,204 million, E1,561 million
and E1,580 million, respectively.

     Reserves are discounted to varying degrees in the United States, Germany,
Hungary, Switzerland, Portugal, France and Belgium. For the United States, the
discount reflected in the reserves is related to annuities for certain
long-tailed liabilities, primarily in workers' compensation. For the other
countries, the reserve discounts relate to annuity reserves for various classes
of business. These classes include personal accident, general liability and
motor liability in Germany and Hungary, workers' compensation in Switzerland and
Portugal, individual and group health disability and motor liability in France
and health disability in Belgium. All of the reserves that have been discounted
have payment amounts that are fixed and timing that is reasonably determinable.

     The following table shows, by country, the carrying amounts of reserves for
claims and claim adjustment expenses that have been discounted, and the interest
rates used for discounting for the years ended December 31:



                                 DISCOUNTED     AMOUNT OF THE
                                 RESERVES IN     DISCOUNT IN    INTEREST RATE USED FOR DISCOUNTING
                                -------------   -------------   -----------------------------------
                                2003    2002    2003    2002          2003               2002
                                -----   -----   -----   -----   ----------------   ----------------
                                       (E IN MILLIONS)
                                                                 
France........................  1,466   1,410     346     451        3.00%         3.00% to 4.00%
Switzerland...................    396     485     242     412        3.25%              4.00%
Germany.......................    366     322     256     223   3.25% to 4.00%     3.25% to 4.00%
United States.................    207     260     257     316        6.55%              6.55%
Belgium.......................     85      80      20      18        4.75%              4.75%
Hungary.......................     60      59      19      18        1.40%              1.40%
Portugal......................     58      91      51      91        4.50%         4.00% to 5.25%
                                -----   -----   -----   -----
  Total.......................  2,638   2,707   1,191   1,529
                                =====   =====   =====   =====


ASBESTOS AND ENVIRONMENTAL RESERVES IN THE UNITED STATES

     In 2002, Fireman's Fund completed an analysis of its asbestos and
environmental (A&E) liabilities, resulting in an increase to these reserves of
$750 million (net and gross) in September 2002. Also during 2002, Fireman's Fund
ceded the majority of its A&E loss reserves to Allianz AG. During 2003, there
were no significant developments to these A&E reserves.

     There are significant uncertainties in estimating the amount of A&E claims.
Reserves for asbestos-related illnesses, toxic waste clean-up claims and latent
drug and chemical exposures cannot be estimated with traditional loss reserving
techniques. Case reserves are established when sufficient information has been
obtained to indicate the involvement of a specific insurance policy. In
addition, IBNR reserves are established to cover additional exposures on both
known and unasserted claims. In establishing the liabilities for claims arising
from asbestos-related illnesses, toxic waste clean-up and latent drug and
chemical exposures, management considers facts currently known and the current
state of the law and coverage litigation. However, given the expansion of
coverage and liability by the courts and the legislatures in the past and the

                                       132


possibilities of similar interpretation in the future, there is significant
uncertainty regarding the extent of remediation and insurer liability, and given
the inherent uncertainty in estimating A&E liabilities, significant adverse
deviation from the current carried A&E reserve position is possible.

     In response to the uncertainty associated with A&E claims, Fireman's Fund
created an environmental claims unit focused on A&E claims evaluation and
remediation for the Allianz Group's U.S. property-casualty insurance
subsidiaries. The staff of this unit, consisting of a total of approximately 50
employees, determines appropriate coverage issues according to the terms of the
policies and contracts involved and, on the basis of its experience and
expertise, makes judgments as to the ultimate loss potential related to each
claim submitted for payment under the various policies and contracts. Judgments
of potential losses are also made from precautionary reports submitted by
insured companies for claims which have the possibility of involving policy
coverage. Factors considered in determining the reserve are: whether the claim
relates to asbestos or hazardous waste; whether the claim is for bodily injury
or property damage; the limits of liability and attachment points; policy
provisions for expenses (which are a significant portion of the estimated
ultimate cost of these claims); type of insured; and any provision for
reinsurance recoverables. In addition, Fireman's Fund actively pursues
commutations and reinsurance cessions to reduce its A&E exposures.

     The industry-wide loss trends for some of these exposures, especially for
asbestos-related losses, have deteriorated over the past several years. Some of
the reasons for this deterioration include: insureds who either produced or
installed products containing asbestos have seen more and larger claims brought
against them, some of these companies have declared bankruptcy, which has caused
plaintiffs' attorneys to seek larger amounts from solvent defendants and to also
include new defendants; some defendants are also seeking relief under different
coverage provisions when the product liability portion of their coverage has
been exhausted. These developments led the Allianz Group to engage outside
actuarial consulting firms to update a previous study conducted in 1995 to
analyze the adequacy of the Allianz Group's reserves for these types of losses.
In 1995, Fireman's Fund had increased its net and gross reserves for A&E by $800
million and in 2000 an additional $250 million was reallocated to A&E.

     These A&E reserve analyses were completed during 2002, ultimately resulting
in an additional $750 million of reserves attributed entirely to
asbestos-related exposures. The analyses included a review of the ultimate gross
asbestos loss and allocated loss expense reserves for accident years 1987 and
prior. The methodology involved exposure-based modeling of policies with the
greatest asbestos exposure, supplemented by aggregate methods for the remaining
insureds.

     The range of reasonable potential outcomes for A&E liabilities provided in
these analyses was particularly large, and given the inherent uncertainty in
estimating A&E liabilities, significant adverse (or favorable) deviation from
the current carried A&E reserve position is possible. The range of net loss and
allocated loss expense reserve estimates resulting from the A&E study (based on
data evaluated as of December 31, 2001) -- taking into account internal and
external actuarial analyses, together with management's estimates concerning
such factors as the impact of claims handling efforts, commutations, aggressive
reinsurance collection, potential conservatism in the estimates and the
recognition that not all outcomes would likely be favorable or unfavorable at
the same time (resulting in a compression of the range) -- was $1,196 million to
$1,965 million, with a midpoint of $1,580 million. Such range compared to the
Allianz Group carried A&E reserves of $816 million at December 31, 2001,
resulting in a deficiency of $380 million to $1,149 million. As a result, the
Allianz Group increased gross and net A&E reserves by $750 million in 2002 in
order to bring carried A&E reserves at December 31, 2002 to the midpoint of such
range.

                                       133


     The table below shows Fireman's Fund case count activity for A&E in 2001 to
2003:



                                                  YEAR TO DATE CASE COUNTS
                                                        DECEMBER 31,         PERCENT CHANGE
                                                  ------------------------   ---------------
                                                   2003     2002     2001     2003     2002
                                                  ------   ------   ------   ------   ------
                                                                       
New.............................................    428      495      486    (13.5)%    1.9%
Reopened........................................    244      241      175      1.2%    37.7%
Closed..........................................    660      902    1,906    (26.8)%  (52.7)%
Pending.........................................  1,718    1,741    1,903     (1.3)%   (8.5)%


     On September 30, 2002, Fireman's Fund entered into a reinsurance contract
whereby it ceded all net carried A&E reserves to Allianz AG, with Allianz AG
providing reinsurance cover up to a maximum of $2,158 million. Total A&E
reserves ceded under this treaty were $1,276 million for consideration in the
amount of $1,276 million. The following table summarizes the gross and net U.S.
claim reserves for A&E claims at December 31 for the years indicated.



                                                                 AS PERCENTAGE OF     AS PERCENTAGE OF
                                                                  U.S. PROPERTY-    THE ALLIANZ GROUP'S
YEAR-END                                  A&E NET    A&E GROSS    CASUALTY GROSS     PROPERTY-CASUALTY
DECEMBER 31,                              RESERVES   RESERVES        RESERVES          GROSS RESERVES
------------                              --------   ---------   ----------------   --------------------
                                            (E IN MILLIONS)
                                                                        
1999....................................     883       1,509           12.6%                2.9%
2000....................................   1,072       1,778           14.0%                3.3%
2001....................................     979       1,649           10.1%                2.7%
2002....................................   1,250       1,704           11.8%                2.9%
2003....................................     906       1,263           11.9%                2.2%


     The table below shows total A&E loss activity for the past five years for
Fireman's Fund and AGR U.S. These numbers are shown gross of reinsurance and on
a statutory basis.

                         A&E GROSS LOSS AND LAE HISTORY



                                                                YEAR ENDED DECEMBER 31,
                                                         -------------------------------------
ASBESTOS:                                                1999    2000    2001    2002    2003
---------                                                -----   -----   -----   -----   -----
                                                                    ($ IN MILLIONS)
                                                                          
Loss + LAE Reserves as of January 1....................    957     727     679     596   1,147
Plus Incurred Loss and LAE.............................    (54)    126      23     688     101
Less Loss and LAE Payments.............................    175     174     106     137     151
  Payments for Loss....................................    149     142      79     102     106
  Payments for LAE.....................................     26      32      27      35      45
Loss + LAE Reserves as of December 31..................    727     679     596   1,147   1,097




                                                                YEAR ENDED DECEMBER 31,
                                                         -------------------------------------
ENVIRONMENTAL:                                           1999    2000    2001    2002    2003
--------------                                           -----   -----   -----   -----   -----
                                                                    ($ IN MILLIONS)
                                                                          
Loss + LAE Reserves as of January 1....................  1,205     788     975     863     630
Plus Incurred Loss and LAE.............................    (34)    318     (37)     73     (89)
Less Loss and LAE Payments.............................    383     131      75     306      58
  Payments for Loss....................................    349      75      38     259      31
  Payments for LAE.....................................     34      55      37      47      28
Loss + LAE Reserves as of December 31..................    788     975     863     630     482


                                       134




                                                                YEAR ENDED DECEMBER 31,
                                                         -------------------------------------
TOTAL ASBESTOS AND ENVIRONMENTAL:                        1999    2000    2001    2002    2003
---------------------------------                        -----   -----   -----   -----   -----
                                                                    ($ IN MILLIONS)
                                                                          
Loss + LAE Reserves as of January 1....................  2,162   1,515   1,654   1,459   1,776
Plus Incurred Loss and LAE.............................    (88)    444     (13)    760      12
Less Loss and LAE Payments.............................    558     305     182     443     209
  Payments for Loss....................................    498     217     117     361     137
  Payments for LAE.....................................     60      87      65      83      72
Loss + LAE Reserves as of December 31..................  1,515   1,654   1,459   1,776   1,579


      SELECTED STATISTICAL INFORMATION RELATING TO OUR BANKING OPERATIONS

     For the purposes of presenting the following information, our banking
operations include Dresdner Bank AG and its subsidiaries (Dresdner Bank),
including its asset management operations, and certain other banking
subsidiaries of the Allianz Group. This presentation differs from the
presentation in the remainder of "Information on the Company and Operating and
Financial Review and Prospects", where the asset management operations of
Dresdner Bank are included in our asset management segment and excluded from our
banking segment. The following information has been derived from the financial
records of our banking operations and has been prepared in accordance with IFRS;
it does not reflect adjustments necessary to convert such information to U.S.
GAAP. Although the financial statements of Dresdner Bank were consolidated into
the financial statements of Allianz AG on the date of our acquisition of
Dresdner Bank on July 23, 2001, the information presented below includes the
banking operations of Dresdner Bank for all periods in order to provide the
reader with comparable information about our banking operations. Additionally,
the assets and liabilities of Dresdner Bank do not reflect the purchase
accounting adjustments applied with respect to Dresdner Bank's assets and
liabilities at July 23, 2001. Additional limitations concerning certain of the
average balance sheet data of Dresdner Bank for the periods ending before
January 1, 2002 discussed in this section are noted below under "-- Average
Balance Sheet and Interest Rate Data."

     In applying our accounting policies to the financial statements of Dresdner
Bank during periods prior to July 23, 2001, certificated commercial loans common
to the German market, or Schuldscheindarlehen, have been reclassified from Loans
and advances to banks and Loans and advances to customers to Investment
securities available for sale in order to conform to our accounting policies. At
December 31, 2003, 2002, 2001, 2000 and 1999, the book value of
Schuldscheindarlehen was approximately E1.9 billion, E1.4 billion, E44.0
billion, E46.6 billion and E48.6 billion, respectively. Because there were no
loan loss allowances recorded on such Schuldscheindarlehen, such
reclassification had no impact on the gross amount of the loss allowances
described below under "-- Summary of Loan Loss Experience." However, such
reclassification did adversely affect the ratio of total allowances for loan
losses to total loans. On August 1, 2002, we also merged our mortgage banking
subsidiary, Deutsche Hyp, which was a part of our Other division, with the
mortgage banking subsidiaries of Commerzbank and Deutsche Bank into a single
entity, Eurohypo. The assets and liabilities of the former Deutsche Hyp were
accordingly deconsolidated as of August 1, 2002.

AVERAGE BALANCE SHEET AND INTEREST RATE DATA

     The following table sets forth the average balances of assets and
liabilities and related interest earned from interest-earning assets and
interest expensed on interest-bearing liabilities, as well as the resulting
average interest yields and rates for the years ended December 31, 2003, 2002
and 2001. For the years ended December 31, 2003 and 2002, the average balance
sheet and interest rate data is based on consolidated monthly average balances
using month-end balances prepared in accordance with IFRS. For the year ended
December 31, 2001, Dresdner Bank did not prepare consolidated balance sheet and
interest rate data on a monthly basis. The average balance sheet and interest
rate data shown below for the year ended December 31, 2001 was derived using
unconsolidated monthly balances of Dresdner Bank AG and its non-German branch
operations and significant subsidiaries, together with quarterly consolidated
balances of

                                       135


Dresdner Bank prepared in accordance with IFRS. Such unconsolidated monthly
balances reflected approximately 90% of Dresdner Bank's consolidated assets and
liabilities, were not available for all months in the periods shown, and were
not in all cases prepared fully in accordance with IFRS. Dresdner Bank has
reconciled such monthly balances to the consolidated quarterly balances that
were not subject to these limitations, and the data shown below reflects
adjustments to give effect to differences identified in such a reconciliation
process. We believe that the average balances provide a fair representation of
the activities of our banking operations.

     Since the adoption of IAS 39 on January 1, 2001, the fair values of all
derivative instruments have been included within non-interest-earning assets or
non-interest-bearing liabilities. Prior to January 1, 2001, the fair values of
qualifying hedge derivative instruments were not recorded in the balance sheet;
however, the fair values of all non-qualifying hedge and trading derivatives
have been included within non-interest-earning assets or non-interest-bearing
liabilities for each period. Interest income and interest expense relating to
qualifying hedge derivative instruments have been reported within the interest
income and interest expense of the hedged item for each period.

     The allocation between German and non-German components is based on the
location of the office that recorded the transaction. Categories of loans and
advances include loans placed on nonaccrual status. For a description of our
accounting policies on nonaccrual loans see "-- Risk Elements -- Nonaccrual
Loans" and "-- Critical Accounting Policies and Estimates."

                                       136


     Our banking operations do not have a significant balance of tax-exempt
investments. Accordingly, interest income on such investments has been included
as taxable interest income for purposes of calculating the change in taxable net
interest income.



                                                                 YEAR ENDED DECEMBER 31,
                             ------------------------------------------------------------------------------------------------
                                          2003                             2002                             2001
                             ------------------------------   ------------------------------   ------------------------------
                                       INTEREST    AVERAGE              INTEREST    AVERAGE              INTEREST    AVERAGE
                             AVERAGE   INCOME/     YIELD/     AVERAGE   INCOME/     YIELD/     AVERAGE   INCOME/     YIELD/
                             BALANCE   EXPENSE    RATE IN %   BALANCE   EXPENSE    RATE IN %   BALANCE   EXPENSE    RATE IN %
                             -------   --------   ---------   -------   --------   ---------   -------   --------   ---------
                                                              (E IN MILLIONS, EXCEPT % DATA)
                                                                                         
ASSETS
Trading securities
In German offices..........   84,197     1,724       2.0%      57,523     1,681       2.9%      56,220     2,075       3.7%
In non-German offices......   28,056       767       2.7%      30,155     1,137       3.8%      30,020     1,484       4.9%
                             -------    ------                -------    ------                -------    ------
Total......................  112,253     2,491       2.2%      87,678     2,818       3.2%      86,240     3,559       4.1%
                             -------    ------                -------    ------                -------    ------
Loans and advances to banks
In German offices..........   18,509       464       2.5%      15,708       454       2.9%      22,028       744       3.4%
In non-German offices......    6,883       311       4.5%       9,966       343       3.4%      18,009       776       4.3%
                             -------    ------                -------    ------                -------    ------
Total......................   25,392       775       3.1%      25,674       797       3.1%      40,037     1,520       3.8%
                             -------    ------                -------    ------                -------    ------
Loans and advances to
customers
In German offices..........   90,720     4,452       4.9%     112,709     5,490       4.9%     131,346     8,339       6.3%
In non-German offices......   39,246     2,137       5.4%      45,760     2,413       5.3%      56,144     3,741       6.7%
                             -------    ------                -------    ------                -------    ------
Total......................  129,966     6,589       5.1%     158,469     7,903       5.0%     187,490    12,080       6.4%
                             -------    ------                -------    ------                -------    ------
Securities purchased under
resale agreements
In German offices..........   91,306     2,602       2.8%      56,213     2,109       3.8%      46,890     2,267       4.8%
In non-German offices......   27,492       851       3.1%      38,059       794       2.1%      41,254     1,545       3.7%
                             -------    ------                -------    ------                -------    ------
Total......................  118,798     3,453       2.9%      94,272     2,903       3.1%      88,144     3,812       4.3%
                             -------    ------                -------    ------                -------    ------
Investment securities(1)
In German offices..........    7,563       306       4.0%      35,017     1,584       4.5%      59,346     2,929       4.9%
In non-German offices......    9,179       319       3.5%       9,893       401       4.1%      10,577       469       4.4%
                             -------    ------                -------    ------                -------    ------
Total......................   16,742       625       3.7%      44,910     1,985       4.4%      69,923     3,398       4.9%
                             -------    ------                -------    ------                -------    ------
Total interest-earning
  assets...................  403,151    13,933       3.5%     411,003    16,406       4.0%     471,834    24,369       5.2%
                             -------    ------                -------    ------                -------    ------
Non-interest-earning assets
In German offices..........   38,581                           49,686                           49,006
In non-German offices......   30,868                           29,206                           22,101
                             -------                          -------                          -------
Total non-interest-earning
Assets.....................   69,449                           78,892                           71,107
                             -------                          -------                          -------
Total assets...............  472,600                          489,895                          542,941
                             =======                          =======                          =======
Percent of assets
  attributable to
Non-German offices.........     30.0%                            33.3%                            32.8%


                                       137




                                                                 YEAR ENDED DECEMBER 31,
                             ------------------------------------------------------------------------------------------------
                                          2003                             2002                             2001
                             ------------------------------   ------------------------------   ------------------------------
                                       INTEREST    AVERAGE              INTEREST    AVERAGE              INTEREST    AVERAGE
                             AVERAGE   INCOME/     YIELD/     AVERAGE   INCOME/     YIELD/     AVERAGE   INCOME/     YIELD/
                             BALANCE   EXPENSE    RATE IN %   BALANCE   EXPENSE    RATE IN %   BALANCE   EXPENSE    RATE IN %
                             -------   --------   ---------   -------   --------   ---------   -------   --------   ---------
                                                              (E IN MILLIONS, EXCEPT % DATA)
                                                                                         
LIABILITIES AND
SHAREHOLDERS' EQUITY
Liabilities to banks(2)
In German offices..........   86,172     2,000       2.3%      58,881     1,978       3.4%      71,681     2,765       3.9%
In non-German offices......   13,784       754       5.5%      23,284     1,081       4.6%      30,217     2,301       7.6%
                             -------    ------                -------    ------                -------    ------
Total......................   99,956     2,754       2.8%      82,165     3,059       3.7%     101,898     5,066       5.0%
                             -------    ------                -------    ------                -------    ------
Liabilities to customers(2)
In German offices..........   57,486     1,740       3.0%      71,296     1,906       2.7%      99,113     2,713       2.7%
In non-German offices......   37,211       910       2.4%      36,977     1,126       3.0%      46,628     1,653       3.5%
                             -------    ------                -------    ------                -------    ------
Total......................   94,697     2,650       2.8%     108,273     3,032       2.8%     145,741     4,366       3.0%
                             -------    ------                -------    ------                -------    ------
Securities sold under
repurchase agreements
In German offices..........   58,997     1,719       2.9%      40,328     1,544       3.8%      39,327     1,958       5.0%
In non-German offices......   17,568       638       3.6%      26,840       588       2.2%      37,548     1,315       3.5%
                             -------    ------                -------    ------                -------    ------
Total......................   76,565     2,357       3.1%      67,168     2,132       3.2%      76,875     3,273       4.3%
                             -------    ------                -------    ------                -------    ------
Subordinated liabilities
In German offices..........    3,757       173       4.6%       4,541       206       4.5%       4,439       189       4.3%
In non-German offices......    3,836       194       5.1%       4,661       361       7.7%       4,793       458       9.6%
                             -------    ------                -------    ------                -------    ------
Total......................    7,593       367       4.8%       9,202       567       6.2%       9,232       647       7.0%
                             -------    ------                -------    ------                -------    ------
Certificated liabilities(2)
In German offices..........   13,745       537       3.9%      42,166     2,507       5.9%      71,266     4,628       6.5%
In non-German offices......   40,093     1,365       3.4%      56,854     2,108       3.7%      44,657     2,440       5.5%
                             -------    ------                -------    ------                -------    ------
Total......................   53,838     1,902       3.5%      99,020     4,615       4.7%     115,923     7,068       6.1%
                             -------    ------                -------    ------                -------    ------
Profit participation
certificates outstanding
In German offices..........    1,515       111       7.3%       1,771       133       7.5%       2,052        76       3.7%
Total......................    1,515       111       7.3%       1,771       133       7.5%       2,052        76       3.7%
                             -------    ------                -------    ------                -------    ------
Total interest-bearing
Liabilities................  334,164    10,141       3.0%     367,599    13,538       3.7%     451,721    20,496       4.5%
                             -------    ------                -------    ------                -------    ------
Non-interest-bearing
  liabilities
In German offices..........   89,562                           64,014                           34,196
In non-German offices......   36,447                           39,288                           34,576
Total non-interest-bearing
Liabilities................  126,009                          103,302                           68,772
                             -------                          -------                          -------
Shareholders' equity.......   12,427                           18,994                           22,448
                             -------                          -------                          -------
Total liabilities and
shareholders' equity.......  472,600                          489,895                          542,941
                             =======                          =======                          =======
Percent of liabilities
attributable to non-German
offices....................     32.4%                            39.9%                            38.1%


                                       138


---------------

(1) The average yields for investment securities available for sale have been
    calculated using amortized cost balances and do not include changes in fair
    value recorded within a component of shareholders' equity. The average
    yields for investment securities held to maturity have been calculated using
    amortized cost balances.

(2) Interest-bearing deposits have been presented within liabilities to banks
    and liabilities to customers; certificates of deposit have been presented
    within certificated liabilities.

NET INTEREST MARGIN

     The following table sets forth the average total interest-earning assets,
net interest earned and the net interest margin of our banking operations.



                                                             YEAR ENDED DECEMBER 31,
                                                          ------------------------------
                                                            2003       2002       2001
                                                          --------   --------   --------
                                                          (E IN MILLIONS, EXCEPT % DATA)
                                                                       
Average total interest-earning assets...................  403,151    411,003    471,834
Net interest earned(1)..................................    3,792      2,868      3,873
Net interest margin in %(2).............................     0.94%      0.70%      0.82%


---------------

(1) Net interest earned is defined as total interest income less total interest
    expense.

(2) Net interest margin is defined as net interest earned divided by average
    total interest-earning assets.

                                       139


     The following table sets forth an allocation of changes in interest income,
interest expense and net interest income between changes in the average volume
and changes in the average interest rates for the two most recent years. Volume
and interest rate variances have been calculated based on movements in average
balances over the period and changes in interest rates on average
interest-earning assets and average interest-bearing liabilities. Changes due to
a combination of volume and rate are allocated proportionally to the absolute
change in volume and rate.



                                                           YEAR ENDED DECEMBER 31,
                                 ---------------------------------------------------------------------------
                                            2003 OVER 2002                         2002 OVER 2001
                                 ------------------------------------   ------------------------------------
                                          INCREASE/(DECREASE) DUE TO             INCREASE/(DECREASE) DUE TO
                                                  CHANGE IN:                             CHANGE IN:
                                          ---------------------------            ---------------------------
                                           AVERAGE                                AVERAGE
                                 TOTAL    INTEREST                      TOTAL    INTEREST
                                 CHANGE     RATE      AVERAGE VOLUME    CHANGE     RATE      AVERAGE VOLUME
                                 ------   ---------   ---------------   ------   ---------   ---------------
                                                               (E IN MILLIONS)
                                                                           
INTEREST INCOME
Trading securities
  In German offices............     43       (595)           638         (394)      (441)            47
  In non-German offices........   (370)      (295)           (75)        (347)      (354)             7
                                 ------    ------         ------        ------    ------         ------
  Total........................   (327)      (890)           563         (741)      (795)            54
                                 ------    ------         ------        ------    ------         ------
Loans and advances to banks
  In German offices............     10        (65)            75         (290)       (97)          (193)
  In non-German offices........    (32)        91           (123)        (433)      (135)          (298)
                                 ------    ------         ------        ------    ------         ------
  Total........................    (22)        26            (48)        (723)      (232)          (491)
                                 ------    ------         ------        ------    ------         ------
Loans and advances to customers
  In German offices............  (1,038)       41         (1,079)       (2,849)   (1,770)        (1,079)
  In non-German offices........   (276)        77           (353)       (1,328)     (704)          (624)
                                 ------    ------         ------        ------    ------         ------
  Total........................  (1,314)      118         (1,432)       (4,177)   (2,474)        (1,703)
                                 ------    ------         ------        ------    ------         ------
Securities purchased under
  resale agreements
  In German offices............    493       (595)         1,088         (158)      (561)           403
  In non-German offices........     57        316           (259)        (751)      (639)          (112)
                                 ------    ------         ------        ------    ------         ------
  Total........................    550       (279)           829         (909)    (1,200)           291
                                 ------    ------         ------        ------    ------         ------
Investment securities
  In German offices............  (1,278)     (152)        (1,126)       (1,345)     (227)        (1,118)
  In non-German offices........    (82)       (54)           (28)         (68)       (39)           (29)
                                 ------    ------         ------        ------    ------         ------
  Total........................  (1,360)     (206)        (1,154)       (1,413)     (266)        (1,147)
                                 ------    ------         ------        ------    ------         ------
Total interest income..........  (2,473)   (1,231)        (1,242)       (7,963)   (4,967)        (2,996)
                                 ------    ------         ------        ------    ------         ------


                                       140




                                                           YEAR ENDED DECEMBER 31,
                                 ---------------------------------------------------------------------------
                                            2003 OVER 2002                         2002 OVER 2001
                                 ------------------------------------   ------------------------------------
                                          INCREASE/(DECREASE) DUE TO             INCREASE/(DECREASE) DUE TO
                                                  CHANGE IN:                             CHANGE IN:
                                          ---------------------------            ---------------------------
                                           AVERAGE                                AVERAGE
                                 TOTAL    INTEREST                      TOTAL    INTEREST
                                 CHANGE     RATE      AVERAGE VOLUME    CHANGE     RATE      AVERAGE VOLUME
                                 ------   ---------   ---------------   ------   ---------   ---------------
                                                               (E IN MILLIONS)
                                                                           
INTEREST EXPENSE
Liabilities to banks
  In German offices............     22       (725)           747         (787)      (331)          (456)
  In non-German offices........   (327)       169           (496)       (1,220)     (768)          (452)
                                 ------    ------         ------        ------    ------         ------
  Total........................   (305)      (556)           251        (2,007)   (1,099)          (908)
                                 ------    ------         ------        ------    ------         ------
Liabilities to customers
  In German offices............   (166)       232           (398)        (807)       (62)          (745)
  In non-German offices........   (216)      (223)             7         (527)      (213)          (314)
                                 ------    ------         ------        ------    ------         ------
  Total........................   (382)         9           (391)       (1,334)     (275)        (1,059)
                                 ------    ------         ------        ------    ------         ------
Securities sold under
  repurchase agreements
  In German offices............    175       (427)           602         (414)      (463)            49
  In non-German offices........     50        300           (250)        (727)      (413)          (314)
                                 ------    ------         ------        ------    ------         ------
  Total........................    225       (127)           352        (1,141)     (876)          (265)
                                 ------    ------         ------        ------    ------         ------
Subordinated liabilities
  In German offices............    (33)         2            (35)          17         13              4
  In non-German offices........   (167)      (111)           (56)         (97)       (85)           (12)
                                 ------    ------         ------        ------    ------         ------
  Total........................   (200)      (109)           (91)         (80)       (72)            (8)
                                 ------    ------         ------        ------    ------         ------
Certificated liabilities
  In German offices............  (1,970)     (665)        (1,305)       (2,121)     (363)        (1,758)
  In non-German offices........   (743)      (161)          (582)        (332)      (900)           568
                                 ------    ------         ------        ------    ------         ------
  Total........................  (2,713)     (826)        (1,887)       (2,453)   (1,263)        (1,190)
                                 ------    ------         ------        ------    ------         ------
Profit participation
  certificates outstanding
  In German offices............    (22)        (3)           (19)          57         69            (12)
  Total........................    (22)        (3)           (19)          57         69            (12)
                                 ------    ------         ------        ------    ------         ------
TOTAL INTEREST EXPENSE.........  (3,397)   (1,612)        (1,785)       (6,958)   (3,516)        (3,442)
                                 ------    ------         ------        ------    ------         ------
CHANGE IN TAXABLE NET INTEREST
  INCOME.......................    924        381            543        (1,005)   (1,451)           446
                                 ======    ======         ======        ======    ======         ======


                                       141


RETURN ON EQUITY AND ASSETS

     The following table sets forth the net income, average shareholders' equity
and selected financial information and ratios of our banking operations.



                                                                 YEAR ENDED DECEMBER 31,
                                                              ------------------------------
                                                                2003       2002       2001
                                                              --------   --------   --------
                                                              (E IN MILLIONS, EXCEPT % DATA)
                                                                           
Net (loss)/income...........................................   (1,816)      (944)       539
Average shareholders' equity................................   12,427     18,994     22,448
Return on assets in %(1)....................................    (0.38)%    (0.19)%     0.10%
Return on equity in %(2)....................................   (14.61)%    (4.97)%     2.40%
Equity to assets ratio in %(3)..............................     2.63%      3.88%      4.13%


---------------

(1) Return on assets is defined as net (loss)/income of our banking operations
    divided by average total assets of our banking operations.

(2) Return on equity is defined as net (loss)/income of our banking operations
    divided by average shareholders' equity of our banking operations.

(3) Equity to assets ratio is defined as average shareholders' equity of our
    banking operations divided by average total assets of our banking
    operations.

TRADING AND INVESTMENT SECURITIES

     The following table sets forth the book value of trading and investment
securities held by our banking operations by type of issuer. The allocation
between German and non-German components is based on the domicile of the issuer.



                                                                   AT DECEMBER 31,
                                                           --------------------------------
                                                            2003      2002           2001
                                                           -------   ------         -------
                                                                   (E IN MILLIONS)
                                                                           
TRADING SECURITIES
  GERMAN:
     Federal and state government and government agency
       debt securities...................................   19,764   14,304           8,267
     Local government debt securities....................    4,384    2,573           3,153
     Corporate debt securities...........................   31,319   34,645          35,326
     Mortgage-backed securities..........................      315      403              50
     Equity securities...................................    1,636      412           1,147
                                                           -------   ------         -------
     German total........................................   57,418   52,337          47,943
                                                           -------   ------         -------
  NON-GERMAN:
     U.S. Treasury and other U.S. government agency debt
       securities........................................    5,107    5,798             802
     Other government and official institution debt
       securities........................................   28,424   23,568          29,509
     Corporate debt securities...........................   19,468    8,066          12,667
     Mortgage-backed securities..........................      543    1,021             474
     Equity securities...................................   13,216    8,668          13,917
                                                           -------   ------         -------
     Non-German total....................................   66,758   47,121          57,369
                                                           -------   ------         -------
TOTAL TRADING SECURITIES.................................  124,176   99,458         105,312
                                                           =======   ======         =======


                                       142




                                                                   AT DECEMBER 31,
                                                           --------------------------------
                                                            2003      2002           2001
                                                           -------   ------         -------
                                                                   (E IN MILLIONS)
                                                                           
SECURITIES AVAILABLE FOR SALE
  GERMAN:
     Federal and state government and government agency
       debt securities...................................    1,036      581           6,691
     Local government debt securities....................    1,591    1,840          24,842
     Corporate debt securities...........................    5,666    7,534          21,566
     Mortgage-backed and other debt securities...........       14       22              63
     Equity securities...................................    2,828    3,951           7,003
                                                           -------   ------         -------
     German total........................................   11,135   13,928(1)       60,165
                                                           -------   ------         -------
  NON-GERMAN:
     U.S. Treasury and other U.S. government agency debt
       securities........................................      246      227             453
     Other government and official institution debt
       securities........................................    1,792    2,550           6,884
     Corporate debt securities...........................    3,561    5,337           6,270
     Mortgage-backed and other debt securities...........      905      520             105
     Equity securities...................................    4,213    3,097           3,297
                                                           -------   ------         -------
     Non-German total....................................   10,717   11,731          17,009
                                                           -------   ------         -------
TOTAL SECURITIES AVAILABLE FOR SALE......................   21,852   25,659          77,174
                                                           =======   ======         =======
SECURITIES HELD TO MATURITY
  GERMAN:
     Mortgage-backed securities..........................       --       --             301
                                                           -------   ------         -------
     German total........................................       --       --             301
                                                           -------   ------         -------
  NON-GERMAN:
     Other government and official institution debt
       securities........................................       96      579             558
     Corporate debt securities...........................       --      145             152
                                                           -------   ------         -------
     Non-German total....................................       96      724             710
                                                           -------   ------         -------
TOTAL SECURITIES HELD TO MATURITY........................       96      724           1,011
                                                           =======   ======         =======


---------------

(1) Change from 2001 to 2002 reflects primarily the August 2002 deconsolidation
    of Deutsche Hyp.

     At December 31, 2003, our banking operations held ordinary shares of Munich
Re that had a book value in excess of ten percent of the shareholders' equity of
our banking operations. The aggregate shareholders' equity of Dresdner Bank and
our other banking operations was approximately E12,460 million at December 31,
2003. The aggregate book value and market value of such ordinary shares of
Munich Re were E1,627 million at December 31, 2003.

                                       143


MATURITY ANALYSIS OF DEBT INVESTMENT SECURITIES

     The following table sets forth an analysis of the contractual maturity and
weighted average yields of our banking operations' debt investment securities.
Actual maturities may differ from contractual maturity dates because issuers may
have the right to call or prepay obligations. The allocation between German and
non-German components is based on the domicile of the issuer.



                                                       AT DECEMBER 31, 2003
                                      -------------------------------------------------------
                                                 DUE AFTER    DUE AFTER
                                       DUE IN     ONE YEAR    FIVE YEARS
                                      ONE YEAR    THROUGH      THROUGH     DUE AFTER
                                      OR LESS    FIVE YEARS   TEN YEARS    TEN YEARS   TOTAL
                                      --------   ----------   ----------   ---------   ------
                                                     (E IN MILLIONS, EXCEPT %)
                                                                        
SECURITIES AVAILABLE FOR SALE
  GERMAN:
     Federal and state government
       and government agency debt
       securities...................      59         727           70         180       1,036
     Local government debt
       securities...................     111         932          332         216       1,591
     Corporate debt securities......   1,130       3,929          498         109       5,666
     Mortgage-backed and other debt
       securities...................      14          --           --          --          14
                                       -----       -----        -----         ---      ------
     German total...................   1,314       5,588          900         505       8,307
                                       -----       -----        -----         ---      ------
  NON-GERMAN:
     U.S. Treasury and other U.S.
       government agency debt
       securities...................       6          93           94          53         246
     Other government and official
       institution debt
       securities...................     618         493          507         174       1,792
     Corporate debt securities......   2,012       1,066          418          65       3,561
     Mortgage-backed and other debt
       securities...................     643         168           82          12         905
                                       -----       -----        -----         ---      ------
     Non-German total...............   3,279       1,820        1,101         304       6,504
                                       -----       -----        -----         ---      ------
TOTAL SECURITIES AVAILABLE FOR
  SALE..............................   4,593       7,408        2,001         809      14,811
                                       =====       =====        =====         ===      ======
WEIGHTED AVERAGE YIELD IN %.........     3.1         3.1          4.6         4.9         4.1
SECURITIES HELD TO MATURITY
  GERMAN:
       Mortgage-backed securities...      --          --           --          --          --
                                       -----       -----        -----         ---      ------
     German total...................      --          --           --          --          --
                                       -----       -----        -----         ---      ------
  NON-GERMAN:
       Other government and official
          institution debt
          securities................      --          96           --          --          96
       Corporate debt securities....      --          --           --          --          --
                                       -----       -----        -----         ---      ------
       Non-German total.............      --          96           --          --          96
                                       -----       -----        -----         ---      ------
TOTAL SECURITIES HELD TO MATURITY...      --          96           --          --          96
                                       =====       =====        =====         ===      ======
WEIGHTED AVERAGE YIELD IN %.........      --         7.4           --          --         7.4


                                       144


LOAN PORTFOLIO

     The following table sets forth an analysis of our loan portfolio, excluding
allowances for loan losses, net of unearned income, according to the industry
sector of borrowers. The allocation between German and non-German components is
based on the domicile of the borrower.



                                                       AT DECEMBER 31,
                                       -----------------------------------------------
                                        2003      2002      2001      2000      1999
                                       -------   -------   -------   -------   -------
                                                       (E IN MILLIONS)
                                                                
GERMAN:
  Corporate:
     Manufacturing industry..........    8,042     9,728    10,825    11,539    11,014
     Construction....................    1,063     1,226     1,813     2,042     2,228
     Wholesale and retail trade......    4,274     6,041     7,165     7,419     7,555
     Financial institutions
       (excluding banks) and
       insurance companies...........    2,959     2,810     4,896     4,196       926
     Banks...........................      276       611       517       601     2,342
     Service providers...............   12,953    13,797    22,943    21,326    23,658
     Other...........................    2,281     2,911     3,974     3,067     4,416
                                       -------   -------   -------   -------   -------
     Corporate total.................   31,848    37,124    52,133    50,190    52,139
                                       -------   -------   -------   -------   -------
  Public authorities.................      173       212       718       540       276
  Private individuals (including
     self-employed professionals)....   40,834    43,041    63,773    65,883    64,706
                                       -------   -------   -------   -------   -------
  German total.......................   72,855    80,377   116,624   116,613   117,121
                                       -------   -------   -------   -------   -------
NON-GERMAN:
  Corporate:
     Manufacturing industry,
       construction, wholesale and
       retail trade and service
       providers.....................   14,369    21,846    38,383    43,771    39,197
     Financial institutions
       (excluding banks) and
       insurance companies...........    6,617     6,312    10,285    10,166     8,100
     Banks...........................    3,704     3,348     5,157     6,287     6,645
     Other...........................    5,797     9,144     3,899     3,536     3,405
                                       -------   -------   -------   -------   -------
     Corporate total.................   30,487    40,650    57,724    63,760    57,347
                                       -------   -------   -------   -------   -------
  Public authorities.................      589     2,065     3,458       990     2,913
  Private individuals (including
     self-employed professionals)....   11,497    11,046    10,601    10,151     9,922
                                       -------   -------   -------   -------   -------
  Non-German total...................   42,573    53,761    71,783    74,901    70,182
                                       -------   -------   -------   -------   -------
  Total loans........................  115,428   134,138   188,407   191,514   187,303
                                       =======   =======   =======   =======   =======


     The following table sets forth our banking operations' mortgage loans and
finance leases that are included within the above analysis of loans.



                                                         AT DECEMBER 31,
                                            ------------------------------------------
                                             2003     2002     2001     2000     1999
                                            ------   ------   ------   ------   ------
                                                         (E IN MILLIONS)
                                                                 
Mortgage loans............................  38,191   39,683   57,315   61,303   60,587
Finance leases............................     933    1,104    2,414    1,430    1,778


                                       145


LOAN CONCENTRATIONS

     Although our loan portfolio is diversified across more than 161 countries,
at December 31, 2003 approximately 63.1% of our total loans were to borrowers in
Germany. At December 31, 2003, our largest credit exposures to borrowers in
Germany were loans to private individuals (including self-employed
professionals). Approximately 55.2% of these loans are residential mortgage
loans, which represent approximately 19.5% of our total loans. Our residential
mortgage loans include owner-occupied, single- and two-family homes and
apartment dwellings and investment properties. Our residential mortgage loans
are well diversified across all German states. Our remaining loans to private
individuals in Germany primarily include other consumer installment loans and
loans to self-employed professionals, which are also geographically diversified
across Germany. We have no other concentrations of loans to private individuals
(including self-employed professionals) in Germany in excess of ten percent of
our total loans.

     Our corporate customers are broadly diversified. At December 31, 2003,
approximately 11.2% of our total loans were to German corporate customers in
various service industries, including utilities, media, transportation and other
service providers. However, none of those industries are individually
significant to our domestic loan portfolio and we have no concentrations of
loans to borrowers in any services industry in excess of ten percent of our
total loans.

     At December 31, 2003, approximately 17.5% of our total loans were to
non-financial corporate borrowers outside Germany. These loans are well
diversified across various commercial industries, including:



                                                               PERCENT OF
                                                                 TOTAL
                                                                 LOANS
                                                               ----------
                                                            
Manufacturing industry......................................      4.1%
Construction................................................      2.2%
Wholesale and retail trade..................................      0.9%
Telecommunications..........................................      0.6%
Transportation..............................................      1.8%
Other service providers(1)..................................      2.9%
Other(2)....................................................      5.0%


---------------

(1) Other services providers include media, utilities, natural resources and
    other services.

(2) There are no significant concentrations of loans in any industry included in
    other non-financial corporate borrowers outside Germany.

     We have no concentrations of loans to non-financial corporate borrowers in
any industry in excess of ten percent of our total loans.

                                       146


MATURITY ANALYSIS OF LOAN PORTFOLIO

     The following table sets forth an analysis of the contractual maturity of
our loans at December 31, 2003. The allocation between German and non-German
components is based on the domicile of the borrower.



                                                           AT DECEMBER 31, 2003
                                               --------------------------------------------
                                                          DUE AFTER
                                                DUE IN     ONE YEAR
                                               ONE YEAR    THROUGH     DUE AFTER
                                               OR LESS    FIVE YEARS   FIVE YEARS    TOTAL
                                               --------   ----------   ----------   -------
                                                             (E IN MILLIONS)
                                                                        
GERMAN:
  Corporate:
     Manufacturing industry..................    5,268       1,922          852       8,042
     Construction............................      743         161          159       1,063
     Wholesale and retail trade..............    3,241         501          532       4,274
     Financial institutions (excluding banks)
       and insurance companies...............    1,932         548          479       2,959
     Banks...................................      142         115           19         276
     Service providers:
       Telecommunication.....................       45          13           --          58
       Transportation........................      277         395          205         877
       Other service providers...............    4,338       4,712        2,968      12,018
     Total service providers.................    4,660       5,120        3,173      12,953
     Other...................................    1,123         467          691       2,281
                                                ------      ------       ------     -------
     Corporate total.........................   17,109       8,834        5,905      31,848
                                                ------      ------       ------     -------
  Public authorities.........................      137           7           29         173
  Private individuals (including
     self-employed professionals):
     Residential mortgage loans..............    2,036       3,809       16,680      22,525
     Consumer installment loans..............    2,818          --           --       2,818
     Other...................................    2,835       4,318        8,338      15,491
  Total private individuals (including
     self-employed professionals)............    7,689       8,127       25,018      40,834
                                                ------      ------       ------     -------
  German total...............................   24,935      16,968       30,952      72,855
                                                ------      ------       ------     -------


                                       147




                                                           AT DECEMBER 31, 2003
                                               --------------------------------------------
                                                          DUE AFTER
                                                DUE IN     ONE YEAR
                                               ONE YEAR    THROUGH     DUE AFTER
                                               OR LESS    FIVE YEARS   FIVE YEARS    TOTAL
                                               --------   ----------   ----------   -------
                                                             (E IN MILLIONS)
                                                                        
NON-GERMAN:
  Corporate:
     Manufacturing industry..................    2,276       1,881          591       4,748
     Construction............................      455       1,180          825       2,460
     Wholesale and retail trade..............      594         392           80       1,066
     Service Providers:
       Telecommunication.....................      406          83          205         694
       Transportation........................      176       1,397          451       2,024
       Other service providers...............    1,704       1,091          582       3,377
     Total service providers.................    2,286       2,571        1,238       6,095
     Total manufacturing industry,
       construction, wholesale and retail
       trade and service providers...........    5,611       6,024        2,734      14,369
     Financial institutions (excluding banks)
       and insurance companies...............    2,530       2,306        1,781       6,617
     Banks...................................    2,505         794          405       3,704
     Other...................................    1,986       1,100        2,711       5,797
                                                ------      ------       ------     -------
     Corporate total.........................   12,632      10,224        7,631      30,487
                                                ------      ------       ------     -------
  Public authorities.........................      242         203          144         589
  Private individuals (including
     self-employed professionals):
     Residential mortgage loans..............      900       2,754        5,492       9,146
     Consumer installment loans..............      411          30            7         448
     Other...................................    1,075         318          510       1,903
  Total private individuals..................    2,386       3,102        6,009      11,497
                                                ------      ------       ------     -------
  Non-German total...........................   15,260      13,529       13,784      42,573
                                                ------      ------       ------     -------
TOTAL LOANS..................................   40,195      30,497       44,736     115,428
                                                ======      ======       ======     =======


                                       148


     The following table sets forth the total amount of loans due after one year
with predetermined interest rates and floating or adjustable interest rates at
December 31, 2003. Loans with predetermined interest rates are loans for which
the interest rate is fixed for the entire term of the loan. All other loans are
considered floating or adjustable interest rate loans. The allocation between
German and non-German components is based on the domicile of the borrower.



                                                              AT DECEMBER 31, 2003
                                                    ----------------------------------------
                                                                       LOANS WITH
                                                      LOANS WITH      FLOATING OR
                                                    PREDETERMINED      ADJUSTABLE
                                                    INTEREST RATES   INTEREST RATES   TOTAL
                                                    --------------   --------------   ------
                                                                (E IN MILLIONS)
                                                                             
GERMAN:
  Private individuals (including self-employed
     professionals)...............................      29,296            3,849       33,145
  Corporate and public customers..................      10,246            4,529       14,775
German total......................................      39,542            8,378       47,920
NON-GERMAN:
  Private individuals (including self-employed
     professionals)...............................       2,651            6,460        9,111
  Corporate and public customers..................       3,057           15,145       18,202
Non-German total..................................       5,708           21,605       27,313
                                                        ------           ------       ------
Total.............................................      45,250           29,983       75,233
                                                        ======           ======       ======


RISK ELEMENTS

NON-PERFORMING LOANS

     The following table sets forth the outstanding balance of our
non-performing loans. The allocation between German and non-German components is
based on the domicile of the borrower.



                                                           AT DECEMBER 31,
                                               ---------------------------------------
                                               2003     2002     2001    2000    1999
                                               -----   ------   ------   -----   -----
                                                           (E IN MILLIONS)
                                                                  
NONACCRUAL LOANS:
  German.....................................  6,459    7,355    8,751   7,991   7,516
  Non-German.................................  2,236    3,097    2,404   1,928   1,618
                                               -----   ------   ------   -----   -----
  Total nonaccrual loans.....................  8,695   10,452   11,155   9,919   9,134
                                               =====   ======   ======   =====   =====
LOANS PAST DUE 90 DAYS AND STILL ACCRUING
  INTEREST:
  German.....................................    477      644    1,640   1,238   1,526
  Non-German.................................    183      151      309     300     305
                                               -----   ------   ------   -----   -----
  Total loans past due 90 days and still
     accruing Interest.......................    660      795    1,949   1,538   1,831
                                               =====   ======   ======   =====   =====
TROUBLED DEBT RESTRUCTURINGS:
  German.....................................     26       65      215     253     261
  Non-German.................................    200      313      336     323     289
                                               -----   ------   ------   -----   -----
  Total troubled debt restructurings.........    226      378      551     576     550
                                               =====   ======   ======   =====   =====


                                       149


NONACCRUAL LOANS

     Nonaccrual loans are loans on which interest income is no longer recognized
on an accrual basis and loans for which a specific provision is recorded for the
full amount of accrued interest receivable. We place loans on nonaccrual status
when we determine, based on management's judgment, that the payment of interest
or principal is doubtful.

     When a loan is placed on nonaccrual status, any accrued and unpaid interest
receivable is reversed and charged against interest income. We restore loans to
accrual status only when interest and principal are made current in accordance
with the contractual terms and, in management's judgment, future payments are
reasonably assured. When we have doubts about the ultimate collectibility of the
principal of a loan placed on nonaccrual status, all cash receipts are recorded
as reductions in principal. Once the recorded principal amount of the loan is
reduced to zero, future cash receipts are recognized as interest income. For all
remaining loans, interest income is recognized when received.

LOANS PAST DUE 90 DAYS AND STILL ACCRUING INTEREST

     Loans past due 90 days and still accruing interest are loans that are
contractually past due 90 days or more as to principal or interest on which we
continue to recognize interest income on an accrual basis.

TROUBLED DEBT RESTRUCTURINGS

     Troubled debt restructurings are loans that we have restructured due to a
deterioration in the borrower's financial position and in relation to which, for
economic or legal reasons related to the borrower's deteriorated financial
position, we have granted a concession to the borrower that we would not have
otherwise granted.

INTEREST INCOME ON NON-PERFORMING LOANS

     The following table sets forth the gross interest income that would have
been recorded during the year ended December 31, 2003 on nonaccrual loans and
troubled debt restructurings if such loans had been current in accordance with
their original contractual terms and the interest income on such loans that was
actually included in interest income during the year ended December 31, 2003.



                                                          YEAR ENDED DECEMBER 31, 2003
                                                        ---------------------------------
                                                        IN GERMAN   IN NON-GERMAN
                                                         OFFICES       OFFICES      TOTAL
                                                        ---------   -------------   -----
                                                                 (E IN MILLIONS)
                                                                           
Interest income that would have been recorded in
  accordance with the original contractual terms......     265           119         384
Interest income actually recorded.....................      38            18          56


POTENTIAL PROBLEM LOANS

     Potential problem loans are loans that are not classified as nonaccrual
loans, loans past due 90 days and still accruing interest or troubled debt
restructurings, but where known information about possible credit problems
causes us to have serious doubts as to the ability of the borrower to comply
with the present loan repayment terms and which may result in classifying the
loans in one of the three categories of non-performing loans described above.
The outstanding balance of our potential problem loans was E1,717 million at
December 31, 2003, a decrease of E720 million, or 29.5% from E2,437 million at
December 21, 2002.

     Each of our potential problem loans has been subject to our normal credit
monitoring and review procedures. Of these loans, approximately E423 million
have a specific loss allowance. The remaining loans have also been reviewed for
impairment, however, based on our estimated measurement of the impairment, no
specific loss allowance has been recorded on such loans.

     Approximately 40% and 2% of our potential problem loans are to private
individuals in Germany and Europe (outside Germany), respectively. The remaining
loans are to corporate borrowers in manufacturing,

                                       150


construction, wholesale and retail trade, telecommunication, transportation and
other services, including media, utilities, natural resources and other services
and other industry sectors. Our potential problem loans to corporate borrowers
are diversified across the following geographic regions based on the domicile of
the borrower:



                                                               AT DECEMBER 31, 2003
                                                               --------------------
                                                                 PERCENT OF TOTAL
                                                                POTENTIAL PROBLEM
                                                                      LOANS
                                                               --------------------
                                                            
Germany.....................................................            31%
North America...............................................             4%
Europe (excluding Germany)..................................             2%
Latin America...............................................            17%
Asia/Pacific................................................             3%
Middle East/Africa..........................................             1%


FOREIGN OUTSTANDINGS

     Cross-border outstandings consist of loans, net of allowances for loan
losses, accrued interest receivable, acceptances, interest-bearing deposits with
other banks, other interest-bearing investments and other monetary assets that
either are recorded in an office that is not in the same country as the domicile
of the borrower, guarantor, issuer or counter-party, or are denominated in a
currency that is not the local currency of the borrower, guarantor, issuer or
counter-party or are net local country claims. Net local country claims are
domestic claims recorded in offices outside Germany that are denominated in
local or foreign currency and that are not funded by liabilities in the same
currency as the claim and recorded in the same office.

     Our cross-border outstandings are allocated by country based on the country
of domicile of the borrower, guarantor, issuer or counter-party of the ultimate
credit risk. We set limits on and monitor actual cross-border outstandings on a
country-by-country basis based on transfer, economic and political risks.

     The following table sets forth our cross-border outstandings by geographic
location for countries that exceeded 0.75% of the total assets of our banking
operations. At December 31, 2003, there were no cross-border outstandings that
exceeded 0.50% of the total assets of our banking operations in any country
currently facing debt restructurings or liquidity problems that we expect would
materially impact the borrowers' ability to repay their obligations.



                                                                        AT DECEMBER 31, 2003
                                   ----------------------------------------------------------------------------------------------
                                    GOVERNMENT     BANKS AND                NET LOCAL   TOTAL CROSS-    PERCENT
                                   AND OFFICIAL    FINANCIAL                 COUNTRY       BORDER      OF TOTAL     CROSS-BORDER
                                   INSTITUTIONS   INSTITUTIONS   OTHER(1)    CLAIMS     OUTSTANDINGS   ASSETS(2)   COMMITMENTS(3)
                                   ------------   ------------   --------   ---------   ------------   ---------   --------------
                                                                     (E IN MILLIONS, EXCEPT %)
                                                                                              
COUNTRY
United States....................     1,776          6,332        4,266         --         12,374        2.48%         1,850
United Kingdom...................       633          4,276        2,051         98          7,058        1.42%         3,635
France...........................     2,950          3,437        1,282         13          7,682        1.54%         2,604
Italy............................     1,445            941          155        748          3,289        0.66%         2,663
Netherlands......................       560          4,967          763         --          6,290        1.26%         1,436
Switzerland......................        83          3,388          754        174          4,399        0.88%           722
Spain............................     1,673            916          264         --          2,853        0.57%           147
Cayman Islands...................        15          5,196          474         --          5,685        1.14%         5,963


                                       151




                                                                        AT DECEMBER 31, 2002
                                   ----------------------------------------------------------------------------------------------
                                    GOVERNMENT     BANKS AND                NET LOCAL   TOTAL CROSS-    PERCENT
                                   AND OFFICIAL    FINANCIAL                 COUNTRY       BORDER      OF TOTAL     CROSS-BORDER
                                   INSTITUTIONS   INSTITUTIONS   OTHER(1)    CLAIMS     OUTSTANDINGS   ASSETS(2)   COMMITMENTS(3)
                                   ------------   ------------   --------   ---------   ------------   ---------   --------------
                                                                     (E IN MILLIONS, EXCEPT %)
                                                                                              
COUNTRY
United States....................     1,853          4,708        3,963          --        10,524        2.53%         13,100
United Kingdom...................       718          3,048        2,803       3,583        10,152        2.44%          5,421
France...........................     1,035          3,596        1,511          56         6,198        1.49%          2,498
Italy............................     6,194          1,573          202       1,932         9,901        2.38%            649
Netherlands......................       400          3,233        1,064          --         4,697        1.13%          1,972
Switzerland......................        79          1,701          964          --         2,744        0.66%            942
Spain............................       829            948          519          --         2,296        0.55%            148
Cayman Islands...................         9          2,364          127           1         2,501        0.60%          7,994




                                                                        AT DECEMBER 31, 2001
                                   ----------------------------------------------------------------------------------------------
                                    GOVERNMENT     BANKS AND                NET LOCAL   TOTAL CROSS-    PERCENT
                                   AND OFFICIAL    FINANCIAL                 COUNTRY       BORDER      OF TOTAL     CROSS-BORDER
                                   INSTITUTIONS   INSTITUTIONS   OTHER(1)    CLAIMS     OUTSTANDINGS   ASSETS(2)   COMMITMENTS(3)
                                   ------------   ------------   --------   ---------   ------------   ---------   --------------
                                                                     (E IN MILLIONS, EXCEPT %)
                                                                                              
COUNTRY
United States....................      1,266         8,200        7,135       1,178        17,779        3.38%         14,301
United Kingdom...................        354         9,472        2,495          --        12,321        2.34%          7,137
France...........................        556         6,834        4,020          --        11,410        2.17%            124
Italy............................     11,320         1,344          361       1,088        14,113        2.68%          2,409
Netherlands......................      1,408         4,561        2,105          --         8,074        1.54%             --
Switzerland......................         86         2,995        1,887          --         4,968        0.94%            219
Spain............................      2,509         1,530        1,004          32         5,075        0.97%            133
Cayman Islands...................         --         2,624          719          --         3,343        0.64%            266


---------------

(1) Other includes insurance, commercial, industrial, service providers and
    other corporate counter-parties.

(2) Percent of total assets is defined as total cross-border outstandings
    divided by total assets of our banking operations. The total assets of our
    banking operations were E498 billion, E415 billion, and E526 billion at
    December 31, 2003, 2002 and 2001, respectively.

(3) Cross-border commitments have been presented separately as they are not
    included as cross-border outstandings unless utilized.

     Total cross-border outstandings disclosed above included E154 million, E945
million and E668 million of gross loans outstanding to borrowers in the United
States that are also disclosed within the category of non-performing loans at
December 31, 2003, 2002 and 2001, respectively. At December 31, 2003, there were
no material cross-border outstandings disclosed above that were also disclosed
within the category of potential problem loans. At December 31, 2002 total
cross-border outstandings disclosed above also included E126 million of gross
loans outstanding to borrowers in the United States that are also disclosed
within the category of potential problem loans as of December 31, 2002.

SUMMARY OF LOAN LOSS EXPERIENCE

     The following discussion of loan loss allowances refers to the banking
operations of Dresdner Bank, which represents substantially all of our banking
segment, as our other banking operations have not historically been significant.

                                       152


     We establish allowances for loan losses in our loan portfolio that
represent management's estimate of probable losses at the balance sheet date. We
calculate an allowance for each of the following risks that are allocable to
identified loans or groups of loans in our portfolio:

     - a specific loan loss allowance for impaired loans;

     - a general loan loss allowance for impairments that have been incurred but
       are not yet identified; and

     - an allowance for transfer risk, or country risk allowance.

     We do not maintain any additional reserves that are not allocable to
specifically identified loans or groups of loans in the portfolio.

SPECIFIC LOAN LOSS ALLOWANCE

     A specific loan loss allowance is established to provide for specifically
identified counter-party risks. Loans are identified as impaired if it is
probable that borrowers are no longer able to make their contractually
agreed-upon interest and principal payments. Specific loan loss allowances are
established for impaired loans. We calculate the specific loan loss allowance
based on the guidance provided in the International Accounting Standards Board's
International Accounting Standard (IAS) 39, Financial Instruments: Recognition
and Measurement and the Financial Accounting Standards Boards of Financial
Accounting Standard (SFAS) 114, Accounting by Creditors for Impairment of a
Loan, according to which an impaired loan should be recorded at its estimated
recoverable amount either directly, or through the use of an allowance account
by recording a charge to the income statement. The estimated recoverable amount
is the present value of expected future cash flows discounted at the loan's
original effective interest rate, or if the loan is collateral dependent and
foreclosure on the loan is probable, the fair value of the collateral, or if
there is an observable market for the loan, the market value of the loan. If the
amount of the impairment subsequently increases or decreases due to an event
occurring after the initial measurement of impairment, a change in the allowance
is recognized in earnings by a charge or a credit to net loan loss provisions.

     We evaluate our loans based on portfolio segmentation, classified either as
homogeneous or non-homogeneous. Those loans included within the IRU, Dresdner
Kleinwort Wasserstein and Corporate Banking divisions are classified as
non-homogeneous, and are therefore evaluated individually. Loans within the
Private and Business Clients division, which are greater than E1 million are
also classified as non-homogeneous. All remaining loans are included in and then
reviewed together as a homogeneous portfolio. Prior to June 2003, we evaluated
each of our loans individually. Loans for which a specific loan loss allowance
had been previously established were evaluated on an individual basis if the
existing specific loan loss allowance was E0.5 million or more. Loans for which
a specific loan loss allowance of less than E0.5 million had been previously
established were aggregated into homogeneous portfolios by collateral types
(portfolio approach) for evaluation under IAS 39 and SFAS 114.

     We use an internal credit rating system implemented in 2002 to assign
ratings from 1 to 16 to each loan, within the non-homogeneous portfolio, on the
basis of specific quantitative and qualitative customer criteria, including
financial condition, historical earnings, management quality, and general
industry data, among others. Loans that are classified in the rating categories
15 and 16 are loans that are deemed to be impaired under IAS 39 and SFAS 114. In
addition, loans that carry ratings of 13 and 14 are reviewed for potential
impairment. Prior to 2002, we used an internal credit rating system that
assigned ratings from 1 to 8 to each loan. We determine the impairment provision
on the homogeneous portfolios by calculating the average loss rates and the
collection periods for different types of collateral and applying a weighted
average discount rate to these aggregated expected future cash flows. The
results of such calculations are subject to back-testing procedures, such as
individual evaluation of sample loans within particular sub-portfolios.

GENERAL LOAN LOSS ALLOWANCE

     General loan loss allowances are established to provide for incurred but
unidentified losses that are inherent in the loan portfolio as of the relevant
balance sheet date. General allowances for loan losses are established for loans
that are impaired but not yet identified as impaired due to the time lag between
the
                                       153


occurrence of an impairment event and the detection of that event by our credit
risk monitoring systems and controls. Such a time lag may occur due to intervals
between impairment tests, ratings reviews and/or a borrower's financial
reporting. In order to avoid layering or double counting of both specific and
general loan loss allowances, only those loans that have not been deemed
impaired under IAS 39 or SFAS 114 are included as part of the portfolio used to
establish the general loan loss allowance.

     The amount of the general loan loss allowance is based on historical loan
loss experience and management's evaluation of the loan portfolio under current
events and economic conditions. Toward this end, we follow a three-step process.

     First, we derive an economic measure of future expected credit losses over
a given time horizon, based on the application of historical loss data to the
loan portfolio as of the most recent balance sheet date. On the basis of the
individual ratings that we have assigned, we assign empiric probabilities of
default to loans with a similar rating. In a bottom-up process, we apply credit
risk parameters based on differentiation between the underlying risks (e.g.
probabilities of default by internal rating class and collateral recovery rates
by collateral types) to the position data of the loan portfolio. We calculate
probabilities of default using empiric historical data of Dresdner Bank's loan
portfolio, which serves as the basis for predicting future default rates within
our rating categories. We derive the expected loss from Dresdner Bank's
historical experience of the amount of the balance of a claim that is not likely
to be recovered based on the balance of the claim when the loan became impaired.
The result is an economic measure of the expected credit losses of each
individual loan, representing a probability-weighted amount of credit loss in
the event of a default over the measurement horizon. These amounts are
aggregated to the total portfolio level. Through a revolving analysis of actual
credit losses, we update the underlying credit risk parameters of our credit
risk models in order to improve the quality and reliability of our credit risk
measures.

     Second, we adjust the expected credit loss estimate, which reflects all
future credit losses regardless of the accounting period in which they are
expected to occur, to reflect only those credit losses that can be attributed to
the current accounting period as having already occurred, but as not yet having
been identified as of the most recent balance sheet date. These adjustments are
performed on the basis of loss emergence periods, which measure the average time
lag between the economic loss event and accounting recognition of the loss under
IAS 39 or SFAS 114. We generally use default horizons of between six and eight
months from the balance sheet date, depending on the portfolio. The resulting
amount is used as the basis for determining the general loan loss allowance.

     Third, since expected loss estimates are dependent on historical
information, which may not be representative of current circumstances, the
general loan loss allowance may be reviewed by Dresdner Bank senior management.
If we believe certain current factors such as internal lending practices or the
state of the broader credit cycle are not adequately reflected in the historical
credit risk parameters used to establish the general loan loss allowance, we
perform an additional qualitative analysis of the allowance. Modifications of
the allowance may then be proposed to Dresdner Bank's management board. Factors
for which such modifications of the general loan loss allowance may be made
include:

     - Levels of and trends in delinquencies and impaired loans;

     - Levels in and trends in recoveries of prior charge offs;

     - Trends in volume and terms of loans;

     - Effects of changes in lending policies and procedures;

     - Experience, ability, and depth of lending management and other relevant
       staff;

     - National and local trends and conditions; and

     - Credit concentrations.

                                       154


COUNTRY RISK ALLOWANCE

     Country risk allowances are established for transfer risk. Transfer risk is
a measure of the likely ability of a borrower in a certain country to repay its
foreign currency-denominated debt in light of the economic or political
situation prevailing in that country. We establish a country risk allowance for
loan exposures if serious doubts exist regarding a counterparty's ability to
comply with the repayment terms due to the economic or political situation
prevailing in the country of the domicile of the counterparty. We believe that
this risk represents an additional risk above and beyond the normal counterparty
risk.

     Country risk allowances are based on our country rating system that
incorporates current and historical economic, political and other data to
categorize countries by risk profile. Using this system, we define country risk
ratings from 1 to 8. Country risk allowances are established only for loans to
borrowers in countries that are classified in country risk rating categories 6,
7 and 8.

     Country risk allowances apply to loan transactions, acceptances and various
forms of import and export financing such as guarantees and commercial letters
of credit. We exclude certain loans from this assessment, including loans made
in local currency, certain short-term trade financing loans and loans that are
collateralized by assets in, or guaranteed by a party in, an economically and
politically stable country. Country risk allowances are not calculated for
traded products or off-balance sheet products. In order to avoid layering or
double counting of both specific loan loss allowances and country risk
allowances, the amount of the specific loan loss allowances are deducted from
the portfolio prior to determining the country risk allowance.

SELF-CORRECTING MECHANISMS

     The principal self-correcting mechanism used to reduce the difference
between estimated and actual observed losses is our practice of basing loss
estimates on our historical loss experience. Where actual observed losses differ
from estimated losses, information relating to the actual observed losses is
incorporated into the historical statistical data on which we base our estimates
and is accordingly reflected in our subsequent estimated losses. Similarly, the
credit default models that we use in calculating the general loan loss allowance
are updated to incorporate newly available statistical evidence on impairment
into the default calculations.

     In addition, Dresdner Bank reviews its loss estimates on a quarterly basis,
and, where such estimates differ from actual observed losses, makes appropriate
adjustment to the general loan loss allowance and/or the country risk allowance.

MOVEMENTS IN LOAN LOSS ALLOWANCE

     Primarily as a result of the continued reduction of exposures to corporate
customers in the United States, South America and Asia, as part of our strategic
plan to reduce our non-core lending activities outside of Europe, our total loan
portfolio decreased by E18,710 million, or 13.9%, to E115,428 million at
December 31, 2003 from E134,138 million at December 31, 2002. The reduction in
exposures to corporate borrowers was more than offset by the deterioration in
the credit quality of existing borrowers, reflecting the weakness in the current
global economic climate. Our non-performing loans decreased by E2,108 million,
or 18.1%, and potential problem loans decreased E720 million, or 29.5%, from
December 31, 2002 to December 31, 2003.

     As discussed above, when we establish a specific loan loss allowance in
relation to a particular loan, that loan is removed from the portfolio of loans
that is used as a basis for calculating the general loan loss allowance and the
country risk allowance. The establishment of a specific loan loss allowance may
therefore result indirectly in a decrease in the general loan loss allowance and
the country risk allowance, but no direct reallocation of allowances occurs.

     In 2003, we established significant specific loan loss allowances of E1,308
million in relation to approximately E13,800 million of loans to borrowers
included in our IRU division. Such loans were subsequently excluded from the
portfolio of loans used to calculate the general loan loss allowance and the
country risk allowance. The impact of specific loan loss allowances and exposure
reduction in those countries
                                       155


with country risk ratings of 6, 7 and 8 resulted in a decrease in the country
risk allowance of E81 million, primarily relating to exposures in Brazil,
Columbia, Indonesia and Argentina.

     In general, the comparatively high level of net loan loss provisions of
E1,014 million in 2003, together with the decrease in the overall size of the
loan portfolio related to the reduction in non-core lending outside Europe,
resulted in a lower projected level of general loan loss allowances than in
previous years. In light of global economic and geopolitical conditions,
however, we determined not to reduce our general loan loss allowance to reflect
such projections. Our general loan loss allowance was E589 million at December
31, 2003, compared to E747 million at December 31, 2002.

     We believe the level of our total loan loss allowance is adequate in
comparison to our historical net loss experience. The average credit rating of
loans in our portfolio based on our internal rating system has remained largely
constant in recent years, while at the same time our total loan loss allowance
as a percentage of total loans has decreased slightly to 5.0% at December 31,
2003, compared to 5.2% at December 31, 2002, and 4.5% at December 31, 2001,
excluding loans and allowances for loan losses attributable to Deutsche Hyp.

     The following table sets forth an analysis of the specific loan loss
allowances by industry sector and geographic category of the borrowers, and the
percentage of our total loan portfolio accounted for by those industry and
geographic categories, on the dates specified. The allocation between German and
non-German components is based on the domicile of the borrower.


                                                             AT DECEMBER 31,
                                 ------------------------------------------------------------------------
                                         2003                  2002                  2001           2000
                                 --------------------  --------------------  --------------------  ------
                                          PERCENT OF            PERCENT OF            PERCENT OF
                                          TOTAL LOANS           TOTAL LOANS           TOTAL LOANS
                                            IN EACH               IN EACH               IN EACH
                                          CATEGORY TO           CATEGORY TO           CATEGORY TO
                                 AMOUNT   TOTAL LOANS  AMOUNT   TOTAL LOANS  AMOUNT   TOTAL LOANS  AMOUNT
                                 ------   -----------  ------   -----------  ------   -----------  ------
                                                      (E IN MILLIONS, EXCEPT % DATA)
                                                                              
GERMAN:
  Corporate:
    Manufacturing industry.....    687           7.0%    884           7.2%    884           5.7%    687
    Construction...............    256           0.9%    301           0.9%    353           1.0%    381
    Wholesale and retail
      trade....................    382           3.7%    426           4.5%    448           3.8%    506
    Financial institutions
      (excluding banks) and
      insurance companies......     94           2.6%    171           2.1%    133           2.6%    135
    Banks......................      1           0.2%      7           0.5%      5           0.3%      1
    Service providers..........    767          11.2%    827          10.3%    982          12.2%  1,030
    Other......................     39           2.0%    108           2.2%     59           2.1%     95
                                 -----                 -----                 -----                 -----
    Corporate total............  2,226          27.6%  2,724          27.7%  2,864          27.7%  2,835
    Public authorities.........     --           0.1%     --           0.2%     --           0.4%     --
    Private individuals
    (including self-employed
    professionals).............  1,409          35.4%  1,702          32.1%  2,090          33.8%  1,730
                                 -----                 -----                 -----                 -----
    German total...............  3,635          63.1%  4,426          60.0%  4,954          61.9%  4,565
                                 -----                 -----                 -----                 -----


                                          AT DECEMBER 31,
                                 ---------------------------------
                                    2000              1999
                                 -----------  --------------------
                                 PERCENT OF            PERCENT OF
                                 TOTAL LOANS           TOTAL LOANS
                                   IN EACH               IN EACH
                                 CATEGORY TO           CATEGORY TO
                                 TOTAL LOANS  AMOUNT   TOTAL LOANS
                                 -----------  ------   -----------
                                  (E IN MILLIONS, EXCEPT % DATA)
                                              
GERMAN:
  Corporate:
    Manufacturing industry.....         6.0%    840           5.9%
    Construction...............         1.1%    389           1.2%
    Wholesale and retail
      trade....................         3.9%    585           4.0%
    Financial institutions
      (excluding banks) and
      insurance companies......         2.2%    110           0.5%
    Banks......................         0.3%     --           1.3%
    Service providers..........        11.1%    887          12.6%
    Other......................         1.6%    130           2.4%
                                              -----
    Corporate total............        26.2%  2,941          27.9%
    Public authorities.........         0.3%      1           0.1%
    Private individuals
    (including self-employed
    professionals).............        34.4%  1,342          34.6%
                                              -----
    German total...............        60.9%  4,284          62.6%
                                              -----


                                       156



                                                             AT DECEMBER 31,
                                 ------------------------------------------------------------------------
                                         2003                  2002                  2001           2000
                                 --------------------  --------------------  --------------------  ------
                                          PERCENT OF            PERCENT OF            PERCENT OF
                                          TOTAL LOANS           TOTAL LOANS           TOTAL LOANS
                                            IN EACH               IN EACH               IN EACH
                                          CATEGORY TO           CATEGORY TO           CATEGORY TO
                                 AMOUNT   TOTAL LOANS  AMOUNT   TOTAL LOANS  AMOUNT   TOTAL LOANS  AMOUNT
                                 ------   -----------  ------   -----------  ------   -----------  ------
                                                      (E IN MILLIONS, EXCEPT % DATA)
                                                                              
NON-GERMAN:
  Corporate:
    Manufacturing industry,
      construction, wholesale
      and retail trade and
      service providers........    492          12.5%    659          16.3%  1,201          20.4%    998
    Financial institutions
      (excluding banks) and
      insurance companies......    262           5.7%     33           4.7%     96           5.5%    109
    Banks......................    175           3.2%    244           2.5%    118           2.7%     92
    Other......................    157           5.0%    321           6.8%    247           2.1%    118
                                 -----                 -----                 -----                 -----
    Corporate total............  1,086          26.4%  1,257          30.3%  1,662          30.7%  1,317
    Public authorities.........      8           0.5%     14           1.5%     15           1.8%     14
    Private individuals
      (including self-employed
      professionals)...........    143          10.0%    182           8.2%    211           5.6%    224
                                 -----                 -----                 -----                 -----
    Non-German total...........  1,237          36.9%  1,453          40.0%  1,888          38.1%  1,555
                                 -----                 -----                 -----                 -----
Total specific loan loss
  allowances...................  4,872         100.0%  5,879         100.0%  6,842         100.0%  6,120
Country risk allowances........    259                   340                   443                   480
General loss allowances........    589                   747                   753                   523
                                 -----                 -----                 -----                 -----
Total loan loss allowances.....  5,720                 6,966                 8,038                 7,123
                                 =====                 =====                 =====                 =====


                                          AT DECEMBER 31,
                                 ---------------------------------
                                    2000              1999
                                 -----------  --------------------
                                 PERCENT OF            PERCENT OF
                                 TOTAL LOANS           TOTAL LOANS
                                   IN EACH               IN EACH
                                 CATEGORY TO           CATEGORY TO
                                 TOTAL LOANS  AMOUNT   TOTAL LOANS
                                 -----------  ------   -----------
                                  (E IN MILLIONS, EXCEPT % DATA)
                                              
NON-GERMAN:
  Corporate:
    Manufacturing industry,
      construction, wholesale
      and retail trade and
      service providers........        22.9%  1,183          20.9%
    Financial institutions
      (excluding banks) and
      insurance companies......         5.3%    107           4.3%
    Banks......................         3.3%    142           3.5%
    Other......................         1.8%     85           1.8%
                                              -----
    Corporate total............        33.3%  1,517          30.5%
    Public authorities.........         0.5%     30           1.6%
    Private individuals
      (including self-employed
      professionals)...........         5.3%    231           5.3%
                                              -----
    Non-German total...........        39.1%  1,778          37.4%
                                              -----
Total specific loan loss
  allowances...................       100.0%  6,062         100.0%
Country risk allowances........                 659
General loss allowances........                 386
                                              -----
Total loan loss allowances.....               7,107
                                              =====


                                       157


     The following table sets forth the movements in the loan loss allowance
according to the industry sector and geographic category of the borrower. The
allocation between German and non-German components is based on the domicile of
the borrower.



                                                        YEAR ENDED DECEMBER 31,
                                                 --------------------------------------
                                                 2003     2002    2001    2000    1999
                                                 -----   ------   -----   -----   -----
                                                     (E IN MILLIONS, EXCEPT % DATA)
                                                                   
TOTAL ALLOWANCES FOR LOAN LOSSES AT BEGINNING
  OF THE YEAR..................................  6,966    8,038   7,123   7,107   6,131
GROSS CHARGE-OFFS:
GERMAN:
  Corporate:
     Manufacturing industry....................    146      314      66     211      71
     Construction..............................     72      138      16      53      33
     Wholesale and retail trade................    113      206      54     163      71
     Financial institutions (excluding banks)
       and insurance companies.................     28       74      17      19       4
     Banks.....................................      7       11      --      --      --
     Service providers.........................    234      327     103     131      82
     Other.....................................     53      117      16      36       5
                                                 -----   ------   -----   -----   -----
     Corporate total...........................    653    1,187     272     613     266
  Public authorities...........................     --       --      --       1      --
  Private individuals (including self-employed
     professionals)............................    590      348     211     337     173
                                                 -----   ------   -----   -----   -----
German total...................................  1,243    1,535     483     951     439
                                                 -----   ------   -----   -----   -----
NON-GERMAN:
  Corporate:
     Manufacturing industry, construction,
       wholesale and retail trade and service
       providers...............................    232      270     516     594      93
     Financial institutions (excluding banks)
       and insurance companies.................      9       12      23      48       6
     Banks.....................................     52        6      13      14      19
     Other.....................................    391       28       2      72       1
                                                 -----   ------   -----   -----   -----
     Corporate total...........................    684      316     554     728     119
  Public authorities...........................      1       --      --      --      --
  Private individuals (including self-employed
     professionals)............................     43       38      49      32       9
                                                 -----   ------   -----   -----   -----
Non-German total...............................    728      354     603     760     128
                                                 -----   ------   -----   -----   -----
TOTAL GROSS CHARGE-OFFS........................  1,971    1,889   1,086   1,711     567
                                                 -----   ------   -----   -----   -----


                                       158




                                                        YEAR ENDED DECEMBER 31,
                                                 --------------------------------------
                                                 2003     2002    2001    2000    1999
                                                 -----   ------   -----   -----   -----
                                                     (E IN MILLIONS, EXCEPT % DATA)
                                                                   
RECOVERIES:
GERMAN:
  Corporate:
     Manufacturing industry....................      1       --       1       9       1
     Construction..............................     --       --      --      --       1
     Wholesale and retail trade................     --       --      --      --       1
     Service providers.........................      4       --      --      --      10
     Other.....................................     --        1      --      --      --
                                                 -----   ------   -----   -----   -----
     Corporate total...........................      5        1       1       9      13
     Private individual (including
       self-employed professionals)............     24       28      25      21      17
                                                 -----   ------   -----   -----   -----
German total...................................     29       29      26      30      30
                                                 -----   ------   -----   -----   -----
NON-GERMAN:
  Corporate:
     Manufacturing industry, construction,
       wholesale and retail trade and service
       providers...............................     24       57       3       1       1
     Financial institutions (excluding banks)
       and insurance companies.................     --        1       7      --      --
     Banks.....................................     --       --       4       1      --
     Other.....................................     20       32       2       1      --
                                                 -----   ------   -----   -----   -----
     Corporate total...........................     44       90      16       3       1
     Public authorities........................     --       --      --       1      --
     Private individuals (including
       self-employed professionals)............     --       56       6       2       5
                                                 -----   ------   -----   -----   -----
Non-German total...............................     44      146      22       6       6
                                                 -----   ------   -----   -----   -----
TOTAL RECOVERIES...............................     73      175      48      36      36
                                                 -----   ------   -----   -----   -----
NET CHARGE-OFFS................................  1,898    1,714   1,038   1,675     531
                                                 -----   ------   -----   -----   -----
Additions to allowances charged to
  operations...................................    979    1,902   1,901   1,595   1,237
(Decreases)/Increases in allowances due to
  (dispositions)/acquisitions of Allianz Group
  companies and other increases/(decreases)....    (55)  (1,085)     12      41     158
Foreign exchange translation adjustments.......   (272)    (175)     40      55     112
                                                 -----   ------   -----   -----   -----
Total allowances for loan losses at end of the
  year.........................................  5,720    6,966   8,038   7,123   7,107
                                                 =====   ======   =====   =====   =====
Ratio of net charge-offs during the year to
  average loans outstanding during the year....   1.22%    0.93%   0.46%   0.78%   0.27%


     When we determine that a loan is uncollectible, the loan is charged off
against any existing specific loss allowance or directly recognized as expense
in the income statement. Subsequent recoveries, if any, are recognized in the
income statement as a credit to the net loan loss provisions. Since 2000, we
have charged off loans when, based on management's judgment, all economically
sensible means of recovery have been exhausted. Our determination considers
information such as the age of specific loss allowances and expected proceeds
from liquidation of collateral and other repayment sources. Prior to 2000, we
charged off loans only when all legal means of recovery had been exhausted, for
example only after completion of bankruptcy proceedings. The change in practice
has affected both the timing and amount of charge-offs in the years

                                       159


2000-2003, as well as the level of our non-accrual loans in 2002 and 2003. See
"-- Risk Elements -- Non-performing Loans."

DEPOSITS

     The following table sets forth the average balances and the average
interest rates on deposit categories in excess of ten percent of average total
deposits of our banking operations. The allocation between German and non-German
components is based on the location of the office that recorded the transaction.



                                                          YEAR ENDED DECEMBER 31,
                                         ---------------------------------------------------------
                                               2003                2002                2001
                                         -----------------   -----------------   -----------------
                                         AVERAGE   AVERAGE   AVERAGE   AVERAGE   AVERAGE   AVERAGE
                                         BALANCE    RATE     BALANCE    RATE     BALANCE    RATE
                                         -------   -------   -------   -------   -------   -------
                                                      (E IN MILLIONS, EXCEPT % DATA)
                                                                         
IN GERMAN OFFICES:
  Non-interest-bearing demand
     deposits..........................   26,796              16,603              14,364
  Interest-bearing demand deposits.....   34,578      3.7%    45,697      2.6%    31,608      1.5%
  Savings deposits.....................    4,720      2.7%     6,495      2.8%    10,352      3.4%
  Time deposits........................  104,360      2.1%    77,985      3.2%   116,239      4.0%
                                         -------             -------             -------
  German total.........................  170,454             146,780             172,563
                                         -------             -------             -------
IN NON-GERMAN OFFICES:
  Non-interest-bearing demand
     deposits..........................    5,355               2,443               6,098
  Interest-bearing demand deposits.....   11,254      3.9%    16,327      2.3%    11,351      3.8%
  Savings deposits.....................      751      2.5%     1,370      3.4%     1,073      3.9%
  Time deposits........................   38,103      3.0%    41,277      4.2%    57,432      5.3%
                                         -------             -------             -------
Non-German total.......................   55,463              61,417              75,954
                                         -------             -------             -------
     Total deposits....................  225,917             208,197             248,517
                                         =======             =======             =======


     The aggregate amount of deposits by foreign depositors in our German
offices was E54,894 million, E51,688 million and E63,663 million at December 31,
2003, 2002 and 2001 respectively.

TIME DEPOSITS

     The following table sets forth the balance of time certificates of deposit
and other time deposits in the amount of E100,000 or more issued by our German
offices by time remaining to maturity at December 31, 2003.



                                                               AT DECEMBER 31, 2003
                                                               --------------------
                                                                 TIME DEPOSITS OF
                                                                 E100,000 OR MORE
                                                               --------------------
                                                                 (E IN MILLIONS)
                                                            
Maturing in three months or less............................          76,506
Maturing in over three months through six months............           5,691
Maturing in over six months through twelve months...........           4,806
Maturing in over twelve months..............................           9,686
                                                                      ------
Total.......................................................          96,689
                                                                      ======


     The amount of time deposits of E100,000 or more issued by our non-German
offices was E9,460 million at December 31, 2003.

                                       160


SHORT-TERM BORROWINGS

     Short-term borrowings are borrowings with an original maturity of one year
or less. Short-term borrowings are included within liabilities to customers,
liabilities to banks and certificated liabilities.

     Securities sold under agreements to repurchase and negotiable certificates
of deposit are the only significant categories of short-term borrowings within
our banking operations.

     The following table sets forth certain information relating to the
categories of our short-term borrowings.



                                                                YEAR ENDED DECEMBER 31,
                                                            -------------------------------
                                                              2003       2002       2001
                                                            --------   --------   ---------
                                                            (E IN MILLIONS, EXCEPT % DATA)
                                                                         
SECURITIES SOLD UNDER REPURCHASE AGREEMENTS:
Balance at the end of the year............................   92,629     63,287      56,354
Monthly average balance outstanding during the year.......   76,565     67,168      76,875
Maximum balance outstanding at any period end during the
  year....................................................   92,629     91,929     102,587(1)
Weighted average interest rate during the year............      3.1%       3.2%        4.3%
Weighted average interest rate on balance at the end of
  the year................................................      2.1%       2.6%        2.4%
NEGOTIABLE CERTIFICATES OF DEPOSIT:
Balance at the end of the year............................   16,196     30,765      30,268
Monthly average balance outstanding during the year.......   17,351     31,632      28,718
Maximum balance outstanding at any period end during the
  year....................................................   25,384     35,467      30,518(2)
Weighted average interest rate during the year............      2.4%       2.8%        5.0%
Weighted average interest rate on balance at the end of
  the year................................................      2.1%       2.6%        3.1%


---------------

(1) During the year ended December 31, 2001, the maximum balance outstanding at
    any period-end during the year was derived from the maximum balance
    outstanding at any month-end, based on the unconsolidated balances of
    Dresdner Bank AG, its branch operations and significant subsidiaries, and
    certain other banking subsidiaries of the Allianz Group.

(2) During the year ended December 31, 2001, the maximum balance outstanding at
    any period-end during the year was derived from the maximum balance
    outstanding at any quarter-end, based on the consolidated balances of our
    banking operations.

                        LIQUIDITY AND CAPITAL RESOURCES

     We operate as both a holding company for the Allianz Group's insurance,
banking and other subsidiaries and as a reinsurance company, primarily for other
Allianz Group companies. The liquidity and capital resource considerations for
us and for our domestic and non-domestic operating subsidiaries vary in light of
the business conducted by each, as well as the insurance and banking regulatory
requirements applicable to the Allianz Group in Germany and the other countries
in which it does business. At December 31, 2003, 2002 and 2001, Allianz Group
had E25,528 million, E21,008 million, and E21,240 million, respectively, of cash
and cash equivalents. See Note 10 to our consolidated financial statements. We
believe that our working capital is sufficient for our present requirements.

     Our principal sources of funds are premiums, customer deposits, investment
income, funds that may be raised from time to time from the issuance of debt or
equity securities and bank or other borrowings, as well as cash dividends and
reinsurance premiums received from our subsidiaries. For further information
regarding the uses and sources of liquidity, capital requirements, and other
related matters, see "-- Consolidated Cash Flows." See also "-- Selected
Statistical Information Relating to Our Banking Operations" and "Quantitative
and Qualitative Disclosures about Market Risk."

     The majority of Allianz AG's external debt financing at December 31, 2003
was in the form of debentures and money market securities. Our total
certificated liabilities outstanding at December 2003, 2002

                                       161


and 2001 were E63,338 million, E78,750 million and E134,670 million,
respectively. Of the certificated liabilities outstanding at December 31, 2003,
E31,501 million were due within one year. For further information regarding
outstanding certificated liabilities, see Note 19 to our consolidated financial
statements. Proceeds to Allianz Finance B.V. and Allianz Finance II B.V. from
the issuance of debt for the years ended December 31, 2003, 2002 and 2001 were
none in 2003 versus approximately E5,400 million and E3,054 million in 2002 and
2001, respectively.

     Allianz AG paid dividends of E551 million, E374 million and E364 million on
our shares in 2004, 2003 and 2002 with respect to the fiscal years 2003, 2002
and 2001, respectively. See "Key Information -- Dividends."

     Certain of the companies within the Allianz Group are subject to legal
restrictions on the amount of dividends they can pay to their shareholders. In
addition to the restrictions in respect of minimum capital and solvency
requirements that are imposed by insurance and other regulators in the countries
in which these companies operate, other limitations exist in certain countries.
For example, the operations of our insurance company subsidiaries located in the
United States are subject to limitations on the payment of dividends to their
parent company under applicable state insurance laws. Dividends paid in excess
of these limitations generally require prior approval of the insurance
commissioner of the state of domicile. See "-- Regulation and Supervision."

                            CONSOLIDATED CASH FLOWS

     The liquidity requirements of our insurance operations are met both on a
short- and long-term basis by funds provided by insurance premiums collected,
investment income and collected reinsurance receivables, and from the sale and
maturity of investments. We also have access to commercial paper, medium-term
notes and other credit facilities as additional sources of liquidity. The major
uses of these funds are to pay property-casualty claims and related claims
expenses, provide life policy benefits, pay surrenders, cancellations and profit
sharing for life policyholders and pay other operating costs. We generate a
substantial cash flow from insurance operations as a result of most premiums
being received in advance of the time when claim payments or policy benefits are
required. These positive operating cash flows, along with that portion of the
investment portfolio that is held in cash and liquid securities, have
historically met the liquidity requirements of our insurance operations.

     In the insurance industry, liquidity generally refers to the ability of an
enterprise to generate adequate amounts of cash from its normal operations,
including its investment portfolio, in order to meet its financial commitments,
which are principally obligations under its insurance or reinsurance contracts.
The liquidity of our property-casualty insurance operations is affected by the
frequency and severity of losses under its policies, as well as by the
persistency of its products. Future catastrophic events, the timing and effect
of which are inherently unpredictable, may also create increased liquidity
requirements for our property-casualty operations. The liquidity needs of our
life operations are generally affected by trends in actual mortality experience
relative to the assumptions with respect thereto included in the pricing of its
life insurance policies, by the extent to which minimum returns or crediting
rates are provided in connection with its life insurance products, as well as by
the level of surrenders and withdrawals.

     With regard to our banking operations, our primary sources of liquidity are
customer deposits and interest income from our lending transactions and our
investment portfolio, while our major uses of funds are for the issuance of new
loans and advances to banks and customers, and the payment of interest on
deposits, certificated liabilities and subordinated liabilities and other
operating costs. Other sources of liquidity include our ability to borrow on the
interbank market and convert securities in our investment and trading portfolios
into cash.

     Our uses of funds, in addition to the dividends paid to shareholders of
Allianz AG include underwriting expenditures (reinsurance premiums, benefits,
surrenders, claims -- including claims handling expenses -- and profit sharing
by life policyholders), acquisitions, and employee and other operating expenses,
as well as interest expense on outstanding borrowings. Our life and health
insurance products include mandatory profit-

                                       162


sharing features, whereby we return a specified portion of statutory profits to
policyholders annually, generally in the form of premium subsidies or rebates.
See "-- Life/Health Operations by Geographic Region -- Germany -- Life
Insurance" and "-- Life/Health Operations by Geographic Region -- Germany --
Health Insurance."

     Recent significant acquisitions have included the purchases of PIMCO in May
2000, Nicholas-Applegate in January 2001 and Dresdner Bank in July 2001.
Pursuant to the restructuring of our ownership interest in PIMCO, beginning with
the quarter ended March 31, 2003, neither we nor PIMCO's former parent company
could put or call the entire ownership interest of PIMCO's former parent company
in PIMCO with effect prior to October 2004, although either party could put or
call up to $250 million of such ownership interest in any calendar quarter. In
2003, the former parent company of PIMCO exercised its right to put a total of
$1 billion of such ownership interest to Allianz, i.e. $250 million in each
quarter of 2003. Payment for the put of such interests during the first three
quarters of 2003, which totaled $750 million, had been made as of December 31,
2003. The put for such interests during the fourth quarter of 2003, which
amounted to $250 million, had been made as of January 12, 2004. In addition, on
March 31, 2004, Allianz exercised its right to call $250 million of the
remaining ownership interest that is held by the former parent company of PIMCO
to Allianz, with payment therefore made in April 2004. For additional
information, see Notes 3 and 46 to our consolidated financial statements.

     Our capital requirements are primarily dependent on our business plans
regarding the levels and timing of capital expenditures and investments.

YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002

     Cash Flows From Operating Activities.  Net cash provided by operating
activities was E5,152 million in 2003, compared to net cash used in operating
activities of E741 million in 2002. The increase in net cash provided by
operating activities reflected primarily a significant increase in the net
income for the year and a reduction of the use of cash resulting from the change
in other insurance reserves. Net income increased to E1,890 million from a loss
of E1,496 million in 2002, cash used to increase other insurance reserves was
reduced to E510 million from E4,681 million. Cash provided by the change in
trading securities (including trading liabilities) decreased to E8,909 million
provided in 2003 from E14,064 million in 2002, a net change of E5,155 million,
due primarily to an increase in investments held in the Dresdner Bank trading
portfolio and an increase in trading liabilities, which reflected primarily
obligations to deliver securities. An increase in the cash used to provide loans
and advances to banks and customers (E47,109 million in 2003 compared to E5,846
million in 2002) primarily resulting from a significant increase in the volume
of reverse repos, was offset by a swing from net cash used by the change in
liabilities to banks and customers in 2002 of E8,215 million to net cash
provided in 2003 of E48,648 million, primarily resulting from an increase in
other term liabilities. The negative cash flow from other receivables and
liabilities increased to E4,250 million in 2003 from E1,370 million in 2002. The
negative cash flow from certificated liabilities increased to E14,387 million in
2003 from E1,727 million in 2002, due to the repayment of debentures and money
market liabilities.

     Cash Flows From Investing Activities.  Net cash used in investing
activities decreased to E2,810 million in 2003 from E13,779 million in 2002.
This change primarily reflected a significant reduction in the cash used in the
change in cash and cash equivalent from the acquisition of consolidated and
affiliated companies as a result of the disposal of participations in affiliated
companies. The increase in 2003 also reflected an increase to E4,238 million
from E1,681 million of cash provided by other investments.

     Cash Flows From Financing Activities.  Net cash provided by financing
activities was E2,298 million in 2003, compared to net cash provided by
financing activities of E14,397 million in 2003. This decrease was attributable
primarily to the increase in the amount of cash used as well as a decrease of
the amount of cash provided by changes in the investments for policies held on
account and at risk of policyholders and SFAS 97 policies. In addition cash was
used to redeem participation certificates and subordinated liabilities rather
then the issuance of those instruments providing cash. This development was
offset in part by the cash provided through the capital increase from April
2003.

                                       163


YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

     Cash Flows From Operating Activities.  Net cash used in operating
activities was E741 million in 2002, compared to net cash used in operating
activities of E834 million in 2001. The decrease in net cash used reflected
primarily a significant increase in cash provided by trading securities
(including trading liabilities), offset in part by increases in cash used in
other operating activities. Cash provided by trading securities (including
trading liabilities) increased to E14,064 million provided in 2002 from E12,544
million used in 2001, a net change of E26,608 million, due primarily to
reductions in investments held in the Dresdner Bank trading portfolio and an
increase in trading liabilities, which reflected primarily obligations to
deliver securities and net declines in the market values of derivative
transactions. The reductions in the Dresdner Bank trading portfolio reflected a
decline in the carrying value of equity securities. The increase in cash
provided by trading securities was offset in part by a decrease in cash provided
by loans and advances to banks and customers to E5,846 million used in 2002 from
E3,442 million provided in 2001, resulting primarily from a significant increase
in short term loans. Cash flow from other receivables and liabilities also
decreased to E1,370 million used in 2002 from E3,871 million provided in 2001.
Cash flow from certificated liabilities decreased to E1,727 million used in 2002
from E3,130 million provided in 2001, due to repayment of money market
liabilities. Cash flow from liabilities to banks and customers decreased to
E8,215 million used in 2002 from E5,456 million used in 2001. In addition, we
recorded a net loss in 2002 of E1,496 million, a net change of E3,081 million
from 2001, when we recorded net income of E1,585 million.

     Cash Flows From Investing Activities.  Net cash used in investing
activities was E13,779 million in 2002, compared to net cash provided by
investing activities of E11,395 million in 2001. The significant decrease in net
cash from investing activities was due primarily to the decrease in cash and
cash equivalents resulting from the increase in investments in Bayerische
Versicherungsbank AG and Frankfurter Versicherungs -- AG and the deconsolidation
of the cash balances of Deutsche Hyp in 2002. The aggregate impact of these
transactions was E10,787 million. The decrease in 2002 also reflected the high
levels of net cash provided by investing activities in 2001, which resulted from
a significant increase in cash and cash equivalents due to the first-time
consolidation of the cash balances of Dresdner Bank in July 2001. The remaining
decrease in investing cash flows in 2002 was due to net purchases of
investments, excluding the effects of the above transactions.

     Cash Flows From Financing Activities.  Net cash provided by financing
activities was E14,397 million in 2002, compared to net cash provided by
financing activities of E6,452 million in 2001. The increase was attributable
primarily to an increase in cash provided by subordinated liabilities,
reflecting E3,445 million in subordinated debt issued in 2002. Cash provided by
aggregate policy reserves also increased to E10,808 million provided in 2002
from E8,089 million provided in 2001, reflecting the increased net inflow of
funds related to variable annuities and unit-linked life insurance policies in
line with the overall increase in our life insurance business in 2002. These
increases were offset in part by a decrease in cash flow attributable to
redemption of participation certificates.

                           REGULATION AND SUPERVISION

                                    GENERAL

     Our insurance, banking and asset management businesses are subject to
detailed, comprehensive regulation and supervision in all countries in which we
do business. In addition, certain EU regulations and directives implemented
through local legislation in EU member states, have had and will continue to
have a significant impact on the regulation of the insurance, banking and asset
management industries in EU member states, including those in which many of our
most important operations are located, such as Germany, France, Italy and the
United Kingdom. The following discussion addresses significant aspects of the
regulatory schemes to which our businesses are subject. For accounting
regulations see "Notes to the consolidated Financial Statements (1) and (2)" and
for regulation as to dividend policies see "Financial Information -- Dividend
Policy."

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                                   ALLIANZ AG

     Allianz AG operates as a reinsurer and holding company for our insurance,
banking and asset management operating entities. As such, Allianz AG is
supervised and regulated by the German Federal Financial Supervisory Authority
(the Bundesanstalt fur Finanzdienstleistungsaufsicht, or BaFin), a federal
institution governed by public law. The BaFin monitors and enforces regulatory
standards for banks, financial services institutions and insurance companies by
supervising their activities in the financial markets, including securities
supervision and specific aspects of consumer protection. The BaFin will in the
future also be responsible for supervision of the Allianz Group as financial
conglomerate.

     Under the current German Insurance Supervision Act
(Versicherungsaufsichtsgesetz) Allianz AG is not required to be licensed as a
reinsurance company in Germany. Currently, a new legislative reform is being
discussed which will introduce a license requirement, solvency standards and
capital requirements for reinsurers. Already under the current regime, the BaFin
is entitled to monitor whether the management of a reinsurance company is of
good repute and meets certain standards of professional competence as well as
whether the holders of qualified participating interests in the reinsurance
company are of good repute. The BaFin has the power to give orders to request
information and is explicitly entitled to take administrative action to ensure
that a reinsurance company operates in compliance with applicable laws and that
it is able to meet its reinsurance liabilities. Allianz AG is required to submit
several annual and interim reports, including certain accounting documents, to
the BaFin. The BaFin also reviews transactions between Allianz AG and its
subsidiaries, including reinsurance relationships and cost sharing agreements.
Beginning January 1, 2005, additional restrictions will apply to investments
held to cover reinsurance reserves. Reinsurance activities continue to be
regulated indirectly through the supervision of reinsurance programs submitted
by direct insurers.

                               GROUP REGULATIONS

     Under German law based on an EU directive on supplementary supervision of
insurance undertakings in an insurance group, insurance companies that are
members of an insurance group as defined by law are subject to additional
regulatory requirements. The additional regulation includes the following three
components: (i) the supervision of intra-group transactions, (ii) the monitoring
of the adjusted solvency, i.e. on a consolidated basis, and (iii) the
establishment of appropriate internal controls for providing the BaFin with
information as part of its monitoring of the first two components. The most
important intra-group transactions must be reported to the BaFin annually;
intra-group transactions endangering the solvency of an insurance company
subject to supervision must be reported immediately. The law requires that the
insurance group calculate the capital needed to meet the respective solvency
requirements for the insurance group on a consolidated basis. IFRS accounting
may be used as a basis for the calculation. Similar group solvency requirements
are required to be fulfilled by the local parent companies of insurance
subsidiary groups in the different EU jurisdictions.

     Regarding the banking sector, the credit institutions directive of 2000,
consolidating certain older directives, and the capital adequacy directive of
1993 also provide for capital requirements on a consolidated basis. They define,
among other things, the capital requirements needed to ensure sufficient capital
to cover, also on a consolidated basis, the bank's market and credit risks
associated with banking and trading book activities. The directives have been
implemented into German law. With respect to the Allianz Group, Dresdner Bank is
responsible for the capital requirements of the companies within our banking
sector.

     German law also provides for similar requirements for the asset management
sector. The responsibility for this consolidation for the Allianz Dresdner Asset
Management companies which are comprised of Allianz Dresdner Asset Management AG
and its subsidiaries, lies with Allianz Dresdner Asset Management International
GmbH, a German based financial services institution.

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                            FINANCIAL CONGLOMERATES

     In December 2002, the EU adopted a directive that provides for assessment
of the capital requirements of a financial conglomerate on the group level,
supervision of risk concentration and intra-group transactions and prevention of
double-leveraging of the capital of the holding or parent company, i.e. once in
the holding or parent company and a second time in the subsidiary ("double
gearing"). The Allianz Group is a financial conglomerate within the scope of
this directive. The EU member states are required to transpose this directive
into national law for the fiscal year beginning on or after January 1, 2005. It
is expected that the German legislator adopts the respective amendments to the
German Insurance Supervision Act in 2004 to implement the directive.

     In the United States, the Gramm-Leach-Bliley Financial Modernization Act of
1999 substantially eliminates barriers separating the banking, insurance and
securities industries in the United States. The act allows the formation of
diversified financial services firms that can provide a broad array of financial
products and services to their customers. In addition, the act permits insurers
and other financial services companies to acquire banks.

                                   INSURANCE

EUROPEAN UNION

     Under the Treaty of Rome of 1957, Germany and the other EU member states
are required to implement EU legislation into domestic law and to take EU
legislation into account in applying domestic law. EU legislation can take
several forms. If legislation takes the form of a EU regulation, the regulation
is directly applicable as binding law in all member states. If legislation takes
the form of a EU directive, the directive creates an obligation for the member
states to implement and transpose the directive into their national legal
systems. In addition, certain directives include "self-executing" features that
are directly binding on member states, although the directives still require
formal transposition into national legislation.

     Since 1973, the EU has adopted a series of insurance directives on life
insurance and direct insurance other than life insurance. These directives have
been implemented in Germany, France, Italy, the United Kingdom, Austria and the
other EU jurisdictions through national legislation and have resulted in
significant deregulation of the EU insurance markets. The directives are based
on the general principles of freedom of branch operations, freedom of provision
of services and home country control. Under the directives, the regulation of
insurance companies, including insurance operations outside their respective
home countries (whether direct or through branches), is the responsibility of
the home country insurance regulatory authority. In particular, the home country
insurance regulatory authority is responsible for monitoring compliance with
applicable regulations, the solvency and actuarial reserves of insurers and the
assets supporting those reserves.

     As a result of the home country control principle, the EU insurance
directives generally permit an insurance company licensed in any jurisdiction of
the EU to conduct insurance activities, directly or through branches, in all
other jurisdictions of the EU, without being subject to additional licensing
requirements. Under the EU insurance directives, there is no authorization
procedure to regulate insurance terms and conditions or tariffs. Insurers are
required to submit reports to the regulatory authorities in jurisdictions
outside their home country regarding the management, qualifying shareholders,
and other matters such as general and specific policy terms and conditions,
premiums and technical reserves.

     Insurance selling activities are generally regulated by the regulatory
authorities in the country in which the sale of the insurance product takes
place. On January 15, 2003, a new EU directive on insurance mediation became
effective. Under this directive, insurance and reinsurance intermediaries are
required to register in their home member state and to possess appropriate
knowledge and ability, as determined by their home member state. Member states
are required to implement this directive effective January 15, 2005. The impact
of the new directive on Allianz Group companies in EU member states depends on
how the directive will be implemented by the member states. Consequently, we
cannot assess the potential impact of the directive.

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     The EU insurance directives generally prohibit an insurance company from
conducting both non-life and life insurance activities. However, life insurance
companies that conducted non-life insurance activities in EU member states prior
to March 15, 1979, including some of our subsidiaries, may continue to conduct
these activities without restriction. In addition, member states may permit life
insurance companies to write personal accident and health insurance policies, or
insurance companies authorized to write personal accident and health insurance
policies to write life insurance policies.

GERMANY

GENERAL

     German insurance companies, including the companies in our German
Property-Casualty Group, our credit insurance companies, our life insurance
companies and our health insurance companies, are subject to a comprehensive
system of regulation under the German Insurance Supervision Act. The BaFin
monitors and enforces compliance with German insurance laws, applicable
accounting standards, technical administrative regulations, and investment and
solvency provisions. Any change in the articles of association (except changes
regarding capital increases) and all material changes in the business plan of a
German insurance company must be approved, and the books and records of German
insurance companies are subject to examination at any time, by the BaFin.

     Under the Insurance Supervision Act, German insurance companies are subject
to detailed requirements with respect to the administration of their assets and
liabilities. In general, the actuarial and claims reserves of each insurer must
be adequate to allow the insurer to fulfill its contractual commitments to pay
upon receipt of claims. Toward this end, insurers must maintain a solvency
margin (own funds) equal to the minimum solvency margin. One third of the
minimum solvency margin constitutes the guarantee fund. If the solvency margin
falls below the minimum solvency margin, the BaFin may request that the company
submits a plan for restoring its sound financial position; under exceptional
circumstances, the BaFin may restrict or prohibit the free disposal of the
assets. If the solvency margin of an insurance company falls below the guarantee
fund, at the request of the BaFin, the insurance company must submit a plan
detailing how the company will promptly obtain the necessary solvency margin; in
this case, the BaFin may with no further requirements limit or prohibit the
disposal of the insurer's assets. German property-casualty insurance companies
are also required to establish claims equalization reserves according to
established actuarial rules. These claims equalization reserves are intended to
level out fluctuating claims requirements over the course of time. German
regulation law requires that insurers maintain assets equal to the sum of
technical reserves, regarding life insurers including mathematical provisions,
and of liabilities and deferrals under insurance contracts (gebundenes Vermogen)
and that they invest these assets in accordance with certain standards. German
law limits the proportion of the assets which German insurers may invest in
certain categories of investments and imposes restrictions with respect to
particular investments. A regulation issued by the German Federal Government
provides for detailed investment rules.

     New insurance products and policies may be offered in Germany without prior
approval of the BaFin. Insurers must file a description of new products and
policies, and the BaFin may require the modification of terms and conditions or
the withdrawal from the market or modification of any contract that does not
comply with applicable laws and regulations. In addition, the terms of all
health insurance policies are subject to particular consumer protection and
other legislation.

LIFE INSURANCE

     Under German law, German life insurance companies are required, after
receiving the authorization to conduct a life insurance business, to notify the
BaFin of the principles they use to set premium rates and establish actuarial
provisions, and of any intention to alter or amend these principles. German life
insurance companies are also required to appoint a chief actuary responsible for
reviewing and ensuring the appropriateness of actuarial calculation methods.
Prior to the appointment, the insurer must provide the BaFin with the name of
the actuary. Before and after the appointment, the BaFin is entitled to request
that the insurer appoint another actuary if the BaFin has doubts as to the
professional qualifications of the appointed

                                       167


actuary. In case the second appointee does not meet the professional
requirements, or the insurer does not appoint another actuary, the BaFin itself
may appoint an appropriate actuary.

     Additional restrictions apply to the investment of German life insurance
company assets. The BaFin closely monitors the calculation of actuarial reserves
and the allocation of assets covering actuarial reserves. Assets covering
actuarial reserves are also monitored by an independent trustee. The rules
governing the appointment of the trustee are similar to those governing the
appointment of the actuary. The BaFin may issue supplemental instructions to an
insurer if deemed necessary to safeguard the interests of policyholders.

     Amounts payable to policyholders at the maturity of endowment policies
underwritten by German life insurance companies include a "guaranteed benefit"
an amount that, in practice, is equal to a legally mandated maximum rate of
return on actuarial reserves. This rate is currently 2.75% per year for policies
issued on or after January 1, 2004. For policies issued on or after July 1,
2000, the maximum rate of return is 3.25% per annum and for policies issued
through June 30, 2000 this rate is 4,0%. For policies issued prior to 1995, the
maximum rate is 3.5% or 3.0%, depending on the generation of tariff. On policies
written through 1994, German life insurance companies are obliged by regulations
to allocate for the benefit of policyholders at least 90% of their annual
surplus. In 1994 and 1996, the laws and the regulations, respectively, were
modified, and on policies written since June 30, 1994 and thereafter, German
life insurance companies are obliged by the modified regulations to allocate for
the benefit of policyholders at least 90% of their net interest yield on assets
corresponding to technical reserves. In addition, holders of policies written
after June 30, 1994 are entitled to participate in "appropriate amounts" of
profit from sources other than assets, mainly from earnings related to risk
management and cost management. The amount required to be allocated to
policyholders may be used to directly increase a policyholders profit
participation or to contribute to the policyholder's profit reserve. In general,
the amount contributed to the policyholders profit reserve may be used only for
the policyholders profit participation. In the event of an overall loss and to
avoid an emergency situation, the insurer may use parts of the policyholder
profit reserve to cover the loss with the approval of the BaFin if doing so is
in the interest of the policyholders. The profit reserve is accordingly included
in the calculation of the life insurer's solvency margin. The respective
determinations and calculations are based on German statutory accounting
principles. These statutory accounting principles were amended on March 26,
2002, with respect to impairment charges for equity, investment funds and other
fixed-interest rate and non-fixed-interest rate securities. This amendment has a
stabilizing effect on statutory profits and profit participation.

     In December 2002, Protektor Lebensversicherungs-AG (Protektor) was founded.
Protektor is a life insurance company whose role is to protect policyholders of
all German life insurers. Protektor intervenes in cases where other attempts to
prevent insolvency of a German life insurer have failed. In such cases,
Protektor takes over the contract portfolios of the respective company, managing
and consolidating them with the goal of subsequently selling these portfolios.
All German life insurance companies are obliged to be shareholders of Protektor
and thus to finance its capital. This obligation is limited to one percent of
the shareholders own capital investments as of December 31, 2001. In addition,
no shareholder of Protektor may hold more than 10 percent of the capital of
Protektor. Therefore, the obligation to finance Protektor is limited for each
shareholder to a maximum of ten percent of E5,230 million. The latter amount
will be subject to review in 2007. Therefore, Allianz Lebensversicherungs-AG's
maximum obligation to Protektor is E523 million in the aggregate. During 2003,
Protektor intervened in one case in which Allianz Lebensversicherungs-AG was
required to contribute E24 million. Consequently, Allianz Lebensversicherungs-
AG's outstanding commitment to Protektor was E499 million at December 31, 2003.
Currently, a reform of the German Insurance Supervision Act is under discussion
to implement a mandatory life insurance guarantee scheme (Sicherungsfonds). The
outcome of this legislative initiative and its impact on Protektor is currently
unclear.

     The Retirement Savings Act (Altersvermogensgesetz), which is intended to
reform the pension system in Germany, took effect on January 1, 2002. This act
provides for state subsidies, in the form of either direct subsidies or, under
certain circumstances, tax benefits. The prerequisite for state subsidies is
that the underlying products contain certain characteristics entitled to
certification by the BaFin. The main characteristic is that at least the amount
that has been paid in premiums is available at maturity and that life-
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long benefit payments be guaranteed. Administration costs of the certified
products may be high due to the complex state subsidy process. The Retirement
Savings Act also intends to foster company old-age provision. As of January 1,
2002, employees are entitled by law to request that parts of their compensation
be converted into company old-age provision. In addition to the already existing
pension schemes, (Pensionskassen) the new law and the regulations promulgated
there under permit the establishment of pension schemes for employees within
separate legal entities (Pensionsfonds), as new means of company old-age
provision, which are treated as life insurers under the German Insurance
Supervisory Act. Both Pensionskassen and Pensionsfonds are supervised by the
BaFin.

HEALTH INSURANCE

     We offer "substitutive" health insurance products in Germany designed to
partially or totally replace statutory public health insurance coverage. We also
offer products intended to supplement both the statutory and substitutive
schemes. These products are subject to detailed regulations designed to protect
policyholders.

     In general, the core products of German health insurance companies,
including comprehensive health insurance, daily sickness and hospital daily
allowance insurance, are regulated by the BaFin. German law also requires that
private health insurance companies offer certain kinds of health insurance,
including private compulsory long-term care insurance, to policyholders with
substitutive health insurance.

     German health insurance companies are required to appoint and register a
chief actuary and an independent trustee with the BaFin. Premiums are calculated
in accordance with established actuarial and legal principles and are required
to provide an adequate reserve for the increased likelihood of poor health in
old age. Health insurance policies may provide for premium increases to cover
inflation and the increased costs of medical treatment and other developments.
However, any such adjustments must be approved by an independent trustee. For
German private health insurance companies apply the same restrictions on the
allocation of assets as described above for German life insurers.

     Since the beginning of 2000, Allianz Private Health has also been required
by law to allocate to its policyholders 90% of interest surplus, which is a
component of statutory profits. Like endowment and other life insurance
products, health insurance products include mandatory profit-sharing features,
whereby Allianz Private Health, like any other German private health insurer,
returns 80% of the statutory profit on its health business, after the payment of
claims and claims costs, the establishment of reserves, payment of taxes and
other expenses, to policyholders annually, generally in the form of premium
subsidies or rebates. These serve to limit premium increases for policyholders
in higher age brackets or to refund parts of the premiums to customers who did
not request claims compensation in the previous year. As with the Group's
endowment policies in Germany, the actual level of profit sharing the Group
provides its policyholders is, for competitive reasons, in excess of the
statutory minimum and has been between 85% and 90% of statutory profits in
recent years.

     In January 2003, the specific income threshold for German statutory health
insurance coverage was raised by the German legislator in order to stabilize and
maintain the statutory health-care system. As a consequence, the number of
individuals who are able to choose protection under the private healthcare
system decreased, but the law also created new business opportunities for
supplementary insurance for individuals insured under statutory health insurance
plans. Further changes to the German healthcare system were implemented which
reduced the benefits of the statutory scheme, in particular with a view to
reducing its costs. Providers of the statutory scheme are allowed to offer
additional health care programs and to co-operate with private health insurance
companies what means that changes in the sales system of private health
insurance companies may occur.

     Since the financing of the statutory health insurance system is not yet
stabilized and the health insurance business is confronted with an aging
society, changes to the overall health care system are further under discussion.

     To protect health insurance policyholders, the private health insurance
sector founded in July 2003 "Medicator AG" (Medicator). Medicator is a company
whose role is to intervene in cases where other

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attempts to protect insolvency of a German health insurer have failed. Medicator
has not yet been active and the German private health insurance companies have
not yet assigned special obligations with respect to Medicator. Besides this, a
reform of the German Insurance Supervision Act is under discussion to implement
a mandatory health insurance guarantee scheme (Sicherungsfonds).

FRANCE

     On August 1, 2003 the so called "law on financial security" was
implemented. Based on this law, the activities of French insurance companies,
including AGF, which are governed by the French Insurance Code are supervised by
the Commission de Controle des Assurances, des Mutuelles et des Institutions de
Prevoyance (CCAMIP). The CCAMIP is an independent administrative authority that
supervises the financial position and solvency of French insurance companies and
their compliance with applicable insurance regulations, including statutory
accounting principles and financial and technical management regulations.
Insurers are required to make periodic filings of financial, accounting and
statistical statements with the CCAMIP. Any change in the articles of
association of French insurance companies must also be approved by the Insurance
Commission CCAMIP. The CCAMIP may examine the accounts of French insurance
companies at any time. French insurance companies may not engage on an ongoing
basis in any commercial activity other than that of providing insurance coverage
and directly related activities.

     French insurance companies are subject to a number of requirements with
respect to the administration of their assets and liabilities. With respect to
liabilities, actuarial and claims reserves must be adequate to allow the insurer
to fulfill contractual commitments to pay claims upon receipt. French law also
prescribes compliance with a minimum solvency margin and requires insurance
companies to make contributions to certain state-administered guarantee funds.
French insurance companies may invest assets that support actuarial and claims
reserves generally only in debt securities, equity securities and shares of
mutual funds, real estate, mortgage loans, certain government-guaranteed loans
and certain other loans and deposits. French law limits the proportion of assets
that French insurers may invest in certain categories of investments and imposes
restrictions with respect to particular investments.

     French life insurers are obligated by law to allocate for the benefit of
policyholders (other than holders of contracts supported by separate accounts
and term policies) at least 85% of annual investment results on assets
attributable to such policyholders, plus at least 90% of other profits. Amounts
allocated must be credited to policyholders within eight years but otherwise can
be credited at the insurer's discretion. The allocation generally takes the form
of an increase in guaranteed benefits but may also take the form of a reduction
of future premiums.

     New insurance products and policies may be offered in France by either a
French or foreign insurer without obtaining prior approval. However, the
Ministry of the Economy may require submission of contracts or advertising
materials relating to the insurance business. The Ministry of the Economy may
also require the withdrawal from the market or the modification of any contract
or advertising material which, in its judgment, does not comply with applicable
laws and regulations.

ITALY

     Italian insurance companies including our major subsidiaries RAS and Lloyd
Adriatico are subject to a comprehensive regulatory scheme contained in the
Supervision of Insurance Act and supplemented by numerous other regulations and
ordinances. These laws and regulations regulate access to insurance activities,
require the maintenance of certain solvency margins, in part through a guarantee
fund, determine the form of financial statements for insurance concerns and
regulate the activities of insurance intermediaries.

     The activities of Italian insurance companies, insurance agents and brokers
are regulated by the Institute for the Supervision of Private and Public
Interest Insurance, known by its Italian acronym ISVAP. ISVAP grants
authorization to companies to conduct insurance activities. ISVAP is also
responsible for the supervision of the financial management of Italian insurance
companies. In addition, ISVAP has the authority to propose disciplinary
measures, including the revocation of authorizations, which may ultimately be
taken by the Ministry of Industry. ISVAP has the power to request information
from insurance companies, conduct
                                       170


audits of their activities and question their legal representatives, managing
directors and statutory auditors and convene shareholders, directors and
statutory auditors meetings in order to propose measures necessary to conform
the management of insurance companies to legal requirements. Insurance companies
having their registered offices in Italy must receive prior authorization by
ISVAP in order to operate life or non-life insurance activities.

     All Italian insurance companies are required to maintain adequate technical
reserves in respect of each insurance contract. ISVAP establishes the maximum
interest rate Italian insurance companies may guarantee to the policyholders,
for the calculation of required life reserves. Italian law also establishes
maximum limits on the amount of reserves that may be invested in any particular
category of investments. ISVAP may establish stricter limits under some
circumstances. In addition, ISVAP may prohibit companies that do not comply with
reserve requirements from disposing of their assets located in Italy and from
accepting new business.

     Italian insurance companies are required to observe a minimum solvency
margin calculated in accordance with a formula that varies depending on the
types of insurance that they underwrite. In cases where the solvency margin is
less than the guarantee fund, ISVAP may require a company to prepare and
implement a short-term financing plan in order to bring it into compliance with
the applicable requirements, or may prohibit a company from disposing of its
assets.

SWITZERLAND

     Swiss insurance companies including our Swiss subsidiaries must be licensed
by the Swiss Federal Department of Justice and Police and are subject to the
supervision of the Swiss Federal Office of Private Insurance. A separate
authorization is required for each separate line of insurance business conducted
in Switzerland. Although Switzerland is not a member state of the EU and is not
subject to the EU insurance directives, Swiss insurance regulation is generally
consistent with regulation in the EU.

     The Federal Office of Private Insurance monitors the compliance of Swiss
insurance companies with requirements relating to solvency, minimum capital,
reserve building and assets and may conduct audits at any time. The Federal
Office of Private Insurance also fixes the interest rate for calculation of
required life insurance company reserves. Swiss life and health insurance
companies are required to file tariffs and contract conditions with the Federal
Office of Private Insurance.

UNITED KINGDOM

     Insurance companies in the United Kingdom are regulated under the Financial
Services and Markets Act 2000 (or FSMA). The FSMA provides the framework for the
regulation of all business activities within the financial services sector in
the United Kingdom, including life insurance and general insurance companies
such as our subsidiary Allianz Cornhill. The FSMA provides that no firm may
carry on a regulated activity in the United Kingdom in the insurance,
securities, banking or pension sectors, unless it has been authorized to do so
under the FSMA or exempted from it. The Financial Services Authority (or FSA)
has been created as a single regulator for the insurance, securities, banking
and pension sectors in the United Kingdom. The FSA enforces detailed
requirements that firms have to meet in order to receive authorization,
including requirements relating to minimum capital, internal governance systems
and risk control, and the suitability of management and controlling
shareholders. A self-regulatory body known as the General Insurance Standards
Council (or GISC) has also been established to ensure compliance by general
insurance companies with applicable codes of business conduct. The Treasury has
announced that the FSA will assume statutory responsibility for the conduct of
the sale of general insurance by intermediaries and insurance companies from
January 15, 2005. Accordingly, self regulation by the GISC will cease at that
time. The FSA also establishes the conditions on which the home country
principle is implemented with respect to insurance, securities and banking,
granting a European financial services "passport."

     All insurance companies in the United Kingdom must submit to the FSA annual
and, in some cases, quarterly returns together with audited accounts. These
returns must include a certificate as to whether domestic assets are sufficient
to cover domestic liabilities, and are subject to examination by the FSA. An
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annual assessment for the protection of UK policyholders is imposed on all
insurance companies underwriting life and general business.

     Policyholder protection exists through two bodies, the Financial Services
Compensation Scheme (or FSCS) and the Motor Insurance Bureau (or MIB). The FSCS
provides policyholders with a level of protection against insurance company
insolvency. The protection covers all types of property and casualty insurance.
The MIB provides coverage for victims of automobile accidents where there is no
(or inadequate) insurance coverage. FSCS and MIB are funded by means of levies
on insurance companies.

     Insurance companies in the United Kingdom may only market products in
conformity with classes authorized by the FSA.

     In some areas, UK regulations establish customer information rights that
exceed the disclosure standards mandated by the relevant EU directives. Under
those regulations policyholders who are consumers may challenge the terms of
policies which they claim are unfair or unclear. The Office of Fair Trading and
certain consumer groups are empowered to enforce these regulations by requiring
revised contracts when the terms of existing contracts appear to contravene the
regulations.

UNITED STATES

     Our insurance subsidiaries in the United States are subject to
comprehensive and detailed regulation of their activities under U.S. state and
federal laws.

     U.S. property-casualty and life insurance companies are subject to
insurance regulation and supervision in the individual states in which they
transact business. Supervisory agencies in various states have broad powers to
grant or revoke licenses to transact business, regulate trade practices, license
agents, approve insurance policy terms and certain premium rates, set standards
of solvency and reserve requirements, determine the form and content of required
financial reports, examine insurance companies and prescribe the type,
concentration, and amount of investments permitted. Insurance companies are
subject to a mandatory audit every three to five years by state regulatory
authorities, depending on the state of domicile, and every year by independent
auditors.

     U.S. property-casualty and life insurers are also subject to risk based
capital (or RBC) guidelines, which provide a method to measure the adjusted
capital (statutory capital and surplus plus other adjustments) that insurance
companies should have for regulatory purposes, taking into account the risk
characteristics of the company's investments and products. The RBC requirements
establish capital requirements for four categories of risk: asset risk,
insurance risk, interest rate risk and business risk. For each category, the
capital requirement is determined by applying factors to various asset, premium
and reserve items, with the factors being higher for those items with greater
underlying risk and lower for less risky items. An insurance company's RBC ratio
will vary over time depending upon many factors, including its earnings, the mix
of assets in its investment portfolio, the nature of the products it sells and
its rate of sales growth, as well as changes in the RBC formulas required by
regulators. The RBC guidelines are intended to be a regulatory tool only, and
are not intended as a means to rank insurers generally. Each of our U.S.
insurance subsidiaries met its statutory minimum RBC ratios at December 31,
2003.

     Although the federal government generally does not directly regulate the
insurance business, many federal laws affect the insurance business in a variety
of ways. The Federal Fair Credit Reporting Act, which is designed to promote
accuracy and ensure the privacy of information used in consumer reports,
provides a broad federal preemption of state laws regulating the dissemination
of financial information. In November 2002, the Terrorism Risk Insurance Act
(TRIA) was signed into law. This legislation requires insurers to offer coverage
for terrorist acts in their commercial property and casualty insurance policies,
and establishes a federal program to reimburse insurers for a portion of the
losses so insured. These mandatory rules have implications for Allianz Group
companies doing business in the United States. The TRIA is scheduled to expire
at the end of 2005 and efforts are already underway to have it extended in order
to provide longer term stability for commercial risks in the insurance
marketplace. Aside, the Department of Treasury may in the course of 2004 rescind
the duty for insurers to provide terrorism coverage. In this case, insurers can
not

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longer claim state compensation for damages caused by terrorist attacks.
However, should this occur, insurers anticipate that several large states may
impose their own law to regulate terrorism coverage.

     In addition, our U.S. subsidiaries are subject to the restrictions on fund
transfers and other activities under the USA PATRIOT Act of 2001, which,
although it affects primarily our banking and investment services subsidiaries,
also applies to our insurance subsidiaries. On September 18, 2002, the Treasury
Department issued proposed rules regarding Section 352 of the USA PATRIOT Act,
requiring financial institutions to establish anti-money laundering programs. In
the proposed rules, application of this provision to insurers has been limited
to life insurers, annuity issuers and any other insurance product with
investment features similar to life insurance. According to an interim rule
released by the Treasury Department on October 25, 2002, other insurance and
financial services companies are exempted from the requirement to establish
anti-money laundering programs until final rules have been issued. Although the
publication of final rules with respect to insurance companies is still pending,
our U.S. life insurance subsidiaries have implemented programs to comply with
applicable Treasury rules. The Treasury Department has postponed the adoption of
rules related to the customer identification provision of Section 326 of the USA
PATRIOT Act. However, all financial institutions are required to scan their
customers for potential matches to the list of Specially Designated Nationals
issued by the Office of Foreign Assets Control.

     There are a number of proposals for regulation which may significantly
affect the U.S. market. These include the establishment of an optional federal
charter for insurance and reinsurance companies; employee benefits regulations;
changes to pension and retirement savings laws; the establishment of an asbestos
trust fund to provide compensation to persons who have suffered injury as a
result of asbestos exposure, and the taxation of insurance companies and their
products. Also being debated are proposals to modernize and enhance the
efficiency of the state insurance regulation and federal class action reform
legislation, which would move most class action cases from state court into the
federal court. With the exception of class action reform legislation, these
initiatives are mostly in a preliminary stage and, consequently, we cannot
assess their potential impact at this time.

OTHER COUNTRIES

     Our insurance operations in countries other than those discussed above are
also subject to detailed regulation and supervision by authorities in the
relevant jurisdictions, including with respect to such matters as policy forms
and rates, reserving, investment and financial practices, and marketing,
distribution and sales activities.

               BANKING, ASSET MANAGEMENT AND INVESTMENT SERVICES

EUROPEAN UNION

     The supervision of banking, asset management and investment services in the
member states of the European Union is the exclusive responsibility of national
authorities within the individual member states. However, the rules governing
the regulation and supervision of these financial services have been harmonized
by a number of EU directives, which have been implemented in the member states.
These directives mostly focus on establishing harmonized minimum capital
requirements and the freedom to provide services within the member states. As a
result of this harmonization, banking licenses granted in one EU member state
are recognized in all other member states.

     Under the EU investment services directive, member states have to ensure
that financial institutions that are members of a securities exchange in one
member state are eligible for admission to trading on the exchanges of all other
member states. Moreover, the investment services directive provides for certain
rules of conduct and organizational requirements for financial institutions.

     Another field of harmonization which is of importance for financial
institutions is securities trading. The EU directive on offering prospectuses,
which came into force on December 31, 2003, provides for harmonized rules with
respect to the contents and filing of prospectuses for publicly traded
securities.

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Another directive harmonizes the rules for disclosure of financial and other
information that publicly traded companies have to provide. The insider trading
directive sets forth certain rules for securities trading by corporate insiders.
There are also EU directives harmonizing rules governing investment fund
management and investor protection.

GERMANY

     Our banking and other financial services activities in Germany are
extensively supervised and regulated by the BaFin.

BANKING

     Engaging in the banking business requires the authorization by the BaFin.
Banking activities include, among others, deposit and lending activities, safe
custody activities, checking account and e-money activities as well as
underwriting activities. Enterprises engaged in banking business are formally
referred to as credit institutions (Kreditinstitute).

     All banks in Germany, including Dresdner Bank, are subject to comprehensive
governmental supervision and regulation, also on a consolidated basis, by the
BaFin in accordance with the German Banking Act (Kreditwesengesetz, or the
German Banking Act). The BaFin is authorized to issue regulations and guidelines
implementing the provisions of the German Banking Act and other laws affecting
German banks. The German Banking Act and the regulations issued there under have
been amended over time to implement the recommendations on banking supervision
issued by the Basle Committee on Banking Supervision and the relevant European
Council Directives.

     The BaFin supervises the operations of all banks, including Dresdner Bank,
to ensure that they conduct their business in accordance with the provisions of
the German Banking Act and other applicable German laws and regulations.
Particular emphasis is placed on compliance with capital adequacy and liquidity
requirements, lending limits and restrictions on certain activities imposed by
the German Banking Act and the regulations promulgated thereunder. The BaFin is
empowered to request information and documentation on business matters from the
banks. The BaFin may conduct on-site inspections without specific cause. Reports
by a bank's auditor (Prufungsberichte) have to be submitted to the BaFin and the
Deutsche Bundesbank (the Bundesbank), the German central bank.

REGULATION BY THE BUNDESBANK

     The BaFin carries out its banking supervision role in close cooperation
with the Bundesbank. The authority to issue administrative orders that are
binding on specific banks is vested solely with the BaFin. Before issuing
general regulations which affect the Bundesbank the BaFin must consult with the
Bundesbank and must obtain its consent. The Bundesbank is responsible for
organizing the collection and analysis of the periodic and other reports from
the banks.

CAPITAL ADEQUACY REQUIREMENTS

     German banking regulation contains certain capital adequacy requirements.
In accordance with what is known as Principle I, each bank's ratio of Liable
Capital to risk-weighted assets and certain off-balance sheet items, as such
terms are defined or described below, must be at least 8% at the end of each
business day in order to cover credit risks. This ratio is known as the Solvency
Ratio.

     Liable Capital of a bank organized as a stock corporation consists
principally of (i) paid-in share capital without cumulative preferred stock
(Vorzugsaktien), (ii) capital reserves, (iii) earnings reserves which are
disclosed in the bank's annual balance sheet, (iv) net profits which are shown
in audited interim financial statements and which will not be used for
distribution or the payment of taxes, (v) the fund for general banking risks
pursuant to Section 340g of the German Commercial Code, (vi) capital paid in by
silent partners which meets certain conditions set forth in the German Banking
Act, including subordination to all other creditors and participation in the
bank's losses, (vii) reserves for general banking risks pursuant to

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Section 340f of the German Commercial Code, provided that such reserves may not
exceed 4% of the book value of such receivables and securities, (viii) preferred
stock, (ix) capital paid in consideration of profit participation rights
(Genussrechtsverbindlichkeiten) which meets certain conditions set forth in the
German Banking Act, including subordination to all creditors in the case of
insolvency and participation in the bank's losses, (x) long-term subordinated
debt with a term of at least five years meeting certain conditions set forth in
the German Banking Act, including subordination to all creditors in the case of
insolvency, (xi) certain revaluation reserves and (xii) reserves pursuant to
Section 6b of the German Income Tax Act (Einkommensteuergesetz) up to 45%, less
certain positions that are required to be deducted. The capital components set
forth in items (i) through (vi) above, less balance sheet losses, certain
intangible assets (including goodwill) and certain other items, constitute the
core capital. Supplementary Capital is the portion of Liable Capital referred to
in items (vii) through (xii) above. The distinction between Core Capital and
Supplementary Capital reflects the ability of the capital components to cover
losses. Core Capital, with the highest ability to cover losses, corresponds to
Tier I capital, and Supplementary Capital corresponds to Tier II capital as such
terms are used in U.S. capital adequacy rules. The German Banking Act provides
that the aggregate amount of Supplementary Capital must not exceed the Core
Capital. In addition, the sum of long-term subordinated debt must not exceed 50%
of Core Capital. The German Banking Act also requires that certain investments
in banks or financial institutions and certain other items, be deducted in
computing Liable Capital.

     To calculate risk-weighted assets and certain off-balance sheet items, the
assessment basis must first be determined. With respect to risk assets, the
assessment basis is equal to the balance sheet value, adding or deducting
certain items. Further, the assets of a bank are assigned to six broad
categories of relative credit risk depending on the debtor or on the type of
instrument or collateral securing the asset (0%, 10%, 20%, 50%, 70% and 100%),
and the assessment basis of each asset is multiplied by the percentage weight
applicable to its risk category to arrive at the risk-weighted value to be
covered with Liable Capital. With respect to off-balance sheet items, such as
financial guarantees and letters of credit, their value, subsequent to the
determination of their assessment basis, is adjusted according to their risk
classification depending on the type of instrument (20%, 50% and 100%), or, in
the case of swaps and other financial derivatives, according to a
"mark-to-market" method or an original exposure method. After such adjustment,
they are assigned, in the same manner as on-balance sheet assets, to the credit
risk categories multiplied by the applicable percentage weight.

     The German Banking Act also requires market risk and counterparty risk
associated with securities transactions, transactions in derivative products and
foreign exchange transactions of banks to be covered by adequate capital. The
German Banking Act also employs two related concepts: (i) Bank Funds
(Eigenmittel) and (ii) market risk positions. Market risk positions are made up
of overall foreign exchange positions, commodities positions and the trading
book risk positions. For assessing the trading book risk positions, the
distinction between trading transactions which are allocated to a bank's trading
book (Handelsbuch) and transactions in commercial banking business which are
allocated to a bank's investment book (Anlagebuch) is important.

     Bank Funds consist of Liable Capital plus Tier III Capital. Tier III
Capital consists of (i) short-term subordinated debt (with a term of at least
two years) that meets certain conditions set forth in the German Banking Act and
(ii) the net profits which would be realized if all positions in the trading
book were matched, if all anticipated expenses and distributions on capital were
deducted and if all losses that would be incurred in the investment book if the
bank were liquidated were deducted. The sum of Tier III Capital plus the portion
of Supplementary Capital that is not required to cover risk positions in the
investment book cannot exceed 250% of the portion of Core Capital that is not
required to cover risk positions in the investment book.

     The trading book of a bank comprises (i) securities, money market
instruments, foreign currency or units of account, derivatives and marketable
claims and participations that are held by the bank for its own account for
resale or trading or that are acquired by the bank with the intent of profiting
in the short term from existing or expected differences between buying and
selling prices or variations in prices or interest rates; (ii) instruments held
and transactions entered into for the purpose of hedging the market risk of the
trading
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book and transactions to refinance such hedging; (iii) transactions subject to
the designation of the counterparty (Aufgabegeschafte); (iv) receivables for
fees, commissions, interest, dividends and margin payments related to positions
in the trading book; and (v) securities lending, loans or similar transactions
related to positions in the trading book.

     Banks must establish guidelines for the inclusion of transactions in their
trading books, which must be submitted to the BaFin and the Bundesbank. The
investment book of a bank consists of all transactions that are not contained in
the trading book.

     The sum of the risk-weighted values of market risk positions and, under
certain circumstances, separately computed option positions, may not exceed the
difference between Liable Capital and an amount equal to 8% of the risk-weighted
assets increased by the amount of Tier III Capital. This limitation must be
computed daily at the close of business. The risk-weighted values of market risk
positions and option positions must be computed in accordance with rules set
forth in Principle I or, in the case of market risk positions, in accordance
with the bank's own risk computation models which have been approved by the
BaFin. The positions allocated to the trading book are risk-weighted according
to market risk (interest rate and equity security price related) and according
to counterparty risk.

     Capital adequacy rules must not only be met by a bank and its banking
subsidiaries on an individual basis, but also by the entire banking group. In
addition to the calculation and reporting requirements under the German Banking
Act as described above, Dresdner Bank has adopted the risk-adjusted capital
guidelines (or Basle Accord) promulgated by the Basle Committee on Banking
Supervision (BIS-rules) and therefore calculates and reports to the BaFin and
the Bundesbank also pursuant to BIS-rules.

     The capital adequacy rules apply also to financial holding groups such as
the Allianz Dresdner Asset Management companies.

LIQUIDITY REQUIREMENTS

     The German Banking Act and the regulations issued by the BaFin also contain
liquidity requirements. Each bank must invest its funds in a manner designed to
provide adequate liquidity at all times. Under what is known as Principle II,
banks must compute one liquidity factor and three monitoring factors at the end
of every calendar month. Each factor is the quotient of available funds to
payment obligations for one of four short-term time periods of up to one year.

LENDING AND INVESTMENT LIMITS

     The lending activities of banks are restricted in order to avoid high
concentrations of risk. According to the applicable law, lending includes not
only bank loans in the ordinary sense but all items on the asset side of the
balance sheet, derivative transactions (other than written option positions) and
related guarantees and other off-balance sheet positions. A borrower is defined
to include a related group of borrowers consisting of certain related natural or
legal persons or partnerships of the borrower. There are exemptions, and the
limitations on large credits are applied on a risk-weighted basis in a manner
similar to the application of the risk-weighted capital adequacy rules.

     The German Banking Act as it applies to Dresdner Bank as a trading book
institution, distinguishes between investment book lending limits, combined
investment and trading book lending limits, and trading book lending limits. The
limits are as follows:

          (i) A credit constitutes a "large investment book credit" if the sum
     of credits allocated to the investment book extended to any one borrower or
     related group of borrowers, in the aggregate, equals or exceeds 10% of a
     bank's Liable Capital. The bank has to ensure that, without approval of the
     BaFin, no single large investment book credit exceeds 25% of the bank's
     Liable Capital (20% in the case of a bank's unconsolidated affiliate) and
     that the sum of all of a bank's disbursed large investment book credits
     does not exceed eight times the bank's Liable Capital.

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          (ii) A credit constitutes a "large combined investment and trading
     book credit" if the sum of credits allocated to both the investment and
     trading books extended to any one borrower or related group of borrowers,
     in the aggregate, equals or exceeds 10% of the bank's Bank Funds. The bank
     has to ensure that, without approval of the BaFin, no single large combined
     investment trading book credit exceeds 25% of the bank's Bank Funds (20% in
     the case of a bank's unconsolidated affiliate) and that the sum of all of a
     bank's disbursed large combined investment trading book credits does not
     exceed eight times the bank's Bank Funds.

          (iii) If a single large combined investment and trading book credit
     exceeds the respective percentage of the bank's Bank Funds set forth in
     (ii) above, the sum of credits extended to any one borrower or related
     group of borrowers that is allocated to the trading book cannot exceed five
     times that portion of the bank's Bank Funds that is not required to cover
     risk positions in the investment book, even with approval of the BaFin.

          (iv) The sum of all portions of single large combined investment and
     trading book credits that exceed the respective percentage of the bank's
     Bank Funds set forth in (ii) above for more than 10 days cannot exceed,
     after deducting the amounts that do not exceed this limit, six times that
     portion of the bank's Bank Funds that is not required to cover risk
     positions in the investment book.

     A bank must report its large credits to the Bundesbank and must notify the
BaFin and the Bundesbank if it exceeds the ceilings set forth above. With the
approval of the BaFin, a bank may exceed the limits set forth in (i) and (ii).
The amount exceeding these ceilings must be covered by Liable Capital and Bank
Funds, respectively. The limits set forth in (iii) and (iv) may generally not be
exceeded. The excess must be reported, and the excessive amount must be covered
by Liable Capital. The amounts of Liable Capital used to cover such excess
amount must be disregarded when computing the adequacy of Liable Capital under
the capital adequacy rules. If the respective percentage ceilings and the eight
times Liable Capital ceiling or Bank Funds ceiling as mentioned in (i) and (ii)
are exceeded, only the larger of both excess amounts must be covered by Liable
Capital and Bank Funds, respectively.

     The provisions of the German Banking Act limiting large credits by a bank
apply also to the aggregate credits extended by members of a banking group. In
order to determine whether members of a banking group in the aggregate have
extended a large credit, all credits extended by members of the group to one
borrower are consolidated and measured against the consolidated Liable Capital
and Bank Funds (including the shares of other shareholders) of the banking
group. Consolidation of credits to one borrower or related group of borrowers is
only required if the individual total credit position from overall business of
at least one member of the banking group to such borrower is equal to or exceeds
5% of such member's Liable Capital.

BANK REPORTING REQUIREMENTS

     In order to enable the BaFin and the Bundesbank to monitor compliance with
the German Banking Act and other applicable legal requirements and to obtain
information on the financial position of the German banks, the BaFin and the
Bundesbank require the routine periodic filing of information.

     Each bank must file with the BaFin or the Bundesbank, or both, among other
things, the following information: (i) immediate notice of certain personnel and
organizational changes, the extension or increase of large credits, the
acquisition or disposition of 10% or more of the equity or voting rights of
another company or certain changes in the amount of such equity investment, and
the commencement or termination of certain non-banking activities; (ii) monthly
balance sheet and statistical information and annual audited unconsolidated and
consolidated financial statements; (iii) the acquisition or disposition of a
direct or indirect investment in the bank representing 10% or more of the equity
or voting rights of the bank, whether held in the shareholder's own interest or
in the interest of a third party, or giving the person making the investment a
significant influence over the management of the bank (or Significant
Shareholding), or an increase or decrease of a Significant Shareholding which
results in the investment reaching or passing the threshold of 20%, 33% or 50%
of such voting rights or equity, as well as the fact that the bank became or
ceased to be a subsidiary of another enterprise, as soon as the bank has
knowledge of such facts; and on an annual basis, the names and addresses of
holders of Significant Shareholdings in the bank and its foreign subsidiary
banks, and
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the amount of such investment; (iv) monthly compliance statements with regard to
the capital adequacy rules and the requirements on liquidity; and (v) quarterly
statements listing the borrowers to whom the reporting bank has outstanding
loans of E1.5 million or more and certain information about the amount and the
type of the loan, including syndicated loans exceeding this amount even if the
reporting bank's share does not reach E1.5 million.

     If several banks report to the Bundesbank loans of E1.5 million or more to
the same borrower or to a group of affiliated borrowers, the Bundesbank must
inform the reporting banks of the total reported indebtedness and of the type of
such indebtedness and of the number of reporting lending banks.

SANCTIONS FOR NON-COMPLIANCE

     If the BaFin discovers irregularities, it has a wide range of enforcement
powers. The BaFin can exert a direct influence over the management of a bank. If
the Liable Capital of a bank is not adequate or if the liquidity requirements
are not met and the bank has failed to remedy the deficiency within a period
determined by the BaFin, the BaFin may prohibit or restrict the bank's
distribution of profits or extension of credit. These prohibitions also apply to
the parent bank of a banking group if the Bank Funds of the bank members of the
group do not meet the legal requirements.

     If a bank is in danger of defaulting on its obligations to creditors, the
BaFin may take emergency measures to avert default. In this connection, it may,
among other things: (i) issue instructions relating to the management of the
bank; (ii) prohibit the acceptance of deposits and the extension of credit;
(iii) prohibit or restrict management of the bank from carrying on their
functions; and (iv) appoint supervisors. To avoid the insolvency of a bank, the
BaFin has the authority to (i) prohibit payments and disposals of assets, (ii)
suspend customer services and (iii) prohibit the acceptance of payments other
than in payment of debt owed to the bank. Finally, the BaFin may revoke the
bank's license. In addition, violations of the German Banking Act may result in
criminal and administrative penalties.

DEPOSIT PROTECTION

     In accordance with the German Deposit Guarantee Act (Einlagensicherungs-
und Anlegerentschadigungsgesetz), the Bundesverband Deutscher Banken, the
association of the German private sector commercial banks, established a company
known as the Compensation Institution (Entschadigungseinrichtung deutscher
Banken GmbH) to carry out and ensure the deposit guarantee scheme of the German
private sector commercial banks. The Deposit Guarantee Act provides that the
aggregate deposits of a given depositor at a given bank and claims resulting
from securities transactions by a customer with a given bank must each be
covered up to 90% of the aggregate amount or E20,000, whichever is less. Certain
creditors, as defined by the German Deposit Guarantee Act, including other
banks, insurance companies, the public sector and enterprises and persons
related to the bank, may not claim compensation. The deposit guarantees will be
funded through contributions by the private sector commercial banks to the
Compensation Institution.

     In addition, the banking industry has voluntarily set up various protection
funds for the protection of depositors. Most private sector commercial banks,
including Dresdner Bank, are members of the Einlagensicherungsfonds, a deposit
protection association with a fund which covers liabilities to each creditor up
to a certain amount. Obligations vis-a-vis other banks and other persons
described by the fund's articles of association are not covered. Furthermore,
the articles of association provide for certain restrictions not related to
specific creditors, but rather to categories of obligations. Payments from the
Einlagensicherungsfonds generally cover the portion of a deposit not already
covered by the Compensation Institution. Members are required to provide certain
information to the association and the Prufungsverband deutscher Banken e.V., an
institution for the auditing of German banks. This auditing institution conducts
its own inspections of banks in order to reduce the risk of failures within the
deposit protection system.

     Furthermore, depositors and other creditors of German banks are protected
by the arrangements in relation to Liquiditats-Konsortialbank GmbH (or LIKO), a
bank founded in 1974 in order to provide funding for German banks which
experience liquidity problems. The shares in LIKO are owned 30% by the

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Bundesbank, with the rest of the shares being held by other German banks and
banking associations. LIKO is funded by its shareholders. For additional
information, see Note 43 to our consolidated financial statements.

MORTGAGE BANKS

     Through Dresdner Bank, we hold 28.5% of the shares of Eurohypo AG, a
mortgage bank. In Germany, mortgage banks are regulated by a special statute.
The German Mortgage Bank Act (Hypothekenbankgesetz), in addition to the German
Banking Act. Under the Mortgage Bank Act, mortgage banks are authorized to
finance themselves through the issuance of mortgage bonds
(Hypothekenpfandbriefe) and public-debt bonds (Kommunalschuldverschreibungen).
These bonds are generally long-term bonds with an original maturity of four
years or longer, the principal and interest of which are at all times required
to be covered by a pool of specified qualifying assets. Mortgage-backed bonds
are backed by mortgage loans extended by the mortgage bank that cover 60% or
less of the market value of the respective real estate property, and public-debt
backed bonds are backed by communal loans extended by the mortgage bank to
German public authorities or entities organized under public law or to member
states of the EU or to the contracting states to the agreement on the European
Economic Area (or EEA), or which are guaranteed or otherwise secured by such
persons. Separate pools are maintained for the mortgage-backed bonds and for the
public-debt backed bonds. The qualifying assets remain on the mortgage bank's
balance sheet. In case of insolvency proceedings relating to the mortgage bank,
the asset pools constituting cover will be exempt from such proceedings.

INVESTMENT COMPANIES

     In Germany, investment funds are managed by investment companies, which are
specialized credit institutions and subject to the German Banking Act and the
German Investment Act (Investmentgesetz). The German Investment Act came into
force on January 1, 2004 and transforms an European Directive relating to
investments in undertakings for collective investment in transferable securities
(UCITS-Directive) into national law. It regulates certain categories of
investment funds, including hedge-funds and provides for specific investment
restrictions. The BaFin supervises the investment company's compliance with the
applicable investment restrictions. Within Allianz Group, DEUTSCHER
INVESTMENT-TRUST Gesellschaft fur Wertpapieranlagen mbH (dit) and dresdnerbank
investment management Kapitalanlagegesellschaft mbH (dbi) are investment
companies.

     Basically, an investment fund must be segregated from the investment
company's own assets and is not a legal entity. Therefore the assets of the
investment fund may either be jointly owned by the investors or owned by the
investment company as trustee.

     Investment companies are not subject to the above mentioned capital and
liquidity requirements. Currently only a limited version of the above described
Solvency Ratio is of relevance for those investment companies which offer fund
products eligible for state subsidies under the Retirement Savings Act
(Altersvermogensgesetz). See "-- Insurance -- Germany -- Life Insurance."

FINANCIAL SERVICES INSTITUTIONS

     Financial Services Institutions are enterprises that provide certain
financial services described by the German Banking Act. These financial services
include investment and contract brokering, portfolio management and own-account
trading with financial instruments for third parties.

     To engage in the provision of financial services, an authorization by the
BaFin is required. The supervision and regulation of financial services
institutions is substantially similar to the regulation and supervision of
banks. Like investment companies, certain financial services institutions are
exempted from the capital and liquidity requirements described above.

     Within the Allianz Group, Allianz Capital Managers GmbH and Allianz
Dresdner Asset Management International GmbH are financial services
institutions.

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UNITED KINGDOM

     In the United Kingdom, the FSMA also provides the framework for the
regulation of activities of the financial services sector outside of the
insurance business, with the FSA as the responsible supervisory authority. The
FSA also prosecutes offenses involving insider dealing, market manipulation,
money laundering and of market abuse.

     The above requirements of the FSA with respect to the financial services
sector apply to most Allianz Group entities in the United Kingdom, including our
Dresdner Bank subsidiaries. The London branch of Dresdner Bank is a "passported"
bank in the United Kingdom in accordance with the provisions of the EU
directives as implemented in UK law. As such it is lead regulated in prudential
matters by BaFin in Germany.

FRANCE

     Under French law, investment and investment services companies dealing with
financial instruments must be authorized by the Comite des Etablissements de
Credit et des Entreprises d'Investissement (Banque de France) and by the
Autorite des Marches Financiers (which has been created by the August 1, 2003
Law on Financial Security) if they act under the portfolio management status.
They are subject to the supervision of the Autorite des Marches Financiers for
the dealing with listed financial instruments and for their portfolio management
activity. Banks in France, including our Dresdner Bank subsidiary Dresdner Bank
Gestions France, must be authorized by the Comite des Etablissements de Credit
et des Entreprises d'Investissement (Banque de France) and are subject to the
supervision of the Commission Bancaire (Banque de France). The supervision
extends to all the activities of French banks, including their capital adequacy,
shareholdings in other companies and limitation of risk. The Paris branch of
Dresdner Bank is a "passported" bank in France in accordance with the provisions
of EU directives as implemented in French law. As such it is primarily regulated
by the BaFin.

     Banks are required to file monthly reports to the Commission Bancaire.
Changes of shareholdings in French banks do need approval by the Comite des
Etablissements de Credit et des Entreprises d'Investissement (Banque de France).

     French securities regulations prescribe a minimum amount of share capital
for investment and investment services companies and impose certain requirements
on company management and shareholders. The companies must also submit a
business plan with their application for authorization. There are also
regulatory restrictions with respect to equity capital on limitation of risks,
and specific disclosure rules must be observed. In addition, the Autorite des
Marches Financiers oversees the dealings of investment and investment services
companies with investors, including the provision of appropriate information to
investors, and supervise control procedures within these companies. The Autorite
des Marches Financiers supervises compliance with market rules, and the fairness
of transactions.

     French supervisory authorities are authorized to impose sanctions,
including revocation of operating licenses, on companies that fail to comply
with applicable regulations.

ITALY

     Investment and investment services companies in Italy dealing with
financial instruments must be licensed and are subject to regulation by both
Banca d'Italia, the Italian national bank, and the Commissione Nazionale per le
Societa e la Borsa (or CONSOB). Shareholdings in excess of 5% in Italian
investment and investment services companies require the authorization of Banca
d'Italia.

     Banks in Italy, including our subsidiary Rasbank S.p.A. and our Dresdner
Bank subsidiaries, must be authorized by Banca d'Italia and are subject to the
supervision of both Banca d'Italia and CONSOB. The supervision of Banca d'Italia
extends to all the activities of Italian banks, including their capital
adequacy, shareholdings in other companies and limitation of risk. The Milan
branch of Dresdner Bank is a "passported" bank in Italy in accordance with the
provisions of EU directives as implemented in Italian law. As such it is lead
regulated by the BaFin. The CONSOB supervises the provision of investment
services by banks in Italy and rules of conduct to be followed by the banks in
their dealings with the public. Banks are
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required to file their annual and semi-annual reports with both Banca d'Italia
and the CONSOB. They also have ongoing disclosure obligations. The Milan branch
of Dresdner Bank is exempt from these requirements and instead has to submit the
annual financial statements of Dresdner Bank Group to the Camera di Commercio
and Banca d'Italia. Changes in organizational structure of the branch have to be
reported annually.

     Major shareholders of banks and investment and investment services
companies must be of good standing and the top managers and members of the
boards of directors and boards of auditors must meet specific qualifications in
terms of professionalism and good standing. With respect to banks, Italian law
requires those assuming control of or a shareholding of greater than 5% in an
Italian bank to obtain authorization from Banca d'Italia. Similarly, banks
assuming shareholdings in any other company are required to obtain authorization
from Banca d'Italia.

     Italian supervisory authorities are empowered to impose sanctions,
including revocation of operating licenses, on companies that fail to comply
with relevant regulations.

UNITED STATES

     Allianz of America, Inc., Allianz Dresdner Asset Management of America
L.P., Pacific Investment Management Company LLC, Oppenheimer Capital,
Nicholas-Applegate, RCM Capital Management LLC and other financial services
subsidiaries of Allianz AG in the United States are registered as investment
advisers under the Investment Advisers Act of 1940. Many of the investment
instruments managed by these financial services subsidiaries, including a
variety of mutual funds and other pooled investment vehicles, are registered
with the SEC under the Investment Company Act of 1940. The investment advisory
activities of these financial services subsidiaries are subject to various U.S.
federal and state laws and regulations. These laws and regulations relate to,
among other things, limitations on the ability of investment advisers to charge
performance-based or non-refundable fees to clients, record-keeping and
reporting requirements, disclosure requirements, limitations on principal
transactions between an adviser or its affiliates and advisory clients, as well
as general anti-fraud provisions. The failure to comply with these laws or
regulations may result in possible sanctions, including the suspension of
individual employees, limitations on the activities in which the investment
adviser may engage, suspension or revocation of the investment adviser's
registration as an adviser, censure and/or fines.

     Federal and state regulators have focused on, and continue to devote
substantial attention to, the mutual fund and variable insurance product
industries. As a result of publicity relating to widespread perceptions of
industry abuses, there have been numerous proposals for legislative and
regulatory reforms, including mutual fund governance, new disclosure
requirements concerning mutual fund share classes, commission breakpoints,
revenue sharing, advisory fees, market timing, late trading, portfolio pricing,
annuity products, hedge funds, and other issues. It is difficult to predict at
this time whether changes resulting from new laws and regulations will affect
the industries or our investment management businesses, and, if so, to what
degree.

     Some U.S. financial service subsidiaries of Allianz AG are also registered
with the SEC as broker-dealers under the Securities Exchange Act of 1934 and are
subject to extensive regulation as such. In addition, some of these subsidiaries
are members of, and subject to, regulation by self-regulatory organizations such
as the National Association of Securities Dealers and, in the case of Dresdner
Kleinwort Wasserstein Securities LLC, the New York Stock Exchange. The scope of
broker-dealer regulation covers matters such as capital requirements, the use
and safekeeping of customers' funds and securities, advertising and other
communications with the public, record-keeping and reporting requirements,
supervisory and organizational procedures intended to assure compliance with
securities laws and rules of the self-regulatory organizations and to prevent
improper trading on material non-public information, employee-related matters,
limitations on extensions of credit in securities transactions, and clearance
and settlement procedures. A particular focus of the applicable regulations
concerns the relationship between broker-dealers and their customers. As a
result, in some instances they may be required to make "suitability"
determinations as to certain customer transactions.

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     Dresdner Bank provides commercial banking services in the United States
through its New York and Grand Cayman Branches. Dresdner Bank's U.S. banking
activities are accordingly subject to regulation, supervision and examination by
the Federal Reserve Board under the U.S. Bank Holding Company Act of 1956, as
amended (or BHCA), and the International Banking Act of 1978, as amended (or
IBA). The New York Branch of Dresdner Bank is licensed, supervised and examined
by the New York State Banking Department.

     The Gramm-Leach-Bliley Act of 1999 substantially eliminated barriers
separating the banking, insurance and securities industries in the United
States. According to this act, a bank holding company that has effectively
elected to become a financial holding company under the Federal Reserve
Regulation may conduct business activities either directly or through its
subsidiaries that were previously prohibited for bank holding companies.
Dresdner Bank became a financial holding company under the Gramm-Leach-Bliley
Act in 2000. To qualify as a financial holding company, a bank is required to
meet the criteria of being well-managed and well-capitalized. A foreign bank
that is well-capitalized has capital ratios equal to or comparable with those
required for a well-capitalized U.S. bank, i.e. a Tier I capital ratio of 6% and
a total capital to total risk-based assets ratio of 10%. Dresdner Bank is
currently in compliance with these capital requirements. In the event of
non-compliance with these criteria, a financial holding company may be required
to limit previously authorized financial activities and, in the event of
continued non-compliance, to cease its banking activities in the United Sates or
to engage only in such activities conducted by it or its subsidiaries as are
permissible for bank holding companies that are not financial holding companies.
As a result of its ownership of Dresdner Bank, Allianz AG is also subject to the
supervision of the Federal Reserve Board under the BHCA and the IBA and has
elected to be treated as a financial holding company. Allianz AG's status as a
financial holding company became effective on June 30, 2004.

     Under the IBA, the Federal Reserve Board may terminate the activities of
any U.S. office of a foreign bank if it determines that the foreign bank is not
subject to comprehensive regulation on a consolidated basis in its home country
or that there is reasonable cause to believe that the foreign bank or its
affiliate has violated U.S. law or engaged in unsafe or unsound banking practice
in the United States, and as a result of such violation or practice, the
continued operation of the U.S. office would be inconsistent with the public
interest or the purposes of federal banking law.

     Under the trade name Dresdner Kleinwort Capital, subsidiaries of Dresdner
Bank are also active in the private equity business. They provide investment
management services and make, manage and monitor private equity investments in
unaffiliated companies and investment funds, and establish and operate
investment funds in which third-party investors make private equity investments.
These subsidiaries are subject to regulation by the Federal Reserve Board and
the SEC. Two subsidiaries of Dresdner Bank are also active as small business
investment companies and are subject to the U.S. Small Business Administration
Act.

OTHER COUNTRIES

     Our financial services businesses in countries other than those discussed
above are also subject to detailed regulation and supervision by authorities in
the relevant jurisdictions, including with respect to such matters as capital
adequacy, investment advisory and securities trading activities, and mutual fund
management and distribution activities.

                          ACQUISITION CONTROL MATTERS

     In a number of jurisdictions, the direct or indirect acquisition of
"control" of companies is subject to prior regulatory approval. Under the
applicable EU directives, any person acquiring shares in an insurance, bank or
investment services company who would become a "qualifying shareholder" as a
result of the acquisition is required to give prior notice of the proposed
acquisition to the relevant supervisory authorities in the company's home
jurisdiction. A qualifying shareholder is a shareholder that holds at least 10%
of the voting rights or the capital of such a company or otherwise has the
ability to exercise a significant influence over the management of the company.
A qualifying shareholder must also report any increases in shareholdings by any
holder to levels equal to or exceeding 20%, 33% or 50% of the voting rights or
the
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capital. The supervisory authorities have a maximum period of three months
during which to oppose an acquisition of shares if they believe that the
acquisition would jeopardize the sound and prudent management of the insurance
company. Reductions in ownership below the thresholds indicated above must also
be notified to the supervisory authorities. These directives have been
implemented in most EU jurisdictions.

     Under the German Securities Trading Act (Wertpapierhandelsgesetz, or WpHG),
holders of voting securities of a German company listed on a regulated market
within the European Union or within the other contracting states to the
agreement on the EEA must notify the company and the BaFin in writing and
without delay (at the latest, within seven calendar days) of the level of their
holding whenever that holding reaches, exceeds or falls below 5%, 10%, 25%, 50%
or 75% of the company's voting rights. Also, a German company receiving such
notification of shareholding must generally publish such notification without
undue delay.

     The German Securities Acquisition and Takeover Act (Wertpapiererwerbs- und
Ubernahmegesetz, or WpUG) applies to all offers to acquire shares and certain
other securities issued by stock corporations and partnerships limited by shares
(Kommanditgesellschaften auf Aktien) that are domiciled in Germany and admitted
to trading on an regulated market in the European Economic Area (or EEA). The
WpUG provides that any shareholder obtaining direct or indirect control, which
is defined as 30% or more of the voting rights, of a stock corporation or of a
partnership limited by shares, is required to make a mandatory takeover offer to
all other shareholders of the company.

     Similar regulations relating to acquisition of control have been
established as well in other jurisdictions inside and outside of the EU in which
we do business. State insurance holding company statutes in the United States
applicable to Allianz AG's U.S. insurance subsidiaries generally provide that no
person may acquire control of Allianz AG, and thus indirect control of its U.S.
insurance subsidiaries, without the prior approval of the appropriate insurance
regulators. Generally, any person who acquires beneficial ownership of 10% or
more of the outstanding ordinary shares or voting power of Allianz AG would be
presumed to have acquired such control unless the appropriate insurance
regulators, upon application, shall determine otherwise.

                     ANTITRUST REGULATION AND MERGER REVIEW

     EU and national antitrust regulation affects the cooperation between
insurance companies and within insurance associations. While the EC Treaty
generally prohibits arrangements that restrict competition, some types of
cooperation in the insurance sector are expressly exempt from this prohibition
by EU regulation providing for a so-called block exemption.

     In February 2003, the EU adopted a new block exemption regulation for the
insurance sector to replace the existing regulation on this subject at its
expiry on March 31, 2003. In particular with respect to the establishment and
management of insurance and reinsurance pools, the new regulation raises the
market share thresholds for insurance pools and restricts the simultaneous
memberships of insurers who may exercise a determining influence on the
commercial policy of pools acting on the same relevant market in these pools.

     Insurers have in the past been able to seek individual exemption under
applicable antitrust laws for insurance pools that were not eligible for block
exemption and other restrictions on competition. As of May 1, 2004 this
procedure is no longer available. As of this date, certain restrictive practices
may be automatically exempt by law if they meet specific requirements and have
an overall positive effect on competition. The companies involved in such
practices have to assess whether these requirements are met.

     In some business lines, the Allianz Group's market share might raise
concerns under European merger control regulations. If the Allianz Group were to
consider a substantial acquisition in these business lines, the relevant EU
authorities might require divestiture of parts of the portfolio or might
disapprove the transaction. Comparable legislation with respect to merger review
has been enacted in many jurisdictions inside and outside the EU.

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                    RULES OF CONDUCT FOR SECURITIES TRADING

     The German Securities Trading Act prohibits insider trading with respect to
securities admitted to trading or included in the over-the-counter market at a
German exchange or the exchange in another EU member state or in other
contracting states to the agreement on the EEA. The German Securities Trading
Act also requires that the issuer of securities admitted to trading on a German
stock exchange promptly publish any new fact relating to the field of the
issuer's activities that is not publicly known if this fact could have a
material influence on the market price of such securities due to its effects on
the financial position or the overall business performance of the issuer. The
BaFin carries out supervisory functions with respect to these regulations.

     The German Securities Trading Act also introduced rules of conduct for
banks and securities firms (the Rules of Conduct). The Rules of Conduct apply to
all investment services firms in Germany. The BaFin has broad powers to
investigate investment services firms with a view to monitoring compliance with
the Rules of Conduct. The German Securities Trading Act provides for an annual
examination on behalf of the BaFin of a bank's compliance with its obligations
under the German Securities Trading Act.

ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

                              CORPORATE GOVERNANCE

GENERAL

     Allianz AG is a German stock corporation. The corporate bodies of Allianz
AG are the management board (Vorstand), the supervisory board (Aufsichtsrat) and
the general meeting (Hauptversammlung). The management board and the supervisory
board are separate and no individual may serve simultaneously as a member of
both boards. This dual board system is required by German law.

     The management board is responsible for managing the day-to-day business of
Allianz AG in accordance with the German Stock Corporation Act (Aktiengesetz, or
AktG) and the articles of association of Allianz AG. The management board is
bound by applicable German law, the articles of association of Allianz AG as
well as its internal rules of procedure (Geschaftsordnung). The management board
represents Allianz AG in its dealings with third parties. The supervisory board
oversees the management of Allianz AG. It is also responsible for appointing and
removing the members of the management board and representing Allianz AG in
connection with transactions between a member of the management board and
Allianz AG. The supervisory board may not make management decisions, but the
supervisory board or the articles of association must determine that certain
types of transactions require the supervisory board's prior consent.

     In carrying out their duties, the members of the management board and the
supervisory board must exercise the standard of care of a diligent and prudent
business person. In complying with this standard of care, the members of both
boards must take into account a broad range of considerations in their
decisions, including the interests of Allianz AG, its shareholders, employees
and creditors. The management board is additionally required to respect the
rights of shareholders to equal treatment and equal information.

     Members of either board who violate their duties may be personally liable
for damages to Allianz AG. Allianz AG may waive these damages or settle these
claims only if at least three years have passed from the date of their
origination, and if the general meeting approves the waiver or settlement with a
simple majority. No approval of a waiver or settlement by the general meeting
will be effective if opposing shareholders who hold, in the aggregate, one-tenth
or more of the share capital of Allianz AG have their opposition formally noted
in the minutes recorded by a German notary. As a general rule under German law,
a shareholder has no direct recourse against the members of the management board
or the supervisory board in the event that they are believed to have breached a
duty to Allianz AG.

     The supervisory board has comprehensive monitoring functions. To ensure
that these functions are carried out properly, the management board must
regularly report to the supervisory board with regard to current business
operations and future business planning (including financial, investment and
personnel

                                       184


planning). The supervisory board is also entitled to request at any time special
reports regarding the affairs of Allianz AG, the legal or business relations of
Allianz AG to its subsidiaries and the affairs of any of its subsidiaries to the
extent that the affairs of such subsidiary may have a significant impact on
Allianz AG.

     The management board is required to ensure that adequate risk management
and internal monitoring systems exist within Allianz AG to detect risks relating
to the Allianz Group's business activities at the earliest possible stage.

GERMAN CORPORATE GOVERNANCE RULES

     Principal sources of enacted corporate governance standards for German
stock corporations are the German Stock Corporation Act (Aktiengesetz) and the
German Co-determination Act (Mitbestimmungsgesetz). In addition, the German
Corporate Governance Code (the "Code") published by the German Ministry of
Justice (Bundesministerium der Justiz) in 2002, presents essential statutory
regulations for the corporate governance of German listed companies. The aim of
the Code is to make the German corporate governance rules related to German
listed stock corporations transparent for national and for international
investors. As a German listed company, Allianz AG is subject to both the German
Stock Corporation Act and the German Corporate Governance Code.

     The Code comprises a set of best-practice guidelines. In addition to
restating various corporate governance-related provisions of German law, the
Code contains approximately 50 "recommendations," which reflect widely
recognized and well-established standards of corporate governance, and
approximately 25 "suggestions," which incorporate additional standards for the
sound and responsible management and supervision of a listed company. Topics
covered by the German Corporate Governance Code include:

     - The composition and responsibilities of the management board, the
       compensation of management board members, and rules for avoiding and
       resolving conflicts of interest;

     - The composition and responsibilities of the supervisory board and
       committees of the supervisory board, the compensation of supervisory
       board members, and rules for avoiding and resolving conflicts of
       interest;

     - The relationship between the management board and the supervisory board;

     - Transparency and disclosure in periodic reports; and

     - Reporting on, and auditing of, the company's annual financial statements.

     Although the German Corporate Governance Code does not have the force of
law, the Code has a legal basis through the declaration of compliance required
by Section 161 of the German Stock Corporation Act, which entered into force in
2002 and requires that the management board and the supervisory board of a
covered company declare annually either

          (i) that the company has complied, and does comply, with the
     recommendations set forth in the German Corporate Governance Code, or,
     alternatively,

          (ii) which recommendations the company has not complied, or does not
     comply, with (so-called "comply or explain" system).

     On December 17, 2003, our management board and supervisory board issued the
declaration of compliance. You will find the wording of this declaration on our
website under www.allianzgroup.com. (Reference to this "uniform resource
locator" or "URL" is made as an inactive textual reference for informational
purposes only. The information found at this website is not incorporated by
reference into this document.)

     Furthermore, you will find a summary of significant differences between
Allianz AG's corporate governance practices and the NYSE corporate governance
standards at the Allianz Group's homepage under www.allianzgroup.com. (Reference
to this "uniform resource locator" or "URL" is made as an inactive

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textual reference for informational purposes only. The information found at this
website is not incorporated by reference into this document.)

                                MANAGEMENT BOARD

     The management board of Allianz AG currently consists of ten members. Under
the articles of association of Allianz AG, the supervisory board determines the
size of the management board, although it must have at least two members. Under
the articles of association, Allianz AG may be legally represented by two
members of the management board or by one member of the management board and the
holder of a general commercial power of attorney (Prokura), which entitles its
holders to carry out all legal acts and transactions on behalf of Allianz AG. In
addition, pursuant to a filing with the commercial register in Munich, Allianz
AG may also be represented by two holders of a general commercial power of
attorney. The supervisory board represents Allianz AG in connection with
transactions between a member of the management board and Allianz AG. To the
extent that a supervisory board committee is entitled to decide on a specific
matter in lieu of the supervisory board, the right of representing Allianz AG
vis-a-vis the management board in that matter can be transferred to the relevant
supervisory board committee.

     The supervisory board appoints the members of the management board. The
initial term of the members of the management board is generally limited to
three years. Each member may be reappointed or have his term extended by the
supervisory board for one or more terms of up to five years each. The initial
appointment or the reappointment of members of the management board attaining
the age of 60 is generally limited to terms of one year. Members of the
management board must resign from office at the end of the fiscal year in which
they attain the age of 65. The supervisory board may remove a member of the
management board prior to the expiration of his term for good cause, for example
in the case of a serious breach of duty or a bona fide vote of no confidence by
the general meeting. A member of the management board may not deal with, or vote
on, matters relating to proposals, arrangements or contractual agreements
between himself and Allianz AG and may be liable to Allianz AG if he has a
material interest in any contractual agreement between Allianz AG and a third
party which was not disclosed to, and approved by, the supervisory board. The
management board has adopted its own internal rules of procedure.

     The management board regularly reports to the supervisory board on the
business of Allianz AG. According to the internal rules of procedure of the
supervisory board, the management board requires the consent of the supervisory
board for certain transactions, primarily, share capital measures and
acquisitions or divestitures of companies or shareholdings in companies of a
significant volume.

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     The current members of the management board, their areas of responsibility,
the year in which each member was first appointed, the year in which the term of
each member expires, and the principal supervisory or management board
memberships outside the Allianz Group, respectively, are as follows:



                                                   YEAR FIRST   YEAR CURRENT
NAME                       AREA OF RESPONSIBILITY  APPOINTED    TERM EXPIRES   PRINCIPAL OUTSIDE BOARD MEMBERSHIPS
----                       ----------------------  ----------   ------------   -----------------------------------
                                                                   
Michael Diekmann.........  Chairman of the            1998          2007       Member of the supervisory Boards of
                           management board                                    BASF AG, Linde AG (deputy chairman)
                                                                               and Lufthansa AG
Dr. Paul Achleitner......  Group Finance              2000          2009       Member of the supervisory boards of
                                                                               Bayer AG, MAN AG, RWE AG and OIAG
Detlev Bremkamp..........  Europe II                  1991          2005       Member of the supervisory boards of
                                                                               ABB AG (Deutschland) and Hochtief
                                                                               AG
Jan R. Carendi...........  Americas                   2003          2005       None
Dr. Joachim Faber........  Allianz Dresdner Asset     2000          2009       Member of the supervisory boards of
                           Management (ADAM)                                   Bayerische Borse AG, Infineon
                                                                               Technologies AG, and Societa
                                                                               Metallurgica Italiana S.p.A.
Dr. Reiner Hagemann......  Europe I                   1995          2007       Member of the supervisory boards of
                                                                               E.ON Energie AG, Schering AG and
                                                                               Steag AG
Dr. Helmut Perlet........  Group Controlling,         1997          2007       None
                           Financial Risk
                           Management,
                           Accounting, Taxes,
                           Compliance
Dr. Gerhard Rupprecht....  Group Information          1991          2005       Member of the supervisory boards of
                           Technology, Life                                    Heidelberger Druckmaschinen AG,
                           Insurance Germany                                   Quelle AG and ThyssenKrupp
                                                                               Automotive AG
Dr. Herbert Walter.......  Allianz Dresdner           2003          2007       Member of the supervisory boards of
                           Banking                                             Deutsche Borse AG, Banco Popular
                                                                               Espanol and TSV Munchen von 1860
                                                                               GmbH & Co.KG aA
Dr. Werner Zedelius......  Growth Markets             2002          2009       Member of the board of directors of
                                                                               Allianz C.P. Life Insurance Co.
                                                                               Ltd. and Rosno


     The following is a summary of the business experience of the current
members of the management board within the Allianz Group:

     Michael Diekmann:  Joined the Allianz Group in 1988. From 1996 to 1998 he
was chief executive officer of Allianz Insurance Management Asia-Pacific Pte.
Ltd., Singapore. He became a deputy member in October 1998 and a full member of
the management board of Allianz AG in March 2000. He was appointed chairman of
the management board in April 2003.

     Dr. Paul Achleitner:  Joined the management board of Allianz AG in January
2000. He was previously chairman of Goldman, Sachs & Co. oHG, Frankfurt, Germany
and a partner of Goldman Sachs Group from 1994 to 1999.

     Detlev Bremkamp:  Joined the Allianz Group in 1963. He was a deputy member
of the management board of Allianz Versicherung from 1981 to 1982 and a full
member from 1983 to 1987, managing director and general manager of Allianz
Europe Ltd. in Amsterdam from 1987 to 1990, and became a member of the
management board of Allianz AG in 1991.

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     Jan R. Carendi:  Became a member of the Management Board of Allianz AG in
May 2003. He previously held a variety of positions at Skandia Insurance Company
Ltd. and other companies of the Skandia Group, including chief executive officer
of Skandia Insurance Company Ltd. and Skandia New Markets Inc. and chief
executive officer of American Skandia Inc.

     Dr. Joachim Faber:  Joined the Allianz Group in 1997 after holding various
positions at Citibank AG, Frankfurt, Germany (1984-1992), including chairman of
the management board, and Citibank International PLC, London (1992-1997),
including head of capital markets. He was a member of the management board of
Allianz Versicherung from 1997 to 1999 and became a member of the management
board of Allianz AG in January 2000.

     Dr. Reiner Hagemann:  Joined the Allianz Group in 1977. In 1987, he became
a deputy member, in 1990 a full member and in 1995 was made chairman of the
management board of Allianz Versicherung. He was a member of the management
board of Allianz Leben from 1991 through 1994 and became a member of the
management board of Allianz AG in 1995.

     Dr. Helmut Perlet:  Joined the Allianz Group in 1973. He has been head of
the foreign tax department since 1981, head of corporate finance since 1990 and
head of accounting and controlling since 1992. He became a deputy member in July
1997 and a full member of the management board of Allianz AG in January 2000.

     Dr. Gerhard Rupprecht:  Joined the Allianz Group in 1979. In January 1989,
he became a deputy member, and in January 1991 a full member, and in October
1991 was appointed chairman, of the management board of Allianz Leben. He became
a member of the management board of Allianz AG in October 1991.

     Dr. Herbert Walter:  Held various positions at Deutsche Bank AG since 1983,
including chairman of the business segment Private & Business Clients and
speaker of the management board of Deutsche Bank 24. Since 2002, he was a member
of the Group Executive Committee of Deutsche Bank group as well as Global Head
of Private & Business Clients. He became a member of the management board of
Allianz AG on March 19, 2003, and became the Chairman of the management board of
Dresdner Bank AG effective March 25, 2003.

     Dr. Werner Zedelius:  Joined the Allianz Group in 1987. After various
positions in branch offices and in the headquarters of Allianz AG, he was
General Manager Finance and member of the board of directors of Cornhill
Insurance PLC in London from 1996 until 1999. Dr. Zedelius became a member of
the management board of Allianz AG on January 1, 2002.

     The members of the management board may be contacted at the business
address of Allianz AG.

                               SUPERVISORY BOARD

     In accordance with the articles of association of Allianz AG and the German
Co-determination Act (Mitbestimmungsgesetz), the supervisory board of Allianz AG
consists of 20 members, ten of whom are elected by the shareholders and ten of
whom are elected by the employees of the German companies of the Allianz Group.
Three of the employee representatives are representatives of the trade unions
represented in the Allianz Group in Germany. The general meeting may remove any
supervisory board member it has elected by a simple majority of the votes cast.
The employee representatives may be removed with a majority of three-quarters of
the votes cast by those employees who elected them. In addition, any member of
the supervisory board may resign by written notice to the management board.

     The supervisory board has a quorum when all members of the supervisory
board were invited or requested to participate in a decision and either ten or
more members, including the chairman of the supervisory board, or, when the
chairman of the supervisory board is not present, fifteen or more members,
participate in a decision before the supervisory board. Except where a different
majority is required by law or the articles of association of Allianz AG, the
supervisory board acts by simple majority of the votes cast. In

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the case of any deadlock, the chairman has the deciding vote. The supervisory
board meets at least twice each half-year. Its main functions are:

     - to monitor the management of Allianz AG;

     - to appoint the members of the management board; and

     - to approve matters in areas where such approval is required by German law
       or which the supervisory board has made generally or in the individual
       case subject to its approval. See "-- Management Board."

     In addition, supervisory boards of German insurance companies are tasked
with the appointment of the auditors.

     The supervisory board has established a Standing Committee, an Audit
Committee, a Personnel Committee and a Mediation Committee.

     Standing Committee.  The Standing Committee, which comprises the chairman
of the supervisory board, his deputy and three additional members elected by the
supervisory board, may approve or disapprove certain transactions of Allianz AG
to the extent that such transactions do not fall under the competency of any
other committee or are required to be decided by plenary meeting of the
supervisory board. The Standing Committee examines the corporate governance of
Allianz AG, drafts the declaration of compliance and examines the efficiency of
the work of the supervisory board. In addition, it determines the guest status
of non-members who wish to attend supervisory board meetings as well as changes
in form to the articles of association. The Standing Committee held four
meetings in 2003. The members of the Standing Committee are Dr. Henning
Schulte-Noelle as chairman, Norbert Blix, Dr. Gerhard Cromme, Peter Haimerl and
Dr. Manfred Schneider.

     Audit Committee.  The Audit Committee, established in September 2002,
comprises five members elected by the supervisory board. The Audit Committee
prepares the decisions of the supervisory board about the Allianz Group's annual
financial statements, the consolidated financial statements and the appointment
of the auditors and ascertains the independence of the auditors. Furthermore,
the Audit Committee assigns the mandate to the auditors, sets priorities for the
audit and determines the compensation of the auditors. In addition, it examines
the quarterly reports. After the end of the fiscal year, the Audit Committee
examines the Allianz Group's annual financial statements and the consolidated
financial statements, examines the risk monitoring system and discusses the
auditor's report with the auditors. The Audit Committee held five meetings in
2003. The members of the Audit Committee are Dr. Manfred Schneider as chairman,
Dr. Gerhard Cromme, Prof. Dr. Rudolf Hickel, Frank Ley and Dr. Henning
Schulte-Noelle.

     Personnel Committee.  The Personnel Committee consists of the chairman of
the supervisory board and two other members elected by the supervisory board. It
prepares the appointment of members of the management board. In addition, it
tends to on-going personnel matters of the members of the management board
including their membership on boards of other companies, the payments they
receive and the structure of group equity incentives. See "-- Stock-based
Compensation Plans -- Group Equity Incentive (GEI) Plans." The Personnel
Committee held four meetings in 2003. The members of the Personnel Committee are
Dr. Henning Schulte-Noelle as chairman, Norbert Blix and Dr. Gerhard Cromme.

     Mediation Committee.  The Mediation Committee consists of the chairman of
the supervisory board and his representative elected according to the rules of
the German Co-determination Act of 1976, one member elected by the employees and
one member elected by the shareholders. Under sec. 27(3) of the German Co-
determination Act, the Mediation Committee is charged with the solution of
conflicts in the appointment of members of the management board. If the
supervisory board in a vote on the appointment or recall of a member of the
management board fails to obtain the required majority, the Mediation Committee
has to present a proposal to the supervisory board. There arose no need for the
Mediation Committee to meet in 2003. The members of the Mediation Committee are
Dr. Henning Schulte-Noelle as chairman, Norbert Blix and Hinrich Feddersen. A
fourth member will be elected in September 2004.

                                       189


     Each member of the supervisory board is generally elected for a fixed term,
which expires at the end of the general meeting at which the shareholders
discharge the members of the supervisory board in respect of the fourth fiscal
year after the beginning of the term. The fiscal year in which the members of
the supervisory board are first elected is not considered. Supervisory board
members may be reelected.

     The current members of the supervisory board of Allianz AG, their principal
occupations, the year in which each member first served on the supervisory
board, the year in which the current term of each member expires and principal
memberships in statutory supervisory boards of each member outside the Allianz
Group, respectively, are as follows:



                                                           YEAR FIRST   YEAR CURRENT   PRINCIPAL OUTSIDE BOARD
NAME                             PRINCIPAL OCCUPATION      APPOINTED    TERM EXPIRES         MEMBERSHIPS
----                             --------------------      ----------   ------------   ------------------------
                                                                           
Dr. Henning Schulte-Noelle,
  Chairman(1)..................  Former chairman of the       2003          2008       Member of the
                                 management board of                                   supervisory boards of
                                 Allianz AG                                            E.ON AG, Siemens AG and
                                                                                       ThyssenKrupp AG
Norbert Blix, Deputy
  Chairman(2)..................  Employee, Allianz            1997          2008       None
                                 Versicherungs-AG
Dr. Wulf H. Bernotat(1)........  Chairman of the              2003          2008       Member of the management
                                 management board of E.ON                              boards of E.ON AG
                                 AG                                                    (chairman), Ruhrgas AG,
                                                                                       Metro AG, RAG
                                                                                       Aktiengesellschaft,
                                                                                       Powergen Limited
                                                                                       (Chairman) and Sydkraft
                                                                                       (Chairman)
Dr. Diethart Breipohl(1).......  Former member of the         2000          2008       Member of the
                                 management board of                                   supervisory boards of
                                 Allianz AG                                            Beiersdorf AG,
                                                                                       Continental AG,
                                                                                       KarstadtQuelle AG, KM
                                                                                       Europa Metal AG
                                                                                       (chairman), and Credit
                                                                                       Lyonnais
Bertrand Collomb(1)............  President du Conseil         1998          2008       Member of the board of
                                 d'Administration Lafarge                              directors of ATCO Ltd.
                                                                                       and Member of the
                                                                                       Conseil d'Administration
                                                                                       of Total and Vivendi
                                                                                       Universal.
Dr. Gerhard Cromme(1)..........  Chairman of the              2001          2008       Member of the
                                 supervisory board of                                  supervisory boards of
                                 ThyssenKrupp AG                                       ThyssenKrupp AG
                                                                                       (chairman), Axel
                                                                                       Springer Verlag
                                                                                       Aktiengesellschaft,
                                                                                       Siemens AG, Deutsche
                                                                                       Lufthansa AG, E.ON AG,
                                                                                       Ruhrgas AG, Volkswagen
                                                                                       AG, Suez S.A. and BNP
                                                                                       Paribas.
Claudia Eggert-Lehmann(2)......  Employee, Dresdner Bank      2003          2008       None
                                 AG


                                       190




                                                           YEAR FIRST   YEAR CURRENT   PRINCIPAL OUTSIDE BOARD
NAME                             PRINCIPAL OCCUPATION      APPOINTED    TERM EXPIRES         MEMBERSHIPS
----                             --------------------      ----------   ------------   ------------------------
                                                                           
Hinrich Feddersen(2)...........  Member of the federal        2001          2008       Member of the
                                 steering committee of                                 supervisory boards of
                                 ver.di (Vereinte                                      Deutscher Ring
                                 Dienstleistungs-                                      Lebensversicherungs AG
                                 gewerkschaft)                                         and Basler Versicherung
                                                                                       Beteiligungsgesellschaft
                                                                                       mbH
Peter Haimerl(2)...............  Employee, Dresdner Bank      2001          2008       None
                                 AG; Chairman of the
                                 works council of
                                 Dresdner Bank
Professor Dr. Rudolf
  Hickel(2)....................  Professor of Finance,        1999          2008       Member of the
                                 University of Bremen                                  supervisory boards of
                                                                                       Salzgitter Stahl und
                                                                                       Technologie AG,
                                                                                       Howaldtswerke Deutsche
                                                                                       Werft AG and Gewoba
                                                                                       Aktiengesellschaft fur
                                                                                       Wohnen und Bauen
Dr. Renate Kocher(1)...........  Chairman Institut fur        2003          2008       Member of the
                                 Demoskopie, Allensbach                                supervisory boards of
                                                                                       MAN AG and BASF AG
Frank Ley(2)...................  Employee, Allianz            1993          2008       None
                                 Lebensversicherungs-AG;
                                 Chairman of the works
                                 council of Allianz
                                 Lebensversicherungs-AG
Dr. Max Link(3)................  Employee, Allianz            2004          2008(5)    None
                                 Versicherungs-AG
Karl Neumeier(2)...............  Employee, Allianz            2003          2008       None
                                 Versicherungs-AG
Sultan Salam(2)................  Employee, Dresdner Bank      2003          2008       None
                                 AG
Dr. Albrecht Schafer(4)........  General Counsel of           2004          2008(5)    None
                                 Siemens AG
Dr. Manfred Schneider(1).......  Chairman of the              1998          2008       Member of the
                                 supervisory board of                                  supervisory boards of
                                 Bayer AG                                              Bayer AG (chairman),
                                                                                       DaimlerChrysler AG,
                                                                                       Linde AG (chairman),
                                                                                       METRO AG, RWE AG and TUI
                                                                                       AG
Margit Schoffer(2).............  Employee, Dresdner Bank      2003          2008       None
                                 AG
Dr. Herbert Scholl(1)..........  Managing director of         1998          2008       Managing director of
                                 Robert Bosch GmbH                                     Robert Bosch GmbH and
                                                                                       member of the
                                                                                       supervisory board of
                                                                                       BASF AG
Professor Dr. Dennis
  Snower(6)....................  Professor of Economics,      2004          2005(7)    None
                                 University of London


                                       191


---------------

(1) Elected by Allianz AG's shareholders.

(2) Elected by the employees of the German companies of the Allianz Group.

(3) Elected by the employees of the German companies of the Allianz Group as a
    substitute member.

(4) Elected by Allianz AG's shareholders as a substitute member.

(5) The term of substitute members expires at the end of the Annual General
    Meeting in which a successor of the replaced supervisory board member is
    elected and not later than the time at which the regular term of the
    replaced supervisory board member would have expired. The term of the
    replaced supervisory board member would have expired in 2008.

(6) Appointed by court as substitute member.

(7) It is intended to nominate the substitute member for election at the Annual
    General Meeting scheduled for May 4, 2005.

     The members of the supervisory board may be contacted at the business
address of Allianz AG.

                     COMPENSATION OF DIRECTORS AND OFFICERS

     Management Board.  Total compensation for members of our management board
includes a fixed component (the basic salary) and a variable component.
Beginning in 2002, the variable component consisted of the annual bonus, which
includes individual elements and elements based on company performance, and a
three-year bonus, from which payments to members of the management board can be
made for the first time in 2004.

     The total compensation paid by the Allianz Group to the management board
for 2003 was approximately E22.9 million. The compensation allocated to the
management board in 2003 consisted of variable compensation of approximately
E15.5 million and fixed compensation of approximately E7.3 million compared to
E9.5 million and E7.9 million in 2002, respectively.

     In addition to these amounts, in 2003 the Allianz Group paid an amount of
approximately E1,1 million to increase pension reserves and reserves for similar
obligations in favor of active members of the management board.

     Furthermore, Group Equity Incentives (GEI) were granted by Allianz Group to
members of the management board in the form of stock appreciation rights (SAR)
and restricted stock units (RSU) as described under "-- Stock-based Compensation
Plans -- Group Equity Incentive (GEI) plans". The Group equity incentives were
granted in 2003 for a price of E65.91 (average of the daily closing rate of the
Allianz share in Xetra trading on the 10 trading days following the Annual
General Meeting for fiscal 2002). The value of the rights granted in 2003 was
E9.5 million at the date of grant. Of this total, E4.7 million correspond to the
value of the SAR granted and E 4.8 million to the value of the RSU granted. No
payouts on SAR granted in previous years were made. Outstanding Group Equity
Incentives are valued on a quarterly basis and posted under the Allianz Group
website. For additional information on the appreciation rights held by members
of our management board, see Note 45 to our consolidated financial statements.
See also "-- Stock-based Compensation Plans -- Group Equity Incentive (GEI)
plans" below.

     In 2003, pensions and other benefit payments for former members of the
management board amounted to E8.2 million. E4.2 million were set aside in 2003
for compensating the claims of former members of the management board. An amount
of E39.8 million was set aside for current and future pension benefits of former
members of the management board and their beneficiaries.

     Supervisory Board.  Pursuant to our articles of association, each member of
the supervisory board receives an annual fixed remuneration of E4,000 and in
addition, a remuneration of E500 for every cent by which the dividend per share
declared by the Annual General Meeting exceeds the amount of 15 cents. The
chairman of the supervisory board receives twice, and each vice chairman one and
a half times these amounts. Each member of a supervisory board committee (except
the Mediation Committee and the Audit

                                       192


Committee) receives an additional 25% of these amounts, while the chairman of
these committees receives an additional 50%. Members of the Audit Committee
receive an additional annual fixed remuneration of E30,000, while the chairman
receives an additional E45,000. Members of the supervisory board who served for
only part of the fiscal year receive one twelfth of the annual remuneration for
each initiated month of service. This applies in the same manner to the members
of supervisory board committees. The total annual remuneration of a member of
the supervisory board shall not exceed twice, and the remuneration of the
chairman of the supervisory board shall not exceed three times the sum of the
annual fixed compensation and the additional dividend-related compensation of a
member of the supervisory board who has none of these specific positions.
Allianz AG reimburses all supervisory board members for their out-of-pocket
expenses and the value-added tax payable on these salaries. In addition, Allianz
AG provides insurance coverage and technical support to the supervisory board
members to the extent reasonably adequate to carry out their supervisory board
duties.

                                BOARD PRACTICES

     Allianz AG has entered into service contracts with management board members
providing for a limited benefit upon termination of service prior to the stated
expiration date of a management board member's contract. In such circumstances,
the management board member would receive monthly fixed payments for a further
six months as well as pro rata bonus payments if the conditions for the bonus
payments are fulfilled. If regular pension benefits were to become due during
this time period, they would be credited against these payments. Allianz AG has
not entered into such contracts with supervisory board members.

                                SHARE OWNERSHIP

     As of June 18, 2004, the members of the management board and the
supervisory board held less than 1% of our ordinary shares issued and
outstanding. As of such date, based on our share register, the members of the
management board and the supervisory board held in the aggregate approximately
2,800 ordinary shares of Allianz AG.

                                   EMPLOYEES

     As of December 31, 2003, Allianz Group had more than 173,000 employees
worldwide, of whom more than 82,000, or approximately 47.3%, were employed in
Germany. A large number of our German employees are covered by collective
bargaining agreements or similar arrangements. In the past three years, there
have been no work stoppages or strikes at our various sites that have arisen
from collective bargaining disputes or for other reasons which had a material
adverse effect on the Allianz Group's results of operations. We believe that our
employee relations are good.

     The following table shows the average number of employees of the Allianz
Group by region for the years ended December 31, 2003, 2002 and 2001.



                                                                AT DECEMBER 31,
                                                          ---------------------------
                                                           2003      2002      2001
                                                          -------   -------   -------
                                                                     
Germany.................................................   82,245    87,398    87,589
Rest of Europe..........................................   63,538    66,657    61,892
NAFTA...................................................   12,098    12,644    14,722
Rest of World...........................................   15,869    14,952    15,743
                                                          -------   -------   -------
  Total.................................................  173,750   181,651   179,946
                                                          =======   =======   =======


                                       193


                         STOCK-BASED COMPENSATION PLANS

GROUP EQUITY INCENTIVE (GEI) PLANS

     Group Equity Incentives support the orientation of senior management, and
in particular the Management Board, toward the long-term increase of the value
of the company. In 1999, we introduced Stock Appreciation Rights (SAR) through
which part of the total remuneration is directly tied to the development of the
Allianz share price. In 2003, Restricted Stock Units (RSU) with a 5-year vesting
period were issued for the first time. Allianz senior management worldwide is
entitled to participate in these Group Equity Incentives.

     Awards were granted by the respective companies in accordance with uniform
group-wide conditions. The grant price for SAR and RSU applicable for the award
is calculated on the basis of the average daily closing price of the Allianz
share in Xetra trading on the 10 trading days following the Annual General
Meeting of Allianz AG. The grant price for the GEI plan 2004 is E83.47.

     The number of SAR and RSU offered is set individually for each participant
and is determined on the basis of the grant price, the economic development of
the value of Allianz AG and the respective responsible company and individual
elements such as fixed remuneration and performance. The volume of rights
granted and thus the potential gain for the participant depends essentially on
the economic performance.

     For additional information on our Group Equity Incentive Plans see Note 45
to our consolidated financial statements.

                         EMPLOYEE STOCK PURCHASE PLANS

     Allianz AG offers its shares to qualified employees in Germany and abroad
at favorable conditions within pre-defined timeframes. To be eligible, employees
must have been employed for a minimum period of six continuous months prior to
the share offering and no notice of termination of employment must have been
served. Employees are also subject to certain restrictions on the amount that
may be invested to purchase the shares. Allianz AG and each participating
Allianz Group subsidiary establishes a restricted period of at least one and
maximum five years during which employees may not transfer the shares after
purchasing them. After this period, the shares are not subject to vesting or
other restrictions. The eligible employees of the Allianz Group acquired a total
of 944,625 ordinary shares under such arrangements in 2003.

     For additional information on our Employee Stock Purchase Plans, see Note
45 to our consolidated financial statements.

ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

MAJOR SHAREHOLDERS

     The outstanding capital stock of Allianz AG consists of ordinary shares
without par value that are issued in registered form. Under the articles of
association, each outstanding ordinary share represents one vote. Major
shareholders do not have different voting rights. Based on our share register,
as of June 18, 2004, we had approximately 555,300 registered shareholders, of
which approximately 1,760 were U.S. holders. Based on our share register,
approximately 7.5% of our ordinary shares issued were held by such U.S. holders.
Although our shareholders are generally required when registering to indicate
their respective names, addresses and, in the case of legal entities, whether
they hold on behalf of a third party, many of our ordinary shares may be held of
record by brokers, trustees or other nominal holders who are not required to
provide such information with regard to beneficial holders. As a result, the
number of holders of record or registered U.S. holders may not be representative
of the actual number of beneficial U.S. holders. See also "Directors, Senior
Management and Employees -- Share Ownership."

     Under the German Securities Trading Act, holders of voting securities of a
listed German company must notify the German Federal Financial Supervisory
Authority and the company of the level of their holding whenever it reaches,
exceeds or falls below specified thresholds. These thresholds are 5%, 10%, 25%,
50%
                                       194


and 75% of a company's shares. The provisions of the German Securities Trading
Act provide several criteria for attribution of shares.

     The following table sets forth information about beneficial ownership of
our ordinary shares as of the indicated date as to each person (or group of
affiliated persons) known by us, through documents filed publicly with the
United States Securities and Exchange Commission (the "SEC"), to own
beneficially more than 5% of the ordinary shares issued and outstanding, and as
adjusted for recent changes in our outstanding ordinary shares. In addition,
where different, we have indicated the percentage ownership provided by such
shareholders in the filings under the new German reporting requirements
discussed above.



                                                                    OWNERSHIP     OWNERSHIP
                                              NUMBER OF ORDINARY   REPORTED IN   REPORTED IN
                                              SHARES REPORTED IN       SEC         GERMAN
NAME OF BENEFICIAL OWNER                         SEC FILINGS         FILINGS     FILINGS(2)
------------------------                      ------------------   -----------   -----------
                                                                        
Munich Re...................................      46,908,267(1)      12.8%(1)      18.1%(3)


---------------

(1) As of December 31, 2003, as reported on February 12, 2004. In its report,
    Munich Re stated that such percentage was based on a total number of
    366,362,608 outstanding ordinary shares by Allianz as of December 31, 2003,
    but did not include ordinary shares of Allianz AG owned by Allianz Group
    companies or by HypoVereinsbank.

(2) Percentages have been rounded to a single decimal place.

(3) As reported under the German Securities Trading Act on April 2, 2003.

     As of June 18, 2004, 384,718,750 ordinary shares were issued but only
366,734,935 were outstanding, primarily due to the holding of 17,155,008
ordinary shares by Herakles Beteiligungs-Gesellschaft mbH, a wholly owned
Dresdner Bank subsidiary.

     Significant changes in the percentage ownership held of record by any of
our major shareholders in the last three years were as follows:

     - the share ownership of Munich Re decreased from slightly less than 25% as
       of October 2000 to approximately 12.8% of our outstanding ordinary shares
       on December 31, 2003, as reported to the SEC on February 12, 2004

     - the share ownership of Deutsche Bank as reported to the SEC decreased
       from approximately 6.9% as of February 2001 to 3.4% as of June 30, 2003;
       and

     - the share ownership of HypoVereinsbank as reported under German law
       decreased from approximately 6.8% as of October 2000 to less than 5% in
       2002.

                           RELATED PARTY TRANSACTIONS

     Allianz Group companies maintain various types of business relations
(particularly in the area of insurance, banking and asset management) to related
enterprises. Those relations are based on ordinary market terms. In particular,
the business relations with associated companies which are active in the
insurance business take on various forms and may also include special service,
computing, reinsurance, cost-sharing and asset management agreements whose terms
are deemed appropriate by management. Similar relationships may exist with
pension funds, foundations, joint ventures and companies which provide services
to Allianz Group companies.

     The following report relates to material business relationships with
associated enterprises and enterprises in which the Allianz Group held ownership
interest between 10% and 20% during the last fiscal year and enterprises which
held such ownership interest in Allianz AG.

MUNCHENER RUCKVERSICHERUNGS-GESELLSCHAFT AKTIENGESELLSCHAFT

     At the beginning of fiscal year 2003 the ownership interest of Allianz
Group in Munich Re's share capital was above 20%. The ownership interest was
reduced in the course of the first quarter 2003 to below
                                       195


20%. As a result, Munich Re was as of that time no longer an associated company
of the Allianz Group. During the course of fiscal 2003 Allianz Group further
reduced its ownership interest in Munich Re and as of December 31, 2003 held
only approximately 12.4% of Munich Re's share capital. On March 2, 2004 a
further reduction of ownership interest occurred as a result of the exchange of
the MILES-bond in Munich Re shares so that Allianz Group's ownership interest in
Munich Re's share capital was reduced to 9.4%. Pursuant to German insurance
group solvency rules, Allianz's interest in Munich Re is no longer considered as
a participation.

     Munich Re has also reduced its ownership interest in Allianz AG during 2003
and as of December 31, 2003 Munich Re held 12.2% of Allianz AG's share capital.
Taking into account the treasury shares held by Allianz Group as of this date
this corresponds to an ownership percentage of 12.8%.

     The relationship between Allianz AG and Munich Re was set forth in the past
in the so-called Principles of Cooperation of May 2000. After several
transactions during 2001 and 2002, including the reduction of mutual
participation in each other and the mutual participations in other insurance
companies, this contract became irrelevant and was formally canceled with effect
from December 31, 2003. Also, mutual board interlocks had been terminated.
Certain reinsurance relationships between both enterprises will continue.
Furthermore, a continuing quota share agreement provides that Munich Re shall
provide reinsurance for 10.5% of the gross self-retention of the insurance
business of the companies of Allianz's German Property -- Casualty Group via
Allianz AG. According to an agreement dated December 2001 the mutually ceded
reinsurance volume is to be adjusted on a step-by-step basis by 2008. The
reinsurance relationship between Munich Re and Allianz Leben will also continue
on the basis of the old agreements until 2010. In addition, a variety of
reinsurance and retrocession agreements exists between specific subsidiaries of
the Allianz Group and Munich Re which determine which insurance business the
Munich Re Group or the Allianz Group will receive. The conditions of those
reinsurance arrangements between the Groups are subject to arms-length, third
party-terms.

     In 2003, the Allianz Group ceded to and assumed from companies of the
Munich Re Group total premiums of E2,250 million and E650 million, respectively.

     In April 2001, the Allianz Group, Dresdner Bank (an Allianz Group
subsidiary as of July 2001), a Dresdner Bank subsidiary and others entered into
a series of transactions whereby Allianz Group provided Munich Re shares to be
delivered to ERGO Versicherungsgruppe AG (Ergo) shareholders in connection with
Munich Re's acquisition of the minority interest of Ergo pursuant to the public
cash and share offers described below. The purpose of this transaction,
including all individual agreement components, was to allow Munich Re to acquire
Ergo in July 2001 and at the same time achieve the previously agreed reduction
in cross-shareholdings between the Allianz Group and Munich Re. Additionally,
the transaction structure was designed to come within recently enacted changes
in German tax law which took effect as of January 1, 2002, and under which
capital gains on the disposal of equity interests were treated as tax-free.

     The framework agreement for this transaction (the "Ergo Framework
Agreement") was executed by the Allianz Group and all other parties on April 19,
2001, establishing the basic terms of: (i) a public cash tender offer for shares
of Ergo; (ii) parallel share offer by Munich Re for shares of Ergo; (iii) a
series of share lending agreements between DME Umtauschgesellschaft (DME) and
Dresdner Bank, a Dresdner Bank subsidiary and a third-party entity (the "Lending
Agreement"); and (iv) a forward sale agreement between DME and the Allianz
Group, pursuant to which DME acquired Munich Re shares to use, in part, in
repayment of the shares under the Lending Agreement (the "Forward Sale
Agreement").

In accordance with the Ergo Framework Agreement, the Allianz Group delivered
7,065,563 Munich Re shares (an approximate 4% interest of Munich Re) to DME in
July 2001, which were then delivered to Ergo shareholders. In January 2002, DME
acquired 11,213,035 Munich Re shares (an approximate 6.3% interest in Munich Re)
from the Allianz Group via the Forward Sale Agreement. Of the 11,213,035 shares
delivered by the Allianz Group under the Forward Sale Agreement in January 2002,
7,065,563 shares were immediately used by DME, as required by the Ergo Framework
Agreement, to satisfy its return obligation to the Allianz Group under the
Lending Agreement.

                                       196


     Based on the specific facts and circumstances of this transaction, under
both IFRS and U.S. GAAP, the Allianz Group recorded a sale of the 7,065,563
shares delivered under the Lending Agreement in July 2001 resulting in: (i)
derecognition of the 7,065,563 shares of Munich Re; and (ii) recording a 2001
capital gain of E866 million, before tax and minority interest. The delivery of
the 11,213,135 Munich Re shares under the Forward Sale Agreement in January 2002
was recorded as an inter-Allianz Group transfer of 7,065,563 Munich Re shares
and a sale of the remaining 4,147,472 Munich Re shares resulting in: (i)
derecognition of the 4,147,472 shares of Munich Re; and (ii) recording a 2002
capital gain of E1,317 million.

TERROR RISK INSURANCE COMPANIES

     In the aftermath of the terrorist attack of September 11, 2001, terror risk
insurance companies were founded in Germany and Luxembourg to address the
existing shortage of direct insurance and reinsurance coverage for major risks
in the international markets. The shareholders of these companies are a number
of direct insurers and reinsurers, including companies of the Allianz Group. At
December 31, 2003, Allianz Versicherungs-AG held a 16% interest in Deutsche
EXTREMUS Versicherungs-AG (EXTREMUS). EXTREMUS was registered on October 22,
2002, and had equity capital of E57 million. At December 31, 2002, Munich Re
held a 16% interest in EXTREMUS. On the basis of the E10 billion state guarantee
granted by the Federal Republic of Germany, EXTREMUS is able to provide excess
coverage of up to E13 billion for terror risks encountered in Germany. At
December 31, 2003, Allianz AG also held an 18.2% interest in Special Risk
Insurance and Reinsurance Luxembourg S.A. (SRIR). SRIR was registered on April
4, 2002, and has an equity capital of E289 million at December 31, 2003.

LOANS TO MEMBERS OF THE MANAGEMENT BOARD AND THE SUPERVISORY BOARD

     In the normal course of business, and subject to applicable legal
restrictions, members of the Management Board and the Supervisory Board had been
granted loans by Dresdner Bank and other Group companies. Such loans are subject
to the usual conditions in the industry. No additional loans were granted in
2002 and 2003. On December 31, 2003, loans to Management Board members granted
in previous years by subsidiaries of Allianz AG amounted to E0.086 million
(2002: E0.5 million).

                                       197


ITEM 8.  FINANCIAL INFORMATION

            CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

     See pages F-1 forward for the consolidated financial statements required by
this item.

                               LEGAL PROCEEDINGS

GENERAL

     Allianz Group companies are involved in legal, regulatory and arbitration
proceedings in Germany and a number of foreign jurisdictions, including the
United States, involving claims by and against them, which arise in the ordinary
course of their businesses, including in connection with their activities as
insurance, banking and asset management companies, employers, investors and
taxpayers. It is not feasible to predict or determine the ultimate outcome of
the pending or threatened proceedings. Management does not believe that the
outcome of these proceedings, including those discussed below, will have a
material adverse effects on the financial position or results of operations of
Allianz Group, after consideration of any applicable reserves.

LITIGATION

     In May 2001, a consolidated class action complaint seeking class action
status, In re Deutsche Telekom Securities Litigation, was brought against
Dresdner Bank AG and other defendants in the United States District Court for
the Southern District of New York by purported purchasers of Deutsche Telekom
American Depositary Shares (ADSs). The securities were issued pursuant to a
registration statement filed with the SEC on May 22, 2000 and pursuant to a
prospectus dated June 17, 2000. Dresdner Bank AG, which was one of the
underwriting syndicate's joint global coordinators, was one of the named
defendants. The complaint alleges that the offering prospectus contained
material misrepresentations and/or omissions relating to Deutsche Telekom. In
October 2002, the court granted the plaintiffs' motion for class certification.
The action seeks rescission of the sales and damages in an as yet unspecified
amount. Management of Dresdner Bank AG believes the complaint against Dresdner
Bank AG is without merit.

     In July 2002, the German Federal Cartel Office (Bundeskartellamt) commenced
an investigation against several property-casualty insurance companies in
Germany, in connection with alleged coordinated behavior to achieve premium
increases for the commercial and industrial property and liability insurance
business and submitted written charges to several insurance companies, among
them Allianz Versicherungs-AG, on July 19, 2003. Allianz Versicherungs-AG
commented in writing on the charge. A decision of the German Federal Cartel
Office is still outstanding.

     In December 2001 the European Commission commenced an investigation
involving several insurance companies operating in London, including a
subsidiary of Allianz AG, in connection with alleged anticompetitive behavior
related to aviation war risk insurance in the London market. It is currently not
possible to predict the outcome of this proceeding.

     On November 5, 2001, a lawsuit, Silverstein v. Swiss Re International
Business Insurance Company Ltd., was filed in the United States District Court
for the Southern District of New York against certain insurers an reinsurers,
including a subsidiary of Allianz AG which is now named Allianz Global Risks
U.S. Insurance Company. The complaint seeks a determination that the terrorist
attack of September 11, 2001 on the World Trade Center constituted two separate
occurrences under the alleged terms of various coverages. Allianz Global Risks
U.S. Insurance Company has also filed suit against Silverstein on January 2,
2002, in connection with the coverage issues arising from the September 11, 2001
attack on the World Trade Center. This suit and other related suits have been
consolidated for discovery and other purposes. On January 30, 2003, the court
rejected a motion for assessment by Allianz Global Risks U.S. Insurance Company
and referred this issue to the jury. In June 2004, Allianz Global Risks U.S.
Insurance Company filed again a motion for a summary judgment. Based on the
policy wording of the respective insurance contract, management believes that
Silverstein's claims will not succeed as far as they are based on the theory of
two
                                       198


occurrences. In connection with the terrorist attack of September 11, 2001
Allianz Group recorded net claims expense of approximately E1.5 billion in 2001
for the Allianz Group on the basis of one occurrence. In the event that
liability is premised under a two occurrence theory, Allianz AG estimates that
the Allianz Group may have an additional net exposure of approximately E80
million.

     On December 19, 2002, the insolvency administrator of KirchMedia GmbH & Co.
KGaA (KirchMedia) made a formal demand on Dresdner Bank AG to compensate the
insolvency assets (Insolvenzmasse) of Kirch Media for the loss of a 25%
shareholding in the Spanish television group Telecinco. This shareholding had
been pledged by subsidiaries of KirchMedia to Dresdner Bank AG as collateral for
a loan of E500 million from Dresdner Bank to KirchMedia's holding company,
TaurusHolding GmbH & Co. KG (or TaurusHolding). Following TaurusHolding's
default on the loan in April 2002 and insolvency in June 2002, Dresdner Bank AG
enforced its security interest and acquired through a subsidiary the Telecinco
shareholding in a forced auction sale. The insolvency administrator contends
that the pledge was created under circumstances that cause it to be invalid or
void and may initiate legal action against Dresdner Bank AG. The management of
Dresdner Bank AG believes that there is no valid basis for the insolvency
administrator's demand. At the end of June 2004, the 25% shareholding in
Telecinco was placed within Telecinco's initial public offering.

     On May 24, 2002, pursuant to a statutory squeeze-out procedure, the general
meeting of Dresdner Bank AG resolved to transfer shares from its minority
shareholders to Allianz AG as principal shareholder in return for payment of a
cash settlement amounting to E51.50 per share. The amount of the cash settlement
was established by Allianz AG on the basis of an expert opinion, and its
adequacy was confirmed by a court-appointed auditor. Some of the former minority
shareholders applied for a court review of the appropriate amount of the cash
settlement in a mediation procedure (Spruchverfahren), which is pending with the
district court (Landgericht) of Frankfurt. Management believes, that a claim to
increase the cash settlement does not exist. In the event that the court were to
determine a higher amount as an appropriate cash settlement, this would affect
all approximately 16 million shares which were transferred to Allianz AG.

     On May 6, 2004, the U.S. Securities and Exchange Commission (SEC) filed
civil fraud charges in U.S. federal court against PEA Capital LLC, PA Fund
Management LLC, PA Distributors LLC, all subsidiaries of Allianz Dresdner Asset
Management of America L.P. (ADAM of America), and certain officers concerning
alleged tolerance of market timing. Market timing is the repeated buying and
selling of fund shares to benefit from market movements and as such is generally
not illegal, unless it violates the limitations set out in the respective fund
prospectuses. The suit alleges violations of the U.S. anti-fraud rules and seeks
injunctive and monetary relief. Negotiations with the SEC continue and in that
connection certain ADAM of America subsidiaries have responded to an inquiry
from the SEC concerning the status of the New Jersey consent order (described
below) under a law that bars from the investment advisory business any entities
(and affiliates) that are enjoined from securities law violations. Certain ADAM
of America subsidiaries have entered into the above mentioned consent order with
the Attorney General of the State of New Jersey settling a similar suit brought
in New Jersey state court. Pacific Investment Management Company LLC was
dismissed from that proceeding and so was not a party to that order. Since
February 2004, ADAM of America and many of its U.S. subsidiaries have also been
named as defendants in multiple civil U.S. lawsuits commenced as putative class
actions. Some of these lawsuits relate generally to the same facts that are the
subject of the regulatory proceedings discussed above and some relate to the
utilization of fund portfolio securities commissions for distribution of fund
shares. The outcome of these proceedings cannot be predicted at this stage.

                                DIVIDEND POLICY

     Allianz AG normally declares dividends at the annual general assembly of
shareholders and has historically paid these dividends once a year. Under
applicable German law, dividends may be declared and paid only from balance
sheet profits as shown in the German statutory annual financial statements of
Allianz AG. For each fiscal year, the management board approves the annual
financial statements and submits them to the supervisory board with its proposal
as to the appropriation of the annual profit. This proposal will set forth what
amounts of the annual profit should be paid out as dividends, transferred to
capital reserves, or

                                       199


carried forward to the next fiscal year. Upon approval by the supervisory board,
the management board and the supervisory board submit their combined proposal to
the shareholders at the shareholders' assembly. The general assembly of
shareholders ultimately determines the appropriation of the annual profits,
including the amount of the annual dividends. Shareholders generally participate
in distributions of any dividends in proportion to the number of their ordinary
shares. Any dividends declared by Allianz AG will be paid in Euro.

     For information regarding annual dividends paid from 1999 through 2003, see
"Key Information -- Dividends."

                              SIGNIFICANT CHANGES

     For a description of significant developments since the date of the annual
financial statements included in this annual report, see Note 46 to the
consolidated financial statements.

                                       200


ITEM 9.  THE OFFER AND LISTING

                                TRADING MARKETS

     The principal trading market for the ordinary shares is the Frankfurt Stock
Exchange. The ordinary shares also trade on the other German stock exchanges in
Berlin, Bremen, Dusseldorf, Hamburg, Hanover, Munich and Stuttgart, as well as
the stock exchanges in London, Paris and Zurich. The ADSs of Allianz AG, each
representing one-tenth of an ordinary share, trade on the New York Stock
Exchange under the symbol "AZ." See also "Major Shareholders and Related Party
Transactions -- Major Shareholders."

                            MARKET PRICE INFORMATION

     The table below sets forth, for the periods indicated, the high and low
closing sales prices on the Frankfurt Stock Exchange for the ordinary shares of
Allianz AG as reported by Xetra. The table also shows, for the periods
indicated, the highs and lows of the DAX. See the discussion under "Key
Information -- Exchange Rate Information" for information with respect to rates
of exchange between the U.S. dollar and the Euro applicable during the periods
set forth below.



                                                        PRICE PER
                                                        ORDINARY
                                                        SHARE(1)             DAX
                                                      -------------   -----------------
                                                      HIGH     LOW     HIGH       LOW
                                                      -----   -----   -------   -------
                                                           (E)
                                                                    
ANNUAL HIGHS AND LOWS
1999................................................  313.5   214.5   6,958.1   4,678.7
2000................................................  399.2   285.9   8,065.0   6,200.7
2001................................................  358.3   185.8   6,795.1   3,787.2
2002................................................  257.9    68.1   5,462.6   2,598.0
2003................................................  101.5    41.1   3,965.2   2,203.0
2004 (through June 18, 2004)........................  111.2    80.7   4,151.8   3,276.1

QUARTERLY HIGHS AND LOWS
2002
First quarter.......................................  259.5   212.2   5,462.6   4,745.6
Second quarter......................................  254.1   164.7   5,343.9   4,099.1
Third quarter.......................................  188.1    78.4   4,483.0   2,769.0
Fourth quarter......................................  109.1    69.4   3,380.2   2,597.9
2003
First quarter.......................................   89.5    41.1   3,157.3   2,203.0
Second quarter......................................   78.2    43.4   3,304.2   2,450.2
Third quarter.......................................   95.0    69.6   3,668.7   3,146.6
Fourth quarter......................................  101.5    76.0   3,965.2   3,276.4
2004
First quarter.......................................  111.2    86.2   4,151.8   3,726.1
Second quarter (through June 18, 2004)..............   94.4    80.7   4,134.1   3,754.4


                                       201




                                                        PRICE PER
                                                        ORDINARY
                                                        SHARE(1)             DAX
                                                      -------------   -----------------
                                                      HIGH     LOW     HIGH       LOW
                                                      -----   -----   -------   -------
                                                           (E)
                                                                    
MONTHLY HIGHS AND LOWS
2003
October.............................................   92.2    76.0   3,656.0   3,276.6
November............................................   95.9    88.3   3,797.4   3,638.0
December............................................  101.5    92.6   3,965.2   3,806.5
2004
January.............................................  111.2    97.6   4,151.8   3,995.9
February............................................  106.9   100.2   4,141.5   3,991.4
March...............................................  101.3    86.2   4,146.0   3,726.1
April...............................................   94.4    88.5   4,134.1   3,924.9
May.................................................   90.9    80.7   4,022.1   3,754.4
June (through June 18, 2004)........................   87.7    83.5   4,021.6   3,864.2


---------------

(1) Adjusted to reflect the capital increase in April 2003.

     On June 18, 2004, the closing sale price per Allianz AG ordinary share on
XETRA was E86.91, which was equivalent to $105.49 per ordinary share, translated
at the closing buying rate for Euros on such date.

     Based on turnover statistics supplied by Bloomberg, the average daily
volume of the ordinary shares of Allianz AG traded on the Frankfurt Stock
Exchange (XETRA) between January 2, 2004 and June 18, 2004 was 2,750,247.

                                       202


TRADING ON THE NEW YORK STOCK EXCHANGE

     Official trading of Allianz AG ADSs on the New York Stock Exchange
commenced on November 3, 2000. Allianz AG ADSs trade under the symbol "AZ."

     The following table sets forth, for the periods indicated, the high and low
closing sales prices per Allianz AG ADS as reported on the New York Stock
Exchange Composite Tape:



                                                               PRICE PER
                                                                  ADS
                                                              -----------
                                                              HIGH   LOW
                                                              ----   ----
                                                                  ($)
                                                               
ANNUAL HIGHS AND LOWS
2000 (from November 3, 2000)................................  37.5   33.4
2001........................................................  37.6   18.7
2002........................................................  25.2    7.5
2003........................................................  12.7    5.0
2004 (until June 18, 2004)..................................  14.0    9.6

QUARTERLY HIGHS AND LOWS
2002
First quarter...............................................  25.2   20.7
Second quarter..............................................  25.1   17.9
Third quarter...............................................  20.4    8.6
Fourth quarter..............................................  12.3    7.5
2003
First quarter...............................................  10.5    5.0
Second quarter..............................................   9.3    5.3
Third quarter...............................................  10.6    8.2
Fourth quarter..............................................  12.7    9.0
2004
First quarter...............................................  14.0   10.6
Second quarter (until June 18, 2004)........................  11.4    9.6

MONTHLY HIGHS AND LOWS
2003
October.....................................................  10.8    9.0
November....................................................  11.2   10.5
December....................................................  12.7   11.3
2004
January.....................................................  14.0   12.5
February....................................................  13.7   12.6
March.......................................................  12.6   10.6
April.......................................................  11.4   10.5
May.........................................................  10.9    9.6
June (until June 18, 2004)..................................  10.8   10.2


     On June 18, 2004, the closing sales price per Allianz AG ADS on the New
York Stock Exchange as reported on the New York Stock Exchange Composite Tape
was $10.54.

                                       203


ITEM 10.  ADDITIONAL INFORMATION

                            ARTICLES OF ASSOCIATION

     Information relating to Allianz AG's articles of association is
incorporated in this annual report by reference to Allianz AG's Registration
Statement on Form 20-F (File No. 1-15154) as filed with the SEC on October 31,
2000. Allianz AG's current articles of association are filed as an exhibit to
this annual report.

ORGANIZATION

     Allianz AG is a stock corporation organized in the Federal Republic of
Germany under the German Stock Corporation Act. It is registered in the
Commercial Register in Munich, Germany under the entry number HR B 7158.

     The share capital of Allianz AG consists of ordinary shares without par
value. As of June 18, 2004, the capital stock of Allianz AG amounts to E
984,880,000. It is sub-divided into 384,718,750 no-par shares, of which
366,734,935 shares were outstanding. See also "Major Shareholders and Related
Party Transactions -- Major Shareholders."

OBJECTS AND PURPOSES

     Pursuant to article 1, paragraph 2 of our articles of association the
purpose of the Company is the direction of an international group of companies
that are active in the areas of insurance, banking, asset management and other
financial, consulting and similar services, and to hold ownership interests in
insurance companies, banks, industrial companies, investment companies and other
companies. As a reinsurer, Allianz AG primarily assumes insurance business from
Allianz Group companies and other companies in which Allianz AG holds ownership
interests.

     Copies of the articles of association are publicly available from the
Commercial Register in Munich. German- and English-language versions are
available at our headquarter and at our website. An English translation has been
filed with the Securities and Exchange Commission in the United States.

CONDITIONS GOVERNING CHANGES IN CAPITAL

     Allianz AG has several categories of authorized capital, which are set
forth in its articles of association. At the Annual General Meeting on May 5,
2004, the shareholders approved the following authorized capital for issuance of
new registered shares by the management board, upon the approval of the
supervisory board:

     - Up to E450,000,000 in the aggregate on one or more occasions on or before
       May 4, 2009 by issuing new registered no-par shares against contributions
       in cash and/or in kind (Authorized Capital 2004/1), of which an amount of
       E450,000,000 remain as of June 18, 2004. If the capital stock is
       increased against contributions in cash, the shareholders are to be
       granted preemptive rights. However, the management board is authorized,
       upon the approval of the supervisory board, to exclude shareholders'
       preemptive rights:

      (i) for fractional amounts;

       (ii) if necessary to grant preemptive rights on new shares to holders of
     bonds issued by Allianz AG or its Group companies that carry conversation
     or option rights or conversation obligations to such an extent as such
     holders would be entitled after having exercised their conversation or
     option rights after any conversation obligations have been fulfilled; and

       (iii) if the issue price is not substantially lower than the market
     price, subject to certain additional limitations in accordance with the
     German Stock Corporation Act.

     - Furthermore, the management board is authorized, upon the approval of the
       supervisory board, to exclude shareholders' preemptive rights in the case
       of a capital increase against contributions in kind. The management board
       is also authorized, upon the approval of the supervisory board, to
       determine the additional rights of the shares and the conditions of their
       issuance.
                                       204


     - Up to E10,000,000 in the aggregate on one or more occasions on or before
       May 4, 2009 by issuing new registered no-par shares against contributions
       in cash (Authorized Capital 2004/II), of which amount E10,000,000 remain
       as of June 18 2004. The management board is authorized, upon the approval
       of the supervisory board:

       (i) to exclude shareholders' preemptive rights in order to issue the new
     shares to the employees of Allianz AG and Allianz Group companies;

       (ii) to exclude preemptive rights with respect to fractional amounts; and

       (iii) to determine the additional rights of these shares and the
     conditions of their issuance.

     The shareholders have conditionally increased the share capital by an
aggregate amount of E250,000,000.00 through issuance of up to 97,656,250 new
registered no-par shares (Conditional Capital 2004). The conditional capital
increase shall be carried out only to the extent that conversation or option
rights are exercised by holders of bonds that Allianz AG or its Group companies
have issued against payment in cash pursuant to the authorization approved by
the Annual General Meeting on May 5, 2004, or to the extent that mandatory
conversion obligations are fulfilled, and insofar as no other methods of
servicing these rights are used.

     With respect to purchases of our own ordinary shares, see Note 13 to our
consolidated financial statements.

                                CAPITAL INCREASE

     In April 2003, by way of a rights offering, we raised approximately E4.4
billion, based on a subscription price of E38.00 per share, resulting in net
proceeds of approximately E4.3 billion after deduction of the commission payable
to the underwriters. We increased our issued share capital by E300,000,000 to
E982,408,000 by issuing 117,187,500 new no-par value shares with full dividend
entitlement for the 2003 fiscal year. For further information regarding capital
increases see also Note 13 to our consolidated financial statements.

                               MATERIAL CONTRACTS

     For information on material contracts to which Allianz AG or any of its
subsidiaries was a party in the preceding two years, see "Major Shareholders and
Related Party Transactions -- Related Party Transactions."

                               EXCHANGE CONTROLS

     Germany does not generally restrict capital movements between Germany and
other countries, institutions or persons.

     For statistical purposes, subject to certain exceptions, each company or
person domiciled in Germany is required to report to the German Bundesbank each
payment received from or made to a company or person not domiciled in Germany in
excess of E12,500 (or an equivalent amount in a foreign currency). Moreover, all
claims and liabilities of a company or person domiciled in Germany against or
towards a company or person not domiciled in Germany in excess of E5 million (or
an equivalent amount in a foreign currency) are required to be reported monthly
to the German Bundesbank.

     Other than as described above, there is no limitation on the right of
non-resident or foreign owners to receive dividends or other payments relating
to the ordinary shares or the ADSs permitted or granted by German law. Various
national, state and other laws relating to the acquisition of "control" of
Allianz AG's insurance and banking subsidiaries may impose limitations on the
ability to acquire ordinary shares or ADSs beyond specified thresholds. In
addition, some national laws may authorize investigation of certain money
transfers. See "Information on the Company and Operating and Financial Review
and Prospects -- Regulation and Supervision -- Acquisition Control Matters."

                                       205


                                    TAXATION

GERMAN TAXATION

     The following discussion is a summary of the material German tax
consequences for beneficial owners of shares or ADSs who are (i) not German
residents for German income tax purposes (i.e., persons whose residence,
habitual abode, statutory seat or place of effective management and control is
not located in Germany) and (ii) whose shares do not form part of the business
property of a permanent establishment or fixed base in Germany. Throughout this
section we refer to these owners as "Non-German Holders."

     This summary is based on German tax laws and typical tax treaties to which
Germany is a party as they are in effect on the date hereof and is subject to
changes in German tax laws or such treaties. This summary also reflects changes
resulting from the Bill on the Reduction of Tax Privileges approved by German
legislature in April 2003, which largely became effective immediately, and a
package of several tax laws (which we refer to as the German Tax Reform 2004)
approved by the German legislature in December 2003. The changes out of the
German Tax Reform 2004 were implemented effective January 1, 2004. Several of
these changes are to be applied retroactively.

     The following discussion does not purport to be a comprehensive discussion
of all German tax consequences which may be relevant for Non-German Holders. You
should consult your tax advisor regarding the German federal, state and local
tax consequences of the purchase, ownership and disposition of shares or ADSs
and the procedures to follow for the refund of German taxes withheld from
dividends.

TAXATION OF THE COMPANY IN GERMANY

     German corporations with a fiscal year that equals the calendar year,
including Allianz AG, have been subject to a corporate income tax rate of 26.5%
in 2003. The solidarity surcharge of 5.5% on the net assessed corporate income
tax has been retained in 2003, so that the corporate income tax and the
solidarity surcharge, in the aggregate, amount to approximately 27.96%. For the
year 2004, the corporate income tax rate amounts to 25% plus the solidarity
surcharge of 5.5% on the net assessed corporate income tax, so that the
corporate income tax and the surcharge, in the aggregate, will amount to
approximately 26.38%.

     In addition, German corporations are subject to profit-related trade tax on
income, the exact amount of which depends on the municipality in which the
corporation maintains its business establishment(s). Trade tax on income is a
deductible item in computing the corporation's tax base for corporate income tax
purposes.

     From 2004 onwards, tax losses carried forward can be used to offset against
taxable profits of a period for an amount not exceeding E1 million. Taxable
profits exceeding E1 million may only be set off by 60% against tax losses
brought forward from prior periods. Unutilized tax losses can be carried forward
without any time limitation.

TAXATION OF DIVIDENDS

     Germany has a classic corporate tax system, which applied for the first
time to dividend distributions paid by Allianz AG in 2002 for the financial year
2001. The former corporate income tax credit system has been abolished. Certain
transition rules apply in connection with the change from the corporate income
tax credit system to the classic corporate tax system.

     Under the new system, a tax credit is no longer attached to the dividends.
To avoid multiple levels of taxation in a corporate chain, the law provides for
an exemption comparable to a full dividend received deduction for
inter-corporate dividends at the level of a German corporate shareholder.
However, from 2004 onwards, 5% of the gross dividend is considered non tax
deductible expense on each level of a corporate chain for corporate tax as well
as for trade tax purposes. German resident individuals are required to recognize
50% of the dividends received as taxable income. Dividends received from
non-qualifying participations, which are participations of less than 10%, are
subject to trade tax on income in full amount.

                                       206


IMPOSITION OF WITHHOLDING TAX

     Dividend distributions on or after January 1, 2002 by a German corporation
with a calendar year fiscal year are subject to a 20% withholding tax. In
addition, a solidarity surcharge at a rate of 5.5% on the withholding tax is
levied, resulting in an aggregate rate of withholding tax of 21.1% of the
declared dividend. The withholding tax is generally withheld irrespective of
whether and to what extent the dividend distribution is exempt at the level of
the holder.

     If you are a Non-German Holder, the withholding tax rate may be reduced in
accordance with an applicable income tax treaty. Under most income tax treaties
to which Germany is a party, including the U.S.-German income tax treaty, the
rate of dividend withholding tax for individual holders and corporate holders of
a non-qualifying participation is reduced to 15%. In that case, the Non-German
Holder eligible for the reduced treaty rate may apply for a refund of 6.1% of
the declared dividend for dividend distributions paid on or after January 1,
2002 by Allianz AG. The application for refund must be filed with the German
Federal Tax Office (Bundesamt fur Finanzen, Friedhofstrasse 1, D-53225 Bonn,
Germany). The relevant forms can be obtained from the German Federal Tax Office
or from German embassies and consulates.

REFUND PROCEDURE FOR U.S. SHAREHOLDERS

     For shares and ADSs kept in custody with The Depository Trust Company in
New York or one of its participating banks, the German tax authorities have
introduced a collective procedure for the refund of German dividend withholding
tax and the solidarity surcharge thereon on a trial basis. Under this procedure,
The Depository Trust Company may submit claims for refunds payable to eligible
U.S. holders (as defined below) under the income tax convention between Germany
and the United States, as currently in effect (the "Treaty") collectively to the
German tax authorities on behalf of these eligible U.S. holders. The German
Federal Tax Office will pay the refund amounts on a preliminary basis to The
Depository Trust Company, which will redistribute these amounts to the eligible
U.S. holders according to the regulations governing the procedure. The German
Federal Tax Office may review whether the refund was made in accordance with the
law within four years after making the payment to The Depository Trust Company.
Details of this collective procedure are available from The Depository Trust
Company.

     You are an "eligible U.S. holder" if you are a U.S. holder (as defined
below under "-- United States Taxation") that:

     - is a resident of the United States for purposes of the Treaty;

     - does not maintain a permanent establishment or fixed base in Germany to
       which the ordinary shares or ADSs are attributable and through which you
       carry on or have carried on business (or, in the case of an individual,
       perform or have performed independent personal services); and

     - is otherwise eligible for benefits under the Treaty with respect to
       income and gain from the ordinary shares or ADSs.

     Individual claims for refunds may be made on a special German form which
must be filed with the German Federal Tax Office at the address noted above.
Copies of such form may be obtained from the German Federal Tax Office at the
same address or from the Embassy of the Federal Republic of Germany, 4645
Reservoir Road, N.W., Washington, D.C. 20007-1998. Claims must be filed within a
four-year period from the end of the calendar year in which the dividend was
received. Holders who are entitled to a refund in excess of E150 for the
calendar year generally must file their refund claims on an individual basis.
However, the custodian bank may be in a position to make refund claims on behalf
of such holders.

     As part of the individual refund claim, an eligible U.S. holder must submit
to the German tax authorities the original bank voucher (or a certified copy
thereof) issued by the paying agent documenting the tax withheld, and an
official certification on IRS Form 6166 of its last United States federal income
tax return. IRS Form 6166 may be obtained by filing a request with the Internal
Revenue Service Center in Philadelphia, Pennsylvania, Foreign Certification
Request, P.O. Box 16347, Philadelphia, PA 19114-0447. Requests for certification
must include the eligible U.S. holder's name, Social Security or Employer
Identification Number,

                                       207


tax return form number, and tax period for which the certification is requested.
Requests for certifications can include a request to the Internal Revenue
Service to send the certification directly to the German tax authorities. If no
such request is made, the Internal Revenue Service will send a certification on
IRS Form 6166 to the eligible U.S. holder, who then must submit this document
with his refund claim.

TAXATION OF CAPITAL GAINS

     Under German domestic tax law as in effect in 2003, capital gains derived
on or after January 1, 2002 by a Non-German Holder from the sale or other
disposition of shares or ADSs are subject to tax in Germany only if such
Non-German Holder has held, directly or indirectly, shares or ADSs representing
1% or more of the registered share capital of the company at any time during the
five-year period immediately preceding the disposition. In computing the
relevant size of a Non-German Holder's shareholding, shareholdings already
existing prior to the effective date of the German Tax Reduction Act (approved
by the German legislature in July 2000) are also taken into account. Corporate
Non-German Holders are exempt from German tax on capital gains derived on or
after January 1, 2002 from the sale or other disposition of shares or ADSs in a
German corporation with a fiscal year that equals the calendar year. However,
from 2004 onwards, 5% of the net capital gain are considered as non tax
deductible expense for purposes of corporate income tax as well as trade tax on
income. Half of the capital gains realized by the individual Non-German Holders
are subject to German individual income tax plus a 5.5% solidarity surcharge.

     U.S. holders that qualify for benefits under the Treaty are exempt in
Germany under the Treaty on capital gains derived from the sale or disposition
of shares or ADSs.

INHERITANCE AND GIFT TAX

     Under German law, German gift or inheritance tax will be imposed on
transfers of shares or ADSs by a Non-German Holder at death or by way of gift,
if

          (i) the decedent or donor, or the heir, donee or other transferee has
     his residence in Germany at the time of the transfer or with respect to
     German citizens who are not resident in Germany, if the decedent or donor,
     or the heir, donee or other transferee has not been continuously outside of
     Germany for a period of more than five years; or

          (ii) the shares or ADSs subject to such transfer form part of a
     portfolio which represents 10% or more of the registered share capital of
     the company and has been held, directly or indirectly, by the decedent or
     donor, respectively, himself or together with related parties.

     The right of the German government to impose inheritance or gift tax on a
Non-German Holder may be further limited by an applicable estate tax treaty
(such as the U.S.-German Inheritances and Gifts Tax Treaty of December 3, 1980).

OTHER TAXES

     No German transfer, stamp or similar taxes apply to the purchase, sale or
other disposition of shares or ADSs by a Non-German Holder. Currently, net worth
tax is not levied in Germany.

                             UNITED STATES TAXATION

     This section describes the principal United States federal income tax
consequences of owning ordinary shares or ADSs. It applies to you only if you
hold your ordinary shares or ADSs as capital assets for tax purposes. This
section does not address all material tax consequences of owning ordinary shares
or ADSs. It does not address special classes of holders, some of whom may be
subject to other rules, including:

     - dealers in securities or currencies;

     - tax-exempt entities;

     - life insurance companies;
                                       208


     - broker-dealers;

     - traders in securities that elect to use a mark-to-market method of
       accounting for their securities holdings;

     - investors liable for alternative minimum tax;

     - investors that actually or constructively own 10% or more of the voting
       stock of Allianz AG;

     - investors that hold ordinary shares or ADSs as part of a straddle or a
       hedging or conversion transaction; or

     - investors whose functional currency is not the U.S. dollar.

     This section is based on the Internal Revenue Code of 1986, as amended, its
legislative history, existing and proposed regulations, and published rulings
and court decisions, all as currently in effect, as well as on the Treaty. These
laws are subject to change, possibly on a retroactive basis.

     In addition, this section is based in part upon the representations of the
depositary and the assumption that each obligation in the deposit agreement and
any related agreement will be performed in accordance with its terms. In
general, for United States federal income tax purposes, if you hold ADRs
evidencing ADSs, you will be treated as the owner of the shares represented by
those ADSs. Exchanges of shares for ADRs, and ADRs for shares, generally will
not be subject to United States federal income tax.

     You are a "U.S. holder" if you are a beneficial owner of ordinary shares or
ADSs and you are, for United States federal income tax purposes:

     - a citizen or resident of the United States;

     - a domestic corporation;

     - an estate whose income is subject to United States federal income tax
       regardless of its source; or

     - a trust if a United States court can exercise primary supervision over
       the trust's administration and one or more United States persons are
       authorized to control all substantial decisions of the trust.

     You should consult your own tax advisor regarding the United States
federal, state, local, foreign and other tax consequences of owning and
disposing of ordinary shares and ADSs in your particular circumstances. In
particular, you should confirm whether you qualify for the benefits of the
Treaty and the consequences of failing to do so.

TAXATION OF DIVIDENDS

     If you are a U.S. holder, the gross amount of any dividend we pay out of
our current or accumulated earnings and profits (as determined for United States
federal income tax purposes) is subject to United States federal income
taxation. If you are a noncorporate U.S. holder, dividends paid to you in
taxable years beginning after December 31, 2002 and before January 1, 2009 that
constitute qualified dividend income will be taxable to you at a maximum tax
rate of 15% provided that you hold the ordinary shares or ADSs for more than 60
days during the 120 day period beginning 60 days before the ex-dividend date and
meet other holding period requirements. A proposed "technical correction" would
change the minimum required holding period, retroactive to January 1, 2003, to
more than 60 days during the 121-day period beginning 60 days before the
ex-dividend date. The Internal Revenue Service announced that is will permit
taxpayers to apply this proposed correction as if such change were already
effective. Dividends we pay with respect to the ordinary shares or ADSs
generally will be qualified dividend income if you meet the holding period
requirement. You must include any German tax withheld from the dividend payment
in this gross amount even though you do not in fact receive it. The dividend is
taxable to you when you, in the case of ordinary shares, or the depositary, in
the case of ADSs, receive the dividend, actually or constructively. The dividend
will not be eligible for the dividends-received deduction generally allowed to
United States corporations in respect of dividends received from other United
States corporations. The amount of the dividend distribution that you must
include in your income as a U.S. holder will be the U.S. dollar value of the
gross dividend
                                       209


amount, determined at the spot Euro/U.S. dollar rate on the date the dividend
distribution is includible in your income, regardless of whether the payment is
in fact converted into U.S. dollars. Generally, any gain or loss resulting from
currency exchange fluctuations during the period from the date you include the
dividend payment in income to the date you convert the payment into U.S. dollars
will be treated as ordinary income or loss and will not be eligible for the
special tax rate applicable to qualified dividend income. The currency gain or
loss generally will be income or loss from sources within the United States for
foreign tax credit limitation purposes. Distributions in excess of current and
accumulated earnings and profits, as determined for United States federal income
tax purposes, will be treated as a return of capital to the extent of your basis
in the ordinary shares or ADSs and thereafter as capital gain.

     Subject to certain limitations, the German tax withheld in accordance with
German law or the Treaty and paid over to Germany will be creditable against
your United States federal income tax liability. To the extent a refund of the
tax withheld is available to you under German law or under the Treaty, the
amount of tax withheld that is refundable will not be eligible for credit
against your United States federal income tax liability. See "-- German
Taxation -- Refund Procedure for U.S. Shareholders," above, for the procedures
for obtaining a tax refund. Special rules apply in determining the foreign tax
credit limitation with respect to dividends that are subject to the maximum 15%
tax rate.

     Dividends constitute income from sources outside the United States, but
generally will be "passive income" or "financial services income" which are
treated separately from other types of income for purposes of computing the
foreign tax credit allowable to you.

TAXATION OF CAPITAL GAINS

     If you are a U.S. holder and sell or otherwise dispose of your ordinary
shares or ADSs, you will recognize capital gain or loss for United States
federal income tax purposes equal to the difference between the U.S. dollar
value of the amount that you realize and your tax basis, determined in U.S.
dollars, in your ordinary shares or ADSs. Capital gain of a non-corporate U.S.
holder that is recognized on or after May 6, 2003 and before January 1, 2009 is
generally taxed at a maximum rate of 15% where the holder has a holding period
greater than one year. Gain or loss generally will be treated as arising from
sources within the United States for foreign tax credit limitation purposes.

                              DOCUMENTS ON DISPLAY

     Allianz AG is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended. In accordance with these requirements, Allianz
AG files reports and other information with the Securities and Exchange
Commission. These materials, including this annual report and the exhibits
thereto, may be inspected and copied at the Commission's Public Reference Room
at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of the materials may
be obtained from the Commission's Public Reference Room at prescribed rates. The
public may obtain information on the operation of the Commission's Public
Reference Room by calling the Commission in the United States at 1-800-SEC-0330.
The Commission also maintains a web site at http://www.sec.gov that contains
reports, proxy statements and other information regarding registrants that file
electronically with the Commission. Allianz AG's annual reports and some of the
other information submitted by Allianz AG to the Commission may be accessed
through this web site. In addition, material filed by Allianz AG can be
inspected at the offices of the New York Stock Exchange at 20 Broad Street, New
York, New York 10005.

ITEM 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     As providers of financial services, we consider risk management one of our
core competencies. Risk management is therefore an integrated part of our
controlling process. We identify and measure, aggregate and manage risks. The
result of this process determines how much capital is allocated to the Group's
various divisions.

                                       210


                          RISK MANAGEMENT ORGANIZATION

RESPONSIBILITIES

     In our business, successful risk management means controlling risks in
order to increase the value of the Allianz Group on a sustainable basis.
Therefore, the Management Board of Allianz AG formulates the business objectives
and allocates the capital resources of the Allianz Group according to return-on
investment and risk criteria. As part of our risk-control strategy, we assign
responsibility of our risk management process to the respective local entities,
so that the risk management process can be more robust and can adapt to changing
risk situations in a timely manner. At the same time, the local entities are
also responsible for meeting the applicable legal requirements at their
respective locations.

     This decentralized approach is complemented by centralized responsibility
at our Group Risk Controlling, in Germany, which assesses the Group's overall
risk exposure on a local and global basis. In addition to risks that are
separately controlled at the respective local entities, Group Risk Controlling
control the accumulation of risks of the entire Group. In addition, Group Risk
Controlling is also responsible for developing methods and processes for risk
assessment and control on a group-wide basis. The Group's risk management
activities are supervised by both internal and external auditors. In 2003, we
introduced a new Group Risk Policy that is binding for all operational units.
Through this Group Risk Policy, we aim to strengthen as well as align the
existing risk controlling processes at all our local entities.

     In the beginning of 2003, we established a Group Risk Committee comprising
certain members of the Management Board and chaired by our Chief Risk Officer
(the head of Group Risk Controlling). The mission of the committee is to promote
the development of a comprehensive risk culture in the Allianz Group, manage the
Group risk profile and to further improve our risk controlling processes. The
Group Risk Committee is responsible to ensure that the capital allocations and
risk profile of the Allianz Group are transparent. It is also responsible for
providing timely information to the Management Board about the developments on
significant risks as well as coordinating the mitigation measures introduced to
address these risks.

RISK CATEGORIES

     Our total risk exposure is subdivided into individual risk categories:

     Actuarial Risks.  These risks are related to our core insurance business:
we must guarantee future payment commitments, and the volume of such payments
must be calculated in advance. Different actuarial risks exist in the various
insurance lines.

     In property and casualty insurance, actuarial risks arise from an
unexpected variance, i.e., the volume of losses exceeds premiums fixed in
advance (premium risk), or the payout for claims made is higher than the
corresponding provisions (reserve risk).

     In life insurance, actuarial risks arise because we are committed to making
guaranteed long-term payments in return for a fixed insurance premium calculated
in advance, even though the biometric data of the population may change over
time (for example, longer life expectancy as a result of medical progress).

     Credit and Counterparty Risks.  These risks involve potential losses that
may result from the default of a business partner. "Default" means the inability
or refusal of a counterparty, an issuer or another contracting party to meet
contractual obligations. Credit risk also includes the risk of a deterioration
of a business partner's creditworthiness. It thus includes credit risks from the
lending business and credit insurance, counterparty risks from trading
activities as well as country risks in connection with cross-border transactions
and the local business of foreign units. Counterparty risks from trading
activities relate primarily to derivatives and especially over-the-counter (OTC)
transactions. In the insurance business, these risks stem from the possibility
that receivables may remain unpaid, in particular those due from reinsurers.

     Market Risks.  Market risks result from the volatility of share prices and
market parameters, for example interest rates or exchange rates, which lead to
portfolio changes in value.

                                       211


     In the banking business, the market risk especially concerns trading
activities, which are shown in the institution's trading portfolio. Unlike our
trading portfolio, our non-trading portfolio, which includes customer business
and strategic investments, is exposed to long-term factors. Accordingly, the
market risk for non-trading portfolio is essentially the interest rate risk that
resulted from the granting of long-term fixed-rate loans, which are generally
funded in part by short-term deposits. In addition, our non-trading portfolio,
which includes loans and deposits denominated in foreign currencies, is also
exposed to currency risks.

     Investment Risks.  Investment risks in the insurance business primarily
include all counterparty and market risks. There is a direct link between
investments and obligations to our customers. Certain insurance lines are
exposed to an interest guarantee risk. Life insurance, for example, must
generate the guaranteed interest payment agreed upon.

     Liquidity Risks.  These risks can materialize under various circumstances,
for example, if present or future payment obligations cannot be met in full or
as of the due date, or if refinancing capital can only be raised at higher rates
(refinancing risk) in the case of a liquidity crisis, or if assets can only be
liquidated below current market prices (market liquidity risk).

     Health Insurance Risks.  Health insurance risks are treated either as
property and casualty insurance risks or as life and health insurance risks,
depending on the segment to which the health insurance is assigned in the given
market.

MANAGEMENT THROUGH RISK CAPITAL

     We steer our business activities through our respective local companies.
The most important parameters used in our risk-oriented controlling process are
Economic Value Added (EVA) and risk capital.

     Risk capital is used as a hedge against unexpected losses. In 2003, we used
a risk model that is based on the concept developed by the Standard & Poor's
rating agency, for the value based management of our insurance companies within
the Economic Value Added (EVA) framework. In the case of Dresdner Bank, we used
another internally developed risk model for controlling purposes.

     In 2003, we improved and tested our internally developed risk model for
insurance companies. The improved risk model enables us to systematically
evaluate internal data by means of models based on the theory of probability.
This process takes into account the special characteristics of our local units
as well as the specific nature of their risks. Portfolio effects are also
incorporated into our risk analyses. In the course of 2004, we will introduce
the internal risk capital model into our existing value-based management
framework.

RISK CONTROLLING IN OUR INSURANCE BUSINESS

     To control risks in the insurance business, we focus on premium risks,
reserve risks, credit and counterparty risks and investment risks.

     Premium Risks.  Premium risks are controlled primarily with the help of
actuarial models used to calculate premiums and monitor claim patterns. In
addition, we issue guidelines for underwriting insurance contracts and assuming
insurance risks. In life insurance, we essentially concentrate on biometric
risks -- for example, life expectancy, disability, illness and long-term care
requirements. We also focus on risks that could arise from future policy
cancellations.

     Risk management also includes participation in scientific and technical
loss prevention. We regularly carry out technical studies for the manufacturing
and automobile industries. The purpose of these studies is to reduce the
probability of claims and keep losses to a minimum.

     Natural disasters such as earthquakes, storms and floods represent a
special challenge for risk management. Although they happen considerably less
frequently than other incidents, the consequences can be far more extensive
when, for example, entire regions are devastated. To control such risks, we use
special modeling techniques. They involve the combination of data about our
portfolio, for instance the geographic distribution of insurance amounts, with
natural disaster scenarios in order to estimate the potential for damage. The
use of these simulation techniques was further expanded in the reporting year.
                                       212


     Reserve Risks.  We must constitute provisions for insurance claims that
have been submitted but not yet settled. The amount is estimated on the basis of
past experience and on the use of actuarial methods. We also seek to limit risks
by constantly monitoring the development of these provisions and using the
information we obtain to make forecasts. In life insurance, methods for
calculating reserves take into account the biometric data of the populations
insured by using, for example, national mortality tables. See "Information on
the Company and Operating and Financial Review and
Prospects -- Property-Casualty Insurance Reserves" for a discussion of certain
historical data concerning the development of our property-casualty insurance
reserves.

     Credit and Counterparty Risks.  To limit our liability from insurance
business we cede part of the risks we assume to the international reinsurance
market. When selecting our reinsurance partners, we consider only companies that
offer excellent security. To control this credit risk, we compile groupwide data
on receivables from insurance losses. Our Allianz Group companies also use
comprehensive rating information for the active management of credit risks. This
information is either in the public domain or gathered through internal
investigations. Approximately 97% of the Allianz Group's receivables are
distributed over reinsurers who were assigned at least an "A" rating by Standard
& Poor's.

     Investment Risks.  Investments are an integral part of insurance coverage.
They ensure our ability to meet the payment commitments we make in our insurance
contracts. The link between insurance obligations and investment of the capital
related to these obligations is monitored by using specific models. This also
enables us to manage risks arising from interest guarantees provided to our
customers.

     We monitor market risks by means of sensitivity analyses and stress
testing. As protection against exchange rate fluctuations, we back our insurance
commitments to a very large extent by funds in the same currency. We limit
credit risks by setting high requirements on the creditworthiness of our debtors
and by spreading the risk. Through our central credit risk management, we
consolidate our exposure according to debtors and across all investment
categories and business segments, and we use monthly limit lists to monitor
exposure. Approximately 92% of the fixed-interest investments of the insurance
companies of Allianz Group have an investment grade rating. More than 86 percent
are distributed over debtors that have been assigned at least an "A" rating by
Standard & Poor's.

     In individual cases, we use derivative financial instruments such as swaps,
options and futures to hedge against changes in prices or interest rates. The
end-users of these derivatives are Allianz Group companies. We believe that our
internal investment and monitoring rules are stricter than the regulations
imposed by supervisory authorities.

     Market and counterparty risks arising from the use of derivative financial
instruments are subject to particularly strict control procedures. Credit risks
are assessed by calculating replacement values; market risks are monitored by
means of stress tests and limited by specifying stop-loss limits.

     We limit liquidity risks by reconciling our investment portfolio with our
insurance commitments. In addition, we plan our cash flow from ordinary
activities. Asset structure and diversification are other elements in our
management of investment risk.

     Organizational Controlling of Investment Risk.  In terms of organization,
we limit our investment risks through a clear separation of management and
controlling functions. Within the Allianz Group, risk management is implemented
in cooperation with the local units in a top-down, bottom-up process. The
Allianz Finance Committee, which is made up of members of Allianz AG's
Management Board, delegates significant decision-making authority to the
regional Finance Committees, which monitor activities in their respective
regions or countries. The duties and responsibilities at each decision-making
level are defined by guidelines issued at the Allianz Group level. These
guidelines are then applied by the regional Finance Committees, which formulate
specific local investment guidelines. These are adapted according to national
legislation and the nature of the local insurance and capital markets.
Operational responsibility for investment portfolios lies with the local units.

     Risk Capital.  At the end of fiscal 2003, risk capital calculated according
to the Standard & Poor's model, and before minority interests, was composed as
follows: in property and casualty insurance,

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E16.1 billion were allocated for actuarial risks, E1.1 billion for credit and
counterparty risks and E3.5 billion for investment risks. Risk capital in life
insurance amounted to E10.8 billion.

     As a minimum, the capital we allocate to our local units meets the
requirements for an "A" rating from Standard & Poor's.

RISK CONTROLLING IN OUR BANKING BUSINESS

     In this business segment, the following types of risks are controlled:
credit and counterparty risks including counterparty risks from trading
activities, country risks, market risks in the trading and investment
portfolios, and liquidity risks. See "Information on the Company and Operating
and Financial Review and Prospects -- Selected Statistical Information Relating
to Our Banking Operations" for further information concerning our bank lending,
investment and deposit portfolios.

     Credit and Counterparty Risks.  These risks are directly linked to granting
credits in the banking business. Dresdner Bank controls these risks through
guidelines and credit risk committees. The ratings of our customers and their
credit engagements represent the central element used in the approval,
supervisory and control process in the area of credit and derivatives
activities. In this process the various creditworthiness characteristics of the
customers are presented in the form of rating classes. As quality control for
these rating methods, validation benchmarks were introduced in the reporting
year.

     To categorize the default probability of a borrower, a system with 16
different rating classes is used. The first six classes correspond to
"investment grade", classes VII to XIV signify "non investment grade." Rating
classes XV and XVI are default classes according to the Basel II Definition. At
the end of fiscal 2003, about 75% of all counterparty risks in the trading and
banking portfolios of the Dresdner Bank Group fell into rating classes I to VI.

     The volume of the overall portfolio is to a great extent determined by the
bank's trading business, which involves primarily transactions with
counterparties in rating classes I to VI, i. e. with state and local agencies
and financial services providers. These counterparties account for approximately
93% of the bank's trading business and 63% of its total portfolio.

     Counterparty risks are centrally controlled by Dresdner Bank's Risk
Executive Committee (REC), which is headed by the Chief Risk Officer of Dresdner
Bank. This body issues the appropriate guidelines and standards for the risk
strategy and risk control. In addition, the Risk Executive Committee decides on
essential projects involving a credit risk and has a decisive influence on the
modalities of the bank's risk management. The REC is also responsible for the
regular review of the overall portfolio.

     The Group Credit Committee was set up to decide on credits which do not
fall under the responsibility of the risk management units in the divisions and
for which no decision by the Board of Management is required. It will help to
further improve the credit approval process.

     In the past fiscal year, credits were transferred from the business
segments to the Institutional Restructuring Unit (IRU). These are loans which
are not of strategic importance or which are exposed to higher risks. Mainly
concerned are credit lines in North and South America and in Germany, as well as
commitments in the areas of private equity and commercial real estate. The IRU
has the task of reducing these commitments in order to free up risk capital.

     We account for the development of risks in the lending business by making
allowances for individual risks and country risks. In setting up risk
provisions, we consider the creditworthiness of the borrower, the general
economic environment and risk-reducing measures, for example collateral. As of
31 December 2003, total risk provisions in the banking business amounted to E6
billion.

     Counterparty Risk from Trading Activities.  In the credit-sensitive trading
business with OTC derivatives, the selection of counterparties plays a decisive
role. The selection process is aimed at counterparties with top-quality credit
ratings. In the derivatives portfolios of Dresdner Bank, 97% of the positive
replacement values, which are essential for assessing counterparty risk, involve
counterparties in risk classes I to VI as described above and are thus of
"investment grade." To reduce the counterparty risk from trading activities,
so-called
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cross-product netting master agreements with the business partners are set up.
In the case of a defaulting counterparty, netting makes it possible to offset
any claims and liabilities not yet due.

     Country Risks.  We control these risks by using internal country ratings.
These ratings are based upon macroeconomic data and key qualitative indicators.
The latter take into account the economic, social and political environment and
focus on a country's ability to make payments in foreign currencies. At present,
Dresdner Bank's country rating system includes eight risk groups. To establish a
parallel to the category system used to determine individual creditworthiness in
the lending business, the country rating system will be expanded to 16 rating
classes in the current year. At the end of 2003, Dresdner Bank's country risk
provisions totaled E269 million.

     Market Risk.  Dresdner Bank uses a proprietary value-at-risk model that
takes into account both general and specific risks. Value-at-risk is defined as
the potential loss which may occur during a specific period of time and with a
given confidence level. In 1998, the German Federal Supervisory Authority for
Financial Service Providers (BaFin) first approved Dresdner Bank's value-at-risk
model for purposes of reporting in accordance with Principle I of the German
Banking Act. It also approved the improvements made in 2001 and 2002. The
value-at-risk data used to calculate capital adequacy requirements for
regulatory purposes must take into account potential market movements within a
confidence level of 99%, based on an assumed holding period of 10 trading days.
The value-at-risk model is complemented by stress testing.

     Market Risks in the Trading Portfolio.  The risk from Dresdner Bank's
trading activities increased slightly in comparison to the previous year. This
is mainly due to the fact that positions for interest bearing-instruments were
built up moderately.

     To validate the quality of the value-at-risk model, Dresdner Bank performs
regular backtests. For this purpose, the value-at-risk calculated on the basis
of the current position is compared to the actual change in value on the
following day. This shows whether the model used provided an adequate assessment
of the risks.

     For purposes of setting internal limits and risk determination, Dresdner
Bank calculates value-at-risk with a confidence level of 95% and a one-day
holding period. Unlike the value-at-risk calculation required by the supervisory
authority, which is based on market data from the past, Dresdner Bank thus
assigns greater weight to the most recent market fluctuation. Dresdner Bank
believes this ensures that value-at-risk data more accurately reflect current
market developments.

     Value-at-risk (or VaR) is only one of the instruments used to characterize
the risk profile of the Dresdner Bank Group. In addition, Dresdner Bank also
uses operational risk indicators and limits, which are specifically adapted to
the risk situation of the trading units. Trading is controlled by setting
value-at-risk and operational market risk limits. Current limit utilization is
determined and monitored by Risk Controlling on a daily basis. Limit breaches
are immediately indicated to the management concerned so that corrective action
can be taken.

     The following table below shows the VaR for the trading portfolio of
Dresdner Bank at and for the periods indicated (99% confidence level, 10-day
holding period):



                                                   2003 ANNUAL STATISTICS
                                        AT        -------------------------        AT
                                   DECEMBER 31,   MEAN                        DECEMBER 31,
                                       2003       VALUE   MAXIMUM   MINIMUM       2002
                                   ------------   -----   -------   -------   ------------
                                                       (E IN MILLIONS)
                                                               
Aggregate risk...................       96         120      185       79           81
Interest rate risk...............       88         117      188       66           65
Equity risk......................       29          26       58       11           45
Currency/commodity risk..........       19          11       28        1           13
Diversification effect(1)........      (40)        (54)      --       --          (42)


---------------

(1) No diversification effect can be taken into account since the maximum values
    were measured at different dates.

                                       215


                    MATURITIES OF THE DERIVATIVES PORTFOLIO
                    (TRADING AND NON-TRADING DRESDNER BANK)



                                               PRINCIPAL AMOUNTS AT MATURITY
                                      ------------------------------------------------    POSITIVE
                                      LESS THAN     1 TO      GREATER THAN               REPLACEMENT
                                       1 YEAR      5 YEARS      5 YEARS        TOTAL       VALUES
                                      ---------   ---------   ------------   ---------   -----------
                                                             (E IN MILLIONS)
                                                                          
Interest-based derivatives..........  1,504,577     860,397     550,761      2,915,735     38,050
FX-based derivatives................    339,596     258,328      50,691        648,615     13,122
Stock indexed based derivatives.....     89,072     101,305      10,039        200,416      5,879
Credit derivatives..................     11,735      65,550       7,211         84,496      1,321
Other transactions..................      2,161       3,403       1,992          7,556        548
                                      ---------   ---------     -------      ---------     ------
Total...............................  1,947,141   1,288,983     620,694      3,856,818     58,920
                                      =========   =========     =======      =========     ======


                     DERIVATIVES BUSINESS BY MARKET SEGMENT



                                                                   POSITIVE
                                                              REPLACEMENT VALUES
                                                                AT DECEMBER 31,
                                                              -------------------
COUNTERPARTIES BY INDUSTRY SEGMENT                              2003       2002
----------------------------------                            --------   --------
                                                                (E IN MILLIONS)
                                                                   
Banks.......................................................   38,611     47,738
Other financial services providers..........................   16,063     11,673
Insurance companies.........................................      411        484
Small industry..............................................      741        327
Telecommunication, media, technology........................      489        745
Transportation..............................................      457        276
Raw materials...............................................      148        667
Real estate.................................................      108        112
Government..................................................    1,119        676
Other.......................................................      773      1,714
                                                               ------     ------
  Total -- before netting...................................   58,920     64,412
                                                               ------     ------
  Total -- after netting and security.......................   14,251     17,212
                                                               ======     ======


     Market Risks in the Non-trading Portfolio.  This risk mainly comprises the
risk of interest changes and is analyzed on the basis of sensitivity and
value-at-risk indicators (99% confidence level, 10-day holding period). As in
the case of trading, Dresdner Bank controls this risk by setting value-at-risk
limits. The value-at-risk for interest rate risk in the banking portfolio of
Dresdner Bank Group decreased slightly by 2% to E31.2 million at the end of the
year. This indicator also takes into account portfolio effects.

     Currency Risks.  Currency risks at Dresdner Bank are limited by applying
the following principle: all loans and deposits in foreign currencies are
refinanced or reinvested in the same currency with matching maturities.

     Liquidity Risks.  As part of an Allianz Group liquidity policy, Treasury
and Risk Control establishes principles for liquidity management. This policy
must meet both regulatory requirements and internal standards. The liquidity
risk limits include a reporting process for limit breaches and provisions for
emergency planning. Liquidity control and liquidity risk management are tasks
attended to by the treasury.

     Liquidity risk measurement is based on the liquidity management system.
This system models the maturities of all cash flows and draws up a
scenario-based liquidity balance sheet, taking into account available
prime-rated securities.

                                       216


     Operational Risks.  Dresdner Bank has a system for the systematic
identification, measuring and controlling of operational risks. The essential
risk factors are evaluated in the framework of a structured self-assessment.

     Organizational Risk Controlling.  At the organizational level, risk
management and risk controlling are strictly separated on the basis of the
principle of dual control. Dresdner Bank's risk management sets the limits for
the company's different activities that are exposed to risks. This is done in
accordance with a general framework approved by our Management Board.

     Risk Capital.  At the end of fiscal 2003, the risk capital of Dresdner
Bank, before risk-reducing diversification effects, was composed as follows:
E0.7 billion were allocated for market risks, 4.8 billion Euros for credit and
counterparty risks, E3.0 billion Euros for risks from private equity and other
investments, E1.4 billion for operational risks and E0.7 billion for other
business risks. After deduction of diversification effects, total risk capital
amounted to E8.3 billion.

                     REQUIRED RISK CAPITAL BY TYPE OF RISK



                                                                    AT
                                                               DECEMBER 31,
                                                              ---------------
                                                               2003     2002
                                                              ------   ------
                                                              (E IN BILLIONS)
                                                                 
Market risks................................................    0.7      1.0
Credit and counterparty risks...............................    4.8      7.5
Private equity/investments..................................    3.0      3.0
Operating risks.............................................    1.4      1.4
Business risks..............................................    0.7      0.7
Total (before diversification effect).......................   10.7     13.6
Diversification.............................................   (2.4)    (2.6)
                                                               ----     ----
  Total.....................................................    8.3     11.0
                                                               ====     ====


RISK CONTROL IN ASSET MANAGEMENT

     Risk control in asset management is an integral part of the processes of
the local units or the investment platform. The Corporate Center is responsible
for ensuring that Allianz Group-wide standards for asset management are applied
at the local level. The individual asset management companies continually
monitor the portfolio risks of the customer assets they manage by using
analytical tools specifically adapted to the risk profile of the product
concerned. At the same time, the performance of the various product lines is
periodically monitored and analyzed at the Allianz Group level. At the end of
fiscal 2003, risk capital in the asset management segment -- calculated
according to the Standard & Poor's model and before minority
interests -- amounted to E1.8 billion.

                            MARKET RISK MEASUREMENT

SENSITIVITY ANALYSIS

     The Group uses a risk modeling technique known as "sensitivity analysis" to
show the implications of changes in market conditions on the financial
instruments it holds in its trading and non-trading portfolios. This enables the
Allianz Group to make comparisons across its business segments. Sensitivity
analysis measures the potential loss due to changes in fair values resulting
from hypothetical changes in equity prices, interest rates and foreign currency
rates at a given point in time. Sensitivity analysis generates values
representing the risk inherent in each position under given market conditions.
Due to the standardization of the sensitivity analysis in this risk assessment,
diversification effects are not considered.

                                       217


ASSUMPTIONS

     In calculating equity price sensitivity, the Group assumes a 20% decrease
in stock prices. This scenario has been chosen in conformity with German risk
reporting standards (DRS 5-20). Estimates of interest rate risk sensitivity
assume a 100 basis point increase in interest rates. If interest rates rise, the
fair values of interest-sensitive instruments such as bonds, loans and mortgages
may fall; the magnitude of this decrease depends on the maturity, coupon and
other characteristics of a particular instrument. The table below shows the
aggregate effect on the fair value of all of the Group's interest-sensitive
investments, assuming a 100 basis point parallel shift that occurs
simultaneously and instantaneously across all countries, markets and maturities.
This scenario has also been chosen in conformity with German risk reporting
standards (DRS 5-20).

     Foreign exchange risk is calculated in a manner similar to equity price
sensitivity, by assuming a 10% decrease in all non-Euro currency exchange rates
against the Euro. Consequently, the aggregate fair value sensitivity shown in
the table below illustrates the effect on fair values if, simultaneously and
uniformly, all non-Euro currencies lose 10% of their value relative to the Euro.

     The Group believes that the scenarios used in sensitivity analysis
represent reasonable assumptions based on past observations of market
conditions. Although market fluctuations exceeding 20% or 100 basis points are
possible, the Group believes that estimates based on these assumptions offer a
fair view on the risk inherent in its positions. Although these assumptions are
intentionally simplified (for example, they assume static portfolios and do not
take into account that market prices under normal conditions change neither
simultaneously nor by the same magnitude), the Company believes they provide a
useful framework for the Group's risk management analysis and support the
Group's strategic decisions.

LIMITATIONS

     While the Allianz Group believes that sensitivity analysis provides its
managers with a valid estimation of market risk exposures, it recognizes that
there are certain limitations to the use of this method.

     Price changes in a diversified portfolio have offsetting effects, since
various assets revalue in directions or in magnitudes different to overall
marketplace changes. This is known as the "diversification effect" of holding a
portfolio consisting of different assets. Because sensitivity analysis uses a
generalized methodology, the Group's risk estimates do not take this
diversification effect into account. Actual changes in the fair value of the
Group's assets could be different to those shown in the table "Sensitivity
Analysis by Business Segment and Risk Category: Trading Portfolios".

     Additionally, routine daily business activity entails a certain amount of
change in the portfolios' composition as bonds mature or as portfolio managers
buy or sell investments. As a result, the actual sensitivity of the Allianz
Group's portfolio will vary at any particular moment in time, and the risk of
loss from equity, interest rate, foreign exchange or other risks cannot be
eliminated, although it can be quantified and monitored.

     Finally, the Group's sensitivity analyses are estimates based on a fixed
point in the past. Nearly all of the Group's assets and liabilities are subject
to market risk from fluctuating equity, interest and foreign exchange market
values. These fluctuations cannot be foreseen and can occur suddenly. The
quantitative risk measurements provided by the model and reflected in the table
below are a snapshot, describing the potential losses to investments under a
particular set of assumptions and parameters. Although these measurements
reflect reasonable possibility, they may differ considerably from actual losses
that may be experienced in the future.

                  ALLIANZ GROUP MARKET RISK EXPOSURE ESTIMATES

TRADING PORTFOLIOS

     The trading portfolios of the Group and resulting market risks relate
primarily to its banking segment. In its worldwide trading activities, the
Allianz Group uses financial derivatives both as non-standardized financial

                                       218


instruments for the individual management of market risks and as a component of
structured financial transactions. The Group uses derivatives to manage its
proprietary trading portfolio. The Allianz Group's derivative trading activities
focus on interest bearing financial instruments, predominately interest rate
swaps. The Group also uses currency and credit derivatives as well as
equity/index derivatives.

     Insurance Operations.  The Group's insurance business does not generally
engage in trading activities. With the adoption of IAS39 (effective January 1,
2001), however, derivative instruments that do not meet IAS hedge accounting
standards are treated as trading derivatives. As a result of this new accounting
rule, the trading portfolio tables below show significant impact from trading
not only for the Group's banking business but also for its insurance business.
Derivatives used in the Group's insurance operations, however, are principally
used for portfolio hedging and not for trading purposes.

     Banking Operations.  The banking segment is active in trading equities,
interest rate instruments and foreign exchange and commodities. The banking
segment uses derivatives in its trading portfolios primarily to meet customer
demand as well as to hedge market risk. Derivatives are also used to take
advantage of market opportunities. In terms of volume, the primary derivative
products the Group uses are interest rate swaps, futures and options as well as
foreign exchange swaps and equity related derivatives. The primary exposures in
foreign currencies are U.S. dollars and British pounds sterling.

     The following table shows the sensitivity analysis of the market risk in
the material trading portfolio of the Allianz Group. Certain financial
instruments are included in more than one risk category because they may be
affected by changes in more than one parameter. For example, equities
denominated in non-Euro currencies are affected by fluctuation in both stock
prices and exchange rates.

 SENSITIVITY ANALYSIS BY BUSINESS SEGMENT AND RISK CATEGORY: TRADING PORTFOLIOS



                                                                AT DECEMBER 31, 2003
                                               ------------------------------------------------------
                                               PROPERTY-
                                               CASUALTY    LIFE/HEALTH               ASSET
                                               INSURANCE    INSURANCE    BANKING   MANAGEMENT   TOTAL
                                               ---------   -----------   -------   ----------   -----
                                                                  (E IN MILLIONS)
                                                                                 
Equity price risk(1).........................      55           51        (176)       (18)       (88)
Interest rate risk...........................      80          201        (154)        (1)       126
Foreign exchange risk(2).....................     (78)         (11)        (37)       (12)      (138)




                                                                AT DECEMBER 31, 2002
                                               ------------------------------------------------------
                                               PROPERTY-
                                               CASUALTY    LIFE/HEALTH               ASSET
                                               INSURANCE    INSURANCE    BANKING   MANAGEMENT   TOTAL
                                               ---------   -----------   -------   ----------   -----
                                                                  (E IN MILLIONS)
                                                                                 
Equity price risk(1).........................     205          508         (41)        (3)       669
Interest rate risk...........................       2           18         (73)        (2)       (55)
Foreign exchange risk(2).....................     (13)         (10)         66        (12)        30


---------------

(1) Amounts do not take into account the Allianz Group's unconsolidated
    subsidiaries, or affiliated enterprises, joint ventures and associated
    enterprises.

(2) Amounts take into account financial instruments not denominated in Euros.

NON-TRADING PORTFOLIOS

     The Group's remaining portfolios contain all non-trading activities of the
banking segment as well as the financial investments of the insurance segment.
The Group holds and uses many different financial instruments in managing its
businesses. Grouped according to risk category, the following are the most
significant assets according to their fair values:

     - equity price risk: common shares and preferred shares;

     - interest rate risk: bonds, loans and mortgages; and

                                       219


     - foreign exchange rate risk: non-Euro denominated equities and interest
       rate risk sensitive assets.

     Insurance Segment.  The insurance segment's non-trading portfolio is
exposed to foreign exchange risk because some of its assets are denominated in
currencies other than the Euro. If non-Euro foreign exchange rates decline
against the Euro, the fair values of the corresponding assets would also
decline. The insurance segment's primary exposures for foreign exchange risk are
for the U.S. dollar, Swiss Franc and Korean Wong. Local laws generally require
that the insurance policy obligations of the Company's subsidiaries and the
investments covering them must be in the same currency. As a result, currency
fluctuations in connection with foreign subsidiaries have only a minor impact on
the insurance segment's risk management strategies.

     The decline in the equity price risk in 2003 was due to the decision of the
Group to reduce equity exposure. Most of the Group's remaining insurance-related
equity investments are intended to be held for the long term. The equity
holdings are primarily in the Euro zone equity markets of Germany, France and
Italy, with significant additional exposures in the U.S., Swiss and U.K.
markets.

     The insurance segment is exposed to interest rate risk due to its
investments in fixed-income instruments, in particular bonds, loans and
mortgages. The primary exposures for interest rate sensitivity securities are
for bonds, loans and mortgages held by the Company's German, French, U.S.,
Italian and Swiss subsidiaries.

     Banking Segment.  The Allianz Group's banking operations are subject to
currency risk on all non-Euro loans and deposits. For non-trading activities, it
is the Group's policy that all loans and deposits in foreign currencies be
funded and reinvested in the same currency and with matching maturities. Any
residual risk in non-trading portfolios results primarily from operating profits
of affiliated companies abroad during the year.

     The non-trading portfolio of the banking segment with respect to interest
rate risk includes all loans and deposits, issued securities, interest
rate-related investment securities as well as corresponding hedges of Dresdner
Bank as well as the other banks belonging to the Group. Market risk associated
with these positions is primarily interest rate risk resulting from long-term
fixed rate loans, which are funded in part by short-term deposits. On the bank's
non-trading books, interest rate derivatives are used to hedge risk associated
with fixed rate loans. For this purpose, the bank primarily used interest rate
swaps. Futures and options are also used for asset and liability management in
the non-trading activities, albeit to a significantly smaller degree. The Group
also used swaptions to hedge risk arising from a borrower's prepayment options
under some loan agreements. A small volume of equity derivatives is held due to
investments in shares from affiliated and non-affiliated companies.

     Equity holdings in the banking segment are primarily in the German market.
The following table shows a sensitivity analysis of the market risk in the
Group's material non-trading portfolios. Certain financial instruments are
included in more than one risk category because they may be affected by changes
in more than one parameter.

    SENSITIVITY ANALYSIS BY BUSINESS SEGMENT AND RISK CATEGORY: NON-TRADING
                                   PORTFOLIOS



                                                              AT DECEMBER 31, 2003
                                           ----------------------------------------------------------
                                           PROPERTY-
                                           CASUALTY    LIFE/HEALTH               ASSET
                                           INSURANCE    INSURANCE    BANKING   MANAGEMENT     TOTAL
                                           ---------   -----------   -------   ----------   ---------
                                                                (E IN MILLIONS)
                                                                             
Equity price risk(1).....................   (3,070)      (4,804)     (1,141)      (12)         (9,027)
Interest rate risk.......................   (2,366)      (9,586)       (429)       (2)        (12,383)
Foreign exchange risk(2).................   (2,017)      (3,509)         76       (32)         (5,482)


                                       220




                                                             AT DECEMBER 31, 2002
                                          -----------------------------------------------------------
                                          PROPERTY-
                                          CASUALTY    LIFE/HEALTH               ASSET
                                          INSURANCE    INSURANCE    BANKING   MANAGEMENT     TOTAL
                                          ---------   -----------   -------   ----------   ----------
                                                                (E IN MILLIONS)
                                                                            
Equity price risk(1)....................   (4,386)      (5,164)      (959)        (15)        (10,525)
Interest rate risk......................   (2,455))     (9,823)      (376)       (145)        (12,799)
Foreign exchange risk(2)................   (2,685)      (3,784)       (33)        (35)         (6,537)


---------------

(1) Amounts do not take into account unconsolidated subsidiaries of the Allianz
    Group, or affiliated enterprises, joint ventures and associated enterprises.

(2) Amounts take into account financial instruments in foreign currency.

OPERATIONAL RISKS

     Operational Risks.  Operational risks are risks caused by inadequacies or
faults in business processes or controls. These may be related to technical
problems or employees, operational structures or external influences. We seek to
minimize such risks by installing a comprehensive system of internal controls
and security systems in each operating unit. Operational risks are limited by a
wide range of technical and organizational measures such as redundant hardware
configurations, communications equipment and systems, back-up computing
facilities, and data backups to maintain IT capability in emergencies. In
addition, procedures are in place for safeguarding the confidentiality and
integrity of stored data and information. For this purpose, high-performance
firewall systems were introduced to protect the IT network against external
interference along with access authorization procedures, supervision and control
processes. The principle of dual control is adhered to in the case of operating
procedures. The purpose of these measures is to ensure and document an adequate
standard for Allianz Group-internal processes.

     Legal Risks.  Legal risks result from contractual agreements or legal
frameworks. They include risks from the adoption of new statutory regulations,
disadvantageous amendments to existing legislation or regulations or prejudicial
changes in their interpretation. Legal risks also take into account the
possibility that contractual agreements may not be enforceable through legal
action or court proceedings. The limitation of legal risks is an important task
of our Legal Department. This is done, for example, by using internationally
recognized standard documentation and, if necessary, by obtaining legal
opinions. Contracts for established products are continuously reviewed to
include any amendments required by changes in legislation or jurisdiction. In
addition, our Legal Department assists Allianz Group companies in matters
pertaining to business transactions and contractual negotiations to ensure
compliance with minimum standards. It also supports the management and
supervisory bodies of Allianz in meeting their statutory obligations.

                        RISK MONITORING BY THIRD PARTIES

     Supervisory authorities and rating agencies are additional risk monitoring
bodies. Supervisory authorities specify the minimum precautions that must be
taken in individual countries and at the international level. Rating agencies
determine the relationship between the required risk capital of a company and
the available safeguards. In their evaluation of capital resources, the rating
agencies include equity shown in the balance sheet, minority interests and other
items representing additional securities in times of crisis. In addition to
capital resources, the rating process also takes into account elements such as,
the strategic position of the company in individual business areas and markets
as well as its medium-term business prospects.

                                       221


ITEM 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

     Not applicable.

                                    PART II

ITEM 13.  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

     None.

ITEM 14.  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
PROCEEDS

     None.

ITEM 15.  CONTROLS AND PROCEDURES

     The Chairman of the Management Board (Chief Executive Officer) and the
Member of the Management Board responsible for Group Controlling, Financial Risk
Management, Accounting, Taxes and Compliance (Chief Financial Officer), with the
assistance of other members of management, performed an evaluation of our
disclosure controls and procedures, as that term is defined in Rule 13a-15(e) of
the Securities Exchange Act of 1934, as amended, as of the end of the period
covered by this report. Based on that evaluation, they concluded that our
disclosure controls and procedures were effective as of December 31, 2003 to
ensure that information required to be disclosed in this report is recorded,
processed, summarized and reported on a timely basis. There were no significant
changes in our internal controls or in other factors during fiscal year 2003
that have materially affected or are reasonably likely to materially affect our
internal control over financial reporting.

ITEM 16A.  AUDIT COMMITTEE FINANCIAL EXPERT

     Our supervisory board has determined that Dr. Manfred Schneider, chairman
of the audit committee, meets the criteria of an audit committee financial
expert, as that term is defined in Item 16A(b) of Form 20-F.

ITEM 16B.  CODE OF ETHICS

     In response to Section 406 of the Sarbanes-Oxley Act of 2002, we have
adopted a specific Code of Ethics in addition to our general Code of Conduct
that applies to all members of our management board, including persons
performing the functions of a principal executive officer, principal financial
officer, principal accounting officer and controller and senior employees
performing similar functions. A copy of this code of ethics is available on our
Internet website www.allianzgroup.com. (Reference to this "uniform resource
locator" or "URL" is made as an inactive textual reference for informational
purposes only. The information found at this website is not incorporated by
reference into this document). There have been no amendments or waivers to this
code of ethics since its adoption. Information regarding any future amendments
or waivers will be published on the aforementioned website.

ITEM 16C.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

     In 2003 and 2002, KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft
Wirtschaftsprufungsgesellschaft ("KPMG") served as the principal external
auditing firm for Allianz Group.

     The table set forth below contains the aggregate fees billed for each of
the last two fiscal years by KPMG in each of the following categories: (i) Audit
Fees, which comprise fees billed for services rendered for the audit of the
annual financial statements or services that are normally provided in connection
with statutory and regulatory filings or engagements; (ii) Audit-Related Fees,
which comprise fees billed for assurance and related services that are
reasonably related to the performance of the audit or review of the financial
statements and which are not reported under (i); (iii) Tax Fees, which comprise
fees billed for

                                       222


professional services rendered for tax compliance, tax advice and tax planning
and (iv) All Other Fees, which comprise fees billed for all other products and
services provided other than the services reported under (i) through (iii).



                                                                YEAR ENDED
                                                               DECEMBER 31,
                                                              ---------------
                                                              2003      2002
                                                              -----     -----
                                                              (E IN MILLIONS)
                                                                  
Audit fees..................................................   41        25
Audit-related fees..........................................   13        18
Tax fees....................................................    4         4
All other fees..............................................    9         9
                                                               --        --
  Total.....................................................   67        56
                                                               ==        ==


     Audit Fees.  KPMG billed the Allianz Group an aggregate of E41 million in
2003 and E25 million in 2002 respectively in connection with professional
services rendered for the audit of our annual consolidated financial statements
and services normally provided by KPMG in connection with statutory and
regulatory filings or engagements. These services consisted mainly of periodic
review engagements and the annual audit.

     Audit-Related Fees.  KPMG billed the Allianz Group an aggregate of E13
million in 2003 and E18 million in 2002 respectively for assurance and related
services. These services consisted primarily of training in financial accounting
and reporting standards, non-recurring assistance in improvement and
documentation of internal financial statement relevant procedures, translation
of financial reports and the process of observations and recommendations related
to the Allianz Group's process of evaluating the internal control over financial
reporting.

     Tax Fees.  KPMG billed the Allianz Group an aggregate of E4 million in 2003
and 2002 for professional services for tax compliance, tax advice and tax
planning.

     All Other Fees.  KPMG billed the Allianz Group an aggregate of E9 million
in 2003 and 2002 for other services, which consisted primarily of preparatory
advice and critical review of financial disclosure reports, non-recurring
assistance in the improvement and documentation of internal non-financial
statement related procedures as well as non-financial statement related support
services.

     All services provided by KPMG to Allianz Group companies, other than audit
services, must be pre-approved separately by the Audit Committee of the Allianz
AG Supervisory Board. The Audit Committee pre-approval process is based on the
use of a "Positive List" of activities decided by the Audit Committee and, in
addition, an auditor's facts and circumstances test is applied. Group Compliance
and KPMG report to the Audit Committee periodically with respect to services
performed. In 2003, the percentage of the total amount of revenue we paid to our
principal accountants represented by non-audit services subject to paragraph
(c)(7)(1)(C) of Rule 2-01 of Regulation S-X was less than 5%.

ITEM 16D.  EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

     Not applicable.

ITEM 16E.  PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
PURCHASERS

     Not applicable.

                                       223


                      [THIS PAGE INTENTIONALLY LEFT BLANK]

                                       224


                                    PART III

ITEM 17.  FINANCIAL STATEMENTS

     Not applicable.

ITEM 18.  FINANCIAL STATEMENTS

     See pages F-1 forward for the consolidated financial statements required by
this item.

ITEM 19.  EXHIBITS

     The following exhibits are filed as part of this annual report:



EXHIBIT
NUMBER                               DOCUMENT
-------                              --------
        
 1.1       Articles of Association, dated June 18, 2004
 4.1       Principles of Cooperation between Allianz AG and Munich Re,
           dated May 2000 (Incorporated by reference to Exhibit 3.1 to
           the Registrant's Registration Statement on Form 20-F (File
           No. 1-15154))
 4.2       Letter of Intent between Allianz AG and Munich Re, dated May
           4, 2000 (Incorporated by reference to Exhibit 3.2 to the
           Registrant's Registration Statement on Form 20-F (File No.
           1-15154))
 4.3       Agreement in Principle between Allianz AG and Munich Re,
           dated April 4, 2001 (Incorporated by reference to Exhibit
           4.3 to the Registrant's Annual Report on Form 20-F for the
           year ended December 31, 2000)
 4.4       Basic Agreement between Allianz AG and Dresdner Bank, dated
           March 31, 2001 (Incorporated by reference to Exhibit 4.4 to
           the Registrant's Annual Report on Form 20-F for the year
           ended December 31, 2000)
 4.5       First Supplement to Principles of Cooperation between
           Allianz AG and Munich Re, dated December 2001 (Incorporated
           by reference to Exhibit 4.5 to the Registrant's Annual
           Report on Form 20-F for the year ended December 31, 2001)
 4.6       Second Supplement to Principles of Cooperation between
           Allianz AG and Munich Re, dated December 19, 2002
           (Incorporated by reference to Exhibit 4.6 to the
           Registrant's Annual Report on Form 20-F for the year ended
           December 31, 2002)
 4.7       Third Supplement to Principles of Cooperation between
           Allianz AG and Munich Re, dated March 20, 2003 (Incorporated
           by reference to Exhibit 4.7 to the Registrant's Annual
           Report on Form 20-F for the year ended December 31, 2002)
 4.8       Cancellation Agreement with respect to the Principles of
           Cooperation between Allianz AG and Munich Re, dated October
           2003
 8.1       List of subsidiaries
12.1       Certification of the Chief Executive Officer required by
           Section 302 of the Sarbanes-Oxley Act of 2002
12.2       Certification of the Chief Financial Officer required by
           Section 302 of the Sarbanes-Oxley Act of 2002
13.1       Certification of the Chief Executive Officer required by
           Section 906 of the Sarbanes-Oxley Act of 2002
13.2       Certification of the Chief Financial Officer required by
           Section 906 of the Sarbanes-Oxley Act of 2002
14.1       Consent of KPMG Deutsche Treuhand-Gesellschaft AG
           Wirtschaftsprufungsgesellschaft


                                       225


                                 ALLIANZ GROUP

            INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES



                                                               PAGE
                                                               -----
                                                            
Report of Independent Registered Public Accounting Firm.....     F-2
Consolidated Balance Sheets as of December 31, 2003 and
  2002......................................................     F-3
Consolidated Income Statements for each of the years in the
  three-year period ended December 31, 2003.................     F-4
Consolidated Statements of Movements in Shareholders' Equity
  for each of the years in the three-year period ended
  December 31, 2003.........................................     F-5
Consolidated Cash Flow Statements for each of the years in
  the three-year period ended December 31, 2003.............     F-6
Notes to the Consolidated Financial Statements:
  Business Segment Information:
     Consolidated Balance Sheets as of December 31, 2003 and
      2002..................................................     F-8
     Consolidated Income Statements for each of the years in
      the three-year period ended December 31, 2003.........     F-9
     Insurance..............................................    F-10
     Banking................................................    F-12
  Nature of Operations and Accounting Regulations...........    F-13
  Changes to Accounting, Valuation and Reporting Policies...    F-16
  Consolidation.............................................    F-18
  Summary of Significant Accounting and Valuation
     Policies...............................................    F-22
  Supplementary Information on Allianz Group Assets.........    F-42
  Supplementary Information on Allianz Group Liabilities and
     Equity.................................................    F-65
  Supplementary Information on the Allianz Group
     Consolidated Income Statement..........................    F-90
  Other Information.........................................   F-124
  Stock Compensation Plans..................................   F-125
  Events after the Balance Sheet Date.......................   F-132
  Summary of Significant Differences between the Accounting
     Principles used in the Preparation of the Consolidated
     Financial Statements and Accounting Principles
     Generally Accepted in the United States of America.....   F-133
  Selected subsidiaries and other holdings..................   F-151
Schedules:
  Schedule I Summary of Investments.........................     S-1
  Schedule II Parent Only Condensed Balance Sheet (IFRS
     BASIS).................................................     S-2
  Schedule III Supplementary Insurance Information..........     S-5
  Schedule IV Supplementary Reinsurance Information.........     S-7


     Schedule of Valuation and Qualifying Accounts excluded as account balances
are not material.

                                       F-1


(KPMG LOGO)

            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Management Board and Supervisory Board of
Allianz Aktiengesellschaft:

     We have audited the accompanying consolidated balance sheets of Allianz
Aktiengesellschaft and its subsidiaries (collectively, "the Allianz Group") as
of December 31, 2003 and 2002, and the related consolidated income statements,
consolidated statements of movements in shareholders' equity and consolidated
cash flow statements for each of the years in the three-year period ended
December 31, 2003. In connection with our audits of the consolidated financial
statements we have also audited the accompanying financial statement schedules.
These consolidated financial statements and financial statement schedules are
the responsibility of Allianz Group's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedules based on our audits.

     We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Allianz
Group as of December 31, 2003 and 2002, and the results of their operations and
their cash flows for each of the years in the three-year period ended December
31, 2003, in conformity with International Financial Reporting Standards. Also,
in our opinion, the related financial statement schedules referred to above,
when considered in relation to the basic consolidated financial statements taken
as a whole, present fairly, in all material respects, the information set forth
therein.

     International Financial Reporting Standards (IFRS) vary in certain
significant respects from U.S. generally accepted accounting principles (US
GAAP). Information relating to the nature and effect of such differences is
presented in Note 47 to the consolidated financial statements.

     As discussed in Note 2 to the consolidated financial statements, Allianz
Group restated its financial statements for the year ended December 31, 2002 and
reflected the related 2003 impacts in its accompanying IFRS financial statements
for the year ended December 31, 2003.

                              /s/ KPMG Deutsche Treuhand-Gesellschaft
                                  Aktiengesellschaft
                                  Wirtschaftsprufungsgesellschaft

                                  KPMG Deutsche Treuhand-Gesellschaft
                                  Aktiengesellschaft
                                  Wirtschaftsprufungsgesellschaft

Munich, Germany
July 15, 2004

                                       F-2


                                 ALLIANZ GROUP

                          CONSOLIDATED BALANCE SHEETS*
                           DECEMBER 31, 2003 AND 2002



                                                              NOTE    2003      2002
                                                              ----   -------   -------
                                                                      E(MN)     E(MN)
                                                                      
ASSETS
Intangible assets...........................................    5     16,262    18,273
Investments in affiliated enterprises, joint ventures and
  associated enterprises....................................    6      6,442    11,345
Investments.................................................    7    295,067   285,340
Investments held on account and at risk of life insurance
  policyholders.............................................          32,460    25,657
Loans and advances to banks.................................    8    117,511    86,822
Loans and advances to customers.............................    8    203,259   188,084
Trading assets..............................................    9    146,154   124,842
Cash and cash equivalents...................................   10     25,528    21,008
Amounts ceded to reinsurers from insurance reserves.........   11     25,061    28,420
Deferred tax assets.........................................   37     14,364    13,272
Other assets................................................   12     53,804    49,070
                                                                     -------   -------
  Total assets..............................................         935,912   852,133
                                                                     =======   =======

EQUITY AND LIABILITIES
Shareholders' equity........................................   13     28,592    21,674
Minority interests in shareholders' equity..................   14      8,367     8,314
Participation certificates and subordinated liabilities.....   15     12,230    14,174
Insurance reserves..........................................   16    311,471   305,763
Insurance reserves for life insurance where the investment
  risk is carried by policyholders..........................          32,460    25,687
Liabilities to banks........................................   17    178,316   137,332
Liabilities to customers....................................   18    154,728   147,266
Certificated liabilities....................................   19     63,338    78,750
Trading liabilities.........................................   20     84,835    53,520
Other accrued liabilities...................................   21     13,908    13,069
Other liabilities...........................................   22     31,725    31,425
Deferred tax liabilities....................................   37     13,509    12,149
Deferred income.............................................   23      2,433     3,010
                                                                     -------   -------
  Total equity and liabilities..............................         935,912   852,133
                                                                     =======   =======


 * As indicated in Note 2, reflects restatement. See accompanying notes to the
                       consolidated financial statements.

                                       F-3


                                 ALLIANZ GROUP

                        CONSOLIDATED INCOME STATEMENTS*
                  YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001



                                                             NOTE    2003      2002      2001
                                                             ----   -------   -------   ------
                                                                     E(MN)     E(MN)    E(MN)
                                                                            
Premiums earned (net)......................................   24     55,978    55,133   52,745
Interest and similar income................................   25     22,562    28,210   24,224
Income (net) from investments in affiliated enterprises,
  joint ventures and associated enterprises................   26      3,030     4,398    1,588
Other income from investments..............................   27     10,002     9,355    8,502
Trading income.............................................   28        243     1,507    1,592
Fee and commission income, and income from service
  activities...............................................   29      6,060     6,102    4,827
Other income...............................................   30      3,780     2,971    2,172
                                                                    -------   -------   ------
  Total income.............................................         101,655   107,676   95,650
                                                                    -------   -------   ------
Insurance benefits (net)...................................   31     50,432    49,789   50,154
Interest and similar expenses..............................   32      6,437    10,651    7,861
Other expenses for investments.............................   33      9,848    14,866    8,923
Loan loss provisions.......................................   34      1,027     2,241      596
Acquisition costs and administrative expenses..............   35     22,117    24,502   19,383
Amortization of goodwill...................................    5      1,413     1,162      808
Other expenses.............................................   36      7,520     6,098    6,157
                                                                    -------   -------   ------
  Total expenses...........................................          98,794   109,309   93,882
                                                                    -------   -------   ------
Earnings from ordinary activities before taxes.............           2,861    (1,633)   1,768
Taxes (benefit)............................................   37        146      (807)    (861)
Minority interests in earnings.............................   14        825       670    1,044
                                                                    -------   -------   ------
Net income (loss)..........................................           1,890    (1,496)   1,585
                                                                    =======   =======   ======




                                                                       E         E        E
                                                                    -------   -------   ------
                                                                            
  Basic earnings per share.................................   44       5.59     (5.40)    5.71
                                                                    =======   =======   ======
  Diluted earnings per share...............................   44       5.57     (5.40)    5.71
                                                                    =======   =======   ======


 * As indicated in Note 2, reflects restatement. See accompanying notes to the
                       consolidated financial statements.

                                       F-4


                                 ALLIANZ GROUP

         CONSOLIDATED STATEMENTS OF MOVEMENTS IN SHAREHOLDERS' EQUITY*
                  YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001



                                                                  FOREIGN
                                                                 CURRENCY      UNREALIZED
                                           PAID-IN   REVENUE    TRANSLATION    GAINS AND     SHAREHOLDERS'
                                           CAPITAL   RESERVES   ADJUSTMENTS   LOSSES (NET)      EQUITY
                                           -------   --------   -----------   ------------   -------------
                                            E(MN)     E(MN)        E(MN)         E(MN)           E(MN)
                                                                              
Beginning balance January 1, 2001........   7,994     13,145       1,005         13,448         35,592
Currency translation adjustments.........      --         --        (129)            38            (91)
Changes in the group of consolidated
  companies..............................      --       (554)         --             --           (554)
Capital paid in..........................   6,775         --          --             --          6,775
Treasury stock...........................      --     (5,801)         --             --         (5,801)
Unrealized investment gains and losses...      --         --          --         (5,210)        (5,210)
Net income for the year..................      --      1,585          --             --          1,585
Shareholders' dividend...................      --       (367)         --             --           (367)
Miscellaneous............................      --       (316)         --             --           (316)
                                           ------     ------      ------         ------         ------
Balance as of December 31, 2001..........  14,769      7,692         876          8,276         31,613
                                           ------     ------      ------         ------         ------
Currency translation adjustments.........      --         --      (1,218)           (29)        (1,247)
Changes in the group of consolidated
  companies..............................      --        364          --             --            364
Capital paid in..........................      16         --          --             --             16
Treasury stock...........................      --       (157)         --             --           (157)
Unrealized investment gains and losses...      --         --          --         (6,930)        (6,930)
Net income for the year..................      --     (1,496)         --             --         (1,496)
Shareholders' dividend...................      --       (364)         --             --           (364)
Miscellaneous............................      --       (125)         --             --           (125)
                                           ------     ------      ------         ------         ------
Balance as of December 31, 2002..........  14,785      5,914        (342)         1,317         21,674
                                           ------     ------      ------         ------         ------
Currency translation adjustments.........      --         --      (1,574)          (125)        (1,699)
Changes in the group of consolidated
  companies..............................      --     (1,117)         --            876           (241)
Capital paid in..........................   4,562         --          --             --          4,562
Treasury stock...........................      --      1,413          --             --          1,413
Unrealized investment gains and losses...      --         --          --          2,179          2,179
Net income for the year..................      --      1,890          --             --          1,890
Shareholders' dividend...................      --       (374)         --             --           (374)
Miscellaneous............................      --       (812)         --             --           (812)
                                           ------     ------      ------         ------         ------
Balance as of December 31, 2003..........  19,347      6,914      (1,916)         4,247         28,592
                                           ======     ======      ======         ======         ======


     The column foreign currency translation adjustments shows the currency
translation differences accrued since January 1, 1997 (conversion to IFRS
accounting), which are recorded in shareholders' equity and not recognized in
net income.

 * As indicated in Note 2, reflects restatement. See accompanying notes to the
                       consolidated financial statements.

                                       F-5


                                 ALLIANZ GROUP

                       CONSOLIDATED CASH FLOW STATEMENTS*
                  YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001



                                                               2003      2002      2001
                                                              -------   -------   -------
                                                               E(MN)     E(MN)     E(MN)
                                                                         
Operating activities
Net income (loss) for the year..............................    1,890    (1,496)    1,585
Change in unearned premiums.................................      596       542       949
Change in aggregate policy reserves (without aggregate
  policy reserves for life insurance products in accordance
  with SFAS 97).............................................   12,051     6,039     6,859
Change in reserve for loss and loss adjustment expenses.....    1,016     2,530     3,375
Change in other insurance reserves (without change in the
  reserve for latent premium refunds from unrealized
  investment gains and losses)..............................     (510)   (4,681)   (4,007)
Change in deferred acquisition costs........................   (2,460)   (1,211)     (662)
Change in funds held by others under reinsurance business
  assumed...................................................       32     1,349      (171)
Change in funds held under reinsurance business ceded.......      234      (192)     (278)
Change in accounts receivable/payable on reinsurance
  business..................................................      219       232        (4)
Change in trading securities (including trading
  liabilities)..............................................    8,909    14,064   (12,544)
Change in loans and advances to banks and customers.........  (47,109)   (5,846)    3,442
Change in liabilities to banks and customers................   48,648    (8,215)   (5,456)
Change in certificated liabilities..........................  (14,387)   (1,727)    3,130
Change in other receivables and liabilities.................   (4,250)   (1,370)    3,871
Change in deferred tax assets/liabilities (without change in
  deferred tax assets/liabilities from unrealized investment
  gains and losses).........................................     (714)   (1,361)   (2,202)
Adjustment for investment income/expenses not involving
  movements of cash.........................................   (1,539)      939       112
Adjustments to reconcile amortization of goodwill...........    1,413     1,162       808
Other.......................................................    1,113    (1,499)      359
                                                              -------   -------   -------
     Net cash flow provided (used in) by operating
       activities:..........................................    5,152      (741)     (834)
                                                              -------   -------   -------
Investing activities
Change in securities available-for-sale.....................   (8,748)   (7,837)   (3,465)
Change in investments held-to-maturity......................    1,754     1,092       383
Change in real estate.......................................      155     2,226       112
Change in other investments.................................    4,238     1,681     2,692
Change in cash and cash equivalents from the acquisition of
  consolidated affiliated companies.........................   (1,450)  (10,787)   12,114
Other.......................................................    1,241      (154)     (441)
                                                              -------   -------   -------
     Net cash flow (used in) provided by investing
       activities:..........................................   (2,810)  (13,779)   11,395
                                                              -------   -------   -------
Financing activities
Change in participation certificates and subordinated
  liabilities...............................................   (1,943)    2,784      (770)
Change in investments held on account and at risk of life
  insurance policyholders...................................   (7,856)   (2,154)   (1,465)
Change in aggregate policy reserves for life insurance
  products according to SFAS 97.............................    7,819    10,808     8,089
Cash inflow from capital increases..........................    4,562        16       275
Dividend payouts............................................     (675)     (682)     (673)
Other from shareholders' capital and minority interests
  (without change in revenue reserve from unrealized
  investment gains and losses)..............................      391     3,625       996
                                                              -------   -------   -------
     Net cash flow provided by financing activities.........    2,298    14,397     6,452
                                                              -------   -------   -------
Effect of exchange rate changes on cash and cash
  equivalents...............................................     (120)     (109)       18
                                                              -------   -------   -------
Change in cash and cash equivalents.........................    4,520      (232)   17,031
                                                              -------   -------   -------
Cash and cash equivalents at beginning of period............   21,008    21,240     4,209
                                                              -------   -------   -------
Cash and cash equivalents at end of period..................   25,528    21,008    21,240
                                                              =======   =======   =======


 * As indicated in Note 2, reflects restatement. See accompanying notes to the
                       consolidated financial statements.
                                       F-6


SUPPLEMENTARY CASH FLOW INFORMATION

     The data for the Allianz Group's consolidated cash flow statements was
prepared in accordance with International Financial Reporting Standards. It
excludes the effects of major changes in the scope of consolidation, which in
2003 included influences from the deconsolidation of Pioneer Allianz Life
Assurance Corporation, Metro Manila, and during 2002, the purchase of additional
shares of Allianz Lebensversicherungs-AG, Stuttgart, Bayerische
Versicherungsbank AG, Munich, Frankfurter Versicherungs-AG, Frankfurt/Main,
Dresdner Bank Group, Frankfurt/Main, and Slovenska poist'ovna a.s., Bratislava,
as well as the deconsolidation of Deutsche Hyp Deutsche Hypothekenbank
Frankfurt-Hamburg AG, Frankfurt/Main, and during the course of 2001, the
acquisition of Dresdner Bank Group, Frankfurt/Main, and Nicholas-Applegate, San
Diego. Subsequent to the date of acquisition, the cash of these companies has
been included in the Allianz Group's consolidated cash flow statements. The
deconsolidation led to a decrease in the value of investments held (excluding
funds held by others) by E24 million (2002: decrease of E43,558 million, 2001:
increase of E77,978 million) and increased the net total of other assets and
liabilities by E24 million (2002: increase of E51,416 million, 2001: decrease of
E88,568 million). Changes in the scope of consolidation during 2003 did not
result in a change in goodwill (2002: increase of E2,924 million, 2001: increase
of E5,146 million). Cash outflow related to these transactions amounted to
E1,450 million (2002: E10,764 million, 2001: E12,450 million). Changes in the
scope of consolidation during 2003 did not result in a change in cash funds
(2002: decrease of E23 million, 2001: increase of E24,564 million). Cash paid
for taxes on income amounted to E2,665 million (2002: outflow of E1,196 million,
2001: inflow of E306 million).

                                       F-7


                                 ALLIANZ GROUP

                NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
          BUSINESS SEGMENT INFORMATION -- CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2003 AND 2002


                                         PROPERTY-                                                    ASSET
                                         CASUALTY           LIFE/HEALTH           BANKING          MANAGEMENT
                                     -----------------   -----------------   -----------------   ---------------
                                      2003      2002      2003      2002      2003      2002      2003     2002
                                     -------   -------   -------   -------   -------   -------   ------   ------
                                      E(MN)     E(MN)     E(MN)     E(MN)     E(MN)     E(MN)    E(MN)    E(MN)
                                                                                  
ASSETS
Intangible assets..................    2,520     2,960     4,351     4,817     2,847     3,509    6,544    6,987
Investments in affiliated
  enterprises, joint ventures and
  associated enterprises...........   48,385    51,448     5,717     6,183     3,303     4,349        6       20
Investments........................   80,920    76,855   196,335   189,172    27,732    28,965      565      993
Investments held on account and at
  risk of life insurance
  policyholders....................       --        --    32,460    25,657        --        --       --       --
Loans and advances to banks........    9,693     5,219     2,103     3,490   106,794    76,748      160    1,863
Loans and advances to customers....    3,033     2,882    28,155    24,747   182,304   168,919       24      228
Trading assets.....................    1,375     1,404     1,646     1,177   143,167   122,139      125      156
Cash and cash equivalents..........    1,769     2,880     1,103     2,267    22,987    16,322      365      940
Amounts ceded to reinsurers from
  insurance reserves...............   14,400    17,188    16,875    17,623        --        --       --       --
Deferred tax assets................    7,153     7,437     3,368     2,588     3,768     3,161       75       86
Other assets.......................   23,628    21,482    19,747    17,320    13,837    15,416    3,744    3,735
                                     -------   -------   -------   -------   -------   -------   ------   ------
Total segment assets...............  192,876   189,755   311,860   295,041   506,739   439,528   11,608   15,008
                                     =======   =======   =======   =======   =======   =======   ======   ======
EQUITY AND LIABILITIES
Participation certificates and
  subordinated liabilities.........    4,006     4,342        65        --     8,263     9,846       --       --
Insurance reserves.................   83,906    87,557   233,908   224,673        35        --       --       --
Insurance reserves for life
  insurance where the investment
  risk is carried by
  policyholders....................       --        --    32,460    25,687        --        --       --       --
Liabilities to banks...............    8,687     5,166     1,662     1,708   168,770   130,568      111      177
Liabilities to customers...........       --        --        --        --   156,390   146,945      378    2,754
Certificated liabilities...........   17,757    19,031        90       263    51,371    64,569       72      435
Trading liabilities................      353       544     1,396       825    83,307    52,152       --       --
Other accrued liabilities..........    5,594     5,626     1,242       850     6,611     5,984      461      609
Other liabilities..................   15,503    18,312    20,528    20,555     7,295     5,454    1,509    1,304
Deferred tax liabilities...........    7,469     7,330     4,148     2,538     1,836     2,220       56       61
Deferred income....................      135       104       557       354     1,738     2,545        3        7
                                     -------   -------   -------   -------   -------   -------   ------   ------
Total segment liabilities..........  143,410   148,012   296,056   277,453   485,616   420,297    2,590    5,347
                                     =======   =======   =======   =======   =======   =======   ======   ======
Shareholders' equity and minority
  interests........................
Total equity and liabilities.......


                                       CONSOLIDATION
                                        ADJUSTMENTS            GROUP
                                     -----------------   -----------------
                                      2003      2002      2003      2002
                                     -------   -------   -------   -------
                                      E(MN)     E(MN)     E(MN)     E(MN)
                                                       
ASSETS
Intangible assets..................       --        --    16,262    18,273
Investments in affiliated
  enterprises, joint ventures and
  associated enterprises...........  (50,969)  (50,655)    6,442    11,345
Investments........................  (10,485)  (10,645)  295,067   285,340
Investments held on account and at
  risk of life insurance
  policyholders....................       --        --    32,460    25,657
Loans and advances to banks........   (1,239)     (498)  117,511    86,822
Loans and advances to customers....  (10,257)   (8,692)  203,259   188,084
Trading assets.....................     (159)      (34)  146,154   124,842
Cash and cash equivalents..........     (696)   (1,401)   25,528    21,008
Amounts ceded to reinsurers from
  insurance reserves...............   (6,214)   (6,391)   25,061    28,420
Deferred tax assets................       --        --    14,364    13,272
Other assets.......................   (7,152)   (8,883)   53,804    49,070
                                     -------   -------   -------   -------
Total segment assets...............  (87,171)  (87,199)  935,912   852,133
                                     =======   =======   =======   =======
EQUITY AND LIABILITIES
Participation certificates and
  subordinated liabilities.........     (104)      (14)   12,230    14,174
Insurance reserves.................   (6,378)   (6,467)  311,471   305,763
Insurance reserves for life
  insurance where the investment
  risk is carried by
  policyholders....................       --        --    32,460    25,687
Liabilities to banks...............     (914)     (287)  178,316   137,332
Liabilities to customers...........   (2,040)   (2,433)  154,728   147,266
Certificated liabilities...........   (5,952)   (5,548)   63,338    78,750
Trading liabilities................     (221)       (1)   84,835    53,520
Other accrued liabilities..........       --        --    13,908    13,069
Other liabilities..................  (13,110)  (14,200)   31,725    31,425
Deferred tax liabilities...........       --        --    13,509    12,149
Deferred income....................       --        --     2,433     3,010
                                     -------   -------   -------   -------
Total segment liabilities..........  (28,719)  (28,964)  898,953   822,145
                                     =======   =======   =======   =======
Shareholders' equity and minority
  interests........................                       36,959    29,988
                                                         =======   =======
Total equity and liabilities.......                      935,912   852,133
                                                         =======   =======


                                       F-8


                                 ALLIANZ GROUP

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
         BUSINESS SEGMENT INFORMATION -- CONSOLIDATED INCOME STATEMENTS
                  YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001



                              PROPERTY/CASUALTY             LIFE/HEALTH                  BANKING
                           ------------------------   ------------------------   ------------------------
                            2003     2002     2001     2003     2002     2001     2003     2002     2001
                           ------   ------   ------   ------   ------   ------   ------   ------   ------
                           E(MN)    E(MN)    E(MN)    E(MN)    E(MN)    E(MN)    E(MN)    E(MN)    E(MN)
                                                                        
Premiums earned (net)....  37,277   36,458   34,428   18,701   18,675   18,317       --       --       --
Interest and similar
  income.................   4,165    4,473    5,068   11,106   11,215   10,765    8,089   13,336    9,085
Income (net) from
  affiliated enterprises,
  joint ventures and
  associated
  enterprises............   3,611    8,494      889      712      445      525       27    2,071    1,016
Other income from
  investments............   4,892    3,652    4,307    4,294    4,932    3,562      751    1,430      628
Trading income...........  (1,490)     207    1,451      218      244     (117)   1,486    1,081      244
Fee and commission
  income, and income from
  service activities.....     522      521    1,425      234      200      268    2,956    2,925    1,474
Other income.............   1,795    1,751    1,202    1,427      825      772      521      432      308
                           ------   ------   ------   ------   ------   ------   ------   ------   ------
    Total income.........  50,772   55,556   48,770   36,692   36,536   34,092   13,830   21,275   12,755
                           ------   ------   ------   ------   ------   ------   ------   ------   ------
Insurance benefits
  (net)..................  26,923   28,932   28,200   23,528   21,013   21,979       --       --       --
Interest and similar
  expenses...............   1,566    1,564    1,323      368      434      492    5,284    9,509    6,766
Other expenses for
  investments............   3,141    3,857    2,888    5,622    8,989    5,537      912    2,225      465
Loan loss provisions.....      10        7        4        3       10        4    1,014    2,222      588
Acquisition costs and
  administrative
  expenses...............   9,972   10,521   10,042    3,713    4,263    4,259    6,590    7,581    3,446
Amortization of
  goodwill...............     383      370      349      398      174      146      263      241       70
Other expenses...........   3,048    2,999    3,555    2,204    1,806    1,263    1,967    1,034    1,193
                           ------   ------   ------   ------   ------   ------   ------   ------   ------
    Total expenses.......  45,043   48,250   46,361   35,836   36,689   33,680   16,030   22,812   12,528
                           ------   ------   ------   ------   ------   ------   ------   ------   ------
Earnings from ordinary
  activities before
  taxes..................   5,729    7,306    2,409      856     (153)     412   (2,200)  (1,537)     227
Taxes (benefit)..........     641     (495)    (701)     583       54       99   (1,025)    (154)      (6)
Minority interests in
  earnings...............     407      806      746      235     (184)      84      104      (25)     453
                           ------   ------   ------   ------   ------   ------   ------   ------   ------
Net income...............   4,681    6,995    2,364       38      (23)     229   (1,279)  (1,358)    (220)
                           ======   ======   ======   ======   ======   ======   ======   ======   ======


                                                              CONSOLIDATION
                                ASSET MANAGEMENT               ADJUSTMENTS                    GROUP
                           ---------------------------   ------------------------   --------------------------
                            2003      2002      2001      2003     2002     2001     2003      2002      2001
                           -------   -------   -------   ------   ------   ------   -------   -------   ------
                            E(MN)     E(MN)     E(MN)    E(MN)    E(MN)    E(MN)     E(MN)     E(MN)    E(MN)
                                                                             
Premiums earned (net)....      --        --        --        --       --       --    55,978    55,133   52,745
Interest and similar
  income.................      60       119       129      (858)    (933)    (823)   22,562    28,210   24,224
Income (net) from
  affiliated enterprises,
  joint ventures and
  associated
  enterprises............      10       (12)       (3)   (1,330)  (6,600)    (839)    3,030     4,398    1,588
Other income from
  investments............      16        35        44        49     (694)     (39)   10,002     9,355    8,502
Trading income...........      30        (1)       10        (1)     (24)       4       243     1,507    1,592
Fee and commission
  income, and income from
  service activities.....   2,892     2,918     2,479      (544)    (462)    (819)    6,060     6,102    4,827
Other income.............      51       126        79       (14)    (163)    (189)    3,780     2,971    2,172
                            -----     -----     -----    ------   ------   ------   -------   -------   ------
    Total income.........   3,059     3,185     2,738    (2,698)  (8,876)  (2,705)  101,655   107,676   95,650
                            -----     -----     -----    ------   ------   ------   -------   -------   ------
Insurance benefits
  (net)..................      --        --        --       (19)    (156)     (25)   50,432    49,789   50,154
Interest and similar
  expenses...............      29        89        82      (810)    (945)    (802)    6,437    10,651    7,861
Other expenses for
  investments............       6        22        57       167     (227)     (24)    9,848    14,866    8,923
Loan loss provisions.....      --         2        --        --       --       --     1,027     2,241      596
Acquisition costs and
  administrative
  expenses...............   2,300     2,473     1,954      (458)    (336)    (318)   22,117    24,502   19,383
Amortization of
  goodwill...............     369       377       243        --       --       --     1,413     1,162      808
Other expenses...........     458       551       795      (157)    (292)    (649)    7,520     6,098    6,157
                            -----     -----     -----    ------   ------   ------   -------   -------   ------
    Total expenses.......   3,162     3,514     3,131    (1,277)  (1,956)  (1,818)   98,794   109,309   93,882
                            -----     -----     -----    ------   ------   ------   -------   -------   ------
Earnings from ordinary
  activities before
  taxes..................    (103)     (329)     (393)   (1,421)  (6,920)    (887)    2,861    (1,633)   1,768
Taxes (benefit)..........     (16)      (92)     (189)      (37)    (120)     (64)      146      (807)    (861)
Minority interests in
  earnings...............     183       230       182      (104)    (157)    (421)      825       670    1,044
                            -----     -----     -----    ------   ------   ------   -------   -------   ------
Net income...............    (270)     (467)     (386)   (1,280)  (6,643)    (402)    1,890    (1,496)   1,585
                            =====     =====     =====    ======   ======   ======   =======   =======   ======


                                       F-9


                                 ALLIANZ GROUP

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                   BUSINESS SEGMENT INFORMATION -- INSURANCE
                        DECEMBER 31, 2003, 2002 AND 2001


                                                    PREMIUMS EARNED (NET)       NET LOSS RATIO(1)     NET EXPENSE RATIO(3)
                                                   ------------------------   ---------------------   ---------------------
                                                    2003     2002     2001    2003    2002    2001    2003    2002    2001
                                                   ------   ------   ------   -----   -----   -----   -----   -----   -----
                                                   E(MN)    E(MN)    E(MN)      %       %       %       %       %       %
                                                                                           
PROPERTY/CASUALTY
1. Europe
    Germany(5)...................................  10,478   10,265   10,035   71.4     74.2    75.2   25.7    28.3    26.9
    Italy........................................   4,645    4,490    4,181   70.9     74.8    76.7   22.9    22.7    22.5
    France(5)....................................   4,453    4,066    3,746   79.8     84.5    82.3   24.4    26.4    30.0
    Great Britain................................   1,827    1,875    1,765   67.1     68.1    73.2   29.0    30.0    31.0
    Switzerland..................................   1,599    1,611    1,599   71.0     70.3    79.1   25.3    23.8    26.9
    Spain........................................   1,337    1,171    1,027   75.9     77.0    78.7   19.6    20.6    21.2
2. America
    NAFTA Region.................................   4,037    4,689    5,177   70.0     94.6    99.9   28.2    32.9    29.2
    South America................................     408      494      610   71.3     67.0    63.7   32.6    34.8    39.7
3. Asia-Pacific
    Region.......................................   1,171    1,134      768   71.7     78.5    79.9   23.8    24.8    27.3
4. Specialty Lines
    Allianz Global Risks Ruckversicherungs AG....   1,038      559       --   70.9    100.8      --   27.9    41.7      --
    Credit.......................................     845      857      901   49.3     72.1    68.0   32.7    34.2    44.0
    Travel and Assistance........................     784      740      669   60.6     62.0    64.4   31.3    32.5    33.4
    Allianz Marine & Aviation(5).................     417      578      450   65.5     75.2   108.1   21.8    21.1    22.5
5. Other.........................................   4,238    3,929    3,500   73.2     77.7    86.0   24.0    24.2    25.8
6. Consolidation adjustments(4)..................      --       --       --     --       --      --     --      --      --
                                                   ------   ------   ------   ----    -----   -----
    Total........................................  37,277   36,458   34,428     --       --      --
                                                   ======   ======   ======   ====    =====   =====


                                                      NET INCOME (LOSS)        INVESTMENTS
                                                   -----------------------   ---------------
                                                   2003     2002     2001     2003     2002
                                                   -----   ------   ------   ------   ------
                                                   E(MN)   E(MN)    E(MN)    E(MN)    E(MN)
                                                                       
PROPERTY/CASUALTY
1. Europe
    Germany(5)...................................  4,144    8,752    3,243   33,398   30,347
    Italy........................................    318      510      318    8,704    8,780
    France(5)....................................     88      121      (62)   9,131    8,771
    Great Britain................................    186      233       68    2,647    2,617
    Switzerland..................................     22       25       81    3,252    3,438
    Spain........................................     57       36       18    1,677    1,398
2. America
    NAFTA Region.................................   (124)    (976)  (1,064)   8,358    9,878
    South America................................      3       24       12      190      337
3. Asia-Pacific
    Region.......................................     47      (62)     (25)   2,359    1,829
4. Specialty Lines
    Allianz Global Risks Ruckversicherungs AG....    445     (257)      --      416        1
    Credit.......................................     60       33       70    2,167    2,000
    Travel and Assistance........................      2        4       (8)     311      269
    Allianz Marine & Aviation(5).................     53       17      (54)   1,200    1,011
5. Other.........................................   (608)     348      219    7,157    6,351
6. Consolidation adjustments(4)..................    (12)  (1,813)    (452)     (47)    (172)
                                                   -----   ------   ------   ------   ------
    Total........................................  4,681    6,995    2,364   80,920   76,855
                                                   =====   ======   ======   ======   ======


                                       F-10


                                 ALLIANZ GROUP

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
            BUSINESS SEGMENT INFORMATION -- INSURANCE -- (CONTINUED)
                        DECEMBER 31, 2003, 2002 AND 2001



                                      PREMIUMS EARNED (NET)     NET EXPENSE RATIO(2)      NET INCOME (LOSS)        INVESTMENTS
                                     ------------------------   ---------------------   ---------------------   -----------------
                                      2003     2002     2001    2003    2002    2001    2003    2002    2001     2003      2002
                                     ------   ------   ------   -----   -----   -----   -----   -----   -----   -------   -------
                                     E(MN)    E(MN)    E(MN)      %       %       %     E(MN)   E(MN)   E(MN)    E(MN)     E(MN)
                                                                                         
LIFE/HEALTH
1. Europe
    Germany Life...................   8,788    8,249    7,929    6.8     9.4    13.7     (58)     49      27     90,698    85,651
    Germany Health.................   2,959    2,794    2,616   10.4    10.6     9.9     (22)     36      21     12,322    11,379
    France.........................   1,509    1,449    1,515   16.5    17.9    16.3      96     (15)    132     37,881    38,282
    Italy..........................   1,169    1,219    1,247    3.5     5.0     4.8     108     151     133     18,087    16,630
    Switzerland....................     542      624      557    8.6    12.3    10.9     (14)    (59)    (20)     5,806     6,851
    Spain..........................     530      493      873    6.3     6.7     3.9      16      13      12      3,565     3,342
2. USA.............................     598      924    1,068    4.6     4.8    11.5     145     (45)    (46)    15,533    13,693
3. Asia-Pacific....................   1,303    1,605    1,202   10.8    13.5    11.8    (272)    (56)    (32)     3,662     4,046
4. Other...........................   1,303    1,318    1,310   20.0    26.0    62.2      43     (94)      2      8,781     9,476
5. Consolidation adjustments(4)....      --       --       --     --      --      --      (4)     (3)     --         --      (178)
                                     ------   ------   ------                           ----     ---     ---    -------   -------
    Total..........................  18,701   18,675   18,317                             38     (23)    229    196,335   189,172
                                     ======   ======   ======                           ====     ===     ===    =======   =======


---------------

(1) The net loss ratio represents net loss and loss adjustment expenses as a
    percentage of net premiums earned.

(2) The net expense ratio represents net underwriting costs as a percentage of
    net premiums earned (statutory).

(3) The net expense ratio represents net underwriting costs as a percentage of
    net premiums earned.

(4) Represents elimination of intercompany transactions between Allianz Group
    companies in different geographical regions.

(5) The 2001 figures have been restated to reflect the reorganization of the
    Allianz Group's marine, aviation and industrial transport insurance into
    Allianz Marine & Aviation, a new specialty line.

                                       F-11


                                 ALLIANZ GROUP

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                    BUSINESS SEGMENT INFORMATION -- BANKING
                        DECEMBER 31, 2003, 2002 AND 2001



                                     NET OPERATING INCOME(1)     LOAN LOSS PROVISION     ADMINISTRATIVE EXPENSES
                                     -----------------------   -----------------------   -----------------------
                                     2003    2002    2001(3)   2003    2002    2001(3)   2003    2002    2001(3)
                                     -----   -----   -------   -----   -----   -------   -----   -----   -------
                                     E(MN)   E(MN)    E(MN)    E(MN)   E(MN)    E(MN)    E(MN)   E(MN)    E(MN)
                                                                              
Private & Business Customers.......  3,229   3,198    1,429     429      561     233     2,791   3,010    1,379
Corporates & Markets...............  3,727   3,877    1,820     875    1,592     361     2,634   3,551    1,852
Other business divisions...........   (214)    490      648    (289)      69      (6)      660     753       30




                                                            OTHER INCOME/EXPENSES    EARNINGS AFTER TAXES(2)
                                                           -----------------------   ------------------------
                                                           2003    2002    2001(3)   2003     2002    2001(3)
                                                           -----   -----   -------   -----   ------   -------
                                                           E(MN)   E(MN)    E(MN)    E(MN)   E(MN)     E(MN)
                                                                                    
Private & Business Clients...............................  (262)     (52)    (26)    (173)     (304)    (160)
Corporates & Markets.....................................  (418)    (534)   (480)    (273)   (1,642)    (797)
Other business divisions.................................  (900)   1,262     755     (466)      803    1,259




                                   OPERATING INCOME(1)     EARNINGS AFTER TAXES(2)          TOTAL INCOME
                                 -----------------------   ------------------------   -------------------------
                                 2003    2002    2001(3)   2003     2002    2001(3)    2003     2002    2001(3)
                                 -----   -----   -------   -----   ------   -------   ------   ------   -------
                                 E(MN)   E(MN)    E(MN)    E(MN)   E(MN)     E(MN)    E(MN)    E(MN)     E(MN)
                                                                             
Germany........................  3,413   4,571    2,813    (282)    1,858    1,931     8,376   15,976   12,515
Rest of Europe.................  2,397   1,700      655      26      (999)    (434)    5,697    6,687    3,853
NAFTA..........................    385     854      270    (351)   (1,527)    (218)    1,182    2,483      984
Rest of world..................    548     441      116     197      (474)    (106)      760    1,164      544
                                 -----   -----    -----    ----    ------    -----    ------   ------   ------
Subtotal.......................  6,743   7,566    3,854    (410)   (1,142)   1,173    16,015   26,310   17,896
                                 -----   -----    -----    ----    ------    -----    ------   ------   ------
Consolidation adjustments(4)...     --      --       --    (503)       --     (870)   (2,171)  (5,035)  (5,141)
                                 -----   -----    -----    ----    ------    -----    ------   ------   ------
  Total........................  6,743   7,566    3,854    (913)   (1,142)     303    13,844   21,275   12,755
                                 =====   =====    =====    ====    ======    =====    ======   ======   ======


---------------

(1) Consists of net interest and similar income, net fee and commission income,
    and net trading income. Operating income is a measure used by management to
    calculate and monitor the activities and operating performance of its
    banking operations. This measure is used by other banks but other banks may
    calculate the operating income on the basis of different components and
    thus, may not be comparable to the operating income as used herein.

(2) Earnings after taxes represent income before goodwill amortization and
    minority interest.

(3) Reflects the inclusion of Dresdner Bank in our consolidated financial
    statements as of July 23, 2001.

(4) Represents elimination of intercompany transactions between Allianz Group
    companies in different geographical regions.

                                       F-12


                                 ALLIANZ GROUP

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001

(1) NATURE OF OPERATIONS AND ACCOUNTING REGULATIONS

     Allianz Aktiengesellschaft ("Allianz AG") and its subsidiaries ("the
Allianz Group") have global property and casualty insurance, life and health
insurance, banking and asset management operations in more than 70 countries,
with the largest of their operations in Europe. The Allianz Group's headquarters
are located in Munich, Germany. The parent company of the Allianz Group is
Allianz AG, Munich. Allianz AG is an "Aktiengesellschaft" (public stock
corporation) incorporated in Germany. It is recorded in the Commercial Register
of the municipal court Munich under its registered address at Koniginstrasse 28,
80802 Munchen. Besides serving as holding company for the Allianz Group, Allianz
AG also acts as the primary reinsurance carrier for the Allianz Group.

     The Allianz Group is the largest German property-casualty insurance company
based on gross premiums written in 2003. The Allianz Group is also among the
largest property-casualty insurance companies in other countries, including
France, Italy, the United Kingdom, Switzerland and Spain (the Rest of Europe).
The Allianz Group's property/casualty total income, before consolidation
adjustments, represented approximately 50% (2002: 51% and 2001: 51%) of its
consolidated total income in