INTERIM REPORT FIRST QUARTER OF 2007
Table of Contents

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 6-K

Report of Foreign Private Issuer

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

the Securities Exchange Act of 1934

 

for the period ended March 31, 2007

Commission file Number: 1-15154

 

ALLIANZ SE

Königinstrasse 28

80802 Munich

Germany

(Address of principal executive offices)

 

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

Form 20-F  x                 Form 40-F  ¨

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

Yes  ¨                 No  x

THIS REPORT ON FORM 6-K (EXCEPT FOR ANY NON-GAAP FINANCIAL MEASURE AS SUCH TERM IS DEFINED IN REGULATION G UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED) SHALL BE DEEMED TO BE INCORPORATED BY REFERENCE IN THE REGISTRATION STATEMENTS ON FORM S-8 (FILE NO. 333-13462 AND NO. 333-139900) OF ALLIANZ SE AND TO BE A PART THEREOF FROM THE DATE ON WHICH THIS REPORT IS FURNISHED, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY FILED OR FURNISHED. FOR THE AVOIDANCE OF DOUBT, THE DISCLOSURE CONTAINING ANY NON-GAAP FINANCIAL MEASURE CONTAINED IN THE ATTACHED REPORT IS NOT INCORPORATED BY REFERENCE INTO THE ABOVE-MENTIONED REGISTRATION STATEMENTS FILED BY ALLIANZ SE.

 

Table of Contents

 

 

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Table of Contents

 

Content  

Group Management Report

   2

Executive Summary and Outlook

   2

Property-Casualty Insurance Operations

   7

Life/Health Insurance Operations

   12

Banking Operations

   16

Asset Management Operations

   20

Corporate Activities

   24

Balance Sheet Review

   25

Other Information

   28

 

Consolidated Financial Statements for the First Quarter of 2007   31

Notes to the Consolidated Financial Statements

   37

 

 

Development of the Allianz share price versus Dow Jones EURO STOXX 50 and Dow Jones EURO STOXX Insurance

indexed on the Allianz share price in €

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Source: Thomson Financial Datastream

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

 

 

 

 

Basic Allianz share information

 

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

WKN 840 400

ISIN DE 000 840 400 5

Bloomberg     ALV GY
Reuters       ALVG.DE

Investor Relations

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

Allianz SE

Investor Relations

Koeniginstrasse 28

80802 Muenchen

Germany

 

Investor Line:   + 49 1802 2554269
  + 49 1802 ALLIANZ
Fax:   + 49 89 3800 3899
E-mail: investor.relations@allianz.com
Internet: www.allianz.com/investor-relations

 

Table of Contents

 

Allianz Group Key Data

Balance sheet

 

         

As of

    March 31,

2007

€ mn

       

As of

December 31,
2006

€ mn

                Change
from
previous year
Investments     298,763     298,134     0.2%
Loans and advances to banks and customers     444,446     408,278     8.9%
Total assets     1,102,373     1,053,226     4.7%
Liabilities to banks and customers     393,010     361,078     8.8%
Reserves for loss and loss adjustment expenses     64,200     65,464     (1.9)%
Reserves for insurance and investment contracts     289,390     287,697     0.6%
Shareholders’ equity     52,283     50,481     3.6%
Minority interests       6,639       6,409       3.6%

Allianz SE ratings as of March 31, 20071)

 

         

        Standard

& Poor’s

                Moody’s                    A.M.
Best
Insurer financial strength     AA–     Aa3     A+
Outlook     Positive     Stable     Stable
Counterparty credit      AA–     Not rated     aa–2)
Outlook     Positive            Stable
Senior unsecured debt     AA–     Aa3     aa–
Outlook            Stable     Stable
Subordinated debt      A/A–3)     A2/A33)     a+/a3)
Outlook            Stable     Stable

Commercial paper

(short term)

     A-1+     P-1     Not rated
Outlook               Stable        

 

1)

Includes ratings for securities issued by Allianz Finance B.V., Allianz Finance II B.V. and Allianz Finance Corporation.

2)

Issuer credit rating.

3)

Ratings vary on the basis of maturity period and terms.

 

Other selected financial data

 

Three months ended March 31,                     2007                2006       

Change

from
    previous

year

Income statement                          
Total revenues1)   € mn     29,323     29,641     (1.1)%
Operating profit2)   € mn     2,870     2,677     7.2%
Income before income taxes and minority interests in earnings   € mn     4,556     3,031     50.3%
Net income   € mn     3,240     1,779     82.1%
                            
Return                          
Return on equity after income taxes3)   %     6.3     4.4     1.9 pts
                            
Segments                          
Property-Casualty                          
Operating profit2)   € mn     1,267     1,386     (8.6)%
Loss ratio   %     68.2     66.2     2.0 pts
Expense ratio   %     28.6     28.5     0.1 pts
Combined ratio   %     96.8     94.7     2.1 pts
Life/Health                          
Operating profit2)   € mn     750     723     3.7%
Statutory expense ratio   %     7.2     8.2     (1.0) pts
Banking                          
Operating profit2)   € mn     700     547     28.0%
Cost-income ratio   %     66.9     73.6     (6.7) pts
Loan loss provisions   € mn     5     33     (84.8)%
Coverage ratio as of March 31,4)   %     61.3     60.4     0.9 pts

Asset Management

                          
Operating profit2)   € mn     312     304     2.6%
Cost-income ratio   %     60.0     59.5     0.5 pts
Third-party assets under management as of March 31,   € bn     781     7645)     2.2%
                            
Share information                          
Basic earnings per share   €     7.51     4.39     71.1%
Diluted earnings per share   €     7.34     4.32     69.9%
Share price as of March 31,   €     153.71     154.765)     (0.7)%
Market capitalization as of March 31,   € bn       66.4       66.95)       (0.7)%

 

1)

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

2)

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

3)

Based on average shareholders’ equity. Average shareholders’ equity has been calculated based upon the average of the current and preceding end of period’s shareholders’ equity.

4)

Represents total loan loss allowances as a percentage of total non- performing loans and potential problem loans.

5)

As of December 31, 2006.


 

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Table of Contents

Allianz Group Interim Report First Quarter of 2007

 

Executive Summary and Outlook

Good start to 2007 and on track to achieve our targets.

 

• Total revenues in line with expectations.
• Operating profit was up 7.2% to € 2.9 billion.
• € 2.0 billion of realized capital gains.
• Net income of € 3.2 billion.
• Shareholder’s equity increased to € 52.3 billion.

 

 

Total revenues

in € bn

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Net income

in € mn

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Operating profit

in € mn

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Shareholders’ equity2)

in € mn

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1)

Internal total revenue growth excludes the effects of foreign currency translation as well as acquisitions and disposals. Please see page 29 for a reconciliation of nominal total revenue growth to internal total revenue growth for each of our segments and the Allianz Group as a whole.

2)

Does not include minority interests.

 

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Group Management Report

 

Allianz Group’s Consolidated Results of Operations

Total revenues

Total revenues – Segments

in € mn

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At € 29.3 billion, total revenues were slightly up 0.2% on an internal growth basis, in line with our expectations. Due largely to the depreciation of the U.S. Dollar compared to the Euro primarily impacting the development in our Property-Casualty, Life/Health and Asset Management segments, overall, total revenues declined by 1.1%.

Property-Casualty    Gross premiums written were flat at € 14.1 billion, principally reflecting slightly increased volume offset by a negative price impact of a similar magnitude. We continued to stay disciplined in our risk selection and to focus on profitability.

Life/Health    At € 12.3 billion, statutory premiums were down 2.0% from a year earlier before foreign currency translation effects, however this was not unexpected. We recorded strong growth in our Italian bancassurance

distribution channel at RAS Group, while our operations in the United States successfully stabilized statutory premium level compared to 4Q 2006, although it was significantly down from 1Q 2006. However, the slowdown at our U.S. entities bottoms out.

Banking    Our Banking segment’s operating revenues, at € 2.1 billion in 1Q 2007, exceeded the already outstanding prior year level by 7.9%. This increase was supported by a significant positive one-off effect within our net interest income.

Asset Management    Internal operating revenue growth was 9.9%, benefiting from the growth of third-party assets with solid net inflows of € 12 billion based on our consistent strong investment performance. Together with effects from market-related appreciation of € 13 billion and negative foreign currency impacts, third-party assets as of March 31, 2007 amounted to € 781 billion, up 2.2% from December 31, 2006.

Operating profit

Operating profit – Segments

in € mn

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Table of Contents

Allianz Group Interim Report First Quarter of 2007

 

Except for Property-Casualty, where losses from natural catastrophes had a significant impact, all business segments delivered higher operating profits than a year ago.

Property-Casualty    We had another quarter of strong operating profitability, “Kyrill”, one of the heaviest winterstorms in Europe ever, caused net losses of € 340 million. Despite this burden, operating profit only decreased € 119 million from a year ago.

Life/Health    Operating profit, at € 750 million in 1Q 2007, was up 3.7% from an already strong level a year ago. We continued to benefit from our growing asset base, while, at the same time, our operating margin also increased.

Banking    Operating profit grew 28.0% over the already outstanding level last year, benefiting from higher revenues and lower expenses.

Asset Management    Operating profit was up 2.6%. On a local currency basis, the increase was 9.9%. These improvements were driven by our growing asset base and tight expense management. At 60.0% in 1Q 2007, our cost-income ratio remained at a very competitive level.

Non-operating items

Non-operating items created an aggregate income of € 1.7 billion in 1Q 2007, compared to € 354 million a year ago, primarily due to a high level of realized capital gains.

Overall, the impact from net realized gains and impairments of investments amounted to € 2.0 billion, up from € 778 million last year. This coincided with the early redemption of 64.35% of our BITES bond with shares of Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft (“Munich Re”). Furthermore, we realized significant gains from the sale of shares in BMW AG and KarstadtQuelle AG. We locked in unrealized gains after the strong performance of our equity investments and generated in 1Q 2007 a significant part of our capital gains target for 2007. In addition, these gains were also harvested in preparation for the contemplated acquisition of the outstanding shares in Assurances Générales de France (“AGF”, and together with its subsidiaries, the “AGF Group”) that Allianz SE does not already own.

 

Net income

Following the operating profit growth and the high level of realized capital gains, net income in 1Q 2007 rose 82.1% over the prior year period to € 3.2 billion.

Income tax expenses at € 967 million remained relatively stable despite the significant increase in income before income taxes and minority interests in earnings, primarily benefiting from the tax-exemption of the realized capital gains. Hence, our effective tax rate dropped from 29.7% to 21.2%.

Minority interests in earnings were flat at € 349 million. Increased minority interests in higher earnings at AGF Group in France and at our credit insurer Euler Hermes were offset by now zero minority interests at Riunione Adriatica di Sicurtà S.p.A. (or “RAS”, and taken together with its subsidiaries, the “RAS Group”) in Italy following the execution of RAS’s merger with and into Allianz SE in October 2006. The high level of realized gains arose in entities with almost no minority interests.

Earnings per share1)

in €

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1)

See Note 37 to our consolidated financial statements for further details.


 

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Group Management Report

 

The following table summarizes the total revenues, operating profit and net income for each of our segments for the three months ended March 31, 2007 and 2006, as well as IFRS consolidated net income of the Allianz Group.

 

Three months ended March 31,       

Property-

Casualty
€ mn

       

Life/Health

 

€ mn

       

Banking

 

€ mn

        Asset
Management
€ mn		       

Corporate

 

€ mn

       

Consolidation

adjustments

€ mn

       

Allianz Group

 

€ mn

2007                                                 
Total revenues1)     14,111     12,326     2,101     780     —     5     29,323
Operating profit (loss)     1,267     750     700     312     (101)     (58)     2,870
Non-operating items     664     103     117     (122)     511     413     1,686
Income (loss) before income taxes and minority interests in earnings     1,931     853     817     190     410     355     4,556
Income taxes     (537)     (201)     (168)     (80)     (25)     44     (967)
Minority interests in earnings     (214)     (99)     (24)     (11)     (4)     3     (349)
Net income (loss)       1,180       553       625       99       381       402       3,240
2006                                                 
Total revenues1)     14,149     12,822     1,948     751     —     (29)     29,641
Operating profit (loss)     1,386     723     547     304     (180)     (103)     2,677
Non-operating items     428     158     392     (136)     (211)     (277)     354
Income (loss) before income taxes and minority interests in earnings     1,814     881     939     168     (391)     (380)     3,031
Income taxes     (524)     (219)     (245)     (65)     154     —     (899)
Minority interests in earnings     (190)     (128)     (28)     (13)     (2)     8     (353)
Net income (loss)       1,100       534       666       90       (239)       (372)       1,779

 

1)

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

 

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Allianz Group Interim Report First Quarter of 2007

 

Events After the Balance Sheet Date

See Note 41 to the consolidated financial statements.

Outlook

Our outlook remains unchanged.

In the years 2007 to 2009, we expect average annual consolidated operating profit growth of 10% from the 2006 level, adjusted for the particularly favorable natural catastrophe trend in 2006. Within the same time period,

we are striving to maintain a strong combined ratio of less than 94% on average in our Property-Casualty segment. In Life/Health we aim to achieve an average new business margin1) greater than 3%. We are also confident of an average return on risk-adjusted capital in our Banking segment of above 15%. For our Asset Management segment, we are targeting average annual growth of third-party assets under management of 10%, excluding foreign currency conversion effects.

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


 

 

 

Cautionary Note Regarding Forward-Looking Statements

 

The statements contained herein may include statements of future expectations and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. In addition to statements which are forward-looking by reason of context, the words “may”, “will”, “should”, “expects”, “plans”, “intends”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”, or “continue” and similar expressions identify forward-looking statements.

Actual results, performance or events may differ materially from those in such statements due to, without limitation, (i) general economic conditions, including in particular economic conditions in the Allianz Group’s core business and core markets, (ii) performance of financial markets, including emerging markets, (iii) the frequency and severity of insured loss events, (iv) mortality and

morbidity levels and trends, (v) persistency levels, (vi) the extent of credit defaults, (vii) interest rate levels, (viii) currency exchange rates including the Euro/U.S. Dollar exchange rate, (ix) changing levels of competition, (x) changes in laws and regulations, including monetary convergence and the European Monetary Union, (xi) changes in the policies of central banks and/or foreign governments, (xii) the impact of acquisitions, including related integration issues, (xiii) reorganization measures, and (xiv) general competitive factors, in each case on a local, regional, national and/or global basis. Many of these factors may be more likely to occur, or more pronounced, as a result of terrorist activities and their consequences.

The matters discussed herein may also be affected by risks and uncertainties described from time to time in Allianz SE’s filings with the U.S. Securities and Exchange Commission. The company assumes no obligation to update any forward-looking statement.


 

 

 

1)

New business margin according to the definition of European Embedded Value.


 

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Group Management Report

Property-Casualty Insurance Operations

Strong operating profit despite “Kyrill”.

 

• 3.7% impact on loss ratio from natural catastrophes.
• We grew selectively and stayed disciplined.
• Higher yields drove current investment income.

 

Earnings Summary

Gross premiums written

Gross premiums written by region1)

in %

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1)

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

1Q 2007 was another quarter of selective profitable growth. Our gross premiums written remained basically flat overall at € 14,111 million, principally reflecting our successful cycle management efforts. On an internal our

 

 

 

 

Gross premiums written – Growth rates1)

in %

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1)

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

2)

Together with our property-casualty assumed reinsurance business, primarily attributable to Allianz SE, the decline within Germany was 4.9%.

 

 

successful cycle management efforts. On an internal basis, gross premiums written slightly increased by 0.3%. The development of gross premiums varied considerably across our various markets and operations.


 

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Allianz Group Interim Report First Quarter of 2007

 

At Allianz Sach within Germany, gross premiums written decreased moderately by 1.3% to € 4,144 million as premiums from our motor business were down, largely reflecting higher no claims bonuses.

Growth was primarily achieved within our markets in Central and Eastern Europe, at Allianz Global Corporate & Specialty, and in Spain, with additional gross premiums written of € 110 million, € 64 million, and € 34 million, respectively. Within New Europe, our subsidiaries successfully leveraged the well-performing economies in this region. In particular, our motor business in Romania and Poland delivered solid premium growth from higher volumes. Furthermore, the first-time consolidation of Russian People’s Insurance Society “Rosno” contributed to the higher premium volume within New Europe. At Allianz Global Corporate & Specialty, gross premiums written benefited from increased business volumes in the United Kingdom and North America. Our Spanish operations recorded growth due to increased sales in motor business, a good performance of our direct distribution channel Fénix Directo and a favorable volume development in the industrial line of business.

At Fireman’s Fund Insurance Company in the United States, the decline of 11.9% in gross premiums written resulted mainly from the depreciation of the U.S. Dollar against the Euro. Based on internal growth gross premiums written were down 4.0% reflecting primarily a lower volume of crop insurance business.

 

Operating profit

Operating profit

in € mn

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Operating profit, at € 1,267 million in 1Q 2007, was again strong, despite net losses from natural catastrophes of € 349 million, of which € 340 million related to winterstorm “Kyrill” in Europe. Catastrophe risk (“CAT risk”) is an integral part of our property-casualty business and we therefore manage and quantify CAT risk and price for it. We, at the same time, closely monitor severity and frequency of all other claims to determine our underlying profitability, which is measured by accident year loss ratio without natural catastrophes and which we were able to reduce by 1.0 percentage point to 66.7%. We continued to benefit from our strong underwriting profitability and our initiatives to improve claims management processes. With the impact from natural catastrophes our accident year loss ratio increased from 68.1% a year ago to 70.4%. At 2.2%, compared to 1.9% in 1Q 2006, the net development in prior year’s loss reserves remained positive.

Overall, natural catastrophes drove up net claims and insurance benefits incurred by € 201 million to € 6,383 million. Hence, on a calendar year basis, our loss ratio was up from 66.2% to 68.2%. With a nearly flat expense ratio, our combined ratio increased from 94.7% to 96.8%.

Interest and similar income rose by € 84 million to € 1,006 million, mainly reflecting higher yields on debt securities.


 

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Group Management Report

 

Other income amounted to € 84 million, up € 70 million due to a gain on the disposal of an office building in Ireland.

Top contributing markets to our operating profit included Italy at € 175 million and the United States at € 166 million. The strongest absolute increases were recorded in Ireland by € 71 million and Italy by € 67 million. In Germany we experienced a decrease in operating profit of € 254 million, mainly attributable to losses associated with “Kyrill”.

Non-operating items

In aggregate, non-operating items rose substantially by 55.1% to a gain of € 664 million. This improvement resulted predominantly from higher net realized gains from investments which amounted to € 733 million, up € 294 million from a year ago.

 

Net income

Net income was up 7.3% to € 1,180 million, driven both by the solid operating profit development and a significantly higher aggregate gain from non-operating items.

Income tax expenses, at € 537 million in 1Q 2007, remained stable. Based on considerably increased income before income taxes and minority interests in earnings, our effective tax rate decreased from 28.9% to 27.8%, benefiting from, among other factors, tax-exempted realized gains.

Minority interests in earnings rose by € 24 million to € 214 million. The execution of the merger of RAS with and into Allianz SE in October 2006 led to now zero minority interests in earnings at our Italian subsidiary. However, higher earnings at our French property-casualty operations of AGF Group as well as at Euler Hermes had a more than offsetting increasing effect.


 

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Table of Contents

Allianz Group Interim Report First Quarter of 2007

 

The following table sets forth our Property-Casualty insurance segment’s income statement, loss ratio, expense ratio and combined ratio for the three months ended March 31, 2007 and 2006.

 

Three months ended March 31,       

        2007

€ mn

       

        2006

€ mn

Gross premiums written1)     14,111     14,149
Ceded premiums written     (1,586)     (1,712)
Change in unearned premiums     (3,167)     (3,096)
Premiums earned (net)     9,358     9,341
Interest and similar income     1,006     922
Income from financial assets and liabilities designated at fair value through income (net)2)     32     36
Income from financial assets and liabilities held for trading (net), shared with policyholders2)     (15)     —
Realized gains/losses (net) from investments, shared with policyholders3)     34     25
Fee and commission income     272     252
Other income     84     14
Operating revenues     10,771     10,590
                
Claims and insurance benefits incurred (net)     (6,383)     (6,182)
Changes in reserves for insurance and investment contracts (net)     (81)     (72)
Interest expense     (92)     (63)
Loan loss provisions     —     (1)
Impairments of investments (net), shared with policyholders4)     (2)     (4)
Investment expenses     (74)     (48)
Acquisition and administrative expenses (net)     (2,675)     (2,663)
Fee and commission expenses     (197)     (170)
Other expenses     —     (1)
Operating expenses     (9,504)     (9,204)
                
Operating profit     1,267     1,386
                
Income from financial assets and liabilities held for trading (net), not shared with policyholders2)     (29)     4
Realized gains/losses (net) from investments, not shared with policyholders3)     733     439
Impairments of investments (net), not shared with policyholders4)     (24)     (9)
Amortization of intangible assets     (2)     (4)
Restructuring charges     (14)     (2)
Non-operating items     664     428
                
Income before income taxes and minority interests in earnings     1,931     1,814
                
Income taxes     (537)     (524)
Minority interests in earnings     (214)     (190)
Net income     1,180     1,100
                
Loss ratio5) in %     68.2     66.2
Expense ratio6) in %     28.6     28.5
Combined ratio7) in %       96.8       94.7

 

1)

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

2)

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

3)

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

4)

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

5)

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

6)

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

7)

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

 

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Group Management Report

 

Property-Casualty Operations by Geographic Region

The following table sets forth our Property-Casualty gross premiums written, premiums earned (net), combined ratio, loss ratio, expense ratio and operating profit by geographic region for the three months ended March 31, 2007 and 2006. Consistent with our general practice, these figures are presented before consolidation adjustments, representing the elimination of transactions between Allianz Group companies in different geographic regions and different segments.

 

        Gross premiums
written		        Premiums earned
(net)		        Combined ratio        Loss ratio        Expense ratio        Operating profit
Three months ended
March 31,		       

2007

€ mn

        2006
€ mn		       

2007

€ mn

        2006
€ mn		       

2007

%

       

2006

%

       

2007

%

       

2006

%

       

2007

%

       

2006

%

       

2007

€ mn

       

2006

€ mn

Germany     4,616     4,853     2,267     2,412     103.2     92.7     73.6     59.6     29.6     33.1     115     369
France     1,695     1,713     1,114     1,114     101.2     101.0     73.7     74.3     27.5     26.7     75     78
Italy     1,246     1,247     1,197     1,205     93.4     96.8     70.1     72.9     23.3     23.9     175     108
United Kingdom     539     579     491     457     96.3     98.9     62.9     67.9     33.4     31.0     63     56
Switzerland     966     958     404     436     97.6     96.3     70.3     70.2     27.3     26.1     51     63
Spain     691     657     434     395     90.1     91.4     71.2     72.7     18.9     18.7     69     58
                                                                                      

Netherlands

     306     318     198     198     93.6     93.4     62.2     59.5     31.4     33.9     24     27

Austria

     351     357     183     192     97.3     109.8     76.6     86.4     20.7     23.4     21     (6)

Ireland

     203     198     151     153     93.2     91.8     68.6     67.7     24.6     24.1     98     27

Belgium

     124     121     75     74     109.2     101.7     75.3     65.4     33.9     36.3     5     9

Portugal

     80     84     62     66     89.5     87.3     60.9     65.5     28.6     21.8     10     11

Greece

     21     19     12     11     85.8     95.1     56.7     65.6     29.1     29.5     3     1

Western and Southern Europe

     1,085     1,097     681     694     95.7     98.0     68.7     70.2     27.0     27.8     1661)     741)
                                                                                      

Hungary

     194     192     126     127     92.1     91.9     64.8     64.6     27.3     27.3     23     27

Slovakia

     106     93     67     62     66.4     80.2     40.3     46.9     26.1     33.3     28     17

Czech Republic

     78     81     45     43     79.8     90.1     57.6     67.3     22.2     22.8     12     5

Poland

     86     72     56     47     96.4     96.4     63.8     65.5     32.6     30.9     5     3

Romania

     90     71     36     36     103.8     89.6     80.8     71.4     23.0     18.2     —     3

Bulgaria

     23     20     16     17     77.5     74.1     39.0     44.4     38.5     29.7     4     5

Croatia

     23     22     15     13     97.7     96.5     68.5     65.7     29.2     30.8     1     1

Russia2)

     68     7     45     1     104.8     60.3     66.5     28.2     38.3     32.1     1     1

New Europe

     668     558     406     346     90.3     89.2     60.6     61.5     29.7     27.7     74     62
Other Europe     1,753     1,655     1,087     1,040     93.2     95.2     65.6     67.3     27.6     27.9     240     136
                                                                                      
United States     882     1,001     801     886     90.8     90.2     57.0     59.8     33.8     30.4     166     199
Mexico3)     39     51     19     25     84.5     108.8     58.2     84.0     26.3     24.8     5     3
NAFTA     921     1,052     820     911     90.6     90.7     57.0     60.4     33.6     30.3     171     202
                                                                                      
Australia     352     334     304     300     102.4     102.5     77.9     77.6     24.5     24.9     50     38
Other     81     78     37     34     100.5     95.2     60.5     57.8     40.0     37.4     3     4
Asia-Pacific     433     412     341     334     102.2     101.7     76.0     75.5     26.2     26.2     53     42
South America     236     226     168     152     100.1     103.0     65.3     66.5     34.8     36.5     14     12
Other     34     25     8     5     —4)     —4)     —4)     —4)     —4)     —4)     3     1
Specialty lines                                                                                    
Credit Insurance     489     468     301     260     76.3     81.1     48.5     53.9     27.8     27.2     117     95
Allianz Global Corporate & Specialty     934     870     467     389     94.0     83.1     66.3     62.6     27.7     20.5     95     145
Travel Insurance and Assistance Services     296     266     259     231     100.6     101.5     54.9     61.8     45.7     39.7     31     22
Subtotal     14,849     14,981     9,358     9,341     —     —     —     —     —     —     1,272     1,387
Consolidation adjustments5)     (738)     (832)     —     —     —     —     —     —     —     —     (5)     (1)
Total       14,111       14,149       9,358       9,341       96.8       94.7       68.2       66.2       28.6       28.5       1,267       1,386

 

1)

Contains run-off of € 5 mn in both 1Q 2007 and 1Q 2006 from a former operating entity located in Luxembourg.

2)

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

3)

Effective 1Q 2007, life business in Mexico is shown within the Life/Health segment.

4)

Presentation not meaningful.

5)

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

 

11

Table of Contents

Allianz Group Interim Report First Quarter of 2007

 

 

Life/Health Insurance Operations

Promising start going into 2007.

 

•  

Significant revenue growth in Italy, first signs of recovery in the United States.

•  

Strong level of operating profitability maintained.

•  

Investment income grew with asset base.

 

 

Earnings Summary

Statutory premiums

Statutory premiums by region1)

in %

LOGO

 

1)

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

Statutory premiums, at € 12,326 million in 1Q 2007, were in line with our expectations, albeit down 3.9% from a year earlier. Nearly half of that decrease was brought about by negative currency conversion effects, primarily from the depreciation of the U.S. Dollar and of various currencies in the Asia-Pacific region compared to the Euro. On an internal growth basis, statutory premiums declined 2.0%.

 

Statutory premiums – Growth rates1)

in %

LOGO

 

1)

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

In Italy, total revenues increased by € 562 million, mainly as our bancassurance distribution channel at RAS Group showed strong growth. Statutory premiums in the United States decreased by € 1,103 million from the very high level of a year ago. However, the slowdown at Allianz Life bottoms out.


 

12

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Group Management Report

 

In Germany, total life revenues were down € 89 million to € 3,039 million in 1Q 2007. A year ago, the sale of so- called “Riester” pension products was promoted by an increase at that time in the maximum premium amount entitled to subsidies and tax incentives according to German law. Partially offsetting this negative effect on premium development were higher volumes of new recurring premium business versus last year.

Aggregate statutory premiums from our growth markets in Central and Eastern Europe significantly increased by € 112 million to € 392 million. In the fourth quarter of 2006, we successfully launched a limited-edition index-linked life insurance product across six markets which largely contributed to this increase. The highest absolute growth in the region was generated in Poland where we also continued to record increasing sales through our bank partner.

Our operations in Taiwan and China grew significantly. In China, statutory premiums grew primarily due to our expanded sales capacity. In South Korea, total revenues were down following regulatory discussions regarding variable annuity products.

Operating profit

Operating profit

in € mn

LOGO

 

Operating profit was € 750 million in 1Q 2007, up 3.7% from an already very high level a year ago. On balance, this improvement was a result of lower expenses. The markets which contributed strongest to operating profit were Germany, France, Italy, the United States and South Korea.

Interest and similar income continued to increase in line with our growing asset base. Income from financial assets and liabilities carried at fair value through income amounted to a net charge of € 311 million in 1Q 2007 mainly as we observed negative effects from the accounting treatment for certain derivative instruments.

Net acquisition and administrative expenses were down € 151 million to € 874 million. This development reflected primarily adjustments within our deferred acquisition costs asset as a result of the regular review of calculation parameters. Consequently, our statutory expense ratio decreased 1.0 percentage point to 7.2%.

Non-operating items

Income from non-operating items, at € 103 million in 1Q 2007, was down € 55 million from a year earlier. This development resulted primarily from lower net realized gains from investments, not shared with policyholders, at our U.S. operations.

Net income

Net income increased € 19 million to € 553 million. Lower income tax expenses and minority interests in earnings more than balanced the € 28 million decline in income before income taxes and minority interests in earnings.


 

13

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Allianz Group Interim Report First Quarter of 2007

 

With income tax expenses down € 18 million to € 201 million, our effective tax rate decreased to 23.6% in 1Q 2007 from 24.9% a year ago. A key factor in this decline was a relatively higher tax-exempted income in 1Q 2007 compared to last year.

 

Minority interests in earnings decreased to € 99 million primarily as a result of now zero minority interests at RAS in Italy following the execution of its merger with and into Allianz SE, and lower earnings at the life operating entities of AGF Group in France.


The following table sets forth our Life/Health insurance segment’s income statement and statutory expense ratio for the three months ended March 31, 2007 and 2006.

 

Three months ended March 31,       

            2007

€ mn

       

            2006

€ mn

Statutory premiums1)

     12,326     12,822

Ceded premiums written

     (193)     (196)

Change in unearned premiums

     (27)     (75)

Statutory premiums (net)

     12,106     12,551

Deposits from SFAS 97 insurance and investment contracts

     (6,921)     (7,472)

Premiums earned (net)

     5,185     5,079

Interest and similar income

     3,155     3,047

Income from financial assets and liabilities carried at fair value through income (net), shared with policyholders2)

     (311)     31

Realized gains/losses (net) from investments, shared with policyholders3)

     1,088     1,103

Fee and commission income

     171     129

Other income

     54     6

Operating revenues

     9,342     9,395
                

Claims and insurance benefits incurred (net)

     (4,702)     (4,693)

Changes in reserves for insurance and investment contracts (net)

     (2,624)     (2,648)

Interest expense

     (91)     (64)

Loan loss provisions

     (3)     —

Impairments of investments (net), shared with policyholders

     (37)     (35)

Investment expenses

     (196)     (157)

Acquisition and administrative expenses (net)

     (874)     (1,025)

Fee and commission expenses

     (62)     (50)

Operating restructuring charges4)

     (3)     —

Operating expenses

     (8,592)     (8,672)
                

Operating profit

     750     723
                

Income from financial assets and liabilities carried at fair value through income (net), not shared with policyholders2)

     1     —

Realized gains/losses (net) from investments, not shared with policyholders3)

    105     159

Amortization of intangible assets

     (1)     (1)

Non-operating restructuring charges4)

     (2)     —

Non-operating items

     103     158
                

Income before income taxes and minority interests in earnings

     853     881
                

Income taxes

     (201)     (219)

Minority interests in earnings

     (99)     (128)

Net income

     553     534
                

Statutory expense ratio5) in %

       7.2       8.2

 

1)

For the Life/Health segment, total revenues are measured based upon statutory premiums. Statutory premiums are gross premiums written from sales of life insurance policies, as well as gross receipts from sales of unit-linked and other investment-oriented products, in accordance with the statutory accounting practices applicable in the insurer’s home jurisdiction.

2)

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

3)

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

4)

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

5)

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

 

14

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Group Management Report

 

Life/Health Operations by Geographic Region

The following table sets forth our Life/Health statutory premiums, premiums earned (net), statutory expense ratio and operating profit by geographic region for the three months ended March 31, 2007 and 2006. Consistent with our general practice, these figures are presented before consolidation adjustments, representing the elimination of transactions between Allianz Group companies in different geographic regions and different segments.

 

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

        2007

€ mn

       

        2006

€ mn

       

        2007

€ mn

       

        2006

€ mn

       

2007

%

       

2006

%

       

        2007

€ mn

       

        2006

€ mn

Germany Life     3,039     3,128     2,567     2,581     1.4     8.7     191     133
Germany Health2)     779     769     780     770     10.2     7.1     41     53
Italy     2,830     2,268     243     242     5.3     5.8     94     94
France     1,490     1,460     435     356     13.5     13.1     135     174
Switzerland     498     519     195     209     4.5     5.5     16     15
Spain     156     142     111     100     10.6     8.4     27     21
                                                          

Netherlands

     112     124     36     38     12.4     12.3     11     10

Austria

     102     102     68     68     10.1     9.6     19     13

Belgium

     194     179     76     75     7.7     8.0     44     16

Portugal

     22     19     18     17     31.3     13.8     10     7

Luxembourg

     10     10     6     7     24.2     17.4     3     1

Greece

     29     26     16     15     16.7     24.2     1     2

Western and Southern Europe

     469     460     220     220     11.4     10.7     873)     483)
                                                          

Hungary

     30     23     20     19     20.5     26.7     4     4

Slovakia

     63     43     40     32     14.9     19.7     7     6

Czech Republic

     21     18     13     14     20.0     22.6     4     2

Poland

     248     169     28     19     8.5     7.4     3     2

Romania

     9     10     2     2     28.0     31.3     (1)     —

Bulgaria

     7     5     6     5     14.3     14.5     1     1

Croatia

     12     10     9     8     16.5     26.0     2     1

Russia

     2     2     2     2     147.0     39.2     (1)     —

New Europe

     392     280     120     101     12.4     13.4     19     16
Other Europe     861     740     340     321     11.9     11.7     106     64
                                                          
United States     1,669     2,772     101     88     9.3     5.7     71     121
Mexico4)     7     —     7     —     16.2     —     1     —
NAFTA     1,676     2,772     108     88     9.4     5.7     72     121
                                                          
South Korea     465     572     253     255     14.0     11.0     54     25
Taiwan     350     299     15     14     2.3     1.1     3     4
Malaysia     29     22     23     19     15.0     17.8     3     2
Indonesia     30     15     11     9     21.4     34.7     2     —
Other     48     21     4     4     13.5     18.1     (4)     —
Asia-Pacific     922     929     306     301     9.9     8.7     58     31
South America     33     46     9     13     20.4     10.9     (2)     —
Other5)     102     114     91     98     —6)     —6)     20     19
Subtotal     12,386     12,887     5,185     5,079     —     —     758     725
Consolidation adjustments7)     (60)     (65)     —     —     —     —     (8)     (2)
Total       12,326       12,822       5,185       5,079       7.2       8.2       750       723

 

1)

Statutory premiums are gross premiums written from sales of life insurance policies as well as gross receipts from sales of unit-linked and other investment-oriented products, in accordance with the statutory accounting practices applicable in the insurer’s home jurisdiction.

2)

Loss ratios were 77.8% and 75.7% for the three months ended March 31, 2007 and 2006, respectively.

3)

Contains run-off of € (1) mn in both 1Q 2007 and 1Q 2006 from our former life insurance business in the United Kingdom which we sold in December 2004.

4)

Effective 1Q 2007, life business in Mexico is shown within the Life/Health Segment.

5)

Contains, among others, the Life/Health business assumed by Allianz SE.

6)

Presentation not meaningful.

7)

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

 

15

Table of Contents

Allianz Group Interim Report First Quarter of 2007

 

Banking Operations

Strong operating profit.

 

 

•  

Overall revenues exceeded prior year outstanding level.

 

•  

Ongoing efficiency improvements.

 

•  

Disciplined risk taking.

 

 

Earnings Summary

The results of operations of our Banking segment are almost exclusively represented by Dresdner Bank, accounting for 96.3% of our total Banking segment’s operating revenues in 1Q 2007 (1Q 2006: 96.7%). Accordingly, the discussion of our Banking segment’s results of operations relates solely to the operations of Dresdner Bank.

Operating revenues

At € 2,023 million, up 7.4% from a year ago, Dresdner Bank’s operating revenues exceeded the outstanding prior year level, driven by net interest income.

Net interest income increased to € 900 million in 1Q 2007, up € 322 million compared to a year earlier, of which € 171 million stemmed from the disposal of subsidiaries at an associated company and € 72 million from a favourable impact from the accounting treatment for derivative financial instruments which do not qualify for hedge accounting. Net interest income from our operating divisions grew by € 34 million, or 5.3%. The remaining increase was brought about by higher net interest income from our own funds.

Net trading income dropped by € 139 million to € 345 million. In the amount of € 69 million, this decline resulted from a higher negative impact from the accounting treatment for derivative financial instruments which do not qualify for hedge accounting in 1Q 2007 compared to a year ago. An additional negative impact of € 44 million was brought about by trading positions in own financial instruments. Net trading income from our operating divisions was down € 14 million, or 3.2%, from the level of a year ago.

 

Net fee and commission income, at € 789 million in 1Q 2007, was almost on a par with the already high level of a year earlier. A favourable development of our leveraged finance business was offset by a slight decline of our securities business.

Operating profit

Operating profit

in € mn

LOGO

Operating profit amounted to € 677 million, up 28.0% over the already outstanding prior year level. 1Q 2007 represents the seventh consecutive quarter of year-on-year increase in operating profit, despite a lower net release of loan loss provisions. Our cost-income ratio decreased significantly to 66.9% from 73.7% a year ago. Excluding the disposal gain of € 171 million previously mentioned, our cost-income ratio improved by 0.7 percentage points to 73.0%.

Benefiting from further efficiency gains and the ongoing progress of the “Neue Dresdner Plus” reorganization program, at € 1,353 million, operating expenses declined 2.5%, mainly attributable to the reduction of administrative expenses to € 1,355 million. Thereof, non-personnel expenses amounted to € 470 million, down


 

16

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Group Management Report

4.1%. While lower costs for office space and for external services were the main contributors to this development, we achieved reductions across almost all cost categories. Personnel expenses, at € 885 million, were also slightly below the prior year level. Non-performance-related personnel expenses declined following the headcount reduction. Performance-related payments increased in line with the new value-based bonus system in our Investment Banking division.

In 1Q 2007, loan loss provisions amounted to a net release of € 7 million after a net release of € 33 million a year ago. While new provisions of € 101 million were slightly reduced, aggregate releases and recoveries decreased from € 147 million to € 108 million. Our coverage ratio1) improved to 61.3% as of March 31, 2007 from 60.4% a year ago.

 

 

1)

Represents total loan loss allowance as a percentage of total non-performing loans and potential problem loans.

 

Non-operating items

In aggregate, the positive impact from non-operating items dropped from € 392 million to € 115 million. This development was almost exclusively driven by a € 277 million decrease in realized gains.

Net income

Based on the favorable operating profit development and despite the significant reduction of non-operating income, net income came in at € 612 million in 1Q 2007. With income tax expenses of € 158 million, down € 80 million from a year ago, our effective tax rate fell to 19.9% from 25.8%, primarily benefiting from increased tax-exempted income and effects from the utilization of tax losses.


 

17

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Allianz Group Interim Report First Quarter of 2007

 

The following table sets forth the income statements and cost-income ratios for both our Banking segment as a whole and Dresdner Bank for the three months ended March 31, 2007 and 2006.

 

Three months ended March 31,       2007        2006
        Banking
    Segment
€ mn		           Dresdner
Bank
€ mn		       Banking
    Segment
€ mn		               Dresdner
Bank
€ mn

Net interest income1)

     928     900     601       578

Net fee and commission income2)

    832     789     832       793

Trading income (net)3)

    351     345     487       484
Income from financial assets and liabilities designated at fair value through income (net)3)     (10)     (11)     3       3

Other income

     —     —     25       26

Operating revenues4)

     2,101     2,023     1,948       1,884
                                

Administrative expenses

     (1,410)     (1,355)     (1,428)       (1,381)

Investment expenses

     (9)     (11)     (6)       (7)

Other expenses

     13     13     —       —

Operating expenses

     (1,406)     (1,353)     (1,434)       (1,388)
                                
Loan loss provisions     5     7     33          33

Operating profit

     700     677     547       529
                                

Realized gains/losses (net)

     139     137     414       414

Impairments of investments (net)

     (13)     (13)     (20)       (20)

Restructuring charges

     (9)     (9)     (2)       (2)

Non-operating items

     117     115     392       392
                                

Income before income taxes and minority interests in earnings

     817     792     939       921
                                

Income taxes

     (168)     (158)     (245)       (238)

Minority interests in earnings

     (24)     (22)     (28)       (25)

Net income

     625     612     666       658
                                

Cost-income ratio5) in %

       66.9       66.9       73.6           73.7

 

1)

Represents interest and similar income less interest expense.

2)

Represents fee and commission income less fee and commission expense.

3)

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

4)

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

5)

Represents operating expenses divided by operating revenues.

 

18

Table of Contents

Group Management Report

 

Banking Operations by Division

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

 

        Operating revenues        Operating profit (loss)        Cost-Income ratio
Three months ended March 31,       

2007

€ mn

       

2006

€ mn

       

2007

€ mn

       

2006

€ mn

       

2007

%

       

2006

%

Private & Corporate Clients1)    

984

    

991

    

316

    

312

    

67.8

    

67.3

Investment Banking1)    

891

    

864

    

213

    

220

    

77.1

    

78.6

Corporate Other2)    

148

    

29

    

148

    

(3)

    

—3)

    

—3)

Dresdner Bank    

2,023

    

1,884

    

677

    

529

    

66.9

    

73.7

Other Banks4)    

78

    

64

    

23

    

18

    

67.9

    

71.9

Total      

2,101

      

1,948

      

700

      

547

      

66.9

      

73.6

 

1)

Our reporting by division reflects the organizational changes within Dresdner Bank effective starting with 1Q 2007, resulting in two operating divisions, Private & Corporate Clients (“PCC”) and Investment Banking (“IB”). PCC combines all banking activities formerly provided by the Personal Banking and Private & Business Banking (including Private Wealth Management) divisions as well as our activities with medium-sized business clients from our former Corporate Banking division. IB, with Global Banking and Capital Markets, unites the activities formerly provided by the Dresdner Kleinwort Wasserstein division and the remaining activities of the former Corporate Banking division. Prior year balances have been adjusted accordingly to reflect these reorganization measures and allow for comparability across periods.

2)

The Corporate Other division contains income and expense items that are not assigned to Dresdner Bank’s operating divisions. These items include, in particular, impacts from the accounting treatment for derivative financial instruments which do not qualify for hedge accounting as well as provisioning requirements for country and general risks. In 1Q 2007 the impact from the accounting treatment for derivative financial instruments which do not qualify for hedge accounting on Corporate Other’s operating revenues amounted to € (20) mn (1Q 2006: € (23) mn).

3)

Presentation not meaningful.

4)

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

 

19

Table of Contents

Allianz Group Interim Report First Quarter of 2007

 

Asset Management Operations

Solid growth masked by U.S. Dollar depreciation.

 

• Operating profit increased 2.6%.

 

• Continuous high investment performance attracts inflows.

 

• Cost-income ratio of 60.0% in 1Q 2007.

 

 

Third-Party Assets Under Management of the Allianz Group

Our third-party assets increased by € 17 billion1) to € 781 billion as of March 31, 2007, compared to € 764 billion as of December 31, 2006. In 1Q 2007, we achieved net inflows to third-party assets of € 12 billion, primarily in the United States, France and Asia-Pacific. Of the total net inflows, our fixed income business made up for € 10 billion and our equity business for € 2 billion. These strong net inflow levels were achieved despite uncertainty in the fixed income markets and very volatile equity markets.

Market-related appreciation was € 13 billion. The overwhelming majority of both the fixed income and equity assets we manage again outperformed their respective benchmarks, one of our key success factors.

Net inflows and positive market effects were partly offset by negative currency translation effects of € 6 billion, resulting primarily from a weaker U.S. Dollar versus the Euro.

We operate our third-party asset management business primarily through Allianz Global Investors (“AGI”). As of March 31, 2007, AGI managed approximately 94.7% (December 31, 2006: 94.6%) of the Allianz Group’s third-party assets. The remaining third-party assets are managed by Dresdner Bank (approximately 2.7% as of both, March 31, 2007 and December 31, 2006) and other Allianz Group subsidiaries (approximately 2.6% and 2.7% as of March 31, 2007 and December 31, 2006, respectively).

 

1)

Including a negative deconsolidation effect of € 2 bn.

 

The following graphs present the third-party assets managed by the Allianz Group by geographic region, investment category and investor class as of March 31, 2007 and December 31, 2006, respectively.

Third-party assets under management – Fair values by geographic region1)

in € bn

LOGO

 

1)

Based on the origination of the assets.

2)

Consists of third-party assets managed by Dresdner Bank (approximately € 21 bn as of both, March 31, 2007 and December 31, 2006) and by other Allianz Group companies (approximately € 20 bn as of both, March 31, 2007 and December 31, 2006).


 

20

Table of Contents

Group Management Report

 

Third-party assets under management – Fair values by investment category

in € bn

LOGO

 

1)

Includes primarily investments in real estate.

Third-party assets under management – Fair values by Investor class

in € bn

LOGO

Third-party assets under management – Composition of fair value development in the United States

in € bn

LOGO

Third-party assets under management – Composition of fair value development in Germany

in € bn

LOGO

Our major achievements in the first quarter of 2007 included:

 

  •  

Particularly strong net inflows of approximately € 1.2 billion at our U.S. equity fund manager NFJ Investment Group.

 

 

•

  

AGI Germany with assets under management of € 278.6 billion and a market share of 19.5% market leader in Germany.1)

 

 

•

  

Market leadership in “Zertifikatefonds” business with € 3.7 billion assets under management and 63% market share.1)


 

21

 

1)

Source: Bundesverband Investment und Asset Management (“BVI“), an association representing the German investment fund industry.


Table of Contents

Allianz Group Interim Report First Quarter of 2007

 

Earnings Summary

The results of operations of our Asset Management segment are almost exclusively represented by AGI, accounting for 97.2% and 97.4% of our total Asset Management segment’s operating revenues and operating profit, respectively, in 1Q 2007 (1Q 2006: 97.9% and 98.7%, respectively). Accordingly, the discussion of our Asset Management segment’s results of operations relates solely to the operations of AGI.

Operating revenues

At € 758 million, operating revenues were up € 23 million from a year ago, a development which was significantly subdued by currency related effects. Internal operating revenue growth amounted to 9.9%.

Higher asset-based management fees at stable revenue margins resulted from the growth of our third-party asset base. Loading and exit fees did not reach the prior year level due to less mutual funds sales. Other net fee and commission income increased as a result of our business expansion.

The following table sets forth the composition of AGI’s net fee and commission income.

 

Three months ended March 31,       

        2007

€ mn

       

        2006

€ mn

Management fees     851     829
Loading and exit fees     81     91
Performance fees     16     16
Other income     101     79
Fee and commission income     1,049     1,015
Commissions     (220)     (226)
Other expenses     (101)     (85)
Fee and commission expenses     (321)     (311)
Net fee and commission income       728       704

 

Operating profit

Operating profit

in € mn

LOGO

Operating profit, at € 304 million in 1Q 2007, was up slightly compared with a year earlier on a Euro-basis. At constant exchange rates, operating profit would have grown by 8.7%.

Administrative expenses, excluding acquisition-related expenses, increased 4.4% to € 454 million in 1Q 2007. Thereof, personnel expenses amounted to € 297 million, up from € 285 million a year ago, and non-personnel expenses were at € 157 million, compared to € 149 million. These developments were in line with our business expansion and investments in future growth, such as investments in our distribution network and human resources development.

Following the slightly more than proportionate increase in operating expenses compared to that in operating revenues, our cost-income-ratio was up 0.7 percentage points to 59.9%.


 

22

Table of Contents

Group Management Report

 

Non-operating items

Acquisition-related expenses fell 11.6% to € 122 million. As of March 31, 2007, the Allianz Group had acquired 37,760 of the 150,000 PIMCO LLC Class B Units originally outstanding, compared to 11,721 as of March 31, 2006. The resulting lowering effect on acquisition-related expenses was partially offset by the positive operating profit development at PIMCO in the United States.

 

Net income

At € 93 million, net income was up 6.9% from a year ago.

With income tax expenses of € 79 million, up 23.4%, our effective tax rate increased to 43.4% from 39.3%. This increase was, among other factors, driven by higher taxable income in the United States.


The following table sets forth the income statements and cost-income ratios for both our Asset Management segment as a whole and AGI for the three months ended March 31, 2007 and 2006.

 

Three months ended March 31,       2007        2006
         

Asset

Management

Segment

€ mn

       

Allianz

Global

        Investors

€ mn

       

Asset

Management

Segment

€ mn

       

Allianz

Global

        Investors

€ mn

Net fee and commission income1)     746     728     717     704
Net interest income2)     23     19     17     14
Income from financial assets and liabilities carried at fair value through income (net)     7     7     14     14
Other income     4     4     3     3
Operating revenues3)     780     758     751     735
                              
Administrative expenses, excluding acquisition-related expenses4)     (468)     (454)     (447)     (435)
Operating expenses     (468)     (454)     (447)     (435)
                              
Operating profit     312     304     304     300
                              
Realized gains/losses (net)     2     2     2     1
Acquisition-related expenses, thereof4)                            

Deferred purchases of interests in PIMCO

     (122)     (122)     (136)     (136)

Other acquisition-related expenses5)

     —     —     (2)     (2)

Subtotal

     (122)     (122)     (138)     (138)
                              
Restructuring charges     (2)     (2)     —     —
Non-operating items     (122)     (122)     (136)     (137)
                              
Income before income taxes and minority interests in earnings     190     182     168     163
                              
Income taxes     (80)     (79)     (65)     (64)
Minority interests in earnings     (11)     (10)     (13)     (12)
Net income     99     93     90     87
                              
Cost-income ratio6) in %       60.0       59.9       59.5       59.2

 

1)

Represents fee and commission income less fee and commission expense.

2)

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

3)

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

4)

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

5)

Consists of retention payments for the management and employees of PIMCO and Nicholas Applegate.

6)

Represents operating expenses divided by operating revenues.

 

23

Table of Contents

Allianz Group Interim Report First Quarter of 2007

 

Corporate Activities

 

Earnings Summary

Operating loss was € 101 million in 1Q 2007, down € 79 million from a year earlier, reflecting improvements in both Holding Function and Private Equity.

Mainly attributable to exceptionally high realized capital gains, non-operating items rose from an aggregate loss of € 211 million to an aggregate gain of € 511 million.

These developments translate into improved income before income taxes and minorities, amounting to a gain of € 410 million in 1Q 2007 after a loss of € 391 million in the same period last year.

 

        Operating profit (loss)        Non-operating items

Three months

ended March 31,

       

        2007

€ mn

       

        2006

€ mn

       

        2007

€ mn

       

        2006

€ mn

Holding Function

     (132)     (188)     512     (217)

Private Equity

     31     8     (1)     6

Total

       (101)       (180)       511       (211)

 

Holding Function

Operating profit    The decline in operating profit loss primarily driven by higher investment result due to an increased asset base.

Non-operating items    Realized capital gains of € 640 million resulted from the sale of shares.

Private Equity

Operating profit    Operating profit rose by € 23 million to € 31 million. This development resulted predominantly from higher dividends received from equity investments as well as an increased gain from fully consolidated private equity investments, specifically from MAN Roland Druckmaschinen AG.


 

24

Table of Contents

Group Management Report

Balance Sheet Review

At € 52.3 billion, shareholders’ equity was up 3.6% compared to year-end 2006.

 

 

Shareholders’ Equity

As of March 31, 2007, shareholders’ equity was 3.6% higher than at year-end 2006, primarily driven by the high net income in 1Q 2007. Commensurate with the high level of realizations which benefited net income, net unrealized gains/losses declined. An additional negative impact on shareholders’ equity was brought about by increased negative foreign currency translation adjustments, included in revenue reserves in the graph below, stemming predominantly from the depreciation of the U.S. Dollar compared to the Euro in the first three months of the year.

The following graph sets forth the development of our shareholders’ equity.

Shareholders’ equity1)

in € mn

LOGO

 

1)

Does not include minority interests of € 6.6 bn as of March 31, 2007 and of € 6.4 bn as of December 31, 2006. Please see Note 18 to the consolidated financial statements for further information.

2)

Includes foreign currency translation adjustments.

 

Total Assets and Total Liabilities

Total assets and total liabilities increased by € 49.1 billion and € 47.1 billion, respectively. In the following sections we analyze important developments within the balance sheets of our Life/Health, Property-Casualty and Banking segments. Relative to the Allianz Group’s total assets and total liabilities, we consider the total assets and total liabilities from our Asset Management segment as immaterial and have, accordingly, excluded these assets and liabilities from the following discussion. Our Asset Management segment’s results of operations stem primarily from its business with third-party assets. Please see pages 20 to 21 for further information on the development of our third-party assets.

Insurance Assets and Liabilities

Life/Health insurance operations

Reserves for insurance and investment contracts from our Life/Health segment rose by € 1.7 billion, mainly due to increased aggregate policy reserves for universal-life type insurance contracts. Financial liabilities for unit-linked contracts as of March 31, 2007 were € 1.9 billion higher than as of year-end 2006, reflecting our continuous sales successes with unit-linked insurance and investment contracts. Similarly, our Life/Health asset base grew by € 5.1 billion.


 

25

Table of Contents

 

Allianz Group Interim Report First Quarter of 2007

 

The following graph sets forth the development of our Life/Health asset base.

Life/Health asset base

fair values1) in € bn

LOGO

 

1)

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

2)

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

3)

Does not include affiliates at € 2.8 bn and € 2.8 bn as of March 31, 2007 and December 31, 2006, respectively.

4)

Includes, in each case as of March 31, 2007 and December 31, 2006, respectively, debt securities at € 8.1 bn and € 7.3 bn, equity securities at € 2.9 bn and € 2.9 bn, and derivative financial instruments at € (4.6) bn and € (4.4) bn.

 

Property-Casualty insurance operations

Our Property-Casualty segment’s reserves for loss and loss adjustment expenses declined € 1.3 billion from year-end 2006 to € 57.3 billion as of March 31, 2007, due, among other factors, to the depreciation of the U.S. Dollar relative to the Euro. Our Property-Casualty asset base increased by € 1.7 billion.

The following graph sets forth the development of our Property-Casualty asset base.

Property-Casualty asset base

fair values1) in € bn

LOGO

 

1)

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

2)

Does not include affiliates at € 9.5 bn and € 9.5 bn as of March 31, 2007 and December 31, 2006, respectively.

3)

Includes, in each case as of March 31, 2007 and December 31, 2006, respectively, debt securities at € 3.6 bn and € 3.2 bn, equity securities at € 0.4 bn and € 0.4 bn, and derivative financial instruments at € 0.1 bn and € 0.1 bn.


 

26

Table of Contents

Group Management Report

 

Banking Assets and Liabilities

Loans and advances to banks and customers in our Banking segment were € 346.8 billion as of March 31, 2007, up € 33.1 billion from year-end 2006. This increase was particularly driven by higher volumes of collateralized refinancing activities at Dresdner Bank which also led to an increase in our liabilities to banks and customers, primarily in the from of repurchase agreements and collateral received from securities lending transactions.

The following graph sets forth the development of our Banking segment’s loans and advances to banks and customers.

 

Banking loans and advances to banks and customers

in € bn

LOGO

 

1)

Includes loan loss allowance at € (1.0) bn as of both March 31, 2007 and December 31, 2006, respectively.


 

27

Table of Contents

Allianz Group Interim Report First Quarter of 2007

 

Other Information

 

 

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

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

We believe that trends in the underlying profitability of our business can be more clearly identified without the fluctuating effects of the realized capital gains and losses or impairments of investment securities, as these are largely dependent on market cycles or issuer-specific

events over which we have little or no control, and can and do vary, sometimes materially, across periods. Further, the timing of sales that would result in such gains or losses is largely at our discretion. Similarly, we exclude restructuring charges because the timing of the restructuring charges are largely within our control, and accordingly their exclusion provides additional insight into the operating trends of the underlying business.

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

The following table reconciles operating profit on a consolidated basis to the Allianz Group’s income before income taxes and minority interests in earnings.

 

Three months ended

March 31,

       

2007

€ mn

       

2006

€ mn

Operating profit     2,870     2,677
Realized gains/losses and impairments of investments (net)     2,045     778
Income from financial assets and liabilities held for trading (net)     34     (79)
Interest expense from external debt     (222)     (198)
Restructuring charges     (27)     (4)
Acquisition-related expenses     (122)     (138)
Amortization of intangible assets     (3)     (5)
Reclassification of policyholder participation in tax benefits arising in connection with tax-exempt income     (19)     —
Income before income taxes and minority interests in earnings       4,556       3,031

 

28

Table of Contents

Group Management Report

 

Composition of Total Revenue Growth

We further believe that an understanding of our total revenue performance is enhanced when the effects of foreign currency translation as well as acquisitions and disposals (or “changes in scope of consolidation”) are excluded. Accordingly, in addition to presenting “nominal growth”, we also present “internal growth”, which excludes the effects of foreign currency translation and changes in scope of consolidation. The following table sets forth the reconciliation of nominal total revenue growth to internal total revenue growth for each of our segments and the Allianz Group as a whole for the three months ended March 31, 2007.

 

Composition of total revenue1) growth for the three months ended March 31, 2007

 

Segment      

Nominal
growth

       

Changes
in scope
of
consoli-

dation

       

Foreign
currency
translation

       

Internal
growth

         

        %

       

        %

       

        %

       

        %

Property-Casualty     (0.3)     0.4     (1.0)     0.3
Life/Health     (3.9)     —     (1.9)     (2.0)
Banking     7.9     —     (0.3)     8.2

thereof: Dresdner

             Bank

     7.4     —     (0.3)     7.7
Asset Management     3.9     0.6     (6.6)     9.9

thereof: Allianz

             Global

             Investors

     3.1     —     (6.8)     9.9
Allianz Group       (1.1)       0.2       (1.5)       0.2

 

1)

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


 

29

Table of Contents

Allianz Group Interim Report First Quarter of 2007

 

30

Table of Contents

 

Consolidated Financial Statements

Contents

 

32   Consolidated Balance Sheets
33   Consolidated Income Statements
34   Consolidated Statements of Changes in Equity
35   Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
37   1   Basis of presentation
37   2   Changes in the presentation of the consolidated financial statements
38   3   Segment reporting
Supplementary Information to the Consolidated
Balance Sheets
48   4   Financial assets carried at fair value through income
48   5   Investments
48   6   Loans and advances to banks and customers
49   7   Reinsurance assets
49   8   Deferred acquisition costs
49   9   Other assets
49   10   Intangible assets
50   11   Financial liabilities carried at fair value through income
50   12   Liabilities to banks and customers
50   13   Reserves for loss and loss adjustment expenses
51   14   Reserves for insurance and investment contracts
51   15   Other liabilities
51   16   Certificated liabilities
51   17   Participation certificates and subordinated liabilities
52   18   Equity
Supplementary Information to the Consolidated
Income Statements
53   19   Premiums earned (net)
54   20   Interest and similar income
54   21   Income from financial assets and liabilities carried at fair value through income (net)
55   22   Realized gains/losses (net)
56   23   Fee and commission income
56   24   Other income
56   25   Income from fully consolidated private equity investments
57   26   Claims and insurance benefits incurred (net)
58   27   Changes in reserves for insurance and investment contracts (net)
58   28   Interest expense
58   29   Loan loss provisions
59   30   Impairments of investments (net)
59   31   Investment expenses
60   32   Acquisition and administrative expenses (net)
61   33   Fee and commission expenses
62   34   Other expenses
62   35   Expenses from fully consolidated private equity investments
62   36   Income taxes
62   37   Earnings per share
Other Information
63   38   Supplemental information on the Banking segment
63   39   Supplemental information on the consolidated statements of cash flows
64   40   Other information
64   41

 

   Subsequent events

Table of Contents

Allianz Group Interim Report First Quarter of 2007

 

Consolidated Balance Sheets

As of March 31, 2007 and as of December 31, 2006

 

          Note       

As of

March 31,

2007

€ mn

       

As of
December 31,
2006

€ mn

ASSETS                     
Cash and cash equivalents            35,713     33,031
Financial assets carried at fair value through income     4     162,238     156,869
Investments     5     298,763     298,134
Loans and advances to banks and customers     6     444,446     408,278
Financial assets for unit linked contracts            63,765     61,864
Reinsurance assets     7     17,477     19,360
Deferred acquisition costs     8     19,926     19,135
Deferred tax assets            4,562     4,727
Other assets     9     42,058     38,893
Intangible assets     10     13,425     12,935
Total assets               1,102,373       1,053,226
                         
          Note       

As of

March 31,

2007

€ mn

       

As of
December 31,
2006

€ mn

LIABILITIES AND EQUITY                     
Financial liabilities carried at fair value through income     11     90,429     79,699
Liabilities to banks and customers     12     393,010     361,078
Unearned premiums            18,731     14,868
Reserves for loss and loss adjustment expenses     13     64,200     65,464
Reserves for insurance and investment contracts     14     289,390     287,697
Financial liabilities for unit linked contracts            63,765     61,864
Deferred tax liabilities            4,588     4,618
Other liabilities     15     50,282     49,764
Certificated liabilities     16     53,129     54,922
Participation certificates and subordinated liabilities     17     15,927     16,362
Total liabilities            1,043,451     996,336
                       
Shareholders’ equity            52,283     50,481
Minority interests            6,639     6,409
Total equity     18     58,922     56,890
                       
Total liabilities and equity               1,102,373       1,053,226

 

32

Table of Contents

Consolidated Financial Statements

 

Consolidated Income Statements

For the three months ended March 31, 2007 and 2006

 

Three months ended March 31,        Note       

2007

€ mn

       

2006

€ mn

Premiums earned (net)     19     14,543     14,420
Interest and similar income     20     6,266     5,683
Income from financial assets and liabilities carried at fair value through income (net)     21     115     500
Realized gains/losses (net)     22     3,209     1,895
Fee and commission income     23     2,356     2,252
Other income     24     93     39
Income from fully consolidated private equity investments     25     471     159
Total income            27,053     24,948
                       
Claims and insurance benefits incurred (net)     26     (11,085)     (10,875)
Changes in reserves for insurance and investment contracts (net)     27     (2,736)     (2,712)
Interest expense     28     (1,598)     (1,565)
Loan loss provisions     29     2     32
Impairments of investments (net)     30     (67)     (55)
Investment expenses     31     (261)     (183)
Acquisition and administrative expenses (net)     32     (5,638)     (5,809)
Fee and commission expenses     33     (634)     (578)
Amortization of intangible assets            (3)     (5)
Restructuring charges            (30)     (4)
Other expenses     34     13     (1)
Expenses from fully consolidated private equity investments     35     (460)     (162)
Total expenses            (22,497)     (21,917)
                       
Income before income taxes and minority interests in earnings            4,556     3,031
Income taxes     36     (967)     (899)
Minority interests in earnings            (349)     (353)
Net income               3,240       1,779
           
Three months ended March 31,        Note       

2007

€

       

2006

€

Basic earnings per share     37     7.51     4.39
Diluted earnings per share       37       7.34       4.32

 

33

Table of Contents

Allianz Group Interim Report First Quarter of 2007

 

Consolidated Statements of Changes in Equity

For the three months ended March 31, 2007 and 2006

 

        

Paid-in

capital

 

       

Revenue
reserves

 

        Foreign
currency
translation
adjustments		       

Unrealized
gains and
losses (net)

            

Shareholders’
equity

       

Minority
interests

 

            

Total

equity

 

          € mn        € mn        € mn        € mn             € mn        € mn             € mn
Balance as of December 31, 2005     21,616     8,579     (1,032)     10,324       39,487     7,615         47,102
Foreign currency translation adjustments     —     —     (335)     (13)       (348)     (110)         (458)
Available-for-sale investments                                                       

Unrealized gains and losses (net) arising during the year

     —     —     —     858       858     (71)         787

Transferred to net income on disposal

     —     —     —     (463)       (463)     (91)         (554)
Cash flow hedges     —     —     —     (16)       (16)     —         (16)
Miscellaneous     —     (259)     —     —       (259)     (4)         (263)
Total income and expense recognized directly in shareholders’ equity     —     (259)     (335)     366       (228)     (276)         (504)
Net income     —     1,779     —     —       1,779     353         2,132
Total recognized income and expense for the period     —     1,520     (335)     366       1,551     77         1,628
Treasury shares     —     255     —     —       255     —         255
Transactions between equity holders     —     12     —     (4)       8     28         36
Dividends paid     —     —     —     —       —     (15)         (15)
Balance as of March 31, 2006       21,616       10,366       (1,367)       10,686           41,301       7,705           49,006
Balance as of December 31, 2006     25,398     13,629     (2,210)     13,664       50,481     6,409         56,890
Foreign currency translation adjustments     —     —     (141)     (4)       (145)     (23)         (168)
Available-for-sale investments                                                       

Unrealized gains and losses (net) arising during the year

     —     —     —     233       233     (28)         205

Transferred to net income on disposal

     —     —     —     (1,787)       (1,787)     (86)         (1,873)
Cash flow hedges     —     —     —     5       5     —         5
Miscellaneous     —     (84)     —     —       (84)     7         (77)
Total income and expense recognized directly in shareholders’ equity     —     (84)     (141)     (1,553)       (1,778)     (130)         (1,908)
Net income     —     3,240     —     —       3,240     349         3,589
Total recognized income and expense for the period     —     3,156     (141)     (1,553)       1,462     219         1,681
Treasury shares     —     348     —     —       348     —         348
Transactions between equity holders     —     (6)     —     (2)       (8)     34         26
Dividends paid     —     —     —     —       —     (23)         (23)
Balance as of March 31, 2007       25,398       17,127       (2,351)       12,109           52,283       6,639           58,922

 

34

Table of Contents

Consolidated Financial Statements

Consolidated Statements of Cash Flows

For the three months ended March 31, 2007 and 2006

 

Three months ended March 31,

       

            2007

€ mn

       

            2006

€ mn

Cash flow from operating activities:              
Net income     3,240     1,779
Adjustments to reconcile net income to net cash flow provided by (used in) operating activities:              

Minority interests in earnings

     349     353

Share of earnings from investments in associates and joint ventures

     (259)     (74)

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

              

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

     (3,142)     (1,840)

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

     (459)     (138)

Depreciation and amortization

     200     163

Loan loss provision

     (2)     (32)

Interest credited to policyholder accounts

     657     656

Net change in:

              

Financial assets and liabilities held for trading

     7,597     8,842

Reverse repurchase agreements and collateral paid for securities borrowing transactions

     (30,887)     (46,705)

Repurchase agreements and collateral received from securities lending transactions

     25,798     38,953

Reinsurance assets

     623     (177)

Deferred acquisition costs

     (756)     (712)

Unearned premiums

     3,554     3,699

Reserves for losses and loss adjustment expenses

     (1,221)     (373)

Reserves for insurance and investment contracts

     1,866     1,781

Deferred tax assets/liabilities

     266     215

Other (net)

     (1,757)     205
Net cash flow provided by operating activities       5,667       6,595
                
Cash flow from investing activities:              
Net change in:              

Financial assets designated at fair value through income

     (977)     (111)

Available-for-sale investments

     (1,420)     (2,720)

Held-to-maturity investments

     21     42

Investments in associates and joint ventures

     (331)     (346)

Non-current assets and disposal groups held for sale

     —     1,416

Real estate held for investment

     157     96

Loans and advances to banks and customers

     (5,422)     (8,296)

Property and equipment

     49     (460)
Acquisition of subsidiary, net of cash acquired     (507)     —
Other (net)     (124)     141
Net cash flow used in investing activities       (8,554)       (10,238)
                
Cash flow from financing activities:              
Net change in:              

Policyholders’ accounts

     491     1,827

Liabilities to banks and customers

     6,139     6,050

Certificated liabilities, participation certificates and subordinated liabilities

     (1,009)     (2,304)
Transactions between equity holders     21     (9)
Dividends paid to shareholders     (23)     (15)
Net cash from sale or purchase of treasury shares     189     73
Other (net)     (225)     (702)
Net cash flow provided by financing activities     5,583     4,920
                
Effect of exchange rate changes on cash and cash equivalents     (14)     (27)
Change in cash and cash equivalents     2,682     1,250
Cash and cash equivalents at beginning of period     33,031     31,647
Cash and cash equivalents at end of period       35,713       32,897

 

35

Table of Contents

Allianz Group Interim Report First Quarter of 2007

 

 

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36

Table of Contents

Notes to the Consolidated Financial Statements

 

Notes to the Consolidated Financial Statements

1    Basis of presentation

The consolidated financial statements of the Allianz

Group have been prepared in conformity with International Financial Reporting Standards (“IFRS”), as adopted under European Union (“EU”) regulations in accordance with section 315a of the German Commercial Code (“HGB”). IFRS as adopted by the EU offers certain options for applying IFRS standards. The Allianz Group’s application of these options results in no material differences between IFRS as adopted by the EU and IFRS as adopted by the International Accounting Standard Board (“IASB”).

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

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

2    Changes in the presentation of the consolidated financial statements

Recently adopted US accounting pronouncements

In September 2005, the Accounting Standards Executive Committee (“AcSEC”) of the AICPA issued SOP 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts (“SOP 05-1”). SOP 05-1 provides guidance on accounting by insurance enterprises for deferred costs on internal replacements of insurance and investment contracts other than those specifically described in SFAS 97. SOP 05-1 defines an internal replacement as a modification in product benefits, features, rights, or coverages that occurs by the exchange of a contract for a new contract, or by amendment, endorsement, or rider to a contract, or by the election of a feature or coverage within a contract. SOP 05-1 is effective for the year ending December 31, 2007.

 

Consistent with the Allianz Group’s application of US GAAP for insurance and reinsurance contracts, Allianz has adopted SOP 05-1 as of January 1, 2007. SOP 05-1 has had no material impact on Allianz’s net income or financial position.

Reclassifications

Beginning with the third quarter of 2006, income from fully consolidated private equity investments and expenses from fully consolidated private equity investments have been included as separate line items in the consolidated income statements. Accordingly, the prior period income statement has been reclassified to conform to the current period presentation.

A summary of the impact of these changes on the consolidated income statement for the three months ended March, 31, 2006 is as follows:

 

       

Three months
ended
March 31,
2006

as previously
reported

       

Reclassifi-

cations

        Three months
ended
March 31,
2006
          € mn        € mn        € mn
Interest and similar income     5,691     (8)     5,683
Fee and commission income     2,403     (151)     2,252

Income from fully con-

solidated private equity investments

     —     159     159
                       
Interest expense     (1,600)     35     (1,565)

Acquisition costs and ad-

ministrative expenses (net)

     (5,843)     17     (5,826)
Fee and commission expenses     (688)     110     (578)
Expenses from fully con- solidated private equity investments       —       (162)       (162)

Certain immaterial amounts of unearned premiums were previously netted against deferred acquisition costs in the consolidated balance sheets and against the related amortization account in the income statements. All periods have now been presented on a gross basis.


 

37

Table of Contents

Allianz Group Interim Report First Quarter of 2007

 

3    Segment reporting

Business Segment Information – Consolidated Balance Sheets

As of March 31, 2007 and as of December 31, 2006

 

        Property-Casualty        Life/Health        Banking     
         

As of

        March 31,

2007

€ mn

       

As of

December 31,
2006

€ mn

       

As of

        March 31,

2007

€ mn

       

As of

December 31,
2006

€ mn

       

As of

        March 31,

2007

€ mn

       

As of

December 31,
2006

€ mn

     
ASSETS                                            
Cash and cash equivalents     4,865     4,100     10,531     6,998     13,121     21,528  
Financial assets carried at fair value through income     4,996     4,814     11,823     11,026     143,967     139,505  
Investments     88,901     88,819     190,330     190,607     18,435     17,803  
Loans and advances to banks and customers     17,954     16,825     88,686     85,769     346,788     313,709  
Financial assets for unit linked contracts     —     —     63,765     61,864     —     —  
Reinsurance assets     10,835     11,437     6,679     7,966     —     —  
Deferred acquisition costs     4,065     3,704     15,809     15,381     —     —  
Deferred tax assets     1,635     1,651     505     503     1,709     1,679  
Other assets     21,039     17,737     15,475     12,891     11,307     9,571  
Intangible assets     2,182     1,653     2,397     2,399     2,284     2,285  
Total assets        156,472        150,740        406,000        395,404        537,611        506,080     
                         
        Property-Casualty        Life/Health        Banking     
         

As of

March 31,

2007

€ mn

       

As of
December 31,

2006

€ mn

       

As of

March 31,

2007

€ mn

       

As of

December 31,
2006

€ mn

       

As of

March 31,

2007

€ mn

       

As of

December 31,
2006

€ mn

     
LIABILITIES AND EQUITY                                            
Financial liabilities carried at fair value through income     951     1,070     5,439     5,251     83,559     72,215  
Liabilities to banks and customers     4,709     4,473     10,931     7,446     371,704     350,148  
Unearned premiums     16,789     12,994     1,943     1,874     —     —  
Reserves for loss and loss adjustment expenses     57,321     58,664     6,877     6,804     —     —  
Reserves for insurance and investment contracts     9,011     8,956     280,387     278,701     —     —  
Financial liabilities for unit linked contracts     —     —     63,765     61,864     —     —  
Deferred tax liabilities     3,690     3,902     1,328     1,181     92     83  
Other liabilities     20,156     18,699     18,293     16,314     12,702     12,140  
Certificated liabilities     58     657     603     3     44,088     46,191  
Participation certificates and subordinated liabilities     1,606     1,605     66     66     8,025     8,456  
Total liabilities        114,291        111,020        389,632        379,504        520,170        489,233     

 

38

Table of Contents

Notes to the Consolidated Financial Statements

 

 

     Asset Management        Corporate        Consolidation        Group
    

As of

        March 31,

2007

€ mn

       

As of

December 31,
2006

€ mn

       

As of

        March 31,

2007

€ mn

       

As of

December 31,
2006

€ mn

       

As of

        March 31,

2007

€ mn

       

As of

December 31,
2006

€ mn

       

As of

        March 31,

2007

€ mn

       

As of

December 31,
2006

€ mn

                                                     
  578     767     7,313     536    

(695)

     (898)     35,713     33,031
  1,032     985     896     1,158    

(476)

     (619)     162,238     156,869
  720     774     97,286     96,652    

(96,909)

     (96,521)     298,763     298,134
  511     367     3,376     2,963    

(12,869)

     (11,355)     444,446     408,278
  —     —     —     —    

—

     —     63,765     61,864
  —     —     —     —    

(37)

     (43)     17,477     19,360
  52     50     —     —    

—

     —     19,926     19,135
  191     196     1,223     1,473    

(701)

     (775)     4,562     4,727
  3,602     3,471     5,270     7,020    

(14,635)

     (11,797)     42,058     38,893
  6,300     6,334     262     264    

—

     —     13,425     12,935
    12,986       12,944       115,626       110,066      

(126,322)

       (122,008)       1,102,373       1,053,226
                                                             
    Asset Management       Corporate       Consolidation       Group
    

As of

March 31,

2007

€ mn

       

As of

December 31,
2006

€ mn

       

As of

March 31,

2007

€ mn

       

As of

December 31,
2006

€ mn

       

As of

March 31,

2007

€ mn

       

As of

December 31,
2006

€ mn

       

As of

March 31,

2007

€ mn

       

As of

December 31,
2006

€ mn

                                                     
  —     —     899     1,713    

(419)

     (550)     90,429     79,699
  670     605     14,799     7,293    

(9,803)

     (8,887)     393,010     361,078
  —     —     —     —    

(1)

     —     18,731     14,868
  —     —     —     —    

2

     (4)     64,200     65,464
  —     —     257     306    

(265)

     (266)     289,390     287,697
  —     —     —     —    

—

     —     63,765     61,864
  43     46     123     171    

(688)

     (765)     4,588     4,618
  3,471     3,689     13,702     14,149    

(18,042)

     (15,227)     50,282     49,764
  —     —     9,579     9,265    

(1,199)

     (1,194)     53,129     54,922
  —     —     7,097     7,099    

(867)

     (864)     15,927     16,362
    4,184       4,340       46,456       39,996      

(31,282)

       (27,757)       1,043,451       996,336
                  Total equity   58,922        56,890
                  Total liabilities and equity   1,102,373        1,053,226

 

39

Table of Contents

Allianz Group Interim Report First Quarter of 2007

 

Business Segment Information – Consolidated Income Statements

For the three months ended March 31, 2007 and 2006

 

        Property-Casualty        Life/Health        Banking     

Three months ended March 31,

       

2007

€ mn

       

2006

€ mn

       

2007

€ mn

       

2006

€ mn

       

2007

€ mn

       

2006

€ mn

     
Premiums earned (net)     9,358     9,341     5,185     5,079     —     —  
Interest and similar income     1,006     922     3,155     3,047     2,209     1,880  
Income from financial assets and liabilities carried at fair value through income (net)     (12)     40     (310)     31     341     490  
Realized gains/losses (net)     767     464     1,193     1,262     139     414  
Fee and commission income     272     252     171     129     978     992  
Other income     84     14     54     6     —     25  
Income from fully consolidated private equity investments     —     —     —     —     —     —  
Total income     11,475     11,033     9,448     9,554     3,667     3,801  
                                              
Claims and insurance benefits incurred (net)     (6,383)     (6,182)     (4,702)     (4,693)     —     —  
Changes in reserves for insurance and investment contracts (net)     (81)     (72)     (2,624)     (2,648)     —     —  
Interest expense     (92)     (63)     (91)     (64)     (1,281)     (1,279)  
Loan loss provisions     —     (1)     (3)     —     5     33  
Impairments of investments (net)     (26)     (13)     (37)     (35)     (13)     (20)  
Investment expenses     (74)     (48)     (196)     (157)     (9)     (6)  
Acquisition and administrative expenses (net)     (2,675)     (2,663)     (874)     (1,025)     (1,410)     (1,428)  
Fee and commission expenses     (197)     (170)     (62)     (50)     (146)     (160)  
Amortization of intangible assets     (2)     (4)     (1)     (1)     —     —  
Restructuring charges     (14)     (2)     (5)     —     (9)     (2)  
Other expenses     —     (1)     —     —     13     —  
Expenses from fully consolidated private equity investments     —     —     —     —     —     —  
Total expenses     (9,544)     (9,219)     (8,595)     (8,673)     (2,850)     (2,862)  
                                              
Income before income taxes and minority interests in earnings     1,931     1,814     853     881     817     939  
Income taxes     (537)     (524)     (201)     (219)     (168)     (245)  
Minority interests in earnings     (214)     (190)     (99)     (128)     (24)     (28)  
Net income       1,180       1,100       553       534       625       666    

 

40

Table of Contents

Notes to the Consolidated Financial Statements

 

     Asset Management        Corporate        Consolidation        Group
    

2007

            € mn

       

2006

            € mn

       

2007

            € mn

       

2006

            € mn

       

2007

            € mn

       

2006

            € mn

       

2007

            € mn

       

2006

            € mn

  —     —     —     —     —     —     14,543     14,420
  33     25     154     86     (291)     (277)     6,266     5,683
  7     14     85     (96)     4     21     115     500
  2     2     640     70     468     (317)     3,209     1,895
  1,073     1,031     45     41     (183)     (193)     2,356     2,252
  4     3     5     13     (54)     (22)     93     39
  —     —     471     159     —     —     471     159
  1,119     1,075     1,400     273     (56)     (788)     27,053     24,948
                                                     
  —     —     —     —     —     —     (11,085)     (10,875)
  —     —     —     —     (31)     8     (2,736)     (2,712)
  (11)     (8)     (353)     (336)     230     185     (1,598)     (1,565)
  —     —     —     —     —     —     2     32
  —     —     9     13     —     —     (67)     (55)
  1     —     (34)     (17)     51     45     (261)     (183)
  (590)     (585)     (117)     (139)     28     31     (5,638)     (5,809)
  (327)     (314)     (35)     (23)     133     139     (634)     (578)
  —     —     —     —     —     —     (3)     (5)
  (2)     —     —     —     —     —     (30)     (4)
  —     —     —     —     —     —     13     (1)
  —     —     (460)     (162)     —     —     (460)     (162)
  (929)     (907)     (990)     (664)     411     408     (22,497)     (21,917)
                                                     
  190     168     410     (391)     355     (380)     4,556     3,031
  (80)     (65)     (25)     154     44     —     (967)     (899)
  (11)     (13)     (4)     (2)     3     8     (349)     (353)
    99       90       381       (239)       402       (372)       3,240       1,779

 

41

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Allianz Group Interim Report First Quarter of 2007

 

Segment Information – Total Revenues and Operating Profit

For the three months ended March 31, 2007 and 2006

The following table summarizes the total revenues and operating profit for each of the segments for the three months ended March 31, 2007 and 2006, as well as IFRS consolidated net income of the Allianz Group.

 

       

Property-

Casualty

       

Life/Health

       

Banking

        Asset
Management		       

Corporate

       

Consolidation

       

Group

Three months ended March 31,       

            € mn

       

        € mn

       

            € mn

        € mn       

        € mn

       

€ mn

       

            € mn

2007                                                 
Total revenues1)     14,111     12,326     2,101     780     —     5     29,323
Operating profit (loss)     1,267     750     700     312     (101)     (58)     2,870
Non-operating items     664     103     117     (122)     511     413     1,686
Income (loss) before income taxes and minority interests in earnings     1,931     853     817     190     410     355     4,556
Income taxes     (537)     (201)     (168)     (80)     (25)     44     (967)
Minority interests in earnings     (214)     (99)     (24)     (11)     (4)     3     (349)
Net income (loss)       1,180       553       625       99       381       402       3,240
2006                                                 
Total revenues1)     14,149     12,822     1,948     751     —     (29)     29,641
Operating profit (loss)     1,386     723     547     304     (180)     (103)     2,677
Non-operating items     428     158     392     (136)     (211)     (277)     354
Income (loss) before income taxes and minority interests in earnings     1,814     881     939     168     (391)     (380)     3,031
Income taxes     (524)     (219)     (245)     (65)     154     —     (899)
Minority interests in earnings     (190)     (128)     (28)     (13)     (2)     8     (353)
Net income (loss)       1,100       534       666       90       (239)       (372)       1,779

 

1)

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

 

42

Table of Contents

Notes to the Consolidated Financial Statements

 

Property-Casualty Segment

 

Three months ended March 31,       

2007

            € mn

       

2006

            € mn

Gross premiums written1)     14,111     14,149
Ceded premiums written     (1,586)     (1,712)
Change in unearned premiums     (3,167)     (3,096)
Premiums earned (net)     9,358     9,341
Interest and similar income     1,006     922
Income from financial assets and liabilities designated at fair value through income (net)2)     32     36
Income from financial assets and liabilities held for trading (net), shared with policyholder2)     (15)     —
Realized gains/losses (net) from investments, shared with policyholders3)     34     25
Fee and commission income     272     252
Other income     84     14
Operating revenues     10,771     10,590
                
Claims and insurance benefits incurred (net)     (6,383)     (6,182)
Changes in reserves for insurance and investment contracts (net)     (81)     (72)
Interest expense     (92)     (63)
Loan loss provisions     —     (1)
Impairments of investments (net), shared with policyholders4)     (2)     (4)
Investment expenses     (74)     (48)
Acquisition and administrative expenses (net)     (2,675)     (2,663)
Fee and commission expenses     (197)     (170)
Other expenses     —     (1)
Operating expenses     (9,504)     (9,204)
                
Operating profit     1,267     1,386
                
Income from financial assets and liabilities held for trading (net), not shared with policyholders2)     (29)     4
Realized gains/losses (net) from investments, not shared with policyholders3)     733     439
Impairments of investments (net), not shared with policyholders4)     (24)     (9)
Amortization of intangible assets     (2)     (4)
Restructuring charges     (14)     (2)
Non-operating items     664     428
                
Income before income taxes and minority interests in earnings     1,931     1,814
                
Income taxes     (537)     (524)
Minority interests in earnings     (214)     (190)
Net income     1,180     1,100
                
Loss ratio5) in %     68.2     66.2
Expense ratio6) in %     28.6     28.5
Combined ratio7) in %       96.8       94.7

 

1)

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

2)

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

3)

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

4)

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

5)

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

6)

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

7)

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

 

43

Table of Contents

Allianz Group Interim Report First Quarter of 2007

 

Life/Health Segment

 

Three months ended March 31,       

2007

            € mn

       

2006

            € mn

Statutory premiums1)

     12,326     12,822

Ceded premiums written

     (193)     (196)

Change in unearned premiums

     (27)     (75)

Statutory premiums (net)

     12,106     12,551

Deposits from SFAS 97 insurance and investment contracts

     (6,921)     (7,472)

Premiums earned (net)

     5,185     5,079

Interest and similar income

     3,155     3,047

Income from financial assets and liabilities carried at fair value through income (net), shared with policyholders2)

     (311)     31

Realized gains/losses (net) from investments, shared with policyholders3)

     1,088     1,103

Fee and commission income

     171     129

Other income

     54     6

Operating revenues

     9,342     9,395
                

Claims and insurance benefits incurred (net)

     (4,702)     (4,693)

Changes in reserves for insurance and investment contracts (net)

     (2,624)     (2,648)

Interest expense

     (91)     (64)

Loan loss provisions

     (3)     —

Impairments of investments (net), shared with policyholders

     (37)     (35)

Investment expenses

     (196)     (157)

Acquisition and administrative expenses (net)

     (874)     (1,025)

Fee and commission expenses

     (62)     (50)

Operating restructuring charges4)

     (3)     —

Operating expenses

     (8,592)     (8,672)
                

Operating profit

     750     723
                
Income from financial assets and liabilities carried at fair value through income (net), not shared with policyholders2)     1     —

Realized gains/losses (net) from investments, not shared with policyholders3)

    105     159

Amortization of intangible assets

     (1)     (1)

Non-operating restructuring charges4)

     (2)     —

Non-operating items

     103     158
                

Income before income taxes and minority interests in earnings

     853     881
                

Income taxes

     (201)     (219)

Minority interests in earnings

     (99)     (128)

Net income

     553     534
                

Statutory expense ratio5) in %

       7.2       8.2

 

1)

For the Life/Health segment, total revenues are measured based upon statutory premiums. Statutory premiums are gross premiums written from sales of life insurance policies, as well as gross receipts from sales of unit linked and other investment-oriented products, in accordance with the statutory accounting practices applicable in the insurer’s home jurisdiction.

2)

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

3)

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

4)

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

5)

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

 

44

Table of Contents

Notes to the Consolidated Financial Statements

 

Banking Segment

 

Three months ended March 31,       2007        2006
         

Banking
Segment

€ mn

       

Dresdner

Bank

€ mn

       

Banking
Segment

€ mn

       

Dresdner

Bank

€ mn

Net interest income1)     928     900     601     578
Net fee and commission income2)     832     789     832     793
Trading income (net)3)     351     345     487     484
Income from financial assets and liabilities designated at fair value through income (net)3)     (10)     (11)     3     3
Other income     —     —     25     26
Operating revenues4)     2,101     2,023     1,948     1,884
                              
Administrative expenses     (1,410)     (1,355)     (1,428)     (1,381)
Investment expenses     (9)     (11)     (6)     (7)
Other expenses     13     13     —     —
Operating expenses     (1,406)     (1,353)     (1,434)     (1,388)
                              
Loan loss provisions     5     7     33     33
Operating profit     700     677     547     529
                              
Realized gains/losses (net)     139     137     414     414
Impairments of investments (net)     (13)     (13)     (20)     (20)
Restructuring charges     (9)     (9)     (2)     (2)
Non-operating items     117     115     392     392
                              
Income before income taxes and minority interests in earnings     817     792     939     921
                              
Income taxes     (168)     (158)     (245)     (238)
Minority interests in earnings     (24)     (22)     (28)     (25)
Net income     625     612     666     658
                              
Cost-income ratio5) in %       66.9       66.9       73.6       73.7

 

1)

Represents interest and similar income less interest expense.

2)

Represents fee and commission income less fee and commission expense.

3)

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

4)

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

5)

Represents operating expenses divided by operating revenues.

 

45

Table of Contents

Allianz Group Interim Report First Quarter of 2007

 

Asset Management Segment

 

Three months ended March 31,       2007        2006
         

Asset

Management

Segment

€ mn

       

Allianz

Global

        Investors

€ mn

       

Asset

Management

Segment

€ mn

       

Allianz

Global

Investors

            € mn

Net fee and commission income1)     746     728     717     704
Net interest income2)     23     19     17     14
Income from financial assets and liabilities carried at fair value through income (net)     7     7     14     14
Other income     4     4     3     3
Operating revenues3)     780     758     751     735
                              
Administrative expenses, excluding acquisition-related expenses4)     (468)     (454)     (447)     (435)
Operating expenses     (468)     (454)     (447)     (435)
                              
Operating profit     312     304     304     300
                              
Realized gains/losses (net)     2     2     2     1
Acquisition-related expenses, thereof4)                            

Deferred purchases of interests in PIMCO

     (122)     (122)     (136)     (136)

Other acquisition-related expenses5)

     —     —     (2)     (2)

Subtotal

     (122)     (122)     (138)     (138)
Restructuring charges     (2)     (2)     —     —
Non-operating items     (122)     (122)     (136)     (137)
                              
Income before income taxes and minority interests in earnings     190     182     168     163
                              
Income taxes     (80)     (79)     (65)     (64)
Minority interests in earnings     (11)     (10)     (13)     (12)
Net income     99     93     90     87
                              
Cost-income ratio6) in %       60.0       59.9       59.5       59.2

 

1)

Represents fee and commission income less fee and commission expense.

2)

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

3)

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

4)

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

5)

Consists of retention payments for the management and employees of PIMCO and Nicholas Applegate.

6)

Represents operating expenses divided by operating revenues.

 

46

Table of Contents

Notes to the Consolidated Financial Statements

 

Corporate Segment

 

Three months ended March 31,       

2007

            € mn

       

2006

            € mn

Interest and similar income     154     86
Income from financial assets and liabilities designated at fair value through income (net)1)     1     —
Fee and commission income     45     41
Other income     5     13
Income from fully consolidated private equity investments     471     159
Operating revenues     676     299
                
Interest expense, excluding interest expense from external debt2)     (131)     (138)
Investment expenses     (34)     (17)
Acquisition and administrative expenses (net)     (117)     (139)
Fee and commission expenses     (35)     (23)
Expenses from fully consolidated private equity investments     (460)     (162)
Operating expenses     (777)     (479)
                
Operating profit (loss)     (101)     (180)
                
Income from financial assets and liabilities held for trading (net)1)     84     (96)
Realized gains/losses (net)     640     70
Impairments of investments (net)     9     13
Interest expense from external debt2)     (222)     (198)
Non-operating items     511     (211)
                
Income (loss) before income taxes and minority interests in earnings     410     (391)
                
Income taxes     (25)     154
Minority interests in earnings     (4)     (2)
Net income (loss)       381       (239)

 

1)

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

2)

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

 

47

Table of Contents

Allianz Group Interim Report First Quarter of 2007

 

Supplementary Information to the

Consolidated Balance Sheets

 

4    Financial assets carried at fair value through income

 

         

As of

        March 31,

2007

€ mn

       

As of

December 31,

2006

€ mn

Financial assets held for trading              

Debt securities

     76,678     81,881

Equity securities

     38,765     31,266

Derivative financial instruments

     26,153     24,835

Subtotal

     141,596     137,982
Financial assets designated at fair value through income              

Debt securities

     16,107     14,414

Equity securities

     3,828     3,834

Loans to banks and customers

     707     639

Subtotal

     20,642     18,887
Total       162,238       156,869

 

5    Investments

 

         

As of

        March 31,

2007

€ mn

       

As of

December 31,

2006

€ mn

Available-for-sale investments     278,149     277,898
Held-to-maturity investments     4,687     4,748
Funds held by others under reinsurance contracts assumed     1,021     1,033
Investments in associates and joint ventures     5,475     4,900
Real estate held for investment     9,431     9,555
Total       298,763       298,134

Available-for-sale investments

 

       

As of March 31, 2007

       As of December 31, 2006
         

Amortized
cost

€ mn

       

Unrealized
gains

€ mn

       

Unrealized
losses

€ mn

       

Fair

value

€ mn

       

Amortized
cost

€ mn

       

Unrealized
gains

€ mn

       

Unrealized
losses

€ mn

       

Fair

value

€ mn

Equity securities     42,612     25,343     (250)     67,705     43,139     26,795     (159)     69,775
Government debt securities     113,382     2,267     (1,272)     114,377     112,893     2,813     (1,077)     114,629
Corporate debt securities     93,332     1,321     (962)     93,691     90,493     1,542     (860)     91,175
Other debt securities     2,263     145     (32)     2,376     2,122     215     (18)     2,319
Total       251,589       29,076       (2,516)       278,149       248,647       31,365       (2,114)       277,898

6    Loans and advances to banks and customers

 

        As of March 31, 2007        As of December 31, 2006
         

Banks

        € mn

       

Customers

    € mn

       

Total

        € mn

       

Banks

        € mn

       

Customers

€ mn

       

Total

        € mn

Short-term investments and certificates of deposit     8,467     —     8,467     6,775     —     6,775
Reverse repurchase agreements     92,127     62,949     155,076     86,957     52,456     139,413
Collateral paid for securities borrowing transactions     23,670     32,582     56,252     17,612     23,419     41,031
Loans     69,295     127,128     196,423     69,211     129,319     198,530
Other advances     13,106     16,187     29,293     15,225     8,358     23,583
Subtotal     206,665     238,846     445,511     195,780     213,552     409,332
Loan loss allowance     (108)     (957)     (1,065)     (108)     (946)     (1,054)
Total       206,557       237,889       444,446       195,672       212,606       408,278

 

48

Table of Contents

Notes to the Consolidated Financial Statements

 

Loans and advances to customers by type of customer

 

         

As of

        March 31,

2007

€ mn

       

As of
December 31,

2006

€ mn

Corporate customers     171,682     146,750
Private customers     58,935     59,505
Public authorities     8,229     7,297
Subtotal     238,846     213,552
Loan loss allowance     (957)     (946)
Total       237,889       212,606

7    Reinsurance assets

 

         

As of

        March 31,

2007

€ mn

       

As of
December 31,

2006

€ mn

Unearned premiums     1,758     1,317
Reserves for loss and loss adjustment expenses     8,795     9,719
Aggregate policy reserves     6,868     8,223
Other insurance reserves     56     101
Total       17,477       19,360

8    Deferred acquisition costs

 

         

As of

        March 31,

2007

€ mn

       

As of
December 31,

2006

€ mn

Deferred acquisition costs              

Property-Casualty

     4,054     3,692

Life/Health

     13,967     13,619

Asset Management

     52     50

Subtotal

     18,073     17,361
Present value of future profits     1,296     1,227
Deferred sales inducements     557     547
Total       19,926       19,135

 

9    Other assets

 

         

As of
        March 31,

2007

€ mn

       

As of
December 31,
2006

€ mn

Receivables              

Policyholders

     4,442     4,292

Agents

     4,592     3,698

Reinsurers

     2,118     2,832

Other

     7,789     6,283

Less allowance for doubtful accounts

     (336)     (330)

Subtotal

     18,605     16,775
Tax receivables              

Income tax

     2,088     1,995

Other tax

     755     690

Subtotal

     2,843     2,685

Accrued dividends, interest and rent

     5,487     5,658
Prepaid expenses              

Interest and rent

     3,149     2,678

Other prepaid expenses

     247     173

Subtotal

     3,396     2,851
Derivative financial instruments used for hedging that meet the criteria for hedge accounting and firm commitments     479     463
Property and equipment              

Real estate held for use

     4,708     4,758

Equipment

     1,629     1,597

Software

     1,057     1,078

Subtotal

     7,394     7,433
Non-current assets and disposal groups held for sale     18     —
Other assets1)     3,836     3,028
Total       42,058       38,893

 

1)

As of March 31, 2007, includes prepaid benefit costs for defined benefit plans of € 274 mn.

10    Intangible assets

 

         

As of

        March 31,

2007

€ mn

       

As of
December 31,

2006

€ mn

Goodwill     12,486     12,007
Brand names     731     717
Other     208     211
Total       13,425       12,935

Changes in goodwill for the three months ended March 31, 2007, were as follows:

 

                      € mn
Cost as of 1/1/2007     12,231
Accumulated impairments as of 1/1/2007     (224)
Carrying amount as of 1/1/2007     12,007
Additions     515
Foreign currency translation adjustments     (36)
Carrying amount as of 3/31/2007     12,486
Accumulated impairments as of 3/31/2007     224
Cost as of 3/31/2007       12,710

 

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Allianz Group Interim Report First Quarter of 2007

 

Additions include goodwill from

 

  •  

increasing the interest in Russian People’s Insurance Society, Moscow, from 47.4% to 97.2%,

 

  •  

the acquisition of 100.0% participation in United Mercantile Agencies, Inc., Kentucky.

 

11    Financial liabilities carried at fair value through income

 

         

As of

        March 31,

2007

€ mn

       

As of
December 31,

2006

€ mn

Financial liabilities held for trading              

Obligations to deliver securities

     47,812     39,951

Derivative financial instruments

     28,906     27,823

Other trading liabilities

     12,722     10,988

Subtotal

     89,440     78,762
Financial liabilities designated at fair value through income     989     937
Total       90,429       79,699

12    Liabilities to banks and customers

 

        As of March 31, 2007        As of December 31, 2006
         

Banks

        € mn

       

Customers

€ mn

       

Total

        € mn

       

Banks

        € mn

       

Customers

€ mn

       

Total

        € mn

Payable on demand     13,473     59,696     73,169     18,216     68,677     86,893
Savings deposits     —     5,345     5,345     —     5,421     5,421
Term deposits and certificates of deposit     65,361     65,262     130,624     68,429     50,380     118,809
Repurchase agreements     80,778     57,519     138,297     68,189     49,403     117,592
Collateral received from securities lending transactions     22,545     11,165     33,710     19,914     8,703     28,617
Other     8,756     3,109     11,865     876     2,870     3,746
Total       190,913       202,096       393,010       175,624       185,454       361,078

13    Reserves for loss and loss adjustment expenses

 

       

As of

        March 31,

        As of
December 31,
         

2007

€ mn

       

2006

€ mn

Property-Casualty     57,321     58,664
Life/Health     6,877     6,804
Consolidation     2     (4)
Total       64,200       65,464

Changes in the reserves for loss and loss adjustment expenses for the Property-Casualty segment for the three months ended March 31, 2007 and 2006, are as follows:

 

                  2007                            2006          
         

Gross

€ mn

       

Ceded

€ mn

       

Net

€ mn

       

Gross

€ mn

       

Ceded

€ mn

       

Net

€ mn

Reserves for loss and loss adjustment expenses as of 1/1/     58,664     (9,333)     49,331     60,259     (10,604)     49,655
Loss and loss adjustment expenses incurred                                          

Current year

     7,581     (990)     6,591     7,148     (785)     6,363

Prior years

     (407)     199     (208)     (180)     (1)     (181)

Subtotal

     7,174     (791)     6,383     6,968     (786)     6,182
Loss and loss adjustment expenses paid                                          

Current year

     (1,825)     142     (1,683)     (1,515)     34     (1,481)

Prior years

     (5,879)     771     (5,108)     (5,745)     962     (4,783)

Subtotal

     (7,704)     913     (6,791)     (7,260)     996     (6,264)
Foreign currency translation adjustments and other     (920)     782     (138)     (652)     258     (394)
Changes in the consolidated subsidiaries of the Allianz Group     107     (9)     98     —     —     —
Reserves for loss and loss adjustment expenses as of 3/31/       57,321       (8,438)       48,883       59,315       (10,136)       49,179

 

50

Table of Contents

Notes to the Consolidated Financial Statements

 

14    Reserves for insurance and investment contracts

 

         

As of

        March 31,

2007

€ mn

       

As of
December 31,
2006

€ mn

Aggregate policy reserves     257,949     256,333
Reserves for premium refunds     30,668     30,689
Other insurance reserves     773     675
Total       289,390       287,697

15    Other liabilities

 

         

As of

        March 31,

2007

€ mn

       

As of
December 31,
2006

€ mn

Payables              

Policyholders

     4,830     5,322

Reinsurance

     2,053     1,868

Agents

     1,583     1,494

Subtotal

     8,466     8,684
Payables for social security     466     219
Tax payables              

Income tax

     2,321     2,076

Other

     1,251     968

Subtotal

     3,572     3,044
Accrued interest and rent     572     793
Unearned income              

Interest and rent

     2,742     2,645

Other

     284     279

Subtotal

     3,026     2,924
Provisions              

Pensions and similar obligations

     4,130     4,120

Employee related

     2,561     3,120

Share-based compensation

     1,700     1,898

Restructuring plans

     774     887

Loan commitments

     240     261

Other provisions

     1,833     1,943

Subtotal

     11,238     12,229
Deposits retained for reinsurance ceded     4,465     5,716
Derivative financial instruments used for hedging purposes that meet the criteria for hedge accounting and firm commitments     803     907
Financial liabilities for puttable equity instruments     4,098     3,750
Other liabilities     13,576     11,498
Total       50,282       49,764

 

16    Certificated liabilities

 

         

As of

        March 31,

2007

€ mn

       

As of
December 31,
2006

€ mn

Allianz SE1)              

Senior bonds

     6,197     6,195

Exchangeable bonds

     450     1,262

Money market securities

     1,986     870

Subtotal

     8,633     8,327
Banking subsidiaries              

Senior bonds

     20,031     23,337

Money market securities

     23,861     22,655

Subtotal

     43,892     45,992
All other subsidiaries              

Certificated liabilities

     4     4

Money market securities

     600     599

Subtotal

     604     603
Total       53,129       54,922

 

1)

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

17    Participation certificates and subordinated liabilities

 

         

As of

        March 31,

2007

€ mn

       

As of
December 31,
2006

€ mn

Allianz SE1)              

Subordinated bonds

     6,881     6,883

Participation certificates

     85     85

Subtotal

     6,966     6,968
Banking subsidiaries              

Subordinated liabilities

     3,257     3,669

Hybrid equity

     2,505     2,513

Participation certificates

     2,249     2,262

Subtotal

     8,011     8,444
All other subsidiaries              

Subordinated liabilities

     905     905

Hybrid equity

     45     45

Subtotal

     950     950
Total       15,927       16,362

 

1)

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


 

51

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Allianz Group Interim Report First Quarter of 2007

 

18    Equity

 

         

As of

        March 31,

2007

€ mn

       

As of
December 31,
2006

€ mn

Shareholders’ equity              

Issued capital

     1,106     1,106

Capital reserve

     24,292     24,292

Revenue reserves

     17,220     14,070

Treasury shares

     (93)     (441)

Foreign currency translation adjustments

     (2,351)     (2,210)

Unrealized gains and losses (net)1)

     12,109     13,664

Subtotal

     52,283     50,481
Minority interests     6,639     6,409
Total       58,922       56,890

 

1)

As of March 31, 2007 includes € 145 mn related to cash flow hedges (2006: € 140 mn).


 

52

Table of Contents

Notes to the Consolidated Financial Statements

 

Supplementary Information to the Consolidated Income Statements

19    Premiums earned (net)

 

Three months ended March 31,

      

Property-

Casualty

       

Life/Health

       

Consolidation

       

Total

      

€ mn

       

€ mn

       

€ mn

       

€ mn

2007                            
Premiums written                            

Direct

     13,464     5,311     —     18,775

Assumed

     647     84     (3)     728

Subtotal

     14,111     5,395     (3)     19,503

Ceded

     (1,586)     (178)     3     (1,761)

Net

     12,525     5,217     —     17,742
Change in unearned premiums                            

Direct

     (3,498)     (38)     —     (3,536)

Assumed

     (39)     4     —     (35)

Subtotal

     (3,537)     (34)     —     (3,571)

Ceded

     370     2     —     372

Net

     (3,167)     (32)     —     (3,199)
Premiums earned                            

Direct

     9,966     5,273     —     15,239

Assumed

     608     88     (3)     693

Subtotal

     10,574     5,361     (3)     15,932

Ceded

     (1,216)     (176)     3     (1,389)

Net

       9,358       5,185       —       14,543
2006                            
Premiums written                            

Direct

     13,471     5,272     —     18,743

Assumed

     678     72     (5)     745

Subtotal

     14,149     5,344     (5)     19,488

Ceded

     (1,712)     (190)     5     (1,897)

Net

     12,437     5,154     —     17,591
Change in unearned premiums                            

Direct

     (3,532)     (77)     —     (3,609)

Assumed

     (63)     2     —     (61)

Subtotal

     (3,595)     (75)     —     (3,670)

Ceded

     499     —     —     499

Net

     (3,096)     (75)     —     (3,171)
Premiums earned                            

Direct

     9,939     5,195     —     15,134

Assumed

     615     74     (5)     684

Subtotal

     10,554     5,269     (5)     15,818

Ceded

     (1,213)     (190)     5     (1,398)

Net

       9,341       5,079       —       14,420

 

53

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Allianz Group Interim Report First Quarter of 2007

 

20    Interest and similar income

 

Three months ended March 31,       

2007

        € mn

       

2006

        € mn

Interest from held-to-maturity

investments

        56     60

Dividends from available-for-sale

investments

        307     273

Interest from available-for-sale

investments

        2,368     2,217

Share of earnings from investments

in associates and joint ventures

        259     74

Rent from real estate held

for investment

        209     219
Interest from loans to banks
and customers		        2,998     2,807
Other        69     33
Total       6,266       5,683

 

 

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

 

Three months ended March 31,

       Property-
Casualty		       

Life/Health

       

Banking

        Asset
Management		       

Corporate

       

Consolidation

       

Group

      

            € mn

       

            € mn

       

            € mn

       

€ mn

       

            € mn

       

            € mn

       

            € mn

2007                                                 
Income (expense) from financial assets and liabilities held for trading (net)     (44)     (414)     351     (1)     82     4     (22)
Income from financial assets designated at fair value through income     30     139     32     22     3     —     226
Expense from financial liabilities designated at fair value through income     2     8     (42)     —     —     —     (32)
Income (expense) from financial liabilities for puttable equity instruments (net)     —     (43)     —     (14)     —     —     (57)
Total       (12)       (310)       341       7       85       4       115
2006                                                 
Income (expense) from financial assets and liabilities held for trading (net)     4     (18)     487     3     (96)     21     401
Income from financial assets designated at fair value through income     44     154     21     36     —     —     255
Expense from financial liabilities designated at fair value through income     (1)     —     (18)     —     —     —     (19)
Income (expense) from financial liabilities for puttable equity instruments (net)     (7)     (105)     —     (25)     —     —     (137)
Total       40       31       490       14       (96)       21       500

 

54

Table of Contents

Notes to the Consolidated Financial Statements

 

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

Life/Health Segment

Income from financial assets and liabilities held for trading for the three months ended March 31, 2007 includes expenses of € 417 mn (2006: € 17 mn) from derivative financial instruments in the Life/Health insurance segment. This includes expenses from derivative financial instruments related to equity indexed annuity contracts and guaranteed benefits under unit-linked contracts of € 140 mn (2006: income: € 39 mn) and expenses from other derivative financial instruments of € 277 mn (2006: € 56 mn).

Banking Segment

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

 

Three months ended March 31,       

        2007

€ mn

       

        2006

€ mn

Trading in interest products     240     242
Trading in equity products     145     136
Foreign exchange/precious metals trading     82     110
Other trading activities     (116)     (1)
Total       351       487

Corporate Segment

Income from financial assets and liabilities held for trading for the three months ended March 31, 2007, includes income of € 50 mn (2006: expenses: € 71 mn) from derivative financial instruments used by the Corporate segment for which hedge accounting is not applied. This includes expenses from derivative financial instruments embedded in exchangeable bonds of € 97 mn (2006: € 335 mn), income from derivative financial instruments which economically hedge the exchangeable bonds, however which do not qualify for hedge accounting, of € 164 mn (2006: € 232 mn), and expenses from other derivative financial instruments of € 17 mn (2006: income: € 32 mn).

 

22    Realized gains/losses (net)

 

Three months ended March 31,       

2007

€ mn

       

2006

€ mn

Realized gains              
Available-for-sale investments              

Equity securities

     3,158     1,518

Debt securities

     139     224

Subtotal

     3,297     1,742

Investments in associates

and joint ventures1)

     7     141
Loans to banks and customers     9     27
Real estate held for investment     109     174
Subtotal     3,422     2,084
Realized losses              
Available-for-sale investments              

Equity securities

     (54)     (72)

Debt securities

     (136)     (90)

Subtotal

     (190)     (162)

Investments in associates

and joint ventures2)

     (3)     (3)
Loans to banks and customers     (13)     (6)
Real estate held for investment     (7)     (18)
Subtotal     (213)     (189)
Total       3,209       1,895

 

1)

During the three months ended March 31, 2007, includes realized gains from the disposal of subsidiaries of € 1 mn (2006: € 45 mn).

2)

During the three months ended March 31, 2007, includes realized losses from the disposal of subsidiaries of € – mn (2006: € – mn).


 

55

Table of Contents

Allianz Group Interim Report First Quarter of 2007

 

23    Fee and commission income

 

Three months ended March 31,       2007        2006
         

Segment

            € mn

       

Consolidation

€ mn

       

Group

            € mn

       

Segment

            € mn

       

Consolidation

€ mn

       

Group

            € mn

Property-Casualty                                          

Fees from credit and assistance

business

     173     —     173     168     —     168
Service agreements     99     (5)     94     81     (10)     71
Investment advisory     —     —     —     3     —     3
Subtotal     272     (5)     267     252     (10)     242
Life/Health                                          
Service agreements     54     (11)     43     37     (21)     16
Investment advisory     114     (8)     106     87     —     87
Other     3     (3)     —     5     (3)     2
Subtotal     171     (22)     149     129     (24)     105
Banking                                          
Securities business     465     (49)     416     465     (47)     418
Investment advisory     154     (38)     116     152     (40)     112
Payment transactions     91     —     91     91     —     91
Mergers and acquisitions advisory     41     —     41     65     —     65
Underwriting business     23     —     23     35     —     35
Other     204     (9)     195     184     (26)     158
Subtotal     978     (96)     882     992     (113)     879
Asset Management                                          
Management fees     866     (30)     836     841     (21)     820
Loading and exit fees     82     —     82     93     —     93
Performance fees     16     —     16     16     —     16
Other     109     (2)     107     81     (3)     78
Subtotal     1,073     (32)     1,041     1,031     (24)     1,007
Corporate                                          
Service agreements     45     (28)     17     41     (22)     19
Subtotal     45     (28)     17     41     (22)     19
Total       2,539       (183)       2,356       2,445       (193)       2,252

 

24    Other income

 

Three months ended March 31,

       

2007

€ mn

       

2006

€ mn

Income from real estate held for use              

Realized gains from disposals of real estate held for use

     91     35

Other income from real estate held for use

     —     4

Subtotal

     91     39
Income from non-current assets and disposal groups held for sale     2     —
Total        93        39

 

25    Income from fully consolidated private equity investments

 

Three months ended

March 31,

       

MAN

Roland
Druckma-
schinen AG

€ mn

       

Four

Seasons

Health

    Care Ltd.
€ mn

       

Total



            € mn

2007                     
Sales and service revenues     456     —     456
Other operating revenues     12     —     12
Interest income     3     —     3
Total       471       —       471
2006                     
Sales and service revenues     —     159     159
Other operating revenues     —     —     —
Interest income     —     —     —
Total        —        159        159

 

56

Table of Contents

Notes to the Consolidated Financial Statements

 

26    Claims and insurance benefits incurred (net)

 

Three months ended March 31,

      

Property-

Casualty

       

Life/Health

       

Consolidation

       

Total

      

€ mn

       

€ mn

       

€ mn

       

€ mn

2007                            
Gross                            

Claims and insurance benefits paid

     (7,704)     (4,888)     6     (12,586)

Change in loss and loss adjustment expenses

     530     10     (1)     539

Subtotal

     (7,174)     (4,878)     5     (12,047)
Ceded                            

Claims and insurance benefits paid

     912     202     (6)     1,108

Change in loss and loss adjustment expenses

     (121)     (26)     1     (146)

Subtotal

     791     176     (5)     962
Net                            

Claims and insurance benefits paid

     (6,792)     (4,686)     —     (11,478)

Change in loss and loss adjustment expenses

     409     (16)     —     393

Total

       (6,383)       (4,702)       —       (11,085)
2006                            
Gross                            

Claims and insurance benefits paid

     (7,260)     (4,956)     4     (12,212)

Change in loss and loss adjustment expenses

     292     86     (1)     377

Subtotal

     (6,968)     (4,870)     3     (11,835)
Ceded                            

Claims and insurance benefits paid

     996     176     (4)     1,168

Change in loss and loss adjustment expenses

     (210)     1     1     (208)

Subtotal

     786     177     (3)     960
Net                            

Claims and insurance benefits paid

     (6,264)     (4,780)     —     (11,044)

Change in loss and loss adjustment expenses

     82     87     —     169

Total

       (6,182)       (4,693)       —       (10,875)

 

57

Table of Contents

Allianz Group Interim Report First Quarter of 2007

 

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

 

Three months ended March 31,

       Property-
Casualty		       

Life/Health

 

       

Consolidation

 

       

Total

 

       € mn        € mn        € mn        € mn
2007                            
Gross                            

Aggregate policy reserves

     (62)     (504)     —     (566)

Other insurance reserves

     —     (94)     —     (94)

Expenses for premium refunds

     (21)     (2,046)     (31)     (2,098)

Subtotal

     (83)     (2,644)     (31)     (2,758)
Ceded                            

Aggregate policy reserves

     (1)     19     —     18

Other insurance reserves

     1     (4)     —     (3)

Expenses for premium refunds

     2     5     —     7

Subtotal

     2     20     —     22
Net                            

Aggregate policy reserves

     (63)     (485)     —     (548)

Other insurance reserves

     1     (98)     —     (97)

Expenses for premium refunds

     (19)     (2,041)     (31)     (2,091)

Total

       (81)       (2,624)       (31)       (2,736)
2006                            
Gross                            

Aggregate policy reserves

     (59)     (583)     —     (642)

Other insurance reserves

     8     (17)     —     (9)

Expenses for premium refunds

     (28)     (2,101)     8     (2,121)

Subtotal

     (79)     (2,701)     8     (2,772)
Ceded                            

Aggregate policy reserves

     6     43     —     49

Other insurance reserves

     (1)     5     —     4

Expenses for premium refunds

     2     5     —     7

Subtotal

     7     53     —     60
Net                            

Aggregate policy reserves

     (53)     (540)     —     (593)

Other insurance reserves

     7     (12)     —     (5)

Expenses for premium refunds

     (26)     (2,096)     8     (2,114)

Total

       (72)       (2,648)       8       (2,712)

 

28    Interest expense

 

Three months ended March 31,       

        2007

€ mn

       

        2006

€ mn

Liabilities to banks and customers     (833)     (746)
Deposits retained on reinsurance ceded     (20)     (33)
Certificated liabilities     (380)     (413)
Participating certificates and subordinated liabilities     (178)     (177)
Other     (187)     (196)
Total       (1,598)       (1,565)

 

29    Loan loss provisions

 

Three months ended March 31,       

        2007

€ mn

       

        2006

€ mn

Additions to allowances including direct impairments     (106)     (120)
Amounts released     51     100
Recoveries on loans previously impaired     57     52
Total        2        32

 

58

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Notes to the Consolidated Financial Statements

 

30    Impairments of investments (net)

 

Three months ended March 31,       

        2007

€ mn

       

        2006

€ mn

Impairments              
Available-for-sale investments              

Equity securities

     (81)     (47)

Debt securities

     —     (2)

Subtotal

     (81)     (49)
Investments in associates and joint ventures     —     (6)
Real estate held for investment     (2)     (1)
Subtotal     (83)     (56)
Reversals of impairments              
Available-for-sale investments              

Debt securities

     13     1
Real estate held for investment     3     —
Subtotal     16     1
Total        (67)        (55)

 

31    Investment expenses

 

Three months ended March 31,       

        2007

€ mn

       

        2006

€ mn

Investment management expenses     (103)     (83)
Depreciation from real estate held for investment     (54)     (58)
Other expenses from real estate held for investment     (72)     (53)
Foreign currency gains and losses (net)              

Foreign currency gains

     127     142

Foreign currency losses

     (159)     (131)

Subtotal

     (32)     11
Total        (261)        (183)

 

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Allianz Group Interim Report First Quarter of 2007

 

32    Acquisition and administrative expenses (net)

 

Three months ended March 31,       2007        2006
         

      Segment

€ mn

       

Consolidation

€ mn

       

            Group

€ mn

       

        Segment

€ mn

       

Consolidation

€ mn

       

            Group

€ mn

Property-Casualty                                          
Acquisition costs                                          

Incurred

     (2,070)     —     (2,070)     (1,901)     —     (1,901)

Commissions and profit received on reinsurance business ceded

     170     —     170     168     —     168

Deferrals of acquisition costs

     1,587     —     1,587     1,178     —     1,178

Amortization of deferred acquisition costs

     (1,267)     —     (1,267)     (952)     —     (952)

Subtotal

     (1,580)     —     (1,580)     (1,507)     —     (1,507)
Administrative expenses     (1,095)     16     (1,079)     (1,156)     51     (1,105)
Subtotal     (2,675)     16     (2,659)     (2,663)     51     (2,612)
Life/Health                                          
Acquisition costs                                          

Incurred

     (907)     1     (906)     (980)     —     (980)

Commissions and profit received on reinsurance business ceded

     48     —     48     26     —     26

Deferrals of acquisition costs

     627     —     627     830     —     830

Amortization of deferred acquisition costs

     (182)     —     (182)     (529)     —     (529)

Subtotal

     (414)     1     (413)     (653)     —     (653)
Administrative expenses     (460)     (10)     (470)     (372)     12     (360)
Subtotal     (874)     (9)     (883)     (1,025)     12     (1,013)
Banking                                          
Personnel expenses     (907)     —     (907)     (910)     —     (910)
Non-personnel expenses     (503)     9     (494)     (518)     10     (508)
Subtotal     (1,410)     9     (1,401)     (1,428)     10     (1,418)
Asset Management                                          
Personnel expenses     (425)     —     (425)     (427)     —     (427)
Non-personnel expenses     (165)     6     (159)     (158)     —     (158)
Subtotal     (590)     6     (584)     (585)     —     (585)
Corporate                                          
Administrative expenses     (117)     6     (111)     (139)     (42)     (181)
Subtotal     (117)     6     (111)     (139)     (42)     (181)
Total       (5,666)       28       (5,638)       (5,840)       31       (5,809)

 

60

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Notes to the Consolidated Financial Statements

 

33    Fee and commission expenses

 

Three months ended March 31,       2007        2006
         

        Segment

€ mn

       

Consolidation

€ mn

       

            Group

€ mn

       

        Segment

€ mn

       

Consolidation

€ mn

       

            Group

€ mn

Property-Casualty                                          
Fees from credit and assistance business     (118)     —     (118)     (124)     —     (124)
Service agreements     (79)     4     (75)     (44)     4     (40)
Investment advisory     —     —     —     (2)     —     (2)
Subtotal     (197)     4     (193)     (170)     4     (166)
Life/Health                                          
Service agreements     (21)     8     (13)     (25)     6     (19)
Investment advisory     (41)     1     (40)     (25)     —     (25)
Subtotal     (62)     9     (53)     (50)     6     (44)
Banking                                          
Securities business     (40)     —     (40)     (33)     —     (33)
Investment advisory     (46)     2     (44)     (50)     2     (48)
Payment transactions     (5)     —     (5)     (5)     —     (5)
Mergers and acquisitions advisory     (3)     —     (3)     (9)     —     (9)
Underwriting business     —     —     —     (1)     —     (1)
Other     (52)     3     (49)     (62)     17     (45)
Subtotal     (146)     5     (141)     (160)     19     (141)
Asset Management                                          
Commissions     (235)     112     (123)     (242)     107     (135)
Other     (92)     1     (91)     (72)     1     (71)
Subtotal     (327)     113     (214)     (314)     108     (206)
Corporate                                          
Service agreements     (35)     2     (33)     (23)     2     (21)
Subtotal     (35)     2     (33)     (23)     2     (21)
Total       (767)       133       (634)       (717)       139       (578)

 

 

61

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Allianz Group Interim Report First Quarter of 2007

 

34    Other expenses

 

Three months ended March 31,       

2007

€ mn

       

2006

€ mn

Expenses from real estate held for use              

Depreciation of real estate held for use

     —     (1)
Other     13     —
Total       13       (1)

 

35    Expenses from fully consolidated private equity investments

 

Three months ended
March 31,

       

MAN

Roland
Druckma-
schinen AG

€ mn

       

Four

Seasons

Health

Care Ltd.

€ mn

       

Total

€ mn

2007                     
Cost of goods sold     (352)     —     (352)
Commissions     (39)     —     (39)
General and administrative expenses     (62)     —     (62)
Interest expense     (7)     —     (7)
Total       (460)       —       (460)
2006                     
Cost of goods sold     —     —     —
Commissions     —     —     —
General and administrative expenses     —     (128)     (128)
Interest expense     —     (34)     (34)
Total       —       (162)       (162)

 

36    Income taxes

 

Three months ended March 31,       

2007

€ mn

       

2006

€ mn

Current income tax expense     (686)     (658)
Deferred income tax expense     (281)     (241)
Total       (967)       (899)

 

37    Earnings per share

Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the effect of dilutive securities. Dilutive securities include participation certificates issued by Allianz SE which can potentially be converted to Allianz shares, warrants issued by Allianz SE, share-based compensation plans, and derivatives on own shares.

 

Three months ended March 31,       

2007

€ mn

       

2006

€ mn

Numerator for basic earnings per share (net income)     3,240     1,779
Effect of dilutive securities     (7)     —
Numerator for diluted earnings per share (net income after assumed conversion)     3,233     1,779
Denominator for basic earnings per share (weighted-average shares)     431,473,954     405,332,211
Dilutive securities:              

Participation certificates

     1,469,443     1,469,443

Warrants

     964,831     674,870

Share-based compensation plans

     1,088,515     86,941

Derivatives on own shares

     5,639,750     3,987,500
Subtotal     9,162,539     6,218,754
Denominator for diluted earnings per share (weighted-average shares after assumed conversion)     440,636,493     411,550,965
Basic earnings per share     7.51     4.39
Diluted earnings per share       7.34       4.32

For the three months ended March 31, 2007, the weighted average number of shares excludes 676,046 (2006: 707,789) treasury shares.


 

62

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Notes to the Consolidated Financial Statements

 

Other Information

38    Supplemental information on the Banking segment

Net interest income from the Banking segment

 

Three months ended
March 31,		       

        Segment

€ mn

       

Consolidation

€ mn

       

            Group

€ mn

2007                     
Interest and similar income     2,209     (11)     2,198
Interest expense     (1,281)     31     (1,250)
Net interest income       928       20       948
2006                     
Interest and similar income     1,880     (23)     1,857
Interest expense     (1,279)     19     (1,260)
Net interest income       601       (4)       597

Net fee and commission income from the Banking segment

 

Three months ended
March 31,		       

        Segment

€ mn

       

Consolidation

€ mn

       

            Group

€ mn

2007                     
Fee and commission income     978     (96)     882
Fee and commission expense     (146)     5     (141)
Net fee and commission income       832       (91)       741
2006                     
Fee and commission income     992     (113)     879
Fee and commission expense     (160)     19     (141)
Net fee and commission income       832       (94)       738

 

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

 

Three months ended March 31,       

            2007

€ mn

       

            2006

€ mn

Securities business     425     432

Investment advisory

     108     102
Payment transactions     86     86
Mergers and acquisitions advisory     38     56
Underwriting business     23     34
Other     152     122
Total       832       832

 

39    Supplemental information on the consolidated statements of cash flows

 

Three months ended March 31,       

2007

€ mn

       

2006

€ mn

Income taxes (paid)/received     (533)     78
Dividends received     238     235
Interest received     5,725     5,445
Interest paid     (1,829)     (1,659)
Significant non-cash transactions:              

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

              

Available-for-sale investments

     (812)     (552)

Certificated liabilities

     (812)     (552)

Novation of quota share reinsurance agreement:

              

Reinsurance assets

     (1,213)     (1,134)

Deferred acquisition costs

     70     73

Payables from reinsurance contracts

       (1,143)       (1,061)

On February 21, 2007, the Allianz Group increased its investment in Russians People’s Insurance Society “Rosno”, Moscow from 47.4% to 97.2% at a purchase price of € 571 mn. The impact of the acquisition, net of cash acquired, on the consolidated statement of cash flows for the three months ended March 31, 2007 was:

 

As of March 31,

       

2007

€ mn

Intangible assets     (525)
Other assets     (798)
Other liabilities     713
Deferred tax liabilities     15
Minority interests     10
Less: previous investment in Rosno     78
Acquisition of subsidiary, net of cash acquired       (507)

 

63

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Allianz Group Interim Report First Quarter of 2007

 

40    Other information

Number of employees

The Allianz Group had a total of 171,879 (2006: 166,505) employees as of March 31, 2007. 75,198 (2006: 76,731) of these were employed in Germany and 96,681 (2006: 89,774) in other countries. The number of employees undergoing training decreased by 50 to 3,905.

41    Subsequent events

Allianz Group increases stake in Allianz Lebensversicherungs-AG to 92.58%

On February 28, 2007 Allianz AZL Vermögensverwaltung GmbH & Co. KG, a subsidiary of Allianz Deutschland AG (“ADAG“) announced a tender offer to the shareholders of Allianz Lebensversicherungs-AG (“Allianz Leben“). The deadline for acceptance of the offer elapsed on March 29, 2007. The Allianz Group increased its ownership interest from the 91.03% interest already indirectly held by ADAG and Allianz SE, by 1.55% to a total of 92.58% of the share

capital. Allianz Group’s interest therefore stays below the 95% level required for a squeeze-out of the remaining minority shareholders pursuant to the German Stock Corporation Act.

Minority buyout in Assurances Générales de France (“AGF“)

On April 27, 2007 the French stock market authority Autorité des Marchés Financiers (“AMF“) announced, that following the closing of the tender offer for the outstanding shares of AGF, the Allianz SE (directly and indirectly through its subsidiary AZ Holding France SAS) will hold 92.18% of AGF share capital and voting rights. Taking into account treasury shares held by AGF representing 3.21% of the share capital, minority shareholders will hold 4.61% and therefore less than 5% of the AGF share capital and voting rights following the tender offer. As stated already in the tender offer document, the Allianz Group intends to launch a squeeze-out procedure pursuant to the conditions set forth in the General Regulations of the AMF.


 

Munich, May 7, 2007

Allianz SE

The Board of Management

 

LOGO

 

64

Table of Contents

 

 

 

 

 

 

 

Allianz SE

Koeniginstrasse 28

80802 Muenchen

Germany

Telephone +49 89 38 00 0

Telefax +49 89 34 99 41

www.allianz.com

Table of Contents

SIGNATURE

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

Date: May 9, 2007

 

 

ALLIANZ SE

By

  

/s/ Harry Langley-Poole

 

  Name:    Harry Langley-Poole
  Title:      Head of Group Management Reporting