Allianz SE · XETR:ALV
Allianz — Investor Day (July 2007)
14 slides from Allianz's investor day presentation, Jul 12, 2007
Slide 1: Exit value based financial statements: A value added for the capital markets?
Helmut Perlet, CFO Allianz Group Exit value based financial statements: A value added for the capital markets? (Review of the discussion paper of the IASB on IFRS 4 Phase II) Munich, July 12th, 2007
Slide 2: Agenda
Agenda Key objectives of the CFO Forum We agree With the conceptual framework With the three building blocks of liabilities valuation Issues No economic view on cash flows The margin split Upfront profit recognition caused by market average exit value Artificial volatility Preliminary as
Slide 3: Key objectives of the CFO Forum
IFRS 4 Phase II Key objectives of the CFO Forum What we are seeking in our financial …and how it will benefit users and statements… other stakeholders Better reflection of insurance business model Under- Compara- standability bility Transparency and comparability of insurance contract accounting
Slide 4: We agree: With the conceptual framework
IFRS 4 Phase II We agree: With the conceptual framework Economic approach Shareholders Eliminates accounting missmatch equity Covers options and guarantees but: Market value of There are still conceptual flaws assets Market value of Some objectives not yet adequately liabilities addressed
Slide 5: We agree: With the three building blocks of liabilities valuation
IFRS 4 Phase II We agree: With the three building blocks of liabilities valuation Exit value Discount with market Margin consistent rate Best estimate liabilities BEL BEL (BEL) (discounted) (discounted) © Allianz SE 2007 But there are major issues 4
Slide 6: 1: No economic view on cash flows
IFRS 4 Phase II Issue 1: No economic view on cash flows We agree with the basic idea of an unbiased probability weighted best estimate of cash flows as the basis We agree with a single model for Life and General insurance Values options and guarantees are fully reflected Unbiased best However,
Slide 7: 2: Margin split
IFRS 4 Phase II Issue 2: Margin split “Day 1” profit Concept not well defined Margin Service margin Split based on “market Present value of premiums Risk margin average” assumptions “Day 1” profits according to The IASB view IASB are rare exceptions Best estimate liabilities The “conventional”
Slide 8: 3: Upfront gain recognition caused by market average exit value
IFRS 4 Phase II Issue 3: Upfront gain recognition caused by market average exit value Scenario 2 IASB view “base case” Scenario 1 “Day 1” profit “Day 1” loss Service margin Present value of premiums Risk margin Present value of premiums IASB liabilities IASB liabilities Present Best value of estimat
Slide 9: 4: Artificial volatility - Example 1: Expenses
IFRS 4 Phase II Issue 4: Artificial volatility - Example 1: Expenses Current bases Discussion paper (DP) proposals Under current bases actual entity The DP will boost profits recognized expense bases are considered in at inception for entities less efficient the liabilities valuation so profit at th
Slide 10: 4: Artificial volatility - Example 2: Change in assumptions
IFRS 4 Phase II Issue 4: Artificial volatility - Example 2: Change in assumptions 22 20 Service margin 22 20 Risk margin Change in P&L impact: Best assumptions 160 estimate 176 Loss of 20 liabilities +16 “Day 1” “Day X” © Allianz SE 2007 valuation valuation Recognition of losses even if the contract
Slide 11: Our preliminary assessments
IFRS 4 Phase II Our preliminary assessments Status 1 Level playing field - improve transparency - allow cross sector comparability 2 Reflect business model of insurance - the way we manage risk - eliminate accounting missmatch - no upfront gain recognition 3 Allow for convergence 4 © Allianz SE 2007
Slide 12: The way forward
IFRS 4 Phase II The way forward Option 1 Option 2 Difference between Profit margin Equity (OCI) option 1 and 2 rather Risk margin Risk margin philosophical No upfront gain recognition Accounting liabilities Accounting liabilities Present value Profit recognition in line Best of premiums Best w
Slide 13: Does the IASB discussion paper meet your expectations and needs
IFRS 4 Phase II Does the IASB discussion paper meet your expectations and needs as one of the most important addressee of financial statements Ö We want you to become an active part of the discussion © Allianz SE 2007 12
Slide 14: Disclaimer
IFRS 4 Phase II Disclaimer No offer These materials do not constitute an offer to sell, or the solicitation of an offer to buy, any securities in any jurisdiction, including the United States. Cautionary Note Regarding Forward-Looking Statements The statements contained herein may include statements