Allianz SE · XETR:ALV
Allianz — Analysts' Conference March 2003
132 slides from Allianz's conference presentation, March 2003
Slide 1: Trimming the ship
Trimming the ship Analysts’ Conference March 2003 © Allianz Business Information and Presentations (BIP)
Slide 2: Agenda
Agenda A. Trimming the ship Michael Diekmann A 1 B. Group financial results 2002 Helmut Perlet B 1 C. Securing our capital base Paul Achleitner C 1 D. Allianz Leben: The safe side of life Gerhard Rupprecht D 1 E. Allianz Life: Promising growth engine Mark Zesbaugh E 1 F. Institutional Restructuring
Slide 3: A. Trimming the ship
Michael Diekmann - Board member Allianz AG A. Trimming the ship Analysts’ Conference March 2003
Slide 4: Taking stock: A world-class franchise
A. Trimming the ship Taking stock: A world-class franchise P/C Leading insurer with core strengths in Germany, Italy, France, Spain and CEE Leading position in private and corporate pension business L/H in Germany and strong positions in Italy and the U.S. Asset Top 5 global asset manager with outst
Slide 5: Our strategy is sound ...
A. Trimming the ship Our strategy is sound ... Our strategic priorities 1. Optimizing EVA 2. Strengthening P/C 3. Growing long-term savings 4. Broadening distribution 5. Building on investment and capital markets expertise A 2
Slide 6: ... but implementation needs improvement
A. Trimming the ship ... but implementation needs improvement What went wrong? Disappointing share price performance* 300 1. Bull market investment 250 returns weakened our 200 150 operating discipline 100 50 2. Excess capital allowed 0 2 2 2 2 2 2 2 2 2 2 3 3 3 development of excessively .0 .0 .0 .
Slide 7: Our challenges
A. Trimming the ship Our challenges Issues to address My personal emphasis 1. Operational performance in selected insurance areas like AGF or AGR § Operational discipline 2. Bank profitability and realization of synergies § Capital and portfolio management 3. Life profitability and risks § Reduction
Slide 8: Operational discipline: P/C
A. Trimming the ship Operational discipline: P/C P/C net premiums earned 2002 Company Adjusted combined ratio* (in %) EUR 36.5bn 2001 2002 2003e Weak AGR 136.0 126.3 < 100.0 2% FFIC** 112.7 99.2 < 97.0 Mediocre 23% AGF 112.3 110.9 103.0 Strong Rest of 100.4 98.5 < 98.0 75% Group Group 104.4 101.7 <
Slide 9: Operational discipline: FFIC
A. Trimming the ship Operational discipline: FFIC Status Headcount Accident year Equity ratio claims ratio § New management team in place -32.5% -16.0%-p -25.0%-p § Exit of underperforming businesses – Surety – National accounts 8,448 92.8% – Diversified risk 80.1% 7,093 76.8% – Medical malpractice
Slide 10: Operational discipline: Dresdner
A. Trimming the ship Operational discipline: Dresdner Status Headcount Admin. expenses Risk-weighted (FTE*) (EUR m) assets (EUR bn) § New management team in place -13.2% -12.3% -24.8% § Turnaround program up and running – Divisionalization – Fixing of business models 45,793 189.8 8,039 – IRU 39,754
Slide 11: Operational discipline: Allianz Leben
A. Trimming the ship Operational discipline: Allianz Leben* Status Policyholders’ Statutory Shareholders’ dividend expense ratio participation rate § Reduction of policyholders’ dividend 2.2%-p -0.8%-p 4.2%-p § Improved statutory expense ratio § Diversification into unit- 8.8% linked business 7.9% 7
Slide 12: Operational discipline: ADAM
A. Trimming the ship Operational discipline: ADAM* Status Net inflow** Cost-income Operating (EUR bn) ratio result (EUR m) § Well-diversified business model ... 126% -6.2%-p 58% § ... made ADAM one of the few global asset managers with significant positive net inflows (EUR 43bn) 495 84.7% § Merger o
Slide 13: Capital and portfolio management
A. Trimming the ship Capital and portfolio management § Sale of equities and implementation of hedges Reduction of to reduce equity gearing and volatility equity exposure § Since beginning of 2003, implementation of about EUR 10bn* and volatility in hedges § New agreement with Munich Re § Allocate c
Slide 14: People management
A. Trimming the ship People management Purpose of the organization is success Strong culture High loyalty and commitment Rich potential pipeline Sophisticated training concept Consistent performance management “Walk the talk” A 11
Slide 15: Today's agenda: All challenges will be addressed
A. Trimming the ship Today’s agenda: All challenges will be addressed Operational performance in selected 1 Helmut Perlet insurance areas like AGF or AGR Helmut Perlet 2 Bank profitability and realization of synergies Jan Kvarnström Gerhard Rupprecht 3 Perception of life profitability and risks Mark
Slide 16: Taking stock: A world-class franchise
A. Trimming the ship Taking stock: A world-class franchise P/C Leading insurer with core strengths in Germany, Italy, France, Spain and CEE Leading position in private and corporate pension business L/H in Germany and strong positions in Italy and the U.S. Asset Top 5 global asset manager with outst
Slide 17: What you can expect from us
A. Trimming the ship What you can expect from us Strong core business § Extremely strong franchise § Concentrate capital in our most profitable segments Focus on operational discipline § Improve the strong § Turnaround the weak Well managed capital base § Strong capital relative to peers § Reduced g
Slide 18: B. Group financial results 2002
Helmut Perlet - Board member Allianz AG B. Group financial results 2002 Analysts’ Conference March 2003
Slide 19: Difficult economic environment and exceptional burdens put heavy strains on result
B. Group financial results 2002 Difficult economic environment and exceptional burdens put heavy strains on result ... § Extremely difficult economic and capital market environment – Impairments on investments “available for sale” EUR 5.5bn - bottom line impact: EUR 2.7bn – Dresdner Bank net revenue
Slide 20: ... and outweigh operating improvements
B. Group financial results 2002 ... and outweigh operating improvements § Operating improvements, e.g. – Adjusted* combined ratio down 2.7% to 101.7% – Life insurance premiums up 18.9% – Dresdner Bank administrative expenses down 12.3%** – EUR 43bn net inflows in Asset Management Operating Difficult
Slide 21: Key figures and ratios (1)
B. Group financial results 2002 Key figures and ratios (1) (in EUR bn) 2000 2001 2002 ∆ 2002 / 2001 Net income 3.5 1.6 -1.2 -175.0% Extraordinary effects* 1.1 - - - Adjusted net income 2.4 1.6 -1.2 -175.0% EPSR (in EUR) 14.10 6.66 -4.81 -172.2% EPSA before goodwill depreciation (in EUR) 11.74 * 9.98
Slide 22: Key figures and ratios (2)
B. Group financial results 2002 Key figures and ratios (2) (in EUR m) 2000 2001 2002 ∆ 2002 / 2001 Profit before tax and goodwill 5,408 2,635 -52 -102.0% Property / Casualty 4,176 2,758 7,924 187.3% Life / Health 1,763 558 83 -85.1% Banking 116 297 -1,296 -536.4% Asset Management 134 -91 143 Consoli
Slide 23: Breakdown of consolidations
B. Group financial results 2002 Breakdown of consolidations (in EUR m) Intra-group gains elimination Dividends, other Total 1,139 6,906 1,938 3,881 -52 Property / Life / Banking Casualty Health B 5
Slide 24: Group: Strong internal growth in Life 19.6%
B. Group financial results 2002 Group: Strong internal growth in Life 19.6% Total revenues* (in EUR bn) Internal growth insurance (in %) Life / Health Banking Life / Health Property / Casualty Asset Management Property / Casualty Allianz Group Insurance 92.5 81.0 2.3 + 13% 7.6 + 94% 2.0 19.6 3.9 40.
Slide 25: P/C: Key figures and ratios
B. Group financial results 2002 P/C: Key figures and ratios (in EUR m) 2001 2002 ∆ 2002 / 2001 Gross premiums written 42,137 43,294 2.7% Investment result 7,543 11,734 55.6% Investment result adjusted* 7,854 4.1% Claims ratio 81.1% 78.2% -2.9%-p Expense ratio 27.7% 27.5% -0.2%-p Combined ratio 108.8
Slide 26: Most P/C combined ratios considerably improved
B. Group financial results 2002 Most P/C combined ratios considerably improved (in %) Combined ratio 2001 2002 Comments SGD (German P/C Group) 97.7 101.5 Floods in Bavaria and new „Länder“ raised ratio by 5.1%-p Allianz AG 113.2 104.1 Adjusted for floods 101.0% AGF France 112.3 110.9 Expense ratio d
Slide 27: AGR: Reorganizing Allianz's international corporate business
B. Group financial results 2002 AGR: Reorganizing Allianz’s international corporate business* (in EUR m) Approach Performance 2002 Gross premiums 2,362 Build global center of competence § Full accountability for the International Corporate Net premiums earned 1,056 Business (ICB) § Harmonized and st
Slide 28: AGF: Measures for improvement enacted
B. Group financial results 2002 AGF: Measures for improvement enacted Claims ratio Expense ratio Approach Combined ratio (in %) Status Tied agent’s unit 114.3 104.2 ü IT migration completed in 2001 § Focus on Motor business § Tight claims management 85.6 79.5 ü Tariff increase performed in 2002 (per
Slide 29: L/H: Key figures and ratios
B. Group financial results 2002 L/H: Key figures and ratios (in EUR m) 2001 2002 ∆ 2002 / 2001 Statutory premiums 33,687 40,066 18.9% IFRS premiums 20,145 20,663 2.6% Investment result 8,544 7,445 -12.9% Expenses (as % of investments) 1.75 1.66 -0.09%-p Statutory expense ratio (in %) 12.1 10.0 -2.1%
Slide 30: Life: Value of new business written after minorities
B. Group financial results 2002 Life: Value of new business written after minorities (in EUR m) Value of new business at issue after cost of assigned capital 231 112 54 42 4 9 10 Germany France* Italy Other USA Asia Total Europe Margin in % of annualized 6.3 1.8 9.9 4.8 13.6 1.2 6.9 premiums *) Fran
Slide 31: Banking: Key figures and ratios
B. Group financial results 2002 Banking: Key figures and ratios (in EUR m) 2002 2002 2001 (pro forma) ∆ 2002 / Segment Dresdner Bank Dresdner Bank*** 2001 Net revenues 7,566 7,278 8,940 -18.6% Net loan-loss provisions -2,222 -2,218 -1,893 17.2% Loan loss provisions as % of Ø RWA 1.24% 1.31% 0.90% 45
Slide 32: Dresdner Bank: Reconciliation between banking segment and stand-alone result
B. Group financial results 2002 Dresdner Bank: Reconciliation between Allianz Group banking segment and Dresdner Bank stand-alone result in EUR m +1,486 -886 -274 -942 +9 -1,278 Dresdner Net income Investment Depreciation Other Net income contribution Dresdner Bank result of Dresdner Allianz banking
Slide 33: Dresdner Bank: Coverage of risk elements slightly improved
B. Group financial results 2002 Dresdner Bank: Coverage of risk elements slightly improved (in EUR bn) 2001 2002 Non-accruals 10.5 10.0 90 days past due 1.9 0.8 Troubled debt restructuring 0.6 0.4 Non-performing loans (NPL) 13.0 11.2 Potential problem loans (PPL) 2.9 2.4 Total risk elements (NPL/PPL
Slide 34: Dresdner Bank: Significant reduction of RWA by EUR 47bn
B. Group financial results 2002 Dresdner Bank: Significant reduction of RWA by EUR 47bn Risk-weighted assets (in EUR bn) 189.8 Further reduction in non-strategic areas -25.0 142.8 -7.2 -7.6 131.1 -7.2 22 CI 15 17 IRU 12 65 C&M 64 39 PBC 40 31/12/2001 Decon- Domestic International Trading 31/12/2002
Slide 35: Bulk of cost reductions for 2003 already executed
B. Group financial results 2002 Bulk of cost reductions for 2003 already executed (in EUR m) 7,200 Headcount reduction Thereof 50% 6,950 initiated or 2003 (in FTE**) -250 -150 validated -350 6,450 -200 6,250 § Dec. 2002 39,754 § Headcount reduction -2,165 § Budget 37,589 Pro Non- Run rate Imple- Imp
Slide 36: Asset Management: Strong net inflows in difficult capital market environment
B. Group financial results 2002 Asset Management: Strong net inflows in difficult capital market environment Assets under management (in EUR bn) Evolution of result (in EUR m) Operating result Net income Cost-income ratio Third party AuM 620 (as on 31/12/01) 84.7% Net inflow +43 78.5% F/X effects -7
Slide 37: Impairments on securities available for sale
B. Group financial results 2002 Impairments on securities “available for sale” (in EUR m) Impairments 2002 Impairments - Quarterly basis 5,523 2,501 2,670 1,911 1,852 1,705 1,104 1,223 743 P/C L/H Banking Total P&L Q1 2002 Q2 2002 Q3 2002 Q4 2002 Effect § P&L effect reflects impairment impact after
Slide 38: Shareholders' equity decreased by nearly EUR 9.9bn
B. Group financial results 2002 Shareholders’ equity decreased by nearly EUR 9.9bn (in EUR m) 31,664 223 - 1,386 - 364 21,772 - 7,198 - 1,167 Equity Changes in Currency Dividend Change in Net Equity 31/12/2001 consolidated translation, pay-out unrealized income 31/12/2002 group and etc. gains / loss
Slide 39: Revaluation reserve around EUR 14.9bn
B. Group financial results 2002 Revaluation reserve around EUR 14.9bn (in EUR bn) Off balance sheet Revaluation reserve On balance sheet Shareholders’ share Policyholders’ share 5.1 (59.5%) 1.8 (20.5%) 14.9 4.9 Real estate Minorities 3.7 0.6 (7.0%) At equity 4.7 Available Deferred taxes for sale 6.3
Slide 40: Solvency ratio of Allianz Group at 153% ...
B. Group financial results 2002 Solvency ratio of Allianz Group at 153% ... (in EUR bn) Solo solvency Group solvency 7.5 Surplus All individual companies are 21.7 Property / Casualty well-capitalized (incl. Munich Re): 7.5 14.2 Life / Health: 6.7 Maximum Required available solvency solvency funds B
Slide 41: ... however, current capitalization does not fully meet internal requirements
B. Group financial results 2002 ... however, current capitalization does not fully meet internal requirements (in EUR bn) Allocated economic risk capital Available risk-bearing funds Allianz Group (internal stochastic model; confidence level 99.96%) Shareholders’ equity 21.8 Minority interests 8.1 P
Slide 42: Back up
Allianz Group Back up B24
Slide 43: P/C premiums by region
B. Group financial results 2002 P/C premiums by region in EUR bn % of total in % Market share* Internal 2002 growth Germany 12.3 28.6 Germany 17.2 1.6 France 4.9 11.4 France 11.4 9.7 Italy 4.9 11.4 UK 2.7 6.3 Italy 15.2 7.7 Spain 1.5 3.5 UK 4.7 9.5 Switzerland 1.2 2.8 Spain 6.9 16.6 Other Europe 2.1
Slide 44: P/C investment income increased by EUR 0.3bn
B. Group financial results 2002 P/C investment income increased by EUR 0.3bn (in EUR m) 2,725 7,543 7,854 -1,244 -887 -283 Net investment Current Realized gains / Trading Write-ups / Net investment income 2001 earnings* losses** income -downs income 2002 2001 4,747 2,206 1,451 -861 7,543 2002 4,464
Slide 45: P/C earnings contribution by company / region (1)
B. Group financial results 2002 P/C earnings contribution by company / region (1)* (in EUR m) 4.500 9,513 2001 2002 2,516 1,883 1,660 842 383 395 237 31 69 32 62 -357 -666 Allianz AG SGD** AGF Italy Cornhill Allianz Fireman’s France** Spain Fund *) Before consolidation across countries, after tax, b
Slide 46: P/C earnings contribution by company / region (2)
B. Group financial results 2002 P/C earnings contribution by company / region (2)* (in EUR m) 121 2001 2002 91 31 21 16 21 11 5 3 -17 -27 -54 -257 -100 Allianz Suisse Asia/ Allianz AMA AGR Re Credit Travel/ ex. ART Pacific Australia insurance Assistance *) Before consolidation across countries, afte
Slide 47: L/H statutory premiums by region
B. Group financial results 2002 L/H statutory premiums by region in EUR bn % of total in % Market share* Internal 2002 growth Germany 12.6 31.5 Germany 14.9 7.8 Italy 7.7 19.2 Italy 13.7 29.8 France 4.3 10.8 France 4.7 -12.0 Switzerland 1.2 3.0 Switzerland 4.8 -1.5 Spain 0.6 1.5 Spain 1.9 7.7 Other
Slide 48: L/H investment income decreased by EUR 1.1bn
B. Group financial results 2002 L/H investment income decreased by EUR 1.1bn (in EUR m) 8,544 92 361 -164 7,445 -1,388 Net investment Current Realized gains / Trading Write-ups / Net investment income 2001 earnings* losses income -downs income 2002 2001 10,517 -934 -117 -922 8,544 2002 10,609 -1,098
Slide 49: L/H earnings contribution by company / region
B. Group financial results 2002 L/H earnings contribution by company / region* (in EUR m) 2001 2002 289 261 97 65 80 64 48 26 3 -17 -24 -18 -80 -223 Germany Allianz Italy AGF AZ Allianz Life / AZ Life Life PKV France** Suisse USA South Korea *) Before consolidation across countries, after tax, befor
Slide 50: Banking: Contribution by segment
B. Group financial results 2002 Banking: Contribution by segment* (in EUR m) Private & Business Clients Corporates & Markets Banking segment 2001** 303 2002 Profit after tax before -160 goodwill and minorities -304 -797 -1,141 -1,642 Net interest income 801 1,778 841 1,624 2,363 3,827 Net fee an com
Slide 51: Dresdner Bank: Productivity has tripled in less than two years
B. Group financial results 2002 Dresdner Bank: Productivity has tripled in less than two years New business life plus non-life Business value (in EUR m)* Number of contracts 2000 2001 2002 2000 2001 2002 166,771 +180% +445% 103,268 L/H 88,531 99,227 71,846 51,363 30,628 35,499 63,503 P/C 21,338 9,29
Slide 52: Dresdner Bank: Synergies ahead of plan
B. Group financial results 2002 Dresdner Bank: Synergies ahead of plan (in EUR m) Revenue synergies 376 +30% § Cost synergies ahead of plan Cost synergies 23 -53% § Revenue synergies delayed due 290 to weak market environment 50 § Total synergies exceed budget by 30% 353 +46% 240 2002 plan 2002 actu
Slide 53: Assets under management
B. Group financial results 2002 Assets under management (in EUR bn) Assets under Third party Group investments management Unit linked 989 25 (4.3%) Other* 586 11 (3.3%) Real estate 15 (4.5%) 71 Trading** Asset management 561 (95.7%) Equity 63 (19.0%) 332 Fixed income 243 (73.2%) *) E.g. funds held b
Slide 54: Despite adverse market conditions, ADAM achieved stable profits
B. Group financial results 2002 Despite adverse market conditions, ADAM managed to achieve stable profits through improved profitability Asset management Results (in EUR m) 2001 2002 Targets 2005 Assets under management (in EUR bn) 1,126*) 989 3rd party AuM growth p.a. 10 - 15% of which 3rd party as
Slide 55: Goodwill
B. Group financial results 2002 Goodwill (in EUR m) Goodwill acquired 3,059 Dresdner Bank 2,002 13,786 12,649 -1,162 Allianz Leben 633 -532 -228 Frankfurter Versicherung 57 Bayer. Versicherungsbank 94 Slovenská Poist’ovna a.s. 138 Others 135 Total 3,059 Goodwill Currency Reclassi- Acquisitions Depre
Slide 56: Taxes
B. Group financial results 2002 Taxes (in EUR m) Tax charges (-) / benefits (+) Current income taxes -844 Deferred income taxes +1,653 Income taxes +809 Other taxes -74 840 735 Tax benefit +735 -176 2000 2001 2002 B 38
Slide 57: Decrease in profit after tax and minorities
B. Group financial results 2002 Decrease in profit after tax and minorities (in EUR m) Reported Adjusted* -53.1% -32.0% 3,460 2,385 1,623 1,623 -171.9% -1,167 -171.9% -1,167 2000 2001 2002 2000 2001 2002 *) 2000 adjusted for tax effect B 39
Slide 58: Decrease in EPS
B. Group financial results 2002 Decrease in EPS (in EUR) Basic EPSR EPSA before goodwill Number Unweighted Weighted depreciation* of shares outstanding outstanding # of shares at -15.0% beginning of year 241,189,535 241,189,535 -53.1% Capital increase - - 14.10 11.74 Change in treasury 1,650,054 1,5
Slide 59: Value management: Assigned capital and ROE N
B. Group financial results 2002 Value management: Assigned capital and ROEN (in EUR bn) Assigned capital after minorities Normalized ROE after minorities (in %) 2002 (Total: EUR 38.2bn) 2002 27.3 Property / 9.2 11.4 Banking Casualty 11.1 (29.1%) 17.5 (45.7%) Asset -13.3 Management Life / Health Prop
Slide 60: Value management: ROE N of major P/C operations
B. Group financial results 2002 Value management: ROEN of major P/C operations (in %) Before minorities 28.0 28.1 29.2 24.1 24.2 24.7 22.4 23.2 10.1 12.2 12.7 14.4 14.4 9.8 3.9 4.0 -20.2 -32.4 Assigned capital before minorities 2002 (in EUR bn) 0.3 3.0 2.1 1.1 20.9 0.4 0.2 0.5 0.9 0.7 1.5 0.4 2.7 0.
Slide 61: Value management: ROE N of major L/H operations
B. Group financial results 2002 Value management: ROEN of major L/H operations (in %) Before minorities 40.4 27.0 17.7 17.8 15.6 15.9 13.3 9.9 11.1 5.8 4.3 Assigned capital before minorities 2002 (in EUR bn) 1.8 0.8 3.2 10.0 0.2 1.5 0.1 0.7 0.4 1.2 0.2 a iu m y in o KV n H e re tal t ic be iss ica a
Slide 62: Embedded value of Allianz's life operations
Embedded value of Allianz’s life operations B 44
Slide 63: The Allianz embedded value framework for life business
B. Group financial results 2002 The Allianz embedded value framework for life business Before minorities Assigned capital (AC) Embedded value + Present value of future profits (PVFP) (EV) – Cost of assigned capital (CAC) Capital tied in to life business Assigned capital (S & P capital adequacy model
Slide 64: Overview of economic assumptions used for projections
B. Group financial results 2002 Overview of economic assumptions used for projections (in %) Embedded value 2002 economic assumptions for selected countries Risk discount Return on Equity return Tax Shareholders’ rate (after tax) government bonds (pre tax) rate participation (pre tax)* Germany 8.15
Slide 65: Life: Embedded value after minorities
B. Group financial results 2002 Life: Embedded value after minorities (in EUR m) Per region and by components PVFP - CAC 10,977 AC 3,620 3,110 7,357 2,194 1,961 1,763 1,274 1,303 1,132 386 471 447 647 1,575 1,836 1,062 856 1,292 736 - 89 Germany France Italy Other USA* Asia Total Europe *) In USA, c
Slide 66: Life: Value of new business written after minorities
B. Group financial results 2002 Life: Value of new business written after minorities (in EUR m) Value of new business at issue after cost of assigned capital 231 112 54 42 4 9 10 Germany France* Italy Other USA Asia** Total Europe Margin in % of annualized 6.3 1.8 9.9 4.8 13.6 1.2 6.9 premiums *) Fr
Slide 67: Movement analysis of embedded value after minorities
B. Group financial results 2002 Movement analysis of embedded value after minorities (in EUR m) EV published 9,559 Initial adjustments* 583 Revised start value 10,142 Unwinding of discount rate 874 Non-economic variances and assumption changes -251 In-force operating profit 623 New business value ad
Slide 68: Value of new business for selected countries
B. Group financial results 2002 Value of new business (NB) for Allianz’s share in selected countries (in EUR m) Value of NB Value of NB Annual Single NB margin* NB margin* Country before CAC after CAC premium premium before CAC after CAC Germany 66.2 53.5 710.2 1,424.8 7.8% 6.3% France 35.3 4.2 49.3
Slide 69: Sensitivities on value of in-force for selected countries
B. Group financial results 2002 Sensitivities on value of in-force for Allianz’s share in selected countries (in EUR m) PVFP-CAC - 1 %-p in total - 1 %-p in - 1 %-p in Using statutory Name of country Base case investment equity risk discount solvency yield yield rate capital Germany 1,132 -128 -18 1
Slide 70: Comparison of PVFP to IFRS equity
B. Group financial results 2002 Comparison of PVFP to IFRS equity Shareholder share of IFRS amounts in DAC/VOBA DAC/VOBA exceed statutory levels included in PVFP Aggregate IFRS life technical reserves Technical reserves exceed statutory reserves used in PVFP Aggregate values of unrealized capital ga
Slide 71: Reconciliation of PVFP to IFRS equity
B. Group financial results 2002 Reconciliation of PVFP to IFRS equity (in EUR m) PVFP - CAC 3,620 - Shareholder value of IFRS DAC / VOBA 3,017 + Difference in life mathematical reserves 1,337 + Tax and other differences 178 Subtotal: additional value to IFRS recognized within PVFP - CAC 2,118 + Asse
Slide 72: Review of embedded value methodology
B. Group financial results 2002 Review of embedded value methodology Tillinghast-Towers Perrin have reviewed the methodology and assumptions used to determine the PVFP and the CAC at 31 December 2002, and the value added by 2002 new business, for the eight main operating countries of the Allianz Gro
Slide 73: C. Securing our capital base
Paul Achleitner - Board member of Allianz AG C. Securing our capital base Analysts’ Conference March 2003
Slide 74: Agenda
C. Securing our capital base Agenda Topics 1 Equity exposure 2 Equity requirement 3 Equity raising 4 Equity protection C 1
Slide 75: Significant decline of shareholder's equity in 2002 mainly due to weak equity markets
C. Securing our capital base 1 Significant decline of shareholder’s equity in 2002 mainly due to weak equity markets In EUR bn 31.7 -1.3 1.8 0.2 21.8 -1.2 -0.4 -9.0 Share- Currency Stock Bond Net Dividends Other Share- holders’ translation depreciation appreciation income to holders’ equity sharehol
Slide 76: Our shareholder relevant net equity exposure
C. Securing our capital base 1 Our shareholder relevant net equity exposure Reconciliation: Gross vs. net equity figures (in EUR bn, 31/12/2002) 63.2 Life / Health Property / Casualty Banking -3.6 26.8 32.4 -20.8 -4.2 2.5 -2.2 26.9 20.7 9.5 9.2 Gross After After After After Net exposure hedge policy
Slide 77: Structure of equity portfolio and recent hedging limit volatility
C. Securing our capital base 1 Structure of equity portfolio and recent hedging limit volatility and reduce downside risk substantially Portfolio protection Sensitivity of portfolio vs. DAX Scenario analysis, as of 19/03/2003* § Portfolio structure DAX – Cash sales of EUR 0.3bn Group Portfolio since
Slide 78: Current capitalization well above solvency requirements, but below internal demands
C. Securing our capital base 2 Current capitalization well above solvency requirements, but below internal demands (in EUR bn) Solvency Rating Economic capital 153% ~1.7 43.5 41.8 S&P AA- negative 21.7 outlook 14.2 Moody’s Aa2 negative outlook Required Available Allocated Available capital funds cap
Slide 79: Launching a capital improvement program
C. Securing our capital base 3 Launching a capital improvement program to secure financial strength and strong rating relative to peers Capital improvement program Comment § Substantially reducing volatility by hedging ü Substantial hedging measures in place – Group-level (macro hedge) – OE-level (s
Slide 80: Rigorous and disciplined capital allocation approach
C. Securing our capital base 4 Rigorous and disciplined capital allocation approach Criteria for allocating capital Capital allocation process § Required economic capital § Thorough review of capital allocation currently conducted across the Group - Up to now measured with S&P methodology - Currentl
Slide 81: Reduction of cross-shareholdings with Munich Re
C. Securing our capital base 4 Reduction of cross-shareholdings with Munich Re § Munich Re – Supporting rights issue by participating Munich Re via “Operation Blanche” thereby reducing its stake to ~15% § Allianz Group 19.3% ~15% – Reducing its stake of 22.4% in two steps to ~15% – In a first step,
Slide 82: New arrangement with Pacific Life
C. Securing our capital base 4 New arrangement with Pacific Life May 2000 § Allianz acquired majority holding in PIMCO § Pacific Life retained minority stake in PIMCO § Allianz and Pacific Life entered into Initial Put/Call Arrangement: Put exercisable since Mai 2000, Call exercisable since January
Slide 83: Summary
C. Securing our capital base Summary § Exposure already lower than perceived Exposure § Active hedging programs § Solvency and rating secured Requirement § Economic capital need of EUR ~2.0bn § Breaking speculative cycle / volatility § External equity / hybrid issue of EUR ~5.0bn Raising § Divestitu
Slide 84: D. Allianz Leben: The safe side of life
Gerhard Rupprecht - Chairman Allianz Lebensversicherungs-AG D. Allianz Leben: The safe side of life All figures based on HGB (German GAAP) Analysts’ Conference March 2003
Slide 85: Allianz Leben: Germany's no. 1 life insurer
D. Allianz Leben: The safe side of life Allianz Leben: Germany’s no. 1 life insurer Key facts & figures 2002 § Statutory premiums: EUR 9,648m (+7.8%) § Contracts in force: 10.4m (+2.4%) § Market share by in-force premiums*: 14.6% (+0.2%-p) § Market share by new premiums*: 18.3% (+3.2%-p) Private new
Slide 86: Where the gross surplus comes from and where it goes to
D. Allianz Leben: The safe side of life Where the gross surplus comes from ... ... and where it goes to Expense loadings Interest income Risk premiums + “Zillmer” DAC Benefits Extraordinary income paid for death, disability, Administrative expenses long-term care Technical interest rate* Released cl
Slide 87: German features of profit participation
D. Allianz Leben: The safe side of life German features of profit participation Contracts effected before July 1994 Contracts effected after July 1994 Gross surplus after taxes Net investment Underwriting result income on mathe- Expense result matical reserves Other results if positive Minimum Maxim
Slide 88: Shareholders' participation: Significant increase in the last decade
D. Allianz Leben: The safe side of life Shareholders’ participation: Significant increase in the last decade Shareholders’ participation rate and ROE after tax 1992 - 2002 (in %) 25 ROE Participation rate 20 21.0 19.0 15 17.1 15.8 16.0 15.9 14.4 14.9 14.8 14.9 14.6 10 8.8 5 5.5 4.6 3.3 3.3 3.8 2.5 2
Slide 89: Investment portfolio: Still well-reserved
D. Allianz Leben: The safe side of life Investment portfolio: Still well-reserved (in EUR bn) Book value Net hidden reserves Real estate Equities incl. participating 99.6 102.2 interests, equity in funds 12.7 Fixed income 2.7 2.8 16.2 2.1 20.7 8.5 1.9 7.7 * 0.9 * 76.2 83.2 5.7 2.9 2001 2002 2001 200
Slide 90: Solid cover for liabilities
D. Allianz Leben: The safe side of life Solid cover for liabilities (in EUR bn) Assets Equity & liabilities Net hidden 107.0 8.5 Equity reserves Total assets 1.2 Free RfB 2.5 4.5 Terminal bonus fund 1.6 Allocated RfB Investments 102.2 Mathematical 92.4 reserves (incl. interest-bearing accounts) Othe
Slide 91: Strict fixed-income guidelines limit the credit risk
D. Allianz Leben: The safe side of life Strict fixed-income guidelines limit the credit risk Rating structure Bonds + tradable loans Guidelines Market value: EUR 69.4bn Credit limits Issuer limits Other AAA § Definition of § A or better: Max. 20% 0.19% 71.37% - individual benchmark per bond issue -
Slide 92: Policyholders provide the required solvency
D. Allianz Leben: The safe side of life Policyholders provide the required solvency (in EUR m) Required solvency margin Available solvency capital 8,500 Hidden reserves 7,900 Equity Explicit 986 less intangible assets solvency ratio: Comfortable 225% 2,519 Free RfB Solvency ratio incl. hidden reserv
Slide 93: Introduction of mandatory stress test by BaFin
D. Allianz Leben: The safe side of life Introduction of mandatory stress test by BaFin § At least quarterly examination of whether assets provide sufficient cover for liabilities, if ... Market value: Equities Securities Scenario A -35% -10% Scenario B -20% -5% Fixed-income portfolio: Discounts for
Slide 94: Measures to be adopted if a German life insurer gets into financial difficulties
D. Allianz Leben: The safe side of life Measures to be adopted in case a German life insurer gets into financial difficulties By law, BaFin is given far-reaching powers to intervene: 1. Financial reorganization under supervision of BaFin Various options: Injection of new capital, appointment of a tr
Slide 95: Rescue company Protektor established by life insurance industry
D. Allianz Leben: The safe side of life Rescue company Protektor established by life insurance industry Tasks: 1. Fulfill commitment to pay policyholders guaranteed benefits 2. Protect reputation of life insurance industry Shareholders LIC-A LIC-B LIC-C LIC-M LIC-X Participation according to market
Slide 96: Allianz Leben: Takeaways
D. Allianz Leben: The safe side of life Allianz Leben: Takeaways Key messages § Comprehensive product range to provide state-of-the-art solutions for private and corporate customers § Distribution through three well-established channels - tied agents, banks and brokers - secures access to customers
Slide 97: E. Allianz Life: Promising growth engine
Mark Zesbaugh - Chief Executive Officer Allianz Life E. Allianz Life: Promising growth engine Analysts’ Conference March 2003
Slide 98: Introduction: 2nd largest L/H entity of Allianz Group
E. Allianz Life: Promising growth engine Introduction: 2nd largest L/H entity of Allianz Group Key facts & figures § Acquisition of North American Life and Casualty in 1979, merged with Life USA in 1999 § Top 40 US life company (out of 1,200 total, ranked by 2001 statutory premiums) § 0.7% market sh
Slide 99: Key figures and ratios
E. Allianz Life: Promising growth engine Key figures and ratios (in EUR m) IFRS 2000 2001 2002 ∆ 2002/2001 Income statement Statutory premiums 3,681 4,982 9,530 91% Gross premiums written 1,465 1,478 1,411 -5% Revenues 1) 1,654 1,536 1,394 -9% Net income 117 -44 -37 16% Net income without realized g
Slide 100: Products: major market segments
E. Allianz Life: Promising growth engine Products: 3 major market segments (in EUR m) 2002 Revenue split Revenues Stat. premiums Fixed Annuities (non EIA) 550 3,002 Equity-Indexed Annuities 203 3,630 Long-Term Care 37 157 Universal Life 65 71 39% Variable Life & Annuities 96 1,873 55% Life Re 444 43
Slide 101: Distribution: Key to strong growth
E. Allianz Life: Promising growth engine Distribution: Key to strong growth Equity- Variable Health Fixed Long- Universal Products Indexed Life & Life Re Excess Annuities Term Care Life Annuities Annuities of Loss Brokers / Wholesalers dealers Internal & Distribution / independent channel 61,000 bro
Slide 102: Growth: Value-added products well-positioned for the flight to quality
E. Allianz Life: Promising growth engine Growth: Value-added products well-positioned for the flight to quality and stability Variable Annuities: Statutory premium growth Fixed Annuities: Statutory premium growth Allianz Life Allianz Life US industry* US industry* 126% 88% 86% 88% 86% 45% 7% -19% 20
Slide 103: Risk management (1): Risks identified and well-managed
E. Allianz Life: Promising growth engine Risk management (1): Risks identified and well-managed Risks Management Immunized duration-matched portfolio, annual statutory Interest rate cash flow testing over a 30 year horizon Management levers include crediting rates, cap rates, and Mispricing commissi
Slide 104: Risk management (2): Conservative investment portfolio
E. Allianz Life: Promising growth engine Risk management (2): Conservative investment portfolio Philosophy § High quality, AA- average rating § Immunized portfolio, duration matched Allocation of investable general account Bond portfolio characteristics 1) assets (total volume: EUR 15.3bn) 1) NAIC r
Slide 105: Outlook: Building on strength - achieving scale
E. Allianz Life: Promising growth engine Outlook: Building on strength - achieving scale Market trends / environment Allianz Life profile Continued “flight to quality” § Diligent risk management § Highly rated § Superior reputation Changing demographics: Increasing § Strong position in fixed annuiti
Slide 106: F. Institutional Restructuring Unit (IRU)
Jan E. Kvarnström - Chief Executive Officer of IRU F. Institutional Restructuring Unit (IRU) Analysts’ Conference March 2003
Slide 107: Why the IRU?
F. Institutional Restructuring Unit (IRU) Why the IRU? § The IRU of Dresdner Bank has been established to free up risk capital § The IRU sets the focus on the separation and exit of non-performing and non-core assets, as identified by the core business areas § Core business areas to focus on operati
Slide 108: Organizational principles
F. Institutional Restructuring Unit (IRU) Organizational principles § The IRU has an exit-driven approach: - Distinct focus on non-core and non-performing assets - Well-defined objectives and responsibilities - Tailor-made processes and systems - Fast decision making - Specialist recruiting - Transp
Slide 109: IRU at a glance
F. Institutional Restructuring Unit (IRU) IRU at a glance § EUR 30.9bn of exposures, of which EUR 22.9bn utilized lines and funded assets - EUR 14.9bn of usage are performing transactions - EUR 8.0bn of usage are potential problem loans (PPL) and non-performing loans (NPL) according to SEC form 20F
Slide 110: Portfolio structure
F. Institutional Restructuring Unit (IRU) Portfolio structure (in EUR bn) Dresdner Bank IRU IRU in % Loan volume limit 183.9 29.7 * 16.2 Loan volume usage 123.1 22.2 * 18.0 – PPL 2.4 1.1 45.8 – NPL 11.2 6.9 61.6 RWA 142.7 17.4 12.2 Risk capital 11.0 2.9 26.4 Specific provisions (balance) 5.5 3.6 65.
Slide 111: Usage breakdown by quality and region
F. Institutional Restructuring Unit (IRU) Usage breakdown by quality and region Usage in EUR bn split according to booking locations (as of January 1, 2003) Germany Rest of North Latin Asia Private Total Europe America America equity Non-performing loans 4.0 1.0 1.0 0.6 0.3 6.9 Potential problem loa
Slide 112: The IRU Werkstatt
F. Institutional Restructuring Unit (IRU) The IRU “Werkstatt” Transfer process Asset transfer and corporate restructuring Special North Europe Europe Germany Latin Asia Private Assess accounts America I II America equity Europe NSB Rest ICU NSB North Real America ICU Europe ICUs Germany Estate NSB U
Slide 113: Exit management
F. Institutional Restructuring Unit (IRU) Exit management § “Action plans” reviewed by the IRU executive committee. § All types of exit options are available for IRU. § Actual choice depending on pricing, P&L impact, legal constraints, liquidity and complexity of execution. Conventional exit types A
Slide 114: Are loan provisions sufficient?
F. Institutional Restructuring Unit (IRU) Are loan provisions sufficient? Loans are adequately provisioned as of 31 December 2002 § The loans are adequately provisioned as of 31 December 2002, on the assumption that there is no further deterioration of world economies § Most of the PPL and NPL are p
Slide 115: Time table
F. Institutional Restructuring Unit (IRU) Time table Action plans, exit strategies and execution Transfer process January February March April May First internal reporting Start Credit Review Committees Global kick-off Allianz annual results IRU update on 1st quarter 2003 Start IRU F 9
Slide 116: Targets
F. Institutional Restructuring Unit (IRU) Targets Exit exposures of EUR 10bn before end of 2004 Free up nearly EUR 3bn of risk capital in the medium term Thereof EUR 1bn before end of 2004 During the whole process - careful considerations of value vs. time F 10
Slide 117: G. Appendix
G. Appendix Analysts’ Conference March 2003
Slide 118: Index (1)
G. Appendix Index (1) A. Trimming the ship A Most P/C combined ratios considerably improved ............................ B 8 AGR: Reorganizing Allianz’s international corporate business .......... B 9 Taking stock: A world-class franchise ................................................ A 1 AGF: Mea
Slide 119: Index (2)
G. Appendix Index (2) L/H earnings contribution by company / region ................................. B 31 C. Securing our capital base C Banking: Contribution by segment ..................................................... B 32 Topics ...............................................................
Slide 120: Index (3)
G. Appendix Index (3) D. Allianz Leben: The safe side of life D F. Institutional Restructuring Unit F Allianz Leben: Germany’s no. 1 life insurer ........................................ D 1 Why the IRU? ..................................................................................... F 1 Where
Slide 121: Glossary (1)
G. Appendix Glossary (1) ACP: Allianz Capital Partners ADAM: Allianz Dresdner Asset Management A&E: Asbestos & Environmental AFS: Securities available for sale AGM: Annual General Meeting AGR: Allianz Global Risks ART: Allianz Risk Transfer Assets under management (AuM): Sum of investments marked-to
Slide 122: Glossary (2)
G. Appendix Glossary (2) Assigned capital: Capital assigned to subsidiaries for core business AVmG: German Law on Retirement Savings BAFin: Federal Financial Supervisory Authority BIS: Bank for International Settlement CAC: Cost of assigned capital CAGR: Compounded average growth rate Capital ratios
Slide 123: Glossary (3)
G. Appendix Glossary (3) - Total capital ratio: Relation of Tier I plus Tier II capital to risk-weighted assets. Tier II capital (supplementary capital) comprises profit-participation certificates, subordinated liabilities and revaluation reserves on securities and other adjustments CIR: Cost-income
Slide 124: Glossary (4)
G. Appendix Glossary (4) dit: Deutscher Investment-Trust DVFA: Deutsche Vereinigung für Finanzanalyse und Asset Management (German Society of Investment Analysis and Asset Management) Embedded Value (EV): Sum of assigned capital and difference between present value of future profits (PVFP) and cost
Slide 125: Glossary (5)
G. Appendix Glossary (5) Excess capital: Difference between net asset value and assigned capital Expense ratio: Commissions, other acquisition expenses, general and administrative expenses as % of net premiums earned FTE: Full-time equivalents Goodwill: Difference between a subsidiary’s purchase pri
Slide 126: Glossary (6)
G. Appendix Glossary (6) Investment result ratio: Net investment income as % of net premiums earned Investment return: Net investment income as % of average investments (without unit-linked investments) IRU: Institutional Restructuring Unit L/H: Life and health insurance LoB: Line of business NAV (N
Slide 127: Glossary (7)
G. Appendix Glossary (7) NPL: Non-performing loans NPV: Net present value OE: Operating entity Operating ratio: Difference between combined ratio and investment result ratio PBC: Private and Business Clients P/C: Property and casualty insurance PD: Probability of default PPL: Potential problem loans
Slide 128: Glossary (8)
G. Appendix Glossary (8) Pre-tax margin as % of investments: Profit before tax and goodwill as % of investments (including unit-linked investments) PVFP: Present value of future profits RfB: Reserve for premium refunds R/I: Reinsurance ROEA: Same as ROER, but adjusted for the impact of extraordinary
Slide 129: Glossary (9)
G. Appendix Glossary (9) Statutory premiums: Premium income under local GAAP Survival ratio: Claims reserves divided by claims payments TAC: Total adjusted capital Tax ratio: Tax expenditure as % of profit before tax and goodwill (effective tax ratio); tax expenditure adjusted for extraordinary tax
Slide 130: Investor Relations contacts
G. Appendix Investor Relations contacts Oliver Schmidt Tel. +49 (0) 89 3800-3963 Christian Tel. +49 (0) 89 3800-3892 Lamprecht Head of e-mail: e-mail: christian.lamprecht Investor Relations oliver.schmidt@allianz.com @allianz.com Susanne Arheit Tel. +49 (0) 89 3800-3324 Stefan Engelke Tel. +49 (0) 8
Slide 131: Financial calendar 2003/2004
G. Appendix Financial calendar 2003/2004 29 April 2003 Annual General Meeting 16 May 2003 Financial report first quarter of 2003 14 August 2003 Financial report first half 2003 14 November 2003 Financial report first three quarters 2003 18 March 2004 Financial press conference for the 2003 fiscal ye
Slide 132: Disclaimer
G. Appendix Disclaimer All assessments are, as always, subject to the disclaimer provided below. No Offer None of the statements contained herein constitute an offer or invitation to subscribe for or purchase any securities. Securities of Allianz AG that will be offered outside the United States, as