Allianz SE
Annual Report 2015

Plain-text annual report

Building on Our Proud Heritage Allianz Group Annual Report 2015 Content A   5  12  19  20  23 B  27  32  34  37 C  52 To Our Investors Letter to the Investors Supervisory Board Report Supervisory Board Board of Management Allianz Share Corporate Governance Corporate Governance Report Statement on Corporate Management pursuant to § 289a of the HGB Takeover-related Statements and Explanations Remuneration Report Group Management Report Content Your AlliAnz  53  58  61 Business Operations and Markets Strategy and Steering Progress in Sustainable Development MAnAgeMent Discussion AnD AnAlYsis  67  69  74  80  86  90  92  98 105 110 Business Environment Executive Summary of 2015 Results Property-Casualty Insurance Operations Life/Health Insurance Operations Asset Management Corporate and Other Outlook 2016 Balance Sheet Review Liquidity and Funding Resources Reconciliations risk AnD opportunitY report AnD FinAnciAl control 112 131 Risk and Opportunity Report Controls over Financial Reporting and Risk Capital D Consolidated Financial Statements 134 135 136 137 138 139 141 E 245 246 247 248 249 Content Consolidated Balance Sheets Consolidated Income Statements Consolidated Statements of Comprehensive Income Consolidated Statements of Changes in Equity Consolidated Statements of Cash Flows Notes to the Consolidated Financial Statements Further Information Joint Advisory Council of the Allianz Companies International Advisory Board Mandates of the Members of the Supervisory Board Mandates of the Members of the Board of Management Glossary To go directly to any chapter, simply click on the headline or the page number. Allianz at a glance AnnuAl results Income statement Total revenues1 Operating profit2 Net income from continuing operations3 Net income (loss) from discontinued operations, net of income taxes3 Net income thereof: Attributable to shareholders Balance sheet as of 31 December Total assets Investments Total liabilities thereof: Reserves for insurance and investment contracts thereof: Reserves for loss and loss adjustment expenses Shareholders’ equity Non-controlling interests Share information Basic earnings per share Diluted earnings per share Dividend per share Total dividend Share price as of 31 December Market capitalization as of 31 December Other information Return on equity6,7 Return on equity (excluding unrealized gains/losses on bonds net of shadow DAC)6,7 Conglomerate solvency8 Standard & Poor’s rating9 Total assets under management as of 31 December thereof: Third-party assets under Change from previous year 2.4 % 3.2 % 5.8 % – 5.8 % 6.3 % 5.4 % 4.7 % 5.5 % 2015 125,190 10,735 6,987 – 6,987 6,616 848,942 509,493 782,843 € mn € mn € mn € mn € mn € mn € mn € mn € mn 2014 2013 2012 2011 2010 2009 More details on page 122,253 110,773 106,383 103,560 106,451 97,385 10,402 6,603 10,066 6,343 – 6,603 6,221 – 6,343 5,996 9,337 5,558 – 5,558 5,231 7,764 2,853 – 2,853 2,591 8,243 5,209 – 5,209 5,053 7,044 4,650 (395) 4,255 4,207 805,787 486,445 742,085 711,079 411,148 658,230 694,411 401,711 641,448 641,322 350,645 595,575 624,945 334,618 578,383 583,717 294,252 541,488 € mn 486,222 4.9 % 463,334 404,072 390,984 361,956 349,793 323,801 € mn € mn € mn € € € € mn € € mn % % % 72,003 63,144 2,955 14.56 14.55 7.304 3,320 4,5 163.55 74,742 4.4 % 3.9 % – 6.2 % 6.6 % 6.6 % 6.7 % 19.1 % 19.1 % 10.7 (0.5) %-p 12.5 200 AA (0.4) %-p 19.6 %-p – 68,989 60,747 2,955 13.71 13.64 6.85 3,112 137.35 62,769 11.2 13.0 181 AA 66,566 50,083 2,765 13.23 13.05 5.30 2,405 130.35 59,505 11.9 13.5 182 AA 72,540 50,388 2,576 11.56 11.48 4.50 2,039 104.80 47,784 11.1 12.5 197 AA 68,832 43,457 2,290 66,474 44,491 2,071 64,441 40,108 2,121 5.74 5.58 4.50 2,037 73.91 11.20 11.12 4.50 2,032 88.93 9.33 9.30 4.10 1,850 87.15 33,651 40,419 39,557 5.9 6.2 179 AA 11.9 12.4 173 AA 12.5 12.6 164 AA € mn 1,762,896 (2.1) % 1,801,178 1,769,551 1,852,332 1,656,993 1,517,538 1,202,122 70 70 – – 71 71 99 172 99 190 186 98 198 231 231 24 71 24 24 92 92 98 114 87 87 65 management as of 31 December € mn 1,275,886 (2.8) % 1,312,910 1,360,759 1,438,425 1,281,256 1,163,982 Employees 142,459 (3.4) % 147,425 147,627 144,094 141,938 151,338 925,699 153,203 1 2 3 4 5 Total revenues comprise statutory gross premiums written in Property-Casualty and Life/Health, operating revenues in Asset Management, and total revenues in Corporate and Other (Banking). The Allianz Group uses operating profit as a key financial indicator to assess the performance of its business segments and the Group as a whole. Following the announcement of the sale on 31 August 2008, Dresdner Bank was classified as held for sale and discontinued operations. Therefore, all revenue and profit figures presented for our continuing busi- ness do not include the parts of Dresdner Bank that we sold to Commerzbank on 12 January 2009. The results from these operations are presented in a separate net income line “Net income (loss) from dis- continued operations, net of income taxes”. Proposal. Total dividend reflects the treasury shares held at the time of the publication of the convocation of the Annual General Meeting in the Federal Gazette. Such treasury shares are not entitled to the dividend pursuant to § 71b of the German Stock Corporation Act (AktG). Should there be any change in the num- ber of treasury shares by the date of the Annual General Meeting, the total dividend will be amended accordingly. Based on average shareholders’ equity. Average shareholders’ equity has been calculated based upon the average of the current and the preceding year’s shareholders’ equity as of 31 December. Based on net income from continuing operations after non-controlling interests. Solvency according to the E.U. Financial Conglomerates Directive. Off-balance sheet reserves are accepted by the authorities as eligible capital only upon request. Allianz SE has not submitted an application so far. Excluding off-balance sheet reserves, the solvency ratio as of 31 December 2015 and 2014 would be 191 % and 172 %, respectively.  For further information about insurer financial strength ratings of Allianz SE, please refer to page 114. 6 7 8 9 Disclaimer regarding roundings The consolidated financial statements are presented in millions of Euros (€ MN), unless otherwise stated. Due to rounding, numbers presented may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures. Figures prior to 2013 have not been adjusted accordingly. Group profile Allianz is one of the strongest financial communities worldwide. More than 85 million private and corporate customers insured by Allianz rely on its knowledge, globAl reAch and cApitAl strength to protect them and help them realize their goals in life. Allianz stands for trust based on integrity, resilience and the dedicAtion of its 142,459 employees. € bn 63.1 shareholders’ equity AA standard & poor’s rating since 2007 page 98 € 7.30 dividend per share (proposal) page 24 € bn 125.2 total revenues page 70 € Mn 10,735 operating profit page 70 € Mn 6,616 net income attributable to shareholders 200 % page 71 conglomerate solvency ratio page 98 To our InvesTors a annual report 2015 allianz Group 33 3 a _ To our InvesTors Pages 4 – 24  5 12 19 20 23 Letter to the Investors Supervisory Board Report Supervisory Board Board of Management Allianz Share 4 annual report 2015 allianz Group A To Our Investors  5 Letter to the Investors 12 Supervisory Board Report Supervisory Board 19 20 Board of Management 23 Allianz Share oliver bäte Chairman of the Board of Management Your Allianz looks back on another successful year – a year in which we celebrated our 125th anniversary and generated record revenues of € 125.2 BN. Operating profit grew 3.2 % to € 10.7 BN and net income attributable to shareholders was € 6.6 BN. These figures show that your company is very well positioned and can deliver impressive results even in difficult times. The excellent results are due, above all, to our more than 142,000 highly motivated employees, who have put all their energy into making 2015 a successful year for Allianz. I would like to extend to them my warmest thanks for their loyalty and hard work. Annual Report 2015 Allianz Group 5 I am proud of this team. Allianz is a different company today from the one I joined in 2008. Besides being more profitable, we have become more versatile, more efficient and more responsive. This is the lasting legacy of Michael Diekmann, my predecessor as Chairman of the Board of Management. In twelve years, many of which were plagued by crisis, he took your company to new levels of performance and secured Allianz a place in the league of the most reputable financial service companies worldwide. I believe I speak in your name when I express my sincere thanks to Mr. Diekmann for his outstanding services. At the same time, I am delighted that the share price performed so strongly in 2015 with the value of your shares increasing by 19.1 %. Including the dividend payment, we are pleased to report a return of 24.6 %. As we want you to further participate in our robust per­ formance in 2015, we will propose to the Annual General Meeting to increase the dividend by € 0.45 to € 7.30. The performance of the Property­Casualty segment was again very strong: By growing revenues by 6.8 % and operating profit by 4.1 %, Allianz has clearly confirmed its position as global market leader. Another major reason for our continued success in 2015 is the accelerating reorientation of our Life/Health insurance business towards unit­linked and capital­efficient products. We have successfully adjusted the product offer to match the low­yield environment in our key markets, such as Germany. The new products have a balanced opportunity­risk profile, as lower guarantees come with a higher share of the investment result. As a result they are in strong demand, allowing us to significantly increase the share of these innovative products in our new business. In the case of PIMCO, although the new management team successfully stabilized the business and outflows were reduced, net outflows have not yet ceased. Overall, flows were significantly influenced by the macroeconomic environment and in particular by the expectation of rising interest rates in the United States, which prompted many investors to reduce their investments in fixed­income securities. As a consequence, PIMCO will again be an area of focus for Allianz in 2016, with the clear goal of regaining its former momentum. Encouraged by the very good overall results, it is now time for us to look to the future. Rather than take our healthy position in the insurance market and asset management business for granted, we must adapt to the radical economic, political and global upheaval that is taking place. We are currently affected by geopolitical instability, demographic 6 Annual Report 2015 Allianz Group A To Our Investors  5 Letter to the Investors 12 Supervisory Board Report Supervisory Board 19 20 Board of Management 23 Allianz Share and social change, a slowdown in growth in many markets, and persistently low interest rates. In addition, digitalization is revolutionizing everything we do. It is fundamentally changing the way in which people interact with companies and with each other. In order for us to remain successful and strong in this constantly changing environment, we – the Board of Management, together with more than 200 colleagues in different countries and functions – have developed our Renewal Agenda. It was presented to you and the entire investor community at our Capital Markets Day in November 2015. Your company has defined five fields of action to secure growth in revenues and profit­ ability. True Customer Centricity: We aim for an outstanding customer experience by gaining a better understanding of our customers’ needs and tailoring our services so as to meet those needs. Our success is measured by our customers’ willingness to recommend Allianz, for which we use the Net Promoter Score (NPS). The results reveal the level of our customers’ satisfaction and loyalty and indicate how we can improve even more. Since a high NPS also means accelerated revenue growth, by 2018 we would like 75 % of our businesses (currently 50 %) to be loyalty leaders or at least above­market average in terms of NPS. Digital by Default: Digitalization can suddenly threaten business models that have been successful in the past, as we have witnessed in other industries. But the good news for you as an Allianz investor is that digitalization also opens up major opportunities for your company. It allows us to transform Allianz and concentrate on the things that promote positive customer experience and customer growth, and at the same time to increase our productivity. We are working throughout the Group on simplifying products and processes and on common technologies and platforms that will fully digitalize the business step by step. The resulting productivity gains will be invested in future business model improvements. Our ambition is that these initiatives will bring about a sustained increase in productivity of at least € 1 BN per year by 2018. In order to reach this goal, we will have to consistently align business models, products, and processes across country and company borders and minimize paper at each element of the value chain. Annual Report 2015 Allianz Group 7 Technical Excellence: Our aim is to raise the quality of our insurance business to a level that generates superior margins and growth rates by leveraging the best analytical methods and our highly­talented experts and managers. The advantages offered by digitalization will be used to optimize our risk­adequate pricing and to streamline and speed up claims processing. We also seek to increase growth and effectiveness in our business with medium­sized enterprises and commercial firms. In the Property­Casualty segment, our goal is to achieve a combined ratio of 94 % or better by 2018, with the support of the best technical experts, and to receive consistently positive feedback from brokers and custom­ ers. In the Life/Health business segment we are targeting a return on equity of 10 % or higher and a new business margin of at least 3 %. This also requires us to selectively wind down unprofitable business. Growth Engines: We will consolidate our leading positions in mature markets and expand our presence in growth regions with the aim of generating stronger growth and improving margins. Our new joint venture with the Chinese web portal Baidu, which reaches 90 % of Chinese internet users, is one good example. It puts us in a prominent position in one of the most dynamic digital insurance markets with annual growth rates of 40 % and expected annual revenues of € 100 BN by 2020. Inclusive Meritocracy: Our corporate culture will be refined to make not only high per­ formance matter, but also the way in which our employees go about achieving it, for example by collaborating closely in cross­functional teams. The aim is to promote an entrepreneurial spirit that concentrates on finding the best ideas and implementing them productively together with others in the organization. For this to succeed, we are adjusting our remuneration and incentive systems. The Inclusive Meritocracy Index (IMIX), which is based on our annual employee surveys, shows the progress we have made towards renewing our management culture. It currently stands at 68 % throughout the Group, and we aim to increase it to 72 % by 2018. We are implementing the Renewal Agenda together – full of optimism, ideas and con­ fidence in our own capabilities because we have excellent and in many cases unique resources. Even in adverse conditions, our financial strength has firm foundations. Allianz stands for trust based on competence, integrity, and resilience. That is why our customers and shareholders place their trust in us. We have a strong brand and it is getting even stronger – Allianz is the only insurer among the top 50 companies in the 8 Annual Report 2015 Allianz Group A To Our Investors  5 Letter to the Investors 12 Supervisory Board Report Supervisory Board 19 20 Board of Management 23 Allianz Share Brand Finance brand value ranking. We must now use our existing strengths to become even stronger, so we can consistently make the most of the opportunities presented by change. But we can only continue to be resilient if we constantly adapt to our environ­ ment. We believe we have set ourselves the right priorities to achieve this with our Renewal Agenda program. I feel particularly encouraged by the exciting and innovative initiatives that are being developed and launched in our strategic project groups covering these five fields of action. We have brought together a large number of enthusiastic colleagues from all continents who know what needs to be done and how important their mission is. They are already working hard to implement our plans in the operating businesses. As the Board of Management of Allianz, it is particularly important to us that the orga­ nization develops a clearer market orientation. If we want to grow in the digital era, we will have to pay closer attention to our customers and our competition in the future. This includes compe titors that have not been the primary focus of our benchmarking in the past. It is also essential that we exercise discipline when allocating capital. Business segments that do not have market leadership are at a competitive disadvantage. We cannot afford to tie up valuable capital and personnel that offer greater earnings potential when re­ deployed to businesses with higher margins and stronger growth. With this in mind, we will carefully reshape our portfolio with sound judgement to create even more leading and superior business units. Smaller, highly profitable companies will benefit from the advantages of using common regional platforms. Allianz will become even more flexible and focused on its customers. At the same time, our intrinsic values will remain the same as in the past 125 years: integrity, competence, and resilience. We will not follow every trend that comes along. But if and when funda­ mental opportunities emerge we will take the lead in our industry and carry out any changes required. This includes our decision to gradually adapt our investment policy to sustainable investment criteria and stop financing the coal industry. Although the operating environment poses growing risks and macroeconomic forces are unlikely to lead to an additional surge in growth, we will do everything we can to make 2016 another successful year for Allianz. 2016 will test our ability to implement the Annual Report 2015 Allianz Group 9 Renewal Agenda in our operating businesses and to take concrete steps towards becoming an Allianz that is consistently customer­focused and digital throughout its business. I am encouraged by the strengths of our business, by the solidarity of our management, and by our employees, who know what is at stake. It is clear to the employees of Allianz that both the future success of our company and your success as an investor depend, directly and entirely, on our ability to understand our customers and to tailor our products and services even more consistently to their require­ ments – or in other words, to provide simple, modern, and outstanding service quality at all times. I would like to thank you for your support and the trust you have placed in us and would be delighted if you remain a part of Allianz in the future. 10 Annual Report 2015 Allianz Group A To Our Investors  5 Letter to the Investors 12 Supervisory Board Report Supervisory Board 19 20 Board of Management 23 Allianz Share Annual Report 2015 Allianz Group 11 Supervisory Board Report Ladies and Gentlemen, During the 2015 fiscal year, the Supervisory Board fulfilled all its duties and obligations as laid out in the company statutes and applicable law. It monitored the management of the company, advised the Board of Management regarding the conduct of business and dealt with personnel matters related to the Board of Management as well as to succession planning. Overview Within the framework of our activities, the Board of Management informed us on a regular basis and in a timely and comprehensive manner, both verbally and in writing, on the course of business as well as on the development of the Allianz Group and Allianz SE, including devia- tions in actual business developments from the planning. The annual financial statements of Allianz SE and the consolidated financial statements with its respective auditor’s reports as well as the half-yearly and quarterly financial reports were thoroughly examined by the Super- visory Board and the Audit Committee. 12 Annual Report 2015 Allianz Group A To Our Investors  5 Letter to the Investors 12 Supervisory Board Report Supervisory Board 19 20 Board of Management 23 Allianz Share Further key areas the Board of Management reported on were the Renewal Agenda on busi- ness strategy of the Board of Management, capital adequacy, the ongoing challenges facing the life insurance business due to low interest rates, exceptional developments at certain subsidiaries, and implementation of the German Act on Equal Participation of Women and Men in Executive Positions. In addition, we were extensively involved in the Board of Manage- ment’s planning for both the 2016 fiscal year and the three-year period from 2016 to 2018. In the 2015 fiscal year, the Supervisory Board held six meetings. The meetings took place in February, March, May, August, October and December. The Board of Management’s verbal reports at the meetings were accompanied by written documents, which were sent to each member of the Supervisory Board in time for the relevant meeting. The Board of Management also informed us in writing of important events that occurred between meetings. The chair- men of the Supervisory and Management Boards also had regular discussions about major developments and decisions. Details on each member’s participation at meetings of the Supervisory Board and its commit- tees can be found in the Corporate Governance Report, starting on the Supervisory Board who were unable to attend meetings of the Supervisory Board or its committees were excused and, as a rule, cast their votes in writing. page 27. Members of issues discussed in the supervisOry BOard plenary sessiOns In all of the Supervisory Board’s 2015 meetings, the Board of Management reported on Group revenues and results by addressing the developments in individual business segments. Further- more, we were regularly informed by the Board of Management about the capital, financial and risk situation, the impact of natural catastrophes, the status of major legal disputes and other essential developments. In the meeting of 25 February 2015, the Supervisory Board dealt comprehensively with the pro visional financial figures for the 2014 fiscal year and the Board of Management’s recom- mended dividend. The appointed audit firm, KPMG AG Wirtschaftsprüfungsgesellschaft (KPMG), Munich, reported in detail on the provisional results of their audit. Underwriting reserves and IT systems were among the focal points of the audit. The Chief Compliance Officer then provided the annual report on the compliance organization and key compliance-related matters. During the further course of the meeting, the Supervisory Board also reviewed the extent to which individual members of the Board of Management had achieved their targets and set their variable remuneration for the 2014 fiscal year. We also verified the fitness and propriety of the members of the Board of Management and the Supervisory Board. Annual Report 2015 Allianz Group 13 In the meeting of 12 March 2015, the Supervisory Board discussed the audited annual Allianz SE and consolidated financial statements as well as the recommendation for the appropriation of earnings by the Board of Management for the 2014 fiscal year. KPMG confirmed, that there were no discrepancies to their February report and issued an unqualified auditor’s report for the individual and consolidated financial statements. In addition, the Board of Management submitted its report on risk developments in 2014. The Supervisory Board also dealt with the agenda for the 2015 Annual General Meeting (AGM) of Allianz SE and the respective proposals for resolution. The Supervisory Board also resolved to appoint KPMG as auditor for the individual and consolidated financial statements for the 2015 fiscal year and for the auditor’s review of the 2015 half-yearly interim report. In addition, the Super visory Board was informed about the developments in digitalization and the strategic importance of this topic. On 6 May 2015, just before the AGM, the Board of Management briefed us on the first quarter 2015 performance and on the Allianz Group’s current situation, particularly on the capitaliza- tion, the share price development, and the impact of certain loss events. In our meeting on 6 August 2015, the Board of Management reported in depth on the half-yearly results and also dealt with the issuance of Allianz shares to employees of the Allianz Group as well as the future Common European Sales Law. We then dealt extensively with the effects of the low interest rate environment on the life insurance sector and, in particular, the mea- sures adopted by Allianz. The Supervisory Board agreed to the early termination of Mr. Manuel Bauer’s appointment as a member of the Board of Management of Allianz SE with effect from 31 August 2015. In the course of the subsequent re-alignment of the schedule of responsibilities of the Board of Management, it appointed Mr. Oliver Bäte as the member of the Board of Man- agement responsible for “employment and social welfare”. The Supervisory Board also elected Mr. Jürgen Lawrenz to the Risk Committee as the successor of Mr. Franz Heiß, who stepped down from the Supervisory Board, and dealt extensively with the matter of implementing the German Act on Equal Participation of Women and Men in Executive Positions. The meeting was preceded by a separate information session for members of the Supervisory Board, at which Allianz managers gave presentations on current life insurance topics. The main focus of the meeting on 1 October 2015 was the future strategy of the Allianz Group. Mr. Bäte and his colleagues from the Board of Management presented the Renewal Agenda and initial implementation measures regarding the strategic topics True Customer Centricity, Digital by Default, Technical Excellence, Growth Engines, and Inclusive Meritocracy. The Supervisory Board discussed in detail the key points and further steps toward implementing the new strategic initiatives. 14 Annual Report 2015 Allianz Group A To Our Investors  5 Letter to the Investors 12 Supervisory Board Report Supervisory Board 19 20 Board of Management 23 Allianz Share At the 10 December 2015 meeting, the Board of Management provided us with information about the third-quarter results and further business developments as well as on further specifics of the Renewal Agenda. We also discussed the planning for the 2016 fiscal year and the 2016 – 2018 three- year period, the remuneration system within the Allianz Group and the Declaration of Conformity with the German Corporate Governance Code. The Supervisory Board reviewed the appropriateness of the remuneration of the Board of Management and adopted a resolution, on the recommendation of the Personnel Committee, to adjust the con- tributions to the pension plan. In addition, the Supervisory Board set targets for the variable remuneration of members of the Board of Management and discussed succession planning with regard to the Board of Management. Finally, we took a detailed look at the results of the Supervisory Board’s efficiency review and adopted a 15-year limit to the term of membership on the Supervisory Board. declaratiOn Of cOnfOrmity with the German cOrpOrate GOvernance cOde On 10 December 2015, the Board of Management and the Supervisory Board issued the Decla- ration of Conformity in accordance with § 161 of the German Stock Corporation Act (“Aktien- gesetz”). The Declaration was posted on the company website, where it is available to shareholders at all times. Allianz SE fully complies and will continue to fully comply with the recommendations of the German Corporate Governance Code made in the Code’s version of 5 May 2015. Further explanations of corporate governance in the Allianz Group can be found in the Corporate Governance Report starting on ment pursuant to § 289a HGB starting on nance can also be found on the Allianz website at page 27 and the Statement on Corporate Manage- page 32. More information on corporate gover- www.allianz.com/corporate-governance. cOmmittee activities The Supervisory Board has formed various committees in order to perform its duties efficiently: the Standing Committee, the Personnel Committee, the Audit Committee, the Risk Committee and the Nomination Committee. The committees prepare the discussion and adoption of resolutions in the plenary sessions. Furthermore, in appropriate cases, the authority to adopt resolutions has been delegated to the committees. There is no Conciliation Committee because the German Co-Determination Act (“Mitbestimmungsgesetz”), which provides for such a committee, does not apply to Allianz SE as a European Company (SE). The Standing Committee held three meetings in 2015. These related primarily to corporate governance issues, the preparation for the AGM, the matter of implementing the German Act on Equal Participation of Women and Men in Executive Positions, and the internal review of the Supervisory Board’s efficiency. During the fiscal year the committee passed resolutions to approve loans to senior executives. Annual Report 2015 Allianz Group 15 The Personnel Committee held four regular meetings and two extraordinary meetings by tele- phone conference in the 2015 financial year. Areas of focus were the re-alignment of the schedule of responsibilities of the Board of Management following the departure of Mr. Bauer, and further succession planning. The committee also dealt with other mandate matters for active and former members of the Board of Management and with the proportion of women on Allianz SE’s Board of Management. In addition to preparing the target achievement of Board of Management members for the 2014 fiscal year, the committee prepared the review of the remuneration system, and the setting of targets for variable remuneration. The Audit Committee held five meetings in 2015. In the presence of the auditor, it discussed the annual financial statements of Allianz SE and the consolidated financial statements of the Allianz Group, the management reports and auditor’s reports, as well as the half-yearly and quarterly financial reports. After carrying out these reviews, the Audit Committee saw no objections. The committee also dealt with the auditor’s engagement, established priorities for the annual audit in the fiscal year 2015, and discussed assignments to the auditors for services not connected to the audit itself. In addition, the committee dealt extensively with the com- pliance system, the internal auditing system as well as the accounting process and internal financial reporting control mechanisms. The committee received regular reports on the audit department’s work and on legal and compliance issues. Furthermore, in a presentation on cyber-security, the committee was informed about the measures to protect Allianz’s IT systems, and it also familiarized itself with the implementation status of the governance requirements according to Solvency II. The Risk Committee held two meetings in 2015, at which it discussed the current risk situation of the Allianz Group with the Board of Management. The risk report and other risk-related statements in the annual Allianz SE and consolidated financial statements, as well as in man- agement and group management reports, were reviewed with the auditor and the Audit Committee was informed of the result. The appropriateness of the early risk recognition system at Allianz was also discussed. The committee looked in detail at the effectiveness of the risk management system, in particular behavioral risk in property insurance. Other matters con- sidered were the new supervisory regime according to Solvency II, the risk strategy of Allianz SE and of the Allianz Group, a MaRisk (Minimum Requirements for Risk Management) audit, the effects of the enduring low interest rate environment, and the Allianz SE’s classification as a Global Systemically Important Insurer (G-SII). In November 2015, the Nomination Committee held a meeting by telephone conference to discuss the vacant position on the Supervisory Board that will materialise at the end of the AGM on 4 May 2016. 16 Annual Report 2015 Allianz Group A To Our Investors  5 Letter to the Investors 12 Supervisory Board Report Supervisory Board 19 20 Board of Management 23 Allianz Share The Supervisory Board was regularly and comprehensively informed of the committees’ work. Chair and committees of the Supervisory Board – as of 31 December 2015 Chairman of the Supervisory Board: Dr. Helmut Perlet Deputy Chairmen: Dr. Wulf H. Bernotat, Rolf Zimmermann Standing Committee: Dr. Helmut Perlet (Chairman), Dr. Wulf H. Bernotat, Prof. Dr. Renate Köcher, Gabriele Burkhardt-Berg, Rolf Zimmermann Personnel Committee: Dr. Helmut Perlet (Chairman), Christine Bosse, Rolf Zimmermann Audit Committee: Dr. Wulf H. Bernotat (Chairman), Dr. Helmut Perlet, Jim Hagemann Snabe, Jean-Jacques Cette, Ira Gloe-Semler Risk Committee: Dr. Helmut Perlet (Chairman), Christine Bosse, Peter Denis Sutherland, Dante Barban, Jürgen Lawrenz Nomination Committee: Dr. Helmut Perlet (Chairman), Prof. Dr. Renate Köcher, Peter Denis Sutherland audit Of annual accOunts and cOnsOlidated financial statements In compliance with the special legal provisions applying to insurance companies, the statutory auditor and the auditor for the review of the half-yearly financial report are appointed by the Supervisory Board of Allianz SE and not by the AGM. The Supervisory Board has appointed KPMG as statutory auditor for the annual Allianz SE and consolidated financial statements, as well as for the review of the half-yearly financial report of the fiscal year 2015. KPMG audited the financial statements of Allianz SE and the Allianz Group as well as the respective management reports. They issued an auditor’s report without any reservations. The consolidated financial statements were prepared on the basis of the international financial reporting standards (IFRS), as adopted in the European Union. KPMG performed a review of the half-yearly and quarterly financial reports. All Supervisory Board members received the documentation relating to the annual financial statements and the auditor’s reports from KPMG on schedule. The provisional financial state- ments and KPMG’s audit results were discussed in the Audit Committee on 17 February 2016 and in the plenary session of the Supervisory Board on 18 February 2016. The final financial statements and KPMG’s audit reports were reviewed on 10 March 2016 by the Audit Committee and in the Supervisory Board plenary session. The auditors participated in these discussions and presented the main results from the audit. No material weaknesses in the internal financial reporting control process were discovered. There were no circumstances that might give cause for concern about the auditor’s independence. Annual Report 2015 Allianz Group 17 On the basis of our own reviews of the annual Allianz SE and consolidated financial state- ments, the management and group management reports and the recommendation for appro- priation of earnings, we raised no objections and agreed with the results of the KPMG audit. We approved the Allianz SE and consolidated financial statements prepared by the Board of Management. The company’s financial statements are therefore adopted. We agree with the Board of Management’s proposal on the appropriation of earnings. The Supervisory Board would like to thank all Allianz Group employees for their great personal commitment over the past year. memBers Of the supervisOry BOard and BOard Of manaGement Mr. Franz Heiß retired on 31 July 2015 and thus stepped down from his position as employee representative on the Supervisory Board of Allianz SE. The Supervisory Board thanked Mr. Heiß and expressed its appreciation of his efforts during his period of office. Mr. Jürgen Lawrenz replaced Mr. Heiß as elected employee representative on the Supervisory Board of Allianz SE with effect from 1 August 2015. The current term of the Supervisory Board will expire following the 2017 AGM. The fiscal year 2015 also saw personnel changes within Allianz SE’s Board of Management. Mr. Michael Diekmann left the Board of Management with effect from 6 May 2015. Mr. Oliver Bäte took over as Chairman of the Board of Management with effect from 7 May 2015. Mr. Manuel Bauer left the Board of Management with effect from 31 August 2015 and his areas of responsibility were allocated to other Board departments. Munich, 10 March 2016 For the Supervisory Board: Dr. Helmut Perlet Chairman 18 Annual Report 2015 Allianz Group A To Our Investors  5 Letter to the Investors 12 Supervisory Board Report Supervisory Board 19 20 Board of Management 23 Allianz Share Supervisory Board Dr. Helmut Perlet Chairman Former Member of the Board of Management of Allianz SE Dr. Wulf H. Bernotat Vice Chairman Former Chairman of the Board of Management of E.ON AG rolf Zimmermann Vice Chairman Chairman of the (European) SE Works Council of Allianz SE Dante BarBan Employee of Allianz S.p.A. CHristine Bosse Former Chief Executive Officer of Tryg A/S GaBriele BurkHarDt-BerG Chairwoman of the Group Works Council of Allianz SE Jean-JaCques Cette Chairman of the Group Works Council of Allianz France S.A. ira Gloe-semler Regional Representative Financial Services of ver.di Hamburg franZ Heiss until 31 July 2015 Employee of Allianz Beratungs- und Vertriebs-AG Prof. Dr. renate köCHer Head of “Institut für Demoskopie Allensbach” (Allensbach Institute) JürGen laWrenZ since 1 August 2015 Employee of Allianz Managed Operations & Services SE Jim HaGemann snaBe Chairman of World Economic Forum USA Peter Denis sutHerlanD Former Chairman of the Board of Directors of Goldman Sachs International Annual Report 2015 Allianz Group 19 Board of Management oliver Bäte Dr. HelGa JunG serGio BalBinot (from left to right) Dr. CHristof masCHer Dr. Werner ZeDelius (from left to right) 20 Annual Report 2015 Allianz Group A To Our Investors  5 Letter to the Investors 12 Supervisory Board Report Supervisory Board 19 20 Board of Management 23 Allianz Share Jay ralPH Dr. axel tHeis (from left to right) Dr. Dieter Wemmer Dr. maximilian Zimmerer (from left to right) Annual Report 2015 Allianz Group 21 Board of Management oliver Bäte Chairman of the Board of Management since 7 May 2015 Global Property-Casualty until 6 May 2015 miCHael Diekmann until 6 May 2015 Chairman of the Board of Management serGio BalBinot Insurance Western & Southern Europe Insurance Middle East, Africa, India since 1 September 2015 manuel Bauer until 31 August 2015 Insurance Growth Markets Dr. HelGa JunG Insurance Iberia & Latin America, Legal & Compliance, Mergers & Acquisitions Dr. CHristof masCHer Operations, Allianz Worldwide Partners Jay ralPH Asset Management, US Life Insurance Dr. axel tHeis Global Insurance Lines & Anglo Markets Global Property-Casualty since 7 May 2015 Dr. Dieter Wemmer Finance, Controlling, Risk Dr. Werner ZeDelius Insurance German Speaking Countries Insurance Central & Eastern Europe since 1 September 2015 Dr. maximilian Zimmerer Investments, Global Life/Health Insurance Asia Pacific since 1 September 2015 22 Annual Report 2015 Allianz Group A To Our Investors  5 Letter to the Investors 12 Supervisory Board Report Supervisory Board 19 20 Board of Management 23 Allianz Share Allianz Share − Allianz shares up by 19 %. − Dividend increases to € 7.30. Double-digit returns on investment four years in a row Following a year of turbulent developments in share prices, European stock markets reported a slight increase as the year drew to a close. Back in spring, stock markets set new records, driven mainly by the expansionary monetary policy of the European Central Bank, as well as a weaker Euro. It was then, however, that a change occurred in the fundamental data, as the Euro embarked on a recovery course and the Greek crisis flared up again. Moreover, there were growing con- cerns about a possible slowdown in the Chinese economy. In circum- stances like these, a 19.1 % increase in the value of Allianz shares to € 163.55 is substantial, outperforming the STOXX Europe 600 Insur- ance sector index (+14.0 %) and the EURO STOXX 50 cross-sector index (+3.8 %). Provided the dividend was reinvested in Allianz shares, investments in the company would have seen an increase of 24.6 %. This year’s gain constitutes a double-digit rise in value for the fourth time in a row. Not only is this a reflection of favorable business devel- opments, it is also testament to the positive reaction to an investor event, in which our Renewal Agenda was introduced in detail. You can find more detailed information in the Strategy and Steering starting page 58. Following the publication of the 2015 results on 19 Feb- on ruary 2016, 63 % of analysts issued a “buy” recommendation for Allianz shares – with an average price target of € 174. You can find the current www. analyst recommendations and profit forecasts online at allianz.com/analystrecommendations. A rising share price in 2015 lends further credibility to the appeal of a long-term investment in Allianz shares. Investors who have had our shares in their portfolios for five years and opted to reinvest their dividends achieved an average annual performance of 18.1 % over this period of time. Over the last ten years the corresponding gain came to 6.7 %. AlliAnz shAre performAnce in compArison average annual performance in % Allianz (excl. dividends) Allianz (incl. dividends) sToXX Europe 600 Insurance eUro sToXX 50 DAX Source: Thomson Reuters Datastream 1 year 2015 5 years 2011 – 2015 10 years 2006 – 2015 19.1 24.6 14.0 3.8 9.6 13.0 18.1 13.1 3.2 9.2 2.5 6.7 1.6 (0.9) 7.1 DevelopmenT of The AlliAnz shAre price versUs sToXX eUrope 600 insUrAnce AnD eUro sToXX 50 indexed on the Allianz share price in € € 163.55 (31/12/2015) 170 160 150 140 € 137.35 (1/1/2015) 1Q 2Q 3Q 4Q Allianz STOXX Europe 600 Insurance EURO STOXX 50 Source: Thomson Reuters Datastream shAre price DevelopmenT AgAinsT sToXX eUrope 600 insUrAnce € 200 175 150 125 100 75 50 169.70 133.35 139.70 130.80 117.20 101.75 108.05 105.85 70.02 57.47 2011 2012 2013 2014 2015 Allianz share price STOXX Europe 600 Insurance (indexed on the Allianz share price) Allianz highs and lows Source: Thomson Reuters Datastream Annual Report 2015 Allianz Group 23 Higher dividend Shareholder structure In line with our dividend policy, we will be proposing to the Annual General Meeting a dividend increase of € 0.45 to € 7.30. This corre- sponds to a dividend yield of 4.5 % on the year-end share price. The payout ratio will remain unchanged at 50 %. You can find more page 92 and detailed information in the Outlook 2016 starting on at www.allianz.com/dividend. Weighting in major indices The Allianz share is strongly represented in major German and Euro- pean indices, as well as included in important global indices. WeighTing of AlliAnz shAres in mAjor inDices as of 31 December 2015 DAX eUro sToXX 50 sToXX Europe 600 Insurance msci World Financials msci World Source: Deutsche Börse Group, STOXX Limited, MSCI Weighting in % Ranking Index members 8.3 3.5 14.7 1.2 0.3 3 6 1 9 69 30 50 36 361 1,664 With around 470,000 shareholders, Allianz is one of the most widely held listed public corporations in Europe. Apart from approximately 0.5 % of Allianz shares held in treasury, all our shares are held in free float. At the end of the year, 85 % were held by institutional investors and 15 % by private investors. The breakdown by region shows that 74 % of Allianz shares were owned by European investors and 26 % by non- European investors. For more detailed information on our share- holder structure, please refer to www.allianz.com/shareholders. bAsic shAre informATion Share type Security codes Bloomberg Reuters Registered shares with restricted transfer Wkn 840 400 isin De 000 840 400 5 Alv gr 0#Alvg.DeU Service and contact Allianz Investor Line Monday to Friday, 8 am to 8 pm CET Phone: +49.89.3800-7555 E-mail: investor.relations@allianz.com www.allianz.com/investor-relations Allianz Investor Relations app for iOS and Android Financial calendar: see back cover. AlliAnz shAre key inDicATors AT A glAnce Total number of issued shares as of 31 December 457,000,000 457,000,000 456,500,000 455,950,000 455,300,000 2015 2014 2013 2012 2011 Share price as of 31 December High of the year Low of the year Share price performance in the year Beta coefficient1 Market capitalization as of 31 December Basic earnings per share Price-earnings ratio Dividend per share Total dividend Dividend yield as of 31 December Payout ratio4 € € € % € bn € € € mn % % 163.55 169.70 133.35 19.1 0.9 74.7 14.56 11.2 7.302 3,3202,3 4.52 502,3 137.35 139.70 117.20 5.4 0.8 62.8 13.71 10.0 6.85 3,112 5.0 50 130.35 130.80 101.75 24.4 1.3 59.5 13.23 9.9 5.30 2,405 4.1 40 104.80 105.85 70.02 41.8 1.1 47.8 11.56 9.2 4.50 2,039 4.3 39 73.91 108.05 57.47 (16.9) 1.5 33.7 5.74 13.1 4.50 2,037 6.1 79 1 2 3 In comparison with EURO STOXX 50, source: Bloomberg. Proposal. Total dividend reflects the treasury shares held at the time of the publication of the convocation of the Annual General Meeting in the Federal Gazette. Such treasury shares are not entitled to the dividend pursuant to § 71b of the German Stock Corporation Act (AktG). Should there be any change in the number of treasury shares by the date of the Annual General Meeting, the total dividend will be amended accordingly. Based on net income after non-controlling interests. 4 24 Annual Report 2015 Allianz Group coRpoRAte GoveRnAnce B Annual Report 2015 Allianz Group 2525 B _ coRpoRAte GoveRnAnce pages 26 – 50 27 32 34 37 Corporate Governance Report Statement on Corporate Manage ment pursuant to § 289a of the HGB (part of the Group Management Report) Takeover-related Statements and Explanations (part of the Group Management Report) Remuneration Report (part of the Group Management Report) 26 Annual Report 2015 Allianz Group B Corporate Governance 27 32 Corporate Governance Report Statement on Corporate Management pursuant to § 289a of the HGB 34 Takeover-related Statements and Explanations 37 Remuneration Report Corporate Governance Report Good corporate governance is essential for sustainable business per- formance. The Board of Management and the Supervisory Board of Allianz SE thus attach great importance to complying with the recom- mendations of the German Corporate Governance Code (referred to hereinafter as the “Code”). The Declaration of Conformity with the recommendations of the Code issued by the Board of Management and the Supervisory Board on 10 December 2015 and the company’s position regarding the Code’s suggestions can be found in the State- ment on Corporate Management pursuant to § 289a of the HGB starting on page 32. Regular Board of Management meetings are led by the Chair- man. Each member of the Board may request a meeting, providing notification of the proposed subject. The Board takes decisions by a simple majority of participating members. In the event of a tie, the Chairman casts the deciding vote. The Chairman can also veto deci- sions, but cannot impose any decisions against the majority vote. Board of ManaGeMent and Group CoMMittees In the financial year 2015, there were the following Board of Manage- ment committees: Corporate Constitution of the European Company (SE) As a European Company, Allianz SE is subject to special European SE regulations and the German SE Implementation Act (“SE-Ausfüh- rungsgesetz”) in addition to German stock corporation Act. However, the main features of a German stock corporation – in particular the two-tier board system (Board of Management and Supervisory Board) and the principle of equal employee representation on the Super- visory Board – have been maintained by Allianz SE. Function of the Board of Management The Board of Management of Allianz SE comprises nine members. It is responsible for setting business objectives and the strategic direc- tion, coordinating and supervising the operating entities, as well as implementing and overseeing an efficient risk management system. The Board of Management also prepares the Group’s consolidated financial statements and the annual financial statements of Allianz SE, as well as interim reports. The members of the Board of Management are jointly responsible for management and for complying with legal requirements. Not- withstanding this overall responsibility, the individual members head the departments they have been assigned independently. There are divisional responsibilities for business segments as well as func- tional responsibilities. The latter include the Finance-, Risk Manage- ment- and Controlling-Function, Investments, Operations – includ- ing IT –, Human Resources, Legal and Compliance, Internal Audit and Mergers & Acquisitions. Business division responsibilities focus on geographical regions or Global Lines, such as Asset Management. Rules of procedure specify in more detail the structure and depart- mental responsibilities of the Board of Management. Board CoMMittees Board CoMMittees responsiBiLities Group CapitaL CoMMittee Michael Diekmann (Chairman) until 6 May 2015, Oliver Bäte (Chairman) from 7 May 2015, Dr. Dieter Wemmer, Dr. Maximilian Zimmerer Group finanCe and risk CoMMittee Dr. Dieter Wemmer (Chairman), Sergio Balbinot, Dr. Helga Jung, Jay Ralph, Dr. Axel Theis, Dr. Maximilian Zimmerer Group it CoMMittee Dr. Christof Mascher (Chairman), Jay Ralph, Dr. Axel Theis from 21 May 2015, Dr. Dieter Wemmer, Dr. Werner Zedelius Group MerGers and aCquisitions CoMMittee Dr. Helga Jung (Chairwoman), Dr. Dieter Wemmer, Dr. Maximilian Zimmerer as of 31 December 2015 Proposals to the Board of Management concerning risk capital management, including Group-wide capital and liquidity planning, as well as investment strategy. Implementing and overseeing the principles of Group-wide capital and liquidity planning, as well as investment strategy and preparing risk strategy. This includes, in particular, significant individual investments and guidelines for currency management, Group financing and internal Group capital management, as well as establishing and overseeing a Group-wide risk management and monitoring system including dynamic stress tests. Developing, proposing, implementing and monitoring a Group-wide it strategy, approval of relevant it investments. Managing and overseeing Group M & a transactions, including approval of individual transactions within certain thresholds. Besides Board committees, there are also Group committees whose job it is to prepare decisions for the Board of Management of Allianz SE, submit proposals for resolutions, and ensure the smooth flow of information within the Group. Annual Report 2015 Allianz Group 27 Principles and function of the Supervisory Board The German Co-Determination Act (“Mitbestimmungsgesetz”) does not apply to Allianz SE because it has the legal form of a European Company (SE). The size and composition of the Supervisory Board are instead determined by general European SE regulations. These regu- lations are implemented in the Statutes and by the SE Agreement. The Supervisory Board comprises twelve members, including six shareholder representatives appointed by the AGM. The six employee representatives are appointed by the SE works council. The specific procedure for their appointment is laid down in the SE Agreement. This agreement stipulates that the six employee representatives must be allocated in proportion to the number of Allianz employees in the different countries. The Supervisory Board currently in office comprises four employee representatives from Germany and one each from France and Italy. The last regular election of the Super- visory Board took place in May 2012 for a term lasting until the end of the ordinary AGM in 2017. According to § 17 (2) of the German SE Imple- mentation Act (“SE-Ausführungsgesetz”) the Supervisory Board of Allianz SE shall be composed of at least 30 % women and at least 30 % men as of 1 January 2016. The Supervisory Board oversees and advises the Board of Man- agement on managing the business. It is also responsible for appoint- ing the members of the Board of Management, determining their overall remuneration and reviewing Allianz SE’s and the Allianz Group’s annual financial statements. The Supervisory Board’s activi- ties in the 2015 financial year are described in the Supervisory Board Report starting on page 12. The Supervisory Board held six regular meetings in the 2015 financial year and is scheduled to meet three times each half calendar year in the future. Extraordinary meetings may be convened as needed. The committees also hold regular meetings. The Supervisory Board takes all decisions based on a simple majority. The special require- ments for appointing members to the Board of Management con- tained in the German Co-Determination Act and the requirement for a Conciliation Committee do not apply to an SE. In the event of a tie, the casting vote lies with the Chairman of the Supervisory Board, who at Allianz SE must be a shareholder representative. If the Chairman is not present in the event of a tie, the casting vote lies with the deputy chairperson from the shareholder side. A second deputy chairperson is elected on the proposal of the employee representatives. The Supervisory Board regularly reviews the efficiency of its activities. The Supervisory Board discusses recommendations for improvements and adopts appropriate measures on the basis of rec- ommendations from the Standing Committee. In the financial year 2015, there were the following Group committees: Group CoMMittees Group CoMMittees responsiBiLities Group CoMpensation CoMMittee Board members of Allianz se and executives below Allianz se Board level Group underwritinG CoMMittee Members of the Board of Management, executives below Allianz se Board level and Chief Underwriting Officers of Group companies Group investMent CoMMittee Members of the Board of Management and executives below Allianz se Board level internationaL exeCutive CoMMittee Chairman of the Allianz se Board of Management (Chairman), all other members of the Allianz se Board of Management and Managing Directors of major Group companies Designing, monitoring and improving Group-wide compensation systems in line with regulatory requirements and sub - mitting an annual report on the results of its monitoring, along with proposals for improvement. Monitoring of the underwriting business, of the related risk management and strategy as well as developing an underwriting policy. Implementing Group investment strategy, including monitoring Group-wide invest - ment activities as well as approving invest- ment-related frameworks and guidelines and individual investments within certain thresholds. Discussion of overall strategic issues for the Allianz Group. The Allianz Group runs its operating entities and business segments via an integrated management and control process. The Holding and the operating entities first define the business strategies and goals. On this basis, joint plans are then prepared for the Supervisory Board’s consideration when setting targets for performance-based remuneration of the members of the Board of Management. For details, see the Remuneration Report starting on page 37. The Board of Management reports regularly and comprehen- sively to the Supervisory Board on business development, the financial position and earnings, planning and achievement of objectives, busi- ness strategy and risk exposure. Details of the Board of Management’s reporting to the Supervisory Board are laid down in the reporting rules issued by the Supervisory Board. Important decisions of the Board of Management require approval by the Supervisory Board. These requirements are stipu- lated by law, by the Statutes, or in individual cases by decisions of the Annual General Meeting (AGM). Supervisory Board approval is required, for example, for certain capital transactions, intercompany agreements and the launch of new business segments or the closure of existing ones. Approval is also required for acquisitions of compa- nies and holdings in companies, as well as divestments of Group companies which exceed certain threshold levels. The Agreement concerning the Participation of Employees in Allianz SE in the version dated 3 July, 2014 (hereinafter “SE Agreement”) requires the approval of the Supervisory Board for the appointment of the member of the Board of Management responsible for employment and social welfare. 28 Annual Report 2015 Allianz Group B Corporate Governance 27 32 Corporate Governance Report Statement on Corporate Management pursuant to § 289a of the HGB 34 Takeover-related Statements and Explanations 37 Remuneration Report supervisory Board CoMMittees Part of the Supervisory Board’s work is carried out by its committees. The Supervisory Board receives regular reports on the activities of its committees. The composition of committees and the tasks assigned to them are regulated by the Supervisory Board’s Rules of Procedure. puBLiCation of detaiLs of MeMBers’ partiCipation in MeetinGs The Supervisory Board considers it good corporate governance to publish the details of individual members’ participation in plenary sessions and committee meetings. supervisory Board CoMMittees puBLiCation of detaiLs of MeMBers’ partiCipation in MeetinGs supervisory Board CoMMittees standinG CoMMittee 5 members − Chairman: Chairman of the Supervisory Board (Dr. Helmut Perlet) − Two further shareholder representatives (Prof. Dr. Renate Köcher, Dr. Wulf H. Bernotat) − Two employee represen tatives (Gabriele Burkhardt-Berg, Rolf Zimmermann) audit CoMMittee 5 members − Chairman: appointed by the Supervisory Board (Dr. Wulf H. Bernotat) − Three shareholder representatives (in addition to Dr. Wulf H. Bernotat: Dr. Helmut Perlet, Jim Hagemann Snabe) − Two employee represen tatives (Ira Gloe-Semler, Jean-Jacques Cette) risk CoMMittee 5 members − Chairman: appointed by the Supervisory Board (Dr. Helmut Perlet) − Three shareholder representatives (in addition to Dr. Helmut Perlet: Christine Bosse, Peter Denis Sutherland) − Two employee represen tatives (Dante Barban, Franz Heiß until 31 July 2015, Jürgen Lawrenz from 6 August 2015) personneL CoMMittee 3 members − Chairman: Chairman of the Supervisory Board (Dr. Helmut Perlet) − One further shareholder representative (Christine Bosse) − One employee represen tative (Rolf Zimmermann) noMination CoMMittee 3 members − Chairman: Chairman of the Supervisory Board (Dr. Helmut Perlet) − Two further shareholder responsiBiLities − Approval of certain transactions which require the approval of the Supervisory Board, e.g. capital measures, acquisitions and disposals of participations − Preparation of the Declaration of Conformity pursuant to § 161 “Aktiengesetz” (German Stock Corporation Act) and checks on corporate governance − Preparation of the efficiency review of the Supervisory Board − Initial review of the annual Allianz se and consolidated financial statements, management reports (incl. Risk Report) and the dividend proposal, review of half-yearly reports or, where applicable, quarterly financial reports or statements − Monitoring of the financial reporting process, the effectiveness of the internal control and audit system and legal and compliance issues − Monitoring of the audit procedures, including the independence of the auditor and the services addi - tionally rendered, awarding of the audit contract and determining the focal points of the audit − Monitoring of the general risk situation and special risk developments in the Allianz Group − Monitoring of the effectiveness of the risk management system − Initial review of the Risk Report and other risk-related statements in the annual financial statements and management reports of Allianz se and the Allianz Group, informing the Audit Committee of the results of such reviews − Preparation of the appointment of Board of Management members − Preparation of plenary session resolutions on the compensation system and the overall compensation of Board of Management members − Conclusion, amendment and termination of service contracts of Board of Management members unless reserved for the plenary session − Long-term succession planning for the Board of Management − Approval of the assumption of other mandates by Board of Management members − Setting of concrete objectives for the composition of the Supervisory Board − Establishment of selection criteria for shareholder representatives on the Supervisory Board in compliance with the Code’s recommendations on the composition of the Supervisory Board representatives (Prof. Dr. Renate Köcher, Peter Denis Sutherland) − Selection of suitable candidates for election to the Supervisory Board as shareholder representatives Annual Report 2015 Allianz Group pLenary sessions of tHe supervisory Board Dr. Helmut Perlet (Chairman) Dr. Wulf H. Bernotat (Vice Chairman) Rolf Zimmermann (Vice Chairman) Dante Barban Christine Bosse Gabriele Burkhardt-Berg Jean-Jacques Cette Ira Gloe-Semler Franz Heiß Prof. Dr. Renate Köcher Jürgen Lawrenz Jim Hagemann Snabe Peter Denis Sutherland standinG CoMMittee Dr. Helmut Perlet (Chairman) Dr. Wulf H. Bernotat Gabriele Burkhardt-Berg Prof. Dr. Renate Köcher Rolf Zimmermann personneL CoMMittee Dr. Helmut Perlet (Chairman) Christine Bosse Rolf Zimmermann audit CoMMittee Dr. Wulf H. Bernotat (Chairman) Jean-Jacques Cette Ira Gloe-Semler Jim Hagemann Snabe Dr. Helmut Perlet risk CoMMittee Dr. Helmut Perlet (Chairman) Dante Barban Christine Bosse Franz Heiß Jürgen Lawrenz Peter Denis Sutherland noMination CoMMittee Dr. Helmut Perlet (Chairman) Prof. Dr. Renate Köcher Peter Denis Sutherland 1 2 Mr. Heiß left the Supervisory Board on 31 July 2015. Mr. Lawrenz joined the Supervisory Board on 1 August 2015. presenCe in perCent 6/6 5/6 6/6 6/6 6/6 6/6 6/6 6/6 3/31 6/6 3/3 2 6/6 5/6 3/3 1/3 3/3 2/3 3/3 6/6 5/6 6/6 4/5 5/5 5/5 5/5 5/5 2/2 2/2 2/2 1/11 1/12 1/2 1/1 1/1 1/1 100 83.33 100 100 100 100 100 100 100 100 100 100 83.33 100 33.33 100 66.67 100 100 83.33 100 80 100 100 100 100 100 100 100 100 100 50 100 100 100 29 oBjeCtives of tHe supervisory Board reGardinG its CoMposition In order to implement a recommendation by the Code, the Super- visory Board specified the following objectives for its composition at its meeting on 10 December 2015: oBjeCtives of aLLianz se’s supervisory Board reGardinG its CoMposition “The aim of Allianz se’s Supervisory Board is to have members who are equipped with the necessary skills and competence to properly supervise and advise Allianz se’s management. Supervisory Board candidates should possess the professional expertise and experience, integrity, motivation and commitment, independence and personality required to successfully carry out the responsibilities of a Supervisory Board member in a financial-services institution with international operations. To promote additional cooperation among Supervisory Board members, care should be taken in selecting the candidates to ensure that adequate attention is paid to ensuring diversity in occupational backgrounds, professional expertise and experience. Employee representation within Allianz se, as provided for by the se Agreement concerning the Participation of Employees dated 3 July 2014, contributes to diversity of work experience and cultural background. Pursuant to § 6 (2) sentence 2 of the Act on the Participation of Employees in a European Company (seBG), the number of women and men appointed as German employee representatives should be proportional to the number of women and men working in the German companies. However, the Supervisory Board does not have the right to select the employee representatives. The following requirements and objectives apply to the composition of Allianz se’s Supervisory Board:1 – – depending on possible memberships in one or more of the currently five Super- visory Board committees, extra time planning to participate in the committee meetings and to prepare for such meetings is required; this applies in particular to the Audit and Risk Committees; extraordinary meetings of the Supervisory Board or of a committee may be necessary to deal with special matters. 4. Retirement age According to the Supervisory Board’s Rules of Procedure, its members may not, in general, be older than 70 years of age. 5. Term of membership The continuous period of membership for any member of the Supervisory Board should, as a rule, not exceed 15 years. II. Requirements relating to the composition of the Board as a whole 1. Specialist knowledge – At least one member must have considerable experience in the insurance and financial-services fields At least one member must have expert knowledge of accounting and auditing as defined by § 100 (5) of the German Stock Corporation Act (AktG). – – Specialist knowledge of, or experience in, other economic sectors. 2. International character At least four of the members must, on the basis of their origin or function, represent regions or cultural areas in which Allianz se conducts significant business. Since the establishment of Allianz se as a Societas Europaea (European Company), Allianz employees from different Member States of the eu are considered in the distribution of Supervisory Board seats for employee representatives, according to the Agreement concerning the Participation of Employees in Allianz se dated 3 July 2014. 3. Diversity and appropriate representation of women The members of the Supervisory Board shall complement one another regarding their background, professional experience and specialist knowledge, in order to provide the Supervisory Board with the most diverse sources of experience and specialist knowledge possible. The Supervisory Board shall be composed of at least 30 % women and at least 30 % men. The representation of women is generally considered to be the joint responsibility of the shareholder and employee representatives. “ I. Requirements relating to the individual members of the Supervisory Board 1. General selection criteria – Managerial or operational experience – General knowledge of the insurance and financial services business – Willingness and ability to make sufficient commitments on substance – Fulfillment of the regulatory requirements, in particular1: – Reliability – Knowledge of the field of corporate governance and supervisory law – Knowledge of the main features of accounting and risk management Compliance with the limitation on the number of mandates as recommended by the German Corporate Governance Code and required by § 24 (4) of the German Insurance Supervision Act 2016 (“Versicherungsaufsichtsgesetz – vaG 2016”). – 2. Independence At least eight members of the Supervisory Board should be independent as defined by No. 5.4.2 of the Corporate Governance Code, i.e. they may not have any business or personal relations with Allianz se or its Executive Bodies, a controlling shareholder or an enterprise associated with the latter, which may cause a substantial and not merely temporary conflict of interests. In case shareholder representatives and employee representatives are viewed separately, at least four members should be independent within the meaning of No. 5.4.2 of the Corporate Governance Code. Regarding employee representatives, however, the mere fact of employee repre- sentation and the existence of a working relationship with the company shall not itself affect independence. In addition, at least one member must be independent within the meaning of § 100 (5) of the German Stock Corporation Act (AktG). It must be taken into account that the possible emergence of conflicts of interest in individual cases cannot, as a general rule, be excluded. Potential conflicts of interest must be disclosed to the chairman of the Supervisory Board and will be resolved by appropriate measures. 3. Time of availability Each member of the Supervisory Board must ensure that it has sufficient time to dedicate to the proper fulfilment of the Supervisory Board mandate. It has to be taken into account that – there are six ordinary Supervisory Board meetings per year, each of which requires adequate preparation; sufficient time has to be dedicated for the audit of the annual and consolidated financial statements; attendance of the General Meeting is required; – – 1 For further details, please see BaFin Guidance Notice on Vetting Members of Administrative and Super- visory Bodies in accordance with the German Banking Act and the German Insurance Supervision Act in its respective effective version. 30 Annual Report 2015 Allianz Group B Corporate Governance 27 32 Corporate Governance Report Statement on Corporate Management pursuant to § 289a of the HGB 34 Takeover-related Statements and Explanations 37 Remuneration Report The composition of the Supervisory Board of Allianz SE reflects these objectives. It has an appropriate number of independent members with international backgrounds. With four female Supervisory Board members, the current legislation for equal participation of women and men in leadership positions (statutory gender quota of 30 %) is being met. The current composition of the Supervisory Board and its page 17. committees is described on Shares held by members of the Board of Management and the Supervisory Board The total holdings of members of the Board of Management and the Supervisory Board of Allianz SE amounted to less than 1 % of the com- pany’s issued shares as of 31 December 2015. Directors’ dealings Members of the Board of Management and the Supervisory Board are obliged by the German Securities Trading Act (“Wertpapierhandels- gesetz”) to disclose any transactions involving shares of Allianz SE or financial instruments based on them to both Allianz SE and the Ger- man Federal Financial Supervisory Authority should the value of the shares acquired or divested by the member or a person closely asso- ciated to the member amount to five thousand Euros or more within a calendar year. Such disclosures are published on our website at www.allianz.com/ www.allianz.com/management-board and supervisory-board. Annual General Meeting Shareholders exercise their rights at the Annual General Meeting. When adopting resolutions, each share carries one vote. Shareholders can follow the AGM’s proceedings on the internet and be represented by proxies. These proxies exercise voting rights exclusively on the basis of instructions given by the shareholder. Shareholders are also able to cast their votes via the internet in the form of online voting. Allianz SE regularly promotes the use of internet services. The AGM elects the shareholder representatives of the Super- visory Board and approves the actions taken by the Board of Manage- ment and the Supervisory Board. It decides on the use of profits, capital transactions and the approval of intercompany agreements, as well as the remuneration of the Supervisory Board and changes to the company’s Statutes. In accordance with European regulations and the Statutes, changes to the Statutes require a two-thirds major- ity of votes cast in case less than half of the share capital is repre- sented in the AGM. Each year, an ordinary AGM takes place at which the Board of Management and Supervisory Board give an account of the preceding financial year. For special decisions, the German Stock Corporation Act provides for the convening of an extraordinary AGM. Accounting and auditing The Allianz Group prepares its accounts according to § 315a of the German Commercial Code (“Handelsgesetzbuch – HGB”) on the basis of IFRS international accounting standards as adopted within the European Union. The annual financial statements of Allianz SE are prepared in accordance with German law, in particular the HGB. In compliance with special legal provisions that apply to insur- ance companies, the auditor of the annual financial statements and of the half-yearly financial report is appointed by the Supervisory Board, and not by the AGM. The audit of the financial statements covers the individual financial statements of Allianz SE and also the consoli- dated financial statements of the Allianz Group. To ensure maximum transparency, we inform our shareholders, financial analysts, the media and the general public of the company’s situation on a regular basis and in a timely manner. The annual financial statements of Allianz SE, the Allianz Group’s consolidated financial statements and the respective management reports are published within 90 days of the end of each financial year. Additional information is provided in the Allianz Group’s quarterly and half- yearly financial reports. As of the fiscal year 2016, the quarterly finan- cial reports will be replaced by quarterly statements; the half-yearly financial reports will still be reviewed by the auditor. Information is also made available at the AGM, at press and analysts’ conferences, as well as on the Allianz Group’s website. Our website also provides a financial calendar listing the dates of major publications and events, such as annual reports, quarterly statements and half-yearly financial reports, AGMS as well as analyst conference calls and Finan- cial press conferences. You can find the 2016 financial calendar on our website at www.allianz.com/financialcalendar. Outlook The regulatory environment still remains in a state of flux. The pro- posed recast of the Directive on shareholder rights, which could prompt some changes to the corporate governance structure, is at an advanced stage. The reform of the legislation regarding external auditors will primarily impact the work of the Supervisory Board. The Allianz Group’s classification as a Global Systemically Important Insurer will also have a tangible effect on corporate governance. Annual Report 2015 Allianz Group 31 Statement on Corporate Manage ment pursuant to § 289a of the HGB The Statement on Corporate Management pursuant to § 289a of the German Commercial Code (“Handelsgesetzbuch – HGB”) forms part of the Group Management Report. According to § 317 (2), sentence 4 of the HGB, this Statement does not have to be included within the scope of the audit. In addition, Allianz SE follows all the suggestions of the Code in its 5 May 2015 version and also followed all suggestions in the previous version of 24 June 2014. The Declaration of Conformity and further information on corporate governance at Allianz can be found on our website at Declaration of Conformity with the German Corporate Governance Code On 10 December 2015, the Board of Management and the Supervisory Board issued the following Declaration of Conformity of Allianz SE with the German Corporate Governance Code (hereinafter the “Code”): Declaration of conformity in accorDance witH § 161 of tHe German Stock corporation act (aktG) “Declaration of Conformity by the Management Board and the Supervisory Board of Allianz Se with the recommendations of the German Corporate Governance Code Commission in accordance with § 161 of the German Stock Corporation Act (AktG) 1. All recommendations of the German Corporate Governance Code (GcGc) in the version of May 5, 2015 are currently complied with and will be complied with in the future. 2. Since the last Declaration of Conformity as of December 11, 2014, all recommen­ dations of the GcGc in the version of June 24, 2014 were complied with except for the following deviation: According to Item 5.3.2 GcGc, the Audit Committee of the Supervisory Board shall be responsible for the monitoring of the risk management system. The Supervisory Board of Allianz Se has additionally established a specific Risk Committee, which is responsible for the monitoring of the risk management system. However, such deviation ceases to exist due to the amendment of Item 5.3.2 GcGc in the version of May 5, 2015. Munich, December 10, 2015 Allianz Se For the Board of Management: Signed Oliver Bäte Signed Dr. Helga Jung For the Supervisory Board: Signed Dr. Helmut Perlet” www.allianz.com/corporate-governance. The listed Group company Oldenburgische Landesbank AG issued its own Declaration of Conformity in December 2015, which states that Oldenburgische Landesbank AG complies with all of the recommendations of the Code in the version of 5 May 2015 (as well as in the previous year’s version of 24 June 2014). Corporate governance practices internal control SyStemS The Allianz Group has an effective internal control system for verify- ing and monitoring its operating activities and business processes, in particular the control of financial reporting. The requirements placed on the internal control systems are essential not only for the survival of the company, but also to maintain the confidence of the capital market, our customers and the public. A comprehensive risk management system regularly assesses the appropriateness of the internal control system, taking into account not only qualitative and quantitative guidelines, but also specific controls for individual busi- ness activities. For further information on the risk organization and page 127. For further information on risk principles, please refer to the internal Controls over Financial Reporting and Risk Capital, please refer to page 131. In addition, the quality of the internal control system is assessed by the Allianz Group’s internal audit staff. Internal Audit conducts independent audit procedures, analyzing the structure and efficacy of the internal control systems as a whole. In addition, it also exam- ines the potential for additional value and improvement of our orga- nization’s operations. Fully compliant with all international auditing principles and standards, Internal Audit contributes to the evalua- tion and improvement of the effectiveness of the risk management, control and governance processes. Therefore, internal audit activities are geared towards helping the company to mitigate risks and further assist in strengthening its governance processes and structures. 32 Annual Report 2015 Allianz Group B Corporate Governance 27 32 Corporate Governance Report Statement on Corporate Management pursuant to § 289a of the HGB 34 Takeover­related Statements and Explanations 37 Remuneration Report compliance proGram The sustained success of the Allianz Group is based on the respon- sible behavior of all Group employees, who embody trust, respect and integrity. By means of the global compliance program coordinated by its central compliance function, Allianz supports and follows inter- nationally and nationally recognized guidelines and standards for rules-compliant and value-based corporate governance. These include the principles of the United Nations (UN Global Compact), the Guidelines of the Organization for Economic Co-operation and Development (OECD guidelines) for Multinational Enterprises, and European and international standards on data and consumer protec- tion, economic and financial sanctions and combating corruption, bribery, money laundering and terrorism financing. Through its sup- port for and acceptance of these standards, Allianz aims to avoid the risks that might arise from non-compliance. The central compliance function is responsible – in close cooperation with local compliance departments – for ensuring the effective implementation and moni- toring of the compliance program within the Allianz Group, as well as for investigating potential compliance infringements. The standards of conduct established by the Allianz Group’s Code of Conduct for Business Ethics and Compliance are obligatory for all employees worldwide. The Code of Conduct is available on our www.allianz.com/corporate-governance. website at The Code of Conduct and the internal guidelines derived from it provide all employees with clear guidance on behavior that lives up to the values of the Allianz Group. In order to transmit the principles of the Code of Conduct and the internal compliance program based on these principles, Allianz has implemented interactive training programs around the world. These provide practical guidelines which enable employees to come to their own decisions. The Code of Conduct also forms the basis for guidelines and controls to ensure fair dealings with Allianz Group customers (sales compliance). There are legal provisions against corruption and bribery in almost all countries in which Allianz has a presence. The global Anti- Corruption Program of the Allianz Group ensures the continuous monitoring and improvement of the internal anti-corruption con- trols. More information on the Anti-Corruption Program can be found www.allianz.com/ in the Sustainability Report on our website at sustainability. A major component of the Allianz Group’s compliance program is a whistleblower system that allows employees to alert the relevant compliance department confidentially about irregularities. No employee voicing concerns about irregularities in good faith needs to fear retribution, even if the concerns turn out to be unfounded at a later date. DeScription of tHe functionS of tHe BoarD of manaGement anD tHe SuperviSory BoarD anD of tHe compoSition anD functionS of tHeir committeeS A description of the composition of the Supervisory Board and its page 17 and 19 of the Annual Report. committees can be found on A description of the composition of the Board of Management can be found on page 20 to 22, while the composition of the Committees of the Board of Management is described in the Corporate Governance Report starting on page 27. This information is also available on our website at www.allianz.com/corporate-governance. A general description of the functions of the Board of Manage- ment, the Supervisory Board and their committees can be found in page 27, and on our the Corporate Governance Report starting on website at www.allianz.com/corporate-governance. German Act on Equal Participation of Women and Men in Executive Positions in the Private and the Public Sector To implement the German Act on Equal Participation of Women and Men in Executive Positions in the Private and the Public Sector, Allianz SE has set the following objectives for the proportion of women on the Board of Management and the two management levels below the Board of Management, which are to be achieved by 30 June 2017. The objective for the proportion of women on Allianz SE’s Board of Management is 11 %. This figure is based on the status quo, as it is not easily possible to intervene in ongoing Board appointments and the first legal implementation period runs only until mid-2017. How- ever, the Supervisory Board of Allianz SE has already declared its intention to increase the proportion of women on the Board of Man- agement to at least 20 % by the end of 2018. As regards the proportion of women on the first and the second management level below the Board of Management of Allianz SE, the Board of Management has set a target quota of at least 20 %. Over the longer term, Allianz is aiming for at least 30 % of positions on these two management levels to be held by women. § 17 (2) of the SE Implementation Act (“SE-Ausführungsgesetz”) states that the Supervisory Board of Allianz SE must be composed of at least 30 % of both women and men as of 1 January 2016. This require- ment was already met in the 2015 financial year, as the Supervisory Board consisted of four female and eight male members throughout the year. Annual Report 2015 Allianz Group 33 Takeover-related Statements and Explanations Statements pursuant to § 289 (4) and § 315 (4) of the German Commercial Code (“Handelsgesetzbuch – HGB”) and explanatory report. Composition of share Capital As of 31 December 2015, the share capital of Allianz SE was € 1,169,920,000. It was divided into 457,000,000 registered and fully paid-up shares with no-par value and a corresponding share capital amount of € 2.56 per share. All shares carry the same rights and obli- gations. Each no-par value share carries one vote. restriCtions on voting rights and share transfers; exerCise of voting rights in Case of employee equity partiCipations Shares may only be transferred with the consent of the company. The company may withhold a duly applied approval only if it deems this to be necessary in the interest of the company on exceptional grounds. The applicant will be informed of the reasons. Shares acquired by employees of the Allianz Group as part of the Employee Stock Purchase Plan are in principle subject to a one-year lock-up period. Outside Germany, the lock-up period may in some cases be up to five years. In some countries, in order to ensure that the lock-up period is observed, the employee shares are held through- out that period by a bank, another natural person or a legal entity acting as a trustee. Nevertheless, employees may instruct the trustee to exercise voting rights or have power of attorney granted to them to exercise such voting rights. Lock-up periods contribute to the Employee Stock Purchase Plan’s aims of committing employees to the company and letting them benefit from the performance of the share price. interests in the share Capital exCeeding 10 % of the voting rights No direct or indirect interests in the share capital of Allianz SE that exceed 10 % of the voting rights have been reported to Allianz SE; nor are we otherwise aware of any such interests. shares with speCial rights Conferring powers of Control There are no shares with special rights conferring powers of control. legal and statutory provisions appliCable to the appointment and removal of members of the board of management and to amendments of the statutes The Supervisory Board appoints the members of Allianz SE’s Board of Management for a maximum term of five years (Article 9 (1), Article 39 (2) and Article 46 of the SE Regulation, §§ 84, 85 of the German Stock Corporation Act and § 5 (3) of the Statutes). Reappointments, in each case for a maximum of five years, are permitted. A simple majority of the votes cast in the Supervisory Board is required to appoint mem- bers of the Board of Management. In the case of a tie vote, the Chair- person of the Supervisory Board, who pursuant to Article 42, sen- tence 2 of the SE Regulation must be a shareholder representative, shall have the casting vote (§ 8 (3) of the Statutes). If the Chairperson does not participate in the vote the Deputy Chairperson shall have the casting vote, provided he or she is a shareholder representative. A Deputy Chairperson who is an employee representative has no casting vote (§ 8 (3) of the Statutes). If a required member of the Board of Management is missing, in urgent cases the courts must appoint such member upon the application of an interested party (§ 85 of the German Stock Corporation Act). The Supervisory Board may dismiss members of the Board of Management if there is an important reason (§ 84 (3) of the German Stock Corporation Act). According to § 5 (1) of the Statutes, the Board of Management shall consist of at least two persons. Otherwise, the Supervisory Board determines the number of members. The Supervisory Board has appointed a Chairman of the Board of Management pursuant to § 84 (2) of the German Stock Corporation Act. German insurance supervisory law requires that members of the Board of Management have the reliability and professional compe- tence needed to manage an insurance company. A person cannot become a member of the Board of Management if he or she is already a manager of two other insurance undertakings, pension funds, insurance holding companies or insurance special purpose vehicles. However, the supervisory authority may permit more than two such mandates if they are held within the same group (§ 24 (3) of the German Insurance Supervision Act (“Versicherungsaufsichts gesetz” in the version applicable as from 1 January 2016, VAG). The Federal Financial Services Supervisory Authority (“Bundes anstalt für Finanz dienst- leistungsaufsicht”) must be notified about the intention of appointing a Board of Management member pursuant to § 47 No. 1 VAG. 34 Annual Report 2015 Allianz Group B Corporate Governance 27 32 Corporate Governance Report Statement on Corporate Management pursuant to § 289a of the hgb 34 Takeover-related Statements and Explanations 37 Remuneration Report Amendments to the Statutes must be adopted by the General Meeting. § 13 (4) sentence 2 of the Statutes of Allianz SE stipulates that, unless this conflicts with mandatory law, changes to the Statutes require a two-thirds majority of the votes cast, or, if at least one half of the share capital is represented, a simple majority of the votes cast. The Statutes thereby make use of the option set out in § 51 sentence 1 of the SE Implementation Act (“SE-Ausführungsgesetz”) which is based upon Article 59 (1) and (2) of the SE Regulation. A larger major- ity is, inter alia, required for a change in the corporate object or the relocation of the registered office to another E.U. member state (§ 51 sentence 2 of the SE Implementation Act). The Supervisory Board may alter the wording of the Statutes (§ 179 (1) sentence 2 of the Ger- man Stock Corporation Act and § 10 of the Statutes). authorization of the board of management to issue and repurChase shares The Board of Management is authorized to issue shares as well as to acquire and use treasury shares as follows: It may increase the company’s share capital, on or before 6 May 2019, with the approval of the Supervisory Board, by issuing new reg- istered no-par value shares against contributions in cash and/or in kind, on one or more occasions: The Board of Management may buy back and use Allianz shares for other purposes until 6 May 2019 on the basis of the authorization of the General Meeting of 7 May 2014 (§ 71 (1) No. 8 of the German Stock Corporation Act). Together with other treasury shares that are held by Allianz SE, or which are attributable to it under §§ 71a et seq. of the German Stock Corporation Act, such shares may not exceed 10 % of the share capital at any time. The shares acquired pursuant to this authorization may be used, under exclusion of the shareholders’ sub- scription rights, for any legally admissible purposes, and in particular those specified in the authorization. Furthermore, the acqui sition of treasury shares under this authorization may also be carried out using derivatives such as put options, call options, forward purchases or a combination thereof, provided such derivatives do not relate to more than 5 % of the share capital. Domestic or foreign banks that are majority-owned by Allianz SE may buy and sell Allianz shares for trading purposes (§ 71 (1) No. 7 and (2) of the German Stock Corporation Act) under an authorization of the General Meeting valid until 6 May 2019. The total number of shares acquired thereunder, together with treasury shares held by Allianz SE or attributable to it under §§ 71a et seq. of the German Stock Corporation Act, shall at no time exceed 10 % of the share capital of Allianz SE. − Up to a total of € 550,000,000 (Authorized Capital 2014/I). In case of a capital increase against cash contribution, the Board of Management may exclude the shareholders’ subscription rights for these shares with the consent of the Supervisory Board, (i) for fractional amounts, (ii) in order to safeguard the rights pertain- ing to holders of convertible bonds or bonds with warrants, including mandatory convertible bonds, and (iii) in the event of a capital increase of up to 10 %, if the issue price of the new shares is not significantly less than the stock market price. The Board of Management may furthermore exclude the shareholders’ sub- scription rights with the consent of the Supervisory Board, in the event of a capital increase against contributions in kind. − Up to a total of € 13,720,000 (Authorized Capital 2014/II). The share- holders’ subscription rights can be excluded in order to issue the new shares to employees of Allianz SE and its Group companies as well as for fractional amounts. The company’s share capital is conditionally increased by up to € 250,000,000 (Conditional Capital 2010/2014). This conditional capital increase will only be carried out to the extent that conversion or option rights resulting from bonds issued by Allianz SE or its subsidiaries on the basis of the authorization of the General Meeting of 5 May 2010 or on the basis of the authorization of the General Meeting of 7 May 2014 are exercised, or that conversion obligations tied to such bonds are fulfilled. essential agreements of allianz se with Change of Control Clauses and Compensation agreements providing for takeover sCenarios The following essential agreements of the company are subject to a change of control condition following a takeover bid: − Our reinsurance contracts, in principle, include a clause under which both parties to the contract have an extraordinary termi- nation right in the case where the other party to the contract merges or its ownership or control situation changes materially. Agreements with brokers regarding services connected with the purchase of reinsurance cover also provide for termination rights in case of a change of control. Such clauses are standard market practice. − The exclusive bancassurance distribution agreement between Allianz and HSBC for life insurance products in Asia (China, Indo- nesia, Malaysia, Australia, Sri Lanka, Taiwan, Brunei, Philippines) includes a clause under which both parties have an extraordi- nary termination right in case there is a change of control of the other party’s ultimate holding company. − The exclusive bancassurance distribution agreement between Allianz SE and HSBC for life insurance products in Turkey includes a clause under which both parties have an extraordinary termina- tion right in case there is a change of control of the other party’s ultimate holding company. Annual Report 2015 Allianz Group 35 Under the Allianz Sustained Performance Plan (ASPP), Restricted Stock Units (RSU) – i.e. virtual Allianz shares – are granted as a stock- based remuneration component to senior management of the Allianz Group worldwide. In addition, under the Group Equity Incentive (GEI) scheme, Stock Appreciation Rights (SAR) – i.e. virtual options on Allianz shares – were also granted until 2010. Some of these are still outstanding. The conditions for these RSU and SAR contain change of control clauses, which apply if a majority of the voting share capital in Allianz SE is acquired, directly or indirectly, by one or more third parties who do not belong to the Allianz Group and which provide for an exception from the usual vesting and exercise periods. The RSU will be released, in line with their general conditions, by the company for the relevant plan participants on the day of the change of control without observing any vesting period that would otherwise apply. The cash amount payable per RSU must equal the average market value of the Allianz share and be at least the price offered per Allianz share in a preceding tender offer. In case of a change of control as described above, SAR will be exercised, in line with their general conditions, by the company for the relevant plan participants on the day of the change of control without observing any vesting period. By providing for the non-application of the vesting period in the event of a change of control, the terms take into account the fact that the conditions under which the share price moves are very different when there is a change in control. − The framework agreements between Allianz SE and the subsi- diaries of various car manufacturers (FCE Bank plc, Volkswagen Financial Services AG, respectively) relating to the distribution of car insurance by the respective car manufacturers each include a clause under which each party has an extraordinary termina- tion right in case there is a change of control of the other party. − Bilateral credit agreements in some cases provide for termina- tion rights if there is a change of control, mostly defined as the acquisition of at least 30 % of the voting rights within the meaning of § 29 (2) of the German Takeover Act (“Wertpapiererwerbs- und Übernahmegesetz”, WpÜG). If such termination rights are exer- cised, the respective credit lines have to be replaced by new credit lines under conditions then applicable. The company has entered into the following compensation agree- ments with members of the Board of Management and employees providing for the event of a takeover bid: A change of control clause in the service contracts of the mem- bers of Allianz SE’s Board of Management provides that, if within twelve months after the acquisition of more than 50 % of the compa- ny’s share capital by one shareholder or several shareholders acting in concert (change of control) the appointment as a member of the Board of Management is revoked unilaterally by the Supervisory Board, or if the mandate is ended by mutual agreement, or if the Management Board member resigns his or her office because the responsibilities as a Board member are significantly reduced through no fault of the Board member, he or she shall receive his or her con- tractual remuneration for the remaining term of the service contract, but limited, for the purpose hereof, to three years, in the form of a one-off payment. The one-off payment is based on the fixed remu- neration plus 50 % of the variable remuneration, however, this basis being limited to the amount paid for the last fiscal year. To the extent that the remaining term of the service contract is less than three years, the one-off payment is generally increased in line with a term of three years. This applies accordingly if, within two years of a change of control, a mandate in the Board of Management is coming to an end and is not extended; the one-off payment will then be granted for the period between the end of the mandate and the end of the three- year period after the change of control. For further details, please refer to the Remuneration Report starting on page 37. 36 Annual Report 2015 Allianz Group B Corporate Governance 27 32 Corporate Governance Report Statement on Corporate Management pursuant to § 289a of the HGB 34 Takeover-related Statements and Explanations 37 Remuneration Report Remuneration Report This report covers the remuneration arrangements for the Board of Management and the Supervisory Board of Allianz SE. The report has been prepared in accordance with the require- ments of the German Commercial Code (HGB) and the International Financial Reporting Standards (IFRS). It also takes into account the relevant regulatory provisions and the recommendations of the German Corporate Governance Code. Allianz SE Board of Management remuneration GOVERNANCE SYSTEM The remuneration of the Board of Management is decided upon by the entire Supervisory Board based on proposals prepared by the Personnel Committee. If required, outside advice is sought from inde- pendent external consultants. The Personnel Committee and the Supervisory Board consult with the Chairman of the Board of Ma- nagement, as appropriate, in assessing the performance and remu- neration of members of the Board of Management. The Chairman of the Board of Management is not present when his own remuneration is discussed. Regarding the activities and decisions taken by the Per- sonnel Committee and the Supervisory Board, please refer to the Supervisory Board Report. The structure, weighting and level of remuneration is decided by the Supervisory Board. Remuneration survey data of DAX 30 companies and international insurance peers is provided by external consul- tants. Compensation levels are around the third quartile of this group. The structure of the Allianz Group’s total remuneration is more strongly weighted to variable, longer-term components than in most DAX 30 companies. Remuneration and benefit arrangements are also periodically compared with best practices. In addition, the Supervisory Board takes remuneration levels within the Group into account when reviewing the adequateness and the appropriateness of the remuneration of the Board of Management. REMUNERATION STRUCTURE, COMPONENTS, AND TARGET SETTING PROCESS There are four main remuneration components. Each has the same weighting within annual target remuneration: base salary, annual bonus, annualized mid-term bonus (MTB), and equity-related remu- neration. The target compensation of each variable component does not exceed the base salary, with the total target variable compensation not exceeding three times the base salary. In addition, Allianz offers pensions and similar benefits and perquisites. Base salary Base salary is the fixed remuneration component, expressed as an annual cash sum and paid in twelve monthly installments. REMUNERATION PRINCIPLES AND MARKET POSITIONING The key principles of Board of Management remuneration are as follows: Variable remuneration Variable remuneration is designed to balance short-term perfor- mance, longer-term success and sustained value creation. − Support of the Group’s strategy: Performance targets reflect the Allianz Group’s business strategy. − Alignment of pay and performance: The performance-based, variable component forms a significant portion of the overall remuneration. − Variable remuneration focused on sustainability: Two thirds of the variable remuneration reflect longer-term performance. One third is a deferred payout after three years, based on a sustain- ability assessment covering the three-year period. The other third rewards the sustained performance of the share price with a deferred payout four years after grant. − Alignment with shareholder interests: One third of the variable remuneration is dependent upon share price performance. Each year, the Supervisory Board agrees on performance targets for the variable remuneration component with members of the Board of Management. These are documented for the upcoming financial year. Every three years, the MTB sustainability criteria are set for the following mid-term period. All variable awards are made under the rules and conditions of the “Allianz Sustained Performance Plan” (ASPP). The grant of variable remuneration components is related to performance and can vary between 0 % and 150 % of the respective target values. If performance was rated at 0 % no variable component would be granted. Conse- quently, the minimum total direct compensation for a regular mem- ber of the Board of Management equals the base salary of € 750 THOU (excluding perquisites and pension contributions). The maximum total direct compensation (excluding perquisites and pension con- tributions) is € 4,125 THOU: base salary € 750 THOU plus € 3,375 THOU (150 % of the sum of all three variable compensation components at target). Annual Report 2015 Allianz Group 37 Details on the variable compensation components: − Annual bonus (short-term): A cash payment which rewards the achievement of quantitative and qualitative targets for the respective financial year and is paid the year following the perfor- mance year. Quantitative targets represent 75 % and consist of 50 % Group targets (equally divided between annual operating profit and annual net income) and 25 % divisional targets. For members of the Board of Management with business division responsibili- ties, divisional targets are set with the following split: 10 % annual operating profit, 10 % annual net income before minorities and 5 % dividends. For members of the Board of Management with a func- tional focus, the divisional quantitative targets are determined based on their key responsibilities. Qualitative targets represent 25 % and reflect the specific individual priorities for the perfor- mance year per member of the Board of Management. The perfor- mance of the Chairman of the Allianz SE Board of Management is determined by the average target achievement of the other Board of Management members and can be adjusted by the Super visory Board based on the Chairman’s personal performance. Based on the 2015 target achievement for the Group, the business division/corporate functions, and the qualitative per- formance, the total annual bonus awards ranged between 101 % and 133 % of the target with an average bonus award of 121 % of the target. − MTB (mid-term): A deferred award which reflects the achieve- ment of the annual targets by accruing an amount identical to the annual bonus. The payout of the award at the end of a three- year cycle is subject to a sustainability assessment for these three years. The following criteria are considered: − adjusted capital growth vs. planned development in light of risk capital employed (adjusted capital essentially repre- sents the fair value of shareholders’ equity), − balance sheet strength, − comparison with peers, − “partner of choice” for stakeholders, and − extraordinary events. Following the final performance and sustainability assessment of the MTB 2013 – 2015, a total payout of € 29,176 THOU was approved by the Supervisory Board. The Supervisory Board conducted the sustainability assessment in accordance with the agreed criteria. This analysis concluded that the years 2013 – 2015 represented a period of solid and sustainable performance for Allianz with over- all positive development against the criteria – in particular with regard to balance sheet strength. The final distributions have been differentiated according to the assessments made across the business divisions with adjustments ranging from 0 % to + 10 % of the target value. ILLUSTRATION Of THE PROCESS AND THE UNDERLYING TIMELINE Of THE MTB CYCLE, fROM TARGET SETTING TO fINAL PERfORMANCE ASSESSMENT1 € THOU Sustainability criteria setting for the three-year performance period Notional accruals Max: 3,300 150 % Accrual 650 Accrual 620 Accrual 930 Total 2,200 Accrual 650 Accrual 620 Accrual 930 Initial accrued amounts ± Sustainability assessment = Final payout Target: 2,200 Min: 0 0 % 20163 Dec 2012 20132 20142 20152 Sustainability criteria setting Performance period Sustainability assessment & payout Year 1 Year 2 Year 3 1 2 Example based on target values of a regular member of the Board of Management with an annual target of € 700 THOU for 2013 and € 750 THOU for the MTB in 2014 and 2015. Accrual is only a notional indication. Actual accrual for the MTB (mid-term) usually equals the annual bonus payout of the respective financial year. Since the performance assessment and the final payout occur after completion of the performance cycle, this value is only a notional indication. 3 Final payout is subject to the sustainability assessment of the Supervisory Board and may vary between 0 % and 150 % of the cumulative target values, independent of the notional accruals. 38 Annual Report 2015 Allianz Group Company contributions to the current pension plan depend on the years of service on the Board of Management. For most members of the Allianz SE Board of Management, the contributions are invested in a fund with a guarantee for the contributions paid, but no further interest guarantee. On retirement, the accumulated capital is paid out as lump sum or can be converted into a lifetime annuity. Each year the Supervisory Board decides whether and to what extent a bud- get is provided, also taking into account the targeted pension level. This budget includes a risk premium paid to cover death and dis- ability. The earliest age a pension can be drawn is 62, except for cases of occupational or general disability for medical reasons. In these cases, it may become payable earlier and an increase by projection may apply. In the case of death, a pension may be paid to dependents. Surviving dependents normally receive 60 % (surviving partner) and 20 % (per child) of the original Board member’s pension, with the aggregate not to exceed 100 %. Should Board membership cease before retirement age for other reasons, the accrued pension rights are maintained if vesting requirements are met. For members of the Allianz SE Board of Management who were born before 1 January 1958 and for rights accrued before 2015 the guaranteed minimum interest rate remains at 2.75 % and the retire- ment age is still 60. Perquisites Perquisites mainly consist of contributions to accident and liability insurances and the provision of a company car. Perquisites are not linked to performance. Each member of the Board of Management is responsible for the income tax on these perquisites. The Supervisory Board regularly reviews the level of perquisites. B Corporate Governance 27 32 Corporate Governance Report Statement on Corporate Management pursuant to § 289a of the HGB 34 Takeover-related Statements and Explanations 37 Remuneration Report − Equity-related remuneration (long-term): A virtual share award, known as “Restricted Stock Units” (RSUs). The grant value of the RSUs allocated equals the annual bonus of the performance year. The number of RSUs allocated is derived from dividing the grant value by the fair market value of an RSU at the time of grant. The fair market value is calculated based on the ten-day average Xetra closing price of the Allianz stock following the financial press conference on the annual results. As RSUs are virtual stocks without dividend payments, the average Xetra closing price is reduced1 by the net present value of the expected future dividend payments during the vesting period. The expected dividend stream is discounted with the respective swap rates as of the valuation day. Following the end of the four-year vesting period, the com- pany makes a cash payment based on the number of RSUs granted and the ten-day average Xetra closing price of the Allianz stock following the annual financial press conference in the year of expiry of the respective RSU plan. The RSU payout is capped at 200 % above grant price to avoid extreme payouts2. Outstanding RSU holdings are forfeited should a Board member leave at his/ her own request or be terminated for cause. Variable remuneration components may not be paid, or payment may be restricted in the case of a breach of the Allianz Code of Con- duct, risk limits, or compliance requirements. Additionally, a reduc- tion or cancellation of variable remuneration may occur if the super- visory authority (BaFin) requires this in accordance with its statutory powers. Pensions and similar benefits To provide competitive and cost-effective retirement and disability benefits, Board of Management members have participated in a con- tribution-based system since 1 January 2005 which was modified to My Allianz Pension in 2015 for all Board members born after 31 Decem- ber 1957. Before 2005, Board members participated in a defined benefit plan that provided fixed benefits not linked to base salary increases. Benefits generated under this plan were frozen at the end of 2004. Additionally, most Board members participate in the Allianz Versor- gungskasse VVaG (AVK), a contribution-based pension plan, and the Allianz Pensionsverein e.V. (APV) – which provide pension benefits for salaries up to the German social security ceiling. 1 2 The fair market value of the RSUs is further subject to a small reduction of a few Euro cents due to the 200 % cap on the RSU payout. This reduction is calculated based on a standard option price formula. The relevant share price used to determine the final number of RSUs granted and the 200 % cap is only available after sign-off by the external auditors. Annual Report 2015 Allianz Group 39 REMUNERATION fOR 2015 The following remuneration disclosure is based on and compliant with the German Corporate Governance Code and illustrates indi- vidual remuneration for 2014 and 2015, including fixed and variable remuneration and pension service cost. The “grant” column below shows the remuneration at target and minimum and maximum levels. The “payout” column discloses the 2014 and 2015 payments. The base salary, annual bonus and perquisites are linked to the reported performance years 2014 and 2015, whereas the Group Equity Incentive (GEI) and Allianz Equity Incentive (AEI) payouts result from grants related to the performance years 2008 – 2010. INDIVIDUAL REMUNERATION: 2015 AND 2014 To make the remuneration related to the performance year 2015 more transparent, the additional column “actual grant” includes the 2015 fixed compensation, the bonus paid for 2015, the MTB 2013 – 2015 tranche accrued for the performance year 2015, and the fair value of the RSU grant in 2016 for the performance year 2015. The 2015 payout is significantly higher than in 2014 due to the fact that the payout of the MTB 2013 – 2015 is disclosed. This compris- es payment for three performance years in total. € THOU Oliver Bäte6 (Appointed: 01/2008; CEO since 05/2015) Michael Diekmann7 (Appointed: 10/1998; CEO 04/2003 – 05/2015) Sergio Balbinot8 (Appointed: 01/2015) Base Salary Perquisites Total fixed compensation Annual Variable Compensation – Annual Bonus Deferred Compensation MTB (2013 – 2015)2 AEI 2016/RSU3 AEI 2015/RSU3 AEI 2011/RSU3 GEI 2010/RSU3 GEI 2009/RSU3 GEI 2010/SAR4 GEI 2008/SAR4 Total Pensions Service Cost5 Total Grant 2015 Target 994 15 1,009 996 996 996 – – – – – – 3,997 483 4,480 Min 994 15 1,009 – – – – – – – – – 1,009 483 1,492 Max 994 15 1,009 1,494 1,494 1,494 – – – – – – 5,491 483 5,974 2014 Target 750 7 757 750 750 – 750 – – – – – 3,007 368 3,375 Actual Grant 2015 994 15 1,009 1,260 1,260 1,260 – – – – – – 4,790 483 5,273 Payout1 2014 2015 750 7 757 1,009 – – – – – 228 438 – 2,432 368 2,800 994 15 1,009 1,260 3,516 – – 1,704 916 – – 263 8,668 483 9,151 Grant Target 447 12 459 442 442 442 – – – – – – Min 447 12 459 – – – – – – – – – 2014 Target 1,280 24 1,304 1,280 1,280 1,280 – – – – – – Max 447 12 459 663 663 663 – – – – – – 447 12 459 534 534 534 – – – – – – Actual Grant Payout1 Grant Actual Grant Payout1 2015 2015 2014 2015 2014 2015 2015 2014 2015 Target Target Min 750 33 783 – – – – – – – – – Max 750 33 783 1,125 1,125 1,125 – – – – – – 750 33 783 999 999 999 – – – – – – 750 33 783 750 750 750 – – – – – – 1,280 24 1,304 1,546 – – – – – – 376 963 4,189 998 5,187 447 12 459 534 3,952 2,776 1,569 – – – – 450 9,740 235 9,975 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 750 33 783 999 999 – – – – – – – 2,781 222 3,003 5,144 998 6,142 1,785 235 2,020 459 235 694 2,448 235 2,683 2,061 235 2,296 3,033 222 3,255 783 222 1,005 4,158 222 4,380 3,780 222 4,002 1 2 3 4 In accordance with the German Corporate Governance Code, the annual bonus disclosed for performance year 2015 is paid in 2016 and for performance year 2014 in 2015. The payments for equity related deferred compensation (GEI and AEI), however, are disclosed for the year in which the actual payment was made. The MTB figure included in the Actual Grant column shows the annual accrual. The payout 2015 figure includes the 2015 allocation and the accruals from the performance years 2013 and 2014, as adjusted by the sustainability assessment. The MTB 2013 – 2015 is paid out in spring 2016. Payout is capped at 200 % above grant price. The relevant share price used to determine the fair market value, and hence the final number of RSUs granted, and the 200 % cap are only available after sign-off by the external auditors. The equity-related remuneration that applied before 2010 consisted of two vehicles, virtual stock awards known as RSUs and virtual stock options known as “Stock Appreciation Rights” (SAR). Only RSUs have been awarded as of 1 January 2010. The remuneration system valid until December 2009 is disclosed in the Annual Report 2009 (starting on page 17). Whereas the GEI/RSU grants are automatically exercised at the vesting date, the GEI/SAR grants are exercised by the Board member within the exercise period following the vesting date. Hence the total payout from SARs depends on the individual decision by the Board member. SARs are released to plan participants upon expiry of the vesting period, assuming all other exercise hurdles are met. For SARs granted until and including 2008, the vesting period was two years and the exercise period five years. For SARs granted 2009, the vesting period is four years and the exercise period three years. SARs can be exercised on the condition that the price of the Allianz SE stock is at least 20 % above the strike price at the time of grant. During the term of the plan, at least once on five consecu- tive trading days the Allianz SE stock must relatively appreciate at least 0.01 percentage points ahead of the appreciation of the Dow Jones EURO STOXX Price Index (600). Pension Service Cost in accordance with IAS 19: represents the company cost not the actual entitlement nor a payment, however, according to the German Corporate Governance Code the Pension Service Cost is to be included in all columns. Oliver Bäte’s base salary and his target for the annual bonus, the MTB tranche, and equity-related com- pensation are disclosed based on his pro-rated base salary of € 750 THOU until 6 May 2015 and his pro-rated base salary of € 1,125 THOU from 7 May 2015. The different pro-rated amounts for base salary and target amounts result from different pro-rating methodologies, which are generally applied. 5 6 7 Michael Diekmann retired on 7 May 2015. He received a pro-rated base salary, annual bonus, and equity- related compensation. The different pro-rated amounts for base salary and target amounts result from different pro-rating methodologies, which are generally applied. According to his service contract, he will receive his fixed salary of € 106.7 THOU per month for a period of 6 months from December 2015 as a transition payment, which will be set off against the regular pension payment. As part of the transition payment he will receive a payment of 25 % of the annual variable target compensation (€ 960 THOU) in spring 2017. 8 In addition to the amounts disclosed in the table, Sergio Balbinot received a buyout award of € 6 Mn to compensate for forfeited grants from his previous employer: € 3 Mn in cash and € 3 Mn in RSUs. 50 % of the cash amount was paid in February 2015 and 50 % will be paid in 2016 and are subject to clawback. 40 Annual Report 2015 Allianz Group B Corporate Governance 27 32 Corporate Governance Report Statement on Corporate Management pursuant to § 289a of the HGB 34 Takeover-related Statements and Explanations 37 Remuneration Report INDIVIDUAL REMUNERATION: 2015 AND 2014 Annual Variable Compensation – Annual Bonus Base Salary Perquisites Total fixed compensation Deferred Compensation MTB (2013 – 2015)2 AEI 2016/RSU3 AEI 2015/RSU3 AEI 2011/RSU3 GEI 2010/RSU3 GEI 2009/RSU3 GEI 2010/SAR4 GEI 2008/SAR4 Total Total Pensions Service Cost5 € THOU Oliver Bäte6 (Appointed: 01/2008; CEO since 05/2015) Michael Diekmann7 (Appointed: 10/1998; CEO 04/2003 – 05/2015) Sergio Balbinot8 (Appointed: 01/2015) Grant 2014 2015 Target Target 750 7 757 750 750 750 – – – – – – 994 15 1,009 996 996 996 – – – – – – Min 994 15 1,009 – – – – – – – – – Max 994 15 1,009 1,494 1,494 1,494 – – – – – – Actual Grant 2015 994 15 1,009 1,260 1,260 1,260 – – – – – – 3,007 368 3,375 3,997 483 4,480 1,009 483 1,492 5,491 483 5,974 4,790 483 5,273 Payout1 2014 2015 750 7 757 1,009 – – – – – – 228 438 2,432 368 2,800 994 15 1,009 1,260 3,516 1,704 916 – – – – 263 8,668 483 9,151 Grant Actual Grant Payout1 Grant Actual Grant Payout1 2014 2015 2015 2014 2015 2014 2015 2015 2014 2015 Target Target 1,280 24 1,304 1,280 1,280 – 1,280 – – – – – 5,144 998 6,142 447 12 459 442 442 442 – – – – – – 1,785 235 2,020 Min 447 12 459 – – – – – – – – – 459 235 694 Max 447 12 459 663 663 663 – – – – – – 2,448 235 2,683 447 12 459 534 534 534 – – – – – – 2,061 235 2,296 1,280 24 1,304 1,546 – – – – – 376 963 – 4,189 998 5,187 447 12 459 534 3,952 – – 2,776 1,569 – – 450 9,740 235 9,975 Target Target – – – – – – – – – – – – – – – 750 33 783 750 750 750 – – – – – – 3,033 222 3,255 Min 750 33 783 Max 750 33 783 – 1,125 – – – – – – – – 783 222 1,005 1,125 1,125 – – – – – – 4,158 222 4,380 750 33 783 999 999 999 – – – – – – 3,780 222 4,002 – – – – – – – – – – – – – – – 750 33 783 999 999 – – – – – – – 2,781 222 3,003 1 In accordance with the German Corporate Governance Code, the annual bonus disclosed for performance member. SARs are released to plan participants upon expiry of the vesting period, assuming all other year 2015 is paid in 2016 and for performance year 2014 in 2015. The payments for equity related deferred exercise hurdles are met. For SARs granted until and including 2008, the vesting period was two years and compensation (GEI and AEI), however, are disclosed for the year in which the actual payment was made. the exercise period five years. For SARs granted 2009, the vesting period is four years and the exercise 2 The MTB figure included in the Actual Grant column shows the annual accrual. The payout 2015 figure period three years. SARs can be exercised on the condition that the price of the Allianz SE stock is at least includes the 2015 allocation and the accruals from the performance years 2013 and 2014, as adjusted by 20 % above the strike price at the time of grant. During the term of the plan, at least once on five consecu- the sustainability assessment. The MTB 2013 – 2015 is paid out in spring 2016. tive trading days the Allianz SE stock must relatively appreciate at least 0.01 percentage points ahead of 3 Payout is capped at 200 % above grant price. The relevant share price used to determine the fair market the appreciation of the Dow Jones EURO STOXX Price Index (600). value, and hence the final number of RSUs granted, and the 200 % cap are only available after sign-off by 5 Pension Service Cost in accordance with IAS 19: represents the company cost not the actual entitlement the external auditors. nor a payment, however, according to the German Corporate Governance Code the Pension Service Cost 4 The equity-related remuneration that applied before 2010 consisted of two vehicles, virtual stock awards is to be included in all columns. known as RSUs and virtual stock options known as “Stock Appreciation Rights” (SAR). Only RSUs have been 6 Oliver Bäte’s base salary and his target for the annual bonus, the MTB tranche, and equity-related com- awarded as of 1 January 2010. The remuneration system valid until December 2009 is disclosed in the pensation are disclosed based on his pro-rated base salary of € 750 THOU until 6 May 2015 and his pro-rated Annual Report 2009 (starting on page 17). Whereas the GEI/RSU grants are automatically exercised at the base salary of € 1,125 THOU from 7 May 2015. The different pro-rated amounts for base salary and target vesting date, the GEI/SAR grants are exercised by the Board member within the exercise period following amounts result from different pro-rating methodologies, which are generally applied. the vesting date. Hence the total payout from SARs depends on the individual decision by the Board 7 8 Michael Diekmann retired on 7 May 2015. He received a pro-rated base salary, annual bonus, and equity- related compensation. The different pro-rated amounts for base salary and target amounts result from different pro-rating methodologies, which are generally applied. According to his service contract, he will receive his fixed salary of € 106.7 THOU per month for a period of 6 months from December 2015 as a transition payment, which will be set off against the regular pension payment. As part of the transition payment he will receive a payment of 25 % of the annual variable target compensation (€ 960 THOU) in spring 2017. In addition to the amounts disclosed in the table, Sergio Balbinot received a buyout award of € 6 Mn to compensate for forfeited grants from his previous employer: € 3 Mn in cash and € 3 Mn in RSUs. 50 % of the cash amount was paid in February 2015 and 50 % will be paid in 2016 and are subject to clawback. Annual Report 2015 Allianz Group 41 INDIVIDUAL REMUNERATION: 2015 AND 2014 € THOU Manuel Bauer 6 (Appointed: 01/2011; End of Service: 09/2015) Dr. Helga Jung (Appointed: 01/2012) Dr. Christof Mascher (Appointed: 09/2009) Base Salary Perquisites Total fixed compensation Annual Variable Compensation – Annual Bonus Deferred Compensation MTB (2013 – 2015)2 AEI 2016/RSU3 AEI 2015/RSU3 AEI 2011/RSU3 GEI 2010/RSU3 GEI 2009/RSU3 GEI 2010/SAR4 GEI 2008/SAR4 Total Pensions Service Cost5 Total Grant 2014 2015 Target Target 750 15 765 750 750 – 750 – – – – – 3,015 317 3,332 563 1687 731 561 561 561 – – – – – – 2,414 296 2,710 Min 563 1687 731 – – – – – – – – – 731 296 1,027 Max 563 1687 731 842 842 842 – – – – – – 3,257 296 3,553 Actual Grant 2015 563 1687 731 629 629 629 – – – – – – 2,619 296 2,915 Payout1 2014 2015 750 15 765 778 – – – – – – – – 1,543 317 1,860 563 1687 731 629 2,335 – – – – – – – 3,695 296 3,991 € THOU Jay Ralph (Appointed: 01/2010) Dr. Axel Theis (Appointed: 01/2015) Dr. Dieter Wemmer (Appointed: 01/2012) Base Salary Perquisites Total fixed compensation Annual Variable Compensation – Annual Bonus Deferred Compensation MTB (2013 – 2015)2 AEI 2016/RSU3 AEI 2015/RSU3 AEI 2011/RSU3 GEI 2010/RSU3 GEI 2009/RSU3 GEI 2010/SAR4 GEI 2008/SAR4 Total Pensions Service Cost5 Total Grant 2014 2015 Target Target 750 30 780 750 750 – 750 – – – – – 3,030 254 3,284 750 19 769 750 750 750 – – – – – – 3,019 283 3,302 Min 750 19 769 – – – – – – – – – 769 283 1,052 Max 750 19 769 1,125 1,125 1,125 – – – – – – 4,144 283 4,427 Actual Grant 2015 750 19 769 870 870 870 – – – – – – 3,379 283 3,662 Payout1 2014 2015 750 30 780 912 – – – – – – – – 1,692 254 1,946 750 19 769 870 2,784 – – 1,520 876 – 719 – 7,538 283 7,821 1 2 3 4 In accordance with the German Corporate Governance Code, the annual bonus disclosed for performance year 2015 is paid in 2016 and for performance year 2014 in 2015. The payments for equity related deferred compensation (GEI and AEI), however, are disclosed for the year in which the actual payment was made. The MTB figure included in the Actual Grant column shows the annual accrual. The payout 2015 figure includes the 2015 accrual and the accruals from the performance years 2013 and 2014, as adjusted by the sustainability assessment. The MTB 2013 – 2015 is paid out in spring 2016. Payout is capped at 200 % above grant price. The relevant share price used to determine the fair market value, and hence the final number of RSUs granted, and the 200 % cap are only available after sign-off by the external auditors. The equity-related remuneration that applied before 2010 consisted of two vehicles, virtual stock awards known as RSUs and virtual stock options known as “Stock Appreciation Rights” (SAR). Only RSUs have been awarded as of 1 January 2010. The remuneration system valid until December 2009 is disclosed in the Annual Report 2009 (starting on page 17). Whereas the GEI/RSU grants are automatically exercised at the vesting date, the GEI/SAR grants are exercised by the Board member within the exercise period following the vesting date. Hence the total payout from SARs depends on the individual decision by the Board member. SARs are released to plan participants upon expiry of the vesting period, assuming all other exercise hurdles are met. For SARs granted until and including 2008, the vesting period was two years and the exercise period five years. For SARs granted 2009, the vesting period is four years and the exercise period three years. SARs can be exercised on the condition that the price of the Allianz SE stock is at least 20 % above the strike price at the time of grant. During the term of the plan, at least once on five consecu- tive trading days the Allianz SE stock must relatively appreciate at least 0.01 percentage points ahead of the appreciation of the Dow Jones EURO STOXX Price Index (600). 5 Pension Service Cost in accordance with IAS 19: represents the company cost, not the actual entitlement nor a payment; however, according to the German Corporate Governance Code, the Pension Service Cost is to be included in all columns. 6 According to his cancellation agreement and in addition to the amounts disclosed in the table, Manuel Bauer receives a payment of € 281.3 THOU in spring 2016 and according to his severance agreement, a payment of € 187.5 THOU in 2015. The different pro-rated amounts for base salary and target amounts result from different pro-rating methodologies, which are generally applied. 7 8 9 Manuel Bauer received a payment of € 156 THOU in 2015 for 25 years of service to Allianz. Dr. Christof Mascher received a payment of € 156 THOU in 2014 for 25 years of service for Allianz. Since Dr. Christof Mascher joined the Board of Management in September 2009, his pay-out from the GEI 2009 plans are shown pro rata temporis. 42 Annual Report 2015 Allianz Group Grant Actual Grant Payout1 Grant Actual Grant Payout1 2014 2015 2015 2014 2015 2014 2015 2015 2014 2015 Target Target Target Target 3,014 302 3,316 3,014 274 3,288 764 274 1,038 4,139 274 4,413 3,037 274 3,311 1,527 302 1,829 4,056 274 4,330 3,162 339 3,501 3,002 348 3,350 752 348 1,100 4,127 348 4,475 3,330 348 3,678 Min 750 14 764 Max 750 14 764 1,125 1,125 1,125 Min 750 27 777 Max 750 27 777 1,125 1,125 1,125 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 750 14 764 758 758 758 – – – – – – 750 27 777 956 956 956 – – – – – – 750 14 764 750 750 750 – – – – – – 750 27 777 750 750 750 – – – – – – 750 14 764 750 750 750 – – – – – – – – – – – – – – – – – – – – – 750 14 764 758 2,534 – – – – – – 750 27 777 956 956 – – – – – – 750 14 764 763 – – – – – – – – – – – – – – – – – – – – – – – 750 1628 912 750 750 750 – – – – – – 750 17 767 750 750 750 – – – – – 750 2 752 750 750 750 – – – – – – 750 16 766 750 750 750 – – – – – – Min 750 2 752 Max 750 2 752 1,125 1,125 1,125 Min 750 16 766 Max 750 16 766 1,125 1,125 1,125 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 750 2 752 859 859 859 – – – – – – 750 16 766 961 961 961 – – – – – – 750 1628 912 907 1319 1,950 339 2,289 – – – – – – – – – – – – – – – 750 17 767 996 750 2 752 859 2,885 1,584 593 – – – – – 6,673 348 7,021 750 16 766 961 3,156 – – – – – – – Grant Actual Grant Payout1 Grant Actual Grant Payout1 2014 2015 2015 2014 2015 2014 2015 2015 2014 2015 Target Target Target Target 3,027 397 3,424 777 397 1,174 4,152 397 4,549 3,644 397 4,041 2,689 397 3,086 3,017 249 3,266 3,016 282 3,298 766 282 1,048 4,141 282 4,423 3,649 282 3,931 1,763 249 2,012 4,883 282 5,165 B Corporate Governance 27 32 Corporate Governance Report Statement on Corporate Management pursuant to § 289a of the HGB 34 Takeover-related Statements and Explanations 37 Remuneration Report € THOU Manuel Bauer 6 (Appointed: 01/2011; End of Service: 09/2015) Dr. Helga Jung (Appointed: 01/2012) Dr. Christof Mascher (Appointed: 09/2009) Actual Grant 2015 Payout1 2014 2015 Grant Actual Grant Payout1 Grant Actual Grant Payout1 2014 2015 2015 2014 2015 2014 2015 2015 2014 2015 Target Target 750 14 764 750 750 – 750 – – – – – 3,014 302 3,316 750 14 764 750 750 750 – – – – – – 3,014 274 3,288 Min 750 14 764 Max 750 14 764 – 1,125 – – – – – – – – 764 274 1,038 1,125 1,125 – – – – – – 4,139 274 4,413 750 14 764 758 758 758 – – – – – – 3,037 274 3,311 750 14 764 763 – – – – – – – – 1,527 302 1,829 750 14 764 758 2,534 – – – – – – 4,056 274 4,330 Target Target 750 1628 912 750 750 – 750 – – – – – 3,162 339 3,501 750 2 752 750 750 750 – – – – – – 3,002 348 3,350 Min 750 2 752 Max 750 2 752 – 1,125 – – – – – – – – 752 348 1,100 1,125 1,125 – – – – – – 4,127 348 4,475 750 2 752 859 859 859 – – – – – – 3,330 348 3,678 750 1628 912 907 – – – – – 1319 – – 1,950 339 2,289 750 2 752 859 2,885 – – 1,584 593 – – – 6,673 348 7,021 € THOU Jay Ralph (Appointed: 01/2010) Dr. Axel Theis (Appointed: 01/2015) Dr. Dieter Wemmer (Appointed: 01/2012) Actual Grant 2015 Payout1 2014 2015 Grant Actual Grant Payout1 Grant Actual Grant Payout1 2014 2015 2015 2014 2015 2014 2015 2015 2014 2015 Target Target – – – – – – – – – – – – – – – 750 27 777 750 750 750 – – – – – – 3,027 397 3,424 Min 750 27 777 Max 750 27 777 – 1,125 – – – – – – – – 777 397 1,174 1,125 1,125 – – – – – – 4,152 397 4,549 750 27 777 956 956 956 – – – – – – 3,644 397 4,041 – – – – – – – – – – – – – – – 750 27 777 956 956 – – – – – – 2,689 397 3,086 Target Target 750 17 767 750 750 750 – – – – – 3,017 249 3,266 750 16 766 750 750 750 – – – – – – 3,016 282 3,298 Min 750 16 766 Max 750 16 766 – 1,125 – – – – – – – – 766 282 1,048 1,125 1,125 – – – – – – 4,141 282 4,423 750 16 766 961 961 961 – – – – – – 3,649 282 3,931 750 17 767 996 – – – – – – – – 1,763 249 2,012 5 6 7 8 9 Pension Service Cost in accordance with IAS 19: represents the company cost, not the actual entitlement nor a payment; however, according to the German Corporate Governance Code, the Pension Service Cost is to be included in all columns. According to his cancellation agreement and in addition to the amounts disclosed in the table, Manuel Bauer receives a payment of € 281.3 THOU in spring 2016 and according to his severance agreement, a payment of € 187.5 THOU in 2015. The different pro-rated amounts for base salary and target amounts result from different pro-rating methodologies, which are generally applied. Manuel Bauer received a payment of € 156 THOU in 2015 for 25 years of service to Allianz. Dr. Christof Mascher received a payment of € 156 THOU in 2014 for 25 years of service for Allianz. Since Dr. Christof Mascher joined the Board of Management in September 2009, his pay-out from the GEI 2009 plans are shown pro rata temporis. Annual Report 2015 Allianz Group 750 16 766 961 3,156 – – – – – – – 4,883 282 5,165 43 INDIVIDUAL REMUNERATION: 2015 AND 2014 Annual Variable Compensation – Annual Bonus Base Salary Perquisites Total fixed compensation Deferred Compensation MTB (2013 – 2015)2 AEI 2016/RSU3 AEI 2015/RSU3 AEI 2011/RSU3 GEI 2010/RSU3 GEI 2009/RSU3 GEI 2010/SAR4 GEI 2008/SAR4 Total Total Pensions Service Cost5 Base Salary Perquisites Total fixed compensation Deferred Compensation MTB (2013 – 2015)2 AEI 2016/RSU3 AEI 2015/RSU3 AEI 2011/RSU3 GEI 2010/RSU3 GEI 2009/RSU3 GEI 2010/SAR4 GEI 2008/SAR4 Total Total Pensions Service Cost5 Annual Variable Compensation – Annual Bonus 3,015 317 3,332 2,414 296 2,710 731 296 1,027 3,257 296 3,553 2,619 296 2,915 1,543 317 1,860 3,695 296 3,991 Grant 2014 2015 Target Target 750 15 765 750 750 750 – – – – – – 750 30 780 750 750 750 – – – – – – 563 1687 731 561 561 561 – – – – – – 750 19 769 750 750 750 – – – – – – Min 563 1687 731 – – – – – – – – – – – – – – – – – – Min 750 19 769 Max 563 1687 731 842 842 842 – – – – – – Max 750 19 769 1,125 1,125 1,125 – – – – – – 563 1687 731 629 629 629 – – – – – – 750 19 769 870 870 870 – – – – – – Grant 2014 2015 Target Target 750 15 765 778 – – – – – – – – – – – – – – – – 750 30 780 912 563 1687 731 629 2,335 – – – – – – – 750 19 769 870 2,784 – – – – 1,520 876 719 7,538 283 7,821 3,030 254 3,284 3,019 283 3,302 769 283 1,052 4,144 283 4,427 3,379 283 3,662 1,692 254 1,946 1 In accordance with the German Corporate Governance Code, the annual bonus disclosed for performance awarded as of 1 January 2010. The remuneration system valid until December 2009 is disclosed in the year 2015 is paid in 2016 and for performance year 2014 in 2015. The payments for equity related deferred Annual Report 2009 (starting on page 17). Whereas the GEI/RSU grants are automatically exercised at the compensation (GEI and AEI), however, are disclosed for the year in which the actual payment was made. vesting date, the GEI/SAR grants are exercised by the Board member within the exercise period following 2 The MTB figure included in the Actual Grant column shows the annual accrual. The payout 2015 figure the vesting date. Hence the total payout from SARs depends on the individual decision by the Board includes the 2015 accrual and the accruals from the performance years 2013 and 2014, as adjusted by the member. SARs are released to plan participants upon expiry of the vesting period, assuming all other sustainability assessment. The MTB 2013 – 2015 is paid out in spring 2016. exercise hurdles are met. For SARs granted until and including 2008, the vesting period was two years and 3 Payout is capped at 200 % above grant price. The relevant share price used to determine the fair market the exercise period five years. For SARs granted 2009, the vesting period is four years and the exercise value, and hence the final number of RSUs granted, and the 200 % cap are only available after sign-off by period three years. SARs can be exercised on the condition that the price of the Allianz SE stock is at least the external auditors. 20 % above the strike price at the time of grant. During the term of the plan, at least once on five consecu- 4 The equity-related remuneration that applied before 2010 consisted of two vehicles, virtual stock awards tive trading days the Allianz SE stock must relatively appreciate at least 0.01 percentage points ahead of known as RSUs and virtual stock options known as “Stock Appreciation Rights” (SAR). Only RSUs have been the appreciation of the Dow Jones EURO STOXX Price Index (600). IndIvIdual remuneratIon: 2015 and 2014 € thou Base Salary Perquisites Total fixed compensation Annual Variable Compensation – Annual Bonus Deferred Compensation mtB (2013 – 2015)2 aeI 2016/rSu3 aeI 2015/rSu3 aeI 2011/rSu3 GeI 2010/rSu3 GeI 2009/rSu3 GeI 2010/Sar4 GeI 2008/Sar4 Total Pensions Service Cost5 Total Dr. Werner Zedelius (Appointed: 01/2002) Grant 2014 2015 Target Target 750 17 767 750 750 – 750 – – – – – 3,017 576 3,593 750 19 769 750 750 750 – – – – – – 3,019 646 3,665 Min 750 19 769 – – – – – – – – – 769 646 1,415 Max 750 19 769 1,125 1,125 1,125 – – – – – – 4,144 646 4,790 Actual Grant 2015 750 19 769 959 959 959 – – – – – – 3,646 646 4,292 € thou Dr. Maximilian Zimmerer (Appointed: 06/2012) Base Salary Perquisites Total fixed compensation Annual Variable Compensation – Annual Bonus Deferred Compensation mtB (2013 – 2015)2 aeI 2016/rSu3 aeI 2015/rSu3 aeI 2011/rSu3 GeI 2010/rSu3 GeI 2009/rSu3 GeI 2010/Sar4 GeI 2008/Sar4 Total Pensions Service Cost5 Total Grant 2014 2015 Target Target 750 10 760 750 750 – 750 – – – – – 3,010 409 3,419 750 16 766 750 750 750 – – – – – – 3,016 386 3,402 Min 750 16 766 – – – – – – – – – 766 386 1,152 Max 750 16 766 1,125 1,125 1,125 – – – – – – 4,141 386 4,527 Actual Grant 2015 750 16 766 940 940 940 – – – – – – 3,585 386 3,971 Payout1 2014 2015 750 17 767 1,032 – – – – – 1,048 187 – 3,034 576 3,610 750 19 769 959 3,066 – – 1,505 1,225 – 591 328 8,443 646 9,089 Payout1 2014 2015 750 10 760 909 – – – – – – – – 1,669 409 2,078 750 16 766 940 2,993 – – – – – – – 4,699 386 5,085 1 2 3 4 In accordance with the German Corporate Governance Code, the annual bonus disclosed for performance year 2015 is paid in 2016 and for performance year 2014 in 2015. The payments for equity related deferred compensation (GEI and AEI), however, are disclosed for the year in which the actual payment was made. The MTB figure included in the Actual Grant column shows the annual accrual. The payout 2015 figure includes the 2015 accrual and the accruals from the performance years 2013 and 2014, as adjusted by the sustainability assessment. The MTB 2013 – 2015 is paid out in spring 2016. Payout is capped at 200 % above grant price. The relevant share price used to determine the fair market value, and hence the final number of RSUs granted, and the 200 % cap are only available after sign-off by the external auditors. The equity-related remuneration that applied before 2010 consisted of two vehicles, virtual stock awards known as RSUs and virtual stock options known as “Stock Appreciation Rights” (SAR). Only RSUs have been awarded as of 1 January 2010. The remuneration system valid until December 2009 is disclosed in the Annual Report 2009 (starting on page 17). Whereas the GEI/RSU grants are automatically exercised at the vesting date, the GEI/SAR grants are exercised by the Board member within the exercise period following the vesting date. Hence the total payout from SARs depends on the individual decision by the Board member. SARs are released to plan participants upon expiry of the vesting period, assuming all other exercise hurdles are met. For SARs granted until and including 2008, the vesting period was two years and the exercise period five years. For SARs granted 2009, the vesting period is four years and the exercise period three years. SARs can be exercised on the condition that the price of the Allianz SE stock is at least 20 % above the strike price at the time of grant. During the term of the plan, at least once on five consecu- tive trading days the Allianz SE stock must relatively appreciate at least 0.01 percentage points ahead of the appreciation of the Dow Jones EURO STOXX Price Index (600). Pension Service Cost in accordance with IAS 19: represents the company cost not the actual entitlement nor a payment, however, according to the German Corporate Governance Code the Pension Service Cost is to be included in all columns. 5 44 Annual Report 2015 Allianz Group B Corporate Governance 27 32 Corporate Governance Report Statement on Corporate Management pursuant to § 289a of the HGB 34 Takeover-related Statements and Explanations 37 Remuneration Report GERMAN ACCOUNTING STANDARD 17 DISCLOSURE The total remuneration to be disclosed in accordance with German Accounting Standard 17 for 2015 is defined differently than in the Ger- man Corporate Governance Code and is composed of the base salary, perquisites, annual bonus, the fair value of the RSU grant and the pay- out of the MTB 2013 – 2015. However, it excludes the pension service cost. The information on remuneration for 2014 (in parentheses) does not disclose the notional accruals for the MTB 2013 – 2015: Oliver Bäte € 7,046 (2,774) THOU, Michael Diekmann € 5,479 (4,397) THOU, Sergio Balbinot € 3,780 (–) THOU, Manuel Bauer € 4,325 (2,322) THOU, Dr. Helga Jung € 4,813 (2,290) THOU, Dr. Christof Mascher € 5,356 (2,726) THOU, Jay Ralph € 5,293 (2,603) THOU, Dr. Axel Theis € 3,644 (–) THOU, Dr. Dieter Wemmer € 5,844 (2,760) THOU, Dr. Werner Zedelius € 5,753 (2,831) THOU, Dr. Maximilian Zimmerer € 5,638 (2,578) THOU. The sum of the total remuneration of the Board of Management for 2015, including the payments of the MTB 2013 – 2015 and excluding the pension service cost, amounts to € 57 MN (2014 excluding the notional accruals for the MTB 2013 – 2015: € 30 MN). The corresponding amount, including pension service cost, equals € 61 MN (2014 excluding the notional accruals for the MTB 2013 – 2015: € 35 MN). EqUITY-RELATED REMUNERATION In accordance with the approach described earlier, a number of RSUs were granted to each member of the Board of Management in March 2016, which will vest and be settled in 2020. GRANTS, OUTSTANDING HOLDINGS, AND EqUITY COMPENSATION ExPENSE UNDER THE ALLIANz EqUITY PROGRAM Board members Oliver Bäte (Chairman since 7/5/2015) Michael Diekmann (Chairman until 6/5/2015) Sergio Balbinot3 Manuel Bauer Dr. Helga Jung Dr. Christof Mascher Jay Ralph Dr. Alex Theis Dr. Dieter Wemmer Dr. Werner Zedelius Dr. Maximilian Zimmerer Total RSU Number of RSU granted on 4/3/20161 10,898 4,618 8,638 5,443 6,551 7,430 7,521 8,263 8,311 8,291 8,124 SAR Number of RSU held at 31/12/20151 Number of SAR held at 31/12/2015 Strike Price € Equity Compensation 2 Expense 2015 € THOU 38,613 60,292 24,820 32,973 27,331 34,260 34,968 23,005 28,740 35,513 29,892 – – – – 3,167 7,892 – – – – – – – – – 87.36 87.36 – – – – – – 2,363 3,493 1,345 1,821 1,508 2,223 2,195 1,442 1,370 2,176 1,718 21,653 84,088 370,407 11,059 1 The relevant share price used to determine the fair market value, and hence the final number of RSUs granted, is only available after sign-off of the Annual Report by the external auditors, thus numbers are based on a best estimate. As disclosed in the Annual Report 2014, the equity-related grant in 2015 was made to participants as part of their 2014 remuneration. The disclosure in the Annual Report 2014 was based on a best estimate of the RSU grants. The actual grants deviated from the estimated values and have to be disclosed accordingly. The actual RSU grants as of 12 March 2015 under the Allianz Equity Incentive are as follows: Oliver Bäte: 8,187, Michael Diekmann: 12,554, Manuel Bauer: 6,319, Dr. Helga Jung: 6,192, Dr. Christof Mascher: 7,364, Jay Ralph: 7,401, Dr. Dieter Wemmer: 8,088, Dr. Werner Zedelius: 8,379, Dr. Maximilian Zimmerer: 7,379. 2 3 Grants of equity-related remuneration are accounted for as cash settled awards. The fair market value of the granted RSUs and SARs is remeasured at each reporting date and accrued, as a compensation expense, proportionately over the vesting and service period. Upon vesting, any subsequent changes in the fair value of the unexercised SARs are also recognized as a compensation expense. 24,820 RSUs granted in March 2015 include RSUs granted for his December 2014 employment contract. Annual Report 2015 Allianz Group 45 PENSIONS Company contributions for the current plan remain unchanged from 2014 and are set at 27.98 % of the base salary, increasing to 34.98 % after five years and to 41.98 % after ten years of service on the Board of Man- agement. These are invested in a fund and have a guarantee for the contributions paid, but no further interest guarantee (for members of the Board of Management who were born before 1 January 1958, the guaranteed minimum interest rate remains at 2.75 % p.a.). For mem- bers with pension rights in the frozen defined benefit plan, the above contribution rates are reduced by 19 % of the expected annual pension from that frozen plan. The Allianz Group paid € 4 MN (2014: € 4 MN) to increase reserves for pensions and similar benefits for active members of the Board of Management. As of 31 December 2015, reserves for pensions and similar benefits for active members of the Board of Management amounted to € 38 MN (2014: € 56 MN). Defined benefit pension plan (frozen) Current pension plan AVK/APV1 Transition payment2 Total SC4 DBO5 SC4 DBO5 SC4 DBO5 SC4 DBO5 SC4 DBO5 INDIVIDUAL PENSIONS: 2015 AND 2014 Total might not sum up due to rounding € THOU Board of Management Oliver Bäte (Chairman since 7/5/2015) Michael Diekmann6 (Chairman until 6/5/2015) Sergio Balbinot Manuel Bauer7 Dr. Helga Jung Dr. Christof Mascher Jay Ralph Dr. Axel Theis Dr. Dieter Wemmer Dr. Werner Zedelius Dr. Maximilian Zimmerer 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 Annual pension payment3 – – 337 337 – – 57 57 62 62 – – – – – – – – – – 306 9,963 – – – 58 56 43 – – – – – – – 1,678 1,187 1,175 – – – – 120 110 3,085 – – – 225 225 161 161 – – – 213 170 150 118 – – – 5,751 5,700 3,897 3,869 283 322 230 577 219 – 287 249 210 251 280 273 278 251 199 – 278 247 398 350 191 232 2,916 2,722 – 6,373 243 – – 1,818 1,800 1,629 3,016 2,802 1,860 1,618 2,450 – 1,181 905 4,151 3,823 2,672 2,524 6 3 3 10 2 – 9 9 8 9 5 3 5 3 31 26 – 253 2 – – 162 147 221 37 29 23 17 10 214 – 4 2 9 10 9 9 – 8 9 203 268 196 264 194 44 3 105 495 284 – 1,278 1 – – – – – 63 63 – – 78 – – – 26 47 36 49 1 – – – – – 508 453 1 1 722 – 1 1 641 618 656 627 483 368 235 998 222 – 296 317 274 302 348 339 283 254 397 – 282 249 646 576 386 409 3,442 3,032 – 17,867 246 – – 3,658 3,134 3,025 3,562 3,284 1,884 1,635 6,471 – 1,190 915 10,746 10,409 7,422 7,285 1 2 3 4 Plan participants contribute 3 % of their relevant salary to the AVK. For the AVK the minimum guaranteed interest rate is 2.75 % – 3.50 % depending on the date of joining Allianz. In general, the company funds the balance required via the APV. Before Allianz’s founding of the APV in 1998, both Allianz and the plan participants were contributing to the AVK. For details on the transition payment, see section Termination of service. In any event a death benefit is included. Expected annual pension payment at assumed retirement age (age 60), excluding current pension plan. SC = service cost. Service costs are calculatory costs for the DBO related to the reported business year. 5 6 7 DBO = defined benefit obligation, end of year. The figures show the obligation for Allianz resulting from defined benefit plans taking into account realistic assumptions with regard to interest rate, dynamics and biometric probabilities. As Michael Diekmann retired on 7 May 2015, his employer-financed DBO of € 17,277 THOU (thereof € 9,256 THOU for the frozen DB-Pension-Plan, € 6,416 THOU for the Current Pension Plan, € 303 THOU AVK/ APV and € 1,301 THOU for the transition payment) is covered with former Board members. As Manuel Bauer left Allianz on 30 September 2015, his employer-financed DBO of € 3,924 THOU (thereof € 1,699 THOU for the frozen DB-Pension-Plan, € 2,030 THOU for the Current Pension Plan and € 195 THOU AVK/APV) is covered with former Board members. 46 Annual Report 2015 Allianz Group B Corporate Governance 27 32 Corporate Governance Report Statement on Corporate Management pursuant to § 289a of the HGB 34 Takeover-related Statements and Explanations 37 Remuneration Report In 2015, remuneration and other benefits totaling € 7 MN (2014: € 6 MN) were paid to former members of the Board of Management and dependents, while reserves for current pension obligations and accrued pension rights totaled € 122 MN (2014: € 102 MN). LOANS TO MEMBERS Of THE BOARD Of MANAGEMENT As of 31 December 2015, there were no outstanding loans granted by Allianz Group companies to members of the Board of Management. TERMINATION Of SERVICE Board of Management contracts are limited to a period of five years. For new appointments, in compliance with the German Corporate Governance Code, a shorter period is typical. Arrangements for termination of service including retirement are as follows: Termination of service – details of the payment arrangements Transition payment (appointment before 1 January 2010) Board members receiving a transition payment are subject to a six- months non-compete clause. The payment is calculated based on the last base salary (paid for a period of six months) and 25 % of the target variable remuneration at the date when notice is given. A Board member with a base salary of € 750 THOU would receive a maximum of € 937.5 THOU. Where an Allianz pension is immediately payable, transition payment amounts are set off accordingly. Severance payment cap Payments to Board members for early termination with a remaining term of contract of more than two years are capped at two years’ com- pensation. 1. Board members who were appointed before 1 January 2010 – and who have served a term of at least five years – are eligible for a six- month transition payment after leaving the Board of Management. Whereby the annual compensation: 2. Severance payments made to Board members in case of an early termination comply with the German Corporate Governance Code. 3. Special terms, also compliant with the German Corporate Gover- nance Code, apply if service is ended as a result of a “change of control”. This requires that a shareholder of Allianz SE, acting alone or together with other shareholders, holds more than 50 % of voting rights in Allianz SE. Contracts do not contain provisions for any other cases of early ter- mination from the Board of Management. Board members who were appointed before 1 January 2011 are eligible to use a company car for a period of one year after their retirement. 1. is calculated on the basis of the previous year’s annual base sal- ary plus 50 % of the target variable remuneration (annual bonus, accrued MTB and equity-related remuneration: For a Board member with a fixed base salary of € 750 THOU, the annual com- pensation would amount to € 1,875 THOU. Hence, he/she would receive a maximum severance payment of € 3,750 THOU) and 2. shall not exceed the latest year’s actual total compensation. If the remaining term of contract is less than two years, the payment is pro-rated according to the remaining term of the contract. Change of control In case of early termination as a result of a change of control, sever- ance payments made to Board members generally amount to three years’ compensation (annual compensation as defined above) and shall not exceed 150 % of the severance payment cap (a Board mem- ber with a base salary of € 750 THOU would receive a maximum of € 5,625 THOU). Annual Report 2015 Allianz Group 47 MISCELLANEOUS Internal and external Board appointments When a member of the Board of Management holds an appointment in another company within the Allianz Group, the full remuneration amount is transferred to Allianz SE. In recognition of the benefits to the organization, Board of Management members are allowed to accept a limited number of non-executive supervisory roles in appro- priate external organizations. In these cases, 50 % of the remunera- tion received is paid to Allianz SE. A Board member retains the full remuneration only when the Supervisory Board qualifies the appoint- ment as a personal one. Remuneration paid by external organiza- tions is shown in the annual reports of the companies concerned. The remuneration relating to the external appointment is set by the gov- erning body of the relevant organization. OUTLOOK fOR 2016 The Supervisory Board approved the following changes to the remu- neration of the Board of Management on 10 December 2015, and the Board of Management for all executives of Allianz Group from 2016 and 2017 in a phased approach: The pension contributions as a percentage of base salary paid by the company to the contribution-based pension plan will have a unified level of 50 % of base salary in 2016. Remuneration of the Supervisory Board The remuneration of the Supervisory Board is governed by the Statutes of Allianz SE and the German Stock Corporation Act. The structure of the Supervisory Board’s remuneration is regularly reviewed with respect to German, European and international corporate gover- nance recommendations and regulations. REMUNERATION PRINCIPLES − Set total remuneration at a level aligned with the scale and scope of the Supervisory Board’s duties, and appropriate to the com- pany’s activities and business and financial situation. − Set a remuneration structure that takes into account the indi- vidual functions and responsibilities of Supervisory Board mem- bers, such as chair, vice-chair or committee mandates. The Performance Management system has been adjusted to support Allianz’s strategic Renewal Agenda. Under the new Inclusive Meritoc- racy approach, Group or company related financial KPIs make up half the performance equation. The other half is linked to individual per- formance, which consists of quantitative and predominantly qualita- tive criteria. The new approach places greater emphasis on behav- ioral aspects of performance through a common standard designed to drive cultural change across the Group. These are: − Set a remuneration structure to allow for proper oversight of business as well as for adequate decisions on executive personnel and remuneration. REMUNERATION STRUCTURE AND COMPONENTS The remuneration structure, which comprises fixed and committee- related remuneration only, was approved by the Annual General Meeting 2011 and is laid down in the Statutes of Allianz SE. − Customer and Market Excellence, − Collaborative Leadership, − Entrepreneurship, − Trust. The new MTB 2016 – 2018 comprises sustainability (performance and health) indicators, which are aligned with the Group’s external targets: − Performance indicators: − Sustainable improvement/stabilization of Return on Equity (excluding unrealized gains/losses on bonds), − Compliance with economic capitalization guidance (capital- ization level and volatility limit); − Health indicators (aligned with the Renewal Agenda): − True Customer Centricity, − Digital by Default, − Technical Excellence, − Growth Engines, − Inclusive Meritocracy (including gender diversity – women in leadership). 48 Annual Report 2015 Allianz Group Fixed annual remuneration The remuneration of a Supervisory Board member consists of a fixed cash amount paid after the end of each business year for services rendered over that period. As in 2014, a regular Supervisory Board member receives a fixed remuneration of € 100 THOU per year. Each deputy Chairperson receives € 150 THOU and the Chairperson € 200 THOU. Committee-related remuneration The Chairperson and members of the Supervisory Board committees receive additional committee-related remuneration. The committee- related remuneration is as follows: COMMITTEE-RELATED REMUNERATION € THOU Committee Personnel Committee, Standing Committee, Risk Committee Audit Committee Chair Member 40 80 20 40 B Corporate Governance 27 32 Corporate Governance Report Statement on Corporate Management pursuant to § 289a of the HGB 34 Takeover-related Statements and Explanations 37 Remuneration Report Attendance fees and expenses In addition to the fixed and committee-related remuneration, mem- bers of the Supervisory Board receive an attendance fee of € 750 for each Supervisory Board or committee meeting they attend. Should several meetings be held on the same or consecutive days, the atten- dance fee will be paid only once. Allianz SE reimburses the members of the Supervisory Board for their out-of-pocket expenses and the VAT payable on their Supervisory Board activity. For the performance of his duties, the Chairman of the Supervisory Board is furthermore entitled to an office with secretarial support and use of the Allianz carpool service. In the financial year 2015, Allianz SE reimbursed expenses totaling € 54,424. REMUNERATION fOR 2015 The total remuneration for all Supervisory Board members, including attendance fees, amounted to € 2,021 THOU in 2015 (€ 2,035 THOU in 2014). The following table shows the individual remuneration for 2015 and 2014: INDIVIDUAL REMUNERATION: 2015 AND 2014 Total might not sum up due to rounding € THOU Members of the Supervisory Board Dr. Helmut Perlet (Chairman) Dr. Wulf H. Bernotat (Deputy Chairman) Rolf Zimmermann (Deputy Chairman) Dante Barban Christine Bosse Gabriele Burkhardt-Berg Jean-Jacques Cette Ira Gloe-Semler Franz Heiß2 Prof. Dr. Renate Köcher Jürgen Lawrenz3 Jim Hagemann Snabe4 Peter Denis Sutherland Total5 Committees1 P C C M M M M S C C M M M M M M M M R C C M M M M M M M M M A M M C C M M M M M M N C C M M M M Fixed remu ne ration Commit tee remu ne ration Atten dance fees Total remu neration 200.0 200.0 150.0 150.0 150.0 150.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 58.3 100.0 100.0 100.0 41.7 – 100.0 66.7 100.0 100.0 160.0 160.0 100.0 100.0 40.0 40.0 20.0 20.0 40.0 40.0 20.0 20.0 40.0 40.0 40.0 40.0 11.7 20.0 20.0 20.0 8.3 – 40.0 26.7 20.0 20.0 6.7 8.2 4.5 6.0 5.2 6.0 4.5 3.7 5.2 6.0 4.5 4.5 6.0 5.2 6.0 5.2 2.2 4.5 4.5 4.5 2.2 – 5.2 3.8 3.7 3.7 366.7 368.2 254.5 256.0 195.2 196.0 124.5 123.7 145.2 146.0 124.5 124.5 146.0 145.2 146.0 145.2 72.2 124.5 124.5 124.5 52.2 – 145.2 97.2 123.7 123.7 1,400.0 1,408.4 560.0 563.4 60.7 63.5 2,020.7 2,035.3 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 Legend: C = Chairperson of the respective committee, M = Member of the respective committee 1 2 3 Abbreviations: A – Audit, N – Nomination, P – Personnel, R – Risk, S – Standing. Until 31 July 2015. Since 1 August 2015. 4 5 Since 7 May 2014. The total remuneration reflects the remuneration of the full Supervisory Board in the respective year. Annual Report 2015 Allianz Group 49 Remuneration for mandates in other Allianz companies and for other functions All current employee representatives of the Supervisory Board except for Mrs. Ira Gloe-Semler are employed by Allianz Group companies and receive a market-aligned remuneration for their services. Loans to members of the Supervisory Board On 31 December 2015 there was one outstanding loan granted by Allianz Group companies to members of the Supervisory Board of Allianz SE. One member received a mortgage loan of € 80 THOU from Allianz Bank in 2010. The loan has a duration of ten years and was granted at a normal market interest rate. 50 Annual Report 2015 Allianz Group GRoup mAnAGement RepoRt C Annual Report 2015 Allianz Group 5151 C _ GRoup mAnAGement RepoRt pages 52 – 132 Your AlliAnz Business Operations and Markets Allianz Group structure Insurance operations Asset Management Corporate and Other  53  53  53  54  54  55 Worldwide presence and business segments  56 Our markets  58  58  58  59  60  61  61  61  62  63  65  65 Strategy and Steering Operating environment The Renewal Agenda Ensuring successful execution Our steering Progress in Sustainable Development Sustainability management and governance Sustainable insurer Responsible investor Trusted company Committed corporate citizen Attractive employer MAnAgeMent Discussion AnD AnAlYsis  67  67  67  68  69  69  70  70  71  71  71  71  73  73  73  74  74  75  77  78  80  80  81  81  81  83  85 52 Business Environment Economic environment 2015 Business environment 2015 for the insurance industry Business environment 2015 for the asset management industry Executive Summary of 2015 Results Earnings summary Total revenues Operating profit Non-operating result Income taxes Net income Proposal for appropriation of net earnings Events after the balance sheet date Other information Other parts of the Group Management Report Property-Casualty Insurance Operations Gross premiums written Operating profit Net income Property-Casualty insurance operations by reportable segments Life/Health Insurance Operations Statutory premiums Premiums earned (net) Present value of new business premiums (PVNBP) Operating profit Net income Life/Health insurance operations by reportable segments Annual Report 2015 Allianz Group  86  86  88  89  89  90  91  91  92  92  93  93  94  94  94  95  96  96  97  98  98  98  99 104 105 105 105 105 109 110 110 110 111 Asset Management Assets under management Operating revenues Operating profit Net income Corporate and Other Earnings summary Operating earnings summaries by reportable segment Outlook 2016 Overview: 2015 results versus previous year outlook Economic outlook Insurance industry outlook Asset management industry outlook Outlook for the Allianz Group Overview: outlook and assumptions 2016 Management’s assessment of expected revenues and earnings for 2016 Financing and liquidity development and capitalization Expected dividend development Management’s overall assessment of the current economic situation of the Allianz Group Balance Sheet Review Shareholders’ equity Regulatory capital adequacy Total assets and total liabilities Off-balance sheet arrangements Liquidity and Funding Resources Organization Liquidity management of our operating entities Liquidity management and funding of Allianz SE Allianz Group consolidated cash flows Reconciliations Composition of total revenues Composition of total revenue growth Life/Health Insurance Operations risk AnD opportunitY report AnD FinAnciAl control 112 112 113 116 119 127 129 130 131 131 132 Risk and Opportunity Report Allianz risk profile and management assessment Capitalization Internal risk capital framework Internal risk assessment Risk governance Risk management priorities for 2016 Further future challenges and opportunities Controls over Financial Reporting and Risk Capital Internal controls over financial reporting Risk capital controls C Group Management Report Your Allianz Business Operations and Markets 53 58 Strategy and Steering 61 Progress in Sustainable Development Business Operations and Markets Allianz offers a comprehensive range of insurance and asset management products and services and has 85.4 million insured customers. Allianz Group structure Allianz SE and its subsidiaries (the Allianz Group) offer property- casualty insurance, life/health insurance and asset management products and services in over 70 countries, with the largest of its operations in Europe. Allianz SE, the parent company of the Allianz Group, has its headquarters in Munich, Germany. The Allianz Group structure reflects both business segments and geographical regions. The business activities are first organized by product and type of service, based on how these are strategically managed: insurance activities, asset management activities, and cor- porate and other activities. Due to differences in the nature of prod- ucts, risks, and capital allocation, insurance activities are further divided into property-casualty and life/health categories. In accor- dance with the responsibilities of the Board of Management, each of the insurance categories is grouped into regional reportable seg- ments. Corporate and other activities are divided into three different reportable segments in order to differentiate between the respective products, risks, and capital allocation. In 2015, the Allianz Group had 16 reportable segments. AlliAnz Group structure – business seGments And reportAble seGments property-cAsuAlty life/HeAltH Asset mAnAGement corporAte And otHer – German Speaking Countries and Central & Eastern Europe – Western & Southern Europe, Middle East, Africa, India – German Speaking Countries and Central & Eastern Europe – Western & Southern Europe, Middle East, Africa, India – Iberia & Latin America – Global Insurance Lines & Anglo Markets – Asia Pacific – Allianz Worldwide Partners – Iberia & Latin America – Global Insurance Lines & Anglo Markets – Asia Pacific – USA – Asset Management – Holding & Treasury – Banking – Alternative Investments Insurance operations selected product rAnGe insurAnce We offer a wide range of property-casualty and life/health insurance products to both retail and corporate customers. We are the leading property-casualty insurer globally and rank among the top five in the life/health insurance business. Our key markets, based on premiums, are Germany, France, Italy, and the United States. Most of our insurance markets are served by local Allianz com- panies. However, some business lines – such as Allianz Global Corpo- rate & Specialty (AGCS), Allianz Worldwide Partners (AWP) and Credit Insurance – are run globally. property-cAsuAlty Retail Clients Corporate Clients – Motor (liability/own damage) – Liability – Property – Accident – Travel and assistance – Property – Liability – Motor fleets – Directors’ and Officers’ liability – Credit – Marine, aviation and transport life/HeAltH Retail Clients Corporate Clients – Endowment – Annuity – Term – Disability – Investment-oriented products – Private health insurance – Group life products – Group health and disability products – Pension products for employees Annual Report 2015 Allianz Group 53 Asset Management Corporate and Other Our two major investment management businesses, PIMCO and AllianzGI, operate under Allianz Asset Management (AAM). With € 1,763 BN total assets under management (AuM) (including those of the Allianz Group), we are one of the largest asset managers in the world actively managing assets. Our core markets are the United States, Germany, France, Italy, the United Kingdom and the Asia- Pacific region. selected product rAnGe Asset mAnAGement Equity Fixed Income Alternatives Solutions retAil And institutionAl clients – Systematic – Sector/theme funds – Region /country funds – Style funds – Small cap funds – Stocks plus – Money market – Low duration – Real return – Global – Investment grade – Structured products – Commodity funds – Certificate funds – Currency funds – Life-cycle concepts – Multi-asset solution – Variable annuity solutions – Diversified income – High yield – Emerging markets – Convertible bonds – Equity long/short – Relative value – Infrastructure debt/ equity – Asset/liability management – Risk management concepts The Corporate and Other business segment’s activities include the management and support of the Allianz Group’s businesses through its central holding functions, as well as Banking and Alternative Investments. HoldinG & treAsury Holding & Treasury includes the management and support of the Group’s businesses through its strategy, risk, corporate finance, trea- sury, financial reporting, controlling, communication, legal, human resources, technology, and other functions. bAnkinG Our banking operations – with a primary focus on retail clients – sup- port our insurance business and complement the products we offer in Germany, Italy, France, the Netherlands, and Bulgaria. As a division of Allianz Deutschland AG, Oldenburgische Landesbank AG (OLB) is Allianz’s main own banking product and service provider in Germany. OLB, Germany’s largest private regional bank, covers the northwest of Germany. AlternAtiVe inVestments Alternative Investments provides global alternative investment man- agement services in the private equity, real estate, renewable energy, and infrastructure sectors, mainly on behalf of our insurance opera- tions. The Alternative Investments reportable segment also included a fully consolidated private equity investment, which was sold in December 2015. 54 Annual Report 2015 Allianz Group C Group Management Report Your Allianz Business Operations and Markets 53 58 Strategy and Steering 61 Progress in Sustainable Development Worldwide presence and business segments Market positions of our business operations1 insurance Western & southern europe, insurance Middle east, africa, india insurance GerMan speakinG countries, insurance central & eastern europe Europe ◼ II. ◼ II. ◼ III. ◼ III. ◼ II. ◼ II. ◼ III. ◼ III. ◼ III. ◼ I. ◼ III. ◼ III. ◼ III. ◼ III. ◼ ◼ ◼ Italy Greece Turkey France Belgium The Netherlands Luxembourg Middle East and North Africa ◼ III. Egypt ◼ II. ◼ III. ◼ III. ◼ II. ◼ II. Lebanon Saudi Arabia Africa ◼ II. ◼ II. ◼ II. ◼ I. ◼ II. ◼ IV. ◼ II. ◼ – ◼ II. ◼ II. ◼ II. ◼ II. ◼ II. ◼ I. ◼ II. ◼ – ◼ II. ◼ II. Benin Burkina Faso Cameroon Central Africa Congo Brazzaville Ghana Ivory Coast Kenya Madagascar Mali Senegal Togo ◼ III. ◼ II. India3 German Speaking Countries ◼ ◼ I. Germany ◼ I. ◼ II. ◼ II. ◼ III. ◼ II. Austria Switzerland Central & Eastern Europe ◼ II. ◼ I. ◼ Bulgaria ◼ II. ◼ II. ◼ I. ◼ II. ◼ II. ◼ I. ◼ I. ◼ III. ◼ II. ◼ IV. ◼ III. ◼ II. Croatia Czech Republic Hungary Poland Romania Slovakia us life insurance ◼ II. United States Global insurance lines & anGlo Markets ◼ – ◼ III. ◼ II. ◼ II. ◼ II. ◼ I. ◼ IV. ◼ – ◼ III. ◼ III. ◼ IV. United Kingdom Australia Ireland Allianz Global Corporate & Specialty Credit Insurance Reinsurance Russia Ukraine insurance iberia & latin aMerica allianz WorldWide partners ◼ II. ◼ II. ◼ II. ◼ III. Spain Portugal Latin America ◼ II. ◼ III. ◼ II. ◼ III. ◼ IV. ◼ III. Argentina Brazil Colombia Mexico ◼ – ◼ – Allianz Worldwide Partners insurance asia pacific ◼ – ◼ II. ◼ – ◼ IV. ◼ IV. ◼ II. Brunei2 China3 Hong Kong2 Indonesia ◼ – ◼ I. ◼ I. ◼ – ◼ III. ◼ III. ◼ – ◼ – ◼ IV. ◼ III. ◼ III. ◼ IV. ◼ III. Japan2 Laos Malaysia Pakistan Philippines Singapore2 South Korea Sri Lanka Taiwan Thailand asset ManaGeMent North and Latin America ◼ ◼ United States ◼ ◼ ◼ ◼ Europe ◼ ◼ ◼ ◼ ◼ ◼ ◼ ◼ ◼ ◼ ◼ ◼ ◼ ◼ ◼ ◼ ◼ ◼ Asia Pacific ◼ ◼ ◼ ◼ ◼ ◼ ◼ ◼ ◼ ◼ ◼ ◼ ◼ ◼ Canada Brazil Germany France Italy Spain Switzerland Belgium The Netherlands United Kingdom Nordics Japan Hong Kong Taiwan Singapore South Korea China Australia ◼ Property-Casualty ◼ Life/Health ◼ Banking ◼ Retail Asset Management ◼ Institutional Asset Management Insurance market position by gross premiums written: 4 III. Position 6 to 10 II. Position 2 to 5 I. Position 1 IV. Not among the top 10 1 2 This overview is based on our organizational structure in place as of 31 December 2015. For further informa- tion, please refer to the Executive Summary of 2015 Results starting on page 69. Property-Casualty business belongs to Allianz Global Corporate & Specialty. 3 4 Based on foreign competitor market ranking (excluding domestic competitors). Source: Own local estimations as of 2014. Annual Report 2015 Allianz Group 55 than 9,000 products have been sold by year-end 2015. Overall, less than one third of total new business in life came from traditional products. Through Allianz Private Kranken (APKV) we provide a wide range of health insurance products, including full private health care cover- age, supplementary health and long-term care insurance, as well as foreign travel medical insurance. In 2015, we expanded our product portfolio in comprehensive health insurance with the launch of a new tariff (AktiMed90P) and an additional module for fitness-oriented customers. Also, within the Allianz digitalization strategy, APKV established a number of digital services and processes, such as the photo app for claims, which enables customers to interact more easily and efficiently in all matters of health insurance. Italy Our Italian insurance entity Allianz Italy has a very strong multi- channel footprint and is the digital leader in the Italian market. We are strongly dedicated to the agent channel, and we also offer our products through Genialloyd – the leading company in the Italian direct business –, the broker channel, Allianz Bank Financial Advi- sors S.p.A., and bancassurance, with UniCredit as our main distribu- tion partner. In our property-casualty business, Allianz Italy again significantly outperformed the market in terms of premium growth and profit- ability, increased our market share for the fourth consecutive year, and maintained a superior profitability with a combined ratio about 10 percentage points better than the rest of the market. Our agent network was key to this performance. In 2015, we com- pleted the integration of the insurance business of UnipolSai Assi- curazioni S.p.A., which we acquired in 2014, including its 725 agencies. We also completed the introduction in the network of the common Digital Agency platform, which benefits from simple, mobile and paperless processes that drastically reduce administrative tasks for both the agents and our back offices. Another innovation for our agent network was the introduction of the Allianz1 Business modular offer for small enterprises, complementing the Allianz1 retail offer that we introduced in 2014 and which has since reached 240,000 contracts. In direct, Genialloyd premiums were up by 9.0 %, outperforming a contracting market. Property-casualty bancassurance premiums also grew strongly, especially thanks to retail motor products distrib- uted through the Italian branches of UniCredit. Allianz Italy has also received strong market recognition with awards from primary institutions such as “MilanoFinanza” (Allianz1 Business, Digital Agency, and Genialloyd) and “Istituto Tedesco di Qualità e Finanza” (Best Motor insurer in terms of quality for Agents and the Direct channel). Our markets The following sections provide an overview of our business operations in our insurance core markets by business division. insurAnce core mArkets1 insurAnce core mArkets Core markets Germany France Italy United States I. II. II. I. III. II. II. Statutory/ gross premiums written Operating profit Number of customers € mn 30,629 12,383 16,691 10,475 € mn 2,687 1,015 1,343 841 mn 20.6 5.6 7.4 1.2 Market position ◼ Property-Casualty ◼ Life/Health Market position by gross premiums written: II. Position 2 to 5 I. Position 1 III. Position 6 to 10 IV. Not among the top 10 Germany We offer our customers in Germany a full range of insurance and financial services through Allianz Deutschland AG. Our products are mainly provided by Allianz Versicherungs-AG (Allianz Sach), Allianz Lebensversicherungs-AG (Allianz Leben) and Allianz Private Kranken- versicherungs-AG (Allianz Private Kranken). They are distributed through a broad network of distribution channels, such as agencies, brokers and direct, with a strong focus on our tied-agents network. Here, Allianz Beratungs- und Vertriebs-AG serves as our distribution company. As the market leader in the German property-casualty market, we provide our products and services to retail and commercial cus- tomers. For retail customers the product world of Allianz became more digital with the launch of an online configuration tool for the modular product “Privatschutz” on Allianz.de. For purely direct cus- tomers the product range of AllSecur was broadened to liability and household. In July 2015, a new modular commercial product called “Firmenkonzept” – which is sold via tied agents – was successfully launched. The product combines property, liability and legal protec- tion insurance and targets small and medium-sized companies. Our life insurance business is active in retail and commercial markets and provides a comprehensive range of products. The main coverage offered includes annuity, endowment, term, disability, and long-term care insurance. In 2015, Komfort Dynamik – a new product that combines traditional guarantees with a stronger upside potential through a higher share of equity investment – was launched. More 1 The following sections do not cover our global insurance lines, e.g. Allianz Global Corporate & Specialty, our credit insurer Euler Hermes, or Allianz Worldwide Partners, even if those entities also operate in the respective market. 56 Annual Report 2015 Allianz Group United States Our property-casualty insurance business in the United States was primarily conducted through Fireman’s Fund Insurance Company (FFIC) until April 2015. In January 2015, our property-casualty insur- ance business in the United States was realigned. The reorganization comprised the integration of Fireman’s Fund Insurance Company’s commercial business into Allianz Global Corporate & Specialty North America (AGCS NA), the sale of the personal insurance business to the global insurance company ACE, as well as the internal transfer of the discontinued run-off business through a reinsurance agreement within the Allianz Group. The sale, which took place by means of a renewal rights arrangement, received regulatory approval from the California Department of Insurance in March 2015 and closed in April 2015. We therefore focus on the Life business within this section. Our life and annuity business is managed through Allianz Life Insurance Company of North America (Allianz Life). Our life and annuity business primarily underwrites fixed-index and variable annuities and fixed-index universal life insurance prod- ucts – all of which are sold through independent distribution channels, as well as large financial institutions such as banks and wire houses. Despite a competitive market environment in 2015, we main- tained our position as the market leader in the fixed-index annuity market as a result of an innovative index strategy introduced in 2014 and higher penetration into the Securities and Exchange Commission (SEC) licensed broker-dealer channel. Despite the modest interest rate increase in December 2015, we believe the Federal Reserve is likely to continue to raise interest rates very cautiously – leading to only modest increases in interest yields in 2016. Although this low interest rate environment remains challenging, we actively manage our product pricing strategy to maintain profitability. C Group Management Report Your Allianz Business Operations and Markets 53 58 Strategy and Steering 61 Progress in Sustainable Development In our life business, we had another year of strong premium vol- umes, particularly supported by bancassurance and our personal financial advisor network. Sales of low-capital-consuming unit- linked products accounted for 81 % of new business, compared to an estimated market average of around 41 %. The corporate structure in Italy was also streamlined in 2015 through the following transactions: We acquired the outstanding 50 % stake of Antoniana Veneta Popolare Vita, the Life Bancassurance joint venture with Banca Monte Paschi di Siena, which had been held by the partner bank. We also merged ACIF S.p.A., the financial holding com- pany, into Allianz S.p.A. to simplify corporate governance. At the same time we acquired the minority shareholdings of Allianz S.p.A. held by Allianz Subalpina Holding S.p.A. and Lloyd Adriatico Holding S.p.A. Allianz S.p.A. is thus now fully owned by the Allianz Group. France Allianz France S.A. is a major provider of insurance and financial ser- vices in the French retail and commercial markets, offering a broad range of property-casualty and life/health products for individuals and corporate customers. We distribute these offerings mostly via agents, life and health consultants, brokers and independent finan- cial advisors, as well as selected external partners. In addition, our customers can research and buy products online – either through ‘eAllianz’ or via our direct sales channel ‘AllSecur’. In 2015 a new stra- tegic plan ‘Innovation & Trust’ was launched for 2020. Capitalizing on past successes such as the partnership with Drivy (car sharing), Allianz France has given priority to fostering innovation. Examples include a crowdfunding equity fund in partnership with SmartAngels, a Pay As You Drive offer with TomTom as the first insurer in the French market, as well as hackathons and a start-up accelerator. Since local regulatory changes regarding cancellation rules were introduced in 2014, the French retail property-casualty market has seen higher customer churn. However, our constant focus on innova- tive solutions, such as fast quotes, has allowed us to grow our cus- tomer base, for example in motor insurance. Furthermore, we con- tinue to be one of the leaders in the midcorp market (ranked as third in midcorp and second in commercial property-casualty insurance). With regards to the life market in France, we have responded to the needs of our clients with a range of traditional and unit-linked products in both group and individual business, combining financial strength with the opportunity for more attractive yields. Evidence of the success of this strategy is the increase in the unit-linked proportion of our business mix from 39 % in 2014 to 48 % in 2015. We also hold a strong position in the health market, often com- bining elements of life, health and disability insurance as compre- hensive solutions for individual and commercial customers. Our retail insurance activities are also complemented by Allianz ‘Patrimoine’, which allows us to offer one-stop solutions, in particular for our high-net-worth individual life customers. Annual Report 2015 Allianz Group 57 Strategy and Steering As we celebrate 125 years of Allianz, we act from a position of strength. We will continue to protect the pillars of our success: our integrity, financial strength, technical competence, operational excellence, and talent base. However, our world and our industry are changing fast and fundamentally, spurring us to renew our way of doing business. Building on our strong foundations, we will reinforce our leading position by focusing our efforts in five fields of action: putting our customers at the heart of everything we do; becoming Digital by Default, everywhere; employing Technical Excellence even more consistently; creating new Growth Engines; and fostering a renewed corporate culture of Inclusive Meritocracy. Operating environment Geopolitical instability, demographic and societal shifts, persistently low interest rates – particularly in Europe – and uncertain economic outlooks are putting severe strains on society and the global economy. Meanwhile, digitalization is transforming economies and economics at increasing speed, enabling new, easy-to-use, customized offerings and fundamentally altering customer expectations. Thriving in such an environment puts high demands on those aspiring to be tomorrow’s leading players, but it also holds huge opportunities for those that manage to truly adapt to these new real- ities. These leaders will adapt by: carefully balancing shock resilience with capital efficiency, establishing commanding market positions and realizing visible benefits from skills and scale, leveraging digital to become customer-centric and agile, and relentlessly lifting pro- ductivity reserves in the capital, cost, and revenue base. The Renewal Agenda True Customer Centricity: Achieving True Customer Centricity is at the core of our agenda. Everything we do will only translate into suc- cess if our clients trust us fully and experience superior value when- ever dealing with us. By making superior customer experience the top priority for all our actions, we strive to significantly increase custom- er loyalty in all our entities. For instance, systematic customer experi- ence management will help us identify and enhance drivers of satis- faction along the customer journeys. “Fast” product and service solutions – such as Fast Quote/Fast Offer – will provide an immediate response experience to customers in all our local entities. We will measure progress against clear targets on Net Promoter Score (NPS), which are firmly embedded into our planning process and incentives. Digital by Default: Building further on our existing leading digital assets and common Group platforms, we strive to become Digital by Default everywhere. Based on a deep understanding of customer needs, we will roll out new digital products, processes and commu- nication globally. This will help increase both the convenience we offer our customers and our productivity. Reinforcing our leadership position means building on our existing strengths while acting decisively where the new environment requires step change. Since spring 2015, we have been mobilizing management and employees globally to jointly develop our program for the years to come in a highly inclusive and agile process. We intend to leverage the best of Allianz to produce true scale advan- tages and apply our strongest skills and assets even more systemati- cally, consistently, and ubiquitously. Five mutually reinforcing levers will help us to further expand our competitive advantage: Technical Excellence: In Property-Casualty, we create superior mar- gins, innovation, and growth by having the best technical talent and consistently applying state-of-the-art skills. We will invest further in advanced analytics, enabling superior risk selection, pricing, and claims management practices. Within Life/Health, we will enhance margins and reduce capital intensity through further shifting our new business towards unit-linked and capital-efficient products, increasing the share of protection & health business and actively managing our in-force business. Our investment management will 58 Annual Report 2015 Allianz Group C Group Management Report Your Allianz Business Operations and Markets 53 58 Strategy and Steering 61 Progress in Sustainable Development continue to capture economies of scale and skills, especially in asset- liability management processes and by pooling our investment management infrastructure, and will broaden the alternative asset allocation. Growth Engines: We systematically exploit new sources for profitable growth across regions, business segments, and sales channels. This means we will both consolidate existing leadership positions in mature markets and secure our future potential in growth markets with dedicated strategies, including new digital distribution models and regional partnerships. We will enhance our product range by replicating proven products, adding services, and driving innova- tions, for example in Health insurance. Inclusive Meritocracy: We reinforce a corporate culture where both people and performance matter. The Renewal Agenda implies sig- nificant change for all our employees, including an increased degree of agility and flexibility. Consequently, collaborative leadership, excellence with customers and markets, entrepreneurship, and trust are the four cornerstones of our adjusted global management incen- tive model. We remain committed to further strengthen diversity at Allianz. We will measure progress in the company towards incorpo- rating our renewed leadership principles by a newly defined Inclusive Meritocracy Index (IMIX), based on global employee feedback. We will continuously advance our business model and set-up to sus- tainably ensure these five levers have the greatest impact. For example, we will further strengthen our regional platforms to capture true scale benefits, not only in terms of mere efficiency gains but also cus- tomer service, best practice capabilities, and digital transformation. In addition, we will move further towards greater capital alloca- tion discipline to free up significant resources for stronger value creation. This means we will optimize our businesses for capital pro- ductivity (return on equity) and reduced capital intensity (Solvency II sensitivity) and capitalize our local entities towards a more efficient capital base. On this base, we will ensure that capital is available and fungible within the Group and allocated appropriately to finance growth initiatives. Ensuring successful execution To enable successful execution of these policies throughout the Allianz Group, we will systematically address the change process, governance, and role of the corporate center: − We will ensure mobilization of the entire global senior leader- ship team across local entities, functions, and lines of business in a new, horizontal change process. While the Board members of Allianz SE commit as sponsors of the Renewal Agenda topics, market experts and practitioners from our businesses will be driving solutions development and implementation in agile teams throughout the Group. − We will enhance governance to even better facilitate capturing skill and scale benefits. We will also promote convergence of business models and their execution globally. Aligned incentives will now give more weight to local management’s contribution to Group value, beyond local business requirements. − To increase agility and market focus of the corporate center, we will bring top leaders from our strongest businesses into the Group center while bringing functional experts from the Holding into the markets. We will continue to streamline our holding functions to put more focus on customer and market success and the implementation of the Renewal Agenda. We have defined clear ambitions for 2018. With regard to financial performance, we strive for a return on equity (excluding unrealized gains/losses on bonds net of shadow DAC) of 13 %, while growing our earnings per share at a compound annual growth rate of 5 %. To ensure sustainability of performance, we have set ourselves health targets for customer loyalty and employee engagement. We expect at least 75 % of our businesses to be or become rated by their customers as Loyalty Leader or above market in terms of NPS. At the same time, we aim to increase our IMIX from 68 % to 72 %. Building on our strong heritage, we will move forward with this ambitious program to reinforce Allianz’s leadership position for the years to come. Annual Report 2015 Allianz Group 59 Our steering BOARD OF MANAGEMENT AND ORGANIZATIONAL STRUCTURE Allianz SE has a divisional Board structure that is split into functional and business responsibilities. The business-related divisions reflect our business segments Property-Casualty, Life/Health, Asset Manage- ment, and Corporate and Other and were overseen by six Board members (five since 1 September 2015). The remaining four divisions (i.e. Chairman of the Board of Management, Finance, Investments and Operations) focus on Group functions, along with business-related responsibilities. MEMBERS OF ThE BOARD OF MANAGEMENT AND ThEIR RESpONSIBILITIES IN 2015 BOARD MEMBERS Oliver Bäte RESpONSIBILITIES Chairman of the Board of Management (since 7 May 2015), Global Property-Casualty (until 6 May 2015) Michael Diekmann (until 6 May 2015) Chairman of the Board of Management (until 6 May 2015) Sergio Balbinot Insurance Western & Southern Europe, Insurance Middle East, Africa, India (since 1 September 2015) Manuel Bauer (until 31 August 2015) Insurance Growth Markets (until 31 August 2015) Dr. Helga Jung Dr. Christof Mascher Jay Ralph Dr. Axel Theis Dr. Dieter Wemmer Dr. Werner Zedelius Dr. Maximilian Zimmerer Insurance Iberia & Latin America, Legal & Compliance, Mergers & Acquisitions Operations, Allianz Worldwide Partners Asset Management, US Life Insurance Global Insurance Lines & Anglo Markets, Global Property-Casualty (since 7 May 2015) Finance, Controlling, Risk Insurance German Speaking Countries, Insurance Central & Eastern Europe (since 1 September 2015) Investments, Global Life/Health, Insurance Asia Pacific (since 1 September 2015) TARGET SETTING AND MONITORING The Allianz Group steers its operating entities and business seg- ments via an integrated management and control process. This starts with the definition of a business-specific strategy and goals, which are discussed and agreed upon between the Holding and operating entities. According to this strategy, a three-year plan is prepared by the operating entities and aggregated to form the financial plans for the business divisions and the Allianz Group. This plan also forms the basis for our capital management. The Supervisory Board then approves the plan and sets corresponding targets for the Board of Management. The performance-based remuneration of the Board of Management is linked to short-, mid-, and long-term targets to ensure effectiveness and emphasize sustainability. For further details about the remuneration structure, including target setting and per- formance assessment, please refer to the Remuneration Report start- ing on page 37. We continuously monitor our business performance against these targets through monthly reviews to ensure that appropriate measures can be taken in the event of negative developments. During these reviews, we monitor key operational and financial metrics. Operating profit and net income are the main financial performance indicators across all business segments for the Allianz Group. In addition, we also use segment-specific figures such as the combined ratio for Property-Casualty, in-force and new business margins as well as margin on reserves for Life/Health, and the cost-income ratio for Asset Management. Furthermore, we use Return on Risk Capital (RoRC) for new business steering purposes in the Property-Casualty and Life/Health business segments. For a comprehensive view of our business segment performance, please refer to the Management Dis- cussion and Analysis starting on page 67. Besides performance steering, we also have a risk steering pro- cess in place, which is described in the Risk and Opportunity Report starting on page 112. Non-financial key performance indicators (KPIs) are mainly used for the sustainability assessment of the mid-term bonus. Under the category “partner of choice” the following KPIs are considered: Allianz Engagement Survey and NPS results, brand performance (measured by the Funnel Performance Index), diversity development, organizational transparency (as measured by the Transparency International Corporate Reporting ranking) and sustainable develop- ment (as measured by widely-recognized indices and rankings). 60 Annual Report 2015 Allianz Group C Group Management Report Your Allianz Business Operations and Markets 53 58 Strategy and Steering 61 Progress in Sustainable Development Progress in Sustainable Development Sustainable development means creating long-term economic value with a forward-thinking approach to corporate governance, environ- mental stewardship, and social responsibility. This is fundamental to our day-to-day insurance and asset management business, as we have to deliver on our promises to customers not only today, but also in 20 or 30 years. We work with different stakeholder groups to identify what is materially important for sustainable development. Our material issues are those deemed to be crucial for business success while also important to our stakeholders. The following pages highlight some of our key sustainability approaches and major developments in 2015. The Allianz Group Sus- tainability Report, with the full details of our sustainability strategy, approach and progress, is available on our sustainability website.1 Sustainability management and governance The responsibilities of our Group-level sustainability management include managing the strategic framework for Group-wide sustain- ability activities, developing and introducing relevant policies, and supporting operating entities in integrating the Group’s strategic approach and policies. The highest governing body for sustainability-related issues is the environmental, social and governance (ESG) Board, which was established in 2012. It consists of three Allianz SE Board members who meet quarterly. The ESG Board is responsible for integrating ESG into all business lines and core processes that deal with insurance and investment decisions. It also leads associated stakeholder engage- ment. During 2015, we focused on further embedding sustainability into our core business. We did this through internal debate, stake- holder engagement, and being an incubator for new business oppor- tunities and pilot projects. ESG in inSurancE and invEStmEntS The approach we take to ESG issues is not a sustainability “add-on”; it is part of everyday decision-making. As an insurer, we carefully manage ESG risks in underwriting. As an investor of our proprietary assets, we incorporate ESG factors into our investment process. And as an asset manager of third-party assets, we systematically integrate the evaluation of ESG risk and opportunities into our investment decisions. At the core, ESG integration into our insurance business and our direct investments of proprietary assets is carried out by a global ESG screening process. We have identified 13 sensitive business sectors2 where we see significant risks across regions and lines of business. We identify these sectors through dialogue with non-governmental orga- nizations (NGOs) and ongoing internal stakeholder engagement. For each sector, guidelines highlight the key ESG issues to be considered. In 2015, we reviewed our Weapons and Hydropower guidelines according to new best-practice information including international standards, frameworks and guidelines. Our intention is that no busi- ness is excluded by default, with a few exceptions such as our coal divestments of proprietary assets (for more information please refer to the section Responsible Investor). Instead, each transaction is assessed on a case-by-case basis. Through this process we aim to better understand the risks associated with an insurance or invest- ment transaction, and to take all necessary measures to address and mitigate these risks. During 2015, 405 transactions (2014: 150 transactions)3 for our insurance and investment business were assessed for ESG consider- ations against our sensitive business guidelines. Of these, 47 % were approved, 50 % were conditionally approved and 3 % rejected. Sustainable insurer ESG in undErWritinG As an insurer and risk consultant, we mostly face ESG risks indirectly due to the risks we accept for our insurance clients. Prudent manage- ment of ESG issues represents a major opportunity to reduce risks in underwriting for ourselves and our customers. Our guidelines on sensitive business apply to our entire insur- ance business globally, whether we act as lead insurer or as part of a panel. A dedicated center of competence within the underwriting division of Allianz Global Corporate & Specialty offers ESG support to property and casualty insurance transactions. During 2015, we deliv- ered over 16 separate training sessions to different underwriters of various specialties and geographic responsibilities. In 2016, we will look to develop our training concept further and integrate it into our underwriting training academies. We are a signatory to the Principles for Sustainable Insurance (PSI) of the United Nations Environment Programme Finance Initia- tive. As a signatory to the PSI, Allianz is required to make an annual disclosure on progress. In 2015, as part of a PSI project, our subsidiary 1 www.allianz.com/sustainability Annual Report 2015 Allianz Group 2 3 Agriculture, animal testing, animal welfare, betting and gambling, clinical trials, defense, human rights, hydro-electric power, infrastructure, mining, nuclear energy, oil and gas, and the sex industry. Increase due to greater awareness and integration of process from March 2015. 61 Euler Hermes supported a project with other insurance industry partners examining the need for ESG principles in surety bond under- writing of infrastructure. The continued growth of the sustainable products market is proof that sustainable innovation is becoming an increasingly important business opportunity. Our offerings include insurance for large-scale renewable-energy projects for business customers and solutions promoting energy-efficiency at home and on the move for retail customers. Our own revenues generated by products such as our mileage- based tariffs, green life insurance, renewable energy, infrastructure, and crop protection products amounted to more than € 1.1 BN in 2015. micrOinSurancE Besides our green solutions, we also provide products that improve people’s lives. As a leader in the microinsurance sector, we already provide 58.6 million low-income people in Asia, Africa and Latin America with affordable insurance solutions. In 2015, we broke through the 50-million mark for customers with microinsurance policies, with 2015 revenues standing at € 135 MN. That is around € 2.30 premium per person per year. Over 99 % of these customers still only hold one insurance policy, mostly life insurance. The microinsurance market has a potential of 2.7 billion custom- ers. We see this business expanding exponentially along with the global middle class, which is estimated to grow to around 5 billion by 2030, with growth mostly in our primary microinsurance markets of Asia, South America, and Africa. Responsible investor For Allianz, responsible investment means systematically integrating ESG factors into our investment decisions. Our role as an investor is two-fold: Firstly, we invest our proprietary assets, which include pre- miums collected from our insurance customers. Secondly, in our third-party asset management business, we invest on behalf of cus- tomers by tailoring products and solutions to best meet their needs. As one of the world’s largest asset managers and as an institu- tional investor, we take environmental and social risks seriously and also seize investment opportunities arising in this area. Allianz SE, as an asset owner, and our third-party asset managers Allianz Global Investors (AllianzGI) and PIMCO are all individual signatories to the United Nations-supported Principles for Responsible Investment (PRI). ESG in Our OWn invEStmEntS Allianz invests more than € 630 BN, mainly the premiums we collect from the customers we insure, in a wide range of asset classes. We are a signatory to the United Nations-supported PRI. Based on these prin- ciples we have implemented and are further developing a number of processes to systematically integrate ESG issues across different assets. 62 Annual Report 2015 Allianz Group The ESG functional rule for investments is the foundation of our ESG integration into investments. It binds all asset managers acting on behalf of Allianz to integrate ESG into their investment process and is closely monitored by Allianz Investment Management. For our direct investments, such as real estate, infrastructure, and private equity, ESG is integrated through our overarching ESG screening process. In 2015, we launched a project to strengthen and systemize the integration of ESG into fixed-income securities and corporate equities, which represent over 90 % of our assets. We analyzed our portfolio along 37 key ESG issues – such as greenhouse gas emissions and labor management – based on the information provided by the rating agency MSCI ESG Research. This transparency on ESG across the entire investment portfolio enabled a more targeted management of risks and opportunities. We exclude certain sectors from our investments. We apply exclusion criteria, restricting investments in companies producing or associated with banned weapons1 such as anti-personnel land- mines, cluster munitions, and biological, chemical, and toxic weap- ons. Furthermore, in November 2015, we decided to stop financing coal-based business models. This means Allianz will no longer invest proprietary assets in companies that derive more than 30 % of revenue from coal mining or generate over 30 % of energy from burning coal. Equities amounting to € 225 MN will be divested by March 2016, while bonds amounting to € 3.9 BN will be maturing. As part of our ESG strategy, we also consider it our responsibility to address systematic hurdles to ESG integration with peers, regula- tors, and other market participants, as well as to promote sustainable business practices within the companies we invest in. As an institutional investor, we can play a key role in building a low-carbon economy. By investing our proprietary assets in energy- efficient real estate and renewable energy, we help reduce climate emissions and create economic growth. Allianz Capital Partners (ACP) is our in-house investment platform for alternative invest- ments, with a growing portfolio of wind energy and solar power. Its total investment in renewable energy by the end of 2015 was over € 2.5 BN (compared to € 2.0 BN in 2014), covering 60 wind farms and 7 solar parks in France, Germany, Italy, Sweden, and – new in 2015 – Austria, Finland, and the United States. ACP’s wind and solar portfolio generates sufficient renewable energy to supply over 800,000 house- holds. 1 Weapons in scope of the following international conventions: – Ottawa Convention (anti-personnel landmines), – Convention on Cluster Munitions (cluster ammunition/bomb; Oslo Process), – Biological and Toxin Weapons Convention (biological weapons), – Chemical Weapons Convention (chemical weapons). C Group Management Report Your Allianz Business Operations and Markets 53 58 Strategy and Steering 61 Progress in Sustainable Development ESG in third-party aSSEt manaGEmEnt Allianz is one of the world’s largest asset managers. We run the asset management business out of two investment management entities: AllianzGI and PIMCO, which operate under the Allianz Asset Manage- ment holding (AAM). In addition to managing the majority of our proprietary assets, AllianzGI and PIMCO are responsible for our third- party asset management business. Despite different regional focuses and investment strategies, embedding ESG criteria into asset management is common practice at AllianzGI and PIMCO and they are both signatories to the PRI. Furthermore, they offer a range of Sustainable and Responsible Investment (SRI) products and services which provide customers with new choices that deliver financial, social, and environmental returns, using strategies such as the best-in-class approach, impact investing, or negative screening. At the end of 2015, total SRI managed by AAM amounted to € 103 BN (2014: € 117 BN), corresponding to 6 % of AAM’s total assets under management. The largest share of AAM’s total SRI assets under management is managed by PIMCO, which totaled € 82 BN (2014: € 95 BN). In addition, AllianzGI managed € 21 BN (2014: € 22 BN) of SRI investments. Trusted company Our customers’ needs and how we meet them are central to our ambition to keep being part of the strongest financial community, and to our aim of being the most trusted partner within our core busi- ness of insurance and investments. As part of this, our customers rightly expect that their personal information will be treated with utmost care. As we move towards a culture of Digital by Default, we remain committed to protecting customer privacy and data security. We know that consumers are increasingly basing their loyalty around whether a business offers sustainable solutions that deliver both financial and societal value. To this end, our range of responsible products continues to grow, including insurance products that aim to reward low-carbon lifestyles and affordable microinsurance for individuals and small businesses around the world. cuStOmEr cEntricity Putting True Customer Centricity at the core of our Renewal Agenda means providing a superior customer experience. By leveraging digi- tal technology, we can provide our customers with convenient access to Allianz at any time, creating easy, modular, and transparent offers with the flexibility for customization. For example, through our inno- vative Fast Quote approach, Allianz customers can get an insurance offer simply and quickly over the internet by providing only few data and either buy directly online or finalize their purchase at an agency. Fast Quote solutions are now deployed in 15 countries, with more markets to come. The next step is to scale up the combination of Fast Quote technol- ogy with modular offers like “Allianz1”: a product innovation launched in Italy in 2014, providing retail customers with a set of 13 optional modules for tailored insurance cover in line with personal needs and budgets. A modular offer for small and medium enterprises was launched at the end of 2015. Another approach to creating distinctive additional value and a caring customer experience is the integration of our global assistance services into our insurance products – for example, of roadside assistance into motor insurance. To continuously measure and benchmark our performance on customer centricity, we use key feedback tools such as the Net Pro- moter Score (NPS). NPS measures our customers’ willingness to re - commend Allianz and is broadly established as our key global metric for customer loyalty. Top-down NPS is conducted regularly according to global cross-industry standards and allows benchmarking against competitors in the respective markets. In 2015, 50 % of all businesses measured significantly outperformed their local peer average or even achieved loyalty leadership in their market. To steadily improve the satisfaction of our customers, we addi- tionally apply our “Customer Experience Management” methodology: This involves asking our customers for direct feedback regarding their experience with Allianz. Our methodology helps us to identify key areas for improvement and to improve customer satisfaction along the entire customer journey, for example in sales and claims handling. As we see a clear correlation of NPS performance with sustain- able growth, a superior customer experience is our top priority. We set clear customer-oriented targets, which are hardwired into our culture, planning, processes, and incentives. cuStOmEr BaSE The overall number of customers insured by Allianz worldwide grew from 85 million in 2014 to 85.4 million in 2015. cuStOmErS By rEGiOn/cOuntry1 as of 31 December 2015 [31 December 2014] in % Anglo Markets 8.1 [8.0] USA 1.4 [1.4] Growth Markets 30.3 [30.6] Rest of Europe & Latin America 18.2 [18.8] Germany 24.2 [23.9] Rest of German Speaking Countries 2.6 [2.6] France 6.5 [6.8] Italy 8.7 [7.9] 1 Customer figures exclude clients in microinsurance, pension funds, and all Global Lines. For more infor- mation on our customer base, please refer to page 55. Annual Report 2015 Allianz Group 63 allianz – OnE Of thE WOrld’S StrOnGESt BrandS The brand Allianz1 plays a key role in driving sustainable growth. It fosters close bonds with our customers, which are even more impor- tant in a digital context. In turn, this helps us to build sustainable relationships: Trust in the name Allianz helps us to attract new cus- tomers, engage with our products and services, and maintain cus- tomer loyalty in the long term. In 2015, Allianz-branded revenues stood at 84 % (2014: 83 %) of total revenues. Our “one-brand” strategy leaves room for renowned specialty brands such as PIMCO and Euler Hermes, which use Allianz as their reference. Our strong brand performance was again acknowl- edged in the annual 100 Best Global Brands Ranking from Interbrand: In 2015, our brand value increased by 10 % to USD 8.5 BN (2014: USD 7.7 BN) and has more than doubled compared to 2007 when we first entered the ranking. According to Interbrand, Allianz now ranks 54th among the world’s top 100 brands. Corporate responsibility is a vital component in our established sports and culture partnerships strategy – be it our commitment to the Paralympic Movement around the topics of diversity and inclu- sion or our Road Safety program, with 41 local entities participating in 2015. Our annual youth programs inspire and unite young genera- tions around one common passion – for example, the Allianz Junior Football Camp where teens from all over the world apply to train with FC Bayern München youth coaches and meet their idols, or the Allianz Junior Music Camp where star pianist Lang Lang and his Lang Lang International Music Foundation encourage the next generation of classical musicians. EnvirOnmEntal manaGEmEnt As a business dealing with risks, managing our environmental impact has always been very important to us. Our ESG materiality assessment continues to show that climate change is a key environ- mental risk and opportunity. For this reason, we prioritize carbon reduction also in our own activities to reduce the environmental foot- print of our operations. Our strategic approach to reducing our carbon footprint is three- fold: avoid and reduce our emissions, substitute with lower-carbon alternatives, and offset our remaining emissions through direct investments in high-quality carbon reduction projects. BrEakdOWn Of cO2 EmiSSiOnS1 % as of 31 December 2015 Energy Travel Paper Water Waste 2015 55.1 39.3 3.7 0.2 1.7 1 KPMG Wirtschaftsprüfungsgesellschaft AG has provided limited assurance on the 2015 environmental performance information. For further information, please refer to www.allianz.com/sustainability. Since over 98 % of our emissions comes from energy consumption, travel, and paper use, the focus of our carbon reduction activities is in these areas. We had set ourselves a target to reduce our carbon emissions per employee by 35 % by 2015 (against a 2006 baseline) and to reduce the energy consumption per employee by 10 % (against a 2010 baseline). We achieved both targets ahead of time and our final per- formance in the target year 2015 was at 43.3 % CO2 and 25.7 % energy reduction. We have been a carbon-neutral company since 2012 and in 2015 301,339 credits were offset from our own projects, each one account- ing for one metric ton of carbon. EnvirOnmEntal fOOtprint1 as of 31 December Total emissions Per employee emissions Total energy consumption thereof: Renewables Total travel – plane, train, car Total paper consumption 2015 20142 20132 in metric tons cO2e in metric tons cO2e in GJ in % in tkm in metric tons 301,339 300,537 333,509 2.12 2,577,050 42.7 908,442 2.12 2,516,470 41.6 901,101 2.37 2,850,903 42.1 906,430 16,941 17,112 17,656 1 2 KPMG Wirtschaftsprüfungsgesellschaft AG has provided limited assurance on the 2015 environmental performance information. For further information, please refer to www.allianz.com/sustainability. 2013 and 2014 figures were adjusted for a material divestment in 2015. cOmpliancE manaGEmEnt Our risk management framework includes compliance risks. A com- pliance management system helps us to ensure compliance with internationally recognized laws, rules, and regulations, while addi- tional risk identification exercises help us to continually improve our approach. We take a proactive stance, working with organizations such as the German Institute for Compliance and the Global Insur- ance Chief Compliance Officers Forum to enhance understanding of compliance issues and share best practice. 1 Our Allianz trademark is registered and protected worldwide, as are our domains. Furthermore, we have registered our corporate design and brand claim “Allianz. With you from A – Z.” in the relevant countries worldwide. 64 Annual Report 2015 Allianz Group C Group Management Report Your Allianz Business Operations and Markets 53 58 Strategy and Steering 61 Progress in Sustainable Development To ensure continuous improvement, all compliance risks are monitored and reported within the Group. Our compliance quality assurance program comprises self-assessments, on-site reviews and local spot checks, and our intranet-based compliance case reporting tool provides Group-wide oversight by passing information to the audit and integrity committees. Committed corporate citizen As a global company with a presence in more than 70 countries, we believe that acting as a responsible corporate citizen is good for soci- ety and good for business. By helping to build stronger and more inclusive communities, we are supporting the development of a more stable economic landscape. This, in turn, ensures resilient markets for our products and services. Much of our time and skill is dedicated to empowering the next generation. That is why we have developed Future Generation, a frame work to support children, adolescents and young adults on a range of issues. This is also why we continue to fund SOS Children’s Villages, an organization that provides orphaned and abandoned children in 125 countries with loving family homes. We support short- term emergency measures and long-term help for children through local activities as well as advocacy at a global level. In 2015, we estab- lished local partnerships with SOS villages in France, Romania, India, and Germany. With our collective financial and business skills, we assist char- itable organizations through employee volunteering. This helps to build skills and motivation that can be brought back into the work- place. In 2015, we launched ACT!, an online marketplace for employee volunteering, starting with a pilot in Germany. The marketplace fea- tures Allianz projects and moreover, employees can promote their own volunteering activities. In 2015, corporate giving totaled € 23 MN (compared to € 21 MN in 2014).1 pOlitical EnGaGEmEnt In 2015, Allianz SE merged its regulatory and political departments to form a Group center for Regulatory and Public Policy Affairs. It acts as a global center of competence for all our subsidiaries and its remit is to develop regulatory and political strategy, coordinate our engage- ments, and analyze current and emerging issues and our positions on them. Two key lobbying issues in 2015 were: − Digitalization and data security: We support the European Com- mission’s digital agenda to foster innovation, economic growth, and progress. We are actively contributing to public discussions on these issues, with a special focus on the practicability of reg- ulation for the Group. − Consumer protection: As part of our commitment to customer privacy and security, we support promoting transparency, sim- plicity, and fairness in the market for consumer financial prod- ucts and services. We contributed to the E.U. green paper on Retail Financial Services and Insurance. This paper addresses some of the obstacles consumers face when offering or purchasing financial services. Attractive employer Globally, we employ 142,459 people in nearly 70 countries. Our busi- ness strategy requires us to have the best people in place in order to deliver success today and over the long term. We also apply a consis- tent approach to human resources (HR) management across the Group and we do this through strategic HR frameworks, principles, and tools. This includes globally consistent people attributes along the value chain – throughout an employee’s career at Allianz. talEnt manaGEmEnt To ensure the quality and performance of our employees, we focus on managing talent and careers, developing technical and leadership skills, and meeting future workforce needs. We work to create a sus- tainable performance culture which empowers individuals to realize their full potential through a wide range of learning and development opportunities. In this way, we enhance the skills base of our Group and build employee loyalty. We place a strong emphasis on the devel- opment of both technical expertise and leadership skills across all business functions as key drivers for sustainable and profitable growth. traininG kEy fiGurES1 Total expenses in training Training expenses per employee € mn € Average training days per employee, staff 2015 2014 2013 85 621 2.9 91 668 3.0 86 629 3.0 1 Figures based on the number of employees in Allianz’s core business. Excluded are fully consolidated companies which are considered pure financial investments, non-profit organizations, e.g. foundations, and companies classified as held for sale. 1 KPMG Wirtschaftsprüfungsgesellschaft AG has provided limited assurance on the 2015 corporate giving information. For further information, please refer to www.allianz.com/sustainability. Annual Report 2015 Allianz Group 65 divErSity At Allianz, we recognize the importance of having a diverse, inclusive workforce that is made up of employees from different backgrounds. To accomplish this, we have implemented a number of initiatives, in - cluding those focused on gender, ethnicity, age, religion, sexual orien- tation, disability, education, and nationality. We actively support employee rights and strive to apply core human-rights principles based on the United Nations Declaration of Human Rights throughout our worldwide organization. We are a par- ticipant of the United Nations Global Compact and have integrated its ten principles into our globally binding Code of Conduct. We also respect the OECD Guidelines for Multinational Enterprises. WOmEn acrOSS thE allianz GrOup1 % Women in executive positions2,4 Female managers3,4 Share of women in overall workforce 2015 23.3 36.8 52.4 2014 23.1 36.2 52.9 2013 21.2 35.5 52.8 1 2 3 4 Figures based on the number of employees in Allianz’s core business. Excluded are fully consolidated companies which are considered pure financial investments, non-profit organizations, e.g. foundations, and companies classified as held for sale. Including women in all executive positions below the Board of Management. Including women functionally responsible for other staff, regardless of level, e.g. division, department, and team managers. These figures do not represent the proportion of women in the two management levels below the Board of Management of Allianz SE. To support employee rights, we were one of the first companies to create pan-European worker participation standards and establish a European SE works council under the legislation for Societas Euro- paea (SE) companies. We are also a signatory to the International Labour Organization’s (ILO) Declaration on Fundamental Rights and Principles at Work, including the ILO declaration on the freedom of association and the right to collective bargaining. SuStainaBlE valuE apprOach tO rEmunEratiOn Our remuneration and incentive structures are designed to encourage sustainable value creation and offer both monetary and non-mone- tary rewards. Our remuneration system is based on the following principles: − Provide a transparent, fair and integrated offering to attract, motivate, and retain highly qualified employees. − Deliver total rewards that are competitive in the relevant markets. − Align remuneration with the performance of the individual and the achievement of Allianz’s financial and strategic goal to “pay for performance”. − Operate effectively in different performance scenarios and busi- ness circumstances. − Reward risk control and avoid inappropriate risk-taking. WEllBEinG and EmplOyEE EnGaGEmEnt We take an active role in promoting the physical and mental health of our employees, including a variety of stress management pro- grams and measures. Our central Work Well program analyzes root causes of stress to find the most effective solutions. We also believe that committed and motivated employees bring competitive benefits to our business. By actively engaging with our workforce, we have developed a culture of high performance, greater integrity, and better customer focus. Each year, we conduct the Group-wide Allianz Engagement Survey (AES) to gather employee feedback on a range of issues, including those identified as promot- ing a high-performance culture. In 2015, 120,204 employees from 67 Allianz companies were invited to participate. The global response rate of 84 % was in line with 2014. A key measurement of the AES is the Employee Engagement Index (EEI), which reflects employee satisfaction, loyalty, advocacy, and pride within their organizations. In 2015, the EEI score at Group level was 75 %. This reflects a high level of engagement among our workforce, as well as the highest ever EEI result since the survey began. EmplOyEE EnGaGEmEnt indEx % Employee Engagement Index 2015 75 2014 72 2013 73 66 Annual Report 2015 Allianz Group C Group Management Report Management Discussion and Analysis Business Environment 67 69 Executive Summary of 2015 Results 74 Property-Casualty Insurance Operations 80 Life/Health Insurance Operations 86 Asset Management 90 Corporate and Other 92 Outlook 2016 98 Balance Sheet Review 105 Liquidity and Funding Resources 110 Reconciliations Business Environment Economic environment 2015 Diverging growth Dynamics in inDustrializeD countries anD emerging markets In 2015 the global economy offered both light and shade. Geopolitical tensions and crises and acts of terrorism created a difficult backdrop. The slide in the oil price and other commodity prices had a marked impact on global income flows. Many advanced economies benefited from purchasing power gains, whereas a host of emerging markets saw revenues plummet. However, alongside developments in com- modity prices, structural factors also lay behind the relative economic weakness in emerging markets. The slowdown in China continued, while other major emerging market economies like Brazil and Russia experienced severe recessions. Nevertheless, there were also some bright spots in emerging markets like India and most eastern Euro- pean E.U. member states, which registered robust growth. Overall, emerging markets expanded by a rather disappointing 3.3 % in 2015, the lowest growth rate in 15 years, if one ignores the Great Recession in 2009. Compared with 2014, economic growth in industrialized coun- tries picked up slightly in 2015. Real gross domestic product rose by 1.8 % (2014: 1.7 %). The further stabilization in the Eurozone economy was among the positive aspects witnessed in 2015. The decline in commodity prices and the lower Euro, but also progress on the reform front in the former crisis countries bolstered this upward trend. As a result, real gross domestic product expanded by 1.5 %. With an increase of 1.7 % the German economy recorded a slightly higher growth rate than the Eurozone as a whole. In the United States the six-year-long upswing continued, but given the strength of the U.S. Dollar, growth was practically unchanged from the year before at 2.4 %. Broadly speaking, consumption was the driver of growth in industrialized countries with investment providing little impetus. Overall, the world economy grew by an estimated 2.4 %, slightly lower than in 2014, when global output rose by 2.7 %. Global merchandise trade, by contrast, expanded by only about 2 % in 2015. For a number of years now the old rule of thumb that global trade increases at twice the rate of global output has no longer applied. This shows that the pace of globalization in merchandise trade has clearly abated. Financial market developments in 2015 continued to be charac- terized by extremely low interest rates, a strong U.S. Dollar and increasingly volatile equity markets. In the United States, the Federal Reserve ended its zero interest rate policy in December, lifting the target range for the federal funds rate to 0.25 to 0.5 %. By contrast, the European Central Bank continued to ease its monetary policy stance with a bundle of measures, for example an extension of its bond pur- chasing program and a further lowering of its deposit rate to (0.3) %. Yields on 10-year German government bonds ended 2015 at 0.6 %, a minor increase of 10 basis points compared with a year earlier. The performance of major stock market indices was mixed, with gains in the Eurozone and Japan and losses in emerging markets. The Euro fluctuated considerably against the U.S. Dollar, closing the year at a rate of 1.09 U.S. Dollar to Euro, well below the level seen at the begin- ning of 2015. The diverging monetary policies of the U.S. Federal Reserve and the European Central Bank were a key factor behind this downward correction. Financial markets in emerging markets had a difficult year – substantial capital outflows exerted a sharp down- ward pressure on both stock and currency markets. Business environment 2015 for the insurance industry 2015 offered the now familiar cocktail of economic and political chal- lenges that describes the business environment after the financial crisis: modest premium growth but persistently low interest rates, volatile financial markets and new regulatory burdens. The only “bright” spot was the low level of insured losses – compared with his- torical averages – resulting from natural catastrophes. This was mainly thanks to a calm hurricane season in the North Atlantic. Nonetheless, weather-related natural catastrophes were plentiful in 2015, from winter storms in North America to droughts and heat- waves around the world to floods in Great Britain. However, neither natural catastrophes nor political woes posed the biggest challenges in 2015. It was, in addition to economic chal- lenges, technological change, which now fully encompasses the insurance industry. Digital technology and Big Data are transforming the whole business model, the way the industry underwrites risks, distributes products and communicates with customers. Against this background, it is not surprising that industry consolidation gathered pace in 2015, resulting in deals such as the acquisition of the Chubb Group by ACE Limited. In the property-casualty sector, premium growth in advanced mar- kets was basically unchanged from the previous year. Whereas the ongoing – albeit slow – recovery supported demand for insurance, particularly in Europe, softening prices in some markets and busi- ness lines put a damper on premium growth. In contrast to this, emerging markets followed increasingly divergent trends. In par- ticular, Latin America showed significantly slower growth than in preceding years, dragged down by the severe recession in its biggest economy, Brazil. The indisputable growth champion of 2015 was again emerging Asia, with a strong Chinese market as its driving force. Encouragingly, the other heavyweight in emerging Asia, India, returned to healthy growth, too. Overall, according to our own esti- mates and based on preliminary figures, global premiums rose by around 4.5 % in 2015 (in nominal terms and adjusted for foreign cur- rency translation effects). Annual Report 2015 Allianz Group 67 Underwriting profitability remained stable on average, with combined ratios in most markets clearly below 100 %, reflecting lower catastrophe losses. However, overall profitability remained under pressure as investment returns were challenged by very low interest rates. In the life sector, premium growth in advanced markets slowed slightly in 2015. While the U.S. market was more or less stable, growth in some European markets, for example in Italy, normalized after a very strong performance in the previous year. By contrast, premium growth in emerging markets was not only much stronger but actu- ally picked up slightly. Even Latin America and Eastern Europe, despite their economic troubles, kept up rather well in 2015. However, the dominance of emerging Asia – and in particular China – is even more pronounced in life than in the property-casualty sector: In 2015, almost half of all premiums in emerging markets were written in China, and more than 60 % of all premium growth was generated there. In total, according to our own estimates and based on pre- liminary figures, global premiums grew by around 5.0 % in 2015 (in nominal terms and adjusted for foreign currency translation effects). The stubbornly low yield environment posed the greatest chal- lenge for profitability in the life sector. Life insurers reacted mainly by shifting the portfolio mix towards alternative and less liquid assets, for example infrastructure. They also started to develop new product concepts with reduced guarantees and fostered protection-type products. All in all, insurers managed to shift the product mix towards less capital-intensive products, safeguarding profitability and solvency positions. Business environment 2015 f or the asset management industry As described earlier, markets were highly volatile for the asset man- agement industry. On the one hand they were supported by continu- ously low interest rates and quantitative-easing measures. Equity and bond markets also developed positively. On the other hand, the third quarter of 2015, in particular, was tumultuous for global mar- kets, which were impacted by the economic slowdown in China and concerns about other emerging markets. European equity indices were especially subject to strong fluc- tuations in the second half of the year. In the fourth quarter of 2015, European equity markets developed favorably and rose above 2014 levels, driven by the announcement in December by the European Central Bank of further supportive monetary measures. U.S. equity prices recovered strongly at the beginning of the fourth quarter of 2015 and the NASDAQ finished the year in positive territory. However, the 25 basis points increase in the U.S. federal funds rate at the end of the fourth quarter hit equity investors. In addition, the continued sharp decline in the price of oil burdened corporates and countries exposed to oil production, as did ongoing concerns about the Chinese economy. The effects of slowing growth in China and weak commodity demand made 2015 a difficult year for emerging markets. As a result, many Asia Pacific and emerging market indices lost ground compared to the end of December 2014. During the year, bond markets were also impacted by uncertainty surrounding the timing of the increase in the U.S. federal funds rate. With the decision taken by the U.S. Federal Reserve in December 2015, yields rose across most U.S. bond classes, which led to a weak fourth quarter of 2015 in terms of strong net outflows from nearly all types of mutual funds and asset classes in the United States. Throughout the year, yields on the short end of the yield curve grew at a faster pace than those at the long end, signaling falling expectations for future inflation. Overall, mutual funds in 2015 recorded continued net inflows. In the United States, passive mutual funds noted strong net inflows in 2015 driven by equities and bonds. Active U.S. mutual funds, in contrast, suffered notable net outflows in 2015 – mainly in U.S. equities and taxable bonds. Money market funds in the United States profited, especially in December 2015, from the interest rate uncertainties. German mutual equity funds recorded net inflows for the first time in years. Furthermore, net inflows in mutual funds in Germany were again dominated by multi-asset funds. 68 Annual Report 2015 Allianz Group C Group Management Report Management Discussion and Analysis Business Environment 67 69 Executive Summary of 2015 Results 74 Property-Casualty Insurance Operations 80 Life/Health Insurance Operations 86 Asset Management 90 Corporate and Other 92 Outlook 2016 98 Balance Sheet Review 105 Liquidity and Funding Resources 110 Reconciliations Executive Summary of 2015 Results − Total revenues increased to € 125.2 BN. − Operating profit grew 3.2 % to € 10,735 MN. − Net income rose to € 6,987 MN. − Conglomerate solvency ratio up 19.6 percentage points to 200 %.1,2 Allianz Group overview Allianz SE and its subsidiaries (the Allianz Group) have opera- tions in over 70 countries. The Group’s results are reported by business segment: Property-Casualty insurance operations, Life/Health insurance operations, Asset Management, and Corporate and Other. Key figures key figures AlliAnz group € mn Total revenues Operating profit Net income Conglomerate solvency ratio1,2 in % 2015 125,190 10,735 6,987 200 2014 122,253 10,402 6,603 181 Earnings summary mAnAgement’s Assessment of 2015 results We recorded total revenues of € 125.2 BN, a growth of 2.4 %. On an internal basis3, revenues dropped by 2.1 %. In our Life/Health business segment, premiums decreased in particular in the United States and in Germany, where the strategic shift to capital-light products further contributed to the decline. In our Asset Management business seg- ment, operating revenues were primarily burdened by lower average third-party assets under management (AuM), mainly driven by third- party net outflows, albeit continuously diminishing over the course of the year. These effects were partly compensated for by mainly vol- ume driven premium growth in our Property-Casualty business seg- ment and slightly increased revenues in our Corporate and Other business segment. 1 2 3 Off-balance sheet reserves are accepted by the authorities as eligible capital only upon request. Allianz SE has not submitted an application so far. Excluding off-balance sheet reserves, the conglomerate solvency ratios would be 191 % and 172 % as of 31 December 2015 and 31 December 2014, respectively. Figures as of 31 December. Internal total revenue growth excludes the effects of foreign currency translation as well as acquisitions and disposals. Please refer to page 110 for a reconciliation of nominal total revenue growth to internal total revenue growth for each of our business segments and the Allianz Group as a whole. Our operating profit rose 3.2 % to € 10,735 MN, which is in the upper end of our 2015 target range. Our Life/Health business segment showed a 14.1 % increase in operating profit, driven by a higher invest- ment margin and favorable foreign currency translation effects. Our Property-Casualty business segment also contributed to the overall operating profit growth, in particular due to a net gain from the sale of Fireman’s Fund personal insurance business. These favorable developments were partly offset by a decrease in operating profit in our Asset Management business segment, mainly driven by the impact from lower average third-party AuM. Our Corporate and Other business segment was burdened by higher centralized pension costs – which resulted in an increased operating loss. Net income was up 5.8 % to € 6,987 MN, mainly due to an improve- ment in our non-operating result and our strong operating perfor- mance, partly offset by the higher effective tax rate. Net income attri­ butable to shareholders rose 6.3 % to € 6,616 MN (2014: € 6,221 MN). Net income attributable to non­controlling interests was € 371 MN (2014: € 381 MN). Our shareholders’ equity went up by € 2.4 BN to € 63.1 BN, com- pared to 31 December 2014. Over the same period, our conglomerate solvency ratio strengthened from 181 % to 200 %.1 From 1 January 2016 onwards, capitalization based on Solvency II will be utilized for regu- latory purposes. Annual Report 2015 Allianz Group 69 Total revenues1 Operating profit totAl revenues – Business segments operAting profit – Business segments � mn 140,000 120,000 100,000 80,000 60,000 40,000 20,000 122,2531 556 6,388 67,331 (2.1) % + 4.5 % (11.4) % (4.9) % 125,1901 577 6,479 66,903 48,322 + 2.9 % 51,597 � mn 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 10,4021 2,603 3,327 5,382 (820) + 3.2 % (11.8) % + 14.1 % + 4.1 % (15.1) % 10,7351 2,297 3,796 5,603 (945) 2014 2015 2014 2015 Property-Casualty Internal growth Life/Health Asset Management Corporate and Other Property-Casualty Life/Health Asset Management Corporate and Other Growth 1 Total revenues include € (365) mn (2014: € (344) mn) from consolidation. 1 Total operating profit includes € (16) mn (2014: € (91) mn) from consolidation. Property­Casualty gross premiums written grew 6.8 % and amounted to € 51.6 BN. On an internal basis2, we recorded an increase of 2.9 % mainly due to favorable volume effects. We registered strong internal growth – particularly at Allianz Worldwide Partners, in Turkey, and at AGCS excl. Fireman’s Fund. Life/Health statutory premiums amounted to € 66.9 BN, a decrease of 4.9 % on an internal basis2. This was mainly due to a drop in fixed-indexed annuity business in the United States and reduced sales of traditional products in Germany and Italy. These effects out- weighed the premium growth in the unit-linked business in Italy and Taiwan. As a result of implementing changes in our product strategy, premiums shifted more towards unit-linked and capital-efficient products. Asset Management operating revenues rose by € 92 MN to € 6.5 BN. Excluding the strong effects from foreign currency translation, mainly resulting from the sharp depreciation of the Euro against the U.S. Dollar, operating revenues decreased by 11.4 % on an internal basis2. This was mainly driven by lower average third-party AuM and the corresponding AuM-related income. It was partly offset by higher performance fees. Total revenues in our Banking operations (reported in our Cor­ porate and Other business segment) increased by € 21 MN to € 577 MN, primarily driven by a higher net fee and commission result. Our Property­Casualty operating profit went up by € 221 MN – or 4.1 % – to € 5,603 MN. This was mainly driven by the € 0.2 BN net gain from the sale of the Fireman’s Fund personal insurance business to ACE Limited, which was partly offset by restructuring charges of € 0.1 BN for the Fireman’s Fund reorganization. Growth in operating investment income – which rose from € 3,066 MN to € 3,120 MN – and a higher underwriting result contributed positively. Life/Health operating profit was up by € 468 MN to € 3,796 MN. A higher investment margin in Germany, positive foreign currency translation effects, a higher investment spread margin in the United States, and increased unit-linked management fees in Italy and France mainly drove this development. However, these increases were negatively affected by loss recognition in South Korea amounting to € 244 MN. Asset Management operating profit went down by € 306 MN – or 11.8 % – to € 2,297 MN. On an internal basis3, the decrease was 23.5 %, mainly driven by lower third-party AuM-driven revenues, partly offset by higher performance fees and lower operating expenses. Our operating loss in Corporate and Other grew by € 124 MN to € 945 MN. Increases in Banking and Alternative Investments’ operat- ing profit were more than offset by a higher operating loss in Hold- ing & Treasury due to higher centralized pension costs. 1 2 Total revenues comprise statutory gross premiums written in Property-Casualty and in Life/Health, oper- ating revenues in Asset Management, and total revenues in Corporate and Other (Banking). Internal total revenue growth excludes the effects of foreign currency translation as well as acquisitions and disposals. Please refer to page 110 for a reconciliation of nominal total revenue growth to internal total revenue growth for each of our business segments and the Allianz Group as a whole. 3 Operating profit adjusted for foreign currency translation and (de-)consolidation effects. In 2015, the average exchange rate of the U.S. Dollar to Euro was 1.11 (2014: 1.33) 70 Annual Report 2015 Allianz Group C Group Management Report Management Discussion and Analysis Business Environment 67 69 Executive Summary of 2015 Results 74 Property-Casualty Insurance Operations 80 Life/Health Insurance Operations 86 Asset Management 90 Corporate and Other 92 Outlook 2016 98 Balance Sheet Review 105 Liquidity and Funding Resources 110 Reconciliations Non-operating result Net income Our non­operating result improved by € 1,015 MN to a loss of € 539 MN. This was mainly due to a lower negative impact from the reclassifica- tion of tax benefits, compared to 2014, and increased non-operating realized gains and losses (net). These improvements were partly off- set by higher non-operating amortization of intangible assets. Non­operating income from financial assets and liabilities carried at fair value through income (net) improved by € 84 MN to a loss of € 219 MN, mainly due to favorable impacts from hedging-related activities. Non­operating realized gains and losses (net) increased by € 399 MN to € 1,211 MN as a result of higher realizations, mainly on equity investments. Non­operating impairments of investments (net) rose by € 72 MN to € 268 MN, mainly due to higher impairments on equities in line with unfavorable market developments – predominantly in the third quarter of 2015. The negative impact from the reclassification of tax benefits declined by € 839 MN to € 62 MN. The second half of 2014 included sig- nificant one-off tax benefits, reflected within income taxes, a portion of which were reclassified and shown within operating profit in order to adequately reflect policyholder participation. Non­operating amortization of intangible assets increased from € 104 MN to € 304 MN. As a result of the impairment test in 2015, all of the goodwill of € 171 MN allocated to the cash generating unit Asia Pacific in the business segment Life/Health was completely impaired, mainly driven by steadily decreasing and persisting low interest rates in South Korea. For further information, please refer to note 15 to the consolidated financial statements. Income taxes Income taxes were up by € 964 MN to € 3,209 MN. The increase in income taxes was mostly due to the higher income before income taxes in 2015 and higher one-off tax benefits in 2014. In 2015, the effec- tive tax rate was below our long-term average of approximately 33 % and amounted to 31.5 %. The effective tax rate in 2015, adjusted for non-tax deductible goodwill impairments and valuation allowances on deferred tax assets, would have been approximately 30.6 %. In 2014, our effective tax rate of 25.4 % benefited from extraordinary tax ben- efits from a favorable court decision, which amounted to € 1,120 MN. The policyholder share in tax benefits amounted to € 892 MN. Without policyholder participation, the Allianz Group’s 2014 effective tax rate attributable to the shareholders would have been approximately 32 %. Net income increased by € 384 MN to € 6,987 MN, primarily driven by our higher non-operating result and our solid operating performance, partly offset by the higher effective tax rate. Net income attributable to shareholders rose 6.3 % to € 6,616 MN (2014: € 6,221 MN). Net income attributable to non­controlling interests was € 371 MN (2014: € 381 MN). Our largest non-controlling interests in net income related to Euler Hermes and PIMCO. Basic earnings per share increased from € 13.71 to € 14.56 in 2015 and diluted earnings per share rose from € 13.64 to € 14.55. For further information on earnings per share, please refer to note 51 to the con- solidated financial statements. Proposal for appropriation of net earnings The Board of Management and the Supervisory Board propose that the net earnings (“Bilanzgewinn”) of Allianz SE of € 4,228,626,130.21 for the 2015 fiscal year shall be appropriated as follows: − Distribution of a dividend of € 7.30 per no-par share entitled to a dividend: € 3,320,374,442.20 − Unappropriated earnings carried forward: € 908,251,688.01 The proposal for appropriation of net earnings reflects the 2,154,186 treasury shares held directly and indirectly by the company at the time of the publication of the convocation of the Annual General Meeting (AGM) in the Federal Gazette. Such treasury shares are not entitled to the dividend pursuant to § 71b of the German Stock Cor- poration Act (AktG). Should there be any change in the number of shares entitled to the dividend by the date of the AGM, the above pro- posal will be amended accordingly and presented for resolution on the appropriation of net earnings at the AGM, with an unchanged dividend of € 7.30 per each share entitled to dividend. Munich, 16 February 2016 Allianz SE Annual Report 2015 Allianz Group 71 totAl revenues And reconciliAtion of operAting profit to net income € mn Total revenues1 Premiums earned (net) Operating investment result Interest and similar income Operating income from financial assets and liabilities carried at fair value through income (net) Operating realized gains/losses (net) Interest expenses, excluding interest expenses from external debt Operating impairments of investments (net) Investment expenses Subtotal Fee and commission income Other income Claims and insurance benefits incurred (net) Change in reserves for insurance and investment contracts (net)2 Loan loss provisions Acquisition and administrative expenses (net), excluding acquisition-related expenses and one-off effects from pension revaluation Fee and commission expenses Operating amortization of intangible assets Restructuring charges Other expenses Reclassification of tax benefits Operating profit Non-operating investment result Non-operating income from financial assets and liabilities carried at fair value through income (net) Non-operating realized gains/losses (net) Non-operating impairments of investments (net) Subtotal Income from fully consolidated private equity investments (net) Interest expenses from external debt Acquisition-related expenses One-off effects from pension revaluation Non-operating amortization of intangible assets Reclassification of tax benefits Non-operating items Income before income taxes Income taxes Net income Net income attributable to: Non-controlling interests Shareholders Basic earnings per share in € Diluted earnings per share in € 1 2 Total revenues comprise statutory gross premiums written in Property-Casualty and in Life/Health, operating revenues in Asset Management, and total revenues in Corporate and Other (Banking). Includes expenses for premium refunds (net) in Property-Casualty of € (240) mn (2014: € (307) mn). 72 Annual Report 2015 Allianz Group 2015 125,190 2014 122,253 70,645 68,274 22,408 (2,089) 6,726 (375) (1,258) (1,094) 24,319 10,945 476 (51,702) (14,065) (60) (25,729) (3,777) (19) (231) (129) 62 10,735 (219) 1,211 (268) 724 (60) (849) 12 – (304) (62) (539) 10,196 (3,209) 6,987 371 6,616 14.56 14.55 21,443 (1,301) 3,205 (415) (697) (961) 21,274 10,119 216 (49,650) (13,929) (45) (23,351) (3,238) (19) (16) (135) 901 10,402 (303) 812 (197) 312 (23) (846) 7 – (104) (901) (1,554) 8,848 (2,245) 6,603 381 6,221 13.71 13.64 C Group Management Report Management Discussion and Analysis Business Environment 67 69 Executive Summary of 2015 Results 74 Property-Casualty Insurance Operations 80 Life/Health Insurance Operations 86 Asset Management 90 Corporate and Other 92 Outlook 2016 98 Balance Sheet Review 105 Liquidity and Funding Resources 110 Reconciliations solvency ii: ApprovAl of pArtiAl internAl model1 In November 2015, our partial internal model was approved by the German supervisory authority. With this approval, the uncertainty about our future Solvency II capital requirements has been signifi- cantly reduced – even if some uncertainty about the future capitaliza- tion requirements of Allianz Group remains, since the future capital requirements applicable for Global Systemically Important Insurers (so-called G-SIIs) have not been finalized as yet. From 1 January 2016 onwards, capitalization based on our partial internal model under Solvency II will be utilized for regulatory purposes. We are confident that the Allianz Group will be able to meet the capital requirements under the new regulatory regimes. For further information please refer to the Risk and Opportunity Report starting on page 112. Other parts of the Group Management Report The following information also forms part of the Group Management Report: − Statement on Corporate Management pursuant to § 289a of the HGB starting on page 32, − Takeover-related Statements and Explanations starting on page 34, and the − Remuneration Report starting on page 37. Events after the balance sheet date The Allianz Group was not subject to any subsequent events that sig- nificantly impacted the Group’s financial results after the balance sheet date and before the financial statements were authorized for issue. Other information chAnges in segment structure Effective 1 January 2015, the Allianz Group reorganized the structure of its insurance activities to reflect the changes in the responsibilities of the Board of Management. The property-casualty insurance opera- tions of the former reportable segment USA were allocated to the reportable segment Global Insurance Lines & Anglo Markets. Due to further changes in the Board of Management, effective 1 September 2015, the reportable segment Growth Markets ceased to exist. The reallocation of its former parts has led to changes in the structure, the renaming of other reportable segments, as well as the introduction of a new reportable segment Asia Pacific, which consists of the insurance business in that region. The insurance business in Central & Eastern Europe has been integrated in the previous report- able segment German Speaking Countries, which was renamed Ger- man Speaking Countries and Central & Eastern Europe. The insurance business in Russia and Ukraine has been allocated to the reportable segment Global Insurance Lines & Anglo Markets. The insurance business in India, Middle East, and North Africa has been integrated in the previous reportable segment Western & Southern Europe, which was renamed to Western & Southern Europe, Middle East, Africa, India. Previously reported information has been adjusted to reflect this change in the composition of the Allianz Group’s reportable segments. Additionally, some minor reallocations between the reportable seg- ments have been made. For information on Segment reporting, please refer to note 6 to the consolidated financial statements. 1 From a formalistic perspective, the German Supervisory Authority deems our model to be ‘partial’ because it does not cover all of our operations: some of our smaller operations report under the standard model and others under the deduction and aggregation approach. Annual Report 2015 Allianz Group 73 Property-Casualty Insurance Operations − Gross premiums written reached € 51.6 BN – up by 6.8 %. − Positively impacted by the net sales gain from Fireman’s Fund personal insurance business, our operating profit grew 4.1 % to € 5,603 MN. − Combined ratio slightly increased to 94.6 %. Business segment overview Key figures Our Property-Casualty business offers a wide range of products and services for both private and corporate clients. Our offerings cover many insurance classes such as motor, accident/disability, property, and general liability. We conduct business worldwide in more than 70 countries. We are also a global leader in travel insurance, assistance services, and credit insurance. We distrib- ute our products via a broad network of agents, brokers, banks, and other strategic partners, as well as through direct channels. key figures property-casualty € mn Gross premiums written Operating profit Net income Loss ratio in % Expense ratio in % Combined ratio in % 2015 51,597 5,603 4,124 66.2 28.4 94.6 2014 48,322 5,382 3,448 66.0 28.3 94.3 Analyzing internal premium growth in terms of price and volume, we use four clusters based on 2015 internal growth over 2014: Cluster 1: Overall growth – both price and volume effects are positive. Cluster 2: Overall growth – either price or volume effects are positive. Cluster 3: Overall decline – either price or volume effects are negative. Cluster 4: Overall decline – both price and volume effects are negative. Gross premiums written1 On a nominal basis, we recorded gross premiums written of € 51,597 MN, an increase of € 3,274 MN or 6.8 % compared to 2014. Foreign currency translation effects amounted to € 1,529 MN, mainly due to the strong U.S. Dollar, British Pound and Swiss Franc against the Euro.2 Consolidation/deconsolidation effects were at € 357 MN mainly due to positive effects from the acquisition of a part of the insurance business of UnipolSai and the takeover of the Property-Casualty insurance business of the Territory Insurance Office in Australia. This was partly offset by the sale of the Fireman’s Fund personal insurance business to ACE Limited and the downscaling of our retail business in Russia. On an internal basis, our gross premiums went up 2.9 %. This was composed of a volume effect of 2.1 % and a price effect of 0.8 %. We recorded strong internal growth at Allianz Worldwide Partners, in Turkey, and at AGCS excl. Fireman’s Fund. 1 2 We comment on the development of our gross premiums written on an internal basis, meaning adjusted for foreign currency translation and (de-)consolidation effects, in order to provide more comparable information. Based on the average exchange rates in 2015 compared to 2014. 74 Annual Report 2015 Allianz Group C Group Management Report Management Discussion and Analysis Business Environment 67 69 Executive Summary of 2015 Results 74 Property-Casualty Insurance Operations 80 Life/Health Insurance Operations 86 Asset Management 90 Corporate and Other 92 Outlook 2016 98 Balance Sheet Review 105 Liquidity and Funding Resources 110 Reconciliations cluster 1 In France, gross premiums increased to € 4,330 MN. The internal growth of 1.8 % was mainly due to a positive price impact from our commercial and retail business. In Australia, gross premiums grew 4.9 % to € 2,991 MN on an inter- nal basis. This was driven by positive price and volume effects across most of our lines of business. In Spain, gross premiums were at € 2,138 MN – up 6.1 % on an internal basis. We registered positive volume effects in all our lines of business and favorable price effects mainly in our motor and per- sonal lines business. In Turkey, gross premiums amounted to € 1,312 MN. The internal growth of 26.3 % resulted from higher price and volume effects across our main lines of business, especially in our motor third party liability insurance business. cluster 2 In Germany, we recorded gross premiums of € 9,629 MN, a rise of 1.0 % on an internal basis. This was due to positive price effects especially in our motor insurance business. It was partly offset by unfavorable volume impacts in our accident insurance with premium refunds (APR). At AGCS incl. FFIC, gross premiums increased to € 8,107 MN. The internal growth of 1.0 % was mainly driven by favorable volume effects at Allianz Risk Transfer, while negative price impacts in our energy and aviation lines of business had some compensating effects. At Allianz Worldwide Partners, gross premiums went up to € 3,975 MN. The internal growth of 10.8 % was due to positive contribu- tions from all our lines of business, but particularly due to higher volume impacts at Worldwide Care and our U.S. travel business. In the United Kingdom, gross premiums stood at € 3,055 MN, an increase of 2.6 % on an internal basis. This was due to favorable price effects in our commercial motor and pet insurance businesses. In Latin America, gross premiums rose 8.0 % to € 2,086 MN. The internal growth was largely driven by our motor insurance business. cluster 3 In Italy, gross premiums stood at € 4,755 MN, a decline of 1.6 % on an internal basis. This mainly resulted from negative price effects in our motor insurance business. In Credit Insurance, gross premiums decreased by 0.1 % and were at € 2,241 MN. Negative price effects after experiencing a low claims environment in some of our mature markets were largely offset by positive volume effects in Asia and Italy. In Russia, gross premiums were at € 196 MN – down by 26.4 % on an internal basis. This was the result of lower commercial volumes. Operating profit operating profit € mn Underwriting result Operating investment income (net) Other result1 Operating profit 2015 2,281 3,120 202 5,603 2014 2,251 3,066 66 5,382 1 Consists of fee and commission income/expenses, other income/expenses and restructuring charges. Operating profit increased by € 221 MN to € 5,603 MN, which includes a net gain of € 0.2 BN from the sale of the Fireman’s Fund personal insurance business to ACE Limited in the second quarter. This was partly offset by restructuring charges of € 0.1 BN for the Fireman’s Fund reorganization. Both operating investment income and under- writing result contributed positively. Despite higher losses from natural catastrophes and a negative motor driven impact from Argentina, our underwriting result went up by € 30 MN to € 2,281 MN, benefiting from a higher contribution from run-off. Our combined ratio worsened by 0.3 percentage points to 94.6 %. underwriting result € mn Premiums earned (net) Accident year claims Previous year claims (run-off) Claims and insurance benefits incurred (net) Acquisition and administrative expenses (net), excluding one-off effects from pension revaluation Change in reserves for insurance and investment contracts (net) (without expenses for premium refunds)1 Underwriting result 2015 46,430 (32,646) 1,924 (30,721) 2014 43,759 (30,263) 1,385 (28,878) (13,208) (12,400) (220) 2,281 (231) 2,251 1 Consists of the underwriting-related part (aggregate policy reserves and other insurance reserves) of “change in reserves for insurance and investment contracts (net)”. For further information, please refer to note 34 to the consolidated financial statements. Our accident year loss ratio stood at 70.3 % – a 1.2 percentage point deterioration compared to the previous year. This was driven by an increase in losses from natural catastrophes from an extraordinarily low level of € 400 MN in 2014 to € 738 MN resulting in a higher impact on our combined ratio of 1.6 percentage points compared to 0.9 per- centage points in 2014. Excluding losses from natural catastrophes, our accident year loss ratio deteriorated to 68.7 % from 68.2 % in 2014. This was the result of a worse attritional loss ratio of our motor portfolios in the United Kingdom and Italy as well as higher weather-related losses in Australia. Annual Report 2015 Allianz Group 75 The following operation contributed positively to the development of our accident year loss ratio: Operating investment income (net) increased slightly by € 54 MN to € 3,120 MN. Allianz Worldwide Partners: 0.3 percentage points. The accident year loss ratio for our B2B2C business improved driven by Global Assistance. The following operations contributed negatively to the development of our accident year loss ratio: United Kingdom: 0.5 percentage points. The accident year loss ratio was affected by severe storms and flooding in December, a higher impact of large losses compared to last year, and an adverse loss ratio development of our retail motor portfolio. Australia: 0.3 percentage points. This stemmed from an increased impact of losses from natural catastrophes and weather-related events. Germany: 0.3 percentage points. After the rather benign level of claims from natural catastrophes in 2014, this year’s accident year loss ratio was affected by claims caused by storms including Mike and Niklas in the first quarter as well as Siegfried and Thompson in the third quarter. AGCS excl. FFIC: 0.2 percentage points. This is predominantly the result of higher losses from natural catastrophes. Interest and similar income (net of interest expenses) was stable at € 3,529 MN, whereby higher income from equities was broadly offset by a lower contribution from fixed income. The average asset base1 grew by 4.3 % from € 104.6 BN to € 109.2 BN compared to the previous year. Operating income from financial assets and liabilities carried at fair value through income (net) fell by € 31 MN to a loss of € 25 MN. This was due to negative developments in the foreign currency result net of hedges with respect to emerging market bonds denominated in local currency. Operating realized gains (net) increased by € 66 MN to € 252 MN. This was driven by higher realizations in debt securities and was par- tially offset by lower realized gains on equities, both mainly in the APR business. Operating impairments of investments (net) amounted to € 59 MN, up € 39 MN largely due to higher impairments on equities in our APR business. Expenses for premium refunds (net) were at € 240 MN, a decrease of € 67 MN compared to last year. The change was mainly driven by our APR business in Germany. Our run-off result amounted to € 1,924 MN, compared to € 1,385 MN in the previous year – resulting in a higher run-off contribution of 4.1 %. The 1.0 percentage point increase compared to the 2014 run-off ratio was the result of the strongly negative impact from reserve strength- ening in Russia and Brazil in the previous year, a lower than prior year reserve strengthening for the former Fireman’s Fund portfolio and positive run-off contributions from most operations in 2015. Total expenses amounted to € 13,208 MN in 2015 compared to € 12,400 MN in 2014. Our expense ratio deteriorated 0.1 percentage points to 28.4 %. This was mainly driven by higher acquisition expenses. operating investment income (net)1 € mn Interest and similar income (net of interest expenses) Operating income from financial assets and liabilities carried at fair value through income (net) Operating realized gains (net) Operating impairments of investments (net) Investment expenses Expenses for premium refunds (net)2 Operating investment income (net) 2015 2014 3,529 (25) 252 (59) (337) (240) 3,120 3,525 6 186 (20) (323) (307) 3,066 1 2 The operating investment income (net) for our Property-Casualty business segment consists of the operating investment result – as shown in note 6 to the consolidated financial statements – and expenses for premium refunds (net) (policyholder participation) as shown in note 34 to the consolidated financial statements. Refers to policyholder participation, mainly from APR (accident insurance with premium refunds) busi- ness, and consists of the investment-related part of “change in reserves for insurance and investment contracts (net)”. For further information, please refer to note 34 to the consolidated financial statements. 76 Annual Report 2015 Allianz Group other result € mn Fee and commission income Other income1 Fee and commission expenses Other expenses Restructuring charges Other result 2015 1,474 279 2014 1,260 60 (1,367) (1,180) (34) (149) 202 (45) (30) 66 1 We recorded a € 0.2 BN net gain from the sale of the Fireman’s Fund personal insurance business, which is reported as other income. 1 Including French health business, excluding fair value option and trading. C Group Management Report Management Discussion and Analysis Business Environment 67 69 Executive Summary of 2015 Results 74 Property-Casualty Insurance Operations 80 Life/Health Insurance Operations 86 Asset Management 90 Corporate and Other 92 Outlook 2016 98 Balance Sheet Review 105 Liquidity and Funding Resources 110 Reconciliations Net income Net income increased by € 676 MN to € 4,124 MN compared to 2014. We recorded lower one-off expenses from pension revaluation and higher non-operating realized gains. property-casualty Business segment information € mn Gross premiums written1 Ceded premiums written Change in unearned premiums Premiums earned (net) Interest and similar income Operating income from financial assets and liabilities carried at fair value through income (net) Operating realized gains/losses (net) Fee and commission income Other income Operating revenues 2015 51,597 (4,933) (234) 46,430 3,601 (25) 252 1,474 279 52,010 2014 48,322 (3,961) (602) 43,759 3,595 6 186 1,260 60 48,867 Claims and insurance benefits incurred (net) (30,721) (28,878) Change in reserves for insurance and investment contracts (net) Interest expenses Operating impairments of investments (net) Investment expenses Acquisition and administrative expenses (net), excluding one-off effects from pension revaluation Fee and commission expenses Restructuring charges Other expenses Operating expenses (460) (72) (59) (337) (13,208) (1,367) (149) (34) (538) (71) (20) (323) (12,400) (1,180) (30) (45) (46,407) (43,485) Operating profit 5,603 5,382 Non-operating items Income before income taxes Income taxes Net income Loss ratio2 in % Expense ratio3 in % Combined ratio4 in % 181 5,784 (1,660) 4,124 66.2 28.4 94.6 (406) 4,976 (1,528) 3,448 66.0 28.3 94.3 1 2 3 4 For the Property-Casualty business segment, total revenues are measured based upon gross premiums written. Represents claims and insurance benefits incurred (net), divided by premiums earned (net). Represents acquisition and administrative expenses (net), excluding one-off effects from pension revalua tion divided by premiums earned (net). Represents the total of acquisition and administrative expenses (net), excluding one-off effects from pension revaluation, and claims and insurance benefits incurred (net) divided by premiums earned (net). Annual Report 2015 Allianz Group 77 Property-Casualty insurance operations by reportable segments ProPerty-Casualty insuranCe oPerations by rePortable segments € mn Germany Switzerland Austria Central & Eastern Europe2 Poland Slovakia Hungary Czech Republic Other German Speaking Countries and Central & Eastern Europe Italy3 France Benelux Turkey Greece Africa Middle East Western & Southern Europe, Middle East, Africa and India4 Spain Portugal Latin America Iberia & Latin America Allianz Global Corporate & Specialty5 AGCS excl. Fireman’s Fund Fireman’s Fund Reinsurance PC 6 Reinsurance PC excl. San Francisco RE San Francisco RE Credit Insurance United Kingdom Ireland United States7 Australia8 Russia Ukraine Global Insurance Lines & Anglo Markets9 Asia Pacific Allianz Worldwide Partners10 Consolidation and Other11,12 Total Gross premiums written Premiums earned (net) Operating profit (loss) internal1 2015 9,629 1,717 983 1,732 409 336 271 316 401 14,061 4,755 4,330 1,164 1,312 100 105 88 11,855 2,138 343 2,086 4,566 8,107 6,227 1,881 4,841 4,841 – 2,241 3,055 496 – 2,991 196 4 21,931 774 3,975 2014 9,532 1,489 976 1,676 419 330 263 286 380 13,673 4,196 4,248 1,135 1,082 108 96 74 10,939 2,015 320 2,101 4,437 5,389 5,389 – 3,738 3,738 – 2,158 2,684 439 1,958 2,763 537 13 19,680 722 3,341 2015 9,629 1,507 983 1,729 408 336 272 313 401 13,849 4,130 4,324 1,164 1,366 100 105 76 11,266 2,138 343 2,270 4,750 7,177 5,605 1,572 4,799 4,799 – 2,157 2,754 496 – 2,898 269 7 20,556 738 3,703 2014 9,532 1,489 976 1,676 419 330 263 286 380 13,673 4,196 4,248 1,135 1,082 108 96 74 10,939 2,015 320 2,101 4,437 7,104 5,376 1,728 3,738 3,738 – 2,158 2,684 439 – 2,763 365 13 19,265 722 3,341 (5,565) 51,597 (4,469) 48,322 (5,552) 49,310 (4,455) 47,920 2015 7,877 1,620 831 1,413 344 267 225 269 308 11,741 4,665 4,007 1,062 967 81 74 60 10,915 1,907 285 1,549 3,741 5,066 3,604 1,462 4,078 4,078 – 1,549 2,322 432 – 2,362 183 3 15,994 501 3,538 – 46,430 2014 7,824 1,428 831 1,372 348 267 223 238 297 11,455 3,906 3,926 1,065 906 89 65 49 10,006 1,806 271 1,622 3,699 3,162 3,162 – 3,118 3,118 – 1,482 2,439 385 1,874 2,180 528 8 15,176 443 2,981 – 43,759 2015 1,216 245 81 141 (1) 56 24 34 29 1,683 1,075 465 108 90 12 11 11 1,798 208 20 (154) 74 423 514 (91) 625 584 41 400 56 42 – 307 2 – 1,846 74 128 – 5,603 2014 1,303 198 75 167 17 67 22 44 17 1,743 932 428 96 90 16 11 8 1,588 255 (4) (147) 104 560 560 – 464 464 – 401 178 85 (151) 353 (194) (1) 1,699 57 105 86 5,382 1 2 3 4 This reflects gross premiums written on an internal basis, adjusted for foreign currency translation and (de-)consolidation effects. Includes income and expense items from a management holding and consolidations between countries in this region. Effective 1 July 2014, the Allianz Group acquired parts of the insurance business of UnipolSai Assicurazioni S.p.A., Bologna. Includes € 4 MN and € 7 MN operating profit for 2015 and 2014, respectively, from a management holding located in Luxembourg. Includes € 21 MN operating profit for 2015 from an associated entity in Asia Pacific. 5 6 7 Effective 1 January 2015, Fireman’s Fund Insurance Company was integrated into AGCS Group. Previous period figures were not adjusted. The sale of the renewal rights for personal lines was effective 1 April 2015. 12M 2015 figures include the net gain on the sale of the personal insurance business to ACE Limited of € 0.2 BN. The results from the run-off portfolio included in San Francisco Reinsurance Company Corp., a former subsidiary of Fireman’s Fund Insurance Company, have been reported within Reinsurance PC since 1 January 2015. Previous period figures for the United States were not adjusted and include the prior year’s business of Fireman’s Fund Insurance Company. 78 Annual Report 2015 Allianz Group C Group Management Report Management Discussion and Analysis Business Environment 67 69 Executive Summary of 2015 Results 74 Property-Casualty Insurance Operations 80 Life/Health Insurance Operations 86 Asset Management 90 Corporate and Other 92 Outlook 2016 98 Balance Sheet Review 105 Liquidity and Funding Resources 110 Reconciliations % Germany Switzerland Austria Central & Eastern Europe2 Poland Slovakia Hungary Czech Republic Other German Speaking Countries and Central & Eastern Europe Italy3 France Benelux Turkey Greece Africa Middle East Western & Southern Europe, Middle East, Africa and India4 Spain Portugal Latin America Iberia & Latin America Allianz Global Corporate & Specialty5 AGCS excl. Fireman’s Fund Fireman’s Fund Reinsurance PC 6 Reinsurance PC excl. San Francisco RE San Francisco RE Credit Insurance United Kingdom Ireland United States7 Australia8 Russia Ukraine Global Insurance Lines & Anglo Markets9 Asia Pacific Allianz Worldwide Partners10 Consolidation and Other11,12 Total Combined ratio Loss ratio Expense ratio 2015 91.9 89.5 94.0 95.5 104.3 83.8 101.5 90.7 2014 91.5 91.0 94.4 93.3 99.5 79.5 102.7 85.0 2015 66.8 65.8 68.2 62.5 71.5 51.7 60.6 64.2 2014 65.7 67.8 69.0 60.7 64.0 53.2 62.4 56.9 2015 25.1 23.7 25.9 33.0 32.8 32.2 40.9 26.5 2014 25.9 23.2 25.4 32.6 35.5 26.3 40.3 28.1 –13 92.1 –13 91.9 –13 66.2 –13 65.6 –13 25.9 –13 26.3 83.1 95.9 96.2 102.2 89.1 92.7 93.9 90.9 92.7 96.5 116.6 102.9 102.9 94.0 124.8 89.5 89.2 – 83.2 102.6 94.9 – 96.2 111.9 113.5 96.5 93.5 97.4 – 94.6 82.5 96.3 97.6 97.8 86.1 92.6 97.4 91.1 89.9 105.7 116.1 102.6 93.1 93.1 – 88.6 88.6 – 78.6 97.6 84.7 120.0 94.6 141.6 114.9 96.5 95.2 96.6 – 94.3 56.5 66.8 66.9 79.0 53.8 56.3 60.4 63.3 71.6 72.9 79.2 74.8 72.0 66.2 86.1 60.6 60.6 – 53.3 73.1 67.4 – 69.7 70.6 56.4 67.0 61.1 62.7 – 66.2 55.0 67.6 67.6 75.1 51.1 48.4 62.6 63.1 68.8 82.7 79.7 74.6 65.2 65.2 – 60.5 60.5 – 48.8 65.9 55.6 85.6 69.7 98.7 62.3 66.8 64.5 65.6 – 66.0 26.6 29.1 29.3 23.1 35.3 36.5 33.6 27.6 21.1 23.6 37.4 28.0 31.0 27.8 38.7 28.9 28.6 – 29.8 29.5 27.5 – 26.5 41.3 57.1 29.5 32.5 34.6 – 28.4 27.5 28.7 30.0 22.6 35.0 44.2 34.7 28.0 21.1 23.0 36.5 28.0 27.9 27.9 – 28.0 28.0 – 29.7 31.6 29.2 34.4 24.9 42.9 52.6 29.7 30.6 31.0 – 28.3  8  9 10 Effective 1 January 2015, the Allianz Group acquired the Property-Casualty insurance business of the Territory Insurance Office (TIO Business), Darwin. Includes € 8 MN operating loss and € 3 MN operating profit for 2015 and 2014, respectively, from AGF UK. The reportable segment Allianz Worldwide Partners includes the Global Assistance business as well as the business of Allianz Worldwide Care and the reinsurance business of Allianz Global Automotive, in addition to income and expenses from a management holding. 11 12 13 Represents elimination of transactions between Allianz Group companies in different geographic regions. The 2014 analysis of the Allianz Group’s asbestos risks resulted in a reduction of reserves and a positive run-off result of € 86 MN, as reflected in the operating profit for 2014. Presentation not meaningful. Annual Report 2015 Allianz Group 79 Life/Health Insurance Operations − Statutory premiums stable at € 66.9 BN: continued targeted shift towards unit-linked and capital-efficient products. − Operating profit increased 14.1 % to € 3,796 MN, driven by a higher investment margin. Business segment overview Key figures Allianz offers a broad range of life, health, savings, and invest- ment-oriented products, including individual and group life insurance contracts. Via our distribution channels – mainly tied agents, brokers, and bank partnerships – we offer life and health products to both retail and corporate clients. As one of the world- wide market leaders in life business, we serve customers in more than 45 countries. Key figures life/health € mn Statutory premiums Operating profit Net income Margin on reserves (bps)1 2015 66,903 3,796 2,621 67 2014 67,331 3,327 2,320 65 Statutory premiums2,3 On a nominal basis, we recorded statutory premiums of € 66,903 MN, down by 0.6 %. This includes favorable foreign currency translation effects of € 2,848 MN. On an internal basis3, statutory premiums decreased by € 3,276 MN – or 4.9 % – to € 64,055 MN. As a result of changes in our product strategy, premiums shifted towards unit-linked and capital-efficient products. Decreased sales of traditional products in Germany and Italy more than offset the premium growth in the unit-linked business in Italy and Taiwan. In addition, we recorded lower premiums from the fixed- indexed annuity business in the United States. In the German life business, we recorded statutory premiums of € 17,742 MN. The drop of 6.7 % on an internal basis was due to lower single premium business, which saw reduced sales of traditional life products – which include long-term interest rate guarantees. This was partly compensated for by growth in the regular premium busi- ness. Statutory premiums in the German health business went up to € 3,257 MN. The rise of 0.4 % on an internal basis resulted from premium rate increases in comprehensive insurance in January 2015. In the United States, statutory premiums amounted to € 10,475 MN, down 26.1 % on an internal basis. We experienced lower fixed-indexed annuity sales due to both the impact of pricing changes made in the first half of 2015, in response to the low interest rate environment, as well as market developments. We also recorded exceptionally high premiums in the second and third quarters of 2014 resulting from the introduction of an innovative index strategy. Statutory premiums in Italy went up to € 11,936 MN, representing internal growth of 5.3 %. Statutory premiums benefited from strong growth in the unit-linked business. Along with a decrease in tradi- tional life business, the share of unit-linked premiums of total statu- tory premiums increased significantly to 75 % compared to 63 % in 2014. In France, statutory premiums dropped to € 8,053 MN. The decrease of 2.3 % on an internal basis was mainly due to a decline in our tradi- tional individual life and group pension business, with growth in our group protection and health business partly compensating for the negative development. In Asia Pacific4, statutory premiums increased to € 6,769 MN, up 5.8 % on an internal basis. This was mainly because of higher sales of single premium unit-linked products distributed via bancassurance in Taiwan. 1 2 Represents operating profit divided by the average of the current and previous year-end net reserves, where net reserves equal reserves for loss and loss adjustment expenses, reserves for insurance and investment contracts, and financial liabilities for unit-linked contracts less reinsurance assets. Statutory premiums are gross premiums written from sales of life and health insurance policies as well as gross receipts from sales of unit-linked and other investment-oriented products, in accordance with the statutory accounting practices applicable in the insurer’s home jurisdiction. 3 4 In the following section, we comment on the development of our statutory gross premiums written on an internal basis, i.e. adjusted for foreign currency translation and (de-)consolidation effects, in order to provide more comparable information. Asia Pacific refers to Asian-Pacific countries. 80 Annual Report 2015 Allianz Group C Group Management Report Management Discussion and Analysis Business Environment 67 69 Executive Summary of 2015 Results 74 Property-Casualty Insurance Operations 80 Life/Health Insurance Operations 86 Asset Management 90 Corporate and Other 92 Outlook 2016 98 Balance Sheet Review 105 Liquidity and Funding Resources 110 Reconciliations Statutory premiums in Switzerland totaled € 1,842 MN. On an internal basis, this represented a decrease of 2.3 %, largely due to lower single premium business in group life. In Benelux, statutory premiums stood at € 2,239 MN – a decline of 11.1 % on an internal basis. This mainly resulted from lower tradi- tional life product sales and was partially offset by an increase in the sale of single premium unit-linked products. Statutory premiums in Spain went up to € 1,375 MN. The increase of 9.2 % on an internal basis was mainly driven by traditional products distributed via the bancassurance channel. Statutory premiums in Central & Eastern Europe amounted to € 818 MN, down 4.7 % on an internal basis. We recorded lower regular premiums in the Czech Republic and lower single premiums in Hun- gary. A stronger regular premium business in Bulgaria partly com- pensated for this. Premiums earned (net) Premiums earned (net) were down by € 300 MN to € 24,215 MN. This was mainly due to lower business from traditional life products in Ger- many. Favorable foreign currency translation effects from some of the major currencies partly compensated for the decrease. Present value of new business premiums (PVNBP)1,2 PVNBP fell by € 318 MN to € 60,614 MN. This was driven by a drop in our guaranteed savings & annuities line of business, primarily due to decreased fixed-indexed annuity sales in the United States and lower sales of traditional business with high guarantees – particularly in Germany and Italy. The PVNBP share of unit-linked without guarantee line of business rose to 24.3 %. Operating profit operating profit by profit sources2 The objective of the Life/Health operating profit sources analysis is to explain movements in IFRS results by analyzing underlying drivers of performance on a Life/Health business segment consolidated basis. operating profit by profit sources € mn Loadings and fees Investment margin Expenses Technical margin Impact of change in Dac Operating profit 2015 5,667 3,915 2014 5,285 2,973 (6,610) (6,522) 1,156 (332) 3,796 1,203 388 3,327 Our operating profit rose by € 468 MN to € 3,796 MN. This mainly resulted from a higher investment margin in Germany, positive foreign cur- rency translation effects, a higher investment spread margin in the United States, and increased unit-linked management fees in Italy and France. It was partly offset by loss recognition in South Korea amounting to € 244 MN. Loadings and fees Loadings and fees include premium and reserve based fees, unit- linked management fees, and policyholder participation in expenses. loaDings anD fees € mn Loadings from premiums Loadings from reserves Unit-linked management fees present value of new business premiums (pvnbp) by lines of business Loadings and fees Year 2015 [2014] in % Unit-linked without guarantee 24.3 [18.7] Protection & health 10.7 [9.9] Loadings from premiums as % of statutory premiums Loadings from reserves as % of average reserves1,2 Unit-linked management fees as % of average unit-linked reserves2,3 Guaranteed savings & annuities 65.0 [71.3] 2015 3,751 1,143 772 5,667 5.6 0.2 0.6 2014 3,566 1,091 628 5,285 5.3 0.2 0.6 1 2 3 Aggregate policy reserves and unit-linked reserves. Yields are pro-rata. Unit-linked management fees, excluding asset management fees, divided by unit-linked reserves. Our loadings and fees were up by € 381 MN to € 5,667 MN. The growth in loadings from premiums of € 185 MN was primarily due to higher sales in Asia Pacific, the positive impact of lower volumes of products with sales inducements in the United States, favorable foreign currency translation effects, and increased unit-linked pre- miums in Italy and France. This was partially offset by reduced single 1 2 PVNBP before non-controlling interests. Prior year figures changed in order to reflect the roll out of profit source reporting to Malaysia. Annual Report 2015 Allianz Group 81 premium business in Germany. Loadings from premiums as a per- centage of statutory premiums rose by 31 basis points, largely because of a higher proportion of regular premiums in Germany. The increase in loadings from reserves of € 52 MN was mainly Expenses Expenses include acquisition expenses and commissions (excluding commission clawbacks, which are allocated to the technical margin) as well as administrative and other expenses. driven by a higher reserve volume, particularly in Asia Pacific. The growth in unit-linked management fees of € 144 MN was largely due to higher assets under management in France and Italy as well as increased performance fees in Italy. expenses € mn Acquisition expenses and commissions Administrative and other expenses Expenses Acquisition expenses and commissions as % of pvnbp1 Administrative and other expenses as % of average reserves2,3 1 2 3 PVNBP before non-controlling interests. Aggregate policy reserves and unit-linked reserves. Yields are pro-rata. 2015 (4,915) (1,695) (6,610) (8.1) (0.3) 2014 (4,912) (1,610) (6,522) (8.1) (0.4) Our expenses were up by € 87 MN to € 6,610 MN. Acquisition expenses were flat, as lower acquisition expenses driven by reduced fixed- indexed annuity sales in the United States and lower single premium business in Germany were offset by higher acquisition expenses mainly due to sales growth in Asia Pacific and Italy. Administrative expenses increased predominantly because of adverse foreign currency translation effects from our businesses in the United States and in Asia Pacific. Technical margin Technical margin comprises risk result (risk premiums less benefits in excess of reserves less policyholder participation), lapse result (surrender charges and commission clawbacks) and reinsurance result. Our technical margin declined by € 47 MN to € 1,156 MN. This was driven by additional reserving for an annuity take-up option in Italy and increased provisions for unclaimed contracts in France. It was partly offset by a favorable disability result in Switzerland. Impact of change in Dac Impact of change in DAC (deferred acquisition costs) includes effects of change in DAC, unearned revenue reserves (URR) and value of busi- ness acquired (VOBA). It represents the net impact of deferral and amortization of acquisition costs and front-end loadings on operating profit and therefore deviates from the IFRS financial statements. Investment margin The investment margin is defined as IFRS investment income net of expenses, less interest credited to IFRS reserves and policyholder par- ticipation (including policyholder participation beyond contractual and regulatory requirements mainly for the German life business). investment margin € mn Interest and similar income Operating income from financial assets and liabilities carried at fair value through income (net) Operating realized gains/losses (net) Interest expenses Operating impairments of investments (net) Investment expenses Other1 Technical interest Policyholder participation Investment margin 2015 2014 18,331 17,307 (2,050) 6,459 (108) (1,199) (1,013) 174 (9,194) (7,486) 3,915 (1,367) 3,204 (107) (677) (903) 258 (8,740) (6,002) 2,973 Investment margin2,3 in basis points 98 80 1 2 3 Other comprises the delta of out-of-scope entities, which are added here with their respective operating profit and different line item definitions compared to the financial statements, such as interest paid on deposits for reinsurance, fee and commission income and expenses excluding unit-linked management fees. Investment margin divided by the average of current previous year-end aggregate policy reserves. Yields are pro-rata. Our investment margin rose by € 942 MN to € 3,915 MN, or by 18 basis points as a percentage of reserves. The increase was mainly driven by higher realizations on both debt and equity investments, predomi- nantly in Germany. It was also supported by higher interest income largely from debt investments. As the volume effects of a higher asset base were mostly offset by lower yields, this higher interest was pri- marily due to favorable foreign currency translation effects, arising mainly in the United States. These increases were partially offset by a negative foreign currency result on partially hedged emerging mar- kets bonds and unfavorable impacts from financial derivatives to lengthen duration. Higher impairments on equities – mainly in the German life business – as a result of volatile equity markets during the year also contributed negatively. The policyholder participation ratio decreased slightly, driven by a drop in the policyholder participation in Italy and France. 82 Annual Report 2015 Allianz Group C Group Management Report Management Discussion and Analysis Business Environment 67 69 Executive Summary of 2015 Results 74 Property-Casualty Insurance Operations 80 Life/Health Insurance Operations 86 Asset Management 90 Corporate and Other 92 Outlook 2016 98 Balance Sheet Review 105 Liquidity and Funding Resources 110 Reconciliations impact of change in Dac € mn Capitalization of Dac Amortization, unlocking and true-up of Dac Impact of change in DAC life/health business segment information1 2015 1,741 (2,073) (332) € mn 2014 1,904 Statutory premiums2 (1,516) Ceded premiums written 388 Change in unearned premiums Statutory premiums (net) 2015 66,903 (747) (309) 65,847 (41,632) 24,215 5,667 3,751 1,143 772 2014 67,331 (630) (544) 66,157 (41,643) 24,514 5,285 3,566 1,091 628 3,915 2,973 (6,610) (4,915) (1,695) (6,522) (4,912) (1,610) Deposits from insurance and investment contracts Premiums earned (net) Loadings and fees Loadings from premiums Loadings from reserves Unit-linked management fees Investment margin (net of policyholder participation) Expenses Acquisition expenses and commissions Administrative and other expenses Technical margin 1,156 1,203 Operating profit before change in DAC 4,128 2,939 Impact of change in DAC3 Capitalization of Dac Amortization, unlocking and true-up of Dac Operating profit Non-operating items Income before income taxes Income taxes Net income (332) 1,741 (2,073) 3,796 (6) 3,790 (1,169) 2,621 388 1,904 (1,516) 3,327 (12) 3,316 (996) 2,320 Margin on reserves4 in basis points 67 65 1 2 3 4 Profit sources are based on in-scope operating entities with coverage of 96.5 % of statutory premiums. Operating profit from operating entities that are not in scope is included in investment margin. Statutory premiums are gross premiums written from sales of life and health 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. Impact of change in DAC includes effects of change in DAC, URR, and VOBA. It represents the net impact of deferral and amortization of acquisition costs and front-end loadings on operating profit and therefore deviates from the financial statements. Represents operating profit divided by the average of the current and previous year-end net reserves, where net reserves equal reserves for loss and loss adjustment expenses, reserves for insurance and investment contracts, and financial liabilities for unit-linked contracts less reinsurance assets. The impact of change in DAC turned from € 388 MN to minus € 332 MN. This was largely due to higher DAC amortization associated with our variable annuity business in the United States, loss recognition in South Korea in the second and third quarters of 2015, and a lower capitalization of DAC, due to a decline in the fixed-indexed annuity business in the United States. operating profit by lines of business operating profit by lines of business € mn Guaranteed savings & annuities Protection & health Unit-linked without guarantee Operating profit 2015 2,846 577 373 3,796 2014 2,369 661 298 3,327 The operating profit increase in the guaranteed savings & annuities line of business was largely driven by a higher investment margin in Germany and a higher investment spread margin in the United States. Operating profit in the protection & health line of business declined, mainly because of loss recognition in South Korea. Operating profit in the unit-linked without guarantee line of business rose, primarily due to higher fees in Italy. margin on reserves In 2015, the margin on reserves was up from 65 to 67 basis points, driven mainly by the increased investment margin. Net income Our net income rose by € 301 MN to € 2,621 MN, in line with our operating performance. We recorded higher non-operating income stemming primarily from increased realizations on equity investments in Italy. This was offset by the impairment of the goodwill allocated to the cash generating unit Asia Pacific, mainly driven by steadily decreasing and persisting low interest rates in South Korea. The slight increase in the effective tax rate contributed negatively. Annual Report 2015 Allianz Group 83 life/health operating profit by profit sources anD lines of business1 € mn Loadings from premiums Loadings from reserves Unit-linked management fees Loadings and fees Life/Health Guaranteed savings & annuities Protection & health Unit-linked without guarantee 2015 3,751 1,143 772 5,667 2014 3,566 1,091 628 5,285 2015 2014 1,885 1,868 976 326 958 266 2015 1,582 100 – 2014 1,440 86 – 3,187 3,091 1,683 1,525 2015 2014 284 66 446 797 258 47 363 668 Investment margin (net of policyholder participation) 3,915 2,973 3,794 2,876 62 43 60 54 Acquisition expenses and commissions Administrative and other expenses Expenses Technical margin (4,915) (1,695) (6,610) (4,912) (1,610) (6,522) (3,113) (1,077) (4,190) (3,336) (1,091) (4,426) (1,276) (1,194) (454) (376) (1,730) (1,570) (526) (164) (690) (382) (144) (526) 1,156 1,203 425 532 621 587 109 84 Operating profit before change in DAC Capitalization of Dac 4,128 1,741 2,939 1,904 3,216 1,144 2,073 1,414 Amortization, unlocking and true-up of Dac (2,073) (1,516) (1,515) (1,119) Impact of change in DAC2 Operating profit (332) 3,796 388 3,327 (371) 2,846 296 2,369 636 372 (431) (59) 577 585 374 276 224 (299) (128) 75 661 97 373 281 116 (98) 18 298 1 Profit sources are based on in-scope operating entities with coverage of 96.5 % of statutory premiums. Operating profit from operating entities that are not in scope is included in investment margin. 2 Impact of change in DAC includes effects of change in DAC, URR, and VOBA. It represents the net impact of deferral and amortization of acquisition costs and front-end loadings on operating profit and therefore deviates from the financial statements. 84 Annual Report 2015 Allianz Group C Group Management Report Management Discussion and Analysis Business Environment 67 69 Executive Summary of 2015 Results 74 Property-Casualty Insurance Operations 80 Life/Health Insurance Operations 86 Asset Management 90 Corporate and Other 92 Outlook 2016 98 Balance Sheet Review 105 Liquidity and Funding Resources 110 Reconciliations Life/Health insurance operations by reportable segments Life/HeaLtH insurance operations by reportabLe segments € mn Statutory premiums1 Premiums earned (net) Operating profit (loss) Margin on reserves2 (bps) Germany Life Germany Health Switzerland Austria Central & Eastern Europe Poland Slovakia Czech Republic Hungary Other4 German Speaking Countries and Central & Eastern Europe internal3 2015 2014 2015 2014 2015 2014 17,742 3,257 1,842 399 818 194 247 114 115 148 19,014 3,245 1,655 405 857 185 252 147 138 134 17,742 3,257 1,617 399 817 193 247 113 116 148 19,014 3,245 1,655 405 857 185 252 147 138 134 10,520 3,257 501 317 520 88 199 67 44 123 11,468 3,244 519 325 516 73 210 74 42 118 2015 1,257 214 75 33 129 27 34 15 13 40 2014 1,079 209 83 37 118 21 38 15 12 33 24,058 25,176 23,833 25,176 15,115 16,073 1,707 1,527 Italy France Benelux Turkey Greece Africa Middle East Western & Southern Europe, Middle East, Africa and India6 11,936 8,053 2,239 985 95 68 215 11,332 8,241 2,518 854 88 57 176 11,936 8,053 2,239 1,026 95 68 191 11,332 8,241 2,518 854 88 57 176 449 3,183 522 179 55 29 170 478 3,100 520 148 51 28 132 268 550 121 54 (3) 5 32 23,591 23,266 23,608 23,266 4,587 4,458 1,062 Spain Portugal Latin America Iberia & Latin America 1,375 283 380 2,037 1,259 247 338 1,844 1,375 283 382 2,040 1,259 247 338 1,844 440 86 127 653 USA 10,475 11,840 8,753 11,840 1,193 Reinsurance LH Russia Global Insurance Lines & Anglo Markets Asian-Pacific countries South Korea Taiwan Indonesia Malaysia Thailand China Other4 Global Life Asia Pacific Consolidation7 Total 596 39 634 6,769 1,704 2,706 701 451 750 451 6 5 6,774 537 52 589 5,732 1,646 2,026 700 423 622 311 5 4 5,736 363 53 416 6,067 1,527 2,376 662 447 664 385 6 5 6,072 537 52 589 5,732 1,646 2,026 700 423 622 311 5 4 5,736 456 38 494 2,170 486 293 296 203 733 145 13 3 2,172 (666) 66,903 (1,120) 67,331 (666) 64,055 (1,120) 67,331 – 24,215 – 24,514 437 83 123 643 984 398 49 448 1,909 509 201 285 187 611 106 11 1 1,910 196 21 14 231 841 38 9 47 (83) (244) 6 74 20 87 2 (28) – (83) (10) 3,796 173 455 132 26 – 6 24 815 191 22 16 229 656 14 1 15 104 (51) 2 61 18 71 1 2 1 105 (17) 3,327 2015 2014 60 75 50 66 377 469 270 249 343 –5 65 44 64 72 186 (95) 176 382 64 241 351 127 235 87 211 469 236 (30) (202) 8 488 145 254 20 –5 –5 (30) –5 67 55 77 62 80 358 374 303 253 332 –5 63 32 56 85 106 –5 212 352 53 257 374 177 256 81 76 27 71 43 (48) 3 478 147 249 16 –5 –5 43 –5 65 1 2 Statutory premiums are gross premiums written from sales of life and health 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. Represents operating profit (loss) divided by the average of the current and previous year-end net reserves, where net reserves equal reserves for loss and loss adjustment expenses, reserves for insurance and invest- ment contracts, and financial liabilities for unit-linked contracts less reinsurance assets. 3 4 5 6 7 Statutory premiums adjusted for foreign currency translation and (de-)consolidation effects. Includes income and expense items from management holdings, smaller operating entities and consoli- dations between countries in these regions. Presentation not meaningful. Includes € 34 MN operating profit for 2015 from an associated entity in Asia Pacific. Represents elimination of transactions between Allianz Group companies in different geographic regions. Annual Report 2015 Allianz Group 85 Asset Management − Operating profit down 11.8 % to € 2,297 mn. − Cost-income ratio rose to 64.5 %. − Third-party net outflows substantially reduced in 2015, amounting to € 107 bn. − Total assets under management at € 1,763 bn – a decline of € 38 bn. Business segment overview Key figures Allianz offers asset management products and services for third- party investors and the Allianz Group’s insurance operations. We serve a wide range of retail and institutional clients world- wide with investment and distribution capacities in all major markets. Based on total assets under management, we are one of the largest asset managers in the world that manage third- party assets with active investment strategies. key figures asset management € mn Operating revenues Operating profit Cost-income ratio in % Net income Total assets under manage ment as of 31 December in € bn thereof: Third-party assets under manage ment as of 31 December in € bn 2015 6,479 2,297 64.5 1,449 1,763 1,276 2014 6,388 2,603 59.2 1,621 1,801 1,313 Unfavorable effects from Market and Other, amounting to € 34 bn, also contributed to the decrease of total AuM. Negative effects of € 41 bn at PImCO – mainly from fixed income assets – were only partially offset by positive effects at AllianzGI of € 8 bn. We recorded a decline in total AuM of € 13 bn, reported as con- solidation, deconsolidation and other adjustments. This was mainly due to an adjustment of third-party AuM related to a joint venture and a correction in reporting of notional accounts. Mainly as a result of the depreciation of the Euro against the U.S. Dollar, which declined from 1.21 at the beginning of the year to 1.09 on 31 December 2015, we recorded favorable foreign currency trans- lation effects of € 125 bn. Assets under management Total assets under management decreased by € 38 bn to € 1,763 bn, mainly driven by third-party assets under management (AuM) net outflows and negative effects from Market and Other, but largely offset by favorable effects from foreign currency translation. Of total AuM, € 1,276 bn related to third-party AuM and € 487 bn to Allianz Group assets. In 2015, we recorded total AuM net outflows of € 116 bn. Net out- flows from third-party AuM amounted to € 107 bn. This was strongly driven by PImCO in the United States, primarily from traditional fixed income products. However, since the end of 2014, third-party AuM net outflows at PImCO have significantly receded with each quarter, amounting to only € 11 bn in the fourth quarter of 2015. Allianz Global Investors (AllianzGI) recorded strong third-party net inflows in 2015. These were primarily due to net inflows in Europe, continuing AllianzGI’s trend of third-party net inflows for the twelfth consecutive quarter. 86 Annual Report 2015 Allianz Group C Group Management Report Management Discussion and Analysis Business Environment 67 69 Executive Summary of 2015 Results 74 Property-Casualty Insurance Operations 80 Life/Health Insurance Operations 86 Asset Management 90 Corporate and Other 92 Outlook 2016 98 Balance Sheet Review 105 Liquidity and Funding Resources 110 Reconciliations development of total assets under management € bn Total AuM (as of 31/12/2014) Net flows 2 Market and Other 3 Consolidation, deconsoli- dation and other adjustments F/X effects Total AuM (as of 31/12/2015) 1,5721 2291 01 1,801 (116) (34) (13) 1,385 176 1514 515 + 125 1,763 0 500 1,000 1,500 2,000 Fixed income Equities Multi-assets Other Changes 1 2 3 Fixed income, equities and other definitions based on legal entity view as of 31 December 2014. There- fore, 2014 and 2015 figures are not comparable. From the first quarter of 2015, net flows represent the sum of new client assets, additional contributions from existing clients – including dividend reinvestment – withdrawals of assets from, and termination of, client accounts and distributions to investors. Reinvested dividends amounted to € 18 BN. From the first quarter of 2015, Market and Other represents current income earned on, and changes in the fair value of, securities held in client accounts. It also includes dividends from net investment income 4 5 and from net realized capital gains to investors of open ended mutual funds and of closed end funds. Multi-assets is a combination of several asset classes (e.g. bonds, stocks, cash and real property) used as an investment. Multi-assets class investments increase the diversification of an overall portfolio by dis- tributing investments throughout several asset classes. Other is composed of other asset classes than equity, fixed income and multi-assets, e.g. money markets, commodities, real estate investment trusts, infrastructure investments, private equity investments, hedge funds, etc. In the following section we focus on the development of third-party assets under management. As of 31 December 2015, the share of third-party AuM by business unit was 77.3 % attributable to PImCO and 22.7 % attributable to AllianzGI. At the beginning of 2015 we enhanced our asset class reporting from a legal entity view to a more granular asset class split composed of fixed income, equities, multi-assets, and other. Furthermore, we replaced the retail and institutional asset split by an investment vehicle view, comprised of mutual funds and separate accounts.1 Based on the asset class split on 31 December 2015, the third- party AuM share of fixed income amounted to 74.0 %, reflecting the high share of fixed income assets at PImCO. 11.8 % in equity assets was due to the notable equity share at AllianzGI. Multi-assets and other accounted for 10.5 % and 3.7 %, respectively. The share of third-party assets between mutual funds and sepa- rate accounts changed in favor of separate accounts, compared to the end of 2014 – with mutual funds at 58.3 % and separate accounts at 41.7 %. third-party assets under management by region/country1 as of 31 December 2015 [31 December 2014] in % Asia-Pacific 11.3 [10.8] America2 56.0 [60.0] Europe 32.7 [29.2] 1 2 Based on the location of the asset management company. “America” consists of the United States, Canada and Brazil (€ 699 BN, € 14 BN and € 1 BN third-party AuM as of 31 December 2015, respectively). 1 Mutual funds are investment vehicles (in the United States, investment companies subject to the U.S. code; in Germany, vehicles subject to the “Standard-Anlagerichtlinien des Fonds” Investmentgesetz) where the money of several individual investors is pooled into one account to be managed by the asset manager, e.g. open-end funds, closed-end funds. Separate accounts are investment vehicles where the money of a single investor is directly managed by the asset manager in a separate dedicated account (e.g. public or private institutions, high net worth individuals, and corporates). Annual Report 2015 Allianz Group 87 Operating revenues Our operating revenues increased by € 92 mn – or 1.4 % – to € 6,479 mn. Before the positive effect from foreign currency translation, which was mainly driven by the sharp depreciation of the Euro against the U.S. Dollar, operating revenues decreased by 11.4 % on an internal basis1. Net fee and commission income went up 1.7 % to € 6,488 mn. How- ever, excluding the positive effect from foreign currency translation, this was a decrease of 11.7 %. The decrease was mostly due to a drop of 16.3 % in our third-party AuM-driven revenues. This was mainly due to lower average third-party AuM, which declined by 15.9 % before foreign currency translation effects. The reduced third-party AuM primarily resulted from third-party net outflows at PImCO and a nega- tive market return especially impacting fixed income assets. More- over, third-party AuM-driven revenues were also impacted – albeit to a lesser extent – by a decline in our third-party AuM-driven margin. This was primarily driven by a lower share of mutual funds in our average third-party AuM. Our performance fees grew by € 331 mn to € 607 mn. The increase was € 253 mn before foreign currency trans- lation effects and can mainly be attributed to carried interest from the redemption of a large private fund at PImCO. A strong growth in performance fees at AllianzGI in the United States and Europe also contributed to this development. Our income from financial assets and liabilities carried at fair value through income (net) dropped by € 12 mn, mainly because of foreign currency translation and valuation effects. The regional allocation of third-party AuM shifted in favor of Europe and – to a lesser extent – the Asia-Pacific region. This was mainly due to strong third-party net outflows in the United States and third-party net inflows at AllianzGI in Europe and was supported by market effects. It was only partially offset by positive foreign currency trans- lation effects. three-year rolling investment performance of pimco and allianzgi1 as of 31 December in % PIMCO AllianzGI 100 80 60 40 20 0 (20) (40) 90 88 (10) (12) 69 (31) 55 55 (45) (45) 70 (30) 2013 2014 2015 2013 2014 2015 Outperforming third-party assets under management Underperforming third-party assets under management 1 Three-year rolling investment performance reflects the mandate-based and volume-weighted three- year investment success of all third-party assets that are managed by Allianz Asset Management’s portfolio-management units. For separate accounts and mutual funds, the investment success (valued on the basis of the closing prices) is compared with the investment success prior to cost deduction of the respective benchmark, based on various metrics. For some mutual funds, the investment success, reduced by fees, is compared with the investment success of the median of the respective Morningstar peer group (a position in the first and second quartile is equivalent to outperformance). The overall three-year rolling investment performance of our Asset Management business decreased, but remained on a high level, with 69 % of third-party assets outperforming their respective benchmarks (31 December 2014: 84 %). The decrease was mainly driven by PImCO’s rolling investment performance, which was impacted by strong quarters of 2012 rolling off and more challenging quarters of 2015 roll- ing in. 69 % of PImCO third-party assets outperformed their respective benchmarks. AllianzGI improved significantly with 70 % of third-party assets outperforming their respective benchmarks. 1 Operating revenues adjusted for foreign currency translation and (de-)consolidation effects. In 2015, the average exchange rate of the U.S. Dollar to Euro was 1.11 (2014: 1.33). 88 Annual Report 2015 Allianz Group C Group Management Report Management Discussion and Analysis Business Environment 67 69 Executive Summary of 2015 Results 74 Property-Casualty Insurance Operations 80 Life/Health Insurance Operations 86 Asset Management 90 Corporate and Other 92 Outlook 2016 98 Balance Sheet Review 105 Liquidity and Funding Resources 110 Reconciliations Operating profit Net income Our operating profit went down by € 306 mn – or 11.8 % – to € 2,297 mn. On an internal basis1, the decrease was 23.5 %, mainly driven by lower third-party AuM-driven revenues due to lower average third-party AuM and – to a lesser extent – lower third-party AuM-driven margins, partly offset by higher performance fees and lower operating expenses. Administrative expenses rose 9.3 % to € 4,141 mn. However, adjusted for foreign currency translation effects, they went down by 5.3 %.This was mainly driven by lower personnel expenses – including a 11.2 % drop in variable compensation – and to a smaller proportion due to lower non-personnel expenses. Nevertheless, administrative expenses were impacted by several special items, in particular by the Special Performance Award (SPA), which was introduced in the fourth quarter of 2014 to secure performance and retain talent at PImCO. Restructuring charges of € 41 mn were an additional burden for operating expenses. They were driven by a restructuring program at AllianzGI, which started in the third quarter of 2015 and aims to posi- tion AllianzGI as a global investment leader. Our cost-income ratio went up 5.3 percentage points to 64.5 %. The SPA contributed 2.0 percentage points2 and the restructuring pro- gram at AllianzGI contributed 0.6 percentage points of the upswing. Our net income declined by € 172 mn – or 10.6 % – to € 1,449 mn. This represents a drop of 22.6 % before the effect from foreign currency translation and is largely consistent with our operating profit devel- opment. asset management business segment information € mn Management and loading fees Performance fees Other Fee and commission income Commissions Other Fee and commission expenses Net fee and commission income Net interest income1 Income from financial assets and liabilities carried at fair value through income (net) Other income Operating revenues Administrative expenses (net), excluding acquisition-related expenses Restructuring charges Operating expenses 2015 7,370 607 34 8,011 (1,440) (83) (1,523) 6,488 (5) (8) 4 2014 7,505 275 46 7,825 (1,301) (145) (1,445) 6,380 (3) 5 6 6,479 6,388 (4,141) (41) (4,182) (3,787) 3 (3,784) Operating profit 2,297 2,603 Non-operating items Income before income taxes Income taxes Net income (31) 2,266 (817) 1,449 (15) 2,588 (967) 1,621 Cost-income ratio2 in % 64.5 59.2 1 2 Represents interest and similar income less interest expenses. Represents operating expenses divided by operating revenues. 1 2 Operating profit adjusted for foreign currency translation and (de-)consolidation effects. In 2015, the average exchange rate of the U.S. Dollar to Euro was 1.11 (2014: 1.33). Net of the impact on variable compensation. Annual Report 2015 Allianz Group 89 Corporate and Other Operating loss increased by € 124 mn to € 945 mn, due to higher centralized pension costs. Business segment overview Key figures Corporate and Other encompasses the reportable segments Holding & Treasury, Banking, and Alternative Invest ments. Hold- ing & Treasury includes the management of and support for the Allianz Group’s businesses through its strategy, risk, corporate finance, treasury, financial reporting, controlling, communica- tion, legal, human resources, technology, and other functions. Our banking products offered in Germany, Italy, France, the Nether lands, and Bulgaria complement our insurance product port folio. We also provide global alternative investment man- agement services in the private equity, real estate, renewable energy, and infrastructure sectors, mainly on behalf of the Allianz Group. Key figures Corporate and other1 € mn Operating revenues Operating expenses Operating result 2015 1,899 (2,844) (945) 2014 1,750 (2,571) (820) Net income (loss) (1,003) (657) Key figures reportable segments € mn holding & treasury Operating revenues Operating expenses Operating result banKing Operating revenues Operating expenses Operating result alternative investments Operating revenues Operating expenses Operating result 2015 2014 562 (1,639) (1,076) 1,127 (1,032) 94 213 (176) 37 469 (1,386) (917) 1,114 (1,047) 66 176 (146) 30 1 Consolidation included. For further information about our Corporate and Other business segment, please refer to note 6 to the consolidated financial statements. 90 Annual Report 2015 Allianz Group C Group Management Report Management Discussion and Analysis Business Environment 67 69 Executive Summary of 2015 Results 74 Property-Casualty Insurance Operations 80 Life/Health Insurance Operations 86 Asset Management 90 Corporate and Other 92 Outlook 2016 98 Balance Sheet Review 105 Liquidity and Funding Resources 110 Reconciliations Earnings summary Our operating result decreased by € 124 mn to a loss of € 945 mn. Improvements in Banking and Alternative Investments were more than offset by a decline in Holding & Treasury, which mainly resulted from higher centralized pension costs. Our net loss deteriorated by € 346 mn to € 1,003 mn since the effect in our non-operating result from an adapted cost allocation scheme1 for the pension provisions was € 335 mn lower than the previous year’s one-off benefit from pension revaluation with our German sub- sidiaries2. Operating earnings summaries by reportable segment holding & treasury Our operating loss increased by € 159 mn to € 1,076 mn. This was largely due to an € 181 mn increase in administrative expenses, mainly resulting from higher centralized pension expenses – partly offset by a related € 31 mn increase in other income. Administrative expenses (net), excluding acquisition-related expenses, went up by € 181 mn to € 917 mn. Most of this increase was related to higher centralized pension costs, due to both the adapted cost allocation scheme1 for the pension provisions between German subsidiaries and Allianz SE and the net effect of decreased discount rates and other assumption changes. Various smaller effects, includ- ing higher IT expenses and the positive effect from recharging of expenses for the implementation of Solvency II to our operating business segments, almost offset each other. Other income increased from € 116 mn to € 148 mn. Other income in 2014 included € 116 mn resulting from the policyholder participation related to the pension revaluation with our German subsidiaries2. In 2015, we recorded € 148 mn of other income, resulting from policy- holder participation related to the above-mentioned adapted cost allocation scheme for pension provisions. Our net interest result improved by € 33 mn to a loss of € 19 mn. Interest and similar income decreased by € 43 mn to € 222 mn. This was mainly driven by the absence of income from associated companies, which is recognized within the insurance business segments from 2015 onwards. A drop in interest income triggered by lower interest yields was more than offset by higher dividend income. As a result of lower internal borrowing and interest rates, our interest expenses, excluding interest expenses from external debt, decreased by € 76 mn to € 241 mn. 1 2 For further information on the adapted cost allocation scheme for the pension provisions, please refer to note 6 to the consolidated financial statements. Respective offsetting effects were recorded within our other business segments, mainly within Property- Casualty. For further information on one-off effects from pension revaluation, please refer to note 6 to the consolidated financial statements. Our net fee and commission result improved by € 21 mn to a loss of € 184 mn. This improvement was primarily driven by a disposal gain from certain IT infrastructure assets. Operating income from financial assets and liabilities carried at fair value through income (net) dropped from income of € 27 mn to a loss of € 28 mn. This was due to both a negative net effect of foreign currency movements and related hedge positions as well as lower fair values of certain fund investments. Investment expenses were up by € 4 mn to € 76 mn. banKing Our operating profit increased by € 28 mn to € 94 mn, with all Banking units contributing positive results. The increase was driven by both lower administrative expenses and higher net fee and commission result and was partly offset by higher loan loss provisions and restruc- turing charges. Administrative expenses decreased by € 29 mn to € 409 mn as a result of reduced variable remuneration in Italy and Germany – and to a lesser extent fewer staff. Our net interest, fee and commission result increased by € 15 mn to € 559 mn. Our net fee and commission result was up by € 16 mn to € 225 mn. This was mainly due to higher management and perfor- mance fee income, in line with higher assets under management in Italy. Our net interest result remained unchanged at € 334 mn (2014: € 335 mn). However, this result benefited from a special dividend, whereas the low-interest yield environment put pressure on our interest rate margin in almost all Banking units. Our loan loss provisions increased by € 15 mn to € 60 mn. Higher general loan loss allowances in Bulgaria were the largest driver of this increase. We recorded restructuring charges of € 9 mn (2014: release of € 3 mn) mainly related to the modernization and digitalization pro- gram “OLB 2019” as announced by the Oldenburgische Landesbank in October 2015. Our operating income from financial assets and liabilities carried at fair value through income (net), which includes trading income, was up by € 6 mn to € 16 mn. This was due primarily to a better trading result within our German banking business. alternative investments Our operating profit increased by € 7 mn to € 37 mn. This was almost entirely driven by the net effect of € 35 mn higher fee and commission income and a € 28 mn increase in administrative expenses. Both developments were in line with the increased assets under manage- ment. Annual Report 2015 Allianz Group 91 Outlook 2016 − Global recovery is set to continue – only moderate acceleration in emerging market growth. − Allianz Group operating profit outlook in the range of € 10.5 BN, plus or minus € 0.5 BN. Overview: 2015 results versus previous year outlook1 2015 results versus previous year outlook for 2015 outlook 2015 – as per annual report 2014 results 2015 allianz Group Operating profit of € 10.4 Bn, plus or minus € 0.4 Bn. Operating profit of € 10.7 Bn. Protection of shareholders’ investments, while continuing to provide attractive returns and dividends. Selective profitable growth. Return on equity (RoE) at 10.7 % (2014: 11.2 %). RoE excluding unrealized gains/losses on bonds, net of shadow deferred acquisition costs (DaC), amounted to 12.5 % (2014: 13.0 %). Proposed dividend at € 7.30 (2014: € 6.85) per share. Stable payout ratio of 50 %. Property-Casualty with continued sound risk selection and selective external growth, Life/Health with growing asset base and solid new business margins, but Asset Management with net outflows. property-Casualty Growth in gross premiums written by approximately 3.0 %. Including a strong positive foreign currency impact, gross premiums written increased by 6.8 % driven by both internal growth (of 2.9 %) and external acquisitions. Operating profit in the range of € 5.2 Bn to € 5.8 Bn. Operating profit of € 5.6 Bn is above the mid-point of our target range, including a higher than expected investment income and a rather low impact from natural catastrophes, but worse than expected results in Argentina. The progress of our turn-around programs at Fireman’s Fund and in Brazil was slower than initially expected. Combined ratio below 96 % over the cycle. Combined ratio was 94.6 %. Pressure on operating investment income (net) due to reinvestments in a low interest rate environment. Operating investment income (net) increased slightly by € 54 mn compared to the prior year. life/HealtH Prioritizing profitability over growth, taking further product and pricing actions to address the prolonged low yield environment. As a result, revenues are expected to be in the range of € 59.0 Bn to € 65.0 Bn. Revenues at € 66.9 Bn – above target range – driven by significant growth in unit-linked premiums as a result of changes in our product strategy to shift towards unit-linked and capital-efficient products, as well as positive foreign currency effects. This more than offset the reduced sales of traditional products in major European countries. Operating profit between € 3.0 Bn and € 3.6 Bn. Operating profit of € 3.8 Bn – above target range – driven by higher level of net harvesting from our portfolio de-risking actions and favorable foreign currency effects, mainly from u.s. Dollar appreciation. This more than compensated for the loss recognition in South Korea. Margin on reserves between 50 and 70 basis points. Margin on reserves at 67 basis points. Pressure on investment income due to low interest rates and continued capital market uncertainty. Operating investment result increased 17 % to € 20.4 Bn, supported by high level of realized gains from our portfolio de-risking actions. asset manaGement Slight decrease in total assets under management (AuM) due to continued, but receding, expected net outflows at pimCo. Operating profit in the range of € 2.2 Bn to € 2.8 Bn. Underlying cost-income ratio of 60.0 % or below. Decrease of total AuM by 2.1 % driven by net outflows at pimCo of € 132.3 Bn (2014: € 229.2 Bn). Third-party net outflows at pimCo were receding quarter by quarter, amounting to € 11.4 Bn in the fourth quarter of 2015. Overall negative market return also contributed to this development. However, it was partially compensated for by positive foreign currency impact and net inflows at AllianzGi. Operating profit of € 2.3 Bn – below the mid-point of the outlook range mainly due to lower AuM-driven revenues, lower than expected performance fees, and a less flexible expense base. This was partially compensated for by positive foreign currency impacts. Cost-income ratio deteriorated 5.3 percentage points to 64.5 %. Adjusted for Special Performance Award at pimCo and restructuring charges related to AllianzGi 2.0, underlying cost-income ratio was 61.9 %. 1 For more detailed information on the previous year outlook for 2015, please see the Annual Report 2014 starting on page 104. 92 Annual Report 2015 Allianz Group C Group Management Report Management Discussion and Analysis Business Environment 67 69 Executive Summary of 2015 Results 74 Property-Casualty Insurance Operations 80 Life/Health Insurance Operations 86 Asset Management 90 Corporate and Other 92 Outlook 2016 98 Balance Sheet Review 105 Liquidity and Funding Resources 110 Reconciliations Economic outlook1 Insurance industry outlook At the beginning of 2016, the global economic picture is, broadly speaking, split between industrialized countries and emerging mar- kets. On the one hand, economic activity in industrialized countries is likely to remain quite solid. In the United States, domestic demand looks set to firm up further. In the Eurozone, the economic recovery is likely to continue, supported by improved competitiveness and lower energy prices. With real gross domestic product expected to increase by 1.7 %, growth will be slightly higher than in 2015. Supported by improving economic conditions in the Eurozone and a favorable environment for private consumption, the German economy could expand by more than 2 % in 2016. On the other hand, growth prospects for several major emerging market countries remain subdued – for both cyclical and structural reasons. Following a severe recession in Brazil and Russia last year, economic activity is expected to gradually stabilize in the course of 2016. Overall, global output is likely to expand by about 2.7 % in 2016, compared with 2.4 % in 2015. Industrial- ized countries are expected to register gross domestic product growth of 2.0 %, while in emerging markets it could increase to 3.7 % from the 3.3 % seen in 2015, which was the lowest economic expansion since the great recession of 2009. At the global level, inflation is likely to remain very low, with a few exceptions in Latin America and Eastern Europe, where inflation rates have risen sharply for country-specific reasons (for example in Venezuela and in Ukraine). As in 2015, financial markets will primarily be driven by mone- tary policy and geopolitical tensions, but also by economic and polit- ical developments in major emerging market countries such as China. On the monetary policy front, the Federal Reserve is likely to continue to hike interest rates very cautiously this year. By contrast, the European Central Bank is expected to keep key interest rates at present or even lower levels throughout 2016. We also do not see any trimming of the European Central Bank’s unconventional measures before the end of this year. Slightly rising yields on 10-year U.S. government bonds, along with growing speculation towards year-end about the timing and manner in which the European Central Bank exits from its bond- purchasing program in 2017, will exert some upward pressure on European government benchmark bond yields. However, with short- term rates practically at zero, there are limited prospects of markedly higher yields on longer-term bonds. We predict yields on 10-year German and U.S. government bonds to climb modestly towards 1 % and around 2 %, respectively, by the end of 2016. In the coming months a number of factors, including the expected rate increases by the Fed- eral Reserve, will weigh on the Euro. However, with the economic recovery in the Eurozone on a firmer footing, the Euro will gain sup- port. We expect the year-end U.S. Dollar to Euro exchange rate to be marginally above last year’s closing level of 1.09. 1 The information presented in the sections Economic outlook, Insurance industry outlook and Asset management industry outlook is based on our own estimates. 2016 is set to become another challenging year for the insurance industry. The big picture – characterized by only modest premium growth, low interest rates, volatile financial markets, new regulatory burdens and digital transformation – will not change. As a conse- quence, industry profitability will remain under pressure and restruc- turing will gather pace. However, that does not mean 2016 will be identical to the previ- ous year. For example, we expect to see interest rates starting to rise – but only slightly: overall, the interest rate environment will con- tinue to present a headwind for the industry. Another important change is the implementation of Solvency II in Europe. This brings more clarity on capital positions, acting as a possible catalyst for more industry consolidation. High pent-up demand, accommodative government policies – in particular in the life sector – and general trends like urbanization continue to underpin relatively strong insur- ance premium growth in emerging markets. Therefore, we expect these markets to outgrow advanced markets in the foreseeable future, although our outlook has become more cautious. In the property-casualty sector, we anticipate stable premium growth in advanced markets. While the ongoing recovery will support demand, pricing is becoming a growing concern. Despite the region- wide economic pickup, Western Europe is set to remain the laggard in terms of global premium growth. On the other hand – as in previous years – we expect very strong performances in emerging Asia. There, government efforts – particularly in China – to raise insurance pene- tration across the board are starting to pay off. Overall, we expect global premium revenue to rise between 4.0 % and 5.0 % in 2016 (in nominal terms, adjusted for foreign currency translation effects); a good one percentage point of this is attributable to China alone. Due to the challenging pricing outlook, underwriting profitability may come under pressure, especially if financial losses resulting from natural catastrophes return to historical averages. At the same time, investment returns will remain weak, despite the expected rise in interest rates. In the life sector, the overall picture is quite similar – although pre- mium growth is much more volatile than in the property-casualty sector. In the coming year, this volatility may be exacerbated further by new regulations, changing government policies and ensuing shifts in the product mix. One thing, however, is unlikely to change: The highest premium growth is expected in emerging Asia, where coun- tries such as China and Indonesia should continue with high, in many cases double-digit growth. Rising incomes and social security reforms remain strong engines for growing insurance demand. All in all, we expect global premium revenue to rise in the 4.0 – 5.0 % range in 2016 (in nominal terms, adjusted for foreign currency translation effects). Annual Report 2015 Allianz Group 93 Looking at profitability, there is no expected relief from the pains associated with the low yield environment and regulation. As a result, the rebalancing of investment portfolios will continue as well as the shift in the product mix. New, less capital-intensive products, mixing unit-linked product characteristics with some sort of return guaran- tees, will increasingly replace the old-style savings products. At the same time, mastering the digital transformation is becoming more and more crucial. This mix of strategic challenges will not only spur industry consolidation but could also act as a drag on overall profit- ability. Outlook for the Allianz Group As discussed earlier, world economic growth is expected to be mod- erately higher in 2016. Growth dynamics, however, vary significantly across the globe and there are clear risks for 2016. Geopolitical ten- sions, a renewed flare-up of the European sovereign debt crisis and currency or trade wars could all jeopardize economic development. However, the outlook provided here assumes the absence of such shocks. Overview: outlook and assumptions 2016 outlook 2016 allianz Group Operating profit of € 10.5 Bn, plus or minus € 0.5 Bn. Protection of shareholders’ investments, while continuing to provide attractive returns and dividends. Selective profitable growth. property-Casualty Growth in gross premiums written of approximately 2 %. life/HealtH asset manaGement Operating profit in the range of € 5.2 Bn to € 5.8 Bn. Progress towards our combined ratio ambition of 94 % or better by 2018. Pressure on operating investment income (net) to continue due to reinvestments in a consistently low interest rate environment. Prioritizing profitability over growth and continuing to shift new business mix towards unit-linked, capital efficient and protection products. Addressing customer needs in the prolonged low yield environ ment. Revenues are expected to be in the range of € 62.0 Bn to € 68.0 Bn. Operating profit between € 3.3 Bn and € 3.9 Bn. RoE1 between 9.0 % and 11.0 %. Pressure on investment income due to low interest rates and continued capital market uncertainty. Slight increase in total AuM due to positive market return, supported by a return to positive net flows at pimCo and continued solid net inflows at AllianzGi. Operating profit in the range of € 1.9 Bn to € 2.5 Bn. Cost-income ratio of well below 65 %. 1 Excluding unrealized gains/losses on bonds net of shadow DAC. Asset management industry outlook The markets widely expect the U.S. Federal Reserve to continue to increase interest rates slowly in 2016 and to potentially start selling the bonds accumulated in its post-crisis bond-buying program grad- ually throughout the year. However, these actions are dependent on the unemployment rate and inflation levels in the United States. In addition, the extension of the policy of low interest rates and quanti- tative easing programs in the Eurozone and Japan in 2016 is very likely. Thus, investors will continue to try to anticipate the central banks’ moves and measures and we expect volatility to persist or even increase in equity and fixed income markets in 2016. Global market volatility could also be fueled by ongoing concerns about the economic development in China, a further decrease in commodity prices (such as crude oil) and a potential unstable geopolitical situ- ation in certain regions. We have seen many of these factors combine in the opening weeks of 2016 and the resulting impacts on financial markets and policymakers worldwide. However, bonds should remain attractive if longer-term trends towards moderately higher interest rates – especially in the United States – are coupled with global demographic trends. For the growing number of retirees in developed countries looking for a stable stream of income, bonds are particularly interesting. This also holds true for liability-driven investors. Although we see a more challenging environment for the asset management industry in 2016, prospects for further growth in almost all classes in the asset management industry are buoyed by these positive economic conditions as well as trends in client demand. However, profitability in the industry is under pressure from con- tinuous flows into passive products and rising distribution and/or marketing costs that are tightening operating margins. Measures aimed at increasing regulatory oversight and reporting could also affect profitability in the asset management sector. In order to continue growing, it is vital that asset managers have sufficient business volumes, maintain efficient operations and keep investment results above benchmark levels. 94 Annual Report 2015 Allianz Group C Group Management Report Management Discussion and Analysis Business Environment 67 69 Executive Summary of 2015 Results 74 Property-Casualty Insurance Operations 80 Life/Health Insurance Operations 86 Asset Management 90 Corporate and Other 92 Outlook 2016 98 Balance Sheet Review 105 Liquidity and Funding Resources 110 Reconciliations assumptions Our outlook assumes no significant deviations from the following underlying assumptions: − Global recovery to continue. − Subdued growth prospects for several major emerging markets. − Modest rise in interest rates expected. − A 100 basis point increase or decrease in interest rates would, respectively, either raise or lower operating profits by approx- imately € 0.1 BN in the first year following the rate change. This does not include fair value changes in interest rate-sensitive positions that are reported in our income statement. − No major disruptions of capital markets. − No disruptive fiscal or regulatory interference. − Level of claims from natural catastrophes at expected average levels. − Average U.S. Dollar to Euro exchange rate of 1.11. − A 10 % weakening or strengthening of the U.S. Dollar versus our planned exchange rate of 1.11 to the Euro would have a negative or positive impact on operating profits of approximately € 0.3 BN, respectively. Although the global economy is showing signs of recovery, invest- ment results are likely to remain under pressure due to low interest rates. This will be offset by an increase in our operating asset base. Management’s assessment of expected revenues and earnings for 2016 In 2015, our total revenues amounted to € 125.2 BN, representing a 2.4 % increase and a 2.1 % decrease on a nominal and internal basis, respectively, compared to last year. We expect a rather flat revenue development in 2016, with Property-Casualty advancing and Asset Management revenues slightly decreasing. Life/Health revenues are likely to be under pressure due to our selective focus on profitable growth. In 2015, our operating profit was in the upper end of our target range, hitting € 10.7 BN. In 2016, we envisage an operating profit of € 10.5 BN, plus or minus € 0.5 BN, as we expect a slightly lower operating profit in the Property-Casualty, Life/Health and Asset Management business segments and a slight improvement in our Corporate and Other business segment. Our net income attributable to shareholders increased, reaching € 6.6 BN in 2015. Consistent with our disclosure practice in the past and given the susceptibility of our non-operating results to adverse capi- tal market developments, we do not provide a precise outlook for net income. However, since our outlook presumes no major disruptions of capital markets, we anticipate a rather stable net income for 2016. property-Casualty insuranCe We expect our revenues to increase by approximately 2 % in 2016 (2015: 6.8 %), supported by favorable volume and – to a lesser extent – price effects as well as external growth. This growth is expected to be supported by the acquisition of the commercial portfolio of Aegon, strengthening our position in the attractive Benelux Property-Casualty market. Premium growth in 2016 is expected mainly from our European core markets, including the United Kingdom, Germany, and Italy. Top line development will be further supported by positive trends at Allianz Worldwide Partners, bundling our B2B2C business activities. We believe the overall slow rise in prices we witnessed in a num- ber of markets in 2015 will continue in 2016. However, as in previous years, we will keep our focus on achieving strong underwriting results by adhering to our strict underwriting discipline and will be willing to accept a lower top line if target margins cannot be achieved. In 2015, our combined ratio was at 94.6 %. In 2016, we expect prog- ress towards our 2018 ambition of 94 % or better. This rests on our expectation that the aggregate effect of improvements in pricing, claims management, and productivity will compensate for any underlying claims inflation. Despite the high volatility of natural catastrophes in recent years, we have assumed such claims will be in line with their expected average level in 2016. As the low interest rate environment is likely to persist, invest- ment income will remain under pressure due to the rather short duration of investments in the Property-Casualty business segment. We will continue to take measures to adapt our investment strategy to ongoing market conditions. Overall, we expect our 2016 operating profit to be in the range of € 5.2 BN to € 5.8 BN (2015: € 5.6 BN). Annual Report 2015 Allianz Group 95 life/HealtH insuranCe In 2015, our operating profit of € 3.8 BN exceeded our target range – due to a higher level of net harvesting from our active portfolio de- risking actions. This more than compensated for the loss recognition in South Korea. For 2016, we expect operating profit in our Life/Health business segment to be between € 3.3 BN and € 3.9 BN. As communicated at the Capital Markets Day in November 2015, RoE1 will be one of the major key performance indicators (KPIs) for the steering of our Life business. In 2016 we expect RoE1 in our Life/Health business segment to be between 9.0 % and 11.0 %. In 2016 we will focus on the new business mix as well as in-force management in order to address customer needs in light of the pro- longed low yield environment and improve shareholder returns. We will continue to move our new business mix towards unit-linked, capital-efficient and protection products and will work on product and distribution actions. We will actively manage in-force business and work on expense management, asset/liability management, and crediting strategies in order to mitigate the impacts of the difficult market conditions, particularly low interest rates. It must be noted, however, that market volatility, along with the level of net harvesting, can significantly affect the Life/Health busi- ness segment results and make precise predictions difficult. asset manaGement Although we see a more challenging environment for the asset man- agement industry in 2016 compared to previous years, we expect positive net flows at PIMCO in 2016 and continued solid net inflows at AllianzGI. Market returns are expected to contribute moderately to a positive development of total AuM. Management and loading fees as well as performance fees are expected to decrease slightly. Lower operating expenses are expected to only partially offset the impact of lower operating revenues. Therefore, we envisage our operating profit to be in the range of € 1.9 BN and € 2.5 BN in 2016 (2015: € 2.3 BN). In 2016, we expect a cost income ratio of well below 65 % (2015: 64.5 %), supported by our focus on expense discipline and operational excellence. Mid-term we expect our cost-income ratio to be at 60 %. Corporate anD otHer Our Corporate and Other business segment recorded an operating loss of € 0.9 BN in 2015. Due to the expectation of an improving operat- ing result of the Holding & Treasury reportable segment – mainly attributable to lower administrative expenses – we predict an operat- ing loss in the range of € 0.7 BN to € 0.9 BN for Corporate and Other (including consolidation) in 2016. Financing and liquidity development and capitalization The Allianz Group maintains a healthy liquidity position combined with superior financial strength and capitalization well above what supervisory authorities currently require. We expect to have steady access to financial markets at reason- able cost in order to maintain our strong financial flexibility. This is supported by prudent steering of our liquidity resources and a matu- rity profile focusing on a long-dated average remaining term. Based on current interest rate expectations, our average capital market financing costs in 2016 should be broadly in line with 2015. We closely monitor the capital positions of the Group and at the operating entity level. Additionally, we will continue to optimize our interest rate and spread sensitivities through asset/liability manage- ment and life product design. Expected dividend development2 In November 2014, the Board of Management and the Supervisory Board of Allianz SE decided on a new allocation of net income in its dividend policy. Starting with the financial year 2014, the proposed regular pay-out to Allianz shareholders has been 50 % of Allianz Group net income (attributable to shareholders). In the interest of dividend continuity, the objective is to keep the dividend per share at least at the level paid in the previous year. The dividend policy of the Allianz Group continues to aim for a healthy balance between an attractive yield and investments in profitable growth. To assure capital discipline, management further intends to evaluate and pay out any unused capital budget earmarked for exter- nal growth every three years. The first evaluation will take place at the end of 2016. Out of a budget of € 2.4 BN for external growth (equals 20 % of the net income attributable to shareholders for the years 2013 and 2014), we have invested a total net amount (including risk capital requirements and net of divestments) of € 0.9 BN in 2014 and 2015. The dividend policy is subject to a sustainable Solvency II ratio above 160 %. This policy is reflected in our proposed dividend of € 7.30 per share. 1 Excluding unrealized gains/losses on bonds net of shadow DAC. 96 Annual Report 2015 Allianz Group 2 This dividend policy represents the current intention of the Board of Management and the Supervisory Board and may be revised in the future. Also, the dividend payment in any given year is subject to specific dividend proposals by the Board of Management and the Supervisory Board, each of which may elect to deviate from this dividend policy if appropriate under the then prevailing circumstances, as well as to the decision of the Annual General Meeting. C Group Management Report Management Discussion and Analysis Business Environment 67 69 Executive Summary of 2015 Results 74 Property-Casualty Insurance Operations 80 Life/Health Insurance Operations 86 Asset Management 90 Corporate and Other 92 Outlook 2016 98 Balance Sheet Review 105 Liquidity and Funding Resources 110 Reconciliations Management’s overall assessment of the current economic situation of the Allianz Group Overall, at the date of issuance of this Annual Report and given cur- rent information regarding natural catastrophes and capital market trends – in particular foreign currency, interest rates and equities – the Board of Management has no indication that the Allianz Group is facing any major adverse developments. Cautionary note regarding forward-looking statements The statements contained herein may include prospects, 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. Actual results, perfor- mance or events may differ materially from those expressed or implied in such forward- looking statements. Such deviations may arise due to, without limitation, (i) changes of the general economic conditions and competitive situation, particularly in the Allianz Group’s core business and core markets, (ii) performance of financial markets (particularly market volatility, liquidity and credit events), (iii) frequency and severity of insured loss events, including from natural catas- trophes, and the development of loss expenses, (iv) mortality and morbidity levels and trends, (v) persistency levels, (vi) particularly in the banking business, the extent of credit defaults, (vii) interest rate levels, (viii) currency exchange rates including the Euro/U.S. Dollar exchange rate, (ix) changes in laws and regulations, including tax regulations, (x) the impact of acquisi- tions, including related integration issues, and reorganization measures, and (xi) 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. No duty to update The company assumes no obligation to update any information or forward-looking statement contained herein, save for any information required to be disclosed by law. Annual Report 2015 Allianz Group 97 Balance Sheet Review − Shareholders’ equity increased by € 2.4 bn to € 63.1 bn. − Conglomerate solvency ratio up 19.6 percentage points to 200 %.1 Shareholders’1equity 2 Regulatory capital adequacy ShareholderS’ equity € mn 70,000 60,000 50,000 40,000 30,000 20,000 10,000 60,747 13,917 17,901 28,928 + 3.9 % 63,144 10,920 23,296 28,928 31/12/2014 31/12/2015 Paid-in capital Unrealized gains/losses (net) Retained earnings (includes foreign currency translation adjustments) In 2015, shareholders’ equity went up by € 2,397 mn to € 63,144 mn as of 31 December 2015. Unrealized gains in shareholders’ equity decreased by € 2,998 mn, mainly due to lower fair values of debt securities follow- ing a modest increase in interest rates. Realizations on both debt securities and equities also contributed to this reduction. In addition, shareholders’ equity was lowered by the € 3,112 mn dividend payout in May 2015. However, these effects were more than offset by our net income attributable to shareholders of € 6,616 mn and the € 1,050 mn positive foreign currency translation adjustments that predominantly resulted from the appreciation of the U.S. Dollar against the Euro. Fur- thermore, the recovery of actuarial losses on defined benefit plans contributed with € 465 mn to an increase in other comprehensive income. The Allianz Group is a financial conglomerate within the scope of the E.U. Financial Conglomerates Directive and the related German law in force since 2005. The law requires that financial conglomerates calculate the capital available to meet their solvency requirements on a consolidated basis, which we refer to as “eligible capital”. From 1 January 2016 onwards, capitalization based on Solvency II will be utilized for regulatory purposes. Conglomerate SolvenCy1 € bn 181 % 200 % 49.8 58.0 27.6 29.0 60 50 40 30 20 10 0 31/12/2014 31/12/2015 Conglomerate solvency ratio Eligible capital Requirement 1 Off-balance sheet reserves are accepted by the authorities as eligible capital only upon request. Allianz SE has not submitted an application so far. Excluding off-balance sheet reserves, the conglomerate solvency ratios would be 191 % and 172 % as of 31 December 2015 and 31 December 2014, respectively. As of 31 December 2015, our conglomerate solvency ratio amounted to 200 % – 19.6 percentage points higher compared to year-end 2014. The Group’s eligible capital for solvency purposes went up by € 8.1 bn to € 58.0 bn, including off-balance sheet reserves of € 2.7 bn (31 Decem- ber 2014: € 2.3 bn). This increase was mainly driven by our net income 1 2 Off-balance sheet reserves are accepted by the authorities as eligible capital only upon request. Allianz SE has not submitted an application so far. Excluding off-balance sheet reserves, the conglomerate solvency ratios would be 191 % and 172 % as of 31 December 2015 and 31 December 2014, respectively. This does not include non-controlling interests of € 2,955 mn as of 31 December 2015 and 2014, respectively. For further information, please refer to note 25 to the consolidated financial statements. Retained earnings include foreign currency translation adjustments of € (926) mn and € (1,977) mn as of 31 December 2015 and 31 December 2014, respectively. 98 Annual Report 2015 Allianz Group C Group Management Report Management Discussion and Analysis Business Environment 67 69 Executive Summary of 2015 Results 74 Property-Casualty Insurance Operations 80 Life/Health Insurance Operations 86 Asset Management 90 Corporate and Other 92 Outlook 2016 98 Balance Sheet Review 105 Liquidity and Funding Resources 110 Reconciliations (net of accrued dividends) of € 3.3 bn, the issuance of a subordinated bond (€ 1.5 bn), and changes in deferred tax assets/liabilities and intangibles. The required funds were up by € 1.4 bn to € 29.0 bn, mainly because of higher aggregate policy reserves in the Life/Health busi- ness segment, but also due to strong nominal growth in our Property- Casualty business segment. This was only partly offset by lower required funds for our Asset Management business segment due to an amended calculation methodology. At year-end 2015, our eligible capital surpassed the minimum legally stipulated level by € 29.0 bn. Total assets and total liabilities As of 31 December 2015, total assets amounted to € 848.9 bn and total liabilities were € 782.8 bn. Compared to year-end 2014, total assets and total liabilities increased by € 43.2 bn and € 40.8 bn, respectively. The following section mainly focuses on our financial invest- ments in debt instruments, equities, real estate, and cash, since these reflect the major developments in our asset base. StruCture of inveStmentS – portfolio overview The following portfolio overview covers the Allianz Group assets held for investment, which are mainly driven by our insurance businesses. aSSet alloCation Investment portfolio as of 31 December 2015: € 638.3 bn [as of 31 December 2014: € 614.6 bn] in % Real estate 2 [2] Equities 7 [7] Cash/Other 2 [2] Debt instruments 89 [89] Compared to year-end 2014, our investment portfolio grew by € 23.7 bn to € 638.3 bn as of 31 December 2015, with no relative change in our overall asset allocation despite some major realizations. Our direct gross exposure to equities increased by € 4.5 bn to € 45.7 bn. The growth in this exposure was mainly driven by new investments. Our equity gearing1 remained almost unchanged at 24 % (31 December 2014: 25 %) as the increase in this exposure was accom- panied by increases in shareholders’ equity and hedging of this addi- tional exposure against share price declines. Our direct exposure to real estate was up by € 0.6 bn to € 12.0 bn mainly due to new investments. Our cash and other investments increased by € 0.3 bn to € 12.5 bn. Our exposure to debt instruments grew by € 18.3 bn – mainly driven by new investments – and amounted to € 568.1 bn. This expo- sure still represented 89 % of our total investment portfolio. fixed inCome portfolio Total fixed-income portfolio as of 31 December 2015: € 568.1 bn [as of 31 December 2014: € 549.8 bn] in % Banks 6 [6] Other 10 [10] Government bonds 38 [38] Other corporate bonds 29 [26] Covered bonds 17 [20] The allocation of our well-diversified fixed income portfolio showed a slight increase in the share of corporate bonds and a minor reduc- tion in the portion of covered bonds while the other components remained virtually unchanged. About 94 % of this portfolio of debt instruments was invested in investment-grade bonds and loans.2 Our government bond exposure was up by € 8.3 bn to € 217.5 bn, still representing 38 % of our fixed income portfolio. The increase in absolute terms was mainly driven by new investments. The alloca- tion of our government and government-related direct bond expo- sure showed marginal changes in the geographical portfolio weight- ings, all of which were less than two percentage points. Our sovereign debt exposure in Italy and Spain equaled 5.2 % and 1.7 % of our fixed income portfolio, respectively. The corresponding unrealized gains (gross) amounted to € 5,506 mn in Italy and to € 679 mn in Spain. 1 2 Equity gearing is defined as the ratio of our equity holdings allocated to the shareholder after policyholder participation and hedges to shareholders’ equity plus off-balance sheet reserves less goodwill. Excluding self-originated German private retail mortgage loans. For 2 %, no ratings were available. Annual Report 2015 Allianz Group 99 Our government bond exposure in Portugal remained limited, with small unrealized gains. We continued to have virtually no exposure to Greek or Ukrainian government bonds. The respective exposure to Russia was relatively small in the context of our overall portfolio and the greatest part of this exposure was denominated in U.S. Dollar. Our covered bond exposure decreased by € 9.0 bn to € 98.7 bn, representing 17 % (31 December 2014: 20 %) of our fixed-income port- folio. This was mainly due to matured bonds which have not been reinvested within this asset class. 42 % (31 December 2014: 44 %) of this portfolio was German Pfandbriefe, backed by either public-sector loans or mortgage loans. Almost unchanged, another 16 %, 10 % and 8 % of the covered bonds were attributable to France, Spain and Italy, respectively. Covered bonds provide a cushion against real estate price deterioration and payment defaults through minimum required security buffers and overcollateralization. Our corporate bonds exposure increased by € 19.8 bn to € 164.9 bn – in relative terms, three percentage points to 29 %. This was primarily driven by new investments. The slight regional shift from Eurozone corporate bonds to North American ones, as reported in 2014, contin- ued in 2015. Our exposure to bank securities – including exposure to subordi- nated securities in banks – decreased by € 1.1 bn to € 31.3 bn. This exposure still represented 6 % of our fixed-income portfolio. The expo- sure to subordinated securities in banks decreased from € 5.3 bn to € 4.6 bn. Our exposure to asset-backed securities (AbS) decreased by € 1.3 bn to € 21.6 bn. This exposure still accounted for 4 % of our fixed income portfolio. The largest part of our AbS portfolio was related to mortgage-backed securities (mbS). mbS issued by U.S. agencies, which are backed by the U.S. government, accounted for 17 % of the AbS port- folio. Overall, 98 % of the AbS portfolio received an investment grade rating, with 88 % rated “AA” or better. inveStment reSult inveStment inCome (net) € mn Operating investment result 2015 2014 Delta Interest and similar income (net)1 22,033 21,028 1,005 Operating income from financial assets and liabilities carried at fair value through income (net) Operating realized gains/losses (net) Operating impairments of investments (net) Investment expenses Subtotal Non-operating investment result Non-operating income from financial assets and liabilities carried at fair value through income (net) Non-operating realized gains/losses (net) Non-operating impairments of investments (net) Subtotal Total investment income (net) (2,089) 6,726 (1,258) (1,094) 24,319 (1,301) 3,205 (697) (961) 21,274 (219) (303) 1,211 812 (268) 724 25,042 (197) 312 21,586 (788) 3,521 (561) (132) 3,045 84 399 (72) 411 3,456 1 Net of interest expenses (excluding interest expenses from external debt). Our total investment income (net) increased by € 3,456 mn – or 16.0 % – to € 25,042 mn. This was largely due to higher realized gains and the increase in interest and similar income (net)1, partly offset by increases in operating losses from financial assets and liabilities car- ried at fair value through income (net) and impairments (net). 100 Annual Report 2015 Allianz Group 1 Net of interest expenses (excluding interest expenses from external debt). C Group Management Report Management Discussion and Analysis Business Environment 67 69 Executive Summary of 2015 Results 74 Property-Casualty Insurance Operations 80 Life/Health Insurance Operations 86 Asset Management 90 Corporate and Other 92 Outlook 2016 98 Balance Sheet Review 105 Liquidity and Funding Resources 110 Reconciliations Operating investment result Our operating investment income (net) went up by € 3,045 mn to € 24,319 mn, as increases in realized gains as well as in interest and similar income (net)1 more than offset negative developments in its other components. Operating realized gains and losses (net) more than doubled from € 3,205 mn to € 6,726 mn. This was driven by higher realizations on both debt securities and equities. Interest and similar income (net)1 was up by € 1,005 mn to € 22,033 mn, reflecting almost equal increases in income from both debt securities and equities. The former increase benefited from positive foreign exchange effects from our exposures denominated in U.S. Dollar, held domestically by our U.S. life insurance business. Operating income from financial assets and liabilities carried at fair value through income (net) deteriorated by € 788 mn to a loss of € 2,089 mn. This was mainly due to losses from the net of foreign cur- rency translation effects and financial derivatives that are used to protect against equity and foreign currency fluctuations, as well as to manage duration and other interest rate-related exposures. Our operating impairments of investments (net) increased by € 561 mn to € 1,258 mn. The greatest part of these impairments was related to equities and was consistent with unfavorable develop- ments in the respective equity markets, in particular in the third quarter of 2015. Investment expenses rose by € 132 mn to € 1,094 mn. This was mainly due to higher management fees from the increased asset base. Non-operating investment result Our non-operating investment income (net) more than doubled from € 312 mn to € 724 mn. This was almost entirely driven by higher non- operating realized gains, which expanded by € 399 mn to € 1,211 mn mainly as a result of higher realizations on equities. Non-operating income from financial assets and liabilities carried at fair value through income (net) improved by € 84 mn to a loss of € 219 mn. This mainly stemmed from capital hedging activities related to our U.S. life insurance business. Our non-operating impairments of investments (net) increased by € 72 mn – largely driven by impairments of equities – to € 268 mn. aSSetS and liabilitieS of the property-CaSualty buSineSS Segment Property-Casualty assets The Property-Casualty asset base remained almost unchanged at € 110.1 bn (31 December 2014: € 109.2 bn). A slight increase in debt securities was partly offset by a decline in loans and advances to banks and customers. CompoSition of aSSet baSe – fair valueS1 € bn as of 31 December Financial assets and liabilities carried at fair value through income Equities Debt securities Other2 Subtotal Investments3 Equities Debt securities Cash and cash pool assets4 Other Subtotal Loans and advances to banks and customers 2015 2014 0.4 0.1 – 0.5 6.7 74.8 5.0 9.2 95.8 13.8 0.4 0.1 – 0.5 6.3 72.4 5.6 9.5 93.8 15.0 Property-Casualty asset base 110.1 109.2 1 2 3 4 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 on – among other factors – our ownership percentage. This comprises assets of € 0.1 bn and € 0.1 bn and liabilities of € (0.1) bn and € (0.1) bn as of 31 December 2015 and 31 December 2014, respectively. These do not include affiliates of € 8.9 bn and € 8.9 bn as of 31 December 2015 and 31 December 2014, respectively. Including cash and cash equivalents, as stated in our business segment balance sheet of € 3.6 bn and € 3.7 bn, and receivables from cash pooling amounting to € 3.5 bn and € 4.2 bn, net of liabilities from securities lending and derivatives of € (0.1) bn and € (0.1) bn, as well as liabilities from cash pooling of € (2.1) bn and € (2.1) bn as of 31 December 2015 and 31 December 2014, respectively. AbS within the Property-Casualty business segment asset base decreased by € 0.7 bn to € 3.3 bn and represented 3.0 % (31 December 2014: 3.7 %) of the business segment’s asset base. 1 Net of interest expenses (excluding interest expenses from external debt). Annual Report 2015 Allianz Group 101 Property-Casualty liabilities development of reServeS for loSS and loSS adjuStment expenSeS1 aSSetS and liabilitieS of the life/health buSineSS Segment € bn As of 1 January 2015 Balance carryforward of discounted loss reserves2 Subtotal Loss and loss adjustment expenses paid in current year relating to previous years Loss and loss adjustment expenses incurred in previous years Foreign currency translation adjustments and other changes Changes in reserves for loss and loss adjustment expenses in current year Subtotal Ending balance of discounted loss reserves2 As of 31 December 2015 Gross 58.9 3.6 62.5 (15.1) (2.4) 1.8 18.3 65.1 (3.9) 61.2 Ceded (6.6) (0.3) (6.9) 1.3 0.5 (0.5) (1.9) (7.6) 0.3 (7.2) Net 52.3 3.3 55.6 (13.7) (1.9) 1.2 16.4 57.5 (3.6) 53.9 1 2 For further information about changes in the reserves for loss and loss adjustment expenses for the Property-Casualty business segment, please refer to note 19 to the consolidated fin an cial statements. Although discounted loss reserves have been reclassified to “Reserves for insurance and investment contracts” in the balance sheet in 2013, the underlying business development of these Property-Casualty reserves is still considered in the loss and loss adjustment expenses and in the loss ratio, and is therefore included in the development of the reserves above. As of 31 December 2015, the business segment’s gross reserves for loss and loss adjustment expenses and discounted loss reserves amounted to € 65.1 bn – an increase of € 2.5 bn compared to year-end 2014. On a net basis, our reserves – including discounted loss reserves – increased from € 55.6 bn to € 57.5 bn. Foreign currency translation effects and other changes contributed € 1.2 bn to this increase on a net basis. Life/Health assets The Life/Health business segment asset base increased by € 31.5 bn to € 596.9 bn. This was largely driven by a greater volume of debt secu- rities and financial assets for unit-linked contracts and, to a lesser extent, higher equities. CompoSition of aSSet baSe – fair valueS € bn as of 31 December Financial assets and liabilities carried at fair value through income Equities Debt securities Other1 Subtotal Investments2 Equities Debt securities Cash and cash pool assets3 Other Subtotal Loans and advances to banks and customers Financial assets for unit-linked contracts4 Life/Health asset base 2015 2014 2.4 2.7 (7.5) (2.4) 36.0 343.8 7.7 10.8 398.3 95.1 105.9 596.9 1.8 2.0 (6.8) (3.0) 32.2 331.8 8.0 10.4 382.4 91.4 94.6 565.4 1 2 3 4 This comprises assets of € 1.4 bn and € 1.4 bn and liabilities (including the market value lia bility option) of € (8.8) bn and € (8.2) bn as of 31 December 2015 and 31 December 2014, respectively. These do not include affiliates of € 0.2 bn and € 0.2 bn as of 31 December 2015 and 31 December 2014, respectively. Including cash and cash equivalents, as stated in our business segment balance sheet, of € 8.5 bn and € 7.6 bn and receivables from cash pooling amounting to € 2.5 bn and € 3.1 bn, net of liabilities from securities lending and derivatives of € (3.2) bn and € (2.6) bn as well as liabilities from cash pooling of € (0.0) bn and € (0.0) bn as of 31 December 2015 and 31 December 2014, respectively. Financial assets for unit-linked contracts represent assets owned by, and managed on behalf of, policy- holders 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 to the value of financial liabilities for unit-linked contracts. The International Financial Report- ing Standards (IFRS) require the classification of any contract written by an insurance company either as an insurance contract or as an investment contract, depending on whether an insurance component is included. This requirement also applies to unit-linked products. In contrast to unit-linked investment contracts, unit-linked insurance contracts include coverage for significant mortality or morbidity risk. AbS within the Life/Health business segment asset base remained almost flat at € 16.5 bn (31 December 2014: € 16.9 bn) and represented a rather unchanged 2.8 % of the business segment’s asset base. 102 Annual Report 2015 Allianz Group C Group Management Report Management Discussion and Analysis Business Environment 67 69 Executive Summary of 2015 Results 74 Property-Casualty Insurance Operations 80 Life/Health Insurance Operations 86 Asset Management 90 Corporate and Other 92 Outlook 2016 98 Balance Sheet Review 105 Liquidity and Funding Resources 110 Reconciliations finanCial aSSetS for unit-linked ContraCtS1 € bn aSSetS and liabilitieS of the aSSet management buSineSS Segment As of 1 January 2015 Net premium inflows (outflows) Changes in fund value Foreign currency translation adjustments Other changes As of 31 December 2015 Unit-linked insurance contracts Unit-linked investment contracts 62.7 4.4 0.8 3.4 (3.4) 67.9 31.9 5.9 0.3 (0.2) – 38.0 Total 94.6 10.3 1.2 3.2 (3.4) 105.9 Asset Management assets The Asset Management business segment’s results are derived pri- marily from asset management for third-party investors and the Allianz Group’s insurance operations.2 In this section, we refer only to the business segment’s own assets. Driven by a decrease in its largest component, cash and cash pool assets, the business segment’s asset base was down by € 0.4 bn to € 2.2 bn. Asset Management liabilities Liabilities in our Asset Management business segment increased by € 0.5 bn to € 2.9 bn. aSSetS and liabilitieS of the Corporate and other buSineSS Segment Corporate and Other assets The Corporate and Other asset base increased from € 44.7 bn to € 47.5 bn. A decrease in loans and advances to banks and customers was more than offset by an increase in debt securities and lower negative cash and cash pool asset positions. 1 Financial assets for unit-linked contracts represent assets owned by, and managed on behalf of, policy- holders 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 to the value of financial liabilities for unit-linked contracts. The International Financial Report- ing Standards (IFRS) require the classification of any contract written by an insurance company either as an insurance contract or as an investment contract, depending on whether an insurance component is included. This requirement also applies to unit-linked products. In contrast to unit-linked investment contracts, unit-linked insurance contracts include coverage for significant mortality or morbidity risk. Financial assets for unit-linked contracts increased by € 11.3 bn – or 12.0 % – to € 105.9 bn. Unit-linked insurance contracts were up by € 5.2 bn to € 67.9 bn, due to premium inflows exceeding outflows by € 4.4 bn and the stronger U.S. Dollar (€ 2.8 bn). This was partly offset by fund losses of € 0.6 bn in the U.S. as well as transfers to the general account in France (€ (0.9) bn) and the Netherlands (€ (0.5) bn). Unit- linked investment contracts increased by € 6.1 bn to € 38.0 bn, due to net premium inflows of € 5.9 bn and an € 0.3 bn increase in fund val- ues. Negative foreign currency translation adjustments of € 0.2 bn were mainly attributable to the weaker Turkish Lira.1 Life/Health liabilities Life/Health reserves for insurance and investment contracts increased by € 22.7 bn – or 5.1 % – to € 472.0 bn in 2015. The € 16.6 bn growth in aggregate policy reserves and other reserves was mainly driven by our operations in Germany (€ 8.3 bn) and the U.S. (€ 5.4 bn before currency effects). Reserves for premium refund decreased by € 3.5 bn, due to lower unrealized gains to be shared with policyholders. Currency impacts of € 9.6 bn resulted mainly from the stronger U.S. Dollar (€ 7.8 bn) and Swiss Franc (€ 1.3 bn).1 1 Based on the closing rates on the respective balance sheet dates. 2 For further information on the development of these assets, please refer to Asset Management. Annual Report 2015 Allianz Group 103 Off-balance sheet arrangements In the normal course of business, the Allianz Group may enter into arrangements that do not lead to the recognition of assets and liabil- ities in the consolidated financial statements under IFRS. Since the Allianz Group does not rely on off-balance sheet arrangements as a significant source of revenue or financing, our off-balance sheet exposure to loss is immaterial relative to our financial position. The Allianz Group enters into various commitments including loan and leasing commitments, purchase obligations and other com- mitments. Please refer to note 47 to the consolidated financial state- ments for more details. The Allianz Group has also entered into contractual relation- ships with various types of structured entities. They have been designed in such a way that their relevant activities are directed by means of contractual arrangements instead of voting or similar rights. Typically, structured entities have been set up in connection with asset-backed financings and certain investment fund products. For more details on our involvement with structured entities, please refer to note 45 to the consolidated financial statements. Please refer to the Risk and Opportunity Report from page 112 onwards for a description of the main concentrations of risk and other relevant risk positions. CompoSition of aSSet baSe – fair valueS € bn as of 31 December Financial assets and liabilities carried at fair value through income Equities Debt securities Other1 Subtotal Investments2 Equities Debt securities Cash and cash pool assets3 Other Subtotal Loans and advances to banks and customers Corporate and Other asset base 2015 2014 0.1 0.3 (0.6) (0.1) 2.9 31.7 (2.9) 0.3 32.1 15.6 47.5 0.1 0.2 (0.5) (0.1) 2.7 28.4 (4.1) 0.3 27.3 17.5 44.7 1 2 3 This comprises assets of € 0.2 bn and € 0.2 bn and liabilities of € (0.8) bn and € (0.6) bn as of 31 December 2015 and 31 December 2014, respectively. These do not include affiliates of € 92.4 bn and € 77.2 bn as of 31 December 2015 and 31 December 2014, respectively. The increase was triggered by the streamlining of the legal corporate structure in Italy, which led to the move of respective opposite consolidation effects from business segment level to group level. For further information on the streamlining, please refer to page 57. Including cash and cash equivalents, as stated in our business segment balance sheet, of € 2.0 bn and € 2.0 bn and receivables from cash pooling amounting to € 1.6 bn and € 1.7 bn, net of liabilities from securities lending and derivatives of € (0.2) bn and € (0.0) bn as well as liabilities from cash pooling of € (6.2) bn and € (7.9) bn as of 31 December 2015 and 31 December 2014, respectively. AbS within the Corporate and Other business segment asset base decreased by € 0.3 bn to € 1.7 bn and in relative terms from 4.5 % to 3.7 %. Corporate and Other liabilities In comparison to year-end 2014, other liabilities decreased by € 3.8 bn to € 24.3 bn, resulting from lower liabilities from cash pooling and other provisions mainly related to pension obligations. Subordinated liabilities increased by € 0.2 bn to € 12.2 bn. This was mainly related to the net effect of the issuance and redemptions of subordinated bonds.1 Certificated liabilities decreased by € 0.2 bn to € 12.1 bn.2 1 2 This net effect also includes the redemption of a subordinated bond of € 400 mn issued by Allianz France S.A., which is not listed separately in the bonds table shown on page 108. For further information on Allianz SE debt as of 31 December 2015, please refer to notes 23 and 24 to the consolidated financial statements. 104 Annual Report 2015 Allianz Group C Group Management Report Management Discussion and Analysis Business Environment 67 69 Executive Summary of 2015 Results 74 Property-Casualty Insurance Operations 80 Life/Health Insurance Operations 86 Asset Management 90 Corporate and Other 92 Outlook 2016 98 Balance Sheet Review 105 Liquidity and Funding Resources 110 Reconciliations Liquidity and Funding Resources Organization The Allianz Group’s liquidity management is based on policies and guidelines approved by the Allianz SE Board of Management. Allianz SE and each of the operating entities are responsible for managing their respective liquidity positions, while Allianz SE provides central liquid­ ity pooling for the Group. Capital allocation is steered by Allianz SE for the entire Group. This structure allows the efficient use of liquidity and capital resources and for Allianz SE to achieve the desired liquidity and capitalization levels for the Group and its operating units. Liquidity management of our operating entities insUrAnCe operAtions The major sources of liquidity for our operational activities are pri­ mary and reinsurance premiums received, reinsurance receivables collected, investment income, and proceeds generated from the maturity or sale of investments. These funds are mainly used to pay claims arising from the Property­Casualty insurance business and related expenses, life policy benefits, surrenders and cancellations, acquisition costs and operating costs. We receive a large part of premiums before payments of claims or policy benefits are required, generating solid cash flows from our insurance operations. This allows us to invest the funds in the inter­ im to create investment income. Our insurance operations also carry a high proportion of liquid investments, which can be converted into cash to pay for claims. Generally, our investments in fixed income securities are sequenced to mature when funds are expected to be needed. The overall liquidity of our insurance operations depends on capital market developments, interest rate levels, and our ability to realize the market value of our investment portfolio to meet insurance claims and policyholder benefits. Other factors affecting the liquidity of our Property­Casualty insurance operations include the timing, frequency, and severity of losses underlying our policies and policy renewal rates. In our Life operations, liquidity needs are generally influenced by trends in actual mortality rates compared to the assumptions underlying our life insurance reserves. Market returns, crediting rates and the behavior of our life insurance clients – for example regarding the level of surrenders and withdrawals – can also have significant impacts. Asset mAnAgement operAtions Within our Asset Management operations, the most important sour­ ces of liquidity are fees generated from asset management activities. These are primarily used to cover operating expenses. BAnking operAtions The major sources of liquidity in our Banking operations include cus­ tomer deposits, interbank loans and interest and similar income from our lending transactions. The most important uses of funds are the issuance of new loans and investments in fixed income securities. The liquidity of our Banking operations is largely dependent on the ability of our private and corporate customers to meet their payment obliga­ tions arising from loans and other outstanding commitments. Our ability to retain our customers’ deposits is equally important to us. Liquidity management and funding of Allianz SE The responsibility for managing the funding needs of the Group, maximizing access to liquidity sources and minimizing borrowing costs lies with Allianz SE. We therefore comment on the liquidity and funding resources of Allianz SE in the following sections. Restrictions on the transferability of capital within the Group result mainly from the capital maintenance rules under applicable company laws and the regulatory solvency capital requirements for regulated group companies. LiQUiDitY resoUrCes AnD Uses Allianz SE ensures adequate access to liquidity and capital for our operating subsidiaries. The main sources of liquidity available for Allianz SE are dividends received from subsidiaries and funding pro­ vided by capital markets. Liquidity resources are defined as readily available assets – specifically cash, money market investments, and highly liquid government bonds. Our funds are primarily used for paying interest expenses on our debt funding, operating costs, internal and external growth investments, and dividends to our shareholders. Annual Report 2015 Allianz Group 105 fUnDing soUrCes Allianz SE’s access to external funds depends on various factors such as capital market conditions, access to credit facilities, credit ratings and credit capacity. The financial resources available to Allianz SE in the capital markets for short­, mid­ and long­term funding needs are described below. In general, mid­ to long­term financing is covered by issuing senior or subordinated bonds or ordinary shares. Equity funding As of 31 December 2015, the issued capital registered at the Commer­ cial Register was € 1,169,920,000. This was divided into 457,000,000 registered shares with restricted transferability. As of 31 December 2015, the Allianz Group held 2,176,362 (2014: 2,751,961) own shares. Allianz SE has the option to increase its equity capital base according to authorizations provided by our shareholders. The fol­ lowing table outlines Allianz SE’s capital authorizations as of 31 December 2015: CApitAL AUthorizAtions of ALLiAnz se CApitAL AUthorizAtion nominAL AmoUnt Authorized Capital 2014/i Authorized Capital 2014/ii Authorization to issue bonds carrying conversion and/or option rights € 550,000,000 (214,843,750 shares) € 13,720,000 (5,359,375 shares) € 10,000,000,000 (nominal bond value) Conditional Capital 2010/2014 € 250,000,000 (97,656,250 shares) expirY DAte of the AUthorizAtion 6 May 2019 6 May 2019 6 May 2019 (issuance of bonds) No expiry date for Conditional Capital 2010/2014 (issuance in case option or conversion rights are exercised) Please refer to repurchase shares. page 35 regarding authorizations to issue and Long-term debt funding As of 31 December 2015, Allianz SE had senior and subordinated bonds in a variety of maturities outstanding, reflecting our focus on long­term financing. As the cost and availability of external funding may be negatively affected by general market conditions or by matters specific to the financial services industry or the Allianz Group, we seek to reduce refinancing risk by actively steering the maturity profile of our funding structure. mAtUritY strUCtUre of ALLiAnz se’s senior AnD sUBorDinAteD BonDs As of 31 DeCemBer 2015 nominal value in € Bn 7 6 5 4 3 2 1 1.5 1.5 0.5 1.5 2.5 0.8 1.5 1.0 1.5 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2041 2042 2043 2045 perpetual Senior bonds Subordinated bonds 6.6 106 Annual Report 2015 Allianz Group C Group Management Report Management Discussion and Analysis Business Environment 67 69 Executive Summary of 2015 Results 74 Property-Casualty Insurance Operations 80 Life/Health Insurance Operations 86 Asset Management 90 Corporate and Other 92 Outlook 2016 98 Balance Sheet Review 105 Liquidity and Funding Resources 110 Reconciliations Interest expenses on senior bonds increased to € 270 MN (2014: € 264 MN). This was due to the appreciation of the British Pound against the Euro. For subordinated bonds, interest expenses increased to € 560 MN (2014: € 554 MN). This was primarily driven by slightly higher outstanding volumes on average in 2015. senior AnD sUBorDinAteD BonDs issUeD or gUArAnteeD BY ALLiAnz se1 CUrrenCY ALLoCAtion of ALLiAnz se’s senior AnD sUBorDinAteD BonDs nominal value in € mn as of 31 December 2015 Euro Non-Euro Total Senior and sub ordinated bonds 16,450 2,347 18,797 2014 Senior and sub ordinated bonds 15,950 2,209 18,159 as of 31 December 2015 Senior bonds Subordinated bonds Total 2014 Senior bonds Subordinated bonds Total Nominal value € mn Carrying value € mn Interest expense € mn 6,716 12,080 18,797 6,716 11,442 18,159 6,711 11,962 18,673 6,653 11,371 18,024 270 560 830 264 554 818 Weighted average interest rate2 % 4.0 4.8 4.5 3.9 5.3 4.8 1 2 For further information on Allianz SE debt (issued or guaranteed) as of 31 December 2015, please refer to notes 23 and 24 to the consolidated financial statements. Based on nominal value. The table below details the long­term debt issuances and redemp­ tions of Allianz SE during 2015 and 2014: Short-term debt funding Short­term funding sources available are the Medium­Term Note Pro­ gram and the Commercial Paper Program. As of 31 December 2015, Allianz SE had money market securities outstanding with a carrying value of € 1,276 MN, a € 235 MN increase in the use of commercial paper compared to the previous year­end. Interest expenses on money market securities increased to € 6 MN (2014: € 3 MN) mainly due to a higher level of volumes outstanding on average in 2015. moneY mArket seCUrities of ALLiAnz se as of 31 December 2015 Money market securities 2014 Carrying value € mn 1,276 1,041 Interest expense € mn 6 3 Average interest rate % 0.4 0.3 issUAnCes AnD reDemptions of ALLiAnz se’s senior AnD sUBorDinAteD BonDs Money market securities € mn as of 31 December Issuances1 Redemptions1 Issuances net of redemptions 2015 Senior bonds Subordinated bonds 2014 Senior bonds Subordinated bonds 1 Based on nominal value. – 1,500 – 1,916 – 1,000 – 1,500 – 500 – 416 Funding in currencies other than the Euro enables us to diversify our investor base or to take advantage of favorable funding costs in those markets. Funds raised in non­Euro currencies are incorporated in our general hedging strategy. As of 31 December 2015, approximately 12.5 % (2014: 12.2 %) of long­term debt was issued or guaranteed by Allianz SE in currencies other than the Euro. The Group maintained its A­1+/Prime­1 ratings for short­term issu­ ances. Thus we can continue funding our liquidity under the Euro Commercial Paper Program at an average rate for each tranche below Euribor and under the U.S. Dollar Commercial Paper Program at an average rate for each tranche below U.S. Libor. Further potential sources of short­term funding allowing the Allianz Group to fine­tune its capital structure are letter of credit facilities and bank credit lines. Annual Report 2015 Allianz Group 107  ALLiAnz se BonDs1 oUtstAnDing As of 31 DeCemBer 2015 AnD interest expenses in 2015 1. senior BonDs2 4.0 % bond issued by Allianz Finance ii B.V., Amsterdam Volume Year of issue Maturity date isin Interest expenses 1.375 % bond issued by Allianz Finance ii B.V., Amsterdam Volume Year of issue Maturity date isin Interest expenses 4.75 % bond issued by Allianz Finance ii B.V., Amsterdam Volume Year of issue Maturity date isin Interest expenses 3.5 % bond issued by Allianz Finance ii B.V., Amsterdam Volume Year of issue Maturity date isin Interest expenses 3.0 % bond issued by Allianz Finance ii B.V., Amsterdam Volume Year of issue Maturity date isin Interest expenses 4.5 % bond issued by Allianz Finance ii B.V., Amsterdam Volume Year of issue Maturity date isin Interest expenses 2.241 % bond issued by Allianz se Volume Year of issue Maturity date isin Interest expenses € 62 mn 4.375 % bond issued by Allianz Finance ii B.V., Amsterdam Volume Year of issue Maturity date isin € 1.5 Bn 2015 7/7/2045 De 000 A14 J9n 8 € 1.4 Bn 2005 perpetUAL xs 021 163 783 9 € 25 mn € 1.5 Bn 2006 23/11/2016 xs 027 588 026 7 € 0.5 Bn 2013 13/3/2018 De 000 A1h g1J 8 Interest expenses € 64 mn € 7 mn 5.375 % bond issued by Allianz Finance ii B.V., Amsterdam € 1.5 Bn 2009 22/7/2019 Volume Year of issue Maturity date isin € 0.8 Bn 2006 perpetUAL De 000 A0g npz 3 De 000 A1A khB 8 Interest expenses € 43 mn € 74 mn 5.5 % bond issued by Allianz se € 1.5 Bn 2012 14/2/2022 Volume Year of issue Maturity date isin UsD 1.0 Bn 2012 perpetUAL xs 085 787 250 0 De 000 A1g 0rU 9 Interest expenses € 53 mn € 54 mn 4.75 % bond issued by Allianz se € 0.75 Bn 2013 13/3/2028 Volume Year of issue Maturity date isin € 1.5 Bn 2013 perpetUAL De 000 A1Y CQ2 9 De 000 A1h g1k 6 Interest expenses € 72 mn € 24 mn 3.25 % bond issued by Allianz se gBp 0.75 Bn 2013 13/3/2043 Volume Year of issue Maturity date isin Chf 0.5 Bn 2014 perpetUAL Ch 023 483 337 1 De 000 A1h g1L 4 Interest expenses € 17 mn € 50 mn 3.375 % bond issued by Allianz se Total interest expenses for senior bonds € 270 mn Volume 2. sUBorDinAteD BonDs3 5.75 % bond issued by Allianz Finance ii B.V., Amsterdam Volume Year of issue Maturity date isin Interest expenses 5.625 % bond issued by Allianz se Volume Year of issue Maturity date isin Interest expenses Year of issue Maturity date isin Interest expenses Total interest expenses for subordinated bonds € 2.0 Bn 2011 8/7/2041 De 000 A1g nAh 1 3. issUes reDeemeD in 2015 € 116 mn 6.5 % bond issued by Allianz Finance ii B.V., Amsterdam € 1.5 Bn 2012 17/10/2042 De 000 A1r e1Q 3 Volume Year of issue Maturity date isin Interest expenses € 86 mn Sum of interest expenses € 1.5 Bn 2014 perpetUAL De 000 A13 r7z 7 € 1.0 Bn 2002 13/1/2025 xs 015 952 750 5 € 52 mn € 527 mn € 2 mn € 799 mn € 50 mn € 849 mn 1 2 For further information on Allianz SE debt (issued or guaranteed) as of 31 December 2015, please refer to notes 23 and 24 to the consolidated financial statements. Senior bonds provide for early termination rights in case of non-payment of amounts due under the bond (interest and principal) as well as in case of insolvency. 108 Annual Report 2015 Allianz Group Interest expenses from external debt not presented in the table Total interest expenses from external debt 3 The terms of the subordinated bonds do not explicitly provide for early termination rights in favor of the bondholder. C Group Management Report Management Discussion and Analysis Business Environment 67 69 Executive Summary of 2015 Results 74 Property-Casualty Insurance Operations 80 Life/Health Insurance Operations 86 Asset Management 90 Corporate and Other 92 Outlook 2016 98 Balance Sheet Review 105 Liquidity and Funding Resources 110 Reconciliations Net cash outflow used in investing activities decreased by € 6.5 BN to € 20.4 BN in 2015. This was mainly due to lower net cash outflows from available­for­sale investments, especially in our Life/Health business segment in Germany, the United States, and France. This was partly offset by Allianz SE, Allianz Korea, and our banking activi­ ties in Italy. In addition, we recorded higher cash inflows from loans and advances to banks and customers, primarily at Allianz SE and Allianz Korea. This was only partly offset by our Life/Health business segment in the Netherlands. Net cash outflow used in financing activities amounted to € 2.8 BN (2014: € 3.2 BN) and was mainly driven by net cash inflows from liabil­ ities to banks and customers (after net cash outflows in 2014). This was, in particular, attributable to our Banking operations in Italy and our Life/Health business in the United States. Higher dividend pay­ ments to our shareholders and lower net cash inflows from our refi­ nancing activi ties1 partly offset these effects. Cash and cash equivalents increased by € 1.0 BN to € 14.8 BN as of 31 December 2015, mainly stemming from our Life/Health business segment in Germany. CAsh AnD CAsh eQUiVALents € mn as of 31 December Balances with banks payable on demand Balances with central banks Cash on hand Treasury bills, discounted treasury notes, similar treasury securities, bills of exchange and checks Total cash and cash equivalents 2015 7,764 388 225 6,465 14,842 2014 6,657 397 184 6,625 13,863 Allianz Group consolidated cash flows AnnUAL ChAnges in CAsh AnD CAsh eQUiVALents 23,663 € mn 40,000 32,232 30,000 20,000 10,000 0 (10,000) (20,000) (30,000) Net cash flow provided by operating activities 2014 2015 2,656 979 (3,189) (2,837) (20,394) (26,927) Net cash flow used in investing activities Net cash flow used in financing activities Change in cash and cash equivalents1 1 Includes effects of exchange rate changes on cash and cash equivalents of € 548 Mn and € 541 Mn in 2015 and 2014, respectively. Net cash flow provided by operating activities amounted to € 23.7 BN in 2015, down by € 8.6 BN compared to the previous year. This consists of net income plus adjustments for non­cash charges, credits and other items included in net earnings and cash flows related to the net change in operating assets and liabilities. Net income after adding back non­cash charges and similar items went down by € 0.4 BN to € 10.5 BN in 2015. Operating cash flows from net changes in operating assets and liabilities, including other items, fell by € 8.1 BN to € 13.2 BN. This was driven by lower reserves for insurance and investment con­ tracts in our Life/Health business segment, mainly in the United States, Germany, Italy, and France. We also recorded net cash outflows (after net cash inflows in 2014) from our financial assets and liabilities held for trading, stemming from our Life/Health business segment in Germany and in the United States. This was partially offset by higher net cash inflows from repurchase agreements and collateral received from securities lending transactions – in particular at Allianz SE – and by higher reserves for losses and loss adjustment expenses mainly in our Property­Casualty business segment at Allianz SE (Reinsurance), Italy and France. Annual Report 2015 Allianz Group 109 1 Refers to cash flows from certified liabilities and subordinated liabilities. Reconciliations The previous analysis is based on our consolidated financial state- ments and should be read in conjunction with them. In addition to our figures stated in accordance with the International Financial Reporting Standards (IFRS), the Allianz Group uses operating profit and internal growth to enhance the understanding of our results. These additional measures should be viewed as complementary to, rather than a substitute for, our figures determined according to IFRS. For further information, please refer to note 6 to the consolidated financial statements. Composition of total revenue growth We believe that an understanding of our total revenue performance is enhanced when the effects of foreign currency translation as well as acquisitions, disposals, and transfers (or “changes in scope of consolidation”) are analyzed separately. Accordingly, in addition to presenting nominal total revenue growth, we also present internal growth, which excludes these effects. reConCiliation of nominal total revenue growth to internal total revenue growth Composition of total revenues Total revenues comprise statutory gross premiums written in Property- Casualty and Life/Health, operating revenues in Asset Management, and total revenues in Corporate and Other (Banking). % 2015 Property-Casualty Life/Health Asset Management Corporate and Other Allianz Group 2014 Property-Casualty Life/Health Asset Management Corporate and Other 2015 2014 51,597 48,322 66,903 67,331 6,479 6,388 Allianz Group Internal growth Changes in scope of consolidation Foreign currency translation Nominal growth 2.9 (4.9) (11.4) 4.5 (2.1) 3.0 19.5 (8.5) (2.2) 10.6 0.7 0.0 0.0 (0.7) 0.3 2.1 (0.4) (2.5) 3.2 0.5 3.2 4.2 12.8 0.0 4.2 (1.4) (0.3) 0.0 0.0 (0.8) 6.8 (0.6) 1.4 3.7 2.4 3.7 18.6 (10.8) 1.0 10.4 Composition of total revenues € mn Property-Casualty Gross premiums written Life/Health Statutory premiums Asset Management Operating revenues consisting of: Net fee and commission income 6,488 Net interest income1 Income from financial assets and liabilities carried at fair value through income (net) Other income Corporate and Other thereof: Total revenues (Banking) consisting of: Interest and similar income Income from financial assets and liabilities carried at fair value through income (net)2 Fee and commission income Interest expenses, excluding interest expenses from external debt Fee and commission expenses Consolidation effects within Corporate and Other Consolidation Allianz Group total revenues 1 2 Represents interest and similar income less interest expenses. Includes trading income. (5) (8) 4 577 546 16 565 (212) (340) 2 (365) 125,190 6,380 (3) 5 6 556 590 10 513 (255) (305) 3 (344) 122,253 110 Annual Report 2015 Allianz Group C Group Management Report Management Discussion and Analysis Business Environment 67 69 Executive Summary of 2015 Results 74 Property-Casualty Insurance Operations 80 Life/Health Insurance Operations 86 Asset Management 90 Corporate and Other 92 Outlook 2016 98 Balance Sheet Review 105 Liquidity and Funding Resources 110 Reconciliations Life/Health Insurance Operations operating profit The reconciling item scope comprises the effects from out-of-scope entities in the profit sources reporting compilation. Operating profit from operating entities that are not in-scope entities is included in the investment margin. Currently, 20 entities comprising 96.5 % of Life/Health total statutory premiums are in scope. Expenses Expenses comprise acquisition expenses and commissions as well as administrative and other expenses. The delta shown as definitions in acquisition expenses and com- missions represents commission clawbacks, which are allocated to the technical margin. The delta shown as definitions in administrative and other expenses mainly represents restructuring charges, which are stated in a separate line item in the group income statement. Capitalization and amortization of daC1 € mn Capitalization of daC2 Definition: urr capitalized Definition: policyholder participation3 Scope Capitalization of DAC4 Amortization, unlocking and true-up of daC2 Definition: urr amortized Definition: policyholder participation3 Scope Amortization, unlocking and true-up of DAC4 2015 1,741 603 880 141 2014 1,904 566 908 123 3,364 3,502 (2,073) (249) (1,006) (105) (3,432) (1,516) (13) (1,033) (86) (2,648) 1 2 3 4 Prior year figures changed in order to reflect the roll out of profit source reporting to Malaysia. As per Group Management Report. For German Speaking Countries, policyholder participation on revaluation of DAC/URR capitalization/ amortization. As per notes to the consolidated financial statements. aCquisition, administrative, Commissions and other expenses1 € mn 2015 2014 € mn reConCiliation to notes1 Acquisition expenses and commissions2 Administrative and other expenses2 Capitalization of daC2 Amortization, unlocking and true-up of daC2 Acquisition and administrative expenses Definitions Scope Commissions and profit received on reinsurance business ceded Administrative expenses on reinsurance business ceded 2015 (4,915) (1,695) 1,741 (2,073) (6,942) 125 (224) 115 4 2014 (4,912) (1,610) 1,904 (1,516) (6,134) 341 (169) 88 14 Acquisition and administrative expenses (net)3,4 (6,922) (5,860) 1 2 3 4 Prior year figures changed in order to reflect the roll out of profit source reporting to Malaysia. As per Group Management Report. As per notes to the consolidated financial statements. Excluding one-off effects from pension revaluation. For further details, please refer to note 6 to the consolidated financial statements. Acquisition expenses and commissions2 (4,915) (4,912) Definitions Scope Acquisition costs incurred3 32 (379) 28 (319) (5,262) (5,203) Administrative and other expenses2 (1,695) (1,610) Definitions Scope Administrative expenses on reinsurance business ceded (134) 118 4 (115) 112 14 Administrative and other expenses (net)3,4 (1,707) (1,599) 1 2 3 4 Prior year figures changed in order to reflect the roll out of profit source reporting to Malaysia. As per Group Management Report. As per notes to the consolidated financial statements. Excluding one-off effects from pension revaluation. For further details, please refer to note 6 to the consolidated financial statements. Impact of change in Deferred Acquisition Costs (daC) Impact of change in DAC includes effects of change in DAC, unearned revenue reserves (URR) and value of business acquired (VOBA) and is the net impact of the deferral and amortization of acquisition costs and front-end loadings on operating profit. URR capitalized: Capitalization amount of unearned revenue reserves (URR) and deferred profit liabilities (DPL) for FAS 97 LP. URR amortized: Total amount of URR amortized includes scheduled URR amortization, true-up and unlocking. Both capitalization and amortization is included in the line item premiums earned (net) in the group income statement. Policyholder participation is included within change in reserves for insurance and investment contracts (net) in the group income statement. Annual Report 2015 Allianz Group 111 Risk and Opportunity Report − The Allianz risk management approach is designed to add value by focusing on both risk and return. − The Allianz Group is well capitalized and its solvency ratios are resilient. Allianz risk profile and management assessment Risk pRofile and maRket enviRonment The Allianz Group is exposed to a variety of risks through its core insurance and asset management activities. These include market, credit, insurance, operational, business, and strategic risks. The three largest risks in terms of their contribution to Allianz’s risk profile are: − Market risk, especially interest rate risk due to the duration mismatch between assets and liabilities for long-term savings products as well as equity risk, which we take to benefit from the expected risk premium; − Credit and credit spread risks driven by assets backing long-term savings products; − Property-Casualty premium and reserve risks resulting from natural and man-made catastrophes as well as from claims uncertainty. Allianz’s risk profile is driven by our strategic risk appetite and steered by the risk management practices and limits which are described later in this report. The risk profile and relative contribu- tions have changed in 2015, due to changes in the market environ- ment, management actions, and model changes driven by regulatory developments and feedback Allianz received during the internal model approval process. These model changes are described in the section Model changes in 2015. In the following paragraphs we provide an overview of major developments and risks that may affect Allianz’s portfolio. Financial markets and operating environment The European Central Bank is continuing its expansive monetary policy in order to fight low inflation rates and stimulate the Eurozone economy. As a result, financial markets are characterized by histori- cally low interest rates and risk premia, prompting investors to look for higher-yielding – and potentially higher-risk – investments. In addition to sustained low interest rates, the challenges of implement- ing long-term structural reforms in key Eurozone countries and the uncertainty about the future path of monetary policy may lead to continued market volatility. This could be accompanied by a flight to 112 Annual Report 2015 Allianz Group quality, combined with falling equity and bond prices due to rising spread levels, even in the face of potentially lower interest rates. Also, possible asset bubbles (as observed in the Chinese equity market) might spill over to other markets, contributing to increasing volatility. Therefore, we continue to closely monitor the political and financial developments in the Eurozone – such as in Greece during 2015 – in order to manage our overall risk profile to specific event risks. The persisting geopolitical risks, including the conflicts in the Middle East, are manageable for the Allianz Group, since our direct exposure to the affected regions remains relatively small in the context of our overall investment portfolio. Nevertheless, we are monitoring these developments, since a significant deterioration may lead to spill-over effects on the global financial markets, triggering negative impacts on our business and risk profile. Over the past years, Allianz Group and its operating entities have developed operational contingency plans for various crisis scenarios. We continue to conduct scenario analysis on a regular basis to bolster our financial and operational resilience to strong shock scenarios. In addition, we continue to optimize our product design and pricing in the Life/Health business segment with respect to guarantees and sur- render conditions. Continuous monitoring as well as prudent risk positions and contingency planning remain priorities for our man- agement. Regulatory developments With the approval of our partial internal model1 in November 2015, the uncertainty about our future Solvency II capital requirements has been significantly reduced. Nevertheless, some uncertainty about the future capitalization requirements of Allianz remains, since the future capital requirements applicable for Global Systemically Important Insurers (so-called G-SIIs) are still not finalized. Finally, the potential for a multiplicity of different regulatory regimes, capital standards, and reporting requirements will increase operational complexity and costs. In any case, the Solvency II regime will lead to higher volatility in solvency ratios compared to Solvency I, due to the market value balance sheet approach. 1 From a formalistic perspective, the German Supervisory Authority deems our model to be “partial” because it does not cover all of our operations: some of our smaller operations report under the standard model and others under the deduction and aggregation approach. C Group Management Report Risk and Opportunity Report and Financial Control Risk and Opportunity Report 112 131 Controls over Financial Reporting and Risk Capital management assessment The Allianz Group’s management feels comfortable with the Group’s overall risk profile and has confidence in the effectiveness of its risk management framework to meet the challenges of a rapidly changing environment as well as day-to-day business needs. This confidence is based on several factors, which are outlined in more detail in the sections that follow and are summarized below: − Due to its effective capital management, the Allianz Group is well capitalized and met its internal-, rating agency- and regula- tory-solvency targets as of 31 December 2015. Allianz is also con- fident that it will be able to meet the capital requirements under the new regulatory regimes. Allianz remains one of the highest- rated insurance groups in the world, as reflected by our external rating agencies. − The Group’s management also believes that Allianz is well posi- tioned to deal with potential future adverse events, in part due to our strong internal limit framework defined by the Group’s risk appetite and risk management practices including our approved partial internal model. − The Group has a conservative investment profile and disciplined business practices in the Property-Casualty, Life/Health and Asset Management business segments, leading to sustainable operating earnings with a well-balanced risk-return profile. − Finally, the Group has the additional advantage of being well diversified, both geographically and across a broad range of businesses and products. Capitalization For the benefit of shareholders and policyholders alike, Allianz’s aim is to ensure that the Group is adequately capitalized at all times and that all operating entities meet their respective regulatory capital requirements. Furthermore, risk capital and cost of capital are important aspects taken into account in business decisions. Our risk capital reflecting our risk profile plays a significant role in the management of capital across the Group. In addition, we take into account the external requirements of regulators and rating agencies. While capital requirements imposed by regulators consti- tute a binding constraint, meeting rating agencies’ capital require- ments and maintaining strong credit ratings are strategic business objectives of the Allianz Group. We closely monitor the capital position of the Group and its operating entities along each of these dimensions, and apply regular stress tests based on standard adverse scenarios. This allows us to take appropriate measures to ensure our continued capital and sol- vency strength. RegulatoRy capital adequacy The Allianz Group is a financial conglomerate within the scope of the E.U. Financial Conglomerates Directive and the related German law in force since 1 January 2005. The law requires that a financial con- glomerate calculates the capital available to meet its solvency requirements on a consolidated basis, which we refer to as “eligible capital”. For the 2015 financial year, the requirements for our insur- ance business are based on Solvency I. These capital requirements, as well as the definition and calculation of eligible capital, will be replaced by the Solvency II rules once the new regulation becomes binding on 1 January 2016. Allianz expects to be well capitalized also under these future regulatory requirements. conglomeRate solvency1 € Bn as of 31 December Eligible capital Requirement Solvency ratio 2015 58.0 29.0 200 % 2014 49.8 27.6 181 % 1 Off-balance sheet reserves are accepted by the authorities as eligible capital only upon request. Allianz SE has not submitted an application so far. Excluding off-balance sheet reserves, the conglomerate solvency ratios would be 191 % and 172 % as of 31 December 2015 and 31 December 2014, respectively. The conglomerate solvency ratio increased by 19.6 percentage points.1 exteRnal Rating agency capital adequacy Rating agencies apply their own methodology to evaluate the relation- ship between the required risk capital of a company and its available capital resources. An assessment of capital adequacy is usually an integral part of the rating process. Moody’s, Standard & Poor’s and A.M. Best affirmed their Allianz Group’s rating in 2015. The Allianz Group has one of the highest ratings amongst its peers. The following table provides the ratings of the Allianz Group awarded by major rating agencies. 1 For further details on changes in eligible capital and solvency requirement, please refer to Balance Sheet Review from page 98. Annual Report 2015 Allianz Group 113 Ratings of the allianz gRoup Ratings1 Insurer financial strength rating Counterparty credit rating Commercial paper (short-term) rating 2015 2014 2015 2014 2015 2014 A–1+ AA Stable outlook A–1+ (affirmed December 2015) Prime –1 Aa3 Stable outlook2 Prime –1 (affirmed October 2015) aa– Not rated Not rated Standard & Poor’s Moody’s A.M. Best AA Stable outlook (affirmed December 2015) Aa3 Stable outlook (affirmed October 2015) A+ Stable outlook (affirmed September 2015) AA Stable outlook Aa3 Stable outlook A+ AA Stable outlook (affirmed December 2015)2 Aa3 Stable outlook (affirmed October 2015)2 aa– Stable outlook3 (affirmed September 2015) 1 2 3 Includes ratings for securities issued by Allianz Finance II B.V. and Allianz Finance Corporation. Rating reflects senior unsecured debt. Issuer credit rating. As part of the long-term financial strength rating, Standard & Poor’s has a rating for “Enterprise Risk Management” (ERM). Since 2013, Standard & Poor’s has assigned Allianz its highest possible rating – “very strong” – for the ERM capabilities of our insurance operations. This indicates that Standard & Poor’s regards it as “unlikely that Allianz Group will experience major losses outside its risk tolerance”. Standard & Poor’s stated that the assessment is based on Allianz’s strong risk management culture, strong controls for the majority of key risks, and strong strategic risk management. In addition, Stan- dard & Poor’s reviewed our internal risk capital framework, for the first time in 2012 and since then on an annual basis. Based on this review, Standard & Poor’s has given further credit to the capital posi- tion of the Allianz Group since the fourth quarter of 2012 by taking into account the results based on our internal risk capital framework when determining the capital requirements to meet specific rating classes. solvency ii RegulatoRy capitalization The Allianz Group’s own funds as well as the capital requirements are based on the market value balance sheet approach as the major eco- nomic principle of Solvency II rules.1 From 1 January 2016 onwards, the Solvency II capitalization will replace the capitalization based on Solvency I as the regulatory binding one. Our objective is to maintain available capital at the Group level that is above the minimum indi- cated requirements and consistent with our risk profile, risk appetite and capital management strategy. Our capitalization based on these requirements is shown in the following table. Our U.S.-based life busi- ness, Allianz Life of North America (AZ Life), is included on the basis of third-country equivalence treatment2. allianz gRoup: solvency ii RegulatoRy capitalization € Bn as of 31 December Own funds Capital requirement Capitalization ratio 2015 72.7 36.4 200 % 2014 66.0 34.6 191 % Compared to year-end 2014, our Solvency II capitalization increased 9 percentage points to 200 %, which was mainly driven by an increase in own funds only partly compensated for by an increase in risk cap- ital. The change in own funds was driven by positive contributions of existing and new business as well as the issuance of a subordinated bond, partially offset by negative impacts from model changes and transferability restrictions. The change in risk capital was mainly driven by higher exposure due to business growth and model changes necessary in the context of our internal model application. Impacts of model changes on our risk profile are presented in the section Model changes in 2015. This increase in risk capital was also partially offset by actions to reduce our sensitivity to market movements, in particular our sensitivity to interest rates. The following table summarizes our Solvency II regulatory capi- talization ratios disclosed over the course of the year 2015. allianz gRoup: solvency ii RegulatoRy capitalization Ratios % Capitalization ratio 31 December 2015 30 September 2015 30 June 2015 31 March 2015 31 December 2014 200 200 212 192 191 The solvency ratio as of 31 December 2015 reflects regulatory model changes necessary for the go-live of Solvency II in 2016. These changes are described in detail in the section Model changes in 2015. The following table presents the sensitivity of our predicted Sol- vency II capitalization ratio under certain standard financial scenar- ios. These are defined by reasonably possible individual movements in key market parameters, while keeping all other parameters con- stant, with the effects impacting both the available capital and the internal risk capital. 1 Own funds and capital requirement are calculated under consideration of volatility adjustment and yield curve extension, as described in Yield curve and volatility adjustment assumptions on page 116. 2 Third-country equivalence treatment for AZ Life means that the entity is included at Group level with 150 % of the local statutory capital requirement for life insurance companies (“Company Action Level RBC”). 114 Annual Report 2015 Allianz Group C Group Management Report Risk and Opportunity Report and Financial Control Risk and Opportunity Report 112 131 Controls over Financial Reporting and Risk Capital allianz gRoup: solvency ii RegulatoRy capitalization Ratios % as of 31 December Base capitalization ratio Interest rates up by 0.5 %1 Interest rates down by 0.5 %1 Equity prices up by 30 % Equity prices down by 30 % Combined scenario: Interest rate down by 0.5 %1 Equity prices down by 30 % 2015 200 208 185 208 190 2014 191 205 170 199 179 176 158 1 Non-parallel interest rate shifts due to extrapolation of the yield curve beyond the last liquid point in line with forthcoming Solvency II rules. Risk pRofile With Solvency II becoming the binding regulatory regime and the approval of our partial internal model, risk is measured and steered based on the risk profile underlying our regulatory capital require- ment. By that we allow for a consistent view on risk steering and capitalization under the Solvency II framework. This is supplemented by economic business scenarios and sensitivities. This Risk and Opportunity Report outlines the Group’s risk fig- ures, reflecting its risk profile based on pre-diversified risk figures and group-diversification effects. Pre-diversified risk figures reflect the diversification effect within each modeled risk category (i.e. market, credit, underwriting, business, and operational risk) but does not comprise the diversification effects across risk categories. Group- diversified risk figures also capture the diversification effect across all risk categories. As of 31 December 2015, the group-diversified risk reflecting our risk profile before non-controlling interests of € 36.4 bn (2014: € 35.3 bn1) represented a diversification benefit2 of approximately 27 % (2014: 27 %1) across risk categories and business segments. The group- diversified risk is broken down as follows: allianz gRoup: allocated Risk accoRding to the Risk pRofile (total poRtfolio BefoRe non-contRolling inteRests) € mn Market risk Credit risk Underwriting risk Business risk Operational risk Diversification Total as of 31 December 2015 20141 2015 20141 2015 20141 2015 20141 2015 20141 2015 20141 2015 20141 Property-Casualty Life/Health 5,690 6,050 16,516 14,290 Asset Management 146 146 Corporate and Other 2,922 2,663 2,406 6,141 26 667 2,379 5,408 26 701 10,101 10,109 937 987 1,502 1,425 3,687 3,646 – 355 – 67 – – – – 2,274 2,019 686 580 2,166 2,110 686 707 (6,663) (6,751) 14,745 14,941 (7,784) (6,893) 22,081 19,986 – – 857 857 (924) (784) 3,600 3,354 Total Group 25,274 23,150 9,240 8,514 11,958 11,601 4,623 4,634 5,559 5,669 (15,371) (14,428) 41,283 39,139 Tax Total Group (4,860) (3,826) 36,423 35,313 1 2014 risk profile figures recalculated based on model changes in 2014, as described in Model changes in 2015 from page 118. With Solvency II becoming the regulatory binding regime, the breakdown reflects Allianz’s regulatory capital requirements, including the third-country equivalence treatment of AZ Life. Detailed discussions of movements in respective risks are provided in the sections that follow. 1 2 2014 risk profile figures recalculated based on model changes in 2015 as described in Model changes in 2015 from page 118. Diversification before tax. Annual Report 2015 Allianz Group 115 Internal risk capital framework We define internal risk capital as the capital required to protect us against unexpected, extreme economic losses, which forms the basis for determining our Solvency II regulatory capitalization and the associated risk profile. On a quarterly basis, we calculate and aggre- gate internal risk capital across all business segments, based on a common standard for measuring and comparing risks across the wide range of different activities that we undertake as an integrated financial services provider. geneRal appRoach We utilize an approach for the management of our risk profile and solvency position that reflects the forthcoming Solvency II rules. This comprises our approved partial internal model covering all major insurance operations1. Other entities are reflected based on their standard model results as well as on sectoral or local requirements, in accordance with the Solvency II framework. Our partial internal model is based on a best-practice technical platform with an up-to- date methodology covering all modeled sources of quantifiable risks. inteRnal Risk capital model Our partial internal risk capital model is based on a Value-at-Risk (VaR) approach using a Monte Carlo simulation. Following this approach, we determine the maximum loss in the portfolio value of our businesses in the scope of the model within a specified time- frame (“holding period”) and probability of occurrence (“confidence level”). We assume a confidence level of 99.5 % and apply a holding period of one year. In the risk simulation, we consider risk events from all modeled risk categories (“sources of risk”) and calculate the port- folio value based on the net fair value of assets and liabilities under potentially adverse conditions. The risk capital is defined as the difference between the current portfolio value and the portfolio value under adverse conditions dependent on the 99.5 % confidence level. Because we consider the impact of a negative or positive event on all sources of risks and cov- ered businesses at the same time, diversification effects across prod- ucts and regions are taken into account. The results of our Monte Carlo simulation allow us to analyze our exposure to each source of risk, both separately and in aggregate. In addition, in particular for market risks, we analyze several pre-defined stress scenarios, based either on historically observed market movements or on hypothetical market movement assumptions. This modeling approach, therefore, also enables us to identify scenarios that may have a positive impact on our solvency situation. Yield curve and volatility adjustment assumptions When calculating the fair values of assets and liabilities, the assump- tions regarding the underlying risk-free yield curve are crucial in determining and discounting future cash flows. We apply the method- ology provided by the European Insurance and Occupational Pensions Authority (EIOPA) within the technical documentation (EIOPA- BoS-15/035) for the extension of the risk-free interest rate curves beyond the last liquid tenor2. In addition, we adjust the risk-free yield curves by a volatility adjustment for all business segments, except unit-linked business with guarantees in most markets where a volatility adjustment is defined by EIOPA. This is done to better reflect the underlying eco- nomics of our business, as the cash flows of our insurance liabilities are, to a large degree, predictable. The advantage of being a long-term investor, therefore, is the opportunity to invest in bonds yielding spreads over the risk-free return and earning this additional yield component. Being a long-term investor mitigates to a great extent the risk of forced selling of debt instruments at a loss prior to maturity. Therefore, we reflect this mitigation using a volatility adjustment spread risk offset, and view the more relevant risk to be default and migration risk rather than credit spread risk. Valuation assumption: replicating portfolios Since efficient valuation and complex, timely analysis is required, we replicate the liabilities of our Life/Health insurance business as well as for our internal pension obligations. This technique enables us to represent all options and guarantees, both contractual and discre- tionary, by means of standard financial instruments. In the risk cal- culation we use the replicating portfolio to determine and revalue these liabilities under all potentially adverse Monte Carlo scenarios. Diversification and correlation assumptions Our partial internal risk capital model considers concentration, accu- mulation, and correlation effects when aggregating results at Group level. This reflects the fact that not all potential worst-case losses are likely to materialize at the same time. This effect is known as diversi- fication and forms a central element of our risk management frame- work. We strive to diversify the risks we are exposed to in order to limit the impact of any single source of risk and help increase the chances that the positive developments outweigh the negative. The degree to which diversification can be realized depends in part on the level of relative concentration of those risks and the joint movement of sources of risk. Where possible, we derive correlation parameters for each pair of market risks through statistical analysis of historical market data, considering quarterly observations over several years. In case historical market data or other portfolio-specific observations are insufficient or not available, correlations are set according to a well-defined 1 As mentioned under Solvency II capitalization, AZ Life is taken into account by means of third-country equivalence into the Group capitalization. 2 Due to late availability of the EIOPA publication, the risk-free interest rate term structure used might be slightly different from the one published by EIOPA. 116 Annual Report 2015 Allianz Group C Group Management Report Risk and Opportunity Report and Financial Control Risk and Opportunity Report 112 131 Controls over Financial Reporting and Risk Capital Group-wide process. Correlations are determined by the Correlation Settings Committee, which combines the expertise of risk and busi- ness experts. In general, we set the correlation parameters to represent the joint movement of risks under adverse conditions. Based on these correlations, we use an industry-standard approach, the Gaussian copula approach, to determine the dependency structure of quantifi- able sources of risk within the applied Monte Carlo simulation. Actuarial assumptions Our partial internal risk capital model also includes assumptions on claims trends, liability inflation, mortality, longevity, morbidity, policy- holder behavior, expense, etc. We use our own internal historical data for actuarial assumptions wherever possible and also consider recommendations from the insurance industry, supervisory authori- ties, and actuarial associations. The derivation of our actuarial assumptions is based on generally accepted actuarial methods. With- in our internal risk capital and financial reporting framework, com- prehensive processes and controls exist for ensuring the reliability of these assumptions. scope By design, our partial internal risk capital model takes into account the following risk categories: market risk, credit risk, underwriting risk, business risk, and operational risk – whenever these risks are present. A further breakdown of the risk categories can be found in the section on internal risk assessment. With the exception of the Asset Management business segment, all business segments are exposed to the full range of stated risk categories. By contrast, the Asset Management business segment is mainly exposed to opera- tional and market risk and to a lesser extent to credit risk. Coverage of the risk capital calculations Allianz’s partial internal risk capital model covers all major insur- ance operations1. This includes the relevant assets (including bonds, loans, mortgages, investment funds, equities and real estate) and liabilities (including the cash flow run-off profile of all technical reserves as well as deposits, issued debt, and other liabilities). For with-profit products in the Life/Health business segment, options and guarantees embedded in insurance contracts – including policy- holder participation rules – are taken into account.2 Smaller entities within the European Economic Area which are not covered by the partial internal model are reflected based on their standard model results. At Group level, the capital requirements for smaller insurance operating entities outside the European Economic Area that have only an immaterial impact on the Group’s risk profile are treated with book value deduction3. 1 2 3 As mentioned under Solvency II capitalization, AZ Life is taken into account by means of third-country equivalence into the Group capitalization. For further information about participating life business, please refer to note 20 to the consolidated financial statements. Under book value deduction, the book value of the respective entity is deducted from eligible own funds of the Group. Risk capital related to our European banking operations is allo- cated to the Corporate and Other business segment, based on the approach applied by banks under the local requirements with respect to the Basel regulation (Basel standards). Capital requirements for banks represent an insignificant amount of approximately 1.5 % (2014: 1.3 %4) of our total pre-diversified risk. Therefore, risk management with respect to banking operations is not discussed in more detail. For our Asset Management business segment, we assign internal risk capital requirements based on the sectorial regulatory capital requirements as envisaged in Solvency II. The Asset Management business is mainly affected by operational risks. However, since most of our Asset Management business is not located within the Euro- zone, at the Group level it also bears foreign exchange rate risk. Our Asset Management business is covered by adequate risk controlling processes, including regular reporting and qualitative risk assess- ments (such as Top Risk Assessment) to the Group. However, since it is mainly affected by the previously mentioned two risk types (opera- tional and foreign exchange rate), and due to the fact that the impact on total pre-diversified risk capital is minor, risk management with respect to Asset Management is not discussed in more detail. Limitations Our partial internal risk capital model expresses the potential “worst- case” amount in economic value that we might lose at a certain con- fidence level. However, there is statistically a low probability of 0.5 % that actual losses could exceed this threshold at Group level in the course of one year. We use model and scenario parameters derived from historical data, where available, to characterize future possible risk events. If future market conditions differ substantially from the past, for exam- ple in an unprecedented crisis, our VaR approach may be too conser- vative or too liberal in ways that are too difficult to predict. In order to mitigate reliance on historical data, we complement our VaR analysis with stress testing. Our ability to back-test the model’s accuracy is limited because of the high confidence level of 99.5 %, the one-year holding period as well as the fact that for some insurance risk events – such as natural catastrophes – only limited data are available. Furthermore, as historical data is used where possible to cali- brate the model, historical data cannot be used for validation. Instead, we validate the model and parameters through sensitivity analyses, independent internal peer reviews and, where appropriate, external reviews by independent consulting firms, focusing on methods for selecting parameters and control processes. To ensure proper valida- tion we established an Independent Validation Unit (IVU) within Group Risk responsible for validating our partial internal model within a comprehensive model validation process. Overall, we believe that our validation efforts are effective and that the model adequately assesses the risks to which we are exposed. 4 2014 risk profile figures recalculated based on model changes in 2015, as described in Model changes in 2015 from page 118. Annual Report 2015 Allianz Group 117 As described in a previous section, insurance liability values in the risk calculation are derived from replicating portfolios of standard financial market instruments in order to allow for effective risk man- agement. This replication is subject to the set of available replicating instruments and might, therefore, be too simple or too restrictive to capture all factors affecting the change in value of liabilities. As with other model components, the replications are subject to independent validation and to suitability assessments as well as to stringent data and process quality controls. Therefore, we believe that the liabilities are adequately represented by the replicating portfolios. Since the partial internal risk capital model takes into account the change in the economic fair value of our assets and liabilities, it is crucial to estimate the market value of each item accurately. For some assets and liabilities it may be difficult, if not impossible – notably in distressed financial markets – to obtain either a current market price or to apply a meaningful mark-to-market approach. For such assets we apply a mark-to-model approach. Non-standardized derivative instruments – such as derivatives embedded in structured financial products – are represented by the most comparable standard deriva- tive types or by means of sensitivities, because the volume of non- standard instruments is not material at either the local or Group level. For some of our liabilities, the accuracy of their values depends on the quality of the actuarial cash flow estimates. Despite these limitations, we believe the estimated fair values are appropriately assessed. model changes in 2015 In 2015, our partial internal model has been adjusted, based on both regulatory developments and feedback received during the ongoing consultations with regulators as part of our internal model approval process. For the sake of clarity, all model changes and the resulting changes to our risk profile are presented jointly within this section, based on data as of 31 December 2014. This also comprises changes in the model scope, for example the third-country equivalence treat- ment of AZ Life, in order to reflect the risk profile according to the new regulatory binding capital requirement, effective from 1 January 2016. In all subsequent sections the figures after the model changes will form the basis for the movement analysis of our risk profile in 2015. allianz gRoup: impact of model change, allocated Risk accoRding to Risk pRofile (total poRtfolio BefoRe non-contRolling inteRests) € mn Market risk Credit risk Underwriting risk Business risk Operational risk Diversification Total as of 31 December 20141 20142 20141 20142 20141 20142 20141 20142 20141 20142 20141 20142 20141 20142 Property-Casualty Life/Health Asset Management 6,120 6,050 18,569 14,290 521 146 Corporate and Other 2,891 2,663 2,374 7,817 128 699 2,379 5,408 26 701 9,619 1,626 – 65 10,109 917 987 1,425 4,404 3,646 – 67 – – – – 1,797 2,035 668 645 2,166 (7,246) (6,751) 13,582 14,941 2,110 (10,161) (6,893) 24,291 19,986 686 707 – – (883) (784) 1,317 3,417 857 3,354 Total Group 28,102 23,150 11,018 8,514 11,311 11,601 5,321 4,634 5,146 5,669 (18,291) (14,428) 42,607 39,139 Tax (4,180) (3,826) Total Group 38,427 35,313 1 2 2014 risk profile figures as reported previously. 2014 risk profile figures recalculated based on new model. The change in model scope to reflect our risk profile according to the Solvency II capital requirements was the most significant driver for changes in the modeling of our risk capital. Thereof, the change to include AZ Life on the basis of third-country equivalence treatment was the main contributor, with the main impact on market and cred- it risks. In addition, Allianz Benelux and Allianz Compania de Seguros were switched from the partial internal model to the standard model. Finally, we included some smaller entities (Turkey, Taiwan and Brazil) based on their standard model figures while they had previously been taken into account by book value deduction. Otherwise, changes to our partial internal model focused on the following risk categories: Market risk Market risk was significantly affected by the change in model scope. In addition, the modelling of how impairments within special funds are treated was updated to better reflect the management of special funds. Furthermore, the assumptions on dynamic lapses were adjusted, based on updated lapse evaluations, to better reflect policy- holder behavior in a low interest rate environment. Also the modelling of cash flows related to Surplus funds under emergency scenarios was enhanced to better reflect the Surplus fund value. Finally, there are regulatory required add-ons on Group level allocated to segments and risk types. The different model changes decreased the total market risk by € 5.0 bn to € 23.1 bn. 118 Annual Report 2015 Allianz Group C Group Management Report Risk and Opportunity Report and Financial Control Risk and Opportunity Report 112 131 Controls over Financial Reporting and Risk Capital Credit risk In 2015, no new model changes were implemented to the credit risk model. Only annual updates of rating transition matrices and asset correlations based on extended time series were introduced. Never- theless, the model change related to modeling of the loss-absorbing capacity of technical provisions in the traditional life business had also an impact on credit risk, leading to a decrease of € 0.3 bn. In total, credit risk decreased on a pre-diversified basis by € 2.5 bn to € 8.5 bn, primarily driven by the changes in model scope. Underwriting risk The decrease in underwriting risk both in the Life/Health and the Property-Casualty business segment is mainly due to the change in model scope. Business Risk The decrease in business risk in the Life/Health business segment is mainly due to the change in model scope and parametrization changes for dynamic lapses. Operational risk In 2015, a central model change regarding a more conservative defini- tion of operational risk capital led to an overall increase in opera- tional risk capital. Impact of model changes on Eligible Group Own Funds Model changes in 2015 resulted in a € 0.3 bn decrease of own funds, mainly driven by changes in unavailability deductions partly offset by regulatory and model changes as well as scope changes. The scope changes refer to the new in-scope entities Brazil, Turkey and Taiwan and increased own funds by € 1.1 bn. The unavailability deductions increased by € 1.7 bn, mainly driven by lower capital requirements which limit the transferability. Remaining changes relate to model changes effecting the valuation of technical provisions. Internal risk assessment Risk pRofile and Risk management As we are an integrated financial services provider offering a variety of products across different business segments and geographic regions, diversification is key to our business model. Diversification is a key element in managing our risks efficiently by limiting the eco- nomic impact of any single event and by contributing to relatively stable results and our risk profile in general. Therefore, our aim is to maintain a balanced risk profile without any disproportionately large risk concentrations and accumulations. With respect to investments, top-down indicators such as stra- tegic asset allocations are defined and closely monitored to ensure balanced investment portfolios. Furthermore, we have a limit system in place which is defined at Group level separately for the Life/Health and the Property-Casualty business segments as well as at operating entity level. The limits comprise economic limits, in particular finan- cial VaR and credit VaR as derived from the internal risk capital frame- work, complemented by stand-alone interest rate and equity sensi- tivity limits as well as by limits on foreign exchange exposures. In addition we introduced capitalization limits, defining target Solvency II capitalization ratios on Group as well as operating entity level after applying shock scenarios. Our limit-setting process ensures that prevailing statutory restrictions regarding the composition of investments are taken into account. Most statutory restrictions apply at the local level, where the statutory restrictions as binding constraints enter the limit-setting processes. In addition, guidelines are derived by the Group center for certain investments, for example concerning the use of derivatives, and compliance with the guidelines is controlled by the respective risk and controlling functions. In order to further limit the impact of any financial market changes and to ensure that assets adequately back policyholder lia- bilities, we have additional measures in place. One of these is asset/ liability management, linked to the internal risk capital framework, which incorporates risks as well as return aspects stemming from our insurance obligations. In addition, we are using derivatives mostly to either hedge our portfolio against adverse market movements or to reduce our reinvestment risk – for example by using forwards or swaptions. Furthermore, we have put in place standards for hedging activi- ties due to exposures to fair value options embedded in life insurance products. Life/Health operating entities carrying these exposures are required to follow these standards, including making a conscious decision on the amount of hedging.1 The hedging of risks stemming from investments is also an element applied to manage and limit risks efficiently. For example, protective puts are used to limit the downward exposure of certain investments2. We also closely monitor concentrations and accumulation of non-market risks on a stand-alone basis (i.e. before diversification effects) within a global limit framework in order to avoid substantial losses from single events such as natural catastrophes, terror or credit events. In order to manage counterparty concentration risk, we run a Group-wide country and obligor group limit management frame- work (CRisP3), which covers credit and equity exposures and is based on data used by the investment and risk experts at the Group and operating entity levels. This limit framework forms the basis for dis- cussions on credit actions and provides notification services with a quick and broad communication of credit-related decisions across the Group. Clearly defined processes ensure that exposure concen- trations and limit utilizations are appropriately monitored and man- aged. The setting of country and obligor exposure limits from the 1 2 3 For further information about the risk concentration in the Life/Health business segment, please refer to note 20 to the consolidated financial statements. For further information on derivatives used for hedging, please refer to note 43 to the consolidated financial statements. Credit Risk Platform. Annual Report 2015 Allianz Group 119 Group’s perspective (i.e. the maximum concentration limit) takes into account the Allianz Group’s portfolio size and structure as well as our overall risk strategy. It is the ultimate responsibility of the Board of Management to decide upon limit budgets. The Board of Management delegates authorities for limit setting and modification to the Group Finance and Risk Committee and Group Chief Risk Officer by clearly defining maximum limit amounts. All limits are subject to annual review and approval according to the delegated authorities. In addition, central elements of Allianz’s dividend policy are linked to the Solvency II capitalization based on our partial internal model. This shows that the partial internal model is fully integrated in the business steering of Allianz and that the application of the par- tial internal model satisfies the so-called “use-test” under Solvency II. In the following sections we explain the evolution of the risk pro- file per modeled risk category. All risks are presented on a pre-diver- sified basis and concentrations of single sources of risk are discussed accordingly. Risk Based steeRing Allianz steers its portfolio using a comprehensive view of risk and return, i.e. results based on the partial internal risk model including scenario-based analyses are used actively for decision making: on the one hand, economic risk and concentrations are actively restricted by means of limits as outlined above and on the other hand, there is a comprehensive analysis of the return on risk capital (RORC). The latter allows us to identify profitable lines of business and products on a sustainable basis, which provide reasonable profits on allocated risk capital over the life time of the products. Therefore, it is a key criterion for capital allocation decisions. quantifiaBle Risks Market risk As an inherent part of our insurance operations, we collect premiums from our customers and invest them in a wide variety of assets. Thereby, the Allianz Group holds and uses many different financial instruments. The resulting investment portfolios back the future claims and benefits to our customers. In addition, we invest share- holders’ capital, which is required to support the risks underwritten. As the fair values of our investment portfolios depend on financial markets, which may change over time, we are exposed to market risks. The following table presents our Group-wide risk figures related to market risks by business segment and source of risk. allianz gRoup: Risk pRofile – maRket Risk By Business segment and souRce of Risk (total poRtfolio BefoRe tax and non-contRolling inteRests) pre-diversified, € mn as of 31 December 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 Interest rate Inflation Credit spread Equity Real estate Currency Total Property-Casualty Life/Health Asset Management Corporate and Other Total Group 415 526 2,931 3,431 739 576 996 914 554 544 4,129 5,934 20 643 20 452 237 – 451 528 4,694 2,973 6,085 3,804 1,326 1,003 – 221 – 541 – 408 20 977 20 1,272 6,011 20 86 20 96 1,986 1,663 5,207 6,932 3,618 4,181 5,975 3,957 8,078 55 45 86 224 410 58 48 86 213 405 5,690 6,050 16,516 14,290 146 146 2,922 2,663 25,274 23,150 Share of total Group pre-diversified risk 44.6 % 43.2 % Our total pre-diversified market risk showed an increase of € 2.1 bn mainly driven by equity and credit spread risk in the Life/Health seg- ment. The increase in equity risk was mainly driven by higher expo- sure. This was partly offset by a decrease in interest rate risk, pre- dominantly due to management actions aiming at reducing our interest rate sensitivity by asset/liability management (ALM) mea- sures. This, however, also contributed to some extent to the increase in credit spread risk, for example due to some duration extension on the asset side. The decrease in inflation risk was mainly driven by the hedging of inflation exposure and higher discount rates, resulting in lower market values of inflation-sensitive liabilities and internal pension liabilities. Real estate risk increased mainly due to higher exposure. Interest rate risk As interest rates may fall below the rates guaranteed to policyholders in some life/health markets, and given the long duration of insurance obligations, we are specifically exposed to interest rate risk because we have to reinvest maturing assets prior to the maturity of life con- tracts. This interaction of our investment strategy and obligations to policyholders forms an integral part of our internal risk capital framework. In addition, our ALM approach is closely linked to the internal risk capital framework and designed to achieve investment returns over the long term in excess of the obligations related to insurance and investment contracts. 120 Annual Report 2015 Allianz Group C Group Management Report Risk and Opportunity Report and Financial Control Risk and Opportunity Report 112 131 Controls over Financial Reporting and Risk Capital These risks are reflected in the risk profile and managed by interest rate sensitivity limits. A significant part of the Life/Health business segment’s pre-diversified interest rate risk lies in Western Europe – 76.5 % as of 31 December 2015 (2014: 83.4 %) –, mainly to cover traditional life insurance products with guarantees. We manage interest rate risk from a comprehensive corporate perspective: While the potential payments related to our liabilities in the Property-Casualty business segment are typically shorter in maturity than the financial assets backing them, the opposite usu- ally holds true for our Life/Health business segment due to the long- term life insurance contracts. In part, this provides us with a natural hedge on an economic basis at the Group level. As of 31 December 2015, our interest-rate-sensitive investments excluding unit-linked business – amounting to a market value of € 419.3 bn1 – would have gained € 30.6 bn or lost € 32.8 bn in value in case of interest rates changing by (100) and +100 basis points, respec- tively. As described above, the risk related to interest rates lies in the fact that, in the long run, yields that can be achieved by reinvesting may not be sufficient enough to cover the guaranteed rates. In con- trast, opportunities may materialize when interest rates increase. This may result in higher returns from reinvestments than the guar- anteed rates. Inflation risk As an insurance company we are exposed to changing inflation rates, predominantly due to our non-life insurance obligations. In addition, internal pension obligations contribute to our exposure to inflation. Since inflation increases both claims and costs, higher inflation rates will lead to greater liabilities. Inflation assumptions are already taken into account in our product development and pricing and the risk of changing inflation rates is incorporated in our partial internal model. Equity risk The Allianz Group’s insurance operating entities usually hold equity investments to diversify their portfolios and take advantage of expected long-term returns. Strategic asset allocation benchmarks and investment limits are used to manage and monitor these expo- sures. In addition, equity investments fall within the scope of CRisP to avoid a disproportionately large concentration of risk. As of 31 December 2015, our investments excluding unit-linked business that are sensitive to changing equity markets – amounting to a market value of € 44.2 bn2 – would have lost € 12.9 bn in value assuming equity markets declined by 30 %. 1 2 The stated market value includes all investments whose market value is sensitive to interest rate move- ments (excluding unit-linked business) reflecting the Solvency II framework, and therefore is not based on classifications given by accounting principles. The stated market value includes all investments whose market value is sensitive to equity movements (excluding unit-linked business) reflecting the Solvency II framework, and therefore is not based on clas- sifications given by accounting principles. Risks from changes in equity prices are normally associated with decreasing share prices and increasing equity price volatilities. As stock markets also might increase, opportunities may arise from equity investments. Credit spread risk Our internal risk capital framework fully acknowledges the risk of declining market values for our fixed-income assets, such as bonds, due to the widening of credit spreads. However, for our risk manage- ment and appetite we also take into account the underlying econom- ics of our business model; for example, the application of the volatil- ity adjustment in our internal risk capital framework to partially mitigate spread risk, as described in the section on yield curve assumptions. The advantage of being a long-term investor therefore gives us the opportunity to invest in bonds yielding spreads over the risk-free return and earning this additional yield component. Currency risk Based on our foreign exchange management limit framework, cur- rency risk is monitored and managed at the operating entity and Group level. As our operating entities are typically invested in assets of the same currency as their liabilities, the major part of foreign cur- rency risk results from the economic value of our non-Euro operating entities. If non-Euro foreign exchange rates decline against the Euro from a Group perspective, the Euro-equivalent net asset values also decrease. However, at the same time the capital requirements in Euro terms from the respective non-Euro entity also decrease, partially mitigating the total impact on the capitalization. Real estate risk Despite the risk of decreasing real estate values, real estate is a suitable addition to our investment portfolio, due to good diversification benefits as well as to the contribution of relatively predictable cash- flows in the long term. As of 31 December 2015, about 3.5 % (2014: 3.1 %3) of the total pre-diversified risk was related to real estate exposures. Credit risk The Allianz Group monitors and manages credit risk exposures and concentrations to ensure it is able to meet policyholder obligations when they are due. This objective is supported by the internal credit risk model and the CRisP as described under the section on the risk profile. Group-wide credit data is collected following a centralized process and using standard obligor and obligor group mappings. Credit risk is measured as the potential economic loss in the value of our portfolio due to changes in the credit quality of our coun- terparts (“migration risk”) or the inability or unwillingness of the counterparty to fulfill contractual obligations (“default risk”). Our internal credit risk modeling framework covers counterparty risk and 3 2014 figure recalculated based on model changes in 2015 as described in Model changes in 2015 from page 118. Annual Report 2015 Allianz Group 121 country risk. Counterparty risk arises from our fixed-income invest- ments, cash positions, derivatives, structured transactions, receiv- ables from Allianz agents and other debtors, as well as reinsurance recoverables and credit insurance. Country risk exposure is calcu- lated as cross-border exposure to all obligors domiciled abroad from the respective operating entities’ perspective. The internal credit risk capital model is a state-of-the-art tool which provides bottom-up analysis. The major drivers of credit risk for each instrument are exposure at default, ratings, seniority, col- lateral and maturity. Additional parameters assigned to obligors are migration probabilities and obligor asset correlations reflecting dependencies within the portfolio. Ratings are assigned to single obli- gors via an internal rating approach, which is based on long-term ratings from rating agencies. It is dynamically adjusted using market- implied ratings and the most recently available information. The loss profile of a given portfolio is obtained through a Monte- Carlo simulation, taking into account interdependencies and expo- sure concentrations per obligor segment. To reflect portfolio specific diversification effects, the loss profiles are calculated at different levels of the Allianz Group structure (pre-diversified). They are then fed into the overall partial internal risk capital model for further aggregation across sources of risk to derive group-diversified internal credit risk. By managing our credit risk on the basis of our limit manage- ment and credit risk modeling frameworks, we have composed a well-diversified credit portfolio. Our long-term investment strategy to hold investments through the cycle to maturity enables us to keep our portfolio stable even under adverse market conditions. It also gives us the opportunity to earn planned excess returns throughout the entire holding period of the investments. In our credit insurance business, proactive credit management offers opportunities to keep losses from single credit events below expected levels and therefore strongly supports writing business that contributes to a balanced Group credit portfolio. AlliAnz Group: risk profile – AllocAted credit risk by business seGment (totAl portfolio before tAx And non-controllinG interests) pre-diversified, € mn as of 31 December Property-Casualty Life/Health Asset Management Corporate and Other Total Group Share of total Group pre-diversified risk 1 2014 risk profile figures recalculated based on model changes in 2015. 2015 2,406 6,141 26 667 9,240 16.3 % 20141 2,379 5,408 26 701 8,514 15.9 % provisions in the traditional life business, which increased the credit risk after policyholder participation. Additionally, for the purpose of asset/liability management under the low-yield environment the amount of long-duration assets has grown, which further contrib- uted to the increase of credit risk, particularly in the Life/Health busi- ness segment. The following table displays the sensitivities of credit risk to cer- tain scenarios: a deterioration of credit quality measured by issuer rating1 downgrades and the decline of recovery rates in the event of a default (Loss-Given-Default, LGD). The sensitivities are calculated by applying each scenario to all exposures individually, but keeping all other parameters constant.2 AlliAnz Group: impAct of selected credit scenArios on credit risk1 pre-diversified, € mn as of 31 December Base case Rating down by 1 notch Rating down by 2 notches lGd up by 10 % Total 2015 9,240 10,135 11,485 9,780 20142 8,514 9,313 10,560 8,988 1 2 A notch is referred to rating sub-classes, such as “AA+”, “AA”, “AA-” at Standard & Poor’s scale or “Aa1”, “Aa2”, “Aa3” at Moody’s scale. 2014 risk profile figures recalculated based on model changes in 2015. The majority of credit risk and the impact of sensitivity analysis can be allocated to long-term sovereign debt as well as senior unsecured bonds with lower investment grade borrowers. The different components of Allianz credit risk exposure are described in the table below: AlliAnz components of credit risk exposure investment portfolio Premiums collected from our customers and shareholders’ capital, which is required to support the risks underwritten, are invested to a great extent in fixed-income instruments. These investment portfolios ultimately cover the future claims to our customers. However, for certain life insurance products, losses due to credit events can be shared with the policyholder, as described in the context of market risks. reinsurAnce portfolio Credit risk to external reinsurers appears when insurance risk exposures are transferred by us to external reinsurance companies to mitigate insurance risk. Potential losses can arise either due to non-recoverability of reinsurance receivables already present at the as-of date or default on benefits that are under reinsurance treaties in-force. credit insurAnce portfolio Credit risk arises from potential claim payments on limits granted by Euler Hermes to its policyholders. Euler Hermes protects its policyholders (partially) from credit risk associated with short-term trade credits advanced to clients of the policyholder. If the client of the policyholder is unable to meet its payment obligations, Euler Hermes indemnifies the loss to the policyholder. Throughout 2015 the credit environment was mostly stable. There were limited rating actions, as the economic situation and outlook were already reflected in current rating levels, compared to the eco- nomic disruptions of previous years. The credit risk for the Group increased, mainly due to reduced loss-absorbing capacity of technical 1 2 Credit risk calculations are based on issuer (borrower) ratings as opposed to issue (instrument) ratings. The difference between issue and issuer ratings is primarily due to collateralization and seniority and is reflected in Loss-Given-Default (LGD). Scenarios are applied only to investment and reinsurance exposure positions in portfolios of Allianz operating entities. 122 Annual Report 2015 Allianz Group C Group Management Report Risk and Opportunity Report and Financial Control Risk and Opportunity Report 112 131 Controls over Financial Reporting and Risk Capital Credit risk – investment As of 31 December 2015, credit risk arising from the investment port- folio accounted for 88.2 % (2014: 92.7 %) of our total Group pre-diversi- fied internal credit risk. Credit Risk in the Life/Health business seg- ment is primarily driven by long-term assets covering long-term liabilities. Typical investments are government bonds, senior corpo- rate bonds, covered bonds, self-originated mortgages and loans, as well as a modest amount of derivatives. Due to the nature of the busi- ness, the fixed-income securities in the Property-Casualty business segment tend to be short- to mid-term, which explains the lower Credit Risk consumption in this segment.1 Allianz has a well-diversified portfolio of Exchange- and OTC- traded derivatives that are used as part of an efficient exposure man- agement. The counterparty credit risk arising from derivatives is low, since the derivatives usage is governed by the Group-wide internal guidelines for collateralization of derivatives that stipulate master netting and collateral agreements with each counterparty and require high quality and liquid collateral. In addition, Allianz closely moni- tors the credit ratings of counterparties and exposure movements. Central clearing of certain classes of OTC derivatives as required by the European Market Infrastructure Regulation (EMIR) and additional reporting duties will contribute to further reducing counterparty credit risk and operational risk at Allianz. As of 31 December 2015, the rating distribution based on issue (instrument) ratings of our fixed income portfolio was as follows: rAtinG distribution of AlliAnz Group’s fixed-income portfolio1 – fAir vAlue € bn Type of issuer as of 31 December AAA AA A BBB BB B CCC CC C D Not rated Total Government & Agency 2015 44.8 95.9 15.8 52.9 3.9 1.6 – – – 0.1 2.5 2014 51.8 84.0 15.5 50.9 2.7 0.8 – – – 0.1 3.4 217.5 209.3 2015 57.7 23.8 11.4 5.0 0.5 – – – – – 0.3 98.7 Covered Bond Corporate Banks ABS / MBS Short-term Loan Other Total 2014 57.2 20.2 23.1 6.0 1.0 0.1 – – – – 0.1 2015 2.4 11.3 49.8 81.9 9.5 3.0 0.3 0.1 0.1 0.4 6.2 2014 2015 2014 1.1 10.3 45.6 72.8 7.2 3.2 0.1 0.1 0.1 0.4 4.3 1.1 6.2 14.6 7.3 1.6 0.1 – 0.1 – – 1.5 6.6 16.8 5.6 1.5 0.1 0.1 – – – 0.4 31.3 0.2 32.4 2015 16.0 2014 17.3 3.0 1.7 0.6 0.1 0.1 – 0.1 – – – 2.4 2.0 0.7 0.1 0.1 – 0.2 0.1 – – 21.6 22.9 2015 2014 2015 2014 2015 2014 0.1 1.1 0.6 0.5 0.2 – – – – – 0.5 3.0 – 1.4 0.9 0.6 0.2 – – – – – 0.3 3.6 – 0.1 0.8 0.5 – – – – – – – 0.1 0.9 0.6 – – – – – – 122.1 141.4 94.6 148.7 15.8 4.8 0.4 0.2 0.1 0.5 128.8 125.2 104.8 137.2 12.7 4.3 0.3 0.3 0.1 0.5 2.8 4.3 1.7 3.3 12.7 10.0 541.4 524.3 107.6 164.9 145.1 1 In accordance with the Group Management Report, figures stated include investments of Banking and Asset Management. Table excludes private loans. Stated market values include investments not in scope of the Solvency II framework. Credit risk – reinsurance As of 31 December 2015, 0.4 % (2014: 0.4 %) of our total Group pre-diver- sified internal credit risk was allocated to reinsurance exposures – of which 52.0 % (2014: 58.5 %) was related to reinsurance counterparties in the United States and Germany. A dedicated team selects our reinsurance partners, focusing on companies with strong credit profiles. We may also require letters of credit, cash deposits, or other financial measures to further mitigate our exposure to credit risk. As of 31 December 2015, 86.0 % (2014: 82.9 %) of the Allianz Group’s reinsurance recoverables were distributed among reinsurers that had been assigned at least an “A-” rating by Standard & Poor’s or A.M. Best. As of 31 December 2015, non-rated reinsurance recoverables represented 13.3 % (2014: 15.7 %). Reinsurance recoverables without a Standard & Poor’s rating include exposures to brokers, companies in run-off, and pools – where no rating is available. 1 Additionally, 4.8 % (2014: 2.4 %) of our total Group pre-diversified internal credit risk is allocated to receiv- ables, potential future exposure for derivatives and reinsurance, and other off-balance sheet exposures. Annual Report 2015 Allianz Group 123 ReinsuRance RecoveRaBles By Rating class1 € Bn as of 31 December AAA AA+ to AA- A+ to A- BBB+ to BBB- Non-investment grade Not assigned Total 2015 0.04 6.64 4.68 0.08 – 1.76 13.19 2014 0.03 6.06 4.35 0.17 – 1.97 12.59 1 Represents gross exposure broken down by reinsurer. Credit risk – credit insurance Our credit insurance portfolio is modeled by Euler Hermes based on a proprietary model component, which is a local adaptation of the central internal credit risk module and is reviewed by Group Risk. The result is integrated in the Group’s internal credit risk to capture the concentration and diversification effects. As of 31 December 2015, 6.5 % (2014: 4.5 %) of our total Group pre-diversified internal credit risk was allocated to Euler Hermes credit insurance exposures, for which the relative increase is primarily driven by the re-allocation of credit risk from the investment portfolio, where exposure size has decreased following the reduced scope of Allianz entities in the partial internal model. Underwriting risk Underwriting risk consists of premium and reserve risks in the Prop- erty-Casualty business segment as well as biometric risks in the Life/ Health business segment. For the Asset Management business seg- ment and our banking operations, underwriting risks are not rele- vant. The following table presents the pre-diversified risk calculated for underwriting risks stemming from our insurance.1 allianz gRoup: Risk pRofile – allocated undeRwRiting Risk By Business segment and souRce of Risk (total poRtfolio BefoRe non-contRolling inteRests)1 pre-diversified, € mn as of 31 December Property-Casualty Life/Health Asset Management Corporate and Other Total Group Premium natural catastrophe Premium terror Premium non-catastrophe Reserve Biometric Total 2015 543 – – – 2014 523 – – – 543 523 2015 17 – – – 17 2014 2015 2014 2015 2014 26 4,579 4,461 4,926 4,970 – – – – – – – – – – – – – – – 2015 37 2014 2015 2014 130 10,101 10,109 1,502 1,425 1,502 1,425 – 355 – 67 – 355 – 67 26 4,579 4,461 4,926 4,970 1,894 1,621 11,958 11,601 Share of total Group pre-diversified risk 21.1 % 21.7 % 1 As risks are measured by an integrated approach on an economic basis, internal risk profile takes reinsur- ance effects into account. Property-Casualty risk changes are mainly driven by exposure and model updates as well as foreign currency translation effects. For bio- metric risk there were only minor movements. We face the risk that underwriting profitability is lower than expected. The volatility of the underwriting profitability measured over one year defines our premium risk for the Allianz Group. Underwriting risk Property-Casualty Our Property-Casualty insurance businesses are exposed to premium risk related to the current year’s new and renewed business, as well as reserve risks related to the business in force. pRopeRty-casualty loss Ratios1 foR the past ten yeaRs % 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 Loss ratio 66.2 66.0 65.9 68.3 69.9 69.1 69.5 68.0 66.1 65.0 Premium risk1 As part of our Property-Casualty business operations, we receive pre- miums from our customers and provide insurance protection in return. Changes in profitability over time are measured based on loss ratios and their fluctuations.2 1 2 2014 risk profile figures recalculated based on model changes in 2015. Please refer to the section Property-Casualty Insurance Operations – Property-Casualty insurance opera- tions by reportable segments from page 78 for a regional breakdown of loss ratios over the past two years. Loss ratio excluding natural catastrophes 64.6 65.1 63.0 66.6 65.5 65.9 68.4 66.3 64.1 64.4 1 Represents claims and insurance benefits incurred (net), divided by premiums earned (net). Premium risk is subdivided into natural catastrophe risk, terror risk, and non-catastrophe risk. We calculate premium risk based on actu- arial models that are used to derive loss distributions. Premium risk is actively managed by the Allianz Group and its local operating entities. 124 Annual Report 2015 Allianz Group C Group Management Report Risk and Opportunity Report and Financial Control Risk and Opportunity Report 112 131 Controls over Financial Reporting and Risk Capital Assessing the risks as part of the underwriting process is a key ele- ment of our risk management framework. There are clear under- writing limits and restrictions, centrally defined and in place across the Group. In addition to the centrally-defined underwriting limits, the local operating entities have limits in place that take into account their business environments. Excessive risks are mitigated by exter- nal reinsurance agreements. All these measures contribute to a limitation on risk accumulation. Natural disasters, such as earthquakes, storms and floods, rep- resent a significant challenge for risk management due to their accu- mulation potential and occurrence volatility. In order to measure such risks and better estimate the potential effects of natural disasters, we use special modeling techniques in which we combine portfolio data (such as the geographic distribution and characteristics of insured objects and their values) with simulated natural disaster sce- narios to estimate the magnitude and frequency of potential losses. Where such stochastic models do not exist, we use deterministic, scenario-based approaches to estimate potential losses. The top five perils contributing to the natural catastrophe risk as of 31 December 2015 were: Europe windstorm, Germany hail, Germany flood, U.S. hurricane and U.K. flood. Reserve risk We estimate and hold reserves for claims resulting from past events that have not yet been settled. If the reserves are not sufficient to cover claims to be settled in the future due to unexpected changes, we would experience losses. The volatility of past claims measured over a one-year time horizon defines our reserve risk. In general, our operating entities constantly monitor the devel- opment of reserves for insurance claims on a line-of-business level.1 In addition, the operating entities generally conduct annual reserve uncertainty analyses based on similar methods used for reserve risk calculations. Allianz SE performs regular independent reviews of these analyses and Allianz SE representatives participate in the local reserve committees’ meetings. Underwriting risk Life/Health Underwriting risks in our Life/Health operations (biometric risks) include mortality, disability, morbidity, and longevity risks. Mortality, disability, and morbidity risks are associated with the unexpected increase in the occurrence of death, disability, or medical claims on our insurance products. Longevity risk is the risk that due to changing biometric assumptions, the reserves covering life annuities and group pension products might not be sufficient. We measure these risks within our partial internal risk capital model by distinguishing between the different sub-components, whenever relevant or material: absolute level, trend, volatility around the best estimate assumptions, and pandemic risks. Depending on the nature and complexity of the risk involved, our health business is represented in the partial internal model, according to Property- Casualty or Life/Health calculation methods, and is therefore included in the relevant Property-Casualty and Life/Health figures accordingly. However, most of our health business is attributable to the Life/ Health business segment. Due to effective product design and the diversity of our products, there were no significant concentrations of underwriting risks within our Life/Health business segment as of 31 December 2015.2 Life/Health underwriting risk arises from profitability being lower than expected due to changes in actuarial parameters. As prof- itability calculations are based on several parameters – such as his- torical loss information, assumptions on inflation or on mortality, and morbidity – the realized parameters may differ from the ones used for calculation. For example, higher inflation than that incorpo- rated in the calculations may lead to a loss. However, deviations can also occur in the opposite direction and be beneficial and lead to additional profit. For example, a lower morbidity rate than expected will most likely result in lower claims. Business risk Business risks include cost risks and policyholder behavior risks and are mostly driven by the Life/Health business segment and to a lesser extent by the Property-Casualty business segment. Cost risks are associated with the risk that expenses incurred in administering policies are higher than expected or that new business volume decreases to a level that does not allow Allianz to absorb its fixed costs. In the Life/Health business segment, policyholder behavior risks are risks related to the unpredictability and adverse behavior of policy- holders in exercising their different contractual options: early termi- nation of contracts, surrenders, partial withdrawals, renewals, and annuity take-up options. Assumptions on policyholder behavior are set in line with accepted actuarial methods and are based on our own historical data, to the extent available. If data is not available, assumptions are based on industry data or expert judgment. allianz gRoup: Risk pRofile – allocated Business Risk By Business segment (total poRtfolio BefoRe tax and non-contRolling inteRests) pre-diversified, € mn as of 31 December Property-Casualty Life/Health Asset Management Corporate and Other Total Group Share of total Group pre-diversified risk 2015 937 3,687 – – 4,623 8.2 % 2014 987 3,646 – – 4,634 8.7 % For business risk in our Life/Health business segment there were only minor movements. 1 For further information, please refer to note 19 to the consolidated financial statements. 2 For further information about insurance risk in the Life/Health business segment, please refer to note 20 to the consolidated financial statements. Annual Report 2015 Allianz Group 125 As for underwriting risks, a positive deviation from the under­ lying parameters will lead to additional returns. For example, lower­ than­expected expenses in our Property­Casualty business will lead to an improved combined ratio. Operational risk Operational risks represent losses resulting from inadequate or failed internal processes, from personnel and systems, or from external events – including legal and compliance risk, but excluding losses from strategic and reputational risk. Allianz has developed a consistent Group­wide operational risk management framework that focuses on the early recognition and proactive management of operational risks in all “first line of defense”­ functions. The framework defines roles and responsibilities, risk pro­ cesses, and methods and has been implemented in our operating entities. Local risk managers as the “second line of defense” ensure this framework is implemented in their respective operating entity. They identify and evaluate relevant operational risks and control weaknesses via a dialogue between the “first line of defense” and the risk function. Furthermore, operational risk events are collected in a central risk event database. In 2015, Allianz also delivered internal loss data on an anonymized basis to the “Operational Riskdata eXchange Association (ORX)”, a global operational loss data insurance consor­ tium, to improve its internal control system and to validate opera­ tional risk parameters in the future. An analysis of the causes of inter­ nal and external losses exceeding € 1 mn is carried out to provide comprehensive and timely information to senior management and to share with operating entities, so they can implement measures aimed at avoiding or reducing future losses. The risks related to non­compliance or other misconduct are addressed via various dedicated compliance programs. Written poli­ cies detail the Allianz Group’s approach towards the management of these areas of risk. The implementation and communication of those compliance programs are monitored by the Group Compliance func­ tion at Allianz SE. In close cooperation with the Risk function of the Group, the risk­mitigating measures are taken and enforced by a global network of dedicated compliance functions throughout the Allianz Group. With respect to financial statements, our internal con­ trol system is designed to mitigate operational risks.1 1 For additional information regarding our internal control over financial reporting, please refer to Controls over Financial Reporting and Risk Capital from page 131. 126 Annual Report 2015 Allianz Group AlliAnz Group: risk profile – AllocAted operAtionAl risk by business seGment (totAl portfolio before tAx And non-controllinG interests) pre-diversified, € mn as of 31 December Property-Casualty Life/Health Asset Management Corporate and Other Total Group Share of total Group pre-diversified risk 2015 2,274 2,019 686 580 5,559 9.8 % 2014 2,166 2,090 686 707 5,669 10.6 % Major failures and disasters also at our outsourcing providers, which could cause a severe disruption to our working environment, repre­ sent significant operational risks for the Allianz Group. Our Business Continuity and Crisis Management framework strives to protect criti­ cal business functions from these shocks and enables them to carry out their core tasks on time and at the highest standard. Regularly enhanced, business continuity and crisis activities are embedded in the company’s risk management processes. Allianz works on a Cyber and Information Security program on an ongoing basis, in order to better respond to current external devel­ opments and to further strengthen the internal control environment around related operational risks. The decrease shown in the operational risk is driven by the regular update of local parameters. other risks There are certain risks that cannot be fully quantified across the Group using our partial internal risk capital model. For these risks we also pursue a systematic approach with respect to identification, analysis, assessment, monitoring, and steering. In general, the risk assessment is based on qualitative criteria or scenario analyses. The most important of these other risks are strategic, liquidity and repu­ tational risk. Strategic risk Strategic risk is the risk of an unexpected negative change in the company’s value arising from the adverse effect of management decisions on business strategies and their implementation. Strategic risks are evaluated and analyzed in the strategic and planning dialogue between Allianz Group and its operating entities. To ensure proper implementation of strategic goals in the current business plan, strategic controls are carried out by monitoring respective business targets. We also constantly monitor market and competitive conditions, capital market requirements, regulatory conditions, etc., to decide whether to make strategic adjustments. In addition, strategic decisions are discussed in various Board of Man­ agement level committees (e.g. Group Capital Committee, Group Finance and Risk Committee). The assessment of the associated risks is a fundamental element in these discussions. C Group Management Report Risk and Opportunity Report and Financial Control Risk and Opportunity Report 112 131 Controls over Financial Reporting and Risk Capital Liquidity risk Liquidity risk is defined as the risk that requirements from current or future payment obligations cannot be met or can only be met on the basis of adversely altered conditions. Liquidity risk can arise primarily if there are mismatches in the timing of cash flows on the asset and liability side. Detailed information regarding the Allianz Group’s liquidity risk exposure, liquidity and funding – including changes in cash and cash equivalents – is provided in Liquidity and Funding page 105 onwards and notes 17, 23, 24 and 43 to Resources from the consolidated financial statements. The main goal of planning and managing Allianz SE’s liquidity position is to ensure that we are always able to meet payment obliga- tions. To comply with this objective, the liquidity position of Allianz SE is monitored and forecast on a daily basis. Strategic liquidity planning over time horizons of 12 months and three years is reported to the Board of Management regularly. The accumulated short-term liquidity forecast is updated daily and is subject to an absolute minimum strategic cushion amount and an absolute minimum liquidity target. Both are defined for the Allianz SE cash pool in order to be protected against short-term liquidity crises. As part of our strategic planning, contingent liquidity requirements and sources of liquidity are taken into account to ensure that Allianz SE is able to meet any future payment obligations even under adverse conditions. Major contingent liquidity require- ments include non-availability of external capital markets, combined market and catastrophe risk scenarios for subsidiaries, as well as lower-than-expected profits and dividends from subsidiaries. Our insurance operating entities manage liquidity risk locally, using asset/liability management systems designed to ensure that assets and liabilities are adequately matched. The local investment strategies particularly focus on the quality of investments and ensure a significant portion of liquid assets (e.g. high-rated government bonds or covered bonds) in the portfolios. This also allows us to meet increased liquidity requirements in the case of unlikely events. We employ actuarial methods for estimating our liabilities arising from insurance contracts. In the course of standard liquidity planning we reconcile the cash flows from our investment portfolio with the esti- mated liability cash flows. These analyses are performed at the oper- ating entity level and aggregated at the Group level. Regarding our Asset Management business, forecasting and managing liquidity is a regular process designed to meet both regula- tory requirements and Group standards. This process is supported by the liquidity management framework implemented in Allianz Asset Management. In addition, we launched a project in 2015 to develop an enhanced liquidity risk framework taking stress situations into account and allowing for a group-wide consistent aggregation. The framework will be rolled out to the Group during 2016 and will further strengthen the Allianz liquidity position and resilience to stress scenarios. Reputational risk Allianz’s reputation as a well-respected and socially aware provider of financial services is influenced by our behavior in a range of areas such as product quality, corporate governance, financial performance, customer service, employee relations, intellectual capital, and corpo- rate responsibility. Reputational risk is the risk of an unexpected drop in the value of the Allianz SE share price, the value of the in-force busi- ness, or the value of future business, being caused by a decline in our reputation. With the support of Group Communications, Group Compliance and the ESG Office1, Group Risk defines sensitive business areas and applicable risk guidelines, which are mandatory for all operating entities in the Allianz Group. All affected Group and operating entity functions cooperate in the identification of reputational risk. Group Communications is responsible for the risk assessment, based on a Group-wide methodology. In 2015, Allianz has embedded conduct risk triggers for products and services into the reputational risk manage- ment process. Single reputational risk management decisions are integrated in the overall risk management framework and reputational risks are identified and assessed as part of a yearly Top Risk Assessment, during which senior management also decides on a risk management strat- egy and related actions. This is supplemented by quarterly updates. In addition, reputational risk is managed on a case-by-case basis. Single cases with a potential impact on other operating entities or the Group have to be reported to the Allianz Group for pre-approval. Risk governance Risk management fRamewoRk As a provider of financial services, we consider risk management to be one of our core competencies. It is therefore an integral part of our business process. Our risk management framework covers, on a risk- based approach, all operations including IT, processes, products, and departments/subsidiaries within the Group. The key elements of our risk management framework are: − Promotion of a strong risk management culture, supported by a robust risk governance structure. − Consistent application of an integrated risk capital framework across the Group to protect our capital base and support effective capital management. − Integration of risk considerations and capital needs into man- agement and decision-making processes through the attribution of risk and allocation of capital to the various business segments. 1 The Allianz Environmental, Social, Governance (ESG) Board and ESG office are constituted as advisor to the Board of Management of Allianz SE and will further elevate environmental, social, and governance aspects in corporate governance and decision-making processes at the Allianz Group. Annual Report 2015 Allianz Group 127 This comprehensive framework ensures that risks are identified, ana- lyzed, assessed, and managed in a consistent manner across the Group. Our risk appetite is defined by a clear risk strategy and limit structure. Close risk monitoring and reporting allows us to detect potential deviations from our risk tolerance at an early stage at both the Group and operating entity levels. For the benefit of shareholders and policyholders alike, our risk management framework adds value to Allianz SE and its operating entities through the following four primary components: Risk underwriting and identification: A sound risk underwriting and identification framework forms the foundation for adequate risk- taking and management decisions such as individual transaction approvals, new product approvals, and strategic asset allocations. The framework includes risk assessments, risk standards, valuation methods, and clear minimum standards for underwriting. Risk reporting and monitoring: Our comprehensive qualitative and quantitative risk reporting and monitoring framework provides senior management with the transparency and risk indicators to help them decide on our overall risk profile and whether it falls within del- egated limits and authorities. For example, risk dashboards, internal risk allocation, and limit consumption reports are regularly pre- pared, communicated and monitored. Risk strategy and risk appetite: Our risk strategy clearly defines our risk appetite. It ensures that rewards are appropriate for the risks taken and that the delegated authorities are in line with our overall risk-bearing capacity. The risk-return profile is improved through the integration of risk considerations and capital needs into decision- making processes. This also keeps risk strategy and business objec- tives consistent with each other and allows us to take opportunities within our risk tolerance. Communication and transparency: Finally, transparent and robust risk disclosure provides the basis for communicating this strategy to our internal and external stakeholders, ensuring a sustain- able positive impact on valuation and financing. It also strengthens the risk awareness and risk culture throughout the entire Group. Risk goveRnance stRuctuRe As a key element of our risk management framework, Allianz’s approach to risk governance enables an integrated management of local and global risks and ensures that our risk profile remains con- sistent with our risk strategy and our capacity to bear risks. Supervisory Board and Board of Management Within our risk governance system, the Supervisory Board and Board of Management of Allianz SE have both Allianz SE and Group-wide responsibilities and have set up committees to provide them with support. Examples include: Supervisory Board The Risk Committee of the Supervisory Board monitors the effective- ness of the Allianz risk management and monitoring framework. Furthermore, it focuses on risk-related developments as well as gen- eral risks and specific risk exposures. Board of Management The Board of Management formulates business objectives and a cor- responding, consistent risk strategy. The core elements of the risk framework are set out in the Allianz Group Risk Policy, which is approved by the Board of Management. − The Group Capital Committee supports the Board of Manage- ment with recommendations regarding the capital structure, capital allocation, and investment strategy, including the strate- gic asset allocation. − The Group Finance and Risk Committee (GFRC) ensures over- sight of the Group’s and Allianz SE’s risk management frame- work, acting as a primary early-warning function by monitoring the Allianz Group’s and Allianz SE’s risk profiles as well as the availability of capital. The GFRC also ensures that an adequate relationship between return and risk is maintained. Addition- ally, the GFRC defines risk standards, forms the limit-setting authority within the framework set by the Board of Management and approves major single financing and reinsurance trans- actions. Overall risk organization and roles in risk management A comprehensive system of risk governance is achieved by setting standards related to organizational structure, risk strategy and appe- tite, written policies, limit systems, documentation, and reporting. These standards ensure the accurate and timely flow of risk-related information and a disciplined approach towards decision-making and execution at both the global and local level. As a general principle, the “first line of defense” rests with busi- ness managers in the local operating entities and Allianz Investment Management units. They are responsible, in the first instance, for both the risks of and returns on their decisions. Our “second line of defense” is made up of our independent, global oversight functions such as Risk, Actuarial, Compliance and Legal. Audit forms the “third line of defense”. On a periodic basis, Group Audit independently reviews risk governance implementation, performs quality reviews of risk processes, and tests adherence to business standards, including the internal control framework. Group Risk Group Risk is managed by the Group Chief Risk Officer, who reports to the Board member responsible for Finance, Controlling and Risk. Group Risk supports the aforementioned Allianz Group committees 128 Annual Report 2015 Allianz Group C Group Management Report Risk and Opportunity Report and Financial Control Risk and Opportunity Report 112 131 Controls over Financial Reporting and Risk Capital responsible for risk oversight through the analysis and communica- tion of risk management-related information and by facilitating the communication and implementation of committee decisions. For example, Group Risk is operationally responsible for monitoring the limits and accumulation of specific types of risks across business lines, such as natural disasters and exposures to financial markets and counterparties. In addition, Group Risk independently supports the adequacy of the operating entities’ risk management through the development of a common risk management framework and by monitoring adher- ence to Group minimum requirements for methods and processes. Group Risk strengthens the Group’s risk network through regular and close interaction with the operating entities’ management and with key areas such as the local finance, risk, actuarial and investment departments. A strong risk network across the Group allows us to identify risks early and bring them to the attention of management. Operating entities Operating entities are responsible for their own risk management, including adherence to both external requirements (for example, those imposed by local regulators) and internal Group-wide stan- dards. The operating entities’ Board of Management is responsible for setting and approving a local risk strategy during the annual Strategic and Planning Dialogues with the Group and for ensuring operating entities’ adherence to their risk strategy. All business line management functions with a direct profit and loss responsibility (i.e. “first line of defense”, or “risk-taking units”) are in charge of active risk-return management through adherence to delegated limits and the operating entity’s policy framework. “Second line of defense”-functions support, challenge and have the oversight of business functions through proactive risk management. A risk function that is independent from the business line man- agement is established by each operating entity. This function oper- ates under the direction of the operating entity’s Chief Risk Officer. In addition, a local Risk Committee supports both the operating entity’s Board of Management and the Chief Risk Officer by acting as the pri- mary risk controlling body. Group Risk is also represented on the local Risk Committees to enhance the risk dialogue between the Group and the operating entities. Other functions and bodies In addition to Group Risk and the operating entities’ risk functions, legal and compliance and actuarial functions have been established at both the Group and operating entity level, constituting additional components of the “second line of defense”. Group Legal and Compliance seeks to mitigate legal risks with support from other departments. Legal risks include legislative changes, litigation and disputes, regulatory proceedings and con- tractual clauses that are unclear or construed differently by the courts. Compliance risk is the risk of legal or regulatory sanctions, material financial loss, or loss to reputation that an undertaking may suffer as a result of not complying with applicable laws, regulations, and administrative provisions. The objectives of Group Legal and Compliance are to ensure that laws and regulations are observed, to react appropriately to all impending legislative changes or new court rulings, to attend to legal disputes and litigation, and to provide legally appropriate solutions for transactions and business processes. In addition, Group Legal and Compliance is responsible for integrity management, which aims to protect the Allianz Group, our operating entities and employees from regulatory risks. Group Actuarial contributes towards assessing and managing risks in line with regulatory requirements. These risks stem from the risk-taking/mitigating activities involving professional actuarial experience. The role includes, but is not limited to, the activities of: − calculation and oversight of technical reserves for accounting and regulatory purposes, − pricing and profitability oversight, − technical actuarial support of business planning, reporting and result monitoring, − contribution to the effective implementation of the risk manage- ment system. In order to adapt to a continually changing environment, the Global Issues Forum (GIF) supports the Group in the assessment of long- term trend changes in the risk landscape on a timely basis. As an active participant of the Emerging Risk Initiative of the Chief Risk Officer Forum, we monitor with other chief risk officers of major Euro- pean insurance companies and financial conglomerates the industry- wide risk landscape and raise awareness of major risks for the insur- ance industry. Risk management priorities for 2016 In addition to maintaining our high standards and practices in day- to-day risk management and controlling, Allianz has set the following priorities for 2016: Our first priority is to further embed our partial internal model into business steering, for example by providing sound information on potential impacts of management decisions on the Allianz risk profile. Regarding regulatory developments, our second priority is to ensure that we meet the emerging requirements for G-SII (Global Sys- temically Important Insurers). Therefore, we will continue to partici- pate in the capital field-testing exercise conducted by the IAIS (Inter- national Association of Insurance Supervisors). In addition, we will continue to further enhance and strengthen our liquidity risk man- agement framework. Annual Report 2015 Allianz Group 129 Further future challenges and opportunities1 The success of our business is heavily affected by a variety of global, long-term issues. To ensure our sustainable and profitable growth, our strategy places a high priority on monitoring, analyzing and responding to the challenges and opportunities these issues present, today and tomorrow. By consistently following our Group strategy, we are confident that the Allianz Group is in a privileged position to deal with the chal- lenges and opportunities ahead. The most important of these are outlined below. climate and demogRaphic challenges and oppoRtunities Global warming could alter our climate and such changes could result in a range of risks and opportunities that affect our entire busi- ness. We have a Group-wide strategy covering climate-related risks and opportunities for our business and our customers: we finance and insure low-carbon energy projects, such as wind and solar, offer customers a range of “green” solutions, and provide them with advice on weather-related risk reduction. As a company we continually reduce and offset our own carbon emissions. We also incorporate not only environmental, but also social and governance factors into our investment and underwriting processes as well as in asset manage- ment. Demographic changes are also creating both opportunities and challenges for financial services providers. While the urban popula- tions of Asia and Africa are expanding and their middle classes grow- ing, Western populations are aging and their workforces shrinking. With more people over 60 years old than ever before and declining birth rates, social security systems are under pressure and demand is growing for additional accumulation as well as decumulation products. We are responding to these trends by providing integrated insurance and asset management solutions. Our solid market posi- tion in continental Europe and the United States as well as our strong brand and well-diversified product portfolio put us in an excellent position to develop solutions to meet the needs of the retirement, health care, and assistance markets. In addition, many of the world’s industrialized nations are reliant on infrastructure that is 30 to 50 years old, and yet public-sector investments in this area have been declining across the board. In order to upgrade this aging infrastructure, billions of Euros are required per year – figures that most governments are not able to cover, especially considering the increase in social security spending due to demographic effects. At the same time, the current workforce is faced first and foremost with the need to accumulate adequate funds for retirement, which is proving very difficult in the sustained low interest rate environment. We are at the forefront of bringing 1 For further information on the Cautionary note regarding forward-looking statements, please refer to Outlook 2016 from page 92. 130 Annual Report 2015 Allianz Group these two challenges together to find solutions for the long term: bridging the public-sector infrastructure investment gap and provid- ing profitable retirement provisions. The amendment of the Solvency II Delegated Regulation reducing the required amount of regulatory capital for such investments led to increased incentives for insurers to invest in infrastructure projects. The Allianz Group has multi-year experience within this asset class and benefits from its scale which allows direct access to this asset class as the Allianz Group can also invest in large transactions. In emerging economies, the need for formal social security systems is growing due to the weakening of traditional family ties and support networks. From life to health and crop insurance, our growing micro- insurance portfolio helps low-income families in developing countries protect themselves against – and better manage – the risks in life to build a more secure future. For example, in Asia, Allianz is working on an insurance model for rice farmers based on satellite technology. For more information, please refer to Progress in Sustainable Development from page 61. stRategic oppoRtunities fRom digitalization Digitalization is key element of the Renewal Agenda and enables us to completely transform our business moving forward. Digitalization is not merely a tool through which we can innovate or streamline our internal processes; rather, we can also leverage digital technologies and developments to profoundly reshape the customer experience journey design of our operations. From creating fully modular prod- ucts that can be explored and purchased online to enabling manage- ment of the claims process via an app, we can solidify our customer focus and become their partner of choice. To ensure that these advances will not compromise data security and privacy, we are closely involved in political discussions on the update and modern- ization of European privacy legislation. Substantial opportunities arise from entering new digital busi- nesses and making use of related new technologies. Our recently- launched partnership with the Chinese company Baidu, as well as rapidly developing relationships with sharing economy players like the mobility solution Drivy, prove that we can build strong alliances in these evolving markets. We are scaling up our expertise in fields such as telematics, robo advice, and the Internet of Things, while also reinforcing our presence in the “FinTech” and “InsurTech” spaces. These developments aim to make Allianz the leading digital insurer. Internally, we are investing substantially in our digital growth, with related investments into the digital transformation in 2015 of roughly € 650 Mn when excluding basic IT investments and main- tenance. We project that our digital investments will continue at both the local and global level. With these investments we are also placing a strong emphasis on building capabilities to enable productivity gains. By harmonizing our technology and streamlining our opera- tions, we expect to achieve recurring productivity gains of € 1 bn by 2018 throughout the Allianz Group. C Group Management Report Risk and Opportunity Report and Financial Control Risk and Opportunity Report 112 131 Controls over Financial Reporting and Risk Capital Controls over Financial Reporting and Risk Capital Statements pursuant to § 289 (5) and § 315 (2) no. 5 of the German Commercial Code (“Handelsgesetzbuch – HGB”) and explanatory report. accountIng and consolIdatIon processes The accounting and consolidation processes we use to produce con- solidated financial statements are based on a central consolidation and reporting IT solution and local general ledger solutions. The latter are largely harmonized throughout the Group, using standardized processes, master data, posting logics and interfaces for data delivery to the Holding. Access rights to accounting systems are managed according to strict authorization procedures. Accounting rules for the classification, valuation and disclosure of all items in the balance sheet, income statement and related notes of the annual and interim financial statements are primarily defined in our Group accounting manual. Internal controls are embedded in the accounting and consolidation processes to safeguard the accuracy, completeness and consistency of the information provided in the financial statements. Internal controls over financial reporting In line with both our prudent approach to risk governance and com- pliance with regulatory requirements, we have created a structure to identify and mitigate the risk of material errors in our consolidated financial statements. Our internal control system over financial reporting (ICOFR) is based on the revised framework developed by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013 and is regularly reviewed and updated. Our approach also includes the following five interrelated components: Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring. These five components are covered by an Entity Level Control Assessment Process (ELCA), IT General Controls (ITGC) and controls at process levels. The ELCA framework contains controls such as a compliance program or committee gover- nance structure. In the ITGC framework we implemented, for example, controls regarding access right management and project and change management controls. Internal control system approach Internal control system approach Scoping Identify risks Implement key controls Assessment Determination of significant accounts and operating entities to be covered by system of internal control Identification of risk scenarios that could result in a material financial misstatement Implementation of key controls that prevent or detect errors or fraud resulting from risk scenarios Assessment of the design and operating effectiveness of key controls process Annual Report 2015 Allianz Group 131 Our approach can be summarized as follows: − We use a top-down, risk-based approach to determine the accounts and operating entities that should fall under the scope of our internal control system over financial reporting. The meth- odology is described in our ICOFR manual. During the scoping process, materiality and susceptibility to a misstatement are considered simultaneously. The final results are documented in the list of operating entities under the scope of ICOFR as well as in the list of significant accounts. In addition to the quantitative ICOFR calculation, we also consider qualitative criteria – such as expected increase in business volume – which are provided by different Group Centers, Group Audit and external Audit. − Then, our local entities identify risks that could lead to material financial misstatements including all relevant root causes (i.e. human processing errors, fraud, system weaknesses, external factors, etc.). After identifying and analyzing the risks, the poten- tial impacts and occurrence probabilities are evaluated. − Preventive and detective key controls over the financial reporting process have been put in place to reduce the likelihood and the impact of financial misstatements. If a potential risk material- izes, actions are taken to reduce the impact of the financial mis- statement. Given the strong dependence of financial reporting processes upon information technology systems, we also imple- ment IT controls. − Finally, we focus on ensuring that controls are appropriately designed and effectively executed to mitigate risk. We have set consistent documentation requirements across the Allianz Group for elements such as processes, related key controls and their execution. We conduct an annual assessment of our control system to maintain and continuously enhance its effectiveness. Group Audit and local internal audit functions ensure that the overall quality of our control system is subjected to regular con- trol-testing, to assure reasonable design and operating effective- ness. Internal Audit does so through a comprehensive risk-based approach, which holistically assesses the key controls of the company’s internal procedures and processes, including local and Group internal controls over financial reporting. governance Responsibility for ensuring the completeness, accuracy and reliability of our consolidated financial statements rests with the Chairman of the Board of Management and the Board member responsible for Finance, Controlling and Risk of Allianz SE, supported by Group Center functions, the Group Disclosure Committee and operating entities. The Group Disclosure Committee ensures that these board members are made aware of all material information that could affect our disclosures and assesses the completeness and accuracy of the information provided in the quarterly and annual financial reports. The committee met on a quarterly basis before the financial reports were issued. Subsidiaries within the scope of our control system are individu- ally responsible for adhering to the Group’s internal governance and control policy and for creating local Disclosure Committees that are similar to the Group-level committee. The entities’ CEOs and CFOs provide periodic sign-offs to the management of Allianz SE, certifying the effectiveness of their local system of internal controls as well as the completeness, accuracy and reliability of financial data reported to the Holding. Further control mechanIsms In our opinion, a strong internal control environment is key to manag- ing our company successfully and to reinforce trust with our stake- holders. In addition to ICOFR, for example, we have implemented an enhanced internal control environment across our largest Life insur- ance operating entities for the Market Consistent Embedded Value (MCEV) reporting process. Risk capital controls Similar to our ICOFR framework, we have also established a robust and comprehensive control concept in the risk capital calculation and aggregation process, since our internal risk capital calculations incorporate economic factors that are not fully reflected in the accounting results. We have put in place additional controls within our management reporting processes to ensure that these additional estimates are adequately controlled and that the data quality is accurate, consistent and complete. These controls include the validation of models and assumptions by independent reviews and continuous benchmarking to market and/ or peer assumptions and practices. We benchmark and explain our non-market assumptions against practices in the industry, actuarial associations and guidance from supervisory authorities. 132 Annual Report 2015 Allianz Group consoliDAteD finAnciAl stAtements D Annual Report 2015 Allianz Group 133133 D _ consoliDAteD finAnciAl stAtements 135 Consolidated BalanCe sheets 136 Consolidated inCome statements 137 138 139 Consolidated statements of Comprehensive inCome Consolidated statements of Changes in equity Consolidated statements of Cash flows 141 notes to the Consolidated finanCial statements General Information Notes to the Consolidated Income Statements Pages 134 – 242 141 141 150 154 155 157  1 Nature of operations and basis of presentation  2 Summary of significant accounting policies  3 Use of estimates and assumptions  4 Recently adopted and issued accounting pronouncements and changes in the presentation of the consolidated financial statements  5 Consolidation  6 Segment reporting Notes to the Consolidated Balance Sheets 172 172 172 176 176 177 178 180 181 185 185 186 186 190 193 194 195 196 196 Non-current assets and disposal groups classified as held for sale Intangible assets Financial liabilities carried at fair value through income Liabilities to banks and customers Financial assets carried at fair value through income Investments Loans and advances to banks and customers  7 Cash and cash equivalents  8  9 10 11 Reinsurance assets 12 Deferred acquisition costs 13 Other assets 14 15 16 17 18 Unearned premiums 19 Reserves for loss and loss adjustment expenses 20 Reserves for insurance and investment contracts Financial liabilities for unit-linked contracts 21 22 Other liabilities 23 Certificated liabilities 24 25 Subordinated liabilities Equity 134 Annual Report 2015 Allianz Group 199 199 200 200 201 201 201 202 202 203 203 203 203 203 204 204 204 26 Premiums earned (net) 27 28 Interest and similar income Income from financial assets and liabilities carried at fair value through income (net) Fee and commission income 29 Realized gains/losses (net) 30 31 Other income 32 Income and expenses from fully consolidated private equity investments 33 Claims and insurance benefits incurred (net) 34 Change in reserves for insurance and investment contracts (net) Interest expenses Loan loss provisions Impairments of investments (net) Investment expenses 35 36 37 38 39 Acquisition and administrative expenses (net) 40 41 Other expenses Income taxes 42 Fee and commission expenses Other Information 207 209 218 220 220 223 226 229 231 231 233 234 241 242 Litigation, guarantees and other contingencies and commitments Financial instruments and fair value measurement Interests in unconsolidated structured entities 43 Derivative financial instruments 44 45 46 Related party transactions 47 48 Pensions and similar obligations 49 Share-based compensation plans 50 Restructuring plans Earnings per share 51 52 Other information 53 Subsequent events List of participations of the Allianz Group as of 31 December 2015 according to § 313 (2) HGB Responsibility statement Auditor’s report D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes Consolidated balanCe sheets consolidated balance sheets € mn as of 31 December assets Cash and cash equivalents Financial assets carried at fair value through income Investments Loans and advances to banks and customers Financial assets for unit-linked contracts Reinsurance assets Deferred acquisition costs Deferred tax assets Other assets Non-current assets and assets of disposal groups classified as held for sale Intangible assets Total assets liabilities and eQUitY Financial liabilities carried at fair value through income Liabilities to banks and customers Unearned premiums Reserves for loss and loss adjustment expenses Reserves for insurance and investment contracts Financial liabilities for unit-linked contracts Deferred tax liabilities Other liabilities Liabilities of disposal groups classified as held for sale Certificated liabilities Participation certificates and subordinated liabilities Total liabilities Shareholders’ equity Non-controlling interests Total equity Total liabilities and equity note 2015 2014 7 8 9 10 11 12 42 13 14 15 16 17 18 19 20 21 42 22 14 23 24 25 14,842 7,268 509,493 117,630 105,873 14,843 25,234 1,394 38,813 109 13,443 848,942 9,207 25,531 20,660 72,003 486,222 105,873 4,003 38,686 18 8,383 12,258 782,843 63,144 2,955 66,099 13,863 5,875 486,445 117,075 94,564 13,587 22,262 1,046 37,080 235 13,755 805,787 8,496 23,015 19,800 68,989 463,334 94,564 4,932 38,609 102 8,207 12,037 742,085 60,747 2,955 63,702 848,942 805,787 Annual Report 2015 Allianz Group 135 Consolidated inCome statements consolidated income statements € mn Gross premiums written Ceded premiums written Change in unearned premiums Premiums earned (net) Interest and similar income Income from financial assets and liabilities carried at fair value through income (net) Realized gains/losses (net) Fee and commission income Other income Income from fully consolidated private equity investments Total income Claims and insurance benefits incurred (gross) Claims and insurance benefits incurred (ceded) Claims and insurance benefits incurred (net) Change in reserves for insurance and investment contracts (net) Interest expenses Loan loss provisions Impairments of investments (net) Investment expenses Acquisition and administrative expenses (net) Fee and commission expenses Amortization of intangible assets Restructuring charges Other expenses Expenses from fully consolidated private equity investments Total expenses Income before income taxes Income taxes Net income Net income attributable to: Non-controlling interests Shareholders Basic earnings per share (€) Diluted earnings per share (€) 136 Annual Report 2015 Allianz Group note 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 15 50 41 32 42 51 51 2015 76,723 (5,536) (543) 70,645 22,408 (2,307) 7,937 10,945 476 732 2014 73,883 (4,463) (1,146) 68,274 21,443 (1,604) 4,017 10,119 216 696 110,836 103,161 (54,472) (52,140) 2,770 (51,702) (14,065) (1,224) (60) (1,526) (1,094) (25,718) (3,777) (322) (231) (129) (792) 2,490 (49,650) (13,929) (1,261) (45) (894) (961) (23,343) (3,238) (123) (16) (135) (720) (100,640) (94,314) 10,196 (3,209) 6,987 8,848 (2,245) 6,603 371 6,616 14.56 14.55 381 6,221 13.71 13.64 D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes Consolidated statements of Comprehensive inCome consolidated statements of comprehensive income € mn Net income Other comprehensive income Items that may be reclassified to profit or loss in future periods Foreign currency translation adjustments Reclassifications to net income Changes arising during the year Subtotal Available-for-sale investments Reclassifications to net income Changes arising during the year Subtotal Cash flow hedges Reclassifications to net income Changes arising during the year Subtotal Share of other comprehensive income of associates and joint ventures Reclassifications to net income Changes arising during the year Subtotal Miscellaneous Reclassifications to net income Changes arising during the year Subtotal Items that may never be reclassified to profit or loss Actuarial gains and losses on defined benefit plans Total other comprehensive income 2015 6,987 2014 6,603 85 993 1,078 (1,279) (1,694) (2,973) (7) (41) (48) 1 79 80 – 23 23 470 (1,370) 2 1,428 1,431 (641) 7,817 7,176 34 50 85 – 54 54 – (151) (151) (1,607) 6,988 Total comprehensive income 5,617 13,590 Total comprehensive income attributable to: Non-controlling interests Shareholders 414 5,202 534 13,056 For further details concerning income taxes relating to components of the other comprehensive income, please see note 42 Income taxes. Annual Report 2015 Allianz Group 137 Consolidated statements of Changes in equity Unrealized gains and losses (net) Shareholders’ equity Non- controlling interests Total equity Foreign currency translation adjustments (3,313) 1,340 – – (4) – 6,742 7,176 – – – – (1,977) 1,053 13,917 (3,001) – – (3) – – – 4 – (926) 10,920 50,083 13,056 59 (1) (45) (2,405) 60,747 5,202 – 63 244 (3,112) 63,144 2,765 534 – – (33) (311) 2,955 414 – – (144) (270) 2,955 52,849 13,590 59 (1) (78) (2,716) 63,702 5,617 – 63 99 (3,382) 66,099 consolidated statements of changes in eQUitY € mn Balance as of 1 January 2014 Total comprehensive income1 Paid-in capital Treasury shares Transactions between equity holders Dividends paid Balance as of 31 December 2014 Total comprehensive income1 Paid-in capital Treasury shares Transactions between equity holders Dividends paid Paid-in capital 28,869 – 59 – – – 28,928 – – – – – Balance as of 31 December 2015 28,928 Retained earnings 17,786 4,540 – (1) (41) (2,405) 19,878 7,151 – 63 243 (3,112) 24,222 1 Total comprehensive income in shareholders’ equity for the year ended 31 December 2015 comprises net income attributable to shareholders of € 6,616 mn (2014: € 6,221 mn). 138 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes Consolidated statements of Cash flows consolidated statements of cash flows € mn sUmmarY Net cash flow provided by operating activities Net cash flow used in investing activities Net cash flow used in financing activities Effect of exchange rate changes on cash and cash equivalents Change in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period cash flow from operating activities Net income Adjustments to reconcile net income to net cash flow provided by operating activities Share of earnings from investments in associates and joint ventures Realized gains/losses (net) and impairments of investments (net) of: 2015 2014 23,663 (20,394) (2,837) 548 979 13,863 14,842 32,232 (26,927) (3,189) 541 2,656 11,207 13,863 6,987 6,603 (290) (196) Available-for-sale and held-to-maturity investments, investments in associates and joint ventures, real estate held for investment, loans and advances to banks and customers, non-current assets and disposal groups classified as held for sale (6,407) (3,105) Other investments, mainly financial assets held for trading and designated at fair value through income Depreciation and amortization Loan loss provisions Interest credited to policyholder accounts Net change in: Financial assets and liabilities held for trading Reverse repurchase agreements and collateral paid for securities borrowing transactions Repurchase agreements and collateral received from securities lending transactions Reinsurance assets Deferred acquisition costs Unearned premiums Reserves for loss and loss adjustment expenses Reserves for insurance and investment contracts Deferred tax assets/liabilities Other (net) Subtotal Net cash flow provided by operating activities 3,460 1,359 60 5,319 (3,250) (61) 2,365 (806) 202 775 2,040 14,031 262 (2,383) 16,676 23,663 2,537 1,159 45 3,879 375 107 466 (218) (1,219) 1,120 1,039 23,036 (10) (3,384) 25,629 32,232 Annual Report 2015 Allianz Group 139 Consolidated statements of Cash flows – Continued consolidated statements of cash flows € mn cash flow from investing activities Proceeds from the sale, maturity or repayment of: Financial assets designated at fair value through income Available-for-sale investments Held-to-maturity investments Investments in associates and joint ventures Non-current assets and disposal groups classified as held for sale Real estate held for investment Loans and advances to banks and customers (purchased loans) Property and equipment Subtotal Payments for the purchase or origination of: Financial assets designated at fair value through income Available-for-sale investments Held-to-maturity investments Investments in associates and joint ventures Non-current assets and disposal groups classified as held for sale Real estate held for investment Loans and advances to banks and customers (purchased loans) Property and equipment Subtotal Business combinations (note 5): Proceeds from sale of subsidiaries, net of cash disposed Acquisitions of subsidiaries, net of cash acquired Change in other loans and advances to banks and customers (originated loans) Other (net) Net cash flow used in investing activities cash flow from financing activities Net change in liabilities to banks and customers Proceeds from the issuance of certificated liabilities and subordinated liabilities Repayments of certificated liabilities and subordinated liabilities Cash inflow from capital increases Transactions between equity holders Dividends paid to shareholders Net cash from sale or purchase of treasury shares Other (net) Net cash flow used in financing activities sUpplementarY information on the consolidated statements of cash flows Income taxes paid Dividends received Interest received Interest paid 140 Annual Report 2015 Allianz Group 2015 2014 1,529 151,470 3,218 513 187 522 11,465 127 169,032 1,335 124,855 579 709 146 329 8,345 119 136,416 (2,300) (1,693) (170,170) (149,120) (2,474) (884) – (1,273) (5,461) (2,033) (331) (1,271) – (963) (5,005) (1,692) (184,595) (160,076) 19 – (4,142) (708) – (200) (2,403) (665) (20,394) (26,927) 365 5,217 (873) 3,823 (5,044) (3,435) – 99 51 (78) (3,382) (2,716) 64 (157) (2,837) (2,609) 1,878 19,412 (1,265) 6 35 (3,189) (3,081) 1,555 18,851 (1,326) D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes Notes to the Consolidated Financial Statements General InformatIon 1 – Nature of operations and basis of presentation Nature of operatioNs Allianz SE and its subsidiaries (the Allianz Group) offer Property-Casu- alty insurance, Life/Health insurance and Asset Management prod- ucts and services in over 70 countries, with the largest of its opera- tions in Europe. The Allianz Group’s headquarters and Allianz SE as its parent company are located in Munich, Germany. Allianz SE is record- ed in the Commercial Register of the municipal court in Munich under its registered address at Königinstrasse 28, 80802 Munich. Allianz SE is a stock corporation in the form of a European Com- pany (Societas Europaea). Allianz SE shares are listed on all German stock exchanges and Allianz SE American Depositary Receipts (ADRs) are traded in the U.S. over the counter on OTCQX. The consolidated financial statements of the Allianz Group for the year ended 31 December 2015 were authorized for issue by the Board of Management on 16 February 2016. Basis of preseNtatioN The consolidated financial statements of the Allianz Group have been prepared in conformity with International Financial Reporting Stan- dards (IFRS), as adopted under European Union (E.U.) regulations in accordance with § 315a of the German Commercial Code (HGB). With- in these consolidated financial statements, the Allianz Group has applied all standards and interpretations issued by the IASB and endorsed by the E.U. that are compulsory as of 31 December 2015. IFRS comprise International Financial Reporting Standards (IFRS), Inter- national Accounting Standards (IAS) and interpretations developed by the IFRS Interpretations Committee (formerly called the IFRIC) or the former Standing Interpretations Committee (SIC). IFRS do not provide specific guidance concerning all aspects of the recognition and measurement of insurance contracts, reinsur- ance contracts and investment contracts with discretionary partici- pation features. Therefore, as envisioned in IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, to those aspects where specific guidance is not provided by IFRS 4, Insurance Contracts, the provisions embodied under accounting principles generally accepted in the United States of America (US GAAP) as at first-time adoption of IFRS 4 on 1 January 2005 have been applied. The accounting policies adopted are consistent with those of the previous financial year, except for recently adopted IFRS effective 1 January 2015 and for the change in presentation as described in note 4 Recently adopted and issued accounting pronouncements and changes in the presentation of the consolidated financial statements. The consolidated financial statements are prepared as of and for the year ended 31 December and presented in millions of Euro (€ mn), unless otherwise stated. 2 – Summary of significant accounting policies priNCipLes of CoNsoLiDatioN Scope of consolidation In line with IFRS 10, the consolidated financial statements of the Allianz Group comprise the financial statements of Allianz SE and its subsidiaries (including certain investment funds and structured entities) over which the Allianz Group has control. The Allianz Group controls a subsidiary when it is exposed to, or has rights to, variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. Power over a subsidiary arises when the Allianz Group has existing rights that give it the current ability to direct the relevant activities of the subsidiary. This is usually the case when the Allianz Group owns more than half of the voting rights or similar rights. In order to deter- mine whether control exists, potential voting rights that are currently exercisable or convertible are taken into consideration. Where sub- sidiaries have been designed so that voting or similar rights are not the dominant factor of control, such as when any voting rights relate to administrative tasks only and returns are directed by means of contractual arrangements, control is assessed on the basis of the Allianz Group’s level of involvement in defining the terms and fea- tures of these contractual arrangements, as is the case for structured entities. In the case of investment funds managed by Allianz Group internal asset managers, the control assessment considers whether the Allianz Group is in a principal or agent role with a view to the investment funds assessed. This assessment takes into account kick- out rights held by third-party investors as well as the aggregate eco- nomic interest of the Allianz Group in the investment funds assessed. Subsidiaries are consolidated as from the date on which control is obtained by the Allianz Group, up to the date on which the Allianz Group no longer maintains control. Accounting policies of subsidiar- ies are adjusted where necessary to ensure consistency with the accounting policies adopted by the Allianz Group. The effects of intra- Allianz Group transactions are eliminated. Annual Report 2015 Allianz Group 141 recorded at the exchange rate prevailing on the date of the trans- action. At the balance sheet date, monetary assets and liabilities denominated in foreign currencies are translated into the functional currency using the closing exchange rate. Non-monetary assets and liabilities denominated in foreign currencies that are measured at historical cost are translated at historical rates and non-monetary items that are measured at fair value are translated using the closing rate. Foreign currency gains and losses arising from foreign currency transactions are reported in income from financial assets and liabil- ities carried at fair value through income (net), except when the gain or loss on a non-monetary item measured at fair value is recognized in other comprehensive income. In this case, any foreign exchange component of that gain or loss is also recognized in other compre- hensive income. Translation from the functional currency to the presentation currency For the purposes of the consolidated financial statements, the results and financial position of each of the Allianz Group’s subsidiaries are expressed in Euro, the presentation currency of the Allianz Group. Assets and liabilities of subsidiaries not reporting in Euro are trans- lated at the closing rate on the balance sheet date and income and expenses are translated at the quarterly average exchange rate. Any foreign currency translation differences, including those arising from the equity method, are recorded in other comprehensive income. FINANCIAL INSTRUMENTS Recognition and initial measurement Financial assets are generally recognized and derecognized on the trade date, i.e. when the Allianz Group commits to purchase or sell securities or incur a liability. Financial instruments are initially recog- nized at fair value plus, in the case of financial instruments not carried at fair value through income, directly attributable transaction costs. Offsetting Financial assets and liabilities are offset and the net amount is pre- sented in the balance sheet only when there is a legally enforceable right to offset the recognized amounts and there is an intention to either settle on a net basis, or to realize the asset and settle the liability simultaneously. Derecognition A financial asset is derecognized when the contractual rights to the cash flows from the financial asset expire or the Allianz Group trans- fers the asset and substantially all of the risks and rewards of owner- ship. A financial liability is derecognized when it is extinguished. Third-party assets held in an agency or fiduciary capacity are not assets of the Allianz Group and are not presented in these consoli- dated financial statements. In some jurisdictions the ability of subsidiaries to transfer funds to the parent company in the form of dividends or to repay loans is subject to local corporate or insurance laws and regulations as well as solvency requirements. Business combinations including acquisitions and disposals of non-controlling interests Business combinations are accounted for using the acquisition method. Non-controlling interests in the acquiree can be measured either at the acquisition date fair value or at the non-controlling inter- est’s proportionate share of the acquiree’s identifiable net assets. This option is exercised on a case-by-case basis. Associates and joint arrangements Associates are entities over which the Allianz Group can exercise significant influence. In general, if the Allianz Group holds 20 % or more of the voting power in an investee but does not control the investee, it is assumed to have significant influence, unless it can be clearly demonstrated that this is not the case. Investments in associates are generally accounted for using the equity method. Joint arrangements are structures over which the Allianz Group and one or more other parties contractually agreed of sharing con- trol, which exists only when decisions over the relevant activities require the unanimous consent of the parties sharing control. Joint arrangements whereby the Allianz Group has rights to the net assets of the arrangement (joint ventures) are generally accounted for using the equity method. The Allianz Group accounts for all material investments in asso- ciates and joint arrangements with a time lag of no more than three months. Income from investments in associates and joint arrange- ments – excluding distributions – is included in interest and similar income. Accounting policies of associates and joint arrangements are adjusted where necessary to ensure consistency with the accounting policies adopted by the Allianz Group. In some jurisdictions the ability of associates and joint arrange- ments to transfer funds to the Allianz Group in the form of dividends or to repay loans is subject to local corporate or insurance laws and regulations and solvency requirements. FOREIGN CURRENCY TRANSLATION Translation from any foreign currency to the functional currency The individual financial statements of each of the Allianz Group’s subsidiaries are prepared in the prevailing currency in the primary economic environment where the subsidiary conducts its ordinary activities (its functional currency). Transactions recorded in curren- cies other than the functional currency (foreign currencies) are 142 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes Securities lending and repurchase agreements The Allianz Group enters into securities lending transactions and repurchase agreements. If all of the risks and rewards of the securities remain substantially with the Allianz Group these securities are not derecognized. Cash received as collateral in securities lending trans- actions is recognized together with a corresponding liability, whereas securities received as collateral are not recognized under the terms of the agreements if risks and rewards have not been transferred. For repurchase agreements, the proceeds received from the sale are reported under liabilities to banks or customers. Interest expenses from such transactions are accrued over the duration of the agree- ments and reported in interest expenses. If for reverse repo trans- actions all of the risks and rewards of the securities remain substan- tially with the counterparty over the entire lifetime of the agreement, the securities concerned are not recognized as assets. The amounts of cash disbursed are recorded under loans and advances to banks and customers. Interest income on reverse repo agreements is accrued over the duration of the agreements and is reported in inter- est and similar income. Securities borrowing transactions generally require the Allianz Group to deposit cash with the security’s lender. Fees paid are reported as interest expenses. Impairments A held-to-maturity or available-for-sale debt security, as well as a loan, is impaired if there is objective evidence that a loss event has occurred after initial recognition and up to the relevant date of the Allianz Group’s consolidated balance sheet, and that loss event has negatively affected the estimated future cash flows, i.e. amounts due according to the contractual terms of the security are not considered collectible. Once impairment is triggered for an available-for-sale debt instrument, the cumulative loss recognized in the other com- prehensive income is reclassified to profit or loss. The cumulative loss corresponds to the difference between amortized cost and the current fair value of the investment. Further declines in fair value are recognized in other comprehensive income unless there is further objective evidence that such declines are due to a credit-related loss event. If in subsequent periods objective evidence results in a fair value increase after the impairment loss was recognized, the impair- ment loss is reversed through the income statement. The reversal is measured as the lesser of the full original impairment loss previ- ously recognized in the income statement and the subsequent increase in fair value. For held-to-maturity investments and loans, the impairment loss is measured as the difference between the amortized cost and the expected future cash flows using the original effective interest rate. If the amount of the impairment of a held-to- maturity debt security or a loan subsequently increases or decreases due to an event occurring after the initial measurement of impair- ment, the change is recorded in the income statement. For banking entities, valuation allowances of their loan book are reported as loan loss allowances. For all non-banking entities, loans to banks and customers have an investment character and valuation allowances are reported as ‘impairments of investments’. An available-for-sale equity security is considered to be impaired if there is objective evidence that the cost may not be recovered. Objective evidence that the cost may not be recovered, in addition to qualitative impairment criteria, includes a significant or prolonged decline in the fair value below cost. The Allianz Group’s policy consid- ers a decline to be significant if the fair value is below the weighted average cost by more than 20 %. A decline is considered to be prolonged if the fair value is below the weighted average cost for a period of more than nine months. If an available-for-sale equity security is impaired, any further declines in the fair value at subsequent reporting dates are recognized as impairments. Therefore, at each reporting period, for an equity security that was determined to be impaired, additional impairments are recognized for the difference between the fair value and the original cost basis, less any previously recognized impair- ment. Reversals of impairments of available-for-sale equity securities are not recorded through the income statement but recycled out of other comprehensive income when sold. Hedge accounting For derivative financial instruments used in hedge transactions that meet the criteria for hedge accounting, the Allianz Group designates the derivative as a hedging instrument in a fair value hedge, cash flow hedge, or hedge of a net investment in a foreign operation. The Allianz Group documents the hedge relationship, as well as its risk manage- ment objective and strategy for entering into the hedge transaction. The Allianz Group assesses, both at the hedge’s inception and on an ongoing basis, whether the hedging instruments used are expected to be highly effective in offsetting changes in fair values or cash flows of the hedged items. Fair value hedges are hedges of a change in the fair value of a recognized financial asset or liability or an unrecognized firm com- mitment due to a specified risk. Changes in the fair value of a deriva- tive financial instrument, together with the change in fair value of the hedged item attributable to the hedged risk, are recognized in income from financial assets and liabilities carried at fair value through income (net). Cash flow hedges offset the exposure to variability in expected future cash flows that is attributable to a particular risk associated with a recognized asset or liability or a highly probable forecasted transaction. Changes in the fair value of a derivative financial instru- ment that represent an effective hedge are recorded in unrealized gains and losses (net) in equity and are transferred to the consoli- dated income statement when the offsetting gain or loss associated with the hedged item is recognized. Any ineffectiveness of the cash flow hedge is recognized directly in income from financial assets and liabilities carried at fair value through income (net). Furthermore, hedge accounting may be applied to derivative financial instruments used to hedge the foreign currency risk asso- ciated with a net investment in a foreign operation. The effective Annual Report 2015 Allianz Group 143 proportion of gains or losses arising from the measurement of the derivative financial instrument is recognized in foreign currency translation adjustments in equity, while any ineffectiveness is recog- nized directly in income from financial assets and liabilities carried at fair value through income (net). The Allianz Group discontinues hedge accounting prospectively when the hedge is no longer expected to be highly effective, when the derivative financial instrument or the hedged item expires, or is sold, terminated or exercised, or when the Allianz Group decides that hedge accounting is no longer appropriate. Derivative financial instruments designated in hedge accounting relationships are included in the line item other assets and liabilities. Freestanding derivatives are included in the line item financial assets or liabilities held for trading. For further information on derivatives, please refer to note 43 Derivative financial instruments. Disclosures relating to financial instruments The following table summarizes the relationship between balance sheet positions and classes of financial instruments according to IFRS 7. The balance sheet positions are the same as the IAS 39 catego- ries except when noted in parentheses. BaLaNCe sheet LiNe iteMs, ias 39 CateGories aND ifrs 7 CLasses of fiNaNCiaL iNstruMeNts Cash aND Cash eQuiVaLeNts Cash and cash equivalents include balances with banks payable on demand, balances with central banks, cash on hand, treasury bills to the extent they are not included in financial assets held for trading, as well as checks and bills of exchange that are eligible for refinancing at central banks, subject to a maximum term of three months from the date of acquisition. fiNaNCiaL assets aND LiaBiLities CarrieD at fair VaLue throuGh iNCoMe Financial assets and liabilities carried at fair value through income include financial assets and liabilities held for trading as well as financial assets and liabilities designated at fair value through income. Financial assets and liabilities held for trading consist of debt and equity securities that have been principally acquired for the purpose of generating a profit from short-term fluctuations in price or for the purpose of selling in the near future as well as of derivative financial instruments, which include bifurcated embedded deriva- tives of hybrid financial instruments and of insurance contracts. Financial assets and liabilities are designated at fair value through income to eliminate or significantly reduce an accounting mismatch. Subsidiaries must reach out to the Allianz Group Account- ing and Reporting Department for approval before designating any financial asset or liability as at fair value through income. Measurement basis iNVestMeNts fiNaNCiaL assets Cash and cash equivalents Financial assets carried at fair value through income Financial assets held for trading Financial assets designated at fair value through income Investments Available-for-sale investments Held-to-maturity investments Loans and advances to banks and customers (Loans and receivables) Financial assets for unit-linked contracts Other assets Nominal value Fair value Fair value Fair value Amortized cost Amortized cost Fair value Derivative financial instruments used for hedging that meet the criteria for hedge accounting and firm commitments Fair value fiNaNCiaL LiaBiLities Financial liabilities carried at fair value through income Financial liabilities held for trading Financial liabilities designated at fair value through income Liabilities to banks and customers (Other liabilities) Financial liabilities for unit-linked contracts Other liabilities Fair value Fair value Amortized cost Fair value Derivative financial instruments used for hedging that meet the criteria for hedge accounting and firm commitments Fair value Financial liabilities for puttable equity instruments Redemption amount Certificated liabilities (Other liabilities) Subordinated liabilities (Other liabilities) Amortized cost Amortized cost Available-for-sale investments Available-for-sale investments comprise debt and equity securities that are designated as available-for-sale or are not classified as held- to-maturity, loans and advances, or financial assets carried at fair value through income. Available-for-sale investments are initially recognized and subsequently measured at fair value. Unrealized gains and losses, which are the difference between fair value and cost or amortized cost, are recognized as a separate component of other comprehensive income, net of deferred taxes and the latent reserves for premium refunds to the extent that policyholders will participate in such gains and losses on the basis of statutory or contractual regu- lations when they are realized. When an available-for-sale invest- ment is derecognized or determined to be impaired, the cumulative gain or loss previously recorded in other comprehensive income is transferred and recognized in the consolidated income statement. Realized gains and losses on securities are generally determined by applying the average cost method at the subsidiary level. Held-to-maturity investments Held-to-maturity investments are debt securities with fixed or deter- minable payments and fixed maturities, for which the Allianz Group has the positive intent and ability to hold to maturity. These securities are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method. 144 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes Funds held by others under reinsurance contracts assumed Funds held by others under reinsurance contracts assumed relate to cash deposits to which the Allianz Group is entitled, but which the ceding insurer retains as collateral for future obligations of the Allianz Group. The cash deposits are recorded at face value, less any impairment for balances that are deemed not to be recoverable. Investments in associates and joint ventures For details on the accounting for investments in associates and joint ventures please see the section ‘principles of consolidation’. Real estate held for investment Real estate held for investment (i.e. real estate and rights equivalent to real property and buildings, including buildings on leased land) is carried at cost less accumulated depreciation and impairments. Real estate held for investment is depreciated on a straight-line basis over its useful life, with a maximum of 50 years. At each reporting date or whenever there are any indications that the carrying amount may not be recoverable, real estate is tested for impairment by determining its recoverable amount. Subsequent costs are capitalized if they extend the useful life or increase the value of the asset; otherwise they are expensed as incurred. LoaNs aND aDVaNCes to BaNks aND CustoMers Loans and advances are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and which are not classified as financial assets held for trading, desig- nated at fair value through income, or designated as available for sale. Loans and advances are initially recognized at fair value. Sub- sequently, they are measured at amortized cost using the effective interest method. Interest income is accrued on the outstanding carry- ing amount, net of impairments. Using the effective interest method, net deferred fees and premiums or discounts are recorded as an adjustment of other interest income yield over the lives of the related loans. fiNaNCiaL assets for uNit-LiNkeD CoNtraCts Financial assets for unit-linked contracts are recorded at fair value with changes in fair value recognized in the income statement together with the offsetting changes in fair value of the corresponding financial liabilities for unit-linked contracts. reiNsuraNCe assets Assets and liabilities related to reinsurance are reported on a gross basis. Reinsurance assets include balances expected to be recovered from reinsurance companies. The amount of reserves ceded to re- insurers is estimated in a manner consistent with the claim liability associated with the reinsured risks. To the extent that the assuming reinsurers are unable to meet their obligations, the respective ceding insurers of the Allianz Group remain liable to its policyholders for the portion reinsured. Consequently, allowances are made for receiv- ables on reinsurance contracts which are deemed uncollectible. DeferreD aCQuisitioN Costs Deferred acquisition costs (DaC) Costs that vary with and are directly related to the acquisition and renewal of insurance contracts and investment contracts with dis- cretionary participation features are deferred by recognizing a DAC asset. DAC generally consists of commissions, underwriting expenses, and policy issuance costs. At inception, DAC is tested to ensure that it is recoverable over the life of the contracts. Subsequently, loss recog- nition tests at the end of each reporting period ensure that only the amount of DAC that is covered by future profits is carried on the con- solidated balance sheet. Please refer to the section reserves for insur- ance and investment contracts, where details on the corresponding liability adequacy test are explained. For short-duration, traditional long-duration, and limited-pay- ment insurance contracts, DAC is amortized in proportion to premium revenue recognized. For universal life-type and participating life insurance contracts as well as investment contracts with discretionary participation features, DAC is generally amortized over the life of a book of contracts based on estimated gross profits (EGP) or estimated gross margins (EGm), respectively. EGP and EGm are based on best estimate assumptions which are reviewed at the end of each reporting period; the effect of changes is recognized in the reporting period’s income statement. Acquisition costs for unit-linked investment contracts without discretionary participation features accounted for under IAS 39 at fair value are deferred in accordance with IAS 18 if the costs are incremen- tal. For non-unit-linked investment contracts without discretionary participation features accounted for under IAS 39 at amortized cost, acquisition costs that meet the definition of transaction costs under IAS 39 are considered in the aggregate policy reserves. Present value of future profits (pVfp) The value of an insurance business or an insurance portfolio acquired is measured by the PVFP, which is the present value of net cash flows anticipated in the future from insurance contracts in force at the date of acquisition. It is amortized over the life of the related contracts. Deferred sales inducements Sales inducements on insurance contracts are deferred and amor- tized using the same methodology and assumptions as for deferred acquisition costs when they meet the following criteria: the sales inducements are recognized as part of the reserves, explicitly identi- fied in the contract at inception and incremental to amounts credited on similar contracts without sales inducements, and higher than the contract’s expected ongoing crediting rates for periods after the inducement. Annual Report 2015 Allianz Group 145 Shadow accounting For insurance contracts and investment contracts with discretionary participation features, shadow accounting is applied to DAC, PVFP and deferred sales inducements in order to include the effect of unrealized gains or losses in the measurement of these assets in the same way as it is done for realized gains or losses. Accordingly, the assets are adjusted with corresponding charges or credits recognized directly in other comprehensive income as a component of the related unre- alized gain or loss. When the gains or losses are realized they are recognized in the income statement through recycling and prior adjustments due to shadow accounting are reversed. other assets Other assets primarily consist of receivables, accrued dividends, interest and rent as well as own-used property and equipment. Receivables are generally recorded at face value less any pay- ments received, net of valuation allowances. Own-used property and equipment generally is carried at cost less accumulated depreciation and impairments. The assets are depreciated on a straight-line basis over their estimated useful lives. Software, which includes software purchased from third parties or developed internally, is initially recorded at cost and amortized on a straight-line basis over the estimated useful service lives or con- tractual terms. The Allianz Group accounts for fixed assets of its fully consoli- dated private equity investments and alternative investments as property, plant and equipment in line with IAS 16. These assets are carried at cost less accumulated depreciation and impairments. Depreciation is generally computed using the straight-line method over the estimated useful lives of the assets. The table below summarizes estimated useful lives for real estate held for own use, equipment, software, and fixed assets of alternative investments. estiMateD usefuL LiVes (iN Years) Real estate held for own use Software Equipment Fixed assets of alternative investments Years max. 50 2 – 10 2 – 10 4 – 25 iNtaNGiBLe assets aND GooDWiLL The Allianz Group distinguishes between intangible assets with finite and with indefinite useful lives. Intangible assets with finite useful lives are measured at cost less accumulated amortization. If neces- sary, impairment losses are recognized. Intangible assets with indef- inite useful lives are reviewed annually to determine whether the indefinite-life classification is still appropriate. If not, the intangible asset is reclassified from indefinite to finite on a prospective basis. 146 Annual Report 2015 Allianz Group The amortization period of intangible assets with finite useful lives is reviewed at least once a year at year-end. Changes in expected useful lives are treated as changes in accounting estimates. Intangible assets with finite useful lives comprise long-term dis- tribution agreements, acquired business portfolios and customer relationships. The amortization method reflects the pattern in which the asset’s future economic benefits are expected to be consumed. The table below summarizes estimated useful lives and the amortization methods for each class of intangible asset with finite useful lives. estiMateD usefuL LiVes (iN Years) aND aMortizatioN MethoDs Long-term distribution agreements Acquired business portfolios Customer relationships Useful lives Amortization method 10 – 25 20 – 42 8 – 13 straight-line considering contractual terms in proportion to revenue recognized straight-line or in relation to customer churn rates Goodwill is recognized for business combinations in the amount of the consideration transferred in excess of the fair values assigned to the identifiable assets acquired and liabilities assumed. Goodwill is accounted for at the acquiree in the acquiree’s functional currency. Goodwill is not amortized. It is evaluated at least annually whether the goodwill is deemed recoverable. iNsuraNCe, iNVestMeNt aND reiNsuraNCe CoNtraCts Insurance and investment contracts Insurance contracts and investment contracts with discretionary participating features are accounted for under the insurance accounting provisions of US GAAP, as at first-time adoption of IFRS 4 on 1 January 2005, where IFRS 4 does not provide specific guidance. Investment contracts without discretionary participation features are accounted for as financial instruments in accordance with IAS 39. Reinsurance contracts The Allianz Group’s consolidated financial statements reflect the effects of ceded and assumed reinsurance contracts. Assumed rein- surance refers to the acceptance of certain insurance risks by the Allianz Group that other companies have underwritten. Ceded rein- surance refers to the transfer of insurance risk, along with the respec- tive premiums, to one or more reinsurers who will share in the risks. When the reinsurance contracts do not transfer significant insurance risk, deposit accounting is applied as required under the related rein- surance accounting provisions of US GAAP or under IAS 39. Assumed reinsurance premiums, commissions and claim settlements, as well as the reinsurance element of technical provisions are accounted for D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes in accordance with the conditions of the reinsurance contracts, and in consideration of the original contracts for which the reinsurance was concluded. Liability adequacy tests Liability adequacy tests are performed for each insurance portfolio on the basis of estimates of future claims, costs, premiums earned, and proportionate investment income. For short-duration contracts, a premium deficiency is recognized if the sum of expected claim costs and claim adjustment expenses, expected dividends to policy- holders, DAC, and maintenance expenses exceeds related unearned premiums while considering anticipated investment income. For traditional long-duration contracts and limited-payment contracts, if actual experience regarding investment yields, mortality, morbidity, terminations or expense indicates that existing contract liabilities, along with the present value of future gross premiums, will not be sufficient to cover the present value of future benefits and to recover DAC, a premium deficiency is recognized. For other long-duration contracts, if the present value of esti- mated gross profits or margins plus unearned revenue liability, if applicable, will not be sufficient to recover DAC, a premium deficiency is recognized. UNEARNED PREMIUMS For short-duration insurance contracts like most of the property and casualty contracts, premiums to be earned in future years are recorded as unearned premiums. These premiums are earned in subsequent periods in relation to the insurance coverage provided. Amounts charged as consideration for origination of certain long-duration insurance contracts (i.e. initiation or front-end fees) are reported as unearned revenue which are included in unearned premiums. These fees are recognized using the same amortization methodology as DAC. RESERVES FOR LOSS AND LOSS ADJUSTMENT EXPENSES Reserves are established for the payment of losses and loss adjust- ment expenses (LAE) on claims which have occurred but are not yet settled. Reserves for loss and loss adjustment expenses fall into two categories: case reserves for reported claims and reserves for incurred but not reported losses (IBNR). Case reserves for reported claims are based on estimates of future payments that will be made with respect to claims, including LAE relating to such claims. The estimates reflect the informed judg- ment of claims personnel based on general insurance reserving practices and knowledge of the nature and value of a specific type of claim. These case reserves are regularly re-evaluated in the ordinary course of the settlement process and adjustments are made as new information becomes available. IBNR reserves are established to recognize the estimated cost of losses that have occurred but where the Allianz Group has not yet been notified. IBNR reserves, similar to case reserves for reported claims, are established to recognize the estimated costs, including expenses, necessary to bring claims to final settlement. The Allianz Group relies on its past experience, adjusted for current trends and any other relevant factors to estimate IBNR reserves. IBNR reserves are estimates based on actuarial and statistical projections of the expected cost of the ultimate settlement and administration of claims. The analyses are based on facts and circumstances known at the time, predictions of future events, estimates of future inflation and other societal and economic factors. Trends in claim frequency, severity and time lag in reporting are examples of factors used in pro- jecting the IBNR reserves. IBNR reserves are reviewed and revised peri- odically as additional information becomes available and actual claims are reported. In general, reserves for loss and loss adjustment expenses are not discounted, except when payment amounts are fixed and timing is reasonably determinable. Discounted loss reserves as well as their unwinding are presented within reserves for insurance and invest- ment contracts to better reflect the nature of the reserves and to only reflect the net underwriting result within the key performance indi- cator combined ratio. RESERVES FOR INSURANCE AND INVESTMENT CONTRACTS Reserves for insurance and investment contracts include aggregate policy reserves, reserves for premium refunds and other insurance reserves. Aggregate policy reserves The aggregate policy reserves for participating life insurance contracts are calculated using the net level premium method based on assump- tions for mortality, morbidity and interest rates that are guaranteed in the contract or used in determining the policyholder dividends (or premium refunds). For traditional long-duration insurance contracts, such as tradi- tional life and health products, aggregate policy reserves are com- puted using the net level premium method based on best estimate assumptions adjusted for a provision for adverse deviation for mor- tality, morbidity, expected investment yields, surrenders, and expenses at the policy inception date, which remain locked in there- after unless a premium deficiency occurs. The aggregate policy reserves for universal life-type insurance contracts are equal to the account balance, which represents pre- miums received and investment return credited to the policy less deductions for mortality costs and expense charges. The aggregate policy reserve for universal life-type contracts includes insurance reserves for unit-linked insurance contracts and for investment con- tracts with discretionary participation features, as well as liabilities for guaranteed minimum death and similar mortality and morbidity benefits related to non-traditional contracts with annuitization options. Annual Report 2015 Allianz Group 147 fiNaNCiaL LiaBiLities for uNit-LiNkeD CoNtraCts The fair value measurement of financial liabilities for unit-linked contracts is equal to the fair value measurement of the financial assets for unit-linked contracts. other LiaBiLities Other liabilities primarily consist of payables, provisions for pensions and similar obligations, employee-related provisions, deposits retained for reinsurance ceded, and financial liabilities for puttable equity instruments. Pensions and similar obligations For defined benefit plans, the Allianz Group uses the projected unit credit method to determine the present value of its defined benefit obligations and the related service cost and, where applicable, past service cost. The interest rate used to discount the defined benefit obligation is also used to calculate the interest income on plan assets. The resulting net interest expense or income is recognized in profit or loss under administrative expenses in the consolidated income statement. The interest rates for discounting are determined by refer- ence to market yields at the end of the reporting period on high- quality corporate bonds in the respective markets. For maturities where no high-quality corporate bonds are available as a benchmark, discount factors are estimated by extrapolating current market rates along the yield curve. Share-based compensation plans The share-based compensation plans of the Allianz Group are classi- fied as either equity-settled or cash-settled plans. Equity-settled plans are measured at fair value on the grant date (grant-date fair value) and the grant-date fair value is recognized as an expense over the vesting period. Where equity-settled plans involve equity instru- ments of Allianz SE, a corresponding increase in shareholders’ equity is recognized. Where equity-settled plans involve equity instruments of subsidiaries of the Allianz Group, the corresponding increase is recognized in non-controlling interests. Equity-settled plans include a best estimate of the number of equity instruments that are expected to vest in determining the amount of expense to be recognized. For cash-settled plans, the Allianz Group accrues the fair value of the award as a compensation expense over the vesting period. Upon vest- ing, any change in the fair value of any unexercised awards is also recognized as a compensation expense. Where expected tax deduc- tions differ in amount and timing from the cumulative share-based payment expense recognized in profit or loss, deferred taxes are rec- ognized on temporary differences. Insurance contract features which are not closely related to the underlying insurance contracts are bifurcated from the insurance contracts and accounted for as derivatives in line with IFRS 4 and IAS 39. The assumptions used for aggregate policy reserves are deter- mined using current and historical client data, industry data, and in the case of assumptions for interest reflect expected earnings on assets, which back the future policyholder benefits. The information used by the Allianz Group’s actuaries in setting such assumptions includes, but is not limited to, pricing assumptions, available experi- ence studies, and profitability analyses. The interest rate assump- tions used in the calculation of deferred acquisition costs and aggre- gate policy reserves are as follows: iNterest rate assuMptioNs Deferred acquisition costs Aggregate policy reserves Traditional long-duration insurance contracts Participating life insurance contracts 2.5 – 6.0 % 2.5 – 6.0 % 2.2 – 5.0 % 0.8 – 4.3 % The Allianz Group has recognized all rights and obligations related to issued insurance contracts according to its accounting policies, and thus has not separately recognized an unbundled deposit com- ponent in respect of any of its insurance contracts. Non-unit-linked investment contracts without discretionary participating features are accounted for under IAS 39. The aggregate policy reserves for those contracts are initially recognized at fair value, or the amount of the deposit by the contract holder, net of the transaction costs that are directly attributable to the issuance of the contract. Subsequently, those contracts are measured at amortized cost using the effective interest rate method. Reserves for premium refunds Reserves for premium refunds include the amounts allocated under the relevant local statutory/contractual regulations or at the entity’s discretion to the accounts of the policyholders and the amounts resulting from the differences between these IFRS-based financial statements and the local financial statements (latent reserves for premium refunds), which will reverse and enter into future profit participation calculations. Unrealized gains and losses recognized for available-for-sale investments are recognized in the latent reserves for premium refunds to the extent that policyholders will participate in such gains and losses on the basis of statutory or contractual regu- lations when they are realized, based on and similar to shadow accounting. The profit participation allocated to participating policy- holders or disbursed to them reduces the reserves for premium refunds. 148 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes Restructuring provisions Restructuring provisions are recognized when programs materially change the scope of business performed by an operating entity or business unit or the manner in which business is conducted, and when the main features of a detailed formal plan have been announced to those affected or the implementation of the restructuring plan has started. Financial liabilities for puttable equity instruments Financial liabilities for puttable equity instruments primarily include the non-controlling interests in the net assets of controlled mutual funds. These interests qualify as a financial liability of the Allianz Group, as they give the holder the right to put the instrument back to the Allianz Group for cash or another financial asset (puttable instrument). These liabilities are generally required to be recorded at the redemption amount with changes recognized in the income statement. CertifiCateD LiaBiLities aND suBorDiNateD LiaBiLities Certificated liabilities and subordinated liabilities are subsequently measured at amortized cost, using the effective interest method to amortize the premium or discount to the redemption value over the life of the liability. eQuitY Issued capital represents the mathematical per-share value received at the issuance of shares. Additional paid-in capital represents the premium exceeding the issued capital received at the issuance of shares. Retained earnings comprise the net income of the current year, earnings not yet distributed from prior years, treasury shares, and any amounts directly recognized in equity according to IFRS. Treasury shares are deducted from shareholders’ equity. No gain or loss is rec- ognized on the sale, issuance, acquisition or cancellation of these shares. Any consideration paid or received is recorded directly in shareholders’ equity. Please refer to the above section on foreign currency translation, where foreign currency changes that are recognized in equity are explained. The effective portion of gains and losses of hedging instru- ments designated as hedges of a net investment in a foreign opera- tion is recognized in foreign currency trans lation adjustments. Unrealized gains and losses (net) include unrealized gains and losses from available-for-sale investments and from derivative financial instruments that meet the criteria for cash flow hedge accounting. Non-controlling interests represent equity in subsidiaries, not attributable directly or indirectly, to Allianz as parent. preMiuMs Premiums for short-duration insurance contracts are recognized as revenues over the period of the contract in proportion to the amount of insurance protection provided. Unearned premiums are calculated separately for each individual policy to cover the unexpired portion of written premiums. Premiums for long-duration insurance contracts are recognized as earned when due. Long-duration insurance contracts are con- tracts that are not cancellable by the insurance company, guaranteed to be renewable, and expected to remain in force over an extended period of time. Revenues for universal life-type and investment contracts rep- resent charges assessed against the policyholders’ account balances for the front-end loads, net of the change in unearned revenue liabil- ities, cost of insurance, surrenders and policy administration, and are included within premiums earned (net). Premiums ceded for reinsurance are deducted from premiums earned. iNterest aND siMiLar iNCoMe aND iNterest eXpeNses Interest income and interest expenses are recognized on an accrual basis. Interest income is recognized using the effective interest method. This line item also includes dividends from available-for- sale equity securities and income from investments in associates and joint ventures. Dividends are recognized in income when the right to receive the dividend is established. Share of earnings from invest- ments in associates and joint ventures represents the share of net income from entities accounted for using the equity method. iNCoMe froM fiNaNCiaL assets aND LiaBiLities CarrieD at fair VaLue throuGh iNCoMe (Net) Income from financial assets and liabilities carried at fair value through income (net) includes all investment income as well as real- ized and unrealized gains and losses from financial assets and liabil- ities carried at fair value through income. In addition, commissions attributable to trading operations and related interest expenses as well as refinancing and transaction costs are included in this line item. Foreign currency gains and losses on monetary items are also reported within income from financial assets and liabilities carried at fair value through income (net). fee aND CoMMissioN iNCoMe Fee and commission income primarily consists of asset manage- ment fees that are recognized when the service is provided. Perfor- mance fees may not be recognized as fee income before the respec- tive benchmark period is completed, because, before its completion, the obligation to pay the fee is conditional, the fund performance is regularly not reliably estimable, and related service is not fully per- formed. In any case, performance-related fees from alternative investment products (‘carried interest’) should not be recognized as revenue prior to the date of the official declaration of distribution by the fund. Annual Report 2015 Allianz Group 149 CLaiMs aND iNsuraNCe BeNefits iNCurreD These expenses consist of claims and insurance benefits incurred during the period, including benefit claims in excess of policy account balances and interest credited to policy account balances. Furthermore, it includes claim handling costs that are directly related to the processing and settlement of claims. Reinsurance recoveries are deducted from claims and insurance benefits. iNCoMe taXes Current income taxes are calculated based on the respective local taxable income and local tax rules for the period. In addition, current income taxes presented for the period include adjustments for uncertain tax payments or tax refunds for periods not yet finally assessed, including interest expense and penalties on the underpay- ment of taxes. For the case that amounts included in the tax return are considered unlikely to be accepted by the tax authorities (uncer- tain tax positions), a provision for income taxes is recognized. The amount is based on the best possible assessment of the expected tax payment. Tax refund claims from uncertain tax positions are recog- nized when it is probable that they can be realized. Deferred tax assets or liabilities are calculated for temporary dif- ferences between the tax bases and the financial statement carrying amounts, including differences from consolidation, unused tax loss carry forwards, and unused tax credits. Measurement is based on enacted or substantively enacted tax rates and tax rules. The Allianz Group recognizes a valuation allowance for deferred tax assets when it is unlikely that a corresponding amount of future taxable profit will be available against which the deductible temporary differences, tax loss carry forwards and tax credits can be utilized. Changes in deferred tax assets and liabilities are generally rec- ognized through profit and loss in the consolidated income state- ment, except for changes recognized directly in equity. 3 – Use of estimates and assumptions The following sections describe complex accounting areas that are especially sensitive to the use of estimates and assumptions. Any change in the assumptions and estimates could, in certain circum- stances, significantly affect the reported results and values because the range of reasonable judgment may in some cases be material. The Allianz Group understands the degree of impact that these judg- ments may have and has established a strong system of governance as well as controls, procedures and guidelines to ensure consistency and soundness of these judgments. reserVes for Loss aND Loss aDJustMeNt eXpeNses, reserVes for iNsuraNCe aND iNVestMeNt CoNtraCts aND DeferreD aCQuisitioN Costs As of 31 December 2015, the Allianz Group reported:1 − reserves for loss and loss adjustments expenses of € 72,003 mn, mainly for the Property-Casualty operations, including run-off business and reinsurance business assumed, − reserves for insurance and investment contracts of € 486,222 mn, mainly for the Life/Health operations, and − deferred acquisition costs of € 25,234 mn. For Life/Health and for Property-Casualty, the central oversight process includes the following key components: Group-wide standards and guidelines: They define the reserving practices that must be conducted by each subsidiary, including aspects of assumptions and estimates. This includes organization and structure, data, methods and reporting. The Allianz Group Actu- arial Department monitors compliance with these standards and guidelines. Regular site visits: The Allianz Group Actuarial Department regu- larly visits Allianz subsidiaries in order to ensure that they apply the group-wide standards and guidelines. The on-site review focuses on all significant changes in assumptions and methodologies as well as on procedures and professional practices relevant for the reserving process. Furthermore, these meetings are to update knowledge of the underlying local business developments. Regular quantitative and qualitative reserve monitoring: On a quarterly basis, the Allianz Group Actuarial Department monitors reserve levels, movements and trends across the Allianz Group. This monitoring is conducted on the basis of quarterly data submitted by the subsidiaries as well as through frequent dialogue with local actuaries. The oversight and monitoring of the Allianz Group’s reserves culminates in quarterly meetings of the Allianz Group Reserve Com- mittee, which is the supervising body that governs all significant reserves. It particularly monitors key developments across the Allianz Group affecting the adequacy of loss reserves. Life/Health reserves are dependent on estimates and assumptions, especially on the life expectancy and health of an insured individual (mortality, longevity and morbidity risk) and on the development of interest rates and investment returns (asset-liability mis match risk). These assumptions also have an impact on the presentation of costs arising from the origination of insurance business (acquisition costs and sales inducements) and the value of acquired insurance business (PVFP). To ensure consistency in the application of actuarial methods 1 Please refer to note 2 Summary of significant accounting policies. For further details, please refer to note 12 Deferred acquisition costs, note 19 Reserves for loss and loss adjustment expenses and note 20 Reserves for insurance and investment contracts. 150 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes and assumptions in the Life/Health reserving process, the Allianz Group has designed a two-stage reserving process: Stage one: Life/Health reserves are calculated by qualified local staff experienced in the business of the subsidiaries. Actuaries in the local entities also conduct tests of the adequacy of the premiums and reserves to cover future claims and expenses (liability adequacy tests). The process follows group-wide standards for applying consis- tent and plausible assumptions. The appropriateness of the reserves and compliance with the group-wide standards is confirmed by the local actuary. Stage two: The Allianz Group Actuarial Department regularly reviews the local reserving processes, including the appropriateness and consistency of assumptions, and analyzes the movements of reserves. Any adjustments to reserves and other insurance-related reporting items are reported to and analyzed together with the Allianz Group Reserve Committee. Property-Casualty reserves are set by leveraging the use of actu- arial techniques and educated judgment. A two-stage process exists for the setting of reserves in the Allianz Group: Stage one: Property-Casualty reserves are calculated by local reserving actuaries in the Allianz operating entities. Reserves are set based on a thorough analysis of historical data, enhanced by interac- tions with other business functions (e.g. Underwriting, Claims and Reinsurance). Actuarial judgment is applied where necessary, espe- cially in cases where data is unreliable, scanty or unavailable. The judgment of Property-Casualty actuaries is based on past experience of the characteristics of each line of business, the current stage of the underwriting cycle and the external environment in which the subsidiary operates. The reserves are proposed to a local reserve com- mittee, whereby the rationale of the selections are discussed and subsequently documented. A final decision on the reserve selection is made in the reserve committee. Local actuaries are responsible for their compliance with the Group Actuarial Standards and Guidelines. Stage two: The Allianz Group Actuarial Department forms an opinion on the adequacy of the reserves proposed by the local entities. The Allianz Group Actuarial Department challenges the operating entities’ selection through their continuous interaction with local teams and quarterly attendance in the local reserve committees. The ability to form a view on reserve adequacy is further enabled by regular reviews of the local reserving practices. Such reviews consist of an evaluation of the reserving process as well as of the appropriateness and consistency of assumptions, and an analysis of movement of reserves. Significant findings from such reviews are communicated in the Allianz Group Reserve Committee to initiate actions where necessary. fair VaLue aND iMpairMeNts of fiNaNCiaL iNstruMeNts The Allianz Group carries certain financial instruments at fair value and discloses the fair value of most other assets and liabilities. The fair value of an asset or liability is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. Assets and liabilities measured or disclosed at fair value in the consolidated financial statements are measured and classified in accordance with the fair value hierarchy in IFRS 13, which categorizes the inputs to valuation techniques used to measure fair value into three levels. The level 1 inputs of financial instruments that are traded in active markets are based on unadjusted quoted market prices or dealer price quotations for identical assets or liabilities on the last exchange trading day prior to or at the reporting date, if the latter is a trading day. Level 2 applies if the market for a financial instrument is not active or when the fair value is determined by using valuation tech- niques based on observable input parameters. Such market inputs are observable substantially over the full term of the asset or liability and include references to formerly quoted prices for identical instru- ments from an active market, quoted prices for identical instruments from an inactive market, quoted prices for similar instruments from active markets, and quoted prices for similar instruments from inactive markets. Market observable inputs also include interest rate yield curves, volatilities and foreign currency exchange rates. Level 3 applies where not all input parameters are observable in the market. Accordingly, the fair value is based on valuation tech- niques using non-market observable inputs. Valuation techniques include the discounted cash flow method, comparison to similar instruments for which observable market prices exist and other valu- ation models. Appropriate adjustments are made for credit risks. In particular when observable market inputs are not available, the use of estimates and assumptions may have a strong impact on the valu- ation outcome. For fair value measurements categorized as level 2 and level 3, the Allianz Group uses valuation techniques consistent with the three widely used valuation techniques listed in IFRS 13: − Market approach: Prices and other relevant information gener- ated by market transactions involving identical or comparable assets or liabilities. − Cost approach: Amount that would currently be required to replace the service capacity of an asset (replacement cost). − Income approach: Conversion of future amounts such as cash flows or income to a single current amount (present value tech- nique). Annual Report 2015 Allianz Group 151 There is no one-to-one connection between valuation technique and hierarchy level. Depending on whether valuation techniques are based on significant observable or unobservable inputs, financial instruments are classified in the fair value hierarchy. In general, the subsidiaries assume responsibility for assessing fair values and hierarchies of assets and liabilities. This is consistent with the decentralized organizational structure of the Allianz Group and reflects local managers’ market insights. Estimates and assump- tions are particularly significant when determining the fair value of financial instruments for which at least one significant input is not based on observable market data (classified within level 3 of the fair value hierarchy). The availability of market information is determined by the relative trading levels of identical or similar instruments in the market, with emphasis placed on information that represents actual market activity or binding quotations from brokers or dealers. The degree of judgment used in measuring the fair value of financial instruments closely correlates with the level of non-market observable inputs. The Allianz Group uses a maximum of observable inputs and a minimum of non-market observable inputs when mea- suring fair value. Observability of input parameters is influenced by various factors such as type of the financial instrument, whether a market is established for the particular instrument, specific trans- action characteristics, liquidity, and general market conditions. If the fair value cannot be measured reliably, amortized cost is used as a proxy for determining fair values. As of 31 December 2015, the Allianz Group reported financial instruments carried at fair value as follows:1 − € 211,155 mn of the financial assets and € 105,478 mn of the financial liabilities carried at fair value are classified as level 1 of the fair value hierarchy (unadjusted quoted prices in active markets) − € 371,770 mn of the financial assets and € 4,343 mn of the financial liabilities carried at fair value are classified as level 2 of the fair value hierarchy (valuation techniques with observable market inputs) − € 19,145 mn of the financial assets and € 8,317 mn of the financial liabilities carried at fair value are classified as level 3 of the fair value hierarchy (valuation techniques with significant input being non-observable). Level 3 financial assets represent 3.2 % of the Allianz Group’s total financial assets carried at fair value. Financial liabilities classified as level 3 represent 7.0 % of the Allianz Group’s total financial liabilities carried at fair value. 1 Please refer to the consolidated financial statements note 2 Summary of significant accounting policies, note 37 Impairments of investments (net) and note 44 Financial instruments and fair value measurement for further details regarding financial instruments and impairments. 152 Annual Report 2015 Allianz Group The evaluation of whether a financial debt security is impaired requires analysis of the underlying credit risk/ quality of the relevant issuer and involves significant management judgment. In particular, current publicly available information with regard to the issuer and the particular security is considered relating to factors including, but not limited to, evidence of significant financial difficulty of the issuer and breach of contractual obligations of the security, such as a default or delinquency on interest or principal payments. The Allianz Group also considers other factors which could provide objective evi- dence of a loss event, including the probability of bankruptcy and the lack of an active market due to financial difficulty. The presence of either a decline in fair value below amortized cost or the downgrade of an issuer’s credit rating does not by itself represent objective evi- dence of a loss event, but may represent objective evidence of a loss event when considered with other available information. In general, the subsidiaries assume responsibility for assessing fair values and evaluating impairments of financial instruments. This process is consistent with the decentralized organizational structure and reflects the fact that local managers are often best suited to analyze securities trading in local markets. Nevertheless, the subsidiaries are responsible for adhering to the Allianz Group’s internal control policy regarding impairment assessment, measure- ment and disclosure. Subsidiaries must report all impairment deci- sions on debt securities to the Allianz Group Accounting and Reporting department, which then reviews them for consistency and resolves discrepancies. assessMeNt of the iNCLusioN MethoD The relevant criteria for determining the appropriate inclusion method of a company are summarized in note 2 Summary of signifi- cant accounting policies of this Annual Report. The determination of the appropriate inclusion method of some entities involves manage- ment judgment. For some subsidiaries where the Allianz Group does not hold a majority stake, management has assessed that the Allianz Group controls these companies. The Allianz Group controls these entities on the basis of distinctive rights stipulated by shareholder agree- ments between the Allianz Group and the other shareholders in these companies. There are some companies where the Allianz Group holds a majority stake but where management has assessed that the Allianz Group does not control these entities because it has no majority representation in the governing bodies and/or it requires at least the confirmative vote of another investor to pass any decisions over relevant activities. Although the Allianz Group’s share in some companies is below 20 %, management has assessed that the Allianz Group has signifi- cant influence over these companies because it is represented in the governing bodies that decide on the relevant activities of these com- panies. D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes To determine control for investment funds managed by the Allianz Group, management considers in particular the remuneration to which the asset manager is entitled, the exposure to variability of returns from these investments, and the rights held by other parties. When the exposure to variability of returns is within a certain range, significant judgment is required for the determination of the appro- priate inclusion method of these investment funds. For certain investment funds managed by the Allianz Group in which the Allianz Group holds a minority stake, management has assessed that the Allianz Group controls these investment funds because of its asset management role combined with its aggregate economic interest in these investment funds. For certain investment funds managed by third parties where the Allianz Group holds a majority stake, management has assessed that the Allianz Group does not control these investment funds because it has neither a majority representation in the governing bodies of these investment funds nor any substantial removal rights to replace the asset manager. For certain investment funds in which the Allianz Group holds a stake of above 20 %, management has assessed that the Allianz Group has no significant influence because it is not represented in the gov- erning bodies of these investment funds. Pursuant to IFRS 11, investments in joint arrangements have to be classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. The Allianz Group has assessed the nature of all its joint arrangements and determined them to be joint ventures. For further details, please refer to the explanations to the list of page 234 of this Annual participations of the Allianz Group from Report onwards. GooDWiLL As of 31 December 2015, the Allianz Group reported total goodwill of € 12,101 mn, of which:1 − € 2,448 mn related to the business segment Property-Casualty, − € 2,087 mn related to the business segment Life/Health, and − € 7,566 mn related to the business segment Asset Management. The recoverable amounts of all cash generating units (CGUs) to which goodwill has been allocated are typically determined on the basis of value in use calculations. The determination of a CGU’s recoverable amount requires significant judgment regarding the selection of appropriate valuation techniques and assumptions. These assump- tions include the selection of appropriate discount rates, planning horizons, capitalization requirements, and the expected future busi- ness results. Assumptions may need to change as economic, market and business conditions change. As such, the Allianz Group continu- ously evaluates external conditions and the operating performances of the CGUs. The Allianz Group’s processes and controls around the estima- tion of recoverable amounts are generally applied at the Allianz Group level and are designed to minimize subjectivity. For example, the assumptions used are required to be consistent with the para- meters of the well-defined planning and controlling processes. Important input factors for those calculations are the business plan, the estimate of the sustainable returns, and eternal growth rates, as is further explained in note 15 Intangible assets. The Allianz Group also performs sensitivity tests with regard to key value drivers, such as projected long-term combined ratios or discount rates. Furthermore, the Allianz Group reviews market-based business transaction multi- ples where available. This information is used to assess reasonable- ness since directly comparable market value information is not gener- ally available. DeferreD taX assets As of 31 December 2015, the Allianz Group reported deferred tax assets of € 1,394 mn. The deferred tax assets before netting with deferred tax liabilities amounted to € 19,874 mn. € 1,614 mn thereof resulted from tax losses which are carried forward to future periods.2 Deferred tax assets are determined based on tax loss carry for- wards, unused tax credits, and deductible temporary differences between the Allianz Group’s carrying amounts of assets and liabili- ties in its consolidated balance sheet and their tax bases. Deferred tax assets are recognized only to the extent it is probable that sufficient future taxable income will be available for their realization. Assess- ments as to the recoverability of deferred tax assets require the use of judgment regarding assumptions related to estimated future tax- able profits. This includes the character and amounts of taxable future profits, the periods in which those profits are expected to occur, and the availability of tax planning opportunities. The analysis and forecasting required in this process, and as a result the determination of the deferred tax assets, is performed for individual jurisdictions by qualified local tax and financial profes- sionals. Given the potential significance surrounding the underlying estimates and assumptions, Group-wide policies and procedures have been designed to ensure consistency and reliability around the recoverability assessment process. Forecasted operating results are based upon approved business plans, which are themselves subject to a well-defined process of control. As a matter of policy, especially strong evidence supporting the recognition of deferred tax assets is required if an entity has suffered a loss in either the current or pre- ceding period. Recognition and recoverability of all significant deferred tax assets are reviewed by tax professionals at Group level and the Allianz Group Tax Committee. 1 Please refer to note 2 Summary of significant accounting policies and note 15 Intangible assets for further details. 2 Please refer to note 2 Summary of significant accounting policies and note 42 Income taxes for further details. Annual Report 2015 Allianz Group 153 4 – Recently adopted and issued accounting pronouncements and changes in the presentation of the consolidated financial statements reCeNtLY aDopteD aCCouNtiNG proNouNCeMeNts effective 1 January 2015 The following interpretation as well as the amendments to and revi- sions of existing standards became effective for the Allianz Group’s consolidated financial statements as of 1 January 2015: − IFRIC 21, Levies, − IAS 19, Defined Benefit Plan: Employee Contributions, − Annual Improvements to IFRSs 2010 – 2012 Cycle, − Annual Improvements to IFRSs 2011 – 2013 Cycle. These changes had no material impact on the financial results or financial position of the Allianz Group. reCeNtLY issueD aCCouNtiNG proNouNCeMeNts effective on or after 1 January 2016 and not adopted early ifrs 9, Financial Instruments IFRS 9, Financial Instruments, was issued by the IASB in July 2014 and will replace IAS 39 with a new standard. IFRS 9 provides a new approach on how to classify financial instruments based on their cash flow characteristics and the business model under which they are man- aged. Furthermore, the standard introduces a new impairment model for debt instruments and provides new rules for hedge accounting. The effective date is 1 January 2018. However, the IASB decided to propose a deferral of IFRS 9 for insurers to align the effective dates between IFRS 9 and the new insurance contracts standard IFRS 4. The Allianz Group will thoroughly analyze implications from the Exposure Draft on the IFRS 9 deferral for insurers and is currently evaluating the impact of adopting IFRS 9 on its consolidated financial statements. At initial application it can be assumed that the main impact from IFRS 9 on the Allianz Group will arise from the new classification rules lead- ing to more financial instruments being measured as at fair value through profit and loss as well as the new impairment model. peNsioN LiaBiLities aND siMiLar oBLiGatioNs As of 31 December 2015, the Allianz Group reported a defined benefit obligation for defined benefit plans of € 22,327 mn, which is offset by the fair value of plan assets of € 13,333 mn.1 Liabilities for pension and similar obligations and related net pension expenses are determined in accordance with actuarial valu- ation models. These valuations rely on extensive assumptions. Key assumptions including discount rates, inflation rates, compensation increases, pension increases and rates of medical cost trends are defined centrally at the Allianz Group level, considering the circum- stances in the particular countries. In order to ensure their thorough and consistent determination, all input parameters are discussed and defined, taking into consideration economic developments, peer reviews, and currently available market and industry data. The dis- count rate assumptions are determined by reference to yields of high- quality corporate bonds of appropriate duration and currency at the reporting date. In countries where there is no deep market in such bonds, market yields on government bonds are generally used as dis- count rates. Due to changing market and economic conditions, the under- lying assumptions may differ from actual developments. Potential financial impacts from deviations in certain critical assumptions based on respective sensitivity analyses are disclosed in note 48 Pen- sions and similar obligations. restruCturiNG proVisioNs As of 31 December 2015, the Allianz Group reported provisions for restructuring programs of € 112 mn.2 The detailed formal plan of a restructuring program necessary for recognizing a restructuring provision is based on several esti- mates and assumptions, such as the number of employees to be dis- missed, amount of severance payments, impacts of onerous contracts, possibilities of sub-leases of vacated properties, timing of the various steps of the program and in consequence timing of the expected cash flows. Generally, the subsidiaries undertaking the restructuring pro- gram are responsible for determining all underlying estimates and assumptions. For this purpose, the subsidiaries must have imple- mented appropriate procedures in place to plan and control the program. The respective documentation has to be submitted to the Allianz Group Accounting and Reporting department, where qualified staff members review all restructuring programs. This includes a review of all estimates and assumptions, and an assessment of whether all requirements for setting up a restructuring provision are satisfied, including which cost components can be treated as restruc- turing charges. 1 2 Please refer to note 2 Summary of significant accounting policies and note 48 Pensions and similar obliga- tions for further details. Please refer to note 2 Summary of significant accounting policies and note 50 Restructuring plans for further details. 154 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes The amendments and interpretations are not expected to have a material impact on the financial position and financial results of the Allianz Group. Early adoption is generally allowed but not intended by the Allianz Group. ChaNGe iN preseNtatioN Since the third quarter of 2015, certain changes in U.S. life products have been presented net in a single line item in order to provide more relevant information. This change in presentation had no material impact. other reCLassifiCatioNs Certain prior-period amounts have been reclassified to conform to the current period presentation. 5 – Consolidation sCope of CoNsoLiDatioN The number of entities by type listed in the table below is included in the scope of consolidation in addition to the parent company Allianz SE. sCope of CoNsoLiDatioN Number of fully consolidated entities (subsidiaries) Germany Other countries Subtotal Number of fully consolidated investment funds Germany Other countries Subtotal Total number of fully consolidated entities Number of joint ventures valued at equity Number of associates valued at equity 2015 2014 137 672 809 42 41 83 892 33 62 131 695 826 37 40 77 903 26 58 All subsidiaries, joint ventures and associates are individually listed page 234 of in the list of participations of the Allianz Group from this Annual Report onwards. ifrs 15, Revenue from Contracts with Customers In May 2014, the IASB issued IFRS 15, Revenue from Contracts with Customers. IFRS 15 supersedes IAS 18, Revenue, IAS 11, Construction Contracts, and a number of revenue-related interpretations. With the introduction of IFRS 15, the IASB pursued the objective of developing a single revenue standard containing comprehensive principles for recognizing revenue. Following the IASB’s recent decision of deferring IFRS 15 by one year, the new standard is now effective for periods beginning on or after 1 January 2018; earlier application is permitted. The Allianz Group plans to adopt the new standard on the required effective date, after endorsement by the E.U. The Allianz Group is currently evaluat- ing the new rules in order to determine which application method to apply as well as to assess the financial impact from applying the new rules. Fee and commission income, primarily related to asset man- agement fees, is likely to be one of the areas most affected by IFRS 15, but other transactions outside of asset management are being explored as well. ifrs 16, Leases In January 2016, the IASB issued IFRS 16, Leases, which supersedes IAS 17. IFRS 16 eliminates the classification of leases as either operating or finance leases for a lessee. Instead, all leases are treated in a similar way to finance leases under IAS 17. For those leases previously classi- fied as operating leases, the most significant effect of the new require- ments will be an increase in lease assets and financial liabilities and a change to the nature of expenses. IFRS 16 does not require a lessee to recognize assets and liabilities for short-term leases and leases of low-value assets. The effective date announced by the IASB is 1 January 2019, with early adoption permitted if IFRS 15 is applied as well. The Allianz Group will assess the potential impact on its consolidated financial statements resulting from the application of IFRS 16. Further amendments and interpretations In addition to the above-mentioned recently issued accounting pro- nouncements, the following amendments and revisions to standards and interpretations have been issued by the IASB but are not yet effective for or adopted early by the Allianz Group. further aMeNDMeNts aND iNterpretatioNs staNDarD/iNterpretatioN effeCtiVe Date ias 1, Disclosure Initiative ifrs 11, Accounting for Acquisitions of Interests in Joint Operations Annual Improvements to ifrss 2012 – 2014 ias 16 and ias 38, Clarification of Acceptable Methods of Depreciation and Amortisation Annual periods beginning on or after 1 January 2016 Annual periods beginning on or after 1 January 2016 Annual periods beginning on or after 1 January 2016 Annual periods beginning on or after 1 January 2016 Annual Report 2015 Allianz Group 155 The following table summarizes the recognized amounts of assets acquired and liabilities assumed in the context of the TIO busi- ness and the mAC contract: propertY-CasuaLtY iNsuraNCe BusiNess of the territorY iNsuraNCe offiCe (tio) – iDeNtifiaBLe assets aND LiaBiLities Date of initial consoli- dation Equity interest % – 1 January 2015 Goodwill1 Transaction € MN € MN Cash and cash equivalents Financial assets carried at fair value through income Investments 48 Acquisition Loans and advances to banks and customers Fair value 11 79 50 2 32 2 72 37 285 (45) (107) (18) (13) (183) 102 Reinsurance assets Deferred tax assets Other assets Intangible assets Total assets Unearned premiums Reserves for loss and loss adjustment expenses Deferred tax liabilities Other liabilities Total liabilities Total net identifiable assets Intangible assets mainly consist of the fair values of the mAC contract, the TIO brand name, the customer relationships related to the acquired insurance portfolio and the present value of the transferred in-force business. The acquired TIO business comprises goodwill which was deter- mined as follows as of 1 January 2015: propertY-CasuaLtY iNsuraNCe BusiNess of the territorY iNsuraNCe offiCe (tio) – DeterMiNatioN of GooDWiLL € MN Consideration transferred Total net identifiable assets Goodwill Fair value 150 102 48 The goodwill of € 48 mn of the business combination largely reflects the benefits associated with cost and reinsurance synergies as well as the ability to revert to an existing infrastructure in a new geographical market. None of this goodwill is expected to be deductible for income tax purposes. siGNifiCaNt aCQuisitioNs siGNifiCaNt aCQuisitioNs 2015 Property-Casualty insurance business of the Territory Insurance Office (tio), Darwin 2014 Part of Property-Casualty insurance business of UnipolSai Assicurazioni S.p.A., Bologna 1 At the date of initial consolidation. – 1 July 2014 257 Acquisition The following section describes all significant acquisitions during the year ended 31 December 2015. Property-Casualty insurance business of the Territory Insurance Office (tio), Darwin Effective 1 January 2015, the Allianz Group acquired the Property- Casualty insurance business of the Territory Insurance Office (TIO busi- ness), Darwin, and entered into a 10-year agreement to manage the compulsory motor accidents compensation scheme (mAC contract). The acquired TIO business includes, inter alia, all relevant insurance assets and liabilities, operations, employees and the brand name related to the TIO business. The acquired TIO business represents insurance activities with premiums equal to approximately € 88 mn (for the year 2014). As a result of the acquisition, the Allianz Group expects to increase its presence in the Australian market. It also expects to reduce costs through economies of scale and through synergies in the reinsurance area. The final consideration paid in cash amounted to € 150 mn. 156 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes In administrative expenses, acquisition-related costs in the amount of € 1 mn were included in fiscal year 2014 and in the amount of € 3 mn in fiscal year 2015. The impact of the acquired Property-Casualty insurance business of the Territory Insurance Office on the Allianz Group’s total revenues and net income since the acquisition was € 82 mn and € (4) mn, respectively. siGNifiCaNt DisposaLs aND DeCoNsoLiDatioNs During the year ended 31 December 2015, the Allianz Group disposed of Allianz Suisse Rückversicherungs AG, Zurich, 100 % owned, and Selecta Group S.à r.l., Luxembourg, 99.3 % owned. Both entities were deconsolidated on 11 December 2015. In total, the Allianz Group received proceeds from the sale of € 81 mn. The impacts of the disposals, net of cash disposed, on the con- solidated statement of cashflows for the year ended 31 December 2015 were as follows: iMpaCts of the DisposaLs € MN Investments Loans and advances to banks and customers Other assets Intangible assets Liabilities to banks and customers Reserves for loss and loss adjustment expenses Deferred tax liabilities Other liabilities Other comprehensive income Realized gains from the disposals Non-controlling interests Disposal of subsidiaries, net of cash disposed Total 61 70 259 645 (866) (37) (95) (219) 88 111 3 19 siGNifiCaNt ChaNGes iN NoN-CoNtroLLiNG iNterests During 2015 and 2014, no significant changes in non-controlling interests occurred. 6 – Segment reporting iDeNtifiCatioN of reportaBLe seGMeNts The business activities of the Allianz Group are first organized by product and type of service: insurance activities, asset management activities and corporate and other activ ities. Due to differences in the nature of products, risks and capital allocation, insurance activities are further divided into the business segments Property-Casualty and Life/Health. In accordance with the responsibilities of the Board of Management, each of the insurance business segments is grouped into the following reportable segments: − German Speaking Countries and Central & Eastern Europe, − Western & Southern Europe, Middle East, Africa, India, − Iberia & Latin America, − USA (Life/Health only), − Global Insurance Lines & Anglo Markets, − Asia Pacific, − Allianz Worldwide Partners (Property-Casualty only). Asset management activities represent a separate reportable seg- ment. Due to differences in the nature of products, risks and capital allocation, corporate and other activities are divided into three reportable segments: Holding & Treasury, Banking and Alternative Investments. In total, the Allianz Group has identified 16 reportable segments in accordance with IFRS 8, Operating Segments. The types of products and services from which the reportable segments derive revenues are described below. Property-Casualty In the business segment Property-Casualty, reportable segments offer a wide variety of insurance products to both private and corpo- rate customers, including motor liability and own damage, accident, general liability, fire and property, legal expense, credit and travel insurance. Life/Health In the business segment Life/Health, reportable segments offer a comprehensive range of life and health insurance products on both an individual and a group basis, including annuities, endowment and term insurance, unit-linked and investment-oriented products, as well as full private health, supplemental health and long-term care insurance. Annual Report 2015 Allianz Group 157 Asset Management The reportable segment Asset Management operates as a global pro- vider of institutional and retail asset manage ment products and ser- vices to third-party investors and provides investment management services to the Allianz Group’s insurance operations. The products for retail and institutional customers include equity and fixed- income funds as well as alternative products. The United States and Germany as well as France, Italy and the Asia-Pacific region represent the primary asset management markets. Corporate and Other The reportable segment Holding & Treasury includes the manage- ment and support of the Allianz Group’s businesses through its strategy, risk, corporate finance, treasury, financial reporting, con- trolling, communication, legal, human resources, technology and other functions. The reportable segment Banking consists of the banking activities in Germany, France, Italy, the Netherlands and Bulgaria. The banks offer a wide range of products for corporate and retail clients, with a primary focus on the latter. The reportable seg- ment Alternative Investments provides global alternative investment management services in the private equity, real estate, renewable energy and infrastructure sectors, mainly on behalf of the Allianz Group’s insurance operations. GeNeraL seGMeNt reportiNG iNforMatioN Prices for transactions between reportable segments are set on an arm’s length basis in a manner similar to trans actions with third par- ties. Transactions between reportable segments are eliminated in the Consolidation. For the reportable segment Asset Management, interest revenues are reported net of interest expenses. Financial infor mation is recorded based on reportable segments. Cross-seg- mental country-specific information is not determined. reportaBLe seGMeNts Measure of profit or Loss The Allianz Group uses operating profit to evaluate the performance of its reportable segments as well as of the Allianz Group as a whole. Operating profit highlights the portion of income before income taxes that is attributable to the ongoing core operations of the Allianz Group. 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 per- formance and the comparability of its operating performance over time. To better understand the ongoing operations of the business, the Allianz Group generally excludes the following non-operating effects: − acquisition-related expenses and the amortization of intangible assets, as these relate to business combinations, − interest expenses from external debt, as these relate to the capital structure of the Allianz Group, − income from fully consolidated private equity investments (net), as this represents income from industrial holdings, which is out- side the Allianz Group’s normal scope of operating business, − income from financial assets and liabilities carried at fair value through income (net), as this does not reflect the Allianz Group’s long-term performance, − realized capital gains and losses (net) or impairments of invest- ments (net), as the timing of sales that would result in such real- ized gains or losses is largely at the discretion of the Allianz Group and impairments are largely dependent on market cycles or issuer-specific events over which the Allianz Group has little or no control and which can vary, sometimes materially, over time, − one-off effects from pension revaluation. Allianz SE has a joint liability for a large part of the pension provisions of its German subsidiaries. Service costs incurred in this context are borne by the German subsidiaries and disbursed to Allianz SE. In the financial year 2014, the German subsidiaries of Allianz SE changed the application of the option provided by article 67 (1) sentence 1 of the Introductory Act to the German Commercial Code (EGHGB) to distribute the conversion expenses resulting from the first-time application of the German Accounting Law Modernization Act ( BilMoG) in 2010 over a period of up to 15 years in such a way that conversion expenses were fully recog- nized in the first quarter of 2014. Additionally, effective 1 January 2015, the cost allocation scheme for the pension provisions between the German subsidiaries and Allianz SE was adapted to reflect the changed interest rate environment. For both effects, the resulting one-off expenses at the German subsidiaries and one-off income at Allianz SE are shown as non-operating items. In case of policyholder participation within the Life/Health insurance business, the one-off expenses and the corresponding one-off income at Allianz SE are presented within operating profit. On the Allianz Group level, the one-off expenses and income offset each other. The only impact on the Allianz Group level is the related policyholder participation, which had a posi- tive impact on income before income taxes of € 148 mn in 2015 and of € 116 mn in 2014. 158 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes The following exceptions apply to this general rule: − In all reportable segments, income from financial assets and liabilities carried at fair value through income (net) is treated as operating profit if the income relates to operating business. − For life/health insurance business and property-casualty insur- ance products with premium refunds, all items listed above are included in operating profit if the profit sources are shared with policyholders. This is also applicable to tax benefits, which are shared with policyholders. IFRS requires that the consolidated income statements present all tax benefits in the income taxes line item, even when they belong to policyholders. In the seg- ment reporting, tax benefits are reclassified and shown within operating profit in order to adequately reflect the policyholder participation in tax benefits. Operating profit should be viewed as complementary to, and not as a substitute for, income before income taxes or net income as deter- mined in accordance with IFRS. reCeNt orGaNizatioNaL ChaNGes Effective 1 January 2015, the Allianz Group has reorganized the struc- ture of its insurance activities to reflect the changes in the responsi- bilities of the Board of Management. The property-casualty insurance operations of the former reportable segment USA have been allocated to the reportable segment Global Insurance Lines & Anglo Markets. Due to further changes in the Board of Management, effective 1 September 2015, the reportable segment Growth Markets ceased to exist. The reallocation of its former parts has led to changes in the structure, the renaming of other reportable segments as well as the introduction of a new reportable segment Asia Pacific which consists of the insurance business in that region. The insurance business in Central & Eastern Europe has been integrated into the previous reportable segment German Speaking Countries, which was renamed to German Speaking Countries and Central & Eastern Europe. The insurance business in Russia and Ukraine has been allocated to the reportable segment Global Insurance Lines & Anglo Markets. The insurance business in India, Middle East and North Africa has been integrated into the previous reportable segment Western & Southern Europe, which was renamed to Western & Southern Europe, Middle East, Africa, India. Previously reported information has been adjusted to reflect this change in the composition of the Allianz Group’s reportable seg- ments. Additionally, some minor reallocations between the report- able segments have been made. Annual Report 2015 Allianz Group 159 Business segment information – Consolidated BalanCe sheets Business segment information – Consolidated BalanCe sheets Property-Casualty Life/Health Asset Management Corporate and Other Consolidation 2015 2014 2015 2014 2015 2014 3,635 643 99,649 13,781 – 9,265 4,647 1,107 23,489 37 2,781 159,034 3,668 601 97,129 14,963 – 8,466 4,595 1,013 23,494 61 2,722 156,710 8,467 6,431 390,785 95,138 105,873 5,632 20,587 310 18,792 72 2,998 7,555 5,238 374,589 91,411 94,564 5,176 17,667 240 18,723 92 3,063 655,086 618,318 156,483 139,900 (134,008) (121,229) Property-Casualty Life/Health Asset Management Corporate and Other Consolidation 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 112 901 17,071 61,169 14,407 – 2,482 19,533 15 12 – 129 878 16,595 58,925 14,276 – 2,681 19,445 – 38 – 8,834 5,807 3,605 10,857 472,010 105,873 3,137 14,856 3 12 95 8,240 4,273 3,222 10,081 449,263 94,564 4,226 13,739 – 13 95 115,702 112,969 625,088 587,714 2,940 2,407 2014 1,449 46 106 72 – – – – 177 2,951 7,286 12,087 2015 1,329 64 230 99 294 2,677 7,653 12,348 – – – – – – – – – – – – 174 174 16 2,750 2,231 – – – – – 2 – – – 1,952 625 127,284 15,591 – – – 1,395 9,626 – 11 750 21,777 – – – – – 80 24,256 12,054 12,213 71,130 (54) (55) (1,712) (15,772) (2,167) (16,684) 2015 (541) (495) (108,454) (6,980) – – – – (489) (3,127) (15) (23) (195) – – (1,712) (22,710) (3,695) (50) (32,018) 2,028 511 108,669 17,547 – – – 1,782 8,595 83 685 648 20,749 – – – – 189 28,028 102 12,231 11,992 73,938 Total equity Total liabilities and equity 2014 (838) (521) (94,048) (6,917) – – – – (521) (3,057) (17) (18) (205) – – (2,167) (24,834) (4,075) (50) (34,943) Group 2015 14,842 7,268 509,493 117,630 105,873 14,843 25,234 1,394 38,813 109 13,443 848,942 Group 2015 9,207 25,531 20,660 72,003 486,222 105,873 4,003 38,686 18 8,383 12,258 782,843 66,099 848,942 2014 13,863 5,875 486,445 117,075 94,564 13,587 22,262 1,046 37,080 235 13,755 805,787 2014 8,496 23,015 19,800 68,989 463,334 94,564 4,932 38,609 102 8,207 12,037 742,085 63,702 805,787 € mn as of 31 December assets Cash and cash equivalents Financial assets carried at fair value through income Investments Loans and advances to banks and customers Financial assets for unit-linked contracts Reinsurance assets Deferred acquisition costs Deferred tax assets Other assets Non-current assets and assets of disposal groups classified as held for sale Intangible assets Total assets € mn as of 31 December liaBilities and eQuitY Financial liabilities carried at fair value through income Liabilities to banks and customers Unearned premiums Reserves for loss and loss adjustment expenses Reserves for insurance and investment contracts Financial liabilities for unit-linked contracts Deferred tax liabilities Other liabilities Liabilities of disposal groups classified as held for sale Certificated liabilities Subordinated liabilities Total liabilities 160 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes Business segment information – Consolidated BalanCe sheets Business segment information – Consolidated BalanCe sheets Property-Casualty Life/Health Asset Management Corporate and Other Consolidation 2015 1,329 64 230 99 – – – 294 2,677 – 7,653 12,348 2014 1,449 46 106 72 – – – 177 2,951 – 7,286 12,087 2015 2014 1,952 625 127,284 15,591 – – – 1,395 9,626 – 11 2,028 511 108,669 17,547 – – – 1,782 8,595 83 685 2015 (541) (495) (108,454) (6,980) – (54) – (1,712) (15,772) – – 2014 (838) (521) (94,048) (6,917) – (55) – (2,167) (16,684) – – 156,483 139,900 (134,008) (121,229) Property-Casualty Life/Health Asset Management Corporate and Other Consolidation 2015 – 174 – – – – 16 2,750 – – – 2014 – 174 – – – – 2 2,231 – – – 115,702 112,969 625,088 587,714 2,940 2,407 2015 2014 2015 2014 750 21,777 – – – – 80 24,256 – 12,054 12,213 71,130 648 20,749 – – – – 189 28,028 102 12,231 11,992 73,938 (489) (3,127) (15) (23) (195) – (1,712) (22,710) – (3,695) (50) (32,018) Total equity Total liabilities and equity (521) (3,057) (17) (18) (205) – (2,167) (24,834) – (4,075) (50) (34,943) Financial assets carried at fair value through income Investments Loans and advances to banks and customers Financial assets for unit-linked contracts Non-current assets and assets of disposal groups classified as held for sale € mn as of 31 December assets Cash and cash equivalents Reinsurance assets Deferred acquisition costs Deferred tax assets Other assets Intangible assets Total assets € mn as of 31 December liaBilities and eQuitY Financial liabilities carried at fair value through income Liabilities to banks and customers Unearned premiums Reserves for loss and loss adjustment expenses Reserves for insurance and investment contracts Financial liabilities for unit-linked contracts Liabilities of disposal groups classified as held for sale Deferred tax liabilities Other liabilities Certificated liabilities Subordinated liabilities Total liabilities 2015 2014 2015 2014 655,086 618,318 3,635 643 99,649 13,781 – 9,265 4,647 1,107 23,489 37 2,781 159,034 112 901 17,071 61,169 14,407 – 2,482 19,533 15 12 – 3,668 601 97,129 14,963 – 8,466 4,595 1,013 23,494 61 2,722 156,710 129 878 16,595 58,925 14,276 – 2,681 19,445 38 – – 8,467 6,431 390,785 95,138 105,873 5,632 20,587 310 18,792 72 2,998 8,834 5,807 3,605 10,857 472,010 105,873 3,137 14,856 3 12 95 7,555 5,238 374,589 91,411 94,564 5,176 17,667 240 18,723 92 3,063 8,240 4,273 3,222 10,081 449,263 94,564 4,226 13,739 – 13 95 2015 2014 2015 2014 Group 2015 14,842 7,268 509,493 117,630 105,873 14,843 25,234 1,394 38,813 109 13,443 848,942 Group 2015 9,207 25,531 20,660 72,003 486,222 105,873 4,003 38,686 18 8,383 12,258 782,843 66,099 848,942 2014 13,863 5,875 486,445 117,075 94,564 13,587 22,262 1,046 37,080 235 13,755 805,787 2014 8,496 23,015 19,800 68,989 463,334 94,564 4,932 38,609 102 8,207 12,037 742,085 63,702 805,787 Annual Report 2015 Allianz Group 161 Business segment information – total revenues and reConCiliation of operating profit (loss) to net inCome (loss) Business segment information – total revenues and reConCiliation of operating profit (loss) to net inCome (loss) Property-Casualty Life/Health Asset Management Corporate and Other Consolidation € mn Total revenues1 Premiums earned (net) Operating investment result Interest and similar income Operating income from financial assets and liabilities carried at fair value through income (net) Operating realized gains/losses (net) Interest expenses, excluding interest expenses from external debt Operating impairments of investments (net) Investment expenses Subtotal Fee and commission income Other income 2015 51,597 46,430 3,601 (25) 252 (72) (59) (337) 3,360 1,474 279 2014 48,322 43,759 3,595 6 186 (71) (20) (323) 3,373 1,260 60 Claims and insurance benefits incurred (net) (30,721) (28,878) Change in reserves for insurance and investment contracts (net)2 Loan loss provisions Acquisition and administrative expenses (net), excluding acquisition-related expenses and one-off effects from pension revaluation Fee and commission expenses Operating amortization of intangible assets Restructuring charges Other expenses Reclassification of tax benefits Operating profit (loss) Non-operating investment result Non-operating income from financial assets and liabilities carried at fair value through income (net) Non-operating realized gains/losses (net) Non-operating impairments of investments (net) Subtotal Income from fully consolidated private equity investments (net) Interest expenses from external debt Acquisition-related expenses One-off effects from pension revaluation Non-operating amortization of intangible assets Reclassification of tax benefits Non-operating items Income (loss) before income taxes Income taxes Net income (loss) Net income (loss) attributable to: Non-controlling interests Shareholders (460) – (13,208) (1,367) – (149) (34) – 5,603 (99) 746 (223) 424 – – – (181) (63) – 181 5,784 (1,660) 4,124 143 3,981 (538) – (12,400) (1,180) – (30) (45) – 5,382 (114) 463 (168) 180 – – – (537) (49) – (406) 4,976 (1,528) 3,448 159 3,290 2015 66,903 24,215 18,331 (2,050) 6,459 (108) (1,199) (1,013) 20,421 1,331 198 (20,986) (13,550) – (6,922) (599) (19) (32) (262) – 3,796 (51) 298 (18) 228 – – – (13) (222) – (6) 3,790 (1,169) 2,621 143 2,478 2014 67,331 24,514 17,307 (1,367) 3,204 (107) (677) (903) 17,457 1,017 156 (20,775) (12,563) – (5,860) (387) (19) 3 (217) – 3,327 (131) 183 (21) 31 – – – (7) (36) – (12) 3,316 (996) 2,320 122 2,198 (4,141) (1,523) (41) 2015 6,479 (8) (12) (13) 8,011 – 7 – – – 4 – – – – – – – – – – – – 11 (31) (11) – (31) 2,266 (817) 1,449 71 1,378 (10) (454) 2014 6,388 7,825 (3,787) (1,445) – 7 5 – – – 2 6 – – – – 3 – – – 4 – 4 – – 6 – (14) (11) (15) 2,588 (967) 1,621 86 1,535 2015 577 790 (15) (85) 237 974 149 – – – – – (60) (1,489) (745) – (9) (2) – (58) 337 (27) 252 (52) (849) 1 224 (8) – (1,377) 374 (1,003) 14 (1,017) 2014 556 – 876 33 – – (573) (77) 259 724 117 (45) (1,310) (567) – – – 8 – (7) (33) 184 (7) 144 (42) (846) 1 558 (8) – (1,013) 356 (657) 15 (673) (432) (192) 2,297 2,603 (945) (820) Group 2015 125,190 – 70,645 68,274 2015 (365) – (321) 9 15 270 – 340 314 (845) (154) (55) 30 457 170 62 (16) (10) (170) (181) (8) 5 – – – – – – – – (62) (250) (267) 63 (204) (1) (203) 2014 (344) (342) 22 (184) 346 – 342 183 (707) (124) (828) 3 – 7 – – 342 134 901 (91) (25) (22) (47) 19 – – – – – (901) (929) (1,020) 890 (129) – (129) 22,408 (2,089) 6,726 (375) (1,258) (1,094) 24,319 10,945 476 (51,702) (14,065) (60) (25,729) (3,777) (19) (231) (129) 62 10,735 (219) 1,211 (268) 724 (60) (849) 12 – (304) (62) (539) 10,196 (3,209) 6,987 371 6,616 2014 122,253 21,443 (1,301) 3,205 (415) (697) (961) 21,274 10,119 216 (49,650) (13,929) (45) (23,351) (3,238) (19) (16) (135) 901 10,402 (303) 812 (197) 312 (23) (846) 7 – (104) (901) (1,554) 8,848 (2,245) 6,603 381 6,221 1 Total revenues comprise statutory gross premiums written in Property-Casualty and Life/Health, operating revenues in Asset Management and total revenues in Corporate and Other (Banking). 2 For the year ended 31 December 2015, includes expenses for premium refunds (net) in Property-Casualty of € (240) mn (2014: € (307) mn). 162 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes Business segment information – total revenues and reConCiliation of operating profit (loss) to net inCome (loss) Business segment information – total revenues and reConCiliation of operating profit (loss) to net inCome (loss) € mn Total revenues1 Premiums earned (net) Operating investment result Interest and similar income Investment expenses Subtotal Fee and commission income Other income Operating income from financial assets and liabilities carried at fair value through income (net) Operating realized gains/losses (net) Interest expenses, excluding interest expenses from external debt Operating impairments of investments (net) Claims and insurance benefits incurred (net) Change in reserves for insurance and investment contracts (net)2 Loan loss provisions Acquisition and administrative expenses (net), excluding acquisition-related expenses and one-off effects from pension revaluation Fee and commission expenses Operating amortization of intangible assets Restructuring charges Other expenses Reclassification of tax benefits Operating profit (loss) Non-operating investment result Non-operating income from financial assets and liabilities carried at fair value through income (net) Non-operating realized gains/losses (net) Non-operating impairments of investments (net) Subtotal Income from fully consolidated private equity investments (net) Interest expenses from external debt Acquisition-related expenses One-off effects from pension revaluation Non-operating amortization of intangible assets Reclassification of tax benefits Non-operating items Income (loss) before income taxes Income taxes Net income (loss) Net income (loss) attributable to: Non-controlling interests Shareholders 2015 51,597 46,430 3,601 (25) 252 (72) (59) (337) 3,360 1,474 279 (30,721) (460) (13,208) (1,367) (149) (34) 5,603 (99) 746 (223) 424 – – – – – – – (181) (63) 181 5,784 (1,660) 4,124 143 3,981 2014 48,322 43,759 3,595 6 186 (71) (20) (323) 3,373 1,260 60 (28,878) (538) (12,400) (1,180) (30) (45) 5,382 (114) 463 (168) 180 – – – – – – – (537) (49) (406) 4,976 (1,528) 3,448 159 3,290 2015 66,903 24,215 18,331 (2,050) 6,459 (108) (1,199) (1,013) 20,421 1,331 198 (20,986) (13,550) – (6,922) (599) (19) (32) (262) – 3,796 (51) 298 (18) 228 – – – – (13) (222) (6) 3,790 (1,169) 2,621 143 2,478 2014 67,331 24,514 17,307 (1,367) 3,204 (107) (677) (903) 17,457 1,017 156 (20,775) (12,563) – 3 – (5,860) (387) (19) (217) 3,327 (131) 183 (21) 31 – – – – (7) (36) (12) 3,316 (996) 2,320 122 2,198 Property-Casualty Life/Health Asset Management Corporate and Other Consolidation 2015 6,479 – 7 (8) – (12) – – (13) 8,011 4 – – – (4,141) (1,523) – (41) – – 2,297 – – – – – – 11 (31) (11) – (31) 2,266 (817) 1,449 71 1,378 2014 6,388 – 7 5 – (10) – – 2 7,825 6 – – – (3,787) (1,445) – 3 – – 2015 577 – 790 (15) – (454) – (85) 237 974 149 – – (60) (1,489) (745) – (9) (2) – 2014 556 – 876 33 – (573) – (77) 259 724 117 – – (45) (1,310) (567) – 8 (7) – 2,603 (945) (820) – 4 – 4 – – 6 (14) (11) – (15) 2,588 (967) 1,621 86 1,535 (58) 337 (27) 252 (52) (849) 1 224 (8) – (33) 184 (7) 144 (42) (846) 1 558 (8) – (432) (192) (1,377) 374 (1,003) 14 (1,017) (1,013) 356 (657) 15 (673) 2015 (365) – (321) 9 15 270 – 340 314 (845) (154) 5 (55) – 30 457 – – 170 62 (16) (10) (170) – (181) (8) – – – – (62) (250) (267) 63 (204) (1) (203) 1 Total revenues comprise statutory gross premiums written in Property-Casualty and Life/Health, operating 2 For the year ended 31 December 2015, includes expenses for premium refunds (net) in Property-Casualty revenues in Asset Management and total revenues in Corporate and Other (Banking). of € (240) mn (2014: € (307) mn). Annual Report 2015 Allianz Group 2014 (344) Group 2015 125,190 2014 122,253 – 70,645 68,274 (342) 22 (184) 346 – 342 183 (707) (124) 3 (828) – 7 342 – – 134 901 (91) (25) (22) – (47) 19 – – – – (901) (929) (1,020) 890 (129) – (129) 22,408 (2,089) 6,726 (375) (1,258) (1,094) 24,319 10,945 476 (51,702) (14,065) (60) (25,729) (3,777) (19) (231) (129) 62 10,735 (219) 1,211 (268) 724 (60) (849) 12 – (304) (62) (539) 10,196 (3,209) 6,987 371 6,616 21,443 (1,301) 3,205 (415) (697) (961) 21,274 10,119 216 (49,650) (13,929) (45) (23,351) (3,238) (19) (16) (135) 901 10,402 (303) 812 (197) 312 (23) (846) 7 – (104) (901) (1,554) 8,848 (2,245) 6,603 381 6,221 163 reportaBle segments – propertY-CasualtY reportaBle segments – propertY-CasualtY € mn Gross premiums written Ceded premiums written Change in unearned premiums Premiums earned (net) Interest and similar income Operating income from financial assets and liabilities carried at fair value through income (net) Operating realized gains/losses (net) Fee and commission income Other income Operating revenues Claims and insurance benefits incurred (net) Change in reserves for insurance and investment contracts (net) Interest expenses Operating impairments of investments (net) Investment expenses Acquisition and administrative expenses (net), excluding one-off effects from pension revaluation Fee and commission expenses Restructuring charges Other expenses Operating expenses Operating profit Non-operating income from financial assets and liabilities carried at fair value through income (net) Non-operating realized gains/losses (net) Non-operating impairments of investments (net) One-off effects from pension revaluation Amortization of intangible assets Non-operating items Income before income taxes Income taxes Net income Net income attributable to: Non-controlling interests Shareholders Loss ratio2 in % Expense ratio3 in % Combined ratio4 in % German Speaking Countries and Central & Eastern Europe Western & Southern Europe, Middle East, Africa, India 2015 14,061 (2,209) (111) 11,741 1,149 (43) 252 162 39 2014 13,673 (2,174) (44) 11,455 1,208 8 186 140 34 2015 11,855 (856) (83) 10,915 931 16 – 33 33 2014 10,939 (829) (104) 10,006 877 (8) – 39 8 13,300 13,030 11,929 10,922 3,952 3,922 18,107 17,061 480 4,285 3,544 (7,778) (387) (14) (59) (114) (3,039) (154) (49) (23) (7,512) (464) (11) (20) (109) (3,012) (134) (4) (21) (6,907) (6,312) (2,799) (2,758) (10,711) (10,140) (306) (286) (2,220) (1,956) 86 (30,721) (28,878) (39) (16) – (103) (3,017) (33) (4) (11) (39) (17) – (106) (2,799) (39) (17) (5) (11,618) (11,287) (10,131) (9,334) (3,878) (3,818) (16,261) (15,362) (469) (423) (4,157) (3,439) 106 178 (46,407) (43,485) 1,683 1,743 1,798 1,588 104 1,846 1,699 74 57 105 86 5,603 5,382 (72) 236 (82) (166) (2) (87) 1,596 (449) 1,147 (1) 1,147 66.2 25.9 92.1 (50) 134 (37) (530) (2) (485) 1,258 (309) 948 8 940 65.6 26.3 91.9 (6) 221 (96) – (40) 79 1,878 (595) 1,283 12 1,271 63.3 27.6 90.9 (45) 172 (98) – (35) (6) 1,583 (602) 980 15 966 63.1 28.0 91.1 Iberia & Latin America Anglo Markets Asia Pacific Allianz Worldwide Partners Consolidation and Other1 Property-Casualty (1,049) (1,035) (4,725) (4,506) (163) (1,225) (704) 11 79 (13,208) (12,400) (1,367) (1,180) Global Insurance Lines & 2015 2014 21,931 (6,239) 302 15,994 1,249 (9) – 667 206 19,680 (4,224) (280) 15,176 1,241 (2) 646 – – (17) (50) – (102) (559) (96) (1) (33) 272 (47) (13) (17) 163 2,009 (497) 1,512 109 1,403 67.0 29.5 96.5 (16) (39) – (91) (543) (9) (18) (22) 141 (31) (7) (13) 68 1,767 (531) 1,236 119 1,117 66.8 29.7 96.5 2014 4,437 (705) (33) 3,699 197 8 – – 18 (6) (3) – (14) – – (1) 2 13 (2) – (2) 11 115 (12) 103 (1) 105 74.6 28.0 102.6 2015 4,566 (738) (87) 3,741 195 14 – – 2 (13) (1) – (16) – – – 74 11 12 1 – (2) 23 97 (60) 37 5 33 74.8 28.0 102.9 2015 774 (254) (19) 501 43 – – – – 543 (1) – – – – – – – – – – (2) (2) 72 (18) 55 15 40 61.1 32.5 93.5 2014 722 (250) (28) 443 37 (1) – – (1) (136) – – – – – – – – – – – (2) (2) 56 (18) 38 16 22 64.5 30.6 95.2 2015 3,975 (200) (237) 3,538 45 (4) 706 – – (4) (3) – (1) – – 128 (1) 5 – (1) (1) 2 130 (41) 89 3 86 62.7 34.6 97.4 2014 3,341 (247) (113) 2,981 38 – – 526 – (13) (1) – (2) (924) (544) – – – 3 – – – 3 108 (27) 81 3 78 65.6 31.0 96.6 2015 2014 2015 2014 (5,565) (4,469) 5,565 4,469 (11) (2) (95) – (106) (90) – (92) 51,597 (4,933) (234) 46,430 3,601 (25) 252 1,474 279 52,010 48,322 (3,961) (602) 43,759 3,595 6 186 1,260 60 48,867 – – – – – 1 – – – – – – – – 4 4 – 60 –5 –5 –5 (460) (72) (59) (337) (149) (34) (99) 746 (223) (181) (63) 181 143 3,981 66.2 28.4 94.6 (538) (71) (20) (323) (30) (45) (114) 463 (168) (537) (49) (406) 159 3,290 66.0 28.3 94.3 90 (30) 60 5,784 4,976 (1,660) (1,528) 4,124 3,448 – – – – – – 11 – – 11 84 – – – – – – – 1 1 1 – 1 – 1 –5 –5 –5 1 2 3 The 2014 analysis of the Allianz Group’s asbestos risks resulted in a reduction of reserves and a positive run-off result of € 86 mn reflected in the operating profit for 2014. Represents claims and insurance benefits incurred (net) divided by premiums earned (net). Represents acquisition and administrative expenses (net), excluding one-off effects from pension revalu- ation, divided by premiums earned (net). 4 5 Represents the total of acquisition and administrative expenses (net), excluding one-off effects from pension revaluation, and claims and insurance benefits incurred (net) divided by premiums earned (net). Presentation not meaningful. 164 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes reportaBle segments – propertY-CasualtY reportaBle segments – propertY-CasualtY € mn Operating income from financial assets and liabilities carried at fair value through income (net) Claims and insurance benefits incurred (net) Change in reserves for insurance and investment contracts (net) Operating impairments of investments (net) Interest expenses Investment expenses Acquisition and administrative expenses (net), excluding one-off effects from pension revaluation Non-operating income from financial assets and liabilities carried at fair value through income (net) Gross premiums written Ceded premiums written Change in unearned premiums Premiums earned (net) Interest and similar income Operating realized gains/losses (net) Fee and commission income Other income Operating revenues Fee and commission expenses Restructuring charges Other expenses Operating expenses Operating profit Non-operating realized gains/losses (net) Non-operating impairments of investments (net) One-off effects from pension revaluation Amortization of intangible assets Non-operating items Income before income taxes Income taxes Net income Net income attributable to: Non-controlling interests Shareholders Loss ratio2 in % Expense ratio3 in % Combined ratio4 in % 2015 14,061 (2,209) (111) 11,741 1,149 (43) 252 162 39 (7,778) (387) (14) (59) (114) (3,039) (154) (49) (23) (72) 236 (82) (166) (2) (87) 1,596 (449) 1,147 (1) 1,147 66.2 25.9 92.1 2014 13,673 (2,174) (44) 11,455 1,208 8 186 140 34 (7,512) (464) (11) (20) (109) (3,012) (134) (4) (21) (50) 134 (37) (530) (2) (485) 1,258 (309) 948 8 940 65.6 26.3 91.9 2015 11,855 (856) (83) 10,915 931 16 – 33 33 (39) (16) – (103) (3,017) (33) (4) (11) (6) 221 (96) – (40) 79 1,878 (595) 1,283 12 1,271 63.3 27.6 90.9 2014 10,939 (829) (104) 10,006 877 (8) – 39 8 (39) (17) – (106) (2,799) (39) (17) (5) (45) 172 (98) – (35) (6) 1,583 (602) 980 15 966 63.1 28.0 91.1 1,683 1,743 1,798 1,588 1 The 2014 analysis of the Allianz Group’s asbestos risks resulted in a reduction of reserves and a positive 4 Represents the total of acquisition and administrative expenses (net), excluding one-off effects from run-off result of € 86 mn reflected in the operating profit for 2014. pension revaluation, and claims and insurance benefits incurred (net) divided by premiums earned (net). 2 3 Represents claims and insurance benefits incurred (net) divided by premiums earned (net). 5 Presentation not meaningful. Represents acquisition and administrative expenses (net), excluding one-off effects from pension revalu- ation, divided by premiums earned (net). Asia Pacific Allianz Worldwide Partners Consolidation and Other1 Property-Casualty German Speaking Countries Western & Southern Europe, and Central & Eastern Europe Middle East, Africa, India Iberia & Latin America 2015 4,566 (738) (87) 3,741 195 14 – – 2 2014 4,437 (705) (33) 3,699 197 8 – – 18 Global Insurance Lines & Anglo Markets 2015 2014 21,931 (6,239) 302 15,994 1,249 (9) – 667 206 19,680 (4,224) (280) 15,176 1,241 (2) – 646 – 13,300 13,030 11,929 10,922 3,952 3,922 18,107 17,061 2015 774 (254) (19) 501 43 – – – – 543 2014 722 (250) (28) 443 37 – – – – 2015 3,975 (200) (237) 3,538 45 (4) – 706 – 2014 3,341 (247) (113) 2,981 38 – – 526 – 480 4,285 3,544 (6,907) (6,312) (2,799) (2,758) (10,711) (10,140) (306) (286) (2,220) (1,956) (13) (1) – (16) (6) (3) – (14) (17) (50) – (102) (16) (39) – (91) – (1) – – – (1) – (1) (4) (3) – (1) (1,049) (1,035) (4,725) (4,506) (163) (136) (1,225) – – – – – (1) (559) (96) (1) (543) (9) (18) – – – – – – (704) – – (13) (1) – (2) (924) (544) – – 2015 2014 2015 2014 (5,565) (4,469) 5,565 4,469 51,597 (4,933) (234) 46,430 3,601 (25) 252 1,474 279 52,010 48,322 (3,961) (602) 43,759 3,595 6 186 1,260 60 48,867 – – (2) – – (90) – (92) 86 (30,721) (28,878) – 1 – – 11 79 – – (460) (72) (59) (337) (538) (71) (20) (323) (13,208) (12,400) (1,367) (1,180) (149) (34) (30) (45) – – (11) – – (95) – (106) – – 11 – – 11 84 – – (11,618) (11,287) (10,131) (9,334) (3,878) (3,818) (16,261) (15,362) (469) (423) (4,157) (3,439) 106 178 (46,407) (43,485) 74 11 12 1 – (2) 23 97 (60) 37 5 33 74.8 28.0 102.9 104 1,846 1,699 74 57 2 13 (2) – (2) 11 115 (12) 103 (1) 105 74.6 28.0 102.6 (33) 272 (47) (13) (17) 163 2,009 (497) 1,512 109 1,403 67.0 29.5 96.5 (22) 141 (31) (7) (13) 68 1,767 (531) 1,236 119 1,117 66.8 29.7 96.5 – – – – (2) (2) 72 (18) 55 15 40 61.1 32.5 93.5 – – – – (2) (2) 56 (18) 38 16 22 64.5 30.6 95.2 128 (1) 5 – (1) (1) 2 130 (41) 89 3 86 62.7 34.6 97.4 105 – 3 – – – 3 108 (27) 81 3 78 65.6 31.0 96.6 – – – – – 1 1 1 – 1 – 1 –5 –5 –5 86 5,603 5,382 – – – – 4 4 (99) 746 (223) (181) (63) 181 (114) 463 (168) (537) (49) (406) 90 (30) 60 5,784 4,976 (1,660) (1,528) 4,124 3,448 – 60 –5 –5 –5 143 3,981 66.2 28.4 94.6 159 3,290 66.0 28.3 94.3 Annual Report 2015 Allianz Group 165 reportaBle segments – life/health reportaBle segments – life/health € mn Statutory premiums1 Ceded premiums written Change in unearned premiums Statutory premiums (net) Deposits from insurance and investment contracts Premiums earned (net) Interest and similar income Operating income from financial assets and liabilities carried at fair value through income (net) Operating realized gains/losses (net) Fee and commission income Other income Operating revenues Claims and insurance benefits incurred (net) Change in reserves for insurance and investment contracts (net) Interest expenses Operating impairments of investments (net) Investment expenses Fee and commission expenses Operating amortization of intangible assets Restructuring charges Other expenses Operating expenses Operating profit (loss) Non-operating income from financial assets and liabilities carried at fair value through income (net) Non-operating realized gains/losses (net) Non-operating impairments of investments (net) One-off effects from pension revaluation Non-operating amortization of intangible assets Non-operating items Income (loss) before income taxes Income taxes Net income (loss) Net income (loss) attributable to: Non-controlling interests Shareholders Margin on reserves2 in basis points (14,678) (14,810) (8,762) (8,683) (94) (965) (670) (101) (377) (608) (4,112) (2,229) (19) (218) (256) (1,962) (425) – (2) (18) (3,878) (2,257) (22) (293) (228) (1,845) (249) – (4) (13) German Speaking Countries and Central & Eastern Europe Western & Southern Europe, Middle East, Africa, India Iberia & Latin America USA Asia Pacific Consolidation Life/Health Global Insurance Lines & Anglo Markets 2015 2014 24,058 (133) (257) 23,668 (8,553) 15,115 9,325 (954) 5,416 209 169 25,176 (159) (344) 24,672 (8,599) 16,073 9,226 383 2,369 203 133 2015 23,591 (561) 52 23,082 2014 23,266 (1,022) (7) 22,237 (18,495) (17,779) (1,368) (1,185) (9,163) (10,734) (4,052) (3,345) (41,632) (41,643) 4,587 3,962 2 946 778 27 4,458 3,918 (66) 742 531 21 29,281 28,387 10,303 9,604 1,255 1,215 4,085 2,542 462 3,061 2,685 (56) (63) 48,484 44,832 (1,092) (1,641) (2,050) (1,367) (1,092) (1,037) (1,090) (798) (20,986) (20,775) (13,550) (12,563) 41 41 (1,615) (1,060) (117) (85) (24) (24) 2015 2,037 (12) (4) 2,021 653 360 27 35 180 – (661) (44) (2) – (8) (209) (100) – – – – – – – (16) (16) 215 (58) 157 42 116 235 2014 1,844 (12) (4) 1,828 643 374 32 26 140 – (605) (100) (2) (1) (7) (202) (70) – – – – 1 – – (16) (15) 213 (48) 165 44 121 256 2015 10,475 (140) 22 10,357 1,193 3,813 55 115 – (112) (1,422) (14) (3) (54) – – – (47) 45 (1) – – 839 (245) 594 – 594 87 2014 11,840 (115) (8) 11,717 984 3,030 57 113 – (84) (672) (8) – (38) – – – – – – (126) (6) 524 (154) 371 – 371 81 (2) (131) 2015 634 (146) 494 6 – 494 74 (12) – – – 555 (332) (58) (1) – (1) – – – – – – – – – – 47 (11) 36 – 36 236 2014 589 (112) (29) 448 – 448 71 (58) (308) (53) (1) – 1 – – – – – – – – (1) (3) – – (4) 11 (8) 2 – 2 71 2015 6,774 (421) (129) 6,224 2,172 838 (12) 11 51 1 (20) (13) (25) (956) (1) – – – – 10 (1) – (179) (170) (253) 28 (224) 38 (262) (30) 2014 5,736 (329) (151) 5,255 1,910 728 (1) 13 32 3 (13) (6) (21) (653) (1) – 8 (5) – 36 (1) – (7) 28 132 (27) 106 31 75 43 – – – – – 3 – – – 2 – – – – – – – – – – 2015 (666) 666 2014 (1,120) 1,120 (41) (9) (4) (3) – (41) (15) (3) (3) – 2015 66,903 (747) (309) 65,847 24,215 18,331 6,459 1,331 198 (108) (1,199) (1,013) (6,922) (599) (19) (32) (262) (51) 298 (18) (13) (222) (6) 3,790 (1,169) 2,621 2014 67,331 (630) (544) 66,157 24,514 17,307 3,204 1,017 156 (107) (677) (903) (5,860) (387) (19) 3 (217) (131) 183 (21) (7) (36) (12) 3,316 (996) 2,320 – – – – – – – – 2 3 – – – – – – – – – – – (10) (17) (10) (17) – (10) (17) 143 2,478 122 2,198 –3 –3 67 65 231 229 841 656 47 15 (83) 105 (10) (17) 3,796 3,327 (27,574) (26,860) (9,241) (8,789) (1,024) (987) (3,244) (1,886) (508) (447) (3,144) (2,580) 46 45 (44,688) (41,504) 1,707 1,527 1,062 – 2 – (13) (2) (12) 1,695 (563) 1,133 16 1,116 – – – (7) (1) (8) 1,518 (500) 1,018 13 1,005 65 63 (4) 240 (17) – (25) 194 1,256 (321) 935 47 888 64 815 (5) 153 (17) – (11) 119 934 (258) 676 34 642 53 (51) (19) (29) (244) (45) (19) (1) (200) Acquisition and administrative expenses (net), excluding one-off effects from pension revaluation (2,062) (2,017) 1 Statutory premiums are gross premiums written from sales of life and health 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 3 Represents operating profit divided by the average of the current and previous year-end net reserves, where net reserves equal reserves for loss and loss adjustment expenses, reserves for insurance and investment contracts and financial liabilities for unit-linked contracts less reinsurance assets. Presentation not meaningful. 166 Annual Report 2015 Allianz Group reportaBle segments – life/health reportaBle segments – life/health € mn Claims and insurance benefits incurred (net) Change in reserves for insurance and investment contracts (net) Statutory premiums1 Ceded premiums written Change in unearned premiums Statutory premiums (net) Premiums earned (net) Interest and similar income Operating realized gains/losses (net) Fee and commission income Other income Operating revenues Interest expenses Investment expenses Operating impairments of investments (net) Fee and commission expenses Operating amortization of intangible assets Restructuring charges Other expenses Operating expenses Operating profit (loss) Non-operating realized gains/losses (net) Non-operating impairments of investments (net) One-off effects from pension revaluation Non-operating amortization of intangible assets Non-operating items Income (loss) before income taxes Income taxes Net income (loss) Net income (loss) attributable to: Non-controlling interests Shareholders Margin on reserves2 in basis points Acquisition and administrative expenses (net), excluding one-off effects from pension revaluation (2,062) (2,017) Non-operating income from financial assets and liabilities carried at fair value through income (net) 2015 2014 24,058 (133) (257) 23,668 (8,553) 15,115 9,325 (954) 5,416 209 169 25,176 (159) (344) 24,672 (8,599) 16,073 9,226 383 2,369 203 133 (14,678) (14,810) (8,762) (8,683) (94) (965) (670) (51) (19) (29) (244) – 2 – (13) (2) (12) 1,695 (563) 1,133 16 1,116 (101) (377) (608) (45) (19) (1) (200) – – – (7) (1) (8) 1,518 (500) 1,018 13 1,005 2015 23,591 (561) 52 23,082 4,587 3,962 2 946 778 27 (4,112) (2,229) (19) (218) (256) (1,962) (425) – (2) (18) (4) 240 (17) – (25) 194 1,256 (321) 935 47 888 64 2014 23,266 (1,022) (7) 22,237 4,458 3,918 (66) 742 531 21 (3,878) (2,257) (22) (293) (228) (1,845) (249) – (4) (13) 815 (5) 153 (17) – (11) 119 934 (258) 676 34 642 53 D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes German Speaking Countries Western & Southern Europe, and Central & Eastern Europe Middle East, Africa, India Iberia & Latin America USA Global Insurance Lines & Anglo Markets Asia Pacific Consolidation Life/Health Deposits from insurance and investment contracts (18,495) (17,779) (1,368) (1,185) (9,163) (10,734) Operating income from financial assets and liabilities carried at fair value through income (net) 29,281 28,387 10,303 9,604 1,255 1,215 4,085 2,542 653 360 27 35 180 – 643 374 32 26 140 – 1,193 3,813 984 3,030 (1,092) (1,641) 55 115 – 57 113 – 2015 2,037 (12) (4) 2,021 2014 1,844 (12) (4) 1,828 2015 10,475 (140) 22 10,357 2014 11,840 (115) (8) 11,717 2015 634 (146) 6 494 – 494 74 (12) – – – 555 (332) (58) (1) – (1) 2014 589 (112) (29) 448 – 448 71 (58) – 1 – 2015 6,774 (421) (129) 6,224 2014 5,736 (329) (151) 5,255 (4,052) (3,345) 2,172 838 (12) 11 51 1 1,910 728 (1) 13 32 3 2015 (666) 666 – – – – (41) (9) (4) (3) – 2014 (1,120) 1,120 – – – – (41) (15) (3) (3) – 2015 66,903 (747) (309) 65,847 2014 67,331 (630) (544) 66,157 (41,632) (41,643) 24,215 18,331 24,514 17,307 (2,050) (1,367) 6,459 1,331 198 3,204 1,017 156 462 3,061 2,685 (56) (63) 48,484 44,832 (308) (53) (1) – – (1,092) (1,037) (1,090) (798) (20) (13) (25) (956) (1) – – – (13) (6) (21) (653) (1) – 8 (5) – 3 41 – – – 2 – – – – – 41 – – 2 3 – – – (20,986) (20,775) (13,550) (12,563) (108) (1,199) (1,013) (6,922) (599) (19) (32) (262) (107) (677) (903) (5,860) (387) (19) 3 (217) (661) (44) (2) – (8) (209) (100) – – – (605) (100) (2) (1) (7) (202) (70) – – – (112) (1,422) (14) (3) (54) (84) (672) (8) – (38) (1,615) (1,060) (117) (85) (24) (24) – – – – – – – – – – – – – – (27,574) (26,860) (9,241) (8,789) (1,024) (987) (3,244) (1,886) (508) (447) (3,144) (2,580) 46 45 (44,688) (41,504) 1,707 1,527 1,062 231 229 841 656 47 15 (83) 105 (10) (17) 3,796 3,327 – – – – (16) (16) 215 (58) 157 42 116 235 – 1 – – (16) (15) 213 (48) 165 44 121 256 (47) 45 (1) – – (126) (6) – – – (2) (131) 839 (245) 594 524 (154) 371 – 594 87 – 371 81 – – – – – – 47 (11) 36 – 36 236 – (1) (3) – – (4) 11 (8) 2 – 2 71 – 10 (1) – (179) (170) (253) 28 (224) 38 (262) (30) – 36 (1) – (7) 28 132 (27) 106 31 75 43 – – – – – – (10) – (10) – (10) – – – – – – (51) 298 (18) (13) (222) (6) (17) 3,790 – (1,169) (17) 2,621 (131) 183 (21) (7) (36) (12) 3,316 (996) 2,320 – (17) 143 2,478 122 2,198 –3 –3 67 65 Annual Report 2015 Allianz Group 167 1 Statutory premiums are gross premiums written from sales of life and health insurance policies, as well 2 Represents operating profit divided by the average of the current and previous year-end net reserves, as gross receipts from sales of unit-linked and other investment-oriented products, in accordance with where net reserves equal reserves for loss and loss adjustment expenses, reserves for insurance and the statutory accounting practices applicable in the insurer’s home jurisdiction. investment contracts and financial liabilities for unit-linked contracts less reinsurance assets. 3 Presentation not meaningful. 65 63 reportaBle segments – asset management reportaBle segments – asset management € mn Net fee and commission income1 Net interest income2 Income from financial assets and liabilities carried at fair value through income (net) Other income Operating revenues Administrative expenses (net), excluding acquisition-related expenses and one-off effects from pension revaluation Restructuring charges Operating expenses Operating profit Realized gains/losses (net) Acquisition-related expenses One-off effects from pension revaluation Amortization of intangible assets Non-operating items Income before income taxes Income taxes Net income Net income attributable to: Non-controlling interests Shareholders Cost-income ratio3 in % 1 2 3 Represents fee and commission income less fee and commission expenses. Represents interest and similar income less interest expenses. Represents operating expenses divided by operating revenues. 2015 6,488 (5) (8) 4 6,479 (4,141) (41) (4,182) 2014 6,380 (3) 5 6 6,388 (3,787) 3 (3,784) 2,297 2,603 – 11 (31) (11) (31) 2,266 (817) 1,449 71 1,378 64.5 4 6 (14) (11) (15) 2,588 (967) 1,621 86 1,535 59.2 168 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes Annual Report 2015 Allianz Group 169 reportaBle segments – Corporate and other reportaBle segments – Corporate and other € mn Interest and similar income Operating income from financial assets and liabilities carried at fair value through income (net) Fee and commission income Other income Operating revenues Interest expenses, excluding interest expenses from external debt Loan loss provisions Investment expenses Administrative expenses (net), excluding acquisition-related expenses and one-off effects from pension revaluation Fee and commission expenses Restructuring charges Other expenses Operating expenses Operating profit (loss) Non-operating income from financial assets and liabilities carried at fair value through income (net) Realized gains/losses (net) Impairments of investments (net) Income from fully consolidated private equity investments (net) Interest expenses from external debt Acquisition-related expenses One-off effects from pension revaluation Amortization of intangible assets Non-operating items Income (loss) before income taxes Income taxes Net income (loss) Net income (loss) attributable to: Non-controlling interests Shareholders Holding & Treasury Banking Alternative Investments Consolidation Corporate and Other 2015 222 (28) 221 148 562 (241) – (76) (917) (405) – – 2014 265 27 61 116 469 (317) – (72) (736) (266) 4 – (1,639) (1,386) (1,032) (1,047) (176) (146) (2,844) (2,571) (1,076) (58) 260 (23) – (849) 1 230 (8) (447) (1,524) 414 (1,110) – (1,110) (917) (32) 171 (6) – (846) 1 563 (8) (157) (1,074) 389 (685) – (685) Cost-income ratio1 for the reportable segment Banking in % 1 Represents investment expenses, administrative expenses (net), excluding acquisition-related expenses and one-off effects from pension revaluation, restructuring charges and other expenses divided by interest and similar income, operating income from financial assets and liabilities carried at fair value through income (net), fee and commission income, other income, interest expenses, excluding interest expenses from external debt, and fee and commission expenses. 170 Annual Report 2015 Allianz Group 2015 546 16 565 1 1,127 (212) (60) (1) (409) (340) (9) (2) 94 – 15 (4) – – – (1) – 11 105 (35) 70 5 65 73.2 2014 590 10 513 – 1,114 (255) (45) (1) (438) (305) 3 (7) 66 – 13 (1) – – – (1) – 11 77 (24) 53 7 45 79.9 (165) (137) (52) (42) 2014 22 (4) 157 – 176 (2) – (8) 30 – 1 – – – – – – (4) – (46) (16) (9) (25) 8 (33) 2015 23 (2) 192 – 213 (2) – (9) – – – – – – – 37 61 (5) – 4 41 (5) 36 9 27 2015 – – – (3) (3) – – – 1 2 – – – 3 – – – – – – – – – – – – – – 2014 (1) (7) (8) – – – 1 – 3 1 3 – – 8 – – – – – – – – – – – – – – 2015 790 (15) 974 149 1,899 (454) (60) (85) (1,489) (745) (9) (2) (945) (58) 337 (27) (52) (849) 1 224 (8) (432) (1,377) 374 (1,003) 14 (1,017) 2014 876 33 724 117 1,750 (573) (45) (77) (1,310) (567) 8 (7) (820) (33) 184 (7) (42) (846) 1 558 (8) (192) (1,013) 356 (657) 15 (673) D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes reportaBle segments – Corporate and other reportaBle segments – Corporate and other € mn Operating income from financial assets and liabilities carried at fair value through income (net) Interest expenses, excluding interest expenses from external debt Administrative expenses (net), excluding acquisition-related expenses and one-off effects from pension revaluation Non-operating income from financial assets and liabilities carried at fair value through income (net) Income from fully consolidated private equity investments (net) Interest and similar income Fee and commission income Other income Operating revenues Loan loss provisions Investment expenses Fee and commission expenses Restructuring charges Other expenses Operating expenses Operating profit (loss) Realized gains/losses (net) Impairments of investments (net) Interest expenses from external debt Acquisition-related expenses One-off effects from pension revaluation Amortization of intangible assets Non-operating items Income (loss) before income taxes Income taxes Net income (loss) Net income (loss) attributable to: Non-controlling interests Shareholders 2015 222 (28) 221 148 562 (241) (76) (917) (405) – – – (1,076) (58) 260 (23) – 1 (849) 230 (8) (447) (1,524) 414 (1,110) – (1,110) 2014 265 27 61 116 469 (317) (72) (736) (266) – 4 – (917) (32) 171 (6) – 1 (846) 563 (8) (157) (1,074) 389 (685) – (685) Cost-income ratio1 for the reportable segment Banking in % 1 Represents investment expenses, administrative expenses (net), excluding acquisition-related expenses income (net), fee and commission income, other income, interest expenses, excluding interest expenses and one-off effects from pension revaluation, restructuring charges and other expenses divided by interest from external debt, and fee and commission expenses. and similar income, operating income from financial assets and liabilities carried at fair value through Holding & Treasury Banking Alternative Investments Consolidation Corporate and Other 2015 546 16 565 1 1,127 (212) (60) (1) (409) (340) (9) (2) 2014 590 10 513 – 1,114 (255) (45) (1) (438) (305) 3 (7) 2015 23 (2) 192 – 213 (2) – (9) 2014 22 (4) 157 – 176 (2) – (8) (165) (137) – – – – 1 – (1,639) (1,386) (1,032) (1,047) (176) (146) 94 – 15 (4) – – – (1) – 11 105 (35) 70 5 65 73.2 66 – 13 (1) – – – (1) – 11 77 (24) 53 7 45 79.9 37 – 61 – (52) – – (5) – 4 41 (5) 36 9 27 30 – – – (42) – – (4) – (46) (16) (9) (25) 8 (33) 2015 – – (3) – (3) – – 1 2 – – – 3 – – – – – – – – – – – – – – – 2014 (1) – (7) – (8) 1 – 3 1 3 – – 8 – – – – – – – – – – – – – – – 2015 790 (15) 974 149 1,899 (454) (60) (85) (1,489) (745) (9) (2) 2014 876 33 724 117 1,750 (573) (45) (77) (1,310) (567) 8 (7) (2,844) (2,571) (945) (58) 337 (27) (52) (849) 1 224 (8) (432) (1,377) 374 (1,003) 14 (1,017) (820) (33) 184 (7) (42) (846) 1 558 (8) (192) (1,013) 356 (657) 15 (673) Annual Report 2015 Allianz Group 171 Notes to the coNsolidated balaNce sheets 7 – Cash and cash equivalents 9 – Investments cash and cash equivalents € mn as of 31 December Balances with banks payable on demand Balances with central banks Cash on hand Treasury bills, discounted treasury notes, similar treasury securities, bills of exchange and checks Total 2015 7,764 388 225 6,465 14,842 investments 2014 € mn as of 31 December 6,657 Available-for-sale investments 397 184 Held-to-maturity investments Funds held by others under reinsurance contracts assumed 6,625 Investments in associates and joint ventures 13,863 Real estate held for investment Total 2015 488,365 2,745 1,349 5,056 11,977 509,493 2014 465,914 3,969 1,154 4,059 11,349 486,445 8 – Financial assets carried at fair value through income Financial assets carried at Fair value through income € mn as of 31 December Financial assets held for trading Debt securities Equity securities Derivative financial instruments Subtotal Financial assets designated at fair value through income Debt securities Equity securities Subtotal Total 2015 2014 489 187 1,582 2,258 2,645 2,365 5,010 7,268 402 195 1,618 2,214 1,887 1,773 3,660 5,875 172 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes available-For-sale investments available-For-sale investments € mn as of 31 December Debt securities Government and agency mortgage-backed securities (residential and commercial) Corporate mortgage-backed securities (residential and commercial) Other asset-backed securities Government and government agency bonds France Italy Germany United States South Korea Belgium Austria Spain Switzerland Netherlands Hungary Ireland Russia Portugal Greece Supranationals All other countries Subtotal Corporate bonds Other Subtotal Equity securities Total held-to-maturity investments held-to-maturity investments € mn as of 31 December Government and government agency bonds Corporate bonds1 Total 1 Also include corporate mortgage-backed securities. 2015 2014 Amortized Cost Unrealized Gains Unrealized Losses Fair Value Amortized Cost Unrealized Gains Unrealized Losses Fair Value 3,860 12,879 4,303 31,039 23,459 13,081 14,248 7,430 7,412 5,442 9,119 5,015 3,599 821 1,352 380 158 1 16,899 37,632 177,087 211,835 3,357 413,320 28,906 442,226 143 243 223 8,052 5,521 1,919 645 1,190 1,589 1,246 829 698 374 98 37 2 29 2 2,577 1,592 26,398 12,681 588 40,276 12,119 52,396 (10) 3,993 3,548 (128) (98) (70) (54) (52) (82) – (59) (10) (152) (2) (10) – (23) (18) – – (64) (865) (1,462) (4,149) (7) (5,854) (402) (6,256) 12,994 4,427 39,021 28,926 14,948 14,810 8,619 8,942 6,678 9,795 5,711 3,963 918 1,365 365 187 3 19,412 38,359 202,023 220,367 3,938 447,742 40,624 488,365 13,685 4,313 31,113 25,203 12,900 10,574 6,156 5,866 5,476 5,055 4,695 4,102 868 620 472 198 1 15,726 33,401 162,426 193,315 2,471 379,757 26,113 405,870 192 546 284 9,509 5,557 2,152 875 882 1,818 1,698 944 610 506 105 28 – 29 2 3,202 2,013 29,928 18,807 499 50,255 11,313 61,568 (2) (44) (46) (21) (5) (5) (34) – – (1) (1) – (1) – – (71) – – (3) (196) (338) (837) (2) (1,269) (255) (1,524) 3,738 14,186 4,552 40,601 30,755 15,048 11,415 7,038 7,684 7,173 5,997 5,305 4,607 972 648 401 227 3 18,925 35,217 192,016 211,284 2,968 428,743 37,171 465,914 2015 2014 Amortized Cost Unrealized Gains Unrealized Losses Fair Value Amortized Cost Unrealized Gains Unrealized Losses Fair Value 2,184 562 2,745 363 62 425 (2) (3) (5) 2,544 621 3,165 2,398 1,571 3,969 379 362 741 – (1) (1) 2,777 1,933 4,710 Annual Report 2015 Allianz Group 173 unrealized losses on available-For-sale investments and held-to-maturity investments The following table sets forth gross unrealized losses on available- for-sale investments and held-to-maturity investments, as well as the related fair value, broken down by investment category and length of time such investments have been in a continuous unrealized loss position as of 31 December 2015 and 2014. unrealized losses on available-For-sale investments and held-to-maturity investments € mn as of 31 December 2015 Debt securities Government and agency mortgage-backed securities (residential and commercial) Corporate mortgage-backed securities (residential and commercial) Other asset-backed securities Government and government agency bonds Corporate bonds Other Subtotal Equity securities Total 2014 Debt securities Government and agency mortgage-backed securities (residential and commercial) Corporate mortgage-backed securities (residential and commercial) Other asset-backed securities Government and government agency bonds Corporate bonds Other Subtotal Equity securities Total Up to 12 months Greater than 12 months Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses 775 3,375 1,094 30,016 56,578 194 92,033 3,704 95,737 46 1,087 722 6,871 13,782 126 22,633 3,566 26,200 (9) (73) (25) (1,212) (3,057) (7) (4,382) (396) (4,778) (1) (17) (10) (141) (550) (1) (720) (250) (970) 23 1,266 848 2,227 4,029 4 8,396 1 8,398 63 1,049 900 3,579 4,086 3 9,680 11 9,691 (1) (54) (74) (253) (1,095) – (1,477) (6) (1,483) (1) (27) (36) (197) (288) – (550) (5) (554) 799 4,641 1,942 32,243 60,607 197 100,430 3,705 104,135 109 2,136 1,621 10,450 17,868 130 32,314 3,577 35,891 (10) (128) (98) (1,464) (4,152) (7) (5,859) (402) (6,261) (2) (44) (46) (338) (837) (2) (1,270) (255) (1,525) Government and government agency bonds Total unrealized losses amounted to € 1,464 mn as of 31 December 2015. The Allianz Group holds a large variety of government bonds, mostly of OECD countries (Organization of Economic Cooperation and Devel- opment). In general, the credit risk of government and government agency bonds is rather moderate since they are backed by the fiscal capacity of the issuers who typically hold an investment grade coun- try- and/or issue-rating. During 2015, government and government agency bond perfor- mance has been negative, due to a increasing interest rate level, resulting in an increase of unrealized losses of € 1,126 mn. The unreal- ized losses on the Allianz Group’s investment in government bonds were spread over many countries, particulary related to South Ame- rican countries. Based on a detailed analysis of the underlying secu- rities, the Allianz Group did not consider these investments to be impaired as of 31 December 2015. 174 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes Corporate bonds Total unrealized losses amounted to € 4,152 mn as of 31 December 2015. The Allianz Group holds a large variety of bonds issued by corpora- tions mostly domiciled in OECD countries. For the vast majority of the Allianz Group’s corporate bonds, the issuers and/or issues are of “investment grade”. The increase in unrealized losses of € 3,314 mn is is driven by an increasing interest environment and spread over sev- eral sectors with energy as main driver. Based on a detailed analysis of the underlying securities, the Allianz Group did not consider these investments to be impaired as of 31 December 2015. Equity securities As of 31 December 2015, unrealized losses from equity securities amounted to € 402 mn. These unrealized losses concern equity securi- ties that did not meet the criteria of the Allianz Group’s impairment policy for equity securities as described in note 2 Summary of sig- nificant accounting policies. The major part of the unrealized losses have been in a continuous loss position for less than 6 months. contractual term to maturity The amortized cost and fair value of available-for-sale debt securities and held-to-maturity debt securities as of 31 December 2015, by con- tractual term to maturity, are as follows: contractual term to maturity € mn as of 31 December 2015 available-For-sale debt securities Due in 1 year or less Due after 1 year and up to 5 years Due after 5 years and up to 10 years Due after 10 years Total held-to-maturity debt securities Due in 1 year or less Due after 1 year and up to 5 years Due after 5 years and up to 10 years Due after 10 years Total Amortized Cost Fair Value 28,361 102,847 117,713 164,399 413,320 365 1,104 599 677 2,745 28,952 108,383 125,753 184,654 447,742 397 1,209 695 864 3,165 Actual maturities may deviate from the contractually defined matur- ities because certain security issuers have the right to call or repay certain obligations ahead of schedule, with or without redemption or early repayment penalties. Investments that are not due at a single maturity date are, in general, not allocated over various maturity buckets but shown within their final contractual maturity dates. investments in associates and joint ventures As of 31 December 2015, loans to associates and joint ventures as well as available-for-sale debt securities issued by associates and joint ventures held by the Allianz Group amounted to € 2,195 mn (2014: € 654 mn). associates and joint ventures € mn Share of earnings Share of other comprehensive income Share of total comprehensive income 2015 292 80 371 2014 196 54 250 real estate held For investment real estate held For investment € mn Cost as of 1 January Accumulated depreciation as of 1 January Carrying amount as of 1 January Additions Changes in the consolidated subsidiaries of the Allianz Group Disposals and reclassifications into non-current assets and assets of disposal groups classified as held for sale Reclassifications Foreign currency translation adjustments Depreciation Impairments Reversals of impairments Carrying amount as of 31 December Accumulated depreciation as of 31 December Cost as of 31 December 2015 14,403 (3,054) 11,349 1,025 247 (330) (283) 218 (251) (37) 40 11,977 3,136 15,113 2014 13,837 (3,053) 10,783 983 – (291) 30 57 (232) (24) 44 11,349 3,054 14,403 As of 31 December 2015, real estate held for investment pledged as security and other restrictions on title were € 36 mn (2014: € 36 mn). Annual Report 2015 Allianz Group 175 10 – Loans and advances to banks and customers loans and advances to banks and customers € mn as of 31 December Short-term investments and certificates of deposit Reverse repurchase agreements Collateral paid for securities borrowing transactions and derivatives Loans Other Subtotal Loan loss allowance Total 1 Primarily include covered bonds. 2015 Customers – – – 62,509 10 62,519 (307) 62,213 Banks 3,106 5 878 51,0631 365 55,417 – 55,417 Total 3,106 5 878 113,573 375 117,936 (307) 117,630 2014 Customers – 4 – 55,950 12 55,966 (298) 55,668 Banks 3,622 121 696 56,4141 555 61,407 – 61,407 Total 3,622 125 696 112,363 567 117,373 (298) 117,075 loans and advances to banks and customers by contractual maturity loans and advances to banks and customers by contractual maturity € mn as of 31 December 2015 Loans and advances to banks Loans and advances to customers Total Up to 3 months > 3 months up to 1 year > 1 year up to 3 years > 3 years up to 5 years Greater than 5 years 2,087 2,717 4,804 3,370 3,042 6,411 7,893 5,333 13,226 8,820 8,225 17,045 33,246 43,203 76,449 Total 55,417 62,519 117,936 As of 31 December 2015, impaired loans amounted to € 515 mn (2014: € 728 mn). The interest income recognized on these impaired loans amounted to € 1 mn (2014: € 2 mn). 11 – Reinsurance assets reinsurance assets € mn as of 31 December Unearned premiums Reserves for loss and loss adjustment expenses Aggregate policy reserves Other insurance reserves Total 2015 1,655 7,712 5,366 110 2014 1,519 6,947 4,998 123 14,843 13,587 Changes in aggregate policy reserves ceded to reinsurers are as follows: changes in aggregate policy reserves ceded to reinsurers € mn Carrying amount as of 1 January Foreign currency translation adjustments Changes recorded in the consolidated income statements Other changes Carrying amount as of 31 December 2015 4,998 397 183 (212) 5,366 2014 4,463 430 114 (9) 4,998 Changes in the reserves for loss and loss adjustment expenses ceded to reinsurers in the business segment Property-Casualty are shown in the respective table in note 19 Reserves for loss and loss adjust- ment expenses. 176 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes The Allianz Group reinsures a portion of the risks it underwrites in an effort to control its exposure to losses and events and to protect its capital resources. For natural catastrophe events, the Allianz Group maintains a centralized program that pools exposures from its subsidiaries by internal reinsurance agreements. Allianz SE limits exposures in this portfolio through external reinsurance. For other risks, the subsidiaries of the Allianz Group have individual reinsur- ance programs in place. Allianz SE participates with up to 100 % on an arm’s length basis in these cessions, in line with local requirements. The risk coming from these cessions is also limited by external retro- cessions. Reinsurance involves credit risk and is subject to aggregate loss limits. Reinsurance does not legally discharge the respective Allianz company from primary liability under the reinsured policies. Although the reinsurer is liable to this company to the extent of the business ceded, the Allianz company remains primarily liable as the direct insurer on all the risks it underwrites, including the share that is rein- sured. The Allianz Group monitors the financial condition of its rein- surers on a regular basis and reviews its reinsurance arrangements periodically in order to evaluate the reinsurer’s ability to fulfill its obligations to the Allianz Group companies under existing and planned reinsurance contracts. The Allianz Group’s evaluation crite- ria, which include the degree of creditworthiness, capital levels and marketplace reputation of its reinsurers, are such that the Allianz Group believes that its reinsurance credit risk is not significant, and historically has not experienced noteworthy difficulty in collecting claims from its reinsurers. Additionally, and as appropriate, the Allianz Group may also require letters of credit, deposits, or other financial guarantees to further minimize its exposure to credit risk. In certain cases, however, the Allianz Group does establish an allow- ance for doubtful amounts related to reinsurance as appropriate, although this amount was not significant as of 31 December 2015 and 2014. The Allianz Group primarily maintains business relations with highly rated reinsurers. 12 – Deferred acquisition costs deFerred acquisition costs € mn as of 31 December Deferred acquisition costs Property-Casualty Life/Health Subtotal Present value of future profits Deferred sales inducements Total 2015 2014 4,647 18,941 23,588 6131 1,033 25,234 4,595 16,089 20,685 870 708 22,262 1 In the second quarter of 2015, € 151 mN were reclassified from present value of future profits to intangible assets. deFerred acquisition costs changes in deFerred acquisition costs € mn property-casualty Carrying amount as of 1 January Additions Changes in the consolidated subsidiaries of the Allianz Group Foreign currency translation adjustments Amortization Carrying amount as of 31 December liFe/health Carrying amount as of 1 January Reclassification of entities from Asset Management to Life/Health Additions Foreign currency translation adjustments Changes in shadow accounting Amortization Carrying amount as of 31 December Total 2015 2014 4,595 6,194 – 44 (6,186) 4,647 4,354 5,847 39 82 (5,727) 4,595 16,089 15,837 – 3,268 743 1,895 (3,055) 18,941 23,588 159 3,350 892 (1,832) (2,318) 16,089 20,685 Annual Report 2015 Allianz Group 177 present value oF Future proFits 13 – Other assets present value oF Future proFits € mn Cost as of 1 January other assets 2014 € mn as of 31 December 2,954 Receivables 2015 3,021 Accumulated amortization as of 1 January (2,151) (1,908) Policyholders Carrying amount as of 1 January Foreign currency translation adjustments Changes in shadow accounting Amortization Reclassifications Carrying amount as of 31 December Accumulated amortization as of 31 December Cost as of 31 December deFerred sales inducements deFerred sales inducements € mn Carrying amount as of 1 January Additions Foreign currency translation adjustments Changes in shadow accounting Amortization Carrying amount as of 31 December 870 (6) 34 (134) (151) 613 2,277 2,889 2015 708 61 127 350 (213) 1,033 1,046 27 (34) (170) – 870 2,151 3,021 2014 807 121 142 (203) (158) 708 Agents Reinsurers Other Less allowance for doubtful accounts Subtotal Tax receivables Income taxes Other taxes Subtotal Accrued dividends, interest and rent Prepaid expenses Interest and rent Other prepaid expenses Subtotal Derivative financial instruments used for hedging that meet the criteria for hedge accounting and firm commitments Property and equipment Real estate held for own use Software Equipment Fixed assets of alternative investments Subtotal Other assets Total1 2015 2014 6,013 4,379 2,264 4,340 (647) 16,349 1,698 1,512 3,210 7,887 32 296 328 565 3,261 2,361 1,426 1,763 8,811 1,664 5,846 4,348 1,951 4,711 (693) 16,163 1,996 1,426 3,422 7,836 25 256 281 477 2,566 2,142 1,291 1,465 7,464 1,437 38,813 37,080 1 Includes other assets due within one year of € 31,068 mN (2014: € 28,069 mN). 178 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes property and equipment Real estate held for own use real estate held For own use € mn Cost as of 1 January Accumulated depreciation as of 1 January Carrying amount as of 1 January Additions Changes in the consolidated subsidiaries of the Allianz Group Disposals and reclassifications into non-current assets and assets of disposal groups classified as held for sale Reclassifications Foreign currency translation adjustments Depreciation Reversals of impairments Carrying amount as of 31 December Accumulated depreciation as of 31 December Cost as of 31 December Equipment equipment € mn Cost as of 1 January 2015 3,867 2014 3,823 Accumulated depreciation as of 1 January (2,576) (2,651) 2015 3,637 2014 3,497 Carrying amount as of 1 January (1,071) (1,074) Additions 2,566 183 84 (110) 593 16 (74) 4 3,261 1,084 4,345 2,423 346 Changes in the consolidated subsidiaries of the Allianz Group Disposals – Reclassifications Foreign currency translation adjustments (116) (32) 11 (68) 2 2,566 1,071 3,637 Depreciation Impairments Carrying amount as of 31 December Accumulated depreciation as of 31 December Cost as of 31 December Fixed assets of alternative investments Fixed assets oF alternative investments1 As of 31 December 2015, assets pledged as security and other restric- tions on title were € 121 mn (2014: € 113 mn). € mn Cost as of 1 January Accumulated depreciation as of 1 January Carrying amount as of 1 January Additions Changes in the consolidated subsidiaries of the Allianz Group Disposals Foreign currency translation adjustments Depreciation Impairments Carrying amount as of 31 December Accumulated depreciation as of 31 December Cost as of 31 December 1 Include fixed assets of wind parks, solar parks and Selecta. Software soFtware € mn Cost as of 1 January 2015 6,360 2014 5,632 Accumulated amortization as of 1 January (4,218) (3,800) Carrying amount as of 1 January Additions Changes in the consolidated subsidiaries of the Allianz Group Disposals and reclassifications into non-current assets and assets of disposal groups classified as held for sale Foreign currency translation adjustments Amortization Impairments Carrying amount as of 31 December1 Accumulated amortization as of 31 December Cost as of 31 December 2,142 709 (15) (14) 8 (430) (38) 2,361 4,516 6,878 1,832 691 9 (7) 15 (393) (4) 2,142 4,218 6,360 1 As of 31 December 2015, includes € 1,534 mN (2014: € 1,398 mN) for self-developed software and € 827 mN (2014: € 743 mN) for software purchased from third parties. Annual Report 2015 Allianz Group 1,291 435 63 (94) (10) 30 (278) (13) 1,426 2,828 4,254 2015 2,284 (819) 1,465 622 (197) (3) 5 (130) – 1,763 387 2,151 1,173 349 18 (52) 1 35 (226) (5) 1,291 2,576 3,867 2014 2,009 (705) 1,304 279 – (4) (1) (114) (1) 1,465 819 2,284 179 Allianz Life & Annuity Company, Minneapolis During the fourth quarter of 2015, the Allianz Group decided to dis- pose of Allianz Life & Annuity Company, Minneapolis, a preconsoli- dated subsidiary of Allianz Life Insurance Company of North America, Minneapolis. Thus, the assets and liabilities of the consolidated entity, which are allocated to the reportable segment USA (Life/Health), were classified as held for sale. As of 31 December 2015, no cumulative gains were recorded in other comprehensive income relating to the disposal group classified as held for sale. The sale is expected to occur during the first half-year of 2016. Upon measurement of the disposal group at fair value less costs to sell, no impairment loss was recog- nized for the year ended 31 December 2015. non-current assets classiFied as held For sale As of 31 December 2014, real estate held for investment classified as held for sale had comprised several office buildings allocated to the reportable segment German Speaking Countries and Central & Eastern Europe (Life/Health), which were sold during the first quarter of 2015, as expected. Real estate held for own use classified as held for sale had com- prised, as of 31 December 2014, several office buildings allocated to the reportable segment Global Insurance Lines & Anglo Markets (Property-Casualty), which were sold during the third quarter of 2015, as expected. As of 31 December 2015, real estate held for own use classified as held for sale comprised an office building allocated to the reportable segment Western & Southern Europe, Middle East, Africa, India (Life/ Health). The sale of this building is expected to be completed during the third quarter of 2016. Upon measurement of this building at fair value less costs to sell, no impairment loss was recognized for the year ended 31 December 2015. 14 – Non-current assets and disposal groups classified as held for sale non-current assets and disposal groups classiFied as held For sale € mn as of 31 December Assets of disposal groups classified as held for sale Münsterländische Bank Thie & Co. kg, Münster Bürgel Wirtschaftsinformationen, Hamburg Allianz Life & Annuity Company, Minneapolis Subtotal Non-current assets classified as held for sale Real estate held for investment Real estate held for own use Subtotal Total Liabilities of disposal groups classified as held for sale Münsterländische Bank Thie & Co. kg, Münster Bürgel Wirtschaftsinformationen, Hamburg Allianz Life & Annuity Company, Minneapolis Total 2015 2014 – 35 11 46 – 63 63 109 – 15 3 18 83 – – 83 92 61 152 235 102 – – 102 disposal groups classiFied as held For sale Münsterländische Bank Thie & Co. kg, Münster In May 2015, the Allianz Group completed the sale of Münster län- dische Bank Thie & Co. KG, Münster, which had been classified as a disposal group held for sale during the fourth quarter of 2014. Upon measurement of the disposal group at fair value less costs to sell, no impairment losses were recognized until the disposal. Bürgel Wirtschaftsinformationen, Hamburg During the fourth quarter of 2015, the Allianz Group decided to dis- pose of Bürgel Wirtschaftsinformationen, Hamburg. Thus, the assets and liabilities of the consolidated entities, which are allocated to the reportable segment Global Insurance Lines & Anglo Markets (Property- Casualty), were classified as held for sale. As of 31 December 2015, no cumulative gains were recorded in other comprehensive income relating to the disposal group classified as held for sale. The sale is expected to occur during the first quarter of 2016. Upon measurement of the disposal group at fair value less costs to sell, no impairment loss was recognized for the year ended 31 December 2015. 180 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes 15 – Intangible assets intangible assets € mn as of 31 December Intangible assets with indefinite useful lives Goodwill Brand names1 Subtotal Intangible assets with finite useful lives Distribution agreements2 Acquired business portfolios3 Customer relationships4 Other5 Subtotal Total 2015 2014 12,101 6 12,107 899 186 116 135 1,337 13,443 12,166 289 12,455 948 64 231 57 1,300 13,755 1 2 3 4 5 For 2014, include primarily the brand name “Selecta”. Include primarily the long-term distribution agreements with Commerzbank aG of € 298 mN (2014: € 335 mN), Banco Popular s.a. of € 389 mN (2014: € 353 mN), Yapı ve Kredi Bankası a.s. of € 122 mN (2014: € 147 mN) and hsbc Asia, hsbc Turkey and btPN Indonesia of € 79 mN (2014: € 90 mN). Includes primarily acquired business portfolios of Allianz Yasam ve Emeklilik a.s. of € 120 mN (2014: € – mN), Allianz Hayat ve Emeklilik a.s. of € 10 mN (2014: € – mN) and of Allianz Popular Pensiones eGFP s.a. of € 17 mN (2014: € 18 mN). Until the third quarter of 2015, the intangible assets category “Acquired business port folios” was included in the intangible assets category “Other”. In the second quarter of 2015, € 151 mN were reclassified from present value of future profits to intangible assets category “Acquired business portfolios”. Include primarily customer relationships from acquired parts of the insurance business of UnipolSai Assicurazioni S.p.A. of € 76 mN (2014: € 100 mN) and from the acquisition of Selecta of € – mN (2014: € 85 mN), Assurances Médicales s.a. of € 16 mN (2014: € 18 mN) and Yapı Kredi Sigorta a.s. of € 6 mN (2014: € 8 mN). Include primarily heritable building rights of € 38 mN (2014: € 17 mN), land use rights of € 13 mN (2014: € 8 mN) and lease rights of € 10 mN (2014: € – mN). intangible assets with indeFinite useFul lives Goodwill goodwill € mn Cost as of 1 January Accumulated impairments as of 1 January Carrying amount as of 1 January Additions Disposals Foreign currency translation adjustments Impairments Carrying amount as of 31 December Accumulated impairments as of 31 December Cost as of 31 December 2015 13,156 (990) 12,166 70 (316) 352 (171) 12,101 976 13,077 2014 12,534 (990) 11,544 290 – 331 – 12,166 990 13,156 2015 Additions are mainly related to goodwill arising from the acquisition of the Property-Casualty insurance business of the Territory Insurance Office, Darwin, effective 1 January 2015, as well as from the acquisition of several windparks. Disposals relate mainly to the sale of Selecta Group S.à r.l., Luxem- bourg during the fourth quarter of 2015. As a result of the impairment test, all of the goodwill of € 171 mn allocated to the CGU Asia Pacific in the business segment Life/Health was completely impaired mainly driven by steadily decreasing and persisting low interest rates in South Korea. The recoverable amount of the CGU Asia Pacific in the business segment Life/Health is its value in use and amounted to € 1,920 mn. The reference rate used for the current estimate is the local swap curve minus 10 basis points credit risk adjustment plus 15 basis points volatility adjustment (South Korea only) (2014: local swap curve minus 10 basis points credit risk adjustment plus 5 basis points volatility adjustment (South Korea only)). Compared to 2014, the composition of several CGUs and, corre- spondingly, the allocation of goodwill has changed due to changes in the Board of Management of Allianz SE during 2015, accompanied by a reallocation of responsibilities among the Board Members. For the CGU Asia Pacific in the business segment Life/Health, this change translated into a transfer of the region Middle East from the CGU Asia Pacific to the CGU Insurance Western & Southern Europe, Middle East and Africa. 2014 Additions are related to goodwill arising from the acquisition of spe- cific distribution activities of the Property-Casualty insurance busi- ness of UnipolSai Assicurazioni S.p.A., Bologna, from the acquisition of Assurances Médicales S.A., Paris, and from the acquisition of several windparks. Brand names Brand names in 2014 consisted primarily of the brand name “Selecta” which was disposed of in the fourth quarter of 2015. Due to the rebranding activities of the Allianz Group in the Rus- sian market, the amortization of the brand name of the Russian People’s Insurance Society “Rosno” was € 3 mn in 2015. Thus, the brand is now completely amortized. Annual Report 2015 Allianz Group 181 Impairment test for goodwill and other intangible assets with indefinite useful lives The carrying amounts of goodwill and brand names are allocated to the Allianz Group’s CGUs as of 31 December 2015 and 20142 as follows: − Global Insurance Lines & Anglo Markets, including Australia, Subtotal Ireland, Russia, Ukraine and the United Kingdom, Allocation principles For the purpose of impairment testing, the Allianz Group has allo- cated goodwill to CGUs1. These CGUs represent the lowest level at which goodwill is monitored for internal management purposes. CGUs in the Property-Casualty business segment are: − Insurance German Speaking Countries, − Insurance Western & Southern Europe, Middle East and Africa, including Belgium, France, Greece, Italy, Luxembourg, the Nether- lands, Turkey, Egypt, Lebanon and Africa, − Insurance Iberia & Latin America, including Mexico, Portugal, South America and Spain, − Asia Pacific, − Central and Eastern Europe, including Bulgaria, Croatia, Czech Republic, Hungary, Poland, Romania and Slovakia, − Specialty Lines I, including Allianz Re, Allianz Global Corporate & Specialty and Credit Insurance, and − Specialty Lines II, including Allianz Worldwide Partners. CGUs in the Life/Health business segment are: − Insurance German Speaking Countries, − Health Germany, − Insurance Western & Southern Europe, Middle East and Africa, including Belgium, France, Greece, Italy, Luxembourg, the Nether- lands, Turkey, Egypt, Lebanon and Africa, − Asia Pacific, − Central and Eastern Europe, including Bulgaria, Croatia, Czech Republic, Hungary, Poland, Romania and Slovakia, and − Insurance USA. The business segment Asset Management is represented by the CGU Asset Management, including mainly Allianz Global Investors and PImCO. The CGU Selecta Group S.à r.l. in the business segment Corporate and Other was disposed of in the fourth quarter of 2015. allocation oF carrying amounts oF goodwill and brand names to cgus € mn as of 31 December cgu property-casualty Insurance German Speaking Countries Insurance Western & Southern Europe, Middle East and Africa Insurance Iberia & Latin America Asia Pacific Central and Eastern Europe Global Insurance Lines & Anglo Markets Specialty Lines i Specialty Lines ii liFe/health Insurance German Speaking Countries Health Germany Insurance Western & Southern Europe, Middle East and Africa Asia Pacific Central and Eastern Europe Insurance usa Subtotal asset management corporate and other Selecta Group S.à r.l. Subtotal Total 2015 2014 Goodwill Brand names Goodwill Brand names 281 1,327 21 81 292 386 39 21 2,448 611 327 654 – 23 471 2,087 7,566 – – 12,101 – – – – – 6 – – 6 – – – – – – – – – – 6 287 1,358 21 86 307 321 38 21 2,440 602 326 656 171 23 454 2,232 7,187 – – – – 3 – – – 3 – – – – – – – – 307 307 12,166 286 286 289 Valuation techniques The recoverable amounts for all CGUs are determined on the basis of value in use calculations. The Allianz Group applies generally acknowledged valuation principles to determine the value in use. 1 The following paragraphs include all cGUs that contain goodwill. 2 The allocation as of 31 December 2014 is based on the allocation of goodwill before the changes in the Board of Management of Allianz se during 2015. 182 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes For all CGUs in the Property-Casualty business segment and for the CGU Asset Management, the Allianz Group uses the discounted earnings method to derive the value in use. Generally, the basis for the determination of the discounted earnings value is the business plan (“detailed planning period”) as well as the estimate of the sus- tainable returns and eternal growth rates, which can be assumed to be realistic on a long-term basis (“terminal value”) for the operating entities included in the CGU. The discounted earnings value is calcu- lated by discounting the future earnings using an appropriate dis- count rate. The business plans applied in the value in use calculations are the results of the structured management dialogues between the Board of Management of the Allianz Group and the operating entities in connection with a reporting process integrated into these dialogues. Generally, the business plans comprise a planning horizon of three years and are based on the current market environment. The terminal values are largely based on the expected profits of the final year of the detailed planning period. Where necessary, the planned profits are adjusted to reflect long-term sustainable earn- ings. The financing of the assumed eternal growth in the terminal values is accounted for by appropriate profit retention. For all CGUs in the Life/Health business segment the value in use is based on an Appraisal Value method which is derived from the Embedded Value and new business value calculation. As a starting point for the impairment test for the CGUs in the Life/Health business segment, the Market Consistent Embedded Value (mCEV) and a mul- tiple of the Market Consistent Value of New Business is used. mCEV is an industry-specific valuation method to assess the current value of the in-force portfolio. The Allianz Group uses an economic balance sheet approach to derive the mCEV, which is directly taken out of the Market Value Balance Sheet (mVBS) as determined using Solvency II guidance. Significant assumptions In determining the business plans, certain key assumptions were made in order to project future earnings. For entities included in the CGUs of the Property-Casualty busi- ness segment, the business plans are mainly based on key assump- tions including expense ratio, loss ratio, investment income, risk capital, market share, premium rate changes and taxes. The basis for determining the values assigned to the key assumptions are current market trends and earnings projections. The discount rate is based on the capital asset pricing model (CAPm) and appropriate eternal growth rates. The assumptions, including the risk-free interest rate, market risk premium, segment beta, and leverage ratio used to calculate the discount rates are in general consistent with the parameters used in the Allianz Group’s planning and controlling process. The discount rates and eternal growth rates for the CGUs in the Property-Casualty business segment are as follows: discount rates and eternal growth rates For the cgus in the property-casualty business segment1 % cgus in the Property-Casualty business segment Discount rate Eternal growth rate Insurance German Speaking Countries Insurance Western & Southern Europe, Middle East and Africa Insurance Iberia & Latin America Asia Pacific Central and Eastern Europe Global Insurance Lines & Anglo Markets Specialty Lines i Specialty Lines ii 7.8 9.2 16.5 11.5 8.8 8.8 8.0 8.0 1.0 2.1 4.5 4.0 1.5 1.0 1.0 1.0 1 The table provides an overview of weighted key parameters on cGU level of the country-specific discount rates and eternal growth rates used. For entities included in the CGUs of the business segment Life/Health, the mCEV is the excess of assets over liabilities of the mVBS according to the Solvency II requirements. Assets and liabilities included in the mVBS are measured at their market value as of the reporting date. Technical provisions are an essential part of the liabilities included in the mVBS and generally consist of the best estimate plus a risk mar- gin. The best estimate corresponds to the probability-weighted aver- age of future cash flows considering the time value of money, using the relevant risk-free interest rate term structure. The calculation of the best estimate is based on assumptions made for demographic factors (e.g. mortality, morbidity, lapse/surrender rates), expense allowances, taxation, assumptions on market conditions for market consistent projections (e.g. reference rates, volatilities) as well as investment strategy and asset allocation of the entity. The risk margin ensures that the value of the technical provisions is equivalent to the amount that the entity would be expected to require in order to take on and meet the insurance and reinsurance obligations. Annual Report 2015 Allianz Group 183 Reference rates used for the calculation of the best estimate fol- low EIOPA specifications for the Solvency II guidance. The following table provides an overview of the reference rates for the CGUs in the Life/Health business segment: For entities included in the CGU of the Asset Management busi- ness segment, key assumptions include assets under management growth, cost-income ratio and risk capital. The key assumptions are based on the current market environment. The discount rate for the CGU Asset Management is 9.6 % and the eternal growth rate is 1.0 %. reFerence rates For the cgus in the liFe/health business segment cgus in the Life/Health business segment Reference rate for entities with Appraisal Value based on mcev Insurance German Speaking Countries Health Germany Insurance Western & Southern Europe, Middle East and Africa Asia Pacific Central and Eastern Europe Euro swap curve minus 10 bps credit risk adjustment plus 25 bps volatility adjustment chF swap curve minus 10 bps credit risk adjustment plus 10 bps volatility adjustment Euro swap curve minus 10 bps credit risk adjustment plus 25 bps volatility adjustment Euro swap curve minus 10 bps credit risk adjustment plus 25 bps volatility adjustment Local swap curve minus 10 bps credit risk adjustment (South Korea only) plus 15 bps volatility adjustment (South Korea only) For those entities reporting in Euro: Euro swap curve minus 10 bps credit risk adjustment plus 25 bps volatility adjustment For other entities: Local swap curve minus 10 bps credit risk adjustment plus volatility adjustment for the following currencies only (hrk: 0 bps, czk: 8 bps, pln: 31 bps) Insurance usa Local swap curve minus 10 bps credit risk adjustment plus 83 bps volatility adjustment Sensitivity analysis Sensitivity analyses were performed with regard to discount rates and key value drivers of the business plans. For the CGUs in the business segment Property-Casualty and for the CGU Asset Management, sensitivity analyses were performed in respect to the long-term sustainable combined ratios and cost- income ratios. For all CGUs, excluding Property-Casualty Asia Pacific, discounted earnings value sensitivities still exceeded their respective carrying amounts. The recoverable amount of the CGU Asia Pacific in the business segment Property-Casualty slightly exceeds its carrying amount. An increase of less than 50 basis points in the discount rate or the combined ratio results in the recoverable amount of the CGU getting close to its carrying amount. In the business segment Life/Health, excluding Life/Health Asia Pacific due to the recognized impairment, sensitivity analyses were performed based on mCEV sensitivity testing on the reference rate. The analyses have shown that in case of a decrease in reference rates by 50 basis points the appraisal value of each CGU still exceeds its carrying amount. The new business value calculation is based on a best estimate of one year of value of new business, multiplied by a factor (multiple) to capture expected future new business. The best estimate of new busi- ness is generally derived from the achieved value of new business. The new business multiple accounts for the risk and the growth asso- ciated with future new business in analogy to the discount rate and the growth rate in a discounted earnings method. For all CGUs in the Life/Health business segment, a multiple of not more than ten times the value of new business is applied. 184 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes 16 – Financial liabilities carried at fair value through income Financial liabilities carried at Fair value through income € mn as of 31 December Financial liabilities held for trading Derivative financial instruments Other trading liabilities Total 2015 2014 9,203 4 9,207 8,493 3 8,496 17 – Liabilities to banks and customers liabilities to banks and customers € mn as of 31 December Payable on demand Savings deposits Term deposits and certificates of deposit Repurchase agreements Collateral received from securities lending transactions and derivatives Other Total 2015 Banks Customers 66 – 1,129 2,922 3,573 3,801 11,492 5,339 2,410 1,361 – – 4,929 14,039 Total 5,405 2,410 2,490 2,922 3,573 8,730 25,531 2014 Banks Customers 69 – 971 1,197 2,715 4,278 9,230 4,803 2,846 1,946 – – 4,191 13,786 liabilities to banks and customers by contractual maturity liabilities to banks and customers by contractual maturity € mn as of 31 December 2015 Liabilities to banks Liabilities to customers Total Up to 3 months > 3 months up to 1 year > 1 year up to 3 years > 3 years up to 5 years Greater than 5 years 6,979 10,865 17,844 1,623 501 2,124 971 1,523 2,494 484 426 910 1,435 724 2,159 Total 4,872 2,846 2,916 1,197 2,715 8,469 23,015 Total 11,492 14,039 25,531 Annual Report 2015 Allianz Group 185 18 – Unearned premiums unearned premiums € mn as of 31 December Property-Casualty Life/Health Consolidation Total 19 – Reserves for loss and loss adjustment expenses reserves For loss and loss adjustment expenses € mn as of 31 December Property-Casualty Life/Health Consolidation Total 2015 61,169 10,857 (23) 72,003 2014 58,925 10,081 (18) 68,989 2015 17,071 3,605 (15) 20,660 2014 16,595 3,222 (17) 19,800 Reserves for loss and loss adjustment expenses for the Property- Casualty business segment are described in detail in the following sections. change in reserves For loss and loss adjustment expenses The following table reconciles the beginning and ending reserves of the Allianz Group, including the effect of reinsurance ceded, for the Property-Casualty business segment for the years ended 31 Decem- ber 2015 and 2014. change in the reserves For loss and loss adjustment expenses in the property-casualty business segment € mn As of 1 January Balance carry forward of discounted loss reserves Subtotal Loss and loss adjustment expenses incurred Current year Prior years Subtotal Loss and loss adjustment expenses paid Current year Prior years Subtotal Foreign currency trans lation adjustments and other changes1 Changes in the consolidated subsidiaries of the Allianz Group Subtotal Ending balance of discounted loss reserves As of 31 December Gross 58,925 3,597 62,522 35,381 (2,373) 33,008 (17,123) (15,071) (32,194) 1,755 (39) 65,051 (3,882) 61,169 2015 2014 Ceded (6,577) (326) (6,903) (2,735) 448 (2,287) 832 1,331 2,163 (534) 1 (7,560) 332 (7,228) Net 52,348 3,271 55,619 32,646 (1,924) 30,721 (16,291) (13,740) (30,031) 1,221 (38) 57,492 (3,550) 53,942 Gross 56,614 3,207 59,821 32,773 (1,752) 31,021 (16,113) (14,684) (30,797) 2,477 – 62,522 (3,597) 58,925 Ceded (6,070) (306) (6,376) (2,510) 367 (2,143) 703 1,392 2,095 (478) – (6,903) 326 (6,577) Net 50,544 2,901 53,445 30,263 (1,385) 28,878 (15,410) (13,292) (28,702) 1,999 – 55,619 (3,271) 52,348 1 Include effects of foreign currency translation adjustments for prior years’ claims of gross € 1,423 mn (2014: € 1,534 mn) and of net € 1,272 mn (2014: € 1,282 mn) and for current year claims of gross € (234) mn (2014: € 165 mn) and of net € (195) mn (2014: € 130 mn). 186 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes Prior years’ net loss and loss adjustment expenses incurred reflect the changes in estimation charged or credited to the consolidated income statement in each year with respect to the reserves for loss and loss adjustment expenses established as of the beginning of that year. During the year ended 31 December 2015, the Allianz Group recorded additional income of € 1,924 mn (2014: € 1,385 mn) net in respect of losses occurring in prior years. During the year ended 31 December 2015, this amount, expressed as a percentage of the net balance of the beginning of the year, was 3.5 % (2014: 2.6 %). changes in historical reserves For loss and loss adjustment expenses (lae) The analysis of loss and LAE reserves by actuaries and management is conducted by line of business and separately for specific claim types such as asbestos and environmental claims. The origin year of losses is taken into consideration by analyzing each line of business by accident year. While this determines the estimates of reserves for loss and LAE by accident year, the effect in the consolidated income statement in the respective calendar year combines the accident year loss ratio for the current year with the favorable or adverse develop- ment from prior years (run-off). Although discounted loss reserves have been reclassified to “Reserves for insurance and investment contracts” in the balance sheet, the underlying business development of these non-life reserves is still considered in the loss ratio. Therefore the tables below show the loss development by accident year including the business devel- opment of discounted loss reserves. The run-off triangle, also known as the “loss triangle”, is a tabular representation of loss-related data (such as payments, loss reserves, ultimate losses) in two, time-related dimensions. One of these is the calendar year, while the other is the accident year (year of loss occur- rence). Run-off triangles – as the basis for measuring loss reserves – make clear how the loss reserves change over the course of time due to payments made and new estimates of the expected ultimate loss at the respective reporting date. The run-off triangles are not prepared on a currency-adjusted basis. This means all figures are translated from the respective local currency into the Allianz Group presentation currency (Euro), con- sistently using the exchange rates applicable at the respective report- ing date. This ensures that the reserves reconcile with reserves in the consolidated balance sheet. Loss payments for the individual accident years (per calendar year, net) loss payments For the individual accident years (per calendar year, net) € mn Accident year Calendar year 2006 & prior 2007 2008 2009 2010 2011 2012 2013 2014 2015 Total 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 24,002 12,255 5,608 3,705 2,591 1,838 1,673 1,615 1,517 1,162 12,631 6,397 1,744 934 687 483 323 211 202 13,130 7,350 2,151 1,034 716 497 303 262 13,368 6,688 1,725 1,107 712 465 395 14,094 6,945 1,972 1,113 729 476 14,316 7,434 2,090 1,169 775 14,443 7,181 1,890 1,054 15,449 7,009 1,850 15,410 7,564 16,291 24,002 24,886 25,135 26,167 26,459 26,545 27,828 28,979 28,702 30,031 Annual Report 2015 Allianz Group 187  Reserves for loss and loss adjustment expenses for the individual accident years at the respective reporting date (net) reserves For loss and loss adjustment expenses For the individual accident years at the respective reporting date (net) € mn Accident year as of 31 December 2006 & prior 2007 2008 2009 2010 2011 2012 2013 2014 2015 Total 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 49,331 34,665 26,125 21,807 19,089 17,565 17,416 15,550 14,646 13,751 14,012 7,449 5,038 3,911 2,973 2,417 1,953 1,574 1,362 14,222 7,620 5,666 4,337 3,249 2,601 2,198 1,838 14,074 7,456 5,147 4,061 3,117 2,492 2,018 14,729 7,218 5,238 3,837 3,105 2,540 15,596 7,861 5,190 4,066 3,156 15,564 7,239 5,223 3,874 13,957 7,101 5,088 15,215 7,504 16,358 49,331 48,677 47,796 48,539 50,850 52,836 55,807 53,445 55,619 57,492 Ultimate loss for the individual accident years at the respective reporting date (net) ultimate loss For the individual accident years at the respective reporting date (net) € mn Accident year as of 31 December 2006 & prior 2007 2008 2009 2010 2011 2012 2013 2014 2015 Total 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Surplus1 Reduction/(increase) 2015 to 20142 73,333 70,922 67,990 67,378 67,250 67,565 69,089 68,837 69,450 69,718 3,616 26,643 26,477 25,810 25,617 25,367 25,294 25,153 24,984 24,975 1,668 (267) 9 27,353 28,100 28,297 28,002 27,630 27,478 27,378 27,281 72 97 27,442 27,512 26,928 26,950 26,718 26,557 26,478 964 28,823 28,257 28,250 27,962 27,958 27,869 954 78 89 29,912 29,610 29,029 29,074 28,938 973 136 30,007 28,863 28,736 28,442 1,565 295 29,407 29,560 29,397 10 163 30,625 30,479 146 146 32,649 – 3 – 3 9,968 746 1 2 Includes effects from foreign currency translation adjustments and other changes. The total development 2015 to 2014 of € 746 mn represents the cumulative surplus from reestimating the ultimate loss for prior year claims. Considering foreign currency translation adjustments of net € 1,272 mn as well as changes in the consolidated subsidiaries of the Allianz Group and other changes of in total € (94) mn, this leads to an effective run-off result of net € 1,924 mn, which can be found in the table “Change in the reserves for loss and loss adjustment expenses” within this note. Presentation not meaningful. 3 188 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes Calendar year premiums earned and ultimate loss ratio for the individual accident years at the respective reporting date (net) calendar year premiums earned and ultimate loss ratio For the individual accident years at the respective reporting date (net) as of 31 December 2007 2008 2009 2010 2011 2012 2013 2014 2015 Premiums earned (net) € mn 38,553 38,213 37,828 39,303 39,898 41,705 42,047 43,759 46,430 2007 % 69.1 68.7 66.9 66.4 65.8 65.6 65.2 64.8 64.8 2008 % 71.6 73.5 74.1 73.3 72.3 71.9 71.6 71.4 2009 % 72.5 72.7 71.2 71.2 70.6 70.2 70.0 Accident year 2010 % 2011 % 2012 % 2013 % 2014 % 2015 % 73.3 71.9 71.9 71.1 71.1 70.9 75.0 74.2 72.8 72.9 72.5 72.0 69.2 68.9 68.2 69.9 70.3 69.9 70.0 69.7 70.3 The ultimate loss of an accident year comprises all payments made for that accident year up to the reporting date, plus the loss reserve at the reporting date. Given complete information regarding all losses incurred up to the reporting date, the ultimate loss for each accident- year period would remain unchanged. In practice, however, the ulti- mate loss (based on estimates) is exposed to fluctuations that reflect the increase in knowledge regarding the loss cases. The loss ratio presented above deviates from the reported loss ratio because the ultimate loss in the table above is based on the sum of the payments plus the loss reserve, not the incurred loss from the consolidated income statement. This means that effects like changes in consoli- dated subsidiaries, foreign currency translation and reclassification of unwinding of discounted loss reserves are presented differently. contractual cash Flows As of 31 December 2015, reserves for loss and loss adjustment expens- es, which are expected to be due in 2016 amounted to € 16,884 mn, while those expected to be due between 2017 and 2020 amounted to € 20,725 mn and those expected to be due after 2020 amounted to € 19,883 mn. asbestos and environmental (a & e) loss reserves There are significant uncertainties in estimating A & E reserves for loss and LAE. Reserves for asbestos-related illnesses and environmen- tal clean-up losses cannot be estimated using traditional actuarial techniques due to the long latency period and changes in the legal, socio-economic and regulatory environment. Case reserves are established when sufficient information is available to indicate the involvement of a specific insurance policy. In addition, IBnR reserves are established to cover additional exposures on both known and not yet reported claims. To the extent possible, A & E loss reserve estimates are based not only on claims reported to date, but also on a survey of policies that may be exposed to claims reported in the future (i.e. an exposure analysis). In establishing liabilities for A & E claims, management considers facts currently known and the current state of the law and coverage litigation. However, given the expansion of coverage and liability by the courts and the legislatures in the past and the possibilities of similar interpretation in the future, there is significant uncertainty regarding the extent of insurer liability. As a result, the range of rea- sonable potential outcomes for A & E liabilities provided in these analyses is particularly large. Given this inherent uncertainty in esti- mating A & E liabilities, significant deviation from the currently car- ried A & E reserve position is possible. While the U.S. A & E claims still represent a majority of the total A & E claims reported to the Allianz Group, the insurance industry is facing an increased prominence in exposures to A & E claims on a global basis. The Allianz Group continues to monitor these A & E expo- sures. During 2015, A & E gross reserves increased from € 2,679 mn to € 2,763 mn due to claims development and foreign exchange rate effects of € 249 mn, partially offset by claim payments of € 166 mn. Annual Report 2015 Allianz Group 189 The following table summarizes the gross and net loss and LAE reserves for A & E claims. gross and net reserves For loss and lae For a & e claims € mn as of 31 December a & e net reserves a & e gross reserves As percentage of the Allianz Group’s Property-Casualty gross reserves 2015 2,178 2,763 4.5 % 2014 2,173 2,679 4.5 % 20 – Reserves for insurance and investment contracts reserves For insurance and investment contracts € mn as of 31 December Aggregate policy reserves Reserves for premium refunds Other insurance reserves Total 2015 425,312 59,732 1,178 486,222 2014 399,227 63,026 1,081 463,334 aggregate policy reserves changes in aggregate policy reserves € mn As of 1 January Balance carry forward of discounted loss reserves Subtotal Foreign currency translation adjustments Changes recorded in the consolidated income statement Premiums collected Separation of embedded derivatives Interest credited Dividends allocated to policyholders Releases upon death, surrender and withdrawal Policyholder charges Portfolio acquisitions and disposals Other changes1 Subtotal Ending balance of discounted loss reserves As of 31 December 2015 399,227 (3,597) 395,631 9,358 2,546 24,076 90 5,319 1,368 (16,145) (1,652) (270) 1,108 421,430 3,882 425,312 2014 365,519 (3,207) 362,312 9,600 3,514 28,085 972 3,879 1,356 (13,711) (1,628) (52) 1,302 395,630 3,597 399,227 1 Mainly relate to insurance contracts when policyholders change their contract from a unit-linked to a universal life-type contract. reserves For premium reFunds reserves For premium reFunds € mn Amounts already allocated under local statutory or contractual regulations As of 1 January 15,020 13,231 2015 2014 Foreign currency translation adjustments Changes in the consolidated subsidiaries of the Allianz Group Changes As of 31 December Latent reserves for premium refunds As of 1 January Foreign currency translation adjustments Changes due to fluctuations in market value Changes due to valuation differences charged to income As of 31 December Total 29 – 351 15,400 48,006 211 (8,629) 4,743 44,332 59,732 (7) (1) 1,797 15,020 24,541 51 21,338 2,077 48,006 63,026 190 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes ConCentration of insuranCe risk in the Life/heaLth business segment The Allianz Group’s Life/Health business segment provides a wide variety of insurance and investment contracts to individuals and groups in over 30 countries around the world. Individual contracts include both traditional contracts and unit-linked contracts. Without taking policyholder participation into account, traditional contracts generally incorporate significant investment risk for the Allianz Group, while unit-linked contracts generally result in the contract holder assuming the investment risk. Traditional contracts include life, endowment, annuity and health contracts. Traditional annuity contracts are issued in both deferred and immediate types. In addi- tion, the Allianz Group’s life insurance operations in the United States issue a significant amount of equity-indexed deferred annui- ties. In certain markets, the Allianz Group also issues group life, group health and group pension contracts. As of 31 December 2015 and 2014, the Allianz Group’s deferred acquisition costs and reserves for insurance and investment contracts for the business segment Life/Health are summarized per reportable segment as follows: ConCentration of insuranCe risk in the Life/heaLth business segment per reportabLe segment € mn as of 31 December 2015 German Speaking Countries and Central & Eastern Europe Western & Southern Europe, Middle East, Africa, India Iberia & Latin America USA Global Insurance Lines & Anglo Markets Asia Pacific Consolidation Total 2014 German Speaking Countries and Central & Eastern Europe Western & Southern Europe, Middle East, Africa, India Iberia & Latin America USA Global Insurance Lines & Anglo Markets Asia Pacific Consolidation Total Deferred acquisition costs Aggregate policy reserves Reserves for premium refunds Other insurance reserves Total non-unit-linked reserves Liabilities for unit-linked contracts 9,053 2,229 54 7,032 120 2,099 – 20,587 8,754 2,377 56 4,385 118 1,977 – 17,667 208,667 99,570 8,104 80,506 1,941 17,792 (3,619) 412,961 198,865 98,536 7,845 67,335 1,879 16,107 (3,414) 387,154 45,618 10,579 1,255 – – 516 (1) 57,966 46,879 12,435 1,449 – – 430 (1) 61,192 267 258 – – 6 557 (5) 1,083 230 241 – – 6 445 (5) 917 254,552 110,407 9,359 80,506 1,947 18,864 (3,626) 472,010 245,974 111,213 9,294 67,335 1,885 16,983 (3,420) 449,263 9,025 59,826 454 25,999 – 10,568 – 105,873 8,199 51,649 158 25,445 – 9,112 – 94,564 Total 263,577 170,233 9,813 106,505 1,947 29,432 (3,625) 577,883 254,174 162,862 9,452 92,780 1,885 26,095 (3,420) 543,826 The majority of the Allianz Group’s Life/Health business segment operations are conducted in Western Europe. Insurance laws and regulations in Europe have historically been characterized by legal or contractual minimum participation of contract holders in the profits of the insurance company issuing the contract. In particular, life insurance business in Germany, Switzerland and Austria, which com- prises approximately 47 % (2014: 48 %) of the Allianz Group’s reserves for insurance and investment contracts as of 31 December 2015, includes a substantial level of policy holder participation in all sourc- es of profit, including mortality/morbidity, investment and expense. As a result of this policyholder participation, the Allianz Group’s exposure to insurance, investment and expense risk is mitigated. Furthermore, all of the Allianz Group’s annuity policies issued in the United States meet the criteria for classification as insurance con- tracts under IFRS 4, because they include options for contract holders to elect a life-contingent annuity. These contracts currently do not expose the Allianz Group to significant longevity risk, nor are they expected to do so in the future, as the projected and observed annui- tization rates are very low. Additionally, many of the Allianz Group’s traditional contracts issued in France and Italy do not incorporate significant insurance risk, although they are accounted for as insur- ance contracts because of their discretionary participation features. Similarly, a significant portion of the Allianz Group’s unit-linked con- tracts in France and Italy do not incorporate significant insurance risk. Annual Report 2015 Allianz Group 191 As a result of the considerable diversity in types of contracts issued, including the offsetting effects of mortality risk and longevity risk inherent in a combined portfolio of life insurance and annuity products, the geographic diversity of the Allianz Group’s Life/Health business segment and the substantial level of policyholder participa- tion in mortality/morbidity risk in certain countries in Western Europe, the Allianz Group does not believe its Life/Health segment has any significant concentrations of insurance risk, nor does it believe its net income or shareholders’ equity is highly sensitive to insurance risk. The Allianz Group’s Life/Health business segment is exposed to significant investment risk as a result of guaranteed minimum inter- est rates being included in most of its non-unit-linked contracts. The weighted average guaranteed minimum interest rates of the Allianz Group’s largest operating entities in the business segment Life/ Health, comprising 87 % (2014: 87 %) of non-unit-linked reserves in 2015, can be summarized by country as follows: weighted average guaranteed minimum interest rates oF liFe insurance entities as of 31 December 2015 2014 Germany France Italy United States Switzerland South Korea Belgium Guaranteed rate Non-unit-linked reserves % of non-unit-linked reserves Guaranteed rate Non-unit-linked reserves % of non-unit-linked reserves % 2.7 0.4 1.9 0.7 1.8 4.4 2.8 € bn 161.6 55.0 29.6 80.5 11.7 10.5 8.9 % 97.3 73.7 48.3 75.6 94.6 88.6 94.8 % 2.8 0.5 2.1 0.9 2.1 4.5 2.9 € bn 155.1 55.0 29.7 67.3 10.3 9.8 8.5 % 97.3 76.0 53.1 72.6 93.5 89.4 95.4 In most of these markets, the effective interest rates earned on the investment portfolio exceed these guaranteed minimum interest rates. In addition, the operations in these markets may also have sig- nificant mortality and expense margins. However, the Allianz Group’s Life/Health operations in Switzerland, Belgium, South Korea and Tai- wan have high guaranteed minimum interest rates on older con- tracts in their portfolios and, as a result, may be sensitive to declines in investment rates or a prolonged low interest rate environment. As of 31 December 2015, the Allianz Group has written off deferred acqui- sition costs and established premium deficiency reserves on parts of the portfolio in South Korea, with an overall impact of € (244) mn on the consolidated income statement. If current interest rate levels per- sist, further reserve strengthening for certain portfolios may become necessary. Future policy benefits As of 31 December 2015, benefits for insurance and investment con- tracts which are expected to be due in 2016 amounted to € 57 Bn, while those expected to be due between 2017 and 2020 amounted to € 200 Bn and those expected to be due after 2020 amounted to € 1,029 Bn. The resulting total benefits for insurance and investment con- tracts in the amount of € 1,286 Bn include contracts where the timing and amount of payments are considered fixed and determinable, and contracts which have no specified maturity dates and may result in a payment to the contract beneficiary depending on mortality and morbidity experience and the incidence of surrenders, lapses or maturities. Furthermore, the amounts are undiscounted and do not include any expected future premiums; therefore they exceed the reserves for insurance and investment contracts presented in the consolidated balance sheet. For contracts without fixed and determinable payments, the Allianz Group has made assumptions in estimating the undiscount- ed cash flows of contractual policy benefits including mortality, mor- bidity, interest crediting rates, policyholder participation in profits and future lapse rates. These assumptions represent current best estimates and may differ from the estimates used to establish the reserves for insurance and investment contracts in accordance with the Allianz Group’s established accounting policy. Due to the uncer- tainty of the assumptions used, the amount presented could be mate- rially different from the actual incurred payments in future periods. 192 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes 21 – Financial liabilities for unit-linked contracts changes in Financial liabilities For unit-linked insurance contracts and unit-linked investment contracts € mn As of 1 January Foreign currency translation adjustments Changes in the consolidated subsidiaries of the Allianz Group Premiums collected Interest credited Releases upon death, surrender and withdrawal Policyholder charges Portfolio acquisitions and disposals Reclassifications1 As of 31 December Unit-linked insurance contracts 2015 Unit-linked investment contracts 62,656 3,412 – 10,257 839 (5,842) (1,826) (8) (1,594) 67,894 31,907 (197) 1 10,692 344 (4,811) (109) (38) 190 37,979 Unit-linked insurance contracts 2014 Unit-linked investment contracts 55,357 3,602 – 7,868 3,693 (5,140) (1,551) 23 (1,196) 62,656 25,707 210 – 8,860 1,786 (4,453) (99) (75) (27) 31,907 Total 94,564 3,215 1 20,948 1,182 (10,653) (1,934) (46) (1,403) 105,873 Total 81,064 3,811 – 16,728 5,479 (9,593) (1,650) (53) (1,223) 94,564 1 These reclassifications mainly relate to insurance contracts when policyholders change their contract from a unit-linked to a universal life-type contract. Annual Report 2015 Allianz Group 193 22 – Other liabilities other liabilities € mn as of 31 December Payables Policyholders Reinsurance Agents Subtotal Payables for social security Tax payables Income taxes Other taxes Subtotal Accrued interest and rent Unearned income Interest and rent Other Subtotal Provisions Pensions and similar obligations Employee related Share-based compensation plans Restructuring plans Loan commitments Contingent losses from non-insurance business Other provisions Subtotal Deposits retained for reinsurance ceded Derivative financial instruments used for hedging that meet the criteria for hedge accounting and firm commitments Financial liabilities for puttable equity instruments Other liabilities Total1 2015 2014 5,006 1,413 1,625 8,043 428 1,732 1,450 3,181 579 36 339 374 9,149 2,599 527 112 6 160 1,674 14,227 1,636 472 2,585 7,159 38,686 4,934 1,460 1,615 8,009 420 1,801 1,387 3,187 613 24 283 307 9,765 2,327 606 109 12 134 1,684 14,637 1,843 281 1,793 7,520 38,609 1 Includes other liabilities due within one year of € 25,568 mn (2014: € 25,013 mn). 194 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes 23 – Certificated liabilities certiFicated liabilities € mn1 Allianz se2 Senior bonds Fixed rate Contractual interest rate Money market securities Fixed rate Contractual interest rate Total Allianz SE2 Banking subsidiaries Senior bonds Fixed rate Contractual interest rate Floating rate Current interest rate Total banking subsidiaries Total Contractual maturity date 2016 2017 2018 2019 2020 Thereafter as of 31 December 2015 as of 31 December 2014 1,498 4.00 % 1,276 0.40 % 2,774 80 1.44 % – – 80 2,854 – – – – – 42 0.92 % – – 42 42 499 1.38 % – – 499 – – – – – 1,486 4.75 % – – 1,486 – – – – – 499 1,486 – – – – – – – – – – – 3,227 3.70 % – – 3,227 – – 274 0.17 % 274 3,501 6,711 – 1,276 – 7,987 122 – 274 – 395 6,653 – 1,041 – 7,694 186 – 327 – 513 8,383 8,207 1 2 Except for interest rates. Interest rates represent the weighted average. Includes senior bonds issued by 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 uncon- ditionally guaranteed by Allianz SE. Annual Report 2015 Allianz Group 195 24 – Subordinated liabilities subordinated liabilities € mn1 Allianz se2 Subordinated bonds3 Fixed rate Contractual interest rate Floating rate Current interest rate Total Allianz SE2 Banking subsidiaries Subordinated bonds Fixed rate Contractual interest rate Total banking subsidiaries All other subsidiaries Subordinated liabilities Fixed rate Contractual interest rate Hybrid equity Floating rate Current interest rate Total all other subsidiaries Total Contractual maturity date 2016 2017 2018 2019 2020 Thereafter – – – – – – – – – – – – – – – 15 5.61 % 15 83 4.27 % 83 20 4.35 % 20 – – – – – 15 – – – – – 83 – – – – – 20 – – – – – – – – – – – – – – – – – – – 30 5.32 % 30 – – – – – 30 1,716 5.44 % 10,246 4.47 % 11,962 103 3.89 % 103 – – 45 1.45 % 45 12,110 as of 31 December 2015 as of 31 December 2014 1,716 – 10,246 – 11,962 1,621 – 9,750 – 11,371 251 – 251 – – 45 – 45 221 – 221 400 – 45 – 445 12,258 12,037 1 2 Except for interest rates. Interest rates represent the weighted average. Includes subordinated bonds issued by Allianz Finance II B.V. and guaranteed by Allianz SE. 3 Change due to redemption of a € 1.0 Bn bond and the issuance of a € 1.5 Bn bond in the first quarter of 2015. 25 – Equity equity € mn as of 31 December Shareholders’ equity Issued capital Additional paid-in capital Retained earnings1 Foreign currency translation adjustments Unrealized gains and losses (net)2 Subtotal Non-controlling interests Total 2015 2014 1,170 27,758 24,222 (926) 10,920 63,144 2,955 66,099 1,170 27,758 19,878 (1,977) 13,917 60,747 2,955 63,702 1 2 As of 31 December 2015, include € (159) mn (2014: € (222) mn) related to treasury shares. As of 31 December 2015, include € 239 mn (2014: € 288 mn) related to cash flow hedges. issued capital Issued capital as of 31 December 2015 amounted to € 1,170 mn divided into 457,000,000 registered shares. The shares have no-par value but a mathematical per-share value of € 2.56 each as a proportion of the issued capital. authorized capital As of 31 December 2015, Allianz SE had authorized capital for the issu- ance of 214,843,750 shares until 6 May 2019, with a notional amount of € 550 mn (Authorized Capital 2014/I). The shareholders’ subscription rights can be excluded for capital increases against contribution in kind. For a capital increase against contributions in cash, the share- holders’ subscription rights can be excluded: (i) for fractional amounts, (ii) if the issue price is not significantly below the market price and the shares issued under exclusion of the subscription rights pursuant to § 186 (3) sentence 4 of the German Stock Corpora- tion Act (Aktiengesetz) do not exceed 10 % of the share capital, and (iii) to the extent necessary to grant a subscription right for new shares to the holders of bonds that carry conversion or option rights or provide for mandatory conversion. The subscription rights for new 196 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes shares from the Authorized Capital 2014/I and the Conditional Capi- tal 2010/2014 may only be excluded for the proportionate amount of the share capital of up to € 234 mn (corresponding to 20 % of the share capital at year-end 2013). In addition, Allianz SE has authorized capital (Authorized Capi- tal 2014/II) for the issuance of shares against cash until 6 May 2019. The shareholders’ subscription rights can be excluded in order to issue new shares to employees of Allianz SE and its Group companies. As of 31 December 2015, the Authorized Capital 2014/II amounted to € 14 mn (5,359,375 shares). Further, as of 31 December 2015, Allianz SE had conditional cap- ital totaling € 250 mn (97,656,250 shares) (Conditional Capital 2010/2014). This conditional capital increase will only be carried out if conversion or option rights attached to bonds which Allianz SE or its Group companies have issued against cash payments according to the resolutions of the AGm on 5 May 2010 or 7 May 2014, are exer- cised or the conversion obligations under such bonds are fulfilled, and only insofar as the conversion or option rights or conversion obli- gations are not serviced through treasury shares or through shares from authorized capital. Convertible subordinated notes totaling € 500 mn, which may be converted into Allianz shares, were issued against cash in July 2011. Within 10 years after the issuance a mandatory conversion of the notes into Allianz shares at the then prevailing share price may apply if certain events occur, subject to a floor price of at least € 74.90 per share. Within the same period, the investors have the right to convert the notes into Allianz shares at a price of € 187.26 per share. Both con- version prices are subject to anti-dilution provisions. The subscrip- tion rights of shareholders for these convertible notes have been excluded with the consent of the Supervisory Board and pursuant to the authorization of the AGm on 5 May 2010. The granting of new shares to persons entitled under such convertible notes is secured by the Conditional Capital 2010/2014. On or before 31 December 2015, there was no conversion of any such notes into new shares. changes in the number oF issued shares outstanding number oF issued shares outstanding Number of issued shares outstanding as of 1 January Capital increase for employee share programs Changes in number of treasury shares Number of issued shares outstanding as of 31 December Treasury shares1 Total number of issued shares 1 Thereof 2,175,776 (2014: 2,751,360) own shares held by Allianz SE. 2015 2014 454,248,039 453,736,619 – 575,599 500,000 11,420 454,823,638 454,248,039 2,176,362 2,751,961 457,000,000 457,000,000 In the year ending 31 December 2015, no new shares (2014: 500,000) were issued out of the Authorized Capital 2014/II for the purpose of covering subscriptions by employees in the context of Employee Stock Purchase Plans. In lieu thereof, the shares for covering sub- scriptions of the Employee Stock Purchase Plans in 2015 were taken from the stock of own shares specially earmarked for this purpose. The Authorized Capital remained unchanged during the year ending 31 December 2015. dividends For the year ending 31 December 2015, the Board of Management will propose to shareholders at the AGm the distribution of a dividend of € 7.30 per qualifying share. For the year ended 31 December 2014, Allianz SE paid a dividend of € 6.85 per qualifying share. treasury shares As of 31 December 2015, Allianz SE held 2,175,776 (2014: 2,751,360) own shares. Of these, 1,522,732 (2014: 145,191) were held for covering future subscriptions by employees in Germany and abroad in the context of Employee Stock Purchase Plans, whereas 653,044 (2014: 2,606,169) were held as a hedge for obligations from the Allianz Equity Incentive Program (former Group Equity Incentive Program). In March 2015, a total of 1,953,125 own shares were rededicated to the new purpose of “covering subscriptions by employees in the context of Employee Stock Purchase Plans of Allianz SE and its sub- sidiaries in Germany and abroad”. Previously, these shares served as a hedge for obligations resulting from the Allianz Equity Incentive Program and had been bought on the basis of former authorizations in accordance with § 71 (1) No. 8 AktG. In the year ending 31 December 2015, 575,584 (2014: 510,435) shares were sold in the context of the Employee Stock Purchase Plan to employees of Allianz SE and its subsidiaries in Germany and abroad. Of these, 145,191 (2014: 155,626) originated from the capital increase for the Employee Stock Purchase Plan in 2014 (2013). 430,393 shares were taken from the stock of own shares dedicated to this pur- pose. This is in contrast to 2014, when no own shares had been taken from the stock of own shares. Employees of the Allianz Group pur- chased shares at prices ranging from € 98.42 (2014: € 93.52) to € 125.84 (2014: € 111.33) per share. At 31 December 2015, no own shares were held anymore which derived from a capital increase for the purposes of Employee Stock Purchase Plans. As of 31 December 2015, the remaining own shares of Allianz SE held for covering subscriptions by employees in the context of Employee Stock Purchase Plan of Allianz SE and its subsidiaries in Germany and abroad amounted to 1,522,732 shares. In the year ending 31 December 2015, the total num- ber of own shares of Allianz SE decreased by 575,584 (2014: decrease of 10,435) shares, which corresponds to € 1,473,495 (2014: € 26,714) or 0.126 % (2014: 0.002 %) of issued capital. The own shares of Allianz SE and its subsidiaries represent € 6 mn or 0.48 % of the share capital. Annual Report 2015 Allianz Group 197 non-controlling interests non-controlling interests € mn as of 31 December Unrealized gains and losses (net) Share of earnings Other equity components Total 2015 162 371 2,422 2,955 2014 189 381 2,385 2,955 The share of earnings attributable to non-controlling interests main- ly consists of Euler Hermes Group companies of € 93 mn (2014: € 92 mn), PImCO of € 71 mn (2014: € 86 mn), CreditRas Vita of € 35 mn (2014: € 27 mn), Allianz Ayudhya of € 35 mn (2014: € 28 mn) and Allianz p.l.c. of € 15 mn (2014: € 27 mn). The other equity components of non- controlling interests mainly consist of Euler Hermes Group compa- nies of € 744 mn (2014: € 688 mn), PImCO of € 89 mn (2014: € 235 mn), CreditRas Vita of € 295 mn (2014: € 269 mn), Allianz Ayudhya of € 139 mn (2014: € 141 mn) and Allianz p.l.c. of € 105 mn (2014: € 82 mn). Further information about companies with non-controlling interests are given in the list of participations of the Allianz Group. capital requirements The Allianz Group’s capital requirements are primarily dependent on the type of business that it underwrites, the industry and geographic locations in which it operates and the allocation of the Allianz Group’s investments. During the Allianz Group’s annual planning dialogues with its operating entities, internal capital requirements are determined through business plans regarding the levels and tim- ing of capital expenditures and investments. Internal capital require- ments are determined by explicitly taking stress resilience into account. Regulators impose minimum capital requirements at the level of the Allianz Group’s operating entities and the Allianz Group as a whole. On 1 January 2005, the Financial Conglomerates Directive (FCD), a supplementary European Union (E.U.) directive, became effective in Germany. Under this directive, a financial conglomerate is defined as any financial parent holding company that, together with its subsid- iaries, has significant cross-border and cross-sector activities. The Allianz Group is a financial conglomerate within the scope of the directive and the related German laws. The directive requires that the financial conglomerate calculates the capital needed to meet the respective solvency requirement on a consolidated basis. As of 31 December 2015, the Allianz Group’s eligible capital for the solvency margin, required for the insurance segments and the Asset Management and Banking business, was € 58.0 Bn (2014: € 49.8 Bn) including off-balance sheet reserves1 of € 2.7 Bn (2014: € 2.3 Bn), surpassing the minimum legally stipulated level by € 29.0 Bn (2014: € 22.2 Bn). This margin resulted in a preliminary cover ratio of 200 % (2014: 181 %) as of 31 December 2015. In addition to regulatory capital requirements, Allianz SE also uses an internal risk capital framework based on its partial internal model2 to determine how much capital is required to absorb any unexpected volatility in results of operations and to steer its opera- tions. This partial internal model was approved by the European col- lege of supervisors in November 2015 and will therefore be the basis to determine capital requirements under the new Solvency II framework, which has become the binding regulatory regime as of 1 January 2016. Insurance subsidiaries of the Allianz Group including Allianz SE prepare individual financial statements based on local laws and regulations. Local regulations establish additional restrictions on the minimum level of capital and the amount of dividends that may be paid to shareholders. The respective local minimum capital require- ments are based on various criteria including, but not limited to, the volume of premiums written or claims paid, amount of insurance reserves, investment risks, mortality risks, credit risks, and under- writing risks. As of 31 December 2015, the Allianz Group believes that there are no outstanding regulatory capital or compliance matters that would have a material adverse effect on the financial position or the results of operations of the Allianz Group. Some insurance subsidiaries are subject to regulatory restric- tions on the amount of dividends which can be remitted to Allianz SE without prior approval by the appropriate regulatory body. Such restrictions require that a company may only pay dividends up to an amount in excess of certain regulatory capital levels, or based on the levels of undistributed earned surplus or current year income or a percentage thereof. By way of example only, the operations of the Allianz Group’s insurance subsidiaries located in the United States are subject to limitations on the payment of dividends to their parent company under applicable state insurance laws. Dividends paid in excess of these limitations generally require the prior approval of the insurance commissioner of the state of domicile. The Allianz Group believes that these restrictions will not affect the ability of Allianz SE to pay dividends to its shareholders in the future. 1 2 Off-balance sheet reserves are accepted by the authorities as eligible capital only upon request. Allianz SE has not submitted an application so far. Excluding off-balance sheet reserves, the reported solvency ratio as of 31 December 2015 would be 191 % (31 December 2014: 172 %). From a formalistic perspective, the German Supervisory Authority deems the model to be ‘partial’ because it does not cover all of the operations: some of the smaller operations report under the standard model and others under the deduction & aggregation approach. 198 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes Notes to the CoNsolidated iNCome statemeNts 26 – Premiums earned (net) 27 – Interest and similar income 2015 118 1,895 14,276 290 896 4,731 203 22,408 2014 166 1,562 13,609 196 848 4,868 193 21,443 Premiums earned (net) € mn 2015 Premiums written Direct Assumed Subtotal Ceded Net Change in unearned premiums Direct Assumed Subtotal Ceded Net Premiums earned Direct Assumed Subtotal Ceded Net 2014 Premiums written Direct Assumed Subtotal Ceded Net Change in unearned premiums Direct Assumed Subtotal Ceded Net Premiums earned Direct Assumed Subtotal Ceded Net Property- Casualty Life/Health Consoli- dation Group interest and similar income € mn Interest from held-to-maturity investments Dividends from available-for-sale investments Interest from available-for-sale investments Share of earnings from investments in associates and joint ventures Rent from real estate held for investment – (110) (110) 72,186 4,538 76,723 110 (5,536) Interest from loans to banks and customers – – (1) (1) 1 – – (111) (111) 111 – 71,188 Other interest income Total (479) (240) (719) 176 (543) 71,707 4,298 76,005 (5,360) 70,645 – (100) (100) 70,253 3,630 73,883 100 (4,463) – – 5 5 (5) – – (95) (95) 95 – 69,420 (931) (123) (1,053) (93) (1,146) 69,322 3,508 72,829 (4,555) 68,274 47,638 3,959 51,597 (4,933) 46,664 (168) (238) (405) 171 (234) 47,470 3,721 51,191 (4,762) 46,430 45,238 3,084 48,322 (3,961) 44,362 (408) (107) (515) (88) (602) 44,830 2,978 47,808 (4,048) 43,759 24,548 689 25,237 (713) 24,524 (311) (2) (313) 4 (309) 24,237 687 24,924 (709) 24,215 25,015 646 25,660 (602) 25,058 (523) (21) (544) – (544) 24,492 624 25,116 (602) 24,514 Annual Report 2015 Allianz Group 199 28 – Income from financial assets and liabilities carried at fair value through income (net) income from financial assets and liabilities carried at fair value through income (net) € mn 2015 Property- Casualty Life/Health Asset Management Corporate and Other Consolidation Group (263) 1 (3,936) Income (expenses) from financial assets and liabilities held for trading (net) (270) (3,404) Income (expenses) from financial assets and liabilities designated at fair value through income (net) Income (expenses) from financial liabilities for puttable equity instruments (net) Foreign currency gains and losses (net) Total 2014 (3) 1 147 20 11 1,271 (125) (2,101) – – – (8) (8) (4) 1 194 (72) Income (expenses) from financial assets and liabilities held for trading (net) (313) (3,472) (1) (141) Income (expenses) from financial assets and liabilities designated at fair value through income (net) Income (expenses) from financial liabilities for puttable equity instruments (net) Foreign currency gains and losses (net) Total 2 (4) 206 161 (88) 1,901 (108) (1,497) 2 – 3 5 18 – 123 – (2) – – 12 13 1,604 (1) (2,307) (1) (1) – – (3,928) 182 (91) 2,234 (3) (1,604) Foreign currency gains and losses are reported within income from financial assets carried at fair value through income (net) (2015: income of € 1,604 MN; 2014: income of € 2,234 MN). These foreign cur- rency gains and losses arise subsequent to initial recognition on all assets and liabilities denominated in a foreign currency that are monetary items and not measured at fair value through income. The Allianz Group uses freestanding derivatives, included in the line item income (expenses) from financial assets and liabilities held for trading (net), to hedge against foreign currency fluctuations (2015: expenses of € 2,350 MN; 2014: expenses of € 2,502 MN). Additionally included in the business segment Life/Health are derivative financial instruments from German entities which relate to duration management (2015: expenses of € 419 MN; 2014: income of € 780 MN) and protection against equity fluctuations (2015: income of € 239 MN; 2014: expenses of € 125 MN), and from U.S. entities which relate to fixed-indexed annuity products and guaranteed benefits under unit-linked contracts (2015: expenses of € 1,143 MN; 2014: expenses of € 1,783 MN). 29 – Realized gains/losses (net) realized gains/losses (net) € mn realized gains Available-for-sale investments Equity securities Debt securities Subtotal Investments in associates and joint ventures1 Real estate held for investment Loans and advances to banks and customers Non-current assets classified as held for sale 2015 2014 3,349 4,486 7,834 148 115 876 108 1,736 2,296 4,033 27 141 287 32 Subtotal 9,081 4,519 realized losses Available-for-sale investments Equity securities Debt securities Subtotal Investments in associates and joint ventures2 Real estate held for investment Loans and advances to banks and customers Non-current assets classified as held for sale Subtotal Total (267) (866) (1,133) (5) (1) (5) – (1,144) 7,937 (205) (279) (484) (12) (4) (1) (1) (502) 4,017 1 2 During the year ended 31 December 2015, include realized gains from the disposal of subsidiaries and businesses of € 115 mN (2014: € 1 mN). During the year ended 31 December 2015, include realized losses from the disposal of subsidiaries and businesses of € 2 mN (2014: € 1 mN). 200 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes 30 – Fee and commission income 32 – Income and expenses from fully consolidated private equity investments fee and commission income € mn ProPerty-casualty Fees from credit and assistance business Service agreements Subtotal life/health Service agreements Investment advisory Other Subtotal asset management Management and advisory fees Loading and exit fees Performance fees Other Subtotal corPorate and other Service agreements Investment advisory and banking activities Subtotal consolidation Total 2015 2014 income and exPenses from fully consolidated Private equity investments 995 478 1,474 93 1,237 – 1,331 6,795 575 607 34 8,011 234 741 974 (845) 10,945 € mn Income Sales and service revenues Subtotal Expenses Cost of goods sold General and administrative expenses Interest expenses 790 471 1,260 97 919 1 1,017 Subtotal Consolidation1 Total 2015 2014 732 732 (226) (481) (77) (784) (8) (60) 696 696 (216) (469) (54) (738) 19 (23) 1 This consolidation effect results from the deferred policyholder participation recognized in the result from fully consolidated private equity investments within operating profit in the Life/Health business segment that was reclassified to expenses from fully consolidated private equity investments in non- operating profit to ensure the consistent presentation of the Allianz Group‘s operating profit. 6,834 670 275 46 7,825 70 654 724 (707) 10,119 31 – Other income other income € mn Income from real estate held for own use Realized gains from disposals of real estate held for own use Other income from real estate held for own use Subtotal Income from alternative investments Other Total 2015 2014 31 4 35 235 2071 476 24 2 26 187 2 216 1 Includes a net gain of € 0.2 bN on the sale of the personal insurance business of Fireman’s Fund Insurance Company to aCe Limited. The sale was an integral part of the reorganization of Allianz Group’s Property- Casualty insurance business in the United States. Annual Report 2015 Allianz Group 201 33 – Claims and insurance benefits incurred (net) 34 – Change in reserves for insurance and investment contracts (net) Claims and insuranCe benefits inCurred (net) Change in reserves for insuranCe and investment ContraCts (net) € mn 2015 Gross Claims and insurance benefits paid Change in reserves for loss and loss adjustment expenses Subtotal Ceded Claims and insurance benefits paid Change in reserves for loss and loss adjustment expenses Subtotal Net Claims and insurance benefits paid Change in reserves for loss and loss adjustment expenses Total 2014 Gross Claims and insurance benefits paid Change in reserves for loss and loss adjustment expenses Subtotal Ceded Claims and insurance benefits paid Change in reserves for loss and loss adjustment expenses Subtotal Net Claims and insurance benefits paid Change in reserves for loss and loss adjustment expenses Property- Casualty Life/Health Consoli- dation Group € mn 2015 Gross Property- Casualty Life/Health Consoli- dation Group (32,194) (21,015) 72 (53,137) Aggregate policy reserves (226) (6,492) Other insurance reserves (3) (162) (2) – (6,721) (165) (814) (522) (33,008) (21,536) – 72 (1,335) (54,472) Expenses for premium refunds Subtotal Ceded Aggregate policy reserves 2,163 476 (67) 2,572 Other insurance reserves Expenses for premium refunds 124 2,287 75 550 – (67) 198 2,770 Subtotal Net (241) (7,247) (470) (13,901) (53) (55) (7,540) (14,425) 9 – – 9 338 8 5 352 – – – – 347 9 5 361 (30,031) (20,539) (690) (447) (30,721) (20,986) 5 – 5 (50,566) (1,137) (51,702) (30,797) (20,946) 47 (51,696) (224) (231) (31,021) (21,177) 12 58 (444) (52,140) 2,095 375 (42) 2,428 49 2,143 27 402 (14) (56) 62 2,490 (28,702) (20,571) 5 (49,268) (175) (204) (2) (382) Aggregate policy reserves (218) (6,154) Other insurance reserves (2) (153) (2) – (6,374) (156) Expenses for premium refunds Total 2014 Gross (240) (7,242) (460) (13,550) (53) (55) (7,535) (14,065) Aggregate policy reserves (238) (6,189) Other insurance reserves 2 (252) – – (6,427) (250) Expenses for premium refunds Subtotal Ceded Aggregate policy reserves Other insurance reserves Expenses for premium refunds Subtotal Net (313) (6,390) (827) (7,529) (549) (12,830) (827) (14,206) 7 (1) 5 10 246 11 11 268 – – (1) (1) 253 10 15 277 Aggregate policy reserves (231) (5,943) Other insurance reserves – (241) – – (6,174) (240) Expenses for premium refunds Total (307) (6,379) (828) (7,514) (538) (12,563) (828) (13,929) Total (28,878) (20,775) 3 (49,650) 202 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes 35 – Interest expenses 38 – Investment expenses interest expenses € mn Liabilities to banks and customers Deposits retained for reinsurance ceded Certificated liabilities Subordinated liabilities Other Total investment expenses € mn Investment management expenses Depreciation of real estate held for investment Other expenses from real estate held for investment Total 2015 (207) (47) (294) (580) (97) 2014 (241) (48) (285) (585) (102) (1,224) (1,261) 2015 (676) (251) (167) (1,094) 2014 (561) (232) (168) (961) 36 – Loan loss provisions loan loss provisions € mn Additions to allowances, including direct impairments Amounts released Recoveries on loans previously impaired Total 39 – Acquisition and administrative expenses (net) acquisition and administrative expenses (net) 2015 (142) 79 3 (60) 2014 € mn (133) 68 20 (45) property-casualty Acquisition costs Incurred Commissions and profit received on reinsurance business ceded Deferrals of acquisition costs Amortization of deferred acquisition costs 37 – Impairments of investments (net) impairments of investments (net) € mn impairments Available-for-sale investments Equity securities Debt securities Subtotal Investments in associates and joint ventures Real estate held for investment Loans and advances to banks and customers Non-current assets classified as held for sale 2015 2014 (1,156) (344) (1,500) (11) (37) (26) – (553) (345) (898) – (24) (16) (5) Subtotal (1,575) (944) Subtotal Administrative expenses1 Subtotal life/HealtH Acquisition costs Incurred Commissions and profit received on reinsurance business ceded Deferrals of acquisition costs Amortization of deferred acquisition costs Subtotal Administrative expenses1 Subtotal asset management Personnel expenses1 Non-personnel expenses Subtotal reversals of impairments Real estate held for investment Loans and advances to banks and customers Subtotal Total 40 8 48 44 6 51 corporate and otHer Administrative expenses1 Subtotal (1,526) (894) consolidation Total 2015 2014 (10,834) (10,102) 576 6,655 (6,611) (10,214) (3,175) (13,388) 448 6,138 (6,035) (9,551) (3,386) (12,937) (5,262) (5,203) 115 3,364 (3,432) (5,215) (1,720) (6,934) (2,576) (1,585) (4,161) (1,264) (1,264) 30 88 3,502 (2,648) (4,261) (1,606) (5,868) (2,380) (1,415) (3,795) (750) (750) 7 (25,718) (23,343) 1 Include one-off effects from pension revaluation. Please refer to note 6 Segment reporting for further details. Annual Report 2015 Allianz Group 203 40 – Fee and commission expenses 42 – Income taxes fee and Commission expenses € mn property-Casualty Fees from credit and assistance business Service agreements Subtotal life/health Service agreements Investment advisory Subtotal asset management Commissions Other Subtotal Corporate and other Service agreements Investment advisory and banking activities Subtotal Consolidation Total 41 – Other expenses other expenses € mn inCome taxes € mn Current income taxes Deferred income taxes Total 2015 2014 (999) (367) (820) (360) (1,367) (1,180) 2015 (2,889) (320) (3,209) 2014 (2,454) 209 (2,245) (46) (553) (599) (1,440) (83) (1,523) (410) (335) (745) 457 (34) (353) (387) (1,301) (145) (1,445) (269) (298) (567) 342 (3,777) (3,238) During the year ended 31 December 2015, current income taxes included income of € 73 mn (2014: € 485 mn) related to prior years. Of the deferred income taxes for the year ended 31 December 2015, expenses of € 309 mn (2014: income of € 198 mn) are attributable to the recognition of deferred taxes on temporary differences, and expenses of € 12 mn (2014: € 15 mn) are attributable to tax losses carried forward. Changes of applicable tax rates due to changes in tax law produced deferred tax income of € 1 mn (2014: € 26 mn). For the years ended 31 December 2015 and 2014, the income taxes relating to components of other comprehensive income consist of the following: inCome taxes relating to Components of other Comprehensive inCome € mn Items that may be reclassified to profit or loss in future periods Foreign currency translation adjustments Available-for-sale investments Cash flow hedges Share of other comprehensive income of associates and joint ventures 2015 2014 119 1,775 34 (1) (19) 124 (2,820) (40) (1) (160) (228) 1,679 695 (2,201) 2015 2014 Miscellaneous Realized losses from disposals of real estate held for own use Expenses from alternative investments Expenses from non-current assets classified as held for sale Other Total – (121) (5) (2) (129) (7) (103) (18) (7) (135) Items that may never be reclassified to profit or loss Actuarial gains (losses) on defined benefit plans Total The recognized income taxes for the year ended 31 December 2015 are € 155 mn above (2014: € 391 mn below) the calculated income taxes, which are determined by multiplying the respective income before income taxes with the applicable country-specific tax rates. The fol- lowing table shows the reconciliation from the calculated income taxes to the effectively recognized taxes of the Allianz Group. The Allianz Group’s reconciliation is a summary of the individual com- pany-related reconciliations, which are based on the respective country-specific tax rates taking into consideration consolidation effects with an impact on the Group result. The applicable tax rate 204 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes deferred tax assets and liabilities deferred tax assets and liabilities € mn as of 31 December Deferred tax assets Financial assets carried at fair value through income Investments Deferred acquisition costs Other assets Intangible assets Tax losses carried forward Insurance reserves Pensions and similar obligations Other liabilities Total deferred tax assets Non-recognition or valuation allowance for deferred tax assets on tax losses carried forward Effect of netting Net deferred tax assets Deferred tax liabilities Financial assets carried at fair value through income Investments Deferred acquisition costs Other assets Intangible assets Insurance reserves Pensions and similar obligations Other liabilities Total deferred tax liabilities Effect of netting Net deferred tax liabilities Net deferred tax assets (liabilities) 2015 2014 136 4,995 967 1,435 170 2,373 4,888 4,455 1,214 53 3,202 1,759 1,283 166 2,435 4,616 4,353 871 20,633 18,737 (759) (850) (18,480) (16,841) 1,394 1,046 235 9,357 4,958 1,267 661 2,808 2,674 524 128 9,643 4,824 1,017 410 2,691 2,609 450 22,483 (18,480) 4,003 (2,609) 21,773 (16,841) 4,932 (3,886) used in the reconciliation for domestic Allianz Group companies includes corporate tax, trade tax and the solidarity surcharge, and amounted to 31.0 % (2014: 31.0 %). The effective tax rate is determined on the basis of the effective income tax expenses on income before income taxes. effeCtive tax rate € mn Income before income taxes Applied weighted income tax rate Calculated income taxes Trade tax and similar taxes Net tax exempt income Effects of tax losses Other effects Effective income taxes Effective tax rate 2015 10,196 30.0 % 3,054 185 (108) 82 (3) 3,209 31.5 % 2014 8,848 29.8 % 2,636 210 (2) 142 (740) 2,245 25.4 % For the year ended 31 December 2015, the write-down of deferred taxes on tax losses increased the tax expenses by € 113 mn (2014: € 167 mn). The reversal of write-down of deferred tax assets on tax losses carried forward resulted in deferred tax income of € – mn (2014: € 6 mn). Due to the use of tax losses carried forward, for which deferred tax assets were previously written off, the current income tax expenses decreased by € 3 mn (2014: € 9 mn). Deferred tax income increased by € 28 mn (2014: € 10 mn) due to the use of tax losses car- ried forward, for which deferred tax assets were previously written off. The above-mentioned effects are shown in the reconciliation state- ment as “effects of tax losses”. The other effects include for the year ended 31 December 2014 a total of € (846) mn in current and deferred taxes for prior years, resulting from a favorable decision of the German Federal Fiscal Court (BFH) received by Allianz Leben. The tax rates used in the calculation of the Allianz Group’s de - ferred taxes are the applicable national rates, which in 2015 ranged from 10.0 % to 45.0 %. Changes to tax rates that had already been adopted on 31 Decem ber 2015 are taken into account. In 2015, Italy enacted a tax rate decrease from 27.5 % to 24 % effective 2017. In 2015, the United Kingdom enacted a gradual tax rate decrease to 18 % in 2018. Impacts from changes in tax rates lead to deferred tax income of € 1 mn (2014: € 26 mn). Deferred tax assets on losses carried forward are recognized to the extent to which it is more likely than not that sufficient future taxable profits will be available for realization. Entities which suffered a tax loss in either the current or the preceding period recognized deferred tax assets in excess of deferred tax liabilities amounting to € 466 mn (2014: € 375 mn). Annual Report 2015 Allianz Group 205 Taxable temporary differences associated with investments in Allianz Group companies for which no deferred tax liabilities are recognized, as the Allianz Group is able to control the timing of their reversal, and which will not reverse in the foreseeable future, amounted to € 585 mn (2014: € 707 mn). Deductible temporary differences arising from investments in Allianz Group companies for which no deferred tax assets are recognized, as it is not probable that they will reverse in the foreseeable future, amounted to € 98 mn (2014: € 191 mn). tax losses Carried forward Tax losses carried forward at 31 December 2015 of € 10,395 mn (2014: € 10,521 mn) resulted in the recognition of deferred tax assets to the extent that there is sufficient certainty that the unused tax losses will be utilized. € 9,383 mn (2014: € 9,422 mn) of the tax losses carried for- ward can be used for an unlimited period of time. Tax losses carried forward are scheduled according to their expiry periods as follows: tax losses Carried forward € mn 2016 2017 – 2018 2019 – 2020 2021 – 2025 >10 years Unlimited Total 2015 37 92 156 594 132 9,383 10,395 206 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes Other InfOrmatIOn 43 – Derivative financial instruments Derivative financial instruments € mn as of 31 December 2015 Maturity by notional amount Up to 1 year 1 – 5 years Over 5 years Notional principal amounts Positive fair values Negative fair values Notional principal amounts 2014 Positive fair values Negative fair values Interest rate contracts OTC Forwards Swaps Swaptions Caps Options Exchange-traded Futures Forwards Warrants Subtotal Equity/Index contracts OTC Forwards Floors Swaps Options Warrants Exchange-traded Futures Options Warrants Subtotal Foreign exchange contracts OTC Futures Forwards Swaps Options Subtotal Credit contracts OTC Swaps Options Exchange-traded Swaps Subtotal Real estate contracts OTC Options Subtotal Total 1,361 864 – 905 – 4,193 – – 4,122 3,847 4,000 4,032 – – – – 264 53,334 6,081 2 14 – – 3 5,746 58,046 10,081 4,939 14 4,193 – 3 338 577 93 – – – – – (238) (361) – (13) (14) – – – 2,735 31,504 32,228 4,939 19 5,189 78 – 424 556 120 – – 34 3 – – (397) – (18) (3) (8) – – 7,322 16,001 59,699 83,022 1,008 (626) 76,693 1,136 (426) 1,120 1 4,191 144,570 – 9,765 5,642 2,705 – – 35 3,956 – – – – 199 – 1,252 208 5,442 – – – 1,319 1 5,478 148,734 5,442 9,765 5,642 2,705 167,993 3,992 7,101 179,085 – 44,445 246 14 44,705 – 1,387 218 37 1,641 – – 642 – 642 – 45,832 1,106 50 46,988 68 8 – 76 6 6 1,617 1,090 2,775 – – – – 8 – 1,617 1,090 2,783 – – – – 6 6 135 1 24 412 – – 58 14 644 – 415 60 7 482 11 – – 11 – – (59) – (66) 926 – 6,332 (8,193) 147,424 (174) 4,513 – – – 20,709 6,347 2,684 65 – 34 469 – 86 84 51 (15) – (39) (7,315) (181) (65) – – (8,492) 188,936 789 (7,616) – (396) (28) – 721 33,621 637 34 (424) 35,013 (130) (2) – 4,025 2 7 (132) 4,033 – – 6 6 1 121 19 8 148 19 – 3 22 1 1 (16) (663) (27) – (706) (26) – – (26) – – 220,101 23,251 68,532 311,883 2,146 (9,675) 304,681 2,096 (8,774) Annual Report 2015 Allianz Group 207 Additionally, the Allianz Group uses fair value hedges to hedge its equity portfolio against equity market risk. As of 31 December 2015, the derivatives used as hedging instruments in the related fair value hedges had a total positive fair value of € 84 mn (2014: € 21 mn). For the year ended 31 December 2015, the Allianz Group recog- nized for fair value hedges a net gain of € 3 mn (2014: net loss of € 30 mn) on the hedging instruments and a net loss of € 9 mn (2014: net gain of € 35 mn) on the hedged items attributable to the hedged risk. Cash flow hedges During the year ended 31 December 2015, cash flow hedges were used to hedge the exposure to the variability from cash flows arising from interest rate or exchange rate fluctuations as well as inflation. As of 31 December 2015, the derivative instruments utilized had a total positive fair value of € 177 mn (2014: € 412 mn). Unrealized gains and losses (net) in shareholders’ equity decreased by € 49 mn (2014: increased by € 84 mn). Amounts accumulated in the other compre- hensive income are reclassified to profit or loss in the periods when the hedged item affects profit or loss. This is the case when the fore- cast transactions that are hedged take place. Hedge of net investment in foreign operations As of 31 December 2015, the Allianz Group hedges part of its U.S. Dollar, British Pound, Australian Dollar and Swiss Franc net investments through the issuance of U.S. Dollar, British Pound, Australian Dollar and Swiss Franc denominated liabilities with a nominal amount of GbP 0.8 bn and CHF 0.5 bn, as well as the use of forward sales of U.S. Dollar, British Pound, Australian Dollar and Swiss Franc with a notional of USD 0.5 bn, GbP 0.3 bn, AUD 0.4 bn and CHF 0.1 bn. The total positive fair value in 2015 was € 9 mn (2014: total negative fair value of € 80 mn). offsetting The Allianz Group mainly enters into enforceable master netting arrangements and similar arrangements for derivatives transactions. None of these enforceable master netting arrangements or similar arrangements meet the requirements for offsetting in line with IAS 32. Credit risk associated with netting arrangements is further mit- igated by collateral. For further information on collateral, please refer to note 44 Financial instruments and fair value measurement. The table shows the fair value and notional amounts of all freestand- ing derivatives as well as derivatives for which hedge accounting is applied by the Allianz Group as of 31 December 2015 and 2014, respec- tively. The notional principal amounts indicated in the table are cumulative, as they include the absolute value of the notional princi- pal amounts of derivatives with positive and negative fair values. Although these notional principal amounts reflect the degree of the Allianz Group’s involvement in derivative transactions, they do not represent amounts exposed to risk. Further information on the use of derivatives to hedge risks can be found in the sections on market and credit risk in the Risk and Opportunity Report which forms part of the Group Management Report. freestanDing Derivative financial instruments As of 31 December 2015, freestanding derivatives, included in the line item financial assets and liabilities held for trading, had a notional principal amount of € 292.1 bn (2014: € 297.2 bn), as well as a positive fair value of € 1.6 bn (2014: € 1.6 bn) and a negative fair value of € 9.2 bn (2014: € 8.5 bn). Out of the total allocated to the freestanding deriva- tives, € 202.9 bn (2014: € 189.2 bn) of the notional principal relate to annuity products. These products are equity-indexed or contain cer- tain embedded options or guarantees which are considered embed- ded derivatives under IAS 39. For these embedded derivatives, the notional principal amounts included in the table refer to the account value of the related insurance contracts. The total negative fair value of these embedded derivatives amounts to € 7.8 bn (2014: € 6.7 bn). Further information on the fair value measurement of these deriva- tives can be found in note 44 Financial instruments and fair value measurement. Derivative financial instruments useD in accounting heDges As of 31 December 2015, derivatives which form part of hedge accounting relationships, which are included in the line items other assets and other liabilities, had a notional amount of € 19.8 bn (2014: € 7.5 bn), as well as a positive fair value of € 565 mn (2014: € 477 mn) and a negative fair value of € 472 mn (2014: € 281 mn). These hedging instruments mainly include interest rate forwards with a total nega- tive fair value of € 176 mn (2014: € 151 mn). Fair value hedges The Allianz Group uses fair value hedges to hedge the exposure to changes in the fair value of financial assets due to movements in inter- est or exchange rates. As of 31 December 2015, the derivative financial instruments used for the related fair value hedges of the Allianz Group had a total negative fair value of € 177 mn (2014: € 157 mn). Within the Allianz Group’s banking business, derivatives to hedge against interest rate changes are implemented for individual trans- actions (micro hedges) or for a portfolio of similar assets or liabilities (macro hedges). 208 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes 44 – Financial instruments and fair value measurement Certain risk disclosure requirements of IFRS 7 are reflected in the following sections within the Risk and Opportunity Report in the Group Management Report: − Internal risk capital model including all subsections, − Limitations, − Risk profile and risk management, − Quantifiable risks, including all subsections other than Business risk and Operational risk, − Liquidity risk. fair values anD carrying amounts The following table compares the carrying amount with the fair value of the Allianz Group’s financial assets and financial liabilities: fair values anD carrying amounts of financial instruments € mn as of 31 December financial assets Cash and cash equivalents Financial assets held for trading Financial assets designated at fair value through income Available-for-sale investments Held-to-maturity investments Investments in associates and joint ventures Real estate held for investment Loans and advances to banks and customers Financial assets for unit-linked contracts Derivative financial instruments and firm commitments included in other assets financial liabilities Financial liabilities held for trading Liabilities to banks and customers Financial liabilities for unit-linked contracts Derivative financial instruments and firm commitments included in other liabilities Financial liabilities for puttable equity instruments Certificated liabilities Subordinated liabilities As of 31 December 2015, fair values could not be reliably measured for equity investments with carrying amounts totaling € 216 mn (31 December 2014: € 189 mn). These investments are primarily investments in privately held corporations and partnerships. During the year ended 31 December 2015, such investments with carrying amounts of € 62 mn (2014: € 78 mn) were sold. The gains and losses from these disposals were immaterial. 2015 2014 Carrying amount Fair value Carrying amount Fair value 14,842 2,258 5,010 488,365 2,745 5,056 11,977 117,630 105,873 565 9,207 25,531 105,873 472 2,585 8,383 12,258 14,842 2,258 5,010 488,365 3,165 6,207 17,810 136,397 105,873 565 9,207 25,563 105,873 472 2,585 9,208 13,100 13,863 2,214 3,660 465,914 3,969 4,059 11,349 117,075 94,564 477 8,496 23,015 94,564 281 1,793 8,207 12,037 13,863 2,214 3,660 465,914 4,710 4,820 16,323 140,238 94,564 477 8,496 23,607 94,564 281 1,793 9,293 13,253 fair value measurement on a recurring basis The following financial assets and liabilities are carried at fair value on a recurring basis: − Financial assets and liabilities held for trading, − Financial assets and liabilities designated at fair value through income, − Available-for-sale investments, − Financial assets and liabilities for unit-linked contracts, − Derivative financial instruments and firm commitments included in other assets and other liabilities, and − Financial liabilities for puttable equity instruments. Annual Report 2015 Allianz Group 209 The following tables present the fair value hierarchy for financial instruments carried at fair value in the consolidated balance sheets as of 31 December 2015 and 2014. fair value hierarchy as of 31 December 2015 (items carrieD at fair value) € mn financial assets Financial assets carried at fair value through income Financial assets held for trading Debt securities Equity securities Derivative financial instruments Subtotal Financial assets designated at fair value through income Debt securities Equity securities Subtotal Subtotal Available-for-sale investments Government and agency mortgage-backed securities (residential and commercial) Corporate mortgage-backed securities (residential and commercial) Other asset-backed securities Government and government agency bonds Corporate bonds Other debt securities Equity securities Subtotal Financial assets for unit-linked contracts Derivative financial instruments and firm commitments included in other assets Total financial liabilities Financial liabilities held for trading Derivative financial instruments Other trading liabilities Subtotal Financial liabilities for unit-linked contracts Derivative financial instruments and firm commitments included in other liabilities Financial liabilities for puttable equity instruments Total Level 1 – Quoted prices in active markets Level 2 – Market observable inputs Level 3 – Non-market observable inputs 101 31 60 192 1,605 2,230 3,836 4,027 14 20 176 41,977 28,428 627 32,932 104,174 102,954 – 211,155 28 – 28 102,954 – 2,496 105,478 387 148 1,483 2,018 1,014 23 1,037 3,055 3,979 12,700 3,994 159,999 182,185 1,762 776 365,396 2,755 565 371,770 1,041 4 1,046 2,755 472 71 4,343 – 9 38 47 25 112 137 184 – 274 257 47 9,754 1,548 6,915 18,796 164 – 19,145 8,134 – 8,134 164 – 19 8,317 Total 489 187 1,582 2,258 2,645 2,365 5,010 7,268 3,993 12,994 4,427 202,023 220,367 3,938 40,624 488,365 105,873 565 602,071 9,203 4 9,207 105,873 472 2,585 118,137 210 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes fair value hierarchy as of 31 December 2014 (items carrieD at fair value) € mn financial assets Financial assets carried at fair value through income Financial assets held for trading Debt securities Equity securities Derivative financial instruments Subtotal Financial assets designated at fair value through income Debt securities Equity securities Subtotal Subtotal Available-for-sale investments Government and agency mortgage-backed securities (residential and commercial) Corporate mortgage-backed securities (residential and commercial) Other asset-backed securities Government and government agency bonds Corporate bonds Other debt securities Equity securities Subtotal Financial assets for unit-linked contracts Derivative financial instruments and firm commitments included in other assets Total financial liabilities Financial liabilities held for trading Derivative financial instruments Other trading liabilities Subtotal Financial liabilities for unit-linked contracts Derivative financial instruments and firm commitments included in other liabilities Financial liabilities for puttable equity instruments Total Level 1 – Quoted prices in active markets Level 2 – Market observable inputs Level 3 – Non-market observable inputs 79 47 260 385 887 1,624 2,512 2,897 43 – 259 29,810 15,885 273 30,077 76,347 91,885 2 171,131 49 – 49 91,885 – 1,754 93,688 323 133 1,336 1,792 981 38 1,018 2,810 3,695 14,146 4,075 162,166 188,946 1,966 868 375,862 2,511 476 381,659 1,315 3 1,319 2,511 281 24 4,135 – 15 22 38 19 110 129 167 – 40 218 39 6,452 729 6,226 13,704 166 – 14,037 7,129 – 7,129 166 – 15 7,310 Total 402 195 1,618 2,214 1,887 1,773 3,660 5,875 3,738 14,186 4,552 192,016 211,284 2,968 37,171 465,914 94,564 477 566,830 8,493 3 8,496 94,564 281 1,793 105,134 Financial assets carried at fair value through income yield curves, and foreign exchange rates observable at commonly quoted intervals. Financial assets held for trading – Debt and equity securities The fair value is mainly determined using the market approach. In some cases, it is determined based on the income approach, using interest rates and yield curves observable at commonly quoted intervals. Financial assets designated at fair value through income – Debt securities The fair value is mainly determined based on net asset values for funds and the market approach. Financial assets held for trading – Derivative financial instruments The fair value is mainly determined based on the income approach, using present value techniques and the Black-Scholes-Merton model. Primary inputs for the valuation include volatilities, interest rates, Financial assets designated at fair value through income – Equity securities For level 2, the fair value is determined using the market approach. For level 3, equity securities mainly represent unlisted equity securi- ties measured at cost. Annual Report 2015 Allianz Group 211 Available-for-sale investments Available-for-sale investments – Debt securities Debt securities include: − Government and agency mortgage-backed securities (residential and commercial), − Corporate mortgage-backed securities (residential and commercial), − Other asset-backed securities, − Government and government agency bonds, − Corporate bonds, and − Other debt securities. The valuation techniques for these debt securities are similar. For level 2 and level 3, the fair value is determined using the market and the income approach. Primary inputs for the market approach are quoted prices for identical or comparable assets in active markets where the comparability between security and benchmark defines the fair value level. The income approach in most cases means that a present value technique is applied where either the cash flow or the discount curve is adjusted to reflect credit risk and liquidity risk. Depending on the observability of these risk parameters in the market, the security is classified as level 2 or level 3. Available-for-sale investments – Equity securities For level 2, the fair value is mainly determined using the market approach or net asset value techniques for funds. For certain pri vate equity investments, the funds are priced based on transaction prices using the cost approach. As there are only few holders of these funds, the market is not liquid and transactions are only known to partici- pants. For level 3, the fair value is mainly determined using net asset values. The net asset values are based on the fair value meas urement of the underlying investments and are mainly provided by fund man- agers. For certain level 3 equity securities, the capital invested is con- sidered to be a reasonable proxy for the fair value. Financial assets for unit-linked contracts For level 2, the fair value is determined using the market or the income approach. For the income approach, primary observable inputs include yield curves observable at commonly quoted intervals. For level 3, the fair value is mainly determined based on the net asset value. Financial liabilities for unit-linked contracts are valued based on their corresponding assets. Derivative financial instruments and firm commitments included in other assets The fair value of the derivatives is mainly determined based on the income approach using present value techniques. Primary inputs include yield curves observable at commonly quoted intervals. The derivatives are mainly used for hedging purposes. Certain derivatives are priced by Bloomberg functions, such as Black-Scholes Option Pricing or the swap manager tool. Financial liabilities held for trading – Derivative financial instruments For level 2, the fair value is mainly determined using the income approach. Valuation techniques applied for the income approach mainly include discounted cash flow models as well as the Black- Scholes-Merton model. Main observable input parameters include volatilities, yield curves observable at commonly quoted intervals and credit spreads observable in the market. For level 3, the fair value is mainly determined based on the income approach using deterministic discounted cash flow models. A significant proportion of derivative liabilities represent derivatives embedded in certain life insurance and annuity contracts. Significant non-market observable input parameters include mortality rates and surrender rates. Financial liabilities held for trading – Other trading liabilities The fair value is mainly determined based on the income approach using present value techniques. Primary inputs comprise swap curves, share prices and dividend estimates. Derivative financial instruments and firm commitments included in other liabilities For level 2, the fair value is mainly determined using the income approach. Primary inputs include interest rates and yield curves observable at commonly quoted intervals. Financial liabilities for puttable equity instruments Financial liabilities for puttable equity instruments are generally required to be recorded at the redemption amount with changes recognized in income. For level 2 and level 3, the fair value is mainly determined using net asset value techniques. Significant transfers of financial instruments carried at fair value In general, financial assets and liabilities are transferred from level 1 to level 2 when liquidity, trade frequency and activity are no longer indicative of an active market. Conversely, the same policy applies for transfers from level 2 to level 1. 212 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes Significant level 3 portfolios – Narrative description and sensitivity analysis Available-for-sale investments – Equity securities Equity securities within available-for-sale investments classified as level 3 mainly comprise private equity fund investments as well as alternative investments of the Allianz Group, and in most cases are delivered as net asset values by the fund managers (€ 5.7 bn). The net asset values are calculated using material, non-public information about the respective private equity companies. The Allianz Group has only limited insight into the specific inputs used by the fund man- agers and hence a narrative sensitivity analysis is not applicable. The fund’s asset manager generally prices the underlying single portfolio companies in line with the International Private Equity and Venture Capital Valuation (IPEV) guidelines using discounted cash flow (income approach) or multiple methods (market approach). For certain investments, the capital invested is considered to be a rea- sonable proxy for the fair value. In these cases, sensitivity analyses are also not applicable. Available-for-sale investments – Corporate bonds Corporate bonds within available-for-sale investments classified as level 3 are mainly priced based on the income approach (€ 6.1 bn). The primary non-market observable input used in the discounted cash flow method is an option-adjusted spread taken from a bench- mark security. A significant yield increase of the benchmark securities in isolation could result in a decreased fair value, while a significant yield decrease could result in an increased fair value. However, a 10 % stress of the main non-market observable inputs has only immaterial impact on fair value. Financial liabilities held for trading Financial liabilities held for trading mainly include embedded de rivative financial instruments relating to annuity products that are priced internally using discounted cash flow models (€ 7.9 bn). A sig- nificant decrease (increase) in surrender rates, in mortality rates or in the utilization of annuitization benefits could result in a higher (lower) fair value. For products with a high death benefit, surrender rates may show an opposite effect. However, a 10 % stress of the main non-market observable inputs has only immaterial impact on fair value. Quantification of significant non-market observable inputs The following table shows the quantitative description of the valua- tion technique(s) and input(s) used for the level 3 portfolios described above. Quantitative Description of valuation techniQue(s) anD non-market observable input(s) useD € mn Description Available-for-sale investments Equity securities Corporate bonds Financial liabilities held for trading Derivative financial instruments Fixed-indexed annuities Fair value as of 31 December 2015 Valuation technique(s) Non-market observable input(s) 5,719 Net asset value n/a Range n/a 6,076 Discounted cash flow method Option-adjusted spread 40 bps – 1,415 bps 7,869 5,526 Discounted cash flow method Annuitizations Variable annuities 2,343 Discounted cash flow method 1 Presentation not meaningful. Mortality assumptions are mainly derived from the Annuity 2000 Mortality Table. Surrenders Mortality Withdrawal benefit election Volatility Surrenders Mortality 0 % – 25 % 0 % – 25 % n/a1 0 % – 50 % n/a 0.5 % – 35 % n/a1 Annual Report 2015 Allianz Group 213 Reconciliation of level 3 financial instruments The following tables show reconciliations of the financial instruments carried at fair value and classified as level 3. reconciliation of level 3 financial assets € mn financial assets Financial assets carried at fair value through income Financial assets held for trading Debt securities Equity securities Derivative financial instruments Subtotal Financial assets designated at fair value through income Debt securities Equity securities Subtotal Available-for-sale investments Corporate mortgage-backed securities (residential and commercial) Other asset-backed securities Government and government agency bonds Corporate bonds Other debt securities Equity securities Subtotal Financial assets for unit-linked contracts Total financial assets at fair value reconciliation of level 3 financial liabilities € mn Carrying value (fair value) as of 1 January 2015 Additions through purchases and issues Net transfers into (out of) level 3 Disposals through sales and settlements Net gains (losses) recognized in consolidated Net gains (losses) recognized in other Foreign currency subsidiaries of the Changes in the consolidated Carrying value (fair value) as of income statement comprehensive income Impairments transla tion adjustments Allianz Group 31 December 2015 – 15 22 38 19 110 129 40 218 39 6,452 729 6,226 13,704 166 14,037 – – 24 24 18 1 19 – 84 16 3,582 773 1,405 5,859 5 5,907 – – – – 1 – 1 171 – 1 (10) – – 162 1 164 – (8) (201) (209) (12) – (12) (139) (102) (12) (547) (57) (1,224) (2,080) (10) (2,311) Carrying value (fair value) as of 1 January 2015 Additions through purchases and issues Net transfers into (out of) level 3 Disposals through sales and settlements Net losses (gains) recognized in consolidated Net losses (gains) recognized in other Foreign currency transla tion adjustments Changes in the consolidated subsidiaries of the Carrying value (fair value) as of income statement comprehensive income Impairments Allianz Group 31 December 2015 financial liabilities Financial liabilities held for trading Derivative financial instruments Financial liabilities for unit-linked contracts Financial liabilities for puttable equity instruments Total financial liabilities at fair value 7,129 166 15 7,310 1,851 5 9 1,865 26 1 – 26 (778) (10) (6) (793) 214 Annual Report 2015 Allianz Group – – 192 193 (1) 1 – 37 23 (3) – 3 126 186 2 381 (891) 2 1 (888) (13) (29) (1) (291) 95 475 237 – 238 – 1 – 1 – – – – – – – (1) (1) (1) (5) (111) (116) (117) – – – – – – – – – – – – – – – 2 2 – – – 25 18 3 570 5 (13) 609 – 611 796 – – 796 – – – – – – – – – 3 152 46 32 234 – 234 – – – – Net gains (losses) in profit or loss attributable to a change in unrealized gains or losses for financial assets held at the reporting date (8) (8) – – – – – – – 2 – – (1) (11) (10) (18) 701 – – 701 Net losses (gains) in profit or loss attributable to a change in unrealized gains or losses for financial liabilities held at the reporting date – 9 38 47 25 112 137 274 257 47 9,754 1,548 6,915 18,796 164 19,145 8,134 164 19 8,317 Reconciliation of level 3 financial instruments The following tables show reconciliations of the financial instruments carried at fair value and classified as level 3. reconciliation of level 3 financial assets € mn financial assets Financial assets carried at fair value through income Financial assets held for trading Debt securities Equity securities Derivative financial instruments Subtotal Debt securities Equity securities Subtotal Available-for-sale investments Financial assets designated at fair value through income Corporate mortgage-backed securities (residential and commercial) Other asset-backed securities Government and government agency bonds Corporate bonds Other debt securities Equity securities Subtotal Financial assets for unit-linked contracts Total financial assets at fair value reconciliation of level 3 financial liabilities € mn – 15 22 38 19 110 129 40 218 39 6,452 729 6,226 13,704 166 14,037 – – 24 24 18 1 19 – 84 16 3,582 773 1,405 5,859 5 5,907 – – – – 1 – 1 – 1 – – 1 171 (10) 162 164 26 1 – 26 – (8) (201) (209) (12) – (12) (139) (102) (12) (547) (57) (1,224) (2,080) (10) (2,311) (778) (10) (6) (793) D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes Carrying value (fair value) as of 1 January 2015 purchases and issues into (out of) level 3 sales and settlements Additions through Net transfers Disposals through Net gains (losses) recognized in consolidated income statement Net gains (losses) recognized in other comprehensive income Impairments Foreign currency transla tion adjustments Changes in the consolidated subsidiaries of the Allianz Group Carrying value (fair value) as of 31 December 2015 Net gains (losses) in profit or loss attributable to a change in unrealized gains or losses for financial assets held at the reporting date – – 192 193 (1) 1 – 37 23 – (3) 3 126 186 2 381 – 1 – 1 – – – (13) (29) (1) (291) 95 475 237 – 238 – – (1) (1) – – – – (1) – – (5) (111) (116) – (117) – – 2 2 – – – 25 18 3 570 5 (13) 609 – 611 – – – – – – – 152 46 – – 3 32 234 – 234 – 9 38 47 25 112 137 274 257 47 9,754 1,548 6,915 18,796 164 19,145 – – (8) (8) – – – (1) – – (11) 2 – (10) – (18) Carrying value (fair value) as of 1 January 2015 purchases and issues into (out of) level 3 settlements Additions through Net transfers through sales and Disposals Net losses (gains) recognized in consolidated income statement Net losses (gains) recognized in other comprehensive income Foreign currency transla tion adjustments Changes in the consolidated subsidiaries of the Allianz Group Carrying value (fair value) as of 31 December 2015 Impairments financial liabilities Financial liabilities held for trading Derivative financial instruments Financial liabilities for unit-linked contracts Financial liabilities for puttable equity instruments Total financial liabilities at fair value 7,129 166 15 7,310 1,851 5 9 1,865 (891) 2 1 (888) – – – – – – – – 796 – – 796 – – – – 8,134 164 19 8,317 Annual Report 2015 Allianz Group Net losses (gains) in profit or loss attributable to a change in unrealized gains or losses for financial liabilities held at the reporting date 701 – – 701 215 fair value measurement on a non-recurring basis Certain financial assets are measured at fair value on a non-recurring basis when events or changes in circumstances indicate that the carrying amount may not be recoverable. If financial assets are measured at fair value on a non-recurring basis at the time of impairment, or if fair value less cost to sell is used as the measurement basis under IFRS 5, corresponding disclosures can be found in note 37 Impairments of investments (net). fair value information about financial assets anD liabilities not carrieD at fair value fair value hierarchy as of 31 December 2015 (items not carrieD at fair value) € mn financial assets Held-to-maturity investments Investments in associates and joint ventures Real estate held for investment Loans and advances to banks and customers Total assets financial liabilities Liabilities to banks and customers Certificated liabilities Subordinated liabilities Total liabilities fair value hierarchy as of 31 Decemeber 2014 (items not carrieD at fair value) € mn financial assets Held-to-maturity investments Investments in associates and joint ventures Real estate held for investment Loans and advances to banks and customers Total assets financial liabilities Liabilities to banks and customers Certificated liabilities Subordinated liabilities Total liabilities Held-to-maturity investments For level 2 and level 3, the fair value is mainly determined based on the market approach using quoted market prices and the income approach using deterministic discounted cash flow models. 216 Annual Report 2015 Allianz Group Level 1 – Quoted prices in active markets Level 2 – Market observable inputs Level 3 – Non-market observable inputs 1,677 362 – 4,978 7,018 8,574 – – 8,574 1,452 40 – 82,913 84,405 3,938 8,625 12,829 25,392 36 5,806 17,810 48,505 72,156 13,051 583 271 13,905 Level 1 – Quoted prices in active markets Level 2 – Market observable inputs Level 3 – Non-market observable inputs 1,182 330 – 494 2,006 7,984 – – 7,984 3,525 18 – 96,339 99,882 1,608 8,618 13,012 23,239 2 4,472 16,323 43,403 64,200 14,015 675 241 14,931 Total 3,165 6,207 17,810 136,397 163,579 25,563 9,208 13,100 47,871 Total 4,710 4,820 16,323 140,238 166,091 23,607 9,293 13,253 46,154 D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes Investments in associates and joint ventures For level 2, fair values are mainly determined based on the net asset values. For level 3, fair values are mainly based on an income approach using a discounted cash flow method or net asset values as provided by third-party vendors. Real estate Fair values are mainly determined based on the income approach. In some cases, a market approach is applied using market prices of identical or comparable assets in markets which are not active. The fair values are either calculated internally and validated by external experts or derived from expert appraisals with internal controls in place to monitor these valuations. Loans and advances to banks and customers For loans and advances to banks and customers, quoted market prices are rarely available. Level 1 consists mainly of highly liquid advances, e.g. short-term investments. The fair value for these assets in level 2 and level 3 is mainly derived based on the income approach using deterministic discounted cash flow models. Liabilities to banks and customers Level 1 consists mainly of highly liquid liabilities, e.g. payables on demand. The fair value for liabilities in level 2 and level 3 is mainly derived based on the income approach, using future cash flows dis- counted with risk-specific interest rates. Main non-market observable inputs include credit spreads. In some cases, the carrying amount (amortized cost) is considered to be a reasonable estimate of the fair value. Certificated liabilities and subordinated liabilities For level 2, the fair value is mainly determined based on the market approach, using quoted market prices, and based on the income approach, using deterministic discounted cash flow models. For level 3, fair values are mainly derived based on the income approach using deterministic cash flows with credit spreads as primary non- market observable inputs. In some cases, the carrying amount (amortized cost) is considered to be a reasonable estimate for the fair value. reclassification of financial assets On 31 January 2009, certain USD-denominated CDOs were reclassified from financial assets held for trading to loans and advances to banks and customers in accordance with IAS 39. As of 31 December 2014, the carrying amount and fair value of the CDOs was € 167 mn and € 169 mn, respectively. As of 31 December 2015, the carrying amount and fair value of the CDOs was € 4 mn and € 4 mn, respectively. This reduction was driven by the circumstance that one CDO vehicle was restructured during the second quarter of 2015. In the course of this, the underlying assets of the CDO vehicle were recog- nized as available-for-sale investments. For the year ended 31 Decem- ber 2015, the net profit related to the CDOs was € 19 mn. transfers of financial assets As of 31 December 2015, the Allianz Group substantially retained all the risks and rewards out of the ownership of transferred assets. There have not been any transfers of financial assets that were derec- ognized in full or partly, in which Allianz continues to control the transferred assets. Transfers of financial assets mainly relate to secu- rities lending and repurchase agreement transactions. Transferred financial assets in repurchase agreement and securities lending transactions are mainly available-for-sale debt and equity securities for which substantially all of the risks and rewards are retained. As of 31 December 2015, the carrying amount of the assets transferred for securities lending trans actions amounted to € 5,294 mn (2014: € 7,596 mn). For repurchase agreements, the carrying amount of the assets transferred amounted to € 1,394 mn (2014: € 1,119 mn) and the carrying amount of the associated liabilities amounted to € 1,410 mn (2014: € 1,168 mn). assets pleDgeD anD collateral The carrying amounts of the assets pledged as collateral are dis- played in the following table: assets pleDgeD as collateral € mn as of 31 December Collaterals without right to resell or repledge Financial assets carried at fair value through income Investments Loans and advances to banks and customers Subtotal Collaterals with right to resell or repledge Investments Subtotal Total 2015 2014 7 6,337 2,726 9,070 2,295 2,295 11,365 – 4,734 2,877 7,611 2,628 2,628 10,239 As of 31 December 2015, the Allianz Group has received collateral, consisting of fixed income and equity securities, with a fair value of € 2,349 mn (2014: € 2,501 mn), which the Allianz Group has the right to sell or repledge. For the years ended 31 December 2015 and 2014, no pre viously received collateral was sold or repledged by the Allianz Group. As of 31 December 2015, the Allianz Group received cash collat- eral with a carrying amount of € 212 mn (2014: € 15 mn). Annual Report 2015 Allianz Group 217 45 – Interests in unconsolidated structured entities nature, purpose anD role of the allianz group in structureD entities To improve transparency and to meet requirements of regulators and other financial authorities, IFRS 12 introduced additional disclosure requirements for unconsolidated structured entities often referred to as off-balance sheet activities. Unconsolidated structured entities, particularly securitization vehicles and asset-backed financings, were identified by regulators as forming part of such activities. Under IFRS 12, a structured entity is defined as an entity that has been designed so that voting rights or similar rights are not the dom- inant factor in deciding who controls the entity, such as when any voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements. The Allianz Group engages in some business activities that involve entities that fit the above-mentioned definition of structured entities. Primarily, the Allianz Group is involved with such entities due to its investment activities in the insurance business and due to its asset management activities. Furthermore, structured entities are used by the Allianz Group to source out certain risks to investors as part of its reinsurance business. Generally, the classification of enti- ties as structured entities may require significant judgment. In the following, the business activities involving unconsolidated structured entities are described. Investments in asset-backed securities (abs) and mortgage-backed securities (mbs) issued by securitization vehicles The Allianz Group acts as investor in AbS- or mbS-issuing securitiza- tion vehicles which purchase pools of assets including commercial mortgage loans (CmbS), auto loans, credit card receivables and oth- ers. These securitization vehicles refinance the purchase of assets by issuing tranches of AbS or mbS, whose repayment is linked to the per- formance of the assets held by the vehicles. Securitization vehicles invested in by the Allianz Group have been set up by third parties. Furthermore, the Allianz Group has nei- ther transferred any assets to these vehicles nor has it provided any further credit enhancements to them. Income derived from investments in securitization vehicles mainly includes interest income generated from AbS and mbS, as well as realized gains and losses from disposals of these securities. Within the asset management business, the Allianz Group acts as asset manager for some securitization vehicles. The assets under management of these vehicles amounted to € 1,753 mn as of 31 Decem- ber 2015 (2014: € 2,202 mn). Some of the affected vehicles have been set up by the Allianz Group whereas others have been set up by third parties. In this respect, the role of the Allianz Group is limited to asset management. The Allianz Group has not invested in these vehicles being managed. 218 Annual Report 2015 Allianz Group Income derived from the management of securitization vehicles comprises asset management fees. Investments in investment funds Considering the broad variety of investment funds across different jurisdictions, the classification of investment funds as structured entities based on the definition in IFRS 12 and current industry prac- tice is judgmental. As a general rule, the relevant activities of an investment fund are dedicated to the fund manager via asset manage- ment agreements. In contrast, influence from investors on the rele- vant activities of unconsolidated funds is usually either precluded by legal or regulatory provisions or is not deemed to be substantial. Investment funds are generally subject to stringent regulatory requirements from financial authorities in all jurisdictions across the world. Comprehensive regulation of funds protects fund investors and also helps to limit investment risk. These mechanisms result in a legal set-up of funds, agreed and accepted by investors and invest- ment managers, that may lead to a classification as structured enti- ties under IFRS 12. With regard to investment activities, income mainly includes distributions from the funds as well as realized gains and losses from disposals. Fund management activities Within the asset management business, investment funds are estab- lished and managed to accommodate retail and institutional clients’ requirements to hold investments in specific assets, market segments or regions. Within the insurance business, policyholder money is partly invested in investment funds, which include funds managed by Allianz Group internal asset managers as well as funds set up and managed by third parties. Investment funds managed or invested in by Allianz Group may include mutual funds, special funds and other funds. Income derived from the management of investment funds includes mainly asset management fees and performance based fees. Investment funds launched by group-internal asset managers can be considered to be sponsored by the Allianz Group. As a sponsor, the Allianz Group through its asset management subsidiaries is involved in the legal set-up and marketing of internally managed investment funds. This may include providing seed capital to the funds and providing administrative services to ensure the invest- ment funds’ operation. Investment funds managed by group-internal asset managers can be reasonably associated with the Allianz Group. The use of the Allianz name for investment funds is another indicator that the Allianz Group has acted as a sponsor for the respective funds. Information on the management fees generated in the asset manage- ment business are disclosed in note 30 Fee and commission income of this Annual Report. D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes Reinsurance business The Allianz Group also uses structured entities in the reinsurance business, where hurricane and earthquake risks are sourced to exter- nal investors via the issuance of catastrophe bonds issued by bank- ruptcy-remote structured entities. The performance of the issued bonds is linked to the occurrence or non-occurrence of specific catas- trophe events. The cash received from the issued bonds is invested into low-risk structured notes. In parallel, the structured entities enter into derivative contracts with the Allianz Group under which the underlying risks are transferred from the Allianz Group to the structured entities. Thus, the Allianz Group transfers exposure to variable returns into the structured entities instead of exposing itself to them. Since the Allianz Group is not exposed to the variable returns of these entities, they are not consolidated within the consolidated financial statements of the Allianz Group. Income derived from the involvement in these structured entities is only driven by the valuation of the derivatives under which insur- ance risks are transferred. According to the purpose those derivatives are held to maturity. They are treated as freestanding derivatives and are thus measured at fair value through profit or loss. nature of risks associateD with unconsoliDateD structureD entities Interests in asset-backed securities (abs) and mortgage- backed securities (mbs) issued by securitization vehicles carrying amounts of abs anD mbs investments by type of category € mn as of 31 December Financial assets carried at fair value through income Loans and advances to banks and customers Investments 2015 u.s. agency cmbs cmo/cDo1 Auto Credit card Other Total 2014 u.s. agency cmbs rmbs cmo/cDo Auto Credit card Other Total – – 2 – – 2 4 – – – 3 – – 16 19 3,584 9,433 3,554 468 284 4,096 21,419 3,445 10,347 2,435 940 871 270 4,178 22,485 – – 165 – – 28 193 – – 215 192 – – – 407 Total 3,584 9,433 3,721 468 284 4,126 21,616 3,445 10,347 2,649 1,135 871 270 4,194 22,912 1 In 2015, € 2.2 Bn were reclassified from rmBS to CmO/CDO. Annual Report 2015 Allianz Group carrying amounts of abs anD mbs investments by rating € mn Financial assets carried at fair value through income Loans and advances to banks and customers Investments – – – – 2 1 4 13 – 1 – 3 1 19 16,000 2,796 1,723 558 328 14 21,419 17,253 2,301 1,917 695 309 11 22,485 – 161 – – 4 28 193 – 112 103 – 164 28 407 as of 31 December 2015 aaa aa a bbb Non-investment grade Not rated Total 2014 aaa aa a bbb Non-investment grade Not rated Total Total 16,000 2,957 1,723 558 335 44 21,616 17,266 2,413 2,021 695 476 40 22,912 The carrying amounts in the tables listed above correspond to an aggregated amortized cost amount of € 21,244 mn (2014: € 21,981 mn). This amortized cost amount represents the maximum exposure to loss for the Allianz Group from these investments. In the reporting period, the Allianz Group has not provided any financial or other sup- port to these entities, nor does it have the intention to provide such support in the future. Investments in investment funds investments in investment funDs by asset class € mn as of 31 December 2015 Debt funds Stock funds Private equity funds Property funds Other funds Total 2014 Debt funds Stock funds Private equity funds Property funds Other funds Total Financial assets carried at fair value through income Investments Total 499 881 1 – 242 1,623 340 884 – – 196 1,420 5,399 2,984 6,360 2,633 288 17,665 5,908 3,370 5,685 1,531 238 16,731 5,898 3,865 6,361 2,633 530 19,288 6,248 4,254 5,685 1,531 433 18,150 219 Out of the total investment fund exposure, investments of € 10.1 bn (2014: € 10.0 bn) relate to listed investment funds, whereas invest- ments of € 9.2 bn (2014: € 8.1 bn) relate to unlisted investment funds. As of the reporting date, the Allianz Group has receivables from unconsolidated investment funds, which are mainly due in return for asset management services, amounting to € 723 mn (2014: € 724 mn). Furthermore, the Allianz Group has commitments to invest in private equity funds and similar financial instruments totaling € 5,460 mn as of 31 December 2015 (2014: € 4,388 mn). The carrying amounts in the tables listed above correspond to an aggregated amortized cost amount of € 16,196 mn (2014: € 15,205 mn). This amortized cost amount represents the maximum exposure to loss for the Allianz Group from these investments. In the reporting period, the Allianz Group has not provided any financial or other sup- port to these entities, nor does it have the intention to provide such support in the future. Besides the above-mentioned investments in investment funds, the Allianz Group also holds investment funds to fund unit-linked insurance contracts. However, these holdings are held on behalf and for the benefit of unit-linked policyholders only. For that reason, these holdings are not included in the above-mentioned table. As of 31 December 2015, the volume of unit-linked assets amounted to € 105,873 mn (2014: € 94,564 mn). The maximum exposure to loss on these investments is covered by liabilities recorded for unit-linked contracts. Reinsurance business As of 31 December 2015, the outstanding volume of catastrophe bond linked to hurricane and earthquake risks sponsored by the Allianz Group amounted to € 161 mn (2014: € 343 mn). The fair value of the derivative between the Allianz Group and the structured entity issu- ing the catastrophe bond amounted to € (1) mn (2014: € (4) mn). 46 – Related party transactions Information on the remuneration of Board members and transactions with these persons can be found in the Remuneration Report, starting on page 37. Transactions between Allianz SE and its subsidiaries that are to be deemed related parties have been eliminated in the consolidation and are not disclosed in the notes. Business relations with joint ventures and associates are set on an arm’s length basis. 47 – Litigation, guarantees and other contingencies and commitments litigation Allianz Group companies are involved in legal, regulatory, and arbi- tration proceedings in Germany and a number of foreign jurisdic- tions, including the United States. Such proceedings arise in the ordi- nary course of businesses, including, amongst others, their activities as insurance, banking and asset management companies, employ- ers, investors and taxpayers. It is not feasible to predict or determine the ultimate outcome of the pending or threatened proceedings. Management does not believe that the outcome of these proceedings, including those discussed below, will have a material adverse effect on the financial position and the results of operations of the Allianz Group, after consideration of any applicable reserves. On 24 May 2002, pursuant to a statutory squeeze-out procedure, the general meeting of Dresdner Bank AG resolved to transfer shares from its minority shareholders to Allianz as principal shareholder in return for payment of a cash settlement amounting to € 51.50 per share. Allianz established the amount of the cash settlement on the basis of an expert opinion, and its adequacy was confirmed by a court- appointed auditor. Some of the former minority shareholders applied for a court review of the appropriate amount of the cash settlement in a mediation procedure (“Spruchverfahren”). In September 2013, the district court (“Landgericht”) of Frankfurt dismissed the minor- ity shareholders’ claims in their entirety. This decision has been appealed to the higher regional court (“Oberlandesgericht”) of Frank- furt. In the event that a final decision were to determine a higher amount as an appropriate cash settlement, this would affect all of the approximately 16 mn shares that were transferred to Allianz. In September 2015, a putative class action complaint was filed against Allianz Life Insurance Company of North America (Allianz Life) in California, making allegations similar to those made in prior class actions regarding the sale of Allianz Life’s two-tier annuity pro- ducts, including allegations of breach of contract and violation of California unfair competition law. The ultimate outcome of the case cannot yet be determined. In 2015, Allianz Life also settled a consoli- dated matter, and another case was dismissed. Pacific Investment Management Company LLC (PImCO) and Allianz Asset Management of America, L.P. (AAm US), have been named as defendants in litigation in California brought by William H. Gross, a former employee of PImCO, in October 2015. Mr. Gross’s complaint alleges that, even though Mr. Gross resigned, he is entitled to addi- tional profit sharing payments from PImCO of at least USD 200 mn. Allianz believes that this lawsuit is without merit. The ultimate out- come of this matter cannot yet be determined. 220 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes guarantees anD other contingencies Guarantees The guarantees issued by the Allianz Group consist of financial guar- antees, indemnification contracts and performance contracts. Financial guarantees The majority of the Allianz Group’s financial guarantees are issued to customers through the normal course of banking business in return for fee and commission income, which is generally determined based on rates subject to the nominal amount of the guarantees and inher- ent credit risks. Once a guarantee has been drawn upon, any amount paid by the Allianz Group to third parties is treated as a loan to the customer, and is, therefore, basically subject to the credit risk of the customer or the collateral pledged, respectively. As of 31 December 2015, the financial guarantees amount to € 454 mn (2014: € 434 mn), € 393 mn of which are due within one year. The collateral held amounts to € 57 mn (2014: € 49 mn). Nearly all cus- tomers of the letters of credit have no external credit rating. Indemnification contracts Indemnification contracts are executed by the Allianz Group with various counterparties under existing service, lease or acquisition transactions. Such contracts may also be used to indemnify counter- parties under various contingencies, such as changes in laws and regulations or litigation claims. In connection with the sale of various of the Allianz Group’s for- mer private equity investments, subsidiaries of the Allianz Group provided indemnities to the respective buyers in the event that certain contractual warranties arise. The terms of the indemnity contracts cover ordinary contractual warranties, environmental costs, and any potential tax liabilities the entity incurred while owned by the Allianz Group. As of 31 December 2015, the indemnification contracts amount to € 89 mn (2014: € 108 mn), which are almost entirely due after five years. No collateral was held. Nearly all customers of the indemnifica- tion contracts have an external credit rating of A. Performance guarantees Performance guarantees are given by the Allianz Group to ensure third-party entitlements if certain performance obligations of the guarantee recipient are not fulfilled. As of 31 December 2015, the performance guarantees amount to € 31 mn (2014: € 43 mn), € 19 mn of which are due within one year. The collateral held amounts to € 31 mn (2014: € 55 mn). Other contingencies In accordance with § 5 (10) of the Statutes of the Joint Fund for Secur- ing Customer Deposits (“Einlagensicherungsfonds”), Allianz SE has undertaken to indemnify the Federal Association of German Banks (“Bundesverband deutscher Banken e.V.”) for any losses it may incur Annual Report 2015 Allianz Group by reason of supporting measures taken in favor of Oldenburgische Landesbank AG (OLb) and Münsterländische Bank Thie & Co. KG. Allianz and HT1 Funding GmbH have signed a Contingent Indemnity Agreement in July 2006, pursuant to which Allianz may, in certain circumstances, be obliged to make payments to HT1 Funding GmbH. HT1 Funding GmbH issued nominal € 1,000 mn Tier 1 Capital Securities with an annual coupon of 6.352 % (as of 30 June 2017, the coupon will be 12-month EURIbOR plus a margin of 2.0 % p.a.). The con- tingent payment obligation of the Allianz Group was reduced in 2012 following a reduction of the nominal amount of the Tier 1 Capital Securities from € 1,000 mn to € 416 mn. The securities have no sched- uled maturity and the security holders have no right to call for their redemption. The securities may be redeemed at the option of the issuer on 30 June 2017, and thereafter. The Allianz Group expects not to be obliged to make a payment in the foreseeable future; however, it is not possible for the Allianz Group to predict the ultimate potential payment obligations at this point in time. commitments Loan commitments The Allianz Group engages in various lending commitments to meet the financing needs of its customers. They consist of advances, stand- by facilities, guarantee credits, mortgage loans and public-sector loans. As of 31 December 2015, the total of loan commitments amounts to € 1,045 mn (2014: € 953 mn) and represents the amounts at risk should customers draw fully on all facilities and then default, excluding the effect of any collateral. Since the majority of these com- mitments may expire without being drawn upon, these loan commit- ments are not representative of actual liquidity requirements for such commitments. Leasing commitments The Allianz Group occupies property in many locations under various long-term operating leases as well as one long-term finance lease and has entered into various operating leases covering the long-term use of data processing equipment and other office equipment. As of 31 December 2015, the future minimum lease payments under non-cancelable operating and finance leases were as follows: Operating leases future minimum lease payments - operating leases € mn Due in 1 year or less Due after 1 year and up to 5 years Due after 5 years Subtotal Subleases Total 2015 332 1,141 1,397 2,871 (307) 2,565 221 For the year ended 31 December 2015, rental expenses totaled € 347 mn (2014: € 322 mn), net of sublease rental income received of € 5 mn. Finance lease future minimum lease payments - finance lease € mn Due in 1 year or less Due after 1 year and up to 5 years Due after 5 years Total 2015 Gross amount Present value 1 21 1,071 1,093 1 21 181 203 As of 31 December 2015, the net carrying amount of the finance lease obligation, which is included in other liabilities, amounted to € 111 mn. Gross minimum lease payments were reduced by imputed interest in the amount of € 890 mn to receive the present value of minimum lease payments. The underlying contract expires as of 31 December 2111. Purchase obligations The Allianz Group has commitments for mortgage loans and to buy multi-tranche loans of € 4,133 mn (2014: € 3,388 mn) as well as to invest in private equity funds and similar financial instruments totaling € 5,460 mn (2014: € 4,388 mn) as of 31 December 2015. As of 31 Decem- ber 2015, commitments outstanding to invest in real estate used by third parties or used by the Allianz Group for its own activities and for infra structure investments amount to € 1,958 mn (2014: € 1,209 mn). In addition, as of 31 December 2015, the Allianz Group has other purchase obligations of € 2,762 mn (2014: € 743 mn) mainly referring to maintenance, IT-services, sponsoring and other obligations. Other commitments Within the Allianz Group several entities are obliged to make contri- butions to an industry-specific compensation scheme. The most important ones are the following: Pursuant to §§ 221 ff. of the German Insurance Supervision Act in its version applicable as from 1 January 2016 (“Versicherungsaufsichts- gesetz” – VAG), a mandatory insurance guarantee scheme (“Sicher- ungsfonds”) for life insurers is implemented in Germany. Each mem- ber of the scheme is obliged to make annual contributions to the scheme as well as special payments under certain circumstances. The exact amount of obligations for each member is calculated according to the provisions of a Federal Regulation (“Sicherungsfonds-Finan- zierungs-Verordnung (Leben)” – SichLVFinV). As of 31 December 2015, the future liabilities of Allianz Lebens versicherungs-Aktiengesell- schaft and its subsidiaries to the insurance guarantee scheme pursu- ant to the SichLVFinV amount to annual contributions of € 11.9 mn (2014: € 10.3 mn) and an obligation for special payments of, in prin- ciple, € 157 mn (2014: € 157 mn) per year. In accordance with §§ 221 ff. of the German Insurance Super- vision Act, Allianz Private Kranken versicherungs-AG is a member of the mandatory insurance guarantee scheme (Sicherungsfonds) for German health insurers. In case the guarantee scheme has to resume responsibility for insurance contracts, it will collect special payments from its members to fulfill its tasks. Up until the reporting date, no contributions have been requested by the scheme. As of 31 December 2015, the potential liabilities of Allianz Private Krankenversicherungs- AG to the insurance guarantee scheme amount to an obligation for special payments of € 52 mn (2014: € 51 mn). In December 2002, Protektor Lebensversicherungs-Aktiengesell- schaft (“Protektor”), a life insurance company whose role is to protect policyholders of all German life insurers, was founded. Allianz Lebens versicherungs-Aktiengesellschaft and some of its subsidiaries are obligated to provide additional funds either to the mandatory insurance guarantee scheme or to Protektor, in the event that the funds provided to the mandatory insurance guarantee scheme are not sufficient to handle an insolvency case. Such obligation is based on a maximum of 1 % of the sum of the net underwriting reserves with deduction of payments already provided to the insurance guarantee scheme. As of 31 December 2015, and under inclusion of the contribu- tions to the mandatory insurance scheme mentioned above and assuming that no other life insurer is exempted from payments, the aggregate out standing commitment of Allianz Lebensversicherungs- Aktiengesellschaft and its subsidiaries to the insurance guarantee scheme and to Protektor is € 1,424 mn (2014: € 1,420 mn). According to the German Investor Compensation Act (AnlEntG – “Anlegerentschädigungsgesetz”) all financial services institutions and external capital management companies, as well as certain credit institutions licensed to do business in Germany, must adhere to a statutory compensation scheme. Allianz Global Investors GmbH, PImCO Deutschland GmbH and risklab GmbH are currently members of EdW (“Entschädigungseinrichtung der Wertpapierhandelsunter- nehmen”, Berlin). The annual contribution is determined in consid- eration of each member’s scope of business. In addition, EdW may levy special contributions from its members, if the funds available to EdW are insufficient to satisfy all eligible claims. Special contributions are determined by reference to the preceding yearly contribution. For 2015, the yearly contributions for above-mentioned entities have been determined by notification from the EdW in the amount of € 5 mn (2014: € 2 mn). With respect to the insolvency of Phoenix Kapitaldienst GmbH, the German Federal Financial Supervisory Authority (“Bundes- anstalt für Finanzdienst leistungsaufsicht” – BaFin) has determined that certain investor claims will be covered under the compensation scheme and special contributions have been levied. In this regard, special contributions were notified by EdW to above-mentioned enti- ties in 2015 in the amount of € 8 mn (2014: € 5 mn). The above-men- tioned entities have appealed the special contributions. For received but not yet paid notifications and for the estimated special contribu- tion for 2016, adequate provisions have been accrued. 222 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes 48 – Pensions and similar obligations overview Retirement benefits in the Allianz Group, which are granted to employees and in Germany also to agents, are either in the form of defined benefit or defined contribution plans. For defined benefit plans, the beneficiary is granted a defined benefit by the employer or via an external entity. In contrast to defined contribution arrange- ments, the future cost to the employer of a defined benefit plan is not known with certainty in advance. The Allianz Group provides competitive and cost effective retire- ment and disability benefits using risk appropriate vehicles. The plans may vary from country to country due to the different legal, fiscal and economic environment. Typically associated with defined benefit plans are biometric risks like longevity, disability and death as well as economic risks like interest rates, inflation and compensation increases. The Allianz Group continued to mitigate the risk impact by applying the benefits rule as part of the Allianz Standard for HR. Major de-risking actions are described in detail in the sections for Germany and U.K. New plans are primarily based on contributions and may include, in some cases, guarantees such as the preservation of contributions or minimum interest rates. In the Pension Task Force, the heads of Group HR, Group Account- ing and Reporting, Group Treasury and Corporate Finance, Group Planning and Controlling, Group Risk and AIm met four times to pro- vide global governance and pre-align pension-related topics such as risk management and Solvency II prior to relevant Group Committee meetings. Pension plans in Germany, the U.K. and Switzerland are described in more detail regarding key risks and regulatory environment, as each of them contributes more than 5 % to the Allianz Group’s defined benefit obligation or its plan assets. Germany Germany accounts for 75.3 % of the Allianz Group’s defined benefit obligation and 62.9 % of the Allianz Group’s plan assets. The discount rate used to calculate the defined benefit obligation at year-end was 2.25 % p.a. for pension plans, and in case of a shorter duration 2.0 % p.a. Most active German employees participate in contribution- based systems using different vehicles to cover the base salary both below and above the German social security ceiling. The Allianz Ver- sorgungskasse VVaG (AVK), financed through employee contribu- tions, and the Allianz Pensionsverein e.V. (APV), financed by the employer, provide pension benefits for the base salary up to the Ger- man social security ceiling. Both plans are wholly funded along local regulatory requirements and were closed for new entrants, effective 31 December 2014. AVK and APV are legally separate administered pension funds with trustee boards being responsible for the invest- ment of the assets and the risk management. AVK is subject to Ger- man insurance regulation. Additionally, for salary above the German social security ceiling, the Allianz Group contributes to contribution-based pension plans. The Allianz Group decides each year whether and to which extent a budget for the contribution-based pension plans is provided. Inde- pendently from this decision, an additional risk premium is paid to cover death and disability. Generally the accruals of the contribution- based pension plans are wholly funded, whereas the grandfathered plans are funded to a minor extent. On retirement, the accumulated capital is paid as a lump sum or converted to a lifetime annuity. Since 1 January 2015 Allianz Group contributes for new entrants and for the majority of the contribution-based pension plan benefi- ciaries to a new low risk pension plan, My Allianz Pension, where only the contributions are preserved. The assets of the contribution-based pension plans are allocated to a trust (Methusalem Trust e.V.) and managed by a board of trustees. There is also a partly funded defined benefit pension plan for agents (VertreterVersorgungsWerk, VVW), which has been closed for new entrants as of 31 December 2011. A part of the pension plan serves as a replacement for the compensatory claim of agents according to German Commercial Code (§ 89b). VVW is close to a final salary ben- efit and pension increases are broadly linked to inflation. This pension plan was de-risked in 2015 as 40 % of the active tied agents accepted an attractive offer to opt for a lump sum payment instead of annuities at retirement. For the AVK the annual minimum interest rate guaranteed is 1.75 % – 3.50 %, depending on the date of joining the Allianz Group, and for the closed part of the contribution-based pension plan it is 2.75 %. Pension increases apart from AVK are guaranteed at least with 1 % p.a. Depending on legal requirements, some pension increases are linked to inflation. In AVK the complete surplus share of the retirees is used to increase their pension. Employees generally have a choice between lump sum pay- ments and annuities, with some vehicles providing only annuities. The period in which a retirement benefit can be drawn is usually between age 60 and age 67. Disability benefits are granted prior to retirement in the event of an occurrence of a qualifying disability. In the case of death, surviving dependents normally receive 60 % (widow/widower) and 20 % (per child) of the original employee’s pen- sion, in total not to exceed 100 %. In My Allianz Pension the surviving dependents gain the accrued capital. Additionally, the Allianz Group offers a deferred compensation program, Pensionszusage durch Entgeltumwandlung (PZE), for active employees. Within some boundaries they convert at their discretion parts of their gross income and receive in exchange a pension com- mitment of equal value. PZEs almost qualify as defined contribution plans with minor risk exposure. Annual Report 2015 Allianz Group 223 United Kingdom The U.K. accounts for 7.6 % of the Allianz Group’s defined benefit obli- gation and 11.7 % of the Allianz Group’s plan assets. The discount rate used to calculate the defined benefit obligation at year-end was 3.9 % p.a. for pension plans. The U.K. operates a funded pension scheme, the Allianz Retire- ment and Death Benefits Fund. The trustee board is required by law to act in the best interests of members and is responsible for setting certain policies (e.g. investment and contribution policies) of the principal U.K. scheme. The fund has a defined benefit pension section and a defined contribution section. The defined contribution section was estab- lished on 1 April 2001, from which date the defined benefit section was closed to new entrants. From 1 July 2015, the fund closed to future accrual and no more defined benefit benefits will be accrued beyond that date. A new Group Personal Pension Plan (GPPP), outside of the Allianz Retirement and Death Benefits Fund, was established in 2015. All future accrual of benefits will be via the GPPP and all defined con- tribution section benefits will be transferred into the GPPP, leaving only a defined benefit section of the Allianz Retirement and Death Benefits Fund, in respect of benefits built up before 1 July 2015. The defined benefit section provides pension increases broadly linked to Retail Prices Index (RPI) inflation. The assets of this section were significantly de-risked over 2015, moving a large allocation from equities to bonds. Since 1 July 2015, contributions to the fund are made only by the employer in respect of the deficit in the defined benefit section of the fund. Switzerland Switzerland accounts for 5.9 % of the Allianz Group’s defined benefit obligation and 10.1 % of the Allianz Group’s plan assets. The discount rate used to calculate the defined benefit obligation at year-end was 1.0 % p.a. for pension plans. There are obligatory corporate pension plans in Switzerland, eligible for all employees. The plans are wholly funded through legal- ly separate trustee-administered pension funds, with the trustee board being responsible for the investment of the assets and risk management. The plans are contribution-based and cover the risks of longevity, disability and death. Employees contribute only a small amount whereas the employer contributes for the complete risk cov- erage and a large part of the savings components. The interest rate is decided annually by the board of the pension funds. For the manda- tory part, the minimum interest rate is regulated by law and reviewed annually (1.75 % in 2015, 1.25 % in 2016). At retirement, beneficiaries can choose between a lump sum payment, an annuity or a combina- tion of both where the part which is not granted as a lump sum is converted to a fixed annuity according to the rules of the pension fund, taking into account legal requirements. If employees contract out of the Allianz Suisse pension plan, they have to take their vested pension capital (“Freizügigkeitsleistung”) to the next employer, which implies a small liquidity risk. DefineD benefit plans Amounts recognized in the Allianz Group’s consolidated balance sheet for defined benefit plans are as follows: reconciliation of DefineD benefit plans on the balance sheet € mn Net amount recognized as of 1 January Changes in the consolidated subsidiaries of the Allianz Group1 Foreign currency translation adjustments Recognized expenses2 Payments oci recognition (before deferred taxes) Net amount recognized as of 31 December thereof assets thereof liabilities 2015 9,707 (23) 9 686 (596) (722) 9,062 (87) 9,149 2014 7,500 (3) 21 662 (737) 2,264 9,707 (58) 9,765 1 2 For 2015, these include € 21 mn for the deconsolidated subsidiary Selecta. For 2015, includes net interest expenses of € 191 mn (2014: € 253 mn). 224 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes The following table sets out the changes in the defined benefit obli- gation, in the fair value of plan assets and in the effect of the asset ceiling for the various Allianz Group defined benefit plans: reconciliation of DefineD benefit obligation, plan assets anD effect of asset ceiling € mn change in DefineD benefit obligation Defined benefit obligation as of 1 January 22,767 19,110 2015 2014 Current service costs Interest expenses Plan participants’ contributions Actuarial (gains)/losses due to Changes in demographic assumptions Changes in financial assumptions Experience adjustments Past service costs Foreign currency translation adjustments Benefits paid Changes in the consolidated subsidiaries of the Allianz Group1 Divestitures Settlement gain/(loss) Settlement payments2 Defined benefit obligation as of 31 December3 495 492 111 20 (664) (47) – 275 (693) (200) – (1) (229) 22,327 398 663 107 6 3,227 (111) (4) 197 (680) (4) (5) 15 (152) 22,767 As of 31 December 2015, post-retirement health benefits included in the defined benefit obligation and in the net amount recognized amounted to € 11 mn (2014: € 13 mn) and € 11 mn (2014: € 13 mn), respec- tively. During the year ended 31 December 2015, the defined benefit costs related to post-retirement health benefits amounted to € 1 mn (2014: € – mn). Assumptions The assumptions for the actuarial computation of the defined benefit obligation and the recognized expense depend on the circumstances in the particular country where the plan has been established. The calculations are based on current actuarially calculated mortality tables, projected turnover depending on age and length of service and internal Allianz Group retirement projections. Although this represents the best estimate as of today, considering a further increase in life expectancy could be reasonable. The weighted aver- age life expectancy of a currently 65-year-old plan participant is about 89.1 years for women and 86.6 years for men. An increase in life expectancy by one year would lead to an increase of the defined ben- efit obligation by € 717 mn. The weighted average values of the assumptions for the Allianz Group’s defined benefit plans used to determine the defined benefit obligation and the recognized expense are as follows: change in fair value of plan assets assumptions for DefineD benefit plans Fair value of plan assets as of 1 January 13,123 11,668 Interest income on plan assets Return on plan assets greater/(less) than interest income on plan assets Employer contributions Plan participants’ contributions Foreign currency translation adjustments 302 28 316 111 272 411 860 317 107 177 Benefits paid4 (413) (381) % as of 31 December Discount rate Rate of compensation increase Rate of pension increase Rate of medical cost trend 2015 2.4 2.1 1.8 1.0 2014 2.2 2.1 1.8 2.6 Changes in the consolidated subsidiaries of the Allianz Group5 Divestitures Assets distributed on settlement6 Fair value of plan assets as of 31 December change in effect of asset ceiling7 Effect of asset ceiling as of 1 January Interest expenses on effect of asset ceiling Change in effect of asset ceiling in excess of interest Foreign currency translation adjustments Effect of asset ceiling as of 31 December (178) – (229) 13,333 63 1 (2) 5 67 (4) (1) (31) 13,123 58 1 2 1 63 1 2 3 4 5 6 7 For 2015, these include € 204 mn for the deconsolidated subsidiary Selecta. These include a settlement payment of € 121 mn in South Korea for a plan change into a defined contribu- tion pension plan in 2014 and € 225 mn for the plan restructuring in the U.K. in 2015. As of 31 December 2015, € 7,857 mn (2014: € 8,271 mn) of the defined benefit obligation are wholly unfunded, while € 14,470 mn (2014: € 14,496 mn) are wholly or partly funded. In addition, the Allianz Group has paid € 287 mn (2014: € 306 mn) directly to plan participants. For 2015, these include € 183 mn for the deconsolidated subsidiary Selecta. These include € 225 mn for the plan restructuring in the U.K. in 2015. The asset ceiling is determined by taking the reduction of future contributions into account. The recognized expense is recorded based on the assumptions of the corresponding previous year. The discount rate assumption is the most significant risk for the defined benefit obligation. It reflects market yields at the balance sheet date of high-quality fixed income investments corresponding to the currency and duration of the liabilities. In the Eurozone, the decision for the discount rate is based on AA-rated financial and cor- porate bonds, provided by Allianz Investment Data Services (IDS), and a standardized cash flow profile for a mixed population. The Internal Controls Over Financial Reporting (ICOFR) certified Allianz Global Risk Parameters (GRIPS) methodology is an internal development of the Nelson-Siegel model and consistently used by Group Risk, Group Audit, AIm and PImCO. The range for the sensitivity calculations was derived by analyz- ing the average volatility over a five-year period. Annual Report 2015 Allianz Group 225 An increase (or decrease) in the discount rate by 50 basis points would lead to a decrease of € 1.5 bn (or increase of € 1.8 bn) in the defined benefit obligation. In addition to the plan assets of € 13.3 bn, the Allianz Group has ded icated assets at Group level amounting to € 5.9 bn as of 31 December 2015, which are likewise managed according to Allianz ALm standards. An increase of pre-retirement benefit assumptions (e.g. salary increase) of 25 basis points would have an effect of € 67 mn on the defined benefit obligation. However, the increase of post-retirement assumptions (e.g. inflation-linked increases of pension payments) of 25 basis points would affect the defined benefit obligation by € 498 mn. A change in the medical cost trend rate by 100 basis points would have an effect of € 1 mn on the defined benefit obligation and no mate- rial effect on the defined benefit costs. Plan Assets/Asset Liability Management (alm) Based on the estimated future cash flows of € 715 mn for 2016, € 746 mn for 2017, € 769 mn for 2018, € 801 mn for 2019, € 808 mn for 2020 and € 4,475 mn for 2021 – 2025, the weighted duration of the defined benefit obligation is 17.6 years. The Allianz Group uses, based on the liability profiles of the defined benefit obligation and on the regulatory fund- ing requirements, stochastic asset liability models to optimize the asset allocation from a risk-return perspective. Due to a well-diversified portfolio of 136,000 plan parti cipants, there is no reasonable uncertainty of future cash flows expected that could have an impact on the liquidity of the Allianz Group. The target allocation for the plan assets compares to the current asset allocation as follows: asset allocation of plan assets as of 31 December Equity securities Quoted Non-quoted Debt securities Quoted Non-quoted Real estate Annuity contracts Life insurance investment products Other Total Target allocation Real allocation % 11.9 % 12.5 Real allocation 2015 Real allocation 2014 € mn € mn 54.5 53.5 5.0 21.8 5.5 1.3 4.7 22.4 5.5 1.4 1,665 – 5,089 2,049 632 2,980 728 190 1,955 – 4,816 2,125 654 2,697 691 185 100.0 100.0 13,333 13,123 The bulk of the plan assets are held by the Allianz Versorgungskasse VVaG, Munich, which is not part of the Allianz Group. Plan assets do not include any real estate used by the Allianz Group and include only € 6.2 mn of own transferable financial instru- ments. 226 Annual Report 2015 Allianz Group Contributions For the year ending 31 December 2016, the Allianz Group expects to contribute € 329 mn to its defined benefit plans and to pay € 289 mn directly to participants in its defined benefit plans. DefineD contribution plans Defined contribution plans are funded through independent pension funds or similar organizations. Contributions fixed in advance (e.g. based on salary) are paid to these institutions and the beneficiary’s right to benefits exists against the pension fund. The employer has no obligation beyond payment of the contributions. During the year ended 31 December 2015, the Allianz Group re- cognized expenses for defined contribution plans of € 242 mn (2014: € 224 mn). Additionally, the Allianz Group paid contributions for state pension schemes of € 385 mn (2014: € 344 mn). 49 – Share-based compensation plans group eQuity incentive plans The Group Equity Incentive plans (GEI plans) of the Allianz Group help senior management, in particular the Board of Management, focus on the long-term increase in the value of the Allianz Group. Until 2010, the GEI plans included grants of stock appreciation rights (SARs) and restricted stock units (RSUs). From the 2011 grant onwards, the Allianz Equity Incentive plan (AEI plan) has replaced the GEI plans. With the AEI Plan, only restricted stock units (RSUs) are granted to the plan participants. Stock appreciation rights The SARs granted to a plan participant obligate the Allianz Group to pay in cash the excess of the market price of an Allianz SE share over the reference price on the exercise date for each right granted. The excess is capped at 150 % of the reference price. The reference price represents the average of the closing prices of an Allianz SE share for the ten trading days following the Financial Press Conference of Allianz SE in the year of issue. SAR which were granted up to 2008 vest after two years and expire after seven years. From the 2009 grant onwards, SARs vest after four years and also expire after seven years. Upon vesting, SARs may be exercised by the plan participant if the following market conditions are attained: − During their contractual term, the market price of the Allianz SE share has outperformed the Dow Jones EURO STOXX Price Index at least once for a period of five consecutive trading days; and − the Allianz SE market price is in excess of the reference price by at least 20 % on the exercise date. D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes In addition, upon the death of a plan participant, a change of control, or notice for operational reasons, the SARs vest immediately and will be exercised by the company provided the above market conditions have been attained. Upon the expiration date, any unexercised SARs will be exercised automatically if the above market conditions have been attained. The SAR are forfeited if the plan participant ceases to be employed by the Allianz Group or if the exercise conditions are not attained by the expiration date. The fair value of the SARs at grant date is measured using a Cox- Ross-Rubinstein binomial tree option pricing model. Volatility was derived from observed historical market prices. In the absence of historical information regarding employee stock appreciation exer- cise patterns, the expected life has been estimated to equal the term to maturity of the SARs. The SAR are accounted for as cash-settled plans by the Allianz Group. Therefore, the Allianz Group accrues the fair value of the SARs as a compensation expense over the vesting period. Upon vesting, any changes in the fair value of the unexercised SARs are recognized as a compensation expense. During the year ended 31 December 2015, the Allianz Group recognized compensation expenses related to the unexercised SARs of € 18 mn (2014: € 7 mn). As of 31 December 2015, the Allianz Group recorded provisions of € 26 mn (2014: € 54 mn) in other liabilities for the unexercised SARs. Restricted stock units The RSU granted to a plan participant obligate the Allianz Group to pay in cash the average market price of an Allianz SE share in the ten trading days preceding the vesting date or to issue one Allianz SE share, or other equivalent equity instrument, for each unit granted. The RSU vest after five years. The Allianz Group will exercise the RSUs on the first stock exchange day after their vesting date. On the exer- cise date, the Allianz Group can choose the settlement method for each unit. In addition, upon the death of a plan participant, a change of control or notice for operational reasons, the RSU vest immediately and will be exercised by the company. The RSUs are virtual stocks without dividend payments. The fair value is calculated by subtracting the net present value of expected future dividend payments until maturity of the RSUs from the prevail- ing share price as of the valuation date. The RSUs are accounted for as cash-settled plans as the Allianz Group intends to settle in cash. Therefore, the Allianz Group accrues the fair value of the RSUs as a compensation expense over the vesting period. During the year ended 31 December 2015, the Allianz Group recognized compensation expenses related to the non-vested RSUs of € 12 mn (2014: € 24 mn). As of 31 December 2015, the Allianz Group recorded no provisions anymore (2014: € 90 mn) as the last RSUs plan was exercised during the year ended 31 December 2015. allianz eQuity incentive plan Since the 2011 grant year, the Allianz Equity Incentive plan (AEI plan) has replaced the GEI plans. The AEI plan is granted in the form of restricted stock units (RSUs) and is part of a new variable compensa- tion component for the plan beneficiaries. The RSU granted to a plan participant obligate the Allianz Group to pay in cash the average closing price of an Allianz SE share on the last day of the vesting period and the prior nine trading days, or to convert one RSU into one Allianz SE share. The payout is capped at a 200 % share price growth above the grant price. The RSUs are subject to a vesting period of four years and will be released on the last day of the vesting period. The Allianz Group can choose the settlement method for each unit. In addition, upon the death of a plan participant, a change of control or notice for operational reasons, the RSUs vest immediately and will be exercised by the company. The RSUs are virtual stocks without dividend payments and a capped payout. The fair value is calculated by subtracting the net present value of expected future dividend payments until maturity as well as the fair value of the cap from the prevailing share price as of the valuation date. The cap is valued as a European short call option, using prevailing market data as of the valuation date. The following table provides the assumptions used in calculating the fair value of the RSUs at grant date: assumptions of aei plans Share price Average dividend yield Average interest rate Expected volatility 20161 2015 2014 143.90 154.50 120.65 5.4 (0.1) 21.1 4.6 0.1 18.7 4.5 0.5 20.0 € % % % 1 The rSUs 2016 are deemed to have been granted to participants as part of their 2015 remuneration. Consequently, the assumptions for rSU grants delivered in March 2016 are based on best estimation. The RSUs are accounted for as cash-settled plans as the Allianz Group intends to settle in cash. Therefore, the Allianz Group accrues the fair value of the RSUs as a compensation expense over the service period of one year and afterwards over the vesting period. During the year ended 31 December 2015, the Allianz Group recognized compensa- tion expenses related to the AEI plans of € 238 mn (2014: € 160 mn). As of 31 December 2015, the Allianz Group recorded provisions of € 470 mn (2014: € 399 mn) for these RSUs in other liabilities. Annual Report 2015 Allianz Group 227 share-baseD compensation plans of subsiDiaries of the allianz group pimco llc Class B Unit Purchase Plan When acquiring Allianz Global Investors of America L.P. ( AllianzGI L.P.) during the year ended 31 December 2000, Allianz SE caused Pacific Investment Management Company LLC (PImCO LLC), a subsidiary of AllianzGI L.P., to enter into a Class B Purchase Plan (the “Class B Plan”) for the benefit of members of the management of PImCO LLC. The plan participants of the Class B Plan have rights to a 15 % priority claim on the adjusted operating profits of PImCO LLC. The Class B equity units issued under the Class B Plan vest over 3 to 5 years and are subject to repurchase by AllianzGI L.P. upon the death, disability, or termination of the participant prior to vesting. Starting 1 January 2005, AllianzGI L.P. has the right to repurchase, and the participants have the right to cause AllianzGI L.P. to repurchase, a portion of the vested Class B equity units each year. The call or put right is exercisable no earlier than 6 months after the initial vesting of each grant. On the repurchase date, the repurchase price will be based on the determined value of the Class B equity units being repurchased. As the Class B equity units are puttable by plan partici- pants, the Class B Plan is accounted for as a cash-settled plan. Therefore, the Allianz Group accrues the fair value of the Class B equity units as a compensation expense over the vesting period. Upon vesting, any changes in the fair value of the Class B equity units are recognized as compensation expense. During the year ended 31 December 2015, the Allianz Group recognized compensation expenses related to the Class B equity units of € (12) mn (2014: € (10) mn). In addition, the Allianz Group recognized expenses related to the priority claim on the adjusted operating profits of PImCO LLC of € 1 mn (2014: € 3 mn). The plan participants put a total of 668 Class B equity units during the year ended 31 December 2015. The total amount paid related to the put of the Class B equity units was € 25 mn. The total recognized compensation expenses for Class B equity units that are outstanding are recorded as a liability in other liabili- ties. As of 31 December 2015, the Allianz Group recorded a liability for the Class B equity units of € 15 mn (2014: € 47 mn). pimco llc Class M-unit Plan In 2008, AllianzGI L.P. launched a new management share-based pay- ment incentive plan for certain senior level executives and affiliates of PImCO LLC. Participants in the plan are granted options to acquire a new class of equity instruments (M-units), which vest in one-third increments on approximately the third, fourth and fifth anniversary of the option grant date. Upon vesting, options will automatically be exercised in a cashless trans action, but only if they are in the money. Participants may elect to defer the receipt of M-units through the M-unit Deferral Plan until termination of their service at the latest. With the M-unit Plan, participants can directly participate in PImCO’S performance. Class M-units are non-voting common equity with lim- ited information rights. They bear quarterly distributions equal to a pro-rata share of PImCO’S net distributable income. Deferred M-units have a right to receive a quarterly cash compensation equal to and in lieu of quarterly dividend payments. A maximum of 250,000 M-units are authorized for issuance under the M-unit Plan. The fair value of the underlying M-unit options was measured using the Black-Scholes option pricing model. Volatility was derived in part by considering the average historical and implied volatility of a selected group of peers. The expected life of one granted option was calculated based on treating the three vesting tranches (one third in years 3, 4, and 5) as three separate awards. The following table provides the assumptions used in calculating the fair value of the M-unit options at grant date: assumptions of class m-unit plan Weighted-average fair value of options granted Assumptions: Expected term (years) Expected volatility Expected dividend yield Risk free rate of return 2015 – – – – – 2014 567.49 3.84 24.9 13.3 1.1 € % % % The number and weighted-average exercise price of the M-unit options outstanding and exercisable are as follows: reconciliation of outstanDing m-unit options 2015 2014 Number of options Weighted- average exercise price € Number of options Weighted- average exercise price € Outstanding as of 1 January 175,360 17,212.31 241,109 13,709.98 Granted Exercised Forfeited Outstanding as of 31 December Exercisable as of 31 December – – 48,894 19,749.44 (18,059) 19,852.60 (43,321) 12,508.00 (42,403) 16,525.91 (44,322) 16,879.96 114,898 20,043.67 175,360 17,212.31 – – – – 228 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes The aggregate intrinsic value of share options outstanding was € – mn and € 65 mn for the years ended 31 December 2015 and 2014, respec- tively. As of 31 December 2015, the M-unit options outstanding have an exercise price of between € 16,947.44 and € 22,104.39 and a weighted- average remaining contractual life of 2.17 years. The shares settled by delivery of PImCO LLC shares are accounted for as equity-settled plans by PImCO LLC. Therefore, PImCO LLC meas- ures the total compensation expense to be recognized for the equity- settled shares based on their fair value as of the grant date. The total compensation expense is recognized over the vesting period. During the year ended 31 December 2015, the Allianz Group recorded compensation expenses of € 31 mn (2014: € 31 mn) related to these share options. employee stock purchase plans The Allianz Group offers Allianz SE shares in 20 countries to entitled employees at favorable conditions. The shares have a minimum holding period of one to five years. During the year ended 31 Decem- ber 2015, the number of shares sold to employees under these plans was 575,584 (2014: 510,435). During the year ended 31 December 2015, the Allianz Group recognized the difference between the issue price charged to the subsidiaries of the Allianz Group and the discounted price of the shares purchased by employees, amounting to € 18 mn (2014: € 7 mn) as compensation expenses. other share option anD shareholDing plans The Allianz Group has other local share-based compensation plans, including share option and employee share purchase plans, none of which, individually or in the aggregate, are material to the consoli- dated financial statements. During the year ended 31 December 2015, the total expenses recorded for these plans were € 3 mn (2014: € 2 mn). 50 – Restructuring plans As of 31 December 2015, the Allianz Group has provisions for restruc- turing resulting from a number of restructuring programs in various business segments. These provisions for restructuring primarily include personnel costs, which result from severance payments for employee terminations, and contract termination costs, including those relating to the termination of lease contracts that will arise in connection with the implementation of the relevant initiatives. The following table shows the changes in the provisions for restructuring plans. provisions for restructuring plans € mn As of 1 January New provisions Additions to existing provisions Release of provisions recognized in prior years Utilization of provisions via payments Utilization of provisions via transfers Foreign currency translation adjustments As of 31 December 2015 109 200 8 (10) (31) (163) – 112 2014 214 8 24 (28) (75) (35) 2 109 The development of the restructuring provisions reflects the imple- mentation status of the restructuring initiatives. Based on the spe- cific IFRS guidance, restructuring provisions are recognized prior to when they qualify to be recognized under the guidance for other types of provisions. In order to reflect the timely implementation of the various restructuring initiatives, restructuring provisions, as far as they are already “locked in”, are transferred to the provision type that would have been used if a restructuring initiative had not been in place. This applies to each single contract. At the time an employee has contractually agreed to leave the Allianz Group by signing either an early retirement, a partial retirement (Altersteilzeit, which is a specific type of an early retirement program in Germany), or a termi- nation arrangement, the respective part of the restructuring provi- sion is transferred to employee-related provisions. In addition, provi- sions for vacant office spaces that result from restructuring initiatives are transferred to “other” provisions after the offices have been com- pletely vacated. allianz global investor’s restructuring plan Allianz Global Investors (AllianzGI) launched the restructuring pro- gram AllianzGI 2.0 in the third quarter of 2015. The program aims to position AllianzGI as a global investment leader and affects all func- tions and regions in Europe and in parts of the U.S. in which AllianzGI is operating. The AllianzGI 2.0 plan includes the “Business Excellence Initiative” focusing on improving the effectiveness and efficiency especially within business support and “Strategic Investments” in future growth engines. The program will result in a reduction of headcount of approxi- mately 300 full-time equivalents by 2018. In addition, the reorganiza- tion and outsourcing of business processes will be going along with the impairment and shut-down of IT systems and early contract can- cellation with service providers. During the year ended 31 December 2015, restructuring charges of € 41 mn were recorded. As of 31 December 2015, restructuring provi- sions for this program amounted to € 36 mn. Annual Report 2015 Allianz Group 229 fireman’s funD’s restructuring plan During 2015, the Allianz Group realigned its Property-Casualty insur- ance business in the U.S. One integral part of the reorganization was the sale of the personal insurance business to ACE Limited by means of a renewal rights arrangement. In addition, the realignment com- prised the integration of Fireman’s Fund Insurance Company’s com- mercial business into Allianz Global Corporate & Specialty North America, as well as the internal transfer of the discontinued run-off business through a reinsurance agreement within the Allianz Group. During the year ended 31 December 2015, restructuring charges of € 95 mn were recorded. As of 31 December 2015, restructuring provi- sions of € 17 mn were recorded. allianz beratungs- unD vertriebs-ag’s restructuring plan In the second quarter of 2015, Allianz Beratungs- und Vertriebs-AG, Germany, initiated a restructuring program in order to reorganize its sales and distribution organization to meet changing client expecta- tions as well as new regulatory requirements and to strengthen sus- tainability and competitiveness. A reduction of 368 employees in total is expected, mainly by implementing an early retirement program and by offering severance payments in addition to natural fluctuation. In this regard, restructuring charges of € 76 mn were recorded in 2015. Restructuring provisions amounted to € 14 mn as of 31 Decem- ber 2015. olDenburgische lanDesbank’s restructuring plan To increase customer focus and improve profitability, the bank is planning a thorough implementation of integrated digitalization and the further introduction of online products and consulting elements as part of its strategic program “OLb 2019“. The branch network will be adjusted in the course of this development. The complexity of end- to-end processes and range of products will be reduced. The reduc- tion of complexity will result in lower staffing requirements. During the year ended 31 December 2015, restructuring charges of € 10 mn were recorded for this program. Restructuring provisions amounted to € 10 mn as of 31 December 2015. effect of the reversal of Discounting For the years ended 31 December 2015 and 2014, there was no effect of the reversal of discounting arising from the passage of time. 230 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes 51 – Earnings per share Basic earnings per share Basic earnings per share are calculated by dividing net income attrib­ utable to shareholders by the weighted average number of common shares outstanding for the period. Basic earnings per share € mn Net income attributable to shareholders used to calculate basic earnings per share 2015 2014 Asia Pacific & Africa 6,616 6,221 America Total 52 – Other information numBer of employees numBer of employees as of 31 December Germany Rest of Europe 2015 40,600 63,7421 23,762 14,355 2014 40,692 70,346 21,366 15,021 142,459 147,425 Weighted average number of common shares outstanding 454,367,277 453,841,370 1 The decrease is mainly due to the disposal of Selecta. Basic earnings per share (€) 14.56 13.71 The average total number of employees for the year ended 31 Decem­ ber 2015 was 146,726. DiluteD earnings per share Diluted earnings per share are calculated by dividing net income attributable to shareholders by the weighted average number of common shares outstanding for the period, both adjusted for the effects of potentially dilutive common shares. These effects arise from various share­based compensation plans of the Allianz Group. DiluteD earnings per share € mn Net income attributable to shareholders Effect of potentially dilutive common shares Net income used to calculate diluted earnings per share Weighted average number of common shares outstanding Potentially dilutive common shares resulting from assumed conversion of: 2015 6,616 (5) 6,611 2014 6,221 (24) 6,197 454,367,277 453,841,370 Share-based compensation plans 61,755 425,532 Weighted average number of common shares outstanding after assumed conversion 454,429,033 454,266,902 Diluted earnings per share (€) 14.55 13.64 personnel expenses personnel expenses € mn Salaries and wages Social security contributions and employee assistance Expenses for pensions and other post-retirement benefits Total 2015 9,589 1,376 1,402 12,367 2014 9,037 1,293 1,186 11,515 issuance of the Declaration of compliance with the german corporate governance coDe accorDing to § 161 aktg On 10 December 2015, the Board of Management and the Supervisory Board of Allianz SE issued the Declaration of Compliance according to § 161 AktG, which has been made permanently available to share­ holders on the company’s website. The Declaration of Compliance of the publicly traded group company Oldenburgische Landesbank AG was issued in December 2015 and has been made available to shareholders on a permanent basis. For the year ended 31 December 2015, the weighted average number of common shares excludes 2,632,723 (2014: 2,738,082) treasury shares. Annual Report 2015 Allianz Group 231 principal accountant fees anD services KPMG AG Wirtschaftsprüfungsgesellschaft (KPMG AG) serves as the external auditing firm for the Allianz Group. Fees billed by KPMG AG and the worldwide member firms of KPMG International (KPMG) are disclosed in four categories: All other fees KPMG invoiced the Allianz Group an aggregate of € 6.2 Mn (2014: € 6.0 Mn) for other products and services, which consisted primarily of services under the guidance of Allianz Group management and general consulting services. kpmg fees € mn Audit fees Audit-related fees Tax fees All other fees Total kpmg worldwide thereof: kpmg ag 2015 39.6 6.9 1.8 6.2 54.5 2014 38.1 7.9 2.8 6.0 54.8 2015 9.3 5.4 0.3 3.0 18.0 2014 9.9 6.5 1.2 2.9 20.5 Audit fees KPMG billed the Allianz Group an aggregate of € 39.6 Mn (2014: € 38.1 Mn) in connection with professional services rendered for the audit of the Allianz Group’s consolidated financial statements, statutory audits of the financial statements of Allianz SE and its subsidiaries, and ser­ vices normally provided by KPMG in connection with statutory and regulatory filings or engagements. These services consisted mainly of periodic review engagements and the annual audit. Audit-related fees KPMG charged the Allianz Group an aggregate of € 6.9 Mn (2014: € 7.9 Mn) for assurance and services that are reasonably re lated to the performance of the audit or to the review of the financial statements and are not reported within audit fees. These services consisted pri­ marily of advisory and consulting services related to accounting and financial reporting standards and financial due diligence services. Tax fees KPMG fees for professional services, rendered for tax advice and tax compliance, amounted to € 1.8 Mn (2014: € 2.8 Mn) and resulted pri­ marily from tax advice. All services provided by KPMG to Allianz Group companies must be approved by the Audit Committee of the Allianz SE Supervisory Board. Services other than audit services must be pre­approved by the Audit Committee. The Audit Committee pre­approval process is based on the use of a “Positive List” of activities decided by the Audit Commit­ tee and, in addition, a “Guiding Principles and User Test” is applied. Group Compliance and KPMG report to the Audit Committee periodi­ cally with respect to services performed. KPMG is the main auditing firm for the Allianz Group and is assigned more than 68 % of all audit­related tasks. Auditing firms other than KPMG billed the Allianz Group an aggregate of € 21.4 Mn (2014: € 16.4 Mn). remuneration for the BoarD of management As of 31 December 2015, the Board of Management is comprised of 9 members. The following values reflect the full Board of Manage­ ment active in the respective year. The sum of the total remuneration of the Allianz SE Board of Management for 2015, including the payments of the MTB 2013 – 2015 and excluding the pension service cost, amounts to € 57 Mn (2014 excluding the notional accruals for MTB 2013 – 2015: € 30 Mn). The equity­related remuneration is comprised in 2015 of 84,0081 (2014: 71,8632) Restricted Stock Units (RSU). RSU with a total fair value of € 9.7 Mn (2014: € 10.6 Mn) were granted to the Board of Management for the year ended 31 December 2015. In 2015, remuneration and other benefits totaling € 7 Mn (2014: € 6 Mn) were paid to former members of the Board of Management and dependents, while reserves for current pension obligations and accrued pension rights totaled € 122 Mn (2014: € 102 Mn). The total remuneration for all Supervisory Board members, including attendance fees, amounted to € 2.0 Mn (2014: € 2.0 Mn). Board of Management and Supervisory Board compensation by individual is included in the Remuneration Report. The information provided there is considered part of these consolidated financial statements. 1 2 The relevant share price used to determine the final number of RSUs granted is only available after sign-off of the Annual Report by the external auditors, thus numbers are based on a best estimate. The disclosure in the Annual Report 2014 was based on a best estimate of the RSU grants. The figure shown here for 2014 now includes the actual fair value as of the grant date (12 March 2015). The value therefore differs from the amount disclosed last year. 232 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes 53 – Subsequent events The Allianz Group was not subject to any subsequent events that sig­ nificantly impacted the Group’s financial results after the balance sheet date and before the financial statements were authorized for issue. Munich, 16 February 2016 Allianz SE The Board of Management Annual Report 2015 Allianz Group 233  List of participations of the Allianz Group as of 31 December 2015 according to § 313 (2) HGB % owned 1 % owned 1 % owned 1 Germany Consolidated affiliates ACP GmbH & Co. Beteiligungen KG, Munich ACP GmbH & Co. Beteiligungen KG II, Munich ACP Vermögensverwaltung GmbH & Co. KG Nr. 4, Munich ACP Vermögensverwaltung GmbH & Co. KG Nr. 4a, Munich ACP Vermögensverwaltung GmbH & Co. KG Nr. 4c, Munich ACP Vermögensverwaltung GmbH & Co. KG Nr. 4d, Munich ACP Vermögensverwaltung GmbH Nr. 4 d. 1, Munich ADEUS Aktienregister-Service-GmbH, Munich AGA Service Deutschland GmbH, Aschheim AGCS Vermögensverwaltungsgesellschaft mbH & Co. KG, Munich Alida Grundstücksgesellschaft mbH & Co. KG, Hamburg Allianz AADB Fonds, Frankfurt am Main Allianz ABS Fonds, Frankfurt am Main Allianz AKR Fonds, Frankfurt am Main Allianz ALD Fonds, Frankfurt am Main Allianz ALIK Fonds, Frankfurt am Main Allianz APAV Fonds, Frankfurt am Main Allianz APKR Fonds, Frankfurt am Main Allianz Asset Management AG, Munich Allianz AVM-B Fonds, Frankfurt am Main Allianz AZL Vermögensverwaltung GmbH & Co. KG, Munich Allianz Beratungs- und Vertriebs-AG, Munich Allianz Capital Partners GmbH, Munich Allianz Capital Partners Verwaltungs GmbH, Munich Allianz Climate Solutions GmbH, Munich Allianz Deutschland AG, Munich Allianz Digital Accelerator GmbH, Munich Allianz DLVR Fonds, Frankfurt am Main Allianz EEE Fonds, Frankfurt am Main Allianz Esa cargo & logistics GmbH, Bad Friedrichshall Allianz Esa EuroShip GmbH, Bad Friedrichshall Allianz FAD Fonds, Frankfurt am Main Allianz Finanzbeteiligungs GmbH, Munich Allianz Global Corporate & Specialty SE, Munich Allianz Global Investors GmbH, Frankfurt am Main Allianz GLR Fonds, Frankfurt am Main Allianz GLRS Fonds, Frankfurt am Main Allianz GLU Fonds, Frankfurt am Main Allianz GRGB Fonds, Frankfurt am Main Allianz Handwerker Services GmbH, Aschheim Allianz Investment Management SE, Munich Allianz LAD Fonds, Frankfurt am Main Allianz Leben Direkt Infrastruktur GmbH, Munich Allianz Leben Infrastrukturfonds GmbH, Munich Allianz Leben Private Equity Fonds 1998 GmbH, Munich Allianz Leben Private Equity Fonds 2001 GmbH, Munich Allianz Leben Private Equity Fonds 2008 GmbH, Munich Allianz Leben Private Equity Fonds Plus GmbH, Munich Allianz Lebensversicherungs-Aktiengesellschaft, Stuttgart Allianz LFE Fonds, Frankfurt am Main Allianz L-PD Fonds, Frankfurt am Main Allianz Managed Operations & Services SE, Munich Allianz of Asia-Pacific and Africa GmbH, Munich Allianz Pension Direkt Infrastruktur GmbH, Munich Allianz Pension Partners GmbH, Munich 0.0 2 0.0 2 100.0 100.0 100.0 100.0 99.3 79.6 100.0 100.0 94.8 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 100.0 3 100.0 100.0 100.0 4 100.0 100.0 100.0 100.0 100.0 3 100.0 3 100.0 51.0 100.0 3 100.0 100.0 100.0 100.0 3 100.0 3 100.0 3 100.0 3 100.0 100.0 4 100.0 3 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 3 100.0 3 100.0 100.0 100.0 100.0 234 Annual Report 2015 Allianz Group Allianz Pension Service GmbH, Munich Allianz Pensionsfonds Aktiengesellschaft, Stuttgart Allianz Pensionskasse Aktiengesellschaft, Stuttgart Allianz PK-PD Fonds, Frankfurt am Main Allianz PKV-PD Fonds, Frankfurt am Main Allianz Private Equity GmbH, Munich Allianz Private Equity Partners Verwaltungs GmbH, Munich Allianz Private Krankenversicherungs-Aktiengesell- schaft, Munich Allianz ProzessFinanz GmbH, Munich Allianz PV 1 Fonds, Frankfurt am Main Allianz PV WS Fonds, Frankfurt am Main Allianz PV-RD Fonds, Frankfurt am Main Allianz Re Asia, Frankfurt am Main Allianz Real Estate Germany GmbH, Stuttgart Allianz Real Estate GmbH, Munich Allianz Rechtsschutz-Service GmbH, Munich Allianz Renewable Energy Management GmbH, Sehestedt Allianz Renewable Energy Subholding GmbH & Co. KG, Sehestedt Allianz RFG Fonds, Frankfurt am Main Allianz Risk Consulting GmbH, Munich Allianz SDR Fonds, Frankfurt am Main Allianz SE-PD Fonds, Frankfurt am Main Allianz Service Center GmbH, Munich Allianz SOA Fonds, Frankfurt am Main Allianz Taunusanlage GbR, Stuttgart Allianz Treuhand GmbH, Stuttgart Allianz UGD 1 Fonds, Frankfurt am Main Allianz VAE Fonds, Frankfurt am Main Allianz Venture Partners Beteiligungs GmbH, Munich Allianz Versicherungs-Aktiengesellschaft, Munich Allianz VGI 1 Fonds, Frankfurt am Main Allianz VGL Fonds, Frankfurt am Main Allianz VKA Fonds, Frankfurt am Main Allianz VKRD Fonds, Frankfurt am Main Allianz V-PD Fonds, Frankfurt am Main Allianz VSR Fonds, Frankfurt am Main Allianz VW AV Fonds, Frankfurt am Main Allianz Warranty GmbH, Unterföhring AllianzGI-Fonds APF Renten, Frankfurt am Main AllSecur Deutschland AG, Munich APKV Direkt Infrastruktur GmbH, Munich APKV Infrastrukturfonds GmbH, Munich APKV Private Equity Fonds GmbH, Munich ARE Brep Acht Vermögensbeteiligungsgesellschaft mbH & Co. KG, Munich Atropos Vermögensverwaltungsgesellschaft mbH, Munich AUG. PRIEN Immobilien PE Verwaltung Brahms- Quartier GmbH, Stuttgart Auros GmbH, Munich Auros II GmbH, Munich AZ-Arges Vermögensverwaltungsgesellschaft mbH, Munich AZ-Argos 14 Vermögensverwaltungsgesellschaft mbH, Munich AZ-Argos 41 Vermögensverwaltungsgesellschaft mbH, Munich AZ-Argos 44 Vermögensverwaltungsgesellschaft mbH & Co. KG, Munich AZ-Argos 50 Vermögensverwaltungsgesellschaft mbH & Co. KG, Munich AZ-Argos 51 Vermögensverwaltungsgesellschaft mbH & Co. KG, Munich AZ-Argos 57 Vermögensverwaltungsgesellschaft mbH & Co. KG, Munich AZ-Argos 58 Vermögensverwaltungsgesellschaft mbH & Co. KG, Munich 100.0 100.0 100.0 100.0 3 100.0 3 100.0 100.0 100.0 100.0 100.0 3 100.0 3 100.0 3 100.0 3 100.0 100.0 100.0 100.0 100.0 100.0 3 100.0 100.0 3 100.0 3 100.0 100.0 3 99.5 100.0 100.0 3 100.0 3 100.0 100.0 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 40.2 2,5 100.0 100.0 100.0 100.0 100.0 100.0 94.9 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 AZ-Argos 61 Vermögensverwaltungsgesellschaft mbH & Co. KG, Munich AZ-Argos 64 Vermögensverwaltungsgesellschaft mbH & Co. KG, Munich AZ-Argos 68 Vermögensverwaltungsgesellschaft mbH, Munich AZ-Argos 69 Vermögensverwaltungsgesellschaft mbH, Munich AZ-Argos 70 Vermögensverwaltungsgesellschaft mbH & Co. KG, Munich AZ-Argos 71 Vermögensverwaltungsgesellschaft mbH & Co.KG, Munich AZ-GARI Vermögensverwaltungsgesellschaft mbH & Co. KG, Munich AZL AI Nr. 1 GmbH, Munich AZL PE Nr. 1 GmbH, Munich AZRE AZD P&C Master Fund, Munich AZS-Arges Vermögensverwaltungsgesellschaft mbH, Munich AZ-SGD Direkt Infrastruktur GmbH, Munich AZ-SGD Infrastrukturfonds GmbH, Munich AZ-SGD Private Equity Fonds 2 GmbH, Munich AZ-SGD Private Equity Fonds GmbH, Munich AZT Automotive GmbH, Ismaning Brahms Beteiligungs GmbH & Co. KG, Stuttgart BrahmsQ Objekt GmbH & Co. KG, Stuttgart Bürgel Wirtschaftsinformationen GmbH & Co. KG, Hamburg Bürgel Wirtschaftsinformationen Verwaltungs- GmbH, Hamburg dbi-Fonds Ammerland, Frankfurt am Main dbi-Fonds DAV, Frankfurt am Main dbi-Fonds WE, Frankfurt am Main Deutsche Lebensversicherungs-Aktiengesellschaft, Berlin Donator Beratungs GmbH, Munich Donator Beteiligungsverwaltung GmbH, Munich Euler Hermes Aktiengesellschaft, Hamburg Euler Hermes Collections GmbH, Potsdam Euler Hermes Rating Deutschland GmbH, Hamburg GA Global Automotive Versicherungsservice GmbH, Halle (Saale) InnoSolutas GmbH, Bad Friedrichshall KomfortDynamik Sondervermögen, Frankfurt am Main KVM ServicePlus - Kunden- und Vertriebsmanage- ment GmbH, Halle (Saale) Mondial Kundenservice GmbH, Nuremberg Münchener und Magdeburger Agrarversicherung Aktiengesellschaft, Munich My Finance Coach Stiftung GmbH, Munich Objekt Burchardplatz GmbH & Co. KG, Stuttgart Oldenburgische Landesbank Aktiengesellschaft, Oldenburg PIMCO Deutschland GmbH, Munich REC Frankfurt Objekt GmbH & Co. KG, Hamburg REC Frankfurt zweite Objektverwaltungsgesellschaft mbH, Hamburg RehaCare GmbH, Munich risklab GmbH, Munich Roland Holding GmbH, Munich Signa 12 Verwaltungs GmbH, Düsseldorf Spherion Beteiligungs GmbH & Co. KG, Stuttgart Spherion Objekt GmbH & Co. KG, Stuttgart UfS Beteiligungs-GmbH, Munich VLS Versicherungslogistik GmbH, Berlin Volkswagen Autoversicherung AG, Braunschweig Volkswagen Autoversicherung Holding GmbH, Braunschweig Windpark Aller-Leine-Tal GmbH & Co. KG, Sehestedt Windpark Berge-Kleeste GmbH & Co. KG, Sehestedt 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 3 100.0 100.0 100.0 100.0 100.0 100.0 94.9 95.0 50.1 50.4 100.0 3 100.0 3 100.0 3 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 99.3 5 100.0 100.0 100.0 100.0 100.0 90.2 100.0 4 80.0 60.0 100.0 100.0 75.2 94.9 94.9 100.0 100.0 100.0 100.0 49.0 2 100.0 100.0 D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes Windpark Büttel GmbH & Co. KG, Sehestedt Windpark Calau GmbH & Co. KG, Sehestedt Windpark Cottbuser See GmbH & Co. KG, Sehestedt Windpark Dahme GmbH & Co. KG, Sehestedt Windpark Eckolstädt GmbH & Co. KG, Sehestedt Windpark Emmendorf GmbH & Co. KG, Sehestedt Windpark Freyenstein-Halenbeck GmbH & Co. KG, Sehestedt Windpark Kesfeld-Heckhuscheid GmbH & Co. KG, Sehestedt Windpark Kirf GmbH & Co. KG, Sehestedt Windpark Kittlitz GmbH & Co. KG, Sehestedt Windpark Pröttlin GmbH & Co. KG, Sehestedt Windpark Quitzow GmbH & Co. KG, Sehestedt Windpark Redekin-Genthin GmbH & Co. KG, Sehestedt Windpark Schönwalde GmbH & Co. KG, Sehestedt Windpark Waltersdorf GmbH & Co. KG Renditefonds, Sehestedt Windpark Werder Zinndorf GmbH & Co. KG, Sehestedt Non-consolidated affiliates AERS Consortio Aktiengesellschaft, Stuttgart Allianz Global Benefits GmbH, Stuttgart Allianz Objektbeteiligungs-GmbH, Stuttgart Allianz Pension Consult GmbH, Stuttgart AZ Beteiligungs-Management GmbH, Munich AZ-Argos 56 Vermögensverwaltungsgesellschaft mbH, Munich Bürgel Beteiligungs GmbH, Hamburg Elbe Forderungsmanagement GmbH, Hamburg EURO-PRO Gesellschaft für Data Processing mbH, Grävenwiesbach Grundstücksgesellschaft der Vereinten Versicherungen mbH, Munich IDS GmbH - Analysis and Reporting Services, Munich Infrastruktur Putlitz Ost GmbH & Co. KG, Husum Lola Vermögensverwaltungsgesellschaft mbH & Co. KG, Munich manroland AG, Offenbach am Main manroland Vertrieb und Service GmbH, Mühlheim am Main META Finanz-Informationssysteme GmbH, Munich OLB-Immobiliendienst-GmbH, Oldenburg OLB-Service GmbH, Oldenburg Supercheck GmbH, Cologne Joint ventures BEG Weser-Ems Baugrund- und Erschließungsgesell- schaft mbH & Co. OHG, Oldenburg Dealis Fund Operations GmbH, Frankfurt am Main SPN Service Partner Netzwerk GmbH, Munich Associates AV Packaging GmbH, Munich DCSO Deutsche Cyber-Sicherheitsorganisation GmbH, Berlin esa EuroShip GmbH & Co. KG Underwriting for Shipping, Bad Friedrichshall Mühl Product & Service und Thüringer Baustoff- handel Beteiligungs- und Verwaltungs GmbH, Kranichfeld Reisegarant GmbH, Hamburg T&R GP Management GmbH, Bonn T&R Investment GmbH & Co. KG, Frankfurt am Main T&R MLP GmbH, Bonn T&R Real Estate GmbH, Bonn Umspannwerk Putlitz GmbH & Co. KG, Oldenburg Other participations between 5 and 20 % of voting rights EXTREMUS Versicherungs-Aktiengesellschaft, Cologne FC Bayern München AG, Munich MLP AG, Wiesloch Annual Report 2015 Allianz Group % owned 1 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 55.3 100.0 100.0 100.0 100.0 100.0 100.0 100.0 75.2 100.0 100.0 70.8 100.0 100.0 6,7 100.0 7 100.0 100.0 100.0 100.0 50.0 50.0 30.0 8 51.0 9 25.0 40.0 25.0 24.0 25.0 25.0 25.0 25.0 25.4 16.0 8.3 8.8 Protektor Lebensversicherungs-AG, Berlin Sana Kliniken AG, Ismaning ForeiGn entities Consolidated affiliates 114 Venture LP, Wilmington, DE 490 Fulton JV LP, Wilmington, DE 490 Fulton REIT LP, Wilmington, DE 490 Lower Unit GP LLC, Wilmington, DE 490 Lower Unit LP, Wilmington, DE A.V.I.P. Assurance Vie de Prévoyance SA, Courbevoie ACMAR SA, Casablanca Advanz Fundo de Investimento Renda Fixa Crédito Privado, São Paulo Aero-Fonte S.r.l., Catania AGA Alarmcentrale NL B.V., Amsterdam AGA Assistance (India) Private Limited, Gurgaon AGA Assistance Australia Pty Ltd., Toowong AGA Assistance Beijing Services Co. Ltd., Beijing AGA Assistance Japan Co. Ltd., Tokyo AGA Inc., Richmond, VA AGA Insurance Broker (Thailand) Co. Ltd., Bangkok AGA Service Company Corp., Richmond, VA AGA Service Italia S.c.a.r.l., Milan AGA Services (India) Private Limited, Gurgaon AGA Services (Thailand) Co. Ltd., Bangkok AGA Servis Hizmetleri A.S., Istanbul AGA Sigorta Aracilik Hizmetleri LS, Istanbul AGCS Marine Insurance Company, Chicago, IL AGCS Resseguros Brasil S.A., Rio de Janeiro AGF Benelux S.A., Luxembourg AGF FCR, Paris AGF Holdings (UK) Limited, Guildford AGF Insurance Limited, Guildford AGF Inversiones S.A., Buenos Aires AGIF RCM European Equity Dividend AT/IT, Senninger - berg AGR Services Pte Ltd., Singapore AIM Equity EMU 1, Paris AIM Equity US, Paris AIM Singapore Pte Ltd., Singapore AIM Underwriting Limited, Toronto, ON Allegiance Marketing Group LLC, North Palm Beach, FL Allianz (UK) Limited, Guildford Allianz Actio France, Paris Allianz Actions Aéquitas, Paris Allianz Actions Emergentes, Paris Allianz Actions Euro, Paris Allianz Actions Euro Convictions, Paris Allianz Actions Euro MidCap, Paris Allianz Actions France, Paris Allianz Actions Internationales, Paris Allianz Africa S.A., Paris Allianz Air France IFC, Paris Allianz Alapkezelõ Zrt., Budapest Allianz Amerika Aandelen Fonds, Rotterdam Allianz Annuity Company of Missouri, Clayton, MO Allianz Argentina Compañía de Seguros Generales S.A., Buenos Aires Allianz Argentina RE S.A., Buenos Aires Allianz Asac Actions, Paris Allianz Asset Management of America Holdings Inc., Dover, DE Allianz Asset Management of America L.P., Dover, DE Allianz Asset Management of America LLC, Dover, DE Allianz Asset Management U.S. Holding II LLC, Dover, DE Allianz Australia Advantage Ltd., Sydney Allianz Australia Employee Share Plan Pty Ltd., Sydney Allianz Australia Insurance Limited, Sydney Allianz Australia Life Insurance Limited, Sydney Allianz Australia Limited, Sydney % owned 1 10.0 14.3 99.0 96.5 100.0 100.0 100.0 100.0 55.0 100.0 3 100.0 100.0 100.0 100.0 100.0 80.1 100.0 100.0 100.0 100.0 100.0 97.6 97.0 100.0 100.0 100.0 100.0 100.0 5 100.0 100.0 100.0 46.3 2,5 100.0 100.0 3 100.0 3 100.0 100.0 100.0 100.0 81.5 5 69.8 5 94.6 5 83.1 5 88.8 5 72.2 5 74.4 5 99.3 5 100.0 100.0 5 100.0 84.7 5 100.0 100.0 100.0 100.0 3 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Allianz Australia Partnership Services Limited, Sydney Allianz Australia Services Pty Limited, Sydney Allianz Australia Workers Compensation (NSW) Limited, Sydney Allianz Australia Workers Compensation (Victoria) Limited, Melbourne Allianz Australian Claims Services Limited, Sydney Allianz Australian Real Estate Trust, Sydney Allianz Aviation Managers LLC, Burbank, CA Allianz Ayudhya Assurance Public Company Limited, Bangkok Allianz Bank Bulgaria AD, Sofia Allianz Bank Financial Advisors S.p.A., Milan Allianz Banque S.A., Courbevoie Allianz Benelux S.A., Brussels Allianz Bénin Assurances SA, Cotonou Allianz Bonds Diversified Euro, Paris Allianz Bonds Euro High Yield, Paris Allianz Bulgaria Holding AD, Sofia Allianz Burkina Assurances SA, Ouagadougou Allianz Burkina Assurances Vie SA, Ouagadougou Allianz Business Services Limited, Lancaster Allianz business services s.r.o., Bratislava Allianz Cameroun Assurances SA, Douala Allianz Cameroun Assurances Vie SA, Douala Allianz Cap ISR 2016, Paris Allianz Capital Partners of America Inc., New York, NY Allianz Carbon Investments B.V., Amsterdam Allianz Cash SAS, Paris Allianz Centrafrique Assurances SA, Bangui Allianz Chicago Private Reit LP, Wilmington, DE Allianz China General Insurance Company Ltd., Guangzhou Allianz China Life Insurance Co. Ltd., Shanghai Allianz Citizen Care SRI, Paris Allianz Colombia S.A., Bogotá D.C. Allianz Combinatie Fonds, Rotterdam Allianz Compañía de Seguros y Reaseguros S.A., Barcelona Allianz Congo Assurances SA, Brazzaville Allianz Cornhill Information Services Private Ltd., Trivandrum Allianz Côte d'Ivoire Assurances SA, Abidjan Allianz Côte d'Ivoire Assurances Vie SA, Abidjan Allianz Creactions 1, Paris Allianz Creactions 2, Paris Allianz Defensief Mix Fonds, Rotterdam Allianz Digital Corporate Ventures S.à r.l., Luxem- bourg Allianz Discovery Asia Strategy, Senningerberg Allianz do Brasil Participações Ltda., São Paulo Allianz Duurzaam Wereld Aandelen Fonds, Rotterdam Allianz Dynamic Multi Asset Strategy 75, Senninger- berg Allianz EDUKACJA S.A., Bialobrzegi Allianz Egypt for Financial Investments Company S.A.E., New Cairo Allianz Elementar Lebensversicherungs-Aktiengesell- schaft, Vienna Allianz Elementar Versicherungs-Aktiengesellschaft, Vienna Allianz Emerging Markets Flexible Bond, Senninger- berg Allianz Engineering Inspection Services Limited, Guildford Allianz Equity Emerging Markets 1, Paris Allianz Equity Investments Ltd., Guildford Allianz Equity Large Cap EMU, Paris Allianz EURECO Equity, Paris Allianz Euro Bond Plus, Paris Allianz Euro Bond Strategy, Senningerberg Allianz Euro Emprunts d'Etat, Paris Allianz Euro Inflation-linked Bond, Senningerberg Allianz Euro Obligations Crédit ISR, Paris Allianz Euroland Equity SRI, Senningerberg % owned 1 100.0 100.0 100.0 100.0 100.0 100.0 3 100.0 62.6 99.9 100.0 100.0 100.0 83.5 100.0 3 100.0 3 66.2 60.3 71.8 100.0 100.0 75.4 75.8 99.9 5 100.0 100.0 100.0 88.3 100.0 100.0 51.0 76.8 5 100.0 93.5 5 99.9 100.0 100.0 74.1 71.0 100.0 3 100.0 3 100.0 5 100.0 59.0 5 100.0 53.8 5 74.3 5 100.0 100.0 100.0 100.0 96.0 5 100.0 100.0 3 100.0 100.0 3 96.8 5 56.3 5 50.2 5 38.6 2,5 55.0 5 90.4 5 40.7 2,5 235 Allianz Europa Aandelen Fonds, Rotterdam Allianz Europa Obligatie Fonds, Rotterdam Allianz Europe B.V., Amsterdam Allianz Europe Conviction Equity, Senningerberg Allianz Europe Income and Growth, Senningerberg Allianz Europe Ltd., Amsterdam Allianz Finance Corporation, Wilmington, DE Allianz Finance II B.V., Amsterdam Allianz Finance II Luxembourg S.à r.l., Luxembourg Allianz Finance III B.V., Amsterdam Allianz Finance IV Luxembourg S.à r.l., Luxembourg Allianz Finance Obligations Monde, Paris Allianz Finance Pty Ltd., Sydney Allianz Finance VII Luxembourg S.A., Luxembourg Allianz Finance VIII Luxembourg S.A., Luxembourg Allianz FinanzPlan 2055, Senningerberg Allianz Fire and Marine Insurance Japan Ltd., Tokyo Allianz Foglalkoztatói Nyugdíjszolgáltató Zrt., Budapest Allianz Foncier, Paris Allianz Formuléo ISR, Paris Allianz France Favart I, Paris Allianz France Investissement OPCI, Paris Allianz France Real Estate Invest SPPICAV, Paris Allianz France Richelieu 1 S.A.S., Paris Allianz France S.A., Paris Allianz Fund Investments Inc., Wilmington, DE Allianz Fund Investments S.A., Luxembourg Allianz Garantie Fonds 3 %, Rotterdam Allianz Garantie Fonds 4,75 %, Rotterdam Allianz Garantiefonds 3,35 %, Rotterdam Allianz Garantiefonds 5 %, Rotterdam Allianz Geldmarkt Fonds, Rotterdam Allianz General Insurance Company (Malaysia) Berhad p.l.c., Kuala Lumpur Allianz General Laos Ltd., Vientiane Allianz generalni sluzby s.r.o., Prague Allianz Global Assistance International SA, Paris Allianz Global Assistance New Zealand Limited, Auckland Allianz Global Corporate & Specialty do Brasil Partici- pações Ltda., Rio de Janeiro Allianz Global Corporate & Specialty of Africa (Proprietary) Ltd., Johannesburg Allianz Global Corporate & Specialty South Africa Ltd., Johannesburg Allianz Global Emerging Markets Equity Dividend, Senningerberg Allianz Global Equity Selection, Senningerberg Allianz Global Investors Asia Pacific Ltd., Hong Kong Allianz Global Investors Distributors LLC, Dover, DE Allianz Global Investors Fund Management LLC, Dover, DE Allianz Global Investors Ireland Ltd., Dublin Allianz Global Investors Japan Co. Ltd., Tokyo Allianz Global Investors Korea Limited, Seoul Allianz Global Investors Nominee Services Ltd., George Town Allianz Global Investors Schweiz AG, Zurich Allianz Global Investors Singapore Ltd., Singapore Allianz Global Investors Taiwan Ltd., Taipei Allianz Global Investors U.S. Holdings LLC, Dover, DE Allianz Global Investors U.S. LLC, Dover, DE Allianz Global Life Ltd., Dublin Allianz Global Risks US Insurance Company Corp., Chicago, IL Allianz Groen Rente Fonds, Rotterdam Allianz Hayat ve Emeklilik A.S., Istanbul Allianz Hellas Insurance Company S.A., Athens Allianz Hold Co Real Estate S.à r.l., Luxembourg Allianz Holding eins GmbH, Vienna Allianz Holding France SAS, Paris Allianz Holdings plc, Guildford Allianz Hospitaliers Euro, Paris % owned 1 75.2 5 87.2 5 100.0 99.3 5 40.0 2,5 100.0 100.0 100.0 100.0 100.0 100.0 95.6 5 100.0 100.0 100.0 74.0 5 100.0 74.0 56.4 5 100.0 5 100.0 3 100.0 100.0 100.0 100.0 100.0 100.0 100.0 5 99.5 5 100.0 5 100.0 5 66.4 5 100.0 51.0 100.0 100.0 100.0 100.0 100.0 100.0 60.0 5 99.0 5 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 5 89.0 100.0 100.0 100.0 100.0 100.0 100.0 3 Allianz Hospitaliers Valeurs Durables, Paris Allianz Hungária Biztosító Zrt., Budapest Allianz IARD S.A., Paris Allianz IARD Vintage, Paris Allianz Immo, Paris Allianz Individual Insurance Group LLC, Minneapolis, MN Allianz Informatique G.I.E., Paris Allianz Infrastructure Czech HoldCo I S.à r.l., Luxembourg Allianz Infrastructure Czech HoldCo II S.à r.l., Luxembourg Allianz Infrastructure Luxembourg Holdco I S.A., Luxembourg Allianz Infrastructure Luxembourg Holdco II S.A., Luxembourg Allianz Infrastructure Luxembourg I S.à r.l., Luxem- bourg Allianz Infrastructure Norway Holdco I S.à r.l., Luxembourg Allianz Infrastructure Spain Holdco I S.à r.l., Luxembourg Allianz Infrastructure Spain Holdco II S.à r.l., Luxembourg Allianz Insurance Company Ghana Limited, Accra Allianz Insurance Company Lanka Limited, Saram Allianz Insurance Company of Kenya Limited, Nairobi Allianz Insurance Company-Egypt S.A.E., Cairo Allianz Insurance plc, Guildford Allianz International Ltd., Guildford Allianz Inversiones S.A., Bogotá D.C. Allianz Invest 10 Division S/U, Vienna Allianz Invest 11 Division Leben/Kranken, Vienna Allianz Invest 12 Division Leben/Kranken, Vienna Allianz Invest 50, Vienna Allianz Invest Alternativ, Vienna Allianz Invest Cash, Vienna Allianz Invest d.o.o., Zagreb Allianz Invest Kapitalanlagegesellschaft mbH, Vienna Allianz Invest Ostrent, Vienna Allianz Invest Spezial 3, Vienna Allianz Investment Management LLC, Minneapolis, MN Allianz Investmentbank Aktiengesellschaft, Vienna Allianz Investments I Luxembourg S.à r.l., Luxem- bourg Allianz Investments II Luxembourg S.à r.l., Luxem- bourg Allianz Investments III Luxembourg S.à r.l., Luxem- bourg Allianz Irish Life Holdings p.l.c., Dublin Allianz kontakt s.r.o., Prague Allianz Langlopend Obligatie Fonds, Rotterdam Allianz Leasing Bulgaria AD, Sofia Allianz Life & Annuity Company, Minneapolis, MN Allianz Life (Bermuda) Ltd., Hamilton Allianz Life Assurance Company-Egypt S.A.E., Cairo Allianz Life Financial Services LLC, Minneapolis, MN Allianz Life Insurance Co. Ltd., Seoul Allianz Life Insurance Company Ltd., Moscow Allianz Life Insurance Company of Missouri, Clayton, MO Allianz Life Insurance Company of New York, New York, NY Allianz Life Insurance Company of North America, Minneapolis, MN Allianz Life Insurance Japan Ltd., Tokyo Allianz Life Insurance Lanka Ltd., Colombo Allianz Life Insurance Malaysia Berhad p.l.c., Kuala Lumpur Allianz Life Luxembourg S.A., Luxembourg Allianz Madagascar Assurances SA, Antananarivo Allianz Malaysia Berhad p.l.c., Kuala Lumpur Allianz Mali Assurances SA, Bamako Allianz Managed Operations & Services Nether - lands B.V., Rotterdam Allianz Managed Operations & Services Thailand Co. Ltd., Bangkok % owned 1 100.0 3 100.0 100.0 100.0 3 42.8 2,5 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 95.0 100.0 100.0 100.0 100.0 3 100.0 3 100.0 3 100.0 5 100.0 5 80.6 5 100.0 100.0 95.7 5 100.0 3 100.0 100.0 100.0 100.0 100.0 66.5 100.0 100.0 5 51.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 75.0 77.0 100.0 100.0 Allianz Management Services Limited, Guildford Allianz Marine & Transit Underwriting Agency Pty Ltd., Sydney Allianz Marine (UK) Ltd., Ipswich Allianz Mena Holding Bermuda Ltd., Beirut Allianz México S.A. Compañía de Seguros, Mexico City Allianz Multi Actions Monde, Paris Allianz Multi Croissance, Paris Allianz Multi Dynamisme, Paris Allianz Multi Equilibre, Paris Allianz Multi Horizon 2018-2020, Paris Allianz Multi Horizon 2021-2023, Paris Allianz Multi Horizon 2024-2026, Paris Allianz Multi Horizon 2027-2029, Paris Allianz Multi Horizon 2030-2032, Paris Allianz Multi Horizon 2033-2035, Paris Allianz Multi Horizon 2036-2038, Paris Allianz Multi Horizon 2039-2041, Paris Allianz Multi Horizon Court Terme, Paris Allianz Multi Horizon Long Terme, Paris Allianz Multi Opportunités, Paris Allianz Multi Rendement Premium (R), Paris Allianz Multi Rendement Réel, Paris Allianz Multi Sérénité, Paris Allianz Mutual Funds Management Company S.A., Athens Allianz Nederland Asset Management B.V., Rotterdam Allianz Nederland Groep N.V., Rotterdam Allianz Nederland Levensverzekering N.V., Rotterdam Allianz New Europe Holding GmbH, Vienna Allianz New Zealand Limited, Auckland Allianz Obligations Internationales, Paris Allianz Obligations Monde, Paris Allianz of America Inc., Wilmington, DE Allianz Offensief Mix Fonds, Rotterdam Allianz One Beacon GP LLC, Wilmington, DE Allianz One Beacon LP, Wilmington, DE Allianz Opéra, Paris Allianz Osmea 4, Paris Allianz p.l.c., Dublin Allianz Pacific Aandelen Fonds, Rotterdam Allianz Pan Asian REITs Fund Segregated Portfolio, George Town Allianz Pension Fund Trustees Ltd., Guildford Allianz Pensionskasse Aktiengesellschaft, Vienna Allianz penzijní spolecnost a.s., Prague Allianz Pimco Corporate, Vienna Allianz Pimco Mortgage, Vienna Allianz pojistovna a.s., Prague Allianz Polska Services Sp. z o.o., Warsaw Allianz Popular Asset Management SGIIC S.A., Madrid Allianz Popular Pensiones EGFP S.A., Madrid Allianz Popular S.L., Madrid Allianz Popular Vida Compañía de Seguros y Reaseguros S.A., Madrid Allianz Potential, Paris Allianz Private Equity Partners Europa I, Milan Allianz Private Equity Partners Europa II, Milan Allianz Private Equity Partners Europa III, Milan Allianz Private Equity Partners IV, Milan Allianz Private Equity Partners V, Milan Allianz Private Equity UK Holdings Limited, London Allianz Properties Limited, Guildford Allianz Prudence, Paris Allianz Re Dublin Limited, Dublin Allianz Real Estate France SAS, Paris Allianz Real Estate of America LLC, New York, NY Allianz Renewable Energy Fund Management 1 Ltd., London Allianz Renewable Energy Management AT GmbH, Pottenbrunn % owned 1 100.0 65.0 100.0 99.9 100.0 95.2 5 100.0 5 94.1 5 97.7 5 54.6 5 46.6 2,5 57.7 5 82.3 5 100.0 5 100.0 5 100.0 5 100.0 5 76.8 5 71.5 5 99.0 5 98.0 5 87.8 5 99.6 5 100.0 100.0 100.0 100.0 100.0 100.0 79.1 5 99.9 5 100.0 100.0 5 100.0 100.0 100.0 3 100.0 5 100.0 86.7 5 100.0 3 100.0 100.0 100.0 73.0 5 97.3 5 100.0 100.0 100.0 100.0 60.0 100.0 100.0 5 86.8 3 92.0 3 99.6 3 100.0 3 100.0 3 100.0 100.0 99.5 5 100.0 100.0 100.0 100.0 100.0 236 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes % owned 1 % owned 1 % owned 1 Allianz Renewable Energy Partners I LP, London Allianz Renewable Energy Partners II Limited, London Allianz Renewable Energy Partners III LP, London Allianz Renewable Energy Partners IV Limited, London Allianz Renewable Energy Partners of America LLC, Wilmington, DE Allianz Renewable Energy Partners V plc., London Allianz Risk Consultants Inc., Los Angeles, CA Allianz Risk Transfer (Bermuda) Ltd., Hamilton Allianz Risk Transfer (UK) Limited, London Allianz Risk Transfer AG, Zurich Allianz Risk Transfer Inc., New York, NY Allianz Risk Transfer N.V., Amsterdam Allianz S.A. de C.V., Mexico City Allianz S.p.A., Trieste Allianz Saint Marc CL, Paris Allianz SAS S.A.S., Bogotá D.C. Allianz Saúde S.A., São Paulo Allianz Secteur Euro Immobilier, Paris Allianz Secteur Europe Immobilier, Paris Allianz Sécurité, Paris Allianz Seguros de Vida S.A., Bogotá D.C. Allianz Seguros S.A., São Paulo Allianz Seguros S.A., Bogotá D.C. Allianz Selectie Fonds, Rotterdam Allianz Selection Total Return Asian Equity, Hong Kong Allianz Selection US High Yield, Hong Kong Allianz Sénégal Assurances SA, Dakar Allianz Sénégal Assurances Vie SA, Dakar Allianz Services (UK) Limited, London Allianz Sigorta A.S., Istanbul Allianz SNA s.a.l., Beirut Allianz Sociedad Anónima A.S. Agencia de Seguros, Barcelona Allianz Sociedade Gestora de Fundos de Pensões S.A., Lisbon Allianz Société Financière S.à r.l., Luxembourg Allianz South America Holding B.V., Amsterdam Allianz Special Opportunities Alternative Fund, Milan Allianz Specialised Investments Limited, London Allianz Specjalistyczny Fundusz Inwestycyjny Otwarty Subfunduszu Allianz 1, Warsaw Allianz Subalpina Holding S.p.A., Turin Allianz Suisse Immobilien AG, Wallisellen Allianz Suisse Lebensversicherungs-Gesellschaft AG, Wallisellen Allianz Suisse Versicherungs-Gesellschaft AG, Wallisellen Allianz Taiwan Life Insurance Co. Ltd., Taipei Allianz Telematics S.p.A., Rome Allianz Tiriac Asigurari SA, Bucharest Allianz Tiriac Pensii Private Societate de administrare a fondurilor de pensii private S.A., Bucharest Allianz Togo Assurances SA, Lome Allianz UK Credit Fund, Paris Allianz UK Infrastructure Debt GP Limited, London Allianz Ukraine LLC, Kiev Allianz Underwriters Insurance Company Corp., Burbank, CA Allianz US Investment GP LLC, Wilmington, DE Allianz US Investment LP, Wilmington, DE Allianz US Private REIT GP LLC, Wilmington, DE Allianz US Private REIT LP, Wilmington, DE Allianz Valeurs Durables, Paris Allianz Vermogen B.V., Rotterdam Allianz Vie S.A., Paris Allianz Vorsorgekasse AG, Vienna Allianz Worldwide Care S.A., Paris Allianz Worldwide Care Services Ltd., Dublin Allianz Worldwide Partners S.A.S., Paris Allianz Yasam ve Emeklilik A.S., Istanbul Allianz Zagreb d.d., Zagreb Annual Report 2015 Allianz Group 100.0 100.0 98.6 98.6 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 5 100.0 100.0 94.9 5 89.5 5 96.5 5 100.0 100.0 100.0 85.1 5 81.8 5 62.3 5 83.2 96.8 100.0 96.2 100.0 100.0 87.6 100.0 100.0 100.0 3 100.0 100.0 3 98.1 100.0 100.0 100.0 99.7 100.0 52.2 100.0 97.9 100.0 3 100.0 100.0 100.0 100.0 100.0 100.0 100.0 53.3 5 100.0 100.0 100.0 100.0 100.0 100.0 80.0 83.2 Allianz ZB d.o.o. Company for the Management of Obligatory Pension Funds, Zagreb Allianz ZB d.o.o. Company for the Management of Voluntary Pension Funds, Zagreb AllianzGI Best Styles Emerging Markets Equity Fund, Boston, MA AllianzGI China Equity Fund, Boston, MA AllianzGI Discovery US Portfolio, Boston, MA AllianzGI Emerging Markets Debt Fund, Boston, MA AllianzGI Europe Equity Dividend, Boston, MA AllianzGI Global Fundamental Strategy Fund, Boston, MA AllianzGI Global Megatrends Fund, Boston, MA AllianzGI Global Small-Cap Opportunity Portfolio, Boston, MA AllianzGI Global Sustainability Fund, Boston, MA AllianzGI International Growth Fund, Boston, MA AllianzGI Multi-Asset Real Return Fund, Boston, MA AllianzGo S.r.l., Trieste Allianz-Slovenská DSS a.s., Bratislava Allianz-Slovenská poist'ovna a.s., Bratislava Amaya Compañía de Seguros y Reaseguros S.A., Madrid American Automobile Insurance Company Corp., Earth City, MO American Financial Marketing Inc., Minneapolis, MN AMOS Austria GmbH, Vienna AMOS European Services SAS, Paris AMOS IberoLatAm S.L., Barcelona AMOS International B.V., Amsterdam AMOS IT Suisse AG, Wallisellen AMOS Italy S.p.c.A., Milan AMOS of America Inc., Wilmington, DE Ann Arbor Annuity Exchange Inc., Ann Arbor, MI Antoniana Veneta Popolare Vita S.p.A., Trieste APEH Europe VI, Paris APKV US Private REIT GP LLC, Wilmington, DE APKV US Private REIT LP, Wilmington, DE APP Broker S.r.l., Trieste Arab Gulf Health Services LLC, Dubai Arcalis SA, Courbevoie Arcalis UN, Paris Arges Investments I N.V., Amsterdam Arges Investments II N.V., Amsterdam Asit Services S.R.L., Bucharest Assistance Courtage d'Assurance et de Réassurance S.A., Paris Associated Indemnity Corporation, Novato, CA Assurances Médicales SA, Paris Avip Actions 100, Paris Avip Actions 60, Paris Avip Top Croissance, Paris Avip Top Defensif, Paris Avip Top Harmonie, Paris AWP Romania S.A., Bucharest AZ Euro Investments II S.à r.l., Luxembourg AZ Euro Investments S.à r.l., Luxembourg AZ Jupiter 10 B.V., Amsterdam AZ Jupiter 4 B.V., Amsterdam AZ Jupiter 8 B.V., Amsterdam AZ Jupiter 9 B.V., Amsterdam AZ Real Estate GP LLC, New York, NY AZ Servisni centar d.o.o., Zagreb AZ Vers US Private REIT GP LLC, Wilmington, DE AZ Vers US Private REIT LP, Wilmington, DE AZGA Insurance Agency Canada Ltd., Kitchener, ON AZGA Service Canada Inc., Kitchener, ON AZL PF Investments Inc., Minneapolis, MN AZOA C.V., Amsterdam AZOA Services Corporation, New York, NY Beleggingsmaatschappij Willemsbruggen B.V., Rotterdam Beykoz Gayrimenkul Yatirim Insaat Turizm Sanayi ve Ticaret A.S., Ankara 51.0 51.0 54.0 5 58.4 5 100.0 5 96.8 5 88.5 5 95.4 5 96.7 5 97.9 5 96.8 5 97.3 5 71.7 5 100.0 100.0 99.6 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 99.6 3 100.0 100.0 100.0 100.0 100.0 100.0 5 100.0 100.0 100.0 100.0 100.0 65.0 100.0 5 100.0 5 99.1 5 98.9 5 94.9 5 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 55.0 100.0 100.0 100.0 100.0 100.0 Bilan Services S.N.C., Nanterre Borgo San Felice S.r.l., Castelnuovo Berardenga (Siena) Botanic Building SPRL, Brussels BPS Brindisi 211 S.r.l., Lecce BPS Brindisi 213 S.r.l., Lecce BPS Brindisi 222 S.r.l., Lecce BPS Mesagne 214 S.r.l., Lecce BPS Mesagne 215 S.r.l., Lecce BPS Mesagne 216 S.r.l., Lecce BPS Mesagne 223 S.r.l., Lecce BPS Mesagne 224 S.r.l., Lecce Brasil de Imóveis e Participações Ltda., São Paulo Bright Mission Berhad Ltd., Kuala Lumpur British Reserve Insurance Co. Ltd., Guildford Brobacken Nät AB, Stockholm BSMC (Thailand) Limited, Bangkok Bulgaria Net AD, Sofia Bureau d'Expertises Despretz S.A., Brussels Calobra Investments Sp. z o.o., Warsaw Calypso S.A., Paris CAP Rechtsschutz-Versicherungsgesellschaft AG, Wallisellen Caroline Berlin S.C.S., Luxembourg Centrale Photovoltaique de Saint Marcel sur aude SAS, Paris Centrale Photovoltaique de Valensole SAS, Paris CEPE de Bajouve S.à r.l., Versailles CEPE de Haut Chemin S.à r.l., Versailles CEPE de la Forterre S.à r.l., Versailles CEPE de Langres Sud S.à r.l., Versailles CEPE de Mont Gimont S.à r.l., Versailles CEPE de Sambres S.à r.l., Versailles CEPE des Portes de la Côte d'Or S.à r.l., Versailles CEPE du Bois de la Serre S.à r.l., Versailles Château Larose Trintaudon S.A., Saint Laurent Médoc Chicago Insurance Company Corp., Chicago, IL CIC Allianz Insurance Ltd., Sydney Club Marine Limited, Sydney Colisee S.à r.l., Luxembourg Companhia de Seguros Allianz Portugal S.A., Lisbon Compañía Colombiana de Servicio Automotriz S.A., Bogotá D.C. Consultatio Renta Mixta F.C.I., Buenos Aires Corn Investment Ltd., London Corsetec Assessoria e Corretagem de Seguros Ltda., São Paulo CPRN Thailand Ltd., Bangkok Creactif Allocation, Paris CreditRas Assicurazioni S.p.A., Milan CreditRas Vita S.p.A., Milan Darta Saving Life Assurance Ltd., Dublin Deeside Investments Inc., Wilmington, DE Delta Technical Services Ltd., London Diamond Point a.s., Prague Dresdner Kleinwort Pfandbriefe Investments II Inc., Minneapolis, MN EF Solutions LLC, Wilmington, DE Energie Eolienne Lusanger S.à r.l., Versailles Eolica Erchie S.r.l., Lecce Etablissements J. Moneger SA, Dakar Euler Hermes ACI Services LLP, Baltimore, MD Euler Hermes ACMAR Services SARL, Casablanca Euler Hermes Asset Management France S.A., Paris la Défense Euler Hermes Canada Services Inc., Montreal, QC Euler Hermes Cescob Service s.r.o., Prague Euler Hermes Collections Sp. z o.o., Warsaw Euler Hermes Consulting (Shanghai) Co. Ltd., Shanghai Euler Hermes Crédit France S.A.S., Paris la Défense Euler Hermes Credit Management Services Ireland Ltd., Dublin Euler Hermes Credit Services (JP) Ltd., Tokyo 66.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 98.4 100.0 100.0 100.0 100.0 93.2 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 64.8 100.0 100.0 3 100.0 99.5 100.0 100.0 5 50.0 2 50.0 2 100.0 50.1 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 237 % owned 1 % owned 1 % owned 1 Euler Hermes Excess North America LLC, Owings Mills, MD Euler Hermes Group SA, Paris La Défense Euler Hermes Hellas Credit Insurance SA, Athens Euler Hermes Hellas Services Ltd., Athens Euler Hermes Hong Kong Service Limited, Hong Kong Euler Hermes Korea Non-life Broker Company Limited, Seoul Euler Hermes Luxembourg Holding S.à r.l., Luxembourg Euler Hermes Magyar Követeleskezelö Kft., Budapest Euler Hermes North America Holding Inc., Owings Mills, MD Euler Hermes North America Insurance Company Inc., Baltimore, MD Euler Hermes Patrimonia SA, Brussels Euler Hermes Ré SA, Luxembourg Euler Hermes Real Estate SPPICAV, Paris Euler Hermes Recouvrement France S.A.S., Paris la Défense Euler Hermes Reinsurance AG, Wallisellen Euler Hermes Risk Yönetimi A.S., Istanbul Euler Hermes S.A., Brussels Euler Hermes Seguros de Crédito S.A., São Paulo Euler Hermes Service AB, Stockholm Euler Hermes Services AG, Wallisellen Euler Hermes Services B.V., 's-Hertogenbosch Euler Hermes Services Belgium S.A., Brussels Euler Hermes Services Bulgaria EOOD, Sofia Euler Hermes Services G.C.C. Limited, Dubai Euler Hermes Services India Private Limited, Mumbai Euler Hermes Services S.A.S., Paris la Défense Euler Hermes Services South Africa Ltd., Johannesburg Euler Hermes Services Sp. z o.o., Warsaw Euler Hermes Services Tunisia S.à r.l., Tunis Euler Hermes Services UK Limited, London Euler Hermes Servicii Financiare S.R.L., Bucharest Euler Hermes Serviços Ltda., São Paulo Euler Hermes Servis s.r.o., Bratislava Euler Hermes Sigorta A.S., Istanbul Euler Hermes Singapore Services Pte Ltd., Singapore Euler Hermes South Express S.A., Brussels Euler Hermes Taiwan Services Limited, Taipei Euler Hermes Trade Credit Limited, Auckland Euler Hermes Trade Credit Underwriting Agents Pty Ltd., Sydney Euler Hermes UMA, Louisville, KY Euler Hermes World Agency SASU, Paris la Défense Euler Hermes, Mierzejewska-Kancelaria Prawna Sp.k, Warsaw Eurl 20/22 Le Peletier, Paris la Défense Euro Garantie AG, Pfäffikon Eurosol Invest S.r.l., Udine FAI Allianz Ltd., Sydney FCP LBPAM IDR, Paris FCT CIMU 92, Pantin FCT Rocade L2 Marseille, Paris Fénix Directo Compañía de Seguros y Reaseguros S.A., Madrid Ferme Eolienne de Villemur-sur-Tarn S.à r.l., Versailles Ferme Eolienne des Jaladeaux S.à r.l., Versailles Financière Aldebaran SAS, Paris la Défense Financière Callisto SAS, Paris la Défense Fireman's Fund Financial Services LLC, Dallas, TX Fireman's Fund Indemnity Corporation, Liberty Corner, NJ Fireman's Fund Insurance Company Corp., Novato, CA Fireman's Fund Insurance Company of Bermuda, Hamilton Fireman's Fund Insurance Company of Hawaii Inc., Honolulu, HI Fireman's Fund Insurance Company of Ohio Corp., Cincinnati, OH Fondo Chiuso Allianz Infrastructure Partners I, Milan 100.0 69.5 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 60.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 5 100.0 3 100.0 3 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 3 238 Annual Report 2015 Allianz Group Fragonard Assurance S.A., Paris Friederike MLP S.à r.l., Luxembourg Fu An Management Consulting Co. Ltd., Beijing Fusion Brokerage Inc., Richmond, VA Fusion Company Inc., Richmond, VA Gaipare Action, Paris GamePlan Financial Marketing LLC, Woodstock, GA Generation Vie S.A., Courbevoie Genialloyd S.p.A., Milan Gestion de Téléassistance et de Services S.A., Chatillon GIE Euler Hermes SFAC Services, Paris la Défense Global Transport & Automotive Insurance Solutions Pty Limited, Sydney Hauteville Insurance Company Limited, St Peter Port Havelaar & van Stolk B.V., Rotterdam Helviass Verzekeringen B.V., Rotterdam Home & Legacy (Holdings) Limited, London Home & Legacy Insurance Services Limited, London Hunter Premium Funding Ltd., Sydney Immovalor Gestion S.A., Paris Inforce Solutions LLC, Woodstock, GA Insurance CJSC "Medexpress", Saint Petersburg Intermediass S.r.l., Milan International Film Guarantors Limited, London International Film Guarantors LLC, Santa Monica, CA Interstate Fire & Casualty Company, Chicago, IL Investitori Real Estate Fund, Milan Investitori SGR S.p.A., Milan Järvsö Sörby Vindkraft AB, Danderyd JCR Intertrade Ltd., Bangkok Jefferson Insurance Company Corp., New York, NY Kaishi Pte. Ltd., Singapore Ken Tame & Associates Pty Ltd., Sydney Kiinteistö OY Eteläesplanadi 2, Helsinki Königinstrasse I S.à r.l., Luxembourg La Rurale SA, Paris LCF IDR, Paris Les Vignobles de Larose S.A.S., Saint Laurent Médoc LLC "Medexpress-service", Saint Petersburg LLC "Progress-Med", Moscow LLC "Risk Audit", Moscow Lloyd Adriatico Holding S.p.A., Trieste Maevaara Vind 2 AB, Stockholm Maevaara Vind AB, Stockholm Magdeburger Sigorta A.S., Istanbul Martin Maurel Vie SA, Courbevoie Medi24 AG, Bern Mombyasen Wind Farm AB, Halmstad Mondial Assistance Asia Pte Ltd., Singapore Mondial Assistance Australia Holding Pty Ltd., Toowong Mondial Assistance France SAS, Paris Mondial Assistance France Services à la personne SAS, Paris Mondial Assistance GmbH, Vienna Mondial Assistance Indian Ocean LLC, Ebene Mondial Assistance Ireland Ltd., Dublin Mondial Assistance Mexico S.A. de C.V., Mexico City Mondial Assistance Portugal Serviços de Assistência Lda., Lisbon Mondial Assistance Réunion S.A., Saint Denis Mondial Assistance s.r.o., Prague Mondial Assistance Service España S.A., Madrid Mondial Assistance Services Hellas A.E., Athens Mondial Assistance Sp. z o.o., Warsaw Mondial Assistance United Kingdom Ltd., Croydon Surrey Mondial Chile Asistencia Veinticuatro Horas y Viajes Limitada, Santiago Mondial Contact Center Italia S.r.l., Milan Mondial Protection Corretora de Seguros Ltda., São Bernardo do Campo 100.0 100.0 1.0 2 100.0 100.0 100.0 5 100.0 52.5 100.0 100.0 100.0 81.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 3 100.0 100.0 40.0 2 100.0 67.6 80.0 100.0 100.0 99.9 100.0 5 100.0 100.0 100.0 100.0 99.9 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 95.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 51.0 100.0 100.0 100.0 100.0 100.0 Mondial Service - Belgium S.A., Brussels Mondial Service Argentina S.A., Buenos Aires Mondial Service Colombia SAS, Bogotá D.C. Mondial Servicios S.A. de C.V., Mexico City Mondial Serviços Ltda., São Bernardo do Campo Morgan Stanley Italian Office Fund, Milan National Surety Corporation, Chicago, IL Neoasistencia Manoteras S.L., Madrid Nextcare Bahrain Ancillary Services Company B.S.C., Manama NEXtCARE Egypt LLC, Cairo NEXtCARE Holding WLL, Manama NEXtCARE Lebanon SAL, Beirut Nextcare Tunisia S.à r.l., Tunis NFJ Investment Group LLC, Dover, DE Northstar Mezzanine Partners VI U.S. Feeder II L.P., Dover, DE OJSC "My Clinic", Moscow OJSC Insurance Company Allianz, Moscow OJSC Insurance Company ROSNO-MS, Moscow Ontario Limited, Toronto, ON OOO "IC Euler Hermes Ru", Moscow OOO Euler Hermes Credit Management, Moscow OOO Mondial Assistance, Moscow OPCI Allianz France Angel, Paris Oppenheimer Group Inc., Dover, DE Orione PV S.r.l., Milan Orsa Maggiore PV S.r.l., Milan Orsa Minore PV S.r.l., Milan Pacific Investment Management Company LLC, Dover, DE Parc Eolien de Bonneuil S.à r.l., Versailles Parc Eolien de Bruyère Grande SAS, Versailles Parc Eolien de Chaourse SAS, Versailles Parc Eolien de Croquettes SAS, Versailles Parc Eolien de Fontfroide SAS, Versailles Parc Eolien de Forge SAS, Paris Parc Eolien de la Sole du Bois SAS, Paris Parc Eolien de Longchamps SAS, Versailles Parc Eolien de Ly-Fontaine SAS, Versailles Parc Eolien de Remigny SAS, Versailles Parc Eolien des Barbes d´Or SAS, Versailles Parc Eolien des Joyeuses SAS, Versailles Parc Eolien des Mistandines SAS, Paris Parc Eolien des Quatre Buissons SAS, Paris Parc Eolien du Bois Guillaume SAS, Paris Parc Eolien Les Treize SAS, Paris Personalized Brokerage Service LLC, Topeka, KS Pet Plan Ltd., Guildford PFP Holdings Inc., Dover, DE PGA Global Services LLC, Dover, DE PGREF V 1301 Sixth Investors I LLC, Wilmington, DE PGREF V 1301 Sixth Investors I LP, Wilmington, DE PIMCO (Schweiz) GmbH, Zurich PIMCO Asia Ltd., Hong Kong PIMCO Asia Pte Ltd., Singapore PIMCO Australia Pty Ltd., Sydney PIMCO Canada Corp., Toronto, ON PIMCO Canada Credit Bond Trust, Toronto, ON PIMCO Canada Credit Long Bond Trust, Toronto, ON PIMCO Canadian Real Return Bond Fund, Toronto, ON PIMCO Covered Bond Source UCITS ETF, Dublin PIMCO Emerging Markets Bond Fund III, George Town PIMCO Euro Low Duration Investment Grade Corpo- rate Fund, Dublin PIMCO Europe Ltd., London PIMCO Global Advisors (Ireland) Ltd., Dublin PIMCO Global Advisors (Luxembourg) S.A., Luxembourg PIMCO Global Advisors (Resources) LLC, Dover, DE PIMCO Global Advisors LLC, Dover, DE PIMCO Global Holdings LLC, Dover, DE 100.0 100.0 100.0 100.0 100.0 100.0 3 100.0 100.0 100.0 100.0 75.0 100.0 100.0 100.0 100.0 3 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 95.6 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 5 100.0 5 56.7 5 71.0 5 49.4 2,5 100.0 3 100.0 100.0 100.0 100.0 100.0 100.0 D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes PIMCO GP I LLC, Wilmington, DE PIMCO GP III LLC, Wilmington, DE PIMCO GP IX LLC, Wilmington, DE PIMCO GP V LLC, Wilmington, DE PIMCO GP VII LLC, Wilmington, DE PIMCO GP X LLC, Wilmington, DE PIMCO GP XI LLC, Wilmington, DE PIMCO GP XII LLC, Wilmington, DE PIMCO GP XIII LLC, Wilmington, DE PIMCO GP XIV LLC, Wilmington, DE PIMCO GP XV LLC, Wilmington, DE PIMCO Income Fund Wholesale, Melbourne PIMCO International Dividend Fund, Wilmington, DE PIMCO Investments LLC, Dover, DE PIMCO Japan Ltd., Road Town PIMCO Latin America Administradora de Carteiras Ltda., Rio de Janeiro PIMCO RAE Fundamental Emerging Markets Fund, Dublin PIMCO RAE Fundamental Global Developed Fund, Dublin PIMCO RAE Fundamental Global Equities Plus Fundo de Investimento Multimercado Investimento no Exterior, Rio de Janeiro PIMCO RAE Fundamental US Fund, Dublin PIMCO Real Return Limited Duration Fund, Boston, MA PIMCO RealPath Blend 2020 Fund, Wilmington, DE PIMCO RealPath Blend 2025 Fund, Wilmington, DE PIMCO RealPath Blend 2030 Fund, Wilmington, DE PIMCO RealPath Blend 2035 Fund, Wilmington, DE PIMCO RealPath Blend 2040 Fund, Wilmington, DE PIMCO RealPath Blend 2045 Fund, Wilmington, DE PIMCO RealPath Blend 2050 Fund, Wilmington, DE PIMCO RealPath Blend 2055 Fund, Wilmington, DE PIMCO RealPath Blend Income Fund, Wilmington, DE PIMCO RealPath 2055 Fund, Boston, MA PIMCO REIT Management LLC, Wilmington, DE PIMCO Select U.S. High Yield BB-B Bond Fund, Dublin PIMCO Select UK Retirement Strategy Fund, Dublin PIMCO U.S. Dividend Fund, Wilmington, DE PIMCO-World Bank Gemloc Fund, Luxembourg POD Allianz Bulgaria AD, Sofia Primacy Underwriting Management Ltd., Wellington Primacy Underwriting Management Pty Ltd., Melbourne Prosperaz Fundo de Investimento Renda Fixa Crédito Privado, São Paulo Protexia France S.A., Paris PT Asuransi Allianz Life Indonesia p.l.c., Jakarta PT Asuransi Allianz Utama Indonesia Ltd., Jakarta PTE Allianz Polska S.A., Warsaw Q 207 GP S.à r.l., Luxembourg Q207 S.C.S., Luxembourg Quality 1 AG, Bubikon Questar Agency Inc., Minneapolis, MN Questar Asset Management Inc., Ann Arbor, MI Questar Capital Corporation, Minneapolis, MN Quintet Properties Ltd., Dublin RAS Antares, Milan Rävaberget Nät AB, Stockholm RB Fiduciaria S.p.A., Milan RCM Dynamic Multi-Asset Plus VIT, Boston, MA Real Faubourg Haussmann SAS, Paris la Défense Real FR Haussmann SAS, Paris la Défense Redoma S.à r.l., Luxembourg Rhea SA, Luxembourg Risikomanagement und Softwareentwicklung GmbH, Vienna Rivage Richelieu 1, Paris Roster Financial LLC, Mount Laurel, NJ SA Carène Assurance, Paris Saint-Barth Assurances S.à r.l., St. Barts San Francisco Reinsurance Company Corp., Petaluma, CA Annual Report 2015 Allianz Group % owned 1 % owned 1 % owned 1 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 72.8 5 49.9 2,5 100.0 100.0 100.0 100.0 5 97.2 5 98.9 5 74.9 5 96.1 5 95.1 5 77.9 5 94.4 5 85.1 5 96.2 5 94.5 5 94.9 5 96.0 5 94.0 5 90.7 5 100.0 57.6 5 92.8 5 46.1 2,5 100.0 5 65.9 100.0 100.0 100.0 3 100.0 99.8 97.8 100.0 100.0 94.0 100.0 100.0 100.0 100.0 100.0 100.0 3 100.0 100.0 68.7 5 100.0 100.0 100.0 100.0 100.0 100.0 3 100.0 100.0 100.0 100.0 SAS 20 pompidou, Paris la Défense SAS Allianz Etoile, Paris la Défense SAS Allianz Forum Seine, Paris la Défense SAS Allianz Logistique, Paris la Défense SAS Allianz Platine, Paris la Défense SAS Allianz Rivoli, Paris la Défense SAS Allianz Serbie, Paris la Défense SAS Angel Shopping Centre, Paris la Défense SAS Madeleine Opéra, Paris la Défense SAS Passage des princes, Paris la Défense SAS Société d'Exploitation du Parc Eolien de Nélausa, Paris Sättravallen Wind Power AB, Strömstad Saudi NEXtCARE LLC, Al Khobar SC Tour Michelet, Paris la Défense SCI 46 Desmoulins, Paris la Défense SCI Allianz ARC de Seine, Paris la Défense SCI Allianz Chateaudun, Paris la Défense SCI Allianz Invest Pierre, Paris SCI Allianz Messine, Paris la Défense SCI AVIP SCPI Selection, Courbevoie SCI ESQ, Paris la Défense SCI Stratus, Courbevoie SCI Via Pierre 1, Paris la Défense SCI Volnay, Paris la Défense SDIII Energy GmbH & Co. KG, Pottenbrunn SI 173-175 Boulevard Haussmann SAS, Paris la Défense Siac Services S.r.l., Rome Silex Gas Management AS, Oslo Silex Gas Norway AS, Oslo Sirius S.A., Luxembourg SLC "Allianz Life Ukraine", Kiev Società Agricola San Felice S.p.A., Milan Société de Production D'électricité D'harcourt Moulaine SAS, Versailles Société d'Energie Eolien Cambon SAS, Versailles Société d'Exploitation du Parc Eolien d'Aussac Vadalle SAS, Paris Société Européenne de Protection et de Services d'Assistance à Domicile S.A., Paris Société Foncière Européenne B.V., Amsterdam Société Nationale Foncière S.A.L., Beirut SOFE One Ltd., Bangkok SOFE Two Ltd., Bangkok Sofiholding S.A., Brussels South City Office Broodthaers SA, Brussels SpaceCo S.A., Paris Standard General Agency Inc., Dallas, TX StocksPLUS Management Inc., Dover, DE Téléservices et Sécurité "TEL2S" SARL, Chatillon TFI Allianz Polska S.A., Warsaw The American Insurance Company Corp., Cincinnati, OH The Annuity Store Financial & Insurance Services LLC, Sacramento, CA The MI Group Limited, Guildford Three Pillars Business Solutions Limited, Guildford Ticket Guard Small Amount & Short Term Insurance Co. Ltd., Tokyo Tihama Investments B.V., Amsterdam Top Assistance Service GmbH, Vienna Top Immo A GmbH & Co. KG, Vienna Top Immo Besitzgesellschaft B GmbH & Co. KG, Vienna Top Versicherungsservice GmbH, Vienna Top Vorsorge-Management GmbH, Vienna Towarzystwo Ubezpieczen Euler Hermes S.A., Warsaw Trafalgar Insurance Public Limited Company, Guildford TU Allianz Polska S.A., Warsaw TU Allianz Zycie Polska S.A., Warsaw UP 36 SA, Brussels 100.0 100.0 100.0 100.0 100.0 100.0 100.0 90.0 100.0 100.0 100.0 100.0 52.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 75.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 94.8 100.0 100.0 100.0 100.0 100.0 56.0 100.0 66.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 99.9 100.0 100.0 100.0 99.4 100.0 100.0 100.0 100.0 100.0 100.0 100.0 75.0 100.0 100.0 100.0 100.0 100.0 VermögensManagement 2027 Plus, Senningerberg VertBois S.à r.l., Luxembourg Vigny Depierre Conseils SAS, Archamps Viveole SAS, Versailles Volta, Paris Vordere Zollamtsstraße 13 GmbH, Vienna WFC Investments Sp. z o.o., Warsaw Windpark GHW GmbH, Pottenbrunn Windpark Ladendorf GmbH, Vienna Windpark Les Cent Jalois SAS, Versailles Windpark Scharndorf GmbH, Pottenbrunn Windpark Zistersdorf GmbH, Pottenbrunn Wm. H McGee & Co. (Bermuda) Ltd., Hamilton Wm. H McGee & Co. Inc., New York, NY Wm. H McGee & Co. of Puerto Rico Inc., San Juan YAO Investment S.à r.l., Luxembourg Yorktown Financial Companies Inc., Minneapolis, MN ZAD Allianz Bulgaria, Sofia ZAD Allianz Bulgaria Zhivot, Sofia ZAD Energia, Sofia ZiOst Energy GmbH & Co. KG, Pottenbrunn Non-consolidated affiliates A. Diffusion S.A., Nanterre AGF Pension Trustees Ltd., Guildford Allianz America Latina S.C. Ltda., Rio de Janeiro Allianz Financial Services S.A., Athens Allianz Global Corporate & Specialty Escritório de Representação no Brasil Ltda., Rio de Janeiro Allianz Insurance Services Ltd., Athens Allianz Northern Ireland Limited, Belfast Allianz Risk Consultants B.V., Amsterdam Assurance France Aviation S.A., Paris business lounge GmbH, Vienna COGAR S.à r.l., Paris Gesellschaft für Vorsorgeberatung AG, Bern ICC Evaluation SARL, Paris Knightsbridge Allianz LP, Bartlesville, OK Office Sénégalais de Conseils en Assurance SARL, Dakar RE-AA SA, Abidjan SCI AVIP de Camp Laurent, Courbevoie SCI J.T., Courbevoie SCI Vilaje, Courbevoie SIFCOM Assur S.A., Abidjan Société Immobilière de l'Avenue du Roule SAS, Courbevoie Top Versicherungs-Vermittler Service GmbH, Vienna Joint ventures A&A Centri Commerciali S.r.l., Milan Allee-Center Kft., Budapest Allianz C.P. General Insurance Co. Ltd., Bangkok AMLI-Allianz Investment LP, Wilmington, DE Ancilyze Technologies LLC, Oakbrook Terrace, IL Atenction Integral a la Dependencia S.L., Cordoba AZ/JH Co-Investment Venture (DC) LP, Wilmington, DE AZ/JH Co-Investment Venture (IL) LP, Wilmington, DE Bajaj Allianz Financial Distributors Limited, Pune Companhia de Seguro de Créditos S.A., Lisbon Dorcasia Ltd., Sydney Euromarkt Center d.o.o., Ljubljana Europe Logistics Venture 1 FCP-FIS, Luxembourg Fiumaranuova S.r.l., Genoa Guotai Jun'an Allianz Fund Management Co. Ltd., Shanghai International Shopping Centre Investment S.A., Luxembourg Israel Credit Insurance Company Ltd., Tel Aviv Market Street Trust, Sydney NET4GAS Holdings s.r.o., Prague NRF (Finland) AB, Västeras 87.7 5 100.0 100.0 100.0 100.0 5 100.0 87.5 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 87.4 99.0 51.0 100.0 99.9 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 99.5 5 99.6 97.5 100.0 100.0 100.0 60.0 100.0 100.0 50.0 50.0 50.0 75.0 8 50.0 50.0 80.0 8 80.0 8 50.0 50.0 50.0 50.0 83.3 5,8 50.1 8 49.0 8 50.0 50.0 50.0 5 50.0 50.0 239 SNC Société d'aménagement de la Gare de l'Est, Paris Solveig Gas Holdco AS, Oslo Wildlife Works Carbon LLC, San Francisco, CA Other participations between 5 and 20 % of voting rights Al Nisr Al Arabi, Amman Banco BPI S.A., Porto Sri Ayudhya Capital Public Company Limited, Bangkok Zagrebacka banka d.d., Zagreb % owned 1 49.0 30.0 10.0 9 18.0 8.4 16.8 11.7 1 2 3 4 5 6 7 8 9 Percentage includes equity participations held by dependent entities in full, even if the Allianz Group's share in the dependent entity is below 100 %. Controlled by the Allianz Group. Investment fund. Releasing impact according to § 264 (3) HGB through the Allianz Group's consolidated financial statements. Mutual, private equity or special fund. Group share through indirect holder Roland Holding GmbH, Munich: 75.2 %. Insolvent. Classified as joint venture according to IFRS 11. Classified as associate according to IAS 28. One Beacon Joint Venture LP, Wilmington, DE Porterbrook Holdings I Limited, London Previndustria - Fiduciaria Previdenza Imprenditori S.p.A., Milan Queenspoint S.L., Madrid RMPA Holdings Limited, Colchester SC Holding SAS, Paris SES Shopping Center AT1 GmbH, Salzburg Solunion Compañía Internacional de Seguros y Reaseguros SA, Madrid TopTorony Ingatlanhasznosító Zrt., Budapest Triskelion Property Holding Designated Activity Company, Dublin Waterford Blue Lagoon LP, Wilmington, DE Associates Adriatic Motorways d.d., Zagreb Allianz EFU Health Insurance Ltd., Karachi Allianz Euro Credit SRI, Paris Allianz Euro Oblig Court Terme ISR, Paris Allianz Euro Tactique, Paris Allianz Fóndika S.A. de C.V., Mexico City Allianz High Dividend Asia Pacific, Senningerberg Allianz Invest Osteuropa, Vienna Allianz Invest Vorsorgefonds, Vienna Allianz Saudi Fransi Cooperative Insurance Company, Riyadh Allianz Securicash SRI, Paris Allianz Sécurité PEA, Paris Archstone Multifamily Partners AC JV LP, Wilmington, DE Archstone Multifamily Partners AC LP, Wilmington, DE Areim Fastigheter 2 AB, Stockholm Areim Fastigheter 3 AB, Stockholm Assurcard N.V., Haasrode Autoelektro tehnicki pregledi d.o.o., Vojnić Bajaj Allianz General Insurance Company Ltd., Pune Bajaj Allianz Life Insurance Company Ltd., Pune Bazalgette Equity Ltd., London Berkshire Hathaway Services India Private Limited, New Delhi Berkshire India Private Limited, New Delhi Broker on-line de Productores de Seguros S.A., Buenos Aires Brunei National Insurance Company Berhad Ltd., Bandar Seri Begawan Chicago Parking Meters LLC, Wilmington, DE CJSC "MedCentreStrakh", Moscow CPIC Allianz Health Insurance Co. Ltd., Shanghai Data Quest SAL, Beirut Douglas Emmett Partnership X LP, Wilmington, DE Dr. Ignaz Fiala GmbH, Vienna European Outlet Mall Fund FCP-FIS, Luxembourg Foncière de Paris SIIC, Paris Four Oaks Place LP, Wilmington, DE Graydon Holding N.V., Amsterdam Helios Silesia Holding B.V., Amsterdam Henderson UK Outlet Mall Partnership LP, Edinburgh IPE Tank and Rail Investment 1 S.C.A., Luxembourg Madrid Gas Investments S.A., Luxembourg Medgulf Allianz Takaful B.S.C., Seef New Path S.A., Buenos Aires OeKB EH Beteiligungs- und Management AG, Vienna OJSC "Avariinyi Comissar", Moscow OVS Opel VersicherungsService GmbH, Vienna PGREF V 1301 Sixth Holding LP, Wilmington, DE Professional Agencies Reinsurance Limited, Hamilton Residenze CYL S.p.A., Milan SAS Alta Gramont, Paris SCI Bercy Village, Paris SK Versicherung AG, Vienna SNC Alta CRP Gennevilliers, Paris SNC Alta CRP La Valette, Paris % owned 1 50.0 30.0 8 50.0 100.0 8 56.0 8 50.0 50.0 50.0 50.0 50.0 49.0 8 33.3 49.0 33.4 5 24.1 5 35.0 5 26.8 20.9 5 21.5 5 28.6 5 32.5 22.3 5 34.1 5 40.0 28.6 23.3 26.2 20.0 49.0 26.0 26.0 34.3 20.0 20.0 30.0 25.0 49.9 36.4 22.9 36.0 28.6 33.3 25.8 5 22.7 49.0 27.5 45.0 19.5 9 48.8 33.3 25.0 40.0 49.0 23.3 40.0 24.5 22.0 33.3 49.0 49.0 25.8 49.0 49.0 240 Annual Report 2015 Allianz Group D Consolidated Financial Statements 135 Consolidated Balance Sheets 136 Consolidated Income Statements 137 Consolidated Statements of Comprehensive Income 138 Consolidated Statements of Changes in Equity 139 Consolidated Statements of Cash Flows 141 Notes Responsibility statement To the best of our knowledge, and in accordance with the applicable reporting principles, the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the group, and the group management report includes a fair review of the development and performance of the business and the position of the group, together with a description of the material opportunities and risks associated with the expected development of the group. Munich, 16 February 2016 Allianz SE The Board of Management Annual Report 2015 Allianz Group 241 In our opinion, based on the findings of our audit, the consoli- dated financial statements comply with IFRSs, as adopted by the E.U., the additional requirements of German commercial law pursuant to § 315a para. 1 HGB and supplementary provisions of the articles of incorporation and give a true and fair view of the net assets, financial position and results of operations of the Group in accordance with these requirements. The group management report is consistent with the consolidated financial statements and as a whole provides a suitable view of the Group’s position and suitably presents the opportunities and risks of future development. Munich, 29 February 2016 KPMG AG Wirtschaftsprüfungsgesellschaft Becker Wirtschaftsprüfer (Independent Auditor) Dr. Pfaffenzeller Wirtschaftsprüfer (Independent Auditor) auditoR’s RepoRt We have audited the consolidated financial statements prepared by Allianz SE, Munich, comprising the consolidated balance sheets, the consolidated income statements, the consolidated statements of comprehensive income, the consolidated statements of changes in equity, the consolidated statements of cash flows and the notes, together with the group management report for the business year from 1 January to 31 December 2015. The preparation of the consoli- dated financial statements and the group management report in accordance with IFRSs, as adopted by the EU, and the additional requirements of German commercial law pursuant to § 315a para. 1 HGB [Handelsgesetzbuch “German Commercial Code”] and supple- mentary provisions of the articles of incorporation are the responsi- bility of the parent company’s management. Our responsibility is to express an opinion on the consolidated financial statements and on the group management report based on our audit. We conducted our audit of the consolidated financial state- ments in accordance with § 317 HGB and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Ger- many] (IDW). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the consolidated financial statements in accordance with the applicable financial reporting framework and in the group management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Group and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence sup- porting the disclosures in the consolidated financial statements and the group management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements of those entities included in consolida- tion, the determination of entities to be included in consolidation, the accounting and consolidation principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements and group management report. We believe that our audit provides a reasonable basis for our opinion. Our audit has not led to any reservations. 242 Annual Report 2015 Allianz Group fuRthER infoRmAtion E Annual Report 2015 Allianz Group 243243 E _ fuRthER infoRmAtion Pages 244 – 252 Joint Advisory Council of the Allianz Companies International Advisory Board 245 246 247 Mandates of the Members of the Supervisory Board 248 Mandates of the Members of the Board of Management 249 Glossary 244 Annual Report 2015 Allianz Group E Further Information 245 Joint Advisory Council of the 247 Mandates of the Members of 249 Glossary Allianz Companies the Supervisory Board 246 International Advisory Board 248 Mandates of the Members of the Board of Management Joint Advisory Council of the Allianz Companies Dr. Helmut Perlet Chairman Chairman of the Supervisory Board Allianz SE Dr. Kurt bocK Chairman of the Board of Executive Directors BASF SE Dr. tHomas enDers Chief Executive Officer Airbus Group franz feHrenbacH Managing Partner Robert Bosch Industrietreuhand KG Chairman of the Supervisory Board Robert Bosch GmbH Dr. rüDiger grube Chairman of the Board and Chief Executive Officer Deutsche Bahn AG Herbert Hainer Chairman of the Board of Management adidas AG Harry roels KasPer rorsteD Chairman of the Board of Management Henkel AG & Co. KGaA Dr. manfreD scHneiDer until 31 December 2015 Chairman of the Supervisory Board RWE AG Linde AG Prof. Dr. Dennis J. snoWer President of the Kiel Institute for the World Economy Peter terium Chief Executive Officer RWE AG Dr.-ing. e.H. HeinricH Weiss until 31 December 2015 Chairman of the Supervisory Board SMS Holding GmbH manfreD Wennemer Dr. Jürgen Heraeus until 31 December 2015 Chairman of the Supervisory Board Heraeus Holding GmbH Prof. Dr. Dieter HunDt, senator e.H. until 31 December 2015 Chairman of the Supervisory Board Allgaier Werke GmbH ambassaDor Prof. Dr. Wolfgang iscHinger Chairman Munich Security Conference Prof. Dr.-ing. Dr.-ing. e.H. Hans-Peter Keitel until 31 December 2015 Vice-President of BDI-Federation of German Industries Dr. nicola leibinger-Kammüller Chief Executive Officer TRUMPF GmbH & Co. KG Dr. tHomas rabe CEO & Chairman of the Executive Board Bertelsmann SE & Co. KGaA Dr.-ing. Dr.-ing. e.H. norbert reitHofer Chairman of the Supervisory Board BMW AG Annual Report 2015 Allianz Group 245 International Advisory Board Dr. Paul acHleitner Chairman of the Supervisory Board of Deutsche Bank AG Dr. Jürgen HambrecHt until 31 December 2015 Chairman of the Supervisory Board of BASF SE Paulo De azeveDo Chairman and Co-Chief Executive Officer of Sonae SGPS, S.A. Dr. franz b. Humer Chairman of DIageo plc lubna olayan since 28 May 2015 Chief Executive Officer and Deputy Chairperson of Olayan Financing Company Dr. gianfelice rocca Chairman of Techint Group of Companies cansen basaran-symes since 5 May 2015 President of Turkish Industry & Business Association (TUSIAD) alfonso cortina De alcocer Vice Chairman of Rothschild Europe BV, Senior Advisor at Texas Pacific Group Peter costello Chairman of Australia’s Future Fund moHameD a. el-erian since 1 January 2016 Chief Economic Advisor to Allianz ambassaDor robert m. Kimmitt Senior International Counsel of Wilmer Cutler Pickering Hale and Dorr angel ron Chairman of Banco Popular izumi KobayasHi Member of the Board of Directors of ANA Holdings Inc., Director of the Board of Mitsui & Co., Ltd. antHoni salim President and Chief Executive Officer of Salim Group Dr. mario monti President of Bocconi University, Chairman of the High-level Group on Own Resources of the European Union louis scHWeitzer Président d’Honneur de Renault lorD iain vallance of tummel Chairman of Amsphere Ltd. Jacques a. nasser Chairman of BHP Billiton 246 Annual Report 2015 Allianz Group E Further Information 245 Joint Advisory Council of the 247 Mandates of the Members of 249 Glossary Allianz Companies the Supervisory Board 246 International Advisory Board 248 Mandates of the Members of the Board of Management Mandates of the Members of the Supervisory Board DR. HELMUT PERLET Chairman Former Member of the Board of Management of Allianz SE Membership in other statutory supervisory boards and SE administrative boards in Germany Commerzbank AG GEA Group AG DR. WULf H. BERnoTaT Vice Chairman Former Chairman of the Board of Management of E.ON AG Membership in other statutory supervisory boards and SE administrative boards in Germany Bertelsmann Management SE Bertelsmann SE & Co. KGaA Vonovia SE (Chairman), formerly named Deutsche Annington Immobilien SE Deutsche Telekom AG METRO AG until 4 September 2015 RoLf ZiMMERMann Vice Chairman Chairman of the (European) SE Works Council of Allianz SE DanTE BaRBan Employee of Allianz S.p.A. CHRiSTinE BoSSE Former Chief Executive Officer of Tryg A/S Membership in comparable1 supervisory bodies Aker ASA until 9 April 2015 P/F BankNordik (Chairwoman) since 25 March 2015 TDC A/S GaBRiELE BURKHaRDT-BERG Chairwoman of the Group Works Council of Allianz SE JEan-JaCQUES CETTE Chairman of the Group Works Council of Allianz France S.A. Membership in comparable1 supervisory bodies Membership in Group bodies Allianz France S.A. iRa GLoE-SEMLER Regional Representative Financial Services of ver.di Hamburg fRanZ HEiSS until 31 July 2015 Employee of Allianz Beratungs- und Vertriebs-AG PRof. DR. REnaTE KöCHER Head of “Institut für Demoskopie Allensbach” (Allensbach Institute) Membership in other statutory supervisory boards and SE administrative boards in Germany BMW AG Infineon Technologies AG Nestlé Deutschland AG Robert Bosch GmbH JüRGEn LaWREnZ since 1 August 2015 Employee of Allianz Managed Operations & Services SE Membership in other statutory supervisory boards and SE administrative boards in Germany Membership in Group bodies Allianz Managed Operations & Services SE JiM HaGEMann SnaBE Chairman of World Economic Forum USA Membership in other statutory supervisory boards and SE administrative boards in Germany SAP SE Siemens AG Membership in comparable1 supervisory bodies Bang & Olufsen A/S (Vice Chairman) Danske Bank A/S PETER DEniS SUTHERLanD Former Chairman of the Board of Directors of Goldman Sachs International Membership in comparable1 supervisory bodies BW Group Ltd. Goldman Sachs International (Chairman) until 30 June 2015 Koç Holding A.Ş. 1 We regard memberships in other supervisory bodies as “comparable” if the company is listed on a stock exchange or has more than 500 employees. Annual Report 2015 Allianz Group 247 Mandates of the Members of the Board of Management oLivER BäTE Chairman of the Board of Management since 7 May 2015 Global Property-Casualty until 6 May 2015 Membership in other statutory supervisory boards and SE administrative boards in Germany Membership in Group bodies Allianz Deutschland AG since 17 March 2015 Membership in comparable1 supervisory bodies Membership in Group bodies Allianz France S.A. (Vice Chairman since 7 May 2015) Allianz S.p.A. (Vice Chairman until 6 February 2015) MiCHaEL DiEKMann until 6 May 2015 Chairman of the Board of Management Membership in other statutory supervisory boards and SE administrative boards in Germany BASF SE (Vice Chairman) Linde AG (Vice Chairman) Siemens AG Membership in Group bodies Allianz Asset Management AG (Chairman) until 23 February 2015 Allianz Deutschland AG until 16 March 2015 Membership in comparable1 supervisory bodies Membership in Group bodies Allianz France S.A. (Vice Chairman) Allianz S.p.A. SERGio BaLBinoT Insurance Western & Southern Europe Insurance Middle East, Africa, India since 1 September 2015 Membership in comparable1 supervisory bodies Membership in Group bodies Allianz France S.A. Allianz S.p.A. (Vice Chairman since 7 February 2015) Allianz Sigorta A.S. (Vice Chairman) Allianz Yasam ve Emeklilik A.S. ManUEL BaUER until 31 August 2015 Insurance Growth Markets Membership in comparable1 supervisory bodies Bajaj Allianz General Insurance Co. Ltd. Bajaj Allianz Life Insurance Co. Ltd. Membership in Group bodies Allianz Hungária Biztosító Zrt. (Chairman) Allianz Tiriac Asigurari S.A. (Chairman) DR. HELGa JUnG Insurance Iberia & Latin America, Legal & Compliance, Mergers & Acquisitions Membership in other statutory supervisory boards and SE administrative boards in Germany Membership in Group bodies Allianz Asset Management AG (Chairwoman) since 23 February 2015 Allianz Global Corporate & Specialty SE (Vice Chairwoman) Membership in comparable1 supervisory bodies Unicredit S.p.A. Membership in Group bodies Allianz Compañía de Seguros y Reaseguros S.A. Companhia de Seguros Allianz Portugal S.A. DR. CHRiSTof MaSCHER Operations, Allianz Worldwide Partners Membership in other statutory supervisory boards and SE administrative boards in Germany Volkswagen Autoversicherung AG Membership in Group bodies Allianz Managed Operations and Services SE (Chairman) Membership in comparable1 supervisory bodies Membership in Group bodies Allianz Worldwide Partners SAS (Chairman until 1 December 2015) Jay RaLPH Asset Management, US Life Insurance Membership in comparable1 supervisory bodies Membership in Group bodies Allianz Life Insurance Company of North America (Chairman) DR. axEL THEiS Global Insurance Lines & Anglo Markets Global Property-Casualty since 7 May 2015 Membership in other statutory supervisory boards and SE administrative boards in Germany ProCurand GmbH & KGaA (Chairman) Membership in Group bodies Allianz Global Corporate & Specialty SE (Chairman) Membership in comparable1 supervisory bodies Membership in Group bodies Allianz Australia Ltd. since 1 September 2015 Allianz Insurance plc (Chairman) Allianz Irish Life Holdings plc since 20 March 2015 Euler Hermes S.A. since 1 June 2015 DR. DiETER WEMMER Finance, Controlling, Risk Membership in other statutory supervisory boards and SE administrative boards in Germany Membership in Group bodies Allianz Asset Management AG Allianz Investment Management SE DR. WERnER ZEDELiUS Insurance German Speaking Countries Insurance Central & Eastern Europe since 1 September 2015 Membership in other statutory supervisory boards and SE administrative boards in Germany FC Bayern München AG (Vice Chairman) since 18 May 2015 Membership in Group bodies Allianz Deutschland AG (Chairman) Allianz Investment Management SE Membership in comparable1 supervisory bodies Membership in Group bodies Allianz Elementar Lebensversicherungs-AG (Chairman) Allianz Elementar Versicherungs-AG (Chairman) Allianz Investmentbank AG (Vice Chairman) Allianz Suisse Lebensversicherungs-Gesellschaft AG (Vice Chairman) Allianz Suisse Versicherungs-Gesellschaft AG (Vice Chairman) DR. MaxiMiLian ZiMMERER Investments, Global Life/Health Insurance Asia Pacific since 1 September 2015 Membership in other statutory supervisory boards and SE administrative boards in Germany Membership in Group bodies Allianz Asset Management AG Allianz Investment Management SE (Chairman) Allianz Lebensversicherungs-AG (Vice Chairman) 1 We regard memberships in other supervisory bodies as “comparable” if the company is listed on a stock exchange or has more than 500 employees. 248 Annual Report 2015 Allianz Group E Further Information 245 Joint Advisory Council of the 247 Mandates of the Members of 249 Glossary Allianz Companies the Supervisory Board 246 International Advisory Board 248 Mandates of the Members of the Board of Management Glossary The accounting terms explained here are intended to help the reader understand this Annual Report. Most of these terms concern the balance sheet or the income statement. A Acquisition cost The amount of cash or cash equivalents paid or the fair value of the other consideration given to acquire an asset at the time of its acquisition. ActuAriAl gAins And losses Actuarial gains and losses are changes in the present value of the defined benefit obligation resulting from experience adjustments (i.e. the effects of differences between the previous actuarial assumptions and what has actually occurred) and the effects of changes in actuarial assumptions (e.g. changes in demographic and in financial assumptions). AffiliAtes The parent company of the Group and all subsidiaries. Subsidiaries are entities where the parent company can exercise a significant influence over their corporate strategy in accordance with the control concept. This is possible, for example, where the parent company holds, directly or indirectly, a majority of the voting rights, has the power to appoint or remove a majority of the mem­ bers of the Board of Management or equivalent govern­ ing body, or where there are contractual rights of control. AggregAte policy reserves Policies in force – especially in life, health, and personal accident insurance – give rise to potential liabilities for which funds have to be set aside. The amount required is calculated actuarially. AllowAnce for loAn losses The overall volume of provisions includes allowances for credit losses – deducted from the asset side of the balance sheet – and provisions for risks associated with contingencies, such as guarantees, loan commitments or other obligations, which are stated as liabilities. Where it is determined that a loan cannot be repaid, the uncollect­ able amount is written off against any existing specific loan loss allowance, or directly recognized as an expense in the income statement. Recoveries on loans previously written off are recognized in the income statement under net loan loss provisions. Assets under mAnAgement Assets under management are assets or securities port­ folios, valued at current market value, for which Allianz Asset Management companies provide discretionary investment management decisions and have the port­ folio management responsibility. They are managed on behalf of third parties as well as on behalf of the Allianz Group. AssociAtes All entities over which the Allianz Group has significant influence, i.e. the power to participate in the financial and operating policy decisions of these entities, but no control or joint control of those policies. Amortized cost The amortized cost of a financial asset or financial liability is the amount at which the financial instrument is mea­ sured at initial recognition minus principal repayments, plus or minus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount. AvAilAble­for­sAle investments Available­for­sale investments are securities which are neither held to maturity nor have been acquired for sale in the near term; available­for­sale investments are carried at fair value in the balance sheet. B business combinAtion A business combination is a transaction or event in which an acquirer obtains control of one or more businesses. Business combinations are accounted for using the acqui sition method. certificAted liAbilities Certificated liabilities comprise debentures and other liabilities for which transferable certificates have been issued. collAterAlized debt obligAtion (cdo) A way of packaging credit risk. Several classes of securi­ ties (known as tranches) are created from a portfolio of bonds. Rules determine how the cost of defaults are allocated to the classes. combined rAtio Represents the total of acquisition and administrative expenses (net), excluding one­off effect from pension revaluation, and claims and insurance benefits incurred (net) divided by premiums earned (net). contingent liAbilities Financial obligations not shown as liabilities on the bal­ ance sheet because the probability of a liability actually being incurred is low. Example: guarantee obligations. cost­income rAtio Represents operating expenses divided by operating revenues. credit risk The risk of a loss incurring due to a counterparty’s dete­ rioration of credit quality or its default. current service cost Net expense incurred in connection with a defined benefit plan less any contributions made by the beneficiary to a pension fund. C D cAsh flow stAtement Statement showing movements of cash and cash equi­ valents during a reporting period, classified by three types of activity: operating activities, investing activities and financing activities. deferred Acquisition costs (dAc) Expenses of an insurance company which are incurred in connection with the acquisition of new insurance policies or the renewal of existing policies. They include commis­ sions paid, underwriting expenses and policy issuance costs. Annual Report 2015 Allianz Group 249 deferred tAx Assets/liAbilities The calculation of deferred taxes is based on tax loss carry forwards, tax credit carry forwards and temporary differences between the carrying amounts of assets or liabilities in the published balance sheet and their tax base, and on differences arising from applying uniform valuation policies for consolidation purposes. The tax rates used for the calculation are the local rates appli­ cable in the countries of the entities included in the con­ solidation; changes to tax rates already adopted on the balance sheet date are taken into account. defined benefit plAns For defined benefit plans, the participant is granted a defined benefit by the employer or via an external entity. In contrast to defined contribution arrangements, the future cost of a defined benefit to the employer plan is not known with certainty in advance. To determine the expense over the period, accounting regulations require that actuarial calculations are carried out according to a fixed set of rules. defined contribution plAns Defined contribution plans are funded through indepen­ dent pension funds or similar organizations. Contributions fixed in advance (e.g. based on salary) are paid to these institutions and the beneficiary’s right to benefits exists against the pension fund. The employer has no obligation beyond payment of the contributions and does not par­ ticipate in the investment success of the contributions. derivAtive finAnciAl instruments Financial contracts, the values of which move in relation­ ship to the price of an underlying asset. Derivative finan­ cial instruments can be classified in relation to their under lying assets (e.g. interest rates, share prices, foreign currency exchange rates or prices of goods). Important examples of derivative financial instruments are options, futures, forwards and swaps. E expense rAtio Represents acquisition and administrative expenses (net), excluding one­off effect from pension revaluation, divided by premiums earned (net). F fAir vAlue The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. finAnciAl Assets cArried At fAir vAlue through income Financial assets carried at fair value through income in­ clude financial assets held for trading and financial assets designated at fair value through income. finAnciAl liAbilities cArried At fAir vAlue through income Financial liabilities carried at fair value through income include financial liabilities held for trading and financial liabilities designated at fair value through income. finAnciAl vAr Financial Value at Risk (VaR) is the aggregation of market risk and credit risk taking diversification benefits into account. forwArds The parties to this type of transaction agree to buy or sell at a specified future date. The price of the underlying assets is fixed when the deal is struck. functionAl currency The functional currency is the prevailing currency in the primary economic environment where the subsidiary conducts its ordinary activities. eArnings per shAre (eps) Ratio calculated by dividing the net income for the year attributable to shareholders by the weighted average number of shares outstanding (basic eps). In order to calculate diluted earnings per share, the number of common shares outstanding and the net income for the year attributable to shareholders are adjusted by the effects of potentially dilutive common shares which could still be exercised. Potentially dilutive common shares arise in connection with share­based compensation plans (diluted eps). funds held by others under reinsurAnce contrActs Assumed/ deposits retAined for reinsurAnce ceded Funds held by others are funds to which the reinsurer is entitled but which the ceding insurer retains as collateral for future obligations of the reinsurer. The ceding insurer shows these amounts as “deposits retained for reinsurance ceded”. equity method The equity method is a method of accounting whereby the investment is initially recognized at cost and adjusted thereafter for the post­acquisition change in the investor’s share of the investee’s net assets. futures Standardized contracts for delivery on a future date, traded on an exchange. Normally, rather than actually delivering the underlying asset on that date, the difference between the closing market value and the exercise price is paid. G goodwill Difference between the cost of acquisition and the fair value of the net assets acquired. gross/net In insurance terminology, the terms gross and net mean before and after deduction of reinsurance, respectively. In investment terminology, the term net is used where the relevant expenses have already been deducted from the respective income. H hedging The use of special financial contracts, especially derivative financial instruments, to reduce losses which may arise as a result of unfavorable movements in rates or prices. held for sAle A non­current asset is classified as held for sale if its carrying amount will be recovered principally through sale rather than through continuing use. On the date a non­current asset meets the criteria as held for sale, it is measured at the lower of its carrying amount and fair value less costs to sell. held­to­mAturity investments Held­to­maturity investments comprise debt securities held with the intent and ability that they will be held­to­ maturity. They are valued at amortized cost. I iAs International Accounting Standards. ifrs International Financial Reporting Standards. Since 2002, the designation ifrs applies to the overall framework of all standards approved by the International Accounting Standards Board. Already approved standards will con­ tinue to be cited as International Accounting Standards (iAs). inclusive meritocrAcy index (imix) The Inclusive Meritocracy Index (imix) measures the progress of the organization on its way towards Inclusive Meritocracy. The internal index is subsuming 10 Allianz Engagement Survey (Aes) items around leadership, per­ formance and corporate culture. 250 Annual Report 2015 Allianz Group E Further Information 245 Joint Advisory Council of the 247 Mandates of the Members of 249 Glossary Allianz Companies the Supervisory Board 246 International Advisory Board 248 Mandates of the Members of the Board of Management income from finAnciAl Assets And liAbilities cArried At fAir vAlue through income (net) Includes all realized and unrealized gains and losses, including interest and dividend income, from financial assets and financial liabilities carried at fair value through income, the income (net) from financial liabilities for puttable equity instruments and the foreign currency gains and losses (net). issued cApitAl And AdditionAl pAid­in cApitAl Comprises the capital stock, the premium received on the issue of shares, and amounts allocated when option rights are exercised. J Joint venture A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. L life/heAlth – definition of terms Further wordings used in the Life/Health business segment performance analysis: Front-end load products: Products with a commission applied at the time of the initial recognition. Commission clawbacks: Commission recovered from intermediaries on lapse of (typically newer) contracts. True-up: Retrospective update of assumptions for dAc calculation. Unlocking: Prospective update of assumptions for dAc calculation. life/heAlth lines of business Guaranteed savings & annuities: Guaranteed savings and annuities are life insurance obligations that always relate to the length of human life. Life obligations may be related to guarantees offering life and/or death coverage of the insured in the form of single or multiple payments to a beneficiary. Protection & health: Protection and health insurance covers different risks which are linked to events affecting the physical or mental integrity of a person. Unit-linked without guarantee: Conventional unit­linked products are those where all of the benefits provided by a contract are directly linked to the value of assets contained in an internal or external fund held by the insurance undertakings. Performance is linked to a separate account and the investment risk is borne by the policyholder rather than the insurer. life/heAlth operAting profit sources The objective of the Life/Health operating profit sources analysis is to explain movements in ifrs results by analyzing underlying drivers of performance on a Life/ Health business segment consolidated basis. Loadings & fees: Includes premium and reserve based fees, unit­linked management fees and policyholder participation in expenses. Investment margin: Is defined as ifrs investment income net of expenses less interest credited to ifrs reserves and policyholder participation. Expenses: Includes commissions, acquisition expenses and administration expenses. Technical margin: Comprises risk result (risk premiums less benefits in excess of reserves less policyholder par­ ticipation), lapse result (surrender charges and commis­ sion clawbacks) and reinsurance result. Impact of change in DAC: Includes effects of change in dAc, urr and vobA and is the net impact of deferral and amortization of acquisition costs and front­end loadings on operating profit. loss rAtio Represents claims and insurance benefits incurred (net) divided by premiums earned (net). N net income AttributAble to non­controlling interests That part of net income for the year which is not attribut­ able to the shareholders of the Allianz Group but to other third parties who hold shares in affiliates. O options Derivative financial instruments where the holder is entitled – but not obliged – to buy (call option) or sell (put option) the underlying asset at a predetermined price sometime in the future. The grantor (writer) of the option, on the other hand, is obliged to transfer or buy the asset and receives a premium for granting the option to the purchaser. otc derivAtives Derivative financial instruments which are not standard­ ized and not traded on an exchange but traded directly between two counterparties via over­the­counter (otc) transactions. P pension And similAr obligAtions Reserves for current and future post­employment benefits formed for the defined benefit plans of active and former employees. These also include reserves for health care benefits. premiums written/eArned Premiums written represent all premium revenues in the respective year. Premiums earned represent that part of the premiums written used to provide insurance coverage in that year. In the case of life insurance products where the policyholder carries the investment risk (e.g. variable annuities), only that part of the premiums used to cover the risk insured and costs involved is treated as premium income. net promoter score (nps) A measurement of customers’ willingness to recom­ mend Allianz. Top­down nps is measured regularly according to global cross industry standards and allows benchmarking against competitors in the respective markets. present vAlue of new business premiums (pvnbp) Present value of projected new regular premiums, discounted with risk­free rates, plus the total amount of single premiums received. non­controlling interests Those parts of the equity of affiliates which are not owned by companies of the Allianz Group. R reinsurAnce An insurance company transfers part of its insurance risk assumed to another insurance company. replicAting portfolio Representation of the liabilities of the Life/Health insurance business via standard financial instruments. This form of representation mimics the behavior of these liabilities under different market conditions and allows for efficient risk calculations on the basis of Monte Carlo simulations. Annual Report 2015 Allianz Group 251 surplus funds According to Solvency ii guidance surplus funds are deemed to be accumulated profits, which have not been made available for distribution to policyholders and beneficiaries. swAps Agreements between two counterparties to exchange payment streams over a specified period of time. Impor­ tant examples include currency swaps (in which payment streams and capital in different currencies are exchanged) and interest rate swaps (in which the parties agree to exchange normally fixed interest payments for variable interest payments in the same currency). U uneArned premiums Premiums written attributable to income of future years. The amount is calculated separately for each policy and for every day that the premium still has to cover. uneArned revenue reserves (urr) urr contain premium components that refer to future periods, which are reserved and released over the life­ time of the corresponding contracts. us gAAp Generally Accepted Accounting Principles in the United States of America. V vAlue of business Acquired (vobA) vobA refers to the present value of future profits asso­ ciated with a block of business purchased. vAriAble Annuities The benefits payable under this type of life insurance depend primarily on the performance of the investments in a mutual fund. The policyholder shares equally in the profits or losses of the underlying investments. repurchAse And reverse repurchAse Agreements A repurchase (repo) transaction involves the sale of securities by the Group to a counterparty, subject to the simultaneous agreement to repurchase these securities at a certain later date, at an agreed price. The securities concerned are retained in the Group’s balance sheet for the entire lifetime of the transaction, and are valued in accordance with the accounting principles for financial assets carried at fair value through income or investment securities, respectively. The proceeds of the sale are reported in liabilities to banks or to customers, as appro­ priate. A reverse repo transaction involves the purchase of securities with the simultaneous obligation to sell these securities at a future date, at an agreed price. Such transactions are reported in loans and advances to banks, or loans and advances to customers, respectively. Interest income from reverse repos and interest expenses from repos are accrued evenly over the lifetime of the trans­ actions and reported under interest and similar income or interest expenses. reserves for loss And loss AdJustment expenses Reserves are established for the payment of losses and loss adjustment expenses (lAe) on claims which have occurred but are not yet settled. reserves for premium refunds That part of the surplus which will be distributed to policy holders in the future. This refund of premiums is made on the basis of statutory, contractual, or company by­law obligations, or voluntary undertaking. retAined eArnings In addition to the reserve required by law in the financial statements of the Group parent company, this item con­ sists mainly of the undistributed profits of Group entities and amounts transferred from consolidated net income. risk Appetite The level of risk that an organization is prepared to accept, before action is deemed necessary to reduce it. Risk appetite is therefore clearly and comprehensively defined by using target and minimum risk indicators, (quantita­ tive) limit systems, or adequate policies, standards and guidelines to determine the “boundaries” of the Group’s business operations. S segment reporting Financial information based on the consolidated financial statements, reported by business segments (Property­ Casualty, Life/Health, Asset Management and Corporate and Other) as well as by reportable segments. subordinAted liAbilities Liabilities which, in the event of liquidation or bankruptcy, are not settled until after all other liabilities. 252 Annual Report 2015 Allianz Group Orientation Orientation guide Multichannel reporting This sign indicates where to find additional information in this Annual Report or on the internet. On pages 249 to 252, you will find a glossary of selected accounting, insurance, and financial market terms used in this report. Print Download as PDF www.allianz.com/ annualreport Allianz Investor Relations App Apple App Store and Google Play Store Further Allianz publications Allianz Sustainability Report 2015 Allianz Human Resources Fact Book Encouraging tomorrow Allianz Group Sustainability Report 2015 HR Fact Book 2015 The Allianz Group Sustainability Report “Encouraging tomorrow” covers our contribution to the environment, society and economy. It provides full details of our sustainability strategy, approach and progress as well as an outlook for 2016. Date of publication: 2 May 2016. www.allianz.com/sustainability Factbook_int_2015_0215.indd 1 15.02.16 13:07 The HR Fact Book is the official and most comprehensive report on key human resources facts and figures, highlighting major HR achievements over the past year and revealing the outlook for 2016. Date of publication: 21 March 2016. www.allianz.com/hrfactbook Financial calendar Important dates for shareholders and analysts1 Annual General Meeting ______________________________________ 4 May 2016 Financial Results 1Q _________________________________________ 11 May 2016 Financial Results 2Q/Interim Report 2Q _________________________ 5 August 2016 Financial Results 3Q ____________________________________ 11 November 2016 Financial Results 2016 ____________________________________ 17 February 2017 Annual Report 2016 _______________________________________ 10 March 2017 Annual General Meeting ______________________________________ 3 May 2017 1 The German Securities Trading Act (“Wertpapierhandelsgesetz”) obliges issuers to announce immediately any information which may have a substantial price impact. Therefore we cannot exclude that we have to announce key figures related to quarterly and fiscal year results ahead of the dates mentioned above. As we can never rule out changes of dates, we recommend checking them on the internet at www.allianz.com/financialcalendar. Allianz SE – Königinstrasse 28 – 80802 Munich – Germany – Phone +49.89.3800-0 – info@allianz.com – www.allianz.com Annual Report on the internet: www.allianz.com/annualreport – Design / Concept: hw.design GmbH Photography: Wolfgang Stahr (Oliver Bäte), Peter Rigaud (Board of Management), Andreas Pohlmann (Chairman of the Supervisory Board) – Date of publication: 11 March 2016 This is a translation of the German Annual Report of Allianz Group. In case of any divergences, the German original is legally binding. 

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