Allianz Group annual report 2019 PDF

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Allianz Group annual report 2019...

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OUTPERFORM TRANSFORM REBALANCE ANNUAL REPORT 2019

ALLIANZ GROUP

To go directly to any chapter, simply click on the headline or the page number.

 All references to chapters, pages, notes, internet pages, etc. within this report are also linked.

CONTENT A _ To our Investors 2 4 9 10

Pages 1 – 10

Letter to the Investors Supervisory Board Report Mandates of the Members of the Supervisory Board Mandates of the Members of the Board of Management

B _ Corporate Governance

Pages 11 – 50

12 Corporate Governance Report 18 Statement on Corporate Management pursuant to § 315d and § 289f of the HGB (part of the Group Management Report) 21 Takeover-Related Statements and Explanations (part of the Group Management Report) 23 Remuneration Report (part of the Group Management Report) 41 Combined Separate Non-Financial Report

C _ Group Management Report 52 55 56 57 59 62 64 65 69 71 74 76 92

Business Operations Business Environment Executive Summary of 2019 Results Property-Casualty Insurance Operations Life/Health Insurance Operations Asset Management Corporate and Other Outlook 2020 Balance Sheet Review Liquidity and Funding Resources Reconciliations Risk and Opportunity Report Integrated Risk and Control System for Financial Reporting

D _ Consolidated Financial Statements 94 95 96 97 98

Pages 51 – 92

Pages 93 – 168

Consolidated Balance Sheet Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 101 121 138 143

General Information Notes to the Consolidated Balance Sheet Notes to the Consolidated Income Statement Other Information

E _ Further Information 170 Responsibility Statement 171 Independent Auditor’s Report 175 Independent Practitioner’s Reasonable Assurance Report

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.

Pages 169 – 176

TO OUR INVESTORS

A Annual Report 2019 − Allianz Group

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A _ To our Investors

OLIVER BÄTE Chairman of the Board of Management

While the world around us remains turbulent, we keep building on our strengths. In 2019 we have grown to new record levels: Our revenues reached € 142.4 bn, our operating profit € 11.9 bn. Our healthy business mix and global diversification allowed us to outperform yet another year despite challenges in the performance of our industrial insurance segment. There are many sources to our success. We achieved growth by gaining market share in mature but relatively saturated markets and through strategic expansion in selected regions. In Germany, for example, we grew by 15 % – the rest of the market by 4 %. Not only is our German life insurance business continuing its success story; also, our Property-Casualty segment can grow its customer base after several years of stagnation. At the same time, we are strengthening our presence in growing markets such as Brazil and China; e.g., through our partnership with JD.com. Our Asset Management segment reached € 1,686 bn in third-party assets under management, a level unprecedented in our history – another strong indicator of how much trust clients worldwide extend to us. We are with them for the long run, celebrating our 130th anniversary in 2020. Our sustained and sustainable business success allows us to gratify you, our shareholders: As we achieved a net income attributable to shareholders of € 7.9 bn, we are in the position to propose another increase in dividends to € 9.60 per share – the seventh increase in a row. Our financial performance is strong, and so is our organizational health: Our people and leaders are bringing to life our strategy “Simplicity Wins.” We are creating an environment that is open to and promoting constant change – an essential success factor in highly volatile times like these. The new spirit can be felt throughout the organization, and it is expressed in our Inclusive Meritocracy Index, which measures leadership and performance culture, reaching an all-time high of 73 %. Still, we want to do more to mobilize in particular our frontline employees. They are the face to our customers. Their outstanding commitment is one of the reasons in a comprehensive set of initiatives, which helped us to manage the growth of number of businesses, where Allianz is loyalty leader when customers are asked about their willingness to recommend us to their family and friends. Nevertheless, we must become even better in customer service excellence. Our focus on productivity can never be an excuse to compromise on customer experience. It takes a strong base to remain confident even in uncertain times. We have therefore written down our company purpose and, over the past two years, established it throughout our global organization units. Employees worldwide have worked to put into words what inspires everyone at Allianz to dedicate their best efforts to our customers day by day:

WE SECURE YOUR FUTURE

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Annual Report 2019 − Allianz Group

A _ To our Investors

Apart from the innumerable everyday activities through which Allianz employees fill our company purpose with life, there were some achievements this past year that we are particularly proud of: 



 

We made a series of acquisitions to strategically rebalance our portfolio. To name just a few: In Brazil, we are expanding our presence to become one of the country’s top insurers in Property-Casualty insurance. In the UK, we effected two transactions that made us the second largest general insurer in the market. Our asset manager PIMCO completed its acquisition of Gurtin Municipal Bond Management to offer clients a more extensive and enhanced suite of strategies and services. We continued our productivity improvement and managed to further reduce our expense ratio in the Property-Casualty business – true to our promise of 2018 to focus on what adds value for customers. As an acknowledgement for this achievement, we are rewarding our employees with a free Allianz share in 2020 – true to our promise to them, that they should benefit from our efforts. For the first time, Allianz was ranked the number one insurance brand in the Interbrand Best Global Brands Ranking. In the Top 100 of global brands, we moved up six places to number 43. As part of our continued efforts to safeguard a sustainable future, Allianz initiated the UN-convened Net-Zero Asset Owner Alliance – a group of the world’s largest pension funds and insurers which have committed to reduce the carbon emissions from their investment portfolios to net-zero by 2050. Along the same lines, we also co-chair the Global Investors for Sustainable Development (GISD) initiative, which aims to scale up finance and investment in sustainable development. Through actions like these we gain leading positions in key sustainability rankings like the Dow Jones Sustainability Indices year after year.

These achievements are the best proof for the exceptional quality of our people. On behalf of my Board of Management colleagues – and, I assume, on your behalf as well – I want to express my sincere thanks to our employees and partners around the globe for their unfailing dedication and great work. Like every year, 2019 also presented some challenges. Foremost among them was the low interest rate environment, with rates even turning negative in a growing number of instances. To continue delivering high value to our customers, we moved into alternative asset classes early on, reaching € 161 bn in assets under management by the end of 2019. As we carefully adjust our portfolio, we manage to keep our balance sheet strong even under unfavorable conditions such as these, continually confirmed by very good ratings. Our resilience is fostered by our strategy “Simplicity Wins”. We are making insurance and investing simpler for our clients. We are slimming down our products, our processes, and our IT. We are starting to get rid of old technologies and to prepare for a future-oriented digitization, which is not designed to fit with legacy systems but to accommodate future customer needs. We look to the next year with utmost confidence – not because it is going to be an easy one (it certainly isn’t) but because we are well prepared for what lies ahead. Thank you for being at our side.

Annual Report 2019 − Allianz Group

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A _ To our Investors

SUPERVISORY BOARD REPORT Ladies and Gentlemen, During the financial year 2019, the Sup Supervisory ervisory Bo Boar ar ard d fulfilled all its duties and obligations as laid out in the company statutes and applicable law. It monitored the activities of the company’s Board of Management Management,, dealt with the succession plannin planning g for the Board of Managemen Managementt and advised it on business management issues.

OVERVIEW In the financial year 2019 the Supervisory Board held six meetings and adopted one written resolution. The regular meetings took place in February, March, May, June, September, and December. In all of the meetings in 2019, the Board of Management reported on Group revenues and results as well as developments in individual business segments. The Board of Management informed the Supervisory Board on the course of business as well as on the development of Allianz SE and the Allianz Group, including deviations in actual business developments from the planning. In this context, the adequacy of capitalization, the solvency ratio, and the respective stress scenarios were discussed. The annual Allianz SE and the Group’s consolidated financial statements including the respective auditor‘s reports, the half-yearly as well as the quarterly reports were reviewed in detail by the Supervisory Board after preparation by the Audit Committee. Other focal points of reporting were strategic topics such as the new Allianz strategy “Simplicity Wins” with its three pillars “Outperform”, “Transform” and “Rebalance”, the risk strategy, the Allianz Customer Model (ACM), the launch of the European direct insurer Allianz Direct and the business strategy in China. In addition, the Supervisory Board was extensively involved in the Board of Management’s planning for both the fiscal year 2020 and the three-year period from 2020 to 2022. Cyber risk security and developments of life business in the current lowinterest environment were also regularly discussed. Implications of Brexit for Allianz and economic sanctions were other ongoing topics. Furthermore, the Supervisory Board dealt extensively with personnel matters relating to the Board of Management, the requirements of the new German Corporate Governance Code announced for 2020, and the Act Implementing the Second Shareholders’ Rights Directive (ARUG II). The Supervisory Board received regular, timely, and comprehensive reports from the Board of Management. 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 the Supervisory Board in writing about important events that occurred between meetings. The chairmen of the Supervisory and Management Boards also had regular discussions about major developments and decisions. The Chairman of the Supervisory Board also had individual discussions with each member of the Board of Management about their respective half-year as well as full-year performance. In the financial year 2019, again individual trainings and group events were held for example on actuarial and accounting aspects of the life insurance business, on the basis of an agreed development plan for further training of the members of the Supervisory Board. Details on each member’s participation in meetings of the Supervisory Board and its committees can be found in the Corporate Governance Report, starting on page 12. Members of 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.

ISSUES DISCUSSED IN THE SUPERVISORY BOARD PLENARY SESSIONS In the meeting of 14 February 2019, the Supervisory Board comprehensively dealt with the preliminary financial figures for the financial year 2018 as well as the Board of Management’s dividend proposal. The appointed audit firm, PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft (PwC), Munich, reported in detail on the preliminary results of their audit. In the further course of the meeting, the Supervisory Board also discussed the target achievement of each individual member of the Board of Management and, on this basis, set their variable remuneration for the financial year 2018. As part of this performance assessment, the fitness and propriety of the members of the Board of Management were also confirmed. In addition, various special topics were discussed, such as the status of the implementation of the EU Data Protection Directive, the harmonization of the IT infrastructure in Allianz Group, the life insurance business in Asia, ongoing M&A activities, and the Board of

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Annual Report 2019 − Allianz Group

A _ To our Investors

Management’s deliberations on a potential new share buyback program. The Supervisory Board also dealt with succession planning for the Board of Management. In the meeting of 7 March 2019, the Supervisory Board discussed the audited annual Allianz SE and consolidated financial statements including market value balance sheets, as well as the Board of Management’s recommendation for the appropriation of earnings for the financial year 2018. The auditors confirmed that there were no discrepancies compared to their February report, and issued an unqualified auditor’s report for the individual and consolidated financial statements. The Supervisory Board also reviewed and approved the separate non-financial report for both Allianz SE and the Group, taking into account the report of the external auditor. Further presentations concerned the Board of Management’s report on risk development in 2018, the annual compliance report, and the annual report of the Head of Group Audit. Next, the Supervisory Board reviewed the agenda and proposals for resolution for Allianz SE’s 2019 Annual General Meeting (AGM). At the recommendation of the Audit Committee, the Supervisory Board appointed PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft (PwC) as auditor for the 2019 individual and consolidated financial statements, the auditor’s review of the 2019 half-yearly financial report, and the assurance engagement of the combined separate non-financial report. Furthermore, the Supervisory Board dealt with and approved the control and profit transfer agreement with Allsecur Deutschland AG. The Supervisory Board also received reports on Allianz’s global strategy in the health insurance business and the new Allianz Digital Health unit. On 8 May 2019, just before the AGM, the Board of Management briefed the Supervisory Board on business performance in the first quarter of 2019 as well as on the current situation of both the Allianz Group and Allianz SE, in particular with regard to share price development, capitalization, and capital management. At the meeting on 27 June 2019, the Board of Management first reported in detail on the course of business in fiscal year 2019 to date and provided an outlook on the expected half-year results. In addition, the Board of Management reported on various M&A activities, such as the sale of the stake in the Spanish joint venture “Allianz Popular” and the acquisition of the property insurance business of Legal & General in the UK, and gave an overview of Allianz’s role in ESG issues. The Board of Management then presented the new Allianz strategy “Simplicity Wins” with its three pillars “Outperform”, “Transform” and “Rebalance”, and set out an overview of the next steps required for growth and value creation. The Supervisory Board also dealt in detail with current market trends in China, in particular recent regulatory developments and the successful acquisition of a holding license as the first foreign insurance company to do so. The Board of Management also reported on the offer of IT solutions for external insurance companies. In addition, the Board of Management provided its regular status report on the issue of cyber risk security. Furthermore, the Supervisory Board dealt in detail with personnel matters relating to the Board of Management. Ms. Renate Wagner was appointed to the Board of Management with effect from 1 January 2020, to replace Dr. Helga Jung, who left the Board of Management at her own request at the end of 2019. Dr. Günther Thallinger’s term on the Board of Management, likewise expiring at the end of 2019, was extended for five years. The meeting on 27 September 2019 focused on the continuation of the presentation on the strategic direction of Allianz Group and Allianz SE (solo). In particular, the strategic direction and transformation issues for the “Transformation” pillar were discussed: the Allianz Customer Model (ACM), the European direct insurer Allianz Direct and the orientation of Allianz Partners. With regard to the “Rebalance” pillar, the Board of Management presented and subsequently discussed the China strategy in detail. The Board of Management report on the course of business covered the successful acquisition of Brazilian motor and property insurance operations from Sul América and the strategic realignment of Allianz in South America. In addition, the Supervisory Board dealt with corporate governance issues, the self-evaluation of the Supervisory Board required by supervisory law, and the Supervisory Board’s development plan based on this. The Supervisory Board also decided to extend the Board of Management term of Ms. Jacqueline Hunt, expiring at the end of 2019, for three years. At the meeting on 12 December 2019, the Board of Management first provided information about the thirdquarter results, the further course of business, and the situation of Allianz Group. Furthermore, the Supervisory Board discussed the planning for fiscal year 2020 and the three-year plan for 2020 to 2022. With the risk strategy and the considerations on the strategic development of the Asset Management segment, the Board of Management presented the follow-up on outstanding issues regarding the new Allianz strategy. In addition, the Board of Management provided a status report on the issue of cyber risk security. The Supervisory Board also discussed the declaration of conformity with the German Corporate Governance Code and various corporate governance issues, and dealt with the requirements profile for the Supervisory Board and the Act Implementing

Annual Report 2019 − Allianz Group

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A _ To our Investors

the Second Shareholders’ Rights Directive (ARUG II). Furthermore, the Supervisory Board set targets for the variable remuneration of members of the Board of Management for 2020 and debated succession planning with regard to the Board of Management. The members of the Supervisory Board discussed the introductions of the potential candidates with the Board of Management that took place on two evenings. Finally, the results of this year’s efficiency review of the Supervisory Board’s activities were discussed and appropriate measures for improvement were decided and subsequently implemented. After previous discussion, a new version of the objectives for the composition of the Supervisory Board was adopted by written procedure in December 2019. This new version came into effect as of 1 January 2020 and takes into account the requirements of the new German Corpo...