SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549



                                    FORM 6-K

                        REPORT OF FOREIGN PRIVATE ISSUER

                      PURSUANT TO RULE 13a-16 or 15d-16 OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                                For May 16, 2003

                         Commission File Number: 1-15154

                           ALLIANZ AKTIENGESELLSCHAFT

                               Koeniginstrasse 28
                                  80802 Munich
                                     Germany


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

      Form 20-F [X]        Form 40-F  [  ]

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

      Yes  [ ]             No  [X]

If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82-








OFFERING CIRCULAR                                                   CONFIDENTIAL

                       [ALLIANZ AKTIENGESELLSCHAFT LOGO]

                         117,187,500 NEW ALLIANZ SHARES

                           ALLIANZ AKTIENGESELLSCHAFT

                 SUBSCRIPTION PRICE: E38 PER NEW ALLIANZ SHARE

                            ------------------------

    Allianz Aktiengesellschaft ("Allianz AG") is offering 117,187,500 new
registered no-par value shares with restricted transferability (vinkulierte
Namensaktien) (the "New Allianz Shares") in an international offering. The
international offering consists of an offering of subscription rights to Allianz
AG's existing shareholders and private placements of New Allianz Shares not
subscribed for in the subscription offering and of a residual amount of existing
Allianz AG shares for which subscription rights have been excluded so as to
avoid a fractional subscription ratio.

    Each existing Allianz share entitles its holder to receive one subscription
right. The exercise of 15 subscription rights entitles the exercising holder to
subscribe for seven New Allianz Shares against payment of the subscription
price. Subscriptions will be accepted for a whole number of New Allianz Shares
only. The subscription price is E38 per New Allianz Share, representing a
discount of approximately 33% to the closing price of an Allianz AG share on the
Frankfurt Stock Exchange on April 11, 2003, the date of this Offering Circular,
of E56.95.

    If holders of the subscription rights wish to subscribe for New Allianz
Shares, they must exercise their subscription rights before 5.00 p.m. (Frankfurt
time) on April 29, 2003. Subscription rights not exercised by 5.00 p.m.
(Frankfurt time) on April 29, 2003 will expire. The New Allianz Shares allocated
to such unexercised subscription rights will be offered to eligible investors in
the private placements upon the terms and conditions described in this Offering
Circular.

    Shares of Allianz AG are traded on the stock exchanges in Frankfurt am Main,
Berlin-Bremen, Dusseldorf, Hamburg, Hanover, Munich and Stuttgart (the "German
stock exchanges"), the SWX Swiss Exchange, Euronext Paris and the London Stock
Exchange's market for listed securities under the symbol "ALV." Shares of
Allianz AG, in the form of American Depositary Shares, are listed on the New
York Stock Exchange under the symbol "AZ."

    The subscription rights will be listed and may be traded on the official
market (amtlicher Markt) of the Frankfurt Stock Exchange during the period from
April 15, 2003 up to and including April 25, 2003. Beginning on April 15, 2003,
shares of Allianz AG will be listed on the official market of the German stock
exchanges "ex subscription right" ("ex Bezugsrecht"). Application has been made
for admission (Zulassung) of the New Allianz Shares to listing and trading on
the official market of the German stock exchanges and is expected to be granted
on April 28, 2003. Trading in the New Allianz Shares on the German stock
exchanges is expected to commence on April 30, 2003. Allianz AG intends to have
the New Allianz Shares listed for trading on other stock exchanges where
existing Allianz shares are currently listed.

    INVESTING IN THE SUBSCRIPTION RIGHTS OR THE NEW ALLIANZ SHARES INVOLVES
RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 13 TO READ ABOUT MATERIAL FACTORS
INVESTORS SHOULD CONSIDER BEFORE INVESTING IN THE SUBSCRIPTION RIGHTS OR THE NEW
ALLIANZ SHARES.

    THE SUBSCRIPTION RIGHTS AND THE NEW ALLIANZ SHARES HAVE NOT BEEN AND WILL
NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") AND MAY ONLY BE OFFERED OR SOLD (I) WITHIN THE UNITED
STATES TO QUALIFIED INSTITUTIONAL BUYERS IN RELIANCE ON AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (OTHER THAN RULE 144A) AND (II)
OUTSIDE THE UNITED STATES TO CERTAIN PERSONS IN OFFSHORE TRANSACTIONS IN
RELIANCE ON REGULATION S UNDER THE SECURITIES ACT. THE SUBSCRIPTION RIGHTS AND
THE NEW ALLIANZ SHARES ARE NOT TRANSFERABLE EXCEPT IN ACCORDANCE WITH THE
RESTRICTIONS DESCRIBED UNDER "NOTICE TO INVESTORS."

    The shares subscribed for in the subscription offering will be delivered on
or around April 30, 2003 and the shares to be offered in the private placements
will be delivered on or around May 5, 2003.

                            ------------------------

    The institutions named below (the "Underwriters") have agreed with Allianz
AG to subscribe for any New Allianz Shares not taken up in the subscription
offering. See "Underwriting."

                            ------------------------

                           Joint Global Coordinators


                                                  
CITIGROUP  DEUTSCHE BANK SECURITIES  GOLDMAN, SACHS & CO.  UBS WARBURG LLC


              The date of this Offering Circular is April 11, 2003


     AN UNDERWRITER, AS PRINCIPAL, MAY PERFORM MEASURES THAT ENABLE IT TO KEEP
THE MARKET PRICE OF THE NEW ALLIANZ SHARES AND THE SUBSCRIPTION RIGHTS AT A
LEVEL THAT DIFFERS FROM THE LEVEL THAT MAY OTHERWISE EXIST. STABILIZATION
MEASURES, IF ANY, MAY BE DISCONTINUED AT ANY TIME; ANY STABILIZATION MEASURES
WILL BE CONDUCTED IN GERMANY OR ELSEWHERE IN ACCORDANCE WITH APPLICABLE LAWS AND
REGULATION.

     DURING THE DISTRIBUTION OF NEW ALLIANZ SHARES IN THE INTERNATIONAL
OFFERING, DRESDNER BANK, A SUBSIDIARY OF ALLIANZ AG, INTENDS TO ENGAGE IN
VARIOUS DEALING AND BROKERAGE ACTIVITIES INVOLVING ALLIANZ SHARES OUTSIDE THE
UNITED STATES. AMONG OTHER THINGS, DRESDNER BANK INTENDS TO MAKE A MARKET IN
ALLIANZ SHARES AND DERIVATIVES RELATING TO ALLIANZ SHARES BY PURCHASING AND
SELLING ALLIANZ SHARES AND DERIVATIVES (SUCH AS OPTIONS, WARRANTS AND OTHER
INSTRUMENTS) RELATING TO ALLIANZ SHARES FOR ITS OWN ACCOUNT AND THE ACCOUNTS OF
ITS CUSTOMERS. DRESDNER BANK ALSO INTENDS TO ENGAGE IN TRADES IN ALLIANZ SHARES
FOR ITS OWN ACCOUNT AND THE ACCOUNTS OF ITS CUSTOMERS FOR THE PURPOSE OF HEDGING
THEIR POSITIONS ESTABLISHED IN CONNECTION WITH THE DERIVATIVES MARKET MAKING
DESCRIBED ABOVE, AS WELL AS TO EFFECT UNSOLICITED BROKERAGE TRANSACTIONS IN
ALLIANZ SHARES WITH ITS CUSTOMERS. THESE ACTIVITIES MAY OCCUR ON THE GERMAN
STOCK EXCHANGES AND THE STOCK EXCHANGES IN LONDON, LUXEMBOURG, MILAN, PARIS AND
ZURICH. DRESDNER BANK'S AFFILIATED U.S. BROKER-DEALER MAY ALSO ENGAGE IN
UNSOLICITED BROKERAGE TRANSACTIONS IN ALLIANZ SHARES AND AMERICAN DEPOSITARY
SHARES REPRESENTING ALLIANZ SHARES WITH ITS CUSTOMERS IN THE UNITED STATES.
DRESDNER BANK IS NOT OBLIGED TO MAKE A MARKET IN ALLIANZ SHARES OR DERIVATIVES
ON ALLIANZ SHARES AND ANY SUCH MARKET MAKING MAY BE DISCONTINUED AT ANY TIME.
THESE ACTIVITIES COULD HAVE THE EFFECT OF PREVENTING OR RETARDING A DECLINE IN
THE PRICE OF THE ALLIANZ SHARES.

     This Offering Circular is confidential and is being furnished by Allianz AG
in connection with an offering exempt from registration under the Securities
Act, solely for the purpose of enabling a prospective investor to consider the
purchase of the rights to subscribe for new registered no-par value shares with
restricted transferability, each described herein. This Offering Circular may
not be copied or reproduced, in whole or in part, nor may it be distributed or
any of its contents be disclosed to anyone other than the prospective investors
to whom it is being provided. Each offeree of the subscription rights and/or the
New Allianz Shares, by accepting delivery of this Offering Circular, agrees to
the foregoing.

     The information contained in this Offering Circular has been provided by
Allianz AG and other sources identified herein. No representation or warranty,
express or implied, is made by the Underwriters named herein as to the accuracy
or completeness of such information, and nothing contained in this Offering
Circular is, or shall be relied upon as, a promise or representation by the
Underwriters. No person is to give any information or to make any representation
in connection with the offering or sale of the subscription rights or the New
Allianz Shares other than as contained in this Offering Circular. If any such
information is given or made, it must not be relied upon as having been
authorized by Allianz AG or any of the Underwriters or any of their respective
affiliates or advisers or selling agents. Neither the delivery of this Offering
Circular nor any sale made hereunder shall under any circumstances imply that
there has been no change in the affairs of Allianz AG or its subsidiaries or
that the information set forth herein is correct as of any date subsequent to
the date hereof.

     EFFECTIVE FROM THE DATE OF COMMENCEMENT OF DISCUSSIONS CONCERNING THE
INTERNATIONAL OFFERING, EACH INVESTOR AND EACH OF ITS EMPLOYEES,
REPRESENTATIVES, OR OTHER AGENTS MAY DISCLOSE TO ANY AND ALL PERSONS, WITHOUT
LIMITATION OF ANY KIND, THE U.S. FEDERAL INCOME TAX TREATMENT AND STRUCTURE (AS
SUCH TERMS ARE USED IN SECTIONS 6011, 6111 AND 6112 OF THE U.S. INTERNAL REVENUE
CODE AND THE U.S. TREASURY REGULATIONS PROMULGATED THEREUNDER) OF SUCH OFFERING
AND ALL MATERIALS OF ANY KIND, INCLUDING OPINIONS OR OTHER TAX ANALYSES, THAT
ALLIANZ AG HAS PROVIDED TO INVESTORS RELATING TO SUCH U.S. FEDERAL INCOME TAX
TREATMENT AND STRUCTURE.

                            ------------------------

     The subscription rights and the New Allianz Shares offered hereby have not
been and will not be registered under the Securities Act, or with any securities
regulatory authority of any state or other jurisdiction in the United States,
and may not be offered, sold, pledged or otherwise transferred except pursuant
to an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and in compliance with any applicable state
securities laws. The distribution of this Offering Circular and the offering and
sale of the subscription rights

                                       S-2


and the New Allianz Shares in certain jurisdictions may be restricted by law.
Persons into whose possession this Offering Circular comes are required by
Allianz AG and the Underwriters to inform themselves about and to observe any
such restrictions. This Offering Circular does not constitute an offer of, or an
invitation to purchase, any of the subscription rights or the New Allianz Shares
in any jurisdiction in which such offer or invitation would be unlawful.

                            ------------------------

                       NOTICE TO NEW HAMPSHIRE RESIDENTS:

     NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES
WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY
REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A
FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS
TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN
EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT
THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS
OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT
IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER
OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.

                                       S-3


                              NOTICE TO INVESTORS

     Because of the following restrictions, purchasers are advised to consult
legal counsel prior to making any offer, resale, pledge or transfer of the
subscription rights or the New Allianz Shares offered hereby.

     No actions have been taken to register or qualify the subscription rights
or the New Allianz Shares offered hereby or otherwise permit a public offering
of the subscription rights or the New Allianz Shares offered hereby in any
jurisdiction other than Germany, Austria and the United Kingdom. The
subscription rights and the New Allianz Shares are being offered in the United
States on a private placement basis to "qualified institutional buyers" ("QIBs")
within the meaning of Rule 144A under the Securities Act in transactions exempt
from the registration requirements of the Securities Act and outside the United
States pursuant to Regulation S under the Securities Act. The subscription
rights and the New Allianz Shares offered hereby have not been and will not be
registered under the Securities Act and may not be offered, sold or resold in,
or to persons in, the United States except in accordance with an available
exemption from registration under the Securities Act.

     Investors may not receive or exercise their subscription rights and they
may not purchase New Allianz Shares in the private placements in the United
States unless they are QIBs. Investors may receive and exercise their
subscription rights, and the Underwriters will offer and sell New Allianz Shares
in the private placements, in the United States only if such investors sign and
deliver to one of the Joint Global Coordinators (as directed) an investor letter
substantially as described below.

     If investors sign such a letter, such investors will, among other things,
be:

     (1)   Representing that they and any account for which they are receiving
           and exercising subscription rights or purchasing New Allianz Shares,
           as the case may be, are QIBs as defined in Rule 144A under the
           Securities Act;

     (2)   Acknowledging that they are acquiring "restricted securities" within
           the meaning of the Securities Act, which restricted securities are
           subject to restrictions on resale;

     (3)   Agreeing not to resell the subscription rights or the New Allianz
           Shares issuable upon the exercise of the subscription rights or
           purchased in the private placements in the United States, except (i)
           pursuant to an effective registration statement under the Securities
           Act, (ii) outside the United States in compliance with Rule 904 of
           Regulation S under the Securities Act or (iii) in the case of New
           Allianz Shares, in accordance with Rule 144 under the Securities Act;
           and

     (4)   Agreeing not to deposit the New Allianz Shares issuable upon the
           exercise of the subscription rights or purchased in the private
           placements in the United States for so long as they are "restricted
           securities" in Allianz AG's American Depositary Receipt facility.

     RESALES OF SUBSCRIPTION RIGHTS OR OF NEW ALLIANZ SHARES IN RELIANCE ON RULE
144A UNDER THE SECURITIES ACT ARE NOT PERMITTED.

     From the date of this Offering Circular until the 40th day after the date
on which the New Allianz Shares are delivered (which is currently expected to be
June 15, 2003), J.P. Morgan Chase Bank, as depositary for Allianz AG's American
Depositary Receipt facility, will not accept deposits of Allianz AG shares in
the facility, or permit pre-releases of American Depositary Shares from the
facility, unless the shareholder certifies that it did not acquire the shares to
be deposited through the exercise of subscription rights in the private
placements.

     In addition, each purchaser of New Allianz Shares on the exercise of the
subscription rights or the New Allianz Shares offered hereby will be deemed to
have acknowledged and agreed that:

     (1) It is relying on this Offering Circular in conducting its examination
of Allianz AG and the terms of the international offering, including the merits
and risks involved, and in making an investment decision regarding the
subscription rights or the New Allianz Shares; and

                                       S-4


     (2) No person is authorized to give any information or make any
representations other than those contained in this Offering Circular and, if
given or made, such information or representations will not be relied upon as
having been authorized by Allianz AG or the Underwriters nor will Allianz AG or
the Underwriters have any liability or responsibility therefor.

                                       S-5


                     PRESENTATION OF FINANCIAL INFORMATION

     Allianz AG publishes, and has included in this Offering Circular,
consolidated financial statements prepared in accordance with International
Financial Reporting Standards, or IFRS. Unless Allianz AG notes otherwise,
financial statement amounts set forth in this Offering Circular are presented on
this basis. IFRS differs in certain significant respects from U.S. GAAP. Allianz
AG is a reporting company under the United States Securities Exchange Act of
1934, as amended (the "Exchange Act"). Accordingly, it files annual reports on
Form 20-F with the United States Securities and Exchange Commission (the
"Commission") which include a full reconciliation to U.S. GAAP. Investors can
obtain such information from the Commission; however, the annual report on Form
20-F for the year ended December 31, 2002 has not yet been filed and there is,
therefore, at this time no completed U.S. GAAP reconciliation for 2002.

     Allianz AG publishes its financial statements in euros. In this Offering
Circular, references to "dollars" and "US$" are to United States dollars and
references to "euro" or "E" are to the currency of the member states of the
European Union participating in the Economic and Monetary Union.

                                    TAXATION

U.S. FEDERAL INCOME TAXATION

     The following is a discussion of material U.S. federal income tax
consequences of receipt, exercise and disposition of subscription rights
pursuant to the subscription offering, as well as of the acquisition, ownership
and disposition of New Allianz Shares. This discussion does not purport to be a
comprehensive description of all of the tax considerations that may be relevant
to a particular holder of subscription rights or New Allianz Shares. The
discussion applies to investors only if they hold subscription rights and New
Allianz Shares as capital assets for U.S. federal income tax purposes, and it
does not address special classes of holders, such as:

     -  certain financial institutions;

     -  insurance companies;

     -  dealers and traders in securities or foreign currencies;

     -  persons holding New Allianz Shares or subscription rights as part of a
        hedge, straddle or conversion transaction;

     -  persons whose functional currency for U.S. federal income tax purposes
        is not the U.S. dollar;

     -  partnerships or other entities classified as partnerships for U.S.
        federal income tax purposes;

     -  persons liable for the alternative minimum tax;

     -  tax-exempt organizations;

     -  persons holding New Allianz Shares or subscription rights that own or
        are deemed to own more than ten percent of Allianz AG's voting stock; or

     -  persons who acquired Allianz AG's shares pursuant to the exercise of any
        employee stock option or otherwise as compensation.

     This discussion is based on the Internal Revenue Code of 1986, as amended
(the "Code"), administrative pronouncements, judicial decisions and final,
temporary and proposed Treasury regulations, all as currently in effect. These
laws are subject to change, possibly on a retroactive basis. Investors are
advised to consult their own tax advisers concerning the U.S. federal, state,
local, German and other foreign tax consequences of the receipt, exercise and
disposition of subscription rights pursuant to the subscription offering, as
well as of the acquisition, ownership and disposition of New Allianz Shares in
their particular circumstances.

                                       S-6


     The discussion below applies to an investor only if the investor is a
beneficial owner of subscription rights or New Allianz Shares, as the case may
be, and is, for U.S. federal income tax purposes:

     -  a citizen or resident of the United States;

     -  a corporation, or other entity taxable as a corporation, created or
        organized in or under the laws of the United States or any political
        subdivision thereof; or

     -  an estate or trust the income of which is subject to U.S. federal income
        taxation regardless of its source.

TAXATION OF THE SUBSCRIPTION RIGHTS

RECEIPT OF THE SUBSCRIPTION RIGHTS

     The receipt of subscription rights by investors pursuant to the
subscription offering will be treated as a nontaxable distribution with respect
to their shares for U.S. federal income tax purposes.

     If the fair market value of the subscription rights received by investors
is less than 15% of the fair market value of their shares on the date the
subscription rights are received, the subscription rights will be allocated a
zero basis for U.S. federal income tax purposes, unless investors elect to
allocate basis in proportion to the relative fair market values of their shares
and the subscription rights received determined on the date of receipt. This
election must be made in investors' tax returns for the taxable year in which
the subscription rights are received. On the other hand, if the fair market
value of the subscription rights received by investors is 15% or more of the
fair market value of their shares on the date the subscription rights are
received, then their basis in their shares must be allocated between the shares
and the subscription rights received in proportion to their fair market values
determined on the date the subscription rights are received.

EXERCISE OF THE SUBSCRIPTION RIGHTS

     The exercise of a subscription right by investors or on their behalf will
generally not be a taxable transaction for U.S. federal income tax purposes. The
basis of each New Allianz Share acquired upon exercise of the subscription right
by investors or on their behalf will equal the sum of the price paid for the New
Allianz Share (which will include German taxes, if any, payable by, or on behalf
of, investors in connection with the exercise of the subscription right) and
their tax basis (as determined above), if any, in the subscription right
exercised.

     The holding period of a New Allianz Share acquired upon exercise of one or
more subscription rights begins on and includes the day of exercise.

SALE OR EXPIRATION OF THE SUBSCRIPTION RIGHTS

     For U.S. federal income tax purposes, gain or loss investors realize on a
sale of subscription rights by them will be capital gain or loss, and will be
long-term capital gain or loss if their holding period for the subscription
rights is more than one year. For these purposes, investors' holding period in a
subscription right will include their holding period in the shares with respect
to which the subscription rights was distributed. The amount of investors' gain
or loss will be equal to the difference between their tax basis in the
subscription rights disposed of (as determined above) and the amount realized on
the disposition. Such gain or loss will generally be U.S. source gain or loss
for foreign tax credit purposes.

     An investor whose subscription right expires unexercised will not recognize
any loss upon the expiration of the subscription right, and the tax basis of the
shares with respect to which the expired subscription right was distributed will
remain unchanged compared to their basis prior to the subscription offering.

                                       S-7


TAXATION OF THE NEW ALLIANZ SHARES

TAXATION OF DISTRIBUTIONS ON NEW ALLIANZ SHARES

     Distributions made on New Allianz Shares, to the extent paid out of current
or accumulated earnings and profits as determined under U.S. federal income tax
principles, other than certain pro rata distributions of common shares, will be
treated as a dividend. The amount of this dividend will include any amounts
withheld (or deemed withheld) by Allianz AG or its paying agent in respect of
German taxes. The amount of the dividend will be includible in the investor's
gross income as ordinary income and will be treated as foreign source dividend
income. The dividends will not be eligible for the dividends received deduction
generally allowed to U.S. corporations under the Code. Dividends generally will
constitute passive income for foreign tax credit purposes. Distributions in
excess of current and accumulated earnings and profit of Allianz AG, as
determined for U.S. federal income tax purposes, will be treated as a return of
capital to the extent of the investor's basis in the New Allianz Shares and
thereafter as capital gain.

     Dividends paid in euro will be included in investors' income in a U.S.
dollar amount calculated by reference to the exchange rate in effect on the date
of their receipt of the dividend, regardless of whether the payment is in fact
converted into U.S. dollars. If the dividend is converted into U.S. dollars on
the date of receipt, investors generally should not be required to recognize
foreign currency gain or loss in respect of the dividend income. Investors may
have foreign currency gain or loss if they do not convert the amount of such
dividend into U.S. dollars on the date of its receipt. Foreign currency gain or
loss will be ordinary income or loss from sources within the United States.

     Subject to certain limitations, the German tax withheld in accordance with
German law or the income tax convention between the United States and Germany
(the "Treaty"), if applicable, and paid over to the German tax authorities, will
be creditable against an investor's U.S. federal income tax liability. To the
extent a refund of the tax withheld is available to an investor eligible for the
benefits of the Treaty, the amount of tax withheld that is refundable will not
be eligible for credit against the investor's U.S. federal income tax liability.

SALE AND OTHER DISPOSITION OF NEW ALLIANZ SHARES

     For U.S. federal income tax purposes, gain or loss investors realize on the
sale or other disposition of New Allianz Shares will be capital gain or loss,
and will be long-term capital gain or loss if they held the New Allianz Shares
for more than one year. The amount of gain or loss will equal the difference
between their tax basis in the New Allianz Shares disposed of and the amount
realized on the disposition. Long-term capital gain of a non-corporate investor
is generally taxed at a maximum rate of 20%, and at 18% where the property is
held for more than five years. Such gain or loss will generally be U.S. source
gain or loss for foreign tax credit purposes.

INFORMATION REPORTING AND BACKUP WITHHOLDING

     Payment of dividends and sales proceeds that are made within the United
States or through certain U.S.-related financial intermediaries generally are
subject to information reporting and to backup withholding unless (i) investors
are a corporation or other exempt recipient or (ii) investors provide a correct
taxpayer identification number and certify that no loss of exemption from backup
withholding has occurred.

     The amount of any backup withholding from a payment to investors will be
allowed as a credit against their U.S. federal income tax liability and may
entitle them to a refund, provided that the required information is furnished to
the Internal Revenue Service.

     Each investor and each of its employees, representatives, or other agents
is authorized to disclose to any and all persons, without limitation of any
kind, the U.S. federal income tax treatment and structure (as such terms are
used in Sections 6011, 6111 and 6112 of the U.S. Internal Revenue Code and the
U.S. Treasury Regulations promulgated thereunder) of the international offering
and all materials of any kind, including opinions or other tax analyses, that
have been provided to an investor relating to such U.S. federal income tax
treatment and structure.

                                       S-8


                        ENFORCEMENT OF CIVIL LIABILITIES

     Allianz AG is organized under the laws of the Federal Republic of Germany
and its assets are located primarily outside the United States. In addition, the
directors and officers of Allianz AG are non-residents of the United States and
their assets are located outside the United States. As a result, it may not be
possible for investors to effect service of process within the United States
upon Allianz AG or such persons or to enforce against them or against Allianz AG
judgments of courts of the United States, whether or not predicated upon the
civil liability provisions of the Federal securities or other laws of the United
States or any state thereof. The United States and Germany do not currently have
a treaty providing for reciprocal recognition and enforcement of judgments in
civil and commercial matters. Therefore, a final judgment for the payment of
money rendered by a Federal or state court in the United States based on civil
liability, whether or not predicated solely upon U.S. Federal securities laws,
may not be enforceable, either in whole or in part, in Germany. However, if the
party in whose favor such final judgment is rendered brings a new suit in a
competent court in Germany, such party may submit to the German court the final
judgment that has been rendered in the United States. In the above
circumstances, a judgment by a Federal or state court of the United States
against Allianz AG will be regarded by a German court only as evidence of the
outcome of the dispute to which such judgment relates, and a German court may
choose to rehear the dispute. In addition, awards of punitive damages in actions
brought in the United States or elsewhere are unenforceable in Germany.

                             AVAILABLE INFORMATION

     Allianz AG is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports (including annual reports on Form
20-F) and other information with the Commission. Reports and other information
filed by Allianz AG with the Commission may be read and copied at the
Commission's public reference room at 450 Fifth Street, N.W., Washington, D.C.
20549. Information on the operation of the Commission's public reference rooms
may be obtained by calling the Commission at 1-800-SEC-0330. Copies may also be
obtained from the Commission's website at http://www.sec.gov.

     American Depositary Shares representing Allianz AG's registered shares are
listed on the New York Stock Exchange. Reports and other information concerning
Allianz AG can also be inspected at the offices of the New York Stock Exchange,
20 Broad Street, New York, New York 10005.

                                       S-9


                               TABLE OF CONTENTS



                                        PAGE
                                        ----
                                     
GENERAL INFORMATION...................    1
Responsibility for the Offering
  Circular............................    1
Inspection of Documents...............    1
Subject Matter of the Offering
  Circular............................    1
Forward-Looking Statements............    1
SUMMARY...............................    3
Allianz Group.........................    3
Summary of the Offering...............    4
Selected Consolidated Financial
  Data................................    6
THE OFFERING..........................    7
General...............................    7
Time Table............................    7
Subscription Offer....................    7
Private Placements....................   10
Stock Exchange Listing, Delivery......   10
Consent of Allianz AG to the
  Acquisition and Transfer of the New
  Shares..............................   11
Stabilization.........................   11
Use of Proceeds.......................   11
Securities Identification Numbers,
  Trading Symbol......................   11
Voting Rights.........................   11
Notifications, Paying Agent...........   11
Additional Important Notices..........   12
CAPITALIZATION........................   13
RISK FACTORS..........................   14
Risks Relating to the Group's
  Business............................   14
Risks Relating to the Offering........   23
BUSINESS..............................   25
Introduction..........................   25
Strategy..............................   26
Summary Financial Information.........   29
Factors Affecting Results of
  Operations..........................   30
Critical Accounting Policies..........   32
Consolidated Results of Operations....   35
Consolidated Assets and Liabilities...   36
Discussion of Operations by Business
  Segment.............................   37
  Insurance Operations................   37
  Property-Casualty...................   38
  Life/Health.........................   50
Banking Operations....................   58
Asset Management Operations...........   73
Liquidity and Capital Resources.......   87
Property-Casualty Insurance
  Reserves............................   89
Selected Statistical Information
  Relating to the Group's Banking
  Operations..........................  100
Employees.............................  118
Long-term Incentive Plans and Employee
  Stock Ownership Arrangements........  119
Risk Management.......................  120
Regulation and Supervision............  129
Legal Proceedings.....................  148
INFORMATION RELATING TO ALLIANZ
  AKTIENGESELLSCHAFT..................  151




                                        PAGE
                                        ----
                                     
Incorporation.........................  151
Name, Registered Seat, Objects and
  Purposes of the Company and Fiscal
  Year................................  151
Term and Dissolution..................  151
Dividends and Dividend Policy.........  151
Major Shareholders....................  152
Auditors..............................  152
INFORMATION ABOUT THE SHARE CAPITAL OF
  ALLIANZ AKTIENGESELLSCHAFT..........  153
Share Capital.........................  153
Form and Certification of the Shares /
  Consent to Transfer.................  153
General Information on Capital
  Measures............................  153
Change of the Share Capital...........  154
Authorized Capital....................  154
Conditional Capital...................  155
Acquisition of Own Shares in Allianz
  AG..................................  156
Profit Participation Rights...........  159
Notification and Disclosure
  Obligations.........................  160
German Foreign Exchange Control.......  160
Contingent Liabilities and Other
  Financial Commitments...............  160
DIRECTORS AND SENIOR MANAGEMENT.......  164
General...............................  164
Management Board......................  165
Supervisory Board.....................  167
Compensation of Directors and
  Officers............................  171
General Meeting.......................  172
Voting Rights and Resolutions of the
  General Meeting.....................  173
RELATED PARTY TRANSACTIONS............  174
Transactions with Munich Re...........  174
Exercise of Mandates..................  175
Relationships with members of the
  Management Board and the Supervisory
  Board of Allianz AG.................  175
Other related parties.................  176
Terror risk insurance companies.......  176
UNDERWRITING..........................  177
Lock-up...............................  177
Termination of Underwriting
  Agreement...........................  177
Stabilization.........................  178
TAXATION IN GERMANY...................  179
Taxation of Allianz AG................  179
Taxation of Dividends.................  179
Taxation of Capital Gains.............  181
Inheritance and Gift Tax..............  182
Other Taxes...........................  182
Changes in Tax Laws...................  182
FINANCIAL STATEMENTS..................  183
OUTLOOK...............................  184
GLOSSARY..............................  G-1


                                        i


                              GENERAL INFORMATION

RESPONSIBILITY FOR THE OFFERING CIRCULAR

     Allianz Aktiengesellschaft, Munich (hereinafter referred to as "Allianz AG"
and, together with its subsidiaries, as "Allianz Group" or the "Group") and the
banks listed at the end of this offering circular (Verkaufsprospekt, or the
"Offering Circular") assume the responsibility for the contents of this Offering
Circular pursuant to Section 13 of the German Securities Selling Prospectus Act
(Verkaufsprospektgesetz) in conjunction with Sections 44 et seq. of the German
Securities Exchange Act (Borsengesetz) and declare that to the best of their
knowledge the information contained in this Offering Circular is true and
accurate in all material respects and that no material facts have been omitted.

INSPECTION OF DOCUMENTS

     All publicly available documents referred to in this Offering Circular, to
the extent that they concern Allianz AG, as well as future annual reports and
interim reports are available from, or may be inspected during normal business
hours at, Allianz Aktiengesellschaft, Koniginstrasse 28, 80802 Munich, Germany.

SUBJECT MATTER OF THE OFFERING CIRCULAR

     This Offering Circular relates to 117,187,500 registered no-par value
shares with restricted transferability from the capital increase against cash
contributions from authorized capital with subscription rights (except for
residual amounts), which was resolved by the Management Board on April 7, 2003
with the consent of the Supervisory Board given on April 8, 2003, each with a
notional nominal value (the proportional amount of the share capital
attributable to each share) of E2.56 per share and full dividend entitlement as
of January 1, 2003. The subscription price has been determined by the Management
Board on April 11, 2003 and approval by the Supervisory Board is expected for
April 12, 2003.

FORWARD-LOOKING STATEMENTS

     This Offering Circular contains certain forward-looking statements,
including statements using the words "believes," "anticipates," "expects" or
other similar terms. This applies in particular to statements under the captions
"Risk Factors" and "Business" and statements elsewhere in this Offering Circular
relating to, among other things, the future financial performance, plans and
expectations regarding developments in the business of the Allianz Group, growth
and profitability and general industry and business conditions applicable to the
Allianz Group. These forward-looking statements are subject to a number of
risks, uncertainties, assumptions and other factors that may cause the actual
results, including the financial position and profitability of the Allianz
Group, or those of financial institutions generally to be materially different
from or worse than those expressed or implied by these forward-looking
statements. These factors include, without limitation:

     - general economic conditions, including in particular economic conditions
       in the core business areas and core markets of the Allianz Group;

     - function and performance of global financial markets, including emerging
       markets;

     - frequency and severity of insured loss events, including terror attacks,
       environmental and asbestos claims;

     - mortality and morbidity levels and trends;

     - interest rate levels;

     - currency exchange rate developments, including euro/U.S. dollar exchange
       rate;

     - levels of additional loan loss provisions due to weakening credit
       quality;

     - further impairments of investments;

     - general competitive factors, in each case on a local, regional, national,
       and global level;

                                        1


     - changes in laws and regulations, including in the United States and in
       the European Union;

     - changes in the policies of central banks and/or foreign governments;

     - the impact of the acquisition of Dresdner Bank AG, including related
       integration and restructuring issues;

     - terror attacks, events of war, and their respective consequences

and other factors referred to in this Offering Circular. Allianz AG does not
assume any obligation to update such forward-looking statements and to adapt
them to future events or developments.

                                        2


                                    SUMMARY

     The following summary is supplemented by, and should be read in conjunction
with, the more detailed information provided elsewhere in this Offering Circular
as well as the financial statements and the notes thereto and the discussions of
results of operations under "Business" of the Group's property and casualty,
life/health, banking and asset management businesses. Unless otherwise
indicated, the Allianz Group has obtained data regarding the relative size of
various national insurance markets from annual reports prepared by SIGMA, an
independent organization which publishes market research data on the insurance
industry. In addition, unless otherwise indicated, insurance market share data
are based on gross premiums written. Data on market share within particular
countries are based on the Allianz Group's own internal estimates.

ALLIANZ GROUP

     The Allianz Group is one of the world's leading financial services
providers, offering insurance, banking and asset management products and
services through property-casualty, life/health, banking and asset management
business segments. The Allianz Group is one of the leading insurance groups in
the world based on gross premiums written in 2002. The Group is the leading
German property-casualty and life/health insurance company, with estimated
market shares of approximately 18.3% and 14.2%, respectively, based on gross
premiums written in 2002. The Group also has leading market positions in a
number of other countries, including France, Italy, the United Kingdom,
Switzerland and Spain. The Allianz Group was the second-largest German financial
institution, based on market capitalization, at March 31, 2003. The Group
believes that it is well capitalized relative to its competitors,
notwithstanding recent downgrades of its ratings in March 2003. As of April 7,
2003, the Group had financial strength ratings of A+ from A.M. Best and AA- from
Standard & Poor's Ratings Services ("Standard & Poor's") although both with a
negative outlook. Moody's Investors Services ("Moody's") does not provide a
rating for Allianz AG, but as of April 7, 2003, debt securities issued by
Allianz AG's finance subsidiaries had a senior unsecured debt rating of Aa2 from
Moody's, again with a negative outlook. The Group's investment portfolio
includes a number of significant equity participations, primarily in major
German companies, including both financial institutions and industrial
enterprises.

     The Allianz Group was founded in 1890 in Berlin, Germany, and since that
time it has become the largest German insurer. Through its international
expansion strategy, the Allianz Group has sought to bring into the Group
companies that are well-positioned in their domestic markets and that have
leading positions in particular business lines and attractive earnings
prospects. In the last several years, the Group's non-German insurance business
has therefore grown substantially in importance. Gross premiums written by the
Group's non-German business represented approximately 63.3% of the Group's total
gross premiums written in 2002. The Allianz Group now operates in more than 70
countries worldwide and has leading market positions in many of them.

     In 1998, building on over a century's experience in managing its extensive
insurance investment portfolio, the Allianz Group established financial services
as its third core business segment, in addition to its property-casualty and
life/health insurance businesses. In 2001, following its acquisition of Dresdner
Bank AG ("Dresdner Bank" and, together with its subsidiaries, "Dresdner Bank
Group"), the Allianz Group reorganized its financial services segment into
separate asset management and banking segments. In the Group's asset management
segment, the acquisitions of Dresdner Bank on July 23, 2001 and
Nicholas-Applegate Capital Management ("Nicholas-Applegate") on January 31, 2001
increased the Group's third-party assets under management by E228 billion and
E36 billion, respectively, as of the respective dates of the acquisitions and
made the Allianz Group one of the five leading asset managers in the world based
on total assets under management as of December 31, 2002. In the Group's banking
segment, which is now its fourth core business segment, the Allianz Group's
acquisition of Dresdner Bank made the Group one of the leading banks in Germany
and the thirteenth-largest bank in Europe, based on total assets, and provided
the Group with significantly expanded bank distribution channels for its
property-casualty, life/health and asset management products and services.

                                        3


     The Allianz Group's strategy is to achieve profitable growth across the
Group's four business segments for the benefit of its shareholders,
policyholders and employees. The Allianz Group believes that its size, financial
strength and worldwide reach are key competitive strengths that will permit the
Group to participate in the ongoing consolidation of the financial services
industry and maintain its position as an industry leader. The Allianz Group
offers its products through multiple distribution channels including agents and
brokers and, in many markets, bancassurance and e-commerce. In its mature
markets of Germany, the rest of western Europe and the United States, the
Allianz Group believes demographic trends will particularly favor the Group's
life/health and asset management businesses in the coming years. The Allianz
Group intends to capitalize on cross-selling opportunities between the Group's
banking and pension provision businesses for corporate customers and to take
advantage of additional potential synergies between the Group's life/health,
asset management and banking operations.

     As a reflection of the underlying strengths of the Group's franchise as
well as the leading market positions in many of its businesses, the Group's core
strategy remains substantially unchanged. Allianz AG's five main strategic
priorities are:

     - Optimize the Economic Value Added ("EVA") of the Group, based on
       risk-adjusted capital requirements and sustainable growth targets;

     - Exploit attractive market opportunities by leveraging the Group's
       traditional risk management expertise;

     - Strengthen the Group's leading position in life/health insurance and in
       asset management, especially in private and corporate retirement
       insurance plans;

     - Increase the Group's asset gathering capabilities by building
       customer-oriented, multichannel distribution platforms; and

     - Expand the Group's investments and capital markets expertise.

SUMMARY OF THE OFFERING

SUBSCRIPTION OFFER

     Based on the authorization pursuant to Section 2 para. 3 of the articles of
association of Allianz AG, the Management Board resolved on April 7, 2003, with
the consent of the Supervisory Board given on April 8, 2003, to increase the
share capital by E300,000,000 to E982,408,000 by issuing 117,187,500 new no-par
value shares with full dividend entitlement for the 2003 fiscal year.

     The banks listed under the caption "Underwriting" have agreed to underwrite
the new no-par value shares and, with the exception of a residual amount of
approximately 860,275 shares, to offer them to the existing shareholders of
Allianz AG at a ratio of 15:7 at a subscription price of E38.00 per share.

EXERCISE OF SUBSCRIPTION RIGHTS

     To avoid exclusion of their subscription rights, the shareholders of
Allianz AG will be asked to exercise their subscription rights in the period
from April 15, 2003 up to and including April 29, 2003.

     Shareholders may subscribe for seven new no-par value shares for each 15
Allianz shares held at a subscription price of E38.00 per share. The
subscription price is due and payable not later than April 29, 2003.

RIGHTS TRADING

     The subscription rights (German Securities Identification Number 245 771)
will be traded and listed on the official market (amtlicher Markt) of the
Frankfurt Stock Exchange in the period from April 15, 2003 up to and including
April 25, 2003.

                                        4


PRIVATE PLACEMENTS

     The residual share amounts to which shareholders' subscription rights were
excluded and any shares not subscribed to in the subscription offer, will be
offered through the Underwriters to institutional investors in private
placements.

LOCK-UP

     Allianz AG will agree with the Underwriters that, until October 31, 2003,
to the extent legally permitted, it will not issue new shares or sell own shares
outside of the Allianz Group or issue securities which are convertible into or
exchangeable for or which carry the right to acquire any new shares of Allianz
AG, except for shares or other securities offered to senior executives or
employees of Allianz AG or its affiliates, and shares issued in connection with
a capital increase from retained earnings (stock dividends) or in connection
with an acquisition or a joint venture directly to the partner of such
acquisition or joint venture, provided that the acquiror agrees to such lock-up.

STOCK EXCHANGE LISTING

     Application has been made for admission of the new shares to trading and
listing on the official market of all German stock exchanges as well as for
admission to the official market with uniform post-admission duties (Prime
Standard) segment of the Frankfurt Stock Exchange and is expected to be granted
on April 28, 2003. Trading of the new shares on all German stock exchanges is
expected to commence on April 30, 2003.

DELIVERY

     The New Allianz Shares will be represented by one or more global share
certificates deposited with Clearstream Banking AG, Frankfurt am Main. The New
Allianz Shares will be credited to the respective subscribers' and investors'
securities account.

USE OF PROCEEDS

     Allianz AG intends to use the net proceeds for general financing purposes
within Allianz AG and the Allianz Group.

SECURITIES IDENTIFICATION NUMBERS

ISIN:                                        DE 000 840 400 5

German Securities Identification Number:     840 400

Common Code:                                 001182013

TRADING SYMBOL

ALV

                                        5


                      SELECTED CONSOLIDATED FINANCIAL DATA



                                                                             DECEMBER 31,
                                                                     -----------------------------
                                                                      2002       2001       2000
                                                                     -------    -------    -------
                                                                               
EARNINGS
Earnings before taxes...............................    E million     (1,214)     1,827      4,913
  Property-casualty insurance.......................    E million      7,554      2,409      3,899
  Life/health insurance.............................    E million        (91)       412      1,626
  Banking...........................................    E million     (1,537)       227        124
  Asset management..................................    E million       (234)      (334)        45
Taxes...............................................    E million        735        840       (176)
Minority interests in earnings......................    E million       (688)    (1,044)    (1,277)
Net income (loss)...................................    E million     (1,167)     1,623      3,460
Total premium income................................    E billion       82.6       75.1       68.7
Net revenue from banking............................    E billion        7.6        3.9        0.2
Net revenue from asset management...................    E billion        2.3        2.0        1.1
BALANCE SHEET
Investments.........................................    E billion        285        345        281
Trading assets......................................    E billion        125        128          0
Receivables.........................................    E billion        275        301         35
Shareholders' equity................................    E billion         22         32         36
Minority interests in equity........................    E billion          8         17         16
Participation certificates, subordinated
  liabilities.......................................    E billion         14         12          1
Insurance provisions................................    E billion        306        300        285
Liabilities.........................................    E billion        285        313         15
Balance sheet total.................................    E billion        852        943        440
OTHER DATA (UNAUDITED)
Return on equity after taxes........................    %               (4.4)       4.8       10.6
Return on equity before amortization of goodwill....    %                0.0        7.2       12.1
PER SHARE
Earnings per share..................................    E              (4.81)      6.66      14.10
Earnings per share before amortization of
  goodwill..........................................    E              (0.02)      9.98      16.12
Dividend per share..................................    E               1.50(1)    1.50       1.50
Dividend payment....................................    E million        374(1)     364        367
Share price at year-end.............................    E                 91        266        399
Market capitalization at year-end...................    E billion       22.0       64.2       98.0
OTHER
Employees...........................................    E            181,651    179,946    119,683
Assets under Management.............................    E billion        989      1,126        700


------------

(1) Proposed.

                                        6


                                  THE OFFERING

GENERAL

     The offering relates to a total number of 117,187,500 new shares in Allianz
AG (the "New Allianz Shares") and consists of a subscription offer to existing
shareholders of Allianz AG, the placement of a residual amount not subject to
the subscription rights (corresponding to approximately 860,275 shares), as well
as the placement of any shares not subscribed to in the subscription offer by
way of private placements with institutional investors worldwide (except for
Canada, Japan and Australia) (the "Offering").

     The Offering is subject to an underwriting agreement dated April 12, 2003
(the "Underwriting Agreement"). The registration of the implementation of the
capital increase from authorized capital in the commercial register
(Handelsregister) is expected to occur on April 25, 2003. The subscription offer
is subject to the condition precedent that the implementation of the capital
increase is registered in the commercial register. Moreover, the Offering may be
discontinued or postponed by up to one week under certain circumstances. See
"-- Subscription Offer -- Important Notices."

TIME TABLE

     The Offering is based on the following timetable:

April 11, 2003                   Approval (Billigung) of the Offering Circular
                                 by the Frankfurt Stock Exchange

April 14, 2003                   Publication of the subscription offer

April 15, 2003                   Crediting of the subscription rights based on
                                 status of collective custody accounts as of the
                                 evening of April 14 (record date)

April 15, 2003                   Subscription period and subscription rights
                                 trading commence

April 25, 2003                   End of the subscription rights trading period

April 28, 2003                   Admission resolutions (Zulassungsbeschluss) by
                                 the stock exchanges in Frankfurt/Main,
                                 Berlin-Bremen, Dusseldorf, Hamburg, Hanover,
                                 Munich, and Stuttgart

April 29, 2003                   End of the subscription period

April 29, 2003                   Payment of the subscription price

April 30, 2003                   Inclusion of the shares of Allianz AG from the
                                 capital increase in the trading on all German
                                 stock exchanges

SUBSCRIPTION OFFER

     The following is the subscription offer, which is expected to be published
on April 14, 2003 in the Frankfurter Allgemeine Zeitung and on April 14, 2003 in
the electronic issue of the Federal Gazette (Bundesanzeiger) and on April 15,
2003 in the printed issue of the Federal Gazette:

       SUBSCRIPTION OFFER FOR SHARES FROM THE APRIL 2003 CAPITAL INCREASE

     Based on the authorization pursuant to Section 2 para. 3 of the articles of
association of Allianz AG, the Management Board, with the consent of the
Supervisory Board given on April 8, 2003, has resolved on April 7, 2003 to
increase the share capital by E300,000,000 to E982,408,000 by issuing
117,187,500 new registered no-par value shares with restricted transferability
(the "New Allianz Shares"). The subscription right of existing shareholders was
excluded in respect of a residual amount of approximately E2,202,304. The New
Allianz Shares are entitled to full dividends as of the 2003 fiscal year.

     The underwriters, jointly led by Citigroup Global Markets Deutschland AG,
Deutsche Bank AG, Goldman, Sachs & Co. oHG, and UBS Warburg AG (the
"Underwriters") have agreed to underwrite the New Allianz Shares pursuant to the
underwriting agreement dated April 12, 2003

                                        7


(the "Underwriting Agreement") and to offer them to the existing shareholders of
Allianz AG at a ratio of 15:7, subject to the terms set forth under the caption
"Important Notices" below. The registration of the implementation of the capital
increase in the commercial register at the local court (Amtsgericht) in Munich
is expected to occur on April 25, 2003.

     Clearstream Banking AG will automatically credit the subscription rights
for shares which are held in collective custody as of the evening of April 14,
2003 to the depositary banks. Shareholders who hold effective share certificates
made out to a nominal amount and "Allianz Aktiengesellschaft" and with an
issuance date "im April 1997" in individual securities accounts or personally,
may, for the avoidance of exclusion, exercise their subscription rights by
submitting the dividend coupon no. 8.

     Shareholders who have not yet exchanged their share certificates made out
to "Allianz Aktiengesellschaft Holding" (the previous company name of Allianz
AG) and a nominal amount of DM 50.00, which certificates have been declared void
in the meantime, for no-par value shares may only exercise their subscription
rights if they submit their old certificates (together with the dividend coupon
no. 20 and the renewal coupon, registration confirmation and assignment
declaration) to Dresdner Bank AG through their depositary bank by April 22,
2003, identifying their bank account as well as a securities account and/or bank
account number for the transfer of the shares resulting from the conversion and
the subscription rights.

     IN ORDER TO AVOID EXCLUSION OF THE SUBSCRIPTION RIGHTS, WE ASK OUR
SHAREHOLDERS TO EXERCISE THEIR SUBSCRIPTION RIGHTS TO THE NEW ALLIANZ SHARES IN
THE PERIOD

             FROM APRIL 15, 2003 UP TO AND INCLUDING APRIL 29, 2003

AT ONE OF THE SUBSCRIPTION AGENTS LISTED BELOW DURING NORMAL BUSINESS HOURS.

In the Federal Republic of Germany:

Deutsche Bank AG
Citigroup Global Markets Deutschland AG
Dresdner Bank AG
UBS Warburg AG

In Switzerland:

UBS AG

     Corresponding to the subscription ratio of 15:7, existing shareholders may
subscribe for seven New Allianz Shares for each 15 Allianz shares held. Pursuant
to Section 67 para. 2 of the German Stock Corporation Act (Aktiengesetz), only
those persons who are registered in the share register of Allianz AG are treated
as shareholders in relation to Allianz AG. The acquisition of subscription
rights -- as well as the acquisition of shares -- requires the consent of
Allianz AG. Pursuant to its articles of association, Allianz AG will only
withhold such consent if it deems this to be necessary in the interest of
Allianz AG on exceptional grounds. The exercise of subscription rights by
shareholders who are already registered in the share register of Allianz AG does
not require the consent of Allianz AG. In the event that Allianz AG withholds
its consent, subscription rights purchased by investors will still be credited
to their respective securities accounts, together with any New Allianz Shares
acquired through the exercise thereof. Allianz AG may, however, refuse to
register any such investors in its share register.

SUBSCRIPTION PRICE

     The subscription price is E38.00 per New Allianz Share. The subscription
price is due and payable not later than April 29, 2003.

RIGHTS TRADING

     The subscription rights (ISIN DE 000 245 771 0/German Securities
Identification Number 245 771) will be listed and traded on the official market
(amtlicher Markt) of the Frankfurt Stock Exchange during the period from April
15, 2003 up to and including April 25, 2003. The subscription agents in Germany
have agreed to broker stock exchange purchases and sales of subscription rights,
if possible. Beginning on April 15, 2003, shares of Allianz AG will be listed on
the

                                        8


official market of all German securities exchanges "ex Bezugsrecht" (without
subscription right). The subscription for one New Allianz Share is possible;
accordingly, fractions of the subscription rights will be traded during the
subscription period.

IMPORTANT NOTICES

     The Underwriters reserve the right to terminate the Underwriting Agreement
for certain reasons or to delay the completion of the subscription offer by up
to one week. These reasons include, without limitation, significant adverse
changes in the financial position or results of operations or shareholders'
equity of the Group, to the extent not discussed in this Offering Circular,
material restrictions of exchange trading or of the banking business, the
eruption or escalation of hostilities, which have, or can be expected to have, a
material adverse effect on the financial markets, and the failure to register
the implementation of the capital increase in the commercial register by April
28, 2003.

     IN THE EVENT OF A TERMINATION OF THE UNDERWRITING AGREEMENT PRIOR TO THE
REGISTRATION OF THE IMPLEMENTATION OF THE CAPITAL INCREASE IN THE COMMERCIAL
REGISTER, THE SUBSCRIPTION RIGHTS BECOME VOID. IF THIS WAS TO OCCUR, THE
BROKERING INSTITUTIONS WOULD NOT REVERSE ANY SUBSCRIPTION RIGHTS TRADING
TRANSACTIONS. ACCORDINGLY, INVESTORS WHO HAVE ACQUIRED SUBSCRIPTION RIGHTS ON A
STOCK EXCHANGE WOULD SUFFER A LOSS. TO THE EXTENT THAT THE UNDERWRITERS
TERMINATE THE UNDERWRITING AGREEMENT AFTER THE REGISTRATION OF THE
IMPLEMENTATION OF THE CAPITAL INCREASE IN THE COMMERCIAL REGISTER, SHAREHOLDERS
WHO HAVE EXERCISED THEIR SUBSCRIPTION RIGHTS MAY SUBSCRIBE TO NEW ALLIANZ SHARES
AT THE SUBSCRIPTION PRICE.

     IN THE EVENT OF A TERMINATION OF THE UNDERWRITING AGREEMENT AFTER THE
SETTLEMENT OF THE SUBSCRIBED SHARES (APRIL 30, 2003), WHICH IS POSSIBLE UNTIL
MAY 2, 2003, THE TERMINATION WOULD ONLY BE APPLICABLE TO SHARES NOT SUBSCRIBED.
THE PURCHASE AGREEMENTS RELATING TO SUCH SHARES ARE THEREFORE CONTINGENT. TO THE
EXTENT THAT ANY NEW ALLIANZ SHARES ACQUIRED IN THE OFFERING HAVE ALREADY BEEN
SOLD SHORT PRIOR TO THE CANCELLATION OF SETTLEMENT, ANY PERSON SO SELLING NEW
ALLIANZ SHARES WILL BEAR THE RISK OF BEING UNABLE TO SETTLE SUCH SALE BY
DELIVERING NEW ALLIANZ SHARES.

CERTIFICATION OF THE NEW ALLIANZ SHARES

     On or around April 30, 2003, the New Allianz Shares will be made available
to shareholders in the form of one or more global share certificates deposited
with Clearstream Banking AG in a collective custody account. Shareholders do not
have any right to receive individual share certificates.

COMMISSION

     The subscription is subject to the customary banking commission unless the
subscriber submits dividend coupon no. 8 for subscription during normal business
hours at the counter of a subscription agent and no additional written
communication is required.

STOCK EXCHANGE TRADING OF THE NEW ALLIANZ SHARES

     Application has been made for admission (Zulassung) of the New Allianz
Shares to trading on the official market of the securities exchanges in
Frankfurt/Main, Berlin-Bremen, Dusseldorf, Hamburg, Hanover, Munich and
Stuttgart as well as for admission to the official market with uniform
post-admission duties (Prime Standard) segment of the Frankfurt Stock Exchange.
Admission to trading on the official market of the German stock exchanges as
well as admission to the Prime Standard segment of the Frankfurt Stock Exchange
is expected to be granted on April 28, 2003. It is anticipated that trading in
the New Allianz Shares will commence on April 30, 2003 and that the New Allianz
Shares will be included in the trading of the existing Allianz shares on such
date. Allianz intends to apply for listing of the New Allianz Shares for trading
on other stock exchanges where its shares are currently listed.

                                        9


PLACEMENT OF UNSUBSCRIBED SHARES

     The New Allianz Shares for which shareholders' subscription rights were
excluded and any shares not subscribed to in the subscription offer will be
offered to institutional investors through the Underwriters in private
placements.

PUBLICATION OF THE NOTIFICATION

     Printed copies of the Offering Circular dated April 11, 2003 will be made
available for free distribution in Germany by, among others, the subscription
agents listed above as well as by the Frankfurt Stock Exchange, Admission
Office, 60284 Frankfurt am Main (fax no. 069/21 01-39 92), the
Baden-Wurttembergische Stock Exchange in Stuttgart, Admission Office, 70173
Stuttgart (fax no. 0711/2 26 81 19), the Bavarian Stock Exchange, Admission
Office, 80333 Munich (fax no. 089/54 90 45-32), the Berlin-Bremen Stock
Exchange, Admission Office, 10623 Berlin (fax no. 030/31 10 91 79), the
Hanseatic Stock Exchange Hamburg, Admission Office, 20095 Hamburg (fax no.
040/36 13 02 23), the Niedersachsische Stock Exchange in Hanover, Admission
Office, 30159 Hanover (fax no. 0511/32 49 15), and the Stock Exchange in
Dusseldorf, Admission Office, 40212 Dusseldorf (fax no. 0211/13 32 87).

SELLING RESTRICTIONS

     The New Allianz Shares and the related subscription rights have not been,
and will not be, registered under the U.S. Securities Act of 1933 (the
"Securities Act") nor with the securities regulatory authority of any U.S.
state, and will not be offered, sold or delivered, directly or indirectly, in
the United States except in limited circumstances pursuant to an exemption from
the registration requirements of the Securities Act.

Munich, in April 2003

                           ALLIANZ AKTIENGESELLSCHAFT
                              THE MANAGEMENT BOARD

PRIVATE PLACEMENTS

     The New Allianz Shares to which shareholders' subscription rights were
excluded and any shares not subscribed to in the subscription offer will be
offered to institutional investors in private placements.

STOCK EXCHANGE LISTING, DELIVERY

     Application has been made for admission of the New Allianz Shares to
trading and listing on the official market of the stock exchanges in
Frankfurt/Main, Berlin-Bremen, Dusseldorf, Hamburg, Hanover, Munich, and
Stuttgart as well as for admission to the official market with uniform
post-admission duties (Prime Standard) segment of the Frankfurt Stock Exchange
and is expected to be granted on April 28, 2003. Inclusion of the admitted
shares into trading of the existing shares of Allianz AG on the stock exchanges
in Frankfurt/Main, Berlin-Bremen, Dusseldorf, Hamburg, Hanover, Munich and
Stuttgart is expected to occur on April 30, 2003. Allianz AG intends to apply
for listing of the New Allianz Shares on other stock exchanges where its shares
are currently listed.

     The shares subscribed to in the subscription offer will be delivered on or
around April 30, 2003 and the shares to be offered in private placements will be
delivered on or around May 5, 2003 through the book-entry facilities of
Clearstream Banking AG, Frankfurt/Main, Clearstream Banking societe anonyme,
Luxembourg, or Euroclear Bank S.A./N.V., Luxembourg. Shareholders and investors
receiving New Allianz Shares may not exercise voting rights resulting from these
shares at the April 29, 2003 general meeting.

     The New Allianz Shares will be represented by one or more global share
certificates deposited with Clearstream Banking AG. Pursuant to the articles of
association of Allianz AG, shareholders' have no right to receive individual
share certificates unless receipt thereof is necessary pursuant to the rules
applicable to a stock exchange on which the shares are listed. Dividend coupons
and renewal coupons will be issued as bearer certificates.

                                        10


CONSENT OF ALLIANZ AG TO THE ACQUISITION AND TRANSFER OF THE NEW SHARES

     As registered shares with restricted transferability, all shares in Allianz
AG may only be acquired and transferred with the consent of Allianz AG. Pursuant
to its articles of association, Allianz AG will only withhold such consent if it
deems this to be necessary in the interest of Allianz AG on exceptional grounds
and will inform the applicant about the reasons leading to such refusal. Only
those persons who are registered in the share register of Allianz AG will be
treated as shareholders in relation to Allianz AG, and only these persons are
entitled to participate in general meetings of Allianz AG and to exercise their
voting rights. See also "Directors and Senior Management -- General Meeting" and
"Information about the Share Capital of Allianz Aktiengesellschaft -- Form and
Certification of Shares/Consent to Transfers."

STABILIZATION

     An Underwriter, as principal, may perform measures that enable it to keep
the market price of the shares and the subscription rights at a level that
differs from the level that may otherwise exist. Stabilization measures, if any,
may be discontinued at any time; any stabilization measures will be conducted in
Germany or elsewhere in accordance with applicable laws and regulations.

USE OF PROCEEDS

     The net proceeds to Allianz AG from the subscription and sale of the New
Allianz Shares amount to approximately E4.3 billion, based on a subscription
price of E38.00 per share. The commission payable by Allianz AG to the
Underwriters amounts to approximately E170 million. Other costs to be borne by
Allianz AG in connection with the Offering amount to approximately E4 million.
See "Underwriting."

     Allianz AG intends to use the net proceeds for general financing purposes
within Allianz AG and the Allianz Group.

SECURITIES IDENTIFICATION NUMBERS, TRADING SYMBOL

International Securities Identification
Number (ISIN):                                DE 000 840 400 5

German Securities Identification Number
(WKN):                                        840 400

Common Code:                                  001182013

Trading Symbol:                               ALV

VOTING RIGHTS

     Each share, including the New Allianz Shares, entitles a shareholder who is
registered in the share register of Allianz AG to one vote at the general
meeting. The voting rights attached to the New Allianz Shares may not be
exercised in the general meeting of April 29, 2003. See also "Directors and
Senior Management -- General Meeting."

NOTIFICATIONS, PAYING AGENT

     In accordance with its articles of association, all notifications of
Allianz AG are published in the electronic German Federal Gazette. Notifications
pertaining to the shares are also published in the electronic German Federal
Gazette and, additionally, in one supra-regional newspaper accredited by the
stock exchanges in Frankfurt/Main, Berlin-Bremen, Dusseldorf, Hamburg, Hanover,
Munich and Stuttgart (Pflichtblatt).

     Dresdner Bank AG is acting as principal paying and depositary agent.

                                        11


ADDITIONAL IMPORTANT NOTICES

     As discussed under the caption "Important Notices" above, the Underwriting
Agreement may be terminated after registration of the implementation of the
capital increase in the commercial register until April 29, 2003 with respect to
the subscription offer, and after commencement of trading in the New Allianz
Shares until May 2, 2003 with respect to the residual share amounts for which
shareholder's subscription rights were excluded and any shares not subscribed in
the subscription offer. Accordingly, the exercise of subscription rights as well
as the purchase agreements relating to shares not subject to any subscription
rights, are contingent. To the extent that any New Allianz Shares acquired in
the Offering have already been sold short prior to the cancellation of
settlement, any person so selling New Allianz Shares will bear the risk of being
unable to settle such sale by delivering New Allianz Shares.

                                        12


                                 CAPITALIZATION

     The following table shows the actual capitalization of Allianz Group as of
December 31, 2002 as well as adjusted on a pro-forma basis for the issuance of
117,187,500 New Allianz Shares from the share capital increase with subscription
rights at a subscription price of E38.00 per New Allianz Shares (prior to
deduction of the commission payable to the Underwriters and other costs to be
borne by Allianz AG).



                                                                 DECEMBER 31, 2002
                                                                -------------------
                                                                ACTUAL     ADJUSTED
                                                                -------    --------
                                                                  (E IN MILLION)
                                                                     
LONG-TERM FINANCIAL LIABILITIES
Certificated Liabilities(1).................................     37,673     37,673
Liabilities to Customers(1).................................     13,473     13,473
Liabilities to Banks(1).....................................     10,575     10,575
Participation Certificates(2)...............................      1,955      1,955
Subordinated Liabilities....................................     12,219     12,219
MINORITY INTERESTS IN SHAREHOLDERS' EQUITY..................      8,165      8,165
SHAREHOLDERS' EQUITY(2)
Issued Capital..............................................        682        982
Capital Reserves............................................     14,102     18,255
Revenue Reserves............................................     10,731     10,731
  Less Treasury Stock.......................................     (5,958)    (5,958)
Other Reserves..............................................      1,049      1,049
Consolidated Unappropriated Profit..........................      1,165      1,165
Total Shareholders' Equity..................................     21,771     26,224
TOTAL CAPITALIZATION........................................    105,831    110,284


------------
(1) In each case, including only the portion of the respective liabilities due
    after more than one year.

(2) In January 2003, Allianz AG concluded the exchange of a portion of its
    outstanding participation certificates into shares of Allianz AG on the
    basis of a voluntary exchange offer made to the holders of the participation
    certificates in November 2002. The conclusion of this exchange offer
    resulted in a reduction of the participation certificates by E386 million
    and a corresponding increase in shareholders' equity, neither of which is
    reflected in this table. In addition, potential increases in the
    participation certificates resulting from the subscription offer of
    participation certificates in connection with the capital increase described
    in this Offering Circular are not reflected.

                                        13


                                  RISK FACTORS

     Prospective investors should carefully review the following risk factors in
conjunction with the other information contained in this Offering Circular
before reaching a decision on whether to subscribe to or purchase New Allianz
Shares. The financial position and results of operations of the Group may be
materially adversely affected by each of these risks. The market price of the
shares of Allianz AG may decline as a result of each of these risks and
investors may lose the value of their investment in whole or in part. The order
of the risk factors that follow is not intended as an indicator of the
probability that the risks discussed below will occur.

RISKS RELATING TO THE GROUP'S BUSINESS

INTEREST RATE VOLATILITY MAY ADVERSELY AFFECT THE GROUP'S RESULTS OF OPERATIONS.

     Changes in prevailing interest rates (including changes in the difference
between the levels of prevailing short- and long-term rates) can affect the
Group's insurance, asset management and banking results. Over the past several
years, movements in both short- and long-term interest rates have affected the
level and timing of recognition of gains and losses on securities that the Group
held in its various investment portfolios. The Group's investment portfolios are
heavily weighted toward euro-denominated fixed-income investments. Accordingly,
interest rate movement in the euro zone will significantly affect the value of
these investment portfolios. In 2002, lower interest rates resulted in a decline
in current income from new investments in fixed-income securities as higher
yielding investments matured. An increase in interest rates could substantially
decrease the value of the fixed income portfolio, and any unexpected change in
interest rates could materially adversely affect the Group's bond and interest
rate derivative positions.

     Excluding separate account assets and trading assets, the Group's insurance
investment portfolio consists primarily of fixed income securities, which
represented approximately 74% of its insurance investments at December 31, 2002.
Excluding trading assets, certain loans to banks and loans to customers, the
Group's banking investment portfolio consists primarily of fixed-income
securities (approximately 65% at December 31, 2002).

     The short-term impact of interest rate fluctuations on the Group's
life/health insurance business may be reduced in part by products designed to
partly or entirely transfer the Group's exposure to interest rate movements to
the policyholder. While product design reduces the Group's exposure to interest
rate volatility, changes in interest rates will impact this business to the
extent they result in changes to current interest income, impact the value of
the Group's fixed income portfolio, and affect the levels of new product sales
or surrenders of business in force. In addition, reductions in the investment
income below the rates assumed in product pricing, or below the regulatory
minimum required rates in countries such as Germany and Switzerland, would
reduce or eliminate the profit margins on the life/health insurance business
written by the Group's life/health subsidiaries.

     Results of the Group's asset management business may also be affected by
movements in interest rates, since management fees are generally based on the
value of assets under management, which fluctuate with changes in the level of
interest rates.

     In addition, the Group's management of interest rate risks affects the
results of its banking operations. The composition of the Group's banking assets
and liabilities, and any mismatches resulting from that composition, cause the
net income of the Group's banking operations to vary with changes in interest
rates. The Group is particularly impacted by changes in interest rates as they
relate to different maturities of contracts and the different currencies in
which the Group holds interest rate positions. A mismatch with respect to
maturity of interest-earning assets and interest-bearing liabilities in any
given period can have a material adverse effect on the financial position or
results of operations of the Group's banking business. In 2002 both the net
interest margin and the net interest spread in the Group's banking operations
declined significantly from 2001 levels, due to changes in the mix of the
Group's assets and liabilities. If the Group is unable to manage any mismatch
between its interest earning-assets and interest-bearing liabilities, the
consequences of further declines in net interest margin and net interest income
could have a material adverse effect on the Group's results of operations. For
additional information, see "Business -- Selected Statistical Information
Relating to the Group's Banking Operations."

                                        14


THE GROUP'S INVESTMENT PORTFOLIO IS SIGNIFICANTLY EXPOSED TO EQUITY SECURITIES.
MARKET RISKS COULD IMPAIR THIS PORTFOLIO AND ADVERSELY IMPACT THE GROUP'S
FINANCIAL POSITION AND RESULTS OF OPERATIONS.

     Allianz Group holds a significant equity portfolio, which represented
approximately 19% of its investments (excluding separate account assets, trading
assets, certain loans to banks and loans to customers) at December 31, 2002. The
Group's equity investment portfolio includes, in particular, large stakes in a
number of major German companies, including Munchener
Ruckversicherungs-Gesellschaft Aktiengesellschaft in Munchen ("Munich Re") and
Beiersdorf AG, significant holdings in companies in France and Italy and equity
investments in companies in virtually all major financial markets of the world.
Fluctuations in equity markets affect the market value and liquidity of these
holdings.

     Most of the Group's assets and liabilities are recorded at fair value,
including trading assets and liabilities, and securities available for sale.
Changes in the value of securities held for trading purposes are recorded
through the consolidated statement of income. Changes in the market value of
securities available for sale are recorded directly in the consolidated
shareholders' equity. Securities available for sale are reviewed regularly for
impairments, and valuation write-downs to fair value are charged to income if an
other than temporary diminution in value occurs. If a decline in the market
value below the original cost of an available for sale security is considered
other than temporary, the decline in value will be recorded in the consolidated
income statement. A decline in the market value below the original cost of a
security available for sale generally is determined to be other than temporary
if it is 20% or more below book value for more than 6 consecutive months.

     In 2002, developments in the capital markets had a significant impact on
the Group's investment portfolios, reducing their value by E60.0 billion. In
particular, reduced valuations of the Group's equity portfolio led to a
reduction of approximately E7.2 billion in the amount of net unrealized gains in
the Group's shareholders' equity. At current equity market levels, the Group
expects to record an additional E800 million of impairment losses on the Group's
equity portfolio in the first quarter of 2003. If equity markets continue to
decline, further significant impairments affecting net income and reductions in
shareholders' equity could be realized in 2003. Accordingly, in the event of
further market declines, there can be no assurance as to the amount or timing of
future unrealized losses or impairments of equity securities, which may, in each
case, materially adversely impact the Group's results of operations and
shareholders' equity.

MARKET FACTORS, AS WELL AS A LACK OF IMPROVEMENT IN THE GROUP'S OPERATING
PERFORMANCE, COULD ADVERSELY AFFECT GOODWILL, DEFERRED ACQUISITION COSTS AND
DEFERRED TAX ASSETS; THE GROUP'S DEFERRED TAX ASSETS ARE ALSO POTENTIALLY
IMPACTED BY CHANGES IN GERMAN TAX LEGISLATION.

     The current uncertain trends and investment climate in many of the Group's
major markets have adversely affected its businesses and profitability in 2002
and can be expected to continue to do so unless conditions improve.

     Business and market conditions may impact the amount of goodwill the Group
carries in its consolidated accounts. As of December 31, 2002 the Group has
recorded goodwill in an aggregate amount of E13,786 million, of which E2,216
million relates to the Group's banking business, E5,079 million to its asset
management business and E6,491 million relates to its insurance business.

     The Group's banking operations, of which Dresdner Bank represents by far
the most significant component, reported a net loss of E1,358 million for the
year ended December 31, 2002. See "Business -- Banking Operations -- Results of
Operations." Notwithstanding such loss, at December 31, 2002, the Group
concluded that a write down of the goodwill relating to Dresdner Bank was not
required. The Group is implementing further turnaround steps and continues to
expect the turnaround of its banking operations in the near future. If
conditions in the banking operations do not improve or continue to deteriorate,
however, an impairment test for the fiscal year 2003 could result in a
significant write-down of goodwill, adversely impacting the Group's results of
operations. As the value of certain other parts of the Group's businesses,
including in particular its asset management business, are also significantly
impacted by such factors as the state of financial markets and ongoing operating
performance, significant declines in financial

                                        15


markets or operating performance could also result in impairment of other
goodwill carried by the Group and result in further significant write-downs,
which could be material.

     The assumptions made by the Group with respect to recoverability of
deferred acquisition costs ("DAC"), particularly in its annuity business in the
United States, are also affected by such factors as operating performance and
market conditions. DAC is incurred in connection with the production of new
business and deferred, to be amortized generally in proportion to profits
expected to be generated over the life of the underlying contracts. If the
assumptions on which expected profits are based prove to be incorrect, it may be
necessary to accelerate amortization of DAC which could materially adversely
affect results of operations.

     As of December 31, 2002, the Group had a total of E13,258 million in
deferred tax assets. The Group also recorded deferred tax liabilities of E12,188
million. The calculation of the respective tax assets and liabilities is based
on current tax laws and accounting standards and depends on the performance of
the Group as a whole and certain business units in particular. At December 31,
2002 E4,910 million (E3,019 million as of December 31, 2001) of deferred tax
assets depended on the ability to use existing tax-loss carry forwards.

     Changes in tax legislation or regulations or an operating performance below
currently anticipated levels may lead to a significant impairment of tax assets.
The Draft Bill on the Reduction of Tax Privileges
(Steuervergunstigungsabbaugesetz) proposed by the German government accordingly
provided for a minimum taxation, pursuant to which tax loss carryforwards could
be offset against only 50% of taxable profits for purposes of corporate and
trade income tax. In addition, the proposal included limitations on the use of
tax credits from prior year profits in connection with profit distributions.
After the draft act was passed by the German First Chamber (Bundestag) and
rejected by the Second Chamber (Bundesrat), on April 9, 2003, the Mediation
Committee (Vermittlungsausschuss) of the Bundestag and Bundesrat proposed a
compromise to the Draft Bill on the Reduction of Tax Privileges. The proposed
compromise included essentially a temporary restriction of the use of accrued
corporate tax credits through the introduction of a three-year moratorium. The
proposals that were not included in the compromise, however, are expected to be
reintroduced, perhaps in modified form in a separate legislative process. In
this case, the Group could be obligated to write-off certain tax assets. Tax
assets may also need to be written down if certain assumptions of profitability
prove to be incorrect, as losses incurred for longer than expected will make the
usability of tax assets more unlikely. Any such development may have a material
adverse impact on the Group's results of operations.

ALLIANZ AG OPERATES BOTH AS A REINSURANCE COMPANY AND AS A HOLDING COMPANY FOR
THE ALLIANZ GROUP, AND IS EXPOSED TO VARIOUS LIQUIDITY RISKS.

     Allianz AG acts as the principal reinsurer for the Group companies. At the
same time, Allianz AG is a holding company, conducting its insurance and
financial services operations through direct and indirect subsidiaries. In
addition to premiums from its reinsurance operations, the principal sources of
Allianz AG's funds are dividends received from subsidiaries, associated
companies and other equity investments as well as funds that it may raise from
time to time through the issuance of debt or equity securities or through bank
or other borrowings. Allianz AG's uses of funds include payment of interest on
its outstanding debt, obligations arising in its reinsurance business, which may
include large and unpredictable claims including catastrophe claims, as well as
the funding of potential capital requirements of its operating subsidiaries or
of acquisitions.

     As of December 31, 2002, Allianz AG had total outstanding debt of E35,475
million (2001: E23,219 million), including amounts owed to credit institutions
of E2,247 million, outstanding subordinated debt instruments of E3,575 million
and outstanding non-subordinated debt instruments of E29,654 million (2001:
E3,079 million, E0 million and E20,140 million, respectively). For the year
ended December 31, 2002, Allianz AG made payments of E1,111 million in respect
of interest on outstanding debt. E1,810 million of long-term debt of Allianz AG
to non-Group companies matures during 2003. In addition, on March 31, 2003, a
subsidiary of Allianz AG received notice from the former parent company of the
Group's asset management subsidiary PIMCO Group ("PIMCO") that such former
parent company had exercised its right to put US$250 million of its remaining
ownership interest in PIMCO to Allianz, with payment therefor due by April 30,
2003. For additional

                                        16


discussion concerning these put arrangements, see "-- Consolidated Results of
Operations -- Asset Management Operations -- Results of Operations -- Year Ended
December 31, 2002 compared to Year Ended December 31, 2001 -- Net Income."

     Allianz AG expects that its premiums from its own reinsurance business,
together with dividends and other amounts received from subsidiaries, associated
companies and other investments, will continue to cover its operating expenses,
including interest payments on its outstanding debt, together with its
reinsurance and other obligations. As a holding company, Allianz AG can offer no
assurance, however, that funds available to it will continue to be sufficient to
meet its operating expenses, funding obligations and interest payments in the
future, and that it will not need to raise additional funds from time to time
through the issuance of debt or equity securities, through bank or other
borrowings or through dispositions of assets or other transactions, nor as to
the adequacy or timing of any such measures.

LOSS RESERVES FOR THE GROUP'S PROPERTY-CASUALTY INSURANCE AND REINSURANCE
POLICIES ARE BASED ON ESTIMATES AS TO FUTURE CLAIMS LIABILITIES. IN 2002, THE
GROUP MADE SIGNIFICANT ADDITIONAL RESERVES RELATING TO ASBESTOS-RELATED AND
ENVIRONMENTAL CLAIMS IN THE UNITED STATES AND IN CONNECTION WITH DISCONTINUED
AND RUN-OFF BUSINESSES. FURTHER ADVERSE DEVELOPMENTS RELATING TO CLAIMS COULD
LEAD TO FURTHER RESERVE ADDITIONS AND MATERIALLY ADVERSELY IMPACT THE GROUP'S
RESULTS OF OPERATIONS.

     In accordance with industry practice and accounting and regulatory
requirements, the Group establishes reserves for loss and loss adjustment
expenses related to its property-casualty insurance and reinsurance businesses,
including discontinued property and casualty business in run-off. Reserves are
based on estimates of future payments that will be made in respect of claims,
including expenses relating to such claims. Such estimates are made both on a
case-by-case basis, based on the facts and circumstances available at the time
the reserves are established, as well as in respect of losses that have been
incurred but not reported ("IBNR") to the Group. These reserves represent the
estimated ultimate cost necessary to bring all pending reported and IBNR claims
to final settlement.

     Reserves, including IBNR reserves, are subject to change due to a number of
variables which affect the ultimate cost of claims, such as changes in the legal
environment, results of litigation, changes in medical costs, costs of repairs
and risk factors such as inflation. The Group's earnings depend significantly
upon the extent to which the Group's actual claims experience is consistent with
the assumptions the Group uses in setting the prices for products and
establishing the liabilities for obligations for technical provisions and
claims. To the extent that the Group's actual claims experience is less
favorable than the underlying assumptions used in establishing such liabilities,
the Group may be required to increase its reserves, which may materially
adversely effect earnings.

     Reserves Generally.  Established loss reserves estimates are periodically
adjusted in the ordinary course of settlement, using the most current
information available to management, and any adjustments resulting from changes
in reserve estimates are reflected in current results of operations. The Group
also conducts reviews of various lines of business to consider the adequacy of
reserve levels, as it did recently with its asbestos and environmental exposure
in the United States. Based on current information available to it and on the
basis of the Group's internal procedures, the management of the Allianz Group
considers that these reserves are adequate. However, because the establishment
of claims reserves is an inherently uncertain process, there can be no assurance
that ultimate losses will not materially exceed the Group's loss reserves and
have a material adverse effect on the Group's earnings. See "Business --
Property-Casualty Insurance Reserves -- General."

     Asbestos-related and Environmental Pollution Claims.  In relation to
asbestos-related and environmental pollution, it has been necessary, and may
over time continue to be necessary, to revise estimated potential loss exposure
and, therefore, the related loss reserves. Changes in law, novel or changing
policy interpretations, evolving judicial theories as well as developments in
class action litigation add to the uncertainties inherent in claims of this
nature. As a result, the Group continues to monitor developments in
asbestos-related and environmental claims and may determine that further
adjustments in the reserve amounts are required in the future. In 2002, reserves
were increased for asbestos and environmental claims in the United States by
E762 million following external and internal actuarial reviews.

                                        17


     Discontinued and Run-off Insurance Businesses.  The Group maintains loss
reserves in its discontinued and run-off insurance businesses to cover its
estimated ultimate liability for losses and loss adjustment expenses for
reported and unreported losses incurred as of the end of each accounting period.
The Group has discontinued certain lines of business formerly pursued by the
Fireman's Fund Insurance Company ("Fireman's Fund") in the United States,
including the surety, national accounts, diversified risk and medical
malpractice lines of business. Commercial auto liability, medical malpractice,
other liability and workers' compensation reserves were increased in respect of
prior years in the amount of E230 million in 2002. Allianz AG believes that
reserves associated with discontinued lines are adequate; however, the costs and
liabilities associated with these divested and run-off businesses and other
contingent liabilities could cause the Group to take additional charges that
could be material to its results of operations. In particular, Fireman's Fund
has issued surety bonds in favor of certain companies, some of which are
currently experiencing financial difficulties. In the case of a default in
respect of the obligations covered by the surety bonds, Fireman's Fund could be
required to establish significant additional loss reserves.

ACTUARIAL EXPERIENCE AND OTHER FACTORS COULD DIFFER FROM THAT ASSUMED IN THE
CALCULATION OF LIFE/HEALTH ACTUARIAL RESERVES AND PENSION LIABILITIES.

     The assumptions the Group makes in assessing its life/health insurance
reserves may differ from that which the Group experiences in the future. The
Group derives its life/health insurance reserves using "best estimate" actuarial
practices and assumptions. These assumptions include the assessment of the long
term development of interest rates, investment returns, the allocation of
investments between equity, fixed income and other categories, policyholder
bonus rates (some of which are guaranteed), mortality and morbidity rates,
policyholder lapses and future expense levels. The Group monitors its actual
experience of these assumptions and to the extent that the Group considers that
this experience will continue in the longer term the Group refines its long-term
assumptions. Similarly, estimates of the Group's own pension obligations
necessarily depend on assumptions concerning future actuarial, demographic,
macroeconomic and financial markets developments. Changes in any such
assumptions may lead to changes in the estimates of life/health insurance
reserves or pension obligations.

     The Group has a substantial portfolio of contracts with guaranteed
investment returns, including endowment and annuity products for the German
market as well as certain guaranteed contracts in other markets. The Group's
amounts payable at maturity of an endowment policy in Germany and in certain
other markets include a "guaranteed benefit," an amount that, in practice, is
equal to a legally mandated maximum rate of return on actuarial reserves. In
Germany, this rate is currently 3.25% per year for policies issued on or after
July 1, 2000 and with euro as applicable currency, and for policies issued
through June 2000, the maximum rate of return is 4.0% per annum. For policies
issued prior to 1995, the maximum rate is 3.5% or 3.0%, depending on the
generation of tariff. The average interest rate that was guaranteed in Germany
at the end of 2002 was approximately 3.5%. If interest rates should remain at
current historically low levels, Allianz AG could be required to provide
additional funds to its life/health subsidiaries to support their obligations in
respect of products with higher guaranteed returns, or increase reserves in
respect of such products, which could in turn have a material adverse effect on
the Group's results of operations.

     In the United States, the Group has a substantial portfolio of contracts
with guaranteed investment returns indexed to equity markets. The Group enters
into hedging arrangements in order to meet the expected returns of the
contracts. There can be no assurance that the hedging arrangements will satisfy
the returns guaranteed to policyholders.

THE FINANCIAL RESULTS OF THE GROUP MAY BE MATERIALLY ADVERSELY AFFECTED BY THE
OCCURRENCE OF CATASTROPHES.

     Portions of the Group's property and casualty insurance cover losses from
unpredictable events such as hurricanes, windstorms, hailstorms, earthquakes,
fires, industrial explosions, freezes, riots, floods and other man-made or
natural disasters. The incidence and severity of these catastrophes in any given
period are inherently unpredictable.

                                        18


     Although Allianz AG monitors the Group's overall exposure to catastrophes
and other unpredictable events in each geographic region, each of its
subsidiaries independently determines its own underwriting limits related to
insurance coverage for losses from catastrophic events. The Group generally
seeks to reduce its exposure to these events through the purchase of
reinsurance, selective underwriting practices and by monitoring risk
accumulation. However, such efforts to reduce exposure may not be successful and
claims relating to catastrophes may result in unusually high levels of losses
and could have a material adverse effect on the Group's financial position or
results of operations. During 2002 and 2001 the Group incurred significant
catastrophe losses, in particular net claims costs of approximately E1.5 billion
relating to the terrorist attack of September 11, 2001. The Group also suffered
losses from severe flooding in Germany and Central and Eastern Europe which
adversely affected the Group's results by E710 million in 2002. If catastrophes
affecting properties insured by the Group continue to occur with such frequency
or with greater frequency or severity than has historically been the case,
related claims could have a material adverse effect on the Group's consolidated
financial position, results of operations and cash flows.

THE GROUP HAS SIGNIFICANT COUNTERPARTY RISK EXPOSURE.

     The Group is subject to a variety of counterparty risks, including:

     - General credit risks:  Third parties that owe the Group money, securities
or other assets may not pay or perform under their obligations. These parties
include the issuers whose securities the Group holds, borrowers under loans
made, customers, trading counterparties, counterparties under swaps and credit
and other derivative contracts, clearing agents, exchanges, clearing houses and
other financial intermediaries. These parties may default on their obligations
to the Group due to bankruptcy, lack of liquidity, downturns in the economy or
real estate values, operational failure or other reasons. In addition, under
credit default swaps, which Dresdner Bank has entered into, Dresdner Bank may
become obliged to make payments if and when a default of a particular debtor
occurs.

     During 2002, the Group recognized losses of E2,818 million due to these
credit exposures, including write-downs and write-offs in its fixed income
portfolio. The current uncertain trends and investment climate in financial
markets have resulted in an increase in investment impairments on the Group's
investment assets due to defaults and credit downgrades and a further downturn
in the economy generally could result in increased impairments. In addition, the
Group is subject to geographic and industry concentrations with respect to its
credit exposures, and as a result developments in particular geographic regions
or industries may adversely impact the Group. In particular, the Group has
extended significant credit to financial institutions in Germany, and as a
result any systemic risk materializing in the German financial industry could
have a material adverse effect on the Group's results of operations.

     - Reinsurers:  The Group transfers its exposure to certain risks in its
property and casualty and life insurance business to others through reinsurance
arrangements. Under these arrangements, other insurers assume a portion of the
Group's losses and expenses associated with reported and unreported losses in
exchange for a portion of policy premiums. The availability, amount and cost of
reinsurance depend on general market conditions and may vary significantly. Any
decrease in the amount of the Group's reinsurance will increase the Group's risk
of loss. When the Group obtains reinsurance, it is still liable for those
transferred risks if the reinsurer cannot meet its obligations. Therefore, the
inability of the Group's reinsurers to meet their financial obligations could
materially affect the Group's results of operations. Although the Allianz Group
conducts periodic reviews of the financial statements and reputations of its
reinsurers, the reinsurers may become financially unsound by the time they are
called upon to pay amounts due, which may not occur for many years. For a
discussion of the Group's external reinsurance relationships, see
"Business -- Property -- Casualty Operations By Geographic Region -- Allianz
AG."

FURTHER POOR OPERATING PERFORMANCE, DIFFICULTIES IN MANAGING AND DELAYS IN
COMPLETING THE INTEGRATION OF DRESDNER BANK WOULD ADVERSELY AFFECT THE GROUP'S
RESULTS.

     In July 2001, the Group acquired Dresdner Bank. Our banking operations, of
which Dresdner Bank is the most significant component, suffered significant net
losses in 2002. In addition to

                                        19


poor operating performance, continuing difficulties in managing and integrating
the additional operations and personnel, significant delays in completing the
integration of Dresdner Bank and any loss of key employees or customers could
adversely affect the Group's results. A substantial amount of management time
has been and continues to be diverted from operations to pursue and complete the
integration of Dresdner Bank within the Group, which has not yet been completed.
The future success of the Group's banking business depends in large part on the
Group's ability to restore the profitability of Dresdner Bank and it is possible
that the anticipated benefits from the acquisition may not be realized in full,
may take longer to realize than expected or may not be realized at all. In the
event that management is unable to successfully implement the restructuring and
cost-cutting measures announced to date, the Group's financial performance and
results of operations may continue to be materially adversely affected.

DRESDNER BANK MAY EXPERIENCE FURTHER SIGNIFICANT LOSSES RELATING TO PROBLEM
LOANS.

     At December 31, 2002, following the deconsolidation of Deutsche
Hypothekenbank AG ("Deutsche Hyp") on August 1, 2002, the Allianz Group's
non-performing loans and potential problem loans, substantially all of which
were attributable to Dresdner Bank, were E11,625 million and E2,437 million,
respectively, representing a net increase of E1,276 million, or 12.3%, in
non-performing loans, and E231 million, or 10.5%, in potential problem loans
from year-end 2001 (excluding the loan portfolio of Deutsche Hyp).

     A substantial majority of Dresdner Bank's problem loans is comprised of
loans made to German corporate customers as well as to individuals. Certain of
its loans to corporate customers represent significant credit exposure to
individual companies. The effects of the weak economic conditions in Germany,
which have continued into 2003, as well as recent financial difficulties faced
by the bank's customers, have resulted in the recognition of substantial
provisions by the Group. For the year ended December 31, 2002, additional net
loan loss provisions in the Group's banking segment were E2,222 million,
including E3,106 million of gross new provisions. Of the new provisions, E2,151
million were specific provisions relating to both Dresdner Bank's German
corporate business, including small businesses and professionals, and its
non-German corporate business, especially in Latin America and the United
States, reflecting the continued weakness in the global economy, deteriorating
credit quality of borrowers, declines in collateral value, inability to enforce
its security interest in collateral and increased insolvencies. Of the new loan
loss provisions in 2002, approximately E1,259 million were specific provisions
relating to the Group's German business, including small businesses and
professionals. The Group's banking operations also recorded specific provisions
of E665 million relating to private individuals and E73 million relating to
banks.

     Dresdner Bank may need to make additional loan loss provisions or recognize
further credit losses as a result of continuing weak economic conditions,
declines in collateral value, inability to enforce security interests in
collateral, an increase in corporate or personal bankruptcies, in particular in
Germany, further deterioration of the financial position of Dresdner Bank's
borrowers or changes in reserve and risk management requirements. Any such
developments could materially adversely affect the Group's results of operations
or result in further capital requirements in its banking operations.

A REDUCED CAPITAL BASE AT DRESDNER BANK, TOGETHER WITH FURTHER ADDITIONAL
WRITEDOWNS AND IMPAIRMENTS, COULD RESULT IN CAPITAL REQUIREMENTS THAT MAY
CONSTRAIN THE GROUP'S OPERATIONS.

     Dresdner Bank's capital ratios at December 31, 2002 were 6.0% in the case
of consolidated Tier 1 capital and 10.6% in the case of consolidated total
capital under BIS principles. In recent years, Dresdner Bank has suffered from
poor operating performance, an increased level of loan loss allowances,
deteriorating asset quality and substantial impairments in its investment
portfolio. Dresdner Bank had to set aside significant new provisions for
possible loan losses in 2002, and additional provisions may be required in the
future. If these trends continue, there can be no assurance that Dresdner Bank
will be able to maintain its capital ratios at the above mentioned levels.
Failure to do so could require the Group to restrict its banking operations, or
further support its banking operations through injection of additional capital.
See "Business -- Regulation and Supervision" for a discussion of the capital
adequacy guidelines applicable to the Group's banking operations.

                                        20


     Further, the risk-adjusted capital guidelines ("Basle Accord") promulgated
by the Basle Committee on Banking Supervision, which form the basis for the
capital adequacy guidelines of the German Federal Financial Supervisory
Authority (the Bundesanstalt fur Finanzdienstleistungsaufsicht, or "BaFin"), are
being revised and implementation is planned for 2006. At this time, the Group is
unable to predict how the revised guidelines will affect its requirements for
capital and the impact of these revisions on its banking or other operations.

MANY OF THE GROUP'S BUSINESSES ARE DEPENDENT ON THE FINANCIAL STRENGTH AND
CREDIT RATINGS ASSIGNED TO THE GROUP AND ITS BUSINESSES BY VARIOUS RATING
AGENCIES. THEREFORE, A DOWNGRADE IN THE GROUP'S RATINGS MAY MATERIALLY ADVERSELY
AFFECT RELATIONSHIPS WITH CUSTOMERS AND INTERMEDIARIES, NEGATIVELY IMPACT SALES
OF THE GROUP'S PRODUCTS AND INCREASE THE GROUP'S COST OF BORROWING.

     Standard & Poor's, Moody's and A.M. Best assign ratings to various
obligations of certain Group companies. On March 20, 2003, Standard & Poor's cut
the Group's financial strength ratings from AA to AA-, citing the Group's
negative performance and reduced capital base resulting from significant
write-downs and losses in the period to December 31, 2002, and noted that
Allianz AG continues to be on "negative outlook." Although Moody's maintained
its rating of Aa2 for the senior unsecured debt securities issued by the Group's
finance subsidiaries, Moody's rating also has a negative outlook. On March 21,
2003 A.M. Best also cut the Group's financial strength rating from A++ to A+,
and noted that Allianz AG continues to be on "negative outlook." Rating agencies
can be expected to continue to monitor the Group's financial strength, and no
assurances can be given that further ratings downgrades will not occur, whether
due to changes in the Group's performance, changes in rating agencies' industry
views or ratings methodologies, or a combination of such factors.

     Claims paying ability and financial strength ratings are a factor in
establishing the competitive position of insurers. The Group's financial
strength rating has a significant impact on the individual ratings of key
subsidiaries. If a rating of certain subsidiaries falls below a certain
threshold the respective operating business may be significantly impacted. A
ratings downgrade, or the potential for such a downgrade, of the Group or any of
its insurance subsidiaries could, among other things, adversely affect
relationships with agents, brokers and other distributors of the Group's
products and services, thereby negatively impact new sales, adversely affect the
Group's ability to compete in its markets and increase the Group's cost of
borrowing. In particular, in those countries where primary distribution of the
Group's products is done through independent agents, such as the United States,
further ratings downgrades could adversely impact sales of the Group's life
insurance products. Any further ratings downgrades will also materially
adversely affect the Group's cost of raising capital, and could, in addition,
give rise to additional financial obligations or accelerate existing financial
obligations which are dependent on maintaining specified rating levels.

IF THE GROUP'S ASSET MANAGEMENT BUSINESS UNDERPERFORMS, IT MAY EXPERIENCE A
DECLINE IN ASSETS UNDER MANAGEMENT AND RELATED FEE INCOME.

     While the assets under management in the Group's asset management segment
include a significant amount of funds related to affiliated Allianz Group
insurance operations, a growing portion of its assets under management,
particularly following the acquisitions of PIMCO in May 2000, Nicholas-Applegate
in January 2001 and Dresdner Bank in July 2001, represents third-party funds. In
2002, despite substantial increases in third party assets under management,
declines in world equity markets resulted in reductions in the value of the
equity portfolios in the Group's asset management business as customers withdrew
or re-allocated funds from equities. Results of the Group's asset management
activities are affected by share prices, share valuation, interest rates and
market volatility. In addition, third-party funds are subject to withdrawal in
the event the Group's investment performance is not competitive with other asset
management firms. Accordingly, fee income from the asset management business
might decline if the level of the Groups' third-party assets under management
were to continue to decline due to investment performance or otherwise.

                                        21


INCREASED GEOPOLITICAL RISKS FOLLOWING THE TERRORIST ATTACK OF SEPTEMBER 11,
2001 AND THE CURRENT MILITARY CONFLICT IN IRAQ, INCLUDING ANY FUTURE TERRORIST
ATTACKS, COULD HAVE A CONTINUING NEGATIVE IMPACT ON THE GROUP'S BUSINESSES.

     After September 11, 2001, reinsurers generally either put terrorism
exclusions into their policies or drastically increased the price for such
coverage. Although the Group has attempted to exclude terrorist coverage from
policies it writes, this has not been possible in all cases. Furthermore, even
if terrorism exclusions are permitted in the Group's primary insurance policies,
the Group may still have liability for fires and other consequential damage
claims that follow an act of terrorism itself. As a result, the Group may have
liability under primary insurance policies for acts of terrorism and may not be
able to recover from its reinsurers.

     At this time, the Group cannot assess the future effects of terrorist
attacks, the ensuing military and other responsive actions, including the
current military conflict in Iraq, and the possibility of further terrorist
attacks, on the Group's businesses. Such matters have significantly adversely
affected general economic, market and political conditions, increasing many of
the risks in the Group's businesses noted in the previous risk factors. This may
have a material negative effect on the Group's businesses and results of
operations over time.

CHANGES IN EXISTING, OR NEW, GOVERNMENT REGULATIONS IN THE COUNTRIES IN WHICH
THE GROUP OPERATES MAY MATERIALLY IMPACT THE GROUP.

     The Group's insurance, banking and asset management businesses are subject
to detailed, comprehensive regulation and supervision in all the countries in
which they do business. The BaFin is currently performing a local review at
Allianz AG with respect to its reinsurance business and its activity as an
insurance holding company. Changes in existing laws and regulations may affect
the way in which the Group conducts its business and the products it may offer.
Changes in regulations relating to pensions and employment, social security,
financial services, taxation, securities products and transactions may
materially adversely affect the Group's insurance, banking and asset management
businesses by restructuring their activities, imposing increased costs or
otherwise.

     In December 2002, the EU adopted a directive that provides for assessment
of the capital requirements of a financial conglomerate on the group level,
supervision of risk concentration and intra-group transactions and prevention of
double-leveraging of the capital of the holding or parent company, i.e. once in
the holding or parent company and a second time in the subsidiary
("double-gearing"). The Group is a financial conglomerate within the scope of
this directive. The EU member states are required to implement this directive
into national law for fiscal years beginning on or after January 1, 2005. It is
as yet unclear how the directive will be implemented in Germany. Therefore, it
is impossible to determine what future impact these requirements will have on
the Group's capital requirements, but there can be no assurance that the current
and future level of capital will be sufficient to meet such requirements. For
more information, see "Business -- Regulation and Supervision."

CHANGES IN TAX LEGISLATION COULD ADVERSELY AFFECT THE GROUP'S BUSINESS.

     Changes to tax laws may affect the attractiveness of certain of the Group's
products that currently receive favorable tax treatment. Under current German
tax regulations, payments received at the maturity of a life insurance policy
with a term of at least 12 years and on which premiums have been paid for at
least 5 years are not taxable, and the life insurance premiums are deductible
from the insured's income in the year paid, subject to certain limitation. In
recent years, the German legislature has from time to time proposed legislation
that would reduce the tax-favored treatment of both premiums and benefit payouts
for these life insurance policies. The enactment of legislation reducing the tax
benefit associated with the Group's German life insurance products could
significantly reduce the attractiveness of life insurance in Germany. Because
the German life business accounts for a significant portion of the Group's total
income (14.7% in 2002), the enactment of any such legislation could adversely
affect the Group's financial results. From time to time, governments in other
jurisdictions in which the Group does business have also considered changes to
tax laws which could adversely affect the tax advantages of such products, and
if enacted, could result in a significant reduction in the sale of such
products.

                                        22


     In addition, from time to time, proposals have been made to repeal the
provisions of the German Tax Reform discussed in "Taxation in Germany" that
generally exempts capital gains from the disposal of corporate shareholdings
from German tax. In the event such proposals were to be enacted into law, the
Group's ability to dispose of its shareholdings profitably might be
significantly affected.

CHANGES IN VALUE RELATIVE TO THE EURO OF NON-EURO ZONE CURRENCIES IN WHICH THE
GROUP GENERATES REVENUES AND INCURS EXPENSES COULD ADVERSELY AFFECT THE GROUP'S
REPORTED EARNINGS AND CASH FLOW.

     The Group prepares its consolidated financial statements in euros. However,
a significant portion of the revenues and expenses from the Group's subsidiaries
outside the euro zone, including in the United States, Switzerland and the
United Kingdom, originates in currencies other than the euro. Allianz AG expects
this trend to continue as the Group expands its business into growing non-euro
zone markets. For the year ended December 31, 2002, approximately 30.8% of the
Group's gross premiums written originated in currencies other than the euro.

     As a result, although non-euro zone Group subsidiaries generally record
their revenues and expenses in the same currency, changes in the exchange rates
used to translate foreign currencies into euros may adversely affect the Group's
reported results. The strength of the euro against other currencies, in
particular the U.S. dollar and pound sterling, reduced premium income by E736
million during 2002. Third-party assets under management in the Group declined
by E77 billion during 2002 due to depreciation of other currencies against the
euro, in particular, the U.S. dollar.

     In addition, Allianz AG's dividends are generally payable in euros. Adverse
changes in exchange rates used to translate the currencies in which the Group's
non euro-zone subsidiaries pay dividends to Allianz AG may materially adversely
affect the cash flow available to Allianz AG to pay dividends and other
obligations. While the Group's non-euro assets and liabilities, and revenues and
related expenses, are generally denominated in the same currencies, the Group
does not generally engage in hedging transactions with respect to dividends or
cash flows in respect of its non-euro subsidiaries.

RISKS RELATING TO THE OFFERING

THE SHARE PRICE OF ALLIANZ AG HAS BEEN AND MAY CONTINUE TO BE VOLATILE.

     The share price of Allianz AG has been volatile in the past due in part to
the high volatility in the securities markets generally, and in financial
institutions' shares in particular, as well as developments which impact its
financial results. Factors other than the Group's financial results that may
affect its share price include but are not limited to: market expectations of
the performance and capital adequacy of financial institutions generally;
investor perception of, as well as the actual performance of, other financial
institutions; investor perception of the success and impact of the Offering and
the strategy described in this Offering Circular; a downgrade or rumored
downgrade of the Group's credit ratings; potential litigation or regulatory
action involving the Group or any of the industries the Group has exposure to
through its insurance and banking activities; announcements concerning the
bankruptcy or other similar reorganization proceedings involving, or any
investigations into the accounting practices of, other insurance or reinsurance
companies or banks; and general market volatility.

SHAREHOLDERS WHO DO NOT PARTICIPATE IN THE OFFERING MAY EXPERIENCE SIGNIFICANT
DILUTION IN THEIR SHAREHOLDINGS.

     Subscription rights that are not exercised on or before April 29, 2003 will
expire. To the extent that a shareholder does not exercise its subscription
right to subscribe for New Allianz Shares, such shareholder's proportionate
ownership and voting interest in Allianz AG will, accordingly, be reduced, and
the percentage that any original shares represent of Allianz AG's increased
share capital after the capital increase will, accordingly, be reduced.

                                        23


IF THE OFFERING IS DISCONTINUED OR THERE IS A SUBSTANTIAL DECLINE IN ALLIANZ
AG'S SHARE PRICE, SUBSCRIPTION RIGHTS MAY BECOME VOID OR WORTHLESS.

     The shares are subscribed by the Underwriters with the obligation to offer
them to the shareholders of Allianz AG pursuant to the Underwriting Agreement
which may be terminated under certain circumstances (see "The Offering --
Subscription Offer"). If the Underwriting Agreement is terminated, this Offering
will not proceed and the subscription rights will become void or worthless.
Accordingly, investors who have acquired subscription rights in the secondary
market will suffer a loss, as trades relating to subscription rights will not be
unwound once the offering is terminated. In addition, a significant decline in
Allianz AG's share price may materially adversely affect the value of the
subscription rights.

ALLIANZ AG CANNOT ASSURE YOU THAT AN ACTIVE TRADING MARKET WILL DEVELOP FOR THE
SUBSCRIPTION RIGHTS AND, IF A MARKET DOES DEVELOP, THE SUBSCRIPTION RIGHTS MAY
BE SUBJECT TO GREATER VOLATILITY THAN THE SHARES OF ALLIANZ AG.

     Allianz AG intends to set a trading period for the subscription rights from
April 15, 2003 to April 25, 2003 on the Frankfurt Stock Exchange. Allianz AG
does not intend to apply for the subscription rights to be traded on any other
exchange. There can be no assurance that an active trading market in those
subscription rights will develop on the Frankfurt Stock Exchange during that
period and that there will be sufficient liquidity throughout the period in
which rights are traded. In accordance with German practice, the price of the
subscription rights is set only once a day. Additionally, because the trading
price of the subscription rights depends on the trading price of the shares of
Allianz AG, the existing volatility of the shares of Allianz AG, as described
above in "-- The share price of Allianz AG has been and may continue to be
volatile," will likewise impact the volatility of the subscription rights.

TRANSFERS OF SHARES IN ALLIANZ AG RELATING TO THIS OFFERING AND OF SUBSCRIPTION
RIGHTS REQUIRE THE CONSENT OF ALLIANZ AG. CONSENT TO ACQUIRE SUCH SHARES OR
RIGHTS MAY BE DENIED.

     Transfers of shares in Allianz AG require the consent of Allianz AG
(represented by its management board). Pursuant to its articles of association,
Allianz AG may deny consent only on exceptional grounds if it deems this to be
necessary in the interest of Allianz AG. If such acquisition is made through a
stock exchange, the shares will be credited to the investor's securities
account. However, if Allianz AG denies its consent, the investor will not be
registered in the share register and, thus, will not become a shareholder of
Allianz AG. In such case, investors may have difficulties in recovering their
payment.

     Likewise, the transfer of subscription rights relating to this Offering
requires the consent of Allianz AG. Allianz AG has informed the Frankfurt Stock
Exchange that Allianz AG will not deny consent to the transfer of subscription
rights, except on exceptional grounds in the interest of Allianz AG. If Allianz
AG denies its consent, the purchaser of the subscription rights, upon exercise
of such rights, will not become a shareholder in Allianz AG.

                                        24


                                    BUSINESS

     The following discussion should be read in conjunction with the Group's
consolidated financial statements, including the notes thereto. The Group
prepares its consolidated financial statements in accordance with International
Financial Reporting Standards (or IFRS). Unless otherwise indicated, the
financial information included in this Offering Circular is presented on a
consolidated basis under IFRS. Unless otherwise indicated, the Allianz Group has
obtained data regarding the relative size of various national insurance markets
from annual reports prepared by SIGMA, an independent organization which
publishes market research data on the insurance industry. In addition, unless
otherwise indicated, insurance market share data are based on gross premiums
written. Data on market share within particular countries are based on the
Allianz Group's own internal estimates.

INTRODUCTION

     The Allianz Group is one of the world's leading financial services
providers, offering insurance, banking and asset management products and
services through property-casualty, life/health, banking and asset management
business segments. The Allianz Group is one of the leading insurance groups in
the world based on gross premiums written in 2002. The Group is the leading
German property-casualty and life/health insurance company, with estimated
market shares of approximately 18.3% and 14.2%, respectively, based on gross
premiums written in 2002. The Group also has leading market positions in a
number of other countries, including France, Italy, the United Kingdom,
Switzerland and Spain. The Allianz Group was the second-largest German financial
institution, based on market capitalization, at March 31, 2003. The Group
believes that it is well capitalized relative to its competitors,
notwithstanding recent downgrades of its ratings in March 2003. As of April 7,
2003, the Group had financial strength ratings of A+ from A.M. Best and AA- from
Standard & Poor's, both with a negative outlook. Moody's does not provide a
rating for Allianz AG, but as of April 7, 2003, debt securities issued by
Allianz AG's finance subsidiaries had a senior unsecured debt rating of Aa2 from
Moody's, again with a negative outlook. The Group's investment portfolio
includes a number of significant equity participations, primarily in major
German companies, including both financial institutions and industrial
enterprises.

     The Allianz Group was founded in 1890 in Berlin, Germany, and since that
time it has become the largest German insurer. Through its international
expansion strategy, the Allianz Group has sought to bring into the Group
companies that are well-positioned in their domestic markets and that have
leading positions in particular business lines and attractive earnings
prospects. In the last several years, the Group's non-German insurance business
has therefore grown substantially in importance. Gross premiums written by the
Group's non-German business represented approximately 63.3% of the Group's total
gross premiums written in 2002. The Allianz Group now operates in more than 70
countries worldwide and has leading market positions in many of them.

     In 1998, building on over a century's experience in managing its extensive
insurance investment portfolio, the Allianz Group established financial services
as its third core business segment, in addition to its property-casualty and
life/health insurance businesses. In 2001, following its acquisition of Dresdner
Bank, the Allianz Group reorganized its financial services segment into separate
asset management and banking segments. In the Group's asset management segment,
the acquisitions of Dresdner Bank on July 23, 2001 and Nicholas-Applegate on
January 31, 2001 increased the Group's third-party assets under management by
E228 billion and E36 billion, respectively, as of the respective dates of the
acquisitions and made the Allianz Group one of the five leading asset managers
in the world based on total assets under management as of December 31, 2002. In
the Group's banking segment, which is now its fourth core business segment, the
Allianz Group's acquisition of Dresdner Bank made the Group one of the leading
banks in Germany and the thirteenth-largest bank in Europe, based on total
assets, and provided the Group with significantly expanded bank distribution
channels for its property-casualty, life/health and asset management products
and services.

     The Allianz Group's German property-casualty and life/health insurance
businesses are managed by subsidiaries located primarily in Munich and
Stuttgart. The Group's non-German insurance businesses are locally managed,
generally through operations located in France, Italy,

                                        25


the United Kingdom, Switzerland, Spain and the United States, which are the
Group's largest non-German markets. In contrast, each of the Allianz Group's
specialty lines of credit insurance, marine and aviation insurance, industrial
reinsurance through Allianz Global Risks Ruckversicherungs-AG ("Allianz Global
Risks"), and travel and assistance insurance is managed and operates on a global
basis. The Allianz Group's asset management segment also operates on a worldwide
basis, with key management centers in Munich, Hong Kong, Paris, Milan, Westport,
Connecticut, and San Diego and Newport Beach, California. The Group's banking
segment operates through the approximately 1,100 German and non-German branch
offices of Dresdner Bank and various subsidiaries, with significant operations
in Germany, the United Kingdom, other European countries and the United States.

     At December 31, 2002, the Allianz Group employed more than 181,000 persons
in its insurance, banking and asset management businesses worldwide, of whom
more than 94,000 were based outside Germany. Through interdisciplinary and
multi-jurisdictional training and advancement programs, the Allianz Group seeks
to develop and promote a corporate culture that emphasizes technical expertise,
dedication to client service and an international outlook.

     The headquarters of the Allianz Group are located in Munich, Germany. In
addition, the Allianz Group has subsidiary, branch, representative and similar
offices worldwide. The Group owns substantially all of the land and buildings
that are used in the normal course of the Group's business in Europe and leases
office space in various locations throughout the world. The Group also has part
of its investment portfolio invested in land and buildings. The Allianz Group
believes that its facilities are adequate for the Group's present needs in all
material respects.

STRATEGY

     This section regarding the Group's strategy contains forward-looking
statements and, therefore, should be read in conjunction with the section
"Forward-Looking Statements." In addition, for a discussion of the risks
involved in achieving the Group's strategic goals, see "Risk Factors."

     The Allianz Group's strategy is to achieve profitable growth across the
Group's four business segments for the benefit of its shareholders,
policyholders and employees. The Allianz Group believes that its size, financial
strength and worldwide reach are key competitive strengths that will permit the
Group to participate in the ongoing consolidation of the financial services
industry and maintain its position as an industry leader. The Allianz Group
offers its products through multiple distribution channels including agents and
brokers and, in many markets, bancassurance and e-commerce. In the Group's
mature markets of Germany, the rest of western Europe and the United States, the
Allianz Group believes demographic trends will particularly favor the Group's
life/health and asset management businesses in the coming years. The Allianz
Group intends to capitalize on cross-selling opportunities between the Group's
banking and pension provision businesses for corporate customers and to take
advantage of additional potential synergies between the Group's life/health,
asset management and banking operations.

     As a reflection of the underlying strengths of the Group's franchise as
well as the leading market positions in many of its businesses, the Group's core
strategy remains substantially unchanged. Allianz AG's five main strategic
priorities are:

     - Optimize the Economic Value Added ("EVA") of the Group, based on
       risk-adjusted capital requirements and sustainable growth targets;

     - Exploit attractive market opportunities by leveraging the Group's
       traditional risk management expertise;

     - Strengthen the Group's leading position in life and health insurance and
       in asset management, especially in private and corporate retirement
       insurance plans;

     - Increase the Group's asset gathering capabilities by building
       customer-oriented, multichannel distribution platforms; and

     - Expand the Group's investments and capital markets expertise.

     Allianz AG has implemented Group-wide a rigorous and disciplined capital
allocation approach. All capital allocation decisions are based on an internal
risk-based model, which, in addition to traditional insurance and banking risks,
also takes into account investment and other

                                        26


capital markets risks. Allianz AG will monitor the Group's risk-adjusted results
closely on an ongoing basis. Companies and business lines which are not expected
to meet the hurdle risk adjusted return on allocated capital over the medium
term will be reviewed for possible divestiture.

     Allianz AG manages the business of the Group with a significant degree of
autonomy for local management teams. Allianz AG believes that these teams are
best positioned to determine what measures to take to maximize the profitability
of their business, and Allianz AG makes them accountable, and compensates them,
based on this performance. The Allianz Group measures performance both on a
local level as well as on a Group basis based on the EVA model. Allianz AG also
monitors closely the nature and volume of risks accumulated locally as well as
across the Group on an ongoing basis.

FOCUS ON IMPLEMENTATION

     The Group's immediate objective is to address the most significant
operating challenges it faces:

     - Further strengthening the Group's pricing and underwriting discipline and
       internal efficiency in line with the EVA requirements, and enforcing
       these consistently across the Group. As part of this effort, the Group
       aims to improve the operational performance of selected operations such
       as Assurances Generales de France ("AGF," and, together with its
       subsidiaries, the "AGF Group"), Fireman's Fund and Allianz Global Risks;

     - Returning Dresdner Bank to profitability;

     - Improving the profitability of the Group's life business;

     - Reducing the dependence of the Group's results on the volatility of the
       equity markets.

OPERATIONAL DISCIPLINE

Property-Casualty Insurance

     The Allianz Group's goal for 2003 and thereafter is to achieve a combined
ratio of below 100% for the group. The Allianz Group is particularly focused on
Fireman's Fund, Allianz Global Risks and AGF, businesses with combined ratios of
over 100%:

     - Fireman's Fund's operational discipline is expected to be improved by a
       new management team, the reduction of headcount, exit of underperforming
       businesses, recent strengthening of environmental and asbestos reserves
       and more defensive portfolio management;

     - Allianz Global Risks is actively seeking to turn its property-casualty
       business around. Allianz Global Risks has undertaken significant changes
       including appointing a new management team, introducing clear operational
       targets and non-renewing certain clients and treaties;

     - AGF has increased rates, not renewed policies and implemented operational
       improvements to reduce the expense ratio.

Turnaround of Dresdner Bank profitability

     Due to the continuing difficult economic environment and the sharp
deterioration in the capital markets since late 2001, Dresdner Bank reported
significant losses in 2002. The Group has recently appointed a new CEO of
Dresdner Bank and intends to reduce personnel costs, operating expenses and
non-core lending to fully exploit the bank's franchise in the coming years. In
the last 18 months, Dresdner Bank has significantly reduced its headcount, and
plans are in place to further reduce headcount positions.

     The turnaround program to restore profitability has several components:

     - IRU:  New Institutional Restructuring Unit ("IRU") within the Group's
       banking segment to free up risk capital through the reduction of
       risk-weighted assets by restructuring non-performing loans to strategic
       customers with the intent of returning such loans to the business units
       from which they originated, while maximizing the recovery from remaining
       non-performing loans, as well as non-strategic customer loans, through
       repayment, sale,

                                        27


       hedging, securitization and other means. Loans to be bundled together in
       the IRU are primarily performing loans to non-strategic clients, such as
       small-capitalization clients in Latin America, Asia and the United
       States, as well as, to a lesser extent, loans to corporate and private
       clients that are currently non-performing. The IRU is expected to
       initially include approximately E31 billion, consisting of approximately
       E22 billion of loans (including approximately E7 billion of
       non-performing loans and approximately E1 billion of potential problem
       loans) and approximately E1 billion of other non-strategic assets,
       including private equity investments, and approximately E8 billion of
       undrawn commitments.

     - Cost-Cutting and Restructuring Measures:

        -- Ongoing cost-cutting efforts are being stepped up.

        -- Certain centralized services were transferred to the two business
           units, Private and Business Clients and Corporates & Markets, which
           are now directly responsible for managing these costs.

CAPITAL AND PORTFOLIO MANAGEMENT

     The Group believes that it is well capitalized relative to its competitors,
notwithstanding recent downgrades of its ratings in March 2003. As of April 7,
2003, the Group had financial strength ratings of A+ from A.M. Best and AA- from
Standard & Poor's, both with a negative outlook. Moody's does not provide a
rating for Allianz AG, but as of April 7, 2003, debt securities issued by
Allianz AG's finance subsidiaries had a senior unsecured debt rating of Aa2 from
Moody's, again with a negative outlook.

     However, the Group's internal risk based model shows a gap of approximately
E1.7 billion as per December 2002. It has therefore been decided to launch a
capital improvement program to secure the financial strength of the Allianz
Group.

Reduction of equity exposure and volatility

     The reduction of the Group's equity exposure is being addressed through a
number of measures. These measures include a significant hedging program to
protect the Group against potential future losses while the Group retains an
upside potential. The Group will continue to further assess this program to
manage its exposures.

     The Allianz Group has also actively sold and expects to continue to sell
equity investments to further reduce the equity exposure of the Group. This
includes, for example, an intended reduction of its stake in Munich Re from
22.4% as of December 31, 2002 to approximately 15% during the course of 2003 and
2004. As of March 31, 2003, the Allianz Group's stake in Munich Re had been
reduced to slightly less than 20%. See "Related Party Transactions --
Transactions with Munich Re."

Focused portfolio management and capital allocation

     In addition, Allianz AG will significantly step up its focus on the
efficient use of capital in the Group. As stated before, Allianz AG will
implement economic capital savings by discontinuing and selectively scaling down
certain business lines. In addition, sub-performing and non-core businesses will
be divested if, according to the EVA methodology, a positive contribution to the
Group is not expected.

Capital Raising

     The capital raising described in this Offering Circular is an important
element of the decision to strengthen the capital base with a set of
transactions intended to raise total capital of up to E5 billion. By way of this
Offering, Allianz AG intends to raise approximately E4.5 billion, based on a
subscription price of E38.00 per share, resulting in net proceeds of
approximately E4.3 billion after deduction of the commission payable to the
Underwriters and other costs to be borne by Allianz AG. See "Underwriting."

     In a second step -- planned for later this year -- Allianz AG intends to
use the Group's hybrid capital capacity, subject to market conditions.

                                        28


SUMMARY FINANCIAL INFORMATION

     The following table shows the relative contributions of the Allianz Group's
property-casualty, life/health, banking and asset management segments and
related geographic and other sub-segments to the Group's gross premiums written,
total income and net income in 2002, 2001 and 2000. The table also shows the
impact of consolidation adjustments, amortization of goodwill and minority
interests. Consistent with the Group's general practice, gross premiums written
and total income by geographic region are presented before consolidation
adjustments representing the elimination of transactions between Group companies
in different geographic regions and different segments, and net income by
geographic region is presented before those consolidation adjustments,
amortization of goodwill and minority interests.



                                                            YEAR ENDED DECEMBER 31,
                         ----------------------------------------------------------------------------------------------
                                       2002                             2001                           2000
                         --------------------------------   ----------------------------   ----------------------------
                           GROSS                              GROSS                          GROSS
                          PREMIUMS     TOTAL       NET       PREMIUMS    TOTAL     NET      PREMIUMS    TOTAL     NET
                         WRITTEN(1)   INCOME     INCOME     WRITTEN(1)   INCOME   INCOME   WRITTEN(1)   INCOME   INCOME
                         ----------   -------   ---------   ----------   ------   ------   ----------   ------   ------
                                                                 (E IN MILLION)
                                                                                      
Property-Casualty
  Germany..............    12,314      24,019       9,235(2)   12,644    18,382    3,773     11,948     16,966   3,320
  Rest of Europe.......    20,494      22,752       1,932     19,606     20,680      848     17,302     20,011   1,285
  NAFTA................     5,992       5,819        (933)     6,822      6,837   (1,030)     6,300      5,866     (86)
  Rest of World........     2,428       2,118          38      2,401      1,787       39      1,886      1,630       5
  Specialty Lines......     4,948       3,712        (199)     2,321      2,303       94      2,267      2,036     227
  Consolidation
    adjustments(3).....    (2,882)     (2,765)     (1,680)    (1,657)    (1,092)    (265)    (1,321)    (1,312)   (570)
                           ------     -------   ---------     ------     ------   ------     ------     ------   -----
    Subtotal...........    43,294      55,655       8,393     42,137     48,897    3,459     38,382     45,197   4,181
  Amortization of
    goodwill...........        --          --        (370)        --         --     (349)        --         --    (277)
  Minority interests...        --          --        (816)        --         --     (746)        --         --    (642)
                           ------     -------   ---------     ------     ------   ------     ------     ------   -----
    Total Property-
      Casualty.........    43,294      55,655       7,207     42,137     48,897    2,364     38,382     45,197   3,262
Life/Health
  Germany..............    12,234      21,247         137     11,660     19,809      127     11,681     21,662     583
  Rest of Europe.......     5,181      10,941         (95)     5,486     10,524      381      5,751     11,866     910
  Rest of World........     3,251       4,388         (24)     3,010      3,856      (49)     2,818      3,724     (71)
  Consolidation
    adjustments(3).....        (3)         (2)         (2)       (11)        (3)      --        (11)        (1)     (2)
                           ------     -------   ---------     ------     ------   ------     ------     ------   -----
    Subtotal...........    20,663      36,574          16     20,145     34,186      459     20,239     37,251   1,420
  Amortization of
    goodwill...........        --          --        (174)        --         --     (146)        --         --    (137)
  Minority interests...        --          --         177         --         --      (84)        --         --    (658)
                           ------     -------   ---------     ------     ------   ------     ------     ------   -----
    Total
      Life/Health......    20,663      36,574          19     20,145     34,186      229     20,239     37,251     625
Banking(4)
  Operations...........        --      21,275      (1,142)        --     12,841      303         --      1,722     183
  Amortization of
    goodwill...........        --          --        (241)        --         --      (70)        --         --       8
  Minority interests...        --          --          25         --         --     (453)        --         --     (90)
                           ------     -------   ---------     ------     ------   ------     ------     ------   -----
    Total Banking......        --      21,275      (1,358)(5)       --   12,841     (220)        --      1,722     101
Asset Management
  Operations...........        --       3,185         202         --      2,738       77         --      1,722     138
  Amortization of
    goodwill...........        --          --        (377)        --         --     (243)        --         --     (89)
  Minority interests...        --          --        (230)        --         --     (182)        --         --    (136)
                           ------     -------   ---------     ------     ------   ------     ------     ------   -----
    Total Asset
      Management.......        --       3,185        (405)        --      2,738     (348)        --      1,722     (87)
                           ------     -------   ---------     ------     ------   ------     ------     ------   -----
Subtotal...............    63,957     116,689       5,463     62,282     98,662    2,025     58,621     85,892   3,901
Consolidation
  adjustments(6).......      (804)     (8,876)     (6,630)      (694)    (2,705)    (402)      (736)    (2,103)   (441)
                           ------     -------   ---------     ------     ------   ------     ------     ------   -----
Total..................    63,153     107,813      (1,167)    61,588     95,957    1,623     57,885     83,789   3,460
                           ======     =======   =========     ======     ======   ======     ======     ======   =====


------------

(1) Represents premiums written for both direct business and reinsurance assumed
    between Group companies in different countries and segments, as well as from
    third parties. The Group's gross premiums written in respect of reinsurance
    assumed from Group companies are eliminated in consolidation.

                                        29


(2) Includes significant investment related results. See "-- Property-Casualty
    Insurance Operations -- Year Ended December 31, 2002 Compared to Year Ended
    December 31, 2001 -- Net Income."

(3) Represents elimination of intercompany transactions between Group companies
    in different geographic regions.

(4) Reflects the inclusion of Dresdner Bank in the Group's consolidated
    financial statements for the full twelve months of 2002, compared to 2001,
    where Dresdner Bank was consolidated only from July 23, 2001, the date of
    the acquisition.

(5) Includes a realized gain of E1,912 million resulting from the transfer in
    August 2002 of substantially all of Dresdner Bank's German asset management
    subsidiaries to ADAM. See "-- Banking Operations." The gain on this transfer
    was eliminated at the Group level. In addition, this item includes a
    realized gain of E244 million resulting from the merger of Deutsche Hyp into
    Eurohypo in August 2002. See "-- Other -- Real Estate."

(6) Represents elimination of intercompany transactions between Group companies
    in different segments.

FACTORS AFFECTING RESULTS OF OPERATIONS

     The Allianz Group's results of operations are affected by demographics
(particularly with respect to life insurance) and by a variety of market
conditions, including economic cycles, insurance industry cycles (particularly
with respect to property-casualty insurance) and fluctuations in interest rates.
The Allianz Group believes that the impact of these factors will continue to
affect the Group's results of operations. For the year ended December 31, 2002,
approximately 36.7% of the Group's gross premiums were derived from the Group's
German operations. As a result, economic, demographic and market developments in
Germany have materially impacted and can be expected to continue to materially
impact the Allianz Group's results. In addition, fluctuations in exchange rates
in non-euro zone countries in which the Allianz Group does business affect the
Group's euro-denominated reported results. The Group's German net income
includes investment income and realized capital gains on the substantial equity
portfolio held at Allianz AG, which is part of the Group's German
property-casualty segment.

GENERAL MARKET CONDITIONS

     Property-Casualty.  Conditions in the property-casualty insurance markets
in which the Allianz Group operates are generally characterized by periods of
price competition, fluctuations in underwriting results and the occurrence of
unpredictable weather-related and other catastrophe losses. In recent years, the
commercial and industrial property-casualty markets in which the Allianz Group
operates have also been characterized by generally lower customer demand and a
growing trend toward higher retention levels and the use of self-insurance
mechanisms by insureds. During this same period in Europe, the Group's
automobile insurance business lines have been characterized by increased
competition. The Group has succeeded in achieving substantial rate increases in
the majority of its primary property-casualty markets in 2002.

     In addition, the underwriting results of the Allianz Group's
property-casualty operations are significantly influenced by estimates of
property-casualty loss reserves, which are an accumulation of the estimated
amounts necessary to settle all outstanding claims as of a particular reporting
date. In recent years, the Group's U.S. property-casualty loss reserves have
shown cumulative deficiencies, primarily as a result of claims related to
environmental and asbestos exposures. See "Risk Factors -- Claims reserves for
the Group's property and casualty insurance and reinsurance policies are based
on future estimates which if not correct could materially adversely effect
earnings," as well as "-- Property-Casualty Insurance Reserves" for a discussion
of the Group's property-casualty reserves on a consolidated Group basis under
IFRS, and on an individual country basis under local accounting rules.

     Prior to March 31, 2003, the Group's most significant associated enterprise
was Munich Re, one of the world's largest reinsurers. To the extent loss reserve
development (favorable or unfavorable) impacted Munich Re's results, it was also
reflected in the Group's results on an equity basis. Effective March 31, 2003,
however, the Group reduced its shareholding in Munich Re to slightly less than
20%. As a result of the reduction in the Group's shareholding in Munich Re to
less than 20%, the Group ceased to account for Munich Re as an associated
enterprise at March 31, 2003. Accordingly, the treatment of Munich Re in the
Group's financial statements after March 31, 2003 will not be comparable to that
of prior periods.

     Life/Health.  Demographic studies suggest that over the next decade there
will be growth in the Allianz Group's principal life insurance markets of
Germany, France, Italy and the rest of Europe and the United States in the
number of individuals who enter the age group that the Allianz Group believes is
most likely to purchase retirement-oriented life insurance products. In

                                        30


addition, in a number of the Group's European markets, including Germany,
retirement, medical and other social benefits previously provided by the
government have been or are expected to be curtailed in the coming years. The
Allianz Group believes that these trends will increase opportunities for private
sector providers of life insurance, health, pension and other social
benefits-related insurance products. The Group believes that its distribution
networks, the quality and diversity of its products and its investment
management expertise in each of these markets position the Allianz Group to
benefit from such developments.

     Banking.  Conditions in the banking market in which the Allianz Group
operates, particularly in Europe, are generally characterized by intense
competition and low profit margins. In 2002, the downturn in global equity
markets, declining transaction volumes and increasing levels of default by both
corporate and individual borrowers combined to result in significant net losses
in the Group's banking segment. Nonetheless, the sale of life insurance and
retirement savings products through bank branches increased in 2002,
particularly in the Group's core markets of Germany, Italy and France. The
Allianz Group believes that bancassurance will be an increasingly important
distribution channel for all of its business segments in the years to come.

     Asset Management.  Prior to 2001, the Allianz Group's asset management
segment had generally benefited from favorable market conditions, including
falling interest rates and generally strong capital markets conditions in Europe
and the United States, marked by intermittent periods of extreme volatility. In
2001 and 2002, the downturn in the global equity markets, together with the
terrorist attack of September 11, 2001, had a significant negative impact on the
Group's asset management operations, resulting in widespread price declines in
equity securities and transaction volumes and increased uncertainty on the part
of many third-party investors. The Allianz Group cannot predict how long the
downturn in the capital markets will last or what its long-term effect on
investor confidence will be. While the assets under management in the Group's
asset management segment include a significant amount of funds related to
affiliated Allianz Group insurance operations, a growing portion of the Allianz
Group's assets under management, particularly following the Group's acquisitions
of PIMCO in May 2000, Nicholas-Applegate in January 2001 and Dresdner Bank in
July 2001, represents third-party funds.

EXCHANGE RATES

     The Allianz Group publishes its consolidated financial statements in euros.
A significant portion of the Group's revenues and expenses from its subsidiaries
outside the euro zone, including in the United States, Switzerland and the
United Kingdom, originates in currencies other than the euro. As a result, the
Allianz Group has a financial reporting translation exposure attributable to
fluctuations in the values of these currencies against the euro. The impact of
these fluctuations in exchange rates is mitigated by the fact that the Group's
non-euro revenues and related expenses, as well as assets and liabilities, are
generally denominated in the same currencies. See "-- Risk Management" for a
discussion of the Group's management of foreign exchange rate-related risks as
well as "Risk Factors -- Changes in value relative to the euro of non-euro zone
currencies in which the Group generates revenues and incurs expenses could
adversely affect the Group's reported earnings and cash flow."

CONSOLIDATION DIFFERENCES

     The Allianz Group's reported segment results in 2002 were significantly
affected by intercompany transactions, including the transfer in August 2002 of
substantially all of Dresdner Bank's German asset management subsidiaries to
Allianz Dresdner Asset Management GmbH ("ADAM") (see "-- Banking Operations")
and transfers of investment securities in connection with the repositioning of
certain shareholdings within the Group (see "-- Insurance Operations" and "--
Banking Operations"). The gains and losses on these transfers were eliminated at
the Group level. In addition, the Group's 2002 results reflect the consolidation
of Dresdner Bank for the full twelve months of 2002, compared to 2001, where
Dresdner Bank was consolidated only from July 23, 2001, the date of the
acquisition. On August 1, 2002, the Group deconsolidated the assets and
liabilities of its former mortgage banking subsidiary, Deutsche Hyp. See "--
Banking Operations -- Other -- Real Estate."

     Prior to March 31, 2003, the Group's most significant associated enterprise
was Munich Re, one of the world's largest reinsurers. To the extent loss reserve
development (favorable or

                                        31


unfavorable) impacted Munich Re's results, it was also reflected in the Group's
results on an equity basis. Effective March 31, 2003, however, the Group reduced
its shareholding in Munich Re to slightly less than 20%. As a result of the
reduction in the Group's shareholding in Munich Re to less than 20%, the Group
ceased to account for Munich Re as an associated enterprise at March 31, 2003.
Accordingly, the treatment of Munich Re in the Group's financial statements
after March 31, 2003 will not be comparable to that of prior periods.

CRITICAL ACCOUNTING POLICIES

     The Allianz Group has identified the accounting policies that are critical
to its business operations and the understanding of its results of operations.
These critical accounting policies are those which involve the most complex or
subjective decisions or assessments, and relate to insurance reserves, loan loss
allowances, the determination of the fair value of financial assets and
liabilities (including impairment charges), goodwill and deferred tax assets and
off-balance sheet arrangements. In each case, the determination of these items
is fundamental to the Group's financial position and results of operations, and
requires management to make complex judgments based on information and financial
data that may change in future periods. As a result, determinations regarding
these items necessarily involve the use of assumptions and subjective judgments
as to future events and are subject to change, and the use of different
assumptions or data could produce materially different results.

INSURANCE RESERVES

     The Allianz Group's insurance reserves represent estimates of future
payouts that the Allianz Group will make in respect of property-casualty and
life/health insurance claims, including expenses relating to such claims. Such
estimates are made on a case-by-case basis, based on the facts known to the
Group at the time reserves are established, and are periodically adjusted to
recognize the estimated ultimate cost of a claim. In addition, the Allianz Group
establishes so-called "IBNR" reserves in its property-casualty business to
recognize the estimated cost of losses that have occurred but of which the Group
does not yet have notice. When actual claims experience differs from the Group's
previous estimates, the resulting difference will generally be reflected in the
Group's reported results for the period of the change in estimate. In each case,
the establishment of the Group's insurance reserves is an inherently uncertain
process, involving assumptions as to factors such as court decisions, changes in
laws, social, economic and demographic trends, inflation and other factors
affecting claim costs, and, in the Group's life/health insurance business,
assumptions concerning mortality and morbidity trends. In recent years, the
Allianz Group's property-casualty insurance reserves in the United States have
been significantly impacted by claims relating to asbestos and environmental
exposures. For a further discussion of the Group's property-casualty insurance
reserves, including an additional E762 million in asbestos and environmental
reserves taken in 2002, see "-- Property-Casualty Insurance Reserves" as well as
"Risk Factors -- Claims reserves for the Group's property-casualty insurance and
reinsurance policies are based on estimates as to future claims liabilities. In
2002, the Group made significant additional reserves relating to
asbestos-related and environmental claims in the United States and in connection
with discontinued and run-off businesses. Further adverse developments relating
to claims could lead to further reserve additions and adversely impact the
Group's results of operations."

LOAN LOSS ALLOWANCES

     The Allianz Group's loan loss allowances represent management's estimate of
the probable credit losses in the Group's loan portfolio. Allowances are
established on a case-by-case basis, are updated over time, and are described at
greater length under "-- Selected Statistical Information Relating to the
Group's Banking Operations." Judgments concerning the timing and level of the
Group's loan loss allowances are based on numerous estimates and judgments,
including determinations concerning borrower creditworthiness, contractual loan
terms and available judicial and other remedies. Allowances for counterparty
risk are established against individual exposures and are subject to periodic
management review. Specific loan loss allowances are recorded if it is probable
that the borrower will not repay principal and/or interest according to the
contractually agreed terms. Individually impaired loans are measured on the
basis of the present value of expected cashflows and take into consideration the
borrower's financial posi-

                                        32


tion, the contractual terms of the loan and the value of collateral if any. In
2002, the Group's banking operations' recorded additional net loan loss
provisions of E2,222 million. See "-- Banking Operations -- Results of
Operations -- Year Ended December 31, 2002 Compared to Year Ended December 31,
2001 -- Loan Loss Provisions" as well as "Risk Factors -- The Group has
significant counterparty risk exposure" and "Risk Factors -- Dresdner Bank
continues to experience significant loan losses relating to problem loans."

     General loss allowances are established to provide for incurred but
unidentified losses that are inherent in the loan portfolio at the relevant
balance sheet date. The general loan loss allowance is reviewed in the light of
general economic conditions, the size and diversity of the portfolio and
historical default rates.

     Country risk allowances are established for transfer risk, which is a
measure of the likely ability of a borrower in a certain country to repay its
foreign currency-denominated debt in light of the impact of currency
devaluations, macroeconomic or political developments in that country. Country
risk allowances are based on country ratings that incorporate current and
historical economic, political and other data to categorize countries by risk
profile.

     When the Allianz Group determines that a loan is uncollectible, the loan is
charged off against any existing specific loss allowance or directly recognized
as expense in the income statement. Changes in judgments, analyses and the
methodologies the Allianz Group utilizes may lead to changes over time in the
level and timing of the allowances the Group establishes and related
charge-offs, which may in turn materially impact the results of the Group's
banking segment. In 2002, the Group's banking segment's gross charge-offs were
E1,889 million.

FAIR VALUES AND IMPAIRMENTS

     A portion of the Allianz Group's assets and liabilities is recorded at fair
value, including trading assets and liabilities, and securities available for
sale. Fair value determinations for financial assets and liabilities are based
generally on listed market prices or broker or dealer price quotations. If
prices are not readily determinable, fair value is based on either internal
valuation models or management's estimate of amounts that could be realized
under current market conditions. Fair values of certain financial instruments,
including OTC derivative instruments, are determined using pricing models that
consider, among other factors, contractual and market prices, correlations, time
value, credit, yield curve volatility factors and/or prepayment rates of the
underlying positions. The use of different pricing models and assumptions could
lead to different estimates of fair value.

     Financial assets are reviewed regularly for impairments, and valuation
write-downs to fair value are charged to income if an other than temporary
diminution in value occurs. Determinations concerning an other than temporary
diminution involve judgments concerning market conditions, issuers' financial
positions and other factors. The Group generally considers an other than
temporary diminution to have occurred upon a decline of 20% or greater from book
value over a period in excess of six consecutive months. For a discussion of
impairment charges taken in 2002, see "Risk Factors -- The Group's investment
portfolio is significantly exposed to equity securities. Market risks could
impair this portfolio and adversely impact the Group's financial position and
results of operations," and "Risk Factors -- Market factors, as well as a lack
of improvement in the Group's operating performance, may adversely affect the
levels of deferred acquisition costs, goodwill and deferred tax assets the Group
maintains on its balance sheet; the deferred tax assets the Group maintains are
also potentially impacted by changes in German tax legislation."

OFF-BALANCE SHEET ARRANGEMENTS

     Off-balance sheet arrangements that the Allianz Group enters into in its
investment and banking activities include securitization and other transactions
involving special- or limited-purpose entities ("SPEs"), credit lines and loan
commitments. Off-balance-sheet arrangements the Allianz Group enters into in its
insurance business also include letter of credit ("LOC") transactions where the
Group provides LOC coverage for all or part of its obligations to insureds or
other customers, or where similar coverage is provided to the Allianz Group by
reinsurers or other counterparties, in each case in accordance with applicable
credit or regulatory requirements.

                                        33


     Off-balance sheet transactions may be carried out with or through a variety
of unconsolidated SPEs. In its insurance and reinsurance businesses, the Allianz
Group has entered into reinsurance transactions with SPEs, which provide the
Group with long-term reinsurance coverage and were funded through the issuance
of so-called "catastrophe bonds" to third-party investors. In its banking
business, the Allianz Group has established SPEs in order to provide
administrative services, engage in underwriting activities, enter into
derivative transactions, provide liquidity and overdraft facilities and
guarantees, securitize financial assets the Group holds, reduce credit risks on
the Group's loan portfolios, and provide alternative financing structures and
investment products for the Group's customers. Material exposures related to the
transactions are recorded or disclosed in the Group's consolidated financial
statements. Risks associated with establishing SPEs and transactions entered
into with SPEs are reviewed in the banking operations risk management process.

     In the context of the "Silver Tower" asset-backed program of Dresdner Bank,
in which third-party receivables and receivables of Dresdner Bank Group are
securitized, and which is refinanced by commercial paper, Dresdner Bank has
granted short-term credit lines in the amount of E10.2 billion in the event that
a refinancing through commercial paper is not possible. So far, E4 billion of
such credit lines were used for refinancing instead of the placement of
commercial paper. The risk exists that Dresdner Bank would be required to use
its own credit lines by up to further E6.2 billion, which would accordingly
raise its regulatory risk-weighted assets.

                                        34


CONSOLIDATED RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

     The Allianz Group's total income increased by E11,856 million, or 12.4%, to
E107,813 million in 2002 from E95,957 million in 2001, due primarily to the
full-year consolidation of Dresdner Bank in 2002, offset in part by the effects
of weakness in the capital markets and the global economy, which affected all of
the Group's operating segments and its banking segment in particular. The
Group's earnings from ordinary activities before taxation decreased by E3,041
million, or 166.4%, to a loss of E1,214 million in 2002 from income of E1,827
million in 2001. The Allianz Group had a consolidated tax benefit of E735
million in 2002 and a consolidated tax benefit of E840 million in 2001,
representing overall effective tax rates of 62.8% and (52.1)%, respectively,
compared to statutory rates for the Group's primary German and other operating
subsidiaries that ranged from 12.5% to 45.5% and averaged 32.5%. The
consolidated tax benefit in 2002 was due primarily to tax losses, for which a
deferred tax asset was recognized.

     Net income decreased E2,790 million, or 171.9%, to a loss of E1,167 million
in 2002, compared to income of E1,623 million in 2001, reflecting primarily
weakness in the capital markets and the global economy, offset in part by the
tax benefit discussed above. This weakness was particularly evident in
write-downs of available for sale investments, which increased significantly to
E5,523 million in 2002. In the Group's banking segment, earnings were negatively
affected by additional net loan loss provisions of E2,222 million. The Group's
property-casualty insurance business was negatively impacted by significant
claims, including primarily E762 million relating to asbestos and environmental
reserve-strengthening measures at Fireman's Fund and E710 million in net claims
relating to severe floods that struck Germany and Central and Eastern Europe in
July and August 2002. These negative effects in our property -- casualty segment
were offset in part by significant investment-related gains and rate increases
in most of the Group's major property-casualty markets.

     The following table sets forth the percentage changes for 2002 over 2001 in
the Allianz Group's total income, total expenses and net income by segment,
which are discussed in greater detail below, and for the Group as a whole.
Changes in results in the Group's banking and asset management segments related
primarily to the full-year consolidation of Dresdner Bank in 2002. Percentage
changes for 2002 over 2001 for the Group's banking segment, which the Allianz
Group established as a separate segment in 2001, reflect the inclusion of
Dresdner Bank in the Group's consolidated financial statements as of July 23,
2001 and are therefore not comparable. See "-- Banking Operations."



                                                                       % CHANGE 2002/2001
                                                          --------------------------------------------
                                                          TOTAL INCOME    TOTAL EXPENSES    NET INCOME
                                                          ------------    --------------    ----------
                                                                                   
Property-Casualty.....................................       13.8%             3.5%            204.9%
Life/Health...........................................        7.0%             8.6%            (91.7)%
Banking...............................................       65.7%            80.8%           (517.3)%
Asset Management......................................       16.3%            11.3%            (16.4)%
Consolidated Group....................................       12.4%            15.8%           (171.9)%


YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000

     The Allianz Group's total income increased E12,168 million, or 14.5%, to
E95,957 million in 2001 from E83,789 million in 2000, due primarily to the
acquisition of Dresdner Bank in July 2001, together with increases in
property-casualty insurance, offset in part by a decrease in life/health
insurance. Despite the increase in total income, the Group's earnings from
ordinary activities before taxation decreased by E3,086 million, or 62.8%, to
E1,827 million in 2001 from E4,913 million in 2000, reflecting primarily the
effects of the terrorist attack of September 11, 2001 in the United States and
weakness in the capital markets. On a consolidated Group basis, the terrorist
attack of September 11, 2001 resulted in net claims costs of approximately E1.5
billion. As a result of the weakness in the capital markets, earnings were also
negatively affected by E1.6 billion of investment write-downs. The Allianz Group
had a consolidated tax benefit of E840 million in 2001 and a consolidated tax
expense of E176 million in 2000, representing overall effective tax rates of
(52.1)% and 2.8% respectively, compared to statutory rates for the Group's
primary German and other operating subsidiaries that ranged from 10.0% to 43.0%,
and averaged 19.2%.

                                        35


The consolidated tax benefit in 2001 was due to a substantial amount of tax
losses resulting primarily from claims related to the September 11, 2001
terrorist attack in the United States, together with a significant amount of
tax-exempt realized gains on investments.

     Net income decreased E1,837 million, or 53.1%, to E1,623 million in 2001,
compared to E3,460 million in 2000, reflecting primarily the impact of the
special adjustment to income taxes in 2000, the effects of the terrorist attack
of September 11, 2001 in the United States and weakness in the capital markets,
offset in part by the tax benefit discussed above.

     The following table sets forth the percentage changes for 2001 over 2000 in
the Allianz Group's total income, total expenses and net income by segment,
which are discussed in greater detail below, and for the Group as a whole.
Results in the Group's banking and asset management segments reflected primarily
the acquisition of Dresdner Bank in July 2001. Percentage changes for 2001 over
2000 for the Group's banking segment, which the Allianz Group established as a
separate segment in 2001, are based on the results for 2000 of the banking
operations of the Allianz Group, which the Group reported in 2000 and prior
years together with asset management as part of its financial services segment
and are therefore not comparable. See "-- Asset Management Operations" and
"-- Banking Operations."



                                                                       % CHANGE 2001/2000
                                                          --------------------------------------------
                                                          TOTAL INCOME    TOTAL EXPENSES    NET INCOME
                                                          ------------    --------------    ----------
                                                                                   
Property-Casualty.....................................         8.2%            12.6%           (27.5)%
Life/Health...........................................        (8.2)%           (5.2)%          (63.4)%
Banking...............................................       645.7%           689.4%          (317.8)%
Asset Management......................................        59.0%            83.2%          (300.0)%
Consolidated Group....................................        14.5%            19.3%           (53.1)%


CONSOLIDATED ASSETS AND LIABILITIES

YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

     Total assets decreased by E90,869 million, or 9.6%, to E852,056 million at
December 31, 2002, from E942,925 million at December 31, 2001, primarily as a
result of the deconsolidation of Deutsche Hyp and price declines in the capital
markets. The Group's own investments (including loans and advances in the
Group's banking segment) decreased by E88,505 million, or 11.3%, to E696,433
million in 2002 from E784,938 million in 2001, while separate account assets
increased by E965 million, or 3.9%, to E25,657 million at December 31, 2002,
from E24,692 million at December 31, 2001. Insurance investments (excluding
separate account assets) increased by E8,442 million, or 2.4%, to E362,577
million in 2002 from E354,135 million in 2001.

     The Allianz Group's shareholders' equity decreased by 31.2% to E21,772
million at December 31, 2002 compared to E31,664 million at December 31, 2001.
This decrease resulted primarily from a decrease in net unrealized gains of
E7,198 million, from E8,276 million at December 31, 2001 to E1,049 million
(adjusted for currency translation) at December 31, 2002, reflecting generally
adverse conditions in the capital markets.

YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000

     Total assets increased by E502,930 million, or 114.3%, to E942,925 million
at December 31, 2001, from E439,995 million at December 31, 2000, primarily as a
result of the Allianz Group's acquisition of Dresdner Bank in July 2001. The
Group's own investments grew by E456,813 million, or 139.2%, to E784,938 million
in 2001 from E328,125 million in 2000, while separate account assets increased
E1,922 million, or 8.4%, to E24,692 million at December 31, 2001, from E22,770
million at December 31, 2000. Insurance investments grew by E19,066 million, or
5.7%, to E354,135 million in 2001 from E335,069 million in 2000.

     The Allianz Group's shareholders' equity decreased by 11.1% to E31,664
million at December 31, 2001 compared to E35,603 million at December 31, 2000.
This decrease resulted primarily from a decrease in net unrealized gains of
E5,210 million in 2001.

                                        36


DISCUSSION OF OPERATIONS BY BUSINESS SEGMENT

INSURANCE OPERATIONS

     The Allianz Group provides property-casualty and life/health products and
services on an individual and group basis in more than 70 countries worldwide.
In its property-casualty business, the Allianz Group provides, among other
things, automobile, homeowners, travel and other personal lines products and is
a leading provider of commercial and industrial coverages to business
enterprises of all sizes, including many of the world's largest companies. The
Allianz Group's life/health insurance businesses provide endowment, annuity and
term insurance products and a wide range of health, disability and related
coverages to individual insureds, as well as group life, group health and
pension products to employers. In addition to strong local positions, the
Allianz Group has established leading positions in certain specialty lines on a
global basis, including credit insurance, marine and aviation insurance,
industrial reinsurance through Allianz Global Risks, and travel and assistance
insurance.

     The Allianz Group's products are marketed in Germany primarily under the
"Allianz" brand name. In other countries the Allianz Group generally operates
through its subsidiary insurers' brand names, which are identified as part of
the Allianz Group. The Group believes that its brand name is one of the
best-known and most highly respected in the German marketplace, combining a
reputation for excellent customer service with an image of superior financial
strength.

     The Allianz Group's philosophy is to provide considerable latitude to its
operating entities in product design, underwriting, distribution, marketing and
operations while providing various levels of centralized support in such areas
as financial and strategic planning, investment management, knowledge transfer,
accounting and reinsurance to the Group's subsidiaries from the Group's
headquarters in Munich. The Group refers to this combination of centralized
strategic management and local business autonomy as a "multi-local" approach to
its global insurance business. The Allianz Group believes that this gives the
Group's subsidiary operations the flexibility to best respond to local market
conditions and allows the Group to implement strategic goals and create
incentives for its employees on a country-by-country basis.

                                        37


PROPERTY-CASUALTY INSURANCE OPERATIONS

     The following table sets forth certain financial information for the
property-casualty operations of the Allianz Group for the years indicated:



                                                                    YEAR ENDED DECEMBER 31,
                                                                -------------------------------
                                                                 2002         2001       2000
                                                                -------      -------    -------
                                                                        (E IN MILLION)
                                                                               
Gross premiums written......................................     43,294       42,137     38,382
                                                                -------      -------    -------
Premiums earned(net)(1).....................................     36,458       34,428     31,529
Interest and similar income.................................      4,473        5,068      5,568
Income from affiliated enterprises, joint ventures and
  associated enterprises....................................      8,494(2)       889      1,833
Other income from investments...............................      3,652        4,307      4,259
Trading income..............................................        207        1,451        (10)
Fee and commission income, and income from service
  activities................................................        521        1,425        940
Other income................................................      1,850        1,329      1,078
                                                                -------      -------    -------
     Total income...........................................     55,655       48,897     45,197
                                                                -------      -------    -------
Insurance benefits(net)(3)..................................    (28,974)     (28,200)   (25,413)
Interest and similar expenses...............................     (1,564)      (1,323)    (1,136)
Other expenses for investments..............................     (3,567)      (2,888)    (1,913)
Loan loss allowance.........................................         (7)          (4)        --
Acquisition costs and administrative expenses(4)............    (10,545)     (10,042)    (9,106)
Amortization of goodwill....................................       (370)        (349)      (277)
Other expenses..............................................     (3,074)      (3,682)    (3,453)
                                                                -------      -------    -------
     Total expenses.........................................    (48,101)     (46,488)   (41,298)
                                                                -------      -------    -------
Earnings from ordinary activities before taxation...........      7,554        2,409      3,899
Taxes.......................................................        469          701          5
Minority interests in earnings..............................       (816)        (746)      (642)
                                                                -------      -------    -------
Net income..................................................      7,207        2,364      3,262
                                                                -------      -------    -------
Special income effects......................................         --           --     (1,037)
                                                                -------      -------    -------
Adjusted net income.........................................      7,207        2,364      2,225
                                                                =======      =======    =======


------------

(1) Net of reinsurance ceded of E6,150 million, E6,669 million and E6,488
    million in 2002, 2001 and 2000, respectively.

(2) Reflects realized gains of E1,886 million from open market sales of Munich
    Re shares and E713 million on the sale of a real estate subsidiary in Italy,
    as well as significant income from intercompany transactions, including
    realized gains of E3,332 million from the transfer of Munich Re shares from
    Allianz AG to Dresdner Bank and dividend income of E382 million from
    Dresdner Bank. The gains on these intercompany transactions were eliminated
    at the Group level.

(3) Includes loss and loss adjustment expenses of E28,502 million, E27,919
    million and E24,566 million in 2002, 2001 and 2000, respectively.

(4) Includes net underwriting costs of E10,015 million, E9,543 million and
    E8,548 million in 2002, 2001 and 2000, respectively.

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

     Gross Premiums Written. The Allianz Group's gross premiums written from
property-casualty operations in 2002 increased by E1,157 million, or 2.7%, to
E43,294 million from E42,137 million in 2001. Eliminating the effect of exchange
rate movements and changes in the scope of consolidation, which decreased 2002
gross premiums written by E246 million, gross premiums written increased by
3.2%. This increase came primarily as a result of rate increases in all of the
Group's major markets, offset in part by a more selective underwriting policy,
particularly in the Group's industrial reinsurance business and in the United
States, but also in other major markets.

     Premiums Earned (Net). On a Group-wide basis, property-casualty net
premiums earned in 2002 and 2001 reflected premiums ceded to reinsurers of
E6,150 million and E6,669 million, respectively, resulting in overall retention
levels of approximately 85.6% in 2002 and 83.8% in 2001. Net premiums earned
increased by E2,030 million, or 5.9%, to E36,458 million in 2002 from

                                        38


E34,428 million in 2001, which exceeded the 2.7% increase in gross premiums
written and reflected the increase in overall retention levels.

     Trading Income. Trading income from the Allianz Group's property-casualty
operations decreased by E1,244 million, to E207 million in 2002 from E1,451
million in 2001, due primarily to the decrease of E1,212 million in gains from
certain derivative financial instruments. These gains relate to derivative
financial instruments embedded in outstanding exchangeable bonds that do not
qualify for hedge accounting and from forward contracts that are used to hedge
investments. Gains or losses on such financial instruments arising from
valuation at fair value are included in trading income. The decrease in 2002
reflected declines in the value of the underlying financial instruments.

     Insurance Benefits (Net).  Net insurance benefits for the Allianz Group's
worldwide property-casualty business, which consist of claims paid, changes in
reserves for loss and loss adjustment expenses, changes in other reserves and
expenses of premium refunds, increased by E774 million, or 2.7%, to E28,974
million in 2002 from E28,200 million in 2001. Of this amount in 2002, E762
million related to asbestos and environmental reserve-strengthening measures at
Fireman's Fund. An additional approximately E710 million was attributable to net
claims relating to severe flooding in Germany and Central and Eastern Europe in
July and August 2002. The increase in net insurance benefits in 2002 followed on
an already high level of net insurance benefits in 2001, which reflected claims
from the terrorist attack of September 11, 2001. For additional information on
reserve-strengthening measures at the Group's U.S. property-casualty insurance
subsidiaries, see "-- Property-Casualty Insurance Reserves -- Individual Country
Reserves -- Gross Reserves -- United States."

     The following table sets forth net claims, expense and combined ratio
information for the Allianz Group's property-casualty operations by geographic
region for the years 2002 and 2001:



                                                         YEAR ENDED DECEMBER 31, 2002
                                        --------------------------------------------------------------
                                                   REST OF              REST OF    SPECIALTY
                                        GERMANY    EUROPE     NAFTA      WORLD       LINES      TOTAL
                                        -------    -------    ------    -------    ---------    ------
                                                                              
Claims ratio(1).....................     74.2%      76.8%      94.6%     74.5%       75.9%       78.2%
Expense ratio(2)....................     28.3%      24.6%      32.9%     28.1%       32.5%       27.5%
                                        ------     ------     ------    ------      ------      ------
Combined ratio......................    102.5%     101.4%     127.5%    102.6%      108.4%      105.7%




                                                         YEAR ENDED DECEMBER 31, 2001
                                        --------------------------------------------------------------
                                                   REST OF              REST OF    SPECIALTY
                                        GERMANY    EUROPE     NAFTA      WORLD       LINES      TOTAL
                                        -------    -------    ------    -------    ---------    ------
                                                                              
Claims ratio(1).....................     76.2%      80.3%      99.9%     72.8%       66.5%       81.1%
Expense ratio(2)....................     26.8%      26.2%      29.2%     32.9%       39.5%       27.7%
                                        ------     ------     ------    ------      ------      ------
Combined ratio......................    103.0%     106.5%     129.1%    105.7%      106.0%      108.8%


------------

(1) Represents ratio of total loss and loss adjustment expenses to net earned
    premium.

(2) Represents ratio of net underwriting costs to net earned premium.

     The overall decrease in the Allianz Group combined ratio to 105.7% in 2002
from 108.8% in 2001 reflects the decrease in the Group's claims ratio to 78.2%
in 2002 from 81.1% in 2001. The Group claims ratio was affected primarily by
improved claims ratios in the Group's reinsurance operations at Allianz AG and
in many of the Group's major markets, reflecting rate increases, particularly in
the Group's automobile lines, and decreased claim frequency. These improvements
were offset in part by increased net claims related to severe flooding in
Germany and Central and Eastern Europe in July and August 2002 and a series of
other storms, asbestos and environmental reserve-strengthening measures at
Fireman's Fund and increased net claims in the Group's credit insurance.
Excluding the effect of the flooding-related claims and the asbestos and
environmental reserve-strengthening measures in 2002 and the effects of the
September 11, 2001 terrorist attack in 2001, the Group claims ratio would have
decreased to 74.2% in 2002 from 76.7% in 2001. The Group expense ratio was
largely unchanged at 27.5% in 2002 compared to 27.7% in 2001. Increased expenses
relating to the development of the distribution capacity in Germany were offset
by increased operating efficiencies at other Group companies.

     Acquisition Costs and Administrative Expenses.  Acquisition costs and
administrative expenses consist primarily of changes in deferred acquisition
costs, administrative expenses, and

                                        39


net underwriting costs. Net underwriting costs of E10,015 million in 2002
increased E472 million, or 4.9%, over 2001 levels of E9,543 million, which
slightly exceeded the Allianz Group's property-casualty premium growth rate of
2.7% due primarily to reduced commission income from reinsurance business ceded,
reflecting higher overall retention levels. The increased expenses were offset
in part by increased operating efficiencies at Group companies and cost
reduction measures.

     Net Income.  Net income from property-casualty insurance operations in 2002
increased by E4,843 million, or 204.9%, to E7,207 million in 2002 compared with
E2,364 million in 2001. The increase was due primarily to investment-related
items, including realized gains of E1,886 million from open market sales of
Munich Re shares, approximately E1,100 million from open market sales of
Vodafone AG shares and E713 million on the sale of a real estate subsidiary in
Italy, as well as realized gains from the sale of other shareholdings in the
Group's German equity portfolio. The segment also recorded significant income
from intercompany transactions, including realized gains of E3,332 million from
the transfer of Munich Re shares from Allianz AG to Dresdner Bank and dividend
income of E382 million from Dresdner Bank, E224 million from the sale of
Vereinte Lebensversicherung AG from Vereinte Versicherung AG to Allianz
Lebensversicherungs-AG ("Allianz Leben"). The gains on these intercompany
transactions were eliminated at the Group level. These increases were offset in
part by realized losses of E1,536 million and net investment write-downs of
E1,737 million, reflecting weakness in the capital markets. Excluding these
investment related items, net income from property-casualty operations in 2002
reflected significantly increased net insurance benefits, including primarily
E762 million relating to asbestos and environmental reserve-strengthening
measures at Fireman's Fund and E710 million in net claims relating to severe
flooding in Germany and Central and Eastern Europe in July and August 2002,
offset in part by the increase in net insurance premiums attributable to rate
increases in most of the Group's major markets.

     Amortization of goodwill was E370 million in 2002, an increase of E21
million, or 6.0%, from E349 million in 2001, largely as a result of the
amortization of goodwill associated with the Allianz Group's acquisition of
additional shareholdings in Frankfurter Versicherungs-AG and Bayerische
Versicherungsbank AG in June 2002. See "Related Party Transactions --
Transactions with Munich Re." Minority interests in earnings increased to E816
million in 2002 from E746 million in 2001.

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

     Gross Premiums Written.  The Allianz Group's gross premiums written from
property-casualty operations in 2001 increased by E3,755 million, or 9.8%, to
E42,137 million from E38,382 million in 2000. Eliminating the effect of exchange
rate movements, which increased 2001 gross premiums written by E28 million,
gross premiums written increased by 9.7%. This increase came as a result of
increases in all of the Group's geographic segments, particularly in Rest of
Europe, due to growth in France and Italy, and in Germany as discussed below.

     Premiums Earned (Net).  On a Group-wide basis, property-casualty net
premiums earned in 2001 and 2000 reflected premiums ceded to reinsurers of
E6,669 million and E6,488 million, respectively, resulting in overall retention
levels of approximately 83.8% in 2001 and 82.9% in 2000. Net premiums earned
increased by E2,899 million, or 9.2%, to E34,428 million in 2001 from E31,529
million in 2000, paralleling the 9.8% increase in gross premiums written.

     Trading Income.  Trading income from the Allianz Group's property-casualty
operations increased E1,461 million, to E1,451 million in 2001 from a loss of
E10 million in 2000, due primarily to income of E1,437 million in gains from
certain derivative financial instruments. These gains relate to derivative
financial instruments embedded in outstanding exchangeable bonds that do not
qualify for hedge accounting and from forward contracts that are used to hedge
investments. Gains or losses on such financial instruments arising from
valuation at fair value are included in trading income.

     Insurance Benefits (Net).  Net insurance benefits for the Allianz Group's
worldwide property-casualty business increased by E2,787 million, or 11.0%, to
E28,200 million in 2001 from E25,413 million in 2000. A significant portion of
the increase was attributable to the September 11, 2001 terrorist attack in the
United States, which negatively impacted net claims in the property-casualty
lines by approximately E1.5 billion in 2001, primarily in the United States, and

                                        40


to a lesser extent, in the Group's reinsurance operations in Germany and other
countries. The remainder of the increase in net insurance benefits related to
increased premium volume.

     The following table sets forth net loss, expense and combined ratio
information for the Allianz Group's property-casualty operations by geographic
region for the years 2001 and 2000:



                                                         YEAR ENDED DECEMBER 31, 2001
                                        --------------------------------------------------------------
                                                   REST OF              REST OF    SPECIALTY
                                        GERMANY    EUROPE     NAFTA      WORLD       LINES      TOTAL
                                        -------    -------    ------    -------    ---------    ------
                                                                              
Claims ratio(1).....................     76.2%      80.3%      99.9%     72.8%       66.5%       81.1%
Expense ratio(2)....................     26.8%      26.2%      29.2%     32.9%       39.5%       27.7%
                                        ------     ------     ------    ------      ------      ------
Combined ratio......................    103.0%     106.5%     129.1%    105.7%      106.0%      108.8%




                                                         YEAR ENDED DECEMBER 31, 2000
                                        --------------------------------------------------------------
                                                   REST OF              REST OF    SPECIALTY
                                        GERMANY    EUROPE     NAFTA      WORLD       LINES      TOTAL
                                        -------    -------    ------    -------    ---------    ------
                                                                              
Claims ratio(1).....................     73.5%      80.8%      87.9%     75.5%       53.1%       77.9%
Expense ratio(2)....................     24.2%      27.1%      29.6%     30.0%       36.3%       27.0%
                                         -----     ------     ------    ------       -----      ------
Combined ratio......................     97.7%     107.9%     117.5%    105.5%       89.4%      104.9%


------------

(1) Represents ratio of total loss and loss adjustment expenses to net earned
    premium.

(2) Represents ratio of net underwriting costs to net earned premium.

     The overall increase in the Group combined ratio to 108.8% in 2001 from
104.9% in 2000 reflects deteriorating claims ratios in the NAFTA zone, Germany
and the Group's specialty lines, primarily due to increased net claims as a
result of the September 11, 2001 terrorist attack and, in the case of specialty
lines, unfavorable economic conditions, offset in part by improved claims ratios
in Rest of Europe and Rest of World. Excluding the effect of the claims relating
to the September 11, 2001 terrorist attack in the United States, the combined
ratio would have decreased slightly to 104.4% in 2001 from 104.9% in 2000. The
Group expense ratio worsened slightly to 27.7% in 2001 from 27.0% in 2000, due
primarily to expenses incurred in the Group's German property-casualty
operations and at Allianz AG in connection with the build-out of the Group's
information technology systems and marketing and sales force development. Also
contributing to the increased expense ratio were expenses incurred at Allianz AG
relating to the integration of Dresdner Bank.

     Acquisition Costs and Administrative Expenses.  Net underwriting costs of
E9,543 million in 2001 increased E995 million, or 11.6%, over 2000 levels of
E8,548 million, which slightly exceeded the Group's property-casualty premium
growth rate of 9.8% due primarily to expenses incurred in connection with
information technology, marketing and sales force development.

     Net Income.  Net income from property-casualty insurance operations in 2001
decreased by E898 million, or 27.5%, to E2,364 million in 2001 compared with
E3,262 million in 2000. The decrease was driven primarily by the special
adjustment to income taxes, which benefited the Allianz Group's results in 2000,
increased net claims resulting from the September 11, 2001 terrorist attack and
reduced investment results, reflecting weakness in the capital markets. These
were offset in part by a tax benefit resulting from a substantial amount of tax
losses attributable primarily to claims related to the September 11, 2001
terrorist attack in the United States, together with a significant amount of
tax-exempt realized gains on investments resulting in large part from forward
sales and other transactions that were entered into in 2001 but concluded in
2002.

     Amortization of goodwill was E349 million in 2001, an increase of E72
million, or 26.0%, from E277 million in 2000, largely as a result of
amortization of goodwill on acquisitions made in Australia and the Netherlands.
Minority interest increased to E746 million in 2001 from E642 million in 2000.

     The Allianz Group's consolidated results of operations in 2000 included the
effects of certain special adjustments to income taxes. There were no special
adjustments to the Group's consolidated results of operations in 2001. Excluding
the impact of these items in 2000, net income would have increased by E139
million, or 6.2%, to E2,364 million in 2001, from E2,225 million in 2000.

                                        41


PROPERTY-CASUALTY OPERATIONS BY GEOGRAPHIC REGION

     The following table sets forth the Allianz Group's property-casualty gross
premiums written and net income by geographic region. Consistent with the
Group's general practice, gross premiums written by geographic region is
presented before consolidation adjustments representing the elimination of
transactions between Group companies in different geographic regions and
different segments, and net income by geographic region is presented before
those consolidation adjustments, amortization of goodwill and minority
interests.



                                                            YEAR ENDED DECEMBER 31,
                                         --------------------------------------------------------------
                                                2002                  2001                  2000
                                         ------------------    ------------------    ------------------
                                          GROSS                 GROSS                 GROSS
                                         PREMIUMS     NET      PREMIUMS     NET      PREMIUMS     NET
                                         WRITTEN     INCOME    WRITTEN     INCOME    WRITTEN     INCOME
                                         --------    ------    --------    ------    --------    ------
                                                                 (E IN MILLION)
                                                                               
Germany(1)...........................     12,314      9,235     12,644      3,773     11,948     3,320
Rest of Europe(1)....................     20,494      1,932     19,606        848     17,302     1,285
NAFTA................................      5,992       (933)     6,822     (1,030)     6,300       (86)
Rest of World........................      2,428         38      2,401         39      1,886         5
Specialty Lines(1)...................      4,948       (199)     2,321         94      2,267       227
Consolidation adjustments............     (2,882)    (1,680)    (1,657)      (265)    (1,321)     (570)
                                          ------     ------     ------     ------     ------     -----
  Subtotal...........................     43,294      8,393     42,137      3,459     38,382     4,181
Amortization of goodwill.............         --       (370)        --       (349)        --      (277)
Minority interests...................         --       (816)        --       (746)        --      (642)
                                          ------     ------     ------     ------     ------     -----
  Total..............................     43,294      7,207     42,137      2,364     38,382     3,262
                                          ======     ======     ======     ======     ======     =====


------------

(1) Reflects the transfers, effective January 1, 2002, of marine, aviation and
    industrial transport insurance business and industrial reinsurance business
    to the Group's marine and aviation and Allianz Global Risks specialty lines.
    See "-- Specialty Lines."

Germany

     Germany is the world's third-largest property-casualty insurance market,
based on gross premiums written in 2002. The Allianz Group was the largest
provider of property-casualty insurance in Germany, with an estimated market
share of 18.3%, as measured by gross premiums written in 2002. Germany is the
Allianz Group's most important single market for property-casualty insurance. As
a percentage of the Group's total property-casualty gross premiums written
worldwide, Germany accounted for 26.7% in 2002, 28.9% in 2001, and 30.1% in
2000. This decrease in percentage primarily reflects the increased levels of
gross premiums written from the Group's operations in countries other than
Germany.

     The Allianz Group conducts its property-casualty insurance operations in
Germany primarily through the Sachversicherungsgruppe Deutschland (the "German
Property-Casualty Group"), which handles most of the Allianz Group's lines of
property-casualty insurance in Germany, other than credit insurance and marine
and aviation insurance. Allianz AG, the parent company of the Group, acts as the
reinsurer for most of the Group's German property-casualty operations and for
other Group companies, other than credit and industrial reinsurance. In
addition, Allianz AG underwrites a relatively small amount of reinsurance with
customers outside of the Allianz Group. The Group's industrial reinsurance needs
are largely handled by Allianz Global Risks. See "-- Specialty Lines -- Allianz
Global Risks Ruckversicherungs-AG."

     German Property-Casualty Group

     The German Property-Casualty Group comprises a number of different
operating entities, some of which offer a full range of property-casualty lines
and others of which provide specialized coverages:

     -- Allianz Versicherungs-AG ("Allianz Versicherung"), which is the German
        Property-Casualty Group's primary full-line property-casualty insurer;

     -- Frankfurter Versicherungs-AG, a full-line property-casualty insurer
        based in Frankfurt;

                                        42


     -- Bayerische Versicherungsbank AG, a full-line property-casualty insurer
        based in Munich;

     -- Kraft Versicherungs-AG, a specialist provider of predominantly
        automobile insurance; and

     -- Vereinte Spezial Versicherung AG, primarily a specialist provider of
        automobile insurance.

     The Allianz Group's interests in some of these subsidiaries were
substantially restructured pursuant to the Group's letter of intent with Munich
Re. See "Related Party Transactions." In addition, effective January 1, 2002,
the Allianz Group transferred its marine, aviation and industrial transport
insurance business in Germany to the Group's marine and aviation specialty line
(see "-- Specialty Lines -- Marine & Aviation"). In November 2002, the Allianz
Group merged its former property-casualty subsidiaries Vereinte Versicherung AG
and Vereinte Rechtsschutzversicherung-AG into Allianz Versicherung, with
retroactive effect to January 1, 2002. In 2003, the Allianz Group intends to
merge Kraft Versicherungs-AG into Vereinte Spezial Versicherung AG, with
retroactive effect to January 1, 2003.

     Products

     The operating companies that make up the German Property-Casualty Group
together offer a comprehensive range of property-casualty insurance products and
related services to customers primarily in Germany. The German Property-Casualty
Group's principal product lines are automobile liability and other automobile
insurance, fire and property insurance, personal accident insurance, liability
insurance and legal expense insurance.

     The German Property-Casualty Group's policy terms and conditions largely
conform to those offered by other insurers in the German market. While the
German Property-Casualty Group does seek to develop new policy types, given its
position as the market leader in the German property-casualty insurance market,
any competitive advantage gained by the introduction of new policy types tends
to be short-lived, as competitors introduce equivalent forms of coverage.

     In all of the German business lines of the Allianz Group, policy
persistency is an important factor in the Group's profitability. Accordingly,
the Allianz Group seeks to ensure that its policyholders maintain their policies
in force with the Group for long periods of time. Based on German industry
statistics, the Group believes that its persistency rates are generally higher
than those of most other German companies. In the property-casualty area, the
Allianz Group has found that customers with multiple policies with the Group
generally keep their policies in force for longer periods of time. Accordingly,
the German Property-Casualty Group provides its customers with substantial
discounts to the extent they hold multiple Allianz insurance policies. The
Allianz Group estimates that currently more than 50% of the German
Property-Casualty Group's German personal lines customers have more than one
Allianz policy in force.

     While the Group's insurance operations in Germany generally operate on a
decentralized basis through separate operating entities, many of the Group's
products in Germany are distributed through common or overlapping distribution
systems. The importance of these distribution channels varies by type of
business. For the German Property-Casualty Group's personal and commercial
lines, the network of full-time tied agents is the Group's most important
distribution channel. For industrial lines, the brokerage channel predominates.
In connection with the Allianz Group's acquisition of Dresdner Bank in 2001, the
Group has placed approximately 960 insurance specialists to sell both life
insurance products and property-casualty insurance products at Dresdner Bank
branches throughout Germany at December 31, 2002. The relative importance of
each of these distribution channels also varies by region and by product mix.

                                        43


     The following sets forth certain key data concerning the Allianz Group's
German insurance distribution systems as they related to property-casualty
insurance at and for the year ended December 31, 2002:



                                                                                 % OF 2002
                                                                             PROPERTY-CASUALTY
                                                                NUMBER(1)        PREMIUMS
                                                                ---------    -----------------
                                                                       
Full-time tied agents.......................................      11,656            65.5
Part-time tied agents.......................................      43,076             6.5
Brokers.....................................................       7,601            14.1
Banks.......................................................       2,224(2)          3.1
Other(3)....................................................          --            10.8
                                                                 -------           -----
Total.......................................................          --           100.0
                                                                 =======           =====


------------

(1) Represents the total number in Germany for all Allianz Group segments.

(2) Represents the number of German branches at Dresdner Bank (811), and at
    unaffiliated banks, comprising Volks- und Raiffeisenbanken (1,406) and
    Industrie Kredit-Bank (7), with which the Allianz Group has distribution
    agreements covering the Group's property-casualty and life/health insurance
    products.

(3) Includes all Allianz Group employees in Germany, who are able to sell
    Allianz policies.

     In its German property-casualty insurance business, the Allianz Group
distributes its products primarily through a network of self-employed, full-time
tied agents. The Group believes that its network of tied agents is the largest
full-time insurance sales force in Europe. These agents, who have an average of
more than ten years' experience selling Allianz products, receive a full range
of support from the Allianz Group, from initial support in establishing an
office and a portfolio to pension benefits based upon the volume and product mix
of their portfolios. Apart from pension provisions, agent compensation is based
primarily on volume, although the Allianz Group also utilizes a number of
incentive schemes to encourage sales of strategically more important policy
types. The Group's full-time tied agents follow centralized underwriting and
pricing guidelines, allowing the Group to carefully segment and monitor its
German book of business.

     Allianz AG

     Allianz AG, the parent company of the Group, acts as the reinsurer for the
Group's German property-casualty operations and for other Group companies, other
than credit insurance and international industrial reinsurance. In addition,
Allianz AG assumes a relatively small amount of reinsurance from non-Group
companies. Each subsidiary is able to place reinsurance directly with reinsurers
other than Allianz AG, but Allianz AG has a preferred partnership with respect
to reinsurance cessions of its subsidiaries based on ordinary market terms and
conditions. For the years ended December 31, 2002, 2001 and 2000, Allianz AG
assumed 39.4%, 41.5% and 41.8%, respectively, of all reinsurance ceded by Group
companies.

     While the Allianz Group remains liable as a primary insurer notwithstanding
the ceding of reinsurance to third parties, the Group's evaluation criteria,
which include the claims-paying and debt ratings, capital and surplus levels,
and marketplace reputation of its reinsurers, are such that the Group believes
any risks of collectibility to which the Group is exposed are not significant,
and historically Group companies have not experienced difficulty in collecting
from their reinsurers. Munich Re is the Allianz Group's primary outside
reinsurer. For the fiscal years ended December 31, 2002, 2001 and 2000, Munich
Re Group assumed E2,300 million, E2,400 million and E2,300 million in
reinsurance premiums from the Allianz Group, representing 31.3%, 30.6% and
30.2%, respectively, of the Allianz Group's total reinsurance premiums ceded.

                                        44


     The following table sets forth premiums ceded by Allianz Group to Munich Re
Group and other reinsurers for the years indicated:



                                                                YEAR ENDED DECEMBER 31,
                                                   --------------------------------------------------
                                                        2002              2001              2000
                                                   --------------    --------------    --------------
                                                     E        %        E        %        E        %
                                                                     (E IN MILLION)
                                                                              
Premiums ceded.................................    2,300     31.3    2,400     30.6    2,300     30.2
Other..........................................    5,057     68.7    5,438     69.4    5,327     69.8
                                                   -----    -----    -----    -----    -----    -----
Total..........................................    7,357    100.0    7,838    100.0    7,627    100.0
                                                   =====    =====    =====    =====    =====    =====


     Allianz AG acts as the primary reinsurer of the Allianz Group's German
property-casualty subsidiaries, other than the Group's credit insurance
subsidiary, EULER & HERMES, and the Group's industrial reinsurance unit, Allianz
Global Risks, for which Munich Re is the primary reinsurer. The Allianz Group
bundled all of its reinsurance activities for its industrial lines in Allianz
Global Risks effective January 1, 2002. See "-- Specialty Lines -- Allianz
Global Risks." In the life/health area, Allianz AG and Munich Re each assume 50%
of the reinsurance ceded by Allianz Lebensversicherungs-AG, the main operating
company for the Group's German life insurance operations. Outside of Germany,
Allianz AG acts as a reinsurer of Group subsidiaries, with a preferred
partnership on all business ceded, and provides centralized advice to
subsidiaries on structuring their own reinsurance programs, establishing lists
of permitted reinsurers, and monitoring aggregate exposures to catastrophes and
other events.

     The following table sets forth the reinsurance assumed by Allianz AG by
gross premiums written for the years shown:



                                                                YEAR ENDED DECEMBER 31,
                                                                -----------------------
                                                                2002     2001     2000
                                                                -----    -----    -----
                                                                    (E IN MILLION)
                                                                         
From German Property-Casualty Group subsidiaries............    3,028    3,024    3,176
From German life/health subsidiaries........................      638      539      567
From EULER & HERMES(1)......................................      155      107      107
From other subsidiaries.....................................    1,190    1,170      907
                                                                -----    -----    -----
  Subtotal..................................................    5,011    4,840    4,757
From non-Group companies....................................      589      847      830
                                                                -----    -----    -----
Total.......................................................    5,600    5,687    5,587
                                                                =====    =====    =====


------------

(1) Reflects the consolidation of the Allianz Group's former French subsidiary,
    EULER, and the Group's former German subsidiary, HERMES, into a new
    corporate entity EULER & HERMES in July 2002.

     Allianz AG writes a limited amount of third-party reinsurance, with
premiums totaling E589 million in 2002, E847 million in 2001 and E830 million in
2000. Other than Munich Re Group, which represented E240 million, E511 million
and E606 million, or 40.7%, 60.3% and 73.0%, of Allianz AG's third-party assumed
reinsurance in 2002, 2001 and 2000, respectively, no single third party
accounted for any significant amount of reinsurance assumed in such years. See
"Related Party Transactions."

     The following table shows key financial data for the Allianz Group's German
property-casualty operations. Gross premiums written by operating company are
presented before consolidation adjustments representing the elimination of
transactions between Group companies in different countries and different
segments. Net income by operating company is presented before those
consolidation adjustments, amortization of goodwill and minority interests.

                                        45


GERMANY -- PROPERTY-CASUALTY: KEY DATA



                                                           YEAR ENDED DECEMBER 31,
                                       ----------------------------------------------------------------
                                               2002                   2001                  2000
                                       --------------------    ------------------    ------------------
                                        GROSS                   GROSS                 GROSS
                                       PREMIUMS      NET       PREMIUMS     NET      PREMIUMS     NET
                                       WRITTEN      INCOME     WRITTEN     INCOME    WRITTEN     INCOME
                                       --------    --------    --------    ------    --------    ------
                                                                (E IN MILLION)
                                                                               
German Property-Casualty Group.....      9,782        1,883     10,075     1,660       9,576     1,377
Allianz AG.........................      5,600        9,513(1)   5,687     2,516       5,587     2,293
Consolidation items................     (3,068)      (2,161)    (3,118)     (403)     (3,215)     (350)
                                        ------     --------     ------     -----      ------     -----
  Total............................     12,314        9,235     12,644     3,773      11,948     3,320
                                        ======     ========     ======     =====      ======     =====


------------

(1) Includes significant investment related results. See "-- Property-Casualty
    Insurance Operations -- Year Ended December 31, 2002 Compared to Year Ended
    December 31, 2001 -- Net Income."

Rest of Europe

     The Rest of Europe is, in the aggregate, the Allianz Group's largest market
for property-casualty insurance. As a percentage of the Group's total
property-casualty gross premiums written worldwide, the Rest of Europe accounted
for 44.4% in 2002, 44.8% in 2001 and 43.6% 2000.

     The Allianz Group conducts its property-casualty insurance operations in
the Rest of Europe through five main groups of operating companies in France,
Italy, the United Kingdom, Switzerland and Spain. In the remainder of the Rest
of Europe, the Allianz Group operates through approximately 35 Allianz
subsidiaries in more than 17 other European countries. The property-casualty
insurance products the Allianz Group offers in the Rest of Europe are in each
case generally similar to those the Group offers in Germany.

     France.  The Allianz Group conducts its property-casualty insurance
operations in France through the AGF Group. The AGF Group is the third-largest
property-casualty insurance provider in France, with an estimated market share
of 11.4%, as measured by gross premiums written in 2002. The primary
property-casualty insurance products that the Allianz Group offers in France are
automobile, personal property, commercial, fire and injury insurance. As of
December 31, 2002, the Allianz Group held 58.9% of the share capital of AGF (or
64.2% after deduction of own shares held by AGF), with the remainder being
publicly traded in France. The Allianz Group distributes its property-casualty
products and services in France primarily through a network of general agents
and brokers. The Group also utilizes a specialized employee sales staff and
bancassurance and other direct sales channels.

     Italy.  The Allianz Group conducts its property-casualty insurance
operations in Italy primarily through the RAS Group and Lloyd Adriatico, which
the Allianz Group refers to together with its other Italian subsidiaries as its
"Italian Subsidiaries." Taken together, the Italian Subsidiaries are the
third-largest property-casualty insurer in the Italian market, with an estimated
combined market share of 15.2%, as measured by gross premiums written in 2002.
Lloyd Adriatico operates in all property-casualty lines, having developed a
particular expertise in automobile insurance, while RAS Group underwrites
primarily automobile insurance together with various other types of
property-casualty insurance for both personal and commercial business throughout
Italy. As of December 31, 2002, the Allianz Group held 51.7% of the voting
rights of RAS Group, with the remainder being publicly traded in Italy, and
99.7% of the share capital of Lloyd Adriatico. As a result of a share buyback
and other excess capital reduction measures at RAS Group that were completed in
February 2003, the Group's holding in the voting rights of RAS Group was
increased to 55.5% as of February 17, 2003. The Italian Subsidiaries distribute
the Group's property-casualty products and services primarily through an
extensive network of general agents, brokers and through Internet and
telephone-based direct sales channels.

     United Kingdom.  The Allianz Group was the sixth-largest provider of
property-casualty insurance in the United Kingdom, with an estimated market
share of 4.7%, as measured by gross premiums written in 2002. The Group operates
its property-casualty insurance business in the United Kingdom primarily through
its wholly owned subsidiary Allianz Cornhill Insurance plc ("Allianz Cornhill"),
formerly known as Cornhill Insurance Public Limited Company. The primary

                                        46


property-casualty insurance products that Allianz Cornhill offers in the United
Kingdom are generally similar to those offered by the German Property-Casualty
Group in Germany. In addition, the Allianz Group sells a number of specialty
products in the United Kingdom, including extended warranty and pet insurance.
The Group distributes its property-casualty products and services in the United
Kingdom through a range of distribution channels, including brokers, and various
product specific distribution channels, including affinity groups and targeted
direct marketing.

     Switzerland.  The Allianz Group was the third-largest provider of
property-casualty insurance in Switzerland, with an estimated market share of
8.3%, as measured by gross premiums written in 2002, not including travel
insurance. The Group conducts its property-casualty insurance operations in
Switzerland primarily through the Allianz Suisse Versicherungsgesellschaft,
comprising the former ELVIA Versicherungs-AG group of companies, the Berner
Versicherungs-Group and Allianz Versicherung (Schweiz) AG, which were merged
into Allianz Suisse Versicherungsgesellschaft. Together with AGF Phenix, the
Allianz Group refers to these companies as its "Swiss Subsidiaries." The Swiss
Subsidiaries handle the Group's lines of property-casualty insurance in
Switzerland other than travel insurance. In addition, the Group's wholly owned
subsidiary Allianz Risk Transfer ("ART") sells conventional reinsurance as well
as a variety of alternative risk transfer products for corporate customers
worldwide. The Group's travel insurance subsidiary Mondial Assistance Group
operates and is managed on a global basis and is discussed separately (see "--
Specialty Lines"). The Swiss Subsidiaries and ART distribute the Group's
products and services through a wide range of tied and general agents, and also
through brokers, bancassurance and other direct channels.

     Spain.  The Allianz Group was the second-largest provider of
property-casualty insurance in Spain, with an estimated market share of 6.8%, as
measured by gross premiums written in 2002. The Group served the Spanish
property-casualty insurance market through Allianz Compania de Seguros ("Allianz
Spain") and the two former AGF companies Union y Fenix and Athena Seguros.
Allianz Spain has headquarters in Madrid and Barcelona, with regional offices
throughout the country. Allianz Spain offers a wide variety of traditional
personal and commercial property-casualty insurance products, with an emphasis
on automobile insurance. Allianz Spain distributes its products through agents,
brokers and direct distribution channels.

     Netherlands.  The Allianz Group's most important subsidiaries in the
Netherlands are Royal Nederland Verzekeringsgroep and Zwolsche Algemeene
Holding. The Group's most important products are automobile and fire insurance.
The Netherlands subsidiaries distribute their products through independent
agents and brokers.

     Austria.  Allianz Elementar offers a broad range of property-casualty and
health insurance products to individual and group customers in Austria. The
Allianz Group distributes the Group's property-casualty products in Austria
primarily through employee agents, tied agents and brokers.

     Ireland.  The Allianz Group's subsidiary Allianz Irish Life Holdings offers
a wide variety of traditional property-casualty insurance products, including
mainly automobile and commercial/ industrial lines. Allianz Irish Life Holdings
distributes its products primarily through brokers and to a lesser extent
through agents and banks.

     Belgium.  The Allianz Group conducts its property-casualty insurance
business in Belgium primarily through AGF Belgium Insurance and Cobac. The
Group's primary emphasis is on industrial insurance, in which the Allianz Group
is among the market leaders. The Allianz Group also has a significant position
in the market in automobile insurance. The Group distributes its
property-casualty products in Belgium mainly through brokers.

     Other.  In addition, the Allianz Group has property-casualty insurance
operations in Hungary, Portugal, Luxembourg, Greece, the Czech Republic, Poland,
Croatia and Bulgaria. The Allianz Group is also represented in the Slovak
Republic, Romania and Russia, and is among the top five insurers in many of
these markets. The primary products sold in these countries are mandatory
third-party liability coverages and related additional coverage. The Allianz
Group expects further increases in property-casualty gross premiums written as
the Group works to build up its sales organization and exploit other synergies
in its insurance operations in the rest of Europe.

                                        47


NAFTA

     The Allianz Group's property-casualty insurance markets in the NAFTA zone
are the United States, Canada and Mexico. As a percentage of the Group's total
property-casualty gross premiums written worldwide, the NAFTA zone accounted for
13.0%, 15.6% and 15.9% in 2002, 2001 and 2000, respectively.

     United States.  The Allianz Group's property-casualty operations in the
United States are organized under the umbrellas of Allianz Insurance Co. and
Allianz of America, Inc. (or Allianz of America). The Allianz Group has been
present in the United States since 1977, when the Group established Allianz
Insurance Co., a leading provider of commercial insurance to major corporate
customers, as one of its first U.S. subsidiaries. In 1991, the Allianz Group
acquired Fireman's Fund Insurance Company, a leading personal and commercial
lines property-casualty insurance company founded in 1864. Allianz of America
comprises a group of companies writing a wide variety of property-casualty lines
of business. The Group's operations in the United States accounted for 88.7% of
its gross written property-casualty insurance premiums in the NAFTA zone in
2002.

     Other.  The Allianz Group also conducts property-casualty operations in
Canada and Mexico. The Group's property-casualty products are generally similar
to those the Group offers and sells in the United States.

Rest of World

     The primary property-casualty insurance markets in which the Allianz Group
operates in the Rest of World are Asia-Pacific and South America. As a
percentage of the Group's total property-casualty gross premiums written
worldwide, Rest of World accounted for 5.2%, 5.5% and 4.8% in 2002, 2001 and
2000, respectively.

     Asia-Pacific

     Australia.  Through Allianz Australia Group, the Allianz Group serves the
markets of Australia, New Zealand and Papua New Guinea. Allianz Australia
Group's insurance operations comprise exclusively property-casualty insurance
products and services. The Allianz Group is the second-largest workers'
compensation insurer in Australia, based on gross premiums written in 2002, and
a leading provider of rehabilitation and occupational health, safety and
environment services. The Group also operates in certain niche areas including
premium financing and pleasure craft insurance. The Group markets its products
through brokers, which are the major distribution channels for commercial
business in Australia, as well as non-tied agents (including automobile dealers,
accountants and banks) and directly to the customer. Allianz Australia Group had
gross premiums written of E1,163 million in 2002.

     Other.  The Allianz Group also markets property-casualty insurance products
and services through its subsidiaries in Taiwan, Malaysia, Japan, Hong Kong,
Indonesia, Laos, Singapore, Vietnam, Korea and China, and through signed joint
venture agreements with Bajaj Auto, a large manufacturing company in India and
the CP Group, a large conglomerate in Thailand.

     South America

     Brazil.  The Allianz Group conducts its property-casualty operations in
Brazil through its subsidiary AGF Seguros. With gross premiums written of E336
million in 2002, AGF Seguros is the Group's largest property-casualty operation
in South America and the sixth-largest property-casualty insurance provider in
Brazil. The company writes primarily automobile insurance, together with fire,
transportation and other lines. Distribution is primarily through brokers.

     Other.  In addition to the markets described above, the Allianz Group sells
property-casualty products in Colombia, Argentina, Chile and Venezuela.

SPECIALTY LINES

     In addition to the Allianz Group's multi-local approach to its global
insurance business, under which the Group's non-German insurance businesses are
locally managed the Allianz Group manages its specialty lines of credit/trade
insurance, marine, aviation and industrial

                                        48


transport insurance, industrial reinsurance and travel/assistance insurance on a
worldwide basis. Through its subsidiary EULER & HERMES, the Allianz Group is the
largest credit insurer in the world, and in travel/assistance insurance, the
Group is also one of the world's largest insurers.

Credit Insurance

     In July 2002, the Allianz Group consolidated its French subsidiary, EULER,
and its German subsidiary, HERMES, into a new corporate entity, EULER & HERMES.
The consolidation of EULER and HERMES, which complemented each other in terms of
product mix and geographical penetration, further strengthened its presence in
the marketplace. Through EULER & HERMES, the Allianz Group is the largest credit
insurer in the world, with an estimated world market share of 37.0%, based on
gross premiums written in 2002. The Group's credit operations generated gross
premiums written of E1,579 million in 2002, E1,589 million in 2001 and E1,611
million in 2000.

     EULER & HERMES is the global leader in credit insurance in terms of gross
premiums written and one of the European market leaders in factoring. EULER &
HERMES's credit insurance operations are rated AA- by Standard & Poor's.

     EULER & HERMES is the leading credit insurer in Germany, with an estimated
domestic market share of approximately 42% at December 31, 2002, based on gross
premiums written. EULER & HERMES cedes a large portion of its gross premiums
written to reinsurers. The percentage of gross premiums written ceded in
reinsurance was 45.0% in 2002, 42.7% in 2001 and 42.0% in 2000, of which 9.8%,
6.7% and 6.6%, respectively, was ceded to Allianz AG.

     EULER & HERMES provides customers around the world with a wide range of
credit insurance and related products and services, including commercial credit
insurance and reinsurance, factoring services, guarantee insurance, fidelity
insurance and consumer credit insurance, and manages and derives fee income
from, the German federal government's export credit guarantee program.

Marine & Aviation

     Effective January 1, 2002, the Allianz Group reorganized its marine,
aviation and industrial transport insurance business in Germany, France and the
United Kingdom under Allianz Marine & Aviation, a new specialty line. The
Group's marine, aviation and industrial transport insurance activities in these
countries, which the Allianz Group had previously included in the property-
casualty insurance results of its respective subsidiaries, were integrated into
Allianz Marine & Aviation as a single European marine, aviation and industrial
transport unit. Allianz Globus MAT Versicherungs-AG, the Group's former German
specialty insurer for marine, aviation and industrial transport insurance, was
renamed Allianz Marine & Aviation Versicherungs-AG, and AGF MAT, the Group's
French specialty unit for marine, aviation and transport insurance, was renamed
Allianz Marine & Aviation (France). Allianz Marine & Aviation generated gross
premiums written of E1,424 million in 2002.

Allianz Global Risks Ruckversicherungs-AG

     The Allianz Group launched Allianz Global Risks on January 1, 2002 to
establish the Group's international industrial risks reinsurance business as a
globally managed segment. While the Group's operating subsidiaries around the
world continue to conduct the Group's direct industrial insurance business,
Allianz Global Risks acts as the Group's industrial reinsurance clearing house,
assuming industrial insurance from Group companies and centralizing the
placement of outgoing reinsurance with third-party carriers, primarily Munich
Re, in the reinsurance market. Allianz Global Risks generated gross premiums
written of E1,136 million in 2002, of which approximately E138 million, or
12.1%, was ceded in reinsurance to Munich Re.

     Through Allianz Global Risks, the Allianz Group aims to increase the
efficiency and transparency of its international industrial reinsurance
activities through economies of scale and a consistent reinsurance structure,
including a selective underwriting policy, appropriate rates and coverage
limits, tight risk management and centralized policies and standards throughout
the Group. The Allianz Group has also introduced new products tailored for
specific risks, such as the Group's specialized directors and officers policy in
the U.S. market, specialized liability products

                                        49


for the pharmaceutical and chemical industries, and policies covering Internet
risks. Through these and other measures, the Group intends to reestablish its
international industrial risks reinsurance business as a profitable market
leader.

Travel and Assistance Insurance

     The Allianz Group is one of the world's largest providers of travel and
assistance insurance. Its travel and assistance insurance operations generated
gross premiums written of E808 million in 2002, E732 million in 2001 and E656
million in 2000. The Allianz Group believes that internal growth and recent
acquisitions in its travel and assistance business will enable the Group to
strengthen its leading market position and achieve enhanced efficiencies in this
dynamic market. With a view toward establishing long-term partnerships, the
Group's travel and assistance business provides business-to-business services to
clients in the travel, insurance, automobile and banking industries. The Allianz
Group provides travel and assistance insurance primarily through the Mondial
Assistance Group, which is owned equally by the Group's subsidiaries AGF and
RAS.

LIFE/HEALTH INSURANCE OPERATIONS

     The following table sets forth certain financial information for the
Allianz Group's life/health insurance operations for the years indicated:



                                                                   YEAR ENDED DECEMBER 31,
                                                                -----------------------------
                                                                 2002       2001       2000
                                                                -------    -------    -------
                                                                       (E IN MILLION)
                                                                             
Gross premiums written(1)...................................     20,663     20,145     20,239
                                                                -------    -------    -------
Premiums earned (net)(2)....................................     18,675     18,317     18,378
Interest and similar income.................................     11,215     10,765     10,152
Income from affiliated enterprises, joint ventures and
  associated enterprises....................................        445        525        693
Other income from investments...............................      4,932      3,562      6,667
Trading income..............................................        244       (117)       (49)
Fee and commission income, and income from service
  activities................................................        200        268        271
Other income................................................        863        866      1,139
                                                                -------    -------    -------
     Total income...........................................     36,574     34,186     37,251
                                                                -------    -------    -------
Insurance benefits (net)....................................    (21,284)   (21,979)   (26,354)
Interest and similar expenses...............................       (434)      (492)      (148)
Other expenses for investments..............................     (8,656)    (5,537)    (3,004)
Loan loss allowance.........................................        (10)        (4)        --
Acquisition costs and administrative expenses...............     (4,263)    (4,259)    (3,927)
Amortization of goodwill....................................       (174)      (146)      (137)
Other expenses..............................................     (1,844)    (1,357)    (2,055)
                                                                -------    -------    -------
     Total expenses.........................................    (36,665)   (33,774)   (35,625)
                                                                -------    -------    -------
Earnings from ordinary activities before taxation...........        (91)       412      1,626
Taxes.......................................................        (67)       (99)      (343)
Minority interests in earnings..............................        177        (84)      (658)
                                                                -------    -------    -------
Net income..................................................         19        229        625
                                                                -------    -------    -------
Special income effects......................................         --         --         16
                                                                -------    -------    -------
Adjusted net income.........................................         19        229        641
                                                                =======    =======    =======


------------

(1) Under IFRS reporting standards, gross written premiums include only the
    cost- and risk-related components of premiums generated from unit-linked and
    other investment-oriented products, but do not include the full amount of
    statutory premiums written on these products. Statutory premiums are total
    revenues from sales of life insurance policies, in accordance with the
    statutory accounting practices applicable in the insurer's home
    jurisdiction. On a statutory premium basis, total premiums written were
    E40,066 million, E33,687 million and E31,025 million in 2002, 2001 and 2000,
    respectively.

(2) Net of reinsurance ceded of E1,207 million, E1,169 million and E1,139
    million in 2002, 2001 and 2000, respectively.

                                        50


Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

     Gross Premiums Written. Gross premiums written of the Allianz Group's
life/health operations in 2002 increased by E518 million, or 2.6%, to E20,663
million in 2002 from E20,145 million in 2001. Disregarding the effects of
exchange rate movements and changes in the scope of consolidation, which reduced
2002 life/health gross premiums written by E32 million, gross premiums written
would have increased by E550 million, or 2.7%. On a statutory premium basis,
gross premiums written increased by E6,379 million, or 18.9%, to E40,066 million
in 2002 from E33,687 million in 2001, due to significant increases in sales of
investment-oriented products, reflecting the general trend towards
investment-oriented insurance products in particular in the United States and
Italy. Gross premiums written for investment-oriented insurance products
increased by E5,861 million, or 43.3%, to E19,403 million.

     Premiums Earned (Net). On a Group-wide basis, life/health net premiums
earned in 2002 and 2001 reflected premiums ceded to reinsurers of E1,207 million
and E1,169 million, respectively, resulting in overall retention levels of
approximately 93.9% in 2002 and 94.0% in 2001. Net premiums increased by E358
million, or 2.0%, to E18,675 million in 2002 from E18,317 million in 2001,
generally consistent with the increase in gross premiums written in this period.

     Insurance Benefits (Net). Net insurance benefits for the Allianz Group's
worldwide life/health business consist of benefits paid, changes in aggregate
policy reserves, and expenses of premium refunds to policyholders. Net
life/health insurance benefits decreased by E695 million, or 3.2%, to E21,284
million in 2002 from E21,979 million in 2001, primarily as a result of reduced
income from investments in 2002 resulting from weakness in the capital markets.
The reduction in income from investments in turn resulted in reduced
policyholder participation benefits, which are included in benefits paid and
changes in aggregate policy reserves, due to the participatory nature of the
Group's life insurance business. See, for example, "-- Germany -- Life
Insurance."

     Acquisition Costs and Administrative Expenses. Acquisition costs and
administrative expenses which consist primarily of payments and changes in
deferred acquisition costs, administrative expenses, and net underwriting costs,
remained relatively constant at E4,263 million in 2002, compared with E4,259
million in 2001.

     Net Income. Net income from life/health insurance decreased by E210
million, or 91.7%, to E19 million in 2002 from E229 million in 2001, primarily
as a result of reduced income from investments, particularly in the Group's
operations in Germany, France and Switzerland. See "-- Asset Management
Operations -- Group's Own Investments -- Investment Income" for a discussion of
investment results for life/health insurance investments.

     Amortization of goodwill in the Group's life/health lines increased to E174
million in 2002 from E146 million in 2001, while minority interests in earnings
were a credit of E177 million in 2002, compared to a debit of E84 million in
2001, primarily as a result of the increase in the Group's shareholding in
Allianz Leben and decreased earnings. See "Related Party
Transactions -- Transactions with Munich Re."

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

     Gross Premiums Written. Gross premiums written of the Allianz Group's
life/health operations in 2001 decreased by E94 million, to E20,145 million in
2001 from E20,239 million in 2000. Disregarding the effects of exchange rate
movements, which reduced 2001 life/health gross premiums written by E85 million,
gross premiums written would have decreased by E9 million. A large portion of
the decrease is explained by the sale of a large group policy in France in 2000,
which increased gross premiums written in that year by approximately E800
million. Excluding the impact of this sale, together with the impact of foreign
exchange movements, gross premiums written would have increased by E791 million,
or 3.9%, in 2001, due to increases in Rest of Europe and Rest of World. On a
statutory premium basis, gross premiums written increased by E2,662 million, or
8.6%, to E33,687 million in 2001 from E31,025 million in 2000, reflecting the
general trend towards investment-oriented insurance products in Rest of Europe
and the United States. Gross premiums written for investment-oriented insurance
products increased by E2,756 million, or 25.6%, to E13,542 million.

     Premiums Earned (Net). On a Group-wide basis, life/health net premiums
earned in 2001 and 2000 reflected premiums ceded to reinsurers of E1,169 million
and E1,139 million, respec-

                                        51


tively, resulting in overall retention levels of approximately 94.0% in 2001 and
94.2% in 2000. Net premiums decreased slightly by E61 million to E18,317 million
in 2001 from E18,378 million in 2000, generally consistent with the slight
decrease in gross premiums written in this period.

     Insurance Benefits (Net). Net life/health insurance benefits decreased by
E4,375 million, or 16.6%, to E21,979 million in 2001 from E26,354 million in
2000, primarily as a result of reduced income from investments in 2001. The
reduction in income from investments in turn resulted in reduced policyholder
participation benefits, which are included in benefits paid and changes in
aggregate policy reserves.

     Acquisition Costs and Administrative Expenses. Acquisition costs and
administrative expenses increased by E332 million, or 8.5%, to E4,259 million in
2001 from E3,927 million in 2000, due primarily to increased underwriting costs
resulting from the continued expansion of the Group's investment-oriented
products. Under IFRS, these costs are expensed as incurred, even though
significantly less than the amount of statutory premium is recognized as
revenue.

     Net Income.  Net income from life/health insurance decreased by E396
million, or 63.4%, to E229 million in 2001 from E625 million in 2000, primarily
as a result of reduced income from investments, particularly in Germany and Rest
of Europe. See "-- Asset Management Operations -- Group's Own
Investments -- Investment Income" for a discussion of investment results for
life/health insurance investments.

     On a Group-wide basis, amortization of goodwill in the Group's life/health
lines increased to E146 million in 2001 from E137 million in 2000, while
minority interest decreased to E84 million in 2001 from E658 million in 2000.
The decrease in minority interests resulted primarily from decreased earnings.

     The consolidated results of the Group's life/health operations in 2000
included the effects of certain special adjustments to income taxes. There were
no special adjustments to the Group's consolidated results of operations in
2001. Excluding the impact of these items in 2000, net income would have
decreased by E412 million, or 64.3%, to E229 million in 2001 from E641 million
in 2000.

LIFE/HEALTH OPERATIONS BY GEOGRAPHIC REGION

     The following table sets forth the Allianz Group's gross life/health
premiums written and net income by geographic region for the years indicated.
Consistent with the Group's general practice, gross premiums written by
geographic region are presented before consolidation adjustments representing
the elimination of transactions between Group companies in different geographic
regions and different segments, and net income by geographic region is presented
after tax and before those consolidation adjustments, amortization of goodwill
and minority interests.



                                                            YEAR ENDED DECEMBER 31,
                                         --------------------------------------------------------------
                                                2002                  2001                  2000
                                         ------------------    ------------------    ------------------
                                          GROSS                 GROSS                 GROSS
                                         PREMIUMS     NET      PREMIUMS     NET      PREMIUMS     NET
                                         WRITTEN     INCOME    WRITTEN     INCOME    WRITTEN     INCOME
                                         --------    ------    --------    ------    --------    ------
                                                                 (E IN MILLION)
                                                                               
Germany
  Life...............................      9,369        80       8,969        65       9,094       514
  Health.............................      2,865        64       2,691        48       2,587        56
  Consolidation adjustments..........         --        (7)         --        14          --        13
                                          ------      ----      ------      ----      ------     -----
     Total...........................     12,234       137      11,660       127      11,681       583
Rest of Europe.......................      5,181       (95)      5,486       381       5,751       910
Rest of World........................      3,251       (24)      3,010       (49)      2,818       (71)
Consolidation adjustments............         (3)       (2)        (11)       --         (11)       (2)
                                          ------      ----      ------      ----      ------     -----
     Subtotal........................     20,663        16      20,145       459      20,239     1,420
Amortization of goodwill.............         --      (174)         --      (146)         --      (137)
Minority interests...................         --       177          --       (84)         --      (658)
                                          ------      ----      ------      ----      ------     -----
     Total...........................     20,663        19      20,145       229      20,239       625
                                          ======      ====      ======      ====      ======     =====


                                        52


     A significant portion of the Group's life/health operations in Rest of
Europe and Rest of World consists of sales of unit-linked products. Only the
cost- and risk-related components of premiums generated from the sale of such
products is included in gross premiums written under IFRS.

Germany

     The Allianz Group was the largest provider of life insurance and the
third-largest provider of health insurance in Germany, with estimated market
shares of 14.8% and 12.4%, respectively, as measured by gross premiums written
in 2002. Germany is by far the Allianz Group's most important market for
life/health insurance. As a percentage of the Group's total life/health gross
premiums written worldwide, Germany accounted for 59.2% in 2002, 57.8% in 2001,
and 57.7% in 2000. On a statutory premium basis, Germany accounted for 31.4% of
the Group's total life/ health gross premiums written in 2002.

     The Allianz Group conducts its life/health insurance operations in Germany
through:

     -- Allianz Lebensversicherungs-AG, the main operating company for the
        Group's German life insurance operations. In January 2002, pursuant to
        an agreement announced in 2001, the Allianz Group purchased an
        additional 40.5% of Allianz Leben's outstanding shares from Munich Re,
        thereby increasing the Group's shareholding in Allianz Leben to 91.0%,
        with the balance of the outstanding shares in Allianz Leben publicly
        traded in Germany. See "Related Party Transactions." At December 31,
        2002, the Allianz Group owned 91.0% of Allianz Leben. In November 2002,
        the Allianz Group merged its former life insurance subsidiary Vereinte
        Lebensversicherung AG into Allianz Leben, with retroactive effect to
        January 1, 2002;

     -- Deutsche Lebensversicherungs-AG, a wholly owned subsidiary of Allianz
        Leben, which is the Group's vehicle for selling standardized, low-cost
        term insurance and unit-linked annuities in Germany; and

     -- Allianz Private Krankenversicherungs-AG ("Allianz Private Health"), the
        Group's health insurance subsidiary, formerly known as Vereinte
        Krankenversicherung AG, which was renamed in January 2003.

     The Allianz Group's life/health insurance operations in Germany employed
9,683 people at the end of 2002, 10,366 people at the end of 2001 and 9,995
people at the end of 2000.

     Distribution

     The Allianz Group's distribution channels for its life/health products in
Germany are similar to those used for the Group's property-casualty products.
Many of the Group's products in Germany are distributed through common or
overlapping distribution systems. In its German life/health insurance
businesses, the Allianz Group distributes its products primarily through a
network of self-employed, full-time tied agents. For the Group's individual
life, health and mutual fund products, the network of full-time tied agents is
the Group's most important distribution channel. Brokers are also an important
channel for the distribution of Allianz Leben's and Allianz Private Health's
group life and health products. The bank distribution channel is utilized
primarily in the Group's life insurance business. The Allianz Group distributes
its life insurance products through Dresdner Bank, and under contractual
arrangements with Volks- und Raiffeisenbanken, a network of cooperative banks in
southern Germany, as well as through IKB, a German industrial credit bank. Since
2001, the Group has placed approximately 960 insurance specialists (as of
December 31, 2002) to sell both life insurance products and property-casualty
insurance products at Dresdner Bank branches throughout Germany.

                                        53


     The following table sets forth certain key data concerning the Allianz
Group's distribution systems as they relate to life and health insurance at and
for the year ended December 31, 2002:



                                                                                 % OF 2002
                                                                         -------------------------
                                                                                           HEALTH
                                                             NUMBER(1)   LIFE PREMIUMS    PREMIUMS
                                                             ---------   -------------    --------
                                                                                 
Full-time tied agents....................................     11,656          58.6          82.0
Part-time tied agents....................................     43,076           5.5           7.2
Brokers..................................................      7,601           9.7           5.9
Banks....................................................      2,224(2)       19.4            --
Other(3).................................................         --           6.8           4.9
                                                              ------         -----         -----
Total....................................................         --         100.0         100.0
                                                              ======         =====         =====


------------
(1) Represents the total number in Germany for all Allianz Group segments.

(2) Represents the number of German branches at Dresdner Bank (811), and at
    unaffiliated banks, comprising Volks- und Raiffeisenbanken (1,406) and
    Industrie Kredit-Bank (7), with which the Allianz Group has distribution
    agreements covering the Group's property-casualty and life/health insurance
    products.

(3) Includes all Allianz Group employees in Germany, who are able to sell
    Allianz policies.

     Life Insurance

     Life insurance is the most popular form of savings for old age in Germany.
With the demographic shift toward an aging German population, the Allianz Group
sees increasing opportunities for its life insurance business as private sector
products are used to supplement decreasing levels of state provisions. In
addition, the demand for insurance against financial loss resulting from
occupational disability has grown rapidly in Germany in recent years as the
German statutory social insurance system has provided declining levels of
support.

     On January 1, 2002, a new law (the "Altersvermogensgesetz") took effect,
providing incentives for private retirement plans and company pension funds
beginning in 2002. The new law, which was enacted by the German legislature in
May 2001, provides for direct state subsidies or, in certain circumstances,
tax-free premium payments, and it requires that life-long benefit payments be
guaranteed. The benefit payments will be subject to income tax. In July 2001,
the Allianz Group started selling through Allianz Leben specially designed
products that satisfy the legal requirements of the Altersvermogensgesetz,
primarily that the sum of premium payments be fixed at the beginning of the
benefit payment period. The Allianz Group established Allianz Pensionskasse AG,
a wholly owned subsidiary of Allianz Leben, and Allianz Dresdner Pensionsfonds
AG, a wholly owned subsidiary of Allianz AG, in 2002 in order to more
aggressively sell a variety of pension products in accordance with the
Altersvermogensgesetz. Although sales of Altersvermogensgesetz products have
been slower than initially expected, Allianz Leben is the leader in this market,
with an estimated market share of approximately 20% as of December 31, 2002.

     In the life insurance area, the Group's policy surrender rates were 3.7% in
2002, 3.6% in 2001, and 3.6% in 2000, compared to German industry-wide surrender
rates of 4.9%, 4.6%, and 4.5% (based on information provided by Gesamtverband
der Deutschen Versicherungswirtschaft), respectively. The Allianz Group believes
that this is in large part due to its widely recognized and well respected brand
name, its position as a market leader in most German insurance lines, its
reputation for superior customer service and its financial strength. The Group
also pays close attention to promoting follow-on business, which involves
persuading policyholders to reinvest funds. This typically takes the form of
using the benefits paid out on an endowment policy as the single premium for an
immediate annuity that ensures a guaranteed income for the rest of the
policyholder's life, or investing in a fund managed by the Group's asset
management subsidiary ADAM. See "-- Asset Management Operations." The proportion
of funds paid by the Group's German life insurance operations that were
reinvested in other Allianz products has increased significantly over the past
three years.

     Products

     The Allianz Group's German life insurance companies offer a comprehensive
and unified range of life insurance and life insurance-related products on both
an individual and group basis.

                                        54


The main classes of coverage offered are: endowment life insurance, annuity
policies, term life insurance, unit-linked annuities, and other life
insurance-related forms of cover, which are provided as riders to other policies
and on a stand-alone basis. Allianz Leben also assumes reinsurance of each of
these individual and group life insurance products.

     The Allianz Group's endowment life products for the German market include
policies both with unchanging levels of premiums and guaranteed benefits and
with premiums and guaranteed benefits that rise automatically in accordance with
contributions to the German statutory pension system in Germany. Amounts payable
at maturity of an endowment policy include a "guaranteed benefit," an amount
established by reference to a legally mandated maximum guaranteed technical
interest rate on actuarial reserves. This interest rate is currently 3.25% per
year for policies issued on or after July 1, 2000, having declined from 4% per
year. The future profit participation credited to policyholders is not
guaranteed. The total amount payable at the maturity of a policy, which is
calculated based on the total expected profit participation, is the principal
basis of competition between life insurance providers in the German market.
Under current German law, the policyholder must be credited with at least 90% of
each year's statutory net investment result plus an appropriate share in other
profit components. In the current competitive environment, however, the rate of
profit participation exceeds this statutory minimum and is subject to periodic
adjustment by insurers in light of competitive conditions prevailing from time
to time. In conformity with prevailing market conditions, the Allianz Group
currently credits 91% to 92% of each year's profits to policyholders.

     Health Insurance

     Allianz Private Health is the third-largest private health insurer in
Germany, with approximately 2.3 million customers and an estimated market share
of approximately 12.4% in 2002. Allianz Private Health has strong ties to the
German medical profession and is the largest health insurer for this profession
in Germany and is the market leader in providing group health insurance.

     The German statutory healthcare system operates as a mandatory system for
persons with incomes below a specified threshold (Versicherungspflichtgrenze)
and allows persons with incomes above the threshold to voluntarily opt out of
the statutory system and use the private healthcare system. Currently, the
German healthcare system is dominated by the German statutory schemes, while
private providers of health insurance, including Allianz Private Health, compete
for the remainder.

     In January 2003, this specified income threshold was raised by the German
legislator in order to stabilize and maintain the statutory healthcare system.
As a consequence, the number of individuals who are able to choose protection
under the private healthcare system may decrease. While this measure may reduce
new business for full private health coverage for salaried employees, it may
also create new business opportunities for supplementary insurance for
individuals insured under statutory health insurance plans. Further changes to
the German healthcare system are currently being considered, in particular with
a view to reducing costs. Enactment into law of any such changes may have an
impact on private health insurance providers, as the amount of new business
written under full private health coverage may further decrease.

     Allianz Private Health provides a wide range of health insurance products,
including full private healthcare coverage for the self-employed, salaried
employees and civil servants; supplementary insurance for people insured under
statutory health insurance plans; daily sickness allowance for the self-employed
and salaried employees; hospital daily allowance; supplementary care insurance;
and foreign travel medical expenses insurance.

     Like endowment and other life insurance products, health insurance products
include mandatory profit-sharing features, whereby Allianz Private Health, like
any other German private health insurer, returns 80% of the statutory profit on
its health business, after the payment of claims and claims costs, the
establishment of reserves, payment of taxes and other expenses, to policyholders
annually, generally in the form of premium subsidies or rebates. Since the
beginning of 2000, Allianz Private Health has also been required by law to
allocate to its policyholders 90% of interest surplus which is a component of
statutory profits. As with the Group's endowment policies in Germany, the actual
level of profit sharing the Group provides its policyholders

                                        55


is, for competitive reasons, in excess of the statutory minimum and has been
between 85% and 90% of statutory profits in recent years.

Rest of Europe

     The Rest of Europe is the Allianz Group's second-largest market for
life/health insurance. As a percentage of the Group's total life/health gross
premiums written worldwide, the Rest of Europe accounted for 25.1% in 2002,
27.2% in 2001 and 28.4% in 2000.

     The Allianz Group conducts its life/health insurance operations in the Rest
of Europe through four main groups of operating companies in France, Italy,
Spain and Switzerland. The life products the Allianz Group writes in its various
Rest of Europe markets are written on both an individual and group basis and
include traditional term and annuity products, unit-linked products and
endowment and pension products. The design and features of these products vary
by country, depending on local tax laws, product regulation and market
conditions, and are designed to pay death benefits, optimize inheritances,
provide for retirement, pay annuities or build capital, or combinations of
these.

     France.  The Allianz Group conducts its life/health insurance operations in
France through the companies of the AGF Group. The AGF Group is the
eighth-largest life insurance provider in France, with an estimated market share
of 4.7%, based on gross premiums written in 2002. The AGF Group provides a broad
line of life insurance and other financial products, including short-term
investment and savings products. An important portion of AGF Group's life
premiums is generated through the sale of unit-linked policies and
investment-oriented products with guaranteed interest, for which only the cost-
and risk-related components of premiums are reflected in gross premiums written
under IFRS.

     The AGF Group also operates in the French health insurance market through a
separate business unit responsible for both group insurance and health insurance
and offers a wide variety of health products, which are designed to pay benefits
that complement those of the mandatory French Social Security plan. The results
of the Group's health operations in France are included in part in the Group's
property-casualty segment and in part in the Group's life segment.

     Italy.  The Allianz Group conducts its life/health insurance operations in
Italy primarily through the Italian Subsidiaries. Taken together, the Italian
Subsidiaries are the second-largest life insurer in the Italian market, with an
estimated market share of 13.6%, based on gross premiums written in 2002. The
Italian Subsidiaries' individual life policies are primarily endowment policies
but also include annuities and other policies, including capitalization and
other products. Consistent with trends in the Italian market generally, the
Italian Subsidiaries' products include an increasing amount of unit-linked
policies, where policyholders participate directly in the performance of
policy-related investments, and a decreasing amount of endowment products. In
2002, sales of unit-linked and equity-linked products sold through banks reached
71.0% of the Group's total statutory life premiums in Italy, reflecting the
importance of this distribution channel. The Italian Subsidiaries' unit-linked
policies include products linked to funds managed by the Italian Subsidiaries,
as well as by third-party investment managers, and index-linked products.

     Spain.  The Allianz Group is the fourteenth-largest life insurance provider
in Spain, with an estimated market share of 2.0%, based on gross premiums
written in 2002. The Group conducts its life/health operations in Spain
primarily through Allianz Spain and through Eurovida and Europensiones, the
Group's joint ventures with Banco Popular. The Group's Spanish life insurance
subsidiaries sell mainly traditional life insurance and pensions and unit-linked
products.

     Switzerland.  The Allianz Group conducts its life/health operations in
Switzerland primarily through the Swiss Subsidiaries. Taken together, the Swiss
Subsidiaries are the sixth-largest life insurance provider in Switzerland, with
an estimated market share of 4.8%, based on gross premiums written in 2002. The
Swiss Subsidiaries sell a wide range of individual and group life insurance
products, including retirement and old age, death and disability products.

     Other.  The Allianz Group conducts significant life/health operations in
the remainder of the Rest of Europe through approximately 18 Allianz
subsidiaries in more than 13 other European countries. In Austria, the Allianz
Group operates through its life insurance subsidiary Allianz

                                        56


Elementar Leben. The Group serves the Belgian life insurance market primarily
through AGF Belgium Insurance and the Netherlands life insurance market
primarily through Royal Nederland Verzekeringsgroep. The Group's largest life
insurance subsidiaries in other countries in the Rest of Europe are located in
Greece, Luxembourg, Portugal, Hungary and Poland. The Group's life insurance
products in Other Rest of Europe are generally the same as the life products the
Allianz Group offers in the German market. The Group's life insurance operations
in Other Rest of Europe had gross premiums written of E1,260 million in 2002,
E1,148 million in 2001, and E971 million in 2000.

Rest of World

     As a percentage of the Allianz Group's total life/health gross premiums
written worldwide, Rest of World accounted for 15.7% in 2002, 14.9% in 2001 and
13.9% in 2000. The Group's primary life/health markets in Rest of World are the
United States and the Asia-Pacific region.

     United States.  The Allianz Group serves the United States life/health
insurance market through Allianz Life, which is headquartered in Minneapolis,
Minnesota. Allianz Life and its subsidiaries are licensed to write business in
all 50 states, the District of Columbia and Guam. Allianz Life markets a wide
variety of fixed and variable life insurance and annuity contracts, and
long-term care insurance to individual and corporate customers. Allianz Life is
a market leader in providing equity-indexed annuities to individuals and life
and health reinsurance to individual and corporate customers. In 2002, the
Group's total statutory premiums written from life/health insurance in the
United States, which include sales of investment-oriented products, were E9,530
million, up significantly from E4,982 million in 2001.

     Asia-Pacific.  The primary life/health insurance markets in which the
Allianz Group operates in the Asia-Pacific area are as follows:

     South Korea.  The Allianz Group's insurance operations in South Korea
consist of two Group subsidiaries, Allianz Life Insurance Korea, formerly First
Life, which the Group acquired in 1999, and France Life, a former subsidiary of
AGF which joined the Allianz Group in 1998 following the Allianz Group's
acquisition of AGF. The Allianz Group refers to these subsidiaries together as
the South Korean Subsidiaries. The South Korean Subsidiaries market a wide
variety of life insurance products including individual endowment insurance,
education insurance, protection insurance, annuities, traditional whole life
insurance policies, group life insurance protection and employee severance
plans. Together, the South Korean Subsidiaries generated E1,894 million in
annual statutory premiums in 2002.

     Other Asia-Pacific.  In addition to the primary markets described above,
the Allianz Group conducts life insurance operations in Taiwan, China, Thailand,
Indonesia, India and Malaysia. The Group also markets a range of health
insurance products in Indonesia, Singapore and Pakistan.

     Other.  In addition to the United States and Asia-Pacific, the Allianz
Group also sells life/ health products in South America, primarily Brazil, Chile
and Colombia.

COMPETITION

     There is substantial competition in Germany and the other countries in
which the Allianz Group does business for the types of insurance products and
services that it provides. This competition is most pronounced in the Group's
more mature markets -- Germany, France, Italy and the United States. In recent
years, however, competition in emerging markets has also increased as large
insurance and other financial services participants from more developed
countries have sought to establish themselves in markets perceived to offer
higher growth potential, and as local institutions have become more
sophisticated and have sought alliances, mergers or strategic relationships with
competitors of the Allianz Group.

     In Germany, which is the Allianz Group's largest market for insurance
operations, there is intense competition for virtually all of the products and
services that the Allianz Group provides. In addition, the German insurance
sector is a mature market in which the Group already has significant market
shares in most lines of business.

                                        57


BANKING OPERATIONS

     Through its subsidiary Dresdner Bank, the Allianz Group offers a wide range
of private, commercial and investment banking products and services for
corporate, governmental and individual customers, primarily in the European
market. Based on total assets at December 31, 2001 and information published by
American Banker (July 12, 2002), Dresdner Bank was one of the largest banks in
Germany, the thirteenth-largest bank in Europe and the twenty-first-largest bank
in the world.

     The Allianz Group established banking as its fourth core business segment
alongside property-casualty insurance, life/health insurance and asset
management following the Allianz Group's acquisition of Dresdner Bank in 2001.
The Group has included Dresdner Bank in its consolidated financial statements
since July 23, 2001, the date of the acquisition. Prior to 2001, the Allianz
Group had included the results of its banking operations, together with those of
its asset management business, in its financial services segment. The Group's
banking segment, established in 2001, consists primarily of the banking
operations of Dresdner Bank, as the other banking operations of the Allianz
Group have not historically been significant. Total banking income increased
from E1,722 million in 2000 to E12,841 million and E21,275 million in 2001 and
2002, respectively. For a discussion of the Group's asset management operations,
including those of Dresdner Bank, which are not included in the Group's banking
segment, see "-- Asset Management Operations." For the year ended December 31,
2002, the Group's banking segment recorded a loss of E1,358 million. This result
included a realized gain of E1,912 million from the transfer in August 2002 of
substantially all of Dresdner Bank's German asset management subsidiaries to
ADAM (see "-- Asset Management Operations") and a realized gain of E244 million
from the merger of the Group's mortgage banking subsidiary Deutsche Hyp into
Eurohypo AG (see "-- Other -- Real Estate"), as well as E287 million of other
net realized gains on investments (see "-- Results of Operations -- Year Ended
December 31, 2002 Compared to Year Ended December 31, 2001.").

     The selected statistical information on the Allianz Group's banking
operations set forth in "-- Selected Statistical Information Relating to the
Group's Banking Operations" differs in significant respects from, and may not be
comparable to, the financial information presented below. Although the Allianz
Group has included Dresdner Bank in the Group's consolidated financial
statements since July 23, 2001, the statistical information includes the banking
operations of Dresdner Bank for all periods presented. The statistical
information for all periods presented also includes the asset management
operations of Dresdner Bank, which the Allianz Group does not include in its
banking segment. In addition, the statistical information presents the assets
and liabilities of Dresdner Bank without reflecting the adjustments that are
necessary to apply purchase accounting, which the Allianz Group has applied in
the financial information presented below. For additional information, see
"-- Selected Statistical Information Relating to the Group's Banking
Operations."

     Dresdner Bank was founded in 1872 in Dresden, Germany, and grew by
acquisition and branch expansion throughout Germany to become a leading German
bank. In 1952, Dresdner Bank was split into three separate institutions, which
were subsequently reunified to form Dresdner Bank Aktiengesellschaft, Frankfurt
am Main, in 1957. In recent years, Dresdner Bank has made significant
acquisitions in investment banking, including British merchant bank Kleinwort
Benson Group plc in 1995 and U.S.-based investment bank Wasserstein Perella &
Co. in January 2001, and asset management, including U.S. asset manager RCM
Capital Management in 1995.

     With approximately 1,100 branch offices and 47,000 employees at December
31, 2002, Dresdner Bank is focused on selected customer groups, geographic
regions and business areas in which the bank traditionally holds a strong
position. The Allianz Group's principal banking products and services include
traditional commercial banking activities such as deposit taking, lending
(including residential mortgage lending), cash management and transaction
banking, as well as corporate finance advisory services, mergers and
acquisitions advisory services, capital and money market services, securities
underwriting and securities trading and derivatives business on the Group's own
account and for the Group's customers.

     The Allianz Group operates through the domestic and international branch
network of Dresdner Bank and through various subsidiaries both in Germany and
abroad, some of which also

                                        58


have branch networks. At December 31, 2002, the Group's branch banking network
comprised approximately 1,000 German branches, giving the Group a presence
throughout Germany, and 100 non-German branches. For 2002, Germany, the Rest of
Europe and the NAFTA zone accounted for approximately 77%, 14% and 8%,
respectively, of Dresdner Bank's net revenue from banking operations.

REORGANIZATION OF BUSINESS DIVISIONS

     Dresdner Bank reorganized its business structure in the course of 2001 to
focus on two major operating divisions, Private and Business Clients and
Corporates & Markets. In 2001, in order to serve comparable customer needs out
of a single integrated business division focused on corporate customers and the
capital markets, the Allianz Group combined its investment banking activities
and its European corporate banking and capital markets activities into its
Corporates & Markets division. Effective January 1, 2002, the Allianz Group also
integrated its small business operations, which the Group had previously
included as part of its Corporates & Markets division, with the Group's Private
Clients division to form a new Private and Business Clients division. The goal
of this reorganization is to increase fee and commission income by creating
cross-selling opportunities through joint provision of services to both small
business and private client customers and by offering a wider range of
commission-related services together with additional advisory expertise.

     In addition, effective January 1, 2002, the Allianz Group merged the home
loan savings businesses of the Allianz Group and Dresdner Bank, which provide
home loans at favorable rates to customers with home loan savings accounts, into
a new entity, Allianz Dresdner Bauspar AG, within the new Private and Business
Clients division. In 2001, the Allianz Group included the home loan savings
business of the Group other than Dresdner Bank in the Group's Private Clients
division, while the home loan savings business of Dresdner Bank was reported
with the Group's other real estate activities in the real estate business line
of the Group's Other division.

     On August 1, 2002, the Allianz Group also merged its mortgage banking
subsidiary, Deutsche Hyp, which was a part of the Group's Other division, with
the mortgage banking subsidiaries of Commerzbank and Deutsche Bank into a single
entity, Eurohypo AG ("Eurohypo"). The assets and liabilities of the former
Deutsche Hyp were accordingly deconsolidated as of August 1, 2002. In connection
with the merger, Dresdner Bank provided a guarantee of up to E351 million for
loan losses relating to the portfolio of Deutsche Hyp. The Allianz Group
accounts for its remaining interest of approximately 28% of Eurohypo using the
equity method. Following the merger, the real estate business line of the
Group's banking segment was dissolved. See "-- Other -- Real Estate."

     In September 2002, in conjunction with the restructuring measures described
below, the Allianz Group announced that certain performing loans to
non-strategic customers and non-performing loans as well as certain private
equity investments held primarily by the Group's Corporates & Markets division
and certain undrawn loan commitments would be bundled together in the new IRU
within the Group's banking segment, effective in 2003. The aim of the IRU is to
free up risk capital through the reduction of risk-weighted assets by
restructuring non-performing loans to strategic customers with the intent of
returning such loans to the business units from which they originated, while
maximizing the recovery from remaining non-performing loans, as well as
non-strategic customer loans, through repayment, sale, hedging, securitization
and other means. Loans to be bundled together in the IRU are primarily
performing loans to non-strategic clients, such as small-capitalization clients
in Latin America, Asia and the United States, as well as, to a lesser extent,
loans to corporate and private clients that are currently non-performing. The
IRU is expected to initially include approximately E31 billion, consisting of
approximately E22 billion of loans (including approximately E7 billion of
non-performing loans and approximately E1 billion of potential problem loans)
and approximately E1 billion of other non-strategic assets, including private
equity investments, and approximately E8 billion of undrawn commitments.

     In other initiatives, the Allianz Group combined the private equity
operations of the Allianz Group and Dresdner Bank into Allianz Private Equity
Holding in April 2002 and merged the Group's information technology companies
AGIS and DREGIS effective January 1, 2003.

                                        59


COST-CUTTING AND RESTRUCTURING MEASURES

     In 2002, in order to increase operating efficiency and cut costs in the
Group's banking segment, Dresdner Bank supplemented its existing restructuring
programs introduced in 2000 and 2001 with new initiatives affecting major parts
of its banking operations. For these combined initiatives, Dresdner Bank has
announced plans to eliminate an aggregate of approximately 11,000 positions and
to significantly improve the operating efficiency of Dresdner Bank by 2004. An
aggregate of approximately 7,050 positions had been eliminated under these
initiatives as of December 31, 2002. The Allianz Group believes that it has made
significant progress in 2002 toward reaching these goals, and the Group intends
to continue striving in 2003 toward the successful completion of its
cost-cutting initiatives.

     In order to align costs more closely with the two major operating divisions
of the Group's banking segment, in 2002 the Allianz Group recorded restructuring
charges associated with its cost-cutting and restructuring plans within the
respective operating divisions of the Group's banking segment. Restructuring
charges originally reflected in net income of the Group's Other division in 2001
have accordingly been reclassified to the Group's Private and Business Clients
division and its Corporates & Markets division in order to facilitate comparison
with the presentation of such charges in 2002.

     For additional information on restructuring charges recorded in 2002, see
"-- Results of Operations -- Year Ended December 31, 2002 Compared to Year Ended
December 31, 2001 -- Other Expenses."

     The principal cost-cutting and restructuring measures implemented in 2002
were as follows:

     -- In September 2002, the Allianz Group announced further initiatives
        involving the elimination of an additional approximately 3,000 positions
        in the Group's banking segment, including approximately 2,100 positions
        in its Corporates & Markets division, 300 positions in its Private and
        Business Clients division and 600 positions in its Other division. The
        goal of the initiatives is to further reduce administrative expenses
        without reducing operating income. In connection with the elimination of
        the first 1,500 of these positions, the Allianz Group recorded
        restructuring charges of approximately E199 million in 2002. The Group
        expects to record an additional approximately E5 million in charges
        associated with the termination of a further 100 of these 3,000
        positions in the first half of 2003. The Allianz Group expects to record
        the remaining charges under these plans when such charges qualify under
        IFRS. Approximately 650 employees had been terminated pursuant to these
        plans as of December 31, 2002.

     -- In April 2002, as part of its ongoing cost-cutting measures, the Allianz
        Group announced the elimination of an additional approximately 200
        positions in its Corporates & Markets division. Costs associated with
        eliminating these positions of approximately E17 million were recorded
        within Acquisition costs and administrative expenses in 2002 without
        establishing restructuring provisions. All 200 of these positions had
        been eliminated as of December 31, 2002. See "-- Results of
        Operations -- Year Ended December 31, 2002 Compared to Year Ended
        December 31, 2001 -- Acquisition Costs and Administrative Expenses."

     Over the course of 2002, the Allianz Group also continued to implement the
comprehensive restructuring plans introduced by Dresdner Bank in 2001 and 2000
to reduce administrative expenses:

     -- In September 2001, the Allianz Group announced plans involving an
        aggregate reduction of approximately 1,300 positions throughout its
        banking segment. In the course of 2001, only the Group's restructuring
        plans at its German subsidiaries were sufficiently detailed to qualify
        for restructuring charges to be recorded under IFRS. Pursuant to such
        qualifying plans, the Allianz Group recorded charges of E31 million in
        2001 for the elimination of approximately 240 positions in branch and
        support functions at the Group's German subsidiaries. Pursuant to plans
        that qualified for restructuring charges in 2002, the Allianz Group
        recorded further charges of E73 million in connection with the
        elimination of approximately 1,000 positions. In addition, the Group
        expects to record charges for the elimination of the approximately 60
        remaining positions in 2003 when such charges

                                        60


        qualify under IFRS. Of the 1,300 positions to be eliminated under these
        plans, approximately 750 positions had been eliminated as of December
        31, 2002.

     -- In 2001, in connection with the reorganization of its Corporates &
        Markets division discussed above (see "-- Reorganization of Business
        Divisions"), the Allianz Group recorded charges of approximately E118
        million for the elimination of approximately 1,500 positions, primarily
        in front and back office support functions. Additional charges of
        approximately E6 million associated with the reorganization were
        recorded in 2002 to reflect a revised estimate of costs associated with
        leased property. For additional information on the restructuring charges
        recorded in 2001, see "-- Results of Operations -- Year Ended December
        31, 2001 -- Other Expenses." Of the 1,500 positions to be reduced under
        this reorganization, all 1,500 had been eliminated as of December 31,
        2002.

     -- In 2000, Dresdner Bank announced a restructuring plan calling for
        consolidation of its German branch network and related back-office
        activities in Germany, including closing approximately 300 of the
        Group's German branches, and the discontinuation of commercial lending
        activities outside of Europe that are not directly related to investment
        banking, by 2004. These measures included aggregate job cuts of
        approximately 5,000 employees. Restructuring charges for the plan were
        initially recorded by Dresdner Bank in 2000, with further charges of
        approximately E10 million recognized during 2002. Of the charges
        recorded in 2000, the Allianz Group recorded releases of E76 million in
        2002 and E5 million in 2001. The releases recorded in 2002 reflected
        primarily a decision not to implement plans to relocate certain banking
        operations in New York and changes in estimates of costs associated with
        the consolidation of back-office functions in Germany. The releases
        recorded in 2001 were attributable to changes in estimates of employee
        termination costs in connection with the discontinuation of the Group's
        commercial lending activities outside Europe. As a result of this plan,
        the Group reduced the total number of German branch locations from
        approximately 1,350 at December 31, 1999 to approximately 1,000 at
        December 31, 2002. Of the aggregate 5,000 positions to be eliminated
        under this plan, approximately 3,950 positions had been eliminated as of
        December 31, 2002.

     In February 2003, as part of the continued reorganization of its business
structure to focus on its two operating divisions, the Allianz Group announced
the closure of its wholly owned subsidiary Lombardkasse AG ("Lombardkasse"), a
broker-dealer specializing in securities custody and clearing transactions. The
closure was effective in February 2003 and involved the termination of
approximately 80 employees. Charges of approximately E40 million were recorded
within other expenses in 2002 in connection with the termination of certain
service contracts associated with the closure. See "-- Results of
Operations -- Year Ended December 31, 2002 Compared to Year Ended December 31,
2001 -- Other Expenses."

     In addition, in February 2003, as part of its efforts to focus on the
Allianz and Dresdner Bank brands, the Allianz Group announced plans to integrate
the activities of its direct banking subsidiary Advance Bank and Financial
Planner into the Allianz Group in 2003. The Group plans to incorporate the
approximately 900 employees of Advance Bank and Financial Planner into the joint
sales network of Allianz and Dresdner Bank. In connection with this initiative,
the Allianz Group estimates that it may record total charges of approximately
E70 million.

     The Allianz Group had approximately 47,000 employees at December 31, 2002
in its banking segment, compared to approximately 52,300 employees (including
part-time employees and employees on leave) at December 31, 2001.

COMPETITION

     The Allianz Group is subject to intense competition in all aspects of its
banking business from both bank and non-bank institutions that provide financial
services and, in some of the Group's activities, from government agencies.
Substantial competition exists among a large number of commercial banks, savings
banks, other public sector banks, brokers and dealers, investment banking firms,
insurance companies, investment advisors, mutual funds and hedge funds to
provide the types of banking products and services that the Allianz Group offers
in its banking operations. In its Private and Business Clients division, the
Allianz Group's main competitors are Deutsche Bank, HypoVereinsbank,
Commerzbank, Citibank and German savings

                                        61


and cooperative banks. In its Corporates & Markets division, the Group's main
competitors for large multinational corporate and financial institution clients
are Deutsche Bank, Goldman Sachs, Morgan Stanley, Merrill Lynch, Citigroup and
Commerzbank, while the Group's main competitors for medium-sized corporate
clients are Deutsche Bank, Commerzbank and HypoVereinsbank, as well as German
public state banks and savings and cooperative banks. Competition is based on a
number of factors, including distribution systems, transaction execution,
products and services, innovation, reputation and price. In recent years, the
Allianz Group has generally experienced intensifying price competition as
competitors have sought to increase their market share. The Group believes this
trend will continue.

RESULTS OF OPERATIONS

     The following table sets forth certain financial information for the
Allianz Group's banking operations for the years indicated.



                                                                  YEAR ENDED DECEMBER 31,
                                                                ----------------------------
                                                                 2002      2001(1)     2000
                                                                -------    -------    ------
                                                                       (E IN MILLION)
                                                                             
Interest and similar income.................................     13,336      9,085     1,502
Income (net) from investments in affiliated enterprises,
  joint ventures, and associated enterprises................      2,071(2)   1,016       122
Other income from investments...............................      1,430        628        25
Trading income..............................................      1,081        244         7
Fee and commission income, and income from service
  activities................................................      2,925      1,474         2
Other income................................................        432        394        64
                                                                -------    -------    ------
       Total income.........................................     21,275     12,841     1,722
                                                                -------    -------    ------
Interest and similar expenses...............................     (9,509)    (6,852)   (1,257)
Other expenses for investments..............................     (2,225)      (465)      (33)
Loan loss provisions........................................     (2,222)      (588)      (21)
Acquisition costs and administrative expenses...............     (7,581)    (3,446)     (170)
Amortization of goodwill....................................       (241)       (70)        8
Other expenses..............................................     (1,034)    (1,193)     (125)
                                                                -------    -------    ------
       Total expenses.......................................    (22,812)   (12,614)   (1,598)
                                                                -------    -------    ------
Earnings from ordinary activities before taxation...........     (1,537)       227       124
Taxes.......................................................        154          6        67
Minority interests in earnings..............................         25       (453)      (90)
                                                                -------    -------    ------
Net income (loss)...........................................     (1,358)      (220)      101
                                                                =======    =======    ======


------------

(1) Reflects the inclusion of Dresdner Bank in the Group's consolidated
    financial statements as of July 23, 2001.

(2) Includes a realized gain of E1,912 million resulting from the transfer in
    August 2002 of substantially all of Dresdner Bank's German asset management
    subsidiaries to ADAM. See "-- Asset Management Operations." The gain on this
    transfer was eliminated at the Group level. In addition, this item includes
    a realized gain of E244 million resulting from the merger of Deutsche Hyp
    into Eurohypo in August 2002. See "-- Other -- Real Estate."

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

     The following section discusses the consolidated results of the Allianz
Group's banking operations for the years ended December 31, 2002 and 2001. This
discussion focuses on factors and trends that affected the Group's consolidated
banking results for the full year 2002 compared to the part-year period after
the Group's acquisition of Dresdner Bank on July 23, 2001, since the Group's
banking operations prior to its acquisition of Dresdner Bank were not
significant. As discussed below, the Group's banking results in 2002 were
significantly affected by the merger into Eurohypo and deconsolidation on August
1, 2002 of the Group's former mortgage banking subsidiary Deutsche Hyp (see "--
Other -- Real Estate"), as well as the E1,912 million of realized gains recorded
in connection with the transfer in August 2002 of Dresdner Bank's German asset
management subsidiaries to ADAM (see "-- Asset Management Operations").

     Net interest and current income.  The Allianz Group measures interest and
current income in its banking operations on a net basis. Net interest and
current income consists of interest and

                                        62


similar income, income from affiliated enterprises, joint ventures and
associated enterprises, less interest and similar expenses.

     The following table shows net interest and current income and its income
statement components for the years indicated:



                                                                   YEAR ENDED
                                                                  DECEMBER 31,
                                                                -----------------
                                                                 2002     2001(1)
                                                                ------    -------
                                                                 (E IN MILLION)
                                                                    
Interest and similar income.................................    13,336     9,085
Income (net) from investments in affiliated enterprises,
  joint ventures and associated enterprises.................     2,071(2)  1,016
Interest and similar expenses...............................    (9,509)   (6,852)
                                                                ------    ------
       Net interest and current income......................     5,898     3,249
                                                                ======    ======


------------

(1) Reflects the inclusion of Dresdner Bank in the Group's consolidated
    financial statements as of July 23, 2001.

(2) Includes a realized gain of E1,912 million resulting from the transfer in
    August 2002 of substantially all of Dresdner Bank's German asset management
    subsidiaries to ADAM. See "-- Asset Management Operations." The gain on this
    transfer was eliminated at the Group level. In addition, this item includes
    a realized gain of E244 million resulting from the merger of Deutsche Hyp
    into Eurohypo in August 2002. See "-- Other -- Real Estate."

     Interest and similar income consists primarily of income from loans and
advances to banks and to customers and investment securities. Interest and
similar income from the Allianz Group's banking operations was E13,336 million
in 2002, reflecting primarily a decrease of approximately E79,700 million, or
approximately 19%, of the Group's average interest-earning assets due to the
deconsolidation of Deutsche Hyp as of August 1, 2002 and decreasing interest
yields in the major markets in which the Group operates. Of this amount, income
from loans and advances to customers accounted for E7,092 million. Interest and
similar income on loans and advances to customers was adversely affected by both
a decrease in average interest yields and a decrease in average volume due
primarily to the deconsolidation in August 2002 of Deutsche Hyp, which affected
primarily the Group's German operations. Income from lending and money market
transactions was E1,073 million, substantially all of which related to
transactions with banks. Interest income from lending and money market
transactions was also adversely affected by both a decrease in average interest
yields and a decrease in average volume. Interest and similar income from
investment securities was E2,232 million, consisting primarily of income from
fixed-interest government securities of E1,951 million and corporate debt
securities of E50 million, reflecting the significance of fixed-income
securities in the Group's portfolio despite decreased volume in the Group's
German operations due to the deconsolidation in August 2002 of Deutsche Hyp.
Dividends from equity securities, which are included in interest and similar
income, were E206 million, reflecting primarily a decline in investments in
equity securities.

     Net income from investments in affiliated enterprises, joint ventures and
associated enterprises, which consists primarily of realized gains and losses
from the disposition of such investments, was E2,071 million in 2002, reflecting
primarily a realized gain of E1,912 million resulting from the transfer in
August 2002 of substantially all of Dresdner Bank's German asset management
subsidiaries to ADAM. See "-- Asset Management Operations." The gain on this
transfer was eliminated at the Group level. In addition, net income from
investments in affiliated enterprises, joint ventures and associated enterprises
included a realized gain of E244 million resulting from the merger of Deutsche
Hyp into Eurohypo in August 2002. See "-- Other -- Real Estate."

     Interest and similar expense consists primarily of interest expense on
certificated liabilities, deposits, repurchase agreements and derivatives
qualifying for hedge accounting treatment. Interest and similar expense was
E9,509 million in 2002, consisting primarily of interest expense of E4,075
million on deposits, E3,633 million on certificated liabilities, consisting of
long-term bonds and certificated money-market instruments, as well as long-term
subordinated liabilities (E578 million) and profit participation certificates
(E133 million), which reflected in each case the impact of a general decline in
interest rates as well as declining volumes. The decline in volumes was due
primarily to a decrease of approximately E76,200 million, or 21%, in the Group's
average interest-bearing liabilities due to the deconsolidation in August 2002
of Deutsche Hyp and reduced funding requirements as a result of reduced lending
activities. The impact of the decon-

                                        63


solidation was particularly evident in certificated liabilities and in
liabilities to customers. Other interest expense was E1,090 million.

     Net interest and current income from the Group's banking operations was
E5,898 million in 2002, reflecting primarily decreased interest and similar
income due to lower interest rates and decreased lending volumes, which were
more than offset by income from investments in affiliated enterprises, joint
ventures and associated enterprises of E2,071 million, reflecting realized gains
from the transfer in August 2002 of substantially all of Dresdner Bank's German
asset management subsidiaries to ADAM (E1,912 million) and the merger in August
2002 of Deutsche Hyp into Eurohypo (E244 million), as well as decreased interest
and similar expense due to decreased average liability volumes and lower average
interest rates.

     The Allianz Group defines its net interest spread and its net interest
margin by reference to the information set forth in "-- Selected Statistical
Information Relating to the Group's Banking Operations -- Average Balance Sheet
and Interest Rate Data." The Allianz Group's net interest spread, which consists
of the difference between the average interest rate earned on average
interest-earning assets of 4.0% and the average interest rate paid on average
interest-bearing liabilities of 3.7%, was 0.3% in 2002, reflecting an overall
reduction in interest income from higher-yielding loans to customers and
investment securities, due primarily to the deconsolidation in August 2002 of
Deutsche Hyp, reduced lending volumes and an overall decline in the interest
rate environment. The Group's net interest margin, which the Group defines as
net interest income, including net interest income on trading assets and trading
liabilities, as a percentage of average interest-earning assets, was 0.7% in
2002. For further information concerning the net interest spread and net
interest margin in the Group's banking business for 2002 and prior years, see
"-- Selected Statistical Information Relating to the Group's Banking Operation
-- Net Interest Margin."

     Other Income from Investments.  Other income from investments consists
primarily of realized gains on investments. Other income from investments was
E1,430 million in 2002, primarily as a result of E1,265 million of realized
gains on the disposition of equity securities available for sale, including
intercompany transfers to reposition equity investments within the Group in the
course of 2002, and an additional E116 million on the disposition of government
debt securities available for sale. The gain on this intercompany transfer was
eliminated at the Group level.

     Trading Income.  Trading income comprises mainly realized and unrealized
gains and losses from trading in interest and equity products, foreign exchange
and precious metals, and the effects of derivative contracts that do not qualify
for hedge accounting. Trading income is net of interest expense and includes
both proprietary trading revenues and margins realized from trades made on
behalf of customers. Trading income was E1,081 million in 2002, consisting
primarily of income of E738 million from trading in interest products,
reflecting an increase in the trading volume of interest products due to ongoing
weakness in the equity securities markets. Income from trading in equity
products was a loss of E49 million. Income from foreign exchange and precious
metals trading was E301 million, while income from the effects of derivative
contracts that do not qualify for hedge accounting declined to E90 million,
reflecting the decrease in income from derivative instruments that do not
qualify for hedge accounting and are therefore recorded at fair value. Gains or
losses on such financial instruments arising from valuation at fair value are
included in trading income.

     Fee and Commission Income, and Income from Service Activities.  Fee and
commission income, and income from service activities from the Group's banking
operations comprises mainly fees and commissions from the Group's securities,
lending, transaction banking, underwriting and mergers and acquisitions advisory
businesses. Fee and commission income, and income from service activities was
E2,925 million in 2002. Fee and commission income from the Group's securities
business was E1,066 million for this period, reflecting decreased transaction
volume in the Group's equity products business due to the continuing reluctance
of German clients to engage in equity securities transactions in light of market
conditions. Fee and commission income from the Group's mergers and acquisitions
advisory businesses (E252 million) and its underwriting business (E104 million)
also was negatively affected as a result of slowing market activity in the
underwriting and advisory businesses in 2002. In addition, fee and commission
income included commission income on account and payment transactions (E390
million),

                                        64


insurance, real estate and other brokerage commissions (E232 million),
commissions earned from lending (E196 million), commissions earned for asset
management products from third-party customers (E207 million) and commissions
earned from the Group's ADAM segment for marketing and selling their asset
management products (E113 million).

     Other Income.  Other income from the Group's banking operations was E432
million, consisting primarily of income from releasing or reducing miscellaneous
accrued liabilities (E53 million), non-trading foreign currency transaction
gains (E36 million), gains from disposals of fixed assets (E28 million) and
other income (E279 million).

     Other Expenses for Investments.  Other expenses for investments from the
Allianz Group's banking operations consist of realized losses and impairment
write-downs on securities and other investments. Other expenses for investments
were E2,225 million in 2002, reflecting E1,129 million of impairment
write-downs, primarily on equity securities, and E1,096 million of realized
losses, mainly on investments in equity securities. The realized losses on
equity securities reflected primarily realized losses on two major shareholdings
as part of intercompany transfers to reposition equity investments within the
Group in the course of 2002. The losses on intercompany transfers were
eliminated at the Group level.

     Loan Loss Provisions.  Loan loss provisions in the Allianz Group's banking
operations consists of specific loan loss provisions, country loan loss
provisions and general loan loss provisions. In addition, provisions for
contingent liabilities relating to the Group's lending business are included in
this category. The Allianz Group establishes specific loan loss provisions if
the Group considers it probable that specifically identified borrowers are no
longer able to make their contractually agreed upon interest and principal
payments. The Group establishes general loss provisions to provide for incurred
but unidentified losses that are inherent in the loan portfolio as of the
relevant balance sheet date. The Group establishes country risk provisions for
transfer risk, which is a measure of the likely ability of a borrower in a
certain country to repay its foreign currency-denominated debt in light of the
economic or political situation prevailing in that country, on the basis of the
Group's country rating system that incorporates current and historical economic,
political and other data to categorize countries by risk profile. For the year
ended December 31, 2002, additions to net loan loss provisions in the Group's
banking segment were E2,222 million, consisting of E3,106 million of new
provisions, offset in part primarily by releases of E810 million of existing
provisions and recoveries of E74 million.

     The Group recorded new specific loan loss provisions of E2,889 million in
2002, of which E2,151 million related to corporate borrowers, particularly in
the telecommunications, media and construction sectors, reflecting the continued
weakness in the global economy, deteriorating credit quality of borrowers and
increased insolvencies. The Allianz Group also recorded specific provisions of
E665 million relating to private individuals and E73 million relating to banks.
Country loan loss provisions were a net release of E97 million in 2002,
reflecting releases of E208 million, due primarily to country upgrades,
decreased lending volumes and other reductions of exposures subject to country
risk provisions, offset in part by increased provisions of E111 million
primarily relating to exposures in Brazil. Net general loan loss provisions were
E89 million in 2002, based primarily on historical loss experience and
management's assessment of the credit quality of the loan portfolio caused by
the deteriorating condition of the global economy. Of the additional net loan
loss provisions of E2,222 million in 2002, the Group recorded E1,592 million in
its Corporates & Markets division, primarily in Germany, Latin America and the
United States, E561 million in its Private and Business Clients division,
primarily in Germany, and E69 million in its Other division. A total of
approximately E1,259 million of the net specific loan loss provisions in 2002
related to borrowers in Germany.

     The continuing weakness in the loan portfolio of the Group's banking
segment is evidenced by the increase in the Group's non-performing loans and
potential problem loans in 2002. For additional information on non-performing
loans and potential problem loans, see "-- Selected Statistical Information
Relating to the Group's Banking Operations -- Risk Elements." At December 31,
2001, the Group's non-performing loans and potential problem loans were E13,655
million and E2,876 million, respectively, which included approximately E3,306
million of non-performing loans and E670 million of potential problem loans,
respectively, attributable to the loan portfolio of Deutsche Hyp. Excluding
Deutsche Hyp, at December 31, 2001, the Group's non-performing loans and
potential problem loans were E10,349 million and E2,206 million, respec-

                                        65


tively. At December 31, 2002, following the deconsolidation of Deutsche Hyp on
August 1, 2002, the Group's non-performing loans and potential problem loans
were E11,625 million and E2,437 million, respectively. On a comparable basis,
excluding loans attributable to Deutsche Hyp, these amounts represented a net
increase of E1,276 million, or 12.3%, in non-performing loans and E231 million,
or 10.5%, in potential problem loans from year-end 2001. At December 31, 2002,
the ratio of the total allowances for loan losses to total loans was
approximately 5.2%, while the ratio of the total allowances for loan losses to
total non-performing loans was approximately 59.9% in each case, reflecting the
deconsolidation of Deutsche Hyp. These percentages represented an increase from
the corresponding ratio of 4.5% and a decrease from the corresponding ratio of
68.5%, respectively, at December 31, 2001, on a comparable basis excluding loans
and allowances for loan losses attributable to Deutsche Hyp.

     Since 2000, Dresdner Bank has charged off loans when, based on management's
judgment, all economically sensible means of recovery have been exhausted. Prior
to 2000, Dresdner Bank charged off loans only when all legal means of recovery
had been exhausted. This change in practice has affected both the timing and
amount of charge-offs in the years 2000 to 2002, and in 2002 also affected the
level of the Group's non-accrual loans. In 2002, the Group's banking segment's
gross charge-offs were E1,889 million. See "-- Selected Statistical Information
Relating to the Group's Banking Operations -- Summary of Loan Loss Experience."

     To reduce its exposure to credit risks, the Allianz Group has taken a
variety of steps in 2002 and 2003, including reducing its loans to corporate
borrowers in the United States, Argentina and Brazil. In addition, in 2003, the
Group began the process of reorganizing certain performing loans to
non-strategic customers, non-performing loans and certain other non-strategic
assets into the IRU. See "-- Reorganization of Business Divisions." For
additional information, see "-- Selected Statistical Information Relating to the
Group's Banking Operations -- Summary of Loan Loss Experience."

     Acquisition Costs and Administrative Expenses.  Acquisition costs and
administrative expenses in the Group's banking segment, which consist primarily
of personnel expenses and operating expenses, were E7,581 million in 2002.
Personnel expenses amounted to E4,335 million, reflecting primarily decreased
wages and salary expenses, social security and pension expenses due to a
reduction in headcount as a result of the Group's ongoing cost-cutting and
restructuring measures and the expiration of the bonus and retention agreements
with Dresdner Bank executives and key management personnel made after merger
negotiations with Deutsche Bank in 2000. These decreases were offset in part by
continuing bonus and retention payments made in connection with the acquisition
of Wasserstein Perella & Co. in January 2001. Bonus and retention payments
recorded in 2002 amounted in the aggregate to E1,058 million. Operating expenses
were E3,246 million, consisting mainly of occupancy-related costs (E1,263
million), depreciation expenses (E395 million), fee and commission expenses
(E267 million), marketing and advertising expenses (E249 million), expenses for
amortization of software and other intangible assets (E235 million), travel
expenses (E143 million), consulting fees (E134 million), training costs (E125
million) and other operating expenses (E435 million). For a discussion of the
Group's restructuring program to reduce administrative expenses, see
"-- Cost-Cutting and Restructuring Measures."

     Amortization of Goodwill.  Amortization of goodwill in the Allianz Group's
banking operations was E241 million in 2002, attributable primarily to the
acquisition of Dresdner Bank on July 23, 2001.

     Other Expenses.  Other expenses from the Allianz Group's banking operations
were E1,034 million in 2002, reflecting primarily restructuring charges of E245
million, and write-downs of E202 million relating to an investment in a real
estate property owned by Dresdner Bank, as well as other expenses of E587
million, including E40 million of costs recorded in connection with the
termination of certain service contracts associated with the closure of
Lombardkasse. Restructuring charges recorded in 2002 consisted primarily of
charges relating to cost-cutting measures in the Group's Corporates & Markets
division (E288 million), offset in part by releases of E87 million from
restructuring plans initiated by Dresdner Bank in 2001 and 2000. For a
discussion of the Group's restructuring programs, see "-- Cost Cutting and
Restructuring Measures."

                                        66


     Taxes.  Taxes on the Allianz Group's banking segment amounted to a tax
credit of E154 million in 2002. The tax benefit was due to tax losses, for which
a deferred tax asset was recognized.

     Minority Interests in Earnings.  Minority interests in the Allianz Group's
banking segment were a credit of E25 million in 2002.

     Net Income.  Net income for the Allianz Group's banking operations was a
loss of E1,358 million in 2002, reflecting the continued weakness in the capital
markets and the deteriorating credit quality of borrowers in Germany and the
Group's other major markets. The loss was attributable primarily to a
significant decline in income in conjunction with a high level of net loan loss
provisions (E2,222 million), write-downs on investment securities (E1,129
million) and realized losses on investment securities (E1,096 million), offset
in part by realized gains from the transfer of substantially all of Dresdner
Bank's German asset management subsidiaries to ADAM (E1,912 million), the merger
of Deutsche Hyp into Eurohypo (E244 million) and realized gains on equity
securities (E1,265 million), as well as a tax credit (E154 million). Although
the Group was able to reduce administrative expenses significantly over the
course of 2002 as a result of cost-cutting and restructuring measures (see
"-- Cost Cutting and Restructuring Measures"), the reduction in costs was not
sufficient to offset the decline in income.

Year Ended December 31, 2001

     The following section discusses the consolidated results of the Allianz
Group's banking operations for the year ended December 31, 2001. This discussion
focuses on factors and trends that affected the Group's consolidated banking
results after the Group's acquisition of Dresdner Bank on July 23, 2001, since
the Group's banking operations prior to its acquisition of Dresdner Bank were
not significant.

     Net interest and current income.  The Allianz Group measures interest and
current income in its banking operations on a net basis.

     The following table shows net interest and current income and its income
statement components for the years indicated:



                                                                   YEAR ENDED
                                                                  DECEMBER 31,
                                                                -----------------
                                                                2001(1)     2000
                                                                -------    ------
                                                                 (E IN MILLION)
                                                                     
Interest and similar income.................................     9,085      1,502
Income (net) from investments in affiliated enterprises,
  joint ventures and associated enterprises.................     1,016        122
Interest and similar expenses...............................    (6,852)    (1,257)
                                                                ------     ------
     Net interest and current income........................     3,249        367
                                                                ======     ======


------------

(1) Reflects the inclusion of Dresdner Bank in the Group's consolidated
    financial statements as of July 23, 2001.

     Interest and similar income from the Group's banking operations was E9,085
million in 2001, reflecting primarily declining interest rates and decreasing
loan balances, offset in part by increased income from other interest-bearing
instruments. Of this amount, income from loans accounted for E5,566 million,
reflecting the Group's reduction of non-core commercial lending activities
outside of Europe, together with intense competition for borrowers in most areas
of lending. Income from lending and money market transactions was E1,908
million, of which E1,472 million related to increased volume of reverse
repurchase agreements. Interest income from securities available for sale was
E1,291 million, consisting primarily of income from fixed-interest government
securities (E1,148 million), reflecting an increase in the volume of such
securities in the Group's portfolio.

     Net income from investments in affiliated enterprises, joint ventures and
associated enterprises was E1,016 million in 2001, reflecting primarily realized
gains of E866 million from the sale of equity holdings in Munich Re in
connection with the Allianz Group's acquisition of Dresdner Bank on July 23,
2001. For additional information on the Group's disposition of ordinary shares
of Munich Re in 2001, see "Related Party Transactions -- Transaction with Munich
Re."

                                        67


     Interest and similar expense was E6,852 million in 2001, consisting
primarily of interest expense of E3,837 million on certificated liabilities,
including long-term bonds and long-term subordinated liabilities, which
reflected the impact of declining interest rates. Interest expense on deposits
and from repurchase agreements was E2,079 million, reflecting primarily an
increase with respect to repurchase agreements in the volume of short term
transactions due to uncertain economic conditions, as well as a slight increase
in the average balance of deposits from customers, particularly non-German
corporate clients, offset in part by a decrease in deposits from banks.

     Net interest and current income from the Allianz Group's banking operations
amounted to E3,249 million in 2001. Excluding the Group's sale of a part of its
shareholding in Munich Re, there was a downward trend in net interest and
current income in 2001 due to a shift in the second half of the year from
corporate and customer lending to lower-yielding reverse repurchase agreements
and investment securities and a shift in funding from deposits from banks to
repurchase agreements.

     The Allianz Group's net interest spread was 0.36% in 2001, reflecting a
change in the mix of interest income from higher-yielding loans to customers to
lower-yielding reverse repurchase agreements and trading assets, and a change in
the mix of funding from higher-yielding deposits from banks to lower-yielding
repurchase agreements. The Group's net interest margin was 0.45% in 2001. In
each case, the Group's net interest spread and margin reflect income and expense
from Dresdner Bank only for the period from July 23, 2001 to December 31, 2001,
calculated as a percentage of the average assets for such period. For a
discussion of the interest spread and margin in the Group's banking business for
the full year 2001 and prior years, see "-- Selected Statistical Information
Relating to the Group's Banking Operation -- Net Interest Margin."

     Other Income from Investments.  Other income from investments amounted to
E628 million in 2001, primarily as a result of E406 million of realized gains on
the disposition of equity securities available for sale, including primarily
shareholdings of Dresdner Bank, and an additional E92 million on the disposition
of government debt securities available for sale.

     Trading Income.  Trading income was E244 million in 2001, reflecting
primarily income from other dealings in derivative financial instruments of E177
million, net of trading interest expense. Income from securities trading was E67
million, reflecting gains from foreign exchange and bond trading which more than
offset losses in the equity trading portfolio.

     Fee and Commission Income, and Income from Service Activities.  Fee and
commission income, and income from service activities amounted to E1,474 million
in 2001. Fee and commission income from the Group's securities business was E623
million for this period, reflecting decreased transaction volume in the Group's
mutual fund and equity securities businesses due to the reluctance of German
clients to engage in securities transactions. Fee and commission income from the
Group's lending, underwriting and mergers and acquisitions advisory businesses
of E213 million, also was negatively affected as a result of slowing market
activity in the underwriting and advisory businesses in 2001. In addition, fee
and commission income included commission income on account and payment
transactions (E176 million), insurance and real estate commissions (E76
million), and commissions earned from the Group's asset management segment (E194
million).

     Other Income.  Other income from the Group's banking operations in 2001 was
E394 million.

     Other Expenses for Investments.  Other expenses for investments were E465
million in 2001, reflecting primarily E340 million of realized losses, mainly on
investments in equity securities and E125 million of impairment write-downs. The
realized losses on equity securities reflected primarily realized losses on
shareholdings of Dresdner Bank.

     Loan Loss Provisions.  For the year ended December 31, 2001, net loan loss
provisions in the Allianz Group's banking segment were E588 million, consisting
of E1,197 million of new provisions, offset in part primarily by releases of
E593 million of existing provisions. Provisions for loan losses in 2001
significantly exceeded expectations in both the Group's German and non-German
loan portfolios, due primarily to the continuing deterioration of the global
economy. In its Dresdner Bank operations, the Allianz Group added specific loan
loss provisions of E562 mil-

                                        68


lion for corporate borrowers and E308 million for private clients. All of the
Group's private client provisions and the majority of its corporate provisions
were incurred in respect of German borrowers. A substantial part of the Group's
non-German corporate provisions in 2001 were incurred in the United States,
including approximately E100 million related to one corporate borrower. The
Allianz Group recorded net general loss provisions of E33 million in 2001, based
primarily on historical loss experience and management's assessment of the
credit quality of the loan portfolio caused by the deteriorating condition of
the global economy, and released net country risk provisions of E92 million. To
reduce its loan loss exposure, the Group took a variety of steps in 2001,
including reducing its loans to corporate borrowers in the United States by
approximately 25% for the year ended December 31, 2001. To manage country risk,
the Allianz Group also reduced its loan exposure in Latin American and other
problem loan countries, including Argentina, which helped to reduce the impact
on the Group's banking operations of the Argentine financial crisis in late
2001. For additional information, see "-- Selected Statistical Information
Relating to the Group's Banking Operations -- Summary of Loan Loss Experience."

     Acquisition Costs and Administrative Expenses.  Acquisition costs and
administrative expenses in the Allianz Group's banking segment were E3,446
million in 2001. Personnel expenses amounted to E2,045 million, reflecting
primarily wages and salary expenses, social security and pension expenses and
bonus and retention payments made to Dresdner Bank executives and key management
personnel pursuant to agreements made after merger negotiations with Deutsche
Bank in 2000 and in connection with the acquisition of Wasserstein Perella & Co.
in January 2001. Bonus and retention payments recorded in 2001 amounted in the
aggregate to E744 million, of which E462 million were recorded in acquisition
costs and administrative expenses and E282 million in other expenses. See
"-- Other Expenses." Operating expenses were E1,401 million, consisting mainly
of rental expenses (E376 million), depreciation expenses (E205 million), fee and
commission expenses (E184 million), marketing and advertising expenses (E151
million), training and outsourcing expenses (E92 million) and travel expenses
(E84 million). For a discussion of the Group's restructuring program to reduce
administrative expenses, see "-- Cost-Cutting and Restructuring Measures."

     Amortization of Goodwill.  Amortization of goodwill in the Allianz Group's
banking operations was E70 million in 2001, attributable primarily to the
acquisition of Dresdner Bank on July 23, 2001.

     Other Expenses.  Other expenses from the Allianz Group's banking operations
were E1,193 million in 2001, reflecting primarily charges of E206 million
recorded in connection with the integration of Dresdner Bank into the Allianz
Group, restructuring charges of E132 million, expenses for amortization of
software and other intangible assets of E119 million and consulting fees of E60
million. Other expenses also included bonus and retention payments of E282
million; the Allianz Group recorded the additional bonus and retention payments
noted above in acquisition costs and administrative expenses. The integration
costs of E206 million comprised mainly consulting costs of E98 million and other
non-staff costs of E95 million relating primarily to integration of information
technology systems. The Allianz Group recorded additional charges in connection
with the integration of Dresdner Bank at Allianz AG, the results of which are
shown in the Group's property-casualty business segment. See "-- Insurance
Operations -- Property-Casualty Insurance Operations -- Results of
Operations -- Year Ended December 31, 2001 Compared to Year Ended December 31,
2000 -- Acquisition Costs and Administrative Expenses." Restructuring charges
recorded in 2001 consisted primarily of charges relating to the reorganization
of the Group's Corporates & Markets division (E118 million) and other German
subsidiaries (E31 million), offset in part by releases of E17 million from
restructuring plans initiated in May 2000. For a discussion of the Group's
restructuring programs, see "-- Cost Cutting and Restructuring Measures."

     Taxes.  Taxes on the Group's banking operations amounted to a tax credit of
E6 million in 2001. The tax benefit was due to tax losses, for which a deferred
tax asset was recognized. Taxable income was reduced by tax-exempt capital
gains.

     Minority Interests in Earnings.  Minority interests in the Group's banking
operations were E453 million in 2001, reflecting primarily the application of
the minority interest ownership in Dresdner Bank during the period ended
December 31, 2001 to the historical cost basis of Dresdner Bank.

                                        69


     Net Income.  Net income for the Allianz Group's banking operations was a
loss of E220 million in 2001, reflecting the weakness in the capital markets,
particularly in the second half of 2001. The loss was attributable primarily to
reduced fee and commission income (E1,474 million), due primarily to decreased
transaction volume attributable to clients' general reluctance to engage in
securities transactions, in combination with a high level of net loan loss
provisions (E588 million). At the same time, administrative expenses were high
(E3,446 million), due largely to high personnel costs and bonus and retention
payments, and the Allianz Group incurred significant other expenses (E1,193
million), primarily in connection with the integration of Dresdner Bank into the
Group and the implementation of measures to restructure the Group's banking
segment as discussed above. See "-- Cost Cutting and Restructuring Measures."

BANKING OPERATIONS BY DIVISION

     The Allianz Group conducts its banking operations through two principal
operating business divisions, Private and Business Clients and Corporates &
Markets. The Group's Other division includes income and expense items that are
not attributable to one of the Group's operating divisions.

     The following table sets forth certain key data concerning the Allianz
Group's banking operations by division for the years indicated. Consistent with
the Group's general practice, net revenue by division is presented before
consolidation adjustments representing the elimination of transactions between
Group companies in different segments. Net income by division is presented
before amortization of goodwill and minority interests.

BANKING OPERATIONS -- KEY DATA BY DIVISION



                                                             YEAR ENDED DECEMBER 31,
                                     -----------------------------------------------------------------------
                                           2002(1)                   2001(2)                    2000
                                     --------------------    -----------------------    --------------------
                                        NET         NET         NET           NET          NET         NET
                                     REVENUE(3)    INCOME    REVENUE(3)    INCOME(4)    REVENUE(3)    INCOME
                                     ----------    ------    ----------    ---------    ----------    ------
                                                                 (E IN MILLION)
                                                                                    
Private and Business
  Clients(5).....................      3,350         (304)     1,678          (160)         --          --
Corporates & Markets(5)..........      3,758       (1,642)     1,725          (797)         --          --
Other............................      2,496          804      1,861         1,260         432         183
                                       -----       ------      -----         -----         ---         ---
     Subtotal....................      9,604       (1,142)     5,264           303         432         183
                                       -----       ------      -----         -----         ---         ---
Amortization of goodwill.........         --         (241)        --           (70)         --           8
Minority Interests...............         --           25         --          (453)         --         (90)
                                       -----       ------      -----         -----         ---         ---
     Total.......................      9,604       (1,358)     5,264          (220)        432         101
                                       =====       ======      =====         =====         ===         ===


------------

(1) Includes a realized gain of E1,912 million resulting from the transfer in
    August 2002 of substantially all of Dresdner Bank's German asset management
    subsidiaries to ADAM. See "-- Asset Management Operations." The gain on this
    transfer was eliminated at the Group level. In addition, includes a realized
    gain of E244 million resulting from the merger of Deutsche Hyp into Eurohypo
    in August 2002. See "-- Other -- Real Estate."

(2) Reflects the inclusion of Dresdner Bank in the Group's consolidated
    financial statements as of July 23, 2001.

(3) Consists of total income (less interest and similar expenses, other expenses
    for investments, fee and commission expenses, other investment-related
    expenses) and tax credits. Amounts in 2002 and 2001 have been reclassified
    to reflect the inclusion in net revenue of tax credits and certain other
    items.

(4) Restructuring charges of E14 million and E95 million originally reflected in
    net income of the Group's Other division have been reclassified to the
    Group's Private and Business Clients division and its Corporates & Markets
    division, respectively, to facilitate comparison with the presentation of
    such charges in 2002. In addition, integration charges of E44 million and
    E16 million originally reflected in net income of the Group's Other division
    have been reclassified to the Group's Private and Business Clients division
    and its Corporates & Markets division, respectively, to facilitate
    comparison with the presentation of such charges in 2002.

(5) Amounts for 2001 have been reclassified to reflect the integration effective
    January 1, 2002 of the Group's small business operations, which the Allianz
    Group had previously included as part of its Corporates & Markets division,
    with the Group's former Private Clients division to form its new Private and
    Business Clients division.

                                        70


Private and Business Clients

     The Allianz Group serves its private and small business customers through
its Private and Business Clients division. In 2002, the Group's Private and
Business Clients division accounted for approximately 34.9% of the Group's net
revenue from banking operations.

     The Allianz Group's Private and Business Clients business is one of the
Group's two core banking activities. The Group believes that rising levels of
private wealth, increasing emphasis on private retirement provision and an
interest in equity securities and investment funds are increasing long-term
demand not only in Germany, but throughout Europe for sophisticated,
individualized investment and private retirement provision advice. Focusing on
structured investment and private retirement provision advice is a core element
of the Group's Private and Business Clients strategy. The Group's Private and
Business Clients operations also continue to grow in importance for the
distribution of investment banking, asset management and insurance products. The
Allianz Group aims to bundle its banking know-how to provide private individual
and small business clients with similar advisory requirements with an all-around
selection of products and services for their business as well as private
financial needs. In 2002, the Group provided Private and Business Clients
banking products and services to approximately 5.7 million customers with more
than E49 billion of deposits and more than E93 billion of assets held under
custody.

     The Allianz Group's Private and Business Clients customer base consists of
high net worth customers worldwide, individual customers in Germany (including
affluent customers) and small business customers.

     Products and Services

     The Allianz Group offers a wide range of banking, asset management and
insurance products and services for high net worth, affluent and other private
individual customers. For its high net worth customers, the Group offers
sophisticated, personalized solutions through Dresdner Private Banking
International. The Group's services include advisory and discretionary portfolio
management, fund-based portfolio management, administration of trusts and
estates and structural asset analysis, including tax planning. For its affluent
customers, the Allianz Group provides structured financial advice based on a
variety of financial planning and investment tools and products, such as mutual
funds, mutual fund portfolio management, tax-advantaged products and alternative
investments. For its other private individual customers, the Group's banking
products and services include deposit-taking, the transmission of payments,
commercial and consumer lending, mortgage lending and other property-related
financing services, credit card operations, securities brokerage and asset
management services and insurance. For its small business customers, the Allianz
Group provides comprehensive financial advice for their private and business
needs, including assistance with credit facilities and securities investment,
company pension scheme and insurance products and services. The Group allocates
fees between its banking segment and its asset management and insurance segments
in the case of cross-segment sales and distribution activities, e.g., the sale
of proprietary fund products or insurance policies through the Group's Private
and Business Client distribution channels.

     Distribution

     In its Private and Business Clients division, the Allianz Group distributes
its products primarily through its branch bank network and its on-site
securities advisors, as well as its network of ATMs. The Group also offers its
banking products and services through a variety of other Internet and electronic
banking channels, Allianz Group insurance agencies and call centers.

Corporates & Markets

     The Allianz Group serves its corporate and capital markets customers
through its Corporates & Markets division, into which the Group combined its
former investment banking and corporate clients business divisions in 2001.
Through this combination, the Group aims to take advantage of its access to
corporate Europe, the Allianz Group's strong credit rating, its extensive
capital markets experience around the world and its strong position in Germany
and the United Kingdom. In 2002, the Group's Corporates & Markets division
accounted for approximately 39.1% of the Group's net revenue from banking
operations.

                                        71


     The Allianz Group's Corporates & Markets division is focused on raising
capital for corporate and institutional customers in the Group's core markets of
Germany, the United Kingdom and other countries in Western Europe, and the
United States. The Allianz Group offers a wide range of investment banking,
commercial banking and other capital markets products and services to its
Corporates & Markets customers. The Group's customer base consists of
approximately 20,000 client groups, most of which are domiciled in Germany.

     Products and Services

     The Allianz Group's Corporates & Markets division offers corporate finance
advisory services on mergers and acquisitions, divestitures, restructurings and
other strategic matters, securities underwriting and market making, securities
and derivatives trading, portfolio management, custodial services, and other
capital markets products and services. The Group also provides corporate loans,
takes deposits and provides its corporate customers with payment, management
consulting, real estate and other corporate banking services.

     Distribution

     In its Corporates & Markets division, the Allianz Group relies on
relationship managers and sales teams working together with product specialists
to develop in-depth corporate finance expertise in both investment banking and
commercial banking to meet the capital markets needs of the Group's clients. The
Group's goal is to offer a full range of capital markets products and services
to its Corporates & Markets clients worldwide. Its customers now have a choice
of three complementary distribution channels: standard "face-to-face" support by
professional advisory staff, the Internet, and the Group's service centers.

Other

     The banking segment's Other division contains income and expense items that
are not directly assigned to the operating divisions, as well as transaction
banking and, until August 2002, its real estate business lines. Income and
expense items that are not directly assigned to the Group's operating divisions
include, in particular, expenses for banking segment functions and projects
affecting more than one division, realized gains and losses from the Group's
strategic investment portfolio and provisioning requirements for country and
general risks. In addition, other items contains charges for the restructuring
measures that have been introduced. See "-- Cost-Cutting and Restructuring
Measures." In 2002, the banking segment's Other division accounted for
approximately 26.0% of the Group's net revenue from banking operations.

     Real Estate.  Until August 2002, the Allianz Group served its real estate
customers through its real estate business line, which comprised primarily the
business operations of the Group's mortgage bank Deutsche Hyp and its German
real estate fund management subsidiary, DEGI Deutsche Gesellschaft fur
Immobilienfonds GmbH ("DEGI").

     On August 1, 2002, the Allianz Group merged Deutsche Hyp with Rheinische
Hypothekenbank AG, the mortgage banking subsidiary of Commerzbank, and Eurohypo
AG, the mortgage banking subsidiary of Deutsche Bank, into a single entity,
which retained the name Eurohypo. The Allianz Group deconsolidated Deutsche Hyp,
which had assets of E79,134 million and liabilities of E76,784 million as of the
date of the deconsolidation, on August 1, 2002. The Allianz Group holds an
ownership interest of approximately 28% in Eurohypo, while Deutsche Bank and
Commerzbank hold approximately 38% and 32%, respectively, with the remainder
publicly traded. The Allianz Group expects Eurohypo to develop over the next
several years into a strong competitor in the European commercial mortgage
banking market by achieving economies of scale and offering a broader product
portfolio. Eurohypo retained the existing residential and other private mortgage
banking business of Deutsche Hyp at the time of the merger, while the Group's
new residential and other private mortgage banking operations were transferred
to Allianz Leben. As of August 1, 2002, the real estate business line in the
banking segment's Other division was dissolved. The Allianz Group's German real
estate fund management subsidiary DEGI remained in the banking segment's Other
division.

     Transaction Banking.  As a corporate service unit in Germany, the Allianz
Group's transaction banking business line primarily provides the Group's Private
and Business Clients and Corporates & Markets divisions, as well as ADAM and
other Allianz Group companies, with a

                                        72


wide variety of products and services relating to the processing of securities
business and payments transactions. Through its custody business, the Allianz
Group offers a comprehensive range of custody products and services to national
and international financial intermediaries. As of December 31, 2002, the total
market value of securities under custody in Dresdner Bank was E415 billion.

ASSET MANAGEMENT OPERATIONS

     The asset management segment of the Allianz Group operates as a global
provider of institutional and retail asset management products and services to
third-party investors and provides investment management services to the Group's
insurance operations. The Allianz Group managed approximately E989 billion of
third-party assets and Group's own investments on a worldwide basis as of
December 31, 2002, with key management centers in Munich, Frankfurt, London,
Paris, Singapore, Hong Kong, Milan, Westport, Connecticut, and San Francisco,
San Diego and Newport Beach, California. The Allianz Group's third-party assets
under management have grown significantly in recent years, with the exception of
2002, and were approximately E561 billion as of December 31, 2002. As measured
by total assets under management at December 31, 2002, the Allianz Group was one
of the five leading asset managers in the world.

     The following table sets forth certain key data concerning the Allianz
Group's asset management operations at December 31 for the years indicated:

ASSETS UNDER MANAGEMENT: KEY DATA



                                                                  DECEMBER 31,
                                           ----------------------------------------------------------
                                                 2002               2001(1)                2000
                                           ----------------    ------------------    ----------------
                                              E         %          E          %         E         %
                                                                 (E IN MILLION)
                                                                              
Third-party assets(2)..................    560,588     56.7      620,458     55.1    336,424     48.0
Group's own investments(3).............    403,061     40.7      480,876     42.7    341,283     48.7
Separate account assets(2)(4)..........     25,657      2.6       24,692      2.2     22,770      3.3
                                           -------    -----    ---------    -----    -------    -----
  Total................................    989,306    100.0    1,126,026    100.0    700,477    100.0
                                           =======    =====    =========    =====    =======    =====


------------

(1) Reflects the inclusion of Dresdner Bank in the Group's consolidated
    financial statements as of July 23, 2001.

(2) Assets are presented at fair value.

(3) Includes trading liabilities and adjustments to reflect real estate and
    investments in affiliated enterprises, joint ventures and associated
    enterprises at market value, and excludes certain loans to banks and loans
    to customers. Amounts in 2001 have been revised to facilitate comparison
    with the presentation of Group's own investments in 2002.

(4) Represents investments held on account and at risk of life insurance
    policyholders.

     The Allianz Group's asset management operations pursue two separate but
related objectives. In its third-party asset management business, the Allianz
Group seeks to leverage the power of its portfolio management expertise,
existing customer relationships and distribution to maintain and further develop
the Group's position as a leading global asset manager. In the management of its
Group's own investments, the Allianz Group seeks to maximize long-term total
return on its investments for the benefit of the Group's shareholders and
policyholders, including the value of the Group's portfolio of financial and
industrial equity participations, while remaining within the Group's risk
management guidelines.

     The Allianz Group manages its third-party asset management business
primarily through ADAM, the Group's wholly owned asset management subsidiary
formed after the Group's acquisition of Dresdner Bank in July 2001. The Allianz
Group reorganized its former financial services segment in late 2001 under ADAM
in order to integrate the asset management operations of Dresdner Bank, to
achieve new economies of scale and to extend the reach of the Group's
distribution networks for asset management products and services. The Group
consolidated the assets and liabilities and results of operations of Dresdner
Bank's asset management business into the Group's asset management segment as of
July 23, 2001, the date of the acquisition. In August 2002, the Allianz Group
transferred substantially all of Dresdner Bank's German asset management
subsidiaries to ADAM. Pursuant to this transfer, debt in the amount

                                        73


of E1,850 million remains outstanding from Allianz AG to Dresdner Bank, which
will be repaid in the first half of 2003. The banking operations formerly
included in the Group's financial services segment are now a part of the Group's
banking segment. See "-- Banking Operations." As of December 31, 2002, ADAM
managed approximately E513 billion, or 91%, of the Group's third-party assets
under management and approximately E194 billion, or 48%, of the Group's own
investments. The remainder of the Group's third-party assets are managed by
Dresdner Bank (approximately E24 billion, or 4%) and other Allianz Group
companies. The majority of the Group's own investments (approximately E209
billion, or 52%) continue to be managed by the respective investment management
units of Allianz Group insurance companies around the world.

     The Allianz Group conducts its third party asset management business
primarily through the Group's operating companies worldwide under the umbrella
brand ADAM. As part of its multi-regional strategy, however, the Allianz Group
operates under multiple brand names in different regions. In the United States,
the Group's main operating companies include PIMCO, Nicholas-Applegate, Dresdner
RCM Global Investors, and Oppenheimer Capital. In Europe, the Allianz Group
operates primarily through AGF Asset Management, RAS Asset Management, Deutscher
Investment Trust ("dit") and Dresdner Bank Investment Management ("dbi"), as
well as Dresdner RCM Global Investors and PIMCO. In Asia, after rebranding in
2002, the Group's main brands are Allianz Dresdner Asset Management, PIMCO and
Meiji Dresdner Asset Management.

     In October 2002, together with Guotai Junan Securities ("GTJA"), the
Allianz Group established Guotai Junan Allianz Fund Management Co., a
Shanghai-based joint venture that was the first joint venture fund management
company and the first licensed fund manager with foreign participation in China.
Through the combination of GTJA's distribution network and the Group's
international asset management expertise, the Allianz Group believes its joint
venture is well positioned to make successful inroads into this growth market.

                                        74


RESULTS OF OPERATIONS

     The following table sets forth certain summarized financial information for
the Allianz Group's asset management operations for the years indicated:



                                                                  YEAR ENDED DECEMBER 31,
                                                                ---------------------------
                                                                 2002     2001(1)     2000
                                                                ------    -------    ------
                                                                      (E IN MILLION)
                                                                            
Interest and similar income.................................       119       129        204
Income from affiliated enterprises, joint ventures and
  associated enterprises....................................       (12)       (3)         1
Other income from investments...............................        35        44         18
Trading income..............................................        (1)       10         16
Fee and commission income, and income from service
  activities................................................     2,918     2,479      1,420
Other income................................................       126        79         63
                                                                ------    ------     ------
Total income................................................     3,185     2,738      1,722
                                                                ------    ------     ------
Interest and similar expenses...............................       (89)      (82)       (61)
Other expenses for investments..............................       (22)      (57)        --
Net loan loss provision.....................................        (2)       --         --
Acquisition costs and administrative expenses...............    (2,378)   (1,895)      (484)
Amortization of goodwill....................................      (377)     (243)       (89)
Other expenses..............................................      (551)     (795)    (1,043)
                                                                ------    ------     ------
Total expenses..............................................    (3,419)   (3,072)    (1,677)
                                                                ------    ------     ------
Earnings from ordinary activities before taxation...........      (234)     (334)        45
Taxes.......................................................        59       168          4
Minority interests in earnings..............................      (230)     (182)      (136)
                                                                ------    ------     ------
Net income..................................................      (405)     (348)       (87)
                                                                ======    ======     ======


------------

(1) Reflects the inclusion of Dresdner Bank in the Group's consolidated
    financial statements as of July 23, 2001.

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

     Assets Under Management.  Third-party assets under management, Group's own
investments and separate account assets decreased by E137 billion, or 12.2%, to
E989 billion at the end of 2002 from E1,126 billion at the end of 2001. The
decrease was due primarily to exchange rate movements (E77 billion with respect
to third-party assets), particularly a decline in the U.S. dollar, and
substantial price declines in the capital markets (E25 billion with respect to
third-party assets), offset in part by significant net capital inflows of
approximately E56 billion into fixed-income funds. Of the decrease, E78 billion
represented a decrease in Group's own investments, while E59 billion represented
a decrease in third-party assets under management. Excluding the effects of
exchange rate movements, the Allianz Group's third-party assets under management
would have increased by E18 billion, or 2.9%, to E638 billion at the end of 2002
due primarily to net inflows of E43 billion, primarily into fixed-income funds.

     Net Income.  Asset management net income decreased by E57 million, to a net
loss of E405 million in 2002 from a net loss of E348 million in 2001, due
primarily to increased amortization of goodwill reflecting the acquisition and
full-year consolidation in 2002 of Dresdner Bank, as well as minority interest
in earnings related to the PIMCO Group. Total income, which consists primarily
of fee and commission income, and income from service activities, increased by
E447 million, or 16.3%, to E3,185 million in 2002 from E2,738 million in 2001,
reflecting primarily the full-year consolidation in 2002 of Dresdner Bank's
former asset management operations, offset in part by the lower average assets
under management due to the effects of exchange rate movements and price
declines in the capital markets. Total expenses increased by E347 million or
11.3%, to E3,419 million in 2002 from E3,072 million in 2001, due primarily to
the full-year consolidation in 2002 of Dresdner Bank's former asset management
operations, offset in part by restructuring measures implemented in the course
of 2002 at virtually all of the Group's equity investment operations to increase
operational efficiency by reducing personnel and streamlining back-office
operations and product lines. Total expenses included acquisition-related
expenses of E729 million recorded in 2002. The acquisition-related expenses
consisted primarily of amortization of goodwill of E377 million associated with
the

                                        75


acquisitions of Dresdner Bank, PIMCO and Nicholas-Applegate and amortization
charges of E155 million relating to capitalized retention payments to key
executives of the PIMCO Group, which are being amortized over periods of five to
seven years from the date of the acquisition. Another E197 million are retention
payments for the management and employees of PIMCO and Nicholas-Applegate. In
addition, minority interest of E230 million in the Group's asset management
operations was accounted for mainly by the minority interest in PIMCO (E162
million) of PIMCO's former parent company, which continues to hold a minority
ownership interest in PIMCO. Allianz's ownership interest in PIMCO was recently
restructured. Pursuant to such restructuring, neither Allianz nor PIMCO's former
parent company can put or call the entire ownership interest of PIMCO's former
parent company in PIMCO with effect prior to October 2004, although either party
may put or call up to $250 million of such ownership interest in any calendar
quarter, beginning with the quarter ended March 31, 2003. On March 31, 2003, a
subsidiary of Allianz AG received notice from the former parent company of PIMCO
that such former parent company had exercised its right to put $250 million of
its remaining ownership interest in PIMCO to Allianz, with payment therefor due
by April 30, 2003. Excluding the effects of the acquisition-related expenses of
E729 million, earnings from ordinary activities before taxation from the Group's
asset management operations would have been E495 million in 2002.

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

     Assets Under Management.  Third-party assets under management, Group's own
investments and separate account assets increased by E426 billion, or 60.8%, to
E1,126 billion at the end of 2001 from E700 billion at the end of 2000. The
increase was due primarily to the Allianz Group's acquisitions of Dresdner Bank
and Nicholas-Applegate, and to a lesser extent, an increase in the Group's own
investments and third-party assets under management. Of the increase, E140
billion represented growth in Group's own investments, while E284 billion
represented growth in third-party assets under management, primarily as a result
of the acquisition of Dresdner Bank (E211 billion), as well as the acquisition
of Nicholas-Applegate (E29 billion). Excluding the effects of these
acquisitions, as well as the effects of exchange rate movements (E16 billion),
the Group's third-party assets under management would have increased by E28
billion, or 8.3%, to E364 billion at the end of 2001 due primarily to growth in
fixed-income investments in the Group's PIMCO operations.

     Net Income.  Asset management net income decreased by E261 million, to a
net loss of E348 million in 2001 from a net loss of E87 million in 2000, despite
the increase in assets under management, primarily because costs rose more
quickly than income. Total income, which consists primarily of fee and
commission income, and income from service activities, increased by E1,016
million, or 59.0%, to E2,738 million in 2001 from E1,722 million in 2000,
reflecting primarily the increased assets under management due to the Allianz
Group's acquisition of Dresdner Bank. Total expenses increased by E1,395
million, or 83.2%, to E3,072 million in 2001 from E1,677 million in 2000, due
primarily to increased expenses associated with the Allianz Group's acquisition
of Dresdner Bank. Total expenses included acquisition-related expenses of E647
million recorded in 2001, as well as costs incurred in connection with the
establishment of ADAM and the reorganization of the Group's asset management
operations as a result of its acquisition of Dresdner Bank. The
acquisition-related expenses included amortization of goodwill of E243 million
associated with the acquisitions of PIMCO and Nicholas-Applegate, amortization
charges of E374 million relating to capitalized retention payments to key
executives of the PIMCO Group, which are being amortized over periods of five to
seven years from the date of the acquisition, and an additional E30 million of
expenses incurred in connection with retention payments to key executives at
Dresdner RCM following the Allianz Group's acquisition of Dresdner Bank in July
2001. In addition, minority interest of E182 million in the Group's asset
management operations was accounted for mainly by the minority interest in PIMCO
(E142 million) of PIMCO's former parent company, which continues to hold an
approximately 30% ownership interest in PIMCO. Excluding the effects of the
acquisition-related expenses of E647 million, earnings from ordinary activities
before taxation from the Group's asset management operations would have been
E313 million in 2001, due primarily to earnings at PIMCO.

                                        76


THIRD-PARTY ASSETS

     The following table sets forth certain key data concerning the Allianz
Group's third-party assets under management at December 31 for the years
indicated:

ASSET MANAGEMENT OPERATIONS -- KEY DATA BY GEOGRAPHIC REGION(1)



                                                                        DECEMBER 31,
                                                        --------------------------------------------
                                                            2002            2001            2000
                                                        ------------    ------------    ------------
                                                         E       %       E       %       E       %
                                                        ---    -----    ---    -----    ---    -----
                                                                       (E IN BILLION)
                                                                             
ADAM
  Germany...........................................     80     14.3     96     15.5      8      2.4
  Rest of Europe....................................     37      6.6     53      8.5     22      6.5
  NAFTA.............................................    388     69.1    409     66.0    297     88.4
  Rest of World.....................................      8      1.4     26      4.2     --       --
                                                        ---    -----    ---    -----    ---    -----
     Subtotal.......................................    513     91.4    584     94.2    327     97.3
Other(2)............................................     48      8.6     36      5.8      9      2.7
                                                        ---    -----    ---    -----    ---    -----
Total...............................................    561    100.0    620    100.0    336    100.0
                                                        ===    =====    ===    =====    ===    =====


------------
(1) Represents location of Allianz Group asset management operations.

(2) Consists of assets managed by Dresdner Bank (E24 billion and E27 billion in
    2002 and 2001, respectively) and other Allianz Group companies (E24 billion
    and E9 billion in 2002 and 2001, respectively). The increase from 2001 to
    2002 reflects a reclassification of certain companies from ADAM in 2001 to
    other Allianz Group companies in 2002.

     The Allianz Group has significantly grown its third-party assets under
management in recent years, both through acquisitions such as Dresdner Bank and
Nicholas-Applegate in 2001 and PIMCO in 2000, and through organic growth. The
Allianz Group intends to leverage the PIMCO, dit, Nicholas-Applegate and
Dresdner RCM franchises in further developing its third-party asset management
business through its flagship subsidiaries on a global basis. The Group believes
that the European markets offer especially attractive opportunities for
third-party fund managers. The Group also expects that investment fund products,
in particular retirement planning vehicles, will increase in importance in
Europe. The Group expects this trend to be supported by the increased
demographic pressure that state-run pension systems will face and the rising
prevalence of defined contribution arrangements. The Group believes that it is
well positioned in third-party markets, especially in Germany, France and Italy,
and it is seeking to increase its market share in these markets.

     The Allianz Group is also developing its insurance and banking distribution
capabilities, including its dedicated advisory, branch bank and insurance
networks in Europe, as asset accumulation arms to further its asset management
capabilities. Leading examples of the Group's activities in this area include
its operations through Dresdner Bank, where the Allianz Group has approximately
7,000 financial advisors in branch offices to distribute its asset management,
life insurance and other financial products; the Group's operations at RAS
Group, with its independent network of licensed financial advisors who
distribute life insurance and financial products; and the Group's operations at
the AGF Group in France, with its network of advisors offering comprehensive
financial planning services. See also "-- Banking Operations."

     As a result of the reorganization of its asset management operations under
ADAM, the Allianz Group believes it is well positioned to deliver quality
products and services in all major asset classes for both retail and
institutional clients. The Allianz Group aims to provide its clients with
first-class products on a global basis by fully utilizing its distribution
channels and leveraging the asset management expertise of its specialized asset
managers around the world.

     The Allianz Group serves a comprehensive range of retail and institutional
asset management clients, including corporate and public pension funds,
insurance and other financial services companies, governments and charities,
financial advisors and private individuals. The Group's third-party asset
management includes primarily equity, fixed income, money market and sector
products, as well as alternative investments.

                                        77


     The following tables show the Allianz Group's third-party assets under
management by investment category and by investor class at December 31 for the
years indicated:



                                                                        DECEMBER 31,
                                                        --------------------------------------------
                                                            2002            2001            2000
                                                        ------------    ------------    ------------
                                                         E       %       E       %       E       %
                                                        ---    -----    ---    -----    ---    -----
                                                                       (E IN BILLION)
                                                                             
Fixed income........................................    405     72.2    377     60.8    240     71.3
Equity..............................................    141     25.1    218     35.2     96     28.7
Other(1)............................................     15      2.7     25      4.0     --       --
                                                        ---    -----    ---    -----    ---    -----
Total...............................................    561    100.0    620    100.0    336    100.0
                                                        ===    =====    ===    =====    ===    =====


-------------------------
(1) Includes primarily investments in real estate.



                                                                         DECEMBER 31,
                                                        -----------------------------------------------
                                                            2002             2001             2000
                                                        -------------    -------------    -------------
                                                         E        %       E        %       E        %
                                                        ----    -----    ----    -----    ----    -----
                                                                        (E IN BILLION)
                                                                                
Institutional.......................................    403      71.8    466      75.2    269      80.1
Retail..............................................    158      28.2    154      24.8     67      19.9
                                                        ---     -----    ---     -----    ---     -----
Total...............................................    561     100.0    620     100.0    336     100.0
                                                        ===     =====    ===     =====    ===     =====


     The Allianz Group's third-party asset management subsidiary ADAM is
organized globally into three principal business lines: global equity, global
fixed-income and global retail (distribution). Each of the Group's asset
management business lines is led by a global head. Together with ADAM's chief
executive officer and chief operating officer, who sets standards and
coordinates corporate controlling and administration, each of the global heads
is also a member of ADAM's executive committee, which is responsible for ADAM's
strategic development and financial performance. In addition, country
organizations led by country managers provide shared infrastructure and
services. ADAM's management structure has been designed to manage the complexity
of its multi-regional, multi-product and multi-channel business activities.
Within this structure, ADAM maintains significant incentives for
entrepreneurship and encourages its business units to operate autonomously.

Portfolio Management

     ADAM believes it has globally consistent, well-structured and transparent
investment processes that are based on fundamental primary research. ADAM's goal
is to provide its clients with portfolios that consistently offer superior
performance in accordance with its clients' investment objectives. ADAM aims for
outperformance through active portfolio management coupled with comprehensive
risk management at all levels of the investment process. At December 31, 2002,
the Group had more than 560 portfolio managers and more than 200 analysts in
major markets worldwide providing a comprehensive range of actively managed
fixed-income and equity products and services.

     Global Fixed Income

     ADAM's fixed-income portfolio investment process is led by PIMCO, one of
the world's leading fixed-income investment managers. The Group's fixed-income
product range includes total return, short and long duration, regional,
country-specific, global and other geographic products, sector products
including government and corporate bonds and specialty funds such as high yield
and emerging markets. The Allianz Group delivers its fixed-income products in a
broad range of investment vehicles, including separate accounts, fixed-income
mutual funds and investment trusts.

     Global Equity

     The Allianz Group's equity portfolio investment products include all major
investment styles: value investment, growth investment and core investment. The
Group's equity product range comprises regional, country-specific, global and
other geographic products, sector products

                                        78


such as technology, biotechnology, capital equipment, consumer goods, energy and
materials, and finance, as well as large, medium and small market capitalization
funds. The Allianz Group delivers its equity products in a broad range of
investment vehicles.

Distribution

     In Europe, ADAM markets and services institutional products offered by its
asset management subsidiaries through specialized personnel located primarily in
its Frankfurt, London, Munich, Paris and Milan offices. European retail
distribution is provided primarily through the proprietary channels of the
Allianz Group, including branch bank advisors, full-time agents employed by
affiliated insurance companies and other Allianz Group financial planners and
advisors.

     In Germany, ADAM and its predecessors have offered mutual funds since 1949.
The funds are distributed primarily through the Group's branch bank network and
its full-time insurance agents. To strengthen these channels, ADAM provides
asset management specialists and support services, including call centers and
client services.

     In France, AGF Asset Management markets a wide range of retail products to
individual investors through its own in-house network of financial advisors,
including full-time agents employed by AGF Group, brokers and specialist
networks.

     In Italy, RAS Asset Management offers mutual funds, private banking
products, current accounts, credit and debit cards, brokerage services and real
estate financing. Retail products and services are marketed through affiliated
financial planners, financial advisors, banks and via the Internet.

     In the United Kingdom and the United States, each of the Group's ADAM asset
managers markets and services its institutional products through its own
specialized personnel. The institutional markets in the United Kingdom and the
United States are dominated by consultants, who advise their clients with regard
to investment strategy and asset allocation, conduct due diligence on and rank
portfolio managers, and conduct searches. As a result, ADAM portfolio managers
in these areas put emphasis on servicing consultants. In addition, in the United
States, ADAM asset managers offer a wide range of retail products. The principal
proprietary channel is PIMCO Funds, which distributes mutual funds managed by
its affiliates through broker-dealers, financial planners, 401(k) funds and
other intermediaries. The Allianz Group also provides "wrap" services through
broker-dealers, by managing all or a part of separate accounts maintained by
broker-dealers for their customers. In the United States, ADAM also advises
mutual funds sponsored by third parties, including other mutual fund families
and insurance companies offering variable annuity products.

     Allianz Group has committed substantial resources to the build-out of a
third-party asset management business in Asia-Pacific. Allianz Group has offices
in Tokyo, Hong Kong, Singapore, Taipei, Seoul and Sydney, which are being
enlarged to accommodate equity and fixed-income portfolio management as well as
institutional and retail distribution. In November 2002, Allianz Group rebranded
its fund management operations across Asia-Pacific under the umbrella brand
ADAM. ADAM is also seeking to leverage its brand, investment know-how and
customer relationships in China and to exploit the opportunities in this growing
asset management market.

Competition

     The Allianz Group's main competitors in the asset management business
include Deutsche Bank, AXA, UBS, Credit Suisse, Fidelity Investments, Citigroup,
Merrill Lynch, Capital Group and Amvescap. Each of these entities has large,
multi-jurisdictional and multi-product asset management operations, and most of
them compete with the Allianz Group for both retail and institutional clients.

GROUP'S OWN INVESTMENTS

     The Allianz Group's own investments consist of the investment portfolios of
the Group's insurance, banking and asset management operations. The Group's
investment strategy with regard to the Group's own investments is to maximize
long-term total return while remaining within the Group's risk management
guidelines. These guidelines relate primarily to the quality

                                        79


of the investments and the matching of assets and liabilities. The Group's
policy is to closely match the maturities and currencies of assets and
liabilities. The investment policies of the insurance subsidiaries reflect the
different liability characteristics and tax profiles of their respective
operations. The Group's internationally integrated teams of portfolio managers
work closely with the regional asset management subsidiaries to coordinate
asset/liability management and product development activities. Because the
Group's insurance investments mostly serve to cover liabilities in the insurance
business, its asset management professionals place a high priority on high
quality, liquid and widely marketable securities in the Group's insurance
investments portfolio. For a discussion of the investment portfolios of the
Group's banking operations, see "-- Selected Statistical Information Relating to
the Group's Banking Operations." For further discussion regarding the Group's
investment strategy and risk management practices, see "-- Risk Management."

                                        80


     The following tables set forth the components of the Group's own investment
portfolios by investment category, as well as separate account assets, at the
end of the years indicated. Consistent with the Group's general practice,
amounts by investment category are presented before consolidation adjustments
representing the elimination of transactions between Group companies in
different segments.



                                                           DECEMBER 31, 2002(1)
                                 ------------------------------------------------------------------------
                                 PROPERTY-                             ASSET      CONSOLIDATION
                                 CASUALTY    LIFE/HEALTH   BANKING   MANAGEMENT    ADJUSTMENTS     TOTAL
                                 ---------   -----------   -------   ----------   -------------   -------
                                                              (E IN MILLION)
                                                                                
Investments in affiliated
  enterprises, joint ventures
  and associated enterprises...    51,448        6,183       4,349        20         (50,655)      11,345
Investments....................    76,855      189,172      28,965       993         (10,645)     285,340
Loans and advances to banks....     5,219        3,490      76,748     1,863            (498)      86,822
Loans and advances to
  customers....................     2,882       24,747     168,919       228          (8,692)     188,084
Trading assets.................     1,404        1,177     122,139       156             (34)     124,842
                                  -------      -------     -------     -----         -------      -------
  Subtotal.....................   137,808      224,769     401,120     3,260         (70,524)     696,433
Separate accounts..............        --       25,657          --        --              --       25,657
                                  -------      -------     -------     -----         -------      -------
  Total........................   137,808      250,426     401,120     3,260         (70,524)     722,090
                                  =======      =======     =======     =====         =======      =======


------------
(1) Group's own investments are stated at balance sheet value.



                                                           DECEMBER 31, 2001(1)
                                 ------------------------------------------------------------------------
                                 PROPERTY-                             ASSET      CONSOLIDATION
                                 CASUALTY    LIFE/HEALTH   BANKING   MANAGEMENT    ADJUSTMENTS     TOTAL
                                 ---------   -----------   -------   ----------   -------------    -----
                                                              (E IN MILLION)
                                                                                
Investments in affiliated
  enterprises, joint ventures
  and associated enterprises...    40,387        6,043       2,079       116         (38,378)      10,247
Investments....................    91,712      180,076      85,133     1,362         (12,981)     345,302
Loans and advances to banks....     5,079        1,010      54,271     1,646            (732)      61,274
Loans and advances to
  customers....................     2,837       24,843     222,916       561         (11,464)     239,693
Trading assets.................     1,373          775     125,741       539              (6)     128,422
                                  -------      -------     -------     -----         -------      -------
  Subtotal.....................   141,388      212,747     490,140     4,224         (63,561)     784,938
Separate accounts..............        --       24,692          --        --              --       24,692
                                  -------      -------     -------     -----         -------      -------
  Total........................   141,388      237,439     490,140     4,224         (63,561)     809,630
                                  =======      =======     =======     =====         =======      =======


------------
(1) Group's own investments are stated at balance sheet value.



                                                            DECEMBER 31, 2000(1)
                                  ------------------------------------------------------------------------
                                  PROPERTY-                             ASSET      CONSOLIDATION
                                  CASUALTY    LIFE/HEALTH   BANKING   MANAGEMENT    ADJUSTMENTS     TOTAL
                                  ---------   -----------   -------   ----------   -------------   -------
                                                               (E IN MILLION)
                                                                                 
Investments in affiliated
  enterprises, joint ventures
  and associated enterprises....    22,514        5,615         96         62         (16,524)      11,763
Investments.....................    95,718      186,799      3,070        528          (5,281)     280,834
Loans and advances to banks.....     4,527        3,747      1,142      1,102          (3,448)       7,070
Loans and advances to
  customers.....................     1,565       14,445     12,555        395            (874)      28,086
Trading assets..................        20          119         51        182              --          372
                                   -------      -------     ------      -----         -------      -------
  Subtotal......................   124,344      210,725     16,914      2,269         (26,127)     328,125
Separate accounts assets........        --       22,770         --         --              --       22,770
                                   -------      -------     ------      -----         -------      -------
  Total.........................   124,344      233,495     16,914      2,269         (26,127)     350,895
                                   =======      =======     ======      =====         =======      =======


------------
(1) Group's own investments are stated at balance sheet value.

                                        81


Insurance Operations Investments

     The following is a discussion of the investment portfolio of the Allianz
Group's insurance operations. For a discussion of the investment portfolios of
the Group's banking operations, see "-- Selected Statistical Information
Relating to the Group's Banking Operations."

     Interest-Bearing Investments

     Fixed income securities, including both government and corporate bonds,
constituted 54.8% of the Allianz Group's property-casualty investment portfolio
and 74.5% of its life/health investment portfolio as of December 31, 2002. The
credit quality of the Group's fixed income securities portfolio has historically
been strong. As of December 31, 2002, of the rated fixed income securities in
the Group's own investments portfolio, approximately 34% had a rating comparable
to a Standard & Poor's rating of AAA, approximately 63% were invested in
securities with a Standard & Poor's rating of AA or better and approximately 95%
were invested in securities with a Standard & Poor's rating of BBB or better.

     The following table analyzes the maturities of the Group's fixed income
investments available for sale at December 31, 2002:



                                                              AMORTIZED COST    MARKET VALUE
                                                              --------------    ------------
                                                                      (E IN MILLION)
                                                                          
Contractual term to maturity:
  Up to one year............................................      18,459           21,091
  Over one year through five years..........................      86,646           79,500
  Over five years through ten years.........................      70,109           90,113
  Over ten years............................................      31,377           27,122
                                                                 -------          -------
     Total..................................................     206,591          217,826
                                                                 =======          =======


     Equity Investments

     Equity investments constituted 27.9% of the Group's property-casualty
investment portfolio and 12.7% of its life/health investment portfolio as of
December 31, 2002. The Allianz Group has a long-standing strategy of investing
life policyholders' and shareholders' funds and some amounts of
property-casualty cash flow in equities. Since the early 1900's, the life/health
and property-casualty investments in Germany have included equity positions in a
number of well-known German companies (see table below).

     In view of weak capital markets in 2002, the Group has reduced its equity
exposure through various divestments and hedging activities. However, the Group
believes that shares continue to represent an attractive long-term investment
option and will deliver additional value to a well-diversified investment
portfolio in the long-term.

     The following table sets forth the Group's own investment portfolios by
geographic region at the end of the years indicated:



                                                                   DECEMBER 31,
                                 --------------------------------------------------------------------------------
                                           2002                        2001                        2000
                                 ------------------------    ------------------------    ------------------------
                                 PROPERTY-                   PROPERTY-                   PROPERTY-
                                 CASUALTY     LIFE/HEALTH    CASUALTY     LIFE/HEALTH    CASUALTY     LIFE/HEALTH
                                 ---------    -----------    ---------    -----------    ---------    -----------
                                                                  (E IN MILLION)
                                                                                    
Germany........................   101,802       119,870       100,600       117,233        79,398       121,100
Rest of Europe.................    64,634       103,270        59,139        97,547        56,164        93,400
NAFTA..........................    19,522        22,038        20,398        18,438        17,945        15,604
Rest of World..................     2,855         5,291         2,514         4,491         1,820         3,607
Specialty Lines................     4,417            --         3,007            --         3,057            --
Consolidation Adjustments......   (55,422)          (43)      (44,270)         (270)      (34,040)         (216)
                                  -------       -------       -------       -------       -------       -------
  Total........................   137,808       250,426       141,388       237,439       124,344       233,495
                                  =======       =======       =======       =======       =======       =======


                                        82


Significant Group Equity Investments

     The following tables set forth information regarding the Group's
significant equity investments in German and non-German companies at December
31, 2002. Except for the investments in Munich Re, Beiersdorf AG and Eurohypo,
which are valued by the equity method because the Allianz Group holds more than
a 20% interest, these investments are carried on the Group's financial
statements at market value.



                                                                       DECEMBER 31, 2002
                                                         ---------------------------------------------
                                                         CARRYING VALUE    MARKET VALUE    % OWNERSHIP
                                                         --------------    ------------    -----------
                                                                        (E IN MILLION)
                                                                                  
Munich Re(1).........................................        3,045            4,548           22.4
Beiersdorf AG(2).....................................        1,620            3,886           43.6
Eurohypo AG..........................................        1,933            1,984           28.7


-------------------------
(1) The Group's interest in Munich Re was substantially restructured pursuant to
    the Group's acquisition of Dresdner Bank in July 2001 and its related
    agreements with Munich Re. In addition, the Group reduced its interest in
    Munich Re to slightly less than 20% on March 31, 2003 and further intends to
    reduce its interest in Munich Re to approximately 15% by the end of 2004.
    See "Related Party Transactions -- Transactions with Munich Re" and "The
    Offering."

(2) Includes 13.1% sold pursuant to repurchase agreements.



                                                                  DECEMBER 31, 2002
                                                              --------------------------
                                                              MARKET VALUE   % OWNERSHIP
                                                              ------------   -----------
                                                                    (E IN MILLION)
                                                                       
GERMAN COMPANIES
  E.ON AG...................................................     1,695           6.4
  BASF AG...................................................     1,269           6.1
  Siemens AG................................................     1,053           2.9
  Bayerische Motorenwerke AG................................       995           5.2
  Schering AG...............................................       978          12.0
  RWE AG....................................................       931           6.9
  Deutsche Bank AG..........................................       824           3.1
  Bayer AG..................................................       872           5.8
  Linde AG..................................................       526          12.6
NON-GERMAN COMPANIES
  Credit Lyonnais S.A.......................................     1,915          10.3
  UniCredito Italiano S.p.A.................................     1,181           4.9
  Banco Popular Espanol S.A.................................       842           9.9
  Total Fina Elf S.A........................................       767           1.3
  Nestle S.A................................................       546           0.7
  Royal Dutch Petroleum.....................................       519           0.5


                                        83


Investment Income

     The following tables set forth the components of the Allianz Group's
investment income and expenses for each of the property-casualty, life/health,
banking and asset management segments for the years ended December 31, 2002,
2001 and 2000:



                                                       YEAR ENDED DECEMBER 31, 2002
                                 -------------------------------------------------------------------------
                                 PROPERTY-                             ASSET      CONSOLIDATION
                                 CASUALTY    LIFE/HEALTH   BANKING   MANAGEMENT    ADJUSTMENTS      TOTAL
                                 ---------   -----------   -------   ----------   -------------    -------
                                                              (E IN MILLION)
                                                                                 
INVESTMENT INCOME
Interest and similar income....    4,473       11,215       13,336       119           (933)        28,210
Income from affiliated
  enterprises, joint ventures
  and associated enterprises...    8,494          445        2,071       (12)        (6,600)         4,398
Realized gains.................    3,358        4,571        1,389        30           (694)         8,654
Income from revaluations.......      294          361           41         5             --            701
Trading income.................      207          244        1,081        (1)           (24)         1,507
                                  ------       ------      -------      ----         ------        -------
  Subtotal.....................   16,826       16,836       17,918       141         (8,251)        43,470
INVESTMENT EXPENSES
Interest and similar
  expenses.....................   (1,564)        (434)      (9,509)      (89)           945        (10,651)
Realized losses................   (1,536)      (5,930)      (1,096)      (11)           368         (8,205)
Loan loss allowance............       (7)         (10)      (2,222)       (2)            --         (2,241)
Write-downs and other
  expenses.....................   (2,031)      (2,726)      (1,129)      (11)            --         (5,897)
Investment management
  expenses.....................     (528)        (650)          --        --            121         (1,057)
                                  ------       ------      -------      ----         ------        -------
  Subtotal.....................   (5,666)      (9,750)     (13,956)     (113)         1,434        (28,051)
                                  ------       ------      -------      ----         ------        -------
INVESTMENT INCOME (NET)........   11,160        7,086        3,962        28         (6,817)        15,419
                                  ======       ======      =======      ====         ======        =======




                                                        YEAR ENDED DECEMBER 31, 2001
                                  -------------------------------------------------------------------------
                                  PROPERTY-                             ASSET      CONSOLIDATION
                                  CASUALTY    LIFE/HEALTH   BANKING   MANAGEMENT    ADJUSTMENTS      TOTAL
                                  ---------   -----------   -------   ----------   -------------    -------
                                                               (E IN MILLION)
                                                                                  
INVESTMENT INCOME
Interest and similar income.....    5,068       10,765       9,085        129           (823)        24,224
Income from affiliated
  enterprises, joint ventures
  and associated enterprises....      889          525       1,016         (3)          (839)         1,588
Realized gains..................    4,211        3,405         505         33            (39)         8,115
Income from revaluations........       96          157         123         11             --            387
Trading income..................    1,451         (117)        244         10              4          1,592
                                   ------       ------      ------       ----         ------        -------
  Subtotal......................   11,715       14,735      10,973        180         (1,697)        35,906
INVESTMENT EXPENSES
Interest and similar expenses...   (1,323)        (492)     (6,852)       (82)           802         (7,947)
Realized losses.................   (2,088)      (4,542)       (341)       (51)            24         (6,998)
Loan loss allowance.............       (4)          (4)       (588)        --             --           (596)
Write-downs and other
  expenses......................     (800)        (995)       (124)        (6)            --         (1,925)
Investment management
  expenses......................     (499)        (546)         --         --            104           (941)
                                   ------       ------      ------       ----         ------        -------
  Subtotal......................   (4,714)      (6,579)     (7,905)      (139)           930        (18,407)
                                   ------       ------      ------       ----         ------        -------
INVESTMENT INCOME (NET).........    7,001        8,156       3,068         41           (767)        17,499
                                   ======       ======      ======       ====         ======        =======


                                        84




                                                        YEAR ENDED DECEMBER 31, 2000
                                  ------------------------------------------------------------------------
                                  PROPERTY-                             ASSET      CONSOLIDATION
                                  CASUALTY    LIFE/HEALTH   BANKING   MANAGEMENT    ADJUSTMENTS     TOTAL
                                  ---------   -----------   -------   ----------   -------------    ------
                                                               (E IN MILLION)
                                                                                  
INVESTMENT INCOME
Interest and similar income.....    5,568       10,152       1,502       204            (831)       16,595
Income from affiliated
  enterprises, joint ventures
  and associated enterprises....    1,833          693         122         1            (789)        1,860
Realized gains..................    4,250        6,639          24        18             (24)       10,907
Income from revaluations........        9           28           1        --              --            38
Trading income..................      (10)         (49)          7        16              --           (36)
                                   ------       ------      ------       ---          ------        ------
  Subtotal......................   11,650       17,463       1,656       239          (1,644)       29,364
INVESTMENT EXPENSES
Interest and similar expenses...   (1,136)        (148)     (1,257)      (61)            203        (2,399)
Realized losses.................   (1,428)      (2,624)        (28)       --               1        (4,079)
Loan loss allowance.............       --           --         (21)       --              --           (21)
Write-downs and other
  expenses......................     (485)        (380)         (5)       --              --          (870)
Investment management
  expenses......................     (558)        (406)         --        --               8          (956)
                                   ------       ------      ------       ---          ------        ------
  Subtotal......................   (3,607)      (3,558)     (1,311)      (61)            212        (8,325)
                                   ------       ------      ------       ---          ------        ------
INVESTMENT INCOME (NET).........    8,043       13,905         345       178          (1,432)       21,039
                                   ======       ======      ======       ===          ======        ======


Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

     Net investment income decreased by E2,080 million, or 11.9%, to E15,419
million in 2002 from E17,499 million in 2001, largely as a result of weakness in
the capital markets in 2002, as reflected in the increase in realized losses,
which increased by E1,207 million, or 17.2%, in 2002 compared to 2001 and
increased write-downs and other expenses of E5,897 million in 2002, compared to
E1,925 million in 2001.

     Property-casualty insurance investments decreased by E3,580 million, or
2.5%, to E137,808 million in 2002 from E141,388 million in 2001, due primarily
to a decrease in securities available for sale, largely offset by an increase in
investments in affiliated enterprises, joint ventures and associated
enterprises. Net investment income from property-casualty investments increased
by E4,159 million, or 59.4%, to E11,160 million in 2002 from E7,001 million in
2001, due primarily to realized gains of E1,886 million from open market sales
of Munich Re shares, approximately E1,100 million from open market sales of
Vodafone AG shares and E713 million on the sale of a real estate subsidiary in
Italy as well as realized gains from the sale of other shareholdings in the
Group's German equity portfolio. Net investment income from property-casualty
investments also included significant investment income from intercompany
transactions, including realized gains of E3,332 million from the transfer of
Munich Re shares from Allianz AG to Dresdner Bank and E224 million from the sale
of Vereinte Lebensversicherung AG from Vereinte Versicherung AG to Allianz
Leben. The gain on this intercompany transaction was eliminated at the Group
level. Net investment income from property-casualty insurance investments was
negatively affected by price declines on the capital markets. Write-downs on
investments increased by E1,231 million, or 153.9%, in 2002 compared with 2001.
Interest and similar income decreased 11.7% to E4,473 million in 2002, compared
with E5,068 million in 2001, while realized gains decreased to E3,358 million in
2002, compared with E4,211 million in 2001. Investment expenses increased by
E952 million, or 20.2%, to E5,666 million in 2002 from E4,714 million in 2001,
reflecting primarily increased realized losses on investments and write-downs of
investments as a result of price declines in the capital markets.

     Life/health insurance investments increased by E12,987 million, or 5.5%, to
E250,426 million in 2002 from E237,439 million in 2001, reflecting primarily an
increase in securities available for sale. Net investment income from
life/health investments decreased by E1,070 million, or 13.1%, to E7,086 million
in 2002 from E8,156 million in 2001, primarily due to an increase in investment
write-downs, which increased by E1,731 million, or 174%, in 2002 compared with
2001 due to price

                                        85


declines in the capital markets. Interest and similar income increased 4.2%, to
E11,215 million in 2002, compared with E10,765 million in 2001, while realized
gains increased 34.2%, to E4,571 million in 2002, compared with E3,405 million
in 2001. Investment expenses increased by E3,171 million, or 48.2%, to E9,750
million in 2002 from E6,579 million in 2001, reflecting primarily an increase in
realized losses on investments and write-downs of investments due to price
declines in the capital markets.

     Banking investments decreased by E89,020 million to E401,120 million in
2002 from E490,140 million in 2001, due primarily to a significant decrease in
securities available for sale. Net investment income from banking investments
increased by E894 million, to E3,962 million in 2002 from E3,068 million in
2001, due primarily to a realized gain of E1,912 million resulting from the
transfer in August 2002 of substantially all of Dresdner Bank's German asset
management subsidiaries to ADAM. The gain on this intercompany transaction was
eliminated at the Group level. Net investment income from banking investments
was negatively affected by price declines in the capital markets. Write-downs of
investments increased significantly by E1,005 million, to E1,129 million in
2002, compared with E124 million in 2001. Interest and similar income increased
to E13,336 million in 2002, compared with E9,085 million in 2001, while realized
gains increased to E1,389 million in 2002, compared with E505 million in 2001.
Investment expenses increased to E13,956 million in 2002 from E7,905 million in
2001.

     Asset management investments decreased by E964 million, or 22.8%, to E3,260
million in 2002 from E4,224 million in 2001, reflecting primarily decreases in
trading assets and securities available for sale. Net investment income from
asset management investments decreased by E13 million to E28 million in 2002
from E41 million in 2001. Interest and similar income decreased by E10 million,
or 7.8%, to E119 million in 2002, compared with E129 million in 2001, while
realized gains decreased to E30 million in 2002 from E33 million in 2001.
Investment expenses decreased by E26 million, or 18.7%, to E113 million in 2002
from E139 million in 2001.

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

     Net investment income decreased by E3,540 million, or 16.8%, to E17,499
million in 2001 from E21,039 million in 2000, largely as a result of the
downturn in the capital markets in 2001, as reflected in the decrease in
realized gains, which decreased by E2,792 million, or 25.6%, and the increase in
realized losses, which increased by E2,919 million, or 71.6%, in 2001 compared
to 2000.

     Property-casualty insurance investments increased by E17,044 million, or
13.7%, to E141,388 million in 2001 from E124,344 million in 2000, due primarily
to an increase in investments in affiliated enterprises, joint ventures and
associated enterprises. Net investment income from property-casualty investments
decreased by E1,042 million, or 13.0%, to E7,001 million in 2001 from E8,043
million in 2000, due primarily to price declines on the capital markets.
Interest and similar income decreased 9.0% to E5,068 million in 2001, compared
with E5,568 million in 2000, while realized gains decreased slightly to E4,211
million in 2001, compared with E4,250 million in 2000. Investment expenses
increased by E1,107 million, or 30.7%, to E4,714 million in 2001 from E3,607
million in 2000, reflecting primarily increased realized losses on investments
and write-downs of investments as a result of price declines in the capital
markets.

     Life/health insurance investments increased slightly by E3,944 million, or
1.7%, to E237,439 million in 2001 from E233,495 million in 2000, reflecting
primarily an increase in separate account investments. Net investment income
from life/health investments decreased by E5,749 million, or 41.3%, to E8,156
million in 2001 from E13,905 million in 2000, primarily due to a decrease in
realized gains on investments and an increase in realized losses on investments
due to price declines in the capital markets. Interest and similar income
increased 6.0%, to E10,765 million in 2001, compared with E10,152 million in
2000, while realized gains decreased 48.7%, to E3,405 million in 2001, compared
with E6,639 million in 2000. Investment expenses increased by E3,021 million, or
84.9%, to E6,579 million in 2001 from E3,558 million in 2000, reflecting
primarily an increase in realized losses on investments and write-downs of
investments due to price declines in the capital markets.

     Banking investments increased by E473,226 million to E490,140 million in
2001 from E16,914 million in 2000, due primarily to the acquisition of Dresdner
Bank. The Dresdner Bank acquisition was also the primary driver of the banking
segment's investment results, as the

                                        86


Group's banking operations were not significant in 2000. Net investment income
from banking investments increased by E2,723 million, to E3,068 million in 2001
from E345 million in 2000. Interest and similar income increased to E9,085
million in 2001, compared with E1,502 million in 2000, while realized gains
increased to E505 million in 2001, compared with E24 million in 2000. Investment
expenses increased to E7,905 million in 2001 from E1,311 million in 2000.

     Asset management investments increased by E1,955 million, or 86.2%, to
E4,224 million in 2001 from E2,269 million in 2000, reflecting primarily the
acquisition of Dresdner Bank, offset in part by price declines on the capital
markets. Net investment income from asset management investments decreased by
E137 million to E41 million in 2001 from E178 million in 2000. Interest and
similar income decreased by E75 million, or 36.8%, to E129 million in 2001,
compared with E204 million in 2000, while realized gains increased to E33
million in 2001 from E18 million in 2000. Investment expenses increased by E78
million, or 127.9%, to E139 million in 2001 from E61 million in 2000, reflecting
primarily realized losses on investments due to price declines in the capital
markets.

LIQUIDITY AND CAPITAL RESOURCES

     Allianz AG operates as both a holding company for the Group's insurance,
banking and other subsidiaries and as a reinsurance company, primarily for other
Group companies. The liquidity and capital resource considerations for Allianz
AG and for its domestic and non-domestic operating subsidiaries vary in light of
the business conducted by each, as well as the insurance and banking regulatory
requirements applicable to the Allianz Group in Germany and the other countries
in which it does business. At December 31, 2002, 2001 and 2000, Allianz Group
had E21,008 million, E21,240 million and E4,209 million, respectively, of cash
and cash equivalents. Allianz AG believes that its working capital is sufficient
for the Group's present requirements.

     Allianz Group's principal sources of funds are premiums, customer deposits,
investment income, funds that may be raised from time to time from the issuance
of debt or equity securities and bank or other borrowings, as well as cash
dividends and reinsurance premiums received from Allianz AG's subsidiaries. For
additional information, see "-- Selected Statistical Information Relating to the
Group's Banking Operations" and "-- Risk Management." For further information
regarding the uses and sources of liquidity, capital requirements, and other
related matters, see "-- Consolidated Cash Flows."

     The majority of Allianz AG's external debt financing at December 31, 2002
was in the form of debentures and money market securities. Allianz Group's total
certificated liabilities outstanding at December 2002, 2001 and 2000 were
E78,750 million, E134,670 million and E13,606 million, respectively. Of the
certificated liabilities outstanding at December 31, 2002, E41,077 million were
due within one year. Proceeds to Allianz Finance B.V. and Allianz Finance II
B.V. from the issuance of debt for the years ended December 31, 2002, 2001 and
2000 were approximately E5,400 million, E3,054 million and E2,354 million,
respectively.

     Allianz AG paid dividends of E364 million, E367 million and E307 million on
its shares in 2002, 2001 and 2000 with respect to the fiscal years 2001, 2000
and 1999, respectively, and has proposed a dividend payment of E374 million for
the fiscal year 2002 which is expected to be paid on April 30, 2003. Dividends
paid by the Group's operating companies outside of Germany are generally
retained by an intermediate holding company to finance operations or
acquisitions in the relevant countries. As a result, Allianz AG generally pays
dividends out of the profits from its reinsurance operations and profits
transferred from its German operating subsidiaries.

     Certain of the Group companies are subject to legal restrictions on the
amount of dividends they can pay to their shareholders. In addition to the
restrictions in respect of minimum capital and solvency requirements that are
imposed by insurance and other regulators in the countries in which these
companies operate, other limitations exist in certain countries. For example,
the operations of Allianz AG's insurance company 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 prior approval of the insurance
commissioner of the state of domicile. See "-- Regulation and Supervision."

                                        87


CONSOLIDATED CASH FLOWS

     The liquidity requirements of the Group's insurance operations are met both
on a short- and long-term basis by funds provided by insurance premiums
collected, investment income and collected reinsurance receivables, and from the
sale and maturity of investments. The Allianz Group also has access to
commercial paper, medium-term notes and other credit facilities as additional
sources of liquidity. The major uses of these funds are to pay property-casualty
claims and related claims expenses, provide life policy benefits, pay
surrenders, cancellations and profit sharing for life policyholders and pay
other operating costs. The Allianz Group generates a substantial cash flow from
insurance operations as a result of most premiums being received in advance of
the time when claim payments or policy benefits are required. These positive
operating cash flows, along with that portion of the investment portfolio that
is held in cash and liquid securities, have historically met the liquidity
requirements of the Group's insurance operations.

     In the insurance industry, liquidity generally refers to the ability of an
enterprise to generate adequate amounts of cash from its normal operations,
including its investment portfolio, in order to meet its financial commitments,
which are principally obligations under its insurance or reinsurance contracts.
The liquidity of the Group's property-casualty insurance operations is affected
by the frequency and severity of losses under its policies, as well as by the
persistency of its products. Future catastrophic events, the timing and effect
of which are inherently unpredictable, may also create increased liquidity
requirements for the Group's property-casualty operations. The liquidity needs
of the Group's life operations are generally affected by trends in actual
mortality experience relative to the assumptions with respect thereto included
in the pricing of its life insurance policies, by the extent to which minimum
returns or crediting rates are provided in connection with its life insurance
products, as well as by the level of surrenders and withdrawals.

     With regard to the Allianz Group's banking operations, the Group's primary
sources of liquidity are customer deposits and interest income from its lending
transactions and its investment portfolio, while its major uses of funds are for
the issuance of new loans and advances to banks and customers, and the payment
of interest on deposits, certificated liabilities and subordinated liabilities
and other operating costs. Other sources of liquidity include the Group's
ability to borrow on the interbank market and convert securities in its
investment and trading portfolios into cash.

     The Allianz Group's uses of funds, in addition to the dividends paid to
shareholders of Allianz AG, include underwriting expenditures (reinsurance
premiums, benefits, surrenders, claims -- including claims handling expenses --
and profit sharing by life policyholders), acquisitions, and employee and other
operating expenses, as well as interest expense on outstanding borrowings. The
Allianz Group's life and health insurance products include mandatory profit-
sharing features, whereby the Group returns a specified portion of statutory
profits to policyholders annually, generally in the form of premium subsidies or
rebates. See "-- Discussion of Operations by Business Segment -- Life/Health
Insurance Operations -- Life/Health Operations by Geographic Region -- Germany
-- Life Insurance" and "-- Discussion of Operations by Business Segment --
Life/Health Insurance Operations -- Life/Health Operations by Geographic Region
-- Germany -- Health Insurance."

     Recent significant acquisitions have included the purchases of PIMCO in May
2000, Nicholas-Applegate in January 2001 and Dresdner Bank in July 2001. On
March 31, 2003, a subsidiary of Allianz AG received notice from the former
parent company of PIMCO that such former parent company had exercised its right
to put US$250 million of its remaining ownership interest in PIMCO to Allianz,
with payment therefor due by April 30, 2003. See "-- Asset Management Operations
-- Results of Operations -- Year Ended December 31, 2002 Compared to Year Ended
December 31, 2001 -- Net Income."

     The Allianz Group's capital requirements are primarily dependent on the
Group's business plans regarding the levels and timing of capital expenditures
and investments.

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

     Net cash used in operating activities was E670 million in 2002, compared to
net cash used in operating activities of E775 million in 2001. The change was
primarily attributable to increased

                                        88


changes in trading securities and in funds held by others under reinsurance
business assumed, offset by a decrease in net income and other receivables and
liabilities.

     Net cash used in investing activities was E15,934 million in 2002, compared
to net cash provided by investing activities of E9,930 million in 2001. The
decrease was primarily driven by a significant decrease in cash and cash
equivalents from the acquisition of consolidated affiliated companies and an
increased change in available-for-sale securities.

     Net cash provided by financing activities was E16,481 million in 2002,
compared to net cash provided by financing activities of E7,858 million in 2001.
The increase was primarily attributable to an increase in participation
certificates and post-ranking liabilities, the change in aggregate policy
reserves for life insurance products according to SFAS 97 and in other financing
activities.

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

     First-time compliance with regulations specific to the banking sector
required changes in the format of the cash flow statement. The headings for the
previous years were adjusted accordingly. The cash flow statement excludes the
effects of the first-time consolidation of major new acquisitions during the
course of 2001, including, among others, Dresdner Bank and Nicholas-Applegate.
Subsequent to their respective dates of acquisition, the cash of these companies
has been included in the cash flow statement.

     Net cash used in operating activities of the Allianz Group was E775 million
in 2001, compared to net cash provided by operating activities of E2,476 million
in 2000. The decrease was primarily attributable to an increased change in
trading securities and a decrease in net income for the year. This was offset by
an increased adjustment for investment income and expenses not involving
movement in cash, and an increased change in other receivables and liabilities.

     Net cash provided by investing activities of the Allianz Group was E9,930
million in 2001, compared to net cash used in investing activities of E13,725
million in 2000. The increase was primarily driven by an increased change in
cash and cash equivalents from the acquisition of consolidated affiliated
companies, following the acquisition of Dresdner Bank and Nicholas-Applegate, an
increased change in available-for-sale securities and an increased change in
other investments.

     Net cash provided by financing activities of the Allianz Group was E7,858
million in 2001, compared to net cash provided by financing activities of
E11,519 million in 2000. The decrease was primarily attributable to a decreased
change in loans, participation certificates and post-ranking liabilities, and a
decreased change in other financing activities.

PROPERTY-CASUALTY INSURANCE RESERVES

GENERAL

     When claims are made by or against policyholders, any amounts that a member
of the Allianz Group's property-casualty segment pays or expects to pay the
claimant are referred to as losses, and the costs of investigating, resolving
and processing these claims are referred to as loss adjustment expenses ("LAE").
The Allianz Group establishes reserves for payment of losses and LAE for claims
that arise from its property-casualty insurance and reinsurance policies by
product, coverage and year for each company in the Group. In accordance with
IFRS, no specific loss and LAE reserves are established until an event that
causes a loss occurs.

     Loss and LAE falls into two categories: reserves for reported claims and
reserves for incurred but not reported (IBNR) claims. Reserves for reported
claims are based on estimates of future payments that will be made in respect of
claims, including expenses relating to such claims. Such estimates are made on a
case-by-case basis, based on the facts and circumstances available at the time
the reserves are established. The estimates reflect the informed judgment of the
Group's claims personnel based on general insurance reserving practices and
knowledge of the nature and value of a specific type of claim. These reserves
are periodically adjusted in the ordinary course of settlement and represent the
estimated ultimate costs necessary to bring all pending reported claims to final
settlement, taking into account inflation, and other societal and economic
factors which can influence the amount of the reserves required. Consideration
is given to historic trends of disposition patterns and loss payments, pending
levels of unpaid claims and types of coverage. In addition,

                                        89


court decisions, economic conditions and public attitudes may also affect the
estimation of reserves, as well as ultimate costs of claims.

     IBNR reserves are established to recognize the estimated cost of losses
that have occurred but about which the Group does not yet have notice. These
reserves, like the reserves for reported claims, are established to recognize
the estimated costs, including expenses, necessary to bring claims arising out
of losses to final settlement. Since nothing is known about the occurrence, the
Group relies on its past experience adjusted for current trends and any other
factors that would modify past experience to estimate the IBNR liability. These
reserves are estimates that involve 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. Late reported claim trends, claim severity, exposure growth and future
inflation are some of the factors used in projecting the IBNR reserve
requirements. These reserves are reviewed and revised periodically as additional
information becomes available and actual claims are reported.

     The time required to learn of and settle claims is an important
consideration in establishing reserves. Short-tail claims, such as automobile
property damage claims, are reported within a few days or weeks and are
generally settled within two to three years. Medium-tail claims such as personal
and commercial motor liability claims generally take four to six years to
settle, while long-tail claims, such as general liability, workers compensation,
construction and professional liability claims take longer to settle. Based on
the profile of property-casualty reserves for its largest operating entities,
the Allianz Group characterizes its reserves as approximately 20% short-tail,
40% medium-tail and 40% long-tail.

     The ultimate cost of loss and LAE is subject to a number of highly variable
circumstances. As time passes between when a claim is reported to the final
settlement of the claim, a change in circumstances may require established
reserves to be adjusted either upwards or downwards. Items such as changes in
the legal environment, results of litigation, and changes in medical costs,
costs of automobile and home repair materials and labor rates can substantially
impact claim costs. These factors can cause actual developments to vary from
expectations, perhaps materially. Claims reserve estimates are periodically
reviewed and updated, using the most current information available to
management, and any adjustments resulting from changes in reserve estimates are
reflected in current results of operations.

     On the basis of the Group's internal procedures, management believes, based
on information currently available to it, that the Group's property-casualty
reserves are adequate. However, the establishment of loss reserves is an
inherently uncertain process, and accordingly, there can be no assurance that
ultimate losses will not differ from the Group's initial estimates.

RECONCILIATION OF BEGINNING AND ENDING LOSS AND LAE RESERVES

     The following table is a summary reconciliation of the beginning and ending
reserves of the Allianz Group, including the effect of reinsurance ceded, for
the property-casualty insurance segment for each of the years in the three-year
period ended December 31, 2002, on an IFRS basis.

                                        90


RECONCILIATION OF LOSS AND LAE RESERVES
PROPERTY-CASUALTY INSURANCE SEGMENT



                                                                 YEAR ENDED DECEMBER 31,
                                                                --------------------------
                                                                 2002      2001      2000
                                                                ------    ------    ------
                                                                      (E IN MILLION)
                                                                           
Balance as of January 1.....................................    61,476    54,047    51,272
Less reinsurance recoverable................................    16,156    12,571    12,089
                                                                ------    ------    ------
Net.........................................................    45,320    41,476    39,183
                                                                ------    ------    ------
Plus incurred related to:
Current year................................................    27,130    27,295    24,163
Prior years(1)..............................................       646        76      (123)
                                                                ------    ------    ------
Total incurred..............................................    27,776    27,371    24,040
                                                                ======    ======    ======
Less paid related to:
Current year................................................    12,642    11,895    11,735
Prior years.................................................    12,143    12,462    11,968
                                                                ------    ------    ------
Total paid..................................................    24,785    24,357    23,703
                                                                ------    ------    ------
Effect of foreign exchange..................................    (3,376)      407       649
Effect of acquisitions(2)...................................       122       423       240
Reclassification(3).........................................        --        --       458
Other(4)....................................................        --        --       609
                                                                ------    ------    ------
Net balance at end of year..................................    45,066    45,320    41,476
Plus reinsurance recoverable................................    14,588    16,156    12,571
                                                                ------    ------    ------
Balance as of December 31...................................    59,654    61,476    54,047
                                                                ======    ======    ======


------------

(1) The favorable development in 2000 is primarily due to the Group's
    subsidiaries in Germany, Austria and the United Kingdom, offset to some
    extent by unfavorable run-off in Italy and the United States. The
    unfavourable development during 2002 is primarily due to increases in
    asbestos and general liability reserves in the United States.

(2) Reserves for loss and LAE of subsidiaries purchased (or sold) are included
    (or excluded) as of the date of acquisition (or disposition).

(3) Represents the movement of certain AGF Belgium reserves from aggregate
    policy reserves to loss reserves.

(4) In 2000, includes the impact of the commutation of a reinsurance agreement
    with Munich Re (E322.5 million).

CHANGES IN HISTORICAL LOSS AND LAE RESERVES

     The following loss and LAE reserve development table illustrates the change
over time of the loss and LAE reserves of the Group at the end of the years
indicated. The reserves represent the estimated amount of loss and LAE for
claims arising in the current and all prior accident years that are unpaid at
the balance sheet date, including IBNR. Since the Group adopted IFRS in 1997,
historical loss development data is available on an IFRS basis of accounting for
the six years 1997 to 2002 only.

     The first section of each table shows gross reserves for loss and LAE as
initially established at the end of each stated year. The second section,
reading down, shows the cumulative amounts paid, gross of reinsurance and
retrocessions, as of the end of the successive years with respect to the reserve
initially established. The third section shows the retroactive re-estimation of
the initially established gross reserves for loss and LAE as of the end of each
successive year, which results primarily from the Group's expanded awareness of
additional facts and circumstances that pertain to open claims. The last section
compares the latest re-estimated gross reserves for loss and LAE to the gross
reserves as initially established and indicates the cumulative development of
the initially established gross reserves through December 31, 2002. For
instance, the surplus (deficiency) shown in the table for each year represents
the aggregate amount by which the original estimates of reserves at that
year-end have changed in subsequent years. Accordingly, the cumulative surplus
(deficiency) for a year-end relates only to reserves at that year-end and such
amounts are not additive.

     Caution should be exercised in evaluating the information shown on this
table, as each amount includes the effects of all changes in amounts for prior
periods. Conditions and trends

                                        91


that have affected development of liability in the past may or may not
necessarily occur in the future, and accordingly, conclusions about future
results may not be derived from information presented in this table.

CHANGES IN HISTORICAL RESERVES FOR UNPAID LOSS AND LAE
PROPERTY-CASUALTY INSURANCE SEGMENT
GROSS OF REINSURANCE



                                                                 DECEMBER 31,(1)
                                             --------------------------------------------------------
                                              1997      1998      1999      2000      2001      2002
                                             ------    ------    ------    ------    ------    ------
                                                                  (E IN MILLION)
                                                                             
Gross liability for unpaid claims and
  claims expenses........................    34,323    45,560(2) 51,272(3) 54,047    61,476(4) 59,654
Paid (cumulative) as of:
  One year later.........................     8,573    12,996    15,949    16,639    17,384
  Two years later........................    13,329    20,967    24,132    24,451
  Three years later......................    16,778    24,588    29,123
  Four years later.......................    19,562    27,829
  Five years later.......................    21,539
Liability re-estimated as of:
  One year later.........................    32,200    46,768    52,663    55,357    60,195
  Two years later........................    33,104    46,975    53,589    55,289
  Three years later......................    32,766    47,346    53,101
  Four years later.......................    33,455    46,687
  Five years later.......................    33,426
Cumulative surplus (deficiency)..........       897    (1,127)   (1,829)   (1,243)    1,281
Cumulative surplus (deficiency) excluding
  impact of foreign exchange.............     1,731     1,511    (1,353)   (2,227)   (1,572)
  Percent................................       5.0%      3.3%     (2.6)%    (4.1)%    (2.6)%


------------

(1) Reserves for loss and LAE of subsidiaries purchased (or sold) are included
    (or excluded) as of the date of the acquisition (or disposition).

(2) As a result of the acquisition of AGF, loss and LAE reserves at December 31,
    1998 increased by E10,658 million on a gross basis.

(3) As of December 31, 1999, gross reserves increased by E1.2 billion as a
    result of the completion of the acquisition of Allianz Australia and by E2.0
    billion as a result of the strengthening of the U.S. dollar and the pound
    sterling against the euro.

(4) As of December 31, 2001, the increase in gross reserves was primarily due to
    the gross incurred losses and loss adjustment expenses related to the
    terrorist attack of September 11, 2001.

     As of December 31, 2002, 2001 and 2000, the Allianz Group's consolidated
property-casualty reserves reflected discounts of E1,529 million, E1,580
million, and E1,445 million, respectively.

     Reserves are discounted to varying degrees in the United States, Germany,
Hungary, Switzerland, Portugal, France and Belgium. For the United States, the
discount reflected in the reserves is related to annuities for certain
long-tailed liabilities, primarily in workers' compensation. For the other
countries, the reserve discounts relate to annuity reserves for various classes
of business. These classes include personal accident, general liability and
motor liability in Germany and Hungary, workers' compensation in Switzerland and
Portugal, individual and group health disability and motor liability in France
and health disability in Belgium. All of the reserves that have been discounted
have payment amounts that are fixed and timing that is reasonably determinable.

     The significant increase in the gross reserves for 2001 over 2000 for the
Allianz Group companies is driven by gross incurred losses and loss adjustment
expenses related to the terrorist attack of September 11, 2001. On a
consolidated Group basis, the terrorist attack of September 11, 2001 resulted in
net claims costs of approximately E1,500 million. Estimated losses are based on
a policy-by-policy analysis as well as a variety of actuarial techniques,
coverage interpretations and claim estimation methodologies, and include an
estimate of incurred but not reported, as well as estimated costs related to the
settlement of claims. These loss estimates are subject to considerable
uncertainty.

                                        92


     Because the terrorist attack of September 11, 2001 was a single coordinated
event, it is the belief of the Group's management that the losses at the World
Trade Center constitute one occurrence. A Group company is currently a defendant
in a lawsuit brought by an insured alleging that the attack constituted multiple
occurrences. Based on the policy wording, the Group believes it is clear that
the attack constitutes one occurrence and intends to defend this matter
vigorously.

     The reserves held at year-end 1997 and year-end 1998 show surpluses of 5.0%
and 3.3%, respectively, after adjusting for the impact of exchange rate
fluctuations. The surplus is primarily driven by favorable claims experience in
Germany, France, the United Kingdom, and Austria and is offset by adverse
development in Italy. The reserves held at year-end 1999, year-end 2000 and
year-end 2001 show deficiencies of 2.6%, 4.1% and 2.6% respectively, after
adjusting for the impact of exchange rate fluctuations. The deficiency for
year-end 1999 is driven by upward development on claims related to the storms
"Lothar" and "Martin" that occurred in Europe in late 1999. Additionally, the
strengthening of the reserves U.S. casualty, asbestos and environmental, as well
as for motor liability and general liability in Italy during 2001 and 2002
contributed to the deficiencies shown for 1999, 2000 and 2001. The cumulative
deficiency in 2001 was also significantly impacted by exchange rate fluctuations
between the euro and U.S. dollar, reflecting the reserve additions taken at the
Group's U.S. subsidiaries Fireman's Fund and Allianz Insurance Co.

INDIVIDUAL COUNTRY RESERVES -- GROSS RESERVES

     The following five tables present loss development data on a local
statutory basis of accounting for Germany, the United States, the United
Kingdom, France and Italy, the five countries in which the Allianz Group writes
the majority of its business.

     Since the Group adopted IFRS in 1997, historical loss development data is
not available on a consistent basis of accounting for years prior to 1997.
Therefore, the individual country tables presented on the following pages are
prepared on a local statutory basis of accounting for each respective country.

     Generally, under German, French and Italian statutory accounting
principles, property-casualty loss and LAE reserves are established based on a
case reserving approach. Individual case reserves, set by claims adjusters, are
aggregated to determine the overall reserve amounts. In addition, local
regulations require an equalization reserve as a safety margin. In comparison,
under IFRS, overall property-casualty reserves are set by analyzing past data
and applying actuarial methodologies to this data. In addition, IFRS-based
reserves exclude equalization reserves. Consistent with IFRS principles,
catastrophe and equalization reserves are not included in the individual country
loss and LAE reserves disclosures.

     The tables for Germany, France, Italy and the United Kingdom present nine
years of loss information, as over 60% of the business in these countries is
short and medium tail. The table for the United States presents ten years of
loss information, as the Group provides longer tail coverages in this market.

Germany

     The loss reserve development table for Germany includes the development of
property-casualty reserves for the Group subsidiaries that insure or reinsure
property-casualty risks in Germany. The table is presented on a consolidated
basis for the Group's subsidiaries in Germany on a German statutory accounting
basis, and represents 100% of property-casualty reserves in Germany.

     In Germany, reserves related to annuities for personal accident, general
liability and motor liability claims are discounted. As of December 31, 2002,
2001, and 2000, the Allianz Group's

                                        93


German property-casualty reserves reflected discounts of E223 million, E202
million, and E180 million, respectively.



                                                                      DECEMBER 31,
                                     ------------------------------------------------------------------------------
                                      1994     1995     1996     1997     1998     1999     2000     2001     2002
                                     ------   ------   ------   ------   ------   ------   ------   ------   ------
                                                                     (E IN MILLION)
                                                                                  
Gross reserves for unpaid claims
  and expenses cumulative paid as
  of:..............................  10,068   10,787   13,046   13,409   13,235   13,341   13,522   14,642   14,519
  One year later...................   2,080    2,052    2,448    2,444    2,527    2,841    2,721    2,992
  Two years later..................   2,875    2,829    3,434    3,328    3,576    3,889    3,872
  Three years later................   3,334    3,357    3,927    4,013    4,198    4,587
  Four years later.................   3,710    3,762    4,421    4,453    4,683
  Five years later.................   4,026    4,103    4,766    4,839
  Six years later..................   4,299    4,329    5,081
  Seven years later................   4,480    4,564
  Eight years later................   4,670
Liability re-estimated as of:
  One year later...................   9,314    9,780   11,821   11,954   11,982   12,413   12,427   13,483
  Two years later..................   8,701    9,144   10,814   10,764   10,916   11,424   11,469
  Three years later................   8,337    8,542    9,977   10,036   10,279   10,662
  Four years later.................   7,913    8,105    9,425    9,549    9,589
  Five years later.................   7,602    7,772    9,061    9,003
  Six years later..................   7,366    7,518    8,593
  Seven years later................   7,167    7,513
  Eight years later................   7,167
  Cumulative surplus (deficiency)..   2,901    3,274    4,453    4,406    3,646    2,679    2,053    1,159
    Percent........................    28.8%    30.4%    34.1%    32.9%    27.5%    20.1%    15.2%     7.9%


     As a multi-line insurer in the German market, the Allianz Group's reserves
include diverse property-casualty coverages including motor liability, general
liability, property, marine, and credit. In Germany, the general practice is to
record statutory reserves based on a prudent case-by-case reserve approach.
Statistically, due to favorable outcomes on certain portions of the case
reserves, this methodology leads to overall favorable development in the total
reserves, leading to statutory reserves that are generally redundant.

     The increase in the gross reserves for 2001 over 2000 for Allianz Group
non-life insurance companies in Germany is driven by gross incurred losses and
loss adjustment expenses related to the terrorist attack of September 11, 2001,
a majority of which is attributable to reinsurance underwritten by Allianz AG.

United States

     The loss reserve development table for the United States includes the
development of property-casualty reserves for the Group subsidiaries in the
United States that insure or reinsure property-casualty risks. The table is
presented on a consolidated basis for the Group's subsidiaries in the United
States on a U.S. statutory basis, and represents 100% of property-casualty
reserves in the United States. As of December 31, 2002, 2001, and 2000, the
Allianz Group's U.S. property-casualty reserves reflected discounts of E316
million, E412 million, and E295 million, respectively.

                                        94




                                                                  DECEMBER 31,
                             ---------------------------------------------------------------------------------------
                              1993     1994     1995     1996     1997     1998     1999     2000     2001     2002
                             ------   ------   ------   ------   ------   ------   ------   ------   ------   ------
                                                                 (E IN MILLION)
                                                                                
Gross reserves for unpaid
  claims and claims
  expenses.................   7,972    7,174    7,415    8,633   10,571   10,047   11,932   12,701   16,292   15,860
Cumulative paid as of:
  One year later...........   1,589    1,536    1,626    2,538    2,589    2,937    4,043    3,966    4,277
  Two years later..........   2,557    2,516    3,191    4,099    4,429    5,323    6,284    6,013
  Three years later........   3,213    3,573    4,308    5,455    5,963    6,707    7,715
  Four years later.........   3,960    4,432    5,384    6,410    6,882    7,672
  Five years later.........   4,569    5,358    6,132    7,087    7,655
  Six years later..........   5,436    5,981    6,654    7,745
  Seven years later........   5,991    6,414    7,255
  Eight years later........   6,358    6,970
  Nine years later.........   6,890
Liability re-estimated as
  of:
  One year later...........   6,970    7,285    8,260   10,644   10,254   11,711   13,081   13,361   16,899
  Two years later..........   7,207    7,984    9,859   10,341   11,286   11,965   13,312   14,429
  Three years later........   7,814    9,274    9,614   11,087   11,374   11,969   14,311
  Four years later.........   8,834    9,112   10,250   11,074   11,316   12,853
  Five years later.........   8,780    9,687   10,261   10,959   12,277
  Six years later..........   9,384    9,710   10,130   11,940
  Seven years later........   9,428    9,597   11,185
  Eight years later........   9,329   10,684
  Nine years later.........  10,450
  Cumulative surplus
    (deficiency)...........  (2,478)  (3,510)  (3,770)  (3,307)  (1,706)  (2,806)  (2,379)  (1,728)    (606)
  Cumulative surplus
    (deficiency) excluding
    impact of foreign
    exchange...............  (2,075)  (1,958)  (1,166)  (1,040)    (765)    (553)  (1,601)  (2,126)  (2,501)
    Percent................   (26.0)%  (27.3)%  (15.7)%  (12.1)%   (7.2)%   (5.5)%  (13.4)%  (16.7)%  (15.3)%


     The Group's portfolio in the United States consists of a diverse group of
personal and commercial coverages, including workers' compensation, general
liability, automobile liability, property, fire and marine generally written
throughout the United States, and as such the Allianz Group is exposed to
general developments and risks that affect the entire U.S. property-casualty
industry.

     The significant increase in the gross reserves for 2001 over 2000 for the
Allianz Group non-life insurance companies in the United States is driven by
incurred losses and loss adjustment expenses related to the simultaneous
terrorist attack of September 11, 2001, nearly all of which is attributable to
Allianz Insurance Co.

     Primary drivers of the increase in 2002 in the estimated liability for
prior years were:

     - Reserve strengthening of US$750 million (net and gross) relating to
       asbestos and environmental ("A&E") exposures at Fireman's Fund for
       accident years 1987 and prior;

     - Increases of US$1,145 million in gross reserves for general liability and
       property exposures at Allianz Insurance Co.; and

     - General net reserve strengthening at Fireman's Fund for accident years
       1999 and 2000.

     In 2002 Fireman's Fund completed an analysis of A&E liabilities. The
analysis used ground-up exposure-based modeling where appropriate, supplemented
by aggregate methods such as average cost models and survival ratio methods. In
response to the results of this study, the Allianz Group increased gross
asbestos reserves by US$750 million (net and gross) in September, 2002, which
was within the reasonable range of the analysis and resulted in an estimated 13
year survival ratio. In 1995, Fireman's Fund had increased its net and gross
reserves for A&E by US$800 million and in 2000 an additional US$250 million was
reallocated to A&E. There are significant uncertainties in estimating the amount
of A&E claims. Reserves for asbestos-related illnesses, toxic waste clean-up
claims and latent drug and chemical exposures cannot be estimated with
traditional loss reserving techniques. Case reserves are established when
sufficient information has been obtained to indicate the involvement of a
specific insurance policy. In addition, IBNR reserves are established to cover
additional exposures on both known

                                        95


and unasserted claims. In establishing the liabilities for claims arising from
asbestos related illnesses, toxic waste clean-up and latent drug and chemical
exposures, 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 remediation and insurer liability, and given the
inherent uncertainty in estimating A&E liabilities, significant adverse
deviation from the current carried A&E reserve position is possible.

     In response to the uncertainty associated with A&E claims, Fireman's Fund
has created an environmental claims unit focused on A&E claims evaluation and
remediation for the Allianz Group's U.S. subsidiaries. The staff of this unit,
consisting of a total of approximately 50 employees, determines appropriate
coverage issues according to the terms of the policies and contracts involved
and, on the basis of its experience and expertise, makes judgments as to the
ultimate loss potential related to each claim submitted for payment under the
various policies and contracts. Judgments of potential losses are also made from
precautionary reports submitted by insured companies for claims which have the
possibility of involving policy coverage. Factors considered in determining the
reserve are: whether the claim relates to asbestos or hazardous waste; whether
the claim is for bodily injury or property damage; the limits of liability and
attachment points; policy provisions for expenses (which are a significant
portion of the estimated ultimate cost of these claims); type of insured; and
any provision for reinsurance recoverables. In addition, Fireman's Fund actively
pursues commutations and reinsurance cessions to reduce its A&E exposures.

     For Allianz Insurance Co., the gross increases in general liability
reserves in 2002 were based on a thorough actuarial analysis carried out in
conjunction with a significant re-underwriting of the company's business. The
majority of the increase, or US$936 million, is attributable to monoline general
liability business. Approximately US$187 million of the increase is from
property and US$30 million from workers compensation, partially offset by
reductions of US$9 million for other lines.

     In addition to the increase in A&E and general liability reserves, in 2002
Fireman's Fund increased reserves for accident years 1999 and 2000 following the
re-evaluation of several business segments during the Group's regular quarterly
reserve analyses. For 1999, Commercial Auto Liability, Medical Malpractice,
Other Liability and Workers' Compensation reserves were increased US$102
million, partially offset by favorable development in Commercial Multi-Peril
(US$41 million). Accident year 2000 reserves were increased in Commercial Auto
Liability, Medical Malpractice and Other Liability (US$141 million), partially
offset by favorable development in Commercial Multi-Peril and Surety (US$56
million). Two of the major business segments that drove the results for
Commercial Auto Liability and Medical Malpractice above have been re-evaluated
as businesses that the Allianz Group will not write in the future.

     On September 30, 2002, Fireman's Fund entered into a reinsurance contract
whereby it ceded all net carried A&E reserves to Allianz AG, with Allianz AG
providing reinsurance cover up to a maximum of US$2,158 million. Total A&E
reserves ceded under this treaty were US$1,276 million for consideration in the
amount of US$1,276 million. The following table summarizes the gross and net
U.S. claim reserves for A&E claims at December 31 for the years indicated.



                                A&E              A&E
                                NET             GROSS          AS A PERCENTAGE OF     AS A PERCENTAGE OF THE
YEAR-END                      RESERVES         RESERVES      U.S. PROPERTY-CASUALTY      GROUP'S PROPERTY-
DECEMBER 31,               (E IN MILLION)   (E IN MILLION)       GROSS RESERVES       CASUALTY GROSS RESERVES
------------               --------------   --------------   ----------------------   -----------------------
                                                                          
1998.....................        982            1,849                 18.4%                     4.1%
1999.....................        883            1,509                 12.6%                     2.9%
2000.....................      1,072            1,778                 14.0%                     3.3%
2001.....................        979            1,649                 10.1%                     2.7%
2002.....................        249            1,704                 10.7%                     2.9%


                                        96


United Kingdom

     The loss reserve development table for the United Kingdom includes the
development of property-casualty reserves for the Group subsidiaries that insure
or reinsure property-casualty risks in the United Kingdom. The table is
presented on a consolidated basis for the Group's subsidiaries on a U.K. GAAP
basis, which is similar to an IFRS basis, and represents 100% of
property-casualty reserves in the United Kingdom.



                                                                   DECEMBER 31,
                                       ---------------------------------------------------------------------
                                       1994    1995    1996    1997    1998    1999    2000    2001    2002
                                       -----   -----   -----   -----   -----   -----   -----   -----   -----
                                                                  (E IN MILLION)
                                                                            
Gross reserves for unpaid claims
  and claims expenses................  1,141   1,158   1,445   1,797   2,727   3,165   3,262   3,557   3,369
Cumulative paid as of:
  One year later.....................    305     393     469     507     835     911   1,059   1,033
  Two years later....................    534     627     695     759   1,264   1,496   1,586
  Three years later..................    708     765     856     907   1,622   1,825
  Four years later...................    807     882     947   1,039   1,841
  Five years later...................    897     938   1,031   1,109
  Six years later....................    934   1,001   1,075
  Seven years later..................    969   1,035
  Eight years later..................    995
Liability re-estimated as of:
  One year later.....................  1,055   1,349   1,613   1,606   2,960   3,052   3,189   3,153
  Two years later....................  1,205   1,467   1,467   1,629   2,816   3,013   2,954
  Three years later..................  1,298   1,356   1,485   1,614   2,720   2,873
  Four years later...................  1,203   1,356   1,467   1,506   2,622
  Five years later...................  1,204   1,355   1,407   1,461
  Six years later....................  1,219   1,330   1,391
  Seven years later..................  1,270   1,322
  Eight years later..................  1,265
  Cumulative surplus (deficiency)....   (124)   (164)     54     336     105     292     308     404
  Cumulative surplus (deficiency)
  Excluding impact of foreign
  exchange...........................      8     143     228     339     369     259     251     223
    Percent..........................    0.7%   12.4%   15.8%   18.9%   13.5%    8.2%    7.7%    6.3%


     In the United Kingdom, the Allianz Group writes a broad mix of
property-casualty business for both individual and commercial clients. The
Group's general practice is to record property-casualty reserves at the
actuarial best estimate plus a margin for prudence. Accordingly, from 1996
through 2000, the Allianz Group has experienced favorable development in
property-casualty claim reserves, which has arisen to differing degrees on
almost all lines of business and reflects the approach of calculating reserves
on a prudent best estimate basis. This approach reflects industry practice in
the United Kingdom.

     Allianz Cornhill experienced gross incurred losses and loss adjustment
expenses related to the terrorist attack of September 11, 2001, which was a
primary factor in year-to-year reserves development.

     The periods prior to and including 1995 differ from subsequent periods in
that they showed a deficiency for earlier development years before a surplus
emerged. This deficiency arose from the strengthening of reserves relating to
Marine Excess of Loss business written through the London Market during the late
1980's. This strengthening of Marine reserves more than offset the redundancy
emerging from other lines of business at the time. The Group considers that the
reserve issues that arose at the time have been fully addressed, as evidenced by
the now positive run-off.

     The table also shows a sharp increase in the level of gross reserves from
1997 to 1998. This is primarily due to the acquisition of AGF in 1998. Reserves
from AGF's UK subsidiaries were E1,067 million at December 31, 1998.

France

     The loss reserve development table for France includes the development of
property-casualty reserves for the Group subsidiaries that insure or reinsure
property-casualty risks in France. The table is presented on a consolidated
basis for the Group's subsidiaries in France on a French

                                        97


statutory accounting basis. All property-casualty lines other than construction,
MAT and credit are presented on an accident year basis. Construction, MAT and
credit are presented on an underwriting year basis, consistent with applicable
French statutes. Loss reserves presented on an "underwriting year" basis
represent claims related to all policies written during a given year. In
contrast, "accident year" loss reserves represent claims for events that
occurred during a given calendar year, regardless of when the policy was
written. Loss reserves on an underwriting year basis may include claims from
different accident years. For example, a policy written during 1999 may have
losses in accident year 1999 and in accident year 2000. Therefore, underwriting
year data as of a particular evaluation date is less mature than accident year
data. This leads to loss emergence taking place over a slightly longer period of
time. For year-ends 1998 through 2002, the lines of business accounted for on an
underwriting year basis accounted for approximately 25% of the Group's reserves
in France.

     At December 31, 2002, 2001, and 2000, as permitted by applicable French
statutes, the Group carried approximately E1.4 billion, E1.4 billion, and E1.4
billion, respectively, in annuity reserves. These annuities reflected discounts
of E451 million, E451 million, and E444 million, respectively. These annuities
relate to individual and group health disability reserves (included in the
non-life segment under the Group's French statutory financial statements) and to
motor liability where payment amounts are fixed and the timing is reasonably
determinable. The reserve development reflected in the table below includes
development attributable to the amortization of the discount.



                                                                  DECEMBER 31,
                                    ------------------------------------------------------------------------
                                    1994    1995    1996    1997    1998     1999    2000     2001     2002
                                    -----   -----   -----   -----   -----   ------   -----   ------   ------
                                                                 (E IN MILLION)
                                                                           
Gross reserves for unpaid claims
  and claims expenses.............  1,231   1,275   1,319   1,297   8,468    9,169   9,573   10,277   10,450
Cumulative paid as of:
  One year later..................    373     363     345     341   2,076    3,003   2,877    2,642
  Two years later.................    536     518     500     469   3,140    4,358   3,977
  Three years later...............    641     622     594     573   3,826    5,065
  Four years later................    723     696     672     648   4,304
  Five years later................    780     758     733     707
  Six years later.................    829     803     780
  Seven years later...............    867     840
  Eight years later...............    898
Liability re-estimated as of:
  One year later..................  1,230   1,293   1,280   1,279   8,082   10,231   9,860   10,359
  Two years later.................  1,260   1,273   1,271   1,218   8,649   10,033   9,939
  Three years later...............  1,253   1,276   1,222   1,241   8,615    9,863
  Four years later................  1,277   1,233   1,234   1,228   8,335
  Five years later................  1,242   1,239   1,239   1,261
  Six years later.................  1,215   1,236   1,259
  Seven years later...............  1,252   1,237
  Eight years later...............  1,234
  Cumulative surplus
    (deficiency)..................     (3)     39      60      36     132     (694)   (366)     (82)
    Percent.......................   (0.3)%   3.1%    4.6%    2.8%    1.6%    (7.6)%  (3.8)%   (0.8)%


     The Allianz Group companies in France form one of the leading French
property-casualty groups. The first-time inclusion of AGF in 1998 resulted in a
E5,513 million increase in held reserves at December 31, 1998.

     The Group's primary property-casualty lines of business in France are motor
liability, property, individual and group health, group disability, general
liability, construction, MAT and credit. Declining frequency trends for motor
liability in recent years and a prudent case reserving philosophy for motor
liability and general liability have contributed to the favorable runoff
reflected in the table for years 1995 through 1997. For 1999, the adverse
run-off is primarily due to the upward development during 2000 of losses from
the storms "Lothar" and "Martin," which occurred in Europe in late December
1999.

     During 2002, reserves for AGF IART experienced adverse development of
approximately E360 million, including E185 million on motor liability,
approximately E50 million on property and E105 million on general liability.
These adverse developments were partially offset by favorable reserve
development on the reserves of Euler and Allianz Marine and Aviation (AMA).

                                        98


Italy

     The loss reserve development table for Italy includes the development of
property-casualty reserves for the Group subsidiaries that insure or reinsure
property-casualty risks in Italy. The table is presented on a consolidated basis
for the Group's subsidiaries in Italy on an Italian statutory accounting basis,
and represents 100% of property-casualty reserves in Italy.



                                                             DECEMBER 31,
                                 ---------------------------------------------------------------------
                                 1994    1995    1996    1997    1998    1999    2000    2001    2002
                                 -----   -----   -----   -----   -----   -----   -----   -----   -----
                                                            (E IN MILLION)
                                                                      
Gross reserves for unpaid
  claims and claims expenses...  2,379   3,471   3,829   4,029   4,640   5,040   5,560   6,097   6,508
Cumulative paid as of:
  One year later...............    888   1,308   1,487   1,562   1,824   1,940   2,092   2,060
  Two years later..............  1,280   1,989   2,152   2,308   2,626   2,879   2,957
  Three years later............  1,534   2,372   2,571   2,742   3,173   3,357
  Four years later.............  1,717   2,660   2,861   3,101   3,496
  Five years later.............  1,859   2,877   3,129   3,334
  Six years later..............  1,989   3,084   3,306
  Seven years later............  2,118   3,222
  Eight years later............  2,208
Liability re-estimated as of:
  One year later...............  2,376   3,527   3,829   4,037   4,650   5,091   5,687   6,021
  Two years later..............  2,333   3,524   3,804   4,147   4,788   5,332   5,677
  Three years later............  2,404   3,605   3,938   4,279   4,984   5,286
  Four years later.............  2,449   3,710   4,049   4,429   4,904
  Five years later.............  2,498   3,796   4,162   4,337
  Six years later..............  2,547   3,879   4,061
  Seven years later............  2,165   3,789
  Eight years later............  2,547
  Cumulative surplus
    (deficiency)...............   (168)   (319)   (232)   (309)   (264)   (247)   (117)     75
    Percent....................   (7.0)%  (9.1)%  (6.0)%  (7.6)%  (5.7)%  (4.9)%  (2.1)%   1.2%


     The Allianz Group companies in Italy form one of the leading Italian
property-casualty groups. The property-casualty reserve portfolio in Italy
consists predominantly of motor liability and general liability. During the past
few calendar years, adverse development in the Italian general liability market
has occurred due to an increase in late-reported claims. In addition, an
increase in personal injuries for motor liability, coupled with an increase in
the average cost of claims, has led to an increase in the ultimate cost of
claims for motor liability. As a result, during the last several calendar years,
but especially during 2001 and 2002, reserves for motor liability and general
liability were strengthened at the RAS Group across several accident years.
These adverse developments were however more than offset by favorable
development in 2002 for other lines and other companies in Italy.

Reserve Discount

     The following table shows, by country, the carrying amounts of reserves as
of December 31, for claims and claim adjustment expenses that have been
discounted, and the interest rates used for discounting.



                             DISCOUNTED       AMOUNT OF THE
                              RESERVES          DISCOUNT
                           (E IN MILLION)    (E IN MILLION)    INTEREST RATE USED FOR DISCOUNTING
                           ---------------   ---------------   -----------------------------------
                            2002     2001     2002     2001          2002               2001
                           ------   ------   ------   ------   ----------------   ----------------
                                                                
United States............    260      288      316      412    6.55%              6.55%
Germany..................    322      279      223      202    3.25% to 4.00%     3.25% to 4.00%
Switzerland..............    485      456      412      374    4.00%              4.00%
France...................  1,410    1,410      451      451    3.20% to 3.25%     3.20% to 4.00%
Portugal.................     91       91       91       91    4.00% to 5.25%     5.25% to 6.00%
Hungary..................     59       50       18       19    1.40%              1.80%
Belgium..................     80      109       18       31    4.75%              4.75%
                           -----    -----    -----    -----
  Total..................  2,707    2,683    1,529    1,580
                           =====    =====    =====    =====


                                        99


SELECTED STATISTICAL INFORMATION RELATING TO THE GROUP'S BANKING OPERATIONS

     For the purposes of presenting the following information, the Allianz
Group's banking operations include Dresdner Bank AG and its subsidiaries,
including its asset management operations, and certain other banking
subsidiaries of Allianz. This presentation differs from the presentation
elsewhere in this Offering Circular, where the asset management operations of
Dresdner Bank are included in the Group's asset management segment and excluded
from its banking segment. The following information has been derived from the
financial records of the Group's banking operations and has been prepared in
accordance with IFRS; it does not reflect adjustments necessary to convert such
information to U.S. GAAP. Although the financial statements of Dresdner Bank
were consolidated into the financial statements of Allianz AG on the date of the
Allianz Group's acquisition of Dresdner Bank on July 23, 2001, the information
presented below includes the banking operations of Dresdner Bank for all periods
in order to provide the reader with comparable information about the Group's
banking operations. Additionally, the assets and liabilities of Dresdner Bank do
not reflect the purchase accounting adjustments applied by the Group with
respect to Dresdner Bank's assets and liabilities at July 23, 2001. Additional
limitations concerning certain of the average balance sheet data of Dresdner
Bank for the periods ending before January 1, 2002 discussed in this section are
noted below under "-- Average Balance Sheet and Interest Rate Data."

     In applying the Allianz Group's accounting policies to the financial
statements of Dresdner Bank during periods prior to July 23, 2001, certificated
commercial loans common to the German market, or Schuldscheindarlehen, have been
reclassified from Loans and advances to banks and Loans and advances to
customers to Investment securities available for sale in order to conform to the
Group's accounting policies. At December 31, 2002, 2001, 2000, 1999 and 1998,
the book value of Schuldscheindarlehen was approximately E1.4 billion, E44.0
billion, E46.6 billion, E48.6 billion and E49.1 billion, respectively. Because
there were no loss allowances recorded on such Schuldscheindarlehen, such
reclassification had no impact on the gross amount of the loss allowances
described below under "-- Summary of Loan Loss Experience." However, such
reclassification did adversely affect the ratio of total allowances for loan
losses to total loans. On August 1, 2002, the Allianz Group also merged its
mortgage banking subsidiary, Deutsche Hyp, which was a part of the Group's Other
division, with the mortgage banking subsidiaries of Commerzbank and Deutsche
Bank into a single entity, Eurohypo. The assets and liabilities of the former
Deutsche Hyp were accordingly deconsolidated as of August 1, 2002.

AVERAGE BALANCE SHEET AND INTEREST RATE DATA

     The following table sets forth the average balances of assets and
liabilities and related interest earned from interest-earning assets and
interest expensed on interest-bearing liabilities, as well as the resulting
average interest yields and rates for the years ended December 31, 2002, 2001
and 2000. For the year ended December 31, 2002, the average balance sheet and
interest rate data is based on consolidated monthly average balances using
month-end balances prepared in accordance with IFRS. For the years ended
December 31, 2001 and 2000, Dresdner Bank did not prepare consolidated balance
sheet and interest rate data on a monthly basis. The average balance sheet and
interest rate data shown below for the years ended December 31, 2001 and 2000
was derived using unconsolidated monthly balances of Dresdner Bank AG and its
non-German branch operations and significant subsidiaries, together with
quarterly consolidated balances of Dresdner Bank prepared in accordance with
IFRS. Such unconsolidated monthly balances reflected approximately 90% of
Dresdner Bank's consolidated assets and liabilities, were not available for all
months in the periods shown, and were not in all cases prepared fully in
accordance with IFRS. Dresdner Bank has reconciled such monthly balances to the
consolidated quarterly balances that were not subject to these limitations, and
the data shown below reflects adjustments to give effect to differences
identified in such a reconciliation process. The Allianz Group believes that the
average balances provide a fair representation of the activities of its banking
operations.

     Since the adoption of IFRS 39 on January 1, 2001, the fair values of all
derivative instruments have been included within non-interest-earning assets or
non-interest-bearing liabilities. Prior to January 1, 2001, the fair values of
qualifying hedge derivative instruments were not recorded in the balance sheet;
however, the fair values of all non-qualifying hedge and trading derivatives
have been included within non-interest-earning assets or non-interest-bearing
liabilities for each

                                       100


period. Interest income and interest expense relating to qualifying hedge
derivative instruments have been reported within the interest income and
interest expense of the hedged item for each period.

     The allocation between German and non-German components is based on the
location of the office that recorded the transaction. Categories of loans and
advances include loans placed on nonaccrual status. For a description of the
Group's accounting policies on nonaccrual loans see "-- Risk Elements --
Nonaccrual loans."

     The Allianz Group's banking operations do not have a significant balance of
tax-exempt investments. Accordingly, interest income on such investments has
been included as taxable interest income for purposes of calculating the change
in taxable net interest income.



                                                                      YEAR ENDED DECEMBER 31,
                                     ------------------------------------------------------------------------------------------
                                                 2002                           2001                           2000
                                     ----------------------------   ----------------------------   ----------------------------
                                               INTEREST   AVERAGE             INTEREST   AVERAGE             INTEREST   AVERAGE
                                     AVERAGE   INCOME/    YIELD/    AVERAGE   INCOME/    YIELD/    AVERAGE   INCOME/    YIELD/
                                     BALANCE   EXPENSE     RATE     BALANCE   EXPENSE     RATE     BALANCE   EXPENSE     RATE
                                     -------   --------   -------   -------   --------   -------   -------   --------   -------
                                                                           (E IN MILLION)
                                                                                             
ASSETS
Trading securities
  In German offices................   57,523     1,681      2.9%     56,220     2,075      3.7%     38,637     1,387      3.6%
  In non-German offices............   30,155     1,137      3.8%     30,020     1,484      4.9%     22,093     1,057      4.8%
                                     -------    ------              -------    ------              -------    ------
  Total............................   87,678     2,818      3.2%     86,240     3,559      4.1%     60,730     2,444      4.0%
                                     -------    ------              -------    ------              -------    ------
Loans and advances to banks
  In German offices................   15,708       454      2.9%     22,028       744      3.4%     17,632       651      3.7%
  In non-German offices............    9,966       343      3.4%     18,009       776      4.3%     12,853     1,271      9.9%
                                     -------    ------              -------    ------              -------    ------
  Total............................   25,674       797      3.1%     40,037     1,520      3.8%     30,485     1,922      6.3%
                                     -------    ------              -------    ------              -------    ------
Loans and advances to customers
  In German offices................  112,709     5,490      4.9%    131,346     8,339      6.3%    133,241     7,391      5.5%
  In non-German offices............   45,760     2,413      5.3%     56,144     3,741      6.7%     50,850     3,627      7.1%
                                     -------    ------              -------    ------              -------    ------
  Total............................  158,469     7,903      5.0%    187,490    12,080      6.4%    184,091    11,018      6.0%
                                     -------    ------              -------    ------              -------    ------
Securities purchased under resale
  agreements
  In German offices................   56,213     2,109      3.8%     46,890     2,267      4.8%     24,895     1,180      4.7%
  In non-German offices............   38,059       794      2.1%     41,254     1,545      3.7%     33,170     1,656      5.0%
                                     -------    ------              -------    ------              -------    ------
  Total............................   94,272     2,903      3.1%     88,144     3,812      4.3%     58,065     2,836      4.9%
                                     -------    ------              -------    ------              -------    ------
Investment securities(1)
  In German offices................   35,017     1,584      4.5%     59,346     2,929      4.9%     60,712     3,310      5.5%
  In non-German offices............    9,893       401      4.1%     10,577       469      4.4%     10,460       702      6.7%
                                     -------    ------              -------    ------              -------    ------
  Total............................   44,910     1,985      4.4%     69,923     3,398      4.9%     71,172     4,012      5.6%
                                     -------    ------              -------    ------              -------    ------
Total interest-earning assets......  411,003    16,406      4.0%    471,834    24,369      5.2%    404,543    22,232      5.5%
                                     -------    ------              -------    ------              -------    ------
Non-interest-earning assets
  In German offices................   49,686                         49,006                         30,123
  In non-German offices............   29,206                         22,101                         30,702
                                     -------                        -------                        -------
Total non-interest-earning
  assets...........................   78,892                         71,107                         60,825
                                     -------                        -------                        -------
Total assets.......................  489,895                        542,941                        465,368
                                     =======                        =======                        =======
Percent of assets attributable to
  non-German offices...............     33.3%                          32.8%                          34.4%
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities to banks(2)
  In German offices................   58,881     1,978      3.4%     71,681     2,765      3.9%     49,420     2,026      4.1%
  In non-German offices............   23,284     1,081      4.6%     30,217     2,301      7.6%     21,602     2,121      9.8%
                                     -------    ------              -------    ------              -------    ------
  Total............................   82,165     3,059      3.7%    101,898     5,066      5.0%     71,022     4,147      5.8%
                                     -------    ------              -------    ------              -------    ------
Liabilities to customers(2)
  In German offices................   71,296     1,906      2.7%     99,113     2,713      2.7%     90,666     2,040      2.3%
  In non-German offices............   36,977     1,126      3.0%     46,628     1,653      3.5%     40,780     2,172      5.3%
                                     -------    ------              -------    ------              -------    ------
  Total............................  108,273     3,032      2.8%    145,741     4,366      3.0%    131,446     4,212      3.2%
                                     -------    ------              -------    ------              -------    ------
Securities sold under repurchase
  agreements
  In German offices................   40,328     1,544      3.8%     39,327     1,958      5.0%     20,441       917      4.5%
  In non-German offices............   26,840       588      2.2%     37,548     1,315      3.5%     33,661     1,640      4.9%
                                     -------    ------              -------    ------              -------    ------
  Total............................   67,168     2,132      3.2%     76,875     3,273      4.3%     54,102     2,557      4.7%
                                     -------    ------              -------    ------              -------    ------
Subordinated liabilities
  In German offices................    4,541       206      4.5%      4,439       189      4.3%      4,355       176      4.0%
  In non-German offices............    4,661       361      7.7%      4,793       458      9.6%      4,335       369      8.5%
                                     -------    ------              -------    ------              -------    ------
  Total............................    9,202       567      6.2%      9,232       647      7.0%      8,690       545      6.3%
                                     -------    ------              -------    ------              -------    ------


                                       101




                                                                      YEAR ENDED DECEMBER 31,
                                     ------------------------------------------------------------------------------------------
                                                 2002                           2001                           2000
                                     ----------------------------   ----------------------------   ----------------------------
                                               INTEREST   AVERAGE             INTEREST   AVERAGE             INTEREST   AVERAGE
                                     AVERAGE   INCOME/    YIELD/    AVERAGE   INCOME/    YIELD/    AVERAGE   INCOME/    YIELD/
                                     BALANCE   EXPENSE     RATE     BALANCE   EXPENSE     RATE     BALANCE   EXPENSE     RATE
                                     -------   --------   -------   -------   --------   -------   -------   --------   -------
                                                                           (E IN MILLION)
                                                                                             
Certificated liabilities(2)
  In German offices................   42,166     2,507      5.9%     71,266     4,628      6.5%     73,717     4,803      6.5%
  In non-German offices............   56,854     2,108      3.7%     44,657     2,440      5.5%     45,818     2,683      5.9%
                                     -------    ------              -------    ------              -------    ------
  Total............................   99,020     4,615      4.7%    115,923     7,068      6.1%    119,535     7,486      6.3%
                                     -------    ------              -------    ------              -------    ------
Profit participation certificates
  outstanding
  In German offices................    1,771       133      7.5%      2,052        76      3.7%      2,034        64      3.1%
                                     -------    ------              -------    ------              -------    ------
  Total............................    1,771       133      7.5%      2,052        76      3.7%      2,034        64      3.1%
                                     -------    ------              -------    ------              -------    ------
Total interest-bearing
  liabilities......................  367,599    13,538      3.7%    451,721    20,496      4.5%    386,829    19,011      4.9%
                                     -------    ------              -------    ------              -------    ------
Non-interest-bearing liabilities
  In German offices................   64,014                         34,196                         27,538
  In non-German offices............   39,288                         34,576                         38,693
                                     -------                        -------                        -------
Total non-interest-bearing
  liabilities......................  103,302                         68,772                         66,231
                                     -------                        -------                        -------
Shareholders' equity...............   18,994                         22,448                         12,308
                                     -------                        -------                        -------
Total liabilities and shareholders'
  equity...........................  489,895                        542,941                        465,368
                                     =======                        =======                        =======
Percent of liabilities attributable
  to non-German offices............     39.9%                          38.1%                          40.8%


------------

(1) The average yields for investment securities available for sale have been
    calculated using amortized cost balances and do not include changes in fair
    value recorded within a component of shareholders' equity. The average
    yields for investment securities held to maturity have been calculated using
    amortized cost balances.

(2) Interest-bearing deposits have been presented within liabilities to banks
    and liabilities to customers; certificates of deposit have been presented
    within certificated liabilities.

NET INTEREST MARGIN

     The following table sets forth the average total interest-earning assets,
net interest earned and the net interest margin of the Allianz Group's banking
operations.



                                                                YEAR ENDED DECEMBER 31,
                                                              ---------------------------
                                                               2002      2001      2000
                                                              -------   -------   -------
                                                                    (E IN MILLION)
                                                                         
Average total interest-earning assets.......................  411,003   471,834   404,543
Net interest earned(1)......................................    2,868     3,873     3,221
Net interest margin(2)......................................     0.70%     0.82%     0.80%


------------

(1) Net interest earned is defined as total interest income less total interest
    expense.

(2) Net interest margin is defined as net interest earned divided by average
    total interest-earning assets.

     The following table sets forth an allocation of changes in interest income,
interest expense and net interest income between changes in the average volume
and changes in the average interest rates for the two most recent years. Volume
and interest rate variances have been calculated based on movements in average
balances over the period and changes in interest rates on average
interest-earning assets and average interest-bearing liabilities. Changes due to
a combination of volume and rate are allocated proportionally to the absolute
change in volume and rate.



                                                            YEAR ENDED DECEMBER 31,
                                         -------------------------------------------------------------
                                                2002 OVER 2001                  2001 OVER 2000
                                         -----------------------------   -----------------------------
                                                  INCREASE/(DECREASE)             INCREASE/(DECREASE)
                                                   DUE TO CHANGE IN:               DUE TO CHANGE IN:
                                                  --------------------            --------------------
                                                   AVERAGE                         AVERAGE
                                         TOTAL    INTEREST    AVERAGE    TOTAL    INTEREST    AVERAGE
                                         CHANGE     RATE       VOLUME    CHANGE     RATE       VOLUME
                                         ------   ---------   --------   ------   ---------   --------
                                                                (E IN MILLION)
                                                                            
INTEREST INCOME
Trading securities
  In German offices....................   (394)      (441)         47      688         40        648
  In non-German offices................   (347)      (354)          7      427         36        391
                                         ------    ------      ------    -----     ------      -----
  Total................................   (741)      (795)         54    1,115         76      1,039
                                         ------    ------      ------    -----     ------      -----


                                       102




                                                            YEAR ENDED DECEMBER 31,
                                         -------------------------------------------------------------
                                                2002 OVER 2001                  2001 OVER 2000
                                         -----------------------------   -----------------------------
                                                  INCREASE/(DECREASE)             INCREASE/(DECREASE)
                                                   DUE TO CHANGE IN:               DUE TO CHANGE IN:
                                                  --------------------            --------------------
                                                   AVERAGE                         AVERAGE
                                         TOTAL    INTEREST    AVERAGE    TOTAL    INTEREST    AVERAGE
                                         CHANGE     RATE       VOLUME    CHANGE     RATE       VOLUME
                                         ------   ---------   --------   ------   ---------   --------
                                                                (E IN MILLION)
                                                                            
Loans and advances to banks
  In German offices....................   (290)       (97)       (193)      93        (59)       152
  In non-German offices................   (433)      (135)       (298)    (495)      (885)       390
                                         ------    ------      ------    -----     ------      -----
  Total................................   (723)      (232)       (491)    (402)      (944)       542
                                         ------    ------      ------    -----     ------      -----
Loans and advances to customers
  In German offices....................  (2,849)   (1,770)     (1,079)     948      1,054       (106)
  In non-German offices................  (1,328)     (704)       (624)     114       (248)       362
                                         ------    ------      ------    -----     ------      -----
  Total................................  (4,177)   (2,474)     (1,703)   1,062        806        256
                                         ------    ------      ------    -----     ------      -----
Securities purchased under resale
  agreements
  In German offices....................   (158)      (561)        403    1,087         24      1,063
  In non-German offices................   (751)      (639)       (112)    (111)      (465)       354
                                         ------    ------      ------    -----     ------      -----
  Total................................   (909)    (1,200)        291      976       (441)     1,417
                                         ------    ------      ------    -----     ------      -----
Investment securities
  In German offices....................  (1,345)     (227)     (1,118)    (381)      (308)       (73)
  In non-German offices................    (68)       (39)        (29)    (233)      (241)         8
                                         ------    ------      ------    -----     ------      -----
  Total................................  (1,413)     (266)     (1,147)    (614)      (549)       (65)
                                         ------    ------      ------    -----     ------      -----
Total interest income..................  (7,963)   (4,967)     (2,996)   2,137     (1,052)     3,189
                                         ------    ------      ------    -----     ------      -----
INTEREST EXPENSE
Liabilities to banks
  In German offices....................   (787)      (331)       (456)     739       (126)       865
  In non-German offices................  (1,220)     (768)       (452)     180       (544)       724
                                         ------    ------      ------    -----     ------      -----
  Total................................  (2,007)   (1,099)       (908)     919       (670)     1,589
                                         ------    ------      ------    -----     ------      -----
Liabilities to customers
  In German offices....................   (807)       (62)       (745)     673        471        202
  In non-German offices................   (527)      (213)       (314)    (519)      (799)       280
                                         ------    ------      ------    -----     ------      -----
  Total................................  (1,334)     (275)     (1,059)     154       (328)       482
                                         ------    ------      ------    -----     ------      -----
Securities sold under repurchase
  agreements
  In German offices....................   (414)      (463)         49    1,041        111        930
  In non-German offices................   (727)      (413)       (314)    (325)      (499)       174
                                         ------    ------      ------    -----     ------      -----
  Total................................  (1,141)     (876)       (265)     716       (388)     1,104
                                         ------    ------      ------    -----     ------      -----
Subordinated liabilities
  In German offices....................     17         13           4       13          9          4
  In non-German offices................    (97)       (85)        (12)      89         48         41
                                         ------    ------      ------    -----     ------      -----
  Total................................    (80)       (72)         (8)     102         57         45
                                         ------    ------      ------    -----     ------      -----
Certificated liabilities
  In German offices....................  (2,121)     (363)     (1,758)    (175)       (16)      (159)
  In non-German offices................   (332)      (900)        568     (243)      (176)       (67)
                                         ------    ------      ------    -----     ------      -----
  Total................................  (2,453)   (1,263)     (1,190)    (418)      (192)      (226)
                                         ------    ------      ------    -----     ------      -----
Profit participation certificates
  outstanding
  In German offices....................     57         69         (12)      12         11          1
  Total................................     57         69         (12)      12         11          1
                                         ------    ------      ------    -----     ------      -----
TOTAL INTEREST EXPENSE.................  (6,958)   (3,516)     (3,442)   1,485     (1,510)     2,995
                                         ------    ------      ------    -----     ------      -----
CHANGE IN TAXABLE NET INTEREST
  INCOME...............................  (1,005)   (1,451)        446      652        458        194
                                         ======    ======      ======    =====     ======      =====


                                       103


RETURN ON EQUITY AND ASSETS

     The following table sets forth the net income, average shareholders' equity
and selected financial information and ratios of the Allianz Group's banking
operations.



                                                              YEAR ENDED DECEMBER 31,
                                                              ------------------------
                                                               2002     2001     2000
                                                              ------   ------   ------
                                                                   (E IN MILLION)
                                                                       
Net (loss)/income...........................................    (944)     539    1,809
Average shareholders' equity................................  18,994   22,448   12,308
Return on assets(1).........................................   (0.19)%   0.10%    0.39%
Return on equity(2).........................................   (4.97)%   2.40%   14.70%
Equity to assets ratio(3)...................................    3.88%    4.13%    2.64%


------------

(1) Return on assets is defined as net income of the Group's banking operations
    divided by average total assets of its banking operations.

(2) Return on equity is defined as net (loss)/income of the Group's banking
    operations divided by average shareholders' equity of its banking
    operations.

(3) Equity to assets ratio is defined as average shareholders' equity of the
    Group's banking operations divided by average total assets of its banking
    operations.

TRADING AND INVESTMENT SECURITIES

     The following table sets forth the book value of trading and investment
securities held by the Allianz Group's banking operations by type of issuer. The
allocation between German and non-German components is based on the domicile of
the issuer.



                                                                    AT DECEMBER 31,
                                                              ---------------------------
                                                                2002      2001      2000
                                                              --------   -------   ------
                                                                    (E IN MILLION)
                                                                          
TRADING SECURITIES
  GERMAN:
     Federal and state government and government agency debt
       securities...........................................    14,304     8,267    4,225
     Local government debt securities.......................     2,573     3,153    1,611
     Corporate debt securities..............................    34,645    35,326   29,892
     Mortgage-backed securities.............................       403        50       --
     Equity securities......................................       412     1,147    2,661
                                                              --------   -------   ------
     German total...........................................    52,337    47,943   38,389
                                                              --------   -------   ------
  NON-GERMAN:
     U.S. Treasury and other U.S. government agency debt
       securities...........................................     5,798       802      610
     Other government and official institution debt
       securities...........................................    23,568    29,509   22,477
     Corporate debt securities..............................     8,066    12,667   11,734
     Mortgage-backed securities.............................     1,021       474       --
     Equity securities......................................     8,668    13,917    9,762
                                                              --------   -------   ------
  Non-German total..........................................    47,121    57,369   44,583
                                                              --------   -------   ------
TOTAL TRADING SECURITIES....................................    99,458   105,312   82,972
                                                              ========   =======   ======
SECURITIES AVAILABLE FOR SALE
  GERMAN:
     Federal and state government and government agency debt
       securities...........................................       581     6,691    7,030
     Local government debt securities.......................     1,840    24,842   25,517
     Corporate debt securities..............................     7,534    21,566   24,196
     Mortgage-backed and other debt securities..............        22        63       73
     Equity securities......................................     3,951     7,003    7,295
                                                              --------   -------   ------
     German total...........................................    13,928(1)  60,165  64,111
                                                              --------   -------   ------


                                       104




                                                                    AT DECEMBER 31,
                                                              ---------------------------
                                                                2002      2001      2000
                                                              --------   -------   ------
                                                                    (E IN MILLION)
                                                                          
  NON-GERMAN:
     U.S. Treasury and other U.S. government agency debt
       securities...........................................       227       453      916
     Other government and official institution debt
       securities...........................................     2,550     6,884    6,467
     Corporate debt securities..............................     5,337     6,270    5,626
     Mortgage-backed and other debt securities..............       520       105       19
     Equity securities......................................     3,097     3,297    2,863
                                                              --------   -------   ------
     Non-German total.......................................    11,731    17,009   15,891
                                                              --------   -------   ------
TOTAL SECURITIES AVAILABLE FOR SALE.........................    25,659    77,174   80,002
                                                              ========   =======   ======
SECURITIES HELD TO MATURITY
  GERMAN:
     Mortgage-backed securities.............................        --       301      219
                                                              --------   -------   ------
     German total...........................................        --       301      219
                                                              --------   -------   ------
  NON-GERMAN:
     Other government and official institution debt
       securities...........................................       579       558      593
     Corporate debt securities..............................       145       152      165
                                                              --------   -------   ------
     Non-German total.......................................       724       710      758
                                                              --------   -------   ------
TOTAL SECURITIES HELD TO MATURITY...........................       724     1,011      977
                                                              ========   =======   ======


------------

(1) Change from 2001 to 2002 reflects primarily the August 2002 deconsolidation
    of Deutsche Hyp.

     At December 31, 2002, the Allianz Group's banking operations held ordinary
shares of Munich Re that had a book value in excess of ten percent of the
shareholders' equity of the Group's banking operations. The aggregate
shareholders' equity of Dresdner Bank and the Group's other banking operations
was approximately E13,036 million at December 31, 2002. The aggregate book value
and market value of such ordinary shares were E1,518 million at December 31,
2002.

                                       105


MATURITY ANALYSIS OF DEBT INVESTMENT SECURITIES

     The following table sets forth an analysis of the contractual maturity and
weighted average yields of the Allianz Group's banking operations' debt
investment securities. Actual maturities may differ from contractual maturity
dates because issuers may have the right to call or prepay obligations. The
allocation between German and non-German components is based on the domicile of
the issuer.



                                                             AT DECEMBER 31, 2002
                                         ------------------------------------------------------------
                                                        DUE AFTER     DUE AFTER
                                                         ONE YEAR    FIVE YEARS
                                          DUE IN ONE     THROUGH     THROUGH TEN   DUE AFTER
                                         YEAR OR LESS   FIVE YEARS      YEARS      TEN YEARS   TOTAL
                                         ------------   ----------   -----------   ---------   ------
                                                                (E IN MILLION)
                                                                                
SECURITIES AVAILABLE FOR SALE
  GERMAN:
     Federal and state government and
       government agency debt
       securities......................       206           170           156          49         581
     Local government debt
       securities......................         6         1,139           675          20       1,840
     Corporate debt securities.........     1,479         4,759         1,236          60       7,534
     Mortgage-backed and other debt
       securities......................        --            22            --          --          22
                                            -----         -----         -----         ---      ------
     German total......................     1,691         6,090         2,067         129       9,977
                                            -----         -----         -----         ---      ------
  NON-GERMAN:
     U.S. Treasury and other U.S.
       government agency debt
       securities......................         1             1             4         221         227
     Other government and official
       institution debt securities.....     1,084           688           524         254       2,550
     Corporate debt securities.........     2,260         2,233           518         326       5,337
     Mortgage-backed and other debt
       securities......................       495            16             6           3         520
                                            -----         -----         -----         ---      ------
     Non-German total..................     3,840         2,938         1,052         804       8,634
                                            -----         -----         -----         ---      ------
TOTAL SECURITIES AVAILABLE FOR SALE....     5,531         9,028         3,119         933      18,611
                                            =====         =====         =====         ===      ======
WEIGHTED AVERAGE YIELD.................       3.4%          4.1%          5.0%        5.6%        4.1%
SECURITIES HELD TO MATURITY
  GERMAN:
     Mortage-backed securities.........        --            --            --          --          --
                                            -----         -----         -----         ---      ------
     German total......................        --            --            --          --          --
                                            -----         -----         -----         ---      ------
NON-GERMAN:
       Other government and official
          institution debt
          securities...................       489            90            --          --         579
       Corporate debt securities.......       145            --            --          --         145
                                            -----         -----         -----         ---      ------
       Non-German total................       634            90            --          --         724
                                            -----         -----         -----         ---      ------
TOTAL SECURITIES HELD TO MATURITY......       634            90            --          --         724
                                            =====         =====         =====         ===      ======
WEIGHTED AVERAGE YIELD.................       7.2%          9.3%           --          --         7.5%


                                       106


LOAN PORTFOLIO

     The following table sets forth an analysis of the Allianz Group's loan
portfolio, excluding allowances for loan losses, net of unearned income,
according to the industry sector of borrowers. The allocation between German and
non-German components is based on the domicile of the borrower.



                                                            AT DECEMBER 31,
                                            -----------------------------------------------
                                             2002      2001      2000      1999      1998
                                            -------   -------   -------   -------   -------
                                                            (E IN MILLION)
                                                                     
GERMAN:
  Corporate:
     Manufacturing industry...............    9,728    10,825    11,539    11,014    12,459
     Construction.........................    1,226     1,813     2,042     2,228     3,378
     Wholesale and retail trade...........    6,041     7,165     7,419     7,555     9,988
     Financial institutions (excluding
       banks) and insurance companies.....    2,810     4,896     4,196       926     4,090
     Banks................................      611       517       601     2,342       628
     Service providers....................   13,797    22,943    21,326    23,658    15,243
     Other................................    2,911     3,974     3,067     4,416     3,048
                                            -------   -------   -------   -------   -------
     Corporate total......................   37,124    52,133    50,190    52,139    48,834
                                            -------   -------   -------   -------   -------
  Public authorities......................      212       718       540       276     1,101
  Private individuals (including self-
     employed professionals)..............   43,041    63,773    65,883    64,706    60,545
                                            -------   -------   -------   -------   -------
  German total............................   80,377   116,624   116,613   117,121   110,480
                                            -------   -------   -------   -------   -------
NON-GERMAN:
  Corporate:
     Manufacturing industry, construction,
       wholesale and retail trade and
       service providers..................   21,846    38,383    43,771    39,197    24,586
     Financial institutions (excluding
       banks) and insurance companies.....    6,312    10,285    10,166     8,100     7,379
     Banks................................    3,348     5,157     6,287     6,645     8,888
     Other................................    9,144     3,899     3,536     3,405     4,446
                                            -------   -------   -------   -------   -------
     Corporate total......................   40,650    57,724    63,760    57,347    45,299
                                            -------   -------   -------   -------   -------
  Public authorities......................    2,065     3,458       990     2,913     1,239
  Private individuals (including self-
     employed professionals)..............   11,046    10,601    10,151     9,922     9,595
                                            -------   -------   -------   -------   -------
  Non-German total........................   53,761    71,783    74,901    70,182    56,133
                                            -------   -------   -------   -------   -------
TOTAL LOANS...............................  134,138   188,407   191,514   187,303   166,613
                                            =======   =======   =======   =======   =======


     The following table sets forth the Allianz Group's banking operations'
mortgage loans and finance leases that are included within the above analysis of
loans.



                                                              AT DECEMBER 31,
                                                 ------------------------------------------
                                                  2002     2001     2000     1999     1998
                                                 ------   ------   ------   ------   ------
                                                               (E IN MILLION)
                                                                      
Mortgage loans.................................  39,683   57,315   61,303   60,587   55,975
Finance leases.................................   1,104    2,414    1,430    1,778    1,568


LOAN CONCENTRATIONS

     Although the Allianz Group's loan portfolio is diversified across more than
152 countries, at December 31, 2002 approximately 59.9% of the Group's total
loans were to borrowers in Germany. At December 31, 2002, the Group's largest
credit exposures to borrowers in Germany were loans to private individuals
(including self-employed professionals). Approximately 54.3% of these loans are
residential mortgage loans, which represent approximately 17.4% of the Group's
total loans. The Allianz Group's residential mortgage loans include
owner-occupied, single- and two-family homes and apartment dwellings and
investment properties. The Group's

                                       107


residential mortgage loans are well diversified across all German states. The
Group's remaining loans to private individuals in Germany primarily include
other consumer installment loans and loans to self-employed professionals, which
are also geographically diversified across Germany. The Allianz Group has no
other concentrations of loans to private individuals (including self-employed
professionals) in Germany in excess of ten percent of its total loans.

     The Allianz Group's loans to corporate customers are broadly diversified.
At December 31, 2002, approximately 10.3% of the Group's total loans were to
German corporate customers in various services industries, including utilities,
media, telecommunication, transportation and other service providers. However,
none of those industries are individually significant to the Allianz Group's
domestic loan portfolio, and the Group has no concentrations of loans to
borrowers in any services industry in excess of ten percent of its total loans.

     At December 31, 2002, approximately 23.1% of the Group's total loans were
to non-financial corporate borrowers outside Germany.

     These loans are well diversified across various commercial industries,
including:



                                                               PERCENT OF
                                                               TOTAL LOANS
                                                               -----------
                                                            
Manufacturing industry......................................       6.9%
Construction................................................       1.6%
Wholesale and retail trade..................................       1.1%
Telecommunication...........................................       1.5%
Transportation..............................................       1.1%
Other service providers(1)..................................       4.1%
Other.......................................................       6.8%


------------

(1) Other service providers include media, utilities, natural resources and
    other services.

     The Allianz Group has no concentrations of loans to non-financial corporate
borrowers in any industry in excess of ten percent of its total loans.

                                       108


MATURITY ANALYSIS OF LOAN PORTFOLIO

     The following table sets forth an analysis of the contractual maturity of
the Allianz Group's loans at December 31, 2002. The allocation between German
and non-German components is based on the domicile of the borrower.



                                                                AT DECEMBER 31, 2002
                                                  ------------------------------------------------
                                                                DUE AFTER
                                                  DUE IN ONE     ONE YEAR
                                                   YEAR OR     THROUGH FIVE   DUE AFTER
                                                     LESS         YEARS       FIVE YEARS    TOTAL
                                                  ----------   ------------   ----------   -------
                                                                   (E IN MILLION)
                                                                               
GERMAN:
  Corporate:
     Manufacturing industry.....................     5,238         3,158         1,332       9,728
     Construction...............................       884           150           192       1,226
     Wholesale and retail trade.................     3,477         1,839           725       6,041
     Financial institutions (excluding banks)
       and insurance companies..................     1,495         1,043           272       2,810
     Banks......................................       354           181            76         611
     Service providers:
       Telecommunication........................        10           497           104         611
       Transportation...........................       300           157           390         847
       Other service providers..................     5,420         3,763         3,156      12,339
     Total service providers....................     5,730         4,417         3,650      13,797
     Other......................................     1,462           972           477       2,911
                                                    ------        ------        ------     -------
     Corporate total............................    18,640        11,760         6,724      37,124
                                                    ------        ------        ------     -------
  Public authorities............................       180            24             8         212
  Private individuals (including self-employed
     professionals):
     Residential mortgage loans.................       277         5,643        17,450      23,370
     Consumer installment loans.................     3,154             0             0       3,154
     Other......................................     5,872         1,848         8,797      16,517
  Total private individuals (including self-
     employed professionals)....................     9,303         7,491        26,247      43,041
                                                    ------        ------        ------     -------
  German total..................................    28,123        19,275        32,979      80,377
                                                    ------        ------        ------     -------


                                       109




                                                                AT DECEMBER 31, 2002
                                                  ------------------------------------------------
                                                                DUE AFTER
                                                  DUE IN ONE     ONE YEAR
                                                   YEAR OR     THROUGH FIVE   DUE AFTER
                                                     LESS         YEARS       FIVE YEARS    TOTAL
                                                  ----------   ------------   ----------   -------
                                                                   (E IN MILLION)
                                                                               
NON-GERMAN:
  Corporate:
     Manufacturing industry.....................     4,600         3,801           831       9,232
     Construction...............................       417         1,094           700       2,211
     Wholesale and retail trade.................       870           574            57       1,501
     Service providers:
       Telecommunication........................       326         1,370           276       1,972
       Transportation...........................       253           575           628       1,456
       Other service providers..................     2,698         2,326           450       5,474
     Total service providers....................     3,277         4,271         1,354       8,902
     Total manufacturing industry, construction,
       wholesale and retail trade and service
       providers................................     9,164         9,740         2,942      21,846
     Financial institutions (excluding banks)
       and insurance companies..................     1,633         3,128         1,551       6,312
     Banks......................................     2,007           994           347       3,348
     Other......................................     5,768         1,867         1,509       9,144
                                                    ------        ------        ------     -------
     Corporate total............................    18,572        15,729         6,349      40,650
                                                    ------        ------        ------     -------
  Public authorities............................     1,702           188           175       2,065
  Private individuals (including self-employed
     professionals):
     Residential mortgage loans.................       850         2,702         5,368       8,920
     Consumer installment loans.................        43            52            34         129
     Other......................................     1,197           276           524       1,997
  Total private individuals.....................     2,090         3,030         5,926      11,046
                                                    ------        ------        ------     -------
  Non-German total..............................    22,364        18,947        12,450      53,761
                                                    ------        ------        ------     -------
TOTAL LOANS.....................................    50,487        38,222        45,429     134,138
                                                    ======        ======        ======     =======


     The following table sets forth the total amount of loans due after one year
with predetermined interest rates and floating or adjustable interest rates at
December 31, 2002. Loans with predetermined interest rates are loans for which
the interest rate is fixed for the entire term of the loan. All other loans are
considered floating or adjustable interest rate loans. The allocation between
German and non-German components is based on the domicile of the borrower.



                                                                    AT DECEMBER 31, 2002
                                                          ----------------------------------------
                                                                             LOANS WITH
                                                            LOANS WITH      FLOATING OR
                                                          PREDETERMINED      ADJUSTABLE
                                                          INTEREST RATES   INTEREST RATES   TOTAL
                                                          --------------   --------------   ------
                                                                       (E IN MILLION)
                                                                                   
GERMAN:
  Private individuals (including self-employed
     professionals).....................................      31,098            2,640       33,738
  Corporate and public customers........................      12,446            6,070       18,516
German total............................................      43,544            8,710       52,254
NON-GERMAN:
  Private individuals (including self-employed
     professionals).....................................       2,637            6,319        8,956
  Corporate and public customers........................       5,763           16,678       22,441
Non-German total........................................       8,400           22,997       31,397
                                                              ------           ------       ------
TOTAL...................................................      51,944           31,707       83,651
                                                              ======           ======       ======


                                       110


RISK ELEMENTS

Non-performing loans

     The following table sets forth the outstanding balance of the Allianz
Group's non-performing loans. The allocation between German and non-German
components is based on the domicile of the borrower.



                                                                AT DECEMBER 31,
                                                    ---------------------------------------
                                                     2002     2001    2000    1999    1998
                                                    ------   ------   -----   -----   -----
                                                                (E IN MILLION)
                                                                       
NONACCRUAL LOANS:
  German..........................................   7,355    8,751   7,991   7,516   6,322
  Non-German......................................   3,097    2,404   1,928   1,618     869
                                                    ------   ------   -----   -----   -----
  Total nonaccrual loans..........................  10,452   11,155   9,919   9,134   7,191
                                                    ======   ======   =====   =====   =====
LOANS PAST DUE 90 DAYS AND STILL ACCRUING
  INTEREST:
  German..........................................     644    1,640   1,238   1,526   1,876
  Non-German......................................     151      309     300     305     196
                                                    ------   ------   -----   -----   -----
  Total loans past due 90 days and still accruing
     interest.....................................     795    1,949   1,538   1,831   2,072
                                                    ======   ======   =====   =====   =====
TROUBLED DEBT RESTRUCTURINGS:
  German..........................................      65      215     253     261     307
  Non-German......................................     313      336     323     289     294
                                                    ------   ------   -----   -----   -----
  Total troubled debt restructurings..............     378      551     576     550     601
                                                    ======   ======   =====   =====   =====


Nonaccrual loans

     Nonaccrual loans are loans on which interest income is no longer recognized
on an accrual basis and loans for which a specific provision is recorded for the
full amount of accrued interest receivable. The Allianz Group places loans on
nonaccrual status when it determines, based on management's judgment, that the
payment of interest or principal is doubtful.

     When a loan is placed on nonaccrual status, any accrued and unpaid interest
receivable is reversed and charged against interest income. The Allianz Group
restores loans to accrual status only when interest and principal are made
current in accordance with the contractual terms and, in management's judgment,
future payments are reasonably assured. When the Group has doubts about the
ultimate collectibility of the principal of a loan placed on nonaccrual status,
all cash receipts are recorded as reductions in principal. Once the recorded
principal amount of the loan is reduced to zero, future cash receipts are
recognized as interest income. For all remaining loans, interest income is
recognized when received.

Loans past due 90 days and still accruing interest

     Loans past due 90 days and still accruing interest are loans that are
contractually past due 90 days or more as to principal or interest on which the
Allianz Group continues to recognize interest income on an accrual basis.

Troubled debt restructurings

     Troubled debt restructurings are loans that the Allianz Group has
restructured due to a deterioration in the borrower's financial position and in
relation to which, for economic or legal reasons related to the borrower's
deteriorated financial position, the Group has granted a concession to the
borrower that it would not have otherwise granted.

Interest Income on Non-performing Loans

     The following table sets forth the gross interest income that would have
been recorded during the year ended December 31, 2002 on nonaccrual loans and
troubled debt restructurings if such loans had been current in accordance with
their original contractual terms and the interest

                                       111


income on such loans that was actually included in interest income during the
year ended December 31, 2002.



                                                                YEAR ENDED DECEMBER 31, 2002
                                                              ---------------------------------
                                                              IN GERMAN   IN NON-GERMAN
                                                               OFFICES       OFFICES      TOTAL
                                                              ---------   -------------   -----
                                                                       (E IN MILLION)
                                                                                 
Interest income that would have been recorded in accordance
  with the original contractual terms.......................     341           137         478
Interest income actually recorded...........................      48            30          78


Potential Problem Loans

     Potential problem loans are loans that are not classified as nonaccrual
loans, loans past due 90 days and still accruing interest or troubled debt
restructurings, but where known information about possible credit problems
causes the Group to have serious doubts as to the ability of the borrower to
comply with the present loan repayment terms and which may result in classifying
the loans in one of the three categories of non-performing loans described
above. The outstanding balance of the Group's potential problem loans was E2,437
million at December 31, 2002.

     Each of the Group's potential problem loans has been subject to the Group's
normal credit monitoring and review procedures. Of these loans, approximately
E576 million have a specific loss allowance. The remaining loans have also been
reviewed for impairment, however, based on the Group's estimated measurement of
the impairment, no specific loss allowance has been recorded on such loans.

     Approximately 6% and 2% of the Group's potential problem loans are to
private individuals in Germany and Latin America, respectively. The remaining
loans are to corporate borrowers in manufacturing, construction, wholesale and
retail trade, telecommunication, transportation and other services, including
media, utilities, natural resources and other services and other industry
sectors. The Allianz Group's potential problem loans to corporate borrowers are
diversified across the following geographic regions:



                                                                AT DECEMBER 31, 2002
                                                               -----------------------
                                                                  PERCENT OF TOTAL
                                                               POTENTIAL PROBLEM LOANS
                                                               -----------------------
                                                            
Germany.....................................................             62%
North America...............................................             11%
Europe (excluding Germany)..................................              8%
Latin America...............................................              7%
Asia/Pacific................................................              2%
Middle East/Africa..........................................              2%


Foreign Outstandings

     Cross-border outstandings consist of loans, net of allowances for loan
losses, accrued interest receivable, acceptances, interest-bearing deposits with
other banks, other interest-bearing investments and other monetary assets that
either are recorded in an office that is not in the same country as the domicile
of the borrower, guarantor, issuer or counter-party, or are denominated in a
currency that is not the local currency of the borrower, guarantor, issuer or
counter-party or are net local country claims. Net local country claims are
domestic claims recorded in offices outside Germany that are denominated in
local or foreign currency and that are not funded by liabilities in the same
currency as the claim and recorded in the same office.

     The Allianz Group's cross-border outstandings are allocated by country
based on the country of domicile of the borrower, guarantor, issuer or
counter-party of the ultimate credit risk. At head-office level the Allianz
Group sets limits on and monitors actual cross-border outstandings on a
country-by-country basis based on transfer, economic and political risks.

     The following table sets forth the Allianz Group's cross-border
outstandings by geographic location for countries that exceeded 0.75% of the
total assets of the Group's banking operations. At December 31, 2002, there were
no cross-border outstandings that exceeded 0.50% of the total assets of the
Allianz Group's banking operations in any country currently facing debt
restructur-

                                       112


ings or liquidity problems that the Group expects would materially impact the
borrowers' ability to repay their obligations.



                                                            AT DECEMBER 31, 2002
                       ----------------------------------------------------------------------------------------------
                        GOVERNMENT
                           AND         BANKS AND                NET LOCAL   TOTAL CROSS-    PERCENT
                         OFFICIAL      FINANCIAL                 COUNTRY       BORDER      OF TOTAL     CROSS-BORDER
                       INSTITUTIONS   INSTITUTIONS   OTHER(1)    CLAIMS     OUTSTANDINGS   ASSETS(2)   COMMITMENTS(3)
                       ------------   ------------   --------   ---------   ------------   ---------   --------------
                                                               (E IN MILLION)
                                                                                  
COUNTRY
United States........      1,853         4,708        3,963          --        10,524        2.53%         13,100
United Kingdom.......        718         3,048        2,803       3,583        10,152        2.44%          5,421
France...............      1,035         3,596        1,511          56         6,198        1.49%          2,498
Italy................      6,194         1,573          202       1,932         9,901        2.38%            649
Netherlands..........        400         3,233        1,064          --         4,697        1.13%          1,972
Japan................        749           476          109          41         1,375        0.33%          1,187
Switzerland..........         79         1,701          964          --         2,744        0.66%            942
Spain................        829           948          519          --         2,296        0.55%            148




                                                            AT DECEMBER 31, 2002
                       ----------------------------------------------------------------------------------------------
                        GOVERNMENT
                           AND         BANKS AND                NET LOCAL   TOTAL CROSS-    PERCENT
                         OFFICIAL      FINANCIAL                 COUNTRY       BORDER      OF TOTAL     CROSS-BORDER
                       INSTITUTIONS   INSTITUTIONS   OTHER(1)    CLAIMS     OUTSTANDINGS   ASSETS(2)   COMMITMENTS(3)
                       ------------   ------------   --------   ---------   ------------   ---------   --------------
                                                               (E IN MILLION)
                                                                                  
COUNTRY
United States........      1,266         8,200        7,135       1,178        17,779        3.38%         14,301
United Kingdom.......        354         9,472        2,495          --        12,321        2.34%          7,137
France...............        556         6,834        4,020          --        11,410        2.17%            124
Italy................     11,320         1,344          361       1,088        14,113        2.68%          2,409
Netherlands..........      1,408         4,561        2,105          --         8,074        1.54%             --
Japan................        361         1,334          422         644         2,761        0.53%          3,132
Switzerland..........         86         2,995        1,887          --         4,968        0.94%            219
Spain................      2,509         1,530        1,004          32         5,075        0.97%            133




                                                            AT DECEMBER 31, 2002
                       ----------------------------------------------------------------------------------------------
                        GOVERNMENT
                           AND         BANKS AND                NET LOCAL   TOTAL CROSS-    PERCENT
                         OFFICIAL      FINANCIAL                 COUNTRY       BORDER      OF TOTAL     CROSS-BORDER
                       INSTITUTIONS   INSTITUTIONS   OTHER(1)    CLAIMS     OUTSTANDINGS   ASSETS(2)   COMMITMENTS(3)
                       ------------   ------------   --------   ---------   ------------   ---------   --------------
                                                               (E IN MILLION)
                                                                                  
COUNTRY
United States........      1,130         11,944       6,632       1,421        21,127        4.22%         18,568
United Kingdom.......        216         12,398       2,891          --        15,505        3.09%          6,685
France...............        730          6,454       3,513          --        10,697        2.14%             69
Italy................      6,548          3,098         314          77        10,037        2.00%          1,041
Netherlands..........      1,131          4,809       2,510          --         8,450        1.69%             --
Japan................        966          2,316         424         696         4,402        0.88%          3,204
Switzerland..........        116          3,531       2,181         455         6,283        1.25%            248
Spain................      2,281          1,430         712         182         4,605        0.92%            775


------------

(1) Other includes insurance, commercial, industrial, service providers and
    other corporate counter-parties.

(2) Percent of total assets is defined as total cross-border outstandings
    divided by total assets of the Group's banking operations. The total assets
    of the Group's banking operations were E415 billion, E526 billion and E501
    billion at December 31, 2002, 2001 and 2000, respectively.

(3) Cross-border commitments have been presented separately as they are not
    included as cross-border outstandings unless utilized.

     Total cross-border outstandings disclosed above included E945 million and
E668 million of gross loans outstanding to borrowers in the United States that
are also disclosed within the category of non-performing loans at December 31,
2002 and 2001, respectively. At December 31, 2002, total cross-border
outstandings disclosed above also included E126 million of gross loans

                                       113


outstanding to borrowers in the United States that are also disclosed within the
category of potential problem loans.

SUMMARY OF LOAN LOSS EXPERIENCE

     The Allianz Group establishes allowances for loan losses in its loan
portfolio that represent management's estimate of probable losses in the
portfolio at the balance sheet date. The components of these allowances are:

     - Specific loss allowances.  A specific loss allowance is established to
       provide for specifically identified counter-party risks. Loans are
       identified as impaired if it is probable that borrowers are no longer
       able to make their contractually agreed-upon interest and principal
       payments. Specific allowances are established for impaired loans. The
       amount of the impairment is measured based on the present value of
       expected future cash flows or based on the fair value of the collateral
       if the loan is collateralized and foreclosure is probable. If the amount
       of the impairment subsequently increases or decreases due to an event
       occurring after the initial measurement of impairment, a change in the
       allowance is recognized in earnings by a charge or a credit to net loan
       loss provisions.

     - General loss allowances.  General loss allowances are established to
       provide for incurred but unidentified losses that are inherent in the
       loan portfolio as of the relevant balance sheet date. General allowances
       for loan losses are established for loans not specifically identified as
       impaired. The amount of the allowance is based on historical loss
       experience and management's evaluation of the loan portfolio under
       current events and economic conditions.

     - Country risk allowances.  Country risk allowances are established for
       transfer risk. Transfer risk is a measure of the likely ability of a
       borrower in a certain country to repay its foreign currency-denominated
       debt in light of the economic or political situation prevailing in that
       country. Country risk allowances are based on the Allianz Group's country
       rating system that incorporates current and historical economic,
       political and other data to categorize countries by risk profile.

                                       114


     The following table sets forth an analysis of the specific loan loss
allowances by industry sector and geographic category of the borrowers, and the
percentage of the Allianz Group's total loan portfolio accounted for by those
industry and geographic categories, on the dates specified. The allocation
between German and non-German components is based on the domicile of the
borrower.


                                                                   AT DECEMBER 31,
                              -----------------------------------------------------------------------------------------
                                      2002                   2001                   2000                   1999
                              --------------------   --------------------   --------------------   --------------------
                                       PERCENT OF             PERCENT OF             PERCENT OF             PERCENT OF
                                       TOTAL LOANS            TOTAL LOANS            TOTAL LOANS            TOTAL LOANS
                                         IN EACH                IN EACH                IN EACH                IN EACH
                                        CATEGORY               CATEGORY               CATEGORY               CATEGORY
                                        TO TOTAL               TO TOTAL               TO TOTAL               TO TOTAL
                              AMOUNT      LOANS      AMOUNT      LOANS      AMOUNT      LOANS      AMOUNT      LOANS
                              ------   -----------   ------   -----------   ------   -----------   ------   -----------
                                                                   (E IN MILLION)
                                                                                    
GERMAN:
  Corporate:
    Manufacturing industry..    884         7.2%       884         5.7%       687         6.0%       840         5.9%
    Construction............    301         0.9%       353         1.0%       381         1.1%       389         1.2%
    Wholesale and retail
      trade.................    426         4.5%       448         3.8%       506         3.9%       585         4.0%
    Financial institutions
      (excluding banks) and
      insurance companies...    171         2.1%       133         2.6%       135         2.2%       110         0.5%
    Banks...................      7         0.5%         5         0.3%         1         0.3%        --         1.3%
    Service providers.......    827        10.3%       982        12.2%     1,030        11.1%       887        12.6%
    Other...................    108         2.2%        59         2.1%        95         1.6%       130         2.4%
                              -----                  -----                  -----                  -----
    Corporate total.........  2,724        27.7%     2,864        27.7%     2,835        26.2%     2,941        27.9%
    Public authorities......     --         0.2%        --         0.4%        --         0.3%         1         0.1%
    Private individuals
      (including self-
      employed
      professionals)........  1,702        32.1%     2,090        33.8%     1,730        34.4%     1,342        34.6%
    German total............  4,426        60.0%     4,954        61.9%     4,565        60.9%     4,284        62.6%
                              -----                  -----                  -----                  -----
NON-GERMAN:
  Corporate:
    Manufacturing industry,
      construction,
      wholesale and retail
      trade and service
      providers.............    659        16.3%     1,201        20.4%       998        22.9%     1,183        20.9%
    Financial institutions
      (excluding banks) and
      insurance companies...     33         4.7%        96         5.5%       109         5.3%       107         4.3%
    Banks...................    244         2.5%       118         2.7%        92         3.3%       142         3.5%
    Other...................    321         6.8%       247         2.1%       118         1.8%        85         1.8%
                              -----                  -----                  -----                  -----
    Corporate total.........  1,257        30.3%     1,662        30.7%     1,317        33.3%     1,517        30.5%
    Public authorities......     14         1.5%        15         1.8%        14         0.5%        30         1.6%
    Private individuals
      (including self-
      employed
      professionals)........    182         8.2%       211         5.6%       224         5.3%       231         5.3%
    Non-German total........  1,453        40.0%     1,888        38.1%     1,555        39.1%     1,778        37.4%
                              -----                  -----                  -----                  -----
TOTAL SPECIFIC LOAN LOSS
  ALLOWANCES................  5,879       100.0%     6,842       100.0%     6,120       100.0%     6,062       100.0%
COUNTRY RISK ALLOWANCES.....    340                    443                    480                    659
GENERAL LOSS ALLOWANCES.....    747                    753                    523                    386
                              -----                  -----                  -----                  -----
TOTAL LOAN LOSS
  ALLOWANCES................  6,966                  8,038                  7,123                  7,107
                              =====                  =====                  =====                  =====


                                AT DECEMBER 31,
                              --------------------
                                      1998
                              --------------------
                                       PERCENT OF
                                       TOTAL LOANS
                                         IN EACH
                                        CATEGORY
                                        TO TOTAL
                              AMOUNT      LOANS
                              ------   -----------
                                 (E IN MILLION)
                                 
GERMAN:
  Corporate:
    Manufacturing industry..    738         7.5%
    Construction............    372         2.0%
    Wholesale and retail
      trade.................    557         6.0%
    Financial institutions
      (excluding banks) and
      insurance companies...    126         2.5%
    Banks...................     --         0.4%
    Service providers.......    654         9.1%
    Other...................     97         1.8%
                              -----
    Corporate total.........  2,544        29.3%
    Public authorities......      2         0.7%
    Private individuals
      (including self-
      employed
      professionals)........  1,170        36.3%
    German total............  3,716        66.3%
                              -----
NON-GERMAN:
  Corporate:
    Manufacturing industry,
      construction,
      wholesale and retail
      trade and service
      providers.............  1,001        14.8%
    Financial institutions
      (excluding banks) and
      insurance companies...     17         4.4%
    Banks...................    195         5.3%
    Other...................     98         2.7%
                              -----
    Corporate total.........  1,311        27.2%
    Public authorities......     15         0.7%
    Private individuals
      (including self-
      employed
      professionals)........    216         5.8%
    Non-German total........  1,542        33.7%
                              -----
TOTAL SPECIFIC LOAN LOSS
  ALLOWANCES................  5,258       100.0%
COUNTRY RISK ALLOWANCES.....    529
GENERAL LOSS ALLOWANCES.....    344
                              -----
TOTAL LOAN LOSS
  ALLOWANCES................  6,131
                              =====


                                       115


     The following table sets forth the movements in the loan loss allowance
according to the industry sector and geographic category of the borrower. The
allocation between German and non-German components is based on the domicile of
the borrower.



                                                                     YEAR ENDED DECEMBER 31,
                                                              --------------------------------------
                                                               2002    2001    2000    1999    1998
                                                              ------   -----   -----   -----   -----
                                                                          (E IN MILLION)
                                                                                
TOTAL ALLOWANCES FOR LOAN LOSSES AT BEGINNING OF THE YEAR...   8,038   7,123   7,107   6,131   4,955
                                                              ------   -----   -----   -----   -----
GROSS CHARGE-OFFS:
GERMAN:
  Corporate:
    Manufacturing industry..................................     314      66     211      71      47
    Construction............................................     138      16      53      33      11
    Wholesale and retail trade..............................     206      54     163      71      26
    Financial institutions (excluding banks) and insurance
      companies.............................................      74      17      19       4       1
    Banks...................................................      11      --      --      --      --
    Service providers.......................................     327     103     131      82      78
    Other...................................................     117      16      36       5       5
                                                              ------   -----   -----   -----   -----
    Corporate total.........................................   1,187     272     613     266     168
    Public authorities......................................      --      --       1      --      --
    Private individuals (including self-employed
      professionals)........................................     348     211     337     173     115
                                                              ------   -----   -----   -----   -----
German total................................................   1,535     483     951     439     283
                                                              ------   -----   -----   -----   -----
NON-GERMAN:
  Corporate:
    Manufacturing industry, construction, wholesale and
      retail trade and service providers....................     270     516     594      93     116
    Financial institutions (excluding banks) and insurance
      companies.............................................      12      23      48       6       5
    Banks...................................................       6      13      14      19       3
    Other...................................................      28       2      72       1       4
                                                              ------   -----   -----   -----   -----
    Corporate total.........................................     316     554     728     119     128
    Private individuals (including self-employed
      professionals)........................................      38      49      32       9      11
                                                              ------   -----   -----   -----   -----
Non-German total............................................     354     603     760     128     139
                                                              ------   -----   -----   -----   -----
TOTAL GROSS CHARGE-OFFS.....................................   1,889   1,086   1,711     567     422
                                                              ------   -----   -----   -----   -----
RECOVERIES:
GERMAN:
  Corporate:
    Manufacturing industry..................................      --       1       9       1       1
    Construction............................................      --      --      --       1      --
    Wholesale and retail trade..............................      --      --      --       1      --
    Service providers.......................................      --      --      --      10      --
    Other...................................................       1      --      --      --       1
                                                              ------   -----   -----   -----   -----
    Corporate total.........................................       1       1       9      13       3
    Private individuals (including self-employed
      professionals)........................................      28      25      21      17      17
                                                              ------   -----   -----   -----   -----
German total................................................      29      26      30      30      20
                                                              ------   -----   -----   -----   -----
NON-GERMAN:
  Corporate:
    Manufacturing industry, construction, wholesale and
      retail trade and service providers....................      57       3       1       1       3
    Financial institutions (excluding banks) and insurance
      companies.............................................       1       7      --      --      --
    Banks...................................................      --       4       1      --      --
    Other...................................................      32       2       1      --      37
                                                              ------   -----   -----   -----   -----
    Corporate total.........................................      90      16       3       1      40
    Public authorities......................................      --      --       1      --      --
    Private individuals (including self-employed
      professionals)........................................      56       6       2       5       6
                                                              ------   -----   -----   -----   -----
Non-German total............................................     146      22       6       6      46
                                                              ------   -----   -----   -----   -----
TOTAL RECOVERIES............................................     175      48      36      36      66
                                                              ------   -----   -----   -----   -----
NET CHARGE-OFFS.............................................   1,714   1,038   1,675     531     356
                                                              ------   -----   -----   -----   -----


                                       116




                                                                     YEAR ENDED DECEMBER 31,
                                                              --------------------------------------
                                                               2002    2001    2000    1999    1998
                                                              ------   -----   -----   -----   -----
                                                                          (E IN MILLION)
                                                                                
Additions to allowances charged to operations...............   1,902   1,901   1,595   1,237   1,024
(Decreases)/increases in allowances due to
  (dispositions)/acquisitions of group companies and other
  increases/(decreases).....................................  (1,085)     12      41     158     555
Foreign exchange translation adjustments....................    (175)     40      55     112     (47)
                                                              ------   -----   -----   -----   -----
TOTAL ALLOWANCES FOR LOAN LOSSES AT END OF THE YEAR.........   6,966   8,038   7,123   7,107   6,131
                                                              ======   =====   =====   =====   =====
RATIO OF NET CHARGE-OFFS DURING THE YEAR TO AVERAGE LOANS
  OUTSTANDING DURING THE YEAR...............................    0.93%   0.46%   0.78%   0.27%   0.15%


     When the Allianz Group determines that a loan is uncollectible, the loan is
charged off against any existing specific loss allowance or directly recognized
as expense in the income statement. Subsequent recoveries, if any, are
recognized in the income statement as a credit to the net loan loss provisions.
Since 2000, the Allianz Group has charged off loans when, based on management's
judgment, all economically sensible means of recovery have been exhausted. The
Group's determination considers information such as the age of specific loss
allowances and expected proceeds from liquidation of collateral and other
repayment sources. Prior to 2000, the Group charged off loans only when all
legal means of recovery had been exhausted, for example only after completion of
bankruptcy proceedings. The change in practice has affected both the timing and
amount of charge-offs in the years 2000-2002, and in 2002 also affected the
level of the Group's non-accrual loans. See "-- Risk Elements -- Non-performing
Loans."

DEPOSITS

     The following table sets forth the average balances and the average
interest rates on deposit categories in excess of ten percent of average total
deposits of the Allianz Group's banking operations. The allocation between
German and non-German components is based on the location of the office that
recorded the transaction.



                                                          YEAR ENDED DECEMBER 31,
                                         ---------------------------------------------------------
                                               2002                2001                2000
                                         -----------------   -----------------   -----------------
                                         AVERAGE   AVERAGE   AVERAGE   AVERAGE   AVERAGE   AVERAGE
                                         BALANCE    RATE     BALANCE    RATE     BALANCE    RATE
                                         -------   -------   -------   -------   -------   -------
                                                              (E IN MILLION)
                                                                         
IN GERMAN OFFICES:
  Non-interest-bearing demand
     deposits..........................   16,603              14,364              10,193
  Interest-bearing demand deposits.....   45,697     2.6%     31,608     1.5%     33,849     2.1%
  Savings deposits.....................    6,495     2.8%     10,352     3.4%     14,457     2.6%
  Time deposits........................   77,985     3.2%    116,239     4.0%     83,367     3.6%
                                         -------             -------             -------
  German total.........................  146,780             172,563             141,866
                                         -------             -------             -------
IN NON-GERMAN OFFICES:
  Non-interest-bearing demand
     deposits..........................    2,443               6,098               8,405
  Interest-bearing demand deposits.....   16,327     2.3%     11,351     3.8%     10,392     4.2%
  Savings deposits.....................    1,370     3.4%      1,073     3.9%        612     3.1%
  Time deposits........................   41,277     4.2%     57,432     5.3%     44,358     7.5%
                                         -------             -------             -------
Non-German total.......................   61,417              75,954              63,767
                                         -------             -------             -------
TOTAL DEPOSITS.........................  208,197             248,517             205,633
                                         =======             =======             =======


     The aggregate amount of deposits by foreign depositors in the Group's
German offices was E51,688 million, E63,663 million and E55,263 million at
December 31, 2002, 2001 and 2000, respectively.

                                       117


TIME DEPOSITS

     The following table sets forth the balance of time certificates of deposit
and other time deposits in the amount of E100,000 or more issued by the Group's
German offices by time remaining to maturity at December 31, 2002.



                                                              AT DECEMBER 31, 2002
                                                                TIME DEPOSITS OF
                                                                E100,000 OR MORE
                                                              --------------------
                                                                 (E IN MILLION)
                                                           
Maturing in three months or less............................         56,390
Maturing in over three months through six months............          2,385
Maturing in over six months through twelve months...........          5,770
Maturing in over twelve months..............................          3,028
                                                                     ------
Total.......................................................         67,573
                                                                     ======


     The amount of time deposits of E100,000 or more issued by the Group's
non-German offices was E25,840 million at December 31, 2002.

SHORT-TERM BORROWINGS

     Short-term borrowings are borrowings with an original maturity of one year
or less. Short-term borrowings are included within liabilities to customers,
liabilities to banks and certificated liabilities. Securities sold under
agreements to repurchase and negotiable certificates of deposit are the only
significant categories of short-term borrowings of the Group's banking
operations.

     The following table sets forth certain information relating to the
categories of the Allianz Group's short-term borrowings.



                                                               YEAR ENDED DECEMBER 31,
                                                              -------------------------
                                                               2002     2001      2000
                                                              ------   -------   ------
                                                                   (E IN MILLION)
                                                                        
SECURITIES SOLD UNDER REPURCHASE AGREEMENTS:
Balance at the end of the year..............................  63,287    56,354   60,648
Monthly average balance outstanding during the year.........  67,168    76,875   54,102
Maximum balance outstanding at any period end during the
  year......................................................  91,929   102,587(1) 68,950(1)
Weighted average interest rate during the year..............     3.2%      4.3%     4.7%
Weighted average interest rate on balance at the end of the
  year......................................................     2.6%      2.4%     4.7%
NEGOTIABLE CERTIFICATES OF DEPOSIT:
Balance at the end of the year..............................  30,765    30,268   28,552
Monthly average balance outstanding during the year.........  31,632    28,718   28,009
Maximum balance outstanding at any period end during the
  year......................................................  35,467    30,518(2) 28,552(2)
Weighted average interest rate during the year..............     2.8%      5.0%     5.7%
Weighted average interest rate on balance at the end of the
  year......................................................     2.6%      3.1%     6.4%


------------

(1) During the years ended December 31, 2001 and 2000, the maximum balance
    outstanding at any period-end during the year was derived from the maximum
    balance outstanding at any month-end, based on the unconsolidated balances
    of Dresdner Bank AG, its branch operations and significant subsidiaries, and
    certain other banking subsidiaries of Allianz.

(2) During the years ended December 31, 2001 and 2000, the maximum balance
    outstanding at any period-end during the year was derived from the maximum
    balance outstanding at any quarter end, based on the consolidated balances
    of the Group's banking operations.

EMPLOYEES

     As of December 31, 2002 and 2001, Allianz AG had 632 and 501 employees,
respectively (excluding members of the Management Board, trainees, interns and
employees on parental leave or on leave for military or civil service). Until
the year 2000, Allianz AG did not have any employees of its own. As of December
31, 2002, Allianz Group had a total of more than

                                       118


181,000 employees worldwide, of whom more than 87,000 or approximately 48.1%
were employed in Germany. A large number of the German employees of Allianz
Group is covered by collective bargaining agreements or similar arrangements. In
the past three years, there have been no work stoppages or strikes at the
Allianz Group's various sites that have arisen from collective bargaining
disputes or for other reasons and which had a material adverse effect on the
Group's results of operations. Allianz AG believes that the relations between
the Allianz Group and its employees are good.

     The following table shows the average number of employees of the Allianz
Group by region for the years ended December 31, 2002, 2001 and 2000.



REGION                                                         2002      2001      2000
------                                                        -------   -------   -------
                                                                         
Germany.....................................................   87,398    87,589    43,124
Rest of Europe..............................................   66,657    61,892    50,569
NAFTA.......................................................   12,644    14,722    12,667
Rest of World...............................................   14,952    15,743    13,323
                                                              -------   -------   -------
Total.......................................................  181,651   179,946   119,683


LONG-TERM INCENTIVE PLANS AND EMPLOYEE STOCK OWNERSHIP ARRANGEMENTS

LONG-TERM INCENTIVE PLANS

     Since 1999 the Group has established long-term incentive plans for the
members of the Management Board of Allianz AG and eligible key executives of the
Allianz Group, which are subject to approval by the Supervisory Board. As of the
date of this Offering Circular, long-term incentive plans were authorized for
2002, 2001, 2000 and 1999. Under these incentive plans, the Allianz Group
granted non-transferable appreciation rights tied to the value of the shares of
Allianz AG to members of the Management Board of Allianz AG and eligible key
executives of the Allianz Group. The appreciation rights were granted on April 1
of each of these years. The rights expire after seven years.

     Under the relevant incentive plan, each plan participant is advised at the
beginning of the plan of the number of the appreciation rights that were granted
to him or her. Each appreciation right entitles the holder to the difference
between the stock of Allianz AG at the time the right is exercised and the base
price of the stock of Allianz AG as specified in the plan, the maximum
difference being capped at 150% of the base price. The 2002, 2001 and 2000
incentive plans specify base prices of E265, E356 and E367, respectively. As of
December 31, 2002, the Allianz Group has issued a total of 1,507,414
appreciation rights under all incentive plans. Of this amount, 625,454
appreciation rights were issued under the 2002 incentive plan, 380,391 were
issued under the 2001 incentive plan and 245,542 were issued under the 2000
incentive plan.

     The appreciation rights may be exercised at any time between the beginning
of the third and the end of the seventh year after commencement of the relevant
plan, provided that the closing stock price of Allianz AG in the Frankfurt Xetra
Trade has exceeded the closing price of the Dow Jones Europe Stoxx Price Index
(600) on each of at least five consecutive trading days and the closing stock
price of Allianz AG in the Frankfurt Xetra Trade has appreciated as of the
exercise date by at least 20% over the base price specified in the plan. Holders
may not exercise an appreciation right within fixed time periods prior to the
publication of the quarterly, semi-annual or annual reports. At other times, an
appreciation right may be exercised only with the approval of the Allianz
Group's compliance department.

     Upon exercise of the appreciation rights, payment is made in the relevant
local currency by the Group's company granting the appreciation rights.
Appreciation rights not exercised by the last day of a plan will be exercised
automatically where the necessary conditions have been met. Where these
conditions have not been met or a plan participant ceases to be employed by the
Allianz Group for reasons other than disability or death, the plan participant's
appreciation rights are forfeited.

                                       119


EMPLOYEE STOCK OWNERSHIP ARRANGEMENTS

     Allianz AG offers certain eligible employees and certain Allianz Group
companies for their respective employees in Germany and abroad to buy its shares
within a limited period of time at a discounted price per share. Costs for the
arrangement are met by the relevant company. In general, to be eligible,
employees are required to have been employed for a minimum period of six
continuous months prior to the share offering. Employees are also subject to
certain restrictions on the amount that may be invested to purchase the shares.
Each participating Group subsidiary establishes a restricted period of at least
one and maximum five years during which employees may not transfer the shares
after purchasing them. After this period, the shares are not subject to vesting
or other restrictions. The eligible employees of the Allianz Group acquired a
total of 136,222 shares under such arrangements in 2002.

RISK MANAGEMENT

     As a provider of financial services, the Allianz Group considers risk
management one of its core competencies. As a result, risk management is an
integrated part of the Group's controlling process, which involves identifying,
measuring, aggregating and managing risks. This process is used to determine how
capital is allocated to the Group's various divisions.

RISK MANAGEMENT ORGANIZATION

Responsibilities

     In the Allianz Group's business, successful management essentially means
controlling risks in order to increase the value of the Group. This is done
through risk-based allocation of capital resources and activities required to
achieve sustainable growth. As a result, Allianz AG's Management Board
formulates the business objectives of the Allianz Group on the basis of return
and risk criteria. These objectives are implemented by the Allianz Group Center
and the local operational units. The Group's risk-control strategy involves
assignment of responsibility for risk management to local entities, which
operate within the legal frameworks applicable for their respective locations.

     This decentralized approach is complemented by centralized responsibility.
This is necessary because the Group needs to deal with an accumulation of global
risks which can considerably increase potential risk exposure. As a result,
central controls are essential. The responsibility for central control lies with
Group Risk Controlling, a unit that was expanded in 2002. Central control now
also includes the banking business. Group Controlling assesses the Allianz
Group's risk exposure on the basis of local and global risks. The results of
these analyses are then submitted to senior management. At the same time, Group
Controlling aims to ensure that the processes are transparent and comprehensive.
Risk management activities are supervised by both internal and external
auditors.

Risk Categories

     Total risk exposure of the Allianz Group is subdivided into individual risk
categories:

     Actuarial Risks.  These risks are based on the technicalities of the
insurance business: the Group must guarantee future payment commitments, and the
volume of such payments must be calculated in advance. Different actuarial risks
exist in the various insurance lines.

     In property and casualty insurance, actuarial risks arise from an
unexpected variance, i.e. the volume of losses exceeds premiums fixed in advance
(premium risk), or the payout for claims made is higher than the corresponding
provisions (reserve risk).

     In life insurance, actuarial risks arise because the Group is committed to
making guaranteed long-term payments in return for a fixed insurance premium
calculated in advance even though the biometric data of the population may
change over time (for example, longer life expectancy as a result of medical
progress).

     Credit and Counterparty Risks.  These risks involve potential losses that
may result from the default of a business partner. "Default" means the inability
or refusal of a counterparty, an issuer or another contracting party to meet
contractual obligations. Credit risk also includes the risk of a deterioration
of a business partner's creditworthiness. It thus includes credit risks from the

                                       120


lending business and credit insurance, counterparty risks from trading
activities as well as country risks in connection with cross-border transactions
and the local business of foreign units. Counterparty risks from trading
activities relate primarily to derivatives and especially over-the-counter (OTC)
transactions. In the insurance business, these risks stem from the possibility
that receivables may remain unpaid, in particular those due from reinsurers.

     Market Risks.  Market risks result from portfolio valuation fluctuations
due to changes in share prices, interest rates or exchange rates. Also risk
relevant are changes observed in the variation behavior (volatility) of an asset
price, for example.

     In the banking business, the volatility risk especially concerns trading
activities, which are shown in the institution's trading portfolio. Unlike the
latter, the non-trading portfolio, which contains customer business and
strategic investments, is exposed to long-term factors. In this case, the market
risk is essentially the interest rate risk resulting from granting long-term
fixed-rate loans, which are funded in part by short-term deposits. In addition,
loans and deposits in foreign currencies are exposed to currency risks.

     Investment Risks.  Investment risks in the insurance business primarily
include all counterparty and market risks. There is a direct link between
investments and obligations to our customers. Certain insurance lines are
exposed to an interest guarantee risk. Life insurance, for example, must
generate the guaranteed interest payment agreed upon.

     Liquidity Risks.  These risks can materialize under various circumstances,
for example, if present or future payment obligations cannot be met in full or
as of the due date, or if refinancing capital can only be raised at higher rates
(refinancing risk) in the case of a liquidity crisis or if assets can only be
liquidated below current market prices (market liquidity risk).

     Health Insurance Risks.  Health insurance risks are treated either as
property and casualty insurance risks or as life and health insurance risks,
depending on the segment to which the health insurance is assigned in the given
market.

Management of the Allianz Group through Risk Capital

     The Allianz Group controls its activities through its respective local
companies. Economic Value Added ("EVA") and risk capital are the most important
parameters used in the context of the Group's risk-based controlling process.

     Risk capital is required to cover unexpected losses. The amount of risk
capital is calculated by using internal models. These models are based on
generally accepted quantification methods, which are used for purposes of
group-internal risk management as well.

     In the insurance business, the Group calculates risk capital for premium,
reserve, investment and credit risks. Within these risk categories, it
distinguishes between the following types of risks:

     - Actuarial risks. In property and casualty insurance these include the
       premium and reserve risks for the various insurance lines. Reinsurance is
       considered separately. In the case of life insurance, the Group
       calculates the insurance provisions required.

     - Investment risks, which include market and counterparty risks. The market
       risks are subdivided according to dividend-bearing instruments,
       interest-bearing instruments and real estate. The credit and counterparty
       risk as part of investment risks is assessed on the basis of the debtor's
       creditworthiness or rating class.

     - Credit and counterparty risks in connection with receivables in the
       insurance business. This risk is mainly assessed on the basis of the
       financial strength or the rating class of the Group's reinsurance
       partners.

     In 2002, the Group launched a comprehensive project to substantially
improve internal risk analysis in the insurance business. The Group's new tools
enable it to systematically evaluate internal data by means of models based on
the theory of probability. This process takes into account the special
characteristics of the Group's local units as well as the specific nature of
their risks. It also takes into account portfolio effects. In the current year,
the Group intends to further develop this large-scale project. At present, the
Group uses risk capital models provided by the Standard & Poor's rating agency.

                                       121


Risk Controlling in the Insurance Business

     To control risks in the insurance business, the Group focuses on premium
risks, reserve risks, credit and counterparty risks and investment risks.

     Premium Risks.  Premium risks are controlled primarily with the help of
actuarial models used to calculate premiums and monitor claim patterns. In
addition, the Group issues guidelines for concluding insurance contracts and
assuming insurance risks. In the case of life insurance, the Group essentially
concentrates on biometric risks -- for example, life expectancy, disability,
illness and long-term care requirements. It also focuses on risks that could
arise from future policy cancellations.

     Risk management also includes participation in scientific and technical
loss prevention. The Group regularly carries out technical studies for the
manufacturing and automobile industries, for example. The purpose of these
studies is to reduce the probability of claims and keep losses to a minimum.

     Natural disasters such as earthquakes, storms and floods represent a
special challenge for risk management. Although they happen considerably less
frequently than other incidents, the consequences can be far more extensive
when, for example, entire regions are devastated. The Group uses special
modeling techniques to control such risks. They involve the collection of data
on earthquakes and weather patterns, which are used to simulate natural disaster
scenarios and estimate the potential for damage.

     Reserve Risks.  The Group must constitute provisions for insurance claims
that have been submitted but not yet settled. The amount is estimated on the
basis of past experience and on the use of statistical methods. The Group also
seeks to limit risks by constantly monitoring the development of these
provisions and using the information it obtains to make forecasts. In the area
of life insurance, reserves are calculated by using actuarial methods. In
addition to other criteria, these calculations take into account the biometric
data of the populations insured by using, for example, national mortality
tables. See "-- Property-Casualty Insurance Reserves" for a discussion of
certain historical data concerning the development of Group-wide property-
casualty insurance reserves.

     Credit and Counterparty Risks.  To limit its liability from insurance
business the Group cedes part of the risks it assumes to the international
reinsurance market when necessary. When selecting reinsurance partners, the
Group considers only companies that it judges to offer excellent security. Group
companies use comprehensive rating information for the active management of
credit risks. This information is either in the public domain or gathered
through internal investigations.

     Investment Risks.  Investments are an integral part of insurance coverage.
They ensure the Group's ability to meet the payment commitments it makes in its
insurance contracts. The link between insurance obligations and investment of
the capital related to these obligations is monitored by using specific models.
This also enables the Group to manage risks arising from interest guarantees
provided to its customers.

     The Group monitors market risks by means of sensitivity analyses and stress
testing. Exchange rate fluctuations represent a risk that can essentially be
disregarded because the Group's insurance commitments generally backed by funds
in the same currency. The Group limits credit risks by setting high requirements
on the creditworthiness of its debtors and by spreading the risk. It
consolidates its exposure according to debtors and across all investment
categories, and uses limit lists to monitor exposure.

     In individual cases, the Group uses derivative financial instruments such
as swaps, options and futures to hedge against changes in prices or interest
rates. The end users of these derivatives are Allianz Group companies. The
Company believes that the Group's internal investment and monitoring rules are
stricter than the regulations imposed by supervisory authorities.

     Market and counterparty risks arising from the use of derivative financial
instruments are subject to particularly strict control procedures. Credit risks
are assessed by calculating replacement values; market risks are monitored by
means of up-to-date value-at-risk calculations and stress tests and limited by
specifying stop-loss limits.

                                       122


     The Group seeks to limit liquidity risks by reconciling its investment
portfolio with its insurance commitments. In addition, it plans its cash flow
from ordinary activities. Asset structure and diversification are other elements
in the Group's management of investment risk.

     Organizational Risk Controlling.  In terms of organization, the Group seeks
to limit its investment risks through a clear separation of management and
controlling functions. Within the Allianz Group, risk management is implemented
in cooperation with the local units in a top-down, bottom-up process. The
Allianz Finance Committee, which is made up of members of the Allianz AG's
Management Board, delegates significant decision-making authority to the
regional Finance Committees, which monitor activities in their respective
regions or countries. The duties and responsibilities at each decision-making
level are defined by guidelines issued at the Group level. These guidelines are
then applied by the regional Finance Committees, which formulate specific local
investment guidelines. These are adapted according to national legislation and
the nature of the local insurance and capital markets. Operational
responsibility for investment portfolios lies with the local units.

     Risk Capital.  At the end of fiscal 2002, risk capital before minority
interests was composed as follows: In property and casualty insurance, E16.1
billion were allocated for actuarial risks, E0.8 billion for credit and
counterparty risks and E3.9 billion for investment risks. Risk capital in life
insurance came to a total of E11.1 billion as of December 31, 2002. It is the
Group's policy that, as a minimum, the capital it allocates to its local units
meets the requirements for an A rating from Standard & Poor's.

Risk Controlling in the Banking Business

     In this business segment, the following types of risks are controlled:
credit and counterparty risks including counterparty risks from trading
activities, country risks, market risks in the trading and investment
portfolios, and liquidity risks. See "-- Selected Statistical Information
Relating to the Group's Banking Operations" for further information concerning
the Group's bank lending, investment and deposit portfolios.

     Credit and Counterparty Risks.  These risks are directly linked to granting
credits in the banking business. Dresdner Bank controls these risks through
guidelines and credit risk committees. The ratings of customers and their credit
engagements represent the central element used in the approval, supervisory and
control process in the area of credit and derivatives activities. This process
involves analyzing and weighting the various creditworthiness characteristics of
the customers and presenting the results in the form of rating scales. The
forecasting quality, up-to-dateness and portfolio coverage of the rating methods
used are controlled by periodic sampling and regular reports.

     In the past year, Dresdner Bank increased the number of rating classes from
8 to 16. The first six classes correspond to "investment grade," classes VII to
XIV signify "non-investment grade." Rating classes XV and XVI are default
classes according to the Basel II Definition. At the end of fiscal 2002, about
70 percent of all counterparty risks in the trading and banking portfolios of
Dresdner Bank fell into rating classes I to VI.

     The volume of the overall portfolio is largely determined by the Bank's
trading business, which involves primarily transactions with low default
probability, typically with state and local agencies and financial services
providers. Approximately 85 percent of the transactions with public agencies or
organizations are rated in the top risk class I. Approximately 60 percent of the
transactions with financial services providers fall into risk classes III to V.
These two segments represent 56 percent of the Bank's total portfolio.

     Counterparty risks are now centrally controlled by Dresdner Bank's Risk
Management and Control Committee, which is headed by the Chief Risk Officer of
Dresdner Bank. The newly created body is responsible for issuing the appropriate
guidelines and standards for the risk strategy and risk control of the Dresdner
Bank Group and for ensuring compliance. In addition, the committee decides on
essential projects involving a credit risk. In this context, the Risk Management
and Control Committee oversees the coordination between the risk management of
the company's divisions and the Corporate Center Risk Control Unit. This is done
in close cooperation with Allianz AG's Group Risk Controlling (Allianz Group
Center). In addition, the committee is responsible for the monthly audit of the
overall portfolio. This audit, which is

                                       123


performed in cooperation with the divisions, is controlled by Risk Controlling.
Its purpose is to monitor credit risks on a continuing basis and to make sure
that the management's credit risk strategy is adhered to.

     In the past year, the Allianz Group set up the IRU in the banking segment.
The task of this unit is to free up risk capital through the reduction of
risk-weighted assets by restructuring non-performing loans to strategic
customers with the intent of returning such loans to the business units from
which they originated, while maximizing the recovery from remaining
non-performing loans, as well as non-strategic customer loans, through
repayment, sale, hedging, securitization and other means. Loans to be bundled
together in the IRU are primarily performing loans to non-strategic clients,
such as small-capitalization clients in Latin America, Asia and the United
States, as well as, to a lesser extent, loans to corporate and private clients
that are currently non-performing.

     The Group accounts for the development of risks in the lending business by
making allowances for individual risks and country risks. In setting up risk
provisions, it considers the creditworthiness of the borrower, the general
economic environment and risk-reducing measures, for example collateral in 2002,
total risk provisions in the banking business amounted to E7.6 billion.

     Counterparty risk from trading activities: in the credit-sensitive trading
business with OTC derivatives, the selection of counterparties plays a decisive
role. The selection process is aimed at counterparties with top-quality credit
ratings. In the derivatives portfolios of Dresdner Bank, 95 percent of the
positive replacement values, which are essential for assessing counterparty
risk, involve counterparties in risk classes I to VI as described above and are
thus of "investment grade." To reduce the counterparty risk from trading
activities, so-called cross-product netting master agreements with the business
partners are set up. In the case of a defaulting counterparty, netting makes it
possible to offset any claims and liabilities not yet due.

     Country Risks.  The Group controls these risks by using internal country
ratings. These ratings are based upon macroeconomic data and key qualitative
indicators. The latter take into account the economic, social and political
environment and focus on a country's ability to make payments in foreign
currencies. At present, Dresdner Bank's country rating system includes eight
risk groups. At the end of 2002, Dresdner Bank's country risk provisions totaled
E367 million.

     Market Risk.  Dresdner Bank uses a proprietary value-at-risk model that
takes into account both general and specific risks. Value-at-risk is defined as
the potential loss which may occur during a specific period of time and with a
given confidence level. In 1998, the BaFin first approved Dresdner Bank's
value-at-risk model for purposes of reporting in accordance with Principle I of
the German Banking Act. It also approved the improvements made in 2001 and 2002.
The value-at-risk data used to calculate capital adequacy requirements for
regulatory purposes must take into account potential market movements within a
confidence level of 99 percent, based on an assumed holding period of 10 trading
days.

     Market risks in the trading portfolio: The risks from Dresdner Bank's
trading activities decreased in comparison to the previous year. This is mainly
attributable to reduced holdings of interest-bearing instruments.

     To validate the quality of the value-at-risk model, the Bank performs
regular backtests. For this purpose, the value-at-risk calculated on the basis
of the current position is compared to the actual change in value on the
following day. This shows whether the model used provided an adequate assessment
of the risks.

     For purposes of setting internal limits and risk determination, Dresdner
Bank calculates value-at-risk with a confidence level of 95 percent and a
one-day holding period. Unlike the value-at-risk calculation required by the
supervisory authority, which is based on market data from the past, the Bank
thus assigns greater weight to the most recent market fluctuation. The Bank
believes this ensures that value-at-risk data more accurately reflect current
market developments.

     Value-at-risk ("VaR") is only one of the instruments used to characterize
the risk profile of the Dresdner Bank Group. In addition, the Bank also uses
operational risk indicators and limits, which are specifically adapted to the
risk situation of the trading units. Trading is controlled by

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setting value-at-risk and operational market risk limits. Current limit
utilization is determined and monitored by Risk Controlling on a daily basis.
Limit breaches must be immediately indicated to the management concerned so that
corrective action can be taken.

     The following table below shows the VaR for the trading portfolio of
Dresdner Bank at and for the periods indicated (99% confidence level, 10-day
holding period):



                                        AT            2002 ANNUAL STATISTICS            AT
                                   DECEMBER 31,   ------------------------------   DECEMBER 31,
                                       2002       MEAN VALUE   MAXIMUM   MINIMUM       2001
                                   ------------   ----------   -------   -------   ------------
                                                          (E IN MILLION)
                                                                    
Aggregate risk...................       81           120         167       35          147
Interest rate risk...............       65           101         147       65          124
Equity risk......................       45            53          83       26           64
Currency/commodity risk..........       13            17         104        2           18
Diversification effect(1)........      (42)          (51)         --       --          (59)


---------------

(1) No diversification effect can be taken into account since the maximum values
    were measured at different dates.

     Market risks in the non-trading portfolio: This risk mainly comprises the
risk of interest changes and is analyzed on the basis of sensitivity and
value-at-risk indicators (99% confidence level, ten-day holding period). As in
the case of trading, the Bank controls this risk by setting value-at-risk
limits. The value-at-risk for interest rate risk in the banking portfolio of
Dresdner Bank Group decreased 67% to E31.9 million at the end of the year. This
indicator also takes into account portfolio effects. The reduction is mainly due
to the deconsolidation of Deutsche Hyp.

     Currency Risks.  Currency risks at Dresdner Bank are limited by applying
the following principle: all loans and deposits in foreign currencies are
refinanced or reinvested in the same currency with matching maturities.

     Liquidity Risks.  As part of a Group liquidity policy, Treasury and Risk
Control establishes principles for liquidity management. This policy must meet
both regulatory requirements and internal standards. The liquidity risk limits
include a reporting process for limit breaches and provisions for emergency
planning.

     Liquidity risk measurement is based on the liquidity management system.
This system models the maturities of all cash flows and draws up a
scenario-based liquidity balance sheet, taking into account available
prime-rated securities.

     Organizational Risk Controlling.  At the organizational level, risk
management and risk controlling are strictly separated on the basis of the
principle of dual control. Dresdner Bank's risk management sets the limits for
the company's different activities that are exposed to risks. This is done in
accordance with a general framework approved by the Management Board.

Risk Control in Asset Management

     Risk control in asset management is an integral part of the processes of
the local units or the investment platform. The Corporate Center is responsible
for ensuring that Group-wide standards for asset management are applied at the
local level. The individual asset management companies continually monitor the
portfolio risks of the customer assets they manage by using analytical tools
specifically adapted to the risk profile of the product concerned. At the same
time, the performance of the various product lines is periodically monitored and
analyzed at the Group level.

MARKET RISK MEASUREMENT

Sensitivity Analysis

     The Group uses a risk modeling technique known as "sensitivity analysis" to
show the implications of changes in market conditions on the financial
instruments it holds in its trading and non-trading portfolios. This enables the
Allianz Group to make comparisons across its business segments. Sensitivity
analysis measures the potential loss due to changes in fair values resulting
from hypothetical changes in equity prices, interest rates and foreign currency
rates at a given point in time. Sensitivity analysis generates values
representing the risk inherent in each

                                       125


position under given market conditions. Due to the standardization of the
sensitivity analysis in this risk assessment, diversification effects are not
considered.

Assumptions

     In calculating equity price sensitivity, the Group assumes a 20% decrease
in stock prices. This assumption has been made in conformity with applicable
German risk reporting standards.

     Estimates of interest rate risk sensitivity assume a 100 basis point
increase in interest rates. If interest rates rise, the fair values of
interest-sensitive instruments such as bonds, loans and mortgages may fall; the
magnitude of this decrease depends on the maturity, coupon or other
characteristics of a particular instrument. The table below shows the aggregate
effect on the fair value of all of the Group's interest-sensitive investments,
assuming a 100 basis point parallel shift that occurs simultaneously and
instantaneously across all countries, markets and maturities. This assumption
has also been made in conformity with applicable German risk reporting
standards.

     Foreign exchange risk is calculated in a manner similar to equity price
sensitivity, by assuming a 10% decrease in all non-euro currency exchange rates
against the euro. Consequently, the aggregate fair value sensitivity shown in
the table below illustrates the effect on fair values if, simultaneously and
uniformly, all non-euro currencies lose 10% of their value relative to the euro.

     The Group believes that the scenarios used in sensitivity analysis
represent reasonable assumptions based on past observations of market
conditions. Although market fluctuations exceeding 20% or 100 basis points are
possible, the Group believes that estimates based on these assumptions offer a
fair view on the risk inherent in its positions. Although these assumptions are
intentionally simplified (for example, they assume static portfolios and do not
take into account that market prices under normal conditions change neither
simultaneously nor by the same magnitude), Allianz AG believes they provide a
useful framework for the Group's risk management analysis and support the
Group's strategic decisions.

Limitations

     While the Allianz Group believes that sensitivity analysis provides its
managers with a valid estimation of market risk exposures, it recognizes that
there are certain limitations to the use of this method.

     Price changes in a diversified portfolio have offsetting effects, since
various assets revalue in directions or in magnitudes different to overall
marketplace changes. This is known as the "diversification effect" of holding a
portfolio consisting of different assets. Because sensitivity analysis uses a
generalized methodology, the Group's risk estimates do not take this
diversification effect into account. Actual changes in the fair value of the
Group's assets could be different to those shown in the table below.

     Additionally, routine daily business activity entails a certain amount of
change in the portfolios' composition as bonds mature or as portfolio managers
buy or sell investments. As a result, the actual sensitivity of the Allianz
Group's portfolio will vary at any particular moment in time, and the risk of
loss from equity, interest rate, foreign exchange or other risks cannot be
eliminated, although it can be quantified and monitored.

     Finally, the Group's sensitivity analyses are estimates based on a fixed
point in the past. Nearly all of the Group's assets and liabilities are subject
to market risk from fluctuating equity, interest and foreign exchange market
values. These fluctuations cannot be foreseen and can occur suddenly. The
quantitative risk measurements provided by the model and reflected in the table
below are a snapshot, describing the potential losses to investments under a
particular set of assumptions and parameters. Although these measurements
reflect reasonable possibility, they may differ considerably from actual losses
that may be experienced in the future.

                                       126


ALLIANZ GROUP MARKET RISK EXPOSURE ESTIMATES

Trading Portfolios

     The trading portfolios of the Group and resulting market risks relate
primarily to its banking segment. In its worldwide trading activities, the
Allianz Group uses financial derivatives both as non-standardized financial
instruments for the individual management of market risks and as a component of
structured financial transactions. The Group uses derivatives to manage its
proprietary trading portfolio. The Allianz Group's derivative trading activities
focus on interest bearing financial instruments, predominately interest rate
swaps. The Group also uses currency and credit derivatives as well as
equity/index derivatives.

     Insurance Operations.  The Group's insurance business does not generally
engage in trading activities. With the adoption of IAS 39 (effective January 1,
2001), however, derivative instruments that do not meet IFRS hedge accounting
standards are treated as trading derivatives. As a result of this new accounting
rule, the trading portfolio tables below show significant impact from trading
not only for the Group's banking business but also for its insurance business.
Derivatives used in the Group's insurance operations, however, are principally
used for portfolio hedging and not for trading purposes.

     Banking Operations.  The banking segment is active in trading equities,
interest rate instruments and foreign exchange and commodities. The banking
segment uses derivatives in its trading portfolios primarily to meet customer
demand as well as to hedge market risk. Derivatives are also used to take
advantage of market opportunities. In terms of volume, the primary derivative
products the Group uses are interest rate swaps, futures and options as well as
foreign exchange swaps and equity related derivatives. The primary exposures in
foreign currencies are U.S. dollars and British pounds sterling.

     The following table shows the sensitivity analysis of the market risk in
the material trading portfolio of the Allianz Group. Certain financial
instruments are included in more than one risk category because they may be
affected by changes in more than one parameter. For example, equities
denominated in non-euro currencies are affected by fluctuation in both stock
prices and exchange rates. In 2000, prior to the adoption of IAS 39 and the
acquisition of Dresdner Bank, all the Group's portfolios were considered
non-trading.

 SENSITIVITY ANALYSIS BY BUSINESS SEGMENT AND RISK CATEGORY: TRADING PORTFOLIOS



                                                         AT DECEMBER 31, 2002
                                   -----------------------------------------------------------------
                                   PROPERTY-CASUALTY   LIFE/HEALTH                  ASSET
                                       INSURANCE        INSURANCE     BANKING     MANAGEMENT   TOTAL
                                   -----------------   -----------   ----------   ----------   -----
                                                            (E IN MILLION)
                                                                                
Equity price risk(1).............         200              500            --           --       700
Interest rate risk...............          --               --          (100)          --      (100)
Foreign exchange risk(2).........          --               --           100           --       100




                                                         AT DECEMBER 31, 2001
                                   -----------------------------------------------------------------
                                   PROPERTY-CASUALTY   LIFE/HEALTH                  ASSET
                                       INSURANCE        INSURANCE    BANKING(3)   MANAGEMENT   TOTAL
                                   -----------------   -----------   ----------   ----------   -----
                                                            (E IN MILLION)
                                                                                
Equity price risk(1).............         300             (200)         (200)          --      (100)
Interest rate risk...............          --               --          (400)          --      (400)
Foreign exchange risk(2).........        (100)             100           300           --       300


---------------

(1) Amounts do not take into account the Allianz Group's unconsolidated
    subsidiaries, or affiliated enterprises, joint ventures and associated
    enterprises.

(2) Amounts take into account financial instruments not denominated in euros.

(3) Includes Dresdner Bank.

Non-Trading Portfolios

     The Group's remaining portfolios contain all non-trading activities of the
banking segment as well as the financial investments of the insurance segment.
The Group holds and uses many

                                       127


different financial instruments in managing its businesses. Grouped according to
risk category, the following are the most significant assets according to their
fair values:

     - equity price risk: common shares and preferred shares;

     - interest rate risk: bonds, loans and mortgages; and

     - foreign exchange rate risk: non-euro denominated equities and interest
       rate risk sensitive assets.

     Insurance Segment.  The insurance segment's non-trading portfolio is
exposed to foreign exchange risk because some of its assets are denominated in
currencies other than the euro. If non-euro foreign exchange rates decline
against the euro, the fair values of the corresponding assets would also
decline. The insurance segment's primary exposures for foreign exchange risk are
for the U.S. dollar, Swiss franc and the Korean won. Local laws generally
require that the insurance policy obligations of Allianz AG's subsidiaries and
the investments covering them must be in the same currency. As a result,
currency fluctuations in connection with foreign subsidiaries have only a minor
impact on the insurance segment's risk management strategies.

     The decline in the equity price risk in 2002 was due to the overall decline
in stock prices. Most of the Group's insurance-related equity investments are
intended to be held for the long term. The equity holdings are primarily in the
euro zone equity markets of Germany, France and Italy, with significant
additional exposures in the U.S., Swiss and U.K. markets.

     The insurance segment is exposed to interest rate risk due to its
investments in fixed-income instruments, in particular bonds, loans and
mortgages. The primary exposures for interest rate sensitivity securities are
for bonds, loans and mortgages held by Allianz AG's German, French, U.S.,
Italian and Swiss subsidiaries.

     Banking Segment.  The Allianz Group's banking operations are subject to
currency risk on all non-euro loans and deposits. For non-trading activities, it
is the Group's policy that all loans and deposits in foreign currencies be
funded and reinvested in the same currency and with matching maturities. Any
residual currency risk in non-trading portfolios results primarily from
developments in results of affiliated companies outside of the euro-zone during
the year.

     The non-trading portfolio of the banking segment with respect to interest
rate risk includes all loans and deposits, issued securities, interest
rate-related investment securities as well as corresponding hedges of Dresdner
Bank. Market risk associated with these positions is primarily interest rate
risk resulting from long-term fixed rate loans, which are funded in part by
short-term deposits. On the bank's non-trading books, interest rate derivatives
are used to hedge risk associated with fixed rate loans. For this purpose, the
bank primarily uses interest rate swaps. Futures and options are also used for
asset and liability management in the non-trading activities, albeit to a
significantly smaller degree. The Group also uses swaptions to hedge risk
arising from a borrower's prepayment options under some loan agreements. A small
volume of equity derivatives is held due to investments in shares from
affiliated and non-affiliated companies.

     Most of the Group's equity investments are intended to be held for long
term. Equity holdings in the banking segment are primarily in the German market.
The following table shows a sensitivity analysis of the market risk in the
Group's material non-trading portfolios. Certain financial instruments are
included in more than one risk category because they may be affected by changes
in more than one parameter.

    SENSITIVITY ANALYSIS BY BUSINESS SEGMENT AND RISK CATEGORY: NON-TRADING
                                   PORTFOLIOS



                                                        AT DECEMBER 31, 2002
                                  ----------------------------------------------------------------
                                  PROPERTY-CASUALTY   LIFE/HEALTH               ASSET
                                      INSURANCE        INSURANCE    BANKING   MANAGEMENT    TOTAL
                                  -----------------   -----------   -------   ----------   -------
                                                           (E IN MILLION)
                                                                            
Equity price risk(1)............       (4,400)          (5,200)     (1,000)        --      (10,600)
Interest rate risk..............       (2,500)          (9,800)       (400)      (100)     (12,800)
Foreign exchange risk(2)........       (2,700)          (3,800)         --         --       (6,500)


                                       128




                                                       AT DECEMBER 31, 2001
                                -------------------------------------------------------------------
                                PROPERTY-CASUALTY   LIFE/HEALTH                  ASSET
                                    INSURANCE        INSURANCE    BANKING(3)   MANAGEMENT    TOTAL
                                -----------------   -----------   ----------   ----------   -------
                                                          (E IN MILLION)
                                                                             
Equity price risk(1)..........       (5,900)          (7,600)       (2,800)       (100)     (16,400)
Interest rate risk............       (2,400)          (8,500)         (400)       (200)     (11,500)
Foreign exchange risk(2)......       (2,600)          (2,600)           --          --       (5,200)


---------------

(1) Amounts do not take into account unconsolidated affiliated enterprises,
    joint ventures and associated enterprises of the Allianz Group.

(2) Amounts take into account financial instruments in foreign currency.

(3) Includes Dresdner Bank.

Operational Risks

     Operational Risks.  Operational risks are risks caused by inadequacies or
faults in business processes or controls. These may be related to technical
problems or employees, operational structures or external influences. The
Allianz Group seeks to minimize such risks by installing a comprehensive system
of internal controls and security systems in each operating unit. Operational
risks are limited by a wide range of technical and organizational measures such
as redundant hardware configurations, communications equipment and systems,
back-up computing facilities, and data backups to maintain IT capability in
emergencies. In addition, procedures are in place for safeguarding the
confidentiality and integrity of stored data and information. For this purpose,
high-performance firewall systems were introduced to protect the IT network
against external interference along with access authorization procedures,
supervision and control processes. The principle of dual control is adhered to
in the case of operating procedures. The purpose of these measures is to ensure
and document an adequate standard for Group-internal processes.

     Legal Risks.  Legal risks result from contractual agreements or legal
frameworks. They include risks from the adoption of new statutory regulations,
disadvantageous amendments to existing legislation or regulations or prejudicial
changes in their interpretation. Legal risks also take into account the
possibility that contractual agreements may not be enforceable through legal
action or court proceedings. The limitation of legal risks is an important task
of the Group's Legal Department. This is done, for example, by using
internationally recognized standard documentation and, if necessary, by
obtaining legal opinions. Contracts for established products are continuously
reviewed to include any amendments required by changes in legislation or
jurisdiction. In addition, the Group's Legal Department assists Group companies
in matters pertaining to business transactions and contractual negotiations to
ensure compliance with minimum standards. It also supports the management and
supervisory bodies of Allianz in meeting their statutory obligations.

Risk Monitoring by Third Parties

     Supervisory authorities and rating agencies are additional risk monitoring
bodies. Supervisory authorities specify the minimum precautions that must be
taken in individual countries and at the international level. Rating agencies
determine the relationship between the required risk capital of a company and
the available safeguards. In their evaluation of capital resources, the rating
agencies include equity shown in the balance sheet, minority interests and other
items representing additional securities in times of crisis. In addition to
capital resources, the rating process also takes into account elements such as,
the strategic position of the company in individual business areas and markets
as well as its medium-term business prospects.

REGULATION AND SUPERVISION

GENERAL

     The insurance, banking and asset management businesses of the Allianz Group
are subject to detailed, comprehensive regulation and supervision in all the
countries in which the Allianz Group does business. In addition, certain EU
regulations and directives implemented through local legislation in EU member
states, have had and will continue to have a significant impact on

                                       129


the regulation of the insurance, banking and asset management industries in EU
member states, including those in which many of out most important flagship
operations are located, such as Germany, France, Italy and the United Kingdom.
The following discussion addresses significant aspects of the regulatory schemes
in these countries.

ALLIANZ AG

     The Allianz AG operates as a reinsurer and holding company for the Group's
insurance, banking and asset management operating entities and, as such, is
supervised and regulated by the BaFin. The BaFin was established on May 1, 2002.
The creation of the BaFin consolidates the functions of the former offices for
banking supervision (the "Bundesaufsichtsamt fur das Kreditwesen"), insurance
supervision (the Bundesaufsichtsamt fur das Versicherungswesen) and securities
supervision (the Bundesaufsichtsamt fur den Wertpapierhandel) into a single
federal regulatory authority. The BaFin monitors and enforces regulatory
standards for banks, financial services institutions and insurance companies by
supervising their activities in the financial markets and performing functions
relating to consumer protection. The BaFin is a federal institution governed by
public law that belongs to the portfolio of the German Federal Ministry of
Finance.

     The Allianz AG is not required to be licensed as a reinsurance company in
Germany. In July 2002, the German Insurance Supervision Act (the
Versicherungsaufsichtsgesetz), which used to provide only for indirect
supervision of reinsurance companies, was amended to extend the BaFin's right to
direct supervision. The BaFin is entitled to monitor whether the management of a
reinsurance company is of good repute and meets certain standards of
professional competence as well as whether the holders of qualified
participating interests in the reinsurance company are of good repute.
Previously, the BaFin already had the power to give orders to request
information. With the amendment in July 2002, the BaFin's power has been
significantly expanded. The BaFin is explicitly entitled to take administrative
action to ensure that a reinsurance company operates in compliance with
applicable laws and that it is able to meet its reinsurance liabilities.
Beginning January 1, 2005, additional restrictions will apply to investments
held to cover reinsurance reserves. Reinsurance activities continue to be
regulated indirectly through the supervision of reinsurance programs submitted
by direct insurers. The BaFin also reviews transactions between the Allianz AG
and its subsidiaries, including reinsurance relationships and cost sharing
agreements.

     In addition, the Allianz AG is subject to regulation as a reinsurance
company and is required to submit internal annual reports, including certain
accounting documents, and internal quarterly reports regarding to its
investments to the BaFin.

GROUP REGULATION

     Under German law based on an EU directive on supplementary supervision of
insurance groups, insurance companies that are members of an insurance group as
defined by law are subject to additional regulatory requirements. The additional
regulation includes the following three components: (i) the supervision of
intra-group transactions, (ii) the monitoring of the adjusted solvency, i.e. on
a consolidated basis, and (iii) the establishment of appropriate internal
controls for providing the BaFin with information as part of its monitoring of
the first two components. The most important intra-group transactions must be
reported to the BaFin annually; intra-group transactions endangering the
solvency of an insurance company subject to supervision must be reported
immediately. The law requires that the insurance group calculate the capital
needed to meet the respective solvency requirements for the insurance group on a
consolidated basis. IFRS accounting may be used as a basis for the calculation.
Similar group solvency requirements are required to be fulfilled by the local
parent companies of insurance subsidiary groups in the different EU
jurisdictions.

     Regarding the banking sector, the credit institutions directive of 2000,
consolidating certain older directives, and the capital adequacy directive of
1993 also provide for capital requirements on a consolidated basis. They define,
among other things, the capital requirements needed to ensure sufficient capital
to cover, also on a consolidated basis, the bank's market and credit risks
associated with banking and trading book activities. The directives have been
implemented into

                                       130


German law. With respect to the Allianz Group, Dresdner Bank is responsible for
the capital requirements of the companies within the banking sector.

FINANCIAL CONGLOMERATES

     In December 2002, the EU adopted a directive that provides for assessment
of the capital requirements of a financial conglomerate on the group level,
supervision of risk concentration and intra-group transactions and prevention of
double-leveraging of the capital of the holding or parent company, i.e. once in
the holding or parent company and a second time in the subsidiary ("double
gearing"). The Allianz Group is a financial conglomerate within the scope of
this directive. The EU member states are required to implement this directive
into national law for the fiscal year beginning on or after January 1, 2005.

     In the United States, the Gramm-Leach-Bliley Financial Modernization Act of
1999 substantially eliminates barriers separating the banking, insurance and
securities industries in the United States. The legislation allows the formation
of diversified financial services firms that can provide a broad array of
financial products and services to their customers. In addition, the legislation
permits insurers and other financial services companies to acquire banks.

INSURANCE

European Union

     Under the Treaty of Rome of 1957, Germany and the other EU member states
are required to implement EU legislation into domestic law and to take EU
legislation into account in applying domestic law. EU legislation can take
several forms. If legislation takes the form of a EU regulation, the regulation
is directly applicable as binding law in all member states. If legislation takes
the form of a EU directive, the directive creates an obligation for the member
states to implement and transpose the directive into their national legal
systems. In addition, certain directives include "self-executing" features that
are directly binding on member states, although the directives still require
formal implementation into national legislation.

     Since 1973, the EU has adopted a series of insurance directives on life
insurance and direct insurance other than life insurance. These directives have
been implemented in Germany, France, Italy, the United Kingdom, Austria and the
other EU jurisdictions through national legislation and have resulted in
significant deregulation of the EU insurance markets. The directives are based
on the general principles of freedom of branch operations, freedom of provision
of services and home country control. Under the directives, the regulation of
insurance companies, including insurance operations outside their respective
home countries (whether direct or through branches), is the responsibility of
the home country insurance regulatory authority. In particular, the home country
insurance regulatory authority is responsible for monitoring compliance with
applicable regulations, the solvency and actuarial reserves of insurers and the
assets supporting those reserves.

     As a result of the home country control principle, the EU insurance
directives generally permit an insurance company licensed in any jurisdiction of
the EU to conduct insurance activities, directly or through branches, in all
other jurisdictions of the EU, without being subject to additional licensing
requirements. Under the EU insurance directives, there is no authorization
procedure to regulate insurance terms and conditions or tariffs. Insurers are
required to submit reports to the regulatory authorities in jurisdictions
outside their home country regarding the management, qualifying shareholders,
and other matters such as general and specific policy terms and conditions,
premiums and technical reserves.

     Insurance selling activities are generally regulated by the regulatory
authorities in the country in which the sale of the insurance product takes
place. In December 2002 a new EU directive on insurance mediation became
effective. Under this directive, insurance and reinsurance intermediaries,
including ancillary intermediaries, are required to register in their home
member state and to possess appropriate knowledge and ability, as determined by
their home member state. Member states are required to implement this directive
effective January 15, 2005. The impact of the new directive on Allianz Group
companies in EU member states depends on how the directive will be implemented
by the member states. Consequently, the Allianz Group cannot assess the
potential impact of the directive.

                                       131


     The EU insurance directives generally prohibit an insurance company from
conducting both non-life and life insurance activities. However, life insurance
companies that conducted non-life insurance activities in EU member states prior
to March 15, 1979, including some of Allianz Group's subsidiaries, may continue
to conduct these activities without restriction. In addition, member states may
permit life insurance companies to write personal accident and health insurance
policies, or insurance companies authorized to write personal accident and
health insurance policies to write life insurance policies.

Germany

     General

     German insurance companies, including the companies in the Allianz' German
Property-Casualty Group, the Group's credit insurance companies, life insurance
companies and health insurance companies, are subject to a comprehensive system
of regulation under the German Insurance Supervision Act. The BaFin monitors and
enforces compliance with German insurance laws, applicable accounting standards,
technical administrative regulations, and investment and solvency provisions.
Any change in the articles of association (except changes regarding capital
increases) and all material changes in the business plan of a German insurance
company must be approved, and the books and records of German insurance
companies are subject to examination at any time, by the BaFin.

     Under the Insurance Supervision Act, German insurance companies are subject
to detailed requirements with respect to the administration of their assets and
liabilities. In general, the actuarial and claims reserves of each insurer must
be adequate to allow the insurer to fulfill its contractual commitments to pay
upon receipt of claims. Toward this end, insurers must maintain a solvency
margin (own funds) equal to the minimum solvency margin. One third of the
minimum solvency margin constitutes the guarantee fund. If the solvency margin
falls below the minimum solvency margin, the BaFin may request that the company
submits a plan for restoring its sound financial position; under exceptional
circumstances, the BaFin may restrict or prohibit the free disposal of the
assets. If the solvency margin of an insurance company falls below the guarantee
fund, at the request of the BaFin, the insurance company must submit a plan
detailing how the company will promptly obtain the necessary solvency margin; in
this case, the BaFin may with no further requirements limit or prohibit the
disposal of the insurer's assets. German property-casualty insurance companies
are also required to establish claims equalization reserves according to
established actuarial rules. These claims equalization reserves are intended to
level out fluctuating claims requirements over the course of time. German
regulation law requires that insurers maintain assets equal to the sum of
technical reserves, regarding life insurers including mathematical provisions,
and of liabilities and deferrals under insurance contracts ("gebundenes
Vermogen") and that they invest these assets in accordance with certain
standards. German law limits the proportion of the assets which German insurers
may invest in certain categories of investments and imposes restrictions with
respect to particular investments. A regulation issued by the German Federal
Government provides for detailed investment rules.

     New insurance products and policies may be offered in Germany without prior
approval of the BaFin. Insurers must file a description of new products and
policies, and the BaFin may require the modification of terms and conditions or
the withdrawal from the market or modification of any contract that does not
comply with applicable laws and regulations. In addition, the terms of all
health insurance policies are subject to particular consumer protection and
other legislation.

     Life Insurance

     Under German law, German life insurance companies are required, after
receiving the authorization to conduct a life insurance business, to notify the
BaFin of the principles they use to set premium rates and establish actuarial
provisions, and of any intention to alter or amend these principles. German life
insurance companies are also required to appoint a chief actuary responsible for
reviewing and ensuring the appropriateness of actuarial calculation methods.
Prior to the appointment, the insurer must provide the BaFin with the name of
the actuary. Before and after the appointment, the BaFin is entitled to request
that the insurer appoint another

                                       132


actuary if the BaFin has doubts as to the professional qualifications of the
appointed actuary. In case the second appointee does not meet the professional
requirements, or the insurer does not appoint another actuary, the BaFin itself
may appoint an appropriate actuary.

     Additional restrictions apply to the investment of German life insurance
company assets. The BaFin closely monitors the calculation of actuarial reserves
and the allocation of assets covering actuarial reserves. Assets covering
actuarial reserves are also monitored by an independent trustee. The rules
governing the appointment of the trustee are similar to those governing the
appointment of the actuary. The BaFin may issue supplemental instructions to an
insurer if deemed necessary to safeguard the interests of policyholders.

     Amounts payable to policyholders at the maturity of endowment policies
underwritten by German life insurance companies include a "guaranteed benefit,"
an amount that, in practice, is equal to a legally mandated maximum rate of
return on actuarial reserves. This rate is currently 3.25% per year for policies
issued on or after July 1, 2000 and with euro as applicable currency. For
policies issued through June 30, 2000, the maximum rate of return is 4.0% per
annum. For policies issued prior to 1995, the maximum rate is 3.5% or 3.0%,
depending on the generation of tariff. On policies written through 1994, German
life insurance companies are obliged by regulations to allocate for the benefit
of policyholders at least 90% of their annual surplus. In 1994 and 1996, the
laws and the regulations, respectively, were modified, and on policies written
since June 30, 1994 and thereafter, German life insurance companies are obliged
by the modified regulations to allocate for the benefit of policyholders at
least 90% of their net interest yield on assets corresponding to technical
reserves. In addition, holders of policies written after June 30, 1994 are
entitled to participate in "appropriate amounts" of profit from sources other
than assets, mainly from earnings related to risk management and cost
management. The amount required to be allocated to policyholders may be used to
directly increase a policyholder's profit participation or to contribute to the
policyholder's profit reserve. In general, the amount contributed to the
policyholder's profit reserve may be used only for the policyholder's profit
participation. In the event of an overall loss and to avoid an emergency
situation, the insurer may use parts of the policyholder profit reserve to cover
the loss with the approval of the BaFin if doing so is in the interest of the
policyholders. The profit reserve is accordingly included in the calculation of
the life insurer's solvency margin. The respective determinations and
calculations are based on German statutory accounting principles. These
statutory accounting principles were amended on March 26, 2002, with respect to
impairment charges for equity, investment funds and other fixed-interest rate
and non-fixed-interest rate securities. This amendment has a stabilizing effect
on statutory profits and profit participation.

     The Retirement Savings Act (the Altersvermogensgesetz), which is intended
to reform the pension system in Germany, took effect on January 1, 2002. This
act provides for state subsidies, in the form of either direct subsidies or,
under certain circumstances, tax benefits. The prerequisite for state subsidies
is that the underlying products contain certain characteristics entitled to
certification by the BaFin. The main characteristic is that at least the amount
that has been paid in premiums is available at maturity and that life-long
benefit payments be guaranteed. Administration costs of the certified products
may be high due to the complex state subsidy process. The Retirement Savings Act
also intends to foster company old-age provision. As of January 1, 2002,
employees are entitled by law to request that parts of their compensation be
converted into company old-age provision. In addition to the already existing
pension schemes, ("Pensionskassen") the new law and the regulations promulgated
thereunder permit the establishment of pension schemes for employees within
separate legal entities ("Pensionsfonds"), as new means of company old-age
provision, which are treated as life insurers under the German Insurance
Supervisory Act. Both Pensionskassen and Pensionsfonds are supervised by the
BaFin.

     Health Insurance

     The Allianz Group offers "substitutive" health insurance products in
Germany designed to partially or totally replace statutory public health
insurance coverage. The Allianz Group also offers products intended to
supplement both the statutory and substitutive schemes. These products are
subject to detailed regulations designed to protect policyholders.

     In general, the core products of German health insurance companies,
including comprehensive health insurance, daily sickness and hospital daily
allowance insurance, are regulated by the

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BaFin. German law also requires that private health insurance companies offer
certain kinds of health insurance, including private compulsory long-term care
insurance, to policyholders with substitutive health insurance.

     German health insurance companies are required to appoint and register a
chief actuary and an independent trustee with the BaFin. Premiums are calculated
in accordance with established actuarial and legal principles and are required
to provide an adequate reserve for the increased likelihood of poor health in
old age. Health insurance policies may provide for premium increases to cover
inflation and the increased costs of medical treatment and other developments.
However, any such adjustments must be approved by an independent trustee.

     Since the beginning of 2000, Allianz Private Health has also been required
by law to allocate to its policyholders 90% of interest surplus, which is a
component of statutory profits. Like endowment and other life insurance
products, health insurance products include mandatory profit-sharing features,
whereby Allianz Private Health, like any other German private health insurer,
returns 80% of the statutory profit on its health business, after the payment of
claims and claims costs, the establishment of reserves, payment of taxes and
other expenses, to policyholders annually, generally in the form of premium
subsidies or rebates. These serve to limit premium increases for policyholders
in higher age brackets. As with the Group's endowment policies in Germany, the
actual level of profit sharing the Group provides its policyholders is, for
competitive reasons, in excess of the statutory minimum and has been between 85%
and 90% of statutory profits in recent years.

     In January 2003, the specific income threshold for German statutory health
insurance coverage was raised by the German legislator in order to stabilize and
maintain the statutory healthcare system. As a consequence, the number of
individuals who are able to choose protection under the private healthcare
system may decrease. While this measure may reduce new business for full private
health coverage for salaried employees, it may also create new business
opportunities for supplementary insurance for individuals insured under
statutory health insurance plans. Further changes to the German healthcare
system are currently being considered, in particular with a view to reducing its
costs. Enactment into law of any such changes may have an impact on private
health insurance providers, as the amount of new business written under full
private health coverage may further decrease.

France

     The activities of French insurance companies including AGF are governed by
the French Insurance Code and licensed and supervised by the French Ministry of
the Economy and the Commission de Controle des Assurances (or the "Insurance
Commission"). The Insurance Commission is an independent administrative
authority that supervises the financial position and solvency of French
insurance companies and their compliance with applicable insurance regulations,
including statutory accounting principles and financial and technical management
regulations. According to a proposed law concerning financial security, the
Insurance Commission shall be replaced by the Commission de Controle des
Assurances, des Mutuelles et des Institutions de Prevoyance with the same
functions. French insurers are required to make periodic filings of financial,
accounting and statistical statements with the Insurance Commission. Any change
in the articles of association of French insurance companies must also be
approved by the Insurance Commission. The Insurance Commission may examine the
accounts of French insurance companies at any time. French insurance companies
may not engage on an ongoing basis in any commercial activity other than that of
providing insurance coverage and directly related activities.

     French insurance companies are subject to a number of requirements with
respect to the administration of their assets and liabilities. With respect to
liabilities, actuarial and claims reserves must be adequate to allow the insurer
to fulfill contractual commitments to pay claims upon receipt. French law also
prescribes compliance with a minimum solvency margin and requires insurance
companies to make contributions to certain state-administered guarantee funds.
French insurance companies may invest assets that support actuarial and claims
reserves generally only in debt securities, equity securities and shares of
mutual funds, real estate, mortgage loans, certain government-guaranteed loans
and certain other loans and deposits.

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French law limits the proportion of assets that French insurers may invest in
certain categories of investments and imposes restrictions with respect to
particular investments.

     French life insurers are obligated by law to allocate for the benefit of
policyholders (other than holders of contracts supported by separate accounts
and term policies) at least 85% of annual investment results on assets
attributable to such policyholders, plus at least 90% of other profits. Amounts
allocated must be credited to policyholders within eight years but otherwise can
be credited at the insurer's discretion. The allocation generally takes the form
of an increase in guaranteed benefits but may also take the form of a reduction
of future premiums.

     New insurance products and policies may be offered in France by either a
French or foreign insurer without obtaining prior approval. However, the
Ministry of the Economy may require submission of contracts or advertising
materials relating to the insurance business. The Ministry of the Economy may
also require the withdrawal from the market or the modification of any contract
or advertising material which, in its judgment, does not comply with applicable
laws and regulations.

Italy

     Italian insurance companies including the Group's major subsidiaries RAS
and Lloyd Adriatico are subject to a comprehensive regulatory scheme contained
in the Supervision of Insurance Act and supplemented by numerous other
regulations and ordinances. These laws and regulations regulate access to
insurance activities, require the maintenance of certain solvency margins, in
part through a guarantee fund, determine the form of financial statements for
insurance concerns and regulate the activities of insurance intermediaries.

     The activities of Italian insurance companies, insurance agents and brokers
are regulated by the Institute for the Supervision of Private and Public
Interest Insurance, known by its Italian acronym "ISVAP." ISVAP grants
authorization to companies to conduct insurance activities. ISVAP is also
responsible for the supervision of the financial management of Italian insurance
companies. In addition, ISVAP has the authority to propose disciplinary
measures, including the revocation of authorizations, which may ultimately be
taken by the Ministry of Industry. ISVAP has the power to request information
from insurance companies, conduct audits of their activities and question their
legal representatives, managing directors and statutory auditors and convene
shareholders, directors and statutory auditors meetings in order to propose
measures necessary to conform the management of insurance companies to legal
requirements. Insurance companies having their registered offices in Italy must
receive prior authorization by ISVAP in order to operate life or non-life
insurance activities.

     All Italian insurance companies are required to maintain adequate technical
reserves in respect of each insurance contract. ISVAP determines the interest
rate for calculation of required life reserves. Italian law also establishes
maximum limits on the amount of reserves that may be invested in any particular
category of investments. ISVAP may establish stricter limits under some
circumstances. In addition, ISVAP may prohibit companies that do not comply with
reserve requirements from disposing of their assets located in Italy and from
accepting new business.

     Italian insurance companies are required to observe a minimum solvency
margin calculated in accordance with a formula that varies depending on the
types of insurance that they underwrite. In cases where the solvency margin is
less than the guarantee fund, ISVAP may require a company to prepare and
implement a short-term financing plan in order to bring it into compliance with
the applicable requirements, or may prohibit a company from disposing of its
assets.

     In July 2000, the Italian antitrust authority imposed fines totaling E361
million on several insurance companies because of alleged coordination of
activities through sharing of information in automobile liability insurance in
previous years. The Italian subsidiaries of the Allianz Group have been
assessed, and have paid, E83 million of this fine. In February 2002, the fine
was upheld by the Italian State Council, the highest administrative court in
Italy.

Switzerland

     Swiss insurance companies including the Group's Swiss subsidiaries must be
licensed by the Swiss Federal Department of Justice and Police and are subject
to the supervision of the Swiss Federal Office of Private Insurance. A separate
authorization is required for each separate

                                       135


line of insurance business conducted in Switzerland. Although Switzerland is not
a member state of the EU and is not subject to the EU insurance directives,
Swiss insurance regulation is generally consistent with regulation in the EU.

     The Federal Office of Private Insurance monitors the compliance of Swiss
insurance companies with requirements relating to solvency, minimum capital,
reserve building and assets and may conduct audits at any time. The Federal
Office of Private Insurance also fixes the interest rate for calculation of
required life insurance company reserves. Swiss life and health insurance
companies are required to file tariffs and contract conditions with the Federal
Office of Private Insurance.

United Kingdom

     Insurance companies in the United Kingdom are regulated under the Financial
Services and Markets Act 2000 ("FSMA"). The FSMA provides the framework for the
regulation of all business activities within the financial services sector in
the United Kingdom, including life insurance and general insurance companies
such as the Group's subsidiary Allianz Cornhill. The FSMA took effect on
December 1, 2001 and provides that no firm may carry on a regulated activity in
the United Kingdom in the insurance, securities, banking or pension sectors,
unless it has been authorized to do so under the FSMA or exempted from it. The
Financial Services Authority (or "FSA") has been created as a single regulator
for the insurance, securities, banking and pension sectors in the United
Kingdom. The FSA enforces detailed requirements that firms have to meet in order
to receive authorization, including requirements relating to minimum capital,
internal governance systems and risk control, and the suitability of management
and controlling shareholders. A self-regulatory body known as the General
Insurance Standards Council (or "GISC") has also been established to ensure
compliance by general insurance companies with applicable codes of business
conduct. The Treasury has announced that the FSA will assume statutory
responsibility for the conduct of the sale of general insurance by
intermediaries and insurance companies from October 2004. Accordingly, self
regulation by the GISC will cease at that time. The FSA also establishes the
conditions on which the home country principle is implemented with respect to
insurance, securities and banking, granting a European financial services
"passport."

     All insurance companies in the United Kingdom must submit to the FSA annual
and, in some cases, quarterly returns together with audited accounts. These
returns must include a certificate as to whether domestic assets are sufficient
to cover domestic liabilities, and are subject to examination by the FSA. An
annual assessment for the protection of UK policyholders is imposed on all
insurance companies underwriting life and general business.

     Policyholder protection exists through two bodies, the Financial Services
Compensation Scheme ("FSCS") and the Motor Insurance Bureau ("MIB"). The FSCS
provides policyholders with a level of protection against insurance company
insolvency. The protection covers all types of property and casualty insurance.
The MIB provides coverage for victims of automobile accidents where there is no
(or inadequate) insurance coverage. FSCS and MIB are funded by means of levies
on insurance companies.

     Insurance companies in the United Kingdom may only market products in
conformity with classes authorized by the FSA.

     In some areas, UK regulations establish customer information rights that
exceed the disclosure standards mandated by the relevant EU directives.
Regulations that came into effect on October 1, 1999 enable policyholders who
are consumers to challenge the terms of policies which they claim are unfair or
unclear. The Office of Fair Trading and certain consumer groups are empowered to
enforce these regulations by requiring revised contracts when the terms of
existing contracts appear to contravene the regulations.

United States

     The insurance subsidiaries of the Allianz Group in the United States are
subject to comprehensive and detailed regulation of their activities under U.S.
state and federal laws.

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     U.S. property-casualty and life insurance companies are subject to
insurance regulation and supervision in the individual states in which they
transact business. Supervisory agencies in various states have broad powers to
grant or revoke licenses to transact business, regulate trade practices, license
agents, approve insurance policy terms and certain premium rates, set standards
of solvency and reserve requirements, determine the form and content of required
financial reports, examine insurance companies and prescribe the type,
concentration, and amount of investments permitted. Insurance companies are
subject to a mandatory audit every three to five years by state regulatory
authorities, depending on the state of domicile, and every year by independent
auditors.

     U.S. property-casualty and life insurers are also subject to risk based
capital ("RBC") guidelines, which provide a method to measure the adjusted
capital (statutory capital and surplus plus other adjustments) that insurance
companies should have for regulatory purposes, taking into account the risk
characteristics of the company's investments and products. The RBC requirements
establish capital requirements for four categories of risk: asset risk,
insurance risk, interest rate risk and business risk. For each category, the
capital requirement is determined by applying factors to various asset, premium
and reserve items, with the factors being higher for those items with greater
underlying risk and lower for less risky items. An insurance company's RBC ratio
will vary over time depending upon many factors, including its earnings, the mix
of assets in its investment portfolio, the nature of the products it sells and
its rate of sales growth, as well as changes in the RBC formulas required by
regulators. The RBC guidelines are intended to be a regulatory tool only, and
are not intended as a means to rank insurers generally. Each of the Group's U.S.
insurance subsidiaries met its statutory minimum RBC ratios at December 31,
2002.

     Although the federal government generally does not directly regulate the
insurance business, many federal laws affect the insurance business in a variety
of ways. In November 2002, the Terrorism Risk Insurance Act was signed into law.
This legislation requires insurers to offer coverage for terrorist acts in their
commercial property and casualty insurance policies and it establishes a federal
program to reimburse insurers for a portion of losses so insured. These
mandatory rules have implications for Allianz Group companies doing business in
the United States. In addition, the U.S. subsidiaries are subject to the
restrictions on fund transfers and other activities under the USA PATRIOT Act of
2001, which, although it affects primarily the banking and investment services
subsidiaries, also applies to the insurance subsidiaries. On September 18, 2002,
the Treasury Department issued proposed rules regarding Section 352 of the USA
PATRIOT Act, requiring financial institutions to establish anti-money laundering
programs. In the proposed rules, application of this provision to insurers has
been limited to life insurers, annuity issuers and any other insurance product
with investment features similar to life insurance. According to an interim rule
released by the Treasury Department on October 25, 2002, other insurance and
financial services companies are exempted from the requirement to establish
anti-money laundering programs until final rules have been issued. The
publication of final rules is expected in the first half of 2003. The Group's
U.S. life insurance subsidiaries have implemented programs to comply with
applicable Treasury rules. The Treasury Department has postponed the adoption of
rules related to the customer identification provision of Section 326 of the USA
PATRIOT Act. However, all financial institutions are required to scan their
customers for potential matches to the list of Specially Designated Nationals
issued by the Office of Foreign Assets Control.

     There are a number of proposals for regulation which may significantly
affect the U.S. market, such as the establishment of an optional federal charter
for insurance and reinsurance companies, employee benefit regulations,
establishment of a federal registry for asbestos claims subject to compensation
limits, and the taxation of insurance companies and their products. These
initiatives are mostly in a preliminary stage and, consequently, the Allianz
Group cannot assess their potential impact at this time.

Other Countries

     The insurance operations of the Allianz Group in countries other than those
discussed above are also subject to detailed regulation and supervision by
authorities in the relevant jurisdictions, including with respect to such
matters as policy forms and rates, reserving, investment and financial
practices, and marketing, distribution and sales activities.

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BANKING, ASSET MANAGEMENT AND INVESTMENT SERVICES

European Union

     The supervision of banking, asset management and investment services in the
member states of the European Union is the exclusive responsibility of national
authorities within the individual member states. However, the rules governing
the regulation and supervision of these financial services have been harmonized
by a number of EU directives, which have been implemented in the member states.
These directives mostly focus on establishing harmonized minimum capital
requirements and the freedom to provide services within the member states. As a
result of this harmonization, banking licenses granted in one EU member state
are recognized in all other member states.

     Under the EU investment services directive, member states have to ensure
that financial institutions that are members of a securities exchange in one
member state are eligible for admission to trading on the exchanges of all other
member states. Moreover, the investment services directive provides for certain
rules of conduct and organizational requirements for financial institutions.

     Another field of harmonization which is of importance for financial
institutions is securities trading. The EU directive on offering prospectuses
provides for harmonized rules with respect to the contents and filing of
prospectuses for publicly traded securities. Another directive harmonizes the
rules for disclosure of financial and other information that publicly traded
companies have to provide. The insider trading directive sets forth certain
rules for securities trading by corporate insiders. There are also EU directives
harmonizing rules governing investment fund management and investor protection.

Germany

     The banking and other financial services activities of the Allianz Group in
Germany are extensively supervised and regulated by the BaFin.

     Banking

     Engaging in the banking business requires the authorization by the BaFin.
Banking activities include, among others, deposit and lending activities, safe
custody activities, checking account and e-money activities as well as
underwriting activities. Enterprises engaged in banking business are formally
referred to as credit institutions (Kreditinstitute).

     All banks in Germany, including Dresdner Bank, are subject to comprehensive
governmental supervision and regulation, also on a consolidated basis, by the
BaFin in accordance with the German Banking Act (Kreditwesengesetz, or the
"German Banking Act"). The BaFin is authorized to issue regulations and
guidelines implementing the provisions of the German Banking Act and other laws
affecting German banks. The German Banking Act and the regulations issued
thereunder have been amended over time to implement the recommendations on
banking supervision issued by the Basle Committee on Banking Supervision and the
relevant European Council Directives.

     The BaFin supervises the operations of all banks, including Dresdner Bank,
to ensure that they conduct their business in accordance with the provisions of
the German Banking Act and other applicable German laws and regulations. To this
end, the BaFin is empowered to request information and documentation on business
matters from the banks. The BaFin may conduct on-site inspections without
specific cause. Reports by a bank's auditors have to be submitted to the BaFin
and the Deutsche Bundesbank (the "Bundesbank"), the German central bank. The
contents of the reports are prescribed in a special regulation issued by the
former Bundesaufsichtsamt fur das Kreditwesen (the
"Prufungsberichtsverordnung"). Particular emphasis is placed on compliance with
capital adequacy and liquidity requirements, lending limits and restrictions on
certain activities imposed by the German Banking Act and the regulations
promulgated thereunder.

     Regulation by the Bundesbank

     The BaFin carries out its banking supervision role in close cooperation
with the Deutsche Bundesbank. Although the authority to issue administrative
orders that are binding on specific

                                       138


banks is vested solely with the BaFin, the BaFin must consult with the
Bundesbank before issuing general regulations and must obtain the consent of the
Bundesbank if the regulations affect the Bundesbank. The Bundesbank is
responsible for organizing the collection and analysis of the periodic and other
reports from the banks.

     Capital Adequacy Requirements

     German banking regulation contains certain capital adequacy requirements.
In accordance with what is known as Principle I, each bank's ratio of Liable
Capital to risk-weighted assets and certain off-balance sheet items, as such
terms are defined or described below, must be at least 8% at the end of each
business day in order to cover credit risks. This ratio is known as the Solvency
Ratio.

     Liable Capital of a bank organized as a stock corporation consists
principally of (i) paid-in share capital without preferred stock
(Vorzugsaktien), (ii) capital reserves, (iii) earnings reserves which are
disclosed in the bank's annual balance sheet, (iv) net profits which are shown
in audited interim financial statements and which will not be used for
distribution or the payment of taxes, (v) the fund for general banking risks
pursuant to Section 340g of the German Commercial Code, (vi) capital paid in by
silent partners which meets certain conditions set forth in the German Banking
Act, including subordination to all other creditors and participation in the
bank's losses, (vii) reserves for general banking risks pursuant to Section 340f
of the German Commercial Code, provided that such reserves may not exceed 4% of
the book value of such receivables and securities, (viii) preferred stock, (ix)
capital paid in consideration of profit participation rights
(Genussrechtsverbindlichkeiten) which meets certain conditions set forth in the
German Banking Act, including subordination to all creditors in the case of
insolvency and participation in the bank's losses, (x) long-term subordinated
debt with a term of at least five years meeting certain conditions set forth in
the German Banking Act, including subordination to all creditors in the case of
insolvency, (xi) certain revaluation reserves and (xii) reserves pursuant to
Section 6b of the German Income Tax Act (Einkommensteuergesetz) up to 45%, less
certain positions that are required to be deducted. The capital components set
forth in items (i) through (vi) above, less balance sheet losses, certain
intangible assets (including goodwill) and certain other items, constitute the
core capital. Supplementary Capital is the portion of Liable Capital referred to
in items (vii) through (xii) above. The distinction between Core Capital and
Supplementary Capital reflects the ability of the capital components to cover
losses. Core Capital, with the highest ability to cover losses, corresponds to
Tier I capital, and Supplementary Capital corresponds to Tier II capital as such
terms are used in U.S. capital adequacy rules. The German Banking Act provides
that the aggregate amount of Supplementary Capital must not exceed the Core
Capital. In addition, the sum of long-term subordinated debt must not exceed 50%
of Core Capital. The German Banking Act also requires that certain investments
in banks or financial institutions and certain other items, be deducted in
computing Liable Capital.

     To calculate risk-weighted assets and certain off-balance sheet items, the
assessment basis must first be determined. With respect to risk assets, the
assessment basis is equal to the balance sheet value, adding or deducting
certain items. Further, the assets of a bank are assigned to six broad
categories of relative credit risk depending on the debtor or on the type of
instrument or collateral securing the asset (0%, 10%, 20%, 50%, 70% and 100%),
and the assessment basis of each asset is multiplied by the percentage weight
applicable to its risk category to arrive at the risk-weighted value to be
covered with Liable Capital. With respect to off-balance sheet items, such as
financial guarantees and letters of credit, their value, subsequent to the
determination of their assessment basis, is adjusted according to their risk
classification depending on the type of instrument (20%, 50% and 100%), or, in
the case of swaps and other financial derivatives, according to a
"mark-to-market" method or an original exposure method. After such adjustment,
they are assigned, in the same manner as on-balance sheet assets, to the credit
risk categories multiplied by the applicable percentage weight.

     The German Banking Act also requires market risk and counterparty risk
associated with securities transactions, transactions in derivative products and
foreign exchange transactions of banks to be covered by adequate capital. The
German Banking Act also employs two related concepts: (i) Bank Funds
(Eigenmittel) and (ii) market risk positions. Market risk positions are made up
of overall foreign exchange positions, commodities positions and the trading
book risk positions. For assessing the trading book risk positions, the
distinction between trading transac-

                                       139


tions which are allocated to a bank's trading book (Handelsbuch) and
transactions in commercial banking business which are allocated to a bank's
investment book (Anlagebuch) is important.

     Bank Funds consist of Liable Capital plus Tier III Capital. Tier III
Capital consists of (i) short-term subordinated debt (with a term of at least
two years) that meets certain conditions set forth in the German Banking Act and
(ii) the net profits which would be realized if all positions in the trading
book were matched, if all anticipated expenses and distributions on capital were
deducted and if all losses that would be incurred in the investment book if the
bank were liquidated were deducted. The sum of Tier III Capital plus the portion
of Supplementary Capital that is not required to cover risk positions in the
investment book cannot exceed 250% of the portion of Core Capital that is not
required to cover risk positions in the investment book.

     The trading book of a bank comprises (i) securities, money market
instruments, foreign currency or units of account, derivatives and marketable
claims and participations that are held by the bank for its own account for
resale or trading or that are acquired by the bank with the intent of profiting
in the short term from existing or expected differences between buying and
selling prices or variations in prices or interest rates; (ii) instruments held
and transactions entered into for the purpose of hedging the market risk of the
trading book and transactions to refinance such hedging; (iii) transactions
subject to the designation of the counterparty (Aufgabegeschafte); (iv)
receivables for fees, commissions, interest, dividends and margin payments
related to positions in the trading book; and (v) securities lending, loans or
similar transactions related to positions in the trading book.

     Banks must establish guidelines for the inclusion of transactions in their
trading books, which must be submitted to the BaFin and the Bundesbank. The
investment book of a bank consists of all transactions that are not contained in
the trading book.

     The sum of the risk-weighted values of market risk positions and, under
certain circumstances, separately computed option positions, may not exceed the
difference between Liable Capital and an amount equal to 8% of the risk-weighted
assets increased by the amount of Tier III Capital. This limitation must be
computed daily at the close of business. The risk-weighted values of market risk
positions and option positions must be computed in accordance with rules set
forth in Principle 1 or, in the case of market risk positions, in accordance
with the bank's own risk computation models which have been approved by the
BaFin. The positions allocated to the trading book are risk-weighted according
to market risk (interest rate and equity security price related) and according
to counterparty risk.

     Capital adequacy rules must not only be met by a bank and its banking
subsidiaries on an individual basis, but also by the entire banking group.

     Liquidity Requirements

     The German Banking Act and the regulations issued by the BaFin also contain
liquidity requirements. Each bank must invest its funds in a manner designed to
provide adequate liquidity at all times. Under what is known as Principle II,
banks must compute one liquidity factor and three monitoring factors at the end
of every calendar month. Each factor is the quotient of available funds to
payment obligations for one of four short-term time periods of up to one year.

     Lending and Investment Limits

     The lending activities of banks are restricted in order to avoid high
concentrations of risk. According to the applicable law, lending includes not
only bank loans in the ordinary sense but all items on the asset side of the
balance sheet, derivative transactions (other than written option positions) and
related guarantees and other off-balance sheet positions. A borrower is defined
to include a related group of borrowers consisting of certain related natural or
legal persons or partnerships of the borrower. There are exemptions, and the
limitations on large credits are applied on a risk-weighted basis in a manner
similar to the application of the risk-weighted capital adequacy rules.

                                       140


     The German Banking Act, as it applies to Dresdner Bank as a trading book
institution, distinguishes between investment book lending limits, combined
investment and trading book lending limits, and trading book lending limits. The
limits are as follows:

          (i) A credit constitutes a "large investment book credit" if the sum
     of credits allocated to the investment book extended to any one borrower or
     related group of borrowers, in the aggregate, equals or exceeds 10% of a
     bank's Liable Capital. The bank has to ensure that, without approval of the
     BaFin, no single large investment book credit exceeds 25% of the bank's
     Liable Capital (20% in the case of a bank's unconsolidated affiliate) and
     that the sum of all of a bank's disbursed large investment book credits
     does not exceed eight times the bank's Liable Capital.

          (ii) A credit constitutes a "large combined investment and trading
     book credit" if the sum of credits allocated to both the investment and
     trading books extended to any one borrower or related group of borrowers,
     in the aggregate, equals or exceeds 10% of the bank's Bank Funds. The bank
     has to ensure that, without approval of the BaFin, no single large combined
     investment trading book credit exceeds 25% of the bank's Bank Funds (20% in
     the case of a bank's unconsolidated affiliate) and that the sum of all of a
     bank's disbursed large combined investment trading book credits does not
     exceed eight times the bank's Bank Funds.

          (iii) If a single large combined investment and trading book credit
     exceeds the respective percentage of the bank's Bank Funds set forth in
     (ii) above, the sum of credits extended to any one borrower or related
     group of borrowers that is allocated to the trading book cannot exceed five
     times that portion of the bank's Bank Funds that is not required to cover
     risk positions in the investment book, even with approval of the BaFin.

          (iv) The sum of all portions of single large combined investment and
     trading book credits that exceed the respective percentage of the bank's
     Bank Funds set forth in (ii) above for more than 10 days cannot exceed,
     after deducting the amounts that do not exceed this limit, six times that
     portion of the bank's Bank Funds that is not required to cover risk
     positions in the investment book.

     A bank must report its large credits to the Bundesbank and must notify the
BaFin and the Bundesbank if it exceeds the ceilings set forth above. With the
approval of the BaFin, a bank may exceed the limits set forth in (i) and (ii).
The amount exceeding these ceilings must be covered by Liable Capital and Bank
Funds, respectively. The limits set forth in (iii) and (iv) may generally not be
exceeded. The excess must be reported, and the excessive amount must be covered
by Liable Capital. The amounts of Liable Capital used to cover such excess
amount must be disregarded when computing the adequacy of Liable Capital under
the capital adequacy rules. If the respective percentage ceilings and the eight
times Liable Capital ceiling or Bank Funds ceiling as mentioned in (i) and (ii)
are exceeded, only the larger of both excess amounts must be covered by Liable
Capital and Bank Funds, respectively.

     The provisions of the German Banking Act limiting large credits by a bank
apply also to the aggregate credits extended by members of a banking group. In
order to determine whether members of a banking group in the aggregate have
extended a large credit, all credits extended by members of the group to one
borrower are consolidated and measured against the consolidated Liable Capital
and Bank Funds (including the shares of other shareholders) of the banking
group. Consolidation of credits to one borrower or related group of borrowers is
only required if the individual total credit position from overall business of
at least one member of the banking group to such borrower is equal to or exceeds
5% of such member's Liable Capital.

     Bank Reporting Requirements

     In order to enable the BaFin and the Bundesbank to monitor compliance with
the German Banking Act and other applicable legal requirements and to obtain
information on the financial position of the German banks, the BaFin and the
Bundesbank require the routine periodic filing of information.

     Each bank must file with the BaFin or the Bundesbank, or both, among other
things, the following information: (i) immediate notice of certain personnel and
organizational changes, the extension or increase of large credits, the
acquisition or disposition of 10% or more of the equity

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or voting rights of another company or certain changes in the amount of such
equity investment, and the commencement or termination of certain non-banking
activities; (ii) monthly balance sheet and statistical information and annual
audited unconsolidated and consolidated financial statements; (iii) the
acquisition or disposition of a direct or indirect investment in the bank
representing 10% or more of the equity or voting rights of the bank, whether
held in the shareholder's own interest or in the interest of a third party, or
giving the person making the investment a significant influence over the
management of the bank ("Significant Shareholding"), or an increase or decrease
of a Significant Shareholding which results in the investment reaching or
passing the threshold of 20%, 33% or 50% of such voting rights or equity, as
well as the fact that the bank became or ceased to be a subsidiary of another
enterprise, as soon as the bank has knowledge of such facts; and on an annual
basis, the names and addresses of holders of Significant Shareholdings in the
bank and its foreign subsidiary banks, and the amount of such investment; (iv)
monthly compliance statements with regard to the capital adequacy rules and the
requirements on liquidity; and (v) quarterly statements listing the borrowers to
whom the reporting bank has outstanding loans of E1.5 million or more and
certain information about the amount and the type of the loan, including
syndicated loans exceeding this amount even if the reporting bank's share does
not reach E1.5 million.

     If several banks report to the Bundesbank loans of E1.5 million or more to
the same borrower or to a group of affiliated borrowers, the Bundesbank must
inform the reporting banks of the total reported indebtedness and of the type of
such indebtedness and of the number of reporting lending banks.

     Sanctions for Non-Compliance

     If the BaFin discovers irregularities, it has a wide range of enforcement
powers. The BaFin can exert a direct influence over the management of a bank. If
the Liable Capital of a bank is not adequate or if the liquidity requirements
are not met and the bank has failed to remedy the deficiency within a period
determined by the BaFin, the BaFin may prohibit or restrict the bank's
distribution of profits or extension of credit. These prohibitions also apply to
the parent bank of a banking group if the Bank Funds of the bank members of the
group do not meet the legal requirements.

     If a bank is in danger of defaulting on its obligations to creditors, the
BaFin may take emergency measures to avert default. In this connection, it may,
among other things: (i) issue instructions relating to the management of the
bank; (ii) prohibit the acceptance of deposits and the extension of credit;
(iii) prohibit or restrict management of the bank from carrying on their
functions; and (iv) appoint supervisors. To avoid the insolvency of a bank, the
BaFin has the authority to (i) prohibit payments and disposals of assets, (ii)
suspend customer services and (iii) prohibit the acceptance of payments other
than in payment of debt owed to the bank. Finally, the BaFin may revoke the
bank's license. In addition, violations of the German Banking Act may result in
criminal and administrative penalties.

     Deposit Protection

     In accordance with the German Deposit Guarantee Act (the
Einlagensicherungs- und Anlegerentschadigungsgesetz), the Bundesverband
Deutscher Banken, the association of the German private sector commercial banks,
established a company known as the Compensation Institution
(Entschadigungseinrichtung deutscher Banken GmbH) to carry out and ensure the
deposit guarantee scheme of the German private sector commercial banks. The
Deposit Guarantee Act provides that the aggregate deposits of a given depositor
at a given bank and claims resulting from securities transactions by a customer
with a given bank must each be covered up to 90% of the aggregate amount or
E20,000, whichever is less. Certain creditors, as defined by the German Deposit
Guarantee Act, including other banks, insurance companies, the public sector and
enterprises and persons related to the bank, may not claim compensation. The
deposit guarantees will be funded through contributions by the private sector
commercial banks to the Compensation Institution.

     In addition, the banking industry has voluntarily set up various protection
funds for the protection of depositors. Most private sector commercial banks,
including Dresdner Bank, are members of the Einlagensicherungsfond, a deposit
protection association with a fund which

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covers liabilities to each creditor up to a certain amount. Obligations
vis-a-vis other banks and other persons described by the fund's articles of
association are not covered. Furthermore, the articles of association provide
for certain restrictions not related to specific creditors, but rather to
categories of obligations. Payments from the Einlagensicherungsfond generally
cover the portion of a deposit not already covered by the Compensation
Institution. Members are required to provide certain information to the
association and the Prufungsverband deutscher Banken e.V., an institution for
the auditing of German banks. This auditing institution conducts its own
inspections of banks in order to reduce the risk of failures within the deposit
protection system.

     Furthermore, depositors and other creditors of German banks are protected
by the arrangements in relation to Liquiditats-Konsortialbank GmbH ("LIKO"), a
bank founded in 1974 in order to provide funding for German banks which
experience liquidity problems. The shares in LIKO are owned 30% by the
Bundesbank, with the rest of the shares being held by other German banks and
banking associations. LIKO is funded by its shareholders.

     Mortgage Banks

     Through Dresdner Bank, the Allianz Group holds approximately 28% of the
shares of Eurohypo AG, a mortgage bank. In Germany, mortgage banks are regulated
by a special statute, the German Mortgage Bank Act (Hypothekenbankgesetz), in
addition to the German Banking Act. Under the Mortgage Bank Act, mortgage banks
are authorized to finance themselves through the issuance of mortgage bonds
(Hypothekenpfandbriefe) and public-debt bonds (Kommunalschuldverschreibungen).
These bonds are generally long-term bonds with an original maturity of four
years or longer, the principal and interest of which are at all times required
to be covered by a pool of specified qualifying assets. Mortgage-backed bonds
are backed by mortgage loans extended by the mortgage bank that cover 60% or
less of the market value of the respective real estate property, and public-debt
backed bonds are backed by communal loans extended by the mortgage bank to
German public authorities or entities organized under public law or to member
states of the EU or to the contracting states to the agreement on the European
Economic Area ("EEA"), or which are guaranteed or otherwise secured by such
persons. Separate pools are maintained for the mortgage-backed bonds and for the
public-debt backed bonds. The total amount of mortgage and public-debt bonds
issued by the mortgage bank must be fully covered by mortgages and communal
loans in at least the same total amount and with at least the same interest
earnings. The qualifying assets remain on the mortgage bank's balance sheet. In
case of insolvency proceedings relating to the mortgage bank, the asset pools
constituting cover will be exempt from such proceedings.

     Investment Companies

     In Germany, investment funds are managed by investment companies.
Investment companies are specialized credit institutions and are subject to the
German Investment Companies Act ("Gesetz uber Kapitalanlagegesellschaften"), in
addition to the German Banking Act. Within the Allianz Group, DEUTSCHER
INVESTMENT-TRUST Gesellschaft fur Wertpapieranlagen mbH (dit) and dresdnerbank
investment management Kapitalanlagegesellschaft mbH (dbi) are investment
companies.

     An investment fund must be segregated from the investment company's own
assets and is not a legal entity; therefore the assets of the investment fund
may either be jointly owned by the unit-holders or owned by the investment
company as trustee. The German Investment Companies Act provides for specific
investment restrictions for different types of investment funds, such as
money-market, securities and real estate investment funds, among others. The
BaFin supervises the investment company's compliance with the applicable
investment restrictions.

     Investment companies do not fall within the scope of the above-mentioned
Principles I and II. Therefore, they are not subject to the capital and
liquidity requirements provided for by these principles.

     Financial Services Institutions

     Financial Services Institutions are enterprises that provide certain
financial services described by the German Banking Act. These financial services
include investment and contract

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brokering, portfolio management and own-account trading with financial
instruments for third parties.

     To engage in the provision of financial services, an authorization by the
BaFin is required. The supervision and regulation of financial services
institutions is substantially similar to the regulation and supervision of
banks. Like investment companies, certain financial services institutions are
exempted from the capital and liquidity requirements described by Principles I
and II.

     Within the Allianz Group, Allianz Capital Managers GmbH and Allianz
Dresdner Asset Management International GmbH are financial services
institutions.

United Kingdom

     In the United Kingdom, the FSMA also provides the framework for the
regulation of activities of the financial services sector outside of the
insurance business, with the FSA as the responsible supervisory authority. The
FSA also prosecutes offenses involving insider dealing, market manipulation,
money laundering and of market abuse.

     The above requirements of the FSA with respect to the financial services
sector apply to most Allianz Group entities in the United Kingdom, including the
Dresdner Bank subsidiaries. The London branch of Dresdner Bank is a "passported"
bank in the United Kingdom in accordance with the provisions of the EU
directives as implemented in UK law. As such it is lead regulated in prudential
matters by BaFin in Germany.

France

     Under French law, investment and investment services companies dealing with
financial instruments must be authorized by the Comite des Etablissement de
Credit et des Entreprises d'Investissement (Banque de France) and by the
Commission des Operations de Bourse if they act under the portfolio management
status. They are subject to the supervision of the Conseil des Marches
Financiers for the dealing with listed financial instruments and the Commission
des Operations de Bourse for their portfolio management activity. Pursuant to
the draft law concerning the financial security mentioned above in connection
with the insurance business, it is intended to merge the Commission des
Operations de Bourse, the Conseil de Discipline de la Gestion Financiere and the
Conseil des Marches Financiers into the Autorite des Marches Financiers.

     Banks in France, including the Dresdner Bank subsidiary Dresdner Bank
Gestions France, must be authorized by the Comite des Etablissement de Credit et
des Entreprises d'Investissement (Banque de France) and are subject to the
supervision of the Commission Bancaire (Banque de France). The supervision
extends to all the activities of French banks, including their capital adequacy,
shareholdings in other companies and limitation of risk. The Paris branch of
Dresdner Bank is a "passported" bank in France in accordance with the provisions
of EU directives as implemented in French law. As such it is primarily regulated
by the BaFin.

     Banks are required to file monthly reports to the Commission Bancaire.
Changes of shareholdings in French banks do need approval by the Comite des
Etablissement de Credit et des Entreprises d'Investissement (Banque de France).

     French securities regulations prescribe a minimum amount of share capital
for investment and investment services companies and impose certain requirements
on company management and shareholders. The companies must also submit a
business plan with their application for authorization. There are also
regulatory restrictions with respect to equity capital on limitation of risks,
and specific disclosure rules must be observed. In addition, the Conseil des
Marches Financiers and the Commission des Operations de Bourse oversee the
dealings of investment and investment services companies with investors,
including the provision of appropriate information to investors, and supervise
control procedures within these companies. The Conseil des Marches Financiers
supervises compliance with market rules, and the Commission des Operations de
Bourse supervises the fairness of transactions.

     French supervisory authorities are authorized to impose sanctions,
including revocation of operating licenses, on companies that fail to comply
with applicable regulations.

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Italy

     Investment and investment services companies in Italy dealing with
financial instruments must be licensed and are subject to regulation by both
Banca d'Italia, the Italian national bank, and the Commissione Nazionale per le
Societa e la Borsa ("CONSOB"). Shareholdings in excess of 5% in Italian
investment and investment services companies require the authorization of Banca
d'Italia.

     Banks in Italy, including the Allianz Group's subsidiary Rasbank S.p.A. and
the Dresdner Bank subsidiaries, must be authorized by Banca d'Italia and are
subject to the supervision of both Banca d'ltalia and CONSOB. The supervision of
Banca d'Italia extends to all the activities of Italian banks, including their
capital adequacy, shareholdings in other companies and limitation of risk. The
Milan branch of Dresdner Bank is a "passported" bank in Italy in accordance with
the provisions of EU directives as implemented in Italian law. As such it is
lead regulated by the BaFin. The CONSOB supervises the provision of investment
services by banks in Italy and rules of conduct to be followed by the banks in
their dealings with the public. Banks are required to file their annual and
semi-annual reports with both Banca d'Italia and the CONSOB. They also have
ongoing disclosure obligations. The Milan branch of Dresdner Bank is exempt from
these requirements and instead has to submit the annual financial statements of
Dresdner Bank Group to the Camera di Commercio and Banca d'Italia. Changes in
organizational structure of the branch have to be reported annually.

     Major shareholders of banks and investment and investment services
companies must be of good standing and the top managers and members of the
boards of directors and boards of auditors must meet specific qualifications in
terms of professionalism and good standing. With respect to banks, Italian law
requires those assuming control of or a shareholding of greater than 5% in an
Italian bank to obtain authorization from Banca d'Italia. Similarly, banks
assuming shareholdings in any other company are required to obtain authorization
from Banca d'Italia.

     Italian supervisory authorities are empowered to impose sanctions,
including revocation of operating licenses, on companies that fail to comply
with relevant regulations.

United States

     Allianz of America, Inc., Allianz Dresdner Asset Management of America
L.P., Pacific Investment Management Company LLC, Oppenheimer Capital,
Nicholas-Applegate, Dresdner RCM Global Investors LLC and other financial
services subsidiaries of Allianz AG in the United States are registered as
investment advisers under the Investment Advisers Act of 1940. Many of the
investment instruments managed by these financial services subsidiaries,
including a variety of mutual funds and other pooled investment vehicles, are
registered with the SEC under the Investment Company Act of 1940. The investment
advisory activities of these financial services subsidiaries are subject to
various U.S. federal and state laws and regulations. These laws and regulations
relate to, among other things, limitations on the ability of investment advisers
to charge performance-based or non-refundable fees to clients, record keeping
and reporting requirements, disclosure requirements, limitations on principal
transactions between an adviser or its affiliates and advisory clients, as well
as general anti-fraud provisions. The failure to comply with these laws or
regulations may result in possible sanctions, including the suspension of
individual employees, limitations on the activities in which the investment
adviser may engage, suspension or revocation of the investment adviser's
registration as an adviser, censure and/or fines.

     Some U.S. financial service subsidiaries of Allianz AG are also registered
with the SEC as broker-dealers under the Securities Exchange Act of 1934 and are
subject to extensive regulation as such. In addition, some of these subsidiaries
are members of, and subject to, regulation by self-regulatory organizations such
as the National Association of Securities Dealers and, in the case of Dresdner
Kleinwort Wasserstein Securities LLC, the New York Stock Exchange. The scope of
broker-dealer regulation covers matters such as capital requirements, the use
and safekeeping of customers' funds and securities, advertising and other
communications with the public, record-keeping and reporting requirements,
supervisory and organizational procedures intended to assure compliance with
securities laws and rules of the self-regulatory organizations and to prevent
improper trading on material non-public information, employee-related matters,
limitations on extensions of credit in securities transactions, and clearance
and settlement procedures.

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A particular focus of the applicable regulations concerns the relationship
between broker-dealers and their customers. As a result, in some instances they
may be required to make "suitability" determinations as to certain customer
transactions.

     Dresdner Bank provides commercial banking services in the United States
through its offices in New York and Los Angeles, as well as the Miami office of
its subsidiary Dresdner Bank Lateinamerika AG. Dresdner Bank is accordingly
subject to regulation, supervision and examination by the Federal Reserve Board
under the U.S. Bank Holding Company Act of 1956, as amended (the "BHCA"), and
the International Banking Act of 1978, as amended (the "IBA"). The New York
branch of Dresdner Bank is licensed, supervised and examined by the New York
State Banking Department.

     The Gramm-Leach-Bliley Act of 1999 substantially eliminated barriers
separating the banking, insurance and securities industries in the United
States. According to this act, a bank holding company that has effectively
elected to become a financial holding company may conduct business activities
either directly or through its subsidiaries that were previously prohibited for
bank holding companies. Dresdner Bank became a financial holding company under
the Gramm-Leach-Bliley Act in 2000. To qualify as a financial holding company, a
bank is required to meet the criteria of being well-managed and
well-capitalized. A foreign bank that is well-capitalized has capital ratios
equal to or comparable with those required for a well-capitalized U.S. bank,
i.e. a Tier I capital ratio of 6% and a total capital to total risk-based assets
ratio of 10%. Dresdner Bank is currently in compliance with these capital
requirements. In addition, a bank holding company is required to elect to be
treated as a financial holding company vis-a-vis the Federal Reserve Board. In
the event of non-compliance with these criteria, a financial holding company may
be required to limit previously authorized financial activities or, after a
certain time period, to terminate authorized banking operations or to divest any
commercial lending companies owned or controlled by the financial holding
company. As a result of its ownership of Dresdner Bank, Allianz AG is also
subject to the supervision of the Federal Reserve Board under the BHCA and the
IBA and has applied to be treated as a financial holding company. The two-year
transition period during which Allianz AG is still treated as a financial
holding company without having been granted such status will terminate in May
2003, subject to possible extension for up to three years. Allianz AG expects
that it will seek such extension.

     Under the IBA, the Federal Reserve Board may terminate the activities of
any U.S. office of a foreign bank if it determines that the foreign bank is not
subject to comprehensive regulation on a consolidated basis in its home country
or that there is reasonable cause to believe that the foreign bank or its
affiliate has violated U.S. law or engaged in unsafe or unsound banking practice
in the United States, and as a result of such violation or practice, the
continued operation of the U.S. office would be inconsistent with the public
interest or the purposes of federal banking law.

     Under the trade name Dresdner Kleinwort Capital, subsidiaries of Dresdner
Bank are also active in the private equity business. They provide investment
management services and make, manage and monitor private equity investments in
unaffiliated companies and investment funds, and establish and operate
investment funds in which third-party investors make private equity investments.
These subsidiaries are subject to regulation by the Federal Reserve Board and
the SEC. Two subsidiaries of Dresdner Bank are also active as small business
investment companies and are subject to the U.S. Small Business Administration
Act.

Other Countries

     The financial services businesses of the Allianz Group in countries other
than those discussed above are also subject to detailed regulation and
supervision by authorities in the relevant jurisdictions, including with respect
to such matters as capital adequacy, investment advisory and securities trading
activities, and mutual fund management and distribution activities.

ACQUISITION CONTROL MATTERS

     In a number of jurisdictions, the direct or indirect acquisition of
"control" of companies is subject to prior regulatory approval. Under the
applicable EU directives, any person acquiring shares in an insurance, bank or
investment services company who would become a "qualifying

                                       146


shareholder" as a result of the acquisition is required to give prior notice of
the proposed acquisition to the relevant supervisory authorities in the
company's home jurisdiction. A qualifying shareholder is a shareholder that
holds at least 10% of the voting rights or the capital of such a company or
otherwise has the ability to exercise a significant influence over the
management of the company. A qualifying shareholder must also report any
increases in shareholdings by any holder to levels equal to or exceeding 20%,
33% or 50% of the voting rights or the capital. The supervisory authorities have
a maximum period of three months during which to oppose an acquisition of shares
if they believe that the acquisition would jeopardize the sound and prudent
management of the insurance company. Reductions in ownership below the
thresholds indicated above must also be notified to the supervisory authorities.
These directives have been implemented in most EU jurisdictions.

     Under the German Securities Trading Act (Wertpapierhandelsgesetz, or the
"German Securities Trading Act"), holders of voting securities of a German
company listed on a stock exchange within the European Union or within the other
contracting states to the agreement on the EEA must notify the company and the
BaFin in writing and without delay (at the latest, within seven calendar days)
of the level of their holding whenever that holding reaches, exceeds or falls
below 5%, 10%, 25%, 50% and 75% of the company's shares. Also, a German company
receiving this notification of shareholding must generally publish these facts.
Effective January 1, 2002, the provisions of the German Securities Trading Act
were amended to broaden the criteria for attribution of shares.

     On January 1, 2002, the German Securities Acquisition and Takeover Act
(Wertpapiererwerbs- und Ubernahmegesetz, or "WpUG") took effect. The WpUG
applies to all offers to acquire securities issued by stock corporations and
partnerships limited by shares (Kommanditgesellschaften auf Aktien) by shares
that are domiciled in Germany and admitted to trading on an organized market in
the European Economic Area ("EEA"). The WpUG provides that any shareholder
obtaining direct or indirect control, which is defined as 30% or more of the
voting rights, of a stock corporation or of a partnership limited by shares, is
required to make a mandatory takeover offer to all other shareholders of the
corporation. The law amending the WpUG also added provisions to the German Stock
Corporation Act (Aktiengesetz) relating to the buyout and the compensation of
minority shareholders. Upon request of a shareholder holding 95% or more of the
share capital of the stock corporation, the shareholders' meeting of the stock
corporation can resolve to transfer all shares held by minority shareholders to
the controlling shareholder in exchange for appropriate cash compensation. The
Allianz AG has made use of these new provisions to acquire the remaining
minority shareholdings of Vereinte Versicherungs-AG, Dresdner Bank AG and Hermes
Kreditversicherungs AG.

     Similar regulations relating to acquisition of control have been
established in the jurisdiction inside and outside of the EU in which the
Allianz Group does business. State insurance holding company statutes in the
United States applicable to Allianz AG's U.S. insurance subsidiaries generally
provide that no person may acquire control of the Allianz AG, and thus indirect
control of its U.S. insurance subsidiaries, without the prior approval of the
appropriate insurance regulators. Generally, any person who acquires beneficial
ownership of 10% or more of the outstanding ordinary shares or voting power of
the Allianz AG (including ADSs) would be presumed to have acquired such control
unless the appropriate insurance regulators upon application determine
otherwise.

ANTITRUST REGULATION AND MERGER REVIEW

     EU and national antitrust regulation affects the cooperation between
insurance companies and within insurance associations. While the EC Treaty
generally prohibits arrangements that restrict competition, some types of
cooperation in the insurance sector are expressly exempt from this prohibition
by EU regulation providing for a so-called block exemption.

     In February 2003, the EU adopted a new block exemption regulation for the
insurance sector to replace the existing regulation on this subject at its
expiry on March 31, 2003. In particular with respect to the establishment and
management of insurance and reinsurance pools, the new regulation raises the
market share thresholds for insurance pools and restricts the simultaneous
memberships of insurers who may exercise a determining influence on the
commercial policy of pools acting on the same relevant market in these pools.

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     Insurers have in the past been able to seek individual exemption under
applicable antitrust laws for insurance pools that were not eligible for block
exemption and other restrictions on competition. As of May 1, 2004 this
procedure is no longer available.

     In some business lines, the Allianz Group's market share might raise
concerns under European merger control regulations. If the Allianz Group were to
consider a substantial acquisition in these business lines, the relevant EU
authorities might require divestiture of parts of the portfolio or might
disapprove the transaction. Comparable legislation with respect to merger review
has been enacted in many jurisdictions inside and outside the EU.

RULES OF CONDUCT FOR SECURITIES TRADING

     The German Securities Trading Act prohibits insider trading with respect to
securities admitted to trading or included in the over-the-counter market at a
German exchange or the exchange in another EU member state or in other
contracting states to the agreement on the EEA. The German Securities Trading
Act also requires that the issuer of securities admitted to trading on a German
stock exchange promptly publish any new fact relating to the field of the
issuer's activities that is not publicly known if this fact could have a
material influence on the market price of such securities due to its effects on
the financial position or the overall business performance of the issuer. The
BaFin carries out supervisory functions with respect to these regulations.

     The German Securities Trading Act also introduced rules of conduct for
banks and securities firms (the "Rules of Conduct"). The Rules of Conduct apply
to all investment services firms in Germany. The BaFin has broad powers to
investigate investment services firms with a view to monitoring compliance with
the Rules of Conduct. The German Securities Trading Act provides for an annual
examination on behalf of the BaFin of a bank's compliance with its obligations
under the German Securities Trading Act.

LEGAL PROCEEDINGS

GENERAL

     Allianz Group companies are involved in legal, regulatory, and arbitration
proceedings in Germany and a number of foreign jurisdictions, including the
United States, involving claims by and against them, which arise in the ordinary
course of their businesses, including in connection with their activities as
insurers, employers, investors, and taxpayers. While it is not feasible to
predict or determine the ultimate outcome of all pending or threatened
proceedings, the management does not believe that the outcome of these
proceedings, including the litigation and the Holocaust-related matters
discussed below, will have a material adverse effect on the financial position
or result of operations of Allianz Group.

LITIGATION

     In May 2001, a consolidated class action complaint, In re Deutsche Telecom
Securities Litigation, was brought against Dresdner Bank and other defendants in
the United States District Court for the Southern District of New York by
purported purchasers of Deutsche Telekom American Depositary Shares (ADSs)
issued pursuant to a registration statement filed with the Securities and
Exchange Commission on May 22, 2000 and pursuant to a prospectus dated June 17,
2000. Dresdner Bank, which was one of the underwriting syndicate's joint global
coordinators, was one of the named defendants. The complaint alleges that the
offering prospectus contained material misrepresentations and/or omissions
relating to Deutsche Telekom. The management of Dresdner Bank believes the
complaint is without merit insofar as it relates to Dresdner Bank. In October
2002, the court has acceded to the plaintiffs' application to admit the lawsuit
as a consolidated class action complaint.

     In August 2001, the European Commission initiated antitrust proceedings
pursuant to Article 81 of the EU Treaty against various banks, including
Dresdner Bank, in connection with alleged agreements to set prices for the
exchange of foreign currencies within the EU. In December 2001, pursuant to
these proceedings, the European Commission imposed a fine of E28 million against
Dresdner Bank. The management of Dresdner Bank believes these proceedings are
without merit as they relate to Dresdner Bank. In February 2002, Dresdner Bank
initiated proceedings against the European Commission in the Court of First
Instance of the European Commu-

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nity. Due to delayed pleadings by the European Commission, Dresdner Bank
requested a judgment by default on June 25, 2002.

     In July 2002, the German Federal Cartel Office (Bundeskartellamt) commenced
an investigation against several property-casualty insurance companies in
Germany, including subsidiaries of Allianz AG, in connection with alleged
coordinated behavior to increase premiums for the commercial and industrial
property and liability insurance business. Also, in December 2001 the European
Commission commenced a preliminary investigation against several insurance
companies operating in London, including a subsidiary of Allianz AG, in
connection with alleged anti-competitive behavior related to war risk coverage
in the area of air traffic insurance. To date, the Allianz Group has not
received any official complaint in either matter. Allianz AG cannot predict the
outcome of these investigations at this time.

     On November 5, 2001, a lawsuit, Silverstein v. Swiss Re International
Business Insurance Company Ltd., was filed against certain insurers and
reinsurers, including Allianz Insurance Co., in the United States District Court
for the Southern District of New York seeking a determination that the terrorist
attack of September 11, 2001, on the World Trade Center constituted two separate
occurrences under the alleged terms of various coverages. Allianz Insurance Co.
has also filed suit against Silverstein on January 2, 2002, in connection with
the coverage issues arising from the September 11, 2001, attack on the World
Trade Center, and these and other related suits have been consolidated for
discovery and other purposes. On January 30, 2003, the court rejected a motion
by Allianz Insurance Co. seeking a determination by the court itself that the
terror attack of September 11, 2001, constituted a single event. The judge
referred this issue to the jury. Based on the policy wording at issue, Allianz
AG believes that the basis of Allianz Insurance Co.'s claim is sound, and that
the Silverstein claims are without merit insofar as they relate to Allianz
Insurance Co. In connection with the terrorist attack of September 11, 2001
Allianz Group recorded net claims expense of approximately E1.5 billion in 2001
for the Allianz Group on the basis of one occurrence. In the event that
liability is premised under a two occurrence theory, Allianz AG estimates that
the Allianz Group may have an additional net exposure of approximately E200
million.

     On December 19, 2002, the insolvency administrator of KirchMedia GmbH & Co.
KGaA ("KirchMedia") made a formal demand on Dresdner Bank to return a former
KirchMedia shareholding to the insolvency assets (Insolvenzmasse) or to make
payment to the insolvency assets to compensate for the loss of the shareholding.
The shareholding, a 25% stake in the Spanish television group Telecinco, had
been pledged by subsidiaries of KirchMedia to Dresdner Bank as collateral for a
loan of E500 million from Dresdner Bank to KirchMedia's holding company,
TaurusHolding GmbH & Co. KG ("TaurusHolding"). Following TaurusHolding's default
on the loan in April 2002 and insolvency in June 2002, Dresdner Bank enforced
its security interest and acquired through a subsidiary the Telecinco
shareholding in a forced auction sale. The insolvency administrator contends
that the pledge was created under circumstances that cause it to be invalid
and/or void and may initiate legal action against Dresdner Bank. The management
of Dresdner Bank believes that there is no valid basis for the insolvency
administrator's demand.

     On May 24, 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 AG as principal shareholder in return for payment of a
cash settlement amounting to E51.50 per share. The amount of the cash settlement
was established by Allianz AG 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), which is pending with the
district court (Landgericht) of Frankfurt. The outcome of this mediation
procedure remains uncertain at this time. In the event that the court were to
determine a higher amount as an appropriate cash settlement, this would affect
all approximately 16 million shares which were transferred to Allianz AG.

HOLOCAUST-RELATED MATTERS

     In July 2000, the governments of Germany and the United States signed an
agreement (the "Executive agreement") meant to secure a comprehensive and
enduring resolution with respect to Holocaust-related claims brought against
German companies and their non-German subsidi-

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aries. Pursuant to the Executive agreement, after being notified that a
Holocaust-related claim has been asserted in a U.S. federal or state court
against a German company, the U.S. government shall inform the Court through a
statement of interest that it is in the foreign policy interests of the United
States for the Foundation for Remembrance, Responsibility and the Future (the
"Foundation") to be the exclusive remedy and forum for resolving such claims
against German companies and their subsidiaries, and that dismissal of such
claims by U.S. federal and state courts is in the foreign policy interest of the
United States.

     The U.S. government has consented to use its best efforts to achieve
similar objectives with respect to legislation that has been implemented by the
states of the United States since 1998, requiring insurance companies to report
the status of policies sold in Europe prior to and during World War II. Some of
these statutes provide for license suspension in the event of non-compliance.
This legislation has been challenged primarily on constitutional grounds in
federal courts in Florida and California by individual insurance companies and
in addition, in California by the American Insurance Association. On October 2,
2001, the United States Court of Appeals for the Eleventh Circuit struck down
the reporting provisions of the Florida statute as unconstitutional. The period
for appeal of this decision has expired. In October 2001, the United States
District Court for the Eastern District of California struck down the California
statute as unconstitutional. This decision was reversed by an appellate decision
of the United States Court of Appeals for the Ninth Circuit on July 15, 2002. On
January 10, 2003, the United States Supreme Court has accepted the suit by which
the plaintiffs challenge the California law on constitutional grounds. The
hearing before the Supreme Court will take place on April 23, 2003.

     In August 2000, the German government enacted legislation (the "Foundation
Law") implementing the Foundation, which was funded with approximately E5.1
billion in equal parts from the German government and German companies. Eligible
claims, including costs, are covered under the provisions of the Foundation Law.
The Foundation began to distribute funds in mid-2001.

     Based on the Executive agreement and statements of interest of the U.S.
government, individual actions and purported class actions previously filed in
the United States against Allianz AG and its subsidiaries, including Dresdner
Bank, were dismissed since 2000. On June 21, 2001, Dresdner Bank was served with
process in a purported Holocaust-related action, Ungaro-Benages v. Dresdner
Bank, filed in the United States District Court for the Southern District of
Florida. On January 18, 2002, the U.S. government filed a statement of interest
to the court. Upon the defendants' motion, the court rejected the action on
February 14, 2003. On April 9, 2003, the plaintiff in this action filed an
appeal. On May 31, 2002, Dresdner Bank was served with process in an additional
Holocaust-related action, Widerynski v. Dresdner Bank, filed in the Superior
Court of California, County of Los Angeles. Upon the defendant's motion, this
action was rejected on January 31, 2003. On June 20, 2002, a new
Holocaust-related action, Gross v. German Foundation Industrial Initiative, was
filed in the United States District Court for the District of New Jersey against
Allianz AG, Dresdner Bank, and other Members of the German Foundation Industrial
Initiative. So far, no service of process has taken place in connection with
this action.

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                            INFORMATION RELATING TO
                           ALLIANZ AKTIENGESELLSCHAFT

INCORPORATION

     Allianz AG was incorporated in Berlin in 1890 as "Allianz
Versicherungs-Aktiengesellschaft." In 1949, Allianz AG relocated its main
administration from Berlin to Munich. Based on a corresponding resolution of the
general meeting dated June 27, 1985, Allianz AG was restructured into a holding
company and its name was changed to "Allianz Aktiengesellschaft Holding." In
accordance with a corresponding resolution of the general meeting dated October
7, 1966, the name of Allianz AG was again changed to "Allianz
Aktiengesellschaft."

NAME, REGISTERED SEAT, OBJECTS AND PURPOSES OF THE COMPANY AND FISCAL YEAR

     Allianz AG is registered as "Allianz Aktiengesellschaft" in the commercial
register at the local court (Amtsgericht) in Munich under the entry number HRB
7158. The registered seat and business address of Allianz AG are at
Koniginstrasse 28, 80802 Munich, Germany.

     Pursuant to its articles of association, the object of Allianz AG is to
direct an international group of companies that are active in the areas of
insurance, banking, asset management and other financial, consulting, and
similar services and to hold ownership interests in insurance companies, banks,
industrial companies, investment companies and other companies.

     As a reinsurer, Allianz AG primarily assumes insurance business from its
Group companies and from other companies in which Allianz AG holds direct or
indirect participations.

     Allianz AG is authorized to engage in any business and to conduct any
measures that seem suitable to serve the objects and purposes of the company. It
may incorporate, acquire and invest in other enterprises, manage other
enterprises or merely manage its participations. As part of the objects and
purposes of the company, Allianz AG is entitled to take up credit and issue
notes.

     The fiscal year of Allianz AG is the calendar year.

TERM AND DISSOLUTION

     Allianz AG has been established for an indefinite period of time. Allianz
AG may be dissolved upon a resolution of the general meeting requiring a
majority of at least three quarters of the share capital represented during the
resolution. The assets of Allianz AG remaining after servicing all liabilities
are distributed among the shareholders pro rata to their shareholding in Allianz
AG pursuant to the provisions of the German Stock Corporation Act.

DIVIDENDS AND DIVIDEND POLICY

     The New Allianz Shares are fully entitled to dividends for the fiscal year
ending December 31, 2003 and all future fiscal years of Allianz AG.

     The New Allianz Shares will have no entitlement to the dividend proposed
for approval at the annual general meeting convened for April 29, 2003.

     For each of the fiscal years 2000 and 2001, Allianz AG has distributed a
dividend of E1.50 for each share entitled to participate in the profits. For the
fiscal year ending December 31, 2002, the Management Board and the Supervisory
Board have proposed the distribution of a dividend of E1.50 for each share
entitled to participate in the profits to the ordinary general meeting convened
for April 29, 2003. In addition, the Management Board and the Supervisory Board
have proposed to this general meeting to amend the articles of association so as
to provide for the permissibility of dividends in kind in lieu of cash
dividends.

     Although Allianz AG generally intends to distribute dividends to its
shareholders in the future, subject to a distributable balance sheet profit, it
cannot offer any assurance that a distributable balance sheet profit will
actually be available in future fiscal years and/or in what amount any dividends
will be paid out. Future dividend payments depend on the performance of Allianz
AG, its financial position, its cash requirements, the general economic
situation of the

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markets in which the Allianz Group operates as well as on the general legal,
fiscal and regulatory environment and other factors.

     The Management Board and the Supervisory Board jointly submit proposals for
the use of any balance sheet profits to the general meeting. The ordinary
general meeting following the end of the respective fiscal year resolves on the
use of the profits.

     If dividends are distributed, they are generally subject to capital income
tax under German law. See "Taxation in Germany."

MAJOR SHAREHOLDERS

     Based on Allianz AG's share register and the information provided by
individual major shareholders pursuant to the provisions of the German
Securities Trading Act (Wertpapierhandelsgesetz) or other notifications, the
ownership interests in Allianz AG, as of the dates indicated is as follows.
Prior to the registration of the implementation of the capital increase relating
to the New Allianz Shares in the commercial register as reported under the
German Securities Trading Act on April 2, 2003, calculated as of 100% of the
issued share capital, Munich Re holds an indirect ownership interest of 18.1% of
Allianz AG's share capital and is the largest shareholder of Allianz AG. Taking
into account the own shares held by the Allianz Group, this corresponds to a
ownership percentage of 19.4%. See also "Related Party
Transactions -- Transactions with Munich Re." As of April 10, 2003, Allianz
Group held a total of 17,292,998 of its own shares or 6.5% of the share capital.
See also "Information about the Share Capital of Allianz
Aktiengesellschaft -- Acquisition of Own Shares in Allianz AG." In addition,
based on the filings under the corresponding provisions of the German Securities
Trading Act and the share register of Allianz AG, Allianz AG is not aware of any
other shareholder who, directly or indirectly, holds more than 5% of the share
capital of Allianz AG in his own name. The remaining portion of approximately
75.4% is free float. See also "Information about the Share Capital of Allianz
Aktiengesellschaft -- Publication and Notification Requirements."

AUDITORS

     Allianz AG has appointed KPMG Deutsche Treuhand-Gesellschaft
Aktiengesellschaft Wirtschaftsprufungsgesellschaft ("KPMG"), GanghoferstraSSe
29, 80339 Munchen as auditor for the fiscal year ending December 31, 2003. The
statutory financial statements of Allianz AG for the fiscal years ended December
31, 2000, 2001 and 2002 were prepared in accordance with the provisions of the
German Commercial Code (Handelsgesetzbuch or HGB) and audited by KPMG pursuant
to sec. 317 HGB in accordance with generally accepted auditing standards in
Germany as determined by the Institute of Accountants in Germany (Institut der
Wirtschafsprufer in Deutschland or IDW). KPMG has issued an unqualified audit
opinion in each case. The consolidated financial statements of Allianz AG for
the fiscal years ended December 31, 2000 and 2001 were prepared in accordance
with sec. 292a HGB and in conformity with International Accounting Standards
(IAS). Since 2002, the term International Financial Reporting Standards (IFRS)
applies to the overall concept of standards adopted by the International
Accounting Standards Board. Standards previously adopted are still quoted as
IAS. The consolidated financial statements of Allianz AG for the fiscal year
ended December 31, 2002 were prepared in accordance with sec. 292a HGB in
conformity with IFRS. The consolidated financial statements for the fiscal years
2000, 2001 and 2002 were audited by KPMG pursuant to the German auditing
provisions and in accordance with generally accepted auditing standards in
Germany as determined by IDW as well as in accordance with Generally Accepted
Auditing Standards in the United States (US-GAAS). KPMG has issued an
unqualified audit report in each case.

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                     INFORMATION ABOUT THE SHARE CAPITAL OF
                           ALLIANZ AKTIENGESELLSCHAFT

     This description is a summary of various information relating to the share
capital of Allianz AG as well as various provisions set forth in its articles of
association and in German stock corporation law. This summary does not purport
to be complete and speaks as of the date of this Offering Circular.

SHARE CAPITAL

     As of April 11, 2003, share capital of Allianz AG amounts to E682,408,000
and is divided into 266,565,625 no-par value registered shares with restricted
transferability. All issued registered shares with restricted transferability
have a notional nominal value (the proportional amount of the share capital
attributable to each share) of E2.56 per share.

FORM AND CERTIFICATION OF THE SHARES/CONSENT TO TRANSFER

     All shares of Allianz AG are issued as registered shares with restricted
transferability with no par value (Stuckaktien). Shareholders who are
individuals are required to inform Allianz AG as to their name, maiden name and
address while shareholders who are legal entities are required to inform Allianz
AG as to their company name, registered office and business address as well as
the number of shares held by them in either case for registration in the share
register.

     The shares and subscription rights to shares may only be transferred with
the consent of Allianz AG. Allianz AG will only withhold its consent to a duly
applied request if it deems this to be necessary in the interest of Allianz AG
on exceptional grounds; Allianz AG will inform the applicant about the reasons
leading to such refusal. Adeus Aktienregister Service-GmbH keeps the share
register of Allianz AG. Registration of a shareholder in the share register is a
prerequisite for the exercise of participation and voting rights during the
general meeting.

     Allianz AG may combine individual shares into share certificates that
represent multiple shares (global shares, global certificates). Shareholders
have no right to receive individual share certificates unless receipt thereof is
necessary pursuant to the rules applicable to a stock exchange on which the
shares are listed.

GENERAL INFORMATION ON CAPITAL MEASURES

     An increase of the share capital of Allianz AG requires a resolution by the
general meeting. Moreover, the general meeting may authorize the Management
Board to increase the share capital of Allianz AG with the consent of the
Supervisory Board within a period of five years by issuing shares for a certain
total amount (authorized capital). Finally, shareholders may resolve on the
creation of conditional capital, however, only to issue conversion or
subscription rights to holders of convertible bonds, to prepare a merger with
another company or to issue subscription rights to employees and members of the
management of Allianz AG or of an affiliated company by way of a consent or
authorization resolution. Each of these resolutions require a majority of three
quarters of the share capital represented at the general meeting.

     The nominal amount of the authorized capital created by the shareholders
may not exceed one half of the share capital existing at the time of
registration of the authorized capital in the commercial register.

     The total amount of the conditional capital created by the shareholders,
the issuance of which was authorized by the shareholders, may not exceed one
half of the share capital existing at the time of the passing of the resolution
relating to the conditional capital increase. The total nominal amount of the
conditional capital for granting subscription rights to employees and members of
the management of Allianz AG or of an affiliated company may not exceed 10% of
the share capital existing at the time of the passing of the resolution relating
to the conditional capital increase.

     In principle, a resolution relating to the reduction of the share capital
of Allianz AG requires a majority of at least three quarters of the share
capital represented at the general meeting.

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CHANGE OF THE SHARE CAPITAL

     The share capital of Allianz AG currently amounts to E682,408,000. During
the last three years, the share capital of Allianz AG was changed as follows
(the data relates to the registration of the capital measure in the commercial
register of Allianz AG in each case): On November 11, 2002, the share capital
was increased from E682,055,680 by E352,320 to E682,408,000. Prior thereto, the
share capital of Allianz AG was increased from E680,249,187.84 by E1,806,492.16
to E682,055,680 on October 11, 2001. On July 20, 2001, the share capital of
Allianz AG was increased from E629,120,000 by E51,129,187.84 to E680,249,187.84.
DAD Transaktionsgesellschaft mbH, Frankfurt provided the contribution as a
contribution-in-kind by contributing its claims against Allianz
Finanzbeteiligungs GmbH, Munich for a total amount of E6,595,932,860.70, which
were assigned to it under a takeover offer by shareholders of Dresdner Bank AG.
On September 19, 2000, the share capital of Allianz AG was increased from
E627,891,200 by E1,228,800 to E629,120,000.

AUTHORIZED CAPITAL

     By resolution of the ordinary general meeting of Allianz AG of July 11,
2001, the Management Board, with the consent of the Supervisory Board, is
authorized to increase the share capital of Allianz AG on one or more occasions
until July 10, 2006 by issuing new registered shares with no par value against
contribution in cash or in kind for an aggregate amount of up to E300,000,000
(Authorized Capital 2001/I). The Management Board, with the consent of the
Supervisory Board, is authorized to exclude shareholders' subscription rights
where shares are issued against contributions in kind. Whenever shares are
issued against contributions in cash, the shareholders shall be granted
subscription rights. However, the Management Board, with the consent of the
Supervisory Board, is authorized to exclude fractional amounts from
shareholders' subscription rights. The Management Board, with the consent of the
Supervisory Board, is furthermore authorized to exclude shareholders'
subscription rights in the case of a capital increase against contributions in
cash when the issue price is not substantially lower than the market price.
However, this authorization shall apply only to the extent that the aggregate
number of shares issued without subscription rights -- in a manner consistent
with sec. 186 para. 3 sentence 4 of the German Stock Corporation Act -- does not
exceed 10% of the share capital, neither at the time when this authorization
becomes effective nor when it is exercised. This 10% limitation shall be
inclusive of the sale of treasury shares, to the extent that this sale is made
pursuant to an authorization that excludes subscription rights in a manner
consistent with sec. 186 para. 3 sentence 4 of the German Stock Corporation Act
and that is either applicable at the time when this authorization becomes
effective or that is replaced by a subsequent authorization. Furthermore, this
10% limitation shall be inclusive of the number of shares necessary to meet
obligations arising from bonds carrying conversion and/or other option rights to
the extent that these bonds have been issued pursuant to an authorization that
excludes subscription rights in a manner consistent with sec. 186 para. 3
sentence 4 of the German Stock Corporation Act and that is either applicable at
the time when this authorization becomes effective or that is replaced by a
subsequent authorization. The Management Board, with the consent of the
Supervisory Board, is authorized to determine additional rights of the shares as
well as additional conditions for their issuance.

     The Authorized Capital 2001/I is used to create the New Allianz Shares.

     The Management Board and the Supervisory Board have proposed to the
ordinary general meeting convened for April 29, 2003 to cancel the Authorized
Capital 2001/I to the extent it has not been fully utilized after the
registration in the commercial register of the implementation of the capital
increase to be resolved by the Management Board by no later than April 28, 2003
utilizing the Authorized Capital 2001/I. At the same time, the Management Board
and Supervisory Board have proposed to the general meeting to create a new
authorized capital, by which the Management Board, with the consent of the
Supervisory Board, will be authorized to increase Allianz AG's share capital on
one or more occasions until April 28, 2008, by issuing new registered shares
with no par value against contribution in cash or in kind by up to E300,000,000
in the aggregate (Authorized Capital 2003/II), as soon as the cancellation of
the Authorized Capital 2001/I has been registered in the commercial register or
the Authorized Capital 2001/I has become meaningless due to a full utilization
and implementation of the capital increase. The Management Board, with the
consent of the Supervisory Board, shall be authorized to exclude

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shareholders' subscription rights where shares are issued against contributions
in kind. Whenever shares are issued against contributions in cash, the
shareholders shall be granted subscription rights. However, the Management
Board, with the consent of the Supervisory Board, shall be authorized to exclude
fractional amounts from the shareholders' subscription rights. The Management
Board, with the consent of the Supervisory Board, shall furthermore be
authorized to exclude shareholders' subscription rights in the case of a capital
increase against contributions in cash when the issue price is not substantially
lower than the market price. However, this authorization shall apply only to the
extent that the aggregate number of shares issued without subscription
rights -- in a manner consistent with sec. 186 para. 3 sentence 4 of the German
Stock Corporation Act -- does not exceed 10% of the share capital, neither at
the time when this authorization becomes effective nor when it is exercised.
This 10% limitation shall be inclusive of the sale of treasury shares, to the
extent that this sale is made pursuant to an authorization that excludes
subscription rights in a manner consistent with sec. 186 para. 3 sentence 4 of
the German Stock Corporation Act and that is either applicable at the time when
this authorization becomes effective or that is replaced by a subsequent
authorization. Furthermore, this 10% limitation shall be inclusive of the number
of shares necessary to meet obligations arising from bonds carrying conversion
and/or other option rights, to the extent that these bonds have been issued
pursuant to an authorization that excludes subscription rights in a manner
consistent with sec. 186 para. 3 sentence 4 of the German Stock Corporation Act
and that is either applicable at the time when this authorization becomes
effective or that is replaced by a subsequent authorization. The Management
Board, with the consent of the Supervisory Board, is authorized to determine
additional rights of the shares as well as additional conditions of their
issuance.

     Based on the resolution of the ordinary general meeting of Allianz AG of
July 11, 2001, the Management Board, with the consent of the Supervisory Board,
is furthermore authorized to increase the share capital of Allianz AG until July
10, 2006, by up to an aggregate amount of E7,841,187.84 by issuing new
registered shares with no par value against contributions in cash (Authorized
Capital 2001/II). The Management Board, with the consent of the Supervisory
Board, is authorized to exclude shareholders' subscription rights in order to
issue shares to employees of Allianz AG and its group companies. The Management
Board, with the consent of the Supervisory Board, is furthermore authorized to
exclude fractional amounts from the shareholders' subscription rights. The
Management Board, with the consent of the Supervisory Board, is authorized to
determine additional rights of the shares as well as additional conditions of
their issuance.

     The Management Board is also authorized, based on the resolution of the
regular shareholders' meeting of July 8, 1998, to increase the share capital
until July 7, 2003, by up to E2,556,459.41 by issuing registered shares. The
Management Board may exclude the subscription rights of existing shareholders in
order to grant holders of conversion or option rights issued by Allianz AG or
its group companies a right to subscribe to such number of new shares during
future capital increases against contributions in cash to the extent, to which
such holders would be entitled upon exercise of their option or conversion right
(Authorized Capital 1998).

     The Management Board and the Supervisory Board have proposed to the
ordinary general meeting convened for April 29, 2003, to increase the share
capital of Allianz AG on one or more occasions until April 28, 2008, with the
approval of the Supervisory Board, by issuing registered shares with no par
value against contributions in kind by up to an aggregate amount of E10,000,000
(Authorized Capital 2003/I). The Management Board may exclude the subscription
rights of existing shareholders in order to grant holders of conversion or
option rights issued by Allianz AG or its group companies a right to subscribe
to such number of new shares during future capital increases against
contributions in cash to the extent, to which such holders would be entitled
upon exercising their option or conversion right and/or after fulfilling a
conversion obligation. The Management Board is also authorized, upon the
approval of the Supervisory Board, to exclude fractional amounts from the
shareholders' subscription rights and determine additional rights of the shares
as well as additional conditions of their issuance. Upon effectiveness of the
Authorized Capital 2003/I, the Authorized Capital 1998 will be cancelled.

CONDITIONAL CAPITAL

     By resolution of the ordinary general meeting of July 11, 2001, the share
capital of Allianz AG was conditionally increased by up to E50,000,000, divided
into up to 19,531,250 registered shares

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with no par value and restricted transferability (Conditional Capital 2001). The
conditional capital increase will be carried out only to the extent that the
holders and/or creditors of conversion rights or warrants -- which were issued
by Allianz AG or associated companies, which are directly or indirectly
majority-owned by it, against payment in cash pursuant to an authorization
resolution passed by the general meeting on July 11, 2001, for the period until
July 10, 2006 -- exercise their conversion and/or option rights, or to the
extent that the holders and/or creditors of mandatory convertible bonds -- which
were issued by Allianz AG or associated companies, which are directly or
indirectly majority-owned by it, against payment in cash pursuant to an
authorization resolution passed by the general meeting on July 11, 2001, for the
period until July 10, 2006 -- fulfill their conversion obligation, and in so far
as treasury shares are not delivered to the holders of the bonds. The new shares
are entitled to participate in the profits from the beginning of the fiscal year
in which they are created by the exercise of conversion and/or option rights or
the fulfillment of mandatory conversion obligations.

ACQUISITION OF OWN SHARES IN ALLIANZ AG

     Pursuant to the German Stock Corporation Act, a German stock corporation
may not acquire any own shares, subject to certain limited exceptions. The
aggregate number of the own shares held by a German corporation may generally
not exceed 10% of the share capital.

AUTHORIZATION TO ACQUIRE OWN SHARES FOR PURPOSES OF SECURITIES TRADING

     By resolution of the ordinary general meeting of June 12, 2002, German or
non-German banks within the meaning of sec. 71 para. 1 No. 7 of the German Stock
Corporation Act, which are majority-owned by Allianz AG, are authorized until
December 11, 2003, to acquire and dispose of shares in Allianz AG for purposes
of securities trading. The total number of shares acquired together with other
treasury shares held by Allianz AG or attributable to it pursuant to sec.sec.
71a et seq. German Stock Corporation Act may not exceed 10% of the share capital
at any time. Pursuant to the resolution, shares may only be acquired if the
consideration for each share does not exceed or fall below the average of the
share prices (final auction price during XETRA trading and/or a comparable
successor system) of Allianz AG on the three exchange business days prior to the
acquisition by more than 10%. The amount of shares acquired for this purpose may
not exceed 5% of the share capital of Allianz AG at the end of each day.

     The Management Board and the Supervisory Board have proposed to the
ordinary general meeting convened for April 29, 2003, to authorize until October
28, 2004, German or non-German banks within the meaning of sec. 71 para. 1 No. 7
of the German Stock Corporation Act, which are majority-owned by Allianz AG, to
acquire and dispose of own shares of Allianz AG for purposes of securities
trading. The total number of shares acquired together with other treasury shares
held by Allianz AG or attributable to it pursuant to sec.sec. 71a et seq. German
Stock Corporation Act may not exceed 10% of the share capital at any time.
Pursuant to the resolution, shares may only be acquired if the consideration for
each share does not exceed or fall below the average of the share prices (final
auction price during XETRA trading and/or a comparable successor system) of
Allianz AG on the three exchange business days prior to the acquisition by more
than 10%. The amount of shares acquired for this purpose may not exceed 5% of
the share capital of Allianz AG at the end of each day. Upon effectiveness of
this authorization, the currently existing authorization for the acquisition of
own shares for purposes of securities trading, which is limited until December
11, 2003, will be cancelled.

AUTHORIZATION TO ACQUIRE OWN SHARES FOR OTHER PURPOSES

     By resolution of the ordinary general meeting of June 12, 2002, Allianz AG
is authorized based on sec. 71 para. 1 No. 8 of the German Stock Corporation Act
to acquire own shares until December 11, 2003, up to an aggregate amount of 10%
of the share capital existing at the time of the general meeting. The total
number of shares acquired together with other treasury shares held by Allianz AG
or attributable to it pursuant to sec.sec. 71a et seq. German Stock Corporation
Act may not exceed 10% of the share capital at any time. This authorization
shall not be used for the purpose of trading in the company's own shares.
Pursuant to the discretion of the Management Board, the shares may be acquired
(1) on a stock exchange, or (2) by means of a public tender offer and/or a
public invitation to tender shares, or (3) by means of a public offer to
exchange the shares against other shares admitted to trading on the official or
regulated market at a German

                                       156


stock exchange (including the Neuer Markt) or a regulated market, within the
meaning of Art. 1 No. 13 of the Council Directive 93/22/ECC dated May 10, 1993,
on investment services in the securities field, in another country of the
European Economic Area and/or a public invitation to exchange shares. If the
shares are acquired on a stock exchange, the consideration paid per share
(excluding incidental costs) may not be 15% higher or lower than the opening
price on the respective trading day in the XETRA trading system (or any
comparable successor system). If the acquisition takes place by means of a
public tender offer and/or a public invitation to tender shares, the tender
price per share or the high and low ends of the price range (without incidental
costs) shall not be more than 20% higher or lower than the closing price of the
XETRA trading system on the third trading day prior to the public announcement
of such tender offer and/or such public invitation to tender shares. If after
the publication of the public tender offer and/or public invitation to tender
shares, material deviations in the relevant price occur, the offer and/or
invitation to tender shares may be adjusted accordingly. In this case, the price
will be based on the price on the third trading day prior to the public
announcement of any such adjustment. The public tender offer and/or the
invitation to tender shares can stipulate further conditions. If the offer
and/or invitation to tender shares is oversubscribed or, in the case of an
invitation to tender shares, not all equivalent offers can be accepted, the
acceptance will take place on a pro-rata basis. Preferential acceptance may be
provided for small lots of up to 100 shares per shareholder. If the acquisition
is based on a public offer and/or a public invitation to tender shares of
Allianz AG in exchange of shares of another corporation, which are admitted to
trading on the official or regulated market of a German stock exchange
(including Neuer Markt) or a regulated market, within the meaning of Art. 1 No.
13 of the Council Directive 93/22/ECC dated May 10, 1993, on investment services
in the securities field, in another country of the European Economic Area
("Exchange Shares"), the exchange ratio may be stipulated or may be determined
by way of an auction. A cash consideration may either supplement the offered
exchange as a purchase price payment or may be used to settle fractional
amounts. In each of these procedures, the exchange price per share and/or the
relevant high and low ends of the exchange price range in form of one or more
Exchange Shares and calculatory fractions, including any cash or fractional
amounts (excluding incidental costs), may not be more than 20% higher or lower
than the relevant value of a share of Allianz AG. The value of the shares of
Allianz AG and of the Exchange Shares shall be determined based on the relevant
closing price in the XETRA trading system (or if the respective shares are not
traded in the XETRA trading system, the trading system used in the particular
market segment, which resembles the XETRA trading system most closely) on the
third trading day prior to the public announcement of the exchange offer and/or
the public invitation to offer shares for exchange. If after the public
announcement of the public exchange offer and/or the invitation to tender shares
for exchange substantial price deviations occur, the offer and/or invitation to
tender shares for exchange may be adjusted. In this case, the prices on the
third trading day prior to the public announcement of the adjustment shall be
relevant. The exchange offer and/or invitation to tender shares for exchange may
stipulate further conditions. If the exchange offer is oversubscribed and/or if
in the case of an invitation to tender shares not all equivalent offers are
accepted, the acceptance will take place on a pro-rata basis. Preferential
acceptance may be provided for small lots of up to 100 offered shares per
shareholder.

     The shareholders' subscription rights to these own shares are excluded to
the extent that they are used under the authorization. Furthermore, the
Management Board is authorized in connection with a sale of own shares through
an offer to the shareholders to grant the holders of bonds with conversion or
option rights, issued by Allianz AG or its group companies, a subscription right
for shares to an extent to which they would be entitled had they exercised their
conversion or option right; the shareholders' subscription rights are excluded
to this extent.

     The Management Board and the Supervisory Board have proposed to the
ordinary general meeting convened for April 29, 2003, to authorize Allianz AG to
acquire own shares until October 28, 2004, up to a total of 10% of the share
capital existing at the time of the general meeting. The total number of shares
acquired together with other treasury shares held by Allianz AG or attributable
to it pursuant to sec.sec. 71a et seq. German Stock Corporation Act may not
exceed 10% of the share capital at any time. This authorization shall not be
used for the purpose of trading in the company's own shares. The authorization
may be exercised by Allianz AG or companies controlled or majority-owned by it
or by third parties for the account of Allianz AG or companies controlled or
majority-owned by it, in whole or in partial amounts, once or several times,
pursuing a single or multiple goals. Pursuant to the discretion of the
Management Board, the

                                       157


shares may be acquired (1) on a stock exchange, or (2) by means of a public
tender offer and/or a public invitation to tender shares, or (3) by means of a
public offer to exchange the shares against other shares of a company
exchange-listed within the meaning of sec. 3 para. 2 German Stock Corporation
Act and/or by means of a public invitation to submit such offer. In cases (2)
and (3), the provisions of the German Securities Acquisition and Takeover Act
shall be observed if and to the extent they apply. If the shares are acquired on
a stock exchange, the consideration paid per share (excluding incidental costs)
may not be more than 15% higher or lower than the opening price on the
respective trading day in the XETRA trading system (or any comparable successor
system). If the acquisition takes place by means of a public tender offer and/or
a public invitation to tender shares, the tender price per share or the high and
low ends of the price range (without incidental costs) shall not be more than
20% higher or lower than the closing price of the XETRA trading system on the
third trading day prior to the public announcement of such tender offer and/or
such public invitation to tender shares. If after the publication of the public
tender offer and/or public invitation to tender shares, material deviations in
the relevant price occur, the offer and/or invitation to tender shares may be
adjusted accordingly. In this case, the price will be based on the price on the
third trading day prior to the public announcement of any such adjustment. The
volume may be limited. If the offer and/or invitation to tender shares is
oversubscribed or, in the case of an invitation to tender shares, not all
equivalent offers can be accepted, the acceptance will take place on a pro-rata
basis. Preferential acceptance may be provided for small lots of up to 100
shares per shareholder. The public tender offer and/or the invitation to tender
shares can stipulate further conditions. If the acquisition is based on a public
offer and/or a public invitation to tender shares of Allianz AG in exchange of
shares of a company exchange-listed within the meaning of sec. 3 para. 2 German
Stock Corporation Act ("Exchange Shares"), a certain exchange ratio may be
stipulated or may be determined by way of an auction. A cash consideration may
either supplement the offered exchange as a purchase price payment or may be
used to settle fractional amounts. In each of these procedures, the exchange
price per share and/or the relevant high and low ends of the exchange price
range in form of one or more Exchange Shares and calculatory fractions,
including any cash or fractional amounts (excluding incidental costs), may not
be more than 20% higher or lower than the relevant value of a share of Allianz
AG. The value of the shares of Allianz AG and of the Exchange Shares shall be
determined based on the relevant closing price in the XETRA trading system (or
if the respective shares are not traded in the XETRA trading system, the trading
system used in the particular market segment, which resembles the XETRA trading
system most closely) on the third trading day prior to the public announcement
of the exchange offer and/or the public invitation to offer shares for exchange.
If after the public announcement of the public exchange offer and/or the
invitation to tender shares for exchange substantial price deviations occur, the
offer and/or invitation to tender shares for exchange may be adjusted. In this
case, the prices on the third trading day prior to the public announcement of
the adjustment shall be relevant. The volume may be limited. If the exchange
offer is oversubscribed and/or if in the case of an invitation to tender shares
not all equivalent offers are accepted, the acceptance will take place on a
pro-rata basis. Preferential acceptance may be provided for small lots of up to
100 offered shares per shareholder. The exchange offer and/or invitation to
tender shares for exchange may stipulate further conditions.

     The shareholders' subscription rights to these own shares as well as own
shares that were acquired pursuant to previous authorizing resolutions according
to sec. 71 para. 1 No. 8 of the German Stock Corporation Act are excluded to the
extent that they are used under the authorization. This shall be permitted in
particular in the case of a near-market sale on a stock exchange, in the case of
a sale against consideration in kind, as well as for purposes of introducing
shares of Allianz AG on non-German stock exchanges and to fulfill the rights of
holders of bonds with conversion or option rights, issued by Allianz AG or its
group companies. Furthermore, the Management Board is authorized in connection
with a sale of own shares through an offer to the shareholders to grant the
holders of bonds with conversion or option rights, issued by Allianz AG or its
group companies, a subscription right for shares to an extent to which they
would be entitled had they exercised their conversion or option right; the
shareholders' subscription rights are excluded to this extent. The Management
Board is furthermore authorized to redeem acquired own shares based on an
authorization pursuant to sec. 71 para. 1 No. 8 of the German Stock Corporation
Act, and the redemption or its completion shall not require an additional
resolution by the general meeting.

                                       158


     Upon effectiveness of this authorization, the currently existing
authorization for the acquisition of own shares for other purposes, which is
limited until December 11, 2003, will be cancelled.

     As of December 31, 2002, Allianz Group held a total of 23,588,411 own
shares of which 17,155,008 shares were held by Herakles
Beteiligungs-Gesellschaft mbH, a wholly-owned subsidiary of Dresdner Bank AG.
The inventory of own shares was reduced due to transactions in own shares in the
trading portfolio and the issuance of own shares to holders of profit
participation certificates who had accepted the voluntary public offer of
Allianz AG, to exchange their profit participation certificates in a relation of
8:10 against shares in Allianz AG. As of April 10, 2003, the Allianz Group held
17,292,998 own shares, whereof 17,155,008 own shares are still held by Herakles
Beteiligungs-Gesellschaft mbH. See also "-- Profit Participation Rights."

PROFIT PARTICIPATION RIGHTS

     With the consent of the Supervisory Board, the Management Board had issued
5,723,512 profit participation certificates in the period between October 1986
until and including March 1998. No profit participation certificates were issued
in the years 1999 to 2002. As of December 31, 2001, 358 profit participation
certificates were terminated by their respective holders.

     In November 2002, Allianz AG submitted a voluntary public offer to the
holders of profit participation certificates for the exchange of their profit
participation certificates against shares of Allianz AG. The voluntary exchange
offer did not constitute a termination of the profit participation certificates
by Allianz AG pursuant to the conditions of the profit participation
certificates. Profit participation certificates for which the exchange offer was
not accepted remained in effect. The exchange ratio was 10 shares for each 8
profit participation certificates. The exchange period ended after a one-time
extension on January 16, 2003. A total of 4,918,488 profit participation
certificates (or approximately 86% of all issued profit participation
certificates) were exchanged against 6,148,110 shares. The shares for the
exchange offer were taken from Allianz AG's inventory of own shares. See also
" -- Acquisition of Own Shares of Allianz AG." After the exchange, 804,666
profit participation certificates currently remain outstanding. The conditions
determined at their issuance still apply to these profit participation
certificates.

     The conditions of the profit participation certificates provide for an
annual distribution in an amount of 240% of the dividend distributed by Allianz
AG for one share for each profit participation certificate with a nominal amount
of E5.12, however at least 5% per annum of the nominal amount of the profit
participation certificate.

     Their holders may terminate the profit participation certificates every
five years, for the first time as of December 31, 2001, upon a prior notice
period of 12 months. The terms guarantee a repayment price for this case, which
corresponds to the weighted average of the issue price of all issuances of
profit participation certificates. After the issuance in April 2003, it will
amount to a uniform amount of E72.39. Allianz AG may terminate the profit
participation certificates as of the end of each fiscal year upon a prior notice
period of 6 months, however, not earlier than as of December 31, 2006. In this
case, the redemption amount for each profit participation certificate would
amount to 122.9% of the average standard quotation of the shares of Allianz AG
based on the official price quotation at the stock exchange in Munich during the
last three months prior to the end of the profit participation relationship,
however, at least currently E72.39. Instead of a cash settlement, Allianz AG
could offer an exchange against shares of Allianz AG in a relation of 10 shares
for 8 profit participation certificates. During its annual general meetings,
Allianz AG has always pointed out that Allianz AG is not subject to any legal
obligation to terminate the profit participation certificates as of December 31,
2006, or as of any other date.

     The conditions of the profit participation certificates furthermore provide
that in connection with capital increases reserving shareholders' subscriptions
rights to new shares of Allianz AG, the holders of profit participation
certificates have a right to subscribe to additional profit participation
certificates from a profit participation capital that is to be increased
correspondingly. By resolution of Allianz AG's ordinary general meeting on July
12, 2000, the Management Board received its latest authorization in this respect
to issue profit participation certificates in an aggregate net amount of up to
E10,000,000 upon the Supervisory Board's consent in order to secure subscription
rights of holders of profit participation certificates at terms and conditions

                                       159


corresponding to those of the previously issued profit participation
certificates. The holders of profit participation certificates receive a
subscription right for new profit participation certificates at conditions that
are comparable to the subscription conditions for shareholders during the
capital increase. The subscription rights of shareholders to these new profit
participation certificates are excluded. Any unsubscribed profit participation
certificates shall be realized on a best efforts basis.

     On April 7, 2003, the Management Board of Allianz AG decided to issue
profit participation certificates in an aggregate nominal amount of
E13,674,521.60, thereby increasing the profit participation capital from
E29,302,548.48 to E42,977,070.08. The increase will be implemented by issuing
2,670,805 profit participation certificates with a nominal amount of E5.12 each,
of which 2,295,294 are attributable to Allianz AG. The remaining 375,511 new
profit participation certificates are subject to a separate subscription offer
that does not require a prospectus. The new profit participation certificates
are bearer certificates and are entitled to distributions from January 1, 2003.
The claims arising from the profit participation certificates are based on the
conditions of the profit participation certificates, which correspond to the
conditions underlying the first issuance of profit participation certificates in
October 1986, as last amended in April 2003.

NOTIFICATION AND DISCLOSURE OBLIGATIONS

     The German Securities Trading Act requires every shareholder whose
participation in a company with registered office in Germany, which is listed
for trading on an organized market in a member state of the European Union or
any other country that is a party to the Treaty on the European Economic Area,
reaches, exceeds, or falls below thresholds of 5%, 10%, 25%, 50%, or 75% of the
voting rights of such company to inform the company and the German Federal
Financial Supervisory Agency without undue delay but in any case no later than
after seven days thereof in writing. In the context of this requirement, the
German Securities Trading Act contains various rules that are meant to ensure
the allocation of share ownership to the person that actually controls the
voting rights arising from such shares. As long as he fails to make such
notification, the shareholder may generally not exercise rights arising from
such shares (including voting and dividend rights).

     On April 2, 2003, Munich Re notified Allianz AG pursuant to the
requirements of the German Securities Trading Act that it indirectly held a
participation of 18.1% of the voting rights in Allianz AG. See "Related Party
Transactions -- Transaction with Munich Re." On June 27, 2002, Bayerische Hypo-
und Vereinsbank AG notified Allianz AG that its participation in Allianz AG had
fallen below the threshold of 5% of the voting rights and amounted to 4.61%. On
April 8, 2002, Deutsche Bank AG notified Allianz AG that it held an aggregate
direct and indirect participation of 3.66% of the voting rights in Allianz AG.
On April 5, 2002, Allianz Finanzbeteiligungs GmbH, Dresdner Bank AG, and
Herakles Beteiligungs-Gesellschaft mbH informed Allianz AG that they held 6.44%
of the voting rights in Allianz AG.

GERMAN FOREIGN EXCHANGE CONTROL

     Germany does not generally restrict capital movements between Germany and
other countries, institutions or persons. Restrictions currently exist with
respect to Iraq and the Taliban, among others, as a result of UN resolutions and
EU rules.

     For statistical purposes, subject to certain exceptions, each company or
person domiciled in Germany is required to report to the German Bundesbank each
payment received from or made to a company or person not domiciled in Germany in
excess of E12,500 (or an equivalent amount in a foreign currency). Moreover, all
claims and liabilities of a company or person domiciled in Germany against or
towards a company or person not domiciled in Germany in excess of E5 million (or
an equivalent amount in a foreign currency) are required to be reported monthly
to the German Bundesbank.

CONTINGENT LIABILITIES AND OTHER FINANCIAL COMMITMENTS

     On December 31, 2002, Allianz AG had contingent liabilities under sureties
in an amount of E7,561 million, matched by rights of recourse for the same
amount.

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     Guarantee declarations have been given for:

     - the bonds issued in 1996 by Allianz Finance B.V., Amsterdam, for E767
       million,

     - the bonds issued in 1997 and increased in 2000 by Allianz Finance B.V.,
       Amsterdam, for E1.1 billion,

     - the debenture bonds issued in 1998 by Allianz Finance B.V., Amsterdam,
       for E1.632 billion,

     - the bonds issued in 1998 for E1.02 billion by Alliance Finance B.V.,
       Amsterdam, exchangeable into shares of Deutsche Bank AG,

     - the bonds issued by Allianz Finance B.V., Amsterdam, in 1999 and
       increased in 2000 for CHF 1.5 billion and a swap deal in which the bonds
       payable are exchanged for an equivalent commitment in euro or US Dollar,

     - the bonds issued in 2000 by Allianz Finance B.V., Amsterdam, for E1.7
       billion, exchangeable into shares of Siemens AG,

     - the bonds issued in 2001 by Allianz Finance II B.V., Amsterdam, for
       E1.979 billion; the amount repayable on redemption is linked to the
       performance of the German DAX share index,

     - the bonds issued in 2001 by Allianz Finance II B.V., Amsterdam, for
       E1.075 billion, exchangeable into shares of RWE AG,

     - the loans totaling US$820 million issued in 2001 by Fireman's Fund
       Insurance Corp., Novato, to five group companies,

     - the bonds issued in 2002 by Allianz Finance II B.V., Amsterdam, for E2
       billion,

     - the subordinated bonds issued in 2002 by Allianz Finance II B.V.,
       Amsterdam, for E2 billion,

     - the subordinated bonds issued in 2002 by Allianz Finance II B.V.,
       Amsterdam, for E1 billion,

     - the subordinated bonds issued in 2002 by Allianz Finance II B.V.,
       Amsterdam, for US$500 million,

     - the loan totaling AUD100 million issued in 2002 to Allianz Australia
       Ltd., Sydney.

     Allianz AG has committed to make future capital payments in favor of its
North American holding company, Allianz of America, Inc. This will place Allianz
of America, Inc. in a position to provide sufficient capital on its part for
Allianz Insurance Company Los Angeles, so that this company can meet its payment
obligations for claims received in connection with the terrorist attack of
September 11, 2001. These future capital payments are limited to US$500 million
and are secured by pledges in securities.

     A commitment to make capital payments in the amount of E27 million also
exists with respect to Allianz Marine & Aviation (France) S.A., Paris.

     In connection with the increase of the capital of the U.S. subsidiaries
Allianz Life of North America, Fireman's Fund Insurance Corp. and Allianz
Insurance Company, a conditional commitment to acquire shares of Allianz Life of
North America and Allianz Insurance Company in the amount of US$962 million was
given.

     A guarantee declaration was provided for Allianz of America, Inc.,
Wilmington, for commitments related to the acquisition of PIMCO Advisors L.P.
Through its subsidiaries, Allianz AG acquired an interest of 69.5% in PIMCO,
while the minority shareholders have the option of selling their 30.5% holding
to Allianz of Americas, Inc. As of December 31, 2002, these commitments totaled
US$2.054 billion. In addition, on March 31, 2003, a subsidiary of Allianz AG
received notice from the former parent company of the Allianz Group's asset
management subsidiary PIMCO that such former parent company had exercised its
right to put $250 million of its remaining ownership interest in PIMCO to a
subsidiary of Allianz AG, with payment therefor due by April 30, 2003. For
additional discussion concerning these put arrangements, see "-- Consolidated
Results of Operations -- Asset Management Operations -- Results of
Operation -- Year Ended December 31, 2002 compared to Year Ended December 31,
2001 -- Net Income."

                                       161


     In addition, a guarantee in the amount of E1.155 billion was provided to
secure the obligations of Allianz BDF GmbH under a repurchase agreement related
to shares in Beiersdorf AG.

     Guarantee declarations have also been given for deferred annuity agreements
signed by Allianz-RAS Seguros y Reaseguros S.A., Madrid.

     Allianz AG has also provided several foreign subsidiaries and associated
companies with either a standard indemnity guarantee or such guarantee as is
required by the supervisory authorities, which cannot be quantified in figures.

     As of April 7, 2003, Allianz AG had incurred, or expected to incur, the
following additional contingent liabilities:

     Allianz AG expects that it will provide keep-well undertakings with minimum
terms of three years and a maximum aggregate amount of US$1.4 billion to support
the ratings of Fireman's Fund.

     Allianz AG has also provided a guarantee which cannot be quantified for
obligations by Allianz Marine & Aviation (France) S.A., Paris, which have been
incurred since January 1, 2002.

     Furthermore, guarantees were provided to secure obligations of AZ-Arges
Vermogensverwaltungsgesellschaft mbH and AZ-Argos 19
Vermogensverwaltungsgesellschaft mbH resulting from derivative transactions
entered into with a view to reducing the valuation risk related to equity
holdings of the Allianz Group. "Business -- Strategy -- Capital and Portfolio
Management."

     Legal obligations to assume any losses arise on account of agreements for
the transfer of control and distribution of profits/losses with the companies of

     - ACM Compagnie Mercur AG

     - Advance Holding Aktiengesellschaft(1)(2)

     - AFIN GmbH

     - Allianz Autowelt GmbH(1)(4)

     - Allianz Dresdner Pension Consult GmbH

     - Allianz Dresdner Pensionsfonds AG

     - Allianz Far East Holding GmbH(1)(3)

     - Allianz Finanzbeteiligungs GmbH

     - Allianz Global Risks Ruckversicherungs-AG

     - Allianz Immobilien GmbH

     - Allianz Lebensversicherungs-AG

     - Allianz Marine & Aviation Versicherungs-AG

     - Allianz Osteuropa Vermogensverwaltungsgesellschaft mbH(1)(3)

     - Allianz Private Equity Holding GmbH(1)(3)

     - Allianz ProzessFinanz GmbH(1)(5)

     - Allianz Versicherungs-AG

     - AZ-Arges Vermogensverwaltungsgesellschaft mbH(1)(6)

     - AZ-Argos 3 Vermogensverwaltungsgesellschaft mbH(1)(7)

     - AZ-Argos 10 Vermogensverwaltungsgesellschaft mbH(1)(8)

     - AZ-Argos 15 Vermogensverwaltungsgesellschaft mbH(1)(9)

     - AZ-Argos 19 Vermogensverwaltungsgesellschaft mbH(1)(10)

     - AZ-BDF Vermogensverwaltungsgesellschaft mbH(1)(6)

     - Bayerische Versicherungsbank AG

                                       162


     - Frankfurter Versicherungs-AG (cancelled effective December 31, 2002)

     - IDS GmbH-Analysis and Reporting Services

     - Kraft Versicherungs-AG

     - META Finanz-Informationssysteme GmbH

     - Orpheus Vermogensverwaltungsgesellschaft mbH(1)(3).
------------

(1)  The Management Board and Supervisory Board of Allianz AG have proposed to
     the ordinary general meeting convened for April 29, 2003, to consent to
     this agreement for the transfer of control and distribution of
     profits/losses.

(2)  The intercompany agreement previously existing between Allianz AG and
     Advance Holding Aktiengesellschaft was rescinded as of December 31, 2002.
     The new agreement for the transfer of control and distribution of
     profits/losses commenced on January 1, 2003.

(3)  This agreement for the transfer of control and distribution of
     profits/losses commenced on January 1, 2002.

(4)  This agreement for the transfer of control and distribution of
     profits/losses commenced on March 21, 2002.

(5)  This agreement for the transfer of control and distribution of
     profits/losses commenced on March 20, 2002.

(6)  This agreement for the transfer of control and distribution of
     profits/losses commenced on August 12, 2002.

(7)  This agreement for the transfer of control and distribution of
     profits/losses commenced on August 22, 2002.

(8)  This agreement for the transfer of control and distribution of
     profits/losses commenced on August 23, 2002.

(9)  This agreement for the transfer of control and distribution of
     profits/losses commenced on September 21, 2002.

(10) This agreement for the transfer of control and distribution of
     profits/losses commenced on September 2, 2002.

     Financial commitments also result in connection with the promise of
compensation to holders of rights under stock option programs of AGF.

     The acquisition of Nicholas-Applegate included an agreement for contingent
earn-out payments falling due in 2005. The amount of these payments will depend
on the income growth of Nicholas-Applegate:

     - The maximum earn-out payment will be US$ 1.09 billion if average income
       rises by 25% or more over this period; this is in addition to incentive
       and retention payments totaling US$150 million.

     - Earn-out payments will be incremental if average income increases between
       more than 10% but less than 25%.

     - No earn-out payments will be made if average income increases by less
       than 10%.

     Advertising contracts resulted in financial commitments amounting to
E17,080,000 for 2003.

     Outstanding contribution obligations for shares that were not fully paid in
existed in an amount of E426.5 million on December 31, 2002, E385.6 million
thereof in relation to affiliated companies.

     Allianz AG cannot exclude that payment obligations may result from these or
similar transactions at a later time, which would have an adverse effect on the
financial position and results of operations of Allianz AG.

                                       163


                        DIRECTORS AND SENIOR MANAGEMENT

GENERAL

     The corporate bodies of Allianz AG are the Management Board (Vorstand), the
Supervisory Board (Aufsichtsrat) and the general meeting (Hauptversammlung). The
Management Board and the Supervisory Board are separate and no individual may
serve simultaneously as a member of both boards.

     The Management Board is responsible for managing the day-to-day business of
Allianz AG in accordance with the German Stock Corporation Act (Aktiengesetz)
and the articles of association of Allianz AG. The Management Board is bound by
applicable German law, the articles of association of Allianz AG as well as its
internal rules of procedure (Geschaftsordnung). It represents Allianz AG in its
dealings with third parties. The Supervisory Board oversees the management of
Allianz AG. It is also responsible for appointing and removing the members of
the Management Board and representing Allianz AG in connection with transactions
between a member of the Management Board and Allianz AG. The Supervisory Board
may not make management decisions, but the Supervisory Board or the articles of
association must determine that certain types of transaction require the
Supervisory Board's prior consent.

     In carrying out their duties, the members of the Management Board and the
Supervisory Board must exercise the standard of care of a diligent and prudent
businessperson. In complying with this standard of care, the members of both
boards must take into account a broad range of considerations in their
decisions, including the interests of Allianz AG, its shareholders, employees
and creditors. The Management Board is additionally required to respect the
rights of shareholders to equal treatment and equal information.

     Members of either board who violate their duties may be personally liable
for damages to Allianz AG. Allianz AG may only waive these damages or settle
these claims if at least three years have passed from the date of their
origination, and if the general meeting approves the waiver or settlement with a
simple majority. No approval of a waiver or settlement by the general meeting
will be effective if opposing shareholders who hold, in the aggregate, one-tenth
or more of the share capital of Allianz AG have their opposition formally noted
in the minutes recorded by a German notary. As a general rule under German law,
a shareholder has no direct recourse against the members of the Management Board
or the Supervisory Board in the event that they are believed to have breached a
duty to Allianz AG.

     The Supervisory Board has comprehensive monitoring functions. To ensure
that these functions are carried out properly, the Management Board must
regularly report to the Supervisory Board with regard to current business
operations and future business planning (including financial, investment and
personnel planning). The Supervisory Board is also entitled to request at any
time special reports regarding the affairs of Allianz AG, the legal or business
relations of Allianz AG to its subsidiaries and the affairs of any of its
subsidiaries to the extent that the affairs of such subsidiary may have a
significant impact on Allianz AG.

     The Management Board is required to ensure that adequate risk management
and internal monitoring systems exist within Allianz AG to detect risks relating
to the Group's business activities at the earliest possible stage.

     Pursuant to sec. 161 of the German Stock Corporation Act, which was
introduced into the Stock Corporation Act by the Transparency and Publicity Act
(Transparenz- und Publizitatsgesetz) which became effective on July 26, 2002,
the Management Board and the Supervisory Board shall declare annually that
Allianz AG has complied or will comply with the recommendations set forth in the
"Corporate Governance Code" published by the German Ministry of Justice
(Bundesministerium der Justiz). In addition, the Management Board and the
Supervisory Board shall disclose any specific recommendation with which they
have failed or will fail to comply. The Corporate Governance Code contains
provisions for corporate governance (with respect to shareholders and general
meetings, Management Board, Supervisory Board, cooperation between Management
Board and Supervisory Board, transparency, reporting and audit of the annual
financial statements). On December 18, 2002, the Management Board and
Supervisory Board declared for the first signed the first compliance
declaration, confirming that Allianz AG complies with all recommendations of the
Corporate Governance Code. However, the members

                                       164


of Allianz AG's Management Board reserve the right to exceed the maximum number
of mandates held outside the Group (section 5.4.3 of the Code) as appropriate,
as the acceptance of supervisory board mandates in companies in which Allianz AG
has substantial holdings forms an essential part of the duties of members of the
Management Board.

MANAGEMENT BOARD

     The Management Board of Allianz AG currently consists of eleven members.
Under the articles of association of Allianz AG, the Supervisory Board
determines the size of the Management Board, although it must have at least two
members. Under the articles of association, Allianz AG may be legally
represented by two members of the Management Board or by one member of the
Management Board and the holder of a general commercial power of attorney
(Prokura), which entitles its holders to carry out all legal acts and
transactions on behalf of Allianz AG. In addition, pursuant to a filing with the
commercial register in Munich, Allianz AG may also be represented by two holders
of a general commercial power of attorney. The Supervisory Board represents
Allianz AG in connection with transactions between a member of the Management
Board and Allianz AG. To the extent that a Supervisory Board committee is
entitled to decide on a specific matter in lieu of the Supervisory Board, the
right of representing Allianz AG vis-a-vis the Management Board in that matter
can be transferred to the relevant Supervisory Board committee.

     The Supervisory Board appoints the members of the Management Board. The
initial term of the members of the Management Board is generally limited to
three years. Each member may be reappointed or have his term extended by the
Supervisory Board for one or more terms of up to five years each. The initial
appointment or reappointments of members of the Management Board attaining the
age of 60, is generally limited to terms of one year. Members of the Management
Board must resign from office at the end of the fiscal year in which they attain
the age of 65. The Supervisory Board may remove a member of the Management Board
prior to the expiration of his term for good cause, for example in the case of a
serious breach of duty or a bona fide vote of no confidence by the general
meeting. A member of the Management Board may not deal with, or vote on, matters
relating to proposals, arrangements or contractual agreements between himself
and Allianz AG and may be liable to Allianz AG if he has a material interest in
any contractual agreement between Allianz AG and a third party which was not
disclosed to, and approved by, the Supervisory Board. The Management Board has
adopted its own internal rules of procedure.

     The Management Board regularly reports to the Supervisory Board on the
business of Allianz AG. See "-- General." According to the internal rules of
procedure of the Supervisory Board, the Management Board requires the consent of
the Supervisory Board for certain transactions, primarily, share capital
measures and acquisitions or divestitures of companies or shareholdings in
companies of a significant volume. In addition, under the articles of
association of Allianz AG, unless the acquirer belongs to the Allianz Group
companies, the Management Board may not dispose of shares held by Allianz AG in
Allianz Versicherungs AG or grant subscription rights pertaining to such shares
without the approval of the general meeting of Allianz AG.

     The current members of the Management Board, their areas of responsibility,
the year in which each member was first appointed, the year in which the term of
each member expires, and the membership in statutory supervisory boards in
Germany or abroad of each member outside the Allianz Group (as of April 7,
2003), respectively, are as follows:

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                                                                                          MEMBERSHIP OF STATUTORY
                                                                                       SUPERVISORY BOARDS IN GERMANY
                                 YEAR OF FIRST   EXPIRATION                                OR ABROAD OUTSIDE THE
NAME                              APPOINTMENT     OF TERM     AREAS OF RESPONSIBILITY          ALLIANZ GROUP
----                             -------------   ----------   -----------------------  -----------------------------
                                                                           
Dr. Henning Schulte-                  1991          2003      Member and chairman of   Deputy chairman of he
  Noelle(1)....................                               Management Board         supervisory board of Linde
                                                                                       AG, member of the supervisory
                                                                                       boards of BASF AG, E.ON AG,
                                                                                       Siemens AG and ThyssenKrupp
                                                                                       AG
Dr. Paul Achleitner............       2000          2004      Group Finance            Member of the supervisory
                                                                                       boards of Bayer AG, MAN AG
                                                                                       and RWE AG
Detlev Bremkamp................       1991          2004      Europa II                Member of the supervisory
                                                                                       boards of ABB AG (Germany)
                                                                                       and Hochtief AG
Michael Diekmann(2)............       1998          2006      North- and               --
                                                              Southamerica; Group
                                                              Human Resources
Dr. Joachim Faber..............       2000          2004      Allianz Dresdner Asset   Member of the supervisory
                                                              Management (ADAM)        boards of Bayerische Borse AG
                                                                                       and Infineon Technologies AG
Dr. Reiner Hagemann............       1995          2004      Europa I                 Member of the supervisory
                                                                                       boards of E.ON Energie AG,
                                                                                       Schering AG, Steag AG
Dr. Horst Muller...............       2001          2003      Group Financial Risk     Chairman of the supervisory
                                                              Management               boards of Europa Carton GmbH
                                                                                       and Smurfit-Stone-Verwal
                                                                                       tungsgesellschaft mbH, member
                                                                                       of the supervisory boards of
                                                                                       BATIG Gesellschaft fur
                                                                                       Beteiligungen mbH,
                                                                                       British-American Tobacco
                                                                                       (Germany) GmbH, British-
                                                                                       American Tobacco (Industrie)
                                                                                       GmbH and Buderus AG
Dr. Helmut Perlet..............       1997          2004      Group Controlling,       --
                                                              Accounting, Tax,
                                                              Compliance
Dr. Gerhard Rupprecht..........       1991          2005      Group Information        Member of the supervisory
                                                              Technology, Life         boards of Heidelberger
                                                              Insurance Germany        Druckmaschinen AG, Quelle AG
                                                                                       and ThyssenKrupp Automotive
                                                                                       AG
Dr. Herbert Walter.............       2003          2007      Allianz Dresdner         --
                                                              Banking
Dr. Werner Zedelius............       2002          2004      Growth Markets           Member of the supervisory
                                                                                       board of SMS AG


------------

(1) Dr. Schulte-Noelle will cease to be a member and chairman of the Management
    Board as of the end of the April 29, 2003 general meeting.

(2) The Supervisory Board has appointed Michael Diekmann chairman of the
    Management Board effective as of the end of the April 29, 2003 general
    meeting.

     Dr. Henning Schulte-Noelle:  Joined the Allianz Group in 1975. He was a
member of the management board of Allianz Versicherung and Allianz Leben from
1988 to 1990. In 1991 he was

                                       166


appointed chairman of the management board of Allianz Leben and member of the
Management Board of Allianz AG. When he was appointed chairman of the Management
Board of Allianz AG in October 1991, he ceased to be chairman of the management
board of Allianz Leben.

     Dr. Paul Achleitner:  Joined the Management Board of Allianz AG in January
2000. He was previously Chairman of Goldman, Sachs & Co. oHG, Frankfurt, Germany
and a partner of Goldman Sachs Group from 1994 to 1999.

     Detlev Bremkamp:  Joined the Allianz Group in 1963. He was a deputy member
of the management board of Allianz Versicherung from 1981 to 1982 and a full
member from 1983 to 1987, managing director and general manager of Allianz
Europe Ltd. in Amsterdam from 1987 to 1990, and became a member of the
Management Board of Allianz AG in 1991.

     Michael Diekmann:  Joined the Allianz Group in 1988. From 1996 to 1998 he
was chief executive officer of Allianz Insurance Management Asia-Pacific Pte.
Ltd., Singapore. He became a deputy member in October 1998 and a full member of
the Management Board of Allianz AG in March 2000.

     Dr. Joachim Faber:  Joined the Allianz Group in 1997 after holding various
positions at Citibank AG, Frankfurt, Germany (1984 -- 1992), including chairman
of the management board, and Citibank International PLC, London (1992 -- 1997),
including head of capital markets. He was a member of the management board of
Allianz Versicherung from 1997 to 1999 and became a member of the Management
Board of Allianz AG in January 2000.

     Dr. Reiner Hagemann:  Joined the Allianz Group in 1977. In 1987, he became
a deputy member, in 1990 a full member and in 1995 was made chairman of the
management board of Allianz Versicherung. He became a member of the Management
Board of Allianz AG in 1995.

     Dr. Horst Muller:  Joined Dresdner Bank in 1970. He became a deputy member
of the management board of Dresdner Bank in 1992, and a full member in 1994.
With the acquisition of Dresdner Bank in July 2001, he became a member of the
Management Board of Allianz AG.

     Dr. Helmut Perlet:  Joined the Allianz Group in 1973. He has been head of
the foreign tax department since 1981, head of corporate finance since 1990 and
head of accounting and controlling since 1992. He became a deputy member in July
1997 and a full member of the Management Board of Allianz AG in January 2000.

     Dr. Gerhard Rupprecht:  Joined the Allianz Group in 1979. In January 1989,
he became a deputy member, and in January 1991 a full member, and in October
1991 was appointed chairman, of the management board of Allianz Leben. He became
a member of the Management Board of Allianz AG in October 1991.

     Dr. Herbert Walter:  Held various positions at Deutsche Bank AG since 1983,
including chairman of the business segment Private & Business Clients and
speaker of the management board of Deutsche Bank 24. Since 2002, he was a member
of the Group Executive Committee of Deutsche Bank group as well as Global Head
of Private & Business Clients. He became a member of the Management Board of
Allianz AG on March 19, 2003, and became the Chairman of the management board of
Dresdner Bank AG effective March 25, 2003.

     Dr. Werner Zedelius:  Joined the Allianz Group in 1987. After various
positions in branch offices and in the headquarters of Allianz AG, he was
General Manager Finance and member of the board of directors of Cornhill
Insurance PLC in London from 1996 until 1999. Dr. Zedelius became a member of
the Management Board of Allianz AG on January 1, 2002.

     The members of the Management Board may be contacted at the address of
Allianz AG.

SUPERVISORY BOARD

     In accordance with the articles of association of Allianz AG and the German
Codetermination Act (Mitbestimmungsgesetz), the Supervisory Board of Allianz AG
consists of 20 members, ten of whom are elected by the shareholders and ten of
whom are elected by the employees of the German companies of the Allianz Group.
Three of the current employee representatives were appointed by court pursuant
to the German Stock Corporation Act. Three of the employee representatives are
representatives of the trade unions represented in the Allianz Group in Germany.
The general meeting may remove any Supervisory Board member it has elected by a

                                       167


simple majority of the votes cast. The employee representatives may be removed
with a majority of three-quarters of the votes cast by those employees who
elected them. In addition, any member of the Supervisory Board may resign by
written notice to the Management Board.

     The Supervisory Board has a quorum when all members of the Supervisory
Board were invited or requested to participate in a decision and either ten or
more members, including the chairman of the Supervisory Board, or, when the
chairman of the Supervisory Board is not present, fifteen or more members must
participate in any decision before the Supervisory Board. Except where a
different majority is required by law or the articles of association of Allianz
AG, the Supervisory Board acts by simple majority of the votes cast. In the case
of any deadlock, the chairman has the deciding vote. The Supervisory Board meets
at least twice each half-year. Its main functions are:

     - to monitor the management of Allianz AG;

     - to appoint the members of the Management Board; and

     - to approve matters in areas where such approval is required by German law
       or which the Supervisory Board has made generally or in the individual
       case subject to its approval. (See "-- Management Board").

     In addition, supervisory boards of German insurance companies are tasked
with the appointment of the auditors.

     The Supervisory Board has established a Standing Committee, an Audit
Committee, a Compensation Committee and a Conciliation Committee.

     Standing Committee.  The Standing Committee, which comprises the chairman
of the Supervisory Board and his representatives and two additional members
elected by the Supervisory Board, may approve or disapprove certain transactions
of Allianz AG to the extent that such matter does not fall under the competency
of any other committee or must be decided by plenary meeting of the Supervisory
Board. The Standing Committee examines the corporate governance of Allianz AG,
assigns the mandate to the auditor for the annual financial statements, drafts
the declaration of compliance and examines the efficiency of the work of the
Supervisory Board. In addition, it determines the guest status of non-members
who wish to attend Supervisory Board meetings as well as changes in form to the
articles of association. The Standing Committee held four meetings in 2002. The
members of the Standing Committee are Dr. Klaus Liesen as chairman, Frank Ley,
Bernd W. Voss, Norbert Blix and Dr. Manfred Schneider.

     Audit Committee.  The Audit Committee, established for the first time in
September 2002, comprises five members elected by the Supervisory Board. The
Audit Committee prepares the decisions of the Supervisory Board about the
Group's annual financial statements, the consolidated financial statements and
about the appointment of the auditors and ascertains the independence of the
auditors. In the future, the Audit Committee will select and appoint the
auditors, set priorities for the audit and determine the compensation of the
auditors. In addition, it examines the quarterly reports. After the end of the
fiscal year, the Audit Committee examines the Group's annual financial
statements and the consolidated financial statements, examines the risk
monitoring system and discusses the auditor's report with the auditors. The
Audit Committee held one meeting in 2002. The members of the Audit Committee are
Dr. Klaus Liesen as chairman, Dr. Diethart Breipohl, Dr. Gerhard Cromme, Prof.
Rudolf Hickel and Horst Meyer.

     Compensation Committee.  The Compensation Committee consists of the
chairman of the Supervisory Board and two other members elected by the
Supervisory Board. It prepares the appointment of members of the Management
Board. In addition, it tends to on-going personnel matters of the members of the
Management Board including their membership on boards of other companies. The
Compensation Committee decides about bonus payments and the structure of
long-term incentive programs. (See "Business -- Long-term Incentive Plans and
Employee Stock Ownership Arrangements -- Long-term Incentive Plans"). The
Compensation Committee held six meetings in 2002. The members of the
Compensation Committee are Dr. Klaus Liesen as chairman, Frank Ley and Bernd W.
Voss.

     Conciliation Committee.  The Conciliation Committee consists of the
chairman of the Supervisory Board and his representative elected according to
the rules of the German Codetermination Act of 1976, one member elected by the
employees and one member elected by the

                                       168


shareholders. Under sec. 27 (3) of the German Codetermination Act the
Conciliation Committee is charged with the solution of conflicts in the
appointment of members of the Management Board. If the Supervisory Board in a
vote on the appointment or recall of a member of the Management Board fails to
obtain the required majority, the Conciliation Committee has to present a
proposal to the Supervisory Board. There arose no need for the Conciliation
Committee to meet in 2002. The members of the Conciliation Committee are Dr.
Klaus Liesen as chairman, Frank Ley, Gerhard Cromme and Prof. Dr. Rudolf Hickl.

     Each member of the Supervisory Board is generally elected for a fixed term,
which expires at the end of the general meeting at which the shareholders
discharge the members of the Supervisory Board in respect of the fourth fiscal
year after the beginning of the term. The fiscal year in which the members of
the Supervisory Board are first elected is not considered. Supervisory Board
members may be reelected.

     The current members of the Supervisory Board of Allianz AG, their principal
occupations, the year in which each member first served on the Supervisory
Board, the year in which the term of each member expires and memberships in
statutory Supervisory Boards in Germany of each member outside the Allianz Group
(as of April 7, 2003), respectively, are as follows:



                                                                    PRINCIPAL OCCUPATION AND MEMBERSHIP
                                 YEAR OF FIRST   EXPIRATION OF        OF STATUTORY SUPERVISORY BOARDS
NAME                               ELECTION          TERM          IN GERMANY OUTSIDE THE ALLIANZ GROUP
----                             -------------   -------------   -----------------------------------------
                                                        
Dr. Klaus Liesen,                    1983            2003        Chairman of the supervisory board of E.ON
  Chairman(1)..................                                  AG and member of the supervisory boards
                                                                 of TUI AG and Volkswagen AG
Frank Ley, Deputy                    1993            2003        Employee of Allianz
  chairman(2)..................                                  Lebensversicherungs-AG
Dr. Bernd W. Voss, Deputy            2002            2003        Former member of the management board of
  chairman(1)..................                                  Dresdner Bank AG, member of the
                                                                 supervisory boards of Continental AG,
                                                                 Dresdner Bank AG, E.ON AG, KarstadtQuelle
                                                                 AG, Quelle AG, TUI AG and Wacker Chemie
                                                                 GmbH
Norbert Blix(2)................      1997            2003        Employee of Allianz Versicherungs-AG,
                                                                 deputy chairman of the supervisory board
                                                                 of Allianz Versorgungskasse VVaG
Dr. Diethart Breipohl(1).......      2000            2003        Former member of the management board of
                                                                 Allianz AG, member of the supervisory
                                                                 boards of Beiersdorf AG, Continental AG,
                                                                 KarstadtQuelle AG, KM Europa Metal AG
                                                                 (chairman) and mg technologies ag
Bertrand Collomb(1)............      1998            2003        President Directeur General Lafarge
Dr. Gerhard Cromme(1)..........      2001            2003        Chairman of the supervisory board of
                                                                 ThyssenKrupp AG, member of the
                                                                 supervisory boards of Axel Springer
                                                                 Verlag Aktiengesellschaft, Deutsche
                                                                 Lufthansa AG, E.ON AG, Ruhrgas AG,
                                                                 Volkswagen AG and Siemens AG (since
                                                                 January 23, 2003)
Jurgen Dormann(1)..............      1998            2003        Chairman and CEO ABB Ltd. and Chairman of
                                                                 the supervisory board of LION bioscience
                                                                 AG
Hinrich Feddersen(3)...........      2001            2003        Member of federal steering committee
                                                                 ver.di, member of the supervisory board
                                                                 of Basler Versicherungs
                                                                 Beteiligungsgesellschaft mbH and
                                                                 Deutscher Ring Lebensversicherungs-AG
Dr. Uwe Haasen(1)..............      2002            2003        Former member of the management board of
                                                                 Allianz AG


                                       169




                                                                    PRINCIPAL OCCUPATION AND MEMBERSHIP
                                 YEAR OF FIRST   EXPIRATION OF        OF STATUTORY SUPERVISORY BOARDS
NAME                               ELECTION          TERM          IN GERMANY OUTSIDE THE ALLIANZ GROUP
----                             -------------   -------------   -----------------------------------------
                                                        
Peter Haimerl(3)...............      2001            2003        Employee of Dresdner Bank AG, member of
                                                                 the supervisory board of Dresdner Bank AG
Prof. Dr. Rudolf Hickel(2).....      1999            2003        Professor of Finance Bremen University,
                                                                 member of the supervisory boards of
                                                                 GEWOBA AG Wohnen and Bauen in Bremen,
                                                                 Howaldtswerke Deutsche Werft AG and
                                                                 Salzgitter AG Stahl and Technologie
Horst Meyer(2).................      2001            2003        Employee of Hermes
                                                                 Kreditversicherungs-AG, deputy chairman
                                                                 of the supervisory board of Hermes
                                                                 Kreditversicherungs-AG and member of the
                                                                 supervisory board of Allianz
                                                                 Versorgungskasse VVaG
Uwe Plucinski(3)...............      2001            2003        Employee of Dresdner Bank AG, member of
                                                                 the supervisory board of BVV
                                                                 Versicherungsverein des Bankgewerbes a.G.
Reinhold Pohl(2)...............      1993            2003        Employee of Allianz Immobilien GmbH
Roswitha Schieman(2)...........      1998            2003        Branch manager Allianz Versicherungs-AG
Dr. Manfred Schneider(1).......      1998            2003        Chairman of the supervisory board of
                                                                 Bayer AG, member of the supervisory board
                                                                 of DaimlerChrysler AG, Linde AG, METRO
                                                                 AG, RWE AG and TUI AG
Dr. Hermann Scholl(1)..........      1998            2003        Chairman of the management board of
                                                                 Robert Bosch GmbH, member of the
                                                                 supervisory board of BASF AG
Jurgen E. Schrempp(1)..........      1998            2003        Chairman of the management board of
                                                                 DaimlerChrylser AG, Chairman of the
                                                                 supervisory board of DaimlerChrylser
                                                                 Services AG
Jorg Thau(2)...................      2000            2003        Employee of Allianz Private
                                                                 Krankenversicherungs-AG


------------

(1) Representative of shareholders.

(2) Representative of employees.

(3) Appointed by court.

     The members of the Supervisory Board may be contacted at the address of
Allianz AG.

     The term of the present members of the Supervisory Board ends as of the
general meeting convened for April 29, 2003 and a new Supervisory Board will be
elected.

     The employee representatives of the new Supervisory Board were elected on
March 17, 2003 by the employees of the German Allianz Group companies. The names
of the elected members are published in the Federal Gazette and the Internet at
the Allianz website. The shareholder representatives will be elected by the
general meeting convened for April 29, 2003. The Supervisory Board proposes to
resolve, that the following members be elected as shareholder representatives in
the Supervisory Board for five years until the end of the 2008 general meeting:

     - Dr. Wulf H. Bernotat, Essen, chairman of the management board of E.ON AG
       (since May 1, 2003)

     - Dr. Diethart Breipohl, Icking, former member of the Management Board of
       Allianz AG

     - Bertrand Collomb, Paris, President Directeur General Lafarge

                                       170


     - Dr. Gerhard Cromme, Essen, chairman of the supervisory board of
       ThyssenKrupp AG

     - Jurgen Dormann, Zurich, chairman of the administrative board
       (Verwaltungsrat) and chairman of group management (Konzernleitung) ABB
       Ltd. and chairman of the supervisory board of LION bioscience AG

     - Dr. Renate Kocher, Konstanz, managing director Institut fur Demoskopie
       Allensbach

     - Dr. Manfred Schneider, Leverkusen, chairman of supervisory board of Bayer
       AG

     - Dr. Hermann Scholl, Stuttgart, chairman of the management board of Robert
       Bosch GmbH

     - Jurgen E. Schrempp, Stuttgart, chairman of the management board of
       DaimlerChrysler AG

     - Dr. Henning Schulte-Noelle, Munchen, chairman of the Management Board of
       Allianz AG (until April 29, 2003)

     The Supervisory Board also proposes to elect the following persons as
deputy members in respect of the aforementioned shareholder representatives:

     - Dr. Albrecht Schafer, Munchen, in-house counsel of Siemens AG

     - Dr. Jurgen Than, Hofheim am Taunus, in-house counsel of Dresdner Bank AG

COMPENSATION OF DIRECTORS AND OFFICERS

     Management Board.  Total compensation for members of the Management Board
includes a fixed component (the basic salary) and a variable component. The
compensation paid by the Allianz Group to the Management Board for 2002 was
approximately E17.4 million. As of November 1, 2002, the number of members of
the Management Board decreased from twelve to eleven. The compensation allocated
to the Management Board in 2002 consists of variable remuneration of
approximately E9.5 million and fixed remuneration of approximately E7.9 million.
From 2002 on, the variable component consists of the annual bonus which includes
an individual element and an element based on company performance, and a
three-year bonus, from which payments to members of the Management Board can be
made for the first time in 2004. If the objective-linked bonus is attained, the
variable compensation amounts to 65% of the total compensation of board members.

     In addition to these amounts, in 2002 the Allianz Group paid an amount of
approximately E9 million to increase pension reserves and reserves for similar
obligations in favor of active members of the Management Board.

     In addition, under the Long-term Incentive Plan, a total of 47,200 stock
appreciation rights were issued to members of the Management Board during the
fiscal year 2002. Based on standard option valuation methods (Black-Scholes or
Binomial Method), these rights had a value of E5.2 million at the time of their
issue. The value of these rights at the end of the fiscal year 2002 was E0.3
million. At an intrinsic value of E0, the full amounts specified are time
values.

     At December 31, 2002, members of the Management Board held a total of
119,739 stock appreciation rights issued from 1999 through 2002 under the
Long-term Incentive Plans. Based on standard option valuation methods
(Black-Scholes or Binomial Method), these rights had a value of E0.5 million at
December 31, 2002. None of the appreciation rights had an intrinsic value at
December 31, 2002, so that the full amount specified is a time value. See
"Business -- Long-term Incentive Plans and Employee Stock Ownership
Arrangements."

     In the fiscal year 2002, pensions and other benefits for former members of
the Management Board as well as payments to compensate the claims of former
members of the Management Board amount to approximately E13 million.
Furthermore, E7 million were set aside in the fiscal year 2002 for compensating
the claims of former members of the Management Board. An amount of E29 million
was set aside for current and future pension benefits of former members of the
Management Board and their beneficiaries.

     Supervisory Board.  The articles of association provide that the annual
compensation for each Supervisory Board member is E4,000, plus E500 for every
cent by which the dividend per share declared for the relevant year exceeds 15
cents. The chairman of the Supervisory Board

                                       171


receives twice that amount, and each member of any Supervisory Board committee
(except of the Conciliation Committee) receives one and one half times that
amount. Allianz AG reimburses all Supervisory Board members for their
out-of-pocket expenses and the value-added tax on this compensation. In
addition, Allianz AG provides members of the Supervisory Board with insurance
coverage and technical support to the extent necessary for the members of the
Supervisory Board to carry out their functions. The aggregate amount of
compensation of the members of the Supervisory Board for the fiscal year 2002
amounts to E2 million, including fees becoming payable after the 2003 general
meeting.

     The Management Board and the Supervisory Board have proposed to the 2003
ordinary general meeting of Allianz AG convened for April 29, 2003, to change
the compensation of the Supervisory Board as follows: The annual fixed
compensation of each Supervisory Board member is E4,000, plus E500 for every
cent by which the dividend per share declared for the relevant year exceeds 15
cents. The chairman of the Supervisory Board receives twice that amount, and
each deputy chairman receives one and one half times that amount. Members of any
Supervisory Board committee (except of the Conciliation Committee and the Audit
Committee) receive a bonus of 25% on these amounts and the committee chairman
receives a bonus of 50% on these amounts. Members of the Audit Committee receive
an additional annual fixed compensation of E30,000 and the chairman receives an
additional annual fixed compensation of E45,000. Members of the Supervisory
Board, who carried out this function only during a portion of the fiscal year,
receive one twelfth of the compensation for each month (whether completed or
not) in which they carried out their function. The same applies with regard to
the membership in any committees of the Supervisory Board. The aggregate annual
compensation of the members of the Supervisory Board may not exceed twice, and
in the case of the chairman of the Supervisory Board three times, the sum of the
annual fixed compensation and the additional dividend-related compensation.
Allianz AG reimburses all Supervisory Board members for their out-of-pocket
expenses and the value-added tax on this compensation. In addition, Allianz AG
provides members of the Supervisory Board with insurance coverage and technical
support to the extent necessary for the members of the Supervisory Board to
carry out their functions.

GENERAL MEETING

     In accordance with the German law governing the supervision of insurance
companies (Versicherungsaufsichtsgesetz), the ordinary general meeting of
Allianz AG must take place within the first 14 months after the end of each
fiscal year. As a general rule, the Management Board convenes the general
meeting; the Supervisory Board is required to convene a general meeting if this
is in the best interest of Allianz AG. Among other things, the general meeting
decides on the following issues: the use of the annual surplus; ratification of
the actions of the Management Board and the Supervisory Board; capital increases
and/or decreases; and the appointment of the members of the Supervisory Board,
provided that no rights to nominate members of the Supervisory Board exist and
not including those members of the Supervisory Board who are to be elected in
accordance with the German Codetermination Act. In addition, the general meeting
of Allianz AG, in accordance with the articles of association, decides on the
inclusion of third-party (i.e., non-Group) shareholders into Allianz
Versicherungs-AG. An extraordinary general meeting may be convened by either the
Management Board or the Supervisory Board. A shareholder or group of
shareholders who, individually or as a group, owns or own at least 5% of the
share capital may also demand that the Management Board convene an extraordinary
general meeting. Should the Management Board refuse to satisfy this demand,
the(se) shareholder(s) may convene the meeting themselves, provided they receive
authorization to do so from a competent court. A shareholder or group of
shareholders who, individually or as a group, owns or own at least 5% or
E500,000 of the share capital of Allianz AG may require that modified or
additional topics be added to the agenda of the general meeting and that these
topics be published before the general meeting takes place. The agenda of the
general meeting must be published at the time of convening of the meeting in the
electronic version of the German Federal Gazette (elektronischer
Bundesanzeiger). Along with its publication, the agenda must be communicated to
those shareholders who either have been registered in the share register
(Aktienregister) of Allianz AG at least two weeks before the day of the general
meeting or who have deposited at least one share with Allianz AG or who have
requested the communication of the agenda after the publication of the convening
of the general meeting in the Federal Gazette. Shareholder motions or proposals
for voting that have been made in accordance with

                                       172


applicable law must be made available to authorized persons. Allianz AG
satisfies this requirement by publication on the Internet.

     Shareholders of Allianz AG whose names are registered in the share register
and who have registered for the meeting in a timely fashion will be entitled to
attend and to vote at the general meeting. The registration deadline for
attending each general meeting is published concurrently with the notice
convening the meeting in the electronic version of the Federal Gazette. Proxies
require written authorization, which can be given electronically, as per further
determination by Allianz AG. Details regarding the granting of proxies are
published alongside the notice convening the general meeting in the electronic
version of the Federal Gazette. In his role as chairman of the general meeting,
the chairman of the Supervisory Board, or, in his absence, another member of the
Supervisory Board appointed by the board, may permit the audio-visual
transmission of the general meeting via electronic media by a method to be
determined by him, provided that this possibility was announced in the
invitation to the general meeting.

VOTING RIGHTS AND RESOLUTIONS OF THE GENERAL MEETING

     In principle, each share entitles the shareholder whose name is registered
in the share register to one vote at the general meeting. Neither the German
Stock Corporation Act nor the articles of association provide for a minimum
quorum requirement for shareholders at the general meeting. A resolution is
validly passed with the majority of votes cast (simple majority), unless German
stock corporation law or the articles of association require a larger majority
or stipulate any further requirements. The dismissal of members of the
Supervisory Board, for example, requires a super-majority of three quarters of
the votes cast. Furthermore, the German Stock Corporation Act and the German law
on the transformation of companies (Umwandlungsgesetz) require a super-majority
of three quarters of the share capital represented at the general meeting, in
addition to a simple majority of votes cast, for the following decisions, among
others: the creation of authorized and conditional capital; capital decreases;
the dissolution of Allianz AG; a merger or combination of Allianz AG with
another corporate entity or a divestiture; an obligation to transfer all or
substantially all of the assets of Allianz AG; entering into agreements between
business enterprises; any change in the corporate form or corporate purpose of
Allianz AG; and the exclusion of subscription rights in connection with a
capital increase. To the extent that the law requires a majority of the capital
in addition to the majority of votes cast, a simple majority of the share
capital represented at the time of the passing of the resolution is sufficient,
according to the articles of association and provided that the law does not
require otherwise. At a parity of votes, a resolution shall be considered
rejected.

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                           RELATED PARTY TRANSACTIONS

     Related parties to the Allianz Group are associated companies and
enterprises in which the Allianz Group holds an interest of between 10% and 20%
or which hold such interest in Allianz AG, and closely associated persons.

TRANSACTIONS WITH MUNICH RE

     Until March 31, 2003, Munich Re was an associated company of the Allianz
Group. The relationship between Allianz AG and Munich Re is set forth in the
so-called "Principles of Cooperation" of May 20, 2000, which mainly govern the
reinsurance relationships between the two companies. Among other things, the
Principles of Cooperation determine that Munich Re shall provide reinsurance for
14% of the gross self-retention of the insurance business of the companies of
the Allianz Group's German Property-Casualty Group via Allianz AG. Due to the
merger of Vereinte Versicherung AG with Allianz Versicherung, the share of the
reinsurance business of the German Property-Casualty Group to be assumed by
Munich Re was reduced from 14% to 10.5% in an agreement of August 2, 2002,
effective retroactively as of January 1, 2002. Under the terms of the Principles
of Cooperation, Munich Re is the principal reinsurer of Allianz AG and Allianz
AG cedes the majority of its externally ceded reinsurance to Munich Re.
Notwithstanding its right to freely choose its reinsurer, Allianz AG will give
Munich Re the first opportunity to submit bids.

     The Principles of Cooperation were amended in December 2001 by a
supplementary agreement, under the terms of which the mutually ceded reinsurance
volume is to be adjusted on a step-by-step basis by 2008. The supplementary
agreement is effective through December 31, 2010.

     The Principles of Cooperation of May 2000 can be terminated as of December
31, 2005. On December 19, 2002, this termination agreement was amended by a
supplementary agreement which stipulates the terms of termination of the
Principles of Cooperation to be ineffective until December 31, 2003 and shortens
the termination notice set forth therein from three to two years. This means
that the Principles of Cooperation will be automatically renewed for another ten
years only if they are not terminated prior to December 31, 2003.

     Other reinsurance and retrocession agreements with individual Group
companies govern the reinsurance business, which Munich Re will assume from or
cede to Allianz Group.

     The Allianz Group assumed from Munich Re gross premiums written amounting
to approximately E600 million, E850 million and E900 million in 2002, 2001 and
2000, respectively. Allianz Group ceded approximately E2.3 billion, E2.4 billion
and E2.3 billion gross premiums written to Munich Re in 2002, 2001 and 2000,
respectively. These amounts represent 31.3%, 30.6% and 30.2% of the Allianz
Group's total third-party reinsurance premiums ceded in 2002, 2001 and 2000,
respectively, and a share of 4.0%, 4.0% and 4.0% of the total gross premiums
written by the Allianz Group in 2002, 2001 and 2000, respectively.

     Allianz AG believes that the reinsurance business it cedes to and assumes
from Munich Re is on terms that are comparable to those that could be obtained
from unrelated third parties.

     On May 4, 2000, Allianz AG and Munich Re signed a letter of intent, which,
among other things, provides for a reduction of their shareholdings in each
other to approximately 20% to be achieved or initiated by December 31, 2003. As
of December 31, 2002, Allianz Group held 22.4% of the shares of Munich Re.
Munich Re informed Allianz AG that on December 31, 2002, it held 21.2% of the
outstanding shares of Allianz AG (as of December 31, 2002). Taking into account
the treasury shares held by the Allianz Group companies on February 28, 2003,
whose number was reduced in January 2003 after fulfilling the exchange offer for
participation certificates of Allianz AG, the registered ownership interest of
Munich Re in Allianz AG amounted to 20.7% as of February 28, 2003. See
"Information about the share capital of Allianz AG -- Acquisition of Own Shares
in Allianz AG."

     In connection with the acquisition of Dresdner Bank, Allianz AG pledged to
the European Commission to limit its voting rights from ordinary shares of
Munich Re to 20.5% of the total ordinary share capital of Munich Re. In
addition, Allianz AG agreed to reduce its long-term shareholding in Munich Re to
20.5%. This commitment includes the ordinary shares of Munich

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Re held by Dresdner Bank. The commitment includes the shares of Munich Re held
by Dresdner Bank. The commitment of Allianz AG to the European Commission does
not affect ordinary shares of Munich Re that are acquired and held by the
companies of the Allianz Group as part of their trading portfolio in the
ordinary course of business and which do not have voting rights. The commitment
also does not affect the exercise of voting rights on behalf of clients or
voting rights of ordinary shares held in the ordinary course of business for the
account of third parties.

     The Principles of Cooperation further provide that upon termination of the
Principles of Cooperation, a mutual obligation of the parties will continue to
exist for a period of two years, in accordance with which each of Allianz AG and
Munich Re, if it wishes to sell the ownership interest it holds in the other,
will grant the other a right to designate the buyer of the ownership interest
being sold. These provisions also apply to the disposition of ownership
interests in majority jointly held companies.

     Upon termination of the Principles of Cooperation, the existing reinsurance
arrangements between Allianz AG and Munich Re will remain in force but may be
terminated at any time pursuant to the provisions of the relevant reinsurance
agreements. The reinsurance arrangements with respect to majority jointly held
entities will remain in effect. Munich Re and Allianz AG have agreed that all
disputes arising from the Principles of Cooperation are to be resolved through
binding arbitration.

     On January 15, 2002, Munich Re transferred its ownership interest of 40.5%
in Allianz Life to Allianz AG. The reinsurance arrangements between Allianz Life
and Munich Re remain in force until 2010 based on the existing agreements.
Furthermore, Munich Re transferred, with effect from June 30, 2002, its
ownership interest of 50.0% in Frankfurter Versicherungs-AG and 45.0% in
Bayerische Versicherungsbank AG to Allianz Versicherung. Allianz AG transferred
its ownership interest of 36.1% in Karlsruher Lebensversicherung AG, a
subsidiary of Munich Re, to Munich Re. The transfers were made in completion of
the arrangements made in the letter of intent of May 4, 2000 between Allianz AG
and Munich Re.

     In connection with the capital increase of Allianz AG as resolved on April
7, 2003 by the Management Board with the approval of the Supervisory Board given
on April 8, 2003, Munich Re and Allianz AG reached an understanding to reduce
their ownership interests in each other. Munich Re has indicated its intention
to reduce its ownership interest in Allianz AG to approximately 15%. In return,
Allianz AG intends to reduce the Group's ownership interest in Munich Re to 16%
to 18% by the end of 2003 and to approximately 15% in the course of 2004. The
understanding does not relate to ordinary shares that are held as part of the
trading portfolio in the ordinary course of business or to ordinary shares held
in the ordinary course of business for the account of third parties. As of March
31, 2003, the Allianz Group's interest in Munich Re was reduced to slightly less
than 20%. Munich Re reduced its interest in Allianz AG to less than 20% as of
March 31, 2003 and Munich Re's interest will be reduced to approximately 15% as
a result of the Offering.

EXERCISE OF MANDATES

     On April 7, 2003, no member of the Management Board or the Supervisory
Board of Allianz AG held any seat on the Management Board or the Supervisory
Board of Munich Re.

RELATIONSHIPS WITH MEMBERS OF THE MANAGEMENT BOARD AND THE SUPERVISORY BOARD OF
ALLIANZ AG

SHAREHOLDING

     On April 7, 2003, the members of the Management Board and the Supervisory
Board of Allianz AG altogether held less than 1% of the share capital of Allianz
AG. According to the share register the members of the Management Board and the
Supervisory Board held at that date altogether 4,336 shares of Allianz AG.

LOANS

     In the normal course of business and subject to applicable legal
restrictions, members of the Management Board and the Supervisory Board may be
granted loans by Dresdner Bank, which are subject to the usual conditions in the
industry. No additional loans were granted in the last

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fiscal year. On December 31, 2002, loans to board members granted in previous
years and amounting to E0.5 million were still outstanding, including E0.5
million to board members of subsidiaries.

OTHER RELATED PARTIES

     Allianz AG has a number of other associated companies in which Allianz AG
holds interests of between 10% and 20%. Companies of the Allianz Group have
various types of business relations with the companies (particularly in the area
of insurance, banking and asset management). These relations are subject to
ordinary market conditions. In particular, the business relations with
associated companies in the insurance business take on various forms and may
also include special service, reinsurance, cost-sharing and asset management
agreements whose terms Allianz AG and Allianz Group deem to be appropriate.

TERROR RISK INSURANCE COMPANIES

     In the aftermath of the terrorist attacks of September 11, 2001, terror
risk insurance companies were founded in Germany and Luxembourg to address the
existing shortage of direct insurance and reinsurance coverage for major risks
in the international markets. The shareholders of these companies are a number
of direct insurers and reinsurers, including companies of the Allianz Group.
Allianz Versicherungs-AG holds a 16% interest in Deutsche EXTREMUS
Versicherungs-AG ("EXTREMUS"), which was registered on October 22, 2002 and has
an equity capital of E50 million. Munich Re also holds a 16% interest in
EXTREMUS. On the basis of the E10 billion state guarantee granted by the Federal
Republic of Germany, EXTREMUS is able to provide excess coverage of up to E13
billion for terror risks encountered in Germany. Allianz AG also holds an 18.2%
interest in Special Risk Insurance and Reinsurance Luxembourg S.A. ("SRIR"),
which was registered on April 4, 2002 and has an equity capital of E300 million.
SRIR's new business was discontinued in March 2003 due to a lack of demand.

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                                  UNDERWRITING

     Citigroup Global Markets Limited, Deutsche Bank AG, Goldman Sachs
International and UBS Limited are the Global Coordinators and Underwriters for
the subscription offer and the private placements. The subscription of the
shares will be effected through the German affiliates of the Underwriters, as
required by German law.

     Pursuant to the terms of the Underwriting Agreement, the Underwriters will
agree, severally and not jointly, to subscribe the number of shares set forth
below and to offer them for subscription to the shareholders of Allianz AG
(except for a residual amount representing approximately 860,275 shares as to
which subscription rights have been excluded); Allianz AG will agree to issue
the number of shares as set forth below.



                                                               NUMBER OF
UNDERWRITERS                                                    SHARES
------------                                                  -----------
                                                           
Citigroup Global Markets Limited............................   29,296,875
Deutsche Bank Aktiengesellschaft............................   29,296,875
Goldman Sachs International.................................   29,296,875
UBS Limited.................................................   29,296,875
                                                              -----------
TOTAL.......................................................  117,187,500
                                                              ===========


     The subscription price per share in the subscription offer is E38.00.

     Shares as to which subscription rights have been excluded and shares, if
any, that have not been subscribed in the subscription offer will be offered
through the Underwriters to institutional investors, in private placements.

     Pursuant to the Underwriting Agreement, the Underwriters will pay to
Allianz AG at least the subscription price for the New Allianz Shares not
subscribed for by April 29, 2003. In relation to sales of such shares by the
Underwriters that are settled on or before May 5, 2003, the Underwriters will
pay to Allianz AG the entire proceeds realized in such sales. In relation to
sales of such shares by the Underwriters settled after May 5, 2003, until the
expiration of a period of 20 trading days commencing on May 2, 2003, the
Underwriters will pay to Allianz AG the amount, if any, by which the price at
which the sales were made exceeds E42.00, provided that the average market price
of Allianz shares exceeds E42.00 on each day in that 20 trading day period.

     Pursuant to the Underwriting Agreement, Allianz AG will pay to the
Underwriters an aggregate commission of approximately E170 million. Furthermore,
Allianz AG may, in its sole discretion, pay to the Underwriters a further
commission of up to E22 million. In the Underwriting Agreement Allianz AG will
agree to indemnify the Underwriters against certain liabilities.

     The Underwriters and certain of their affiliates have entered into and may,
from time to time, enter into commercial and investment banking arrangements
with the Allianz Group and its subsidiaries, including significant lending
arrangements, for which they receive customary fees and expenses.

LOCK-UP

     Allianz AG will agree with the Underwriters that, until October 31, 2003,
to the extent legally permitted, it will not issue new shares or sell own shares
outside the Allianz Group or issue securities which are convertible into or
exchangeable for or which carry the right to acquire any new shares of Allianz
AG, except for shares or other securities offered to senior executives or
employees of Allianz AG or its affiliates, and shares issued in connection with
a capital increase from retained earnings (stock dividends) or in connection
with an acquisition or a joint venture directly to the partner of such
acquisition or joint venture, provided that the acquiror agrees to such lock-up.

TERMINATION OF UNDERWRITING AGREEMENT

     The Underwriters reserve the right to terminate the Underwriting Agreement
for certain reasons or to delay the completion of the subscription offer by up
to one week. These reasons include, without limitation, significant adverse
changes in the financial position or results of operations of shareholders'
equity of the Group, to the extent not discussed in this Offering

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Circular, material restrictions of exchange trading or of the banking business,
the eruption or escalation of hostilities, which have, or can be expected to
have, a material adverse effect on the financial markets, and the failure to
register the implementation of the capital increase in the commercial register
by April 28, 2003. As to the consequences of a termination in relation to the
subscription offer and the first stock exchange trades see "The
Offering -- Subscription Offer -- Important Notices" and "The
Offering -- Additional Important Notices."

STABILIZATION

     An Underwriter, as principal, may perform measures that enable it to keep
the market price of the shares and the subscription rights at a level that
differs from the level that may otherwise exist. Stabilization measures, if any,
may be discontinued at any time; any stabilization measures will be conducted in
Germany or elsewhere in accordance with applicable laws and regulations.

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                              TAXATION IN GERMANY

     The following section "Taxation in Germany" contains a brief summary of
several important taxation principles that are or may become important for the
acquisition, holding, or the disposal of shares. This section is not meant to be
a comprehensive and complete representation of all German tax aspects possibly
relevant for shareholders. This summary is based upon German tax law applicable
as of the date of this Offering Circular and upon provisions of double taxation
treaties entered into between Germany and other countries. In both areas, the
law may change and such changes may have retroactive effect.

     Potential purchasers of shares are urged to consult their tax advisers
about the tax consequences of the purchase, holding, disposal, gratuitous
transfer of shares and the procedures for obtaining a possible refund of German
withholding tax paid. Only such tax advisors are in a position to take into
account adequately the special tax situation of the individual shareholder.

TAXATION OF ALLIANZ AG

     German corporations are generally subject to German corporate income tax at
a uniform rate of 25% on retained earnings as well as distributed profits plus
solidarity surcharge on the corporate income tax liability (in sum: approx.
26.38%). Solely for the year 2003, the uniform corporate income tax rate amounts
to 26.5% plus solidarity surcharge of 5.5% on the corporate income tax liability
(in sum: approx. 27.96%).

     In addition, German corporations are subject to trade income tax. The rate
of trade income tax depends on the municipality in which the corporation has
permanent establishments. Generally, the trade income tax rate ranges between
15% and 25% of the income assessed for trade income tax purposes, depending on
the rate of the municipality. In determining the income relevant for corporate
income tax purposes, the trade income tax is deductible as a business expense.

     As of the abolition of the corporate income tax imputation system
(Korperschaftsteueranrechnungsverfahren) in connection with the introduction of
the so-called half income system (Halbeinkunfteverfahren), dividend
distributions by German resident corporations to Allianz AG are generally exempt
from corporate income tax. Dividend distributions are generally exempt from
trade income tax, if Allianz AG holds, as of the beginning of the relevant
assessment period, at least 10% of the share capital of the distributing
corporation.

TAXATION OF DIVIDENDS

WITHHOLDING TAX

     Generally, Allianz AG has, on account of its shareholders, to withhold from
its dividend distributions withholding tax at a rate of 20% plus solidarity
surcharge on such withholding tax at a rate of 5.5% (in sum: 21.1%) and to pay
such amount over to the tax authorities. The tax basis for such withholding tax
is the amount of the dividend distribution resolved by the shareholders'
assembly.

     Such withholding tax will generally be withheld irrespective of whether and
to which extent the dividend distribution is exempt at the level of the
shareholder and whether the shareholder resides inside or outside Germany.

     For dividends distributed to a company residing in a member state of the
European Community within the meaning of art. 2 of the so-called EC
parent-subsidiary directive (directive no. 90/435/EWG, July 23, 1990),
withholding tax is, in case further requirements are fulfilled, not required to
be withheld.

     In case of shareholders (individuals and corporations) being subject to
unlimited German tax liability as well as shareholders holding their shares as
part of a permanent establishment or a fixed base in Germany or as part of
business assets attributable to a permanent representative in Germany, the
withheld and paid withholding tax (including solidarity surcharge) will be
credited on their individual income or corporate income tax liability, or with
respect to the exceeding amount, be refunded.

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     For dividend distributions to shareholders residing outside Germany, the
withholding tax rate will be further reduced in case Germany and the country in
which the shareholder resides have entered into a double taxation treaty and the
shareholder holds the shares neither as assets attributable to a permanent
establishment in Germany nor as part of business assets attributable to a
permanent representative. The reduction will be granted by way of a refund of
the difference between the amount of dividend withholding tax withheld at the
statutory rate plus solidarity surcharge and the applicable treaty rate (in
general: 15%) upon application to the German tax authorities (Bundesamt fur
Finanzen, FriedhofstraSSe 1, 53225 Bonn, Germany). Refund forms can be obtained
from the German Federal Tax Authority (Bundesamt fur Finanzen) as well as at
German embassies and consulates.

SHAREHOLDERS WITH RESIDENCE IN GERMANY

     For individuals being resident in Germany and holding their shares as
private assets, only half of the dividends will be subject to individual income
tax (so-called half income system; Halbeinkunfteverfahren). Such dividends are
subject to individual income tax at a progressive rate (up to the highest rate
of 48.5% in 2003 and, pursuant to present law, of 47% in 2004 and 42% as of
2005) plus 5.5% solidarity surcharge thereon (with respect to the highest tax
rate of 48.5%, an overall tax burden in the amount of approx. 51.17% would
result). Only half of the expenses economically related to the dividends are
deductible for tax purposes.

     Individuals holding the shares as private assets are entitled to an annual
tax-exempt allowance for investment income (so-called Sparerfreibetrag) in the
amount of E1,550 (for singles) or E3,100 (for married couples assessed jointly).
In addition, a shareholder is also entitled to a lump sum deduction for
investment income related expenses (Werbungskostenpauschale) in the amount of
E51 and E102 respectively, unless a higher amount of expenses can be
established. Only to the extent half of the dividends and other investment
income, after having deducted half of the actually incurred expenses or the lump
sum expenses, exceeds the tax-exempt allowance for investment income, such
dividends are taxable.

     In case the shares are held as business assets of an individual
entrepreneur or partnership held by individuals, half of the dividends are taken
into account as business income for purposes of the individual taxation. Only
half of the expenses being economically related to such dividends are deductible
for tax purposes. Such dividends are also subject to trade income tax, unless
the shareholder holds, as of the beginning of the relevant assessment period, at
least 10% of the share capital of Allianz AG. However, trade income tax is
generally credited against the individual income tax of the shareholder by way
of a lump sum imputation system.

     Dividends to German resident corporations are, subject to certain
exceptions for banks, financial services institutions and financial
institutions, generally exempt from corporate income tax and solidarity
surcharge. A minimum shareholding or a holding period is not required. According
to the German Tax Authorities, expenses directly economically related with the
tax exempt dividends are not deductible for tax purposes. Dividends are subject
to trade income tax, unless the corporate shareholder holds at least 10% of the
share capital of Allianz AG as of the beginning of the relevant assessment
period.

SHAREHOLDERS WITH RESIDENCE OUTSIDE GERMANY

     For individuals not residing in Germany and corporations without permanent
establishment, fixed base or permanent representative in Germany, the tax
liability is deemed to be fulfilled with the withholding of the withholding tax
(possibly reduced under a double taxation treaty).

     In case the shareholder is an individual and the shares are attributable to
a permanent establishment or fixed base in Germany or the shares are held
through a permanent representative in Germany, only half of the dividends are
subject to German income tax plus 5.5% solidarity surcharge thereon. In case the
shares are attributable to a permanent establishment in Germany or are held
through a permanent representative in Germany, half of the dividend
distributions are also generally subject to trade income tax, unless the
shareholder holds as of the beginning of the assessment period at least 10% of
the share capital of Allianz AG. Please note that the trade income tax liability
can generally be credited against the individual income tax liability of the
individual shareholder by way of a lump sum imputation system.

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     Dividend distributions to corporations not residing in Germany are, subject
to certain exceptions for banks, financial services institutions and financial
institutions, generally exempt from corporate income tax and solidarity
surcharge. To the extent the shares are attributable to a permanent
establishment in Germany, the dividends are also subject to trade income tax,
unless the corporation held as of the beginning of the assessment period at
least 10% of the share capital of Allianz AG.

TAXATION OF CAPITAL GAINS

SHAREHOLDERS WITH RESIDENCE IN GERMANY

     Half of the profits resulting from the disposal of shares held as private
assets by a German resident individual are generally subject to individual
income tax and solidarity surcharge if the disposal takes place within twelve
months after the acquisition of the shares. In such case the profits resulting
from the disposal of a subscription right are also subject to individual income
tax and solidarity surcharge if the disposal takes place within twelve months
after the acquisition of the shares to which the subscription rights belong;
there exists a risk that all of the generated profits are subject to individual
income tax and solidarity surcharge. If the profit resulting from all private
capital gains (including half of the profits resulting from the disposal of
shares) per year and person is below E512, such profit is not subject to tax.

     Half of the profits resulting from the disposal of shares held as private
assets by a resident individual shareholder are subject to individual income tax
at the individual tax rate plus solidarity surcharge of 5.5% on the income tax
liability also after the above-mentioned one-year period, if the individual
shareholder or, in case of a gratuitous acquisition, the predecessor held at any
time during the five years preceding the disposal, directly or indirectly, at
least 1% of the share capital of Allianz AG. In such case profits resulting from
the disposal of a subscription right are also subject to individual income tax
and solidarity surcharge; there exists a risk that all of the generated profits
are subject to individual income tax and solidarity surcharge.

     Half of the profits from the disposal of shares held by a German resident
individual as business assets are subject to individual income tax at the
individual tax rate plus solidarity surcharge of 5.5% on the income tax
liability, plus trade income tax. In such case profits resulting from the
disposal of a subscription right are also subject to individual income tax and
solidarity surcharge as well as trade income tax; there exists a risk that all
of the generated profits are subject to individual income tax and solidarity
surcharge as well as trade income tax. However, the trade income tax is
generally credited against the individual income tax liability by way of a lump
sum imputation system.

     Only half of the losses resulting from the disposal of shares and half of
the expenses economically related with the disposal are deductible for tax
purposes to the extent they are generally deductible for tax purposes.

     Profits from the disposal of shares held by corporations are, subject to
certain exceptions for banks, financial services institutions and financial
institutions, generally exempt from trade income tax and corporate income tax
including solidarity surcharge. Correspondingly, according to the German Tax
Authorities, losses resulting from the disposal of shares and expenses directly
economically related to the disposal are not deductible for tax purposes. In
such case there exists significant risk, however, that all of the generated
profits resulting from the disposal of a subscription right are subject to
corporate income tax, solidarity surcharge and trade income tax.

SHAREHOLDERS WITH RESIDENCE OUTSIDE GERMANY

     Half of the profits from the disposal of shares held by a non-resident
individual are subject to German individual income tax plus 5.5% solidarity
surcharge on the income tax liability, if (i) the shares are held as assets
attributable to a permanent establishment or to a permanent representative in
Germany, or (ii) the individual held, directly or indirectly at any time during
the five years preceding the disposal at least 1% of the share capital of
Allianz AG. Most double taxation treaties, however, provide complete exemption
from German taxation in this respect, if the shares are not held as assets
attributable to a permanent establishment or fixed base in Germany. In the
above-stated cases profits resulting from the disposal of a subscription right
are

                                       181


also subject to individual income tax and solidarity surcharge; there exists a
risk that all of the generated profits are subject to individual income tax and
solidarity surcharge.

     Profits from the disposal of shares held by a non-resident corporation
holding the shares as assets attributable to a permanent establishment are
generally exempt from trade income tax and corporate income tax.
Correspondingly, according to the German Tax Authorities, losses resulting from
the disposal and expenses directly economically related to the disposal are not
deductible for tax purposes. In such case there exists significant risk that all
of the generated profits resulting from the disposal of a subscription right are
subject to corporate income tax, solidarity surcharge and trade income tax.

SPECIAL RULES FOR BANKS, FINANCIAL SERVICES INSTITUTIONS AND FINANCIAL
INSTITUTIONS

     To the extent banks and financial services institutions hold shares or
subscription rights, which are, pursuant to sec. 1 para. 12 of the German
Banking Act (Gesetz uber das Kreditwesen -- KWG), attributable to the trading
book (Handelsbuch) the so-called half income system (Halbeinkunfteverfahren) or
the tax exemption do not apply to dividends received nor to profits from the
disposal. The same applies to shares, which were acquired by financial
institutions within the meaning of the German Banking Act in order to realize a
short-term trading gain. This also applies to banks, financial services
institutions and financial institutions with their seat in another member state
of the European Community or another member state of the European Economic Area
Treaty.

INHERITANCE AND GIFT TAX

     The transfer of shares to other persons by way of gift or inheritance is
only subject to German inheritance and gift tax, if

          (1) the testator, donor, heir, donee or any other beneficiary had his
     domicile or residence in Germany or has not been living abroad as a German
     citizen for more than five years without having a domicile in Germany;

          (2) except as provided under (1) the testator's or donor's shares
     belong to a business asset attributable to a permanent establishment or a
     permanent representative in Germany; or

          (3) the testator or donor, either alone or with other closely related
     persons, held at the time of the inheritance or donation, directly or
     indirectly at least 10% of the share capital of Allianz AG.

     The few presently applicable inheritance and gift taxation treaties Germany
is a party to generally provide that German inheritance or gift tax is levied in
case (1) and, with certain restrictions, in case (2).

OTHER TAXES

     On the acquisition, the sale or other disposal of shares, no German stock
exchange transfer tax, value added tax, stamp duty or other tax will be levied.
Under special circumstances it is possible that entrepreneurs elect for a value
added tax duty of otherwise value added tax exempt turnovers. Net wealth tax is,
at present, not be levied in Germany.

CHANGES IN TAX LAWS

     The Draft Bill on the Reduction of Tax Privileges
(Steuervergunstigungsabbaugesetz) proposed by the German government provided,
among other things, for changes in the taxation of private capital gains. After
the draft act was passed by the German First Chamber (Bundestag) and rejected by
the Second Chamber (Bundesrat), on April 9, 2003, the Mediation Committee
(Vermittlungsausschuss) of the Bundestag and Bundesrat proposed a compromise,
pursuant to which the proposals relating to the proposed aggravation of the
taxation of private capital gains would be dropped. It cannot be ruled out,
however, that these or similar proposals may be taken up again in the future.

                                       182


                              FINANCIAL STATEMENTS



                                                               PAGE
                                                               -----
                                                            
CONSOLIDATED FINANCIAL STATEMENTS AND GROUP MANAGEMENT
  REPORT 2002...............................................     F-1
Group Management Report.....................................     F-3
Consolidated Financial Statements...........................    F-61
Independent Auditor's Report................................   F-131
ALLIANZ AKTIENGESELLSCHAFT FINANCIAL STATEMENTS 2002........   F-133
Management Report...........................................   F-134
Balance Sheet...............................................   F-148
Income Statement............................................   F-150
Notes.......................................................   F-151
Independent Auditor's Report................................   F-165
CONSOLIDATED FINANCIAL STATEMENTS AND GROUP MANAGEMENT
  REPORT 2001...............................................   F-167
Group Management Report.....................................   F-168
Consolidated Financial Statements...........................   F-213
Independent Auditor's Report................................   F-288


                                       183


                                 ALLIANZ GROUP

       CONSOLIDATED FINANCIAL STATEMENTS AND GROUP MANAGEMENT REPORT 2002

                                       F-1


                      (This page intentionally left blank)

                                       F-2


                        CONTENTS GROUP MANAGEMENT REPORT



                                        PAGE
                                        ----
                                     
ECONOMIC ENVIRONMENT..................   F-4
Paralyzing uncertainty................   F-4
Rough going for financial services
  providers...........................   F-4
Capital markets.......................   F-6
OVERALL BUSINESS DEVELOPMENT..........   F-9
Recommendation for appropriation of
  profit..............................  F-13
PROPERTY AND CASUALTY INSURANCE.......  F-14
Overview: Property and casualty
  insurance...........................  F-14
Germany...............................  F-16
France................................  F-18
Italy.................................  F-19
Great Britain.........................  F-20
Switzerland...........................  F-21
Spain.................................  F-22
Rest of Europe........................  F-23
NAFTA Region..........................  F-24
Asia-Pacific Region...................  F-25
South America.........................  F-26
Allianz Global Risks
  Ruckversicherungs-AG................  F-26
Credit insurance......................  F-27
Travel insurance and assistance
  services............................  F-27
Allianz Marine & Aviation.............  F-28
LIFE AND HEALTH INSURANCE.............  F-29
Overview: Life and health insurance...  F-29
Germany...............................  F-31
Italy.................................  F-33
France................................  F-34
Switzerland...........................  F-35
Spain.................................  F-35
Rest of Europe........................  F-36
U.S.A. ...............................  F-37
Asia-Pacific Region...................  F-37
South America.........................  F-39




                                        PAGE
                                        ----
                                     
BANKING...............................  F-40
Private customers and business
  customers...........................  F-41
Corporates & Markets..................  F-41
ASSET MANAGEMENT......................  F-43
Asset Management for third party
  investors...........................  F-43
Investments...........................  F-44
RISK REPORT...........................  F-47
Responsibilities......................  F-47
Risk categories.......................  F-47
Management of the Allianz Group
  through risk capital................  F-48
Risk controlling in the insurance
  business............................  F-48
Risk controlling in the banking
  business............................  F-50
Risk control in the asset management..  F-53
Operational risks.....................  F-53
Outlook...............................  F-54
Risk monitoring by third parties......  F-54
OUR EMPLOYEES.........................  F-55
International personnel marketing.....  F-55
International education programs and
  development perspectives............  F-56
Cross-border training programs........  F-56
Expatriation..........................  F-56
Transfer of know-how..................  F-56
AMI management programs...............  F-56
Performance orientation and
  compensation........................  F-57
OUTLOOK...............................  F-58
Many question marks...................  F-58
Uneven business environment for
  financial services providers........  F-58
Business outlook for Allianz Group....  F-58
Cautionary note regarding forward-
  looking statements..................  F-59


                                       F-3


     THE WORLD ECONOMY FAILED TO REGAIN ITS FOOTING IN 2002, DISAPPOINTING MANY
WHO HAD HOPED IT WOULD.  The going remained rough since virtually all regions
fell short of growth expectations. The optimistic mood at the beginning of the
year, which actually could have laid the groundwork for general upward momentum,
had already fizzled out by mid-2002. Anxiety about a war against Iraq,
deep-seated uncertainty on the capital markets and the fear of terrorist attacks
combined to smother the economy and prevented any noticeable rebound.

PARALYZING UNCERTAINTY

     Impetus for sustainable growth failed to materialize from the industrial
countries in 2002. The momentum witnessed at the beginning of the year, which
was fueled by optimistic forecasts, had already dissipated by the end of the
second quarter. In many major countries, consumer spending was more restrained
than had been expected. Many European and U.S. companies also postponed capital
expenditure and investment in expansion. The threat of war in Iraq and the
enormous losses on the capital markets contributed to this reluctance. As a
result, investment declined, which was fatal for the job market, and
unemployment did in fact start to rise again in many countries. The gross
domestic product of the euro region increased by a modest 0.8 percent. On the
other hand, the U.S. economy expanded by 2.3 percent. At the same time, however,
the Japanese economy, the second largest in the world, did not manage to break
out of the cycle of weak growth that is now in its tenth year, and economic
output contracted by 0.2 percent.

     Economic performance in regions with emerging markets varied considerably.
The Latin American economies were down from the previous year, primarily due to
the deep-rooted crisis in Argentina and its impact on neighboring countries. On
the other hand, the situation in Asia, with the exception of Japan, turned out
to be surprisingly positive. This region for the most part lived up to
expectations, and the gross domestic product of these countries rose by an
average of approximately 5.5 percent. Economic expansion in eastern Europe
slowed down, dropping roughly one percentage point to approximately 3 percent.

                              REAL GDP GROWTH in %

                                    (GRAPH)

ROUGH GOING FOR FINANCIAL SERVICES PROVIDERS

     Property & casualty insurance  This area of business, and especially
industrial insurance, continued to suffer from the effects of September 11,
2001, in the course of the reporting period. Terrorism risks have been
reassessed and claims estimates adjusted to take into account the new situation.
Premium income from industrial clients continued to increase. In the U.S.A., the
world's largest insurance market, this trend persisted throughout the entire
year 2002. In preceding years, excess capacity had combined with intense
competition to make it essentially impossible to generate risk-adequate premium
income. The return to reality with respect to pricing resulted from the
financial difficulties of various reinsurers following the terrorist attack in
2001. More than a few found themselves compelled to limit the underwriting
capacity made available to primary insurers. This was reflected in a decrease in
the availability of insurance for industrial clients. In addition, the
disappointing development on the capital market forced property and casualty
insurers to calculate more conservatively. Claims ratios showed improvement over
the previous year, which was overshadowed by the largest insurance claim ever,
the suicide attack on the World Trade Center.

                                       F-4


     Premium income from automobile insurance, the most important source of
property and casualty business with private customers, was in some cases down
from the previous year. The sluggish economy, especially in various major EU
countries, resulted in a decrease in vehicle registrations that had a direct
impact upon providers of automobile insurance (see chart).

          NEW AUTOMOBILE REGISTRATIONS Change over previous year in %

                                    (GRAPH)

     Life and health insurance  The unsolved problems confronting many
governmental retirement systems continue to lend fresh impetus to the insurance
business. Demographic aberrations in the U.S.A. and Europe and the resultant
burden on pay-as-you-go retirement systems have enhanced the image of private
retirement insurance. Germany's so-called "Riester" pension plan is a good
example. It combines private insurance with governmental support. However, sales
of Riester products fell considerably short of industry expectations in their
first year on the market. Nevertheless, premium growth in the German life
insurance sector did double to approximately 4.5 percent for the year although
consumer spending slackened off. This shows that people are concerned about
retirement security and are tending to opt for private life and retirement
insurance. Life insurance sales in other EU countries were also generally up,
but there were exceptions. Although premium income in France rose 2 percent,
income from the sale of insurance declined significantly in Spain. In the
countries of central and eastern Europe as well as in Asia, newfound prosperity
is also fueling the life insurance business, which is of course driven by the
demand for private retirement security. The world's life insurance companies
were faced with a special challenge in 2002 since they have to maintain the
guaranteed returns of their products despite weak stock markets and persistently
low interest rates.

     From early 2000 to the end of last year, the yield on ten-year bonds in the
euro region dropped by more than one percentage point and ended the reporting
period at 4.2 percent. The corresponding decrease was even more pronounced in
the U.S.A., where the rate dropped from 6.5 to 3.8 percent during that time.
This pushed down yields on new issues. Declining interest rates did cause the
prices of fixed-interest securities to rise, but the rise of the bond market did
not by any means compensate for the losses incurred on the stock markets during
the same period. In the course of this three-year period, the German DAX stock
index lost 57 percent of its value, and the U.S. Standard & Poor's 500 Index
recorded a loss of just under 40 percent. The Dow Jones dropped 27 percent, the
Dow Jones EURO STOXX 50 a hefty 50 percent, and Japan's Nikkei Index no less
than 55 percent. Capital market developments presented most life insurance
companies with serious problems.

     The problems experienced by the public health insurance system in Germany
caused large numbers of people who participated in the system voluntarily to
switch to private health insurance. As a result, the industry was once again
able to generate premium income in excess of the 5 percent increase recorded a
year earlier. The question as to how to handle the uncontrolled cost spiral,
notably in the U.S.A., Switzerland and Germany, remains unresolved. Not only
governmental health insurers but also private providers are confronted with
problems. Allianz Private Health Insurance uses a system to manage its
healthcare business and services that has already resulted in substantial
savings by eliminating unnecessary outlays. As a result, Allianz has staked out
a position of leadership in the German market.

                                       F-5


     Asset management  This area of business, which parallels and complements
life insurance, is also benefiting from the fact that retirement systems are
being restructured. For example, the "Riester" pension plan has kindled new
interest in company retirement plans in Germany, which has opened up additional
growth potential in the area of asset management for corporate clients. The
situation is similar in virtually all other EU countries. Asset management is
also becoming increasingly important as a vehicle for asset accumulation and
retirement benefits in central and eastern Europe as well as in Asia. In the Far
East, a steadily growing middle class is stimulating demand for asset-building
products, especially in South Korea, Malaysia and Singapore as well as in the
major metropolitan centers of China.

     The unfavorable capital market development in 2002 proved an obstacle to
these essentially positive conditions underlying Asset Management. Very weak
stock markets in the second half of the year intimidated investors and resulted
in a change in investment priorities. The trend favored funds which for the most
part invest in fixed-interest securities and money market products. On the other
hand, stock funds in 2002 once again failed to repeat the very successful
performance of the '90s. However, this change in investor preferences is hardly
likely to have an unfavorable effect on future growth prospects for asset
management business over the long term and will prove temporary. The mere fact
that asset managers were on balance still able to record an inflow of funds in a
year like 2002 that was so weak in terms of stock performance speaks in favor of
this.

     Banks  In 2002, this sector experienced considerable difficulties. Defaults
on loans and, as a result, higher write-offs due to the lackluster economy took
their toll on lending institutions. The downturn had a serious impact on the
earnings of the banking industry. The nose dive on the stock markets exacerbated
the situation since commission surpluses and trading income dwindled. In
particular, business in the area of new issues and merger and acquisition
consulting for corporate clients disappeared virtually completely. All this
reduced earnings and many financial institutions intensified their cost cutting
efforts. Newspapers were full of reports of layoffs and branch office closures
in many countries. Germany was especially hard hit by this situation.

CAPITAL MARKETS

     Developments on the capital markets had a strong impact on the activities
of Allianz in the areas of insurance, asset management and banking. Since the
financial markets failed to calm down in 2002, the effects on sales performance
and earnings were significant. This was the third year in a row that
fixed-interest securities yielded a higher return than stocks. Clients reacted
accordingly and exhibited a preference for low-risk investments that cut across
the entire market. This trend boosted the new business of our life insurers,
particularly Allianz Leben in Germany and our U.S. subsidiary Allianz Life of
North America. Our U.S. fund manager, PIMCO, which specializes in bonds and
whose PIMCO Total Return product became the largest fund in the United States in
2002, also benefited from this development.

     Stock markets  In the early months of 2002, most stock market indices were
still pointing upward. But when the accounting scandals assumed an unprecedented
dimension in the spring, investor confidence was shattered. Germany also
witnessed numerous cases of illegal manipulation of figures and falsified income
statements. An economic environment that repeatedly gave rise to unsettling
questions, the threat of war in Iraq and the possibility of a further despicable
attack by terrorists smothered all hope of a positive year for the world's stock
markets. In fact, the low for the year in October was well below the level
following the terrorist attack of September 11, 2001. At year-end 2002, the
German DAX index had dropped approximately 44 percent.

                                       F-6


The losses suffered by the broad-based U.S. Standard & Poor's 500 index in the
U.S.A. pointed in the same direction: this barometer was down 20 percent for the
year.

                         STOCK MARKET PERFORMANCE 2002
                            December 31, 2001 = 100

                                    [GRAPH]

     Bond markets  The performance of fixed-interest securities was positive.
Substantial funds from the stock market were reinvested in the bond market. This
resulted in a significant increase in the prices of bonds. Between the spring
and September of 2002, the yields on ten-year government bonds in the U.S.A.
dropped from 5.3 percent to under 4 percent. The comparable decrease on European
bond markets was somewhat less extreme. The yield on such securities fell from
5.2 to 4.4 percent during the same period and ended the year slightly above 4
percent. Both the U.S. Federal Reserve and the European Central Bank reacted to
the threats to the economy in the fourth quarter with another half-point cut in
the fund rate, which made investment in bonds less attractive within a
short-term timeframe.

                      PERFORMANCE OF FIXED INCOME INDEXES
                            December 31, 2001 = 100

                                    [GRAPH]

                                       F-7


     Currencies  In the course of the reporting period, the euro rebounded
against the U.S. dollar after having suffered considerable erosion since its
introduction. The euro started its climb in April 2002, when it was at 0.88 U.S.
dollars, and caught up with the dollar in the early summer. From July, the euro
hovered between 0.96 and 1.02 and ended the year at 1.05 U.S. dollars. In the
course of the year, the euro also firmed up against sterling but remained
essentially unchanged against the Swiss franc.

                DEVELOPMENT OF FOREIGN EXCHANGE MARKETS IN 2002
                            December 31, 2001 = 100

                                  (LINE GRAPH)

                                       F-8


                          OVERALL BUSINESS DEVELOPMENT

CONSOLIDATED BALANCE SHEET (SHORT VERSION)



                                                                2002     2001
                                                                -----    -----
                                                                E BN     E BN
                                                                   
ASSETS
Intangible assets...........................................     18.3     16.9
Investments in affiliated enterprises.......................     11.3     10.2
Investments.................................................    285.3    345.3
Investments held on account and at risk of life insurance
  policy holders............................................     25.7     24.7
Loans and advances to banks.................................     86.8     61.3
Loans and advances to customers.............................    188.1    239.7
Trading assets..............................................    124.8    128.4
Amounts ceded to reinsurers from insurance reserves.........     28.4     31.0
Other assets................................................     83.3     85.4
                                                                -----    -----
TOTAL ASSETS................................................    852.1    942.9
                                                                =====    =====
EQUITY AND LIABILITIES
Shareholders' equity........................................     21.8     31.7
Minority interests in shareholders' equity..................      8.2     17.3
Participation certificates and subordinated liabilities.....     14.2     12.2
Insurance reserves..........................................    305.8    299.5
Insurance reserves for life insurance where the investment
  risk is carried by policyholders..........................     25.7     24.7
Liabilities to banks........................................    137.3    135.4
Liabilities to customers....................................    147.3    177.3
Certificated liabilities....................................     78.8    134.7
Other liabilities...........................................    113.1    110.1
                                                                -----    -----
TOTAL EQUITY AND LIABILITIES................................    852.1    942.9
                                                                =====    =====


CONSOLIDATED INCOME STATEMENT (SHORT VERSION)



                                                                 2002      2001
                                                                ------    ------
                                                                 E BN      E BN
                                                                    
Premiums earned (net).......................................      55.1      52.7
Net interest from banking...................................       4.0       2.4
Income from investments and affiliated enterprises..........      13.2      15.0
Trading income..............................................       1.5       1.6
Fee and commission income, and income resulting from service
  activities................................................       6.1       4.8
Insurance benefits..........................................    - 50.2    - 50.2
Loan loss allowance.........................................     - 2.2     - 0.6
Acquisition costs and administrative expenses...............    - 24.4    - 19.3
Other income/expenses.......................................     - 3.1     - 3.9
Amortization of goodwill....................................     - 1.2     - 0.8
Income before taxes.........................................     - 1.2       1.8
Taxes.......................................................       0.7       0.8
Minority interests in earnings..............................     - 0.7     - 1.0
Net income..................................................     - 1.2       1.6
Earnings per share in E.....................................    - 4.81      6.66


-- IN FISCAL 2002, TOTAL PREMIUM INCOME INCREASED 9.9 PERCENT TO 82.6 BILLION
   EUROS.

-- THE GROUP FINISHED THE YEAR WITH A LOSS OF 1.2 BILLION EUROS.

-- THIS UNSATISFACTORY RESULT WAS ESSENTIALLY DETERMINED BY THE DIFFICULT
   ECONOMIC CLIMATE AND THE WEAKNESS IN THE CAPITAL MARKETS, THE LOSS AT
   DRESDNER BANK AND BY A NUMBER OF SPECIAL INFLUENCES, IN PARTICULAR CLAIMS
   FROM THE FLOOD DISASTER, WHICH TOTALED 710 MILLION EUROS. WE ALSO DECIDED TO
   INCREASE THE RESERVES FOR ASBESTOS AND ENVIRONMENTAL (A&E) EXPOSURE IN THE
   U.S. BY 762 MILLION EUROS.

                                       F-9


-- THE DETERIORATION OF EARNINGS OVERSHADOWED SIGNIFICANT IMPROVEMENTS IN OUR
   OPERATING PERFORMANCE. IN ADDITION TO SUBSTANTIALLY HIGHER REVENUES, THE
   MAJOR ACHIEVEMENTS WERE A CLEARLY IMPROVED COMBINED RATIO IN PROPERTY AND
   CASUALTY INSURANCE, THE TRIMMING OF DRESDNER BANK'S ADMINISTRATIVE EXPENSES
   BY 12.3 PERCENT AND THE GROWTH OF NET INFLOWS IN ASSET MANAGEMENT BY 43
   BILLION EUROS.


                                                                  

        EARNINGS PER SHARE                 TOTAL PREMIUM INCOME                TOTAL PREMIUM INCOME
               in E                        BY BUSINESS SEGMENTS                     BY REGIONS
                                                (E82.6 bn)                          (E82.6 bn)
             (GRAPH)
                                                 (GRAPH)                             (GRAPH)



                                                               

     ASSETS UNDER MANAGEMENT             REVENUES FROM BANKING          RETURN ON EQUITY AFTER TAXES
             in E bn                          BY CATEGORY                           in %
                                               (E7.6 bn)
             (GRAPH)                                                              (GRAPH)
                                                (GRAPH)


-- ALLIANZ HAD TO REPORT A LOSS OF JUST UNDER 1.2 BILLION EUROS IN 2002. A MAJOR
   CONTRIBUTING FACTOR WAS THE EXTRAORDINARILY DIFFICULT SITUATION IN THE
   ECONOMY AND IN THE CAPITAL MARKETS. ANOTHER PROBLEM WAS THE SHORTFALL OF
   OPERATING INCOME AT DRESDNER BANK. TO MAKE MATTERS WORSE, OUR PERFORMANCE WAS
   UNDERMINED BY A NUMBER OF SPECIAL INFLUENCES.

-- THE EFFECTS OF THESE SPECIAL INFLUENCES WERE MAINLY FELT IN THE THIRD
   QUARTER, WHERE THEY COMPLETELY ERODED THE NET EARNINGS OF 1.6 BILLION EUROS
   REPORTED AT MID-YEAR. DESPITE CLEAR IMPROVEMENTS OF OUR EARNINGS, THE FOURTH
   QUARTER ENDED WITH A LOSS OF 0.2 BILLION EUROS, MAINLY DUE TO PERSISTENTLY
   HIGH WRITE-DOWNS ON OUR EQUITY PORTFOLIO. FOR THE FULL FISCAL YEAR 2002,
   THESE AMOUNTED TO 5.6 BILLION EUROS.

-- THE ABRUPT DETERIORATION OF OUR EARNINGS IN THE THIRD QUARTER, WHICH WAS AS
   DEVASTATING AS IT WAS UNEXPECTED, OVERSHADOWS MAJOR IMPROVEMENTS IN OUR
   OPERATING BUSINESS. PREMIUM INCOME INCREASED SUBSTANTIALLY IN MANY AREAS. AT
   THE SAME TIME, WE ACHIEVED A SUBSTANTIAL REDUCTION OF THE COMBINED RATIO IN
   PROPERTY AND CASUALTY INSURANCE.

-- WE PROPOSE TO PAY OUR SHAREHOLDERS A DIVIDEND OF 1.50 EUROS, THE SAME AMOUNT
   AS DISTRIBUTED IN THE PREVIOUS YEAR.

     Our business performance in 2002 was marred by a combination of negative
influences. The downturn in the capital markets forced us to make write-downs on
our equity portfolio in the amount of 5.6 billion euros. At the same time, it
depressed the trading and commission income of our banking segment. Relatively
high fixed costs, particularly in the Corporates & Markets

                                       F-10


unit, also took their toll. At the same time, loan loss allowances had to be
raised substantially because the weak economy increases the probability that
borrowers will default. Severe natural catastrophes heavily impacted earnings;
the severe flooding in central and eastern Europe alone caused claims of 710
million euros. And finally we had to increase risk provisions for asbestos and
environmental (A&E) exposure in the U.S.A. by 762 million euros.

     Unfortunate as they may be, these negative influences reflect only one side
of the reality of our business. On the other side, there are significant
improvements of our operating performance. Total premium income from the
insurance business increased 9.9 percent to 82.6 billion euros. Adjusted for the
special effects of the flood disaster and asbestos exposure, the combined ratio
fell to 101.7 percent. Administrative expenses at Dresdner Bank were cut by 12.3
percent. And despite the adverse conditions in the capital markets, asset
management was able to boost net inflows to 43 billion euros, based on the
exchange rates at the end of 2001.

     What is the bottom line of these conflicting trends? Operating improvements
were insufficient to compensate the drop in earnings in the third quarter. While
we did succeed in reducing the third-quarter loss of 2.5 billion euros to 0.2
billion euros in the fourth quarter, we finished the fiscal year with an overall
loss of 1.2 billion euros.

OVERVIEW



                                                                        12/31/2002    12/31/2001
                                                                        ----------    ----------
                                                                             
Gross premium income........................................    E bn        82.6         75.1
Net revenues from banking...................................    E bn         7.6          3.9
Net revenues from asset management..........................    E bn         2.3          2.0
Total revenues..............................................    E bn        92.5         81.0
Earnings before taxes and amortization of goodwill..........    E bn       - 0.1          2.6
Net income..................................................    E bn       - 1.2          1.6
Earnings per share..........................................       E      - 4.81         6.66
Return on equity after taxes................................       %       - 4.4          4.8


EARNINGS

     Total earnings before taxes and amortization of goodwill amounted to a loss
of 52 million euros, following a profit of 2.6 billion euros in the previous
year. Amortization of goodwill increased to 1,162 (808) million euros, mainly
for two reasons:

     -- The Dresdner Bank Group was for the first time consolidated for the full
        fiscal year.

     -- We increased our interests in the Group companies Allianz
        Lebensversicherungs-AG, Bayerische Versicherungsbank AG and Frankfurter
        Versicherungs-AG.

Fiscal 2002 produced tax income of 735 million euros. The taxes actually paid by
our companies amounted to 844 million euros. But since we were able to
capitalize deferred taxes in the amount of 1,653 million euros, which resulted
from temporary differences between the figures stated in the balance sheet and
their tax basis, we recognized the tax income mentioned above.

     Minority interests in earnings decreased to 0.7 (1.0) billion euros, which
brought the total loss for fiscal 2002 to 1.2 billion euros. Earnings per share
came to - 4.81 euros.

     Our free float now extends to more than 500,000 shareholders. Even in
difficult times, we want to maintain the continuity of our dividend policy and
will therefore propose to the Annual General Meeting to distribute a dividend of
1.50 euros per share for 2002, unchanged from last year.

PREMIUM INCOME FROM THE INSURANCE BUSINESS

     Total premium income from the insurance business increased 7.5 billion
euros or 9.9 percent to 82.6 billion euros. In property and casualty insurance,
revenues were up 2.7 percent while total premium income in life and health
insurance increased 18.9 percent. Changes in the scope of consolidation
contributed 223 million euros to sales growth.

                                       F-11


     Exchange rate fluctuations -- in particular the rise of the euro against
the U.S. dollar and the pound sterling -- reduced premium income by 736 million
euros. Disregarding consolidation and currency effects, total revenues from the
insurance business grew by 10.6 percent.

     In IFRS accounts, which only recognize the cost and risk components of
investment-oriented life insurance as premium income, revenue increased 2.5
percent to 63.2 billion euros.

ASSET MANAGEMENT

     Assets under management in the Allianz Group decreased to 1.0 (1.1)
trillion euros. Investments for third-party investors, which account for 57
percent of the overall portfolio, decreased 9.5 percent to 561 (620) billion
euros. Of this decline, 25 billion euros are attributable to falling prices on
the international stock markets, another 77 billion euros to the depreciation of
the U.S. dollar against the euro. Net revenues came to 2.3 billion euros.

BANKING

     Net revenues from banking amounted to 7.6 billion euros. This figure
includes interest and commission income as well as trading income. The 100
percent increase over the previous year (3.9 billion euros) is due to a special
effect: the figures of Dresdner Bank, which almost exclusively determines the
development of our banking business, were for the first time included in our
annual statements on a full-year basis. In the previous year, the bank was not
consolidated until July, 23. On a comparable basis, operating income of Dresdner
Bank dropped 18.6 percent, mainly as a result of the weaknesses in the economy
and the capital markets. In addition, loan loss provisions in the amount of 2.2
billion euros undermined the earnings performance of the banking segment. To
counteract this trend, the comprehensive Turnaround 2003 program was launched in
the fall of 2002, which is designed to intensify the initiatives to upgrade
efficiency already under way.

SHAREHOLDERS' EQUITY

     At the end of 2002, the shareholders' equity of the Allianz Group came to
21.8 billion euros. This figure takes into account 23,588,411 treasury shares,
which reduce shareholders' equity and were acquired at a cost of 6.0 billion
euros. Overall, shareholders' equity was down 9.9 billion euros compared with
the end of 2001. This is primarily due to the substantially lower balance of
unrealized gains and losses, which dropped from 7.2 to 1.0 billion euros, mainly
as a result of lower stock market prices.

MARKET CAPITALIZATION

     The continuing downturn in the capital markets also brought down the
Allianz share. Insurance stocks clearly underperformed the market average in
2002 because the bear market forced insurers to make substantial write-downs on
their investment portfolios. On the final trading day of 2002, the market
capitalization of Allianz AG came to 22 billion euros after deduction of
treasury shares. That was 42 billion euros or 65.7 percent lower than the
comparable 2001 figure. These figures are based on the Xetra closing price on
the last trading day of the year, which was 91 euros.

HUMAN RESOURCES

     The total number of employees worldwide increased slightly by 1,705 to
181,651 at the end of 2002. This increase was mainly due to the build-up of our
sales network in Germany and the first-time consolidation of recent
acquisitions.

                                       F-12


RECOMMENDATION FOR APPROPRIATION OF PROFIT

     The Board of Management and the Supervisory Board propose that the
available unappropriated earnings of Allianz AG in the amount of
1,164,997,000.00 euros be appropriated as follows:

     -- Distribution of a dividend of 1.50 euros per eligible share

     -- Allocation of 791,088,059.50 euros to other appropriated retained
        earnings.

The recommendation for appropriation of earnings takes into account own shares
held directly or indirectly by the company, which in accordance with the German
Stock Corporation Act (clause sec. 71 b AktG) are not entitled to receive a
dividend. Further purchases or sales of own shares during the period prior to
the Annual General Meeting may increase or decrease the number of shares
eligible for dividends. In this case, an amended proposal for the appropriation
of profit based upon an unchanged dividend in the amount of 1.50 euros per
eligible share will be submitted to the Annual General Meeting for ratification.

Munich, February 27, 2003
Allianz Aktiengesellschaft

The Board of Management


                        
Dr. Schulte-Noelle         Diekmann
Dr. Achleitner             Bremkamp
Dr. Faber                  Dr. Fahrholz
Dr. Hagemann               Dr. Muller
Dr. Perlet                 Dr. Rupprecht
Dr. Zedelius


                                       F-13


                        PROPERTY AND CASUALTY INSURANCE



                                                                    2002       2001       2000
                                                                   -------    -------    -------
                                                                             
Gross premiums.........................................    E mn     43,294     42,137     38,382
Claims ratio...........................................       %       78.2       81.1       77.9
Expense ratio..........................................       %       27.5       27.7       27.0
Investment income......................................    E mn     11,734      7,325      8,393
Net income.............................................    E mn      7,207      2,364      3,262
Investments............................................    E mn    137,113    141,388    125,626
Insurance reserves.....................................    E mn     87,557     90,432     81,046


GROSS PREMIUMS(1)



                                                                 2002      2001      2000
                                                                ------    ------    ------
                                                                 E MN      E MN      E MN
                                                                           
Germany.....................................................    12,314    12,644    11,948
France......................................................     4,941     5,392     4,745
Italy.......................................................     4,938     4,585     4,264
Great Britain...............................................     2,699     2,492     2,104
Switzerland.................................................     1,235     1,244     1,160
Spain.......................................................     1,490     1,278     1,073
Netherlands.................................................     1,023       873       557
Ireland.....................................................       860       738       563
Austria.....................................................       852       844       831
Rest of Europe..............................................     2,099     1,801     1,675
NAFTA Region................................................     5,992     6,822     6,300
Asia-Pacific Region.........................................     1,599     1,344       781
South America...............................................       768       962       891
Allianz Global Risks Re.....................................     1,136
Credit insurance............................................     1,579     1,589     1,611
Travel insurance and assistance services....................       808       732       656
Allianz Marine & Aviation...................................     1,424


------------

(1) Before cross-border consolidation

     In the following breakdown according to countries and regions, transactions
between reporting units are not consolidated. In order to present a clear
picture of our business operations, we have adjusted reported results by
eliminating the amortization of goodwill and extraordinary items primarily
relating to tax regulations for the year 2000.

-- PREMIUM INCOME FROM PROPERTY AND CASUALTY INSURANCE WAS UP 2.7 PERCENT TO
   43.3 BILLION EUROS.

-- THE COMBINED RATIO DECREASED 3.1 PERCENTAGE POINTS TO 105.7 PERCENT. RESTATED
   TO ELIMINATE ONE-TIME CHARGES IN CONNECTION WITH THE SEVERE FLOODING IN
   CENTRAL AND EASTERN EUROPE AND THE INCREASE IN RESERVES TO COVER
   ASBESTOS-RELATED AND ENVIRONMENTAL RISKS, THE COMBINED RATIO AMOUNTED TO
   101.7 PERCENT.

-- NET INVESTMENT INCOME IMPROVED 60 PERCENT TO 11.7 BILLION EUROS, PRIMARILY
   DUE TO INTERCOMPANY TRANSACTIONS. NET INCOME CAME TO 7.2 BILLION EUROS. AFTER
   RESTATEMENT TO ELIMINATE INTERCOMPANY TRANSACTIONS, NET INCOME AMOUNTED TO
   3.4 BILLION EUROS.

                                       F-14


EARNINGS AFTER TAXES(2)



                                                                2002      2001      2000
                                                                -----    -------    -----
                                                                E MN      E MN      E MN
                                                                           
Germany.....................................................    9,235      3,772    2,303
France......................................................      383         31      439
Italy.......................................................      842        395      235
Great Britain...............................................      237         69     - 11
Switzerland.................................................       31        121      199
Spain.......................................................       62         32       41
Austria.....................................................     - 33         16     - 50
Netherlands.................................................       11         34       89
Ireland.....................................................      170        - 4       13
Rest of Europe..............................................     - 29         66        8
NAFTA Region................................................    - 933    - 1,030     - 86
Asia-Pacific Region.........................................     - 17         11       39
South America...............................................       47         29     - 27
Allianz Global Risks Re.....................................    - 257
Credit insurance............................................       16         91      158
Travel insurance and assistance services....................       21          3       24
Allianz Marine & Aviation...................................       17


------------

(2) Earnings after taxes, before amortization of goodwill and minority
    interests, net of extraordinary tax items in 2000

INVESTMENTS(3)



                                                                 2002       2001       2000
                                                                -------    -------    ------
                                                                 E MN       E MN       E MN
                                                                             
Germany.....................................................    101,384    100,600    80,269
France......................................................     20,468     20,579    18,413
Italy.......................................................     10,402      9,985     9,873
Great Britain...............................................      2,879      2,753     2,376
Switzerland.................................................      3,195      3,735     4,379
Spain.......................................................      1,523      1,420     1,459
Austria.....................................................      1,287      1,397     1,482
Netherlands.................................................      1,886      1,851     2,032
Ireland.....................................................      1,341      1,131     1,082
Rest of Europe..............................................      5,801      3,886     3,670
NAFTA Region................................................     19,522     20,398    18,000
Asia-Pacific................................................      2,199      1,737     1,196
South America...............................................        642        652       527
Allianz Global Risks Re.....................................        219
Credit insurance............................................      2,420      2,562     2,825
Travel insurance and assistance services....................        476        445       416
Allianz Marine & Aviation...................................      1,163


-------------------------

(3) Excluding real estate held for own use as of 2001

                                       F-15


     PREMIUM INCOME FROM PROPERTY AND CASUALTY INSURANCE WAS UP 2.7 PERCENT TO
43.3 BILLION EUROS FOR THE YEAR 2002.  This represented 51.5 percent of total
revenues. The combined ratio decreased 3.1 percentage points to 105.7 percent.
After restatement to eliminate the effect of one-time charges in connection with
the flood in central Europe and the increase in reserves for asbestos-related
and environmental risks in the USA, the combined ratio improved to 101.7
percent. Net income for this segment came to 7.2 billion euros. Restated to
eliminate intercompany transactions, this segment contributed 3.4 billion euros
to consolidated net income.

     Restated to eliminate the effects of consolidation and currency
transactions, PREMIUM INCOME was up 3.2 percent, primarily due to rate
increases. However, this gain does not completely reflect the improvement in our
business as we also declined to renew many client portfolios that we did not
feel would be profitable over the long term. These concerned primarily
international corporate clients and clients in the U.S.A. It was possible to
offset the resultant decrease in premium income through rate increases.

     The CLAIMS RATIO improved to 78.2 (81.1) percent. This figure would have
been significantly better, namely 74.2 percent, if we had been spared the
catastrophic floods in central and eastern Europe and did not have to increase
reserves for asbestos-related and environment claims in the U.S. Comparison of
this figure with the 2001 claims ratio, which came to 76.7 percent without
taking into account the extraordinary impact of the attack on the World Trade
Center, also shows significant operational improvement. This improvement
resulted from premium adjustments, especially in the area of automobile
insurance, and the fact that the claims frequency (average number of claims per
policy) remains favorable in many markets.

     The EXPENSE RATIO showed virtually no change from the previous year and
came to 27.5 (27.7) percent. The cost involved in building up the insurance
marketing activities of Dresdner Bank was offset by increased efficiency on the
part of many Group companies.

     NET INVESTMENT INCOME amounted to 11.7 billion euros. After elimination of
intercompany transactions, net investment income comes to 7.8 billion euros.
This figure reflects write-offs on securities in our portfolio in the amount of
2.3 billion euros. Interest for financing activities came to 1.2 billion euros.

     EARNINGS before taxes and amortization of goodwill increased 5.1 billion
euros to 7.9 billion euros. After amortization of goodwill, taxes and minority
interests, net income increased to 7.2 (2.4) billion euros. After elimination of
intercompany transactions, the result fell to 3.4 billion euros.

GERMANY

-- WE SERVE THIS MARKET THROUGH THE COMPANIES OF ALLIANZ SACHGRUPPE DEUTSCHLAND
   (SGD). WITH REVENUES OF 9.8 BILLION EUROS, SGD IS THE LEADING PROVIDER OF
   PROPERTY AND CASUALTY INSURANCE IN GERMANY.

-- ALLIANZ AG, WHICH FUNCTIONS BOTH AS THE GROUP'S MANAGEMENT HOLDING COMPANY
   AND AS ITS REINSURER, GENERATED PREMIUM INCOME IN THE AMOUNT OF 5.6 BILLION
   EUROS.

GROSS PREMIUMS



                                                                2002(*)     2001       2000
                                                                -------    -------    -------
                                                                 E MN       E MN       E MN
                                                                             
Allianz Sachgruppe Deutschland..............................      9,782     10,075      9,576
Allianz AG..................................................      5,600      5,687      5,587
Consolidation property and casualty insurance in Germany....    - 3,068    - 3,118    - 3,215
                                                                -------    -------    -------
PROPERTY AND CASUALTY INSURANCE IN GERMANY..................     12,314     12,644     11,948
                                                                =======    =======    =======


------------

(*) Excluding Allianz Marine & Aviation from 2002 on.

     Excluding revenues of Allianz Marine & Aviation insurance AG and Allianz
Global Risks Ruckversicherungs-AG, which will be reported separately for the
first time this year, we generated premium income in the amount of 12.3 billion
euros.

                                       F-16


EARNINGS AFTER TAXES AND BEFORE AMORTIZATION OF GOODWILL



                                                                2002(*)    2001     2000
                                                                -------    -----    -----
                                                                 E MN      E MN     E MN
                                                                           
Allianz Sachgruppe Deutschland..............................     1,883     1,660      835
Allianz AG..................................................     9,513     2,516    1,818
SUBTOTAL....................................................    11,396     4,176    2,653
Consolidations
  Profit transfer...........................................     1,373       284      303
  Dividends, other..........................................       788       120       47
PROPERTY AND CASUALTY INSURANCE IN GERMANY..................     9,235     3,772    2,303


------------

(*) Excluding Allianz Marine & Aviation from 2002 on.

     EARNINGS AFTER TAXES jumped to 9.2 (3.8) billion euros, primarily due to
realized capital gains on shares in connection with the acquisition of Dresdner
Bank.

SACHGRUPPE DEUTSCHLAND



                                                                      2002(1)     2001       2000
                                                                      -------    -------    ------
                                                                                
Gross premiums............................................    E mn      9,782     10,075     9,576
Claims ratio..............................................       %       73.5       70.9      72.2
Expense ratio.............................................       %       28.0       26.8      25.4
Earnings after taxes(2)...................................    E mn    1,883.5    1,659.9     835.2
Investments...............................................    E mn     21,298     22,007    23,476
Employees.................................................             32,862     31,384    29,998


------------

(1) Excluding Allianz Marine & Aviation from 2002 on.

(2) Before profit transfer

     As of the 2002 fiscal year, Allianz Marine & Aviation is no longer part of
SGD. We include European Marine & Aviation activities in a business unit that we
now report on separately. Excluding the results of Allianz Marine & Aviation,
SGD PREMIUM INCOME increased 1.1 percent to 9.8 billion euros. As a result,
despite a difficult market situation we succeeded in achieving a slight increase
in revenues, primarily through higher automobile insurance rates. This insurance
segment grew 1.6 percent. Accident insurance increased 2.9 percent.

     The CLAIMS RATIO deteriorated to 73.5 (70.9) percent as a result of the
high payouts following the severe flooding in 2002, which totaled 330 million
euros (after reinsurance). If these claims are eliminated, the claims ratio
comes to a low 68.4, an improvement of 2.5 percentage points compared with the
previous year's figure.

     One-time charges for company retirement benefits, investments in expansion
of marketing activities and the expense of integrating Dresdner Bank had a
negative impact on the EXPENSE RATIO, which increased 1.2 percentage points to
28.0 percent.

     SGD INVESTMENTS at the end of the year amounted to 21.3 billion euros. The
corresponding income came to 2.4 billion euros, up from 0.5 billion euros a year
earlier. This improvement was primarily due to capital gains on shares sold in
the context of the acquisition of Dresdner Bank.

     SGD's EARNINGS after taxes rose to 1.9 (1.7) billion euros.

     PREMIUM INCOME from the reinsurance activities of ALLIANZ AG decreased to
5.6 (5.7) billion euros, primarily for two reasons:

     -- On the one hand, as of January 1, 2002, new risks from business with
        international corporate clients, i.e., from the portfolio of major
        international clients, was not reinsured by Allianz AG but rather by
        Allianz Global Risks Ruckversicherungs-AG (AGR). This resulted in a
        decrease in premium volume (gross) by approximately 450 million euros.
        This measure primarily affected the reinsurance of industrial risks,
        i.e., fire, liability, transportation, technology and business
        interruption;

                                       F-17


     -- On the other hand, other contracts were switched from proportional to
        non-proportional coverage. This decision did indeed lower premium income
        for 2002 but should have a noticeably positive effect on earnings in the
        years to come.

ALLIANZ AG



                                                                      2002       2001       2000
                                                                     -------    -------    -------
                                                                               
Gross premiums...........................................    E mn      5,600      5,687      5,587
Claims ratio.............................................       %       75.3       86.3       75.7
Expense ratio............................................       %       28.8       26.9       21.9
Earnings after taxes.....................................    E mn    9,512.9    2,516.4    1,817.5
Investments..............................................    E mn     88,431     83,751     61,972


     In absolute terms, revenues of Allianz AG decreased, but premium income
from the remaining reinsurance business rose, in some cases significantly, as
premiums and conditions were adjusted to take into account the difficult market
situation immediately following the attack on the World Trade Center.

     The CLAIMS RATIO dropped to 75.3 (86.3) percent. This improvement would
have been considerably greater if it were not for a series of extremely severe
natural catastrophes in the year 2002: storms and hail in Germany in the spring,
the severe flooding in central Europe in the summer, Hurricane Isidore over
Mexico in September and in October Windstorm Jeanett in western Europe. Insured
losses caused by the severe flooding, Isidore and Jeanett alone totaled
approximately 227 million euros. A reinsurance contract with Fireman's Fund
Insurance Company calls for this company to cede reserves for asbestos-related
and environmental risks in return for a portfolio entry in the amount of 1.2
billion euros. In exchange, Allianz AG extends reinsurance cover of up to a
maximum 2.16 billion U.S. dollars. The reserves are determined on the basis of
two external reports. Both confirmed a survival ratio of 13 years, which means
that sufficient funds have been allocated to cover claims arising from these
risks over this period. The survival ratio was based on payouts that have
already been made, but extraordinary effects in the area of environmental
liability have been eliminated.

     The EXPENSE RATIO increased 1.9 percentage points to 28.8 percent. This
ratio essentially reflects reinsurance commissions. Expenses incurred in
connection with the integration of Dresdner Bank also had an effect.

     Transactions made at the beginning of the year in connection with the
acquisition of Dresdner Bank as well as the sale of other shares resulted in
high capital gains, which drove NET INVESTMENT INCOME to 9.5 (3.1) billion
euros.

     EARNINGS after taxes improved to 9.5 (2.5) billion euros. After restatement
to eliminate intercompany transactions, earnings come to 5.6 billion euros.

     We assume that SGD revenues will in the course of the CURRENT FISCAL YEAR
keep pace with the market and that the claims ratio will decrease further,
especially since claims arising from natural disasters are likely to decline. We
also hope to push the combined ratio below 100 percent again. The elimination of
further unprofitable business from our portfolios and ongoing cost-reduction
measures make it reasonable to assume that this will be possible. We also want
to expand the reinsurance activities of Allianz AG in 2003. Higher rates, more
favorable conditions and improvement in earnings from insurance activities
should generally boost this area of business although income from investment
activities cannot be expected to reach the previous year's level.

FRANCE

-- STARTING IN THE 2002 FISCAL YEAR, THE FINANCIAL RESULTS OF ALLIANZ MARINE &
   AVIATION FRANCE WILL BE COMBINED WITH THOSE OF ALLIANZ MARINE & AVIATION
   DEUTSCHLAND AND INCLUDED IN A SEPARATE REPORT.

-- AGF REPORTED PREMIUM INCOME OF 4.9 (5.4) BILLION EUROS.

-- THIS ALLIANZ COMPANY RANKS THIRD AMONG FRENCH PROPERTY AND CASUALTY INSURERS.

                                       F-18


     The 9.7 percent gain in PREMIUM INCOME year-on-year was due primarily to
rate adjustments. We were able to raise premiums in the commercial area,
especially in the case of major clients, as well as in the area of consumer
policies. In particular, increases in the prices of private automobile and
household insurance contributed to the gain in revenues.

     Cooperation with Credit Lyonnais remains good. Premium income from our
joint subsidiary, Assurances Federales, rose 16.4 percent to 81.7 million euros.
The introduction of a new accident insurance product for private customers was a
big success, and nearly 50,000 policies were sold in the course of the reporting
period.

     The CLAIMS RATIO, which was negatively affected by business through agents,
increased to 84.5 (83.0) percent. Reserves for claims from previous years were
increased. It was not possible to compensate for the resultant increase in the
claims ratio improvement in commercial business.

     The EXPENSE RATIO decreased 2.9 percentage points to 26.4 percent. This
reflected the successful conclusion of the consolidation of IT systems.

     NET INVESTMENT INCOME came to 701 million euros.

     EARNINGS after taxes benefited from tax income and increased to 383 million
euros, up from 31 million euros a year earlier.

FRANCE



                                                                       2002(*)     2001      2000
                                                                       -------    ------    ------
                                                                                
Gross premiums.............................................    E mn     4,941      5,392     4,745
Claims ratio...............................................       %      84.5       83.0      85.8
Expense ratio..............................................       %      26.4       29.3      28.3
Earnings after taxes.......................................    E mn     383.0       30.9     439.2
Investments................................................    E mn    20,468     20,579    18,413
Employees..................................................            13,797     14,313    14,260


------------

(*) Excluding Allianz Marine & Aviation from 2002 on.

     AGF's income performance is expected to at least keep pace with the market
in the CURRENT FISCAL YEAR. Growth of 6 percent is projected for the French
property and casualty insurance market. Leaner and more efficient workflows will
continue to reduce our expense ratio. We have eliminated especially claims-prone
portfolios in the commercial and private areas and further rate increases will
take hold. As a result, we expect a more favorable claims ratio in the years to
come.

ITALY

-- WE ARE REPRESENTED ON THE ITALIAN MARKET BY THE PROPERTY AND CASUALTY
   INSURANCE COMPANIES OF THE RAS GROUP AND LLOYD ADRIATICO.

-- THESE COMPANIES GENERATED TOTAL PREMIUM INCOME OF 4.9 BILLION EUROS.

-- THEY NOW RANK THIRD IN ITALY.

     PREMIUM INCOME of the RAS Group rose 7.9 percent to 3.7 billion euros.
Lloyd Adriatico, which is primarily involved in automobile insurance, recorded
premium growth of 7.2 percent to 1.3 (1.2) billion euros. This gain was driven
by automobile insurance, which contributed 230 million euros of the total
increase of 353 million euros. Although our companies have adopted a selective
underwriting policy, they were nevertheless able to increase the number of
vehicles insured.

     The premium growth of our Italian direct insurer, Genialloyd (formerly
Lloyd 1885), remains very encouraging. The company increased revenues by 60
percent to 111 million euros. Of this amount, 44 million euros was generated
through the Internet; which makes Genialloyd Italy's undisputed leader in online
insurance.

     The overall CLAIMS RATIO of our Italian companies continued to improve. As
a result, the risk-based underwriting policy they have been applying for years
is paying off. The application of

                                       F-19


stringent criteria to the sale of automotive policies and the use of quality
controls to manage insurance portfolios have once again resulted in a reduction
in the claims frequency. Whereas Lloyd Adriatico's claims ratio neared last
year's good performance of 69.3 (68.5), the claims ratio of the RAS Group
decreased to 76.8 (79.7) percent.

     At 23.9 (23.7) percent, the EXPENSE RATIO of the RAS Group showed virtually
no change over the previous year although the company had invested in measures
to revamp its brand image. Lloyd Adriatico was once again able to improve its
expense ratio, which came to 18.9 (19.2) percent, primarily due to an increase
in revenues.

     NET INVESTMENT INCOME of the RAS Group rose to 1,033 (491) million euros
following the disposal of a large share of the company's real estate holdings.
Lloyd Adriatico recorded net investment income in the amount of 69 (91) million
euros.

RAS GROUP



                                                                        2002     2001     2000
                                                                        -----    -----    -----
                                                                              
Gross premiums..............................................    E mn    3,663    3,396    3,114
Claims ratio................................................       %     76.8     79.7     78.1
Expense ratio...............................................       %     23.9     23.7     22.3
Earnings after taxes........................................    E mn    741.8    284.9    172.9
Investments.................................................    E mn    7,975    7,735    7,669
Employees...................................................            5,029    5,300    5,211


LLOYD ADRIATICO



                                                                        2002     2001     2000
                                                                        -----    -----    -----
                                                                              
Gross premiums..............................................    E mn    1,275    1,189    1,150
Claims ratio................................................       %     69.3     68.5     77.0
Expense ratio...............................................       %     18.9     19.2     19.4
Earnings after taxes........................................    E mn    100.6    109.7     62.0
Investments.................................................    E mn    2,427    2,250    2,204
Employees...................................................            1,316    1,321    1,325


     EARNINGS after taxes of our Italian operations increased to 842 (395)
million euros, which reflects the significant effect of the sale of real estate.
The RAS Group generated 742 (285) million euros in earnings and Lloyd Adriatico
101 (110) million euros.

     We expect the CURRENT FISCAL YEAR to produce continued growth in our
Italian property and casualty insurance business as well as further improvement
in the combined ratio. Our companies' earnings are also expected to show further
improvement. RAS has offered to buy back 7 percent of the company's outstanding
share capital from shareholders. This offer applied for a limited period,
namely, from December 9, 2002, to January 10, 2003. Unlike other RAS
shareholders, we did not take advantage of this offer, and as a result of this
transaction we now hold 55.4 percent interest in the company.

GREAT BRITAIN

-- OUR CORNHILL SUBSIDIARY RANKS SIXTH IN THE BRITISH PROPERTY AND CASUALTY
   INSURANCE MARKET.

-- THIS SUBSIDIARY ACHIEVED A SUBSTANTIAL 2.7 BILLION EUROS INCREASE IN PREMIUM
   INCOME.

     In local currency, we achieved REVENUE GROWTH of 10.5 percent. Although
almost all segments contributed to this success, the improvement in the
commercial and industrial areas was especially striking. For the most part, rate
adjustments provided the upward momentum, including higher rates for automobile
insurance.

     Our pricing policy and our decision to forego unprofitable business
resulted in an improvement of 4.4 percentage points in the CLAIMS RATIO, to 68.8
percent.

     Despite high premium growth, we kept administrative expense under control,
which improved the EXPENSE RATIO 1.1 percentage points to 29.5 percent.

                                       F-20


     NET INVESTMENT INCOME came to 248 (184) million euros. This increase
resulted from high capital gains.

     As a result of the successful performance of our insurance and investment
activities, EARNINGS after taxes tripled to 237 (69) million euros.

CORNHILL



                                                                        2002     2001      2000
                                                                        -----    -----    ------
                                                                              
Gross premiums..............................................    E mn    2,699    2,492     2,104
Claims ratio................................................       %     68.8     73.2      83.5
Expense ratio...............................................       %     29.5     30.6      33.4
Earnings after taxes........................................    E mn    236.9     69.0    - 11.3
Investments.................................................    E mn    2,879    2,753     2,376
Employees...................................................            4,121    3,992     3,717


     For the CURRENT FISCAL YEAR, we expect moderate premium growth and further
improvement in the combined ratio.

SWITZERLAND

-- ALLIANZ SUISSE VERSICHERUNGS-GESELLSCHAFT IS OUR PROPERTY AND CASUALTY
   INSURER IN SWITZERLAND.

-- WITH REVENUES OF 1.2 BILLION EUROS, ALLIANZ SUISSE VERSICHERUNGS-GESELLSCHAFT
   RANKS THIRD IN THE SWISS MARKET.

     At 1.2 billion euros, PREMIUM INCOME approached last year's level despite
the restructuring of both the group health insurance and the accident insurance
activities.

     A lower claims frequency and the restructuring of our group health
insurance business, which had to absorb high payouts last year, reduced the
CLAIMS RATIO to 76.3 (79.8) percent.

     The EXPENSE RATIO improved to 24.3 (27.2) percent, primarily due to lower
commissions.

     NET INVESTMENT INCOME was down. Substantial write-offs on portfolio
holdings, namely, equities, and realized capital losses completely offset income
from investments.

     As a result, EARNINGS after taxes dropped to 31 (121) million euros.

ALLIANZ SUISSE



                                                                        2002     2001     2000
                                                                        -----    -----    -----
                                                                              
Gross premiums..............................................    E mn    1,235    1,244    1,160
Claims ratio................................................       %     76.3     79.8     74.2
Expense ratio...............................................       %     24.3     27.2     30.0
Earnings after taxes........................................    E mn     31.0    120.5    198.5
Investments.................................................    E mn    3,195    3,735    4,379
Employees...................................................            2,887    3,186    3,243


     In the CURRENT FISCAL YEAR, product improvements are expected to stimulate
premium growth. We plan to improve the efficiency of our sales organization in
order to achieve an even lower expense ratio. On the whole, we are confident
that the measures we have taken will produce the desired results and that our
Swiss company will report significantly better earnings performance for the year
2003.

                                       F-21


ALLIANZ RISK TRANSFER



                                                                        2002     2001     2000
                                                                        -----    -----    -----
                                                                              
Gross premiums..............................................    E mn      512      506      479
Claims ratio................................................       %     55.5     77.5     65.9
Expense ratio...............................................       %     22.6     26.2     31.4
Earnings after taxes........................................    E mn     32.8     34.3     47.0
Investments.................................................    E mn    1,153    1,139    1,043
Employees...................................................               30       28       28


     Revenues of our ALLIANZ RISK TRANSFER (ART) company were up 1.2 percent to
512 million euros, with 365 million euros generated by conventional reinsurance
and 147 million euros by alternate risk solutions. Revenues in this area of our
business increased 44 percent. This area involves comprehensive risk management
solutions for companies in the service, financial and industrial sectors. These
products bundle financial and insurance expertise.

     The CLAIMS RATIO showed considerable improvement -- due in part to positive
performance in the area of claim adjustment and settlement -- and dropped
dramatically to 55.5 (77.5) percent.

     The EXPENSE RATIO was down 3.6 percentage points to 22.6 percent, primarily
due to lower commissions.

     Overall, EARNINGS after taxes were down slightly to 33 (34) million euros,
chiefly because of significantly lower investment income.

     However, we expect alternative risk solutions to produce double-digit
growth for the CURRENT FISCAL YEAR, while revenues from our traditional
reinsurance activities essentially stagnate.

SPAIN

-- PREMIUM INCOME OF ALLIANZ COMPANIA DE SEGUROS Y REASEGUROS, OUR PROPERTY AND
   CASUALTY INSURER, AND OUR DIRECT INSURER, FENIX DIRECTO, INCREASED 16.6
   PERCENT TO 1.5 BILLION EUROS.

-- TOGETHER, THESE TWO COMPANY RANK SECOND IN THE SPANISH MARKET.

     The 16.6 percent increase in PREMIUM INCOME was significantly higher than
the 11 percent estimated for the average market and can be attributed to
well-structured and efficient marketing activities. In 2002, the representive
network was woven more tightly and rendered more efficient. The chief growth
driver was automobile insurance, which contributed two-thirds to revenues.

     A risk-based premium structure combined with a restrictive underwriting
policy in the automobile insurance segment to reduce the claims frequency. As a
result, the CLAIMS RATIO improved 1.7 percentage points to 77.0 percent.

     Tighter work processes lowered the EXPENSE RATIO further to 20.6 (21.2)
percent.

     NET INVESTMENT INCOME dropped to 49 (59) million euros.

     EARNINGS after taxes improved substantially to 62 (32) million euros.

SPAIN



                                                                        2002     2001     2000
                                                                        -----    -----    -----
                                                                              
Gross premiums..............................................    E mn    1,490    1,278    1,073
Claims ratio................................................       %     77.0     78.7     81.1
Expense ratio...............................................       %     20.6     21.2     23.8
Earnings after taxes........................................    E mn     61.7     31.7     40.7
Investments.................................................    E mn    1,523    1,420    1,459
Employees...................................................            2,248    2,030    2,159


     In the CURRENT FISCAL YEAR, the turbulent growth in the area of automobile
insurance can be expected to slacken somewhat. However, we expect brisk demand
for other property insurance products and assistance services. Double-digit
revenue growth is projected for these areas. Overall, Allianz Seguros plans to
grow more strongly than the market again in 2003. We are

                                       F-22


counting on our brand image and further expansion of our marketing structure to
achieve this. We also expect further improvement in the combined ratio.

REST OF EUROPE

-- WE ALSO MARKET PROPERTY AND CASUALTY INSURANCE IN AUSTRIA, THE NETHERLANDS,
   IRELAND, BELGIUM, PORTUGAL, LUXEMBOURG AND GREECE. WE ARE ALSO REPRESENTED IN
   HUNGARY, SLOVAKIA, THE CZECH REPUBLIC AND POLAND. IN ADDITION, WE UNDERWRITE
   PROPERTY AND CASUALTY INSURANCE IN CROATIA, BULGARIA, ROMANIA AND RUSSIA.

-- OUR LOCAL COMPANIES RANK AMONG THE FIVE LEADING INSURERS IN MOST OF THESE
   MARKETS.

     PREMIUM INCOME in the rest of Europe rose 13.6 percent to 4.8 billion
euros. With premium income of 1 billion euros, the Netherlands delivered the
best performance, followed by Ireland with 860 million euros and Austria with
852 million euros. In the Netherlands, we achieved especially high premium
growth through rate adjustments as well as through reinforcement of our position
in the international market for fire insurance and brisk new business in the
area of automobile insurance.

     We increased premium income in central and eastern Europe by nearly 30
percent to 1.2 billion euros. This figure includes the premium income of
Slovenska poist'ovna on a pro rata temporis basis, which came to 72 million
euros. The accounts of this company were consolidated as of July 22, 2002.
Slovenska reported revenues of 158 million euros for the entire 2002 fiscal
year. This company is the leader in its market and was acquired from the
Slovakian government.

REST OF EUROPE
GROSS PREMIUMS BY COUNTRY



                                                                2002     2001     2000
                                                                -----    -----    -----
                                                                E MN     E MN     E MN
                                                                         
Netherlands.................................................    1,023      873      557
Ireland.....................................................      860      738      563
Austria.....................................................      852      844      831
Belgium.....................................................      362      391      393
Portugal....................................................      263      235      242
Luxembourg..................................................      194      176      133
Greece......................................................       66       62       75
Denmark.....................................................       --       --       41
                                                                -----    -----    -----
SUBTOTAL WESTERN AND SOUTHERN EUROPE........................    3,620    3,319    2,835
                                                                -----    -----    -----
Hungary.....................................................      511      411      340
Czech Republic..............................................      213      173      181
Slovakia....................................................      158       45       47
Poland......................................................      128      137      116
Rumania.....................................................       93       71       18
Bulgaria....................................................       56       45       39
Croatia.....................................................       38       37       37
Russia......................................................       17       18       13
                                                                -----    -----    -----
SUBTOTAL CENTRAL AND EASTERN EUROPE.........................    1,214      937      791
                                                                -----    -----    -----
TOTAL.......................................................    4,834    4,256    3,626
                                                                =====    =====    =====


     Claim payouts were very negatively impacted by the severe flooding, which
primarily affected our companies in Austria and the Czech Republic. However,
EARNINGS after taxes rose to 119 (112) million euros due to high capital gains
on investments of our companies in Ireland.

     We continue to expect our companies in the major markets of central and
eastern Europe to achieve double-digit premium growth. Measures taken to improve
cost efficiency can be expected to produce the desired results in the short term
and contribute to earnings improvement for the CURRENT FISCAL YEAR.

                                       F-23


NAFTA REGION

-- FIREMAN'S FUND INSURANCE COMPANY (FFIC) IS OUR MOST IMPORTANT SOURCE OF
   REVENUES IN THE NAFTA REGION (NORTH AMERICAN FREE TRADE AGREEMENT).

-- THE ALLIANZ INSURANCE COMPANY (AIC), WHICH SERVES MAJOR INTERNATIONAL
   CLIENTS, RANKS AMONG THE LARGEST INSURANCE COMPANIES IN THIS REGION. IT HAS
   BEEN INTEGRATED INTO ALLIANZ GLOBAL RISKS.

-- ALLIANZ INSURANCE COMPANY OF CANADA SERVES THE CANADIAN MARKET.

-- OUR ALLIANZ MEXICO COMPANIA DE SEGUROS S. A. IS ACTIVE IN THE MEXICAN MARKET.

     PREMIUM INCOME in the NAFTA region dropped 12.2 percent to 6 billion euros.
Expressed in local currency, the comparable figure is 6.2 percent.

     The decrease in revenues can be primarily attributed to the fact that FFIC
has severed business relationships that showed no prospect of profitability. The
reorganization of FFIC's client portfolio, which was started back in 2001, has
produced significant improvement in the operating results of FFIC's core
activities. These activities include insurance for commercial clients and
high-net-worth individuals, transportation and crop insurance and insurance of
special risks.

     Setting aside the influence of stop-loss reinsurance, the combined ratio in
these areas of business improved significantly from 119 to 105 percent,
primarily as a result of a selective underwriting policy and rate increases. On
the basis of the expertise commissioned by us, we doubled our reserves for
asbestos-related and environmental risks (A&E reserves) to 1.2 billion euros. In
terms of the ratio between reserves and the corresponding risks we are now one
of the leading insurers in this market. As a result the CLAIMS RATIO increased
to 94.1 (84.7) percent.

FIREMAN'S FUND INSURANCE COMPANY



                                                                       2002       2001       2000
                                                                      -------    -------    ------
                                                                                
Gross premiums............................................    E mn      4,547      5,366     4,849
Claims ratio..............................................       %       94.1       84.7      88.6
Expense ratio.............................................       %       34.5       29.6      30.3
Earnings after taxes......................................    E mn    - 666.1    - 356.7      39.5
Investments...............................................    E mn     10,198     12,053    10,928
Employees.................................................              5,707      7,093     8,437


     Rigorous cost management, which also involved the shedding of over 2,500
jobs since the year 2000, resulted in savings at the operational level in 2002.
Nevertheless, the EXPENSE RATIO deteriorated to 34.5 (29.6) percent due to
severance settlements and the fact that a larger share our business involves
higher closing costs.

     FFIC reduced the percentage of equities in its investment portfolio from
approximately 20 to 8 percent in the spring of 2002 in order to limit trading
losses. However, write-offs and realized capital losses totaled 496 million
euros.

     As a result, FFIC's LOSS after taxes came to 666 (357) million euros.

     Premium income of AIC, which primarily serves major clients, increased 11.4
percent to 765 million euros. The company ended the year with a loss of 49
million euros. New management has given AIC a new sense of direction. The
company introduced rate increases of 10 percent in the current fiscal year and
continues to dispose of unprofitable business. These and other measures can be
expected to bring AIC back into the profit zone.

     Allianz Insurance Company of CANADA generated premium income in the amount
549 (539) million euros. MEXICAN revenues came to 132 million euros.

                                       F-24


NAFTA



                                                                     2002        2001        2000
                                                                    -------    ---------    ------
                                                                                
Gross premiums..........................................    E mn      5,992        6,822     6,300
Claims ratio............................................       %       94.6         99.9      87.9
Expense ratio...........................................       %       32.9         29.2      29.6
Earnings after taxes....................................    E mn    - 933.1    - 1,029.9    - 86.1
Investments.............................................    E mn     19,522       20,398    18,000
Employees...............................................              7,140        8,585     9,976


     Poor investment performance, high reserves for asbestos-related and
environmental risks and the fact that our restructuring measures are only now
starting to bite meant that our activities in the NAFTA region once again
recorded a LOSS for the year. This loss came to 933 million euros. In the
CURRENT FISCAL YEAR, we will continue to pursue a selective underwriting policy.
Premium income will increase only slightly. We expect our core activities to
generate a profit.

ASIA-PACIFIC REGION

-- WE ARE REPRESENTED BY SUBSIDIARIES OR JOINT VENTURES IN ALMOST ALL MARKETS IN
   THIS REGION, WHICH OFFERS CONSIDERABLE POTENTIAL FOR GROWTH.

-- OUR TOTAL REVENUES IN THE ASIA-PACIFIC REGION AMOUNTED TO 1.6 BILLION EUROS.

     PREMIUM INCOME showed a substantial increase in nearly all markets in which
we are active. Allianz Australia is our largest company by far in this region.
Despite a difficult market, this company was able to increase premium income by
11 percent to an impressive 1.2 billion euros. At the same time, the company's
combined ratio improved by 3.6 percentage points to 104.2 percent.

     However, investment income suffered from high realized capital losses due
to the downscaling of the company's equity portfolio, the company ended the year
with a loss of 27 million euros.

     In January 2002, we acquired a 98 percent interest in Malaysia British
Assurance Berhad in. This Malaysian company now operates under the name Allianz
General Insurance Malaysia. With premium income in the amount of 133 million
euros, it is the second largest company in its market and our second-largest
property and casualty insurer in the region. The company's earnings after taxes
came to 6 million euros. We also started to underwrite property and casualty
insurance in South Korea in 2002.

     Taken together, our companies in the Asia-Pacific region reported a LOSS
after taxes of 17 million euros following a profit of 11 million euros a year
earlier.

ASIA-PACIFIC
GROSS PREMIUMS BY COUNTRY



                                                                2002     2001     2000
                                                                -----    -----    ----
                                                                E MN     E MN     E MN
                                                                         
Australia...................................................    1,163    1,048    557
Malaysia....................................................      133       48     --
Taiwan......................................................      101       89     83
Indonesia...................................................       65       55     40
Japan.......................................................       52       46     47
China.......................................................       42       35     26
Singapore...................................................       33       17     23
Laos........................................................        7        6      5
Korea.......................................................        3       --     --
                                                                -----    -----    ---
TOTAL.......................................................    1,599    1,344    781
                                                                =====    =====    ===


                                       F-25


     In the course of the CURRENT FISCAL YEAR, we will continue to expand our
presence in the Asia-Pacific region. We have started to market property
insurance in the province of Canton in southern China. On the whole, we
anticipate very satisfactory revenue growth.

SOUTH AMERICA

-- IN SOUTH AMERICA, WE ARE PRESENT IN ARGENTINA, BRAZIL, CHILE, COLOMBIA AND
   VENEZUELA.

-- TOTAL PREMIUM INCOME IN THESE COUNTRIES AMOUNTED TO 768 MILLION EUROS.

SOUTH AMERICA
GROSS PREMIUMS BY COUNTRY



                                                                2002    2001    2000
                                                                ----    ----    ----
                                                                E MN    E MN    E MN
                                                                       
Brazil......................................................    336     355     390
Colombia....................................................    222     267     165
Venezuela...................................................    106     126     134
Chile.......................................................     61      76      76
Argentina...................................................     43     138     126
                                                                ---     ---     ---
TOTAL.......................................................    768     962     891
                                                                ===     ===     ===


     Brazil contributed 336 million euros in PREMIUM INCOME to rank first among
our South America companies. Colombia followed with revenues of 222 million
euros. Due to the economic situation in Argentina, we decided to significantly
down-scale our business in that country.

     The COMBINED RATIO for South America declined to 101.8 (103.4) percent.
Although our company in Argentina incurred a loss in the amount of 5 million
euros due to the economic crisis, our subsidiaries in the other South American
countries all produced positive operating results. Earnings after taxes were up
significantly to 47 (29) million euros.

     In Venezuela and Argentina, it is likely that major political decisions
will determine how the economy develops.

ALLIANZ GLOBAL RISKS RUCKVERSICHERUNGS-AG

-- ALLIANZ GLOBAL RISKS RUCKVERSICHERUNGS-AG HAS BEEN IN EXISTENCE SINCE JANUARY
   1, 2002. THIS COMPANY HANDLES ALL BUSINESS WITH OUR MAJOR INTERNATIONAL
   CLIENTS.

-- GROSS PREMIUM INCOME AMOUNTED TO 1.1 BILLION EUROS.

     Why did we found this company? We want to use centralized controls and
uniform, mandatory underwriting guidelines to achieve sustainable profitability
in this difficult business segment.

     The CLAIMS RATIO came to 100.8 percent. Claims in connection with the
severe flooding in central and eastern Europe and reserves for potential risks
from the year 2002 depressed this ratio. In addition, high reinsurance expenses
had a negative effect on the first year of operation. At 77.9 percent, on the
other hand, the gross claims ratio was significantly better.

     The EXPENSE RATIO, which also reflects the effects of significant one-time
expense incurred to build up business, came to 41.7 percent.

     NET INVESTMENT INCOME in the first year of operation was low, as was to be
expected. Allianz Global Risks Ruckversicherungs-AG recorded an after-tax LOSS
in the amount of 257 million euros.

ALLIANZ GLOBAL RISKS RUCKVERSICHERUNGS-AG



                                                                         2002
                                                                        -------
                                                                  
Gross premiums..............................................    E mn      1,136
Claims ratio (net)..........................................       %      100.8
Expense ratio (net).........................................       %       41.7
Earnings after taxes........................................    E mn    - 256.7


                                       F-26


     We plan to achieve dynamic growth in premium income for the CURRENT FISCAL
YEAR, to some extent through higher rates, and expect to move into the profit
zone.

CREDIT INSURANCE

-- WE PROVIDE GLOBAL CREDIT INSURANCE THROUGH EULER & HERMES S. A. IN PARIS.

-- WITH A 37 PERCENT SHARE OF THE WORLD MARKET, WE ARE THE WORLD'S LEADING
   CREDIT INSURER.

     Within the consolidated credit insurance group, EULER concentrates on the
core markets France, Great Britain, Italy, Belgium, Spain, the Netherlands,
Luxembourg, the U.S., Canada and South America.

     HERMES is the Group company that handles credit insurance in Germany,
Switzerland, Austria, Scandinavia, central and eastern Europe, Portugal and the
Asia-Pacific region.

     In addition, EULER handles our factoring activities worldwide and HERMES
our bond and surety business.

     PREMIUM INCOME was down 0.6 percent to 1.6 billion euros. This was
primarily due to the weak economy, which reduced the income of our clients
worldwide. In addition, we took a more selective approach towards underwriting
credit insurance risks than had previously been the case. We also severed
business relationships with no prospects for profitability.

     Despite the reorganization of our portfolio, the CLAIMS RATIO increased 4.1
percentage points to 72.1 percent. Major claims and a large number of
insolvencies due to the situation of the economy depressed this figure.

     The abrupt drop of 9.8 percentage points in the EXPENSE RATIO to 34.2
percent can be explained primarily through the introduction of consistent cost
assignment in the context of the integration of EULER and HERMES. Our
cost-reduction measures also contributed to this improvement.

     NET INVESTMENT INCOME dropped 60 million euros to 56 million euros.

     As a result, EARNINGS after taxes deteriorated significantly to 16 (91)
million euros.

CREDIT INSURANCE



                                                                        2002     2001     2000
                                                                        -----    -----    -----
                                                                              
Gross premiums..............................................    E mn    1,579    1,589    1,611
Claims ratio................................................       %     72.1     68.0     46.6
Expense ratio...............................................       %     34.2     44.0     35.9
Earnings after taxes........................................    E mn     16.1     90.5    157.5
Investments.................................................    E mn    2,420    2,562    2,825
Employees...................................................            5,687    5,849    5,613


     Bundling our activities gives us in-depth information and data that help us
improve decision-making in the area of credit insurance. Provided the economy
picks up, we expect this to provide the basis for a lower claims ratio in the
CURRENT FISCAL YEAR. The expense ratio is also expected to continue to decline.
The reason for this is that all synergistic effects from the merger of EULER and
HERMES have not yet been taken advantage of, especially in the IT area. As a
result, we expect an improvement in earnings for 2003 as a whole.

TRAVEL INSURANCE AND ASSISTANCE SERVICES

-- WITH PREMIUM INCOME TOTALING 1.0 BILLION EUROS, THE MONDIAL ASSISTANCE GROUP
   WAS ABLE TO REINFORCE ITS POSITION AS ONE OF THE WORLD'S LEADING PROVIDERS OF
   ASSISTANCE AND TRAVEL INSURANCE.

-- PREMIUM GROWTH WAS GENERATED PRIMARILY BY AN INCREASE IN TRAVEL INSURANCE
   BUSINESS IN GREAT BRITAIN AND THE ASIA-PACIFIC REGION.

     PREMIUM GROWTH totaled 10.6 percent. Premium income from travel insurance
was up 10.4 percent to 808 million euros. Revenues from assistance services
increased 11.2 to 198 million euros. As a result, this company bucked the
economic trend and defied the especially

                                       F-27


difficult situation of the travel industry in the wake of the terrorist attacks
of 2001 and 2002 (among others New York, Djerba, Karachi, Bali).

     The CLAIMS RATIO in the area of travel insurance decreased to 62.0 (64.4)
percent. Due to more efficient workflows, the EXPENSE RATIO also improved 0.9
percentage points to 32.5 percent.

     Taken together, travel insurance and assistance generated EARNINGS after
taxes in the amount of 21 (3) million euros.

TRAVEL INSURANCE AND ASSISTANCE SERVICES



                                                                        2002     2001     2000
                                                                        -----    -----    -----
                                                                              
Gross premiums..............................................    E mn      808      732      656
Claims ratio................................................       %     62.0     64.4     63.2
Expense ratio...............................................       %     32.5     33.4     36.5
Earnings after taxes........................................    E mn     20.6      2.7     23.5
Investments.................................................    E mn      476      445      416
Employees...................................................            7,083    6,498    5,456


     Despite the current difficult economic and political situation throughout
the world, we expect to be able to maintain our dynamic growth in the CURRENT
FISCAL YEAR.

ALLIANZ MARINE & AVIATION

-- ALLIANZ MARINE & AVIATION IS OUR EUROPEAN INSURER THAT SPECIALIZES IN
   TRANSPORTATION, SHIPPING AND AVIATION RISKS.

-- PREMIUM INCOME AMOUNTED TO 1.4 (1.3) BILLION EUROS.

     Allianz Marine & Aviation handles activities in Germany, France and Great
Britain that were previously managed separately. This company now includes
Allianz Marine & Aviation Versicherungs-AG (formerly Allianz Globus MAT
Versicherungs-AG) and Allianz Marine & Aviation (France), which was previously
called AGF MAT.

     PREMIUM INCOME rose 7.7 year-on-year primarily due to rate increases.

     The CLAIMS RATIO improved by an exceptional 33 percentage points to 75.2
percent. We are therefore reaping the rewards of the thorough portfolio
reorganization that eliminated claims-prone, unprofitable business. In addition,
we were spared the major claims that exerted extreme downward pressure on our
claims ratio in past years.

     Higher premium income combined with constant administrative expense to
relieve pressure on the EXPENSE RATIO, which decreased to 21.1 (22.1) percent.

     EARNINGS after taxes amounted to 17 million euros.

ALLIANZ MARINE & AVIATION



                                                                        2002
                                                                        -----
                                                                  
Gross premiums..............................................    E mn    1,424
Claims ratio (net)..........................................       %     75.2
Expense ratio (net).........................................       %     21.1
Earnings after taxes........................................    E mn       17
Investments.................................................    E mn    1,163


     Allianz Marine & Aviation continued to pursue its previous corporate
strategy in the CURRENT FISCAL YEAR: premiums and conditions were adjusted to
cover risks, and the company was extremely selective about underwriting new
business. We anticipate a more attractive claims ratio and expect these measure
to produce a significant improvement in earnings.

                                       F-28


                           LIFE AND HEALTH INSURANCE



                                                                    2002       2001       2000
                                                                   -------    -------    -------
                                                                             
Total revenues.........................................    E mn     40,066     33,687     31,025
Gross premiums.........................................    E mn     20,663     20,145     20,239
Expense ratio..........................................       %       19.3       20.2       17.4
Investment income......................................    E mn      7,445      8,565     14,044
Net income.............................................    E mn         19        229        625
Investments............................................    E mn    221,313    212,757    211,798
Insurance reserves.....................................    E mn    224,673    215,217    208,829


TOTAL REVENUES(1)



                                                                 2002      2001      2000
                                                                 E MN      E MN      E MN
                                                                ------    ------    ------
                                                                           
Germany.....................................................    12,565    11,672    11,681
Italy.......................................................     7,717     5,944     4,490
France......................................................     4,238     4,864     5,558
Switzerland.................................................     1,197     1,174     1,053
Spain.......................................................       551       940       767
Rest of Europe..............................................     1,635     1,871     1,612
U.S.A.......................................................     9,530     4,982     3,681
Asia-Pacific Region.........................................     2,298     1,817     1,733
South America...............................................       237       356       469


------------

(1) Before cross-border consolidation

                                       F-29


-- TOTAL REVENUES INCREASED 18.9 PERCENT TO 40.1 BILLION EUROS.

-- REVENUES FROM INVESTMENT-ORIENTED LIFE INSURANCE PRODUCTS INCLUDED IN THE
   TOTAL ROSE 43.3 PERCENT TO 19.4 BILLION EUROS, WHICH INCREASED THEIR SHARE OF
   TOTAL REVENUES TO 48.5 PERCENT.

-- NET INVESTMENT INCOME FELL 13.1 PERCENT TO 7.4 BILLION EUROS.

-- REPORTED NET INCOME DROPPED TO 19 (229) MILLION EUROS DESPITE CONSIDERABLE
   IMPROVEMENT IN THE OPERATING ACTIVITIES.

EARNINGS AFTER TAXES(2)



                                                                2002     2001    2000
                                                                -----    ----    ----
                                                                E MN     E MN    E MN
                                                                        
Germany.....................................................      137    127      514
Italy.......................................................      289    261      281
France......................................................    - 223     97      400
Switzerland.................................................     - 80    - 17      43
Spain.......................................................       30     28       51
Rest of Europe..............................................     - 77     12       97
U.S.A.......................................................     - 18    - 24     133
Asia-Pacific Region.........................................      - 9    - 5     - 66
South America...............................................        5    - 20    - 30


------------

(2) Earnings after taxes, before amortization of goodwill and minority
    interests, net of extraordinary tax items in 2000

INVESTMENTS(3)



                                                                 2002       2001       2000
                                                                -------    -------    -------
                                                                 E MN       E MN       E MN
                                                                             
Germany.....................................................    119,786    117,199    121,260
Italy.......................................................     17,413     15,122     14,977
France......................................................     40,256     43,313     43,625
Switzerland.................................................      8,819      8,066      8,213
Spain.......................................................      3,956      3,564      2,776
Rest of Europe..............................................     10,080      9,335      9,278
U.S.A.......................................................     15,903     11,825      8,179
Asia-Pacific Region.........................................      4,675      3,945      3,241
South America...............................................        352        389        424


-------------------------

(3) Excluding real estate held for own use as of 2001

                                       F-30


     TOTAL STATUTORY LIFE AND HEALTH INSURANCE PREMIUMS INCREASED 18.9 PERCENT
TO 40.1 BILLION EUROS.  Almost half of these premiums derived from
investment-oriented products, mainly unit-linked life insurance. Despite the
state of the capital markets, we were able to increase revenues from these
products by 43.3 percent to 19.4 billion euros. We also improved our expense
ratio, but investment income declined sharply to 7.4 billion euros, which in
turn reduced net income to 19 (229) million euros.

     In many countries, in particular in the U.S.A., Italy and France, premiums
from investment-oriented products exceed the sale of traditional life insurance
products. This is surprising because it is generally assumed that in times of
economic difficulty consumers become more skeptical with respect to investment
products. And, indeed, they are more cautious, but instead of rejecting
investment-oriented products, they are showing a growing interest in solutions
with guaranteed capital components.

     The following table shows the premiums we generated from
investment-oriented products in the various countries.

PREMIUMS FROM INVESTMENT-ORIENTED LIFE INSURANCE PRODUCTS



                                                                 2002      2001      2000
                                                                ------    ------    ------
                                                                 E MN      E MN      E MN
                                                                           
U.S.A.......................................................     8,119     3,504     2,216
Italy.......................................................     6,419     4,608     3,036
France......................................................     2,790     3,308     3,261
South Korea.................................................       652       583       759
Switzerland.................................................       546       590       529
Germany.....................................................       331        12         0
Netherlands.................................................       103       252       194
Belgium.....................................................       100       105       115
Spain.......................................................        49        61       235
Other countries.............................................       294       519       441
                                                                ------    ------    ------
TOTAL.......................................................    19,403    13,542    10,786
                                                                ======    ======    ======


     In IFRS accounts, which only recognize the risk and cost elements in
premiums from investment-oriented products, PREMIUM INCOME rose 2.6 percent to
20.7 billion euros.

     The EXPENSE RATIO, in relation to total revenues, i.e., including
investment-oriented products, improved from 12.1 to 10.0 percent. In IFRS
accounts, it declined from 20.2 to 19.3 percent.

     INVESTMENT INCOME, which was depressed by the extremely weak capital
markets, dropped by 1.1 to 7.4 billion euros. For that reason, profit sharing
was considerably lower than last year. Payments made to our customers declined
from 22.0 billion euros to 21.3 billion euros despite the fact that in many
countries higher payments were due for maturities, surrenders and pensions.
Because of this development, lower investment income had less effect on net
income.

     EARNINGS BEFORE TAXES and amortization of goodwill dropped from 558 million
euros to 83 million euros. After amortization of goodwill, taxes and minority
interests, net income amounted to 19 (229) million euros.

GERMANY

-- IN THIS MARKET, WE OFFER LIFE INSURANCE PRODUCTS THROUGH ALLIANZ
   LEBENSVERSICHERUNGS-AG AND DEUTSCHE LEBENSVERSICHERUNGS-AG.

-- IN NOVEMBER 2002, ALLIANZ LEBEN WAS MERGED WITH ALLIANZ
   LEBENSVERSICHERUNGS-AG. THE MERGER WAS RETROACTIVE AS OF JANUARY 1, 2002.

-- OUR HEALTH INSURER IS ALLIANZ PRIVATE KRANKENVERSICHERUNGS-AG (FORMERLY
   VEREINTE KRANKENVERSICHERUNG AG).

-- WE ARE THE MARKET LEADER IN LIFE INSURANCE AND NUMBER THREE IN HEALTH
   INSURANCE.

     Total premium income breaks down as follows: life insurance business
accounted for 9.7 billion euros or 77.2 percent and the sale of health insurance
products contributed 2.9 billion euros

                                       F-31


or 22.8 percent. Total segmental revenues increased 893 million euros or 7.7
percent to 12.6 billion euros.

LIFE INSURANCE

     Following diminishing PREMIUM INCOME in the preceding year, our German life
insurers returned to growth in 2002. Revenues were up 719 million euros or 8
percent, which brought premium income to 9.7 billion euros.

     With 30 percent higher premiums from new contracts, Allianz Leben clearly
outperformed the market. In the area of new business, we were able to increase
our market share from 15.1 to 18.3 percent. On the one hand, this success is due
to the "flight to quality" phenomenon, i.e., in uncertain times, customers
prefer to obtain their private retirement insurance from life insurers that are
financially particularly solid. On the other hand, this upturn in new business
is supported by the efficiency of our distribution channels, which include
exclusive distribution networks, brokers, special and direct sales as well as
the branch network of Dresdner Bank. The bank's contribution to new business
increased substantially from 7.8 to 11.6 percent. The figure for the prior year
also included business generated by HypoVereinsbank until cooperation with this
institution was terminated.

     Since January 1, 2002, certain retirement provision contracts have been
subsidized by the government, partially through support payments and partially
through tax deductions ("Riester contracts"). To a great extent, the growth
expected of this market has not yet materialized. Nonetheless, our life insurers
were able to capture their share of the market. As of year-end 2002, they had
sold about 600,000 Riester contracts, which gave them a market share of 20
percent.

     Our business in corporate retirement provision registered dynamic growth.
In 2002, we were the first insurer to offer customers all available options for
corporate retirement provision. The Allianz pension fund got off to a
particularly successful start: more than 2,000 employers as customers and more
than 150,000 individual contracts signal solid growth for the coming years. Some
10,000 employees signed a retirement provision general contract with us. One
year after the reform of private and corporate retirement provision took effect,
three-quarters of all DAX 30 companies were offering their employees an Allianz
retirement provision scheme.

     The cancellation rate remained at a very low level of 3.7 (3.6) percent.

     The EXPENSE RATIO improved from 13.7 to 9.7 percent. Administrative costs
remained at last year's level of 2.4 percent and thus continue to stay clearly
below the market average.

     Given the persistent weakness of the capital markets, we decided to lower
the profit participation of our life insurance customers for the year 2002 by
1.5 percentage points to 5.3 percent. This step did not affect our competitive
position since all other market participants also had to do the same.

     Our INVESTMENTS amounted to 107,9 (106,4) billion euros. Investment income
fell 11.0 percent or 0.5 billion euros to 4.0 billion euros.

     EARNINGS after taxes increased to 80 (65) billion euros.

ALLIANZ LEBENSVERSICHERUNGS-AG, DEUTSCHE LEBENSVERSICHERUNGS-AG(*)



                                                                    2002       2001       2000
                                                                   -------    -------    -------
                                                                             
Total sales............................................    E mn      9,700      8,981      9,094
Gross premiums.........................................    E mn      9,369      8,969      9,094
Expense ratio..........................................       %        9.7       13.7       11.1
Earnings after taxes...................................    E mn       80.0       64.7      466.6
Investments............................................    E mn    107,887    106,425    111,805
Employees..............................................              5,736      6,440      6,159


------------

(*) Merged with Allianz Lebensversicherungs-AG in 2002

     As the deficits of the statutory retirement insurance become increasingly
obvious, consumers are realizing that they need to make private or company-based
arrangements for old-age provisions. We therefore expect a further increase in
premium income for the CURRENT FISCAL YEAR.

                                       F-32


Due to our inherent strength and our position of market leadership, we should be
able to outperform the market. The business potential of corporate retirement
provision products is especially strong.

HEALTH INSURANCE

     PREMIUM INCOME of Vereinte Krankenversicherung AG increased 6.5 percent to
2.9 billion euros. The growth in premium income from the core health insurance
business resulted from new business, the legal premium supplement and premium
adjustments reflecting higher health care costs.

     In mandatory care insurance, for which the same conditions apply throughout
the market, premium income remained at the previous year's level of 230 million
euros.

     The number of insured increased slightly by 0.2 percent to 2.27 million.

     The CLAIMS RATIO improved to 71.0 (73.1) percent, which is indicative of
the fact that our claims and health management is beginning to take effect.

     The EXPENSE RATIO increased slightly by 0.7 percentage points to 10.6
percent since the offsetting effect of capitalized acquisition costs was lower
than last year.

     INVESTMENT INCOME clearly recovered. After a substantial drop in the
previous year, it increased to 421 (275) million euros. As a result, EARNINGS
after taxes also improved to 64 (48) million euros.

ALLIANZ PRIVATE KRANKENVERSICHERUNGS-AG



                                                                        2002      2001      2000
                                                                       ------    ------    ------
                                                                               
Gross premiums.............................................    E mn     2,865     2,691     2,587
Claims ratio...............................................       %      71.0      73.1      71.6
Expense ratio..............................................       %      10.6       9.9       9.4
Earnings after taxes.......................................    E mn      63.6      48.0      34.1
Investments................................................    E mn    12,132    10,940    10,549
Employees..................................................             3,947     3,926     3,836


     Our business prospects for the CURRENT FISCAL YEAR will to a large extent
depend on the government's decisions on health care policy. Disregarding these
effects, we expect an increase in new business and corresponding growth in
revenues. In this context, we are counting on the strength of our brand and our
exclusive sales organizations. Our ongoing efforts in the area of claims and
health management are likely to further reduce the claims ratio. A more
efficient sales organization is expected to lower the expense ratio. All in all,
we expect improved earnings performance in 2003.

ITALY

-- WITH THE RAS GROUP AND LLOYD ADRIATICO, WE HAVE AN EXCELLENT POSITION IN THE
   ITALIAN LIFE INSURANCE MARKET.

-- TOGETHER, THEY INCREASED THEIR REVENUES TO 7.7 BILLION EUROS.

-- THAT MAKES THEM NUMBER TWO IN THE ITALIAN MARKET.

     The extraordinarily dynamic growth of total PREMIUM INCOME by an impressive
1.8 billion euros or 29.8 percent was well above the market average. The RAS
Group reported revenues of 6.5 billion euros and Lloyd Adriatico revenues of 1.2
billion euros. While the demand for traditional unit-linked life insurance
products declined slightly, this was more than compensated for by sales of
unit-linked products with guaranteed components. Premium income in IFRS
accounts, which includes only a small fraction of the premiums from
investment-oriented life insurance products, amounted to 1.3 billion euros. The
success of our companies increased our share of the Italian health insurance
market from 12.8 to 13.7 percent.

     This growth was mainly attributable to bank-based sales of unit-linked life
insurance products. A strong contributor to this success was our bancassurance
partner, the Unicredito group,

                                       F-33


which sold contracts representing 4.4 billion euros across its counters.
Antoniana Veneta Popolare Vita, a fully consolidated joint venture of Lloyd
Adriatico, once again boosted its revenues by 49 percent to 808 million euros.

     The EXPENSE RATIO increased to 31.3 (22.5) percent. This was mainly due to
the strong performance of our companies in acquiring new business. In IFRS
accounts, acquisition costs are fully recognized while premiums are barely taken
into account. At the same time, efforts made by RAS to reposition its brand are
feeding through to the expense ratio.

     NET INVESTMENT INCOME increased to 868 (842) million euros, mainly because
RAS Group disposed of most of its real estate holdings.

     EARNINGS after taxes increased to 289 (261) million euros.

ITALY



                                                                        2002      2001      2000
                                                                       ------    ------    ------
                                                                               
Total revenues.............................................    E mn     7,717     5,944     4,490
Gross premiums.............................................    E mn     1,298     1,336     1,454
Expense ratio..............................................       %      31.3      22.5      14.8
Earnings after taxes.......................................    E mn     288.6     260.7     281.4
Investments................................................    E mn    17,413    15,122    14,977


     We are confident that revenues from unit-linked life insurance will
continue to increase in the CURRENT FISCAL YEAR, provided that there is a
recovery in the capital markets. The success of sales cooperation with the
Unicredito group and the dynamic development of Antoniana Veneta Popolare Vita
will further strengthen our position in this growth market. On the downside, the
new tax rules announced for life insurance are likely to depress growth in this
industry. Nonetheless, we have reason to believe that we will once again be able
to improve our earnings performance in 2003.

FRANCE

-- IN THE FRENCH LIFE INSURANCE MARKET, THE AGF GROUP RETREATED FROM SIXTH TO
   EIGHTH PLACE.

-- IN HEALTH INSURANCE, WE ARE NUMBER TWO IN FRANCE.

-- TOTAL LIFE INSURANCE REVENUES AMOUNTED TO 4.3 BILLION EUROS.

     PREMIUM INCOME of AGF decreased 11.9 percent for various reasons.

     First of all, demand for unit-linked life insurance products in private
customer business declined 36 percent due to the downturn of the capital
markets. The sale of unit-linked products with guaranteed interest rates to some
extent made up for this loss but did not fully compensate for it. Growth in this
product category amounted to 2 percent. The cancellation ratio continued its
fall to 3.25 percentage points, which is below market average.

     In addition, premium income from group business fell 26 percent because a
major group contract with an industrial company had generated a non-recurring
premium of 416 million euros (after 800 million euros in 2000) in 2001. No such
contract was acquired in 2002. Disregarding this special effect, revenues from
group insurance contracts rose 8 percent.

     The decline in income from the entire segment raised the EXPENSE RATIO 0.5
percentage points to 52.5 percent. This relatively high expense ratio can be
explained by the fact that it is not calculated on the basis of total revenues
but rather on the basis of substantially lower premium income according to IFRS.

     Due to high write-offs and realized capital losses, INVESTMENT INCOME
declined to 0.7 (1.3) billion euros.

     Together with strong competition, this resulted in an after-tax LOSS, which
amounted to 223 million euros after net income of 97 million euros in the
previous year.

                                       F-34


FRANCE



                                                                       2002       2001      2000
                                                                      -------    ------    ------
                                                                               
Total revenues............................................    E mn      4,283     4,864     5,558
Gross premiums............................................    E mn      1,493     1,556     2,297
Expense ratio.............................................       %       52.5      52.0      27.6
Earnings after taxes......................................    E mn    - 223.1      97.4     399.7
Investments...............................................    E mn     40,256    43,313    43,625


     For the CURRENT FISCAL YEAR, we are anticipating a stagnating life
insurance market. In health insurance, further rate adjustments and rising
health care costs can be expected. This should lead to a slight increase in
revenues across the entire segment. More efficient IT systems and lower
administrative costs will bring down the expense ratio. Earnings are likely to
improve.

SWITZERLAND

-- ALLIANZ SUISSE LEBENSVERSICHERUNGSGESELLSCHAFT REPORTED REVENUES OF 1.2
   BILLION EUROS.

-- THAT PUTS THIS COMPANY AT SIXTH PLACE IN THE SWISS MARKET.

     Total premium income increased 2.0 percent to 1.2 billion euros. Premium
income in IFRS accounts, which includes only a small fraction of the premiums
from investment-oriented life insurance products, amounted to 651 million euros.
This growth is mainly attributable to consumer life insurance business with a
high percentage of non-recurring premiums. Gross premium income from this
activity increased 12.2 percent to 412 million euros. Recurring premiums
represented the main source of income in the area of group life insurance, which
brought total premium income up 3.2 percent to 239 million euros.

     The EXPENSE RATIO increased slightly by 0.5 percentage points to 23.1
percent, essentially due to higher project costs.

     INVESTMENT INCOME dropped to 31 (220) million euros, primarily due to
write-offs and realized capital losses, mainly on stocks.

     Our Swiss life insurer reported an after-tax LOSS of 80 (17) million euros
for 2002. This is the result of the 4 percent interest rate for group life
insurance, which is legally guaranteed in Switzerland. This rate has been
excessive for years and cannot be generated under the conditions currently
prevailing in the capital markets. By way of comparison, in 2002 the interest
rate on Swiss bonds was around 2.75 percent.

ALLIANZ SUISSE



                                                                         2002      2001     2000
                                                                        ------    ------    -----
                                                                                
Total revenues..............................................    E mn     1,197     1,174    1,053
Gross premiums..............................................    E mn       651       584      524
Expense ratio...............................................       %      23.1      22.6      9.9
Earnings after taxes........................................    E mn    - 79.6    - 17.1     42.6
Investments.................................................    E mn     8,819     8,066    8,213


     The problem of excessive guaranteed interest continues to smolder despite
the fact that the guaranteed interest rate in the group insurance business has
been reduced to 3.25 percent. We intend to overcome these difficulties in the
CURRENT FISCAL YEAR with a uniform and modernized product portfolio. All in all,
we expect to improve our earnings performance in 2003, despite the difficult
market situation.

SPAIN

-- IN SPAIN, OUR LIFE INSURANCE ACTIVITIES ARE HANDLED BY ALLIANZ SEGUROS AND
   EUROVIDA, A BANCASSURANCE JOINT VENTURE.

-- TOGETHER, THEY RECORDED PREMIUM INCOME OF 551 MILLION EUROS.

-- THAT MADE THEM NUMBER FOURTEEN IN THE SPANISH MARKET.

                                       F-35


     Total PREMIUM INCOME decreased sharply by 41.4 percent to 551 (940) million
euros. This decline was due to the fact that in the previous year our corporate
customers outsourced their employee pension funds and transferred them to us. In
this process, we acquired exceptionally high single payments. In the remaining
group and private customer business our companies resisted the downward trend of
the market and increased their premium income. Growth amounted to 26 percent and
13 percent respectively.

     The additional premium income is attributable to the restructuring of our
sales organization, which clearly improved the productivity of our sales force.
In Spain, there was also less demand for traditional unit-linked life insurance,
Eurovida's core business. Instead, many customers opted for products with
guaranteed components. As a result, we expanded our product offerings
considerably. Despite these efforts, the high growth rate of Eurovida slowed
down. The company reported total revenues in the amount of 127 million euros.

     The EXPENSE RATIO climbed to 7.3 (4.2) percent. In 2001, high non-recurring
revenues resulted in an exceptionally low expense ratio.

     EARNINGS after taxes improved slightly to 30 (28) million euros.

SPAIN



                                                                        2002     2001     2000
                                                                        -----    -----    -----
                                                                              
Total revenues..............................................    E mn      551      940      767
Gross premiums..............................................    E mn      502      879      532
Expense ratio...............................................       %      7.3      4.2      8.9
Earnings after taxes........................................    E mn     29.5     27.5     50.7
Investments.................................................    E mn    3,956    3,564    2,776


     For the CURRENT FISCAL YEAR, no stimulus for market-wide growth is
expected. Forthcoming legal changes, which will provide tax incentives not only
for pension plans and fund investment but also for traditional life insurance,
are a welcome sign of relief. Our attractive products in this area and the new
legal situation should help to reinvigorate this activity and bring new growth
to an area that has been neglected by the entire market. We therefore expect to
be able to report improved earnings performance in 2003.

REST OF EUROPE

REST OF EUROPE
TOTAL REVENUES BY COUNTRY



                                                                2002     2001     2000
                                                                E MN     E MN     E MN
                                                                -----    -----    -----
                                                                         
Belgium.....................................................      413      421      414
Austria.....................................................      303      282      268
Netherlands.................................................      247      409      270
Great Britain...............................................      153      337      344
Luxembourg..................................................      125      129      100
Greece......................................................       80       71       74
Portugal....................................................       74       69       65
                                                                -----    -----    -----
SUBTOTAL WESTERN AND SOUTHERN EUROPE........................    1,395    1,718    1,535
                                                                -----    -----    -----
Slovakia....................................................       73       16       --
Hungary.....................................................       66       53       52
Poland......................................................       45       38       24
Czech Republic..............................................       36       35       --
Croatia.....................................................       14        8       --
Bulgaria....................................................        6        3        1
                                                                -----    -----    -----
SUBTOTAL CENTRAL AND EASTERN EUROPE.........................      240      153       77
                                                                -----    -----    -----
TOTAL.......................................................    1,635    1,871    1,612
                                                                =====    =====    =====


     Total REVENUES from life and health insurance in the other European markets
came to 1.6 (1.9) billion euros. Due to the downturn in the capital markets,
many customers refrained

                                       F-36


from buying unit-linked products, particularly in the Netherlands. In Great
Britain, we withdrew from the investment-oriented business and concentrated our
efforts on risk life insurance. The demand for traditional life insurance
increased in many countries. In IFRS accounts, premium income rose to 1.3 (1.1)
billion euros.

     In 2002, our companies in central and eastern Europe were involved in the
process of building up their business. The corresponding expenses depressed
earnings. In Belgium, the Netherlands and Great Britain, charges arising from
the performance of the capital markets resulted in losses.

     After taxes, we reported a LOSS of 77 million euros in other European
markets, following earnings of 12 million euros in the preceding year.

     For the CURRENT FISCAL YEAR, we expect higher premium income and improved
earnings performance. The fact that private retirement savings are being
increasingly subsidized by the governments of Central and Eastern Europe gives
us reason for optimism. Larger portfolios should improve our expense ratio so
that overall profitability in the other European markets is likely to rise
again.

U.S.A.

-- ALLIANZ LIFE OF NORTH AMERICA IS OUR LIFE INSURER IN THE UNITED STATES OF
   AMERICA.

-- STRONG EXPANSION OF OUR REVENUES NETWORK ENABLED US TO BOOST TOTAL PREMIUM
   INCOME BY 91.3 PERCENT TO 9.5 BILLION EUROS.

     In local currency, the increase came to 103.9 percent. The main contributor
was the retirement insurance business, a traditional domain of Allianz Life. In
this dynamic market, our companies achieved above-average growth rates. On the
one hand, this was due to the swift expansion of our sales network. On the other
hand, the current situation on the financial markets considerably strengthened
demand for retirement insurance, where most capital is invested in fixed-income
securities.

     The dynamic growth triggered high acquisition costs, which in IFRS accounts
are capitalized and amortized over the estimated life of the contracts. As a
result, the EXPENSE RATIO improved to 47.0 (49.2) percent in the reporting year.

     INVESTMENT INCOME rose to 561 (468) million euros.

     Financing of the substantial new business depressed income. After taxes, a
LOSS of 18 (24) million euros was reported, which represents a slight
improvement.

ALLIANZ LIFE



                                                                         2002      2001     2000
                                                                        ------    ------    -----
                                                                                
Total revenues..............................................    E mn     9,530     4,982    3,681
Gross premiums..............................................    E mn     1,411     1,478    1,465
Expense ratio...............................................       %      47.0      49.2     48.2
Earnings after taxes........................................    E mn    - 17.7    - 23.7    132.6
Investments.................................................    E mn    15,903    11,825    8,179
Employees...................................................             1,997     1,750    1,435


     For the most part, the legal minimum interest rate for our life insurance
products is 3.0 percent. We closely monitor the day-to-day situation on the
capital markets and are able to rapidly and flexibly adjust the interest
payments credited to our customers.

     For the CURRENT FISCAL YEAR, we are aiming for premium volume at the level
of the reporting year. Further cost reductions and stable investment income are
expected to restore profitability.

ASIA-PACIFIC REGION

-- WE ALSO OFFER LIFE AND HEALTH INSURANCE IN ASIA AND ARE STEADILY EXPANDING
   OUR BUSINESS IN THE RAPIDLY DEVELOPING MARKETS OF THIS REGION.

-- TOTAL PREMIUM INCOME FROM THIS REGION AMOUNTED TO 2.3 BILLION EUROS.

                                       F-37


     With a total premium volume of 1.9 billion euros, our biggest company in
this region is Allianz Life Insurance South Korea (formerly Allianz First Life).
It ranks fourth in the South Korean life insurance market. The most common
products in this country are guaranteed interest products, which in years with
falling interest rates like 2002 puts life insurers under considerable pressure.
After taxes, the company reported earnings of 3.2 (26) million euros.

     Our Indonesian company, PT Asuransi Allianz Life Indonesia, offers life and
health insurance. In 2002, the two lines generated vigorous growth of 87 percent
to 47 million euros, which was due to the expansion of our distribution
capacity. With 5,400 representatives, we operate the biggest life insurance
distribution network in the Indonesian market. The after-tax loss in Indonesia
came to 2.5 (8.5) million euros.

     We also expanded our sales organization in other Asian countries,
particularly in China and India. At present, 9,000 representatives of our local
joint venture sell our products on the Indian subcontinent.

     In Malaysia, we sell life insurance through our subsidiary Allianz Life
Insurance Malaysia Berhad. We are also represented in the area of life insurance
in Taiwan. In Singapore and Pakistan, we now underwrite health insurance. In
Thailand, we are represented through our interest in Allianz CP Life.

     TOTAL REVENUES in the Asia-Pacific region grew 26.5 percent to 2.3 billion
euros.

     After taxes, the Asia-Pacific region reported a LOSS of 9 million euros,
after 5 million a year earlier.

ASIA-PACIFIC REGION
TOTAL REVENUES BY COUNTRY



                                                                2002     2001     2000
                                                                -----    -----    -----
                                                                E MN     E MN     E MN
                                                                         
Korea.......................................................    1,894    1,642    1,614
Taiwan......................................................      277      127      103
Malaysia....................................................       54       13       --
Indonesia...................................................       47       25       16
China.......................................................       16        8       --
Philippines.................................................        8       --       --
Pakistan....................................................        2        2       --
                                                                -----    -----    -----
TOTAL.......................................................    2,298    1,817    1,733
                                                                =====    =====    =====


     In the CURRENT FISCAL YEAR, we will further expand our life insurance
business in China. We are planning to enter the bancassurance market in South
Korea together with our cooperation partner Hana Bank.

     Effective as of January 14 of this year, we sold our 50 percent interest in
Pioneer Allianz Life Assurance Company (PALAC) to our joint venture partner,
Pioneer, who will from now on operate the company as sole owner. As a result, we
have completely withdrawn from the Philippine insurance market, a market in
which we have been active since 1997 but which today offers insufficient
potential.

     Altogether, we expect further premium growth in the Asia-Pacific region and
improved earnings performance.

                                       F-38


SOUTH AMERICA

     We also sell life insurance in Brazil, Colombia, Chile, Argentina and
Venezuela. Total REVENUES in these countries amounted to 237 million euros.

SOUTH AMERICA
TOTAL REVENUES BY COUNTRY



                                                                2002    2001    2000
                                                                ----    ----    ----
                                                                E MN    E MN    E MN
                                                                       
Brazil......................................................    122     178     208
Colombia....................................................     73     107     195
Chile.......................................................     39       1      --
Argentina...................................................      2      61      59
Venezuela...................................................      1       9       7
                                                                ---     ---     ---
TOTAL.......................................................    237     356     469
                                                                ===     ===     ===


                                       F-39


     THE GROUP'S BANKING BUSINESS EXPERIENCED AN EXTREMELY DIFFICULT YEAR.  The
downturn in the capital markets and a weak, in some countries crisis-prone
economy, put a severe strain on our operating business. Loan loss allowances had
to be substantially increased, which tangibly depressed earnings. These
influences were so acute that the progress achieved in cost management did not
yet produce the expected results. The banking business reported a loss of 1.4
billion euros.

     The operating income from this segment, which is essentially determined by
the business performance of Dresdner Bank, amounted to 7.6 billion euros and
thus failed to meet our expectations. However, our efforts to reduce the
administrative expenses of Dresdner Bank produced first results. At 7.1 billion
euros, they were 12.3 percent or 985 million euros lower than in the previous
year. We are well aware of the fact that this is insufficient to rid our banking
business of its persistent ills.

BANKING OVERVIEW



                                                                         2002      2001(*)
                                                                        -------    -------
                                                                          
Net interest and current income.............................    E mn      3,827      2,363
Net fee and commission income...............................    E mn      2,658      1,290
Trading income..............................................    E mn      1,081        244
Other income/expenses.......................................    E mn        675        248
Administrative expenses.....................................    E mn    - 7,314    - 3,261
Loan loss provisions........................................    E mn    - 2,222      - 588
Earnings before taxes.......................................    E mn    - 1,358      - 220
Operating cost income ratio.................................       %         97         84
Loans and advances to customers and banks...................    E bn        246        277
Liabilities to customers and banks..........................    E bn        278        307


------------

(*) When comparing the figures for fiscal 2002 with those for 2001, it should be
    noted that Dresdner Bank was initially consolidated as of July 23, 2001.

     Our banking business posted the following results.

     The interest-earning business was determined by intensive competition over
conditions, persistently low interest levels and the de-consolidation of
Deutsche Hyp. Total NET INTEREST INCOME amounted to 3.8 (2.4) billion euros. In
August 2002, Deutsche Hyp was merged with Euro Hyp AG, a company in which
Commerzbank, Deutsche Bank and Dresdner Bank have merged their mortgage lending
subsidiaries.

     LOAN LOSS PROVISIONS were increased to 2.2 billion euros. This step was
necessitated by the growing number of insolvencies among business customers and
the fact that we expect substantial loan losses in Latin America. Additional
write-downs were required in the private customer lending business.

     Commission income suffered from the reluctant attitude of customers in the
securities and issuing areas. NET COMMISSION INCOME amounted to 2.7 (1.3)
billion euros.

     Earnings in the TRADING BUSINESS were determined by two opposing trends: in
the bond, currency and precious metal business, we generated positive results.
Stock trading, however, produced a loss. Total trading income amounted to 1.1
(0.2) billion euros.

     ADMINISTRATIVE EXPENSES came to 7.3 billion euros.

     The balance of OTHER INCOME AND EXPENSES increased to 675 (248) million
euros. This amount includes a profit of 1.9 billion euros that was generated by
the transfer of the activities of Dresdner Bank Asset Management to Allianz AG.
This profit is consolidated at Group level. Other expenses essentially included
write-downs on stock portfolios (986 million euros) and restructuring expenses
(245 million euros).

     As a result, the banking business reported a LOSS of 1.4 billion euros.

                                       F-40


     To restore the profitability of Dresdner Bank as quickly as possible and on
a sustainable basis, the Turnaround 2003 program was launched in the fall of
2002. This program has three components:

     1. The newly created Institutional Restructuring Unit (IRU) is intended to
        unwind Dresdner Bank's lending commitments that are of no strategic
        importance or involve impaired loans. Primarily, this concerns borrowers
        in North and South America as well as in Germany. Over the medium term,
        this will release risk capital in the order of up to 3 billion euros
        over the coming years.

     2. The ongoing cost-cutting efforts are being stepped up once again. The
        objective is to reduce operating and personnel costs to 6.5 billion
        euros by the end of 2003.

     3. In the process of divisionalization, previously centralized services
        were transferred to the divisions and made even leaner.

To ensure that the Turnaround 2003 program is successfully realized within the
set timeframe, we established a steering committee made up of members of the
Board of Management of Allianz AG and Dresdner Bank. The execution of this
program is our foremost priority.

PRIVATE CUSTOMERS AND BUSINESS CUSTOMERS

     In 2002, our business with private and business customers was once again
overshadowed by the downward trend of the stock markets. Securities trading
stagnated and the lending business suffered from low interest rates and a high
default rate. We set aside 561 (233) million euros for the corresponding loan
loss provision. This provision primarily concerns our loans to business
customers. Our restructuring measures produced first results und limited
administrative expenses to 3.0 billion euros. Our loss increased to 304 (160)
million euros. However, it should be borne in mind that our earnings were
impacted by restructuring expenses.

PRIVATE CUSTOMERS AND BUSINESS CUSTOMERS



                                                                         2002      2001(*)
                                                                        -------    -------
                                                                          
Total income................................................    E mn      3,350      1,678
Total expenses..............................................    E mn    - 3,093    - 1,605
Loan loss allowance.........................................    E mn      - 561      - 233
Earnings after taxes........................................    E mn      - 304      - 160
Cost income ratio...........................................       %         92         96


------------

(*) When comparing the figures for fiscal 2002 with those for 2001, it should be
    noted that Dresdner Bank was consolidated as of July 23, 2001. Changes in
    the divisional structure and improvements in income classification have been
    taken into account in the prior-year figures stated.

CORPORATES & MARKETS

     The results of the Corporates & Markets division continued to deteriorate.
The weakness of the capital markets and the stagnating world economy caused
income to dwindle to 3.8 billion euros. While we were able to reduce
administrative expenses more than originally planned, cost management alone was
unable to stem the tide, particularly since earnings were hit by loan loss
provisions that climbed to 1.6 billion euros. The write-downs essentially affect
the portfolios which we are transferring to IRU. The after-tax loss doubled to
1.6 (0.8) billion euros.

                                       F-41


CORPORATES & MARKETS



                                                                         2002      2001(*)
                                                                        -------    -------
                                                                          
Total income................................................    E mn      3,758      1,725
Total expenses..............................................    E mn    - 3,808    - 2,161
Loan loss provisions........................................    E mn    - 1,592      - 361
Earnings after taxes........................................    E mn    - 1,642      - 797
Cost income ratio...........................................       %        101        125


------------

(*) When comparing the figures for fiscal 2002 with those for 2001, it should be
    noted that Dresdner Bank was consolidated as of July 23, 2001. Changes in
    the divisional structure and improvements in income classification have been
    taken into account in the prior-year figures stated.

     In the CURRENT FISCAL YEAR, the banking business will continue on its
precarious path. As long as the economy shows no clear signs of recovery and the
decline of the capital markets cannot be reversed, we do not expect any
fundamental improvements. Beyond the timely implementation of the Turnaround
2003 program, our performance will essentially depend on our ability to boost
operating income in a difficult economic context.

                                       F-42


     ALLIANZ IS ONE OF THE FIVE LEADING ASSET MANAGERS IN THE WORLD.  Net inflow
to assets under management for third-party investors reached 43 billion euros.
Nonetheless, assets managed for third parties decreased by 59 billion euros or
9.5 percent to 561 billion euros. This was due to falling stock prices and the
depreciation of the U.S. dollar against the euro. The operating result amounted
to 495 million euros. After deduction of acquisition-related expenses as well as
taxes and minority interests, the segment reported a loss as expected of 405
million euros.

     ASSETS UNDER MANAGEMENT comprise both assets managed for third-party
investors and investments used to cover insurance provisions, equity capital and
borrowed funds.

ASSETS UNDER MANAGEMENT



                                                                CURRENT VALUES    CURRENT VALUES
                                                                  12/31/2002        12/31/2001
                                                                --------------    --------------
                                                                     E BN              E BN
                                                                            
Group investments(*)........................................         403                481
Investments for unit-linked life insurance..................          25                 25
Investments for third-party investors.......................         561                620
                                                                     ---              -----
TOTAL ASSETS UNDER MANAGEMENT...............................         989              1,126
                                                                     ===              =====


------------

(*) For the first time, this statement of Group investments also includes
    trading liabilities. In 2001, assets under management did not include
    trading liabilities amounting to - 45 billion euros.

ASSET MANAGEMENT FOR THIRD-PARTY INVESTORS

     Following the acquisition of Dresdner Bank, we combined all operative asset
management units in Allianz Dresdner Asset Management (ADAM). We now have
production and distribution capacities in all essential markets, reaching 60
million private customers and institutional investors.

     Approximately 57 percent or 561 billion euros of our assets are managed for
third-party investors. That includes 43 billion euros in net inflows. Despite
these inflows, the value of this portfolio decreased by 59 billion euros. The
causes for this decline were lower stock market prices, which accounted for 25
billion euros, and an additional 77 billion euros due to the depreciation of the
U.S. dollar against the euro.

     Approximately 70 percent of our third-party investments come from the
U.S.A. and approximately 19 percent from Germany. As a result, we have a very
strong position in both markets. In terms of total volume, institutional
customers account for 72 percent. We are thus operating in a market environment
with very high demands on the quality of our products and services. This
constellation also benefits our private customers.

     In 2002, we achieved a number of successes:

     -- With a net inflow of 56 billion euros, our fixed-income fund business
        achieved extraordinarily strong growth. This increased the fixed-income
        share of our portfolio to 72 percent; equity funds account for 25
        percent.

     -- Our PIMCO Total Return Fund alone increased its investment volume to 68
        billion U.S. dollars by the end of the year and thus became the largest
        actively managed investment fund in the world.

     -- Its European equivalent, dit Euro Bond Total Return Fund "powered by
        PIMCO," was able to attract 1.5 billion euros in net inflows between its
        launch in May 2002 and the end of the year. That makes it Germany's
        best-selling fixed-interest fund. This performance was recognized by the
        "Financial News," which honored PIMCO as the best European fixed-income
        fund manager.

     -- Measured in terms of net inflows from third-party sales, our public
        funds rank second in the U.S.A.

     -- The leading position of ADAM in the institutional customer business in
        Germany can also be attributed to the successful integration of Dresdner
        Bank Asset Management.

     -- In June 2000, we launched the Allianz Dresdner Pension Fund.

                                       F-43


     -- In China, a market with excellent growth prospects for fund managers,
        our joint venture Guotai Junan Allianz Fund Management Co. was the first
        fund manager with foreign participation to be granted a business
        license. The cooperation brought together the distribution network of
        our partner, Guotai Junan Securities, with our expertise in risk and
        portfolio management, product design and controlling.

     The OPERATING RESULT rose to 495 million euros, up 182 million euros from
the previous year. The increase is due to the fact that the asset management
activities of Dresdner Bank were for the first time included on a full-year
basis. The bank was consolidated as of July 23, 2001. Our operating result
remained essentially unchanged on the previous year, despite the difficult
situation in the capital markets.

     An improved cost structure, mainly due to the restructuring of our equity
investment units, improved the COST-INCOME RATIO from 84.7 to 78.5 percent.

     ACQUISITION-RELATED EXPENSES totaled 729 million euros. They include
amortization of goodwill of 377 million euros as well 155 million euros for the
amortization of loyalty bonuses for the management of the PIMCO group. These
bonuses were agreed upon in 2000 as part of the price paid for the company and
are amortized over five years. Another 197 million euros are "retention
payments" for the management and employees of PIMCO and Nicholas-Applegate.
These payments were also agreed upon as part of the acquisition package for the
fund management companies and will continue for another two years.

     MINORITY INTERESTS in earnings amounted to 230 million euros. PacLife,
which still holds a 30 percent interest in PIMCO, accounts for 162 million euros
of this amount.

     After tax income in the amount of 59 million euros, the segment reported a
LOSS of 405 million euros.

     Our business model is based on spreading income and risks, both with
respect to the different asset classes as well as the regional structure of our
business. Nonetheless, business prospects for the CURRENT FISCAL YEAR will to a
great extent depend on the development of the capital and currency markets. We
expect inflows in the fixed-income business to continue at a satisfactory level
while demand in the equity business is likely to recover. The comprehensive
cost-cutting measures taken in the year under review should produce further
results in 2003, and we expect a clear improvement of our overall operating
result. However, due to high acquisition-related expenses, our after-tax result
will once again be negative.

GROUP INVESTMENT STRUCTURE



                                                                     12/31/2002         12/31/2001
                                                                --------------------    ----------
                                                                CURRENT
                                                                VALUES     WEIGHTING    WEIGHTING
                                                                -------    ---------    ----------
                                                                 E BN        IN %          IN %
                                                                               
Interests in affiliated enterprises, joint ventures and
  associated enterprises....................................      15.0         3.7          5.0
Investments.................................................     289.4        71.8         72.8
  Securities held to maturity...............................       6.5         1.6          1.6
  Securities for sale.......................................     266.0        66.0         67.0
  Real estate used by third parties.........................      14.8         3.7          3.5
  Funds held by others under reinsurance contracts
     assumed................................................       2.1         0.5          0.7
Trading portfolio...........................................      71.3        17.7         17.4
  Trading assets............................................     124.8        31.0         26.7
  Trading liabilities.......................................    - 53.5      - 13.3        - 9.3
Other investments...........................................      27.3         6.8          4.7
                                                                ------      ------        -----
TOTAL INVESTMENTS...........................................     403.0       100.0        100.0
                                                                ======      ======        =====


INVESTMENTS

     The current value of GROUP INVESTMENTS was 403.0 billion euros on December
31, 2001. This amount comprises the investments from the banking business,
including Dresdner Bank, which

                                       F-44


amounted to 99.2 billion euros. Total Group investments decreased 16.2 percent
from the previous year (480.9 billion euros). This decline is primarily due to
lower stock market prices.

     For the first time, this statement of Group investments also includes
trading liabilities in the amount of 53.5 billion euros.

     The current value of INVESTMENTS IN AFFILIATED ENTERPRISES, JOINT VENTURES
AND ASSOCIATED ENTERPRISES decreased by 9.2 billion euros to 15.0 billion euros.
Most of these investments are in associated enterprises (i.e. companies in which
we hold a share of between 20 and 50 percent), which are valued by the equity
method. Our biggest holdings were Munchener Ruckversicherungs-Gesellschaft AG
(4.5 billion euros) and Beiersdorf AG (3.9 billion euros). For the first time,
we also valued our interest in Eurohypo AG as an associated enterprise. In this
company, Dresdner Bank AG, Deutsche Bank AG and Commerzbank AG have pooled
together their real estate financing activities.

     In addition, we held SECURITIES with a current value of 289.4 billion
euros. Of these, 6.5 billion euros were in SECURITIES HELD TO MATURITY and 266.0
billion euros in SECURITIES AVAILABLE FOR SALE. The latter included 18 (25)
percent stocks and 82 (75) percent fixed-income securities. The difference with
respect to the previous year is due to the development of the capital markets
and our decision to reduce the equity allocation in our portfolios. Unrealized
gains and losses from dividend-bearing equity securities decreased to - 4.9
billion euros, those from fixed income securities increased to 11.0 billion
euros. A list of companies in which we hold at least 5 percent of the capital or
in which our investment exceeds 100 million euros can be found on pages F-124 to
F-125 of the Notes to the Consolidated Financial Statements. Also shown in this
list are the percentages of our interest in each company and the market
capitalization of our holdings. At the end of 2002, the market value of these
holdings amounted to 27.7 billion euros.

     REAL ESTATE USED BY OTHERS was valued at 14.8 billion euros in fiscal 2002,
and FUNDS HELD BY OTHERS UNDER REINSURANCE CONTRACTS ASSUMED amounted to 2.1
billion euros.

     The balance of TRADING ASSETS AND TRADING LIABILITIES amounted to 71.3
billion euros at December 31, 2002. Trading assets (124.8 billion euros) consist
of fixed-income securities (74 percent), dividend-earning equity securities (7
percent) and derivatives (19 percent). Trading liabilities (53.5 billion euros)
essentially include derivatives (40 percent) and obligations to deliver
securities (56 percent). These items are primarily attributable to the banking
business.

     Other investments mainly include LOANS ADVANCED BY GROUP ENTERPRISES (18.7
billion euros) as well as BANK DEPOSITS (8.3 billion euros).

INVESTMENT STRUCTURE BY TYPE OF INVESTMENT



                                                                     12/31/2002         12/31/2001
                                                                --------------------    ----------
                                                                CURRENT
                                                                VALUES     WEIGHTING    WEIGHTING
                                                                -------    ---------    ----------
                                                                 E BN        IN %          IN %
                                                                               
Real estate.................................................      14.8         4.5          4.2
Dividend-earning equity securities..........................      63.2        19.0         26.5
Fixed-income securities.....................................     242.7        73.2         66.6
Other investments...........................................      11.0         3.3          2.7
                                                                 -----       -----        -----
SUBTOTAL....................................................     331.7       100.0        100.0
Trading portfolio...........................................      71.3
                                                                 -----
TOTAL INVESTMENTS...........................................     403.0
                                                                 =====


                                       F-45


INVESTMENT STRUCTURE BY SEGMENTS AS OF DECEMBER 31, 2002
CURRENT VALUES IN E BN



                                                                                                ASSET
                                               PROPERTY/CASUALTY    LIFE/HEALTH    BANKING    MANAGEMENT
                                               -----------------    -----------    -------    ----------
                                                                                  
Interests in affiliated enterprises, joint
  ventures and associated enterprises......            8.2               2.0          4.8         --
Investments................................           73.1             190.7         24.1        1.0
  Securities held to maturity..............            0.6               5.2          0.7         --
  Securities for sale......................           64.7             177.3         23.0        1.0
  Real estate used by third parties........            5.9               8.2          0.7         --
  Funds held by others under reinsurance
     contracts assumed.....................            2.0               0.1           --         --
Trading portfolio..........................            0.9               0.3         70.0        0.2
  Trading assets...........................            1.4               1.1        122.2        0.2
  Trading liabilities......................          - 0.5             - 0.8       - 52.2         --
Other investments..........................            7.4              19.9           --         --
                                                     -----            ------       ------        ---
TOTAL INVESTMENTS..........................           89.6             213.0         99.2        1.2
                                                     =====            ======       ======        ===


------------

After elimination of cross-segment group-internal transactions

     INVESTMENT INCOME came to 16.6 billion euros in 2002, down 1.0 billion
euros from the previous year.

     Current income increased from 17.1 billion euros to 17.8 billion euros.
Realized profits and losses amounted to a total of 4.1 (2.3) billion euros,
write-ups came to 0.8 (0.4) billion euros. Due to the weakness of the capital
markets, write-downs on securities increased to 5.6 (1.5) billion euros.
Additional write-downs, in particular on real estate used by third parties, came
to 0.3 (0.7) billion euros. Income from trading activities including the income
contribution of trading liabilities amounted to 1.5 (1.6) billion euros. Other
expenses, in particular for investment management and interest on financial
liabilities, came to 1.7 (1.6) billion euros.

     Investment from the insurance business contributed 13.8 (14.8) billion
euros (also see table 38 "Supplementary information on insurance
business -- Investment income" on page F-108 of the Notes to the Consolidated
Financial Statement). Differences with respect to this presentation are due to
the inclusion of income components from real estate owned by Allianz and used
for its own activities (0.2 billion euros) as well as the exclusion of income
components from trading liabilities (0.2 billion euros). An additional 2.7 (2.8)
billion euros of investment income came from the banking business, including 1.1
billion euros from trading activities.

     INVESTMENTS FOR UNIT-LINKED LIFE INSURANCE increased 4 percent from last
year to 25.7 billion euros.

                                       F-46


     AS PROVIDERS OF FINANCIAL SERVICES, WE CONSIDER RISK MANAGEMENT ONE OF OUR
CORE COMPETENCIES.  As a result, risk management is an integrated part of our
controlling process, which involves identifying, measuring, aggregating and
managing risks. This process is used to determine how capital is allocated to
the Group's various divisions.

RESPONSIBILITIES

     In our business, successful management essentially means controlling risks
in order to increase the value of the Allianz Group. This is done through
risk-adequate allocation of capital resources and activities required to achieve
sustainable growth. As a result, the Board of Management formulates the business
objectives of the Allianz Group on the basis of return and risk criteria. These
objectives are implemented by the Allianz Group Center and the local operational
units. Our risk-control strategy involves assignment of responsibility for risk
management to local entities, which operate within the legal frameworks
applicable for their respective locations.

     This decentralized approach is complemented by centralized responsibility.
This is necessary because we need to deal with an accumulation of global risks
which can considerably increase potential risk exposure. As a result, central
controls are essential. The responsibility for central control lies with Group
Risk Controlling, a unit that was expanded in 2002. Central control now also
includes the banking business.

     Group Controlling assesses the Allianz Group's risk exposure on the basis
of local and global risks. The results of these analyses are then submitted to
senior management. At the same time, Group Controlling ensures that the
processes are transparent and comprehensive. Risk management activities are
supervised by both internal and external auditors.

RISK CATEGORIES

     Total risk exposure of the Allianz Group is subdivided into individual risk
categories:

     Actuarial risks  These risks are based on the technicalities of the
insurance business: we have to guarantee future payment commitments, and the
volume of such payments must be calculated in advance. Different actuarial risks
exist in the various insurance lines.

     In PROPERTY AND CASUALTY INSURANCE, actuarial risks arise from an
unexpected variance:

     -- the volume of losses exceeds premiums fixed in advance (PREMIUM RISK),
        or

     -- the payout for claims made is higher than the corresponding provisions
        (RESERVE RISK).

     In LIFE INSURANCE, actuarial risks arise because we are committed to making
guaranteed long-term payments in return for a fixed insurance premium calculated
in advance even though the biometric data of the population may change over time
(e.g., longer life expectancy as a result of medical progress).

     Credit and counterparty risks  These risks involve potential losses that
may result from the default of a business partner. "Default" means the inability
or refusal of a counterparty, an issuer or another contracting party to meet
contractual obligations. Credit risk also includes the risk of a deterioration
of a business partner's creditworthiness. It thus includes:

     -- CREDIT RISKS from the lending business and credit insurance;

     -- COUNTERPARTY RISKS from trading activities;

     -- COUNTRY RISKS in connection with cross-border transactions and the local
        business of foreign units.

     Counterparty risks from trading activities relate primarily to derivatives
and especially OTC transactions. In the insurance business, these risks stem
from the possibility that receivables may remain unpaid, in particular those due
from reinsurers.

     Market risks  Market risks result from portfolio valuation fluctuations due
to changes in share prices, interest rates or exchange rates. Also risk relevant
are changes observed in the variation behavior (volatility) of an asset price,
for example.

     In the banking business, the volatility risk especially concerns trading
activities, which are shown in the institution's trading portfolio. Unlike the
latter, the non-trading portfolio, which

                                       F-47


contains customer business and strategic investments, is exposed to long-term
factors. In this case, the market risk is essentially the INTEREST RATE RISK
resulting from granting long-term fixed-rate loans, which are funded in part by
short-term deposits. In addition, loans and deposits in foreign currencies are
exposed to CURRENCY RISKS.

     Investment risks Investment risks in the insurance business primarily
include all counterparty and market risks. There is a direct link between
investments and obligations to our customers. Certain insurance lines are
exposed to an INTEREST GUARANTEE RISK. Life insurance, for example, must
generate the guaranteed interest payment agreed upon.

     Liquidity risks  These risks can materialize under various circumstances,
for example:

     -- if present or future payment obligations cannot be met in full or as of
        the due date, or

     -- if refinancing capital can only be raised at higher rates (REFINANCING
        RISK) in the case of a liquidity crisis or if assets can only be
        liquidated below current market prices (MARKET LIQUIDITY RISK).

     Health insurance risks  Health insurance risks are treated either as
property and casualty insurance risks or as life and health insurance risks,
depending on the segment to which the health insurance is assigned in the given
market.

MANAGEMENT OF THE ALLIANZ GROUP THROUGH RISK CAPITAL

     We control our activities through our respective local companies. Economic
Value Added (EVA) and risk capital are the most important parameters used in the
context of our risk-based controlling process.

     Risk capital is required to cover unexpected losses. The amount of risk
capital is calculated by using internal models. These models are based on
generally accepted quantification methods, which are used for purposes of
group-internal risk management as well.

     In the insurance business, we calculate risk capital for premium, reserve,
investment and credit risks. Within these risk categories, we distinguish
between the following types of risks:

     -- actuarial risks. In property and casualty insurance these include the
        premium and reserve risks for the various insurance lines. Reinsurance
        is considered separately. In the case of life insurance, we calculate
        the insurance provisions required.

     -- investment risks, which include market and counterparty risks. The
        market risks are subdivided according to dividend-bearing instruments,
        interest-bearing instruments and real estate. The credit and
        counterparty risk as part of investment risks is assessed on the basis
        of the debtor's creditworthiness or rating class.

     -- credit and counterparty risks in connection with receivables in the
        insurance business. This risk is mainly assessed on the basis of the
        financial strength or the rating class o