SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
Report of Foreign Private Issuer
Pursuant to Rules 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
for the period ended June 30, 2006
Commission file Number: 1-15154
ALLIANZ AKTIENGESELLSCHAFT
Königinstrasse 28
80802 Munich
Germany
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover 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
THIS REPORT ON FORM 6-K SHALL BE DEEMED TO BE INCORPORATED BY REFERENCE IN THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-13462) OF ALLIANZ AKTIENGESELLSCHAFT AND TO BE A PART THEREOF FROM THE DATE ON WHICH THIS REPORT IS FURNISHED, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY FILED OR FURNISHED.
Interim Report Second Quarter and First Half of 2006 Allianz Group |
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Consolidated Financial Statements for the Second Quarter and First Half of 2006 | |
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Investor Relations
We endeavor to keep our shareholders up-to-date on all company developments. Our Investor Relations Team is pleased to answer any questions you may have.
Allianz AG
Investor Relations
Koeniginstrasse 28
80802 Munich
Germany
Investor Line: |
+49 1802 2554269 | |
+49 1802 ALLIANZ | ||
Fax: |
+49 89 3800 3899 | |
E-Mail: |
investor.relations@allianz.com | |
Internet: |
www.allianz.com/investor-relations |
Other Reports
All Allianz Group published quarterly and annual financial reports are available for download at www.allianz.com/investor-relations. Alternatively, you can order printed copies of our reports.
Moderate share price development despite strong business performance.
Allianz share price vs. DJ EURO STOXX 50 and DJ EURO STOXX Insurance
January 1, 2005 June 30, 2006
in
Source: | Thomson Financial Datastream |
Current | information on the development of the Allianz share price is available at www.allianz.com/stock. |
Allianz Share Information
Share type: |
Registered share with restricted transfer | |
Denomination: |
No-par-value share | |
Stock exchanges: |
All German stock exchanges, London, New York, Paris, Zurich | |
Security codes: |
WKN 840 400 | |
ISIN DE 000 840 400 5 | ||
Bloomberg: |
ALV GY | |
Reuters: |
ALVG.DE |
Financial Calendar 2006/2007
Important dates for shareholders and analysts
November 10, 2006 |
Interim report first three quarters of 2006 | |
February 22, 2007 |
Financial press conference for the 2006 fiscal year | |
February 23, 2007 |
Analysts conference for the 2006 fiscal year | |
May 2, 2007 |
Annual General Meeting | |
May 11, 2007 |
Interim report first quarter of 2007 | |
August 10, 2007 |
Interim report first half of 2007 | |
November 14, 2007 |
Interim report first three quarters of 2007 |
As we cannot rule out changes to dates, we recommend that you check them at www.allianz.com/financialcalendar.
2
Allianz Group Selected Consolidated Financial Data
June 30, 2006 |
December 31, 2005 |
Change % |
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Balance Sheet |
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Investments |
| mn | 281,331 | 285,015 | (1.3 | ) | ||||
Loans and advances to banks and customers |
| mn | 393,970 | 336,808 | 17.0 | |||||
Total assets |
| mn | 1,022,672 | 988,584 | 3.4 | |||||
Liabilities to banks and customers |
| mn | 349,485 | 310,316 | 12.6 | |||||
Reserves for loss and loss adjustment expenses |
| mn | 65,702 | 67,005 | (1.9 | ) | ||||
Reserves for insurance and investment contracts |
| mn | 279,849 | 278,829 | 0.4 | |||||
Shareholders equity |
| mn | 40,323 | 39,487 | 2.1 | |||||
Minority interests |
| mn | 7,006 | 7,615 | (8.0 | ) | ||||
Three months ended June 30, |
Change % |
Six months ended June 30, |
Change % |
|||||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||||||
Income Statement |
||||||||||||||||||||
Total revenues1) |
| mn | 24,067 | 23,693 | 1.6 | 53,708 | 51,955 | 3.4 | ||||||||||||
Operating profit |
| mn | 2,794 | 2,346 | 19.1 | 5,471 | 4,233 | 29.2 | ||||||||||||
Income before income taxes and minority interests in earnings |
| mn | 2,992 | 2,134 | 40.2 | 6,023 | 4,389 | 37.2 | ||||||||||||
Net income |
| mn | 2,279 | 1,390 | 64.0 | 4,058 | 2,714 | 49.5 | ||||||||||||
Segments |
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Property-Casualty |
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Operating profit |
| mn | 1,845 | 1,650 | 11.8 | 3,231 | 2, 864 | 12.8 | ||||||||||||
Loss ratio |
% | 65.1 | 65.5 | (0.4)pts | 65.6 | 65.8 | (0.2)pts | |||||||||||||
Expense ratio |
% | 26.8 | 26.6 | 0.2pts | 27.7 | 27.2 | 0.5pts | |||||||||||||
Combined ratio |
% | 91.9 | 92.1 | (0.2)pts | 93.3 | 93.0 | 0.3pts | |||||||||||||
Life/Health |
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Operating profit |
| mn | 527 | 472 | 11.7 | 1,250 | 989 | 26.4 | ||||||||||||
Statutory expense ratio |
% | 9.9 | 8.9 | 1.0pts | 9.0 | 7.9 | 1.1pts | |||||||||||||
Banking (Dresdner Bank) |
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Operating profit |
| mn | 319 | 205 | 55.6 | 848 | 414 | 104.8 | ||||||||||||
Cost-income ratio |
% | 81.0 | 88.6 | (7.6)pts | 77.2 | 84.4 | (7.2)pts | |||||||||||||
Loan loss provisions |
| mn | (5 | ) | 54 | | 28 | (46 | ) | | ||||||||||
Coverage ratio at June 302) |
% | 58.5 | 62.1 | (3.6)pts | 58.5 | 62.1 | (3.6)pts | |||||||||||||
Asset Management |
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(Allianz Global Investors) |
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Operating profit |
| mn | 295 | 249 | 18.5 | 595 | 478 | 24.5 | ||||||||||||
Cost-income ratio |
% | 58.9 | 60.7 | (1.8)pts | 59.0 | 59.8 | (0.8)pts | |||||||||||||
Third-party assets under management at June 30 |
| bn | 721 | 7433 | ) | (3.0 | ) | 721 | 7433 | ) | (3.0 | ) | ||||||||
Share Information |
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Basic earnings per share |
| 5.62 | 3.61 | 55.7 | 10.02 | 7.11 | 40.9 | |||||||||||||
Diluted earnings per share |
| 5.51 | 3.59 | 53.5 | 9.83 | 7.06 | 39.2 | |||||||||||||
Share price at June 30 |
| 123.52 | 127.943 | ) | (3.5 | ) | 123.52 | 127.943 | ) | (3.5 | ) | |||||||||
Market capitalization at June 30 |
| bn | 50.2 | 51.93 | ) | (3.3 | ) | 50.2 | 51.93 | ) | (3.3 | ) | ||||||||
1) | Total revenues comprise Property-Casualty segments gross premiums written, Life/Health segments statutory premiums, Banking segments operating revenues and Asset Management segments operating revenues. |
2) | Represents total loan loss allowances as a percentage of total non-performing loans and potential problem loans. |
3) | At December 31, 2005. |
Allianz AG Ratings at June 30, 20061)
Standard & Poors |
Moodys | A.M. Best |
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Insurer financial strength |
AA- | Aa3 | A+ | |||||
Outlook |
Positive | Stable | Stable | |||||
Counterparty credit |
AA- | Not | aa-2 | ) | ||||
Outlook |
Positive | rated | Stable | |||||
Senior unsecured debt |
AA- | Aa3 | aa- | |||||
Outlook |
Stable | Stable | ||||||
Subordinated debt |
A/A-3 | ) | A2 | a+/a3 | ) | |||
Outlook |
Stable | Stable | ||||||
Commercial paper Outlook |
A-1+
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P-1 Stable |
Not rated |
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1) | Includes ratings for securities issued by Allianz Finance B.V., Allianz Finance II B.V. and Allianz Finance Corporation. |
2) | Issuer credit rating. |
3) | Ratings vary on the basis of maturity period and terms. |
3
Momentum sustained in the second quarter.
| Strong operating profit of 2.8 billion (+19.1% from a year ago) with all segments continuing to improve. |
| Combined ratio of 91.9% in Property-Casualty. |
| Double-digit growth of Life/Health operating profit, despite dip in sales. |
| Dresdner Bank grows operating revenues and operating profit dynamically. |
| Asset Management delivered seventh consecutive quarter of double-digit operating profit growth year-over-year. |
| Strong net income of 2.3 billion (+64.0%), after restructuring charges for our German insurance operations. |
| Full year outlook: Operating profit above 9.0 billion, net income between 5.5 billion and 6.0 billion.1) |
Total Revenues2) in bn |
Net Income in mn | |
Operating Profit in mn |
Shareholders Equity in mn | |
1) | However, as always, natural catastrophes and adverse developments in the capital markets, as well as the factors stated in our Outlook in the cautionary note regarding forward-looking statements, may severely impact our profitability. |
2) | Total revenues comprise Property-Casualty segments gross premiums written, Life/Health segments statutory premiums, Banking segments operating revenues and Asset Management segments operating revenues. |
4
Allianz Groups Consolidated Results of Operations
Total Revenues1)
Our total revenues were 24.1 billion in 2Q 2006, up 1.6% from a year ago (1H 2006: year-over-year increase of 3.4% to 53.7 billion). In 2Q 2006, we experienced dynamic growth in operating revenues from our Banking and Asset Management segments, compared to the prior year period. Our Property-Casualty segments gross premiums written grew modestly and our Life/Health segments statutory premiums showed a slight decline. Internal total revenue growth year-over-year amounted to 1.7% in 2Q 2006 (1H 2006: 2.3%).
Total Revenues Segments
in mn
Property-Casualty We continued our commitment to focus on profitability and remained diligent in our risk selection. In 2Q 2006, this translated into an internal growth in gross premiums written year-over-year of 1.2% (1H 2006: decline of 0.1%), which was accompanied by another quarter of very strong underwriting profitability.
Life/Health Statutory premiums decreased 1.2% in 2Q 2006 compared to the prior year period. This was the net effect of the dynamic growth in statutory premiums in Europe and Asia-Pacific, which could, however, not fully compensate the marked shortfall in the United States. The decline in the United States occurred after several years of substantial rise and as a result of regulatory uncertainty concerning equity-indexed annuity products. On an internal growth basis, statutory premiums were down 1.4% (1H 2006: up 1.7%).
Banking Our Banking segment successfully sustained its operating revenue momentum and experienced dynamic growth to 1.7 billion in 2Q 2006, up 22.4% from a year earlier. Internal growth was comparable at 22.8% (1H 2006: 18.2%). At Dresdner Bank, all revenue categories and operating divisions contributed to this positive development.
1) | Total revenues comprise Property-Casualty segments gross premiums written, Life/Health segments statutory premiums, Banking segments operating revenues and Asset Management segments operating revenues. |
Asset Management In 1H 2006, we experienced net inflows of 15 billion and positive market effects of 3 billion, notwithstanding challenging market conditions. However, net inflows and positive market effects were more than offset by negative currency effects resulting in third-party assets of 721 billion at June 30, 2006. Strong net inflows throughout the previous quarters led to significant operating revenue growth year-over-year of 13.3% to 726 million in 2Q 2006. Internal growth was even higher at 16.0% (1H 2006: 19.3%).
Operating Profit
Operating profit improved significantly across all segments. Overall, growth compared to a year ago was 19.1% to 2.8 billion in 2Q 2006 (1H 2006: 29.2% year-over-year increase to 5.5 billion).
Operating Profit Segments
in mn
Property-Casualty Operating profit grew markedly by 11.8% year-over-year to 1.8 billion in 2Q 2006, mainly as a result of favorable loss development and an increase in interest and similar income. Our combined ratio of 91.9% and 93.3% in 2Q and 1H 2006, respectively, (2Q 2005: 92.1%, 1H 2005: 93.0%) remained at a competitive level, despite claims from natural catastrophes of 109 million and 150 million, respectively, (2Q 2005: million, 1H 2005: 31 million) benefiting from our careful risk selection and the positive developments of claims from prior years.
Life/Health In 2Q 2006, we continued to substantially increase our operating profit by 11.7% compared to the prior year period. A higher investment result was the main driver behind this positive development, stemming from both an increased asset base due to the growth of the segment in recent years and from improved yields. Increased realized gains compensated for the restructuring charges related to our German organization.
5
Banking We experienced dynamic operating profit growth in 2Q and 1H 2006 compared to last year. Correspondingly, our Banking segments and Dresdner Banks cost-income ratio improved strongly. Non-revenue-linked personnel expenses in 2Q 2006 decreased from a year ago, excluding the positive one-off effect in 2Q 2005 stemming from the release of provisions for employment anniversary payments.
Asset Management We successfully achieved significant year-over-year operating profit growth in 2Q and 1H 2006. Similar to our operating revenue growth, our operating profit also benefited from strong net inflows to third-party assets throughout the previous quarters. As operating expenses increased at a much lower rate than operating revenues, our Asset Management segments cost-income ratio further improved above its already competitive level to 59.1% and 59.3% in 2Q and 1H 2006, respectively.
Non-Operating Items
In aggregate, non-operating items amounted to an income of 198 million in 2Q 2006, compared to a charge of 212 million a year ago, only contributing approximately 7% to our income before income taxes and minority interests in earnings. The improvement in non-operating items was despite a 404 million negative impact from restructuring charges related primarily to our German insurance operations with another 118 million being part of operating profit, more than compensated by higher realized capital gains.
In 2Q 2006, significant realized gains stemmed from the sale of our shareholdings in Schering AG. Similarly, in 1Q 2006, we leveraged strong equity capital markets and generated already more than our initial capital gains target for 2006. Overall, non-operating income from realized gains/losses (net) and impairments of investments (net) was 1.3 billion in 2Q 2006 and 2.1 billion in 1H 2006.
The impact from restructuring charges on non-operating items rose to 404 million in 2Q 2006 and 408 million in 1H 2006 (from 78 million and 83 million a year ago). This was primarily a result of restructuring charges at Allianz Deutschland AG in 2Q 2006 in connection with the reorganization of our German insurance operations. This reorganization is intended to help us to improve our competitiveness and offer our customers better service, while operating more efficiently. The structural changes at our German insurance operations announced in detail on June 22, 2006, are in line with with our repositioning plan as announced in September 2005 and the objectives of our 3+One program.
Interest expense from external debt, acquisition-related expenses from our Asset Management segment, and other non-operating items, in aggregate, were up to 694 million in 2Q 2006 and 1.1 billion in 1H 2006 (2Q 2005: 572 million, 1H 2005: 941 million).
Net Income
We achieved a 64.0% year-over-year growth in our net income, which reached 2.3 billion in 2Q 2006. Similarly, net income for 1H 2006 was 4.1 billion, a 49.5% increase over the prior year period.
Income tax expenses in 2Q 2006 were down slightly by 48 million from a year earlier, albeit on a substantially higher income before income taxes and minority interests in earnings, reflecting a lower effective income tax rate of 11.9% (2Q 2005: 18.9%). Our income taxes and effective income tax rate in 2Q 2006 benefited from the tax-exemption of the significant capital gain in connection with the sale of our shareholdings in Schering previously mentioned. In 1H 2006, income taxes were 1.3 billion, up 266 million from a year ago, with a reduced effective income tax rate of 20.8% (1H 2005: 22.6%). The smaller decrease in our effective income tax rate in 1H 2006 compared to that in 2Q 2006 stemmed principally from the favorable taxation of a large gain in 1Q 2005 from the sale of our shareholdings in Gecina S.A.
Minority interests in earnings remained rather stable at 356 million in 2Q 2006 and at 709 million in 1H 2006.
The following graph sets forth the development of our basic and diluted earnings per share.
Earnings per Share
in
1) | See Note 35 to our consolidated financial statements for further details regarding the dilutive effect. |
6
The following tables summarize the total revenues and operating profit for each of our segments for the three and six months ended June 30, 2006 and 2005, respectively, as well as IFRS consolidated net income of the Allianz Group.
Property- Casualty |
Life/Health | Banking | Asset Management |
Corporate | Consolidation adjustments |
Allianz Group | ||||||||||||||||||||||||||||||||||||
Three months ended |
2006 | 2005 | 2006 | 2005 | 2006 | 2005 | 2006 | 2005 | 2006 | 2005 | 2006 | 2005 | 2006 | 2005 | ||||||||||||||||||||||||||||
mn | mn | mn | mn | mn | mn | mn | mn | mn | mn | mn | mn | mn | mn | |||||||||||||||||||||||||||||
Total revenues1) |
9,682 | 9,597 | 11,931 | 12,072 | 1,706 | 1,394 | 726 | 641 | | | 22 | (11 | ) | 24,067 | 23,693 | |||||||||||||||||||||||||||
Operating profit |
1,845 | 1,650 | 527 | 472 | 266 | 215 | 297 | 252 | (74 | ) | (190 | ) | (67 | ) | (53 | ) | 2,794 | 2,346 | ||||||||||||||||||||||||
Non-operating items |
440 | 100 | (17 | ) | 37 | 12 | 217 | (134 | ) | (173 | ) | 184 | (381 | ) | (287 | ) | (12 | ) | 198 | (212 | ) | |||||||||||||||||||||
Income before income taxes and minority interests in earnings |
2,285 | 1,750 | 510 | 509 | 278 | 432 | 163 | 79 | 110 | (571 | ) | (354 | ) | (65 | ) | 2,992 | 2,134 | |||||||||||||||||||||||||
Income taxes |
(466 | ) | (442 | ) | (90 | ) | (46 | ) | (89 | ) | (155 | ) | (62 | ) | 8 | 80 | 231 | 270 | (1 | ) | (357 | ) | (405 | ) | ||||||||||||||||||
Minority interests in earnings |
(237 | ) | (205 | ) | (92 | ) | (106 | ) | (27 | ) | (25 | ) | (11 | ) | (10 | ) | (7 | ) | (6 | ) | 18 | 13 | (356 | ) | (339 | ) | ||||||||||||||||
Net income |
1,582 | 1,103 | 328 | 357 | 162 | 252 | 90 | 77 | 183 | (346 | ) | (66 | ) | (53 | ) | 2,279 | 1,390 | |||||||||||||||||||||||||
Property- Casualty |
Life/Health | Banking | Asset Management |
Corporate | Consolidation Adjustments |
Allianz Group | ||||||||||||||||||||||||||||||||||||
Six months ended |
2006 | 2005 | 2006 | 2005 | 2006 | 2005 | 2006 | 2005 | 2006 | 2005 | 2006 | 2005 | 2006 | 2005 | ||||||||||||||||||||||||||||
mn | mn | mn | mn | mn | mn | mn | mn | mn | mn | mn | mn | mn | mn | |||||||||||||||||||||||||||||
Total revenues1) |
23,831 | 23,740 | 24,753 | 23,952 | 3,654 | 3,083 | 1,477 | 1,208 | | | (7 | ) | (28 | ) | 53,708 | 51,955 | ||||||||||||||||||||||||||
Operating profit |
3,231 | 2,864 | 1,250 | 989 | 813 | 444 | 601 | 483 | (254 | ) | (457 | ) | (170 | ) | (90 | ) | 5,471 | 4,233 | ||||||||||||||||||||||||
Non-operating items |
868 | 616 | 141 | 125 | 404 | 667 | (270 | ) | (337 | ) | (27 | ) | (504 | ) | (564 | ) | (411 | ) | 552 | 156 | ||||||||||||||||||||||
Income before income taxes and minority interests in earnings |
4,099 | 3,480 | 1,391 | 1,114 | 1,217 | 1,111 | 331 | 146 | (281 | ) | (961 | ) | (734 | ) | (501 | ) | 6,023 | 4,389 | ||||||||||||||||||||||||
Income taxes |
(990 | ) | (985 | ) | (309 | ) | (150 | ) | (334 | ) | (229 | ) | (127 | ) | (16 | ) | 234 | 384 | 270 | 6 | (1,256 | ) | (990 | ) | ||||||||||||||||||
Minority interests in earnings |
(427 | ) | (396 | ) | (220 | ) | (228 | ) | (55 | ) | (51 | ) | (24 | ) | (23 | ) | (9 | ) | (7 | ) | 26 | 20 | (709 | ) | (685 | ) | ||||||||||||||||
Net income |
2,682 | 2,099 | 862 | 736 | 828 | 831 | 180 | 107 | (56 | ) | (584 | ) | (438 | ) | (475 | ) | 4,058 | 2,714 | ||||||||||||||||||||||||
1) | Total revenues comprise Property-Casualty segments gross premiums written, Life/Health segments statutory premiums, Banking segments operating revenues and Asset Management segments operating revenues. |
7
Allianz Groups Shareholders Equity and Invested Assets
Shareholders Equity
Since December 31, 2005, our shareholders equity has increased by 2.1% to 40.3 billion at June 30, 2006. Our strong net income more than compensated for significant negative market effects and dividends paid of 811 million. Due to the substantial decreases in market values of our available-for-sale debt securities, following the increase in market interest rates, our unrealized gains and losses (net) declined. Additionally, a weaker U.S. Dollar compared to the Euro at June 30, 2006 resulted in a rise in negative foreign currency translation adjustments from that at December 31, 2005.
The following graph sets forth the development of our shareholders equity in the first half of 2006.
Shareholders Equity
in mn
1) | Consists of the following developments (in mn): foreign currency translation adjustments (894); changes in the consolidated subsidiaries of the Allianz Group 21; treasury shares 1,275; net income 4,058; dividends paid (811); miscellaneous (347). |
Invested Assets
In the following, we present the breakdown of invested assets owned and managed by our Property-Casualty, Life/Health and Banking segments by category and instruments.
Invested Assets Property-Casualty: Allocation by Category and Instruments at June 30, 2006
Fair Values1) in bn (Total: 96.8 bn)
1) | Held-to-maturity investments and real estate held for investment are stated at amortized cost. Investments in associates and joint ventures are stated at either amortized cost or equity, depending upon, among other factors, our ownership percentage. |
2) | Includes debt securities at 3.3 bn, equity securities at 0.3 bn and derivative financial instruments at 0.7 bn. |
3) | Includes associates and joint ventures at 0.5 bn, but does not include affiliates at 9.2 bn. |
4) | Includes held-to-maturity investments at 0.6 bn. |
Invested Assets Life/Health: Allocation by Category and Instruments at June 30, 2006
Fair Values1) in bn (Total: 274.3 bn)
1) | Held-to-maturity investments and real estate held for investment are stated at amortized cost. Investments in associates and joint ventures are stated at either amortized cost or equity, depending upon, among other factors, our ownership percentage. |
2) | Includes debt securities at 7.1 bn, equity securities at 2.9 bn and derivative financial instruments at 0.7 bn. |
3) | Includes associates and joint ventures at 1.2 bn, but does not include affiliates at 3.1 bn. |
4) | Includes held-to-maturity investments at 4.0 bn. |
Invested Assets Banking: Trading Portfolio Allocation at June 30, 2006
Fair Values in bn
8
Corporate Segment
Operating profit improved to a loss of 74 million in 2Q 2006 and 254 million in 1H 2006 from a loss of 190 million and 457 million, respectively, in the prior year periods, reflecting substantially higher operating revenues while operating expenses were relatively stable. The increase in operating revenues stemmed primarily from higher interest and similar income, due to higher dividends received from investments.
Three months ended June 30, |
Six months ended June 30, |
|||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||
mn | mn | mn | mn | |||||||||
Operating revenues |
426 | 331 | 725 | 589 | ||||||||
Interest expense, excluding interest expense from external debt1) |
(142 | ) | (226 | ) | (315 | ) | (399 | ) | ||||
Acquisition and administrative expenses (net) |
(167 | ) | (96 | ) | (323 | ) | (217 | ) | ||||
Other operating expenses |
(191 | ) | (199 | ) | (341 | ) | (430 | ) | ||||
Operating expenses |
(500 | ) | (521 | ) | (979 | ) | (1,046 | ) | ||||
Operating profit |
(74 | ) | (190 | ) | (254 | ) | (457 | ) | ||||
Income from financial assets and liabilities held for trading (net) |
(56 | ) | (149 | ) | (152 | ) | (153 | ) | ||||
Realized gains/losses (net) |
427 | 2 | 497 | 108 | ||||||||
Impairments of investments (net) |
9 | (4 | ) | 22 | (36 | ) | ||||||
Interest expense from external debt1) |
(196 | ) | (230 | ) | (394 | ) | (423 | ) | ||||
Non-operating items |
184 | (381 | ) | (27 | ) | (504 | ) | |||||
Income before income taxes and minority interests in earnings |
110 | (571 | ) | (281 | ) | (961 | ) | |||||
1) | The total of these items equals interest expense in the segment income statement in Note 3 to the consolidated financial statements. |
Events After the Balance Sheet Date
See Note 39 to our consolidated financial statements.
9
Property-Casualty Insurance Operations
Continued underwriting excellence.
| Selective volume growth with a focus on profitability delivers results. |
| Combined ratio of 91.9% in 2Q 2006 reflects underwriting discipline and favorable loss development. |
| High interest and dividend income. |
| Particularly high operating profit growth at our operations in the United States and France. |
Earnings Summary
Gross Premiums Written by Region1)
in bn
1) | After elimination of transactions between Allianz Group companies in different geographic regions and different segments. Gross premiums written from our speciality lines have been allocated to the respective geographic regions. |
Gross Premiums Written Growth Rates1)
1) | Before elimination of transactions between Allianz Group companies in different geographic regions and different segments. |
2) | Comprise Other Europe. |
Gross Premiums Written
2006 to 2005 Three Month Comparison
Notwithstanding an environment where price depression was prevalent in some markets, profitability remained our focus. We accept only those risks which we believe will produce adequate returns. As a result of these continued and successful efforts, our gross premiums written grew only modestly from 9,597 million to 9,682 million. Based on internal growth, gross premiums written increased 1.2%.
Positive developments were primarily experienced by our entities in the United States, Spain, South America and New Europe, our growth markets in Central and Eastern Europe, with additional gross premiums written of 51 million (5.1%), 38 million (8.9%), 37 million (23.1%) and 28 million (7.1%), respectively. In 2Q 2006, our growth markets in Asia-Pacific and in New Europe, together with the markets in South America accounted for 11% of our gross premiums written in the segment.
10
In the United States, our operations benefited from growth in our crop line, largely as a result of earlier underwriting of a significant book of business. The positive trend in Spain occurred primarily within our industrial lines, where we established sound growth with customers in the engineering and transportation sectors. In South America, growth mainly stemmed from Brazil, driven by a good performance of the fleet business and the increase of new car sales. Additionally, foreign currency effects, in particular the appreciation of the Brazilian Real compared to the Euro, contributed to the growth in gross premiums written in South America. Largely as a result of strong sales performance within the Polish and Romanian motor markets, we continued to expand our presence within New Europe.
These increases were offset by decreased gross premiums written in other countries, where keeping up profitability in more difficult market conditions required concessions to volume growth.
In France, our third largest property-casualty market, AGFs gross premiums written declined by 3.4% to 1,132 million, mainly as a result of price pressure negatively affecting our large client business and, to a lesser degree, lower volume in our individual motor business.
The decline under specialty lines by 294 million (12.9%) was almost exclusively due to lower assumed gross premiums written at Allianz Re. Allianz Re primarily comprises the reinsurance business assumed by Allianz AG, in particular from our property-casualty subsidiaries. Gross premiums written volume at Allianz Re declined 260 million to 648 million, mainly impacted by the change of an intra-Allianz Group reinsurance contract, resulting in increased aggregate loss retention levels of participating entities. This effect, however, is consolidated at the segment level and therefore eliminated.
Within our German property-casualty business, our primary market, gross premiums written were challenged by lower volume within our motor business, compensated by sound development in our casualty line, leaving our gross premiums written relatively stable at 1,698 million.
2006 to 2005 Six Month Comparison
For the first six months of 2006, our gross premiums written remained stable at 23,831 million. However, we were able to achieve growth particularly in the United States, Spain and South America. While maintaining our strategy of selective and profitable growth, our German and United Kingdom operations recorded slight decreases. Based on internal growth, our gross premiums written declined marginally by 0.1%.
Operating Profit
Operating Profit
in mn
2006 to 2005 Three Month Comparison
Our operating profit increased markedly by 11.8% to 1,845 million, as a result of a favorable calendar year loss development and an increase in interest and similar income. Our top five contributing entities included Allianz Sach in Germany at 350 million, Firemans Fund in the United States at 227 million, RAS in Italy at 169 million, AGF in France at 139 million and our credit insurance activities combined within our Euler Hermes brand at 122 million. The strongest improvements, by markets, occurred in our operations within the United States (61 million), France (57 million) and at our credit insurance operations (31 million).
Premiums earned (net) declined slightly to 9,358 million, due to increased reinsurance rates for our industrial and marine & aviation business, following the significant natural catastrophe losses in 2005.
Interest and similar income exhibited a considerable increase of 12.2% to 1,257 million, primarily reflecting growth in income at our operations in Germany and France as a result of higher dividend and bond yields.
Claims and insurance benefits incurred (net) decreased slightly by 0.9% to 6,090 million, a consequence of favorable loss development of reserves concerning prior years, especially in the United States at Firemans Fund and at Allianz Re. In the context of our sustainability program we have reviewed and improved our claims management process in many companies, which has begun to pay off. Our calendar year loss ratio declined to 65.1% (2Q 2005: 65.5%). On an accident year basis, claims slightly increased by 2.2% to 6,512 million, producing an accident year loss ratio of 69.6% (2Q 2005: 67.9%), mainly driven by claims from natural catastrophes of 109 million (2Q 2005: million) and single large claims from our industrial business.
11
Acquisition and administrative expenses (net) remained relatively stable at 2,511 million, with only a slight rise in administrative expenses at Firemans Fund in the United States as well as within our German operations. This development, together with a marginal depression in our premiums earned (net) as a result of hardened reinsurance pricing conditions, caused our expense ratio to rise slightly by 0.2 percentage points to 26.8% (2Q 2005: 26.6%).
Driven by the improvement of our loss ratio, our combined ratio reached 91.9%, 0.2 percentage points lower, further solidifying our competitive position within the property-casualty market.
2006 to 2005 Six Month Comparison
Consistent with our 2Q success, we succeeded in increasing operating profit in the first six months of 2006 by 12.8% to 3,231 million. A major driver was the growth in interest and similar income, in particular at our German property-casualty business and AGF in France. Conversely, our combined ratio in the first six months of 2006 increased marginally to 93.3%, largely due to the increase in our expense ratio in 1Q 2006 from higher commission payments.
Non-Operating Items
2006 to 2005 Three Month Comparison
Income from our non-operating items increased to 440 million. This development was primarily attributable to significantly increased realized gains/losses (net) from investments, not shared with policyholders, largely as the result of gains from the sale of our participation in Schering AG. To a lesser degree, we realized gains in Austria through the sale of our real estate portfolio and at our subsidiary Lloyd Adriatico in Italy, where we disposed of Banca Antonveneta shares. Conversely, impairments of investments (net), not shared with policyholders increased from 25 million to 80 million, as stock markets around the world trended lower.
The increased realizations of investments gains were partially offset by overall costs of 354 million recorded as restructuring charges. At an amount of 333 million, these charges were incurred in connection with the reorganization of our German insurance operations, which unites our German property-casualty and life/health businesses within the new entity Allianz Deutschland AG (or ADAG). This reorganization is intended to help us to improve our competitiveness and offer better service to our customers, while operating more efficiently. The structural changes, which were announced in detail on June 22, 2006, are in line with our repositioning plan as announced in September 2005 and the objectives of our 3+One program. Additionally, RAS in Italy recorded restructuring costs of 21 million.
2006 to 2005 Six Month Comparison
Income from our non-operating items for the first-half of 2006 was driven by similar measures as those previously mentioned for 2Q. In particular, by increased realized gains/losses (net) from investments, not shared with policyholders, especially through our sale of our participation in Schering AG in 2Q. Additionally, while restructuring charges, primarily in connection with the reorganization of our German operations, resulted in charges of 356 million, net realizations on investments proved a compensating balance, driving our non-operating income up by 40.9% to 868 million.
Net Income
2006 to 2005 Three Month Comparison
Net income increased by 43.4% to 1,582 million, driven both by our marked growth in operating profit and a significantly improved non-operating income.
Income tax expenses amounted to 466 million, rising slightly. However, largely due to higher tax-exempt income, in particular the realized gain from the sale of our participation in Schering AG, our effective tax rate declined to 20.4% (2Q 2005: 25.3%).
Minority interests in earnings rose slightly to 237 million as a result of significantly higher earnings at AGF in France, which more than compensated lower earnings attributable to third-party shareholders at RAS in Italy following the buy-out of minorities in late 2005.
2006 to 2005 Six Month Comparison
Driven both by our further enhanced operating profitability and significantly improved non-operating income, our net income for the first six months of 2006 was up significantly by 27.8% to 2,682 million. Due to the effects of a relatively higher share of tax-exempt income, our effective tax rate decreased to 24.2% (1H 2005: 28.3%).
12
The following table sets forth our Property-Casualty insurance segments income statement, loss ratio, expense ratio and combined ratio for the three and six months ended June 30, 2006 and 2005, respectively.
Three months ended June 30, |
Six months ended June 30, |
|||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||
mn | mn | mn | mn | |||||||||
Gross premiums written1) |
9,682 | 9,597 | 23,831 | 23,740 | ||||||||
Ceded premiums written |
(1,230 | ) | (1,161 | ) | (2,942 | ) | (2,859 | ) | ||||
Change in unearned premiums |
906 | 950 | (2,190 | ) | (2,355 | ) | ||||||
Premiums earned (net) |
9,358 | 9,386 | 18,699 | 18,526 | ||||||||
Interest and similar income |
1,257 | 1,120 | 2,179 | 1,987 | ||||||||
Income from financial assets and liabilities designated at fair value through income (net)2) |
6 | 35 | 42 | 56 | ||||||||
Realized gains/losses (net) from investments, shared with policyholders3) |
11 | 72 | 36 | 86 | ||||||||
Fee and commission income |
265 | 270 | 517 | 486 | ||||||||
Other income |
24 | 17 | 38 | 21 | ||||||||
Operating revenues |
10,921 | 10,900 | 21,511 | 21,162 | ||||||||
Claims and insurance benefits incurred (net) |
(6,090 | ) | (6,144 | ) | (12,272 | ) | (12,184 | ) | ||||
Changes in reserves for insurance and investment contracts (net) |
(121 | ) | (211 | ) | (193 | ) | (334 | ) | ||||
Interest expense |
(66 | ) | (115 | ) | (129 | ) | (195 | ) | ||||
Loan loss provisions |
(2 | ) | | (3 | ) | | ||||||
Impairments of investments (net), shared with policyholders4) |
(13 | ) | (2 | ) | (17 | ) | (4 | ) | ||||
Investment expenses |
(67 | ) | (102 | ) | (115 | ) | (195 | ) | ||||
Acquisition and administrative expenses (net) |
(2,511 | ) | (2,496 | ) | (5,174 | ) | (5,048 | ) | ||||
Fee and commission expenses |
(205 | ) | (175 | ) | (375 | ) | (332 | ) | ||||
Other expenses |
(1 | ) | (5 | ) | (2 | ) | (6 | ) | ||||
Operating expenses |
(9,076 | ) | (9,250 | ) | (18,280 | ) | (18,298 | ) | ||||
Operating profit |
1,845 | 1,650 | 3,231 | 2,864 | ||||||||
Income from financial assets and liabilities held for trading (net)2) |
(1 | ) | (6 | ) | 3 | (1 | ) | |||||
Realized gains/losses (net) from investments, not shared with policyholders3) |
878 | 193 | 1,317 | 718 | ||||||||
Impairments of investments (net), not shared with policyholders4) |
(80 | ) | (25 | ) | (89 | ) | (30 | ) | ||||
Amortization of intangible assets |
(3 | ) | (4 | ) | (7 | ) | (9 | ) | ||||
Restructuring charges |
(354 | ) | (58 | ) | (356 | ) | (62 | ) | ||||
Non-operating items |
440 | 100 | 868 | 616 | ||||||||
Income before income taxes and minority interests in earnings |
2,285 | 1,750 | 4,099 | 3,480 | ||||||||
Income taxes |
(466 | ) | (442 | ) | (990 | ) | (985 | ) | ||||
Minority interests in earnings |
(237 | ) | (205 | ) | (427 | ) | (396 | ) | ||||
Net income |
1,582 | 1,103 | 2,682 | 2,099 | ||||||||
Loss ratio5) in % |
65.1 | 65.5 | 65.6 | 65.8 | ||||||||
Expense ratio6) in % |
26.8 | 26.6 | 27.7 | 27.2 | ||||||||
Combined ratio7) in % |
91.9 | 92.1 | 93.3 | 93.0 | ||||||||
1) | For the Property-Casualty segment, total revenues are measured based upon gross premiums written. |
2) | The total of these items equals income from financial assets and liabilities carried at fair value through income (net) in the segment income statement in Note 3 to the consolidated financial statements. |
3) | The total of these items equals realized gains/losses (net) in the segment income statement in Note 3 to the consolidated financial statements. |
4) | The total of these items equals impairments of investments (net) in the segment income statement in Note 3 to the consolidated financial statements. |
5) | Represents claims and insurance benefits incurred (net) divided by premiums earned (net). |
6) | Represents acquisition and administrative expenses (net) divided by premiums earned (net). |
7) | Represents the total of acquisition and administrative expenses (net) and claims and insurance benefits incurred (net) divided by premiums earned (net). |
13
Property-Casualty Operations by Geographic Region
The following tables set forth our property-casualty gross premiums written, premiums earned (net), combined ratio, loss ratio, expense ratio and operating profit by geographic region for the three and six months ended June 30, 2006 and 2005, respectively. Consistent with our general practice, gross premiums written, premiums earned (net), combined ratio, loss ratio, expense ratio and operating profit by geographic region are presented before consolidation adjustments, representing the elimination of transactions between Allianz Group companies in different geographic regions and different segments.
Gross premiums written |
Premiums earned (net) |
Combined ratio | Loss ratio | Expense ratio | Operating Profit | |||||||||||||||||||||||||||||
mn | mn | % | % | % | mn | |||||||||||||||||||||||||||||
Three months ended June 30, |
2006 | 2005 | 2006 | 2005 | 2006 | 2005 | 2006 | 2005 | 2006 | 2005 | 2006 | 2005 | ||||||||||||||||||||||
Germany1) |
1,698 | 1,681 | 1,866 | 1,763 | 92.8 | 89.4 | 66.8 | 64.3 | 26.0 | 25.1 | 350 | 372 | ||||||||||||||||||||||
France |
1,132 | 1,172 | 1,092 | 1,092 | 98.6 | 101.9 | 71.1 | 73.3 | 27.5 | 28.6 | 139 | 82 | ||||||||||||||||||||||
Italy |
1,373 | 1,355 | 1,242 | 1,229 | 93.5 | 96.4 | 70.3 | 71.0 | 23.2 | 25.4 | 250 | 231 | ||||||||||||||||||||||
United Kingdom |
648 | 658 | 462 | 478 | 94.6 | 94.3 | 65.6 | 63.1 | 29.0 | 31.2 | 71 | 80 | ||||||||||||||||||||||
Switzerland |
284 | 260 | 432 | 429 | 94.9 | 88.3 | 72.8 | 69.8 | 22.1 | 18.5 | 54 | 62 | ||||||||||||||||||||||
Spain |
464 | 426 | 417 | 384 | 90.0 | 91.5 | 70.6 | 71.2 | 19.4 | 20.3 | 64 | 53 | ||||||||||||||||||||||
Other Europe, thereof: |
1,199 | 1,207 | 1,026 | 1,035 | 84.9 | 91.6 | 57.1 | 63.4 | 27.8 | 28.2 | 271 | 195 | ||||||||||||||||||||||
Netherlands |
227 | 247 | 206 | 210 | 87.3 | 92.3 | 55.1 | 59.4 | 32.2 | 32.9 | 47 | 42 | ||||||||||||||||||||||
Austria |
200 | 204 | 188 | 195 | 96.9 | 100.5 | 70.1 | 75.7 | 26.8 | 24.8 | 36 | 24 | ||||||||||||||||||||||
Ireland |
176 | 184 | 153 | 165 | 65.9 | 80.7 | 42.5 | 57.9 | 23.4 | 22.8 | 68 | 44 | ||||||||||||||||||||||
Belgium |
85 | 84 | 75 | 73 | 98.7 | 103.0 | 63.3 | 63.3 | 35.4 | 39.7 | 14 | 9 | ||||||||||||||||||||||
Portugal |
68 | 74 | 64 | 69 | 86.5 | 93.5 | 60.9 | 67.4 | 25.6 | 26.1 | 13 | 8 | ||||||||||||||||||||||
Greece |
19 | 18 | 12 | 11 | 78.0 | 86.7 | 49.1 | 53.0 | 28.9 | 33.7 | 3 | 2 | ||||||||||||||||||||||
Western and Southern Europe |
775 | 811 | 698 | 723 | 86.0 | 93.0 | 57.6 | 64.5 | 28.4 | 28.5 | 1863 | ) | 1283 | ) | ||||||||||||||||||||
Hungary |
124 | 134 | 123 | 124 | 83.2 | 102.9 | 55.9 | 70.5 | 27.3 | 32.4 | 36 | 18 | ||||||||||||||||||||||
Slovakia |
59 | 52 | 60 | 60 | 64.3 | 62.0 | 36.9 | 41.9 | 27.4 | 20.1 | 27 | 28 | ||||||||||||||||||||||
Czech Republic |
57 | 56 | 44 | 40 | 82.1 | 91.0 | 63.0 | 68.1 | 19.1 | 22.9 | 9 | 5 | ||||||||||||||||||||||
Poland |
71 | 60 | 49 | 37 | 83.8 | 86.9 | 49.8 | 54.7 | 34.0 | 32.2 | 9 | 6 | ||||||||||||||||||||||
Romania |
67 | 49 | 24 | 29 | 103.8 | 83.3 | 97.9 | 66.2 | 5.9 | 17.1 | 1 | 5 | ||||||||||||||||||||||
Bulgaria |
23 | 23 | 15 | 9 | 88.9 | 56.4 | 50.7 | 21.4 | 38.2 | 35.0 | 2 | 4 | ||||||||||||||||||||||
Croatia |
18 | 17 | 13 | 11 | 95.0 | 98.6 | 62.5 | 63.4 | 32.5 | 35.2 | 1 | 1 | ||||||||||||||||||||||
Russia |
5 | 5 | | 2 | 90.4 | 70.6 | 37.8 | 19.6 | 52.6 | 51.0 | | | ||||||||||||||||||||||
New Europe |
424 | 396 | 328 | 312 | 82.4 | 88.4 | 55.9 | 60.7 | 26.5 | 27.7 | 85 | 67 | ||||||||||||||||||||||
NAFTA, thereof: |
1,094 | 1,051 | 862 | 848 | 83.9 | 89.6 | 50.3 | 59.5 | 33.6 | 30.1 | 232 | 168 | ||||||||||||||||||||||
United States |
1,053 | 1,002 | 838 | 827 | 83.7 | 90.2 | 49.8 | 60.0 | 33.9 | 30.2 | 227 | 166 | ||||||||||||||||||||||
Mexico |
41 | 49 | 24 | 21 | 93.5 | 65.0 | 69.5 | 39.6 | 24.0 | 25.4 | 5 | 2 | ||||||||||||||||||||||
Asia-Pacific, thereof: |
447 | 431 | 336 | 321 | 86.7 | 82.4 | 59.5 | 56.1 | 27.2 | 26.3 | 88 | 102 | ||||||||||||||||||||||
Australia |
368 | 363 | 301 | 291 | 85.9 | 82.1 | 60.1 | 56.9 | 25.8 | 25.2 | 83 | 96 | ||||||||||||||||||||||
Other |
79 | 68 | 35 | 30 | 93.5 | 87.5 | 54.1 | 50.2 | 39.4 | 37.3 | 5 | 6 | ||||||||||||||||||||||
South America |
197 | 160 | 148 | 119 | 102.0 | 94.4 | 64.8 | 61.4 | 37.2 | 33.0 | 15 | 15 | ||||||||||||||||||||||
Other |
30 | 25 | 14 | 8 | 4 | ) | 4 | ) | 4 | ) | 4 | ) | 4 | ) | 4 | ) | 3 | 2 | ||||||||||||||||
Specialty Lines |
||||||||||||||||||||||||||||||||||
Alllianz Re1) |
648 | 908 | 564 | 746 | 94.3 | 88.4 | 72.2 | 65.6 | 22.1 | 22.8 | 75 | 70 | ||||||||||||||||||||||
Credit Insurance |
398 | 425 | 283 | 251 | 77.3 | 81.9 | 50.9 | 50.4 | 26.4 | 31.5 | 122 | 91 | ||||||||||||||||||||||
Allianz Global Corporate & Specialty1) |
687 | 690 | 368 | 432 | 103.1 | 91.0 | 72.0 | 66.2 | 31.1 | 24.8 | 66 | 78 | ||||||||||||||||||||||
Travel Insurance and Assistance Services |
249 | 253 | 239 | 241 | 98.9 | 93.0 | 58.5 | 56.3 | 40.4 | 36.7 | 25 | 26 | ||||||||||||||||||||||
Subtotal |
10,548 | 10,702 | 9,351 | 9,376 | | | | | | | 1,825 | 1,627 | ||||||||||||||||||||||
Consolidation adjustments2) |
(866 | ) | (1,105 | ) | 7 | 10 | | | | | | | 20 | 23 | ||||||||||||||||||||
Total |
9,682 | 9,597 | 9,358 | 9,386 | 91.9 | 92.1 | 65.1 | 65.5 | 26.8 | 26.6 | 1,845 | 1,650 | ||||||||||||||||||||||
1) | With effect from 1Q 2006, we have combined the activities of the former Allianz Global Risk Re and Allianz Marine & Aviation, as well as the corporate customer business of Allianz Sach, which was formerly included within Germany. Additionally, with effect from 2Q 2006, we have included Allianz Global Re US, which was formerly presented within NAFTA, within the newly combined entity Allianz Global Corporate & Specialty. Further, with effect from 2Q 2006, we present our property-casualty assumed reinsurance business, primarily attributable to Allianz AG and formerly included within Germany, as Allianz Re within our specialty lines. Prior year balances have been adjusted to reflect this reclassification and allow for comparability across periods. |
2) | Represents elimination of transactions between Allianz Group companies in different geographic regions. |
3) | Contains run-off of a former operating entity located in Luxembourg of 5 mn in 2006 and (1) mn in 2005. |
4) | Presentation not meaningful. |
14
Gross premiums written |
Premiums earned (net) |
Combined ratio | Loss ratio | Expense ratio | Operating profit | ||||||||||||||||||||||||||||
mn | mn | % | % | % | mn | ||||||||||||||||||||||||||||
Six months ended June 30, |
2006 | 2005 | 2006 | 2005 | 2006 | 2005 | 2006 | 2005 | 2006 | 2005 | 2006 | 2005 | |||||||||||||||||||||
Germany1) |
5,896 | 5,987 | 3,558 | 3,477 | 91.9 | 89.4 | 64.2 | 62.2 | 27.7 | 27.2 | 670 | 686 | |||||||||||||||||||||
France |
2,845 | 2,867 | 2,206 | 2,195 | 99.8 | 103.3 | 72.7 | 75.3 | 27.1 | 28.0 | 216 | 87 | |||||||||||||||||||||
Italy |
2,620 | 2,596 | 2,447 | 2,418 | 95.1 | 97.3 | 71.6 | 71.3 | 23.5 | 26.0 | 358 | 346 | |||||||||||||||||||||
United Kingdom |
1,227 | 1,290 | 919 | 958 | 96.7 | 95.1 | 66.7 | 64.1 | 30.0 | 31.0 | 127 | 148 | |||||||||||||||||||||
Switzerland |
1,241 | 1,253 | 868 | 854 | 95.6 | 91.7 | 71.5 | 68.9 | 24.1 | 22.8 | 118 | 100 | |||||||||||||||||||||
Spain |
1,121 | 1,057 | 812 | 748 | 90.7 | 92.1 | 71.6 | 72.5 | 19.1 | 19.6 | 123 | 102 | |||||||||||||||||||||
Other Europe, thereof: |
2,854 | 2,855 | 2,067 | 2,051 | 89.9 | 91.8 | 62.1 | 63.7 | 27.8 | 28.1 | 406 | 359 | |||||||||||||||||||||
Netherlands |
545 | 558 | 403 | 410 | 90.3 | 93.0 | 57.3 | 61.2 | 33.0 | 31.8 | 74 | 70 | |||||||||||||||||||||
Austria |
557 | 563 | 380 | 383 | 103.3 | 99.3 | 78.3 | 74.5 | 25.0 | 24.8 | 29 | 45 | |||||||||||||||||||||
Ireland |
374 | 399 | 306 | 326 | 78.8 | 85.5 | 55.1 | 63.0 | 23.7 | 22.5 | 95 | 73 | |||||||||||||||||||||
Belgium |
206 | 202 | 149 | 144 | 100.2 | 103.1 | 64.3 | 64.6 | 35.9 | 38.5 | 23 | 16 | |||||||||||||||||||||
Portugal |
152 | 162 | 130 | 139 | 86.9 | 91.2 | 63.2 | 66.5 | 23.7 | 24.7 | 24 | 17 | |||||||||||||||||||||
Greece |
38 | 37 | 23 | 22 | 86.4 | 86.2 | 57.2 | 53.7 | 29.2 | 32.5 | 4 | 4 | |||||||||||||||||||||
Western and Southern Europe |
1,872 | 1,921 | 1,391 | 1,424 | 92.0 | 93.8 | 63.8 | 66.0 | 28.2 | 27.8 | 2593 | ) | 2233 | ) | |||||||||||||||||||
Hungary |
316 | 319 | 250 | 256 | 87.6 | 95.7 | 60.3 | 66.1 | 27.3 | 29.6 | 63 | 49 | |||||||||||||||||||||
Slovakia |
152 | 175 | 122 | 122 | 72.4 | 68.4 | 42.0 | 38.4 | 30.4 | 30.0 | 44 | 48 | |||||||||||||||||||||
Czech Republic |
139 | 130 | 87 | 78 | 86.0 | 91.8 | 65.1 | 70.4 | 20.9 | 21.4 | 14 | 11 | |||||||||||||||||||||
Poland |
143 | 120 | 97 | 73 | 90.0 | 88.2 | 57.5 | 55.5 | 32.5 | 32.7 | 12 | 11 | |||||||||||||||||||||
Romania |
138 | 103 | 60 | 57 | 95.3 | 86.4 | 82.1 | 65.5 | 13.2 | 20.9 | 4 | 8 | |||||||||||||||||||||
Bulgaria |
43 | 43 | 31 | 16 | 81.1 | 64.1 | 47.4 | 25.4 | 33.7 | 38.7 | 7 | 8 | |||||||||||||||||||||
Croatia |
40 | 34 | 27 | 22 | 95.8 | 96.7 | 64.1 | 61.7 | 31.7 | 35.0 | 2 | 1 | |||||||||||||||||||||
Russia |
11 | 10 | 2 | 3 | 69.0 | 57.0 | 31.0 | 12.0 | 38.0 | 45.0 | 1 | | |||||||||||||||||||||
New Europe |
982 | 934 | 676 | 627 | 85.6 | 87.3 | 58.6 | 58.5 | 27.0 | 28.8 | 147 | 136 | |||||||||||||||||||||
NAFTA, thereof: |
2,146 | 2,011 | 1,772 | 1,684 | 87.4 | 90.2 | 55.5 | 60.1 | 31.9 | 30.1 | 434 | 318 | |||||||||||||||||||||
United States |
2,054 | 1,932 | 1,723 | 1,643 | 87.0 | 90.9 | 54.9 | 60.7 | 32.1 | 30.2 | 426 | 313 | |||||||||||||||||||||
Mexico |
92 | 79 | 49 | 41 | 101.3 | 63.5 | 76.9 | 38.1 | 24.4 | 25.4 | 8 | 5 | |||||||||||||||||||||
Asia-Pacific, thereof: |
860 | 807 | 670 | 626 | 94.2 | 90.5 | 67.5 | 64.6 | 26.7 | 25.9 | 130 | 151 | |||||||||||||||||||||
Australia |
703 | 669 | 601 | 568 | 94.1 | 90.1 | 68.8 | 65.5 | 25.3 | 24.6 | 121 | 143 | |||||||||||||||||||||
Other |
157 | 138 | 69 | 58 | 94.3 | 93.8 | 55.9 | 55.4 | 38.4 | 38.4 | 9 | 8 | |||||||||||||||||||||
South America |
423 | 312 | 300 | 225 | 102.5 | 97.3 | 65.7 | 62.3 | 36.8 | 35.0 | 27 | 31 | |||||||||||||||||||||
Other |
72 | 63 | 26 | 23 | 4 | ) | 4 | ) | | 4 | ) | 4 | ) | 4 | ) | 4 | 3 | ||||||||||||||||
Specialty Lines |
|||||||||||||||||||||||||||||||||
Allianz Re1) |
2,377 | 2,645 | 1,279 | 1,467 | 94.7 | 89.8 | 63.0 | 63.1 | 31.7 | 26.7 | 145 | 163 | |||||||||||||||||||||
Credit Insurance |
866 | 898 | 543 | 492 | 79.1 | 76.4 | 52.3 | 48.4 | 26.8 | 28.0 | 217 | 186 | |||||||||||||||||||||
Allianz Global Corporate & Specialty1) |
1,557 | 1,594 | 757 | 843 | 92.8 | 93.5 | 67.2 | 69.2 | 25.6 | 24.3 | 211 | 112 | |||||||||||||||||||||
Travel Insurance and Assistance Services |
515 | 505 | 470 | 453 | 100.2 | 94.3 | 60.1 | 59.5 | 40.1 | 34.8 | 47 | 46 | |||||||||||||||||||||
Subtotal |
26,620 | 26,740 | 18,694 | 18,514 | | | | | | | 3,233 | 2,838 | |||||||||||||||||||||
Consolidation adjustments2) |
(2,789 | ) | (3,000 | ) | 5 | 12 | | | | | | | (2 | ) | 26 | ||||||||||||||||||
Total |
23,831 | 23,740 | 18,699 | 18,526 | 93.3 | 93.0 | 65.6 | 65.8 | 27.7 | 27.2 | 3,231 | 2,864 | |||||||||||||||||||||
1) | With effect from 1Q 2006, we have combined the activities of the former Allianz Global Risk Re and Allianz Marine & Aviation, as well as the corporate customer business of Allianz Sach, which was formerly included within Germany. Additionally, with effect from 2Q 2006, we have included Allianz Global Re US, which was formerly presented within NAFTA, within the newly combined entity Allianz Global Corporate & Specialty. Further, with effect from 2Q 2006, we present our property-casualty assumed reinsurance business, primarily attributable to Allianz AG and formerly included within Germany, as Allianz Re within our specialty lines. Prior year balances have been adjusted to reflect this reclassification and allow for comparability across periods. |
2) | Represents elimination of transactions between Allianz Group companies in different geographic regions. |
3) | Contains run-off of a former operating entity located in Luxembourg of 10 mn in 2006 and (2) mn in 2005. |
4) | Presentation not meaningful. |
15
Life/Health Insurance Operations
Operating profit up 11.7%.
| Dynamic statutory premium growth in Asia-Pacific and Europe could not fully compensate the dip in sales in the United States. |
| Higher investment result drove operating profit. |
| Restructuring charges fully funded. |
Earnings Summary
Statutory Premiums by Regions1)
in bn
1) | After elimination of transactions between Allianz Group companies in different geographic regions and different segments. |
Statutory Premiums Grouth Rates1)
1) | Before elimination of transactions between Allianz Group companies in different geographic regions and different segments. |
2) | Comprise Other Europe. |
Statutory Premiums
2006 to 2005 Three Month Comparison
Our statutory premiums base remains sound; we experienced a slight decline in 2Q by 1.2% to 11,931 million. This was the net result of a quarter during which most of our major life insurance markets continued to enjoy very dynamic growth, offset by declines particularly in the United States and to a lesser degree in Italy. Based on internal growth, our statutory premiums decreased by 1.4%.
At Germany Life, our operating entities experienced strong production of new business leading to a total statutory premiums growth in 2Q of 20.7% to 3,075 million, after an already excellent 2Q 2005. This success was primarily driven by the sale of single premium products, including the limited offer of an innovative and very successful equity-indexed product on the German market. Additionally, recurring premiums picked up significantly due to the sales success of our government-sponsored pension products and unit linked contracts.
In France, our entities continued to enjoy the sales momentum achieved through our proprietary financial advisors network and through partnerships with independent advisors, driving a 6.9% rise with statutory premiums written reaching 1,474 million. Our Korean entity, Allianz Life Insurance Co. Ltd., furthered its successful marketing efforts, as evidenced by a significant increase in statutory premiums written of 49.1% to 522 million, also driven by the launch of equity-indexed products.
16
Within New Europe, our growth markets in Central and Eastern Europe, our Polish operations continued to benefit from a successful sales campaign with a bank partner in 1Q 2006, evidenced by statutory premiums written which tripled to 62 million in 2Q.
Conversely, in the United States, statutory premiums written decreased by 27.4% to 2,204 million compared to a strong 2Q 2005, as the sale of equity-indexed annuity products fell short of their prior year success. This development was largely due to uncertainty in part of our broker-dealer distribution channel following the introduction of new regulation by the National Association of Securities Dealers on the supervision of sales of equity-indexed annuities. However, the statutory premium written volume in the United States continues to maintain a sound base and remains a key market for us. In Italy, the picture was mixed: RAS maintained strong statutory premium volume in a market environment prevalent with lower sales of unit linked life products due to uncertainty among investors in response to the high volatility of capital markets in 2Q 2006. At Lloyd Adriatico, we experienced a slowdown of sales through the bancassurance channel, which ultimately led to a decline in statutory premiums written in Italy of 8.6% to 2,362 million.
2006 to 2005 Six Month Comparison
In contrast to the overall development in 2Q, our statutory premiums written increased by 3.3% to 24,753 million, driven in particular by strong sales within Germany Life, France, South Korea and New Europe. However, the trend in statutory premiums written in the United States and Italy did not vary from that of 2Q. Based on internal growth, our statutory premiums written increased by 1.7 %.
Operating Profit
Operating Profit
in mn
2006 to 2005 Three Month Comparison
Our operating profit rose by 11.7% to 527 million in 2Q, despite restructuring charges related to the reorganization of our German insurance business. This development was primarily the result of a significant rise in investment income, which was due to both a higher asset base and increased yields.
The markets which contributed strongest to operating profit were our German Life subsidiaries at 113 million, Italy at 109 million, France at 101 million and Germany Health at 46 million. The strongest improvements occurred within our primary market of Germany at our life and health operations, with increases of 100 million and 16 million, respectively.
Interest and similar income developed favorably with an increase of 11.8% to 3,698 million, driven by higher dividend distributions from equity investments at Germany Life, as well as higher interest income from bonds at our French and American entities through increased yields and larger investment volumes.
Within income from financial assets and liabilities carried at fair value through income (net) especially our French operating entities exhibited negative fair value changes, leading to an overall increase of charges by 189 million to 216 million.
Our realized gains/losses (net) from investments, shared with policyholders more-than-tripled to 947 million in 2Q, as we maximized opportunities within the capital markets for the realization of capital gains. The increase was in particular due to the sale of our participation in Schering AG within Germany Life. To a lesser degree, our French entities also benefited from a rise in realized investment gains.
Conversely, impairments of investments (net), shared with policyholders rose substantially from 31 million to 210 million, as stock markets around the world trended lower. Similarly, investment expenses increased significantly to 211 million, primarily from disproportionately higher foreign exchange losses than foreign exchange gains on available-for-sale debt securities at Germany Life, driven by the year-on-year decline of the U.S. Dollar to the Euro.
Changes in reserves for insurance and investment contracts (net) rose by 26.2% to 2,950 million. This increase was primarily attributable to the sale of our participation in Schering AG within Germany Life, of which the associated realized gain is allocated largely to our policyholders. Additionally, though to a lesser degree, this movement was driven by new business volume both from traditional and investment-oriented policies, especially within our German operations.
Acquisition and administrative expenses (net) increased markedly by 9.9% to 1,153 million, caused in particular by a rise in acquisition expenses due to new business written at our German Life operations as well as higher amortization of deferred acquisition costs due to the business in force volume growth of recent years. Consequently, our statutory expense ratio increased by 1.0 percentage points to 9.9% (2Q 2005: 8.9%).
17
Overall charges of 118 million were recorded for operating restructuring charges. These charges were incurred in connection with the reorganization of our German insurance operations, which unites our German property-casualty and life/health businesses within the new entity Allianz Deutschland AG (or ADAG). This reorganization is intended to help us to improve our competitiveness and offer better service to our customers, while operating more efficiently. The structural changes, which were announced in detail on June 22, 2006, are in line with our repositioning plan as announced in September 2005 and the objectives of our 3+One program. Of the total amount, 71 million was recorded within Germany Life and 47 million within Germany Health.
2006 to 2005 Six Month Comparison
Operating profit was up by 26.4% to 1,250 million. Favorable developments were experienced in particular by our German and French life entities. One of the key drivers of this development was interest and similar income, which showed a significant increase, primarily through higher dividend payments from equity investments. To a lesser degree, operating profit was up due to higher realized gains/losses (net) from investments, shared with policyholders, especially from the sales transaction of Schering AG shares in 2Q 2006.
Non-Operating Items
2006 to 2005 Three Month Comparison
Non-operating items were down by 54 million to a charge of 17 million. This development resulted from charges for non-operating restructuring charges of 43 million in connection with the restructuring of our German life and health businesses, as previously indicated. To a lesser degree, the decline in non-operating items was also attributable to lower realized gains/losses (net) from investments, not shared with policyholders, which fell 29 million to 27 million as a result of lower gains at our Italian, Dutch and South Korean life entities.
2006 to 2005 Six Month Comparison
In contradiction to the development in 2Q, during the first six months of 2006 we recorded an 16 million increase in non-operating income to 141 million, primarily from increased realized gains/losses (net) from investments, not shared with policyholders, as we had recorded gains in 1Q 2006 from the sale of a strategic equity portfolio and a sales company at Allianz Life in the United States. However, non-operating restructuring charges in 2Q 2006 within our German life and health businesses were an offsetting measure to this development.
Net Income
2006 to 2005 Three Month Comparison
Despite a stable income before income taxes and minority interests in earnings, our net income declined by 8.1% to 328 million, impacted primarily by higher income taxes in 2Q 2006 resulting from the absence of a favorable tax settlement which occurred in the prior year period.
Income taxes nearly doubled to 90 million, significantly driving up our effective tax rate to 17.6% (2Q 2005: 9.0%). In 2Q 2005, our income taxes benefited from a favorable tax settlement at Allianz Life in the United States.
Minority interests in earnings were down 13.2% to 92 million, mainly through lower minority interest at RAS in Italy resulting from the buy-out of minority shares at our Italian subsidiary in late 2005.
2006 to 2005 Six Month Comparison
Net income for the first six months of 2006 rose by 17.1%, driven by a strong operating profit development, primarily caused by increased dividend income from equity investments. At the same time, our non-operating items were also up over the first six months 2005, as increased realized gains/losses (net) from investments, not shared with policyholders more-than-offset higher non-operating restructuring charges for our German reorganization.
18
The following table sets forth our Life/Health insurance segments income statement and statutory expense ratio for the three and six months ended June 30, 2006 and 2005, respectively.
Three months ended June 30, |
Six months ended June 30, |
|||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||
mn | mn | mn | mn | |||||||||
Statutory premiums1) |
11,931 | 12,072 | 24,753 | 23,952 | ||||||||
Ceded premiums written |
(213 | ) | (211 | ) | (409 | ) | (442 | ) | ||||
Change in unearned premiums |
(28 | ) | (25 | ) | (86 | ) | (54 | ) | ||||
Statutory premiums (net) |
11,690 | 11,836 | 24,258 | 23,456 | ||||||||
Deposits from SFAS 97 insurance and investment contracts |
(6,874 | ) | (7,231 | ) | (14,346 | ) | (13,684 | ) | ||||
Premiums earned (net) |
4,816 | 4,605 | 9,912 | 9,772 | ||||||||
Interest and similar income |
3,698 | 3,309 | 6,745 | 6,121 | ||||||||
Income from financial assets and liabilities carried at fair value through income (net) |
(216 | ) | (27 | ) | (185 | ) | (4 | ) | ||||
Realized gains/losses (net) from investments, shared with policyholders2) |
947 | 277 | 2,050 | 1,644 | ||||||||
Fee and commission income |
162 | 114 | 291 | 206 | ||||||||
Other income |
7 | 20 | 13 | 29 | ||||||||
Operating revenues |
9,414 | 8,298 | 18,826 | 17,768 | ||||||||
Claims and insurance benefits incurred (net) |
(4,103 | ) | (4,132 | ) | (8,796 | ) | (8,854 | ) | ||||
Changes in reserves for insurance and investment contracts (net) |
(2,950 | ) | (2,337 | ) | (5,598 | ) | (5,480 | ) | ||||
Interest expense |
(73 | ) | (119 | ) | (137 | ) | (223 | ) | ||||
Loan loss provisions |
1 | (2 | ) | 1 | (3 | ) | ||||||
Impairments of investments (net), shared with policyholders |
(210 | ) | (31 | ) | (245 | ) | (53 | ) | ||||
Investment expenses |
(211 | ) | (124 | ) | (368 | ) | (246 | ) | ||||
Acquisition and administrative expenses (net) |
(1,153 | ) | (1,049 | ) | (2,195 | ) | (1,858 | ) | ||||
Fee and commission expenses |
(70 | ) | (32 | ) | (120 | ) | (62 | ) | ||||
Operating restructuring charges3) |
(118 | ) | | (118 | ) | | ||||||
Operating expenses |
(8,887 | ) | (7,826 | ) | (17,576 | ) | (16,779 | ) | ||||
Operating profit |
527 | 472 | 1,250 | 989 | ||||||||
Realized gains/losses (net) from investments, not shared with policyholders2) |
27 | 56 | 186 | 147 | ||||||||
Amortization of intangible assets |
(1 | ) | (4 | ) | (2 | ) | (7 | ) | ||||
Non-operating restructuring charges3) |
(43 | ) | (15 | ) | (43 | ) | (15 | ) | ||||
Non-operating items |
(17 | ) | 37 | 141 | 125 | |||||||
Income before income taxes and minority interests in earnings |
510 | 509 | 1,391 | 1,114 | ||||||||
Income taxes |
(90 | ) | (46 | ) | (309 | ) | (150 | ) | ||||
Minority interests in earnings |
(92 | ) | (106 | ) | (220 | ) | (228 | ) | ||||
Net income |
328 | 357 | 862 | 736 | ||||||||
Statutory expense ratio4) in % |
9.9 | 8.9 | 9.0 | 7.9 | ||||||||
1) | For the Life/Health segment, total revenues are measured based upon statutory premiums. Statutory premiums are gross premiums written from sales of life insurance policies, as well as gross receipts from sales of unit linked and other investment-oriented products, in accordance with the statutory accounting practices applicable in the insurers home jurisdiction. |
2) | The total of these items equals realized gains/losses (net) in the segment income statement in Note 3 to the consolidated financial statements. |
3) | The total of these items equals restructuring charges in the segment income statement in Note 3 to the consolidated financial statements. |
4) | Represents acquisition and administrative expenses (net) divided by statutory premiums (net). |
19
Life/Health Operations by Geographic Region
The following tables set forth our life/health statutory premiums, premiums earned (net), statutory expense ratio and operating profit by geographic region for the three and six months ended June 30, 2006 and 2005, respectively. Consistent with our general practice, statutory premiums, premiums earned (net), statutory expense ratio and operating profit by geographic region are presented before consolidation adjustments, representing the elimination of transactions between Allianz Group companies in different geographic regions and different segments.
Statutory premiums1) | Premiums earned (net) |
Statutory expense ratio |
Operating profit |
|||||||||||||||||||
mn | mn | % | mn | |||||||||||||||||||
Three months ended June 30, |
2006 | 2005 | 2006 | 2005 | 2006 | 2005 | 2006 | 2005 | ||||||||||||||
Germany Life |
3,075 | 2,547 | 2,317 | 2,043 | 9.5 | 9.2 | 113 | 13 | ||||||||||||||
Germany Health2) |
772 | 762 | 772 | 762 | 7.6 | 8.9 | 46 | 30 | ||||||||||||||
Italy |
2,362 | 2,584 | 280 | 233 | 6.9 | 5.6 | 109 | 127 | ||||||||||||||
France |
1,474 | 1,379 | 425 | 406 | 15.1 | 14.4 | 101 | 117 | ||||||||||||||
Switzerland |
178 | 204 | 80 | 93 | 12.8 | 14.2 | 13 | 6 | ||||||||||||||
Spain |
174 | 149 | 122 | 126 | 9.3 | 6.4 | 20 | 17 | ||||||||||||||
Other Europe, thereof: |
536 | 480 | 313 | 295 | 16.6 | 16.2 | 60 | 49 | ||||||||||||||
Netherlands |
104 | 95 | 35 | 38 | 11.9 | 16.3 | 12 | 7 | ||||||||||||||
Austria |
83 | 78 | 64 | 65 | 15.5 | 10.0 | 9 | 9 | ||||||||||||||
Belgium |
116 | 144 | 69 | 69 | 14.2 | 10.5 | 16 | 18 | ||||||||||||||
Portugal |
25 | 17 | 16 | 13 | 16.2 | 20.2 | 5 | 4 | ||||||||||||||
Luxembourg |
12 | 7 | 8 | 6 | 13.4 | 27.6 | 1 | 1 | ||||||||||||||
Greece |
24 | 23 | 16 | 14 | 22.1 | 23.4 | | | ||||||||||||||
Western and Southern Europe |
364 | 364 | 208 | 205 | 14.4 | 13.3 | 43 | 39 | ||||||||||||||
Hungary |
22 | 23 | 18 | 18 | 27.4 | 25.1 | 4 | 4 | ||||||||||||||
Slovakia |
45 | 36 | 34 | 32 | 19.2 | 22.6 | 7 | 1 | ||||||||||||||
Czech Republic |
19 | 17 | 13 | 13 | 19.3 | 18.9 | 2 | 2 | ||||||||||||||
Poland |
62 | 22 | 21 | 13 | 19.8 | 35.7 | 2 | 1 | ||||||||||||||
Romania |
5 | 4 | 4 | 2 | 46.8 | 23.2 | | 1 | ||||||||||||||
Bulgaria |
6 | 4 | 5 | 4 | 17.2 | 9.4 | 1 | 1 | ||||||||||||||
Croatia |
11 | 10 | 8 | 8 | 23.6 | 26.7 | 1 | | ||||||||||||||
Russia |
2 | | 2 | | 4.7 | 5 | ) | | | |||||||||||||
New Europe |
172 | 116 | 105 | 90 | 21.2 | 25.0 | 17 | 10 | ||||||||||||||
United States |
2,204 | 3,037 | 80 | 145 | 7.6 | 4.4 | 32 | 90 | ||||||||||||||
Asia-Pacific, thereof: |
1,043 | 798 | 308 | 293 | 11.0 | 13.8 | 20 | 1 | ||||||||||||||
South Korea |
522 | 350 | 248 | 242 | 15.8 | 24.3 | 13 | 1 | ||||||||||||||
Taiwan |
445 | 393 | 27 | 20 | 3.3 | 3.0 | 5 | (1 | ) | |||||||||||||
Malaysia |
28 | 33 | 22 | 18 | 23.7 | 17.5 | 2 | 1 | ||||||||||||||
Indonesia |
19 | 16 | 7 | 8 | 29.3 | 22.7 | 1 | | ||||||||||||||
Other |
29 | 6 | 4 | 5 | 18.4 | 30.2 | (1 | ) | | |||||||||||||
South America |
42 | 33 | 12 | 8 | 18.1 | 19.4 | (1 | ) | (1 | ) | ||||||||||||
Other3) |
129 | 207 | 105 | 200 | 5 | ) | 5 | ) | 38 | 24 | ||||||||||||
Subtotal |
11,989 | 12,180 | 4,814 | 4,604 | | | 551 | 473 | ||||||||||||||
Consolidation adjustments4) |
(58 | ) | (108 | ) | 2 | 1 | | | (24 | ) | (1 | ) | ||||||||||
Total |
11,931 | 12,072 | 4,816 | 4,605 | 9.9 | 8.9 | 527 | 472 | ||||||||||||||
1) | Statutory premiums are gross premiums written from sales of life insurance policies as well as gross receipts from sales of unit linked and other investment-oriented products, in accordance with the statutory accounting practices applicable in the insurers home jurisdiction. |
2) | Loss ratios were 63.7% and 68.5% for the three months ended June 30, 2006 and 2005, respectively. |
3) | Contains, among others, the life/health business assumed by Allianz AG, which was previously reported under Germany in the Property-Casualty segment. Prior year balances have been adjusted to reflect this reclassification and allow for comparability across periods. |
4) | Represents elimination of transactions between Allianz Group companies in different geographic regions. |
5) | Presentation not meaningful. |
20
Statutory premiums1) |
Premiums earned (net) |
Statutory expense ratio |
Operating profit |
|||||||||||||||||||
mn | mn | % | mn | |||||||||||||||||||
Six months ended June 30, |
2006 | 2005 | 2006 | 2005 | 2006 | 2005 | 2006 | 2005 | ||||||||||||||
Germany Life |
6,204 | 5,665 | 4,898 | 4,742 | 9.1 | 6.9 | 246 | 169 | ||||||||||||||
Germany Health2) |
1,541 | 1,517 | 1,542 | 1,518 | 7.3 | 9.2 | 99 | 75 | ||||||||||||||
Italy |
4,631 | 4,928 | 522 | 489 | 6.4 | 5.3 | 203 | 183 | ||||||||||||||
France |
2,934 | 2,587 | 798 | 798 | 14.6 | 14.6 | 275 | 236 | ||||||||||||||
Switzerland |
697 | 692 | 289 | 289 | 7.4 | 8.3 | 27 | 18 | ||||||||||||||
Spain |
316 | 285 | 222 | 243 | 8.9 | 7.1 | 41 | 33 | ||||||||||||||
Other Europe, thereof: |
1,274 | 981 | 636 | 599 | 13.8 | 16.2 | 124 | 91 | ||||||||||||||
Netherlands |
228 | 197 | 73 | 72 | 12.2 | 15.0 | 22 | 14 | ||||||||||||||
Austria |
184 | 169 | 132 | 129 | 12.5 | 8.4 | 22 | 16 | ||||||||||||||
Belgium |
295 | 296 | 145 | 155 | 10.4 | 12.5 | 32 | 32 | ||||||||||||||
Portugal |
45 | 37 | 33 | 30 | 15.1 | 21.6 | 12 | 8 | ||||||||||||||
Luxembourg |
21 | 16 | 15 | 12 | 15.2 | 23.9 | 3 | 2 | ||||||||||||||
Greece |
50 | 46 | 31 | 27 | 23.1 | 23.2 | 2 | | ||||||||||||||
Western and Southern Europe |
823 | 761 | 429 | 425 | 12.3 | 13.5 | 93 | 72 | ||||||||||||||
Hungary |
44 | 44 | 37 | 35 | 27.1 | 25.6 | 8 | 8 | ||||||||||||||
Slovakia |
88 | 71 | 67 | 64 | 19.5 | 20.2 | 14 | 4 | ||||||||||||||
Czech Republic |
38 | 30 | 27 | 24 | 20.9 | 21.7 | 4 | 3 | ||||||||||||||
Poland |
231 | 40 | 40 | 25 | 10.7 | 38.4 | 3 | 2 | ||||||||||||||
Romania |
15 | 7 | 6 | 3 | 39.1 | 32.2 | | | ||||||||||||||
Bulgaria |
11 | 8 | 10 | 8 | 15.9 | 10.6 | 1 | 1 | ||||||||||||||
Croatia |
20 | 20 | 16 | 15 | 24.7 | 23.9 | 1 | 1 | ||||||||||||||
Russia |
4 | | 4 | | 17.4 | 5 | ) | | | |||||||||||||
New Europe |
451 | 220 | 207 | 174 | 16.4 | 25.1 | 31 | 19 | ||||||||||||||
United States |
4,976 | 5,761 | 168 | 258 | 6.5 | 3.8 | 153 | 126 | ||||||||||||||
Asia-Pacific, thereof: |
1,972 | 1,312 | 609 | 584 | 9.9 | 15.1 | 51 | 14 | ||||||||||||||
South Korea |
1,094 | 699 | 503 | 486 | 13.3 | 22.4 | 38 | 6 | ||||||||||||||
Taiwan |
744 | 519 | 41 | 41 | 2.5 | 3.6 | 9 | 6 | ||||||||||||||
Malaysia |
50 | 52 | 41 | 33 | 21.2 | 17.2 | 4 | 1 | ||||||||||||||
Indonesia |
34 | 33 | 16 | 15 | 31.9 | 22.2 | 1 | 1 | ||||||||||||||
Other |
50 | 9 | 8 | 9 | 18.3 | 41.4 | (1 | ) | | |||||||||||||
South America |
88 | 65 | 25 | 15 | 14.3 | 16.3 | (1 | ) | (1 | ) | ||||||||||||
Other3) |
242 | 271 | 203 | 237 | 5 | ) | 5 | ) | 99 | 50 | ||||||||||||
Subtotal |
24,875 | 24,064 | 9,912 | 9,772 | | | 1,317 | 994 | ||||||||||||||
Consolidation adjustments4) |
(122 | ) | (112 | ) | | | | | (67 | ) | (5 | ) | ||||||||||
Total |
24,753 | 23,952 | 9,912 | 9,772 | 9.0 | 7.9 | 1,250 | 989 | ||||||||||||||
1) | Statutory premiums are gross premiums written from sales of life insurance policies as well as gross receipts from sales of unit linked and other investment-oriented products, in accordance with the statutory accounting practices applicable in the insurers home jurisdiction. |
2) | Loss ratios were 69.7% and 71.7% for the six months ended June 30, 2006 and 2005, respectively. |
3) | Contains, among others, the life/health business assumed by Allianz AG, which was previously reported under Germany in the Property-Casualty segment. Prior year balances have been adjusted to reflect this reclassification and allow for comparability across periods. |
4) | Represents elimination of transactions between Allianz Group companies in different geographic regions. |
5) | Presentation not meaningful. |
21
Another strong quarter.
| Operating revenues and operating profit momentum sustained, attaining dynamic growth. |
| Cost-income ratio strongly improved. |
| On track to achieve ambitious full year targets. |
Earnings Summary
The results of operations of our Banking segment are almost exclusively represented by Dresdner Bank, accounting for 98.3% of our total Banking segments operating revenues in 1H 2006 (1H 2005: 95.8%). Accordingly, the discussion of our Banking segments results of operations relates solely to the operations of Dresdner Bank.
Operating Revenues
2006 to 2005 Three Month Comparison
Operating revenues, at 1,709 million, experienced dynamic growth of 28.5%. All revenue categories and both operating divisions, Private & Business Clients (or PBC) and Corporate & Investment Banking (or CIB), contributed to this development.
Net interest income was up 17.9% to 631 million. In 2Q 2006, the impact of accounting for derivative financial instruments which do not qualify for hedge accounting was marginal, whereas 2Q 2005 was negatively affected to a significant extent. Excluding this impact as well as lower income from associated companies as a result of the sale of our shareholdings in Eurohypo AG in the prior two quarters, net interest income was stable.
Net fee and commission income increased 3.3% to 680 million. Despite a challenging market environment our PBC division managed to expand its securities business, especially from equities, investment funds and certificates. Our CIB division exhibited a decline, however, exclusively due to a large client IPO in 2Q 2005.
Trading income (net) was the main contributor to the increase in operating revenues and almost tripled to 381 million amongst a volatile market environment in 2Q 2006. This development resulted from our strong business performance in 2Q 2006, which compares to a weak second quarter a year earlier. In the same quarter, the accounting for derivative financial instruments which do not qualify for hedge accounting had a significant positive impact. Excluding this impact, growth in trading income (net) was even stronger.
2006 to 2005 Six Month Comparison
Operating revenues increased by 21.7% to 3,593 million. The strong growth resulted principally from the developments previously described, with net fee and commission income evolving even more favorably for the first six months of 2006.
Operating Profit
2006 to 2005 Three Month Comparison
Operating profit experienced substantial growth to 319 million, up 55.6% from a year ago. Our PBC and CIB divisions both contributed to this positive development, which was primarily due to the strengthening of the divisions operating revenues.
Operating expenses increased 17.5%, almost entirely influenced by the development of administrative expenses, which amounted to 1,386 million, a rise of 20.0%. This increase almost exclusively refers to revenue-linked personnel expenses, which predominantly were incurred from the dynamic operating revenue growth within our CIB division. As a result, personnel expenses were up 45.8% to 892 million, as the weak 2Q 2005 included only marginal bonus accruals for CIB. Further, personnel expenses last year benefited from a one-off effect as a result of the release of provisions for employee anniversary payments. Non-personnel expenses decreased by 9.0% to 494 million in 2Q 2006. This development was mainly attributable to lower expenses for office space and information technology. As a consequence of the dynamic operating revenue growth, our cost-income ratio improved significantly by 7.6 percentage points to 81.0%.
Loan loss provisions resulted in a net charge of 5 million, compared to a net release of 54 million a year ago. Adequate reserving for current risks was broadly offset by significant recoveries of loans and releases of provisions of, in aggregate, 101 million. Gross new additions to loan loss provisions amounted to 106 million, in line with our qualitatively improved loan portfolio following the successful completion of the wind-down of our Institutional Restructuring Units (or IRU) portfolio in September 2005.
22
2006 to 2005 Six Month Comparison
Operating profit doubled to 848 million. This positive development is largely attributable to the dynamic operating revenue growth, which drove our cost-income ratio down 7.2 percentage points to 77.2%. Further, loan loss provisions resulted in a net release of 28 million in 1H 2006, compared to a net charge of 46 million a year ago. Similar to 2Q 2006, significantly higher recoveries of loans was a key factor in this development. At June 30, 2006, our coverage ratio was 58.5%, down 3.6 percentage points from a year earlier.
Operating Profit Dresdner Bank
in mn
Non-Operating Items
2006 to 2005 Three Month Comparison
Income from non-operating items was 12 million, down 206 million from a year earlier. This development is almost exclusively attributable to the decline in realized gains/losses (net), which, in the prior year period, included significant gains from sales, including our shareholdings in Bilfinger Berger AG.
2006 to 2005 Six Month Comparison
The decrease in non-operating items in 1H 2006 was of a similar magnitude compared to that in 2Q 2006. Realized gains/losses (net) in 1Q 2006 included a tax-exempt gain of 282 million from the sale of Dresdner Banks remaining 2.3% shareholdings in Munich Re to Allianz AG as well as a significant gain from the disposal of our remaining participation in Eurohypo AG.
Net Income
2006 to 2005 Three Month Comparison
Net income was down 19.5% to 198 million. This development despite strong operating profit growth reflected the impact of the substantial decrease in non-operating items. Income taxes declined to 112 million from 156 million with a relatively stable effective income tax rate of 33.8% (2Q 2005: 36.9%).
2006 to 2005 Six Month Comparison
Net income increased 4.8% to 856 million. Backed by strong operating profit growth, income taxes rose by 126 million to 350 million. Our effective income tax rate was 27.9%, considerably higher from 20.6% a year earlier. In 1Q 2005, a tax-exempt gain similar to 1Q 2006 from the sale of Munich Re shares was realized, which had a larger impact on the 1Q 2005 effective income tax rate due to a lower income before income taxes and minority interests in earnings.
23
The following table sets forth the income statements and cost-income ratios for both our Banking segment as a whole and Dresdner Bank for the three and six months ended June 30, 2006 and 2005, respectively.
Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||||||||||
Banking Segment1) |
Dresdner Bank |
Banking Segment1) |
Dresdner Bank |
Banking Segment1) |
Dresdner Bank |
Banking Segment1) |
Dresdner Bank |
|||||||||||||||||
mn | mn | mn | mn | mn | mn | mn | mn | |||||||||||||||||
Net interest income2) |
652 | 631 | 555 | 535 | 1,253 | 1,209 | 1,104 | 1,066 | ||||||||||||||||
Net fee and commission income3) |
728 | 680 | 695 | 658 | 1,560 | 1,473 | 1,397 | 1,324 | ||||||||||||||||
Trading income (net)4) |
308 | 381 | 135 | 128 | 795 | 865 | 582 | 563 | ||||||||||||||||
Income from financial assets and liabilities designated at fair value through income (net)4) |
18 | 18 | 5 | 5 | 21 | 21 | (4 | ) | (4 | ) | ||||||||||||||
Other income |
| (1 | ) | 4 | 4 | 25 | 25 | 4 | 4 | |||||||||||||||
Operating revenues5) |
1,706 | 1,709 | 1,394 | 1,330 | 3,654 | 3,593 | 3,083 | 2,953 | ||||||||||||||||
Administrative expenses |
(1,436 | ) | (1,386 | ) | (1,209 | ) | (1,155 | ) | (2,864 | ) | (2,767 | ) | (2,575 | ) | (2,466 | ) | ||||||||
Investment expenses |
(10 | ) | (12 | ) | (8 | ) | (9 | ) | (16 | ) | (19 | ) | (15 | ) | (19 | ) | ||||||||
Other expenses |
13 | 13 | (14 | ) | (15 | ) | 13 | 13 | (8 | ) | (8 | ) | ||||||||||||
Operating expenses |
(1,433 | ) | (1,385 | ) | (1,231 | ) | (1,179 | ) | (2,867 | ) | (2,773 | ) | (2,598 | ) | (2,493 | ) | ||||||||
Loan loss provisions |
(7 | ) | (5 | ) | 52 | 54 | 26 | 28 | (41 | ) | (46 | ) | ||||||||||||
Operating profit |
266 | 319 | 215 | 205 | 813 | 848 | 444 | 414 | ||||||||||||||||
Realized gains/losses (net) |
32 | 30 | 237 | 237 | 446 | 444 | 729 | 729 | ||||||||||||||||
Impairments of investments (net) |
(12 | ) | (12 | ) | (15 | ) | (14 | ) | (32 | ) | (32 | ) | (57 | ) | (56 | ) | ||||||||
Amortization of intangible assets |
(1 | ) | | | | (1 | ) | | | | ||||||||||||||
Restructuring charges |
(7 | ) | (6 | ) | (5 | ) | (5 | ) | (9 | ) | (8 | ) | (5 | ) | (5 | ) | ||||||||
Non-operating items |
12 | 12 | 217 | 218 | 404 | 404 | 667 | 668 | ||||||||||||||||
Income before income taxes and minority interests in earnings |
278 | 331 | 432 | 423 | 1,217 | 1,252 | 1,111 | 1,082 | ||||||||||||||||
Income taxes |
(89 | ) | (112 | ) | (155 | ) | (156 | ) | (334 | ) | (350 | ) | (229 | ) | (224 | ) | ||||||||
Minority interests in earnings |
(27 | ) | (21 | ) | (25 | ) | (21 | ) | (55 | ) | (46 | ) | (51 | ) | (41 | ) | ||||||||
Net income |
162 | 198 | 252 | 246 | 828 | 856 | 831 | 817 | ||||||||||||||||
Cost-income ratio6) in % |
84.0 | 81.0 | 88.3 | 88.6 | 78.5 | 77.2 | 84.3 | 84.4 | ||||||||||||||||
1) | Consists of Dresdner Bank and non-Dresdner Bank banking operations within our Banking segment, as well as the elimination of trading income (net) of 81 mn at Dresdner Bank resulting from Dresdner Banks trading activities in Allianz AG shares in 2Q and 1H 2006. |
2) | Represents interest and similar income less interest expense. |
3) | Represents fee and commission income less fee and commission expense. |
4) | The total of these items equals income from financial assets and liabilities carried at fair value through income (net) in the segment income statement in Note 3 to the consolidated financial statements. |
5) | For the Banking segment, total revenues are measured based upon operating revenues. |
6) | Represents operating expenses divided by operating revenues. |
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Banking Operations by Division
The following tables set forth our banking operating revenues, operating profit and cost-income ratio by division for the three and six months ended June 30, 2006 and 2005, respectively. Consistent with our general practice, operating revenues, operating profit and cost-income ratio by division are presented before consolidation adjustments, representing the elimination of transactions between Allianz Group companies in different segments.
Three months ended June 30, |
2006 | 2005 | |||||||||||||||
Operating revenues |
Operating profit |
Cost- income ratio |
Operating revenues |
Operating profit |
Cost- income ratio |
||||||||||||
mn | mn | % | mn | mn | % | ||||||||||||
Private & Business Clients1) |
774 | 160 | 77.3 | 730 | 146 | 75.8 | |||||||||||
Corporate & Investment Banking1) |
979 | 220 | 76.6 | 558 | 91 | 85.5 | |||||||||||
Corporate Other2) |
(44 | ) | (61 | ) | 3 | ) | 42 | (32 | ) | 3 | ) | ||||||
Dresdner Bank |
1,709 | 319 | 81.0 | 1,330 | 205 | 88.6 | |||||||||||
Other Banks4) |
(3 | ) | (53 | ) | 3 | ) | 64 | 10 | 84.3 | ||||||||
Total |
1,706 | 266 | 84.0 | 1,394 | 215 | 88.3 | |||||||||||
Six months ended June 30, |
2006 | 2005 | |||||||||||||||
Operating revenues |
Operating profit |
Cost- income ratio |
Operating revenues |
Operating profit |
Cost- income ratio |
||||||||||||
mn | mn | % | mn | mn | % | ||||||||||||
Private & Business Clients1) |
1,666 | 430 | 72.6 | 1,529 | 288 | 76.1 | |||||||||||
Corporate & Investment Banking1) |
1,946 | 483 | 76.4 | 1,309 | 198 | 82.5 | |||||||||||
Corporate Other2) |
(19 | ) | (65 | ) | 3 | ) | 115 | (72 | ) | 3 | ) | ||||||
Dresdner Bank |
3,593 | 848 | 77.2 | 2,953 | 414 | 84.4 | |||||||||||
Other Banks4) |
61 | (35 | ) | 3 | ) | 130 | 30 | 80.8 | |||||||||
Total |
3,654 | 813 | 78.5 | 3,083 | 444 | 84.3 | |||||||||||
1) | Our reporting by divisions reflects the organizational changes within Dresdner Bank in 1H 2006 resulting in two operating divisions. Private & Business Clients combines all banking activities for private and corporate customers formerly provided by the Personal Banking and Private & Business Banking divisions. Furthermore, Corporate & Investment Banking combines the former Corporate Banking and Dresdner Kleinwort Wasserstein divisions. Following a decision taken in late June 2006, we will integrate our business activities with medium-sized business clients into that with private and corporate customers. In the table above, our medium-sized business clients are still included in Corporate & Investment Banking. The final new business model with two new organizational units Private & Corporate Clients and Investment Banking is not reflected in the table above. |
2) | The Corporate Other division contains income and expense items that are not assigned to Dresdner Banks operating divisions. These items include, in particular, impacts from the accounting for derivative financial instruments which do not qualify for hedge accounting, provisioning requirements for country and general risks, as well as realized gains and losses from Dresdner Banks non-strategic investment portfolio. For the three and six months ended June 30, 2006, the impact from the accounting for derivative financial instruments which do not qualify for hedge accounting on Corporate Others operating revenues amounted to a gain of 9 mn and a charge of 14 mn, respectively (2005: gain of 93 mn and 73 mn, respectively). With effect from 1Q 2006, the majority of expenses for support functions and central projects previously included within Corporate Other have been allocated to the operating divisons. Additionally, the non-strategic Institutional Restructuring Unit (or IRU) was closed down effective September 30, 2005 having successfully completed its mandate to free-up risk capital through the reduction of risk-weighted assets. Furthermore, effective in 1Q 2006, and as a result of Dresdner Bank restructuring its divisions, the IRUs 2005 results of operations were reclassified into Corporate Other. Prior year balances have been adjusted to reflect these reclassifications and allow for comparability across periods. |
3) | Presentation not meaningful. |
4) | Consists of non-Dresdner Bank banking operations within our Banking segment, as well as the elimination of trading income (net) of 81 mn at Dresdner Bank resulting from Dresdner Banks trading activities in Allianz AG shares in 2Q and 1H 2006. |
24
Strong operating profit development continues.
| Double-digit operating profit growth year-over-year for the seventh consecutive quarter. |
| Net inflows of 15 billion in the first half of 2006 despite a challenging market environment. |
| Net inflows and positive market effects more than offset by negative currency effects resulting in third-party assets under management of 721 billion. |
Third-Party Assets Under Management
Overall, in the first half of 2006, we were faced with a challenging market environment. Whereas in 1Q 2006, capital markets worldwide developed favorably, 2Q 2006 showed substantial declines in market values, particularly within the equity capital markets. Additionally, net flows in the fixed income mutual fund market in the United States and Germany turned negative in 2Q 2006.
Despite this challenging market environment in the first six months of the year, we achieved net inflows to third-party assets of 15 billion. Both fixed income and equity products contributed to the positive development, which affirms our strong position as one of the worlds largest asset managers, based on total assets under management.1) A key success factor continues to be our competitive investment performance. The overwhelming majority of the third-party assets we manage again outperformed their respective benchmarks. Market-related appreciation was 3 billion. Net inflows and positive market effects were more than offset by negative effects of 40 billion from exchange rate movements, resulting primarily from a weaker U.S. Dollar versus the Euro. As a consequence, on a Euro-basis, our third-party assets decreased 22 billion to 721 billion at June 30, 2006, compared to December 31, 2005.
Our major achievements in the first half of 2006 included:
United States
| Allianz/PIMCO Funds were named Best Mutual Fund Family of 2005 in the annual Lipper/Barrons Fund Families Survey. |
| Particularly strong net inflows of approximately 4 billion at our equity fund manager NFJ Investment Group. |
| PIMCO was named Investor of the Year 2005 by Securitization News. |
Germany
| Allianz Global Investors (or AGI) ranked first among German asset management companies, based on net inflows in retail equity products.2) |
| Germany´s equity management platform ranked first among Best German Asset Managers and achieved twelve individual top 3 rankings.3) |
1) | Source: Own internal analysis and estimates. |
2) | Source: Bundesverband Investment und Asset Management (or BVI), an association representing the German investment fund industry. |
3) | Source: Handelsblatt and Thomson Extel Surveys, June 22, 2006. |
We operate our third-party asset management business primarily through AGI. At June 30, 2006, AGI managed approximately 94.6% (December 31, 2005: 95.2%) of our third-party assets. The remaining assets are managed by Dresdner Bank (approximately 2.8% and 2.3% at June 30, 2006 and December 31, 2005, respectively) and other Allianz Group companies (approximately 2.6% and 2.5% at June 30, 2006 and December 31, 2005, respectively).
The following graphs present the third-party assets managed by the Allianz Group by geographic region, investment category and investor class at June 30, 2006 and December 31, 2005, respectively.
26
Third-party Assets Under Management Fair Values by Geographic Region1)
in bn
1) | Based on the origination of the assets. |
2) | Consists of third-party assets managed by Dresdner Bank (approximately 20 bn and 17 bn at June 30, 2006 and December 31, 2005, respectively) and by other Allianz Group companies (approximately 19 bn and 19 bn at June 30, 2006 and December 31, 2005, respectively). |
Third-party Assets Under Management Fair Values by Investment Category
in bn
1) | Includes primarily investments in real estate. |
Third-party Assets Under Management Fair Values by Investor Class
in bn
Earnings Summary
The results of operations of our Asset Management segment are almost exclusively represented by AGI, accounting for 98.8% and 99.3% of our total Asset Management segments operating revenues and operating profit, respectively, for 2Q 2006 (2Q 2005: 98.9% and 98.8%). Accordingly, the discussion of our Asset Management segments results of operations relates solely to the operations of AGI.
Operating Revenues
2006 to 2005 Three Month Comparison
Our operating revenues rose by 13.1% to 717 million. Internal growth was even stronger at 15.9%. Higher asset-based management fees, reflecting both net inflows, particularly in the United States, and rising financial markets throughout the previous quarters, contributed largely to this performance. In addition, we experienced positive impacts from our strengthened equity business.
2006 to 2005 Six Month Comparison
Operating revenues reached 1,452 million, up 263 million (22.1%) from a year ago. On an internal growth basis, operating revenues rose by 19.1%. The increase resulted principally from the factors previously described. Further, income from financial assets and liabilities carried at fair value through income (net) increased by 14 million to 12 million, predominantly due to the mark-to-market valuation of seed money in the United States.
27
The following table sets forth the composition of AGIs net fee and commission income.
Three months ended June 30, | Six months ended June 30, | |||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||
mn | mn | mn | mn | |||||||||
Fee and commission income, thereof: |
1,015 | 868 | 2,030 | 1,660 | ||||||||
Management fees |
823 | 707 | 1,652 | 1,354 | ||||||||
Loading and exit fees |
86 | 80 | 177 | 157 | ||||||||
Performance fees |
9 | 13 | 25 | 22 | ||||||||
Other |
97 | 68 | 176 | 127 | ||||||||
Fee and commission expenses, thereof: |
(314 | ) | (253 | ) | (625 | ) | (498 | ) | ||||
Commissions |
(223 | ) | (190 | ) | (449 | ) | (377 | ) | ||||
Other |
(91 | ) | (63 | ) | (176 | ) | (121 | ) | ||||
Net fee and commission income |
701 | 615 | 1,405 | 1,162 | ||||||||
Operating Profit
2006 to 2005 Three Month Comparison
We experienced an operating profit growth of 18.5% to 295 million, primarily resulting from the increase in our operating revenues. In addition, exchange rate movements also proved beneficial, predominantly stemming from a stronger U.S. Dollar compared to the Euro. Excluding the effects related to currencies, operating profit would have improved by 44 million, or 17.7%. In line with our continued positive business performance in the United States, our U.S.-based operations contributed substantially to our operating profit growth. On a Euro-basis, operating profit in the United States rose by 12.9% to 223 million.
Operating expenses were 422 million, up 9.6% from a year earlier. Thereof, personnel expenses reached 265 million, up 12.9%. This increase resulted largely from higher performance-linked compensation, rising in line with operating profit. In addition, increased headcount following our business growth over the previous quarters also contributed to the rise in operating expenses. Non-personnel expenses increased 4.2% to 157 million, coupled with, among other factors, the impact of a higher asset base on our administrative expenses.
As a result, our cost-income ratio improved by 1.8 percentage points to 58.9%.
2006 to 2005 Six Month Comparison
Operating profit improved by 24.5% to 595 million. Effects from exchange rate movements contributed 25 million, or 5.2%. Operating expenses at 857 million were 20.5% higher compared to a year ago. The developments in the six months comparison resulted principally from the factors previously described in the three months comparison. Consequently, our cost-income ratio improved by 0.8 percentage points to 59.0%.
Operating Profit Allianz Global Investors
in mn
Non-Operating Items
2006 to 2005 Three Month Comparison
Acquisition-related expenses and amortization of intangible assets, in aggregate, decreased 24.6% to 132 million. This decline was mainly driven by a lower number of outstanding PIMCO LLC Class B Units (or Class B Units). As of June 30, 2006, the Allianz Group has acquired 11,721 of the 150,000 units originally outstanding.
Going forward, we expect acquisition-related expenses to be mainly driven by our operating profit development.
2006 to 2005 Six Month Comparison
Acquisition-related expenses and amortization of intangible assets, in aggregate, decreased 20.8% to 270 million. In addition to a lower number of outstanding Class B Units previously mentioned, the expiration of amortization charges relating to capitalized loyalty bonuses for PIMCO management in 2Q 2005 also contributed to this development.
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Net Income
2006 to 2005 Three Month Comparison
Net income reached 90 million, up 18.4% from a year earlier. Currency-related effects contributed 2.6%, or 2 million, to this increase. Income taxes amounted to an expense of 62 million after a tax benefit of 8 million in 2Q 2005. This tax benefit stemmed predominantly from a one-off deferred tax credit of 37 million in the United States related to tax deductible goodwill amortization.
2006 to 2005 Six Month Comparison
Net income grew significantly by 71.8% to 177 million. Excluding the effects related to exchange rate movements, net income would have improved by 65 million, or 63.1%. Income taxes rose to 126 million from 17 million a year earlier due to significantly increased taxable income in the United States and the one-off deferred tax credit in 2Q 2005, previously mentioned.
The following table sets forth the income statements and cost-income ratios for both our Asset Management segment as a whole and AGI for the three and six months ended June 30, 2006 and 2005, respectively.
Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||||||||||
Asset Management Segment |
Allianz Global Investors |
Asset Segment |
Allianz Global Investors |
Asset Management Segment |
Allianz Global Investors |
Asset Management Segment |
Allianz Global Investors |
|||||||||||||||||
mn | mn | mn | mn | mn | mn | mn | mn | |||||||||||||||||
Net fee and commission income1) |
712 | 701 | 624 | 615 | 1,429 | 1,405 | 1,180 | 1,162 | ||||||||||||||||
Net interest income2) |
13 | 15 | 14 | 19 | 30 | 29 | 17 | 23 | ||||||||||||||||
Income from financial assets and liabilities carried at fair value through income (net) |
(2 | ) | (2 | ) | | (3 | ) | 12 | 12 | 5 | (2 | ) | ||||||||||||
Other income |
3 | 3 | 3 | 3 | 6 | 6 | 6 | 6 | ||||||||||||||||
Operating revenues3) |
726 | 717 | 641 | 634 | &n |