Effective January 1, 2006, in addition to our four operating segments Property-Casualty, Life/Health, Banking and Asset Management, and with retrospective application, the Allianz Group introduced a fifth segment named Corporate. Activities included in the Corporate segment were previously reported in the Property-Casualty segment. Generally, the Corporate segment includes all Group activities that are not allocated to one of our operating segments, in particular:
Holding Function Comprises Group Center functions carried out by the Allianz Group’s holding company Allianz SE, as well as regional management companies and special investment vehicles. In particular, the Holding Function works with the operating entities to guide the Allianz Group towards effective operation using a common set of values and corporate governance processes. It supports the growth of the Allianz Group’s businesses through its risk, corporate finance, treasury, financial control, communication, legal, human resources strategy and technology functions.
Private Equity Includes the income and expense items associated with the private equity investments held in particular by Allianz Capital Partners GmbH and Allianz Private Equity Partners GmbH.
Earnings Summary
While operating loss, down € 50 million to € 831 million in 2006, remained relatively stable, net expenses from non-operating items declined significantly by € 962 million. As a result, loss before income taxes and minority interests in earnings was down € 1,012 million to € 987 million.
For our Corporate segment’s income statement for the years ended December 31, 2006, 2005 and 2004 please see pages 142 to 143. You find them in the PDF file "Notes to the Consolidated Financial Statements", which you can download on page Notes to the Consolidated Financial Statements.
The following table sets forth Corporate’s operating profit and non-operating items by activity for the years ended December 31, 2006, 2005 and 2004. Consistent with our general practice, these figures are presented before consolidation adjustments, representing the elimination of transactions between Allianz Group companies in different segments.
Operating profit and non-generating items of the Corporate segment
Operating profit (loss)
Non-operating items
2006
€ mn
2005
€ mn
2004
€ mn
2006
€ mn
2005
€ mn
2004
€ mn
Holding Function
(838)
(923)
(618)
(455)
(1,109)
(649)
Private Equity
7
42
(252)
299
(9)
477
Total
(831)
(881)
(870)
(156)
(1,118)
(172)
Holding Function
Operating profit The considerable decrease in operating loss stemmed primarily from higher interest and similar income due to higher dividends received from equity investments. Further key operating items included within Holding Function are administrative expenses to run our Group Center, expenses associated with our pension plans, and expenses for certain Allianz Group-wide growth initiatives.
Non-operating items Net expenses from non-operating items decreased by € 654 million, predominantly from higher realized gains brought about by various sales transactions. With net realized gains of € 434 million the sale of our shareholding in Schering AG in June 2006 contributed most. In addition, non-operating items benefited from a lower net loss from financial assets and liabilities held for trading in comparison to 2005 when the effects of derivatives from an equity-linked loan issued in connection with financing the cash tender offer for the outstanding RAS shares made a significant negative impact. Interest expense from external debt, at € 775 million in 2006, remained relatively constant.
Private Equity
Operating profit Operating profit decreased € 35 million from the 2005 level. In August 2006, the Allianz Group acquired 100.0% of MAN Roland Druckmaschinen AG. The full consolidation of this private equity investment had impacts of a similar magnitude both on operating revenues and operating expenses, namely income and expenses from fully consolidated private equity investments.
Non-operating items Non-operating items improved from a loss of € 9 million to a gain of € 299 million. The disposal of Four Seasons Health Care Ltd. (or “Four Seasons”) in August 2006 contributed € 287 million to this development.
