On October 13, 2006 with effectiveness of the cross-border merger of the Italian Riunione Adriatica di Sicurtà S.p.A. (RAS) with and into Allianz AG, Allianz AG changed its legal form to a European Company. Beside the German company law, special European SE regulations and the German law implementing the European Company are now applicable to Allianz SE. This has resulted in a couple of changes that mainly relate to the Supervisory Board. The main features of the company’s existing corporate governance structure, in particular the two-tier board system consisting of the Board of Management and the Supervisory Board, as well as the principle of equal employee representation on the Supervisory Board, have been maintained in Allianz SE. For further details on the differences between a German stock corporation and a European stock corporation with registered seat in Germany, please refer to our web site under www.allianz.com/allianz-se.
Board of Management
The board of management is responsible for managing Allianz SE and the Allianz Group. Corresponding to the international scope of the Allianz Group’s business, the internationally composed board of management currently consists of 11 members. The management board’s main responsibilities are the determination of the business objectives and the strategic directions, the coordination and supervision of the operating entities, as well as the implementation and supervision of an efficient risk control system. The chairman of the management board coordinates the board’s activities. As a consequence of the transformation into Allianz SE, the position of the chairman was strengthened by providing him with a statutory veto right with respect to the management board’s decisions. If he objects a decision, that decision is deemed to be not taken. On the other hand, he can not bind the board of management to any decision against the majority vote. In cases of equal votes the chairman has the casting vote. This definition of the chairman’s position is essentially in line with the already exercised practice.
The board of management reports regularly and comprehensively to the Supervisory Board on the business developments, the financial and profit situation, the planning and achievement of objectives as well as on the strategy and existing risk exposures. Certain important decisions of the management board, for example, major acquisitions or divestments of strategic stakeholdings, the conclusion of significant agreements or the opening or closure of important business segments require approval from the supervisory board.
An overview of the composition of the board of management can be found on page Board of Management of this report.
Supervisory Board
The conversion of the company into an SE has brought noteworthy changes to the supervisory board. The German law on co-determination (“Mitbestimmungsgesetz”) does no longer apply. The size and the composition of the supervisory board is now determined in line with the European framework regulations on SE’s. To a material extent, these regulations have been implemented by an agreement on employee representation at Allianz SE, which was signed on September 20, 2006 with representatives of the European Allianz employees. This agreement can be found on our web site under www.allianz.com/allianz-se.
The size of the supervisory board has been reduced from 20 to 12 members. Six of these members are appointed pursuant to a nomination by the employees. For the first time in the history of Allianz there are employee representatives from several European countries on the supervisory board. In accordance with the agreement on employee representation in Allianz SE, the seats for the six employee representatives are arranged in proportion to the total number of Allianz employees in the EU member states. The first supervisory board and the supervisory board that will be elected at the 2007 General Meeting consists of four employee representatives from Germany and one each from France and the UK. Given that the duration of nominations to the first Supervisory Board is limited by law to the next Annual General Meeting, the entire Supervisory Board will newly be elected by the Annual General Meeting of Allianz SE on May 2, 2007. As regards the election of employee representatives, the General Meeting is bound to accept the candidates proposed by the company employees.
The supervisory board oversees and advises the board of management on managing the business. Furthermore, the supervisory board is responsible for appointing the members of the board of management and the determination of their remuneration as well as the review of Allianz SE’s and Allianz Group’s annual financial statements. The supervisory board takes all decisions on a simple majority. The special decision-making provisions for the appointment of members of the board of management contained in the law on co-determination as well as the requirement to establish a mediation committee, no longer apply. In cases of tied votes, the casting vote lies with the chairman of the Supervisory Board, or, if he is not present, with the deputy chairman representing shareholder interests. Another deputy chairman is elected on recommendation of the employee representatives, but he has no casting vote.
A part of the supervisory board’s activities is delegated to the following committees of the supervisory board.
The Audit Committee is responsible for the preliminary review of the annual financial statements of the company and the group as well as the respective management reports (including the risk report) and the recommendation on profit distribution. In addition, it reviews the quarterly reports and the US annual report on Form 20-F. Finally, the audit committee is an important contact for the external auditor, whose independence it supervises.
The Standing Committee is responsible for the approval of certain transactions that need to be approved by the supervisory board. These include, in particular, certain capital measures and acquisitions or divestments. Furthermore, the standing committee is responsible for the preparation of the compliance statement pursuant to section 161 of the German Stock Corporation Act (AKtG) as well as for the periodic review of the company’s corporate governance and the efficiency of the Supervisory Board’s activities.
The Personnel Committee is responsible for personnel matters concerning members of the board of management. It prepares the nomination of members of the board of management, takes decisions concerning their contracts with the company, including the remuneration of the board of management and is involved in long-term succession planning for the board of management.
The Risk Committee, recently established by the Supervisory Board, monitors the risk strategy and the appropriateness of the company’s risk management organization as well as the related group-wide guidelines. The Risk Committee also has the responsibility for information on the general risk situation and on specific risk developments within the Allianz Group. The Risk Committee and the Audit Committee have a common responsibility to ensure that appropriate risk management and risk control mechanisms are in place and to review the specific risk related statements within Allianz SE’s and Allianz Group’s annual reports (including the management reports).
In the course of the transformation of the company into an SE, an SE works council consisting of employee representatives from up to 26 EU member states, the European Economic Area (EEA) and from Switzerland was elected to represent the European Allianz employees. The SE works council has mainly information and consultation rights regarding cross border matters within Europe affecting the Allianz Group. As such, the SE works council, in simple terms, is a company-wide representative body for the European employees with special responsibility for cross border matters within Europe affecting Allianz. Details of the SE works council are contained in the agreement on participation of employees in Allianz SE dated September 20, 2006.
General Meeting
At the general meeting, the shareholders exercise their rights. In the course of taking decisions, each share provides one vote (“one share – one vote”). To ensure the exercise of the shareholder’s rights we provide to our shareholders the possibility to follow the general meeting on the internet and vote through proxy holders. We constantly promote the use of e-mail and internet services. The general meeting elects the members of the supervisory board. As regards the election of employee representatives, the general meeting is bound to the proposals of the employees. The General Meeting decides on the approval of the actions of the Management Board and the Supervisory Board. It decides on the appropriation of net earnings, on capital measures, on the approval of company agreements, on the remuneration of the Supervisory Board, and on changes to the company’s articles of association. Each year, an ordinary general meeting takes place at which the management board and supervisory board give an account of the preceding financial year. The German Stock Corporation Law provides for calling an extraordinary general meeting in special cases.
Accounting standards and audit of annual accounts
Allianz group accounts follow International Financial Reporting Standards (IFRS). As the Allianz share is quoted on the New York Stock Exchange (NYSE), we are obliged to file an annual report on Form 20-F with the US stock exchange supervisory authority, the Securities and Exchange Commission (SEC), in accordance with the rules applicable to foreign issuers. This report is based on the IFRS group accounts and additionally contains a reconciliation statement in line with US Generally Accepted Accounting Principles (US GAAP). In compliance with special provisions applying to insurance companies (section 341k paragraph 2 of the Commercial Code) our auditors are appointed by the supervisory board and not by the general meeting. The audit of the annual accounts relates to the individual financial statements of Allianz SE as well as the consolidated financial statements under German and US law.
Further developments in Corporate Governance
Further developments in corporate governance are mainly driven by the European guidelines and initiatives. On January 20, 2007, the German rules implementing the European Transparency Directive became effective. These lead to changes in the obligations relating to publications and notifications, for example, of percentage of voting rights or for calling the general meeting as well as in the area of accounting standards. From financial year 2007 onwards the board of management has to give a specific assurance that the annual and interim financial statements as well as the corresponding consolidated financial statements and management reports impart a true picture of the actual circumstances.
The Directive on Shareholders Rights, that is intended to establish a uniform minimum standard in Europe regarding the information and the use of voting rights in general meetings and, in particular, to eliminate obstacles to the use of voting rights across borders, is currently under discussion. This issue is also important given the often insufficient presence at general meetings. In this regard the use of registered shares offers the advantage that documents can be sent directly by letter or e-mail to the shareholders registered in the share register and registration and exercise of voting rights can be done over the internet. A major obstacle in the exercise of voting rights across borders is that currently there is insufficient registration of actual shareholders in the share register or that the documents for the general meetings are not passed on or the use of the right to exercise voting rights by intermediaries. Apart from this directive, there are several discussions under way in Germany aiming to increase the low numbers of people attending general meetings.
Furthermore, the European Commission in the autumn of 2006 commissioned a study on the implementation across Europe of the principle of “One share - one vote”.
