Operations In our most important market, Allianz Lebensversicherungs-Aktiengesellschaft (or “Allianz Leben”) is the market leader for life insurance based on statutory premiums in 2006.(1) In addition to Allianz Leben, we operate through a variety of smaller operating entities in the German market.
Products and Distribution We are active both in the private and commercial markets and offer a comprehensive range of life insurance and related products on both an individual and group basis. The main classes of coverage offered include annuity, endowment and term insurance. In our commercial lines, we offer group life insurance and provide companies with services and solutions in connection with pension schemes and defined contribution plans. Allianz Leben distributes its products mainly through a network of full-time tied agents, while distribution through Dresdner Bank branches and brokers is increasing.
Outlook We are currently reorganizing our major German operating entities. The new structure is designed to further develop our leading position in the German insurance market by a joint presence, thus allowing us to provide an enhanced customer orientation and improved service, while at the same time cutting costs in the long-term through reduced complexity.(2) The proposed acquisition of the minority interest in Allianz Leben is part of our strategy to establish our German insurance business under one entity, Allianz Deutschland AG.(3) This strategy is also designed to simplify our corporate governance structure.
Germany Health
Operations Through Allianz Private Krankenversicherungs-Aktiengesellschaft (or “Allianz Private Kranken”), we are the third-largest private health insurer in Germany based on statutory premiums in 2005(1) with more than two million customers.
Products and Distribution Allianz Private Kranken provides a wide range of health insurance products, including full private healthcare coverage for salaried employees and the self-employed, supplementary insurance for individuals insured under statutory health insurance plans, supplementary care insurance as well as foreign travel medical insurance. Allianz Private Kranken distributes its products mainly through a network of full-time tied agents.
Outlook The ongoing discussions about reforming the German statutory health insurance system causes uncertainty among customers. The demographic change combined with medical progress will cause rising expenses within the statutory health insurance system. Furthermore, benefit cuts will most likely occur. Private health insurers will benefit from this development in the long-run.(2)
France
Operations In France, through the companies of AGF Group, we are the eighth-largest life insurance provider based on statutory premiums in 2005.(4)
Products and Distribution We provide a broad range of life and health insurance products, including short-term investment and savings products. An important portion of our life statutory premiums in France is generated through the sale of unit-linked policies.
Outlook Life insurance is one of the fastest growing businesses of the AGF Group and we expect this strong growth to continue.
The proposed acquisition of the minority interest in AGF is designed to allow us to reduce the complexity of our organizational and management structures, permitting us to further implement Allianz Group-wide programs and initiatives, as well as strengthen our market position in France.(5)
Italy
Operations We maintain a strong position in the Italian life insurance market through RAS Group, Lloyd Adriatico S.p.A. and Allianz Subalpina S.p.A. Jointly, on the basis of statutory premiums in 2005, our Italian subsidiaries ranked second.(6)
Products and Distribution In Italy we offer individual life policies, primarily endowment policies, but also annuities and unit-linked products in addition to other products. Consistent with general trends in the Italian market, our business includes an increasing number of unit-linked policies, in which policyholders participate directly in the performance of policy-related investments. In 2006, two-thirds of our combined statutory premiums in Italy comprised unit-linked products. A large percentage of our contracts are marketed through our bancassurance channel.
Outlook RAS S.p.A., Lloyd Adriatico S.p.A. and Allianz Subalpina S.p.A. have launched the project to integrate the Allianz Group’s operations in Italy. The integration is designed to allow Allianz to serve the Italian market, its third largest based on statutory premiums in 2006, with a broad range of insurance and financial products and with more effective customer service. We are also implementing this integration to seek to benefit from the announced deregulation of insurance distribution in Italy.
Switzerland
Operations We conduct our life/health operations in Switzerland primarily through Allianz Suisse Lebensversicherungs-Gesellschaft and Phénix Vie. In aggregate, these operating entities represent the sixth largest life insurance provider in Switzerland based on statutory premiums in 2005.(7)
Products and Distribution We market a wide range of individual and group life insurance products, including retirement, death and disability products.
Outlook Given the relatively higher market share we hold in our property-casualty business in Switzerland, we believe there is potential for growth in our life/health business through cross-selling between our segments.
Spain
Operations We conduct our life/health operations in Spain through Allianz Compañía de Seguros y Reaseguros S.A. and through Eurovida, our joint venture with Banco Popular.
Products and Distribution Our Spanish insurance subsidiaries offer a broad product portfolio, consisting primarily of traditional life insurance, annuities, pension and unit-linked products, which are mainly distributed by agents and through our bank channel.
Outlook In 2006, income tax reforms were approved in Spain and became effective as of January 2007. Under the new tax law, most life insurance policies, except annuities, lose their tax privileges. It is still too early to finally assess the long-term impact of this income tax reform on our business. Nevertheless, we have analyzed our existing product range resulting in the development of new products and adaptation of the existing ones, in order to benefit through further profitable growth.
Western and Southern Europe
Operations We conduct life/health insurance operations in most of the other Western and Southern European countries, of which, based on statutory premiums 2006, the largest are in Belgium and the Netherlands.
Products and Distribution AGF Belgium Insurance S.A. markets a wide range of life insurance products mainly through brokers. In the Netherlands, we also offer a broad range of life insurance products and have a strong position in the unit-linked market.
Outlook The larger life insurance markets forming our Western and Southern European region are mature and provide limited growth opportunities.
New Europe
Operations We are present in all key markets in this region and are one of the top four international life insurance providers, based on statutory premiums in 2005.(8)
Products and Distribution In 2006, we continued to expand our product range and sales capacity throughout New Europe. We follow a multi-channel distribution approach and sell both unit-linked and traditional life insurance products. In the fourth quarter of 2006, our companies in the region launched a limited-edition index-linked life insurance product across six markets. In 2006, our Hungarian insurer, Allianz Hungária Biztositó Rt., opened its own retail bank and has become an integrated financial services provider.
Outlook Central and Eastern Europe represents one of the fastest growing life insurance markets of the world, as current penetration levels are low. In anticipation of the expected growth, we continuously strengthen our sales capacity and product range.
United States
Operations In the United States, we are represented by Allianz Life Insurance Company of North America (or “Allianz Life United States”) which is, as with our property-casualty business in the United States, also organized under the umbrella of Allianz of America Inc. In August 2006, Allianz Life United States sold its health insurance business to HCC Insurance Holdings Inc.
Products and Distribution Allianz Life United States is the market leader in fixed-indexed annuities, with approximately one-third of the market share based on statutory premiums in 2006. On the same basis, Allianz Life United States holds a 10% share of the overall fixed annuity market and also has a 2% share of the large variable annuity market.(9) Its smaller but growing product lines include individual life and long-term care insurance.
Outlook Allianz Life United States is taking measures to grow its annuity products business by expanding distribution with broker-dealers, banks and wire-houses, designing channel-specific products, and also reinforcing product development of variable products and fixed-indexed products. For example, since November 2006, Allianz Life United States has entered into broker-dealer marketing agreements, having signed six in 2006 adding more than 10,000 agents. In addition, we are confident that our reorganization measures previously described will also help us to strengthen our market position.(10)
Asia-Pacific
Operations In Asia-Pacific, the majority of our operations are conducted in South Korea through Allianz Life Insurance Co. Ltd. (or “Allianz Life Korea”). Allianz Life Korea is the fifth-largest life insurance company in South Korea based on statutory premiums in 2005.(11) We are also represented in Taiwan by Allianz President Life Insurance Co. Ltd. (or “Allianz Life Taiwan”) and maintain operations in Malaysia, Indonesia, as well as other Asia-Pacific countries, including China, Thailand and India.
Products and Distribution Our South Korean operations market a wide range of life insurance products. Due to the very low interest rate environment and a favorable equity market in South Korea, Allianz Life Korea has increasingly shifted its focus to variable life products. Allianz Life Taiwan sells term life, whole life and endowment products. In addition, Allianz Life Taiwan increasingly offers investment-linked products.
Outlook We are seeking to expand in all of our selected Asia-Pacific markets, through internal growth and selected acquisitions. For example, in January 2007, we agreed with our long-term joint venture partner in Taiwan, the Uni-President Group, to acquire Uni-President’s shareholding in our joint venture Allianz Life Taiwan.
China is a strategic market for the Allianz Group and our partnership with Industrial and Commercial Bank of China Ltd. emphasizes our long-term commitment to the market and also offers a platform for our strategic expansion in China.
Additionally, Bajaj Allianz Life Insurance Company Ltd. (or “Allianz Life India”), in which we held an interest of 26.0% at December 31, 2006, has demonstrated strong growth in the last several years, becoming a leading private insurer in India, which we expect to continue.
South America
Operations Our largest life operation in this region is in Colombia. We also operate a small life portfolio in Brazil.
Products and Distribution Our life insurance activities in Colombia include traditional group life insurance as well as investment-oriented products like savings, pensions and annuity products.
Outlook We estimate that growth rates in the South American life insurance market will remain attractive over the coming years. Accordingly, we seek to expand our presence in life insurance beyond our Colombian subsidiary.
(1) Source: German Insurance Association, GDV. (2) Please see Important Group Organizational Changes for further information. (3) Please see “Executive Summary and Outlook – Outlook – Significant Expected Investments” and “Allianz Group Success Factors – Important Group Organizational Changes – Reorganization of German Insurance Operations” for further information. (4) Source: French Insurers Association, FFSA. (5) Please see “Executive Summary and Outlook – Outlook – Significant Expected Investments” for further information. (6) Source: Italian Insurers Association, ANIA. (7) Source: Statistics of the Swiss Federal Bureau of Private Insurers. (8) Source: Own estimate based on published annual reports. (9) Source: LIMRA. (10) Please see “Important Group Organizational Changes – Reorganization in the United States” for further information. (11) Source: South Korean Life Insurance Association.
