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Allianz Annual Report 2012

Annual Report 2012    Allianz Group 125 Earnings summary Economic and industry environment in 2012 The world economy lost more steam in 2012 and continued to present challenges for the insurance industry. Restrained U.S. growth and a shrinking European economy accompanied by the European sovereign debt and banking crisis, as well as high unemployment in many countries impacted insurance demand. While equity markets re- bounded strongly in the second half of the year and selected corporate and sovereign credit spreads narrowed, persis- tently low interest rates and financial market volatility con- tinued to put pressure on the insurance industry’s invest- ment returns. Compared to 2011, claims from natural catas­trophes declined significantly in 2012. In the property-casualty insurance industry, market condi- tions recovered slightly and the positive pricing momen- tum continued into 2012. Premium growth was largely driven by rate increases, whereas volumes declined – partic­ ularly in recession-hit countries in Europe, such as Spain and Italy. Claims from natural catastrophes remained signif­ icantly lower than in the previous year, which was burdened by severe losses. However, claims resulting from Storm Sandy and the drought in the United States weighed heavily onindustryprofitability,whilethoseinEuropeandemerging markets were relatively benign. In the life insurance industry, global premium growth re- mainedsluggish.ApartfromsomeEuropeanmarkets–such as France, Italy and Spain – which struggled the most under the current economic conditions, premium growth in ad- vanced markets like Germany was almost flat. Declining annuity sales as a result of shrinking return guarantees in the U.S. market were partly offset by the recovery of the pre- mium growth in emerging markets in particular in China and Latin America. The persistent low-yield environment impacted customer demand for long-term insurance ­saving products. In the asset management industry most asset classes saw a positive flow development in the majority of countries, with money market funds in the United States and equity mutualfundsinEuropeexperiencingredemptions.Growth in the industry as a whole picked up moderately and fixed income absorbed the major bulk of the inflows. Management’s assessment of 2012 results We recorded growth in total revenues of 2.7 % to € 106.4  bn, despite the low interest rate environment which weighed on premium growth for our life business. On an internal basis, we increased revenues by 0.5 %. Our Property-Casualty and Asset Management segments generated strong reve- nue growth, while premiums in the Life/Health business decreased moderately. Solid growth in all our operating segments resulted in a strong increase of 20.8 % to € 9,501  mn in our operating profit. The excellent result in our Asset Management segment was driven by the increase in assets under management and higherperformancefees.OurLife/Healthbusinessbenefited from an improved investment result while our Property- Casualty segment recorded a higher underwriting result – supported by lower natural catastrophe claims. The operating result from the Corporate and Other segment deteriorated mainly due to a lower net fee and commission result. Overall, we significantly exceeded our original upper operating profit target of € 8.2  bn plus € 0.5  bn. Netincomenearlydoubledto€ 5,491  mn,drivenbythestrong operating performance in all our operating segments as well as a higher non-operating result. In 2012, we benefited from an easing European sovereign debt crises in contrast to the previous year when both our operating as well as non-operating investment results were heavily impacted by the impairments on Greek sovereign bonds and financial sector assets. Net income attributable to shareholders and non-controlling interests was € 5,169  mn (2011: € 2,545  mn) and € 322 mn (2011: € 259 mn), respectively. Our capitalization remained strong and shareholders’ equity grew € 8.6  bn to € 53.6  bn compared to 31 December 2011. Our conglomerate solvency further strengthened by 18 per- centage points to 197 %. C Group Management Report Management Discussion and Analysis 122 Business Environment 124 Executive Summary of 2012 Results 132 Property-Casualty Insurance Operations 140 Life/Health Insurance Operations 148 Asset Management 152 Corporate and Other 154 Outlook 2013 and 2014 166 Balance Sheet Review 175 Liquidity and Funding Resources 182 Reconciliations