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Allianz Annual Report 2012

Annual Report 2012    Allianz Group design. Moreover, we will keep focusing our investments on businesses with strong cash returns or lower tail risks. Expected dividend development As we continuously strive to protect our investors’ capital and provide attractive returns and dividends, we aim to strike a balance between payout, solvency and sustainability when determining our dividend proposal. In a normal earnings environment we consider a payout ratio of 40% of net income attributable to shareholders to allow us to retain the capital needed to support our growth and provide an attractive dividend. This policy was reflected in our consis- tent payout ratio of 40 % between 2008 and 2010. In 2011, given the profound effects of the heavy turmoil in the finan- cial markets and the severe impact of natural catastrophes on our financial results, striking the right balance was more difficult. Our effort to maintain a stable dividend and attractive return for shareholders resulted in a payout ratio well above 40 %. Overall, our business exhibited a very strong performance in 2012, which resulted in a significant increase in our net earnings. This leaves us in a very healthy capital position and allows us to return to our earnings-based dividend policy. We will propose at the Annual General Meeting ­to maintain our dividend at €  4.50 per share, which again re- flects a payout ratio of 40 %. Going forward, provided that our outlook assumptions hold, we will continue to target a payout ratio of 40 %, based on net income attributable to shareholders. Management’s assessment of expected earnings for 2014 Based on current estimates, we expect our 2014 operating profit to improve compared to 2013 and to be driven again by positive contributions from all operating segments. Consistent with our disclosure practice in the past and given the susceptibility of our non-operating results to ­adverse capital market developments, we do not provide specific predictions concerning our net income. However, since our outlook presumes no major disruptions in the capital markets, we would nevertheless expect a stable or slightly increasing net income for 2014. Asalways,naturalcatastrophes,aswellasfactorsmentioned in our cautionary note regarding forward-looking state- ments, may adversely affect the results of our operations. Management’s views on future challenges and opportunities As a global financial services provider, our business is heav- ily impacted by a variety of issues of global and long-term scope. We place a high priority on monitoring, analyzing and responding to the challenges and opportunities we are presented with in order to ensure the company’s sustain- able and profitable growth. It is essential that we maintain and strengthen the trust our customers, employees, investors and the public place in us. That is why our long-term business strategy is based on an in-depth understanding of the risks and opportunities fac- ing us not only today but also in the future. By consistently following our Group strategy, we are confident that the Allianz Group is in a privileged position to build on this trust and deal with the myriad challenges and opportunities ahead. The future key challenges and opportunities, as we see them, are outlined below. Macroeconomic environment and stability of financial markets Persistentlylowinterestrateswillpresentfurtherchallenges to the life insurance sector, while ongoing economic uncer- tainties – primarily around the sovereign debt crisis in the Eurozone and the lack of strong growth in developed mar- kets–willcontinuetoputpressureontheinsuranceaswell as the asset management industries. Although these factors are likely to have a lasting impact on ­Allianz and other financial services providers, we believe we are well prepared to meet the potential challenges. Just as we did in 2012, we will continue to redesign and reprice our products in response to the changing economic envi- ronment, relentlessly pursue strong underwriting results and strive for operational excellence across all business segments. We will maintain our focus on asset/liability management, while further executing the derisking pro- grams that we have already started and continuously look for new investment opportunities beyond traditional asset classes. 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 161