Obbligazione AllianZ 1.301% ( DE000A2YPFA1 ) in EUR

AllianZ

100 EUR ▲

Germania

DE000A2YPFA1 ( in EUR )

1.301% per anno ( pagato 1 volta l'anno)

25/09/2049

Prospetto opuscolo dell'obbligazione Allianz DE000A2YPFA1 en EUR 1.301%, scadenza 25/09/2049

100 000 EUR

1 000 000 000 EUR

25/09/2025 ( In 85 giorni )

Allianz è un gruppo assicurativo e di gestione degli investimenti tedesco, tra i maggiori al mondo, operante in oltre 70 paesi.

The Obbligazione issued by AllianZ ( Germany ) , in EUR, with the ISIN code DE000A2YPFA1, pays a coupon of 1.301% per year.
The coupons are paid 1 time per year and the Obbligazione maturity is 25/09/2049

Prospectus dated 25 September 2019

ALLIANZ SE
(incorporated as a European Company (Societas Europaea SE) in Munich, Germany)
EUR 1,000,000,000 Subordinated Fixed to Floating Rate Notes with
scheduled maturity in 2049
Issue Price 100.00 per cent.
Allianz SE (the "Issuer"), will issue on 25 September 2019 (the "Issue Date") EUR 1,000,000,000 subordinated fixed to floating rate
notes with a scheduled maturity in 2049 in a denomination of EUR 100,000 per Note (the "Notes") as Series 85 Tranche 1 under the
25,000,000,000 Debt Issuance Programme of Allianz SE, Allianz Finance II B.V. and Allianz Finance III B.V. guaranteed by Allianz
SE (the "Programme").
The Notes will be governed by the laws of the Federal Republic of Germany ("Germany").
The Notes will bear interest from and including the Issue Date to but excluding 25 September 2029 (the "First Call Date") at a rate of
1.301 per cent. per annum, scheduled to be paid annually in arrear on 25 September in each year, commencing on 25 September
2020. Thereafter, unless previously redeemed, the Notes will bear interest at a rate of 2.350 per cent. per annum above the 3-
months EURIBOR being the Euro-zone inter-bank offered rate for three-month Euro deposits, scheduled to be paid quarterly in
arrear on 25 March, 25 June, 25 September and 25 December in each year (each a "Floating Interest Payment Date"),
commencing on 25 December 2029. Under certain circumstances described in § 3.1 (d) of the Terms and Conditions of the Notes
(the "Terms and Conditions") certain benchmark replacement provision will apply in case the 3-months EURIBOR (or a successor
benchmark) used as a reference for the calculation of interest amounts payable under the Notes were to be discontinued or
otherwise unavailable.
Under certain circumstances described in § 3.2 of the Terms and Conditions, interest payments on the Notes may be deferred at the
option of the Issuer or will be required to be deferred.
The Notes are scheduled to be redeemed at the Redemption Amount (as defined in the Terms and Conditions) on the Floating
Interest Rate Payment Date falling on or nearest to 25 September 2049, provided that on such date the Conditions to Redemption
and Repurchase (as defined in the Terms and Conditions) are fulfilled. If this is not the case, the Notes will be redeemed only in the
circumstances described in the definition of the term Final Maturity Date (as defined in the Terms and Conditions) on the Final
Maturity Date. Under certain circumstances described in § 4 of the Terms and Conditions, the Notes may be subject to early
redemption. This includes that under certain circumstances the Issuer may call the Notes for early redemption (in whole but not in
part) for the first time with effect as of the First Call Date and on each Floating Interest Payment Date thereafter.
This prospectus in respect of the Notes (the "Prospectus") constitutes a prospectus within the meaning of Article 6.3 of Regulation
(EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities
are offered to the public or admitted to trading on a regulated market, and repealing Directive 2003/71/EC (as amended, the
"Prospectus Regulation"). This Prospectus will be published in electronic form together with all documents incorporated by
reference on the website of the Luxembourg Stock Exchange (www.bourse.lu).
This Prospectus has been approved by the Commission de Surveillance du Secteur Financier, in Luxembourg ("CSSF") as
competent authority under the Prospectus Regulation. The CSSF only approves this Prospectus as meeting the standards of
completeness, comprehensibility and consistency imposed by the Prospectus Regulation. Such approval should neither be
considered as an endorsement of the Issuer that is subject of this Prospectus nor of the quality of the securities that are the subject
of this Prospectus. Investors should make their own assessment as to the suitability of investing in the securities. The Issuer may
request CSSF to provide competent authorities in other host Member States within the European Economic Area ("EEA") with a
certificate of approval attesting that the Prospectus has been drawn up in accordance with the Prospectus Regulation. The CSSF
gives no undertaking as to the economic and financial soundness of the transaction or the quality or solvency of the Issuer.
This Prospectus will be valid until 25 September 2020 and may in this period be used for admission of the Notes to trading on a
regulated market. In case of a significant new factor, material mistake or material inaccuracy relating to the information included in
this Prospectus which may affect the assessment of the Notes, the Issuer will prepare and publish a supplement to the Prospectus
without undue delay in accordance with Article 23 of the Prospectus Regulation. The obligation of the Issuer to supplement this
Prospectus will cease to apply once the Notes have been admitted to trading on the regulated market of the Luxembourg Stock
Exchange and at the latest upon expiry of the validity period of this Prospectus.
Application has been made to the Luxembourg Stock Exchange for the Notes to be listed on the official list of the Luxembourg Stock

Exchange (the "Official List") and to be admitted to trading on the Luxembourg Stock Exchange's regulated market "Bourse de
Luxembourg", appearing on the list of regulated markets issued by the European Commission. The Luxembourg Stock Exchange's
regulated market is a regulated market for the purposes of the Directive 2014/65/EU of the European Parliament and of the Council
of 15 May 2014 on markets in financial instruments (as amended, "MiFID II").
The Notes will initially be represented by a temporary global note in bearer form (the "Temporary Global Note"). Interests in a
Temporary Global Note will be exchangeable, in whole or in part, for interest in a permanent global note (the "Permanent Global
Note") on or after the date 40 days after the later of the commencement of the offering and the Issue Date (the "Exchange Date"),
upon certification as to non-U.S. beneficial ownership. The Global Notes will be deposited prior to the Issue Date with Clearstream
Banking AG, Frankfurt am Main ("Clearstream Frankfurt").
This Prospectus does not constitute an offer to sell, or the solicitation of an offer to buy, the Notes in any jurisdiction where such offer
or solicitation is unlawful.
The Notes have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act")
and subject to certain exceptions, the Notes may not be offered or sold within the United States or to, or for the account or
benefit of, U.S. persons.
The Notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made
available to any retail investor in the EEA. For these purposes, a retail investor means a person who is one (or more) of: (i) a retail
client as defined in point (11) of Article 4(1) of MiFID II; or (ii) a customer within the meaning of Directive (EU) 2016/97 (as amended,
the "Insurance Distribution Directive"), where that customer would not qualify as a professional client as defined in point (10) of
Article 4(1) of MiFID II; or (iii) not a qualified investor as defined in the Prospectus Regulation. Consequently, no key information
document required by Regulation (EU) No 1286/2014 (as amended, the "PRIIPs Regulation") for offering or selling the Notes or
otherwise making them available to retail investors in the EEA has been prepared and therefore offering or selling the Notes or
otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPs Regulation.
Following the First Call Date, amounts payable under the Notes are calculated by reference to the 3-months EURIBOR
("EURIBOR"), which is provided by the European Money Market Institute ("EMMI"). As at the date of this Prospectus, EMMI appears
on the register of administrators and benchmarks established and maintained by the European Securities and Markets Authority
("ESMA") pursuant to Article 36 of the Benchmark Regulation (Regulation (EU) 2016/1011) (the "Benchmark Regulation").

Joint Lead Managers
BofA MERRILL LYNCH
BNP PARIBAS
CITIGROUP
COMMERZBANK
DEUTSCHE BANK

Co-Lead Managers
BAYERNLB
CRÉDIT AGRICOLE CIB
HSBC
HELABA
SMBC NIKKO
UNICREDIT BANK

RESPONSIBILITY STATEMENT
The Issuer with its registered office in Germany accepts responsibility for the information contained
in this Prospectus and hereby declares that the information contained in this Prospectus is, to the
best of its knowledge, in accordance with the facts and contains no omission likely to affect its
import.
The Issuer further confirms that (i) this Prospectus contains al relevant information with respect to
the Issuer (also referred to as "Allianz SE" herein) and its consolidated subsidiaries taken as a
whole (the "Allianz Group") and to the Notes which is material in the context of the issue and the
offering of the Notes, including al relevant information which, according to the particular nature of
the Issuer and of the Notes is necessary to enable investors and their investment advisers to make
an informed assessment of the assets and liabilities, financial position, profits and losses, and
prospects of the Issuer and the Al ianz Group and of the rights attached to the Notes; (i ) the
statements contained in this Prospectus relating to the Issuer, the Al ianz Group and the Notes are
in every material respect true and accurate and not misleading; (i i) there are no other facts in
relation to the Issuer, the Al ianz Group or the Notes the omission of which would, in the context of
the issue and offering of the Notes, make any statement in the Prospectus misleading in any
material respect; and (iv) reasonable enquiries have been made by the Issuer to ascertain such
facts and to verify the accuracy of all such information and statements. Al references to "we," "us,"
or "our" in this Prospectus are to Al ianz Group.
NOTICE
No person is authorised to give any information or to make any representation other than those
contained in this Prospectus and, if given or made, such information or representation must not be
relied upon as having been authorised by or on behalf of the Issuer or BNP Paribas, Citigroup
Global Markets Limited, Commerzbank Aktiengesellschaft, Deutsche Bank AG, London Branch
and Merril Lynch International (together, the "Joint Lead Managers") and Bayerische
Landesbank, Crédit Agricole Corporate and Investment Bank, HSBC Bank plc, Landesbank
Hessen-Thüringen Girozentrale, SMBC Nikko Capital Markets Europe GmbH and UniCredit Bank
AG (the "Co-Lead Managers" and together with the Joint Lead Managers, the "Managers").
This Prospectus should be read and understood in conjunction with any supplement hereto and
with all documents incorporated herein or therein by reference.
The legal y binding language of this Prospectus is English. Any part of the Prospectus in German
language constitutes a translation, except for the Terms and Conditions in respect of which
German is the legal y binding language.
In this Prospectus, all references to "", "EUR" or "Euro" are to the currency introduced at the start
of the third stage of the European economic and monetary union, and as defined in Article 2 of
Council Regulation (EC) No. 974/98 of 3 May 1998 on the introduction of the Euro, as amended.
References to "US$", "USD" and "U.S. dollars" are to the currency of the United States of
America. References to "bil ions" are to thousands of mil ions.
Each investor contemplating purchasing any Notes should make its own independent investigation
of the financial condition and affairs, and its own appraisal of the creditworthiness, of the Issuer.
This Prospectus does not constitute an offer of Notes or an invitation by or on behalf of the Issuer
or the Managers to purchase any Notes. Neither this Prospectus nor any other information
supplied in connection with the Notes should be considered as a recommendation by the Issuer or
the Managers to a recipient hereof and thereof that such recipient should purchase any Notes.
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This Prospectus reflects the status as at its date. The offering, sale and delivery of the Notes and
the distribution of the Prospectus may not be taken as an implication that the information
contained herein is accurate and complete subsequent to the date hereof or that there has been
no adverse change in the financial condition of the Issuer since the date hereof.
To the extent permitted by the laws of any relevant jurisdiction, neither any Manager nor any of its
respective affiliates nor any other person mentioned in the Prospectus, except for the Issuer,
accepts responsibility for the accuracy and completeness of the information contained in this
Prospectus or any other documents incorporated by reference and accordingly, and to the extent
permitted by the laws of any relevant jurisdiction, none of these persons accept any responsibility
for the accuracy and completeness of the information contained in any of these documents. The
Managers have not independently verified any such information and accept no responsibility for
the accuracy thereof.
This Prospectus does not constitute, and may not be used for the purposes of, an offer or
solicitation by anyone in any jurisdiction in which such offer or solicitation is not authorized or to
any person to whom it is unlawful to make such of er or solicitation.
The distribution of this Prospectus and the offering, sale and delivery of the Notes in certain
jurisdictions may be restricted by law. Persons into whose possession this Prospectus comes are
required to inform themselves about and to observe any such restrictions. For a description of the
restrictions see the section "Subscription and Sale of the Notes Sel ing Restrictions" below. In
particular, the Notes have not been and wil not be registered under the Securities Act and are
subject to United States tax law requirements. Subject to certain exceptions, the Notes may not be
offered, sold or delivered within the United States of America or to U.S. persons as defined in
Regulation S under the Securities Act ("Regulation S").
The Notes issued pursuant to this Prospectus are complex financial instruments and are not a
suitable or appropriate investment for all investors. In some jurisdictions, regulatory authorities
have adopted or published laws, regulations or guidance with respect to the offer or sale of
securities such as the Notes to retail investors.
For the avoidance of doubt the content of any website referred to in this Prospectus does not form
part of this Prospectus and the information on such websites has not been scrutinised or approved
by the CSSF as competent authority under the Prospectus Regulation.
MIFID II PRODUCT GOVERNANCE / TARGET MARKET: PROFESSIONAL INVESTORS AND
ECPS ONLY
Solely for the purposes of each manufacturer's product approval process, the target market
assessment in respect of the Notes has led to the conclusion that: (i) the target market for the
Notes is eligible counterparties and professional clients only, each as defined in MiFID II; and (i )
all channels for distribution of the Notes to eligible counterparties and professional clients are
appropriate. Any person subsequently offering, selling or recommending the Notes (a
"distributor") should take into consideration the manufacturers' target market assessment;
however, a distributor subject to MiFID II is responsible for undertaking its own target market
assessment in respect of the Notes (by either adopting or refining the manufacturers' target market
assessment) and determining appropriate distribution channels.
PRIIPS REGULATION / PROSPECTUS REGULATION / PROHIBITION OF SALES TO EEA
RETAIL INVESTORS
The Notes are not intended to be offered, sold or otherwise made available to and should not be
offered, sold or otherwise made available to any retail investor in the EEA. For these purposes, a
4

retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of
Article 4(1) of MiFID II; or (i ) a customer within the meaning of the Insurance Distribution Directive,
where that customer would not qualify as a professional client as defined in point (10) of Article
4(1) of MiFID II. Consequently, no key information document required by the PRIIPs Regulation for
offering or selling the Notes or otherwise making them available to retail investors in the EEA has
been prepared and therefore offering or selling the Notes or otherwise making them available to
any retail investor in the EEA may be unlawful under the PRIIPs Regulation.
Where acting as agent on behalf of a disclosed or undisclosed client when purchasing, or making
or accepting an offer to purchase, any Notes (or any beneficial interests therein) from the Issuer
and/or the Managers the foregoing representations, warranties, agreements and undertakings wil
be given by and be binding upon both the agent and its underlying client.
BENCHMARK REGULATION: STATEMENT ON REGISTRATION OF BENCHMARK
ADMINISTRATOR
Following the First Call Date, amounts payable under the Notes are calculated by reference to the
EURIBOR, which is provided by the EMMI. As at the date of this Prospectus, EMMI appears on
the register of administrators and benchmarks established and maintained by ESMA pursuant to
Article 36 of the Benchmark Regulation.
STABILISATION
IN
CONNECTION
WITH
THE
ISSUE
OF
THE
NOTES,
COMMERZBANK
AKTIENGESELLSCHAFT (THE "STABILISING MANAGER") (OR ANY PERSON ACTING ON
BEHALF OF ANY STABILISING MANAGER) MAY OVER-ALLOT NOTES OR EFFECT
TRANSACTIONS WITH A VIEW TO SUPPORTING THE MARKET PRICE OF THE NOTES AT A
LEVEL HIGHER THAN THAT WHICH MIGHT OTHERWISE PREVAIL. HOWEVER,
STABILISATION MAY NOT NECESSARILY OCCUR. ANY STABILISATION ACTION MAY BEGIN
ON OR AFTER THE DATE ON WHICH ADEQUATE PUBLIC DISCLOSURE OF THE TERMS OF
THE OFFER OF THE NOTES IS MADE AND, IF BEGUN, MAY CEASE AT ANY TIME, BUT IT
MUST END NO LATER THAN THE EARLIER OF 30 DAYS AFTER THE ISSUE DATE OF THE
NOTES AND 60 DAYS AFTER THE DATE OF THE ALLOTMENT OF THE NOTES. ANY
STABILISATION ACTION OR OVER-ALLOTMENT MUST BE CONDUCTED BY THE
STABILISING MANAGER (OR ANY PERSON ACTING ON BEHALF OF THE STABILISING
MANAGER) IN ACCORDANCE WITH ALL APPLICABLE LAWS AND RULES.
FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements, including statements using the
words "believes", "anticipates", "intends", "expects" or other similar terms. This applies in particular
to statements under the caption "Description of Al ianz SE and Al ianz Group" and statements
elsewhere in this Prospectus relating to, among other things, the future financial performance,
plans and expectations regarding developments in the business of Al ianz SE. These forward-
looking statements are subject to a number of risks, uncertainties, assumptions and other factors
that may cause the actual results, including the financial position and profitability of Al ianz SE, to
be material y different from or worse than those expressed or implied by these forward-looking
statements. Neither the Issuer nor the Managers do assume any obligation to update such
forward-looking statements and to adapt them to future events or developments.
ALTERNATIVE PERFORMANCE MEASURES
This Prospectus contains certain alternative performance measures ("APMs") which are not
recognised financial measures under the International Financial Reporting Standards as issued by
5

International Accounting Standards Board and as adopted by the European Union ("IFRS"). Such
APMs must be considered only in addition to, and not as a substitute for or superior to, financial
information prepared in accordance with IFRS included elsewhere in the Prospectus. Investors are
cautioned not to place undue reliance on these APMs and are also advised to review them in
conjunction with the financial statements of the Issuer and related notes. For further information,
please see " Description of Al ianz SE and Al ianz Group - Alternative Performance Measures".

6

TABLE OF CONTENTS

Page
RISK FACTORS ................................................................................................................................ 8
TERMS AND CONDITIONS OF THE NOTES ................................................................................ 26
DESCRIPTION OF ALLIANZ SE AND ALLIANZ GROUP .............................................................. 69
TAXATION ..................................................................................................................................... 102
SUBSCRIPTION AND SALE ......................................................................................................... 103
GENERAL INFORMATION ........................................................................................................... 105
DOCUMENTS INCORPORATED BY REFERENCE .................................................................... 108
7

RISK FACTORS

Al ianz SE and the Al ianz Group is exposed to a variety of risks through its core insurance and
asset management activities, including market, credit, underwriting, business, operational,
strategic, liquidity, and reputational risks. The following is a description of the material risk factors
in relation to Al ianz SE as Issuer and the Al ianz Group in relation to the Notes. The realisation of
any of the risks described below may affect the ability of Al ianz SE to fulfil its obligations as Issuer
and/or may adversely affect the market price of Notes and can lead to losses for the holders of the
Notes (the "Noteholders"). As a result, investors are exposed to the risk of losing their investment
in whole or in part. Additional risks not included in the risk factors below, e.g., because they are
now immaterial or not currently known to Al ianz SE or Al ianz Group, may result in material risks in
the future. Investors should be aware that the Issuer as the ultimate parent of the Al ianz Group
may face the same risks as the Al ianz Group.
Words and expressions defined in the Terms and Conditions shal have the same meanings in this
section.
Risk factors relating to Al ianz SE / Al ianz Group
I. Market Risks
The market risks of the Al ianz Group include credit spread risk, equity risk, interest rate risk, real
estate risk, currency risk and inflation risk. In our assessment, the credit spread risk for the Al ianz
Group is the most material risk in the category of market risks.
The Al ianz Group is Exposed to Credit Spread Risk.
The Al ianz Group holds a significant portfolio of fixed-income assets such as bonds. The value of
this portfolio is changing in case of moving credit spreads. It may lose value if credit spreads
widen. This may happen in case the perception of risk in the market changes, i.e. investors
demand higher compensation for taking on risks, which can happen for several reasons for
example following a political crisis, an economic recession or changed monetary policy.
We consider this risk to be high.
The Al ianz Group is Exposed to Equity Risk.
The Al ianz Group holds a significant equity portfolio. This portfolio is subject to volatility in equity
markets affecting the market value and liquidity of these holdings. Investments are reviewed
regularly for impairment, with write-downs to fair value charged to income if there is objective
evidence that the cost may not be recovered. The Al ianz Group holds interests in a number of
financial institutions as part of its portfolios, which are particularly exposed to uncertain market
conditions affecting the financial services sector generally.
In prior years the Al ianz Group has incurred significant impairments on the value of the securities
and other financial assets that it holds and there is the risk that the Al ianz Group wil recognize
significant impairments in the future again, which may have an adverse effect on the Al ianz
Group's earnings and on the Al ianz Group's business and its financial condition.
We consider this risk to be high.
The Al ianz Group is Exposed to Alternative Inverstment Portfolio Risk.
The Al ianz Group holds a significant alternative investments portfolio. Alternative investments
include real estate, private equity, renewable energy and infrastructure investments. These
investments are subject to volatility in equity and alternative investment markets af ecting the
8

market value and liquidity of these holdings. Investments are reviewed regularly for impairment,
with write-downs to fair value charged to income if there is objective evidence that the cost may
not be recovered.
In prior years the Al ianz Group has incurred significant impairments on the value of the securities
and other financial assets that it holds and there is the risk that the Al ianz Group wil recognize
significant impairments in the future again, which may have an adverse effect on the Al ianz
Group's earnings and on the Al ianz Group's business and its financial condition.
We consider this risk to be low.
The Al ianz Group is Exposed to Interest Rate Risk.
Changes in prevailing interest rates (including changes in the dif erence between the levels of
prevailing short- and long-term rates, or enduring negative rates) may adversely affect the Al ianz
Group's insurance, asset management, corporate and other results.
An increase in interest rates could substantial y decrease the value of the Al ianz Group's fixed-
income portfolio, and any unexpected change in interest rates could materially adversely affect the
Al ianz Group's bond and interest rate derivative positions.
Assets and liabilities from an Al ianz Group perspective are not necessarily matched in terms of
interest rate sensitivities and therefore any significant change in interest rates could materially
adversely affect the Al ianz Group's bond and interest rate derivative positions and the fair value of
liabilities. A change in prevailing interest rates may accordingly have a negative impact on the
capitalization of the Al ianz Group.
Results of the Al ianz Group's asset management business may also be affected by movements in
interest rates, as management fees are general y based on the value of assets under
management, which fluctuate with changes in the level of interest rates.
Changes in interest rates wil impact the Al ianz Group's Life/Health business to the extent they
result in changes to current interest income, impact the value of the Al ianz Group's fixed-income
portfolio and the fair value of the liabilities and affect the levels of new product sales or surrenders
of business in force. Reductions in the effective investment income below the rates prevailing at
the issue date of the policy, or below the long-term guarantees in countries such as Germany and
Switzerland, would reduce the profit margins or lead to losses on the Life/Health insurance
business written by the Al ianz Group's Life/Health subsidiaries to the extent the maturity
composition of the assets does not match the maturity composition of the insurance obligations
they are backing. In particular, if low interest rates persist, the effective investment income wil
decrease over time due to reducing reinvestment yields. Similarly, reductions in the effective
investment income of the fixed income trust assets backing the Al ianz Group's pension reserves
may lead to deficits of the internal pension plans, and these deficits would have to be covered by
the Al ianz Group. Interest rate volatility risk could substantially impact the economic capitalization
in a low interest rate environment, as long term guarantees in Life/Health business increase in
value.
We consider this risk to be medium.
The Al ianz Group is exposed to currency risk.
The Al ianz Group prepares its consolidated financial statements in Euro. However, a significant
portion of the revenues and expenses from the Al ianz Group companies outside the Euro zone,
originates in currencies other than the Euro. As a result, although the Al ianz Group's non-Euro
zone subsidiaries generally record their revenues and expenses in the same currency, changes in
the exchange rates used to translate foreign currencies into Euro may adversely affect the Al ianz
9

Group's results of operations and the net asset value of subsidiaries from an Al ianz Group
perspective.
We consider this risk to be low.
The Al ianz Group is Exposed to Inflation Risk.
Al ianz Group is exposed to changing inflation rates, predominantly due to the Non-Life insurance
obligations but also due to inflation-indexed internal pension obligations. Unexpected inflation
increases both future claims and expenses, leading to greater liabilities and payments to
policyholders.
We consider this risk to be low.
II. Credit Risks
The Al ianz Group companies are subject to a potential economic loss in the value of their portfolio
that would result from either changes in the credit quality of counterparties ("migration risk") or the
inability or unwil ingness of a counterparty to fulfil contractual obligations ("default risk"). The
Group's credit risk profile is derived from three sources:
- Investment portfolio: Credit risk results from Al ianz Group's investments in fixed-income
bonds, loans, derivatives, cash positions, and receivables whose value may decrease
depending on the credit quality of the obligor. As a result, defaults by one or more of these
parties on their obligations to the Al ianz Group companies due to bankruptcy, lack of liquidity,
downturns in the economy or real estate values, operational failure or other reasons, or even
rumors about potential defaults by one or more of these parties or regarding the financial
services industry general y, could lead to losses or defaults by the Al ianz Group companies or
by other institutions. In addition, with respect to secured transactions, the Al ianz Group
companies' credit risk may be exacerbated when the col ateral held by them cannot be
realized or is liquidated at prices not sufficient to recover the full amount of the loan or
derivative exposure. The Al ianz Group companies also have exposure to a number of
financial institutions in the form of unsecured debt instruments, derivative transactions and
equity in-vestments. Losses on or impairments to the carrying value of these assets may
materially and adversely af ect the Al ianz Group's business or results of operations. In our
assessment, the credit risk related to the investment portfolio of the Al ianz Group is the most
material risk in the category of credit risk. We consider this risk to be medium.
- Credit insurance: Credit risk arises from potential claim payments on limits granted by Euler
Hermes to its policyholders. Euler Hermes insures its policyholders from credit risk associated
with short-term trade credits advanced to clients of the policyholder. If the client of the
policyholder is unable to meet its payment obligations, Euler Hermes indemnifies the loss to
the policyholder. We consider this risk to be low.
- Reinsurance: The Al ianz Group transfers exposure to certain risks in the Property-Casualty
and Life/Health insurance businesses to others through reinsurance arrangements. Under
these arrangements, other insurers assume a portion of the Al ianz Group's losses and
expenses associated with reported and unreported losses in exchange for a portion of policy
premiums. Credit risk arises from potential losses from non-recoverability of reinsurance
receivables or due to default on benefits under in-force reinsurance treaties. We consider this
risk to be low.
If any of the above-mentioned risks materialize, this may materially and adversely affect the Al ianz
Group's business or results of operations. In prior years the Al ianz Group has incurred significant
impairments on the value of the securities and other financial assets that it holds and there is the
10