Edgar Filing: ALLIANZ SE

Interim Report Third Quarter and First Nine Months of 2006

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

Report of Foreign Private Issuer

Pursuant to Rules 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

for the period ended September 30, 2006

Commission file Number: 1-15154

ALLIANZ SE

Königinstrasse 28

80802 Munich

Germany

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F x Form 40-F ¨

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes ¨ No x

THIS REPORT ON FORM 6-K (EXCEPT FOR ANY NON-GAAP FINANCIAL MEASURE AS SUCH TERM IS DEFINED IN REGULATION G UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED) SHALL BE DEEMED TO BE INCORPORATED BY REFERENCE IN THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-13462) OF ALLIANZ SE AND TO BE A PART THEREOF FROM THE DATE ON WHICH THIS REPORT IS FURNISHED, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY FILED OR FURNISHED. FOR THE AVOIDANCE OF DOUBT, THE DISCLOSURE CONTAINING ANY NON-GAAP FINANCIAL MEASURE CONTAINED IN THE ATTACHED REPORT IS NOT INCORPORATED BY REFERENCE INTO THE ABOVE-MENTIONED REGISTRATION STATEMENT FILED BY ALLIANZ SE.

Interim Report Third Quarter and First Nine Months of 2006

Allianz Group

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Contents


2		Group Management Report

4		Executive Summary

10		Property-Casualty Insurance Operations

16		Life/Health Insurance Operations

22		Banking Operations

26		Asset Management Operations

31		Outlook

33		Consolidated Financial Statements for the Third Quarter and First Nine Months of 2006

38		Notes to the Consolidated Financial Statements

Investor Relations

We endeavour to keep our shareholders up-to-date on all company developments. Our Investor Relations Team is pleased to answer any questions you may have.


Allianz SE¹⁾
Investor Relations
Koeniginstrasse 28
80802 Munich
Germany

Investor Line:		+49 1802 2554269
		+49 1802 ALLIANZ
Fax:		+49 89 3800 3899
E-Mail:		investor.relations@allianz.com
Internet:		www.allianz.com/investor-relations

¹⁾	Effective October 13, 2006, our German holding company Allianz AG converted into Allianz SE. Following this conversion, we only use the new company name Allianz SE in this interim report.

Other Reports

All Allianz Group published quarterly and annual financial reports are available for download at www.allianz.com/investor-relations. Alternatively, you can order printed copies of our reports.

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Moderate share price development despite strong business performance.

Allianz share price vs. DJ EURO STOXX 50 and DJ EURO STOXX Insurance

January 1, 2005 – September 30, 2006

in €

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Source: Thomson Financial Datastream

Current information on the development of the Allianz share price is available at www.allianz.com/stock.

Allianz Share Information


Share type:		Registered share with restricted transfer
Denomination:		No-par-value share
Stock exchanges:		All German stock exchanges, London, New York, Paris, Zurich
Security codes:		WKN 840 400
		ISIN DE 000 840 400 5
Bloomberg:		ALV GY
Reuters:		ALVG.DE

Allianz Group Selected Consolidated Financial Data


			September 30, 2006	December 31, 2005	Change %
Balance Sheet
Investments	€	mn	293,676	285,015	3.0
Loans and advances to banks and customers	€	mn	415,055	336,808	23.2
Total assets	€	mn	1,058,948	988,584	7.1
Liabilities to banks and customers	€	mn	372,134	310,316	19.9
Reserves for loss and loss adjustment expenses	€	mn	66,278	67,005	(1.1	)
Reserves for insurance and investment contracts	€	mn	286,184	278,829	2.6
Shareholders’ equity	€	mn	44,934	39,487	13.8
Minority interests	€	mn	7,614	7,615	—


			Three months ended September 30,		Change %	Nine months ended September 30,		Change %
			2006	2005	Change %	2006	2005	Change %
Income Statement
Total revenues¹⁾	€	mn	22,599	23,823	(5.1)	76,308	75,779	0.7
Operating profit	€	mn	2,660	1,864	42.7	8,131	6,097	33.4
Income before income taxes and minority interests in earnings	€	mn	2,673	1,646	62.4	8,696	6,035	44.1
Net income	€	mn	1,591	794	100.4	5,649	3,508	61.0

Segments
Property-Casualty
Operating profit	€	mn	1,727	992	74.1	4,958	3,856	28.6
Loss ratio		%	64.2	73.0	(8.8)pts	65.1	68.2	(3.1)pts
Expense ratio		%	26.0	25.6	0.4pt	27.1	26.7	0.4pt
Combined ratio		%	90.2	98.6	(8.4)pts	92.2	94.9	(2.7)pts
Life/Health
Operating profit	€	mn	617	556	11.0	1,867	1,545	20.8
Statutory expense ratio		%	11.7	8.8	2.9pts	9.8	8.2	1.6pts
Banking
Operating profit	€	mn	406	252	61.1	1,219	696	75.1
Cost-income ratio		%	78.8	92.3	(13.5)pts	78.6	87.0	(8.4)pts
Loan loss provisions	€	mn	52	130	(60.0)	78	89	(12.4)
Coverage ratio at September 30²⁾		%	61.8	60.1	1.7pts	61.8	60.1	1.7pts
Asset Management
Operating profit	€	mn	294	300	(2.0)	895	783	14.3
Cost-income ratio		%	59.5	57.7	1.8pts	59.4	59.2	0.2pts
Third-party assets under management at September 30	€	bn	755	743³⁾	1.6	755	743³⁾	1.6

Share Information
Basic earnings per share	€		3.93	2.03	93.6	13.94	9.11	53.0
Diluted earnings per share	€		3.88	2.02	92.1	13.69	9.06	51.1
Share price at September 30	€		136.48	127.94³⁾	6.7	136.48	127.94³⁾	6.7
Market capitalization at September 30	€	bn	55.4	51.9³⁾	6.7	55.4	51.9³⁾	6.7

¹⁾	Total revenues comprise Property-Casualty segment’s gross premiums written, Life/Health segment’s statutory premiums, Banking segment’s operating revenues and Asset Management segment’s operating revenues.

²⁾	Represents total loan loss allowances as a percentage of total non-performing loans and potential problem loans.

³⁾	At December 31, 2005.

Allianz SE Ratings at September 30, 2006¹⁾


	Standard & Poor’s		Moody’s	A.M. Best
Insurer financial strength	AA-		Aa3	A+
Outlook	Positive		Stable	Stable

Counterparty credit	AA-		Not	aa-²	⁾
Outlook	Positive		rated	Stable

Senior unsecured debt	AA-		Aa3	aa-
Outlook			Stable	Stable

Subordinated debt	A/A-³	⁾	A2	a+/a³	⁾
Outlook			Stable	Stable

Commercial paper (short term)	A-1+		P-1	Not
Outlook			Stable	rated

¹⁾	Includes ratings for securities issued by Allianz Finance B.V., Allianz Finance II B.V. and Allianz Finance Corporation.

²⁾	Issuer credit rating.

³⁾	Ratings vary on the basis of maturity period and terms.

Executive Summary

Strong earnings momentum.

•

Strong operating profit of €2.7 billion in 3Q 2006, up 43% from a year ago.

•

Combined ratio of 90.2% in Property-Casualty.

•

Double-digit growth in Life/Health operating profit, despite lower revenues in Italy and the United States.

•

Dresdner Bank operating profit grew by 38%.

•

Asset Management maintained strong operating profitability.

•

Net income doubled to €1.6 billion, driven by operating profit improvements.

•

Full year outlook: We expect operating profit to exceed €9.5 billion and net income to surpass €6 billion.¹⁾


Total Revenues²⁾		Net Income
in € bn		in € mn


Operating Profit		Shareholders’ Equity³⁾
in € mn		in € mn

¹⁾	However, as always, natural catastrophes and adverse developments in the capital markets, as well as the factors stated in our Outlook in the cautionary note regarding forward-looking statements, may severely impact our profitability.

²⁾	Total revenues comprise Property-Casualty segment’s gross premiums written, Life/Health segment’s statutory premiums, Banking segment’s operating revenues and Asset Management segment’s operating revenues.

³⁾	Does not include minority interests.

Allianz Group’s Consolidated Results of Operations

Total Revenues

Our total revenues remained at a strong level of €22.6 billion and €76.3 billion in 3Q and 9M 2006, respectively. This was the net effect of growth in our Property-Casualty, Banking and Asset Management segments and a decline in our Life/Health segment. Total internal revenue growth year-on-year amounted to (4.0)% in 3Q 2006 (9M 2006: year-on-year increase of 0.3%).

Total Revenues – Segments

in € mn

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Property-Casualty Gross premiums written, at €10.4 billion in 3Q 2006, were 0.4% higher than a year ago, as we continued to exhibit diligent risk selection and focus on profitability. This successful policy translated into marked growth in selected rewarding markets around the world, offset by decreases of, in aggregate, a similar magnitude in markets where maintaining profitability required concessions to volume. Internal growth of gross premiums written year-on-year was 1.8% (9M 2006: 0.5%).

Life/Health Statutory premiums remained sound at €9.8 billion in 3Q 2006, albeit down 11.8% from a year ago. We continued to experience solid growth both in emerging markets and in some of our more mature markets. However, this was more than offset by marked shortfalls in the United States and Italy. In the United States, our distribution was faced with regulatory impediments. Similarly, in Italy, the difficult market environment and adverse developments within our bancassurance distribution channel caused revenues to drop. On an internal growth basis, statutory premiums were down 10.9% (9M 2006: year-on-year decrease of 2.3%).

Banking In 3Q 2006, operating revenues from our Banking segment increased 5.7% from a year ago to €1.7 billion. Strong growth of net interest income was offset by a decline in trading income (net), following the uncertain and challenging market environment in 3Q 2006. On a nine months comparison, our banking segment’s operating revenues experienced dynamic growth to €5.3 billion, up 14.2%, with all revenue categories and operating divisions at Dresdner Bank contributing to this strong development. Internal growth of our Banking segment’s operating revenues was 5.9% and 14.1% in 3Q and 9M 2006, respectively.

Asset Management During the first nine months of 2006, net inflows to third-party assets and market effects amounted to €25 billion each. Partially offsetting this were negative foreign currency effects, resulting in third-party assets of €755 billion at September 30, 2006. Mainly attributable to our strong and continuously growing third-party asset base, we experienced increases in operating revenues year-on-year of 2.3% in 3Q 2006 and 14.9% in 9M 2006. Internal growth was 6.3% and 14.3%, respectively.

Operating Profit

At €2.7 billion, operating profit in 3Q 2006 was 42.7% higher than a year ago. For the first nine months of 2006, we experienced a 33.4% year-on-year increase to €8.1 billion, with all segments exhibiting strong double-digit increases.

Operating Profit – Segments

in € mn

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Property-Casualty Operating profit grew markedly by 74.1 % year-on-year to €1.7 billion in 3Q 2006 (9M 2006: growth of 28.6% from a year ago to €5.0 billion). Similarly, our combined ratio improved significantly and remained at a very competitive level of 90.2% and 92.2% in 3Q and 9M 2006, respectively, compared to 98.6% and 94.9% in the same periods last year. The exceptionally heavy damages from major natural catastrophes in the United States, Central Europe and Asia in the prior year period were not repeated in 3Q 2006. However, our loss ratio continued to develop strongly, irrespective of the impact from natural catastrophes.

Life/Health In 3Q 2006, we continued to substantially increase our operating profit by 11.0% to €617 million compared to the prior year period. Our strong asset base after the segment’s growth in recent years and improved equity markets, as well as our high margins on both our in-force and new business contributed to this development.

Banking We experienced double-digit operating profit growth year-on-year for the third consecutive quarter, almost achieving our full year 2006 operating profit target after only nine months. Our cost-income ratio improved significantly to 78.6% for the first nine months of 2006 compared to 87.0% a year earlier.

Asset Management Strong operating profitability continued. Our Asset Management’s cost-income ratio remained at very competitive levels of 59.5% in 3Q 2006 and 59.4% in 9M 2006 compared to 57.7% and 59.2% in the same periods last year.

Non-Operating Items

Overall, non-operating items created an income of €13 million in 3Q 2006, compared to a charge of €218 million a year ago (9M comparison: income of €565 million in 2006 versus a charge of €62 million in 2005).

In 3Q 2006, significant capital gains of €0.3 billion stemmed from the sale of Four Seasons Healthcare Ltd. Similarly, in the first half of 2006, we realized significant gains from the sale of our participations in Schering AG and Eurohypo AG. In aggregate, non-operating income from realized gains/losses (net) and impairments of investments (net) was €465 million in 3Q 2006 and €2.5 billion in 9M 2006, up 60.3% and 72.7%, respectively, from a year ago.

The impact from restructuring charges on non-operating items rose to €50 million in 3Q 2006 from €2 million a year ago, reflecting the first impacts of our ongoing “Neue Dresdner Plus program”. For the first nine months of 2006, non-operating restructuring charges amounted to €458 million (9M 2005: €85 million). This was primarily a result of charges at Allianz Deutschland AG in 2Q 2006 in connection with the reorganization of our German insurance operations. This reorganization is intended to help us to improve our competitiveness and offer our customers better service, while operating more efficiently.

Interest expense from external debt, acquisition-related expenses from our Asset Management segment, and other non-operating items, in aggregate, were down to €402 million in 3Q 2006 from €506 million a year earlier (9M 2006 versus 9M 2005: up from €1.4 billion to €1.5 billion).

Net Income

Net income in 3Q 2006 doubled compared to a year ago and reached €1.6 billion. For the first nine months of 2006, net income was €5.6 billion, a 61.0% increase over the prior year period. These strong improvements were primarily driven by our operating profit, reflecting the high quality of our earnings.

Accordingly, income tax expenses in 3Q 2006 were up €280 million from last year to €797 million, representing an effective income tax rate of 29.8% (3Q 2005: 31.4%). Our effective income tax rate benefited from the tax-exemption of the capital gain in connection with the sale of Four Seasons Healthcare Ltd., previously mentioned. Similarly, with income tax expenses up €546 million to €2.1 billion in 9M 2006, our effective income tax rate in 9M 2006 declined to 23.6% compared to 25.0% a year ago mainly due to higher tax-exempted income, such as the realized capital gain from the Schering transaction in June 2006.

Minority interests in earnings, at €285 million in 3Q 2006, were down €50 million, primarily due to the buyout of minorities and decreased earnings after income taxes at RAS in Italy, as well as lower earnings after income taxes at AGF in France. For the first nine months of 2006, minority interests in earnings were flat at €1.0 billion.

The following graph sets forth the development of our basic and diluted earnings per share.

Earnings per Share

in €

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¹⁾	See Note 37 to our consolidated financial statements for further details regarding the dilutive effect.

The following tables summarize the total revenues and operating profit for each of our segments for the three and nine months ended September 30, 2006 and 2005, respectively, as well as IFRS consolidated net income of the Allianz Group.


	Property- Casualty				Life/Health				Banking				Asset Management				Corporate				Consolidation adjustments				Allianz Group
Three months ended September 30,	2006		2005		2006		2005		2006		2005		2006		2005		2006		2005		2006		2005		2006		2005
	€ mn		€ mn		€ mn		€ mn		€ mn		€ mn		€ mn		€ mn		€ mn		€ mn		€ mn		€ mn		€ mn		€ mn
Total revenues¹⁾	10,412		10,368		9,847		11,164		1,668		1,578		726		710		—		—		(54	)	3		22,599		23,823

Operating profit	1,727		992		617		556		406		252		294		300		(331	)	(223	)	(53	)	(13	)	2,660		1,864
Non-operating items	139		188		(8	)	28		(8	)	(31	)	(133	)	(212	)	27		(230	)	(4	)	39		13		(218	)

Income before income taxes and minority interests in earnings	1,866		1,180		609		584		398		221		161		88		(304	)	(453	)	(57	)	26		2,673		1,646

Income taxes	(600	)	(513	)	(240	)	(124	)	(96	)	(72	)	(67	)	(33	)	180		224		26		1		(797	)	(517	)
Minority interests in earnings	(177	)	(161	)	(81	)	(130	)	(19	)	(26	)	(10	)	(13	)	—		(2	)	2		(3	)	(285	)	(335	)

Net income	1,089		506		288		330		283		123		84		42		(124	)	(231	)	(29	)	24		1,591		794


	Property- Casualty				Life/Health				Banking				Asset Management				Corporate				Consolidation adjustments				Allianz Group
Nine months ended September 30,	2006		2005		2006		2005		2006		2005		2006		2005		2006		2005		2006		2005		2006		2005
	€ mn		€ mn		€ mn		€ mn		€ mn		€ mn		€ mn		€ mn		€ mn		€ mn		€ mn		€ mn		€ mn		€ mn
Total revenues¹⁾	34,243		34,108		34,600		35,116		5,322		4,661		2,203		1,918		—		—		(60	)	(24	)	76,308		75,779

Operating profit	4,958		3,856		1,867		1,545		1,219		696		895		783		(585	)	(680	)	(223	)	(103	)	8,131		6,097
Non-operating items	1,007		804		133		153		396		636		(403	)	(549	)	—		(734	)	(568	)	(372	)	565		(62	)

Income before income taxes and minority interests in earnings	5,965		4,660		2,000		1,698		1,615		1,332		492		234		(585	)	(1,414	)	(791	)	(475	)	8,696		6,035

Income taxes	(1,590	)	(1,498	)	(549	)	(274	)	(430	)	(301	)	(194	)	(49	)	414		608		296		7		(2,053	)	(1,507	)
Minority interests in earnings	(604	)	(557	)	(301	)	(358	)	(74	)	(77	)	(34	)	(36	)	(9	)	(9	)	28		17		(994	)	(1,020	)

Net income	3,771		2,605		1,150		1,066		1,111		954		264		149		(180	)	(815	)	(467	)	(451	)	5,649		3,508

¹⁾	Total revenues comprise Property-Casualty segment’s gross premiums written, Life/Health segment’s statutory premiums, Banking segment’s operating revenues and Asset Management segment’s operating revenues.

Allianz Group’s Shareholders’ Equity and Invested Assets

Shareholders’ Equity

Since December 31, 2005, our shareholders’ equity has increased 13.8% to €44.9 billion at September 30, 2006. Our strong net income more than compensated for a rise in negative foreign currency translation adjustments primarily due to a weaker U.S. Dollar compared to the Euro, and dividends paid of €811 million.

The following graph sets forth the development of our shareholders’ equity in the first nine months of 2006.

Shareholders’ Equity¹⁾

in € mn

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¹⁾	Does not include minority interests.

²⁾	Consists of the following developments (in € mn): foreign currency translation adjustments (797); changes in the consolidated subsidiaries of the Allianz Group 45; treasury shares 1,266; net income 5,649; dividends paid (811); miscellaneous 21.

Invested Assets

In the following, we present the breakdown of invested assets owned and managed by our Property-Casualty Life/Health and Banking segments by category and instruments.

Invested Assets – Property-Casualty: Allocation by Category and Instruments at September 30, 2006

Fair Values¹⁾in € bn (Total: €99.9 bn)

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¹⁾	Held-to-maturity investments and real estate held for investment are stated at amortized cost. Investments in associates and joint ventures are stated at either amortized cost or equity, depending upon, among other factors, our ownership percentage.

²⁾	Includes debt securities at €3.6 bn and equity securities at €0.3 bn.

³⁾	Includes associates and joint ventures at €0.8 bn, but does not include affiliates at €9.3 bn.

⁴⁾	Includes held-to-maturity investments at €0.7 bn.

Invested Assets – Life/Health: Allocation by Category and Instruments at September 30, 2006

Fair Values¹⁾in € bn (Total: €278.8 bn)

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¹⁾	Held-to-maturity investments and real estate held for investment are stated at amortized cost. Investments in associates and joint ventures are stated at either amortized cost or equity, depending upon, among other factors, our ownership percentage.

²⁾	Includes debt securities at €7.4 bn, equity securities at €2.8 bn and derivative financial instruments at €(3.6) bn.

³⁾	Includes associates and joint ventures at €2.1 bn, but does not include affiliates at €2.7 bn.

⁴⁾	Includes held-to-maturity investments at €4.0 bn.

Invested Assets – Banking: Trading Portfolio Allocation at September 30, 2006

Fair Values in € bn

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Corporate Segment

In July 2006, a subsidiary of Allianz SE (formerly Allianz AG), which is managed by Allianz Capital Partners and in which Allianz Capital Partners holds an interest of 65%, acquired all shares of MAN Roland Druckmaschinen AG. This acquisition had an impact of a similar magnitude both on our Corporate segment’s operating revenues and operating expenses. The increases in realized gains/losses (net) stemmed primarily from the sale of our shareholdings in Schering AG in June 2006 and the disposal of Four Seasons Healthcare Ltd. in August 2006.


	Three months ended September 30,				Nine months ended September 30,
	2006		2005		2006		2005
	€ mn		€ mn		€ mn		€ mn
Operating revenues	529		273		1,254		862

Interest expense, excluding interest expense from external debt¹⁾	(109	)	(54	)	(374	)	(414	)
Acquisition and administrative expenses (net)	(215	)	(141	)	(496	)	(358	)
Other operating expenses	(536	)	(301	)	(969	)	(770	)

Operating expenses	(860	)	(496	)	(1,839	)	(1,542	)

Operating profit	(331	)	(223	)	(585	)	(680	)

Income from financial assets and liabilities held for trading (net)	(62	)	(123	)	(214	)	(276	)
Realized gains/losses (net)	287		41		784		149
Impairments of investments (net)	(7	)	24		15		(12	)
Interest expense from external debt¹⁾	(191	)	(172	)	(585	)	(595	)

Non-operating items	27		(230	)	—		(734	)

Income before income taxes and minority interests in earnings	(304	)	(453	)	(585	)	(1,414	)

¹⁾	The total of these items equals interest expense in the segment income statement in Note 3 to the consolidated financial statements.

Events After the Balance Sheet Date

See Note 41 to our consolidated financial statements.

Property-Casualty Insurance Operations

Continued underwriting excellence.

•

Effective cycle management.

•

Excellent combined ratio across all regions.

•

Combined ratio of 90.2% in 3Q 2006, down 8.4 percentage points from a year ago.

Earnings Summary

Gross Premiums Written by Region¹⁾

in € bn

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¹⁾	After elimination of transactions between Allianz Group companies in different geographic regions and different segments. Gross premiums written from our speciality lines have been allocated to the respective geographic regions.

Gross Premiums Written – Growth Rates¹⁾

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¹⁾	Before elimination of transactions between Allianz Group companies in different geographic regions and different segments.

Gross Premiums Written

2006 to 2005 Three Month Comparison

We continued to forego premium growth in softening markets with increasing pricing pressures. As a result of our successful cycle management efforts, the modest rise of gross premiums written from €10,368 million to €10,412 million in 3Q 2006 was accompanied by further improved underwriting profitability. Based on internal growth, gross premiums written increased 1.8%.

Positive developments were primarily experienced by our entities in the United States, Spain and the United Kingdom, with additional gross premiums written of €50 million (+ 3.2%), €43 million (+ 10.7%) and €24 million (+ 4.3%) respectively. We furthermore successfully achieved strong increases within New Europe, our growth markets in Central and Eastern Europe, and South America. In these regions, gross premiums written grew by €43 million (+10.3%) and €26 million (+ 14.4%), respectively. In 3Q 2006, our growth markets in Asia-Pacific and New Europe, together with the markets in South America, accounted for approximately 10% of our Property-Casualty segment’s gross premiums written.

In the United States, our operations benefited primarily from growth in our crop insurance line due to higher prices on major crops and higher rates on nursery coverage. The positive development in Spain was mainly attributable to our motor and industrial lines of business. At Cornhill in the United Kingdom, our commercial lines performed favorably.

Similarly, in Brazil, continued good development of our motor business was a key growth factor. In addition, foreign currency effects, in particular the appreciation of the Brazilian Real compared to the Euro, added to the rise in South America.

Within New Europe, in Romania, the increase in gross premiums written was driven by a new large insurance contract in our aviation business and strong sales performance in our retail business. Our Polish motor business benefited from expanded sales capacity.

These increases were offset by decreased gross premiums written in other countries.

At Allianz Sach within PC Germany, our primary market, gross premiums written were impacted by lower volume within our motor business, partially compensated by sound development in our casualty line. At Allianz Re assumed gross premium volume declined, mainly impacted by the change of an intra-Allianz Group reinsurance contract, resulting in increased aggregate loss retention levels of participating entities. This effect, however, is consolidated out at the segment level.

In Australia, gross premiums written were impacted by softening market conditions in our commercial business. Additionally, the depreciation of the Australian Dollar against the Euro contributed to the decline.

The decrease in Switzerland was the net effect of an increase in gross premiums written at Allianz Suisse, whereas at Allianz Risk Transfer (or “ART”) premium volume was down. Allianz Suisse continued to benefit from our favorably developing motor business. At ART, the shortfall occurred as premiums in connection with a long-term contract with a major client were recognized in 4Q 2005.

In specialty lines the decline by €113 million, or 8.0%, was due to lower gross premiums written at Allianz Global Corporate & Specialty. Gross premiums written at Allianz Global Corporate & Specialty were down €106 million to €649 million, primarily due to foregone business volume as a result of declining rates.

2006 to 2005 Nine Month Comparison

For the first nine months of 2006, our gross premiums written increased marginally by 0.4% to €34,243 million. We were able to achieve growth particularly in the United States, South America, Spain and New Europe. However, while maintaining our strategy of selective and profitable growth, we recorded slight decreases in some of our other markets. Based on internal growth, our gross premiums written were up slightly by 0.5%.

Operating Profit

in € mn

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2006 to 2005 Three Month Comparison

Our operating profit increased markedly to €1,727 million, a rise of 74.1% from a year earlier. The main driver behind this strong development was our significantly enhanced underwriting profitability. The exceptionally high losses from major natural catastrophes in the prior year period were not repeated. Further, our underwriting discipline and the improvements in connection with our Sustainability program are paying off. Top contributing markets to our operating profit included PC Germany at €454 million, Italy at €209 million, the United States at €201 million, as well as our credit insurance activities combined within our Euler Hermes brand at €111 million. The strongest improvements occurred at Allianz Global Corporate & Specialty (€281 million), as well as in our operations within the United States (€209 million), Switzerland (€53 million) and Italy (€45 million).

Claims and insurance benefits incurred (net) decreased considerably by 12.2% to €6,208 million. In the prior year period, major natural catastrophes in the United States, Central Europe and Asia inflicted huge damages, heavily impacting the insurance and reinsurance markets as a whole. These damages were not repeated in 3Q 2006. Our calendar year loss ratio declined to 64.2% (3Q 2005: 73.0%). On an accident year basis, claims also markedly decreased 13.0% to €6,320 million, producing an accident year loss ratio of 65.3% (3Q 2005: 74.9%), mainly driven by the developments described above. However, even after excluding the impacts from natural catastrophes, we continued to improve our already excellent underwriting profitability.

Acquisition and administrative expenses (net) remained relatively stable at €2,512 million (3Q 2005: €2,481 million), largely in line with our premium development. Together with a marginal decline in our premiums earned (net), our expense ratio rose slightly by 0.4 percentage points to 26.0% from 25.6% a year earlier.

Driven by the development of our loss ratio, our combined ratio improved significantly by 8.4 percentage points to 90.2%, further solidifying our competitive position within the property-casualty market.

2006 to 2005 Nine Month Comparison

We succeeded in increasing operating profit for the first nine months of 2006 by 28.6% compared to the prior year period to €4,958 million. At 92.2%, our combined ratio was 2.7 percentage points lower than a year ago. Similar to the developments in 3Q 2006 previously described, these improvements were mainly attributable to significantly lower claims from natural catastrophes, together with our focus on continuous underwriting excellence.

Non-Operating Items

2006 to 2005 Three Month Comparison

Income from our non-operating items decreased €49 million to €139 million. In 3Q 2006, a significant realized gain resulted from the disposal of our wholly-owned subsidiary Four Seasons Healthcare Ltd. However, higher net realized gains from investments, not shared with policyholders, were more than offset by increased net impairments of investments, stemming in large part from our available-for-sale debt securities.

2006 to 2005 Nine Month Comparison

Income from our non-operating items for the first nine months of 2006 amounted to €1,007 million, up 25.2% from a year ago. This increase was particularly driven by increased realized gains/losses (net) from investments, not shared with policyholders, especially through the sale of our participation in Schering AG in 2Q 2006. Net realizations on investments proved a compensating balance for restructuring charges of €366 million, primarily in connection with the reorganization of our German insurance operations.

Net Income

2006 to 2005 Three Month Comparison

Net income more than doubled from a year ago to €1,089 million, driven by the significant growth in our operating profit.

Income tax expenses amounted to €600 million, rising by 17.0%. This increase resulted mainly from our higher income before income taxes and minority interests in earnings. Our effective tax rate declined to 32.2% (3Q 2005: 43.5%) due to the absence of one-off tax charges experienced in the prior year period.

Minority interests in earnings rose slightly to €177 million primarily as a result of higher earnings at AGF in France, which more than compensated for lower minority interests at RAS in Italy following the partial buy-out of minorities in 2005.

2006 to 2005 Nine Month Comparison

Driven both by our significantly improved operating profitability and increased non-operating income, our net income for the first nine months of 2006 was up markedly by 44.8% to €3,771 million. Due to the effects of a relatively higher share of tax-exempt income, primarily from the Schering transaction, our effective tax rate decreased to 26.7% (9M 2005: 32.1%).

The following table sets forth our Property-Casualty insurance segment’s income statement, loss ratio, expense ratio and combined ratio for the three and nine months ended September 30, 2006 and 2005, respectively.


	Three months ended September 30,				Nine months ended September 30,
	2006		2005		2006		2005
	€ mn		€ mn		€ mn		€ mn
Gross premiums written¹⁾	10,412		10,368		34,243		34,108
Ceded premiums written	(1,486	)	(1,488	)	(4,428	)	(4,347	)
Change in unearned premiums	750		812		(1,440	)	(1,543	)

Premiums earned (net)	9,676		9,692		28,375		28,218
Interest and similar income	928		929		3,107		2,916
Income from financial assets and liabilities designated at fair value through income (net)²⁾	39		42		81		98
Realized gains/losses (net) from investments, shared with policyholders³⁾	8		14		44		100
Fee and commission income	253		259		770		745
Other income	13		24		51		45

Operating revenues	10,917		10,960		32,428		32,122

Claims and insurance benefits incurred (net)	(6,208	)	(7,074	)	(18,480	)	(19,258	)
Changes in reserves for insurance and investment contracts (net)	(151	)	(113	)	(344	)	(447	)
Interest expense	(67	)	(62	)	(196	)	(257	)
Loan loss provisions	—		(3	)	(3	)	(3	)
Impairments of investments (net), shared with policyholders⁴⁾	(5	)	—		(22	)	(4	)
Investment expenses	(63	)	(49	)	(178	)	(244	)
Acquisition and administrative expenses (net)	(2,512	)	(2,481	)	(7,686	)	(7,529	)
Fee and commission expenses	(184	)	(186	)	(559	)	(518	)
Other expenses	—		—		(2	)	(6	)

Operating expenses	(9,190	)	(9,968	)	(27,470	)	(28,266	)

Operating profit	1,727		992		4,958		3,856

Income from financial assets and liabilities held for trading (net)²⁾	(7	)	5		(4	)	4
Realized gains/losses (net) from investments, not shared with policyholders³⁾	223		193		1,540		911
Impairments of investments (net), not shared with policyholders⁴⁾	(64	)	(12	)	(153	)	(42	)
Amortization of intangible assets	(3	)	(3	)	(10	)	(12	)
Restructuring charges	(10	)	5		(366	)	(57	)

Non-operating items	139		188		1,007		804

Income before income taxes and minority interests in earnings	1,866		1,180		5,965		4,660

Income taxes	(600	)	(513	)	(1,590	)	(1,498	)
Minority interests in earnings	(177	)	(161	)	(604	)	(557	)

Net income	1,089		506		3,771		2,605

Loss ratio⁵⁾ in%	64.2		73.0		65.1		68.2
Expense ratio⁶⁾ in %	26.0		25.6		27.1		26.7

Combined ratio⁷⁾ in %	90.2		98.6		92.2		94.9

¹⁾	For the Property-Casualty segment, total revenues are measured based upon gross premiums written.

²⁾	The total of these items equals income from financial assets and liabilities carried at fair value through income (net) in the segment income statement in Note 3 to the consolidated financial statements.

³⁾	The total of these items equals realized gains/losses (net) in the segment income statement in Note 3 to the consolidated financial statements.

⁴⁾	The total of these items equals impairments of investments (net) in the segment income statement in Note 3 to the consolidated financial statements.

⁵⁾	Represents claims and insurance benefits incurred (net) divided by premiums earned (net).

⁶⁾	Represents acquisition and administrative expenses (net) divided by premiums earned (net).

⁷⁾	Represents the total of acquisition and administrative expenses (net) and claims and insurance benefits incurred (net) divided by premiums earned (net).

Property-Casualty Operations by Geographic Region

The following tables set forth our property-casualty gross premiums written, premiums earned (net), combined ratio, loss ratio, expense ratio and operating profit by geographic region for the three and nine months ended September 30, 2006 and 2005, respectively. Consistent with our general practice, gross premiums written, premiums earned (net), combined ratio, loss ratio, expense ratio and operating profit by geographic region are presented before consolidation adjustments, representing the elimination of transactions between Allianz Group companies in different geographic regions and different segments.


	Gross premiums written				Premiums earned (net)				Combined ratio				Loss ratio				Expense ratio				Operating profit
	€ mn				€ mn				%				%				%				€ mn
Three months ended September 30,	2006		2005		2006		2005		2006		2005		2006		2005		2006		2005		2006		2005
PC Germany¹⁾	2,439		2,502		2,475		2,546		87.0		93.9		62.2		70.0		24.8		23.9		454		436
France	1,208		1,196		1,121		1,099		99.6		100.2		72.2		73.5		27.4		26.7		99		78
Italy	1,078		1,083		1,214		1,231		89.9		95.0		68.0		71.4		21.9		23.6		209		164
United Kingdom	585		561		473		477		90.7		93.9		60.7		64.3		30.0		29.6		98		75
Switzerland	369		393		401		434		90.7		114.6		67.5		91.9		23.2		22.7		52		(1	)
Spain	446		403		428		398		91.1		89.6		71.1		70.2		20.0		19.4		62		66

Netherlands	207		196		206		206		87.3		90.3		53.1		61.0		34.2		29.3		43		30
Austria	195		200		198		202		91.1		99.4		65.2		74.5		25.9		24.9		35		19
Ireland	182		182		157		161		56.8		77.9		34.9		56.8		21.9		21.1		85		47
Belgium	80		79		74		76		100.5		93.9		61.5		62.2		39.0		31.7		10		12
Portugal	68		71		64		69		88.1		85.7		63.3		61.0		24.8		24.7		10		13
Greece	17		16		11		11		82.1		83.7		51.2		52.0		30.9		31.7		3		2

Western and Southern Europe	749		744		710		725		83.0		89.8		54.2		63.7		28.8		26.1		191³	⁾	122³	⁾

Hungary	135		145		123		138		89.8		92.1		65.4		62.4		24.4		29.7		22		28
Slovakia	72		67		65		65		65.2		82.5		35.7		51.3		29.5		31.2		27		16
Czech Republic	56		56		45		41		76.5		72.4		60.1		55.9		16.4		16.5		12		12
Poland	71		58		50		42		88.6		86.7		54.7		55.6		33.9		31.1		7		4
Romania	79		52		37		27		85.9		106.9		68.1		93.2		17.8		13.7		6		(1	)
Bulgaria	24		21		15		9		88.7		92.3		56.0		51.6		32.7		40.7		2		1
Croatia	15		12		12		12		101.8		99.1		66.1		65.4		35.7		33.7		—		1
Russia	8		6		1		2		127.0		46.5		68.8		8.6		58.2		37.9		—		—

New Europe	460		417		348		336		83.6		87.9		57.7		60.3		25.9		27.6		76		61

Other Europe	1,209		1,161		1,058		1,061		83.2		89.3		55.4		62.7		27.8		26.6		267		183

NAFTA, thereof:	1,641		1,587		1,073		1,059		90.0		107.8		65.4		82.9		24.6		24.9		202		(5	)
United States	1,601		1,551		1,049		1,032		89.4		109.4		64.8		84.3		24.6		25.1		201		(8	)
Mexico	40		36		24		27		114.2		54.0		89.3		33.1		24.9		20.9		1		3

Asia-Pacific, thereof:	488		510		324		320		93.9		97.3		67.6		69.7		26.3		27.6		65		57
Australia	413		445		289		290		93.7		97.1		68.6		70.6		25.1		26.5		60		53
Other	75		65		35		30		94.7		97.3		58.8		59.8		35.9		37.5		5		4

South America	207		181		157		137		99.9		99.6		66.4		64.1		33.5		35.5		12		21

Other	22		21		14		12		— ⁴	⁾	— ⁴	⁾	— ⁴	⁾	— ⁴	⁾	— ⁴	⁾	— ⁴	⁾	1		1

Specialty Lines
Credit Insurance	404		404		285		238		74.9		62.0		48.8		36.3		26.1		25.7		111		100
Allianz Global Corporate & Specialty¹⁾	649		755		390		427		95.3		153.1		64.4		120.5		30.9		32.6		75		(206	)
Travel Insurance and Assistance Services	252		259		267		259		102.3		96.0		62.3		62.0		40.0		34.0		26		20

Subtotal	10,997		11,016		9,680		9,698		—		—		—		—		—		—		1,733		989

Consolidation adjustments²⁾	(585	)	(648	)	(4	)	(6	)	—		—		—		—		—		—		(6	)	3

Total	10,412		10,368		9,676		9,692		90.2		98.6		64.2		73.0		26.0		25.6		1,727		992

¹⁾

With effect from 1Q 2006, we have combined the activities of the former Allianz Global Risk Re and Allianz Marine & Aviation, as well as the corporate customer business of Allianz Sach, which was formerly included within PC Germany. Additionally, with effect from 2Q 2006, we have included Allianz Global Risks US, which was formerly presented within NAFTA, within the newly combined entity Allianz Global Corporate & Specialty. Prior year balances have been adjusted to reflect this reclassification and allow for comparability across periods.

²⁾	Represents elimination of transactions between Allianz Group companies in different geographic regions.

³⁾	Contains run-off of a former operating entity located in Luxembourg of €5 mn in 2006 and €(1) mn in 2005.

⁴⁾	Presentation not meaningful.


	Gross premiums written				Premiums earned (net)				Combined Ratio				Loss ratio				Expense ratio				Operating profit
	€ mn				€ mn				%				%				%				€ mn
Nine months ended September 30,	2006		2005		2006		2005		2006		2005		2006		2005		2006		2005		2006		2005
PC Germany¹⁾	9,390		9,620		7,328		7,508		90.8		91.0		63.3		65.1		27.5		25.9		1,272		1,310
France	4,053		4,063		3,327		3,294		99.7		102.3		72.5		74.7		27.2		27.6		315		165
Italy	3,698		3,679		3,661		3,649		93.4		96.5		70.4		71.3		23.0		25.2		567		510
United Kingdom	1,812		1,851		1,392		1,435		94.7		94.8		64.7		64.2		30.0		30.6		225		223
Switzerland	1,610		1,646		1,269		1,288		94.0		99.4		70.2		76.6		23.8		22.8		170		99
Spain	1,567		1,460		1,240		1,146		90.9		91.2		71.5		71.7		19.4		19.5		185		168

Netherlands	752		754		609		616		89.3		92.0		55.9		61.1		33.4		30.9		117		100
Austria	752		763		578		585		99.1		99.3		73.8		74.5		25.3		24.8		64		64
Ireland	556		581		463		487		71.4		83.0		48.3		60.9		23.1		22.1		180		120
Belgium	286		281		223		220		100.3		100.0		63.4		63.8		36.9		36.2		33		28
Portugal	220		233		194		208		87.2		89.4		63.2		64.7		24.0		24.7		34		30
Greece	55		53		34		33		84.9		85.3		55.2		53.1		29.7		32.2		7		6

Western and Southern Europe	2,621		2,665		2,101		2,149		89.0		92.4		60.6		65.2		28.4		27.2		450³	⁾	345³	⁾

Hungary	451		464		373		394		88.3		94.4		62.0		64.8		26.3		29.6		85		77
Slovakia	224		242		187		187		69.9		73.3		39.8		42.9		30.1		30.4		71		64
Czech Republic	195		186		132		119		82.8		85.1		63.4		65.4		19.4		19.7		26		23
Poland	214		178		147		115		89.5		87.6		56.5		55.5		33.0		32.1		19		15
Romania	217		155		97		84		91.7		93.0		76.7		74.4		15.0		18.6		10		7
Bulgaria	67		64		46		25		83.6		74.3		50.2		34.9		33.4		39.4		9		9
Croatia	55		46		39		34		97.7		97.6		64.7		63.0		33.0		34.6		2		2
Russia	19		16		3		5		91.1		53.1		45.4		10.7		45.7		42.4		1		—

New Europe	1,442		1,351		1,024		963		84.8		87.4		58.2		59.1		26.6		28.3		223		197

Other Europe	4,063		4,016		3,125		3,112		87.6		90.9		59.8		63.3		27.8		27.6		673		542

NAFTA, thereof:	3,787		3,598		2,845		2,743		88.5		97.1		59.3		69.0		29.2		28.1		636		313
United States	3,655		3,483		2,772		2,675		88.0		98.0		58.7		69.8		29.3		28.2		627		305
Mexico	132		115		73		68		105.5		59.8		81.0		36.2		24.5		23.6		9		8

Asia-Pacific, thereof:	1,348		1,317		994		946		94.0		92.8		67.5		66.3		26.5		26.5		195		208
Australia	1,116		1,114		890		858		94.0		92.6		68.8		67.3		25.2		25.3		181		196
Other	232		203		104		88		94.5		95.0		56.9		56.9		37.6		38.1		14		12

South America	630		493		457		362		101.6		98.2		65.9		63.0		35.7		35.2		39		52

Other	94		84		40		35		— ⁴	⁾	— ⁴	⁾	— ⁴	⁾	— ⁴	⁾	— ⁴	⁾	— ⁴	⁾	5		4

Specialty Lines
Credit Insurance	1,270		1,302		828		730		77.6		71.6		51.1		44.4		26.5		27.2		328		286
Allianz Global Corporate & Specialty¹⁾	2,206		2,349		1,147		1,270		93.6		113.6		66.2		86.5		27.4		27.1		286		(94	)
Travel Insurance and Assistance Services	767		764		737		712		100.9		94.9		60.9		60.4		40.0		34.5		73		66

Subtotal	36,295		36,242		28,390		28,230		—		—		—		—		—		—		4,969		3,852

Consolidation adjustments²⁾	(2,052	)	(2,134	)	(15	)	(12	)	—		—		—		—		—		—		(11	)	4

Total	34,243		34,108		28,375		28,218		92.2		94.9		65.1		68.2		27.1		26.7		4,958		3,856

¹⁾

With effect from 1Q 2006, we have combined the activities of the former Allianz Global Risk Re and Allianz Marine & Aviation, as well as the corporate customer business of Allianz Sach, which was formerly included within PC Germany. Additionally, with effect from 2Q 2006, we have included Allianz Global Risk US, which was formerly presented within NAFTA, within the newly combined entity Allianz Global Corporate & Specialty. Prior year balances have been adjusted to reflect this reclassification and allow for comparability across periods.

²⁾	Represents elimination of transactions between Allianz Group companies in different geographic regions.

³⁾	Contains run-off of a former operating entity located in Luxembourg of €15 mn in 2006 and €(3) mn in 2005.

⁴⁾	Presentation not meaningful.

Life/Health Insurance Operations

Operating profitability further improved.

•

Revenue shortfall in Italy and the United States.

•

Operating profit improvement driven by growth in our asset base.

•

High margins on both our in-force and new business.

Earnings Summary

Statutory Premiums by Regions¹⁾

in € bn

LOGO

¹⁾	After elimination of transactions between Allianz Group companies in different geographic regions and different segments.

Statutory Premiums – Growth Rates¹⁾

LOGO

¹⁾	Before elimination of transactions between Allianz Group companies in different geographic regions and different segments.

Statutory Premiums

2006 to 2005 Three Month Comparison

Our statutory premiums at €9,847 million in 3Q 2006 remained sound and we continued to experience solid increases both in some of our more mature and emerging markets. In the context of our Sustainability program the leveraging of our worldwide life insurance product expertise, has begun to contribute to our revenues. However, in aggregate, statutory premiums were down 11.8% from a year earlier. This development was mainly attributable to declines in the United States and Italy. Based on internal growth, our statutory premiums decreased 10.9%.

In France, our entities continued to enjoy strong sales momentum with unit-linked contracts, achieved through our proprietary financial advisors network and through partnerships with independent advisors. This drove a 6.4% rise, with statutory premiums reaching €1,313 million.

Germany Life again experienced strong production of new single premium business leading to total statutory premiums in 3Q 2006 of €2,640 million, an increase of €45 million from 3Q 2005.

Within New Europe, our growth markets in Central and Eastern Europe, our Polish operations continued to benefit from a successful sales campaign with a bank partner in 1Q 2006, evidenced by statutory premiums which more than doubled to €76 million in 3Q 2006.

Conversely, at Allianz Life in the United States, statutory premiums decreased 24.9% to €2,144 million, as the sale of equity-indexed annuity products fell short of their prior year level. We attribute this

decrease primarily to the impact of the NASD’s¹⁾ notice in late 2005 to members regarding the sale of index annuities which has created impediments to sales of equity index annuities. Allianz Life is taking action to regain growth momentum by expanding distribution with the broker-dealers, banks and wire-houses, designing channel-specific products, and at the same time reinforcing core strengths in product development of variable products and fixed indexed products.

As expected, statutory premiums were down in Italy. In aggregate, RAS and Lloyd Adriatico experienced a decline of 36.0% to €1,267 million in 3Q 2006, negatively influenced by the difficult market environment. In addition, adverse developments within our bancassurance distribution channel continued to make an impact. At RAS, our share in the total life production of our joint venture partner reduced as expected, while at Lloyd Adriatico, we remained confronted with challenges due to organizational changes at our joint venture partner.

The decrease in statutory premiums by 7.6% to €835 million from our operations in Asia-Pacific, was the net effect of strong increases in South Korea and China, overcompensated by lower premium volume in Taiwan. At Allianz Life Insurance Co. Ltd. in South Korea, we were able to maintain statutory premium momentum from our continued strong sales performance with equity-indexed and variable annuity products. This led to a significant increase in statutory premiums of 30.1% to €467 million. In China, we started to benefit from our cooperation with Industrial and Commercial Bank of China Ltd. In contrast, in Taiwan, statutory premiums decreased 40.8% to €296 million.

2006 to 2005 Nine Month Comparison

Our statutory premiums decreased 1.5% to €34,600 million. Whereas we experienced strong growth in most of our life insurance markets, such as Germany, France, Asia-Pacific and New Europe, the developments in the United States and Italy did not vary from those in 3Q. Based on internal growth, our statutory premiums were down 2.3%.

Operating Profit

in € mn

LOGO

¹⁾	The National Association of Securities Dealers (or “NASD”) is a private-sector provider of financial regulatory services in the United States.

2006 to 2005 Three Month Comparison

Operating profit was €617 million in 3Q 2006, up 11.0% from a year earlier. The most important factors driving this increase were our strong asset base after the segment’s growth in recent years and higher trending equity markets, as well as our improved new business margin.

The markets which contributed strongest to operating profit were Germany Life at €208 million, France at €95 million, the United States at €91 million and Italy at €66 million.

Interest and similar income rose by 9.2% to €3,093 million. This development was in large part due to higher interest income from bonds in the United States through increased yields and growth in our asset base, as well as higher dividend distributions from equity investments at Germany Life.

Realized gains/losses (net) from investments, shared with policyholders, were up 3.5% to €537 million predominantly from the sale of Four Seasons Healthcare Ltd.

Acquisition and administrative expenses (net) rose by 17.4% to €1,132 million, reflecting in particular increased acquisition expenses due to higher amortization of deferred acquisition costs. Factors important for this development were increased lapses in Italy, whereas the corresponding surrender gains are not shown in the expense line item, and the change of an intra-Allianz Group reinsurance contract. Consequently, together with the shortfall in statutory premiums (net), our statutory expense ratio increased to 11.7% from 8.8% a year ago.

Income from financial assets and liabilities carried at fair value through income (net) resulted in an overall expense of €20 million, after an income of €290 million last year. Germany Life exhibited expenses due to the retrospective release of hedging connections. In addition, in the United States, we experienced lower income due to, among other factors, an increase in market interest rates.

While claims and insurance benefits incurred (net) increased, changes in reserves for insurance and investment contracts (net) were down by a similar magnitude, resulting in aggregate, in charges of €6,204 million, consistent with a year ago. The increase of claims and insurance benefits incurred (net) from €3,836 million to €3,942 million stemmed in large part from higher lapses and surrender rates in our operations within Italy, as well as the maturity of savings products at Allianz Life Insurance Co. Ltd. in South Korea. Changes in reserves for insurance and investment contracts (net) were down €117 million to €2,262 million in particular due to decreased statutory premium volume in Italy and the United States. Additionally, a change in product mix in South Korea, reflected by higher sales of separate account variable annuity contracts, contributed to decreased net expenses from changes in reserves.

2006 to 2005 Nine Month Comparison

Operating profit was up 20.8% to €1,867 million. One of the key drivers of this development was interest and similar income, which showed a significant increase, primarily through higher dividend payments from equity investments. To a lesser degree, operating profit benefited from higher realized gains/losses (net) from investments, shared with policyholders, especially from the Schering transaction in 2Q 2006.

Non-Operating Items

2006 to 2005 Three Month Comparison

Non-operating items were down €36 million to a charge of €8 million. This development resulted from lower realized gains/losses (net) from investments, not shared with policyholders, which fell €33 million in large part due to realized gains at RAS from the sale of its remaining interest in Mediobanca in 3Q 2005.

2006 to 2005 Nine Month Comparison

Similar to the development in 3Q, during the first nine months of 2006 we recorded €20 million decline in non-operating income to €133 million, primarily from non-operating restructuring charges in 2Q 2006 within our German life and health businesses.

Net Income

2006 to 2005 Three Month Comparison

Despite an increased income before income taxes and minority interests in earnings, our net income was down 12.7% to €288 million, impacted by income tax expenses which almost doubled from last year. This drove our effective tax rate to 39.4% from 21.3%.

Minority interests in earnings were down 37.7% to €81 million, mainly through lower income after taxes and before minority interests at AGF and RAS. An additional factor in this development was the buy-out of minority shares at our Italian subsidiary RAS.

2006 to 2005 Nine Month Comparison

Net income for the first nine months of 2006 rose by 7.9% to €1,150 million, driven by our strong operating profit development.

Income tax expenses doubled to €549 million, with an effective tax rate of 27.4% (9M 2005: 16.2%). At a relatively constant income after taxes and before minority interests, minority interests in earnings were down €57 million from a year earlier to €301 million primarily as a result of the buy-out at RAS previously mentioned.

The following table sets forth our Life/Health insurance segment’s income statement and statutory expense ratio for the three and nine months ended September 30, 2006 and 2005, respectively.


	Three months ended September 30,				Nine months ended September 30,
	2006		2005		2006		2005
	€ mn		€ mn		€ mn		€ mn
Statutory premiums¹⁾	9,847		11,164		34,600		35,116
Ceded premiums written	(163	)	(211	)	(572	)	(653	)
Change in unearned premiums	(4	)	(46	)	(90	)	(100	)

Statutory premiums (net)	9,680		10,907		33,938		34,363
Deposits from SFAS 97 insurance and investment contracts	(5,169	)	(6,605	)	(19,515	)	(20,289	)

Premiums earned (net)	4,511		4,302		14,423		14,074
Interest and similar income	3,093		2,832		9,838		8,953
Income from financial assets and liabilities carried at fair value through income (net)	(20	)	290		(205	)	286
Realized gains/losses (net) from investments, shared with policyholders²⁾	537		519		2,587		2,163
Fee and commission income	144		152		435		358
Other income	7		—		20		29

Operating revenues	8,272		8,095		27,098		25,863

Claims and insurance benefits incurred (net)	(3,942	)	(3,836	)	(12,738	)	(12,690	)
Changes in reserves for insurance and investment contracts (net)	(2,262	)	(2,379	)	(7,860	)	(7,859	)
Interest expense	(70	)	(98	)	(207	)	(321	)
Loan loss provisions	—		5		1		2
Impairments of investments (net), shared with policyholders	(63	)	(45	)	(308	)	(98	)
Investment expenses	(129	)	(135	)	(497	)	(381	)
Acquisition and administrative expenses (net)	(1,132	)	(964	)	(3,327	)	(2,822	)
Fee and commission expenses	(57	)	(87	)	(177	)	(149	)
Operating restructuring charges³⁾	—		—		(118	)	—

Operating expenses	(7,655	)	(7,539	)	(25,231	)	(24,318	)

Operating profit	617		556		1,867		1,545

Realized gains/losses (net) from investments, not shared with policyholders²⁾	—		33		186		180
Amortization of intangible assets	—		(3	)	(2	)	(10	)
Non-operating restructuring charges³⁾	(8	)	(2	)	(51	)	(17	)

Non-operating items	(8	)	28		133		153

Income before income taxes and minority interests in earnings	609		584		2,000		1,698

Income taxes	(240	)	(124	)	(549	)	(274	)
Minority interests in earnings	(81	)	(130	)	(301	)	(358	)

Net income	288		330		1,150		1,066

Statutory expense ratio⁴⁾in %	11.7		8.8		9.8		8.2

¹⁾

For the Life/Health segment, total revenues are measured based upon statutory premiums. Statutory premiums are gross premiums written from sales of life insurance policies, as well as gross receipts from sales of unit-linked and other investment-oriented products, in accordance with the statutory accounting practices applicable in the insurer’s home jurisdiction.

²⁾	The total of these items equals realized gains/losses (net) in the segment income statement in Note 3 to the consolidated financial statements.

³⁾	The total of these items equals restructuring charges in the segment income statement in Note 3 to the consolidated financial statements.

⁴⁾	Represents acquisition and administrative expenses (net) divided by statutory premiums (net).

Life/Health Operations by Geographic Region

The following tables set forth our life/health statutory premiums, premiums earned (net), statutory expense ratio and operating profit by geographic region for the three and nine months ended September 30, 2006 and 2005, respectively. Consistent with our general practice, statutory premiums, premiums earned (net), statutory expense ratio and operating profit by geographic region are presented before consolidation adjustments, representing the elimination of transactions between Allianz Group companies in different geographic regions and different segments.


	Statutory premiums¹⁾				Premiums earned (net)				Statutory expense ratio				Operating profit
	€ mn				€ mn				%				€ mn
Three months ended September 30,	2006		2005		2006		2005		2006		2005		2006		2005
Germany Life	2,640		2,595		2,205		2,125		9.9		9.3		208		63
Germany Health²⁾	776		765		773		762		10.5		8.5		33		42
Italy	1,267		1,980		198		184		10.2		4.4		66		71
France	1,313		1,234		376		247		15.3		16.9		95		242
Switzerland	143		170		76		81		16.9		14.0		14		20
Spain	111		94		72		74		15.6		9.6		24		18

Netherlands	96		91		38		37		36.8		16.4		11		15
Austria	86		80		69		63		14.8		13.4		6		9
Belgium	120		141		64		78		13.4		10.9		35		9
Portugal	19		19		16		15		13.2		23.6		5		2
Luxembourg	14		9		7		5		12.3		16.3		—		2
Greece	21		20		14		13		25.6		24.7		1		4

Western and Southern Europe	356		360		208		211		20.7		14.3		58		41

Hungary	24		22		18		19		23.9		28.5		3		3
Slovakia	43		37		33		34		11.6		21.7		1		3
Czech Republic	17		16		13		12		8.6		19.3		3		1
Poland	76		31		29		14		26.8		27.7		2		1
Romania	5		5		3		1		38.6		36.0		—		—
Bulgaria	6		4		5		4		15.4		13.6		1		1
Croatia	11		9		9		8		16.8		22.9		1		—
Russia	2		—		2		—		14.1		— ⁵	⁾	—		—

New Europe	184		124		112		92		20.5		24.4		11		9

Other Europe	540		484		320		303		20.6		16.9		69		50

United States	2,144		2,853		95		127		7.6		5.7		91		77

Asia-Pacific, thereof:	835		904		301		280		11.3		8.2		19		12
South Korea	467		359		243		245		13.1		16.9		17		14
Taiwan	296		500		24		13		6.2		0.3		2		2
Malaysia	26		21		21		18		12.8		11.2		2		(1	)
Indonesia	21		15		9		7		30.4		27.0		—		—
Other	25		9		4		(3	)	19.4		56.2		(2	)	(3	)

South America	28		28		8		9		21.3		24.7		(1	)	5

Other³⁾	96		113		88		108		— ⁵	⁾	— ⁵	⁾	24		(46	)

Subtotal	9,893		11,220		4,512		4,300		—		—		642		554

Consolidation adjustments⁴⁾	(46	)	(56	)	(1	)	2		—		—		(25	)	2

Total	9,847		11,164		4,511		4,302		11.7		8.8		617		556

¹⁾	Statutory premiums are gross premiums written from sales of life insurance policies as well as gross receipts from sales of unit-linked and other investment-oriented products, in accordance with the statutory accounting practices applicable in the insurer’s home jurisdiction.

²⁾	Loss ratios were 67.4% and 67.0% for the three months ended September 30, 2006 and 2005, respectively.

³⁾	Contains, among others, the life/health business assumed by Allianz SE, which was previously reported under PC Germany in the Property-Casualty segment. Prior year balances have been adjusted to reflect this reclassification and allow for comparability across periods.

⁴⁾	Represents elimination of transactions between Allianz Group companies in different geographic regions.

⁵⁾	Presentation not meaningful.


	Statutory premiums ¹⁾				Premiums earned (net)			Statutory expense ratio				Operating profit
	€ mn				€ mn			%				€ mn
Nine months ended September 30,	2006		2005		2006		2005	2006		2005		2006		2005
Germany Life	8,844		8,260		7,103		6,867	9.4		7.6		454		232
Germany Health²⁾	2,317		2,282		2,315		2,280	8.4		9.0		132		117
Italy	5,898		6,908		720		673	7.2		5.0		269		254
France	4,247		3,821		1,174		1,045	14.8		15.4		370		478
Switzerland	840		862		365		370	9.0		9.4		41		38
Spain	427		379		294		317	10.7		7.7		65		51

Netherlands	324		288		111		109	19.5		15.4		33		29
Austria	270		249		201		192	13.3		10.2		28		25
Belgium	415		437		209		233	11.3		12.0		67		41
Portugal	64		56		49		45	14.6		22.3		17		10
Luxembourg	35		25		22		17	14.1		21.1		3		4
Greece	71		66		45		40	23.9		23.7		3		4

Western and Southern Europe	1,179		1,121		637		636	14.9		13.8		151		113

Hungary	68		66		55		54	25.9		26.6		11		11
Slovakia	131		108		100		98	16.8		20.7		15		7
Czech Republic	55		46		40		36	17.0		20.9		7		4
Poland	307		71		69		39	14.7		33.7		5		3
Romania	20		12		9		4	39.0		33.6		—		—
Bulgaria	17		12		15		12	15.7		11.7		2		2
Croatia	31		29		25		23	21.9		23.6		2		1
Russia	6		—		6		—	16.4		— ⁵	⁾	—		—

New Europe	635		344		319		266	17.6		24.9		42		28

Other Europe	1,814		1,465		956		902	15.9		16.4		193		141

United States	7,120		8,614		263		385	6.9		4.4		244		203

Asia-Pacific, thereof:	2,807		2,216		910		864	10.3		12.3		70		26
South Korea	1,561		1,058		746		731	13.2		20.5		55		20
Taiwan	1,040		1,019		65		54	3.6		2.0		11		8
Malaysia	76		73		62		51	18.3		15.5		6		—
Indonesia	55		48		25		22	31.3		23.7		1		1
Other	75		18		12		6	18.6		97.7		(3	)	(3	)

South America	116		93		33		24	16.0		18.8		(2	)	4

Other³⁾	338		384		291		345	— ⁵	⁾	— ⁵	⁾	123		4

Subtotal	34,768		35,284		14,424		14,072	—		—		1,959		1,548

Consolidation adjustments⁴⁾	(168	)	(168	)	(1	)	2	—		—		(92	)	(3	)

Total	34,600		35,116		14,423		14,074	9.8		8.2		1,867		1,545

¹⁾	Statutory premiums are gross premiums written from sales of life insurance policies as well as gross receipts from sales of unit-linked and other investment-oriented products, in accordance with the statutory accounting practices applicable in the insurer’s home jurisdiction.

²⁾	Loss ratios were 68.9% and 70.1% for the nine months ended September 30, 2006 and 2005, respectively.

³⁾	Contains, among others, the life/health business assumed by Allianz SE, which was previously reported under PC Germany in the Property-Casualty segment. Prior year balances have been adjusted to reflect this reclassification and allow for comparability across periods.

⁴⁾	Represents elimination of transactions between Allianz Group companies in different geographic regions.

⁵⁾	Presentation not meaningful.

Banking Operations

On track to achieve ambitious full year targets.

•

Operating revenues stable.

•

Sustainable operating profit improvement continued.

•

Significantly improved cost-income ratio.

Earnings Summary

The results of operations of our Banking segment are almost exclusively represented by Dresdner Bank, accounting for 96.1% of our total Banking segment’s operating revenues for the first nine months of 2006 (9M 2005: 95.8%). Accordingly, the discussion of our Banking segment’s results of operations relates solely to the operations of Dresdner Bank.

Operating Revenues

2006 to 2005 Three Month Comparison

Operating revenues, at €1,521 million in 3Q 2006, were on a par with a year earlier despite lower trading income in a challenging market environment. Overall, significantly higher net interest income made up for decreased trading income (net), while net fee and commission income was flat.

Net interest income amounted to €695 million, up 35.2% from a year ago. Excluding the impact of accounting for derivative financial instruments which do not qualify for hedge accounting, net interest income increased 5.2%. In our operating divisions, Private & Business Clients (or “PBC”) and Corporate & Investment Banking (or “CIB”), net interest income was relatively stable. In PBC, our favorably developing deposit business more than compensated for lower net interest income from our loan business.

At €631 million, net fee and commission income was rather unchanged. Our operating divisions developed favorably with PBC experiencing increased income from closed-end funds, compensating for lower income from the securities business, and CIB generating higher fee income from its investment banking activities.

Trading income (net) was down 48.5% to €188 million primarily in our derivative business due to low activities stemming from an uncertain market environment and unfavorable conditions in July and August. In September, trading income (net) recovered.

2006 to 2005 Nine Month Comparison

Operating revenues increased considerably by 14.6% to €5,114 million. This strong growth resulted from positive developments in all revenue categories and both operating divisions.

Operating Profit

2006 to 2005 Three Month Comparison

Operating profit grew to €311 million, up 38.2% from a year earlier. While slightly increased revenues also helped in this development, decreases of both bonus-related and non-bonus-related personnel expenses were the key drivers.

Operating expenses declined 11.0% to €1,259 million, of which administrative expenses amounted to €1,237 million, down 10.9%. Administrative expenses declined due to a reduction in revenue-linked bonuses and related social security expenses, reflecting the revenue development in our CIB division. Additionally, administrative expenses benefited from further efficiency gains, resulting from, among other factors, a reduction in headcount after the closure of our Institutional Restructuring Unit (or “IRU”). As a result of the stable development of our operating revenues and declining operating expenses, our cost-income ratio improved significantly by 10.9 percentage points to 82.8%.

Loan loss provisions experienced a net release of €49 million. Adequate reserving for current risks with gross additions of €103 million was in line with the improved quality of our loan portfolio following the successful completion of the wind-down of our IRU portfolio in 2005. Gross additions were more than offset by recoveries from loans previously written off and releases of provisions of, in aggregate, €152 million.

2006 to 2005 Nine Month Comparison

Operating profit increased significantly to €1,159 million, up 81.4%. This strong development was largely attributable to the dynamic growth in operating revenues, whereas operating expenses were only 3.2% higher. We successfully drove down our cost-income ratio by 8.8 percentage points to 78.8%. Loan loss provisions resulted in a net release of €77 million, compared to an €84 million net release in the prior year period. Similar to a year ago, high recoveries of loans and releases of provisions were key factors in this development. At September 30, 2006, our coverage ratio was 59.8%, up 1.0 percentage point from September 30, 2005.

Operating Profit – Dresdner Bank

in € mn

LOGO

Non-Operating Items

2006 to 2005 Three Month Comparison

In aggregate, net expenses from non-operating items were €8 million, down €21 million from a year ago. Realized gains/losses (net) of €73 million were, in large part, connected to the sale of a subsidiary. Restructuring charges amounted to €33 million (3Q 2005: €5 million) and impairments of investments (net) to €(48) million (3Q 2005: €(24) million). Restructuring charges reflected the initial impact from our “Neue Dresdner Plus program”.

2006 to 2005 Nine Month Comparison

The significant decline in income from non-operating items by 38.0% was mainly attributable to reduced realized gains/losses (net). In addition, higher restructuring charges were incurred, resulting primarily from the “Neue Dresdner Plus program”.

Net Income

2006 to 2005 Three Month Comparison

Net income more-than-doubled to €230 million. This development reflected, in particular, our strong operating profit growth. Conversely, income tax expenses decreased from €64 million to €56 million, reflecting an effective tax rate of 18.5% (3Q 2005: 32.6%). Income taxes benefited from tax-exempt realized gains in 3Q 2006.

2006 to 2005 Nine Month Comparison

Net income increased 16.8% to €1,086 million. Driven by strong operating profit growth, income tax expenses rose by €118 million to €406 million. Our effective income tax rate was 26.1%, compared to 22.5% a year earlier. In 1Q 2005 and 2006, similar significant tax-exempt gains from the sale of Munich Re shares were realized, which had a larger impact on the 9M 2005 effective tax rate due to a lower income before income taxes and minority interests in earnings compared to that for the first nine months of 2006.

The following table sets forth the income statements and cost-income ratios for both our Banking segment as a whole and Dresdner Bank for the three and nine months ended September 30, 2006 and 2005, respectively.


	Three months ended September 30,								Nine months ended September 30,
	2006				2005				2006				2005
	Banking Segment¹⁾		Dresdner Bank		Banking Segment¹⁾		Dresdner Bank		Banking Segment¹⁾		Dresdner Bank		Banking Segment¹⁾		Dresdner Bank
	€mn		€mn		€mn		€mn		€mn		€mn		€mn		€mn
Net interest income²⁾	709		695		529		514		1,962		1,904		1,633		1,580
Net fee and commission income³⁾	668		631		676		640		2,228		2,104		2,073		1,964
Trading income (net)⁴⁾	285		188		382		365		1,080		1,053		964		928
Income from financial assets and liabilities designated at fair value through income (net)⁴⁾	6		6		(7	)	(7	)	27		27		(11	)	(11	)
Other income	—		1		(2	)	(2	)	25		26		2		2

Operating revenues⁵⁾	1,668		1,521		1,578		1,510		5,322		5,114		4,661		4,463

Administrative expenses	(1,294	)	(1,237	)	(1,430	)	(1,388	)	(4,158	)	(4,004	)	(4,005	)	(3,854	)
Investment expenses	(19	)	(21	)	(8	)	(9	)	(35	)	(40	)	(23	)	(28	)
Other expenses	(1	)	(1	)	(18	)	(18	)	12		12		(26	)	(26	)

Operating expenses	(1,314	)	(1,259	)	(1,456	)	(1,415	)	(4,181	)	(4,032	)	(4,054	)	(3,908	)

Loan loss provisions	52		49		130		130		78		77		89		84

Operating profit	406		311		252		225		1,219		1,159		696		639

Realized gains/losses (net)	71		73		—		—		517		517		729		729
Impairments of investments (net)	(48	)	(48	)	(25	)	(24	)	(80	)	(80	)	(82	)	(80	)
Amortization of intangible assets	1		—		(1	)	—		—		—		(1	)	—
Restructuring charges	(32	)	(33	)	(5	)	(5	)	(41	)	(41	)	(10	)	(10	)

Non-operating items	(8	)	(8	)	(31	)	(29	)	396		396		636		639

Income before income taxes and minority interests in earnings	398		303		221		196		1,615		1,555		1,332		1,278

Income taxes	(96	)	(56	)	(72	)	(64	)	(430	)	(406	)	(301	)	(288	)
Minority interests in earnings	(19	)	(17	)	(26	)	(19	)	(74	)	(63	)	(77	)	(60	)

Net income	283		230		123		113		1,111		1,086		954		930

Cost-income ratio⁶⁾in %	78.8		82.8		92.3		93.7		78.6		78.8		87.0		87.6

¹⁾	Consists of Dresdner Bank and non-Dresdner Bank banking operations within our Banking segment, as well as the elimination of trading income (net) of €(81) mn and €– mn at Dresdner Bank resulting from Dresdner Bank’s trading activities in Allianz SE shares in 3Q and 9M 2006, respectively.

²⁾	Represents interest and similar income less interest expense.

³⁾	Represents fee and commission income less fee and commission expense.

⁴⁾	The total of these items equals income from financial assets and liabilities carried at fair value through income (net) in the segment income statement in Note 3 to the consolidated financial statements.

⁵⁾	For the Banking segment, total revenues are measured based upon operating revenues.

⁶⁾	Represents operating expenses divided by operating revenues.

Banking Operations by Division

The following tables set forth our banking operating revenues, operating profit and cost-income ratio by division for the three and nine months ended September 30, 2006 and 2005, respectively. Consistent with our general practice, operating revenues, operating profit and cost-income ratio by division are presented before consolidation adjustments, representing the elimination of transactions between Allianz Group companies in different segments.


Three months ended September 30,	2006					2005
	Operating revenues	Operating profit		Cost-income ratio		Operating revenues		Operating profit		Cost-income ratio
	€ mn	€ mn		%		€ mn		€ mn		%
Private & Business Clients¹⁾	754	145		78.0		744		109		82.7
Corporate & Investment Banking¹⁾	748	134		83.0		851		171		84.3
Corporate Other²⁾	19	32		— ³	⁾	(85	)	(55	)	— ³	⁾

Dresdner Bank	1,521	311		82.8		1,510		225		93.7

Other Banks⁴⁾	147	95		83.3⁵	⁾	68		27		60.3

Total	1,668	406		78.8		1,578		252		92.3


Nine months ended September 30,	2006					2005
	Operating revenues	Operating profit		Cost-income ratio		Operating revenues		Operating profit		Cost-income ratio
	€ mn	€ mn		%		€ mn		€ mn		%
Private & Business Clients¹⁾	2,420	573		74.3		2,273		398		78.2
Corporate & Investment Banking¹⁾	2,694	617		78.3		2,160		368		83.2
Corporate Other²⁾	—	(31	)	— ³	⁾	30		(127	)	— ³	⁾

Dresdner Bank	5,114	1,159		78.8		4,463		639		87.6

Other Banks⁴⁾	208	60		71.6⁵	⁾	198		57		73.7

Total	5,322	1,219		78.6		4,661		696		87.0

¹⁾

Our reporting by divisions reflects the organizational changes within Dresdner Bank in 2006 resulting in two operating divisions. Private & Business Clients combines all banking activities for private and corporate customers formerly provided by the Personal Banking and Private & Business Banking divisions. Furthermore, Corporate & Investment Banking combines the former Corporate Banking and Dresdner Kleinwort Wasserstein divisions. Following a decision taken in June 2006, we will integrate our business activities with medium-sized business clients into that with private and corporate customers. In the table above, our medium-sized business clients are still included in Corporate & Investment Banking. The final new business model with two new organizational units Private & Corporate Clients and Investment Banking is not reflected in the table above.

²⁾

The Corporate Other division contains income and expense items that are not assigned to Dresdner Bank’s operating divisions. These items include, in particular, impacts from the accounting for derivative financial instruments which do not qualify for hedge accounting, provisioning requirements for country and general risks, as well as realized gains and losses from Dresdner Bank’s non-strategic investment portfolio. For the three and nine months ended September 30, 2006, the impact from the accounting for derivative financial instruments which do not qualify for hedge accounting on Corporate Other’s operating revenues amounted to €(35) mn and €(49) mn, respectively (2005: €(154) mn and €(81) mn, respectively). With effect from 1Q 2006, the majority of expenses for support functions and central projects previously included within Corporate Other have been allocated to the operating divisions. Additionally, the non-strategic Institutional Restructuring Unit (or “IRU”) was closed down effective September 30, 2005 having successfully completed its mandate to free-up risk capital through the reduction of risk-weighted assets. Furthermore, effective in 1Q 2006, and as a result of Dresdner Bank restructuring its divisions, the IRU’s 2005 results of operations were reclassified into Corporate Other. Prior year balances have been adjusted to reflect these reclassifications and allow for comparability across periods.

³⁾	Presentation not meaningful.

⁴⁾	Consists of non-Dresdner Bank banking operations within our Banking segment, as well as the elimination of trading income (net) of €(81) mn and €– mn at Dresdner Bank resulting from Dresdner Bank’s trading activities in Allianz SE shares in 3Q and 9M 2006, respectively.

⁵⁾	Excludes the impact from the elimination of trading income (net) at Dresdner Bank resulting from Dresdner Bank’s trading activities in Allianz SE shares.

Asset Management Operations

Strong operating profitability maintained.

•

Net inflows, at €25 billion in the first nine months of 2006, strengthened again.

•

Strong operating profit in 3Q 2006, as in the prior year.

•

Cost-income ratio remains at a very competitive level.

Third-Party Assets Under Management

Overall, in the first nine months of 2006, we were faced with a volatile and challenging market environment. Whereas in the first and third quarter, equity capital markets developed favorably worldwide, the second quarter showed substantial declines in market values. In the fixed income capital markets, substantial decreases in market values occurred throughout the first half of the year, following the increases in market interest rates, only recovering during the last quarter. Additionally, net flows in the fixed income mutual fund market in the United States and Germany turned negative during 2Q 2006, a development which persisted in Germany during the third quarter.

Despite this challenging market environment, net inflows to third-party assets strengthened again in 3Q 2006, reaching €25 billion in the first nine months of the year. Both fixed income and equity products contributed to the positive development, which bolstered our strong position as one of the largest asset managers, based on total assets under management.¹⁾

A key success factor continued to be our competitive investment performance. The overwhelming majority of the third-party assets we manage again outperformed their respective benchmarks. Market-related appreciation was €25 billion. Net inflows and positive market effects were partly offset by negative effects of €38 billion from exchange rate movements, resulting primarily from a weaker U.S. Dollar versus the Euro. As a consequence, on a Euro-basis, our third-party assets increased by a net €12 billion to €755 billion at September 30, 2006, compared to €743 billion at December 31, 2005.

Our major achievements in the first nine months of 2006 included the following:

United States

•

Allianz/PIMCO Funds were named “Best Mutual Fund Family of 2005” in the annual Lipper/Barron’s Fund Families Survey.

•

Particularly strong net inflows of approximately €5 billion at our equity fund manager NFJ Investment Group.

•

PIMCO Commodity Real Return Funds began trading on June 29, 2006 and already successfully raised USD 425 million in assets.

•

PIMCO was named “Investor of the Year 2005” by Securitization News.

Germany

•

Allianz Global Investors Germany in market-leading positions concerning net inflows in special funds (as of June 2006) and in equity mutual funds (as of September 2006).²⁾

•

Deutscher Investment Trust (or “dit”) ranked first in the “Most Improved Group” of Standard & Poor’s German Fund Awards 2006.

•

dit was awarded five stars by German financial magazine “Capital”, the highest possible score.

We operate our third-party asset management business primarily through Allianz Global Investors (or “AGI”). At September 30, 2006, AGI managed approximately 94.7% (December 31, 2005: 95.2%) of our third-party assets. The remaining assets are managed by Dresdner Bank (approximately 2.8% and 2.3% at September 30, 2006 and December 31, 2005, respectively) and other Allianz Group companies (approximately 2.5% both at September 30, 2006 and December 31, 2005).

¹⁾	Source: Own internal analysis and estimates.

²⁾	Source: Bundesverband Investment and Asset Management (or “BVI”), an association representing the German investment fund industry.

The following graphs present the third-party assets managed by the Allianz Group by geographic region, investment category and investor class at September 30, 2006 and December 31, 2005, respectively.

Third-party Assets Under Management – Fair Values by Geographic Region¹⁾

in € bn

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¹⁾	Based on the origination of the assets.

²⁾	Consists of third-party assets managed by Dresdner Bank (approximately €21 bn and €17 bn at September 30, 2006 and December 31, 2005, respectively) and by other Allianz Group companies (approximately €19 bn both at September 30, 2006 and December 31, 2005).

Third-party Assets Under Management – Fair Values by Investment Category

in € bn

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¹⁾	Includes primarily investments in real estate.

Third-party Assets Under Management – Fair Values by Investor Class

in € bn

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Earnings Summary

The results of operations of our Asset Management segment are almost exclusively represented by AGI, accounting for 98.3% and 99.3% of our total Asset Management segment’s operating revenues and operating profit, respectively, in 3Q 2006 (3Q 2005: 98.2% and 98.0%). Accordingly, the discussion of our Asset Management segment’s results of operations relates solely to the operations of AGI.

Operating Revenues

2006 to 2005 Three Month Comparison

Operating revenues increased 2.4% from a year ago to €714 million in 3Q 2006, of which net fee and commission income amounted to €689 million, up 3.0%. Higher asset-based management fees, primarily reflecting our third-party asset growth, was the key factor in this development. Partially offsetting were negative foreign currency effects from the depreciation of the U.S. Dollar compared to the Euro. Internal operating revenue growth was 6.4%.

2006 to 2005 Nine Month Comparison

At €2,166 million for the first nine months of 2006, operating revenues showed a solid rise of 14.8% from a year earlier. In addition to our increased third-party asset base previously mentioned, this growth reflected higher management fees, in particular from our further strengthened equity business. Internal growth of operating revenues at 14.3% was slightly less, mainly attributable to the appreciation of the U.S. Dollar compared to the Euro in the nine month comparison.

The following table sets forth the composition of AGI’s net fee and commission income.


	Three months ended September 30,				Nine months ended September 30,
	2006		2005		2006		2005
	€ mn		€ mn		€ mn		€ mn
Fee and commission income, thereof:	984		952		3,013		2,612
Management fees	818		775		2,469		2,130
Loading and exit fees	75		87		253		244
Performance fees	5		21		30		42
Other	86		69		261		196
Fee and commission expenses, thereof:	(295	)	(283	)	(919	)	(781	)
Commissions	(214	)	(211	)	(663	)	(588	)
Other	(81	)	(72	)	(256	)	(193	)

Net fee and commission income	689		669		2,094		1,831

Operating Profit

2006 to 2005 Three Month Comparison

We generated operating profit of €292 million, a slight decline by 0.7% compared to the prior year period. Excluding effects related to foreign currency translation and changes in scope of consolidation, operating profit would have improved by 1.8%. Our operations in the United States contributed most, with operating profit reaching €237 million, up 8.0%, despite the challenging market environment in 3Q 2006.

Operating expenses increased 4.7% to €422 million, comprising personnel related expenses of €278 million and non-personnel related expenses of €144 million. This development was in line with our business expansion and higher headcount. Additionally, key strategic future growth investments in Germany, Europe and Asia contributed to increased operating expenses. Consequently our cost-income ratio reached 59.1%, 1.3 percentage points higher than a year ago.

2006 to 2005 Nine Month Comparison

Our operating profit rose by €115 million to €887 million. Internal growth was €113 million or 14.8%. Operating expenses increased 14.8% to €1,279 million. Thereof, personnel-related expenses amounted to €829 million, up 17.1%, and non-personnel-related expenses amounted to €450 million, up 10.8%. In addition to the developments previously mentioned in the three month comparison, personnel-related expenses increased due to higher performance-linked compensation primarily in the United States, in line with the positive business development and higher headcount. At 59.0%, our cost-income ratio remained stable and at a very competitive level.

Operating Profit – Allianz Global Investors

in € mn

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Non-Operating Items

2006 to 2005 Three Month Comparison

Acquisition-related expenses dropped from €214 million in the prior year period to €134 million in 3Q 2006, a decline of 37.4%. This development was mainly driven by a lower number of outstanding PIMCO LLC Class B Units (or “Class B Units”). As of September 30, 2006, the Allianz Group had acquired 21,762 of the 150,000 units originally outstanding.

Going forward, we expect acquisition-related expenses to be mainly driven by our operating profit development.

2006 to 2005 Nine Month Comparison

Acquisition-related expenses and amortization of intangible assets, in aggregate, decreased 27.2% to €404 million. In addition to the lower number of outstanding Class B Units just mentioned, the expiration of amortization charges relating to capitalized loyalty bonuses for PIMCO management in 2Q 2005 also contributed to this development.

Net Income

2006 to 2005 Three Month Comparison

At €82 million, net income more than doubled from €38 million a year ago. Excluding effects from foreign currency translation, net income would have improved by €47 million. Income tax expenses reached €67 million (3Q 2005: €32 million), mainly driven by significantly increased taxable income in the United States.

2006 to 2005 Nine Month Comparison

Net income grew dynamically by 83.7% to €259 million, including positive effects from exchange rate movements of €2 million. Income tax expenses were up to €193 million from €49 million a year ago, mainly resulting from the significantly increased taxable income in the United States previously mentioned and a one-off deferred tax credit of €37 million in the United States related to tax deductible goodwill amortization in 2Q 2005.

The following table sets forth the income statements and cost-income ratios for both our Asset Management segment as a whole and AGI for the three and nine months ended September 30, 2006 and 2005, respectively.

Three months ended September 30,

Nine months ended September 30,

2006

2005

2006

2005

Asset
Management
Segment

Allianz
Global
Investors

Asset
Management
Segment

Allianz
Global
Investors

Asset
Management
Segment

Allianz
Global
Investors

Asset
Management
Segment

Allianz
Global
Investors

€ mn

Net fee and commission income¹⁾

699

689

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