7 January 2020 | 12:08PM GMT

Allianz SE (ALVG.DE)
Neutral

Understanding buy-back capabilities

ALVG.DE 12m Price Target: €225.00 Price: €217.70 Upside: 3.4%

Johnny Vo
+44(20)7552-5785 | johnny.vo@gs.com
Goldman Sachs International

Allianz has conducted €7.5bn of share buy-backs over recent years. Edward Gunby, CFA
+44(20)7774-3488 | edward.c.gunby@gs.com
In the absence of M&A, investor expectations for additional Goldman Sachs International

buy-backs continue to build. To assess Allianz’s financial flexibility, its Adam Uddin
+44(20)7051-3991 | adam.uddin@gs.com
structure and approach to liquidity management need to be Goldman Sachs International

understood. In this report, we outline the accounts of Allianz SE (SE) Sami Taipalus
+44(20)7051-7237 | sami.taipalus@gs.com
and Allianz Europe BV (BV) over 2009-18. These show the recent Goldman Sachs International

decline in Unencumbered Liquidity within SE (€3.6bn at FY18) and Key Data __________________________________
demonstrate that BV is not a store of group liquidity, and therefore Market cap: €95.5bn / $106.9bn
3m ADTV: €210.8mn / $233.5mn
does not influence group capital return prospects. We maintain our Germany
Europe Insurance
Neutral rating and 12-month price target of €225. Shares outst. (mn): 438.9
Free float (%): --
M&A Rank: 3

Excess cash/capital (Unencumbered Liquidity) stored in Allianz SE GS Forecast ________________________________

12/18 12/19E 12/20E 12/21E
Allianz seeks to upstream excess cash/capital generated by its PBT (€ mn) 10,399.0 11,042.2 11,821.1 12,360.5
Net inc. (€ mn) 7,462.0 7,495.8 8,059.9 8,437.8
operating entities into its parent company (SE). In historic
Op. inc. (€ mn) 8,527.4 8,461.4 8,826.1 9,202.1
presentations, management has outlined this approach to liquidity EPS (€) 17.43 17.80 19.26 20.12
DPS (€) 9.00 9.30 9.70 10.10
management, providing details on remittance dynamics and the BVPS (€) 144.26 150.35 158.58 167.24
Tang. BVPS (€) 111.82 117.41 125.71 134.45
accumulation of a “strategic liquidity reserve”. When considering P/E (X) 10.7 12.2 11.3 10.8
excess liquidity, we note that appropriate liabilities/financing must Dividend yield (%) 4.8 4.3 4.5 4.6

be netted off and a liquidity buffer should be maintained to manage 9/19 12/19E 3/20E 6/20E
EPS (€) 4.64 3.41 4.82 4.82
volatility in subsidiary capitalization and remittances.
GS Factor Profile ____________________________
Growth

Allianz Europe BV does not hold excess cash/capital

Financial Returns
Allianz’s key intermediate holding company (BV) is not a store of
Multiple
cash/capital. Of note, some market participants have quoted its
dividend reserve as a gauge for group financial flexibility. We Integrated

highlight that the dividend reserve of BV (€14.6bn at FY18) is an

Percentile 20th 40th 60th 80th 100th
accounting measure and not a cash item. The entity’s financial
ALVG.DE relative to Europe Coverage
accounts over 2009-18 show that cash on its balance sheet (defined ALVG.DE relative to Europe Insurance
as net current assets) has remained modest over the period. This is
Source: Company data, Goldman Sachs Research estimates.
a result of any cash received by BV, from Operating Entities, being See disclosures for details.

almost immediately passed to SE.

Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result,
investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this
report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC
certification and other important disclosures, see the Disclosure Appendix, or go to
www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research
analysts with FINRA in the U.S.

saurabh@softbank.com Saurabh Jalan 02/04/20 10:01:54 AM Softbank Inc.

Goldman Sachs Allianz SE (ALVG.DE)

Allianz SE (ALVG.DE) Balance Sheet (€ mn) _____________________________________

Neutral Rating since May 15, 2018 Total assets
12/18
897,567.0
12/19E
924,026.4
12/20E
953,415.1
12/21E
983,898.9
Total shareholders’ equity 63,679.0 65,339.9 69,079.0 73,027.8
Minorities 2,447.0 2,510.8 2,654.5 2,806.2
Ratios & Valuation _______________________________________ Goodwill 13,767.0 13,767.0 13,767.0 13,767.0
12/18 12/19E 12/20E 12/21E Revaluation reserve 1,000.0 2,209.1 1,618.2 1,027.3
Actual ROE (%) 17.2 19.0 18.1 18.1 Adjusted NAV 47,465.0 49,062.1 52,657.5 56,454.6
ROTE (%) 17.2 16.8 17.7 17.0 Interest bearing debt 22,700.0 22,700.0 22,700.0 22,700.0

P/E (X) 10.7 12.2 11.3 10.8 Int. debt/(Eq. + int. debt) (%) 26.3 25.8 24.7 23.7
P/EBIT (IFRS) (X) -- -- -- --
Normal dividend yield (%) 4.8 4.3 4.5 4.6 Total embedded value 78,256.0 83,570.2 89,605.4 95,973.2
P/BVPS (X) 1.2 1.5 1.4 1.3
Non-life technical reserves -- -- -- --
P/TBVPS (X) 1.6 1.8 1.6 1.5
P/Adjusted TBVPS (X) 1.6 1.8 1.7 1.6
Life traditional reserves 279,421.8 279,421.8 279,421.8 279,421.8
P/EVPS (X) NM NM NM NM
Life unit-linked reserves 41,931.8 41,931.8 41,931.8 41,931.8
Life total reserves 321,353.5 321,353.5 321,353.5 321,353.5
Growth & Margins (%) ____________________________________
12/18 12/19E 12/20E 12/21E
Assets under management 1,436,000.0 1,684,841.2 1,775,960.5 1,872,533.6
Loss ratio 0.7 0.7 0.7 0.7
Expense ratio 0.3 0.3 0.3 0.3 BVPS (€) 144.26 150.35 158.58 167.24
Comb. Ratio 0.9 0.9 0.9 0.9 TBVPS (€) 117.59 123.41 132.05 141.14
Adjusted TBVPS (€) 115.23 118.13 128.18 138.69
Life new business margin -- -- -- --
EVPS (€) -- -- -- --
Price Performance _______________________________________ Source: Company data, Goldman Sachs Research estimates.
ALVG.DE (€) FTSE World Europe (EUR)

260 525

240 500

220 475

200 450

180 425

160 400

Apr-19 Jul-19 Oct-19 Jan-20

3m 6m 12m
Absolute 5.6% 0.3% 22.7%
Rel. to the FTSE World Europe (EUR) (3.5)% (5.9)% 1.7%
Source: FactSet. Price as of 6 Jan 2020 close.

Income Statement (€ mn) __________________________________

12/18 12/19E 12/20E 12/21E
Non-life pre-tax result 5,725.0 5,711.2 5,853.9 6,055.7
Life pre-tax result 4,152.0 4,391.0 4,373.9 4,476.1
Banking pre-tax result -- -- -- --
Asset mgmt. pre-tax result 2,530.0 2,676.4 3,077.8 3,295.1
Other pre-tax result 1,635.0 1,936.4 2,283.9 2,503.4
Holding company pre-tax result (895.0) (740.0) (793.9) (791.8)
Eliminations (1,113.0) (996.4) (690.6) (674.7)
Group pre-tax result 10,399.0 11,042.2 11,821.1 12,360.5
Pre-tax profit 10,399.0 11,042.2 11,821.1 12,360.5
Minority interest (241.0) (265.2) (279.1) (288.0)
Provision for taxes (2,696.0) (3,281.2) (3,482.1) (3,634.6)
Net inc. (post-exceptionals) 7,462.0 7,495.8 8,059.9 8,437.8
GS operating net income 8,527.4 8,461.4 8,826.1 9,202.1
EPS (€) 17.43 17.80 19.26 20.12
DPS (€) 9.00 9.30 9.70 10.10
Buyback per share (€) 2.36 3.59 -- --

Dividend 3,610.0 3,807.8 3,873.6 4,049.9

Buyback 1,000.0 1,500.0 0.0 0.0
Wtd avg shares out. (basic) (mn) 428.2 421.2 418.4 419.4

Non-life gross written premiums 53,636.0 55,245.1 56,902.4 58,609.5

Non-life net earned premiums 48,305.0 49,889.2 51,587.9 53,135.5
Non-life claims expense (31,864.0) (32,997.4) (34,172.5) (35,144.5)
Non-life operating expense (13,542.0) (13,753.3) (14,144.2) (14,488.9)
Non-life underwriting result 2,899.0 3,138.5 3,271.1 3,502.1
Non-life investment income 3,017.0 2,821.7 2,820.6 2,796.5
Life APE -- -- -- --
Life new business profit -- -- -- --

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Goldman Sachs Allianz SE (ALVG.DE)

Understanding buy-back capabilities

The ability of an insurance company to return capital to shareholders can simplistically

be considered in terms of three key elements: Group Solvency II capitalization,
Unencumbered Liquidity and Leverage Capacity. The first is an over-arching constraint
that needs to be managed (with numerous sub constraints, e.g. subsidiary
capitalization); however, the latter two components, which are inter-related, tend to be
less well understood.

For an insurance company to utilize excess Group Solvency II capital, liquidity needs to
be available for distribution. This can come from two sources. First, what we term
Unencumbered Liquidity, which is long-term central liquidity in holding companies.
Finally, leverage capacity, which provides a simple means to create liquidity, depending
on the form of debt used.

Allianz SE holds the group’s central liquidity

Given the comfortable level of Solvency II capital and capital generation of Allianz Group,
we believe liquidity and leverage considerations are more pertinent for Allianz. These
factors will influence both the buy-back capabilities of the group, and strategic direction
by determining the size/structure of potential M&A.

In the exhibit below, we outline a simplified organizational structure of Allianz, including

disclosure provided on the origination of group remittances (as per the 2014 Investor
Day). It can be seen that Allianz’s organizational structure is relatively simple. The group’s
ultimate holding company, Allianz SE, is an operating holding company, offering a range
of reinsurance coverage, primarily to Allianz insurance entities. Allianz SE also conducts
the governance, management, strategic oversight and liquidity management of the
group (together with its sub-holding company Allianz Europe BV).

Exhibit 1: The majority of Allianz’s remittances pass through Allianz Europe BV

Schematic of Allianz remittance structure as disclosed at its 2014 investor day

Allianz SE

c.2/3 of OE remittances c.1/3 of OE remittances

Allianz Europe BV

US French Italian German

Holding Holding Holding Holding

PIMCO L/H L/H L/H AGCS

L/H P/C P/C P/C AAM

Source: Company data, Goldman Sachs Global Investment Research

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Goldman Sachs Allianz SE (ALVG.DE)

Allianz Europe BV facilitates liquidity transfers to Allianz SE

Allianz Europe BV is the central holding company for the majority of the group’s
Operating Entities (including PIMCO), which account for c.2/3 of remittances in a given
period. These remittances are provided to Allianz Europe BV in a number of forms
(predominantly dividend receipts), which are then subsequently passed to Allianz SE via
both loans and dividend payments. The group’s German domiciled entities, including
AGCS and AGI, have direct profit and loss transfer agreements with Allianz SE, which
account for c.1/3 of remittances in a given period.

Allianz Europe BV does not itself retain liquidity; instead it acts as an intermediate
“pass-through” entity, domiciled in Amsterdam (in part for tax purposes). All cash from
Allianz Europe BV is either passed “up” to Allianz SE or “down” to Operating Entities
requiring resources. Allianz SE holds what the group terms its “strategic liquidity
reserve”, from which these resources provide opportunities for the group to conduct
buy-backs and/or M&A.

Debt leverage trends

While Allianz has somewhat utilised its stock of Unencumbered Liquidity, we believe it
maintains some leverage capacity. It is notable that gross debt has increased over the
past few years, although corresponding growth in the equity base has meant that the
group’s IFRS leverage ratio has remained relatively stable.

We tend to take a relatively conservative approach to calculating leverage, adjusting for

goodwill and unrealised capital gains. On this basis, the group has seen a modest uptick
in leverage since conducting share buybacks and M&A. The group’s own leverage ratio
does not adjust for these items and has remained more stable over recent periods,
supported in 2019 by a strong recovery in financial markets (benefiting the group’s
equity base). Management has historically guided to a “soft ceiling” of 30% leverage,
on the group’s own basis. This would suggest potentially €3bn of spare leverage
capacity.

Exhibit 2: Allianz has increased gross debt over recent years... Exhibit 3: ...however, its leverage ratio (on its own basis) has
Allianz gross debt (€bn, LHS) and leverage ratio on both a GS and Allianz remained largely stable
basis (%, RHS) Allianz style leverage ratio composition (%)

Gross debt (LHS) GS leverage ratio (RHS)

Subordinated debt Senior debt Leverage ratio
Allianz leverage ratio (RHS)
30%
25 40% 28%
39% 27%
38% 27% 27%
37% 26% 26% 25%
36% 25%
24% 24%
22 35% 35% 35% 12% 23%
34% 12%
33% 33% 12%
32% 20% 14% 13% 12% 12%
11% 10%
19 30% 11%
28% 15%
27% 27% 27%
26% 26%
16 25% 25%
24% 24% 10%
23%
16% 15% 15%
13% 13% 14% 14% 14% 14%
13 20% 12%
5%
16.4 17.9 18.9 17.3 18.2 20.1 21.2 23.0 22.7 23.0
10 15% 0%
2010 2011 2012 2013 2014 2015 2016 2017 2018 1H19 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H19

Source: Company data, Goldman Sachs Global Investment Research Source: Company data, Goldman Sachs Global Investment Research

7 January 2020 4

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Goldman Sachs Allianz SE (ALVG.DE)

Allianz SE: Storing the “fruits” of its labour

Allianz SE is the destination where Allianz stores its excess liquidity which it broadly
refers to as its “strategic liquidity reserve”. As we have discussed in previous reports
(see “The Prudence Premium”), we believe that liquidity has become increasingly
important in a Solvency II world, as it represents what is potentially distributable, should
other “gating” factors be favourable (Solvency II, IFRS, local statutory, leverage
capacity).

Allianz’s “strategic liquidity reserve” is also where it keeps additional buffers for shocks
to subsidiaries and funding for gaps in annual dividends (should remittances fall short in
a given year). It also determines whether the company has the capacity to support
further dividend growth, capital repatriations or M&A. While Allianz, like its peers, ties its
dividends to IFRS earnings, we believe that looking purely on a “flow basis” would not
be fully accurate as cash/capital/liquidity entering and exiting the holding company
appears more episodic than assumed, as shown by the accounts of Allianz SE and
Allianz Europe BV within this report.

“Strategic liquidity reserve” compared to “Unencumbered Liquidity”

When looking at the accounts of Allianz SE (as shown by the summary balance sheet
below), it is notable that the group holds a large proportion of financial investments,
which Allianz calls its “strategic liquidity reserve”. This represents the gross liquid assets
in Allianz’s parent company. This differs from our definition of Unencumbered Liquidity,
which removes any “ring-fenced assets” (e.g. assets backing insurance reserves and/or
pension liabilities) and short-term financing.

Allianz had historically built significant Unencumbered Liquidity, prior to the

commencement of its share buy-back programmes. Today, post buy-backs, bolt-on M&A
and a growing dividend, we estimate Unencumbered Liquidity for Allianz Group (within
Allianz SE) of c.€3.6bn. We outline this calculation in Exhibit 7.

Exhibit 4: Allianz SE is the store of liquidity for Allianz Group... Exhibit 5: ...with liquidity often passed from Allianz Europe BV via
Allianz SE Unencumbered Liquidity (€bn) intra-group loans
Allianz SE intra-group payables and Allianz Europe BV intra-group
receivables (€bn)

12 SE Intra Group Payables BV Intra Group Receivables

16

8 7.6 7.3
12
4.7
3.9 3.6
4 3.0
2.8
2.2 8

0
4
-0.3

-4 -2.9 0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: Company data, Goldman Sachs Global Investment Research Source: Company data, Goldman Sachs Global Investment Research

7 January 2020 5

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Goldman Sachs Allianz SE (ALVG.DE)

Exhibit 6: Allianz SE: Summary Balance Sheet

€mn unless otherwise stated
Allianz SE: Summary Balance Sheet (€mn)
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Financial investments 14,101 14,371 16,698 21,243 24,700 26,500 27,700 33,400 33,329 27,886
Investment in subsidiaries 69,054 69,719 70,628 70,592 69,633 71,170 73,711 71,354 74,176 76,322
Other investments 2,927 3,726 4,362 3,292 5,074 4,656 5,290 5,472 5,398 4,401
Total investing assets 86,082 87,816 91,688 95,127 99,407 102,326 106,701 110,226 112,903 108,609
Intangible assets 726 737 727 711 451 406 442 636 337 366
Other assets 4,942 4,419 4,561 4,594 2,715 3,661 7,167 8,617 8,840 10,667
Total non-investing assets 5,668 5,156 5,288 5,305 3,166 4,067 7,609 9,253 9,177 11,033
Total Assets 91,750 92,972 96,976 100,432 102,573 106,393 114,310 119,479 122,080 119,642
Insurance reserves 9,780 9,999 10,527 10,795 8,439 9,851 13,168 14,471 14,980 15,927
Pension liabilities 3,651 3,561 3,694 3,912 4,155 5,081 6,307 6,066 6,418 6,874
Other non-financing liabilities 5,734 5,392 5,457 5,428 6,004 7,115 7,806 8,861 9,307 10,189
Total non-financing liabilities 19,165 18,952 19,678 20,135 18,598 22,047 27,281 29,398 30,705 32,990
Short term debt 4,478 3,754 2,277 2,455 1,855 1,668 3,007 1,685 1,338 1,396
Senior debt 7,962 8,229 7,649 7,960 8,030 8,207 8,383 7,615 9,700 9,200
Subordinated debt 6,834 6,931 9,060 11,356 11,330 11,741 12,340 13,806 13,689 13,750
Loans from subsidiaries 5,654 8,798 10,490 8,065 10,150 6,797 8,965 12,214 9,529 11,704
Other payables 5,348 3,904 5,276 7,601 8,936 11,479 9,356 10,112 15,105 9,586
Total financing liabilities 30,276 31,616 34,752 37,437 40,301 39,892 42,051 45,432 49,361 45,636
Shareholders’ equity 42,309 42,404 42,546 42,860 43,674 44,454 44,978 44,649 42,014 41,016
Total shareholders’ equity & liabilities 91,750 92,972 96,976 100,432 102,573 106,393 114,310 119,479 122,080 119,642
Double Leverage (GS Estimate) 163% 164% 166% 165% 159% 160% 164% 160% 177% 186%

Source: Company data, Goldman Sachs Global Investment Research

Exhibit 7: Allianz SE: Summary Unencumbered Liquidity

€bn unless otherwise stated
Allianz SE: Summary Unencumbered Liquidity Calculation (€bn)
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Total assets 91.8 93.0 97.0 100.4 102.6 106.4 114.3 119.5 122.1 119.6
Insurance reserves -9.8 -10.0 -10.5 -10.8 -8.4 -9.9 -13.2 -14.5 -15.0 -15.9
Insurance reserve buffer -1.6 -1.6 -1.6 -1.6 -1.5 -2.8 -3.6 -4.8 -4.7 -5.0

Total insurance related liabilities -11.4 -11.6 -12.1 -12.4 -9.9 -12.7 -16.8 -19.3 -19.7 -21.0

Short-term debt -4.5 -3.8 -2.3 -2.5 -1.9 -1.7 -3.0 -1.7 -1.3 -1.4
Pension liabilities -3.7 -3.6 -3.7 -3.9 -4.2 -5.1 -6.3 -6.1 -6.4 -6.9
Other payables -5.3 -3.9 -5.3 -7.6 -8.9 -11.5 -9.4 -10.1 -15.1 -9.6

Total obligatory liabilities -13.5 -11.2 -11.2 -14.0 -14.9 -18.2 -18.7 -17.9 -22.9 -17.9

Investment in subsidiaries -69.1 -69.7 -70.6 -70.6 -69.6 -71.2 -73.7 -71.4 -74.2 -76.3

Total related party assets -69.1 -69.7 -70.6 -70.6 -69.6 -71.2 -73.7 -71.4 -74.2 -76.3

Intangible assets -0.7 -0.7 -0.7 -0.7 -0.5 -0.4 -0.4 -0.6 -0.3 -0.4
Other deductions / additions 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -3.0 -2.0 -0.5

Total other deductions / additions -0.7 -0.7 -0.7 -0.7 -0.5 -0.4 -0.4 -3.6 -2.3 -0.9

Total unencumbered liquidity -2.9 -0.3 2.2 2.8 7.6 3.9 4.7 7.3 3.0 3.6

1.5x holding company expenses (incl. coupon) -1.8 -1.8 -2.2 -2.3 -2.0 -1.8 -1.7 -1.7 -1.6 -1.6

Total unencumbered liquidity incl. buffer -4.7 -2.1 0.1 0.5 5.6 2.1 3.0 5.7 1.4 2.0

Source: Company data, Goldman Sachs Global Investment Research

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Goldman Sachs Allianz SE (ALVG.DE)

Allianz Europe BV: Dividend reserve, no cash

Allianz holds the majority of its subsidiaries through one intermediate sub-holding
company, Allianz Europe BV, with the German domiciled subsidiaries having direct
remittance structures via P&L transfer agreements (meaning the P&L fully accrues in
the Allianz SE P&L with the German domiciled businesses accruing a zero P&L).

Allianz uses Allianz Europe BV as a key gating intermediary to conduct transactions and
manage cash flow, but the entity does not store excess liquidity. We can see this
through our analysis of Allianz Europe BV’s Unencumbered Liquidity, as shown in the
exhibit below and summary accounts of this entity provided in this report.

Dividend reserve an accounting metric, not a cash metric

Allianz’s key intermediate holding company (BV) is not a store of cash/capital. Of note,
some market participants have quoted its dividend reserve (€14.6bn at FY18) as a gauge
for financial resources available at Allianz Group for ongoing capital returns and/or M&A.
While we believe Allianz does retain a level of excess liquidity in Allianz SE (discussed
above), it does not retain liquidity/cash in Allianz Europe BV.

The significant dividend reserve in Allianz Europe BV is a function of the entity’s profit
(primarily from dividend receipts from Operating Entities) less dividend payments to
Allianz SE and other minor adjustments. However, we would highlight that this is an
accounting measure and not a cash item, meaning that it should not be used as a
measure of available liquidity nor dividend capability.

Allianz Europe BV often transfers its liquid resources, around the group, either to Allianz
SE or Operating Entities via intra-group loans. As a result, the dividend reserve may
build even if liquid resources have left the entity. This can be seen via its balance sheet,
which holds limited liquid assets. As stated, excess liquidity is transferred to Allianz SE,
which can be seen by the close correlation between intra-group payables within Allianz
SE and intra-group receivables within Allianz Europe BV (Exhibit 5).

Exhibit 8: Allianz Europe BV has a c.€14.6bn dividend reserve... Exhibit 9: ...however, liquidity within the entity is relatively modest
Allianz Europe BV shareholders’ equity composition (€bn) Allianz Europe BV Unencumbered Liquidity (€bn)
Share Capital Share Premium 1.0
Revaluation Reserve Translation Reserve
Dividend Reserve & Other
50
0.5
40 7.4 13.7
11.0 12.5 12.4 15.2 14.6

30 5.3 0.0
2.9

20
35.3
31.4 31.4 31.6 31.6 29.9 29.9 -0.5
23.7 25.7 25.8
10

0 -1.0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: Company data, Goldman Sachs Global Investment Research Source: Company data, Goldman Sachs Global Investment Research

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Goldman Sachs Allianz SE (ALVG.DE)

Exhibit 10: Allianz Europe BV: Summary Balance Sheet

€mn unless otherwise stated
Allianz Europe BV: Summary Balance Sheet (€mn)
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Tangible assets (incl. PPE) 4 5 4 3 4 4 4 4 5 6
Investment in subsidiaries 24,249 29,897 32,361 42,625 39,785 39,922 36,807 32,050 32,357 31,146
Loans to affiliates 32 39 124 1,393 4,534 4,559 7,111 12,212 9,898 14,158
Other investments 0 0 0 0 0 0 99 0 0 0
Total investing assets 24,286 29,940 32,489 44,022 44,323 44,485 44,021 44,267 42,260 45,310
Cash and equivalents 0 0 0 6 2 0 0 0 0 0
Other receivables 48 5 25 84 31 6 401 1,447 3,356 1,803
Other assets 1 1 1 0 0 0 0 29 19 43
Total non-investing assets 48 6 27 90 33 6 401 1,476 3,374 1,846
Total Assets 24,334 29,946 32,516 44,112 44,356 44,491 44,422 45,743 45,634 47,156
Accrued liabilities 1 1 1 1 1 1 3 1 2 2
Other non-financing liabilities 0 1 5 4 13 19 17 28 29 38
Total non-financing liabilities 1 2 6 4 14 20 20 30 31 39
Loans from affiliates 0 842 901 967 1,373 200 0 0 0 2,085
Other payables 0 0 0 9 6 3 33 0 0 0
Total financing liabilities 0 842 901 976 1,379 203 33 0 0 2,085
Shareholders’ equity 24,333 29,102 31,609 43,132 42,772 44,268 44,417 45,713 45,603 45,031
Total shareholders’ equity & liabilities 24,334 29,947 32,516 44,112 44,164 44,491 44,471 45,743 45,634 47,156
Double Leverage (GS Estimate) 100% 103% 102% 99% 93% 90% 83% 70% 71% 69%

Source: Company data, Goldman Sachs Global Investment Research

Exhibit 11: Allianz Europe BV: Summary Unencumbered Liquidity

€bn unless otherwise stated
Allianz Europe BV: Summary Unencumbered Liquidity Calculation (€bn)
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Total assets 24.3 29.9 32.5 44.1 44.4 44.5 44.4 45.7 45.6 47.2
Insurance reserves 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Insurance reserve buffer 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Total insurance related liabilities 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Short-term debt 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Pension liabilities 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Other payables 0.0 0.0 -0.1 0.0 -0.1 -0.2 -0.2 -0.3 -0.3 -0.4
Total obligatory liabilities 0.0 0.0 -0.1 -0.1 -0.1 -0.2 -0.2 -0.3 -0.3 -0.4
Investment in subsidiaries -24.2 -29.9 -32.4 -42.6 -39.8 -39.9 -36.8 -32.1 -32.4 -31.1
Loans & receivables from affiliates -0.1 0.0 -0.1 -1.5 -4.6 -4.6 -7.5 -13.7 -13.3 -16.0
Total related party assets -24.3 -29.9 -32.5 -44.1 -44.4 -44.5 -44.3 -45.7 -45.6 -47.1
Intangible assets 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Other deductions / additions 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Total other deductions / additions 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Total unencumbered liquidity 0.0 0.0 -0.1 0.0 -0.1 -0.2 -0.1 -0.3 -0.3 -0.3

Source: Company data, Goldman Sachs Global Investment Research

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Goldman Sachs Allianz SE (ALVG.DE)

Summary financials, valuation & risks

Summary financials
In the exhibit below, we outline our summary earnings, profitability and returns metrics
for Allianz.

Exhibit 12: Allianz: Summary Financials

€mn unless otherwise stated

Source: Company data, Goldman Sachs Global Investment Research

Valuation
We maintain our 12-month price target of €225. Our price target is derived from our
sector-wide RoC model, assuming an 8.1% cost of capital and a 13.6% adjusted return
of capital.

Key risks
Key risks are predominantly macro-related. While rising bond yields are helpful from an
insurance perspective, this could be offset by PIMCO, where net flows may suffer.
Other macro risks include currency (particularly USD), equity markets and corporate
bond spreads. We also highlight regulatory risk, especially around the heavily regulated
German life insurance business. Finally, we see potential M&A-related risk, if any
larger-scale acquisition announcement is poorly received by the market.

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Goldman Sachs Allianz SE (ALVG.DE)

Disclosure Appendix
Reg AC
We, Johnny Vo, Edward Gunby, CFA, Adam Uddin, Sami Taipalus, Krishna Jain and Teresa Wang, hereby certify that all of the views expressed in this
report accurately reflect our personal views about the subject company or companies and its or their securities. We also certify that no part of our
compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Unless otherwise stated, the individuals listed on the cover page of this report are analysts in Goldman Sachs’ Global Investment Research division.

GS Factor Profile
The Goldman Sachs Factor Profile provides investment context for a stock by comparing key attributes to the market (i.e. our coverage universe) and its
sector peers. The four key attributes depicted are: Growth, Financial Returns, Multiple (e.g. valuation) and Integrated (a composite of Growth, Financial
Returns and Multiple). Growth, Financial Returns and Multiple are calculated by using normalized ranks for specific metrics for each stock. The
normalized ranks for the metrics are then averaged and converted into percentiles for the relevant attribute. The precise calculation of each metric may
vary depending on the fiscal year, industry and region, but the standard approach is as follows:
Growth is based on a stock’s forward-looking sales growth, EBITDA growth and EPS growth (for financial stocks, only EPS and sales growth), with a
higher percentile indicating a higher growth company. Financial Returns is based on a stock’s forward-looking ROE, ROCE and CROCI (for financial
stocks, only ROE), with a higher percentile indicating a company with higher financial returns. Multiple is based on a stock’s forward-looking P/E, P/B,
price/dividend (P/D), EV/EBITDA, EV/FCF and EV/Debt Adjusted Cash Flow (DACF) (for financial stocks, only P/E, P/B and P/D), with a higher percentile
indicating a stock trading at a higher multiple. The Integrated percentile is calculated as the average of the Growth percentile, Financial Returns
percentile and (100% - Multiple percentile).
Financial Returns and Multiple use the Goldman Sachs analyst forecasts at the fiscal year-end at least three quarters in the future. Growth uses inputs
for the fiscal year at least seven quarters in the future compared with the year at least three quarters in the future (on a per-share basis for all metrics).
For a more detailed description of how we calculate the GS Factor Profile, please contact your GS representative.

M&A Rank
Across our global coverage, we examine stocks using an M&A framework, considering both qualitative factors and quantitative factors (which may vary
across sectors and regions) to incorporate the potential that certain companies could be acquired. We then assign a M&A rank as a means of scoring
companies under our rated coverage from 1 to 3, with 1 representing high (30%-50%) probability of the company becoming an acquisition target, 2
representing medium (15%-30%) probability and 3 representing low (0%-15%) probability. For companies ranked 1 or 2, in line with our standard
departmental guidelines we incorporate an M&A component into our target price. M&A rank of 3 is considered immaterial and therefore does not
factor into our price target, and may or may not be discussed in research.

Quantum
Quantum is Goldman Sachs’ proprietary database providing access to detailed financial statement histories, forecasts and ratios. It can be used for
in-depth analysis of a single company, or to make comparisons between companies in different sectors and markets.

Disclosures
Financial advisory disclosure
Goldman Sachs and/or one of its affiliates is acting as a financial advisor in connection with an announced strategic matter involving the following
company or one of its affiliates: Allianz Se

Coverage group(s) of stocks by primary analyst(s)

Johnny Vo: Europe-Insurance. Sami Taipalus: Europe-Insurance.
Europe-Insurance: Admiral Group, Aegon NV, Ageas SA/NV, Allianz SE, ASR Nederland NV, Assicurazioni Generali, Aviva Plc, AXA, Baloise, Direct Line
Group, Gjensidige Forsikring ASA, Hannover Ruckversicherung, Hastings Group, Helvetia Holding, Legal & General Group, Munich Re, NN Group,
Prudential Plc, Quilter Plc, RSA Insurance Group, Sampo, SCOR, St. James’s Place Plc, Standard Life Aberdeen Plc, Swiss Re, Topdanmark A/S, Tryg
A/S, Zurich Insurance Group.

Company-specific regulatory disclosures

The following disclosures relate to relationships between The Goldman Sachs Group, Inc. (with its affiliates, “Goldman Sachs”) and companies covered
by the Global Investment Research Division of Goldman Sachs and referred to in this research.
Goldman Sachs beneficially owned 1% or more of common equity (excluding positions managed by affiliates and business units not required to be
aggregated under US securities law) as of the second most recent month end: Allianz SE (€217.70)
Goldman Sachs has received compensation for investment banking services in the past 12 months: Allianz SE (€217.70)
Goldman Sachs expects to receive or intends to seek compensation for investment banking services in the next 3 months: Allianz SE (€217.70)
Goldman Sachs has received compensation for non-investment banking services during the past 12 months: Allianz SE (€217.70)
Goldman Sachs had an investment banking services client relationship during the past 12 months with: Allianz SE (€217.70)
Goldman Sachs had a non-investment banking securities-related services client relationship during the past 12 months with: Allianz SE (€217.70)
Goldman Sachs had a non-securities services client relationship during the past 12 months with: Allianz SE (€217.70)
Goldman Sachs holds a position greater than U.S. $15 million (or equivalent) in the debt or debt instruments of: Allianz SE (€217.70)

Distribution of ratings/investment banking relationships

Goldman Sachs Investment Research global Equity coverage universe

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Goldman Sachs Allianz SE (ALVG.DE)

Rating Distribution Investment Banking Relationships

Buy Hold Sell Buy Hold Sell
Global 43% 42% 15% 64% 56% 50%

As of October 1, 2019, Goldman Sachs Global Investment Research had investment ratings on 2,987 equity securities. Goldman Sachs assigns stocks
as Buys and Sells on various regional Investment Lists; stocks not so assigned are deemed Neutral. Such assignments equate to Buy, Hold and Sell for
the purposes of the above disclosure required by the FINRA Rules. See ‘Ratings, Coverage groups and related definitions’ below. The Investment
Banking Relationships chart reflects the percentage of subject companies within each rating category for whom Goldman Sachs has provided
investment banking services within the previous twelve months.

Price target and rating history chart(s)

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Goldman Sachs Allianz SE (ALVG.DE)

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Goldman Sachs Allianz SE (ALVG.DE)

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