ECONOMIC ENVIRONMENT 37 broader base. The most important property and casualty line, automobile insurance, developed quite differently in various markets: in Germany, it grew by about 2 percent after close to 3 percent in the previous year, mainly due to the lower number of new car registrations (see chart). At the same time, Spanish automobile insurers enjoyed an extraordinarily dynamic upsurge of over 6 percent. Life and Health insurance In most industrialized countries, citi- zens are becoming increasingly aware of the problems of an ag- ing population and the strains that it puts on state pension sys- tems. Additional private and corporate retirement insurance has finally become a widely discussed topic, and frequently, life in- surance plays a predominant role in this discussion. So it is not surprising that this business segment continues to attract strong demand, as is the case in Germany, for example. But this de- mand is concentrated on the major, financially strong providers. That is a reaction to the turbulence in the capital markets, which made it very difficult for a number of smaller insurers to generate the returns on investment that their customers ex- pected. Another drop in stock performance at the beginning of the year and persistently low interest rates put noticeable pres- sure on the investment income of many life insurers. And while interest rates went up slightly in the second half, they are still at a very low level, which will be a daunting challenge for the financial management of life insurers for some time to come. In nearly all industrialized nations, citizens have to make private retirement insurance arrangements to compensate for the cut in benefits provided by state pension systems. In a num- ber of countries such as Sweden and nearly all the Central and Eastern European countries that are joining the European Union, workers are required by law to make retirement provi- sions by paying into pension funds. A part of these contributions is directly invested in pension funds that are managed by insti- tutional asset managers and not by the state. The funds indus- try also benefits from the fact that the baby boomer generation is now growing into a phase of life where retirement planning is receiving increasing attention. This effect was observed in Asset Management The fund management industry felt the tur- bulence in the capital markets in 2003 as well. Investor confi- dence only returned in the second half of the year. The unsteady price development in the stock and fixed-interest markets made money market funds as popular as they had been in the previous year. Total fund assets were up after having suffered a decline in each of the two previous years. That rekindled the hope of a return to the growth rates of the past, a hope that is born out by the fundamentals of this business segment, which are quite good. Mandatory health insurance is also undergoing a financial crisis, at least in Germany. The resulting discussion about fu- ture financing concepts and the curtailed scope of benefits, which ultimately brought about a change of law, is a boon to the private insurance business, at least for the time being. Driven by rate adjustments and rising health care costs, they outpaced the already good growth of the prior year by a solid 6 percent. The introduction of a higher income limit for mandatory health insurance, which reduced the number of voluntarily insured policyholders likely to opt for private insurance, had a negative effect. But there were positive impulses as well. In Germany, they came from the pension reform and the concomitant reevalua- tion of company retirement provision schemes. At the same time, the sale of private provision instruments, such as the state- subsidized “Riester” pension plans, left much to be desired. Overall, industry-wide premium income was up 3 percent. The development in other important Allianz markets such as Italy and France, however, was extremely dynamic. On the whole, the life insurance industry still felt the reluctance of customers with respect to unit-linked life insurance, which is a natural re- action to the development of the financial markets.  New car registrations  Change over previous year in % –8 –6 –4 –2 0 2 4 6 8 2003 2001 2002 Germany France Italy Spain