G ROUP MANAGEMENT REPORT Life and Health Insurance 65 GERMANY  _  In this market, we provide life insurance products through Allianz Leben, which includes the companies Allianz Lebensversiche- rungs-AG, Deutsche Lebensversicherungs-AG and Allianz Pensionskasse AG. _  Our health insurer is Allianz Private Krankenversicherungs-AG. _  We are number one in life insurance business and number three in health insurance. The breakdown for total premium income is as follows: 10.4 billion euros or 77.9 percent came from the life insurance busi- ness and 3.0 billion euros or 22.1 percent from the sale of health insurance products. Total segment revenues increased 841 mil- lion euros or 6.7 percent to 13.4 billion euros. Changes in tax law resulted in both a one-time tax charge for previous years and higher tax charges for the coming years. The  expense ratio declined from 9.4 to 6.8 percent, mainly as a result of changed assumptions and because of strong premium growth as well as lower administrative expenses. Administrative expenses were pared to 2.5 (2.8) percent – a figure that is sig- nificantly better than the market average. Our  investments increased to 112.1 (107.9) billion euros. The income they produced rose by 11 percent or 441 million euros to 4.4 billion euros. In part, this was due to the positive devel- opment of the stock market, which reduced the need for write- downs on the investment portfolio. Total  premium income increased 7.7 percent to 10.4 billion eu- ros. In IFRS accounts, which recognize only the risk and cost components of premiums from investment-oriented life insur- ance products, premium income came to 9.9 (9.4) billion euros. With an increase of 25.9 percent in premium income from new business, Allianz Leben outperformed the market and in- creased its market share in new business from 19.0 to 20.4 per- cent. This success demonstrates that customers apportion par- ticular importance to the security and financial strength of a market-leading life insurer, especially in times of uncertain cap- ital markets. All distribution channels contributed to new busi- ness: more than half of new business was generated by our tied- agents network, which is our most important sales channel. Sales through Dresdner Bank were up 28 percent. In view of the continuing low-interest environment, the German legislature has lowered the maximum notional interest rate for guaranteed insurance benefits from 3.25 to 2.75 per- cent, effective January 1, 2004. Like nearly all our competitors, we decided to lower the interest rate for current profit partici- pation by 0.8 percentage points. As a result, we will credit our customers’ accounts with a current total interest of 4.5 percent as of the beginning of 2004. Life insurance Earnings after taxes fell to – 50 (80) million euros, mainly due to significantly higher taxes, which increased from 38 million euros to 241 million euros. The higher tax charge is primarily due to the changes in tax law, which retrospectively no longer permits the deduction of disposal losses and write-downs on in- vestment fund shares, if the impairment was caused by stocks that are part of the funds’ assets. Corporate retirement provision plans give our life insurers excellent business opportunities, particularly since we offer all five available options for such plans. Soaring by 65.9 percent, new premiums registered vigorous growth and rose to 1.4 billion euros. Over 40 percent of total new business came from this area. Our most successful company was Allianz Pensionskasse, which nearly tripled its new business. *) In relation to total premiums earned (net). 2003 2002 2001 Total revenues ¤ mn 10,446 9,700 8,981 Gross premiums ¤ mn 9,924 9,369 8,969 Premiums earned (net) ¤ mn 8,788 8,249 7,929 Expense ratio *) % 6.8 9.4 13.7 Earnings after taxes ¤ mn – 49.6 80.0 64.7 Investments ¤ mn 112,144 107,887 106,425 Employees 5,863 5,736 6,440 Allianz Leben