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As a provider of financial services, our fundamental assets are our capital strength and solvency. Securing our capital base was our foremost task in the reporting year. Strengthening our shareholders’ equity by 6.9 billion euros, we achieved a satisfactory interim result. 

## Shareholders’ equity, reserves and solvency 

On December 31, 2003, the shareholders’ equity of the Allianz Group amounted to 28.6 (21.7) billion euros, not including 18,246,052 treasury shares acquired at a purchase price of 4.5 billion euros. Shareholders’ equity was thus 6.9 billion euros higher than in the previous year, which is mainly due to our capital increase, reserves on securities whose prices recovered, and the exchange of Allianz participation certificates against treasury shares. 

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1) For further details see “Changes in shareholder’s equity” on page 104 2) 

Revenue reserves include currency translation effects (2002: – 342 million euros; 2003: – 1,916 million euros) 

The objective of the capital increase was to strengthen the finan- cial solidity of Allianz after an extremely turbulent and challeng- ing fiscal year 2002. We offered our shareholders the subscrip- tion of 7 new shares per 15 old shares at a price of 38 euros per share. The subscription period began on April 15, 2003 and ended on April 29, 2003. 99.7 percent of our shareholders exer- cised their subscription rights. A total of 117 million shares were issued, which, after deduction of transaction costs, strengthened our shareholders’ equity with 4.4 billion euros. 

As was already stated in our Annual Report 2002, we of- fered the holders of Allianz profit participation certificates an exchange of these certificates into Allianz shares at a rate of eight certificates for ten Allianz shares. When the exchange pe- riod ended on January 16, 2003, 86 percent of the certificates issued had been exchanged for shares. The share certificates is- sued were taken from treasury stock. This outflow increased our shareholders’ equity by 426 million euros after taxes. 

The balance of unrealized gains and losses from securities held for sale is part of shareholders’ equity. Following the increase of valuations in the capital markets in the second half of 2003, this balance grew to 4.3 (1.1) billion euros. 

Shareholders’ equity does not include valuation reserves for our real estate holdings nor participations consolidated at equity. After deduction of taxes, minority interests and interests of pol- icyholders, these amounted to 1.6 (5.1) billion euros at the end of 2003. 

As of December 31, 2003, Allianz Group calculated the capital elements eligible for the legally required solvency margin of in- surance groups to have a total value of 26.0 (21.7) billion eu- ros. At the end of 2003, the solvency margin of insurance groups required by law is expected to be 12.6 billion euros, which corresponds to a cover ratio of 206.3 (152.8) percent. However, the solvency margin directive applies only to the in- surance segment and contains no capital requirements for the banking business. Until the Financial Conglomerates Directive takes effect in fiscal 2005, multiple gearing of regulatory capi- tal is still possible in part. 

In addition, all entities of the Allianz Group had sufficient own funds and met local solvency requirements. 

