To create value, the capital used by a company must yield a higher return than a comparable alternative investment. In order to accomplish this objective and to measure our success, we apply the EVA® (1) (Economic Value Added) concept, adapted to our specific needs, across the Allianz Group. EVA® involves profit compared to cost of capital, representing the return an investor can expect from an alternative investment with comparable risk. EVA® – whether positive or negative – is the difference between profit and the cost of capital. A positive EVA® means that an added value has been achieved and a negative EVA® indicates that a shareholder would have received a greater return from another risk adequate investment than from Allianz SE shares.

EVA® is an all-encompassing tool for coordination and steering which connects our internal management approach with a capital market orientation. To create the EVA® we calculate normalized profit minus capital charges. Whereby capital charges are defined as our capital multiplied with our cost of capital.

To get the normalized profit we minimize the impact of equity market fluctuations by basing our calculations on “normalized” long-term average returns.

For generating the capital charges an important component is the determination of the capital required to cover the financial risks involved in our business activities (2).

It is our role to be attentive that the sum of our risks is affordable for the Group and that the achieved return justifies the amount of capital employed. Therefore we assign available capital to our operating entities based on their a risk-return profile and their strategic position. Using this process, our companies can only ensure that they receive growth capital if they:

The second component of creating capital charges is the cost of capital, which in our Group is based on the return from a risk-free alternative investment plus a market risk premium and taking into account the specific risk of Allianz Group in relation to the overall market.

All Allianz Group companies are responsible for generating a return on their risk capital that covers at least their cost of capital. Profits exceeding the cost of capital can be retained by the operating entities to finance further organic growth. That means, that our most profitable entities have direct access to considerable funds. If these funds are not required to finance their organic growth, they will be distributed to the holding company.

The requirement to meet the cost of capital is just the minimum we demand. Over the medium-term, our objective is to generate a return of 15 % or more on the capital employed. Therefore, our companies must determine what business activities will increase their value and concentrate their efforts and resources on these activities. Further, new value drivers must be created, for example, through new products, more cost-effective processes and optimized distribution channels. Local management must also prevent value being destroyed along the complete value chain. If value diminishes, countermeasures must be implemented immediately.

Due to our strong net income our EVA®, after minority interests, reached € 3,928 million in 2007 and the return on risk adjusted capital (3) was 21.4 %.

Because EVA® is an important factor in managing our business, senior management compensation is based on this measurement to a significant extent (4). Our incentive-based management compensation system helps to make the continuous increase in the value of the Allianz Group a priority across our entire organization.

Our objective to accomplish a positive EVA® not only benefits our shareholders but our customers, employees and the communities in which we operate benefit as well. We can only succeed by offering high quality products at attractive prices that satisfy our customers, generate sales to secure jobs and produce profits that allow us to further increase our contribution to society.

___________________________

1) EVA® is a registered trademark of Stern Stewart & Co.

2) For detailed information on the determination of our internal risk capital please see our risk report (page 77) of the Allianz Group Annual Report 2007.

3) Return on risk adjusted capital represents normalized profit divided by average risk adjusted capital.

4) For detailed information on the remuneration of the board of management and of the supervisory board see our remuneration report on pages 15 to 22 of the Allianz Group Annual Report 2007.