Allianz Presentation ML Oct 11
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Transcript of Allianz Presentation ML Oct 11
Quality!
Michael Diekmann, Chief Executive Officer
Merrill Lynch Banking and Insurance Conference,London, October 2011
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OutlookD
European Sovereign Insurance Mechanism (ESIM)C
Déjà vu – lessons from the crisisB
Allianz at a glanceAAgenda
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1) 12/20102) 06/20113) Relation of positive parts of operating profit
P/C
Allianz at a glance
EUR 106bn total revenues1
EUR 1,508bn total AuM2
EUR 8.2bn operating profit1
180% solvency ratio2
EUR 43bn S/H equity2
EUR 44bn market cap2
More than 76mn customers1
Segments1,3
Operating profit in %Regions1,3
Operating profit in %
AM
L/H WesternEurope
GermanyGrowth markets
Specialty insurance
Broker markets US, UK, AUS
31%
22%
47%
5%12%
32%28%
23%
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§ Leading P/C insurer globally1
§ Top 5 in life business globally
§ Top 5 asset manager globally
§ Largest global assistance provider
§ Worldwide leader in credit insurance
§ One of the leading industrial insurers globally
§ Building the leading global automotive
provider
1) All rankings mentioned on the slide based on 2010 data
Market positions and brands
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Key developments in H1 20111
§ Strong operating profit despite crisis, slightly below previous year due to high NatCat and negative F/X impact
§ Total revenues EUR 54.5bn (-2.6%)
H1 § Operating profit EUR 4.0bn (-1.8%)
§ Shareholders’ equity EUR 42.6bn (-2.6%)
§ Net income EUR 2.0bn (-28.0%)
1) Percentage changes related to results of first half year 2010
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OutlookD
European Sovereign Insurance Mechanism (ESIM)C
Déjà vu – lessons from the crisisB
Allianz at a glanceAAgenda
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My slide shown at this conference in 2003
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10 years of streamlining
Russia: Acquisition of first stake in ROSNO
India: Start of JV between Allianz and Bajaj
September 11
Flood Central Europe
Internet bubble bursting
ICBC: investment and cooperation agreement
Minority buyout RAS
Announcement of major restructuring in Germany
Turkey: Acquisition of stake in insurance JV
Sale of Dresdner Bank (signing)
Merger of Euler & Hermes
Delisting NYSE
Rebranding AGFto Allianz France
Cominvest acquisition
Agreements with VW, Daimler& BMW
Initial CPIC investment
Acquisition ofDresdner Bank& DIT
Launch of "3+One"
Tsunami in Southeast Asia
Hurricanes in the U.S. and Caribbean
Conversion intoAllianz SE
SARS epidemic in Asia
Hurricane Katrina
Formation ofAllianz Global Risks
20102001 2002 2003 2004 2007 2008 200920062005
Minority buyout AGFand AZ LebenMerger andre-brandingItaly
Allianz InvestmentMgmt. (AIM)
Earthquake in China
Europeanstorm Kyrill
U.S. subprime mortgage crisis
Foundation of AGCS
Bankruptcy of Lehman Brothers
TOM as partof “3+One”
EU initiates Solvency II process
Start of Sustainability Program and Customer Focus Initiative
ADAM becomes Allianz Global Investors
2011
10th anniversary acquisition PIMCO& 20th anniversary East Germany
Floods in AustraliaEarthquakes in New Zealand and Japan
Earthquakes in Chile and Haiti
Hartford investment
2nd war in Iraq Historically low interest rates
i2s
Acquisition of Munich Re stake inAllianz Leben
Political unrest in North AfricaEuropean sovereign debt crisis
Merger ofRussian OEs
RepositioningAGI
Simplificationof holding structures
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Non-controlling interests Combined ratio 10y Bund yield
Equity gearing5 Banking exposure Reinsurance governance
Allianz well positioned to capture upside potential
Stable operating profit1 range1
… with improved risk profile …3
1) Historical reported figures excluding Banking segment in EUR bn2) Financial Conglomerates Directive3) Share of Global Lines in operating profit
2004
2005
2006
2007
2008
2009
2010
2011e
… and higher profit potential (EUR bn)4
Better starting position …2
Operating asset base
1,681
971
H1 20112004
37%
110%
H1 20112004 H1 20112004
9
108
20102004
0.2
1.2
FCD2 solvency ratio
180%120%
H1 20112004
Global Lines3
H1 20112005
36%
23%
Mega Cat
Cat bonds, Swaps Super Cat
Additional Group retention
Retentions of operating entities (OEs)
(RWA4 EUR bn)
(EUR bn)
6.3
6.9
9.0
10.1
7.5
7.2
8.2
8.0 ± 0.5
4) Risk Weighted Assets5) Net equity exposure after tax and policyholder participation as % of NAV
H1 2011
98.1%
H1 2011
3.5%
3.0%5 year average
5 year average
95.3%
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§ Regulatory capital excluding unrealizedgains on bonds, but including impairmentson Greek sovereign debt
§ Economic capital based on marked-to-market sovereign bond portfolio
§ Economic solvency calibrated to 3bps confidence level (Solvency II: 50bps)
§ All solvency ratios after 40% net incomedividend accrual
§ S&P and A.M. Best ratings affirmed in September 2011
FCDsolvencyratio
Economic solvency ratio
S&Prating
2002 2007 1H 2011
100%
100%
161%180%
191% 184%
n.a
n.a.
AAnegative
AAstable
AAstable
Sound regulatory/economic capital ratios …1Strongcapital
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… with moderate sensitivities
FCD solvency ratio
§ Equity gearing significantly reduced
§ Regulatory solvency ratio almost immune against interest rate and spread changes
§ Pro-cyclical banking segment discontinued
1H 2011
Equities -30%
Int. rates -100bp
IFRS S/H equity (EUR bn)
1H 2011
Equities -30%
Int. rates -100bp
Economic solvency ratio
1H 2011
Equities -30%
Int. rates -100bp
180%
167%
176%1
184%
171%
165%
42.6
39.4
46.3
100%
1Strongcapital
1) Lower FCD capital driven by change in DAC write-off (shadow DAC) and negative impact from reserve discounting
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Sound liquidity
1) Excluding opportunistic transactions 2) Amount may vary depending on prevailing regulatory conditions3) Modified duration to allow for asset overhang 4) ~ EUR -200mn impact of 100bps lower yield across all asset classes during first 12 months (excluding fair value changes)
§ Mid term financing completed1
- 2011 issuance covers maturities until 2015 - Attractive conditions and intelligent timing - Allianz CoCo structure offers additional
protection
§ Sensible maturity profile
§ Useful diversification between instruments
§ Over ~EUR 250bn group assets eligible as collateral with central banks2
§ Closely matched ALM structure
§ Stable liabilities with long duration profile
§ Limited interest rate sensitivity of operating earnings4
§ Stable surrender ratios in L/H
1Strongcapital
P/C
L/H
Group1
Assets Liabilities
4.71H115.52010
1H112010
1H112010
6.66.7
5.76.1
3.74.0
7.47.8
6.26.8
Duration3 (years)
Maturity structure(EUR bn)
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2041
Per
petu
al
Senior bondsSubordinated bonds
1.5 1.5 1.5 2.01.0
5.5
2.5
0.9
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8.2
7.2
7.4
10.9
10.4
7.7
6.9
4.0
n.a.
4.5
4.1
3.5
5.5
3.8
2.0
1.8
1.5
We delivered … … thanks todiversification
Operating profit1 (EUR bn) and DPS (EUR)
2003
2004
2005
2006
2007
2008
2009
2010
OP by business segment in %2
… in tough environment
iBoxx EUR overall asset swap spread in bp
5.2
-3.9
60.3
49.0
-3.5
-1.1
1.8
-8
9
11
12
7
60
58
54
54
55
73
49
47
45
23
21
21
22
26
15
34
31
31
16
12
14
12
12
12
17
22
240
0
0
0
1) Historical reported figures2) Based on historical reported figures excl.
Corporate segment and Conso. 2011: H1
115.02011e
79.2
Operating profitDividend per share P/C
L/HAM
Bank
Balanced portfolio stabilizes operating profit2Sustainableprofitability
8.0 ± 0.5
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EMU: Government bond yields EMU: 7-10 year corporate bond yields
Fixed income investment landscape: more than just German Bunds …
2Sustainableprofitability
Sources: Bloomberg, EcoWin
2
3
4
5
6
7
8
9
10
11
12
2000 2002 2004 2006 2008 2010AAA rated BBB ratedGerman Pfandbrief
Investment grade
in % in %
Weighted average yield on 10-year EMU gvt. bondsYield on German 10-year government bonds
2000 2002 2004 2006 2008 20101.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
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Business in force New business
Based on aggregate policy reserves
Based on book value of assets
2.8%
… resulting in positive L/H margins despite low interest rates
2Sustainableprofitability
Based on aggregate policy reserves
1) Net of php; in stress scenario higher shareholder share possible2) Based on IFRS investment + underwriting result3) Based on IFRS current interest and similar income4) Weighted by aggregate policy reserves
GermanyReinvestmentyield of 1.5% sufficient to pay all guarantees
Harvesting and other
Underwriting and expenses
5.5%
4.9%
4.5% 4.5%
0.2%1
Ø guaranteeof new
business4
Reinvestmentyield F/I
01-06/2011
Total2return2010
Current3yield2010
Ø min. guarantee4
2010
0.2%
270bp
Covered bonds9ys mat., ~4.4%95% A or better
~30%
~30%
Government bonds10ys maturity, ~4.1%
80% A or better
ITA 11% EM
10%
FRA6%
Other13%
~40%
Corporate bonds 6ys mat., ~4.1%
92% BBB or better
~2.2%
200bp~4.2%
2012e~2.0%
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EUR 448.4bn
AAA 45%
AA 14%A 25%BBB 10%
Not rated3 4%
Cash / Other 2%EUR 6.8bn
Real estate 2%EUR 8.6bn
Equities 7%EUR 33.4bn
Debt instruments 89%EUR 399.6bn
Rating profile2
1) H1 2011, based on consolidated insurance portfolios (P/C, L/H), Corporate and other2) Excluding self-originated German private retail mortgage loans3) Mostly policyholder loans and registered debentures, all of investment grade quality
Non-investment grade 2%
High-quality investment portfolio
Conservative asset allocation1 High-quality fixed income portfolio
2Sustainableprofitability
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Absolute exposure
100% 100% 100%
Carrying value in %
of total investments
Unrealized loss (gross) in % of shareholders'
equity2
Unrealized loss(gross) in % ofrequired FCD solvency cap.2
Limited exposure to peripheral sovereign debt
-1,44436,442Total
-71829,157Italy
-7267,285Sub-total
-2805,077Spain
-6782Greece
-245780Portugal
-195646Ireland
Unrealized loss (gross)Carrying valueEUR mn
1H 2011
Relative exposure1
1.6%
8.1%
1.7%3.4%
2Sustainableprofitability
3.2%6.3%
All ratios before php
and tax!
1) Light grey ratios refer to total exposure (peripherals plus Italy)2) Ratios slightly overstated, because net unrealized losses are already deducted from S/H equity
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Crisis deserves attention, but don’t overlook the positive operative trend
2Sustainableprofitability
Property/Casualty§ Strong accident year profitability§ Higher retention of profitable business § Sound pricing momentum § Disciplined cycle management
Life /Health§ Consistent reserve growth§ Solid margins1
§ Attractively diversified business mix
Business Steering / Central Functions
Operations
DistributionProductsMarket
Management
0
100
200
300
400
500
2005 2006 2007 2008 2009 2010 1H 20110
20
40
60
80
100
Asset Management§ Strong growth momentum§ Consistent realization of economies of scale§ Solid outperformance
Corporate§ Target Operating Model implemented§ Improving operational leverage§ Progressive globalization of scalable businesses
1) Operating profit over average technical reserves
AY CR ex NatCatNet retention
85.0%
87.5%
90.0%
92.5%
95.0%
97.5%
100.0%
2005 2006 2007 2008 2009 2010 1H 2011
3rd p. AuM (EUR bn) - IhsCIR (bps) - rhs
Technical reserves (EUR bn) - Ihs
OP margin1
(bps) - rhs
0
200
400
600
800
1000
1200
1400
2005 2006 2007 2008 2009 2010 1H 201152545658606264666870
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Continuing optimization of strategic portfolio
Divested anddiscontinued operations
Last 12 months§ Banking Hungary§ Banking Poland§ Alba (Switzerland)§ Phenix (Switzerland)§ Kazakhstan§ Life Japan1
Structuralimprovements
Last 12 months§ Russia (streamlining)§ Asset Management (repositioning)§ Streamlining of holding structures
Ongoing§ AGCS (portfolio consolidation)§ Latin America (back-office integration)§ FFIC (IT)§ Germany (P/C)
3Manageablecomplexity
1) Discontinuation of new business beginning January 2012
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OutlookD
European Sovereign Insurance Mechanism (ESIM)
C
Déjà vu – lessons from the crisisB
Allianz at a glanceAAgenda
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European sovereign debt crisis: high uncertainty and growing downside risks
§ Risk premiums reach record highs§ Rising tension in the interbank market§ Stock market crash§ Pace of economic growth in the
Euro area expected to decelerate
Government bond spreads over 10yr (German government bonds, % points)
Outsized downward pressure on bank shares
Source: EcoWin
Ireland
Italy
Greece
Portugal
Spain
22
20
18
16
14
12
10
8
6
4
2
0May May
May
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Signs of stabilization in the Eurozone periphery
Economic stabilization in EMU periphery?GDP, index Q1 2008 = 100
Decreasing primary deficits reflect consolidation progress, primary balance*, as % of GDP
Shrinking current account deficits% of GDP
Lower labor costs in Portugal, Greece and IrelandTotal nominal hourly labor costs, index 2008=100
-20-18-16-14-12-10
-8-6-4-202
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011p
-36
-30
-24
-18
-12
-6
0
6
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011p
*) net lending/borrowing excluding interest payments
Sources: Eurostat, EU Commission. 2011: own estimates.
Ireland Spain Greece Portugal
85
90
95
100
105
Q12008
Q3 Q12009
Q3 Q12010
Q3 Q12011
Q3
1.0-0.1Spain
-1.41.3Portugal
2.1-0.4Ireland
-5.3-4.4Greece
2011p2010
95
100
105
110
115
Q12008
Q2 Q32008
Q4 Q12009
Q2 Q32009
Q4 Q12010
Q2 Q32010
Q4 Q12011
Q2
*) working day adjusted except for Ireland
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Very low probabilityLow to medium probability
Eurozone scenarios: gradual fiscal integration or radical change
Medium to high probability
Discretionary decisionsand closer fiscal and
economic coordination
Political and fiscal union(including Eurobonds)
Dissolutionof EURO
New measures(Euro summit)
Ongoing slow growthand
painful fiscal consolidation
New measures(ECB interventions,EFSF, ESM tools)
prevent strong contagion
Economic stagnationor double dip recession
in 2012
Greek default and/orserious contagion of
bigger EMU countries(Spain, Italy)
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Leaving the EU is not the answer
Legal view Economic view
Extremely high funding costs
importexport
Devaluation of currency
Extreme pressure on banking system
Discontinuation of EU transfers
High tariffs for export in EU
NegativePositiveLikely impact on peripheral country leaving the EU
extremely arduous,
theoretical option only1
Secession
Expulsion
Euro and EUEuro onlyCountry leaves
1) Unanimous consent of all 27 member states required, including the leaving country itself
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Our proposal: the European Sovereign Insurance Mechanism (ESIM)
0%
100%
Investors’ exposure Insured by ESIM
Example 1 Example 2
EFSFESMfunds(EUR 440bn)
Leverage1
EUR ≥ 1.1tn
x 2.5
Advantages§ Committed funds leveraged up to 3.7 times1
§ Total coverage up to EUR 2.9tn2
§ Extension of program does not reduce available funds
§ Terms tailored to specific debtor situations
§ Selected allocation of funds (contrarian to Eurobonds)
§ (Re)enforcement of restructuring targets via pricing and allocation
§ Pricing determined by ESIM (not CDS)
§ Necessary support of banks still possible
§ Feasible within existing legal framework: quick implementation possible
§ Solution of Greek’s solvency problem via voluntary exchange of existing bonds into insured bonds above current market values but significantly below par
Inve
stor
10%
Investor10%
Investor50%
Investor50%
40% 40%
1) Lower coverage for selected countries increases leverage, e.g. to 3.7 with 40% coverage for Greece, Portugal and Ireland and 25% for Italy and Spain 2) Current guarantees given to EFSF leveraged via ESIM = EUR 780bn x 3.7 = EUR 2.9tn
EFSF (and subsequently ESM) acts as sovereign bond insurer for new funding and exchange offers
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OutlookD
European Sovereign Insurance Mechanism (ESIM)C
Déjà vu – lessons from the crisisB
Allianz at a glanceAAgenda
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Financial strength Competence Integrity
Priorities
Attr
act &
dev
elop
bes
t tal
entCapitalization Capital
allocationCash
generation Rating
Cycle-management
Pensionopportunity
Multi-channeldistribution
BRIC + Global Lines
Efficiencyimprovement
Riskmanagement
Investmentstrategy Diversification
Capitalmanagement
Operatingprofitability
Growth
Our strategic priorities
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§ Revenues at EUR 27bn§ EUR 2.1bn net inflows
§ EUR 34bn net inflows§ CIR 59.0%
§ Please mind the seasonality of the business and our disclaimer1!
§ Exceptionally high NatCat§ CR 98.1%
§ As expected
Total
L/H
AM
Co
P/C 2.04.2 – 4.8
1.42.2 – 2.8
1.1
-0.4
4.0
EUR 7.5 – 8.5 bn operating profit expected in 2011
Operating profit (EUR bn)
-0.9 – -1.1
1) Disclaimer: Impact from NatCat, financial markets and global economic development not predictable!
H1 2011 Outlook published 02/11 H1 2011
8.57.5
8.0
1.8 – 2.2
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Short-selling ban limited to FRA, ITA, SPA, BEL only
Recent stock performance driven by technicalities
Source: Thomson Reuters Datastream
Relative performance Allianz versus STOXX Europe 600 Insurance
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
Jan Feb Mar Apr May Jun Jul Aug Sep-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
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Summary: Allianz well positioned
Resilient and well diversified business model
High-quality investment portfolio
Strong market positions and brands
Strong capital base
EUR 7.5bn – 8.5bn operating profit expected in 2011
Well positioned for the
“New Normal”
Appendix
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Investor Relations contacts
Oliver SchmidtHead of Investor Relations
Phone +49 89 [email protected]
Peter Hardy
Phone +49 89 [email protected]
Holger Klotz
Phone +49 89 [email protected]
Reinhard Lahusen
Phone +49 89 [email protected]
Christian Lamprecht
Phone +49 89 [email protected]
Stephanie AldagIR Events
Phone +49 89 [email protected]
Investor Relations
Fax +49 89 [email protected]
Internet
(English): www.allianz.com/investor-relations(German): www.allianz.com/ir
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Financial calendar
November 11, 2011 3rd quarter results 2011
February 23, 2012 Financial press conference for the 2011 fiscal year
February 24, 2012 Analysts’ conference for the 2011 fiscal year
March 23, 2012 Annual Report 2011
May 9, 2012 Annual General Meeting
May 15, 2012 Interim Report 1st quarter 2012
August 3, 2012 Interim Report 2nd quarter 2012
November 9, 2012 Interim Report 3rd quarter 2012
The German Securities Trading Act ("Wertpapierhandelsgesetz") obliges issuers to announce immediately any information which may have a substantial price impact, irrespective of the communicated schedules. Therefore we cannot exclude that we have to announce key figures of quarterly and fiscal year results ahead of the dates mentioned above. As we can never rule out changes of dates, we recommend checking them on the Internet at www.allianz.com/financialcalendar.
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Disclaimer
These assessments are, as always, subject to the disclaimer provided below.
Cautionary Note Regarding Forward-Looking StatementsThe statements contained herein may include statements of future
expectations and other forward-looking statements that are based
on management’s current views and assumptions and involve known
and unknown risks and uncertainties that could cause actual results,
performance or events to differ materially from those expressed or
implied in such statements. In addition to statements which are forward-
looking by reason of context, the words “may”, “will”, “should”, “expects”,
“plans”, “intends”, “anticipates”, “believes”, “estimates”, “predicts”,
“potential”, or “continue” and similar expressions identify forward-looking
statements. Actual results, performance or events may differ materially
from those in such statements due to, without limitation, (i) general economic
conditions, including in particular economic conditions in the Allianz Group’s
core business and core markets, (ii) performance of financial markets,
including emerging markets, and including market volatility, liquidity and
credit events (iii) the frequency and severity of insured loss events,
including from natural catastrophes and including the development of loss
expenses, (iv) mortality and morbidity levels and trends, (v) persistency
levels, (vi) the extent of credit defaults, (vii) interest rate levels, (viii) currency
exchange rates including the Euro/U.S. Dollar exchange rate, (ix) changing
levels of competition, (x) changes in laws and regulations, including monetary
convergence and the European Monetary Union, (xi) changes in the policies
of central banks and/ or foreign governments, (xii) the impact of acquisitions,
including related integration issues, (xiii) reorganization measures, and (xiv)
general competitive factors, in each case on a local, regional, national and/ or
global basis. Many of these factors may be more likely to occur, or more
pronounced, as a result of terrorist activities and their consequences. The
company assumes no obligation to update any forward-looking statement.
No duty to updateThe company assumes no obligation to update any information
contained herein.