§ 2 (3) of the Statutes of Allianz SE provides for an authorized capital (Authorized Capital 2014/I). The Authorized Capital 2014/I was created by the General Meeting on May 7, 2014 and still amounts to EUR 550,000,000. It is valid up until May 6, 2019.
The Management Board and Supervisory Board propose to the Annual General Meeting that a new Authorized Capital 2018/I amounting to EUR 334,960,000 be created. The Authorized Capital 2014/I shall be cancelled as soon as the new Authorized Capital 2018/I becomes effective.
With the new Authorized Capital 2018/I we intend to replace the Authorized Capital 2014/I which is expiring prior to the ordinary Annual General Meeting 2019. The proposed framework of EUR 334,960,000 accounts for 28.6% of the current share capital.
The Authorized Capital 2018/I is proposed because Allianz SE has, at all times, to be in a position to act in a quick and flexible manner for the benefit of its shareholders. The Management Board therefore believes that it is its duty to ensure that the Company always has the required instruments to raise capital, regardless of any current and precise plans for utilization. In most cases, the tight timeframe for decisions regarding capital needs does not allow the Company to be dependent on the cycle of the Annual General Meetings. The instrument of authorized capital has therefore been created by law to address this issue. Reasons for the use of authorized capital are, in particular, strengthening a Company’s equity basis and financing acquisitions.
The sum total of shares issued under this authorization and the shares that are to be issued to service bonds (including participation rights) with conversion or option rights or a conversion obligation, that were issued during the term of this authorization shall not exceed a proportionate amount of the share capital of EUR 467,968,000 (equivalent to 40% of the current share capital). Shares that are to be issued to service conversion obligations ensuing from subordinated bonds, which are issued during the term of this authorization to create own fund items in accordance with the requirements under insurance supervisory law (referred to below as "Solvency II Instruments"), shall not be considered for this restriction of the use of the Authorized Capital 2018/I.
If the Authorized Capital 2018/I is utilized by way of cash capital increases, shareholders generally have subscription rights.
However, the Management Board shall be authorized, upon the approval of the Supervisory Board, to exclude shareholders’ subscription rights with respect to fractional amounts. This enables the Company to increase the share capital in round numbers and facilitates the technical handling of an issue. The fractional shares excluded from the subscription rights will be sold in a way most efficient for the Company.
Furthermore, it shall be possible, with the approval of the Supervisory Board, to exclude shareholders’ subscription rights to the extent this is necessary to grant subscription rights to new shares to holders of bonds (including participation rights) already issued or to be issued in the future that carry conversion and/or option rights or conversion obligations, if the terms and conditions of these bonds (or participation rights) provide for such subscription rights. Such bonds (or participation rights) usually provide for protection against dilution. If, in the ensuing period, shares with subscription rights are issued at a price that is lower than the current stock exchange price of the share, the value of the option or conversion right and/or the conversion obligation of the holders of bonds (or convertible participation rights) would be reduced. Therefore, in order to prevent this disadvantage in terms of value, as a general rule the dilution protection applies. This stipulates that, in the event of subsequent share issues with shareholders’ subscription rights, the holders are granted a discount on the option/conversion price. Alternatively, the terms and conditions of the bonds or convertible participation rights can also grant the holders subscription rights to new shares such as those granted to the shareholders. The holders are thus placed in the same position as if they had already exercised their option or conversion rights or if a conversion obligation had been fulfilled. To enable the Company to grant the holders such subscription rights, shareholders’ subscription rights must be excluded. The option of granting shares to the holders of bonds that carry conversion and/or option rights or convertible participation rights as opposed to a discount on the option or conversion price may be a more cost-efficient option for the Company. By granting shares instead of reducing the option/conversion prices, the Company may realize a higher issue price for the shares to be issued in connection with the exercise of a conversion or option right.
In addition, upon the approval of the Supervisory Board, it shall be possible to exclude shareholders’ subscription rights in the case of a capital increase against contributions in cash when the issue price is not substantially lower than the market price, as provided for by § 186 (3) sentence 4 AktG. This authorization enables the Company to take advantage, in a quick and flexible manner, of market opportunities in the various areas of its business activities and to meet capital needs at very short notice when necessary. By excluding subscription rights, the Company is given the ability to quickly respond and to place shares at a price close to the market price, i.e. without the discounts usually necessary in connection with the issue of subscription rights. As a result, the Company benefits from higher proceeds. Furthermore, new investor groups may be attracted by such issues. When utilizing this authorization, the Management Board will fix the discount as low as possible in light of the market conditions existing at the time of the placement, and in no event in excess of 5% of the then prevailing market price when utilizing the Authorized Capital 2018/I. Furthermore, pursuant to § 186 (3) sentence 4 AktG, the number of shares issued without subscription rights may not exceed 10% of the existing share capital, neither at the time of this authorization becoming effective, nor at the time of its exercise.
The sale of treasury shares will be counted towards this limitation if the sale occurs during the term of this authorization and if subscription rights are excluded pursuant to § 186 (3) sentence 4 AktG. In addition, shares that are to be issued to serve conversion or option rights and/or conversion obligations ensuing from bonds (including participation rights) will also count towards this limit, if these bonds (including participation rights) are issued during the term of this authorization under exclusion of subscription rights in corresponding application of § 186 (3) sentence 4 AktG.
These requirements ensure the protection of shareholders against dilution. Each shareholder has, in principle, the opportunity to acquire via the stock exchange the shares necessary to avoid dilution on substantially similar terms, given that the issue price of the new shares is close to the market price and the size of the placement without subscription rights is restricted. This ensures that the economic and voting rights interests of shareholders are adequately protected when shares are issued from the Authorized Capital 2018/I under exclusion of subscription rights, while granting the Company flexibility for the benefit of all of its shareholders.
Also, an authorization to exclude shareholders’ subscription rights shall be given in the case of a capital increase against contributions in kind, with the approval of the Supervisory Board. This authorization enables the Management Board to deliver shares of the Company, as appropriate in the individual cases, in connection with the acquisition of companies or interests in companies, or other assets. This option will increase the Company’s competitive position with respect to potential acquisition targets and increase its flexibility to take advantage of opportunities to acquire companies, interests in companies or other assets while maintaining its liquidity levels. Using shares as acquisition currency can also be advantageous when optimizing the financing structure. The recommended authorization is not disadvantageous to the Company as the issue of shares against contributions in kind is only permissible if such contributions in kind represent a fair value compared to the delivered shares.
Within the framework of the exclusion of subscription rights in the event of capital increases against contributions in kind, the Management Board shall further be authorized to issue shares using the Authorized Capital 2018/I, instead of providing cash settlement, to satisfy, in part or in whole, securitized or non-securitized monetary claims against the Company. The Company is thus granted additional flexibility to settle such cash claims by the issue of shares even in instances where it had initially agreed to pay in cash (e.g. for an acquisition target).
The total shares issued pursuant to this authorization, excluding subscription rights, in return for contributions in cash or contributions in kind may not exceed a pro rata amount of the share capital of EUR 116,992,000 (corresponds to 10% of the current share capital). Shares shall count towards this limitation that are to be issued to service conversion or option rights and/or conversion obligations ensuing from bonds (including participation rights), provided that the bonds (including participation rights) were issued during the term of this authorization for Authorized Capital 2018/I subject to exclusion of the subscription rights or shares that are issued during the term of this authorization to service conversion rights or conversion obligations under the EUR 500,000,000 convertible bond issued in 2011; excluded are shares, which are to be issued to service Solvency II Instruments. This restriction limits the possible dilution for the shareholders excluded from subscription rights. As Solvency II Instruments are recognized as own fund items under insurance supervisory law, it is in the Company's interest to have an increased scope of action to issue such instruments and therefore not to include them in the sum of total shares above. The volume of Solvency II Instruments with conversion obligations, that are issued subject to the exclusion of subscription rights, is restricted in accordance with Agenda Item 7 insofar as the possible conversion obligations in shares of the Company – at the time of issuance - shall not exceed a proportionate amount of the share capital of EUR 116,992,000 (equivalent to 10% of the current share capital).
The Management Board will carefully analyze in each case whether to exclude shareholders’ subscription rights when raising capital pursuant to this authorization. This option will only be used if, following the assessment of the Management Board, it is deemed to be in the best interest of the Company, and, therefore, of its shareholders. Provisional resolutions of this kind with the possibility to exclude shareholders’ subscription rights are common, both nationally and internationally.
The Management Board will report about the use of the Conditional Capital 2018/I at each General Meeting following such use.