§ 2 (3) of the Statutes of Allianz SE provides for an authorized capital (Authorized Capital 2018/I). The Authorized Capital 2018/I was created by the General Meeting on May 9, 2018 and still amounts to EUR 334,960,000. It is valid up until May 8, 2023.
The Management Board and Supervisory Board propose to the Annual General Meeting that a new Authorized Capital 2022/I amounting to EUR 467,968,000 be created. The Authorized Capital 2018/I shall be cancelled as soon as the new Authorized Capital 2022/I becomes effective.
The proposed framework of EUR 467,968,000 accounts for 40% of the current share capital, the term of the authorization is five years. When the authorizations to increase the share capital proposed to the Annual General Meeting for resolution under Agenda Items 8, 9, and 10 take effect, the previous corresponding authorizations will be cancelled, so that, upon the proposed authorizations coming into effect, Allianz SE will possess no other authorizations to increase the share capital.
The Authorized Capital 2022/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.
At the same time, the sum total of the shares issued (i) through utilization of the Authorized Capital 2022/I and (ii) the shares that are to be issued to service the conversion or option rights or conversion obligations under certain bonds (including participation rights), issued during the term of this authorization, is limited to a proportionate amount of the share capital of EUR 467,968,000 - at the time of this authorization, this corresponds to 40% of the share capital of EUR 1,169,920,000. This 40% limit is also intended to limit the scope of these two authorizations because it has been proposed that the limit for the Authorized Capital 2022/I be increased by around eleven percentage points compared to the Authorized Capital 2018/I. This increases the flexibility of the Company without at the same time increasing the overall limits for the issue of shares from authorized capital and from conversion or option rights or conversion obligations under certain bonds (including participation rights).
If the Authorized Capital 2022/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) with 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, because the value of the conversion or option right or conversion obligation of bond holders (including participation rights) would be reduced if these investors were not granted a subscription right to new shares to the extent to which they would be entitled following the exercise of their conversion or option rights or the fulfilment of a conversion obligation. 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 with conversion and/or option rights or convertible participation rights as opposed to a discount on the option or conversion price may be economically advantageous for the Company.
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 whereby, when utilizing the Authorized Capital 2022/I, this shall be based on the most recent closing price or a weighted average price over the last three to ten trading days on the Xetra trading system (or a comparable successor system of the Frankfurt Stock Exchange). 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 of 10% if the sale occurs during the term of this authorization and if subscription rights are excluded in corresponding application of § 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 for the restriction of the subscription right exclusion 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 2022/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 2022/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 sum of 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 - at the time of this authorization, this corresponds to 10% of the share capital of EUR 1,169,920,000. 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 2022/I subject to exclusion of the subscription rights. This restriction limits the possible dilution for the shareholders excluded from subscription rights.
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.
There are currently no concrete plans to utilize the new Authorized Capital 2022/I. The Management Board will report about the use of the Authorized Capital 2022/I at each General Meeting following such use.