Report of the Management Board on Agenda Item 8 

Under Agenda Item 8, the Company is authorized to acquire treasury shares in an amount of up to 10% of the current share capital. This may be done by the Company itself, by other companies controlled or majority-owned by the Company, or by third parties acting for the account of such companies or the account of the Company. In case the share capital decreased by the time of execution of the authorization, the decreased amount shall be decisive. The authorization is to remain valid until May 7, 2029. This authorization is intended to particularly enable share buy-backs and redemptions, which constitute an important element of the Company's capital management along the dividend and growth strategy. 

The acquisition via a stock exchange may also be carried out in the form of a structured buy-back program carried out by a mandated credit institution, securities institution or undertaking that fulfills the requirements of § 186 (5) sentence 1 AktG.

Pursuant to § 71 (1) no. 8 AktG, the shares may also be acquired and sold in ways other than via a stock exchange. In addition to buying on a stock exchange, the Company may also acquire treasury shares by means of a public tender offer to the shareholders of the Company. The principle of equal treatment set forth by the German Stock Corporation Act must be observed. In this instance, the shareholders may decide how many shares they wish to tender and, if a price range has been fixed, at what price. 

The Company may also offer as consideration shares of a listed company as defined in § 3 (2) AktG instead of cash. Pursuant to this provision, a company is deemed to be a listed company if its shares are admitted to trading on a market which is regulated and supervised by state-recognized authorities, has regular trading and is directly or indirectly accessible to the general public. Thus, this allows the Company greater flexibility than if it were restricted to cash offers. At the same time, the Company obtains the opportunity to place shares held by it. Correspondingly, shareholders can exchange all or part of their shares in Allianz for shares in such other companies.

If, in case of a public tender offer or a public exchange offer, the number of offered shares exceeds the number of shares that had been intended for purchase, the purchase will not take place in the ratio of the participation but in the ratio of the tendered shares. This serves to simplify the allocation process. A preferred consideration of up to 100 tendered shares per shareholder can be provided for (minimum allocation).

Besides the aforementioned possibilities of acquiring treasury shares the acquisition by means of derivatives is also permitted. 

For the Company, it may be advantageous to sell put options or purchase call options instead of directly acquiring shares in the Company. In addition, it can be advantageous to purchase shares by means of forward purchases. In doing so, the Management Board intends to use put and call options, as well as forward purchases (hereinafter also collectively referred to as “derivative contracts” or “derivatives”) only as a supplement to conventional share buy-backs. The acquisition of treasury shares by way of derivatives has to be carried out by a credit institution, a securities institution or an undertaking that fulfills the requirements of § 186 (5) sentence 1 AktG.

When selling put options, the Company grants the acquirer of the put options the right to sell Allianz shares to the Company at a price laid down in the put option (exercise price). As consideration, the Company receives an option premium, which corresponds to the value of the disposal right taking into account the exercise price, the term of the option and the volatility of the Allianz share. If the put option is exercised, the option premium paid by the acquirer of the put option reduces the overall consideration rendered by the Company for the acquisition of the share. It is economically favorable to the option holder to exercise the put option if the Allianz share price at the time of exercise is lower than the exercise price, because the put option holder can then sell the shares at the higher exercise price. From the Company’s point of view, the advantage of a share buy-back using put options is that the exercise price is fixed already on the day the option contract is concluded, while the liquidity does not flow until the exercise date. Moreover, due to the option premium collected, the overall acquisition price of the shares for the Company is lower than the share price at the time the option contract is concluded. If the option holder does not exercise the option because the share price at the exercise date is higher than the exercise price, the Company will not be able to acquire treasury shares in this way, but can still keep the collected option premium.

If a call option is purchased, the Company acquires the right to purchase, against payment of an option premium a predetermined number of shares at a predetermined price (exercise price) from the seller of the option, the “option writer”. It is economically favorable to the Company to exercise the call option if the Allianz share price is higher than the exercise price, because it can then purchase the shares from the option writer at the lower exercise price. In this way, the Company hedges itself against rising share prices. Furthermore, the Company’s liquidity is not affected, since the fixed acquisition price for the shares does not need to be paid until the call options are exercised. 

In the case of a forward purchase, the Company agrees with the forward seller to purchase the shares on a set future date. The purchase is made according to a forward price that is determined when the forward purchase is concluded. On the date agreed, the Company pays the forward price to the forward seller; in return the forward seller delivers the shares.

The term of the derivatives must end on May 7, 2029, at the latest, and must be chosen in such way that the acquisition of Allianz shares upon the exercise of the options and the fulfillment of forward purchases will take place no later than May 7, 2029. 

The acquisition price to be paid by the Company for the shares is the exercise price fixed in the particular put or call option or the forward price agreed for the forward purchase. The exercise price or the forward price may be higher or lower than the stock exchange price of Allianz shares when the put option is sold, the call option is acquired, or the forward purchase is concluded. However, the exercise or forward price (excluding any incidental costs) may not exceed by more than 10% and not fall short of by more than 10%, the price determined for shares in the Company in the opening auction in the Xetra-trading system (or any comparable successor system at the Frankfurt Stock Exchange) on the day of the derivative contract. 

The option premium agreed on by the Company when selling the put options or acquiring the call options may, in the case of put options, not be materially lower and, in the case of call options, not be materially higher than the theoretical market value of the respective options on the date the option contract is concluded. The theoretical market value must be determined using recognized finance-mathematical methods, with the calculation of such market value taking into account, among other things, the agreed exercise price. The discount on the theoretical market value determined using recognized finance-mathematical methods in case put options are sold, or the add-on in case call options are acquired, may, however, in no event exceed 5% of the determined theoretical market value of the options. 

Similarly, the forward price agreed by the Company for forward purchases may not materially exceed the theoretical forward price determined according to recognized finance-mathematical methods, the calculation of which must take into account, among other things, the current stock exchange price and the term of the forward purchase.

The terms and conditions of the derivatives shall ensure that the shares to be delivered to the Company upon exercise of the options or fulfillment of forward purchases have previously been acquired in keeping with the legal principle of equal treatment. In particular, an acquisition via a stock exchange fulfills this requirement. 

The determination of the option premium and the exercise price or forward price in the manner described above and the obligation to settle options and forward purchases only with shares that have previously been acquired in keeping with the legal principle of equal treatment, rule out economic disadvantages for shareholders as a consequence of the acquisition of treasury shares via options or forward purchases. Since the Company receives or pays a fair market price, the shareholders not involved in the derivative transactions do not suffer any loss in value. This is comparable to the position of shareholders in the case of share buy-backs via the stock exchange, where in fact not all shareholders are able to sell shares to the Company. Both the regulations governing the structure of the derivatives and the regulations governing the shares suitable for delivery ensure that full account is taken of the principle of equal treatment of shareholders also in this form of acquisition.

Therefore, it is justified that a claim by shareholders to conclude such derivative contracts with the Company is excluded, in corresponding application of § 186 (3) sentence 4 AktG. By excluding subscription rights, the Company – unlike in an offer to all shareholders to purchase options or conclude forward purchase contracts – is in a position to conclude derivative contracts at short notice and is thus provided with the necessary flexibility to react quickly to market situations.

If shares are acquired using derivatives, shareholders have a right to offer their shares only insofar as the Company is obligated vis-à-vis the respective shareholder to purchase the relevant shares under the options or forward purchases. Otherwise, the use of derivatives in acquiring shares would not be possible, and thus the Company would not be able to generate the associated benefits. Having carefully weighed the interests of the shareholders and the interests of the Company, the Management Board considers the non-granting or restriction of the shareholders’ rights to offer shares to be justified and reasonable, given the advantages resulting from the use of derivative contracts for the Company. 

It may also be beneficial to the Company to not only acquire treasury shares via the stock exchange, but also via a multilateral trading facility (“MTF”). MTFs are defined in § 2 (6) German Stock Exchange Act (“Börsengesetz – BörsG”). By additionally using a buy-back via MTFs, the Company can gain access to a larger trading volume. The Company will, as a rule, acquire treasury shares via those MTFs where it is evident that prices do not materially deviate from the stock exchange prices on the regulated market. Particularly these types of MTF are not materially different from a stock exchange in the formal sense. Acquisitions made via MTFs are subject to the same upper and lower price limits that apply to buy-backs performed via the stock exchange; an acquisition made via MTFs is likewise linked to the stock exchange price determined on the Frankfurt Stock Exchange through the opening auction in the electronic trading system. 

The treasury shares acquired may be used for any lawful purposes, including the following:

The acquired treasury shares can be sold for cash outside a stock exchange with exclusion of subscription rights. As a prerequisite, these shares must be sold against a cash consideration at a price that is not substantially below the stock exchange price of shares in the Company at the time of the sale. This authorization makes use of the option of the eased exclusion of subscription rights provided for by § 71 (1) no. 8 AktG in corresponding application of § 186 (3) sentence 4 AktG. As shares may be sold only at a price not substantially below the applicable stock exchange price, shareholders are duly protected against dilution. The final sales price of the treasury shares will be determined shortly before the sale. The Management Board will set any potential discount on the stock exchange price as low as possible. The discount will in no event exceed 5% of the current stock exchange price at the time of the exercise of the authorization. 

This authorization applies with the proviso that the shares disposed of under exclusion of subscription rights in corresponding application of § 186 (3) sentence 4 AktG, may not, in total, exceed 10% of the share capital of the Company, neither at the time when this authorization takes effect nor at the time when it is exercised. In determining this 10% limit, all shares must be included that are issued from authorized capital during the term of this authorization under exclusion of subscription rights pursuant to § 186 (3) sentence 4 AktG. Furthermore, shares required to be issued to meet obligations arising from bonds (including participation rights) carrying conversion or option rights or conversion obligations must also be included in determining this 10% limit if these bonds (or participation rights) were issued under exclusion of subscription rights during the term of this authorization in corresponding application of § 186 (3) sentence 4 AktG. This limitation, and the fact that the sales price must be based on the stock exchange price, adequately protects the economic interests and voting rights of the shareholders. This authorization is in the interest of the Company because it affords greater flexibility. It enables the Company, for example, to sell treasury shares to institutional investors or to target new investor groups.

The disposal of treasury shares may also be made against contributions in kind under exclusion of shareholders’ subscription rights. As a result, the Management Board would be able to offer treasury shares in appropriate cases as consideration for the acquisition of a company, interests in companies, or other assets. The ability to offer treasury shares as consideration is advantageous when competing for attractive acquisition targets. If market opportunities arise, it also affords the necessary scope for acquiring companies, interests in companies or other assets, while at the same time maintaining liquidity. This may also be useful under the aspect of an optimal financing structure. When determining the valuation ratios, the Management Board will ensure that shareholders’ interests are adequately protected and take into account the stock exchange price of the Allianz share.

In addition, the authorization allows the use of treasury shares under exclusion of shareholders’ subscription rights for the placement of shares in the Company on foreign stock exchanges on which they are not yet admitted for trading. This allows for the expansion of the shareholder base in foreign countries and to increase the attractivity of the shares. The initial offer price (excluding incidental costs) of these shares when being placed on additional stock exchanges may not be more than 5% below the closing price in the Xetra-trading system (or any comparable successor system at the Frankfurt Stock Exchange) on the last trading day prior to the placement.

Furthermore, it might be feasible to use, in whole or in part, treasury shares, excluding shareholders’ subscription rights, instead of a capital increase to meet obligations under conversion or option rights or conversion obligations. The possibility to partially exclude shareholders’ subscription rights for the benefit of holders of bonds (including participation rights) with conversion or option rights or a conversion obligation enables the Company to offer subscription rights to shares, instead of a reduction of the option or conversion price, to such bond holders as a protection against dilution.

The acquired treasury shares may also be offered for sale to the employees of the Company or its Group companies. This may be an economically viable alternative to a capital increase. Offering shares to the employees is in the interests of the Company and its shareholders, because it enhances employee identification with the Company and encourages them to take responsibility for the Company. For treasury shares to be offered to employees, the shareholders’ subscription rights with regard to such shares must be excluded. In determining the price to be paid by the employees, a customary discount on offers of shares to employees may be granted. The authorization also provides the possibility to offer shares to employees without consideration. The treasury shares may also be transferred to a third party in charge of the administration of the employee stock participation program, if and as long it is legally guaranteed that the third party offers such shares to the aforementioned employees for purchase.

The Company may redeem treasury shares acquired on the basis of this authorization and previous authorizations without obtaining another resolution by the General Meeting. In principle, this leads to a decrease in the share capital. Alternatively, the Management Board is authorized to carry out the redemption without changing the share capital pursuant to § 237 (3) no. 3 AktG. In this case, the redemption will increase the pro-rata amount of the remaining shares in the share capital pursuant to § 8 (3) AktG. 

The aforementioned possibilities of utilizing treasury shares also pertain to shares acquired pursuant to § 71 (1) no. 8 AktG on the basis of authorizations granted by previous General Meetings. This also applies to shares purchased by Group companies or pursuant to § 71d sentence 5 AktG.

The Management Board will report on the extent to which it has made use of the authorization at the respective next Annual General Meeting following such use.