Allianz SE
Annual Report 2019

Plain-text annual report

OUTPERFORM TRANSFORM REBALANCE ANNUAL REPORT 2019 ALLIANZ SE To go directly to any chapter, simply click on the headline or the page number. All references to chapters, pages, notes, internet pages, etc. within this report are also linked. CONTENT A _ To Our Investors 2 Supervisory Board Report 7 Mandates of the Members of the Supervisory Board 8 Mandates of the Members of the Board of Management Pages 1 – 8 B _ Management Report of Allianz SE Pages 9 – 58 10 Executive Summary and Outlook 14 Operations by Reinsurance Lines of Business 16 Balance Sheet Review 18 Liquidity and Funding Resources 19 Risk and Opportunity Report 30 Corporate Governance Report (not part of the audit) 36 Statement on Corporate Management pursuant to § 289f of the HGB 39 Remuneration Report 56 Other Information C _ Financial Statements of Allianz SE Pages 59 – 90 FINANCIAL STATEMENTS 60 Balance Sheets 62 Income Statement NOTES TO THE FINANCIAL STATEMENTS 63 Nature of Operations and Basis of Preparation 63 Accounting, Valuation and Calculation Methods 66 Supplementary Information on Assets 70 Supplementary Information on Equity and Liabilities 77 Supplementary Information on the Income Statement 80 Other Information 83 List of Participations of Allianz SE, Munich as of 31 December 2019 according to § 285 No. 11 and 11b HGB in conjunction with § 286 (3) No. 1 HGB D _ Further Information 92 Responsibility Statement 93 Independent Auditor's Report Pages 91 – 96 Disclaimer regarding roundings Due to rounding, numbers presented may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures. TO OUR INVESTORS A Annual Report 2019 – Allianz SE 1 A _ To our Investors SUPERVISORY BOARD REPORT Ladies and Gentlemen, During the financial year 2019, the Supervisory Board fulfilled all its duties and obligations as laid out in the company statutes and applicable law. It monitored the activities of the company’s Board of Management, dealt with the succession planning for the Board of Management and advised it on business management issues. OVERVIEW In the financial year 2019 the Supervisory Board held six meetings and adopted one written resolution. The regular meetings took place in February, March, May, June, September, and December. In all of the meetings in 2019, the Board of Management reported on Group revenues and results as well as developments in individual business segments. The Board of Management informed the Supervisory Board on the course of business as well as on the development of Allianz SE and the Allianz Group, including deviations in actual business developments from the planning. In this context, the adequacy of capitalization, the solvency ratio, and the respective stress scenarios were discussed. The annual Allianz SE and the Group’s consolidated financial statements including the respective auditor‘s reports, the half-yearly as well as the quarterly reports were reviewed in detail by the Supervisory Board after preparation by the Audit Committee. Other focal points of reporting were strategic topics such as the new Allianz strategy “Simplicity Wins” with its three pillars “Outperform”, “Transform” and “Rebalance”, the risk strategy, the Allianz Customer Model (ACM), the launch of the European direct insurer Allianz Direct and the business strategy in China. In addition, the Supervisory Board was extensively involved in the Board of Management’s planning for both the fiscal year 2020 and the three-year period from 2020 to 2022. Cyber risk security and developments of life business in the current low- interest environment were also regularly discussed. Implications of Brexit for Allianz and economic sanctions were other ongoing topics. Furthermore, the Supervisory Board dealt extensively with personnel matters relating to the Board of Management, the requirements of the new German Corporate Governance Code announced for 2020, and the Act Implementing the Second Shareholders’ Rights Directive (ARUG II). The Supervisory Board received regular, timely, and comprehensive reports from the Board of Management. The Board of Management’s verbal reports at the meetings were accompanied by written documents, which were sent to each member of the Supervisory Board in time for the relevant meeting. The Board of Management also informed the Supervisory Board in writing about important events that occurred between meetings. The chairmen of the Supervisory and Management Boards also had regular discussions about major developments and decisions. The Chairman of the Supervisory Board also had individual discussions with each member of the Board of Management about their respective half-year as well as full-year performance. In the financial year 2019, again individual trainings and group events were held for example on actuarial and accounting aspects of the life insurance business, on the basis of an agreed development plan for further training of the members of the Supervisory Board. Details on each member’s participation in meetings of the Supervisory Board and its committees can be found in the Corporate Governance Report, starting on page 30. Members of the Supervisory Board who were unable to attend meetings of the Supervisory Board or its committees were excused and, as a rule, cast their votes in writing. ISSUES DISCUSSED IN THE SUPERVISORY BOARD PLENARY SESSIONS In the meeting of 14 February 2019, the Supervisory Board comprehensively dealt with the preliminary financial figures for the financial year 2018 as well as the Board of Management’s dividend proposal. The appointed audit firm, PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft (PwC), Munich, reported in detail on the preliminary results of their audit. In the further course of the meeting, the Supervisory Board also discussed the target achievement of each individual member of the Board of Management and, on this basis, set their variable remuneration for the financial year 2018. As part of this performance assessment, the fitness and propriety of the members of the Board of Management were also confirmed. In addition, various special topics were discussed, such as the status of the implementation of the EU Data Protection Directive, the harmonization of the IT infrastructure in Allianz Group, the life insurance business in Asia, ongoing M&A activities, and the Board of 2 Annual Report 2019 – Allianz SE A _ To our Investors Management’s deliberations on a potential new share buyback program. The Supervisory Board also dealt with succession planning for the Board of Management. In the meeting of 7 March 2019, the Supervisory Board discussed the audited annual Allianz SE and consolidated financial statements including market value balance sheets, as well as the Board of Management’s recommendation for the appropriation of earnings for the financial year 2018. The auditors confirmed that there were no discrepancies compared to their February report, and issued an unqualified auditor’s report for the individual and consolidated financial statements. The Supervisory Board also reviewed and approved the separate non-financial report for both Allianz SE and the Group, taking into account the report of the external auditor. Further presentations concerned the Board of Management’s report on risk development in 2018, the annual compliance report, and the annual report of the Head of Group Audit. Next, the Supervisory Board reviewed the agenda and proposals for resolution for Allianz SE’s 2019 Annual General Meeting (AGM). At the recommendation of the Audit Committee, the Supervisory Board appointed PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft (PwC) as auditor for the 2019 individual and consolidated financial statements, the auditor’s review of the 2019 half-yearly financial report, and the assurance engagement of the combined separate non-financial report. Furthermore, the Supervisory Board dealt with and approved the control and profit transfer agreement with Allsecur Deutschland AG. The Supervisory Board also received reports on Allianz’s global strategy in the health insurance business and the new Allianz Digital Health unit. On 8 May 2019, just before the AGM, the Board of Management briefed the Supervisory Board on business performance in the first quarter of 2019 as well as on the current situation of both the Allianz Group and Allianz SE, in particular with regard to share price development, capitalization, and capital management. At the meeting on 27 June 2019, the Board of Management first reported in detail on the course of business in fiscal year 2019 to date and provided an outlook on the expected half-year results. In addition, the Board of Management reported on various M&A activities, such as the sale of the stake in the Spanish joint venture “Allianz Popular” and the acquisition of the property insurance business of Legal & General in the UK, and gave an overview of Allianz’s role in ESG issues. The Board of Management then presented the new Allianz strategy “Simplicity Wins” with its three pillars “Outperform”, “Transform” and “Rebalance”, and set out an overview of the next steps required for growth and value creation. The Supervisory Board also dealt in detail with current market trends in China, in particular recent regulatory developments and the successful acquisition of a holding license as the first foreign insurance company to do so. The Board of Management also reported on the offer of IT solutions for external insurance companies. In addition, the Board of Management provided its regular status report on the issue of cyber risk security. Furthermore, the Supervisory Board dealt in detail with personnel matters relating to the Board of Management. Ms. Renate Wagner was appointed to the Board of Management with effect from 1 January 2020, to replace Dr. Helga Jung, who left the Board of Management at her own request at the end of 2019. Dr. Günther Thallinger’s term on the Board of Management, likewise expiring at the end of 2019, was extended for five years. The meeting on 27 September 2019 focused on the continuation of the presentation on the strategic direction of Allianz Group and Allianz SE (solo). In particular, the strategic direction and transformation issues for the “Transformation” pillar were discussed: the Allianz Customer Model (ACM), the European direct insurer Allianz Direct and the orientation of Allianz Partners. With regard to the “Rebalance” pillar, the Board of Management presented and subsequently discussed the China strategy in detail. The Board of Management report on the course of business covered the successful acquisition of Brazilian motor and property insurance operations from Sul América and the strategic realignment of Allianz in South America. In addition, the Supervisory Board dealt with corporate governance issues, the self-evaluation of the Supervisory Board required by supervisory law, and the Supervisory Board’s development plan based on this. The Supervisory Board also decided to extend the Board of Management term of Ms. Jacqueline Hunt, expiring at the end of 2019, for three years. At the meeting on 12 December 2019, the Board of Management first provided information about the third- quarter results, the further course of business, and the situation of Allianz Group. Furthermore, the Supervisory Board discussed the planning for fiscal year 2020 and the three-year plan for 2020 to 2022. With the risk strategy and the considerations on the strategic development of the Asset Management segment, the Board of Management presented the follow-up on outstanding issues regarding the new Allianz strategy. In addition, the Board of Management provided a status report on the issue of cyber risk security. The Supervisory Board also discussed the declaration of conformity with the German Corporate Governance Code and various corporate governance issues, and dealt with the requirements profile for the Supervisory Board and the Act Implementing Annual Report 2019 – Allianz SE 3 A _ To our Investors the Second Shareholders’ Rights Directive (ARUG II). Furthermore, the Supervisory Board set targets for the variable remuneration of members of the Board of Management for 2020 and debated succession planning with regard to the Board of Management. The members of the Supervisory Board discussed the introductions of the potential candidates with the Board of Management that took place on two evenings. Finally, the results of this year’s efficiency review of the Supervisory Board’s activities were discussed and appropriate measures for improvement were decided and subsequently implemented. After previous discussion, a new version of the objectives for the composition of the Supervisory Board was adopted by written procedure in December 2019. This new version came into effect as of 1 January 2020 and takes into account the requirements of the new German Corporate Governance Code expected for 2020. DECLARATION OF CONFORMITY WITH THE GERMAN CORPORATE GOVERNANCE CODE On 13 December 2019, the Board of Management and the Supervisory Board issued the Declaration of Conformity in accordance with § 161 of the German Stock Corporation Act (“Aktiengesetz”). The declaration was posted on the company website, where it is available to shareholders at all times. Allianz SE fully complies and will continue to fully comply with the recommendations of the German Corporate Governance Code in its version of 7 February 2017. Further explanations on corporate governance in the Allianz Group can be found in the Corporate Governance page 30, as well as in the Statement on Corporate Management pursuant to § 289f of the Report starting on page 36. More details on corporate governance are provided on the Allianz website, HGB, which starts on specifically:  www.allianz.com/corporate-governance. COMMITTEE ACTIVITIES The Supervisory Board has formed various committees in order to perform its duties efficiently. The committees prepare the consultations in plenary sessions as well as the adoption of resolutions; they can also adopt their own resolutions. The Standing Committee held four meetings in 2019. These were concerned primarily with corporate governance issues, the preparations for the Annual General Meeting, the Supervisory Board self-evaluation as required by supervisory law and associated development plan, and the efficiency review of the Supervisory Board. Collective and, if necessary, individual trainings are continuously carried out as part of the implementation of the develop- ment plan. In addition, the Standing Committee had to pass resolutions approving the granting of loans to senior executives. The Personnel Committee held four meetings in 2019 and adopted two written resolutions. The Committee dealt in detail with the succession to the Board of Management for Dr. Helga Jung and the extensions to the terms of Ms. Jaqueline Hunt and Dr. Günther Thallinger. Other key topics included the preparatory review of the Board of Management’s remuneration system, target achievement of the Board of Management members in the financial year 2018, and defining the targets for the 2020 variable remuneration. The committee also looked at various mandate matters of individual board members and at further succession planning for the Board of Management. The Audit Committee held five regular meetings in 2019. In the presence of the auditors, the committee discussed both Allianz SE’s annual financial statements and the Allianz Group’s consolidated financial statements, as well as the management and auditor’s reports and the half-yearly financial report. These reviews revealed no reasons for objection. The Audit Committee further received the Board of Management’s reports on quarterly results. It prepared the engagement of the external advisor and defined key audit areas for the 2019 financial year. The committee also discussed the assignments of non-audit services to the auditors and approved an updated appro- priate positive list of pre-authorized audit and non-audit services. In addition, it dealt extensively with the compliance system, the internal audit system, and the financial reporting process as well as the respective internal controls. Regular reports on legal and compliance issues in the Group and individual subsidiaries as well as on the work of the Internal Audit department were presented and discussed in detail. Furthermore the head of the actuarial department (Group Actuarial, Planning & Controlling) presented his annual report. In addition, the Audit Committee discussed the internal audit plan for 2020, current developments in data protection, and the forthcoming amendments to the IFRS 9 and 17 accounting standards. 4 Annual Report 2019 – Allianz SE A _ To our Investors The Risk Committee held two meetings in 2019. In both meetings, the committee discussed the current risk situation of the Allianz Group and Allianz SE with the Board of Management. The risk report and other risk-related statements in the annual Allianz SE and consolidated financial statements as well as management and group management reports were reviewed with the auditor and the Audit Committee was informed of the result. The appropriateness of the early risk recognition system at Allianz SE and Allianz Group and the result of further risk assessments by the auditor were also discussed. The committee took a detailed look at the risk strategy, including risk appetite and capital management, as well as the effectiveness of the risk management system for the Allianz Group and Allianz SE. Other matters considered included the report on Allianz’s own risk and solvency assessment (ORSA), and the changes to the internal Solvency II model. Moreover, the Risk Committee dealt extensively with the company’s exposure to cyber risks, activities to ensure information security and the specific risks of the cyber insurance industry. Besides political risks like the Brexit and the trade conflict between China and the United States, topics such as Reinsurance, industrial insurance and money laundering were dealt with. The Technology Committee had two meetings in the fiscal year 2019 in which it dealt in detail with the main elements of the IT strategy. In the first meeting the committee got an overview of the IT strategy. Therefore, the realignment of the IT platform based on harmonization and standardization of processes and products as part of the transformation project Allianz Customer Model (ACM) was presented on the one hand. On the other hand the committee was informed about key central IT-projects and the ambitions for the year 2019. In the second meeting the technology committee dealt intensively with strategic IT transformation topics, such as the business master platform for the Allianz Customer Model (ACM) including a decommissioning strategy for old systems and the Allianz Direct platform. Apart from these new strategic initiatives like the strategic data use in Allianz Group, opportunities presented by the use of artificial intelligence as well as the cloud strategy for Allianz Group were discussed. At one meeting in the fiscal year 2019, the Nomination Committee dealt in detail with the objectives for the composition of the Supervisory Board and prepared a revision of the objectives to bring them into line with the requirements of the new German Corporate Governance Code. In addition, the preparation process for the Supervisory Board elections at the Annual General Meeting 2022 was discussed and next steps were defined. The Supervisory Board was informed regularly and comprehensively of the committees’ work. CHAIR AND COMMITTEES OF THE SUPERVISORY BOARD – AS OF 31 DECEMBER 2019 Chairman: Michael Diekmann Vice Chairwoman/ Chairman: Gabriele Burkhardt-Berg, Jim Hagemann Snabe Standing Committee: Michael Diekmann (Chairman), Jean-Claude Le Goaër, Herbert Hainer, Jürgen Lawrenz, Jim Hagemann Snabe Personnel Committee: Michael Diekmann (Chairman), Gabriele Burkhardt-Berg, Herbert Hainer Audit Committee: Dr. Friedrich Eichiner (Chairman), Sophie Boissard, Michael Diekmann, Jean-Claude Le Goaër, Martina Grundler Risk Committee: Michael Diekmann (Chairman), Christine Bosse, Dr. Friedrich Eichiner, Godfrey Hayward, Frank Kirsch Technology Committee: Jim Hagemann Snabe (Chairman), Gabriele Burkhardt-Berg, Michael Diekmann, Dr. Friedrich Eichiner, Jürgen Lawrenz Nomination Committee: Michael Diekmann (Chairman), Christine Bosse, Jim Hagemann Snabe AUDIT OF ANNUAL ACCOUNTS AND CONSOLIDATED FINANCIAL STATEMENTS In compliance with the special legal provisions applying to insurance companies, the statutory auditor and the auditor for the review of the half-yearly financial report are appointed by the Supervisory Board of Allianz SE, not by the AGM. The Supervisory Board appointed PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft (PwC) as statutory auditor for the annual Allianz SE and consolidated financial statements, as well as for the review of the half-yearly financial report of the financial year 2019. PwC audited the financial statements of Allianz SE and the Allianz Group as well as the respective management reports. They issued an auditor’s report without any reservations. The consolidated financial statements were prepared on the basis of the International Financial Reporting Standards (IFRS) as adopted in the European Union. PwC performed a review of the half- yearly financial report. In addition, PwC was also mandated to perform an audit of the market value balance sheet according to Solvency II as of 31 December 2019 for Allianz SE and the Allianz Group. Annual Report 2019 – Allianz SE 5 A _ To our Investors All Supervisory Board members received the documentation relating to the annual financial statements and the auditor’s reports from PwC on schedule. The preliminary financial statements and PwC’s preliminary audit results were discussed in the Audit Committee on 19 February 2020 as well as in the Supervisory Board’s plenary session on 20 February 2020. The finalized financial statements and PwC’s audit reports (dated 24 February 2020) were reviewed by the Audit Committee on 4 March 2020, and in the Supervisory Board plenary session on 5 March 2020. The auditors participated in the discussions and presented key results from their audit. Particular emphasis was placed on the key audit matters described in the auditor’s report and on the audit procedures performed. No material weaknesses in the internal financial reporting control process were discovered. There were no circumstances that might give cause for concern about the auditor’s independence. In addition, the market value balance sheets dated 31 December 2019 for both Allianz SE and the Allianz Group as well as the respective PwC reports were addressed by the Audit Committee and the Supervisory Board. On the basis of its own reviews of the annual Allianz SE and consolidated financial statements, the management and group management reports, and the recommendation for the appropriation of earnings, the Supervisory Board has raised no objections and instead agreed with the results of the PwC audit. It has also approved the Allianz SE and consolidated financial statements prepared by the Board of Management. The financial statements have thus been formally adopted. The Supervisory Board agrees with the Board of Management’s proposal on the appropriation of earnings. The Supervisory Board would like to thank all Allianz Group employees for their great personal commitment over the past year. ASSURANCE ENGAGEMENT OF THE COMBINED SEPARATE NON-FINANCIAL REPORT In the financial year 2019, the company was required to issue a separate non-financial report. This report was combined for Allianz SE and the Allianz Group. The Supervisory Board commissioned PwC to perform an assurance engagement of this report. All Supervisory Board members received the combined separate non-financial report and the independent practitioner’s assurance report in due time. The report and PwC’s assurance report were discussed in the plenary session of the Supervisory Board on 5 March 2020. The auditors from PwC participated in these discussions and presented the results of their assurance engagement. Based on its own review of the combined separate non-financial report, the Supervisory Board did not raise any objections and approved by acknowledgement the results of the PwC assurance engagement. MEMBERS OF THE SUPERVISORY BOARD AND BOARD OF MANAGEMENT There were no changes in the composition of the Supervisory Board in fiscal year 2019. As already mentioned, Dr. Helga Jung left the Board of Management of Allianz SE as of 31 December 2019. Ms. Renate Wagner was appointed as her successor with effect from 1 January 2020. Munich, 5 March 2020 For the Supervisory Board: Michael Diekmann Chairman 6 Annual Report 2019 – Allianz SE MANDATES OF THE MEMBERS OF THE SUPERVISORY BOARD MICHAEL DIEKMANN Chairman Member of various Supervisory Boards Membership in other statutory supervisory boards and SE administrative boards in Germany BASF SE until 3 May 2019 Fresenius Management SE Fresenius SE & Co. KGaA Siemens AG JIM HAGEMANN SNABE Vice Chairman Member of various Supervisory Boards Membership in other statutory supervisory boards and SE administrative boards in Germany Siemens AG (Chairman) Membership in comparable1 supervisory bodies A.P. Møller-Mærsk A/S (Chairman) GABRIELE BURKHARDT-BERG Vice Chairwoman Chairwoman of the Group Works Council of Allianz SE SOPHIE BOISSARD Chairwoman of the Board of Management of Korian S.A. Membership in other statutory supervisory boards and SE administrative boards in Germany Curanum AG (Korian Group company, Chairwoman) Membership in comparable1 supervisory bodies Segesta SpA (Korian Group company, Chairwoman) Senior Living Group NV (Korian Group company) CHRISTINE BOSSE Member of various Supervisory Boards Membership in comparable1 supervisory bodies P/F BankNordik (Chairwoman) DR. FRIEDRICH EICHINER Member of various Supervisory Boards Membership in other statutory supervisory boards and SE administrative boards in Germany Festo AG (Chairman) Infineon Technologies AG since 20 February 2020 Membership in comparable1 supervisory bodies Festo Management AG (Chairman) JEAN-CLAUDE LE GOAËR Employee of Allianz Informatique G.I.E. Membership in comparable1 supervisory bodies Membership in Group bodies Allianz France S.A. A _ To our Investors MARTINA GRUNDLER National Representative Insurances, ver.di Berlin HERBERT HAINER Member of various Supervisory Boards Membership in other statutory supervisory boards and SE administrative boards in Germany Deutsche Lufthansa AG FC Bayern München AG (Chairman since 9 December 2019) Membership in comparable1 supervisory bodies Accenture Plc GODFREY ROBERT HAYWARD Employee of Allianz Insurance plc FRANK KIRSCH Employee of Allianz Beratungs- und Vertriebs-AG Membership in other statutory supervisory boards and SE administrative boards in Germany Membership in Group bodies Allianz Deutschland AG until 31 December 2019 JÜRGEN LAWRENZ Employee of Allianz Technology SE Membership in other statutory supervisory boards and SE administrative boards in Germany Membership in Group bodies Allianz Technology SE 1_Generally, we regard memberships in other supervisory bodies as “comparable” if the company is listed on a stock exchange or has more than 500 employees. Annual Report 2019 – Allianz SE 7 A _ To our Investors MANDATES OF THE MEMBERS OF THE BOARD OF MANAGEMENT DR. CHRISTOF MASCHER Operations, Allianz Services Membership in other statutory supervisory boards and SE administrative boards in Germany Volkswagen Autoversicherung AG Membership in Group bodies Allianz Technology SE (Chairman) Membership in comparable1 supervisory bodies Membership in Group bodies Allianz Partners S.A.S. NIRAN PEIRIS Global Insurance Lines & Anglo Markets, Reinsurance, Middle East, Africa Membership in other statutory supervisory boards and SE administrative boards in Germany Membership in Group bodies Allianz Global Corporate & Specialty SE (Chairman) Membership in comparable1 supervisory bodies Membership in Group bodies Allianz Australia Ltd. until 31 July 2019 Allianz p.l.c. IVÁN DE LA SOTA Business Transformation, Insurance Iberia & Latin America, Allianz Partners Membership in comparable1 supervisory bodies Membership in Group bodies Allianz Compañía de Seguros y Reaseguros S.A., Spain Allianz Partners S.A.S. Allianz Seguros S.A., Brazil (Chairman) Companhia de Seguros Allianz Portugal S.A. GIULIO TERZARIOL Finance, Controlling, Risk DR. GÜNTHER THALLINGER Investment Management Membership in other statutory supervisory boards and SE administrative boards in Germany Membership in Group bodies Allianz Investment Management SE (Chairman) Allianz Lebensversicherungs-AG Allianz Private Krankenversicherungs-AG Allianz Versicherungs-AG DR. AXEL THEIS Insurance German Speaking Countries and Central & Eastern Europe Membership in other statutory supervisory boards and SE administrative boards in Germany Gemeinnützige ProCurand GmbH (Chairman) Membership in Group bodies Allianz Deutschland AG (Chairman) Allianz Investment Management SE Membership in comparable1 supervisory bodies Membership in Group bodies Allianz Elementar Lebensversicherungs-AG (Chairman) Allianz Elementar Versicherungs-AG (Chairman) Allianz Investmentbank AG Allianz Suisse Lebensversicherungs-Gesellschaft AG Allianz Suisse Versicherungs-Gesellschaft AG RENATE WAGNER since 1 January 2020 Human Resources, Legal, Compliance, Mergers & Acquisitions Membership in other statutory supervisory boards and SE administrative boards in Germany Membership in Group bodies Allianz Global Investors GmbH OLIVER BÄTE Chairman of the Board of Management Membership in other statutory supervisory boards and SE administrative boards in Germany Membership in Group bodies Allianz Deutschland AG SERGIO BALBINOT Insurance Western & Southern Europe, Asia Pacific Membership in comparable1 supervisory bodies UniCredit S.p.A. Bajaj Allianz General Insurance Company Ltd. Bajaj Allianz Life Insurance Company Ltd. Membership in Group bodies Allianz China Insurance Holding Company Ltd. (Chairman) since 28 November 2019 Allianz France S.A. Allianz Sigorta A.S. Allianz Yasam ve Emeklilik A.S. JACQUELINE HUNT Asset Management, US Life Insurance Membership in comparable1 supervisory bodies Membership in Group bodies Allianz Life Insurance Company of North America (Chairwoman) DR. HELGA JUNG until 31 December 2019 Human Resources, Legal, Compliance, Mergers & Acquisitions Membership in other statutory supervisory boards and SE administrative boards in Germany Deutsche Telekom AG Membership in Group bodies Allianz Beratungs- und Vertriebs-AG Allianz Deutschland AG Allianz Global Corporate & Specialty SE Allianz Private Krankenversicherungs-AG Allianz Versicherungs-AG since 14 November 2019 Membership in comparable1 supervisory bodies Membership in Group bodies Allianz Compañía de Seguros y Reaseguros S.A. Companhia de Seguros Allianz Portugal S.A. 1_Generally, we regard memberships in other supervisory bodies as “comparable” if the company is listed on a stock exchange or has more than 500 employees. 8 Annual Report 2019 – Allianz SE MANAGEMENT REPORT OF ALLIANZ SE B Annual Report 2019 – Allianz SE 9 B _ Management Report of Allianz SE EXECUTIVE SUMMARY AND OUTLOOK Earnings summary CONDENSED INCOME STATEMENT € mn Gross premiums written Premiums earned (net) Claims (net) Underwriting expenses (net) Other technical reserves (net) Net underwriting result Change in claims equalization and similar reserves Net technical result Investment result Allocated interest return Other non-technical result Non-technical result Net operating income Taxes Net income 2019 2018 12,384 10,912 11,436 (8,291) (3,558) 15 (397) 172 (225) 5,929 (19) (1,514) 4,396 4,170 433 4,603 10,047 (6,946) (3,018) 45 128 160 289 5,933 (20) (1,358) 4,555 4,843 512 5,355 Change 1,472 1,389 (1,344) (539) (30) (526) 12 (514) (4) 1 (157) (159) (673) (79) (752) NET UNDERWRITING RESULT Gross premiums written increased by 13.5 % to € 12,384 mn (2018: € 10,912 mn), mainly driven by higher premium volume from Allianz IARD S.A., Liverpool Victoria Insurance Company Ltd., and Allianz Compañía de Seguros y Reaseguros S.A. In total, € 11,911 mn (2018: € 10,514 mn) of gross premiums came from Property-Casualty reinsur- ance and € 473 mn (2018: € 398 mn) from Life/Health reinsurance. The net retention ratio slightly increased to 93.9 % (2018: 92.3 %). Premiums earned (net) increased to € 11,436 mn (2018: € 10,047 mn), driven by the development of gross premiums written as well as the higher retention. The accident year claims ratio (net) in Property-Casualty reinsur- ance decreased to 70.4 % (2018: 71.5 %). This was mainly driven by the increase in earned premiums (net), while natural catastrophe losses of € 355 mn were only slightly above prior year (2018: € 343 mn)1. Natural catastrophes before retrocessions € mn Losses for Allianz SE Major Events in 2019 Storms Jörn/Klaus, Germany Typhoon Hagibis, Japan Typhoon Faxai, Japan Storm Eberhard, Northern and Western Europe Bushfires, Australia Storm Bernd, Germany Tornado, Northern Italy Storm Bennet, Northern and Western Europe Hailstorm, France Flooding, Southern France Other Total Major Events in 2018 Storm Friederike, Germany Hailstorm, Australia Typhoon Jebi, Japan Storm Yvonne, Germany Storm Eleanor (Burglind), Western Europe Rain and storm, Italy Storm Fabienne, Western Europe Storm Wilma, Germany Earthquake and tsunami, Indonesia Storm, France Other Total 111 50 50 38 37 24 12 8 7 6 12 355 Losses for Allianz SE 114 56 52 20 16 14 13 12 11 9 25 343 The run-off result amounted to € (204) mn (2018: € 276 mn) and was mainly influenced by liability reinsurance (€ (350) mn), partly offset by fire and property reinsurance (€ 79 mn) as well as credit and bond reinsurance (€ 67 mn). In total, there was an increase of the calendar year claims ratio (net) in Property-Casualty reinsurance to 72.3 % (2018: 68.7 %). The expense ratio (net) in Property-Casualty reinsurance increased to 30.7 % (2018: 30.0 %), driven by a higher commission ratio of 29.8 % (2018: 29.0 %). The administrative expense ratio slightly decreased to 0.9 % (2018: 1.0 %). In Life/Health reinsurance, the net underwriting result decreased to € (36) mn (2018: € 23 mn), mainly due to an initial commission for a new reinsurance contract. The total net underwriting result amounted to € (397) mn (2018: € 128 mn), mainly driven by the negative development of the calendar year loss ratio in Property-Casualty reinsurance in 2019. 1_Based on Group definition for large losses. 10 Annual Report 2019 – Allianz SE B _ Management Report of Allianz SE Realized gains grew by € 145 mn to € 265 mn. This increase is almost completely attributable to realized gains from the sale of bonds, which went up by € 145 mn to € 257 mn. Income from reversal of impairments decreased by € 53 mn to € 94 mn, fully stemming from write-ups related to our bond portfolio (€ 94 mn). Expenses for the management of investments, interest, and other investment-related expenses declined by € 31 mn to € 1,041 mn. This reduction mainly resulted from lower interest expenses (€ 42mn) as a consequence of lower refinancing rates for the rollover of matured debt instruments. Depreciation and impairments of investments rose by € 67 mn to € 245 mn. Impairments in 2019 were particularly attributable to write- downs on shares in affiliated enterprises (€ 139 mn) and impairment charges on our bond portfolio (€ 93 mn). Realized losses went up by € 53 mn to € 173 mn and were mainly related to the sale of bonds (€ 74 mn) and the partial buyback of a subordinated bond issued by our subsidiary Allianz Finance II B.V. via tender offer (€ 96 mn). Expenses for losses taken over went down by € 114 mn to € 163 mn. This was primarily due to lower losses taken over from our service provider Allianz Technology SE, which decreased by € 135 mn to € 140 mn. OTHER NON-TECHNICAL RESULT The other non-technical result deteriorated by € 157 mn to € (1,514) mn. This development was primarily driven by the result on derivatives which deteriorated by € 125 mn. For further information re- garding other income and expenses, please refer to note 25. TAXES AND NET INCOME As far as legally permissible, Allianz SE acts as the controlling company (“Organträger”) of the German tax group most German subsidiaries belong to. As the controlling company, Allianz SE is liable for the in- come taxes of this German tax group. After being offset against tax losses, the current tax charge of Allianz SE amounted to € (67) mn (2018: € (130) mn). Moreover, Allianz SE received a tax allocation of € 485 mn (2018: € 635 mn) by Allianz SE tax group companies that recorded taxable income. Taking into account other taxes, the income from taxes amounted to € 433 mn (2018: € 512 mn). Net income declined by € 752 mn to € 4,603 mn (2018: € 5,355 mn). NET TECHNICAL RESULT In 2019, a change in claims equalization and similar reserves of € 172 mn (2018: € 160 mn) mainly resulted from the claims develop- ment in motor business. After the release of equalization and similar reserves, the net tech- nical result amounted to € (225) mn (2018: € 289 mn). NON-TECHNICAL RESULT INVESTMENT RESULT € mn Investment income Income from profit transfer agreements Income from affiliated enterprises and participations Income from other investments Realized gains Income from reversal of impairments Subtotal Investment expenses Expenses for the management of investments, interest, and other investment- related expenses Depreciation and impairments of investments Realized losses Expenses for losses taken over Subtotal Investment result 2019 2018 Change 2,625 4,046 521 265 94 7,551 2,111 4,587 615 119 147 7,579 (1,041) (1,072) (245) (173) (163) (1,622) 5,929 (178) (120) (277) (1,647) 5,933 514 (541) (93) 145 (53) (28) 31 (67) (53) 114 25 (4) The investment result decreased slightly by € 4 mn to € 5,929 mn. Income from profit transfer agreements rose by € 514 mn to € 2,625 mn, primarily due to higher profit transfers from Allianz Argos 14 GmbH and Allianz Deutschland AG, which went up by € 372 mn to € 976 mn and by € 238 mn to € 1,158 mn. This was partly offset by lower profit transfers from Allianz Asset Management GmbH, which declined by € 12 mn to € 463 mn, and Allianz Global Corporate & Specialty SE which transferred no profit in the fiscal year, after € 90 mn in 2018. Income from affiliated enterprises and participations declined by € 541 mn to € 4,046 mn, mainly because the dividend payment received from our subsidiary Allianz Europe B.V. was reduced by € 700 mn to € 3,400 mn in 2019. Income from other investments went down by € 93 mn to € 521 mn, substantially driven by lower income from intra-group loans, which declined by € 65 mn to € 86 mn. Annual Report 2019 – Allianz SE 11 B _ Management Report of Allianz SE Economic outlook1 Global growth is expected to muddle through in the next two years. Monetary policies have to deal with a threefold series of disturbances, i.e. political risk, an external shock on trade, and structural issues re- lated to ecological transition. Monetary policy only is particularly ill- equipped to tackle these kinds of shocks, which have long-lasting im- pacts. Global growth is likely to converge towards but remain below its potential of + 3.0 % at the horizon of 2021: we expect the GDP to further decelerate in 2020 at + 2.4 % from + 2.5 % in 2019. US-China trade tensions should neither escalate nor de-escalate much further in 2020. The deal is not a game changer, but it announces slightly lower uncertainty as a tariff escalation is unlikely in a U.S. elec- toral year. Monetary policies will remain a safety net for growth and markets. We expect monetary policies to remain very accommodative in 2020. The U.S. Federal Reserve will continue easing its monetary policy, with one rate cut in the first half of 2020 to cope with the recession of the U.S. manufacturing sector. The European Central Bank is likely to im- plement another deposit rate cut of 10 basis points in the first half of 2020 as well to - 0.6 %. Monthly Quantitative Easing purchases will be maintained at the current pace of € 20 bn per month until the end of the year. On the markets, political risk will remain the main volatility driver. In a context of wait-and-see posture of investors linked to U.S. elections and progressive erosion of profits, the global equity market is expected to register an inflexion in its upward (monetary driven) trend. Insurance industry outlook On the surface, 2020 promises to be very similar to 2019, with moderate premium growth despite continuing headwinds such as low yields, high political uncertainty, and weak global growth and trade. Under the sur- face, however, three fundamental changes are about to gather speed. First, the pivot to Asia: Asia's rising middle class emerges as the con- sumer of last resort with huge pent-up demand, reflecting weak social security systems and protection gaps in natural catastrophes, health, re- tirement, and mortality. Second, the pivot to digital ecosystems for bet- ter customer interaction, accelerating the shift from pure risk manage- ment to risk prevention and from single products to comprehensive so- lutions. Key for success, in particular in Europe, will be that regulation and supervision keep pace with the business transformation. Third, the pivot to higher claim costs, reflecting climate change (natural catastro- phes), social change (litigation and class action) and technology change (connectivity), ushering in a new era of cost cutting (automati- zation) and consolidation. The flip side of these changes, however, is that the topic of sustainability moves mainstream in public debates, cre- ating new opportunities for insurance. In the non-life sector, premium growth is expected to remain more or less stable. As in previous years, emerging markets are the main driver of growth. Overall, we expect global premium growth of around 4 % in 2020 (in nominal terms and adjusted for foreign currency trans- lation effects). The two opposing effects of higher rates on the one, but low investment income on the other hand point toward unchanged in- dustry profitability. 1_The information presented in the sections “Economic outlook” and “Insurance industry outlook” is based on our own estimates. 12 In the life sector, premium growth is expected to slightly accelerate as demand in emerging markets continues to grow and demand in ad- vanced economies should at least stabilize, reflecting the increasing supply of new savings products. Overall, we expect global premium growth to increase by about 6 % in 2020 (in nominal terms and adjusted for foreign currency translation effects). Given the challenging invest- ment environment, however, industry profitability is likely to remain un- der pressure. Business outlook Our outlook assumes no significant deviations from our underlying assumptions – specifically:  Global economic growth to be stable albeit slightly decelerating in 2020,  Interest rates to remain at the current level,  No major disruptions in the capital markets,  No disruptive fiscal or regulatory interference,  Level of claims from natural catastrophes at expected average levels,  An average U.S. Dollar to Euro exchange rate of 1.09. Allianz SE provides a wide range of reinsurance coverage, primarily to Allianz insurance entities (group-internal business), but also to third- party customers (external business). This includes Property-Casualty as well as Life/Health business on both a proportional and a non- proportional basis. Due to the broad spread of exposures underwritten by types of business and geography, Allianz SE’s portfolio is well diversified. Allianz SE and its subsidiaries (the Allianz Group) use Allianz SE, in particular, as a vehicle for actively managing their overall exposure to natural catastrophes. Under a group-wide risk management framework, each operating entity is responsible for controlling its exposure to individual catastrophes and defining its local reinsurance requirements, based on its local risk appetite and capital position. The respective cover is then provided by Allianz SE or one of its subsidiaries. At the Group level, the Allianz SE Board reviews and approves the risk appetite. The reinsurance division is then responsible for designing and implementing Group catastrophe protection within given exposure limits. These covers take various forms and aim to protect the Group against excessive from major natural or man-made catastrophes. However, there is still the potential for an unexpected frequency and/or severity of catastrophic events that may materially impact the results of Allianz SE. The top five residual risk exposures at the Group level are summarized on page 29. losses Compared to previous year’s outlook for 2019, net premiums were slightly higher than expected, mainly due to higher than planned quota share cessions from European Allianz entities. Driven by a negative run-off result, the combined ratio significantly exceeded plan and consequently, the net underwriting result before equalization reserve was significantly behind plan. Despite several major natural catastrophe events in 2019, reinsurance capacity remains abundant, with 2019 losses expected to be below the 10-year average. After several years of rate decreases, Annual Report 2019 – Allianz SE B _ Management Report of Allianz SE Management’s overall assessment of the current economic situation of Allianz SE Overall, at the date of issuance of this Annual Report and given current information regarding natural catastrophes and capital market trends – in particular foreign currencies, interest rates, and equities – the Board of Management has no indication that Allianz SE is facing any major adverse developments. January renewals saw a moderate one digit increase, and we will expect further improvements in the remaining of 2020 renewals, especially for the Japanese wind renewals. Allianz SE’s technical result largely depends on group-internal cessions resulting from quota share agreements with European Allianz entities. We expect a slight decrease of net premiums in parallel with a slight improvement of the net underwriting result before equalization reserve in 2020. Based on our estimates, we expect a slightly the Property-Casualty ratio reinsurance in 2020. It should be noted that the actual result may vary significantly as the reinsurance business is, by nature, volatile in terms of frequency and severity of losses. improved combined for While the investment result for 2019 was relatively stable compared to our outlook, the underwriting result and the other non- technical result negatively deviated. Despite that, our net earnings were in line with the expectations. For 2020, we predict an increase in net income with almost stable net earnings. Based on our current planning, the underwriting result, the investment result and the other non-technical result contribute to the higher planned earnings. We are not planning a specific foreign currency result, nor are we able to from derivatives. This could anticipate any net gains/losses considerably income of Allianz SE. Given the susceptibility of our non-technical result to adverse capital market developments, we do not provide a precise outlook for net income. Nevertheless, we are ultimately planning and managing the Allianz SE net earnings in line with the Allianz Group’s dividend policy. To this end, we take advantage of the opportunity to make use of the dividends of our subsidiaries, in particular those of Allianz Europe B.V., in order to generate net earnings for Allianz SE that match the dividend policy of Allianz Group. For more detailed information on our dividend policy, see the Allianz Group’s Annual Report 2019 and www.allianz.com/ dividend. impact the net Cautionary note regarding forward-looking statements This document includes forward-looking statements, such as prospects or expectations, that are based on management's current views and assumptions and subject to known and unknown risks and uncertainties. Actual results, performance figures, or events may differ significantly from those expressed or implied in such forward-looking statements. Deviations may arise due to changes in factors including, but not limited to, the following: (i) the general economic and competitive situation in the Allianz Group's core business and core markets, (ii) the performance of financial markets (in particular market volatility, liquidity, and credit events), (iii) the frequency and severity of insured loss events, including those resulting from natural catastrophes, and the development of loss expenses, (iv) mortality and morbidity levels and trends, (v) persistency levels, (vi) particularly in the banking business, the extent of credit defaults, (vii) interest rate levels, (viii) currency exchange rates, most notably the EUR/USD exchange rate, (ix) changes in laws and regulations, including tax regulations, (x) the impact of acquisitions including and related integration issues and reorganization measures, and (xi) the general competitive conditions that, in each individual case, apply at a local, regional, national, and/or global level. Many of these changes can be exacerbated by terrorist activities. No duty to update The Allianz Group assumes no obligation to update any information or forward-looking statement contained herein, save for any information we are required to disclose by law. Annual Report 2019 – Allianz SE 13 B _ Management Report of Allianz SE OPERATIONS BY REINSURANCE LINES OF BUSINESS Gross premiums written increased by 13.5 % to € 12,384 mn (2018: € 10,912 mn). All in all, 87.7 % (2018: 91.5 %) of premiums written origi- nated from the Allianz Group’s internal business. In addition, Allianz SE continued to write business from selected external partners in order to diversify the internal portfolio. Gross premiums written and net technical result by reinsurance lines of business Gross premiums written Combined ratio Property-Casuality Change in claims equalization and similar reserves Net technical result 2019 € mn 4,989 3,316 1,080 868 415 236 718 2018 € mn 4,200 2,885 947 695 402 180 662 1,295 1,269 403 373 317 314 265 156 957 382 312 287 408 258 111 799 12,384 10,912 Change %1 18.8 14.9 14.1 24.8 3.3 30.8 8.5 2.0 5.3 19.5 10.4 (23.0) 2.7 41.0 19.7 13.5 2019 % 105.2 98.3 90.1 99.1 97.0 108.1 109.1 113.3 75.9 113.4 n/a 90.5 102.0 n/a 103.9 102.9 2018 % 102.0 97.6 93.4 86.4 86.3 85.3 128.5 102.8 79.6 93.6 n/a 61.9 97.9 n/a 104.1 98.7 2019 € mn 24 (28) - (28) - - - 161 1 42 - 6 9 - (43) 172 2018 € mn (72) (23) - (23) - - - 22 - (4) - 36 (2) - 2019 € mn (257) 23 103 (22) 12 (17) (53) (5) 93 (6) (34) 35 5 (1) 203 160 (77) (225) 2018 € mn (176) 37 62 51 53 25 (154) (12) 79 15 26 150 3 (2) 171 289 Motor Fire and property reinsurance thereof: Household and homeowner Fire Engineering Business interruption Other property reinsurance Liability Personal accident Marine and aviation Life Credit and bond Legal expenses Health Other lines Total 1_For lines of business on the basis of the accurate, non-rounded amount. in motor reinsurance Premiums written increased by 18.8 % to € 4,989 mn (2018: € 4,200 mn), mainly driven by higher premium volume from Liverpool Victoria Insurance Company Ltd., Allianz IARD S.A. and Allianz Compañía de Seguros y Reaseguros S.A. The combined ratio increased to 105.2 % (2018: 102.0 %), mainly due to a higher accident year claims ratio of 77.6 % (2018: 74.7 %). A release of the equalization reserve by € 24 mn (2018: strengthening of € 72 mn) led to a net technical result of € (257) mn (2018: € (176) mn). The household and homeowner reinsurance portfolio increased by 14.1 %, with gross premiums written of € 1,080 mn (2018: € 947 mn) mainly coming from business with Allianz IARD S.A. and Allianz Versi- cherungs-AG. The combined ratio improved to 90.1 % (2018: 93.4 %), driven by a decline in the accident year claims ratio to 61.4 % (2018: 63.9 %) as well as in the expense ratio to 28.5 % (2018: 29.5 %). The net technical result increased to € 103 mn (2018: € 62 mn). The fire reinsurance portfolio increased by 24.8 % to € 868 mn (2018: € 695 mn) in gross premiums written, driven by business with Allianz IARD S.A., Allianz Compañía de Seguros y Reaseguros S.A. and Allianz Corporate & Speciality SE. The combined ratio worsened to 99.1 % (2018: 86.4 %), driven by an increase of the calendar year claims ratio to 69.6 % (2018: 63.3 %) due to a lower run-off result of € 100 mn (2018: € 194 mn) as well as a higher expense ratio of 29.6 % (2018: 23.1 %). After a further strengthening of the equalization reserve by € 28 mn (2018: € 23 mn), the net technical result amounted to € (22) mn (2018: € 51 mn). Engineering reinsurance premiums written increased to € 415 mn (2018: € 402 mn), mainly due to its business with Allianz IARD S.A. The combined ratio deteriorated to 97.0 % (2018: 86.3 %), mainly driven by a negative run-off result of € (9) mn (2018: € 25 mn). The net technical re- sult declined to € 12 mn (2018: € 53 mn). Other property reinsurance includes extended coverage for fire and business interruption as well as hail, storm, water damage, live- stock, burglary, and glass reinsurance. Premiums written rose by 8.5 % to € 718 mn (2018: € 662 mn) due to higher external business volume. Driven by a decrease of the accident year claims ratio to 87.7 % (2018: 102.2 %) and a higher run-off result of € 54 mn (2018: € 35 mn), the combined ratio decreased to 109.1 % (2018: 128.5 %). The net technical result amounted to € (53) mn (2018: € (154) mn). Premiums written for liability reinsurance rose by 2.0 % to € 1,295 mn (2018: € 1,269 mn), mainly driven by Allianz IARD S.A. The combined ratio worsened to 113.3 % (2018: 102.8 %), mainly due to a negative run-off result of € (350) mn (2018: € (90) mn). Driven by a higher release of the equalization reserve of € 161 mn (2018: € 22 mn), the net technical result amounted to € (5) mn (2018: € (12) mn). The premium revenue of personal accident insurance rose by 5.3 % to € 403 mn (2018: € 382 mn), driven by internal business. The combined ratio decreased to 75.9 % (2018: 79.6 %), driven by a better accident year claims ratio of 53.3 % (2018: 54.4 %) and a higher run-off result of € 47 mn (2018: € 39 mn). The net technical result increased to € 93 mn (2018: € 79 mn). The gross premium written in marine and aviation reinsurance increased by 19.5 % to € 373 mn (2018: € 312 mn), mainly driven by an increase in premium revenue from Allianz Corporate & Speciality SE. The combined ratio rose to 113.4 % (2018: 93.6 %), mainly due to a 14 Annual Report 2019 – Allianz SE B _ Management Report of Allianz SE negative run-off result of € (27) mn (2018: € 51 mn). Despite a release of the equalization reserve of € 42 mn (2018: strengthening of € 4 mn), the net technical result was negative with € (6) mn (2018: € 15 mn). In life reinsurance, the premium revenue increased to € 317 mn (2018: € 287 mn), mainly driven by internal business. The net technical result decreased to € (34) mn (2018: € 26 mn), mainly driven by an ini- tial commission for a new reinsurance contract. Gross premiums written in credit and bond reinsurance decreased by 23.0 % to € 314 mn (2018: € 408 mn) due to less business with Euler Hermes Reinsurance AG. Driven by a higher accident year claims ratio of 72.2 % (2018: 62.3 %) and a lower run-off result of € 67 mn (2018: € 115 mn), the combined ratio increased to 90.5 % (2018: 61.9 %). The net technical result amounted to € 35 mn (2018: € 150 mn) after a lower release of the equalization reserve of € 6 mn (2018: € 36 mn). The premium revenue of legal expenses reinsurance rose by 2.7 % to € 265 mn (2018: € 258 mn), driven by its business with Allianz Versicherungs-AG. The combined ratio increased to 102.0 % (2018: 97.9 %) due to an increase in the calendar year claims ratio to 66.7 % (2018: 61.9 %), stemming from a higher accident year claims ratio and a lower run-off result. Driven by a release of the equalization reserve with an amount of € 9 mn (2018: strengthening of € 2 mn), the net technical result increased to € 5 mn (2018: € 3 mn). Other reinsurance lines include:  emergency assistance,  fidelity & political risk,  motor extended warranty,  other property and casualty business. Annual Report 2019 – Allianz SE 15 B _ Management Report of Allianz SE BALANCE SHEET REVIEW Condensed balance sheet € mn as of 31 December ASSETS Intangible assets Investments Receivables Other assets Deferred charges and prepaid expenses Excess of plan assets over pension and similar obligations 2019 2018 20 115,132 5,393 801 266 13 32 114,351 4,401 511 334 13 Total assets 121,626 119,642 EQUITY AND LIABILITIES Shareholders’ equity Subordinated liabilities Insurance reserves net Other provisions Funds held with reinsurance business ceded Payables on reinsurance business Other financial liabilities Deferred income 40,428 13,390 17,852 8,446 1,603 461 39,441 3 41,016 13,750 15,927 8,137 1,701 343 38,761 8 Total equity and liabilities 121,626 119,642 Investments € mn as of 31 December Real estate Investments in affiliated enterprises and participations Other investments Funds held by others under reinsurance business assumed 2019 264 74,458 29,373 11,037 2018 252 76,322 27,886 9,891 Total investments 115,132 114,351 The book value of investments in affiliated enterprises and participa- tions decreased by € 1.9 bn to € 74.5 bn, driven by a reduction of loans to affiliated enterprises (€ 2.6 bn), which was partly offset by a higher book value of shares in affiliated enterprises (€ 0.7 bn). More details regarding this position are explained in note 5 to our financial state- ments. Other investments rose from € 27.9 bn to € 29.4 bn, reflecting in- creases in debt securities (€ 0.9 bn), deposits with banks (€ 0.4 bn), and loans (€ 0.2 bn). At the end of 2019, € 24.8 bn of other investments were invested in debt securities, of which € 9.9 bn were government bonds. We raised our overall government bond exposure by € 1.6 bn compared to year- end 2018, while keeping our investments in Spanish and Italian gov- ernment bonds unchanged at € 0.8 bn and € 0.3 bn, respectively. Funds held by others under reinsurance business assumed in- creased to € 11.0 bn (2018: € 9.9 bn). This increase reflects the devel- opment of reserves for loss and loss adjustment expenses. As of 31 December 2019, the fair value of investments amounted to € 139.8 bn (2018: € 125.8 bn), compared to a carrying amount of € 115.1 bn (2018: € 114.4 bn). The significant increase of valuation re- serves to € 24.7 bn (2018: € 11.4 bn) is primarily driven by higher fair values of bonds held by Allianz SE directly and by our subsidiaries due to the decline of market interest rates. Accordingly, the overall rise of valuation reserves is mostly attributable to higher net asset values of our shares in affiliated enterprises. Receivables Receivables increased from € 4.4 bn to € 5.4 bn driven by a rise of € 0.5 bn, each in other receivables and receivable on reinsurance busi- ness. The growth in other receivables resulted from higher intra-group receivables of € 0.5 bn. Shareholders’ equity As of 31 December 2019, our shareholders’ equity amounted to € 40.4 bn (2018: € 41.0 bn), a decrease of € 0.6 bn over the course of the financial year. The reduction is caused by a buy-back of own shares at acquisition costs of € 1.5 bn. The shares were cancelled without re- ducing of the issued capital. This decrease was partly offset by a rise of € 0.9 bn, due to net income being higher than the dividend paid and due to the sale of own shares for the Employee Stock Purchase Plan. Compared to 2018, net income decreased by € 0.8 bn to € 4.6 bn, mainly due to lower dividend payments of Allianz SE’s subsidiaries. Thereof € 0.9 bn were transferred to revenue reserves. The Board of Management proposes to use the net earnings of € 4,480 mn for dividend payments in the amount of € 3,999 mn.1 The unappropriated earnings of € 481 mn will be carried forward. Our disclosures concerning treasury shares as required in our financial statements in accordance with § 160 (1) No. 2 AktG can be found in note 12. 16 Annual Report 2019 – Allianz SE 1_The proposal reflects the number of shares entitled to the dividend as of 31 December 2019. B _ Management Report of Allianz SE Development of shareholders’ equity and of issued shares as of 31 December 2018 Own shares: cancellation Own shares Own shares: realized gains Dividend payment for 2018 Net income Issued shares Issued capital Number 424,459,661 (7,286,802) - - - - € thou 1,169,920 - - - - - Mathematical value of own shares € thou (2,651) - 980 - - - Additional paid-in capital € thou 27,949,540 - - 48,606 - - Revenue reserves € thou 7,355,135 (1,501,300) 27,342 - - 900,000 Net earnings as of 31 December € thou 4,544,153 - - - (3,767,247) 3,703,376 € thou 41,016,097 (1,501,300) 28,322 48,606 (3,767,247) 4,603,376 as of 31 December 2019 417,172,859 1,169,920 (1,671) 27,998,146 6,781,177 4,480,282 40,427,854 Insurance reserves and other provisions For information on insurance reserves and other provisions, please re- fer to notes 14 and 15 to our financial statements. Financial liabilities As of 31 December 2019, Allianz SE had the following outstanding financial liabilities: Financial liabilities € mn as of 31 December Intra-group subordinated liabilities Third-party subordinated liabilities Subordinated liabilities Bonds issued to Group companies Liabilities to banks Other intra-group financial liabilities Other third-party financial liabilities Other financial liabilities Total financial liabilities 2019 2,481 10,909 13,390 2,750 250 34,415 2,026 39,441 2018 3,412 10,337 13,750 1,848 2 35,516 1,394 38,761 52,832 52,511 Of these financial liabilities, € 39.6 bn (2018: € 40.8 bn) were intra- group liabilities. Subordinated liabilities decreased to € 13.4 bn (2018: € 13.7 bn). Details regarding this position are explained in note 13 to our financial statements. Liabilities from bonds issued to Group companies increased to € 2.8 bn (2018: € 1.8 bn). The issuance of new bonds totaling € 1.1 bn was partly compensated for by the redemption of bonds amounting to € 0.2 bn. Liabilities to banks went up to € 0.3 bn (2018: € 0 bn) due to short- term funding via repurchase agreements. Other intra-group financial liabilities declined to € 34.4 bn (2018: € 35.5 bn) and were composed of the following positions: Other intra-group financial liabilities € mn as of 31 December Intra-group loans Cash pool liabilities Miscellaneous 2019 24,508 9,052 855 2018 25,931 8,446 1,140 Other intra-group financial liabilities 34,415 35,516 While liabilities from intra-group loans decreased from € 25.9 bn to € 24.5 bn and miscellaneous intra-group liabilities went down from € 1.1 bn to € 0.9 bn, liabilities from intra-group cash pooling climbed from € 8.4 bn to € 9.1 bn, partially offsetting the overall decline. In 2019, other third-party financial liabilities amounted to € 2.0 bn (2018: € 1.4 bn). This increase was mainly attributable to higher short-term liabilities from unsettled security transactions, which grew by € 0.8 bn to € 0.9 bn. Annual Report 2019 – Allianz SE 17 B _ Management Report of Allianz SE LIQUIDITY AND FUNDING RESOURCES The responsibility for managing the funding needs of the Group, as well as for maximizing access to liquidity sources and minimizing bor- rowing costs, lies with Allianz SE. Allianz SE has the option to increase its share capital base accord- ing to authorizations provided by the AGM. The following table out- lines Allianz SE’s capital authorizations as of 31 December 2019: Liquidity Resources and Uses Allianz SE ensures adequate access to liquidity and capital for our op- erating subsidiaries. Main sources of liquidity available to Allianz SE are dividends and funds received from subsidiaries, reinsurance premi- ums received, and funding provided by capital markets. Liquidity re- sources are defined as readily available assets – specifically cash, money market investments, and highly liquid government bonds. Funds are primarily used for paying interest expenses on our debt funding, claims arising from the reinsurance business, operating costs, internal and external growth investments, and dividends to our share- holders. Funding Sources Allianz SE’s access to external funds depends on various factors such as capital market conditions, access to credit facilities, credit ratings and credit capacity. The financial resources available to Allianz SE are both equity and debt funding. Equity can be raised by issuing ordinary no-par value shares. The issuance of debt in various maturities as well as group-wide liquidity management are the main sources of our debt funding. SHARE CAPITAL As of 31 December 2019, the issued share capital registered at the Commercial Register was € 1,169,920,000. This was divided into 417,172,859 no-par value shares. As of 31 December 2019, Allianz SE held 595,677 (2018: 961,636) own shares. Capital authorizations of Allianz SE Capital authorization Authorized Capital 2018/I1 Authorized Capital 2018/II2 Conditional Capital 2010/20183 Nominal amount € 334,960,000 € 15,000,000 € 250,000,000 Expiry date of the authorization 8 May 2023 8 May 2023 1_For issuance of shares against contribution in cash and/or kind, with the authorization to exclude shareholders’ subscription rights. 2_For issuance of shares to employees with exclusion of shareholders’ subscription rights. 3_To cover convertible bonds, bonds with warrants, convertible participation rights, participation rights, and subordinated financial instruments, each with the authorization to exclude shareholders’ subscription rights. For further details on Allianz SE’s authorized and conditional capital, please refer to note 12 to our financial statements. DEBT FUNDING The cost and availability of debt funding may be negatively affected by general market conditions, or by matters specific to the financial services industry or to Allianz SE. Our main sources of debt funding are senior and subordinated bonds. Among others, money market securi- ties, letter-of-credit facilities and bank credit lines allow Allianz SE to fine-tune its capital structure. In 2019, we issued a € 1.0 bn subordinated bond and at the same time repurchased a subordinated bond of € 0.9 bn. Also we have called for redemption a subordinated bond of CHF 0.5 bn. liabilities overall decreased to € 13.4 bn (2018: Subordinated € 13.7 bn) at year-end. Other financial liabilities increased to € 39.4 bn (2018: € 38.8 bn), mainly as a result of higher intra-group bonds. For further details on Allianz SE’s financial liabilities, please refer to notes 13 and 16 to our financial statements. 18 Annual Report 2019 – Allianz SE B _ Management Report of Allianz SE RISK AND OPPORTUNITY REPORT Target and strategy of risk management Allianz SE aims to ensure that it is adequately capitalized at all times for the benefit of both shareholders and policyholders. This includes meeting the Solvency II regulatory capital requirements resulting from the internal model. We closely monitor the capital position and risk concentrations of Allianz SE (solo) and apply regular stress tests (including standardized and historical stress test scenarios). These analyses allow us to take appropriate measures to preserve our continued capital and solvency strength. Furthermore, our risk capital reflecting our risk profile and the cost of capital is an important aspect to be taken into account in busi- ness decisions. In addition, the liquidity risk framework of Allianz SE ensures that our liquidity risks are managed and a sufficient liquidity position is maintained under both market (expected as well as stressed) and business conditions. Risk governance system RISK MANAGEMENT FRAMEWORK As the holding company of the Allianz Group and as a global reinsurer, we consider risk management to be a core competency and an inte- gral part of our business. Our risk management framework covers all operations and business units of Allianz SE (solo), in proportion to the inherent risks of the activities, ensuring that risks across Allianz SE are consistently identified, analyzed, assessed, and managed. The primary goals of our risk management framework are:  Promotion of a strong risk management culture, supported by a robust risk governance structure.   Consistent application of an integrated risk capital framework to protect our capital base and support effective capital management. Integration of risk considerations and capital needs into manage- ment and decision-making processes by attributing risk and allo- cating capital to the business units. issues and risks quickly. For example, risk dashboards and limit utiliza- tion reports as well as scenario analyses and stress tests are regularly prepared and communicated. Communication and transparency: Transparent risk disclosure provides the basis for communicating our strategy and performance to internal and external stakeholders, ensuring a sustainable positive impact on valuation and financing. It also strengthens risk awareness and our risk culture throughout Allianz SE. Our Strategy Allianz SE’s main tasks are the ownership of legal entities, in particular subsidiaries, the provision of central financing functions, and offering reinsurance services to mostly internal but also external counterpar- ties. To this end, Allianz SE’s business strategy is aligned with the strategy of Allianz Group. ALLIANZ GROUP’S BUSINESS ASPIRATIONS The Board of Management of Allianz SE has defined the following objectives for Allianz Group’s medium-term strategy:  Outperform: we seek to move ahead of our competitors, both traditional business and disruptors.  Transform: we seek to become simpler and deeply digital, and to make our business more scalable.  Rebalance: we seek to build dominant positions large, profitable and fast-growing geographical markets as well as in new areas of business. in ALLIANZ GROUP’S BUSINESS STRATEGY With regard to these strategic objectives, the Allianz Group has de- fined a number of strategic priorities, and is implementing initiatives and programs to address the five dimensions of the Renewal Agenda 2.0 also for Allianz SE:  True Customer Centricity: Design intuitive products and processes to achieve loyalty leadership in our core markets, Our risk management system is based on the following four pillars:  Digital by Default: Build legacy-free platforms with core processes Risk identification and underwriting: A robust system of risk iden- tification and underwriting forms the foundation for adequate risk and management decisions. Supporting activities include standards for underwriting, valuation methods, individual transaction approvals, emerging-/operational-/top-risk assessments, liquidity risk and sce- nario analyses, among others. Risk strategy and risk appetite: Our risk strategy defines our risk appetite consistently with our business strategy. It ensures that rewards are appropriate based on the risks taken and capital required, and that delegated decision-making authorities are in line with our overall risk-bearing capacity and strategy. Risk reporting and monitoring: Our comprehensive qualitative and quantitative risk monitoring and reporting framework provides management with the transparency needed to assess whether our risk profile falls within the approved limits, and helps to identify emerging automation,  Technical Excellence: Move to data-driven product design, pricing and claims handling,  Growth Engines: Systematically exploit new sources for profitable  growth, Inclusive Meritocracy: Reinforce a culture where both people and performance matter. The Board of Management of Allianz SE has also defined a strategy for the management of risk. This risk strategy places particular empha- sis on protecting the Allianz brand and reputation, remaining solvent even in the event of extreme adverse scenarios, maintaining sufficient liquidity to always meet financial obligations, and providing resilient profitability. Annual Report 2019 – Allianz SE 19 B _ Management Report of Allianz SE OPPORTUNITIES The Allianz Group’s and Allianz SE’s financial strength, coupled with ongoing transformation, makes us resilient and allows us to profit from new opportunities in a fast-changing business environment. For example, by combining profound customer and market understanding and evolving data-analytics techniques, Allianz SE is well positioned for growth and productivity gains, as well as for mergers & acquisitions. That said, since Allianz SE’s main tasks – as laid out in our business strategy – are to provide central financing functions to Allianz Group companies and to act as a reinsurer with predominantly group-internal business, we regard the topic opportunities management to be imma- terial to us, as it is primarily a responsibility for the Allianz Group’s primary insurance and asset management entities. For further details on opportunities envisaged by Allianz SE, please refer to the section “Business Outlook”. Risk governance structure SUPERVISORY BOARD AND BOARD OF MANAGEMENT Allianz SE’s approach to risk governance ensures that our risk profile remains consistent with both our risk strategy and our capacity to bear risks. Within our risk governance system, the Supervisory Board and the Board of Management of Allianz SE have both Allianz SE (solo) and group-wide responsibilities. The Board of Management sets busi- ness objectives and a corresponding risk strategy; the core elements of the risk framework are set out in the Allianz Group Risk Policy approved by the Board of Management, which together with the Allianz SE-specific appendix also serves as the master risk policy for Allianz SE (solo). The Supervisory Board advises, challenges, and supervises the Board of Management in performing its risk man- agement activities. The following committees support the Board of Management and the Supervisory Board on risk issues. SUPERVISORY BOARD RISK COMMITTEE The Risk Committee reports to the Supervisory Board where the infor- mation and the findings are discussed with the Board of Management. It monitors the effectiveness of Allianz SE’s risk management frame- work. Furthermore, it focuses on risk-related developments as well as the overall risk profile and specific risk exposures. For more information please refer to the paragraph “Risk Commit- tee” of the Supervisory Board Report on page 5. GROUP FINANCE AND RISK COMMITTEE The Group Finance and Risk Committee (GFRC) provides oversight of the Group’s and Allianz SE’s risk management framework, acting as a primary early-warning function by monitoring the Allianz Group’s and Allianz SE’s risk profiles as well as the availability of capital. The GFRC also ensures that an adequate relationship between return and risk is maintained. Additionally, the GFRC defines risk standards, acts as the limit-setting authority within the framework set by the Board of Man- agement, and approves major financing and capital management reinsurance transactions. Finally, the GFRC supports the Board of Man- agement with recommendations regarding capital structure, capital allocation, liquidity position and investment strategy, including the sub-portfolio strategic asset allocations. OVERALL RISK ORGANIZATION AND ROLES IN RISK MANAGEMENT A comprehensive system of risk governance is achieved by setting standards related to organizational structure, risk strategy and appe- tite, limit systems, documentation, and reporting. These standards ensure the accurate and timely flow of risk-related information and a disciplined approach towards decision-making and execution. As a general principle, the “first line of defense” rests with business managers in the business units of Allianz SE (solo). They are responsi- ble for both the risks taken and the returns from their decisions. Our “second line of defense” is made up of independent oversight functions including Risk, Actuarial, Compliance, and Legal, which support the Board of Management in defining the risk framework within which the business can operate. Audit forms the “third line of defense”, inde- pendently and regularly reviewing Allianz SE’s risk governance imple- mentation, compliance with risk principles, performing quality reviews of risk processes, and testing adherence to business standards, includ- ing the internal control framework. For the first and the second line of defense, Allianz SE has established dedicated responsibilities at its departments (including reinsurance). RISK MANAGEMENT FUNCTION The function of Chief Risk Officer for both the Allianz Group and Allianz SE is performed by the same person. Independent risk over- sight for Allianz SE is performed by risk control units within Group Risk and within the reinsurance department of Allianz SE. The risk manage- ment function supports the Board of Management of Allianz SE, in- cluding its committees, by performing various analyses, communi- cating risk management related information, and in implementing committee decisions. The risk management function also supports the Board of Man- agement in developing the risk management framework – which covers risk governance, risk strategy, and appetite – and risk monitor- ing and reporting. The risk management function’s operational re- sponsibilities encompass assessing risks and monitoring limits and ac- cumulations of specific risks across business units and business lines, including natural and man-made disasters and exposures to financial markets and counterparties. OTHER FUNCTIONS AND BODIES In addition to the risk management function for Allianz SE, Allianz SE’s legal, compliance, and actuarial functions constitute additional com- ponents of the “second line of defense”. Allianz SE’s legal and compliance functions seek to mitigate legal risks for Allianz SE with support from other departments. The objec- tives of both functions are to ensure that laws and regulations are observed, to react appropriately to all impending legislative changes or new court rulings, to attend to legal disputes and litigation, and to provide legally appropriate solutions for transactions and business processes. In addition, Compliance – in conjunction with Legal and other experts involved – is responsible for integrity management, which aims to protect Allianz SE and employees from regulatory risks. The Allianz SE actuarial function contributes towards assessing and managing risks in line with regulatory requirements, in particular for those risks whose management requires actuarial expertise. The 20 Annual Report 2019 – Allianz SE B _ Management Report of Allianz SE range of tasks includes, among others, the calculation and monitoring of technical provisions, technical actuarial assistance in business plan- ning, reporting and monitoring of the results, and supporting the effec- tive implementation of the risk management system. Risk based steering and risk management Allianz SE is exposed to a variety of risks through its holding company and reinsurance activities, including market, credit, underwriting, busi- ness, operational, strategic, liquidity, and reputational risks. Allianz SE considers diversification across different lines of busi- ness and regions to be an important element in managing our risks efficiently, limiting the economic impact of any single event and con- tributing to relatively stable results. Our aim is to maintain a balanced risk profile without disproportionately large risk concentrations and ac- cumulations. With Solvency II being the binding regulatory regime relevant for Allianz SE since 1 January 2016, our risk profile is measured and steered based on our approved Solvency II internal model. We have introduced a target solvency ratio in accordance with Solvency II, sup- plemented by ad-hoc scenarios, historical stress tests, and sensitivity analyses. By that we allow for a consistent view on risk steering and capitalization according to the Solvency II framework. Allianz SE steers its portfolio using a comprehensive view of risk and return based on the internal risk model and including scenario analyses: Risk and concentrations are actively restricted by limits based on our internal model or other considerations. Furthermore, a comprehensive analysis of the return on risk capital1 (RoRC) is regularly conducted and translated for the underwriting of property and casu- alty reinsurance business. The RoRC allows us to identify profitable lines of business on a sustainable basis, and thus is a key criterion for capital allocation decisions. As a consequence, the internal model is fully integrated in busi- ness steering, and the application of the internal model satisfies the so-called “use-test” under Solvency II. MARKET RISK As the holding company of the Allianz Group and as a global reinsurer, Allianz SE (solo) holds and uses a broad range of financial instruments, which are reflected on our balance sheet as both assets and liabilities. For our holding activities (i.e. to hold participations, provide fi- nancing for Group companies, cover internal pension liabilities, invest cash pooled from subsidiaries, and as the lender of last resort within Allianz Group), Allianz SE predominantly invests in participations and fixed-income assets. As an inherent part of our reinsurance operations, we collect premiums from our customers and invest them in a wide va- riety of assets. The resulting reinsurance investment portfolio backs the future claims and benefits to our cedents. In addition, we also invest shareholders’ capital, which is required to support the underwritten risks and the holding activities. Our market risk from liabilities primarily relates to fixed-income instruments held for financing, as well as to in- ternal pensions2 and reinsurance liabilities. Finally, we use derivatives for various purposes, especially to hedge our planned dividend income from non-Euro subsidiaries against adverse currency market move- ments. Asset/liability management (ALM) decisions are taken based on the internal model, considering both the risks and the returns on the financial markets. As the fair values of our assets and liabilities depend on changes on the financial markets, we are exposed to the risk of adverse finan- cial market developments. Allianz SE’s most important market risk re- sults from changes in the value of its participations in Group compa- nies. The long-dated internal pension liabilities of German Group com- panies on Allianz SE’s balance sheet contribute to interest rate risk, in particular as they cannot be fully matched by available investments due to long maturities. In addition, we are also exposed to adverse changes in equity and real estate prices, credit spread levels, inflation, implied volatilities, and currency values, which might impact the value of our assets and liabilities. To measure these market risks, real-world stochastic models for the relevant risk factors are calibrated using historical time series to generate possible future market developments. After the scenarios for all risk factors are generated, the asset and liability positions are reval- ued under each scenario. The worst-case outcome of the portfolio profit and loss distribution at a confidence level of 99.5 % defines the market Value at Risk (VaR). Market risk from material M&A transactions of Allianz SE is man- aged by assessing risk capital implications. Strategic asset allocation benchmarks are defined for several sub-portfolios of the investment portfolio of Allianz SE. Furthermore, we have risk limits in place, including financial VaR, stand-alone inter- est rate and equity sensitivity limits, and foreign-exchange exposure limits. Limits are closely monitored and, if a breach occurs, counter- measures are implemented which may include the escalation to cer- tain decision-making bodies and/or the closing of positions. Finally, guidelines are in place regarding certain investments, new investment products, and the use of derivatives. EQUITY RISK Allianz SE’s equity risk predominantly results from the performance of our strategic insurance participations. Other material risk exposures reflect listed and unlisted equities, equity derivatives, own shares, and management incentive plans. Risks from changes in equity prices are normally associated with decreasing share prices and increasing equity price volatilities. As the performance of our participations might exceed expectations and stock values also might increase, opportunities may arise from partici- pations and other equity investments. In 2019, Allianz SE had in place profit-and-loss transfer agree- ments with thirteen German subsidiaries. These are listed in the appen- dix on page 80. Risk from these contracts is reflected via the risk capital calculation on participations. INTEREST RATE RISK If the duration of our assets is shorter than our liabilities, we may suffer an economic loss in a falling interest rate environment as we reinvest maturing assets at lower rates prior to the maturity of liability contracts. By contrast, opportunities may arise when interest rates increase. Interest rate risk is managed within our asset-liability-management process and controlled via an interest rate sensitivity limit. 1_The return on risk capital is defined as the discounted present value of future real world profits on the capital requirement 2_Internal pensions are evaluated and modeled based on deterministic models, following IAS 19 principles. (including a buffer to regulatory requirements). Annual Report 2019 – Allianz SE 21 B _ Management Report of Allianz SE CREDIT SPREAD RISK Fixed-income assets such as bonds may lose value, if credit spreads widen. However, our risk appetite for credit spread risk takes into account the underlying economics of our reinsurance business model. As a liability-driven investor, we typically hold fixed-income assets covering reinsurance liabilities until maturity. This implies that short- term changes in market prices affect us to a lesser extent. INFLATION RISK As the holding company of the Allianz Group and as a reinsurance company, we are exposed to changing inflation rates. Since inflation increases reinsurance claims and costs as well as internal pension ob- ligations, higher inflation rates will lead to greater liabilities. Inflation assumptions are taken into account in our reinsurance underwriting. However, unexpected inflation increases both future claims and expenses, leading to greater liabilities. Conversely, if future inflation rates were to be lower than assumed, liabilities would be lower than anticipated. The risk of changing inflation rates is incorpo- rated in our internal model. CURRENCY RISK The major part of Allianz SE’s foreign currency risk results from our ownership of non-Euro group companies. In addition to this risk, Allianz SE’s currency risk is driven by its non-Euro reinsurance exposure, as well as by the use of foreign currency bonds as external financing instruments. If the Euro strengthens, the Euro-equivalent net asset value of our foreign subsidiaries and the value of our non-EUR financing instru- ments will decline from Allianz SE's perspective; at the same time, how- ever, capital requirements in Euro will decrease, partially mitigating the total impact on the capitalization of Allianz SE. An additional important source of currency risk is the planned div- idend income from non-Euro subsidiaries. Allianz SE’s currency risk is monitored and managed based on our foreign exchange management limit framework. CREDIT RISK Credit risk is measured as the potential economic loss in the value of our portfolio that would result from either changes in the credit quality of our counterparties (“migration risk”) or the inability or unwillingness of a counterparty to fulfil contractual obligations (“default risk”). Allianz SE’s credit risk profile comes from three sources: our invest- ment portfolio, guarantees and retrocession. Investment portfolio: Credit risk results from our investments in fixed-income bonds, loans, derivatives, cash positions, and receivables, whose value may decrease depending on the credit quality of the obligor. Guarantees: Credit risk is caused by the potential default of Group companies on commitments from contracts with external stakehold- ers, which are backed with guarantees from Allianz SE. Retrocession: Credit risk to external reinsurers arises when parts of Allianz SE’s reinsurance business are retroceded to external reinsur- ance companies to mitigate risks. Credit risk arises from potential losses from non-recoverability of reinsurance receivables, or due to de- fault on benefits under in-force reinsurance treaties. Our reinsurance partners are carefully selected by a team of specialists. Besides focus- ing on companies with a strong credit rating, we may further require 1_Credit Risk Platform. 22 letters of credit, cash deposits, or other financial measures to further mitigate our exposure to credit risk. The internal credit risk capital model takes into account the major drivers of credit risk for each instrument, including exposure at default, rating, seniority, collateral, and maturity. Additional parameters assigned to obligors are migration probabilities and obligor asset correlations reflecting dependencies within the portfolio. Ratings are assigned to single obligors via an internal rating approach. It is based on long-term ratings from rating agencies, which are dynamically ad- justed using market-implied ratings and the most recent qualitative information available. The loss profile of the portfolio is obtained through Monte Carlo simulation, taking into account interdependencies and exposure concentrations per obligor segment. To ensure effective credit risk management, a credit VaR limit is derived from our internal risk capital framework, and rating bucket benchmarks are used to define our risk appetite for exposures in the lower investment grade and non-investment grade area. Our group-wide country and obligor group limit management framework (CrisP1) allows us to manage counterparty concentration risk, covering both credit and equity exposures at the levels of the Group and of Allianz SE. This limit framework forms the basis for dis- cussions on credit actions. Clearly defined processes ensure that expo- sure concentrations and limit utilizations are appropriately monitored and managed. UNDERWRITING RISK Allianz SE’s underwriting risk consists of premium risk and reserve risk in the Property-Casualty reinsurance business, as well as of biometric risk from internal pensions and the Life/Health reinsurance business. PROPERTY-CASUALTY Our Property-Casualty reinsurance business is exposed to premium risk related to adverse developments in the current year’s new and renewed business, as well as to reserve risk related to the business in force. As part of our Property-Casualty reinsurance operations, we receive premiums from our customers and provide insurance protection in return. Premium risk is the risk that actual claims for the business in the current year develop adversely relative to expected claims ratios. Premium risk into three categories: natural catastrophe risk, terror risk, and non-catastrophe risk including man- made catastrophes. is subdivided Allianz SE actively manages premium risk. The assessment of risks as part of the underwriting process is a key element of our risk management framework. There are clear underwriting guidelines, limits, and restrictions in place. Excessive risks are mitigated by external retrocession agreements. All these measures contribute to a limitation of risk accumulation. We also monitor concentrations and accumulation of non-market risks on a stand-alone basis (i.e. before diversification effects) within an Allianz Group global limit framework in order to avoid substantial losses from single events such as natural catastro- phes and from man-made catastrophes such as terror or large indus- trial risk accumulations. Premium risk is estimated based on actuarial models that are used to derive claims distributions and consider the features of our Annual Report 2019 – Allianz SE B _ Management Report of Allianz SE reinsurance contracts (e.g. shares, limits, reinstatements, and commis- sions). Non-catastrophe risks are modeled using attritional loss models for frequency losses, as well as frequency and severity models for large losses. Natural disasters, such as earthquakes, storms, and floods, rep- resent a significant challenge for risk management due to their accu- mulation potential and occurrence volatility. For natural catastrophe risks, we use special modeling techniques which combine portfolio data (geographic location, characteristics of insured objects, and their values) with simulated natural disaster scenarios to estimate the mag- nitude and frequency of potential losses. For significant exposures where such stochastic models do not exist, we use deterministic, sce- losses. Similar nario-based approaches approaches are used to evaluate risk concentrations for terror and man-made catastrophes including losses from cyber incidents and in- dustrial concentrations. to estimate potential These loss distributions are then used within the internal model to calculate potential losses with a predefined confidence level of 99.5 %. Reserve risk represents the risk of adverse developments in best- estimate reserves over a one-year time horizon, resulting from fluctu- ations in the timing and/or amount of claims settlement. Allianz SE estimates and holds reserves for claims resulting from past events that have not yet been settled. In case of unexpected developments, we will experience a reserve gain or loss dependent on the assumptions applied for the estimate. Reserve risk can be mitigated by retrocession. We constantly mon- itor the development of reserves for reinsurance claims on a line-of- business level. In addition, Allianz SE conducts annual reserve uncer- tainty analyses based on similar methods used for reserve risk calcula- tions. Where appropriate, the expertise and analysis of other Group entities is leveraged. The Allianz Group performs regular independent reviews of these analyses. Similar to premium risk, reserve risk is calculated based on actu- arial models. The reserve distributions derived are then used within the internal model to calculate potential losses based on a predefined confidence level of 99.5 %. LIFE/HEALTH Underwriting risks in Allianz SE’s Life/Health reinsurance operations and from our internal pension obligations (biometric risks) include mortality, disability, morbidity, and longevity risks. Mortality, disability, and morbidity risks are associated with the unexpected increase in the occurrence of death, disability, or medical claims. Longevity risk is the risk that the reserves covering life annuities and pension contracts might not be sufficient due to longer life expectancies of the insured persons. Life/Health underwriting risk arises from profitability being lower than expected. As profitability calculations are based on several parameters – such as historical loss information and assumptions on inflation, mortality or morbidity – parameters realized may differ from the ones used for the calculation of pension liabilities and for under- writing. For example, higher-than-expected inflation may lead to higher medical claims in the future. On the other hand, there may also be beneficial deviations; such as, for example, a lower morbidity rate than expected will most likely result in lower claims. We measure risks within our internal risk capital model, distinguishing, where appropriate, between risks affecting the abso- lute level and trend development of actuarial parameter assumptions as well as pandemic risk scenarios. OPERATIONAL RISK Operational risks represent losses resulting from inadequate or failed internal processes, human errors, system failures, and external events, and can stem from a wide variety of sources, for example:  The category “execution, delivery and process management” describes potential losses arising from transaction or process man- agement failures. Examples include interest and penalties from non-payment or underpayment of taxes. These losses tend to occur with a low financial impact (although single large loss events can occur).  The category “clients, products & business practices” includes potential losses due to a failure to meet the professional obliga- tions, or from the design of transactions. Examples include anti- trust behavior, data protection, sanctions and embargoes. These losses can have a high financial impact. “Other operational risks” include, for example, internal and exter- nal fraud, financial misstatement risk, and information security in- cidents causing business disruption or fines. Potential failures at our outsourcing partners can also cause a disruption to our work- ing environment.  In view of Allianz SE’s tasks as holding company for Allianz Group and reinsurer, the operational risk capital of Allianz SE is dominated by the risk of potential losses within the areas of “execution, delivery and pro- cess management” and “clients, products & business practices”. Oper- ational risk capital is calculated using a scenario approach based on expert judgment as well as internal and external operational loss data. The estimates for frequency and severity of potential loss events for each material operational risk category are assessed and used as the basis for our internal model calibration. Allianz SE has implemented a group-wide operational risk man- agement framework that focuses on the early recognition and proactive management of material operational risks. The framework defines roles and responsibilities as well as management processes and methods. An important component of this framework is the Inte- grated Risk and Control System (IRCS), which ensures that effective controls or other risk mitigation activities are in place for all significant operational risks. Risk managers in the Allianz SE risk management function, in their capacity as the “second line of defense”, identify and evaluate relevant operational risks and control weaknesses via a dia- log with the “first line of defense”, and in close interaction with both the other “second line of defense” functions at Allianz SE and with the au- dit function. In the IRCS approach, risk identification, assessment and controls vary between the different operational risk sources reporting, compliance and operations. For example, compliance risks are addressed via written policies. The risk of financial misstatement is mitigated by a system of internal controls covering financial reporting. Outsourcing risks are covered by an Outsourcing Policy, by Service Level Agreements, and by Business Continuity and Crisis Management programs to protect critical business functions from these events. Cyber risks are mitigated through investments in cyber security, cyber insurance Allianz SE buys from third party insurers, and a variety of ongoing control activities. Operational risk events are reported in a central database. Annual Report 2019 – Allianz SE 23 B _ Management Report of Allianz SE BUSINESS RISK Allianz SE’s business risk comprises of cost risk from Property-Casualty reinsurance business as well as policyholder behavior risk from both Life/Health and Property-Casualty reinsurance. The main goal of planning and managing Allianz SE’s liquidity position is to ensure that we are always in a position to meet payment obligations. To comply with this objective, the liquidity position of Allianz SE is monitored and forecast on a daily basis. Cost risk is associated with the risk that administration expenses are higher than expected, or that the new business volume decreases to a level that does not allow Allianz SE to cover its fixed costs. Assumptions on policyholder behavior are set in line with accepted actuarial methods and are based on our own historical data, if and as available. If there is no historical data, assumptions are based on industry data or expert judgment. Reflecting the business model of Allianz SE as primarily a group- internal reinsurer, business risk is minor. OTHER RISKS (NOT COVERED BY THE INTERNAL MODEL) There are certain risks which, due to their nature, cannot be adequately addressed or mitigated by additional capital and are therefore not considered in the internal risk capital model. For the identification, analysis, assessment, monitoring, and management of these risks, we also use a systematic approach, with risk assessment generally based on qualitative criteria or scenario analyses. The most important of these other risks are strategic, liquidity and reputational risk. STRATEGIC RISK Strategic risk is the risk of a decrease in the company’s value arising from adverse management decisions on business strategies and their implementation. Strategic risks are identified and evaluated as part of the Allianz Group’s and Allianz SE’s Top Risk Assessment processes and discussed in various Board of Management-level committees (e.g. the Group Finance and Risk Committee). We also monitor market and competitive conditions, capital market requirements, regulatory condi- tions, etc., to decide if strategic adjustments are necessary. The most important strategic risks are directly addressed through Allianz’s Renewal Agenda 2.0, which focuses on True Customer Centricity, Digital by Default, Technical Excellence, Growth Engines and Inclusive Meritocracy. Progress on mitigating strategic risks and meeting the Renewal Agenda 2.0 objectives are monitored and evaluated the Strategic and Planning Dialogue between Allianz Group and the operative functions of Allianz SE. in LIQUIDITY RISK Liquidity risk is defined as the risk that current or future payment obli- gations cannot be met or can only be met on the basis of adversely altered conditions. Liquidity risk can arise primarily if there are mis- matches in the timing of cash in- and outflows. The investment strategy of Allianz SE particularly focuses on the quality of investments and ensures a significant portion of liquid assets in the portfolio (e.g. high-rated government or corporate bonds). We employ actuarial methods for estimating our liabilities arising from reinsurance and internal pension contracts. In our liquidity planning process, we reconcile liquidity sources (e.g. dividends received from subsidiaries, cash from investments and premiums) and liquidity needs (e.g. payments due to dividends to shareholders, reinsurance claims and expenses) under a best estimate plan, as well as under idiosyn- cratic and systemic adverse liquidity scenarios. Allianz SE’s short-term liquidity is managed within Allianz SE’s cash pool, which serves as a centralized tool also for investing the excess liquidity of other Group companies. The accumulated short- term liquidity forecast is updated daily. The cash position in this portfo- lio is subject to an absolute minimum amount and an absolute alert amount. Both limits are defined for the Allianz SE cash pool in order to be protected against short-term liquidity crises. As part of our liquidity stress testing framework, contingent li- quidity requirements and sources of liquidity are taken into account to ensure that Allianz SE is able to meet any future payment obligations even under adverse conditions. Major contingent liquidity require- ments include non-availability of external capital markets, combined market and catastrophe risk scenarios for subsidiaries, as well as lower than expected profit transfers and dividends from subsidiaries. In order to protect the Allianz Group against the liquidity impact of adverse risk events beyond those covered by the capital and li- quidity buffers at our subsidiaries, Allianz SE holds a strategic liquidity reserve for which the target level is re-evaluated annually. The strategic liquidity planning for Allianz SE covering the time horizons of one calendar year (more granular) and three calendar years is regularly reported to the Board of Management. REPUTATIONAL RISK Allianz SE’s reputation as a well-respected and socially aware holding and reinsurance company is influenced by our behavior in a range of areas, such as financial performance, quality of reinsurance underwriting and customer service, corporate governance, employee relations, intellectual capital, and corporate responsibility. Reputational risk is the risk of an unexpected drop in the value of the Allianz share price, the value of the in-force business, or the value of the future business caused by a decline in our reputation assessed by stakeholders. All affected Allianz SE functions cooperate in identifying reputational risk. Group Communications and Corporate Responsibility assesses reputational risk for Allianz SE based on a group-wide methodology. The identification and assessment of reputational risks is part of the annual Top Risk Assessment process. During this process, senior management decides on a risk management strategy for the most significant risks facing the company, including those with a potentially severe reputational impact. In addition, direct reputational risk is man- aged on a case-by-case basis. Internal risk capital framework We define internal risk capital as the capital required to protect us against unexpected, extreme economic losses. It forms the basis for determining our Solvency II regulatory capitalization. On a quarterly basis, we calculate internal risk capital for Allianz SE in total, as well as for all contributing business units. We also project risk capital re- quirements on a bi-weekly basis during periods of financial market turbulence. 24 Annual Report 2019 – Allianz SE B _ Management Report of Allianz SE GENERAL APPROACH For the management of our risk profile and solvency position, we utilize an approach that reflects the Solvency II rules. INTERNAL MODEL Our internal risk capital model is based on a Value at Risk (VaR) approach using a Monte Carlo simulation. Following this approach, we determine the maximum loss in portfolio value in scope of the model within a specified timeframe (“holding period”, set at one year) and probability of occurrence (“confidence level”, set at 99.5 %). We simu- late risk events from all risk categories modeled (“sources of risk”) and calculate the portfolio value based on the net fair value of assets minus liabilities, including risk-mitigating measures like retrocession or derivatives, under each scenario. The required risk capital is defined as the difference between the current portfolio value and the portfolio value under adverse condi- tions at the 99.5 % confidence level. As we simultaneously consider the impact of a negative or positive event on all covered businesses, diver- sification effects across products and regions are taken into account. The results of our Monte Carlo simulation allow us to analyze our exposure to each source of risk, both separately and in aggregate. We also analyze several pre-defined stress scenarios, representing histori- cal events and adverse scenarios relevant for our portfolio. Further- more, we conduct ad-hoc stress tests to reflect current political and financial developments and to analyze specific non-financial risks more closely. COVERAGE OF THE RISK CAPITAL CALCULATIONS Allianz SE’s internal risk capital model to calculate the Solvency Capital Requirement (SCR) covers the activities of Allianz SE as the holding company for Allianz Group, as well as its activities as a reinsurer. Whereas the model treats most subsidiaries as participations, it applies a look-through rule for 32 subsidiaries and investment funds, which are ancillary to Allianz SE’s operations (mainly by holding assets), and reflects their risks on a granular level either completely or partially. The risk capital model covers all relevant assets (including fixed- income instruments, equities, real estate, and derivatives) and liabili- ties (including the run-off of all technical provisions, as well as deposits, issued debt and other liabilities such as guarantees). Therefore, Allianz SE’s risk capital framework covers all material and quantifiable risks. Risks specifically not covered by our internal model include strategic, liquidity, and reputational risks. ASSUMPTIONS AND LIMITATIONS RISK FREE RATE AND VOLATILITY ADJUSTMENT ASSUMPTIONS When calculating the fair values of assets and liabilities, the assump- tions regarding the underlying risk-free yield curve are crucial in deter- mining and discounting future cash flows. For extrapolation of the risk- free interest rate curves beyond the last liquid tenor, we apply the methodology provided by the European Insurance and Occupational Pensions Authority (EIOPA) in its technical documentation (EIOPA BoS-15/035).1 1_Due to late availability of the EIOPA publication, the risk-free interest rate term structure used might slightly differ from the one published by EIOPA. In addition, we adjust the risk-free yield curves by a volatility adjustment (VA) for most markets where a volatility adjustment is de- fined by EIOPA and approved by BaFin. This is done to better reflect the underlying economics of our business. The advantage of being a long-term investor is the opportunity to invest in bonds yielding spreads over the risk-free return and earning this additional yield component over the duration of the bonds. Being a long-term investor mitigates much of the risk of forced selling of debt instruments at a loss prior to maturity. The approach of the Allianz Group to model the volatility adjust- ment with the help of a dynamic component differs methodologically from replicating the EIOPA VA methodology. To account for deviations with respect to the EIOPA VA methodology, the Allianz Group applies a scaling factor for the dynamic volatility adjustment. Regular valida- tion is performed to verify the appropriateness and prudency of the approach. DIVERSIFICATION AND CORRELATION ASSUMPTIONS Our internal model considers concentration, accumulation, and corre- lation effects when aggregating results for Allianz SE. The resulting diversification reflects the fact that all potential worst-case losses are not likely to materialize at the same time. Diversification typically occurs when looking at combined risks that are not, or only partly, interdependent. Important diversification factors include regions (for example windstorm in Australia versus windstorm in Germany), risk categories (for example market risk versus underwriting risk), and subcategories within the same risk category (for example equity risk versus interest rate risk). Ultimately, diversification is driven by the specific features of the investments or reinsurance transactions in question and their respective risk exposures. For exam- ple, an operational risk event at the Allianz SE branch in Singapore can be considered to be highly independent of a change in the credit spread for a French government bond held in Allianz SE’s reinsurance investment portfolio in Munich. Where possible, the Allianz Group derives correlation parameters for each pair of market risks through statistical analysis of historical market data, considering quarterly observations over more than a decade. In case historical data or other portfolio-specific observations are insufficient or unavailable, correlations are set by the Allianz Group Correlation Setting Committee, which combines the expertise of risk and business experts in a well-defined and controlled process. In general, when using expert judgment we set the correlation parameters to represent the joint movement of risks under adverse conditions. Based on these correlations, the Allianz Group uses an industry-standard approach, the Gaussian copula, to determine the dependency structure of quantifiable sources of risk within the applied Monte Carlo simulation. ACTUARIAL ASSUMPTIONS Our internal model also includes assumptions on claims trends, liability inflation, mortality, morbidity, longevity, policyholder behavior, expenses, etc. We use our own internal historical data for actuarial assumptions wherever possible, leverage expertise of other Allianz Group companies in the scope of the internal model, and also consider recommendations from the insurance industry, supervisory authorities, and actuarial associations. The derivation of our actuarial assumptions is based on generally accepted actuarial methods. Annual Report 2019 – Allianz SE 25 B _ Management Report of Allianz SE Within our internal risk capital and financial reporting framework, comprehensive processes and controls exist for ensuring the reliability of these assumptions. MODEL LIMITATIONS As the internal model is based on a 99.5 % confidence level, there is a low statistical probability of 0.5 % that actual losses could exceed this threshold at the Allianz SE level in the course of one year. We use model and scenario parameters derived from historical data, where available, to characterize future possible risk events. If future market conditions differ substantially from the past, for example in an unprecedented crisis, our VaR approach may be too conservative or too liberal in ways that are difficult to predict. In order to mitigate reliance on historical data, we complement our VaR analysis with stress testing. Furthermore, we validate the model and parameters through sensitivity analyses, independent internal peer reviews, and – where appropriate – independent external reviews, focusing on methods for selecting parameters and control processes. Overall, we believe that our validation efforts are effective and that the model adequately assesses the risks to which we are exposed. Since the internal model takes into account the change in the economic fair value of our assets and liabilities, it is crucial to estimate the market value of each item accurately. For some assets and liabili- ties it may be difficult, if not impossible – notably in distressed financial markets – to either obtain a current market price or to apply a mean- ingful mark-to-market approach. For such assets we apply a mark- to-model approach. For some of our liabilities, the accuracy of their values additionally depends on the quality of the actuarial cash flow estimates. Despite these limitations, we believe the estimated fair values are appropriately assessed. While the aggregate risk capital is exactly modeled, the whole account stop loss construction leads to the use of approximations when reporting contributory risk capital figures for the sub-categories of underwriting risk as the individual contributions have to be ap- proximated based on the underlying distributions. MODEL CHANGES IN 2019 In 2019, our internal model has been further enhanced based on regulatory developments, model validation results, and feedback received by Allianz Group during the ongoing consultations with the regulator. For the sake of clarity, model changes1 and resulting impacts are presented within this section, based on data as of 31 Decem- ber 2018. Overall, the model changes implemented in 2019 increased the Solvency II risk capital of Allianz SE by € 10.8 bn. In the subsequent sections, the risk figures for 2018 after model changes will form the basis for the analysis of the changes in our risk profile in 2019. Allianz SE: Impact of model changes; Allocated risk according to the risk profile € mn as of 31 December Market risk Credit risk Underwriting risk Business risk Operational risk Diversification Total Allianz SE 20181 34,157 554 3,270 40 740 (3,641) 35,121 20182 23,264 567 3,282 39 744 (3,608) 24,288 1_2018 risk profile figures recalculated based on model changes in 2019. 2_2018 risk profile figures as reported previously. The changes to our internal model affected the risk categories and di- versification as follows: MARKET RISK Several model changes, especially a changed modeling of strategic participations, increased market risk by € 10.9 bn. CREDIT RISK In 2019, changes in the modeling of credit risk resulted in small de- crease in risk of € 13 mn. UNDERWRITING RISK The implementation of several small model changes decreased under- writing risk by € 12 mn. BUSINESS RISK A model change indirectly increased business risk by € 1 mn. OPERATIONAL RISK Operational risk slightly decreased by € 4 mn, also reflecting indirect model change effects. DIVERSIFICATION An update in the modeling of correlations, together with the indirect impact of various other model changes, increased the risk capital relief from diversification by € 33 mn. Risk profile and management assessment RISK PROFILE AND MARKET ENVIRONMENT The quantitative risk profile of Allianz SE is primarily dominated by market risk that results from its non-traded insurance participations when measured in a manner consistent with the treatment of partici- pations under Solvency II (e.g. without looking through to the underly- ing risks behind the participations). In order to provide greater trans- parency, the Group risk figures as reflected in the Allianz Group Annual Report can be interpreted as a “look-through” view at the consolidated risk profile represented by all of the Group’s participations as well as those risks unique to Allianz SE. The second largest risk for Allianz SE from an internal model perspective is the underwriting risk arising from its reinsurance business and from internal pension obligations. 1_As per the Allianz Standard for Model Changes (ASMC). 26 Annual Report 2019 – Allianz SE B _ Management Report of Allianz SE In 2019, the risk profile and relative contributions have changed, mainly due to changes in the market environment and management actions such as new equity and real estate investments. POTENTIAL RISKS IN THE FINANCIAL MARKETS AND IN OPERATING ENVIRONMENT Financial markets are characterized by historically low interest rates and risk premiums, prompting some investors to look for higher- yielding – and potentially higher-risk – investments. In addition to sustained low interest rates, the challenges of implementing long- term structural reforms in key Eurozone countries, the uncertainty about future monetary and fiscal policies, rising populism, and increased tensions in international trade may lead to higher market volatility. The increasing reliance on digital technologies – to increase efficiency and competitiveness – increases the risk of cyber attacks, data breaches and system failures. There is also the risk of noncompliance with increasing regulation covering IT related business processes. This could be accompanied by a flight to quality, combined with falling equity and bond prices due to rising spread levels, even in the face of potentially lower interest rates. We therefore continue to closely monitor political and financial developments – such as the Brexit of the United Kingdom and the potential rise of Euroscepticism, and the global trade situation – in order to manage our overall risk profile to specific event risks. Political risk is the risk that returns could suffer as a result of political changes or instability in a country, a region, or globally (for example via the Brexit, i.e. the withdrawal of the United Kingdom from the European Union). Allianz SE is exposed to the Brexit through rein- surance renewals with UK reinsurers, derivative contract continuity risk, and the impact on earnings and solvency. Based on our assessments, Allianz SE is well prepared for the Brexit and confident that it will have only minimal direct impact. This is because our reinsurance and investment management departments have taken actions to ensure that they are in the position to handle various Brexit scenarios. Examples:  Allianz SE has very limited exposure in terms of outward cessions to UK-based reinsurers, including replacement options.  For inwards reinsurance, the Allianz SE reinsurance department will be able to use legal options such as Temporary Permission or Run-off Regimes, or to make use of Allianz Group branch so- lutions.  No issues are expected regarding derivatives, as we are in the process of shifting our derivatives to EU markets as appropriate. In addition, we expect that all outstanding derivatives will be valid for a reasonable time period post Brexit. Even under conservative assumptions (driven by assumed adverse financial market developments, which to a large extent are already priced across asset classes in significant risk premia related to the Brexit), Allianz SE will remain well capitalized. REGULATORY DEVELOPMENTS As Solvency II became effective in 2016, our approved internal model has been applied since the beginning of that year. 1_Own funds and capital requirement are calculated taking into account volatility adjustment and yield curve extension, as described in “Risk free rate and volatility adjustment assumptions” on page 25. In addition, future Solvency II capital requirements might change depending on the outcome of the 2020 review of the Solvency II framework by EIOPA. The concrete effects of the Solvency II review for Allianz SE however can only be assessed after final results are available. MANAGEMENT ASSESSMENT Allianz SE’s management feels comfortable with Allianz SE’s overall risk profile and has confidence that the effectiveness of its risk man- agement framework meets both the challenges of a rapidly changing environment and the day-to-day business needs. This confidence is based on several factors:  Due to its effective capital management, Allianz SE is well capital- ized. We have met our internal and regulatory solvency targets as of 31 December 2019.  Allianz SE is well positioned to withstand potentially adverse future events – due, in part, to our strong internal limit framework, stress testing, internal model, and risk management practices.  Allianz SE has a conservative investment profile and disciplined business practices in the reinsurance business, leading to sustaina- ble operating earnings with a well-balanced risk-return profile. SOLVENCY II REGULATORY CAPITALIZATION Allianz SE’s own funds and capital requirements are based on the market value balance sheet approach consistent with the economic principles of Solvency II.1 Our regulatory capitalization is shown in the following table: Allianz SE: Solvency II regulatory capitalization as of 31 December Own funds Capital requirement Capitalization ratio 1_2018 risk profile figures as reported previously. € bn € bn % 2019 92.9 38.4 242 20181 83.9 24.3 345 As of 31 December 2019, the Solvency II capitalization of the legal entity Allianz SE is at 242 %. The decrease by 103 percentage points in 2019 was caused by a € 14.1 bn increase in risk capital (mostly driven by the before mentioned model change for strategic participations), combined with a € 9.0 bn increase in eligible own funds. Quantifiable risks and opportunities by risk category This Risk and Opportunity Report outlines Allianz SE’s risk figures, reflecting its risk profile based on pre-diversified risk figures and Allianz SE diversification effects. We measure and steer risk based on an approved internal model, which measures the potential adverse developments of Own Funds. The results provide an overview of how our risk profile is distributed over different risk categories, and determine the regulatory capital requirements in accordance with Solvency II. Annual Report 2019 – Allianz SE 27 B _ Management Report of Allianz SE The pre-diversified risk figures reflect the diversification effects within each modeled risk category (i.e. within market, credit, under- writing, business, and operational risk) but do not include the diversifi- cation effects across risk categories. The Allianz SE diversified risk also captures the diversification effects across all risk categories. The Allianz SE diversified risk is broken down as follows: Allianz SE: Allocated risk according to the risk profile € mn as of 31 December Market risk Credit risk Underwriting risk Business risk Operational risk Diversification Total Allianz SE 2019 37,524 559 3,407 48 657 (3,827) 38,368 2018 34,157 554 3,270 40 740 (3,641) 35,121 As of 31 December 2019, Allianz SE’s diversified risk capital amounted to € 38.4 bn (2018: € 35.1 bn). This represents a slight reduction in the diversification benefit by 0.3 % to 9.1 %. The increase in Solvency II capital requirement was mainly due to higher market risk, driven by M&A transactions and business evolution. The following sections outline the evolution of the risk profile per modeled risk category. All risks are presented on a pre-diversified basis and concentrations of single sources of risk are discussed accordingly. INFLATION RISK The € 45 mn increase in the market risk relief that results from inflation risk in 2019 mainly results from the impact of lower interest rates. EQUITY RISK In 2019, Allianz SE’s equity risk increased by € 3,455 mn, reflecting, among others, a change in the value of participations in Allianz Group companies due to the business evolution, as well as private equity transactions. As of 31 December 2019, those of our investment assets that are sensitive to changing equity markets would have lost € 442 mn in value, assuming equity markets declined by 30 %. CREDIT SPREAD RISK Allianz SE’s credit spread risk is € 87 mn lower than in 2018, mainly caused by diversification effects. REAL ESTATE RISK The € 110 mn increase in 2019 reflects higher real estate values and new investments. CURRENCY RISK Allianz SE’s € (390) mn currency risk at year-end 2019 results from net open positions in several currencies, dominated by the U.S. Dollar. The € 52 mn increase in the relief that currency risk provides to market risk is mainly caused by a weakening of the EUR and higher values of non-EUR participations. MARKET RISK The following table presents the market risk of Allianz SE related to the source of risk: CREDIT RISK Credit risk of the legal entity Allianz SE slightly increased by € 5 mn in 2019. Allianz SE: Risk profile – Market risk by source of risk pre-diversified, € mn as of 31 December Interest rate Inflation Credit spread Equity Real estate Currency 2019 23 (333) 349 37,673 203 (390) 2018 37 (288) 436 34,218 93 (338) Total Allianz SE 37,524 34,157 For Allianz SE, the pre-diversified market risk as of year-end 2019 shows an increase of € 3,367 mn driven by equity risk. UNDERWRITING RISK The following table presents the pre-diversified risk calculated for underwriting risks stemming from our reinsurance business and internal pensions:1 Allianz SE: Risk Profile – Underwriting risk by source of risk pre-diversified, € mn as of 31 December Premium natural catastrophe Premium non-catastrophe and terror Reserve Biometric Total Allianz SE 2019 363 1,466 1,437 140 2018 331 1,485 1,394 60 3,407 3,270 INTEREST RATE RISK In 2019, the interest rate risk of Allianz SE decreased by € 14 mn, mainly reflecting a change in diversification. For Allianz SE, the pre-diversified underwriting risk showed an increase of € 137 mn, driven by increases in all subcategories except premium non-catastrophe risk. As of 31 December 2019, Allianz SE’s interest-rate-sensitive assets amounting to a market value of € 42.4 bn would have gained € 2.3 bn or lost € 2.0 bn in value, in the event of interest rates changing by -100 and +100 basis points, respectively. PROPERTY-CASUALTY Premium risk In 2019, Allianz SE’s natural catastrophe slightly increased by € 32 mn. 1_Impact of whole account stop loss reinsurance contract between Allianz SE and Allianz Re Dublin dac on pre-diversified insurance risks: For premium natural catastrophe risk rose of € 44 mn (2018: € 30 mn), for premium non-catastrophe and terror risk rose of € 177 mn (2018: € 179 mn). 28 Annual Report 2019 – Allianz SE B _ Management Report of Allianz SE The top five scenarios contributing to the natural catastrophe risk of Allianz SE as of 31 December 2019 were a windstorm in Europe, a tropical cyclone in Japan, a tropical cyclone in Australia, an earth- quake in Italy, and an earthquake in Australia. The non-catastrophe and terror premium risk of Allianz SE slightly decreased by € 19 mn in 2019. Reserve risk Among others, the € 43 mn increase in Allianz SE’s reserve risk in 2019 reflects the building up of reserves in group-internal quota shares. LIFE/HEALTH In 2019, Allianz SE’s biometric risk is € 80 mn higher than in 2018. The main driver is an increase in longevity risk from internal pension obli- gations reflecting lower interest rates. BUSINESS RISK Business risk increased by € 8 mn, mainly due to lapse risk from higher quota share exposure. OPERATIONAL RISK The decrease of € 83 mn shown in the operational risk mainly results from the update of a central model parameter, whereas a reassessment of potential data errors in reinsurance underwriting resulted in higher operational risk than in the previous year. LIQUIDITY RISK Detailed information regarding Allianz SE’s liquidity risk exposure, liquidity, and funding – including changes in cash and cash equivalents – are provided in the chapter Liquidity and Funding Resources from page 18. As inferred from the section on the management of li- quidity risks, they are quantified and monitored through regular stress test reporting and properly managed but are not quantified for risk capital purposes. Annual Report 2019 – Allianz SE 29 B _ Management Report of Allianz SE CORPORATE GOVERNANCE REPORT Good corporate governance is essential for sustainable business per- formance. The Board of Management and the Supervisory Board of Allianz SE therefore attach great importance to complying with the recommendations of the German Corporate Governance Code (here- inafter referred to as the “Code”). The Declaration of Conformity with the recommendations of the Code, as issued by the Board of Manage- ment and the Supervisory Board on 13 December 2019, and the com- pany’s position regarding the Code’s suggestions can be found in the Statement on Corporate Management pursuant to § 289f of the HGB starting on page 36. Corporate Constitution of the European Company (SE) As a European Company, Allianz SE is subject to special European SE regulations and the German SE Implementation Act (“SE-Ausfüh- rungsgesetz”) in addition to the German SE Employee Involvement Act (“SE-Beteiligungsgesetz”). Notwithstanding, the main features of a German stock corporation – in particular the two-tier board system (Board of Management and Supervisory Board) and the principle of equal employee representation on the Supervisory Board – have been maintained by Allianz SE. Function of the Board of Management The Board of Management of Allianz SE has ten members. It is respon- sible for setting business objectives and the strategic direction, for co- ordinating and supervising for implementing and overseeing an efficient risk management system. The Board of Management also prepares the annual financial state- ments of Allianz SE, the Allianz Group’s consolidated financial state- ments, the market value balance sheet, and the interim report. the operating entities, and The members of the Board of Management are jointly responsi- ble for management and for complying with legal requirements. Not- withstanding this overall responsibility, the individual members head the departments they have been assigned independently. There are divisional responsibilities for business segments as well as functional responsibilities. The latter include the Finance, Risk Management and Controlling Functions, Investments, Operations and Allianz Services, Human Resources, Legal, Compliance, Internal Audit, and Mergers & Acquisitions. Business division responsibilities focus on geographical regions or Global Lines. Rules of procedure specify in more detail the structure and departmental responsibilities of the Board of Manage- ment. Board of Management meetings are led by the Chairman. Each member of the Board may request a meeting, providing notification of the proposed subject. The Board makes decisions by a simple majority of participating members. In the event of a tie, the Chairman casts the deciding vote. The Chairman can also veto decisions, but he cannot impose any decisions against the majority vote. BOARD OF MANAGEMENT AND GROUP COMMITTEES In the financial year 2019, the following Board of Management com- mittees were in place: Board Committees Board committees Responsibilities GROUP FINANCE AND RISK COMMITTEE Giulio Terzariol (Chairman), Niran Peiris, Dr. Günther Thallinger, Dr. Axel Theis. GROUP IT COMMITTEE Dr. Christof Mascher (Chairman), Niran Peiris, Giulio Terzariol, Dr. Günther Thallinger, Dr. Axel Theis. GROUP MERGERS AND ACQUISITIONS COMMITTEE Dr. Helga Jung (Chairwoman), Oliver Bäte, Niran Peiris, Giulio Terzariol. As of 31 December 2019 Preparation of the capital and liquidity planning for the Group and Allianz SE, implementing and overseeing the principles of group-wide capital and liquidity planning, as well as investment strategy and preparing risk strategy. This includes, in particular, significant individual investments and guidelines for currency management, Group financing and internal Group capital management, as well as establishing and overseeing a group-wide risk management and monitoring system including dynamic stress tests. Developing, proposing, implementing and monitoring a group-wide IT strategy, approving external IT contracts and business- related IT contracts with strategic and group relevance. Managing and overseeing Group M & A- transactions, including approval of individual transactions within certain thresholds. In addition to Board committees, there are also Group committees. They are responsible for preparing decisions for the Board of Management of Allianz SE, submitting proposals for resolutions, and ensuring a smooth flow of information within the Group. In the financial year 2019, the following Group committees were in place: Group committees Group committees Responsibilities GROUP COMPENSATION COMMITTEE Board members of Allianz SE and executives below Allianz SE Board level. GROUP INVESTMENT COMMITTEE Board members of Allianz SE and Allianz Group executives. Designing, monitoring, and improving group-wide compensation systems in line with regulatory requirements and sub- mitting an annual report on the monitoring results, along with proposals for improvement. Implementing the Group investment strategy, including monitoring group-wide invest- ment activities as well as approving invest- ment-related frameworks and guidelines and individual investments within certain thresholds. As of 31 December 2019 The Allianz Group runs its operating entities and business segments via an integrated management and control process. First, the Holding and the operating entities define the business strategies and goals. On this basis, joint plans are then prepared for the Supervisory Board’s consid- eration when setting targets for the performance-based remuneration of the members of the Board of Management. For details, see the Remuneration Report starting on page 39. 30 Annual Report 2019 – Allianz SE B _ Management Report of Allianz SE The Board of Management reports regularly and comprehen- sively to the Supervisory Board on business development, the com- pany’s financial position and earnings, planning and achievement of objectives, business strategy, and risk exposure. Details on the Board of Management’s reporting to the Supervisory Board are laid down in the information rules issued by the Supervisory Board. The Supervisory Board regularly reviews the efficiency of its acti- vities. The Supervisory Board discusses recommendations for improve- ments and adopts appropriate measures on the basis of recommen- dations from the Standing Committee. This self-assessment also in- cludes an evaluation of the fitness and propriety of the individual members. Important decisions of the Board of Management require approval by the Supervisory Board. These requirements are stipulated by law, by the Statutes, or in individual cases by decisions of the Annual General Meeting (AGM). Supervisory Board approval is required, for example, for certain capital transactions, intercompany agreements, and the launch of new business segments or the closure of existing ones. Approval is also required for acquisitions of companies and hold- ings in companies, as well as for divestments of Group companies that exceed certain threshold levels. The Agreement concerning the Partic- ipation of Employees the version dated in Allianz SE, 3 July 2014 (hereinafter “SE Agreement”), requires the approval of the Supervisory Board for the appointment of the member of the Board of Management responsible for employment and social welfare. in Principles and function of the Supervisory Board The German Co-Determination Act (“Mitbestimmungsgesetz”) does not apply to Allianz SE because it has the legal form of a European Company (SE). Instead, the size and composition of the Supervisory Board is determined by general European SE regulations. These regu- lations are implemented in the Statutes and via the SE Agreement. The Supervisory Board comprises twelve members, including six shareholder representatives appointed by the AGM. The six employee representatives are appointed by the SE works council. The specific procedure for their appointment is laid down in the SE Agreement. This agreement stipulates that the six employee representatives must be allocated in proportion to the number of Allianz employees in the dif- ferent countries. The Supervisory Board currently in office includes four employee representatives from Germany and one each from France and the United Kingdom. According to § 17 (2) of the German SE Im- plementation Act (“SE-Ausführungsgesetz”), the Supervisory Board of Allianz SE shall be composed of at least 30 % women and at least 30 % men. The Supervisory Board oversees and advises the Board of Man- agement on managing the business. It is also responsible for appoint- ing the members of the Board of Management, determining their overall remuneration, succession planning for the Board of Manage- ment, and reviewing Allianz SE’s and the Allianz Group’s annual finan- cial statements. The Supervisory Board’s activities in the 2019 financial year are described in the Supervisory Board Report starting on page 2. The Supervisory Board makes all decisions based on a simple ma- jority. The special requirements for appointing members to the Board of Management, as stipulated in the German Co-Determination Act, and the requirement to have a Conciliation Committee do not apply to an SE. In the event of a tie, the casting vote lies with the Chairman of the Supervisory Board, who at Allianz SE must be a shareholder repre- sentative. If the Chairman is not present in the event of a tie, the casting vote lies with the vice chairperson from the shareholder side. A second vice chairperson is elected at the employee representatives’ proposal. SUPERVISORY BOARD COMMITTEES Part of the Supervisory Board’s work is carried out by its committees. The Supervisory Board receives regular reports on the activities of its committees. The composition of committees and the tasks assigned to them are regulated by the Supervisory Board’s Rules of Procedure. Supervisory Board committees Supervisory Board committees Responsibilities STANDING COMMITTEE 5 members – Chairman: Chairman of the Supervisory Board (Michael Diekmann) – Two further shareholder representatives (Herbert Hainer, Jim Hagemann Snabe) – Two employee representatives (Jürgen Lawrenz, Jean-Claude Le Goaër) AUDIT COMMITTEE 5 members – Chairman: appointed by the Supervisory Board (Dr. Friedrich Eichiner) – Three shareholder representatives (in addition to Dr. Friedrich Eichiner: Sophie Boissard, Michael Diekmann) – Two employee representatives (Jean-Claude Le Goaër, Martina Grundler) RISK COMMITTEE 5 members – Chairman: appointed by the Supervisory Board (Michael Diekmann) – Three shareholder representatives (in addition to Michael Diekmann: Christine Bosse, Dr. Friedrich Eichiner) – Two employee representatives (Godfrey Hayward, Frank Kirsch) PERSONNEL COMMITTEE 3 members – Chairman: Chairman of the Supervisory Board (Michael Diekmann) – One further shareholder representative (Herbert Hainer) – One employee representative (Gabriele Burkhardt-Berg) NOMINATION COMMITTEE 3 members – Chairman: Chairman of the Supervisory Board (Michael Diekmann) – Two further shareholder representatives (Christine Bosse, Jim Hagemann Snabe) TECHNOLOGY COMMITTEE 5 members – Chairman: appointed by the Supervisory Board (Jim Hagemann Snabe) – Three shareholder representatives (in addition to Jim Hagemann Snabe: Michael Diekmann, Dr. Friedrich Eichiner) – Two employee representatives (Gabriele Burkhardt-Berg, Jürgen Lawrenz) As of 31 December 2019 – Approval of certain transactions which require the approval of the Supervisory Board, e.g. capital measures, acquisitions, and disposals of participations – Preparation of the Declaration of Conformity pursuant to § 161 “Aktiengesetz” (German Stock Corporation Act) and checks on corporate governance – Preparation of the efficiency review of the Supervisory Board – Initial review of the annual Allianz SE and consoli- dated financial statements, management reports (incl. Risk Report) and the dividend proposal, review of half-yearly reports or, where applicable, quarterly financial reports or statements – Monitoring of the financial reporting process, the effectiveness of the internal control and audit system and legal and compliance issues – Monitoring of the audit procedures, including the independence of the auditor and the services additionally rendered, awarding of the audit contract and determining the focal points of the audit – Monitoring of the general risk situation and special risk developments in the Allianz Group – Monitoring of the effectiveness of the risk management system – Initial review of the Risk Report and other risk- related statements in the annual financial statements and management reports of Allianz SE and the Allianz Group, informing the Audit Committee of the results of such reviews – Preparation of the appointment of Board of Management members – Preparation of plenary session resolutions on the compensation system and the overall compensation of Board of Management members – Conclusion, amendment, and termination of service contracts of Board of Management members unless reserved for the plenary session – Long-term succession planning for the Board of Management – Approval of the assumption of other mandates by Board of Management members – Setting of concrete objectives for the composition of the Supervisory Board – Establishment of selection criteria for shareholder representatives on the Supervisory Board in compliance with the Code’s recommendations on the composition of the Supervisory Board – Selection of suitable candidates for election to the Supervisory Board as shareholder representatives – Regular exchange regarding technological developments – In-depth monitoring of the Board of Management’s technology and innovation strategy – Support of the Supervisory Board in monitoring the implementation of the Board of Management’s technology and innovation strategy Annual Report 2019 – Allianz SE 31 B _ Management Report of Allianz SE PUBLICATION OF DETAILS OF MEMBERS’ PARTICIPATION IN MEETINGS The Supervisory Board considers it good corporate governance to publish the details of individual members’ participation in plenary ses- sions and committee meetings: Publication of details of members’ participation in meetings Presence % PLENARY SESSIONS OF THE SUPERVISORY BOARD Michael Diekmann (Chairman) Gabriele Burkhardt-Berg (Vice Chairwoman) Jim Hagemann Snabe (Vice Chairman) Sophie Boissard Christine Bosse Dr. Friedrich Eichiner Jean-Claude Le Goaër Martina Grundler Herbert Hainer Godfrey Hayward Frank Kirsch Jürgen Lawrenz STANDING COMMITTEE Michael Diekmann (Chairman) Jean-Claude Le Goaër Herbert Hainer Jürgen Lawrenz Jim Hagemann Snabe PERSONNEL COMMITTEE Michael Diekmann (Chairman) Gabriele Burkhardt-Berg Herbert Hainer AUDIT COMMITTEE Dr. Friedrich Eichiner (Chairman) Sophie Boissard Michael Diekmann Jean-Claude Le Goaër Martina Grundler RISK COMMITTEE Michael Diekmann (Chairman) Christine Bosse Dr. Friedrich Eichiner Godfrey Hayward Frank Kirsch TECHNOLOGY COMMITTEE Jim Hagemann Snabe (Chairman) Gabriele Burkhardt-Berg Michael Diekmann Dr. Friedrich Eichiner Jürgen Lawrenz NOMINATION COMMITTEE Michael Diekmann (Chairman) Christine Bosse Jim Hagemann Snabe 6/6 6/6 6/6 6/6 6/6 6/6 6/6 5/6 6/6 6/6 6/6 6/6 4/4 4/4 4/4 4/4 4/4 4/4 4/4 4/4 5/5 5/5 5/5 5/5 5/5 2/2 2/2 2/2 2/2 2/2 2/2 2/2 2/2 2/2 2/2 1/1 1/1 1/1 100 100 100 100 100 100 100 83.3 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 32 Annual Report 2019 – Allianz SE B _ Management Report of Allianz SE OBJECTIVES OF THE SUPERVISORY BOARD REGARDING ITS COMPOSITION The objectives for the composition of the Supervisory Board in the version of August 2017, as specified to implement a recommendation by the Code, are set out below. In light of the new German Corporate Governance Code expected in 2020, the Supervisory Board already in December 2019 amended the objectives for its composition, effective 1 January 2020, to reflect the specifications of the new Code. Objectives of Allianz SE’s Supervisory Board regarding its composition1 “The aim of Allianz SE’s Supervisory Board is to have members who are equipped with the necessary skills and competence to properly supervise and advise Allianz SE’s management. Supervisory Board candidates should possess the professional expertise and experience, integrity, motivation and commitment, independence, and personality required to successfully carry out the responsibilities of a Supervisory Board member in a financial services institution with international operations. These objectives take into account the regulatory requirements for the composition of the Supervisory Board as well as the relevant recommendations of the German Corporate Governance Code (“GCGC”). In addition to the requirements for each individual member, a profile of skills and expertise (“Kompetenzprofil”) as well as a diversity concept are provided for the entire Supervisory Board. I. Requirements relating to the individual members of the Supervisory Board 1. Propriety The members of the Supervisory Board must be proper as defined by the regulatory provisions. A person is assumed to be proper as long as no facts are to be known which may cause impropriety. Therefore, no personal circumstances shall exist which – according to general experience – lead to the assumption that the diligent and orderly exercise of the mandate may be affected (in particular administrative offenses or violation of criminal law, esp. in connection with commercial activity). 2. Fitness The members of the Supervisory Board must have the expertise and experience necessary for a diligent and autonomous exercise of the Allianz SE Supervisory Board mandate, in particular for exercising control of and giving advice to the Board of Management as well as for the active support of the development of the company. This comprises in particular: – adequate expertise in all business areas; – adequate expertise in the insurance and finance sector or comparable relevant experience and expertise in other sectors; – adequate expertise in the regulatory provisions material for Allianz SE (supervisory law, including Solvency II regulation, corporate and capital markets law, corporate governance); – ability to assess the business risks; – knowledge of accounting and risk management basics. 3. Independence The GCGC defines a person as independent who, in particular, does not have any business or personal relations with Allianz SE or its executive bodies, a controlling shareholder, or an enterprise associated with the latter, which may cause a substantial and not merely temporary conflict of interest. To further specify the definition of independence, the Supervisory Board of Allianz SE states the following: – Former members of the Allianz SE Board of Management shall not be deemed independent during the mandatory corporate law cooling-off period. – Members of the Supervisory Board of Allianz SE in office for more than 15 years (since 1.1.2020: 12 years) shall not be deemed independent. – Regarding employee representatives, the mere fact of employee representation and the existence of a working relationship with the company shall not in itself affect the independence of the employee representatives. Applying such definition, at least eight members of the Supervisory Board shall be independent. In case shareholder representatives and employee representatives are viewed separately, at least four of each should be independent. It has to be considered that the possible emergence of conflicts of interests in individual cases cannot generally be excluded. Potential conflicts of interest must be disclosed to the Chairman of the Supervisory Board and will be resolved by appropriate measures. 4. Time of availability Each member of the Supervisory Board must ensure that they have sufficient time to dedicate to the proper fulfilment of the mandate of this Supervisory Board position. In addition to the mandatory mandate limitations and the GCGC recommendation for active Management Board members of listed companies (max. three mandates – since 1.1.2020: two mandates), the common capital markets requirements shall be considered. With respect to the Allianz SE mandate, the members shall ensure that – they can attend at least four, usually six ordinary Supervisory Board meetings per year, each of which requires adequate preparation; – they have sufficient time for the audit of the annual and consolidated financial statements; The amendment in particular relates to the skills and expertise of the Supervisory Board and the reduction of the term of membership from 15 to 12 years. In addition to the skills profile for the overall Supervisory Board, also to be established due to a new recommendation of the Code, the diversity concept in accordance with the legislation on the implementation of the European guideline as regards the disclosure of non-financial and diversity information (CSR Directive) is also included: Employee representation within Allianz SE, according to the Agreement concerning the Participation of Employees in Allianz SE, contributes to the diversity of work experience and cultural background. Pursuant to the provisions of the German SE Participation Act (SEBG), the number of women and men appointed as German employee representatives should be proportional to the number of women and men working in the German companies. However, the Supervisory Board does not have the right to select the employee representatives. The following requirements and objectives apply to the composition of Allianz SE’s Supervisory Board: – they can attend the General Meeting; – depending on possible membership in one or more of the current six Supervisory Board special committees, this involves extra time planning to participate in these Committee meetings and do the necessary preparation for these meetings; this applies in particular for the Audit and risk Committees; – they can attend extraordinary meetings of the Supervisory Board or of a special committee to deal with special matters as and when required. 5. Retirement age The members of the Supervisory Board shall, as a rule, not be older than 70 years of age. 6. Term of membership The continuous period of membership for any member of the Supervisory Board should, as a rule, not exceed 15 years (since 1.1.2020: 12 years). 7. Former Allianz SE Management Board members Former Allianz SE Management Board members are subject to the mandatory corporate law cooling- off period of two years. According to regulatory provisions, no more than two former Allianz SE Management Board members shall be members of the Supervisory Board. II. Requirements for the entire Supervisory Board 1. Profile of skills and expertise for the entire Supervisory Board In addition to the expertise-related requirements for the individual members, the following shall apply with respect to the expertise and experience of the entire Supervisory Board: – familiarity of members in their entirety with the insurance and financial services sector; – adequate expertise of the entire board with respect to investment management, insurance actuarial practice, and accounting (since 1.1.2020: and technology); – at least one member with considerable experience in the fields of insurance and financial services; – at least one member with comprehensive expertise in the fields of accounting or auditing; (since 1.1.2020: at least one member with comprehensive expertise in the field of digital transformation); – specialist expertise or experience in other economic sectors; – managerial or operational experience. 2. Diversity concept To promote an integrative cooperation among the Supervisory Board members, the Supervisory Board strives for an adequate diversity with respect to gender, internationality, different occupational backgrounds, professional expertise, and experience: – The Supervisory Board shall be composed of at least 30 % women and at least 30 % men. The representation of women is generally considered to be the joint responsibility of the shareholder and employee representatives. – At least four of the members must, on the basis of their origin or function, represent regions or cultural areas in which Allianz SE conducts significant business. For Allianz SE as a Societas Europaea, the agreement concerning the participation of employees in Allianz SE provides the following: Allianz employees from different EU member states be considered in the allocation of employee representatives’ Supervisory Board seats. – In order to provide the Board with the most diverse sources of experience and specialist knowledge possible, the members of the Supervisory Board shall complement each other with respect to their background, professional experience, and specialist knowledge.” 1_As of 31 December 2019. Annual Report 2019 – Allianz SE 33 B _ Management Report of Allianz SE The composition of the Supervisory Board of Allianz SE reflects these objectives. According to the assessment by the Supervisory Board, all shareholder representatives, i.e. Ms. Boissard, Ms. Bosse as well as Mr. Diekmann, Dr. Eichiner, Mr. Hainer and Mr. Snabe, are independent within the meaning of the objectives (see No. I.3). With four female and eight male Supervisory Board members, the current legislation for equal participation of women and men in leadership positions (statu- tory gender quota of 30 %) is being met. In addition, the Supervisory Board has five members with international backgrounds. The skills profile is also met by all current members of the Supervisory Board. Based on the objectives regarding its composition, the Supervisory Board of Allianz SE has developed the following skills matrix. Diekmann Snabe Boissard Bosse Eichiner Hainer Burkhardt- Berg Le Goaër Grundler Hayward Kirsch Lawrenz Tenure Joined Board in 2017 2014 2017 2012 2016 2017 2012 2018 2016 2017 2018 2015 Personal appro- priate- ness Diversity Expertise Regulatory requirement (Fit & Proper) Independence1 No Overboarding1 Gender Nationality Accounting Insurance Actuarial Practice Investment Management Technology Digital Transformation Employee Engagement North America Regional Expertise Growth Markets Europe (EU) ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ male male German Danish female French female Danish male male female male female German German German French German male British male male German German ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ - ✓ ✓ - - ✓ ✓ ✓ ✓ ✓ ✓ ✓ - - ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ - ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ - - ✓ ✓ ✓ - ✓ ✓ ✓ - - ✓ ✓ ✓ - - - ✓ - - ✓ ✓ ✓ ✓ - - ✓ - - ✓ ✓ ✓ ✓ - - ✓ - - ✓ ✓ ✓ ✓ ✓ ✓ ✓ - - ✓ ✓ Criteria met. Expertise criteria based on yearly self-assessment. Tick means at least “Good knowledge” and implies the capacity to well understand the relevant matters and to take educated decisions. Good knowledge may result from existing qualifications and from the training measures regularly attended by all members of the Supervisory Board. On a scale from A-E this requires at least grade B. 1_According to German Corporate Governance Code. The current composition of the Supervisory Board and its committees is described on page 5. Annual General Meeting Directors’ dealings Members of the Board of Management and the Supervisory Board, as well as persons closely associated with them, are obliged by the E.U. Market Abuse Directive to disclose to both Allianz SE and the German Federal Financial Supervisory Authority any transactions involving shares or debt securities of Allianz SE or financial derivatives or other instruments based on them, as soon as the value of the securities acquired or divested by the member amounts to five thousand Euros or more within a calendar year. These disclosures are published on our website at www.allianz.com/directorsdealings. Shareholders exercise their rights at the Annual General Meeting. When adopting resolutions, each share carries one vote. Shareholders can follow the AGM’s proceedings on the internet and be represented by proxies. These proxies exercise voting rights exclusively on the basis of instructions given by the shareholder. Shareholders are also able to cast their votes via the internet in the form of online voting. Allianz SE regularly promotes the use of internet services. The AGM elects the shareholder representatives of the Supervisory Board and approves the actions taken by the Board of Management and the Supervisory Board. It decides on the use of profits, capital transactions, the approval of intercompany agreements, the re- muneration of the Supervisory Board, and changes to the company’s Statutes. Resolutions of the General Meeting shall be passed, unless mandatory legal provisions require otherwise, by a simple majority of the valid votes cast. In accordance with European regulations and the Statutes, changes to the Statutes require a two-thirds majority of votes cast in case less than half of the share capital is represented in the AGM. Each year, an ordinary AGM takes place at which the Board of Management and the Supervisory Board give an account of the preceding financial year. For special decisions, the German Stock Corporation Act provides for the convening of an extraordinary AGM. 34 Annual Report 2019 – Allianz SE B _ Management Report of Allianz SE Accounting and auditing Regulatory requirements The regulatory requirements for corporate governance applicable for insurance companies, insurance groups, and financial conglomerates are also important. Specifically, they include the establishment and further design of significant control functions (risk management, actu- arial function, compliance, and internal audit) as well as general prin- ciples for a sound business organization. These regulatory require- ments are applicable throughout the Group in principle and have been implemented using written guidelines issued by the Board of Management of Allianz SE. Solvency II requires the publication of qualitative and quantitative information including a market value bal- ance sheet. Details on the implementation of the regulatory require- ments the Allianz Group can be found in the Solvency and Financial Condition Report of Allianz SE and of the Allianz Group, which are published on our website at for corporate governance by Allianz SE and by www.allianz.com/sfcr. The Allianz Group prepares its accounts according to § 315e of the Ger- man Commercial Code (“Handelsgesetzbuch – HGB”) on the basis of the International Financial Reporting Standards (IFRS) adopted by the European Union. The annual financial statements of Allianz SE are pre- pared in accordance with German law and accounting rules. In compliance with the special legal provisions that apply to insur- ance companies, the auditor of the annual financial statements and of the half-yearly financial report is appointed by the Supervisory Board, not the AGM. The audit of the financial statements covers the individ- ual financial statements of Allianz SE and the consolidated financial statements of the Allianz Group. We inform our shareholders, financial analysts, the media, and the general public about the company’s situation on a regular basis and in a timely manner. The annual financial statements of Allianz SE, the Allianz Group’s consolidated financial statements, and the respective management reports are published within 90 days of the end of each financial year. Additional information is provided in the Allianz Group’s half-yearly financial reports and quarterly statements. Information is also made available at the AGM, at press and analysts’ conferences, and on the Allianz Group’s website. Our website also pro- vides a financial calendar listing the dates of major publications and events, such as annual reports, half-yearly financial reports, and quar- terly statements, AGMs, and analyst conference calls as well as finan- cial press conferences. You can find the 2020 financial calendar on our website at www.allianz.com/financialcalendar. Annual Report 2019 – Allianz SE 35 B _ Management Report of Allianz SE STATEMENT ON CORPORATE MANAGEMENT PURSUANT TO § 289F OF THE HGB The Statement on Corporate Management pursuant to § 289f of the German Commercial Code (“Handelsgesetzbuch – HGB”) forms part of the Management Report. According to § 317 (2), sentence 6 of the HGB, this Statement does not have to be included within the scope of the audit. Declaration of Conformity with the German Corporate Governance Code On 13 December 2019, the Board of Management and the Supervisory Board issued the following Declaration of Conformity of Allianz SE with the German Corporate Governance Code (hereinafter the “Code”): Declaration of Conformity in accordance with § 161 of the German Stock Corporation Act Declaration of Conformity by the Management Board and the Supervisory Board of Allianz SE with the recommendations of the German Corporate Governance Code Commission in accordance with § 161 of the German Stock Corporation Act (AktG) the System of Governance. For further information on our risk organi- zation and risk principles, please refer to   page 19. Information on the “Integrated Risk and Control System for Financial Reporting” can be found on   page 58. In addition, the quality of our internal control system is assessed by the Internal Audit Function. This function conducts independent, objective assurance and consulting activities, analyzing the structure and efficiency of the internal control systems as a whole. In addition, it also examines the potential for additional value and improvement of our organization’s operations. Fully compliant with all international auditing principles and standards, Internal Audit contributes to eval- uating and improving of the effectiveness of the risk management, control, and governance processes. Therefore, internal audit activities are geared towards helping the company to mitigate risks, and further assist in strengthening its governance processes and structures. COMPLIANCE MANAGEMENT SYSTEM Integrity is at the core of our compliance programs and the basis for the trust of our customers, shareholders, business partners and employees. Since the last Declaration of Conformity as of December 12, 2018, Allianz SE has complied with all recommendations of the German Corporate Governance Code in the version of February 7, 2017 and will comply with them in the future. The compliance function fosters a corporate culture of individual and collective responsibility for ethical conduct and adherence to the rules by: F Munich, December 13, 2019 Allianz SE For the Management Board: Signed Oliver Bäte Signed Dr. Helga Jung For the Supervisory Board: Signed Michael Diekmann In addition, Allianz SE follows all the suggestions of the Code in its 7 February 2017 version. The Declaration of Conformity and further information on corporate governance at Allianz can be found on our website at www.allianz.com/corporate-governance. Corporate governance practices INTERNAL CONTROL SYSTEMS Allianz SE, as a member of the Allianz Group, has an effective internal risk and control system for verifying and monitoring its operating activi- ties and business processes, in particular financial reporting, as well as compliance with regulatory requirements. The requirements placed on the internal control systems are essential not only for the resilience and franchise value of the company, but also to maintain the confidence of the capital market, our customers, and the public. A comprehensive risk and control management system regularly also assesses the effec- tiveness and appropriateness of the internal control system as part of  Advising the board of management, managers and employees on  business conduct that is lawful and ethical; Identifying and assessing material compliance risks and oversee- ing the implementation of adequate and effective internal con- trols to mitigate them;  Providing a speak-up facility that employees and third parties can use to confidentially address irregularities; Interacting transparently and trustfully with regulators.  Compliance with applicable laws, rules, and regulations in all countries in which Allianz SE and Allianz Group operate, as well as with internal policies and guidelines, is key. The global compliance programs coordinated by Allianz SE’s central Group Compliance function support our employees, managers and executive board members to act responsibly and with integrity in all situations. By participating in the United Nations Global Compact, the world’s largest and most important initiative for responsible corporate leadership, and respect- ing the Guidelines of the Organization for Economic Cooperation and Development (OECD Guidelines) for Multinational Enterprises, we integrate sustainability and corporate responsibility into our business. By accepting and complying with European and international standards and applicable laws, Allianz aims to avoid the risks that arise from non- compliance. To enhance our understanding of compliance issues and share best practices, we work with organizations such as the German Institute for Compliance (DICO) and the Global Insurance Chief Compliance Officers’ Forum (CCO Forum). Moreover, Allianz SE’s central Group Compliance function is respon- sible – in close cooperation with local compliance functions – for ensuring the effective implementation and monitoring of the compliance 36 Annual Report 2019 – Allianz SE B _ Management Report of Allianz SE Board of Management is described in the Corporate Governance Report starting on page 30. This information is also available on our website at www.allianz.com/corporate-governance. A general description of the functions of the Board of Manage- ment, the Supervisory Board, and their committees can be found in the Corporate Governance Report starting on page 30, and on our website at www.allianz.com/corporate-governance. Information in accordance with the German Act on Equal Participation of Women and Men in Executive Positions in the Private and the Public Sector This section outlines the targets set by Allianz SE for the Board of Man- agement and the two management levels below the Board of Man- agement. Article 17 (2) of the German SE Implementation Act stipu- lates that as of 1 January 2016, the share of women and men among the members of the Supervisory Board of Allianz SE must each total up to 30 % at least. The Supervisory Board currently in office fulfils this requirement because it includes four women (33 %) and eight men (67 %). In August 2017, the Supervisory Board resolved on a target for the percentage of women on Allianz SE’s Board of Management at 30 % up until 31 December 2021. As of 31 December 2019, the percentage of women on Allianz SE’s Board of Management amounted to 20 %. As regards the proportion of women on the first and second manage- ment levels below the Board of Management, the Board of Manage- ment of Allianz SE has set a target of 20 % and 30 %, respectively, to be met by 31 December 2021. As of 31 December 2019, this target was already met for the first management level with a percentage of women of 22 %, but could not yet be met on the second level with a percentage of 24 %.The first two management levels below the Board of Management comprises a very small comparative group of execu- tives. No suitable female candidates could be identified for the very few positions that became vacant in the period considered. In the longer term, Allianz aims to place women in at least 30 % of the positions at these two management levels throughout the Group. programs within the Allianz Group, as well as for investigating poten- tial compliance infringements. Furthermore, as a key function, the compliance function carries out the advisory, risk identification and assessment, monitoring and early warning tasks required under the Solvency II regime. CODE OF CONDUCT Our Code of Conduct for Business Ethics and Compliance and the in- ternal Compliance policies and guidelines derived from it provide all employees, managers, and executive board members with clear and practical guidance, enabling them to act in line with the values of the Allianz Group. The rules of conduct established by the Code of Con- duct are binding for all employees worldwide and build the basis for our compliance programs. The Code of Conduct is available on our www.allianz.com/corporate-governance. website at SPEAK UP A major component of the Allianz Group’s compliance management system is a speak-up facility that allows employees and third parties to notify the relevant compliance department confidentially about irregularities. No employee voicing concerns about potential irregularities in good faith needs to fear retribution, even if the concerns later turn out to be unfounded. Third parties can contact the compliance department via an electronic mailbox on our website at www.allianz.com/complaint-system. COMPLIANCE PROGRAMS Allianz SE’s central Group Compliance function has set up internal guidelines for the following identified compliance risk areas: bribery and corruption, money laundering and terrorism financing, economic sanctions, capital markets integrity, sales compliance/customer protection, antitrust, internal fraud, data privacy, and US Foreign Account Tax Compliance Act (FATCA). For further information on these compliance risk areas, please refer to the Combined Separate Non- Financial Report for Allianz Group and Allianz SE of the Allianz Group’s Annual Report 2019 and the Sustainability Report on our website at www.allianz.com/sustainability. COMPLIANCE TRAINING In order to convey the principles of the Code of Conduct and the com- pliance programs based on these principles, Allianz has implemented interactive training programs around the world. These provide practi- cal guidance that enables employees to make their own decisions based on internal and external requirements as well as ethical princi- ples. Training programs comprise in-person and e-learning trainings and are delivered in several languages. An anti-corruption training is compulsory for all Allianz employees worldwide. The same is true for the antitrust training to exposed em- ployees. Further trainings exist for the other compliance programs. DESCRIPTION OF THE FUNCTIONS OF THE BOARD OF MANAGEMENT AND THE SUPERVISORY BOARD AND OF THE COMPOSITION AND FUNCTIONS OF THEIR COMMITTEES A description of the composition of the Supervisory Board and its com- mittees can be found on page 5 and 7 of the Annual Report. A de- scription of the composition of the Board of Management can be page 8, while the composition of the Committees of the found on Annual Report 2019 – Allianz SE 37 B _ Management Report of Allianz SE Diversity concepts for the Board of Management and Supervisory Board In accordance with the legislation to implement the European CSR Directive, the diversity concepts for the Board of Management and the Supervisory Board, their objectives, implementation, and results achieved are to be reported for the 2019 financial year. The Supervisory Board adopted the following diversity concept for the Board of Management of Allianz SE in August 2017: “For the composition of the Management Board, the Supervisory Board aims for an adequate ‘Diversity of Minds’. This comprises broad diversity with regard to gender, internationality, and educational as well as professional background. The Supervisory Board assesses the achievement of such target, inter alia, on the basis of the following specific indicators:  Adequate proportion of women on the Management Board: at least 30 % by 31 December 2021;  Adequate share of members with an international background (e.g. based on origin or extensive professional experience abroad), ideally with a connection to the regions in which Allianz Group is operating;  Adequate diversity with regard to educational and professional background, taking into account the limitations for the Supervisory Board by regulatory requirements (fitness).” This diversity concept is implemented in the appointment procedure for members of the Board of Management by the Supervisory Board. It is ensured that lists of successors will comprise appropriate percent- ages of female candidates as well as of candidates with international experience. The Personnel Committee takes this into consideration es- pecially in succession planning. The share of women on the Manage- ment Board is currently 20 %. Six members of the Management Board have international backgrounds. There is an adequate degree of vari- ety as regards educational and professional backgrounds. The diversity concept for the Supervisory Board was approved by the Supervisory Board in August 2017, and included in the objectives for the composition of the Supervisory Board (see No. II.2 of the objectives page 33). The Su- for the composition of the Supervisory Board on pervisory Board pursues these objectives, and thus also the diversity concept, when nominating candidates for shareholder representa- tives. As employee representatives are appointed according to differ- ent national provisions, there is only limited potential influence to the selection of employee representatives. The Supervisory Board is cur- rently composed in accordance with the diversity concept. For details please see the Corporate Governance Report on page 30. 38 Annual Report 2019 – Allianz SE B _ Management Report of Allianz SE ADEQUACY OF THE BOARD OF MANAGEMENT REMUNERATION The structure, weighting, and level of each remuneration component shall be adequate and appropriate. HORIZONTAL APPROPRIATENESS The Supervisory Board regularly benchmarks the Allianz SE Board of Management’s remuneration against other DAX 30 companies. Given Allianz’s relative size, complexity, and sustained performance, compensation levels are oriented towards the fourth quartile of the compensation of that peer group. VERTICAL APPROPRIATENESS This comparison is based on the total direct compensation of a member of the Board of Management and the average direct compensation of an employee of the Allianz workforce in Germany. For the fiscal year 2019, the factor resulting from this comparison for the Chairman of Board of Management to employee is “77” and the factor regular board member to employee is “42”. REMUNERATION STRUCTURE The current structure became effective on 1 January 2019. It was approved by the Annual Shareholder Meeting of Allianz SE on 8 May 2019 with a majority vote of 92 %. However, in order to ensure that the remuneration system is also in line with the new version of the German Corporate Governance Code announced for 2020, the special severance payment rule for the event of a change of control has been deleted without replacement and, in the event of a contractually agreed non-competition clause, provision has been made for a severance payment due to early termination of a Management Board member to be set off against a non-competition compensation (Karenzentschädigung). REMUNERATION REPORT This remuneration report describes the remuneration structure and ar- rangements for the Board of Management and the Supervisory Board of Allianz SE. All information provided here concerning Allianz SE Board of Manage- ment remuneration as well as additional information can also be found on our remuneration website at www.allianz.com/remuneration. Remuneration of the Allianz SE Board of Management RESPONSIBILITY FOR BOARD OF MANAGEMENT REMUNERATION The Board of Management’s remuneration is decided upon by the entire Supervisory Board, based on proposals prepared by the Personnel Committee of the Supervisory Board1. The Supervisory Board designs the remuneration system for the members of the Board of Management in accordance with the applicable laws and regulations, in particular the requirements of the German Stock Corporation Act (AktG) in the currently valid version, regulatory requirements as well as the provisions of the German Corporate Governance Code, while ensuring clarity and comprehensibility. The Supervisory Board determines the total target remuneration on the basis of the remuneration system. KEY PRINCIPLES  Alignment of pay and performance: The performance-based, varia- ble component of the Board remuneration forms a significant por- tion of the overall remuneration (70 %).  Sustainability of performance and alignment with shareholder interests: A major part of the variable remuneration reflects longer-term performance with deferred payout (64 %) and is linked to the absolute and relative performance of the share price.  Support of the Group’s strategy: The design of the performance targets reflects the Allianz Group’s business strategy. 1_If required, outside advice is sought from independent external consultants. The Personnel Committee and the Supervisory Board consult with the Chairman of the Board of Management, as appropriate, in assessing the performance and remu- neration of Board of Management members – with one exception: The Chairman of the Board of Management is not involved in the discussion about his own remuneration. Annual Report 2019 – Allianz SE 39 B _ Management Report of Allianz SE REMUNERATION COMPONENTS AND TARGET SETTING PROCESS BASE SALARY The base salary, which is not performance-related, is paid in twelve equal monthly installments. PERQUISITES Perquisites mainly consist of contributions to accident and liability insurances, tax consultant fees (if in the interest of Allianz) and the provision of a company car. Perquisites are not linked to performance; a contractual annual cap applies. Each member of the Board of Management is responsible for paying the income tax due on these perquisites. The Supervisory Board regularly reviews the level of perquisites. VARIABLE REMUNERATION Variable remuneration includes the annual bonus and a long-term incentive (LTI). Annual bonus The annual bonus is based on the achievement of Group financial targets for the respective financial year for which the annual bonus is granted, and adjusted by an individual contribution factor (ICF), taking into account individual and business division performance. GROUP FINANCIAL TARGETS The Group financial targets are based on equally weighted targets for Group operating profit and Group net income attributable to share- holders. Both key performance indicators (KPIs) are important steering parameters for the Allianz Group. Operating profit highlights the underlying performance of ongoing core operations. Net income attributable to shareholders is the profit after tax and non-controlling interests (minorities). Furthermore, the net income forms the basis for the dividend payout and for the return on equity calculation. The Group financial targets therefore reflect the level of implementation of the Group’s strategy as set by the Board of Management. INDIVIDUAL CONTRIBUTION FACTOR (ICF) For each board member, the Group financial target achievement is multiplied by the ICF. The ICF is based on an overall discretionary assessment by the Allianz SE Supervisory Board, as well as on KPIs that take into account the specific area of responsibility of the respec- tive board member and the personal contribution of the board mem- ber. It is limited to a range of 0.8 to 1.2. The ICF takes into account each board member’s individual contribution to the implementation of the business strategy. For board members with business-related division responsibilities, the contribution to the financial performance considers various in- dicators of profitability (e.g., operating profit and net income) and productivity (e.g., expense ratio) for the respective business division. For board members with a functional focus, quantitative division-specific performance targets are determined based on their key responsibilities. Non-financial targets take into account customer satisfaction (e.g., 40 Annual Report 2019 – Allianz SE B _ Management Report of Allianz SE NPS), employee engagement (e.g., Allianz Engagement Survey) and leadership quality, including strategic priorities. The assessment of the individual leadership quality also includes a review of behavioral aspects, such as customer orientation, collaborative leadership, entre- preneurship, and trust (e.g., corporate social responsibility, integrity, diversity as well as sustainability as measured by the reduction of the carbon footprint, the greenhouse gas reduction as well as a step-by- step plan to achieve net-zero compliant asset allocation until 2050, at the latest). PAYOUT AND ANNUAL BONUS CAP Following the end of the respective financial year for which the bonus is granted, the annual bonus is settled in cash and may range between zero and 150 % of the target amount. Long-term incentive (LTI) The long-term share-based compensation component takes the highest share within the variable compensation. It fosters shareholder alignment and takes the implementation of the long-term strategy into account. Furthermore, the company’s long-term development is reflected by the deferred sustainability assessment. ALLIANZ SHARE PERFORMANCE The LTI is granted annually in the form of virtual Allianz shares, so-called restricted stock units (RSUs), with a four-year contractual vesting period. The LTI allocation amount is derived by multiplying the LTI target amount by the annual bonus achievement factor, and capped at 150 % of the LTI target level. To determine the number of RSUs to be granted, the LTI allocation amount is divided by the allocation value of an RSU at grant. The RSU allocation value is based on the ten-day- average Xetra closing price of the Allianz stock following the annual financial media conference1.As RSUs are virtual stock without dividend payments, the relevant share price is reduced by the net present value of the expected future dividend payments during the contractual vesting period. RELATIVE PERFORMANCE VERSUS PEERS The LTI payout takes Allianz’s relative performance into account:   The Allianz SE total shareholder return (TSR) is benchmarked against the TSR of the STOXX Europe 600 insurance index by reflecting the relation of the total performance of the Allianz share (“Allianz TSR”) and the total performance of the STOXX Europe 600 Insurance Performance Index (“Index TSR”) between start and end of the four-year contractual vesting period. In order to avoid incentivizing excessive risk taking, the relative TSR performance factor is limited: It can vary between zero (for underperformance of the index by - 50 %-points or lower) and 200 % (for outperformance of the index by + 50 %-points or higher).  The relative TSR performance factor is calculated as follows: Allianz TSR at the end of the contractual vesting period in %- points minus index TSR at the end of the contractual vesting pe- riod in %-points, the result times two, plus 100 %.  Example: 5 %-points outperformance results in a relative perfor- mance factor of 110 %, 5 %-points underperformance results in a relative performance factor of 90 %. SUSTAINABILITY CHECK Following the sustainability assessment, the LTI payout amount may be reduced to zero, if the performance of a board member was not deemed sustainable. It compares the development of the annual bonus KPIs in the grant year with the pay-out year of the LTI, addi- tionally taking into account extraordinary events, the Solvency II ratio, and balance sheet strength. LTI PAYOUT AND CAP Following the end of the four-year contractual vesting period, the RSUs granted are settled in cash based on the ten-day average Xetra closing price of the Allianz SE share following the annual financial media conference in the year the respective RSU plan vests, multiplied by the relative TSR performance factor and adjusted by the sustaina- bility assessment as described above. The payout per RSU is capped at twice the share price at grant. Taking into account the overall compensation cap, the LTI payout, relative to the LTI target, is limited to 255 % for the Chairman of the Board of Management and 272 % for a regular board member Overall cap and sensitivity of total compensation. 1_For accounting purposes, the determination of the fair value of RSUs is based on an option pricing model taking into account additional input parameters, including the term structure of interest rates and the expected relative performance of the Allianz share price compared to the peer index. For the latter, simulation techniques are applied at the valuation date to determine the volatility of the Allianz stock, the volatility of the peer index, their correlation, and the expected dividends. The value of the RSUs used for the board members compensation may deviate from this IFRS value, as a simplified calculation method was applied to increase transparency and traceability. Annual Report 2019 – Allianz SE 41 B _ Management Report of Allianz SE Illustrative Examples LTI payout: Performance exceeds expectation (scenario 1) Illustrative example for RBM Initial grant based on: •LTI target •LTI allocation value: annual bonus achievement factor applied to LTI target •RSU grant based on share price at grant (€ 200), reduced by the net present value of estimated future dividends (€ 40) LTI payout at vesting based on: •RSU x share price at vesting (€ 250) •TSR relative performance factor: 2 x (TSR Allianz: 45 % – TSR Stoxx Europe 600 Insurance: 40 %) + 100 % Payout LTI payout: Performance remains below expectation (scenario 2) Illustrative example for RBM Initial grant based on: •LTI target •LTI allocation value: annual bonus achievement factor applied to LTI target •RSU grant based on share price at grant (€ 200), reduced by the net present value of estimated future dividends (€ 40) LTI payout at vesting based on: •RSU x share price at vesting (€ 190) •TSR relative performance factor: 2 x (TSR Allianz: 15 % – TSR Stoxx Europe 600 Insurance: 40 %) + 100 % Payout Malus/Clawback Variable remuneration components may not be paid, or payment may be restricted, in the case of a significant breach of the Allianz Code of Conduct or regulatory Solvency II policies or standards, including risk limits. In the same way, for three years after payout, variable remuneration components already paid may be subject to a clawback. Additionally, a reduction or cancellation of variable remuneration may occur if the supervisory authority (BaFin) requires this in accord- ance with its statutory powers. RSU € thou € thou 10,058 1,463 1,609 - 2,515 2,766 RSU € thou € thou 8,229 1,463 1,317 - 1,564 782 110% 110% 90% 50% 42 Annual Report 2019 – Allianz SE B _ Management Report of Allianz SE OVERALL CAP AND SENSITIVITY OF TOTAL COMPENSATION The variable remuneration is designed to help achieve the operational targets and to reward sustainable performance. Therefore, payout of almost two thirds of the annual variable compensation will not occur for a period of four years; such payout is subject to sustainability assessment adjustments. A failure to meet targets may result in a maximum reduction of the variable compensation to zero, with the overall payout being capped: Compensation sensitivity € thou CEO/RBM PENSION CONTRIBUTION AND SIMILAR BENEFITS To provide competitive and cost-effective retirement and disability benefits, company contributions to the current defined-contribution pension plan “My Allianz Pension” are invested in a fund with a guaran- tee for the contributions paid, but no further interest guarantee. Each year the Supervisory Board decides whether and to what extent a budget is provided, also taking into account the target pension level. The current pension contribution generally represents 15 % of the target compensation of the board members. Apart from cases of occupational or general disability for medical reasons, the earliest age a pension can be drawn is 62. Should board membership cease before the retirement age is reached, accrued pension rights are maintained if vesting requirements are met. Members of the Board of Management may have pension entitle- ments under former pension plans or based on previous positions in the Allianz Group or due to membership of the Board of Management before 2015. MAXIMUM TOTAL COMPENSATION (OVERALL CAP) The sum of variable compensation and base salary payout including pension contributions, which is paid in relation to one financial perfor- mance year, will be capped at a maximum amount of € 6,000 thou for a regular member of the Board of Management and at € 10,000 thou for the Chairman of the Board of Management. SHAREHOLDING REQUIREMENTS AND TOTAL SHAREHOLDING EXPOSURE Members of the Board of Management must build share ownership within three years, with the minimum level defined as follows:  Chairman of the Board of Management: two times base salary, i.e. € 3,412 thou,  Regular Board of Management member: one time base salary, i.e. € 975 thou. Holding is required for the entire term of service on the Board of Management. Shares will be acquired through mandatory pay com- ponent conversion. The holding obligation ceases with the end of the mandate. Annual Report 2019 – Allianz SE 43 B _ Management Report of Allianz SE In combination with the virtual shares accumulated through the LTI plan, the Allianz SE Board of Management has significant economic exposure to the Allianz stock: It amounts to approx. € 14,000 thou for the Chairman (= 240 % of total target direct compensation) and approx. € 7,000 thou for a regular board member (= 210 % of total target direct compensation). TERMINATION OF SERVICE Board of Management contracts are limited to a period of five years. For new appointments, based on the recommendation by the German Corporate Governance Code announced for 2020, a shorter period of up to three years is provided. Severance payments made to board members in case of early termination are restricted according to the German Corporate Governance Code. SEVERANCE PAYMENT CAP Payments for early termination to board members with a remaining term of contract of more than two years are capped at twice the annual compensation, consisting of last year’s base salary and 100 % of the variable target compensation. If the remaining term of contract is less than two years, the payment is pro-rated for the remaining term of the contract. Contracts do not contain provisions for any other cases of early termination of Board of Management service. In par- ticular, to comply with the recommendation by the German Corporate Governance Code announced for 2020, severance payments in case of a change of control are discontinued. TRANSITION PAYMENT Board members appointed before 1 January 2010 are eligible for a transition payment after leaving the Board of Management. The transition payment comprises an amount corresponding to the most recent base salary (paid for a period of six months), plus a one-time payment of 25 % of the target variable remuneration at notice date. Where an Allianz pension is immediately payable, such pension is deducted from the monthly transition payments. MISCELLANEOUS INTERNAL AND EXTERNAL BOARD APPOINTMENTS When a member of the Board of Management simultaneously holds an appointment at another company within the Allianz Group or their joint ventures with outside partners, the full amount of the respective remuneration is transferred to Allianz SE. In recognition of related benefits to the organization and subject to prior approval by the Supervisory Board of Allianz SE, board members are also allowed to accept a limited number of non-executive supervisory roles at appropriate external organizations. In these cases, 50 % of the remu- neration received is paid to Allianz SE. Only if the Allianz SE Supervisory Board classifies the appointment as a personal one (ad personam), the respective board member will retain the full remuneration for that position. Any remuneration paid by external organizations will be itemized in those organizations’ annual reports; its level will be determined by the governing body of the relevant organization. 44 Annual Report 2019 – Allianz SE B _ Management Report of Allianz SE TARGET ACHIEVEMENT FOR 2019 GROUP FINANCIAL TARGETS The combined target achievement level of the Group's financial tar- gets is calculated as the simple average of the achievement of the Group financial target achievement level targets for the Group operating profit and Group net income at- tributable to shareholders. The solid achievement of the operating profit and the significant over-achievement of the net income attribut- able to shareholders led to an overall achievement of these Group targets of 108.72 %1. Financial Group targets Operating profit Net income attributable to shareholders 0% Floor in € bn 100% - Target in € bn 150% - max in € bn 5.80 3.80 11.50 7.50 14.35 9.35 Actual in € bn 11.86 7.91 Achievement level in % 106.24 111.19 Weight in % 50 50 Achievement level combined in % 108.72 INDIVIDUAL CONTRIBUTION FACTOR To calculate the annual bonus, the combined target achievement level of the financial Group targets is multiplied by the individual contribu- tion factor (ICF) which is determined by the Supervisory Board for each board member. In determining the ICF, which is provided as a multi- plier of 0.8 to 1.2 in the remuneration system, the Supervisory Board, following the proposal of the Personnel Committee, has used almost the entire range from 0.8 to 1.13. In addition to business segment- specific quantitative targets, qualitative targets such as customer satisfaction, employee engagement, leadership quality, and the achievement of strategic milestones were considered. The fulfilment of quantitative targets in the life sector and in asset management and in many property-casualty companies had a positive effect. Productivity targets were overachieved in all business divisions. The Supervisory Board values very positively the progress made in the strategic positioning in China, the progressing diversification in investments, and the systematic implementation of the Allianz Customer Model. The acquisitions in England and Brazil were also considered positively. Besides the high scores from employee and customer surveys, the Supervisory Board paid special tribute to Allianz's leading position in the Dow Jones Sustainability Index for the third consecutive year and its first-time leading position as worldwide most valuable insurance brand in the Interbrand Best Global Brands 2019 ranking. A negative factor was the poor result in the international industrial insurance business AGCS, which was well below plan in a difficult market with increasing claims frequency and severity. This development could not be compensated by the division's otherwise very committed and successful work. A missed target in property and casualty business in Spain and the technical difficulties in introducing the European direct insurer in Germany were also considered in the assessment. Variable compensation 2019 Target achievement 2019 Oliver Bäte Sergio Balbinot Jacqueline Hunt Dr. Helga Jung Dr. Christof Mascher Niran Peiris Iván de la Sota Giulio Terzariol Dr. Günther Thallinger Dr. Axel Theis 1_Group target achievement is based on an operating profit of € 11,855,449.63 thou and net income attributable to share- holders of € 7,914,009.88 thou. Annual Report 2019 – Allianz SE Group financial performance in % Target achievement factor in % ICF range: 0.8 - 1.2 Annual bonus payout in € thou LTI allocation value in € thou 108.72 108.72 108.72 108.72 108.72 108.72 108.72 108.72 108.72 108.72 1.13 1.11 1.10 1.07 1.07 0.80 0.95 1.07 1.07 1.11 122.85 120.68 119.59 116.33 116.33 86.98 103.28 116.33 116.33 120.68 1,747 981 972 946 946 707 840 946 946 981 3,144 1,766 1,750 1,702 1,702 1,273 1,511 1,702 1,702 1,766 45 B _ Management Report of Allianz SE REMUNERATION FOR 2019 The following remuneration disclosure, which is compliant with the disclosure requirements stipulated by the German Corporate Govern- ance Code as well as the German Accounting Standard No. 17, shows the individual board members’ remuneration for 2018 and 2019, including fixed and variable remuneration and pension service cost. The Grant column specifies the target, minimum, and maximum remuneration. The Payout column discloses the 2018 and 2019 pay- ments. The base salary, annual bonus, and perquisites are linked to the performance reporting years, 2018 and 2019, whereas the Allianz Equity Incentive (AEI) payouts result from grants related to performance years 2013 and 2014. To enhance remuneration transparency for performance years 2018 and 2019, an additional column “Actual grant” was inserted: It includes the fixed compensation components, the annual bonuses paid for both performance years, the tranche of the MTB 2016 – 2018 accrued for the 2018 performance year, and the fair value of the RSU grant for 2018 and 2019 (granted under the AEI for 2018 and under the LTI for 2019). The 2018 payout is significantly higher than in 2019 because it includes the MTB 2016 – 2018 and thus payments for three perfor- mance years. The MTB is discontinued from 2019, therefore no MTB disclosure for 2019 is made. 46 Annual Report 2019 – Allianz SE Individual remuneration: 2019 and 2018 € thou (total might not sum up due to rounding) Base salary Perquisites Total fixed compensation Annual variable compensation Annual bonus Deferred compensation LTI 2019 - 2020/RSU4 AEI 2019/RSU4 MTB (2016 – 2018)5 AEI 2015/RSU4 AEI 2014/RSU4 Total Pension service cost6 Total Base salary Perquisites Total fixed compensation Annual variable compensation Annual bonus Deferred compensation LTI 2019 - 2020/RSU4 AEI 2019/RSU4 MTB (2016 – 2018)5 AEI 2015/RSU4, 7 AEI 2014/RSU4 Total Pension service cost6 Total B _ Management Report of Allianz SE Oliver Bäte (Appointed: 01/2008; CEO since 05/2015) Grant1 2019 Actual grant1, 2 Payout3 2018 2019 2018 2019 Target 1,706 20 1,726 Min 1,706 20 1,726 Max 1,706 20 1,726 1,313 17 1,329 1,706 20 1,726 1,313 17 1,329 1,706 20 1,726 2018 Target 1,313 17 1,329 1,313 1,422 2,133 1,614 1,747 1,614 1,747 - - - - - - 2,637 - - - - 5,785 891 1,726 891 7,506 891 3,647 - - - - - 1,614 1,614 - - 6,172 696 3,143 - - - - 6,616 891 - - 4,828 - 1,862 9,634 696 - - - 1,585 - 5,058 891 5,963 6,676 2,617 8,397 6,868 7,507 10,330 5,949 Sergio Balbinot (Appointed: 01/2015) Grant1 2019 Actual grant1, 2 Payout3 2018 2019 2018 2019 Target 975 74 1,049 813 1,516 - - - - Min 975 74 1,049 - - - - - - Max 975 74 1,049 1,220 2,128 - - - - 3,378 435 1,049 435 4,397 435 750 40 790 932 - 932 932 - - 3,586 360 975 74 1,049 981 1,795 - - - - 3,826 435 750 40 790 932 - - 3,071 - - 4,793 360 975 74 1,049 981 - - - - - 2,030 435 2,465 - 1,313 1,313 - - 5,267 696 2018 Target 750 40 790 750 - 750 750 - - 3,040 360 3,400 3,813 1,484 4,832 3,946 4,260 5,153 1_The disclosed LTI target/min/max and LTI actual 2019 figures represent the LTI fair values, which differs from the LTI allocation value. The determination of the LTI fair values is based on an option pricing model taking into account additional input parameters, including the term structure of interest rates and the expected relative performance of the Allianz share price compared to the peer index. For the latter, simulation techniques are applied at the valuation date to determine the volatility of the Allianz stock, the volatility of the peer index and their correlation. 2_The column “Actual grant 2019" is in line with the disclosure requirements under the German Accounting Standard No. 17. To reconcile figures with said requirements for 2018, the total as shown in column “Actual grant 2018” has to be adjusted to exclude the MTB accrual for 2018 and to include the payout from the MTB 2016 - 2018 as disclosed in column "Payout 2018". 3_In accordance with the German Corporate Governance Code, the annual bonus disclosed for performance year 2019 is paid in 2020 and for performance year 2018 in 2019. The payments for share-based deferred compensation (AEI and LTI), however, are disclosed for the year in which the actual payment was made. 4_The share price related value increase is capped at 200 % above grant price for the AEI/RSU and at 100 % above grant price for the LTI/RSU. Furthermore, the value increase is limited by the overall payout cap. The relevant share price used to determine the RSU value, and hence the final number of RSUs granted, and the caps are only available after sign-off by the external auditors. 5_The MTB figure included in the column “Actual grant 2018” shows the annual accrual before any adjustments that may follow from the sustainability assessment. The payout 2018 figure includes the payout for the performance years 2016 – 2018, as adjusted based on the sustainability assessment. The MTB 2016 – 2018 was paid out in spring 2019. 6_Pension service cost in accordance with IAS 19: represents the company cost, not the actual entitlement or a payment. The German Corporate Governance Code requires that the pension service cost be included in all columns. 7_Sergio Balbinot received in 2015 a buyout award to compensate for forfeited grants from his previous employer. Half of this compensation was granted in the form of RSUs which vested in March 2019. A payment of € 4,807 thou was made. Annual Report 2019 – Allianz SE 47 B _ Management Report of Allianz SE Individual remuneration: 2019 and 2018 € thou (total might not sum up due to rounding) Base salary Perquisites Total fixed compensation Annual variable compensation Annual bonus Deferred compensation LTI 2019 - 2020/RSU4 AEI 2019/RSU4 MTB (2016 – 2018)5 AEI 2015/RSU4 AEI 2014/RSU4 Total Pension service cost6 Total Base salary Perquisites Total fixed compensation Annual variable compensation Annual bonus Deferred compensation LTI 2019 - 2020/RSU4 AEI 2019/RSU4 MTB (2016 – 2018)5 AEI 2015/RSU4 AEI 2014/RSU4 Total Pension service cost6 Total Jacqueline Hunt (Appointed: 07/2016) Grant1 2019 Actual grant1, 2 Payout3 2018 2019 2018 2019 Target 975 20 995 813 1,516 - - - - Min 975 20 995 - - - - - - Max 975 20 995 1,220 2,128 - - - - 3,324 449 995 449 4,343 449 750 11 761 904 - 904 904 - - 3,472 317 975 20 995 972 1,781 - - - - 3,748 449 750 11 761 904 - - 2,470 - - 4,135 317 975 20 995 972 - - - - - 1,967 449 2,416 3,328 3,773 1,444 4,792 3,789 4,197 4,452 Dr. Helga Jung (Appointed: 01/2012; End of service: 12/2019)8 Grant1 2019 Actual grant1, 2 Payout3 2018 2019 2018 2019 Target 975 15 990 813 1,516 - - - - Min 975 15 990 - - - - - - Max 975 15 990 750 1727 922 1,220 866 2,128 - - - - - 866 866 - - 3,520 441 975 15 990 946 1,736 - - - - 3,672 506 750 1727 922 866 - - 2,846 - 1,679 6,313 441 975 15 990 946 - - - 1,199 - 3,135 506 3,319 506 990 506 4,338 506 3,612 3,825 1,496 4,844 3,961 4,178 6,753 3,641 2018 Target 750 11 761 750 - 750 750 - - 3,011 317 2018 Target 750 1727 922 750 - 750 750 - - 3,172 441 1_The disclosed LTI target/min/max and LTI actual 2019 figures represent the LTI fair values, which differs from the LTI allocation value. The determination of the LTI fair values is based on an option pricing model taking into account additional input parameters, including the term structure of interest rates and the expected relative performance of the Allianz share price compared to the peer index. For the latter, simulation techniques are applied at the valuation date to determine the volatility of the Allianz stock, the volatility of the peer index and their correlation. 2_The column “Actual grant 2019" is in line with the disclosure requirements under the German Accounting Standard No. 17. To reconcile figures with said requirements for 2018, the total as shown in column “Actual grant 2018” has to be adjusted to exclude the MTB accrual for 2018 and to include the payout from the MTB 2016 - 2018 as disclosed in column "Payout 2018". 3_In accordance with the German Corporate Governance Code, the annual bonus disclosed for performance year 2019 is paid in 2020 and for performance year 2018 in 2019. The payments for share-based deferred compensation (AEI and LTI), however, are disclosed for the year in which the actual payment was made. 4_The share price related value increase is capped at 200 % above grant price for the AEI/RSU and at 100 % above grant price for the LTI/RSU. Furthermore, the value increase is limited by the overall payout cap. The relevant share price used to determine the RSU value, and hence the final number of RSUs granted, and the caps are only available after sign-off by the external auditors. 5_The MTB figure included in the column “Actual grant 2018” shows the annual accrual before any adjustments that may follow from the sustainability assessment. The payout 2018 figure includes the payout for the performance years 2016 – 2018, as adjusted based on the sustainability assessment. The MTB 2016 – 2018 was paid out in spring 2019. 6_Pension service cost in accordance with IAS 19: represents the company cost, not the actual entitlement or a payment. The German Corporate Governance Code requires that the pension service cost be included in all columns. 7_Helga Jung received a payment of € 156 thou in 2018 for 25 years of service to Allianz. 8_The appointment of Helga Jung as member of the Board of Management of Allianz SE ended as of 31 December 2019. Helga Jung is bound by a broad post-contractual one year non-competition obligation under her service agreement. As compensation for this non-compete obligation she obtains a payment of 50 % of her total target direct compensation (sum of base salary and target variable compensation), i.e. € 1,625.5 thou. 48 Annual Report 2019 – Allianz SE Individual remuneration: 2019 and 2018 € thou (total might not sum up due to rounding) Base salary Perquisites Total fixed compensation Annual variable compensation Annual bonus Deferred compensation LTI 2019 - 2020/RSU4 AEI 2019/RSU4 MTB (2016 – 2018)5 AEI 2015/RSU4 AEI 2014/RSU4 Total Pension service cost6 Total Base salary Perquisites Total fixed compensation Annual variable compensation Annual bonus Deferred compensation LTI 2019 - 2020/RSU4 AEI 2019/RSU4 MTB (2016 – 2018)5 AEI 2015/RSU4 AEI 2014/RSU4 Total Pension service cost6 Total B _ Management Report of Allianz SE Dr. Christof Mascher (Appointed: 09/2009) Grant1 2019 Actual grant1, 2 Payout3 2018 2019 2018 2019 Target 975 9 984 813 1,516 - - - - Min 975 9 984 - - - - - - Max 975 9 984 1,220 2,128 - - - - 3,313 489 984 489 4,331 489 750 8 758 819 - 819 819 - - 3,216 432 975 9 984 946 1,737 - - - - 3,666 489 750 8 758 819 - - 2,743 - 1,669 5,989 432 975 9 984 946 - - - 1,426 - 3,356 489 2018 Target 750 8 758 750 - 750 750 - - 3,008 432 3,440 3,801 1,473 4,820 3,648 4,155 6,421 3,844 Niran Peiris (Appointed: 01/2018) 2018 Target 750 1057 855 Grant1 2019 Target 975 47 1,022 Min 975 47 1,022 Max 975 47 1,022 Actual grant1, 2 Payout3 2018 2019 2018 2019 750 1057 855 975 47 1,022 750 1057 855 975 47 1,022 750 813 1,220 866 707 866 707 1,516 - - - - - 750 750 - - 3,105 317 2,128 - - - - - 866 866 - - 3,454 317 1,331 - - - - 3,060 413 - - 941 - - 2,662 317 - - - - - 1,730 413 2,143 3,351 413 1,022 413 4,370 413 3,422 3,764 1,435 4,783 3,771 3,473 2,980 - - - - - - 1_The disclosed LTI target/min/max and LTI actual 2019 figures represent the LTI fair values, which differs from the LTI allocation value. The determination of the LTI fair values is based on an option pricing model taking into account additional input parameters, including the term structure of interest rates and the expected relative performance of the Allianz share price compared to the peer index. For the latter, simulation techniques are applied at the valuation date to determine the volatility of the Allianz stock, the volatility of the peer index and their correlation. 2_The column “Actual grant 2019" is in line with the disclosure requirements under the German Accounting Standard No. 17. To reconcile figures with said requirements for 2018, the total as shown in column “Actual grant 2018” has to be adjusted to exclude the MTB accrual for 2018 and to include the payout from the MTB 2016 - 2018 as disclosed in column "Payout 2018". 3_In accordance with the German Corporate Governance Code, the annual bonus disclosed for performance year 2019 is paid in 2020 and for performance year 2018 in 2019. The payments for share-based deferred compensation (AEI and LTI), however, are disclosed for the year in which the actual payment was made. 4_The share price related value increase is capped at 200 % above grant price for the AEI/RSU and at 100 % above grant price for the LTI/RSU. Furthermore, the value increase is limited by the overall payout cap. The relevant share price used to determine the RSU value, and hence the final number of RSUs granted, and the caps are only available after sign-off by the external auditors. 5_The MTB figure included in the column “Actual grant 2018” shows the annual accrual before any adjustments that may follow from the sustainability assessment. The payout 2018 figure includes the payout for the performance years 2016 – 2018, as adjusted based on the sustainability assessment. The MTB 2016 – 2018 was paid out in spring 2019. 6_Pension service cost in accordance with IAS 19: represents the company cost, not the actual entitlement or a payment. The German Corporate Governance Code requires that the pension service cost be included in all columns. 7_Niran Peiris received a one-time payment of € 50 thou to reimburse him for relocation cost. Annual Report 2019 – Allianz SE 49 B _ Management Report of Allianz SE Individual remuneration: 2019 and 2018 € thou (total might not sum up due to rounding) Base salary Perquisites Total fixed compensation Annual variable compensation Annual bonus Deferred compensation LTI 2019 - 2020/RSU4 AEI 2019/RSU4 MTB (2016 – 2018)5 AEI 2015/RSU4 AEI 2014/RSU4 Total Pension service cost6 Total Base salary Perquisites Total fixed compensation Annual variable compensation Annual bonus Deferred compensation LTI 2019 - 2020/RSU4 AEI 2019/RSU4 MTB (2016 – 2018)5 AEI 2015/RSU4 AEI 2014/RSU4 Total Pension service cost6 Total Iván de la Sota (Appointed: 04/2018)7 Grant1 2019 Actual grant1, 2 Payout3 2018 2019 2018 2019 Target 975 18 993 813 1,516 - - - - Min 975 18 993 - - - - - - Max 975 18 993 1,220 2,128 - - - - 3,322 488 993 488 4,341 488 563 718 633 639 - 639 639 - - 2,549 266 975 18 993 840 1,562 - - - - 3,395 488 563 718 633 639 - - 695 - - 1,967 266 2,594 3,810 1,481 4,829 2,815 3,883 2,233 Giulio Terzariol (Appointed: 01/2018) Grant1 2019 Actual grant1, 2 Payout3 2018 2019 2018 2019 Target 975 26 1,001 813 1,516 - - - - Min 975 26 1,001 - - - - - - Max 975 26 1,001 1,220 2,128 - - - - 3,329 483 1,001 483 4,348 483 750 27 777 885 - 885 885 - - 3,432 304 975 26 1,001 946 1,737 - - - - 3,683 483 750 27 777 885 - - 960 - - 2,622 304 2018 Target 563 718 633 565 - 565 565 - - 2,328 266 2018 Target 750 27 777 750 - 750 750 - - 3,027 304 975 18 993 840 - - - - - 1,833 488 2,321 975 26 1,001 946 - - - - - 1,946 483 2,429 3,330 3,812 1,483 4,831 3,735 4,166 2,925 1_The disclosed LTI target/min/max and LTI actual 2019 figures represent the LTI fair values, which differs from the LTI allocation value. The determination of the LTI fair values is based on an option pricing model taking into account additional input parameters, including the term structure of interest rates and the expected relative performance of the Allianz share price compared to the peer index. For the latter, simulation techniques are applied at the valuation date to determine the volatility of the Allianz stock, the volatility of the peer index and their correlation. 2_The column “Actual grant 2019" is in line with the disclosure requirements under the German Accounting Standard No. 17. To reconcile figures with said requirements for 2018, the total as shown in column “Actual grant 2018” has to be adjusted to exclude the MTB accrual for 2018 and to include the payout from the MTB 2016 - 2018 as disclosed in column "Payout 2018". 3_In accordance with the German Corporate Governance Code, the annual bonus disclosed for performance year 2019 is paid in 2020 and for performance year 2018 in 2019. The payments for share-based deferred compensation (AEI and LTI), however, are disclosed for the year in which the actual payment was made. 4_The share price related value increase is capped at 200 % above grant price for the AEI/RSU and at 100 % above grant price for the LTI/RSU. Furthermore, the value increase is limited by the overall payout cap. The relevant share price used to determine the RSU value, and hence the final number of RSUs granted, and the caps are only available after sign-off by the external auditors. 5_The MTB figure included in the column “Actual grant 2018” shows the annual accrual before any adjustments that may follow from the sustainability assessment. The payout 2018 figure includes the payout for the performance years 2016 – 2018, as adjusted based on the sustainability assessment. The MTB 2016 – 2018 was paid out in spring 2019. 6_Pension service cost in accordance with IAS 19: represents the company cost, not the actual entitlement or a payment. The German Corporate Governance Code requires that the pension service cost be included in all columns. 7_Iván de la Sota joined the Allianz SE Board of Management on 1 April 2018. He received a pro-rated base salary, annual bonus, MTB tranche, and equity-related compensation. The different pro-rated amounts for base salary and target amounts result from different pro-rating methodologies, which are generally applied. 8_Iván de la Sota received a one-time payment of € 50 thou to reimburse him for relocation cost. 50 Annual Report 2019 – Allianz SE Individual remuneration: 2019 and 2018 € thou (total might not sum up due to rounding) Base salary Perquisites Total fixed compensation Annual variable compensation Annual bonus Deferred compensation LTI 2019 - 2020/RSU4 AEI 2019/RSU4 MTB (2016 – 2018)5 AEI 2015/RSU4 AEI 2014/RSU4 Total Pension service cost6 Total Base salary Perquisites Total fixed compensation Annual variable compensation Annual bonus Deferred compensation LTI 2019 - 2020/RSU4 AEI 2019/RSU4 MTB (2016 – 2018)5 AEI 2015/RSU4 AEI 2014/RSU4 Total Pension service cost6 Total B _ Management Report of Allianz SE Dr. Günther Thallinger (Appointed: 01/2017) Grant1 2019 Actual grant1, 2 Payout3 2018 2019 2018 2019 Target 975 6 981 813 1,516 - - - - Min 975 6 981 - - - - - - Max 975 6 981 1,220 2,128 - - - - 3,310 473 981 473 4,328 473 750 4 754 904 - 904 904 - - 3,465 395 975 6 981 946 1,737 - - - - 3,664 473 750 4 754 904 - - 1,911 - - 3,568 395 3,399 3,783 1,454 4,801 3,860 4,137 3,963 Dr. Axel Theis (Appointed: 01/2015) Grant1 2019 Actual grant1, 2 Payout3 2018 2019 2018 2019 Target 975 32 1,007 813 1,516 - - - - Min 975 32 1,007 - - - - - - Max 975 32 1,007 1,220 2,128 - - - - 3,336 564 1,007 564 4,354 564 750 32 782 932 - 932 932 - - 3,578 510 975 32 1,007 981 1,787 - - - - 3,775 564 750 32 782 932 - - 3,015 - - 4,729 510 2018 Target 750 4 754 750 - 750 750 - - 3,004 395 2018 Target 750 32 782 750 - 750 750 - - 3,032 510 975 6 981 946 - - - - - 1,926 473 2,400 975 32 1,007 981 - - - - - 1,988 564 2,552 3,542 3,900 1,571 4,919 4,087 4,340 5,238 1_The disclosed LTI target/min/max and LTI actual 2019 figures represent the LTI fair values, which differs from the LTI allocation value. The determination of the LTI fair values is based on an option pricing model taking into account additional input parameters, including the term structure of interest rates and the expected relative performance of the Allianz share price compared to the peer index. For the latter, simulation techniques are applied at the valuation date to determine the volatility of the Allianz stock, the volatility of the peer index and their correlation. 2_The column “Actual grant 2019" is in line with the disclosure requirements under the German Accounting Standard No. 17. To reconcile figures with said requirements for 2018, the total as shown in column “Actual grant 2018” has to be adjusted to exclude the MTB accrual for 2018 and to include the payout from the MTB 2016 - 2018 as disclosed in column "Payout 2018". 3_In accordance with the German Corporate Governance Code, the annual bonus disclosed for performance year 2019 is paid in 2020 and for performance year 2018 in 2019. The payments for share-based deferred compensation (AEI and LTI), however, are disclosed for the year in which the actual payment was made. 4_The share price related value increase is capped at 200 % above grant price for the AEI/RSU and at 100 % above grant price for the LTI/RSU. Furthermore, the value increase is limited by the overall payout cap. The relevant share price used to determine the RSU value, and hence the final number of RSUs granted, and the caps are only available after sign-off by the external auditors. 5_The MTB figure included in the column “Actual grant 2018” shows the annual accrual before any adjustments that may follow from the sustainability assessment. The payout 2018 figure includes the payout for the performance years 2016 – 2018, as adjusted based on the sustainability assessment. The MTB 2016 – 2018 was paid out in spring 2019. 6_Pension service cost in accordance with IAS 19: represents the company cost, not the actual entitlement or a payment. The German Corporate Governance Code requires that the pension service cost be included in all columns. Annual Report 2019 – Allianz SE 51 B _ Management Report of Allianz SE GERMAN ACCOUNTING STANDARD NO. 17 DISCLOSURE The total remuneration to be disclosed for 2019 under the German Accounting Standard No. 17 is shown in the column “Actual grant” of the 2019 individual remuneration tables. The “total” excluding pension service cost, comprises the following relevant components: the base salary, perquisites, the annual bonus, and the fair value of the RSU grant. For 2018, the disclosure required under the German Accounting Standard No. 17 is composed of the same components but includes the payout of the MTB 2016 – 2018:  Oliver Bäte: € 9,386 thou,  Sergio Balbinot: € 5,725 thou,  Jacqueline Hunt: € 5,038 thou,  Dr. Helga Jung: € 5,500 thou,  Dr. Christof Mascher: € 5,140 thou,  Niran Peiris: € 3,529 thou,  Iván de la Sota: € 2,605 thou,  Giulio Terzariol: € 3,507 thou,  Dr. Günther Thallinger: € 4,472 thou,  Dr. Axel Theis: € 5,661 thou. The sum of the total remuneration of the Board of Management for 2019, excluding the pension service cost, amounts to € 39 mn (2018, including the payments of the MTB 2016 – 2018: € 51 mn). The corresponding amount, including pension service cost, equals € 44 mn (2018, including the payments of the MTB 2016 – 2018: € 55 mn). SHARE-BASED REMUNERATION In accordance with the method described earlier, a number of RSUs were granted to each member of the Board of Management in March 2020. They will vest and be settled in 2024. Grants and outstanding holdings under the Allianz Equity Program (AEI, until and including 2019) and the LTI from March 2020 Board members RSU Number of RSU granted on 6/3/20201 Number of RSU held at 31/12/20191 Oliver Bäte Sergio Balbinot Jacqueline Hunt Dr. Helga Jung Dr. Christof Mascher Niran Peiris Iván de la Sota Giulio Terzariol Dr. Günther Thallinger Dr. Axel Theis Total 17,011 9,553 9,467 9,209 9,209 6,886 8,176 9,209 9,209 9,553 42,080 28,660 15,175 24,865 25,127 16,539 15,217 14,471 17,287 27,885 97,482 227,306 1_The relevant value of an RSU is only available after sign-off of the Annual Report by the external auditors, therefore numbers are based on a best estimate. As disclosed in the Annual Report 2018, the share-based grant in 2019 was made to participants as part of their 2018 remuneration. The disclosure in the Annual Report 2018 was based on a best estimate of the RSU grants. The actual grants deviated from the estimated values and have to be disclosed accordingly. The actual RSU grants as of 1 March 2019 under the Allianz Equity Incentive are as follows: Oliver Bäte: 10,422, Sergio Balbinot: 6,016, Jacqueline Hunt: 5,834, Dr. Helga Jung: 5,592, Dr. Christof Mascher: 5,290, Niran Peiris: 5,592, Iván de la Sota: 4,941, Giulio Terzariol: 5,713, Dr. Günther Thallinger: 5,834, Dr. Axel Theis: 6,016. 52 Annual Report 2019 – Allianz SE B _ Management Report of Allianz SE PENSIONS Company contributions to the current pension plan “My Allianz Pension” are generally 15 % of total target direct compensation, reduced by an amount covering the death and occupational or general disability risk. They are invested in a fund with a guarantee on the contributions paid, but no further interest guarantee. For members with pension rights under the now frozen defined- benefit plan, the above contribution rates are reduced by 19 % of the expected annual pension from that frozen plan. In 2019, Allianz Group paid € 5 mn (2018: € 4 mn) to increase reserves for pensions and similar benefits for active members of the Board of Management. As of 31 December 2019, reserves for pensions and similar benefits for active members of the Board of Management amounted to € 41 mn (2018: € 31 mn). In 2019 former members of the Board of Management and their dependents received remunerations and other benefits totaling € 7 mn (2018: € 7 mn), while reserves for current pension obligations and accrued pension rights totaled € 153 mn (2018: € 146 mn). Individual pensions: 2019 and 2018 € thou (total might not sum up due to rounding) Defined-benefit pension plan (frozen) Contribution-based pension plan (frozen)1 Current pension plan AVK/APV2 Transition payment3 Total Board of Management Oliver Bäte Sergio Balbinot Jacqueline Hunt Dr. Helga Jung Dr. Christof Mascher Niran Peiris Iván de la Sota Giulio Terzariol Dr. Günther Thallinger Dr. Axel Theis Expected annual pension payment4 SC5 DBO6 - - - - - - 62 62 - - - - 14 14 19 19 - - - - - - - - 61 60 - - - - 11 - 14 14 - - - - - - - - 1,814 1,498 - - - - 377 303 387 289 - - 120 120 92 108 3,479 2,930 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 SC5 82 54 4 - - - 19 26 6 25 - - 42 - 30 6 38 31 34 33 DBO6 3,898 3,087 32 28 - - 2,221 1,841 3,770 3,139 - - 61 34 660 486 1,700 1,266 2,910 2,415 SC5 750 595 429 357 449 317 417 345 429 357 413 317 426 266 425 269 429 357 406 334 DBO6 2,868 2,028 1,836 1,351 1,270 820 1,773 1,301 1,897 1,409 751 322 710 268 935 486 1,420 949 1,712 1,254 SC5 DBO6 6 6 3 2 - - 10 9 6 6 - - 9 - 14 14 7 7 11 11 46 41 9 7 - - 253 221 52 47 - - 122 96 277 238 42 37 330 306 SC5 53 41 - - - - - - 49 44 - - - - - - - - DBO6 1,201 890 - - - - - - 912 717 - - - - - - - - 22 24 896 727 SC5 891 696 435 360 449 317 506 441 489 432 413 317 488 266 483 304 473 395 564 510 DBO6 8,013 6,045 1,877 1,386 1,270 821 6,062 4,861 6,631 5,312 751 322 1,270 701 2,260 1,500 3,162 2,252 9,327 7,633 1_The service cost of the frozen contribution-based pension plan reflects the continued death and disability cover. 2_Plan participants contribute 3 % of their relevant salary to the AVK. For the AVK the minimum guaranteed interest rate is 2.75 % – 3.50 % depending on the date of joining Allianz. In general, the company funds the balance required via the APV. Before Allianz’s founding of the APV in 1998, both Allianz and the plan participants were contributing to the AVK. 3_For details on the transition payment, see section “Termination of service”. In any event a death benefit is included. 4_Expected annual pension payment at assumed retirement age for the frozen defined-benefit pension plan, excluding current pension plan. 5_SC = service cost. Service costs are calculatory costs for the DBO related to the business year reported. 6_DBO = defined-benefit obligation, end of year. The figures show the obligation for Allianz resulting from defined benefit plans, taking into account realistic assumptions with regard to interest rate, dynamics, and biometric probabilities. Annual Report 2019 – Allianz SE 53 B _ Management Report of Allianz SE SHAREHOLDINGS Under the shareholding requirements, Members of the Board of Management must build share ownership within three years, i.e., a third shareholding requirements. As of 31 December 2019, the every year members of the Board of Management held the following numbers of shares: Board members Oliver Bäte Sergio Balbinot Jacqueline Hunt Dr. Helga Jung Dr. Christof Mascher Niran Peiris Iván de la Sota Giulio Terzariol Dr. Günther Thallinger Dr. Axel Theis Number of shares 5,754 1,644 1,644 1,644 1,644 1,644 1,644 1,644 1,644 1,644 Portfolio value at 31/12/2019 in € thou 1,260 360 360 360 360 360 360 360 360 360 OUTLOOK FOR 2020 NEW BOARD MEMBER The remuneration of the new regular member of the Board of Management, Renate Wagner, has been set at the same level as for the other regular members of the Board of Management. Remuneration of the Allianz SE Supervisory Board The remuneration of the Supervisory Board is governed by the Statutes of Allianz SE and the German Stock Corporation Act. The structure of the Supervisory Board’s remuneration is regularly reviewed with regard to its compliance with German, European, and international corporate governance recommendations and regulations. REMUNERATION PRINCIPLES  Set total remuneration at a level both aligned with the scale and scope of the Supervisory Board’s duties and appropriate in view of the company’s activities and its business and financial situation.  Establish a remuneration structure that takes into account the individual functions and responsibilities of Supervisory Board members, such as chair, vice chair, or committee mandates.  Establish a remuneration structure that allows proper oversight of business as well as independent decisions on executive personnel and remuneration. REMUNERATION STRUCTURE AND COMPONENTS The remuneration structure, which comprises fixed and committee- related remuneration only, was approved by the Annual General Meeting in 2018 and is laid down in the Statutes of Allianz SE. FIXED ANNUAL REMUNERATION The remuneration of a Supervisory Board member consists of a fixed cash amount paid pro rata temporis after the end of the respective quarter of the business year for services rendered over that period. In 2019 each regular Supervisory Board member received a fixed com- pensation amounting to € 125 thou per year. Each Vice Chairperson received € 187.5 thou, the Chairperson received € 250 thou. COMMITTEE-RELATED REMUNERATION The Chairperson and members of the Supervisory Board committees receive additional committee-related remuneration. The committee- related remuneration is as follows: Committee-related remuneration € thou Committee1 Personnel Committee, Standing Committee, Risk Committee, Technology Committee Audit Committee Chair Member 50 100 25 50 1_Members of the Nomination Committee do not receive an additional remuneration. ATTENDANCE FEES AND EXPENSES In addition to the fixed and committee-related remuneration, members of the Supervisory Board receive an attendance fee of € 1,000 for each Supervisory Board or committee meeting they attend. Should several meetings be held on the same or consecutive days, the attendance fee will only be paid once. In addition, Allianz SE reimburses the Supervi- sory Board members for their out-of-pocket expenses and the VAT payable on their Supervisory Board service. The company provides in- surance coverage and technical support to the Supervisory Board members to an extent reasonable for carrying out their Supervisory Board duties. 54 Annual Report 2019 – Allianz SE B _ Management Report of Allianz SE REMUNERATION FOR 2019 The total remuneration for all Supervisory Board members, including attendance fees, amounted to € 2,685 thou (2018: € 2,684 thou). The following table shows the individual remuneration for 2019 and 2018: Individual remuneration: 2019 and 2018 € thou (total might not sum up due to rounding) Committees1 Members of the Supervisory Board Michael Diekmann (Chairman) Jim Hagemann Snabe (Vice Chairman) Gabriele Burkhardt-Berg (Vice Chairwoman)4 Sophie Boissard Christine Bosse Dr. Friedrich Eichiner Jean-Claude Le Goaër5 Martina Grundler Herbert Hainer Godfrey Robert Hayward Frank Kirsch7 Jürgen Lawrenz Total10 N C C M M M M A M M M M C C M M5 M M P C C M M2 M M R C C M M M M M M M M7 M8 S C C M M M3 M M6 M M M M Legend: C = Chairperson of the respective committee, M = Member of the respective committee 1_Abbreviations: A - Audit, N - Nomination, P - Personnel, R - Risk, S - Standing, T - Technology 2_Since 1 September 2018. 3_Until 31 August 2018. 4_Since 1 September 2018. 5_Since 1 August 2018. Fixed remunera- tion Committee remunera- tion Attend- ance fees Total remunera- tion 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 250.0 250.0 187.5 187.5 187.5 145.8 125.0 125.0 125.0 125.0 125.0 125.0 125.0 52.1 125.0 125.0 125.0 125.0 125.0 125.0 125.0 41.7 125.0 125.0 225.0 225.0 75.0 75.0 50.0 50.0 50.0 50.0 25.0 25.0 150.0 150.0 75.0 29.2 50.0 50.0 50.0 50.0 25.0 25.0 25.0 8.3 50.0 50.0 9.0 9.0 6.0 6.0 6.0 7.0 9.0 8.0 6.0 6.0 9.0 8.0 9.0 4.0 7.0 8.0 6.0 7.0 6.0 6.0 6.0 2.0 6.0 6.0 484.0 484.0 268.5 268.5 243.5 202.8 184.0 183.0 156.0 156.0 284.0 283.0 209.0 85.3 182.0 183.0 181.0 182.0 156.0 156.0 156.0 52.0 181.0 181.0 T M M C C M M M M M M9 2019 2018 1,750.0 1,750.0 850.0 850.0 85.0 84.0 2,685.0 2,684.0 6_Since 1 September 2018. 7_Since 1 September 2018. 8_Until 31 August 2018. 9_Since 1 September 2018. 10_The total reflects the remuneration of the full Supervisory Board in the respective year. REMUNERATION FOR MANDATES IN OTHER ALLIANZ COMPANIES AND FOR OTHER FUNCTIONS As remuneration for his membership in the Supervisory Board of Allianz Deutschland AG, Mr. Frank Kirsch received € 40 thou for the 2019 financial year. Mr. Jürgen Lawrenz did not receive any remunera- tion for his service on the Supervisory Board of Allianz Technology SE. All current employee representatives of the Supervisory Board, except for Ms. Martina Grundler, are employed by Allianz Group companies and receive a market-based remuneration for their services. OUTLOOK 2020 The remuneration of the Supervisory Board of Allianz SE was last amended by the Annual General Meeting on 9 May 2018. In light of the development of the supervisory board remuneration at peer companies, an amended remuneration of the Supervisory Board as well as a remuneration for members of the Nomination Committee will be proposed to the Annual General Meeting on 6 May 2020. Annual Report 2019 – Allianz SE 55 B _ Management Report of Allianz SE OTHER INFORMATION Our steering BOARD OF MANAGEMENT AND ORGANIZATIONAL STRUCTURE Allianz SE has a divisional Board structure based on functional and business responsibilities. Business-related divisions reflect our business segments Property-Casualty, Life/Health, Asset Management, and Corporate and Other. In 2019 they were overseen by five board mem- bers. The following divisions focus on Group functions and come with business-related responsibilities: Chairman of the Board of Manage- ment; Finance, Controlling and Risk; Investment Management; Opera- tions and Allianz Services; Human Resources, Legal, Compliance and M&A; and Business Transformation1. § 289b (3) in conjunction with § 298 (2) of the HGB) of the Allianz Group’s Annual Report 2019. Branches In 2019, Allianz SE operated its business from Munich and from branch offices in Casablanca (Morocco), Singapore, Labuan (Malaysia), Wallisellen (Switzerland), Vienna (Austria) and Dublin (Ireland). Takeover-related Statements and Explanations For further information on Board of Management members and their responsibilities, please refer to Mandates of the Members of the page 8. Board of Management on The following information is provided pursuant to § 289a (1) of the Ger- man Commercial Code (“Handelsgesetzbuch – HGB”) and § 176 (1) of the German Stock Company Act (“Aktiengesetz – AktG”). TARGET SETTING AND MONITORING The Allianz Group steers its operating entities and business segments via an integrated management and control process. It begins with the definition of a business-specific strategy and goals, which are dis- cussed and agreed upon between the Holding and operating entities. Based on this strategy, our operating entities prepare three-year plans which are then aggregated to form the financial plans for the business divisions and for the Allianz Group as a whole. This plan also forms the basis for our capital management. The Supervisory Board approves the plan and sets corresponding targets for the Board of Manage- ment. The performance-based remuneration of the Board of Manage- ment is linked to short-term and long-term targets to ensure effective- ness and emphasize sustainability. For further details about our remu- neration structure, including target setting and performance assess- page 39. ment, please refer to the Remuneration Report starting on We continuously monitor our business performance against these targets through monthly reviews – which cover key operational and fi- nancial metrics – to ensure we can move quickly and take appropriate measures in the event of negative developments. The Allianz Group uses operating profit and net income as key financial performance in- dicators across all its business segments. Other indicators include seg- ment-specific figures, such as the combined ratio for Property-Casu- alty, return on equity2 for Life/Health, and the cost-income ratio for As- set Management. We also use new business margins for Life/Health. Besides performance steering, we also have a risk steering pro- cess in place, which is described in the Risk and Opportunity Report starting on page 19. Non-financial key performance indicators (KPIs) are used to as- sess the organizational health of Allianz and are reflected in the an- nual bonus. In line with our Renewal Agenda 2.0 motto “Simplicity Wins”, Customer Centricity and employee commitment – the two key levers identified – are reflected in two KPIs: the Net Promoter Score (NPS3) and the Inclusive Meritocracy Index. For further information on non-financial KPIs, please refer to the Combined Separate Non- Financial Report for the Allianz Group and Allianz SE (according to COMPOSITION OF SHARE CAPITAL As of 31 December 2019, the share capital of Allianz SE was € 1,169,920,000. It was divided into 417,172,859 registered and fully paid-up shares with no par value. All shares carry the same rights and obligations. Each no-par value share carries one vote. RESTRICTIONS ON VOTING RIGHTS AND SHARE TRANSFERS; EXERCISE OF VOTING RIGHTS IN CASE OF EMPLOYEE EQUITY PARTICIPATIONS Shares may only be transferred with the consent of the company. An approval duly applied for may only be withheld if this is deemed necessary in the company’s interest on exceptional grounds. The applicant will be informed of the reasons. Shares acquired by employees of the Allianz Group as part of the employee stock purchase plan are generally subject to a three-year lock-up period. During the lock-up period, employees can exercise their voting rights. INTERESTS IN THE SHARE CAPITAL EXCEEDING 10 % OF THE VOTING RIGHTS Allianz SE is not aware of any direct or indirect interests in the share capital that exceed 10 % of the voting rights. SHARES WITH SPECIAL RIGHTS CONFERRING POWERS OF CONTROL There are no shares with special rights conferring powers of control. LEGAL AND STATUTORY PROVISIONS APPLICABLE TO THE APPOINTMENT AND REMOVAL OF MEMBERS OF THE BOARD OF MANAGEMENT AND TO AMENDMENTS OF THE STATUTES The appointment and removal of members of Allianz SE’s Board of Management is governed by Articles 9 (1), 39 (2) and 46 of the SE Regulation, §§ 84, 85 AktG, § 24 (3) and § 47 No. 1 German Insurance Supervision Act (“Versicherungsaufsichtsgesetz – VAG”), and the 1_This member of the Board of Management also oversees Insurance Iberia & Latin America, Allianz Partners, and Allianz 3_NPS is a measurement of customers’ willingness to recommend Allianz. Top-down NPS is measured regularly according Direct. 2_Excluding unrealized gains/losses on bonds net of shadow accounting. to global cross-industry standards and allows benchmarking against competitors in the respective markets. 56 Annual Report 2019 – Allianz SE B _ Management Report of Allianz SE Statutes. According to the Statutes, the Board of Management shall consist of at least two persons; the Supervisory Board determines the number of any additional members (§ 5 (1) of the Statutes). The mem- bers of the Board of Management are appointed by the Supervisory Board for a term of up to five years; reappointment is permitted for a maximum of five years in each case (§ 5 (3) of the Statutes). A simple majority of the votes cast in the Supervisory Board is required to ap- point members of the Board of Management. In the case of a tie vote, the Chairperson of the Supervisory Board, who pursuant to Article 42 of the SE Regulation must be a shareholder representative, shall have the casting vote (§ 8 (3) of the Statutes). If the Chairperson does not participate in the vote the Vice Chairperson shall have the casting vote, provided he or she is a shareholder representative. A Vice Chair- person who is an employee representative has no casting vote (§ 8 (3) of the Statutes). Amendments to the Statutes are governed by Article 59 SE Regu- lation, § 179 AktG, and the Statutes § 13 (4) of the Statutes of Allianz SE stipulates that, unless mandatory law requires otherwise, changes to the Statutes require a two-thirds majority of the votes cast at a General Meeting or, if at least one half of the share capital is represented, a simple majority of the votes cast. Where the law requires a majority in capital for a shareholder resolution, a simple majority of the capital represented at the General Meeting is sufficient, provided this is in line with legal requirements. The Supervisory Board may alter the wording of the Statutes (§ 179 (1) AktG and § 10 of the Statutes). AUTHORIZATION OF THE BOARD OF MANAGEMENT TO ISSUE AND REPURCHASE SHARES The Board of Management is authorized to issue shares as well as to acquire and use treasury shares as follows: It may increase the company’s share capital on or before 8 May 2023, with the approval of the Supervisory Board, by issuing new registered no-par value shares against contributions in cash and/or in kind, on one or more occasions:  Up to a total of € 334,960,000 (Authorized Capital 2018/I): In case of a capital increase against cash contribution, the Board of Man- agement may exclude the shareholders’ subscription rights for these shares with the consent of the Supervisory Board (i) for frac- tional amounts, (ii) in order to safeguard the rights pertaining to holders of convertible bonds or bonds with warrants, including mandatory convertible bonds, and (iii) in the event of a capital increase of up to 10 %, if the issue price of the new shares is not significantly below the stock market price. The Board of Manage- ment may furthermore exclude the shareholders’ subscription rights with the consent of the Supervisory Board in the event of a capital increase against contributions in kind.  Up to a total of € 15,000,000 (Authorized Capital 2018/II): The shareholders’ subscription rights are excluded. New shares may only be issued to employees of Allianz SE and its Group compa- nies. The company’s share capital is conditionally increased by up to € 250,000,000 (Conditional Capital 2010/2018). This conditional capi- tal increase will only be carried out to the extent that the holders of convertible bonds, bonds with warrants, convertible participation rights, participation rights, and subordinated financial instruments issued against cash by Allianz SE or its subsidiaries, based on the authorizations granted by the General Meeting on 5 May 2010 or 9 May 2018, exercise their conversion or option rights, or to the extent that conversion obligations from such bonds are fulfilled, and to such extent that treasury shares or shares from authorized capital are not used for such purpose. Under an authorization by the General Meeting of 9 May 2018, the Board of Management may, until 8 May 2023, buy back Allianz shares corresponding to up to 10 % of the lower of (i) the share capital at the moment of the shareholder resolution and (ii) the share capital at the moment of the buy-back, and to use those shares for other pur- poses (§ 71 (1) No. 8 AktG). Together with other treasury shares that are held by Allianz SE, or which are attributable to it under §§ 71a et seq. AktG, such shares may not exceed 10 % of the share capital at any time. The shares acquired pursuant to this authorization may be used, under exclusion of the shareholders’ subscription rights, for any legally ad- missible purposes, in particular those specified in the authorization. Furthermore, the acquisition of treasury shares under this authoriza- tion may also be carried out using derivatives, provided such deriva- tives do not relate to more than 5 % of the share capital. Domestic or foreign banks that are majority-owned by Allianz SE may buy and sell Allianz shares for trading purposes (§ 71 (1) No. 7 and (2) AktG) under an authorization of the General Meeting valid until 8 May 2023. The total number of shares acquired thereunder, together with treasury shares held by Allianz SE or attributable to it under §§ 71a et seq. AktG, shall at no time exceed 10 % of the share capital of Allianz SE. ESSENTIAL AGREEMENTS OF ALLIANZ SE WITH CHANGE-OF-CONTROL CLAUSES AND COMPENSATION AGREEMENTS PROVIDING FOR TAKEOVER SCENARIOS The following essential agreements of the company are subject to a change-of-control condition following a takeover bid:  Our reinsurance contracts, in principle, include a clause under which both parties to the contract have an extraordinary termina- tion right, if and when the counterparty merges with another entity or its ownership or control situation changes materially. Agree- ments with brokers regarding services connected with the pur- chase of reinsurance cover also provide for termination rights in case of a change of control. Such clauses are standard market practice.  Allianz SE is also party to various bancassurance distribution agreements for insurance products in various regions. These distri- bution agreements normally include a clause under which the par- ties have an extraordinary termination right in the event of a change of control of the other party’s ultimate holding company.  Shareholder agreements and joint ventures to which Allianz SE is a party often contain change-of-control clauses that provide, as the case may be, for the termination of the agreement, or for put or call rights that one party can exercise with regard to the joint venture or the target company, if there is a change of control of the other party.  The framework agreements between Allianz SE and the subsidiaries of various car manufacturers relating to the distribution of car insurance by the respective car manufacturers each include a clause under which each party has an extraordinary termination right in case there is a change of control of the other party. Annual Report 2019 – Allianz SE 57 B _ Management Report of Allianz SE  Bilateral credit agreements in some cases provide for termination rights in the event of a change of control, mostly defined as the acquisition of at least 30 % of the voting rights within the meaning of § 29 (2) of the German Takeover Act (“Wertpapiererwerbs- und Übernahmegesetz – WpÜG”). Where such termination rights are exercised, the respective credit lines have to be replaced by new credit lines under conditions then applicable. The company has entered into the following compensation agree- ments with members of the Board of Management and certain em- ployees, providing for the event of a takeover bid: A change-of-control clause in the service contracts of the mem- bers of Allianz SE’s Board of Management provides that, if within twelve months after the acquisition of more than 50 % of the com- pany’s share capital by one shareholder or several shareholders acting in concert (change of control) the appointment as a member of the Board of Management is revoked unilaterally by the Supervisory Board, or if the mandate is ended by mutual agreement, or if the Man- agement Board member resigns because his or her responsibilities as a board member are significantly reduced through no fault of the board member, he or she shall receive his or her contractual remuner- ation for the remaining term of the service contract, but for the purpose hereof limited to two years, in the form of a one-off payment. The one- off payment is based on the fixed remuneration plus the variable re- muneration, with this basis being limited, however, to the amount paid for the last fiscal year. This applies accordingly if, within twelve months of a change of control, a mandate in the Board of Management comes to an end and is not extended: The one-off payment will then be granted for the period between the end of the mandate and the end of the two-year period following the change of control. The change of control clauses in the service contracts of the members of Allianz SE’s Board of Management cease to have effect as soon as the new German Corporate Governance Code expected in 2020 is pub- lished in the official part of the Federal Gazette (Bundesanzeiger). For further details, please refer to the Remuneration Report starting on page 39. Under the Allianz Sustained Performance Plan (ASPP), Restricted Stock Units (RSUs) – i.e. virtual Allianz shares – are granted to senior management of the Allianz Group worldwide as a stock-based remu- neration component. The conditions for these RSU contain change-of- control clauses, which apply when a majority of the voting share capi- tal in Allianz SE is directly or indirectly acquired by one or more third parties who do not belong to the Allianz Group, and which provide for an exception from the usual vesting and exercise periods. In line with the relevant general conditions, the company will release the RSUs to plan participants on the day of the change of control, without observ- ing any vesting period that would otherwise apply. The cash amount payable per RSU must equal the average market value of the Allianz share and must equal or exceed the price offered per Allianz share in a preceding tender offer. By providing for the non-application of the vesting period in the event of a change of control, the terms take into account the fact that the conditions influencing the share price are sub- stantially different when there is a change of control. Integrated Risk and Control System for Financial Reporting The following information is provided pursuant to § 289 (4) of the HGB. In line with both our prudent approach to risk governance and compliance with regulatory requirements, we have created a frame- work and processes to identify and mitigate the risk of material errors in our financial statements (this also includes market value balance sheet and risk capital controls). The Integrated Risk and Control Sys- tem (IRCS) of Allianz SE is regularly reviewed and updated. It differen- tiates between three areas: Financial Reporting, Compliance and other operational risks (including IT risks). The IT controls are based on COBIT 5 and include, for example, controls for access rights manage- ment, and for IT project and change management. Additionally, our Entity Level Control Assessment (ELCA) framework contains controls to monitor the effectiveness of the system of governance. ACCOUNTING PROCESSES The accounting processes we use to produce financial statements are based on a group-wide IT solution and local general ledger. Access rights to accounting systems are managed according to strict authori- zation procedures. Internal controls are embedded in the accounting processes to safeguard the accuracy, completeness, and consistency of the infor- mation provided in our financial statements. INTEGRATED INTERNAL RISK AND CONTROL SYSTEM APPROACH Our approach can be summarized as follows:  We use a centrally developed risk catalogue which is linked to in- dividual accounts. This risk catalogue is reviewed on a yearly basis and is the starting point for the definition of the Group’s as well as of Allianz SE’s scope on financial reporting risks. The methodology is described in the IRCS Guideline. During the scoping process, both materiality and susceptibility to a misstatement are considered simultaneously. In addition to the quantitative calculation, we also consider qualitative criteria.  Based on the centrally provided risk catalogue, we identify risks that could lead to material financial misstatements.  Preventive and detective key controls to address financial report- ing risks have been put in place to reduce the likelihood and im- pact of financial misstatements. If a potential risk materializes, ac- tions are taken to reduce the impact of the financial misstatement. Given the strong dependence of financial reporting processes on IT systems, we have also implemented IT controls.  Finally, we ensure that controls are appropriately designed and ef- fectively executed to mitigate risk. We conduct an annual assess- ment of our control system to maintain and continuously enhance its effectiveness. Internal audit ensures that the overall quality of our control system is subjected to regular control testing, to assure reasonable design and operating effectiveness. 58 Annual Report 2019 – Allianz SE FINANCIAL STATEMENTS OF ALLIANZ SE C Annual Report 2019 – Allianz SE 59 C _ Financial Statements of Allianz SE FINANCIAL STATEMENTS BALANCE SHEET € thou as of 31 December ASSETS A. Intangible assets I. Self-created industrial property rights and similar rights and assets II. Licenses acquired against payment, industrial property rights, and similar rights and assets as well as licenses for such rights and assets III. Advance payments made B. Investments I. Real estate, real estate rights, and buildings, including buildings on land not owned by Allianz SE II. Investments in affiliated enterprises and participations III. Other investments IV. Funds held by others under reinsurance business assumed C. Receivables I. Accounts receivable on reinsurance business thereof from affiliated enterprises: € 614,161 thou (2018: € 376,373 thou) thereof from participations¹: € 20,172 thou (2018: € 4,657 thou) II. Other receivables thereof from affiliated enterprises: € 3,998,026 thou (2018: € 3,317,797 thou) thereof from participations¹: € 1,751 thou (2018: € 1,181 thou) D. Other assets I. Tangible fixed assets and inventories II. Cash with banks, checks, and cash on hand III. Miscellaneous assets E. Deferred charges and prepaid expenses I. Accrued interest and rent II. Other deferred charges and prepaid expenses F. Excess of plan assets over pension and similar obligations Total Assets 1_Companies in which we hold a participating interest. Note 2019 2019 2018 1, 2 1, 3 – 6 18,864 1,010 85 264,130 74,458,220 29,373,172 11,036,788 19,960 30,722 1,458 61 32,240 251,549 76,321,527 27,886,256 9,891,301 115,132,310 114,350,633 1,132,058 670,538 7 4,261,362 3,730,741 5,393,420 4,401,278 14,135 351,186 435,586 197,887 68,592 8 9 10 800,907 266,478 12,509 14,269 283,557 212,813 510,638 276,273 57,303 333,577 13,163 121,625,585 119,641,530 60 Annual Report 2019 – Allianz SE C _ Financial Statements of Allianz SE Note 2019 2019 2019 2018 12 1,169,920 1,671 1,168,249 27,998,146 6,781,177 4,480,282 1,798,743 586,079 13,202,561 27,414 2,208,537 29,150 1,229 6,779,948 1,842,823 44,080 614,790 28,711 15,742,376 2,539,816 27,423 9 29,150 - 1,169,920 2,651 1,167,269 27,949,540 1,229 7,353,906 7,355,135 4,544,153 40,427,854 41,016,097 13,390,097 13,749,596 1,661,911 62,207 1,599,704 640,625 27,971 612,654 13,969,041 2,685,623 11,283,419 29,361 2,755 26,606 2,380,716 23,600 - 23,600 17,852,484 15,926,698 8,446,272 1,603,237 8,136,545 1,701,367 461,375 342,595 2,750,117 1,848,356 250,375 36,440,949 2,374 36,910,351 39,902,816 39,103,676 2,824 7,550 121,625,585 119,641,530 13, 16 14 15 16 16 16 € thou as of 31 December EQUITY AND LIABILITIES A. Shareholders’ equity I. Issued capital Less: mathematical value of own shares II. Additional paid-in capital III. Revenue reserves 1. Statutory reserve 2. Other revenue reserves IV. Net earnings B. Subordinated liabilities C. Insurance reserves I. Unearned premiums 1. Gross 2. Less: amounts ceded II. Aggregate policy reserves 1. Gross 2. Less: amounts ceded III. Reserves for loss and loss adjustment expenses 1. Gross 2. Less: amounts ceded IV. Reserves for premium refunds 1. Gross 2. Less: amounts ceded V. Claims equalization and similar reserves VI. Other insurance reserves 1. Gross 2. Less: amounts ceded D. Other provisions E. Funds held with reinsurance business ceded F. Other liabilities I. Accounts payable on reinsurance business thereof to affiliated enterprises: € 328,252 thou (2018: € 147,546 thou) thereof to participations¹: € 6 thou (2018: € 253 thou) II. Bonds thereof to affiliated enterprises: € 2,750,117 thou (2018: € 1,848,356 thou) III. Liabilities to banks IV. Miscellaneous liabilities including taxes of: € 18,456 thou (2018: € 17,760 thou) thereof for social security: € 4,009 thou (2018: € 5,891 thou) thereof to affiliated enterprises: € 34,415,254 thou (2018: € 35,516,467 thou) thereof to participations¹: € 2 thou (2018: € 101 thou) G. Deferred income Total equity and liabilities 1_Companies in which we hold a participating interst. Annual Report 2019 – Allianz SE 61 C _ Financial Statements of Allianz SE INCOME STATEMENT € thou I. Technical account 1. Premiums earned (net) a) Gross premiums written b) Ceded premiums written c) Change in gross unearned premiums d) Change in ceded unearned premiums Premiums earned (net) 2. Allocated interest return (net) 3. Other underwriting income (net) 4. Loss and loss adjustment expenses (net) a) Claims paid aa) Gross ab) Amounts ceded in reinsurance b) Change in reserve for loss and loss adjustment expenses (net) ba) Gross bb) Amounts ceded in reinsurance Loss and loss adjustment expenses (net) 5. Change in other insurance reserves (net) 6. Expenses for premium refunds (net) 7. Underwriting expenses (net) 8. Other underwriting expenses (net) 9. Subtotal (net underwriting result) 10. Change in claims equalization and similar reserves 11. Net technical result II. Non-technical account 1. Investment income 2. Investment expenses 3. Investment result 4. Allocated interest return 5. Other income 6. Other expenses 7. Other non-technical result 8. Non-technical result 9. Net operating income 10. Income Taxes Amounts charged to other Group companies 11. Other taxes 12. Taxes 13. Net income 14. Unappropriated earnings carried forward 15. Transfer to revenue reserves To other revenue reserves 16. Net earnings Notes 2019 2019 2019 2018 10,912,145 (840,958) 10,071,186 (20,948) (3,348) (24,296) 11,435,629 10,046,890 17,912 1 19,116 17 (5,323,299) (473,171) (5,796,470) (1,823,073) 673,464 (1,149,609) (8,290,549) (6,946,079) 21,410 (639) 53,693 (4,140) (3,557,564) (3,018,242) (23,654) (397,454) 172,179 (225,275) 5,910,013 (23,195) 128,060 160,451 288,511 7,579,253 (1,646,728) 5,932,524 (20,044) 5,912,480 1,989,069 (3,346,618) (1,514,251) (1,357,549) 4,395,763 4,170,487 432,889 4,554,932 4,843,443 (129,995) 634,888 504,893 6,675 511,568 4,603,376 5,355,011 776,906 689,142 12,384,252 (758,707) (170,812) (19,104) (7,322,103) 875,494 (1,658,675) (185,265) 11,625,546 (189,916) (6,446,609) (1,843,940) 18 19 20 21 22 23 24 7,550,956 (1,622,082) 5,928,874 (18,860) 2,129,025 (3,643,275) (66,668) 485,184 418,516 14,373 25 26 27 (900,000) (1,500,000) (900,000) (1,500,000) 4,480,282 4,544,153 62 Annual Report 2019 – Allianz SE C _ Financial Statements of Allianz SE NOTES TO THE FINANCIAL STATEMENTS NATURE OF OPERATIONS AND BASIS OF PREPARATION NATURE OF OPERATIONS Allianz SE, the holding and reinsurance company of the Allianz Group, is located at Königinstraße 28, 80802 Munich, and registered in the Commercial Register of the municipal court in Munich under HRB 164232. The annual financial statements of Allianz SE and the consoli- dated financial statements of the Allianz Group are published digitally in the Federal Gazette (“Bundesanzeiger”). BASIS OF PREPARATION Our financial statements and the management report have been pre- pared in accordance with the regulations of the German Commercial Code (HGB), the German Stock Corporation Act (AktG), the Law on the Supervision of Insurance Enterprises (VAG), and the Government Or- der on the External Accounting Requirements of Insurance Enterprises (RechVersV). All amounts in these financial statements are presented in thou- sands of Euros (€ thou), unless otherwise stated. ACCOUNTING, VALUATION, AND CALCULATION METHODS INTANGIBLE ASSETS Intangible assets are recorded at acquisition or construction cost less depreciation. They are amortized on a straight-line basis over a useful life of generally three to five years. In case of a permanent impairment, an unscheduled write-down is recognized. Based on the capitalization option in accordance with § 248 (2) sentence 1 of the German Commer- cial Code, the internally generated intangible assets are capitalized. REAL ESTATE, REAL ESTATE RIGHTS, AND BUILDINGS, INCLUDING BUILDINGS ON LAND NOT OWNED BY ALLIANZ SE These items are recorded at acquisition or construction cost less depre- ciation. Depreciation is measured mainly using a straight-line method according to ordinary useful life. The useful life of newly acquired prop- erties is based on the remaining useful life in the purchase report. For all other assets, we use tax depreciation tables. In case of a permanent impairment, the values of these items are adjusted through unsched- uled write-downs. INVESTMENTS IN AFFILIATED ENTERPRISES AND PARTICIPATIONS SHARES IN AFFILIATED ENTERPRISES AND PARTICIPATIONS These are recorded at cost less impairments, in accordance with § 341b (1) of the German Commercial Code in conjunction with § 253 (3) sen- tence 5 of the German Commercial Code. Impairments are measured either as the difference between the acquisition cost and the respective value, in accordance with IDW RS HFA 10 in conjunction with IDW S1, or as the difference between the acquisition cost and the lower share price as of 31 December 2019, or in some cases as the difference between the acquisition cost and the net asset value. Wherever the market value at the balance sheet date is higher than the previous year’s valuation, the value is written up to no more than the historical acquisition cost. LOANS IN AFFILIATED ENTERPRISES AND PARTICIPATIONS These items are normally recorded at cost less impairments, in accord- ance with § 253 (3) sentence 5 of the German Commercial Code. How- ever, when converting foreign currency loans into Euros at the report- ing date, the strict lower of cost or market value principle is applied. OTHER INVESTMENTS STOCKS, INTERESTS IN FUNDS, DEBT SECURITIES AND OTHER FIXED AND VARIABLE INCOME SECURITIES, MISCELLANEOUS INVESTMENTS These items are generally valued in accordance with § 341b (2) of the German Commercial Code in conjunction with § 253 (1), (4), and (5) of the German Commercial Code, using either the acquisition cost or the stock exchange or market value on the balance sheet date, whichever is lower. We calculate the acquisition cost by averaging the different acquisition costs for securities of the same type. REGISTERED BONDS, DEBENTURES AND LOANS These items are recorded at cost less impairments in accordance with § 253 (3) sentence 5 of the German Commercial Code. In accordance with § 341c of the code, amortized cost accounting is applied and the difference between acquisition cost and the redemption amount is amortized over the remaining period, based on the effective interest method. ASSETS TO MEET LIABILITIES RESULTING FROM RETIREMENT PROVISION COMMITMENTS These assets are recorded at fair value in accordance with § 253 (1) of the German Commercial Code, and offset against the liabilities in ac- cordance with § 246 (2) of the code. Group life insurance contracts are recorded at asset value. If the liabilities exceed the fair value, the exceeding amount will be shown under other provisions. If the fair value of the assets exceeds Annual Report 2019 – Allianz SE 63 C _ Financial Statements of Allianz SE the liabilities, the exceeding amount is shown as an excess of plan as- sets over pensions and similar obligations. The accounting and valuation method of the excess of plan assets over pension and similar obligations is the same as described in the section „Other provisions”. TANGIBLE FIXED ASSETS, INVENTORIES, AND MISCELLANEOUS ASSETS These items are recorded at acquisition cost less depreciation on a straight-line basis. The expected useful life is based on the tax depre- ciation tables. Low-value assets worth up to € 250 are written off im- mediately. A compound item for tax purposes formed in accordance with § 6 (2a) of the German Income Tax Act (EStG) for assets from € 250 to € 1,000 is depreciated by one fifth each year. DEFERRED TAX ASSETS When calculating deferred taxes, deferred tax assets and liabilities are offset. Based on the capitalization option in accordance with § 274 (1) sentence 2 of the German Commercial Code, the surplus of deferred tax assets over deferred tax liabilities is not recognized. Aggregate policy reserves for Life/Health reinsurance are gener- ally recorded according to the amounts in the cedent’s statements. Reserves for loss and loss adjustment expenses are established for the payment of losses and loss adjustment expenses on claims that have occurred but are not yet settled. Reserves for loss and loss ad- justment expenses fall into two categories: case reserves for reported claims and reserves for losses incurred but not reported yet, or not suf- ficiently reported. Reserves for premium refunds are generally recorded according to the amounts in the cedent’s statements. For Property-Casualty reinsurance, the equalization reserve, the reserve for nuclear plants, the product liability reserve for major phar- maceutical risks, and reserves for risks relating to terrorist attacks are calculated according to § 341h of the German Commercial Code in conjunction with § 29 and § 30 RechVersV. The reserves are set up to moderate substantial fluctuations in the claims of individual lines of business. In cases where above-average or below-average claims oc- cur, changes in the reserves mitigate the technical result for the individ- ual lines of business. Other insurance reserves are generally recorded according to the amounts in the cedent’s statements. REMAINING ASSETS These consist of the following: funds held by others under reinsurance business assumed,   bank deposits,  accounts receivable on reinsurance business,  other receivables,  cash with banks and cash on hand. These items are recorded at face value less repayments and impair- ments. INSURANCE RESERVES These consist of the following:  unearned premiums,  aggregate policy reserves,    claims equalization and similar reserves,  other insurance reserves. reserves for loss and loss adjustment expenses, reserves for premium refunds, Insurance reserves are set up according to the German Commercial Code and RechVersV requirements. The primary goal is to ensure our ongoing ability to satisfy reinsurance contract liabilities in all cases. Generally, reinsurance reserves are booked according to the cedent’s statements. For claims incurred but not yet reported, or not sufficiently reported, additional reserves are calculated using actuarial techniques. Insurance reserves in the ceded reinsurance business are calcu- lated according to the terms of the retrocession contracts. Unearned premiums are accrued premiums already written for future risk periods. They are calculated in accordance with German accounting principles, partly on the basis of information received from the cedents and partly using nominal percentages. Where unearned premiums are calculated using such percentages, these are based on many years of experience and the latest information available. OTHER PROVISIONS Pension provisions are calculated applying actuarial principles. Other obligations such as provisions for jubilee payments, birthday payments and phased-in early retirement benefits are also calculated in accord- ance with actuarial principles. According to § 253 (2) sentence 1 of the German Commercial Code (HGB), the discount rate used for calculating the pension obli- gations has to be derived from a 10-year-average, for calculating other obligations it has to be derived from a 7-year-average. § 253 (6) sentence 2 of the German Commercial Code states that a positive difference resulting from the calculation of pension obliga- tions with the discount rate of 7-year-average versus 10-year-average is subject to the restriction on dividend payout. Apart from that, with respect to the discount rate, the simplifica- tion option set out in § 253 (2) sentence 2 of the German Commercial Code has still been applied (duration of fifteen years). The effect re- sulting from the change in the discount rate is reported under other non-technical result. For further information regarding the accounting for pensions and similar obligations, please refer to note 15 to our financial state- ments. Remaining other provisions are recognized at the settlement amount. Long-term provisions are discounted applying the net ap- proach in accordance with IDW RS HFA 34. REMAINING LIABILITIES These consist of the following: subordinated liabilities, funds held with reinsurance business ceded,    other liabilities. These items are valued at the settlement amount. Annuities are rec- orded at present value. 64 Annual Report 2019 – Allianz SE C _ Financial Statements of Allianz SE PREPAID EXPENSES AND DEFERRED INCOME Accrued interest and rent are valued at nominal amounts. Premiums and discounts carried forward as prepaid income and expenses are amortized over the remaining life of the related financial instruments. Issued debt securities and borrowings denominated in foreign currencies are converted into Euro at the middle forex spot rate as of the reporting date. Unrealized losses are recognized immediately in the income statement, while unrealized gains are not. CURRENCY TRANSLATION Transactions are generally recorded in the original currency and con- verted into Euros at the relevant daily rate (middle forex spot rate). Loans to affiliated enterprises denominated in foreign currencies are converted into Euros using the middle forex spot rate as of the re- porting date and applying the strict lower of cost or market value prin- ciple. The valuation of foreign currency shares in affiliated enterprises and participations, stocks, interests in funds, and other variable and fixed-income securities is performed by converting their value from the original currency into Euro, using the middle forex spot rate as of the reporting date. Comparing the acquisition cost in Euros with the value in Euro as described above, the moderate lower-value principle is applied for af- filiated enterprises and participations. For other investments, the strict lower of cost or market value principle is applied. As a result of this valuation method, currency gains and losses are not separately determined and shown as foreign-exchange gains/losses in the other non-technical result. Instead, the net effect of both changes (exchange rate and value in original currency) is re- flected in the impairments/reversals of impairments and in the realized gains/losses calculated for these asset classes and is disclosed in the investment result. All other monetary assets and liabilities with a remaining term of 1 year or less recorded in foreign currency are valued at the mid- dle forex spot rate as of the reporting date. Both unrealized losses and gains resulting from the valuation of these foreign currency positions are reflected immediately in the other non-technical result as neither § 253 (1) sentence 1 nor § 252 (1) number 4 clause 2 of the German Commercial Code (HGB) are applicable. VALUATION UNITS Allianz SE made use of the option of forming valuation units as defined in § 254 of the German Commercial Code. This option is used for de- rivative contracts in which Allianz SE acts as an intra-group clearing agency. In this function, Allianz SE enters into derivative transactions with other Group companies and hedges the exposure resulting from these transactions by entering into mirror positions with the same term and structure but with different partners. Opposing positions whose performance completely offset each other have been combined into valuation units and form a perfect micro hedge. When accounting for valuation units, we apply the “freezing” method, which means that mutually offsetting changes in value of opposing positions (i.e., within valuation units) are not recorded in the income statement. More details regarding derivative transactions combined into valuation units are explained in note 17 to our financial statements. Annual Report 2019 – Allianz SE 65 C _ Financial Statements of Allianz SE SUPPLEMENTARY INFORMATION ON ASSETS 1 _ Change of assets A., B.I. through B.III. A. Intangible assets 1. Self-created industrial property rights and similar rights and assets 2. Licenses acquired against payment, industrial property rights, and similar rights and assets as well as licenses for such rights and assets 3. Advance payments made Subtotal A. B.I. Real estate, real estate rights, and buildings, including buildings on land not owned by Allianz SE B.II. Investments in affiliated enterprises and participations 1. Shares in affiliated enterprises 2. Loans to affiliated enterprises 3. Participations 4. Loans to participations Subtotal B.II. B.III. Other investments 1. Stocks, interests in funds and other variable-income securities 2. Debt securities and other fixed-income securities 3. Other loans a) Registered bonds b) Loans and promissory notes 4. Bank deposits Subtotal B.III. Subtotal B.I. – B.III. Total 2 _ Intangible assets Values stated as of 1 January 2019 € thou 30,722 1,458 61 32,240 251,549 72,005,738 3,755,641 555,149 5,000 76,321,527 1,069,810 23,969,823 1,895,493 338,817 612,315 27,886,256 104,459,332 104,491,572 % 0.2 68.9 3.6 0.5 - 73.1 1.0 22.9 1.8 0.3 0.6 26.7 100.0 The book value of intangible assets totaled € 20 mn (2018: € 32 mn) and mainly consists of internally generated software. The decline was primarily driven by the unscheduled write-down of € 16 mn on inter- nally generated software. In 2019, the research and development costs of Allianz SE amounted to € 10 mn. The total sum represents development costs for internally generated software. 3 _ Market value of investments Fair values and carrying amounts of the investments, subdivided into individual asset categories, were as follows: Book values and market values of investments € bn as of 31 December Real estate Equity securities Debt securities Loans Bank deposits Funds held by others under reinsurance business assumed Total Book value Market value Valuation reserve 2019 0.3 74.6 24.8 3.4 1.0 11.0 2018 0.3 73.6 24.0 6.0 0.6 9.9 2019 0.9 97.5 25.7 3.6 1.0 11.0 2018 0.8 84.1 24.3 6.1 0.6 9.9 2019 0.6 23.0 0.9 0.2 - - 2018 0.5 10.5 0.3 0.1 - - 115.1 114.4 139.8 125.8 24.7 11.4 66 Annual Report 2019 – Allianz SE C _ Financial Statements of Allianz SE Disposals (-) € thou Revaluation (+) € thou Depreciation (-) € thou Additions (+) € thou 10,080 152 25 10,256 18,430 1,587,939 9,498 63,752 - 1,661,188 324,940 36,011,907 1,901,647 71,375 405,299 38,715,168 40,394,786 40,405,043 Transfers € thou 189 (189) - - - - - - - - - - - - - - - - - - - - - - - - 421 130 722,223 2,630,719 21,144 3,500 3,377,587 160,902 35,163,085 1,767,218 138,286 - 37,229,492 40,607,499 40,607,499 - - - - - - 94,062 - - - 94,062 94,192 94,192 Net additions (+) Net disposals (-) Values stated as of 31 December 2019 € thou (11,857) (448) 25 (12,280) 12,582 726,131 (2,621,221) 35,283 (3,500) € thou 18,864 1,010 85 19,960 264,130 72,731,869 1,134,420 590,432 1,500 22,126 410 - 22,537 5,558 139,584 - 7,324 - 146,908 (1,863,307) 74,458,220 - 92,822 - - - 92,822 245,288 267,825 164,038 850,062 134,428 (66,911) 405,299 1,233,848 24,819,884 2,029,921 271,905 1,017,614 1,486,916 (363,809) (376,089) 29,373,172 104,095,523 104,115,483 % 0.3 69.9 1.1 0.6 - 71.5 1.2 23.8 2.0 0.3 1.0 28.2 100.0 VALUATION METHODS USED TO DETERMINE THE MARKET VALUE REAL ESTATE Land and buildings are valued using the Discounted Cash Flow method or, for new buildings, at cost. The fair value was determined during the fiscal year. EQUITY SECURITIES Investments in companies quoted on the stock exchange are generally measured by the stock exchange price quoted on the last trading day of 2019. Non-quoted companies are valued at their net asset value calculated by the German Association for Financial Analysis and Asset Management’s (DVFA) method. For recent transactions the transac- tion prices were used. DEBT SECURITIES These items are measured at the stock exchange value quoted on the last trading day of 2019 or, if there is no active market, at the prices obtained from brokers or pricing services. LOANS Loans are valued using the Discounted Cash Flow method. Relevant discount rates are derived from observable market parameters and reflect the remaining life and credit risk of the instruments. In excep- tional cases, the carrying amount is used as fair value. BANK DEPOSITS AND FUNDS HELD BY OTHERS UNDER REINSURANCE BUSINESS ASSUMED There are no differences between the book value and the fair value of those items. DETAILS IN ACCORDANCE WITH § 285 NO. 18 OF THE GERMAN COMMERCIAL CODE ON INVESTMENTS WHERE THE BOOK VALUE EXCEEDS THE MARKET VALUE We disregarded market value declines of € 0.2 mn for loans with a book value of € 429 mn. Based on the expected development of market conditions, the decline in market value is not expected to be of an enduring nature. We intend to hold loans until maturity to ensure repayment at par value. Annual Report 2019 – Allianz SE 67 C _ Financial Statements of Allianz SE 4 _ Real estate, real estate rights and buildings 6 _ Interests in investment funds The book value of own property for own use amounted to € 153 mn in 2019 (2018: € 140 mn). Details on interests in investment funds in accordance with § 285 (26) of the German Commercial Code: 5 _ Investments in affiliated enterprises and participations € bn as of 31 December Shares in affiliated enterprises Loans to affiliated enterprises Participations Total 2019 72.7 1.1 0.6 74.5 2018 72.0 3.8 0.6 76.3 Change 0.7 (2.6) 0.0 (1.9) The book value of shares in affiliated enterprises went up by € 0.7 bn to € 72.7 bn (2018: € 72.0 bn). This increase resulted from the following:  Funding of two newly incorporated holding companies, Allianz China Insurance Holding Company Limited, Shanghai, and Allianz Africa Holding GmbH, Munich, with € 0.3 bn and € 0.2 bn, respec- tively,  A book value increase of € 0.2 bn due to purchase of shares in a newly established subsidiary Allianz Sakura Multifamily Lux SCSp, Luxembourg, for the purpose of investing in a Japanese real estate portfolio. € thou Equity funds Allianz Global AC Equity Insights Fund Allianz US Micro Cap Equity Fund Subtotal equity funds Bond funds Allianz RE Asia Fund Allianz Fixed Income Macro Fund Allianz SE – PD Fund Allianz Selective Global High Yield Allianz SE Ashmore Emerging Markets Corporates Fund Subtotal bond funds Mixed funds Allianz Voyager Asia Subtotal mixed funds Book value Fair value Valuation reserve Dividend distribution 3,939 4,202 8,141 5,313 4,346 9,659 1,374 144 1,518 - - - 1,037,621 1,076,111 38,490 12,391 4,035 74,405 4,568 78,350 4,459 4,719 100,000 1,220,520 103,560 1,267,308 4,500 4,500 4,513 4,513 533 3,945 260 3,560 46,788 13 13 - - - - 12,391 22 22 Total 1,233,161 1,281,480 48,319 12,413 Allianz SE holds more than 10.0 % of the respective shares of these investment funds. The fund shares can be redeemed each trading day. Loans to affiliated enterprises declined by € 2.6 bn to € 1.1 bn (2018: € 3.8 bn) mainly due to the termination of a € 2.1 bn intra-group loan provided to Allianz Holding France SAS. Further redemptions of intra- group loans amounted to € 0.5 bn. 7 _ Other receivables As of 31 December 2019, other receivables amounted to € 4,261 mn (2018: € 3,731 mn). They mainly comprise receivables from profit trans- fer agreements amounting to € 3,165 mn (2018: € 2,633 mn), receiva- bles from cash pooling (€ 716 mn (2018: € 579 mn)) and tax receiva- bles of € 241 mn (2018: € 348 mn). 68 Annual Report 2019 – Allianz SE C _ Financial Statements of Allianz SE 8 _ Miscellaneous assets At the end of the fiscal year, this position mainly included variation mar- in connection with financial derivative transactions gins paid (€ 427 mn). 9 _ Deferred charges and prepaid expenses This item includes accrued interest in the amount of € 198 mn (2018: € 276 mn), which mainly results from our investments in debt securities and loans, as well as other deferred charges and prepaid expenses amounting to € 69 mn (2018: € 57 mn). The latter comprise the dis- count on borrowings from affiliated enterprises, issued bonds, and subordinated liabilities. 10 _ Excess of plan assets over pension and similar obligations A part of the pension obligations is secured by group life insurance contracts and offsettable plan assets. As a different discount rate is ap- plied for these plan assets, compared to the calculation of the settle- ment amount of the pension obligations, this results in an excess of plan assets over pension and similar obligations for some pension plans. This results in the disclosure of an excess of plan assets over pen- sion and similar obligations of € 13 mn (2018: € 13 mn). 11 _ Collateral Assets amounting to € 51 mn (2018: € 0.6 bn), of which € 48 mn (2018: € 0.6 bn) were in favor of affiliated enterprises, were pledged as col- lateral for liabilities. Annual Report 2019 – Allianz SE 69 C _ Financial Statements of Allianz SE SUPPLEMENTARY INFORMATION ON EQUITY AND LIABILITIES 12 _ Shareholders’ equity capital ISSUED CAPITAL Issued to as € 1,169,920.0 thou, divided into 417,172,859 fully paid registered shares. The shares have no-par value but a mathematical per-share value as a proportion of the issued capital.1 31 December 2019 amounted of AUTHORIZED CAPITAL As of 31 December 2019, Allianz SE had authorized capital with a notional amount of € 334,960.0 thou for the issuance of new shares until 8 May 2023 (Authorized Capital 2018/I). The shareholders’ sub- scription rights can be excluded for capital increases against contri- bution in kind. For a capital increase against contributions in cash, the shareholders’ subscription rights can be excluded: (i) for fractional amounts, (ii) if the issue price is not significantly below the market price and the shares issued under exclusion of the subscription rights pursuant to § 186 (3) sentence 4 of the German Stock Corporation Act (Aktiengesetz) do not exceed 10 % of the share capital, and (iii) to the extent necessary to grant a subscription right for new shares to the holders of bonds that carry conversion or option rights or pro- vide for mandatory conversion. The subscription rights for new shares from the Authorized Capital 2018/I and the Conditional Capital 2010/2018 may only be excluded for the proportionate amount of the share capital of up to € 116,992.0 thou (corresponding to 10 % of the share capital at year-end 2019). In addition, Allianz SE has authorized capital (Authorized Capital 2018/II) for the issuance of new shares against contributions in cash until 8 May 2023. The shareholders’ subscription rights are excluded. The new shares may only be offered to employees of Allianz SE and its Group companies. As of 31 December 2019, the Authorized Capital 2018/II amounted to € 15,000.0 thou. CONDITIONAL CAPITAL As of 31 December 2019, Allianz SE had conditional capital totaling € 250,000.0 thou (Conditional Capital 2010/2018). This conditional capital increase will only be carried out if conversion or option rights attached to convertible bonds, bonds with warrants, convertible par- ticipation rights, participation rights, and subordinated financial instru- ments which Allianz SE or its Group companies have issued against cash payments according to the resolutions of the Annual General Meeting (AGM) on 5 May 2010 or 9 May 2018, are exercised or the conversion obligations under such bonds are fulfilled, and only to the extent that the conversion or option rights or conversion obligations are not serviced through treasury shares or through shares from authorized capital. Convertible subordinated notes totaling € 500,000.0 thou, which may be converted into Allianz shares, were issued against cash in July 2011. Within 10 years after the issuance a mandatory conversion of the notes into Allianz shares at the then prevailing share price may apply if certain events occur, subject to a floor price of at least € 74.90 per share. Within the same period, investors have the right to convert the notes into Allianz shares at a price of € 187.26 per share. 1_Mathematical per-share value € 2.80 (rounded). Both conversion prices are as of inception and subject to antidilution provisions. The subscription rights of shareholders for these convertible notes have been excluded with the consent of the Supervisory Board and pursuant to the authorization of the AGM on 5 May 2010. The granting of new shares to persons entitled under such convertible notes is secured by the Conditional Capital 2010/2018. On or before 31 December 2019, there was no conversion of any such notes into new shares. CHANGES IN THE NUMBER OF ISSUED SHARES OUTSTANDING Number of issued shares outstanding Number of issued shares outstanding as of 1 January Changes in number of treasury shares Cancellation of issued shares Number of issued shares outstanding as of 31 December Treasury shares1 2019 423,498,025 365,959 (7,286,802) 416,577,182 595,677 2018 438,879,929 408,081 (15,789,985) 423,498,025 961,636 Total number of issued shares 417,172,859 424,459,661 1_Thereof 595,677 (2018: 961,636) own shares held by Allianz SE. PROPOSAL FOR APPROPRIATION OF NET EARNINGS The Board of Management and the Supervisory Board propose that the net earnings (“Bilanzgewinn”) of Allianz SE of € 4,480,281,669.73 for the 2019 fiscal year shall be appropriated as follows:  Distribution of a dividend of € 9.60 per no-par share entitled to a dividend: € 3,999,140,947.20  Unappropriated earnings carried forward: € 481,140,722.53 The proposal for appropriation of net earnings reflects the 595,677 treasury shares held directly and indirectly by the company as of 31 December 2019. Such treasury shares are not entitled to the dividend pursuant to § 71b of the German Stock Corporation Act (AktG). Should there be any change in the number of shares entitled to the dividend by the date of the Annual General Meeting, the above pro- posal will be amended accordingly and presented for resolution on the appropriation of net earnings at the Annual General Meeting, with an unchanged dividend of € 9.60 per each share entitled to dividend. TREASURY SHARES As of 31 December 2019, Allianz SE held 595,677 (2018: 961,636) treasury shares. Of these, 395,677 (2018: 761,636) were held for covering future subscriptions by employees in Germany and abroad in the context of Employee Stock Purchase Plans, whereas 200,000 (2018: 200,000) were held as a hedge for obligations from the Allianz Equity Incentive Program. In 2019, 365,959 (2018: 407,495) treasury shares were sold to employees of Allianz SE and its subsidiaries in Germany and abroad in the context of the Employee Stock Purchase Plan. These shares were 70 Annual Report 2019 – Allianz SE C _ Financial Statements of Allianz SE taken from the stock of treasury shares dedicated to this purpose. In 2019, as in the previous year, no capital increase for the purpose of Employee Stock Purchase Plans was undertaken. Employees of the Allianz Group purchased approximately 75 % of these shares at a reference price of € 210.21 per share and were allocated one addi- tional share per three shares purchased, which is equivalent to a discount of approximately 25 %. The shares were sold to employees at prices between € 157.66 and € 161.59. (2018: between € 137.57 and € 153.94). As of 31 December 2019, the remaining treasury shares of Allianz SE held for covering subscriptions by employees in the context of the Employee Stock Purchase Plan of Allianz SE and its subsidiaries in Germany and abroad amounted to 395,677 shares. In the year ending 31 December 2019, the total number of treas- ury shares of Allianz SE decreased by 365,959 (2018: decrease of 407,495), which corresponds to € 1,026,295.80 (2018: € 1,123,161.03) or 0.09 % (2018: 0.10 %) of issued capital as of 31 December 2019. SHARE BUY-BACK PROGRAM 2019 In its meeting on 14 February 2019, the Board of Management of Allianz SE resolved to carry out a share buy-back program in an amount of up to € 1.5 bn within a period between 1 March 2019 and 31 December 2019 (Share Buy-Back Program 2019) based on the authorization granted by the Annual General Meeting on 9 May 2018. In the period between 4 March 2019 and 30 July 2019, a total of 7,286,802 treasury shares with a market value of € 1,499,999,871.33 were acquired for an average price of € 205.85. All of the treasury shares acquired within the Share Buy-Back Program 2019 have been redeemed according to the simplified pro- cedure without reduction of the share capital. Additional paid-in capital € thou The treasury shares of Allianz SE and its subsidiaries represented € 1,670,517.20 thou (2018: € 2,650,516.16 thou) or 0.14 % (2018: 0.23 %) of the issued capital as of 31 December 2019. As of 31 December 2018 Own shares: realized gains As of 31 December 2019 Revenue reserves € thou as of 31 December 1. Statutory reserve 2. Other revenue reserves2 Total 2018 1,229 7,353,906 7,355,135 Own shares exceeding mathematical value Own shares: cancellation1 Transfer to revenue reserves - 27,342 27,342 - (1,501,300) (1,501,300) - 900,000 900,000 27,949,540 48,606 27,998,146 2019 1,229 6,779,948 6,781,177 1_Share buy-back program 2019: Acquisition costs of the repurchased and cancelled shares of Allianz SE. 2_Thereof reserves for own shares € 1,671 thou (2018: € 2,651 thou). RESTRICTIONS ON DIVIDEND PAYOUT The unappropriated reserves plus the unappropriated earnings car- ried forward are not fully available for the distribution of a dividend due to legal restrictions. The unappropriated reserves of Allianz SE correspond to the other revenue reserves. Of the unappropriated reserves plus the unappropriated earnings carried forward, a total of € 910,065 thou (2018: € 1,045,224 thou) is exempt from dividend distribution. Of this amount, € 888,178 thou (2018: € 1,010,582 thou) are due to the legal requirement for discount- ing pension obligations according to § 253 (2) sentence 1 in connection with § 253 (6) of the German Commercial Code. Another € 18,864 thou (2018: € 30,722 thou) account for inter- nally generated intangible assets according to § 268 (8) sentence 1 of the German Commercial Code and € 1,352 thou (2018: € 1,269 thou) account for the surplus of the fair value of pension plan assets and phased-in early retirement plan assets compared to the acquisition costs according to § 268 (8) sentence 3 of the German Commercial Code. Another, € 1,671 thou (2018: € 2,651 thou) correspond to the mathematical value of own shares deducted from issued capital ac- cording to § 272 (1a) of the German Commercial Code. 13 _ Subordinated liabilities liabilities decreased to € 13.4 bn Subordinated in 2019 (2018: € 13.7 bn). Of these, € 10.9 bn (2018: € 10.3 bn) were external subordi- nated liabilities resulting from subordinated bonds directly issued by Allianz SE. In 2019, Allianz SE redeemed a bond with a volume of CHF 0.5 bn (equals € 0.4 bn) and placed a new bond with a volume of € 1.0 bn. Further, intra-group subordinated liabilities amounting to € 2.5 bn (2018: € 3.4 bn) were attributable to subordinated bonds issued by Allianz Finance II B.V., an affiliated enterprise that usually transfers the proceeds from these issues to Allianz SE via intra-group loans. In 2019, Allianz Finance II B.V. bought back a principal amount of € 0.9 bn of a € 2.0 bn subordinated bond via tender offer. Allianz SE provides a financial guarantee for the total amount of bonds issued by Allianz Finance II B.V. Annual Report 2019 – Allianz SE 71 C _ Financial Statements of Allianz SE 14 _ Insurance reserves € thou as of 31 December 2019 Motor Fire and property reinsurance Liability Personal accident Marine and aviation Life Credit and bond Legal expenses Health Other lines Total Unearned premiums Aggregate policy reserves 615,818 537,268 227,773 41,334 23,390 48,734 19,057 48,951 2,452 233,966 - - - 43,332 - 541,229 - - 1,518 - Reserves for loss and loss adjustment expenses 4,156,825 2,293,296 4,271,537 555,018 526,068 153,182 370,446 343,415 12,294 520,479 Reserves for premium refunds Claims equalization and similar reserves - 3,557 1,647 793 - - 21,275 - - 141 349,316 662,253 257,038 2,402 35,969 - 450,862 31,299 - 419,398 Other insurance reserves 13,123 6,506 2,266 2,163 394 1,105 63 1,025 21 2,484 Total 5,135,082 3,502,880 4,760,262 645,042 585,822 744,251 861,702 424,691 16,285 1,176,467 1,798,743 586,079 13,202,561 27,414 2,208,537 29,150 17,852,484 The development of the insurance reserves was mainly driven by in- creased reserves for loss and loss adjustment expenses due to the overall portfolio growth. AGGREGATE POLICY RESERVES Aggregate policy reserves declined by € 27 mn to € 586 mn, which was mainly attributable to the Life/Health reinsurance. RESERVES FOR LOSS AND LOSS ADJUSTMENT EXPENSES Reserves for loss and loss adjustment expenses increased by 17.0 % to € 13,203 mn, largely due to the growth of the portfolio. CLAIMS EQUALIZATION AND SIMILAR RESERVES In 2019, claims equalization and similar reserves decreased by € 172 mn to € 2,209 mn, mainly resulting from liability reinsurance (€ 161 mn). 15 _ Other provisions Development of other provisions € thou Provisions for pensions and similar liabilities Tax provisions Miscellaneous 1. Anticipated losses 2. Remaining provisions Total 1_Including currency translation effects. Provision 1 January 2019 6,874,193 438,565 350,943 472,844 8,136,545 Use (-) 339,702 48,680 235,257 255,808 879,447 Release1 (-) 135,306 7,217 10,288 39,897 192,708 Additions1 (+) 89,812 84,283 211,700 275,044 660,839 Reversal of Discounting Provision (+) 31 December 2019 718,005 - 1,349 1,689 7,207,002 466,951 318,447 453,872 721,043 8,446,272 The total of other provisions rose by € 310 mn. This growth resulted mainly from a net increase of pension liabilities by € 333 mn. Miscella- neous provisions went down by € 51 mn, driven by a decrease in both the provisions for anticipated losses (€ 32 mn) and the remaining pro- visions (€ 19 mn). Allianz SE has made pension promises for which pension provi- sions are recognized. Part of these pension obligations are secured by a Contractual Trust Arrangement (Methusalem Trust e.V.). These trust assets constitute offsettable plan assets, with the asset value/market value being used as the fair value. In 1985, the pension provisions of the German subsidiaries were centralized by transferring the corresponding assets to Allianz SE. As a result, Allianz SE has a joint liability for a large part of these old pension promises. The German subsidiaries reimburse the costs, with Allianz SE assuming responsibility for settlement. Consequently, these pension provisions are reported by Allianz SE. As of 1 January 2015, Allianz SE completely assumed the obliga- tions resulting from the agents pension fund (“Vertreterversorgungs- werk” – VVW) from Allianz Beratungs- und Vertriebs-AG. Effective from 1 January 2017, the German subsidiaries reimburse only the service costs for their employees. There is no cost reimbursement anymore for the risks arising from changes in interest rate, inflation, and mortality tables. 72 Annual Report 2019 – Allianz SE C _ Financial Statements of Allianz SE turnover to reflect company-specific circumstances. The adjustment was installed in 2010 and reviewed and revised in 2018. The retirement age applied is the contractual or legal retirement age. 2019 603,850 2018 563,936 7,799,411 604,918 7,426,221 565,111 Net amount of pension provisions and excess of plan assets over pension and similar obligations 7,194,494 6,861,110 Allianz SE has obligations resulting from jubilee payments, birthday payments, and phased-in early retirement, which are reported under remaining provisions. The obligations resulting from a long-term credit account are shown under provisions for pensions and similar liabilities. These obligations are basically calculated in the same way as pension obligations, using the same actuarial assumptions (except for the dis- count rate). Offsettable plan assets are held at Methusalem Trust e.V. to se- cure the phased-in early retirement and long-term credit account obli- gations. The asset value/market value is used as the fair value. The following table shows a breakdown of the offset assets and liabilities that result from phased-in early retirement and long-term credit account obligations. Information on the offset assets and liabilities € thou as of 31 December Historical costs of the offset assets Settlement amount of the offset liabilities Fair value of the offset assets 2019 21,657 21,837 21,941 2018 20,915 20,929 21,009 The following table shows a breakdown of pension provisions: Settlement amount of the offset liabilities € thou as of 31 December 2019 2018 Old pension promises of the German subsidiaries 1,913,742 1,925,634 Pension promises of Allianz SE agents pension fund (VVW) old pension promises to employees contribution-based pension plans deferred compensation Total Supplementary information € thou as of 31 December 5,282,603 4,947,730 Historical costs of the offset assets 227,147 243,748 132,172 216,919 218,073 117,866 7,799,411 7,426,221 Settlement amount of the offset liabilities (-) Fair value of the offset assets The settlement amount is calculated on the basis of the projected unit credit method and/or reported as the present value of the entitle- ments acquired. In the case of security-linked pension plans, the fair value of the offset assets is shown. Due to the fact that there is no employment relationship between the tied agents and Allianz SE, and since Allianz Beratungs- und Ver- triebs-AG no longer reimburses any costs, the pension obligations re- sulting from the VVW are recorded at their full present value. Actuarial parameters % as of 31 December Applied discount rate (10-year-average) Applied discount rate (7-year-average) Rate of assumed pension trend Rate of assumed salary increase (inclusive average career trend) 2019 2.71 1.97 1.50 3.25 2018 3.21 2.32 1.70 3.25 Contrary to the above rates, part of the pension promises are calcu- lated using a guaranteed pension increase rate of 1.00 % p.a. of these pension promises. The mortality tables used are the RT2005G-tables of Heubeck, which have been adjusted with respect to mortality, disability and labor Annual Report 2019 – Allianz SE 73 C _ Financial Statements of Allianz SE 16 _ Maturity of financial liabilities The residual terms of subordinated liabilities, bonds issued, and mis- cellaneous liabilities are as follows: Maturity table as of 31 December 2019 € thou Subordinated liabilities (B.) Intra-group transmission of proceeds from third-party financing Subordinated bonds issued by Allianz SE Subtotal Subordinated liabilities (B.) Bonds (intra-group – F.II.) Liabilities to banks (F.III.) Miscellaneous liabilities (F.IV.) Intra-group transmission of proceeds from third-party financing Other intra-group liabilities1 Subtotal intra-group miscellaneous liabilities Liabilities to third parties Subtotal Miscellaneous liabilities (F.IV.) Total Total Term < 1 year Term 1 – 5 years Term > 5 years 2,481,240 10,908,857 13,390,097 2,750,117 250,375 85,440 121,226 206,666 154,117 250,375 6,929,060 1,543,948 27,486,194 19,122,194 - 1,500,000 1,500,000 137,000 - 2,250,000 8,264,000 2,395,800 9,287,631 11,683,431 2,459,000 - 3,135,112 100,000 34,415,254 20,666,141 10,514,000 3,235,112 2,025,695 2,025,695 - - 36,440,949 22,691,837 10,514,000 3,235,112 52,831,538 23,302,995 12,151,000 17,377,543 1_As of 31 December 2019, other intra-group liabilities due within one year amounted to € 19.1 bn. Thereof, cash pool and intra-group loans accounted for € 9.1 bn and € 9.4 bn, respectively. Upon maturity, intra-group loans are rolled forward by Allianz SE on a regular basis. Maturity table as of 31 December 2018 € thou Subordinated liabilities (B.) Intra-group transmission of proceeds from third-party financing Subordinated bonds issued by Allianz SE Subtotal Subordinated liabilities (B.) Bonds (intra-group – F.II.) Liabilities to banks (F.III.) Miscellaneous liabilities (F.IV.) Intra-group transmission of proceeds from third-party financing Other intra-group liabilities1 Subtotal intra-group miscellaneous liabilities Liabilities to third parties Subtotal Miscellaneous liabilities (F.IV.) Total Total Term < 1 year Term 1 – 5 years Term > 5 years 3,412,136 10,337,461 13,749,596 1,848,356 2,374 112,136 124,307 236,443 302,356 2,374 - 1,500,000 1,500,000 - - 6,784,610 1,670,207 3,500,000 28,731,857 15,993,567 12,638,290 3,300,000 8,713,153 12,013,153 1,546,000 - 1,614,404 100,000 35,516,467 17,663,774 16,138,290 1,714,404 1,393,884 1,393,884 - - 36,910,351 19,057,657 16,138,290 1,714,404 52,510,678 19,598,831 17,638,290 15,273,557 1_As of 31 December 2018, other intra-group liabilities due within one year amounted to € 16.0 bn. Thereof, cash pool and intra-group loans accounted for € 8.4 bn and € 6.6 bn, respectively. Upon maturity, intra-group loans are rolled forward by Allianz SE on a regular basis. Of our total financial liabilities, other intra-group liabilities with a resi- dual term of less than one year amounting to € 0.9 bn (2018: € 0.8 bn) were secured by assets pledged as collateral as of 31 December 2019. 74 Annual Report 2019 – Allianz SE C _ Financial Statements of Allianz SE 17 _ Information about derivative financial instruments Options dealing in shares and share indices as of 31 December 2019 Nominal Fair value Book value Underlying Balance sheet position Class Long call Short call Long put Short put € thou 51,988 51,988 44,999 44,999 € thou 9,446 (9,466) 1,540 (1,540) € thou 5,249 5,249 1,872 1,872 Share index Share index Share index Share index Assets D.III. Liabilities F.IV. Assets D.III. Liabilities F.IV. The options on share indices are held in the context of hedging ac- tivities of Allianz companies with Allianz SE. Allianz SE hedged these positions by entering into countertrades at the market. Both intra- group and group-external positions were combined to valuation units (“Bewertungseinheiten”). The average remaining term of the call op- tions is eight years, the remaining term of the put options less than one year. European-type options are valued using the Black Scholes model and American-type options using the binomial model, both based on the closing price on the valuation date. Yield curves are derived from the swap rates prevailing on the valuation date. The future dividend yield is estimated on the basis of market information on the valuation date. Volatility is estimated based on currently traded implicit volatility, taking into account the residual term and the ratio between the strike price and the prevailing share price. Forward contracts in shares, share indices and hedge RSU as of 31 December 2019 Class Long forward Long forward Long forward Short forward Short forward Hedge RSU Nominal Fair value Book value Underlying Balance sheet position € thou 551,764 238,293 304,533 238,293 304,533 281,579 € thou 40,940 50,636 22,826 (50,636) (22,826) (423,816) € thou – – – – – 423,816 Allianz SE share Liabilities D. UniCredit S.p.A. share China Pacific Insurance (Group) Company Ltd. share China Pacific Insurance (Group) Company Ltd. share UniCredit S.p.A. share – – – – Allianz SE share Liabilities F.IV. Positions in long forwards on Allianz SE shares and in hedge RSU are held in the context of hedging the Allianz Equity Incentive Plans. For the purpose of hedging the share price risk of UniCredit S.p.A. shares and of the shares in China Pacific Insurance (Group) Company Ltd., our subsidiary Allianz Finance II Luxembourg S.à.r.l. entered into short forwards on these underlying with Allianz SE. Allianz SE hedged these positions by entering into countertrades at the market. Both intra- group and group-external positions were combined to valuation units (“Bewertungseinheiten”). The remaining term of these forwards is less than one year. The fair value of a forward contract is determined as the difference between the underlying closing price on the valuation date and the discounted forward price. The net present value of dividend payments due before maturity of the forward contract is also taken into ac- count, unless the dividends are subject to a pass-through agreement. Liabilities from hedge RSU, which the Group companies acquire from Allianz SE in order to hedge their liabilities from the Group Equity Incentive programs, are valued on the basis of the Allianz closing price on the valuation date, minus the net present value of estimated future dividends due before maturity of the respective hedge RSU. Applicable discount rates are derived from interpolated swap rates. Forward contracts in bonds as of 31 December 2019 Class Long forward Short forward Nominal € thou 535,960 535,960 Fair value Book value Underlying Balance sheet position € thou 16,842 (16,842) € thou – – Bonds Bonds – – For the purpose of hedging the interest rate risk of investments, Allianz Benelux N.V. entered into forward transactions on bonds with Allianz SE. Allianz SE hedged these positions by entering into counter- trades at the market. Both intra-group and group-external positions were combined to valuation units (“Bewertungseinheiten”). The aver- age remaining term of these forwards is one year. The fair value of a forward bond contract is determined as the difference between the market price of the underlying bond (including accrued interest) on the valuation date and the discounted forward price, taking into account the net present value of all interest payments occurring between the valuation date and the expiry date of the for- ward contract. Annual Report 2019 – Allianz SE 75 C _ Financial Statements of Allianz SE Forward currency contracts as of 31 December 2019 Class Long forward Short forward Nominal € thou Fair value € thou 10,566,807 120,511 Book value € thou 22,856 17,278,332 (343,920) 263,596 Underlying Balance sheet position AED, AUD, BRL, CAD, CHF, CNY, COP, CZK, GBP, HKD, HUF, ILS, INR, JPY, KRW, NOK, PLN, QAR, SEK, TRY, TWD, USD, ZAR AED, AUD, BRL, CAD, CHF, CNY, COP, CZK, GBP, HKD, HUF, JPY, NOK, PLN, QAR, SEK, SGD, TRY, USD, ZAR Liabilities D. Liabilities D. Allianz SE holds long and short positions in various currencies in order to manage foreign exchange risk within Allianz SE and other entities of the Allianz Group. The fair value of a forward currency contract is the difference between the discounted forward price and the spot rate in Euros. The discounted forward price is calculated by applying the Euro interest rate as a discount rate and the foreign currency interest rate as a com- pound interest rate. Long forwards and short forwards with a nominal value of € 6.5 bn and a fair value of € 130.7 mn, respectively, were aggregated to valuation units (“Bewertungseinheiten”), each comprising intra-group positions offset by countertrades at the market. The average remaining term of the forwards in valuation units is less than one year. Swap contracts as of 31 December 2019 Class Receiver swap EUR Nominal € thou 1,500,000 Fair value Book value € thou 55,685 € thou – Underlying Balance sheet position Long-term interst rate positions – Allianz SE holds a EUR receiver swap in order to hedge interest rate risk arising from interest rate positions of Allianz SE. The fair value of an interest rate swap is the aggregate net pre- sent value of all expected incoming and outgoing cash flows of the respective swap transaction. Our financial participations include put and call options on com- pany shares, which are linked to certain conditions. Due to the lack of quoted prices on active markets for these financial participations and the uncertainty regarding the occurrence of the option conditions, the fair value of such options cannot be determined reliably. Wherever feasible, contractual arrangements including the option agreements were taken into account when determining the fair value of the finan- cial participation. However, no stand-alone valuation of the options as derivative financial instruments was performed. 76 Annual Report 2019 – Allianz SE C _ Financial Statements of Allianz SE SUPPLEMENTARY INFORMATION ON THE INCOME STATEMENT 18 _ Gross premiums written 22 _ Underwriting expenses (net) € thou Property-Casualty reinsurance Life/Health reinsurance Total € thou 2019 2018 11,911,333 10,514,438 Gross underwriting expenses 472,920 397,706 Less: commission received on retroceded business 12,384,252 10,912,145 Net 2019 2018 (3,599,956) (3,191,149) 42,392 172,907 (3,557,564) (3,018,242) Gross premiums written increased by 13.5 % to € 12,384 mn. This increase was driven by motor reinsurance (€ 789 mn) as well as fire and property reinsurance (€ 431 mn). The increase of underwriting expenses (net) mainly resulted from the premium development. The expense ratio (net) in Property-Casualty reinsurance increased to 30.7 % (2018: 30.0 %), driven by a higher com- mission ratio of 29.8 % (2018: 29.0 %). 19 _ Allocated interest return (net) The allocated interest return (net) mainly corresponds to the agreed interest rate for deposited provisions and is therefore transferred from the non-technical section to the technical section. It reduced to € 18 mn (2018: € 19 mn). 20 _ Run-off result In 2019, the run-off result amounted to € (204) mn (2018: € 276 mn) and was mainly influenced by liability reinsurance (€ (350) mn), partly offset by fire and property reinsurance (€ 79 mn) as well as credit and bond reinsurance (€ 67 mn). 21 _ Change in other insurance reserves (net) € thou Change in aggregate policy reserves (net) Other insurance reserves (net) Total 2019 26,841 (5,431) 2018 47,158 6,535 21,410 53,693 23 _ Investment income € thou a) Income from participations thereof from affiliated enterprises: € 4,004,912 thou (2018: € 4,564,423 thou) b) Income from other investments thereof from affiliated enterprises: € 212,828 thou (2018: € 258,784 thou) aa) Income from real estate, real estate rights, and buildings including buildings on land not owned by Allianz SE bb) Income from other investments (see below) c) Income from reversal of impairments d) Realized gains e) Income from profit transfer agreements Total bb) Income from other investments Debt securities Loans to affiliated enterprises Funds held by others under reinsurance business assumed Receivables from intra-group cash pooling Interests in funds Other The change in aggregate policy reserves (net) was mainly driven by increased business volume in life reinsurance. Total The other insurance reserves (net) mostly include reserves for mo- tor reinsurance. 2019 2018 4,045,911 4,586,715 12,808 508,602 94,191 264,651 12,196 602,430 147,407 119,263 2,624,794 2,111,242 7,550,956 7,579,253 2019 2018 257,266 86,469 125,322 21,513 12,540 5,492 295,386 151,434 87,182 41,863 22,076 4,489 508,602 602,430 Annual Report 2019 – Allianz SE 77 C _ Financial Statements of Allianz SE 24 _ Investment expenses 25 _ Other non-technical result € thou a) Expenses for the management of investments, interest, and other investment-related expenses aa) Interest expenses (see below) ab) Other b) Depreciation and impairments of investments c) Realized losses d) Expenses from losses taken over Total aa) Interest expenses Subordinated bonds issued by Allianz SE Liabilities from intra-group loans Intra-group subordinated liabilities (intra-group transmission of proceeds from third-party financing) Liabilities from intra-group bonds Liabilities from intra-group cash pooling Liabilities from commercial paper issues Other Total 2019 2018 (959,124) (81,986) (245,288) (172,798) (162,887) (1,000,771) (71,574) (177,846) (119,955) (276,582) (1,622,082) (1,646,728) 2019 2018 (413,171) (235,039) (408,160) (223,107) (186,418) (56,638) (41,870) (16,883) (9,105) (200,196) (104,193) (35,959) (20,000) (9,156) (959,124) (1,000,771) € thou Other Income Gains on derivatives Currency gains Other service revenues from group companies Income from the release of other provisions Intercompany income Service revenues from pensions charged to group companies Interest and similar income thereof from affiliated enterprises: € 67 thou (2018: € 17 thou) Other Total other income Other expenses Expenses for derivatives Interest and similar expenses thereof from reversal of discounting miscellaneous provisions: € (1,410) thou (2018: € (2,489) thou) thereof from affiliated enterprises: € (1,112) thou (2018: € (1,803) thou) Currency losses Other HR-related expenses Other administrative expenses Anticipated losses on derivatives Depreciation and impairments of investments include unscheduled write-downs of € 140 mn (2018: € 0.4 mn) on holdings in affiliated enterprises. Other service expenses to group companies Pension expenses Service expenses from pensions charged to group companies Other Total other expenses Other non-technical Result 2019 2018 1,125,093 555,349 206,565 175,975 39,294 12,185 10,694 3,869 930,700 610,189 185,610 193,405 36,617 15,939 12,102 4,506 2,129,025 1,989,069 (974,077) (566,503) (803,309) (698,360) (314,859) (313,972) (210,244) (206,565) (107,053) (12,185) (2,651) (731,425) (811,659) (283,064) (290,206) (298,588) (185,610) (157,894) (15,939) (5,728) (3,643,275) (3,346,618) (1,514,251) (1,357,549) 78 Annual Report 2019 – Allianz SE C _ Financial Statements of Allianz SE Our other non-technical result amounted to € (1,514) mn after € (1,358) mn in 2018. This deterioration is mainly attributable to the re- sult from derivatives, which turned negative to € (59) mn after € 66 mn in the previous year, driven by forward positions held to manage the foreign exchange risk in various currencies as well as the share price risk resulting from the Allianz Equity Incentive plans. Allianz SE has a joint liability for a large part of the pension pro- visions of its German subsidiaries (see note 15 for more details). Ex- penses incurred in this context are recognized as service expenses from pension plans charged to group companies, as they are reimbursed by the German subsidiaries according to the cost allocation contract and result in corresponding service revenues. Income from the release of other provisions refers to income from the release of pension provisions of € 135 mn in 2019. The reason is the decrease in the pension trend parameter of 1.7 % p.a. to 1.5 % p.a. Furthermore, other income/expenses include the following offset income and expenses: € thou Actual return of the offset assets Imputed interest cost for the settlement amount of the offset liabilities Effect resulting from the change in the discount rate for the settlement amount Net amount of the offset income and expenses 2019 2018 Pensions and similar obligations Other obligations Pensions and similar obligations Other obligations (19,351) 234,913 502,444 718,006 (585) 596 7 18 (15,123) 248,512 446,974 680,363 (270) 313 11 54 Wirtschaftsprüfungsgesellschaft FEES TO THE AUDITOR PricewaterhouseCoopers GmbH (PwC GmbH) is the external auditing firm for the Allianz Group. Audit services primarily relate to services rendered for the audit of the Allianz Group’s consolidated financial statements, the audit of the stat- utory financial statements of Allianz SE and its subsidiaries, the audit of the Allianz Group’s solvency balance sheet as well as the solvency balance sheets of Allianz SE and its subsidiaries. In addition, a review of the Allianz Group’s consolidated interim financial statements was performed. Tax services primarily refer to tax compliance services, other ser- vices mainly refer to consulting services. Details of the fees to the auditor for services to Allianz SE, pursu- ant to § 285 (17) of the German Commercial Code, can be found in the notes to the Allianz Group’s consolidated financial statements. 26 _ Income taxes In 2019, our tax income, most of which is net operating income, de- creased to € 419 mn (2018: € 505 mn). As the controlling company (“Organträger”) of the tax group, Allianz SE files a consolidated tax return with most of its German af- filiated enterprises. As long as the corporate income tax loss carried forward is not fully utilized, the tax compensation payments as of € 485 mn (2018: € 635 mn) received from members of the tax group result in a tax income. The greatest differences between accounting and tax-based valuation concern the balance sheet items “pension accruals”, “re- serves for loss and loss adjustment expenses”, and “provisions for an- ticipated losses” resulting in deferred tax assets. In addition, the existing corporate tax loss increases the surplus of deferred tax assets. The valuation of the domestic deferred taxes is based on the following tax rates:  31.0 % differences in balance sheet items,  15.8 % corporate tax losses,  15.2 % trade tax losses. 27 _ Net earnings € thou Net income Unappropriated earnings carried forward Transfer to other revenue reserves Net earnings 2019 4,603,376 776,906 (900,000) 2018 5,355,011 689,142 (1,500,000) 4,480,282 4,544,153 Annual Report 2019 – Allianz SE 79 C _ Financial Statements of Allianz SE OTHER INFORMATION Contingent liabilities, other financial commitments, and litigation CONTINGENT LIABILITIES GUARANTEES RELATING TO ALLIANZ GROUP COMPANIES The following guarantees have been provided by Allianz SE to Allianz Group companies as well as to third parties with regard to the liabilities of certain Allianz Group companies:  Bonds issued by Allianz Finance II B.V. and Allianz Finance III B.V. for € 11.0 bn, of which € 2.4 bn were on a subordinated basis,  Commercial papers issued by Allianz Finance Corporation. As of 31 December 2019, USD 0.2 bn in commercial papers were issued as part of the program,  Letters of credit issued to various Allianz Group companies amounting to € 1.1 bn. Guarantee declarations totaling € 1.1 bn have also been made for life policies signed by Allianz Compañía de Seguros y Reaseguros S.A. Contingent liabilities exist because of indirect pension promises organized via pension funds (Allianz Versorgungskasse VVaG) and support funds (Allianz Pensionsverein e.V.). The adjustment obligation according to Section 16 BetrAVG is not funded in the APV old tariff. Due to this and because of the sharp decrease of the discount rate as of 31 December 2019, the plan assets of the support funds are less than the liabilities pension obligations. As of 31 December 2019, the resulting deficit amounts to € 19 mn (2018: € 8 mn). Allianz SE has a joint liability of € 501 mn for a part of the pension promises of its German subsidiaries. In the context of the sale of investments, guarantees were given in individual cases to cover counterparty exposure or the various bases used to determine purchase prices. In addition, Allianz SE has issued guarantees to various Alli- anz Group companies totaling € 0.7 bn. OTHER GUARANTEES TO THIRD PARTIES A contingent indemnity agreement has been entered into with re- spect to securities issued by HT1 Funding GmbH, in case HT1 Funding GmbH cannot serve the agreed coupon of the bond in part or in total. On 18 November 2019, HT1 has issued a call notice with respect to the securities, effective on 30 June 2020. The call is subject to the absence of an obligation to write-down the silent participation between HT1 Funding GmbH and Commerzbank AG, which is related to the securi- ties issued by HT1 Funding GmbH. Allianz SE expects that the securities will be redeemed on 30 June 2020, and does not expect to be obliged to make any future payment under the contingent indemnity agree- ment, which automatically terminates upon the repayment of the se- curities. As of 31 December 2019, other guarantee commitments given by Allianz SE amounted to € 3 mn. Allianz SE enters into contingent liabilities only after careful con- sideration of the risks involved. On the basis of a continuous evaluation of the risk situation of the contingent liabilities entered into, and taking into account the knowledge gained up to the preparation date, it can be assumed that the obligations underlying the contingent liabilities can be met by the respective principal debtors. As of today, and to the best of our knowledge, Allianz SE assesses the probability of a loss re- sulting from contingent liabilities to be extremely remote. LEGAL OBLIGATIONS Legal obligations to assume any losses arise on account of manage- ment control agreements and/or profit transfer agreements with the following companies:  Allianz Argos 14 GmbH,  Allianz Asset Management GmbH,  Allianz Climate Solutions GmbH,  Allianz Deutschland AG,  Allianz Direct Versicherungs-AG,  Allianz Finanzbeteiligungs GmbH,  Allianz Global Corporate & Specialty SE,  Allianz Global Health GmbH,  Allianz Investment Management SE,  Allianz Real Estate GmbH,  Allianz Technology SE,  AZ-Arges Vermögensverwaltungsgesellschaft mbH,  IDS GmbH-Analysis and Reporting Services. OTHER FINANCIAL COMMITMENTS There are financial obligations of € 554 mn, which mainly result from advertising agreements LITIGATION Allianz SE is involved in legal, regulatory, and arbitration proceedings. Such proceedings arise in the ordinary course of business, including, amongst others, Allianz SE’s activities as a reinsurance company, employer, investor and taxpayer. It is not feasible to predict or deter- mine the ultimate outcome of the pending or threatened proceedings. Management does not believe that the outcome of these proceedings will have a material adverse effect on the financial position and the results of Allianz SE, after consideration of any provisions applicable. 80 Annual Report 2019 – Allianz SE C _ Financial Statements of Allianz SE Board Members The pension obligations for former members of the Board of Management and their surviving dependents are as follows: All supervisory board members, current or having resigned during the year, and all board members, current or having resigned during the year, are denoted on pages 7 and 8. Their memberships in supervisory boards or similar committees of other enterprises are also mentioned on these pages. € thou as of 31 December Fair value of the offset assets Settlement amount of the offset liabilities Pension provisions 2019 123,739 128,064 4,325 2018 124,056 128,576 4,520 Board of Management remuneration1 As of 31 December 2019, the Board of Management was comprised of ten members. The following expenses reflect the full Board of Manage- ment active in the respective year. The remuneration of the Board of Management includes fixed and variable components. The variable remuneration consists of the annual bonus (short- term), the mid-term bonus (MTB) (until 2018, discontinued from 2019) and the equity-related remuneration (long-term). In 2019, the equity- related remuneration was comprised of 97,482 2 (2018: 61,2503) Restricted Stock Units (RSU). Board of Management remuneration € thou Base salary Annual bonus MTB 2016 – 2018 Perquisites Subtotal Base salary, Annual bonus, MTB and Perquisites Fair value of RSU at grant date Subtotal equity-related remuneration Total 2019 (10,481) (10,011) - (267) (20,759) (18,346) (18,346) 2018 (7,875) (9,361) (23,481) (485) (41,202) (9,361) (9,361) (39,105) (50,563) Full-time staff Part-time staff Total Supervisory Board remuneration4 Fixed remuneration Committee-related remuneration Attendance fees Total 2019 2018 € thou (1,750) (850) (85) % 65.2 31.7 3.2 € thou (1,750) (850) (84) % 65.2 31.7 3.1 (2,685) 100.0 (2,684) 100.0 Average number of employees Excluding members of the Board of Management, trainees, interns, employees in the passive phase of early retirement and on early retire- ment, and employees on maternity leave or voluntary military/federal voluntary service. 2019 1,488 223 1,711 2018 1,450 223 1,673 The total remuneration of the Board of Management of Allianz SE for 2019 amounted to € 39,105 thou (2018, including the pay-out from the MTB 2016 – 2018: € 50,563 thou). Staff expenses EQUITY-RELATED REMUNERATION The remuneration system as of 1 January 2010 only awards RSUs. For 2019, the fair value of the RSUs at the date of grant was € 18,346 thou (2018: € 9,361 thou). BENEFITS TO RETIRED MEMBERS OF THE BOARD OF MANAGEMENT In 2019, remuneration and other benefits of € 7 mn (2018: € 7 mn) were paid to retired members of the Board of Management and to surviving dependents of deceased former Board members. Including members of the Board of Management, trainees, interns, employees in the passive phase of early retirement, and employees on maternity leave or voluntary military/federal voluntary service. € thou Wages and salaries Statutory welfare contributions and expenses for optional support payments Expenses for pensions and other post-retirement benefits Total expenses 2019 2018 (326,780) (314,304) (25,113) (26,535) (25,297) (22,466) (378,428) (362,067) 1_For detailed information regarding the Board of Management remuneration, please refer to the Remuneration Report starting on page 39. 2_The relevant share price to determine the final number of RSUs granted is only available after the sign-off by the external auditors, thus numbers are based on a best estimate. 3_The disclosure in the Annual Report 2018 was based on a best estimate of the RSU grants. The figure shown here for 2018 now includes the actual fair value as of the grant date (1 March 2019), including the Board members who left as of 31 December 2018. The value therefore differs from the value disclosed last year. 4_For detailed information regarding the Supervisory Board remuneration, please refer to the Remuneration Report starting on page 39. Annual Report 2019 – Allianz SE 81 C _ Financial Statements of Allianz SE Events after the balance sheet date Information pursuant to § 160 (1) No. 8 AktG SHARE BUY-BACK PROGRAM In March 2020, Allianz SE has started a new share buy-back program with a volume of up to € 1.5 bn. For further information, please refer to the section “Expected dividend development” of the chapter Outlook 2020 within the Group Management Report. Mandates of the Members of the Supervisory Board and Board of Management The disclosures required in accordance with § 285 No. 10 HGB for the Supervisory Board and Board of Management can be found on pages 7 and 8. The following major shareholdings exist and were reported pursuant to § 20 (1) or (4) AktG or pursuant to §§ 33, 34 WpHG: By way of a letter dated 15 November 2019, BlackRock Inc., Wilmington, Delaware, United States of America, notified in the course of a voluntary group notification with triggered threshold on subsidiary level its voting rights pursuant to §§ 33, 34 WpHG as of 12 November 2019, amounting to 6.39 % (representing 26,641,372 shares), its holdings in instruments pursuant to § 38 (1) No. 1 WpHG as of 12 November 2019, amounting to 0.02 % (representing 63,452 vot- ing rights absolute), and its holdings in instruments pursuant to § 38 (1) No. 2 WpHG as of 12 November 2019, amounting to 0.03 % (representing 141,728 voting rights absolute). The total position as no- tified on 15 November 2019 amounted to 6.43 %. By way of a letter dated 21 May 2019, the Ministry of Finance on behalf of the State of Norway, Oslo, Norway, notified that its voting rights pursuant to §§ 33, 34 WpHG have fallen below 3 % as of 20 May 2019 and amounted to 2.65 % (representing 11,250,552 shares). As of 20 May 2019, its holdings in instruments pursuant to § 38 (1) No. 1 WpHG amount to 0.05 % (representing 213,917 voting rights absolute). The total position notified on 21 May 2019, amounted to 2.70 %. Declaration of Conformity with the German Corporate Governance Code On 13 December 2019, the Board of Management and the Supervi- sory Board of Allianz SE issued the Declaration of Conformity with the German Corporate Governance Code required by § 161 AktG and it permanently available on the company’s website at made www.allianz.com/corporate-governance . 82 Annual Report 2019 – Allianz SE C _ Financial Statements of Allianz SE LIST OF PARTICIPATIONS OF ALLIANZ SE, MUNICH AS OF 31 DECEMBER 2019 ACCORDING TO § 285 NO. 11 AND 11B HGB IN CONJUNCTION WITH § 286 (3) NO. 1 HGB Owned1 % Equity € thou Net Earnings € thou Owned1 % Equity € thou Net Earnings € thou GERMAN ENTITIES Affiliates ACP Vermögensverwaltung GmbH & Co. KG Nr. 4a, Munich ADAC Autoversicherung AG, Munich ADEUS Aktienregister-Service-GmbH, Munich AGCS Infrastrukturfonds GmbH, Munich AGCS-Argos 76 Vermögensverwaltungsgesellschaft mbH, Munich AGCS-Argos 86 Vermögensverwaltungsgesellschaft mbH, Munich ALIDA Grundstücksgesellschaft mbH & Co. KG, Hamburg Allianz Africa Holding GmbH, Munich Allianz Argos 14 GmbH, Munich Allianz Asset Management GmbH, Munich Allianz AZL Vermögensverwaltung GmbH & Co. KG, Munich Allianz Beratungs- und Vertriebs-AG, Munich Allianz Capital Partners GmbH, Munich Allianz Capital Partners Verwaltungs GmbH, Munich Allianz Deutschland AG, Munich Allianz Direct Versicherungs-AG, Munich Allianz Finanzbeteiligungs GmbH, Munich 100.0 51.0 80.0 100.0 2 5,670 112,475 6,462 29,042 100.0 2 53,788 100.0 2 42,705 95.0 3 100.0 100.0 2 100.0 2 100.0 100.0 100.0 2 100.0 100.0 100.0 2 100.0 2 398,486 180,018 4,490,006 3,308,358 409,334 8,605 27,388 55,973 7,274,341 44,831 824,678 Allianz Global Corporate & Specialty SE, Munich 100.0 2,3 1,144,237 100.0 2 100.0 3 100.0 2 100.0 2 100.0 2 307,838 35,670 5,882 188,974 947,286 100.0 2 32,893 100.0 2 4,237,235 100.0 2 26,321 Allianz Global Investors GmbH, Frankfurt am Main Allianz Handwerker Services GmbH, Aschheim Allianz Investment Management SE, Munich Allianz Leben Direkt Infrastruktur GmbH, Munich Allianz Leben Infrastrukturfonds GmbH, Munich Allianz Leben Private Equity Fonds 1998 GmbH, Munich Allianz Leben Private Equity Fonds 2001 GmbH, Munich Allianz Leben Private Equity Fonds 2008 GmbH, Munich Allianz Lebensversicherungs-Aktiengesellschaft, Stuttgart Allianz of Asia-Pacific and Africa GmbH, Munich Allianz Partners Deutschland GmbH, Aschheim Allianz Pensionsfonds Aktiengesellschaft, Stuttgart Allianz Pensionskasse Aktiengesellschaft, Stuttgart Allianz Private Equity GmbH, Munich Allianz Private Krankenversicherungs- Aktiengesellschaft, Munich Allianz Real Estate GmbH, Munich Allianz Renewable Energy Subholding GmbH & Co. KG, Sehestedt Allianz Taunusanlage GbR, Stuttgart Allianz Technology SE, Munich Allianz Versicherungs-Aktiengesellschaft, Munich Allianz X GmbH, Munich APK Infrastrukturfonds GmbH, Munich Annual Report 2019 – Allianz SE APK-Argos 75 Vermögensverwaltungsgesellschaft mbH, Munich APK-Argos 85 Vermögensverwaltungsgesellschaft mbH, Munich (12) 11,438 APKV Direkt Infrastruktur GmbH, Munich APKV Infrastrukturfonds GmbH, Munich 852 APKV Private Equity Fonds GmbH, Munich - - - 10,657 (7) - - (60) - - 27,691 - - - - - APKV-Argos 74 Vermögensverwaltungsgesellschaft mbH, Munich APKV-Argos 84 Vermögensverwaltungsgesellschaft mbH, Munich ARE Funds APKV GmbH, Munich ARE Funds AZL GmbH, Munich ARE Funds AZV GmbH, Munich atpacvc Fund GmbH & Co. KG, Munich Atropos Vermögensverwaltungsgesellschaft mbH, Munich AZ ATLAS GmbH & Co. KG, Stuttgart AZ ATLAS Immo GmbH, Stuttgart AZ-Arges Vermögensverwaltungsgesellschaft mbH, Munich AZL-Argos 73 Vermögensverwaltungsgesellschaft mbH, Munich AZL-Argos 83 Vermögensverwaltungsgesellschaft mbH, Munich AZL-Private Finance GmbH, Stuttgart AZ-SGD Classic Infrastrukturfonds GmbH, Munich AZ-SGD Direkt Infrastruktur GmbH, Munich (4,916) AZ-SGD Infrastrukturfonds GmbH, Munich - - - - - - AZ-SGD Private Equity Fonds 2 GmbH, Munich AZ-SGD Private Equity Fonds GmbH, Munich AZV-Argos 72 Vermögensverwaltungsgesellschaft mbH, Munich AZV-Argos 77 Vermögensverwaltungsgesellschaft mbH, Munich AZV-Argos 82 Vermögensverwaltungsgesellschaft mbH, Munich AZV-Argos 87 Vermögensverwaltungsgesellschaft mbH, Munich 100.0 100.0 100.0 3 100.0 3 100.0 100.0 2 100.0 2 100.0 2,3 100.0 3 100.0 3 100.0 2,3 100.0 100.0 100.0 2 2,991,344 535,000 BrahmsQ Objekt GmbH & Co. KG, Stuttgart 831,291 11,433 57,049 297,493 31,323 337,731 21,237 16,500 170,235 328,396 887,569 6,764 19,928 36,389 (1,307) 963 25,666 - - - 1,414 3,907 - - 26 - Deutsche Lebensversicherungs-Aktiengesellschaft, Berlin Euler Hermes Aktiengesellschaft, Hamburg Lola Vermögensverwaltungsgesellschaft mbH & Co. KG, Munich manroland AG, Offenbach am Main manroland Vertrieb und Service GmbH, Mühlheim am Main Mercato Leadmanagement Investments Holdings GmbH, Berlin PIMCO Deutschland GmbH, Munich REC Frankfurt Objekt GmbH & Co. KG, Hamburg Seine GmbH, Munich Seine II GmbH, Munich Spherion Objekt GmbH & Co. KG, Stuttgart Syncier GmbH, Munich 100.0 2 36,826 100.0 2 100.0 2 100.0 2 100.0 2 62,498 36,101 141,985 627,026 100.0 2 105,272 100.0 2 100.0 2,3 202,836 123,850 100.0 2,3 1,152,709 100.0 2,3 100.0 100.0 95.0 3 100.0 3 9,657 25,333 451,996 44,393 9,588 100.0 2 172,158 100.0 2 581,403 100.0 2 100.0 2 100.0 2 100.0 2 100.0 2 100.0 2 100.0 2 1,348,437 100,100 19,435 33,787 136,249 18,538 714,899 100.0 2 52,924 100.0 2 6,323 100.0 2 104,375 100.0 2 95.0 3 100.0 2 100.0 3 83,200 82,626 44,991 107,698 - - - - - - - - - - (3,974) (3,888) (2,009) 1 - - - - - - - - - - - - - 3,366 - 14,372 100.0 3 100.0 4,5 6,070 (6) 148,289 (179,129) 100.0 4,5 5,155 100.0 3 100.0 2 80.0 3 100.0 100.0 100.0 3 90.0 12,036 35,030 296,097 52,218 32,602 70,622 5,147 - 149 - 10,307 (650) (347) 3,416 (4,111) 83 C _ Financial Statements of Allianz SE Owned1 % Equity € thou Net Earnings € thou Volkswagen Autoversicherung AG, Braunschweig 100.0 2 112,561 Volkswagen Autoversicherung Holding GmbH, Braunschweig Windpark Aller-Leine-Tal GmbH & Co. KG, Sehestedt Windpark Berge-Kleeste GmbH & Co. KG, Sehestedt Windpark Büttel GmbH & Co. KG, Sehestedt Windpark Calau GmbH & Co. KG, Sehestedt Windpark Cottbuser See GmbH & Co. KG, Sehestedt Windpark Dahme GmbH & Co. KG, Sehestedt Windpark Eckolstädt GmbH & Co. KG, Sehestedt Windpark Freyenstein-Halenbeck GmbH & Co. KG, Sehestedt Windpark Kesfeld-Heckhuscheid GmbH & Co. KG, Sehestedt Windpark Kittlitz GmbH & Co. KG, Sehestedt Windpark Pröttlin GmbH & Co. KG, Sehestedt Windpark Quitzow GmbH & Co. KG, Sehestedt Windpark Redekin-Genthin GmbH & Co. KG, Sehestedt Windpark Schönwalde GmbH & Co. KG, Sehestedt Windpark Waltersdorf GmbH & Co. KG Renditefonds, Sehestedt Windpark Werder Zinndorf GmbH & Co. KG, Sehestedt 49.0 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 117,254 20,341 9,350 22,160 48,282 9,448 24,596 34,425 100.0 3 18,903 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 20,475 7,591 14,463 14,219 24,164 16,223 100.0 3 9,412 4,534 774 1,432 1,558 1,819 1,401 3,637 1,267 1,501 237 807 1,484 1,515 1,152 849 634 100.0 3 24,421 2,334 Joint ventures AQ Überseehaus GmbH & Co. KG, Hamburg Dealis Fund Operations GmbH, Frankfurt am Main 40.0 3 50.0 6,535 32,914 Associates Autobahn Tank & Rast Gruppe GmbH & Co. KG, Bonn AV Packaging GmbH, Munich T&R Real Estate GmbH, Bonn Verimi GmbH, Berlin 25.0 3 100.0 25.0 3 15.0 3 372,238 16,764 140,814 54,793 Other participations below 20% voting rights GDV Dienstleistungs-GmbH, Hamburg Sana Kliniken AG, Ismaning EXTREMUS Versicherungs-Aktiengesellschaft, Cologne Protektor Lebensversicherungs-AG, Berlin MLP AG, Wiesloch FC Bayern München AG, Munich Simplesurance GmbH, Berlin La Famiglia Fonds I GmbH & Co. KG, Munich N26 GmbH, Berlin STEMMER IMAGING AG, Munich FOREIGN ENTITIES Affiliates 490 Lower Unit LP, Wilmington, DE Aero-Fonte S.r.l., Catania AGA Service Company Corp., Richmond, VA AGCS International Holding B.V., Amsterdam AGCS Marine Insurance Company, Chicago, IL AGCS Resseguros Brasil S.A., São Paulo AGF Benelux S.à r.l., Luxembourg AGF Holdings (UK) Limited, Guildford Allianz (UK) Limited, Guildford Allianz Africa SAS, Paris la Défense Allianz Alapkezelõ Zrt., Budapest 19.0 3 14.0 3 16.0 3 10.0 3 10.0 3 8.0 3 14.0 3 6.0 3 6.0 3 6.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 27,430 998,916 64,058 15,332 424,826 451,273 10,885 15,917 104,702 70,500 132,852 14,132 17,120 1,257,886 143,012 253,304 324,734 87,761 1,014,545 47,694 6,870 - Allianz Argentina Compañía de Seguros Generales S.A., Buenos Aires Allianz Argentina RE S.A., Buenos Aires Allianz Asset Management of America L.P., Dover, DE Allianz Asset Management of America LLC, Dover, DE Allianz Asset Management U.S. Holding II LLC, Dover, DE Allianz Australia Insurance Limited, Sydney Allianz Australia Life Insurance Holdings Limited, Sydney Allianz Australia Life Insurance Limited, Sydney Allianz Australia Limited, Sydney Allianz Ayudhya Assurance Public Company Limited, Bangkok Allianz Ayudhya Capital Public Company Limited, Bangkok Allianz Bank Bulgaria AD, Sofia Allianz Bank Financial Advisors S.p.A., Milan Allianz Banque S.A., Puteaux Allianz Benelux S.A., Brussels Allianz Bulgaria Holding AD, Sofia Allianz Cameroun Assurances SA, Douala Allianz Carbon Investments B.V., Amsterdam Allianz Cash SAS, Paris la Défense Allianz Chicago Private Reit LP, Wilmington, DE Allianz China Life Insurance Co. Ltd., Shanghai Allianz Colombia S.A., Bogotá D.C. Allianz Compañía de Seguros y Reaseguros S.A., Madrid Allianz Côte d'Ivoire Assurances SA, Abidjan Allianz Côte d'Ivoire Assurances Vie SA, Abidjan Allianz Debt Fund SCSp SICAV-SIF, Luxembourg (498) (61) 852 (262) (13) (28,661) Allianz do Brasil Participações Ltda., São Paulo Allianz Elementar Lebensversicherungs- Aktiengesellschaft, Vienna Allianz Elementar Versicherungs-Aktiengesellschaft, Vienna Allianz EM Loans S.C.S., Luxembourg Allianz Engineering Inspection Services Limited, Guildford Allianz Equity Investments Ltd., Guildford Allianz Europe B.V., Amsterdam Allianz Europe Ltd., Amsterdam Allianz Finance II B.V., Amsterdam Allianz Finance II Luxembourg S.à r.l., Luxembourg Allianz Finance IX Luxembourg S.A., Luxembourg Allianz Finance VII Luxembourg S.A., Luxembourg Allianz Finance VIII Luxembourg S.A., Luxembourg Allianz Fire and Marine Insurance Japan Ltd., Tokyo Allianz France Investissement OPCI, Paris la Défense Allianz France Real Estate Invest SPPICAV, Paris la Défense Allianz France Richelieu 1 S.A.S., Paris la Défense Allianz France S.A., Paris la Défense Allianz France US REIT LP, Wilmington, DE Allianz Fund Investments 2 S.A. (Compartment), Luxembourg Allianz Fund Investments Inc., Wilmington, DE Allianz General Insurance Co. Ltd., Bangkok Allianz General Insurance Company (Malaysia) Berhad p.l.c., Kuala Lumpur Allianz General Laos Ltd., Vientiane 901 99,642 118 320 34,494 21,954 10,354 - 39,906 7,800 4,735 5,818 (13,003) 805 2,223 11,101 (3,139) (13,075) 197,878 2,298 3,485 Owned1 % 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Equity € thou 76,139 12,958 Net Earnings € thou 35,197 10,528 713,789 1,483,843 6,493,935 1,828,789 245,732 1,777,624 132,010 105,477 1,758,570 73,385 237,872 - (19,423) 238,427 83.0 3 390,150 65,975 49.0 3 100.0 3 100.0 3 100.0 100.0 3 66.0 3 75.0 3 100.0 3 100.0 100.0 3 51.0 3 100.0 3 203,743 113,227 235,504 116,413 814,704 59,706 10,998 11,997 5,965 179,838 179,500 94,199 10,313 15,089 9,039 2,791 155,201 20,215 (2,232) (412) 294 15 84,291 (2,636) 100.0 864,268 142,364 74.0 3 71.0 3 100.0 3 100.0 7,485 7,749 946,663 293,858 3,354 3,061 20,270 76,003 100.0 113,226 12,198 100.0 100.0 3 100.0 3 100.0 3 559,637 169,030 13,573 157,114 220,784 10,440 1,939 (10,639) 100.0 3 45,031,308 3,513,244 3,529,367 161,533 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 8,230 4,145,810 239,921 2,841,328 858,790 29,156 135,066 100.0 3 1,471,945 100.0 100.0 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 51.0 3 534,522 6,142,162 117,572 47,579 271,272 16,218 419,193 9,117 3,629 22,578 (139) 6,912 3,005 3,356 5,385 243,386 (3,999) 979,460 672 29,849 761 (8,249) 48,824 1,586 84 Annual Report 2019 – Allianz SE Allianz Global Corporate & Specialty do Brasil Participações Ltda., Rio de Janeiro Allianz Global Corporate & Specialty of Africa (Proprietary) Ltd., Johannesburg Allianz Global Corporate & Specialty South Africa Ltd., Johannesburg Allianz Global Investors Asia Pacific Ltd., Hong Kong Allianz Global Investors Distributors LLC, Dover, DE Allianz Global Investors Holdings Ltd., London Allianz Global Investors Japan Co. Ltd., Tokyo Allianz Global Investors Singapore Ltd., Singapore Allianz Global Investors Taiwan Ltd., Taipei Allianz Global Investors U.S. Holdings LLC, Dover, DE Allianz Global Investors U.S. LLC, Dover, DE Allianz Global Life dac, Dublin Allianz Global Risks US Insurance Company Corp., Chicago, IL Allianz Hayat ve Emeklilik A.S., Istanbul Allianz Hellas Insurance Company S.A., Athens Allianz Hold Co Real Estate S.à r.l., Luxembourg Allianz Holding eins GmbH, Vienna Allianz Holding France SAS, Paris la Défense Allianz Holdings p.l.c., Dublin Allianz Holdings plc, Guildford Allianz Hrvatska d.d., Zagreb Allianz Hungária Biztosító Zrt., Budapest Allianz HY Investor LP, Wilmington, DE Allianz IARD S.A., Paris la Défense Allianz Infrastructure Czech HoldCo I S.à r.l., Luxembourg Allianz Infrastructure Czech HoldCo II S.à r.l., Luxembourg Allianz Infrastructure Luxembourg Holdco I S.A., Luxembourg Allianz Infrastructure Luxembourg Holdco II S.A., Luxembourg Allianz Infrastructure Luxembourg Holdco III S.A., Luxembourg Allianz Infrastructure Luxembourg Holdco IV S.A., Luxembourg Allianz Infrastructure Luxembourg I S.à r.l., Luxembourg Allianz Infrastructure Norway Holdco I S.à r.l., Luxembourg Allianz Infrastructure Spain Holdco I S.à r.l., Luxembourg Allianz Insurance Company of Kenya Limited, Nairobi Allianz Insurance Company-Egypt S.A.E., New Cairo Allianz Insurance Lanka Limited, Colombo Allianz Insurance plc, Guildford Allianz Inversiones S.A., Bogotá D.C. Allianz Invest Kapitalanlagegesellschaft mbH, Vienna Allianz Investment Management LLC, Minneapolis, MN Allianz Investmentbank Aktiengesellschaft, Vienna Allianz Investments III Luxembourg S.A., Luxembourg Allianz Jewel Fund ICAV, Dublin Allianz Jingdong General Insurance Company Ltd., Guangzhou Allianz Leasing Bulgaria AD, Sofia Allianz Leben Real Estate Holding I S.à r.l., Luxembourg Allianz Leben Real Estate Holding II S.à r.l., Luxembourg Allianz Life (Bermuda) Ltd., Hamilton Allianz Life Assurance Company-Egypt S.A.E., New Cairo Allianz Life Financial Services LLC, Minneapolis, MN Allianz Life Insurance Company Ltd., Moscow Allianz Life Insurance Company of Missouri, Clayton, MO Allianz Life Insurance Company of New York, New York, NY Allianz Life Insurance Company of North America, Minneapolis, MN Allianz Life Insurance Japan Ltd., Tokyo Allianz Life Insurance Malaysia Berhad p.l.c., Kuala Lumpur Allianz Life Luxembourg S.A., Luxembourg Allianz Malaysia Berhad p.l.c., Kuala Lumpur Allianz Marine (UK) Ltd., Ipswich Allianz Maroc S.A., Casablanca Allianz MENA Holding (Bermuda) Ltd., Hamilton 1,309 10,653 2,840 (4,931) 3,557 3,725 22,042 96,700 87,069 3,906 15,369 4,808 (7,612) 62,068 Owned1 % Equity € thou Net Earnings € thou 100.0 3 255,050 11,595 100.0 3 10,664 1,311 100.0 3 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 3 10,656 36,368 32,636 30,935 18,649 19,770 41,216 135,219 79,946 139,000 100.0 3 1,687,467 18,066 145,882 378,954 89.0 3 100.0 3 100.0 3 100.0 100.0 100.0 3 100.0 3 83.0 3 100.0 3 100.0 3 2,500,026 346,799 Allianz México S.A. Compañía de Seguros, Mexico City 9,152,290 1,098,804 Allianz Nederland Groep N.V., Rotterdam 61,516 1,706,434 136,710 137,850 370,422 20,006 256,682 16,705 62,132 (2,968) Allianz New Europe Holding GmbH, Vienna Allianz New Zealand Limited, Auckland Allianz Nigeria Insurance plc, Lagos 100.0 1,832,702 217,333 Allianz Partners S.A.S., Saint-Ouen Allianz p.l.c., Dublin Allianz Pensionskasse Aktiengesellschaft, Vienna Allianz penzijní spolecnost a.s., Prague Allianz PNB Life Insurance Inc., Makati City Allianz pojistovna a.s., Prague 100.0 3 106,876 29,845 100.0 3 106,839 29,562 Allianz Polska Services Sp. z o.o., Warsaw Allianz Popular Pensiones EGFP S.A., Madrid 100.0 3 3,197,850 169,051 Allianz Popular S.L., Madrid 100.0 3 667,839 35,284 100.0 3 264,700 100.0 3 65,358 (24) (23) Allianz Popular Vida Compañía de Seguros y Reaseguros S.A., Madrid Allianz Presse Infra S.C.S., Luxembourg Allianz Presse US REIT LP, Wilmington, DE Allianz Properties Limited, Guildford Allianz Re Dublin dac, Dublin 100.0 3 4,405,612 29,862 Allianz Real Estate Investment S.A., Luxembourg 100.0 3 120,462 13,827 100.0 3 100.0 3 95.0 3 100.0 3 100.0 3 100.0 3 100.0 100.0 3 100.0 100.0 3 100.0 3 50.0 3 100.0 3 50,045 6,100 18,614 59,895 1,144,003 5,748 8,191 5,305 28,709 1,255,160 154,196 158,853 5,527 (10) (1,130) 4,356 1,928 52,789 92 2,642 51,026 4,195 (34,865) (9,667) 4,193 906 Allianz Reinsurance America Inc., Los Angeles, CA Allianz Renewable Energy Partners I LP, London Allianz Renewable Energy Partners II Limited, London Allianz Renewable Energy Partners III LP, London Allianz Renewable Energy Partners IV Limited, London Allianz Renewable Energy Partners of America 2 LLC, Wilmington, DE Allianz Renewable Energy Partners of America LLC, Wilmington, DE Allianz Renewable Energy Partners V plc., London Allianz Renewable Energy Partners VI Limited, London Allianz Renewable Energy Partners VIII Limited, London Allianz Risk Transfer (Bermuda) Ltd., Hamilton Allianz Risk Transfer AG, Schaan Allianz Risk Transfer Inc., New York, NY Allianz S.p.A., Trieste Allianz Saúde S.A., São Paulo C _ Financial Statements of Allianz SE Owned1 % Equity € thou 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 2,212,918 8,232 51,237 32,529 46,392 Net Earnings € thou 7,089 2,611 9,532 8,022 12,210 100.0 3 285,966 15,534 100.0 3 155,919 6,086 100.0 3 100.0 3 100.0 3 100.0 3 75.0 3 100.0 3 99.0 3 100.0 3 100.0 3 100.0 3 100.0 100.0 99.0 3 7,059,505 587,140 23,058 (446) 222,612 92,777 223,426 10,656 80,321 33,004 150,932 211,597 802,761 37,071 23,129 31,044 17,441 32,835 38 (7,214) 8,028 21,507 32,247 233,037 2,083 (2,075) 100.0 3 100.0 3 100.0 100.0 3 51.0 3 100.0 3 100.0 3 100.0 60.0 100.0 92.0 3 92.0 3 100.0 3 100.0 3 100.0 3 100.0 100.0 100.0 99.0 99.0 3 396,368 856,843 12,476 35,510 33,938 239,402 21,201 18,789 32,161 9,668 762 2,776 1,852 67,020 4,271 15,606 888,438 129,829 75,736 15,116 59,109 216,298 35,868 (89) (514) 9,418 1,032,686 333,592 392,675 408,949 145,316 111,698 125,247 700,687 2,642 17,476 7,446 (21,926) 6,787 22,215 100.0 321,140 5,306 100.0 100.0 100.0 100.0 100.0 3 100.0 3 100.0 3 100.0 3 100.0 891,651 637,681 721,446 280,319 105,126 532,005 75,393 78,830 24,708 8,473 6,783 21,380 59,573 8,580 2,174,168 492,729 38,175 2,657 Allianz Individual Insurance Group LLC, Minneapolis, MN 100.0 3 193,941 (501) Allianz of America Inc., Wilmington, DE 100.0 14,127,950 2,094,961 100.0 3 1,110,510 188,176 Allianz Saudi Fransi Cooperative Insurance Company, Riyadh 51.0 3 62,390 5,893 Annual Report 2019 – Allianz SE 85 C _ Financial Statements of Allianz SE Allianz Seguros de Vida S.A., Bogotá D.C. Allianz Seguros S.A., Bogotá D.C. Allianz Seguros S.A., São Paulo Allianz Sénégal Assurances SA, Dakar Allianz Services (UK) Limited, London Allianz Services Private Ltd., Trivandrum Allianz Sigorta A.S., Istanbul Allianz SNA s.a.l., Beirut Allianz Société Financière S.à r.l., Luxembourg Allianz South America Holding B.V., Amsterdam Allianz Strategic Investments S.à r.l., Luxembourg Allianz Suisse Lebensversicherungs-Gesellschaft AG, Wallisellen Allianz Suisse Versicherungs-Gesellschaft AG, Wallisellen Allianz Taiwan Life Insurance Co. Ltd., Taipei Allianz Technology (Thailand) Co. Ltd., Bangkok Allianz Technology AG, Wallisellen Allianz Technology GmbH, Vienna Allianz Technology S.C.p.A., Milan Allianz Technology S.L., Barcelona Allianz Technology S.p.A., Milan Allianz Technology SAS, Paris Allianz Tiriac Asigurari SA, Bucharest Allianz Tiriac Pensii Private Societate de administrare a fondurilor de pensii private S.A., Bucharest Allianz Underwriters Insurance Company Corp., Burbank, CA Allianz US Investment LP, Wilmington, DE Allianz US Private REIT LP, Wilmington, DE Allianz Vie S.A., Paris la Défense Allianz Vorsorgekasse AG, Vienna Allianz Yasam ve Emeklilik A.S., Istanbul Allianz ZB d.o.o. Mandatory and Voluntary Pension Funds Management Company, Zagreb Allianz-Slovenská DSS a.s., Bratislava Allianz-Slovenská poist'ovňa a.s., Bratislava American Automobile Insurance Company Corp., Earth City, MO American Financial Marketing LLC, St. Louis Park, MN Ann Arbor Annuity Exchange LLC, Plymouth, MI APK US Investment LP, Wilmington, DE APKV US Private REIT LP, Wilmington, DE Appia Investments S.r.l., Milan Arges Investments I N.V., Amsterdam Arges Investments II N.V., Amsterdam Asit Services S.R.L., Bucharest Assistance Courtage d'Assurance et de Réassurance S.A., Courbevoie Associated Indemnity Corporation, Los Angeles, CA Assurances Médicales SA, Metz AWP Assistance Service España S.A., Madrid AWP Assistance UK Ltd., London AWP Australia Holdings Pty Ltd., Toowong AWP Business Services Co. Ltd., Beijing AWP France SAS, Saint-Ouen AWP Health & Life S.A., Saint-Ouen AWP MEA Holdings Co. W.L.L., Manama AWP P&C S.A., Saint-Ouen AWP Service Brasil Ltda., São Bernardo do Campo AWP Services NL B.V., Amsterdam 86 Owned1 % 100.0 3 100.0 3 100.0 83.0 3 100.0 3 100.0 3 96.0 3 100.0 3 100.0 3 100.0 3 100.0 3 Equity € thou 59,267 42,253 288,157 5,325 6,529 19,332 409,000 53,001 Net Earnings € thou 2,036 AWP USA Inc., Richmond, VA (2,523) 79,212 999 189 AZ Euro Investments II S.à r.l., Luxembourg AZ Euro Investments S.A., Luxembourg AZ Jupiter 10 B.V., Amsterdam AZ Jupiter 11 B.V., Amsterdam 9,935 AZ Jupiter 8 B.V., Amsterdam 98,667 AZ Jupiter 9 B.V., Amsterdam 6,578 AZ Vers US Private REIT LP, Wilmington, DE 1,479,575 229,582 AZGA Service Canada Inc., Kitchener, ON 450,521 339,331 (22,223) AZL PF Investments Inc., Minneapolis, MN (6,646) AZOA Services Corporation, New York, NY 100.0 781,492 52,226 100.0 100.0 100.0 3 100.0 100.0 100.0 3 100.0 3 100.0 3 100.0 3 52.0 750,932 533,185 9,000 11,812 22,284 15,818 68,959 9,360 45,432 194,848 315,623 60,259 1,538 3,672 (1,028) 14 (4,739) (11,438) 2,134 31,985 Beleggingsmaatschappij Willemsbruggen B.V., Rotterdam Beykoz Gayrimenkul Yatirim Insaat Turizm Sanayi ve Ticaret A.S., Ankara British Reserve Insurance Co. Ltd., Guildford Calobra Investments Sp. z o.o., Warsaw Calypso S.A., Paris la Défense CAP Rechtsschutz-Versicherungsgesellschaft AG, Wallisellen Caroline Berlin S.C.S., Luxembourg Castle Field Limited, Hong Kong Central Shopping Center a.s., Bratislava CEPE de la Forterre S.à r.l., Versailles CEPE de Langres Sud S.à r.l., Versailles 100.0 27,288 (3,735) CEPE de Mont Gimont S.à r.l., Versailles 100.0 3 100.0 3 100.0 3 100.0 100.0 80.0 3 51.0 100.0 3 100.0 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 58.0 100.0 3 100.0 3 100.0 100.0 100.0 3 100.0 100.0 3 100.0 3 100.0 3 100.0 3 95.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 53,994 1,809,250 1,863,664 3,072,993 33,871 98,232 21,690 45,642 380,776 69,857 31,528 13,976 104,195 280,870 877,849 141,540 105,567 26,810 6,057 80,368 6,502 6,134 8,092 6,774 14,915 16,502 461,428 28,399 453,964 28,660 11,655 1,357 (8,412) (8,530) 300,894 6,989 47,403 7,602 4,105 85,684 1,126 647 1,412 (246) (178) 21,057 1,052 368 917 5,402 1,199 3,733 (4,513) (2,412) - (11,424) (579) (34,215) (8,683) (30,665) (4,397) 2,452 CEPE de Sambres S.à r.l., Versailles CEPE de Vieille Carrière S.à r.l., Versailles CEPE des Portes de la Côte d'Or S.à r.l., Versailles CEPE du Bois de la Serre S.à r.l., Versailles Chicago Insurance Company Corp., Chicago, IL CIC Allianz Insurance Ltd., Sydney Climmolux Holding SA, Luxembourg Club Marine Limited, Sydney Companhia de Seguros Allianz Portugal S.A., Lisbon Corn Investment Ltd., London CPRN Thailand Ltd., Bangkok CreditRas Assicurazioni S.p.A., Milan CreditRas Vita S.p.A., Milan Darta Saving Life Assurance dac, Dublin Delta Technical Services Ltd., London Diamond Point a.s., Prague Dresdner Kleinwort Pfandbriefe Investments II Inc., Minneapolis, MN Eff siebzigdrei Beteiligungsverwaltung GmbH, Vienna Elite Prize Limited, Hong Kong Eolica Erchie S.r.l., Lecce Euler Hermes Acmar SA, Casablanca Euler Hermes Collections North America Company, Owings Mills, MD Euler Hermes Collections Sp. z o.o., Warsaw Euler Hermes Crédit France S.A.S., Paris la Défense Euler Hermes Group SA, Paris la Défense Euler Hermes Hong Kong Service Limited, Hong Kong Euler Hermes Korea Non-life Broker Company Limited, Seoul Euler Hermes Luxembourg Holding S.à r.l., Luxembourg Euler Hermes North America Holding Inc., Owings Mills, MD Euler Hermes North America Insurance Company Inc., Owings Mills, MD Owned1 % 100.0 3 100.0 3 100.0 3 100.0 3 98.0 3 100.0 3 100.0 3 100.0 3 55.0 3 100.0 3 100.0 Equity € thou 271,148 294,192 Net Earnings € thou (9,860) 22,345 3,443,290 257,966 361,425 172,003 3,277,723 330,851 105,334 27,015 535,775 11,514 6,873 2,369 (439) 7,498 (581) (1,348) - (8,915) 100.0 3 90,622 1,982 100.0 3 100.0 3 100.0 3 100.0 100.0 93.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 100.0 3 100.0 65.0 3 100.0 100.0 3 50.0 3 50.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 100.0 3 100.0 3 55.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 120,323 10,710 138,756 69,696 41,257 183,048 10,829 57,087 8,016 21,779 11,818 11,338 5,771 8,499 5,246 58,020 26,704 76,617 5,924 147,936 12,539 68,416 99,180 481,661 355,419 45,275 12,440 634,366 15,042 16,249 7,005 5,769 5,635 117,713 108,912 11,203 287 5,276 (3,416) 9,484 3,014 (655) 3,582 (1,388) 2,684 2,231 (7,556) (1,785) (3,281) (3,013) (52) (220) 2,123 1,180 (2,669) 2,961 (6,071) 8,880 35,394 66,723 875 853 8,657 (4,398) (227) 857 470 547 11,788 4,167 1,629,414 160,638 7,046 524 100.0 3 252,506 77,832 100.0 3 103,048 (66) 100.0 3 176,584 2,715 100.0 3 199,967 22,976 Annual Report 2019 – Allianz SE Fireman's Fund Indemnity Corporation, Liberty Corner, NJ 100.0 3 13,323 Owned1 % 100.0 3 100.0 3 60.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 Equity € thou 344,714 61,055 111,793 22,617 995,125 698,669 29,351 8,130 13,660 Net Earnings € thou 16,441 Kensington Fund, Milan - Keyeast Pte. Ltd., Singapore 4,819 Kiinteistöosakeyhtiö Eteläesplanadi 2 Oy, Helsinki 11,565 187,119 73,068 12,126 KLGCREF II Holdco Pte. Ltd., Singapore Kohlenberg & Ruppert Premium Properties S.à r.l., Luxembourg Kuolavaara-Keulakkopään Tuulipuisto Oy, Oulu LAD Energy GmbH & Co. KG, Pottenbrunn 1,996 Legal & General Insurance Limited, Guildford 12,268 Liverpool Victoria General Insurance Group Limited, Guildford 100.0 3 13,539 6,502 Liverpool Victoria Insurance Company Limited, Guildford 100.0 3 100.0 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 100.0 3 5,451 6,813 6,655 37,303 8,435 49,996 9,524 40,788 7,518 (1,315) LLC "IC Euler Hermes Ru", Moscow 921 2,205 668 5,582 1,405 895 (5,724) 292 249 LV Repair Services Limited, Guildford Maevaara Vind 2 AB, Stockholm Maevaara Vind AB, Stockholm Medi24 AG, Bern Mombyasen Wind Farm AB, Halmstad Multiassistance S.A., Paris National Surety Corporation, Chicago, IL NEXtCARE Claims Management LLC, Dubai NEXtCARE Lebanon SAL, Beirut Niederösterreichische Glasfaserinfrastrukturgesellschaft mbH, St. Pölten OPCI Allianz France Angel, Paris la Défense 100.0 3 100.0 3 100.0 3 100.0 3 95.0 3 100.0 3 100.0 3 53.0 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 1,148,829 28,684 Orione PV S.r.l., Milan 56,892 10,028 123,131 85,379 20,661 117,820 79,999 386,618 28,804 5,359 274,684 328,197 20,599 56,574 207,175 24,420 12,247 10,677 6,420 18,486 7,264 5,457 11,130 63,476 44,520 15,799 108,783 319,213 9,511 9,402 52,187 16,124 (125) Orsa Maggiore PV S.r.l., Milan (3,526) (38,689) 8,116 (2,024) 2,365 3,507 36,945 (13,256) (168) 4,174 - 2,690 (9) 4,016 (11) 6,943 1,316 829 3,082 (435) 940 (69) 1,511 520 4,654 (12,103) 15,792 (231) (206) 5,618 1,112 Pacific Investment Management Company LLC, Dover, DE Parc Eolien de Chaourse SAS, Versailles Parc Eolien de Chateau Garnier SAS, Versailles Parc Eolien de Fontfroide SAS, Versailles Parc Eolien de la Sole du Bois SAS, Paris Pet Plan Ltd., Guildford PFP Holdings Inc., Dover, DE PGA Global Services LLC, Dover, DE PIMCO (Schweiz) GmbH, Zurich PIMCO Asia Ltd., Hong Kong PIMCO Asia Pte Ltd., Singapore PIMCO Australia Management Limited, Sydney PIMCO Australia Pty Ltd., Sydney PIMCO Canada Corp., Toronto, ON PIMCO Europe Ltd., London PIMCO Global Advisors (Ireland) Ltd., Dublin PIMCO Global Advisors (Resources) LLC, Dover, DE PIMCO Global Advisors LLC, Dover, DE PIMCO Global Holdings LLC, Dover, DE PIMCO Investments LLC, Dover, DE PIMCO Japan Ltd., Road Town PIMCO Taiwan Ltd., Taipei POD Allianz Bulgaria AD, Sofia Protexia France S.A., Paris la Défense PT Asuransi Allianz Life Indonesia p.l.c., Jakarta PT Asuransi Allianz Utama Indonesia Ltd., Jakarta PTE Allianz Polska S.A., Warsaw Q207 S.C.S., Luxembourg Questar Capital Corporation, Minneapolis, MN Real Faubourg Haussmann SAS, Paris la Défense Real FR Haussmann SAS, Paris la Défense 100.0 3 28,523 1,963 SA Carène Assurance, Paris Euler Hermes Patrimonia SA, Brussels Euler Hermes Ré SA, Luxembourg Euler Hermes Real Estate SPPICAV, Paris la Défense Euler Hermes Recouvrement France S.A.S., Paris la Défense Euler Hermes Reinsurance AG, Wallisellen Euler Hermes S.A., Brussels Euler Hermes Service AB, Stockholm Euler Hermes Services B.V., 's-Hertogenbosch Euler Hermes Services Italia S.r.l., Rome Euler Hermes Services North America LLC, Owings Mills, MD Euler Hermes Serviços de Gestão de Riscos Ltda., São Paulo Euler Hermes Sigorta A.S., Istanbul Euler Hermes Singapore Services Pte. Ltd., Singapore Euler Hermes South Express S.A., Brussels Euler Hermes, Mierzejewska-Kancelaria Prawna Sp.k, Warsaw Eurl 20/22 Le Peletier, Paris la Défense Eurosol Invest S.r.l., Udine Fénix Directo Compañía de Seguros y Reaseguros S.A., Madrid Ferme Eolienne des Jaladeaux S.à r.l., Versailles Fireman's Fund Insurance Company Corp., Los Angeles, CA Flying Desire Limited, Hong Kong Foshan Geluo Storage Services Co. Ltd., Foshan Fragonard Assurance S.A., Paris Franklin S.C.S., Luxembourg Galore Expert Limited, Hong Kong GamePlan Financial Marketing LLC, Woodstock, GA Generation Vie S.A., Courbevoie Genialloyd S.p.A., Milan Grupo Multiasistencia S.A., Madrid Havelaar & van Stolk B.V., Rotterdam Highway Insurance Company Limited, Guildford Highway Insurance Group Limited, Guildford Home & Legacy Insurance Services Limited, Guildford Humble Bright Limited, Hong Kong ICON Immobilien GmbH & Co. KG, Vienna ICON Inter GmbH & Co. KG, Vienna Immovalor Gestion S.A., Paris la Défense ImWind AO GmbH & Co. KG, Pottenbrunn ImWind GHW GmbH & Co. KG, Pottenbrunn ImWind Loidesthal GmbH & Co. KG, Pottenbrunn ImWind PDV GmbH & Co. KG, Pottenbrunn ImWind PL GmbH & Co. KG, Pottenbrunn Insurance CJSC "Medexpress", Saint Petersburg Interstate Fire & Casualty Company, Chicago, IL Investitori Logistic Fund, Milan Investitori SGR S.p.A., Milan Järvsö Sörby Vindkraft AB, Danderyd Jefferson Insurance Company Corp., New York, NY Joukhaisselän Tuulipuisto Oy, Oulu Jouttikallio Wind Oy, Kotka JSC Insurance Company Allianz, Moscow KAIGO Hi-Tech Development (Beijing) Co. Ltd., Beijing KaiLong Greater China Real Estate Fund II S.C.Sp., Luxembourg Annual Report 2019 – Allianz SE C _ Financial Statements of Allianz SE Owned1 % 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 Equity € thou 146,572 56,575 30,894 18,306 106,025 20,118 8,950 Net Earnings € thou 3,516 (18) 1,486 1,233 5,791 (737) 1,203 275,070 (56,854) 100.0 3 929,548 85,707 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 95.0 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 66.0 3 100.0 100.0 3 98.0 3 100.0 3 94.0 3 100.0 3 100.0 3 100.0 3 100.0 820,663 12,199 13,441 39,347 98,793 6,024 36,223 5,654 66,094 14,693 6,144 21,133 118,580 8,993 19,082 80,350 6,360 11,317 3,329 2,240 (2,553) (5,871) (4,350) 582 (6,154) (1,696) (5,846) 4,236 662 2,185 595,710 1,900,645 7,254 5,394 6,258 7,340 107,981 260,406 6,962 19,890 28,779 19,554 5,420 30,216 18,888 159,851 33,873 5,319 391,577 31,206 94,578 36,826 5,025 30,588 49,891 350,890 55,474 48,920 86,924 10,277 604,321 62,694 16,477 (873) (1,349) 43 1,287 (34) 8,000 2,615 5,976 (4,933) 8,678 173 24,372 23,668 169,956 17,894 17 261,652 25,158 250,175 36,519 (4,111) 8,058 13,702 47,200 (4) 6,042 2,930 (4,610) (503) 2,621 1,186 87 C _ Financial Statements of Allianz SE SA Vignobles de Larose, Saint-Laurent-Médoc Saarenkylä Tuulipuisto Oy, Oulu SAS 20 pompidou, Paris la Défense SAS Allianz Etoile, Paris la Défense SAS Allianz Forum Seine, Paris la Défense SAS Allianz Logistique, Paris la Défense SAS Allianz Platine, Paris la Défense SAS Allianz Prony, Paris la Défense SAS Allianz Rivoli, Paris la Défense SAS Allianz Serbie, Paris la Défense SAS Angel Shopping Centre, Paris la Défense SAS Chaponnay Mérieux Logistics, Paris la Défense SAS Madeleine Opéra, Paris la Défense SAS Passage des princes, Paris la Défense Sättravallen Wind Power AB, Strömstad SC Tour Michelet, Paris la Défense SCI 46 Desmoulins, Paris la Défense SCI Allianz ARC de Seine, Paris la Défense SCI Allianz Immobilier Durable, Paris la Défense SCI Allianz Invest Pierre, Paris la Défense SCI Allianz Messine, Paris la Défense SCI Allianz Value Pierre, Paris la Défense SCI AVIP SCPI Selection, Courbevoie SCI ESQ, Paris la Défense SCI Via Pierre 1, Paris la Défense SDIII Energy GmbH & Co. KG, Pottenbrunn Servicios Compartidos Multiasistencia S.L., Madrid Silex Gas Norway AS, Oslo Sirius S.A., Luxembourg Società Agricola San Felice S.p.A., Milan Société Foncière Européenne B.V., Amsterdam Société Nationale Foncière S.A.L., Beirut Sofiholding S.A., Brussels South City Office Broodthaers SA, Brussels Stam Fem Gångaren 11 AB, Stockholm StocksPLUS Management Inc., Dover, DE TFI Allianz Polska S.A., Warsaw The American Insurance Company Corp., Cincinnati, OH The Annuity Store Financial & Insurance Services LLC, Sacramento, CA Three Pillars Business Solutions Limited, Guildford Top Immo A GmbH & Co. KG, Vienna Top Immo Besitzgesellschaft B GmbH & Co. KG, Vienna Top Versicherungsservice GmbH, Vienna Towarzystwo Ubezpieczen Euler Hermes S.A., Warsaw Trafalgar Insurance Public Limited Company, Guildford TU Allianz Zycie Polska S.A., Warsaw TUiR Allianz Polska S.A., Warsaw Vailog Hong Kong DC17 Limited, Hong Kong Vailog Hong Kong DC19 Limited, Hong Kong Valderrama S.A., Luxembourg Vanilla Capital Markets S.A., Luxembourg VertBois S.à r.l., Luxembourg Viveole SAS, Versailles Vordere Zollamtsstraße 13 GmbH, Vienna Weihong (Shanghai) Storage Services Co. Ltd., Shanghai Weilong (Hubei) Storage Services Co. Ltd., Ezhou Owned1 % 100.0 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 90.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 100.0 100.0 3 96.0 100.0 3 75.0 3 100.0 3 100.0 3 100.0 3 100.0 3 95.0 3 100.0 3 100.0 3 66.0 3 100.0 3 100.0 3 100.0 3 100.0 100.0 3 Equity € thou 48,084 8,159 114,614 109,055 241,421 693,620 275,332 76,258 100,372 338,056 286,049 7,598 639,923 194,404 47,478 54,646 112,978 213,719 62,100 653,934 220,169 112,004 45,043 105,703 250,810 6,043 77,910 62,107 352,062 42,352 212,764 7,481 18,586 52,482 83,238 5,341 7,274 100.0 3 59,804 100.0 3 100.0 3 100.0 100.0 100.0 100.0 3 100.0 3 100.0 100.0 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 10,103 5,201 5,993 9,004 17,843 21,359 43,604 109,890 295,653 18,557 11,534 150,007 179,912 19,963 17,326 72,809 12,300 10,537 Net Earnings € thou 521 Weilong (Jiaxing) Storage Services Co. Ltd., Jiaxing (1,024) Weiyi (Shenyang) Storage Services Co. Ltd., Shenyang 4,563 787 7,363 9,867 Windpark AO GmbH, Pottenbrunn Windpark GHW GmbH, Pottenbrunn Windpark Ladendorf GmbH, Vienna Windpark Les Cent Jalois SAS, Versailles 18,233 Windpark LOI GmbH, Pottenbrunn (142) 3,950 Windpark PDV GmbH, Pottenbrunn Windpark PL GmbH, Pottenbrunn 11,065 Windpark Scharndorf GmbH, Pottenbrunn 3,320 124 Windpark Zistersdorf GmbH, Pottenbrunn YAO NEWREP Investments S.A., Luxembourg 19,104 Yorktown Financial Companies Inc., Minneapolis, MN 2,711 ZAD Allianz Bulgaria Zhivot, Sofia (10,225) ZAD Allianz Bulgaria, Sofia ZAD Energia, Sofia ZiOst Energy GmbH & Co. KG, Pottenbrunn 1,564 4,180 7,218 339 Joint ventures 4,281,754 114 Venture LP, Wilmington, DE 3,361 245 3,013 2,438 8,992 537 1515 Broadway Realty LP, Dover, DE 1800 M Street Venture LP, Wilmington, DE 53 State JV L.P., Wilmington, DE A&A Centri Commerciali S.r.l., Milan Allee-Center Kft., Budapest AMLI-Allianz Investment LP, Wilmington, DE 10,372 AS Gasinfrastruktur Beteiligung GmbH, Vienna 2,714 56,059 (332) 2,186 276 1,021 1,525 (6,973) 71 2,150 830 433 (14) 696 1,147 (913) 70 289 17,846 40,407 150 172 (752) (1,482) 898 1,248 505 Austin West Campus Student Housing LP, Wilmington, DE AZ/JH Co-Investment Venture (DC) LP, Wilmington, DE AZ/JH Co-Investment Venture (IL) LP, Wilmington, DE Chapter Master Limited Partnership, London Columbia REIT - 333 Market Street LP, Wilmington, DE Columbia REIT-University Circle LP, Wilmington, DE Companhia de Seguro de Créditos S.A., Lisbon CPIC Fund Management Co. Ltd., Shanghai Daiwater Investment Limited, London Dundrum Car Park Limited Partnership, Dublin Dundrum Retail Limited Partnership, Dublin Elton Investments S.à r.l., Luxembourg Enhanzed Reinsurance Ltd., Hamilton ESR India Logistics Fund Pte. Ltd., Singapore Euromarkt Center d.o.o., Ljubljana Fiumaranuova S.r.l., Genoa Hudson One Ferry JV L.P., Wilmington, DE Israel Credit Insurance Company Ltd., Tel Aviv Italian Shopping Centre Investment S.r.l., Milan LBA IV-PPI Venture LLC, Dover, DE LBA IV-PPII-Office Venture LLC, Dover, DE LBA IV-PPII-Retail Venture LLC, Dover, DE NET4GAS Holdings s.r.o., Prague NRF (Finland) AB, Västeras Podium Fund HY REIT Owner LP, Wilmington, DE Porterbrook Holdings I Limited, London Queenspoint S.L., Madrid RMPA Holdings Limited, Colchester SC Holding SAS, Paris (17) SES Shopping Center AT1 GmbH, Salzburg (1,249) SES Shopping Center FP 1 GmbH, Salzburg Owned1 % 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 100.0 3 94.0 3 100.0 3 99.0 3 87.0 3 51.0 3 100.0 3 50.0 3 50.0 3 43.0 3 49.0 3 50.0 3 50.0 3 75.0 3 56.0 3 Equity € thou 14,702 14,344 12,494 8,337 8,103 6,953 Net Earnings € thou (371) (1,940) (636) 864 1,054 2,104 12,746 (1,210) 8,781 6,723 5,078 8,081 76,620 152,825 37,442 44,517 15,483 11,636 174,676 944,383 377,350 320,172 151,836 104,051 89,514 338,635 (264) (380) 587 961 230 4 500 7,719 4,754 1,507 5,716 8,511 5,225 (292) 4,569 11,437 2,860 39,439 45.0 3 434,081 236 80.0 3 80.0 3 46.0 3 45.0 3 45.0 3 50.0 3 49.0 37.0 3 50.0 3 50.0 3 33.0 3 25.0 3 50.0 3 50.0 3 50.0 3 45.0 3 50.0 3 50.0 3 45.0 3 45.0 3 45.0 3 50.0 3 50.0 3 44.0 3 30.0 3 50.0 3 56.0 3 50.0 3 50.0 3 50.0 3 302,267 251,404 309,425 433,696 474,218 46,508 65,704 820,936 34,073 1,140,258 306,856 171,213 40,275 43,868 155,510 120,634 47,324 26,150 319,528 28,426 41,331 214,474 193,390 798,131 1,235,902 111,477 10,548 12,121 220,888 105,092 13,257 15,428 (12,214) 13,437 18,476 5,504 2,656 19,204 1,984 53,834 (67,057) (5,372) (1,977) 7,294 8,354 (1,761) 6,538 4,980 7,445 1,890 2,273 (158) 20,690 683 77,016 8,436 15,034 1,605 10,386 3,157 88 Annual Report 2019 – Allianz SE C _ Financial Statements of Allianz SE Owned1 % Equity € thou Net Earnings € thou 6.0 3 13,051 599 6.0 3 2.0 3 5.0 3 6.0 3 2.0 3 5.0 3 5.0 3 6.0 3 15.0 3 18.0 3 12.0 3 8.0 3 1.0 3 1.0 3 7.0 3 10.0 3 18.0 3 7.0 20.0 3 6.0 3 13.0 3 3.0 3 12.0 3 2.0 3 5.0 3 10.0 3 40,509 1,705,380 1,218,200 5,560 1,705,380 286,394 154,810 969,871 2,181,061 5,880 2,216,919 14,291 4,354 90,364 150,600 1,494 90,364 27,013 (9,515) 75,727 126,326 (3,544) 250,350 821 1,006,310 697,248 55,841,000 3,892,000 2,843,597 622,233 248,624 25,961 79,434 5,341 363,040 159,430 1,365,371 1,875,070 81,761 88,861 5,271 92,889 3,051 7,384 (15) 24,998 82,399 92,681 241,562 (39,328) (44,548) (11,156) Agrupación Española de Entidades Aseguradoras de los Seguros Agrarios Combinados S.A., Madrid Tecnologías de la Información y Redes para las Entidades Aseguradoras S.A., Las Rozas de Madrid Oddo et Cie SCA, Paris Geodis SACS, Levallois-Perret Civi Pol Conseil S.A., Paris 28,144 (1,782) (9,552) 11,160 4,927 Rothschild & Co SCA, Paris (1,168) (1,872) 44,665 Foncière INEA, Geneviliers IDI SCA, Paris Logistis SPPICAV, Paris 3,983 SOFIDY Pierre Europe SPPICAV, Evry Wayhome Ltd., London Zagrebacka banka d.d., Zagreb 19,816 (25,998) 120,336 (1,376) 114,128 88,716 - PT Asuransi Andika Raharja Putera, Jakarta PT Aplikasi Karya Anak Bangsa, Jakarta UniCredit S.p.A., Milan Autostrade per l’Italia S.p.A., Rome Italo - Nuovo Trasporto Viaggiatori S.p.A., Rome Al-Nisr Al-Arabi Insurance Company, Amman Meiji Yasuda Asset Management Company Ltd., Tokyo ALTRO Invest S.C.A., Weiswampach Logistis Luxembourg S.A., Luxembourg Logistis Luxembourg Feeder S.A., Luxembourg FLE SICAV-FIS, Luxembourg CLF Fund I LP, Singapore Nauto Inc., Paolo Alto, CA Lemonade Inc., New York, NY Urgent.ly Inc., Wilmington, DE 1_Percentage includes equity participations held by dependent entities in full, even if the Allianz Group’s share in the dependent entity is below 100%. 2_Profit and loss transfer agreement. 3_As per annual financial statement 2018. 4_Insolvent. Dependent entities are shown in a way, which reflects the state as of the date of filing for insolvency. 5_As per annual financial statement 2010. This is only applicable for manroland AG and their subsidiaries. Solunion Compañía Internacional de Seguros y Reaseguros SA, Madrid Spanish Gas Distribution Investments S.à r.l., Luxembourg SPREF II Pte. Ltd., Singapore Terminal Venture LP, Wilmington, DE The FIZZ Student Housing Fund S.C.S., Luxembourg The State-Whitehall Company LP, Dover, DE TopTorony Ingatlanhasznosító Zrt., Budapest VGP European Logistics S.à r.l., Senningerberg VISION (III) Pte Ltd., Singapore Waterford Blue Lagoon LP, Wilmington, DE Associates Archstone Multifamily Partners AC JV LP, Wilmington, DE Archstone Multifamily Partners AC LP, Wilmington, DE Areim Fastigheter 2 AB, Stockholm Areim Fastigheter 3 AB, Stockholm Bajaj Allianz General Insurance Company Ltd., Pune Bajaj Allianz Life Insurance Company Ltd., Pune Bazalgette Equity Ltd., London Blue Vista Student Housing Select Strategies Fund L.P., Dover, DE Brunei National Insurance Company Berhad Ltd., Bandar Seri Begawan Chicago Parking Meters LLC, Wilmington, DE CPIC Allianz Health Insurance Co. Ltd., Shanghai Delgaz Grid S.A., Târgu Mures Douglas Emmett Partnership X LP, Wilmington, DE Four Oaks Place LP, Wilmington, DE Helios Silesia Holding B.V., Amsterdam Lennar Multifamily Venture LP, Wilmington, DE Medgulf Takaful B.S.C.(c), Manama MFM Holding Ltd., London Ocean Properties LLP, Singapore OeKB EH Beteiligungs- und Management AG, Vienna Quadgas Holdings Topco Limited, Saint Helier Residenze CYL S.p.A., Milan SAS Alta Gramont, Paris SCI Bercy Village, Paris SK Versicherung AG, Vienna SNC Alta CRP Gennevilliers, Paris SNC Alta CRP La Valette, Paris SNC Société d'aménagement de la Gare de l'Est, Paris Tikehau Real Estate III SPPICAV, Paris UK Outlet Mall Partnership LP, Edinburgh Wildlife Works Carbon LLC, San Francisco, CA Other participations below 20% voting rights Portima SCRL, Bruxelles Cofinimmo S.A., Brussels 1QB Information Technologies Inc., Vancouver, BC PERILS AG, Zürich Commercial Bank of Cameroon LC, Douala Société Générale de Banque au Cameroun LC, Douala Société Générale de Banques en Côte d'Ivoire S.A., Abidjan SONACO SA, Abidjan Owned1 % Equity € thou Net Earnings € thou 50.0 3 105,188 6,104 40.0 3 50.0 3 29.0 3 50.0 3 50.0 3 50.0 3 50.0 3 30.0 3 49.0 3 40.0 3 29.0 3 23.0 3 32.0 3 26.0 3 26.0 3 34.0 3 1,247,989 95,672 289,558 169,999 232,445 7,913 306,475 55,303 344,202 53,461 95,739 168,489 223,944 559,631 1,155,036 567,879 25.0 3 127,153 3,839 25.0 3 50.0 3 23.0 3 30.0 3 29.0 3 49.0 3 45.0 3 11.0 3 25.0 3 37.0 20.0 3 49.0 3 13.0 3 33.0 3 49.0 3 49.0 3 26.0 3 49.0 3 49.0 3 49.0 3 12.0 3 20.0 3 9.0 3 11.0 3 2.0 3 5.0 3 10.0 3 10.0 3 16.0 3 6.0 3 12.0 3 11,980 186,541 145,659 691,435 25,235 462,647 59,398 2,087 38,253 (17,865) (12,048) 2,762 11,202 (2,258) 1,944,395 178,364 15,472 88,511 1,466,365 120,940 438 (1,173) 59,131 10,428 2,934,655 (1,289,764) 85,514 257,008 41,818 15,316 29,551 20,948 13,504 238,416 479,544 6,230 (1,901) 1,932 7,848 1,024 2,044 4,295 3,136 22,303 28,397 150 9,713 2,181 1,903,159 121,056 27,941 9,408 22,287 2,760 372 3,247 112,501 22,018 255,809 11,012 63,786 141 China Pacific Insurance (Group) Co. Ltd., Shanghai 3.0 3 19,057,788 2,308,471 Annual Report 2019 – Allianz SE 89 C _ Financial Statements of Allianz SE This page intentionally left blank. 90 Annual Report 2019 – Allianz SE FURTHER INFORMATION D Annual Report 2019 – Allianz SE 91 D _ Further Information RESPONSIBILITY STATEMENT To the best of our knowledge, and in accordance with the applicable reporting principles, the financial statements of Allianz SE give a true and fair view of the assets, liabilities, financial position, and profit or loss of the company, and the management report includes a fair review of the development and performance of the business and the position of the company, together with a description of the principal opportunities and risks associated with the expected development of the company. Munich, 20 February 2020 Allianz SE The Board of Management Oliver Bäte Sergio Balbinot Jacqueline Hunt Dr. Christof Mascher Niran Peiris Iván de la Sota Giulio Terzariol Dr. Günther Thallinger Dr. Axel Theis Renate Wagner 92 Annual Report 2019 - Allianz SE D _ Further Information INDEPENDENT AUDITOR’S REPORT To Allianz SE, Munich Report on the Audit of the Annual Financial Statements and of the Management Report AUDIT OPINIONS We have audited the annual financial statements of Allianz SE, Munich, which comprise the balance sheet as at 31 December 2019, and the income statement for the financial year from 1 January to 31 December 2019, and notes to the financial statements, including the presentation of the recognition and measurement policies. In addition, we have audited the management report of Allianz SE for the financial year from 1 January to 31 December 2019. In accordance with the German legal requirements, we have not audited the content of those parts of the management report listed in the “Other Infor- mation” section of our auditor’s report. In our opinion, on the basis of the knowledge obtained in the audit,   the accompanying annual financial statements comply, in all material respects, with the requirements of German commercial law and give a true and fair view of the assets, liabilities and finan- cial position of the Company as at 31 December 2019 and of its financial performance for the financial year from 1 January to 31 December 2019 in compliance with German Legally Required Accounting Principles, and the accompanying management report as a whole provides an appropriate view of the Company's position. In all material respects, this management report is consistent with the annual financial statements, complies with German legal requirements, and appropriately presents the opportunities and risks of future development. Our audit opinion on the management report does not cover the content of those parts of the management report listed in the “Other Information” section of our auditor’s report. Pursuant to § 322 (3) sentence 1 HGB of the German Commercial Code (“Handelsgesetzbuch – HGB”), we declare that our audit has not led to any reservations relating to the legal compliance of the annual finan- cial statements and of the management report. BASIS FOR THE AUDIT OPINIONS We conducted our audit of the annual financial statements and of the management report in accordance with § 317 HGB and the EU Audit Regulation (No. 537/2014, referred to subsequently as "EU Audit Regu- lation") and in compliance with German Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer (Institute of Public Auditors in Germany – IDW). Our responsibilities under those requirements and principles are further described in the "Auditor's Responsibilities for the Audit of the Annual Financial Statements and of the Management Report" section of our auditor's report. We are independent of the Company in accordance with the requirements of European law and German commercial and professional law, and we have fulfilled our other German professional responsibilities in accordance with these requirements. In addition, in accordance with Article 10 (2) point (f) of the EU Audit Regulation, we declare that we have not provided non-audit services prohibited under Article 5 (1) of the EU Audit Regulation. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinions on the annual financial statements and on the manage- ment report. KEY AUDIT MATTERS IN THE AUDIT OF THE ANNUAL FINANCIAL STATEMENTS Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the financial year from 1 January to 31 December 2019. These matters were addressed in the context of our audit of the annual financial statements as a whole, and in forming our opinion thereon; we do not provide a separate audit opinion on these matters. In our view, the matters of most significance in our audit were as follows:  Measurement of shares in affiliated enterprises  Measurement of reserves for loss and loss adjustment expenses Our presentation of these key audit matters has been structured in each case as follows:  Matter and issue  Audit approach and findings  Reference to further information Hereinafter, we present the key audit matters: MEASUREMENT OF SHARES IN AFFILIATED ENTERPRISES Matter and issue In the annual financial statements of the Company, shares in affiliated enterprises amounting to € 72,732 mn (60 % of total assets) are reported under the “Investments in affiliated enterprises and participations” balance sheet item. Shares in affiliated enterprises are measured at the lower of cost and fair value in accordance with German commercial law. The fair values of the material shares in affiliated enterprises are generally calculated using earnings model or appraisal values for life and health companies. Expectations relating to future market devel- opments and assumptions about the development of macroeconomic factors are also taken into account. The discount rate used for earnings models is the individually determined cost of capital for the relevant financial investment. For certain shares in affiliated enterprises, the fair values are calculated using valuation models. On the basis of the values determined and supplementary documentation, a write-down totalling € 139.6 mn and a reversal totalling € 0 mn were required for the financial year. The outcome of this valuation is dependent to a large extent on the estimates made by the executive directors of the future earnings Annual Report 2019 – Allianz SE 93 D _ Further Information and cash flows, and on the respective discount rates and rates of growth. The valuation is therefore subject to material uncertainties. Against this background and due to the highly complex nature of the valuation and its material significance for the Company's assets, liabilities and financial performance, this matter was of particular significance in the context of our audit. Audit approach and findings As part of our audit, we assessed the methodology used for the pur- poses of the valuation, among other things. In particular, we assessed whether the fair values of the material shares in affiliated enterprises had been appropriately determined us- ing adequate models in compliance with the relevant measurement standards. We based our assessment, among other things, on a com- parison with general and sector-specific market expectations as well as on the executive directors‘ detailed explanations regarding the key value drivers underlying the expected cash flows. Where the Company used alternative valuation models for individual shares in affiliated en- terprises, we examined whether the application of these valuation models was sufficiently documented and substantiated. With the knowledge that even relatively small changes in the discount rate applied can have a material impact on the value of the entity calculated in this way, we focused our testing in particular on the parameters used to determine the discount rate applied, and assessed the calculation model. In our view, taking into consideration the information available, the valuation methods and parameters and underlying assumptions used by the executive directors are appropriate overall for the purpose of appropriately measuring the shares in affiliated enterprises. Reference to further information The Company's disclosures on the measurement of shares in affiliated enterprises are included in the sections “Accounting, valuation, and calculation methods” and “3 – Market value of investments” of the notes to the financial statements. MEASUREMENT OF RESERVES FOR LOSS AND LOSS ADJUSTMENT EXPENSES Matter and issue In the annual financial statements of the Company, technical provi- sions (so called “claims provisions”) amounting to € 13,203 mn (11 % of total assets) are reported under the “Reserves for loss and loss ad- justment expenses” balance sheet item. Of this amount, € 13,015 mn is attributable to the Property-Casualty Insurance business segment. Insurance companies are required to recognize technical pro- visions to the extent necessary in accordance with reasonable busi- ness judgment to ensure that they can meet their obligations from insurance contracts on a continuous basis. Defining assumptions for the purpose of measuring the technical provisions requires the Company's executive directors, in addition to complying with the re- quirements of commercial and regulatory law, to make estimations of future events and to apply appropriate measurement methods. The gross provision is generally determined on the basis of the cedents' information or, in the case of outstanding settlements, on the basis of an estimate. The Company reviews the appropriateness of the cedents' information and, if necessary, makes appropriate increases to the amounts. The methods used to determine the amount of the claims provi- sions and the calculation parameters are based on judgments and assumptions made by the executive directors. In particular the lines of products with long claims settlement periods, low loss frequency or high individual losses are usually subject to increased estimation uncertainties and usually require a high degree of judgment by the Company's executive directors. Minor changes to those assumptions and to the methods used may have a material impact on the measurement of the claims pro- visions. Due to the material significance of the amounts of these provi- sions in relation to the assets, liabilities and financial performance of the Company as well as the considerable scope for judgment on the part of the executive directors and the associated uncertainties in the estimations made, the measurement of the claims provisions was of particular significance in the context of our audit. Audit approach and findings As part of our audit, we evaluated the appropriateness of selected controls established by the Company for the purpose of selecting actuarial methods, determining assumptions and making estimates for the measurement of provisions for unsettled claims in property- casualty insurance. With the support of our property-casualty insurance valuation specialists, we have compared the respective actuarial methods applied and the material assumptions with generally recognized actuarial practices and industry standards and examined to what extent these are appropriate for the valuation. Our audit also included an evaluation of the plausibility and integrity of the data and assumptions used in the valuation and an analysis of the claims settlement processes and the reconciliation of the information provided by the cedents. Further- more, we recalculated the amount of the provisions for selected lines of products, in particular lines of products with large reserves or in- creased estimation uncertainties. For these lines of products we com- pared the recalculated provisions with the provisions calculated by the Company and evaluated any differences. Based on our audit procedures, we were able to satisfy ourselves that the estimates and assumptions made by the executive directors are appropriate overall for measuring the technical provisions in property-casualty insurance. Reference to further information The Company's disclosures on the measurement of provisions for unsettled claims are contained in section “Accounting, valuation, and calculation methods” in the notes to the financial statements. OTHER INFORMATION The executive directors are responsible for the other information. The other information comprises the following non-audited parts of the management report:    the statement on corporate management pursuant to § 289f HGB included in section Statement on Corporate Management pursuant to § 289f of the HGB of the management report the Corporate Covernance Report pursuant to No. 3.10 of the German Corporate Governance Code the separate non-financial report pursuant to § 289b (3) HGB and § 315b (3) HGB 94 Annual Report 2019 - Allianz SE The other information comprises further the remaining parts of the annual report – excluding cross-references to external information – with the exception of the audited annual financial statements, the audited management report, and our auditor’s report. Our audit opinions on the annual financial statements and on the management report do not cover the other information, and consequently we do not express an audit opinion or any other form of assurance conclusion thereon. In connection with our audit, our responsibility is to read the other information and, in so doing, to consider whether the other infor- mation  is materially inconsistent with the annual financial statements, with the management report or with our knowledge obtained in the audit, or  otherwise appears to be materially misstated. RESPONSIBILITIES OF THE EXECUTIVE DIRECTORS AND THE SUPERVISORY BOARD FOR THE ANNUAL FINANCIAL STATEMENTS AND THE MANAGEMENT REPORT The executive directors are responsible for the preparation of the annual financial statements that comply, in all material respects, with the requirements of German commercial law, and that the annual financial statements give a true and fair view of the assets, liabilities, financial position and financial performance of the Company in compliance with German Legally Required Accounting Principles. In addition, the executive directors are responsible for such internal con- trol as they, in accordance with German Legally Required Accounting Principles, have determined necessary to enable the preparation of annual financial statements that are free from material misstatement, whether due to fraud or error. In preparing the annual financial statements, the executive di- rectors are responsible for assessing the Company's ability to continue as a going concern. They also have the responsibility for disclosing, as applicable, matters related to going concern. In addition, they are re- sponsible for financial reporting based on the going concern basis of accounting, provided no actual or legal circumstances conflict there- with. Furthermore, the executive directors are responsible for the preparation of the management report that as a whole provides an appropriate view of the Company’s position and is, in all material respects, consistent with the annual financial statements, complies with German legal requirements, and appropriately presents the oppor- tunities and risks of future development. In addition, the executive directors are responsible for such arrangements and measures (systems) as they have considered necessary to enable the prepara- tion of a management report that is in accordance with the applicable German legal requirements, and to be able to provide sufficient appropriate evidence for the assertions in the management report. The supervisory board is responsible for overseeing the Company's financial reporting process for the preparation of the annual financial statements and of the management report. D _ Further Information AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE ANNUAL FINANCIAL STATEMENTS AND OF THE MANAGEMENT REPORT Our objectives are to obtain reasonable assurance about whether the annual financial statements as a whole are free from material misstatement, whether due to fraud or error, and whether the manage- ment report as a whole provides an appropriate view of the Company’s position and, in all material respects, is consistent with the annual financial statements and the knowledge obtained in the audit, complies with the German legal requirements and appropriately presents the opportunities and risks of future development, as well as to issue an auditor’s report that includes our audit opinions on the annual financial statements and on the management report. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with § 317 HGB and the EU Audit Regulation and in compliance with German Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer (IDW) will always detect a material misstatement. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these annual financial statements and this management report. We exercise professional judgment and maintain professional scepti- cism throughout the audit. We also:  Identify and assess the risks of material misstatement of the annual financial statements and of the management report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our audit opinions. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls.  Obtain an understanding of internal control relevant to the audit of the annual financial statements and of arrangements and measures (systems) relevant to the audit of the management re- port, in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an audit opinion on the effectiveness of these systems of the Company.  Evaluate the appropriateness of accounting policies used by the executive directors and the reasonableness of estimates made by the executive directors and related disclosures.  Conclude on the appropriateness of the executive directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw atten- tion in the auditor's report to the related disclosures in the annual financial statements and in the management report or, if such disclosures are inadequate, to modify our respective opinions. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to be able to continue as a going concern. Annual Report 2019 – Allianz SE 95 D _ Further Information  Evaluate the overall presentation, structure, and content of the annual financial statements, including the disclosures, and whether the annual financial statements present the underlying transactions and events in a manner that the annual financial statements give a true and fair view of the assets, liabilities, financial position, and financial performance of the Company in compliance with German Legally Required Accounting Principles.  Evaluate the consistency of the management report with the annual financial statements, its conformity with German law, and the view of the Company's position it provides.  Perform audit procedures on the prospective information pre- sented by management in the management report. On the basis of sufficient appropriate audit evidence we evaluate, in particular, the significant assumptions used by the executive directors as a basis for the prospective information, and evaluate the proper derivation of the prospective information from these assumptions. We do not express a separate audit opinion on the prospective information and on the assumptions used as a basis. There is a substantial unavoidable risk that future events will differ materially from the prospective information. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in in- ternal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with the relevant independence requirements, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, the related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the annual financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter. Other Legal and Regulatory Requirements FURTHER INFORMATION PURSUANT TO ARTICLE 10 OF THE EU AUDIT REGULATION We were elected as auditor by the supervisory board on 7 March 2019. We were engaged by the audit committee of the supervisory board on 13 May 2019. We have been the auditor of Allianz SE, Munich, without interruption since the financial year 2018. We declare that the audit opinions expressed in this auditor's report are consistent with the additional report to the audit committee pursuant to Article 11 of the EU Audit Regulation (long-form audit report). German Public Auditor Responsible for the Engagement The German Public Auditor responsible for the engagement is Richard Burger. Munich, 24 February 2020 PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft Richard Burger Julia Unkel Wirtschaftsprüfer (German Public Auditor) Wirtschaftsprüferin (German Public Auditor) 96 Annual Report 2019 - Allianz SE D _ Further Information This page intentionally left blank. Annual Report 2019 – Allianz SE 97 Allianz SE – Königinstrasse 28 – 80802 Munich – Germany – Phone + 49 89 3800 0 – info@allianz.com – www.allianz.com Front page design: hw.design GmbH – Typesetting: Produced in-house with SmartNotes Printing: G. Peschke Druckerei GmbH – Annual Report on the internet: www.allianz.com/annualreport – Date of publication: 6 March 2020 This is a translation of the German Annual Report of Allianz SE. In case of any divergences, the German original is legally binding. 

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