D _ Consolidated Financial Statements OTHER INFORMATION 33 _ Derivative financial instruments Derivative financial instruments € mn As of 31 December 2021 2020 Maturity by notional amount Notional Notional principal Positive fair Negative fair principal Positive fair Negative fair Up to 1 year 1 - 5 years Over 5 years amounts values values amounts values values Interest rate contracts 34,675 26,647 89,378 150,700 928 (266) 138,013 1,541 (117) Equity/index contracts 327,733 20,604 19,558 367,895 9,969 (19,964) 333,707 13,530 (23,733) Foreign exchange contracts 130,949 2,482 2,016 135,447 560 (1,646) 116,701 1,493 (471) Other 2,287 27,947 826 31,060 64 (9) 26,479 34 (2) Total 495,644 77,680 111,778 685,102 11,521 (21,885) 614,900 16,598 (24,323) thereof OTC1 400,621 74,578 111,778 586,977 10,245 (21,779) 524,572 15,738 (24,223) thereof exchange-traded 95,023 3,102 - 98,125 1,276 (106) 90,328 860 (100) 1_Consists mainly of equity/index contracts and foreign exchange contracts. The table shows the fair value and notional amounts of all freestanding negative fair value of € 0.4 bn (2020: total positive fair value of derivatives, as well as derivatives for which hedge accounting is applied € 0.2 bn). by the Allianz Group, as of 31 December 2021 and 2020 respectively. The notional principal amounts indicated in the table are cumulative, Fair value hedges as they include the absolute value of the notional principal amounts of The Allianz Group uses fair value hedges to hedge the exposure to derivatives with positive and negative fair values. Although these changes in the fair value of financial assets and financial liabilities due notional principal amounts reflect the degree of the Allianz Group’s to movements in interest or exchange rates and to hedge its equity involvement in derivative transactions, they do not represent amounts portfolio against equity market risk. As of 31 December 2021, the exposed to risk. Further information on the use of derivatives to hedge derivative financial instruments used for the related fair value hedges risk can be found in the sections on market and credit risk of the Risk of the Allianz Group had a total negative fair value of € 256 mn (2020: and Opportunity Report, which forms part of the Group Management total positive fair value of € 58 mn). Report. Cash flow hedges During the year ended 31 December 2021, cash flow hedges were As of 31 December 2021, freestanding derivatives, which are included used to hedge the exposure to the variability of cash flows arising from in the line item financial assets and liabilities held for trading, had a interest rate or exchange rate fluctuations as well as inflation. As of notional principal amount of € 658.1 bn (2020: € 586.9 bn) as well as 31 December 2021, the derivative instruments utilized had a total a positive fair value of € 11.2 bn (2020: € 15.5 bn), and a negative fair negative fair value of € 40 mn (2020: total positive fair value of value of € 20.9 bn (2020: € 24.1 bn). Out of the total allocated to € 620 mn). the freestanding derivatives, € 122.2 bn (2020: € 111.6 bn) of the The ineffectiveness that arises from cash flow hedges is immaterial. notional principal relate to annuity products. Annuity products are equity-indexed or contain certain embedded options or guarantees Hedges of net investment in foreign operations which are considered embedded derivatives under IAS 39. For these As of 31 December 2021, the Allianz Group hedged part of its foreign embedded derivatives, the notional principal amounts included in the currency net investments through the issuance of several foreign table refer to the account value of the related insurance contracts. The currency denominated liabilities and the use of forward sales. The total total negative fair value of these embedded derivatives amounts to negative fair value in 2021 was € 367 mn (2020: total positive fair € 12.9 bn (2020: € 12.4 bn). Further information on the fair value value of € 212 mn). measurement of these derivatives can be found in note 34 . The Allianz Group enters into enforceable master netting arrangements and similar arrangements mainly for derivatives As of 31 December 2021, derivatives, which form part of hedge transactions. None of these enforceable master netting accounting relationships and which are included in the line items other arrangements or similar arrangements meet the requirements for assets and other liabilities, had a notional amount of € 27.0 bn (2020: offsetting in line with IAS 32. € 28.0 bn) as well as a positive fair value of € 0.3 bn (2020: € 1.1 bn) Credit risk associated with netting arrangements is further and a negative fair value of € 1.0 bn (2020: € 0.2 bn). These hedging mitigated by collateral. For further information on collateral, please instruments mainly include foreign exchange rate forwards with a total 166 Annual Report 2021 − Allianz Group