C _ Group Management Report LIQUIDITY AND FUNDING RESOURCES Organization Within our Asset Management operations, the most important sources The Allianz Group’s liquidity management is based on policies and of liquidity are fees generated from asset management activities. guidelines approved by the Allianz SE Board of Management. These are primarily used to cover operating expenses. Allianz SE and each of the operating entities are responsible for managing their respective liquidity positions, while Allianz SE provides central cash pooling for the Group. Capital allocation is managed by Liquidity management and funding of Allianz SE for the entire Group. This structure allows the efficient use of Allianz SE liquidity and capital resources, and enables Allianz SE to achieve the desired liquidity and capitalization levels for the Group and its The main responsibility for managing the funding needs of operating entities. Allianz Group, maximizing access to liquidity sources and optimizing the trade off between borrowing costs, balancing the maturity profile, and the choice between senior and subordinated funding instruments, Liquidity management of our lies with Allianz SE. We therefore comment on the liquidity and funding operating entities resources of Allianz SE in the following sections. Restrictions on the transferability of capital within the Group mainly result from the capital maintenance rules under applicable corporate laws as well as from the regulatory solvency capital requirements for regulated Group Major sources of liquidity for our operational activities are companies. primary and reinsurance premiums received, reinsurance receivables collected, investment income, and proceeds generated from the maturity or sale of investments. These funds are mainly used to pay Allianz SE ensures adequate access to liquidity and capital for our claims arising from the Property-Casualty insurance business and operating entities. The main sources of liquidity available for related expenses, life policy benefits, surrenders and cancellations, Allianz SE are dividends received from subsidiaries and external acquisition costs, and operating costs. funding raised in the capital markets. Liquidity resources are defined We receive a large part of premiums before payments of claims as readily available assets – specifically cash, money market securities, or policy benefits are required, generating solid cash flows from our and highly liquid fixed income securities. Our funds are primarily insurance operations. This allows us to invest the funds in the interim to used for interest payments on our debt funding, operating costs, create investment income. internal and external growth investments, and dividends or share buy- Our insurance operations also carry a high proportion of liquid backs to our shareholders. investments, which can be converted into cash to pay for claims. Generally, our investments in fixed-income securities are sequenced to mature when funds are expected to be needed. Allianz SE’s access to external funds depends on various factors such The overall liquidity of our insurance operations depends on as capital market conditions, access to credit facilities, credit ratings, capital market developments, interest rate levels, and our ability to and credit capacity. The financial resources available to Allianz SE in realize the market value of our investment portfolio to meet insurance the capital markets for short-, mid- and long-term funding needs are claims and policyholder benefits. Other factors affecting the liquidity described below. In general, mid- to long-term financing is covered by of our Property-Casualty insurance operations include the timing, issuing senior bonds, subordinated bonds or ordinary no-par value frequency, and severity of losses underlying our policies and policy shares. renewal rates. In our Life operations, liquidity needs are generally influenced by trends in actual mortality rates compared to the Share capital assumptions underlying our life insurance reserves. Market returns, As of 31 December 2021, the issued share capital as registered at the crediting rates, and the behavior of our life insurance clients – for Commercial Register was € 1,169,920,000. This was divided into example, regarding the level of surrenders and withdrawals – can 408,457,873 no-par value shares. As of 31 December 2021, the also have significant impacts. Allianz Group held 238,720 (2020: 247,489 ) own shares. Allianz SE has the option to increase its share capital according to authorizations provided by the AGM. The following table outlines Allianz SE’s capital authorizations as of 31 December 2021: 92 Annual Report 2021 − Allianz Group