Declaration of conformity 2018

Declaration of conformity by Talanx AG pursuant to § 161 of the German Stock Corporation Act (AktG) with respect to the German Corporate Governance Code

The German Corporate Governance Code (DCGK) sets out key statutory provisions governing the management and supervision of listed German companies and contains both internationally and nationally recognised standards of good, responsible enterprise management. The purpose of the Code is to promote the trust of investors, customers, employees and the general public in German corporate governance. Section 161 of the German Stock Corporation Act (AktG) requires the boards of management and supervisory boards of listed German companies to issue an annual declaration of conformity with the recommendations of the Government Commission on the German Corporate Governance Code published by the Federal Ministry of Justice, or alternatively to explain which recommendations were or are not followed and why (“comply or explain”).

The last declaration of conformity was issued on 27 February 2018. The Board of Management and Supervisory Board declare in accordance with section 161 of the AktG that in its implementation of the German Corporate Governance Code in the currently applicable version dated 7 February 2017 Talanx AG has departed from the recommendations of the Code for the following three items:

1. Section 4.2.3 (2) of the Code (maximum limits on variable remuneration components in Board of Management contracts)

Part of the variable remuneration of Members of the Board of Management is granted in the form of Talanx share awards. The maximum number of share awards granted at the time of allocation depends on the total amount of variable remuneration, which is capped. This means that the allocation of share awards is subject to the maximum limit. Share awards are subject to a four-year vesting period. This means that Members of the Board of Management share in both positive and negative developments at the Company during this period, as reflected in the share price. After the end of the vesting period, the equivalent value of the share awards is paid out to Members of the Board of Management. The amount paid out is determined on the basis of the price of the Talanx share on the payout date, plus an amount equal to the total dividends per share distributed during the vesting period. This means that the share awards are aligned with the economic performance of the Talanx share.

The amount of variable remuneration resulting from the granting of share awards is therefore limited at the time of allocation of the share awards, but it is not capped again on the payout date. The Company believes that it is unreasonable to impose a further limit as of the payout date on the amount of variable remuneration resulting from the granting of share awards, given that the share awards are intended to align the interests of the shareholders and Members of the Board of Management of Talanx AG. From the Company’s perspective, payment in Talanx share awards represents, in economic terms, a compulsory investment in Talanx shares with a four-year holding period.

Talanx AG therefore formally declares a departure from section 4.2.3 (2) of the Code as a highly precautionary measure.

2. Section 4.2.3 (4) of the Code (caps on severance payments in Board of Management contracts)

Early termination of a contract of service without serious cause is only possible by mutual agreement. Even if the Supervisory Board insists upon setting a severance cap when concluding or renewing a Board of Management contract, this does not rule out the possibility of negotiations also extending to the severance cap if a Member of the Board of Management leaves. In addition, the scope for negotiation over such an exit could be restricted if a severance cap were agreed, which could be particularly disadvantageous in cases where there is ambiguity surrounding the existence of a serious cause for termination. In the opinion of Talanx AG, it is therefore in the interest of the Company to depart from the recommendation in section 4.2.3 (4) of the Code.

3. Section 5.3.2 (3) Sentence 3 of the Code (chairmanship of the Audit Committee)

The current Chairman of the Finance and Audit Committee is also the Chairman of the full Supervisory Board. In view of his earlier service as Chief Financial Officer he is equipped with extensive knowledge of and experience in the application of accounting principles and internal control procedures in the primary insurance and reinsurance sector. Combined with his many years of experience in leading the company and the Group, he is therefore particularly well suited for the role of Committee Chairman. In his dual role as Chairman of the Finance and Audit Committee and of the full Supervisory Board, he singlehandedly coordinates the work of both bodies and can therefore optimise the efficiency of their activities. This does not lead to a concentration of power in his hands on either the Finance and Audit Committee or the full Supervisory Board because in both bodies he has only one vote, just like the other members. In light of this, the Company believes that the current Chairman of the Supervisory Board is the most suitable person to act as Chairman of the Finance and Audit Committee. It is therefore in the interest of the Company to depart from the recommendation in section 5.3.2 (3) Sentence 3 of the Code.

Apart from the above-mentioned exceptions, the Company will continue to comply with the recommendations of the German Corporate Governance Code.

Hannover, 9 November 2018



On behalf of the Board of Management
On behalf of the Supervisory Board

The Board of Management and Supervisory Board issued the following declaration of conformity with the German Corporate Governance Code for Talanx AG before the annual financial statements were adopted:

The German Corporate Governance Code (DCGK) sets out the key statutory provisions governing the management and supervision of listed German companies and contains both internationally and nationally recognised standards of good, responsible enterprise management. The purpose of the Code is to promote the trust of investors, customers, employees and the general public in German company management. Section 161 of the AktG requires the boards of management and supervisory boards of listed German companies to issue an annual declaration of conformity with the recommendations of the Government Commission on the German Corporate Governance Code published by the Federal Ministry of Justice, or alternatively to explain which recommendations were not and are not complied with and why (“comply or explain”).

The last declaration of conformity was issued on 27 February 2017. The Board of Management and Supervisory Board declare in accordance with section 161 of the AktG that Talanx AG, in its implementation of the German Corporate Governance Code in the currently applicable version dated 7 February 2017 and published in the Federal Gazette on 24 April 2017, as well as in its previous version dated 5 May 2015, has departed from the recommendations of the Code for three items:

1. Section 4.2.3(2) of the Code (maximum limits on variable remuneration components in Board of Management contracts)

Part of the variable remuneration of Members of the Board of Management is granted in the form of Talanx share awards. The maximum number of share awards granted at the time of allocation depends on the total amount of variable remuneration, which is capped. This means that the allocation of share awards is subject to the maximum limit. Share awards are subject to a four-year lock-up period. This means that Members of the Board of Management share in both positive and negative developments at the Company during this period, as reflected in the share price. After the lock-up period, the equivalent value of the share awards is paid out to Members of the Board of Management. The amount paid out is determined on the basis of the price of Talanx shares on the payout date, plus an amount equal to the total dividends per share distributed during the lock-up period. This means that the share awards are aligned with the economic performance of Talanx shares. The amount of variable remuneration resulting from the grant of the share awards is therefore limited at the time of allocation of share awards, but not on the payout date. The Company believes that it is unreasonable to impose a further limit as of the payout date on the amount of variable remuneration resulting from the grant of share awards, given that the share awards are intended to align the interests of the shareholders and Members of the Board of Management of Talanx AG. From the Company’s perspective, payment in Talanx share awards represents, in economic terms, a compulsory investment in Talanx shares with a four-year holding period.

Talanx AG therefore formally declares a departure from section 4.2.3(2) of the Code as a highly precautionary measure.

2. Section 4.2.3(4) of the Code (caps on severance payments in Board of Management contracts)

Early termination of the contract of service without cause is only possible by mutual agreement. Even if the Supervisory Board sets a severance cap when signing or renewing a Board of Management contract, this does not rule out the possibility of negotiations extending to the severance cap if a Member of the Board of Management leaves. In addition, the scope for negotiations on
such a departure could be restricted if a severance cap was agreed, which can be particularly disadvantageous in cases where there is ambiguity about the existence of a cause for dismissal. In the opinion of Talanx AG, it is therefore in the interest of the Company to depart from the recommendation in section 4.2.3(4) of the Code.

3. Section 5.3.2(3) sentence 3 of the Code (chairmanship of the Audit Committee)

The current Chairman of the Finance and Audit Committee is also the Chairman of the full Supervisory Board. Although other members of the Finance and Audit Committee have specialist knowledge of and experience in the application of accounting principles and internal control procedures, the current Chairman of the Committee is the only person who has spent his whole career in the insurance sector. He can look back on 29 years on the boards of management of insurance and insurance holding companies, including 20 years as Chairman of the Board of Management, where he shared direct responsibility for the earnings of the companies concerned and for the presentation of this information in the financial statements. In his double role as Chairman of the Finance and Audit Committee and the full Supervisory Board, he coordinates the work of both committees and can therefore optimise the efficiency of their activities. His position does not lead to a concentration of power on either the Finance and Audit Committee or the full Supervisory Board, as he only has one vote in each of these, just like the other members. In light of this, the Company believes that the current Chairman of the Supervisory Board is the most suitable person to act as Chairman of the Finance and Audit Committee. It is therefore in the interests of the Company to depart from the recommendation in section 5.3.2(3) sentence 3 of the Code.

Apart from the above-mentioned exceptions, the Company will continue to comply with the recommendations of the German Corporate Governance Code.

Hannover, 27 February 2018

On behalf of the On behalf of the
Board of Management Supervisory Board

A. Introduction

Talanx AG is incorporated under the laws of Germany. Its corporate standing, rules of operation as well as the rights of shareholders are governed by the provisions of German corporate law. In certain areas, these provisions differ from the relevant provisions of Polish law.

In this report Talanx AG gives notice of the non-application of certain corporate governance rules specified in the “Best Practice for GPW Listed Companies 2016” along with an explanation why these rules were not applied. The recommendations defined in the “Best Practice for GPW Listed Companies 2016” are not subject of the declaration.

The information provided should be assessed together with the Annual Report of Talanx AG which contains general information about the structure of the Talanx Group and its corporate governance system.

According to the German Stock Corporation Act, Talanx AG operates under a system based on three corporate bodies – the Annual General Meeting of shareholders, the Supervisory Board and the Board of Management.

The Board of Management and Supervisory Board submitted a declaration of conformity with the German Corporate Governance Code (“DCGK”) for Talanx AG prior to approval of the annual financial statements. This declaration of conformity is part of the Annual Report of Talanx AG and published on the company´s website. The DCGK sets out major statutory requirements governing the management and supervision of German listed companies and contains both internationally and nationally recognised standards for good and responsible enterprise management.

By good corporate governance, the Board of Management and Supervisory Board of Talanx AG understand a responsible enterprise management and supervision geared towards sustainable value creation. The company´s understanding of good corporate governance is being summarised in Talanx AG’s Corporate Governance Principles which were adopted by the Board of Management and Supervisory Board in 2012 and revised in 2015.

B. Information as to which corporate governance rules defined in section I-VI were not applied by Talanx AG and an explanation under what circumstances and for what reasons these rules were not applied

Chapter I. Disclosure Policy, Investor Communications

I.Z.1. A company should operate a corporate website and publish on it, in a legible form and in a separate section, in addition to information required under the legislation:

I.Z.1.11. information about the content of the company’s internal rule of changing the company authorised to audit financial statements or information about the absence of such rule;

I.Z.1.19. shareholders’ questions asked to the management board pursuant to Article 428 § 1 or § 6 of the Commercial Companies Code together with answers of the management board to those questions, or a detailed explanation of the reasons why no answer is provided, pursuant to principle IV.Z.13;

I.Z.1.20. an audio or video recording of a General Meeting.

Partial non-application of the rule.

Company´s explanation:

Talanx AG makes relevant information and documents available for review by shareholders on the corporate website.

I.Z.1.11. According to EU law, the responsible auditor of a Public Interest Entity, as Talanx AG, has to rotate after 10 years. There does not exist any specific internal rules of Talanx AG concerning the changing of the company’s auditor. Change of auditors company for Talanx AG is approved as of 2018.

I.Z.1.19. Talanx AG reports the detailed results on all votes via a company release and via its website shortly after the Annual General Meeting has ended.

I.Z.1.20.Talanx AG limits – consistent with German law – the broadcast of the Annual General Meeting to such parts which do not show private investors or their representatives.

Chapter IV. General Meeting, Shareholder Relations

IV.Z.4. If the Management Board becomes aware a General Meeting being convened pursuant to Article 399 § 2–4 of the Commercial Companies Code, the Management Board should immediately take steps which it is required to take in order to organise and conduct the General Meeting. The foregoing applies also where a General Meeting is convened under authority granted by the registration court according to Article 400 § 3 of the Commercial Companies Code.

Partial non-application of the rule.

Company´s explanation:

IV.Z.4. According to German and Polish rules governing the conflict of laws, solely German law is applicable in respect of corporate legal processes, particularly regarding the way of convening a General Meeting.

Chapter VI. Remuneration

VI.Z.3. The remuneration of members of the Supervisory Board should not be linked to options or other derivatives or any other variable components, and neither should it be linked to the company´s results.

Partial non-application of the rule.

Company´s explanation:

VI.Z.3. The remuneration of the Supervisory Board members of Talanx AG has a variable component which is linked to the company´s averaged results of the last three business years.

Talanx AG
The Board of Management

March 2018