Best Affirms FSR for Allianz Cornhill

July 13, 2005

A.M. Best Co. has affirmed the financial strength rating of A+ (Superior) and the issuer credit rating of “aa-” of Allianz Cornhill Insurance plc (ACI) (United Kingdom). The outlook for these ratings remains negative, which is in line with the parent company, Allianz AG (Germany).

The rating reflects support from Allianz AG, excellent stand-alone risk-adjusted capitalization, strong operating performance and ACI’s excellent business profile.

A.M. Best anticipates that ACI’s risk-adjusted capitalization will remain supportive of the current rating in 2005, factoring retained earnings of approximately GBP 70 million (USD 130 million), a decrease in net written premiums due to the cancellation of inadequately priced business, as well as the sale of the life business in late 2004.

A.M. Best believes that ACI continues to benefit from its underwriting initiatives (such as its underwriting academy) and its strong position in the small to mid-size corporate market. Additionally, ACI targets specialist markets such as large corporate schemes and animal health, which are less susceptible to the market cycle. A.M. Best believes that this is likely to enable ACI to maintain excellent underwriting results in 2005 despite an overall softening of rates in the U.K. market.

A.M. Best anticipates a pre-tax return on equity of approximately 15% at year-end 2005 despite an anticipated 2% deterioration in the combined ratio to approximately 96%. The combination of benign weather conditions and an almost complete absence of major losses resulted in ACI achieving a 1.3% improvement in its combined ratio to 93.9% and a 56% increase in pre-tax earnings to GBP 236.8 million (USD 456 million) in 2004.

The sale of the life business to the Britannic Group in December 2004 led to a one off cash inflow of GBP 110 million (USD 210 million), most of which is likely to be distributed as a dividend to the parent in 2005.

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