Best Affirms Allianz SE & Subsidiaries ‘A+’ Ratings

December 26, 2006

A.M. Best Co. has affirmed the financial strength rating of “A+” (Superior) and the issuer credit ratings of “aa-” of German-based Allianz Societas Europaea (Allianz SE) and its subsidiaries. Best also affirmed the debt ratings of “aa-” on senior debt and assigned an “a” rating to the subordinated debt, which are guaranteed by Allianz SE. The outlook on all ratings remains stable.

The ratings are essentially identical with Best’s ratings of Allianz AG and its subsidiaries. The new “SE” designation recognizes the completion of Allianz structural change from a German company to a European entity. Allianz announced the conversion plan in September 2005 (See IJ web site Sept. 13, 2005) in conjunction with its plan to merge with its Italian subsidiary Riunione Adriatica di Sicurtà (RAS) S.p.A (See related article) by acquiring the remaining 45 percent of the Company that it didn’t own. The changeover was completed in October.

“The rating of Allianz SE reflects its improved operating performance, improving risk-adjusted capitalization and very strong business position, particularly in Germany and other European countries,” said Best.

“Allianz enjoys very strong business positions, mainly in Continental Europe, and especially in Germany, Italy and France,” the bulletin continued. “A continuing strong demand for life insurance in Germany and Eastern Europe is partly offsetting the decline in variable annuities in the United States and unit-linked products in Italy.” Best also noted that P/C “premiums remain stable due to increasing competition, especially in motor and industrial lines of business. Dresdner Bank (Allianz SE’s main banking subsidiary) is experiencing strong growth in 2006, while asset management continues the strong trend observed over 2005.”

Best indicated that it “expects a further significant improvement in earnings in 2006 as a result of the company’s focus on sustainable profitability and anticipates that all four business segments (property/casualty, life/health, banking and asset management) will positively contribute to this.” Full year 2006 profits are expected to be around €9.8 billion ($12.9 billion), “a more than 30 percent increase over 2005, mainly driven by the turnaround in Dresdner Bank, the lack of major natural catastrophes and the improved equity market conditions.”

Best also explained that the Group’s Life&Health segment has been most affected by equity market conditions. “Increased dividend payments more than offset the revenue decline in some key markets (United States and Italy) and the increasing acquisition expenses.”

In the P/C sector operating profit “grew by 28.6 percent due to reduced catastrophes, which resulted in a decline in combined ratio from 94.9 percent to 92.2 percent for the first nine months in 2006.” Best said it “believes that this trend is likely to continue for the full year 2006, while the competitive market pressures in the industrial risks market and the German and French motor business are likely to impact results in 2007. It also noted the strong results from Dresdner Bank, which seems to have been turned around.

“Allianz SE’s risk-adjusted capitalization has further strengthened following the strong financial performance during 2006,” Best continued; “increased unrealized capital gains, which comes after the increase in capital; and the issuance of subordinated debt in 2005.” Best also foresees “a further improvement from retained earnings, compensating for higher capital requirements from the planned growth in the life/health segment.”

For a complete list of Allianz Societas Europaea’s FSRs, ICRs and debt ratings, consult:

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