Best Affirms AGF’s ‘A+’ Ratings

January 3, 2007

A.M. Best Co. has affirmed the financial strength rating (FSR) of “A+” (Superior) and the issuer credit rating (ICR) of “aa-” of France’s AGF Group and the ICR of “a-” of the group’s non-operating holding company Assurance Generales de France SA (AGF SA). The ratings of the main operating subsidiaries and of the debt issued by the group have also been affirmed. The outlook on all ratings remains stable.

“The ratings reflect the company’s continuing strong business profile in France, stable financial performance and continuing strong risk-adjusted capitalization, said Best. “The rating of AGF reflects the implicit support of Allianz AG, which owns 57.9 percent of AGF.”

Although part of the Allianz Group, AGF operates independently in France, its largest market, which produced 62 percent of total gross written premiums in 2005. Best said it “anticipates that AGF’s consolidated premiums for the year-end 2006 will increase by approximately 7 percent to €18 billion ($24 billion). The consolidated non-life premiums will increase by approximately 4 percent in 2006, reflecting the combined effect of increased competition in motor business and the strong growth in assistance and travel insurance business through Mondial Assistance.”

Best also noted that the “Fourgous amendment has resulted in increased conversion of euro-linked policies into multi-funds or unit-linked policies. AGF’s sale of unit-linked products continues to grow at above French market average rates, with life premiums likely to increase by approximately 11 percent in 2006.”

The rating agency indicated that it “expects AGF’s financial performance in 2006 to remain stable with pre-tax profits of approximately EUR 2.3 billion ($3.0 billion). Technical profitability will be enhanced by strong premium growth, rigorous underwriting and expense reductions. However, increases of the long-term interest rates combined with high exposure in fixed income securities is likely to start depressing the exceptionally high reported capital gains.”

Best concluded: “AGF’s strong consolidated risk-adjusted capitalization is likely to remain stable in 2006 as the impact of increased retained earnings is offset by increased business volumes. The current dividend policy of distributing approximately 40 percent of earnings will be maintained in 2006. Prospective capitalization is further supported by the increasing proportion of unit-linked business in AGF’s life portfolio.”

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