High Ratings for Allianz Debt by S&P, A.M. Best

Standard & Poor’s and A.M. Best have both given high ratings to new debt issues from Germany’s Allianz Group.

S&P assigned its ‘A-1’-plus short-term debt rating to Allianz Finance Corp.’s commercial paper program, which is authorized to a limit of $5 billion, and is guaranteed by Munich-based Allianz AG (AA+/Stable/A-1+)

A.M. Best assigned an “aaa” rating to € 1.2 billion ($1.08 billion) of 1.25% guaranteed exchangeable notes due 2006, issued by Allianz Finance II B.V., a special purpose financing vehicle wholly owned by Allianz. The notes are fully guaranteed on an unsubordinated basis by Allianz AG. The ratings on Allianz’s existing senior debt have been affirmed, while the A++ (Superior) group financial strength rating is unaffected.

S& P commented that,

The notes are a senior unsecured obligation of the issuer and rank pari passu with all other present and future unsecured and unsubordinated obligations of the issuer and the guarantor. The program is authorized to a maximum outstanding amount of $5 billion. Maturities are up to 366 days from the date of issue and notes will not be redeemable prior to maturity or subject to voluntary prepayment. The proceeds of the issue will be used by Allianz AG and subsidiaries as working capital in the U.S. and in Europe. Allianz AG’s financial flexibility and liquidity are very strong and are reported on a regular basis.”

A.M. Best indicated that, “Proceeds of the current issue will be used to bolster Allianz’s capital position following its acquisition of Dresdner Bank earlier this year and provides Allianz with additional financial flexibility for incremental earnings from rate firming in the primary property and casualty markets. Allianz’s financial leverage on a pro forma basis–as measured by corporate debt plus hybrids to total capital–remains below 20% and is supported by fixed charge coverage on an IAS basis of approximately 10 times (after minority interests).”

It also noted that, “Following the World Trade Center attack in September 2001, Allianz recognized net claims of EUR1.5 billion [$1.35 billion] –directly related to the terrorist attack– in its third quarter results. Despite this sizeable exposure, losses were absorbed by year-to-date net income of EUR 1.3 billion ($2.5 billion before minority interest) as of September 30, 2001. A.M. Best anticipates that the insurance operations will significantly benefit from the rate hardening in this current cycle, boosting the company’s earnings potential over the medium-term.”

Topics AM Best Allianz