Best Assigns ‘A-’ Rating to Allianz Marine & Aviation

A.M. Best Co. announced that it has assigned a financial strength rating of “A-” (Excellent) and an issuer credit rating (ICR) of “a-” to Germany’s Allianz Marine & Aviation Versicherungs-AG (AMAV) with a stable outlook.

“The rating of AMAV reflects the rating enhancement from its ultimate parent, Allianz Aktiengesellschaft (Allianz) (Germany), its adequate risk-adjusted capitalization and its excellent business position in the European marine and aviation market,” said Best. “An offsetting factor is the anticipated significant deterioration in the company’s underwriting performance in 2005.”

Best noted: “AMAV writes world-wide marine and aviation business within the Allianz group. Allianz is currently in the process of merging this subsidiary with Allianz Global Risk, which writes solely industrial risks. A.M. Best will review the current ratings once the details of the new structure, including the level of capitalization for the newly formed subsidiary, are finalized.”

The rating agency said it “expects AMAV’s risk-adjusted capitalization to decline at year-end 2005, but to remain supportive of the assigned rating, following the company’s significant exposure to the US hurricanes. The expected overall loss will be absorbed by Allianz AG through a profit and loss absorption agreement. However, AMAV will also utilize equalization reserves, which A.M. Best considers as equity, to alleviate the loss.

“AMAV’s underwriting performance will deteriorate due to substantial hurricane losses with a combined ratio of approximately 120 percent in 2005, from an excellent 93.4 percent in 2004. These losses stem to a large extent from an Excess of Loss account, which AMAV has ceased to underwrite. A.M. Best expects the cancellation of this portfolio and revised risk management controls to enable AMAV to return to profitable underwriting in 2006.”

Best also indicated that in its opinion “AMAV benefits from its excellent position as a specialist marine and aviation insurer. A.M. Best anticipates that gross written premiums are likely to increase by approximately 20 percent to €950 million ($1.13 billion) in 2005. This is mainly due to additional premiums in marine business from strong world-wide trading activities, but also from a stronger focus on general aviation business (which will offset the softening of rates experienced in the large airline market) and the cessation of underwriting large marine excess of loss business.”