S&P, Best Comment on Allianz 2004 Earnings

March 18, 2005

Standard & Poor’s Ratings Services noted that “the improved 2004 results published by Allianz AG (See previous article),” (rated “AA-” Negative outlook – “/A-1+) were in line with its expectations. A.M. Best Co. signaled no change in its “A+” – negative outlook rating, indicating that “the level of profit is in line with the year-end results factored within the existing ratings.”

“The results help to reinforce Allianz’ developing track record of improvement across all its major profit centre activities, including banking,” said S&P. “Further detailed analysis is still required to assess the full implications of the 2004 results when added to the significant capital management exercise effected at the end of January 2005, as well as the progress made in life operations.”

The rating agency said its negative outlook on Allianz “will be reviewed in the forthcoming months in the light of these apparently fundamental improvements.” After noting the results (as detailed in the previous article), S&P indicated that it had “expected 2004 results to be strong fuelled by non-life results and recovery at Dresdner. The existing negative outlook is based on residual concerns over the group’s ability to deliver further improvements in the earnings performance of its life, asset-management, and banking operations as well as effective cycle management in a weakening non-life market.”

S&P said it “expects Allianz to achieve an operating ROE of close to 15 percent in 2005, a combined ratio of at least 98 percent (according to Standard & Poor’s calculations) in 2005, and to demonstrate that life profitability will make further, sustainable improvements. In addition, the Dresdner banking sub-group is expected to deliver a ROE after tax of 8 percent in 2005.

Best’s comment said: “Allianz has made significant progress in improving its operating performance, most notably in property/casualty business where the combined ratio reduced to an excellent 92.9 percent in the fourth quarter of 2004 (A.M. Best expectations approximately 95 percent), and at Dresdner Bank, which achieved an overall small profit compared to a loss in the previous year. The company continues its efforts to achieve sustainable profitability in 2005 and further improvements in earnings could trigger a reassessment of this outlook.”

Topics Profit Loss Allianz

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