Best Affirms Allianz Suisse Rating

August 29, 2005

A.M. Best Co. announced that it has affirmed the financial strength rating of “A” (Excellent) of Allianz Suisse Versicherungs-Gesellschaft and Allianz Suisse Lebensversicherungs-Gesellschaft (collectively referred to as Allianz Suisse). Best also assigned an issuer credit rating of “a” to both companies. The outlook for the ratings remains stable.

“The ratings reflect the enhancement from the implicit support of the ultimate parent company, Allianz AG,” said Best. “Other rating factors include Allianz Suisse’s excellent risk-adjusted capitalisation, stable operating performance and excellent business profile.”

Best said, “Allianz Suisse’s consolidated risk-adjusted capitalisation is supportive of the current rating, benefiting from the build up of crash reserves and de-risking of its balance sheet.” However, the rating agency indicated that it “believes Allianz Suisse remains highly dependent on group life business where the relatively high conversion rate into annuities, despite a gradual reduction in the forthcoming years, increases the longevity risk. The relatively short duration of its life bond portfolio carries a higher mismatching risk.”

Best also indicated that it “expects Allianz Suisse’s non-life underwriting performance to remain stable with a combined ratio of approximately 102 percent (including bonus payments) in 2005, as an improvement in accident and health from the cancellation of unprofitable contracts is likely to be offset by a deterioration in liability due to higher claims frequency.

“In life, post-tax earnings are likely to improve to approximately CHF 90 million ($71 million) in 2005, despite a moderate decline in investment income, following a strong return on equity (post-tax earnings/average shareholder’s funds) of 16.6 percent in 2004. A.M. Best expects that the strengthened focus on mandatory group life business is likely to limit further improvement in earnings potential despite restrictive underwriting.”

Best also noted that the company “maintains a strong position in the Swiss market, as the fourth largest non-life insurer and the sixth largest life insurer.” The rating agency said that, following a strategic review, Allianz Suisse’s increased focus on group life business and the launch of new individual products is only gradually leading to higher sales. “Consequently, gross written premiums are likely to decline moderately by approximately 1 percent to CHF 1.56 billion ($1.2 billion) in 2005,” the report continued.

“In non-life, primary gross written premiums are likely to decrease by 1 percent as Allianz Suisse continues the restructuring of the accident and health portfolio and imposes rate increases in underperforming lines,” it concluded.

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