Best Assigns Rating to Allianz Risk Transfer AG

December 23, 2010

A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating (FSR) of ‘A+’ (Superior) and the issuer credit rating (ICR) of “aa” of Allianz Global Corporate & Specialty AG (AGCS AG).

Best also affirmed the FSR of ‘A+’ (Superior) and the ICR of “aa” of Allianz Global Corporate & Specialty (AGCS France), a subsidiary of AGCS AG, and has assigned an FSR of ‘A’ (Excellent) and ICR of “a+” to Allianz Risk Transfer AG (ART) which is based in Switzerland, and is also a subsidiary of AGCS AG.

The outlook for all ratings is stable.

Best said the ratings reflect its view that AGCS AG and AGCS France are “an integral part of the strategy of their ultimate parent company, Allianz Societas Europaea (Allianz SE). AGCS AG and AGCS France write business for large corporate clients on a global basis and, taken together, the AGCS companies in Germany, France and the United States contribute a significant proportion of Allianz SE’s consolidated non-life gross premium written.

“Parental support for AGCS AG continues to be underpinned by a profit and loss absorption agreement providing obligatory payment for net losses as well as a requirement to upstream net income.

“Although the loss absorption agreement limits the accumulation of earnings at AGCS AG, stand-alone risk-adjusted capitalization is strong, benefiting from improvement as a result of Allianz SE’s re-structuring of its global corporate and specialty business. AGCS AG has emerged from the re-structuring as Allianz SE’s principal carrier for this business, having successfully integrated portfolios and business units from elsewhere in the group. AGCS AG allocated €160 million [$209 million] to equalization reserves in 2009,” which, Best said, “credits to capital. Risk-adjusted capitalization is also supported by AGCS AG’s conservative investment allocation and extensive use of excess of loss reinsurance protection placed with Allianz SE companies and with third party reinsurers.”

Additionally, the ratings of AGCS AG “reflect its consistent strong performance,” which Best said it believes will continue in 2010. Although Best also indicated that it “anticipates significant growth for the AGCS companies, underwriting profitability is expected to be maintained because part of the growth will arise from transferred business. The companies will also be able to leverage cross-selling opportunities within Allianz SE, and commodity property business will form a smaller part of the overall account written.

“In 2009, AGCS AG maintained its low combined ratio at 84 Percent, supported by substantial prior year reserve releases. Investment income has been affected by the lower yield environment, but in 2009 realized and unrealized capital gains enabled the company to maintain its overall investment income at a comparable level to the previous year at EUR 176 million.

“In terms of breadth of client base as well as territorial and class of business diversification, the profile of the AGCS companies has benefited from the transfer of large corporate accounts previously written by local Allianz SE subsidiaries.

“Further expansion is expected as more large accounts are transferred and due to growth in emerging markets, particularly Brazil and Asia. Certain business lines are also likely to provide medium-term growth opportunities, including marine, energy, financial lines and product and environmental liability.”

Best concluded that as a result it “anticipates strong growth in the volume of business written by the AGCS companies and a continuing strong profile for the companies as Allianz SE’s underwriting vehicles for major multi-national accounts.”

Source: A.M. Best

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