Best Affirms Allianz SE, Most Subs ‘A+ Ratings; Outlook Stable

September 8, 2011

A.M. Best Europe – Rating Services Ltd. has affirmed the financial strength rating (FSR) of ‘A+’ (Superior) and issuer credit ratings (ICR) of ‘aa’ of Germany’s Allianz Societas Europaea (Allianz SE) and a number of its key subsidiaries. The outlook for all of the ratings is stable.

The ratings of Allianz SE reflect its “strong risk-adjusted capitalization and good expected financial performance. The ratings also take into account the company’s very strong business profile,” said Best.

The rating agency also said it “believes that Allianz SE’s risk-adjusted capitalization will remain strong in 2011, despite its high exposure to peripheral euro zone sovereign credit risk.” In Best’s opinion, the group’s capitalization is “strong enough to withstand a deterioration in the credit quality and market values of its holdings in sovereign bonds.

“Despite significant impairments on its Greek government bonds and high natural catastrophe claims, Allianz SE’s shareholder equity (excluding non-controlling interests) remained relatively stable at €42.6 billion [$60 billion] at half year 2011 and was supported by the €2 billion [$2.814 billion] subordinated debt issued in the first quarter of this year.

“A deterioration of the euro zone financial situation—significantly more severe than currently anticipated by the markets and European regulatory stress tests—would be likely to have a negative impact on the ratings of Allianz SE.”

Best also indicated that it expects Allianz SE to “post a good financial performance in 2011, despite lower anticipated investments results while its operating profit of €7.5 to €8.5 billion [$10.5 to $11.96 billion] remains on target. The high natural catastrophe losses experienced in the first quarter of 2011 are likely to be offset by improved claims development in the motor business in Europe. The asset management activities are likely to continue to contribute positively to the group’s overall earnings following a strong performance in 2010.”

In addition Best pointed out that Allianz SE maintains a “very strong business profile worldwide and more particularly in Continental Europe, Asia Pacific and the United States. At half year 2011, the group’s total revenues were down 2.4 percent to €54.5 billion [$76.68 billion] as the decline in life investment type products more than offset the good business growth in the non-life and asset management segments.

“Following the good performance of the group’s specialty insurers and hardening rates in some European non-life business lines,” Best said it “believes that non-life premiums are likely to increase moderately in 2011 and 2012.”

The report summarized the ratings affected as follows:
The FSR of A+ (Superior) and ICR of ‘aa’ have been affirmed for Allianz SE and its following subsidiaries:
— Allianz Lebensversicherungs-AG
— Allianz Versicherungs-AG
— Allianz Private Krankenversicherungs-AG
— Euler Hermes Kreditversicherungs-AG
— Allianz S.p.A
— Allianz Insurance Plc
— Allianz Vie
— Allianz IARD

The ICR has been downgraded to ‘a’ from ‘aa’ for Allianz France S.A. The rating downgrade is reflective of the company’s status as a non-operating holding company.

The following debt ratings have been assigned:
Allianz Finance II B.V. (guaranteed by Allianz SE)—
— ‘aa-‘ on € 2 billion 5.75 percent subordinated bonds, due 2041
— ‘aa’ on € 1.5 billion 4.75 percent senior unsecured bonds, due 2019

The following debt ratings have been affirmed:

Allianz Finance II B.V. (guaranteed by Allianz SE)—
— ‘aa’ on €0.9 billion 5.625 percent senior unsecured bonds, due 2012
— ‘aa’ on €1.5 billion 4.0 percent senior unsecured bonds, due 2016
— ‘aa’ on €1.5 billion 5.0 percent senior unsecured bonds, due 2013
— ‘aa-‘ on €2 billion 6.125 percent senior subordinated bonds, due 2022
— ‘aa-‘ on €1 billion 6.5 percent senior subordinated bonds, due 2025
— ‘aa-‘ on €1.4 billion 4.375 percent undated junior subordinated bonds
— ‘aa-‘ on €0.8 billion 5.375 percent undated subordinated bonds
— ‘aa-‘ on $0.5 billion 7.25 percent perpetual subordinated bonds

Allianz SE—
— ‘aa-‘ on $2 billion 8.375 percent undated subordinated bonds
— ‘aa-‘ on €1.5 billion 5.5 percent perpetual junior subordinated bonds

The following debt rating has been downgraded in line with the downgrade of its issuer:
Allianz France S.A.—
— to ‘a-‘ from ‘a+’ on €0.4 billion 4.625 percent junior subordinated bonds, due 2015

Source: A.M. Best

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