Best Comments on Allianz U.S. Operations Rating Actions

December 20, 2011

A.M. Best has taken the somewhat unusual step of issuing a comment on its downgrading of the issuer credit ratings (ICR) to “aa-” from “aa” and the affirmation of the financial strength rating (FSR) of A+ (Superior) of Allianz Global Corporate & Specialty North America (AGCS NA), which includes Allianz Global Risk US Insurance Company, Allianz Underwriters Insurance Company, both of Burbank, Calif. and AGCS Marine Insurance Company of Chicago, as well as the downgrading of the ICR to “a-” from “a” of Delaware-based Allianz of America Inc. All of the ratings have been placed under review with negative implications.

The downgrading of the ICRs of AGCS NA and Allianz of America Inc reflects “the rating enhancement they receive” from their ultimate parent company, Germany’s Allianz Societas (Allianz SE), whose ICRs were recently downgraded.

Best said that in its opinion, “the AGCS companies (comprising AGCS NA and Allianz Global Corporate & Specialty AG (AGCS AG) (Germany) and all subsidiaries) are an integral part of the strategy of Allianz SE.

“These companies contribute a significant part of the consolidated non-life gross premium income of Allianz SE, and they are the group’s primary risk carriers for corporate and specialty risks. Support from Allianz SE is underpinned by a profit and loss absorption agreement provided to AGCS AG.”

The ratings of AGCS NA “reflect the operational integration of this company into AGCS’ global processes and management structure,” Best continued, adding that the “ICR of Allianz of America Inc reflects standard notching as per A.M. Best criteria.

“The ratings also consider AGCS NA’s sound risk-adjusted capitalization, strong business franchise and solid underwriting and operating performance in recent years.”

Best added that in terms of “breadth of client base as well as territorial and class of business diversification, the profiles of the AGCS companies have benefited from the transfer of large corporate accounts previously written by local Allianz SE subsidiaries.

“Further expansion is expected due to growth in emerging markets, particularly Brazil and Asia.” Best anticipates that there will be “strong growth in business volumes going forward as both companies concentrate on expanding into new products, emerging markets and established territories in such places as Canada, Hong Kong and Japan, as well as onshore and offshore energy, project cargo and engineering, professional indemnity and financial lines of business.”

However, Best also indicated that “upward rating actions are unlikely at this point. Negative rating actions could occur if there were negative rating actions on Allianz SE.”

Source: A.M. Best

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