A.M. Best Affirms Ratings of Allianz Insurance Group and Fireman’s Fund

June 22, 2004

A.M. Best Co. has affirmed the financial strength ratings of A (Excellent) of Allianz Insurance Group (Allianz), which consists of Allianz Global Risks US Insurance Company and its wholly-owned subsidiary, Allianz Underwriters Insurance Company (Allianz Underwriters). The rating outlook for Allianz is stable. All companies listed above are located in Burbank, Calif.

A.M. Best has also affirmed the financial strength ratings of A (Excellent) of Novato, Calif.-based Fireman’s Fund Insurance Company (Fireman’s Fund) and its intercompany pool participants and reinsured affiliates. The rating outlook is negative.

Allianz’s ratings reflect the group’s adequate stand-alone capitalization, as well as the demonstrated parental support provided by its ultimate parent, Allianz A.G. (Munich, Germany). The ratings also take into consideration the group’s solid business franchise and improved current and prospective earnings capabilities in its core industrial risk market.

Somewhat offsetting these positive rating factors are the group’s historically poor underwriting performance and diminished stand-alone risk-adjusted capital position, notwithstanding the advances gained in 2003. While A.M. Best has taken into account the assessment of capitalization, a sizable portion of Allianz’s surplus is in the form of its equity stake in Fireman’s Fund; thus, subjecting Allianz’s capital to even greater variability as it relates to Fireman’s Fund’s turnaround and the continuation of its parental support. Nevertheless, continued support from Allianz A.G., along with improved market conditions, underwriting processes and initiatives implemented in recent years are expected to enable the group to generate an acceptable rate of return on revenue and capital, thus sustaining its strategic importance within the Allianz A.G. Group.

The Fireman’s Fund ratings reflect its strategic importance within the Allianz A.G. Group. This has been demonstrated in recent years by the explicit financial support provided by Allianz A.G. in the form of two Keep Well Agreements, one for pre-2003 accident year loss reserve development and one for the 2003 accident year. Given the sizable reserve additions and challenges faced by Fireman’s Fund in recent years, this parental support and commitment is paramount to its current and prospective ratings. These ratings also recognize the significant improvement in underwriting and operating earnings during 2003, which, when combined with capital gains and various statutory accounting adjustments, served to increase surplus by 25% last year. Nonetheless, there remains some uncertainty regarding the ultimate success of the group’s turnaround and sustainability of current earnings, as well as the recent change in leadership caused by the resignation of its president and chief executive officer in May 2004. Any material and negative deviation from Fireman’s Fund’s planned growth in earnings or any curtailment in parental support will likely result in a downgrading of the ratings.

The financial strength ratings of A (Excellent) have been affirmed with a stable outlook for Allianz Insurance Group and its following subsidiaries:

Allianz Global Risks US Insurance Company
Allianz Underwriters Insurance Company

The financial strength ratings of A (Excellent) have been affirmed with a negative outlook for Fireman’s Fund Insurance Company and its following intercompany pool participants and reinsured affiliates:

American Insurance Company
National Surety Corporation
Interstate Fire & Casualty Company
American Automobile Insurance Company
Chicago Insurance Company
Associated Indemnity Corporation
Interstate Indemnity Company
Fireman’s Fund Insurance Company of Ohio
American Standard Lloyd’s Insurance Company
Fireman’s Fund County Mutual Ins Co
Fireman’s Fund Indemnity Corporation
Fireman’s Fund Insurance Co of Hawaii Inc
Fireman’s Fund Insurance Company of Georgia
Fireman’s Fund Insurance Company of Louisiana
Fireman’s Fund Insurance Company of Missouri
Midway Insurance Company of Illinois
Fireman’s Fund Insurance Company of Wisconsin

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