Best’s News & Research Service - August 11, 2016 03:45 PM (EDT)
A.M. Best Revises Issuer Credit Rating Outlook to Positive for Allianz SE and Most of Its Subsidiaries
- August 11, 2016 03:45 PM (EDT)
London //BestWire// - A.M. Best has revised the issuer credit rating (ICR) outlook to positive from stable and affirmed the financial strength rating (FSR) of A+ (Superior) and ICR of “aa-” of Allianz SE (Allianz) (Germany) and most of its A.M. Best rated subsidiaries. The outlook for the FSR remains stable. (See below for a detailed listing of company ratings).
Allianz’s excellent risk-adjusted capitalisation, strong operating performance, diversified business profile and robust risk management framework add positive pressure to its rating; however, these positive rating drivers are tempered by the company’s exposure to volatile investment markets. The group’s strategic plans include overhauling the mix of new life business written, reducing its sensitivity to credit spreads, digitalising its core underwriting platforms, cultivating customer centricity and improving underwriting performance. If the group is able to broadly achieve these targets over the coming two-to-three years, whilst maintaining strong capitalisation, a rating upgrade is likely.
Allianz’s level of risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), remained stable and at an excellent level in 2015. Capitalisation is expected to remain at a similarly robust level over the coming years, with strong earnings retention likely to offset the additional capital requirements of business growth. Although exposure to market risk subjects the group’s solvency to potential volatility, this is mitigated by significant capital buffers that should absorb market movements.
Allianz’s diversified earnings profile has enabled it to generate a long record of strong underwriting and overall results. In 2015, the group reported a combined ratio for its property/casualty operations of 94.6% and an overall return on equity of 10.8%, which compare favourably to its 10-year weighted averages of 95.4% and 10.2%, respectively. With the exception of a small number of operating units in which issues are actively being addressed, Allianz’s major operating units performed well in 2015. Furthermore, despite challenges at its PIMCO subsidiary, the group’s asset management operations continue to provide a material contribution to its net result. Although improved results are expected at PIMCO over the short-to-medium term, a further decline in this subsidiary’s performance could be a negative rating factor.
Allianz is a leading global insurer with a strong competitive position in numerous mature insurance markets. In 2015, the group reported total revenues of EUR 125 billion. Although a significant proportion of Allianz’s revenue is concentrated in Western Europe, no single market is critical for its overall earnings. The group offers a full range of insurance products to both retail and corporate customers and has good diversification between its life and non-life operations.
The ICR outlooks have been revised to positive from stable and the FSR of A+ (Superior) and the ICR of “aa-” have been affirmed for Allianz SE and its following subsidiaries, while the FSR outlook remains stable:
- Allianz Global Corporate & Specialty SE
- Allianz S.p.A.
- Allianz Risk Transfer AG
- Allianz Risk Transfer (Bermuda) Limited
- AWP P&C
- Jefferson Insurance Company
- AWP Health & Life S.A.
- Allianz Global Risks US Insurance Company
- Allianz Underwriters Insurance Company
- AGCS Marine Insurance Company
- American Automobile Insurance Company
- National Surety Corporation
- The American Insurance Company
- Associated Indemnity Corporation
- Chicago Insurance Company
- Fireman’s Fund Insurance Company
- Fireman’s Fund Indemnity Corporation
- Fireman’s Fund Insurance Company of Hawaii, Inc.
- Fireman’s Fund Insurance Company of Ohio
- Interstate Fire & Casualty Company
- Allianz Life Insurance Company of North America
- Allianz Life Insurance Company of New York
The FSR of A+ (Superior) and the ICR of “aa-” have been affirmed for Euler Hermes North America Insurance Company. The outlook for each rating remains stable, reflecting the level of independence that is present within the Euler Hermes group.
The following outlooks have been revised to positive from stable while the issue ratings have been affirmed:
Allianz Finance II B.V. (debt issues are guaranteed by Allianz)–
— “aa-” on EUR 750 million 3% senior unsecured bonds, due 2028
— “aa-” on GBP 750 million 4.5% senior unsecured bonds, due 2043
— “aa-” on EUR 500 million 1.375% senior unsecured bonds, due 2018
— “aa-” on EUR 1.5 billion 3.5% senior unsecured bonds, due 2022
— “aa-” on EUR 1.5 billion 4.75% senior unsecured bonds, due 2019
— “aa-” on EUR 1.5 billion 4.0% senior unsecured bonds, due 2016
— “a+” on EUR 2 billion 5.75% subordinated bonds, due 2041
— “a” on EUR 1.4 billion 4.375% perpetual subordinated bonds
— “a” on EUR 800 million 5.375% perpetual subordinated bonds
Allianz SE–
— “a+” on EUR 1.5 billion 5.625% subordinated bonds, due 2042
— “a” on USD 1 billion 5.5% perpetual subordinated bonds
— “a” on EUR 1.5 billion 4.75% perpetual subordinated bonds
— “a” on CHF 500 million 3.25% perpetual subordinated bonds
— “a” on EUR 1.5 billion 3.375% perpetual junior subordinated bonds
This press release relates to rating(s) that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page.
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