A.M. Best Lowers Ratings of Allianz AG

OLDWICK, N.J.--(BUSINESS WIRE)--March 21, 2003--A.M. Best Co. has lowered the financial strength rating to A+ (Superior) from A++ (Superior) of Allianz AG, Germany, and its core subsidiaries. At the same time, A.M. Best has lowered the ratings on Allianz's senior debt to "aa-" from "aa+." (See list by clicking on URL below.) The outlook on all ratings is negative.

Published on March 21, 2003

These rating actions reflect Allianz's deteriorated consolidated capitalisation and weak earnings. A.M. Best believes that Allianz continues to have a superior business profile, but it remains challenged to significantly improve earnings in 2003 mainly due to continued depressed capital markets.

Reduced capitalisation -- Allianz's consolidated risk-adjusted capitalisation has deteriorated mainly due to a significant decline in unrealised gains in its investment portfolio and disappointing results from Dresdner Bank. The announced capital measures (rights issue and the issue of subordinated debt) and other initiatives (reduction of risk-weighted assets and reduction of its equity portfolio) are supportive of the current rating level. However, A.M. Best believes that in the short term, Allianz is unlikely to return to previous superior capital levels in the current economic environment.

Weak earnings -- Despite an improvement in non-life underwriting performance and one-off capital gains from the restructuring of its cross-shareholdings with Munich Reinsurance Company (currently rated A++ with a negative outlook), Allianz recorded a post-tax loss of EUR 1.2 billion (USD 1.3 billion) in 2002. Depressed investment income from the life segment and negative results from Dresdner Bank significantly contributed to this loss. A.M. Best expects a further improvement in Allianz's non-life underwriting performance in 2003. However, Allianz's more conservative investment approach and the impact of the difficult capital market environment for the banking business are likely to limit its ability to return to previous earnings levels in the short term.

Superior business position -- Allianz maintains a superior business position in Europe, where it is one of the market leaders in a number of countries, such as Germany, France and Italy. Life/health premiums grew by an excellent 18% in 2002, with particularly strong new business in Germany (where it benefited from the private pension reform), the United States and Italy. Non-life premiums increased by a modest 3% due to stricter underwriting in all lines of business. Dresdner Bank's concentration of its loan book in Germany partially offsets Allianz's excellent diversification.

For a complete listing of Allianz's financial strength and debt ratings, please visit http://www.ambest.com/press/032102allianz.pdf.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.