A.M. Best Affirms Financial Strength and Debt Ratings of Allianz AG.

Business Editors/Insurance Writers

OLDWICK, N.J.--(BUSINESS WIRE)--Feb. 11, 2004

A.M. Best Co. has affirmed the financial strength rating of A+ (Superior) of Allianz Aktiengesellschaft (Allianz AG) (Muenchen, Germany) and its core subsidiaries. Concurrently, A.M. Best has affirmed the "aa-" ratings on Allianz's senior debt issued by Allianz Finance B.V. and guaranteed by Allianz AG. (See below for complete listing of debt and financial strength ratings.) The outlook remains negative.

These ratings reflect the expected improvement in Allianz's consolidated risk-adjusted capitalisation and gradual improvement in earnings. The ratings also recognise Allianz's superior business position as one of the leading insurers worldwide. The negative outlook reflects A.M. Best's concerns on the challenges Allianz is still facing with Dresdner Bank. In addition, further improvements of margins in life business are highly dependent upon the continuous recovery in equity markets.

Risk-adjusted capitalisation -- Allianz has partially restored its capital base through a rights issue of EUR 4.4 billion (USD 5.6 billion) in March 2003. The current recovery of the equity markets -- expected to continue throughout 2004 -- has also partially offset the unrealised capital losses of the past two years. A.M. Best expects Allianz to maintain a risk-adjusted capital level commensurate with the current financial strength rating through retained earnings. Allianz's financial flexibility remains excellent. Traditionally, Allianz's debt issues have been placed successfully, reflecting investors' confidence. In the short term, A.M. Best does not foresee Allianz raising further subordinated debt in excess of EUR 1.5 billion (USD 1.9 billion) earmarked in March 2003. The current relatively low interest coverage is expected to improve as the strengthening of earnings materialises.

Gradual improvement in earnings -- Allianz returned to profitability (net income EUR 421 million (USD 535 million)) in the first nine months of 2003, reflecting the implementation of stricter property/casualty underwriting targets and the absence of major catastrophes. The combined ratio improved substantially to 96.9% from 106.7% during the same period in 2002. At year-end 2003, A.M. Best expects a further increase in the overall profit. Additionally, the EUR 2.9 billion (USD 3.7 billion) realized gain from the sale of most of its stake in Beiersdorf, a cosmetic manufacturer, is expected to be partially offset by building up provisions for the "New Dresdner Program" and by very prudent valuations in the balance sheet. The operational profitability will be mainly driven by positive results from the property/casualty segment. Life earnings remain marginal due to low investment returns but continue to improve, reflecting the recovery in the equity markets and reduction in terminal bonuses. Allianz's banking operations remain unprofitable, albeit on a smaller scale, as the restructuring efforts at Dresdner Bank are expected to gradually positively impact earnings and significantly decrease the expenses for loan loss provisions. In addition, the sale of the company's stake in some strategic investments will yield substantial non-recurring capital gains over the next two years.

Superior business position -- Allianz remains one of the leading insurers worldwide. The company experienced strong new business growth in the life sector in the first nine months of 2003, particularly in Germany, Italy and the United States. A.M. Best expects Allianz to maintain the organic growth of its non-life business to a minimum (2%) as rates begin to soften. In the life sector, A.M. Best believes the strong growth experienced in 2003 is unlikely to be repeated in 2004 and forecasts a premium increase of approximately 5%, reflecting the relatively high market share in gradually maturing markets.

The financial strength ratings of A+ (Superior) have been affirmed for the following core subsidiaries of Allianz AG:

-- Allianz Lebensversicherungs AG

-- Allianz Versicherungs-AG

-- Bayerische Versicherungsbank AG

-- Frankfurter Versicherungs-AG

-- Allianz Private Krankenversicherungs AG

-- Allianz Marine & Aviation (France)

-- Allianz-Elementar Lebensversicherungs AG

-- Allianz-Elementar Versicherungs AG

-- Euler Hermes Kreditversicherungs-AG

-- Riunione Adriatica di Sicurta S.p.A.

-- Assurances Generales de France IART 

-- Assurances Generales de France Vie

-- Lloyd Adriatico S.p.A.

-- Allianz Cornhill Insurance plc

The debt ratings of "aa-" have been affirmed for the following:

Allianz Finance B.V. II --

-- EUR 1 billion 1.25% senior unsecured convertible Eurobonds,

due 2006.

-- EUR 2 billion 1.25% senior unsecured index-linked Eurobonds,

due 2004.

Allianz Finance B.V. --

-- EUR 1.1 billion 5.75% senior unsecured Eurobonds, due 2007.

-- EUR 1.6 billion 5% senior unsecured debentures, due 2008.

-- CHF 1.5 billion 3% senior unsecured notes, due 2005.

-- EUR 1.7 billion 2% senior unsecured convertible Eurobonds, due

2005.

For a complete list of A.M. Best's debt ratings, please visit http://www3.ambest.com/debtratings/.

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.