A.M. Best Affirms Rating of Allianz AG and Its Core Subsidiaries.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating of A+ (Superior) of Allianz AG (Germany) and its core subsidiaries. (See link below for a detailed listing.) At the same time, A.M. Best has assigned an issuer credit rating of "aa-" to these companies. The issuer credit ratings reflect A.M. Best's opinion, expressed on the credit market scale, of each of these companies' overall ability to meet their senior obligations, which are insurance policies; hence both ratings (issuer credit and financial strength ratings) are at the same level. Concurrently, A.M. Best has affirmed the "aa-" ratings on senior debt, assigned an "a+" rating to three new subordinated debt issues and an "aa-" to two new senior unsecured debt issues guaranteed by Allianz AG.

The ratings reflect A.M. Best's view that Allianz's efforts to strengthen earnings as part of its "3 plus one" programme are likely to lead to a further improvement in operating performance in all business segments as well as enhanced risk-adjusted capitalisation. The ratings also factors Allianz's superior business position, particularly in Germany and other European countries. The outlook remains negative and is likely to remain so until Allianz proves a track record of sustained profitability.

Improved consolidated operating performance--Allianz achieved a significant recovery of earnings in the first six months of 2004, compared to the previous period, with property/casualty, life/health and even the banking segment recording post-tax profits totaling EUR 1.3 billion (USD 1.6 billion) (EUR 146 million (USD 179 million) in the previous period). The increase in profitability reflects a decline in the combined ratio to 94.3 % in the first six months of 2004, partially from the absence of large catastrophe losses and Allianz's success in turning around problem cases, such as AGF and Fireman's Funds. Life/health earnings benefited from higher investment returns and lower expense levels. Dresdner Bank's expense-cutting exercise and lower loan loss provisions resulted in a profit of EUR 231 million (USD 283 million), compared to a loss in the previous period. However, the asset management division's earnings are likely to remain negatively impacted by high acquisition related expenses. On a consolidated level, these positive developments in the first six months led A.M. Best to forecast a post-tax profit in the range of EUR 2 - 2.5 billion (USD 2.5 - 3.1 billion) for the full year 2004. Allianz will remain challenged by Dresdner Bank's exposure to the macroeconomic situation in Germany and the structural problems of the German banking sector. Allianz's exposure to the recent hurricanes is unlikely to significantly impair year-end earnings.

Strong risk-based capital--A.M. Best expects Allianz's strong risk-adjusted capitalisation to be supportive of its current rating for which it is expected to retain earnings. In addition, Allianz carries approximately EUR 17 billion (USD 20.8 billion) revaluation reserves on and off its balance sheet, which are expected to stabilise in 2004, as long as interest rates remain stable. The successful issuance of the EUR 1.5 billion (USD 1.8 billion) subordinated bond in February 2004 supports Allianz's capital base and proves investors' trust in the company.

Superior business position with life business growth while the property and casualty premium stabilises--Allianz is likely to benefit from a higher demand for life products in 2004, particularly in Germany, where recent changes in the taxation of life policies are likely to see an increase in sales of tax-beneficial products in the second half of 2004. In property/casualty, A.M. Best expects a stabilisation of Allianz's strong business position in its main markets. Overall life premiums are expected to grow by approximately 5%, whereas property/casualty premiums are likely to remain flat as Allianz restricts its underwriting in segments where rates have started to soften, such as global risks and aviation.

For a complete list of Allianz AG's financial strength and debt ratings, please visit http://www.ambest.com/press/091404allianz.pdf.

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

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 http://www.ambest.com.