A.M. Best Affirms Ratings of Allianz Aktiengesellschaft and Its Rated Subsidiaries.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating of A+ (Superior) and the issuer credit ratings of "aa-" of Allianz Aktiengesellschaft (Allianz AG) (Germany) and its subsidiaries. Concurrently, A.M. Best has affirmed the "aa-" ratings on senior debt and assigned, affirmed or downgraded the "a"or "a+" ratings of the subordinated debt, both guaranteed by Allianz AG. (See below for a complete list of ratings.) The outlook on all ratings has been revised to stable from negative.

The rating reflects A.M. Best's view that Allianz's focus on sustainable earnings through operating efficiency and competitiveness as part of the "three plus one" program is likely to result in a further improvement in operating performance. The rating also factors Allianz's strong risk-adjusted capitalisation and superior business position, particularly in Germany and other European countries.

Operating performance--A.M. Best expects that Allianz's focus on sustainable profitability is likely to lead to higher profits in the range of EUR 3.5 billion (USD 4.2 billion) and EUR 4 billion (USD 4.8 billion) in 2005. However, the absence of goodwill amortisation (EUR 1 billion (USD 1.2 billion) in 2004) will also positively impact earnings. A.M. Best anticipates all business segments (property/casualty, life/health, banking and asset management) to be profitable; however, property/casualty will remain the main contributor despite a likely deterioration of the combined ratio by two percentage points to 94% by the end of 2005 as the favourable claims experience is unlikely to be repeated, and premium reductions in motor--especially in Germany and Italy--are gradually filtering through. In life/health, A.M. Best expects that earnings are unlikely to improve significantly in 2005 as stable regular investment income combined with higher policyholder benefits and competitive bonus payouts is limiting profit margins. A.M. Best expects that the recent constitutional court ruling regarding the treatment of terminal bonuses in Germany is not expected to impact life earnings in the near future.

Despite a return to profitability in 2004, A.M. Best believes that Allianz will remain challenged by Dresdner Bank's exposure to the macroeconomic situation in Germany and the structural problems of the German banking sector.

Risk-adjusted capitalisation--Allianz has strengthened it risk-adjusted capitalisation through the successful issuance of a EUR 1.4 billion (USD 1.7 billion) subordinated bond in January 2005, which A.M. Best is treating as hybrid equity. A.M. Best expects absolute capital levels to further increase through retained earnings; however, higher capital requirements from the stronger growth in life/health is likely to absorb this.

Business position--Allianz enjoys very strong business positions mainly in Continental Europe, especially in Germany, Italy and France. The strong demand for life policies in Germany at year-end 2004, the continued growth of annuity products in the United States and increasing sales of linked products in Italy from the positive developments of equity markets are leading to a strong growth of Allianz's life portfolio in 2005. This is partially offset by flat or slight declining premiums in property/casualty due to increasing competition, especially in motor and Allianz's adherence to strict underwriting in the commercial and industrial sectors.

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

--Allianz Lebensversicherungs AG

--Allianz Versicherungs-AG

--Bayersiche Versicherungsbank AG

--Frankfurter Versicherungs-AG

--Allianz Private Krankenversicherung AG

--Allianz-Elementar Lebensversicherung 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 "aa-" ratings on the following senior debt guaranteed by Allianz have been affirmed:

Allianz Finance II B.V.-

--EUR 1.1 billion 1.25% senior unsecured convertible Eurobonds, due 2006

--EUR 1.1 billion 4.625% senior unsecured bond, due 2007

--EUR 0.9 billion 5.625% senior unsecured bond, due 2012

--EUR 1.2 billion indexed-linked Eurobonds, due 2008

Allianz Finance B.V.-

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

--EUR 1.6 billlion 5% senior unsecured debentures, due 2008

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

The "a+" ratings on the following subordinated debt issued by Allianz Finance II B.V. and guaranteed by Allianz AG have been affirmed:

--EUR 2 billion 6.125% senior subordinated bond, due 2022

--EUR 1 billion 6.5% senior subordinated bond, due 2025

The "a" rating on the following subordinated debt issued by Allianz Finance II B.V. and guaranteed by Allianz AG has been affirmed:

--EUR 1.4 billion 4.375% undated junior subordinated bond

The rating on the following subordinated debt issued by Allianz Finance II B.V. and guaranteed by Allianz AG has been downgraded to "a" from "a+" following a review of the ranking of the debt instrument:

--USD 0.5 billion 7.25% junior subordinated perpetual bond 

An "a" rating has been assigned to the following debt issued by Allianz AG:

--EUR 1.5 billion, 5.5% junior perpetual subordinated bond

For Best's Debt Ratings, all other Best's Ratings, an overview of the rating process and rating methodologies, please visit http://www.ambest.com/ratings.

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.