A.M. Best Upgrades Issuer Credit Rating of Allianz Risk Transfer AG [Manufacturing Close – Up]

A.M. Best Europe - Rating Services Limited has affirmed the financial strength rating of A (Excellent) and upgraded the issuer credit rating to "a+" from "a" of Allianz Risk Transfer AG (ART) (Switzerland).

The outlook assigned to both ratings is stable.

The upgrade reflects ART's strong risk-adjusted capitalisation and strategic importance to its intermediate parent, Allianz Global Corporate & Specialty AG (AGCS AG) and in turn to its ultimate parent Allianz Societas Europaea (Allianz SE) (Germany) as the group's alternative risk transfer unit.

ART's consolidated risk-adjusted capitalisation increased in 2011, precipitated by reduced underwriting risk following the termination of a large reinsurance contract, as well as increased retained earnings. Allowing for the dividend payment of CHF 178.0 million to AGCS AG, capitalisation is expected to remain strong in 2012 and into 2013. The company's traditional portfolio is protected by an extensive reinsurance programme which encompasses a stop loss and an excess of loss agreement between ART and its intermediate parent, AGCS.

Given the nature of some of the business underwritten, underwriting results are subject to some volatility. Nevertheless, this is mitigated by the company's solid risk management framework and extensive reinsurance programme on its traditional portfolio and low retention on its alternative risk transfer business.

The company maintains a good business profile as the dedicated corporate risk transfer unit of the Allianz group. ART benefits from the implicit support of its ultimate parent, Allianz SE. The company is well integrated into its immediate parent, AGCS AG, in terms of business strategy and management. The ratings reflect both implicit support in the form of business integration as well as explicit support from AGCS AG in the form of reinsurance, including stop loss reinsurance.

A positive change in the rating of Allianz SE could lead to positive rating actions on ART.

Negative rating movements could occur if there were a material fall in the risk adjusted capitalisation and/or operating performance of ART. Furthermore, any deterioration in group support/ weakening of the company's strategic importance to its immediate and in turn ultimate parent, Allianz SE, could place downwards pressure on the ratings of ART. Any negative rating actions on Allianz SE could result in negative rating actions on ART.

A.M. Best Company is an insurance rating and information source.

More information:

www.ambest.com

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