Fitch Ratings-London-21 November 2014: Fitch Ratings has affirmed Germany-based Allianz SE’s Insurer Financial Strength (IFS) rating and Long-term Issuer Default Rating (IDR) at ‘AA-‘. At the same time, the agency has affirmed Allianz’s main subsidiaries’ IFS rating at ‘AA’. The Outlook on all ratings is Stable. A full list of rating actions is provided at the end of this commentary.
KEY RATING DRIVERS
The affirmation reflects Allianz’s strong technical profitability, very strong consolidated group capital position, broad diversification by geography and product, and solid business position in its key markets. In addition, the group’s ratings also benefit from an investment mix of sound credit quality. Partially offsetting these rating factors are currently suppressed profitability in its asset management subsidiary, PIMCO, and a challenging medium-term outlook for some of Allianz’s life markets.
Allianz scores “Very Strong” in the agency’s Prism factor-based capital model (FBM) based on end-2013 data that is supportive for the rating level. The group’s strong core capitalisation remained comfortable at end-9M14 with shareholders’ funds of EUR58.2bn (end-2013: EUR50.1bn) and the consolidated regulatory solvency ratio improving to 184% (end-2013: 182%, when adjusted for accounting changes).
For 9M14 Allianz reported an operating profit of EUR8.1bn (+6.0% versus 9M13), composed of EUR4.3bn (+14.0%) from property/casualty insurance, EUR2.7bn (+15.8%) from life/health insurance, and EUR2.0bn (-18.0%) from asset management. Asset management suffered from large net asset outflows at PIMCO, which appear to have reached their peak by mid-October 2014. The combined ratio improved to 93.6% (95.0%). For 9M14, net profit attributable to shareholders increased by 5.5% (EUR5bn).
The subdued outlook for economic growth in the eurozone, low interest rates, and a possible re-intensification of the peripheral eurozone debt crisis creates a challenging operating environment. For the remainder of 2014 and for 2015 Fitch expects that sound underwriting profitability from the non-life business will help Allianz offset earnings from asset management, which are likely to remain under pressure.
Based on 2013 data, Allianz is one of the largest insurance groups in Europe. IFRS gross written premiums were EUR72.1bn and total assets stood at EUR712bn at end-2013. The group is active in both the non-life and life/health businesses as well as in asset management and has a strong business position and franchise.
RATING SENSITIVITIES
Key rating triggers that could lead to a downgrade include a deterioration within the peripheral eurozone countries leading to a decline in bond and other asset prices. If Allianz’s Prism FBM score were to fall below ‘Very Strong’ for a prolonged period of time, the company could also be downgraded.
An upgrade is viewed as unlikely by Fitch over the medium term, but upgrade triggers include a sustained significant increase in the Prism FBM score to “Extremely Strong”, a decline of the FLR to below 15%, and a sustained strong improvement in profitability with a return on equity above 15%.
The rating actions are as follows:
Allianz SE: Long-term IDR affirmed at ‘AA-‘; Outlook Stable
Allianz SE: IFS rating affirmed at ‘AA-‘; Outlook Stable
Allianz core subsidiaries and their ratings:
Allianz Versicherungs-AG: IFS rating affirmed at ‘AA’; Outlook Stable
Allianz Lebensversicherungs-AG: IFS rating affirmed at ‘AA’; Outlook Stable
Allianz Private Krankenversicherungs-AG: IFS rating affirmed at ‘AA’; Outlook Stable
Allianz Elementar Versicherungs-AG: IFS rating affirmed at ‘AA’; Outlook Stable
Allianz Insurance Plc: IFS rating affirmed at ‘AA’; Outlook Stable
Allianz Vie S.A.: IFS rating affirmed at ‘AA’; Outlook Stable
Allianz IARD S.A.: IFS rating affirmed at ‘AA’; Outlook Stable
Allianz Finance II B.V.
All outstanding senior notes affirmed at ‘AA-‘
All subordinated notes affirmed at ‘A’
Allianz Finance’s bonds are guaranteed by Allianz SE
Allianz SE
All outstanding senior notes affirmed at ‘AA-‘
All subordinated notes affirmed at ‘A’
