|
|
| S&P Assigns 'AAA' to Allianz Finance MILES Issue |
LONDON, Dec. 15 /PRNewswire/ -- Standard & Poor's today assigned its
triple-'A' long-term rating to the Eur2.0 billion ($1.8 billion) Guaranteed
Market Index-Linked Equity Exchangeable notes (MILES), due 2004, issued by
Allianz Finance II B.V., and guaranteed by Munich-based Allianz AG. At the
same time, Standard & Poor's affirmed its ratings on Allianz AG:
AAA/Stable/A-1+.
The notes are a senior unsecured obligation of the issuer, and are
mandatorily exchangeable into shares of various specified German companies,
all of which are components of the DAX 30 index. The stock prices at which
exchange will take place are not predetermined, but will be those ruling in a
period leading up to the date of exchange. This transaction cannot therefore
be considered a presale of assets, since Allianz AG retains exposure to the
performance of the underlying stocks until exchange. The amount payable at
redemption is linked to the stocks' movement in the DAX index since the date
of issue.
The ratings on Allianz AG reflect the Allianz Group's extremely strong
business position in Europe and other markets, extremely strong
capitalization, superior financial flexibility, and strong profitability.
Partially offsetting these strengths will be the more aggressive future use of
capital.
Major rating factors:
-- Extremely strong business position: Allianz enjoys an enviable position
in the German life and nonlife markets, in which it is clearly the
market leader. Allianz also has top-five positions in Italy, Spain,
Switzerland, Korea, and Austria. In addition, the acquisition of Pimco
Advisors and Nicholas-Applegate places Allianz among the top-eight
asset managers globally. To satisfy its ambition to be a global
commercial lines insurer, however, Allianz AG must consolidate its
positions in the U.S., the U.K., Japan, and Latin America. In some
cases this will require acquisitions.
-- Superior capitalization, both in absolute terms and relative to
Allianz's business requirements: Allowing for the release of deferred
tax provisions in 2002 and the acquisitions of Pimco and
Nicholas-Applegate, pro forma capital adequacy remains in excess of
200%, according to Standard & Poor's model.
-- Financial leverage is creeping up, but is still moderate. Although
Allianz AG retains a degree of basis risk under the MILES issue,
Standard & Poor's is satisfied that the overall impact on the
consolidated balance sheet is leverage-neutral. Following the two U.S.
acquisitions, financial leverage is expected to remain below 15% and
fixed-charge coverage will remain above 10 times (x).
-- Operating performance is strong when amortization of goodwill is
excluded. Reported ROE based on an international accounting standards
basis has averaged 12% per year over the past three years in difficult
underwriting conditions. However, ROR for the nonlife businesses, and
ROA for life/health operations both appear unimpressive, particularly
outside Germany. The group needs to achieve synergy savings from its
various current integration exercises around Europe, and from radical
actions taken in several underperforming subsidiaries, in order to
compensate for shrinking margins.
As a leading member of the DAX 30 and the Eurostoxx 50 indices, and with
a recent NYSE listing, Allianz AG enjoys superior financial flexibility. This
is partly offset by the group's strong appetite for acquisitions to give
Allianz AG a stronger global profile.
OUTLOOK: STABLE
Capitalization will be diluted in the light of the implementation of
value-based management and the group's appetite for acquisitions. Allianz AG
is likely to acquire a significant U.S. life insurer in the next two years.
Nevertheless, capitalization will remain in the triple-'A' range.
Financial leverage and interest coverage will remain within triple-'A'
tolerances.
Operating performance will improve as rationalization savings are achieved
in a number of markets, and as value-based management prompts a more active
response to problem areas. An upturn in nonlife underwriting results from 2001
will be offset by substantial tax charges on German loss reserves, and
shrinking margins from the life business as a result of lower interest rates.
In the longer term, however, Allianz AG's net income will benefit from the
lowering of the corporate tax rate in Germany.
Asset management operations will exhibit rapid organic growth, which may
be supplemented by further acquisitions, Standard & Poor's said.
-- CreditWire
SOURCE Standard & Poor's
back to topRelated links:
CONTACT:
Martin Lees, +44-20-7847-7048, or Corinne
Cunningham, +44-20-7847-7042, or Wolfgang Rief, +44-20-7847-7057
all of Standard & Poor's
