June 23, 2017 / 1:17 PM / 5 months ago

Fitch Affirms Allianz SE' at IFS 'AA'; Outlook Stable

(The following statement was released by the rating agency) FRANKFURT/LONDON, June 23 (Fitch) Fitch Ratings has affirmed Germany-based Allianz SE's Insurer Financial Strength (IFS) Rating at 'AA' and Long-Term Issuer Default Rating (IDR) at 'AA-'. At the same time, the agency has affirmed Allianz's main subsidiaries' IFS Ratings at 'AA'. The Outlooks are Stable. A full list of rating actions is at the end of this commentary. KEY RATING DRIVERS The affirmation reflects the Allianz's very strong consolidated group capital position, strong technical profitability, broad diversification by geography and product, and a solid business position in the company's key markets. In addition, the ratings also benefit from the sound credit quality of the group's investment mix. Partially offsetting these rating strengths are the currently suppressed profitability at its asset management subsidiary, PIMCO, and a challenging medium-term outlook for some of Allianz's life markets. Allianz scores "Very Strong" in Fitch's Prism factor-based capital model (FBM) based on end-2016 data, which supports the ratings. The group's core capitalisation remained strong at end-2016 with shareholders' funds of EUR67.3 billion (end-2016: EUR63.1 billion) and Solvency II capitalisation of 218% (end-2015: 200%). Financial leverage, as calculated by Fitch, was 21% at end-2016, unchanged from end-2015. For 2016 Allianz reported a stable operating result of EUR10.8 billion (2015: EUR10.7 billion) with strong contributions from all three divisions. The combined ratio remained strong at 94.4% (94.6%) and net profit was up 3.8% at EUR7.3 billion. In the current low-investment yield environment, Allianz benefits from its strong non-life business. Unlike in life insurance, low investment yields are partly compensated by greater underwriting discipline and better technical results. At PIMCO, new business development has stabilised, after three years of net asset outflows. In 1Q17 PIMCO reported a net inflow of EUR21 billion in third-party assets under management. Third-party assets under management in the whole division grew EUR42 billion to EUR1,403 billion in 1Q17. This suggests PIMCO's franchise has not been permanently damaged by the recent shake-up in senior management and that Allianz is likely to retain its strong position in asset management. Allianz is one of the largest insurance groups in Europe. IFRS gross written premiums were EUR76 billion and total assets stood at EUR884 billion at end-2016. 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 deterioration of Allianz's capital position, with its Prism FBM score falling below 'Very Strong' for a sustained period or a sustained decline in profitability with a net return on equity below 9% (2016: 11%). An upgrade is viewed as unlikely by Fitch over the medium term unless the group sees a sustained, significant increase in the Prism FBM score to 'Extremely Strong', a decline of financial leverage to below 15%, and sustained, sharp improvement in profitability with a return on equity consistently above 15%. FULL LIST OF RATING ACTIONS Allianz SE affirmed at Long-Term IDR 'AA-'/Stable and IFS AA'/Stable Senior notes affirmed at 'AA-' and subordinated notes affirmed at 'A' Allianz core subsidiaries affirmed at IFS 'AA'/Stable are: Allianz Versicherungs-AG Allianz Lebensversicherungs-AG Allianz Private Krankenversicherungs-AG Allianz Elementar Versicherungs-AG Allianz Insurance Plc Allianz Vie S.A. Allianz IARD S.A. Allianz Finance II B.V.'s senior notes affirmed at 'AA-' and subordinated notes affirmed at 'A' Allianz Finance's bonds are guaranteed by Allianz SE Contact: Primary Analyst Dr Stephan Kalb Senior Director +49 69 7680 76118 Fitch Deutschland GmbH Neue Mainzer Strasse 46-50 60311 Frankfurt am Main Secondary Analyst Dr Christoph Schmitt Director +49 69 7680 76121 Committee Chairperson Willem Loots Senior Director +44 20 3530 1808 Media Relations: Athos Larkou, London, Tel: +44 203 530 1549, Email: athos.larkou@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Insurance Rating Methodology (pub. 26 Apr 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. 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