Allianz and Fireman’s Fund Affirmed

A.M. Best Co. affirmed the financial strength rating of “A” (excellent) and assigned issuer credit ratings of “a” to Allianz Insurance Group of Burbank, Calif., which consists of Allianz Global Risks US Ins. Co. and its wholly-owned subsidiary, Allianz Underwriters Ins. Co. (Allianz Underwriters). All have a stable outlook.

Best also affirmed the FSR of “A” (excellent) of Fireman’s Fund Ins. Co. of Novato, Calif., and its intercompany pool participants and reinsured affiliates. This rating outlook has been revised to stable from negative.

The Allianz U.S. ratings reflect the solid stand-alone capitalization, explicit parental support provided by its ultimate parent, Allianz A.G. of Munich, Germany, its solid business franchise and improved current and future earnings capabilities in its core industrial risk market.

Offsetting these positive rating factors is the historically poor underwriting performance and sizable portion of the surplus of Allianz U.S. represented by affiliated securities, primarily its 100 percent ownership in Fireman’s Fund, a separately managed operating unit. As a result, the surplus of Allianz U.S. is subject to volatility caused by Fireman’s Fund’s own operating results.

Somewhat mitigating this last concern is the significant improvement in Fireman’s Fund’s results and solid earnings from the Allianz U.S. operations. The latter significantly benefits from investment earnings thrown off from sizable loss reserves related to discontinued operations.

Given the challenges encountered by Fireman’s Fund in the past, this parental commitment is paramount to the group’s current ratings, which take into consideration both past and future support. The ratings also consider the increase in surplus over the last two years from better overall operating earnings and capital gains, as well as continued improvement in earnings during 2005.