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S&P Rates Royal Nederland Group 'AA-'; Outlook Stable

31 May 2000

S&P Rates Royal Nederland Group 'AA-'; Outlook Stable

    LONDON, May 31 Standard & Poor's today assigned its
double-'A'-minus long-term counterparty credit and insurer financial strength
ratings to Royal Nederland Levenverzekering N.V., Royal Nederland
Schadeverzekering N.V., and London & Lancashire Verzekering Maatschappij N.V.
The companies are core members of the Royal Nederland group.  The outlook is
stable.
    The rating reflects the companies' strategic importance to France-based
AGF -- Assurances Generales de France (AA+/Stable/--) and its parent Allianz
AG (AAA/Stable/A-1+), extremely strong capitalization, and strong market
position in the motor and corporate segment.  Offsetting these strengths, the
Royal Nederland group has a modest business position in the highly competitive
life market, combined with high expense levels and exposure to the more
volatile industrial and motor business.
    The companies within the Royal Nederland group are wholly owned
subsidiaries of the AGF group.  AGF is a 51%-owned subsidiary of the Allianz
group, and is responsible for developing business in the Benelux countries.
    Major rating factors:
    -- Strategic importance to the Allianz group.  Allianz aims to become at
least number five in the markets in which it operates.  Although this target
has not been achieved so far in the Netherlands, the Royal Nederland group
contributes substantially to AGF's profits, and is an important part of
Allianz's global network, supporting its industrial business clients.
    -- Extremely strong capitalization.  The group demonstrated extremely
strong risk-based capitalization.  The solvency margin for Royal Nederland
Levenverzekering at year-end 1999 was 260% of the required coverage.  The
nonlife solvency margin was also strong at 89.1% of gross premiums written.
In line with the parent company's strategy, the Royal Nederland group aims to
maintain risk-adjusted capitalization in the double-'A' range.  Excess capital
could be used to finance expansion.
    -- Strong position in the Dutch corporate and motor market.  Through the
merger with Allianz Nederland N.V. in 1999, Royal Nederland Schadeverzekering
acquired a substantial industrial portfolio and has become the leading Dutch
insurer for large corporate clients.  The company's access to the vast Allianz
network and capacity gives Royal Nederland Schadeverzekering a competitive
advantage in the global business segment.
    -- London & Lancashire Verzekering has an exclusive agreement with ANWB,
the Dutch Automobile Association, to sell motor insurances.  This agreement
has been in place since 1921. A significant share of London & Lancashire
Verzekering's premium income is generated through this channel.
    -- Together with the strong position of Royal Nederland Schadeverzekering
in the corporate motor sector (business fleets and employee cars), the group
is the third-largest motor insurance provider in the Dutch market.  Offsetting
these strengths is the group's exposure to these highly competitive and
volatile corporate and motor market segments.
    -- Modest business position in the Dutch life market.  Large players such
as ING GROEP N.V. (AA-/Stable/A-1+), Achmea N.V. (A/Stable/A-1), and AEGON
N.V. (AA/Negative/A-1+) dominate the Dutch life market.  Although Royal
Nederland Levenverzekering offers very flexible and profitable products
(mainly universal life) it may be difficult for the company to sustain its
market position (number 11), as other players introduce universal products.
    -- High expense levels, resulting from the relative immaturity of the
business (when compared with peers), exacerbate this challenge.  Further
uncertainty stems from the Dutch government's plans to change the taxation
system relating to the deductibility of life premiums and the tax treatment of
private assets.
    OUTLOOK: STABLE
    Capital will remain strong, but may be diluted to the double-'A' range in
the medium term. Excess capital may be used for acquisitions in the
Netherlands.  The group should be able to maintain its strong position in the
corporate business and motor market.  Life sales will be affected by the Dutch
government's tax plans, and strong competition will increase pressure on Royal
Nederland Levenverzekering's market position, Standard & Poor's said.
-- CreditWire