Allianz Risk Transfer AG - Allianz Global Corporate & Specialty

Financial management
ART's financial management is fairly conservative, in our view. The company defines its risk tolerance according to its
ability to meet its planned underwriting result. AZSE's goal is sustainable profitability, so we don't believe ART is under
pressure from its parent company to achieve any rapid growth targets.
ART is structured for moderate growth and a low fixed-cost base, with staffing and deal costs having significant
variable components. The company delegates its asset management to Allianz group affiliates, but it defines and
monitors its own investment strategy. We expect the company to continuously hold a certain minimum capital volume
above the requirements for its current alternative risk transfer portfolio. Therefore, we believe the transfer of some of
AGCS' risks onto ART's balance sheet will consume some of that excess capital.
Enterprise Risk Management: Strong Risk Controls
We consider ART's enterprise risk management to be strong. As such, we regard it as unlikely that ART will
experience major losses outside its risk tolerance. The high level of risk inherent in ART's business model is largely
offset by the combination of strong risk controls in key areas and what we see as ART's strong risk management
culture. An independent head of risk management with escalation rights into AGCS AG and AZSE, as well as
underwriting and risk management committees, further strengthen ART's risk management framework. ART has
adopted a sophisticated approach to risk management and strives to continuously enhance its risk management
framework. In 2011, ART implemented a deal management function that allows the separation of the underwriting and
surveillance functions.
Before underwriting any new deals, ART assesses the impact of each additional transaction on the aggregate exposure
of its portfolio, using stochastic models. We view the most significant risks relating to ART's portfolio as modeling
risks, including appropriate risk-aggregation assumptions and deal-structuring issues. ART has substantially enhanced
its model documentation and has embedded this as part of its underwriting process for new deals.
ART's stochastic models underpin its decisions relating to risk acceptance, pricing, risk mitigation, and portfolio
management. Consequently, any deficiencies in the models' parameters, particularly regarding the prediction of how
individual deals will behave under exceptional circumstances, could cause ART's exposure to exceed its stated
tolerance. ART continuously improves the models and is using certain proprietary models for the Swiss Solvency Test,
a mechanism imposed by the Swiss insurance regulator to measure the capital required to support the risks carried by
insurance companies. Legal and compliance risks are inherent in ART's business, given the types of deals it
underwrites. However, we consider these risks to be partly offset by the thorough review of each deal by a legal expert
before acceptance.
Accounting: Reported Premium Income Does Not Reflect The Scale Of
Alternative Business
Allianz Risk Transfer AG
ART's fully audited financial statements are prepared under Swiss generally accepted accounting principles, which is
the basis for the financial tables in this report. In addition, in line with the Allianz group, ART prepares an abridged set
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