Moody's introduced its baskets in 1999. As hybrid volumes increased and deals got more complicated, it refined them last November.
To calculate an issuer's financial ratios, hybrid securities are now put in one of five baskets according to maturity, call options, priority in a liquidation, and other features.
Hybrids in basket A constitute 100% debt, those in basket B are 75% debt and 25% equity, and so on through to basket E, where a hybrid is deemed to consist entirely of equity for ratio calculation. So Allianz's C basket deal is half debt and half equity.
Once its hybrid securities are put in their basket, an issuer can then work out its new financial ratios. For an insurer, these include its ratio of total debt to total capital, and the ratio of its equity investment in subsidiaries to its own equity.
Strengthening Allianz's capital base and keeping its AA financial strength rating is one part of CEO Michael Diekmann's "three plus one" strategy, alongside boosting operating profits and simplifying Allianz's portfolio. Like a lot of insurers, Allianz has had a tough start to the millennium.
Capital enhancement began a year ago with a e4 billion equity rights issue.