Best Comments on Gerling Ratings

May 8, 2003

A.M. Best Co. announced that it would not change the A- (excellent) financial strength rating of Gerling-Konzern Allgemeine Versicherungs-AG (GKA) and its core subsidiary Gerling America Insurance Company, following yesterday’s announcement that Germany’s Deutsche Bank was transferring its 34.5 percent stake in the operating company (GKB) as part of a deal to acquire an interest in credit insurer Gerling NCM (See IJ Website May 7).

Best noted that Swiss Re will increase its share in Gerling NCM to 47.5%, and that “as a consequence, Rolf Gerling will increase his stake to 94% of GKB.” The rating agency observed that the “transaction will result in a cash payment of EUR 180 million (USD 202 million) to GKB which will be partially utilised to improve the liquidity of its reinsurance operations. GKB will continue to seek a partner for GKA and Gerling Lebensversicherungs-AG.”

Best said that it “believes that the proposed transaction will enable GKA to continue its current business strategy of profitable underwriting in the industrial sector, where it is one the market leaders. This is demonstrated by a successful 2003 renewal season with average rate increases of 15% in most lines of business. In the first three months, GKA’s combined ratio improved below 100%, from 106.7% at year end 2002. However, the outlook remains negative, reflecting A.M. Best concerns that GKA’s business position may ultimately be damaged if GKB fails to find a partner.”

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