S&P Raises Gerling Allgemeine Rtgs. to BBB-/Watch Positive

August 1, 2003

Standard & Poor’s reported it raised to ‘BBB-‘ from ‘BB+’ its long-term counterparty credit and insurer financial strength ratings on Germany-based non-life insurer, Gerling-Konzern Allgemeine Versicherungs-AG (GKA).

“The rating action reflects legally binding commitments for GKA’s planned equity capital increase, which today amount to EUR62.5 million,” said Standard & Poor’s credit analyst Joerg Ritthaler. The ratings remain on CreditWatch with positive implications, however.

The ratings were initially placed on CreditWatch with developing implication on Oct. 29, 2002, and the implications were revised to positive on July 11, 2003.

Standard & Poor’s understands that investors, including at least seven large German industrial groups, have signed letters of intent to participate in an equity capital increase for GKA. Total commitments received as at July 31, 2003, exceeded EUR130 million, of which EUR62.5 million are legally binding. Additional commitments to achieve a total capital increase of up to EUR150.0 million are being sought from other parties that have expressed interest. The remaining commitments are expected to be received during August with a view to legal completion in September 2003.

“The ratings remain on CreditWatch with positive implications, reflecting the possibility for a further upgrade if GKA succeeds in raising the full EUR150.0 million sought, and provided that the sale of the Gerling group’s reinsurance operation, Gerling-Konzern Globale Rueckversicherungs-AG (GKG; BB/Negative/–), has been completed,” said Ritthaler.

The sale of GKG will allow the Gerling group to reportedly deconsolidate GKG from its balance sheet and thereby meet regulatory group solvency requirements. Although it is not
obliged to do so under German law, Gerling is expected to wait for the
approvals of U.K. and U.S. regulators before completing the sale.

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