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Standard&Poor’s Ratings Services has lowered to ‘BB+’ from ‘BBB’ its long-term counterparty credit and insurer financial strength ratings on Germany-based Gerling-Konzern Allgemeine Versicherungs-AG (GKA) and Gerling-Konzern Lebensversicherungs-AG (GKL). The ratings remain on CreditWatch with developing implications, where they were placed on

  • October 29, 2002.

    In addition, the ‘A’ long-term counterparty credit and insurer financial strength ratings on the core entities of Germany-based credit insurance group Gerling NCM Credit and Finance AG remain on CreditWatch with negative implications. These ratings were originally placed on CreditWatch with developing implications on December 20, 2002; the implications were subsequently revised to negative on February 3, 2003.

    “The downgrade reflects the fact that the Gerling group is not expected to receive regulatory approval for the sale of its reinsurance operations (Gerling-Konzern Globale R íckversicherungs-AG; GKG) to private investor Dr Achim Kann,” says Standard & Poor’s credit analyst Karin Clemens. “If GKG were to remain as part of the Gerling group, it would put significant pressure on the Gerling group’s risk-based capitalization and solvency,” said Clemens. However, Standard & Poor’s understands from Gerling management that it is still in discussions with Kann, Castlewood Holdings, and other interested parties to achieve a sale, but Standard & Poor’s believes that any sale is unlikely to be completed in the short term. This will hinder plans to find a suitable buyer for Gerling’s primary insurance operations.

    Standard & Poor’s will be in discussions with Gerling management and will give updated information on the CreditWatch placements following further assessments of the ongoing developments at GKA, GKL, and Gerling NCM. Failure in the medium term to find a new owner for each of these entities, or failure to complete the disposal of GKG, might result in lower ratings. “The completion of a disposal of GKG and the completion of the sale of GKA and GKL might result in higher ratings,” says Clemens. “On the other hand, the ratings might also be lowered if the Gerling group is not able to meet regulatory solvency requirements,” adds Clemens.

    Gerling NCM remains more highly rated than GKA and GKL because of the existence of a strong external shareholder Swiss Reinsurance Co. (AA+/Stable/A-1+) and the company’s corporate governance. Standard & Poor’s will continue to assess the effect the lowering of the ratings on GKA and GKL will have on the ratings of GERLING NCM. The ratings on GERLING NCM might be lowered if Gerling group management fails to find a new ownership structure in the medium to long term.