Related News

Standard&Poor’s Ratings Services says that its ‘BBB’ long-term counterparty credit and insurer financial strength ratings on Gerling-Konzern Allgemeine Versicherungs-AG (GKA) and Gerling-Konzern Lebensversicherungs-AG (GKL) the primary insurance operations of the Germany-based Gerling insurance group 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 (collectively Gerling NCM) 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 update follows recent press reports that the Gerling group might not receive regulatory approval for the sale of its reinsurance operations (Gerling-Konzern Globale R íckversicherungs-AG) to private investor Achim Kann. Standard & Poor’s understands from Gerling management that the regulator has as yet made no formal statement, and that a decision is to be expected in early March. Discussions are ongoing between Kann and Castlewood Holdings, which already has a significant involvement in the run-off of GKG’s non-US and non-UK businesses.

“Standard & Poor’s expects Gerling management’s ability to find a suitable buyer for its primary insurance operations to be significantly reduced as long as its reinsurance business forms part of the group,” says Standard & Poor’s credit analyst Karin Clemens. “The group’s ability to meet regulatory solvency requirements is also likely to be challenged under such a scenario, particularly because management has already made extensive use of its main sources of financial flexibility (that is, a company’s ability to source capital relative to its needs).”

Failure to find a new owner for the group in the medium term, or failure to complete the disposal of its reinsurance operations in the short term, would most likely result in the ratings on GKA and GKL being lowered, possibly to the ‘BB’, claims the ratings agency. The ratings would be similarly lowered if, at any point in time, Standard&Poor’s expects that the group will fail to meet regulatory solvency requirements.

“If the ratings on other Gerling group entities are lowered, the ratings on Gerling NCM might also be lowered,” says Clemens. “The ratings might be raised if Gerling management succeeds in finding a new ultimate ownership structure, particularly if the deal involves a strongly rated controlling shareholder.”

Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor’s Web-based credit analysis system, at