Gerling Sale Plan Leads SP to Revise Outlook

March 20, 2002

As plans for the sale of a majority interest in Germany’s Gerling Group become clearer, Standard & Poor’s, while reaffirming the single-‘A’-plus long-term counterparty credit and insurer financial strength ratings on the Group’s core insurance subsidiaries, revised its outlook to “developing” from “stable.”

“The outlook revision follows the surprising announcement on March 15, 2002, by the group holding company Gerling-Konzern Versicherungs-Beteiligungs-AG (GKB) and Deutsche Bank AG (AA/Stable/A-1+), stating that Dr. Rolf Gerling–who currently owns 65.5% of GKB — has agreed to give up his majority holding in the company,” said S&P’s announcement.”

Dr. Gerling and Deutsche Bank — which owns the remaining 34.5%–are now together looking for a strategic partner to acquire the majority control of GKB.”

Deutsche Bank had indicated that, following an emergency injection of $263.4 million in new capital to cover unexpectedly high losses, it wanted to sell its stake. (See IJ Website March 14). The plan was later expanded, when Dr. Rolf gerling, the grandson of the group’s founder, agreed to put his majority interest up for sale as well.

The losses stem mainly from claims related to the WTC attacks and Enron on the group’s reinsurance arm Gerling Global Re. S&P said that the planned sale was contrary to its previous expectation, “and creates a significant degree of uncertainty regarding the Gerling group’s future ownership structure and strategic direction.”

S&P indicated that depending on who an eventual buyer might be the ratings on each entity acquired could go up or down. It expressed the opinion that it would take “several months to find a strategic partner and to subsequently finalize the new structure and strategy of the group.”

While S&P indicated that it will continue to monitor the situation and would evaluate any potential buyers, it warned that “An inability to sell the group would probably have a long-term negative effect on the current ratings in view of the group’s diminished financial flexibility.”|”gerling, sale, plan, leads, sp, revise, outlook

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