S&P Raises Gothaer Re Ratings to ‘A-‘

September 2, 2002

Standard & Poor’s announced that it has raised its long-term counterparty credit and insurer financial strength ratings on Germany’s Gothaer Ruckversicherung AG (Gothaer Re) to single-‘A’-minus from triple-‘B’-plus, and further confirmed a stable outlook.

“The upgrade is based on Gothaer Re’s strong business position in its core markets, strong risk-based capitalization, and satisfactory, but improving, operating performance,” stated S&P’s credit analyst Ashley Gill.

He noted that the company’s relatively small size was “a partial offsetting factor, as the company has limited ability to influence the markets in which it operates, and business position is therefore to some extent constrained.”

While not an exceptionally large company, by international reinsurance standards, Gothaer Re is part of the Gothaer group (formerly Parion), which S&P describes as “one of the largest mutual insurance groups in Germany.” Its second-largest shareholder is Cologne Re, which in turn is part of General Re/Berkshire Hathaway with a 27 stake in Gothaer Re.

The bulletin characterized Gothaer Re’s operating performance as “good through the underwriting cycle, with an average combined ratio of approximately 106% between 1996 and 2000.” This jumped to 112.8 percent in 2001, partly due to a September 11-related net loss of €11 million ($10.75 million). S&P expects “that risk-based capital will remain comfortably in excess of 140% of the required minimum level, and anticipates that the company will “maintain strong underwriting discipline and restrict growth to within the available capital resources and to no more than a 10% increase in net premiums written per year.”

The rating agency forecast a significant improvement in the combined ratio for 2002 to approximately 105%, and indicated that “ROR should reach approximately 3.5% by year-end 2002”. Gill concluded that “Gothaer Re is expected to achieve additional improvements in diversification, both by business line and geographically, thereby further strengthening its business position.”

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