S&P Affirms Gothaer ‘A-‘ Rating

November 17, 2005

Standard & Poor’s Ratings Services announced that it has assigned its ‘A-‘ long-term counterparty credit and insurer financial strength ratings to German non-life insurer Gothaer Allgemeine Versicherung AG (Gothaer Allgemeine) with a stable outlook.

“The ratings on Gothaer Allgemeine reflect its role as a core entity within Germany-based composite insurance group Gothaer, and are based on the group’s strong competitive position, strong capitalization, and strong operating performance in non-life insurance,” said S&P. The rating agency noted, however, that “the relatively weaker financial profile of the group’s life and health businesses and moderate expense efficiency,” partially offset these strengths.

“We expect that Gothaer’s management will continue to pursue a profit-oriented strategy backed by conservative financial management,” stated S&P credit analyst Wolfgang Rief.

S&P said the stable outlook also reflects its “expectation that non-life insurance will continue to be a significant earnings driver, with the group expected to achieve a combined ratio of below 95 percent in 2005 and of significantly below 100 percent throughout the cycle.

“The bottom-line contribution of Gothaer’s life and health activities will significantly increase as of 2005. The average ROE for the consolidated group will be about 10 percent throughout the cycle, with limited reliance on realized capital gains. Capitalization will be maintained at a strong level. The ratings could benefit from upside potential if the group demonstrates a sustained turnaround in performance. This should translate into a more balanced earnings profile as management profitably expands its life and health insurance business, despite the pressure resulting from low interest rates. Conversely, there could be downside potential if management fails to sustain its focus on underwriting discipline against the backdrop of intense competition and continued difficult capital market conditions.”

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