Gothaer Allgemeine Versicherung AG Group Annual Report for ...

Management Report
For unexpected developments, individual company hedging concepts (e.g. share options)
can be implemented to ensure a risk-adequate response to short-term fluctuations and,
in extreme cases, limitation of the losses that occur. These hedging concepts are constantly
reviewed in the light of market developments and adjusted as required.
Because of the minimal volume of the share portfolio, share price risk was negligible in
the Gothaer Allgemeine Group at balance sheet date.
In the property sector, market values continued to recover moderately in the period under
review. Accordingly, net asset values were seen to move increasingly in line with the
model values produced by discounted cash flow analysis in relation to the portfolio as
a whole. This scenario is expected to be repeated during the next reporting period. Given
the generally positive prospects for market development, however, individual value adjustments
are possible. Especially in view of long terms, relatively low marketability and
capital calls on existing commitments, our engagement in this asset class is long-term.
• Exchange rate risk
Exchange rate risk is the risk presented by adverse changes in currency exchange rates.
The existing exchange rate risk is almost entirely hedged at company level by foreign
exchange forward contracts. Hedging is performed in a rolling programme for each
currency. The following chart shows exposure per currency in euros and the relevant
market value in foreign currency at the end of the year. Set against the latter but not
shown in the table are more or less equal volumes of foreign exchange forward contracts
concluded as hedges.
Breakdown by foreign currency
€ million
Market values in €
Market values in
nominal currency
2011 2010 2011 2010
US-Dollar 171.3 153.0 222.1 204.5
Pound sterling 32.6 30.9 27.2 26.5
Other currencies 27.9 25.9 diverse diverse
Considering the hedges in place, a change of 1 % in the individual exchange rates would
thus result in only insignificant changes in the market values of the aggregate foreign
currency positions.
Gothaer Allgemeine Group Annual Report 2011 31