Gothaer Insurance Group

Gothaer Insurance Group

October 31, 2011

Gothaer Insurance Group

Primary Credit Analyst:

Wolfgang Rief, Frankfurt (49) 69-33-999-190;

Secondary Contact:

Johannes Bender, Frankfurt (49) 69-33-999-196;

Table Of Contents

Major Rating Factors



Corporate Profile: A Midsize Player With Mutual Roots

Competitive Position: Despite Various Initiatives, Growth Remains


Management And Corporate Strategy: Strong Commitment To

Value-Based Management

Enterprise Risk Management: Adequate With A Positive Trend

Accounting: Group Reporting Based On IFRS

Operating Performance: Strong Technical Non-life Results, Despite A

Weaker 2010

Investments: Higher Credit Risk Than Peers' And Sensitive To Low

Interest Rates

Liquidity: Highly Liquid Investment Portfolio

Capitalization: Strong And Resilient In 2010

Financial Flexibility: Adequate For Gothaer's Needs

Related Criteria And Research 1

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Gothaer Insurance Group

Please note that the ratings covered by this full analysis apply only to core entities of the group, which are listed

below. These ratings do not apply to any noncore or nonrated entities of the group. Ratings assigned to noncore

entities of the group are published individually.

Major Rating Factors


• Well-diversified portfolio across lines of business.

• Management's strong commitment to focus growth on profitable business.

• Strong underwriting performance in property/casualty insurance.

Operating Companies Covered By

This Report

Financial Strength Rating

Local Currency



• Relatively high exposure to credit risk in the bond portfolio.

• Sensitivity of the financial profile to low interest rates, particularly in the life insurance book.


The ratings on Germany-based Gothaer Allgemeine Versicherung AG (GA), Gothaer Lebensversicherung AG (GL),

and Gothaer Krankenversicherung AG (GK) reflect Standard & Poor's Ratings Services' view that these companies

are core to the strategy of the Gothaer group (Gothaer), due to their close integration in terms of operational

management and their significant contributions to the group's overall business and financial profile. The ratings also

reflect the group's well-diversified portfolio across lines of business, management's strong commitment to focus

growth on profitable lines of business, and Gothaer's strong underwriting performance in property/casualty


We consider these strengths to be partly offset by Gothaer's relatively high exposure to credit risk (versus that of its

peers) and the sensitivity of its financial profile to continually low interest rates, which particularly affect its sizable

life insurance book.

We consider Gothaer's business portfolio to be well diversified and balanced: Property/casualty insurance

contributed 41%, life insurance 38%, and private health insurance 21% to the group's total gross premium written

(GPW) of €4.0 billion in 2010. We believe that the group's ability to offer a broad range of products in all major

lines of business provides a competitive advantage over other midsize insurance groups. Moreover, we think the

comprehensive offering is likely to support Gothaer's franchise and brand recognition in the market.

Nonetheless, earnings diversity is weaker because the property/casualty business continues to be the group's profit

engine, and the life insurance segment is suffering from the ongoing, low-interest-rate environment.

Management's strong commitment to focus on expanding those businesses with sound profit potential is reflected in

various growth initiatives, particularly the small and midsize enterprise (SME) business and the special-industry

business. In contrast, Gothaer has actively reduced exposure related to the highly competitive motor business, which

accounted for only 20% of total non-life GPW in 2010, compared with the market average of 37%. We expect the

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share of noncommodity lines in Gothaer's non-life portfolio to increase further. In life insurance, the group focuses

on the development and sale of less-capital-intensive and lower-risk unit-linked and biometric products, which

accounted for 56% of the new business premiums in 2010.

Underwriting performance in property/casualty insurance is strong, in our view, and above that of many peers. The

overall net combined (loss and expense) ratio increased to 99.8% in 2010, after 95.9% in 2009, because of the

effect of natural catastrophes and a higher incidence of large losses. However, the five-year average ratio of 96.2%

indicates a performance exceeding that of peers. This mainly reflects the group's focus on underwriting profitable

lines of business and reducing its activities in the highly competitive German motor market, while the retained motor

business has proven to be profitable.

Gothaer's bond portfolio is comparably strongly exposed to credit risk, in our view. Bonds of weaker quality,

meaning those rated 'BBB' and lower, accounted for about 22% of the total portfolio as of the end of July 2011.

This is a higher portion than that of peers with a similar financial profile. Our current ratings underlie the

assumption that future write-offs in the bond portfolio will not have the scale to materially impair the group's

capitalization. Exposure to equities with a portfolio share of about 1% is limited and largely hedged.

Because Gothaer's in-force life insurance portfolio is still dominated by traditional interest-rate-sensitive life

insurance products with guarantees, and the company operates with a low asset duration relative to peers', the

group's earnings profile is highly sensitive to interest rate developments in the financial markets. We believe it will

take some time for Gothaer to increase the proportion of new and innovative products in the in-force book

sufficiently to allow for lower interest rate sensitivity and improved earnings prospects.


The stable outlook reflects our expectation that management will continue to pursue a profit-oriented strategy.

Against this background, as well as difficult economic and competitive conditions, we expect GPW for non-life and

life business to remain almost stable in 2011 and 2012. In health, a premium increase of about 4%-6% can be

achieved in 2011 and 2012, in our view. Overall, we expect GPW growth of about 2%-3%.

We think that Gothaer's operating performance will remain strong, reflected in a non-life net combined ratio of less

than 100%. In life insurance, we expect the group's main life insurer GL to continue to record good risk surpluses

of about 0.8% of its actuarial reserves, and at the same time to progress its efforts to reduce administration costs.

Furthermore, the new business margin should exceed 10% of the annual premium equivalent, in our view. Overall,

we expect the group's net income to remain at about €80 million-€90 million in 2010 and 2011, which would result

in a return on reported equity (ROE) of 7%-8%. However, these targets may potentially be under pressure from

financial market volatility. We think the group's capitalization will remain strong.

Given the continually difficult economic and financial conditions, an upgrade is unlikely at this stage. However, we

could consider a positive rating action if we saw Gothaer sustaining sound operating earnings that exceed our

expectations, while maintaining at least strong capitalization. A supportive development would also be Gothaer

Leben's ability to keep rebuilding its financial strength, such as by continuing to reduce risk on the balance sheet,

mainly relating to assets. Negative rating pressure could materialize if the group's profit or capitalization were lower

than we expect, the duration mismatch in the life portfolio increased, or if financial market conditions led to an

unexpected level of impairments. 3

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Corporate Profile: A Midsize Player With Mutual Roots

Total consolidated GPW of €4.0 billion (41% non-life, 38% life, and 21% health) in 2010 positioned mutual

insurer Gothaer as a midsize player in the German primary insurance market. The group operates through three

brands: the traditional Gothaer brand, the Asstel brand (Asstel Lebensversicherung AG and Asstel Sachversicherung

AG; both of which are not rated) for internet sales, and the Janitos brand (Janitos Versicherung AG; not rated) for

operating non-life broker-linked business. In 2010, Gothaer-branded companies accounted for 87% of the GPW,

Asstel accounted for 6%, and Janitos' contribution remained insignificant. In 2010, the group acquired a 78% stake

in the small Poland-based non-life, mainly motor, insurer Polskie Towarzystwo Ubezpieczen (PTU; not rated), which

recorded GPW of about €113 million in 2010 with a market share of 2.1%. We understand that Gothaer plans to

further increase its participating interest and attain complete ownership of PTU in 2011.

GA, GL, GK, Asstel, and Janitos are wholly owned by Gothaer Finanzholding AG (not rated). The group's mutual

parent is Gothaer Versicherungsbank VVaG (not rated), which transferred the bulk of its portfolio to GA in 2001.

Competitive Position: Despite Various Initiatives, Growth Remains Difficult

Table 1

Gothaer Insurance Group/Competitive Position

--Year ended Dec. 31--

(Mil. €) 2010 2009 2008 2007 2006

Total gross premiums written 4,003 4,249 4,039 3,945 3,857

Annual change (%) (5.8) 5.2 2.4 2.3 1.2

Life gross premiums written 1,524 1,847 1,615 1,562 1,530

Annual change (%) (17.5) 14.4 3.4 2.1 3.0

Non-life gross premiums written* 1,648 1,628 1,642 1,590 1,544

Annual change (%) 1.3 (0.9) 3.3 3.0 0.9

Health gross premiuns written 830 774 783 793 782

Annual change (%) 7.3 (1.2) (1.3) 1.4 (1.5)

Direct non-life gross premiums written by line of business (%)

Accident and health/other 10.2 10.1 10.1 10.2 10.4

Motor 20.8 21.2 22.7 24.3 24.1

Marine, aviation, and transport 2.5 2.6 2.4 2.3 2.3

Property 33.2 33.6 33.0 33.8 36.8

Liability 19.6 20.5 20.4 20.6 20.5

Other 13.7 11.9 11.4 8.8 5.8

*Includes third-party reinsurance in run-off results.

We consider Gothaer's competitive position to be strong. We believe that the group, operating almost exclusively in

Germany, generates a competitive advantage from its well-diversified portfolio and broad product offering in

property/casualty, life, and private health insurance. In 2010, owing to a special development in life business, the

group's overall gross premium volume decreased by 6%, after expanding faster than the market in 2009. As

competition in the commodity-type lines of business, like motor, is expected to remain intense, Gothaer continues to

cautiously build up its presence in selected commercial niches.

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Multibrand and multichannel distribution

Through the traditional Gothaer brand, the group successfully addresses its clientele via a tied-agent organization

and broker channel. The clientele includes the more service-oriented and high-income customers, SMEs, and smaller

industrial customers. The Asstel brand, using mainly the internet channel, has been designed in response to an

increasingly price-sensitive commodity product market. Whereas the life entity appears to be on a good track, the

non-life entity still lacks critical size. Although small, the broker servicing non-life operations of Janitos appears to

have potential for further growth over the longer term.


In line with the market, the group reported a year-on-year increase in this segment of about 1% of GPW in 2010.

Gothaer is actively undertaking measures to prevent cancellations and promote cross-selling, which we consider to

be vital in a saturated market. The group has maintained strong market positions in the engineering industry, the

liability business, and alternative-energy industries, although the latter segment remains small in absolute terms. In

response to the highly competitive motor market in Germany, Gothaer actively reduced the portion of motor

business to about 20% of the total non-life premium income in 2010, down from about 30% in 2002.

Consequently, we believe Gothaer's business and earnings profile is relatively more resilient to the negative effects of

intense price competition in this segment.


Gothaer in our view continues to regain its strong competitive position in life insurance despite difficult financial

conditions. In 2010, GPW decreased by 17%, but we view this against Gothaer's above-market boost from

single-premium deferred annuity business in 2009. For the same reason, the sum of new business premiums at the

main operating entity GL decreased by 23% year on year. We view as positive Gothaer's move away from the

classical capital-intensive products toward innovative unit-linked and biometric products, which contributed about

56% of the company's new business in 2010. Asstel's life arm continues to prove to be a successful provider of

highly rated products. However, its GPW--at €218 million in 2010--is stagnating, due to high maturities.


In health, Gothaer continued to record strong new business growth, which translated into a slightly above-market

growth of 7% in terms of GPW in 2010. In view of the challenging political environment, we view positively GK's

strong successes in supplementary cover. GK's premium development benefited from the overhaul and

modernization of its product offering, which helped to boost sales through its broker channel. Moreover, we

acknowledge the group's efforts to expand in group-health business by cooperating with statutory health insurers

and using Asstel's Internet platform.


We expect Gothaer's competitive position to remain strong. However, we believe that growth prospects are limited,

given the background of a difficult financial environment.

In non-life insurance, we expect premiums to stagnate in 2010 and 2011. We believe that the group will continue

with its profit-oriented underwriting and expand further into nonmotor lines, in particular SMEs and special


In life, we think that Gothaer will remain focused on the sale of disability products, unit-linked insurance, and term

insurance, all of which we view as less capital intensive. Given the current environment, we expect the group's life

GPW to show only slight increases in 2011 and 2012. 5

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Gothaer Insurance Group

In the German private health insurance market, which continues to face obstacles arising from the legal framework,

we expect Gothaer to successfully defend its competitive position through product and cooperation initiatives. These

should, in our view, support the further development of both full-comprehensive and supplementary health

insurance business. As a result, we think this will translate into a premium increase of about 5% in 2011 and 2012.

Management And Corporate Strategy: Strong Commitment To Value-Based


We view Gothaer's value-oriented management and corporate strategy as supportive for the rating. The strategy is

clearly aligned with the group's financial resources. Furthermore, management has continuously demonstrated

successful execution of its strategy. However, in our view management is challenged to pursue a sustained profitable

growth path in the currently difficult financial and competitive environment.


We view positively Gothaer's customer-focused multibrand and multichannel strategy, as well as its groupwide

efficiency improvement and cost-reduction initiatives. These, in our view, have bolstered the group's business and

financial profiles. We view it as positive that, despite continually fierce competition in commodity-type products, the

company is strengthening its position in commercial flexible multirisk covers and selected business niches. We also

note that GL is rebuilding its financial strength, although this is difficult in a low-interest-rate environment.

Given the group's position as a midsize player in the saturated German market, we understand that management is

seeking scale by expanding into Central and Eastern Europe through mergers and acquisitions. However, we expect

management to follow a prudent and risk-oriented approach, as demonstrated by the recent acquisition of the

significant shareholding in the small Polish insurer PTU.

Operational management

Management has, in our view, successfully executed its value-oriented strategy in recent years. It has demonstrated

this by reducing the share of motor business in its non-life portfolio, the focus on less-capital-intensive life insurance

products, and the withdrawal from potentially more volatile lines of business, such as reinsurance and credit

insurance. We think that Gothaer is on track to benefit from efficiencies in its organizational and administrative

structure, as well as its information technology architecture and processes. We anticipate that by the end of 2011 the

group's annual administrative expenses will have reduced by about €30 million compared with the 2008 level.

Financial management

We regard Gothaer's financial management as sound. Management's risk appetite and risk tolerance framework are,

in our view, appropriately aligned with its risk-bearing capacity at the group and entity level. Risk tolerance levels

have been set up by taking into account capital requirements resulting from internal economic models, and also

from a regulatory and rating perspective. Furthermore, risk tolerances take into account earnings targets, liquidity

requirements, and debt-usage restrictions. The targeted ROE of about 7%-8% for 2011 and 2012 is achievable, in

our view. We believe, however, that bottom-line profitability will remain under pressure prospectively, especially if

interest rates remain low.

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Gothaer Insurance Group

Enterprise Risk Management: Adequate With A Positive Trend

We view Gothaer's enterprise risk management program (ERM) as adequate with a positive trend. The overall

assessment is supported by our view that risk management culture and risk controls for most of the group's risks are

strong. The assessment of strategic risk management is currently still adequate, which reflects that, despite

significant progress, an integrated groupwide economic capital model using economic-capital and risk-return targets

is still under development and will be rolled out in 2012. Despite ERM's embedded role in Gothaer's strategic

decision-making to reshape its competitive and financial profile, the importance of ERM to the rating is moderate.

This is because the group mainly operates in less-complex personal lines and the SME segment.

Gothaer's risk management culture is considered strong and the group's top management is highly committed to

supporting it. The group has been building a consistent, groupwide risk management framework since 2002. It

includes a central risk controlling function, an investment committee, and a central risk committee. It has defined its

overall risk appetite, derived comprehensive limit systems, and implemented sound risk monitoring, controlling, and

reporting processes, including an early warning system.

Risk controls for the group's key risks--investment risks, including asset-liability management (ALM) risks and

natural catastrophe risks--are strong, in our view. Market/ALM risk controls are based on an internal stochastic

capital market analysis and stress testing consistently for all group entities. The strategic asset allocation takes into

consideration the economic capital requirements, return targets, and risk-bearing capacity of the various operations.

Credit risk controls are also strong and based on the group's internal comprehensive credit analysis process. We

consider emerging-risk management adequate.

Accounting: Group Reporting Based On IFRS

Gothaer uses International Financial Reporting Standards (IFRS) for group reporting. Insurance transactions are

reported according to U.S. generally accepted accounting principles (GAAP). In addition, the group continues to

report the results of its operating insurance companies under German GAAP for compliance, tax, and bonus policy


The main differences between the two accounting standards relate to the valuation of investments and technical

reserves. The equity capital base under IFRS is different from that under German GAAP because the former

recognizes partly asset value reserves and fully equalization reserves. We primarily focus our analysis on the IFRS

group results, but include, when indicated, German GAAP results.

Gothaer prepares traditional embedded-value calculations for its life portfolio. In calculating the group's capital

base, Standard & Poor's recognizes the value in force (VIF) on the group's life portfolio, issued hybrid instruments,

asset-value reserves/losses on properties and non-life bonds, and parts of life and health policyholder capital.

Operating Performance: Strong Technical Non-life Results, Despite A Weaker

2010 7

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Table 2

Gothaer Insurance Group/Operating Statistics

--Year ended Dec. 31--

(Mil. €) 2010 2009 2008 2007 2006


Net income 91 76 64 142 126

Return on equity (%) 7.8 7.3 6.2 12.5 11.2


Non-life revenue 1,446 1,419 1,425 1,374 1,296

Non-life operating result 93 154 194 83 205

Return on revenue (%) 6.4 10.9 13.6 6.1 15.8

Net loss ratio (%) 68.2 66.5 61.4 67.5 57.7

Net expense ratio (%) 31.5 29.5 32.9 33.7 32.5

Net combined ratio (%) 99.7 95.9 94.2 101.2 90.2

Life (Gothaer Lebensversicherung only)

Administrative expense ratio (%) 2.7 2.7 2.8 2.9 3.2

Acquisition expense ratio (%) 6.2 5.9 5.8 5.5 5.5

Lapse ratio (%) 5.3 5.3 4.7 4.3 4.7

Bonus rate (%) 4.0 4.0 4.5 4.2 4.2

We continue to consider Gothaer's operating performance to be strong. Although the combined ratio in 2010 was

affected by large losses and natural catastrophes, the property/casualty segment remains the main profit contributor,

thanks to its strong underwriting discipline. The five-year average combined ratio of 96.2% and five-year average

return on revenue of 10.6% compare favorably with peers'. Although Gothaer's life and health operations have

expanded in absolute terms in recent years, they continue to contribute only moderately to the overall result.

Gothaer's bottom-line net income improved to €91 million in 2010 from €78 million in 2009. The resulting return

on reported equity increased to 7.8% against 7.3% in 2009. The average ROE in 2006-2010 was 9.0%, which is

close to that of similarly rated peers.

Current performance

The group's non-life underwriting performance was affected by large losses and natural catastrophes in 2010,

leading to a combined ratio of 99.7% against 95.9% in 2009. The net expense ratio increased to 31.5% from

29.5% in 2009, but is in line with the five-year average of 32.0%. This is above peers', but we take into account the

group's business mix, which is geared toward business lines with higher acquisition commissions.

Gothaer's underwriting performance in life has improved in recent years, benefiting from higher risk and a more

balanced cost result. GL's 2010 administrative ratio remained at 2.7%, slightly above the market average of 2.4%,

whereas the acquisition expense ratio of 6.2% was higher than the market average of 5.1%. GL's new-business

margin, which is measured using the annual premium equivalent (APE), reached 18.9% in 2010, up from 15% in

2009. The new-business margin has benefited, in our view, from the group's focus on selling unit-linked, term

insurance, and disability products.

The technical result of Gothaer's health business remained strong and improved to 11.1% of gross premiums earned

in 2010, after 9.4% in 2009, which continues to well exceed the market. The strong result should, in our opinion,

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support future premium stability and, consequently, new business sales.


We expect Gothaer's management to continue to pursue its profit-oriented strategy, based on strategic

risk-management principles.

Non-life insurance will remain the dominant earnings stimulus, in our view. The bottom-line contribution of

Gothaer's life and health activities are likely to stay moderate. We expect the non-life combined ratio to remain

comparatively high, given the likely continued strong competition, but to remain below 100%.

In life, we expect the segment's gross surplus to continue to benefit from the mortality/morbidity surplus, which is

likely to remain stable at about 0.8% of the actuarial reserves. Furthermore, we anticipate a new-business margin

clearly exceeding 10% of APE. Overall, we expect the group to record net income of €80 million-€90 million in

2011 as well as in 2012, resulting in a fairly stable return on reported equity of 7%-8%.

Investments: Higher Credit Risk Than Peers' And Sensitive To Low Interest Rates

Table 3

Gothaer Insurance Group/Investments

--Year ended Dec. 31--

(Mil. €) 2010 2009 2008 2007 2006

Net investment income 851 911 1,014 983 863

Direct yield on invested assets (%) 3.7 4.1 4.6 4.5 4.0

Total investment return (including unrealized and realized) (%) 3.7 3.1 3.2 6.0 4.5

Standard & Poor's views Gothaer's overall investment strategy and ALM practices as strong and in line with the

group's risk-bearing capacity. The investment portfolio is dominated by bonds, which accounted for 78% of the

total portfolio as of June 30, 2011, exposing the group to the negative effects of low interest rates. In addition, the

bond portfolio bears a higher exposure to credit risk than that of its peers. The group's exposure to equities,

however, remains low, accounting for about 1% of the total portfolio, as of the end of June 2011 and is largely

hedged. As of June 30, 2011, the group had increased its cash and short-term investments to about 6%.

Gothaer's strategy to achieve stable and meaningful direct income through corporate bonds, combined with the

recent volatility in the capital markets, has led to a significant amount of unrealized losses on bonds.

Investment return

The group's total investment return including all write-offs and realized gains and losses in 2010 increased to 3.6%

from 3.1% in 2009, whereas the current yield decreased to 3.7% from 4.1%. The losses and write-offs stemmed

mainly from its corporate bond portfolio and hedge-fund investments.

Credit risk

Credit exposure is high compared with peers'. This is reflected in the group's fairly high exposure to 'BBB' rated

bonds that accounted for about 15% of the total bond portfolio as of year-end 2010. Almost 8% are invested in

speculative-grade and unrated bonds. We believe that the pressure on the group's financial profile from sovereign

exposures in Greece, Ireland, Italy, Portugal, and Spain, which overall contributed about 7.5% to the group's total

investment portfolio on June 30, 2011, should be manageable. 9

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Gothaer Insurance Group

Corporate bonds are well diversified: Issuance from banks accounts for 39%, and the remaining bonds are split

mainly among utilities, telecommunications, automobiles, and chemicals.

Market risk/asset-liability management

Market risk remains Gothaer's main risk, particularly with respect to its life and health operations, and is largely

related to interest rate fluctuations. Because of its relatively high duration gap, which under the forthcoming

Solvency II regime will likely fuel capital requirements, strategic asset allocation will be a major challenge for the

company in our view. Although the group has somewhat closed the duration it remains below the industry

benchmark. In our view, further activities to reduce the duration gap will require another expansion of the asset

duration, at least in the medium term. Additionally, to reduce risk capital requirements, the company may well be

expected to actively reduce its riskier exposures, such as to alternative risks.

Liquidity: Highly Liquid Investment Portfolio

We view Gothaer's liquidity as strong because about 85% of the group's investments are liquid. Operating cash flow

of about €285 million, after €1.2 billion in 2009, is also sound in our opinion.

Capitalization: Strong And Resilient In 2010

Gothaer's capitalization has remained strong, in our view.

Capital adequacy

Capital adequacy strengthened slightly in 2010 and remained strong according to our model, which supports the

current rating. The group's capital strength lies predominantly within its non-life operations, but GL has maintained

capital at good levels, thanks to its free bonus reserve.

Quality of capital

The quality of group capital is modest and significantly depends on policyholder capital and weaker forms of equity,

such as the VIF. Core shareholders' funds only accounted for 23% of total adjusted capital in 2010.


We believe that Gothaer follows adequate reserving practices for its property/casualty lines on an IFRS basis. This

assessment is supported by the group's positive reserve run-off results over the past five years. Loss reserves were

115% of net premiums written in 2010, which is adequate, in our view. The group has constantly adjusted life

insurance reserves, most recently in 2008, to recognize the new mortality tables established for German pension

products, and we therefore view these reserves as conservative.


We regard Gothaer's non-life reinsurance policy as conservative. The group mainly uses a combination of

quota-share and excess-of-loss reinsurance to smooth volatility in underwriting and to protect its balance sheet.

Moreover, reinsurers are rated predominantly at least 'A' or higher. Retention levels are prudent relative to the

group's capital base, in our view. The effectiveness of Gothaer's natural-catastrophe reinsurance program was

demonstrated after windstorm Kyrill in 2007, which had only a limited effect on the group's net results.

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Financial Flexibility: Adequate For Gothaer's Needs

Table 4

Gothaer Insurance Group/Financial Statistics

--Year ended Dec. 31--

(Mil. €) 2010 2009 2008 2007 2006

Total reported equity 1,226 1,100 977 1,095 1,179

Change in equity (%) 7.9 12.8 (3.9) (3.7) 12.3

Non-life reinsurance utilization ratio (%) 16.0 17.7 18.4 18.0 20.6

Non-life loss reserves/net premiums written (%) 114.7 119.1 117.7 125.0 129.3

Standard & Poor's considers Gothaer's financial flexibility as strong. We do not expect major capital needs over the

near term because organic growth should remain moderate and potential acquisitions are likely to be limited in size

and not require external funding. As a positive, we note that the mutual Gothaer group was able to successfully

issue a €50 million security exclusively with its members.

Related Criteria And Research

All articles listed below are available on RatingsDirect on the Global Credit Portal, unless otherwise stated.

• Principles Of Credit Ratings, Feb. 16, 2011

• Refined Methodology And Assumptions For Analyzing Insurer Capital Adequacy Using The Risk-Based

Insurance Capital Model, June 7, 2010

• Holding Company Analysis, June 11, 2009

Group Methodology, April 22, 2009

• Interactive Ratings Methodology, April 22, 2009

• Summary of Standard & Poor’s Enterprise Risk Management Evaluation Process for Insurers, Nov. 26, 2007

• Counterparty Credit Ratings And The Credit Framework, April 14, 2004

Ratings Detail (As Of October 31, 2011)

Operating Companies Covered By This Report

Gothaer Allgemeine Versicherung AG

Financial Strength Rating

Local Currency

Counterparty Credit Rating

Local Currency

Subordinated (1 Issue)

Gothaer Krankenversicherung AG

Financial Strength Rating

Local Currency

Issuer Credit Rating

Local Currency

Gothaer Lebensversicherung AG

Financial Strength Rating

Local Currency






A-/Stable/-- 11

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Gothaer Insurance Group

Ratings Detail (As Of October 31, 2011) (cont.)

Issuer Credit Rating

Local Currency




*Unless otherwise noted, all ratings in this report are global scale ratings. Standard & Poor's credit ratings on the global scale are comparable across countries. Standard

& Poor's credit ratings on a national scale are relative to obligors or obligations within that specific country.

Additional Contact:

Insurance Ratings Europe;

Additional Contact:

Insurance Ratings Europe;

Standard & Poors | RatingsDirect on the Global Credit Portal | October 31, 2011 12

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