01 Gothaer Konzern_E_09_Umschl - Gothaer Allgemeine ...

Management Report
Counterparty
default risk
Interest-bearing
financial instruments
Counterparty default risk is the risk that arises as a result of default or as a result of a
change in the credit rating or assessment of creditworthiness (credit spread) of security
issuers, counterparties and other debtors with accounts payable. In addition to regulatory
monitoring, counterparty default risk is limited and monitored by reference to internal
investment ceilings.
For risk management purposes, the acquisition of any investment vehicle is permissible
only if a qualified assessment of creditworthiness by an external agency such as
Standard & Poor’s or Moody’s or a qualified internal rating is available. Internal ratings
are used only where no rating has been issued by an external agency. Credit risks are
broadly spread to avoid concentration risks. All investments are constantly monitored in
this regard on the basis of regulatory requirements.
The interest-bearing financial instruments held by the insurance carriers in the Gothaer
Group are divided into two categories for risk management purposes: “liquidity” and
“credit”. The distinction here is whether an instrument presents only an interest risk or
whether an additional credit risk exists because of the solvency of the issuer. So where
a financial instrument entails no or only a minimal default risk, it is assigned to the
“liquidity” category. This is the case, for example, with German government bonds
(bunds) and senior secured covered bonds (pfandbriefe). The balance sheet book values
of our interest-bearing financial instruments can be regarded as an equivalent for the
maximum default risk of the Gothaer Group.
The table below shows the market value of interest-bearing financial instruments
assigned to the “liquidity” and “credit” categories by rating class, as managed and
monitored in the Gothaer Group. Retail funds are not included.
Breakdown by rating category Share in %
2009 2008
AAA 45.7 48.3
AA+ 7.3 5.0
AA 3.3 3.2
AA– 6.1 9.7
A+ 5.6 4.8
A 7.2 9.7
A– 6.0 5.0
BBB+ 5.7 5.1
BBB 2.3 2.6
BBB– 3.9 1.7
Speculative grade (BB+ to D) 5.8 3.6
Non-rated 1.0 1.3
The diagram below shows the market value of the financial instruments assigned to the
“liquidity” and “credit” categories.
80 Gothaer Group Annual Report 2009