01 Gothaer Konzern_E_09_Umschl - Gothaer Allgemeine ...


01 Gothaer Konzern_E_09_Umschl - Gothaer Allgemeine ...

Management Report


default risk


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

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