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Outlook

In the financial year 2001, the Company posted an extraordinarily high deficit, which led to equity meltdown. Withdrawals from capital and revenue reserves were not enough to make up the shortfall for the year. Consequently, the current financial year started with a € 48.5 million retained loss brought forward from the previous year. In March 2002, Gerling-Konzern Versicherungs-Beteiligungs-AG (GKB), Cologne, strength- ened the capital base of Gerling-Konzern Globale Rückversicherungs-AG with a cash capital increase of € 300.0 million (nom. € 329.9 million).

The negative business developments seen in 2001 were analyzed in detail prior to the renewal campaign, as a result of which we are with- drawing from a number of areas of business. We have ceased to operate in the markets of the Arab world altogether. We have terminated a num- ber of special acceptances and severed many individual links. More restructuring will be done before the 2003 renewal campaign gets underway.

Market hardening continued after 11 September 2001, making for an improvement in conditions which will boost premium rates. Owing to the restructuring measures introduced, the carrying value of our insur- ance portfolio will be reduced but the revenues lost as a result of aban- doned business will be compensated by higher premiums from current business. Overall, therefore, only a moderate increase in premium income is anticipated.

In the renewal campaign, which was longer than usual, we managed to put across most of our demands for improvements in conditions. So overall, provided business is not burdened again by exceptionally large losses, we expect significantly better underwriting results in 2002.

It is also expected that the financial year just closed will have a marked impact on results of 2002. In view of the hefty withdrawals from the equalization provision in recent years – especially in the Property class- es – a large allocation is likely in the current financial year. This will significantly strengthen our security but have a negative impact on the result. In the capital markets, there is still no sign of a return to higher yields, so we do not anticipate any really marked increase in the surplus from general business.

After making up the retained loss brought forward from 2001, we expect to post a positive balance sheet result in the current financial year.

64 Gerling-Konzern Globale Rückversicherungs-AG/Management Report

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