Gerling on bidding block as Deutsche Bank exits

Cologne, Germany-based Gerling Versicherungs Beteiligungs A.G. — which operates globally in the primary insurance, reinsurance and life sectors — has been put on the selling block by one of the company’s major shareholders, Deutsche Bank, a statement released by the group says.

The troubled insurance group, which wrote total gross premiums of around US$8.5 billion for 2000, has an estimated market value of around US$7.5 billion. Gerling indicated earlier this year that its Gerling Global Reinsurance Group (GGRG) will post a loss of about US$450 million for the 2001 financial year. As a result, the company’s two majority shareholders, Deutsche Bank and Dr. Rolf Gerling, provided a capital injection of around US$265 million to the company in March of this year. This followed a similar cash infusion of US$360 million made toward the end of last year.

A joint statement released by Rolf Gerling and Deutsche Bank says a major restructuring of the group is currently underway. As part of this process, the group’s GGRG chairman, Norbert Strohnschen has resigned. The statement adds, “the new chairman of the executive board [Gerling Group] and CEO, Dr. Heinrich Focke, will ‘reconstructure’ the group’s portfolio and embark on a new strategic course”. According to the Gerling statement, this primarily involves finding a new “strategic partner”, which Deutsche Bank has indicated that it is willing to sell its entire stakeholding to any interested party.

The potential acquirer would also receive an additional shareholding percentage from Rolf Gerling, thereby making the new partner the majority shareholder of Gerling’s holding company. In order to gain a controlling share of Gerling, the buyer would likely face a US$3.5 billion price tag. “Both shareholders have agreed on finding a strategic partner to guarantee the long-term development of the group. Dr. Gerling and Deutsche Bank are willing to give the new partner the Deutsche Bank share and a further share, thus making him the majority shareholder of Gerling Holding.”

Gerling has not indicated whether any potential suitors have been identified or approached. Nor has any detail been given to how the group’s restructuring will impact on its international subsidiary operations. Gerling says that about 40% of its revenue is generated from outside of Germany. Gerling operates in Canada through Gerling Canada Insurance Co., Gerling Global Reinsurance Co., and Gerling Global Life Insurance Co. Gerling Canada wrote about Cdn$46.5 million in premium for 2000, posting an underwriting profit of Cdn$756,000, while Gerling Global Reinsurance wrote Cdn$59.5 million in premium for last year at a Cdn$5 million underwriting loss.

John Kartechner, president of the Canadian Gerling Global Reinsurance Co., says that, as far as the Canadian operations are concerned, “it’s business as usual. We have no thoughts of withdrawing. This is definitely not going to be a fire sale, we [the group] have a very sound [financial] base.” Kartechner concedes that the reinsurance side of the group has been the problem child. “It’s no secret that the reinsurance operations were the problem this time around. But, we’re still trying to make a turnaround.” With Rolf Gerling and Deutsche Bank having indicated that they will not be placing any further cash into the company, Kartechner says Gerling has to find a new source of capital for expansion in order to achieve growth over the longer-term.