Gerling and Scor ratings downgraded

Two more reinsurers saw their ratings lowered recently, although under very different circumstances.
Gerling-Konzern Globale Ruckversicherung (GKG), which operates in Canada as Gerling Global Reinsurance Company, was downgraded by A.M. Best to B++ (very good) from A- (excellent) in terms of financial strength. The company’s debt rating was also downgraded to bb+ from bbb. A.M. Best has issued a negative outlook on the company which has been on the sale block.
“These rating actions reflect A.M. Best’s opinion that GKG is likely to cease writing new non-life reinsurance business as there is only a remote possibility that it will be able to find a buyer prior to the 2003 renewal season,” notes a Best press release. With Gerling expected to retain its life reinsurance operations, A.M. Best predicts these will become a separate entity and says that if non-life operations are placed in run-off “it will be managed in an orderly manner whilst maintaining a risk-adjusted capitalization commensurate with the current B++ rating”.
Ironically, Scor, which has been downgraded to single A from single A+ by Standard & Poor’s, was a potential buyer for Gerling’s non-life book but withdrew from negotiations citing market conditions.
However, despte the downgrade, S&P has removed Scor from credit watch, saying the outlook is stable for the company, which operates in Canada as Scor Canada Reinsurance Company. The lifting of the credit watch is directly linked to Scor’s decision to withdraw from the Gerling negotiations.
“The rating actions on SCOR reflect Standard & Poor’s expectation that, in common with the whole reinsurance industry, while underlying earnings are expected to be strong in 2003 and 2004, the ability of SCOR to sustain long-term profitability consistent with the higher rating level is limited,” says S&P credit analyst Marcus Rivaldi. Nonetheless, he notes, “the ratings on SCOR continue to reflect the group’s strong business position within the reinsurance sector, and its strong, although pressurized, capital adequacy position.”