Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Pastimes : Clown-Free Zone... sorry, no clowns allowed -- Ignore unavailable to you. Want to Upgrade?

To: Haim R. Branisteanu who wrote (183622)	7/25/2002 8:09:25 PM
From: Haim R. Branisteanu	Read Replies (1) \| Respond to of 436258

S&P revises outlook on Germany's insurance market July 25, 2002 11:19 AM ET Email this article Printer friendly version (Press release provided by Standard & Poor's) NEW YORK, July 25 - Standard & Poor's Ratings Services said today it revised its outlook for the German life insurance market to negative. The outlook revision reflects Standard & Poor's belief that, over the next one to three years, downgrades are likely to outpace upgrades in the German life sector. The rating action follows further sharp declines in asset reserve values since the end of June 2002 and persisting uncertainty and volatility in the capital markets. "A negative outlook is not a precursor to a downgrade," said Wolfgang Rief, a director at Standard & Poor's Financial Services Group in Frankfurt. "Nevertheless, a continued period of falling equity markets, coupled with reduced opportunities for capital and debt raising could eventually lead to downgrades." Many commentators have expressed concerns about the solvency position of German life insurers. Standard & Poor's considers that these concerns are exaggerated for securely rated life companies, and that policyholders' security is not under question at these stronger life offices. Nevertheless, the depth and duration of the bear market will inevitably impact some insurers more adversely than others. This is especially true for those companies that substantially expanded their equity investments in recent years and whose asset-liability management techniques are not highly developed. When markets eventually recover, those insurance companies with weakened capital positions are likely to need to bolster their capital adequacy, while companies with stronger capital will be better placed to seize opportunities for profitable growth and gain ground at the expense of other life insurers. This could lead to future ratings pressure on the business positions of the weaker companies. Furthermore, the financial flexibility of insurers--that is, the balance of capital requirements and sources--has also reduced because of the difficult capital market conditions, limiting the ability of insurers to utilize this source of additional financing. The current state of the capital markets presents a particular challenge for life insurers, as their two main roles--acting as capital gatherers and, at the same time, as investors--are impacted. Depressed capital markets are negatively affecting the insurers' historically high asset value reserves, while at the same time reducing their capital strength and financial flexibility to raise capital and debt. In addition, the industry is finding it increasingly difficult to continue to smooth high client bonus allocations and profit results. Although there has already been substantial pressure on life insurers in recent years because of low interest rates and strong competition, this situation was expected to ease from 2002 following the anticipated boom in private pension business as a result of the German pension reform, which encourages individuals to purchase supplementary private insurance. This business expansion has proven to be slower than expected, however, the only positive effect being that lower new business volumes also alleviate pressures on capital that would be accompanied by more rapid growth. Furthermore, the reduction in asset value reserves might result in sharper cuts in policyholder bonuses than would otherwise have been the case. Both published and economic levels of capital have fallen for most life insurers, although capital reductions need to be judged relative to the high capital levels that have prevailed in Germany over a long period of time. "Standard & Poor's expects a market consolidation of the weaker players, but at the same time the German life insurance industry as a whole remains solid," said Mr. Rief.

To: Haim R. Branisteanu who wrote (183622)	7/25/2002 8:15:39 PM
From: mishedlo	Read Replies (4) \| Respond to of 436258

Any ideas what this means to the Euro or US$ if anything? Portugal says '01 deficit 4.1 pct GDP ---- so who is next ? Spain Italy ?? July 25, 2002 04:10 PM ET By Ian Simpson LISBON, July 25 (Reuters) - Portugal's budget deficit breached a euro currency zone limit last year, reaching 4.1 percent of gross domestic product (GDP), Finance Minister Manuela Ferreira Leite said on Thursday. The gap means that Portugal will be the first country in the 12-nation euro currency zone to undergo European Union proceedings because of its budget shortfall. A special panel headed by Bank of Portugal Governor Vitor Constancio arrived at the figure in an audit of last year's government books, Ferreira Leite said in a televised news conference. "We have to act very rapidly to restore Portugal's credibility in the European Union," Ferreira Leite said. "This is a serious situation, but it doesn't scare us because it can be solved." The centre-right government, which took office in April, will meet its goal of holding the deficit to 2.8 percent of GDP this year and drive the deficit lower in 2003, she said. She spoke after a special cabinet meeting to analyse the budget report. Prime Minister Jose Manuel Durao Barroso appointed the panel to assess last year's budget shortfall. The previous Socialist government had estimated the gap at 2.2 percent of GDP, twice its original target. A European Union source said last week that the European Commission, the EU's executive arm, could start the sanctions process this month against Portugal. The European Commission also has warned France, Italy and Germany about their budget deficits. Portugal's new government passed a revamped budget in May to cut the 2002 shortfall by 2.1 billion euros in six months. Measures included hiking the value-added tax, ending mortgage subsidies, dismissing thousands of short-term workers and abolishing 70 public institutes. Ferreira Leite did not give details about how the deficit was wider than initially estimated. However, Diario Economico newspaper said this week the shortfall was caused in part by ballooning debt by cities and booking irrecoverable taxes as revenues.