ECONOMY

State to help insurance firms boost assets

The Ministry of Development is preparing measures that will make it easier for battered insurance companies to present a better financial picture for the dismal year 2002. Ministry sources said that the measures will allow the companies to overstate the value of their properties by 30 percent, compared to the so-called imputed or objective values that serve as the usual benchmark. This may bring the valuation closer to the market value, but the fact that the State would resort to such a measure is an indication of the companies’ desperation. Why would insurance firms want to overstate the value of their property? Each year, the State audits their accounts to see whether their assets are sufficient to pay off their liabilities without defaulting. Insurance firms with insufficient assets may lose their license to operate, as has happened in the past. Thus, the valuation of the insurers’ properties is an essential part of this process. This year, the ministry has called on the companies to submit valuation data by the end of April, rather than the end of June. The value of their property portfolios is expected, for the second year running, to act as a lifesaver for firms desperately short on cash. This is, however, a temporary measure that does not alter the need for immediate capital infusions. Insurance stocks were battered worse than any others on the Athens Stock Exchange during 2002, losing, on average, close to 80 percent of their value. This leaves a capital increase as the only way to get new capital, short of a merger. A look at the data published by 57 insurance companies, which, together, account for 83.5 percent of market share, shows that first-time general insurance contracts – excluding life insurance contracts – rose a healthy 15.9 percent in value, to 1.56 billion euros from 1.35 billion in 2001. On the other hand, life insurance contracts stagnated and the year was a terrible one for listed insurance firms, which are supposed to be the strongest and healthiest in the market. Their results for 2002, published last week, showed cumulative losses of over 110 million euros. Auto insurance companies, listed and non-listed alike, show a collective loss of 205 million euros; 40 companies have seen their licenses revoked since 1990.