S&P Assigns GE Global $350 Million Notes 'AA'; Ratings Affirmed

Apr 11, 2001, 01:00 ET from Standard & Poor's

    NEW YORK, April 11 /PRNewswire/ -- Standard & Poor's today assigned its
 double-'A' rating on GE Global Insurance Holding Corp.'s $350 senior unsecured
 redeemable 7.5% notes due 2010 and $350 million senior unsecured redeemable
 7.75% notes due 2030, and affirmed its double-'A' counterparty credit and
 senior debt ratings on the company. At the same time, Standard & Poor's
 affirmed its triple-'A' financial strength and counterparty credit ratings on
 Employers Reinsurance Corp. (ERC) and its subsidiaries (see list). The
 outlooks are stable.
     Major Rating Factors:
 
     -- Strong market position. With statutory surplus of $4.0 billion at
 year-end 2000, ERC continues to be a dominant force in the U.S. reinsurance
 market, where it ranked second largest in terms of 1999 statutory surplus
 (Standard & Poor's most recent comprehensive ranking). Fortified by several
 European acquisitions since the mid-1990's, ERC and affiliated companies GE
 Reinsurance Corp and Medical Protective Co. (collectively, ERC Group) have
 expanded their product offerings and geographic reach, transforming ERC Group
 into a formidable global group capturing about 8% of the world's 1999
 reinsurance premiums. ERC Group offers a wide range of property/casualty (80%)
 and life (20%) insurance and reinsurance products from its numerous locations
 worldwide.
     -- Expanding network. The ERC Group provides local attention to the
 customers its serves through 19 offices in North America, 13 offices in
 Europe, 11 offices in Asia/Pacific, and six offices in Latin America. In 2000,
 offices were opened in Seoul, Winterthur, San Juan, and Sao Paulo, evidencing
 the ERC Group's commitment to offering global products and solutions that
 balance local interests and time requirements.
     -- Deterioration in current operating results. The U.S. nonlife GAAP
 combined ratio of 112% and 113% for years ended 2000 and 1999, respectively,
 reflect predominantly insufficient pricing within the domestic
 property/casualty reinsurance industry and adverse development on prior
 accident year losses. The international nonlife GAAP combined ratio of 118%
 and 110% for years ended 2000 and 1999 reflect under-priced business, similar
 to the U.S. book, and is systematic of global overcapacity and competitively
 weakened market terms and conditions, and the impact of significant adverse
 development relating to certain European windstorms occurring in late 1999.
 These results are in sharp contrast with an average combined ratio of 104% in
 the prior five years (1994-1998) that were indicative of superior underwriting
 results as compared with both the top-tier U.S. and global reinsurers. ROR,
 defined as consolidated GAAP pretax operating income divided by total revenue
 (excluding realized capital gains), of 1.8% is considered atypically modest in
 2000, weakened from its very strong five-year average ROR of 8.1%. The
 company's reinsurance program, in conjunction with prudent underwriting, was
 well tested in 1999 and 2000 and has provided adequate protection from
 catastrophe losses.
     -- Very strong capitalization and liquidity. ERC Group has very strong
 capital, with a capital adequacy ratio of 168% as measured by Standard &
 Poor's 1999 property/casualty capital model. Level of capital adequacy has
 deteriorated in the last year from its historically excellent levels. Standard
 & Poor's expects the combination of improved underwriting results, higher
 level investment income from fixed-income securities, and lower dividend
 expectations will rebuild capital adequacy to levels considered superior in
 the industry. ERC Group's investment philosophy is conservative and its
 consolidated reserve position is supported by highly rated, liquid securities,
 which are appropriate given the inherent volatility in a reinsurer's liability
 structure.
     -- Strategic importance to General Electric Capital Services Inc. ERC
 Group is considered strategically important to its immediate parent, within
 General Electric, where insurance is a strategic sector contributing both to
 top line revenue and net earnings.
 
     OUTLOOK: STABLE
     Premium growth, about 10%-15%, is expected to be generated primarily from
 domestic specialty nonlife operations, international operations, and U.S. life
 operations. ROR's are expected to rise to 6%-8% in 2001, largely because of
 better underwriting results prompted by hardening rates, improved cashflows,
 and lower operational costs, returning to historical double-digit levels over
 the next two to three years. Dividends, typically 35% on net income, are
 expected once capital adequacy levels are restored. Standard & Poor's does not
 anticipate an increase in ERC Group's 25% financial leverage. -- CreditWire
 
     RATINGS ASSIGNED
     GE Global Insurance Holding Corp.
        $350M Senior unsecured 7.5% notes     AA
        $350M Senior unsecured 7.75% notes    AA
 
     RATINGS AFFIRMED
     Employers Reinsurance Corp.
        Counterparty credit rating     AAA/Stable
        Financial strength rating      AAA
     EMPLOYERS REINSURANCE CORP. SUBSIDIARIES
     Employers Reassurance Corp.
     GE Frankona Reassurance Ltd.
     GE Frankona Reinsurance A/S
     GE Frankona Ruckversicherungs Aktien Ges ERC Life Reinsurance Corp.
     GE Frankona Reinsurance Ltd.
     Irish European Reinsurance Co. Ltd.
     Luxembourg European Reinsurance S.A.
     Westport Insurance Corp.
       Counterparty credit rating      AAA/Stable
       Financial Strength rating       AAA
 
     GE Global Insurance Holding Corp.
       Counterparty credit rating      AA/Stable
       Senior debt rating              AA
 
 

SOURCE Standard & Poor's
    NEW YORK, April 11 /PRNewswire/ -- Standard & Poor's today assigned its
 double-'A' rating on GE Global Insurance Holding Corp.'s $350 senior unsecured
 redeemable 7.5% notes due 2010 and $350 million senior unsecured redeemable
 7.75% notes due 2030, and affirmed its double-'A' counterparty credit and
 senior debt ratings on the company. At the same time, Standard & Poor's
 affirmed its triple-'A' financial strength and counterparty credit ratings on
 Employers Reinsurance Corp. (ERC) and its subsidiaries (see list). The
 outlooks are stable.
     Major Rating Factors:
 
     -- Strong market position. With statutory surplus of $4.0 billion at
 year-end 2000, ERC continues to be a dominant force in the U.S. reinsurance
 market, where it ranked second largest in terms of 1999 statutory surplus
 (Standard & Poor's most recent comprehensive ranking). Fortified by several
 European acquisitions since the mid-1990's, ERC and affiliated companies GE
 Reinsurance Corp and Medical Protective Co. (collectively, ERC Group) have
 expanded their product offerings and geographic reach, transforming ERC Group
 into a formidable global group capturing about 8% of the world's 1999
 reinsurance premiums. ERC Group offers a wide range of property/casualty (80%)
 and life (20%) insurance and reinsurance products from its numerous locations
 worldwide.
     -- Expanding network. The ERC Group provides local attention to the
 customers its serves through 19 offices in North America, 13 offices in
 Europe, 11 offices in Asia/Pacific, and six offices in Latin America. In 2000,
 offices were opened in Seoul, Winterthur, San Juan, and Sao Paulo, evidencing
 the ERC Group's commitment to offering global products and solutions that
 balance local interests and time requirements.
     -- Deterioration in current operating results. The U.S. nonlife GAAP
 combined ratio of 112% and 113% for years ended 2000 and 1999, respectively,
 reflect predominantly insufficient pricing within the domestic
 property/casualty reinsurance industry and adverse development on prior
 accident year losses. The international nonlife GAAP combined ratio of 118%
 and 110% for years ended 2000 and 1999 reflect under-priced business, similar
 to the U.S. book, and is systematic of global overcapacity and competitively
 weakened market terms and conditions, and the impact of significant adverse
 development relating to certain European windstorms occurring in late 1999.
 These results are in sharp contrast with an average combined ratio of 104% in
 the prior five years (1994-1998) that were indicative of superior underwriting
 results as compared with both the top-tier U.S. and global reinsurers. ROR,
 defined as consolidated GAAP pretax operating income divided by total revenue
 (excluding realized capital gains), of 1.8% is considered atypically modest in
 2000, weakened from its very strong five-year average ROR of 8.1%. The
 company's reinsurance program, in conjunction with prudent underwriting, was
 well tested in 1999 and 2000 and has provided adequate protection from
 catastrophe losses.
     -- Very strong capitalization and liquidity. ERC Group has very strong
 capital, with a capital adequacy ratio of 168% as measured by Standard &
 Poor's 1999 property/casualty capital model. Level of capital adequacy has
 deteriorated in the last year from its historically excellent levels. Standard
 & Poor's expects the combination of improved underwriting results, higher
 level investment income from fixed-income securities, and lower dividend
 expectations will rebuild capital adequacy to levels considered superior in
 the industry. ERC Group's investment philosophy is conservative and its
 consolidated reserve position is supported by highly rated, liquid securities,
 which are appropriate given the inherent volatility in a reinsurer's liability
 structure.
     -- Strategic importance to General Electric Capital Services Inc. ERC
 Group is considered strategically important to its immediate parent, within
 General Electric, where insurance is a strategic sector contributing both to
 top line revenue and net earnings.
 
     OUTLOOK: STABLE
     Premium growth, about 10%-15%, is expected to be generated primarily from
 domestic specialty nonlife operations, international operations, and U.S. life
 operations. ROR's are expected to rise to 6%-8% in 2001, largely because of
 better underwriting results prompted by hardening rates, improved cashflows,
 and lower operational costs, returning to historical double-digit levels over
 the next two to three years. Dividends, typically 35% on net income, are
 expected once capital adequacy levels are restored. Standard & Poor's does not
 anticipate an increase in ERC Group's 25% financial leverage. -- CreditWire
 
     RATINGS ASSIGNED
     GE Global Insurance Holding Corp.
        $350M Senior unsecured 7.5% notes     AA
        $350M Senior unsecured 7.75% notes    AA
 
     RATINGS AFFIRMED
     Employers Reinsurance Corp.
        Counterparty credit rating     AAA/Stable
        Financial strength rating      AAA
     EMPLOYERS REINSURANCE CORP. SUBSIDIARIES
     Employers Reassurance Corp.
     GE Frankona Reassurance Ltd.
     GE Frankona Reinsurance A/S
     GE Frankona Ruckversicherungs Aktien Ges ERC Life Reinsurance Corp.
     GE Frankona Reinsurance Ltd.
     Irish European Reinsurance Co. Ltd.
     Luxembourg European Reinsurance S.A.
     Westport Insurance Corp.
       Counterparty credit rating      AAA/Stable
       Financial Strength rating       AAA
 
     GE Global Insurance Holding Corp.
       Counterparty credit rating      AA/Stable
       Senior debt rating              AA
 
 SOURCE  Standard & Poor's