OVERLAND PARK, Kan.--(BUSINESS WIRE)--Dec. 6, 2002--Standard & Poor's Ratings Services today announced AA- (Very Strong) counterparty credit and financial strength ratings on Employers Reinsurance Corp. and its wholly owned subsidiaries.
In announcing the lower rating, Standard & Poor's cited ERC's declining operating earnings while acknowledging ERC's strong market position, very strong capitalization and liquidity.
S&P said ERC has very strong capitalization and liquidity with GAAP equity at $6.5 billion as of September 30, 2002, which will be maintained with GE's commitment to infuse $1.8 billion in capital to retain ERC's capital strength. S&P reported, At year-end 2001, capital adequacy was considered very strong, with a capital adequacy ratio of 168% as measured by Standard & Poor's 2001 property/casualty capital model. ERC observed that a capital adequacy ratio of 168% is well within S&P's guidelines for a AA rating.
S&P went on to report that ERC continues to be a dominant force in the U.S. reinsurance market, where it ranked third largest in terms of 2001 net written reinsurance. The rating agency also noted ERC's transformation into a formidable global group capturing more than 7% of the world's 2001 reinsurance premiums.
In lowering ERC's rating from AA+, the rating agency focused on the declining operating performance in recent years, including the recent announcement of ERC's decision to increase reserves by $2.5 billion, driven by 1997-2000 underwriting. ERC has taken steps to mitigate prospective exposure by exiting lines that are unprofitable, re-pricing risks maintained, improving terms and conditions, and capturing their actuarial input of risk at the point of sale, said S&P. These measures are considered prudent and their effectiveness will be continually assessed.
ERC Chairman, President & CEO Ron Pressman commented: I lead a management team that has focused for three years on turning ERC into a much more disciplined underwriting team to sustain and grow this franchise for the long term. I am personally committed to this role and our long-term strategies going forward.
Our leaders and experts throughout the world serve our clients effectively with a broad array of talents developed in the insurance and reinsurance industry, in GE, and in other businesses. We share a common vision to expand and enhance our rigorous underwriting culture focused on strategic customers and products in place today along with new clients and innovative new products into the future.
Pressman added: Our challenge is that we must demonstrate consistent operating underwriting performance. While we expect to strengthen prior year reserves during 2002 primarily for 1997-2000, our new portfolio is performing well. Our combined ratio for our current property and casualty insurance and reinsurance portfolio through Sept. 30, 2002, is 98%.
I am confident that we are positioned to deliver improved accident year underwriting in 2003 and beyond.
Employers Reinsurance Corporation, a GE company headquartered in Overland Park, Kansas, USA, is the world's fourth-largest reinsure and a premier global provider of risk solutions. ERC serves clients in property and casualty reinsurance, life & health reinsurance, commercial insurance and other risk management services.
More information on ERC is available at www.ercgroup.com.
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CONTACT: Employers Reinsurance Corporation
Dean Davison, 913/676-5147
[email protected]
Jeff Wilson
GE Capital Corporate Finance
[email protected]
1-203-749-6340