Best Lowers Outlook for Employers Re Group, Westport, First Specialty to Negative

A.M. Best Co. announced that it has revised the rating outlook to negative from stable on the “A” (Excellent) financial strength ratings for Employers Reinsurance Corporation of Overland Park, Kan. and GE Reinsurance Corporation of Barrington, Ill., as well as Employers Re Corp. Group–First Specialty Insurance Corporation and Westport Insurance Corporation. Concurrently, Best assigned issuer credit ratings of “a” with a negative outlook to Employers Reinsurance Corporation and GE Reinsurance Corporation.

“The negative outlook has been precipitated by the projected decline in the companies’ risk-adjusted capitalization levels associated with estimated losses from Hurricanes Charley, Frances, Ivan and Jeanne,” said Best. “While the companies’ risk-adjusted capitalization remains within the excellent range following these recent events, their projected levels of capitalization are only marginally supportive of the current ratings and fall short of originally projected levels. It is management’s intention to completely restore the capital level of each company by year-end 2004. Notwithstanding, the ratings are exposed in the short term to the potential for further shock losses, adverse loss development or volatility stemming from their investment portfolios.”

Best also noted that “despite ownership by General Electric,” it believes the companies’ “financial flexibility remains constrained within these property/casualty (re)insurance subsidiaries. The negative outlook will remain in place until statutory risk-adjusted capital is restored to a level that enables each company to withstand stresses typical of its industry sector while continuing to maintain a reasonable cushion in capitalization supportive of the assigned ratings.”

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