Fitch Revises GE Global Outlook to Negative

October 3, 2002

Fitch Ratings announced that it has changed its ‘A+’ long-term issuer and senior debt rating outlook on GE Global Ins. Holding Corp. to “Negative” from “Stable,” and its ‘AA+’ insurer financial strength rating on Employers Reinsurance Corp. (ERC), GE Global’s main operating subsidiary, to “Negative” from “Stable.”

Fitch said it was taking this action following an update from General Electric Co., ERC’s ultimate parent, that projected 2002 and 2003 operating results would fall below the rating agency’s expectations.

GE revised ERC’s year-end 2002 forecast downward from a breakeven result to a net loss of $350-$450 million, and indicated only a breakeven result in 2003. “Fitch believes that ERC’s 2002 and 2003 operating results lag peers, many of whom are benefiting from favorable reinsurance market conditions,” said the bulletin.

It detailed Q3 results as including $75 million in losses from European storms, $50 million in property damage from a fire in ERC’s Industrial Risk Insurance (IRI) segment and a $50 million charge from adverse prior year reserve development from accident year’s 1997-2000.

Fitch noted that “The third quarter 2002 results follow two and a half years of charges related to adverse development in prior years loss
reserves, primarily in the 1997 to 2000 period stemming from inadequate pricing in the property and casualty insurance and
reinsurance industry, and the tragic events of Sept. 11, 2001, and have weakened ERC’s stand-alone financial profile.”

Fitch said it would continue to monitor ERC’s results, and does expect to see some improvement, given the current increases in reinsurance premiums. It also noted the company’s essential financial strength, and the fact that it “maintains a leading position in U.S. reinsurance markets through its excellent competitive position and significant market share.”

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