Best Affirms General Reinsurance Corp’s ‘A++’ Ratings; Outlook Stable

June 18, 2012

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A++’ (Superior) and issuer credit ratings (ICR) of “aa+” of General Reinsurance Corporation and its core property/casualty and life reinsurance/insurance subsidiaries operating in the United States and internationally – the General Re Group, or Gen Re.

Best has also affirmed the ICR of “aa+” and the commercial paper of AMB-1+ of General Re Corporation. The outlook for all ratings is stable, with the exception of the commercial paper, which does not have an outlook.

The ratings reflect Gen Re’s “consistently superior capitalization, strong operating performance and diversified operating platform, which includes both property/casualty and life reinsurance/insurance business segments with worldwide market profiles,” Best said. “These positive aspects are further reinforced by the support provided by its ultimate parent, Berkshire Hathaway Inc. and the reinsurance coverages provided by Berkshire affiliates, National Indemnity Company (NICO) and Columbia Insurance Company (CIC), both rated ‘A++’ (Superior).”

Best noted that the “Berkshire relationship provides Gen Re with enhanced financial flexibility and investment expertise, and the NICO and CIC reinsurance coverages, which were effective January 1, 2005, provide substantial reinsurance protection through both a loss portfolio transfer and quota share agreement for business written by their North American property/casualty companies.

“Gen Re maintains risk-based capitalization that is fully supportive of its ratings and risk appetite and is further enhanced by a consistently strong operating performance that is complemented by investment income from its well diversified investment portfolio managed by Berkshire. Gen Re also maintains an extensive risk management program that measures risk throughout its operations. The program includes formal risk management committees, a capital model and well documented corporate governance.

“Gen Re’s life operations primarily consist of individual life and accident and health reinsurance lines of business. The life operations continues to produce positive operating earnings due to strong underwriting, despite new business strain and losses from the run-off of the long-term care line of business. In addition, the investment portfolio has performed well and has obtained strong yields. The life operations are expected to remain an important source of income and diversification for Gen Re.”

Best indicated that “negative rating actions could occur if Gen Re’s operating performance and consequently its risk-adjusted capitalization falls consistently below expectations for a prolonged period or if capital erosion occurs due to investment volatility or increased risk appetite, which exceeds Best’s expectations.

The report summarized the companies and ratings affected by Best’s analysis as follows:
The FSR of ‘A++’ (Superior) and ICRs of “aa+” have been affirmed for General Reinsurance Corporation and its following core property/casualty and life reinsurance/insurance subsidiaries:
• Faraday Reinsurance Company Limited
• General Re Life Corporation
• General Reinsurance Australia Ltd
• General Reinsurance Life Australia Ltd.
• General Reinsurance AG
• General Reinsurance Africa Ltd
• General Star Indemnity Company
• Genesis Star National Insurance Company
• Genesis Insurance Company

The FSR of ‘A-‘ (Excellent) and ICR of “a-” have been affirmed for IdeaLife Insurance Company, a subsidiary of Berkshire Hathaway Inc.

The FSR of ‘B+’ (Good) and ICR of “bbb-” have been affirmed for Commercial Casualty Insurance Company, a subsidiary of Berkshire Hathaway Inc.

The FSR of ‘A’ (Excellent) and the ICR of “a” have been affirmed for Fairfield Insurance Company, a subsidiary of Berkshire Hathaway Inc.

Source: A.M. Best

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