GE Global Rated ‘AA’

Fitch Ratings assigned its “AA” long-term issuer rating to GE Global Insurance Holdings Corp. (GE Global) and affirmed the “AAA” insurer financial strength rating of Employers Reinsurance Corp. (ERC), GE Global’s main operating subsidiary. The outlook is stable.

GE Global’s solid capitalization and support from its upstream parents, including General Electric Co. (GE), and diverse revenue streams influenced the ratings. GE Global maintains a leading position in the U.S. and global reinsurance markets through its main operating subsidiary ERC. GE Global has an excellent competitive position in property/casualty reinsurance, a significant position in global life and health reinsurance, and strong niche positions in healthcare and specialty property/casualty lines.

GE Global’s operating performance has been poor over the last three years reflecting weak pricing fundamentals in the global reinsurance markets and recognition of loss reserve deficiencies. The company’s $195 million net loss in 2001 was materially affected by the events of Sept. 11, 2001, for which GE Global estimated gross losses of approximately $3.3 billion and net losses of $575 million.

In addition, Fitch views GE Global’s fixed charge coverage over the last several years as weak. However, Fitch believes that GE Global utilizes a reasonable amount of financial leverage. The company’s debt-to-capital ratio has been steady in recent years at approximately 20 percent.

If recent media reports hinting of a spin off of GE’s property/casualty units are confirmed, Fitch would likely initially place the ratings of GE Global and ERC on Rating Watch Negative. Pending further evaluation, it is possible that Fitch would downgrade the insurer financial strength rating of Employers Re to below the current “AAA” level and GE Global to below the current “AA” level. However, Fitch would not expect the ratings to fall below the “AA” and “A” ratings range, respectively.

Topics Reinsurance Property Casualty