A.M. Best Affirms Ratings of GE Global Insurance and Affiliates; Assigns Initial Debt Ratings.

Business Editors

A.M. Best Co. has affirmed the financial strength ratings of A++ (Superior) of Employers Reinsurance Corporation, Overland Park, Kansas, and its affiliated domestic and international non-life and life reinsurance companies, cumulatively comprising the GE Global Insurance Group (GE Global).

Concurrently, an initial "aa-" senior debt rating has been assigned to existing debt securities issued by the group's direct parent, GE Global Insurance Holding Corp. The revised rating outlook for all assigned ratings is negative.

The ratings continue to reflect the strategic benefit the group derives from being an indirect wholly owned subsidiary of the General Electric Company (NYSE: GE), its excellent stand-alone capitalization, leading global market position and prospective long-term earnings capability. In 2001, GE explicitly demonstrated its support for GE Global through a capital contribution and dividend moratorium, thus maintaining the group's excellent stand-alone capitalization following the events of September 11, 2001.

Augmenting its favorable stand-alone capital position is GE Global's well-diversified business platform and dominant position in the worldwide life and non-life reinsurance markets. The group ranks among the top four reinsurance organizations worldwide and is currently the second-largest provider of life reinsurance in the United States. With operations in six continents, GE Global provides product capabilities, capacity and an extensive corporate network that services large multinational risks. These strengths are supported by its direct and broker marketing capabilities, specialized underwriting expertise, well-established international franchise and strong market penetration of regional companies.

Partially offsetting these positive rating factors are concerns regarding GE's long-term commitment to GE Global due to the latter's protracted decline in operating performance, moderate degree of financial leverage and continued potential for adverse reserve development. Over the past five years, GE Global has experienced material erosion in its pre-tax and total operating returns. Inadequate pricing in its property/casualty books in 1998 to 2000 emerged as adverse loss reserve development in 2001 and in the first half of 2002, cumulatively totaling in excess of $1.0 billion. Further, there is potential for continued adverse reserve development stemming from the group's significant book of excess casualty business. While weak operating fundamentals in its property/casualty businesses have been tempered by a growing profit contribution from its life reinsurance operations, overall, the group's operating performance has fallen below historically superior levels. Moreover, as of December 2001, GE Global's financial leverage--debt as a percent of total adjusted capital--was somewhat high for its rating level at 21%, and its 2001 financial performance resulted in less favorable fixed charge coverage. However, A.M. Best expects the company will continue to manage the financial leverage to a range no greater than the low-to-mid 20% level in the medium term. Fixed charge coverage should normalize by 2003 in the mid-single-digit range as improved property/casualty earnings fall to the bottom line.

Accordingly, the negative rating outlook indicates that should GE Global fail to demonstrate a sustainable improvement in earnings, stability in its current capitalization and continued support of GE, it is likely current ratings will not be sustained.

Concurrent with these rating actions, A.M. Best has downgraded the financial strength ratings to A (Excellent) from A++ (Superior) of First Specialty Insurance Corporation, and Westport Insurance Corporation, both of Jefferson City, Missouri. These rating actions reflect the increased operating leverage at these companies to levels not commensurate with the group. As a result, these companies no longer qualify for a group rating.

For a complete list of debt and financial strength ratings for GE Global Insurance Group, please visit http://www.ambest.com/press/geglobal.pdf.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.