A.M. Best Assigns Employers Re Group Rating of A++.

Business Editors

OLDWICK, N.J.--(BUSINESS WIRE)--Jan. 27, 2000

A. M. Best Co. has assigned a group financial strength rating of A++ (Superior) to Employers Reinsurance Corp., Overland Park, Kan. and its core affiliated property/casualty and life insurance companies listed below.

This rating assignment reflects an affirmation of the A++ (Superior) rating on Employers Reinsurance Corp. in the United States and an extension of the A++ (Superior) rating to Employers Reassurance Corp., ERC Life Insurance Corp. and GE Reinsurance Corp. in the United States. In addition this rating also applies to the members of the ERC Frankona Group in Europe. These affiliates comprise the core operations of GE Global Insurance Holding Corp. (GE Global), Overland Park. A.M. Best considers these companies to be core subsidiaries for the group, as they are integral to its overall strategy and critical to its ongoing success and viability. In addition, these companies, which generate a large majority of its total business, are material contributors to GE Global's market profile, operating performance, and financial strength and are generally well established within their individual market segments.

The rating reflects the group's leading global market position, operational flexibility and superior financial strength, derived in part from its being an indirect subsidiary of General Electric Capital Services Inc. The rating also considers the group's historical operating performance, well-diversified business platform and dominant position in the worldwide reinsurance markets. GE Global also benefits from diversity in earnings and strong capitalization that is supported by conservative reserving, moderate leverage and a diversified asset base. Favorable levels of capitalization at the holding company and operating companies provide ample support for its business risks. A prudent risk management strategy and the strong financial flexibility of its ultimate parent further augment broad service capabilities.

The group ranks among the top four reinsurers worldwide and commands almost 10% of the U.S. reinsurance market. With operations on six continents, GE Global provides product capabilities, capacity, and a large corporate network that can service large multinational risks. In 1998 and 1999, the group significantly expanded its presence in the reinsurance market with several key acquisitions: GE Reinsurance Corp. (formerly known as Kemper Reinsurance Co.) and Eagle Star Reinsurance Co. Ltd., London, which have been integrated into the group's existing operations. In addition, the life reinsurance operations expanded its presence in the U.S. by acquiring the life and health reinsurance operations of Phoenix Home Mutual Life Insurance Co.

These acquisitions have positioned the group as one of the largest reinsurance broker markets in the world, and significantly enhanced its existing distribution channel in the worldwide reinsurance market, enabling it to respond to the growing risk management needs of a wider and more diverse customer base. These strengths are further supported by its direct marketing capabilities, specialized underwriting expertise, well-established international franchise and strong market penetration with regional companies. The 1998 acquisition of Industrial Risk Insurers and its alliance with Hartford Steam Boiler, both of which are leaders in the highly protected risk property market, as well as its 1998 acquisition of Medical Protective Corp., a specialized medical malpractice carrier, also augment the group's product capabilities. Lastly, the group benefits from its relatively low exposure to both mass tort and catastrophe losses as well as its prudent retrocession program, which is designed to afford earnings stability.

Partially offsetting these positive rating factors are the group's potential exposure to adverse reserve development stemming from its significant book of excess casualty business, as well as increased competitive pricing pressures on operating margins. While the group has exposure to high severity risks, corporately it manages such exposures through risk diversification, selective underwriting, aggressive claims management and through the purchase of retrocessional protection. Competitive pricing pressures across all property and casualty business segments and in particular within the reinsurance segment have curtailed the group's recent operating performance. While certain operations in the group have not achieved expected performance levels, A.M. Best has extended the group rating to these operating entities recognizing their prospective contribution to the overall group and GE Global's demonstrated commitment to these important market segments. A.M. Best believes that the group is very well positioned to take full advantage of new opportunities as a result of its enhanced distribution and worldwide service capabilities which is expected to augment its longer term operating performance.

The rating applies to the group's core property/casualty and life/health insurance and reinsurance members worldwide, represented by the fifteen companies as follows: Employers Reinsurance Corp., United States; First Specialty Insurance, Corp., United States; Westport Insurance Corp., United States; Employers Reassurance Corp., United States; ERC Life Reinsurance Corp., United States; ERC Frankona Ruckversicherungs-AG, Germany; ERC Frankona Reinsurance A/S, Copenhagen; Irish European Reinsurance Co., Dublin; Luxembourg European Reinsurance Co., Luxembourg; ERC Frankona Reinsurance Ltd., United Kingdom; ERC Frankona Reassurance Ltd., United Kingdom; and GE Reinsurance Corp., United States.

The A++ rating also applies to the group's reinsured affiliates: CORE Insurance Co., United States, and Vesta County Mutual Insurance Co., United States.

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.