Fitch Affirms Ratings of GE Financial Holdings; Changes Outlook to Negative.

Business Editors

CHICAGO--(BUSINESS WIRE)--July 31, 2003

Fitch Ratings has affirmed the 'A+' long-term issuer and senior debt ratings of General Electric Financial Assurance Holdings, Inc. (GEFA). Fitch has also affirmed the 'AA' insurer financial strength ratings of GEFA's primary life insurance subsidiaries. (See list below). The Rating Outlook for all ratings has been changed to Negative from Stable. At the same time Fitch has affirmed GEFA's 'F1' short-term issuer rating.

The Negative Outlook reflects Fitch's view that the risk-based capital of GEFA's U.S. life insurance subsidiaries is below expectations for the current rating on a stand-alone basis. GEFA's rating has benefited in the past from implied strong support from the parent, but recent restructuring within General Electric Co.'s (GE) insurance operations has increased uncertainty about General Electric's long-term commitment to the insurance operations overall. Insurance is one of 13 GE segments.

The consolidated risked based capital (RBC) of the life operations at 245% at year-end 2002 is well below Fitch's guidelines for the 'AA' IFS rating. In addition, capital and surplus at the lead life company, GE Capital Assurance, had declined approximately 11% at the end of the first quarter of 2003 compared to year-end 2001. The group has committed to strengthening capital in the U.S. life operations in 2003, and Fitch will monitor that progress.

Fitch anticipates that the life operations will need to be self-funding going forward and that competitive pressures and the current low interest rate environment will make the growth of statutory surplus more difficult. Profitability is expected to be pressured by GEFA's declining investment yields, which were at 5.2% at year-end 2002, down from 6.2% in the prior year.

GE Insurance recently announced the sale of GEFA's Japanese life insurance operations as well as the auto and home insurance segment to AIG for $2.5 billion. GEFA's remaining life businesses consist primarily of fixed annuities, GICs and funding agreements and long-term care, all of which are relatively capital-intensive and unlikely to generate the returns expected by GE. Fitch anticipates that return on equity for the group will remain at or below 10%.

Partially offsetting these negative factors are GEFA's moderate financial leverage and strong fixed charge coverage. In addition, Fitch recognizes the value of the GE brand name and GEFA's leadership position in several markets, including fixed annuity, stable value and long-term care, where it believes GE benefits from economies of scale. GEFA also has a strong, well capitalized mortgage insurance operation, General Electric Mortgage Insurance Corp. (GEMICO), which contributes 20% to 30% to the group's operating earnings. These actions do not affect the 'AAA' IFS ratings and Stable Outlook of GEMICO.

These ratings were initiated by Fitch as a service to users of Fitch ratings. The ratings are based primarily on publicly available information.

Entity/Issue/Type Action Rating/Outlook:

Fixed Income Ratings:

GE Financial Assurance Holdings, Inc.

-- Long-term issuer / Affirmed 'A+' / Negative;

-- Senior debt/ Affirmed 'A+'/ Negative;

-- Short term issuer / Affirmed 'F1'.

General Electric Capital Assurance Company

-- Insurer financial strength/ Affirmed 'AA' / Negative.

GE Life and Annuity Assurance Co.

-- Insurer financial strength/ Affirmed 'AA' / Negative.

General Electric Capital Life Assurance Company of New York 

-- Insurer financial strength/ Affirmed 'AA' / Negative.

First Colony Life Insurance Co.

-- Insurer financial strength/ Affirmed 'AA' / Negative.

Federal Home Life Insurance Co.

-- Insurer financial strength/ Affirmed 'AA' / Negative.

American Mayflower Life Insurance Company of New York

-- Insurer financial strength/ Affirmed 'AA' / Negative.