Fitch Changes GE Global & Employers Re's Outlook to Negative.Business Editors CHICAGO--(BUSINESS WIRE)--Oct. 2, 2002 Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has changed the Rating Outlook on its 'A+' long-term issuer and senior debt rating on GE Global Insurance Holding Corporation (GE Global) to Negative from Stable. Fitch has also changed the Rating Outlook on its 'AA+' insurer financial strength (IFS) rating on Employers Reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. Corp. (ERC (database) ERC - An extended entity-relationship model. ), GE Global's main operating subsidiary An operating subsidiary is a business term frequently used within the United States railroad industry. In the case of a railroad, it refers to a company that is a subsidiary but operates with its own identity and rolling stock. , to Negative from Stable. Today's rating action follows General Electric Co.'s (GE), ERC's ultimate parent company, recent third quarter 2002 update announcing ERC's projected 2002 and 2003 operating results, which fell below Fitch's expectations. GE revised ERC's year-end 2002 forecast downward from a breakeven breakeven 1. The level of output or sales necessary to cover fixed expenses. Companies in industries that have high fixed costs and, consequently, high breakevens, such as automobile and steel manufacturing, are likely to exhibit large fluctuations result to a net loss of $350-$450 million. GE also said that it expects ERC to record breakeven results for year-end 2003. Fitch believes that ERC's 2002 and 2003 operating results lag peers, many of whom are benefiting from favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. reinsurance market conditions. ERC's third quarter after-tax results will include losses of approximately $175 million, including $75 million in losses from European storms, $50 million in property damage from a fire in ERC's Industrial Risk Insurance (IRI Iri (ē`rē`), former city, North Jeolla (Cholla) prov., SW South Korea. An agricultural center and transportation hub, it was absorbed into Iksan. ) segment and a $50 million charge from adverse prior year reserve development from accident year's 1997-2000. The third quarter 2002 results follow two and a half years of charges related to adverse development in prior years loss reserves, primarily in the 1997 to 2000 period stemming from inadequate pricing in the property and casualty insurance and reinsurance industry, and the tragic events of Sept. 11, 2001, and have weakened ERC's stand-alone financial profile. Fitch will monitor ERC's results over the intermediate term to look for signs that prior accident year losses have stabilized. Further, Fitch expects ERC to record improvements in underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. profitability commensurate com·men·su·rate adj. 1. Of the same size, extent, or duration as another. 2. Corresponding in size or degree; proportionate: a salary commensurate with my performance. 3. with the current pricing environment. These factors will be key considerations in Fitch's rating actions going forward. GE Global's strong senior debt and long-term issuer ratings incorporate its excellent competitive position in property/casualty reinsurance, a significant position in global life and health reinsurance, as well as strong niche positions in healthcare and specialty property/casualty lines. The IFS rating continues to be supported by ERC's strong capitalization and broad product line. Additionally, ERC maintains a leading position in U.S. reinsurance markets through its excellent competitive position and significant market share. NOTE: The noted ratings were initiated by Fitch as a service to users of Fitch ratings. The ratings are based primarily on public information. Entity/Issue/Type Rating/Outlook GE Global Insurance Holding Corporation --Long-term issuer 'A+'/Negative; --Senior debt 'A+'/Negative. Employers Reinsurance Corp. --Insurer financial strength 'AA+'/Negative. |
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