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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - JUNE 13, 2007 12:00 AM (EDT)
A.M. Best Co. has upgraded the financial strength rating to A- (Excellent) from B++ (Good) and the issuer credit rating to "a-" from "bbb" of Employers Reassurance Corporation (ERAC) (Mission, KS). The outlook for both ratings is stable.
These rating actions reflect ERAC's operating and financial strength profile given the long legacy of parental capital support, positive statutory earnings that A.M. Best expects to emerge over the intermediate term and the claims payment guaranty by Employers Reinsurance Corporation that remains in effect. The rating also gives effect to ERAC's implicit financial strength exhibited by its ability to self-fund a significant amount of Triple X reserves. Offsetting these items has been significant statutory losses and the absence of new business activities.
On each occasion in the past when statutory capital has been negatively affected by operating performance, General Electric (GE), ERAC's ultimate parent, has responded by replenishing it to a level necessary to meet regulatory capital standards, indicating a continuing commitment to the life, health and annuity business. Compared with recent reporting periods, A.M. Best is expecting improved operating results with the return to normal operating mode now that certain internal realignment processes have been completed. Operating earnings should be enhanced by reserve releases once internally funded Triple X liabilities reach their peak in 2009. The contractual support provided by the former parent guaranty represents an effective floor for ERAC's financial standing that will endure until expiration.
A.M. Best expects that further progress in optimizing portfolio value and possibly reducing the size of the closed book of business through transactions with outside parties will positively affect ERAC's performance, dissipating volatility experienced in recent years.
In addition, A.M. Best has affirmed the FSRs and ICRs of A- (Excellent ) and "a-" of Union Fidelity Life Insurance Company (UFLIC) (Schaumburg, IL) and Heritage Life Insurance Company (Phoenix, AZ). Both companies, which are in run off, are also ultimately owned by GE. As the remaining reserves, specifically at UFLIC, are significant, A.M. Best will continue to monitor the ongoing performance of these blocks and anticipates that GE will continue to capitalize these entities in compliance with regulatory standards.
For Best's Ratings, an overview of the rating process and rating methodologies, please visit Best's Rating Center.
Founded in 1899, A.M. Best Company is a full-service credit rating organization dedicated to serving the financial services industries, including the banking and insurance sectors.