Employers Reinsurance Downgraded

Standard & Poor’s lowered its counterparty credit and financial strength ratings on Employers Reinsurance Corp. and its wholly owned subsidiaries (collectively, ERC) to “AA+” from “AAA” based on ERC’s strong market position, very strong capitalization and liquidity, and improved financial leverage offset by deterioration in current operating results. S&P also downgraded its counterparty credit and senior debt ratings on GE Global Insurance Holding Corp. to “AA-“from “AA.” The outlook is stable.

Premium growth of approximately 10 to 15 percent is expected from domestic specialty nonlife operations, international operations, and U.S. life operations over the medium term. ERC’s net property/catastrophic risk retention decreased significantly post Sept 11 and is not expected to contribute to higher loss ratios prospectively. ROR’s are expected to rise to 9 percent in 2002, largely because of better underwriting results prompted by hardening rates, improved cash flows, and lower operational costs. Dividends, typically 35 percent on net income, are expected once capital adequacy levels are restored.