Employers Reinsurance Corporation (ERC) has been downgraded by rating agency A.M. Best on concerns over the level of support the reinsurer can expect from parent General Electric. ERC and its international reinsurance companies have been downgraded from A+ (superior) to A (excellent), with a stable outlook. The ratings “no longer consider any benefit derived from ERC’s affiliation with GE”. A.M. Best points to the poor earnings performance of ERC in recent years, largely from more than US$5 billion in reserve strengthening. It also questions the position of ERC’s life reinsurance operations within the organization. “Over the past five years, ERC has experienced significant underwriting losses necessitating capital support from GE,” states an A.M. Best release. “However, despite over US$2.4 billion in capital infusions from GE over the past two years and significant utilization of third-party aggregate stop-loss reinsurance protection, the group’s overall risk-adjusted capitalization has deteriorated to a level that is no longer supportive of a superior rating.” Mitigating these negative factors are the stand-alone, risk-adjusted capitalization of ERC, and its prospects for long-term earnings from its diversified portfolio of business. Like most reinsurers, ERC has increased rates and tightened underwriting standards to take advantage of the global hard market. Responding to the downgrade, ERC chairman Ron Pressman says, “Despite recent industry-wide rating agency actions including ours today, we believe our business has never been stronger financially or strategically.” It refutes the notion that GE may be less apt to support the reinsurance business, but says it will work to improve its stand-alone rating.