October 4, 2002 by Canadian Underwriter
Rating agency Standard & Poors’ (S&P) has placed Employers Reinsurance Corp. under "negative credit watch", warning that the reinsurer’s current "A-plus" financial rating could fall by a full category.
The negative watch announcement by S&P follows a recent investment analyst meeting held by ERC through which management revealed that the company’s third quarter financial results are likely to be worse than expected. ERC expects to report a US$175 million loss for the third quarter of this year. The reinsurer attributes the financial decline to poor underwriting results from the late 1990s and losses stemming from European floods.
S&P has concerns with regard to adequacy of ERC’s current loss reserves, noting that on a global level the reinsurer seems unable to achieve underwriting profitability. S&P says it will examine ERC’s loss review studies and plans for capital replenishment, specifically the long-term commitment by ERC’s parent, General Electric.