November 21, 2002 by Canadian Underwriter
GE is lowering its earnings expectations for the year after taking a US$1.4 billion charge to increase reserves at Employers Reinsurance Corp. (ERC). GE’s 2002 earnings target is not US$1.51 per share, versus earlier forecasts of US$1.65 per share, a year-on-year increase of 7%.
“Reinsurance is an industry that has had a difficult time over the past few years, and we’re disappointed in our results,” says GE chairman and CEO Jeff Immelt says. “We are committed to running ERC effectively for our investors. This includes restoring profitability and exploring strategic options.”
The move comes amidst rumors the operation would be sold, with prospective buyers including Berkshire Hathaway. This also follows on the heels of Moody’s downgrade of GE ERC to Aa2 from Aaa. At the time, Moody’s stated, “given GE’s focus on the strategic value and operating performance of each of its subsidiaries, the continued poor performance of Employers Re appears to be stressing the parent’s long-term commitment to the reinsurance business”. However, the rating also reflects “the group’s excellent position in the global reinsurance market, as one of the five largest reinsurers worldwide and its overall sound balance sheet fundamentals”.