Best Affirms Ratings of GE Frankona Group

April 7, 2005

A.M. Best Co. announced that it has affirmed the financial strength ratings of “A” (Excellent) and the issuer credit ratings of “a” of the operating companies of Germany’s GE Frankona Group. All the ratings have been removed from under review with negative implications and assigned a stable outlook.

Best noted that the ratings were placed under review on February 7, 2005, in line with those of its parent company, Employers Reinsurance Corporation (ERC). They are based on explicit support in the form of claims guarantees to each subsidiary. “This financial support remains in place following the affirmation of the parent’s rating,” it continued. Best affirmed ERC’s “A” (Excellent) financial strength ratings last week (See IJ Website “National” April 1).

“GE Frankona’s ratings also factor the maintenance of excellent capitalization in all rated entities and excellent underwriting results with a consolidated combined ratio of 87.1 percent in 2004,” the announcement noted. Best said it “expects the combined ratio to deteriorate slightly by three percentage points to 90 percent in 2005 as the exceptionally low loss frequency experience in the previous year is unlikely to be sustained in 2005.”

The rating agency also indicated that “GE Frankona’s business profile in Europe remains excellent despite a 19 percent decline in gross premiums written to 2.9 billion euros ($4.0 billion) in 2004. This was mainly due to withdrawal from unprofitable businesses such as large global casualty risks, catastrophe exposed industrial risks, pharmaceutical and German proportional motor business. The run off of unprofitable business and a relatively stable renewal experience in Europe will lead to a marginal decline in gross premiums written.”

The financial strength ratings of “A” (Excellent) and the issuer credit ratings of “a” have been affirmed for the following companies of GE Frankona Group:
— GE Frankona Rueckversicherungs-AG
— GE Frankona Reinsurance A/S
— GE Frankona Reinsurance Limited
— GE Frankona Reassurance Limited
— GE ERC Strategic Reinsurance Limited
— Luxembourg European Reinsurance S.A.

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