Best Affirms Gen Re’s A++ Rating

August 27, 2008

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A++’ (Superior) and issuer credit ratings (ICR) of “aa+” of General Re Group and its members. The ratings apply to General Reinsurance Corporation (Delaware) and its core P/C and life reinsurance and insurance subsidiaries operating both in the United States and internationally.

Best has also affirmed the ICR and senior debt ratings of “aa+” and the commercial paper of AMB-1+ of Gen Re’s direct parent, General Re Corporation (headquartered in Connecticut). The outlook for all ratings is stable.

Best said: “These ratings reflect Gen Re’s superior capitalization, excellent business position as a leader within the global reinsurance marketplace and adherence to stringent underwriting discipline, which lends to the group’s strong prospective earnings capability.

“In addition, solid investment earnings continue to support excellent total return measures, while Gen Re maintains strong liquidity given the solid credit quality of its fixed income holdings. The group’s superior ratings also reflect the implicit and explicit financial support provided by its ultimate parent, Berkshire Hathaway Inc.,” Best noted.

Best analyzed Gen Re’s risk-adjusted capitalization as “improved considerably over the most recent five-year period, supported by sizeable reinsurance transactions with affiliates, National Indemnity Company and Columbia Insurance Company, both currently rated’ A++’ (Superior). These reinsurance transactions, which were effective on January 1, 2005, include a loss portfolio reinsurance contract and a quota share reinsurance contract,” which both “provided significant reinsurance protection to Gen Re.

“Additionally, strong total return measures bolstered by very strong underwriting results and solid investment income generation have supported the group’s ability to generate the accumulation of capital, as its consolidated GAAP equity approximated $12.5 billion at year-end 2007.”

However, Best noted that the “competitive pressures in the global property/casualty reinsurance market, which could potentially suppress Gen Re’s mid-to-long-term underwriting results and pressure its overall expense position,” should be considered as offsetting factors.”

Best added: “Furthermore, although Gen Re has considerably strengthened its overall loss reserve position, there has been some adverse development on prior accident year casualty reserves primarily attributed to workers’ compensation, and environmental claims.

“Given Gen Re’s stringent underwriting and improved reserving practices, the impact of prior year reserve development has moderated significantly, while recent accident year loss ratios are demonstrating favorable trends. Due to the aforementioned reinsurance transactions, Gen Re’s overall liability leverage is conservative, which reduces the impact of potential loss reserve development on its risk-adjusted capitalization.

“The affirmation of the ratings of General Re Life Corporation (General Re Life) (Stanford, CT) reflect a weak underwriting profit, which is due to poor results in long-term care and discontinued workers’ compensation carve out business. The ratings of General Re Life recognize the ongoing support provided by Gen Re, and therefore are afforded the group ratings status.

The FSR of ‘A++’ (Superior) and ICRs of “aa+” have been affirmed for General Re Group and its following core property/casualty and life reinsurance and insurance members:

General Re Life Corporation
Faraday Reinsurance Company Limited
General Reinsurance Corporation
General Star Indemnity Company
General Star National Insurance Company
Genesis Indemnity Insurance Company
Genesis Insurance Company
General Reinsurance UK Limited
Kölnische Rückversicherungs-Gesellschaft AG
General Reinsurance Australia Ltd
General Reinsurance Africa Ltd.
General Reinsurance Life UK Limited
General Reinsurance Life Australia Ltd.

The ICR of “aa+” has been affirmed for General Re Corporation.

The following debt ratings have been affirmed:

General Re Corporation—
— “aa+” on $150 million 9 percent senior unsecured debentures, due 2009
— AMB-1+ on commercial paper

The FSR of A- (Excellent) and ICR of “a-” have been affirmed for Idealife
Insurance Company.

Source: A.M. Best –

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