OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings of “a-” of Employers Reassurance Corporation and Union Fidelity Life Insurance Company (both domiciled in Overland Park, KS) (collectively referred to as the ERAC Group). The outlook of these Credits Ratings (ratings) is stable.
The ratings of the ERAC Group are based on the consolidated financial results of the two companies. The group currently maintains adequate risk-adjusted capitalization and access to capital, which includes capital maintenance agreements and claim payment guarantee from its ultimate parent, General Electric Company (GE). GE has a history of providing a significant amount of capital contributions to support both companies’ financial strength positions and run-off operating profiles. On a combined basis, the ERAC Group reinsures mortality, long-term care, structured settlement annuities and other business lines. The ratings also give effect to the group’s ability to self-fund its Regulation XXX reserves.
Offsetting these positive rating factors is the ERAC Group’s continued weak operating performance. Earnings trends have been negatively affected by reserve strengthening associated with the long-term care and structured settlement businesses. Operating results for these blocks have been impacted by the continued low interest rate environment and adverse long-term care experience, which has led to net losses. Due to the earnings volatility and its impact on capital, GE has committed to maintaining risk-based capitalization at a defined minimum level through capital maintenance agreements, and for counterparties to Employers Reassurance Corporation’s reinsurance contracts, has guaranteed the payment of claims. The ERAC Group’s business profile also lacks earnings diversification, as all business lines are in run-off.
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