A.M. Best Affirms Ratings of Employers Reassurance Corporation and Union Fidelity Life Insurance Company

A.M. Best has affirmed the financial strength rating of A- (Excellent) and the issuer credit ratings of “a-” of Employers Reassurance Corporation (ERAC) and Union Fidelity Life Insurance Company (UFLIC) (both domiciled in Overland Park, KS) (collectively referred to as the ERAC Group). The outlook for all ratings is stable.

The ratings of the insurance members of the ERAC Group are based upon the consolidated financial results of the two companies. The group also maintains adequate risk-adjusted capitalization, strong liquidity and access to capital, which includes a capital maintenance agreement from its parent, General Electric Capital Corporation (GECC), whose ultimate parent is General Electric Company. On a combined basis, the ERAC Group reinsures mortality, long-term care, structured settlement annuities and other business lines.

Offsetting these positive rating factors is the ERAC Group’s continued weak performance in their long-term care book of business and run-off of all business lines. Operating results for the long-term care block have been impacted by the continued low interest rate environment and incurred claims experience, which has led to substantial reserve strengthening and net losses. Although 2013 net income was positive, historical trends have been unfavorable and required significant capital support from the parent.

A.M. Best believes that positive rating movement for the ERAC Group is currently unlikely. Factors that could result in negative rating actions include a significant decline in the ERAC Group’s risk-adjusted capitalization as measured by Best's Capital Adequacy Ratio (BCAR) model, diminished support from the parent and deterioration in the credit worthiness of GECC.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

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