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Rating Action:

MOODY'S REVIEWS SWISS RE'S RATINGS (Aa2 SENIOR DEBT) FOR POSSIBLE DOWNGRADE; REVIEWS GE INSURANCE SOLUTIONS Baa1 SENIOR DEBT RATING FOR POSSIBLE UPGRADE

18 Nov 2005
MOODY'S REVIEWS SWISS RE'S RATINGS (Aa2 SENIOR DEBT) FOR POSSIBLE DOWNGRADE; REVIEWS GE INSURANCE SOLUTIONS Baa1 SENIOR DEBT RATING FOR POSSIBLE UPGRADE

London, 18 November 2005 -- Moody's Investors Service announced today that it had placed the Aa2 insurance financial strength and senior debt ratings of Swiss Reinsurance Company as well as its' A1 subordinated debt rating on review for possible downgrade. In the same action, Moody's affirmed the A1 insurance financial strength ratings of Employers Reinsurance Corporation and changed the outlook to developing from stable. In addition, Moody's placed the Baa1 debt rating of GE Insurance Solutions Corporation (GE Insurance Solutions) on review for possible upgrade.

This decision follows the earlier announcement by Swiss Re that it had agreed with General Electric Company to acquire GE Insurance Solutions for US$6.8 billion.

Commenting on its decision, Moody's said it was primarily concerned about the execution risks associated with the transaction, particularly Swiss Re's ability to rapidly implement its underwriting and risk management policies at the acquired entity. In Moody's view, a speedy and successful integration would be one of the key factors affecting the financial strength of the combined group going forward, particularly bearing in mind the spotty track record of profitability at GE Insurance Solutions. Furthermore, it remains to be confirmed whether the target is reserved to the same standard as Swiss Re, despite the newly announced US$3.4 billion reserve strengthening.

On the positive side, Moody's notes that the transaction has a number of advantages for Swiss Re, including access to new clients and market segments where it was previously underrepresented, potential synergy benefits, and further risk diversification.

Moody's said that in the course of the review process it will examine the extent to which the capitalisation and profitability of the Group can be maintained. In particular, the review will focus on ascertaining the prospective underwriting and risk management strategy of the combined entity, reserving position of the target, and the effect of the final financing mix on the Group's financial leverage.

Moody's indicated that in the event the review process resulted in a downgrade of Swiss Re's rating, such downgrade would highly likely be limited to one notch.

According to Moody's, the review for possible upgrade of the Baa1 senior debt rating of GE Insurance Solutions will focus primarily on the level of implicit and explicit support to be provided by Swiss Re. Historically, the debt ratings of entities acquired by Swiss Re, such as Underwriters Re Group, Inc., have benefited from high levels of implicit support provided by Swiss Re. The current ratings of GE Insurance Solutions, both debt and insurance financial strength ratings of its subsidiaries, have benefited from the implicit ownership by GE and its history of financial support. Absent the ownership by GE, the ratings would have been lower.

The developing outlook on the insurance operating subsidiaries of GE Insurance Solutions reflects uncertainty in terms of the integration of the operations into Swiss Re and the level of implicit and/or explicit support to be provided. Moody's expects that the plans for the integration will unfold over time.

Moody's notes that GE Insurance Solutions' operating performance has been at a level well below that expected of a Aa-rated (re-)insurer. The company has experienced substantial adverse reserve development on business written during the soft market which heightens the risk that business written during the most favourable part of the market cycle may not be as profitable as anticipated. Resolution of the developing outlook will consider the level of support provided by Swiss Re and the group's prospective capitalization and reserve adequacy given that the group writes significant amounts of long tail business -- including workers' compensation, professional liability, excess casualty reinsurance, and financial lines.

In Moody's view, the sale of GE Insurance Solutions to Swiss Re does not have a material impact on the credit profiles of General Electric Company (Aaa senior unsecured, Prime-1 short-term), General Electric Capital Services ((P)Aa1 senior unsecured shelf, Prime-1 short-term), and General Electric Capital Corp. (Aaa senior unsecured, Prime-1 short-term), and their ratings are therefore unchanged.

The following ratings were placed on review for possible downgrade:

Swiss Reinsurance Company- insurance financial strength rating of Aa2, senior debt rating of Aa2, subordinated debt rating of A1;

European Reinsurance Company of Zurich- insurance financial strength rating of Aa2, guaranteed senior debt rating of Aa2, guaranteed subordinated debt rating of A1;

Swiss Re America Holding Corporation- guaranteed senior debt rating of Aa2, guaranteed subordinated debt rating of A1;

Swiss Reinsurance America Corporation- insurance financial strength rating of Aa2;

Swiss Reinsurance Life and Health America Inc.- insurance financial strength rating of Aa2;

Swiss Re Finance (Bermuda) Ltd- guaranteed senior debt rating of Aa2, guaranteed subordinated debt rating of A1;

Swiss Re Financial Products Corporation- guaranteed senior debt rating of Aa2, guaranteed subordinated debt rating of A1;

Swiss Re Germany- insurance financial strength rating of Aa2;

Swiss Re GB Plc- guaranteed senior debt rating of Aa2, guaranteed subordinated debt rating of A1;

Swiss Re Treasury (Luxembourg) S.A. - guaranteed senior debt rating of Aa2, guaranteed subordinated debt rating of A1;

Swiss Re Germany Holding AG- guaranteed senior debt rating of Aa2, guaranteed subordinated debt rating of A1;

Swiss Reinsurance Company UK Limited- insurance financial strength rating of Aa2;

SR International Business Insurance Co. Ltd- insurance financial strength rating of Aa3;

Underwriters Re Group, Inc- senior debt rating of A1.

In reference to the senior notes issued by Underwriters Re Group, Inc, Moody's said that Swiss Re America Holding Corporation (SRAH) assumed this debt effective 29 March 2001. SRAH is the parent of Swiss Reinsurance America Corporation, and is, in turn, owned by Swiss Reinsurance Company. Moody's noted that the rating reflects the strength of the operating subsidiaries that are owned by SRAH, as well as the implicit support of Swiss Re. There are, however, no explicit forms of support between Swiss Re (the ultimate parent) and the Underwriter Re Group's obligations assumed by SRAH.

The following rating was placed on review, direction uncertain:

Valley Forge Life Insurance Company- insurance financial strength rating of Aa3

The following rating was affirmed with a stable outlook:

Swiss Re Financial Products Corporation - P-1 short-term debt rating

European Reinsuance Company of Zurich - P-1 GTD Euro Debt Issuance PRGM

Swiss RE America Holding Corporation - P-1 GTD Euro Debt Issuance PRGM

The following rating was placed on review for possible upgrade:

GE Insurance Solutions Corporation -- senior unsecured debt at Baa1

The following ratings were affirmed and the outlook changed to developing from stable:

Employers Reinsurance Corporation - insurance financial strength at A1;

GE Frankona Reinsurance AG - insurance financial strength at A1;

GE Frankona Reinsurance A/S - insurance financial strength at A1;

GE Frankona Reassurance Ltd. - insurance financial strength at A1;

GE Reinsurance Corporation - insurance financial strength at A3.

Swiss Reinsurance Company is one of the world's leading reinsurers, based in Zurich, Switzerland. The company reported total net premiums earned of CHF 29.4bn for the year 2004 and total shareholders' equity of CHF 22.0bn as of 30 June 2005.

Kansas City based GE Insurance Solutions is wholly-owned by General Electric Capital Services (GECS), a diversified financial services holding company, which in turn is wholly-owned by General Electric Company (GE: senior debt rated Aaa). GE Insurance Solutions ranks among the top five professional reinsurance groups worldwide. For the six months ended June 30, 2005, GE Insurance Solutions reported total revenues of $4.7 billion and net income of $773 million. Total shareholders' equity as of June 30, 2005 was $10.1 billion.

London
Simon Harris
Managing Director
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

London
Timour Boudkeev
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

No Related Data.
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