A.M. Best Downgrades Credit Ratings of ERAC Group Members
The ratings reflect ERAC Group’s balance sheet strength, which
The adequate balance sheet assessment is reflective of ERAC Group’s continued fairly weak level of risk-adjusted capitalization, as well as significant future long-term care reserve increases, offset by the considerable implicit and explicit capital support provided under a capital maintenance agreement with General Electric Company (GE). ERAC Group’s marginal operating performance has been affected by historical weak earnings trends, as its long-term care (LTC) business continues to be unprofitable relative to original actuarial expectations, although a positive cash flow is expected with LTC price increases that should drive future earnings growth. The company’s business profile is limited due to the continued run-off nature of the business, along with the volatile nature that is associated with the majority LTC business on its books, and the high interest-sensitive reserves related to structured settlements. Overall ERM is appropriate, and is integrated into the
The rating downgrades and outlook revisions to negative reflect A.M. Best’s concerns that the financial strength and operating profile of
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and
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