S&P Lowers GE's P-C Insurance Outlook

S&P Lowers GE's P-C Insurance Outlook

NU Online News Service, June 2, 10:22 a.m. EDT?Standard & Poor's Rating Services has lowered its outlook on General Electric's property-casualty insurance units to "Negative" from "Stable," citing "uncertainty of continued investment" for its future growth by its parent company.

Currently, GE's p-c units have "Double-A-Minus" financial strength and counterparty credit ratings from S&P.

GE's p-c businesses--which are made up of GE Property & Casualty Insurance Co., GE Casualty Insurance Co., GE Auto & Home Assurance Co. and GE Indemnity Insurance Co.--are only a small part of GE Financial Assurance Holdings Inc. And these p-c units offer only a "modest contribution" to its parent company's total revenues and net income, S&P pointed out.

The relatively small role p-c businesses play for Richmond, Va.-based GE Financial is in contrast to its life-health insurance and mortgage operations, S&P said.

Kevin Ahern, director at S&P in New York, noted that life-health insurance units make up some 62 percent of GE Financial's pre-tax income, while mortgage operations offer some 35 percent of overall earnings. P-C units, on the other hand, contribute only around 3 percent to GE Financial's income.

S&P noted that GE's p-c units mostly offer auto coverage for customers with an average age of 60. The ratings firm cautioned that this "relatively narrow customer niche" exposes the insurer to competitive conditions in the marketplace.

Mr. Ahern added that while GE's p-c businesses have improved its earnings compared to its peer companies, "it is not a significant amount for GE Financial."

Still, on a stand-alone basis, "characteristics are good" for GE's p-c units, added Grace Osborne, an analyst at S&P. "It's earnings have been improving--its portfolios are diversifying," said Ms. Osborne, noting that these p-c units posted $522 million in net written premiums last year.

"The outlook revision is not a reflection on p-c operations. It's just a smaller contributor to the GE Financial group," Ms. Osborne said.