GE's Employers Reinsurance Corp., rumored to be spun off by parent General Electric Co., in March said it would combine its Property and Casualty Re Americas and Europe/Asia operating units. Rick Smith was been named President & CEO of the new Global P&C Re business. With the new alignment, GE ERC now has three operating units: Global P&C Re, Global Life & Health and Commercial Insurance.The move could be a precursor to selling the operation through an initial public offering of stock. The Wall Street Journal reported that GE is considering a plan that would involve an IPO of 20% of the Employers Reinsurance Corp., unit later this year. An IPO could be expected to value the business at $8 billion to $10 billion.

"Since Employers Reinsurance was acquired in 1984, it has generated nearly a 22% return on investment. Today, however, the property and casualty market suffers from a challenging pricing environment, escalating claims costs, soft contract terms, the September 11 attack and a toughened investment environment," GE stated in its 2001 annual report.

Analysts believe that after the IPO was completed, GE would probably wait for a tax opinion before spinning off the remaining 80%.

Standard & Poor's Corp. did not change its AAA rating for Employers Reinsurance Corp.

"Currently, it is our understanding that GE is committed to its reinsurance franchise," said Standard & Poor's credit analyst Grace Osborne.

The potential spin off would affect other GE insurance companies as well. If the spin-off plans are confirmed, Standard & Poor's would also place its ratings on GE Reinsurance Corp. on CreditWatch negative. It is also likely that Standard & Poor's would place its ratings on GE Global Insurance Holding Corp. on CreditWatch negative until the terms of servicing and debt repayment could be determined.

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