General Electric, Merrill Lynch, Clarica Insurance Downgraded

June 24, 2003
General Electric Capital Assurance Company, Merrill Lynch Life Insurance Company, and Clarica Life Insurance Company were among 54 companies downgraded by Weiss Ratings, Inc., in its recent review of 1,144 life and health insurers.

A total of 21 companies, including Healthy Alliance Life Insurance Company, CIGNA Worldwide Insurance Company, and American Community Mutual Insurance Company, received upgrades by Weiss Ratings, the nation's leading independent provider of ratings and analyses of financial services companies, mutual funds, and stocks.

General Electric Capital Assurance Company (Richmond, Va.) was downgraded to C+ (Fair) from B- (Good) due to a significant reduction in its risk-adjusted capital ratio since December 31, 2001. The company's risk-adjusted capital ratio fell to 0.83 at December 31, 2002 compared to a ratio of 1.02 at December 31, 2001, which means that the company has only 83 percent of the capital Weiss Ratings believes it needs given the risks in its business activities.

This decline was caused by a nine percent decline in the company's capital and surplus, from $2.6 billion at December 31, 2001 to $2.4 billion at year-end 2002, resulting from a $14.2 million decrease in net income, from a $4.8 million profit in 2001 to a $9.4 million loss in 2002. The company suffered a $75.3 million loss on the sale of its invested assets during 2002.

Merrill Lynch Life Insurance Company (Princeton, N.J.) was downgraded to C+ (Fair) from B (Good) due to a substantial decline in earnings. Net income fell $189.1 million, from a $48.1 million profit in 2001 to a $141 million loss in 2002. Premium revenue decreased $568.8 million, or 46.5 percent, from $1.2 billion in 2001 to $654.5 million in 2002. The revenue decline was primarily due to a $536 million drop in individual annuity premium. The decline in earnings considerably weakened the company's capital position, which dropped from $311.5 million at year-end 2001 to $136.8 million at December 31, 2002.

Clarica Life Insurance Company (Fargo, N.D.) was downgraded to C+ (Fair) from B- (Good) due to a significant decline in earnings over the last two years. Net income plummeted $42 million, from a $16.3 million profit in 2000 to a $25.7 million loss in 2002. Capital and surplus decreased by $19.5 million, from $141.8 million at December 31, 2001 to $122.3 million at the end of 2002. Likewise, return-on-equity dropped to a negative eight percent compared to 6.1 percent in 2000. This resulted in a decline in the company's risk-adjusted capital ratio, which fell to 1.17 compared to a ratio of 1.49 at year-end 2000.

21 Companies Receive Weiss Safety Rating Upgrades

Healthy Alliance Life Insurance Company (St. Louis, Mo.) was upgraded to B- (Good) from C+ (Fair) based on steadily improved performance since December 31, 2000. Net income increased by $16.3 million, from $16.9 million in 2000 to $33.2 million in 2002. During this same period, premiums surged by $397.2 million, from $592.5 million to $989.7 million. The two-year growth in revenue was driven by premium increases of $584 million in individual health products, while group health contributed $26 million in profits to the company's bottom line. The increase in profitability has enabled the company to enhance its capital position, with capital and surplus growing $33.9 million to $137.6 million as of December 31, 2002 compared to $103.7 million at year-end 2000. Additionally, total assets rose from $280 million at December 31, 2000 to $516.2 million at year-end 2002.

CIGNA Worldwide Insurance Company (Wilmington, Del.) was upgraded to C- (Fair) from D+ (Weak) due to continuous improvement in its capital position since year-end 2000. Net income rose from $0.4 million in 2000 to $14.4 million in 2002, with individual life and group health contributing profit increases of $7.3 million and $5.8 million, respectively. Capital and surplus increased by $21.3 million to $35.1 million at the end of 2002 compared to $13.8 million at December 31, 2000. Total assets rose from $239.2 million at December 31, 2000 to $313 million at year-end 2002. Consequently, the company's risk-adjusted capital ratio also increased, rising to 1.84 compared to a ratio of 0.76 at year-end 2000.

American Community Mutual Insurance Company (Livonia, Mich.) was upgraded to C- (Fair) from D (Weak) based on significantly improved performance since year-end 2000. Premium income jumped $106.2 million, from $145.6 million during 2000 to $251.8 million during 2002. Net income increased from a loss of $25.2 million during 2000 to a profit of $18.5 million during 2002. The two business lines primarily responsible for the turnaround were group health and individual health, which earned $24.6 million and $18.9 million, respectively. The increase in profitability has enabled the company to enhance its capital position, with capital and surplus growing $42.1 million to $64.1 million as of December 31, 2002 compared to $22 million at year-end 2000. As a result, the company's risk-adjusted capital ratio also increased, rising to 2.11 compared to a ratio of 1.06 at year-end 2000.

Weiss Ratings issues safety ratings on more than 15,000 financial institutions, including HMOs, life and health insurers, Blue Cross Blue Shield plans, property and casualty insurers, banks and brokers. Weiss also rates the risk-adjusted performance of more than 11,000 mutual funds and more than 9,000 stocks. Weiss Ratings is the only major rating agency that receives no compensation from the companies it rates. Revenues are derived strictly from sales of its products to consumers, businesses, and libraries.

Consumers needing more information on the financial safety of a specific company can purchase a rating and summary analysis for as little as $7.95 through the Weiss Ratings website at www.WeissRatings.com, or starting at $15 by calling 800-289-9222.

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