A.M. Best Affirms Ratings of Employers Holdings, Inc. and Its Subsidiaries

Business Wire

OLDWICK, N.J.--(BUSINESS WIRE)--

A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and issuer credit ratings (ICR) of “a-” of Employers Insurance Company of Nevada, Employers Compensation Insurance Company (Glendale, CA), Employers Preferred Insurance Company and Employers Assurance Company (both domiciled in North Palm Beach, FL), collectively referred to as EMPLOYERS. Concurrently, A.M. Best has affirmed the ICR of “bbb-” of EMPLOYERS’ publicly-traded parent holding company, Employers Holdings Inc. (EHI) [NYSE: EIG]. The outlook for all ratings is negative. All companies are domiciled in Reno, NV, unless otherwise specified.

The affirmation of the ratings reflects EMPLOYERS’ supportive capitalization, historically strong operating performance—which is improving as market conditions improve—and management’s market expertise. The group also benefits from the financial flexibility afforded by EHI, which infused $40 million into the operating companies during the third quarter of 2013 in support of ongoing premium growth.

Partially offsetting these positive factors are EMPLOYERS’ ongoing strong premium growth in recent calendar years, which has somewhat strained its overall risk-adjusted capitalization and the emergence of modest adverse loss reserve development on recent accident years. While EMPLOYERS’ calendar year operating results outperform its workers’ compensation peers, recent accident year results are more in line with the peer group averages, although still slightly better than the peer group average. While the group’s premium growth remains strong in 2013, the level of growth slowed modestly when compared to its growth in 2011 and 2012. However, A.M. Best remains concerned that the ongoing strong premium growth under competitive market conditions could result in additional deterioration of EMPLOYERS’ recent accident year results over time. An additional offsetting rating factor is EMPLOYERS’ business concentration risk operating as a monoline workers’ compensation insurer with a relatively high concentration of premium volume in a select number of states.

Key factors that could trigger negative rating actions on EMPLOYERS’ ratings include a weakening of the group’s risk-adjusted capital position, premium growth in excess of projections, a deterioration in operating performance driven by weakened underwriting performance, and/or additional deterioration in the group’s reserving position due to recent strong premium growth.

Sustained improvement in the group’s underwriting and operating results, and stabilization of its risk-adjusted capital position and loss reserves for the more recent accident years, as well as moderation in the growth of net premiums written, could trigger positive rating actions.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

Contact:
A.M. Best Co.
Gordon McLean
Senior Financial Analyst
908-439-2200, ext. 5304
gordon.mclean@ambest.com
or
Jennifer Marshall
Assistant Vice President
908-439-2200, ext. 5327
jennifer.marshall@ambest.com
or
Rachelle Morrow
Senior Manager, Public Relations
908-439-2200, ext. 5378
rachelle.morrow@ambest.com
or
Jim Peavy
Assistant Vice President, Public Relations
908-439-2200, ext. 5644
james.peavy@ambest.com

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