|[November 29, 2012]
A.M. Best Revises Outlook to Negative of Employers Holdings Inc. and Its Subsidiaries
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 (Reno, NV), Employers Compensation
Insurance Company (Glendale, CA (News - Alert)), Employers Preferred Insurance
Company and Employers Assurance Company (both domiciled in
Maitland, 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) (Reno, NV) [NYSE:
EIG]. The outlook for all ratings has been revised to negative from
The affirmation of the ratings reflects EMPLOYERS' supportive
capitalization, historically strong operating performance and
management's market expertise. The group also benefits from the
financial flexibility afforded by EHI, which infused $70 million during
the third quarter of 2012 into the operating companies in support of
ongoing premium growth. A.M. Best expects the group's underwriting
performance will remain in line with or modestly outperform the workers'
compensation composite for the more recent accident years given
management's disciplined underwriting philosophy and prudent reserving
Offsetting these positive rating factors and driving the revised outlook
are the significant premium growth in the most recent calendar years,
which has strained overall risk-adjusted capitalization and the
emergence of modest adverse loss reserve development occurring on recent
accident years. While EMPLOYRS' calendar year operating results
outperform its workers' compensation composite peers, recent accident
year results are more in line with the peer group averages. A.M. Best is
concerned that the strong growth under challenging market conditions
could result in deterioration of EMPLOYERS' 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
A.M. Best will continue to monitor the performance of EMPLOYERS'
expansion initiatives to ensure that premium growth and the accumulation
of loss reserves do not further strain its capitalization and that
overall operating results are achieved in accordance with A.M. Best's
Key factors that could trigger negative actions on the ratings of
EMPLOYERS' include strong premium growth in excess of projections, the
continued deterioration in its operating performance driven by weak
underwriting performance, particularly the new business written by the
companies in 2011 and 2012 and/or additional adverse reserve development
due to recent strong premium growth.
Positive rating actions could be taken on EMPLOYERS' ratings if its
underwriting results for the most recent accident years remain in line
with A.M. Best's expectations, and if accident year underwriting
operating results improve to historical levels and consistently
outperform other similarly rated workers' compensation rating units with
strongly supportive levels of risk-adjusted capitalization.
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. Key criteria utilized include:
"Understanding BCAR for Property/Casualty Insurers"; "Risk Management
and the Rating Process for Insurance Companies"; "Catastrophe Analysis
in A.M. Best Ratings"; "Insurance Holding Company and Debt Ratings";
"Equity Credit for Hybrid Securities"; "Rating Members of Insurance
Groups"; and "The Treatment of Terrorism Risk in the Rating Evaluation."
Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Founded in 1899, 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 © 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.
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