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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - APRIL 25, 2013 12:00 AM (EDT)
A.M. Best Co. has upgraded the financial strength ratings (FSR) to A (Excellent) from A- (Excellent) and issuer credit ratings (ICR) to “a” from “a-” of Employers Mutual Casualty Company (EMCC) and its six property/casualty subsidiaries (EMC Insurance Companies), which operate under an inter-company pooling agreement led by EMCC. A.M. Best also has upgraded the FSR to A (Excellent) from A- (Excellent) and the ICR to “a” from “a-” of EMCC’s separately rated indirectly owned subsidiary, EMC Reinsurance Company (EMC Re).
Concurrently, A.M. Best has upgraded the ICR to “bbb” from “bbb-” of EMC Insurance Group Inc. (EMCI) [NASDAQ: EMCI] (the immediate parent of EMC Re), a downstream holding company majority owned by EMCC. The outlook for all ratings has been revised to stable from positive. All of the above named companies are headquartered in Des Moines, IA. (See below for a detailed listing of companies.)
The upgrades for EMC Insurance Companies and EMC Re reflect their strong level of risk-adjusted capital, which is supported by generally positive levels of pre-tax operating and net income; consistently favorable development of prior years’ loss and loss adjustment expense reserves; favorable core underwriting results; and the benefits the companies will continue to derive from management’s actions over the past several years associated with pricing and risk selection, claims management and reserving methodology. These initiatives were designed to enable management to more effectively navigate the group’s business through varying market conditions and resulted in a substantially improved underwriting performance in 2012.
Partially offsetting these positive rating factors are EMC Insurance Companies and EMC Re’s exposure to catastrophe and weather-related events, which was evident in 2008 and 2011; above-average levels of common stock leverage; potential for a lower level of favorable development of prior years’ loss reserves in the future; and the continuing impact of challenging insurance market conditions, particularly on EMCC’s primary business. Further offsetting EMC Re’s ratings are its dependence on EMCC as a production source.
The ratings of EMCI reflect the capital strength of its property/casualty affiliates, the support of EMCC and the absence of financial leverage, with no public debt outstanding.
While A.M. Best believes the ratings are well positioned at the current levels, factors that may lead to negative rating actions include a trend of deteriorating underwriting and operating performance to a level below peers or an erosion of surplus to such an extent that it causes a significant decline in risk-adjusted capitalization.
The FSR has been upgraded to A (Excellent) from A- (Excellent) and ICRs have been upgraded to “a” from “a-” for Employers Mutual Casualty Company and its following property/casualty subsidiaries:
· Dakota Fire Insurance Company
· EMC Property and Casualty Company
· EMCASCO Insurance Company
· Hamilton Mutual Insurance Company
· Illinois EMCASCO Insurance Company
· Union Insurance Company of Providence
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.