CONTACTS:
FOR IMMEDIATE RELEASE
OLDWICK, N.J. - JULY 15, 2013 12:00 AM (EDT)
A.M. Best Co. has affirmed the financial strength rating of A (Excellent) and issuer credit ratings (ICR) of a of the property/casualty subsidiaries of Eastern Insurance Holdings, Inc. (EIHI) [NASDAQ: EIHI], which consist of Eastern Alliance Insurance Company, Allied Eastern Indemnity Company, Eastern Advantage Assurance Company and Employers Security Insurance Company (Indianapolis, IN) (collectedly referred to as Eastern Alliance Insurance Group [EAIG]). EAIG operates under an intercompany pooling agreement. Concurrently, A.M. Best has affirmed the ICR of bbb of EIHI. The outlook for all ratings is stable. All companies are domiciled in Lancaster, PA, unless otherwise specified.
The ratings recognize EAIGs strong underwriting and overall operating performance, excellent risk-adjusted capitalization, prudent reserving practices and the financial flexibility afforded it by its publicly traded, debt free parent, EIHI. The cultivation of a loyal agency base within preferred territories has produced profitable growth as evidenced by the groups five-year average combined and operating ratios, which outperformed the workers compensation composite by a significant margin. EAIGs strong underwriting performance reflects its commitment to maintain sound pricing, a proactive return to wellness program and utilization of compromise and release agreements. This approach has allowed EAIG to close claims more quickly and at a lower average cost than the typical workers compensation writer.
Partially offsetting these positive rating factors are EAIGs product concentration as a monoline workers compensation writer, which potentially exposes it to increased risk of regulatory or legislative changes, below-average investment ratio, as well as the execution risks associated with ongoing state expansion initiatives. Despite these concerns, the outlook acknowledges EAIGs prudent operating strategy, focused underwriting initiatives and aggressive claims management, which have contributed to strong earnings over the long term.
While A.M. Best believes the ratings for EAIG are appropriately positioned at their present level, future positive rating actions may result from its continued strong underwriting and operating performance. Factors that could lead to negative rating actions include a lack of underwriting discipline or unsatisfactory execution of ongoing diversification strategies leading to the groups underwriting and overall profitability underperforming its peers for a sustained period or should there be a material decline in its risk-adjusted capitalization.
The methodology used in determining these ratings is Bests Credit Rating Methodology, which provides a comprehensive explanation of A.M. Bests rating process and contains the different rating criteria employed in the rating process. Bests Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
A.M. Best Company is the worlds oldest and most authoritative insurance rating and information source.