A.M. Best has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings of “a” of Employers Mutual Casualty Company (EMCC) and its six property/casualty subsidiaries (collectively referred to as EMC Insurance Companies), which operate under an inter-company pooling agreement led by EMCC. In addition, A.M. Best has affirmed the FSR of A (Excellent) and the ICR of “a” of EMCC’s separately rated, indirectly owned subsidiary, EMC Reinsurance Company (EMC Re).
Concurrently, A.M. Best has affirmed the ICR of “bbb” of EMC Insurance Group Inc. (EMCI) [NASDAQ:EMCI], a downstream holding company majority owned by EMCC. The outlook for all ratings is stable. All of the above companies are headquartered in Des Moines, IA. (See below for a detailed listing of the companies.)
The ratings of 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 as well as the benefits these companies will continue to derive from management’s actions over the past several years, which are 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 have resulted in a substantially improved underwriting performance over the past two years.
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 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 continued challenging, albeit improving, market conditions in the group’s core markets. Further offsetting EMC Re’s ratings are its dependence on EMCC as a production source.
The ratings of EMCI recognize the capital strength of its property/casualty affiliates, the support of EMCC and the absence of financial leverage, with no outstanding debt.
While A.M. Best believes EMCC and its subsidiaries’ ratings are well positioned at the current level, factors that may lead to negative rating actions include a trend of deteriorating underwriting and operating performance to a level below peers and/or an erosion of surplus to such an extent that it causes a significant decline in risk-adjusted capitalization.
The FSR of A (Excellent) and ICRs of “a” have been affirmed 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. For more information, visit www.ambest.com.
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