A.M. Best Affirms Ratings Of Eastern Insurance Holdings, Inc. And Its Subsidiaries

A.M. Best Co. has affirmed the financial strength rating (FSR) 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 EAIG’s strong operating results, excellent risk-adjusted capitalization, prudent reserving practices and the financial flexibility afforded 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 group’s five-year average combined and operating ratios, which outperformed the workers’ compensation composite by a significant margin. EAIG’s strong underwriting performance reflects its management’s 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 EAIG’s product concentration as a monoline workers’ compensation writer, which potentially exposes it to increased risk of regulatory or legislative changes, as well as the execution risk associated with continued expansion initiatives.

While A.M. Best believes EIHI and its operating companies’ are well positioned at their current ratings, factors that could lead to negative rating actions include soft market conditions or lack of execution in its ongoing diversification strategies leading to a deterioration in underwriting and operating results to a level below peers for a sustained period or should there be a decline in the group’s 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: “Rating Members of Insurance Groups”; “Risk Management and the Rating Process for Insurance Companies”; “Insurance Holding Company and Debt Ratings”; “Understanding BCAR for Property/Casualty Insurers”; and “The Treatment of Terrorism Risk in the Rating Evaluation.” Best’s Credit Rating Methodology can be found at 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.

Copyright Business Wire 2010

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