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.
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), 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 stable. 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 practices. 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 EMPLOYERS’ 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 states. 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 expectations.