Best Affirms EMC Group’s ‘A-‘ Ratings; Revises Outlook to Positive

A.M. Best Co. has revised the outlook to positive from stable and affirmed the financial strength ratings (FSR) of ‘A-‘ (Excellent) and issuer credit ratings (ICR) of “a-” of EMC Insurance Companies (EMC) and its seven P/C members, which operate under an intercompany pooling agreement led by Employers Mutual Casualty Company (EMCC) and EMC Reinsurance Company (EMC Re), a separately rated reinsurer indirectly owned by EMCC.

Best also revised the outlook to positive from stable and affirmed the ICR of “bbb-” of EMC Insurance Group Inc., a downstream holding company majority owned by EMCC and the immediate owner of EMC Re. All the above named companies are domiciled in Des Moines, IA.

Best explained that the revised outlook reflects “EMC management’s actions to strengthen claims handling, risk selection and pricing, which will produce improved underwriting and operating results while preserving the group’s historically strong balance sheet, even as soft market conditions persist. These improvements could result in rating upgrades should the group’s underwriting and operating performance continue to improve relative to its peers and the industry.”

Best said the ratings of EMC and EMC Re reflect their “excellent risk-adjusted capitalization, continued favorable core underwriting results (excluding extraordinary catastrophe and weather- related losses in 2008 and 2009) and the continued benefits derived from management actions to improve pricing and risk selection, claims management and reserving methodology.”

As offsetting factors Best cited the group’s “exposure to weather-related losses and above-average common stock leverage, which exposes surplus to increased levels of variability during periods of investment market instability. Further offsetting the ratings of EMC Re is its dependence on its affiliates for business.

“The affirmation of the ICR of EMC Insurance Group Inc. recognizes the strong capitalization of its property/casualty insurance subsidiaries, the support of EMCC and the absence of financial leverage with no public debt outstanding.”

Best summarized the ratings on the companies affected as follows:
The FSR of ‘A-‘ (Excellent) and ICRs of “a-” have been affirmed for EMC Insurance Companies and its following property/casualty members:
— Dakota Fire Insurance Company
— EMC Property & Casualty Company
— EMCASCO Insurance Company
— Employers Mutual Casualty Company
— Hamilton Mutual Insurance Company
— Illinois EMCASCO Insurance Company
— Union Insurance Company of Providence

Source: A.M. Best