A.M. Best Affirms Ratings of EMC Insurance Group Inc. and Its Property/Casualty Affiliates

OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best Co. has affirmed the financial strength rating (FSR) of A- (Excellent) and issuer credit rating of “a-” of EMC Insurance Companies (EMC) and its seven property/casualty insurance company affiliates, which operate under an inter-company pooling agreement led by Employers Mutual Casualty Company (EMCC) and EMC Reinsurance Company (EMC Re), a reinsurance company owned indirectly by EMCC.

Concurrently, A.M. Best has affirmed the ICR of “bbb-” of EMC Insurance Group Inc. (NASDAQ: EMCI), a downstream holding company majority owned by EMCC and the immediate parent of EMC Re. The outlook for all ratings is positive. All of the above named companies are headquartered in Des Moines, IA. (See below for a detailed listing of companies.)

The ratings of EMC and EMC Re reflect their strong level of risk-adjusted capital, which is supported by the consistent generation of pre-tax operating and net income; favorable development of prior years’ loss and loss adjustment expense reserves in recent years; generally favorable core underwriting results; and the benefits the companies will continue to derive from pricing, risk selection and claims actions taken in recent years.

Offsetting these positive rating factors is EMC and EMC Re‘s exposure to catastrophe and weather events that have produced variability in underwriting results in recent years; above-average levels of common stock leverage; potential for a lower level of favorable development of prior years’ loss reserves in the future; and the continuing impact of challenging insurance market conditions, particularly on EMC’s primary business. Further offsetting the EMC Re ratings is its dependence on EMCC as a production source.

The ratings of EMCI reflect the capital strength of its property/casualty insurance subsidiaries, the support of EMCC and the absence of financial leverage, with no public debt outstanding.

The FSR of A- (Excellent) and ICR of “a-” have been affirmed for EMC Insurance Companies and its following affiliates:

• Dakota Fire Insurance Company
• EMC Property and Casualty Company
• EMCASCO Insurance Company
• Employers Mutual Casualty Company
• Hamilton Mutual Insurance Company
• Illinois EMCASCO Insurance Company
• Union Insurance Company of Providence

The principal methodology used in determining these ratings is Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Rating Members of Insurance Groups”; “A.M. Best Ratings & the Treatment of Debt”; “Understanding BCAR for Property/Casualty Insurers”; “The Treatment of Terrorism Risk in the Rating Evaluation”; “Natural Catastrophe Stress Test Methodology”; “Catastrophe Risk Management Incorporated Within the Rating Analysis”; and “Catastrophe Analysis in A.M. Best Ratings.” Methodologies 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 © 2011 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.

A.M. Best Co.
Jennifer Marshall, CPCU, ARM, 908-439-2200, ext. 5327
Senior Financial Analyst
[email protected]
or
Michael J. Lagomarsino, CFA, 908-439-2200, ext. 5810
Assistant Vice President
[email protected]
or
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
[email protected]
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
[email protected]

Source: A.M. Best Company