AM Best Affirms Credit Ratings of Employers Mutual Casualty Company and Subsidiaries

OLDWICK, N.J.--()--AM Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a+” of Employers Mutual Casualty Company (EMCC) and its five property/casualty (P/C) subsidiaries (collectively referred to as EMC Insurance Companies), which operate under an inter-company pooling agreement led by EMCC. In addition, AM Best has affirmed the FSR of A (Excellent) and the Long-Term ICR of “a” of EMCC’s separately rated, indirectly owned subsidiary, EMC Reinsurance Company (EMC Re). Furthermore, AM Best has affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” of EMC National Life Company (EMCNL). Concurrently, AM Best has affirmed the Long-Term ICR of “bbb+” of EMC Insurance Group Inc. (EMCI) [NAS:EMCI], a downstream holding company majority owned by EMCC. The outlook of these Credit Ratings (ratings) is stable. All of the EMC entities are domiciled in Des Moines, IA, except for Dakota Fire Insurance Company, which is domiciled in Bismarck, ND. (See below for a detailed listing of the companies.)

The ratings reflect EMC Insurance Companies’ balance sheet strength, which AM Best categorizes as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).

AM Best’s assessment of the group’s balance sheet strength as strongest is based on its strongest level risk-adjusted capitalization at the VaR 99.6% confidence level, strong reserves, consistently positive earnings and surplus growth. In May 2019, EMCC and EMCI announced that they reached an agreement for EMCC to acquire all of the remaining shares of EMCI that it currently doesn’t own, at the recommendation of a special committee formed by EMCI’s board, and subsequently approved by the board. If the transaction is approved ultimately by EMCI’s minority shareholders, it should have no impact on the operations of EMC Insurance Companies. The group also made a strategic decision in October 2018 to exit its personal lines business beginning in the first quarter of 2019 to focus more time and resources on its commercial, reinsurance and life business. AM Best’s view of the group’s balance sheet strength and business profile was not affected by these changes.

The ratings of EMC Re reflect its balance sheet strength, which AM Best categorizes as strongest, as well as its adequate operating performance, limited business profile and appropriate ERM. The ratings also consider the support the company receives from EMCC. Offsetting ratings factors are EMC Re’s exposure to natural catastrophe and weather–related events that impacted its operating performance negatively in two consecutive years.

The ratings of EMCNL reflect its balance sheet strength, which AM Best categorizes as very strong, as well as its marginal operating performance, neutral business profile and appropriate ERM. The ratings of EMCNL also reflect its strategic importance to its parent, EMCC, its diversified product profile of life, annuity and workplace products, strong risk-adjusted capitalization with explicit capital support from the parent, and positive but declining earnings for the past three years. Partially offsetting rating factors include challenges of building scale in its workplace business and having a moderately high percentage of interest-sensitive liabilities at minimum guaranteed crediting rates.

The FSR of A (Excellent) and the Long-Term ICRs of “a+” have been affirmed, with stable outlooks for EMCC and its following P/C subsidiaries. These companies are all part of an intercompany pooling agreement, whereby all premiums, losses and expenses are shared proportionally based on their stated pooling participation:

  • Dakota Fire Insurance Company
  • EMC Property & Casualty Company
  • EMCASCO Insurance Company
  • Illinois EMCASCO Insurance Company
  • Union Insurance Company of Providence

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global rating agency and information provider with a unique focus on the insurance industry. Visit www.ambest.com for more information.

Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Contacts

Jieqiu Fan
Senior Financial Analyst—P/C
+1 908 439 2200, ext. 5372
jieqiu.fan@ambest.com

Prafull Jhawar
Senior Financial Analyst—L/H
+1 908 439 2200, ext. 5214
prafull.jhawar@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com

Contacts

Jieqiu Fan
Senior Financial Analyst—P/C
+1 908 439 2200, ext. 5372
jieqiu.fan@ambest.com

Prafull Jhawar
Senior Financial Analyst—L/H
+1 908 439 2200, ext. 5214
prafull.jhawar@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com