A.M. Best has revised the outlooks to stable from negative and affirmed the Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a-” of Employers Insurance Company of Nevada, Employers Compensation Insurance Company, Employers Assurance Company and Employers Preferred Insurance Company, collectively referred to as the Employers Insurance Group (Employers). In addition, A.M. Best has revised the outlook to stable from negative and affirmed the Long-Term ICR of “bbb-” of Employers Holdings, Inc. (EHI) [NYSE:EIG], the publicly traded ultimate parent of the Employers. All companies are headquartered in Reno, NV.

The outlook revisions and Credit Ratings (ratings) reflect the consolidated group’s excellent risk-adjusted capitalization, improving operating earnings and significant market expertise operating as a workers’ compensation writer. The ratings also reflect the financial flexibility afforded by its publicly traded parent, EHI. Improved underwriting margins in recent years reflect the pricing flexibility afforded through the use of multiple writing companies, combined with ongoing underwriting initiatives focused on underperforming classes of business.

Partially offsetting these positive rating factors are the underwriting losses reported during 2011 and 2013. This weakened the group’s five year pre-tax operating return on revenue measures, which have trailed the industry composite over the past five-year period. In addition, Employers maintains business concentration risk operating as a mono-line workers’ compensation insurer, with a relatively high concentration of premium volume in a select number of states. While this concentration exposes results to the potential impact of regulatory, legislative and economic changes, this concern is partially mitigated by management’s market expertise.

While recent improvement in underwriting performance has benefited from Employers' multi-year strategy to non-renew poor performing business and increase pricing on underperforming business, challenges associated with softening market conditions, increased loss costs in some states, and the execution risk associated with entering new states remain a challenge over the near term.

While A.M. Best believes the ratings are properly positioned at the current level, positive rating actions could occur if underwriting and operating results improve and are sustained at a level in line with higher-rated peers. Alternatively, negative rating action on the members of Employers may occur if there is a reduction in risk-adjusted capitalization to a level that is not in line with A.M. Best’s expectation. In addition, the ratings could also be impacted by deterioration in operating performance driven by weakened underwriting performance or deterioration in the group’s reserving position.

This press release relates to Credit Ratings that have been published on A.M. 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 A.M. 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.

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