Pennsylvania-based insurers’ ratings upgraded, outlook ‘stable’

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Eastern Alliance Insurance Group (EAIG) and its members had its ratings upgraded in recognition of its strong operating results and capitalization, as well as its conservative practices and financial flexibility, according to A.M. Best Co.

Bruce Eckert

“The upgrade in our A.M. Best Company financial strength rating is evident of our top performing workers’ compensation insurance operational and financial results and validates the successful execution of our strategic business plans, the foundations of which are based on strong relationships with our partner agents and their customers,” said Bruce Eckert, chief executive of Eastern Insurance Holdings, the holding company of EAIG and its members, in a statement. “I was particularly pleased with this achievement considering the challenging market conditions and economic uncertainties that face the insurance industry today.”

The ratings service upgraded the financial strength rating (FSR) to A (Excellent) from A- (Excellent) and issuer credit ratings (ICR) to “a” from “a-” for EAIG, which consists of Eastern Alliance Insurance Co. (EAIC), Allied Eastern Indemnity Co., Eastern Advantage Assurance Co. and Employers Security Insurance Co. With the exception of Employers Security, which is based in Indianapolis, all of the companies are based in Lancaster, Pa.

A.M. Best also upgraded the ICR to “bbb” from “bbb-” of the holding company, Eastern Insurance Holdings. The outlook for all ratings has been revised to “stable” from “positive.”

The ratings service said the cultivation of a loyal agency base within preferred territories has produced profitable growth, as evidenced by the group’s five-year average combined ratio, which outperforms the workers’ compensation composite by a wide margin.

The strong underwriting performance reflects management’s commitment to maintain sound pricing, a proactive return to work program and utilization of “compromise and release” agreements, the service said. This approach has allowed EAIG to close claims more quickly and at a lower average cost than the typical workers’ compensation writer, according to A.M. Best.

The service did note concern about EAIG’s product concentration as a monoline workers’ compensation writer, which potentially exposes it to increased risk of regulatory or legislative changes. In addition, adverse development isolated to EIHI’s run-off specialty reinsurance segment, Eastern Re Ltd. S.P.C., required a reallocation of capital within the organization in 2009 to strengthen the run-off operation.

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