A.M. Best Affirms Ratings of Eastern Alliance Insurance Group and Eastern Insurance Holdings, Inc.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating (FSR) of A- (Excellent) and the issuer credit rating (ICR) of "a-"of Eastern Alliance Insurance Group (EAIG) and its members. The rating reflects the combined results of Eastern Alliance Insurance Company (EAIC) and Allied Eastern Indemnity Company (AEIC), which operate under an intercompany pooling agreement. Concurrently, A.M. Best has affirmed the ICR of "bbb-" of the holding company, Eastern Insurance Holdings, Inc. (EHI) [NASDAQ: EIHI]. The outlook for all ratings is stable. All companies are domiciled in Lancaster, PA.

The ratings recognize EAIG's excellent capitalization, strong underwriting profitability and diversified organizational structure providing multiple revenue streams. EAIG provides managed care workers' compensation products and services to employers in rural and suburban Pennsylvania, Delaware and Maryland. The group benefits from strong relationships with its agency force and maintains a local market presence, enabling better service to its niche clients. The group's five-year average combined ratio remains well below the workers' compensation composite average as these strong results are driven by improved pricing, declining claim frequency and a continued focus on expense management. Additionally, the group has cultivated a loyal agency base operating in preferred territories, which has driven profitable growth. Lastly, financial leverage at the intermediate holding company, Eastern Holding Company Ltd. (EHC), is minimal and acceptable for the current rating level.

Partially offsetting these positive factors are the areas of adverse loss reserve development that occurred in earlier accident years, as well as the group's geographic and product concentration, which potentially exposes it to increased risk of regulatory or legislative changes. Despite these concerns, the rating outlook reflects the group's focused underwriting, aggressive claims closure rates and conservative reserving practices that have resulted in an improvement in overall capitalization.

For Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

Founded in 1899, A.M. Best Company is a full-service credit rating organization dedicated to serving the financial services industries, including the banking and insurance sectors. For more information, visit www.ambest.com.