Employers Direct Insurance Co. said Tuesday that it will stop writing new or renewal workers compensation policies in California as of August 1, and is cutting staff by 18 percent.

The Agoura Hills company, formed in 2003 to take advantage of a then scarcity of willing to do business in the state, cited escalating medical costs, intense price competition, and uncertainty over the sustainability of the 2003-2004 legislative reforms due to recent court decisions.

“The current rapidly changing environment is a reminder of the volatility that saw a catastrophic upheaval in the marketplace just a decade ago,” Chief Executive James Little said in a statement. “There will always be pressure to cut rates, even after five years of sharp reductions. If the market continues to react viscerally to this demand, even as costs increase and investment income plummets. We will be well on the way to another crisis.”

Little said in an interview that the company will start writing policies in California again when it determines it can be competitive with other insurers and still make a profit.

The company, which was acquired by New York’s Alleghany Corp. in 2007, is also licensed in Nevada, Arizona, Colorado, Idaho, Illinois, Oregon, and Utah, but only actively markets its policies in Nevada.

Following the announcement, industry rating agency A.M. Best Co. lowered Employers Direct’ financial strength rating from A- (excellent) to B++ (good), with the outlook downgraded from stable to negative. The company’s credit rating was lowered from “a-” to “bb+”, also with a negative outlook.