Employers Holdings, Inc. Reports Third Quarter 2018 Results
Business Wire 24-Oct-2018 4:45 PM
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Net income of $47.6 million ($1.43 per diluted share), adjusted net
income of $32.7 million ($0.98 per diluted share),
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Gross premiums written of $189.2 million, up 6% year-over-year,
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Net earned premiums of $192.9 million, up 3% year-over-year,
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Underwriting income of $22.7 million, up 66% year-over-year,
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Combined ratio of 88.2%, combined ratio before the impact of the LPT
of 89.6%.
Employers Holdings, Inc. ("EHI" or the "Company") (NYSE:EIG) today
reported the following for the third quarter of 2018: (i) net income of
$47.6 million ($1.43 per diluted share); (ii) net income before the
impact of the LPT of $45.0 million ($1.35 per diluted share); and (iii)
adjusted net income of $32.7 million ($0.98 per diluted share).
The Company's adjusted net income for the third quarter of 2018
increased $11.1 million year-over-year. This increase primarily
reflects: (i) strong underwriting results highlighted by a 62.8% current
accident year loss ratio (62.5% excluding involuntary business) and
$11.9 million of favorable prior year loss reserve development, and (ii)
a reduction in our effective income tax rate from 24.2% to 18.4%,
primarily reflecting the favorable impact of the December 2017 Tax Cuts
and Job Act.
The Company's net income and net income before the impact of the LPT for
the third quarter of 2018 increased by $25.7 million and $25.6 million,
respectively, year-over-year. These third quarter 2018 net income
measures were each favorably impacted by the items previously mentioned,
as well as $11.2 million of after tax unrealized investment gains
relating to the Company's equity investments. Prior to January 1, 2018,
the Company's unrealized gains and losses on equity securities were not
a component of its net income or net income before the impact of the LPT.
The Company's book value per share of $30.22, book value per share
including the Deferred Gain of $34.86 and adjusted book value per share
of $35.55 increased by 6.0%, 4.0%, and 17.4% during the first nine
months of 2018, respectively, each computed after taking into account
dividends declared. The Company's book value per share and book value
per share including the Deferred Gain at September 30, 2018 were each
adversely impacted by $55.9 million of year-to-date after tax unrealized
losses relating to the Company's fixed maturity investments caused by an
increase in market interest rates.
Chief Executive Officer Douglas Dirks commented on the results:
"EMPLOYERS has performed well throughout the first nine months of 2018.
We grew premiums by 5%, lowered our current accident year loss provision
versus that of a year ago and recognized favorable development on our
prior year loss reserves.
As a result of our nearly-completed buildout of our nationwide platform,
an enhanced sales force and greater leveraging of our partnerships and
alliances, we were able to increase our top line despite declining rates
in nearly all of the markets in which we do business. Loss costs and
frequency trends continue to be favorable, despite highly competitive
market conditions."
Summary of Third Quarter 2018 Operating Results(All
comparisons vs. third quarter 2017, unless noted otherwise).
Gross premiums written were $189.2 million, an increase of 6%. The
increase was due primarily to new business writings, partially offset by
rate declines on renewal business. Net earned premiums were $192.9
million, an increase of 3% year-over-year.
The loss and LAE ratio before the impact of the LPT of 56.6% decreased
6.9 percentage points reflecting observed favorable paid loss trends,
including those resulting from our key business initiatives including:
an emphasis on settling open claims; diversifying our risk exposure
across geographic markets; and leveraging data-driven strategies to
target, underwrite and price profitable classes of business across all
of our markets. Favorable prior year loss reserve development
contributed 6.0 percentage points of the decline.
The commission expense ratio of 12.9% increased 0.3 percentage points,
primarily as a result of an increase in the percentage of business
produced by our partnerships and alliances, which is subject to a higher
commission rate, as well as an increase in projected 2018 agency
incentive commissions.
The underwriting and other operating expense ratio of 20.0% increased
2.1 percentage points due largely to expenses associated with the
development and implementation of new technologies and capabilities.
Net investment income of $20.2 million increased 9%, primarily as a
result of higher pre-tax book yields.
Income tax expense was $10.7 million (an 18.4% effective rate) versus
$7.0 million (a 24.2% effective rate). The decrease in the effective
rate is due primarily to a reduction in the statutory Federal income tax
rate from 35% to 21% as a result of the 2017 Tax Cuts and Job Act.
Stockholders' Equity including the Deferred
Gain, Fourth Quarter 2018 Dividend Declaration
Stockholders' equity including the Deferred Gain was $1,143.3 million,
an increase of 2.9% from June 30, 2018 and 5.5% from September 30, 2017.
On October 24, 2018, the Board of Directors declared a fourth quarter
2018 dividend of $0.20 per share. The dividend is payable on November
21, 2018 to stockholders of record as of November 7, 2018.
Conference Call and Webcast, Reports Filed with
The Securities and Exchange Commission (the "SEC") and Supplemental
Materials
The information in this press release should be read in conjunction with
the Financial Supplement that is attached to this press release and is
available on our website.
Reconciliation of Non-GAAP Financial Measures to GAAP
Within this earnings release we present various financial measures, some
of which are a "non-GAAP financial measure" as defined in Regulation G
pursuant to Section 401 of the Sarbanes - Oxley Act of 2002. A
description of these non-GAAP financial measures, as well as a
reconciliation of such non-GAAP measures to the Company's most directly
comparable GAAP financial measures is included in the attached Financial
Supplement. Management believes that these non-GAAP measures are
meaningful to the Company's investors, analysts and other interested
parties who benefit from having an objective and consistent basis for
comparison with other companies within our industry. These non-GAAP
measures are not a substitute for GAAP measures and investors should be
careful when comparing the Company's non-GAAP financial measures to
similarly titled measures used by other companies. Other companies may
calculate these measures differently, and, therefore, these measures may
not be comparable.
The Company will host a conference call on Thursday, October 25, 2018,
at 8:30 a.m. Pacific Daylight Time. The conference call will be
available via a live web cast on the Company's web site at www.employers.com.
An archived version will be available several hours after the call.
The conference call replay number is (404) 537-3406 or (855) 859-2056
with a pass code of 9958939.
The Company provides its filings with the Securities and Exchange
Commission and its investor presentations on its website at www.employers.com.
Forward-Looking Statements
In this press release, the Company and its management discuss and make
statements based on currently available information regarding their
intentions, beliefs, current expectations, and projections of, among
other things, the Company's future performance, business growth,
retention rates, loss costs, claim trends and the impact of key business
initiatives, future technologies and planned investments. Certain of
these statements may constitute "forward-looking" statements as that
term is defined in the Private Securities Litigation Reform Act of 1995.
Forward-looking statements can be identified by the fact that they do
not relate strictly to historical or current facts and are often
identified by words such as "may," "will," "could," "would," "should,"
"expect," "plan," "anticipate," "target," "project," "intend,"
"believe," "estimate," "predict," "potential," "pro
forma," "seek," "likely," or "continue," or other comparable
terminology and their negatives. EHI and its management caution
investors that such forward-looking statements are not guarantees of
future performance. Risks and uncertainties are inherent in EHI's future
performance. Factors that could cause the Company's actual results to
differ materially from those indicated by such forward-looking
statements include, among other things, those discussed or identified
from time to time in EHI's public filings with the SEC, including the
risks detailed in the Company's Quarterly Reports on Form 10-Q and the
Company's Annual Reports on Form 10-K. Except as required by applicable
securities laws, the Company undertakes no obligation to publicly update
or revise any forward-looking statements, whether as a result of new
information, future events, or otherwise.
The SEC filings for EHI can be accessed through the "Investors" link on
the Company's website, www.employers.com,
or through the SEC's EDGAR Database at www.sec.gov
(EHI EDGAR CIK No. 0001379041).
Copyright © 2018 EMPLOYERS. All rights reserved. EMPLOYERS®
and America's small business insurance specialist. ®
are registered trademarks of Employers Insurance Company of Nevada.
Employers Holdings, Inc. is a holding company with subsidiaries that are
specialty providers of workers' compensation insurance and services
focused on select, small businesses engaged in low to medium hazard
industries. Insurance subsidiaries include Employers Insurance Company
of Nevada, Employers Compensation Insurance Company, Employers Preferred
Insurance Company, and Employers Assurance Company, all rated A-
(Excellent) by A.M. Best Company.
Additional information can be found at: http://www.employers.com.
Employers Holdings, Inc.Third Quarter 2018Financial
Supplement
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EMPLOYERS HOLDINGS, INC.
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Table of Contents
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Page
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1
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Consolidated Financial Highlights
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2
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Summary Consolidated Balance Sheets
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3
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Summary Consolidated Income Statements
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4
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Return on Equity
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5
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Combined Ratios
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6
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Roll-forward of Unpaid Losses and LAE
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7
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Consolidated Investment Portfolio
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8
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Book Value Per Share
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9
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Earnings Per Share
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10
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Non-GAAP Financial Measures
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EMPLOYERS HOLDINGS, INC.
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Consolidated Financial Highlights (unaudited)
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$ in millions, except per share amounts
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Three Months Ended
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Nine Months Ended
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September 30,
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September 30,
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2018
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2017
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% change
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2018
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2017
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% change
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Selected financial highlights:
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Gross premiums written
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$
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189.2
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$ 179.2
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6
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%
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$
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587.2
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$ 561.3
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5
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%
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Net premiums written
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187.3
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177.6
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5
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582.5
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556.8
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5
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Net premiums earned
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192.9
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187.9
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3
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547.5
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535.0
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2
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Net investment income
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20.2
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18.5
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9
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59.9
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55.4
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8
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Underwriting income(1)
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22.7
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13.7
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66
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66.6
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34.2
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95
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Net income before impact of the LPT(1)
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45.0
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19.4
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132
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103.7
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61.4
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69
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Adjusted net income(1)
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32.7
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21.6
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51
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93.4
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60.2
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55
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Net income
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47.6
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21.9
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117
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115.7
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69.9
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66
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Comprehensive income
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38.4
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22.2
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73
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59.8
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86.0
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(30
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Total assets
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3,898.5
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3,835.4
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2
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Stockholders' equity
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991.2
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917.1
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8
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Stockholders' equity including the Deferred Gain(2)
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1,143.3
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1,083.5
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6
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Adjusted stockholders' equity(2)
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1,165.8
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992.9
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17
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Annualized adjusted return on stockholders' equity(3)
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11.4
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%
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8.8
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%
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30
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%
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11.5
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%
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8.3
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%
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39
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%
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Amounts per share:
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Cash dividends declared per share
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$
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0.20
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$
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0.15
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33
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%
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$
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0.60
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$
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0.45
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33
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%
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Earnings per diluted share(4)
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1.43
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0.66
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117
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3.48
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2.12
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64
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Earnings per diluted share before impact of the LPT(4)
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1.35
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0.59
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129
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3.12
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1.86
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68
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Adjusted earnings per diluted share(4)
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0.98
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0.65
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51
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2.81
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1.82
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54
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Book value per share(2)
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30.22
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28.28
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7
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Book value per share including the Deferred Gain(2)
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34.86
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33.42
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4
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Adjusted book value per share(2)
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35.55
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30.62
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16
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Combined ratio before impact of the LPT:(5)
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Loss and loss adjustment expense ratio:
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Current year
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62.8
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%
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63.7
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%
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62.6
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%
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63.7
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%
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Prior year
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(6.2
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(0.2
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(7.5
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(0.1
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Loss and loss adjustment expense ratio
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56.6
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%
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63.5
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%
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55.1
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%
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63.6
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%
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Commission expense ratio
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12.9
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12.6
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13.4
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12.4
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Underwriting and other operating expenses ratio
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20.0
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17.9
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21.5
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19.1
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Combined ratio before impact of the LPT
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89.6
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%
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94.0
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%
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90.0
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%
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95.2
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%
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(1) See Page 3 for calculations and Page 10 for information
regarding our use of Non-GAAP Financial Measures.
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(2) See Page 8 for calculations and Page 10 for information
regarding our use of Non-GAAP Financial Measures.
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(3) See Page 4 for calculations and Page 10 for information
regarding our use of Non-GAAP Financial Measures.
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(4) See Page 9 for calculations and Page 10 for information
regarding our use of Non-GAAP Financial Measures.
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(5) See Page 5 for calculations and Page 10 for information
regarding our use of Non-GAAP Financial Measures.
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EMPLOYERS HOLDINGS, INC.
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Summary Consolidated Balance Sheets (unaudited)
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$ in millions, except per share amounts
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September 30,
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December 31,
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2018
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2017
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ASSETS
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Investments, cash and cash equivalents
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$
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2,795.6
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$
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2,752.0
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Accrued investment income
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19.0
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19.6
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Premiums receivable, net
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352.7
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326.7
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Reinsurance recoverable on paid and unpaid losses and LAE
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519.7
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544.2
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Deferred policy acquisition costs
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50.8
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45.8
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Deferred income taxes, net
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20.6
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28.7
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Contingent commission receivable—LPT Agreement
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32.0
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31.4
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Other assets
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108.1
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91.7
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Total assets
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$
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3,898.5
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$
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3,840.1
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LIABILITIES
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Unpaid losses and LAE
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$
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2,233.7
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$
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2,266.1
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Unearned premiums
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356.0
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318.3
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Commissions and premium taxes payable
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59.8
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55.3
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Deferred Gain
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152.1
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163.6
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Notes payable
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20.0
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20.0
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Other liabilities
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85.7
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69.1
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Total liabilities
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$
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2,907.3
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$
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2,892.4
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STOCKHOLDERS' EQUITY
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Common stock and additional paid-in capital
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$
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385.8
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$
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381.8
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Retained earnings(2)
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1,011.9
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842.2
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Accumulated other comprehensive (loss) income, net(2)
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(22.5
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)
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107.4
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Treasury stock, at cost
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(384.0
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(383.7
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)
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Total stockholders' equity
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991.2
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947.7
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Total liabilities and stockholders' equity
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$
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3,898.5
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$
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3,840.1
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Stockholders' equity including the Deferred Gain (1)
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$
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1,143.3
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$
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1,111.3
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Adjusted stockholders' equity (1)
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1,165.8
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1,003.9
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Book value per share (1)
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$
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30.22
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$
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29.07
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Book value per share including the Deferred Gain(1)
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34.86
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34.09
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Adjusted book value per share (1)
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35.55
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30.80
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(1)
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See Page 8 for calculations and Page 10 for information regarding
our use of Non-GAAP Financial Measures.
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(2)
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Adoption of a new accounting standard (ASU No. 2016-01) resulted in
a $74.0 million reclassification adjustment from Accumulated other
comprehensive income to Retained earnings as of January 1, 2018.
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EMPLOYERS HOLDINGS, INC.
|
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Summary Consolidated Income Statements (unaudited)
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$ in millions, except per share amounts
|
|
|
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|
|
|
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|
|
|
|
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Three Months Ended
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Nine Months Ended
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|
|
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September 30,
|
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September 30,
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Underwriting revenues:
|
|
|
|
|
|
|
|
|
|
Gross premiums written
|
|
$
|
189.2
|
|
|
$
|
179.2
|
|
|
$
|
587.2
|
|
|
$
|
561.3
|
|
|
Premiums ceded
|
|
|
(1.9
|
)
|
|
|
(1.6
|
)
|
|
|
(4.7
|
)
|
|
|
(4.5
|
)
|
|
Net premiums written
|
|
|
187.3
|
|
|
|
177.6
|
|
|
|
582.5
|
|
|
|
556.8
|
|
|
Net premiums earned
|
|
|
192.9
|
|
|
|
187.9
|
|
|
|
547.5
|
|
|
|
535.0
|
|
|
Underwriting expenses:
|
|
|
|
|
|
|
|
|
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Losses and LAE incurred
|
|
|
(106.6
|
)
|
|
|
(116.9
|
)
|
|
|
(289.7
|
)
|
|
|
(332.0
|
)
|
|
Commission expense
|
|
|
(24.8
|
)
|
|
|
(23.7
|
)
|
|
|
(73.1
|
)
|
|
|
(66.7
|
)
|
|
Underwriting and other operating expenses
|
|
|
(38.8
|
)
|
|
|
(33.6
|
)
|
|
|
(118.1
|
)
|
|
|
(102.1
|
)
|
|
Underwriting income
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|
22.7
|
|
|
|
13.7
|
|
|
|
66.6
|
|
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34.2
|
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Net investment income
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|
20.2
|
|
|
|
18.5
|
|
|
|
59.9
|
|
|
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55.4
|
|
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Net realized and unrealized gains on investments(1)
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|
15.6
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|
|
|
4.1
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|
|
|
13.2
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7.4
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Gain on redemption of notes payable
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—
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|
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—
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—
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2.1
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Other income
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|
0.2
|
|
|
|
0.4
|
|
|
|
0.4
|
|
|
|
0.5
|
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Interest and financing expenses
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|
(0.4
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)
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(0.3
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)
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(1.1
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)
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|
|
(1.1
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)
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Other expenses
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|
—
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|
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|
(7.5
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)
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|
|
—
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|
|
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(7.5
|
)
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Income tax expense
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|
|
(10.7
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)
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|
|
(7.0
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)
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|
|
(23.3
|
)
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|
|
(21.1
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)
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Net income
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|
47.6
|
|
|
|
21.9
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|
|
|
115.7
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|
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69.9
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Unrealized AFS investment (losses) gains arising during the period,
net of tax(2)
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(9.2
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)
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3.0
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(56.3
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)
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20.9
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Reclassification adjustment for realized AFS investment losses
(gains) in net income, net of tax(2)
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—
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(2.7
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)
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0.4
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(4.8
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)
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Comprehensive income
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$
|
38.4
|
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$
|
22.2
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$
|
59.8
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$
|
86.0
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Net Income
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$
|
47.6
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$
|
21.9
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$
|
115.7
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$
|
69.9
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Amortization of the Deferred Gain - losses
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(2.1
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)
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|
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(2.1
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)
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(7.8
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)
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|
|
(7.0
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)
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Amortization of the Deferred Gain - contingent commission
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|
(0.5
|
)
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(0.4
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)
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(1.5
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)
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(1.5
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)
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LPT reserve adjustment
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—
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—
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(2.2
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)
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|
—
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LPT contingent commission adjustments
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|
—
|
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|
—
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(0.5
|
)
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—
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Net income before impact of the LPT Agreement (3)
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45.0
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19.4
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103.7
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61.4
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Net realized and unrealized gains on investments
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|
(15.6
|
)
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|
|
(4.1
|
)
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|
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(13.2
|
)
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|
(7.4
|
)
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Gain on redemption of notes payable
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|
—
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|
|
—
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|
|
—
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(2.1
|
)
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Write-off of previously capitalized costs
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|
—
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7.5
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—
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7.5
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Amortization of intangibles
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|
—
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—
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0.1
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|
0.2
|
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Income tax expense (benefit) related to items excluded from Net
income
|
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|
3.3
|
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|
(1.2
|
)
|
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|
2.8
|
|
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0.6
|
|
|
Adjusted net income (3)
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|
$
|
32.7
|
|
|
$
|
21.6
|
|
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$
|
93.4
|
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|
$
|
60.2
|
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|
(1)
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Includes $11.2 million and $1.8 million of unrealized gains on
equity securities for the three and nine months ended September 30,
2018, respectively.
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(2)
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AFS = Available for Sale securities.
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(3)
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See Page 10 regarding our use of Non-GAAP Financial Measures.
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Return on Equity (unaudited)
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$ in millions, except per share amounts
|
|
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Three Months Ended
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|
Nine Months Ended
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|
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September 30,
|
|
September 30,
|
|
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
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Net income
|
|
A
|
|
$
|
47.6
|
|
|
$
|
21.9
|
|
|
$
|
115.7
|
|
|
$
|
69.9
|
|
|
Impact of the LPT Agreement
|
|
|
|
|
(2.6
|
)
|
|
|
(2.5
|
)
|
|
|
(12.0
|
)
|
|
|
(8.5
|
)
|
|
Net realized and unrealized gains on investments
|
|
|
|
|
(15.6
|
)
|
|
|
(4.1
|
)
|
|
|
(13.2
|
)
|
|
|
(7.4
|
)
|
|
Gain on redemption of notes payable
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
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|
|
|
(2.1
|
)
|
|
Write-off of previously capitalized costs
|
|
|
|
|
—
|
|
|
|
7.5
|
|
|
|
—
|
|
|
|
7.5
|
|
|
Amortization of intangibles
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.1
|
|
|
|
0.2
|
|
|
Income tax expense (benefit) related to items excluded from Net
income
|
|
|
|
|
3.3
|
|
|
|
(1.2
|
)
|
|
|
2.8
|
|
|
|
0.6
|
|
|
Adjusted net income (1)
|
|
B
|
|
|
32.7
|
|
|
|
21.6
|
|
|
|
93.4
|
|
|
|
60.2
|
|
|
|
|
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|
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|
Stockholders' equity - end of period
|
|
|
|
$
|
991.2
|
|
|
$
|
917.1
|
|
|
$
|
991.2
|
|
|
$
|
917.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity - beginning of period
|
|
|
|
|
956.5
|
|
|
|
899.2
|
|
|
|
947.7
|
|
|
|
840.6
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Average stockholders' equity
|
|
C
|
|
|
973.9
|
|
|
|
908.2
|
|
|
|
969.5
|
|
|
|
878.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity - end of period
|
|
|
|
$
|
991.2
|
|
|
$
|
917.1
|
|
|
$
|
991.2
|
|
|
$
|
917.1
|
|
|
Deferred Gain - end of period
|
|
|
|
|
152.1
|
|
|
|
166.4
|
|
|
|
152.1
|
|
|
|
166.4
|
|
|
Accumulated other comprehensive loss (income) - end of period
|
|
|
|
|
28.4
|
|
|
|
(139.4
|
)
|
|
|
28.4
|
|
|
|
(139.4
|
)
|
|
Income taxes related to accumulated other comprehensive gains and
losses - end of period
|
|
|
|
|
(5.9
|
)
|
|
|
48.8
|
|
|
|
(5.9
|
)
|
|
|
48.8
|
|
|
Adjusted stockholders' equity - end of period
|
|
|
|
|
1,165.8
|
|
|
|
992.9
|
|
|
|
1,165.8
|
|
|
|
992.9
|
|
|
Adjusted stockholders' equity - beginning of period
|
|
|
|
|
1,124.5
|
|
|
|
977.8
|
|
|
|
1,003.9
|
|
|
|
941.0
|
|
|
Average adjusted stockholders' equity (1)
|
|
D
|
|
|
1,145.2
|
|
|
|
985.4
|
|
|
|
1,084.9
|
|
|
|
967.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on stockholders' equity
|
|
A / C
|
|
|
4.9
|
%
|
|
|
2.4
|
%
|
|
|
11.9
|
%
|
|
|
8.0
|
%
|
|
Annualized return on stockholders' equity
|
|
|
|
|
19.6
|
|
|
|
9.6
|
|
|
|
15.9
|
|
|
|
10.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted return on stockholders' equity (1)
|
|
B / D
|
|
|
2.9
|
%
|
|
|
2.2
|
%
|
|
|
8.6
|
%
|
|
|
6.2
|
%
|
|
Annualized adjusted return on stockholders' equity (1)
|
|
|
|
|
11.4
|
|
|
|
8.8
|
|
|
|
11.5
|
|
|
|
8.3
|
|
|
(1) See Page 10 for information regarding our use of Non-GAAP
Financial Measures.
|
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|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
EMPLOYERS HOLDINGS, INC.
|
|
Combined Ratios (unaudited)
|
|
$ in millions, except per share amounts
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
|
|
September 30,
|
|
September 30,
|
|
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Net premiums earned
|
|
A
|
|
$
|
192.9
|
|
|
$
|
187.9
|
|
|
$
|
547.5
|
|
|
$
|
535.0
|
|
|
Losses and LAE incurred
|
|
B
|
|
|
106.6
|
|
|
|
116.9
|
|
|
|
289.7
|
|
|
|
332.0
|
|
|
Amortization of the Deferred Gain - losses
|
|
|
|
|
2.1
|
|
|
|
2.1
|
|
|
|
7.8
|
|
|
|
7.0
|
|
|
Amortization of the Deferred Gain - contingent commission
|
|
|
|
|
0.5
|
|
|
|
0.4
|
|
|
|
1.5
|
|
|
|
1.5
|
|
|
LPT reserve adjustment
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2.2
|
|
|
|
—
|
|
|
LPT contingent commission adjustments
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.5
|
|
|
|
—
|
|
|
Losses and LAE before impact of the LPT (1)
|
|
C
|
|
|
109.2
|
|
|
|
119.4
|
|
|
|
301.7
|
|
|
|
340.5
|
|
|
Prior accident year favorable loss reserve development
|
|
|
|
|
(11.9
|
)
|
|
|
(0.2
|
)
|
|
|
(40.8
|
)
|
|
|
(0.5
|
)
|
|
Losses and LAE before impact of the LPT - current accident year
|
|
D
|
|
$
|
121.1
|
|
|
$
|
119.6
|
|
|
$
|
342.5
|
|
|
$
|
341.0
|
|
|
Commission expense
|
|
E
|
|
$
|
24.8
|
|
|
$
|
23.7
|
|
|
$
|
73.1
|
|
|
$
|
66.7
|
|
|
Underwriting and other operating expenses
|
|
F
|
|
|
38.8
|
|
|
|
33.6
|
|
|
|
118.1
|
|
|
|
102.1
|
|
|
Combined ratio:
|
|
|
|
|
|
|
|
|
|
|
|
Loss and LAE ratio
|
|
B/A
|
|
|
55.3
|
%
|
|
|
62.2
|
%
|
|
|
52.9
|
%
|
|
|
62.1
|
%
|
|
Commission expense ratio
|
|
E/A
|
|
|
12.9
|
|
|
|
12.6
|
|
|
|
13.4
|
|
|
|
12.4
|
|
|
Underwriting and other operating expenses ratio
|
|
F/A
|
|
|
20.0
|
|
|
|
17.9
|
|
|
|
21.5
|
|
|
|
19.1
|
|
|
Combined ratio
|
|
|
|
|
88.2
|
%
|
|
|
92.7
|
%
|
|
|
87.8
|
%
|
|
|
93.6
|
%
|
|
Combined ratio before impact of the LPT: (1)
|
|
|
|
|
|
|
|
|
|
|
|
Loss and LAE ratio before impact of the LPT
|
|
C/A
|
|
|
56.6
|
%
|
|
|
63.5
|
%
|
|
|
55.1
|
%
|
|
|
63.6
|
%
|
|
Commission expense ratio
|
|
E/A
|
|
|
12.9
|
|
|
|
12.6
|
|
|
|
13.4
|
|
|
|
12.4
|
|
|
Underwriting and other operating expenses ratio
|
|
F/A
|
|
|
20.0
|
|
|
|
17.9
|
|
|
|
21.5
|
|
|
|
19.1
|
|
|
Combined ratio before impact of the LPT
|
|
|
|
|
89.6
|
%
|
|
|
94.0
|
%
|
|
|
90.0
|
%
|
|
|
95.2
|
%
|
|
Combined ratio before impact of the LPT: current accident year (1)
|
|
|
|
|
|
|
|
|
|
|
|
Loss and LAE ratio before impact of the LPT
|
|
D/A
|
|
|
62.8
|
%
|
|
|
63.7
|
%
|
|
|
62.6
|
%
|
|
|
63.7
|
%
|
|
Commission expense ratio
|
|
E/A
|
|
|
12.9
|
|
|
|
12.6
|
|
|
|
13.4
|
|
|
|
12.4
|
|
|
Underwriting and other operating expenses ratio
|
|
F/A
|
|
|
20.0
|
|
|
|
17.9
|
|
|
|
21.5
|
|
|
|
19.1
|
|
|
Combined ratio before impact of the LPT: current accident year
|
|
|
|
|
95.7
|
%
|
|
|
94.1
|
%
|
|
|
97.5
|
%
|
|
|
95.3
|
%
|
|
(1) See Page 10 for information regarding our use of Non-GAAP
Financial Measures.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EMPLOYERS HOLDINGS, INC.
|
|
Roll-forward of Unpaid Losses and LAE (unaudited)
|
|
$ in millions
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
September 30,
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Unpaid losses and LAE at beginning of period
|
|
$
|
2,227.9
|
|
|
$
|
2,284.9
|
|
|
$
|
2,266.1
|
|
|
$
|
2,301.0
|
|
|
Reinsurance recoverable on unpaid losses and LAE
|
|
|
512.5
|
|
|
|
559.8
|
|
|
|
537.0
|
|
|
|
580.0
|
|
|
Net unpaid losses and LAE at beginning of period
|
|
|
1,715.4
|
|
|
|
1,725.1
|
|
|
|
1,729.1
|
|
|
|
1,721.0
|
|
|
Losses and LAE incurred:
|
|
|
|
|
|
|
|
|
|
Current year losses
|
|
|
121.1
|
|
|
|
119.7
|
|
|
|
342.5
|
|
|
|
341.0
|
|
|
Prior year losses on voluntary business
|
|
|
(12.0
|
)
|
|
|
—
|
|
|
|
(40.5
|
)
|
|
|
—
|
|
|
Prior year losses on involuntary business
|
|
|
0.1
|
|
|
|
(0.2
|
)
|
|
|
(0.3
|
)
|
|
|
(0.5
|
)
|
|
Total losses incurred
|
|
|
109.2
|
|
|
|
119.5
|
|
|
|
301.7
|
|
|
|
340.5
|
|
|
Losses and LAE paid:
|
|
|
|
|
|
|
|
|
|
Current year losses
|
|
|
31.2
|
|
|
|
23.5
|
|
|
|
56.9
|
|
|
|
45.2
|
|
|
Prior year losses
|
|
|
71.5
|
|
|
|
75.3
|
|
|
|
252.0
|
|
|
|
270.5
|
|
|
Total paid losses
|
|
|
102.7
|
|
|
|
98.8
|
|
|
|
308.9
|
|
|
|
315.7
|
|
|
Net unpaid losses and LAE at end of period
|
|
|
1,721.9
|
|
|
|
1,745.8
|
|
|
|
1,721.9
|
|
|
|
1,745.8
|
|
|
Reinsurance recoverable on unpaid losses and LAE
|
|
|
511.8
|
|
|
|
553.1
|
|
|
|
511.8
|
|
|
|
553.1
|
|
|
Unpaid losses and LAE at end of period
|
|
$
|
2,233.7
|
|
|
$
|
2,298.9
|
|
|
$
|
2,233.7
|
|
|
$
|
2,298.9
|
|
|
|
|
|
|
|
|
|
|
|
Total losses and LAE shown in the above table exclude amortization of
the Deferred Gain, LPT Reserve Adjustments, and LPT Contingent
Commission Adjustments, which totaled $2.6 million and $2.5 million for
the three months ended September 30, 2018 and 2017, respectively, and
$12.0 million and $8.5 million for the nine months ended September 30,
2018 and 2017, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EMPLOYERS HOLDINGS, INC.
|
|
Consolidated Investment Portfolio (unaudited)
|
|
$ in millions
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2018
|
|
|
|
December 31, 2017
|
|
Investment Positions:
|
|
Cost or Amortized Cost
|
|
Net Unrealized (Loss) Gain
|
|
Fair Value
|
|
%
|
|
Fair Value
|
|
%
|
|
Fixed maturities
|
|
$
|
2,423.0
|
|
$
|
(28.4
|
)
|
|
$
|
2,394.6
|
|
|
86
|
%
|
|
$
|
2,463.4
|
|
90
|
%
|
|
Equity securities
|
|
|
100.6
|
|
|
95.4
|
|
|
|
196.0
|
|
|
7
|
|
|
|
210.3
|
|
8
|
|
|
Short-term investments
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
4.0
|
|
—
|
|
|
Cash and cash equivalents
|
|
|
203.0
|
|
|
—
|
|
|
|
203.0
|
|
|
7
|
|
|
|
73.3
|
|
3
|
|
|
Restricted cash and cash equivalents
|
|
|
2.0
|
|
|
—
|
|
|
|
2.0
|
|
|
—
|
|
|
|
1.0
|
|
—
|
|
|
Total investments and cash
|
|
$ 2,728.6
|
|
$
|
67.0
|
|
|
$
|
2,795.6
|
|
|
100
|
%
|
|
$
|
2,752.0
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Breakout of Fixed Maturities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasuries and Agencies $ 124.0
|
|
|
|
$
|
(1.3
|
)
|
|
$
|
122.7
|
|
|
5
|
%
|
|
$
|
148.8
|
|
6
|
%
|
|
States and Municipalities
|
|
|
518.4
|
|
|
9.0
|
|
|
|
527.4
|
|
|
22
|
|
|
|
642.5
|
|
26
|
|
|
Corporate Securities
|
|
|
1,129.1
|
|
|
(18.2
|
)
|
|
|
1,110.9
|
|
|
46
|
|
|
|
1,118.0
|
|
45
|
|
|
Mortgage-Backed Securities
|
|
|
536.3
|
|
|
(17.3
|
)
|
|
|
519.0
|
|
|
22
|
|
|
|
495.3
|
|
20
|
|
|
Asset-Backed Securities
|
|
|
67.1
|
|
|
(0.6
|
)
|
|
|
66.5
|
|
|
3
|
|
|
|
58.8
|
|
2
|
|
|
Other
|
|
|
48.1
|
|
|
—
|
|
|
|
48.1
|
|
|
2
|
|
|
|
—
|
|
—
|
|
|
Total fixed maturities
|
|
$
|
2,423.0
|
|
$
|
(28.4
|
)
|
|
$
|
2,394.6
|
|
|
100
|
%
|
|
$
|
2,463.4
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
Weighted average book yield
|
|
|
|
3.3
|
%
|
|
3.1
|
%
|
|
Average credit quality (S&P)
|
|
|
|
AA-
|
|
AA-
|
|
Duration
|
|
|
|
4.4
|
|
|
4.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EMPLOYERS HOLDINGS, INC.
|
|
Book Value Per Share (unaudited)
|
|
$ in millions, except per share amounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
|
September 30,
|
|
December 31,
|
|
|
2018
|
|
2017
|
|
2017
|
|
2016
|
|
Numerators:
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity A
|
|
$
|
991.2
|
|
|
$
|
947.7
|
|
|
$
|
917.1
|
|
|
$
|
840.6
|
|
|
|
Plus: Deferred Gain
|
|
|
152.1
|
|
|
|
163.6
|
|
|
|
166.4
|
|
|
|
174.9
|
|
|
|
Stockholders' equity including the Deferred Gain (1)
B
|
|
|
1,143.3
|
|
|
|
1,111.3
|
|
|
|
1,083.5
|
|
|
|
1,015.5
|
|
|
|
Accumulated other comprehensive loss (income)
|
|
|
28.4
|
|
|
|
(136.0
|
)
|
|
|
(139.4
|
)
|
|
|
(114.6
|
)
|
|
|
Income taxes related to accumulated other comprehensive gains and
losses
|
|
|
(5.9
|
)
|
|
|
28.6
|
|
|
|
48.8
|
|
|
|
40.1
|
|
|
|
Adjusted stockholders' equity (1) C
|
|
$
|
1,165.8
|
|
|
$
|
1,003.9
|
|
|
$
|
992.9
|
|
|
$
|
941.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator (shares outstanding) D
|
|
|
32,796,666
|
|
|
|
32,597,819
|
|
|
|
32,423,929
|
|
|
|
32,128,922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book value per share (1) A / D
|
|
$
|
30.22
|
|
|
$
|
29.07
|
|
|
$
|
28.28
|
|
|
$
|
26.16
|
|
|
|
Book value per share including the Deferred Gain(1) B
/ D
|
|
|
34.86
|
|
|
|
34.09
|
|
|
|
33.42
|
|
|
|
31.61
|
|
|
|
Adjusted book value per share (1) C / D
|
|
|
35.55
|
|
|
|
30.80
|
|
|
|
30.62
|
|
|
|
29.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per share
|
|
$
|
0.60
|
|
|
$
|
0.60
|
|
|
$
|
0.45
|
|
|
$
|
0.36
|
|
|
|
YTD Change in: (2)
|
|
|
|
|
|
|
|
|
|
|
Book value per share
|
|
|
6.0
|
%
|
|
|
|
|
9.8
|
%
|
|
|
|
|
Book value per share including the Deferred Gain
|
|
|
4.0
|
|
|
|
|
|
7.1
|
|
|
|
|
|
Adjusted book value per share
|
|
|
17.4
|
|
|
|
|
|
6.1
|
|
|
|
|
|
|
|
(1) See Page 10 for information regarding our use of Non-GAAP
Financial Measures.
|
|
(2) Reflects the change in book value per share after taking into
account dividends declared in the period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EMPLOYERS HOLDINGS, INC.
|
|
Earnings Per Share (unaudited)
|
|
$ in millions, except per share amounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
September 30,
|
|
|
|
|
|
September 30,
|
|
Nine Months Ended
|
|
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Numerators:
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
A
|
|
$
|
47.6
|
|
|
$
|
21.9
|
|
|
$
|
115.7
|
|
|
$
|
69.9
|
|
|
Impact of the LPT Agreement
|
|
|
|
|
(2.6
|
)
|
|
|
(2.5
|
)
|
|
|
(12.0
|
)
|
|
|
(8.5
|
)
|
|
Net income before impact of the LPT (1)
|
|
B
|
|
|
45.0
|
|
|
|
19.4
|
|
|
|
103.7
|
|
|
|
61.4
|
|
|
Net realized and unrealized gains on investments
|
|
|
|
|
(15.6
|
)
|
|
|
(4.1
|
)
|
|
|
(13.2
|
)
|
|
|
(7.4
|
)
|
|
Gain on redemption of notes payable
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2.1
|
)
|
|
Write-off of previously capitalized costs
|
|
|
|
|
—
|
|
|
|
7.5
|
|
|
|
—
|
|
|
|
7.5
|
|
|
Amortization of intangibles
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.1
|
|
|
|
0.2
|
|
|
Income tax expense (benefit) related to items excluded from Net
income
|
|
|
|
|
3.3
|
|
|
|
(1.2
|
)
|
|
|
2.8
|
|
|
|
0.6
|
|
|
Adjusted net income (1)
|
|
C
|
|
$
|
32.7
|
|
|
$
|
21.6
|
|
|
$
|
93.4
|
|
|
$
|
60.2
|
|
|
Denominators:
|
|
|
|
Average common shares outstanding (basic)
|
|
D
|
|
|
32,906,250
|
|
|
|
32,563,800
|
|
|
|
32,864,612
|
|
|
|
32,454,443
|
|
|
Average common shares outstanding (diluted)
|
|
E
|
|
|
33,316,164
|
|
|
|
33,053,985
|
|
|
|
33,278,790
|
|
|
|
33,007,217
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
A / D
|
|
$
|
1.45
|
|
|
$
|
0.67
|
|
|
$
|
3.52
|
|
|
$
|
2.15
|
|
|
Diluted
|
|
A / E
|
|
|
1.43
|
|
|
|
0.66
|
|
|
|
3.48
|
|
|
|
2.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share before impact of the LPT: (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
B / D
|
|
$
|
1.37
|
|
|
$
|
0.60
|
|
|
$
|
3.16
|
|
|
$
|
1.89
|
|
|
Diluted
|
|
B / E
|
|
|
1.35
|
|
|
|
0.59
|
|
|
|
3.12
|
|
|
|
1.86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted earnings per share: (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
C / D
|
|
$
|
0.99
|
|
|
$
|
0.66
|
|
|
$
|
2.84
|
|
|
$
|
1.85
|
|
|
Diluted
|
|
C / E
|
|
|
0.98
|
|
|
|
0.65
|
|
|
|
2.81
|
|
|
|
1.82
|
|
|
(1) See Page 10 for information regarding our use of Non-GAAP
Financial Measures.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Glossary of Financial Measures
Within this earnings release we present the following measures, each of
which are "non-GAAP financial measures." A reconciliation of these
measures to the Company's most directly comparable GAAP financial
measures is included herein. Management believes that these non-GAAP
measures are important to the Company's investors, analysts and other
interested parties who benefit from having an objective and consistent
basis for comparison with other companies within our industry.
Management further believes that these measures are more relevant than
comparable GAAP measures in evaluating our financial performance.
The LPT Agreement is a non-recurring transaction that does
not result in any significant ongoing cash benefits to the Company.
Management believes that providing non- GAAP measures that exclude the
effects of the LPT Agreement (amortization of deferred reinsurance gain,
adjustments to LPT Agreement ceded reserves and adjustments to
contingent commission receivable) is useful in providing investors,
analysts and other interested parties a meaningful understanding of the
Company's ongoing underwriting performance.
Deferred reinsurance gain (Deferred Gain) reflects the
unamortized gain from the LPT Agreement. This gain has been deferred and
is being amortized using the recovery method, whereby the amortization
is determined by the proportion of actual reinsurance recoveries to
total estimated recoveries, except for the contingent profit commission,
which is being amortized through June 30, 2024. Amortization is
reflected in losses and LAE incurred.
Adjusted net income (see Page 4 for calculations) is net
income excluding the effects of the LPT Agreement, net realized and
unrealized gains (losses) on investments (net of tax), amortization of
intangible assets (net of tax), gain on redemption of notes payable (net
of tax) and write-off of previously capitalized costs (net of tax).
Management believes that providing this non-GAAP measures is helpful to
investors, analysts and other interested parties in identifying trends
in the Company's operating performance because such items have limited
significance to its ongoing operations or can be impacted by both
discretionary and other economic factors and may not represent operating
trends. The Company previously referred to Adjusted net income as
Operating income.
Stockholders' equity including the Deferred Gain is
stockholders' equity including the Deferred Gain. Management believes
that providing this non-GAAP measure is useful in providing investors,
analysts and other interested parties a meaningful measure of the
Company's total underwriting capital.
Adjusted stockholders' equity (see Page 8 for calculations) is
stockholders' equity including the Deferred Gain, less accumulated other
comprehensive income (net of tax). Management believes that providing
this non-GAAP measure is useful to investors, analysts and other
interested parties since it serves as the denominator to the Company's
operating return on equity metric.
Return on stockholders' equity and Adjusted return on
stockholders' equity (see Page 4 for calculations). Management
believes that these profitability measures are widely used by our
investors, analysts and other interested parties. The Company previously
referred to Adjusted return on stockholders' equity as Operating return
on adjusted stockholders' equity.
Book value per share, Book value per share including the Deferred
Gain, and Adjusted book value per share (see Page 8 for
calculations). Management believes that these valuation measures are
widely used by our investors, analysts and other interested parties. The
Company previously referred to Book value per share as GAAP book value
per share, and Book value per share including Deferred Gain as Book
value per share.
Net income, Combined ratio, and Combined ratio before impact of
the LPT (see Pages 3 and 5 for calculations). Management
believes that these performance and underwriting measures are widely
used by our investors, analysts and other interested parties.
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