UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
_____________________
FORM
8-K
_____________________
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date
of report (Date of earliest event reported): February 11, 2008
EMPLOYERS
HOLDINGS, INC.
(Exact
Name of Registrant as Specified in its Charter)
_____________________
|
NEVADA
(State
or Other Jurisdiction of
Incorporation)
|
001-33245
(Commission
File Number)
|
04-3850065
(I.R.S.
Employer Identification No.)
|
|
9790
Gateway Drive
Reno,
Nevada 89521
(Address
of Principal Executive Offices)
|
89521
(Zip
Code)
|
|
|
Registrant's
telephone number including area code: (888)
682-6671
|
||
|
No
change since last report
(Former
Name or Address, if Changed Since Last
Report)
|
||
_____________________
Check
the appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
o Written communications
pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR 240.13e-4(c))
Section
7 – Regulation FD
Item
7.01. Regulation FD Disclosure
In connection with a presentation by
senior management of Employers Holdings, Inc. (the “Company”) at the 12th Annual
Insurance Industry Conference, hosted by the New York Society of Security
Analysts, the Company is disclosing certain information (the “Disclosed
Information”).
Statements made in the Disclosed
Information which are not historical are forward-looking statements that reflect
management’s current views with respect to future events and performance and may
include statements concerning plans, objectives, goals, strategies, future
events or performance, and underlying assumptions and other statements, which
are other than statements of historical fact. Such statements are
subject to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. See “Forward-looking Statements” in the Disclosed
Information.
A copy of the Disclosed Information is
attached to this report as Exhibit 99.1.
Section
9 – Financial Statements and Exhibits
Item
9.01. Financial Statements and Exhibits.
99.1 Presentation
Materials
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
|
EMPLOYERS
HOLDINGS, INC
|
||
|
By:
|
/s/
Lenard T. Ormsby
|
|
|
Name:
|
Lenard
T. Ormsby
|
|
|
Title:
|
Executive
Vice President and, Chief
|
|
|
Legal
Officer and General Counsel
|
||
Dated: February
11, 2008
Exhibit
Index
|
Exhibit
No.
|
Exhibit
|
|
|
99.1
|
Presentation
Materials
|
Exhibit 99.1
New
York Society of Security Analysts
12th Annual Insurance
Industry Conference
February,
2008
This
slide presentation is for informational purposes only. It
should be read in conjunction with our Form 10-K for the year 2006, our
Form
10-Q for the second and third quarters of 2007 and our Form 8-Ks filed with the Securities and Exchange Commission (SEC), all of which
are available on the “Investor Relations” section of our website at www.employers.com.
10-Q for the second and third quarters of 2007 and our Form 8-Ks filed with the Securities and Exchange Commission (SEC), all of which
are available on the “Investor Relations” section of our website at www.employers.com.
Non-GAAP
Financial Measures
In
presenting Employers Holdings, Inc.’s (EMPLOYERS) results, management has
included and discussed certain non-GAAP financial
measures, as defined in Regulation G. Management believes these non-GAAP measures better explain EMPLOYERS results allowing
for a more complete understanding of underlying trends in our business. These measures should not be viewed as a substitute for those
determined in accordance with GAAP. The reconciliation of these measures to their most comparable GAAP financial measures is
included in this presentation or in our Form 10-K for the year 2006, our Form 10-Q for the second and third quarters of 2007 and our
Form 8-Ks filed with the Securities and Exchange Commission (SEC) and available in the “Investor Relations” section of our website at
www.employers.com.
measures, as defined in Regulation G. Management believes these non-GAAP measures better explain EMPLOYERS results allowing
for a more complete understanding of underlying trends in our business. These measures should not be viewed as a substitute for those
determined in accordance with GAAP. The reconciliation of these measures to their most comparable GAAP financial measures is
included in this presentation or in our Form 10-K for the year 2006, our Form 10-Q for the second and third quarters of 2007 and our
Form 8-Ks filed with the Securities and Exchange Commission (SEC) and available in the “Investor Relations” section of our website at
www.employers.com.
Forward-looking
Statements
All
forward-looking statements made in this presentation, related to the anticipated
acquisition of AmCOMP, Inc. or otherwise, reflect EMPLOYERS
current views with respect to future events, business transactions and business performance and are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties, which may cause actual results to differ materially from
those set forth in these statements. The following factors, among others, could cause or contribute to such material differences: failure to satisfy any of
the conditions of closing, including the failure to obtain AmCOMP stockholder approval or any required regulatory approvals; the risks that EMPLOYERS
and AmCOMP's businesses will not be integrated successfully; the risk that EMPLOYERS will not realize estimated cost savings and synergies; costs
relating to the proposed transaction; and disruption from the transaction making it more difficult to maintain relationships with customers, employees,
agents or producers. More generally, the businesses of EMPLOYERS and AmCOMP could be affected by competition; pricing and policy trends; the
levels of new and renewal business achieved; market acceptance; changes in demand; the frequency and severity of catastrophic events; actual loss
experience; uncertainties in the loss reserving and claims settlement process; new theories of liability; judicial, legislative, regulatory and other
governmental developments; litigation tactics and developments; investigation developments; the amount and timing of reinsurance recoverables; credit
developments among reinsurers; changes in the cost or availability of reinsurance; market developments; rating agency action; possible terrorism or the
outbreak and effects of war and economic, political, regulatory, insurance and reinsurance business conditions; relations with and performance of
employee agents, as well as management’s response to these factors; and other factors identified in EMPLOYERS filings with the Securities and
Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the dates on
which they are made. EMPLOYERS undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
current views with respect to future events, business transactions and business performance and are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties, which may cause actual results to differ materially from
those set forth in these statements. The following factors, among others, could cause or contribute to such material differences: failure to satisfy any of
the conditions of closing, including the failure to obtain AmCOMP stockholder approval or any required regulatory approvals; the risks that EMPLOYERS
and AmCOMP's businesses will not be integrated successfully; the risk that EMPLOYERS will not realize estimated cost savings and synergies; costs
relating to the proposed transaction; and disruption from the transaction making it more difficult to maintain relationships with customers, employees,
agents or producers. More generally, the businesses of EMPLOYERS and AmCOMP could be affected by competition; pricing and policy trends; the
levels of new and renewal business achieved; market acceptance; changes in demand; the frequency and severity of catastrophic events; actual loss
experience; uncertainties in the loss reserving and claims settlement process; new theories of liability; judicial, legislative, regulatory and other
governmental developments; litigation tactics and developments; investigation developments; the amount and timing of reinsurance recoverables; credit
developments among reinsurers; changes in the cost or availability of reinsurance; market developments; rating agency action; possible terrorism or the
outbreak and effects of war and economic, political, regulatory, insurance and reinsurance business conditions; relations with and performance of
employee agents, as well as management’s response to these factors; and other factors identified in EMPLOYERS filings with the Securities and
Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the dates on
which they are made. EMPLOYERS undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
Safe
Harbor Disclosure
EMPLOYERS, AmCOMP
and their respective directors and executive officers and other persons may be
deemed to be participants in the
solicitation of proxies in respect of the proposed transaction. Information regarding EMPLOYERS directors and executive officers is
available in EMPLOYERS' proxy statement for its 2007 annual meeting of stockholders and the EMPLOYERS' 2006 Annual Report on
Form 10-K, which were filed with the SEC on April 19, 2007 and March 30, 2007, respectively. Information regarding AmCOMP's directors
and executive officers is available in AmCOMP's proxy statement for its 2007 annual meeting of stockholders and AmCOMP's 2006 Annual
Report on Form 10-K, which were filed with the SEC on April 27, 2007 and April 2, 2007, respectively. Other information regarding the
participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be
contained in the proxy statement and other relevant materials to be filed with the Securities and Exchange Commission.
solicitation of proxies in respect of the proposed transaction. Information regarding EMPLOYERS directors and executive officers is
available in EMPLOYERS' proxy statement for its 2007 annual meeting of stockholders and the EMPLOYERS' 2006 Annual Report on
Form 10-K, which were filed with the SEC on April 19, 2007 and March 30, 2007, respectively. Information regarding AmCOMP's directors
and executive officers is available in AmCOMP's proxy statement for its 2007 annual meeting of stockholders and AmCOMP's 2006 Annual
Report on Form 10-K, which were filed with the SEC on April 27, 2007 and April 2, 2007, respectively. Other information regarding the
participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be
contained in the proxy statement and other relevant materials to be filed with the Securities and Exchange Commission.
Copyright
© 2007 EMPLOYERS. All rights reserved. EMPLOYERS and America’s small business
insurance specialists are
registered trademarks of Employers Insurance Company of Nevada. Workers’ compensation insurance and services are offered
through Employers Compensation Insurance Company and Employers Insurance Company of Nevada.
registered trademarks of Employers Insurance Company of Nevada. Workers’ compensation insurance and services are offered
through Employers Compensation Insurance Company and Employers Insurance Company of Nevada.
Safe
Harbor Disclosure (continued)
Contents Page
Corporate
Overview
and
Operations
and
Operations
Business
· Specialty
provider of workers’ compensation insurance
– 18th
largest private writer in the U.S. (1)
– 8th
largest private writer in California (1)
– 2nd
largest writer in Nevada (1)
Geographic
· Focused
in western United States
Customers
· Small
businesses in low to medium hazard industries
· Distribution
through independent agents and strategic partners
· 33,027
policies in force at 9/30/2007
· Average
annual policy premium of approximately $11,000
(1) Based
on “One-Year Premium and Loss Study,” U.S., California and Nevada, A.M. Best
Company, 2006
6
Overview
7
Key
Strengths
• Established
enterprise with 95 year operating history
• Focused operations
and disciplined underwriting - target an attractive
and underserved market segment with growth opportunities
and underserved market segment with growth opportunities
• Unique and
long-standing strategic distribution relationships
• Financial strength
and flexibility - strong balance sheet and conservative
reserving
reserving
• Experienced
management team with deep knowledge of workers’
compensation insurance
compensation insurance
2000
2002
2006
2007
FL
NM
MD
TX
OK
KS
NE
SD
ND
MT
WY
CO
UT
ID
AZ
NV
WA
CA
OR
KY
ME
PA
NH
MA
CT
VA
WV
OH
IN
IL
NC
TN
SC
AL
AR
LA
MO
IA
MN
GA
MS
VT
NJ
DE
RI
8
RECENT
STATES
Florida,
Oregon,
Texas, Arizona
and Illinois = 1.3%
Texas, Arizona
and Illinois = 1.3%
Direct
Premiums Written (%) for nine months ended 9/30/07
Expanding
Geographic
Footprint
47.6%
statutory loss and LAE ratio as of 9/30/07
Risk
Selection
Expertise
Strong
Underwriting
Culture
Focused
Guidelines
and
Consistent
Automated
Approach
Disciplined
Underwriting
Underwriting
Local
Knowledge
Pricing
of
Individual
Risks
Five
Basic Elements
9
Disciplined
Underwriting
10
(1) NCCI
2006 Premium Distribution by Hazard Group (as presented at 2007 Annual Issues
Symposium).
Focus
on Low to Medium Hazard Groups
Customer
Selection
|
Hazard
Group |
Class
|
Direct
Premiums
Written
(000s)
|
Percent
of
Total |
|
A
|
Restaurants
|
$ 27,654
|
7.1%
|
|
C
|
Physicians
& Clerical
|
24,858
|
6.4
|
|
B
|
Store:
Wholesale
|
18,854
|
4.8
|
|
B
|
College:
Professional Employees & Clerical
|
11,590
|
3.0
|
|
B
|
Store:
Retail
|
11,189
|
2.9
|
|
C
|
Clerical
Office Employees
|
9,846
|
2.5
|
|
D
|
Machine
Shops
|
9,455
|
2.4
|
|
C
|
Clothing
Manufacturers
|
9,040
|
2.3
|
|
C
|
Dentists &
Dental Surgeons & Clerical
|
7,939
|
2.0
|
|
D
|
Automobile
|
6,458
|
1.7
|
|
Top
10
|
$136,883
|
35.1%
|
EMPLOYERS
further differentiates risks within industry-defined customer
classes
Top
Ten Classes in 2006
11
• Largest payroll
services company
in the U.S. with over 450,000
clients
in the U.S. with over 450,000
clients
• Partner since
entering California
market in 2002
market in 2002
• Business originated
by ADP’s field
sales staff and insurance agency
sales staff and insurance agency
• “Pay-by-Pay” premium
collection
Strategic
partners expand market reach and produce business with high
persistency
12
• Largest group health
carrier in
California
California
• Partner since
entering
California market in 2002
California market in 2002
• Business originated
by
Wellpoint’s health insurance
agents
Wellpoint’s health insurance
agents
• Single bill to
customers
E-chx,
Inc.
• Since Q 4
2006
• Specialty provider
of
payroll services
payroll services
Intego
Insurance
Services, LLC
Services, LLC
• Since Q 4
2007
• Provider of
insurance
software services
software services
Strategic
Distribution Partners
Focus
on
Profitability
Profitability
· Target
attractive, underserved small business market
· Maintain
disciplined risk selection, underwriting and
pricing
pricing
Pursue
Growth
Opportunities
Growth
Opportunities
· Expand
in current markets and in our new states
· Leverage
infrastructure, technology and systems
· Utilize
existing and new strategic distribution partners
· Consider
opportunistic strategic transactions
Optimize
Capital
Structure
Capital
Structure
· Invest
in operations and manage capital prudently
· Return
capital to shareholders
13
Strategies
14
Policyholders
by Industry Group
Miscellaneous
6%
Contracting
Manufacturing
Office
and
Clerical
Clerical
6%
40%
19%
29%
Goods
and Services
Written
Premium by State: $176 M
Florida
Wisconsin
Georgia
Other
29%
13%
14%
23%
8%
6%
7%
Tennessee
Indiana
Texas
%
of Direct Premiums Written, 09/30/07
AmCOMP
Acquisition - Compelling Transaction
• Excellent strategic
fit
– Mono-line workers’
compensation company with focus on disciplined
underwriting for small to mid-sized businesses
underwriting for small to mid-sized businesses
• Immediate premium
volume growth
– Writes in 18
states
– Average premium size
approximately $24,000 at 9/30/07
– Over 900 independent
agencies
FL
NM
MD
TX
OK
KS
NE
SD
ND
MT
WY
CO
UT
ID
AZ
NV
WA
CA
OR
KY
ME
NY
PA
NH
MA
CT
VA
WV
OH
IN
IL
NC
TN
SC
AL
AR
LA
MO
IA
MN
GA
MS
VT
NJ
DE
RI
15
AmCOMP
EMPLOYERS
Overlap
Expands
EMPLOYERS Geographic Footprint
(1) By 2006 Direct
Premiums Written for states, by 2006 Net Premiums Written for total U.S., A.M.
Best
EMPLOYERS
EMPLOYERS
+ AmCOMP Pro Forma
%
of Direct Premiums Written, 09/30/07
California
Indiana
3%
3%
Texas
Other
43%
12%
17%
11%
5%
6%
Wisconsin
Florida
Nevada
California
Nevada
Other
71%
19%
10%
Direct
Premiums Written: $ 268 Million
Direct
Premiums Written: $ 443 Million
Tennessee
3%
3%
16
Diversifies
EMPLOYERS Geographic Footprint
17
Compelling
Transaction
• Increased
scale
– Diversifies earnings
base
– Reduces expense
ratio
– Enhances visibility
with agents / customers
• Meaningful
synergies
– $10 million annual
pre-tax cost savings achievable by 2010
ú Phase-in of
approximately 25% in 2008, approximately 75% in 2009 and 100% in
2010
ú Elimination of
public company expenses, systems integration, reduction in reinsurance
costs
• Financial
benefits
– Efficient use of
capital and debt capacity
ú Pro forma debt to
total capital approximately 20% based on preliminary financing plan
– Accretive to EPS and
ROE in the first full year
Consideration
/
Financing
Financing
· $12.50
per share, $194 million equity value, $230 million
including assumed debt
including assumed debt
· 100%
cash consideration
· Expected
financing sources: combination of debt and cash
Valuation
· Implied
multiple of earnings of 9.5x and 11.5x for 2007E and
2008E, respectively (1)
2008E, respectively (1)
· 1.2x
12/31/07E GAAP book value (2)
Timing
· Announced
1/10/08
· Estimated
closing: 2Q
2008
· Subject
to regulatory approvals and AmCOMP shareholder vote
18
(1) Based on I/B/E/S
estimates
(2) Based on actual book
value of $9.88 per share at 9/30/07plus I/B/E/S EPS estimate for Q 4, 2007 of
$0.26
Acquisition of
AmCOMP - Key Terms
Financial
Results
Surplus
of
$673MM
$673MM
at
9/30/2007
Conservative
Reserving
Reserving
High
Quality
Investment
Portfolio
Investment
Portfolio
Catastrophe
Reinsurance
Program
Reinsurance
Program
0.5:1
NPW / Surplus
(Trailing 12 months NPW
at 9/30/07)
(Trailing 12 months NPW
at 9/30/07)
Approximately
90% fixed
maturity with average
rating AA at 9/30/07
maturity with average
rating AA at 9/30/07
Coverage
up to
$200MM loss
$200MM loss
Track
record of
reserve strength
reserve strength
20
Four
Key Elements of Our Financial Strength
|
Contract
|
|
|
$
millions
|
|
|
Total
Coverage
|
$2,000
|
|
Original
Reserves Transferred
|
$1,525
|
|
Consideration
|
$
775
|
|
Gain
at 1/1/2000
|
750
|
|
Subsequent
Reserve Adjustments
|
(147.5)
|
|
Gain
at 9/30/2007
|
$602.5
|
|
Accounting
at 9/30/07
|
|
|
$
millions
|
|
|
Statutory
Surplus Created
|
$602.5
|
|
Cumulative
Amortization To Date
|
(173.2)
|
|
GAAP:
Deferred Reinsurance
Gain - LPT Agreement |
$429.3
|
21
Loss
Portfolio Transfer (LPT)
• Non-recurring
transaction with no ongoing cash benefits or charges to current
operations
• Retroactive 100%
quota share reinsurance coverage for all losses occurring prior to
7/1/95
7/1/95
• Gain on transaction
booked as statutory surplus; deferred and amortized under
GAAP
Net
Premium Written
Net
Income Before Loss Portfolio Transfer (LPT)
Equity
Incl. Deferred Gain - LPT
Statutory
Surplus
($
million)
Premium
growth has declined due to California rate
decreases
decreases
Strong
growth provides a solid basis for underwriting
Loss
trends and investments are driving net income
Capital
management plans include dividends and share
repurchases
repurchases
22
Financial
Snapshot
23
• Solid in force
policy count
growth continued in the third
quarter, 2007
growth continued in the third
quarter, 2007
– 33,027 at
9/30/07
– 29,311 at
9/30/06
– Total increase of
3,716 or
12.7%
12.7%
Growing
In Force Policy Count
Total
in force policy count has grown consistently with a 2002 - 2006 CAGR of
6%
24
Selected Operating
Results
25
(1) Pro
Forma EPS for 2006 assumes 50,000,002 shares outstanding before the
conversion.
(2) Pro
forma basic and diluted EPS computed using the weighted average shares
outstanding during the period after the Company’s IPO and assumes
the
50,000,002
shares outstanding prior to the IPO. Equity instruments have been excluded
in computing the diluted earnings per share because their
inclusion
would be anti-dilutive.
(3) Basic
EPS and Diluted EPS round to the same amount for the period.
Earnings and
EPS
(1) Excluding $43.4
million of favorable development in the first nine months of 2007, our loss
ratio before the LPT would have been 64.2% and our
combined ratio would have been 103.7%. We target a combined ratio of 100.
combined ratio would have been 103.7%. We target a combined ratio of 100.
(2) Total deferred gain
amortization and LPT reserve adjustment of $19.4 million in 2006, $4.6 million
in the first, second and third quarters of 2007.
(3) Our higher expense
ratio is largely a function of falling California rates.
26
Underwriting
Profitability
• $1.7 billion
of
investment securities
investment securities
-
Less than .03% related to
sub-prime
-
Less than 6% related to
financials
• Approximately
90%
AA rated
AA rated
• Book yield of
4.4%
• Tax equivalent
book
yield of 5.3%
yield of 5.3%
• Effective duration
of 5.7
• Outsourced to
Conning
Asset Management
Asset Management
Portfolio Mix at
9/30/07
27
Investment
Portfolio
• In 2007 greater than
$100
million in cash
million in cash
– $38
million ordinary dividends,
plus
plus
– $9.7 million in net
proceeds
from the IPO, plus
from the IPO, plus
– $55 million
up-streamed
extraordinary dividend
extraordinary dividend
• As of 9/30/07
reported
earnings, $100 million
ordinary dividend capacity
in 2008
earnings, $100 million
ordinary dividend capacity
in 2008
– Additional $200
million
extraordinary dividend
capacity through 12/31/2008
approved by DOI
extraordinary dividend
capacity through 12/31/2008
approved by DOI
Holding
Company
Cash Flow
Cash Flow
Strong
Capital Position
• $771 million
GAAP
adjusted equity at
9/30/2007
adjusted equity at
9/30/2007
• 0.5:1 trailing
12
months NPW/surplus
at 9/30/07
months NPW/surplus
at 9/30/07
• No debt
pending
acquisition
acquisition
• Reserve
strength
Our
goal is to drive shareholder value through an improving ROE resulting from (i)
profitability
consistent with historical results, (ii) disciplined growth and (iii) prudent capital management
consistent with historical results, (ii) disciplined growth and (iii) prudent capital management
28
Capital
Management
Tools
Tools
• Shareholder
dividends
– $0.06 per
share
quarterly dividend
quarterly dividend
– Three
quarters
declared and paid
declared and paid
$3.2
million Q2, 2007
$3.1
million Q3, 2007
$3.0
million Q4, 2007
• Share
repurchase
– $75 million in
2007
3,911,272
shares
Capital
Management
Summary
30
Summary
• Established
enterprise with 95 year operating history
• Focused operations
and disciplined underwriting - target an attractive and
underserved market segment with growth opportunities
underserved market segment with growth opportunities
• Pending acquisition
- - when closed, immediate growth in premium
• Unique and
long-standing strategic distribution relationships
• Financial strength
and flexibility - strong balance sheet and conservative reserving
• Experienced
management team with deep knowledge of workers’
compensation
compensation
Analyst
Contact:
Vicki Erickson
Vice President, Investor Relations
Employers Holdings, Inc.
(775) 327-2794
verickson@employers.com
Vicki Erickson
Vice President, Investor Relations
Employers Holdings, Inc.
(775) 327-2794
verickson@employers.com
9790
Gateway Drive
Reno, NV. 89521-5906
(775) 327-2700
Reno, NV. 89521-5906
(775) 327-2700
31
Douglas
D. Dirks
President & Chief Executive Officer
Employers Holdings, Inc.
William E. (Ric) Yocke
Chief Financial Officer
Employers Holdings, Inc.
President & Chief Executive Officer
Employers Holdings, Inc.
William E. (Ric) Yocke
Chief Financial Officer
Employers Holdings, Inc.