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 25, 2009
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.)
|
|
10375
Professional Circle
Reno,
Nevada
(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
2 – Financial Information
|
Item
2.02.
|
Results
of Operations and Financial
Condition.
|
On
February 25, 2009, Employers Holdings, Inc. (the "Company") issued a press
release announcing results for the fourth quarter and fiscal year ended December
31, 2008. The press release is attached hereto as Exhibit 99.1 and is
incorporated by reference herein, and is being furnished, not filed, under Item
2.02 to this Current Report on Form 8-K.
Section
8 – Other Information
|
Item
8.01.
|
Other
Events.
|
On
February 25, 2009, the Company announced that its Board of Directors has
extended the Company's previously announced stock repurchase program through
December 31, 2009, which program authorized the Company to repurchase up to
$100 million of its common stock.
Under
the program, the Company may repurchase common stock from time to time at
prevailing market prices in open market purchases, privately negotiated
transactions, accelerated stock repurchase programs, issuer self-tender offers
or otherwise, as determined by the Company's management and in accordance with
applicable laws and regulations, and subject to market conditions and other
factors. The program does not obligate the Company to acquire any
particular amount of common stock. The pace of repurchase activity,
if any, will depend on many factors, including levels of cash generation
from operations, cash requirements for investment in the Company's business,
repayment of debt, current stock price, market conditions and other
factors. The program may be suspended, modified or discontinued at
any time without prior notice. Furnished as Exhibit 99.1 and
incorporated herein by reference is the press release issued by the
Company.
On
February 25, 2009, the Company also announced that its Board of Directors has
declared a first quarter cash dividend of six cents per share on the Company's
common stock. The dividend is payable on March 25, 2009 to
stockholders of record as of March 11, 2009. Furnished as Exhibit
99.1 and incorporated herein by reference is the press release issued by the
Company.
Section
9 – Financial Statements and Exhibits
|
Item
9.01.
|
Financial
Statements and Exhibits.
|
99.1 Employers
Holdings, Inc. press release, dated February 25, 2009.
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, Chief
|
|||
|
Legal
Officer and General
Counsel
|
||||
Dated: February
25, 2009
Exhibit
Index
|
Exhibit
No.
|
Exhibit
|
|
|
99.1
|
Employers
Holdings, Inc. press release, dated February 25,
2009.
|
Exhibit
99.1
 |
news
release
|
| February 25, 2009 | For Immediate Release |
Employers Holdings, Inc. Reports
Fourth Quarter and Full Year 2008 Earnings, Extends Stock Repurchase Program and
Announces Dividend
Reno,
Nevada—February 25, 2009—Employers Holdings, Inc. (“EHI” or the “Company”)
(NYSE:EIG) today reported net income for the fourth quarter of 2008 of $15.9
million or $0.32 per share compared with $31.8 million or $0.64 per share in the
fourth quarter of 2007. Net income includes amortization of the deferred
reinsurance gain related to the Loss Portfolio Transfer (“LPT”) Agreement.
Consolidated net income before the impact of the LPT (the Company’s non-GAAP
measure described below) was $11.3 million or $0.23 per share in the fourth
quarter of 2008 compared with $27.4 million or $0.55 per share in the fourth
quarter of 2007.
Net income for the year ended
December 31, 2008 decreased 15.4% to $101.8 million or $2.07 per share from
$120.3 million or $2.32 per pro
forma share for the same period in 2007. Net income before the
impact of the LPT for the year ended December 31, 2008 was $83.4 million or
$1.69 per share compared with $102.2 million or $1.98 per pro
forma share for the same period in 2007.
As of December 31, 2008, total
stockholders’ equity increased to $444.7 million from $379.5 million at December
31, 2007. Equity, including the deferred reinsurance gain related to the LPT,
increased 5.8% to $851.3 million at December 31, 2008 from $804.5 million at
December 31, 2007.
Consolidated stockholders’ equity per share including the LPT
deferred reinsurance gain increased 7.5% to $17.43 at December 31, 2008 compared
to $16.21 at December 31, 2007.
Commenting on the results, President
and Chief Executive Officer Douglas D. Dirks said, “Despite unprecedented
uncertainty in financial markets and the downturn in national and regional
economies, we delivered increased book value, a strengthened balance sheet and
stable net investment income. Our results for the quarter and the year include
the results of our acquired operations for November and December of 2008. With
our recent acquisition, we saw fourth quarter increases in invested assets,
premium and associated losses, and in underwriting expenses prior to the
staffing reductions we announced in January of 2009. Our sales activities remain
strong as overall organic policy count increased 7.7% since December 31, 2007
and 35.3% when 9,318 acquired policies are included. Our acquisition,
including the state licenses, operations and premium, is pivotal in implementing
our expansion strategy, particularly given the challenge of growing organically
in a contracting economy. We will continue to integrate our expanded operations
throughout 2009 with a focus on systems and best practices. Consistent with our
conservative reserving philosophy, we recognized benefits from better than
expected loss development related to prior years.”
Fourth
quarter net premiums earned increased 25.6% to $106.1 million in 2008 from $84.4
million in 2007 due to $31.6 million in acquired earned premium. Net premiums
earned for the twelve months ended December 31, 2008 declined 5.2% to $328.9
million from $346.9 million for the same period in 2007. Declines in premium
were largely attributable to reductions in premium rates, competition and the
economic recession. These impacts were partially offset by an overall in force
policy count increase of 35.3%, including 9,318 acquired policies, to 45,599 at
December 31, 2008 from 33,699 at December 31, 2007.
Fourth
quarter 2008 net investment income increased $2.9 million to $22.1 million from
$19.2 million in the fourth quarter of 2007 primarily due to $3.6 million in
additional investment income from acquired assets. Net investment income for the
twelve months ended December 31, 2008 decreased slightly by 0.7% to $78.1
million. Without the acquisition, net investment income would have decreased
$4.2 million or 5.3% from the previous year largely due to one-time interest
income of $1.8 million received in the first quarter of 2007 from invested net
proceeds related to the issuance of common stock as part of the Company’s
conversion from a mutual insurance holding company. The average pre-tax book
yield on assets declined to 4.20% from 4.28% in 2007. Excluding acquired assets,
the pre-tax book yield at year end 2008 would have been 4.08%. As part of the
acquisition, the Company acquired over $400 million in fixed maturity assets
resulting in $2.0 billion of total invested assets (fair value) at December 31,
2008 compared to $1.7 billion at December 31, 2007.
Realized
losses on investments for the fourth quarter of 2008 totaled $8.3 million
compared with realized gains of $0.5 million in the fourth quarter of 2007. For
the twelve months ended December 31, 2008, realized losses on investments were
$11.5 million compared with a gain of $0.2 million for the twelve months ended
December 31, 2007. Net realized losses in 2008 are largely attributable to
other-than-temporary-impairment in the value of common stock holdings and in
primarily one fixed maturity security.
Fourth
quarter losses and LAE increased to $56.2 million in 2008 from $32.0 million in
2007 largely due to $18.5 million in losses and LAE from acquired operations.
Before the impact of the LPT, losses and LAE would have been $60.7 million in
the fourth quarter of 2008 and $36.3 million in the fourth quarter of 2007.
Favorable prior accident year development was $18.4 million in the fourth
quarter of 2008 compared with $16.6 million in the fourth quarter of 2007.
Losses and LAE for the twelve months ended December 31, 2008 decreased 4.7% to
$136.5 million from $143.3 million in the twelve months ended December 31, 2007.
Excluding the impact of the LPT, losses and LAE would have been $154.9 million
and $161.3 million for the twelve months ended December 31, 2008 and 2007,
respectively. The decrease in losses and LAE for the full year was primarily due
to declines in net earned premiums. Favorable prior accident year loss
development in 2008 was $71.7 million compared with $60.0 million in 2007. The
2008 current year loss estimate was 68.9% compared to 63.8% for
2007.
In the
fourth quarter of 2008, commission expense of $13.2 million increased from $8.5
million in the fourth quarter of 2007 largely due to $3.3 million in commission
expense from acquired operations. Commission expense for the full year 2008
decreased 1.6% to $43.6 million from $44.3 million for the same period in
2007.
Fourth
quarter underwriting and other operating expense increased to $35.8 million from
$23.6 million in 2007 largely due to acquired operating expenses of $11.6
million. For the full year 2008, underwriting and other operating expense
increased to $102.5 million from $91.4 million in 2007 due to acquired
underwriting expenses.
Page
2 of 12
The fourth quarter 2008 income tax
benefit of $3.1 million was primarily attributable to lower fourth quarter 2008
pre-tax income and the reduction in ultimate loss estimates on pre-privatization
reserves that are not taxable. Income taxes in the full year 2008 decreased to
$10.3 million from $30.6 million in 2007 due to a year over year change of $4.8
million related to the final reversal of the liability for previously
unrecognized tax benefits including interest. The effective tax rate for the
twelve months ended December 31, 2008 was 9.2% compared to 20.3% in
2007.
The fourth quarter 2008 combined
ratio of 99.1% (103.4% before the LPT) increased from the fourth quarter 2007
combined ratio of 75.9% (81.1% before the LPT). The full year 2008 combined
ratio increased 5.5 percentage points to 85.9% (91.5% before the LPT) from 80.4%
(85.6% before the LPT) in 2007, with 2.1 percentage points of the increase
related to the acquisition.
EHI also announced today that its
Board of Directors has extended the Company's previously announced stock
repurchase program through December 31, 2009, which program
authorized the Company to repurchase up to
$100 million of its common stock.
Under the program, the Company may
repurchase common stock from time to time at prevailing market prices in open
market purchases, privately negotiated transactions, accelerated stock
repurchase programs, issuer self-tender offers or otherwise, as determined by
the Company's management and in accordance with applicable laws and regulations,
and subject to market conditions and other factors. The program does not
obligate the Company to acquire any particular amount of common stock. The
pace of repurchase activity, if any, will depend on many
factors, including, without limitation, levels of cash generation from
operations, cash requirements for investment in the Company's business,
repayment of debt, current stock price and market conditions. The program
may be suspended, modified or discontinued at any time without prior
notice.
Additionally, the Board of Directors
has declared a first quarter cash dividend of six cents per share. The dividend
is payable on March 25, 2009, to stockholders of record as of March 11,
2009.
Conference Call and Web Cast, Form
10-K
The Company will host a conference
call Thursday, February 26, 2009 at 10:30 a.m. Pacific 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 following the call. The conference call
replay number is (888) 286-8010 with a passcode of 87293366. International
callers may dial (617) 801-6888.
EHI will file its Form 10-K for the
period ended December 31, 2008, with the Securities and Exchange Commission
(“SEC”) on Thursday, February 26, 2009. The Form 10-K will be available without
charge through the EDGAR system at the SEC's Web site and will also posted on the
Company's Web site, www.employers.com ,
and is accessible through the “Investors” link.
Discussion of Non-GAAP Financial
Measures
This earnings release includes
non-GAAP financial measures used to analyze the Company’s operating performance
for the periods presented.
Page
3 of 12
A number of these non-GAAP financial
measures exclude impacts related to the LPT Agreement. The 1999 LPT Agreement
was a non-recurring transaction that does not result in ongoing cash benefits
and, consequently, the Company believes these non-GAAP measures are useful in
providing stockholders and management a meaningful understanding of the
Company’s operating performance. In addition, these measures, as defined, are
helpful to management in identifying trends in the Company’s performance because
the items excluded have limited significance in current and ongoing
operations.
The Company strongly urges
stockholders and other interested persons not to rely on any single financial
measure to evaluate its business. 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.
Net
Income before impact of LPT. Net income less (i) amortization
of deferred reinsurance gain—LPT Agreement and (ii) adjustments to LPT Agreement
ceded reserves.
Deferred
reinsurance gain—LPT Agreement. This reflects the unamortized
gain from the LPT Agreement. Under GAAP, this gain is deferred and amortized
using the recovery method, whereby the amortization is determined by the
proportion of actual reinsurance recoveries to total estimated recoveries, and
the amortization is reflected in losses and LAE.
Gross
Premiums Written. Gross premiums written is the sum of both direct
premiums written and assumed premiums written before the effect of ceded
reinsurance. Direct premiums written represents the premiums on all policies the
Company’s insurance subsidiaries have issued during the year. Assumed premiums
written represents the premiums that the insurance subsidiaries have received
from an authorized state-mandated pool.
Net
Premiums Written. Net premiums written is the sum of direct
premiums written and assumed premiums written less ceded premiums written. Ceded
premiums written is the portion of direct premiums written that are ceded to
reinsurers under reinsurance contracts. The Company uses net premiums written,
primarily in relation to gross premiums written, to measure the amount of
business retained after cession to reinsurers.
Losses
and LAE before impact of LPT. Losses and LAE before (i)
amortization of deferred reinsurance gain—LPT Agreement and (ii) adjustments to
LPT Agreement ceded reserves.
Losses
and LAE Ratio. The losses and LAE ratio is a measure of
underwriting profitability. Expressed as a percentage, it is the ratio of losses
and LAE to net premiums earned.
Commission
Expense Ratio. Commission expense ratio is the ratio (expressed as
a percentage) of commission expense to net premiums
earned.
Underwriting
and Other Operating Expense Ratio. The underwriting and other operating
expense ratio is the ratio (expressed as a percentage) of underwriting and other
operating expense to net premiums earned.
Page
4 of 12
Combined
Ratio. The combined ratio
represents the percentage of each premium dollar spent on claims and expenses.
The combined ratio is the sum of the losses and LAE ratio, the commission
expense ratio and the underwriting and other operating expense ratio.
Combined
Ratio before impacts of LPT. Combined ratio before impacts of LPT
is the GAAP combined ratio before (i) amortization of deferred reinsurance
gain—LPT Agreement and (ii) adjustments to LPT Agreement ceded reserves.
Equity
including deferred reinsurance gain—LPT.
Equity including deferred reinsurance gain—LPT is total equity
including the deferred reinsurance gain—LPT Agreement.
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 regarding the Company’s future operations and performance.
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 our public filings with the
SEC, including the risks detailed in the Company's Quarterly Reports on Form
10-Q for the periods ended March 31, 2008, June 30, 2008 and September 30, 2008
and the Company’s 2007 Annual Report on Form 10-K.
All forward-looking statements made
in this news release reflect EHI’s 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 business of EHI
could be affected by, among other things, competition, pricing and policy term
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 (including adverse developments in financial
markets as a result of, among other things, changes in local, regional or
national economic conditions and continued volatility and further deterioration
of financial markets), credit and other risks associated with EHI’s investment
activities, significant changes in investment yield rates, 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, the integration of acquired operations
(including the failure to realize anticipated benefits
Page
5 of 12
of such acquisitions and potential
disruption from the acquisitions making it more difficult to maintain
relationships with customers, employees, agents or producers), as well as
management’s response to these factors, and other factors identified in EHI’s
filings with the SEC. 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.
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). EHI assumes no obligation to update this
release or the information contained herein, which speaks as of the date
issued.
______________________________________________________________________
Copyright © 2009 Employers Holdings,
Inc. All rights reserved. EMPLOYERS® and America’s
small business insurance specialist.® are registered trademarks
of Employers Insurance Company of Nevada. Employers Holdings, Inc. is an
insurance holding company with subsidiaries that are specialty providers of
workers’ compensation insurance and services focused on select, small and
medium-sized businesses engaged in low to medium hazard industries. The company,
through its subsidiaries, operates in 29 states from 17 office locations.
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. Employers Preferred Insurance Company and Employers Assurance
Company are also known as AmCOMP Preferred Insurance Company and AmCOMP
Assurance Corporation, respectively. Additional information can be found at:
http://www.employers.com .
CONTACT:
Media – Ty Vukelich, Vice President,
Corporate Marketing, tvukelich@employers.com ,
(775) 327-2677
Analysts – Vicki Erickson, Vice
President, Investor Relations, verickson@employers.com ,
(775) 327-2794
Page
6 of 12
Employers Holdings, Inc.
Consolidated Statements of
Income
(In thousands)
|
Three
Months Ended
December
31,
|
Years
Ended
December
31,
|
|||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
|
(unaudited)
|
||||||||||||||||
|
Revenues
|
||||||||||||||||
|
Gross
premiums written
|
$ | 93,004 | $ | 79,384 | $ | 322,922 | $ | 350,696 | ||||||||
|
Net
premiums written
|
$ | 91,043 | $ | 76,537 | $ | 312,847 | $ | 338,569 | ||||||||
|
Net
premiums earned
|
$ | 106,105 | $ | 84,448 | $ | 328,947 | $ | 346,884 | ||||||||
|
Net
investment income
|
22,147 | 19,237 | 78,062 | 78,623 | ||||||||||||
|
Realized
(losses) gains on investments, net
|
(8,313 | ) | 502 | (11,524 | ) | 180 | ||||||||||
|
Other
income
|
138 | 1,189 | 1,293 | 4,236 | ||||||||||||
|
Total
revenues
|
120,077 | 105,376 | 396,778 | 429,923 | ||||||||||||
|
Expenses
|
||||||||||||||||
|
Losses
and loss adjustment expenses
|
56,171 | 31,966 | 136,515 | 143,302 | ||||||||||||
|
Commission
expense
|
13,153 | 8,539 | 43,618 | 44,336 | ||||||||||||
|
Underwriting
and other operating expenses
|
35,845 | 23,621 | 102,459 | 91,399 | ||||||||||||
|
Interest
expense
|
2,135 | — | 2,135 | — | ||||||||||||
|
Total
expenses
|
107,304 | 64,126 | 284,727 | 279,037 | ||||||||||||
|
Net
income before income taxes
|
12,773 | 41,250 | 112,051 | 150,886 | ||||||||||||
|
Income
tax (benefit) expense
|
(3,083 | ) | 9,486 | 10,266 | 30,603 | |||||||||||
|
Net
income
|
$ | 15,856 | $ | 31,764 | $ | 101,785 | $ | 120,283 | ||||||||
|
Net
income after date of conversion through
December 31, 2007
|
$ | 113,812 | ||||||||||||||
|
Reconciliation
of net income and EPS to net income and EPS before impact of LPT
Agreement
|
||||||||||||||||
|
Net
income
|
$ | 15,856 | $ | 31,764 | $ | 101,785 | $ | 120,283 | ||||||||
|
Less:
Impact of LPT Agreement
|
||||||||||||||||
|
Amortization
of deferred reinsurance
gain – LPT Agreement
|
4,513 | 4,340 | 18,421 | 18,034 | ||||||||||||
|
Net
income before LPT Agreement
|
$ | 11,343 | $ | 27,424 | $ | 83,364 | $ | 102,249 | ||||||||
Page
7 of 12
Employers
Holdings, Inc.
Consolidated
Statements of Income
(In
thousands, except share and per share data)
|
For
the Three Months Ended
December
31,
|
For
the Years Ended
December
31,
|
For
the Period
February
5,
through
December 31,
|
||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
|
(unaudited)
|
||||||||||||||||
|
Net
Income
|
$ | 15,856 | $ | 31,764 | $ | 101,785 | $ | 113,812 | ||||||||
|
Earnings
per common share
|
||||||||||||||||
|
Basic
|
$ | 0.32 | $ | 0.64 | $ | 2.07 | $ | 2.19 | ||||||||
|
Diluted
|
$ | 0.32 | $ | 0.64 | $ | 2.07 | $ | 2.19 | ||||||||
|
Weighted
average shares outstanding
|
||||||||||||||||
|
Basic
|
48,854,073 | 49,644,578 | 49,217,829 | 51,933,827 | ||||||||||||
|
Diluted
|
48,902,010 | 49,674,533 | 49,261,228 | 51,943,412 | ||||||||||||
|
Pro Forma for the
Twelve Months Ended December 31,
|
||||||||||||||||
|
2007
|
||||||||||||||||
|
Net
Income
|
$ | 120,283 | ||||||||||||||
|
Earnings
per common share
|
||||||||||||||||
|
Basic
|
$ | 2.32 | ||||||||||||||
|
Diluted
|
$ | 2.32 | ||||||||||||||
|
Weighted
average shares outstanding
|
||||||||||||||||
|
Basic
(1)
|
51,748,392 | |||||||||||||||
|
Diluted (1)
|
51,757,057 | |||||||||||||||
|
For
the Three Months Ended
December
31,
|
For
the Twelve Months Ended
December
31,
|
Pro Forma for the
Twelve Months Ended December 31,
|
||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
|
(unaudited)
|
||||||||||||||||
|
Earnings
per common share for the three month period:
|
||||||||||||||||
|
Basic
|
$ | 0.32 | $ | 0.64 | $ | 2.07 | $ | 2.32 | ||||||||
|
Diluted
|
$ | 0.32 | $ | 0.64 | $ | 2.07 | $ | 2.32 | ||||||||
|
Earnings
per common share attributable to the LPT Agreement
|
||||||||||||||||
|
Basic
|
$ | 0.09 | $ | 0.09 | $ | 0.38 | $ | 0.34 | ||||||||
|
Diluted
|
$ | 0.09 | $ | 0.09 | $ | 0.38 | $ | 0.34 | ||||||||
|
Pro forma earnings per
common share before the LPT Agreement
|
||||||||||||||||
|
Basic
|
$ | 0.23 | $ | 0.55 | $ | 1.69 | $ | 1.98 | ||||||||
|
Diluted
|
$ | 0.23 | $ | 0.55 | $ | 1.69 | $ | 1.98 | ||||||||
|
(1)
|
The
pro forma earnings per common share for the twelve
months ended December 31, 2007 includes shares outstanding for the period
after the Company’s conversion on February 5, 2007 (52,818,747), and for
the period prior to the conversion assuming the common stock available to
eligible members (50,000,002).
|
Page
8 of 12
Employers
Holdings, Inc.
Consolidated
Balance Sheets
(In
thousands, except share data)
|
December
31,
|
December
31,
|
|||||||
|
2008
|
2007
|
|||||||
|
Assets
|
||||||||
|
Available
for Sale:
|
||||||||
|
Fixed
maturity investments at fair value (amortized cost $1,870,227 in
2008
and $1,594,159 in 2007)
|
$ | 1,909,391 | $ | 1,618,903 | ||||
|
Equity
securities at fair value (cost of $43,014 in 2008 and $60,551 in
2007)
|
58,526 | 107,377 | ||||||
|
Short-term
investments at fair value (amortized cost $74,952 at December 31,
2008)
|
75,024 | — | ||||||
|
Total
investments
|
2,042,941 | 1,726,280 | ||||||
|
Cash
and cash equivalents
|
202,893 | 149,703 | ||||||
|
Accrued
investment income
|
24,201 | 19,345 | ||||||
|
Premiums
receivable, less bad debt allowance of $7,911 in 2008
and $6,037
in 2007
|
91,273 | 36,402 | ||||||
|
Reinsurance
recoverable for:
|
||||||||
|
Paid
losses
|
12,723 | 10,218 | ||||||
|
Unpaid
losses, less allowance of $1,335 in 2008 and $1,308 in
2007
|
1,075,015 | 1,051,333 | ||||||
|
Funds
held by or deposited with reinsureds
|
88,163 | 95,884 | ||||||
|
Deferred
policy acquisition costs
|
32,365 | 14,901 | ||||||
|
Federal
income taxes recoverable
|
11,042 | — | ||||||
|
Deferred
income taxes, net
|
80,968 | 59,730 | ||||||
|
Property
and equipment, net
|
14,098 | 14,133 | ||||||
|
Intangible
assets, net
|
18,218 | — | ||||||
|
Goodwill
|
36,192 | — | ||||||
|
Other
assets
|
26,621 | 13,299 | ||||||
|
Total
assets
|
$ | 3,756,713 | $ | 3,191,228 | ||||
|
Liabilities
and stockholders’ equity
|
||||||||
|
Claims
and policy liabilities:
|
||||||||
|
Unpaid losses
and loss adjustment expenses
|
$ | 2,506,478 | $ | 2,269,710 | ||||
|
Unearned
premiums
|
139,310 | 63,924 | ||||||
|
Policyholders’
dividends accrued
|
8,737 | 386 | ||||||
|
Total
claims and policy liabilities
|
2,654,525 | 2,334,020 | ||||||
|
Commissions
and premium taxes payable
|
12,691 | 7,493 | ||||||
|
Federal
income taxes payable
|
— | 13,884 | ||||||
|
Accounts
payable and accrued expenses
|
24,192 | 20,682 | ||||||
|
Deferred
reinsurance gain–LPT Agreement
|
406,581 | 425,002 | ||||||
|
Notes
payable
|
182,000 | — | ||||||
|
Other
liabilities
|
31,996 | 10,694 | ||||||
|
Total
liabilities
|
3,311,985 | 2,811,775 | ||||||
|
Commitments
and contingencies:
Stockholders’
equity
|
||||||||
|
Common
stock, $0.01 par value; 150,000,000 shares authorized;
|
||||||||
|
53,528,207
and 53,527,907 issued and 48,830,140 and 49,616,635 shares
|
||||||||
|
outstanding at December 31,
2008 and December 31, 2007 respectively
|
535 | 535 | ||||||
|
Preferred stock, $0.01 par
value; 25,000,000 shares authorized; none issued
|
— | — | ||||||
|
Additional paid-in
capital
|
306,032 | 302,862 | ||||||
|
Retained
earnings
|
194,509 | 104,536 | ||||||
|
Accumulated
other comprehensive income, net
|
32,804 | 46,520 | ||||||
|
Treasury
stock, at cost (4,698,067 shares at December 31, 2008 and 3,911,272 shares
at December 31, 2007)
|
(89,152 | ) | (75,000 | ) | ||||
|
Total
stockholders’ equity
|
444,728 | 379,453 | ||||||
|
Total
liabilities and stockholders’ equity
|
$ | 3,756,713 | $ | 3,191,228 | ||||
Page
9 of 12
|
December
31,
|
December
31,
|
|||||||
|
2008
|
2007
|
|||||||
|
Equity
including deferred reinsurance gain – LPT
|
||||||||
|
Total
stockholders’ equity
|
$ | 444,728 | $ | 379,453 | ||||
|
Deferred
reinsurance gain – LPT Agreement
|
406,581 | 425,002 | ||||||
|
Total
equity including deferred reinsurance gain – LPT Agreement
|
$ | 851,309 | $ | 804,455 | ||||
Page
10 of 12
Employers
Holdings, Inc.
Consolidated
Statements of Cash Flows
(In
thousands)
|
Years
Ended
December
31,
|
||||||||
|
2008
|
2007
|
|||||||
|
Operating
activities
|
||||||||
|
Net
income
|
$ | 101,785 | $ | 120,283 | ||||
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
|
Depreciation
and amortization
|
7,226 | 6,406 | ||||||
|
Stock-based
compensation
|
3,161 | 1,720 | ||||||
|
Amortization
of premium on investments, net
|
6,226 | 6,430 | ||||||
|
Allowance
for doubtful accounts – premiums receivable
|
(705 | ) | (874 | ) | ||||
|
Allowance
for doubtful accounts – unpaid reinsurance recoverable
|
27 | 32 | ||||||
|
Deferred
income tax expense
|
4,511 | 4,779 | ||||||
|
Realized
losses (gains) on investments, net
|
11,524 | (180 | ) | |||||
|
Realized
losses on retirement of assets
|
22 | 23 | ||||||
|
Change
in operating assets and liabilities, net of effect of
acquisition:
|
||||||||
|
Accrued
investment income
|
(469 | ) | (914 | ) | ||||
|
Premiums
receivable
|
23,203 | 15,783 | ||||||
|
Reinsurance
recoverable on paid and unpaid losses
|
37,938 | 46,317 | ||||||
|
Funds
held by or deposited with reinsureds
|
7,721 | 7,071 | ||||||
|
Unpaid
losses and loss adjustment expenses
|
(71,980 | ) | (38,045 | ) | ||||
|
Unearned
premiums
|
(20,471 | ) | (9,331 | ) | ||||
|
Federal
income taxes payable
|
(20,672 | ) | (10,378 | ) | ||||
|
Accounts
payable, accrued expenses and other liabilities
|
(3,527 | ) | (9,428 | ) | ||||
|
Deferred
reinsurance gain - LPT Agreement
|
(18,421 | ) | (18,034 | ) | ||||
|
Other
|
215 | (1,506 | ) | |||||
|
Net
cash provided by operating activities
|
67,314 | 120,154 | ||||||
|
Investing
activities
|
||||||||
|
Purchase
of fixed maturities
|
(113,587 | ) | (252,275 | ) | ||||
|
Purchase
of equity securities
|
(558 | ) | (1,037 | ) | ||||
|
Proceeds
from sale of fixed maturities
|
42,467 | 208,697 | ||||||
|
Proceeds
from sale of equity securities
|
4,010 | 4,264 | ||||||
|
Proceeds
from maturities and redemptions of investments
|
105,424 | 55,475 | ||||||
|
Cash
paid for acquisition, net of cash and cash equivalents
acquired
|
(168,903 | ) | — | |||||
|
Capital
expenditures and other, net
|
(3,926 | ) | (4,964 | ) | ||||
|
Net
cash (used in) provided by investing activities
|
(135,073 | ) | 10,160 | |||||
|
Financing
activities
|
||||||||
|
Issuance
of common stock, net
|
— | 486,670 | ||||||
|
Cash
paid to eligible policyholders under plan of conversion
|
— | (462,989 | ) | |||||
|
Acquisition
of treasury stock
|
(14,152 | ) | (75,000 | ) | ||||
|
Dividends
paid to stockholders
|
(11,808 | ) | (9,276 | ) | ||||
|
Debt
issuance costs
|
(375 | ) | — | |||||
|
Payments
on notes payable
|
(2,678 | ) | — | |||||
|
Proceeds
from notes payable
|
150,000 | — | ||||||
|
Other
|
(38 | ) | — | |||||
|
Net
cash provided by (used in) financing activities
|
120,949 | (60,595 | ) | |||||
|
Net
increase in cash and cash equivalents
|
53,190 | 69,719 | ||||||
|
Cash
and cash equivalents at the beginning of the year
|
149,703 | 79,984 | ||||||
|
Cash
and cash equivalents at the end of the year
|
$ | 202,893 | $ | 149,703 | ||||
|
Cash
paid for income taxes
|
$ | 22,526 | $ | 36,200 | ||||
|
Cash
paid for interest
|
1,782 | — | ||||||
|
Schedule
of non-cash transactions
|
||||||||
|
Stock
issued in exchange for membership interest
|
$ | — | $ | 281,073 | ||||
Page
11 of 12
Employers
Holdings, Inc.
Calculation
of Combined Ratio before the Impact of the LPT Agreement
(In
thousands, except for percentages)
|
Three
Months Ended December 31,
|
Years
Ended
December
31,
|
|||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
|
(unaudited)
|
||||||||||||||||
|
Net
Premiums Earned
|
$ | 106,105 | $ | 84,448 | $ | 328,947 | $ | 346,884 | ||||||||
|
Losses
and Loss Adjustment Expenses
|
$ | 56,171 | $ | 31,966 | $ | 136,515 | $ | 143,302 | ||||||||
|
Loss
& LAE Ratio
|
52.9 | % | 37.9 | % | 41.5 | % | 41.3 | % | ||||||||
|
Losses
and Loss Adjustment Expenses
|
$ | 56,171 | $ | 31,966 | $ | 136,515 | $ | 143,302 | ||||||||
|
Impacts
of LPT
|
4,513 | 4,340 | 18,421 | 18,034 | ||||||||||||
|
Loss
& LAE before impacts of LPT
|
$ | 60,684 | $ | 36,306 | $ | 154,936 | $ | 161,336 | ||||||||
|
LPT Impacts to the Loss &
LAE Ratio
|
4.3 | % | 5.1 | % | 5.6 | % | 5.2 | % | ||||||||
|
Loss
& LAE Ratio before impacts of LPT
|
57.2 | % | 43.0 | % | 47.1 | % | 46.5 | % | ||||||||
|
Commission
Expense
|
$ | 13,153 | $ | 8,539 | $ | 43,618 | $ | 44,336 | ||||||||
|
Commission Expense
Ratio
|
12.4 | % | 10.1 | % | 13.3 | % | 12.8 | % | ||||||||
|
Underwriting
& Other Operating Expenses
|
$ | 35,845 | $ | 23,621 | $ | 102,459 | $ | 91,399 | ||||||||
|
Underwriting
& Other Operating Expenses Ratio
|
33.8 | % | 28.0 | % | 31.1 | % | 26.3 | % | ||||||||
|
Total
Expense
|
$ | 105,169 | $ | 64,126 | $ | 282,592 | $ | 279,037 | ||||||||
|
Combined
Ratio
|
99.1 | % | 75.9 | % | 85.9 | % | 80.4 | % | ||||||||
|
Total
Expense before impacts of the LPT
|
$ | 109,682 | $ | 68,466 | $ | 301,013 | $ | 297,071 | ||||||||
|
Combined
Ratio before impacts of LPT
|
103.4 | % | 81.1 | % | 91.5 | % | 85.6 | % | ||||||||
Page 12 of 12