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): August 7, 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.)
|
|
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 August 7, 2008, Employers Holdings,
Inc. (the "Company") issued a press release announcing results for the second
quarter ended June 30, 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
9 – Financial Statements and Exhibits
Item
9.01. Financial Statements and Exhibits.
99.1 Employers
Holdings, Inc. press release, dated August 7, 2008.
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: August
7, 2008
Exhibit
Index
|
Exhibit
No.
|
Exhibit
|
|
99.1
|
Employers
Holdings, Inc. press release, dated August 7,
2008.
|
Exhibit
99.1
NEWS RELEASE
| August 7, 2008 | For Immediate Release |
0;
Employers
Holdings, Inc. Reports Second Quarter Earnings
Reno,
Nevada—August 7, 2008—Employers Holdings, Inc. ("EHI" or the "Company")
(NYSE:EIG) today reported results for the second quarter ended June 30,
2008.
Second
quarter consolidated net income was $27.4 million or $0.55 per share in 2008
compared to $30.8 million or $0.58 per share in the second 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 $22.8
million or $0.46 per share in the second quarter of 2008 and $26.2 million or
$0.49 per share in the second quarter of 2007.
Net
income for the six months ended June 30, 2008 was $52.9 million or $1.07 per
share compared with $58.6 million or $1.11 per pro forma share for the six
months ended June 30, 2007. For the first six months of 2008, net
income before the impact of the LPT was $43.5 million or $0.88 per share and
$49.5 million or $0.94 per pro
forma share for the same period in 2007.
Commenting
on the Company’s performance, President and Chief Executive Officer Douglas D.
Dirks said, “Trends reported in the first quarter of 2008 continue as our policy
count growth remains strong and we recognize benefits from declining losses in
prior years. Our acquisition of AmCOMP Incorporated has been delayed and the
required approvals from AmCOMP shareholders and the Florida Office of Insurance
Regulation remain outstanding. EMPLOYERS is committed to the acquisition, but we
will continue to act in the best long-term interests of the Company and our
shareholders.”
Second
quarter net premiums earned declined $10.3 million or 12.2% to $73.8 million in
2008 from $84.1 million in 2007. Net premiums earned for the six months ended
June 30, 2008, were $149.7 million compared to $173.9 million for the same
period in 2007. Declines in premium were largely due to rate decreases resulting
from previously enacted reforms in California, increased competition and changes
in economic and business conditions in some of the Company’s operating areas.
These impacts were partially offset by an overall in force policy count increase
of 10.6% to 35,299 at June 30, 2008 from 31,902 at June 30,
2007.
Second
quarter net investment income decreased $0.8 million in 2008 primarily due to a
decrease in invested assets and a decrease in the pre-tax average book yield
from 4.40% to 4.26%. Net investment income for the six months ended June 30,
2008 decreased 6.7% to $37.4 million from $40.1 million for the same period in
2007 largely due to: (1) one-time interest income of $1.8 million received in
the first quarter of 2007 from the invested net proceeds related to the issuance
of common stock as part of the
Company’s
conversion from a mutual insurance holding company; and (2) a slight decrease in
pre-tax book yield.
Realized
losses on investments for the second quarter of 2008 totaled $0.2 million
compared with realized losses of $0.7 million for the second quarter of
2007. For the six months ended June 30, 2008, realized losses on
investments were $1.7 million compared with $0.5 million for the six months
ended June 30, 2007 due primarily to a decline in the value of equity securities
in the financial services and telecommunications sectors.
Second
quarter losses and LAE decreased 16.2% to $24.1 million in 2008 compared with
$28.8 million in 2007. Before the impact of the LPT, losses and LAE would have
been $28.7 million in the second quarter of 2008 and $33.4 million in the second
quarter of 2007. The decline in losses and LAE was largely due to a reduction in
net premiums earned, a reduction in the current year loss estimate, and
favorable prior accident year development of $16.9 million in this year’s second
quarter compared with favorable development of $20.4 million in the second
quarter of last year. Losses and LAE for the six months ended June 30, 2008
decreased 22.3% to $54.8 million from $70.5 million in the six months ended June
30, 2007. Excluding the impact of the LPT, losses and LAE would have been $64.1
million and $79.6 million for the six months ended June 30, 2008 and 2007,
respectively. The decrease in losses and LAE for the six month period was
primarily due to changes in net earned premiums, favorable prior accident year
loss development of $28.3 million in 2008 compared with $36.0 million in 2007,
and a reduction in the current year’s loss estimate to 61.7% in 2008 from 66.5%
in 2007.
In the
second quarter of 2008, commission expense of $9.7 million decreased from $11.7
million in the second quarter of 2007. Commission expense for the first six
months of 2008 decreased 13.0% to $20.3 million from $23.4 million for the same
period in 2007. Decreases were largely due to the decline in premiums written
and agency incentive commissions.
Second
quarter underwriting and other operating expense was essentially flat at $23.0
million in 2008 compared to $22.8 million in 2007. For the first six months of
2008, underwriting and other operating expense decreased 2.9% to $44.7 million
from $46.1 million in the same period of 2007 primarily due to reduced
consulting fees, a decline in premium taxes due to lower net premiums earned,
and a favorable credit related to prior year’s taxes.
Income
taxes of $8.3 million for the second quarter of 2008 decreased from $9.8 million
for the second quarter of 2007 due to lower pre-tax income. The Company’s
effective tax rate was 23.4% in the second quarter of 2008 compared with 24.2%
in the second quarter of 2007. Income taxes in the first six months of 2008
decreased to $13.6 million from $17.2 million in the first six months of 2007
due to lower pre-tax income. The effective tax rate for the six months ended
June 30, 2008 was 20.5%.
The
second quarter 2008 combined ratio of 77.0% (83.2% before the LPT) increased 1.8
percentage points from the second quarter 2007 combined ratio of 75.2% (80.6%
before the LPT). For the first six months in 2008, the combined ratio
improved 0.4 percentage points to 80.0% (86.3% before the LPT) from 80.4% (85.7%
before the LPT) for the same period in 2007.
Page 2
of 10
As of
June 30, 2008, total stockholders’ equity increased to $398.2 million from
$379.5 million at December 31, 2007. Equity, including the deferred reinsurance
gain related to the LPT, increased 1.2% to $813.8 million from $804.5 million at
December 31, 2007.
Conference Call and Web
Cast, Form 10-Q
The
Company will host a conference call Friday, August 8, 2008, at 10:30 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 following the call. The conference call
replay number is (888) 286-8010 with a passcode of 15205504. International
callers may dial (617) 801-6888.
EHI
will file its Form 10-Q for the period ended June 30, 2008, with the Securities
and Exchange Commission (“SEC”) on Friday, August 8, 2008. The Form 10-Q 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,
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.
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 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
Page 3
of 10
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.
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 impact 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
Form 10-Qs for the periods ended March 31 and June 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
Page 4
of 10
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 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, 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 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
© 2008 EMPLOYERS. All rights reserved. EMPLOYERS and America’s small business
insurance specialist. are registered trademarks of Employers Insurance Company
of Nevada. Workers’ compensation insurance and services are offered through
Employers Insurance Company of Nevada and Employers Compensation Insurance
Company.
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. The company,
through its subsidiaries, operates in 12 states from 12 office locations. The
company’s insurance subsidiaries, Employers Insurance Company of Nevada and
Employers Compensation Insurance Company, are rated A- (Excellent) by the A.M.
Best Company.
CONTACT:
Media – Trish White, Director, Corporate
Communications, twhite@employers.com, (775) 327-2636
Analysts – Vicki Erickson, Vice President,
Investor Relations,
verickson@employers.com, (775) 327-2794
Page 5
of 10
Employers
Holdings, Inc.
Consolidated
Statements of Income
(In
thousands)
|
Three Months
Ended
|
Six Months
Ended
|
|||||||
|
|
June
30,
|
June
30,
|
||||||
|
2008
|
2007
|
2008
|
2007
|
|||||
|
(unaudited)
|
||||||||
|
Revenues
|
|||||||||||||||||||||||||||||||
|
Gross
premiums
written
|
$
|
73,152
|
$
|
84,596
|
$
|
154,826
|
$
|
181,046
|
|||||||||||||||||||||||
|
Net
premiums written
|
$
|
70,389
|
$
|
81,502
|
$
|
149,493
|
$
|
174,713
|
|||||||||||||||||||||||
|
Net
premiums earned
|
$
|
73,815
|
$
|
84,117
|
$
|
149,711
|
$
|
173,909
|
|||||||||||||||||||||||
|
Net
investment income
|
18,538
|
19,305
|
37,441
|
40,140
|
|||||||||||||||||||||||||||
|
Realized
losses on investments, net
|
(219
|
)
|
(658)
|
(1,707
|
)
|
(468)
|
|||||||||||||||||||||||||
|
Other
income
|
422
|
1,046
|
860
|
2,186
|
|||||||||||||||||||||||||||
|
Total
revenues
|
92,556
|
103,810
|
186,305
|
215,767
|
|||||||||||||||||||||||||||
|
Expenses
|
|||||||||||||||||||||||||||||||
|
Losses
and loss adjustment expenses
|
24,142
|
28,802
|
54,756
|
70,469
|
|||||||||||||||||||||||||||
|
Commission
expense
|
9,721
|
11,665
|
20,344
|
23,386
|
|||||||||||||||||||||||||||
|
Underwriting
and other operating
expense
|
22,981
|
22,752
|
44,707
|
46,052
|
|||||||||||||||||||||||||||
|
Total
expenses
|
56,844
|
63,219
|
119,807
|
139,907
|
|||||||||||||||||||||||||||
|
Net
income before income taxes
|
35,712
|
40,591
|
66,498
|
75,860
|
|||||||||||||||||||||||||||
|
Income
taxes
|
8,346
|
9,818
|
13,638
|
17,221
|
|||||||||||||||||||||||||||
|
Net
income
|
$
|
27,366
|
$
|
30,773
|
$
|
52,860
|
$
|
58,639
|
|||||||||||||||||||||||
|
Net
income after date of conversion
through
June 30, 2007
|
$
|
52,168
|
|||||||||||||||||||||||||||||
| Reconciliation of net income to net income before impact of LPT Agreement | |||||||||||||||||||||||||||||||
|
Net
income
|
$
|
27,366
|
$
|
30,773
|
$
|
52,860
|
$
|
58,639
|
|||||||||||||||||||||||
| Less: Impact of LPT Agreement | |||||||||||||||||||||||||||||||
|
Amortization
of deferred
reinsurance
gain – LPT
Agreement
|
4,567
|
4,550
|
9,359
|
9,137
|
|||||||||||||||||||||||||||
|
Net
income before LPT Agreement
|
$
|
22,799
|
$
|
26,223
|
$
|
43,501
|
$
|
49,502
|
|||||||||||||||||||||||
Page 6
of 10
Employers
Holdings, Inc.
Consolidated
Statements of Income
(In
thousands, except share and per share data)
|
For
the three months ended
June
30,
|
For six
months ended
June
30,
|
For
the period February 5,
Through
June 30,
|
||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
|
(unaudited)
|
||||||||||||||||
|
Net
Income
|
$
|
27,366
|
$
|
30,773
|
$
|
52,860
|
$
|
52,168
|
||||||||
|
Earnings
per common share
|
||||||||||||||||
|
Basic
|
$
|
0.55
|
$
|
0.58
|
$
|
1.07
|
$
|
0.97
|
||||||||
|
Diluted
|
$
|
0.55
|
$
|
0.58
|
$
|
1.07
|
$
|
0.97
|
||||||||
|
Weighted
average shares outstanding
|
||||||||||||||||
|
Basic
|
49,407,135
|
53,500,722
|
49,509,173
|
53,510,963
|
||||||||||||
|
Diluted
|
49,457,781
|
53,500,722
|
49,545,264
|
53,510,963
|
||||||||||||
|
Pro forma for six
months
ended
June 30,
|
||||||||||||||||
|
2007
|
||||||||||||||||
|
Net
Income
|
$
|
58,639
|
||||||||||||||
|
Earnings
per common share
|
||||||||||||||||
|
Basic
|
$
|
1.11
|
||||||||||||||
|
Diluted
|
$
|
1.11
|
||||||||||||||
|
Weighted
average shares outstanding
|
||||||||||||||||
|
Basic
(1)
|
52,832,048
|
|||||||||||||||
|
Diluted
(1)
|
52,832,048
|
|||||||||||||||
|
For
the three months ended
June
30,
|
For six
months ended
June
30,
|
Pro forma for six
months
ended
June 30,
|
||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
|
Earnings
per common share for the three month period:
|
||||||||||||||||
|
Basic
|
$
|
0.55
|
$
|
0.58
|
$
|
1.07
|
$
|
1.11
|
||||||||
|
Diluted
|
$
|
0.55
|
$
|
0.58
|
$
|
1.07
|
$
|
1.11
|
||||||||
|
Earnings
per common share attributable to the LPT Agreement
|
||||||||||||||||
|
Basic
|
$
|
0.09
|
$
|
0.09
|
$
|
0.19
|
$
|
0.17
|
||||||||
|
Diluted
|
$
|
0.09
|
$
|
0.09
|
$
|
0.19
|
$
|
0.17
|
||||||||
|
Pro forma Earnings per
common share before the LPT Agreement
|
||||||||||||||||
|
Basic
|
$
|
0.46
|
$
|
0.49
|
$
|
0.88
|
$
|
0.94
|
||||||||
|
Diluted
|
$
|
0.46
|
$
|
0.49
|
$
|
0.88
|
$
|
0.94
|
||||||||
|
(1) The
pro forma
earnings per common share for the six months ended June 30, 2007, was
computed using the actual weighted average shares outstanding as of June
30, 2007. This includes shares outstanding for the period after the
Company’s conversion on February 5, 2008 (53,510,963), and for the period
prior to the conversion assuming the common stock available to eligible
members (50,000,002).
|
||||||||||||||||
Page 7
of 10
Employers
Holdings, Inc.
Consolidated
Balance Sheets
(In
thousands, except share data)
|
June
30,
|
December
31,
|
|||||||
|
2008
|
2007
|
|||||||
|
Assets
|
(unaudited)
|
|||||||
|
Available
for
Sale:
|
||||||||
|
Fixed
maturity
investments at fair value (amortized cost $1,547,613 at
June
30, 2008 and $1,594,159 at December 31, 2007)
|
$ | 1,550,700 | $ | 1,618,903 | ||||
|
Equity
securities at fair value (cost of
$57,787 at June 30, 2008 and $60,551
at December
31, 2007)
Short-term
investments at fair value (amortized cost $65,309 at June 30,
2008)
|
91,398
65,238
|
107,377
--
|
||||||
|
Total
investments
|
1,707,336 | 1,726,280 | ||||||
|
Cash
and cash equivalents
|
152,657 | 149,703 | ||||||
|
Accrued
investment income
|
19,765 | 19,345 | ||||||
|
Premiums
receivable, less bad debt allowance of $6,458 at June 30, 2008 and
$6,037
at December 31, 2007
|
24,840 | 36,402 | ||||||
|
Reinsurance
recoverable for:
|
||||||||
|
Paid
losses
|
10,607 | 10,218 | ||||||
|
Unpaid
losses, less allowance of
$1,308 at each period
|
1,030,632 | 1,051,333 | ||||||
|
Funds
held by or deposited with reinsureds
|
92,309 | 95,884 | ||||||
|
Deferred
policy acquisition costs
|
14,562 | 14,901 | ||||||
|
Deferred
income taxes, net
|
66,604 | 59,730 | ||||||
|
Property
and equipment, net
|
13,586 | 14,133 | ||||||
|
Other
assets
|
15,119 | 13,299 | ||||||
|
Total
assets
|
$ | 3,148,017 | $ | 3,191,228 | ||||
|
Liabilities
and stockholders’ equity
|
||||||||
|
Claims
and policy liabilities:
|
||||||||
|
Unpaid losses
and loss adjustment expenses
|
$ | 2,231,247 | $ | 2,269,710 | ||||
|
Unearned
premiums
|
59,899 | 63,924 | ||||||
|
Policyholders’
dividends accrued
|
158 | 386 | ||||||
|
Total
claims and policy liabilities
|
2,291,304 | 2,334,020 | ||||||
|
Commissions
and premium taxes payable
|
5,633 | 7,493 | ||||||
|
Federal
income taxes payable
|
10,387 | 13,884 | ||||||
|
Accounts
payable and accrued expenses
|
15,850 | 20,682 | ||||||
|
Deferred
reinsurance gain–LPT Agreement
|
415,643 | 425,002 | ||||||
|
Other
liabilities
|
11,047 | 10,694 | ||||||
|
Total
liabilities
|
2,749,864 | 2,811,775 | ||||||
|
Commitments
and contingencies:
Stockholders’
equity
|
||||||||
|
Common stock, $0.01 par value;
150,000,000 shares authorized;
|
||||||||
|
53,528,007
and 53,527,907 issued and 49,241,435 and 49,616,635
|
||||||||
|
outstanding at, June 30, 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
|
304,352 | 302,862 | ||||||
|
Retained
earnings
|
151,454 | 104,536 | ||||||
|
Accumulated
other comprehensive income, net
|
23,808 | 46,520 | ||||||
|
Treasury
stock, at cost (4,286,572 shares at June 30, 2008 and
3,911,272
|
||||||||
|
shares
at December 31, 2007)
|
(81,996 | ) | (75,000 | ) | ||||
|
Total
stockholders’ equity
|
398,153 | 379,453 | ||||||
|
Total
liabilities and stockholders’ equity
|
$ | 3,148,017 | $ | 3,191,228 | ||||
|
Equity
including deferred reinsurance gain – LPT
|
||||||||
|
Total
stockholders’ equity
|
$ | 398,153 | $ | 379,453 | ||||
|
Deferred
reinsurance gain – LPT Agreement
|
415,643 | 425,002 | ||||||
|
Total
equity including deferred reinsurance gain – LPT Agreement
|
$ | 813,796 | $ | 804,455 | ||||
Page 8
of 10
Employers
Holdings, Inc.
Consolidated
Statements of Cash Flows
(In
thousands)
|
Six
months ended June 30,
|
||||||||||
|
2008
|
2007
|
|||||||||
|
(unaudited)
|
||||||||||
|
Operating
activities
|
||||||||||
|
Net
income
|
$
|
52,860
|
$
|
58,639
|
||||||
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||||
|
Depreciation and amortization
|
3,317
|
2,892
|
||||||||
|
Stock-based compensation
|
1,487
|
206
|
||||||||
|
Amortization of premium on investments, net
|
3,226
|
3,301
|
||||||||
|
Allowance for doubtful accounts – premiums receivable
|
421
|
855
|
||||||||
|
Deferred
income tax expense
|
5,357
|
4,372
|
||||||||
|
Realized
losses on investments, net
|
1,707
|
468
|
||||||||
|
Change
in operating assets and liabilities:
|
||||||||||
|
Accrued investment income
|
(420
|
)
|
(702
|
)
|
||||||
|
Premiums receivable
|
11,141
|
2,919
|
||||||||
|
Reinsurance recoverable on paid and unpaid losses
|
20,312
|
16,457
|
||||||||
|
Funds held by or deposited with reinsureds
|
3,575
|
3,665
|
||||||||
|
Unpaid losses and loss adjustment expenses
|
(38,463
|
)
|
(13,503
|
)
|
||||||
|
Unearned premiums
|
(4,025
|
)
|
219
|
|||||||
|
Federal income taxes payable
|
(3,497
|
)
|
(9,652
|
)
|
||||||
|
Accounts payable, accrued expenses and other liabilities
|
(2,651
|
)
|
(9,703
|
)
|
||||||
|
Deferred reinsurance gain–LPT Agreement
|
(9,359
|
)
|
(9,137
|
)
|
||||||
|
Other
|
(2,106
|
)
|
1,778
|
|||||||
|
Net
cash provided by operating activities
|
42,882
|
53,074
|
||||||||
|
Investing
activities
|
||||||||||
|
Purchase
of fixed maturities
|
(152,424
|
)
|
(135,033
|
)
|
||||||
|
Purchase
of equity securities
|
(1,063
|
)
|
(833
|
)
|
||||||
|
Proceeds
from sale of fixed maturities
|
111,917
|
114,572
|
||||||||
|
Proceeds
from sale of equity securities
|
2,135
|
1,906
|
||||||||
|
Proceeds
from maturities and redemptions of investments
Capitalized
acquisition costs
|
16,210
(959
|
)
|
20,049
----
|
|||||||
|
Capital
expenditures and other, net
|
(2,739
|
)
|
(2,915
|
)
|
||||||
|
Net
cash used in investing activities
|
(26,923
|
)
|
(2,254
|
)
|
||||||
|
|
||||||||||
|
Financing
activities
|
||||||||||
|
Issuance
of common stock, net
|
—
|
486,783
|
||||||||
|
Cash
paid to eligible policyholders under plan of conversion
Proceeds
from exercise of stock options
|
—
2
|
(462,989
—
|
)
|
|||||||
|
Acquisition
of treasury stock
|
(6,691
|
)
|
(2,112
|
)
|
||||||
|
Dividend
paid to stockholders
Debt
issuance costs
|
(5,941
(375
|
)
)
|
(3,212
—
|
)
|
||||||
|
Net
cash (used in) provided by financing activities
|
(13,005
|
)
|
18,470
|
|||||||
|
Net
increase in cash and cash equivalents
|
2,954
|
69,290
|
||||||||
|
Cash
and cash equivalents at the beginning of the year
|
149,703
|
79,984
|
||||||||
|
Cash
and cash equivalents at the end of the year
|
$
|
152,657
|
$
|
149,274
|
||||||
|
Schedule
of non-cash transactions
|
||||||||||
|
Stock
issued in exchange for membership interest
|
$
|
—
|
$
|
281,073
|
||||||
Page 9
of 10
Employers
Holdings, Inc.
Calculation
of Combined Ratio before the Impact of the LPT Agreement
(In
thousands, except for percentages)
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||||
|
June
30,
|
June
30,
|
||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
||||||||||||
|
(unaudited)
|
|||||||||||||||
|
Net
Premiums Earned
|
$
|
73,815
|
$
|
84,117
|
$
|
149,711
|
$
|
173,909
|
|||||||
|
Losses
and Loss Adjustment Expenses
|
$
|
24,142
|
$
|
28,802
|
$
|
54,756
|
$
|
70,469
|
|||||||
|
Loss & LAE Ratio
|
32.7
|
%
|
34.2
|
%
|
36.6
|
%
|
40.5
|
%
|
|||||||
|
Losses
and Loss Adjustment Expenses
|
$
|
24,142
|
$
|
28,802
|
$
|
54,756
|
$
|
70,469
|
|||||||
|
Impacts
of LPT
|
4,567
|
4,550
|
9,359
|
9,137
|
|||||||||||
|
Loss & LAE before impacts of LPT
|
$
|
28,709
|
$
|
33,352
|
$
|
64,115
|
$
|
79,606
|
|||||||
|
Loss & LAE Ratio before impacts of LPT
|
38.9
|
%
|
39.6
|
%
|
42.8
|
%
|
45.8
|
%
|
|||||||
|
Commission
Expense
|
$
|
9,721
|
$
|
11,665
|
$
|
20,344
|
$
|
23,386
|
|||||||
|
Commission Expense Ratio
|
13.2
|
%
|
13.9
|
%
|
13.6
|
%
|
13.4
|
%
|
|||||||
|
Underwriting
& Other Operating Expense
|
$
|
22,981
|
$
|
22,752
|
$
|
44,707
|
$
|
46,052
|
|||||||
|
Underwriting & Other Operating Expense Ratio
|
31.1
|
%
|
27.0
|
%
|
29.9
|
%
|
26.5
|
%
|
|||||||
|
Total
Expense
|
$
|
56,844
|
$
|
63,219
|
$
|
119,807
|
$
|
139,907
|
|||||||
|
Combined Ratio
|
77.0
|
%
|
75.2
|
%
|
80.0
|
%
|
80.4
|
%
|
|||||||
|
Total
Expense before impacts of the LPT
|
$
|
61,411
|
$
|
67,769
|
$
|
129,166
|
$
|
149,044
|
|||||||
|
Combined Ratio before the impacts of the LPT
|
83.2
|
%
|
80.6
|
%
|
86.3
|
%
|
85.7
|
%
|
|||||||
Page 10 of 10