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 26, 2008 (February 21,
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
(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 26, 2008, Employers
Holdings, Inc. (the "Company") issued a press release announcing results for the
fourth quarter ended September 30, 2007 and the year end December 31,
2007. The press release is attached hereto as Exhibit 99.1 and is
being furnished, not filed, under Item 2.02 to this Current Report on Form 8-K
and is incorporated by reference herein.
Section
8 – Other Information
Item
8.01. Other Events.
On February 26, 2008, the Company
announced that its Board of Directors approved a quarterly dividend on its
common stock of $0.06 per share. The dividend is payable on March 27,
2008 to shareholders of record as of March 7, 2008. Furnished as
Exhibit 99.2 and incorporated herein by reference is the press release issued by
the Company.
On February 26, 2008, the Company also
announced that its Board of Directors authorized management to repurchase up to
$100,000,000 worth of the Company's common stock through June 30,
2009. The Company intends to use this authorization to repurchase
shares opportunistically from time to time in open market or private
transactions. The Company has no obligation to repurchase shares
under the authorization, and the specific timing and amount of the stock
repurchased will vary based on market conditions, securities law limitations and
other factors. Furnished as Exhibit 99.2 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 26, 2008.
99.2 Employers
Holdings, Inc. press release, dated February 26, 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: February
26, 2008
Exhibit
Index
|
Exhibit
No.
|
Exhibit
|
|
|
99.1
|
Employers
Holdings, Inc. press release, dated February 26, 2008.
|
|
|
99.2
|
Employers
Holdings, Inc. press release, dated February 26,
2008.
|
Exhibit 99.1
|
February 26,
2008
|
For Immediate
Release
|
Employers
Holdings, Inc. Reports Fourth Quarter and Full Year 2007 Earnings
Reno,
Nevada—February 26, 2008—Employers Holdings, Inc. (“EHI” or the “Company”)
(NYSE:EIG) today reported results for the fourth quarter and year ended December
31, 2007.
Commenting
on the Company’s performance, President and Chief Executive Officer Douglas D.
Dirks said, “We are pleased that our business model continued to produce
profitable, solid results throughout 2007. In California, our largest market,
benefits from declining loss trends continued in 2007, although previously
observed favorable impacts from the workers' compensation reforms appear to be
moderating both in terms of loss costs and rate declines. We look forward to
completing our recently announced acquisition of AmCOMP, which will expand and
diversify our geographic footprint, providing immediate growth in premium volume
and a substantial increase in scale.”
Fourth
quarter consolidated net income was $31.8 million or $0.64 per share in 2007
compared to $55.1 million or $1.10 pro forma per share in 2006. Net income in
2007 was $120.3 million ($2.32 pro forma per share and $2.19 per share for the
period February 5 through December 31, 2007) compared to $171.6 million ($3.43
pro forma per share) in 2006.
Net
income includes amortization of the deferred reinsurance gain related to the
Loss Portfolio Transfer (“LPT”) Agreement. Fourth quarter consolidated net
income before the impacts of the LPT (the Company’s non-GAAP measure described
below) was $27.4 million in 2007 and $50.3 million in 2006. For the full year
2007, net income before the impact of the LPT was $102.2 million compared with
$152.2 million in 2006.
Fourth quarter net premiums earned
declined 9.0% to $84.4 million in 2007 from $92.8 million in 2006. Net premiums
earned for the twelve months ended December 31, 2007, were $346.9 million
compared to $393.0 million for the same period in 2006, a decrease of 11.7%. The
declines were largely due to rate decreases resulting from previously enacted
reforms in California and declines in policy count in Nevada as a result of
adherence to the Company’s underwriting guidelines. The impact of these rate
decreases was partially offset by an overall in-force policy count increase of
13.3%, from 29,742 at December 31, 2006 to 33,699 at December 31,
2007. The average policy
premium at December 31, 2007 was $10,275 compared to $13,200 at December 31,
2006.
Fourth
quarter net investment income increased 4.1% compared to the fourth quarter in
2006 due to an increase in invested assets. Net investment income for the full
year increased 15.3% to $78.6 million from $68.2 million in 2006. The increase
was primarily attributable to the following three factors: (1) a 15 basis point
increase in the full year 2007 pre-tax yield of 4.37% on invested assets which
resulted in increased investment income of $1.9 million; (2) an increase in
invested assets that resulted in additional investment income of $6.3 million in
2007; and (3) interest income of $1.8 million generated from the invested net
proceeds from the issuance of the Company’s common stock as part of the
Company’s conversion from a mutual insurance holding company.
Realized
gains for the fourth quarter of 2007 totaled $0.5 million compared to $48.6
million for the fourth quarter of 2006. For the full year, realized gains
decreased to $0.2 million from $54.3 million. This difference was primarily due
to the sale of equity securities in the fourth quarter of 2006, as the Company
elected to reduce the amount of equity securities in its investment portfolio
from 15% to 6% in line with its investment guidelines.
Fourth
quarter losses and LAE were $32.0 million in 2007 compared with $34.0 million in
2006. Before the impact of the LPT, losses and LAE would have been $36.3 million
in the fourth quarter of 2007 and $38.8 million in the fourth quarter of 2006.
Favorable prior accident year reserve development was $16.6 million in the
fourth quarter of 2007 and $25.4 million in the fourth quarter of 2006. Losses
and LAE for the twelve months ended December 31, 2007 were $143.3 million
compared to $129.8 million for the twelve months ended December 31, 2006. This
change for the year was due to the large favorable prior accident year
adjustment of $107.1 million taken primarily in the third quarter of 2006. In
2007, as the impacts of California workers' compensation reforms appeared to
moderate, $60.0 million (net of $1.6 million commutation in the third quarter)
of favorable prior accident year adjustments were recognized. Before the impact
of the LPT, losses and LAE would have been $161.3 million and $149.1 million for
the twelve months ended December 31, 2007 and 2006, respectively.
In the
fourth quarter of 2007, commission expense of $8.5 million decreased from $11.6
million in the fourth quarter of 2006. Commission expense in the full year 2007
decreased 8.4% to $44.3 million from $48.4 million in 2006 largely due to
declines in premium and accrued income from the LPT contingent commission. These
impacts were partially offset by a two percentage point increase in the
Company’s commission rate on select policies incepting on or after July
2006.
Fourth
quarter underwriting and other operating expense decreased to $23.6 million in
2007 from $28.7 million in 2006 primarily due to a reduction in consulting fees.
For the full year 2007, underwriting and other operating expense increased $3.6
million or 4.1% to $91.4 million from $87.8 million in 2006. Increased expenses
include staffing attributable to the Company’s conversion to a public company in
combination with increased technology maintenance and depreciation.
Income
taxes for the fourth quarter and full year 2007 decreased due to decreases in
pre-tax income and lower effective tax rates. The Company’s effective tax rate
was 20.3% in 2007 compared with 32.5% in 2006 largely for three reasons: (1) a
decline in realized gains in 2007; (2) an increase in the ratio of tax exempt
interest and dividends to pre-tax income resulting from the Company’s
reallocation of its investment portfolio in the fourth quarter of 2006; and (3)
the $5.8 million reversal of a liability for previously unrecognized tax
benefits including interest in the third quarter of 2007. Additionally, in 2006
there were non-deductible expenses related to the conversion.
The
fourth quarter, 2007 combined ratio of 75.9% (81.1% before the LPT) declined
from the fourth quarter 2006 combined ratio of 80.0% (85.1% before the LPT). The
4.1 percentage point decrease was due primarily to decreases in commission and
underwriting expenses relative to the fourth quarter of 2006. The combined ratio
was 80.4% in 2007 compared to 67.7% in 2006 primarily due to the recognition of
favorable prior accident year development at higher levels in 2006 than in 2007
and increased operating expenses in 2007. Before the LPT, the combined ratio was
85.6% in 2007 compared with 72.6% in 2006.
Page 2 of
12
As of
December 31, 2007, total stockholders’ equity increased to $379.5 million from
$303.8 million at December 31, 2006. Equity, including the deferred reinsurance
gain related to the LPT agreement, increased 7.7% to $804.5 million from $746.8
million at December 31, 2006. Statutory surplus was $697.7 million at December
31, 2007, an increase of 8.9% compared with $640.5 at December 31,
2006.
Conference Call and Webcast,
Form 10-K
The
Company will host a conference call Wednesday, February 27, 2008 at 7:00 a.m.
Pacific Standard Time. The conference call will be available via a live
webcast on the Company’s website 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 46356674. International
callers may dial (617) 801-6888.
EHI
will file its Form 10-K for the period ended December 31, 2007, with the
Securities and Exchange Commission (“SEC”) in March, 2008. The Form 10-K will be
available without charge through the EDGAR system at the SEC's website and will
also be posted on the Company's website, 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 or under previous fronting facilities.
Page 3 of
12
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.
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
Forms 10-Q for the 2007 periods ended March 31, June 30, September 30, and the
Company’s 2006 Annual Report on Form 10-K.
Page 4 of
12
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 is a registered trademark of
Employers Insurance Company of Nevada and the marketing brand for a group of
companies providing workers’ compensation insurance and services. Insurance
is offered through Employers Compensation Insurance Company, except in Nevada,
where insurance is offered through Employers Insurance Company of Nevada.
Employers Compensation Insurance Company does not do business in all
jurisdictions. Please contact your local EMPLOYERS Sales Executive or visit
www.employers.com.
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
12
Employers
Holdings, Inc.
Consolidated Statements of
Income
(In thousands, except share and per
share data)
|
Quarter
Ended
|
||||||||
|
December
31
|
||||||||
|
2007
|
2006
|
|||||||
|
(Unaudited)
|
||||||||
|
Revenues
|
||||||||
|
Gross
written premiums
|
$
|
79,384
|
$
|
91,434
|
||||
|
Net
written premiums
|
$
|
76,537
|
$
|
87,714
|
||||
|
Net
premiums earned
|
$
|
84,448
|
$
|
92,849
|
||||
|
Net
investment income
|
19,237
|
18,472
|
||||||
|
Realized
(losses) gains on investments, net
|
502
|
48,617
|
||||||
|
Other
income
|
1,189
|
1,106
|
||||||
|
Total
revenues
|
105,376
|
161,044
|
||||||
|
Expenses
|
||||||||
|
Losses
and loss adjustment expenses
|
31,966
|
34,010
|
||||||
|
Commission
expense
|
8,539
|
11,615
|
||||||
|
Underwriting
and other operating expense
|
23,621
|
28,675
|
||||||
|
Total
expenses
|
64,126
|
74,300
|
||||||
|
Net
income before income taxes
|
41,250
|
86,744
|
||||||
|
Income
taxes
|
9,486
|
31,662
|
||||||
|
Net
income
|
$
|
31,764
|
$
|
55,082
|
||||
|
Earnings
per common share-basic and diluted (2)
(pro
forma for quarter ended December 31, 2006)
|
$
|
.64
|
$
|
1.10
|
(1) | |||
|
Reconciliation
of net income to net income before the impacts of the LPT
Agreement
|
$
|
31,764
|
$
|
55,082
|
||||
|
Less:
Amortization of deferred reinsurance gain – LPT Agreement
|
4,340
|
4,759
|
||||||
|
Net
Income before the impacts of LPT Agreement
|
$
|
27,424
|
$
|
50,323
|
||||
|
Pro
forma earnings per share data – basic and diluted – before
impacts of LPT Agreement, assuming the conversion from a mutual company to
a stock company (2)
– (pro forma for quarter ended December 31, 2006)
|
$
|
0.55
|
$
|
1.01
|
(1) | |||
|
Cash
dividends declared per common share
|
$
|
0.06
|
||||||
|
(1)
|
In
compliance with SEC requirements earnings per share is shown based on
50,000,002 shares issued in the conversion, for all historical periods
prior to the Company’s initial public offering. In future earnings
releases, our earnings per share for current periods will reflect the
weighted average shares outstanding for the
period.
|
|
(2)
|
Weighted
average number of common shares outstanding for quarter ended
12/31/07: 49,644,578 – Basic; 49,674,533 –
Diluted
|
Page 6 of
12
Employers
Holdings, Inc.
Consolidated Statements of
Income
(In thousands, except share and per
share data)
|
Year
Ended
|
||||||
|
December
31
|
||||||
|
2007
|
2006
|
|||||
|
Revenues
|
||||||
|
Gross
premiums written
|
$
|
350,696
|
$
|
401,756
|
||
|
Net
premiums written
|
$
|
338,569
|
$
|
387,184
|
||
|
Net
premiums earned
|
$
|
346,884
|
$
|
392,986
|
||
|
Net
investment income
|
78,623
|
68,187
|
||||
|
Realized
gains on investments, net
|
180
|
54,277
|
||||
|
Other
income
|
4,236
|
4,800
|
||||
|
Total
revenues
|
429,923
|
520,250
|
||||
|
Expenses
|
||||||
|
Losses
and loss adjustment expenses
|
143,302
|
129,755
|
||||
|
Commission
expense
|
44,336
|
48,377
|
||||
|
Underwriting
and other operating expense
|
91,399
|
87,826
|
||||
|
Total
expenses
|
279,037
|
265,958
|
||||
|
Net
income before income taxes
|
150,886
|
254,292
|
||||
|
Income
taxes
|
30,603
|
82,722
|
||||
|
Net
income
|
$
|
120,283
|
$
|
171,570
|
||
|
Net
income after date of conversion (February 5 through December 31,
2007)
|
$
|
113,812
|
||||
|
Earnings
per common share-basic and diluted-for the period
February
5 through December 31, 2007 (1)
|
$
|
2.19
|
||||
|
Pro
forma earnings per common share-basic and diluted (2,3)
(pro
forma for year ended December 31, 2006)
|
$
|
2.32
|
$
|
3.43
|
||
|
Cash
dividends declared per common share
|
$
|
0.18
|
||||
|
(1)
|
Weighted
average number of common shares outstanding for period February 5, 2007
through December 31, 2007: 51,933,827 –
Basic; 51,943,412 –
Diluted
|
|
(2)
|
In
compliance with SEC requirements earnings per share is shown based on
50,000,002 shares issued in the conversion, for all historical periods
prior to the Company’s initial public offering. In future earnings
releases, our earnings per share for current periods will reflect the
weighted average shares outstanding for the
period.
|
|
(3)
|
Weighted
average number of common shares outstanding at
12/31/07: 51,748,392 – Basic; 51,757,057 –
Diluted
|
Page 7 of
12
Employers
Holdings, Inc.
Reconciliation of net income and EPS to
net income and EPS
Before impact of LPT
Agreement
(In thousands, except share and
per share data)
Reconciliation
of net income and EPS to net income and EPS before impact of LPT
Agreement
|
Year Ended
|
||||||
|
December
31,
|
||||||
|
2007
|
2006
|
|||||
|
Net
income
|
$
|
120,283
|
$
|
171,570
|
||
|
Less: Impact
of LPT Agreement:
Amortization of deferred
reinsurance gain – LPT
|
18,034
|
19,373
|
||||
|
Pro
forma net income before impact of LPT Agreement
|
$
|
102,249
|
$
|
152,197
|
||
|
Net
income after date of conversion (February 5 through December 31,
2007)
|
$
|
113,812
|
||||
|
Earnings
per common share–basic and diluted – for the period February 5 through
December 31, 2007 (1)
|
$ |
2.19
|
$
|
---- | ||
|
Pro
forma earnings per common share–basic and diluted – for years ended
December 31 (2)
|
$
|
2.32
|
$
|
3.43
|
||
|
Less:
Earnings per common share attributable to amortization of deferred
reinsurance gain – LPT (3,
4)
|
$
|
0.35
|
$
|
0.39
|
||
|
Pro
forma earnings per common share data-basic and diluted-before impact of
LPT
(2, 4)
|
$
|
1.97
|
$
|
3.04
|
||
|
(1)
|
Weighted
average number of common shares outstanding for period February 5, 2007
through December 31, 2007: 51,933,827 –
Basic; 51,943,412 –
Diluted
|
|
(2)
|
In
compliance with SEC requirements earnings per share is shown based on
50,000,002 shares issued in the conversion, for all historical periods
prior to the Company’s initial public offering. In future earnings
releases, our earnings per share for current periods will reflect the
weighted average shares outstanding for the
period.
|
|
(3)
|
Earnings
per share before the impact of the LPT for the period February 5 through
December 31, 2007 has not been
calculated.
|
|
(4)
|
Weighted
average number of common shares outstanding at
12/31/07: 51,748,392 – Basic; 51,757,057 –
Diluted
|
Page 8 of
12
Employers
Holdings, Inc.
Consolidated Balance
Sheets
(In thousands, except share
data)
|
December
31,
|
||||||
|
2007
|
2006
|
|||||
|
Assets
|
||||||
|
Available
for Sale:
|
||||||
|
Fixed
maturity investments at fair value (amortized cost $1,594,159 in 2007
and $1,599,321 in 2006)
|
$
|
1,618,903
|
$
|
1,605,395
|
||
|
Equity
securities at fair value (cost $60,551 in 2007 and $63,478 in
2006)
|
107,377
|
102,289
|
||||
|
Short-term
investments (at cost or amortized cost, which approximates fair
value)
|
—
|
7,989
|
||||
|
Total
investments
|
1,726,280
|
1,715,673
|
||||
|
Cash
and cash equivalents
|
149,703
|
79,984
|
||||
|
Accrued
investment income
|
19,345
|
18,431
|
||||
|
Premiums
receivable, less bad debt allowance of $6,037 in 2007 and $6,911 in
2006
|
36,402
|
51,311
|
||||
|
Reinsurance
recoverable for:
|
||||||
|
Paid
losses
|
10,218
|
11,073
|
||||
|
Unpaid
losses, less allowance of $1,308 in 2007 and $1,276 in
2006
|
1,051,333
|
1,096,827
|
||||
|
Funds
held by or deposited with reinsureds
|
95,884
|
102,955
|
||||
|
Deferred
policy acquisition costs
|
14,901
|
13,767
|
||||
|
Deferred
income taxes, net
|
59,730
|
73,849
|
||||
|
Property
and equipment, net
|
14,133
|
15,598
|
||||
|
Other
assets
|
13,299
|
16,257
|
||||
|
Total
assets
|
$
|
3,191,228
|
$
|
3,195,725
|
||
|
Liabilities
and stockholders’ equity
|
||||||
|
Claims
and policy liabilities:
|
||||||
|
Unpaid losses
and loss adjustment expenses
|
$
|
2,269,710
|
$
|
2,307,755
|
||
|
Unearned
premiums
|
63,924
|
73,255
|
||||
|
Policyholders’
dividends accrued
|
386
|
506
|
||||
|
Total
claims and policy liabilities
|
2,334,020
|
2,381,516
|
||||
|
Commissions
and premium taxes payable
|
7,493
|
6,776
|
||||
|
Federal
income taxes payable
|
13,884
|
24,262
|
||||
|
Accounts
payable and accrued expenses
|
20,682
|
22,178
|
||||
|
Deferred
reinsurance gain–LPT Agreement
|
425,002
|
443,036
|
||||
|
Other
liabilities
|
10,694
|
14,180
|
||||
|
Total
liabilities
|
2,811,775
|
2,891,948
|
||||
|
Commitments
and contingencies
Stockholders’
equity:
|
||||||
|
Common stock, $0.01 par value;
150,000,000 shares authorized;
|
||||||
|
53,527,907 and 0 shares issued
and 49,616,635 and 0 shares
|
||||||
|
outstanding at December 31,
2007 and December 31, 2006, respectively
|
535
|
--
|
||||
|
Preferred stock, $0.01 par
value; 25,000,000 shares authorized; none issued
|
--
|
--
|
||||
|
Additional paid-in
capital
|
302,862
|
—
|
||||
|
Retained
earnings
|
104,536
|
274,602
|
||||
|
Accumulated other comprehensive income, net
|
46,520
|
29,175
|
||||
|
Treasury
stock, at cost (3,911,272 shares at December 31, 2007and 0 shares at
December 31, 2006)
|
(75,000)
|
—
|
||||
|
Total
stockholders’ equity
|
379,453
|
303,777
|
||||
|
Total
liabilities and stockholders’ equity
|
$
|
3,191,228
|
3,195,725
|
|||
|
Equity
including deferred reinsurance gain – LPT
|
||||||
|
Total
stockholders’ equity
|
$
|
379,453
|
$
|
303,777
|
||
|
Deferred
reinsurance gain – LPT Agreement
|
425,002
|
443,036
|
||||
|
Total
equity including deferred reinsurance gain – LPT Agreement
|
$
|
804,455
|
$
|
746,813
|
||
Page 9 of
12
Employers
Holdings, Inc.
Consolidated Statements of Cash
Flows
(In thousands)
|
Year
Ended
|
|||||||
|
December
31,
|
|||||||
|
2007
|
2006
|
||||||
|
Operating
activities
|
|||||||
|
Net
income
|
$
|
120,283
|
$
|
171,570
|
|||
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|||||||
|
Depreciation
|
6,406
|
4,152
|
|||||
|
Stock-based
compensation
|
1,720
|
--
|
|||||
|
Amortization of premium on
investments, net
|
6,430
|
5,496
|
|||||
|
Allowance for doubtful accounts –
premiums receivable
|
(874
|
)
|
294
|
||||
|
Allowance for doubtful accounts –
unpaid reinsurance recoverable
|
32
|
—
|
|||||
|
Deferred income tax
expense
|
4,779
|
5,980
|
|||||
|
Realized gains on investments,
net
|
(180
|
)
|
(54,277
|
)
|
|||
|
Realized losses on retirement of
assets
|
23
|
—
|
|||||
|
Change in operating assets and
liabilities:
|
|||||||
|
Accrued investment
income
|
(914
|
)
|
(4,135
|
)
|
|||
|
Premiums
receivable
|
15,783
|
8,206
|
|||||
|
Reinsurance recoverable on paid
and unpaid losses
|
46,317
|
43,266
|
|||||
|
Funds held by or deposited with
reinsureds
|
7,071
|
11,220
|
|||||
|
Unpaid losses and loss adjustment
expenses
|
(38,045
|
)
|
(42,226
|
)
|
|||
|
Unearned premiums
|
(9,331
|
)
|
(7,480
|
)
|
|||
|
Federal income taxes
payable
|
(10,378
|
)
|
4,393
|
||||
|
Accounts payable, accrued
expenses and other liabilities
|
(9,428
|
)
|
11,025
|
||||
|
Deferred reinsurance gain–LPT
Agreement
|
(18,034
|
)
|
(19,373
|
)
|
|||
|
Other
|
(1,506
|
)
|
(16,300
|
)
|
|||
|
Net
cash provided by operating activities
|
120,154
|
121,811
|
|||||
|
Investing
activities
|
|||||||
|
Purchase
of fixed maturities
|
(252,275
|
)
|
(678,026
|
)
|
|||
|
Purchase
of equity securities
|
(1,037
|
)
|
(12,224
|
)
|
|||
|
Proceeds
from sale of fixed maturities
|
208,697
|
245,216
|
|||||
|
Proceeds
from sale of equity securities
|
4,264
|
189,815
|
|||||
|
Proceeds
from maturities and redemptions of investments
|
55,475
|
165,021
|
|||||
|
Capital
expenditures and other, net
|
(4,964
|
)
|
(9,635
|
)
|
|||
|
Net
cash provided by (used in) investing activities
|
10,160
|
(99,833
|
)
|
||||
|
Financing
activities
|
|||||||
|
Issuance
of common stock, net
|
486,670
|
(3,077
|
)
|
||||
|
Cash
paid to eligible policyholders under plan of conversion
|
(462,989
|
)
|
—
|
||||
|
Acquisition
of treasury stock
|
(75,000
|
)
|
—
|
||||
|
Dividend
paid to stockholders
|
(9,276
|
)
|
—
|
||||
|
Net
cash used by financing activities
|
(60,595
|
)
|
(3,077
|
)
|
|||
|
Net
increase in cash and cash equivalents
|
69,719
|
18,901
|
|||||
|
Cash
and cash equivalents at the beginning of the year
|
79,984
|
61,083
|
|||||
|
Cash
and cash equivalents at the end of the year
|
$
|
149,703
|
$
|
79,984
|
|||
|
Cash
paid for income taxes
|
$
|
36,200
|
$
|
72,349
|
|||
|
Schedule
of non-cash transactions
|
|||||||
|
Stock
issued in exchange for membership interest
|
$
|
281,073
|
$
|
—
|
|||
Page 10
of 12
Employers
Holdings, Inc.
Calculation of Combined Ratio before the
Impacts of the LPT Agreement
(In thousands, except for percentages)
(In thousands, except for percentages)
|
Quarter
Ended
|
|||||||
|
December 31,
|
|||||||
|
2007
|
2006
|
||||||
|
Net
Premiums Earned
|
$
|
84,448
|
$
|
92,849
|
|||
|
Losses
and Loss Adjustment Expenses (LAE)
|
$
|
31,966
|
$
|
34,010
|
|||
|
Loss & LAE
Ratio
|
37.9
|
%
|
36.6
|
%
|
|||
|
Amortization
of deferred reinsurance gain - LPT
|
$
|
4,340
|
$
|
4,759
|
|||
|
Impacts
of LPT
|
5.1
|
%
|
5.1
|
%
|
|||
|
Loss & LAE before impacts
of LPT
|
$
|
36,306
|
$
|
38,769
|
|||
|
Loss & LAE Ratio before
impacts of LPT
|
43.0
|
%
|
41.8
|
%
|
|||
|
Commission
Expense
|
$
|
8,539
|
$
|
11,615
|
|||
|
Commission Expense
Ratio
|
10.1
|
%
|
12.5
|
%
|
|||
|
Underwriting
& Other Operating Expense
|
$
|
23,621
|
$
|
28,675
|
|||
|
Underwriting & Other
Operating Expense Ratio
|
28.0
|
%
|
30.9
|
%
|
|||
|
Total
Expense
|
$
|
64,126
|
$
|
74,300
|
|||
|
Combined Ratio
|
75.9
|
%
|
80.0
|
%
|
|||
|
Total
Expense before impacts of the LPT
|
$
|
68,466
|
$
|
79,059
|
|||
|
Combined Ratio before the
impacts of the LPT
|
81.1
|
%
|
85.1
|
%
|
|||
Page 11
of 12
Employers
Holdings, Inc.
Calculation of Combined Ratio before the
Impacts of the LPT Agreement
(In thousands, except for percentages)
(In thousands, except for percentages)
|
Year
Ended
|
|||||||
|
December
31,
|
|||||||
|
2007
|
2006
|
||||||
|
Net
Premiums Earned
|
$
|
346,884
|
$
|
392,986
|
|||
|
Losses
and Loss Adjustment Expenses (LAE)
|
$
|
143,302
|
$
|
129,755
|
|||
|
Loss & LAE
Ratio
|
41.3
|
%
|
33.0
|
%
|
|||
|
Amortization
of deferred reinsurance gain - LPT
|
$
|
18,034
|
$
|
19,373
|
|||
|
Impacts
of LPT
|
5.2
|
%
|
4.9
|
%
|
|||
|
Loss & LAE before impacts
of LPT
|
$
|
161,336
|
$
|
149,128
|
|||
|
Loss & LAE Ratio before
impacts of LPT
|
46.5
|
%
|
37.9
|
%
|
|||
|
Commission
Expense
|
$
|
44,336
|
$
|
48,377
|
|||
|
Commission Expense
Ratio
|
12.8
|
%
|
12.3
|
%
|
|||
|
Underwriting
& Other Operating Expense
|
$
|
91,399
|
$
|
87,826
|
|||
|
Underwriting & Other
Operating Expense Ratio
|
26.3
|
%
|
22.3
|
%
|
|||
|
Total
Expense
|
$
|
279,037
|
$
|
265,958
|
|||
|
Combined Ratio
|
80.4
|
%
|
67.7
|
%
|
|||
|
Total
Expense before impacts of the LPT
|
$
|
297,071
|
$
|
285,331
|
|||
|
Combined Ratio before the
impacts of the LPT
|
85.6
|
%
|
72.6
|
%
|
|||
Page 12 of
12
Exhibit 99.2
America’s
small business insurance specialist.®
news
release
|
February
26, 2008
|
For
Immediate Release
|
Employers
Holdings, Inc. Announces $100 Million Stock Repurchase Program and Declares
Dividend Payment
Reno,
Nev.—Feb. 26, 2008—Employers Holdings, Inc. (“EHI” or the “Company”) (NYSE:EIG)
today announced that the EHI Board of Directors has authorized a stock
repurchase program for up to $100 million of the Company’s common stock. The
Company expects that shares will be purchased from time to time at prevailing
market prices through June 30, 2009, in open market or private transactions, in
accord with applicable laws and regulations, and subject to market conditions
and other factors. The Company has no obligation to repurchase shares under the
authorization and repurchases may be commenced or suspended from time to time
without prior notice.
EHI
President and Chief Executive Officer Douglas D. Dirks said, “Our strong capital
position is the result of our continuing, solid profitability. Even with our
2008 capital plans, our capital position is stronger than what is typical in the
industry. This repurchase program demonstrates our continued confidence in the
value of our Company.”
In
other action, the EHI Board of Directors declared a first quarter cash dividend
of six cents ($0.06) per share of common stock. The dividend is payable on March
27, 2008, to shareholders of record as of March 7, 2008.
This
news release may contain forward-looking statements regarding the future
performance of Employers Holdings, Inc. within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements are subject to a
variety of risks and uncertainties that could cause actual results to differ
materially from current expectations. These risks and uncertainties include, but
are not limited to, the discretion of Employers Holdings, Inc.'s Board of
Directors with respect to the payment of future dividends based on its periodic
review of factors that ordinarily affect dividend policy, such as current and
prospective financial condition, earnings and liquidity, prospective business
conditions and regulatory, legislative or industry factors. Additional
cautionary statements regarding other risk factors that could have an effect on
the future performance of Employers Holdings, Inc. and its subsidiaries are
contained in its Annual Report on Form 10-K for the year ended Dec. 31, 2006 and
its Quarterly Report and Form 10-Q for the quarter ended September 30, 2007,
filed with the SEC. Employers Holdings, Inc. undertakes no obligation to release
publicly the result of any revisions to these forward-looking statements that
may be made to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
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 11 states from 13 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
Investors:
Vicki Erickson, Vice President, Investor Relations, (775) 327-2794, verickson@employers.com
Media:
Trish White, Director, Corporate Communications, (775) 327-2636,
twhite@employers.com.
Copyright
© 2008 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.