Document



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): April 24, 2019

EMPLOYERS HOLDINGS, INC.
(Exact Name of Registrant as Specified in its Charter)
——————
NEVADA
 
001-33245
 
04-3850065
(State or Other Jurisdiction of
 
(Commission
 
(I.R.S. Employer
Incorporation)
 
File Number)
 
Identification No.)
 
 
 
 
 
10375 Professional Circle
 
 
Reno, Nevada
 
89521
(Address of Principal Executive Offices)
 
(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))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o






Section 2 – Financial Information
Item 2.02.    Results of Operations and Financial Condition.
On April 24, 2019, Employers Holdings, Inc. (the “Company”) issued a press release and financial supplement announcing results for the quarter ended March 31, 2019. The press release and financial supplement are attached hereto as Exhibits 99.1 and 99.2, respectively, and are incorporated herein by reference, and are 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 April 24, 2019, the Company announced that its Board of Directors declared a second quarter 2019 cash dividend of $0.22 per share on the Company’s common stock. The dividend is payable on May 22, 2019 to stockholders of record as of May 8, 2019.
On February 21, 2018, the Board of Directors authorized a share repurchase program for repurchases of up to $50.0 million of our common stock from February 26, 2018 through February 26, 2020 (the 2018 Program). On April 24, 2019, the Board of Directors authorized a $50 million expansion of the 2018 Program, to $100 million, and extended the repurchase authority pursuant to the 2018 Program through June 30, 2020. The 2018 Program provides that shares may be purchased at prevailing market prices through a variety of methods, including open market or private transactions, in accordance with applicable laws and regulations and as determined by management. The timing and actual number of shares that may be repurchased will depend on a variety of factors, including the share price, corporate and regulatory requirements, and other market and economic conditions. Repurchases under the 2018 Program may be commenced, modified, or suspended from time to time without prior notice, and the program may be suspended or discontinued at any time.

Section 9 – Financial Statements and Exhibits
Item 9.01.    Financial Statements and Exhibits.
99.1    Employers Holdings, Inc. press release, dated April 24, 2019.
99.2    Employers Holdings, Inc. financial supplement, dated April 24, 2019.


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.
 
Dated:
April 24, 2019
/s/ Michael S. Paquette
 
 
Michael S. Paquette
 
 
Executive Vice President,
 
 
Chief Financial Officer

Exhibit Index
Exhibit No.
Exhibit
 
99.1
April 24, 2019
99.2
April 24, 2019


Exhibit


https://cdn.kscope.io/e825e0fe9b6dd0f6bcc9beb7f3bc58ba-employerslargelogoa03312019.jpg Exhibit 99.1
news release
For Immediate Release
Employers Holdings, Inc. Reports First Quarter 2019 Results

Net income of $51.8 million ($1.57 per diluted share), adjusted net income of $30.9 million ($0.94 per diluted share),
Net investment income of $21.8 million, up 12% year-over-year,
Gross premiums written of $210.0 million, down 1% year-over-year,
Combined ratio of 90.4%, combined ratio before the impact of the LPT of 91.9%.

Reno, Nevada-April 24, 2019-Employers Holdings, Inc. (“EHI” or the “Company”) (NYSE:EIG) today reported the following for the first quarter of 2019: (i) net income of $51.8 million ($1.57 per diluted share); (ii) net income before the impact of the LPT of $49.3 million ($1.50 per diluted share); and (iii) adjusted net income of $30.9 million ($0.94 per diluted share).

The Company's adjusted net income for the first quarter of 2019 increased $1.6 million year-over-year. This increase primarily reflects the after-tax impact of the following items: (i) $22.0 million of favorable prior year loss reserve development on voluntary business versus $12.0 million of favorable development a year ago, (ii) $21.8 million of net investment income versus $19.4 million a year ago; partially offset by (iii) $47.5 million of underwriting and other operating expenses versus $39.2 million a year ago.

The Company's net income and net income before the impact of the LPT for the first quarter of 2019 increased by $26.2 million and $26.3 million, respectively, year-over-year. These first quarter 2019 net income measures were each favorably impacted by the after-tax impact of the items previously mentioned, as well as the after-tax impact of $21.2 million of unrealized investment gains relating to the Company’s equity investments versus $12.9 of unrealized investment losses recognized a year ago.

The Company’s book value per share of $33.22, book value per share including the Deferred Gain of $37.78 and adjusted book value per share of $37.04 increased by 7.6%, 6.6%, and 3.3% during the first three months of 2019, respectively, each computed after taking into account dividends declared. Book value per share and book value per share including the Deferred Gain at March 31, 2019 were each favorably impacted by $37.3 million of net after tax unrealized gains from the Company’s portfolio of fixed maturity securities.

Chief Executive Officer Douglas Dirks commented on the results: “Our first quarter results were highly satisfying and largely consistent with our expectations. During the quarter, we delivered a 10.4% annualized return on adjusted equity, nearly maintained our top line despite pricing headwinds, actively bought back our stock and executed well on our previously announced plan of aggressive development and implementation of new technologies and capabilities to transform and enhance the digital experience of our customers.”

Summary of First Quarter 2019 Operating Results
(All comparisons vs. first quarter 2018, unless noted otherwise).
 
Gross premiums written were $210.0 million, a decrease of 1%. The decrease was due primarily to a decrease in final audit premiums as well as a decrease in average premium rates. Net earned premiums were $174.8 million, a decrease of 1% year-over-year.

The loss and LAE ratio before the impact of the LPT of 52.1% decreased 3.4 percentage points reflecting observed favorable paid loss trends, including those resulting from our key business initiatives including: an emphasis on settling open claims; diversifying our risk exposure across geographic markets; and leveraging data-driven strategies to target, underwrite and price profitable classes of business across all of our markets. During the quarter, the Company: (i) increased its current accident year loss and LAE ratio on its voluntary business to 64.5%, versus 62.5% a year ago; and (ii) recognized 12.7 percentage points of favorable prior year loss reserve development versus 7.0 percentage points a year ago.

The commission expense ratio of 12.6% decreased 0.8 percentage points, primarily as a result of a decrease in projected 2019 agency incentive commissions.






The underwriting and other operating expense ratio of 27.1% increased 4.9 percentage points. Expenses associated with our aggressive development and implementation of new digital technologies and capabilities contributed 3.9 percentage points to the increase. The remaining 1.0 percentage point increase resulted from significantly higher than anticipated recoveries of bad debts a year ago than those experienced in the current quarter.

Net investment income of $21.8 million increased 12%, primarily as a result of the Company's strong operating cash flows, as well as higher pre-tax book yields.

Income tax expense was $10.0 million (a 16.2% effective rate) versus $3.8 million (a 12.9% effective rate). The increase in the effective rate is due primarily to having a higher proportion of fully taxable income in the current quarter than a year ago.

Share Repurchases and Second Quarter Dividend Declaration

During the first quarter of 2019, the Company repurchased 670,837 shares of its common stock at an average price of $40.90 per share. During the period from April 1, 2019 through April 23, 2019, the Company repurchased a further 241,264 shares of its common shares at an average price of $40.77 per share.

On April 24, 2019, the Board of Directors authorized a $50 million expansion to its existing share repurchase program and extended the repurchase authority pursuant to the expanded program through June 30, 2020. As a result of this action, the Company currently has a remaining share repurchase authorization of $58.1 million.

On April 24, 2019, the Board of Directors also declared a second quarter 2019 dividend of $0.22 per share. The dividend is payable on May 22, 2019 to stockholders of record as of May 8, 2019.

Conference Call and Webcast, Reports Filed with The Securities and Exchange Commission (the "SEC") and Supplemental Materials

The information in this press release should be read in conjunction with the Financial Supplement that is attached to this press release and is available on our website.

Reconciliation of Non-GAAP Financial Measures to GAAP

Within this earnings release we present various financial measures, some of which are a "non-GAAP financial measure" as defined in Regulation G pursuant to Section 401 of the Sarbanes - Oxley Act of 2002. A description of these non-GAAP financial measures, as well as a reconciliation of such non-GAAP measures to the Company's most directly comparable GAAP financial measures is included in the attached Financial Supplement. Management believes that these non-GAAP measures are meaningful to the Company's investors, analysts and other interested parties who benefit from having an objective and consistent basis for comparison with other companies within our industry. These non-GAAP measures are not a substitute for GAAP measures and investors should be careful when comparing the Company's non-GAAP financial measures to similarly titled measures used by other companies. Other companies may calculate these measures differently, and, therefore, these measures may not be comparable.
 
The Company will host a conference call on Thursday, April 25, 2019, at 8:30 a.m. Pacific Daylight Time. The conference call will be available via a live web cast on the Company's web site at www.employers.com. An archived version will be available several hours after the call. The conference call replay number is (404) 537-3406 or (855) 859-2056 with a pass code of 4049627.

The Company provides its filings with the SEC and its investor presentations on its website at www.employers.com.

Forward-Looking Statements

In this press release, the Company and its management discuss and make statements based on currently available information regarding their intentions, beliefs, current expectations, and projections of, among other things, the Company's future performance, business growth, retention rates, loss costs, claim trends and the impact of key business initiatives, future technologies and planned investments. Certain of these statements may constitute "forward-looking" statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and are often identified by words such as "may," "will," "could," "would," "should," "expect," "plan," "anticipate," "target," "project," "intend," "believe," "estimate," "predict," "potential," "pro forma," "seek," "likely," or "continue," or other comparable terminology and their negatives. EHI and its management caution investors that such forward-looking statements are not guarantees of future performance. Risks and uncertainties are inherent in EHI's future performance. Factors that could cause the Company's actual results to differ materially from those indicated by such forward-looking statements include, among other





things, those discussed or identified from time to time in EHI's public filings with the SEC, including the risks detailed in the Company's Quarterly Reports on Form 10-Q and the Company's Annual Reports on Form 10-K. Except as required by applicable securities laws, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

The SEC filings for EHI can be accessed through the “Investors” link on the Company's website, www.employers.com, or through the SEC's EDGAR Database at www.sec.gov (EHI EDGAR CIK No. 0001379041).

About Employers Holdings, Inc.
Employers Holdings, Inc. (NYSE:EIG) 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 45 states and the District of Columbia. Insurance is offered by Employers Insurance Company of Nevada, Employers Compensation Insurance Company, Employers Preferred Insurance Company, and Employers Assurance Company, all rated A- (Excellent) by A.M. Best Company. Additional information can be found at: www.employers.com.

Copyright © 2019 EMPLOYERS. All rights reserved.

EMPLOYERS® and America's small business insurance specialist® are registered trademarks of Employers Insurance Company of Nevada. Insurance is offered through Employers Compensation Insurance Company, Employers Insurance Company of Nevada, Employers Preferred Insurance Company, Employers Assurance Company. Not all insurers do business in all jurisdictions.

Contact
Mike Paquette (775) 327-2562 or mpaquette@employers.com



Exhibit


Exhibit 99.2
                                                                                                                                                                             
Employers Holdings, Inc.
First Quarter 2019
Financial Supplement













https://cdn.kscope.io/e825e0fe9b6dd0f6bcc9beb7f3bc58ba-employerslargelogoa03312019.jpg





EMPLOYERS HOLDINGS, INC.
Table of Contents




Page
 
 
 
 
 
 
Consolidated Financial Highlights
 
 
 
 
Summary Consolidated Balance Sheets
 
 
 
 
Summary Consolidated Income Statements
 
 
 
 
Return on Equity
 
 
 
 
Combined Ratios
 
 
 
 
Roll-forward of Unpaid Losses and LAE
 
 
 
 
Consolidated Investment Portfolio
 
 
 
 
Book Value Per Share
 
 
 
 
Earnings Per Share
 
 
 
 
Non-GAAP Financial Measures





EMPLOYERS HOLDINGS, INC.
Consolidated Financial Highlights (unaudited)
$ in millions, except per share amounts
 
 
Three Months Ended
 
 
March 31,
 
 
2019
 
2018
 
% change
Selected financial highlights:
 
 
 
 
 
 
Gross premiums written
 
$
210.0

 
$
211.6

 
(1
)%
Net premiums written
 
208.7

 
210.1

 
(1
)
Net premiums earned
 
174.8

 
176.6

 
(1
)
Net investment income
 
21.8

 
19.4

 
12

Underwriting income(1)
 
16.7

 
18.3

 
(9
)
Net income before impact of the LPT(1)
 
49.3

 
23.0

 
114

Adjusted net income(1)
 
30.9

 
29.3

 
5

Net income
 
51.8

 
25.6

 
102

Comprehensive income (loss)
 
89.1

 
(9.8
)
 
n/m

Total assets
 
3,973.1

 
3,847.9

 
3

Stockholders' equity
 
1,071.7

 
930.3

 
15

Stockholders' equity including the Deferred Gain(2)
 
1,218.8

 
1,091.3

 
12

Adjusted stockholders' equity(2)
 
1,195.2

 
1,093.3

 
9

Annualized adjusted return on stockholders' equity(3)
 
10.4
 %
 
11.2
 %
 
(7
)%
Amounts per share:
 
 
 
 
 
 
Cash dividends declared per share
 
$
0.22

 
$
0.20

 
10
 %
Earnings per diluted share(4)
 
1.57

 
0.77

 
104

Earnings per diluted share before impact of the LPT(4)
 
1.50

 
0.69

 
117

Adjusted earnings per diluted share(4)
 
0.94

 
0.88

 
7

Book value per share(2)
 
33.22

 
28.40

 
17

Book value per share including the Deferred Gain(2)
 
37.78

 
33.32

 
13

Adjusted book value per share(2)
 
37.04

 
33.38

 
11

Combined ratio before impact of the LPT:(5)
 
 
 
 
 
 
Loss and loss adjustment expense ratio:
 
 
 
 
 
 
Current year
 
64.8
 %
 
62.5
 %
 
 
Prior year
 
(12.7
)
 
(7.0
)
 
 
Loss and loss adjustment expense ratio
 
52.1
 %
 
55.5
 %
 
 
Commission expense ratio
 
12.6

 
13.4

 
 
Underwriting and other operating expenses ratio
 
27.1

 
22.2

 
 
Combined ratio before impact of the LPT
 
91.9
 %
 
91.1
 %
 
 
 
 
 
 
 
 
 
(1) See Page 3 for calculations and Page 10 for information regarding our use of Non-GAAP Financial Measures.
(2) See Page 8 for calculations and Page 10 for information regarding our use of Non-GAAP Financial Measures.
(3) See Page 4 for calculations and Page 10 for information regarding our use of Non-GAAP Financial Measures.
(4) See Page 9 for calculations and Page 10 for information regarding our use of Non-GAAP Financial Measures.
(5) See Page 5 for calculations and Page 10 for information regarding our use of Non-GAAP Financial Measures.

1



EMPLOYERS HOLDINGS, INC.
Summary Consolidated Balance Sheets (unaudited)
$ in millions, except per share amounts
 
 
March 31,
2019
 
December 31,
2018
ASSETS
 
 
 
 
Investments, cash and cash equivalents
 
$
2,852.2

 
$
2,829.7

Accrued investment income
 
18.2

 
18.0

Premiums receivable, net
 
352.7

 
333.1

Reinsurance recoverable on paid and unpaid losses and LAE
 
505.4

 
511.1

Deferred policy acquisition costs
 
52.5

 
48.2

Deferred income taxes, net
 
12.9

 
26.9

Contingent commission receivable—LPT Agreement
 
32.0

 
32.0

Other assets
 
147.2

 
120.2

Total assets
 
$
3,973.1

 
$
3,919.2

 
 
 
 
 
LIABILITIES
 
 
 
 
Unpaid losses and LAE
 
$
2,189.3

 
$
2,207.9

Unearned premiums
 
368.9

 
336.3

Commissions and premium taxes payable
 
53.8

 
57.3

Deferred Gain
 
147.1

 
149.6

Notes payable
 
20.0

 
20.0

Other liabilities
 
122.3

 
129.9

Total liabilities
 
$
2,901.4

 
$
2,901.0

 
 
 
 
 
STOCKHOLDERS' EQUITY
 
 
 
 
Common stock and additional paid-in capital
 
$
388.7

 
$
389.4

Retained earnings
 
1,075.1

 
1,030.7

Accumulated other comprehensive income (loss), net
 
23.6

 
(13.7
)
Treasury stock, at cost
 
(415.7
)
 
(388.2
)
Total stockholders’ equity
 
1,071.7

 
1,018.2

Total liabilities and stockholders’ equity
 
$
3,973.1

 
$
3,919.2

 
 
 
 
 
Stockholders' equity including the Deferred Gain (1)
 
$
1,218.8

 
$
1,167.8

Adjusted stockholders' equity (1)
 
1,195.2

 
1,181.5

Book value per share (1)
 
$
33.22

 
$
31.08

Book value per share including the Deferred Gain(1)
 
37.78

 
35.64

Adjusted book value per share (1)
 
37.04

 
36.06

 
 
 
 
 
(1) See Page 8 for calculations and Page 10 for information regarding our use of Non-GAAP Financial Measures.

2



EMPLOYERS HOLDINGS, INC.
Summary Consolidated Income Statements (unaudited)
$ in millions
 
 
Three Months Ended
 
 
March 31,
 
 
2019
 
2018
Underwriting revenues:
 
 
Gross premiums written
 
$
210.0

 
$
211.6

Premiums ceded
 
(1.3
)
 
(1.5
)
Net premiums written
 
208.7

 
210.1

Net premiums earned
 
174.8

 
176.6

Underwriting expenses:
 
 
 
 
Losses and LAE incurred
 
(88.6
)
 
(95.4
)
Commission expense
 
(22.0
)
 
(23.7
)
Underwriting and other operating expenses
 
(47.5
)
 
(39.2
)
Underwriting income
 
16.7

 
18.3

Net investment income
 
21.8

 
19.4

Net realized and unrealized gains (losses) on investments(1)
 
23.3

 
(8.0
)
Other income
 
0.4

 

Interest and financing expenses
 
(0.4
)
 
(0.3
)
Income tax expense
 
(10.0
)
 
(3.8
)
Net income
 
51.8

 
25.6

Unrealized AFS investment gains (losses) arising during the period, net of tax(2)
 
37.8

 
(35.8
)
Reclassification adjustment for realized AFS investment (gains) losses in net income, net of tax(2)
 
(0.5
)
 
0.4

Comprehensive income (loss)
 
$
89.1

 
$
(9.8
)
Net Income
 
$
51.8

 
$
25.6

Amortization of the Deferred Gain - losses
 
(2.0
)
 
(2.1
)
Amortization of the Deferred Gain - contingent commission
 
(0.5
)
 
(0.5
)
Net income before impact of the LPT Agreement (3)
 
49.3

 
23.0

Net realized and unrealized (gains) losses on investments
 
(23.3
)
 
8.0

Income tax expense (benefit) related to items excluded from Net income
 
4.9

 
(1.7
)
Adjusted net income (3)
 
$
30.9

 
$
29.3

 
 
 
 
 
(1) Includes $21.2 million of unrealized gains on equity securities and $12.9 million of unrealized losses on equity securities for the three months ended March 31, 2019 and 2018, respectively.
(2) AFS = Available for Sale securities.
 
 
 
 
(3) See Page 10 regarding our use of Non-GAAP Financial Measures.
 
 
 
 

3



EMPLOYERS HOLDINGS, INC.
Return on Equity (unaudited)
$ in millions
 
 
Three Months Ended
 
 
March 31,
 
 
2019
 
2018
 
 
 
 
 
Net income
A
$
51.8

 
$
25.6

Impact of the LPT Agreement
 
(2.5
)
 
(2.6
)
Net realized and unrealized (gains) losses on investments
 
(23.3
)
 
8.0

Amortization of intangibles
 

 

Income tax expense (benefit) related to items excluded from Net income
 
4.9

 
(1.7
)
Adjusted net income (1)
B
30.9

 
29.3

 
 
 
 
 
Stockholders' equity - end of period
 
$
1,071.7

 
$
930.3

 
 
 
 
 
Stockholders' equity - beginning of period
 
1,018.2

 
947.7

 
 
 
 
 
Average stockholders' equity
C
1,045.0

 
939.0

 
 
 
 
 
Stockholders' equity - end of period
 
$
1,071.7

 
$
930.3

Deferred Gain - end of period
 
147.1

 
161.0

Accumulated other comprehensive loss (income) - end of period
 
(29.9
)
 
2.5

Income taxes related to accumulated other comprehensive gains and losses - end of period
 
6.3

 
(0.5
)
Adjusted stockholders' equity - end of period
 
1,195.2

 
1,093.3

Adjusted stockholders' equity - beginning of period
 
1,181.5

 
1,003.9

Average adjusted stockholders' equity (1)
D
1,188.4

 
1,048.6

 
 
 
 
 
Return on stockholders' equity
A / C
5.0
%
 
2.7
%
Annualized return on stockholders' equity
 
19.8

 
10.9

 
 
 
 
 
Adjusted return on stockholders' equity (1)
B / D
2.6
%
 
2.8
%
Annualized adjusted return on stockholders' equity (1)
 
10.4

 
11.2

 
 
 
 
 
(1) See Page 10 for information regarding our use of Non-GAAP Financial Measures.

4



EMPLOYERS HOLDINGS, INC.
Combined Ratios (unaudited)
$ in millions
 
 
Three Months Ended
 
 
March 31,
 
 
2019
 
2018
Net premiums earned
A
$
174.8

 
$
176.6

Losses and LAE incurred
B
88.6

 
95.4

Amortization of the Deferred Gain - losses
 
2.0

 
2.1

Amortization of the Deferred Gain - contingent commission
 
0.5

 
0.5

Losses and LAE before impact of the LPT (1)
C
91.1

 
98.0

Prior accident year favorable loss reserve development
 
(22.2
)
 
(12.4
)
Losses and LAE before impact of the LPT - current accident year
D
$
113.3

 
$
110.4

Commission expense
E
$
22.0

 
$
23.7

Underwriting and other operating expenses
F
47.5

 
39.2

Combined ratio:
 
 
 
 
Loss and LAE ratio
B/A
50.7
%
 
54.0
%
Commission expense ratio
E/A
12.6

 
13.4

Underwriting and other operating expenses ratio
F/A
27.1

 
22.2

Combined ratio
 
90.4
%
 
89.6
%
Combined ratio before impact of the LPT: (1)
 
 
 
 
Loss and LAE ratio before impact of the LPT
C/A
52.1
%
 
55.5
%
Commission expense ratio
E/A
12.6

 
13.4

Underwriting and other operating expenses ratio
F/A
27.1

 
22.2

Combined ratio before impact of the LPT
 
91.9
%
 
91.1
%
Combined ratio before impact of the LPT: current accident year (1)
 
 
 
 
Loss and LAE ratio before impact of the LPT
D/A
64.8
%
 
62.5
%
Commission expense ratio
E/A
12.6

 
13.4

Underwriting and other operating expenses ratio
F/A
27.1

 
22.2

Combined ratio before impact of the LPT: current accident year
 
104.6
%
 
98.1
%
 
 
 
 
 
(1) See Page 10 for information regarding our use of Non-GAAP Financial Measures.

5



EMPLOYERS HOLDINGS, INC.
Roll-forward of Unpaid Losses and LAE (unaudited)
$ in millions
 
 
Three Months Ended
 
 
March 31,
 
 
2019
 
2018
 
 
 
Unpaid losses and LAE at beginning of period
 
$
2,207.9

 
$
2,266.1

Reinsurance recoverable on unpaid losses and LAE
 
504.4

 
537.0

Net unpaid losses and LAE at beginning of period
 
1,703.5

 
1,729.1

Losses and LAE incurred:
 
 
 
 
Current year losses
 
113.3

 
110.4

Prior year losses on voluntary business
 
(22.0
)
 
(12.0
)
Prior year losses on involuntary business
 
(0.2
)
 
(0.4
)
Total losses incurred
 
91.1

 
98.0

Losses and LAE paid:
 
 
 
 
Current year losses
 
7.4

 
5.9

Prior year losses
 
96.6

 
94.2

Total paid losses
 
104.0

 
100.1

Net unpaid losses and LAE at end of period
 
1,690.6


1,727.0

Reinsurance recoverable on unpaid losses and LAE
 
498.7

 
531.1

Unpaid losses and LAE at end of period
 
$
2,189.3

 
$
2,258.1

Total losses and LAE shown in the above table exclude amortization of the Deferred Gain, which totaled $2.5 million and $2.6 million for the three months ended March 31, 2019 and 2018, respectively.


6



EMPLOYERS HOLDINGS, INC.
Consolidated Investment Portfolio (unaudited)
$ in millions
 
 
March 31, 2019
 
December 31, 2018
Investment Positions:
 
Cost or Amortized
Cost
 
Net Unrealized (Loss) Gain
 
Fair Value
 
%
 
Fair Value
 
%
Fixed maturities
 
$
2,491.1

 
$
29.9

 
$
2,521.0

 
88
%
 
$
2,496.4

 
88
%
Equity securities
 
147.2

 
89.2

 
236.4

 
8

 
206.3

 
7

Short-term investments
 

 

 

 

 
25.0

 
1

Cash and cash equivalents
 
92.3

 

 
92.3

 
3

 
101.4

 
4

Restricted cash and cash equivalents
 
2.5

 

 
2.5

 

 
0.6

 

Total investments and cash
 
$
2,733.1

 
$
119.1

 
$
2,852.2

 
100
%
 
$
2,829.7

 
100
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Breakout of Fixed Maturities:
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasuries and Agencies
 
$
117.3

 
$
0.6

 
$
117.9

 
5
%
 
$
117.8

 
5
%
States and Municipalities
 
497.7

 
21.8

 
519.5

 
21

 
528.0

 
21

Corporate Securities
 
1,075.3

 
10.7

 
1,086.0

 
43

 
1,090.4

 
44

Mortgage-Backed Securities
 
563.5

 
(2.2
)
 
561.3

 
22

 
545.8

 
22

Asset-Backed Securities
 
60.7

 
0.2

 
60.9

 
2

 
64.5

 
3

Bank Loans
 
176.6

 
(1.2
)
 
175.4

 
7

 
149.9

 
6

Total fixed maturities
 
$
2,491.1

 
$
29.9

 
$
2,521.0

 
100
%
 
$
2,496.4

 
100
%
Weighted average book yield
 
 
3.4%
 
 
 
3.4%
Average credit quality (S&P)
 
 
AA-
 
 
 
AA-
Duration
 
 
3.9
 
 
 
4.1


7



EMPLOYERS HOLDINGS, INC.
Book Value Per Share (unaudited)
$ in millions, except per share amounts
 
 
March 31, 2019
 
December 31, 2018
 
March 31, 2018
 
December 31, 2017
Numerators:
 
 
 
 
 
 
 
 
Stockholders' equity
A
$
1,071.7

 
$
1,018.2

 
$
930.3

 
$
947.7

Plus: Deferred Gain
 
147.1

 
149.6

 
161.0

 
163.6

Stockholders' equity including the Deferred Gain (1)
B
1,218.8

 
1,167.8

 
1,091.3

 
1,111.3

Accumulated other comprehensive (income) loss
 
(29.9
)
 
17.3

 
2.5

 
(136.0
)
Income taxes related to accumulated other comprehensive gains and losses
 
6.3

 
(3.6
)
 
(0.5
)
 
28.6

Adjusted stockholders' equity (1)
C
$
1,195.2

 
$
1,181.5

 
$
1,093.3

 
$
1,003.9

 
 
 
 
 
 
 
 
 
Denominator (shares outstanding)
D
32,263,810

 
32,765,792

 
32,752,139

 
32,597,819

 
 
 
 
 
 
 
 
 
Book value per share (1)
A / D
$
33.22

 
$
31.08

 
$
28.40

 
$
29.07

Book value per share including the Deferred Gain(1)
B / D
37.78

 
35.64

 
33.32

 
34.09

Adjusted book value per share (1)
C / D
37.04

 
36.06

 
33.38

 
30.80

 
 
 
 
 
 
 
 
 
YTD Change in: (2)
 
 
 
 
 
 
 
 
Book value per share
 
7.6
%
 
 
 
(1.6
)%
 


Book value per share including the Deferred Gain
 
6.6

 
 
 
(1.7
)
 
 
Adjusted book value per share
 
3.3

 
 
 
9.0

 
 
 
 
 
 
 
 
 
 
 
(1) See Page 10 for information regarding our use of Non-GAAP Financial Measures.
(2) Reflects the change in book value per share after taking into account dividends declared of $0.22 and $0.20 for the three months ended March 31, 2019 and 2018, respectively.



8



EMPLOYERS HOLDINGS, INC.
Earnings Per Share (unaudited)
$ in millions, except per share amounts
 
 
Three Months Ended
 
 
March 31,
 
 
2019
 
2018
Numerators:
 
 
 
 
Net income
A
$
51.8

 
$
25.6

Impact of the LPT Agreement
 
(2.5
)
 
(2.6
)
Net income before impact of the LPT (1)
B
49.3

 
23.0

Net realized and unrealized (gains) losses on investments
 
(23.3
)
 
8.0

Income tax expense (benefit) related to items excluded from Net income
 
4.9

 
(1.7
)
Adjusted net income (1)
C
$
30.9

 
$
29.3

 
 
 
 
 
Denominators:
 
 
 
 
Average common shares outstanding (basic)
D
32,442,287

 
32,830,481

Average common shares outstanding (diluted)
E
32,954,079

 
33,320,420

 
 
 
 
 
Earnings per share:
 
 
 
 
Basic
A / D
$
1.60

 
$
0.78

Diluted
A / E
1.57

 
0.77

 
 
 
 
 
Earnings per share before impact of the LPT: (1)
 
 
 
 
Basic
B / D
$
1.52

 
$
0.70

Diluted
B / E
1.50

 
0.69

 
 
 
 
 
Adjusted earnings per share: (1)
 
 
 
 
Basic
C / D
$
0.95

 
$
0.89

Diluted
C / E
0.94

 
0.88

 
 
 
 
 
(1)  See Page 10 for information regarding our use of Non-GAAP Financial Measures.

9



Glossary of Financial Measures
Within this earnings release we present the following measures, each of which are "non-GAAP financial measures." A reconciliation of these measures to the Company's most directly comparable GAAP financial measures is included herein. Management believes that these non-GAAP measures are important to the Company's investors, analysts and other interested parties who benefit from having an objective and consistent basis for comparison with other companies within our industry. Management further believes that these measures are more relevant than comparable GAAP measures in evaluating our financial performance.
The LPT Agreement is a non-recurring transaction that does not result in any significant ongoing cash benefits to the Company. Management believes that providing non-GAAP measures that exclude the effects of the LPT Agreement (amortization of deferred reinsurance gain, adjustments to LPT Agreement ceded reserves and adjustments to contingent commission receivable) is useful in providing investors, analysts and other interested parties a meaningful understanding of the Company's ongoing underwriting performance.
Deferred reinsurance gain (Deferred Gain) reflects the unamortized gain from the LPT Agreement. This gain has been deferred and is being amortized using the recovery method, whereby the amortization is determined by the proportion of actual reinsurance recoveries to total estimated recoveries, except for the contingent profit commission, which is being amortized through June 30, 2024. Amortization is reflected in losses and LAE incurred.
Adjusted net income (see Page 4 for calculations) is net income excluding the effects of the LPT Agreement, net realized and unrealized gains (losses) on investments (net of tax), and amortization of intangible assets (net of tax). Management believes that providing this non-GAAP measures is helpful to investors, analysts and other interested parties in identifying trends in the Company's operating performance because such items have limited significance to its ongoing operations or can be impacted by both discretionary and other economic factors and may not represent operating trends. The Company previously referred to Adjusted net income as Operating income.
Stockholders' equity including the Deferred Gain is stockholders' equity including the Deferred Gain. Management believes that providing this non-GAAP measure is useful in providing investors, analysts and other interested parties a meaningful measure of the Company's total underwriting capital.
Adjusted stockholders' equity (see Page 8 for calculations) is stockholders' equity including the Deferred Gain, less accumulated other comprehensive income (net of tax). Management believes that providing this non-GAAP measure is useful to investors, analysts and other interested parties since it serves as the denominator to the Company's operating return on equity metric.
Return on stockholders' equity and Adjusted return on stockholders' equity (see Page 4 for calculations). Management believes that these profitability measures are widely used by our investors, analysts and other interested parties.
Book value per share, Book value per share including the Deferred Gain, and Adjusted book value per share (see Page 8 for calculations). Management believes that these valuation measures are widely used by our investors, analysts and other interested parties. The Company previously referred to Book value per share as GAAP book value per share, and Book value per share including Deferred Gain as Book value per share.
Net income, Combined ratio, and Combined ratio before impact of the LPT (see Pages 3 and 5 for calculations). Management believes that these performance and underwriting measures are widely used by our investors, analysts and other interested parties.


10