UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Date of report (Date of earliest event reported): July 28, 2022
(Exact Name of Registrant as Specified in its Charter)
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| (State or Other Jurisdiction of Incorporation) | |||||||||||
| (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||||||
| (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)
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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:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
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 ☐
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 July 28, 2022, Employers Holdings, Inc. (the “Company”) issued a press release and financial supplement announcing results for the quarter ended June 30, 2022. 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 July 27, 2022, the Company's Board of Directors declared a regular quarterly dividend of $0.26 per share on the Company’s common stock. The dividend is payable on August 24, 2022 to stockholders of record as of August 10, 2022.
Section 9 – Financial Statements and Exhibits
Item 9.01. Financial Statements and Exhibits.
99.1 Employers Holdings, Inc. press release, dated July 28, 2022.
99.2 Employers Holdings, Inc. financial supplement, dated July 28, 2022.
104 Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document
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: | July 28, 2022 | /s/ Michael S. Paquette | ||||||
| Michael S. Paquette | ||||||||
| Executive Vice President, | ||||||||
| Chief Financial Officer | ||||||||
Exhibit Index
| Exhibit No. | Exhibit | |||||||
| 99.1 | July 28, 2022 | |||||||
| 99.2 | July 28, 2022 | |||||||
Exhibit 99.1news release
For Immediate Release
Employers Holdings, Inc. Reports Second Quarter 2022 Financial Results;
Declares Quarterly Cash Dividend of $0.26 per Share
Company to Host Conference Call on Friday, July 29, 2022, at 11:00 a.m. Eastern Daylight Time
Reno, Nevada - July 28, 2022 - Employers Holdings, Inc. (the “Company”) (NYSE:EIG), a holding company with subsidiaries that are specialty providers of workers' compensation insurance and services focused on select, small businesses engaged primarily in low-to-medium hazard industries, today reported financial results for its second quarter ended June 30, 2022.
Financial Highlights
•Gross premiums written of $179.4 million, up 22% year-over-year;
•Net premiums earned of $165.2 million, up 21% year-over-year;
•Record number of ending policies in-force of 117,256, up 9% year-over-year;
•Net investment income of $20.0 million, up 10% year-over-year;
•Net loss of $15.6 million, a loss of $0.56 per common share;
•Adjusted net income of $21.9 million, $0.79 per diluted share;
•The Company repurchased 365,359 shares of its common stock at an average price of $39.81 per share.
Management Commentary
Chief Executive Officer Katherine Antonello commented: “Consistent with the momentum we have experienced in recent prior quarters, our written and earned premiums rose sharply year-over-year and we achieved yet another record number of policies in-force. This growth resulted from strong new and renewal business writings within our Employers segment, strong new business writings within our Cerity segment and further audit premium recognition.
We maintained our current accident year loss and LAE ratio on voluntary business at 64.0%, largely consistent with the 63.5% we recorded throughout 2021. We also performed our routine mid-year full reserve study and recognized $9.6 million of net favorable prior year loss reserve development from our voluntary business. Our combined ratio for Employers, our largest segment, was 92.4% versus 98.8% a year ago, driven primarily by the favorable loss reserve development recognized as well as a significantly lower underwriting expense ratio of 20.2% versus 23.0% a year ago.”
Ms. Antonello continued, "We remain committed to maintaining the highest level of underwriting discipline as we thoughtfully expand our underwriting appetite at both Employers and Cerity. The additional classes of business are contributing nicely to our top-line growth.
Our Cerity operations, which offers digital workers' compensation insurance solutions directly to consumers, experienced solid premium growth again this quarter, due to both its appetite expansion and its recent collaboration with Intuit’s QuickBooks. Cerity continues to develop additional strategic opportunities which will support our growth initiatives by attracting an untapped segment of our target market.
The sharp increases in market interest rates that have occurred throughout the first six months of 2022 have benefited our net investment income while generating unrealized investment losses from our fixed maturity portfolio. These unrealized losses, coupled with unrealized losses from our equity portfolio, have led to a decline in our book value and book value per share metrics.
Our balance sheet and underwriting capital remain very strong and are highly supportive of our continued growth and success.”
Summary of Second Quarter 2022 Results
(All comparisons vs. the second quarter of 2021, unless noted otherwise).
Gross premiums written were $179.4 million, an increase of 22%. The increase was primarily due to higher new and renewal premiums and higher final audit premiums. Net premiums earned were $165.2 million, an increase of 21%.
Losses and loss adjustment expenses were $93.3 million, an increase of 11%. The increase was primarily due to higher earned premiums, partially offset by an increase in net favorable prior accident year loss reserve development. The Company recognized $10.0 million of favorable development during the quarter versus $1.6 million of favorable development a year ago.
Commission expenses were $23.7 million, an increase of 32%. The increase was due primarily to higher earned premiums and higher agency incentives.
Underwriting and general and administrative expenses were $39.4 million, an increase of 6%. The increase resulted primarily from higher premium taxes, assessments and bad debt expenses, each of which vary with earned premium.
Net investment income was $20.0 million, an increase of 10%. The increase was primarily due to higher bond yields.
Income tax (benefit) expense was $(5.8) million (27% effective rate) versus $6.0 million (19% effective rate). The effective rates during each of the periods presented included income tax benefits and exclusions associated with tax-advantaged investment income, LPT adjustments, and deferred gain amortization.
The Company’s book value per share of $35.70 and book value per share including the Deferred Gain of $39.72 decreased by 8% and 7% during the second quarter of 2022, respectively, computed after taking into account dividends declared. These measures were adversely impacted by $73.5 million of after-tax unrealized losses arising from fixed maturity securities (which are reflected on the balance sheet) and $33.2 million of net after tax unrealized losses arising from equity securities and other investments (which are reflected on the income statement).
Summary of Results by Segment
(see page 14 of the Financial Supplement for a description of our reportable segments. All comparisons vs. the second quarter of 2021, unless noted otherwise).
Employers Segment
The Employers segment reported a net loss before income taxes of $11.6 million versus net income of $35.0 million.
Highlights include the following:
–Underwriting income of $12.5 million versus $1.7 million;
–Combined ratio of 92.4% versus 98.8%;
–Current accident year loss and LAE ratio of 63.9% versus 63.7%;
–Calendar year loss and LAE ratio of 57.8% versus 62.6%;
–Commission expense ratio of 14.4% versus 13.2%;
–Underwriting expense ratio of 20.2% versus 23.0%;
–Net investment income of $18.7 million versus $17.4 million; and
–Net realized and unrealized (losses) gains on investments recorded through the income statement of $(42.8) million versus $15.8 million.
Cerity Segment
The Cerity segment reported a net loss before income taxes of $3.1 million versus a net loss of $1.6 million.
Highlights include the following:
–Underwriting loss of $3.0 million versus a loss of $2.5 million;
–Written premium of $0.9 million versus $0.3 million;
–Net investment income of $0.8 million versus $0.7 million;
–Net realized and unrealized (losses) gains on investments recorded through the income statement of $(0.9) million versus $0.2 million; and
–Underwriting expenses of $3.3 million versus $2.6 million.
Corporate and Other
Corporate and Other activities reported a net loss before income taxes of $6.7 million versus a net loss of $1.0 million.
Highlights include the following:
–LPT amortization, which served to reduce losses and LAE, of $2.1 million versus $2.0 million;
–Net investment income of $0.5 million versus $0.1 million;
–Net realized and unrealized losses on investments recorded through the income statement of $6.4 million versus zero; and
–General and administrative expenses of $2.8 million versus $2.9 million.
Share Repurchases and First Quarter 2022 Dividend Declarations
During the second quarter of 2022, the Company repurchased 365,359 shares of its common stock at an average price of $39.81 per share. During the period from July 1, 2022 through July 28, 2022, the Company repurchased a further 96,223 shares of its common stock at an average price of $40.89 per share. The Company currently has a remaining share repurchase authorization of $52.6 million.
On July 27, 2022, the Board of Directors declared a third quarter 2022 dividend of $0.26 per share. The dividend is payable on August 24, 2022 to stockholders of record as of August 10, 2022.
Earnings Conference Call and Webcast
The Company will host a conference call on Friday, July 29, 2022, at 11:00 a.m. Eastern Daylight Time / 8:00 a.m. Pacific Daylight Time.
To participate in the live conference call you must first register here. Once registered you will receive dial-in numbers and a unique PIN number.
The webcast will be accessible on the Company’s web site at www.employers.com through the “Investors” link. An archived version of the webcast will be accessible on the Company’s website following the live call.
Reconciliation of Non-GAAP Financial Measures to GAAP
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.
Within this earnings release we present various financial measures, some of which are “Non-GAAP financial measures” 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 our most directly comparable GAAP financial measures is included in the attached Financial Supplement. 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.
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, economic or market conditions, including the evolving nature of the COVID-19 pandemic, current levels of inflation, labor market expectations, catastrophic events or geo-political conditions, legislative or regulatory actions or court decisions taken in response to the COVID-19 pandemic or otherwise, 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. The Company and its management caution investors that such forward-looking statements are not guarantees of future performance. Risks and uncertainties are inherent in the Company’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 the Company’s public filings with the U.S. Securities and Exchange Commission (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.
Filings with the SEC
The Company’s filings with the SEC and its quarterly investor presentations can be accessed through the “Investors” link on the Company's website, www.employers.com. The Company's filings with the SEC can also be accessed through the SEC's EDGAR Database at www.sec.gov (EDGAR CIK No. 0001379041).
About Employers Holdings, Inc.
EMPLOYERS® and America’s small business insurance specialist® are registered trademarks of EIG Services, Inc. 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 primarily in low-to-medium hazard industries. The Company operates throughout the United States, with the exception of four states that are served exclusively by their state funds. Insurance is offered through Employers Insurance Company of Nevada, Employers Compensation Insurance Company, Employers Preferred Insurance Company, Employers Assurance Company and Cerity Insurance Company, all rated A- (Excellent) by the A.M. Best Company. Not all companies do business in all jurisdictions. See www.employers.com and www.cerity.com for coverage availability.
Contact Information
Company contact:
Mike Paquette (775) 327-2562 or mpaquette@employers.com
Investor relations contact:
Karin Daly, The Equity Group Inc. (212) 836-9623 or kdaly@equityny.com
Exhibit 99.2
Employers Holdings, Inc.
Second Quarter 2022
Financial Supplement
EMPLOYERS HOLDINGS, INC.
Table of Contents
| Page | ||||||||
| Consolidated Financial Highlights | ||||||||
| Summary Consolidated Balance Sheets | ||||||||
| Summary Consolidated Income Statements | ||||||||
| Net Income Before Income Taxes by Segment | ||||||||
| Return on Equity | ||||||||
| Roll-forward of Unpaid Losses and LAE | ||||||||
| Consolidated Investment Portfolio | ||||||||
| Book Value Per Share | ||||||||
| Earnings Per Share | ||||||||
| Non-GAAP Financial Measures | ||||||||
| Description of Reportable Segments | ||||||||
EMPLOYERS HOLDINGS, INC.
Consolidated Financial Highlights (unaudited)
$ in millions, except per share amounts
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||||||||||||||||||||
| 2022 | 2021 | % change | 2022 | 2021 | % change | |||||||||||||||||||||||||||||||||
| Selected financial highlights: | ||||||||||||||||||||||||||||||||||||||
| Gross premiums written | $ | 179.4 | $ | 147.1 | 22 | % | $ | 351.8 | $ | 295.4 | 19 | % | ||||||||||||||||||||||||||
| Net premiums written | 178.1 | 146.0 | 22 | 348.5 | 292.9 | 19 | ||||||||||||||||||||||||||||||||
| Net premiums earned | 165.2 | 137.0 | 21 | 315.4 | 270.9 | 16 | ||||||||||||||||||||||||||||||||
| Net investment income | 20.0 | 18.2 | 10 | 39.1 | 36.6 | 7 | ||||||||||||||||||||||||||||||||
Net (loss) income before impact of the LPT(1) | (17.7) | 24.4 | (173) | (22.0) | 45.4 | (148) | ||||||||||||||||||||||||||||||||
Adjusted net income(1) | 21.9 | 11.8 | 86 | 31.2 | 26.5 | 18 | ||||||||||||||||||||||||||||||||
| Net (loss) income before income taxes | (21.4) | 32.4 | (166) | (23.8) | 60.0 | (140) | ||||||||||||||||||||||||||||||||
| Net (loss) income | (15.6) | 26.4 | (159) | (17.8) | 49.5 | (136) | ||||||||||||||||||||||||||||||||
| Comprehensive (loss) income | (82.7) | 35.2 | (335) | (173.1) | 22.2 | (880) | ||||||||||||||||||||||||||||||||
| Total assets | 3,685.5 | 3,836.7 | (4) | |||||||||||||||||||||||||||||||||||
| Stockholders' equity | 977.5 | 1,203.6 | (19) | |||||||||||||||||||||||||||||||||||
Stockholders' equity including the Deferred Gain(2) | 1,087.7 | 1,324.9 | (18) | |||||||||||||||||||||||||||||||||||
Adjusted stockholders' equity(2) | 1,182.4 | 1,237.1 | (4) | |||||||||||||||||||||||||||||||||||
Annualized adjusted return on stockholders' equity(3) | 7.2 | % | 3.8 | % | 89 | % | 5.1 | % | 4.3 | % | 19 | % | ||||||||||||||||||||||||||
| Amounts per share: | ||||||||||||||||||||||||||||||||||||||
| Cash dividends declared per share | $ | 1.26 | $ | 0.25 | 404 | % | $ | 1.51 | $ | 0.50 | 202 | % | ||||||||||||||||||||||||||
Earnings (loss) per share(4) | (0.56) | 0.92 | (161) | (0.65) | 1.71 | (138) | % | |||||||||||||||||||||||||||||||
Earnings (loss) per share before impact of the LPT(4) | (0.64) | 0.85 | (175) | (0.80) | 1.57 | (151) | % | |||||||||||||||||||||||||||||||
Adjusted earnings per diluted share(4) | 0.79 | 0.41 | 93 | 1.12 | 0.92 | 22 | ||||||||||||||||||||||||||||||||
Book value per share(2) | 35.70 | 42.54 | (16) | |||||||||||||||||||||||||||||||||||
Book value per share including the Deferred Gain(2) | 39.72 | 46.83 | (15) | |||||||||||||||||||||||||||||||||||
Adjusted book value per share(2) | 43.18 | 43.73 | (1) | |||||||||||||||||||||||||||||||||||
Financial information by Segment(5): | ||||||||||||||||||||||||||||||||||||||
| Net income (loss) before income taxes | ||||||||||||||||||||||||||||||||||||||
| Employers | $ | (11.6) | $ | 35.0 | (133) | % | $ | (9.6) | $ | 69.1 | (114) | % | ||||||||||||||||||||||||||
| Cerity | (3.1) | (1.6) | (94) | (5.7) | (4.6) | (24) | ||||||||||||||||||||||||||||||||
| Corporate and Other | (6.7) | (1.0) | 570 | (8.5) | (4.5) | (89) | ||||||||||||||||||||||||||||||||
| (1) See Page 3 for calculations and Page 13 for information regarding our use of Non-GAAP Financial Measures. | ||||||||||||||||||||||||||||||||||||||
(2) See Page 11 for calculations and Page 13 for information regarding our use of Non-GAAP Financial Measures. | ||||||||||||||||||||||||||||||||||||||
| (3) See Page 8 for calculations and Page 13 for information regarding our use of Non-GAAP Financial Measures. | ||||||||||||||||||||||||||||||||||||||
| (4) See Page 12 for description and calculations and Page 13 for information regarding our use of Non-GAAP Financial Measures. | ||||||||||||||||||||||||||||||||||||||
| (5) See Pages 4-7 for details and Page 14 for a description of our reportable segments. | ||||||||||||||||||||||||||||||||||||||
1
EMPLOYERS HOLDINGS, INC.
Summary Consolidated Balance Sheets (unaudited)
$ in millions, except per share amounts
| June 30, 2022 | December 31, 2021 | |||||||||||||
| ASSETS | ||||||||||||||
| Investments, cash and cash equivalents | $ | 2,642.7 | $ | 2,811.3 | ||||||||||
| Accrued investment income | 15.9 | 14.5 | ||||||||||||
Premiums receivable, net | 282.4 | 244.7 | ||||||||||||
| Reinsurance recoverable, net of allowance, on paid and unpaid losses and LAE | 469.1 | 483.8 | ||||||||||||
| Deferred policy acquisition costs | 48.4 | 43.7 | ||||||||||||
| Deferred income tax asset, net | 50.0 | — | ||||||||||||
| Contingent commission receivable—LPT Agreement | 13.9 | 13.9 | ||||||||||||
| Other assets | 163.1 | 171.3 | ||||||||||||
| Total assets | $ | 3,685.5 | $ | 3,783.2 | ||||||||||
| LIABILITIES | ||||||||||||||
| Unpaid losses and LAE | $ | 1,972.8 | $ | 1,981.2 | ||||||||||
| Unearned premiums | 338.8 | 304.7 | ||||||||||||
| Commissions and premium taxes payable | 46.5 | 42.1 | ||||||||||||
| Deferred Gain | 110.2 | 114.4 | ||||||||||||
FHLB Advances(1) | 126.0 | — | ||||||||||||
| Deferred income tax liability, net | — | 7.7 | ||||||||||||
| Other liabilities | 113.7 | 120.0 | ||||||||||||
| Total liabilities | $ | 2,708.0 | $ | 2,570.1 | ||||||||||
| STOCKHOLDERS' EQUITY | ||||||||||||||
| Common stock and additional paid-in capital | $ | 412.4 | $ | 411.3 | ||||||||||
| Retained earnings | 1,278.4 | 1,338.5 | ||||||||||||
| Accumulated other comprehensive income, net | (94.7) | 60.6 | ||||||||||||
Treasury stock, at cost | (618.6) | (597.3) | ||||||||||||
| Total stockholders’ equity | 977.5 | 1,213.1 | ||||||||||||
| Total liabilities and stockholders’ equity | $ | 3,685.5 | $ | 3,783.2 | ||||||||||
Stockholders' equity including the Deferred Gain (2) | $ | 1,087.7 | $ | 1,327.5 | ||||||||||
Adjusted stockholders' equity (2) | 1,182.4 | 1,266.9 | ||||||||||||
Book value per share (2) | $ | 35.70 | $ | 43.73 | ||||||||||
Book value per share including the Deferred Gain(2) | 39.72 | 47.85 | ||||||||||||
Adjusted book value per share (2) | 43.18 | 45.67 | ||||||||||||
| (1) FHLB=Federal Home Loan Bank | ||||||||||||||
| (2) See Page 11 for calculations and Page 13 for information regarding our use of Non-GAAP Financial Measures. | ||||||||||||||
2
EMPLOYERS HOLDINGS, INC.
Summary Consolidated Income Statements (unaudited)
$ in millions
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| June 30, | June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Net premiums earned | $ | 165.2 | $ | 137.0 | $ | 315.4 | $ | 270.9 | |||||||||||||||
| Net investment income | 20.0 | 18.2 | 39.1 | 36.6 | |||||||||||||||||||
Net realized and unrealized (losses) gains on investments(1) | (50.1) | 16.0 | (67.4) | 26.9 | |||||||||||||||||||
| Other income | 0.2 | 0.2 | 0.2 | 0.6 | |||||||||||||||||||
| Total revenues | 135.3 | 171.4 | 287.3 | 335.0 | |||||||||||||||||||
| Expenses: | |||||||||||||||||||||||
| Losses and LAE incurred | (93.3) | (83.7) | (187.5) | (153.3) | |||||||||||||||||||
| Commission expense | (23.7) | (18.0) | (44.6) | (34.8) | |||||||||||||||||||
| Underwriting and general and administrative expenses | (39.4) | (37.0) | (78.6) | (83.6) | |||||||||||||||||||
| Interest and financing expenses | (0.3) | (0.2) | (0.4) | (0.3) | |||||||||||||||||||
| Other expenses | — | (0.1) | — | (3.0) | |||||||||||||||||||
| Total expenses | (156.7) | (139.0) | (311.1) | (275.0) | |||||||||||||||||||
| Net (loss) income before income taxes | (21.4) | 32.4 | (23.8) | 60.0 | |||||||||||||||||||
| Income tax benefit (expense) | 5.8 | (6.0) | 6.0 | (10.5) | |||||||||||||||||||
| Net (loss) income | (15.6) | 26.4 | (17.8) | 49.5 | |||||||||||||||||||
Unrealized AFS investment losses arising during the period, net of tax(2) | (73.5) | 10.4 | (161.9) | (25.1) | |||||||||||||||||||
Reclassification adjustment for net realized AFS investment losses (gains) in net income, net of tax(2) | 6.4 | (1.6) | 6.6 | (2.2) | |||||||||||||||||||
| Total comprehensive (loss) income | $ | (82.7) | $ | 35.2 | $ | (173.1) | $ | 22.2 | |||||||||||||||
| Net (loss) income | $ | (15.6) | $ | 26.4 | $ | (17.8) | $ | 49.5 | |||||||||||||||
| Amortization of the Deferred Gain - losses | (1.7) | (1.6) | (3.4) | (3.3) | |||||||||||||||||||
| Amortization of the Deferred Gain - contingent commission | (0.4) | (0.4) | (0.8) | (0.8) | |||||||||||||||||||
Net (loss) income before impact of the LPT Agreement (3) | (17.7) | 24.4 | (22.0) | 45.4 | |||||||||||||||||||
| Net realized and unrealized losses (gains) on investments | 50.1 | (16.0) | 67.4 | (26.9) | |||||||||||||||||||
| Severance costs | — | 0.1 | — | 3.0 | |||||||||||||||||||
| Income tax (benefit) expense related to items excluded from Net income or loss | (10.5) | 3.3 | (14.2) | 5.0 | |||||||||||||||||||
| Adjusted net income | $ | 21.9 | $ | 11.8 | $ | 31.2 | $ | 26.5 | |||||||||||||||
| (1) Includes net realized and unrealized (losses) gains on equity securities and other investments of $(42.0) million and $14.0 million for the three months ended June 30, 2022 and 2021, respectively, and $(59.0) million and $24.1 million for the six months ended June 30, 2022 and 2021, respectively. | |||||||||||||||||||||||
| (2) AFS = Available for Sale securities. | |||||||||||||||||||||||
| (3) See Page 13 regarding our use of Non-GAAP Financial Measures. | |||||||||||||||||||||||
3
EMPLOYERS HOLDINGS, INC.
Net Income Before Income Taxes by Segment (1) (unaudited)
$ in millions
| Employers | Cerity | Corporate and Other | Consolidated | |||||||||||||||||||||||
| Three Months Ended June 30, 2022 | ||||||||||||||||||||||||||
| Gross premiums written | $ | 178.5 | $ | 0.9 | $ | — | $ | 179.4 | ||||||||||||||||||
| Net premiums written | 177.2 | 0.9 | — | 178.1 | ||||||||||||||||||||||
| Net premiums earned | A | 164.6 | 0.6 | — | 165.2 | |||||||||||||||||||||
| Net investment income | 18.7 | 0.8 | 0.5 | 20.0 | ||||||||||||||||||||||
| Net realized and unrealized losses on investments | (42.8) | (0.9) | (6.4) | (50.1) | ||||||||||||||||||||||
| Other income | 0.2 | — | — | 0.2 | ||||||||||||||||||||||
| Total revenues | 140.7 | 0.5 | (5.9) | 135.3 | ||||||||||||||||||||||
Losses and LAE incurred (2) | B | (95.1) | (0.3) | 2.1 | (93.3) | |||||||||||||||||||||
| Commission expense | C | (23.7) | — | — | (23.7) | |||||||||||||||||||||
| Underwriting and general and administrative expenses | D | (33.3) | (3.3) | (2.8) | (39.4) | |||||||||||||||||||||
| Interest and financing expenses | (0.2) | — | (0.1) | (0.3) | ||||||||||||||||||||||
| Total expenses | (152.3) | (3.6) | (0.8) | (156.7) | ||||||||||||||||||||||
| Net loss before income taxes | $ | (11.6) | $ | (3.1) | $ | (6.7) | $ | (21.4) | ||||||||||||||||||
| Underwriting income (loss) | A+B+C+D | 12.5 | (3.0) | |||||||||||||||||||||||
| Loss and LAE expense ratio: | ||||||||||||||||||||||||||
| Current year | 63.9 | % | n/m | |||||||||||||||||||||||
| Prior years | (6.1) | — | ||||||||||||||||||||||||
| Loss and LAE ratio | 57.8 | n/m | ||||||||||||||||||||||||
| Commission expense ratio | 14.4 | n/m | ||||||||||||||||||||||||
| Underwriting expense ratio | 20.2 | n/m | ||||||||||||||||||||||||
| Combined ratio | 92.4 | % | n/m | |||||||||||||||||||||||
| n/m - not meaningful | ||||||||||||||||||||||||||
| (1) See Page 14 for a description of our reportable segments | ||||||||||||||||||||||||||
| (2) Losses and LAE in Corporate and Other represent the impact of the LPT Agreement | ||||||||||||||||||||||||||
4
EMPLOYERS HOLDINGS, INC.
Net Income Before Income Taxes by Segment (1) (unaudited)
$ in millions
| Employers | Cerity | Corporate and Other | Consolidated | |||||||||||||||||||||||
| Three Months Ended June 30, 2021 | ||||||||||||||||||||||||||
| Gross premiums written | $ | 146.8 | $ | 0.3 | $ | — | $ | 147.1 | ||||||||||||||||||
| Net premiums written | 145.7 | 0.3 | — | 146.0 | ||||||||||||||||||||||
| Net premiums earned | A | 136.8 | 0.2 | — | 137.0 | |||||||||||||||||||||
| Net investment income | 17.4 | 0.7 | 0.1 | 18.2 | ||||||||||||||||||||||
| Net realized and unrealized gains on investments | 15.8 | 0.2 | — | 16.0 | ||||||||||||||||||||||
| Other income | 0.2 | — | — | 0.2 | ||||||||||||||||||||||
| Total revenues | 170.2 | 1.1 | 0.1 | 171.4 | ||||||||||||||||||||||
Losses and LAE incurred (2) | B | (85.6) | (0.1) | 2.0 | (83.7) | |||||||||||||||||||||
| Commission expense | C | (18.0) | — | — | (18.0) | |||||||||||||||||||||
| Underwriting and general and administrative expenses | D | (31.5) | (2.6) | (2.9) | (37.0) | |||||||||||||||||||||
| Interest and financing expenses | — | — | (0.2) | (0.2) | ||||||||||||||||||||||
| Other expenses | (0.1) | — | — | (0.1) | ||||||||||||||||||||||
| Total expenses | (135.2) | (2.7) | (1.1) | (139.0) | ||||||||||||||||||||||
| Net income (loss) before income taxes | $ | 35.0 | $ | (1.6) | $ | (1.0) | $ | 32.4 | ||||||||||||||||||
| Underwriting income (loss) | A+B+C+D | $ | 1.7 | $ | (2.5) | |||||||||||||||||||||
| Loss and LAE expense ratio: | ||||||||||||||||||||||||||
| Current year | 63.7 | % | n/m | |||||||||||||||||||||||
| Prior years | (1.1) | — | ||||||||||||||||||||||||
| Loss and LAE ratio | 62.6 | n/m | ||||||||||||||||||||||||
| Commission expense ratio | 13.2 | n/m | ||||||||||||||||||||||||
| Underwriting expense ratio | 23.0 | n/m | ||||||||||||||||||||||||
| Combined ratio | 98.8 | % | n/m | |||||||||||||||||||||||
| n/m - not meaningful | ||||||||||||||||||||||||||
| (1) See Page 14 for a description of our reportable segments | ||||||||||||||||||||||||||
| (2) Losses and LAE in Corporate and Other represent the impact of the LPT Agreement | ||||||||||||||||||||||||||
5
EMPLOYERS HOLDINGS, INC.
Net Income Before Income Taxes by Segment (1) (unaudited)
$ in millions
| Employers | Cerity | Corporate and Other | Consolidated | |||||||||||||||||||||||
| Six Months Ended June 30, 2022 | ||||||||||||||||||||||||||
| Gross premiums written | $ | 349.7 | $ | 2.1 | $ | — | $ | 351.8 | ||||||||||||||||||
| Net premiums written | 346.4 | 2.1 | — | 348.5 | ||||||||||||||||||||||
| Net premiums earned | A | 314.2 | 1.2 | — | 315.4 | |||||||||||||||||||||
| Net investment income | 36.3 | 1.6 | 1.2 | 39.1 | ||||||||||||||||||||||
| Net realized and unrealized gains (losses) on investments | (58.4) | (1.3) | (7.7) | (67.4) | ||||||||||||||||||||||
| Other income | 0.2 | — | — | 0.2 | ||||||||||||||||||||||
| Total revenues | 292.3 | 1.5 | (6.5) | 287.3 | ||||||||||||||||||||||
Losses and LAE incurred (2) | B | (191.0) | (0.7) | 4.2 | (187.5) | |||||||||||||||||||||
| Commission expense | C | (44.6) | — | — | (44.6) | |||||||||||||||||||||
| Underwriting and general and administrative expenses | D | (66.1) | (6.5) | (6.0) | (78.6) | |||||||||||||||||||||
| Interest and financing expenses | (0.2) | — | (0.2) | (0.4) | ||||||||||||||||||||||
| Total expenses | (301.9) | (7.2) | (2.0) | (311.1) | ||||||||||||||||||||||
| Net loss before income taxes | $ | (9.6) | $ | (5.7) | $ | (8.5) | $ | (23.8) | ||||||||||||||||||
| Underwriting income (loss) | A+B+C+D | 12.5 | (6.0) | |||||||||||||||||||||||
| Loss and LAE expense ratio: | ||||||||||||||||||||||||||
| Current year | 64.0 | % | n/m | |||||||||||||||||||||||
| Prior years | (3.2) | — | ||||||||||||||||||||||||
| Loss and LAE ratio | 60.8 | n/m | ||||||||||||||||||||||||
| Commission expense ratio | 14.2 | n/m | ||||||||||||||||||||||||
| Underwriting expense ratio | 21.0 | n/m | ||||||||||||||||||||||||
| Combined ratio | 96.0 | % | n/m | |||||||||||||||||||||||
| n/m - not meaningful | ||||||||||||||||||||||||||
| (1) See Page 14 for a description of our reportable segments | ||||||||||||||||||||||||||
| (2) Losses and LAE in Corporate and Other represent the impact of the LPT Agreement | ||||||||||||||||||||||||||
6
EMPLOYERS HOLDINGS, INC.
Net Income Before Income Taxes by Segment (1) (unaudited)
$ in millions
| Employers | Cerity | Corporate and Other | Consolidated | |||||||||||||||||||||||
| Six Months Ended June 30, 2021 | ||||||||||||||||||||||||||
| Gross premiums written | $ | 294.8 | $ | 0.6 | $ | — | $ | 295.4 | ||||||||||||||||||
| Net premiums written | 292.3 | 0.6 | — | 292.9 | ||||||||||||||||||||||
| Net premiums earned | A | 270.7 | 0.2 | — | 270.9 | |||||||||||||||||||||
| Net investment income | 35.1 | 1.4 | 0.1 | 36.6 | ||||||||||||||||||||||
| Net realized and unrealized gains (losses) on investments | 26.6 | 0.3 | — | 26.9 | ||||||||||||||||||||||
| Other income | 0.6 | — | — | 0.6 | ||||||||||||||||||||||
| Total revenues | 333.0 | 1.9 | 0.1 | 335.0 | ||||||||||||||||||||||
Losses and LAE incurred (2) | B | (157.3) | (0.1) | 4.1 | (153.3) | |||||||||||||||||||||
| Commission expense | C | (34.8) | — | — | (34.8) | |||||||||||||||||||||
| Underwriting and general and administrative expenses | D | (68.8) | (6.4) | (8.4) | (83.6) | |||||||||||||||||||||
| Interest and financing expenses | — | — | (0.3) | (0.3) | ||||||||||||||||||||||
| Other expenses | (3.0) | — | — | (3.0) | ||||||||||||||||||||||
| Total expenses | (263.9) | (6.5) | (4.6) | (275.0) | ||||||||||||||||||||||
| Net income (loss) before income taxes | $ | 69.1 | $ | (4.6) | $ | (4.5) | $ | 60.0 | ||||||||||||||||||
| Underwriting income (loss) | A+B+C+D | $ | 9.8 | $ | (6.3) | |||||||||||||||||||||
| Loss and LAE expense ratio: | ||||||||||||||||||||||||||
| Current year | 63.8 | % | n/m | |||||||||||||||||||||||
| Prior years | (5.7) | — | ||||||||||||||||||||||||
| Loss and LAE ratio | 58.1 | n/m | ||||||||||||||||||||||||
| Commission expense ratio | 12.9 | n/m | ||||||||||||||||||||||||
| Underwriting expense ratio | 25.4 | n/m | ||||||||||||||||||||||||
| Combined ratio | 96.4 | % | n/m | |||||||||||||||||||||||
| n/m - not meaningful | ||||||||||||||||||||||||||
| (1) See Page 14 for a description of our reportable segments | ||||||||||||||||||||||||||
| (2) Losses and LAE in Corporate and Other represent the impact of the LPT Agreement | ||||||||||||||||||||||||||
7
EMPLOYERS HOLDINGS, INC.
Return on Equity (unaudited)
$ in millions
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| Net (loss) income | A | $ | (15.6) | $ | 26.4 | $ | (17.8) | $ | 49.5 | |||||||||||||||||
| Impact of the LPT Agreement | (2.1) | (2.0) | (4.2) | (4.1) | ||||||||||||||||||||||
| Net realized and unrealized losses (gains) on investments | 50.1 | (16.0) | 67.4 | (26.9) | ||||||||||||||||||||||
| Severance costs | — | 0.1 | — | 3.0 | ||||||||||||||||||||||
| Income tax (benefit) expense related to items excluded from Net income | (10.5) | 3.3 | (14.2) | 5.0 | ||||||||||||||||||||||
Adjusted net income (1) | B | 21.9 | 11.8 | 31.2 | 26.5 | |||||||||||||||||||||
| Stockholders' equity - end of period | $ | 977.5 | $ | 1,203.6 | $ | 977.5 | $ | 1,203.6 | ||||||||||||||||||
| Stockholders' equity - beginning of period | 1,109.3 | 1,186.6 | 1,213.1 | 1,212.8 | ||||||||||||||||||||||
| Average stockholders' equity | C | 1,043.4 | 1,195.1 | 1,095.3 | 1,208.2 | |||||||||||||||||||||
| Stockholders' equity - end of period | $ | 977.5 | $ | 1,203.6 | $ | 977.5 | $ | 1,203.6 | ||||||||||||||||||
| Deferred Gain - end of period | 110.2 | 121.3 | 110.2 | 121.3 | ||||||||||||||||||||||
| Accumulated other comprehensive loss (income) - end of period | 119.8 | (111.1) | 119.8 | (111.1) | ||||||||||||||||||||||
| Income taxes related to accumulated other comprehensive (loss) income - end of period | (25.1) | 23.3 | (25.1) | 23.3 | ||||||||||||||||||||||
| Adjusted stockholders' equity - end of period | 1,182.4 | 1,237.1 | 1,182.4 | 1,237.1 | ||||||||||||||||||||||
| Adjusted stockholders' equity - beginning of period | 1,249.2 | 1,230.9 | 1,266.9 | 1,223.1 | ||||||||||||||||||||||
Average adjusted stockholders' equity (1) | D | 1,215.8 | 1,234.0 | 1,224.7 | 1,230.1 | |||||||||||||||||||||
| Return on stockholders' equity | A / C | (1.5) | % | 2.2 | % | (1.6) | % | 4.1 | % | |||||||||||||||||
| Annualized return on stockholders' equity | (6.0) | 8.8 | (3.3) | 8.2 | ||||||||||||||||||||||
Adjusted return on stockholders' equity (1) | B / D | 1.8 | % | 1.0 | % | 2.5 | % | 2.2 | % | |||||||||||||||||
Annualized adjusted return on stockholders' equity (1) | 7.2 | 3.8 | 5.1 | 4.3 | ||||||||||||||||||||||
| (1) See Page 13 for information regarding our use of Non-GAAP Financial Measures. | ||||||||||||||||||||||||||
8
EMPLOYERS HOLDINGS, INC.
Roll-forward of Unpaid Losses and LAE (unaudited)
$ in millions
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| June 30, | June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Unpaid losses and LAE at beginning of period | $ | 1,981.9 | $ | 2,034.1 | $ | 1,981.2 | $ | 2,069.4 | |||||||||||||||
| Reinsurance recoverable, excluding CECL allowance, on unpaid losses and LAE | 471.7 | 492.3 | 476.9 | 497.0 | |||||||||||||||||||
| Net unpaid losses and LAE at beginning of period | 1,510.2 | 1,541.8 | 1,504.3 | 1,572.4 | |||||||||||||||||||
| Losses and LAE incurred: | |||||||||||||||||||||||
| Current year losses | 105.4 | 87.3 | 201.7 | 172.9 | |||||||||||||||||||
| Prior year losses on voluntary business | (9.6) | (1.6) | (9.6) | (15.0) | |||||||||||||||||||
| Prior year losses on involuntary business | (0.4) | — | (0.4) | (0.5) | |||||||||||||||||||
| Total losses incurred | 95.4 | 85.7 | 191.7 | 157.4 | |||||||||||||||||||
| Losses and LAE paid: | |||||||||||||||||||||||
| Current year losses | 18.5 | 15.9 | 23.1 | 20.6 | |||||||||||||||||||
| Prior year losses | 76.7 | 87.5 | 162.5 | 185.1 | |||||||||||||||||||
| Total paid losses | 95.2 | 103.4 | 185.6 | 205.7 | |||||||||||||||||||
| Net unpaid losses and LAE at end of period | 1,510.4 | 1,524.1 | 1,510.4 | 1,524.1 | |||||||||||||||||||
| Reinsurance recoverable, excluding CECL allowance, on unpaid losses and LAE | 462.4 | 483.5 | 462.4 | 483.5 | |||||||||||||||||||
| Unpaid losses and LAE at end of period | $ | 1,972.8 | $ | 2,007.6 | $ | 1,972.8 | $ | 2,007.6 | |||||||||||||||
Total losses and LAE shown in the above table exclude amortization of the Deferred Gain, which totaled $2.1 million and $2.0 million for the three months ended June 30, 2022 and 2021, respectively and $4.2 million and $4.1 million for the six months ended June 30, 2022 and 2021, respectively.
9
EMPLOYERS HOLDINGS, INC.
Consolidated Investment Portfolio (unaudited)
$ in millions
| June 30, 2022 | December 31, 2021 | |||||||||||||||||||||||||||||||||||||
| Investment Positions: | Cost or Amortized Cost | Net Unrealized Gain (Loss) | Fair Value | % | Fair Value | % | ||||||||||||||||||||||||||||||||
| Fixed maturity securities | $ | 2,320.1 | $ | (119.8) | $ | 2,190.3 | 83 | % | $ | 2,342.7 | 83 | % | ||||||||||||||||||||||||||
| Equity securities | 218.8 | 52.3 | 271.1 | 10 | 344.4 | 12 | ||||||||||||||||||||||||||||||||
| Short-term investments | 3.2 | — | 3.2 | — | 10.5 | — | ||||||||||||||||||||||||||||||||
| Other invested assets | 41.5 | 6.3 | 47.8 | 2 | 38.4 | 1 | ||||||||||||||||||||||||||||||||
| Cash and cash equivalents | 129.1 | — | 129.1 | 5 | 75.1 | 3 | ||||||||||||||||||||||||||||||||
| Restricted cash and cash equivalents | 1.2 | — | 1.2 | — | 0.2 | — | ||||||||||||||||||||||||||||||||
| Total investments and cash | $ | 2,713.9 | $ | (61.2) | $ | 2,642.7 | 100 | % | $ | 2,811.3 | 100 | % | ||||||||||||||||||||||||||
| Breakout of Fixed Maturity Securities: | ||||||||||||||||||||||||||||||||||||||
| U.S. Treasuries and agencies | $ | 65.4 | $ | (2.4) | $ | 63.0 | 3 | % | $ | 68.1 | 3 | % | ||||||||||||||||||||||||||
| States and municipalities | 354.8 | (0.8) | 353.9 | 16 | 436.1 | 19 | ||||||||||||||||||||||||||||||||
| Corporate securities | 1,017.7 | (66.5) | 945.3 | 43 | 1,080.3 | 46 | ||||||||||||||||||||||||||||||||
| Mortgage-backed securities | 435.6 | (31.5) | 404.1 | 18 | 414.1 | 18 | ||||||||||||||||||||||||||||||||
| Asset-backed securities | 69.8 | (5.4) | 64.4 | 3 | 68.5 | 3 | ||||||||||||||||||||||||||||||||
| Collateralized loan obligations | 209.8 | (6.7) | 203.1 | 9 | 85.4 | 4 | ||||||||||||||||||||||||||||||||
| Bank loans and other | 167.0 | (6.5) | 156.5 | 7 | 190.2 | 8 | ||||||||||||||||||||||||||||||||
| Total fixed maturity securities | $ | 2,320.1 | $ | (119.8) | $ | 2,190.3 | 100 | % | $ | 2,342.7 | 100 | % | ||||||||||||||||||||||||||
| Weighted average book yield | 3.3% | 3.0% | |||||||||||||||||||||
| Average credit quality (S&P) | A+ | A+ | |||||||||||||||||||||
| Duration | 4.1 | 3.4 | |||||||||||||||||||||
10
EMPLOYERS HOLDINGS, INC.
Book Value Per Share (unaudited)
$ in millions, except per share amounts
| June 30, 2022 | March 31, 2022 | December 31, 2021 | June 30, 2021 | |||||||||||||||||||||||
| Numerators: | ||||||||||||||||||||||||||
| Stockholders' equity | A | $ | 977.5 | $ | 1,109.3 | $ | 1,213.1 | $ | 1,203.6 | |||||||||||||||||
| Plus: Deferred Gain | 110.2 | 112.3 | 114.4 | 121.3 | ||||||||||||||||||||||
Stockholders' equity including the Deferred Gain (1) | B | 1,087.7 | 1,221.6 | 1,327.5 | 1,324.9 | |||||||||||||||||||||
| Accumulated other comprehensive loss (income) | 119.8 | 34.9 | (76.7) | (111.1) | ||||||||||||||||||||||
| Income taxes related to accumulated other comprehensive (loss) income | (25.1) | (7.3) | 16.1 | 23.3 | ||||||||||||||||||||||
Adjusted stockholders' equity (1) | C | $ | 1,182.4 | $ | 1,249.2 | $ | 1,266.9 | $ | 1,237.1 | |||||||||||||||||
| Denominator (shares outstanding) | D | 27,383,132 | 27,738,429 | 27,741,400 | 28,291,782 | |||||||||||||||||||||
Book value per share (1) | A / D | $ | 35.70 | $ | 39.99 | $ | 43.73 | $ | 42.54 | |||||||||||||||||
Book value per share including the Deferred Gain(1) | B / D | 39.72 | 44.04 | 47.85 | 46.83 | |||||||||||||||||||||
Adjusted book value per share (1) | C / D | 43.18 | 45.03 | 45.67 | 43.73 | |||||||||||||||||||||
YTD Change in: (2) | ||||||||||||||||||||||||||
| Book value per share | (14.9) | % | 1.4 | % | ||||||||||||||||||||||
| Book value per share including the Deferred Gain | (13.8) | 1.0 | ||||||||||||||||||||||||
| Adjusted book value per share | (2.1) | 3.3 | ||||||||||||||||||||||||
| (1) See Page 13 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 $1.51 and $0.50 for the six month ended June 30, 2022 and 2021, respectively. | ||||||||||||||||||||||||||
11
EMPLOYERS HOLDINGS, INC.
Earnings Per Share (unaudited)
$ in millions, except per share amounts
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| Numerators: | ||||||||||||||||||||||||||
| Net (loss) income | A | $ | (15.6) | $ | 26.4 | $ | (17.8) | $ | 49.5 | |||||||||||||||||
| Impact of the LPT Agreement | (2.1) | (2.0) | (4.2) | (4.1) | ||||||||||||||||||||||
Net (loss) income before impact of the LPT (1) | B | (17.7) | 24.4 | (22.0) | 45.4 | |||||||||||||||||||||
| Net realized and unrealized losses (gains) on investments | 50.1 | (16.0) | 67.4 | (26.9) | ||||||||||||||||||||||
| Severance costs | — | 0.1 | — | 3.0 | ||||||||||||||||||||||
| Income tax (benefit) expense related to items excluded from Net income | (10.5) | 3.3 | (14.2) | 5.0 | ||||||||||||||||||||||
Adjusted net income (1) | C | $ | 21.9 | $ | 11.8 | $ | 31.2 | $ | 26.5 | |||||||||||||||||
| Denominators: | ||||||||||||||||||||||||||
| Average common shares outstanding (basic) | D | 27,650,277 | 28,478,788 | 27,585,447 | 28,497,654 | |||||||||||||||||||||
| Average common shares outstanding (diluted) | E | 27,782,921 | 28,809,341 | 27,789,087 | 28,888,735 | |||||||||||||||||||||
| Earnings (loss) per share: | ||||||||||||||||||||||||||
| Basic | A / D | $ | (0.56) | $ | 0.93 | $ | (0.65) | $ | 1.74 | |||||||||||||||||
Diluted (2) | A / E | (0.56) | 0.92 | (0.65) | 1.71 | |||||||||||||||||||||
Earnings (loss) per share before impact of the LPT: (1) | ||||||||||||||||||||||||||
| Basic | B / D | $ | (0.64) | $ | 0.86 | $ | (0.80) | $ | 1.59 | |||||||||||||||||
| Diluted | B / E | (0.64) | 0.85 | (0.80) | 1.57 | |||||||||||||||||||||
Adjusted earnings per share: (1) | ||||||||||||||||||||||||||
| Basic | C / D | $ | 0.79 | $ | 0.41 | $ | 1.13 | $ | 0.93 | |||||||||||||||||
| Diluted | C / E | 0.79 | 0.41 | 1.12 | 0.92 | |||||||||||||||||||||
| (1) See Page 13 for information regarding our use of Non-GAAP Financial Measures. | ||||||||||||||||||||||||||
| (2) Represents basic loss per share or diluted earnings per share, as appropriate. | ||||||||||||||||||||||||||
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Non-GAAP 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 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 3 for calculations) is net income excluding the effects of the LPT Agreement, and net realized and unrealized gains and losses on investments (net of tax), and any miscellaneous non-recurring transactions (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.
Stockholders' equity including the Deferred Gain (see Page 11 for calculations) 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 11 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 adjusted return on stockholders' equity metric.
Return on stockholders' equity and Adjusted return on stockholders' equity (see Page 8 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 11 for calculations). Management believes that these valuation measures are widely used by our investors, analysts and other interested parties.
Net income before impact of the LPT (see Page 3 for calculations). Management believes that these performance and underwriting measures are widely used by our investors, analysts and other interested parties.
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Description of Reportable Segments
The Company has determined that it has two reportable segments: Employers and Cerity. Each of these segments represents a separate and distinct distribution channel through which the Company conducts insurance business.
The nature and composition of each reportable segment and its Corporate and Other activities are as follows:
•The Employers segment represents the traditional business offered through the EMPLOYERS brand name (Employers) through its agents, including business originated from its strategic partnerships and alliances;
•The Cerity segment represents the as business offered under the Cerity brand name, which includes the Company's direct-to-customer business; and
•Corporate and Other activities consist of those holding company expenses that are not considered to be underwriting in nature, the financial impact of the LPT Agreement and legacy (pre-acquisition) business assumed and ceded by Cerity Insurance Company. These expenses are not considered to be part of a reportable segment and are not otherwise allocated to a reportable segment.
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