Employers Holdings, Inc. Reports Third Quarter Earnings, Declares Fourth Quarter Dividend and Announces 2010 Stock Repurchase Plan
Net income for the nine months ended
The third quarter 2009 combined ratio was 88.9% (93.7% before the impact of the LPT deferred reinsurance gain), compared with 78.8% (85.0% before the impact of the LPT deferred reinsurance gain), an increase of 10.1 percentage points. Acquired operations contributed 16.6 percentage points of the increase. Lower favorable reserve development also contributed to the overall 10.1 percentage point increase. These factors were partially offset by the
President and Chief Executive Officer
"Given our strong capital position, our Board of Directors has approved a new
Discussing the Company's outlook, Dirks concluded: "While recent economic data may signal the end of the U.S. recession, the pace of recovery remains uncertain and we believe that employment will continue to be negatively impacted in the near-term. The Obama administration has recently announced new efforts to improve access to credit for small businesses which may be an important step in supporting economic recovery and job creation. No matter what the pace of recovery, our strong capital position and earnings power will enable us to continue to invest in our business while maintaining a strong rating of A- from
Net premiums earned increased
Policy count increased 24.2% to 44,848 at
Third quarter 2009 net investment income of
Third quarter losses and LAE increased to
Year-to-date losses and LAE at
In the third quarter of 2009, we recorded a negative commission expense of
Dividends to policyholders were
Third quarter underwriting and other operating expenses were
Interest expense on the Company's Credit Facility with
Third quarter income tax expense increased to
Total invested assets were
As of
Through the 2008 Stock Repurchase Program, 1,547,106 shares of common stock were repurchased in the third quarter of 2009 at an average price of
Book value per share increased 9.3% to
The Board of Directors declared a fourth quarter dividend of
On
Conference Call and Web Cast, Form 10-Q
The Company will host a conference call
EHI will file its Form 10-Q for the period ended
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.
These non-GAAP financial measures exclude impacts related to the LPT Agreement deferred reinsurance gain. The 1999 LPT Agreement was a non-recurring transaction that does not result in ongoing cash benefits and, consequently, the Company believes these non-GAAP measures are useful in providing stockholders and management a meaningful understanding of the Company's operating performance. In addition, these measures, as defined, are helpful to management in identifying trends in the Company's performance because the items excluded have limited significance in current and ongoing operations.
The Company strongly urges stockholders and other interested persons not to rely on any single financial measure to evaluate its business. The 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 the deferred reinsurance gain - LPT Agreement. Net income less (i) amortization of deferred reinsurance gain--LPT Agreement and (ii) adjustments to LPT Agreement ceded reserves.
Deferred reinsurance gain--LPT Agreement. This reflects the unamortized gain from the LPT Agreement. Under GAAP, this gain is deferred and amortized using the recovery method, whereby the amortization is determined by the proportion of actual reinsurance recoveries to total estimated recoveries, and the amortization is reflected in losses and LAE.
Gross Premiums Written. Gross premiums written is the sum of both direct premiums written and assumed premiums written before the effect of ceded reinsurance. Direct premiums written represents the premiums on all policies the Company's insurance subsidiaries have issued during the year. Assumed premiums written represents the premiums that the insurance subsidiaries have received from an authorized state-mandated pool.
Net Premiums Written. Net premiums written is the sum of direct premiums written and assumed premiums written less ceded premiums written. Ceded premiums written is the portion of direct premiums written that are ceded to reinsurers under reinsurance contracts. The Company uses net premiums written, primarily in relation to gross premiums written, to measure the amount of business retained after cession to reinsurers.
Losses and LAE before impact of the deferred reinsurance gain - LPT Agreement. Losses and LAE less (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 a summary percentage of claims and expenses to net premiums earned. The combined ratio is the sum of the losses and LAE ratio, the commission expense ratio, the policyholder dividends ratio and the underwriting and other operating expense ratio.
Combined Ratio before impacts of the deferred reinsurance gain - LPT Agreement. Combined ratio before impacts of LPT is the GAAP combined ratio before (i) amortization of deferred reinsurance gain--LPT Agreement and (ii) adjustments to LPT Agreement ceded reserves.
Equity including deferred reinsurance gain--LPT Agreement. Equity including deferred reinsurance gain--LPT is total equity plus the deferred reinsurance gain--LPT Agreement.
Book value per share. Equity including deferred reinsurance gain--LPT Agreement divided by number of shares outstanding.
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
All forward-looking statements made in this news release reflect EHI's current views with respect to future events, business transactions and business performance and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties, which may cause actual results to differ materially from those set forth in these statements. The business of EHI could be affected by, among other things, competition, pricing and policy term trends, the levels of new and renewal business achieved, market acceptance, changes in demand, the frequency and severity of catastrophic events, actual loss experience, uncertainties in the loss reserving and claims settlement process, new theories of liability, judicial, legislative, regulatory and other governmental developments, litigation tactics and developments, investigation developments, the amount and timing of reinsurance recoverables, credit developments among reinsurers, changes in the cost or availability of reinsurance, market developments (including adverse developments in financial markets as a result of, among other things, changes in local, regional or national economic conditions and volatility and further deterioration of financial markets), credit and other risks associated with EHI's investment activities, significant changes in investment yield rates, rating agency action, possible terrorism or the outbreak and effects of war and economic, political, regulatory, insurance and reinsurance business conditions, relations with and performance of employees and agents, the integration of acquired operations (including the failure to realize anticipated benefits of such acquisitions and potential disruption from the acquisitions making it more difficult to maintain relationships with customers, employees, agents or producers), as well as management's response to these factors, and other factors identified in EHI's filings with the
The
Copyright (C) 2009 EMPLOYERS. All rights reserved. EMPLOYERS(R)( )and America's small business insurance specialist.(R)( )are registered trademarks of Employers Insurance Company of Nevada. 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 30 states. Insurance subsidiaries include Employers Insurance Company of Nevada, Employers Compensation Insurance Company, Employers Preferred Insurance Company, and Employers Assurance Company, all rated A- (Excellent) by A.M. Best Company. Additional information can be found at: http://www.employers.com.
Employers Holdings, Inc.
Consolidated Statements of Income
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2009 2008 2009 2008
---- ---- ---- ----
(unaudited)
Revenues
Gross premiums written $84,842 $75,857 $306,270 $232,431
======= ======= ======== ========
Net premiums written $82,790 $73,076 $298,159 $224,317
======= ======= ======== ========
Net premiums earned $98,240 $73,131 $314,221 $222,842
Net investment income 22,334 18,474 68,704 55,915
Realized gains (losses)
on investments, net 3,564 (1,504) 1,060 (3,211)
Other income 183 295 388 1,155
------- ------- -------- --------
Total revenues 124,321 90,396 384,373 276,701
Expenses
Losses and loss adjustment
expenses 53,395 25,588 166,657 80,344
Commission (benefit)
expense (1,276) 10,121 25,611 30,465
Dividends to policyholders 1,539 (8) 5,418 78
Underwriting and other
operating expense 33,688 21,915 102,624 66,536
Interest expense 1,824 - 5,608 -
------- ------- -------- --------
Total expenses 89,170 57,616 305,918 177,423
------- ------- -------- --------
Net income before income
taxes 35,151 32,780 78,455 99,278
Income taxes 4,594 (289) 6,698 13,349
------- ------- -------- --------
Net income $30,557 $33,069 $71,757 $85,929
======= ======= ======= =======
Reconciliation of net
income to net income
before impact of deferred
reinsurance gain - LPT
Agreement
Net income $30,557 $33,069 $71,757 $85,929
Less: Impact of LPT
Agreement
Amortization of deferred
reinsurance gain - LPT
Agreement 4,668 4,549 13,377 13,908
------- ------- -------- --------
Net income before impact
of deferred reinsurance
gain - LPT Agreement
$25,889 $28,520 $58,380 $72,021
======= ======= ======= =======
Employers Holdings, Inc
Consolidated Statements of Income
(in thousands, except share and per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2009 2008 2009 2008
---- ---- ---- ----
(unaudited)
Net Income $30,577 $33,069 $71,757 $85,929
Earnings per common
share
Basic $0.68 $0.67 $1.54 $1.74
Diluted $0.67 $0.67 $1.53 $1.74
Weighted average shares
outstanding
Basic 45,113,973 49,005,235 46,706,063 49,339,966
Diluted 45,292,283 49,074,914 46,811,751 49,389,594
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2009 2008 2009 2008
---- ---- ---- ----
(unaudited)
Earnings per common share
Basic $0.68 $0.67 $1.54 $1.74
Diluted $0.67 $0.67 $1.53 $1.74
Earnings per common
share attributable to the
deferred reinsurance gain
- LPT Agreement
Basic $0.11 $0.09 $0.29 $0.28
Diluted $0.10 $0.09 $0.28 $0.28
Earnings per common share
before the deferred
reinsurance gain -
LPT Agreement
Basic $0.57 $0.58 $1.25 $1.46
Diluted $0.57 $0.58 $1.25 $1.46
Employers Holdings, Inc.
Consolidated Balance Sheets
(in thousands, except share data)
September 30, December 31,
2009 2008
------------ -----------
Assets (unaudited)
Available for Sale:
Fixed maturity investments at fair value
(amortized cost $1,915,852 at September
30, 2009 and $1,870,227 at December 31,
2008) $2,046,116 $1,909,391
Equity securities at fair value (cost of
$40,252 at September 30, 2009 and $43,014
at December 31, 2008) 65,746 58,526
Short-term investments at fair value
(amortized cost $2,998 at September 30,
2009 and $74,952 at December 31, 2008) 3,000 75,024
---------- ----------
Total investments 2,114,862 2,042,941
Cash and cash equivalents 212,621 202,893
Accrued investment income 22,874 24,201
Premiums receivable, less bad debt
allowance of $9,812 at September 30, 2009
and $7,911 at December 31, 2008 129,842 150,502
Reinsurance recoverable for:
Paid losses 12,841 12,723
Unpaid losses, less allowance of $1,335 at
each period 1,045,804 1,075,015
Funds held by or deposited with reinsureds 84,064 88,163
Deferred policy acquisition costs 36,764 41,521
Federal income taxes recoverable 6,312 11,042
Deferred income taxes, net 36,366 80,968
Property and equipment, net 12,509 14,098
Intangible assets, net 16,093 18,218
Goodwill 36,192 36,192
Other assets 22,369 26,621
---------- ----------
Total assets $3,789,513 $3,825,098
========== ==========
Liabilities and stockholders' equity
Claims and policy liabilities:
Unpaid losses and loss adjustment expenses $2,443,644 $2,506,478
Unearned premiums 174,471 196,695
Policyholders' dividends accrued 8,428 8,737
---------- ----------
Total claims and policy liabilities 2,626,543 2,711,910
Commissions and premium taxes payable 20,377 21,847
Accounts payable and accrued expenses 17,919 24,192
Deferred reinsurance gain-LPT Agreement 393,204 406,581
Notes payable 182,000 182,000
Other liabilities 24,864 33,840
---------- ----------
Total liabilities $3,264,907 $3,380,370
Employers Holdings, Inc.
Consolidated Balance Sheets
(in thousands, except share data)
(continued)
September 30, December 31,
2009 2008
----------- -----------
(unaudited)
Commitments and contingencies
Stockholders' equity:
Common stock, $0.01 par value;
150,000,000 shares authorized; 536 535
53,563,299 and 53,528,207 shares
issued and 44,248,831 and
48,830,140 shares outstanding at
September 30, 2009 and December
31, 2008 respectively
Preferred stock, $0.01 par value;
25,000,000 shares authorized;
none issued - -
Additional paid-in capital 310,011 306,032
Retained earnings 257,852 194,509
Accumulated other comprehensive
income, net 99,774 32,804
Treasury stock, at cost (9,314,468
shares at September 30, 2009 and (143,567) (89,152)
4,698,067 shares at December 31, 2008) ---------- ----------
Total stockholders' equity 524,606 444,728
---------- ----------
Total liabilities and
stockholders' equity $3,789,513 $3,825,098
========== ==========
September 30, June 30, December 31,
Book Value per Share 2009 2009 2008
------------ ------- -----------
(unaudited) (unaudited)
Equity including deferred
reinsurance gain - LPT
Total stockholders' equity $524,606 $471,066 $444,728
Deferred reinsurance gain
- LPT Agreement 393,204 397,872 406,581
------- ------- -------
Total equity including deferred
reinsurance gain
- LPT Agreement (A) $917,810 $868,938 $851,309
======== ======== ========
Shares outstanding (B) 44,248,831 45,795,937 48,830,140
Book value per share (A * 1000)/B $20.74 $18.97 $17.43
Employers Holdings, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Nine months ended
September 30,
2009 2008
---- ----
(unaudited)
Operating activities
Net income $71,757 $85,929
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 7,834 5,334
Stock-based compensation 4,097 2,459
Amortization of premium on investments, net 3,668 4,814
Allowance for doubtful accounts - premiums
receivable 1,901 (717)
Deferred income tax expense 9,092 6,284
Realized (gains) losses on investments, net (1,060) 3,211
Realized losses on retirement of assets 64 16
Change in operating assets and liabilities:
Accrued investment income 1,327 492
Premiums receivable 18,759 14,894
Reinsurance recoverable on paid and unpaid
losses 29,093 25,914
Funds held by or deposited with reinsureds 4,099 5,817
Federal income taxes payable 4,730 (11,744)
Unpaid losses and loss adjustment expenses (62,834) (57,310)
Unearned premiums (22,224) (7,177)
Accounts payable, accrued expenses and
other liabilities (14,503) (2,040)
Deferred reinsurance gain-LPT Agreement (13,377) (13,908)
Other 3,944 (7,073)
-------- --------
Net cash provided by operating activities 46,367 55,195
Investing activities
Purchase of fixed maturities (165,906) (208,730)
Purchase of equity securities (11,934) (558)
Proceeds from sale of fixed maturities 56,557 149,487
Proceeds from sale of equity securities 19,475 4,010
Proceeds from maturities and redemptions of
investments 131,413 41,462
Cash paid for acquisition, net of cash and
cash equivalents acquired (100) (1,260)
Capital expenditures and other, net (4,020) (4,116)
-------- --------
Net cash provided by (used in) investing
activities 25,485 (19,705)
Financing activities
Acquisition of treasury stock (53,593) (14,152)
Cash transactions related to stock
compensation (123) 5
Dividends paid to stockholders (8,408) (8,878)
Debt issuance costs - (375)
Proceeds from notes payable - 150,000
-------- --------
Net cash (used in) provided by financing
activities (62,124) 126,600
-------- --------
Net increase in cash and cash equivalents 9,728 162,090
Cash and cash equivalents at the beginning
of the period 202,893 149,703
-------- --------
Cash and cash equivalents at the end of the
period $212,621 $311,793
======== ========
Employers Holdings, Inc.
Calculation of Combined Ratio before the Impact of the Deferred
Reinsurance Gain - LPT Agreement
(in thousands, except for percentages)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2009 2008 2009 2008
---- ---- ---- ----
(unaudited)
Net premiums earned $98,240 $73,131 $314,221 $222,842
======= ======= ======== ========
Losses and loss
adjustment expenses $53,395 $25,588 $166,657 $80,344
======= ======= ======== =======
Loss & LAE ratio 54.3% 35.0% 53.0% 36.0%
======= ======= ======== ========
Amortization of deferred
reinsurance gain - LPT $4,668 $4,549 $13,377 $13,908
Impacts of LPT 4.8% 6.2% 4.3% 6.2%
------- ------- -------- --------
Loss & LAE before impact
of the deferred
reinsurance gain
- LPT Agreement $58,063 $30,137 $180,034 $94,252
======= ======= ======== ========
Loss & LAE ratio before
impact of the deferred
reinsurance gain - LPT
Agreement 59.1% 41.2% 57.3% 42.2%
======= ======= ======== ========
Commission (benefit)
expense $(1,276) $10,121 $25,611 $30,465
======= ======= ======== ========
Commission expense ratio -1.3% 13.8% 8.2% 13.7%
======= ======= ======== ========
Dividends to policyholders $1,539 $(8) $5,418 $78
======= ======= ======== ========
Policyholder dividend ratio 1.6% 0.0% 1.7% 0.0%
======= ======= ======== ========
Underwriting & other
operating expense $33,688 $21,915 $102,624 $66,536
======= ======= ======== ========
Underwriting & other
operating expense ratio 34.3% 30.0% 32.7% 29.9%
======= ======= ======== ========
Total expense $87,346 $57,616 $300,310 $177,423
======= ======= ======== ========
Combined ratio 88.9% 78.8% 95.6% 79.6%
======= ======= ======== ========
Total expense before
impact of the deferred
reinsurance gain - LPT
Agreement
$92,014 $62,165 $313,687 $191,331
======= ======= ======== ========
Combined ratio before the
impact of the deferred
reinsurance gain - LPT
Agreement 93.7% 85.0% 99.8% 85.9%
======= ======= ======== ========
SOURCE
Media:
Ty Vukelich,
+1-775-327-2677,
tvukelich@employers.com;
or
Analysts:
Vicki Erickson,
+1-775-327-2794,
verickson@employers.com
