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): November 4, 2009
EMPLOYERS
HOLDINGS, INC.
(Exact
Name of Registrant as Specified in its Charter)
_____________________
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NEVADA
(State
or Other Jurisdiction of
Incorporation)
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001-33245
(Commission
File Number)
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04-3850065
(I.R.S.
Employer Identification No.)
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10375
Professional Circle
Reno,
Nevada
(Address
of Principal Executive Offices)
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89521
(Zip
Code)
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|
Registrant's
telephone number including area code: (888)
682-6671
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||
|
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:
o Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Section
2 – Financial Information
Item
2.02. Results of Operations and Financial Condition.
On
November 4, 2009, Employers Holdings, Inc. (the "Company") issued a press
release announcing results for the third quarter ended September 30,
2009. The press release is attached hereto as Exhibit 99.1 and is
incorporated herein by reference, and is 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
November 4, 2009, the Company announced that its Board of Directors has declared
a third quarter cash dividend of six cents per share on the Company's common
stock. The dividend is payable on December 2, 2009 to stockholders of
record as of November 18, 2009. Furnished as Exhibit 99.1 and
incorporated herein by reference is the press release issued by the
Company.
On
November 4, 2009, the Company also announced that its Board of Directors
authorized management to repurchase up to $50,000,000 million worth of the
Company's common stock in the period January 1, 2010 to December 31,
2010. The Company intends to use this authorization to repurchase
shares opportunistically through a variety of methods, including open market or
private transactions, in accordance with applicable laws and
regulations. The Company has no obligation to repurchase any shares
under the authorization. The timing and actual number of shares
repurchased will depend on a variety of factors, including the share price,
corporate and regulatory requirements and other market and economic
conditions. Repurchases may be commenced or suspended from time to
time without prior notice, and the program may be suspended or discontinued at
any time. Furnished as Exhibit 99.1 and incorporated herein by
reference is the press release issued by the Company.
Section
9 – Financial Statements and Exhibits
Item
9.01. Financial Statements and Exhibits.
99.1 Employers
Holdings, Inc. press release, dated November 4, 2009.
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.
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EMPLOYERS
HOLDINGS, INC.
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|||
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By:
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/s/ Lenard
T. Ormsby
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||
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Name:
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Lenard
T. Ormsby
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Title:
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Executive
Vice President, Chief
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||
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Legal
Officer and General Counsel
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Dated: November
4, 2009
Exhibit
Index
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Exhibit
No.
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Exhibit
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99.1
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Employers
Holdings, Inc. press release, dated November 4,
2009.
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Exhibit
99.1
 |
news
release
|
|
November
4, 2009
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For
Immediate Release
|
Employers
Holdings, Inc. Reports Third Quarter Earnings, Declares Fourth Quarter Dividend
and Announces 2010 Stock Repurchase Plan
Key
Highlights
(Comparisons
refer to the prior-year third quarter unless otherwise stated)
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·
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Increase
in net premiums earned of 34%
|
|
·
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Three
month book value per share growth of 9.3% to $20.74 and 19% book value per
share growth since December 31,
2008
|
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·
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Contingent
profit commission from LPT of $14.1 million resulting in a negative
commission expense of $1.3 million
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·
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Favorable
prior accident year development of $10.4 million in the third quarter and
$39.6 million in the first nine
months
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·
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Stable
portfolio fair market value of $2.1 billion with a tax equivalent yield of
5.6% at September 30, 2009
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Reno,
Nevada—November 4, 2009—Employers Holdings, Inc. (“EHI” or the “Company”)
(NYSE:EIG) today reported third quarter net income of $30.6 million or $0.68 per
share compared with $33.1 million or $0.67 per share in the third quarter of
2008, a decrease of $2.5 million in net income and an increase of $0.01 per
share. Net income includes amortization of the deferred reinsurance gain related
to the Loss Portfolio Transfer (“LPT”) Agreement. Consolidated net income before
the impact of the LPT deferred reinsurance gain (the Company’s non-GAAP measure
described below) was $25.9 million or $0.57 per share in the third quarter of
2009 and $28.5 million or $0.58 per share in the third quarter of
2008.
Net
income for the nine months ended September 30, 2009 was $71.8 million or $1.54
per share compared with $85.9 million or $1.74 per share for the nine months
ended September 30, 2008. For the first nine months of 2009, net
income before the impact of the LPT deferred reinsurance gain was $58.4 million
or $1.25 per share compared to $72.0 million or $1.46 per share for the same
period in 2008.
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 $14.1 million increase in
the LPT contingent profit commission that reduced commission expense. For the
first nine months of 2009, the
combined
ratio was 95.6% (99.8% before the impact of the LPT deferred reinsurance gain),
an increase of 16.0 percentage points from 79.6% (85.9% before the impact of the
LPT deferred reinsurance gain) for the same period in 2008, with acquired
operations contributing 13.4 percentage points of the increase. The decrease in
favorable prior accident year loss development period over period along with
lower premiums earned due to prior rate reductions, competitive pressures, and
overall economic conditions contributed to the higher combined ratio, and these
factors were partially offset by the increase in the LPT contingent profit
commission.
President
and Chief Executive Officer Douglas D. Dirks commented: “Although we continue to
see impacts of the economic contraction, we are pleased with our results in the
third quarter. We grew shareholder equity including the deferred reinsurance
gain 5.6% since June 30, 2009 after returning $25.0 million to our shareholders
through common share dividends and repurchases during the quarter. We grew book
value per share 9.3% in the quarter and 19% since December 31, 2008. Our
invested assets of $2.1 billion yielded 5.6% on a tax equivalent basis at
September 30, 2009 with a net unrealized gain of $101.0 million for the nine
months ended September 30, 2009.
“Given
our strong capital position, our Board of Directors has approved a new $50
million share repurchase program, to be effective January 1, 2010 through
December 31, 2010. We anticipate that any purchases under this 2010 Stock
Repurchase Program will be conducted in a disciplined and opportunistic
manner.”
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
A.M. Best.”
Net
premiums earned increased $25.1 million or 34.3% to $98.2 million from $73.1
million in the third quarter of 2008. Third quarter net premiums earned were
$39.8 million from acquired operations. Excluding acquired operations, net
premiums earned declined $14.7 million or 20.2% in the third quarter as compared
to the same period in 2008, with declines in direct written premium of $14.1
million or 24.8% in California and $4.1 million or 46.0% in Nevada.
Policy
count increased 24.2% to 44,848 at September 30, 2009 from 36,102 at September
30, 2008. Since December 31, 2008, policy count declined 1.6% (a total of 751
policies) with unit decreases of 921 in Nevada and 363 in Florida, partially
offset by unit growth in our Midwest and Southeastern states – particularly
Illinois and Georgia.
Third
quarter 2009 net investment income of $22.3 million increased $3.9 million or
20.9% from $18.5 million in 2008. Net investment income for the nine months
ended September 30, 2009 increased 22.9% to $68.7 million from $55.9 million for
the same period in 2008 with the third quarter and year-to-date increases due
largely to increased invested assets. The pre-tax and tax equivalent yields on
invested assets were 4.6% and 5.6%, respectively, year-to-date at September 30,
2009. Realized
gains on investments for the third quarter of 2009 totaled $3.6 million compared
with realized losses of $1.5 million for the third quarter of
2008. For the nine months ended September 30, 2009, realized gains on
investments were $1.1 million compared with realized losses of $3.2 million for
the nine months ended September 30, 2008. Realized
Page
2 of 13
gains
in the first nine months were partially offset by other-than-temporary
impairments of $1.9 million in the first two quarters of this year.
Third
quarter losses and LAE increased to $53.4 million in 2009 compared with $25.6
million in 2008. Excluding acquired operations, losses and LAE decreased 1.9%.
Before the impact of the LPT deferred reinsurance gain, loss and LAE expense was
$58.1 million in the third quarter of 2009 and $30.1 million in the third
quarter of 2008. Current accident year loss estimates were 69.7% and 75.4% in
the third quarters of 2009 and 2008, respectively. Favorable prior accident year
loss development was $10.4 million in the third quarter of 2009 compared with
$25.0 million in the third quarter of 2008.
Year-to-date
losses and LAE at September 30, 2009 increased to $166.7 million from $80.3
million at September 30, 2008. Excluding acquired operations, losses and LAE
decreased 7.3%. Before the impact of the LPT deferred reinsurance gain, losses
and LAE were $180.0 million and $94.2 million for the nine months ended
September 30, 2009 and 2008, respectively. Current accident year loss estimates
were 69.9% in 2009 and 66.2% in 2008. Favorable prior accident year loss
development was $39.6 million in the first nine months of 2009 compared with
$53.3 million for the same period in 2008.
In the
third quarter of 2009, we recorded a negative commission expense of $1.3 million
largely due to the LPT contingent profit commission compared with an expense of
$10.1 million in the third quarter of 2008. Under the LPT Agreement, a
“contingent profit commission” is calculated every five years beginning June 30,
2004 through June 30, 2024 based on the difference between actual paid losses
and loss expenses and projections of expected ultimate losses and loss expenses
related to the LPT, with reinsurers paying the Company’s Nevada insurance
subsidiary 30% of any favorable difference. Through June 30, 2024, any
previously received contingent profit commission may be required to be repaid to
reinsurers with interest in the event of unfavorable differences between actual
and contractually estimated paid losses and loss expenses. The ultimate
contingent profit commission is estimated each quarter through June 30, 2024 and
included in commission expense. Increases or decreases in the estimated
contingent profit commission are reflected in commission expense in the period
that the estimate is revised. Estimated total losses and loss adjustment
expenses covered under the LPT and to be paid through June 30, 2024 were reduced
in the third quarter by approximately $40 million from the previous estimate.
These calculations resulted in a $14.1 million increase in the LPT contingent
profit commission and $5.7 million in cash paid by reinsurers in the third
quarter of this year with the remainder paid in the fourth quarter. Excluding
acquired commission expense and the contingent profit commission, commission
expense decreased $1.4 million in the third quarter of 2009. Commission expense
for the first nine months of 2009 decreased to $25.6 million from $30.5 million
for the same period in 2008. Excluding acquired commission expense and the LPT
contingent profit commission, commission expense in the first nine months of
2009 decreased $3.8 million.
Dividends
to policyholders were $1.5 million in the quarter and $5.4 million in the first
nine months of 2009 largely from policies related to acquired
operations.
Third
quarter underwriting and other operating expenses were $33.7 million in 2009
compared with $21.9 million in 2008. Excluding acquired operating expenses of
$11.2 million and one-time integration and restructuring charges of $0.6 million
in the quarter, underwriting and other operating expenses remained flat
notwithstanding a $1.6 million decrease in the allowance for bad debt in
2008. For
the first nine months of 2009, underwriting and other operating expenses were
$102.6 million compared with $66.5 million in the same period in 2008. Excluding
acquired operating expenses of $35.2
Page
3 of 13
million
and non-recurring integration and restructuring charges of $4.9 million,
expenses declined $4.0 million in the first nine months of 2009 compared to the
same period in 2008.
Interest
expense on the Company’s Credit Facility with Wells Fargo and acquired surplus
notes was $1.8 million in the third quarter and $5.6 million in the first nine
months of this year.
Third
quarter income tax expense increased to $4.6 million in 2009 compared to an
income tax benefit of $289,000 in 2008 primarily due to the final reversal of
the liability for previously unrecognized tax benefits including interest in the
third quarter of 2008. Income taxes in the first nine months of 2009 were $6.7
million based on lower pre-tax income and the impacts of non-taxable investment
income. The effective tax rate for the third quarter was 13.1% and 8.5% for the
nine months ended September 30, 2009.
Total
invested assets were $2.1 billion at the end of the third quarter 2009. We are
including a list of portfolio securities by CUSIP in the Calendar of Events,
Third Quarter “Investors” section of our web site at www.employers.com.
As of
September 30, 2009, total stockholders’ equity increased to $524.6 million from
$444.7 million at December 31, 2008. Equity, including the deferred reinsurance
gain related to the LPT, increased 7.8% to $917.8 million from $851.3 million at
December 31, 2008.
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 $14.42 per
share. In the first nine months of 2009, the Company repurchased an aggregate of
4,616,401 shares of common stock at an average cost of $11.79 per share. As of
September 30, 2009, the Company has repurchased a total of 9,314,468 shares of
common stock at an average price of $15.41 per share.
Book
value per share increased 9.3% to $20.74 at September 30, 2009 from $18.97 at
June 30, 2009. Book value per share increased 19.0% from $17.43 at December 31,
2008.
The
Board of Directors declared a fourth quarter dividend of six cents per share.
The dividend is payable on December 2, 2009, to stockholders of record as of
November 18, 2009.
On
November 4, 2009, the Board of Directors also authorized a share repurchase
program for up to $50 million of the Company’s common stock. The Company expects
that shares may be purchased at prevailing market prices from January 1, 2010
through December 31, 2010 through a variety of methods, including open market or
private transactions, in accordance with applicable laws and regulations. The
timing and actual number of shares 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 2010 Stock
Repurchase Program may be commenced or suspended from time to time without prior
notice, and the program may be suspended or discontinued at any
time.
Conference Call and Web
Cast, Form 10-Q
The
Company will host a conference call Thursday, November 5, 2009, at 10:30 a.m.
Pacific Time. The conference call will be available via a live web cast on the
Company’s Web site at www.employers.com. An
archived version will be available following the call.
Page
4 of 13
The
conference call replay number is (888) 286-8010 with a passcode of 81986697.
International callers may dial (617) 801-6888.
EHI
will file its Form 10-Q for the period ended September 30, 2009, with the
Securities and Exchange Commission (“SEC”) on Thursday, November 5, 2009. The
Form 10-Q will be available without charge through the EDGAR system at the SEC's
website and will also be posted on the Company's website, www.employers.com,
through the “Investors” link.
Discussion of Non-GAAP
Financial Measures
This
earnings release includes non-GAAP financial measures used to analyze the
Company’s operating performance for the periods presented.
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.
Page
5 of 13
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 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.
All
forward-looking statements made in this news release reflect EHI’s current views
with respect to future events, business transactions and business performance
and are made
Page
6 of 13
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 SEC. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date on which they are
made.
The SEC
filings for EHI can be accessed through the “Investors” link on the Company’s
website, www.employers.com, or
through the SEC's EDGAR Database at www.sec.gov (EHI
EDGAR CIK No. 0001379041). EHI assumes no obligation to update this release or
the information contained herein, which speaks as of the date
issued.
CONTACT:
Media:
Ty Vukelich, (775) 327-2677, tvukelich@employers.com.
Analysts:
Vicki Erickson, (775) 327-2794, verickson@employers.com.
Copyright
© 2009 EMPLOYERS. All rights reserved. EMPLOYERS® and
America’s small business
insurance specialist.® 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.
Page
7 of 13
Employers
Holdings, Inc.
Consolidated
Statements of Income
(in
thousands)
|
Three
Months Ended
|
Nine
Months Ended
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|||||||||||||||
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September
30,
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September
30,
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|||||||||||||||
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2009
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2008
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2009
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2008
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|||||||||||||
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(unaudited)
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||||||||||||||||
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Revenues
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||||||||||||||||
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Gross
premiums written
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$ | 84,842 | $ | 75,857 | $ | 306,270 | $ | 232,431 | ||||||||
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Net
premiums written
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$ | 82,790 | $ | 73,076 | $ | 298,159 | $ | 224,317 | ||||||||
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Net
premiums earned
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$ | 98,240 | $ | 73,131 | $ | 314,221 | $ | 222,842 | ||||||||
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Net
investment income
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22,334 | 18,474 | 68,704 | 55,915 | ||||||||||||
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Realized
gains (losses) on investments, net
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3,564 | (1,504 | ) | 1,060 | (3,211 | ) | ||||||||||
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Other
income
|
183 | 295 | 388 | 1,155 | ||||||||||||
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Total
revenues
|
124,321 | 90,396 | 384,373 | 276,701 | ||||||||||||
|
Expenses
|
||||||||||||||||
|
Losses
and loss adjustment expenses
|
53,395 | 25,588 | 166,657 | 80,344 | ||||||||||||
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Commission
(benefit) expense
|
(1,276 | ) | 10,121 | 25,611 | 30,465 | |||||||||||
|
Dividends
to policyholders
|
1,539 | (8 | ) | 5,418 | 78 | |||||||||||
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Underwriting
and other operating expense
|
33,688 | 21,915 | 102,624 | 66,536 | ||||||||||||
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Interest
expense
|
1,824 | — | 5,608 | — | ||||||||||||
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Total
expenses
|
89,170 | 57,616 | 305,918 | 177,423 | ||||||||||||
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Net
income before income taxes
|
35,151 | 32,780 | 78,455 | 99,278 | ||||||||||||
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Income
taxes
|
4,594 | (289 | ) | 6,698 | 13,349 | |||||||||||
|
Net
income
|
$ | 30,557 | $ | 33,069 | $ | 71,757 | $ | 85,929 | ||||||||
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Reconciliation
of net income to net income before impact of deferred reinsurance gain -
LPT Agreement
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||||||||||||||||
|
Net
income
|
$ | 30,557 | $ | 33,069 | $ | 71,757 | $ | 85,929 | ||||||||
|
Less:
Impact of LPT Agreement
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||||||||||||||||
|
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 | ||||||||
Page
8 of 13
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 | ||||||||
Page
9 of 13
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 | ||||
Page
10 of 13
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;
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
|
536 | 535 | ||||||
|
Preferred
stock, $0.01 par value; 25,000,000 shares authorized; none
ssued
|
— | — | ||||||
|
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
4,698,067
shares at December 31, 2008)
|
(143,567 | ) | (89,152 | ) | ||||
|
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 | ||||||
Page
11 of 13
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 | ||||
Page
12 of 13
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
|
%
|
|||||||
Page 13 or 13