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): September 5, 2007
EMPLOYERS
HOLDINGS, INC.
(Exact
Name of Registrant as Specified in its Charter)
_____________________
NEVADA
(State
or Other Jurisdiction of
Incorporation)
|
001-33245
(Commission
File Number)
|
04-3850065
(I.R.S.
Employer Identification No.)
|
9790
Gateway Drive
Reno,
Nevada 89521
(Address
of Principal Executive Offices)
|
|
89521
(Zip
Code)
|
Registrant's
telephone number including area code: (888)
682-6671
No
change since last report
(Former
Name or Address, if Changed Since Last Report)
_____________________
Check
the appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
o
Written communications
pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Section
7 – Regulation FD
Item
7.01. Regulation FD Disclosure
In
connection with meetings by senior management of Employers Holdings, Inc.
(the
“Company”) with certain analysts, the Company is disclosing certain information
(the “Disclosed Information”).
Statements
made in the Disclosed Information which are not historical are forward-looking
statements that reflect management’s current views with respect to future events
and performance and may include statements concerning plans, objectives,
goals,
strategies, future events or performance, and underlying assumptions and
other
statements, which are other than statements of historical fact. Such
statements are subject to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. See “Forward-looking Statements” in
the Disclosed Information.
A
copy of the Disclosed Information is attached to this report as Exhibit
99.1.
Section
9 – Financial Statements and Exhibits
Item
9.01. Financial Statements and Exhibits.
99.1 Presentation
Materials
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
|
EMPLOYERS
HOLDINGS, INC.
|
|
By:
|
|
/s/
Lenard T. Ormsby
|
|
Name:
|
Lenard
T. Ormsby
|
|
Title:
|
Executive
Vice President, Chief
Legal
Officer and General Counsel
|
Dated: September
5, 2007
Exhibit
Index
|
|
|
99.1
|
|
Presentation
Materials
|
KBW
Annual
Insurance
Conference
September
5,
2007
Safe
Harbor
Disclosure
This
slide presentation is for
informational purposes only. It should be read in conjunction with
our Form 10-K for the year 2006, our Form
10-Q for the second quarter 2007
and our Form 8-Ks filed with the Securities and Exchange Commission (SEC)
and
available in the
“Investor Relations” section of our website at www.employers.com.
Non-GAAP
Financial Measures
In
presenting Employers Holdings,
Inc.’s (EMPLOYERSSM)
results, management has included
and discussed certain non-GAAP financial
measures, as defined in Regulation
G. Management believes these non-GAAP measures better explain
EMPLOYERS results allowing for a
more complete understanding of underlying
trends in our business. These measures should not be viewed as a
substitute for those
determined in accordance with GAAP. The
reconciliation of these measures to their most comparable GAAP financial
measures is included
in this presentation or in our Form 10-K for the year
2006, our Form 10-Q for the second quarter 2007 and our Form 8-Ks filed
with the
Securities and Exchange Commission (SEC) and available in the “Investor
Relations” section of our website at www.employers.com.
Forward-looking
Statements
This
presentation contains certain
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995.
Forward-looking statements include statements
regarding anticipated future results and can be identified by the fact
that they
do not relate
strictly to historical or current facts. They often include
words like "believe”, "expect”, "anticipate”, "estimate" and "intend" or future
or
conditional verbs such as "will”, "would”, "should”, "could" or "may”.
Certain factors that could cause actual results to differ materially from
expected results include increased competitive pressures, changes
in the
interest rate environment, general economic conditions, and
legislative and
regulatory changes that could adversely affect the business of EMPLOYERS
and its
subsidiaries. All subsequent written and
oral forward-looking
statements attributable to us or individuals acting on our behalf are expressly
qualified in their entirety by these
cautionary statements. We
undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new
information, future events or
otherwise.
EMPLOYERS
is a service mark and trade
name for a group of companies which provides workers’ compensation insurance and
services. Insurance is
offered through Employers Compensation Insurance
Company, except in Nevada, where insurance is offered through Employers
Insurance Company of
Nevada. Employers Compensation Insurance Company does
not do business in all jurisdictions. For more information please visit
www.employers.com.
Copyright
©
2007
EMPLOYERS. All
rights reserved.
Contents
Page
18
California
Rates and Rate
Setting
13
Customer
Selection
19
Insurance
Operations
Summary
17
Workers’
Compensation
Industry
16
Policy
Count
15
Strategic
Distribution
Partners
14
Focused
Marketing and
Distribution
12
Focus
on Low to Medium
Hazard Groups
11
Disciplined
Underwriting –
Five Basic Elements
Insurance
Operations
9
Seasoned
Executives with
Extensive Experience
8
Expanding
Geographic
Footprint
7
Strategies
6
Financial
Snapshot
5
Key
Strengths
4
Overview
Corporate
Overview
31-32
Summary
28
29
Mortgage-backed
Securities
Capital
Management
23
Selected
Operating
Results
SUMMARY
27
Investment
Portfolio
26
Reinsurance
Program
25
Underwriting
Profitability
24
Earnings
and EPS
22
Loss
Portfolio
Transfer
21
Four
Key Elements of our
Financial Strength
Financial
Results
Overview
Business
Specialty
provider of workers’ compensation insurance
18th
largest
private writer in the U.S. (1)
8th
largest
private
writer in California (1)
2nd
largest
writer in Nevada (1)
Geographic
Focused
in Western U.S. – direct
premiums written as of the second quarter of 2007
70%
in
California
21%
in
Nevada
9%
in nine
other states
Customers
Small
businesses in low to medium hazard industries
Distribution
through independent agents and strategic partners
31,902
policies in force at 6/30/2007
Average
annual policy premium of approximately $11,000
(1) Based
on “One-Year
Premium and Loss Study,” U.S., California and Nevada, A.M. Best Company,
2006
4
Key
Strengths
Established
enterprise with 94 year
operating history
Focused
operations and disciplined
underwriting – target an attractive
and underserved market segment with
growth opportunities
Unique
and long-standing strategic
distribution relationships
Financial
strength and flexibility -
strong balance sheet and conservative
reserving
Experienced
management team with
deep knowledge of workers’
compensation
5
’02
–
’06
CAGR = 20%
6
Capital
management plans include dividends and share
repurchases
Loss
trends
and investments are driving net income
Strong
growth provides a solid basis for underwriting
Premium
growth has reversed due to California rate
decreases
($
million)
Statutory
Surplus
Equity
Incl. Deferred Gain -
LPT
Net
Premium
Written
Financial
Snapshot
93
387
440
418
298
187
82
0
100
200
300
400
500
2002
2003
2004
2005
2006
1st
&
2nd
Qtr
2007
655
682
339
431
531
640
224
0
200
400
600
800
2002
2003
2004
2005
2006
3/31/07
6/30/07
’02
–
’06
CAGR = 30%
94
152
73
46
11
23
26
0
40
80
120
160
2002
2003
2004
2005
2006
1st
&
2nd
Qtr
2007
’02
–
’06
CAGR = 93%
Net
Income Before Loss
Portfolio Transfer (LPT)
351
747
607
516
424
790
795
0
200
400
600
800
2002
2003
2004
2005
2006
3/31/07
6/30/07
’02
–
’06
CAGR =
21%
Strategies
Focus
on
Profitability
Target
attractive, underserved small business market
Maintain
disciplined risk selection, underwriting and
pricing
Pursue
Organic
Growth
Opportunities
Expand
in
current markets and in our new states
Leverage
infrastructure, technology and systems
Utilize
existing and new strategic distribution partners
Optimize
Capital
Structure
Invest
in
operations and manage capital prudently
Return
capital to shareholders
Consider
opportunistic strategic transactions
7
Expanding
GeographicFootprint
2000
2002
2006
2007
FL
NM
MD
TX
OK
KS
NE
SD
ND
MT
WY
CO
UT
ID
AZ
NV
WA
CA
OR
KY
ME
NY
PA
MI
NH
MA
CT
VA
WV
OH
IN
IL
NC
TN
SC
AL
AR
LA
MO
IA
MN
WI
GA
MS
VT
NJ
DE
RI
8
NEW
STATES
Florida,
Oregon,
Texas,
Arizona
and Illinois = 1.1%
Direct
Premiums Written (%)
for six months ended 6/30/07
Seasoned
Executives
with Extensive Experience
31
EVP,
Chief Financial
Officer
William
E. Yocke
28
SVP,
Chief Underwriting
Officer
Jeff
J. Gans
25
SVP,
Chief Claims
Officer
Stephen
V. Festa
19
SVP,
President of Western Region
George
Tway
22
SVP,
President of Strategic Markets
Region
David
M. Quezada
16
SVP,
President of Pacific Region
T.
Hale Johnston
29
President
and Chief Operating
Officer
Martin
J. Welch
22
Chief
Executive Officer
Douglas
D. Dirks
Experience
(Years)
Title
Name
Average
experience of senior operating leadership = 24 years
9
Disciplined
Underwriting
37.9%
statutory loss and LAE ratio in 2006
Risk
Selection
Expertise
Strong
Underwriting
Culture
Focused
Guidelines
and
Consistent
Automated
Approach
Disciplined
Underwriting
Local
Knowledge
Pricing
of
Individual
Risks
Five
Basic
Elements
11
Focus
on Low to
Medium Hazard Groups
EMPLOYERS
Focus
on low to medium hazard risks allows us to optimize risk selection and
pricing
adequacy
Hazard
Group A
Industry
(1)
%
of
Premiums Written, 12/31/06
12
Hazard
Group B
Hazard
Group C
Hazard
Group D
Hazard
Group E
Hazard
Group F
Hazard
Group G
Hazard
Groups A through
D
Lower
Risk
Higher
Risk
(1)
NCCI 2006 Premium Distribution by
Hazard Group (as presented at 2007 Annual Issues Symposium).
Industry
= 56%
EMPLOYERS
= 82%
Customer
Selection
35.1%
$136,883
Top
10
1.7
6,458
Automobile
D
2.0
7,939
Dentists
&
Dental
Surgeons &
Clerical
C
2.3
9,040
Clothing
Manufacturers
C
2.4
9,455
Machine
Shops
D
2.5
9,846
Clerical
Office Employees
C
2.9
11,189
Store:
Retail
B
3.0
11,590
College:
Professional Employees
& Clerical
B
4.8
18,854
Store:
Wholesale
B
6.4
24,858
Physicians
&
Clerical
C
7.1%
$ 27,654
Restaurants
A
Percent
of
Total
Direct
Premiums
Written
(000s)
Class
Hazard
Group
EMPLOYERS
further differentiates risks within industry-defined customer
classes
Top
Ten
Classes in 2006
13
Focused
Marketing
and Distribution
Independent
Agents and Brokers
PACIFIC
REGION
California
In
2006, 44% of direct
premiums
written
STRATEGIC
REGION
Largely
ADP &
Wellpoint;
added E-CHX in Qtr
4, 2006
Primarily
California today
In
2006, 30% of direct premiums
written
Three
business units target customer segments with a focused underwriting
approach
WESTERN
REGION
Nevada,
Colorado, Utah,
Montana,
Idaho, Texas,
Arizona, Illinois, Oregon,
Florida
In
2006, 26% of direct
premiums
written
Strategic
Distribution Partners
14
Strategic
Distribution Partners
Largest
payroll services company in
the
U.S. with over 450,000 clients
Partner
since entering California
market
in 2002
Business
originated by ADP’s field
sales
staff and insurance agency
“Pay-by-Pay”
premium
collection
Strategic
partners expand market reach and produce business with high
persistency
15
Largest
group health carrier in
California
Partner
since entering California
market
in 2002
Business
originated by Wellpoint’s health
insurance
agents
Single
bill to customers
16
Solid
in force policy count growth
continued in the second quarter,
2007
31,902
at 6/30/07
28,294
at 6/30/06
Total
increase of 3,608 or
12.8%
In
Force Policy
Count
Total
in
force policy count has grown consistently with a 2002 – 2006 CAGR of
6%
23,657
24,967
26,005
27,686
29,742
30,922
31,902
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
2002
2003
2004
2005
2006
3/31/07
6/30/07
’02
–
’06
CAGR = 6%
Workers’
Compensation Industry
Historical
Pure Loss
Ratio
California
Total
U.S.
Source:
WCIRB as of 09/30/06 (California);
Insurance Information Institute as of 12/31/05 (Total U.S.)
2002:
EMPLOYERS
entry into
California
17
18
California
Rates and
Rate Setting
- 14.2%
July
1, 2007
- 9.5%
January
1, 2007
-65.1%
Cumulative
Change
-16.4%
July
1, 2006
-15.3%
January
1, 2006
-18.0%
July
1, 2005
- 2.2%
January
1, 2005
- 7.0%
July
1, 2004
-14.9%
January
1, 2004
Workers’
Compensation
Insurance
Rating Bureau
(WCIRB) recommended decrease of 11.3%
Insurance
Commissioner ordered
decrease of 14.2% in
advisory rates
Company’s
choice to implement rate
changes
Internal
analyses are compared to
Bureau’s view of the
industry to confirm actual experience
Filed
loss cost multipliers (LCMs)
account for loss
adjustment, underwriting and commission expenses and
targeted unlevered return of 12% to 13%
Rate
deviation plans modify full
premium rates based on
individual or group risk characteristics to yield
“effective
rates”
EMPLOYERS
filed a 4.5% decrease
premium for
California policies incepting on or after September 15,
2007
Rate
filing accepted August, 2007
Recent Commissioner
Ordered
Advisory
Pure Premium Changes
High
performing insurance operation,
built upon four key
elements
A
highly focused customer base
A
disciplined underwriting culture
An
efficient -- and scalable –
infrastructure
Strong
producer and strategic
partner relationships, providing us
with:
broader
access to markets
enhanced
value delivery to our
customers
more
cost effective production
Insurance
Operations
Summary
19
Four
Key Elements of
Our Financial Strength
Surplus
of
$640MM
at
12/31/2006
Conservative
Reserving
High
Quality
Investment
Portfolio
Catastrophe
Reinsurance
Program
0.6:1
NPW /
Surplus
at 12/31/2006
Over
90% fixed maturity
with
average rating AA
Coverage
up
to
$200MM loss
Track
record
of
reserve strength
21
Loss
Portfolio
Transfer (LPT)
$
millions
$602.5
Gain
at
6/30/2007
(147.5)
Subsequent
Reserve
Adjustments
750
Gain
at
1/1/2000
$ 775
Consideration
$1,525
Original
Reserves
Transferred
$2,000
Total
Coverage
Contract
$
millions
$433.9
GAAP:
Deferred Reinsurance
Gain – LPT Agreement
(168.6)
Cumulative
Amortization To
Date
$602.5
Statutory
Surplus
Created
Accounting
at 6/30/07
Non-recurring
transaction with no
ongoing cash benefits or charges to current operations
Retroactive
100% quota share
reinsurance coverage for all losses occurring prior to 7/1/95
Gain
on transaction booked as
statutory surplus; deferred and amortized under GAAP
22
Selected
Operating
Results
795.5
361.6
2,294.3
3,221.2
149.3
1,695.2
26.2
30.8
19.3
84.1
81.5
$84.6
746.8
303.8
2,307.8
3,195.7
80.0
1,715.7
152.2
171.6
68.2
393.0
387.2
$
401.8
790.4
352.0
2,307.2
3,221.2
66.5
1,768.6
23.3
27.9
20.8
89.8
93.2
$
96.5
144.6
Shareholders’
equity
Balance
Sheet
Data
1,595.8
Total
investments
61.1
Cash
and cash
equivalents
3,094.2
Total
assets
2,350.0
Reserves
for loss &
LAE
607.0
Equity
including LPT deferred gain
58.7
137.6
Net
Income
49.5
93.8
Net
Income Before LPT
40.1
54.4
Net
Investment Income
173.9
438.3
Net
Earned Premium
174.7
439.7
Net
Written Premium
$181.0
$
458.7
Gross
Written Premium
Income
Statement
Data
$
million
December
31
2005 2006
23
Q1
2007
Q2
2007
YTD
2007
Premiums
are
declining
due to
California
rate
decreases
Loss
trends and
Investments
are
driving
net income
While
premiums have
declined
in California, losses
have
also declined
Portfolio
re-allocation (equity
sales)
in Q4 of 2006 reduced
volatility
Earnings
and
EPS
53,500,722
$
.49
.09
.58
--
--
--
26.2
(4.6)
$30.8
52,832,048
52,155,944
50,000,002
50,000,002
Weighted
Average Shares Outstanding,
pro forma (2)
$
.94
$
.45
EPS
Before Impacts of the LPT, pro forma (2)
.17
$
1.11
.97
--
--
49.5
(9.2)
$58.7
.40
EPS
for Feb. 5 through the period
--
$3.43
$2.75
GAAP
Pro forma EPS – assuming
conversion
--
3.04
1.88
EPS
(Net Income Before LPT)
– assuming
conversion
.08
EPS
attributable to LPT (2)
.53
EPS
for the period
$27.9
$171.6
$137.6
Net
Income
(4.6)
(19.4)
(43.8)
Less:
LPT Deferred Gain
Amortization
23.3
152.2
93.8
Net
Income Before
LPT
$
million,
except per share data
(1)
Based
on 50,000,002 shares assumed
outstanding before the conversion.
(2)
Pro
forma EPS computed using the
actual weighted average shares outstanding as of the end of the
period. This includes shares outstanding for the period after the
Company’s IPO and prior to the IPO. Options have been excluded in computing
the diluted earnings per share for the period 2/5/07 through 6/30/07 because
their
inclusion would be anti-dilutive.
(3)
Pro
forma EPS computed using the
actual weighted average shares outstanding as of 6/30/2007.
December
31
2005 2006
24
Q1
2007
Q2
2007
YTD
2007
(2)
(2)
(3)
(1)
(1)
(1)
(1)
Underwriting
Profitability
$36.0
85.7%
26.5%
13.4%
45.8%
5.3%
40.5%
$15.6
90.5%
25.9%
13.1%
51.5%
5.1%
46.4%
$20.4
$107.1
$78.1
Favorable
Reserve Development ($
million)
106.4%
26.5%
13.4%
66.5%
5.3%
61.2%
Excluding
reserve
development for
6 mos., 2007 (1)
80.6%
27.0%
13.9%
39.6%
5.4%
34.2%
72.6%
84.9%
Combined
Ratio (excl.
LPT)
22.3%
16.0%
Underwriting
&
Other
Expense
Ratio (3)
12.3%
10.7%
Commission
Expense Ratio
(3)
37.9%
58.3%
Loss
&
LAE
Ratio (excl.
LPT)
4.9%
10.0%
Less:
Impact of LPT (2)
33.0%
48.3%
Loss
&
LAE
Ratio
COMBINED
RATIO
(GAAP
and
excluding the LPT)
(1)
Excluding
$36 million of favorable
development in the first six months of 2007, our loss ratio before the
LPT would
have been 66.5% and our combined ratio would
have been 106.4%. We
target a combined ratio of 100. The total combined ratio includes
three items causing upward pressure: (1) one shock loss requiring
additional
reserves that may run in excess of $3.5 million; (2) one-time conversion
costs;
and (3) decreasing earned premium.
(2)
Total
deferred gain amortization and
LPT reserve adjustment of $43.8 million in 2005, $19.4 million in 2006,
$4.6
million in the first and $4.6 million in the second
quarters of 2007.
(3)
Our
higher expense ratio is largely a
function of falling California rates.
Q1
2007
December 31
2005 2006
25
Q2
2007
YTD
2007
Retention
$10M
xs $10M
Catastrophe
per Occurrence
First
Excess
of Loss Layer
$30M
xs $20M
Catastrophe
per Occurrence
Second
Excess of Loss Layer
$50M
xs $50M
Catastrophe
per Occurrence
Third
Excess
of Loss Layer
$50M
xs $100M
Catastrophe
per Occurrence
Fourth
Excess of Loss
Layer
$50M
xs $150M
Catastrophe
per Occurrence
Fifth
Excess of Loss
Layer
$5M
xs $5M
$20M
Aggregate
First
Excess
of Loss Layer
$200M
$
5M
$10M
$20M
$50M
$100M
$150M
Expires
7/1/08
Priced
annually
Includes
terrorism, except
nuclear,
biological,
chemical and
radiological
Increased
retention to $5.0M
from
$4.0M from
previous treaty
Increased
total limits by $25.0M
from
previous
treaty
Catastrophe
Excess of Loss includes
maximum
any one life of
$10.0M
Reinsurance
Program
26
Investment
Portfolio
$1.7
billion of
investment
securities
Over
90% AA+ rated
Book
yield of 4.3%
Tax
equivalent book
yield of
5.3%
Effective
duration of
5.68
Outsourced
to Conning
Asset
Management
Portfolio
Mix at
6/30/07
27
Mortgage-backed
Securities
28
Approximately
97% of
MBS
are agency-backed
Of
these:
Fannie
Mae
= 48%
Freddie Mac =
32%
Ginnie Mae = 20%
(less
than .03% in three
fully-
insured securities that could
be defined as
sub-prime)
6.4%
107.9
Equities
100%
1,695.2
TOTAL
1.6%
27.9
Asset-backed
Securities
2.9%
48.9
Commercial
MB Securities
11.1%
187.7
Mortgage-backed
Securities
51.2%
868.0
Tax-exempt
Municipals
10.9%
184.8
Corporate
Securities
8.3%
140.3
US
Agency Securities
7.6%
129.7
US
Treasury Securities
PORTFOLIO
at
6/30/07
($ million)
Commercial
mortgage-backed
securities are all AAA rated
Capital
Management
$38
million ordinary
dividend
capacity
(unassigned surplus at
12/31/2006), plus
$9.7
million in net proceeds
from the IPO, plus
$55
million up-streamed
extraordinary dividend
Greater
than $100 million
available cash in 2007
Holding
Company
Cash Flow
Strong
Capital Position
$790
million GAAP
adjusted
equity at
3/31/2007
0.6:1
NPW/surplus at
12/31/2006
No
debt
Reserve
strength
Our
goal is to drive shareholder value through an improving ROE resulting from
(i)
profitability
consistent with historical results, (ii) disciplined growth
and (iii) prudent capital management
29
Capital
Management
Tools
Shareholder
dividends
$0.06
per share
quarterly
dividend
Two
quarters
declared and paid
$3.2
million Q2, 2007
$3.1
million Q3, 2007
Share
repurchase
Up
to $75 million in
open market
in 2007
135,716
at 6/30/07
1,618,270
at 8/10/07
Summary
Established
enterprise with 94 year
operating history
Focused
operations and disciplined
underwriting – target an attractive
and underserved market segment with
growth opportunities
Unique
and long-standing strategic
distribution relationships
Financial
strength and flexibility -
strong balance sheet and conservative
reserving
Experienced
management team with
deep knowledge of workers’
compensation
31
Douglas
D. Dirks
President & Chief Executive Officer
Employers Holdings,
Inc.
William E. (Ric) Yocke
Chief Financial Officer
Employers
Holdings, Inc.
Martin J. Welch
President and Chief Operating
Officer
Employers Insurance Company of Nevada and
Employers Compensation
Insurance Company
Analyst
Contact:
Vicki
Erickson
Vice President, Investor Relations
Employers Holdings, Inc.
(775)
327-2794
verickson@employers.com
9790
Gateway
Drive
Reno, NV. 89521-5906
(775) 327-2700
32