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 6, 2008
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.)
|
|
10375
Professional Circle
Reno,
Nevada
(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
2 – Financial Information
Item
2.02 Results of Operations and Financial Condition.
On November 6, 2008, Employers
Holdings, Inc. (the "Company") issued a press release announcing results for the
third quarter ended September 30, 2008. The press release is attached
hereto as Exhibit 99.1 and is incorporated by reference herein, and is being
furnished, not filed, under Item 2.02 to this Current Report on Form
8-K.
Section
9 – Financial Statements and Exhibits
Item
9.01. Financial Statements and Exhibits.
99.1 Employers
Holdings, Inc. press release, dated November 6, 2008.
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: November
6, 2008
Exhibit
Index
|
Exhibit
No.
|
Exhibit
|
|
|
99.1
|
Employers
Holdings, Inc. press release, dated November 6,
2008.
|
 |
||
|
|
news
release
|
|
|
November 6,
2008
|
For Immediate
Release
|
Employers
Holdings, Inc. Reports Third Quarter Earnings
Reno,
Nevada—November 6, 2008—Employers Holdings, Inc. (“EHI” or the “Company”)
(NYSE:EIG) today reported results for the third quarter ended September 30,
2008.
Third
quarter consolidated net income increased 10.7% to $33.1 million or $0.67 per
share in 2008 from $29.9 million or $0.58 per share in the third quarter of
2007. 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 (the Company’s non-GAAP measure described below) increased
12.6% to $28.5 million or $0.58 per share in the third quarter of 2008 from
$25.3 million or $0.49 per share in the third quarter of 2007.
Net
income for the nine months ended September 30, 2008 decreased 2.9% to $85.9
million or $1.74 per share from $88.5 million or $1.69 per pro forma share for the nine
months ended September 30, 2007. For the first nine months of 2008,
net income before the impact of the LPT was $72.0 million or $1.46 per share and
$74.8 million or $1.43 per pro
forma share for the same period in 2007.
Commenting
on the Company’s performance, President and Chief Executive Officer Douglas D.
Dirks said, “Despite unprecedented volatility in the securities markets, our
investment portfolio has performed well. We are pleased with the ongoing
strength of the portfolio which, in the aggregate, has minimal exposure to
recently troubled sectors. Realized losses on investments of $3.2 million for
the first nine months of 2008, while larger than last year, were not
significant. Our sales activities remain strong as overall policy count
increased 9.3% since September 30, 2007. As in previous quarters, we continue to
recognize benefits from better than expected loss development related to prior
years.”
“We are
also pleased to report the completion last week of our acquisition of AmCOMP
Incorporated. We are excited about the acquisition and are actively focusing on
integrating our expanded operations in the 29 states in which we now
operate.”
Third quarter net premiums earned
declined $15.4 million or 17.4% to $73.1 million in 2008 from $88.5 million in 2007. Net premiums earned for the nine months
ended September 30, 2008, were $222.8 million compared to $262.4 million for the
same period in 2007.
Declines in premium were largely due to rate decreases resulting from previously
enacted reforms in California, increased competition and changes in economic and
business conditions in some of the Company’s operating areas, particularly Nevada. These impacts were partially offset by an overall in force
policy count increase of 9.3% to 36,102 at September 30, 2008 from 33,027 at September 30, 2007.
Third
quarter 2008 net investment income decreased $0.7 million to $18.5 million
primarily due to a decrease in the pre-tax average book yield to 3.98% from
4.31% at September 30, 2007. The decrease in pre-tax average book yield was due
to an increase in short-term investments and cash and cash equivalent balances.
Net investment income for the nine months ended September 30, 2008 decreased
$3.5 million or 5.8% to $55.9 million largely due to one-time interest income of
$1.8 million received in the first quarter of 2007 from the invested net
proceeds related to the issuance of common stock as part of the Company’s
conversion from a mutual insurance holding company and decreases in pre-tax book
yield and invested assets.
Realized
losses on investments for the third quarter of 2008 totaled $1.5 million
compared with realized gains of $0.1 million in the third quarter of
2007. For the nine months ended September 30, 2008, realized losses
on investments were $3.2 million compared with $0.3 million for the nine months
ended September 30, 2007, due primarily to a continuing decline in the value of
equities and one fixed maturity security.
Third
quarter losses and LAE decreased 37.4% to $25.6 million in 2008 compared with
$40.9 million in 2007. Before the impact of the LPT, losses and LAE would have
been $30.1 million in the third quarter of 2008 and $45.5 million in the third
quarter of 2007. The decline in losses and LAE was largely due to favorable
prior accident year development of $25.0 million in the third quarter of 2008
compared with favorable development of $7.4 million in the third quarter of 2007
and a reduction in net premiums earned. The reduction in prior period losses
were partially offset by an increase in the current year loss estimate to 66.2%
at September 30, 2008 from 61.7% at June 30, 2008. Losses and LAE for the nine
months ended September 30, 2008 decreased 27.8% to $80.3 million from $111.3
million in the nine months ended September 30, 2007. Excluding the impact of the
LPT, losses and LAE would have been $94.2 million and $125.0 million for the
nine months ended September 30, 2008 and 2007, respectively. The decrease in
losses and LAE for the nine month period was primarily due to changes in net
earned premiums. Additionally, favorable prior accident year loss development
was $53.3 million in the nine month period in 2008 compared with $43.4 million
in the same period in 2007.
In the
third quarter of 2008, commission expense of $10.1 million decreased 18.5% from
$12.4 million in the third quarter of 2007. Commission expense for the first
nine months of 2008 decreased 14.9% to $30.5 million from $35.8 million for the
same period in 2007. Decreases were due to the decline in net premiums
earned.
Third
quarter underwriting and other operating expense was nearly flat at $21.9
million in 2008 compared to $21.7 million in 2007. For the first nine months of
2008, underwriting and other operating expense decreased 1.7% to $66.6 million
from $67.8 million in the same period of 2007 primarily due to reduced
consulting fees and a decline in premium taxes due to lower net premiums
earned.
Income
taxes decreased $4.2 million resulting in a net tax benefit of $0.3 million for
the third quarter of 2008 from a $3.9 million expense in the third quarter of
2007 primarily due to a change of $4.8 million in the final reversal of the
liability related to previously unrecognized tax benefits. Income taxes in the
first nine months of 2008 decreased to $13.3 million from $21.1 million in the
first nine months of 2007 due to the third quarter 2008 reversal noted above.
The effective tax rate for the nine months ended September 30, 2008 was 13.4%
compared to 19.3% for the nine months ended September 30, 2007.
Page
2 of 10
The
third quarter 2008 combined ratio of 78.8% (85.0% before the LPT) improved 5.9
percentage points from the third quarter 2007 combined ratio of 84.7% (89.9%
before the LPT). For the first nine months in 2008, the combined ratio improved
2.3 percentage points to 79.6% (85.9% before the LPT) from 81.9% (87.1% before
the LPT) for the same period in 2007.
As of
September 30, 2008, total stockholders’ equity increased to $394.6 million from
$379.5 million at December 31, 2007. Equity, including the deferred reinsurance
gain related to the LPT, increased 0.2% to $805.7 million from $804.5 million at
December 31, 2007.
Conference Call and Web
Cast, Form 10-Q
The
Company will host a conference call Friday, November 7, 2008, 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. The conference call
replay number is (888) 286-8010 with a passcode of 36216482. International
callers may dial (617) 801-6888.
EHI
will file its Form 10-Q for the period ended September 30, 2008, with the
Securities and Exchange Commission (“SEC”) on Friday, November 7, 2008. The Form
10-Q will be available without charge through the EDGAR system at the SEC's Web
site and will also posted on the Company's Web site, 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.
A number of these non-GAAP financial
measures exclude impacts related to the LPT Agreement. 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. These non-GAAP measures are not a substitute for GAAP
measures and investors should be careful when comparing the Company’s non-GAAP
financial measures to similarly titled measures used by other
companies.
Net Income before impact of
LPT. 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.
Page
3 of 10
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
LPT. Losses and LAE before (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 the percentage of each premium dollar spent on claims and expenses.
The combined ratio is the sum of the losses and LAE ratio, the commission
expense ratio and the underwriting and other operating expense
ratio.
Combined Ratio before impacts of
LPT. Combined ratio before impact 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. Equity including
deferred reinsurance gain—LPT is total equity including the deferred reinsurance
gain—LPT Agreement.
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.
Page
4 of 10
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
Form 10-Qs for the periods ended March 31, June 30, 2008 and September 30, 2008
and the Company’s 2007 Annual Report 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 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 general
market volatility), 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 employee agents, the
integration of AmCOMP (including the failure to realize anticipated benefits of
the AmCOMP acquisition and potential disruption from the acquisition 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
dates 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.
Copyright © 2008
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 29 states from 17 office locations. Insurance subsidiaries include Employers
Insurance Company of Nevada and Employers Compensation Insurance Company, both
rated A- (Excellent) by the A.M. Best Company, and AmCOMP Preferred Insurance
Company and AmCOMP Assurance Corporation. Additional information can be found
at: www.employers.com.
CONTACT:
Media – Trish White, Director,
Corporate Communications, twhite@employers.com, (775) 327-2636
Analysts – Vicki Erickson, Vice
President, Investor Relations, verickson@employers.com,
(775) 327-2794
Page
5 of 10
Employers
Holdings, Inc.
Consolidated Statements of
Income
(In thousands)
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
|
September
30,
|
September
30,
|
|||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
|
(unaudited)
|
||||||||||||||||
|
Revenues
|
||||||||||||||||
|
Gross
premiums written
|
$
|
75,092
|
$
|
90,265
|
$
|
229,918
|
$
|
271,312
|
||||||||
|
Net
premiums written
|
$
|
72,311
|
$
|
87,319
|
$
|
221,804
|
$
|
262,032
|
||||||||
|
Net
premiums earned
|
$
|
73,131
|
$
|
88,527
|
$
|
222,842
|
$
|
262,436
|
||||||||
|
Net
investment income
|
18,474
|
19,246
|
55,915
|
59,386
|
||||||||||||
|
Realized
(losses) gains on investments, net
|
(1,504
|
)
|
146
|
(3,211
|
)
|
(322
|
)
|
|||||||||
|
Other
income
|
295
|
861
|
1,155
|
3,047
|
||||||||||||
|
Total
revenues
|
90,396
|
108,780
|
276,701
|
324,547
|
||||||||||||
|
Expenses
|
||||||||||||||||
|
Losses
and loss adjustment expenses
|
25,588
|
40,867
|
80,344
|
111,336
|
||||||||||||
|
Commission
expense
|
10,121
|
12,411
|
30,465
|
35,797
|
||||||||||||
|
Underwriting
and other operating expense
|
21,907
|
21,726
|
66,614
|
67,778
|
||||||||||||
|
Total
expenses
|
57,616
|
75,004
|
177,423
|
214,911
|
||||||||||||
|
Net
income before income taxes
|
32,780
|
33,776
|
99,278
|
109,636
|
||||||||||||
|
Income
tax (benefit) expense
|
(289
|
)
|
3,896
|
13,349
|
21,117
|
|||||||||||
|
Net
income
|
$
|
33,069
|
$
|
29,880
|
$
|
85,929
|
$
|
88,519
|
||||||||
|
Net
income after date
of conversion through September 30, 2007
|
$
|
82,048
|
||||||||||||||
|
Reconciliation
of net income to net income before impact of LPT Agreement
|
||||||||||||||||
|
Net
income
|
$
|
33,069
|
$
|
29,880
|
$
|
85,929
|
$
|
88,519
|
||||||||
|
Less:
Impact of LPT Agreement Amortization of deferred reinsurance gain
– LPT Agreement
|
4,549
|
4,557
|
13,908
|
13,694
|
||||||||||||
|
Net
income before LPT Agreement
|
$
|
28,520
|
$
|
25,323
|
$
|
72,021
|
$
|
74,825
|
||||||||
Page
6 of 10
Employers
Holdings, Inc.
Consolidated Statements of
Income
(In thousands, except share and per
share data)
|
For
the Three
Months
Ended
September
30,
|
For
the Nine
Months
Ended
September
30,
|
For
the Period
February
5,
through
September 30,
|
|||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
||||||||||||||
|
(unaudited)
|
(unaudited)
|
||||||||||||||||
|
Net
Income
|
$
|
33,069
|
$
|
29,880
|
$
|
85,929
|
$
|
82,048
|
|||||||||
|
Earnings
per common share
|
|||||||||||||||||
|
Basic
|
$
|
0.67
|
$
|
0.58
|
$
|
1.74
|
$
|
1.55
|
|||||||||
|
Diluted
|
$
|
0.67
|
$
|
0.58
|
$
|
1.74
|
$
|
1.55
|
|||||||||
|
Weighted
average shares outstanding
|
|||||||||||||||||
|
Basic
|
49,005,235
|
51,720,231
|
49,339,966
|
52,818,747
|
|||||||||||||
|
Diluted
|
49,074,914
|
51,727,016
|
49,389,594
|
52,821,370
|
|||||||||||||
|
Pro Forma for the
Nine Months Ended September 30,
|
|||||||||||||||||
|
2007
|
|||||||||||||||||
|
Net
Income
|
$
|
88,519
|
|||||||||||||||
|
Earnings
per common share
|
|||||||||||||||||
|
Basic
|
$
|
1.69
|
|||||||||||||||
|
Diluted
|
$
|
1.69
|
|||||||||||||||
|
Weighted
average shares outstanding
|
|||||||||||||||||
|
Basic
(1)
|
52,457,369
|
||||||||||||||||
|
Diluted
(1)
|
52,459,656
|
||||||||||||||||
|
For
the Three Months Ended
September
30,
|
For
the Nine Months Ended
September
30,
|
Pro Forma for the Nine
Months Ended September 30,
|
|||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
||||||||||||||
|
Earnings
per common share for the three month period:
|
|||||||||||||||||
|
Basic
|
$
|
0.67
|
$
|
0.58
|
$
|
1.74
|
$
|
1.69
|
|||||||||
|
Diluted
|
$
|
0.67
|
$
|
0.58
|
$
|
1.74
|
$
|
1.69
|
|||||||||
|
Earnings
per common share attributable to the LPT Agreement
|
|||||||||||||||||
|
Basic
|
$
|
0.09
|
$
|
0.09
|
$
|
0.28
|
$
|
0.26
|
|||||||||
|
Diluted
|
$
|
0.09
|
$
|
0.09
|
$
|
0.28
|
$
|
0.26
|
|||||||||
|
Pro forma Earnings per
common share before the LPT Agreement
|
|||||||||||||||||
|
Basic
|
$
|
0.58
|
$
|
0.49
|
$
|
1.46
|
$
|
1.43
|
|||||||||
|
Diluted
|
$
|
0.58
|
$
|
0.49
|
$
|
1.46
|
$
|
1.43
|
|||||||||
| (1) |
The
pro forma
earnings per common share for the nine months ended September 30, 2007,
was computed using the actual weighted average shares outstanding as of
September 30, 2007. This includes shares outstanding for the period after
the Company’s conversion on February 5, 2008 (52,818,747), and for the
period prior to the conversion assuming the common stock available to
eligible members (50,000,002).
|
||||||||||||||||
Page
7 of 10
Employers
Holdings, Inc.
Consolidated Balance
Sheets
(In thousands, except share
data)
|
September
30,
|
December
31,
|
||||
|
2008
|
2007
|
||||
|
Assets
|
(unaudited)
|
||||
|
Available
for Sale:
|
|||||
|
Fixed
maturity investments at fair value (amortized cost $1,530,282 at September
30, 2008 and $1,594,159 at December 31, 2007)
|
$
|
1,500,206
|
$
|
1,618,903
|
|
|
Equity
securities at fair value (cost of $54,552 at September 30, 2008 and
$60,551 at December 31, 2007)
Short-term
investments at fair value (amortized cost $70,884 at September 30,
2008)
|
79,452
70,386
|
107,377
--
|
|||
|
Total
investments
|
1,650,044
|
1,726,280
|
|||
|
Cash
and cash equivalents
|
311,793
|
149,703
|
|||
|
Accrued
investment income
|
18,853
|
19,345
|
|||
|
Premiums
receivable, less bad debt allowance of $5,320 at September 30, 2008 and
$6,037 at December 31, 2007
|
24,612
|
36,402
|
|||
|
Reinsurance
recoverable for:
|
|||||
|
Paid
losses
|
10,766
|
10,218
|
|||
|
Unpaid
losses, less allowance of $1,308 at each period
|
1,024,871
|
1,051,333
|
|||
|
Funds
held by or deposited with reinsureds
|
90,067
|
95,884
|
|||
|
Deferred
policy acquisition costs
|
14,611
|
14,901
|
|||
|
Deferred
income taxes, net
|
80,482
|
59,730
|
|||
|
Property
and equipment, net
|
19,199
|
14,133
|
|||
|
Other
assets
|
19,843
|
13,299
|
|||
|
Total
assets
|
$
|
3,265,141
|
$
|
3,191,228
|
|
|
Liabilities
and stockholders’ equity
|
|||||
|
Claims
and policy liabilities:
|
|||||
|
Unpaid
losses and loss adjustment expenses
|
$
|
2,212,400
|
$
|
2,269,710
|
|
|
Unearned
premiums
|
59,061
|
63,924
|
|||
|
Policyholders’
dividends accrued
|
149
|
386
|
|||
|
Total
claims and policy liabilities
|
2,271,610
|
2,334,020
|
|||
|
Commissions
and premium taxes payable
|
5,381
|
7,493
|
|||
|
Federal
income taxes payable
|
2,140
|
13,884
|
|||
|
Accounts
payable and accrued expenses
|
18,490
|
20,682
|
|||
|
Deferred
reinsurance gain–LPT Agreement
|
411,094
|
425,002
|
|||
|
Note
payable
|
150,000
|
--
|
|||
|
Other
liabilities
|
11,818
|
10,694
|
|||
|
Total
liabilities
|
2,870,533
|
2,811,775
|
|||
|
Commitments
and contingencies:
Stockholders’ equity
|
|||||
|
Common
stock, $0.01 par value; 150,000,000 shares authorized;
|
|||||
|
53,528,207
and 53,527,907 issued and 48,830,140 and 49,616,635 shares
|
|||||
|
outstanding
at September 30, 2008 and December 31, 2007 respectively
|
535
|
535
|
|||
|
Preferred
stock, $0.01 par value; 25,000,000 shares authorized; none
issued
|
--
|
--
|
|||
|
Additional
paid-in capital
|
305,329
|
302,862
|
|||
|
Retained
earnings
|
181,584
|
104,536
|
|||
|
Accumulated
other comprehensive (loss) income, net
|
(3,688
|
)
|
46,520
|
||
|
Treasury
stock, at cost (4,698,067 shares at September 30, 2008 and 3,911,272
shares at December 31, 2007)
|
(89,152)
|
(75,000)
|
|||
|
Total
stockholders’ equity
|
394,608
|
379,453
|
|||
|
Total
liabilities and stockholders’ equity
|
$
|
3,265,141
|
$
|
3,191,228
|
|
|
Equity
including deferred reinsurance gain – LPT
|
|||||
|
Total
stockholders’ equity
|
$
|
394,608
|
$
|
379,453
|
|
|
Deferred
reinsurance gain – LPT Agreement
|
411,094
|
425,002
|
|||
|
Total
equity including deferred reinsurance gain – LPT Agreement
|
$
|
805,702
|
$
|
804,455
|
|
Page
8 of 10
Employers
Holdings, Inc.
Consolidated Statements of Cash
Flows
(In thousands)
|
Nine
Months Ended
September
30,
|
|||||||
|
2008
|
2007
|
||||||
|
(unaudited)
|
|||||||
|
Operating
activities
|
|||||||
|
Net
income
|
$
|
85,929
|
$
|
88,519
|
|||
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|||||||
|
Depreciation
and amortization
|
5,334
|
4,517
|
|||||
|
Stock-based
compensation
|
2,459
|
902
|
|||||
|
Amortization
of premium on investments, net
|
4,814
|
4,848
|
|||||
|
Allowance
for doubtful accounts – premiums receivable
|
(717
|
)
|
780
|
||||
|
Deferred
income tax expense
|
6,284
|
5,160
|
|||||
|
Realized
losses on investments, net
|
3,211
|
322
|
|||||
|
Realized
losses on retirement of assets
|
16
|
--
|
|||||
|
Change
in operating assets and liabilities:
|
|||||||
|
Accrued
investment income
|
492
|
(310
|
)
|
||||
|
Premiums
receivable
|
12,507
|
5,753
|
|||||
|
Reinsurance
recoverable on paid and unpaid losses
|
25,914
|
36,748
|
|||||
|
Funds
held by or deposited with reinsureds
|
5,817
|
5,283
|
|||||
|
Unpaid
losses and loss adjustment expenses
|
(57,310
|
)
|
(25,264
|
)
|
|||
|
Unearned
premiums
|
(4,863
|
)
|
(2,442
|
)
|
|||
|
Federal
income taxes payable
|
(11,744
|
)
|
(14,245
|
)
|
|||
|
Accounts
payable, accrued expenses and other liabilities
|
(1,967
|
)
|
(11,400
|
)
|
|||
|
Deferred
reinsurance gain - LPT Agreement
|
(13,908
|
)
|
(13,694
|
)
|
|||
|
Other
|
(7,073
|
)
|
(3,041
|
)
|
|||
|
Net
cash provided by operating activities
|
55,195
|
82,436
|
|||||
|
Investing
activities
|
|||||||
|
Purchase
of fixed maturities
|
(208,730
|
)
|
(214,197
|
)
|
|||
|
Purchase
of equity securities
|
(558
|
)
|
(1,021
|
)
|
|||
|
Proceeds
from sale of fixed maturities
|
149,487
|
156,471
|
|||||
|
Proceeds
from sale of equity securities
|
4,010
|
2,744
|
|||||
|
Proceeds
from maturities and redemptions of investments
Capitalized
acquisition costs
|
41,462
(1,260
|
)
|
40,650
--
|
||||
|
Capital
expenditures and other, net
|
(4,116
|
)
|
(3,993
|
)
|
|||
|
Net
cash used in investing activities
|
(19,705
|
)
|
(19,346
|
)
|
|||
|
Financing
activities
|
|||||||
|
Issuance
of common stock, net
|
--
|
486,670
|
|||||
|
Cash
paid to eligible policyholders under plan of conversion
Proceeds
from exercise of stock options
|
--
5
|
(462,989
--
|
)
|
||||
|
Acquisition
of treasury stock
|
(14,152
|
)
|
(67,288
|
)
|
|||
|
Dividends
paid to stockholders
Debt
issuance costs
|
(8,878
(375
|
)
)
|
(6,299
--
|
)
|
|||
|
Proceeds
from note payable
|
150,000
|
--
|
|||||
|
Net
cash provided by (used in) financing activities
|
126,600
|
(49,906
|
)
|
||||
|
Net
increase in cash and cash equivalents
|
162,090
|
13,184
|
|||||
|
Cash
and cash equivalents at the beginning of the period
|
149,703
|
79,984
|
|||||
|
Cash
and cash equivalents at the end of the period
|
$
|
311,793
|
$
|
93,168
|
|||
|
Schedule
of non-cash transactions
|
|||||||
|
Stock
issued in exchange for membership interest
|
$
|
—
|
$
|
281,073
|
|||
Page
9 of 10
Employers
Holdings, Inc.
Calculation of Combined Ratio before the
Impact of the LPT Agreement
(In thousands, except for
percentages)
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||||
|
September
30,
|
September
30,
|
||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
||||||||||||
|
(unaudited)
|
|||||||||||||||
|
Net
Premiums Earned
|
$
|
73,131
|
$
|
88,527
|
$
|
222,842
|
$
|
262,436
|
|||||||
|
Losses
and Loss Adjustment Expenses
|
$
|
25,588
|
$
|
40,867
|
$
|
80,344
|
$
|
111,336
|
|||||||
|
Loss & LAE
Ratio
|
35.0
|
%
|
46.2
|
%
|
36.1
|
%
|
42.4
|
%
|
|||||||
|
Losses
and Loss Adjustment Expenses
|
$
|
25,588
|
$
|
40,867
|
$
|
80,344
|
$
|
111,336
|
|||||||
|
Impacts
of LPT
|
6.2
|
%
|
5.1
|
%
|
6.2
|
%
|
5.2
|
%
|
|||||||
|
Loss & LAE before impacts
of LPT
|
$
|
30,137
|
$
|
45,424
|
$
|
94,252
|
$
|
125,030
|
|||||||
|
Loss & LAE Ratio before
impacts of LPT
|
41.2
|
%
|
51.3
|
%
|
42.3
|
%
|
47.6
|
%
|
|||||||
|
Commission
Expense
|
$
|
10,121
|
$
|
12,411
|
$
|
30,465
|
$
|
35,797
|
|||||||
|
Commission Expense
Ratio
|
13.8
|
%
|
14.0
|
%
|
13.7
|
%
|
13.6
|
%
|
|||||||
|
Underwriting
& Other Operating Expense
|
$
|
21,907
|
$
|
21,726
|
$
|
66,614
|
$
|
67,778
|
|||||||
|
Underwriting & Other
Operating Expense Ratio
|
30.0
|
%
|
24.5
|
%
|
29.9
|
%
|
25.8
|
%
|
|||||||
|
Total
Expense
|
$
|
57,616
|
$
|
75,004
|
$
|
177,423
|
$
|
214,911
|
|||||||
|
Combined
Ratio
|
78.8
|
%
|
84.7
|
%
|
79.6
|
%
|
81.9
|
%
|
|||||||
|
Total
Expense before impacts of the LPT
|
$
|
62,165
|
$
|
79,561
|
$
|
191,331
|
$
|
228,605
|
|||||||
|
Combined Ratio before impacts
of LPT
|
85.0
|
%
|
89.9
|
%
|
85.9
|
%
|
87.1
|
%
|
|||||||
Page 10 of
10