employers_8k.htm
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): August 18, 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
7 – Regulation FD
Item
7.01. Regulation FD Disclosure.
In
connection with a presentation 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 furnished as Exhibit 99.1 to this Current
Report on Form 8-K. The information set forth under "Item
7.01. Regulation FD Disclosure." and Exhibit 99.1 is intended to be
furnished pursuant to Item 7.01. Such information, including Exhibit
99.1 attached hereto, shall not be deemed "filed" for purposes of Section 18 of
the Securities Exchange Act of 1934, as amended, nor shall it be deemed
incorporated by reference into any filing under the Securities Act of 1933, as
amended, except as shall be expressly set forth by specific reference in such
filing. The furnishing of this information pursuant to Item 7.01
shall not be deemed an admission by the Company as to the materiality of such
information.
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.
|
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By:
|
/s/
Lenard T. Ormsby
|
|
|
Name:
|
Lenard
T. Ormsby
|
|
|
Title:
|
Executive
Vice President, Chief
Legal
Officer and General Counsel
|
|
|
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Dated: August
18, 2008
Exhibit
Index
|
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99.1
|
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Presentation
Materials
|
employers_ex99-1.htm
Employers
Holdings, Inc.
Investor
Presentation
August,
2008
Exhibit
99.1
1
This
slide presentation is for informational purposes only. It
should be read in conjunction with our Form 10-K for the year 2007, our Form
10-Q for the first
and second quarters of 2008 and our Form 8-Ks filed with
the Securities and Exchange Commission (SEC), all of which are available on the
“Investor
Relations” section of our website at
www.employers.com.
Non-GAAP
Financial Measures
In
presenting Employers Holdings, Inc.’s (EMPLOYERS) 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
2007, our Form 10-Q for the first and second quarters of 2008 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”. 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.
All
forward-looking statements made in this presentation, related to the anticipated
acquisition of AmCOMP, Incorporated (AmCOMP) or otherwise, reflect
EMPLOYERS
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 following factors, among others, could
cause or contribute to such material differences: failure
to
satisfy any of the conditions of closing, including the failure to obtain
AmCOMP stockholder approval or any required regulatory approvals; the risks
that
EMPLOYERS and AmCOMP's businesses will not be integrated successfully;
the risk that EMPLOYERS will not realize estimated cost savings
and
synergies; costs relating to the proposed transaction; and disruption
from the transaction making it more difficult to maintain relationships with
customers,
employees,
agents
or producers. We
undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new
information, future events or
otherwise.
Copyright
© 2008 EMPLOYERS. All rights reserved. EMPLOYERS and America’s small business
insurance specialists are registered trademarks
of Employers Insurance
Company of Nevada. Workers’ compensation insurance and services are offered
through Employers Compensation
Insurance Company and Employers Insurance
Company of Nevada.
Safe
Harbor Disclosure
2
Business
· Specialty
provider of workers’ compensation
insurance
· Coverage
required by statute
· Medical,
temporary/permanent indemnity, death
Geographic
· 12
states, headquarters Reno, NV
· Market
leading presence in California and Nevada
· Unique
markets by state and area
Customers
· Small
“main street” businesses
· 35,299
in force policies with $8,464 average policy size
at
June 30, 2008
· Low-to-medium
hazard exposure industries
· Top
classes include restaurants, physicians, dentists,
clerical,
retail stores
· Distribution
through agents and strategic partners
$50
billion
per year
industry
(2007,
A.M. Best)
Highly
focused
business
model
Operate
in
48% of total
market
(2007,
A.M. Best)
Overview
3
Key
Strengths
|
Net
Income*
|
Book
Value per Share*
|
2007
|
$
102 Million
|
$16.21
|
2006
|
$
152 Million
|
$14.94
|
2005
|
$
94 Million
|
$12.14
|
*
Adjusted for the Loss Portfolio Transfer
(LPT) - see Appendix and SEC
Filings
• Established
enterprise with consistently strong performance -
95
year operating history
• Focused
operations and disciplined underwriting
-
attractive, underserved target market
segment
with growth opportunities
• Unique
and long-standing strategic distribution relationships - resulting in
higher
retention
• Financial
strength and flexibility
- - strong balance
sheet, conservative reserving, negligible
asset
exposure to recent sub-prime market dislocations
• Experienced
management team with deep knowledge of workers’ compensation
- -
average 25 years
experience with the ability to manage through challenging operating
conditions
4
FOCUS
GROWTH
CAPITAL
Key
Strategies
5
FOCUS
Executing our
Strategies
6
Focus: Attractive
Small Business Market
• U.S. Small
Business Administration
– 26.8 million small
businesses in
2006
– More new business
creation than
closures
in 2006
• Two thirds of new
firms survive at
least
two years; 44% at least four
years
– Create 60% to 80%
of net new jobs
– Share of
employment remains
steady
as some grow into larger
firms
– Small businesses
employ about half
of
U.S. workers
• Proven
business model
• Significant
room for growth
• In-depth
market knowledge
Reduced
reliance on
any one policyholder
Specialty
provider for small businesses
Underserved
by large carriers
Less
price sensitivity
Strong
persistency
7
Risk
Selection
Expertise
Strong
Underwriting
Culture
Focused
Guidelines
and
Consistent
Automated
Approach
Disciplined
Underwriting
Pricing
of Individual
Risks
Local
Knowledge
Focus: Disciplined
Underwriting
9
Focus:
Disciplined Risk Selection
EMPLOYERS further
differentiates risks within industry-defined customer
classes
A
|
Restaurants
|
6.4
|
C
|
Physicians
and Clerical
|
5.8
|
B
|
Wholesale
Stores
|
4.8
|
B
|
Retail
Stores
|
3.0
|
B
|
College
Employees
|
2.6
|
C
|
Clothing
Manufacturers
|
2.4
|
C
|
Clerical
Office Employees
|
2.3
|
D
|
Machine
Shops
|
2.2
|
D
|
Automobile
Services
|
1.8
|
C
|
Dentists/Dental
Employees
|
1.8
|
|
Total Top
10
|
33.1
|
NCCI
Hazard
Group
%
of Direct
Written
Premium
Top
10 Classes in 2007
10
Focus: Superior
Claims Management
• In-house medical
management staff help coordinate care and manage medical costs
– URAC accreditation
in case management and utilization review
• Comprehensive
fraud program
– $10 million
savings in 2007
• Rigorous quality
assurance processes ensure compliance with best practices and
regulatory
requirements
• Dedicated
subrogation unit with recoveries over $2 million in 2007
• Savings in excess
of $2.5 million in 2007 through pharmacy benefit management program
• Claims
professionals average over a decade of experience
11
Focus: Delivering
superior loss ratios
Consistently
lower Losses and LAE ratios than the industry
(Before
the Loss Portfolio Transfer - see
APPENDIX)
A.M.
Best, “Aggregates and Averages”
12
GROWTH
Executing our
Strategies
13
California
Arizona
Montana
Other
Utah
Nevada
Colorado
Illinois
Idaho
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
PA
NH
MA
CT
VA
WV
OH
IN
IL
NC
TN
SC
AL
AR
LA
MO
IA
MN
GA
MS
VT
NJ
DE
RI
Direct
Premiums Written (%) at 6/30/08
2008
Growth:
Selectively Expanding Footprint
14
• 2002 - 2007 NPW
CAGR of 13%
• Top line
challenged by prior rate
decreases
in California, economic
slowdown
in Southern Nevada and
increasing
competition in some markets
• Outlook:
– EMPLOYERS California rate
change
(-
4.5% effective 9/15/07) will roll
through
Q 3, 2008
– California
advisory pure premium rates
stable
since July, 2007
– California Rating
Bureau (WCIRB) is
recommending
pure premium rate
increase
of 16% for 2009
– APPLYING
DISCIPLINE: Will not
grow
top
line at the expense of bottom line
profitability
Growth: Top
Line
$
million
Net
Premiums Written
15
$
million
#
policies
• Strong in force
policy growth
– Strong sales and
marketing efforts
• 2008 TTM* gain a
healthy 10.6%
– 13% in California,
our largest market
– 37% in states
other than California
and
Nevada
• Maintaining
underwriting discipline
– Focused
operations
– 90% of total
policy count in Hazard
Groups
A through D
– Top ten customer
classes: 100% in
Hazard
Groups A through D were
42%
of total 6/30/08 policy count
Growth: Increasing
market penetration
*
trailing twelve months
16
Responsible
Organic Growth
Substantive
M & A Growth
Purchase
Fremont
Book
of Business
Purchase
AmCOMP
Incorporated
Net
Premiums
Written
• Excellent
strategic fit
• Immediate growth
in
premium
volume
– Introduction of A-
rated
paper
• Increased
scale
– 15 new
states
– Diversified
earnings
• Meaningful
synergies
– $10 million by
year 3
– Leverage best
practices
• Financial
benefits
– Deploy capital in
core
assets
with history of
profits
– Accretive to EPS /
ROE
2007
Pro
Forma
(EMPLOYERS,
$339
M and
AmCOMP,
$221 M)
Pending
acquisition of AmCOMP
Growth: Organic
and Strategic
17
FL
NM
MD
TX
OK
KS
NE
SD
ND
MT
WY
CO
UT
ID
AZ
NV
WA
CA
OR
KY
ME
PA
NH
MA
CT
VA
WV
OH
IN
IL
NC
TN
SC
AL
AR
LA
MO
IA
MN
GA
MS
VT
NJ
DE
RI
EMPLOYERS
AmCOMP
Overlap
California
Indiana
3%
Texas
Other
44%
11%
17%
11%
5%
6%
Wisconsin
Nevada
Florida
Tennessee
3%
EMPLOYERS
is building national scale with local knowledge
Pro
Forma with AmCOMP Acquisition
Direct
Premiums Written (%) at 12/31/07
Growth:
Selectively Expanding Footprint
18
• Scalable business
model
– Increasing policy
count per full time employee
• 7.4% increase in
this measure from 2006 to 2007
• Increasing the
ease of doing business
– Highly automated
underwriting system - EACCESS
• Electronic
submission and review of applications
• Includes
underwriting guidelines and standards
• Average small
policy size requires automation
• Initiatives
– Continuing
roll-out of EACCESS to agents
– Building
scale
Growth: Leverage
Infrastructure, Technology and Systems
19
Independent
Agents and Brokers
Strategic
Partnerships
Industry
Focused
• California
Restaurant
Association
provider of choice
• California Medical
Association
sponsorship
• Over 900 in
place
• Strong
relationships
with
agents
Restaurants
and physicians
are our top two classes of
customers
Growth: Unique
Distribution Network
20
Strategic
Partnerships
• Provide a
distribution
advantage
– Expand market
reach
– Significant
knowledge
of
local markets
• Result in
high
persistency
• Contribute
about
one-third of direct
premiums
written
• Largest
payroll services company in the U.S. with over
450,000
clients
• Partner
since 2002 - business originated by ADP’s field sales
staff
and insurance agency with “Pay-by-Pay” premium
collection
• Largest
group health carrier in California - exclusive
relationship
• Partner
since 2002 - business originated by Wellpoint’s health
insurance
agents with a single bill to customers
• Use medical
provider network
• Specialty
provider of payroll services / insurance broker
• Partner
since Q 4 2006, expanded alliance in 2008
• Provider of
insurance software services
• Partner
since Q 4 2007
• Small
business payroll services
• Program
since Q 2 2008
Growth: Increasing
Points of Access
21
• Overall retention
mid to
high
80s
• Strategic
partnerships
historically
low 90s
• Slightly lower but
strong
retention
in 2008
Growth: Strong
retention rates
Strategic
partnerships maintain higher retention rates
22
CAPITAL
Executing our
Strategies
23
Strong
Underwriting
Leverage
Conservative
Reserving
High
Quality
Investment
Portfolio
Catastrophe
Reinsurance
Program
Position
of
Financial Strength
• Strong growth in
statutory surplus provides a solid
basis
for underwriting
– $275 million
extraordinary dividends to parent as of
6/30/08
• 0.7 : 1 NPW /
statutory surplus ratio at 6/30/08
• Financial Strength
Rating of A- (Excellent) by A.M.
Best
($
million)
Operating
Company Surplus
Capital: Manage
Capital Prudently
24
• Holding Company
Leverage
– $150 million
Amended and Restated Secured Revolving Credit Facility (Wells Fargo)
through
April 30, 2009 for acquisition costs and general corporate purposes
• After April 30,
2009 - $50 million
– Currently no
borrowings
– Debt to total
capital to continue below rating agency requirements
• Liquidity
– Holding company
liquidity above requirements for expenses and capital
management
programs
– Allows access to
financial markets
– Conserving cash
since Q 4 2007 for acquisition and general corporate purposes
Holding
Company Position of Financial Strength
Capital: Manage
Capital Prudently
25
• Track record of
reserve strength ($
million)
Reserve
Review
Reserve
Development
Net
reserves for workers’ comp industry estimated to be deficient by $2 Billion at
12/31/07 (1)
(1)
NCCI,
“2008 State of the Line”
Net
Calendar Year Reserve Releases
for Prior Accident Years
Capital: History
of Reserve Strength
• Quarterly
evaluation of prior year reserves
and
current year loss picks
• Consider point
estimate of independent
consulting
actuary
– Twice
annually
• Results from
senior management to Board
Audit
Committee
• OUTLOOK:
– Going forward, we
expect current AY loss
picks
to be closer to consulting actuary
estimates
26
• $1.7 billion
portfolio of invested
securities
-
Less than .02% related to
sub-prime
-
Less than 6% related to
financials
• Approximately 87%
AA rated
• Book yield of
4.27%
• Tax equivalent
book yield of 5.16%
• Effective duration
of 5.54
• Outsourced to
Conning Asset
Management
Portfolio Mix at
6/30/08
Capital: High
Quality Investment Portfolio
27
• Maintain a high
quality reinsurance
program
– Focus on select
small business
provides
a natural dispersion of
exposure
across markets
• Long-term
relationships with lead
reinsurers
• 100% rated A or
better
• Priced
annually, effective
7/1/2008
• Limits
of $200M
• Retention
of $5M
• Catastrophe
excess of
loss
includes maximum any
one
life of $10M
• Includes
terrorism, excludes
nuclear,
biological,
chemical,
and radiological
Program
Structure
Capital: High
Quality Reinsurance
28
Statutory
Surplus
• Generating capital
to support
growth
• Cost containment
initiatives
– Underwriting and
other
operating
expenses have been
flat
YTD at 6/30/08
– Minimal hiring in
2008
– Extensive budget
review
• Redeploying
capital in profitable
operations
– Purchase price of
AmCOMP -
equity
value of $194 million,
$230
million including net debt
assumed
2002-2007
Underwriting/Other Op Exp CAGR 15.6%
Increased
staffing for
public reporting
Acquisition
of Fremont book
2002-2007
Net Premiums Earned CAGR 14.0%
Investing
in the Future
Assuming
acquisition
of
AmCOMP*
2007
Pro
Forma*
* Pro
Forma numbers from Form 8-K filed with the SEC May 2, 2008 (Includes one-time
expenses such as options settlements and severance benefits)
$
million
Capital: Investing
in Operations
29
• $0.06 per share
quarterly to date
• Approximately $12
million per year
• Future dividends
subject to Board
approval
• Repurchased $75
million (3.9 million
shares)
in 2007
• $100 million
authorized in February
2008
through June 30 2009
– $7 million YTD at
June 30, 2008
– $3.8 million in
July of 2008
– Since Q 4, 2007,
we have been
conserving
cash for the pending
acquisition
and for general corporate
purposes
Shareholder
Dividends
Share
Repurchases
EMPLOYERS
returned 83% of 2007 net income to shareholders
Capital: Return
Capital to Shareholders
30
Calendar
Year Combined Ratio Before the LPT
Underwriting
model
targets a 100% combined
ratio and a 12-13% return
84.9%
72.6%
85.6%
(LPT
is 10%)*
(LPT
is 4.9%)
(LPT is
5.2%)
(LPT
is 12%)*
(LPT
is 16.8%)*
(LPT
is 5.5%)*
100.9%
94.3%
90.9%
*
Including reserve adjustments
86.3%
(LPT is
6.3%)
Results:
Consistently Profitable Underwriting
31
YEAR
|
EPS
Before LPT (1)
|
2002
|
$
0.22
|
2003
|
$
0.92
|
2004
|
$
1.46
|
2005
|
$
1.88
|
2006
|
$
3.04
|
2007
|
$
1.98
|
YTD 6/30/08
|
$
0.88
|
$
million
$
million
Annual
Net Income Before LPT
Quarterly
Net Income Before LPT
(1)
50,000,002 shares prior to February 5, 2007.
51,757,057
diluted shares in 2007.
49,545,264
diluted shares in 2008.
Results:
Continuing Profits
32
YEAR
|
Adjusted ROE
(3)
|
2002
|
3.1%
|
2003
|
10.9%
|
2004
|
14.1%
|
2005
|
15.5%
|
2006
|
20.4%
|
2007
|
12.7%
|
YTD 6/30/08
|
5.3%
|
(1)
Shareholder’s equity including deferred gain related to the LPT
(2)
Shareholder’s equity including deferred gain related to the LPT; 50,000,002 pro
forma shares before February 5, 2007
(3)
Net Income Before the LPT, equity includes deferred gain related to the LPT -
equity in the ROE calculation is averaged for the period
Shareholder’s
Equity (1)
Book
Value per Share (2)
$
million
$
million
Results:
Increasing Shareholder’s Equity, Book Value per Share,
Double
Digit ROE
33
Investment
Considerations
FOCUS
on core operations
Organic
/ Strategic GROWTH
Prudent
CAPITAL Management
• Established
enterprise with
consistently
strong performance
• Focused
operations and disciplined
underwriting
• Unique
and long-standing strategic
distribution
relationships
• Financial
strength and flexibility
• Experienced
management team with
deep
knowledge of workers’
compensation
34
Analyst
Contact:
Vicki
Erickson
Vice President, Investor Relations
Employers Holdings,
Inc.
(775) 327-2794
verickson@employers.com
10375
Professional Circle
Reno, NV 89521
(775) 327-2700
Douglas D.
Dirks
President & Chief Executive Officer
Employers Holdings,
Inc.
William E. (Ric) Yocke
Chief Financial Officer
Employers
Holdings, Inc.
36
All
other
states less
than 4%
• $50 billion market
(1)
– California 18% of
total workers’
compensation premiums (2)
Direct
Written Premiums,
Commercial Property & Casualty Market (1)
(1)
A.M. Best - Best’s State/Line - P/C US (data on-line as of 7/23/08)
(2)
A.M. Best, 2007 Data
Direct
Written Premiums,
Commercial Property & Casualty Market,
State Percent
of Total Workers’ Compensation Market (2)
Workers’
Compensation
37
State
Workers
Compensation Fund
established in
Nevada
History
2007
2002
2005
Privatization:
EICN
assumed
assets,
liabilities and
operations of
Fund
Entry
into California,
the largest WC market
in the U.S. (and four
other
states)
Formation of
mutual holding
company
Demutualization and
IPO -
entry into
Florida, Illinois and
Oregon
Pending
AmCOMP
acquisition: enter
15
additional states
1913
2008
Top
25 private
U.S. workers’
compensation
provider
(2007,
A.M. Best)
38
Contract
|
$
millions
|
|
Total
Coverage
|
$2,000
|
|
|
Original
Reserves Transferred
|
$1,525
|
Consideration
|
$ 775
|
Gain
at 1/1/2000
|
750
|
Subsequent
Reserve Adjustments
|
(147.5)
|
Gain
at 9/30/2007
|
$602.5
|
Accounting
at 9/30/07
|
$
millions
|
|
Statutory
Surplus Created
|
$602.5
|
Cumulative
Amortization To Date
|
(186.9)
|
|
|
GAAP:
Deferred Reinsurance Gain
- LPT Agreement
|
$415.6
|
• 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
• Youngest claim is
13 years old, 3754 claims open as of 6/30/08 with, on average,
approximately
6%
closing each year
Loss
Portfolio Transfer (LPT)
• Non-recurring
transaction with no ongoing cash benefits or charges to current
operations
39
Premium
and Incurred Losses
EMPLOYERS
entry
Reform
2007
and 2008 -
increasing
competition
73.6%
of Premium: California
40
California Rate
Setting Process
Rate
Setting Process Example
|
Filed
Loss Costs Estimate
|
65
|
+
or - adjustment
|
-7.5%
|
Revised Loss
Costs Estimate
|
60
|
X LCM
|
166%
|
Revised
Filed Rates
|
100
|
Schedule
Credits
|
-5
|
Effective
Rates
|
95
|
• Key Terms: Loss
Costs (losses only; also referred to as Pure Premium); Lost Cost Multiplier
(LCM); Filed Rate;
Schedule
Credit/Debit; Effective Rate
• WCIRB
recommendations to the Commissioner are based on study of approximately 86% of
the industry “loss
costs”
-
Annually by class of
business
-
Interim studies in aggregate
• Commissioner can
accept, reject or modify WCIRB findings
• Companies then
accept, reject or modify the Commissioner’s recommendations; if they accept or
modify they file new
rates that are the
product of revised pure loss cost estimates X LCM’s required to
cover their total costs by class of
business
• Companies also
file rate deviation plans or schedule
credits
• These schedule
credits are applied to
modify filed
rates
to
individual policy or group
requirements to arrive at
“effective
rates”
42
Employers
Holdings, Inc.
Employers
Insurance
Company
of
Nevada
Employers
Compensation
Insurance
Company
AmCOMP
Preferred
Insurance
Company
Employers
Occupational
Health,
Inc.
AmCOMP
Assurance
Corporation
Elite
Insurance
Services
Pinnacle
Administrative
Company
Pinnacle
Benefits,
Inc.
AmSERV,
Inc.
Employers
Group, Inc.
Current
Organization
(shaded
area)
Organization after
Acquisition
43
AmCOMP
at a Glance
Key
Strengths of AmCOMP
Direct
Premiums Written: $101.7 M
Net
Premiums Earned: $100.7
M
Net
Investment Income: $10.4
M
Net
Income: $6.5
M
Combined
Ratio: 94.8%
Total
Investments: $434.1
M
Total
Assets: $655.5
M
Shareholder’s
Equity: $163.7
M
YTD 6/30/08
Source: AmCOMP
Incorporated Form 10-Q filed with the SEC, August, 2008 and 2007 Form
10-K
(Excluding
policyholder dividends
and interest expense)
Growth:
Acquisition of AmCOMP is a Natural Extension
• Mono-line workers’
compensation
• Leading market
presence in Florida (approximately
30%
of premiums) and meaningful footprint in 17
other
southeast and midwest states
• Disciplined
underwriting and pricing culture
including
loss prevention and claims handling
expertise
• Writes all classes
targeting employers with annual
premiums
of $10,000 to $100,000
• Strong, long-term
agent relationships
– Over 900
independent agencies
• Strong reserve
position with favorable development
each
of the last 14 years
• Successful track
record of expansion and profitable
growth
44
Miscellaneous
Contracting
Manufacturing
Office
and
Clerical
36%
18%
32%
Goods
and
Services
6%
8%
EMPLOYERS
Miscellaneous
Contracting
Manufacturing
Office
and
Clerical
46%
13%
22%
Goods
and
Services
10%
9%
Pro
forma Combined at 12/31/2007
Miscellaneous
Contracting
Manufacturing
Office
and
Clerical
40%
20%
22%
Goods
and
Services
9%
9%
AmCOMP
Policyholder
mix will shift to include more contractors
Direct
Premiums Written: $221 Million
Direct
Premiums Written: $346 Million
Direct
Premiums Written: $567 Million
Growth:
Policyholders by Industry Group