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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):  May 19, 2009
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 presentations by senior management of Employers Holdings, Inc. (the "Company") with certain analysts and investors, the Company is disclosing certain information (the "Disclosed Information").
 
Statements made in the Disclosed Information that 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, 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.
   
   
 
By:
/s/ Lenard T. Ormsby
 
Name:
Lenard T. Ormsby
 
Title:
Executive Vice President, Chief
   
Legal Officer and General Counsel
Dated:    May 19, 2009
 
Exhibit Index
 
Exhibit No.
  
Exhibit
99.1
  
Presentation Materials

employers_ex99-1.htm
Exhibit 99.1
 
Employers Holdings, Inc.
Investor Presentation
May, 2009
 
 
 
1
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 2008, our Form 10-Q for the first
quarter of 2009 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
2008, our Form 10-Q for the first quarter of 2009 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 may contain 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.
Any forward-looking statements made in this presentation 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.
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 © 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. Employers Preferred Insurance Company and Employers Assurance Company are also known as AmCOMP Preferred Insurance
Company and AmCOMP Assurance Corporation in some jurisdictions. Additional information can be found at: http://www.employers.com.
 
 
 
2
Overview
Business
· Specialty provider of workers’ compensation
 insurance
· Coverage required by statute
 » Medical, temporary/permanent indemnity, death
Geographic
· 30 states with concentrations in CA, FL, WI and NV
 » Unique markets by state and area
Customers
· Small “main street” businesses
 » Small business accounts for over 70% of net new jobs
· 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
74% of total
market
(2008, A.M. Best)
 
 
 
 
 
3
2000
2002
2006
2007
FL
NM
MD
TX
OK
KS
NE
SD
ND
MT
WY
CO
UT
ID
AZ
NV
WA
CA
OR
KY
PA
MA
CT
VA
WV
OH
IN
IL
NC
TN
SC
AL
AR
LA
MO
IA
MN
MS
VT
NJ
DE
2008
1913 - 1999
State WC
fund in NV
2000
Privatization
2007
Demutualization
and IPO - entry
into FL, IL and
OR
2002
Acquisition,
book of
business in
CA, UT, ID,
MT, CO
2005
Formation of
mutual hold co
2008
Acquisition of
AmCOMP
Incorporated,
entry into IA
2006 Entry
into TX, AZ
NV
GA
TN
TX
Other
WI
FL
CA
IL
IN
GA
 
 
 
 
4
Key Strategies
 
 
 
 
5
Update
 
 
 
 
 
6
 
 
 
PEOPLE
• Senior management staffing changes implemented
• 14% staff reduction underway
BRANCHES
• Consolidating corporate functions into corporate headquarters
 – Centralizing support functions of 18 branch offices
• Field organization in place
 – 5 business units
• Complete rebranding of 9 acquired branch offices
• Opened Charlotte Customer Service Support Center, centralizing call/imaging/mail center on the East Coast
 for improved customer service and operational efficiencies
BUSINESS
• Underwriting quality
 – Reviewed 20 to 30 largest accounts in each branch
 – Established quality assurance function with common underwriting requirements and processes
• Claims
 – Conversion of claims system partially implemented and to be completed in early 2010
 – Consolidated Florida claims handling in Maitland
• Loss Control
 – Loss control technical manual revised consistent with strategy in coordination with Underwriting and Claims
7
Integration on Track
 
 
 
8
Risk Selection
Expertise
Strong Underwriting
Culture
Focused Guidelines
and Consistent
Automated Approach
Disciplined
Underwriting
Pricing of Individual
Risks
Local Knowledge
Disciplined Underwriting
 
 
 
9
Disciplined Risk Selection
Lower
Risk
Higher
Risk
EMPLOYERS = 87% of
Premiums Written,
Hazard Groups A - D
% of Premiums Written, 12/31/08
C
Physicians and Clerical
6.8
A
Restaurants
6.5
B
Wholesale Stores
5.1
B
Retail Stores
2.9
B
College Employees
2.7
C
Clothing Manufacturers
2.6
D
Automobile Services
2.3
C
Clerical
2.2
D
Machine Shops
2.0
C
Retail Grocery/Provisions
Stores
1.8
Total Top 10
34.9
Top 10 Classes
in 2008
NCCI
Hazard
Group
% Direct
Written
Premium
Further Differentiate Risks within Industry-defined Customer Classes
 
 
 
10
Superior Claims Management
 
 
 
11
Delivering Superior Loss Ratios
Consistently Lower Loss and LAE Ratios than the Industry
A.M. Best, “Aggregates and Averages”
 
 
 
12
Independent Agents and Brokers
Strategic Partnerships
Unique Distribution Network
Industry Focused
• California Restaurant
 Association provider of choice
• California Medical Association
 sponsorship 
• Over 1,900 in place
• Strong relationships
 with agents 
Physicians and restaurants
are our top two classes of
customers
 
 
 
13
Increasing Points of Access
Strategic Partnerships
 
 
 
14
Strong Retention Rates
Strategic Partnerships Result in Consistently Higher Retention Rates
 
 
 
15
$ million
# policies
NPW 2002 - 2008 CAGR, 9%
Policy Count 2002 - 2008 CAGR,12%
• Substantive M & A growth
• Responsible, strong in force policy
 growth
 – 33.2% increase (3/31/08 to
 3/31/09)
• Maintaining underwriting discipline
Increasing Market Penetration
Purchased
Fremont Book
of Business
Purchased
AmCOMP
Incorporated
 
 
 
16
Strong Capital Position
($ million)
.8 to 1
NPW/Statutory
Surplus Ratio
$355 million
extraordinary
dividends to
parent in 2008
Strong Growth in Statutory Surplus Provides a Solid Basis for Underwriting
 
 
 
17
Loss Portfolio Transfer (LPT)
Contract
($ million)
Total Coverage
 $2,000
Original Reserves (Liabilities)
Transferred
 $1,525
Consideration
 $ 775
 Gain at 1/1/2000
 750
Subsequent Reserve Adjustments
 (147.5)
 Gain at 3/31/09
 $602.5
Accounting at 3/31/09
($ million)
Statutory Surplus Created
 $602.5
Cumulative Amortization To Date
 (200.3)
 GAAP: Deferred Reinsurance Gain -
 LPT Agreement
 $402.2
 Youngest claim is 14 years old - 3,656 claims open as of
 3/31/09 with 5% closing each year
 Remaining liabilities at 3/31/09: $920 million
 
 
 
18
High Quality Investment Portfolio
Portfolio at 3/31/09
$2.08 billion fair market value
 
 
 
19
History of Reserve Strength
Reserve Review
Reserve Development
Net reserves for workers’ comp industry estimated to be deficient by $6 Billion at 12/31/08 (1)
(1) NCCI, “2009 State of the Line”
Net Calendar Year Reserve Releases for
Prior Accident Years ($ million)
Track Record of Reserve Strength
 
 
 
20
20
High Quality Reinsurance
Program Structure
Reinsurance Management
 
 
 
Prudent Capital Management
Dividends
Share
Repurchases
Investing in the Future
Returning Capital to Shareholders
Holding Company Flexibility
 $80 million in cash
 $18 million in additional upstream dividends in 2009
Over $200 million in fixed maturities
(Over $100 million in maturing securities over the next year at operating
subsidiaries)
 Investing in operations
 Investing in securities
 Acquisition equity value of
 $189 million
 $150 million Wells Fargo
 secured line of credit
 2008 operating expenses flat (vs.
 2007); Q1 2009 expenses down,
 excluding acquired operations and
 restructuring/integration costs
 14% staff reduction,
 consolidation of functions
 Extensive budget review
 21
 
 
 
22
Income Statement ($ million)
2005
2006
2007
2008
Q1 2009
Gross Written Premium
$ 458.7
$ 401.8
$ 350.7
$ 322.9
$ 128.1
Net Written Premium
439.7
387.2
338.6
312.8
124.7
Net Earned Premium
438.3
393.0
346.9
328.9
111.6
Net Investment Income
54.4
68.2
78.6
78.1
23.3
Net Income
137.6
171.6
120.3
101.8
20.9
Net Income Before LPT
93.8
152.2
102.2
83.4
16.5
Balance Sheet ($ million)
2005
2006
2007
2008
Q1 2009
Total Investments
$ 1,595.8
$ 1,715.7
$ 1,726.3
$ 2,042.9
$ 2,083.2
Cash and Cash Equivalents
61.1
80.0
149.7
202.9
190.4
Total Assets
3,094.2
3,195.7
3,191.2
3,756.7
3,764.8
Reserves for Loss and LAE
2,350.0
2,307.8
2,269.7
2,506.5
2,494.6
Shareholders’ Equity
144.6
303.8
379.5
444.7
459.9
Equity Including LPT Deferred Gain
607.0
746.8
804.5
851.3
862.2
Selected Operating Results
 
 
 
Consistently Profitable Underwriting
Underwriting model targets a
100% combined ratio and a 12-
13% return on a premium dollar
NOTE: LPT percentages include reserve adjustments
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%)
109.2%
94.3%
90.9%
91.5%
(LPT is 5.6%)
103.6%
(LPT is 3.9%)
Non-recurring
integration /
restructuring
charges
added 3.4
points to Q 1
2009 expense
ratio
Expense ratio
on level net
earned
premium and
excluding non
-recurring
charges
would be
approximately
27.1% (see
Appendix for
calculation)
 23
 
 
 
24
Continuing Profits
Net Income Before LPT 2002 - 2008 CAGR = 40%
$ million
NOTE: 50,000,002 pro forma shares prior to February 5, 2007 (IPO date)
0.34
 
 
 
25
Return on Average Adjusted Equity, Increasing Book
Value per Share
NOTE: 50,000,002 pro forma shares prior to February 5, 2007 (IPO date)
 Return on Average Equity includes deferred gain related to the LPT - equity in the ROE calculation is averaged for the period
Trailing
12
Months
ROAAE
 
 
 
26
Summary of Financial Strength
Strong
Underwriting
Leverage
Conservative
Reserving
High Quality
Investment
Portfolio
Catastrophe
Reinsurance
Program
.8 to 1 Surplus to
NPW at 3/31/09
$2 billion - over 97%
fixed maturity with
average rating AA
Track record of
reserve strength:
since IPO, $145
million favorable
prior AY reserve
development as of
3/3109
Coverage up to
$200 M loss
 
 
 
27
Key Strengths
• 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
 
 
 
28
Douglas D. Dirks
President & Chief Executive Officer
Employers Holdings, Inc.


William E. (Ric) Yocke
Chief Financial Officer
Employers Holdings, Inc.



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
 
 
 
29
Appendix
 
 
 
30
Organization
Employers Holdings, Inc.
Employers
Insurance
Company
of Nevada
Employers
Compensation
Insurance
Company
Employers
Preferred
Insurance
Company
Employers
Occupational
Health, Inc.
Employers
Assurance
Company
Elite
Insurance
Services
EIG Services,
Inc.
Pinnacle
Benefits, Inc.
AmSERV,
Inc.
Employers Group, Inc.
 
 
 
COMPUTATION OF ADJUSTED EXPENSE RATIO ON LEVEL PREMIUMS
Three Months
Three Months
Ending
Ending
3/31/2008
3/31/2009
(millions)
Earned Premium
Employers
$   75.8
$    111.6
Acquired operations
 52.2 
 -
 128.0
D
 111.6
A
Underwriting & Other Operating Expenses
 41.7
    36.5
Policyholder Dividends
 2.4
 2.0
Total Expenses
 44.1
    38.5
B
Less: One-time restructuring charge
 -
 3.8
Net Underwriting & Other
 Operating Expenses
$ 44.1
$      34.7
C
Expense ratio
34.5%
34.5%
B/A
Adjusted Expense ratio (net)
34.5%
31.1%
C/A
Adjusted Expense ratio (net)
 on Level Premiums (1stQ-'08)
27.1%
C/D
31
 
 
 
Regional Organization, Pricing Trends in 2009 at 4/1/09
ME
NY
NH
MA
CT
VT
NJ
RI
KY
OH
IN
MO
IA
MN
IL
MIDWEST
KS
NE
SD
ND
NM
TX
OK
MT
WY
CO
UT
ID
AZ
NV
WESTERN
WA
CA
OR
PACIFIC
Corporate Headquarters
Regional Headquarters
MD
PA
VA
WV
NC
TN
AL
AR
LA
GA
MS
DC
SC
FL
SOUTHEAST
 States Licensed, actively writing
States Licensed, not actively writing
+10%
-7.8%
-16.0%
-3.8%
+3.5%
-10.0%
(5/1/09)
-18.6%
-2.4%
+3.2%
-3.1%
-5.9%
+6.4%
-2.3%
+2.8%
+0.4%
-5.1%
-5.4%
-13.0%
-7.7%
-2.9%
+9.1%
-1.4%
+6.0%
-15.0%
-15.9%
+1.7%
-12.2%
%  Employers Insurance Co of NV (ECIN)
%   Employers Comp Ins Company (ECIC)
%  Employers Assurance Co (EAC)
%  Employers Preferred Insurance Co (EPIC)
-0.6%
-1.8%
-18.8%
(5/1/09)
32