UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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Date of report (Date of earliest event reported): April 26, 2017
EMPLOYERS HOLDINGS, INC.
(Exact Name of Registrant as Specified in its Charter)
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NEVADA | 001-33245 | 04-3850065 | ||
(State or Other Jurisdiction of | (Commission | (I.R.S. Employer | ||
Incorporation) | File Number) | Identification No.) | ||
10375 Professional Circle | ||||
Reno, Nevada | 89521 | |||
(Address of Principal Executive Offices) | (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)
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Section 2 – Financial Information
Item 2.02. Results of Operations and Financial Condition.
On April 26, 2017, Employers Holdings, Inc. (the “Company”) issued a press release and financial supplement announcing results for the quarter ended March 31, 2017. The press release and financial supplement are attached hereto as Exhibits 99.1 and 99.2, respectively, and are incorporated herein by reference, and are being furnished, not filed, under Item 2.02 to this Current Report on Form 8-K.
Section 8 – Other Information
Item 8.01. Other Events.
On April 26, 2017, the Company announced that its Board of Directors declared a second quarter 2017 cash dividend of $0.15 per share on the Company’s common stock. The dividend is payable on May 24, 2017 to stockholders of record as of May 10, 2017.
Section 9 – Financial Statements and Exhibits
Item 9.01. Financial Statements and Exhibits.
99.1 Employers Holdings, Inc. press release, dated April 26, 2017.
99.2 Employers Holdings, Inc. financial supplement, dated April 26, 2017.
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. | ||
Dated: | April 26, 2017 | /s/ Lenard T. Ormsby |
Lenard T. Ormsby | ||
Executive Vice President, | ||
Chief Legal Officer and General Counsel | ||
Exhibit Index
Exhibit No. | Exhibit | |
99.1 | Employers Holdings, Inc. press release, dated | April 26, 2017 |
99.2 | Employers Holdings, Inc. financial supplement, dated | April 26, 2017 |
Exhibit 99.1news release
For Immediate Release
Employers Holdings, Inc. Reports First Quarter 2017 Results
• | First quarter net income, net income excluding the impact of the LPT and operating income of $23.2 million, $20.3 million and $18.9 million, respectively. |
• | Annualized operating return on adjusted equity of 8.0%. |
• | First quarter combined ratio of 94.9% and combined ratio excluding the impact of the LPT of 96.6%, each an improvement year-over-year. |
• | First quarter net written premiums of $196.1 million, an increase of $7.4 million year-over-year. |
• | GAAP book value per share of $26.88, book value per share of $32.20 and adjusted book value per share of $29.65, increased 3.3%, 2.3% and 1.7%, respectively, in the first quarter of 2017, including dividends declared. |
• | In-force payroll exposure increased 0.2% overall, year-over-year. |
• | In-force policies were flat overall, year-over-year. |
• | Net earned premiums increased 1.6% in the quarter, year-over-year. |
• | Net investment income increased $1.0 million in the quarter, year-over-year. |
• | Board of Directors approved quarterly dividend per share of $0.15. |
Reno, Nevada-April 26, 2017-Employers Holdings, Inc. (“EHI” or the “Company”) (NYSE:EIG) today reported net income and net income excluding the impact of the LPT of $23.2 million ($0.70 per diluted share) and $20.3 million ($0.62 per diluted share), respectively, for the first quarter of 2017. Operating income was $18.9 million ($0.57 per diluted share) for the quarter ended March 31, 2017. The Company’s underwriting and other operating expense ratio and loss ratio before the LPT decreased in the quarter. The Company’s commission expense ratio increased slightly over the previous year’s first quarter.
Chief Executive Officer Douglas Dirks commented on the results:
“We are pleased with our first quarter 2017 results. Today we reported higher premiums, underwriting income and investment income for the first quarter compared with the comparable period last year. We achieved an annualized return on adjusted equity of 8%, consistent with last year's first quarter, as we grew stockholders’ equity and book value per share. We continue to drive strong new business growth and maintain high levels of retention for our in-force policies, despite competitive market conditions, while improving loss costs. Our claim trends continue to be positive in terms of declining frequency and we have been successful in closing claims on an accelerated basis.
“Given the strength of our balance sheet, the strong execution of our underwriting, claims and investment strategies and our active capital management, we believe that we are well positioned for the current market cycle.”
First Quarter 2017 Results
(All comparisons vs. first quarter 2016, unless noted otherwise).
Net income of $23.2 million increased $1.4 million. The increase in net income reflects increases in net investment income, realized gains, underwriting income, net earned premium, lower underwriting and other operating expenses and slightly higher income tax expense. Our effective tax rate of 21.4% was consistent with that of the first quarter of 2016.
Underwriting results
• | The combined ratio before the impact of the LPT remained strong at 96.6%. |
• | The loss ratio before the LPT of 63.8% decreased 0.2 percentage points. |
• | The commission expense ratio of 12.3% increased 0.5 percentage points due to higher base commissions paid in the first quarter of 2017 and a true-up of agency incentive commissions that lowered our commissions during the first quarter of 2016. |
• | The underwriting and other expense ratio of 20.4% decreased 0.6 percentage points due to lower bad debt, premium taxes and assessments. |
Gross written premiums of $197.6 million increased $6.9 million due to higher final audit premium and new business growth. The increase in final audit pickup can be attributed to higher payroll at final audit driven by increases in hours worked and the number of full-time employees.
In-force premium in states outside California grew 0.8% while in-force premium in California decreased by 1.5%. Policy count outside of California grew 5.3% while policy count in California declined 5.0%. Retention remained high and overall renewal premiums were flat in the first quarter year-over-year with increases in payroll exposure being offset by a 1.8% decrease in average rate.
Net investment income of $18.8 million increased $1.0 million relative to the first quarter of last year, driven by an increase in invested assets and a slight shift in asset mix. Net realized gains on investments were $2.2 million in the first quarter compared with $1.5 million in the first quarter of last year.
Recently Adopted Accounting Standard
In March 2016 the Financial Accounting Standards Board issued Accounting Standards Update Number 2016-09, Compensation - Stock Compensation (Topic 718) that impacted the net tax benefits on the Company's stock-based compensation. The Company elected to early adopt this standard in the third quarter of 2016 with an effective date of January 1, 2016. Adoption of this standard resulted in a $0.8 million reduction to income tax expense and a corresponding increase to net income for the three months ended March 31, 2016.
Stockholders’ Equity including the Deferred Gain, Second Quarter 2017 Dividend Declaration
Stockholders’ equity plus Deferred reinsurance gain - LPT Agreement was $1,039.4 million, an increase of 2.4% from year-end 2016, including an $8.0 million increase in after-tax net unrealized investment gains.
The Board of Directors declared a second quarter 2017 dividend of $0.15 per share. The dividend is payable on May 24, 2017 to stockholders of record as of May 10, 2017.
Conference Call and Web Cast; Form 10-Q; Supplemental Materials
The information in this press release should be read in conjunction with the financial supplement that is attached to this press release and is available on our website.
Reconciliation of Non-GAAP Financial Measures to GAAP
Within this earnings release we present various financial measures, some of which are a "non-GAAP financial measure" as defined in Regulation G pursuant to Section 401 of the Sarbanes - Oxley Act of 2002. A description of these non-GAAP financial measures, as well as a reconciliation of such non-GAAP measures to the Company's most directly comparable GAAP financial measures is included in the attached Financial Supplement. Management believes that these non-GAAP measures are meaningful to the Company's investors, analysts and other interested parties who benefit from having an objective and consistent basis for comparison with other companies within our industry. 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. Other companies may calculate these measures differently, and, therefore, these measures may not be comparable.
The Company will host a conference call on Thursday, April 27, 2017, at 8:30 a.m. Pacific Daylight 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 several hours after the call. The conference call replay number is (404) 537-3406 or (855) 859-2056 with a pass code of 98293259.
EHI expects to file its Form 10-Q for the quarter ended March 31, 2017, with the Securities and Exchange Commission (“SEC”) on or about Thursday, April 27, 2017. The Form 10-Q will be available without charge through the EDGAR system at the SEC's web site and will also be posted on the Company's website, www.employers.com, through the “Investors” link.
The Company provides a list of portfolio securities in the Calendar of Events, “Investors” section of its website at www.employers.com. The Company also provides investor presentations on its website.
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 of, among other things, the Company's future performance, business growth, retention rates, loss costs and claim trends. Certain of these statements may constitute "forward-looking" statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and are often identified by words such as "may," "will," "could," "would," "should," "expect," "plan," "anticipate," "target," "project," "intend," "believe," "estimate," "predict," "potential," "pro forma," "seek," "likely," or "continue," or other comparable terminology and their negatives. EHI and its management caution investors that such forward-looking statements are not guarantees of future performance. Risks and uncertainties are inherent in EHI's future performance. Factors that could cause the Company's actual results to differ materially from those indicated by such forward-looking statements include, among other things, those discussed or identified from time to time in EHI's public filings with the SEC, including the risks detailed in the Company's Quarterly Reports on Form 10-Q and the Company's Annual Reports on Form 10-K. Except as required by applicable securities laws, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
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).
Contact:
Media: Ty Vukelich, (775) 327-2677, tvukelich@employers.com.
Analysts: Vicki Erickson Mills, (775) 327-2794, vericksonmills@employers.com.
Copyright © 2017 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. Insurance subsidiaries include Employers Insurance Company of Nevada, Employers Compensation Insurance Company, Employers Preferred Insurance Company, and Employers Assurance Company, all rated A- (Excellent) by A.M. Best Company.
Additional information can be found at:
http://www.employers.com.
Exhibit 99.2
Employers Holdings, Inc.
First Quarter 2017
Financial Supplement
EMPLOYERS HOLDINGS, INC.
Table of Contents
EMPLOYERS HOLDINGS, INC.
Consolidated Financial Highlights (unaudited)
$ in millions, except per share amounts
Three Months Ended | |||||||||||
March 31, | |||||||||||
2017 | 2016* | % change | |||||||||
Selected financial highlights: | |||||||||||
Gross insurance premiums written | $ | 197.6 | $ | 190.7 | 4 | % | |||||
Net insurance premiums written | 196.1 | 188.7 | 4 | % | |||||||
Net insurance premiums earned | 175.3 | 172.6 | 2 | % | |||||||
Net investment income | 18.8 | 17.8 | 6 | % | |||||||
Underwriting income | 8.9 | 8.7 | 2 | % | |||||||
Net income before impact of the LPT1 | 20.3 | 18.7 | 9 | % | |||||||
Operating income1 | 18.9 | 17.8 | 6 | % | |||||||
Net income | 23.2 | 21.8 | 6 | % | |||||||
Comprehensive income | 31.2 | 41.6 | (25 | )% | |||||||
Total assets | 3,833.6 | 3,796.8 | 1 | % | |||||||
Stockholders' equity | 867.5 | 803.7 | 8 | % | |||||||
Stockholders' equity including deferred reinsurance gain2 | 1,039.4 | 990.1 | 5 | % | |||||||
Adjusted stockholders' equity2 | 956.9 | 886.7 | 8 | % | |||||||
Annualized operating return on adjusted stockholders' equity3 | 8.0 | % | 8.1 | % | (1 | )% | |||||
Amounts per share: | |||||||||||
Cash dividends declared per share | $ | 0.15 | $ | 0.09 | 67 | % | |||||
Net income per diluted share4 | 0.70 | 0.66 | 6 | % | |||||||
Net income before impact of the LPT per diluted share4 | 0.62 | 0.57 | 9 | % | |||||||
Operating income per diluted share4 | 0.57 | 0.54 | 6 | % | |||||||
GAAP book value per share2 | 26.88 | 24.74 | 9 | % | |||||||
Book value per share2 | 32.20 | 30.48 | 6 | % | |||||||
Adjusted book value per share2 | 29.65 | 27.30 | 9 | % | |||||||
Combined ratio before impact of the LPT:5 | |||||||||||
Loss and loss adjustment expense ratio: | |||||||||||
Current year | 63.8 | % | 64.1 | % | |||||||
Prior year | — | % | (0.1 | )% | |||||||
Loss and loss adjustment expense ratio | 63.8 | % | 64.0 | % | |||||||
Commission expense ratio | 12.3 | % | 11.8 | % | |||||||
Underwriting and other operating expense ratio | 20.4 | % | 21.0 | % | |||||||
Combined ratio before impact of the LPT | 96.6 | % | 96.8 | % | |||||||
1 See Page 3 for calculations and Page 10 for information regarding our use of Non-GAAP Financial Measures. | |||||||||||
2 See Page 8 for calculations and Page 10 for information regarding our use of Non-GAAP Financial Measures. | |||||||||||
3 See Page 4 for calculations and Page 10 for information regarding our use of Non-GAAP Financial Measures. | |||||||||||
4 See Page 9 for calculations and Page 10 for information regarding our use of Non-GAAP Financial Measures. | |||||||||||
5 See Page 5 for calculations and Page 10 for information regarding our use of Non-GAAP Financial Measures. | |||||||||||
*The Company adopted ASU Number 2016-9, Stock Compensation in the third quarter of 2016 with an effective date of January 1, 2016. Adoption of this standard resulted in a $0.8 million reduction to our income tax expense for the three months ended March 31, 2016. | |||||||||||
1
EMPLOYERS HOLDINGS, INC.
Summary Consolidated Balance Sheets (unaudited)
$ in millions, except per share amounts
March 31, 2017 | December 31, 2016 | |||||||
ASSETS | ||||||||
Investments, cash and cash equivalents | $ | 2,673.2 | $ | 2,623.4 | ||||
Accrued investment income | 20.1 | 20.6 | ||||||
Premiums receivable, net | 323.8 | 304.7 | ||||||
Reinsurance recoverable on paid and unpaid losses | 581.0 | 588.7 | ||||||
Deferred policy acquisition costs | 48.1 | 44.3 | ||||||
Deferred income taxes, net | 52.1 | 59.4 | ||||||
Contingent commission receivable—LPT Agreement | 31.1 | 31.1 | ||||||
Other assets | 104.2 | 101.2 | ||||||
Total assets | $ | 3,833.6 | $ | 3,773.4 | ||||
LIABILITIES | ||||||||
Unpaid losses and LAE | $ | 2,298.2 | $ | 2,301.0 | ||||
Unearned premiums | 330.8 | 310.3 | ||||||
Commissions and premium taxes payable | 49.3 | 48.8 | ||||||
Deferred reinsurance gain—LPT Agreement | 171.9 | 174.9 | ||||||
Notes payable | 32.0 | 32.0 | ||||||
Other liabilities | 83.9 | 65.8 | ||||||
Total liabilities | $ | 2,966.1 | $ | 2,932.8 | ||||
STOCKHOLDERS' EQUITY | ||||||||
Common stock and additional paid-in capital | $ | 373.3 | $ | 372.6 | ||||
Retained earnings | 795.4 | 777.2 | ||||||
Accumulated other comprehensive income, net | 82.5 | 74.5 | ||||||
Treasury stock, at cost | (383.7 | ) | (383.7 | ) | ||||
Total stockholders’ equity | 867.5 | 840.6 | ||||||
Total liabilities and stockholders’ equity | $ | 3,833.6 | $ | 3,773.4 | ||||
Stockholders' equity including deferred reinsurance gain 1 | $ | 1,039.4 | $ | 1,015.5 | ||||
Adjusted stockholders' equity 1 | 956.9 | 941.0 | ||||||
GAAP Book Value per Share 1 | $ | 26.88 | $ | 26.16 | ||||
Book value per share 1 | 32.20 | 31.61 | ||||||
Adjusted Book Value per Share 1 | 29.65 | 29.29 | ||||||
1 See Page 8 for calculations and Page 10 for information regarding our use of Non-GAAP Financial Measures. | ||||||||
2
EMPLOYERS HOLDINGS, INC.
Summary Consolidated Income Statements (unaudited)
$ in millions, except per share amounts
Three Months Ended | ||||||||
March 31, | ||||||||
2017 | 2016* | |||||||
Underwriting revenues: | ||||||||
Gross premiums written | $ | 197.6 | $ | 190.7 | ||||
Premiums ceded | (1.5 | ) | (2.0 | ) | ||||
Net premiums written | 196.1 | 188.7 | ||||||
Net premiums earned | 175.3 | 172.6 | ||||||
Underwriting expenses: | ||||||||
Losses and LAE incurred | (109.0 | ) | (107.3 | ) | ||||
Commission expense | (21.5 | ) | (20.3 | ) | ||||
Underwriting and other operating expenses | (35.9 | ) | (36.3 | ) | ||||
Underwriting income | 8.9 | 8.7 | ||||||
Net investment income | 18.8 | 17.8 | ||||||
Other income | — | 0.1 | ||||||
Interest expense | (0.4 | ) | (0.4 | ) | ||||
Net realized gains on investments | 2.2 | 1.5 | ||||||
Income tax expense | (6.3 | ) | (5.9 | ) | ||||
Net income | 23.2 | 21.8 | ||||||
Net unrealized gains on investments arising during the period, net of tax | 9.4 | 20.8 | ||||||
Reclassification adj. for realized gains in net income, net of tax | (1.4 | ) | (1.0 | ) | ||||
Comprehensive income | $ | 31.2 | $ | 41.6 | ||||
Add (subtract) | ||||||||
Amortization of deferred reinsurance gain - losses | $ | (2.4 | ) | $ | (2.6 | ) | ||
Amortization of deferred reinsurance gain - contingent commission | (0.5 | ) | (0.5 | ) | ||||
LPT reserve adjustment | — | — | ||||||
LPT contingent commission adjustments | — | — | ||||||
Net income before impact of the LPT Agreement 1 | $ | 20.3 | $ | 18.7 | ||||
Add (subtract) | ||||||||
Impact of the LPT Agreement | $ | (2.9 | ) | $ | (3.1 | ) | ||
Net realized losses (gains) on investments, net of tax | (1.4 | ) | (1.0 | ) | ||||
Amortization of intangibles, net of tax | — | 0.1 | ||||||
Operating income 1 | $ | 18.9 | $ | 17.8 | ||||
1 See Page 10 regarding our use of Non-GAAP Financial Measures. | ||||||||
*The Company adopted ASU Number 2016-9, Stock Compensation in the third quarter of 2016 with an effective date of January 1, 2016. Adoption of this standard resulted in a $0.8 million reduction to our income tax expense for the three months ended March 31, 2016. | ||||||||
3
EMPLOYERS HOLDINGS, INC.
Return on Equity (unaudited)
$ in millions, except per share amounts
Three Months Ended | |||||||||
March 31, | |||||||||
2017 | 2016* | ||||||||
Net income | A | $ | 23.2 | $ | 21.8 | ||||
Add (subtract): | |||||||||
Impact of LPT Agreement | (2.9 | ) | (3.1 | ) | |||||
Net realized losses (gains) on investments, net of tax | (1.4 | ) | (1.0 | ) | |||||
Amortization of intangibles, net of tax | — | 0.1 | |||||||
Operating income 1 | B | $ | 18.9 | $ | 17.8 | ||||
Stockholders' equity - end of period | $ | 867.5 | $ | 803.7 | |||||
Stockholders' equity - beginning of period | 840.6 | 760.8 | |||||||
Average stockholders' equity | C | $ | 854.1 | $ | 782.3 | ||||
Stockholders' equity - end of period | $ | 867.5 | $ | 803.7 | |||||
Add (subtract): | |||||||||
Deferred reinsurance gain | 171.9 | 186.4 | |||||||
Accumulated other comprehensive income, net of tax | (82.5 | ) | (103.4 | ) | |||||
Adjusted stockholders' equity - end of period | 956.9 | 886.7 | |||||||
Adjusted stockholders' equity - beginning of period | 941.0 | 866.7 | |||||||
Average adjusted stockholders' equity 1 | D | $ | 949.0 | $ | 876.7 | ||||
Return on stockholders' equity | A / C | 2.7 | % | 2.8 | % | ||||
Annualized return on stockholders' equity | 10.9 | % | 11.1 | % | |||||
Operating return on adjusted stockholders' equity 1 | B / D | 2.0 | % | 2.0 | % | ||||
Annualized operating return on adjusted stockholders' equity 1 | 8.0 | % | 8.1 | % | |||||
1 See Page 10 for information regarding our use of Non-GAAP Financial Measures. | |||||||||
*The Company adopted ASU Number 2016-9, Stock Compensation in the third quarter of 2016 with an effective date of January 1, 2016. Adoption of this standard resulted in a $0.8 million reduction to our income tax expense for the three months ended March 31, 2016. | |||||||||
4
EMPLOYERS HOLDINGS, INC.
Combined Ratios (unaudited)
$ in millions, except per share amounts
Three Months Ended | |||||||||
March 31, | |||||||||
2017 | 2016 | ||||||||
Net premiums earned | A | $ | 175.3 | $ | 172.6 | ||||
Losses and LAE incurred | B | 109.0 | 107.3 | ||||||
Amortization of deferred reinsurance gain - losses | 2.4 | 2.6 | |||||||
Amortization of deferred reinsurance gain - contingent commission | 0.5 | 0.5 | |||||||
LPT reserve adjustment | — | — | |||||||
LPT contingent commission adjustments | — | — | |||||||
Losses and LAE before impact of the LPT 1 | C | $ | 111.9 | $ | 110.4 | ||||
Less: favorable prior year loss reserve development | — | (0.3 | ) | ||||||
Losses and LAE before impact of the LPT - current accident year | D | $ | 111.9 | $ | 110.7 | ||||
Commission expense | E | 21.5 | 20.3 | ||||||
Underwriting and other operating expenses | F | 35.9 | 36.3 | ||||||
GAAP combined ratio: | |||||||||
Loss and LAE ratio | B/A | 62.2 | % | 62.2 | % | ||||
Commission expense ratio | E/A | 12.3 | % | 11.8 | % | ||||
Underwriting and other operating expense ratio | F/A | 20.4 | % | 21.0 | % | ||||
GAAP combined ratio | 94.9 | % | 95.0 | % | |||||
Combined ratio before impact of the LPT: 1 | |||||||||
Loss and LAE ratio before impact of the LPT | C/A | 63.8 | % | 64.0 | % | ||||
Commission expense ratio | E/A | 12.3 | % | 11.8 | % | ||||
Underwriting and other operating expense ratio | F/A | 20.4 | % | 21.0 | % | ||||
Combined ratio before impact of the LPT | 96.6 | % | 96.8 | % | |||||
Combined ratio before impact of the LPT: current accident year 1 | |||||||||
Loss and LAE ratio before impact of the LPT | D/A | 63.8 | % | 64.1 | % | ||||
Commission expense ratio | E/A | 12.3 | % | 11.8 | % | ||||
Underwriting and other operating expense ratio | F/A | 20.4 | % | 21.0 | % | ||||
Combined ratio before impact of the LPT: current accident year | 96.6 | % | 96.9 | % | |||||
1 See Page 10 for information regarding our use of Non-GAAP Financial Measures. | |||||||||
5
EMPLOYERS HOLDINGS, INC.
Roll-forward of Unpaid Losses and LAE (unaudited)
$ in millions
Three Months Ended | ||||||||
March 31, | ||||||||
2017 | 2016 | |||||||
Unpaid losses and LAE at beginning of period | $ | 2,301.0 | $ | 2,347.5 | ||||
Reinsurance recoverable on unpaid losses and LAE | 580.0 | 628.2 | ||||||
Net unpaid losses and LAE at beginning of period | 1,721.0 | 1,719.3 | ||||||
Losses and LAE incurred: | ||||||||
Current year losses | 111.9 | 110.7 | ||||||
Prior year losses on voluntary business | — | — | ||||||
Prior year losses on involuntary business | — | (0.3 | ) | |||||
Total losses incurred | 111.9 | 110.4 | ||||||
Losses and LAE paid: | ||||||||
Current year losses | 4.7 | 4.7 | ||||||
Prior year losses | 102.9 | 104.5 | ||||||
Total paid losses | 107.6 | 109.2 | ||||||
Net unpaid losses and LAE at end of period | 1,725.3 | 1,720.5 | ||||||
Reinsurance recoverable on unpaid losses and LAE | 572.9 | 621.4 | ||||||
Unpaid losses and LAE at end of period | $ | 2,298.2 | $ | 2,341.9 | ||||
6
EMPLOYERS HOLDINGS, INC.
Consolidated Investment Portfolio (unaudited)
$ in millions
March 31, 2017 | December 31, 2016 | |||||||||||||||||||||
Investment Positions: | Cost or Amortized Cost | Net Unrealized Gain (Loss) | Fair Value | % | Fair Value | % | ||||||||||||||||
Fixed maturities | $ | 2,350.6 | $ | 44.7 | $ | 2,395.3 | 90 | % | $ | 2,344.4 | 89 | % | ||||||||||
Equity securities | 117.6 | 82.2 | 199.8 | 7 | % | 192.2 | 7 | % | ||||||||||||||
Short-term investments | 15.4 | — | 15.4 | 1 | % | 16.0 | 1 | % | ||||||||||||||
Cash and cash equivalents | 58.6 | — | 58.6 | 2 | % | 67.2 | 3 | % | ||||||||||||||
Restricted cash and cash equivalents | 4.1 | — | 4.1 | — | % | 3.6 | — | % | ||||||||||||||
Total investments and cash | $ | 2,546.3 | $ | 126.9 | $ | 2,673.2 | 100 | % | $ | 2,623.4 | 100 | % | ||||||||||
Breakout of Fixed Maturities: | ||||||||||||||||||||||
U.S. Treasuries and Agencies | $ | 144.7 | $ | 4.0 | $ | 148.7 | 6 | % | $ | 140.2 | 6 | % | ||||||||||
States and Municipalities | 794.2 | 23.3 | 817.5 | 34 | % | 851.6 | 36 | % | ||||||||||||||
Corporate Securities | 969.1 | 16.6 | 985.7 | 41 | % | 956.7 | 41 | % | ||||||||||||||
Mortgage-Backed Securities | 396.9 | 0.9 | 397.8 | 17 | % | 353.5 | 15 | % | ||||||||||||||
Asset-Backed Securities | 45.7 | (0.1 | ) | 45.6 | 2 | % | 42.4 | 2 | % | |||||||||||||
Total fixed maturities | $ | 2,350.6 | $ | 44.7 | $ | 2,395.3 | 100 | % | $ | 2,344.4 | 100 | % | ||||||||||
Weighted average book yield | 3.1% | 3.1% | ||||||
Weighted average tax equivalent yield | 3.6% | 3.6% | ||||||
Average credit quality (S&P) | AA- | AA- | ||||||
Duration | 4.3 | years | 4.3 | years | ||||
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EMPLOYERS HOLDINGS, INC.
Book Value Per Share (unaudited)
$ in millions, except per share amounts
March 31, 2017 | December 31, 2016 | March 31, 2016 | December 31, 2015 | ||||||||||||||
Numerators: | |||||||||||||||||
Stockholders' equity | A | $ | 867.5 | $ | 840.6 | $ | 803.7 | $ | 760.8 | ||||||||
Plus: Deferred reinsurance gain | 171.9 | 174.9 | 186.4 | 189.5 | |||||||||||||
Stockholders' equity including deferred reinsurance gain 1 | B | 1,039.4 | 1,015.5 | 990.1 | 950.3 | ||||||||||||
Less: Accumulated other comprehensive income, net of tax | 82.5 | 74.5 | 103.4 | 83.6 | |||||||||||||
Adjusted stockholders' equity 1 | C | $ | 956.9 | $ | 941.0 | $ | 886.7 | $ | 866.7 | ||||||||
Denominator (shares outstanding) | D | 32,276,213 | 32,128,922 | 32,483,983 | 32,216,480 | ||||||||||||
GAAP book value per share 1 | A / D | $ | 26.88 | $ | 26.16 | $ | 24.74 | $ | 23.62 | ||||||||
Book value per share 1 | B / D | 32.20 | 31.61 | 30.48 | 29.50 | ||||||||||||
Adjusted book value per share 1 | C / D | 29.65 | 29.29 | 27.30 | 26.90 | ||||||||||||
Cash dividends declared per share | $ | 0.15 | $ | 0.36 | $ | 0.09 | $ | 0.24 | |||||||||
YTD Change in: 2 | |||||||||||||||||
GAAP book value per share | 3.3 | % | 5.1 | % | |||||||||||||
Book value per share | 2.3 | % | 3.6 | % | |||||||||||||
Adjusted book value per share | 1.7 | % | 1.8 | % | |||||||||||||
1 See Page 10 for information regarding our use of Non-GAAP Financial Measures. | |||||||||||||||||
2 Reflects the change in book value per share after taking into account dividends declared in the period. | |||||||||||||||||
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EMPLOYERS HOLDINGS, INC.
Earnings Per Share (unaudited)
$ in millions, except per share amounts
Three Months Ended | |||||||||
March 31, | |||||||||
2017 | 2016* | ||||||||
Numerators: | |||||||||
Net income | A | $ | 23.2 | $ | 21.8 | ||||
Add (subtract): | |||||||||
Impact of the LPT Agreement | (2.9 | ) | (3.1 | ) | |||||
Net income before impact of LPT 1 | B | $ | 20.3 | $ | 18.7 | ||||
Net realized losses (gains) on investments, net of tax | (1.4 | ) | (1.0 | ) | |||||
Amortization of intangibles, net of tax | — | 0.1 | |||||||
Operating income 1 | C | $ | 18.9 | $ | 17.8 | ||||
Denominators: | |||||||||
Average common shares outstanding (basic) | D | 32,327,784 | 32,413,818 | ||||||
Average common shares outstanding (diluted) | E | 32,965,367 | 32,955,232 | ||||||
Net income per share: | |||||||||
Basic | A / D | $ | 0.72 | $ | 0.67 | ||||
Diluted | A / E | 0.70 | 0.66 | ||||||
Net income before impact of the LPT per share: 1 | |||||||||
Basic | B / D | $ | 0.63 | $ | 0.58 | ||||
Diluted | B / E | 0.62 | 0.57 | ||||||
Operating income per share: 1 | |||||||||
Basic | C / D | $ | 0.58 | $ | 0.55 | ||||
Diluted | C / E | 0.57 | 0.54 | ||||||
1 See Page 10 for information regarding our use of Non-GAAP Financial Measures. | |||||||||
*The Company adopted ASU Number 2016-9, Stock Compensation in the third quarter of 2016 with an effective date of January 1, 2016. Adoption of this standard resulted in a $0.8 million reduction to our income tax expense for the three months ended March 31, 2016. | |||||||||
9
Glossary of Financial Measures
Within this earnings release we present the following measures, each of which are a "non-GAAP financial measure" as defined in Regulation G pursuant to Section 401 of the Sarbanes - Oxley Act of 2002. A reconciliation of these measures to the Company's most directly comparable GAAP financial measures is included herein. Management believes that these non-GAAP measures are important to the Company's investors, analysts and other interested parties who benefit from having an objective and consistent basis for comparison with other companies within our industry. Management further believes that these measures are more relevant than comparable GAAP measures in evaluating our financial performance.
The LPT Agreement is a non-recurring transaction that does not result in ongoing cash benefits to the Company. Management believes that providing non-GAAP measures that exclude the effects of the LPT Agreement (amortization of deferred reinsurance gain, adjustments to LPT Agreement ceded reserves and adjustments to contingent commission receivable) is useful in providing investors, analysts and other interested parties a meaningful understanding of the Company's ongoing underwriting performance.
Deferred reinsurance gain reflects the unamortized gain from the LPT Agreement. This gain has been deferred and is being amortized using the recovery method, whereby the amortization is determined by the proportion of actual reinsurance recoveries to total estimated recoveries, except for the contingent profit commission, which is being amortized through June 30, 2024. Amortization is reflected in losses and LAE incurred.
Operating income (see Page 4 for calculations) is net income excluding the effects of the LPT Agreement , net realized gains (losses) on investments (net of tax) and amortization of intangible assets net of tax). Management believes that providing this non-GAAP measures is helpful to investors, analysts and other interested parties in identifying trends in the Company's operating performance because such items have limited significance to its ongoing operations or can be impacted by both discretionary and other economic factors and may not represent operating trends.
Stockholders' equity including the deferred reinsurance gain is stockholders' equity including the deferred reinsurance gain. Management believes that providing this non-GAAP measure is useful in providing investors, analysts and other interested parties a meaningful measure of the Company's total underwriting capital.
Adjusted stockholders' equity (see Page 8 for calculations) is stockholders' equity including the deferred reinsurance gain, less accumulated other comprehensive income (net of tax). Management believes that providing this non-GAAP measure is useful to investors, analysts and other interested parties since it serves as the denominator to the Company's operating return on equity metric.
Return on stockholders' equity and Operating return on stockholders' equity (see Page 4 for calculations). Management believes that these profitability measures are widely used by our investors, analysts and other interested parties.
GAAP book value per share , Book value per share and Adjusted book value per share (see Page 8 for calculations). Management believes that these valuation measures are widely used by our investors, analysts and other interested parties.
Net income, Combined ratio and Combined ratio before impact of the LPT (see Pages 3 and 5 for calculations). Management believes that these performance and underwriting measures are widely used by our investors, analysts and other interested parties.
Net rate (which is defined as total premium in-force divided by total insured payroll exposure) indicates the average increase or decrease in premiums charged from period-to-period and is a function of a variety of factors, including rate changes, underwriting risk profiles and pricing, and changes in business mix.
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